Auditor-General's Budget & Strategic Plan (2009-2012)

1. The Auditor-General Budget and Strategic Plan 2009-2012 7 October 2008

2. AG’S Strategic Vision and Values AG Vision To be recognised by our stakeholders as a relevant Supreme Audit Institution that enhances public sector accountability Values • We value, respect and recognise our people • Our accountability is clear and personal • We are performance driven • We value and own our reputation and independence • We work effectively in teams • We are proud to be South African

3. Key Strategic focus areas • Regularity audits • Performance auditing • Funding model • Vacancies • Debtor collection • Trainee accountant scheme • Leadership • Governance • Reputation

4. Regularity audits Achievement of unqualified reports • Improving relevance of reporting • Root causes analysis • Timeliness - The timeliness measure will be increased by 5% year-on-year starting from a baseline of 80% and 60% for PFMA and MFMA respectively • Increased visibility of AG leadership • To engage the auditee leadership on the audit focus, process and outcomes

5. Regularity audits • The standard of our quality will be measured using the International Regulatory Body of Auditors (IRBA) quality assessment tool • Targeting 75% of our audit reports to rated by IRBA to be of excellent quality by 2009 / 10 and then increase the quality rating by 1% annually

6. Performance auditing • Performance auditing focuses on evaluating whether auditees have utilised resources economically, efficiently and effectively. • Key sectors for transversal performance auditing are: • Education • Consultants • Public enterprises Initiatives • Centralised management of performance auditing • Research on transversal performance audit themes • Transversal audit of provincial & municipal infrastructure • International peer review

7. Auditing of performance information • The AoPI is carried out in terms sections 20(2)(c) and 28(1)( c) of the PAA • The AG adopted a phased-in approach for compliance with relevant sections until such time that performance management and reporting framework have been legislated and the audit environment is mature • Over and above a financial audit opinion, audit of performance information focuses on the these areas: • Root cause analysis which will lead to a separate opinion on internal controls • Auditing of information which should lead to a separate opinion on performance information • An opinion on whether an auditee complies with laws and regulations • Track compliance of AoPI milestones in the audit process to ensure that there is 100% compliance with pre-determined audit-coverage milestones as defined in the annual AoPI plan

8. Funding model • Assumptions • Remove capping on tariff model • Apply mark-up factor of 2.2 on direct cost • No limit on the top of the band • Tarriffs are calculated on the same principles as SAICA rates • Increase the allowable surplus to 6%

9. Funding model initiatives • Debt collection • Ring fencing of certain debtors ensures that long outstanding debts do not affect collection of debt. These debts are dealt with separately without being written off. • E-billing tool to assist in speeding up billing and collection from auditees • Debtors to comply with the following payment terms: • Max. 90 days for Local Govt • Max. 30 days for National & Provincial Govt. • AG to comply with creditor payment terms for 80% of our creditors (baseline) and increasing the number by 5% annually

10. Initiatives to address vacancies • Reposition the Trainee accountants scheme • Reduce the number of trainees so as to improve the supervisory structures that are required and thus increase the current pass rate to be above the national average • Split the AG entry-level into two groups • Trainees - people who want to qualify as professionals and have the ability to do so • Clerks - people who may not be interested in qualifying or do not have the ability to do so • Improve retention of trainees who completed their training contracts by 10% annually • Corporate Social Investment • Adoption of 15 high schools • Continued participation in the Thuthuka schools project • AG to form partnerships with The Dept of Finance in the regions to sponsor undergraduate bursaries • AG office to sponsor post graduate bursaries • AG to sponsor TA contracts to serve articles

11. Initiatives to address vacancies • As of the end of August 2008 we had 528 new vacancies of which 110 are Assistant Managers and 120 are Audit Managers • Increase retention of Assistant and Audit Managers by 20% and 25% in 2009/10 from a baseline of 15% and 29% respectively. After that an annual increase of 5% • Secondment of Audit Managers from Deloitte/India • On-line recruitment tool to source talent – online application and response tracking • Filling of vacancies through promotions and offering incentives for candidates relocating to outlying provinces • More targeted recruitment for candidates with other professional qualifications (RGA, ACCA, CISA and CIMA) • Leveraging acting appointment before permanent vacancies • Marketing and branding strategies at tertiary institutions and the media • Building relationships with university academics and Industry Associations (SAGRA, AWCA,ABASA) to facilitate the sourcing of candidates • Incentives for employees for referrals • Utilising specific search engines for recruitment • More streamlined recruitment process with adequate resourcing

12. Leadership effectiveness • Effective leadership is the only way to elevate and sustain organisational performance to a level of excellence • Initiatives • The AG roles and responsibilities framework to enhance the level of accountability has been developed and agreed. • The competency framework for critical competencies has been designed and approved – to be utilised for recruitment and developmental purposes as part of AG leadership development initiatives • Rollout of our desired values and behaviors • Leadership programme covers: • Communicating Leader training • Executive coaching for CEs and BEs • Leadership programme for managers • Repositioning Performance management system • Culture index will be increased to 25% (2013-14) with a baseline of 14% that was taken in 2006

13. Governance & risk management • Section 43 of the PAA requires that the DAG establish and maintain a system of risk management & quality control • Initiatives • Reengineering of prioritised ICT, Human resources and Finance processes to be at level 4 of the Capability Maturity Level by 2011-12 • Development of enterprise-wide risk management framework. • Implementation of balanced scorecard tool for data integrity & quality • Encrypted notebooks to mitigate security risk to all information • Revamping of CSA tool for robust internal control This will ensure that the AG • Leads by example in the Public sector • Achieves and maintains unqualified audit reports

14. Reputation • The identified key reputation strategic areas will have the following impact: • Stakeholders understand the role and relevant contribution of AG • Unqualified audit reports • Audit reports are simple and relevant • Reports are easy to read and are understandable • Effective implementation of audit recommendations • The AG is adequately professionalised through the Trainee Accountant Scheme • Meaningful contribution of audit professionals to the public sector • AG is independent and financially sustainable • All sources of risk are identified and mitigated • Measurement will be % improvement on the overall reputation index. The reputation index target in in five years is 25% (2013-14) with a baseline of 19% that was determined in 2006