Risk Management in the TVET Sector

1. TECHNICAL VOCATIONAL EDUCATIONAL AND TRAINING COLLEGES AN INTRODUCTION TO THE IMPEMENTATION OF A COMPLIANT RISK MANAGEMENTPROCESS July 2014

2. Risk Management in the TVET Sector National Overview Imperatives – Legislation and Governance – Reportable non-compliances Implementation Challenges Proposed Solution Toolkit and Implementation Plan Way Forward

3. Risk Management in the TVET Sector National Overview and Current State of Affairs (i) The percentage of colleges without any risk management function at all has decreased from 32% to 4% during the twelve months ended June 2014* Whilst this is undoubtedly a positive change, it is weakened by the varying degrees of adoption of the Risk Management culture by individual colleges and the lack of a comprehensive, standard approach to risk identification and mitigation throughout the sector. * (Source: Quarterly SAICA project reports June 2013 and June 2014)

4. Risk Management in the TVET Sector National Overview and Current State of Affairs (ii) • 72% of the colleges’ risk management processes continue to be “work in progress” WIP as at end June 2014* • It is certain that the risk management systems and processes apparently in place or being developed vary significantly between TVETCs • Due to these anticipated variations in approach, the quality of the outcomes, from college to college, is also likely to vary considerably * (Source: Quarterly SAICA project report June 2014)

5. Risk Management in the TVET Sector Imperatives – The Case for Risk Management (i) The FET Actrequires colleges to implement a risk management system no less effective than that prescribed to other state entities in the Public Finance and Management Act. (Section 25 (1)) The Public Sector Risk Management Framework published by the National Treasury in 2010 as far as it pertains to PFMA

6. Risk Management in the TVET Sector Imperatives – The Case for Risk Management (ii) • Treasury Guidelines – whilst, under current legislation, some may not be directly applicable to TVET colleges, they are considered to be good practice, and the A-G does apply them • The last report on corporate governance in the private sector (King III), incorporating the principles of Risk Management has been cited by the DHET as “best practice” and has been recommended for adoption by the TVET sector

7. Risk Management in the TVET Sector Imperatives – The Case for Risk Management (iii) • King III emphasises the necessity for “risk management to be part of an entity’s internal control and governance procedures” • The Accounting Officer of a public entity is responsible for managing the financial administration of the public entity and must, for this purpose, take all reasonable steps to ensure that the public entity has and maintains effective, efficient and transparent systems of financial and risk management and internal control

8. Risk Management in the TVET Sector Potential Consequences of Ignoring Risk management: Audit qualification – non compliance with requirements of FET Act Disciplinary action against the Accounting Officer for failure to meet the legal requirements of the job, as defined in the Public Finance Act Suspension of Council members for failure to ensure that there are adequate checks, controls and balances in place to mitigate risks that may adversely affect the college’s performance

9. Risk Management in the TVET Sector Potential Consequences of Ignoring Risk management: Additional matters raised in the external auditor’s management report, potentially affecting the achievement of key performance indicators Increased focus on Risk Management by the Auditor-General

10. Risk Management in the TVET Sector Implementation Challenges Risk Management, including measures to combat fraud and corruption, remains an important focus for DHET, the Auditor-General and, thus, all TVET colleges The concept of Risk Management, widely accepted in commerce and the private sector, may be new to many in the TVET sector – but it is not optional The capacity (availability, experience) of current staff may be insufficient to achieve an acceptable, compliant outcome Departments / branches / staff may perceive risk identification as a negative reflection on performance

11. Risk Management in the TVET Sector Implementation Challenges The Risk Register, as part of an effective solution, must be user friendly and unintimidating Leadership, from the top, is essential for acceptance of the new process New Council members may also need specialised RM education Recommendations may be resisted for a variety of reasons, not least when a particular college already has a satisfactory and compliant process in place

12. Risk Management in the TVET Sector The Solution SAICA and DHET have developed a Risk Management Manual to be recommended as a standard to all TVET college councils The initial roll out will focus on colleges that are still striving for compliance with Treasury guidelines, the FET Act and best practice in so far as Risk Management is concerned The Manual, if adopted and implemented correctly, will assist a college to become RM compliant subject to certain conditions

13. Risk Management in the TVET Sector The Solution The mere acquisition or adoption of a particular tool alone does not denote compliance. The following factors must also be present: • It must be used to develop an internal audit programme • Outcomes must be regularly reported to Council • It must be regularly updated (a living document) • Council is obliged to ensure that the Risk Management function is adequately resourced and appropriate skills and capacity must be acquired

14. Risk Management in the TVET Sector The Solution • It is recognised that the use of any particular tool or risk register format may not currently be prescribed to Councils • College councils have three options to choose from: • Create an internal capability within the college • Engage third party providers of expertise in the areas of risk management • A combination of the two • Whether in-house or outsourced, a documented process must exist

15. Risk Management in the TVET Sector Criteria for Successful implementation of a Risk Management environment • Adopt RM policy including a fraud prevention plan • Application Cross functional cooperation • of a Risk Management process • Regularly updated Risk register • Risk based audit plan • Regular review and reporting (Principal’s Office, Finance, Academic, Corporate Services and Registrar)

16. Risk Management in the TVET Sector Way Forward • Council adoption of process or proof of alternative solution in place • Participation in Risk Management introduction and workshops • Ownership of RM process by each and every college • Continuous and ongoing review of risks and verification of mitigating controls as part of internal audit plan

17. Risk Management in the TVET Sector Thank You Any Questions at this point?