2015/16 AUDIT OUTCOMES ANALYSIS

1. 2015/16 AUDIT OUTCOMES ANALYSIS Risk Management Forum: Public Entities Presenter: Jonas Shai | 01 September 2016

2. Ethical Dilemmas

3. Why? • Lower growth(0.0%) • Weaking rand • Higher inflation • Fiscal consolidation • Tax measures (Sugar tax) • Spending Ceilings ( R10 Billlion reduction in compensation budgets) • Reprioritisation (Away from non-essential goods and services)

4. Audit Outcomes Analysis

5. Findings • Heritage Assets (Arts) • Not measured at fair value • Exemptions obtained, however, not to achieve fair presentation • Not recognized and accounted for in financials (understated) • Inadequate records maintained to determine value of assets • Property, Plant and Equipment • Insufficient appropriate audit evidence to substantiate the balances • No review of useful lives & inability to verify existence • Non-existence of disclosed assets

6. Findings • Receivables • Insufficient audit evidence to corroborate • Provision for bad debts not performed in accordance to GRAP • Commitments • Inadequate audit evidence to corroborate the existence, completeness and valuation of the balance • Inadequate systems to ensure appropriateness of the recognition, measurement and presentation • Revenue Management • Inadequate systems to accurately & completely record revenue • Internal control deficiencies leading to inaccurate recording of revenue

7. Findings • Expenditure Management • Irregular Expenditure, Fruitless and wasteful expenditure • Incomplete/ non- disclosure of irregular expenditure • No controls to prevent occurrence of irregular expenditure • No controls to reduce existing irregular expenditure • Normal expenditure • Incomplete accounting of material purchases resulting in the understatement of cost of sales • Insufficient audit evidence to substantiate expenditure

8. Findings - PDO • Usefulness & Reliability • Performance indicators • Undefined • Unverifiable • Performance targets • Immeasurable and not time bound • Corroborative evidence (reported performance vs. approved performance plan) • Inconsistent • Non-existent • uBER

9. Findings - Laws & Regulation • Inadequate internal control • Revenue management • Expenditure management • Financial Statement preparation • Supply Chain best practice • Procurement delegations not adhered to • Insufficient appropriate audit evidence to corroborate the awarding of bids • Extension of contracts without approval of delegated persons • Governance • Lack of governance structures i.e. Internal audit, Audit committees, etc.

10. Findings - Laws & Regulation • Inadequate Leadership • Implementation of systems and controls • Review • Monitoring • Performance management • Lack of implementation and review • Lack of performance management human resources • Consequence management • Inadequate implementation of investigation & internal audit recommendations • Disregard of consequence management

11. Risk Disclosure • Risk Management policy or Strategy • Regular Risk Assessments • Whether RMC advises management on risks, especially mitigation of unacceptable risks • Audit Committee advises and independently monitors effectiveness • Progress in the management of risks and this translates into better performance

12. Thank you