AuditorGeneral of South Africa Integrated Annual Report 2012

Auditor-General of South Africa Integrated Annual Report 2012 -13 Briefing to SCo. AG - 20 September 2013

AGSA’s reputation promise – our mission The Auditor-General of South Africa 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.

Content q Objectives of the presentation q Overview of the AGSA’s commitments to Parliament q Report on the achieving of AGSA’s commitments ü Simplicity, clarity and relevance of messages ü Visibility of leadership ü Strengthen human resources ü Lead by example ü Funding q Sustainability performance q SCo. AG decisions

Objectives of the presentation § To report on the execution of the predetermined objectives set out in the AGSA Strategic Plan and Budget 2012 -2015 § To provide information to Parliament about the AGSA’s financial performance for 2012 -13

AGSA’s strategic commitments § We promised that all our messages will be simple, clear and relevant to ensure that they are understood by all stakeholders § We promised that we will be visible to encourage response and action by our stakeholders § We promised to develop a skilled, high-performing and diverse workforce to deliver best on our mandate § We promised to lead by example in all our internal processes to demonstrate that clean and effective administration is possible and achievable § We promised not to waste public resources and to execute our operations in an economical, efficient and effective manner

HOW WE PERFORMED

What were our messages and how they contributed to the quest for clean administration

Highlights: Simplicity, clarity and relevance of messages Tabled 20 general reports, demonstrating our commitment and ability to communicate the insights we obtain through our audits for the betterment of the public sector q Piloted interim audits of annual performance plans to enable corrective actions earlier in the process q Published the performance audit report on the use of consultants at national on 31 January 2013 q And as a rule our auditors continued identifying root causes and making recommendations for improvement in the auditees’ environments

Highlights: Simplicity, clarity and relevance of messages q Participated in the development of an IT governance framework for the country approved by Cabinet q Introduced the stakeholders combined assurance model to all q Initiated a project with the Institute of Internal Auditors to equip internal auditors in the public sector for performing control assessments q Lead by example by publishing our first integrated annual report. It was incorporated in the Global Reporting Initiative’s (GRI) database of sustainability and integrated reports for sharing and learning purposes.

Continuous Interactions and engagements with both our internal and external stakeholders contribute to the impactful delivery of our organisational mandate

Highlights: Visibility of Leadership q We increased our briefings to the portfolio committees and the quarterly interactions with portfolio chairpersons q Achieved increased interest by executive authority for the key control visits q Completed the municipal door to door visits to all nine provinces After 12 very successful years our engagement with the United Nations Board of Auditors came to an end.

Highlights: Visibility of Leadership q We continued our strong participation in the INTOSAI working mechanisms q Our experience and knowledge are sought after by many other SAIs We hosted the INTOSAI Professional Standards Steering Committee which worked towards finalisation of a number of International Standards of Supreme Audit Institutions (ISSAIs) Hosted study tours from Libya, Kenya, Uganda, Bahrain, Namibia, China, Jordan, Ghana and Nigeria

Strengthening our human resources A motivated workforce is not only critical for achieving organisational objectives, but also for the well-being of employees and their families

Highlights: Strengthening our human resources q The number of the newly qualified audit professionals increased by 36% compared to last year q Our total expenditure on study support, learning and growth was R 65 million q The trainee auditor registration for learnership programmes increased by 23% from last year q We launched two unique programmes for trainee auditors – AGSA SAICA UNISA (ASU) Jumpstart and CTA 2 Boot Camp q The pass rate for external bursary holders increased to 68, 6% (2011 -12: 51, 7%)

Highlights: Strengthening our human resources q We abolished the use of fixed-term contracts (FTCs) as a staffing model. q Our Ethics policy and procedures were revised to ensure they remain relevant and in line with best practice. q We created a platform for knowledge sharing and dialogue through the invitation of thought leaders from the broader public service. q Enhanced our team effectiveness model and rolled it out to most business units q Implemented a People. Soft e-Recruitment system

Highlights: Strengthening our human resources q The public sector awareness programme, aimed at assisting our leadership and audit teams in understand our public sector auditing environment better, continued to yield positive results q Provided funding of over R 3 million to the University of Fort Hare to maintain their SAICA accreditation, in an effort to support the transformation of the accounting profession in the country q We became a founding member of the Chartered Accountants’ Public Sector Forum (CAPSF) which was launched on 01 February 2013 University of Fort Hare graduates

Leading by example We have established policies and procedures designed to provide us with reasonable assurance that the system of quality control in AGSA is relevant, adequate, operating effectively and complied with.

Highlights: Lead by example q We have substantially improved our methodology for the auditing of compliance with legislation, also with a view to expressing an opinion in future q The outcome of the independent firm-level review by IRBA indicated the effective functioning of our internal control monitoring processes q The Quality results improved significantly compared to the previous year and are at their best in the last 4 years.

Highlights : Leading by example q Strengthened our risk management processes and consider the identified risks in our strategy and our business processes. q We maintained the status of a B-BBEE contributor level 3, with 87% of the BUs being level 2 contributors q Spent R 3 108 333 on different corporate social investment initiatives q Implemented a new module of the ASA MIS to capture and track stakeholder engagement We officially opened the AGSA Museum and library on the 30 Nov 2012

Highlights : Leading by example We afforded 34 students the opportunity to pursue careers in accounting / auditing through the AGSA Centenary Scholarship Fund

Highlights: Leading by example q We exceeded our targets for timeliness of performance audit and investigation reports and achieved the targets for our corporate reports q We achieved a 90% compliance with statutory and legislative deadlines for PFMA audits and 2% below target for MFMA Applicable legislation PFMA and AG’s directive MFMA Total number of auditees Number of auditees that submitted AFS in financial year Number % Number of audits completed within legislative deadline Number % 546 532 97% 480 90% 335 332 97% 291 88% 881 864 98% 771 89%

Highlights: Leading by example We continuously monitor and consistently the desired employee equity profile by ethnic group and gender Employment equity profile by gender 2012 -13 African White Coloured Disabled Male Female Indian 50% 2012 -2013 1% 16% Male 11% 7% Female 65% 52% 48% 2011 -2012

Funding We are determined to execute our mandate economically, efficiently and effectively.

Highlights: Funding q Audit income is up by 6, 75%: R 2 214 million (2011 -12: R 2 074 million) q Surplus was down by 81%: R 19 million (2011 -12: R 99 million) q Gross profit at 29%: R 641 million (2011 -12: R 625 million) q Overheads up by 18%: R 688 million (2011 -12: R 583 million) q Cash balance increased from R 415 million to R 464 million q Creditors’ payment days remained at 31 days vs target of 45 days q Total debtors increased from R 480 million to R 517 million q Local government debt collection remained a challenge, debt increased from R 206 million to R 262 million q High increase in bad debt provision from R 74 million to R 115 million

Highlights: Funding Revenue, Direct cost and Gross Profit 2 500 Million 2 000 1 500 1 000 500 - R 1 850 R 2 074 R 1 298 R 552 R 1 449 R 2 214 R 1 573 R 2 226 R 1 540 Revenue R 625 R 640 R 686 Direct cost Gross profit 2011 Actual 2012 Actual 2013 Budget Year The actual Revenue was 0. 56% below budget The actual direct audit cost s were 71% vs budget of 69%

Highlights: Funding Indirect overhead expenditure

Highlights: Funding Net surplus R 140, 00 R 120, 00 R 133 Rmil R 100, 00 R 99 R 80, 00 R 60, 00 R 40, 00 R 20, 00 R 19 2011 2012 Years 2013 We had an operating deficit of R 42 million. The surplus came as a results of net interest income of 60 million ( R 65 interest less R 5 million other comprehensive income)

Highlights: Funding Debtors R 600 R 480 R 500 Million R 400 R 517 R 399 R 300 R 200 R 100 R 263 R 170 R 46 2011 R 206 R 74 2012 Years R 115 2013 Total trade receivables Local debtors portion of total trade receivables

Highlights: Funding Creditors and creditors days R 450 R 400 R 350 R 300 R 250 R 200 R 150 R 100 R 50 R - R 348 R 377 R 428 Actual 34 2010 -11 days Actual 2012 -13 R 110 R 94 2011 2012 Total creditors Actual 2011 -12 Target R 109 2013 Improvement in creditors’ days is due to the availability of funds that makes it possible for us to pay our suppliers timeously. This is in line with our desire to build strong relations with our suppliers so that we are given preferential customer status.

Highlights: Funding Cash flow 2013 Rm 2012 Rm % Growth Net cash inflow from operating activities 127 107 19. 09% Net cash outflow from investing activities -65 -28 136. 40% Net cash (outflow) / inflow from financing activities -13 -16 -19. 96% 49 63 -22. 02% Cash at the beginning of the year 415 352 17. 89% Cash and cash equivalents at end of the year 464 415 11. 83% Net increase in cash and cash equivalents There was a net cash inflow of R 129. 2 million in 2012 -13 (2011 -12: R 108. 9 million). The cash was utilised to fund acquisitions of assets to the value of R 67. 1 million (2011 -12: R 29. 7 million) and for the repayment of finance lease agreements of R 13. 0 million (2011 -12: R 16. 2 million). The net result is an increase in the cash and cash equivalents of R 49. 1 million (2011 -12: R 63. 0 million)

Sustainability performance review We acknowledge that we have an impact on the physical environment and the society in which we operate

Highlights: Sustainability performance review q For the first time we reported on electricity, water and paper use as well as business travel by employees q Our carbon footprint is estimated to be at least 9 683 metric tons of carbon dioxide equivalent q We implemented two new environmental initiatives q. Waste minimisation and waste management q. Business travel optimisation

Highlights: Sustainability performance review q Adopted 127 schools across South Africa bringing the total number of adopted schools to 207 since the programme’s inception q Spent R 2, 5 million in the current financial year (2011 -12: R 0, 699 million) on the rural schools development q We invested R 400 000 in CSR programmes rolled out to all nine provinces on ‘go green’ initiatives At the AGSA, we believe that sustainabilit y is our destiny and not a temporary objective

Highlights: Sustainability performance review q Another way of ensuring our sustainability is through investing in the transformation of the society via our CWC work Allocation of outsourced audit work to private audit firms 2011 -13 Rmil R 300 R 262 R 232 R 250 R 233 R 217 R 213 R 212 R 205 R 236 R 210 R 223 R 200 R 164 R 205 R 146 R 144 R 150 R 109 R 103 R 94 R 100 R 74 Medium Small R 50 R - Large Actual 2011 Budget 2011 Actual Budget 2012 Years Actual 2013 Budget 2013

End of report

Decisions to be made by SCo. AG q Retaining the net surplus by the AGSA: section 38(4) of PAA act 2004 q Confirm the appointment of External auditors: section 39 (1) of PAA act 2004 q

Thank you