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AGSA Strategic Plan and Budget 2013-2016
Presentation to SCoAG19 October 2012
22
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
Reputation promise/mission
33
1. Overview of AGSA commitments
2. What the plan focuses on
3. Strategic environmental context
4. Strategic risk profile
5. Strategic goals, objectives and performance measures
6. Sustainability strategy
7. Budget 2013 - 16
Content
4
Overview of the AGSA’s commitments
Simplicity, clarity and relevance of messages
Reporting with clarity and simplicity
Visibility of the AGSA’s leadership
Communicating audit results through visibility
Strengthen the organisation’s human resources
Unleashing the potential of our human capital
Funding
Ensuring financial viability and sustainability
Lead by example
Showcasing the exemplary nature of the AGSA
Improving the lives of citizens
Leading by example
We continue on the path established over the past few years
Our five strategic goals remain relevant and unchanged, but we are strengthening certain aspects or introducing new activities
We seek to solidify our achievements by institutionalising our best practices
55
Main focus areas in the strategic plan
• Increased portion of performance audits
• Integration of performance audit and investigations with
regularity audits
• Increased prioritisation of the quality of our audit reports
• Exploring ways to collect debt more effectively
• Institutionalisation of the project management approach
within the organisation
• Intensifying the learning and development initiatives
through the work of our newly established L&D unit
• Sustainability strategy
Goal 1
7
Simplicity, clarity and relevance of our messages
Objective 1: To identify root causes and make recommendations
Performance
measure
Target
2013-14 2014-15 2015-16
Clear communication
of relevant root
causes and
recommendations
3 3 3
Tool Qualitative top-down rating by immediate supervisor of communication to the auditee, the executive and oversight, whether through reports (audit reports, management reports, dashboard report, general reports) or other communication (presentations, briefings, etc.)
Source of information: Reports and presentation experience
8
Simplicity, clarity and relevance of our messages
Performance measure Target
2013-14 2014-15 2015-16
% adherence to all quality standards
Audit engagements
87% (C2 and C3 rating)
87% (C2 and C3 rating)
87% (C2 and C3 rating)
Tool Quality control assessment
% adherence to all quality standards
Non-audit deliverables
3 3 3
Tool Qualitative top-down rating by immediate supervisor of all non-audit deliverables. Our targets are based on a four-point rating scale (1-4)
Source of information: Non-audit deliverables
Objective 2: Continued excellence of the quality of audits performed
9
Simplicity, clarity and relevance of messages – initiatives / focus
Increase the volume of performance audits to 10% of the
audit work within five years - a growth strategy and plan for
the medium term to 2018 will be finalised shortly Intensify the proactive evaluation of fraud risks through
assessment of process and financial statement reporting Achieve further integration of our diverse expertise and
products and the deployment of multi-skilled audit teams Deliver a consolidated audit message Achieve IRBA assessment results above our own targets
(already above industry standard level)
Goal 2
11
Visibility of our leadership
Performance measure Target
2012-13 2013-14 2014-15High-quality, value-adding stakeholder interactions are conducted and escalated, where necessary
3 3 3
Tool Qualitative top-down rating by immediate supervisor of communication to the auditee, the executive and oversight, whether through reports (audit reports, management reports, etc.) or other communication media (presentations, briefings, etc.)
Source of information: Reports and presentation experience
Objective: To develop strong stakeholder relationships to encourage clean administration
12
Increase the rigour of the analysis in our general reports Ensure continuity in understanding the audit outcomes Encourage acceptance of ownership for internal controls by
the appropriate responsible officials Intensify our visibility at all levels, widening the circle of
engagements Increase our participation in various governance forums
Visibility of our leadership– initiatives / focus
Goal 3
14
Funding
Our focus remains on providing value-for-money audits to the public sector – i.e. executing the organisation’s mandate economically, efficiently and effectively by ensuring that our services to our auditees are cost-effective, while at the same time ensuring our long-term financial sustainability.
We pay special attention to effective debt collection as this has the potential to undermine our very existence as an independent assurance provider. Our main challenge remains collecting debt from local government auditees.
15
Funding
Performance
measure
Targets
2013-14 2014-15 2015-16
% net surplus 1% 2% 2%
Tool Analysis of the income statement
Creditor days 45 days from
voucher date
45 days from
voucher date
45 days from
voucher date
Tool Analysis of the creditors ageing report
Objective: To execute the AGSA mandate economically, efficiently and effectively
16
Funding
Objective: To execute the AGSA mandate economically, efficiently and effectively
Performance measureTargets
2013-14 2014-15 2015-16
% debt collected averaged over 12 months
All National BUs 99% -101% 99% -101%
99% -
101%
1% debt collected from National Treasury
averaged over 12 months – Finance BU100% 100% 100%
% debt collected averaged over 12 months
All Provincial BUs96% - 98% 96% - 98% 96% - 98%
Tool Analysis of the debtors ageing report
17
Funding goal – initiatives / focus
Increase the efficiency and effectiveness of our audits Analyse and understand the inefficiencies of the entire
public auditing process Enhance the outsourcing of contract audit work Provide for minimum surplus margins
Goal 4
19
Strengthen our human capital
Our strategic focus remains on:
further enhancing and building our high-performance culture which focuses on engagement, understanding and accountability
attracting, retaining and cultivating key talent by adopting the care and growth leadership principles
building a highly skilled workforce that is representative of the demographics of our country by enhancing and developing the skills and competency base of our employees
20
Strengthen our human capital
Performance
measure
Targets
2013-14 2014-15 2015-16
% occupancy level 90% 90% 90%
Tool Staff occupancy rate report from PeopleSoft management
system
Culture index 3.4 3.4 3.4
Leadership index 3.4 3.4 3.4
Culture index 3.4 3.4 3.4
Tools. Survey and focus group interviews and other assessments.
The industry norm is 3.2 and is rated according to the five-
point Likert scale (1 – 5).
Objective: To have a motivated, high-performing and diverse workforce
21
Strengthen our human capital- initiatives / focus
Intensify the relevant training and skills development Create audit professionals with impeccable integrity and
ethics Develop leadership pipeline Make active use of the total performance system to build
high-performing teams and to give regular and timely feedback to employees for their continuous improvement
Goal 5
23
Lead by example
As a Supreme Audit Institution, we accept the responsibility to lead by example through: consistently behaving in an ethical manner producing quality work that demonstrates our
unquestionable competence and technical ability assuming accountability for the management of our
business risks effectively sharing information and knowledge using all available systems, tools and expertise in an
integrated manner
24
Lead by example
Performance measure Target
2013-14 2014-15 2015-16
A clean audit report for the
AGSA
Clean audit
report
Clean audit
report
Clean audit
report
Tool External audit report
Objective 1: To continuously adhere to standards of excellence for clean administration
25
Lead by example
Performance measure Target
2014-15 2015-16 2016-17
% compliance
with statutory
and legislative
deadlines
Strategic plan and budget,
annual report, general reports100% 100% 100%
Performance audits – deadlines
as agreed by the DAG and the
AG
Investigations - deadlines as set
out in the engagement letter to
the auditees
95% 95% 95%
Audit reports (PFMA, MFMA) 90% 90% 90%
Tool Project tracking tool
Objective 2: Continued improvement of the timelines of AGSA reports
26
Lead by example
Objective 3: To maximise the AGSA’s contribution to transformation
Performance measure Target
2013-14 2014-15 2015-16
Achieve identified B-BBEE level
3 3 3
Tool Independent review conducted by external agency
27
Lead by example- initiatives / focus
Make operational excellence the standard method of work Identify and institutionalise critical good practices Maintain adequate information and communication
technology Optimise infrastructure
Enhance our audit software and solutions Mature the information governance of the AGSA Provide strong support to the BBBEE imperative with a
focus on the CA Charter
28
Sustainability aspect of our operations We acknowledge that, like any other organisation, we have an impact on
the physical environment and the society in which we operate, thus we regard as important all matters that relate to our sustainability as a business.
Our considerations are also consistent with the INTOSAI recommendations which emphasise the importance of sustainability and the principles of good governance, transparency and accountability.
For our first year in reporting on some of the sustainability aspects, we commit to establishing the baselines for the following:– Electricity use - Water use– Paper use - Paper waste generated– Business travel – vehicles - Business travel – flights– Carbon footprint– Completion of annual disclosure of interest declarations – Incidents of integrity breach by our staff
BUDGET 2013 - 16
30
Budget 2013–14 vs. budget 2012 – 13
31
31
Determination of audit tariffs Major drivers
Recoverable hours - Head count - Available hours - Recovery rate
Tariff per hour - Salary cost - Recoverable hours - Mark-up factor
32
32
Financial highlights (1 of 2)
Budget 2012-13
R’000
2013-14
R’000
Revenue 2 226 031 2 474 157
Direct audit cost (1 545 969) (1 700 958)
Gross profit 680 062 773 199
Other Income 73 544 80 709
Expenses (707 607) (828 570)
Net surplus for the year 45 999 25 338
33
33
Financial highlights (2 of 2)Budget 2012-13
R'000
2013-14
R'000
Own hours revenue 1 714 416 1 923 487
Regulatory audit
Specialised audit
S&T recoverable
1,447 454157 759109 203
1 591 415218 437113 635
Contract work revenue 554 097 590 039
Regulatory audit
Specialised audit
539 54014 557
565 36424 675
Accounting adjustment (42 482) (39 369)
Total revenue 2 226 031 2 474 157
Less direct cost (1 545 969) (1 700 958)
Gross profit 680 062 773 199
Gross profit % of own hours revenue 42% 42%
Gross profit % of total revenue 31% 31%
34
34
Net surplus as % of audit income
Budget 2012-13
Budget 2013-14
Forecast 2014-15
Forecast 2015-16
Net surplus R46 million
R25 million
R56 million
R 66 million
Net surplus as % of audit income
2,07% 1,02% 2,00% 2,13%
35
35
Overhead analysis
Operating costs Budget 2012-13
R’000
Budget 2013-14
R’000
Move-
ment
R’000
%
Staff remuneration – support
217 767 255 317 37 550 17%
Other personnel costs 99 610 110 616 11 006 11%
Consultant fees 26 929 17 393 (9 536) (35%)
Accommodation 80 586 82 626 2 040 3%
Stakeholder relations 36 125 43 081 6 956 19%
L&D 82 668 108 753 26 085 32%
Technological services
39 058 55 012 15 954 41%
Office maintenance 21 857 25 353 3 496 16%
Other (see next slide) 103 007 130 419 27 412 27%
Total 707 607 828 570 120 963 17%
36
36
Other expenses analysis
Operating costs Budget 2012-13
R’000
Budget 2013-14
R’000
Movement
R’000
%
Oversight governance 1 443 1 288 (155) 11%
Audit expenses 4 959 6 600 1 641 33%
Bank charges 355 357 2 1%
Finance charges 1 686 144 (1 542) (91%)
Recruitment expenses 8 878 10 549 1 671 19%
EWP 10,232 8 140 (2 092) (20%)
Insurance & legal fees 2 573 2 821 248 10%)
Communication 10 406 11 363 957 9%
Depreciation 40 052 47 423 7 371 18%
Other 5 128 20 511 15 383 300%
S&T Irrecoverable 17 295 21 223 3 928 23%
Total 103 007 130 419 27 412 27%
37
37
Key overhead drivers (1 of 2)2012-13
R’000
2013-14
R’000
Movement
R’000
Salaries 217 768 255 318 37 550
New structure 15 238 15 238
Support salary increases 217 768 240 080 22 312
Due to growth in staff 1 642
Due to annual increase 16 300
Compensation progression 4 400
Maintaining business operations 67 536 88 585 21 049
Depreciation 40 052 47 423 7 371
ICT maintenance 15 114 24 875 9 761
Networks 12 370 16 287 3 917
Provision for bad debts 5 127 20 510 15 383
Executive leadership initiatives 1 844 2 390 546
Secondments 1 713 2,300 587
38
38
Key overhead drivers (2 of 2)Budget 2013
R’000
Budget 2014
R’000
Movement
R’000
Learning & development - 16 016 16 016
Study support incentive scheme - 4 039 4 039
Foundations programmes - 8 000 8 000
Tertiary assistance - 3 977 3 977
AG Farewell - 6 850 6 850
Regional stakeholder functions - 1 350 1 350
External & internal stakeholder - 1 000 1 000
Combined staff farewell - 4 500 4 500
Other 110 913 144 005 33 092
Group life policy 7 610 10 772 3 162
Performance bonus 68 442 78 303 9 861
Advertisements 1 200 3 274 2 074
S&T training 8 477 16 145 7 668
Membership fees 10 550 15 760 5 210
Study assistance employees 14 634 19 751 5 117
Total 403 188 533 674 130 486
AG Directive 2012/13
4040
In terms of Sec 13 of the PAA the AG must determine the standards, scope and nature of audits after consultation with SCoAG.
It is against this background that we are advising SCoAG that the current AG audit directive as published in the Government gazette No. 34783, vol 557, Pretoria, 28 November 2011 remains in force.
4141
End of presentation