Audit and Risk Committee Overview on Department of Women, Youth, and Persons with Disabilities Annual Report 2022/23

The Audit and Risk Committee (ARC) provided oversight on governance, risk management, and compliance with legislation for the Department's Annual Report. The ARC met regularly to review performance reports and discuss audit findings for the 2022/23 financial year.

• Audit Committee
• Annual Report
• Governance
• Risk Management
• Compliance

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1. Audit and Risk Committees Overview on Department of Women, Youth and Persons with Disabilities Annual Report for 2022/23 Financial Year Presented by: Ms Gratitude Ramphaka CA (SA) Chairperson: Audit and Risk Committee 10 October 2023 0

2. Table of Contents Background Performance Information Financial Management Internal Controls Internal Audit Risk Management Auditor General s Report 1

3. Background Audit Committee Independence and Responsibility The Audit and Risk Committee (ARC) of the Department of Women, Youth and Persons with Disabilities (Department) is an independent and non-executive committee appointed in terms of Section 38(1)(a)(ii) and in accordance with 77 of the PFMA. The ARC operated in accordance with the Department s ARC Charter which served as the terms of reference for the ARC. The ARC Charter outlines the purpose, responsibility and the authority of the ARC in the Department. The ARC provided oversight and advised the Department on governance, risk management, internal control practices/processes and compliance with applicable legislation. During 2022/23 financial year, the ARC met five (5) times to oversee the Department s quarterly performance reports. The ARC, further convened two special ARC meetings: Firstly, to consider and recommend the Department s Draft Annual Report for approval by the Accounting Officer. Secondly, to consider and discuss the Auditor-General of South Africa s Annual Audit Report and the Management Report for 2022/23 financial year with Management and the Auditor-General of South Africa (AGSA). 2

4. Background The presentation focuses on the ARC observations and conclusions on certain sections of the Department s Annual Report for 2022/23 financial year as contained in the ARC s Annual Report . The presentation includes the ARC s observations and conclusions from the ARC s oversight of the Department during the financial year. The presentation covers the following areas: Preparation of the Annual Report AGSA s Audit Conclusion Performance Information Financial Management Internal Controls Internal Audit Risk Management Auditor General s Report Conclusion 3

5. DWYPDs Annual Report Preparation of the Annual Report The Department prepared and submitted the annual report to AGSA, National Treasury and the Department of Planning, Monitoring and Evaluation within the prescribed time frame as per the applicable legislative framework. The Department s Annual Report for 2022/23 financial year is prepared in accordance with the applicable National Treasury prescripts. AGSA s Annual Audit Report The Department received an unqualified audit opinion with audit findings. The annual audit by AGSA identified only one material finding on non-compliance with legislation. AGSA s conclusion is depicted as follows: Audit area Specific audit Area Audit Outcome Financial statements No material findings Annual performance report Programme 2: Mainstreaming Women s Rights and Advocacy Programme 4: Mainstreaming Youth and Persons with Disability s Rights and Advocacy No material findings Compliance with legislation Annual Financial Statements, Performance and Annual Report No material findings Strategic Planning and Performance Management No material findings Procurement and Contract Management No material findings Expenditure Management No material findings Asset Management No material findings Transfer of funds No material findings Consequence management Material findings 4

6. DWYPDs Annual Report AGSA s Annual Audit Report Finding on consequence management In the 2021/22 financial year audit finding on non-compliance with legislation relates to non-investigation of irregular expenditure and non-implementation of consequence management which was carried over from previous financial years (since the inception of the Department in 2010/11 financial year). In the 2021/22 financial year, the Department investigated and implemented consequence management on irregular expenditure incurred in 2021/22, 2020/21, 2019/20 and 2018/19 financial years. Irregular expenditure incurred in 2017/18, 2016/17, 2016/15, 2014/13 and 2013/12 financial years was still to be investigated and consequence management was still to be implemented. In the 2022/23 financial year, the Department investigated all outstanding irregular expenditure (i.e. 2017/18, 2016/17, 2016/15, 2013/14 and 2012/13) and implemented consequence management on officials who were found to have transgressed the applicable prescripts who are still in the employment of the Department and other Government Departments. Investigations were finalised in March 2023, however the Department could not apply to National Treasury for the condonation and the removal of irregular expenditure amount in the financial statements before the 31st of March 2023. There are transactions where the determination of facts could not be performed because the records could not be traced within the Department. The Department has committed to apply to National Treasury for condonation and removal of the aforementioned transactions in line with the PFMA Compliance Reporting Framework of 2022. The Department committed to include a corrective action of the application of condonation and the removal of irregular expenditure amount in the Department s Audit Improvement Action Plan of 2023/24 financial year. The ARC will monitor the implementation of the 2023/24 financial year Audit Improvement Action Plan. The ARC noted that the delay in applying for condonation and the removal of irregular expenditure amount on time cost the Department a clean audit. Material Irregularity The ARC noted that since the implementation of the material irregularity process by AGSA, no material irregularities were identified. 5

7. DWYPDs Annual Report AGSA s Annual Audit Report Matters of Emphasis An underspending of R 8 455 000 recorded in the financial statements was emphasised by the AGSA. The Department accounted for underspending as follows: Compensation of Employees R 2 543 000 Goods & Services R 3 498 000 Payments for Capital Assets R 1 538 000 Due to vacancies during the financial year which includes the positions of the DDG: Monitoring, Evaluation, Research and Coordination, the CD: International Relations, Stakeholder Management and Capacity Building and Dir: International Relations. Saving realised on Office Accommodation due to the relocation of the department to new premises during October 2022 was earmarked to fund part of the Information Communication Technology (ICT) infrastructure installation . The funds could not be spent due to challenges experienced at the State Information Technology Agency (SITA) to finalise the project Saving realised on Office Accommodation due to the relocation of the department to new premises during October 2022 was earmarked to fund part of the Information Communication Technology (ICT) infrastructure installation . The funds could not be spent due to challenges experienced at the State Information Technology Agency (SITA) to finalise the project During 2022/23 financial year, the Department provided quarterly progress reports to the ARC on the above. The Department reported various systems and mechanisms that were implemented to manage and monitor the budget and expenditure. The systems implemented by the Department include the monthly budget committee meetings, development of procurement plan and the demand management plan. Furthermore the Department implemented the re-prioritisation of the budget on regular intervals and communication with responsible managers on instances where over or under spending of budget are detected. 6

8. DWYPDs Annual Report Performance Information According to the APP and the addendum to the APP the Department had 43 planned targets. 35 of the 43 planned performance targets were achieved i.e. 81% achievement. The following performance targets were not achieved and the Department provided the following reasons for deviation from the planned performance targets: Planned Performance Target Actual Achievement Reasons for Deviation Maintain a vacancy rate of less than 10% annually As at 31 March 2023, vacancy rate was at 10.6% Vacancies in the Office of Deputy Minister were not filled as the President had not appointed a Deputy Minister 4 progress reports on Implementation of Sanitary Dignity Implementation Framework by Provinces produced 4 progress reports on implementation of Sanitary Dignity Implementation Framework by Provinces produced The 4 progress reports produced on implementation of Sanitary Dignity Implementation Framework by provinces produced were not aligned to the Technical Indicator Description. The Technical Indicator Description indicates that the report produced should include amongst others an indication on percentage of indigent girls and women receiving sanitary products per province and the number of girl friendly water supply. 18 GBVF Rapid Response Teams (RRTs) established 17 GBVF Rapid Response Teams (RRTs) established One GBVF Rapid Response Team (RRTs) was not established within the 3rd quarter whereas the process was initiated. It was finalised during the 4th quarter. 2 reports on implementation of Comprehensive National GBVF Prevention Strategy developed 2 reports on Implementation of Comprehensive National GBVF Prevention Strategy developed 1 report on Implementation of the Comprehensive National GBVF Prevention Strategy developed but approved by the Executive Authority outside the required time frame 9 provincial departments and 4 municipalities plans monitored on the implementation of NSP on GBVF 9 provincial departments and 4 municipalities plans monitored on the implementation of NSP on GBVF The Portfolio of Evidence was approved outside the timeframes stipulated in the Department s Planning and Monitoring Policy. 7

9. DWYPDs Annual Report Performance Information (Cont.) Planned Performance Target Actual Achievement Reasons for Deviation South African Youth Development Bill refined South African Youth Development Bill refined The submission requesting approval of the Portfolio of Evidence was approved by the Executive Authority outside the timeframes stipulated in the Department s Policy for Planning, Monitoring and Reporting 2 International Youth engagement reports produced 2 International Youth engagement reports produced The submission requesting approval of the Portfolio of Evidence for 1 International Youth engagement reports was approved by the Executive Authority outside the timeframes stipulated in the Department s Policy for Planning, Monitoring and Reporting 1 status report on compliance with national and international obligations on the inclusion of persons with disabilities produced 1 status report on compliance with national and international obligations on the inclusion of persons with disabilities produced The submission requesting approval of the Portfolio of Evidence for 1 International Youth engagement reports was approved by the Executive Authority outside the timeframes stipulated in the Department s Policy for Planning, Monitoring and Reporting The ARC monitored the performance information of the Department on a quarterly basis. Management provided clarity on areas of performance information in all instances where the Committee requested it. The ARC is satisfied with explanations provided by Management on areas. Performance Information of the Department for 2022/23 financial year is free from material misstatement. However the Committee noted that the annual audit by the AGSA identified inconsistencies between the planned targets and the reported achievement in the annual performance report that were not material. Those inconsistencies were subsequently corrected by the Department. AGSA concluded that the performance information of the department was review is useful and reliable, in accordance with the applicable criteria as developed from the performance management and reporting framework. 8

10. DWYPDs Annual Report Financial Management Financial statements The ARC noted that the audited financial statements of the Department were free from material misstatements. AGSA identified errors in the annual financial statements that were not material in nature and amount. Those errors were subsequently corrected by Management. Compliance with Legislation The Audit and Risk Committee noted that the Department complied with the applicable legislative framework. The Department however, did not request for condonation and removal of irregular expenditure incurred in the prior financial years from National Treasury by the 31st of March 2023. The Department determined facts on irregular expenditure and implemented consequence management against the officials found to be responsible for the transgression of the applicable prescripts, and who are still within the employ of the Department and other Government Departments. There were however, some transactions where the determination of facts could not be performed because the records could not be traced within the Department. The Department has committed to apply to National Treasury for condonation and removal of the aforementioned transactions in line with the PFMA Compliance Reporting Framework of 2022. Information Communication Technology The Audit and Risk Committee exercised oversight on the Information Communication Technology in the Department. The Committee received progress reports from Management and the Information Communication Strategic Committee on its activities on a quarterly basis. Inadequate human and financial resources remained a challenge that prevents the ICT Unit to function at a level that adequately supports the Department to achieve its programmes. Management has assured the Committee that this area is receiving urgent attention within the budget constraints. 9

11. DWYPDs Annual Report Effectiveness of Internal Controls The Accounting Officer and Management are responsible for designing and implementing an effective system of internal controls to mitigate risks and control deficiencies. The system of internal controls are designed to provide reasonable assurance regarding the achievement of Department s objectives in categories of effectiveness and efficiency of operations, financial reporting, compliance to applicable Laws and Regulations as well as Policies and Procedures. In line with the Public Finance Management Act, 1999, Internal Audit provides the Audit Committee and Management with assurance that the Internal Controls are appropriate and effective. This is achieved by evaluating Internal Controls to determine their effectiveness and efficiency, and by developing recommendations for enhancement or improvement. The Accounting Officer retains responsibility for implementing such recommendations as per Treasury Regulation 3.1.12. Internal Audit and the AGSA reports indicated an improvement in the system of internal control in areas pertaining to financial reporting, reporting on predetermined objectives and compliance with laws and regulations. The Committee concludes that the system on internal controls for the reporting period was generally adequate and effective. Internal Audit The Internal Audit Function is responsible for reviewing and providing assurance on the adequacy and effectiveness of the internal controls, risk management and governance processes across all the significant areas of the Department. The Audit and Risk Committee was responsible for ensuring that the Internal Audit Function is independent and has the necessary resources and skills to enable it to discharge its responsibilities effectively. The Internal Audit function performed its audit work independently and had unrestricted access to information, Management and the Audit and Risk Committee. The Committee approved the Risk-Based Three-Year Rolling Strategic Internal Audit Plan and an Annual Audit Coverage Plan which guided internal audit activities during the period under review. Internal Audit performed fourteen of the nineteen audit projects in the plan. Three audit projects were in progress and two were not performed by the end of the financial year. Internal Audit performed eight due diligence ad-hoc reviews on procurement of goods and services above R 500 000.00 as a preventative control for possible irregular expenditure and one ad-hoc review on the mid-term report on the Strategic Plan of the Department. Given the limited human resources within the Internal Audit function, the management requests magnified the situation of constrained human resources in the unit. 10

12. DWYPDs Annual Report Internal Audit Internal Audit s activities were measured against the approved Internal Audit Plan and the Head of Internal Audit provided progress reports against the plan to the Audit and Risk Committee on a quarterly basis. The Audit and Risk Committee is satisfied that the Internal Audit function has properly discharged its functions and responsibilities during the financial year under review. It was satisfied with the quality of audit reports that were presented and management committed to implement the corrective actions to address the shortcomings that were identified. The Audit and Risk Committee is not satisfied with the existing human resource capacity of the Internal Audit Unit and is of the view that capacitation of the unit should be prioritised to ensure a wide risk and audit coverage in the Department. Limited human and financial resources might have an undesirable impact on the effectiveness of the Internal Audit function and its ability to comply with the Standards of the Institute of Internal Auditors. Risk Management Management is responsible for the establishment and maintenance of an effective system of governance, risk management, internal control and the prevention and detection of fraud and corruption. The Department has a Risk Management Committee which advises the Accounting Officer on matters of risk management in fulfilling her mandate as required by the Public Finance Management Act [Section 38 (1) (a) (i)], and in line with the Public Sector Risk Management Framework developed by National Treasury. The Department assessed strategic, operational and fraud risks that could negatively impact on the achievement of its objectives. Risks were prioritised based on likelihood and impact (inherently and residually). Mitigations were implemented to reduce risks to acceptable levels. The Audit and Risk Committee provided oversight on risk management on a quarterly basis. The Committee further relied on Internal Audit to provide assurance on the effectiveness of the risk management system. The Committee noted that the Risk Management function is under-resourced. This situation could potentially compromise management s ability to adequately to identify and manage, amongst others, fraud risks and the implementation of the ethics management processes. 11

13. DWYPDs Annual Report In-Year Management and Quarterly Reports The Department reported on a monthly and quarterly basis to the National Treasury as required by the PFMA. The Audit and Risk Committee reviewed the quarterly reports prepared and issued by the Accounting Officer of the Department during the year under review, and was satisfied with the quality of the reports. The Department presented and reviewed the financial management and performance (predetermined objectives) reports at its Quarterly Review Meetings. These reports were also tabled at the Audit and Risk Committee meetings. The Committee reviewed these reports and raised questions and issues for clarity and explanations. The Committee had suggested improvements predominantly relating to financial management, performance information and information communication technology. Review of Annual Financial Statements and the Annual Performance Information The Audit and Risk Committee has reviewed the Annual Financial Statements and the Annual Performance Information for the year ended 31 March 2023 and duly recommended them for the Accounting Officer s approval prior to submission to the AGSA for audit. The Committee commends Management on the actions taken to improve financial and performance reporting which has resulted in the Department getting an unqualified audit opinion with no material findings in these two performance areas. Auditor General s Report The Audit and Risk Committee, in consultation with the Accounting Officer, noted the terms of the AGSA s Engagement Letter, Audit Strategy and audit fees in respect of the 2022/23 financial year. The Committee also monitored the implementation of the action plans to address matters arising from the Management Report issued by the AGSA for the 2021/22 financial year. The Committee is generally satisfied with the progress made in resolving the audit findings and is aware of the following matters which were not resolved: Gap on the segregation of duties in the ICT unit due to inadequate human resources. Conclusion of irregular expenditure consequence management - application for condonation and removal of irregular expenditure not done within the financial year. 12

14. DWYPDs Annual Report Auditor General s Report (Cont.) The Committee noted the audit findings by AGSA and Management has committed to develop an Audit Action Plan to resolve the audit findings identified during the 2022/23 financial year. This plan will be closely monitored by the Committee to ensure that all the issues are being addressed. The Audit and Risk Committee concurred and accepted the conclusions of the AGSA on the Annual Financial Statements and Performance Information. General Management reported to the Audit and Risk Committee that the Department is seriously short staffed across all the programmes and this situation has an adverse impact on the ability to adequately execute the mandate of the Department as well as the implementation of governance processes. A draft revised organisational structure has been developed and submitted for concurrence by the Minister of Public Service and Administration. It is the Committee s hope that the revised organisational structure will receive the concurrence from the Department of Public Service and Administration and the funding from the National Treasury to fill the proposed vacancies. Conclusion The Audit and Risk Committee expresses its appreciation to the Director-General for her leadership and support, and to Internal Audit and Management for the achievement of an unqualified audit opinion with findings. The Committee also appreciates the effort of the Department to achieve most of its performance targets despite the serious human resource constraints. 13

15. Thank you 14