DEPARTMENT OF BASIC EDUCATION AUDIT COMMITTEE
Description: DEPARTMENT OF BASIC EDUCATION AUDIT COMMITTEE PRESENTATION PORTFOLIO COMMITTEE ON BASIC EDUCATION 15 OCTOBER 2024 PRESENTATION OUTLINE Purpose Audit Committee Responsibility Internal Audit Oversight Audit Committee Meetings General
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slide1. DEPARTMENT OF BASIC EDUCATION AUDIT COMMITTEE PRESENTATION PORTFOLIO COMMITTEE ON BASIC EDUCATION
15 OCTOBER 2024<br>
slide2. PRESENTATION OUTLINE Purpose
Audit Committee Responsibility
Internal Audit Oversight
Audit Committee Meetings
General improvements/challenges in control environment
Monitoring the investigations on Irregular and Fruitless and Wasteful Expenditure
Regularity Audit (Root Causes/Action)
Performance Information audit (Annual Report)
Financial Performance of DBE
Audit Action Plan
Conclusion 2<br>
slide3. PURPOSE To brief the Portfolio Committee on the activities of the Audit Committee of the Department of Basic Education (DBE) 2023/4 3<br>
slide4. AUDIT COMMITTEE RESPONSIBILITY Oversight over Internal and External Audit;
Oversight over the implementation of Internal and External Audit recommendations;
Oversight over Risk Management;
Oversight over the quality of Financial Statements; and
Oversight over the system of internal control for the generation, collation and reporting of Performance Information.
Oversight on investigation progress on irregular expenditure and material irregularities 4<br>
slide5. INTERNAL AUDIT OVERSIGHT Key assurance provider to the Audit Committee Conducted fifteen (15) audits as per approved risk-based audit coverage plan, and thirteen (13) management request on consulting engagements
ASIDI Audits at two (2) Implementing agents ( NECT, and TMT Eastern Cape) on the review of SCM compliance process, contractor's payments, and project management.
Performance Information quarterly reviews were conducted, and findings are also shared with management to address findings before year end audit.
Reviews on the annual report and annual financial statement and areas of improvement were communicated prior submission to the AGSA year end audit.
A follow up on AGSA previous findings review was conducted for DBE and Implementing Agents, 80% of previous findings were resolved.
Presented the quarterly progress reports against the approved plan at the Audit Committee meetings.
Coordinated a special audit committee meetings on the review of the audit action plan on 16 August 2023 and status on investigations and consequence management with management held on 6 September 2023.. 5<br>
slide6. INTERNAL AUDIT OVERSIGHT Advise management through audit assurance, by providing recommendations to improve internal controls.
Coordinated a special in-committee meeting held on 28 November 2023 with DG, CFO, and Legal Services on the progress on material irregularities.
In respect of the recently concluded AGSA audits, an Audit Committee meeting to review the current audit action plan held on the 10 September 2024
There was a special workshop by DG for Audit Committee on Curriculum and Infrastructure held on 15 April 2024
Conducted investigations on irregular and fruitless and wasteful expenditure, and reports were referred after DG’s consideration to Labour Relations for consequence management and Legal Service to start the recovery processes. 6<br>
slide7. INTERNAL AUDIT OVERSIGHT… Participate as a consulting service to provide advice at Technical Evaluations Committees, BEC and BAC.
Reviewed the National Teacher Awards Adjudication process and conducted a follow up and 70% implemented recommendations and 30% partially implemented
Performance information reviewed quarter 2 and Annual Report review prior submission to AGSA by 31 May 2024. Implementation of recommendation was at 95% and the report reflected improvement on evidence provided by Branches.
Reviewed the Human Resource Leave Management process was audited and reported to management and implementation of recommendations 80% implemented and 20% still in progress implemented. DG has incorporated the monitoring of leave management in every DDG performance agreement 24/25 for strengthening.
Review of quarter 2 interim financial statement and the annual financial statement prior submission to AGSA by 31 May 2024. Implemented 70% of action plans. 7<br>
slide8. INTERNAL AUDIT OVERSIGHT… Reviewed the supply chain management process and contractors' payments at Implementing agents, The National Education Collaboration Trust (NECT), and The Mvula Trust (TMT) Eastern Cape. The instances of irregular expenditure were identified.
Conducted SCM Stock Ordering and Inventory Management follow up review and have tested 30% implemented recommendations and 70% were partially implemented on control deficiencies previously identified.
Conducted an audit on Learners with Severe to Profound Intellectual Disabilities (LSPID) grant and site visits and
National School Nutrition Programme (NSNP) grant business plan process and site visits at schools. 8<br>
slide9. AUDIT COMMITTEE MEETINGS 9<br>
slide10. AUDIT COMMITTEE MEETINGS 10<br>
slide11. AUDIT COMMITTEE MEETINGS 11<br>
slide12. AUDIT COMMITTEE MEETINGS 12<br>
slide13. CONTROL ENVIRONMENT IN THE DEPARTMENT Stability in leadership (Accounting Officer) providing leadership and excellent support to the Audit Committee;
Most branches has leadership stability and monitoring is enhanced;
Stability in the governance structures (Audit Committee and Risk Committee and Management structures);
Monitoring of the risk management activities, Branches quarterly reporting progress on mitigation action on identified risks and emerging risks;
Monitoring the risk maturity level overall through risk maturity assessment, to track improvement on the management of risks from Strategic, Operational and project level (improvement 2022/23: Rating 3.7 and 2023/2024: Rating 4; and
Financial Statement quality there is some improvement, although material misstatements still an area that requires strengthening and regular monitoring. 13<br>
slide14. CHALLENGES Strengthening of quality assurance by some Branches still to improve.
Capacity in ASIDI, and Supply Chain management.
Prior audit findings not addressed fully, management still working on addressing them.
Synergy between finance and ASIDI (There is an improved working relationship between Finance and ASIDI).
ASIDI and Finance to strengthen quality assurance and accountability of work done by Implementing Agents.
Supply Chain management is an area that requires more strengthening on control environment and capacity. 14<br>
slide15. IRREGULAR, FRUITLESS & WASTEFUL EXPENDITURE Irregular and Fruitless and Wasteful Expenditure:
IA assist the Accounting Officer with the investigation of irregular, fruitless and wasteful expenditure.
Departmental Investigation Committee was established to investigate, and the investigation unit under Internal Audit.
Previous cases of irregular expenditure were investigated in the 2021/22, 100% of R3.2 billion, and 100% of 2022/23 R1.035 billion were completed, and 2023/24 R954 million were all investigated by year end.
Management to implement consequence management, progress on some cases was monitored and improve the control measures. Audit committee had a special meeting to monitor improvement with consequence management
Condonations was approved for R1.560 billion for concluded irregular expenditure investigations and where consequence management was concluded;
Recovery process letters were written to Implementing Agents or departments through Legal Services. 15<br>
slide16. EXTERNAL AUDIT (KEY ASSURANCE PROVIDER) The Auditor-General has added value to the department and is a trusted assurance provider to the AC
Audit Committee has seen progress with regard to the regularity audit outcome: 16<br>
slide17. 17 Unqualified
2023/24 consistent with 2022/23, with improvements on preparation of Annual Financial Statements
Historical Audit Outcomes
U = Unqualified AUDIT OUTCOMES FOR 2023/24<br>
slide18. 18 Unqualified
Consistent with 2022/23, with minor improvements
Historical Audit Outcomes
U = Unqualified
Q = Qualified AUDIT OUTCOMES FOR 2023/24<br>
slide19. 19 Material misstatements in Performance Information in Programme 2 and 4 - uncorrected
Procurement – Awards made to bidders who didn’t score highest points [Implementing Agents (IAs)]
Irregular Expenditure R188.3m [R954.9m] (IAs)
Fruitless & Wasteful Expenditure R8.9m [R15.6m] (IAs)
Delays in consequence management
Payments not made within 30 days resulting in the withdrawal of the contractor from site and cancellation of the contractual arrangement OTHER MATTERS<br>
slide20. 20 There were no findings on the preparation of Annual Financial Statements (AFS)
Irregular Expenditure reduced from R955m to R188m
Fruitless and wasteful expenditure reduced from R15,6m to R8.9m
3 out of 4 Material Irregularity matters resolved
97 Requests for information (RFIs) issued and all responded to on time
DG weekly meetings between ASIDI ( Infrastructure) and Finance to strengthens coordination
DG weekly meetings with Implementing Agents to strengthens reporting AREAS OF IMPROVEMENT<br>
slide21. The Audit Committee monitored the progress management made and challenges, related to consequence management cases for the last three financial years, i.e. 2021/2022, 2022/2023 and 2023/2024.
Strategies to improve turnaround times on managing consequence management cases
All cases of consequence management from 2013/2014 to 2020/2021 years were implemented, and some challenges is where some officials have left the employment. 21 UPDATE ON CONSEQUENCE MANAGEMENT<br>
slide22. ASIDI: ANALYSIS OF DBE AUDIT OUTCOMES FOR THE PAST 3-YRS 22 In 2021/22, all previously stopped projects were disclosed as Fruitless. Previously it was disclosed as Possible Fruitless.
** Irregular Expenditure reported relates to Current Year Procurement Only.
*Irregular Expenditure relating to Multi-year construction projects. These were declared Irregular in previous periods.<br>
slide23. STRAREGIES TO IMPROVE PROJECT MANAGEMENT AND AUDIT OUTCOMES 23 Local content contributed to most of the Irregular expenditure in the previous financial years . There has since been a new legislation – PPR2022 which made the requirement for local content not to be compulsory.
Fruitless Expenditure reported relates to Stopped Projects due to schools which have low learner enrolment and are earmarked for rationalisation and mergers.
Before the budget is approved by the DG for projects to proceed to Stage 6 – Works:
The DBE and the appointed Implementing Agent (IA) confirm status of schools with Provincial Education Department (PED) given time lapsed between Stage 1 – Initiation where assessment was done to determine the infrastructure needs and Stage 4 – Design documentation when procurement of contractors is finalised.<br>
slide24. CONSEQUENCE MANAGEMENT BY IMPLEMENTING AGENTS (IAs) 24 Implementing Agents apply contractual provisions through:
Application of penalties for delayed projects.
Termination of non-performing Professional Service Providers and Contractors.
The DBSA undertook internal investigations and terminated contracts of some of their officials.<br>
slide25. ASIDI ACTION Continue to improve monitoring of Implementing Agents, PSU and ASIDI staff to improve the process.
Full set of half-year financial statements are prepared, enhance the accurate records.
Submission of information for preparation of AFS timely.
Regular monthly reconciliations to be prepared to prevent misstatements in the financial statements.
More internal audit effort directed.
Interim audit by AG.
Possible disciplinary action against persons that caused irregular, fruitless and wasteful expenditure. 25<br>
slide26. MATERIAL IRREGULARITIES Separate agenda item and we monitor the progress with investigations into MI’s.
Four (4) MI’s identified and follow ups were made and three (3) was resolved, one (1) at legal process.
Progress on consequence management implementation was tracked for all MI in the year under review 26<br>
slide27. REVIEW OF THE ANNUAL REPORT The annual report was reviewed prior to the submission to the AGSA.
Management worked with Internal Audit to correct other gaps identified during the review meeting prior to submission date. In the last review there were a some of annual indicators with report consolidation to be finalised prior submission to AGSA.
There was improvement noted for evidence by other Branches although some branches to improve on quality of evidence and timely submission. 27<br>
slide28. AUDIT OUTCOMES: PERFORMANCE INFORMATION 28<br>
slide29. PROPOSED IMPROVEMENT Audit Committee (AC) recommended:
Management to strengthen quality assurance of reported information timely.
More detailed work by Internal Audit on quarterly performance information reports and financial statement reviews.
Management to improve or address the capacity challenges in Strategic Planning.
Further strengthen accountability and monitoring of Implementing agents, especially the penalty clauses in the MOA’s 29<br>
slide30. MANAGEMENT AUDIT ACTION PLAN Audit Committee (AC) has received a management action plan to address AG findings.
AC has monitored progress.
AC approved follow up audits to be conducted by Internal Audit for ASIDI irregular expenditure completeness, contractors timely payments, project management.
Audit Committee meeting was held after the AGSA report was issued to review management action plan to address root cause on 10 September 2024 and recommendations were provided to management to strengthen the action plan. 30<br>
slide31. CONCLUSION The Audit Committee will continue to address all matters within its mandate and responsibility.
The Audit Committee will pay specific attention to the high risk and high impact issues and monitor implementation of consequence management to assist in moving towards a clean audit. 31<br>
slide32. RECOMMENDATION It is recommended that the Portfolio Committee notes the Audit Committee activities of the Department of Basic Education (DBE). 32<br>
15 OCTOBER 2024<br>
slide2. PRESENTATION OUTLINE Purpose
Audit Committee Responsibility
Internal Audit Oversight
Audit Committee Meetings
General improvements/challenges in control environment
Monitoring the investigations on Irregular and Fruitless and Wasteful Expenditure
Regularity Audit (Root Causes/Action)
Performance Information audit (Annual Report)
Financial Performance of DBE
Audit Action Plan
Conclusion 2<br>
slide3. PURPOSE To brief the Portfolio Committee on the activities of the Audit Committee of the Department of Basic Education (DBE) 2023/4 3<br>
slide4. AUDIT COMMITTEE RESPONSIBILITY Oversight over Internal and External Audit;
Oversight over the implementation of Internal and External Audit recommendations;
Oversight over Risk Management;
Oversight over the quality of Financial Statements; and
Oversight over the system of internal control for the generation, collation and reporting of Performance Information.
Oversight on investigation progress on irregular expenditure and material irregularities 4<br>
slide5. INTERNAL AUDIT OVERSIGHT Key assurance provider to the Audit Committee Conducted fifteen (15) audits as per approved risk-based audit coverage plan, and thirteen (13) management request on consulting engagements
ASIDI Audits at two (2) Implementing agents ( NECT, and TMT Eastern Cape) on the review of SCM compliance process, contractor's payments, and project management.
Performance Information quarterly reviews were conducted, and findings are also shared with management to address findings before year end audit.
Reviews on the annual report and annual financial statement and areas of improvement were communicated prior submission to the AGSA year end audit.
A follow up on AGSA previous findings review was conducted for DBE and Implementing Agents, 80% of previous findings were resolved.
Presented the quarterly progress reports against the approved plan at the Audit Committee meetings.
Coordinated a special audit committee meetings on the review of the audit action plan on 16 August 2023 and status on investigations and consequence management with management held on 6 September 2023.. 5<br>
slide6. INTERNAL AUDIT OVERSIGHT Advise management through audit assurance, by providing recommendations to improve internal controls.
Coordinated a special in-committee meeting held on 28 November 2023 with DG, CFO, and Legal Services on the progress on material irregularities.
In respect of the recently concluded AGSA audits, an Audit Committee meeting to review the current audit action plan held on the 10 September 2024
There was a special workshop by DG for Audit Committee on Curriculum and Infrastructure held on 15 April 2024
Conducted investigations on irregular and fruitless and wasteful expenditure, and reports were referred after DG’s consideration to Labour Relations for consequence management and Legal Service to start the recovery processes. 6<br>
slide7. INTERNAL AUDIT OVERSIGHT… Participate as a consulting service to provide advice at Technical Evaluations Committees, BEC and BAC.
Reviewed the National Teacher Awards Adjudication process and conducted a follow up and 70% implemented recommendations and 30% partially implemented
Performance information reviewed quarter 2 and Annual Report review prior submission to AGSA by 31 May 2024. Implementation of recommendation was at 95% and the report reflected improvement on evidence provided by Branches.
Reviewed the Human Resource Leave Management process was audited and reported to management and implementation of recommendations 80% implemented and 20% still in progress implemented. DG has incorporated the monitoring of leave management in every DDG performance agreement 24/25 for strengthening.
Review of quarter 2 interim financial statement and the annual financial statement prior submission to AGSA by 31 May 2024. Implemented 70% of action plans. 7<br>
slide8. INTERNAL AUDIT OVERSIGHT… Reviewed the supply chain management process and contractors' payments at Implementing agents, The National Education Collaboration Trust (NECT), and The Mvula Trust (TMT) Eastern Cape. The instances of irregular expenditure were identified.
Conducted SCM Stock Ordering and Inventory Management follow up review and have tested 30% implemented recommendations and 70% were partially implemented on control deficiencies previously identified.
Conducted an audit on Learners with Severe to Profound Intellectual Disabilities (LSPID) grant and site visits and
National School Nutrition Programme (NSNP) grant business plan process and site visits at schools. 8<br>
slide9. AUDIT COMMITTEE MEETINGS 9<br>
slide10. AUDIT COMMITTEE MEETINGS 10<br>
slide11. AUDIT COMMITTEE MEETINGS 11<br>
slide12. AUDIT COMMITTEE MEETINGS 12<br>
slide13. CONTROL ENVIRONMENT IN THE DEPARTMENT Stability in leadership (Accounting Officer) providing leadership and excellent support to the Audit Committee;
Most branches has leadership stability and monitoring is enhanced;
Stability in the governance structures (Audit Committee and Risk Committee and Management structures);
Monitoring of the risk management activities, Branches quarterly reporting progress on mitigation action on identified risks and emerging risks;
Monitoring the risk maturity level overall through risk maturity assessment, to track improvement on the management of risks from Strategic, Operational and project level (improvement 2022/23: Rating 3.7 and 2023/2024: Rating 4; and
Financial Statement quality there is some improvement, although material misstatements still an area that requires strengthening and regular monitoring. 13<br>
slide14. CHALLENGES Strengthening of quality assurance by some Branches still to improve.
Capacity in ASIDI, and Supply Chain management.
Prior audit findings not addressed fully, management still working on addressing them.
Synergy between finance and ASIDI (There is an improved working relationship between Finance and ASIDI).
ASIDI and Finance to strengthen quality assurance and accountability of work done by Implementing Agents.
Supply Chain management is an area that requires more strengthening on control environment and capacity. 14<br>
slide15. IRREGULAR, FRUITLESS & WASTEFUL EXPENDITURE Irregular and Fruitless and Wasteful Expenditure:
IA assist the Accounting Officer with the investigation of irregular, fruitless and wasteful expenditure.
Departmental Investigation Committee was established to investigate, and the investigation unit under Internal Audit.
Previous cases of irregular expenditure were investigated in the 2021/22, 100% of R3.2 billion, and 100% of 2022/23 R1.035 billion were completed, and 2023/24 R954 million were all investigated by year end.
Management to implement consequence management, progress on some cases was monitored and improve the control measures. Audit committee had a special meeting to monitor improvement with consequence management
Condonations was approved for R1.560 billion for concluded irregular expenditure investigations and where consequence management was concluded;
Recovery process letters were written to Implementing Agents or departments through Legal Services. 15<br>
slide16. EXTERNAL AUDIT (KEY ASSURANCE PROVIDER) The Auditor-General has added value to the department and is a trusted assurance provider to the AC
Audit Committee has seen progress with regard to the regularity audit outcome: 16<br>
slide17. 17 Unqualified
2023/24 consistent with 2022/23, with improvements on preparation of Annual Financial Statements
Historical Audit Outcomes
U = Unqualified AUDIT OUTCOMES FOR 2023/24<br>
slide18. 18 Unqualified
Consistent with 2022/23, with minor improvements
Historical Audit Outcomes
U = Unqualified
Q = Qualified AUDIT OUTCOMES FOR 2023/24<br>
slide19. 19 Material misstatements in Performance Information in Programme 2 and 4 - uncorrected
Procurement – Awards made to bidders who didn’t score highest points [Implementing Agents (IAs)]
Irregular Expenditure R188.3m [R954.9m] (IAs)
Fruitless & Wasteful Expenditure R8.9m [R15.6m] (IAs)
Delays in consequence management
Payments not made within 30 days resulting in the withdrawal of the contractor from site and cancellation of the contractual arrangement OTHER MATTERS<br>
slide20. 20 There were no findings on the preparation of Annual Financial Statements (AFS)
Irregular Expenditure reduced from R955m to R188m
Fruitless and wasteful expenditure reduced from R15,6m to R8.9m
3 out of 4 Material Irregularity matters resolved
97 Requests for information (RFIs) issued and all responded to on time
DG weekly meetings between ASIDI ( Infrastructure) and Finance to strengthens coordination
DG weekly meetings with Implementing Agents to strengthens reporting AREAS OF IMPROVEMENT<br>
slide21. The Audit Committee monitored the progress management made and challenges, related to consequence management cases for the last three financial years, i.e. 2021/2022, 2022/2023 and 2023/2024.
Strategies to improve turnaround times on managing consequence management cases
All cases of consequence management from 2013/2014 to 2020/2021 years were implemented, and some challenges is where some officials have left the employment. 21 UPDATE ON CONSEQUENCE MANAGEMENT<br>
slide22. ASIDI: ANALYSIS OF DBE AUDIT OUTCOMES FOR THE PAST 3-YRS 22 In 2021/22, all previously stopped projects were disclosed as Fruitless. Previously it was disclosed as Possible Fruitless.
** Irregular Expenditure reported relates to Current Year Procurement Only.
*Irregular Expenditure relating to Multi-year construction projects. These were declared Irregular in previous periods.<br>
slide23. STRAREGIES TO IMPROVE PROJECT MANAGEMENT AND AUDIT OUTCOMES 23 Local content contributed to most of the Irregular expenditure in the previous financial years . There has since been a new legislation – PPR2022 which made the requirement for local content not to be compulsory.
Fruitless Expenditure reported relates to Stopped Projects due to schools which have low learner enrolment and are earmarked for rationalisation and mergers.
Before the budget is approved by the DG for projects to proceed to Stage 6 – Works:
The DBE and the appointed Implementing Agent (IA) confirm status of schools with Provincial Education Department (PED) given time lapsed between Stage 1 – Initiation where assessment was done to determine the infrastructure needs and Stage 4 – Design documentation when procurement of contractors is finalised.<br>
slide24. CONSEQUENCE MANAGEMENT BY IMPLEMENTING AGENTS (IAs) 24 Implementing Agents apply contractual provisions through:
Application of penalties for delayed projects.
Termination of non-performing Professional Service Providers and Contractors.
The DBSA undertook internal investigations and terminated contracts of some of their officials.<br>
slide25. ASIDI ACTION Continue to improve monitoring of Implementing Agents, PSU and ASIDI staff to improve the process.
Full set of half-year financial statements are prepared, enhance the accurate records.
Submission of information for preparation of AFS timely.
Regular monthly reconciliations to be prepared to prevent misstatements in the financial statements.
More internal audit effort directed.
Interim audit by AG.
Possible disciplinary action against persons that caused irregular, fruitless and wasteful expenditure. 25<br>
slide26. MATERIAL IRREGULARITIES Separate agenda item and we monitor the progress with investigations into MI’s.
Four (4) MI’s identified and follow ups were made and three (3) was resolved, one (1) at legal process.
Progress on consequence management implementation was tracked for all MI in the year under review 26<br>
slide27. REVIEW OF THE ANNUAL REPORT The annual report was reviewed prior to the submission to the AGSA.
Management worked with Internal Audit to correct other gaps identified during the review meeting prior to submission date. In the last review there were a some of annual indicators with report consolidation to be finalised prior submission to AGSA.
There was improvement noted for evidence by other Branches although some branches to improve on quality of evidence and timely submission. 27<br>
slide28. AUDIT OUTCOMES: PERFORMANCE INFORMATION 28<br>
slide29. PROPOSED IMPROVEMENT Audit Committee (AC) recommended:
Management to strengthen quality assurance of reported information timely.
More detailed work by Internal Audit on quarterly performance information reports and financial statement reviews.
Management to improve or address the capacity challenges in Strategic Planning.
Further strengthen accountability and monitoring of Implementing agents, especially the penalty clauses in the MOA’s 29<br>
slide30. MANAGEMENT AUDIT ACTION PLAN Audit Committee (AC) has received a management action plan to address AG findings.
AC has monitored progress.
AC approved follow up audits to be conducted by Internal Audit for ASIDI irregular expenditure completeness, contractors timely payments, project management.
Audit Committee meeting was held after the AGSA report was issued to review management action plan to address root cause on 10 September 2024 and recommendations were provided to management to strengthen the action plan. 30<br>
slide31. CONCLUSION The Audit Committee will continue to address all matters within its mandate and responsibility.
The Audit Committee will pay specific attention to the high risk and high impact issues and monitor implementation of consequence management to assist in moving towards a clean audit. 31<br>
slide32. RECOMMENDATION It is recommended that the Portfolio Committee notes the Audit Committee activities of the Department of Basic Education (DBE). 32<br>