SCoAG BRIEFING ON AGSA MANDATE AND METHOD OF WORK5 Sept 2014

REPUTATION PROMISE/MISSION

The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

PURPOSE OF PRESENTATION

To provide SCOAG members the necessary information on the role of the AGSA to assist them in executing their oversight function.

INDEX

1. AGSA mandate, role and functions

2. AGSA Strategic Plan 2014 – 2015

3. SCOAG and AGSA working relationship

4. Issues requiring immediate attention

AGSA MANDATE, ROLE AND FUNCTIONS

- Chapter 9 of the Constitution of the Republic of South Africa

(1996) establishes the institution of the Auditor-General as one of

the institutions supporting constitutional democracy

- The constitution recognises the importance of the AG and

guarantees its independence (AG is subject only to Constitution

and the law)

- Furthermore the Constitution requires that AG must be impartial

and exercise its powers and perform its functions without fear,

favour and prejudice.

The AG’s functions are described in:

•Section 188 of the Constitution – mandates constitutional and other

functions stating the AGSA must audit and report on accounts,

financial statements and financial management of government

institutions

•Section 4 of the Public Audit Act, 2004 (Act No.25 of 2004) (PAA)

differentiates between mandatory and discretionary constitutional

functions or audits

AGSA MANDATE ROLE AND FUNCTIONS (cont.)

AGSA functions are described in:

•Section 5 of the PAA which regulates other functions (audit-related

services and support to legislatures)

•Sections 20 of the PAA – Auditor-General must prepare audit report

containing opinion/conclusion on:

o Financial statements and financial position

o Compliance and financial management

o Predetermined objectives

AGSA MANDATE ROLE AND FUNCTIONS (cont.)

AGSA’s operational network

STAFF PROFILE

68% Generation Y

43Masters degree

4.8 Average years of service 57

CISA

88% occupancy

rate

460 CA(SA)

25ACCA

Average age 33 years

336 RGA

1135 employees

on TA scheme

3249 employees

Organogram of AGSA

10

AGSA PRODUCTSREGULARITY PERFORMANCE INVESTIGATIONS SPECIAL

• MANDATORY • Verify whether there

is no omitted information on financial statements

• Consists of :o Financialo Compliance o Predetermined

objectives (PDO)o Internal control

• Full application of ISA

• DISCRETIONARY• Section 20(3) of the PAA• Evaluate measures to

ensure economic procurement of resources and efficient and effective application of the same

• Effect of policy implementation (not policy evaluation)

• Reporting is factual & does not include an audit opinion

• Audit is conducted by performance auditors & may include subject matter experts

• Focuses on a specific government programme, project or management project

• DISCRETIONARY• An independent

process to prevent or detect fraud/ crime in the public sector

• Specific focus area of financial misconduct, maladministration & impropriety

• DISCRETIONARY• Agreed upon

procedures, i.e. donor funding certificates

Audit of financial statements and specific focus areas

Financial statements•Required in terms of the Constitution and the Public Audit Act•The auditor forms an opinion on whether the financial statements are prepared in all material aspects in accordance with the specific applicable financial reporting framework

Predetermined objectives•Service-delivery issues with focus on the reliability and usefulness of performance information which includes the measurement of targets as set out in the beginning of the financial year, were actually achieved

Compliance with laws and regulations•Reporting on material non-compliance with key legislation

Unqualified with no findings / Clean audit

AUDIT WORK ALLOCATION TO PRIVATE FIRMS (CWC)

Size of firms Budget 2014Actual

allocation 2014

Allocation target 2014

Actual allocation

2014

R mil R mil % %

Big and large 236 210 40% 32%

Medium 236 236 40% 35%

Small 118 219 20% 33%

Total 590 665 100% 100%

STRATEGIC PLAN 2014 – 2015 SUMMARY OF STRATEGIC GOALS AND OBJECTIVES 2014-17

Improving the lives of SA citizens through executing our constitutional mandate of strengthening our country’s democracy

Improving the lives of SA citizens through executing our constitutional mandate of strengthening our country’s democracy

CommitmentsCommitments Strategic objectivesStrategic objectives

Simplicity, clarity and relevance of our messages

Simplicity, clarity and relevance of our messages

FundingFunding

Strengthen our human capitalStrengthen our human capital

Visibility of leadershipVisibility of leadership

Lead by exampleLead by example

•Make value-adding recommendations to auditees•Maintain excellent quality of auditing•Make certain that our messages reach all stakeholders

•Establish, maintain and own stakeholder relationships to encourage clean administration •Execute the organisational mandate economically, efficiently and effectively•Ensure sufficient funding for the achievement of the mandate while maintaining our independence•Build a motivated, high-performing and diverse workforce. Create access to the relevant skills and knowledge required for our work

•Adhere to standards of excellence for clean administration•Continually improve the timeliness of AGSA reports•Maximise the AGSA’s contribution to transformation

ImpactImpact

Sustainable organisational practicesSustainable organisational practices 15

INTOSAI committee involvement

WORKING RELATIONSHIP

• The AGSA is accountable to the National Assembly and has to

report on its activities and performance of its functions.

• The Standing Committee on the Auditor-General (SCOAG),

established in terms of section 10(3) of the PAA, oversees the

performance of the AGSA on behalf of the National Assembly.

• AGSA’s main accountability instruments are the Strategic plan

and budget and the Integrated annual report, both of which are

tabled annually in the National Assembly.

WORKING RELATIONSHIP

• Public Audit Act statutory provisions:

• s3(d): The AGSA is accountable to the National Assembly

• s10(1): The AG is also accountable to the National Assembly

and has to submit an annual report on his/her activities and

performance of his/her functions

• s2(c): SCOAG is the entity through which the National

Assembly fulfills its role in terms of the PAA

• s30(2): The AG is in overall control of and accountable for the

administration of the AGSA.

WORKING RELATIONSHIP

• Public Audit Act statutory provisions:

• S5(2)(b): Provision is made for advisory and other structures

with no details as to composition, mandate, etc. – Advisory

structure and Remuneration Committee are currently in place

• s40(1): Provision is made for audit committee to be appointed

by the DAG in consultation with the Auditor-General with

specific functions and governance requirements

WORKING RELATIONSHIP

• Public Audit Act statutory provisions (cont.):

• s32(1): DAG is head of administration and is responsible for

management of administration (s32(3): Subject to directions

from the AG)

• s43(1): DAG is the accounting officer in the administration

• s32(2): DAG must carry out decisions of the AG, perform

duties delegated by AG and report on these aspects

• s48: Provision for delegation of powers by AG and DAG

WORKING RELATIONSHIP

• The current modus operandi consists of:

• Meeting on the Annual Report after its tabling – early

September

• Meeting on the Strategic Plan and Budget – mid October

• Other PAA required interactions

• Meetings are led by AG (or DAG), depending on availability

Constitutional/Legislative Responsibilities – as per PAA.

•Section 2(c)(i) - Constitutional requirement to protect the

independence, impartiality, dignity and effectiveness of the AG in terms

of Section 181(3) of the Constitution

•Section 2(c)(ii) – Provide advice to the National Assembly

•Section 31(1) - Give opinion on appointment of Deputy-Auditor-

General

•Section 52(2 ) - Give opinion on Regulations

•Section 10(3) - General Oversight Requirement in terms of Sec. 55(2)

(b)(ii) of the Constitution.

SCoAG RESPONSIBILITIES

Performance of the Office – as per the PAA

•Annual Report-Related Matters

oSections 41(5 ) (and refer to sec 10(1) & (2)) - Consider the annual

report, the financial statements and the audit report on these

statements

oSection 38(4) - Agree on the retention of the surplus.

oSection 40(6)(b)(iii ) - Consider concerns raised by the audit

committee

oSection 39(1) - Appointment of external auditor

SCoAG RESPONSIBILITIES

Performance of the Office (cont.)

Budget-related Matters

•Sec. 38 2(a) & 38 (3 ) - Consider the budget and business plan of the

AG and make recommendations to be forwarded to the Speaker for

tabling in NA and to National Treasury

•Section 23(1) - Give opinion on audit fees

•Section 43(5)(b) - Consider reports from DAG on any actual or

impending under-collection of revenue, shortfalls in budgeted revenue

and overspending of the budget or expenditure not in accordance with

the budget.

SCoAG RESPONSIBILITIES

Performance of the Office (cont.)

•Budget-related Matters

o Section 45(3) - Consider report from DAG on decision of AG to

incur irregular expenditure.

SCoAG RESPONSIBILITIES

Audit-related Matters – as per PAA

•Section 13(1)(a),(b),(c) - Give opinion on standards to be applied to

audits, nature and scope of such audits and procedures for the

handling of complaints when performing such audits.

•Section 12(3)(b) - Consultation by the AG in respect of the Code of

Conduct for authorised auditors

SCoAG RESPONSIBILITIES

• Integrated Annual report

• Strategic plan and budget 2015-18

• External Auditor – annual confirmation

• Retention of surplus

• Audit directive

• Outstanding debt

ISSUES REQUIRING IMMEDIATE ATTENTION

28

Debt escalation and debt profile

2010-11 2011-12 2012-13 2013-14

R mil R mil R mil R milTotal 399 480 517 607Local government 170 206 262 322National government & other 229 274 255 285

Local government debt by province

THANK YOU