presentation to the portfolio committee on transport

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Presentation to the Portfolio Committee on Transport

Consolidated audit outcomes of Department of Transport and its

entities for 2009-10

19 October 2010

Reputation promise of the Auditor-General of South Africa (AGSA)“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 democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.”

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Summary of 2009-10 Audit outcomes – Department of Transport and entities

Audit outcomesDepartment

Public entities

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

Opinion on financial statements:

Disclaimer 0 0 0 0

Adverse 0 0 1 0

Qualified 0 0 1 1

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

1 1 7 9

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

0 0 2 1

Total number of audits reported on 1 1 11 * 11 **

Entities with findings arising from AGSA other legal reporting responsibilities:

Predetermined objectives 1 1 6 8

Compliance with laws and regulations 0 1 8 6

* Autopax Passenger Services (Pty) LTD included in analysis for the first time in 2009-10 **The Urban Transport Fund was included in the analysis for 2008-09. This entity ceased to exist effective 31 March 2009

Department of Transport and entities – PFMA audit outcomes 2009-10Drivers of improved audit outcomes

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Leadership

Auditees who have improved/ maintained previous good

practice

Auditees where Improvements are required

Department Public entities Department 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

1 5- 6

1 5 - 5

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:


1 8 - 3

- 7 1 3

3. Leadership monitoring and nurturing of public entities - N/A 1 N/A

4. Leadership’s implementation of action plans to address user access control deficiencies (Information Systems) ***

- - - 5

* Includes Autopax Passenger Services (Pty) LTD – Autopax Passenger Services excluded from analysis of predetermined objectives as this is included in PRASA***Information systems audits done at only 5 entities. The IT audit of the department is at the reporting stage at the date of this presentation.


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Financial and performance management

Auditees who have improved/ maintained

previous good practice


DepartmentPublic entities

Department Public entities

1. Appropriate systems are in place to support the preparation of financial statements and performance reports:


1 7 - 4

- 5 1 5

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


1 5 - 6

1 5 - 5

3. Proper record keeping and management, ensuring that supporting documents are properly filed and easily retrievable:


1 7 - 4

1 7 - 3

4. Application systems susceptible to compromised data integrity (Information Systems) ***

• User access control• Security management• Business Continuity

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-12

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543



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Governance

Auditees who have improved/ maintained

previous good practice


Departments Public entities Departments Public entities

1. Maintaining effective risk assessments and strategies including fraud prevention plans to address identified weaknesses:


1 5 - 6

- 4 1 6

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


1 7 - 4

1 7 - 3

3. Establishment of functioning audit committees that promotes independent accountability and service delivery:


1 7 - 4

1 7 - 3

4. An IT governance framework that directs the positioning of IT, resource requirements, risk and internal control management (Information Systems).***

- 1 - 4


Financial statement qualification areas

• Completeness of penalty income (revenue) - CBRTA• Completeness and existence of accounts receivable - CBRTA• Transactions of Road Traffic Infringement Agency (RTIA) included in the records of Road

Traffic Management Corporation – resulting in overstatement of Trade and other receivables/Cash and cash equivalents/Trade and other payables/Income/Operating expenditure/Staff costs/Property, plant and equipment - RTMC

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Department of Transport and entities– PFMA audit outcomes 2009-10Transversal material misstatements corrected

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Financial statement areas Entities impacted

1. Capital Assets PRASA/RSR/DLCA/CBRTA/RTMC

2. Current Assets PRASA/RSR/DLCA/CBRTA/RTMC

3. LiabilitiesPRASA/RSR/DLCA/CBRTA/RTMC/

SAMSA

Department of Transport and entities– PFMA audit outcomes 2009-10Transversal material misstatements corrected

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Financial statement areas Entities impacted

4. Revenue PRASA/CBRTA/PORTS Regulator/RTMC

5 Expenditure PRASA/RSR/DLCA/SAMSA/CBRTA/RTMC

6. Other disclosures DLCA/CBRTA/ PORTS Regulator

Department of Transport and entities– PFMA audit outcomes 2009-10Fruitless and wasteful expenditure

10

Entity and Reasons Amount – 2009/10

Road Traffic Management Corporation – employees paid after resignation/interest/discontinued system R 17 520 706

Ports Regulator of South Africa – interest on late payment of suppliers R 6 219

Cross Border Road Transport Agency – inadequate planning and project management of office renovations R 535 314


11


Road Accident Fund – sheriff and interest costs as a result of the delay in payment of claims expenditure R 23 206 674

Driving Licence Card Account – contracts and bank account not properly managed R 127 000

South African Civil Aviation Authority – officials reinstated after suspension R 1 625 685


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Passenger Rail Agency of South Africa – interest on overdue supplier accounts R 3 723 279

National Department - Accommodation and flight tickets not cancelled in a timely manner/interest on delay in payment of bus subsidies R 101 000

TOTAL R 46 845 877

Department of Transport and entities– PFMA audit outcomes 2009-10Irregular Expenditure

13


National Department of Transport – Contracts extended without prior approval/Procurement procedures not followed/services rendered after expiry of tax certificate R 951 000

South African Maritime Safety Authority – expenditure incurred prior to budget being approved R 37 000 000

Cross Border Road Transport Agency – non compliance with supply chain management prescripts R 872 184

Department of Transport and entities– PFMA audit outcomes 2009-10Irregular Expenditure

14


Road Traffic Management Corporation – tender process not followed/transaction fee owed to Department of Transport used irregularly R 360 879 704

TOTAL R 399 702 888

Department of Transport and entities– PFMA audit outcomes 2009-10Unauthorized Expenditure

15


National Department of Transport – Overspending on Public Transport Program to pay bus subsidies – funds made available by National Treasury to make payment, however due to the fact that this was not part of the original appropriation to the Department, it was considered as unauthorized expenditure

R 362 000 000

1616

Report on predetermined objectivesIndication of audit conclusions not included in audit report

Type of audit conclusion Department Public entities

Disclaimer 0 1

Adverse 0 2

Qualified 0 2

Unqualified 1 5

Total number of audits reported on 1 10

General

■ Phase-in approach by the AGSA since 2005-06 together with National Treasury

■ Stakeholder engagements to clarify approach and essence of auditing of predetermined objectives have taken place and will continue throughout 2010-11

■ In 2010-11 departments and entities will need to take decisive action to address the areas requiring improvement in order to position themselves for a positive audit outcome on predetermined objectives

There is no reporting on predetermined objectives in Autopax Passenger Services (Pty) LTD as this is included in PRASA

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Department of Transport and entities

Findings on reporting of predetermined objectives 2009-10

Category of finding

Department Public entities

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

Non-compliance with regulatory requirements 100% 0% 40% 63%

Reported information not useful 0% 0% 50% 27%

Reported information not reliable 0% 0% 30% 18%

Information not submitted for audit by 31 May 2010 0% 0% 0% 0%

Total number of audits reported on 1 1 10 11 **

**The Urban Transport Fund was included in the analysis for 2008-09. This entity ceased to exist effective 31 March 2009

There is no reporting on predetermined objectives in Autopax Passenger Services (Pty) LTD as this is included in PRASA

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Department of Transport and Entities

Findings on compliance with laws and regulations 2009-10

Top categories of prohibited actions/non-adherence Number Percentage

Department

SCM issues that resulted in irregular expenditure0 0%

Payments not done within 30 days 0 0%

HR Management 0 0%

General/ fiduciary and reporting responsibilities of accounting officers and internal audit not operating effectively throughout the year 0 0%

Public entities *

SCM issues that resulted in irregular expenditure 2 18%

General/ fiduciary and reporting responsibilities 6 54%

Internal audit 3 27%

Audit committee and strategic/ corporate plans 4 36%

*Analysis includes Autopax Passenger Services (Pty) LTD

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Transport and entities 2009-10

Findings on procurement and contract management

Top 5 findings on procurement and contract management Number Percentage

Public entities *

3 price quotations not invited - reasons not recorded and approved 4 36%

The fraud prevention plan did not include specific measures for preventing and detecting fraud in the procurement process.

5 45%

R500 000 with no competitive bidding - reasons not recorded and approved 2 18%

A list of prospective suppliers from whom to invite price quotations was not in place. 2 18%

SCM policies and procedures were not in place for the acquisition of goods and services. 2 18%

*Analysis includes Autopax Passenger Services (Pty) LTD

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Department of Transport and Entities audit outcomes 2009-10Audits not conducted by the Auditor-General of South Africa

Summary of audit outcomes

Audit outcomes Schedule 2 entities Schedule 3 and other entities

Opinion on financial statements:

Disclaimer 0 0

Adverse 0 0

Qualified 0 0

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

0 0

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

2 0


Entities with findings arising from AGSA other legal reporting responsibilities:

Predetermined objectives 0 0

Compliance with laws and regulations 0 0

2121

Department of Transport and EntitiesAudits not conducted by the Auditor-General of South Africa

Report on predetermined objectives - Indication of audit conclusions 2009-10General

■ Phase-in approach by the AGSA since 2005-06 together with National Treasury

■ Stakeholder engagements to clarify approach and essence of auditing of predetermined objectives have taken place and will continue throughout 2010-11

■ In 2010-11 entities will need to take decisive action to address the areas requiring improvement in order to position themselves for a positive audit outcome on predetermined objectives

Type of audit conclusion Schedule 2 entities Schedule 3 and other entities

Disclaimer 0 0

Adverse 0 0

Qualified 0 0

Unqualified 2 0


presentation to the portfolio committee on transport

Documents

entities pfma audit

public entitiesna1na4

financial statements

autopax passenger services

predetermined objectives18

predetermined objectives15

audit findings key controls

financial reporting