121009audit 2 by JDBmSR3

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									Department of Rural Development and
Land Reform (DRD&LR)
Audit outcome for year ended 31 March 2012




9 October 2012
Reputation promise/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.




2   2
                           Purpose of the meeting
To brief the Portfolio Committee on: DRDLR Portfolio
Subject                                                 Slide number

1.Portfolio Audit outcomes and key control status           4-8

2.Progress on previous commitments                            9

3.Recommendation commitments for clean administration      10 -12

4. Key focus areas                                           13

5. Other matters of interest                                 14

6. Pyramid of Accountability                                 15

7. Combined level of assurance                               16



3
 1. Portfolio audit outcomes and key control status
Opinions                         2010/11                                                  2011/12
Entity        Financial          Predetermine     Compliance      Financial             Predetermined          Compliance
              Statements         d Objectives                     Statements            Objectives
DRD&LR
              Qualified          Qualified        Expenditure     Qualified opinion –   Qualified Usefulness   Expenditure
              opinion –                           management,     Immovable assets      and Reliability        management,
              Immovable                           Financial and                                                Financial and
              assets                              performance                                                  performance
                                                  management                                                   management
                                                  , HR                                                         Improvement:
                                                  Management                                                   HR
                                                                                                               Management

Agricultura                      Not applicable                                         Not applicable –
l Land        Unqualified        – (Audited       Expenditure     Unqualified opinion   (Audited with          Expenditure
Holding       opinion with       with DRD&LR)     management                            DRD&LR)                management
Account       findings                                                                                         Regression:
(ALHA)                                                                                                         Revenue
                                                                                                               Management
                                                                                                               and Asset
                                                                                                               Management
Deeds
Trading       Unqualified with   Adverse          SCM
Account       findings                            management,     Qualified opinion     Qualified opinion      SCM
                                                  Financial and                                                management,
                                                  performance                                                  Financial and
                                                                                                               performance
                                                                                                               management
    4
   1. Portfolio audit outcomes and key control status
Opinions                        2010/11                                         2011/12
Entity            Financial    Predetermined   Compliance         Financial    Predetermined   Compliance
                  Statements   Objectives                         Statements   Objectives
Ingonyama Trust
Board
                  Qualified    Unqualified     Expenditure        Qualified    Unqualified     Expenditure
                  opinion –    opinion         management;        opinion –    opinion         management;
                  immovable                    Asset              immovable                    Asset
                  assets and                   management;        assets and                   management;
                  provisions                   Revenue            provisions                   Revenue
                                               Management;                                     Management;
                                               Annual financial                                Annual financial
                                               statements.                                     statements.
                                                                                               Regression:
                                                                                               Budget;
                                                                                               Procurement
                                                                                               and contract
                                                                                               management.




    5
 1. Portfolio audit outcomes and key control status
     Dept/Entity   Key control status (regression/ improvement/ unchanged)


                   Leadership           Financial and        Governance
                                        Performance
                                        Management
     DRDLR



     ALHA



     Deeds



     ITB




66
    Further analysis on DRDLR key controls classified as
    causing concern
                                                    Analysis of key controls

                                                               7%
                    18%




                                                                                                      67%

                    45%                                        64%




                    36%                                                                               33%
                                                              29%



                                                                                                       0%
                 Leadership                    Financial and performance management                Gorvernance




          Intervention required   Intention there      Some progress        Lots of progress   Almost there      Good




7
    Further analysis on entities of DRDLR key controls
    classified as causing concern
                                                    Analysis of key controls
                     3%                                        8%



                    30%                                       17%




                                                                                                      80%

                                                               50%
                    42%




                    24%                                       25%                                     20%



                 Leadership                    Financial and performance management                Gorvernance




          Intervention required   Intention there      Some progress        Lots of progress   Almost there      Good




8
 2. Progress on prior year commitments
Commitment made                                                                 Current Status   Comment




                                                   DRDLR



                                                                  Deeds
                                                           ALHA



                                                                          ITB
Management to draft and implement new              X       X              X     Intervention     Overall DRDLR and ALHA needs to
operational and financial policies to help the                                  required         draft, implement and update policies
department/entity to mitigate risks, detect and                                 overall          and procedures addressing all internal
prevent irregularities and safeguarding assets                                                   control deficiencies and giving
and records.                                                                                     guidance for operations
Management to develop action plans to address      X       X      X       X     Intervention     The action plans has been drafted but
weakness in system of internal controls and to                                  required         has not been implemented or
give progress reports quarterly. These reports                                  overall          monitored
are made available to the audit committee and
discussed at senior management committee
(SMC) of the department
General Controls on the IT systems                 X       X      X       X     Intervention     Still repeat findings
                                                                                required
Management committed to resolve immovable          X                            Intervention     Still repeat findings
assets qualification                                                            required
Management committed to address the                                       X     Intervention     Still repeat findings
following,                                                                      required
- completeness of royalty revenue.
- valuation of land.
- recovery of fruitless and wasteful expenditure
Commitment to address AOPO findings reported       X                            In progress      Still in progress
for 2010/11
Commitment to conduct quarterly reviews on         X              X             Improved         Irregular expenditure relating to SCM
SCM process                                                                                      decreased from the prior year
3. Recommended commitments for clean administration
Commitment                                                                  DRD&LR ALHA   Deeds ITB
Consultants skills transfer to be monitored and evaluated monthly                         
progress reports from consultants on skill transfer


Effective implementation of approved organisational structure, taking                     
into account the:
•skills gap identified and develop
•IT systems producing credible financial and non financial information
•bodies with skills relevant to finance, performance , compliance and
information system

•Sustainability of in house Internal Audit                                                


•Monitoring and compliance unit strengthened                                              
responsibility(compliance)


•Management self assessment using key control document.                                   

•The department will need to develop a process and reconciliation of                           
state land that will ensure a complete and accurate register is
maintained.


•Interaction between the DRD&LR, DPW, National Treasury and other                               
custodians of state land need to take place to ensure that all state land
is complete and accurate.
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3. Recommended commitments for clean administration
Commitment                                                                DRD&LR ALHA   Deeds   ITB
Monitor compliance with policies and procedures and take decisive                             
action on non compliance


Monitoring of bad planning by entities resulting in an increase in non                   
compliance with PFMA, Treasury Regulations etc.


 Identify and monitor strengths and weaknesses of the portfolio                          
(Sustainability)
Develop checks and balances to ensure credibility of all information.                    

Monthly financial and performance reports that include disclosure                             
items
In line with best practice, update SCM policies to ensure that approval                  
of requests to deviate from normal SCM process by the accounting
officer/authority is based on recommendations by the bid adjudication
committee based on their evaluation of the submission for such a
request.
Effective utilisation of Internal Audit: review internal audit scope to                  
include adequate coverage of AOPO and Compliance in their plans




11
3. Recommended commitments for clean administration
Commitment                                                           DRD&LR ALHA   Deeds ITB
Training programs to incorporate:                                                      
•understanding of why AFS are prepared (for operational management
purposes, eg analysis of financial performance )
•understanding of why key controls are essential
•understanding of why service delivery reporting is critical
•Continuous professional and skills development for all staff and
monitoring thereof


Quarterly reinforcement of clean administration processes by           
Accounting Officer




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 4. Key focus areas
 Auditee    Supply Chain             AOPO                       HR           IT controls       Material errors
            Management                                                                            in AFS
                                                                                                submitted

 DRDLR     Some improvement    Some improvement          Some improvement   Some improvement    No improvement


                               This is done as part of
 ALHA          No matters
                                        DRDLR
                                                         Some improvement   Some improvement    No improvement



 Deeds      Some improvement     No improvement          Some improvement    No improvement     No improvement



 ITB       Some improvement         No matters           Some improvement    No improvement     No improvement




13
 5. Other Matters of interest
     Auditee              Irregular Expenditure                   Fruitless and Wasteful


               Movement




                                                       Movement
                            2010/11        2011/12                  2010/11        2011/12



     DRDLR                  7,835,000     45,536,000               6,724,000     73,406,000



     ALHA                      0              0                     439,000        45,000



     Deeds                 1,933,000       115,000                  43,000         4,000



     ITB                       0              0                        0           545,084




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 PYRAMID OF ACCOUNTABILITY
           Accountable and




                                                                                          "Public Accountability"
       transparent government




                                                                                                 Oversight
                                            Speaker/
                                           Legislature
                                          SCOPA/PC’s
                                           Executives




                                                                                           Reporting and governance
                                             Audit




                                                                                             "Assurance Agents"
                                           Committee




                         Accountable
                                                          Internal Audit
                         Leadership



                         Daily, weekly,                       Monthly
                            monthly                        reporting on
                                                          financial and




                                                                                              "First in of defence"
                         financial and
                         performance                      performance/




                                                                                                 Administration
                           disciplines                        Interim
                                                             financial
                                                            statements
                                           Embedded                        Understandin
              Skills,                     systems of IC                         g of
           competence                     underpinned                      requirements
            ethics and                     by policies                       as well as
             integrity                         and                           cause and
                                           procedures                          effect
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15
 Assurance Model




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     Thank You




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