CLEAN AUDITS and SERVICE DELIVERY Institute of Municipal Finance Officers 7 – 8 February 2013

1. CLEAN AUDITS and SERVICE DELIVERY Institute of Municipal Finance Officers 7 – 8 February 2013

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 • Clean Audits • Audit of Predetermined Objectives and Service Delivery • Conclusion

4. CLEAN AUDITS

5. Audit opinions four (4) Financial audit opinions financial statements give a true and fair view (or are presented fairly, in all material respects) in accordance with the applicable financial reporting framework. Clean Audit Unqualified Qualified departures from financial reporting framework, or limitation on scope which is not so material and pervasive (unqualified opinion cannot be expressed ) Disclaimer limitation on scope is so material and pervasive the auditor has NOT been able to obtain sufficient appropriate audit evidence to form an opinion (unable to express opinion) disagreement with management regarding departures from the financial reporting framework,is so material and pervasive to AFS (qualification of the report is not adequate to disclose the misleading or incomplete nature of the AFS) Adverse

6. Clean Audit However

7. Clean Audit

8. Clean Audit

9. Clean Audit Includes municipal entities

10. Clean Audit Improvements of PY not sustained (Consultants used, internal controls and monthly monitoring not implemented) resulted in regressions Inadequate systems, processes and skills to produce credible financial statements still prevalent Action Plans and commitments agreed upon and reinforced and quarterly engagements not implemented/ too late to have impact CFO’s still being changed, acting or only recently appointed. Also over reliance on consultants to prepare financial statements If key staff have are in positions, they are not available during the audit/or do not attend steering committee meetings Lack of Sustainability Inadequate systems/ processes Action Plans not implemented High turnover/ vacancies of CFOs Unavailability of Key Staff ROOT CAUSES

11. Clean Audit Lack of accountability and no consequences for transgressions and poor performance management. Unassertiveness of leadership in creating culture of ethics and high performance Poor Quality AFS submitted/not supported by accurate; reliable and complete information. Submissions for sake of achieving legislated deadlines (NT withholding of equitable share) Instability of leadership. Factionalism affecting administration, resulting in deliberate sabotage of administration Although MPACs have been established in most, these are not functioning effectively yet Lack of Accountability Poor Quality AFS Political infighting, interference Non-functioning of MPACs ROOT CAUSES

12. AUDIT OF PREDETERMINED OBJECTIVES & SERVICE DELIVERY

13. Audit of Predetermined Objectives OVERSIGHT: Parliament, provincial legislature or municipal council • Identify desired impacts Assess and adjust Specify performance indicators Monitor Set targets and take corrective and allocate action resources Policy development Strategic Planning INSTITUTION National department Provincial department Municipality Public entity Municipality Operational planning and budgeting End-year reporting Implementation and in-year reporting

14. Audit of Predetermined Objectives

15. Audit of Predetermined Objectives AGSA Audit process

16. Audit of Predetermined Objectives Movement in PDO findings

17. Lack of monitoring and oversight over PDO processes Inadequate Systems and processes Reported information not supported/ inaccurate, unreliable, incomplete Root Causes No consequence for continuous non-compliance • Poor understanding of the principles of FMPPI Audit of Predetermined Objectives

18. AoPO Legislation MFMA FMPPI Municipal regulations MSA MFMACirculars • Acts/Regulations: • Chapter 7 – Budget process and related matters • Chapter 10 – Municipal entities (sec 87,88) • Section 121(3)(c) • Section 121(4)(d) • Acts/Regulations: • Chapter 5 – Integrated development planning • Chapter 6 – Performance management • Section 45 • Section 41 • Acts/Regulations: • No. 11: Annual report guidance • No. 13: Service delivery and budget implementation plan • No. 32: The oversight report • No. 42: Funding a municipal budget • No. 55: Municipal Budget Circular for the 2011/12 MTREF Acts/Regulations: Framework for managing programme performance information (issued by the NT in May 2007) • Acts/Regulations: • LG: Municipal planning and performance management regulations, 2001 – GNR.796 of 24 August 2001 • LG: Municipal planning and performance management regulations, 2001 – GNR.796 of 24 August 2001 Available on Treasury website www.treasury.gov.za/legislation/mfma/circulars Also refer to AG Directive General Notice 34783 of 2011 issued 28 November 2011

19. Audit of Predetermined Objectives Why was this necessary? Public sector reforms Improving public reporting Providing better information on what taxpayers are getting for their taxes If you do not measure results, you cannot tell success from failure If you cannot see success, you can not reward it If you cannot reward success, you are probably rewarding failure If you cannot see success, you can not learn from and improve on it If you cannot recognize failure, you cannot correct it If you cannot demonstrate results, you cannot win public support (Service Delivery !!!) Adapted from Osborne and Gaebler, 1992, Reinventing Government

20. Audit of Predetermined Objectives Clean Audit Additional Matter paragraph included in audit report: >20% of targets not achieved

21. Audit of Predetermined Objectives

22. Emerging risks

23. Conclusion