presentation to the portfolio committee on energy prof yaswant gordhan ca (sa) audit committee...
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PRESENTATION TO THE PORTFOLIO COMMITTEE ON ENERGY
PROF YASWANT GORDHAN CA (SA)AUDIT COMMITTEE CHAIRPERSON
11 OCTOBER 2012
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TABLE OF CONTENTS• Audit Committee responsibility
• Membership
• Risk Management
• Effectiveness of Internal Control
• Quality of management reports
• Evaluation of AFS
• Internal Audit
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RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Audit Committee is responsible to exercise oversight responsibility over •Internal Audit•External Audit•Risk Management•Reporting (financial and non financial information)•Compliance with applicable laws and regulations•Internal Control
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MEMBERSHIP • The DoE Audit Committee consists of 3 members
(All Chartered Accountants and specialists on various fields)
• Established in September 2010• Complied with its responsibilities arising from
Sections 38 (1)(a) and 77 of the PFMA and Treasury Regulation 3.1.13
• Adopted a formal Terms of Reference and discharged all its responsibilities arising therefrom
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Risk Management
• The Department has established a process for the management and monitoring of the risk management process.
• This initiative was enhanced with the appointment of a Chief Risk Officer in the current year.
• The committee reviewed the strategic risk register during the current year and recommended improvements to some of the processes.
• The maturity of the enterprise risk management process was found to be at an evolutionary stage and requires further commitment and improvement.
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The effectiveness of Internal Control
• The Department has a system of internal control to provide cost-effective assurance that the Department’s goals will be economically, effectively and efficiently achieved.
• Internal Audit provided the Audit Committee and Management with quarterly internal audit reports in terms of its approved annual and three-year rolling Internal Audit Plan.
• From the various reports of Internal Audit and of the Auditor-General, it was noted that there were some deficiencies in the internal control system.
• Management has undertaken to address the deficiencies and to improve the internal control environment.
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Quality of Management Reports
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• During the period under review, quarterly management reports were presented to the Audit Committee during its meetings.
• The Audit Committee was not entirely satisfied with the content and the quality of the reports (particularly the timely submission of reports and review thereof)
• The Audit Committee suggested certain improvements in the process of reporting.
• Management has undertaken to improve the timely presentation and the content of the required reports as suggested by the Audit Committee.
• Over the 2 year period ending 31 March 2012 notable improvement has been noted in the reporting of non financial information.
• An unqualified audit report was received from the AG on the Audit of Predetermined Objectives in the current year.
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Evaluation of Annual Financial Statements
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The Audit Committee has•Reviewed and discussed the Auditor-General’s final Management Report with the Accounting Officer and Management. An undertaking has been given to address all the reported items;•Reviewed and discussed with the Accounting Officer and Management the 31 March 2012 audited annual financial statements to be included in the 31 March 2012 Annual Report;•Reviewed and discussed the appropriateness of the accounting policies and practices;•Reviewed and discussed the unqualified audit opinion. The Audit Committee takes note of the other reported items included in the Auditor-General’s Report which the Accounting Officer and Management have committed to address in the ensuing financial year.
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• The Audit Committee reviewed the internal audit quarterly reports to ensure that internal audit activities were conducted in terms of the approved annual and three-year rolling plan.
• The Audit Committee, as in the previous year, again registered its concerns with the Accounting Officer and Management regarding the adequacy of resources within the Internal Audit function.
• Although some enhancements have been made, there is a necessity for an evaluation in accordance with the IIA Standards of the internal audit function.
• In July 2012 the Audit Committee had a meeting with the Minister of Energy and, inter alia, raised this internal audit capacity constraint. An assurance was given to address this problem.
Internal Audit
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Internal Audit• The internal audit function of the DoE was established
in April 2010 with 3 auditors
• That capacity was enhanced in April 2011 with the addition of five auditors
• A variety of audit assignments including IT, compliance, performance and financial audits have been planned and executed during the past 2 financial years but the level of assurance still needs enhancement
• Co-sourcing has been arranged during 2011 and 2012 but the funding for such is received towards the 3rd Quarter and this affects the performance of the identified audits
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Meeting with the Minister
• Skills audit for the whole department by an independent service provider
• Balance between internal and external audit• Establishment of an ethics and social committee• Increase in the number of AC members to
enhance the risk management oversight responsibility
• Enhancement of oversight responsibility over DORA transfers
• Risk management capacity
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THANK YOU
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