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PFMA 2013-2014

This presentation provides information on the audit outcomes of the Water Portfolio, highlighting drivers of internal controls, root causes, and key recommendations for improvement. It aims to enable effective oversight by the Portfolio Committee.

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PFMA 2013-2014

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  1. PFMA 2013-2014 Audit Outcomes of the Water Portfolio National D 14 October 2014

  2. Our reputation promise/mission The Auditor-General of South Africa (AGSA) 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 • To provide members of parliament with the necessary information/guidance on the audit outcomes for the portfolio of Police to enable the Portfolio Committee to effectively execute their oversight function: • Audit outcomes • Drivers of internal controls • Root causes • Assurance provided by key role players • Key recommendations • Oversight model

  4. Regression in overall audit outcomes over the past three years 2013-14 PFMA Unqualified with no findings Unqualified with findings Qualified with findings Adverse or disclaimer with findings Audits outstanding 3auditees 3 auditees 3auditees

  5. Movement in audit outcomes 2013-14 PFMA Movement 1 0 0 2 Audit outcome

  6. Three-year trend – financial statements 2013-14 PFMA WRC Unqualified Qualified Adverse or disclaimer 3 auditees 3 auditees 3 auditees

  7. Quality of submitted financial statements 2013-14 PFMA Outcome if NOT corrected Outcome after corrections 2013-14 Financially unqualified (clean audit/ unqualified with findings) Financially qualified (qualified/ adverse/ disclaimed with findings) 3auditees Avoided qualifications by correcting material misstatements during audit process Outcome if NOT corrected Outcome after corrections 2012-13 3auditees 7

  8. Quality of annual performance reports 2013-14 PFMA 0 • Annual performance reports of of the auditees were useful and reliable • No movement over 2013-14 With no findings With findings

  9. Most common material findings on usefulness and reliability 2013-14 PFMA Usefulness • Measurability of planned targets and indicators could not be assessed • No reason for variances between planned and actual achievements could be provided • Performance targets were not specific and well defined Improved Stagnant or little progress Regressed Reliability • Completeness of reported information could not be tested against supporting evidence • Validity of reported information could not be tested against supporting evidence • Accuracy of reported information could not be tested against supporting evidence

  10. Status of compliance with legislation 2013-14 PFMA 3 • Significantnon-compliance with legislation by of the auditees • Stagnation over 2013-14 With no findings With findings 3 auditees 3 auditees 3 auditees

  11. Most common areas of non-compliance 2013-14 PFMA Management of strategic planning and performance WTE DWA & WTE Quality of financial statements submitted for auditing DWS, WRC & WTE 2013-14 2012-13 DWS, WRC & WTE Procurement and contract management DWS, WRC & WTE Improved DWS, WRC & WTE Stagnant or little progress Revenue management Regressed WRC WTE Human resource management DWS DWS & WTE

  12. Irregular expenditure incurred 2013-14 PFMA Decrease in irregular expenditure Nature R 68 275 million R 51 191 million • Non-compliance with SCM legislation • Main areas of non-compliance • Required number of quotations were not obtained for procurement under R500 000 • Awards were made to suppliers who did not submit declarations • Interest not declared • Goods and Services were procured without inviting competitive bids • Preference point system was not applied • Quotation were awarded to bidder that did not score the highest points DWS R10 901 WTE R5 791 Identified by auditees Identified during audit R8 170 million (21 067 instances)

  13. Fruitless and wasteful expenditure incurred 2013-14 PFMA Increase in fruitless and wasteful expenditure Nature + R20 592 million R 2 165 million • Accommodation • VAT paid to Non-VAT vendor • Training not attend • Telephone system • Overdue accounts paid to Eskom & Municipalities • Penalties and interest paid to SARS • Deviation from scope of contract • Legal services cost due to case lost • Failed to notify Travel Administrator for cancellation of booking DWS – R182 WTE – R24 Identified by the auditees Identified during the audit 140 auditees (64%) R651 million (80%) 83 auditees (38%) R164 million (20%)

  14. Drivers of internal controls should improve 2013-14 PFMA Good Concerning Intervention required

  15. Root causes should be addressed 2013-14 PFMA Lack of consequences for poor performance and transgressions A root cause at 3 of the auditees (2012-13: 3 auditees) Instability or vacancies in key positions A root cause at DWS and WTE (2) of the auditees (2012-13: 2 auditees) Key officials lack appropriate competencies A root cause at DWS and WTE (2)of the auditees (2012-13: 2 auditees) Slow response by management (Accounting officer and senior management) Held senior officials accountable for non-compliance with laws and regulations DWS and WTE (2)of the auditees (2012-13: 2 auditees)

  16. Assurance provided by key role players should improve 2013-14 PFMA Provides assurance Provides some assurance Provides limited/no assurance Not established Improved assurance Limited progress on assurance Less assurance

  17. Key recommendations for improvement 2013-14 PFMA • Strengthen the following controls to create a control environment that supports reliable financial and performance reporting and compliance with legislation: • Increase stability within the portfolio by filling key vacant positions (DWS & WTE) • Increase competence of employees by encouraging continuous learning and training. (DWS, WRC and WTE) • Increase continuous monitoring and improvement of business processes (DWS, WRC and WTE) • Hold senior officials accountable for non-compliance with laws and regulations. (DWS, WRC and WTE) • Implement adequate systems/processes to support accurate and reliable financial (DWS, WRC and WTE) and performance information (DWS, WRC and WTE) reporting. • Implementing adequate systems/processes to focus on overall compliance and include consequence management where necessary. • Financial (DWS, WRC and WTE) and performance management (DWS, WRC and WTE) – enhance the “checks and balances” during the year to ensure that all reconciliations are done on a daily / monthly basis.

  18. Considerations for Portfolio Committees when dealing with performance monitoring • Is the Strategic Plans and Annual Performance Plans for entities aligned to the National Development Plan • Does the entity have adequate resources (human and financial) available to achieve predetermined objectives • Are the targets realistic (can it be done) • How are the entities ensuring that Strategic Plans and Annual Performance Plans will be achieved (performance contracts, quarterly monitoring, etc.) • The Portfolio committee should review the quarterly progress of entities with regard to predetermined objectives and contributions to NDP • The Portfolio committee should review annual achievement of predetermined objectives by entities (Annual Reports) • The Portfolio committee should approve and track changes to strategic plans and annual performance reports

  19. How does clean administration improve service delivery Creating a better and dignified life for the citizens of South Africa through timely effective, efficient and economical SERVICE DELIVERY

  20. Accountability and remedies to address transgressions and poor performance A common reaction to the general reports relates to the questions posed by many, including key role players in government, about the need for accountability and consequences and how these can be enforced. Legislation provides the answer to this question as it clearly defines accountability and the remedies. Details are available on pages 44 to 65 of our booklet: In Brief: The Auditor-General of South Africa

  21. Accountability and remedies to address transgressions and poor performance • This AGSA booklet highlights the legislation that enables remedies to be applied where national and provincial departments are guilty of transgressions and poor performance. It addresses the following typical matters reported in the general report • reports: • Failure to comply with legislated obligations and responsibilities • Unauthorised, irregular and fruitless and wasteful expenditure • Possible fraud and corruption • Poor work performance – officials and suppliers • Other non-compliance with legislation

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