SCOAG Aug 2008

Annual Report Presentation : Auditor-General of SA

Key Highlights – Finance & Operations

Kimi Makwetu

20 August 2008

Index

1. Key Interventions

2. Challenges

3. Financial Results

4. Commentary

5. Actual Performance vs Targets for 2007/08

6. Conclusion

Key Interventions

• Reconstituted and focused Audit business

• Head of Audit

• Audit Development & Innovation

• All CE’s on board

• More streamlined support services

• Chief Operations Officer

• Chief Financial Officer

Challenges

• Ongoing vacancy challenge at Supervisory and Managerial Level.

• Stability at Senior Levels

• More attention still required at Managerial and Supervisory level.

– Grow our own leadership

Result

Key focus areas Financial Highlights

• Revenue

– Local

– International

• Net Deficit

2008

R’m

2007

R’m

1,108

21

893

18

(8.3) (1.8)

1,087 875

3. Key financial indicators – 2007-08 performance vs budget.

Actual (R'000)

Budget (R'000)

Variance (R'000) %

Revenue1,130,405 1,025,981 104,424 10%

Audit income 1,114,195

1,013,230

100,965

10%

Own Hours 647,363

700,722

(53,359)

-8%

Note 1

Contract work 423,292

250,525

172,767

69%

Subsistence & Travel 43,540

61,983

(18,443) -30%

Other income 16,210

12,751

3,459

27%

Note 1This variance is made up of the following:

Additional vacancies (64,711) Higher recovery rates 28,354 Lower utilisation (19,701) Net other recoveries 2,700

(53,359)

Commentary

• Includes substantial increase in debt provisions

• Write offs of balance sheet items accumulated over time.

• Detail shared with committee at time of discussing the funding model . (vacancies , contract work, tariff capping)

• Implementation of funding model recommendation will alleviate improvements in margin recoveries.

• Achievements of clean audit report key priority at all times.

• Stronger governance gaining heightened level of attention.

Environment in which Financial Statements are produced

• Leadership in Finance

• Standards of internal control

• Funding model and Balance sheet clean-up ( R3.9m, Note 21)

Commentary

Primary focus area

Main focus area Sub-focus areas Target Actual performance

1. Auditing 1.1 Quality Excellent performance (C2 and C3): 75%

Good performance (R1): 25%

Poor performance (R2): 0%

Excellent performance (C2 and C3): 70%

Good performance (R1): 20%

Poor performance (R2): 10%

1.2 Cost of auditing Additional 1% on the projected efficiency ratios of 33%

25% efficiency ratio

1.3 Timeliness 100% achievement of all audit deadlines:

100%: PFMA organisations

100%: other PFMA organisations

100%: MFMA organisations

45%: PFMA organisations

75%: other PFMA organisations

48%: MFMA organisations

Summary of Actual Performance vs Targets 31 March 2008

Summary of Actual Performance vs Targets 31 March 2008

Main focus area Sub-focus areas Target Actual performance

1.4 Audit of performance information

100% achievement of milestones set per annum

85%: PFMA 70%: MFMA

1.5 Performance auditing

At least 8% of total audit resources allocated to performance audit, including value for money focus areas

8% of total audit resources

1.6 International audits

Not more than 5% of total audit income

Income from international audits makes up 2% (R22m) of total audit income, which is within the target’s range.

Summary of Actual Performance vs Targets 31 March 2008

Main focus area Sub-focus areas Target Actual performance

3. Broad-based black economic empowerment (BBBEE)

100% compliance with BEE criteria per annum

100% compliance with BEE criteria

4. Leadership 4.1 Leadership effectiveness

2 – 3% increase from baseline

1% increase from baseline of 14% Actual Performance = 15%

5. Reputation 5.1 Overall reputation index

1% increase from baseline

3% decrease from baseline of 19% Actual Performance = 16%

Summary of Actual Performance vs Targets 31 March 2008

Main focus area Sub-focus areas Target Actual performance

6. People 6.1 Learning and growth

Minimum 20 qualified audit professionals per annum

32 Chartered Accountants (CA)

65 Registered Government Auditors (RGA)

3 Certified Information System Auditors (CISA)

2 Association of Chartered Certified Accountants (ACCA)

6.2 Retention of staff Less than 12% staff turnover rate

20% staff turnover rate

Summary of Actual Performance vs Targets 31 March 2008

Main focus area Sub-focus areas Target Actual performance

7. Process 7.1 Operational excellence

Level of maturity of business process at least:

0% at level 1

75% at level 2

25% at level 3

Level of maturity of

business process at least:

6% at level 1

81% at level 2

13% at level 3

Summary of Actual Performance vs Targets 31 March 2008

Main focus area Sub-focus areas Target Actual performance

8. Financial performance

8. 1 Efficiency gains (net surplus)

Additional 3% on projected efficiency gains

0% on efficiency gains

Deficit amounting to R8 million:

8.2 Debt collection National and

provincial not more

than 30 days

Local government

not more than 90

days

National = 10 days

Provincial = 34 days

Local government = 111 days

Conclusion

• Funding bottleneck addressed

• Ongoing capacity and leadership

• Skills pipeline through the profession continue to shrink

• Private audit firms remain a key stakeholder for delivery

• Growth and retention of key skills priority

• Substantial development & growth of key processes