Supplementary information


Term Definition or explanation
Accountability ecosystem Multitude of roleplayers functioning at different levels, from leadership and decision making, to support, intervention and oversight
Accounting authority (AA) Boards, chief executive officers or heads of public entities
Accounting framework A set of rules used to prepare financial statements
Accounting officer (AO) Heads of departments or chief executive officers of constitutional institutions
Accounting standards

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’)

Administration, under See Intervention
Asset (in financial statements) Any item belonging to an entity, including property, infrastructure, equipment, cash, and debt due to the entity
Audit committee An independent body, created in terms of legislation, that is responsible for advising accounting officer or authority, senior management and executive authorities on matters relating to financial and performance management governance
Audit of compliance with legislation An audit of whether auditees have complied with key legislation that applies to their financial and performance management and related matters
Audit of reporting on predetermined objectives An audit of the usefulness and reliability of an auditee’s reported performance information
Audit opinion The overall outcome of an audit, based on the evaluation of audit evidence against audit criteria
Auditing The process of examining and verifying an entity’s financial statements
Capital expenditure Expenditure incurred by entities on capital items in a particular financial period; for example, fixed assets such as property, infrastructure and equipment with long expected lives and that are required to provide services, produce income or support operations.
Cash flow (in financial statements) The flow of money from operations: incoming funds are revenue (cash inflow) and outgoing funds are expenses (cash outflow).
Cash-backed (grant management) Unspent grants are supported by available cash
Chapter 9 institution

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.
Chief information officer/ government information technology officer (information technology)

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.

Commitments from roleplayers Initiatives and courses of action communicated to us by role players in local government aimed at improving the audit outcomes.
Conditional grants Funds allocated from national government to certain entities, subject to certain services being delivered or on compliance with specified requirements.
Corrective controls

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

Creditors People, companies or organisations to whom the entity owes money for goods and services procured
Current assets (in financial statements) These assets are made up of cash and other assets, such as inventory or debt for credit extended, which will be traded, used or converted into cash within 12 months. All other assets are classified as non-current, and typically include property, plant and equipment as well as long-term investments.
Current liability (in financial statements) Money owed by an entity to companies, organisations or persons who have supplied goods and services to the entity
Cybersecurity (information technology) Protection of information assets by addressing threats to information processed, stored and transported by internet-worked information systems
Data analytics The process of analysing large volumes of data to identify patterns and draw conclusions about the information contained in the data
Debt impairment A loss in the future economic benefits or service potential of a debt, over and above the recognition of the loss of the asset’s future economic benefits or service potential through amortisation (by reducing or paying off a debt with regular payments).
Deficit An excess of expenditure or liabilities over income or assets in a given period
Detective 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

Discretionary audit see Special audit
District Geographical area including a district municipality and one or more local municipalities
District municipality See Municipality
Enabling legislation Legislation that gives appropriate officials or entities the authority to take certain actions
Equitable share A financial allocation in the form of an unconditional grant that enables municipalities to provide basic services to poor households, and to enable municipalities with limited own resources to afford basic administrative and governance capacity and perform core municipal functions
Executive authority Ministers, members of executive councils, mayors of municipalities
Expanded mandate Additional powers (beyond auditing and reporting) granted to the AGSA by amendments to the Public Audit Act to strengthen accountability mechanisms by focusing on the concept of ‘material irregularity
Financial and performance management (as one of the drivers of internal control)

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.

Financial health

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

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
Financial statements

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

Fraud An intentional act by one or more individuals among management, those charged with governance, employees or third parties, involving the use of deception to obtain an unjust or illegal advantage
Fruitless and wasteful expenditure (FWE)

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


Going concern

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.

Governance (as one of the drivers of internal control) The governance structures (audit committees) and processes (internal audit and risk management) of an entity
Governance (those charged with)

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

Source: Audit reporting

Hacked (information technology) When unauthorised access to a computer system has been gained
Hacker/intruder (information technology) An individual who attempts to gain unauthorised access to a computer system
Implementing agent Government institutions (e.g. the Independent Development Trust), non-governmental organisations or private sector entities appointed by an entity to manage, implement and deliver on projects.
Information systems A computer system or set of components for collecting, creating, storing, processing, and distributing information, typically including hardware and software, system users, and the data itself
Information systems auditing Evaluating the effectiveness of an information system’s controls to establish whether information systems are safeguarding corporate assets, maintaining the integrity of stored and communicated data, supporting corporate objectives effectively, and operating efficiently
Information technology (IT) The development, maintenance and use of any computers, storage, networking and other physical devices, infrastructure and processes to create, process, store, secure and exchange all forms of electronic data
Information technology controls Controls over an entity’s information technology processes that support the continued proper operation of the information technology environment, including the continued effective functioning of information processing controls and the integrity of information (i.e., the completeness, accuracy and validity of information) in the entity’s information system
  • 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.
Information technology infrastructure (information technology) The hardware, software, computer-related communications, documentation and skills that are required to support the provision of information technology services, together with the environmental infrastructure on which it is built
Intermediate city See Municipality
Internal auditing

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?

Internal controls Processes and measures instituted by an entity to prevent threats from materialising (preventative controls), or to identify (detective controls) or correct (corrective controls) failures once they occur
Intervention Under certain circumstances, when municipalities or provincial government do not meet their obligations, the provincial government (for municipalities) or national government (for provinces) may take steps to ensure these obligations are met
  • 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
Irregular expenditure (IE) Expenditure that was not incurred in the manner prescribed by legislation; this does not necessarily mean that money was wasted or that fraud was committed
Legislation A proposed or enacted law or group of laws
Leadership (as one of the drivers of internal control)

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).

Local municipality See Municipality
Mandatory audit see Regularity audit

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

Material finding (from the audit) An audit finding on the quality of the performance report or compliance with key legislation that is significant enough in terms of either its amount or its nature (or both) to be reported in the audit report
Material irregularity (MI) Any non-compliance with, or contravention of, legislation, fraud, theft or a breach of a fiduciary duty identified during an audit performed under the Public Audit Act that resulted in, or is likely to result in, a material financial loss, the misuse or loss of a material public resource, or substantial harm to a public sector institution or the general public
Material Irregularity Regulations Regulations stemming from the provisions of section 52(1A) of the Public Audit Act that enable us to implement the material irregularity provision in the Act by, among others, regulating the decision-making on material irregularities and the timeframes that apply to the material irregularity process
Material misstatement An error or omission that is so significant that it affects the credibility and reliability of the financial statements and/or annual performance reports
Medium-Term Strategic Framework (MTSF)

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.

Metropolitan municipality (metro) See Municipality
Misstatement (in financial statements or performance reports)

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.

Municipal entity

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.

Municipal Finance Management Act 56 of 2003 (MFMA)

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.
Municipality (local, district, and metropolitan)

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
Can be a large town, small town or rural area
  • 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.

Non-cash item (in financial statements)

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.

Non-compliance Intentional or unintentional acts of omission or commission by an entity that are contrary to the prevailing laws or regulations
Operational expenditure Expenditure entities incur as part of their operations, such as service delivery costs, administration and salaries
Payables Amounts owed for purchasing goods or services at a specific date
Performance audit An independent auditing process to evaluate the measures instituted by management to ensure that allocated resources are procured economically and used efficiently and effectively
Preventative controls

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

Professionalisation project Project to ensure the state employs people who have an ethical disposition and a sense of public service, who are qualified, who know what they are doing, and who are fully equipped to perform their public function with diligence
Property, infrastructure, plant and equipment (in financial statements) Assets that physically exist and are expected to be used for more than one year, including land, buildings, leasehold improvements, equipment, furniture, fixtures and vehicles
Public Audit Act 25 of 2004 (PAA)

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.

Public Audit Amendment Act 5 of 2018 (PAA amendments)

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.

Public entity

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

Public Finance Management Act 1 of 1999 (PFMA)

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.
Ransomware (information technology) A type of malicious software designed to block access to a computer system until a ransom demand is satisfied
Receivables or debtors (in financial statements) Money owed to the entity by companies, organisations or persons who have procured goods and services from the entity
Reconciliation (of accounting records) The process of matching one set of data to another; for example, the bank statement to the cheque register, or the accounts payable journal to the general ledger
Regularity audit

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

Reporting on outstanding amounts owing on utilities (bulk water and electricity)

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.

Responsible people

Those responsible for acting on our findings and recommendations

See Accountability ecosystem

Root cause The fundamental reason for a problem, in this case, the main reason(s) for the audit opinion
Section 4(3) audits Audits that the AGSA has opted not to perform in terms of section 25(1)(a) of the Public Audit Act, and which are then conducted by registered auditors appointed by the auditee, with the consent of the AGSA
Senior management People responsible for implementing required basic financial and performance controls, including chief financial officers, chief information officers and heads of supply chain management
Service delivery

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.

Software licence (information technology)

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.

State-owned enterprises (SOEs) Independent public entities, listed in schedule 2 of the Public Finance Management Act, that are partially or fully owned by the state to achieve various socioeconomic goals
Status of records review

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.
Supply chain management (SCM)

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

Supreme audit institution (SAI)

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

Source: IDI

System development (information technology) The development of an integrated set of computer programs designed to serve a particular function that has specific input, processing and output activities

Unauthorised, irregular, and fruitless and wasteful expenditure

See Fruitless and wasteful expenditure, irregular expenditure, unauthorised expenditure

Unauthorised expenditure (UE) Expenditure that occurs when entities use more funds than had been allocated (in other words, overspending) or use allocated funds for purposes other than those intended
Vulnerability (information technology) In information security, a weakness or flaw (in location, physical layout, organisation, management, procedures, personnel, hardware or software) that may be exploited by an attacker to cause an adverse impact
Vulnerable financial position (going concern) See Going concern


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