national pfma audit outcomes...

National

PFMA audit outcomes 2009-10

1

Reputation promise

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

constitutional’s democracy by enabling oversight, accountability and governance

in the public sector through auditing, thereby building public confidence.

2

National – PFMA audit outcomes 2009-10

Summary of audit outcomes

Audit outcomes

Departments (including

Parliament and the National

Consolidation)

Public entities (including

trading and constitutional

institutions and other types

of entities)

2009-10 2008-09 2009-10 2008-09

Opinion on financial statements:

Disclaimer 0 0 3 7

Adverse 0 0 3 2

Qualified 12 13 17 22

Financially unqualified with findings on predetermined objectives and/or compliance with laws and

regulations19 16 89 97

3

Annexure 1

regulations19 16 89 97

Financially unqualified with no findings on predetermined objectives or compliance with laws and

regulations 4 6 110 89

Total number of audits reported on 35 35 222 217

Number of audits not yet finalised at 30 September 2010 0 0 3 1

Total number of audits 35 35 225 218

Public entities with findings arising from the AGSA’s other legal reporting responsibilities:

Predetermined objectives 25 22 93 89

Compliance with laws and regulations 25 21 104 68

National – PFMA audit outcomes 2009-10Drivers of improved audit outcomes

Leadership

Auditees who have improved/

maintained previous good

practice

Auditees where Improvements

are required

Departments Public entities Departments Public entities

1. Provision of adequately skilled resources capable of implementing the

financial reporting framework and performance management

requirements, as well as adequate evaluation of the performance of

existing staff :

• Financial Statements

• Predetermined objectives

17 176 18 46

20 167 15 54

2. Ensuring that proper actions are taken to address audit findings; key

4

2. Ensuring that proper actions are taken to address audit findings; key

controls are implemented to mitigate risk of misstatement of financial

statements and report on predetermined objectives:



14 150 21 72

16 136 20 85

3. Leadership’s implementation of action plans to address user access

control deficiencies (Information Systems) 8 9 20 42

Note: Departments include Parliament and National Consolidation, Public entities include trading and other types of entities

Annexure 2 - Drivers – Departments

Annexure 2 - Drivers - Public entities


Financial and performance management

Auditees who have

improved/ maintained

previous good practice

Auditees where

Improvements are required


1. Appropriate systems are in place to support the preparation of financial

statements and performance reports:



15 172 20 50

15 150 20 71

2. Review of the financial statements and other information by management for completeness and accuracy prior to submission for audit:



13 139 22 83

16 147 19 74

5

3. Proper record keeping and management, ensuring that supporting

documents are properly filed and easily retrievable:



17 189 18 33

18 170 17 51

4. Application systems susceptible to compromised data integrity

(Information Systems)

• User access control

• Security management

• Business Continuity

2

2

4

7

8

21

26

26

23

43

42

29


Annexure 2 - Drivers – Departments



Governance

Auditees who have

improved/ maintained

previous good practice

Auditees where

Improvements are required


1. Maintaining effective risk assessments and strategies including fraud

prevention plans to address identified weaknesses:



23 185 12 37

27 182 8 39

2. Ensuring effective internal audit functions that monitor the adequacy and implementation of internal control:

• Financial Statements• Predetermined objectives

26 197 9 25

27 185 8 36

6

• Predetermined objectives 27 185 8 36

3. Establishment of functioning audit committees that promotes independent

accountability and service delivery:

• Financial Statements• Predetermined objectives

30 206 5 16

30 202 5 19

4. An IT governance framework that directs the positioning of IT, resource

requirements, risk and internal control management (Information

Systems).4 22 23 28


Annexure 2 - Drivers - Departments


Financial statement qualification areas at Departments


67%

77%

40%

50%

60%

70%

80%

90%

100%

2009-10: 100% =12 2008-09: 100% = 13

7

0%

16%

8%

16% 17%

30%

8%

30%

25%

16%

33%

16%

0%

10%

20%

30%

40%

2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09

Capital assets Current assets Liabilities Other disclosure items

Revenue Expenditure Unauthorised, irregular, and fruitless

and wasteful expenditure

Financial statement qualification areas at public entities


39%

49%52%

45%

52%

42%

48%

39%

57%

49% 48%

42%

40%

50%

60%

70%

80%

90%

100%

2009-10: 100% = 23 2008-09: 100% = 31

8

30%

17%

0%

10%

20%

30%

40%

2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09 2009-10 2008-09

Capital assets Current assets Liabilities Other disclosure items

Revenue Expenditure Unauthorised, irregular, and fruitless and

wasteful expenditure

Transversal material misstatements corrected at Departments

National - PFMA audit outcomes 2009-10

9

Transversal material misstatements corrected at public entities

National - PFMA audit outcomes 2009-10

10


Findings on reporting of predetermined objectives

Category of finding

Departments (including Parliament

and National Consolidation)

Public entities (including trading,

constitutional institutions and other

types of entities)

2009-10 2008-09 2009-10 2008-09

Non-compliance with regulatory requirements 56% 44% 22% 29%

1111

Reported information not useful 53% 47% 30% 19%

Reported information not reliable 29% 44% 18% 15%

Information not submitted for audit by 31 May 2010 3% 6% 2% 2%

Total number of audits with findings 25 22 93 89


Findings on compliance with laws and regulations

Top 3 categories of non-compliance and SCM issues Number Percentage

Departments (including Parliament and National Consolidation)

SCM issues that resulted in irregular expenditure (Irregular expenditure relating to SCM at departments = R 59 Million) 18 53%

Payments not done within 30 days 15 44%

HR Management 11 32%

General/ fiduciary and reporting responsibilities of accounting officers and internal audit not operating effectively

throughout the year7 21%

1212

throughout the year

Transversal material misstatements corrected 25 74%

Public entities (including trading, constitutional institutions and other types of entities)

SCM issues that resulted in irregular expenditure (Irregular expenditure relating to SCM at entities = R 337 million) 53 24%

General/ fiduciary and reporting responsibilities 22 10%

Internal audit 21 9%

Audit committee 19 9%

Transversal material misstatements corrected 106 48%

Annexure 3 -Compliance issues

National – PFMA audit outcomes 2009-10Findings on procurement and contract management resulting in irregular expenditure

Top 5 findings on procurement and contract management Number Percentage Amount

Departments (including National Revenue Fund) R

3 price quotations not invited - reasons not recorded and approved 15 44% 5 250 168

Preference point system not applied in procurement > R30 000 7 21% 9 409 407

Competitive bidding deviation not justified 6 18% 9 442 527

Awards to suppliers who failed to provide valid tax clearance certificates 6 18%27 225 791

1313

Awards to suppliers who failed to provide valid tax clearance certificates 6 18%

3 price quotations not invited - deviation not justified 5 15% 2 229 983

Public entities (including trading, constitutional institutions and other types of entities)

3 price quotations not invited - reasons not recorded and approved 26 15% 41 050 126

Preference point system not applied in procurement > R30 000 15 9% 44 369 464

R500 000 with no competitive bidding - reasons not recorded and approved 15 9% 118 417 655

Awards to suppliers who failed to provide valid tax clearance certificates 12 7% 110 999 012

3 price quotations not invited - deviation not justified 12 7% 22 268 419

Annexure 4

National – PFMA audit outcomes 2009-10Findings on procurement and contract management – interest in suppliers

Interest identified in suppliers

Number of

entities/

departments

Number of

instances

Interest identified in suppliers

Employees of department/ entity 15 59

Close family members of employees 2 15

Close family members of other role-players in SCM process – not employed by department/ entity 1 14

1414

Non-compliance or irregularities identified where interest identified

Supplier did not declare the interest 7 14

Employee did not have approval for performing other remunerative work (departments only) 3 13

Person with interest did not declare interest 4 8

Person with interest was involved in making award to supplier 1 1

Interest was not included in annual declarations (senior managers at departments only) 1 1

National – PFMA audit outcomes 2009-10Irregular and Unauthorised expenditure

44%

56%

64%

44%

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

Disclosed in 31 May Financial Statements

Additional Expenditure identified during audit

15

Department Unauthorised expenditure

Department of Transport R 362,394,000

Annexure 4

36% 56%

0

500,000,000

1,000,000,000

Total Departments Entities

Irregular expenditure


Findings from audit of human resource management at departments

Most significant findings Number Percentage

Human Resource Management

No human resource plan 11 32%

Performance agreements of senior managers not signed 8 24%

Acting allowances paid more than 12 months 8 24%

1616

Management of vacancies

Positions vacant for more than 12 months : Senior Management 11 32%

Positions vacant for more than 12 months: Finance division 9 26%

No improvement in overall vacancy rate 8 24%

No improvements in senior management vacancy rate 7 21%


Findings of information systems audits

General General controlsI

Departments (including Parliament

and National Consolidation)

Public entities(including trading and other types of entities)

Number Percentage Number Percentage

Lack of IT governance framework to direct the positioning of IT, resource

requirements, risk and internal control management 23 82% 28 56%

Inadequate security management controls to prevent unauthorised access

to the operating systems (e.g. Windows, Linux, etc.) that grant access to

the application systems26 93% 42 84%

Inadequate user access controls to detect and prevent unauthorised

access, capturing and approval of transactions on the application systems

that are used to prepare the financial statements (e.g. BAS, PERSAL, 26 93% 43 86%

1717

that are used to prepare the financial statements (e.g. BAS, PERSAL,

LOGIS)

26 93% 43 86%

Lack of business continuity and disaster recovery plans that would ensure

the availability of financial and performance information in instances of

data loss or disaster23 82% 29 58%

Key matters to be addressed

DPSA (using SITA) in collaboration with NT, to prescribe a comprehensive IT governance framework which provides

guidance towards IT strategic alignment and decision making, resourcing, risk management and internal control

Accounting officers to ensure implementation of the comprehensive IT governance framework

In the interim, Accounting Officers to implement actions plans developed to address IT related audit findings and

recommendations

Annexure 5 - IT Audit Focus areas

Audits not conducted by the AGSA


18


Summary of audit outcomes – Audits not conducted by the AGSA

Audit outcomes Major Schedule 2 entities

Opinion on financial statements:

Disclaimer 0

Adverse 0

Qualified 0

Financially unqualified with findings on predetermined objectives and/or compliance with laws and

regulations4

19

Financially unqualified with no findings on predetermined objectives or compliance with laws and

regulations 13

Total number of audits reported on 17

Number of audits not finalised at 30 September 2010 0

Total number of audits 17

Predetermined objectives 3

Compliance with laws and regulations 4

Listing of Major SOEs


Findings on reporting of predetermined objectives – Audits not conducted by the AGSA

Findings on predetermined objectives Alexkor LimitedSouth African Airways (Pty)

Limited

South African Broadcasting Corporation

1 Non-compliance with regulatory requirements

20

2 Reported information not useful

3 Reported information not reliable

4 Information not submitted for audit by 31 May 2010


Findings on compliance with laws and regulations – Audits not conducted by the AGSA

Areas of non-compliance with laws and regulations Alexkor Limited

South African

Airways (Pty)

Limited

South African

Broadcasting

Corporation

Transnet Limited

1 Audit committee (section 77 of PFMA and TR 27)

21

2General responsibilities of accounting authorities

(section 51 of PFMA)

3Internal audit (section 51 (1)(a)(ii) of PFMA and TR

27.2.2

4 Irregular expenditure - SCM related (R'000) 187,225 867,000

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