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Budgetary review and recommendations report Add subtitle here

XX Month XXXX

Briefing to Portfolio Committee on Transport

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Reputation promise

The Auditor-General of South Africa (AGSA) has a constitutional mandate and, as the supreme audit institution (SAI) of South Africa, 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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Role of the AGSA in the reporting process

Our role as the AGSA is to reflect on the audit work performed to assist the portfolio committee in its oversight role of assessing the performance of the entities taking into consideration the objective of the committee to produce a Budgetary Review and Recommendations Report (BRRR).

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Our focus 1

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Our annual audit examines 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

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The AGSA expresses the following different audit opinions Unqualified opinion

with no findings

(clean audit)

Financially unqualified

opinion with findings Qualified opinion Adverse opinion Disclaimed opinion

Auditee:

• produced credible and

reliable financial

statements that are free

of material

misstatements

• reported in a useful and

reliable manner on

performance as measured against

predetermined

objectives in the annual

performance plan (APP)

• complied with key

legislation in conducting

their day-to-day

operations to achieve

their mandate

Auditee produced

financial statements

without material

misstatements or could

correct the material

misstatements, but

struggled in one or more

area to:

• align performance reports to the predetermined objectives they committed to in APPs

• set clear performance indicators and targets to measure their performance against their predetermined objectives

• report reliably on whether they achieved their performance targets

• determine the legislation that they should comply

with and implement the required policies, procedures and controls to ensure compliance

Auditee:

• had the same

challenges as those with

unqualified opinions

with findings but, in

addition, they could not

produce credible and

reliable financial

statements

• had material misstatements on

specific areas in their

financial statements,

which could not be

corrected before the

financial statements

were published.

Auditee:

• had the same

challenges as those

with qualified opinions

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

Auditee:

• had the same

challenges as those with

qualified opinions 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

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The overall audit outcomes are indicated as follows:

Unqualified with no findings

Unqualified with findings

Qualified with findings

Adverse with findings

Disclaimed with findings

Audits outstanding

Movement over the previous year is depicted as follows:

Improved

Unchanged Movement of 5% or less: slight improvement slight regression

Regressed

The percentages in this presentation are calculated based on the completed audits of 14 auditees, unless indicated otherwise

DOT – Department of Transport

PRASA – Passenger rail agency of South Africa

SANRAL – South African National Road Agency

ACSA – Airports company of South Africa

SACAA – South African civil aviation authority

RTIA – Road Traffic Infringement Agency

RTMC – Road Traffic Management Corporation

DLCA – Driving License Card Trading Account

PORTS – Ports Regulator of South Africa

ATNS – Air Traffic Navigation Services

CBRTA – Cross Border Road Transport Agency

SAMSA – South African Maritime Safety Authority

RSR – Railway Safety Regulator

RAF – Road Accident Fund

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Transport Portfolio

• South African National Road Agency (SANRAL)

• Road Accident Fund (RAF)

• Cross Border Road Transport

Agency (CBRTA)

• Road Traffic Management

Corporation (RTMC)

• Road Traffic Infringement

Agency (RTIA)

• Driving License Card Account (DLCA)

• Passenger Rail Agency of South Africa (PRASA)

• Railway Safety Regulator (RSR)

* Section 4(3) entity

Department of Transport entities

Road

Rail Maritime

Aviation

• Air Traffic and Navigation Services (ATNS) *

• Airports Company of South Africa (ACSA)

• South African Civil Aviation Authority

(SACAA)

• South African Maritime Safety Authority

(SAMSA)

• Ports Regulator (PR)

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The 2017-18 audit outcomes 2

10

DO

PLAN

CHECK ACT

ACCOUNTABILITY = PLAN + DO + CHECK + ACT

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Portfolio snapshot (2017-18)

Quality financial

statements: 50%

(2016-17: 50%)

Clean audits: 21%

(2016-17: 43%)

Quality performance

reports: 50%

(2016-17: 43%)

No findings on compliance

with legislation: 21%

(2016-17: 43%)

Irregular expenditure:

R5 188m

(2016-17: R6 165m)

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Audit outcomes of portfolio over four years

14 auditees

14%(2) SAMSA PRASA

21% (3) SAMSA ATNS

PRASA 7% (1) DOT

58% (8)

DOT ACSA DLCA RSR

RTMC RTIA RAF

SANRAL

36% (5)

DOT SANRAL

RSR DLCA ACSA

57% (8) ACSA DLCA

PRASA RAF RSR RTIA

SAMSA SANRAL

71% (10)

ACSA C-BRTA DLCA DOT

PRASA RSR RTIA

RTMC SAMSA

SANRAL

21% (3)

C-BRTA SACAA PORTS

43% (6)

C-BRTA SACAA PORTS RTMC RTIA RAF

36% (5)

C-BRTA SACAA PORTS RTMC ATNS

29% (4)

SACAA PORTS

RAF ATNS

2017/18 2016/17 2015/16 2014/15

7% (1) ATNS

14 auditees 14 auditees 14 auditees

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Movement table (2017-18 over 2016-17)

Audit outcome

MOVEMENT

Improved

Unchanged Regressed New auditee

Outstanding

audits

Unqualified

with

no findings = 3

SACAA

PR

CBRTA

Unqualified

with findings =

8

DOT

ACSA

RSR

DLCA

SANRAL

RTMC

RTIA

RAF

Qualified with

findings = 2

SAMSA

PRASA

Adverse with

findings = 0

Disclaimed

with findings =

0

Outstanding

audits ATNS

0 10

Colour of the number indicates the audit opinion from which the auditee has moved.

3 0 1

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100% (14)

100% (14)

15% (2)

21% (3)

85% (11) 79%

(11)

2017-18 2016-17

50% (7)

50% (7)

77% (10)

57% (8)

23% (3)

43% (6)

2017-18 2016-17

Audit of financial statements Findings on

annual performance reports

Findings on compliance

with key legislation

Unqualified Qualified Adverse Disclaimed

AFS submitted

on time

AFS and APR submitted with no

material misstatements

With no findings

With material findings

Movement on the opinion of financial statements, conclusion on the annual performance reports and finding on compliance - (excluding

outstanding audits)

23% (3)

29% (4)

77% (10)

71% (10)

2017-18 2016-17

50% (7) 43%

(6)

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70% (9)

23% (3)

62% (8)

23% (3)

62% (8)

23% (3)

15% (2)

15% (2)

Governance

Financial and performancemanagement

Leadership

7% (1)

Status of internal control (excluding outstanding audits)

Good Of concern Intervention required

Drivers of internal controls

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Assurance provided (excluding outstanding audits)

First

le

ve

l

9

7

8

8

3

13

2

5

3

3

7

1

1

2

2

3

Senior management

Accounting officer/authority

Executive authority

Internal audit unit

Audit committee

Portfolio committee

Third

le

ve

l

Se

co

nd

le

ve

l

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

Provides assurance

Provides some assurance

Provides limited/ no assurance

Not established Not assessed

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

Assurance

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

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Financial health and financial management 3

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50% (7)

54% (7)

29% (4)

31% (4)

21% (3)

15% (2)

2016-17

2017-18

There are liquidity concerns over SANRAL and RAF within the portfolio.

Two or less unfavourable indicators

More than two unfavourable

indicators

Significant doubt that operations can

continue in future

• Management should enhance timely remedial action to improve

the management of working capital especially with regards to

debtor and creditor collection period.

Key concerns identified

Financial health (excluding outstanding audits)

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Unauthorised, irregular as well as fruitless and wasteful expenditure decrease over 5 years

Expenditure incurred

in contravention of

key legislation;

goods delivered but

prescribed

processes not

followed

Expenditure not in

accordance with the

budget vote/

overspending of

budget or

programme

Expenditure

incurred in vain and

could have been

avoided if

reasonable steps

had been taken. No

value for money!

Definition

R5 188 million

R 86 million

R million

R6 588 million

R 250 million

R 177 million

R16 142 million

R 301 million

R million

R2 605 million

R 579 million

R 393 million

R2 808 million

R 40 million

R 768 million

Irregularexpenditure

Fruitless andwasteful expenditure

Unauthorised expenditure

The audit of ATNS is outstanding and the amount of irregular expenditure for 2017/18 is not included.

2013-14 2014-15 2015-16 2016-17 2017-18

Most common findings on supply chain management

0%

23% (3)

0%

23% (3)

31% (4)

23% (3)

15% (2)

38% (6)

Performance of contractors not monitored on monthly basis

Inadequate contract performance measures and monitoring

Suppliers' tax affairs not in order

Preference point system notapplied or incorrectly applied

Declarations of interest not submitted

Competitive bidding not invited

Local content minimumthreashold for local production

not adhered to

Three written quotations not invited

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If officials who deliberately or negligently ignore their duties

and contravene legislation are not held accountable for

their actions, such behaviour can be seen as acceptable

and tolerated.

Management (accounting officers/ authorities and senior

management do not respond with the required urgency to

our messages about addressing risks and improving internal

controls. 64% (7)

27% (3)

36% (4)

Slow response to improving key controls and addressing risk areas

Inadequate consequences for poor performance and transgressions

Instability or vacancies in key positions

The instability and prolonged vacancies in key positions can

cause a competency gap and affect the rate of

improvement in audit outcomes.

Root causes

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Recommendations

• Monitoring and regular follow up with the executive authority and the accounting officer/authority on :

o Appointment of boards and other governance structures to ensure that they are fully constituted with members with the appropriate skills and experience for effective governance and oversight over the entities.

o Management of vacancies to ensure stability of leadership

o Progress on action plans put in place by the entities to address undesirable audit outcomes

o performance and consequence management especially around supply chain management

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Little improvement in plan-do-check-act cycle

Status of audit action plans regressed

Usefulness of performance indicators and targets improved

PLAN

DO Overall internal controls regressed

Basic financial and performance management controls regressed

ICT controls slightly regressed

Vacancies in CFO positions slightly regressed

CHECK Assurance provided by:

• Senior management and accounting officers/authority regressed

• Internal audit units and audit committees regressed

ACT Compliance with consequence management legislation regressed

Investigation of previous year UIFW slightly regressed

Investigations into SCM findings we reported in previous year slightly improved

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