Briefing to the portfolio committee on Science and Technology
Audit outcomes of the Science and Technology portfolio for the 2014-15 financial year
14 October 2015
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.
2
Purpose of the presentation
Annually oversight committees set aside time to focus on assessing the performance of departments. On completion of the process, portfolio committees are required to develop department-specific reports, namely budgetary review and recommendations reports (BRRR) which express the committee`s view on the department’s budget for recommendation to the National Treasury ahead of the following year`s budget period.
Our role as the AGSA is to reflect on the audit work performed to assist the portfolio committee in its oversight role in assessing the performance of the departments taking into consideration the objective of the committee to produce a BRRR.
3
Content
1. Overall audit outcomes for Science and Technology portfolio 5
2. Auditor-General’s six key focus areas 6 - 9
3. Unauthorised/ irregular / fruitless and wasteful expenditure 10
4. Drivers of key controls for portfolio 11
5. Best practice 12
6. Combined assurance and assessment of assurance providers 13 - 14
8. Minister’s commitments to address root causes 15
9. Entities included in the portfolio not audited by AGSA 16
4
1. Overall audit outcomes for Science and Technology portfolio
40%DSTAISA
40%DSTAISA
100% DSTCSIRHSRCNRF
60% CSIRHSRCNRF
60% CSIRHSRCNRF
2014-15 2013-14 2012-134 auditees 5 auditees5 auditees
5
Unqualified no findings
Unqualified with findings
Qualified with findings
Adverse with findings
Disclaimer with findings
Audit not finalised
5
2. Auditor-General’s six key focus areas
100%
Quality of submitted
financial statements
(2.1)
50%(DSTNRF)
50%
Quality of submitted
performance reports
(2.2)
50% (DSTNRF)
50%
100%
100%
100%
Compliance with
legislation
(2.3)
Financial health Human resource
management
Information
technology
2014-15
PFMA
Good
Concerning
Intervention required
Regressed
Stagnant or limited progress
Improvement
6
2.1 Quality of submitted financial statements
100% (4)
100% (4)
Outcome if
NOT corrected
Outcome
after corrections
Avoided
qualifications by
correcting material
misstatements
during audit process
2014
-15
100% (5)
40% (DSTAISA)
60%(3)
Outcome if
NOT corrected
Outcome
after corrections
2013
-14
0 auditees
2 auditees
Financially unqualified
Financially qualified (qualified/ disclaimed with findings)
2014-15
PFMA
7
2.2 Quality of submitted annual performance reports
100% (5)
50% (DSTNRF)
50% (2)
Outcome if
NOT corrected
Outcome
after corrections
Avoided findings by
correcting material
misstatements
during audit process
2014
-15
100% (5)
Outcome if
NOT corrected
Outcome
after corrections
2013
-14
2 auditees
1 auditee
20% (NRF)
80% (4)
8
No material findings reported
Material findings on usefulness and/or reliability
2014-15
PFMA
8
9
2.3 Most auditees did comply with legislation in the following areas
100%
Quality of annual
financial statements
submitted
100%
Prevention of unauthorised,
irregular and/ or fruitless and
wasteful expenditure
100%
100%
100%
100%
Management of
procurement and or
contracts
Management of
strategic planning
and performance
Human resource &
consequence
management
Internal audit &
Audit committee
2014-15
PFMA
9
Good
Concerning
Intervention required
Regressed
Stagnant or limited progress
Improvement
2014-15
PFMA
10
3. Unauthorised, Irregular and Fruitless & Wasteful Expenditure
Unauthorised expenditure
Irregular expenditure
Fruitless and wasteful
expenditure
Definitions
Expenditure not in
accordance with the
budget vote/
overspending of
budget or
programme
Expenditure incurred
in contravention of
key legislation; goods
delivered but
prescribed processes
not followed
Expenditure
incurred in vain and
could have been
avoided if
reasonable steps
had been taken. No
value for money!
DST - R1 922 000 R0.00
CSIR - R117 000 R0.00
HSRC - R241 000 R64 000
NRF - R22 356 000 R14 000
Totals R0 R24 636 000 R78 000
Legends:
Decrease in
incurred
expenditure
No change
Increase in
incurred
expenditure
Finding not
repeated
New finding
Repeat finding
21.85% identified by
auditees100% identified by
auditees
4. Driver of key controls for portfolio
11
2014-15
PFMA
11
DST CSIR HSRC NRF
Leadership
Effective leadership culture
Oversight responsibility
HR management
Policies and procedures
Action plans
IT governance
Financial and performance management
Proper record keeping
Processing and reconciling controls
Reporting
Compliance
IT systems controls
Governance
Risk management
Internal audit
Audit committee
Good Concerning Intervention required
Improvement
Stagnant or little progress
Regressed
5. Best practices to maintain audit outcomes
Senior management’s positive attitude and commitment must be
consistently reinforced in their daily responsibilities.
In order to sustain audit outcomes, the auditees must ensure
effective leadership that is based on a culture of honesty, ethical
business practice and good governance.
12
12
2014-15
PFMA
Senior
management
Accounting
officers/
authority
Executive
authority
Required assurance levels
Extensive Extensive Extensive
Management’s assurance role• Senior management – take
immediate action to address specific
recommendations and adhere to
financial management and internal
control systems
• Accounting officers/ authority –
hold officials accountable on
implementation of internal controls
and report progress quarterly and
annually
• Executive authority – monitor the
progress of performance and enforce
accountability and consequences
Management assurance
First level of assurance
Senior
management
Accounting
officers/
authority
6. Combined assurance – complimentary mandate
Oversight assurance
Second level of assurance
Coordinating /
Monitoring
institutions
Internal
audit
Audit
committee
Extensive Extensive Extensive
Required assurance levels
Oversight’s assurance role• National Treasury/ DPSA – monitor
compliance with laws and regulations
and enforce appropriate action
• Internal audit – follow up on
management’s actions to address
specific recommendations and
conduct own audits on the key
focus areas in the internal control
environment and report on quarterly
progress
• Audit committee – monitor risks and
the implementation of commitments
on corrective action made by
management as well as quarterly
progress on the action plans
Independent assurance
Third level of assurance
Oversight
(portfolio
committees /
councils)
Public
accounts
committee
National
Assembly
Extensive Extensive Extensive
Required assurance levels
Role of independent assurance• Oversight (portfolio committees)
– review and monitor quarterly
progress on the implementation of
action plans to address
deficiencies
• Public accounts committee –
exercise specific oversight on a regular
basis on any report which it may deem
necessary
• National Assembly – provide
independent oversight on the
reliability, accuracy and credibility
of National and provincial government
13
6.1 Assessment of assurance providers for portfolio
14
2014-15
PFMA
Improvement
Stagnant or little progress
Regressed
14
Fir
st
leve
l
Se
co
nd
level
Provides assurance Provides some assurance
Provides limited/ no assurance
VacancyNot
Established/ Evaluated
4
3
4
2
1
2Senior management
Accounting officer/
authority
Executive authority
Internal audit unit
Audit committee
7. Status of Minister’s commitments to address root causes
1. Management monitors the dashboard monthly and updates the minister quarterly
on improvements and the actions taken to improve the controls.
2. Management monitors the planning process properly to ensure compliance with
the National Treasury’s framework and obtain quarterly feedback.
3. The supply chain management process checklist was implemented and must be
completed for all tenders, quotations and deviations. Internal audit will audit the
process to ensure compliance.
1. The minister will require a detailed plan addressing the audit findings, and
quarterly updates on the progress and implementation of the plan.
2. The minister will address ASSAF matters reported with the chairperson of the
ASSAF board to ensure that a turnaround strategy is implemented.
3. The DST will provide necessary support to its public entities to ensure
compliance with its mandate and PFMA.
Implemented In progress Not implemented New 15
15
2014-15
PFMA
8. Entities included in the portfolio not audited by AGSA (section 4(3) audit entities)
AUDIT OPINIONS 14/15 13/14 12/13
Technology Innovation Agency
South African National Space Agency
Academy of Science of South Africa
PREDETERMINED OBJECTIVES 14/15 13/14 12/13
Technology Innovation Agency
South African National Space Agency
Academy of Science of South Africa N/A N/A
COMPLIANCE WITH LAWS AND REGULATIONS 14/15 13/14 12/13
Technology Innovation Agency
South African National Space Agency
Academy of Science of South Africa N/A N/A
AUDIT OPINION LEGEND
CLEAN AUDIT OPINION: No findings on PDO
and Compliance
UNQUALIFIED with findings on PDO and
Compliance
QUALIFIED AUDIT OPINION (with/without
findings)
DISCLAIMER/ADVERSE AUDIT OPINION
ENTITY NOT YET ESTABLISHED
DEPARTMENT/ENTITY HAD FINDINGS (in the
related matter)
16
16
2014-15
PFMA
17
Questions