Budgetary review and recommendations...
Transcript of Budgetary review and recommendations...
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Budgetary review and recommendations report Science and technology portfolio
03 October 2017
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Reputation promise
The Auditor-General of South Africa (AGSA) has a constitutional mandate and, as the supreme audit institution (SAI) of South Africa, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.
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Role of the AGSA in the reporting process
Our role as the AGSA is to reflect on the audit work performed to assist the portfolio committee in its oversight role of assessing the performance of the entities taking into consideration the objective of the committee to produce a Budgetary review and recommendations report (BRRR).
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ANNUAL PERFORMANCE PLAN (APP)
TARGETS PER APP
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“Plan-Do-Check-Act Cycle”, also the Deming cycle , courtesy of the International Organization for Standardization
AGSA theme for the current year to improve outcomes
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DO
PLAN
CHECK ACT
AGSA theme for the current year to improve outcomes
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The AGSA’s Public Audit Act Promise and Focus
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Our annual audits examine three areas
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The AGSA expresses the following different audit opinions:
Unqualified
opinion with no
findings
(clean audit)
Financially
unqualified opinion
with findings
Auditee:
• Credible and reliable
financial statements
that are free of
material
misstatements
• Useful and reliable
performance as
measured against
predetermined
objectives
• complied with key
legislation
Auditee:
• Credible and reliable
financial statements
that are free of material
misstatements
• Did not produce useful
and reliable
performance as
measured against
predetermined
objectives
• Did not comply with
key legislation
Qualified
opinion
Auditee:
• had material
misstatements on
specific areas in their
financial statements,
which could not be
corrected before the
audit report was
issued.
Adverse
opinion
Auditee:
• had the same
challenges as those with
qualified opinions but, in
addition, they had so
many material
misstatements in their
financial statements that
we disagreed with
almost all the amounts
and disclosures in the
financial statements
Auditee:
• had the same
challenges as those
with qualified opinions
but, in addition, they
could not provide us
with evidence for most
of the amounts and
disclosures reported
in the financial
statements, and we
were unable to
conclude or express
an opinion on the
credibility of their
financial statements
Disclaimed
opinion
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The 2016-17 audit outcomes and key messages
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…. compliance with key legislation and….
To improve/maintain the overall audit outcomes, financial statements processes,
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Four year trend – Overall audit outcomes
…. performance planning and reporting must be improved by….
Regression in audit outcomes in the current year
2016-1
PFMA
• DST retained their unqualified with findings due to a regression on
the performance information despite the improvement on compliance
with legislation issue that impacted them on the prior year.
• HSRC and NRF regressed from an unqualified audit opinion with no
findings to an unqualified audit opinion with findings on compliance
with legislation and performance information respectively.
• Senior management should implement audit action plans that are
based on the audit findings, root causes and recommendations.
• Ensure basic financial disciplines and monthly processing and
reconciling of transactions are done regularly.
• Increase in irregular expenditure is a
concern at HSRC due to adequate steps
not taken to prevent irregular expenditure
occurring.
• Officials should be held accountable for
non-compliance with legislation resulting in
irregular expenditure.
• Proactive measures should be implemented
to prevent irregular expenditure.
• Management at DST and NRF should implement appropriate
systems to collect, collate, verify and store information by the
programmes to ensure that the reported targets are valid,
accurate and complete.
• Management at DST and NRF should enhance their review
and monitoring controls to ensure that misstatements are
prevented or detected and corrected timely before reporting
on the annual performance report.
Three year trend –
Compliance with key legislation
25% (HSRC)
25% (DST)
75% (DST, CSIR, NRF)
75% (NRF, CSIR, HSRC)
100%
2016-17 2015-16 2014-15
Three-year trend –
Quality of annual
performance plans
Three year trend –
Quality of submitted
annual performance reports
100% 100% 100%
2016-17 2015-16 2014-15
50% (DST, NRF)
50% (CSIR
, HSRC
100% 100%
2016-17 2015-16 2014-15
Unqualified
with
no findings
Unqualified
with findings
Qualified
with findings
Adverse
with findings
Disclaimed
with finding
Audits
outstanding
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75% (DST, HSRC, NRF)
25% (DST)
25% (DST)
75% (CSIR, HSRC, NRF)
75% (CSIR, HSRC, NRF)
100% (DST, CSIR, HSRC, NRF)
25% (CSIR)
2016-17 2015-16 2014-15 2013-14
11 With no
material findings With
material findings Outstanding
audits No APR/
late submitted 11
Status of Key controls
Good Concerning Intervention required
4 … providing attention to the key controls by…
Regression in audit outcomes in the current year - continued
• Dedication is required for DST and NRF management, to ensure
information supporting the annual performance reports are adequately
reviewed to ensure that the reported target is valid, accurate and complete.
• Controls should be enhanced to ensure compliance with SCM legislation at
HSRC.
• Adequate steps should be taken to prevent irregular expenditure from
occurring.
Fir
st
leve
l
… the key role players as part of their role in combined assurance
Assurance providers per level
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4
1 (CSIR)
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1
4
3 (DST/HSRC/NRF) Senior
management
Accounting officer/authority
Executive authority
Internal audit unit
Audit committee
Portfolio committee T
hir
d
leve
l
Sec
on
d
leve
l
Basis for PC evaluation:
• Oversight role ito robust budget vote process, review of the annual report
including the audit report, quarterly reporting;
• Follow up on progress made by the entities to address audit outcomes;
• Recommendations made in relation to key audit matters; and
• Follow up on key matters reported in the committee’s prior year BRRR report.
The Portfolio committee performed the legislative oversight requirements and it
robustly engages the department and its entities on its role and mandate.
Provides assurance
Provides some
assurance
Provides limited/ no assurance
Vacancy Not
established
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Improved
Stagnant
Regressed
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DS
T
NR
F
CS
IR
HS
RC
- Audit committee
- Proper record keeping
- Daily and monthly controls
- Regular, accurate & complete finanial and
performance reports
- Review and monitor compliance
- Design and Implement IT controls
GOVERNANCE
- Audit Action plans
- ICT governance
- Risk management
- Internal Audit
FINANCIAL AND
PERFORMANCE MANAGEMENT
- Oversight responsibility
- Effective HR management
- Policies and procedures
LEADERSHIP
- Effective leadership
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Performance management linked to programmes/ objectives tested
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Programmes Usefulness Reliability
Material
adjustments
Budgeted
amount
(R ‘000)
Spent
amount
(R ‘000)
%
Spending
No. of
targets
planned
No. of targets
achieved or
overachieved
%
Achievement Programme 1-
Administration Not audited Not audited - R 356 110 R 332 629 93.4% 15 13 87%
Programme 2-
Technology
Innovation
No
material
finding
No
material
findings
X R1 027 588 R1 016 471 98.9% 11 10 91%
Programme 3-
International
Cooperation and
Resources
Not audited Not audited - R 121 316 R 118 466 97.6% 10 10 100%
Programme 4-
Research
Development and
Support
No
material
findings
No
material
findings
X R4 157 604 R4 152 019 99.9% 11 9 82%
Programme 5-
Socio-economic
Innovation
partnerships
No
material
findings
Material
finding X R1 766 378 R1 764 009 99.9% 15 13
87%
Totals R7 428 996 R7 383 594 99.4% 62 55 89%
Quality of APP and analysis of expenditure per programme vs performance
achievements
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Kindly refer to page 72 to 108 of the annual report for the detail of where management has reported on the their achievement of the above targets for each
programme as included in the Annual Performance Report.
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Financial health and financial management
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Improvement in financial health
100% (4)
75% (3)
100% (4)
25% (1)
2014-15
2015-16
2016-17
Two or less unfavourable indicators
More than two unfavourable indicators
Significant doubt that operations can continue in future and/or auditee received a disclaimed or adverse opinion, which meant that the financial statements were not reliable enough for analyses
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Figure 1: Findings on compliance with
key legislation – all auditees
2015-16 2014-15 2013-14
Compliance with legislation and quality of financial statements
Figure 2: Quality of submitted
financial statements
2016-17
Outcome if
NOT corrected
Outcome
after corrections
0 auditees (0%) [2015-16: 0(%] avoided qualifications
due to the correction of material misstatements
during the audit process
100% (4)
100% (4)
Outcome if
NOT corrected
Outcome
after corrections
2015-16
100% (4)
100% (4)
With no material misstatements
With material misstatements
2015-16
PFMA
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25% (HSRC)
25% (DST)
Expenditure management (payment within 30 days)
Prevention and/or follow-up of irregular expenditure
Unauthorised, irregular as well as fruitless and wasteful expenditure disclosed in the
financial statements 2016-17
PFMA
R 25 million
R 1 million
R 12 million
R 12 million
R 4 million
R million
Irregular expenditure
Fruitless and wastefulexpenditure
Unauthorisedexpenditure
R 0 million
Expenditure
incurred in
contravention
of key
legislation;
goods
delivered but
prescribed
processes not
followed
Expenditure
not in
accordance
with the
budget vote/
overspending
of budget or
programme
Expenditure
incurred in
vain and
could have
been avoided
if reasonable
steps had
been taken.
No value for
money!
Definition UIFW amounts incurred by entities in portfolio Nature of UIFW expenditure
2016-17 2015-16 2014-15
• DST (R2 000) - Penalty fees charged for
cancellation of bookings
• NRF (R890 000) - Volunteers were paid
beyond their contract period and also
stipends paid to invalid volunteers/students
• CSIR (R6 997) - A customs penalty was
levied on the CSIR, due to under
declaration of imported items.
• HSRC (R3 307 000) - The expenditure was
mainly due to CCMA pay-outs and
settlement agreements.
• Irregular expenditure resulted mainly
from non-compliance with National
Treasury’s supply chain
management prescripts:
• DST: R176 000
• NRF: R4 545 000
• CSIR: R920 000
• HSRC: R6 465 000
Audit report impact
No impact
Non compliance on
irregular expenditure
not being prevented
was reported in
HSRC due to
increase in irregular
expenditure and lack
of monitoring of
compliance with
supply chain
management
legislation.
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None None
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Fraud and consequence management
Irregular expenditure reported for investigation
100% (7)
100% (7)
2016-17 2015-16
Not investigated Investigated Under
investigation
Supply chain management findings reported to management for investigation
50% (2), 2 instances
25% (1), 5 instances
Other SCM findingsreported for investigation
Employee(s) failed todisclose interest in supplier
Supplier(s) submittedfalse declaration of interest
SCM findings reported for investigation during the
2016-17 audit process
(all auditees)
Follow-up of the previous year’s SCM
findings reported for investigations
All investigated Some investigated None investigated
7 Other SCM-related allegations
Employee(s) failed to disclose interest in supplier
Supplier(s) submitted false declaration of interest
Under investigation
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Top root causes, follow up on commitments and proposed
recommendations
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… the following root causes must be addressed …
Root causes
Slow response by management (Accounting
officer and senior management)
Ineffective review and monitoring of compliance
with legislation
Status of key commitments by minister
Monitor the implementation of the audit action plans that are based on the audit findings, root causes and recommendations reported by the AGSA, internal audit, audit committees and other governance structures.
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Minister to monitor the implementation of the audit action plan to address audit findings on performance information to ensure that the reported information is useful and reliable.
Implemented In progress Not implemented New
… through honouring the following commitments made by the executive authority……
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25% (HSRC)
75% (DST, NRF and HSRC)
2016-17
• Management should implement appropriate systems to
collect, collate, verify and store information by the
programmes to ensure that the reported targets are
valid, accurate and complete.
• Management should enhance review and monitoring
controls to ensure that misstatements are prevented or
detected and corrected timely before reporting on the
annual performance report.
• Regular monitoring of the action plans to ensure that
the identified deficiencies are addressed to avoid
repeat findings and continued non-compliance.
• Officials should be held accountable for non-
compliance with legislation and irregular expenditure
should be tracked, with proactive preventative
measures being implemented.
• We met with the minister on 31 July 2017. The audit
outcomes of the portfolio was discussed with the minister
and the progress of the implementation of the 2015-16
commitments were followed up with the minister.
• New commitments were obtained from the minister.
2015-16 PFMA
Top root causes, follow up on commitments and proposed recommendations … and implementation of the following proposed commitments by the PC.
1. Portfolio Committee must
monitor the
implementation of the
action plans to address
the audit findings
identified.
2. Portfolio Committee will
exercise oversight during
its quarterly reviews with
regards to compliance and
performance reporting to
ensure compliance taking
place and objectives are
being achieved.
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Entities included in the portfolio
not audited by AGSA: PAA (section 4(3) audit entities)
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Entities included in the portfolio not audited by AGSA:
PAA (section 4(3) audit entities)
Three year audit outcome of auditees within the Science and Technology portfolio which are not audited
by the AGSA in terms of PAA section 4(3):
Auditee:
Three
year
Trend
Audit Outcomes
2016-17
Audit Outcomes
2015-16
Audit Outcomes
2014-15
AFS AoPO Compliance AFS AoPO Compliance AFS AoPO Compliance
Technology
Innovation Agency
(TIA)
a
a
a
a
a
a
South African
National Space
Agency (SANSA)
a
a
a
a
a
a
Academy of
Science South
Africa (ASSAF)
N/A
r
N/A
r
N/A
r
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2016-17
PFMA
Improved
Stagnant
Regressed
AFS outcome
legend Unqualified with
no findings
Unqualified
with findings
Qualified
with findings
Adverse
with findings
Disclaimed
with finding
Audits
outstanding
No Material
Findings
Material
findings
a
r
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AGSA audit methodology improvements
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AGSA audit methodology improvements
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Status of key focus areas
Oversight and monitoring
(Unchanged)
Financial management
(Unchanged)
Performance management
(Regressed)
Procurement and contract management
(Unchanged) Compliance management
(Unchanged)
HR management
(Unchanged)
IT management
(Unchanged)
Financial health
(Regressed)
Status of
records review
Pro-active
follow up
procedures
Financial and non – financial information
(internal and external reports/documents
& discussions with senior managers)
Feedback linked to Focus Areas
AGSA audit methodology improvements (cont.)
Engaging accounting officers in conversations that are insightful, relevant and have an
impact
Identify matters that add value in putting measures
and action plans in place well in advance to mitigate
risks
Assess progress made in implementing action plans/
follow through with commitments made in previous
engagements
Provide our assessment of the status of key focus
areas that we reviewed
Identify key areas of concern that may derail progress
in the preparation of financial and performance
reports and compliance with relevant legislation and
consequential regression in audit outcome
Key control engagements / status of records review – objectives
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Sou
rce:
Rob
ert K
litga
ard
(aca
dem
ic a
nti-c
orru
ptio
n re
sear
ch)
Correlation between low accountability, corruption and impact on service delivery
Corruption
Service Delivery
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Stay in touch with the AGSA
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