Briefing to SCOAG
9 September 2011
Our 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.
This is our reputation promise
Table of contents
 Objectives of this document
 Overview of AGSA commitments
 Report on AGSA’s achievements on the 5
organisational commitments:
o
o
o
o
o
Simplicity, clarity and relevance of messages
Visibility of leadership
Strengthen human resources
Lead by example
Funding
 Conclusion
 Decisions for SCOAG
Objectives of this document
(an Executive Summary of the AGSA Annual Report 2010-11)
 To report on the outcomes of the predetermined
objectives set out in the AGSA Strategic Plan and
Budget 2010-2013
 To appraise Parliament of the AGSA’s financial
performance for the year under review
Overview of AGSA commitments
The AGSA remains committed to the following goals with a view to impact
positively on public sector accountability:
– Communicate root causes and recommendations in simple, clear and
relevant language, thus deepen stakeholder understanding of our reports
– Encourage championing of the implementation of the audit
recommendations through our intensive leadership’s visibility programme
to auditees, oversight authorities and our staff
– Strengthen our human resources: by creating a high-performance culture,
motivated staff and developing competent leaders in the organisation
– Lead by example by delivering audit products of a consistently high
standard and timeliness, and addressing our own internal controls and
organisational transformation
– Ensuring our financial sustainability
Simplicity, clarity and relevance
AGSA’s main achievements

Being able to communicate messages on which our auditees could take action
and that in turn is critical to achieving oversight, accountability and governance
in the public sector

Demonstrating our success through achieved commitments from different
stakeholders to address the root causes of audit outcomes.

Integrating the work of the specialised audit units (Performance Auditing,
Investigations and Information Systems Auditing) into regularity audits.
Fundamental requirement 4: Empowering the public to hold government accountable and responsive,
through objective information, simplicity and clarity of the message, and convenient access to audit
reports and messages in relevant languages
INTOSAI framework “Value and benefits of SAIs”
Simplicity, clarity and relevance
Information Systems Audit
 As part of the AGSA’s integrated audit approach, the unit provided
information systems (IS) audit support to regularity audits
 PFMA : IS audit coverage increased by 8.5%
 MFMA: IS audit coverage increased significantly by 32%
 In total 400 assignments were completed throughout the PFMA and
MFMA cycles
 ISA Unit established presence in four provinces: KZN, WC, EC, & GP
 Impact achieved: Enabled effective transversal audit in supply chain
management & human resources by the regularity audit BUs
Simplicity, clarity and relevance
Performance audit:

Celebrated 25 years since the 1st performance audit at the then Department of
Education and Training

The focus of the Performance Audit BU has shifted from identifying performance
audit themes to having sector specialists in all of the Government’s 12 strategic
outcomes

Completed a performance audit of infrastructure at provincial Departments of
Health and Education – the outcomes shared with management and all parties
committed to immediate and drastic actions to address the deficiencies identified

Conducted research on the oversight and governance systems of the
Department of Public Enterprises over state-owned entities and Government’s
readiness to report on their performance
Visibility of leadership
AGSA’s main achievements
 Sharing the audit outcomes of both PFMA and MFMA through the annual AG
roadshows with both the executive and legislative arms of government, as well as
structures such as APAC, the SALGA, Speakers’ Forum, etc
 Recognition
of AGSA’s leading role in the international community through the
hosting of INCOSAI
 The AGSA was awarded the prestigious Jörg Kandutsch Award during XXth
INCOSAI in recognition of its exceptional implementation of INTOSAI goals within
the member’s regional working group and globally.
Fundamental requirement 13: SAIs should strengthen communication with stakeholders for better
understanding of the SAI’s responsibilities, audit work and results
INTOSAI framework “Value and benefits of SAIs”
Visibility of leadership
Visibility of leadership
Visibility of leadership
Note: The figure that refers to the training of provincial Public Accounts Committee (PAC) members, also
includes a large portion of Portfolio Committee (PC) members given their dual membership of the
PAC/PC. There were also a number of members of Municipal Public Accounts Committees (MPACs)
present at the PAC training. Therefore, the training covered PAC members of all three legislative spheres.
Visibility of leadership
 The AG’s roadshows with staff in each province and per portfolio at head office
affords employees an opportunity to engage one-on-one with the AGSA top
leadership which enhances their understanding of the AGSA’s strategic
objectives and outcomes of its audit reports.
 Our continued strategic relationships with professional bodies like IRBA and
SAICA affords us an opportunity to influence the developments in the auditing
and accounting profession and standards as to address the needs for auditing
frameworks in the public sector.
 As one of the most active SAIs within INTOSAI, the AGSA participates in
several task teams, working groups and committees, each established in terms
of INTOSAI’s strategic plan
 This year marks the Centenary of AGSA
Strengthen our human resources
AGSA’s Main Achievements
 Achieved significant progress in streamlining the executive performance
management, through improvement of performance contracting and reviewing
processes at executive leadership level
 Reached 89% occupancy level against a target of 80% by establishing a
Recruitment Centre of Excellence to deal with skills scarcity, trainee auditor
retention strategy and comprehensive salary benchmarking.
 Increased by 73% the number of audit professionals who passed final qualifying
examinations and completed their practical experience through our bursary
schemes, learnerships (trainee auditor scheme) study support and training.
Fundamental requirement 10: SAIs’ policies and procedures should set out that the SAI will only
undertake work that it is competent to perform, while managing the risks to quality.
• SAIs should ensure that they have appropriate resources to perform their work in accordance with relevant
standards and other requirements.
INTOSAI framework “Value and benefits of SAIs”
Strengthen human resources
Strategies yielding good results:
• Commitment of line management and training officers
• Structured and comprehensive training program
• Strong governance processes
- Trainee auditor assessment
• Good relationships with professional bodies
Strengthen human resources
Professional membership employees profile 2007 to 2011
Professional membership employees profile:
2007 to 2011
900
•
800
16% aggregate growth in
professional employees over 5
700
year period
600
•
500
46% aggregate growth in CAs
employees from 2007- 2011
400
•
300
employees over a 5 year
200
period
100
0
8% decline in RGAs
•
CA (SA)
2007
256
2008
252
2009
296
2010
343
2011
375
RGA
369
356
351
345
339
CISA
32
32
37
35
43
ACCA
9
11
12
16
16
Total
666
651
696
739
773
34% & 77% aggregate growth
in CISA and ACCA employees
in five years
Strengthen human resources
 The AGSA leadership were encouraged to
continue adapting their skills to meet the
evolving requirements and ensure an
appropriate leadership culture.
 Executive pipeline continued to be built to
ensure business continuity at the AGSA. Our
improved position allows us to meet long- and
short-term leadership needs at all levels.
Lead by example
AGSA’s Main achievements
 The AGSA completed its work within the legislated deadlines for both
the PFMA and MFMA audit cycles, consistently exceeding our internal
targets, whilst taking care not to achieve timely submission at the
expense of our people and internal quality processes.
 AGSA is a certified level 3 contributor to BBBEE
 The organisation achieved a clean audit report.
 In a first of its kind review the AGSA as a SAI subjected itself to a firm
(office)-level review by a private sector regulator namely, the
Independent Regulatory Board for Auditors.
Fundamental requirement 11: In keeping with the principle of ‘leading by example’, SAIs need to adhere
to the same, appropriate rules and philosophy that SAIs expect from auditees as a minimum.
INTOSAI framework “Value and benefits of SAIs”
Lead by example
AGSA’s Main achievements
(international level)
 Successful hosting of XX th INCOSAI enabled the AGSA to position
itself within the global INTOSAI community and in Africa as a SAI that
vigorously implements its constitutional mandate.
 AGSA’s credit contributed substantially to developing guidelines
through INTOSAI that form part of the ISSAIs, public sector specific
application guidance on performance audits and the auditing of
financial statements, internal control and legislative compliance.
Lead by example
Employment equity profile: 2007 to 2011
120%
93%
100%
89%
88%
86%
84%
80%
60%
Designated
group
40%
NonDesignated
20%
16%
14%
12%
11%
7%
0%
2007
2008
2009
2010
2011
• A steady improvement from 2007 in designated versus non-designated groups ratio
• Stabilisation of the appropriate ratio at all employment bands
• Organisational policies were reviewed with emphasis on fairness and equality
Lead by example
Quality assurance – 77% vs 75% industry average
100%
90%
84%
80%
72%
86%
77%
75%
70%
70%
• AGSA achieved 77% vs target of 86%
due to
• New clarified ISAs
• Newly revised audit methodology &
working papers
• Audit teams ability to audit full
GRAP accounting framework
implementation
• Audit teams unfamiliar with audit
of predetermined objectives
60%
50%
40%
30%
20%
10%
0%
2006
2007
2008
Year
• Reviewed engagement performance
policies, procedures and working
papers
• Industry average - 75%
2009
2010
2011
• IRBA firm level review on compliance
to ISQC1 yielded good
results.
Lead by example
We completed our work for both the PFMA and MFMA audit cycleswithin
the legislated deadlines
PFMA timeliness trend results:
2006-2010
MFMA timeliness trend results:
2006-2010
100%
100%
99%
98%
97%
99%
90%
92%
96%
96%
94%
88%
80%
79%
92%
70%
92%
90%
60%
88%
87%
86%
50%
84%
40%
82%
80%
42%
30%
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
Lead by example
Corporate social investment (CSI) is an integral part of our
contribution towards transformation of our country.
 We visited a total of 107 schools in all nine provinces during 2010-11.
 The total planned allocation to audit firms increased by 7% (2010: R508m)
 We allocated 57% (R310m) of actual spending to small & medium size firms
Allocation
targets
% (2010-11)
Budget
R million
(2010-11)
Actual
R million
(2010-11)
% of
Actual
(2010-11)
Planned
allocation
R million
(2009-10)
Big and
large
45
R210
R233
42.9%
R229
Medium
35
R164
R236
43.5%
R198
Small
20
R94
R74
13.6%
R81
Total
100%
R468
R543
100%
R508
Size of
firms
Funding
AGSA’s Main Achievements
 The actual net surplus achieved for the year was R133 million (or
7.2% of revenue) against a budget of R68.6 million (or 3.7% of
budgeted revenue).
 Actual audit income was R1.850 billion (2009-10: R1.645 billion)
against a budgeted audit income of R1.836 billion.
 Free cash flow was R119 million on 31/03/2011 (R58 million on
31/03/2010).
Fundamental requirement 8: “SAIs manage their operations economically, efficiently, effectively and in
accordance with laws and regulations and report publicly on these matters.”
INTOSAI framework “Value and benefits of SAIs”
Funding
Financial highlights - Income statement
Revenue
2011
(R’000)
2010
(R’000)
1 850 432
1 644 647
Net surplus/deficit (R million)
R 160
R133m
R 140
Direct audit cost
Gross Profit
552 244
Gross profit% on
own hrs revenue
Other Income
(1 298 188)
30%
(1 155 124)
R 120
R99m
489 523 R 100
30%
R 80
R 60
83 667
53 960
R 40
R 20
Expenses
(502 794)
Net surplus
•
•
•
•
133 117
(444 318)
R0
99 165 R -20
R -40
-R8m
-R16m
2008
2009
Revenue is up by 13% compared to 2010
Gross profit margin remains 30%
Operating expenses are 27% of the revenue (2010: 28%)
The net surplus increased to 7.2% of revenue (2010: 6%)
2010
2011
Funding
Revenue breakdown
2011
(R’000)
2010
(R’000)
1 248 871
1 082 928
543 317
508 247
S&T
66 813
55 040
International
audit
25 585
32 055
Present value
adjustment
(34 154)
(33 623)
Total revenue
1 850 432
1 644 647
Own hours
revenue
Contract work
revenue
• Own hours revenue
increased by 15% due
to growth in the number
of audit heads
• 20% decrease in
international audit
income
Funding
Total debt trend results including accruals
R 180
R 160
R 140
Rmillion
R 120
R 100
R 80
R 60
R 40
R 20
R0
National Gov.
2009
2010
2011
R 64
R 67
R 50
Provincial
Gov.
R 83
R 106
R 107
Local Gov.
R 105
R 140
R 167
Statutory
bodies
R 41
R 44
R 48
Other
R 30
R 13
R 18
Funding
Local Government debtors per
Province (Total – R167 022 000)
Local Government ill-liquid debtors
per Province (Total – R36 838 000)
6,922 3,324
26,495
- -
9,657
48,653
9,878
9,792
1,306
4,187
19,903
33,876
10,839
8,040 4,052
-
5,965
971
Eastern Cape
Freestate
Eastern Cape
Freestate
Gauteng
Kwazulu-Natal
Gauteng
Kwazulu-Natal
Mpumalanga
Northern Cape
Mpumalanga
Northern Cape
Limpopo
North West
Limpopo
North West
Western Cape
National C
Western Cape
National C
Funding
AGEING OF TOTAL DEBT (includes accruals)
Total
(R’000)
National
Gov.
Current
(R’000)
30 – 120
days
(R’000)
120 + days
(R’000)
Ill-liquid
debtors
(R’000)
50 252
48 272
1 205
775
-
Provincial
Gov.
107 102
87 920
15 895
3 287
166
Local Gov.
167 022
43 069
55 563
68 090
36 838
Statutory
Bodies
47 776
34 306
4 760
8 710
6 467
Other (N1)
18 751
11 778
3 485
3 488
2 380
390 903
225 345
81 208
84 350
45 851
(N2)
Total
Notes:
N1 – Other debtor types include unlisted public entities, staff debtors, municipal entities, utility
agency corporations.
N2 – The 45,8million is included in the Total Debt figure of R390,9million
Conclusion
 AGSA continued to be a model organisation both locally
and on an international level
We continued to manage the organisation economically,
efficiently and effectively ensuring its financial viability
We increased our efforts in engaging our stakeholders
to encourage clean administration
We remained focused on contributing to continuous
transformation of our country
 Most importantly, we believe that with all our
professional activities we have contributed to the well
being of the citizens of South Africa
Decisions for SCoAG
Net surplus: (section 38(4) of Public Audit Act 2004)
Confirm appointment of external auditors (section
39(1) of Public Audit Act 2004)
Thank you