Audit Outcomes of Agriculture, Forestry and Fisheries Portfolio 2014-15

1. Briefing to the Portfolio CommitteeAudit outcomes of the Agriculture, Forestry and Fisheries portfolio for the 2014-15 financial year 13 October 2015

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. Purpose of the presentation Annually oversight committees set aside time to focus on assessing the performance of departments. On completion of the process, portfolio committees are required to develop department-specific reports, namely budgetary review and recommendations reports (BRRR) which express the committee`s view on the department’s budget for recommendation to the National Treasury ahead of the following year`s budget period. Our role as the AGSA is to reflect on the audit work performed to assist the portfolio committee in its oversight role in assessing the performance of the departments taking into consideration the objective of the committee to produce a BRRR.

4. The scope of AGSA audits

5. Content (excluding Section 4(3) entities) Overall audit outcomes 6 Unauthorised/ irregular / fruitless and wasteful expenditure 10 3.Root causes and recommendations 11 4. Combined Assurance 12 Minister commitments 13 Questions 14

6. 2. Overall audit outcomes – DAFF Portfolio Key controls Assurance levels Overall stagnation in audit outcomes Senior management First level Accounting officer/authority Executive authority Second level Internal audit unit Audit committee Third level Portfolio committee 3 1 2 … the key role players need to assurethat … … attention is given to the key controls To improve the audit outcomes … 5 4 … the root causes are addressed … … the risk areas and… Risk areas Root causes Legends Quality of submitted financial statements Quality of submitted performance reports Supply chain management Slow response by management (Accounting officer and senior management) Portfolio Movement 1 2 3 DAFF ARC MLRF NAMC OBP Improvement Stagnant or limited progress Regressed Key officials lack appropriate competencies Human resource management Information technology Financial health 4 5 6 Instability in key positions 2014-15 2013-14 6

7. 2.1 Quality of submitted financial statements 2014-15 PFMA Outcome after corrections Outcome if NOT corrected 2 1 Financially unqualified with findings Financially qualified (qualified with findings) Legend: Financially unqualified with/without findings Financially qualified 2 auditees 2014-15 NAMC ARC Avoided qualifications by correcting material misstatements during audit process Outcome if NOT corrected Outcome after corrections 4 3 4 1 auditee 2013-14 ARC 7

8. 2.2 Quality of annual performance reports 2 of reports were reliable and useful compared with 2in previous year. of auditees that submitted information, did so in time for audit auditees did not prepare annual performance report (2013-14: 0) 5 0 With no findings With findings Legends: With no findings With findings Improvement Stagnant or limited progress Regressed NAMC DAFF Improved OBP Stagnant or little progress NAMC DAFF OBP Regressed Usefulness Reliability 1 2 DAFF NAMC OBP DAFF OBP 8 8

9. 2.3 Most auditees did not comply with legislation in following areas 2014-15 PFMA Quality of annual financial statements submitted Prevention of unauthorised, irregular and/ or fruitless and wasteful expenditure Management of procurement and or contracts 1 2 3 DAFF Legends: With no findings Intervention required With findings Improvement Stagnant or limited progress Regressed DAFF Management of strategic planning and performance Human resource & consequence management Internal audit & Audit committee 4 6 5 Improvement Stagnant or limited progress Regressed DAFF DAFF DAFF OBP OBP 9

10. 3. Unauthorised, irregular and fruitless and wasteful expenditure Fruitless and wasteful expenditure Unauthorised expenditure Irregular expenditure Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money! Expenditure not in accordance with the budget vote/ overspending of budget or programme Expenditure incurred in contravention of key legislation, prescribed processes not followed Definitions Legends: Decrease in incurred expenditure No change Increase in incurred expenditure 10

11. 4. Top three root causes and recommendations Slow response by management in addressing the root causes of poor audit outcomes PORTFOLIO DAFF ARC MLRF NAMC OBP Recommendation: Slow responses by management in the portfolio and a lack of ownership by the employees of the DAFF and both employees and management of the ARC in the areas of compliance with legislation and the quality of performance reports should be improved by timeous development of action plans with clear milestones and deadlines. Key officials lack appropriate competencies Recommendation: The competencies of key officials and employees should be improved by providing them with both formal and on-the job training. 2014-15 2013-14 Improved Instability in key positions Stagnant or little progress Recommendation: Key positions must be filled timeously with competent and experienced personnel. Regressed 11

12. Management assurance First level of assurance Oversight assurance Second level of assurance Independent assurance Third level of assurance Senior management Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Coordinating / Monitoring institutions Internal audit Audit committee Oversight (portfolio committees / councils) Public accounts committee National Assembly 5. Combined assurance – complimentary mandate Required assurance levels Required assurance levels Required assurance levels Extensive Extensive Extensive Extensive Extensive Extensive 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 • Oversight’s assurance role • National Treasury/ DPSA– monitor compliance with laws and regulations and enforce appropriate action • Internal audit– follow up on management’s actions to address specific recommendations and conduct own audits on the key focus areas in the internal control environment and report on quarterly progress • Audit committee– monitor risks andthe implementation of commitments on corrective action made by management as well as quarterly progress on the action plans • Role of independent assurance • Oversight (portfolio committees)– review and monitor quarterly progress on the implementation of action plans to address deficiencies • Public accounts committee– exercise specific oversight on a regular basis on any report which it may deem necessary • National Assembly – provide independent oversight on the reliability, accuracy and credibility of National and provincial government

13. 6. Minister commitments to address root causes 2014-15 PFMA Status of key commitments by minister (1) The Marine Living Resource will be merged with the department to ensure effective management of the entity. (2) Vacant senior manager positions will be filled to ensure and build a positive culture. (3) A project plan will be developed, setting out the timelines for review of quarterly performance reports by the internal audit, audit committee, external audit and portfolio committee to ensure the quality of reported predetermined objectives. (4) The Ncera Farms will be deregistered to ensure better management of the entity. Checks and balances to ensure that the credibility and completeness of financial reports will be implemented. (1) Plan to support agricultural schools and encourage youngsters to study in the agricultural field. (2) Collaborate with the provincial MECs to ensure proper monitoring and evaluation of DoRA funds. (3) Empower the internal audit to be fully effective and functional. (4) Manage deviation from procurement process in a transparent manner. (1) Implement a plan to identify specific areas where service delivery will take place. (2) Ensure a linkage between budget and the targets in the strategic plan. (3) Checks and balances to ensure that the credibility and completeness of performance reports will be implemented. Not implemented In progress Implemented New 13

14. Questions