Department of Home Affairs on internal audit & monitoring and evaluation

Home Affairs

30 April 2013
Chairperson: Ms M Maunye
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Meeting Summary

The Committee was informed that the Department of Home Affairs’ (DHA) internal audit unit was independent, and not accountable to the Director General, but to the audit committee of the Department, the Auditor General, National Treasury (NT)  and the Minister. A new internal audit committee had been appointed in 2012, and the committee had an arrangement with the Minister that they would directly report to her every three months.
There was a Chief Audit Executive (CAE), but she was currently on suspension and undergoing a disciplinary process. Internal audit was a critical function in terms of the Public Finance Management Act and NT regulations, and as a result the DHA could not sit without an active head in that unit. NT had been approached and they had seconded Mr Beerson Baboojee for a period of three months while the matter relating to the CAE was being resolved. The intention was to ensure the internal audit continued without disruption.
The Committee had previously indicated that some of DHA’s targets were impossible to meet. With the help of the auditors, DHA had strengthened and reviewed its targets at mid-year. The auditors had indicated they could not find any fault with the targets for the current year, provided DHA gave details on how they would measure them. The unit would work closely with the auditors to ensure that there was an agreement on the nature and format of evidence required for each target.  The chief directorate was fully staffed and situated within the office of the DG and included policy, planning, monitoring and evaluation units.

The Department had embarked on various enhancement strategies to improve the effectiveness of the unit, some of which had yielded results to date. There was more work to do to reach a satisfactory level. The audit committee had approved the three-year internal audit plan from 2013 – 2016, and had also approved the internal audit charter that regulated the functioning of the internal audit.  The budget for the unit stood at R20 million, and the establishment contained 22 funded posts; 17 were filled; employment offers had been made for three positions (Director and Deputy Director IT, and the Office Manager); and two were vacant.
The DHA’s internal audit unit worked hand in hand with its counterparts at the Department of International Relations and Cooperation (DIRCO), particularly with regard to the auditing of foreign missions. There were 54 foreign missions where the DHA had its own staff. The  unit used a criteria matrix to rank a mission’s risk and then a determination would be made as to which missions would be audited.  All other missions were audited by DIRCO staff. Dialogue had been entered into with DIRCO with the aim of receiving their reports and helping to improve weaknesses in the DHA’s internal audits at foreign missions.
Members voiced concerns at the time it took to make staff appointments, as well as the delay in resolving the matter involving the Chief Audit Executive. Members also sought clarity on the audit charter, responsibility for compliance with the Department, skills development and training facilities, and time management within the unit.
 

Meeting report

Opening remarks
The Chairperson proposed that minutes be adopted at the next meeting as some Members were rushing home. The Committee was scheduled to deal with the report of the Department, but that need not happen as the report had been dealt with at length in the previous meeting. The reason the report had not been adopted was because the Independent Electoral Commission’s (IEC) recommendations were not included. If Members formed a quorum they would adopt it, but if not, the report would be shifted to the following week.

Briefing by Department of Home Affairs
Mr Mkuseli Apleni, Director-General (DG), Department of Home Affairs (DHA), said the DHA would deliver presentations on monitoring and evaluation, and internal audit. Although Government came up with clear objectives and policies, it had difficulty implementing them. Traditionally the function of internal audit had focussed only on compliance with legislation, but an additional angle had now been added.  The focus had moved to include performance information as well. However, the Auditor General (AG) had not yet started looking at performance information.

The motivation for this was to allow departments to build processes that would to ensure objectives were smartly done, and were credible and measurable.  Departments were encouraged to come up with units for monitoring and evaluation to assist with properly crafted plans.

The presentation would be in two parts: monitoring and evaluation and internal audit.   Internal audit was an independent unit, and not accountable to the DG, but to the audit committee of the Department, AG, National Treasury (NT) and the Minister. A new internal audit committee had been appointed in 2012, and the committee had an arrangement with the Minister that they would directly report to her every three months.
There was a Chief Audit Executive (CAE) at DHA, but the CAE was currently on suspension and undergoing a disciplinary process. Internal audit was a critical function in terms of the Public Finance Management Act (PFMA) and NT regulations, and as a result the DHA could not sit without an active head in that unit. NT had been approached and they had seconded Mr Beerson Baboojee for a period of three months, while the matter relating to CAE was being resolved. The intention was to ensure the internal audit continued without hassle.

Monitoring and Evaluation function
Dr John Carneson, DHA Chief Director: Strategy and Planning, said monitoring and evaluation had various aspects, according to a framework devised by NT.   The three elements of ensuring compliance included producing plans, annual reports and budgets. There were standards for drafting targets and indicators, and financial management. Key documents, such as the strategic plan, annual performance plan (APP), the estimate of national expenditure (ENE) and annual reports, spelt out how targets should be audited. The unit worked closely with the AG to improve the level of compliance to key standards.

The Committee had previously indicated that some of DHA’s targets were impossible to meet. With the help of the auditors, DHA had strengthened and reviewed its targets at mid-year. The auditors had indicated they could not find any fault with the targets for the current year, provided DHA gave details on how they would measure them. The unit would work closely with the auditors to ensure that there was an agreement on the nature and format of evidence required for each target.

The chief directorate was fully staffed and situated within the office of the DG, and included policy, planning, monitoring and evaluation units. There were nodal points (persons) in branches that helped with the function of coordinating reports. The Department had developed these people professionally on how to report properly and prepare reports. DHA ran short courses with the University of Stellenbosch on monitoring and evaluation. A monitoring and evaluation road-show had been undertaken to the provinces.

Another project had been initiated to strengthen the monitoring and evaluation function. The DHA wanted to use monitoring and evaluation as a major aspect for transformation in the Department. Although most departments were compliant with monitoring, they did not focus much on the evaluation aspect. This required skills, hence the establishment of the Department of Performance Monitoring and Evaluation (DPME).

The DHA was negotiating with the DPME to be part of its evaluation programme for next year. The details were still scattered and had not even been presented to the DG yet. Monitoring and evaluation was critical for accountability -- there were just too many stakeholders who required accurate information on how DHA performed.

The objectives of monitoring and evaluation included tracking organisational performance; aligning DHA with government initiatives; monitoring if policy and strategy cascaded to the operational level; and providing management information to support the work of the Department. Monitoring and evaluation forced one out of the comfort zone if it was conducted well.
Internal monitoring was both financial and non-financial; reporting was required on expenditure and performance against targets. That information had to be shared with the NT, DPME and the Committee; before that could happen, all senior managers at DHA had to meet for two days in every quarter. The internal audit unit had a rolling programme of auditing which was discussed at those meetings.

While internal audit monitored the implementation of audit recommendations, the risk management unit monitored the implementation of the risk action plan. Six years ago, there hardly was a risk management unit at the DHA, and establishing the unit was indicative of the progress made. Today, a risk register was being produced. The quarterly reports fed into the annual report. The reporting was complex, and the DHA had to do 132 reports every year.

Each Deputy Director General (DDG) presented an quarterly review meetings and were interrogated on any shortcomings. The meetings were attended by frontline people who were allowed to dispute if the progress of delivery was inaccurately presented. The emphasis of reporting was placed on the core business, with presentations from civic services and immigration services.

Mr Apleni said the monitoring and evaluation unit was used as a gadget to test the pulse of the Department. While the internal audit unit focussed on compliance, this unit was now chasing the targets. In April, the DHA had invited 900 departmental managers to a meeting where the Minister had outlined processes going forward and engaged them on challenges. The DHA wanted to see why it should not achieve the 100 % targets it had set for itself.

Internal audit function
Mr Baboojee said the internal audit function reported to both the DG on administrative matters and the audit committee on legislative matters. The internal audit unit had encountered challenges at the Department for some time now. The audit committee, the AG, and the Committee had all been concerned about these things. The challenges had culminated in the suspension of the head of the internal audit unit in October 2012. The process had led to disciplinary proceedings, which had been slow, due to matters beyond the control of the Department.  He said his term – as an NT secondment – had been extended from the initial three-months period, and would thus end in June. Operations at NT necessitated that he return to the NT, and the process of finding a replacement had already started.

The Department had embarked on various enhancement strategies to improve the effectiveness of the internal function, some of which had yielded results to date. There was more work to do to reach a satisfactory level. About three weeks ago, the audit committee had approved the three-year internal audit plan from 2013 – 2016. The audit committee had also approved the internal audit charter that regulated the functioning of the internal audit.

The internal audit unit reported to all of the audit committee meetings, and there were no limitation on the scope of its function. The unit also coordinated with the office of the AG, as well as the risk management unit and other assurance providers, in ensuring work was not duplicated or that the mandate for various units was not contradicted.

This was where there were a few challenges, because in terms of NT regulations it was said the internal audit function should assist the accounting officer to maintain efficient and effective controls, but also to evaluate the system of risk management. This covered the IT environment, and the reliability and integrity of financial and operational information.

The AG had reported previously that insufficient auditing had occurred in the IT environment, performance information and financial information. The Department had just received the interim audit report that had been completed. This was largely a legacy, as the issue had been addressed previously through crafting an audit plan which covered these types of audit. Unfortunately, the DHA had not been able to complete the audit in this audit cycle.

The budget for the unit stood at R20 million, and the establishment contained 22 funded posts; 17 were filled; employment offers had been made to three (Director and Deputy Director IT, and the Office Manager); and two were vacant. IT was essential to the running of the Department, hence the appointment of two senior officials in the unit.  Internal audit also looked to hire two senior auditors.

The unit had intensively reviewed the internal audit methodology and it had been brought into line with international standards. Internal audit staff had been trained in the application of the internal audit methodology, and checklists had been introduced in the audit process to improve quality control. Extensive on-the-job training on technical aspects had been undertaken, and was still ongoing.

The unit had also improved the systems for documenting and tracking the implementation of audit recommendations. Other improvements had been made on the time management systems, where it was ensured that auditors met timelines. Internal auditors still took far too long to complete projects. There was a need to improve, specifically on the use of computer-assisted auditing techniques (CAATs).

He ran the Committee through the AG’s findings, the majority of which had been resolved. The findings included not submitting reports, the absence of a three-year rolling strategic plan, and the non-clarification of the purpose, authority and responsibility of the internal audit function. Other findings related to not having an annual internal audit plan, and the failure by the unit to evaluate the reliability and integrity of financial and operational information as required by NT regulations. The internal audit had to complete its tasks, otherwise it would continue to have gaps in its reports. Getting internal audit to perform better was a priority task.  Emphasis had been placed on sticking to timelines and quality.

Mr Baboojee said DHA’s internal audit unit worked hand in hand with its counterparts at the Department of International Relations and Cooperation (DIRCO), particularly with regard to auditing foreign missions. There were 54 foreign missions where the DHA had its own staff. All other missions were audited by DIRCO staff. Dialogue had been entered into with DIRCO with an aim to receive their reports and help improve weaknesses in the DHA’s internal audits at foreign missions.

The DHA did not audit missions randomly -- there was a risk-ranking matrix that informed as to which missions should be audited. The Department had been instructed by the Executive to audit jointly the missions of Asmara, Eritrea and one other mission to be agreed on. No foreign missions were audited last year, but audits were planned for Windhoek, Maputo, Sao Paolo, Canberra, Toronto and Mbabane in 2013.

A challenge that the unit faced was the finalisation of the labour relations process of the incumbent CAE. But the capability of internal audit staff was sometimes also found wanting and had thus resulted in long delays in finalising audit reports. From time to time, lack of capacity compromised the quality of the audit reports. Another challenge was the operating model of the internal audit. This aspect was related to the fact that this function had previously been outsourced. A decision had then been taken to say the function ought to be done internally, but the Department had not found a suitable model.

Remedial steps to address challenges included finding an acting CAE, a process which was under way. The unit had developed a number of tools to ensure time spent on audits was properly tracked and remedial steps were taken. The unit had to improve on the implementation of these tools to ensure it got the maximum benefits. At the moment, the unit did not do these things too well; it was concentrating on staff development. A process also was under way to appoint a pool of service providers to work with on improving internal capacity. The incoming IT executive would be tasked with coming up with a system of efficiently doing more continuous auditing at a lower cost.

Ms Rene Kenosi, DHA Audit Committee Member, said the audit committee was concerned at the time it took to finalise the matter involving the CAE. The challenges at the Department were also concerning and there had been talks with the Minister to address the issue of how much training one could have in an organisation.

The Minister was even pondering a training academy for internal audit within Home Affairs. For now, the Department needed to sustain what it had. There had been an improvement, but the persistent challenge was that the completion of reports took long. This was one of the areas the Department was working on.

Mr Apleni commented that internal audit was a technical area which required skilled people. When departments started these units, they appointed people without the requisite skills. This meant the departments had to re-skill those people.

Discussion
The Chairperson said she hoped the DHA would not find it appropriate to appoint people in acting capacities in all the proposed senior management positions. The Department took a really long time to appoint people. She pleaded with the DG to speedily appoint permanent people for accountability purposes.

Mr Apleni replied that the director for IT had already been approved by the Minister. All that was left was to issue a letter of appointment to the recommended candidate. He had signed the submission for the appointment of an acting internal audit executive. The two officials were likely to start on 1 June. The Office Manager position needed to be approved at a lower level.

The Chairperson commented that the Department already had an existing training academy. She asked if it would not be ideal to have a branch of internal auditors within that set-up, as opposed to starting a new academy for internal auditors.

Mr Apleni clarified that the Department was not starting a new academy, but putting more emphasis on the internal audit capacity within the existing one. The profession of auditing was still a challenge in the country.

Mr M Mnqasela (DA) sought clarity on the audit charter. What did this charter say, and if it was possible, could the Department give a short brief on what it contained?

Mr Baboojee replied there were two different audit charters that were in place; one was the internal audit charter. The way internal audit was structured, it was required by law to report to the DG (administratively) and the audit committee (functionally). The audit charter regulated this aspect and ensured the internal audit was protected from undue influence from management. The charter spelt out what the internal audit could or could not do, and also detailed the reporting lines.

Ms Kenosi said the charter also dealt with the roles and responsibilities of the audit committee. The committee could at any given time have meetings with the AG on issues contained in the audit report. There also could be meetings with the internal audit unit to assess the effectiveness of the function. In terms of responsibilities, the audit committee should assess the risk management controls, external audit, financial information and the internal controls of the organisation. The committee was required to have at least four meetings per annum, but there would also be two meetings dedicated to financial statements.

Mr Apleni replied the charters ensured non-interference on the work internal audit was doing. While he could interfere with departmental reports, this was just not allowed with internal audit. The unit met with the Minister when they wished, and the DG could not sit in on those meetings.

Mr Mnqasela asked who was responsible for compliance within the Department, and at what level was the person employed. Was there a dedicated capacity in the business unit to deal with compliance?  Corruption in the Department was a serious matter that necessitated that compliance be looked at thoroughly.

Mr Apleni replied  that compliance was the responsibility of every manager. Internal audit assisted in ensuring that the managers complied, but it was every manager’s responsibility. The rules and regulations were made known, and people were trained on them. The DHA was also looking at enhancing the monitoring and evaluation unit so it could check transgressions before deadlines had passed. He cited a new system called “track and trace” that the Department used for Identity Documents. This was being used now to trace invoices. The DHA had also appointed finance staff at provinces; each province now had finance directors and deputy directors, and human resources directors.

Mr Mnqasela asked why other missions had been left out when the report was made. He also asked why the CAE was being investigated; how far was the matter from completion?

Mr Apleni replied this was an issue of performance. In 2010/11, an external evaluation had indicated that the internal audit unit was not up to the challenge. This was where the issue had been picked up to see if the executive was really able to execute her responsibilities. The suspension had nothing to do with corruption. There were processes that had to be followed in order to deal with the matter. Unfortunately, the DHA had had to follow all these processes and this had resulted in the delays.

Mr Baboojee said some of the missions should have been done the year before, but the audit committee had given approval that they be done in 2013.

The Chairperson sought clarity on the contingent assets of DIRCO and DHA at foreign missions. How far was the rectification process?

Mr Baboojee replied that since the audit report had been issued, the matter had received a lot of attention. That process had started even before the report was issued. The DHA had got some extra resources to reconcile the accounts going back to 2009. The process was almost complete; internal audit would start next week with the help of finance experts from the Chief Finance Officer’s office and KPMG.  Before the assets could be entered into the books an independent verification process had to be undertaken. A lot of work had been done in that area.

Ms T Gasebonwe (ANC) asked what could be done to prevent delays in the finalisation of internal audit projects.

The Chairperson wanted to know how the matter involving unaudited missions could be handled in order to avoid qualification from the AG.

Ms N Mnisi (ANC) asked what had been enhanced in the time management systems mentioned in the presentation.

Mr Baboojee replied that the two questions tied well together. DHA’s time management system had not been up to scratch. A new time management system had been developed; in fact, it allocated time to each auditor on a project. Time sheets were given to the office manager on a weekly basis, and as soon a slack period was noticed, the matter would be brought to the attention of the CAE.

The idea would be to ascertain the causes of the overruns, and based on this, the CAE would have to address the challenges. He said overruns were caused by a number of things, like management not cooperating with auditors, or inefficiencies on the part of the internal auditors. The time management systems were really a diagnostic tool to help when there were challenges.

He said with the unaudited missions, there was a risk that problems were missed by not auditing. Unfortunately, this was the risk of not auditing on time.

Ms Kenosi commented that when the missions were selected for auditing, they were done on the basis of the risk. The DHA would have identified missions with risk, but it would prioritise the missions with the highest risk in a given financial year.

Mr M de Freitas (DA) asked how risk was defined, and how such a determination of a higher risk than the other was arrived at.

Mr Baboojee replied there was a unit within DHA called the Foreign Offices Coordination Unit that worked with foreign missions. The unit graded the missions, based on issues as hardship, and political situation. The unit had three core criteria for foreign missions. Internal audit also looked at other criteria like documents issued, the value of revenue generated, previous audits on the mission, fraud and corruption at the mission. The internal audit unit used these on the matrix to rank the missions’ risk and then a determination would be made as to which missions would be audited.

Mr Apleni alerted the Committee to the DHA’s appearance before the Standing Committee on Public Accounts on 14 May.

The Chairperson thanked the Department for good work and said the Committee hoped the DHA would get a better audit opinion for the past financial year.

The report containing the IEC recommendations was adopted with amendments.

The meeting was adjourned.
 

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