AGSA Strategic Plan and Budget 2013-2016

Presentation to SCoAG19 October 2012

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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

Reputation promise/mission

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1. Overview of AGSA commitments

2. What the plan focuses on

3. Strategic environmental context

4. Strategic risk profile

5. Strategic goals, objectives and performance measures

6. Sustainability strategy

7. Budget 2013 - 16

Content

4

Overview of the AGSA’s commitments

Simplicity, clarity and relevance of messages

Reporting with clarity and simplicity

Visibility of the AGSA’s leadership

Communicating audit results through visibility

Strengthen the organisation’s human resources

Unleashing the potential of our human capital

Funding

Ensuring financial viability and sustainability

Lead by example

Showcasing the exemplary nature of the AGSA

Improving the lives of citizens

Leading by example

We continue on the path established over the past few years

Our five strategic goals remain relevant and unchanged, but we are strengthening certain aspects or introducing new activities

We seek to solidify our achievements by institutionalising our best practices

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Main focus areas in the strategic plan

• Increased portion of performance audits

• Integration of performance audit and investigations with

regularity audits

• Increased prioritisation of the quality of our audit reports

• Exploring ways to collect debt more effectively

• Institutionalisation of the project management approach

within the organisation

• Intensifying the learning and development initiatives

through the work of our newly established L&D unit

• Sustainability strategy

Goal 1

7

Simplicity, clarity and relevance of our messages

Objective 1: To identify root causes and make recommendations

Performance

measure

Target

2013-14 2014-15 2015-16

Clear communication

of relevant root

causes and

recommendations

3 3 3

Tool Qualitative top-down rating by immediate supervisor of communication to the auditee, the executive and oversight, whether through reports (audit reports, management reports, dashboard report, general reports) or other communication (presentations, briefings, etc.)

Source of information: Reports and presentation experience

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Simplicity, clarity and relevance of our messages

Performance measure Target

2013-14 2014-15 2015-16

% adherence to all quality standards

Audit engagements

87% (C2 and C3 rating)

87% (C2 and C3 rating)

87% (C2 and C3 rating)

Tool Quality control assessment

% adherence to all quality standards

Non-audit deliverables

3 3 3

Tool Qualitative top-down rating by immediate supervisor of all non-audit deliverables. Our targets are based on a four-point rating scale (1-4)

Source of information: Non-audit deliverables

Objective 2: Continued excellence of the quality of audits performed

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Simplicity, clarity and relevance of messages – initiatives / focus

Increase the volume of performance audits to 10% of the

audit work within five years - a growth strategy and plan for

the medium term to 2018 will be finalised shortly Intensify the proactive evaluation of fraud risks through

assessment of process and financial statement reporting Achieve further integration of our diverse expertise and

products and the deployment of multi-skilled audit teams Deliver a consolidated audit message Achieve IRBA assessment results above our own targets

(already above industry standard level)

Goal 2

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Visibility of our leadership

Performance measure Target

2012-13 2013-14 2014-15High-quality, value-adding stakeholder interactions are conducted and escalated, where necessary

3 3 3

Tool Qualitative top-down rating by immediate supervisor of communication to the auditee, the executive and oversight, whether through reports (audit reports, management reports, etc.) or other communication media (presentations, briefings, etc.)

Source of information: Reports and presentation experience

Objective: To develop strong stakeholder relationships to encourage clean administration

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Increase the rigour of the analysis in our general reports Ensure continuity in understanding the audit outcomes Encourage acceptance of ownership for internal controls by

the appropriate responsible officials Intensify our visibility at all levels, widening the circle of

engagements Increase our participation in various governance forums

Visibility of our leadership– initiatives / focus

Goal 3

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Funding

Our focus remains on providing value-for-money audits to the public sector – i.e. executing the organisation’s mandate economically, efficiently and effectively by ensuring that our services to our auditees are cost-effective, while at the same time ensuring our long-term financial sustainability.

We pay special attention to effective debt collection as this has the potential to undermine our very existence as an independent assurance provider. Our main challenge remains collecting debt from local government auditees.

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Funding

Performance

measure

Targets

2013-14 2014-15 2015-16

% net surplus 1% 2% 2%

Tool Analysis of the income statement

Creditor days 45 days from

voucher date

45 days from

voucher date

45 days from

voucher date

Tool Analysis of the creditors ageing report

Objective: To execute the AGSA mandate economically, efficiently and effectively

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Funding

Objective: To execute the AGSA mandate economically, efficiently and effectively

Performance measureTargets

2013-14 2014-15 2015-16

% debt collected averaged over 12 months

All National BUs 99% -101% 99% -101%

99% -

101%

1% debt collected from National Treasury

averaged over 12 months – Finance BU100% 100% 100%

% debt collected averaged over 12 months

All Provincial BUs96% - 98% 96% - 98% 96% - 98%

Tool Analysis of the debtors ageing report

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Funding goal – initiatives / focus

Increase the efficiency and effectiveness of our audits Analyse and understand the inefficiencies of the entire

public auditing process Enhance the outsourcing of contract audit work Provide for minimum surplus margins

Goal 4

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Strengthen our human capital

Our strategic focus remains on:

further enhancing and building our high-performance culture which focuses on engagement, understanding and accountability

attracting, retaining and cultivating key talent by adopting the care and growth leadership principles

building a highly skilled workforce that is representative of the demographics of our country by enhancing and developing the skills and competency base of our employees

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Strengthen our human capital

Performance

measure

Targets

2013-14 2014-15 2015-16

% occupancy level 90% 90% 90%

Tool Staff occupancy rate report from PeopleSoft management

system

Culture index 3.4 3.4 3.4

Leadership index 3.4 3.4 3.4

Culture index 3.4 3.4 3.4

Tools. Survey and focus group interviews and other assessments.

The industry norm is 3.2 and is rated according to the five-

point Likert scale (1 – 5).

Objective: To have a motivated, high-performing and diverse workforce

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Strengthen our human capital- initiatives / focus

Intensify the relevant training and skills development Create audit professionals with impeccable integrity and

ethics Develop leadership pipeline Make active use of the total performance system to build

high-performing teams and to give regular and timely feedback to employees for their continuous improvement

Goal 5

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Lead by example

As a Supreme Audit Institution, we accept the responsibility to lead by example through: consistently behaving in an ethical manner producing quality work that demonstrates our

unquestionable competence and technical ability assuming accountability for the management of our

business risks effectively sharing information and knowledge using all available systems, tools and expertise in an

integrated manner

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Lead by example

Performance measure Target

2013-14 2014-15 2015-16

A clean audit report for the

AGSA

Clean audit

report

Clean audit

report

Clean audit

report

Tool External audit report

Objective 1: To continuously adhere to standards of excellence for clean administration

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Lead by example

Performance measure Target

2014-15 2015-16 2016-17

% compliance

with statutory

and legislative

deadlines

Strategic plan and budget,

annual report, general reports100% 100% 100%

Performance audits – deadlines

as agreed by the DAG and the

AG

Investigations - deadlines as set

out in the engagement letter to

the auditees

95% 95% 95%

Audit reports (PFMA, MFMA) 90% 90% 90%

Tool Project tracking tool

Objective 2: Continued improvement of the timelines of AGSA reports

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Lead by example

Objective 3: To maximise the AGSA’s contribution to transformation

Performance measure Target

2013-14 2014-15 2015-16

Achieve identified B-BBEE level

3 3 3

Tool Independent review conducted by external agency

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Lead by example- initiatives / focus

Make operational excellence the standard method of work Identify and institutionalise critical good practices Maintain adequate information and communication

technology Optimise infrastructure

Enhance our audit software and solutions Mature the information governance of the AGSA Provide strong support to the BBBEE imperative with a

focus on the CA Charter

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Sustainability aspect of our operations We acknowledge that, like any other organisation, we have an impact on

the physical environment and the society in which we operate, thus we regard as important all matters that relate to our sustainability as a business.

Our considerations are also consistent with the INTOSAI recommendations which emphasise the importance of sustainability and the principles of good governance, transparency and accountability.  

For our first year in reporting on some of the sustainability aspects, we commit to establishing the baselines for the following:– Electricity use - Water use– Paper use - Paper waste generated– Business travel – vehicles - Business travel – flights– Carbon footprint– Completion of annual disclosure of interest declarations – Incidents of integrity breach by our staff

BUDGET 2013 - 16

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Budget 2013–14 vs. budget 2012 – 13

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Determination of audit tariffs Major drivers

Recoverable hours - Head count - Available hours - Recovery rate

Tariff per hour - Salary cost - Recoverable hours - Mark-up factor

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Financial highlights (1 of 2)

Budget 2012-13

R’000

2013-14

R’000

Revenue 2 226 031 2 474 157

Direct audit cost (1 545 969) (1 700 958)

Gross profit 680 062 773 199

Other Income 73 544 80 709

Expenses (707 607) (828 570)

Net surplus for the year 45 999 25 338

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Financial highlights (2 of 2)Budget 2012-13

R'000

2013-14

R'000

Own hours revenue 1 714 416 1 923 487

Regulatory audit

Specialised audit

S&T recoverable

1,447 454157 759109 203

1 591 415218 437113 635

Contract work revenue 554 097 590 039

Regulatory audit

Specialised audit

539 54014 557

565 36424 675

Accounting adjustment (42 482) (39 369)

Total revenue 2 226 031 2 474 157

Less direct cost (1 545 969) (1 700 958)

Gross profit 680 062 773 199

Gross profit % of own hours revenue 42% 42%

Gross profit % of total revenue 31% 31%

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Net surplus as % of audit income

Budget 2012-13

Budget 2013-14

Forecast 2014-15

Forecast 2015-16

Net surplus R46 million

R25 million

R56 million

R 66 million

Net surplus as % of audit income

2,07% 1,02% 2,00% 2,13%

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Overhead analysis

Operating costs Budget 2012-13

R’000

Budget 2013-14

R’000

Move-

ment

R’000

%

Staff remuneration – support

217 767 255 317 37 550 17%

Other personnel costs 99 610 110 616 11 006 11%

Consultant fees 26 929 17 393 (9 536) (35%)

Accommodation 80 586 82 626 2 040 3%

Stakeholder relations 36 125 43 081 6 956 19%

L&D 82 668 108 753 26 085 32%

Technological services

39 058 55 012 15 954 41%

Office maintenance 21 857 25 353 3 496 16%

Other (see next slide) 103 007 130 419 27 412 27%

Total 707 607 828 570 120 963 17%

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Other expenses analysis

Operating costs Budget 2012-13

R’000

Budget 2013-14

R’000

Movement

R’000

%

Oversight governance 1 443 1 288 (155) 11%

Audit expenses 4 959 6 600 1 641 33%

Bank charges 355 357 2 1%

Finance charges 1 686 144 (1 542) (91%)

Recruitment expenses 8 878 10 549 1 671 19%

EWP 10,232 8 140 (2 092) (20%)

Insurance & legal fees 2 573 2 821 248 10%)

Communication 10 406 11 363 957 9%

Depreciation 40 052 47 423 7 371 18%

Other 5 128 20 511 15 383 300%

S&T Irrecoverable 17 295 21 223 3 928 23%

Total 103 007 130 419 27 412 27%

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Key overhead drivers (1 of 2)2012-13

R’000

2013-14

R’000

Movement

R’000

Salaries 217 768 255 318 37 550

New structure 15 238 15 238

Support salary increases 217 768 240 080 22 312

Due to growth in staff 1 642

Due to annual increase 16 300

Compensation progression 4 400

Maintaining business operations 67 536 88 585 21 049

Depreciation 40 052 47 423 7 371

ICT maintenance 15 114 24 875 9 761

Networks 12 370 16 287 3 917

Provision for bad debts 5 127 20 510 15 383

Executive leadership initiatives 1 844 2 390 546

Secondments 1 713 2,300 587

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Key overhead drivers (2 of 2)Budget 2013

R’000

Budget 2014

R’000

Movement

R’000

Learning & development - 16 016 16 016

Study support incentive scheme - 4 039 4 039

Foundations programmes - 8 000 8 000

Tertiary assistance - 3 977 3 977

AG Farewell - 6 850 6 850

Regional stakeholder functions - 1 350 1 350

External & internal stakeholder - 1 000 1 000

Combined staff farewell - 4 500 4 500

Other 110 913 144 005 33 092

Group life policy 7 610 10 772 3 162

Performance bonus 68 442 78 303 9 861

Advertisements 1 200 3 274 2 074

S&T training 8 477 16 145 7 668

Membership fees 10 550 15 760 5 210

Study assistance employees 14 634 19 751 5 117

Total 403 188 533 674 130 486

AG Directive 2012/13

4040

In terms of Sec 13 of the PAA the AG must determine the standards, scope and nature of audits after consultation with SCoAG.

It is against this background that we are advising SCoAG that the current AG audit directive as published in the Government gazette No. 34783, vol 557, Pretoria, 28 November 2011 remains in force.

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End of presentation