briefing to portfolio committee on department of trade and...

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Briefing to Portfolio Committee on Department of Trade and Industry

Key control engagements / status of records review – objectives

Identify those matters that add value when

measures and action plans have been put 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, with consequential

regression in audit outcomes

Key

focus areas

Oversight and

monitoring Financial management

Performance management

Procurement and contract managementCompliance

management

HR management

IT management

Financial health

Key control engagements / status of records

review – focus areas

2

Engaging accounting officers in conversations

that are insightful, relevant and have an impact

4

DO

PLAN

CHECKACT

5

The overall audit outcomes are indicated as follows:

Unqualified with no findings

Unqualified with findings

Qualified with findings

Adverse with findings

Disclaimed with findings

Audits outstanding

Movement over a period is depicted as follows:

Improved

Unchanged slight improvement slight regression

Regressed

The percentages in this presentation are calculated based on the completed audits of 10 auditees, unless indicated otherwise

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Key projects

Financial health

Audit outcomes

Irregular expenditure andsupply chainmanagement

Fruitless and wastefulexpenditure

Unauthorisedexpenditure

Fraud andconsequences

Internal control

Informationtechnology

Assurance providers

Root causes/Best practices

2016-17 PFMA outcomesTotal budget: R10 billion

2016201620162016----17171717 2015201520152015----16161616

80%

100%

60%

40%

20%

0%

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Audit outcomes over four years

10 auditees

10% (1) 10% (1) 10% (1)

30% (3) 30% (3)

50% (5)

70% (7)

60% (6) 60% (6)

40% (4)

20% (2)

2016-17 2015-16 2014-15 2013-14

10% (1)

10 auditees 10 auditees 10 auditees

60%

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Movement table (2016-17 over 2015-16)

Improved Unchanged Regressed New auditee

+

Outstanding

audits

Unqualified with no

findings = 6

• Department of

Trade and

Industry (the

dti)

• Companies and

Intellectual

Property

Commission

(CIPC)

• National Consumer

Tribunal (NCT)

• National Gambling

Board (NGB)

• National Lotteries

Commission (NLC)

• Companies Tribunal

(CT)

None None None

Unqualified with

findings = 3None

• National Consumer

Commission (NCC)

• National Credit

Regulatory

(NCR)

• South African

Bureau of

Standards

(SABS)

None None

Qualified with

findings = 1None

• National Regulator

for Compulsory

Specifications

(NRCS)

None None None

2 026 0Movement

Audit

outcome

Colour of the number indicates the audit opinion from which the auditee has moved.

0

9

Management and delivery on key programmes – spending, performance and reporting – the dti

ProgrammeBudget

spent

Material

misstate

ments

Unauthorised,

irregular and

fruitless and

wasteful

Findings on material indicators Achievement

of targets –

from

performance

reportIndicator

Not

useful

Not

reliable

Trade and

Industry -

Programme 6:

Incentive

Development

and

Administration

100% No None

• Value (rand) of projected

investments to be

leveraged from projects /

enterprises approved

• Projected number of new

jobs supported from

projects /enterprises

approved

• Projected number of jobs

to be retained from

approved enterprises

• Projected number of jobs

to be retained from

approved enterprises

No

findings

No

Findings

All targets

achieved

GoodGoodGoodGood Of concernOf concernOf concernOf concern Intervention requiredIntervention requiredIntervention requiredIntervention required

UE UE UE UE –––– Unauthorised expenditure IE Unauthorised expenditure IE Unauthorised expenditure IE Unauthorised expenditure IE –––– Irregular expenditure FWE Irregular expenditure FWE Irregular expenditure FWE Irregular expenditure FWE –––– Fruitless and wasteful expenditureFruitless and wasteful expenditureFruitless and wasteful expenditureFruitless and wasteful expenditure

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Improvement in financial health – Portfolio, excluding Companies Tribunal

89% (8)

67% (6)

89% (8)

11% (1)

33% (3)

11% (1)

2014-15

2015-16

2016-17

Material uncertainty exists whether of auditees can continue to operate in future 0%

Two or less unfavourable Two or less unfavourable Two or less unfavourable Two or less unfavourable

indicatorsindicatorsindicatorsindicators

More than two unfavourable More than two unfavourable More than two unfavourable More than two unfavourable

indicatorsindicatorsindicatorsindicators

Significant doubt that operations Significant doubt that operations Significant doubt that operations Significant doubt that operations

can continue in future and/or can continue in future and/or can continue in future and/or can continue in future and/or

auditee received a disclaimed or auditee received a disclaimed or auditee received a disclaimed or auditee received a disclaimed or

adverse opinion, which meant adverse opinion, which meant adverse opinion, which meant adverse opinion, which meant

that the financial statements that the financial statements that the financial statements that the financial statements

were not reliable enough for were not reliable enough for were not reliable enough for were not reliable enough for

analysesanalysesanalysesanalyses

• Although an overall improvement in financial health for the portfolio,

Department of Trade and Industry remained with more than two

unfavourable indicators:

• Accrual-adjusted deficit for the year was realised

• Accrual-adjusted net current liability position was realised

• Accrual-adjusted net liability position was realised

Key concerns identified

89%

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Movement on the quality of financial statements, annual performance reports and compliance

25%(1)

25%(1)

75% (3)

75% (3)

2016-17 2015-16

10% (1)

10% (1)

80% (8)

80% (8)

2016-17 2015-16

56%(5)

22%(2)

44% (4) 33%

(3)

56% (5) 67%

(6)

2016-17 2015-16

Audit of financial statementsFindings on annual performance

reports, excluding CT

Findings on compliance

with key legislation, excluding CT

Unqualified Qualified Adverse DisclaimedAFS submittedAFS submittedAFS submittedAFS submitted

on timeon timeon timeon time

AFS and APR submitted with no AFS and APR submitted with no AFS and APR submitted with no AFS and APR submitted with no

material misstatementsmaterial misstatementsmaterial misstatementsmaterial misstatements

With no findingsWith no findingsWith no findingsWith no findings

With findingsWith findingsWith findingsWith findings

60%(6)

60%(6)

100%(4)

100%(4)

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Unauthorised, irregular as well as fruitless and wasteful expenditure increase over 3 years

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

R40 120 million

R million

R37 000 million

R16 768 million

R million

R million

R11 418 million

R million

R million

Irregularexpenditure

Fruitless andwasteful expenditure

Unauthorised expenditure

2016-17 : R42 787 (2 auditees)

2015-16 :R417 519 (5 auditees)

2014-15: R142 447 (7 auditees)

2014-15 : The unauthorised expenditure

relate to the 2004-05 financial year and was

approved by Parliament/legislature with

funding in 2015-16

2016-17 2015-16 2014-15

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Most common findings on supply chain management, excluding CT

0% (0)

11% (1)

11% (1)

22% (2)

11% (1)

11% (1)

0% (0)

Local content - biddocumentation did not stipulatethe minimum threshold for…

Bid documentation did notinclude evaluation criteria

Criteria applied in evaluationdiffered from originally specified

Preference point system notapplied or incorrectly applied

Contracts amended or extendedwithout approval by a delegated

official

Competitive bidding not invited

Three written quotations not invited

14

Fraud and consequence management

Allegations of financial and/or fraud and SCM

misconduct (10 auditees)

28% (43)

17% (26)

9% (14)

Allegations not investigated

Investigationstook longer than three months

Allegations not properly investigated

Previous year unauthorised, irregular and fruitless and

wasteful expenditure reported for investigation

90% (9) 90% (9)

10% (1) 10% (1)

2016-17 2015-16

Not investigatedNot investigatedNot investigatedNot investigatedInvestigatedInvestigatedInvestigatedInvestigated

90%

• 1 auditee had findings on non-compliance with legislation on consequence management for which none had material findings

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Supply chain management findings reported to management for investigation

30% (3), 27

instances

0% (0), 0 instances

10% (1), 7

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 investigatedAll investigatedAll investigatedAll investigated Some investigatedSome investigatedSome investigatedSome investigated None investigatedNone investigatedNone investigatedNone investigated

8

0

35

Other SCM-related allegations

Employee(s) failed to disclose interest in supplier

Supplier(s) submitted false declaration of interest

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Status of internal control, excluding CT

44% 22% 33%Leadership

33% 22% 44%

Financial andperformancemanagement

100%Governance


Good controls = 60%

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Good controls = Information technology controls

10% (1)

20% (2)

70% (7) 50% (5)

50% (5)

30% (3)

40% (4)

30% (3)

2016-17 2015-16 2014-15

33% (3)

67% (6)

Department

Public entities


30%

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Assurance and key controlsFirst

level

9

8

5

4

1

5

4

3 2Senior

management

Accounting officer/authority

Executive authority

Internal audit unit

Audit committee

Portfolio committee

Third

level

Second

level

-------------------------------------------------


Provides assurance

Provides some assurance

Provides limited/ no assurance

Not established

-------------------------------------------------

Assurance

Key controls60%

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If officials who deliberately or negligently ignore their duties and

contravene legislation are not held accountable for their actions,

such behaviour can be seen as acceptable and tolerated.

Management (accounting authorities and senior management) do not

respond with the required urgency to our messages about

addressing risks and improving internal controls.

Root causes

33% (3)

11% (1)

11% (1)

Slow response toimproving key controlsand addressing risk areas

Key officials lackappropriate competencies

Instability or vacancies inkey positions

The instability and prolonged vacancies in key positions can

cause a competency gap and affect the rate of improvement in audit

outcomes.

Best practices = 60%

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Source: Robert Klitgaard (academic anti-corruption research)

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