AGSA
5TH PARLIAMENT
CAPACITY
BUILDING
PRESENTATION
23 September 2014
1
WELCOME
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.
2
PURPOSE OF PRESENTATION
To
provide
members
of
parliament
with
the
necessary
information/guidance on the role of the AGSA to enable them to effectively
execute their oversight function.
3
CONTENT
Oversight role
1.
•
Oversight body
•
Combined assurance model
•
AGSA contribution to oversight
2. Audit mandate and process
•
AGSA mandate & Legislative requirements
•
AGSA aspiration to the public service
3. The work we do
•
AGSA products
•
Good administration
4. Briefing process
4
THE ROLE OF OVERSIGHT
5
The role of oversight
Identify the desired impacts
Assess & adjust
Strategic planning
AG audits
accountability
information
Year-end reporting
Monitor & take corrective
action
Institution
Department
Public entity
Implementation /
in-year reporting
Specify performance
indicators
Budgeting /
operational
planning
Set targets & allocate
resources
6
Strategic planning
• Is the strategic plan in line with the legislative requirements / objectives?
• Ensure that the strategic plan and strategic initiatives are aligned with
the government priorities, national plan of action and Medium Term
Expenditure Framework (MTEF)
• Enquire about / identify:
– challenges in meeting the strategic objectives
– initiatives to address them
• Evaluate:
– how success will be measured
7
Budgeting
 Budget preparation
 Is the budget aligned with the strategic plan?
 Have adequate resources been allocated to the priority areas?
 Are there budget constraints and how have they been dealt with?
 Focus on changes in the budget from one year to the other
8
Implementation/Monitoring
 Is departmental spending on the right track and in line with strategic plan
priorities?
 Does management evaluate monthly and quarterly reports?
 Do action plans exist to address audit findings and improve financial
management and accountability?
 Are there designed, implemented and maintained internal controls
(relevant to financial and non-financial information)?
 Are procedures in place to identify, prevent and detect fraud?
 Are adequate governance arrangements in place and are they effective
(internal audit and audit committee)?
9
Reporting
 Keeping management accountable and determining whether there is –
• Compliance with reporting responsibilities as set out in the PFMA
• Compliance with Parliament’s Appropriation Act
• Effective and efficient utilisation of resources
 Review the annual report of the department / entity including the audit
report, and consider both the financial and non-financial information
presented.
10
Combined assurance model
Management assurance
First level of assurance
Senior
management
Accounting
officers/
authority
Executive
authority
Required assurance levels
Extensive
Extensive
Extensive
Management’s assurance role
• Senior management – take immediate
action to address specific recommendations
and adhere to financial management and
internal control systems
• Accounting officers/ authority – hold
officials accountable on implementation of
internal controls and report progress
quarterly and annually
• Executive authority – monitor the progress
of performance and enforce accountability
and consequences
11
AGSA contribution to oversight
Provide briefings to committees:
• On audit reports before the portfolio committee compiles their BRRR
(read with the annual report)
• Update on progress of current year audits. Sharing of audit risks &
•
•
•
•
•
•
status of key controls
Before the APPs is reviewed by the portfolio committee to discuss
the findings identified from the pro-active audit of the PDOs of the
department
Acts as an expert witness during public hearings
Road shows after tabling of the general report (PFMA & MFMA)
Regular follow-up on the progress of implementation of resolutions
Interactions with the chairpersons (quarterly)
Assist in building capacity of members via APAC.
12
AUDIT MANDATE AND PROCESS
13
AGSA Mandate and Legislative requirements
1. Constitution of the Republic of South Africa (1996)
Section 188 – must audit and report on accounts, financial statements
and financial management of government institutions and report to
Parliament / legislature that has a direct interest in the report.
2. Public Audit Act (Act No.25 of 2004)
Sections 20 – Auditor-General must prepare audit report containing
opinion/conclusion on:
i.
Financial statements and financial position
ii.
Compliance and financial management
iii.
Predetermined objectives
14
AGSA’S aspirations for the Public Service
Robust
financial and
performance
management
systems
•
•
•
•
Transparent and stable reporting systems
Budgeting and planning processes
Focussed information management platforms
Strong internal audit capabilities
Oversight and
accountability
• Reporting to enable effective oversight
• Applying consequences for
transgressions and poor performance
Professionalism
Commitment
and ethical
behaviour by all
Competent and
value-adding
Auditor General
• Visible commitment by all players in the
public service
• Demonstrated impeccable ethical
behaviour and professionalism
Creating a better
and dignified life
for the citizens of
South Africa
through timely,
effective,
efficient and
economical
SERVICE
DELIVERY
DAC Mission
“To enhance job
creation by
preserving,
protecting and
developing arts,
culture and
heritage to
sustain our
democracy and
build our nation”.
• Independent and relevant reporting by the AG
• Value-adding input expressed by the AG
15
Accountability and reporting
• The AGSA is accountable to the National Assembly and has to
report on its activities and performance of its functions in terms of
section 10 of the Public Audit Act (PAA).
• The main accountability instruments are the AGSA's budget and
strategic plan, as well as the annual report, both of which are
tabled annually in the National Assembly.
• The Standing Committee on the Auditor-General (SCoAG),
established in terms of section 10(3) of the PAA, oversees the
performance of the AGSA on behalf of the National Assembly.
16
Visibility of the AGSA beyond the mandate
• The AGSA provides the oversight committees in parliament
and all legislatures with briefings on root causes and
recommendations on corrective measures to improve audit
outcomes before the entity hearings.
• Developing required leadership competencies through
mentoring, coaching and leadership programmes and
processes for effectively managing change.
• The AGSA consults widely with the stakeholders in the
executive and legislatures prior to tabling the General Reports
that consolidate the audit outcomes of National, provincial and
municipalities
• The General Reports are tabled in Parliament & Legislatures
17
THE WORK WE DO
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AGSA Products
Regularity Audit - Mandatory
•
•
•
Verify whether there is no omitted information on financial statements
Consists of – Financial, Compliance , PDO and Internal control
Full application of international auditing standards
Regularity audit are supported by:
Information systems audit
ISA focus on the assessment of the information systems environment, use of Computer
Assisted Audit Techniques (CAATs) in audits and data analytics
Performance Audits
DISCRETIONARY
(Section 20(3) of the PAA)
1. Evaluate measures to ensure economic
procurement of resources and efficient and
effective application of the same
2. Effect of policy implementation (not
policy evaluation)
3. Reporting is factual and does not include
an audit opinion
4. Audit is conducted by performance
auditors and may include subject matter
experts
5. Focuses on a specific government
programme, project or management project
Investigations
DISCRETIONARY
Special Audits
DISCRETIONARY
An independent
process to prevent or
detect fraud/ crime in
the public sector
Specific focus area of
financial misconduct
maladministration &
impropriety
Agreed upon
procedures, i.e. donor
funding certificates
19
AGSA products (service types and value add)
Performance Auditing:
Focuses on a specific government policy or management process
BEST RESOURCE
BASED ON NEED
BEST RESULTS
USING WHAT WE
HAVE
VALUE FOR
MONEY
GOAL REACHED
SERVICE
DELIVERY
20
The regularity audit – what we do & what not

X
• Provide assurance that AFS
are free from material
misstatements
• Provide assurance that all
applicable laws and regulations
have been complied with
• Report on usefulness and
reliability of the information in
the annual performance report
• Identification of fraud
• Report on material noncompliance with relevant laws
and regulations
• Provide assurance that service
delivery has been achieved
• Identify key internal control
deficiencies to be addressed
21
Timelines of regularity audit cycle
31 March
Year end
(PFMA)
31 July
Audits complete
(PFMA)
(AGSA)
Last quarter of current
year / First quarter of
following year
General reports (PFMA)
published
22
Audit of financial statements and specific focus areas
Financial statements
• Required in terms of the Constitution and the Public Audit Act
• The auditor forms an opinion on whether the financial statements are
prepared in all material aspects in accordance with the specific
applicable financial reporting framework.
Predetermined objectives
• Service-delivery issues with focus on the reliability and usefulness of
performance information which includes the measurement of targets
as set out in the beginning of the financial year, were actually
achieved.
Compliance with laws and regulations
• Reporting on material non-compliance with key legislation.
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Good Administration / Clean audit
Financially Unqualified
AFS
(free from material
misstatement)
Good
Administration
/ Clean audit
No material findings on
Compliance with laws and
regulations
No material findings on
the Performance Report
(Predetermined Objectives)
24
Different types of audit opinion
Unqualified/
unmodified
Unmodified with
emphasis of matter
Qualified
25
Financial statements give a true and fair view (or are
presented fairly, in all material respects) in accordance
with the applicable financial reporting framework.
The addition of such an emphasis of matter paragraph(s)
does not affect the auditor’s opinion on whether the
financial statements are fairly presented
The effect of any disagreements with management re
departures from financial reporting framework, or limitation on
scope is not so material and pervasive (unqualified opinion
cannot be expressed )
Different types of audit opinion continues
Disclaimer
Adverse
26
There is lack of sufficient appropriate audit evidence to
express an opinion.
The auditor disagrees with the representation made by
management in the financial statements to the extent of
confirming that it’s not a fair reflection of the financial
position, performance and cash flow.
Audit of Predetermined Objectives
Definition:
Annual audit of reported actual performance against predetermined objectives, indicators
and targets as contained in the annual performance report of departments and their
entities.
Audit consists of the following Main Criteria:
Compliance with
regulatory
requirements
E
x
i
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t
e
n
c
e
T
i
m
e
l
i
n
e
s
s
Reliability
Usefulness
P
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M
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Audit report structure
a) Report on the financial statements






Introduction
Accounting officer/authority’s responsibility
Auditor-General’s responsibility
Opinion
Emphasis of matters
Additional matters
b) Report on other legal and regulatory requirements


Predetermined objectives
Compliance with laws and regulations ( Treasury regulations, PFMA, etc.)
c) Internal control



Leadership
Financial and performance management
Governance
d) Other reports



Investigations
Performance audits
Agreed up procedures
28
Emphasis of matter/additional matters
Why? – to draw the users of financial statements attention, i.e.
• Going concern
• Internal control weaknesses
• Financial management
• DoRA
• Fraud or suspected fraud
• Unauthorised, irregular and fruitless and wasteful expenditure
Emphasis of matter
Additional matters
to draw users’ attention to a matter
presented or disclosed in the financial
statements which is of such importance
that it is fundamental to their understanding
of the financial statements
to draw users’ attention to any matter other
than those presented or disclosed in the
financial statements which is relevant to
users’ understanding of the audit, the
auditor’s responsibilities or the auditor’s
report
29
BRIEFING PROCESS
30
Briefing process
Annual Report
including
Audit Report
&
Performance
Report
State of the
Nation
Address/
Budget
speeches
Estimates of
National
Expenditure
AGSA Briefing
Notes
TOOLS
Accounting
officer and
audit
committee ’s
Reports
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Department of Arts
and Culture & its
entities
performance
32
DEPARTMENT OF ARTS & CULTURE
Overview of the Annual Report
The Annual Report of the department consists of the following:
1. General information
- Minister’s foreword, Deputy Minister’s statement, Overview of the Accounting officer,
Strategic overview, Legislative mandate of the department, Organisational structure, Public
entities and statutory bodies reporting to the Minister.
2. Information on predetermined objectives and programme performance
- Audited in terms of the audit work performed on predetermined objectives.
3. Human resources (HR) management
- Includes statistical information on the HR elements of the department)
33
DEPARTMENT OF ARTS & CULTURE
Overview of the Annual Report
The Annual Report of the department (Continued)
4. Annual financial Statement Sections (DAC)
- Includes the following:
4.1) Report of the Audit committee
4.2) Report of the Accounting Officer
4.3) Report of the Auditor-General
4.4) Financial Statements
•
Appropriation Statement, Statement of financial performance, Statement of
Financial Position, Statement of Net Assets, Cash flow statement, Notes
•
The financial statements are prepare in accordance with the Modified Cash
Standards for DAC.
•
In terms of the modified cash basis of accounting a transaction is only
recognised when it is initiated by the receipt of payment of cash.
34
Audit opinions over past 3 years
Nr
Name of Department/Entity
1
Department of Arts & Culture
2
Artscape
3
Die Afrikaanse Taalmuseum
4
Ditsong: Museums of South Africa
5
Freedom Park
6
Iziko Museums of South Africa
7
KwaZulu-Natal Museum
8
Luthuli Museum
9
Market Theatre Foundation
Financially
unqualified with
no findings (clean
audit opinion)
Financially
unqualified with
findings
Qualified with
findings
2010/11
2011/12
2012/13
Adverse or
disclaimer with
findings
35
Audit opinions over past 3 years (continued..)
Nr
Name of Department/Entity
10
Msunduzi/Voortrekker Museum
11
National Arts Council of South Africa
12
National Film and Video Foundation
13
National Heritage council
14
National Library of South Africa
15
National Museum: Bloemfontein
16
Nelson Mandela Museum: Mthatha
17
Pan SA Language Board
18
Performing Arts Centre of the Free
State
Financially
unqualified with
no findings (clean
audit opinion)
Financially
unqualified with
findings
Qualified with
findings
2010/11
2011/12
2012/13
Adverse or
disclaimer with
findings
36
Audit opinions over past 3 years (continued..)
Nr
Name of Department/Entity
19
Robben Island Museum
20
SA Library for the Blind
21
SA Heritage Resources Agency
22
State Theatre
23
The national English Literary Museum
24
The Playhouse Company
25
The War Museum of Boer Republics:
Bloemfontein
26
Williams Humphrey Art Gallery: Kimberley
27
Windybrow Theatre
Financially
unqualified with
no findings (clean
audit opinion)
Financially
unqualified with
findings
Qualified with
findings
2010/11
2011/12
2012/13
Adverse or
disclaimer with
findings
37
THANK YOU
38