BRIEFING ON AUDIT REPORT Department of Women, Children and People with Disabilities 2010/11

1. BRIEFING ON AUDIT REPORT Department of Women, Children and People with Disabilities 2010/11 Portfolio Committee on Women, Children and People with Disabilities 11 October 2011 Parliament

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 • Legislative requirements • Opinions • Summary of audit outcomes • Audit report structure • Audit outcomes achieved 2010/11 • Emphasis of matters • Predetermined objectives • Compliance • Internal controls • Other matters

4. 1. Legislative requirements Legislative requirements 1. Public Finance Management Act (Act No.1 of 1999) Accounting Officer: Section 40(1)(a) & (b) – Record keeping responsibilities by accounting officer and preparing financial statements for audit Section 40(1)(c) – Submission of financial statements to Auditor-General for audit Auditor-General: Section 40(2) – Audit financial statements and submit report to accounting officer 2. Constitution of the Republic of South Africa (1996) Section 188 – must audit and report on accounts, financial statements and financial management of government institutions 3. Public Audit Act (Act No.25 of 2004) Sections 20 – Auditor-General must prepare audit report containing opinion/conclusion on: • Financial statements and financial position • Compliance and financial management • Predetermined objectives

5. 2. Opinions • Different audit opinions: • Unqualified (unmodified) • Qualified • Disclaimer • Adverse

6. 2. Opinions Overall summary description per opinion:

7. 2. Opinions Overall summary description per opinion:

8. 3. Summary of audit outcomes History of audit opinions: Goal: Unqualified opinion with no other matters or findings on predetermined objectives and compliance with laws and regulations

9. 4. Audit report structure • Report on the financial statements • Introduction • Accounting officer/authority’s responsibility • Auditor-General’s responsibility • Opinion • Emphasis of matters • Additional matters • Report on other legal and regulatory requirements • Predetermined objectives • Compliance with laws and regulations • Internal control • Leadership • Financial and performance management • Governance • Internal control • Investigations • Performance audits • Agreed up procedures • Now please refer to handout for actual audit report of DWCPD

10. 4. Audit report structure • Emphasis of matter/Additional matter • Why? • To draw the users of financial statements’ attention to a matter • HIGHLIGHT! • Difference? • Opinion? • “My opinion is not modified in respect of these matter(s)”

11. 4. Audit report structure • Matters highlighted • Emphasis of matter: • Financial reporting framework • Significant uncertainties • Revision of previously issued AFS • Restatements of corresponding figures • Material underspending • Accruals • Going concern/funding/financial sustainability • Additional matter: • Prior year audited by predecessor auditor • Material inconsistencies included in annual report • Unaudited supplementary schedules • Revision of previously issued AFS • Financial reporting framework

12. 5. Audit outcomes achieved 2010/11 • Actual audit report of DWCPD: refer to annexure • Opinion: • Unqualified audit opinion • Other matters highlighted: • Emphasis of matters • Unauthorised and irregular expenditure

13. 5. Audit outcomes achieved 2010/11 • Actual audit report of DWCPD: refer to annexure • 3. Predetermined objectives • Usefulness of information • Reliability of information • 4. Compliance • PFMA • National Treasury Regulations • Other legislation • Internal control • Summary of control deficiencies in 3 Fundamentals: • Leadership • Financial and performance management • Governance

14. 6. Emphasis of matters • NB! • Audit only highlight if matter is disclosed in the financial statements of the entity • Unauthorised and irregular expenditure • Overspending on the vote of R3,729 million • R6,358 million savings on capital expenditure used to defray current over-expenditure • -matters highlighted as these are material and significant to users. • expenditure = spending of public funds • Indication of financial management

15. 6. Emphasis of matters • Recommendation • Department should implement a review process to ensure compliance with laws and regulations in preparation of financial statements. • The department must strengthen controls to: • Prevent; • Detect; and • Adequately disclose irregular expenditure • Adequate planning and project management to ensure that allocated funds are spent appropriately and timely in order to achieve objectives and within the allocated budget.

16. 7. Predetermined Objectives • Usefulness of information • Relevance: there is no clear and logical link between the objectives, outcomes, outputs, indicators and performance targets. • Measurability: the indicators and the planned and reported targets were not measurable in identifying the required performance. • Recommendation • The department must ensure that they operate in terms of an approved strategic plan, the indicators are well defined and that targets in the strategic plan conform to the “SMART” principle as required by the Treasury Framework. Quarterly reports must be submitted to and approved by the Executive Authority in order to track performance against the approved objectives. • Maintain sufficient and appropriate support evidence for reported targets, collecting and collating of evidence to ensure correct reporting.

17. 8. Compliance Summary of compliance findings

18. 8. Compliance

19. 8. Compliance • Recommendation • Implementation of a adequate review process of financial statements prior to submission for audit to ensure compliance. • A system to ensure that the department procures goods and services in a transparent, cost effective and efficient manner. Compliance to laws and regulations should be adhered to during procurement in order to prevent irregular expenditure i.e (signed off checklist indicating steps followed prior to approval for payment) • Despite a concerted effort to ensure payments are affected within 30 days, instances of non-compliance were still noted. Action needs to be taken against non-complying individuals as the processes are in place and just require adherence thereto. • Risk management needs to ensure compliance with required laws and regulations. • Governance structures need to be given priority to provide oversight over financial, performance, governance and compliance matters.

20. 8. Compliance • Vacancies at senior levels to be filled to ensure critical line functions are accountable to senior management and internal controls are implemented and monitored.

21. 9. Internal controls

22. 10. Other matters • Going forward • DWCPD must develop an action plan to address all audit findings. This action plan will be monitored regularly at audit steering committees and feedback will be provided at audit committee meetings. • Vacancies in key management positions were filled post year end, however, the impact is not yet known. • Internal audit and audit committee is receiving attention but greater urgency is required as half of the next financial year has already past. • Audit opinion of predetermined objectives in audit report in future. • Greater focus on compliance matters.

23. QUESTIONS???