Department of Agriculture Forestry and Fisheries DAFF Portfolio

Department of Agriculture, Forestry and Fisheries (DAFF) Portfolio overview 16 April 2013

Reputation promise/mission The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence. 2

Purpose of meeting To brief the portfolio committee on the progress made by the department from previous audit cycle. 3

Agenda 1. 2. 3. 4. 5. 6. 7. 8. 4 Prior year audit outcomes Silver bullets for the portfolio Action plans developed by department Audit of predetermined objectives Budget 2013/14 and key issues Combined assurance Clean administration Conclusion

PRIOR YEAR AUDIT OUTCOMES 5

2011 -12 Audit outcomes Department of Agriculture, Forestry and Fisheries 1 (DAFF) Entities Onderstepoort Biological Products Ltd (OBP) 2 4 Agricutural Research Council (ARC) 5 Ncerha Farms 6 Marine Living Resources Fund (MLRF) Perishable Products Export Control Board (PPECB) Financially unqualified with Qualified, with findings no findings Financially unqualified with Adverse, disclaimer, findings with findings Compliance with laws and regulations Predetermined objectives National Agricultural Marketing Council (NAMC) 3 7 6 2010 -11 Financial audit opinion Auditee 2011 -12 Financial audit opinion Audit opinion 2011 -12 Material findings identified No material findings

2011 -12 Key control assessment DAFF & Entities 7

2011 -12 Status of key focus areas 8

2011 -12 Status of key focus areas 9

SILVER BULLETS FOR THE PORTFOLIO 10

Silver bullets for the portfolio What DAFF needs to change to achieve clean audit outcomes by 2014 Lack of monitoring of compliance with laws and regulations Lack of discipline of credible comprehensive monthly reporting Ineffective internal audit function Skills and policies for pre-determined objectives are lacking 11

ACTION PLANS DEVELOPED BY DEPARTMENT 12

Action plans developed by the department A C T I O N P L A N S D E V E L O P E D ? 13 Yes Audit matrix (action plan) drafted • Continues monitoring • Updated quarterly However repeat findings are still reoccurring

Root causes not addressed 14

AUDIT OF PREDETERMINED OBJECTIVES 15

Audit of Predetermined Objectives OVERSIGHT: Parliament, provincial legislature or municipal council Policy development • Identify desired impacts Assess and adjust Strategic Planning INSTITUTION End-year reporting Monitor and take corrective action 16 National department Provincial department Municipality Public entity Municipal entity Implementation and in-year reporting Specify performance indicators Operational planning and budgeting Set targets and allocate resources

Audit of Predetermined Objectives Definition: Annual audit of reported actual performance against predetermined objectives, indicators and targets as contained in the annual performance report of departments and their entities. Audit consists of the following Main Criteria: Compliance with regulatory requirements E c x e i s t e n 17 T e i s ms e l i n Reliability Usefulness P r e s e n t a t i o n C o n s i s t e n c y M e a s u r a b i l i t y R c e e l e v a n V y a l i d i t A y c c u r a c C o m p l e t e n e s s

Audit of Predetermined Objectives 2011/12 Audit Outcomes Reliability Usefulness Compliance with regulatory E T requirements x i s t e n c e i m e l i n e s s P r e s e n t a t i o n C o n s i s t e n c y M e a s u r a b i l i t y R e l e v a n c e V a l i d i t y A c c u r a c y C o m p l e t e n e s s Additional Matter paragraphs included in audit report: >20% of targets not achieved and material adjustments were made to the annual performance report submitted for audit 18 No matters reported Reported in audit report

Audit of Predetermined Objectives Usefulness of 2012/13 Annual Performance Report Requirement Presentation Conclusion Requirement Consistency Conclusion Requirement Measurability Conclusion Requirement Relevance Conclusion 19 Can only conclude once the Annual Performance Report is made available on 31 May 2013. Objectives, indicators and targets must be consistent between planning and reporting documents. A total of 44% of the indicators and targets as per the annual performance plan are not consistent with the indicators and targets as per the approved strategic plan as required by the National Treasury Framework for Strategic Plans and Annual Performance Plans. Indicators should be well-defined and verifiable. Targets should be specific, measurable and time-bound. No material findings reported. The indicators relate logically and directly to an aspect of the institution's mandate, and the realisation of strategic goals and objectives No material findings reported.

Audit of Predetermined Objectives Usefulness of 2013/14 Annual Performance Report Requirement Presentation Conclusion Requirement Consistency Conclusion Requirement Measurability Conclusion Requirement Relevance Conclusion 20 Can only conclude once the Annual Performance Report is made available on 31 May 2014. Objectives, indicators and targets must be consistent between planning and reporting documents. Can only conclude once the Annual Performance Report is made available on 31 May 2014. Indicators should be well-defined and verifiable. Targets should be specific, measurable and time-bound. No material findings identified. The indicators relate logically and directly to an aspect of the institution's mandate, and the realisation of strategic goals and objectives No material findings identified. Non-material findings reported: “SMART” principles

BUDGET 2013/14 & Key issues 21

Compliance requirements Section 27 (1) Section 27 (4) Section 28 “The Minister must table the annual budget for a financial year in the National Assembly before the start of that financial year or, in exceptional circumstances, on a date as soon as possible after the start of that financial year, as the Minister may determine”. “When the annual budget is introduced in the National Assembly or a provincial legislature, the accounting officer for each department must submit to Parliament or the provincial legislature, as may be appropriate, measurable objectives for each main division within the department’s vote. The relevant treasury may co-ordinate these submissions and consolidate them in one document. ” “Multi-year budget projections. — (1) The Minister (of finance) and the MEC for finance in a province must annually table in the National Assembly and in that province’s provincial legislature, respectively, a multi-year budget projection of – (a) the estimated revenue expected to be raised during each year of the multi-year period; and (b) the estimated expenditure expected to be incurred per vote during each year” Public Finance Management Act No. 1 of 1999 22

Compliance requirements 6. 1 Accounting Officer 5. 1 Annual preparation of strategic plans “ 6. 1. 3 An accounting officer of a budget vote must ensure that the budget submission for that vote includes appropriate supporting information in respect of constitutional institutions and public entities receiving transfers on that vote. ” “ 5. 1. 1 Each year, the accounting officer of an institution must prepare a strategic plan for the forthcoming MTEF period for approval by the relevant executive authority. ” AOPO immaterial findings Treasury Regulations 5. 2 Submission and contents of strategic plans “ 5. 2. 1 In order to facilitate the discussion of individual votes, the approved strategic plan must be tabled in Parliament or the relevant legislature at least 10 days prior to the discussion of the department’s budget vote. ” 23 Findings noted in 12/13 6. 2 Format of annual budget “ 6. 2. 1 The annual budget documentation, as presented to Parliament or a provincial legislature, must conform to the formats as determined by the National Treasury. ” No findings noted in 12/13

Budget comparison VOTE 26: 2012 -13 & 2013 -14 comparison Total to be appropriated Number Total 24 Programme 1 Administration 2 Total to be appropriated 2012 -13 2013 -14 R'000 Increase / (decrease) in budget 612 935 663 900 50 965 Agriculture Production, Health and Food Safety 1 891 603 2 066 100 174 497 3 Food Security and Agrarian Reform 1 408 635 1 597 700 189 065 4 Trade Promotion and Market Access 212 033 231 600 19 567 5 Forestry 1 261 775 1 184 500 (77 275) 6 Fisheries 411 791 434 000 22 209 5 798 772 6 178 000 379 228

Key issues on the departments budget Utilisation vs Service delivery Reliability of Ao. PO 25 • In 2011 -12 DAFF did not achieve 51% of the planned targets per their strategic plan. However, 99% of the vote was spent during the 2011/12 financial year, this requires significant improvement to achieve more efficient service delivery. • Validity, Accuracy and Completeness of reported predetermined objectives could not be verified in 2011 -12.

National Development Plan (NDP) 2030 NDP “Realise a food trade surplus, with one-third produced by small-scale farmers or households. ” Nu er mb d l r ho lde s l l ma er of t a o r a h m ine llho su f s mall ssing gh d o lde bsis o u r (S ce ro e far n ind r pro tenc mb cers rs ac es th sa) DAFF u me us du e a N du ce vic Afi Strategic r tr try ce nd o r pr rodu l se d M ain foc rs p cia an Plan ing us ed n SP a fin CA 26

National Development Plan (NDP) 2030 NDP Gazetted Green Paper (National Food Security Policy) Ensure household food and nutrition DAFF security Strategic Plan Approved Business Case on Zero Hunger 27 Report on Zero Hunger Campaign implementation

COMBINED ASSURANCE 28

Combined assurance First level of assurance: Management assurance Human resources capacity and productivity Timeous filling of vacancies with right skills Effective performance management Maintaining leadership stability Attention to credibility of management information Effective operation of daily controls (checks and balances) Monthly reporting (Financial, service delivery, compliance and IT controls) Second and third level of assurance: Oversight and audit (independent assurance) Effectiveness of assurance providers Management implement action plans and report thereon 29 Effective monitoring of commitments by oversight Validating credibility of management information

CLEAN ADMINISTRATION 30

Clean administration No material findings on Compliance Financially Unqualified AFS No material findings on Predetermined Objectives Clean Audit 31

Conclusion • The above assessment indicates that there is still work to be done in the movement towards clean administration however if focus is place on silver bullets and way forward it can be achieved. Overall assessment 32 Focus Areas • Supply Chain Management (SCM); • Predetermined Objectives (Ao. PO); • Misstatements in AFS (Completeness of disclosure notes); and • Capacitating internal audit. • Adequate preparation of complete Monthly AFS with full disclosure notes; • Preparation of Monthly Key Controls by auditees; • Focussed Quarterly key controls assessments and discussions; • Action against transgressors (consequence management); and • Timely implementation of action plans to address root caused and not findings. Way forward

Thank You 33