AGSA Strategic Plan and Budget 2014 2017 Presentation

AGSA Strategic Plan and Budget 2014 -2017 Presentation to SCo. AG February 2014

Reputation promise / mission The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution 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.

Presentation Outline q Overview of AGSA’s strategic objectives q Main focus areas in the Strategic Plan q Summary of Strategic Goals and Objectives q Strategic Risk Profile q Strategic goals, objectives and performance measures with strategic initiatives q Sustainability Strategy q Budget 2014 -17 3

Summary of Strategic Goals and Objectives Commitments Strategic objectives Simplicity, clarity and relevance of our messages • Make value-adding recommendations to auditees • Maintain excellent quality of auditing • Make certain that our messages reach all stakeholders Visibility of leadership • Establish, maintain and own stakeholder relationships to encourage clean administration Funding • Execute the organisational mandate economically, efficiently and effectively • Ensure sufficient funding for the achievement of the mandate while maintaining our independence Strengthen our human capital • Build a motivated, high-performing and diverse workforce. Create access to the relevant skills and knowledge required for our work Lead by example • Adhere to standards of excellence for clean administration • Continually improve the timeliness of AGSA reports • Maximise the AGSA’s contribution to transformation Sustainable organisational practices Impact Improving the lives of SA citizens through executing our constitutional mandate of strengthening our country’s democracy

Focus Areas In The Strategic Plan q Integration of our various types of audit to holistically assess shortcomings in financial management, compliance and performance. q Increased research and consultations to confirm the required growth in performance auditing and relevant topics and areas for such auditing q Continual engagement with those charged with governance in public sector to encourage clean administration 5

Focus Areas In The Strategic Plan q Optimisation of the audit fees q Exploring ways to collect debt more effectively; q Intensifying the learning and development initiatives 6

Strategic Risk Profile Risk 1: The basis & mechanism of our mandate not always fully understood • Simplicity, clarity and relevance of our messages Risk & Risk 2: Failure to adequately understand &respond to priorities of our external stakeholders responsible • Visibility of leadership for leadership, governance and oversight Risk 3: Inability to have access to the right people and other resources to deliver on our mandate Risk 4: Unaffordable and unrealistic audit fees Risk 5: Inability to recover debts Strategic risks 7 • Strengthen human resources • Lead by example • Funding Strategic goals

Goal 1: Simplicity, clarity and relevance of messages Complementing the quality of the message with the quality of the audit process Objective 1: Provide value-adding recommendations to stakeholders based on audit results Objective 2: Continued excellence of the quality of audits performed

Goal 1: Simplicity, clarity and relevance of messages Objective 1: Provide value-adding recommendations to stakeholders based on audit results Performance measure Clear communication of relevant root causes and recommendations in our reports Tool Targets 2014 -15 2015 -16 2016 -17 100% Qualitative rating by AG Source of information: reports and presentation experience and stakeholder feedback Note: Internal products will be rated according to quality and timelines agreed with the relevant line manager.

Goal 1 – Main activities / initiatives q Enhance the packaging and positioning of our messages and the timing and structure of our general reports q Conduct interim audits of the annual performance plans q Continue to oversee and influence the audit process where we opted not to conduct the audits - to ensure the required quality and depth of the audits q Increase the number of audits of state-owned companies, universities and FET colleges

Goal 1 – Main activities / initiatives q. Organic integration between regularity auditing and the specialised units for performance auditing, investigations and information systems auditing. q. Increased access to specialised advice, and specifically legal expertise provided to the audit teams to deal with unique issues arising during the audit process. q. Optimising the efficiency of the audit process by reviewing the existing audit practices, the structures and the resources used in audits, the use of contracted firms, as well as the scope and impact of the use of technology on the audit.

Goal 1: Simplicity, clarity and relevance of messages Objective 2: Continued excellence of the quality of audits performed Performance measure Targets 2014 -15 2015 -16 Adherence to all quality standards Audit engagements Tool Quality control assessment committee review Adherence to all quality standards Corporate reports Tool 2016 -17 87% (C 1, C 2 90% (C 1, and C 3 C 2 and C 3 rating) 100% Qualitative rating by AG 100%

Goal 1 – Main activities / initiatives q. Constantly raise and maintain awareness of the importance of the quality of audits. q. Continue with proactive pre-issuance reviews on selected engagements. q. Perform independent post-issuance reviews (incl. those performed by contracted firms for adherence to the International Standards on Auditing. q. Implement and monitor policies and procedures in respect of all elements of ISQC 1. q. Continuously benchmark our audit practices internationally and obtain assurance from independent external bodies.

Goal 2: Visibility of leadership Objective: Develop stakeholder relationships to encourage clean administration Performance measure High-quality, value-adding external stakeholder interactions conducted and escalated, where necessary Tool Targets 2014 -15 100% 2015 -16 100% 2016 -17 100% Qualitative rating by AG Source of information: Stakeholder feedback

Goal 2 – Main activities / initiatives q Optimise the return on investment of our interactions with stakeholders by concentrating on the impact of our engagements. q Pursue high-quality interactions – create, own, manage and sustain relationships. q Re-evaluate and tailor our engagements to focus on those stakeholders that display willingness to improve. q Implement detailed tracking to determine the amount of time and other costs spent on the different areas of stakeholder engagements.

Goal 2 – Main activities / initiatives q Significantly improve visibility to internal stakeholders to create room for strategic discussion. Ensure that the brand promise is also part of the staff’s experience. q Seek balance between visibility, quality of our product and growing the skills of our staff. q Intensify the use of social media platforms to engage directly with the public. q Contribute to capacity building globally and on the African continent. q Encourage the private firms that conduct audits on our behalf to align with our visibility programmes.

Goal 3: Funding Objective: Execute the AGSA’s mandate economically, efficiently and effectively Performance measure Net surplus (%) Tool Targets 2014 -15 2015 -16 2016 -17 1% 2% 2% Analysis of income statement Performance Targets measure 2014 -15 2015 -16 2016 -17 Creditors’ days 45 days Tool Analysis of creditors’ ageing report

Goal 3: Funding Performance measure % debt collected – all national Targets 2014 -15 2015 -16 2016 -17 98% -100% 100% 96% - 98% business units 1% debt collected from the NT – Finance BU % debt collected – all provincial business units Tool Analysis of the debtors’ ageing report

Goal 3 – Main activities / initiatives q. Review of our funding strategy q. Pursue further maturity of our finance systems and implement conscious cost-cutting programmes / austerity plans q. Closely track all strategic initiatives to enable faster decisions and direct resources appropriately. q. Continue to negotiate direct appropriation of municipal audit fees from the National Treasury. q. Engage key government stakeholder to influence the debt payment by auditees

Goal 4: Strengthen our human capital Objective: To achieve a motivated, high-performing and diverse workforce Performance Targets measure Occupancy level (%) Tool 2014 -15 2015 -16 2016 -17 90% 90% Staff occupancy rate report from the ERP system Performance measure Targets 2014 -15 Maximum staff turnover 12% 2015 -16 12% 2016 -17 12% (%) Tool Staff turnover report from the ERP system (the targets exclude TAs and short-term contract (STC) employees)

Goal 4: Strengthen our human capital Objective: To achieve a motivated, high-performing and diverse workforce Performance Targets 2014 -15 2015 -16 2016 -17 Culture index 3. 75 3. 77 3. 79 Leadership index 3. 74 3. 76 3. 78 Staff engagement index 4. 05 4. 07 4. 09 measure Tool Annual survey and focus groups interviews. The target is expressed on a 5 -point scale Note: This targets are only applicable at organisational level. BUs will be measured on implementation of people plans as approved by relevant CEs

Goal 4 – Main activities / initiatives q 3 -pronged strategy: Development of leadership competence, talent management and creation of an environment for a high-performing and ethical workforce. q Talent management q improving the talent-sourcing mechanism q developing and monitoring talent in the AGSA q monitoring occupancy levels and reducing staff turnover rates throughout the business units q implementing a total reward strategy.

Goal 4 – Main activities / initiatives q Leadership competence and performance – augmenting the capacity and performance of our leaders through: q Providing executive coaching and mentoring q Ongoing competency assessment and development of the AGSA leadership q Developing and strengthening the leadership pipeline for succession planning q Enhancing the level of team effectiveness q Participating in executive development programmes q Best practice knowledge sharing with other SAIs

Goal 4 – Main activities / initiatives q Learning and development - enhancing and developing the skills and competency base of our employees through: § Maintaining an effective TA scheme § Further strengthening our pipeline through providing external bursaries and partnering with stakeholders in the auditing industry. § Growing qualified audit professionals belonging to various professional bodies as part of the desired professional qualifications profile § Enhancing the learning and skills development interventions for continuous growth of our employees

Goal 5: Leading by example Objective: Adhere to standards of excellence Performance measure Unmodified audit opinion on the AGSA Tool Targets 2014 -15 2015 -16 2016 -17 Unmodified audit opinion External audit report Objective: Maximise our contribution to transformation Performance measure B-BBEE level Tool Targets 2014 -15 2015 -16 2016 -17 2 2 2 Independent review conducted by an external agency Levels defined through the accepted country-wide system

Goal 5: Leading by example Objective: Continually improve timeliness of our reports Performance Targets measure Timeliness of PFMA reports 2014 -15 2015 -16 2016 -17 90% 90% reports within 2 months where annual financial statements are received as per the legislated deadlines MFMA 90% reports within 3 months where annual financial statements are received on time and f 4 months where statements are not received on time Tool Measure pertains to all annual financial statements received and required to be completed within the financial year

Goal 5: Leading by example Objective: continually improve timeliness of our reports Targets Performance 2014 -15 measure 2015 -16 2016 -17 Timeliness of Performance 95% (deadlines as reports audit reports Corporate as agreed with AG/DAG) 100% reports Tool Corporate reports as legislated 100%

Goal 5 – Main activities/initiatives Optimising our business processes and information technology q Improve connectivity to enable better resource mobility and timely access to information. q Step up the ability to process growing data volumes at improved speeds q Minimise the organisation’s dependence on paper records allowing faster access to and an in-depth analysis of data. q Enhance information-sharing.

Goal 5 – Main activities/initiatives q Continue to position IT as an important part of strengthening our internal controls. q Streamline our business processes even more to ensure minimal disruptions to business q Gradually implement new audit software - to gain efficiencies, facilitate better interaction between the teams, improve remote access and enhance user experience. q Automate the CWC process to minimise the time of processing the allocation of outsourced work

Sustainability – Main activities/initiatives Note: our organisational strategy has embedded various aspects of economic, cultural and social sustainability in the five strategic goals, here the focus is on the environmental aspect of our sustainability. q Optimise and integrate our reporting procedures and process q Improve our information systems to enhance integrity and quality of our sustainability reporting information q Continuously assess our carbon footprint q Monitor and evaluate environmental sustainability initiatives.

BUDGET 2014 - 15

Budget overview Actual 2012 -13 Surplus/(deficit )% Budget 2013 -14 2014 -15 0. 83% 1. 01% 1. 08% Total overheads as % of total audit income 30. 81% 32. 96% 33. 96% Gross Profit % 30. 21% 32. 33% 33. 28% CWC income % 27. 71% 23. 47% 22. 77%

Income statement overview Budget 2013 -14 Budget 2014 -15 Movement Audit income - Own hours - Contract work - S&T Direct expenditure Recoverable staff cost Contract work S&T Gross profit Other income Rmil 2, 514 1, 810 590 114 Rmil 2, 707 1, 972 616 119 % 1, 701 997 590 114 813 41 1, 806 1, 071 616 119 901 48 Contribution to Overheads Overhead expenditure Surplus/(deficit) 854 948 829 919 11% 25. 34 29. 34 16% 8% 9% 4% 4% 6% 7% 4% 4% 11% 16%

Capital expenditure Budget 2013/14 Rmil Computer equipment Budget 2014/15 Rmil 37 43 2 4 Furniture & Fittings 15 11 Leasehold improvements 11 20 1 2 66 80 Office equipment Motor vehicles Capital Purchases