Briefing by the AGSA on highlights (financial and non-financial) performance of the Department of Rural Development and Land Reform (DRD&LR)For the year ended 31 March 2010

12 October 2010

2

Reputation promise/mission

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.

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Agenda discussion points

• Highlights on the performance (financial and non-financial) of DRD&LR

• Highlights on the performance (financial and non-financial) of the Ingonyama Trust Board

4

Highlights on the financial performance of DRD&LR

Report paragraph 09/10 08/09 07/08 06/07 05/06

Tangible capital assets (Immoveable assets)

Q Q Q Q Q

Receivables for departmental revenue - Q Q Q Q

Material losses through criminal conduct EOM - - - -

Significant uncertainties EOM - - - -

Irregular expenditure EOM EOM - - -

Fruitless and wasteful expenditure EOM EOM - - -

Commitments EOM - Q - -

Interest received, interest receivable for departmental revenue

- OM Q

Biological assets - - Q - -

Report on predetermined objectives(previously audit of performance information)

ROLRR OM OM OM OM

5

Highlights on the financial performance of DRD&LR (cont)

Report paragraph 09/10 08/09 07/08 06/07 05/06

Non-compliance with applicable legislation-TR 3.2.1 (2009/10)-TR 38(1)(a)(i) (2009/10)-TR 8.2.3 (2008/09)-TR 11.2.1 (2008/09)

ROLRR OM - -

Internal controls ROLRR Y - - -

Investigations OR OM OM - -

Legends

Q Qualification

EOM Emphasis of matter

ROLRR Report on other legal and regulatory requirements

OR Other reports

OM Other matters

6

Tangible capital assets

• Findings

– Could not confirm the completeness and valuation of, rights and obligations regarding immoveable assets

– Milestones as per National Vesting Master Plan not achieved

• Recommendations

– Implementation of the milestones as per the National Vesting Master Plan,

– Surveying of all un-surveyed state land (Deadline as per National Vesting Master Plan – March 2012) and

– Vesting of state land (Deadline as per National Vesting Master Plan – March 2014)

7

Material losses through criminal conduct

• Findings

– R53.301 million losses incurred as a result of fraudulent activities identified through forensic investigations in 3 Land Reform LRAD projects in KZN. (Fictitious beneficiaries, duplicate payments, property registered incorrectly in the name of fictitious beneficiaries)

– Non-compliance with laws and regulations (section 38(1)(a)(i) of the PFMA (Adequacy of policies and procedures, database of beneficiaries receiving grant funding and adequate monitoring to detect fictitious beneficiaries)

• Recommendations

– Improvement of internal controls to prevent and detect irregularities,– Extension of investigations to other LRAD projects (Department indicated

intention of the services by the SIU),– Finalisation of investigations currently in progress (32 investigations ongoing

at 31 July 2010)– Updating the fraud risk register and fraud prevention plan as required in terms

of the TR 3.2.1

8

Highlights on the non-financial performance of DRD&LR

Programme Strategic objectives

per programme

Performance indicators

per programme

Targets per programme

Number of targets achieved and/or

exceeded

Number of targets not achieved

and/or partially achieved

Percentage not

achieved and/or

partially achieved

2 2 5 5 3 2 40%

3 4 7 7 2 5 71%

4 1 3 3 - 3 75%

5 3 4 4 - 4 100%

6 1 4 4 1 3 75%

7 2 7 7 1 6 85%

Summary 13 30 30 7 23 77%

9

Highlights on the non-financial performance of DRD&LR cont …

• Lack of effective, efficient and transparent system and internal controls regarding performance management which does not describe how the processes of performance planning, monitoring, measurement, review and reporting will be conducted, organised and managed, as required in terms of section 38(1)(a)(i) and (b) of the PFMA.

• Performance indicators and targets do not always comply with the SMART principles (specific, measurable, attainable, realistic and time-bound). Findings for Programme 4 and 5 (Targets were not Specific and Measurable)

• Reported targets for Programme 5 not reliable – Lack of suppourting documentation

• Leadership – No oversight on reporting and controls relating to pre-determined objectives / Implementation of prior year audit recommendations (Repetition of audit findings).

• Based on the phased in approach to the audit of predetermined objectives, an audit opinion was not expressed in the audit report on the report on predetermined objectives during the 2009/10 financial period.

10

Summary of financial information for DRD&LR – PFMA Section 32

Actual figures 09/10R’000

08/09R’000

Percentage variance

Total revenue 6 436 660 6 723 566 (4%)

Current expenditure 1 578 815 1 253 547 26%

Capital expenditure 35 577 1 471 606 (98%)

The reason for the significant decrease in capital expenditure is the creation of the Agricultural Land Holdings Account trading entity during the year under review as a result of the Provision of Land and Assistance Amendment Act.

Total expenditure 5 854 721 6 663 857 (12%)

Surplus for the year 581 939 59 709 875%

Borrowings - - -

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Summary of significant financial information for DRD&LR

09/10R’000

08/09R’000

Percentage variance

Material losses through criminal conduct 53 301 6 109 773%

Irregular expenditure 4 177 74 957 (94%)

Fruitless and wasteful expenditure 3 324 596 458%

Commitments 8 363 765 8 809 783 (5%)

Contingent liabilities 631 068 395 052 34%

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• Questions?