Briefing to the Portfolio Committee: Police

Audit outcomes of the portfolio for the 2015-16 financial

year

11 October 2016

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2015-16

PFMA

The AGSA’s promise and focus

Reputation promise

The Auditor-General of South Africa (AGSA) 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.

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2015-16

PFMA

Role of AGSA in the BRRR process

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 entities taking into consideration the

objective of the committee to produce a BRRR.

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Our annual audits examine three areas

1 FAIR PRESENTATION AND

RELIABILITY OF FINANCIAL

STATEMENTS 2 RELIABLE AND CREDIBLE

PERFORMANCE INFORMATION

FOR PREDETERMINED

OBJECTIVES 3

COMPLIANCE WITH KEY

LEGISLATION ON FINANCIAL

AND PERFORMANCE

MANAGEMENT

2015-16

PFMA

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Unqualified opinion with no

findings (clean audit)

Financially unqualified opinion with

findings 2015-16

PFMA

Auditee:

• produced credible and reliable financial

statements that are free of material

misstatements; and

• reported in a useful and reliable manner

on performance as measured against

predetermined objectives in the annual

performance plan (APP); and

• observed/complied with key legislation in

conducting their day-to-day to operations

to achieve on their mandate.

Auditee produced financial statements without

material misstatements or could correct the

material misstatements but struggled to:

• align their performance reports to the

predetermined objectives they committed to

in their APPs; and/or

• set clear performance indicators and targets

to measure their performance against their

predetermined objectives; and/or

• report reliably on whether they achieved their

performance targets; and/or

• determine which legislation they should

comply with and implement the required

policies, procedures and controls to ensure

compliance.

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Qualified opinion

Adverse opinion

Disclaimed opinion

2015-16

PFMA Auditee:

• had same challenges as those that were unqualified with findings but, in

addition, they could not produce credible and reliable financial statements

and

• had material misstatements on specific areas in their financial statements,

which could not be corrected before the financial statements were published.

Auditee:

• had same challenges as those that were qualified but, in addition, they

• had so many material misstatements in their financial statements that we

disagreed with almost all the amounts and disclosures in the financial

statements.

Auditee:

• had same challenges as those that were qualified but, in addition, they

• could not provide us with evidence for most of the amounts and disclosures

reported in the financial statements, and we were unable to conclude or

express an opinion on the credibility of their financial statements.

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2

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2015-16

PFMA

The 2015-16 audit outcomes

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Audit outcomes over 3 years – Police Portfolio 2015-16

PFMA

4 auditees 4 auditees 3 auditees

Unqualified with

no findings

Unqualified with

findings

Qualified with

findings

Adverse with

findings

Disclaimed with

findings

Audits outstanding

Improvement over 3 years in the most common qualifications areas

at CSP

9

2015-16

2014-15

2013-14

2015-16

PFMA

3

3

10

Performance management linked to programmes/ objectives tested

2015-16

PFMA

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With no material findings

With material findings

2015-16

PFMA

Quality of performance information

---------------------------------------------------

Usefulness of annual

performance information

Reliability of

performance information

12

2015-16

PFMA

Material findings on usefulness and reliability

Improved

Stagnant or

little

progress

Usefulness

CSP’s findings on the usefulness of information

were the following:

- Programmes 2, 3 & 4: The indicators are not

well-defined to ensure that they have clear,

unambiguous definitions so that data will be

collected consistently

- Programmes 2, 3 & 4: Performance targets

are not specific and measurable.

Reliability

The most common findings on reliability of

information were the following:

- Reported information was not complete

- Reported information was not valid

- Reported information was not accurate

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4

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Compliance

2015-16

PFMA

14 4 auditees

With no material

compliance findings

With material

compliance findings

Outstanding audits

2015-16

PFMA

Stagnation in compliance with legislation

4 auditees

`1`

Figure 1: Findings on compliance with

key legislation – all auditees

2015-16 2014-15

Slight improvement in compliance with legislation and quality of financial statements

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Prevention of unauthorised, irregular and/

or fruitless and wasteful expenditure

Management of procurement and/

or contracts

Consequence management

75% (3)

50% (2)

50% (IPID &

PSiRA)

25% (1)

50% (DoP &

CSP)

50% (2)

50% (PSiRA &

CSP)

Material misstatements in submitted

annual financial statements 75% (DoP,

CSP & PSiRA)

Figure 2: Findings on compliance with key

SCM legislation – all auditees

Figure 3: Quality of submitted

financial statements

2015-16

Outcome if

NOT corrected

Outcome

after corrections

2 auditees (50%) [2014-15: 1 (25%)] avoided

qualifications

due to the correction of material misstatements

during the audit process

Outcome if

NOT corrected

Outcome

after corrections

2014-15

With no material misstatements

With material misstatements

Irregular expenditure

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2015-16

PFMA

Expenditure

incurred in

contravention

of key

legislation;

goods

delivered but

prescribed

processes not

followed

Definition Irregular amounts incurred by entities in portfolio Investigations of irregular expenditure

2015-16

CSP lodged investigations to determine root cause

and consequences of irregular expenditure

incurred

2015-16 2014-15

4 Entities

2014-15

4

Entities

Investigated Not investigated

CSP (33%) [2014-15 :PSiRA (33%) lodged

investigations to determine root cause and

consequences of irregular expenditure incurred

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6

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Key controls, assurance providers, commitments made, top three

root causes and proposed recommendations

2015-16

PFMA

Regression in controls

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2015-16

PFMA

Leadership

Financial and

performance

management

Governance

Good

Concerning

Intervention required

Improved

Stagnant or little

progress

Regressed

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2015-16

PFMA

Provides assurance

Provides some

assurance

Provides limited /

no assurance

Not established

Improved

Stagnant or little

progress

Regressed

Sen

ior

man

agem

ent

Acc

ount

ing

offic

ers/

auth

oriti

es

Exe

cutiv

e au

thor

itie

Inte

rnal

aud

it

units

Aud

it co

mm

ittee

s

First level of assurance

Management/leadership

Second level of assurance

Internal independent assurance and

oversight

Third level of

assurance

External

independent

assurance and

oversight

Por

tfolio

com

mitt

ee

Improvement in assurance provided by key role players

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2015-16

PFMA

Appointment of key officials at PSiRA.

Follow up on commitments by the minister

In progress

Not Implemented

New

Implemented

3

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2015-16

PFMA

2

1 Instability and/or vacancies in senior positions.

Slow response in addressing audit findings, improving key

controls and addressing risk areas.

Insufficient internal controls over financial and performance

reporting to ensure that valid, accurate and complete

information is included in both the financial statements and

annual performance report.

Top three root causes in the portfolio

Actions required to improve audit outcomes

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2013-14

PFMA

2013-14

PFMA

2015-16

PFMA

• Finalisation of suspension cases of the DGs in SAPS and IPID and the

appointment of Secretary of Police at CSP.

• Management should act on recommendations made by the AGSA in a

timely manner and implement action plans for internal controls that are

sustainable.

• Accounting officers / authority must successfully implement basic

internal controls and accounting disciplines by preparing regular and

accurate financial statements and performance reports (including interim

reports).

• Senior management, leadership and oversight structures should

continue to pay close attention to the occurrence of supply chain

management transgressions. Investigate the incidents of non-compliance,

take appropriate corrective steps, and implement consequence

management.

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Actions required by the Oversight structures

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2013-14

PFMA

2013-14

PFMA

2015-16

PFMA

• Oversee the finalisation of suspension cases of the DGs of SAPS and IPID

and the appointment of the Secretariat of Police to ensure that there is

leadership stability in the portfolio.

• Senior management, political leadership and oversight structures should

continue to pay close attention to the occurrence of supply chain

management transgressions. Investigate the incidents of non-compliance,

take appropriate corrective steps, and implement consequence

management

• When the department and entities are called before the committee, that

the committee stresses the importance of controls over financial and

performance reporting to ensure that the reported information is valid,

accurate and complete.

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Questions