Our missionThe 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.

This is our reputation promise

Table of contents Objectives of this document Overview of AGSA commitments Report on AGSA’s achievements on the 5

organisational commitments:o Simplicity, clarity and relevance of messageso Visibility of leadershipo Strengthen human resourceso Lead by exampleo Funding

Conclusion Decisions for SCOAG

Objectives of this document(an Executive Summary of the AGSA Annual Report 2010-11)

To report on the outcomes of the predetermined

objectives set out in the AGSA Strategic Plan and

Budget 2010-2013

To appraise Parliament of the AGSA’s financial

performance for the year under review

Overview of AGSA commitmentsThe AGSA remains committed to the following goals with a view to impact

positively on public sector accountability:

– Communicate root causes and recommendations in simple, clear and relevant language, thus deepen stakeholder understanding of our reports

– Encourage championing of the implementation of the audit recommendations through our intensive leadership’s visibility programme to auditees, oversight authorities and our staff

– Strengthen our human resources: by creating a high-performance culture, motivated staff and developing competent leaders in the organisation

– Lead by example by delivering audit products of a consistently high standard and timeliness, and addressing our own internal controls and organisational transformation

– Ensuring our financial sustainability

Simplicity, clarity and relevanceAGSA’s main achievements

Being able to communicate messages on which our auditees could take action and

that in turn is critical to achieving oversight, accountability and governance in the

public sector

Demonstrating our success through achieved commitments from different

stakeholders to address the root causes of audit outcomes.

Integrating the work of the specialised audit units (Performance Auditing,

Investigations and Information Systems Auditing) into regularity audits.

Simplicity, clarity and relevanceInformation Systems Audit

As part of the AGSA’s integrated audit approach, the unit provided

information systems (IS) audit support to regularity audits

PFMA : IS audit coverage increased by 8.5%

MFMA: IS audit coverage increased significantly by 32%

In total 400 assignments were completed throughout the PFMA and

MFMA cycles

ISA Unit established presence in four provinces: KZN, WC, EC, & GP

Impact achieved: Enabled effective transversal audit in supply chain

management & human resources by the regularity audit BUs

Simplicity, clarity and relevancePerformance audit:

Celebrated 25 years since the 1st performance audit at the then Department of

Education and Training

The focus of the Performance Audit BU has shifted from identifying performance

audit themes to having sector specialists in all of the Government’s 12 strategic

outcomes

Completed a performance audit of infrastructure at provincial Departments of

Health and Education – the outcomes shared with management and all parties

committed to immediate and drastic actions to address the deficiencies identified

Conducted research on the oversight and governance systems of the

Department of Public Enterprises over state-owned entities and Government’s

readiness to report on their performance

Visibility of leadership

Fundamental requirement 13: SAIs should strengthen communication with stakeholders for better

understanding of the SAI’s responsibilities, audit work and results

INTOSAI framework “Value and benefits of SAIs”

AGSA’s main achievements Sharing the audit outcomes of both PFMA and MFMA through the annual AG

roadshows with both the executive and legislative arms of government, as well as

structures such as APAC, the SALGA, Speakers’ Forum, etc

Recognition of AGSA’s leading role in the international community through the

hosting of INCOSAI

The AGSA was awarded the prestigious Jörg Kandutsch Award during XXth

INCOSAI in recognition of its exceptional implementation of INTOSAI goals within

the member’s regional working group and globally.

Visibility of leadership

Visibility of leadership

Visibility of leadership

Note: The figure that refers to the training of provincial Public Accounts Committee (PAC) members, also includes a large portion of Portfolio Committee (PC) members given their dual membership of the PAC/PC. There were also a number of members of Municipal Public Accounts Committees (MPACs) present at the PAC training. Therefore, the training covered PAC members of all three legislative spheres.

Visibility of leadership The AG’s roadshows with staff in each province and per portfolio at head office

affords employees an opportunity to engage one-on-one with the AGSA top

leadership which enhances their understanding of the AGSA’s strategic

objectives and outcomes of its audit reports.

Our continued strategic relationships with professional bodies like IRBA and

SAICA affords us an opportunity to influence the developments in the auditing

and accounting profession and standards as to address the needs for auditing

frameworks in the public sector.

As one of the most active SAIs within INTOSAI, the AGSA participates in

several task teams, working groups and committees, each established in terms

of INTOSAI’s strategic plan This year marks the Centenary of AGSA

Strengthen our human resources

Fundamental requirement 10: SAIs’ policies and procedures should set out that the SAI will only

undertake work that it is competent to perform, while managing the risks to quality.

• SAIs should ensure that they have appropriate resources to perform their work in accordance with

relevant standards and other requirements.

INTOSAI framework “Value and benefits of SAIs”

AGSA’s Main Achievements Achieved significant progress in streamlining the executive performance

management, through improvement of performance contracting and reviewing processes at executive leadership level

Reached 89% occupancy level against a target of 80% by establishing a Recruitment Centre of Excellence to deal with skills scarcity, trainee auditor retention strategy and comprehensive salary benchmarking.

Increased by 73% the number of audit professionals who passed final qualifying examinations and completed their practical experience through our bursary schemes, learnerships (trainee auditor scheme) study support and training.

Strategies yielding good results: • Commitment of line management and training officers• Structured and comprehensive training program• Strong governance processes - Trainee auditor assessment • Good relationships with professional bodies

Strengthen human resources

Professional membership employees profile 2007 to 2011

Strengthen human resources

• 16% aggregate growth in professional employees over 5 year period

• 46% aggregate growth in CAs employees from 2007- 2011

• 8% decline in RGAs employees over a 5 year period

• 34% & 77% aggregate growth in CISA and ACCA employees in five years

Strengthen human resources

The AGSA leadership were encouraged to continue adapting their skills to meet the evolving requirements and ensure an appropriate leadership culture.

Executive pipeline continued to be built to ensure business continuity at the AGSA. Our improved position allows us to meet long- and short-term leadership needs at all levels.

Lead by example

Fundamental requirement 11: In keeping with the principle of ‘leading by example’, SAIs need to adhere

to the same, appropriate rules and philosophy that SAIs expect from auditees as a minimum.

INTOSAI framework “Value and benefits of SAIs”

AGSA’s Main achievements

The AGSA completed its work within the legislated deadlines for both the PFMA and MFMA audit cycles, consistently exceeding our internal targets, whilst taking care not to achieve timely submission at the expense of our people and internal quality processes.

AGSA is a certified level 3 contributor to BBBEE

The organisation achieved a clean audit report.

In a first of its kind review the AGSA as a SAI subjected itself to a firm (office)-level review by a private sector regulator namely, the Independent Regulatory Board for Auditors.

Lead by exampleAGSA’s Main achievements

(international level)

Successful hosting of XX th INCOSAI enabled the AGSA to position itself within the global INTOSAI community and in Africa as a SAI that vigorously implements its constitutional mandate.

AGSA’s credit contributed substantially to developing guidelines through INTOSAI that form part of the ISSAIs, public sector specific application guidance on performance audits and the auditing of financial statements, internal control and legislative compliance.

Employment equity profile: 2007 to 2011

• A steady improvement from 2007 in designated versus non-designated groups ratio

• Stabilisation of the appropriate ratio at all employment bands

• Organisational policies were reviewed with emphasis on fairness and equality

Lead by example

• Reviewed engagement performance policies, procedures and working papers

• Industry average - 75%

• AGSA achieved 77% vs target of 86% due to • New clarified ISAs• Newly revised audit methodology &

working papers• Audit teams ability to audit full

GRAP accounting framework implementation

• Audit teams unfamiliar with audit of predetermined objectives

• IRBA firm level review on compliance to ISQC1 yielded good results.

Quality assurance – 77% vs 75% industry average

Lead by example

We completed our work for both the PFMA and MFMA audit cycleswithin the legislated deadlines

Lead by example

Corporate social investment (CSI) is an integral part of our

contribution towards transformation of our country.

We visited a total of 107 schools in all nine provinces during 2010-11. The total planned allocation to audit firms increased by 7% (2010: R508m) We allocated 57% (R310m) of actual spending to small & medium size firms

Size of firms

Allocation targets

% (2010-11)

BudgetR million (2010-11)

ActualR million (2010-11)

% ofActual

(2010-11)

Planned allocationR million (2009-10)

Big and large 45 R210 R233 42.9% R229

Medium 35 R164 R236 43.5% R198

Small 20 R94 R74 13.6% R81

Total 100% R468 R543 100% R508

Lead by example

Funding

Fundamental requirement 8: “SAIs manage their operations economically, efficiently, effectively and in

accordance with laws and regulations and report publicly on these matters.”

INTOSAI framework “Value and benefits of SAIs”

AGSA’s Main Achievements The actual net surplus achieved for the year was R133 million (or

7.2% of revenue) against a budget of R68.6 million (or 3.7% of

budgeted revenue).

Actual audit income was R1.850 billion (2009-10: R1.645 billion)

against a budgeted audit income of R1.836 billion.

Free cash flow was R119 million on 31/03/2011 (R58 million on

31/03/2010).

2011(R’000)

2010 (R’000)

Revenue 1 850 432 1 644 647

Direct audit cost (1 298 188) (1 155 124)

Gross Profit 552 244 489 523

Gross profit% on own hrs revenue

30% 30%

Other Income 83 667 53 960

Expenses (502 794) (444 318)

Net surplus 133 117 99 165

• Revenue is up by 13% compared to 2010• Gross profit margin remains 30% • Operating expenses are 27% of the revenue (2010: 28%) • The net surplus increased to 7.2% of revenue (2010: 6%)

-R16m

R99m

R133m

-R8m

FundingFinancial highlights - Income statement

Funding

2011 (R’000)

2010 (R’000)

Own hours revenue

1 248 871 1 082 928

Contract work revenue

543 317 508 247

S & T 66 813 55 040

International audit

25 585 32 055

Present value adjustment

(34 154) (33 623)

Total revenue 1 850 432 1 644 647

• Own hours revenue increased by 15% due to growth in the number of audit heads

• 20% decrease in international audit income

Revenue breakdown

Funding

FundingLocal Government debtors per

Province (Total – R167 022 000)Local Government ill-liquid debtors per Province (Total – R36 838 000)

Funding

Total(R’000)

Current(R’000)

30 – 120 days

(R’000)

120 + days(R’000)

Ill-liquid debtors(R’000)

National Gov.

50 252 48 272 1 205 775 -

Provincial Gov.

107 102 87 920 15 895 3 287 166

Local Gov. 167 022 43 069 55 563 68 090 36 838

Statutory Bodies

47 776 34 306 4 760 8 710 6 467

Other (N1) 18 751 11 778 3 485 3 488 2 380

Total 390 903 225 345 81 208 84 350 45 851(N2)

AGEING OF TOTAL DEBT (includes accruals)

Notes:N1 – Other debtor types include unlisted public entities, staff debtors, municipal entities, utility agency corporations.N2 – The 45,8million is included in the Total Debt figure of R390,9million

Conclusion AGSA continued to be a model organisation both locally

and on an international levelWe continued to manage the organisation economically,

efficiently and effectively ensuring its financial viabilityWe increased our efforts in engaging our stakeholders to

encourage clean administrationWe remained focused on contributing to continuous

transformation of our country Most importantly, we believe that with all our

professional activities we have contributed to the well being of the citizens of South Africa

Decisions for SCoAG

Net surplus: (section 38(4) of Public Audit Act 2004)

Confirm appointment of external auditors (section

39(1) of Public Audit Act 2004)

Thank you