Supplementary information

A set of practices and policies used to organise accounting functions across firms and over time to make them consistent, transparent and easily comparable

Source: Investopedia (‘Accounting standards’ and ‘IFRS’)

Institutions established in terms of chapter 9 of the Constitution to guard democracy, namely:

• the Auditor-General of South Africa
• the Public Protector
• the South African Human Rights Commission
• the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities
• the Commission for Gender Equality
• the Independent Electoral Commission an independent authority to regulate broadcasting.

The most senior official of the entity who is accountable for:

• aligning information technology and business strategies
• planning, resourcing and managing the delivery of information technology services and information
• deploying the associated human resources

The chief information officers in the South African public sector are referred to as government information technology officers.

A type of internal control designed and implemented by management to correct failures in preventative controls that have occurred, resulting in threats to the institution’s objectives materialising

See Internal controls, detective controls, preventative controls

A type of internal control designed and implemented by management to identify failures in preventative controls and threats to the institution’s objectives once they have materialised

See Internal controls, corrective controls, preventative controls

Performing tasks relating to internal control and monitoring to achieve the financial management, reporting and service delivery objectives of the entity (management and other employees)

These controls include the basic daily and monthly controls for processing and reconciling transactions, the preparation of regular and credible financial and performance reports, and the review and monitoring of compliance with key legislation.

A description of the state of an organisation’s finances and how it handles its money

We normally conclude overall that an auditee’s financial health is concerning if there are multiple indicators of financial strain.

See Financial indicators

Something that shows how good or bad an organisation’s financial health is

Examples of indicators of poor financial health:

• deficit (see deficit)
• inability to pay creditors and/or paying them late
• inability to recover debt

Written records that provide an account of an entity’s financial affairs and its overall financial position – in other words, whether its operations are financially sustainable

Link to Why are financial statements important?

Result of an evaluation of collected audit evidence against audit criteria

Source: ISO19011

Expenditure that was made in vain and that could have been avoided if reasonable care had been taken

See UIFW/UIFWE

The presumption that an entity will continue to operate in the near future, and will not go out of business and liquidate its assets

For the going concern presumption to be reasonable, the entity must have the capacity and prospect to raise enough financial resources to stay operational.

Those who are responsible for overseeing an entity’s strategic direction accountability-related obligations, including overseeing the financial reporting process

Source: Audit reporting

• IT governance

• Leadership, organisational structures and processes which ensure that an entity’s IT control environment functions well and enables service delivery

• ·         Security management

• Controls preventing unauthorised access to the computer networks, computer operating systems and application systems that generate and prepare financial and performance information

• User access management

• Measures designed by business management to prevent and detect the risk of unauthorised access to, and the creation or amendment of, financial and performance information stored in the application system

• IT service continuity

• Controls that enable entities to recover within a reasonable time the critical business operations and application systems that would be affected by disasters or major system disruptions.

Examination and verification of an entity’s financial records, usually continuous, conducted by employees of that entity

See What is the difference between internal and external auditors?

• National intervention (under section 100(1)(a) and (b) of the Constitution)

When provinces fail to deliver on their constitutional obligations, national government may intervene following rules laid out in section 100 of the Constitution, which describes a two-part process:

• Section 100(1)(a) allows national government to issue a directive instructing the province to comply with its obligations and laying out the steps to do so.
• Section 100(1)(b) applies when the province has not followed the directive and allows national government to step in and assume responsibility for obligations that have not been met.

• Provincial intervention (under section 139(1)(a), (b) and (c) of the Constitution

When municipalities fail to deliver on their constitutional obligations, provincial government may intervene following rules laid out in section 139 of the Constitution, which describes a three-part process:

• Section 139(1)(a) allows provincial government to issue a directive instructing the province to comply with its obligations and laying out the steps to do so
• Section 139(1)(b) applies when the municipality has not followed the directive and allows provincial government to step in and assume responsibility for obligations that have not been met
• Section 139(1)(c) allows provincial government, in exceptional circumstances, to dissolve the municipal council and appoint an administrator until a newly elected council has been elected

The administrative leaders of an entity, such as municipal managers, heads of departments, chief executive officers and senior management

It can also refer to the political leadership (including the mayor and the council for municipalities), or the leadership in the province (such as the premier).

A threshold or cut-off point for the significance of a misstatement

Information is material if its omission or misstatement could influence the economic decisions that users take based on the financial statements.

A misstatement can be material based on the volume (i.e. the size of the amount), the impact (i.e. the effect on the financial statements) or the nature (i.e. the type of misstatement, or the area in which it occurs)

Source: CFA Journal

See Material misstatement

Government’s strategic plan for the 2019-24 electoral term

It reflects the commitments made in the election manifesto of the governing party, including the commitment to implement the National Development Plan. Its aim is to ensure policy coherence, alignment and coordination across government plans as well as alignment with budgeting processes.

Incorrect or omitted information in the financial statements or annual performance reports, such as incorrect or incomplete classification of transactions, or incorrect values placed on assets, liabilities or financial obligations and commitments or incorrect measuring of performance objective/ indicator

When such misstatements are material, the errors or omissions are so significant that they affect the credibility and reliability of the financial statements.

A municipal entity is defined by the Municipal Systems Act as:

(a)  a company, co-operative, trust, fund or any other corporate entity established in terms of any applicable national or provincial legislation and which operates under the ownership control of one or more municipalities. and includes, in the case of a company under’ such ownership control, any subsidiary of that company; or

(b)  a service utility

Municipal entities are independent organisations that perform municipal services on behalf of a municipality and the municipality controls the majority shareholding.

Legislation governing the local sphere of government, i.e. municipalities and their municipal entities

The MFMA intends:

• to secure sound and sustainable management of the financial affairs of municipalities and other institutions in the local sphere of government
• to establish treasury norms and standards for the local sphere of government
• to provide for matters connected therewith.

Geographical areas defined by the Municipal Demarcation Board

The provincial minister of local government establishes municipalities that are governed through municipal councils.

There are three categories of municipalities in South Africa, namely metropolitan, district, and local.

• Local municipality

• District municipalities

Performs certain functions on behalf of municipalities, such as integrated planning, infrastructure development, and the provision of electricity and public transport

A district municipality may or may not be a water services authority and may provide financial, technical and administrative support services to a local municipality within its area and to the extent that it has the capacity to do so.

• Metropolitan municipality (metro)

Large urban complex with a population of more than one million people

Metros account for the largest portion of municipal expenditure and serve the highest number of households and thus most of the people in the country.

An entry in the financial statements relating to expenses that are essentially just accounting entries rather than actual movements of cash

Depreciation and amortisation are the two most common examples of non-cash items.

A type of internal control designed and implemented by management to avoid (prevent) threats to the institution’s objectives from materialising

See Internal controls, detective controls, corrective controls

The Auditor-General of South Africa’s enabling legislation

The objective of the Act is to give effect to the provisions of our country’s constitution by establishing and assigning functions to an auditor-general and by providing for the auditing of institutions in the public sector.

An Act amending the Public Audit Act to give the Auditor-General of South Africa more power to ensure accountability in the public sector

The intent of the amendments is not to take over the functions of the municipal manager, the mayor or the council, as their accountability responsibilities are clear in municipal legislation. It is rather to step in where those responsibilities are not fulfilled in spite of us alerting leadership to material irregularities that need to be investigated and addressed.

A national or provincial organisation or body performing a public function in and for South Africa, as defined in the Public Finance Management Act

There are two categories of public entity, namely national and provincial.

• National public entity

A national public entity is:

(a)  a national government business enterprise; or

(b)  a board, commission, company, corporation, fund or other entity (other than a national government business enterprise) which is­

(i)     established in terms of national legislation

(ii)    fully or substantially funded either from the National Revenue Fund, or by way of a tax, levy or other money imposed in terms of national legislation; and

(iii)   accountable to Parliament

• Provincial public entity

A provincial public entity is:

(a)  a provincial government business enterprise; or

(b)  a board, commission, company, corporation, fund or other entity (other than a provincial government business enterprise) which is­

(i)     established in terms of legislation or a provincial constitution;

(ii)    fully or substantially funded either from a Provincial Revenue Fund or by way of a tax, levy or other money imposed in terms of legislation; and

(iii)   accountable to a provincial legislature

Legislation governing the national and provincial spheres of government, i.e. departments, state-owned enterprises, etc.

The PFMA intends:

• to regulate financial management in the national government
• to ensure that all revenue, expenditure, assets and liabilities of that government are managed efficiently and effectively
• to provide for the responsibilities of persons entrusted with financial management in that government
• to provide for matters connected therewith.

An audit of financial statements and other financial records, resulting in an audit opinion

The statutory audits that we perform in terms of our constitutional mandate

The total amount owing at year-end represents the full amount outstanding (including amounts owed for the 0 to 30 days period).

When reporting on amounts in arrears, the amount excludes the 0 to 30 days portion.

Those responsible for acting on our findings and recommendations

See Accountability ecosystem

The act of government providing a service to citizens

Municipalities define and set targets to measure their service delivery in their integrated development plans and service delivery budget implementation plans.

A document that provides legally binding guidelines for the use and distribution of software

It also defines the responsibilities of the parties entering into the licence agreement and may impose restrictions on how the software can be used.

A process in which the auditor performs basic review procedures to identify risks and areas of concern for discussion with the accounting officer

The purpose of the status of records review is to:

• ensure that there is a system of early warning to the accounting officer on challenges that may compromise good financial and performance management and compliance with legislation
• demonstrate to the accounting officer a deepened level of understanding of the business of the auditee and the value added by the auditor
• contribute to capacitating the accounting officer and senior management in instilling good practices of regular reporting, review and oversight
• identify risks early and throughout the audit cycle to respond to these timeously and correctly.

Management of the flow of goods and services, including all processes that transform raw materials into final products.

It involves actively streamlining a business’s supply-side activities to maximise customer value and gain a competitive advantage in the marketplace.

Source: Investopedia

Public oversight institution that audits a government’s use of public funds

Source: IDI

Unauthorised, irregular, and fruitless and wasteful expenditure

See Fruitless and wasteful expenditure, irregular expenditure, unauthorised expenditure