Strengthening Oversight and Accountability in the Public Sector through Auditing

1. Portfolio Committee on Appropriations Audit of predetermined objectives 26 March 2013

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. Topics for discussion

4. Audits performed by AGSA General approach and outcome

5. Audit of Predetermined Objectives

6. Combined assurance Management assurance First level of assurance Oversight assurance Second level of assurance Independent assurance Third level of assurance Senior management Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Coordinating / Monitoring institutions Internal audit Audit committee Oversight (portfolio committees / councils) Public accounts committee External audit Required assurance levels Required assurance levels Required assurance levels Extensive Extensive Extensive Extensive Extensive Extensive Extensive Extensive Extensive • Management’s assurance role • Senior management– take immediate action to address specific recommendations and adhere to financial management and control systems • Accounting officers/ authority– hold officials accountable implementation of plan and report quarterly and annually progress • Executive authority– monitor the progress of performance and enforce accountability and consequences • Oversight’s assurance role • National Treasury/ DPSA– monitor compliance with laws and regulations and enforce appropriate action • Internal audit– follow up on management’s actions to address specific recommendations and conduct own audits on the Strategic Plans & APP and quarterly progress • Audit committee– monitor the implementation of commitments on corrective action made by management as well as quarterly progress on the plans • Role of independent assurance • Oversight (portfolio committees /councils)– review strategic and performance plans as well as the accounting officer’s quarterly reports on performance • Public accounts committee– exercise specific oversight on a regular basis • External audit– provide independent assurance on the usefulness of plans and the reliability and credibility of reported performance information and identify instances non-compliance

7. Clean administration – from annual audits General approach and outcome *Not qualified, disclaimed or adverse opinion

8. Audit of predetermined objectives defined as: Annual audit of reported actual performance against predetermined objectives, indicators and targets as contained in the annual performance report . • Integral part of the annual regularity audit process, confirming the • Compliance with laws and regulations • Usefulness of performance reporting • Reliability of performance reporting

9. Legislative requirements - auditing Sections 20(2)(c) and 28(1)(c) of the Public Audit Act (PAA) An audit report must reflect an opinion or conclusion relating to the performance of the auditee against predetermined objectives Applicable to all spheres of government

10. Legislative requirements for planning, budgeting & reporting of performance info Public Finance Management Act (PFMA), 1999 (Act No.1 of 1999) Treasury Regulations issued in terms of the PFMA, 2002 Public Service Regulations (PSR), Part III B: (Only applicable to departments) Guidelines, instruction notes, practice notes, issued by National Treasury Framework for managing programme performance information (issued by the National Treasury in May 2007) Framework for strategic and annual performance plans (issued by National Treasury in August 2010)

11. Audit of predetermined objectives

12. Audit of Predetermined Objectives Why was this necessary? Public sector reforms Improving public reporting Providing better information on what taxpayers are getting for their taxes If you do not measure results, you cannot tell success from failure If you cannot see success, you can not reward it If you cannot reward success, you are probably rewarding failure If you cannot see success, you can not learn from and improve on it If you cannot recognize failure, you cannot correct it If you cannot demonstrate results, you cannot win public support (Service Delivery !!!) Adapted from Osborne and Gaebler, 1992, Reinventing Government

13. AGSA strategy to the audit of predetermined objectives 2009/10 to 2012/13 2004/05 to 2008/09 • Adopted a phased-in approach • Factual audit findings reported in both management and audit reports • No audit opinion in audit reports – only findings • Regular interaction with stakeholders (NT, Presidency, DPSA) to determine and test audit approach • Provided inputs to drafting of NT Frameworks (FMPPI) • Completed phased audit approach • Audit to the extent necessary to express an audit opinion • Audit opinion in the management report • Audit reports contain audit findings – not audit opinions

14. Auditing the planning, budgeting and reporting cycle

15. Audit criteria Main criteria Sub-criteria Existence Compliance with regulatory requirements Timeliness Presentation Measurability Usefulness Relevance Consistency Validity Reliability Accuracy Completeness

16. Audit of Predetermined Objectives AGSA Audit process

17. Audit reporting – Management report An audit conclusion will be prepared and included in the management reports for all departments, constitutional institutions, trading entities, public entities, Parliament and provincial legislatures

18. Audit reporting – Auditor’s report REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Predetermined objectives Reliability of information: Audit findings focus on the validity, accuracy & completeness of reported performance information Usefulness of information: Audit findings focus on the consistency, relevance, measurability & presentation of reported performance information. COMPLIANCE WITH LAWS AND REGULATIONS Report non-compliance matters in relation to the performance management and reporting processes

19. DPME - Audit of Predetermined Objectives Additional Matter paragraph included in audit report: >20% of targets not achieved No matters reported Reported in audit report

20. Lack of monitoring and oversight over PDO processes Root Causes DPME • Lack of understanding of the principles of FMPPI New Department that was not fully established for the whole year under review DPME - Root Causes

21. DPME - Recommendations and way forward

22. DPME - Recommendations and way forward

23. DPME - Recommendations and way forward

24. Audit of Predetermined Objectives - NYDA No matters reported Reported in audit report