Briefing to the standing committee on appropriation. Audit outcomes for the financial year Water portfolio

Transcription

1 Briefing to the standing committee on appropriation Audit outcomes for the financial year Water portfolio 14 April 2016

2 Reputation promise/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. 2

3 Content 1. Regularity audit outcomes 2014/15 Water & Sanitation portfolio 4 2. Unauthorised/irregular/fruitless and wasteful expenditure Top three root causes and recommendations Minister s commitments to address root causes Performance audit outcomes 13 3

4 1.1 Audit outcomes Water and Sanitation portfolio 17% (IUCMA) 50% (TCTA, IUCMA, BGCMA) 33% (TCTA, IUCMA) 66% (WTE, WRC, TCTA, BGCMA 2 33% (WRC, BGCMA) 17% (DWS) 50% (DWS, WTE, WRC) 33% (DWS, WTE) Unqualified with no findings Unqualified with findings Qualified with findings Disclaimer with findings 4

5 Third level Second level First level 1.2 Assurance levels Water and Sanitation portfolio (continue ) Senior management 2 WRC IUCMA 4 Accounting officer/authority 6 Executive authority 3 DWS WRC WTE 3 Internal audit unit 1 BGCMA 5 Audit committee 5 1 TCTA Portfolio committee 6 Provides assurance Provides some assurance Provides limited/ no assurance Vacancy Not assessed 2 5

6 DWS WTE WRC TCTA IUCMA BGCMA 1.3 Key controls Water and Sanitation portfolio (continue ) LEADERSHIP FINANCIAL AND PERFORMANCE MANAGEMENT GOVERNANCE Good Concerning Intervention required 6 6

7 Quality of submitted financial statements (continue ) Outcome if NOT corrected Outcome after corrections 50% (3) WTE, TCTA, IUCMA 66% (5) 2 auditees 50% (3) Outcome if NOT corrected 17% (1) DWS Outcome after corrections Avoided qualifications by correcting material misstatements during audit process Financially unqualified with/without findings 50% (3) 50% DWS, WRC, WTE 50% (3) 50% DWS, WRC, WTE zero auditees Financially qualified (qualified/ disclaimed with findings) 7

8 1.5 Quality of annual performance reports (continue ) 4 6 reports were reliable and useful compared to 3 in the previous year. auditees who submitted information did so in time for the audit. Legends: % 33% (DWS, WTE) With no findings % 50% (DWS, WRC, WTE) With findings Improvement Usefulness Reliability Stagnant or limited progress Regressed 67% (4) 67% (4) 33% (DWS, WTE) 33% (DWS, WTE) 8

9 1.6 Non compliance with legislation in the following areas (continue ) Quality of annual financial statements submitted Prevention of unauthorised, irregular and/or fruitless and wasteful expenditure Management of procurement and/or contracts 3 3 DWS, WRC, BGCMA 3 3 DWS, WTE, WRC 4 DWS, WTE, WRC, TCTA 1 1 IUCMA Legends: With no findings Intervention required With findings Management of strategic planning and performance Human resource and consequence management Internal audit and audit committee Improvement Stagnant or limited progress 4 2 DWS, WTE 3 3 DWS, WTE, TCTA 5 TCTA Regressed 9

10 2. Unauthorised, Irregular and Fruitless Wasteful expenditure Unauthorised expenditure Irregular expenditure Fruitless and wasteful expenditure Definitions Expenditure not in accordance with the budget vote/ overspending of budget or programme Expenditure incurred in contravention of key legislation, prescribed processes not followed Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money! DWS - R R WTE - R R WRC - R R1 836 TCTA - R R IUCMA Legends: Decrease in expenditure No change Increase in expenditure BGCMA Totals - R R

11 3. Top three root causes and recommendations Slow response by management in addressing the root causes of poor audit outcomes 33% (DWS, WTE) 33% (DWS, WRC) Recommendation: Implement proper record keeping to ensure that the annual financial statements are supported by complete and proper records. The audit committees should strengthen action plans to ensure that financial reporting and related controls prevent misstatements by engaging with the internal audit unit. Senior personnel should regularly review and monitor daily and monthly processing of transactions to ensure compliance with applicable policies and procedures. Instability or vacancies in key positions 67% (DWS, WTE, TCTA, BGCMA) % (DWS, WTE, WRC) Recommendation: All critical positions must be filled on time Improved Lack of consequences for poor performance and transgressions 33% (DWS, WRC) 50% (DWS, WRC, TCTA) Stagnant or little progress Regressed Recommendation: Staff should be held accountable for poor performance and for any transgression. 11

12 4. Minister s commitments to address root causes Status of key commitments by minister The focus risk assessment will be discussed by top management and monitored by the audit committee. Establish a structure for the department that incorporates the sanitation function. Provide a business process reengineering committee (BPRC) implementation plan with milestones to the portfolio committee. The monitoring of the new WTE CFO is ongoing. The minister requested a joint team consisting of the DWS, the AGSA and the NT to work proactively towards addressing issues of concern, so that there would be a common understanding of issues before reporting time. Not implemented In progress Implemented New 12

13 5. Overview of the Rural Household Infrastructure Grant (RHIG) and Rural Household Infrastructure Programme (RHIP) 13

14 Overview The Rural Household Infrastructure Grant (RHIG) was developed to fasttrack the Rural Household Infrastructure Programme (RHIP) 2 implementing agents Budget R1.2 billion over 3 financial years Audit sample was 254 VIP toilets in 7 rural provinces VIP toilets completed and handed over between October 2010 and March

15 Key Findings on the Special audit of the RHIG and RHIP 15

16 Key Findings - Procurement Vast discrepancies between scores of the BEC members on functionality Implementing agents submitted possible complementary bids in an attempt to divide the market Results of background & security screening not considered 17

17 Key Findings - Project Management Project management company did not perform effective project management, resulting in certification of poor quality toilets Project management company was not measured against programme deliverables Duplication of project management functions which led to lack of accountability Inability to clarify roles 18

18 Productivity Pattern % of VIP toilets completed per province per financial year 100% 80% % completed & handed-over per province % % completed & handed-over per province % % completed & handed-over per province % 0% 19

19 Rands(R) Expenditure patterns Actual expenditure vs budget amount on RHIG for company A and company B (63%) (34%) (76%) Financial Year Budget amount Actual expenses 20

20 Expenditure patterns Amount Spent (R) Irregular and inconsistent expenditure Most of expenditure was in the last quarter of each year Expenditure on RHIG Month 21

21 No. of VIP Toilets Expenditure patterns 95% paid to project management company vs. only 46% of the RHIG was spent on building of VIP toilets Completed Toilets vs Expenditure Actual units completed Reconcialiation based on expenditure Total Financial Year 22

22 Non-compliance with approved norms and standards 53 VIP toilets had vent pipes that were below 500mm 13 VIP toilets or slabs were found to be crooked and slanting 23 VIP toilets had no fly screens 11 toilets with the soil around the VIP toilet not properly compacted 23

23 Non-compliance with approved norms and standards 2 toilet rings were not securely fitted 9 VIP toilets had broken panels, hinges and locks 3 doors were damaged 24

24 Non-compliance with approved norms and standards 10 VIP toilets were built under trees 7 VIP toilets had roofs that were not waterproof 6 VIP toilets had broken vent pipes 25

25 Provision of education and training in the maintenance and upkeep of sanitation facilities At 14 out of the 26 municipalities, health and hygiene training was not done effectively In some municipalities the beneficiaries did not understand how the VIP toilets worked 26

26 Provision of education and training in the maintenance and upkeep of sanitation facilities 27

27 Analysis of Key Findings The BEC did not probe further into the project plans The department missed an opportunity to identify and manage its potential risk by not complying with the directive of the National Vetting Strategy The inability to clarify roles on the project opened the project up to inconsistent reporting and neglect The project management company was not measured against how or if the programme performed Construction on VIP toilets not started 2010/11 = 28, 33% 2011/12= 16, 66% 28

28 Key Recommendations 28

29 Recommendations We recommend that the department do the following: Wait for background and screening results Determine whether there was a need for the appointment of a management consultant and whether this resulted in value for money Measures should be put in place to improve the rate of delivery on site Introduce an effective management tool to track delivery on site against national targets 30

30 Recommendations We recommend that the department do the following: Revise functionality criteria used in assessing the capacity to implement of service providers Verify viability of project plans submitted by service providers Ensure service providers are going concerns Portfolio committee follows up on incomplete units

31 Questions?? 31