AUDIT REPORT Department of Energy 2010/11 Energy Portfolio Committee 13 October 2011 Parliament

1. AUDIT REPORT Department of Energy 2010/11 Energy Portfolio Committee 13 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. Energy portfolio audit outcomes 2010-11

4. Agenda • Legislative requirements • Opinions • Emphasis of matters / Additional matters • Audit of predetermined objectives • Compliance with laws and regulations • Audit report structure • Audit outcomes of the Department of Energy 2010-11 • Energy portfolio outcomes 2010-11

5. 1. 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 • Constitution of the Republic of South Africa (1996) Section 188 – must audit and report on accounts, financial statements and financial management of government institutions 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 Predetermined objectives Compliance and financial management

6. 2. Opinions Financial statements and financial position • Different audit opinions: • Unqualified (unmodified) • Qualified • Disclaimer (Modified) • Adverse

7. Financial statements and financial position 2. Opinions (Cont.) Overall summary description per opinion:

8. Financial statements and financial position 2. Opinions (Cont.) Overall summary description per opinion:

9. 3. Emphasis of matters/ Additional matters • 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)”

10. 3. Emphasis of matters/ Additional matters (Cont.) • Examples of matters that could be highlighted • Emphasis of matter: • Financial reporting framework • Significant uncertainties • Revision of previously issued Annual Financial Statements (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

11. Predetermined objectives 4. Audit of predetermined objectives Main criteria Sub-criteria Existence (2) * Compliance with regulatory requirements Timeliness Presentation Measurability (9) * Usefulness Relevance Consistency (4) * Validity (1) * Reliability Accuracy (1) * Completeness (2) * * Number in brackets represents number of audit clients in the Energy portfolio with material findings on the sub-criteria

12. 5. Compliance with laws and regulations Compliance and financial management The subject matters which the AGSA focuses on determined by legislation: Strategic planning and performance management (1) * Budgets Annual financial statements, performance and annual reports (10) * Audit committees (3) * Internal audit (7) * Procurement and contract management (2) * Human resource management and compensation Expenditure management (8) * Transfer of funds and/or conditional grants Revenue management Asset management Financial misconduct * Number in brackets represents number of audit clients in the Energy portfolio with material noncompliance findings

13. 6. Audit report structure • Report on the financial statements • Introduction • Accounting officer/authority’s responsibility • Auditor-General’s responsibility • Opinion • Emphasis of matters (if applicable) • Additional matters (if applicable) • 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

14. 7. Audit outcomes of the Department of Energy 2010-11 • Actual audit report of Department of Energy: • Opinion: • Unqualified audit opinion • Other matters highlighted: • Emphasis of matters • Unauthorised and Irregular expenditure • Additional matters • Unaudited supplementary schedules (standard for departments) • Financial reporting framework (standard for departments)

15. 7. Audit outcomes achieved 2010/11 (Cont.) • Actual audit report of Department of Energy • 3. Predetermined objectives • Usefulness of information • 4. Compliance • DoRA • PFMA - (Irregular and unauthorised, submission of AFS, material adjustments to AFS, inconsistent performance information between the annual report and strategic plan). • Internal control • Summary of control deficiencies in 2 Fundamentals: • Leadership • Financial and performance management

16. 8. Energy portfolio audit outcomes

17. QUESTIONS