1page 1

Strategic plan and budget of the Auditor General of South Africa

for 2010 - 2013

Version 1.130 October 2009

SCoAG presentation

2

Mission

The Auditor-General 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.

This is our reputation promise

3

Table of contents

Strategic Plan and Budget 2010-2013

Audit tariffs

Audit directive

Way Forward

Page 4

Strategic Plan and Budget

5

See Word document attachment with targets

Page 6

Audit Tariffs

7

Recoverable hours

BE OL SM M A/AM TA

Available Hours 2009 2009 2009 2009 2009 2009

Annual Leave -180 -180 -180 -180 -180 -180

Sick Leave -82 -82 -82 -82 -82 -82

Study Leave -40 -40 -40 -120 -120 -180

Training -120 -120 -120 -120 -120 -180

Supervision of BU Activities -300 -200 -200 -120 -120

Strategic Initiatives -400 -300 -100

Admin -187 -187 -87 -67 -67 -67

Recoverable Hours 700 900 1200 1320 1320 1320

Percentage Recoverable 35% 45% 60% 66% 66% 66%

8

Calculation of AGSA Hourly Tariff

• Hourly Tariff = (Annual Salary/Annual Recoverable hrs) * mark-up factor

• AGSA average mark-up factor = 2.2

• Utilised 7% salary increase assumption

• For example:

– An audit manager with an annual salary of R500000 has a charge out for 09/10 of R824 per hour.

– Assuming a 7% salary increase for 10/11 an audit manager will earn a salary of R535000 and have a charge out of R884 per hour.

– This means a fee increase of 7.28% for our auditees.

9

Calculation of SAICA Hourly Tariff

• SAICA mark-up factor = 2.86

• Aligned recoverable hours to AGSA hours

• Where existing rate was higher, left at existing rate

• Where new rate was higher, capped increase at 7%

• There is a 30% differential between AGSA tariffs and SAICA tariffs

• For example, if we take an annual salary of R405000

– The AGSA rate is calculated as (R405000/1320hours)*2.2 = R675

– The SAICA rate is calculated as (R405000/1320hours)*2.86 = R878

– So the auditees pay a premium of (R878-R675) = R203 per hour on this band

– This equates to a premium of 30% (R203/R675)

Page 10

Audit Directive

11

Broad consultation on audit directive

• The Directive sets out the audit standards of the AGSA, therefore broad consultation is necessary

• Environmental scanning: Directive addresses lessons learnt from previous audit cycles, including readiness assessments (consultation/scanning with: auditors, AGSA senior leadership, AGSA technical specialists, NT, CFOs)

• Technical developments: Directive is aligned to developments in accounting and auditing (consultation with: ASB, NT, SAICA Public Sector Committee, IRBA, AGSA Technical Committee, AGSA EXCO. Also, IFAC and INTOSAI developments are considered)

• Consultation with SCoAG in terms of s13(1) of the PAA (planned for 16 October 2009)

12

Key elements in the Directive

• Applicability: all auditors of publicly funded institutions, including those that the AGSA opts not to audit itself (s4(3) of the PAA)

• Enforces consultation by Institutions on the appointment of auditors (s25 of PAA)

• Emphasises that the Audit Directive must be complied with and outlines the consequences of non-compliance

• Confirms that an opinion will be issued on the financial statements in terms of international auditing standards

• Elaborates on the AGSA phased approach to the audit of performance information and indicates the key areas of focus to be included in audit reports

• Confirms that while no opinion is issued on non-compliance, this remains a reportable matter

• Confirms that Performance Audits are undertaken in terms of INTOSAI standards

• Confirms that Investigations are undertaken in terms of the AGSA’s own standards and guidelines

• Specifies the standards applicable to audit related services and to reports on donor funds

• Explicitly provides details of the AGSA response in terms of International Standards on Auditing to the different accounting frameworks