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BRIEFING ON AUDIT REPORT Commission for Gender Equality 2010/11

BRIEFING ON AUDIT REPORT Commission for Gender Equality 2010/11 Portfolio Committee on Communication 11 October 2011 Parliament. Reputation promise/mission.

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BRIEFING ON AUDIT REPORT Commission for Gender Equality 2010/11

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  1. BRIEFING ON AUDIT REPORT Commission for Gender Equality 2010/11 Portfolio Committee on Communication 11 October 2011 Parliament

  2. 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.

  3. Agenda • Legislative requirements • Opinions • Summary of audit outcomes • Audit report structure • Audit outcomes achieved 2010/11 • Emphasis of matters • Predetermined objectives • Compliance • Internal controls • Other matters

  4. 1. Legislative requirements Legislative requirements 1. Public Finance Management Act (Act No.1 of 1999) Accounting Officer: Section 40(1)(a) & (b) – Record keeping responsibilities by accounting officer and preparing financial statements for audit Section 40(1)(c) – Submission of financial statements to Auditor-General for audit Auditor-General: Section 40(2) – Audit financial statements and submit report to accounting officer 2. Constitution of the Republic of South Africa (1996) Section 188 – must audit and report on accounts, financial statements and financial management of government institutions 3. 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

  5. 2. Opinions • Different audit opinions: • Unqualified (unmodified) • Qualified • Disclaimer • Adverse

  6. 2. Opinions Overall summary description per opinion:

  7. 2. Opinions Overall summary description per opinion:

  8. 3. Summary of audit outcomes History of audit opinions: Goal: Unqualified opinion with no other matters or findings on predetermined objectives and compliance with laws and regulations

  9. 4. Audit report structure • Index: • 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 • Internal control • Leadership • Financial and performance management • Governance • Other reports • Investigations • Performance audits • Agreed up procedures • Now please refer to handout for actual audit report of CGE

  10. 4. Audit report structure • Emphasis of matter/Additional matter • Why? • To draw the users of financial statements’ attention to a matter • HIGHLIGHT! • Difference? • Opinion? • “My opinion is not modified in respect of these matter(s)”

  11. 4. Audit report structure • Matters highlighted • Emphasis of matter: • Financial reporting framework • Significant uncertainties • Revision of previously issued AFS • Restatements of corresponding figures • Material under spending • Accruals • Going concern/funding/financial sustainability • Additional matter: • Prior year audited by predecessor auditor • Material inconsistencies included in annual report • Unaudited supplementary schedules • Revision of previously issued AFS • Financial reporting framework

  12. 5. Audit outcomes achieved 2010/11 • Actual audit report of CGE: refer to handout • Opinion: • Unqualified audit opinion • Other matters highlighted: • Emphasis of matters • Irregular and fruitless and wasteful expenditure • Restatement of corresponding figures

  13. 5. Audit outcomes achieved 2010/11 • Actual audit report of CGE • 3. Predetermined objectives • Presentation of information • Usefulness of information • 4. Compliance • National Treasury Regulations/ Practise notes • PFMA

  14. 5. Audit outcomes achieved 2010/11 • Actual audit report of CGE • 5. Internal control • Summary of control deficiencies in 2 fundamentals: • Leadership • Financial and performance management • 6. Other reports • Investigation

  15. 6. Emphasis of matters • NB! • Audit only highlight if matter is disclosed in the financial statements of the entity • Irregular and fruitless and wasteful expenditure • Emphasise the occurrence of irregular and fruitless and wasteful expenditure, as disclosed in the financial statements amounting to R10,3 million and R207 568 respectively. • The irregular expenditure relates to transactions in contravention of the Preferential Procurement Policy Framework Act and Regulations, PFMA, Treasury regulations and National Treasury Practise Notes. • The fruitless and wasteful expenditure relates to interest and penalties due to late PAYE payments to the South African Revenue Services as well as interest on the bank overdraft. • 2. Restatement of corresponding figures • Prior year figures was corrected in current year financial statements due to an error discovered in the during the audit. • `

  16. 6. Emphasis of matters • Recommendation • CGE must strengthen its internal controls to: • Prevent; • Detect; and • Adequately disclose irregular and fruitless and wasteful expenditure • CGE should implement a review process to ensure compliance with laws and regulations in preparation of financial statements.

  17. 7. Predetermined objectives • Presentation • National Treasury’s guidelines were not followed in terms of reporting • Reasons for major variances between planned and actual reported targets were not explained. • Usefulness of information • Reported objectives, indicators and targets reported were not complete compared to the planned objectives, indicators and targets • Planned and reported targets were not specific, measurable and time bound

  18. 7. Predetermined objectives • Recommendation • CGE must implement effective, efficient and transparent system and internal controls regarding performance management, which describe and represent how the institution’s processes of performance planning, monitoring, measurement, review and reporting will be conducted, organised and managed. This included processes for quarterly reporting. • CGE must ensure that the targets in the strategic plan conform to the “SMART” principle as required by the Treasury Framework.

  19. 8. Compliance Summary of compliance findings

  20. 7. Compliance Summary of compliance findings

  21. 7. Compliance • Recommendation • A system for performance management which describe and represent how the institution’s processes of performance planning, monitoring, measurement, review and reporting should be conducted, organised and managed, including procedures for quarterly reporting to the executive authority. • Processes should be put in place to prevent and detect fruitless and wasteful expenditure. This can be achieved through staff and management training as well as constant communication and reinforcement by line managers to all staff. • Despite a concerted effort to ensure payments are affected within 30 days, instances of non-compliance were still noted. Action needs to be taken against non-complying individuals as the processes are in place and just require adherence thereto.

  22. 7. Compliance • Recommendation • A system to ensure that CGE procures goods and services in a transparent, cost effective and efficient manner. Compliance to laws and regulations should be adhered to during procurement in order to prevent irregular expenditure. • Implementation of a proper control system regarding assets. • Proper cash flow management to avoid bank accounts being in overdraft. • Implementation of a adequate review process of financial statements prior to submission for audit to ensure compliance.

  23. 8. Internal controls

  24. 9. Other reports • Investigations • Two investigations conducted by two independent parties were requested by the former deputy speaker of parliament, regarding complaints and allegations of improper conduct, financial impropriety and maladministration. • The investigation covered the 2007-08 and 2008-09 financial years and was concluded during the year under review, with detailed recommendation for immediate implementation by CGE. • Two separate reports were tabled regarding the outcome of these investigations. • The findings identified are predominately due to the non-adherence to the CGE’S internal policies/procedures and laws and regulations. It also point to inadequate planning, monitoring and oversight by the leadership of the CGE to ensure performance, compliance and ethical behaviour. • The National Assembly took a resolution to establish an Ad Hoc committee to monitor the implementation of the recommendation. • Substantial progress has been made regarding the implementation of the recommendations.

  25. 10. Other matters • Going forward • CGE must develop an action plan to address all audit findings. • Greater focus on compliance matters.

  26. QUESTIONS???

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