Higher Education and Training: audit outcomes 2013/14 14 th October 2014

Higher Education and Training: audit outcomes 2013/14

14th October 2014

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 ourcountry’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

Agenda

1. Purpose of the presentation

2. Internal controls dashboard

3. Assurance levels

4. Audit outcomes for the department and its entities

5. Audit outcomes for the FET colleges

6. Audit outcomes for the universities

To provide members of parliament with the necessary information on the audit outcomes for the portfolio to enable the Portfolio Committee to

effectively execute their oversight function

Purpose of presentation

INTERNAL CONTROL DASHBOARD

Internal control dashboard

What is an internal control?

Internal control is defined as a process effected by an entity’s governing body (accounting officer/authority or equivalent), management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the efficiency and effectiveness of operations, reliability of reporting (financial and non-financial) and compliance with laws and regulations.


Primary purpose of internal controls

The primary purpose of internal control is to help management better control the organisation. Everyone in the organisation has some responsibility for internal control. Internal control is a multi- dimensional iterative process of on-going tasks and activities.

Internal controls dashboard

Why implement internal controls?• The implementation of effective internal control helps achieve

important objectives and sustain and improve performance. Objectives are derived from the regulatory environment or regulations.

• The objectives are driven by the mandate and the mission and vision. The objectives reflect how the auditee seeks to create, preserve and realise value. Setting objectives is a prerequisite to internal control and a key part of strategic planning. An organisation establishes a mission, sets strategies, establishes the objectives (goals) it wants to achieve and formulates the plan for achieving them.


What is the objective of internal controls in the public sector?1. Accountability and reportingThe process whereby organisations and individuals are held responsible for

their decisions and actions, including their stewardship of public funds, fairness and all aspects of performance.

2. Compliance with laws and regulations• Laws and regulations mandate the collection and spending of public

money and the way of operating. • Acting in accordance with government policy.

3. OperationalExecuting orderly, ethical, economical, efficient and effective operations. This

relates to the achievement of the mission, the fundamental reason for the auditee’s existence.


• Orderly: In a well-organised way, methodical.

• Ethical (moral principles): Ethical behaviour and prevention and detection of fraud and corruption: Public servants should serve the public interest with fairness and manage public resources properly.

• Economical (not wasteful or extravagant): Getting the right amount of resources, of the right quality, delivered at the right time and place, at the lowest cost.

• Efficient (relationship between the resources used and the outputs produced to achieve the objectives): The minimum resource inputs to achieve a given quantity and quality of output.

• Effective (accomplishment of objectives): Extent to which the outcomes of an activity match the objective.


4. Safeguarding of resources against loss, misuse and damage

Resources in the public sector generally embody public money and their use in the public interest requires special care. Other resources, such as information, source documents and accounting records, are key to achieving transparency and accountability of government operations. They are also in danger of being stolen, misused or destroyed.


Key drivers of internal control

• Leadership• Culture of honesty, ethical principles and good governance• Oversight responsibilities• Effective HR management• Policies and procedures• Action plans• Information technology (IT) governance framework


Key drivers of internal control• Financial and performance management

• Proper record keeping• Daily and monthly processing of information• Regular (monthly) and accurate financial and performance reports

supported by reliable documents• Review and monitor compliance• Design and implement IT controls

• Governance• Risk management• Internal audit• Audit committee

ASSURANCE LEVELS

Seniormanagement

Accountingofficers/authority

Executiveauthority

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 assuranceFirst level of assurance

Seniormanagement

Accountingofficers/authority

Assurance levels

Oversight assuranceSecond level of assurance

Coordinating /Monitoringinstitutions

Internalaudit

Auditcommittee



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 andthe implementation of commitments on corrective action made by management as well as quarterly progress on the action plans

Independent assuranceThird level of assurance

Oversight(portfolio

committees / councils)

Publicaccounts

committee

National Assembly



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

AUDIT OUTCOMES FOR THE DEPARTMENT AND ITS ENTITIES

Audit outcomes for the department and its entities

Audit outcomes for the department and its entities – assurance levels

Audit outcomes for the department and its entities – key controls

Audit outcomes for the department and its entities – risk areas

Audit outcomes for the department and its entities – root causes

Audit outcomes for the department and its entities - commitments

AUDIT OUTCOMES FOR THE FET COLLEGES

Audit outcomes for the FET’s

Audit outcomes for the FET’s – assurance levels

Audit outcomes for the FET’s – key controls

Audit outcomes for the FET’s – key risk areas

Audit outcomes for the FET’s

AUDIT OUTCOMES FOR THE UNIVERSITIES

The AGSA and the audits of Universities

Background

-Universities are established in terms of the Higher Education Act (HEA) 101 of 1997 as amended.

-Pre-amble to the HEA states inter alia “AND WHEREAS IT IS DESIRABLE for higher education institutions to enjoy freedom and autonomy in their relationship with the State within the context of public accountability and the national need for advanced skills and scientific knowledge”.-Concept of autonomy was often interpreted by the institutions to mean that they are not part of the “public sector” and therefore the AGSA should not be involved in their audits.

-AGSA General Notice 1111 of 2010, made special mention institutions of higher education falling within the ambit of s4(3) of the Public Audit Act (PAA), in response to calls for their inclusion from DHET and the Portfolio Committee for Higher Education and Training.

The AGSA and the audits of Universities

Background (cont.)

-AGSA involvement started in 2011 and is currently limited to:providing guidance to auditors on the audit of compliance with legislation and predetermined objectives .Attendance of audit committees more on an observer role than an active participatory role.

-Currently universities appoint own auditors after consultation with the AGSA i.t.o. s25 of the PAA.

-Legislative environment is quite thin e.g. no prescribed requirements pertaining to procurement in the HEA.

-New regulations for reporting issued in June 2014 have more stringent requirements planning and reporting on performance.

Audit outcomes of the Universities

Regression in audit outcomes

Financial statements (F)

Compliance with legislation (C)

Audit outcomes area

Unqualified Qualified Adverse/disclaimer Audits outstanding With no findings in audit report

With findings in audit report

33

Outcomes Improved Unchanged Regressed

Unqualified with no findings 17 Stellenbosch

Tshwane

Cape Peninsula,Central,Durban, NMMU,North West, Rhodes, UCT, Fort Hare, UJ, UKZN, Pretoria, Free State, UWC, Wits, Venda

Unqualified with findings 6

LimpopoUNISAWalter Sisulu

MangosuthuZululandVaal

Qualified with findings 0

Adverse or disclaimer with

findings0

33

Movements of the universities reported on

3322

33

Improvement

Regression

2323

0%0%

26%26%

0%0%

2323

74%74%

1515

2233

1818

Audit outcomes of universities over the past 5 years

9% 9% 14%26% 23% 4%

74% 78%87% 91% 86%

2013-14 2012-13 2011-12 2010-11 2009-10

Unqualified with no findings

Unqualified with findings

Qualified with findings

Adverse or disclaimer with findings

Compliance findings

- PAYE not deducted on certain fringe benefits or incorrectly calculated (2)

- No council or minister approval for construction of permanent building (1)

- VAT related (2)

- Conflicts of interest (3)

- HR related (1)

QUESTIONS???

Documents

Higher Education and Training: audit outcomes 2013/14 14 th October 2014