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Justin ScharneckEOH
Government CIO SummitOperation Clean Audit 2014: Governance of ICT: Contribution to the reduction of ICT costs and improved service delivery
Date: 30th May 2013
Using innovative technology solutions to reduce audit risk and improve service delivery
Overview
• ICT Governance – Extracting Business Value
• What is Operation Clean Audit 2014 (OCA -2014)?
• OCA -2014: Progress to-date
• AG Audit Opinion Types + Risk Areas
• EOHPSAS Response to OCA - 2014
• Our approach - Leveraging Technology
• Achievements in support of OCA - 2014
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ICT Governance – Extracting Business Value
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ICT Governance
GITO - Responsible
Corporate Governance of ICTHoD - Accountable
Corporate GovernanceMEC – Political Leadership HOD – Strategic Leadership
People Processes Technology Information
GITO - Considerations
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• Moratorium on Systems (IFMS)
• Value for Money (3 E’s)
• Pressure to reduce use of 3rd Parties (Consultants)
• Cost of Compliance (CGICTF) vs Reduction of ICT Costs
• Clean Audit Requirement
• Inherent Limitations of Transversal Systems
What is Operation Clean Audit 2014 (OCA -2014) ?
• OCA-2014 is a clarion call to all municipalities, national and provincial departments to
achieve clean audits by 2014.
• Launched in 2009 by ex Minister of COGTA (Sicelo Shiceka)
• This bold initiative is aimed at sustaining quality financial statements and management
information.
• Its core objective is the improvement of service delivery, in pursuance of further building
public confidence in government.
“There can be no compromise on the basic principles of sound financial management in ensuring that resources are mobilised efficiently to serve our people” – Pravin Gordhan (12/13 Budget Speech)
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AG Audit Opinion Types
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Audit Report Framework
Regularity
Clean Audit
Unqualified
Qualified
Adverse
Disclaimer
Report on other Legal and
Regulatroy Requirements
Predetermined Objectives
(Performance Information)
Usefulness
Reliability
Compliance :Law &
Regulation
CGICTF
Internal Control
Leadership
Financial & Performance
Mngt
Governance-ICT
-Other
Unqualified with No Emphasis of Matter/Control Findings
Supported Variance Analysis Consistency Strategic Plans & App Performance Indicators & Targets
o SMART Criteria
Validity, Accuracy, Completeness of Performance Reporting in Annual Report
Audit Evidence
Phase 1 – March 2014 Phase 2 – March 2015 Phase 3 – March 2016
OCA -2014: Progress to-date (Based on 12/13 Outcomes)*
*2012/13 CONSOLIDATED GENERAL REPORT on NATIONAL and PROVINCIAL audit outcomes
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Fewer and fewer clean audits since the launch in 2009 of OCA- 2014!
• Central Government and Public Entities
• Gradual decline from the 152 clean audits
achieved in 2009-10, to 132 in 2010-11, to
only 117 in 2011-12.
• Slightly more regressions than improvements
• 50 of these entities were unable to maintain
the clean audit reports they received in prior
year.
OCA -2014: Progress to-date (Based on 12/13 Outcomes)*
*2012/13 CONSOLIDATED GENERAL REPORT on NATIONAL and PROVINCIAL audit outcomes
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Main Risk Areas and Controls
“Even though I have stressed for the past three years the
urgent need to address the quality of the financial
statements submitted for audit and weaknesses in supply
chain management, human resource management and
information technology controls, there has been minimal
improvement” – Terence Nombembe (Auditor General)
People Processes Technology Information
Differing Needs Manual Evolving Disparate
Transversal Systems vs Disclosure Requirements
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BAS LOGIS
PERSAL MEDSAS
Transversal Systems
Cash – Based Systems Modified - Cash Accounting
• Disclosure Note Items
• Commitments
• Accruals
• Irregular, Fruitless & Wasteful Expenditure
• Movable Assets
• Leases?
EOHPSAS Clean Audit Response
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• EOH has conceptualised several pioneering solutions, incorporating
specialist consulting services, underpinned by bespoke-developed,
custom software
• These innovative and practical solutions enable our clients to respond to
challenges such expenditure management, project accounting and
movable asset management.
• We have devised a unique, cost-effective engagement model whereby we
provide a specialist service and work with public service officials in a co-
sourced environment. Our approach to delivering projects and improving the internal control environments of our clients through our commitment to skills transfer, technical advice, audit evidence and reconciliation.
EOHPSAS Technology Solutions
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Project Accounting• Multi-year MIS• Commitments register• Disclosure notes• Lead schedules, • Working papers• Audit evidence • BI Reporting for the
above…
Movable Asset Management• National Treasury format• Asset record capturing • SCOA classification• Major / Minor • Consolidation • Gap analysis • Digitised audit evidence• Inventory sheets• Duplication elimination• Disclosure
Expenditure Review• Reduce material and
inherent expenditure misallocation and misclassification risk
• Audit trail of expenditure review
• Segregation of duties• Internal controls
consistently in place • Digitised audit evidence• Automated journal
functionality
So how do we do this?
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Output
Asset Register & Automated Journals
Audit Trail /Evidence / Controls Disclosure Note WP RFI/COAF Register
&Tracking
Consulting & Applications
ART ERA DNA RFI Expert
Area
Assets Transaction Review AFS/IFS RFI/COAF
Typical Movable Asset Management Challenges
Additions not in AR
Assets not Bar-coded
Misclassification: Minor Vs Major
Manual Journals – Time Consuming
Insufficient Supporting Docs
FAR not in Treasury Format (Excel)
Physical Verification
Lack of Reconciliation to BAS
Inaccurate Asset Data in AR
Incorrect SCOA application
Leases
ART – Asset Register Toolset• Browser-based, hosted solution
• Asset Additions reconciled to BAS
• National Treasury format
• Asset record capturing
• SCOA classification
• Major / Minor
• Gap analysis
• Digitised audit evidence
Achievements in support of OCA - 2014
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ERA has enabled the review of R8billion worth of provincial government expenditure
over the last three years, fully supported by digitised evidence, at the click of a button.
eWIP produces an automated commitments register at a project level.
An MEC can now use their tablet or smartphone to access reconciled project
information to support reporting on service delivery to community members.
ART - Recently, we have supported a Department of Health to account for its
movable assets across 1200 health facilities, in accordance with the requirements of
National Treasury.
• AG Finding – R6,3million Misclassified as Transfer Payments
• Full audit trail of review provided to AG from ERA
RESULT: AG audit finding mitigated
Case Study - DPW
• 2009/10
Audit Opinion – Qualified: Misclassification of Expenditure
• 2010/11
– 7500 Transactions Review with Full Audit Trail
– 2500 Journal – 1500 Consolidated
– R475 million worth of adjusting journals
Audit Opinion - Unqualified
Case Study - DORT