Reputation promise/mission

Briefing to the Portfolio Committee on Basic Education on the audit outcomes of the Provincial Departments of Education and related entitiesFor the year ended 31 March 2010

13 October 2010

By: Meisie Nkau

2

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.

33

Agenda discussion points

• Audit outcome on the Provincial and National Departments of Education

• Conclusions on audit of pre-determined objectives

• Overview on Education Sector Auditing

• Highlights on the performance (financial and non-financial) of the entities related to the Department of Education

4

Audit outcome on the Provincial and National Departments of Education for the past three years (Financial information)

Province Opinion 09/10 Opinion 08/09 Opinion 07/08

Eastern Cape Disclaimer Adverse Adverse

Free State Qualified - -

Gauteng - Qualified Qualified

KwaZulu-Natal - - -

Limpopo Disclaimer Qualified Qualified

Mpumalanga Qualified - Qualified

Northern Cape Qualified Disclaimer Disclaimer

North West Disclaimer - -

Western Cape - - -

National Department - - -

Number of modified reports

6 4 5

Percentage (%) 60% 40% 50%

5

Audit outcome on the Provincial and National Departments of Education for the past three years (continue)…

2009/10 Financial year (Financial reporting)

Ideally, departments should strive for an clean audit report, which isan unqualified opinion on the financial statements, without theneed to include other matters under the auditor’s opinion paragraph.

Only the national department received a clean audit report. Therewere no clean audit reports in all of the nine provincial departments.

The Gauteng, KwaZulu-Natal and Western Cape, received unqualifiedreports with other matters noted in the report.

All the remaining provincial departments received qualified auditopinions ranging from qualified audit reports (three reports), to adisclaimer (one report) and an adverse report (one report).

6


2009/10 Conclusion

The overall performance of the provincial education departments in

terms of internal controls remained to be unsatisfactory. Six of nine

provinces received either a disclaimer or a qualified audit opinion.

Of concern is that the number of provinces that received a

disclaimer of audit opinion has grown from one in 2008/09 to three

in the 2009/10 financial year.

The root causes for the negative audit outcomes indicated above lie in the

internal control deficiencies identified in the three fundamental areas of

internal control, namely, leadership, financial and performance management

and governance.

7


Assessment of deficiencies in terms of the three fundamentals of internal control

Leadership

Overall, in all departments that received either a disclaimer orqualified audit opinion, the leadership of the department either failedto exercise adequate oversight responsibility over compliance withlaws and regulations, did not provide an environment conducive togood accountability and service delivery, or did not address controlweaknesses identified in prior years by external audit over theachievement of complete and accurate financial and performancereporting.

8


Assessment of deficiencies in terms of the three fundamentals of internal control – continued

Financial and performance management

In all departments that received disclaimers of audit opinions on financialstatements, the overriding factor was a lack of documented trail to supporttransactions included in the financial statements. The lack of supportingdocumentation meant that the occurrence, validity and completeness of transactions included in financial statementscould not be verified.

In those departments that received disclaimers in particular, there was a lack ofinternal controls over record keeping and management. In such an environment,fraud and abuse of public resources can be easily perpetrated, resulting inirregular, unauthorised, fruitless and wasteful expenditure and other forms ofnon compliance with laws and regulations.

9


Assessment of deficiencies in terms of the three fundamentals of

internal control – continued

Governance

In all provincial departments, a number of investigations took place

during the year under review that related to fraud and other forms

of non compliance to the laws and regulations. The underlying cause

in most of those cases was either a lack of effective internal audit

function or fraud prevention plan not being implemented and

monitored.

10

Summary of audit outcomes – comparison between 2009/10 and 2008/09

Province Unchanged Improvement Regression

Eastern Cape X - -

Free State - - X

Gauteng - X -

KwaZulu-Natal X - -

Limpopo - - X

Mpumalanga X - -

Northern Cape - X -

North West - - X

Western Cape X - -

National Department X - -

Number of audits 5 2 3

Percentage (%) 50% 20% 30%

11

Budgeted and actual expenditure per province

Province Budget 2009-10

R’000

Actual 2009-10

R’000

Actual 2008-09

R’000

Eastern Cape 20 529 488 21 165 545 17 875 193

Free State 8 005 432 7 846 210 6 713 036

Gauteng 19 981 832 20 058 080 16 688 394

KwaZulu-Natal 26 058 854 26 230 746 22 991 742

Limpopo 16 311 033 17 864 636 14 691 919

Mpumalanga 10 683 793 10 940 089 9 360 979

Northern Cape 3 169 930 3 183 574 2 852 550

North West 8 473 135 8 390 526 7 178 647

Western Cape 10 663 812 10 613 313 9 192 461

Subtotal: Provincial 123 877 309 126 292 719 107 544 938

National Department 21 922 129 21 415 241 19 709 070

Total: 145 799 438 147 707 960 127 253 991

12

Unauthorised expenditure

Province Overspending on vote/main division of vote R’000

Eastern Cape 709 000

Free State -

Gauteng 76 248

KwaZulu-Natal 253 286

Limpopo 803 591

Mpumalanga 343 016

Northern Cape 13 644

North West -

Western Cape -

National Department -

Total 2 198 785

13

Irregular expenditure

Province Irregular expenditure R’000

Eastern Cape 1 406 600

Free State 94 790

Gauteng -

KwaZulu-Natal 32 394

Limpopo 171

Mpumalanga 936

Northern Cape 35 582

North West 150

Western Cape 470


Total 1 571 093

14

Fruitless and Wasteful Expenditure

Province Irregular expenditure R’000

Eastern Cape 58 000

Free State 18 925

Gauteng 20 282

KwaZulu-Natal 2 248

Limpopo 5 066

Mpumalanga 159

Northern Cape -

North West 328

Western Cape 645


Total 105 653

15

Financial statements areas qualified for only modified reports

16

Financial statements areas qualified - continued

The proportion of audits that received either a qualification or

disclaimer per qualification area has decreased when compared to

2008/09. However, the situation remains largely unchanged when

taking into account the fact that the number of qualified audits

has increased in 2009/10 when compared to 2008/09 as indicated

under the summary of audit outcomes above.

17

Conclusions on audit of predetermined objectives included in management reportsProvince Disclaimer

2009-10

Adverse

2009-10

Qualified

2009-10 Unqualified with other matters

2009-10

Unqualified with no other matters

2009-10

Eastern Cape X

Free State X

Gauteng X

KwaZulu-Natal X

Limpopo X

Mpumalanga X

Northern Cape X

North West X

Western Cape X

National Department X

Percentage (%) 40% 20% 20% 20%

18

Conclusions on audit of predetermined objectives (continue)…ConclusionA review of the bases for audit opinions revealed the following internalcontrol deficiencies:

Leadership The accounting officer did not exercise oversight responsibilityover performance, reporting and compliance with laws andregulations, especially with regards to quarterly reporting. Alsoactions are not taken by management to address risks pertaining tothe achievement of complete and accurate performance reporting.

Performance management and reportingReported information on predetermined objectives was notreviewed by management to ensure accuracy and completenessprior to submission for audit.

Most of the findings that form the basis of qualified or disclaimers of auditopinion relate to non compliance with laws and regulations and reliability ofreported information on predetermined objectives.

19

Movements in audit outcomes

Conclusion

Overall there is a general decline in the quality of audit outcomes

for 2009/10 financial year compared to 2008/09 financial year. This

is in line with the overall increase in internal control deficiencies

in the fundamental areas of internal control, namely, leadership,

financial and performance management and governance as shown

above under the summary of audit outcomes above

20

EDUCATION SECTOR AUDITING

Objective

The education sector auditing aims to provide a picture of financial,performance and service delivery matters from a national and provincial departments perspective within the education sector.

Service delivery issues are analysed to determine the factors thatcontribute to low service delivery and recommendations are made to improve service delivery in the selected areas.

Deliverable

Education SECTOR general report

21

Education Sector focus areas – 2009/10The following specific sector service delivery focus areas wereaudited to identify and highlight any service delivery challenges in these areas:

1. HIV & Aids (Life Skills and Education) conditional grant to provinces*

2. National School Nutrition Programme conditional grant to provinces*

3. Dinaledi Schools Initiative

4. Learner Transport Scheme

5. Qualifications of Mathematics and Physical Science Teachers

* Funded through the DORA allocation. Other three activities are funded through programmes within the Department.

22

Background on Sector auditing

The Basic Education Sector consists of 9 provincial Departments of Basic Education and a National Department of Basic Education each having its own reporting structure. According to the NT Provincial Budgets And Expenditure Review 2005/06-2011/12 the total spendingon education in South Africa will constitute 18,2 percent of totalgovernment expenditure by 2011/12.

As part of the process of re-organising government departments whenthe new administration took over in May 2009, the Department of Education was split into two departments, namely the Department ofBasic Education (DoBE) and the Department of Higher Education andTraining.

In light of the importance of education to the overall development of SouthAfrica, it was believed that there needed to be a specific focus onimproving education in schools, because it is significantly different fromthe principles applied at the higher education level.

23

Background on Sector auditing (continue)…

The key strategic objective of the Department of Basic Education is to ensure that quality education is provided to all learners in the South African schooling system. This is achieved by ensuring thatthe department’s policies and the approved curriculum are effectivelyimplemented, reviewed and refined.

Currently, Government has made education the key priority. In sodoing, it placed education and skills development at the centre of thecurrent administration’s priorities. This required the creation of twoMinistries with clear responsibilities.

Basic Education will primarily focus on schools in order to achieve thegoal of a quality basic education system. The Ministry of HigherEducation and Training will deliver an improved higher education and training system which will provide a diverse range of learningopportunities for youth and adults.

24

Background on Sector auditing (continue)…

A sector report can only be successfully prepared and published if the

same procedures are performed at all departments.

After discussion and inputs from amongst others, the National

Treasury, the following focus areas from 09-10 were confirmed and

three new focus areas were added for auditing during 2010-11 PFMA

audit cycle:

25

Basic Education Sector focus areas – 2010/11

The following specific sector service delivery focus areas will be

audited to identify and highlight any service delivery challenges in

these areas:

• HIV & Aids (Life Skills and Education) conditional grant to provinces

• National School Nutrition Programme conditional grant to provinces

• Learner Transport Scheme• Qualifications of Mathematics and Physical Science Teachers• Leaner Teacher Support Material (New)• Allocation of Funds to schools (New)• Technical Secondary Schools Recapitalisation Grant (New)

26

Conclusion on Sector focus areas

The 2009/10 Sector general report still in progress.

27

Entities related to the Department of Basic Education

• Education Labour Relations Council (ELRC)• Council for Quality Assurance in General and Further Education

and Training (Umalusi)• South African Council for Educators (SACE)

28

Outcome of audits for entities related to the Department of Education – 2009/10

Entity 2009-10 2008-09

2007-08 Other matters reported

2009-10

Education Labour Relations Council (ELRC)

Unqualified Unqualified Unqualified None

(Umalusi) Unqualified Unqualified Unqualified None

South African Council for Educators (SACE)

Unqualified Unqualified Unqualified Yes

29

Reported matters for SACE – 2009/10

South African Council for Educators (SACE)

Non-payment to the South African Revenue Services (SARS) of

employees’ tax withheld for the periods October 2009 to January 2010.

Steps to remit payment to SARS have been initiated by management.

Usefulness of reported performance information

• No system in place for the effective monitoring, evaluating and

reporting.• Reporting of targets were not in line with targets and objectives set

out in the annual/ strategic plan

30

Reported matters for SACE – 2009/10 (continue)…

Reliability of reported performance information

Certain performance targets could not be validated due to

management not maintaining appropriate documentation to support

its targets achieved.

Quarterly reports did not result in documented corrective action that

needs to take place in order for the entity to achieve its objectives.

31

THANK YOU

Reputation promise/mission

Documents

Transcript of Reputation promise/mission