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AGSA 5 TH PARLIAMENT CAPACITY BUILDING PRESENTATION 23 September 2014. WELCOME. REPUTATION PROMISE/MISSION. The Auditor-General of South Africa has a constitutional mandate and,
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AGSA 5TH PARLIAMENT CAPACITY BUILDING PRESENTATION 23 September 2014 WELCOME
REPUTATION PROMISE/MISSION The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.
PURPOSE OF PRESENTATION To provide members of parliament with the necessary information/guidance on the role of the AGSA to enable them to effectively execute their oversight function.
CONTENT • Oversight role • Oversight body • Combined assurance model • AGSA contribution to oversight • Audit mandate and process • AGSA mandate & Legislative requirements • AGSA aspiration to the public service • 3. The work we do • AGSA products • Good administration • 4. Briefing process
The role of oversight Oversight body Vote Identifythe desired impacts Assess & adjust Strategic planning Specify performance indicators Institution Department Public entity Year-end reporting AG audits accountability information Budgeting / operational planning Implementation / in-year reporting Monitor & take corrective action Set targets & allocate resources
Strategic planning • Is the strategic plan in line with the legislative requirements / objectives? • Ensure that the strategic plan and strategic initiatives are aligned with the government priorities, national plan of action and Medium Term Expenditure Framework (MTEF) • Enquire about / identify: • challenges in meeting the strategic objectives • initiatives to address them • Evaluate: • how success will be measured
Budgeting • Budget preparation • Is the budget aligned with the strategic plan? • Have adequate resources been allocated to the priority areas? • Are there budget constraints and how have they been dealt with? • Focus on changes in the budget from one year to the other
Implementation/Monitoring • Is departmental spending on the right track and in line with strategic plan priorities? • Does management evaluate monthly and quarterly reports? • Do action plans exist to address audit findings and improve financial management and accountability? • Are there designed, implemented and maintained internal controls (relevant to financial and non-financial information)? • Are procedures in place to identify, prevent and detect fraud? • Are adequate governance arrangements in place and are they effective (internal audit and audit committee)?
Reporting • Keeping management accountable and determining whether there is – • Compliance with reporting responsibilities as set out in the PFMA • Compliance with Parliament’s Appropriation Act • Effective and efficient utilisation of resources • Review the annual report of the department / entity including the audit report, and consider both the financial and non-financial information presented.
Combined assurance model Management assurance First level of assurance Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Senior management Required assurance levels Extensive Extensive Extensive • Management’s assurance role • Senior management– take immediate action to address specific recommendations and adhere to financial management and internal control systems • Accounting officers/ authority– hold officials accountable on implementation of internal controls and report progress quarterly and annually • Executive authority– monitor the progress of performance and enforce accountability and consequences
AGSA contribution to oversight • Provide briefings to committees: • On audit reports before the portfolio committee compiles their BRRR (read with the annual report) • Update on progress of current year audits. Sharing of audit risks & status of key controls • Before the APPs is reviewed by the portfolio committee to discuss the findings identified from the pro-active audit of the PDOs of the department • Acts as an expert witness during public hearings • Road shows after tabling of the general report (PFMA & MFMA) • Regular follow-up on the progress of implementation of resolutions • Interactions with the chairpersons (quarterly) • Assist in building capacity of members via APAC.
AGSA Mandate and Legislative requirements 1. Constitution of the Republic of South Africa (1996) Section 188 – must audit and report on accounts, financial statements and financial management of government institutions and report to Parliament / legislature that has a direct interest in the report. 2. Public Audit Act (Act No.25 of 2004) Sections 20 – Auditor-General must prepare audit report containing opinion/conclusion on: Financial statements and financial position Compliance and financial management Predetermined objectives
AGSA’S aspirations for the Public Service Creating a better and dignified life for the citizens of South Africa through timely,effective, efficient and economicalSERVICE DELIVERY DAC Mission “To enhance job creation by preserving, protecting and developing arts, culture and heritage to sustain our democracy and build our nation”. • Transparent and stable reporting systems • Budgeting and planning processes • Focussed information management platforms • Strong internal audit capabilities • Reporting to enable effective oversight • Applying consequences for transgressions and poor performance Professionalism • Visible commitment by all players in the public service • Demonstrated impeccable ethical behaviour and professionalism • Independent and relevant reporting by the AG • Value-adding input expressed by the AG
Accountability and reporting • The AGSA is accountable to the National Assembly and has to report on its activities and performance of its functions in terms of section 10 of the Public Audit Act (PAA). • The main accountability instruments are the AGSA's budget and strategic plan, as well as the annual report, both of which are tabled annually in the National Assembly. • The Standing Committee on the Auditor-General (SCoAG), established in terms of section 10(3) of the PAA, oversees the performance of the AGSA on behalf of the National Assembly.
Visibility of the AGSA beyond the mandate The AGSA provides the oversight committees in parliament and all legislatures with briefings on root causes and recommendations on corrective measures to improve audit outcomes before the entity hearings. Developing required leadership competencies through mentoring, coaching and leadership programmes and processes for effectively managing change. The AGSA consults widely with the stakeholders in the executive and legislatures prior to tabling the General Reports that consolidate the audit outcomes of National, provincial and municipalities The General Reports are tabled in Parliament & Legislatures
AGSA Products Regularity Audit - Mandatory • Verify whether there is no omitted information on financial statements • Consists of – Financial, Compliance , PDO and Internal control • Full application of international auditing standards Regularity audit are supported by: ISA focus on the assessment of the information systems environment, use of Computer Assisted Audit Techniques (CAATs) in audits and data analytics Information systems audit DISCRETIONARY (Section 20(3) of the PAA) 1. Evaluate measures to ensure economic procurement of resources and efficient and effective application of the same 2. Effect of policy implementation (not policy evaluation) 3. Reporting is factual and does not include an audit opinion 4. Audit is conducted by performance auditors and may include subject matter experts 5. Focuses on a specific government programme, project or management project DISCRETIONARY An independent process to prevent or detect fraud/ crime in the public sector Specific focus area of financial misconduct maladministration & impropriety DISCRETIONARY Agreed upon procedures, i.e. donor funding certificates Performance Audits Investigations Special Audits
AGSA products (service types and value add) Performance Auditing: Focuses on a specific government policy or management process = BEST RESOURCE BASED ON NEED BEST RESULTS USING WHAT WE HAVE GOAL REACHED VALUE FOR MONEY + SERVICE DELIVERY =
Audit of financial statements and specific focus areas • Financial statements • Required in terms of the Constitution and the Public Audit Act • The auditor forms an opinion on whether the financial statements are prepared in all material aspects in accordance with the specific applicable financial reporting framework. • Predetermined objectives • Service-delivery issues with focus on the reliability and usefulness of performance information which includes the measurement of targets as set out in the beginning of the financial year, were actually achieved. • Compliance with laws and regulations • Reporting on material non-compliance with key legislation.
Unqualified/ unmodified Different types of audit opinion Financial statements give a true and fair view (or are presented fairly, in all material respects) in accordance with the applicable financial reporting framework. Unmodified with emphasis of matter The addition of such an emphasis of matter paragraph(s) does not affect the auditor’s opinion on whether the financial statements are fairly presented Qualified The effect of any disagreements with management re departures from financial reporting framework, or limitation on scope is not so material and pervasive (unqualified opinion cannot be expressed )
Disclaimer Different types of audit opinion continues There is lack of sufficient appropriate audit evidence to express an opinion. The auditor disagrees with the representation made by management in the financial statements to the extent of confirming that it’s not a fair reflection of the financial position, performance and cash flow. Adverse
Definition: Annual audit of reported actual performance against predetermined objectives, indicators and targets as contained in the annual performance report of departments and their entities. Audit consists of the following Main Criteria: Audit of Predetermined Objectives Reliability Usefulness Compliance with regulatory requirements Existence Timeliness Presentation Measurability Relevance Consistency Validity Accuracy Completeness
Audit report structure Report on the financial statements • Introduction • Accounting officer/authority’s responsibility • Auditor-General’s responsibility • Opinion • Emphasis of matters • Additional matters Report on other legal and regulatory requirements • Predetermined objectives • Compliance with laws and regulations ( Treasury regulations, PFMA, etc.) Internal control • Leadership • Financial and performance management • Governance d) Other reports • Investigations • Performance audits • Agreed up procedures
Emphasis of matter/additional matters • Why? – to draw the users of financial statements attention, i.e. • Going concern • Internal control weaknesses • Financial management • DoRA • Fraud or suspected fraud • Unauthorised, irregular and fruitless and wasteful expenditure
Annual Report including Audit Report & Performance Report State of the Nation Address/Budget speeches AGSA Briefing Notes TOOLS • Estimates of National Expenditure Accounting officer and audit committee ’s Reports Briefing process
DEPARTMENT OF ARTS & CULTURE Overview of the Annual Report • The Annual Report of the department consists of the following: • General information • - Minister’s foreword, Deputy Minister’s statement, Overview of the Accounting officer, • Strategic overview, Legislative mandate of the department, Organisational structure, Public • entities and statutory bodies reporting to the Minister. • 2. Information on predetermined objectives and programme performance • - Audited in terms of the audit work performed on predetermined objectives. • 3. Human resources (HR) management • - Includes statistical information on the HR elements of the department)
DEPARTMENT OF ARTS & CULTURE Overview of the Annual Report • The Annual Report of the department (Continued) • 4. Annual financial Statement Sections (DAC) • - Includes the following: • 4.1) Report of the Audit committee • 4.2) Report of the Accounting Officer • 4.3) Report of the Auditor-General • 4.4) Financial Statements • Appropriation Statement, Statement of financial performance, Statement of Financial Position, Statement of Net Assets, Cash flow statement, Notes • The financial statements are prepare in accordance with the Modified Cash Standards for DAC. • In terms of the modified cash basis of accounting a transaction is only recognised when it is initiated by the receipt of payment of cash.
