2 February 2016

1. Briefing to the Portfolio Committee on Rural Development and Land Reform (DRDLR)Audit outcomes of the DRDLR portfolio 2 February 2016

2. Reputation promise/mission The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, 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 To brief the portfolio committee on the audit outcomes for the DRDLR portfolio over the past 5 years where applicable on the following, Financial audit opinions for portfolio Status of the six key risk focus areas Status of drivers of internal controls The three main root causes leading to deficiencies of internal controls Implementation and progress tracking of audit recommendations

4. The scope of AGSA audits

5. Content DRDLR Overall audit outcomes 6 Status on key risk focus areas 7 Status of drivers of internal control 8 Root causes and recommendations 9 Combined Assurance 10 Status of implementation – AG 2014/15 audit finding recommendations 11 Status of implementation - internal audit finding recommendations 12 DRDLR budget comparison 2014/15 vs 2015/16 13 Questions 15

6. 1. Overall audit outcomes – DRDLR portfolio

7. 2.Status of key risk focus areas Submission of AFS Submission of AOPO Supply chain management Financial health Human resource management Information technology

8. 3.Status on drivers of internal control Financial and performance management Leadership Effective leadership, oversight responsibility, HR management, actions plans, IT governance, policies & procedures Proper record keeping, processing and recon controls, regular reporting, compliance monitoring, IT system controls Governance Risk management, audit committee & internal audit

9. 4. Top three root causes and recommendations 1. Slow response by management in addressing the root causes of poor audit outcomes Recommendation: Management should ensure that the root cause of the audit findings is correctly identified to address the controls weakness. The action plan drafted should be focusing on the root causes and the progress on the implementation of the action plan should be strictly monitored. All action plans and the root causes of audit finding should be communicate to all staff in order for them to implement the action plan agreed by senior management 2. Key officials lack appropriate competencies Recommendation: Management should ensure that staff at the regions are being assessed to ensure that their shortcoming are identified. Training should be performed to all staff on the revised policies and procedures, updates on the new legislation or changes on existing legislation . 2014-15 2013-14 Improved 3. Instability or vacancies in key positions Stagnant or little progress Regressed Recommendation: Management should ensure that vacancies for key management is address timeously going forward, as it will have an impact on the overall audit outcome.

10. 5. Combined assurance – complimentary mandate 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 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

11. 6. Status of implementation 31 Oct 2015 - AG 2014/15 audit finding recommendations

12. 7. Status of implementation – Internal audit findings recommendations

13. 8. DRDLR budget comparison 201415 vs 2015/16 This include s an analysis of budget on  how much will be spent on operations (salaries, admin activities & bursaries etc ) and how much money is left for service delivery - 1% Budget Comparison R’000 000 - 3% - 2% 3% - 6% 7%

14. 8. DRDLR Budget analysis 2015/16 – Department (cont.) Economic classification DRDLR 2015/16 Budget Budget vs Employee Costs

15. Questions