Auditor-General of South Africa on use of audit reports as oversight tools; Department of Basic Education briefing on district support

Meeting report

Briefing by Office of the Auditor-General South Africa (AGSA)

Mr Godfrey Diale, Senior Manager, AGSA, contextualised the presentation by means of a video clip to introduce AGSA. The purpose of the presentation was to inform the Committee in order to enable them to conduct effective oversight.

Mr Diale recommended that the Committee familiarise themselves with the indicators embodied in the structure of the role of oversight. Monitoring was essential for corrective action, and medium-term actions should be implemented as control measures.  Even though the strategic plans were reviewed and approved, the process was not audited, and they were funded in good faith. However, the Office of the Auditor-General provided reasonable assurance based on the quality of information upon which approvals for funding were made.

The Committee was urged to be proactive and review the quarterly reports and ensure that follow-up feedback was made available against the strategic plan and annual performance plan, with regard to service delivery.

He emphasised that the strategic plan must be aligned with the requirements of legislation. He indicated that the plan had to be scrutinised by the Committee in line with the enabling legislation, engagement on the challenges in meeting the strategic plan was necessary, and initiatives must be subsequently established to address these challenges.

The performance indicator was evaluated to measure success. The budget was allocated appropriately according to resources and priorities. Analytical review of the budget was necessary and the reasoning should be rational and auditable.

If the Department needed to be engaged, this could take place at any given time. Any form of interrogation that may be considered an audit, must be tabled before the Committee. Management needed to establish fraud prevention measures internally, as this was not the responsibility of AGSA.

Accountability for the use of resources and service delivery should be in line with the reporting responsibilities outlined in the Public Finance Management Act (PFMA) and Parliament’s Appropriation Act. There should not be a trend in Government whereby performance indicators were not reported on, or sufficient reasoning was not provided.

The Combined Assurance Model was consulted with regard to the provision of assurance. The structures of governance should provide assurance by reviewing and interrogating the credibility of the provided documentation within their jurisdictions. There was a need for continuous evaluation, and if the model was maximised, the audit outcomes would be acceptable.

AGSA Contribution to Oversight

AGSA provides briefing to Committees, and the Department is advised on deficiencies before annual performance plans (APPs) are approved.

AGSA is a Chapter nine institution and conforms to legislative requirements as set out by the Constitution, the Public Audit Act and the Public Finance Management Act.

AGSA’s aspirations for the Public Service

Mr Diale said AGSAs aspirations for the public service were professionalism, robust financial performance and management systems, oversight and accountability, commitment and ethical behaviour by all, and a competent and value-adding Auditor-General.

Mr Diale added that AGSA performs duties beyond its mandate.

AGSA Products

Mr Diale said the regularity audit ensured that information had not been omitted, and dealt with governance issues. This mandatory audit was characterised by financial compliance, pre-determined objectives (PDOs) and internal control, as well as the complete application of international auditing standards. All of the information audited was supported by various systems.

Independent, discretionary audits may be effected to avoid fraud and mismanagement.

Performance auditing was conducted by the Auditor-General to focus on specific government policy and management processes. However, the Auditor-General was not responsible for the identification of fraud, nor the assurance that all applicable laws and regulations had been complied with, or that service delivery had been achieved. The Auditor-General would verify information in line with the documentation and provide assurance on material misstatements on a sample basis.

The Auditor-General reported on the usefulness and reliability of the information in the annual performance plan, reported on material non-compliance with laws and regulations and identified key internal control deficiencies which needed to be addressed.

Mr Diale outlined the timeline of regularity audit cycles. These were:

- 31 March was the year end, aligned with the PFMA.

- 31 May – financial statements were due

- 31 July - Audits complete (PFMA).

Sector reports did not have legislated timeframes. The sector report was the consolidation of all of the findings.

The audit of financial statements was mandated by the Constitution and produced within the framework of the National Treasury for consistency. The focus areas AGSA were financial statements, predetermined objectives, compliance with laws and regulations, and the education sector audit.

He said that the key focus areas for the 2013-2014 audit were infrastructure, Learner Teacher Support Material (LTSM), Learner Teacher Support (LTS). National School Nutrition Programme (NSNP), Ka Ri Gude, adult literacy and teacher professional development. He requested that the Committee provide inputs on the key focus areas for 2014-2015 to be included in the sector report.

Good administration and a clean audit were achievable. Unqualified and unmodified audit opinions were audits which indicated desirable compliance. Qualified audits indicated concerns and deficiencies which prevented a qualified or adverse opinion from being issued.

Mr Diale said an audit considered issues of compliance with regulatory requirements, usefulness and reliability. The audit report structure was characterised by a report on the financial statements, a report on other legal and regulatory requirements aligned with predetermined objectives and compliance with legislation, and internal control with regard to governance and financial and performance management. Other reports with consist of investigations, performance audits and agreed-upon agreements.

Emphasis of matter/additional matters

Mr Diale explained that if issues existed, the Auditor-General was required to bring these issues to the user’s attention and request action plans to remedy the concerns. ‘Emphasise of matter referred to information that had been disclosed in the financial statement and ‘Additional matters’ referred to information that had not been included in the statement and should be, at the discretion of the auditor.

AGSA was an organ of the state and was required to brief parliament in order for Committees to have context for financial matters within the scope of the Auditor-General. AGSA provided briefing notes for engagement.  These briefing tools were:

- Annual report, including the audit report and performance report;

- Accounting officer and audit Committee’s reports;

- Estimates of national expenditure;

- State of the Nation Address and budget speeches.

The briefing process included reporting by departments and entities, understanding the mandate of entities by oversight, the actual briefing process, recommendations by oversight committees and action plans by entities and progress monitoring

Discussion

Ms D van der Walt (DA) said that value, in terms of infrastructure, referred to the cost in relation to the quality of a building, based on inspection. She enquired if inspections were ongoing, as this was crucial.

Ms H Boshoff (DA) asked if the strategic plan was aligned with the requirements set out by AGSA. She said that money was budgeted and then shifted around, and asked if this could occur with or without the auditor’s input.  She asked how mismanagement was addressed, as many accounting officers were “not on par.”

Ms A Lovemore (DA) said the Department of Basic Education had not met all of its targets in previous years. One of the results of this had been that these targets had been omitted, as they were not sufficiently measurable. Did the Auditor-General consider this? Teacher training at universities was not the responsibility of the DHET, and it did not appear as a target, yet it was crucial. She asked how performance measurement was effected for targets between departments.

Mr D Mnguni (ANC) was concerned with the issue of monitoring, and asked for current examples of monitoring instruments. He referred to financial statements, and said that it was crucial that requirements were complied with, and that service delivery was of a quality standard. Food was provided to schools by the Department, and had been listed under nutrition in the previous financial report. However, the quantity had not been submitted.  He said the practicality of the requirements for the reports should be addressed.

The Chairperson said that the execution and nature of particular activities was a requirement from the Department, and that AGSA was not answerable.

Ms N Mashabela (EFF) asked what the powers of the Committee were regarding audit reports, as opposed to the National Assembly.   Could audit reports be used to legally charge public servants for mismanagement?      

Mr Diale said that in September 2011, the Auditor-General had tabled a report in Parliament on infrastructure for health and education. One of the findings had related to the value of money regarding infrastructure. He indicated that suppliers increased their prices if resources were in demand and that when an organ of state negotiated a price, suppliers did not alter their prices. The challenge for the Auditor-General was that such an audit was not within the organisation’s scope. The national department had developed an action plan to address the above-mentioned root causes in order to reduce the likelihood of mistakes being repeated.

The challenge with non-compliance was that it could not be undone. However, the formulation of a performance indicator could be advised upon. The same approval process must be followed when making recommendations to the Department. A legislative requirement did not exist for approval of the shifting of funds, as the Office was independent of management. However, the Office of the Auditor-General was able to advise on the process and procedure which should be utilised, with a virement.

Mr Diale responded to the question regarding the mismanagement of funds and the laying of charges, and said that the Office was accountable to Parliament and could act as witnesses, but could not initiate criminal proceedings. Where there was mismanagement, the case would be taken to the executive authority and followed-up.  However, the Office did not have the authority to prosecute.

There was a five-year strategic roll-out plan, with specific targets. The backlog from previous years needed to be factored in to the current report. The Auditor-General would bring omitted objectives to the user’s attention.

The concern regarding inadequate levels of teacher training was justified. The Office could not force the departments to include objectives, however. Parliament was in a suitable position to make these recommendations. There should be coordination between the ministries, and perhaps an engagement with the departments on this objective. Continuous education development required the education portfolio to use the bulk of the budget on human resources.

Mr Diale indicated that training on annual financial statement frameworks could be arranged once Treasury had assessed the framework, with the necessary additions. He emphasised the need for the Committee to have a basic understanding of accounting frameworks. A template was not provided, but it was crucial that the findings and rot causes were submitted with a plan of action.

He referred to the school nutrition programme, and said that the audit office could not audit the information provided by management, and could not impose objectives. Treasury had released annexure E, with technical descriptions, which discussed how indicators were assessed.

Mr Diale responded to the question relating to the powers of the Committee, and said he was not entirely certain. The Parliamentary office would need to research this information. The reports tabled to the National Assembly required that all committees were informed.

The Chair emphasised the issue of private schools receiving large subsidies from the government and requested the opinion of the Office on the management of this money. How did the Office reflect the levels of reporting from a school, and not just the management? How were the provinces audited, as it affected the national finances.

Mr Diale responded that the Office was still finalising the report. He stressed the lack of concurrent functioning and explained that it was a result of the arrangement of government and misaligned objectives. Equitable share controls were not consistent and allowed provinces to redirect funds for other purposes. The biggest challenge was coordination, as it impacted on service delivery. The key focus areas were the most manageable in terms of auditing, based on the available resources.

The Schools’ Act stated that schools could appoint their own auditors.  Despite the mandate, however, the Auditor-General did not have the capacity to audit.  Financial statements could be produced and audited for funding, but the Auditor-General had not been involved with schools. Funds for the focus areas were managed by the provinces and the national stakeholders, and were not given to the schools. AGSA may need to engage the national leadership on education on the issue of school auditing.

The Chair said that teacher training would be addressed at a joint meeting with the Department of Higher Education and Training.

The Chair thanked AGSA for their presentation.

Briefing by Department of Basic Education on District Support

The Minister, Deputy Minister and Acting Director-General submitted their apologies, which were noted and accepted by the Chairperson and the Committee.

Ms Palesa Tyobeka, Deputy Director-General, DBE, outlined the structure of the presentation and said that the profiles of underperforming districts had been handed out to Members.

She said that the previous organogram had not emphasised districts in the non-negotiable focuses. The non-negotiables identified formed the key focuses.

The focus of districts should be on learning outcomes. Two-day working meetings had been established to solidify these focuses, to monitor the work of the districts.

A similar structure had been developed for under-performing districts – those which performed under the 70% target -- and 20 Districts had been identified. Mentors had been appointed for the 10 districts in the Eastern Cape. In addition to this, accountability meetings had been formulated to emphasise learning and teaching, and not solely administration.

Data on learner performance and administration was available for decision-making and interventions based on data. The support to districts would therefore be enhanced.

Performance should be a central focus, and it was measured by means of National Senior Certificate (NSC) performance. Between 2011 and 2013, the trend was that performance was improving in all provinces, with the exception of Gauteng, which had experienced a slight decrease in performance.  There had been a consistent improvement in the districts in all subjects.

The Department had aimed to strengthen district support through individual school profiling, with the exception of one district, where profiling was under way and would be finalised by the end of September. The key issues identified were admissions, human resource provisioning, LTSM and curriculum, academic preparation and curriculum coverage, school management and government, learner well-being and infrastructure. School profiling completed by 31 May indicated that there had been insufficient success regarding infrastructure, especially regarding the well-being of teachers and learners in the Eastern Cape and Kwa-Zulu Natal.

The Chair enquired as to the meaning of “learner well-being.”

Ms Tyobeka explained that it was informed by factors such as orphans, child-headed households and absenteeism. The Department coordinated with the schools and districts to address emerging concerns. Learner well-being was a concern in the Northern Cape which needed to be investigated.

The Department faced the following key issues and challenges:

·         Variation in responsibilities and authority of districts, despite promulgation of a national policy;
·         Vacancies in critical district/field worker posts;
·         Inadequate resources/tools of the trade;
·         Weak performance management systems and accountability measures;
·         Inappropriate appointments across all levels of the district, including in subject advisory posts;
·         Critical skills gaps across the various levels of the district; and
·         Continued challenges in small and non-viable schools as a result of population migration.

Ms Tyobeka emphasised the need for alignment through flexible norms and standards to accelerate the implementation of policy.

Key priority actions were:

- To reinforce the position of districts as a key lever for a ‘radical transformation’ in the delivery of education;
- To ensure alignment through clearly defined but flexible norms and standards to accelerate the implementation of the policy; and
- To design a clear intervention plan, focusing on modelling operations of an ideal district focused on providing support to schools, developing criteria for the appointment of District Directors, Circuit Managers and Subject advisors, developing a sustainable capacity building model and programmes, and establishing a credible monitoring and performance management system.

Ms Tyobeka said that the Department received a team of five individuals from McKinsey South Africa, with three officials in permanent positions.

Key focus areas involved the filling of key vacancies, publishing the minimum norms and standards,defining and provisioning of a minim enabling resource package, determining the recruitment criteria for district officials, profiling district staff and developing a capacity building for deistic directors.

Ms Tyobeka explained that the issue of using data to plan and monitor performance would be addressed and effectively utilised.

She said that the Department welcomed a suggestion for indicators to be included.

Discussion

The Chairperson said that programme advisors did not visit the schools, owing to a lack of resources. During oversight, the main challenge to district offices was the utility of subject advisors. She asked about the tools of trade afforded to district officials.

Ms Basson said that performance was affected by available resources. She referred to the challenges in the John Taolo Gaetsewe (JTG) district in the Northern Cape, and enquired as to what support was provided to these learners during final examinations.  She asked why only two districts were prioritised in Mpumalanga. She was concerned that the Department had not started on key focus areas as yet.

Ms Lovemore was not convinced that district offices had a key role, owing to feedback from principals. Norms and standards were non-binding and would require regulation. The Districts should have data at hand -- it should not be the role of the DBE.  She asked who the mentors were and where they came from. Not one of the schools in her constituency had received annual results. She did not see this as an exercise that indicated provincial political will. She said that the average was not an adequate indicator of underperforming schools, based on the balance between high performing and badly performing schools.

Mr Mnguni said that the officials were not performing, as there was inadequate monitoring. Some district circuits were under-resourced, despite their allocated budgets. He asked if it was possible for the circuits to be fully equipped and controlling their own budgets, and emphasised that under-qualified individuals who were appointed to senior positions was a concern.

Mr Khosa said there had been no mention of plans for maintenance. He enquired as to whether the private schools funded by government were monitored, and about the timeframes for delivery.  The lack of coordination between teachers and advisors was a concern.  What was the Department’s plan of action with regard to improving the quality of support?

Ms Van der Walt referred to the criteria for district officials, and said she had been under the impression that this had been implemented.  She asked whether a circuit manager who was director in an independent school or learning academy, could be appointed and recommended that strict regulations should be implemented with regard to the criteria.

Ms Tyobeka agreed that advisors were underperforming and acknowledged that the filling of critical vacancies was the Department’s priority.  Provinces were claiming budgetary challenges. There was a need for re-prioritisation which would require recommendations from the Committee.

The Department would place emphasis on circuit managers and subject advisors, who had been identified as District staff initially.

Regarding the JTG district, the issue was that parents were preventing learners from attending schools, and the Department would work extensively to protect the gains made thus far.

The Department was not convinced that the Eastern Cape was ‘overloaded’, but believed that it was not adequately structured.  Slowness in action was the issue, and not the lack of resources. However, districts were divided, and many of the schools were not aligned with policy. The Department was aiming to assist the province with regard to this.

Ms Tyobeka said the Department believed that districts were a key driver and had identified some of the areas and reasons for concern. The Department was also looking into competency assessments and the alignment of performance agreements on which to monitor districts.

She said that mentors were retired district directors from Gauteng, with a history of good performance. She was distressed to learn that learners had not received annual results, and said that the Department would look into this.

The Department would look into the appointment of unqualified personnel, as well as the implementation of the maintenance policy.

The need for support was a great concern, and the Department was evaluating creative ways to address this through various entities.  The Department would be looking at the timelines and evaluating the appointment criteria.

The Chairperson said the strides made by the Department should be communicated to the public. Mobilising the communities was a useful instrument, but there had not been sufficient engagement. The districts were necessary but needed enhancement and effectiveness, as the districts portfolio had been very weak.

The meeting was adjourned.