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Deloitte municipal audit series part two – Leadership ownership

audit series

Effective internal control systems are paramount to enhancing and improving audit outcomes and consequently contribute to effective service delivery by municipalities

Ownership, accountability and the right example set by the council, the executive mayor and the municipal manager in designing, implementing and maintaining an effective internal control system within a municipality cannot be underestimated.

For a more detailed discussion on this topic contact Nazeer Essop (Partner in Audit and Deloitte Industry Leader for the Public Sector) at nessop@deloitte.co.za, Corne Oberholzer (Director in Consulting and Deloitte Industry Leader for Local Government) at coberholzer@deloitte.co.za or Lungelo Nomvalo (Director in Consulting and Deloitte Industry Leader for Metropolitan Municipalities) at lnomvalo@deloitte.co.za. We welcome you to visit the Deloitte Public Sector website

CLICK HERE  to download the full article

Three main areas within an internal control environment requiring the focussed and constant attention by the leadership of a municipality are:

1. A culture of good governance, honesty and ethical business practice

Challenges which municipalities face include:

  • Risk management, allowing leadership to identify risks preventing the achievement of municipal objectives, is not in place
  • Action plans to address the internal control deficiencies in the areas of financial and performance reporting as well as compliance with laws and regulations are not established or are not effectively monitored by leadership
  • There is often a lack of ownership by leadership to establish, implement and monitor a key control process
  • Inadequate engagement with the internal auditors and the audit committees on their assessment of the internal control environment results in the neglect of key findings

Solutions to be considered:

An adequate regulatory framework exists, therefore the lack of implementation is not arising from an absence of guidance and legislation but rather a lack of capacity, skill set and accountability by leadership.

  • Training of leadership and oversight committees through formal interventions with external governance specialists to ensure a clear understanding of the requirements of an effective governance framework
  • Co-sourcing internal and other assurance to enhance objectivity must be considered
  • Formalising the implementation of municipal specific codes of ethics and conduct, and implementation of behavioural transformation programmes can assist leadership
  • Leading by example
  • A combined assurance model implemented to ensure that the oversight function is receiving the right level of assurance

2. Adequate and sufficiently skilled human resources must be available and their performance managed through effective management policies and practices

The challenges which municipalities face include:

  • The appointment of people who do not have the right skills, competencies and/or experience to perform the job
  • Employees do not keep up-to-date with the changing local government environment
  • Inadequate or conflicts between the legislation, human resource policies and procedures and, the municipality’s own code of conduct or labour agreements creating ineffective disciplinary processes
  • Inadequate performance management of accounting officers and employees and no consequences for poor performance
  • Attraction and retention of qualified competent people across all areas of the organisation – high vacancy levels of key positions

Solutions to be considered by leadership:

  • Formal recruitment procedures and job descriptions defining the key competencies, skills and experience required
  • On-going development programmes for all municipal officials in order to ensure that they are up-to-date with changing requirements, legislation and regulations in the local government environment
  • No conflicts between labour legislation, human resources policies and procedures, the municipal code of conduct and labour agreements
  • Concise, clear human resource procedural manuals in line with legislation and labour agreements
  • Formalised employee contracts, performance management and disciplinary procedures to ensure enforceability
  • Assess and address reasons for ineffective performance management or implementation of disciplinary procedures
  • Policies to allow the appointment of an independent chairman/prosecutor for disciplinary enquiries to ensure no bias or intimidation
  • Industrial relations or legal specialist separate from the HR team in order to deal with disciplinary issues and processes.

3. Information technology (IT) systems and tools must be available to enable municipalities to deliver value and improve performance within good IT governance parameters

The challenges which municipalities face include:

  • IT governance frameworks not implemented to address the IT risk management and strategic alignment of IT with business objectives
  • IT service management receiving little or no attention, including the definition and management of service level agreements between the municipalities and the vendors supporting their financial systems, management of third-party services, and the overall IT contract management portfolio
  • Key IT controls to ensure effective and efficient IT management are often still in the design stage
  • Inadequate management direction, support and oversight of IT governance implementations

Solutions to be considered:

  • IT governance projects need support and monitoring from Municipal leadership
  • A business case outlining why the municipality is embarking on an IT governance programme including benefits to be derived
  • Strategic alignment between IT and the municipality’s Integrated Development Plan (IDP)
  • Governance structures to provide guidance and ensure that IT enables and supports the municipal IDP with cost effective IT services, in a stable, reliable and secure manner
  • Formal service level agreements (SLAs) to monitor the services rendered
  • Embedding IT governance activities into day-to-day business practices
  • Establishment of IT Steering Committees and/or project management offices to monitor budget and implementation

Internal control deficiencies are not insurmountable challenges. They require leadership, armed with the appropriate tools and surrounded by the appropriate expertise, to exercise regular oversight over activities within the municipality and hold people accountable.

CLICK HERE to download the full article

For a more detailed discussion on this topic contact Nazeer Essop (Partner in Audit and Deloitte Industry Leader for the Public Sector) at nessop@deloitte.co.za, Corne Oberholzer (Director in Consulting and Deloitte Industry Leader for Local Government) at coberholzer@deloitte.co.za or Lungelo Nomvalo (Director in Consulting and Deloitte Industry Leader for Metropolitan Municipalities) at lnomvalo@deloitte.co.za. We welcome you to visit the Deloitte Public Sector website

Deloitte Risk Advisory share their thoughts on social media and the related risks

Social media is attractive to companies for marketing, brand development, customer integration and many more reasons because it has a wide footprint and responses are in real-time. It is these very characteristics, however, that make is dangerous.

Slow response times, no responses, or inappropriate responses by companies to negative content on social media can result in widespread negative publicity in a very short period of time.

Being proactive in the social media space by understanding your market, introducing relevant social media strategies, good governance frameworks, monitoring, measurement and crisis control processes are essential.   Rather than treating social media as a necessary evil, companies can harness its power to earn a positive return on investment in the form of increased sales and customer loyalty.

In this video produced by Deloitte Risk Advisory at Deloitte Southern Africa, Mark Casey (Technology, Media and Telecommunications Leader) and others share their thoughts and point of views on social media and the related risks.

If you would like to discuss your company’s approach and next steps towards addressing social media risks, we welcome you to contact Mark Casey (Deloitte Industry Leader for Technology, Media and Telecommunications) at mcasey@deloitte.co.za or or Judy Prins (Deloitte Risk Advisory Leader for Sport, Media & Entertainment) at jprins@deloitte.co.za

For more information visit the Deloitte Risk Advisory website

Deloitte Municipal Audit Efficiency Series – Leadership Ownership

This is the second article in the Deloitte Municipal Audit Efficiency Series which focusses on leadership ownership and accountability.

The latest Auditor-General (AGSA) report emphasises that only 5% of municipalities received clean audit reports for the 2010/2011 financial year. Key reasons for municipalities failing to receive clean audit reports were poor governance and oversight.

Ownership, accountability and the right example set by the council, the executive mayor and the municipal manager in designing, implementing and maintaining an effective internal control system within a municipality cannot be underestimated.

In this article we deal with the three main areas within an internal control environment, requiring the focussed and constant attention by the leadership of a municipality.

  1. A culture of good governance, honesty and ethical business practice needs to be implemented in the financial and performance management areas. The development and consistent monitoring of action plans which address the internal control deficiencies in these areas is critical. The compliance with laws and regulations should be the golden thread throughout these processes.
  2. Adequate and sufficiently skilled human resources must be available and their performance managed through effective management policies and practices.
  3. Information technology (IT) systems and tools must be available to enable municipalities to deliver value and improve performance within good IT governance parameters.

Download the article . . . . Municipal Clean Audit Efficiency Series – Leadership Ownership

If you would like to have a more detailed discussion relating to municipal audit efficiency, feel free to contact the the Deloitte Industry Leader for Public Sector, Nazeer Essop, at nessop@deloitte.co.za

If you have any questions or feedback, feel free to comment below. I urge you to use the links provided to share this article with your network.

Related articles

Municipal Clean Audit Efficiency Series – Financial Management

 

African expansion requires you to think differently

A wise Kenyan once said, “In the business schools of the world we are taught to think outside-the-box, though sometimes a situation will force you to think inside-the-box, but to succeed in Africa you HAVE to think without a box.”

The world needs Africa and Africa needs the world ! Africa is the last of the “untapped” continents and for the past century has been drenched in colonialism and war. Once the independence of many countries was won, colonialism gave way to unstable governments and high levels of corruption. Mix this with the out of control HIV /AIDS pandemic and inadequately trained workforces and you get a very dark continent under  a cloud of poor infrastructure and a culture of asking yearning for a better life!

Despite this doom and gloom; recent history has shown us that Africa is the Europe of 1946 !

Europe in 1946

Africa in 2010

Severe division due to war 54 different countries
Strong upcoming youth The age bracket between 0 – 14 is well above the world average
Focus on entrepreneurship Vibrant natural entrepreneurs operating across country borders effortlessly
On the brink of Industrial revolution On the brink of a technology revolution
Agriculture boom drove the economy Unlimited agriculture potential given the climate
Need to import commodities to fuel growth Abundance of natural resources/ commodities e.g. Oil, iron ore, diamonds, platinum etc. Require the ability to enhance value of commodities instead of exporting.

The major factors that Africa has to its advantage are: the development curve that is the Technology revolution; the ability to breach the severe infrastructure gap and the willingness of the children of Africa to embrace these technologies. Examples of this can be found in the emphatic success of MPESA (the cellular money concept launched in East Africa but specifically in Kenya by Safaricom – a local cell phone provider). MPESA created the ability to move money around in a safe and effortless manor, bypassing risks associated with bad roads, security, infrastructure etc. A dairy farmer, for example, can now be paid within 3 days of delivering his product to the central distributor in an effective and secure way instead of waiting up to 4 weeks to go and collect money from the distributor and in the process have to overcome bad roads, floods drought and possible hi-jacking.

Combine this high innovation with the increase in connectivity due to the installation of optical fiber cables in the near shore areas all around the African coast,  and this creates a platform for major growth. The scene is set….!

Still though the image of the dark continent influences the investment decisions of those with the deep pockets. In recent studies it has been determined that Multi-Nationationals that have already invested in Africa are significantly more bullish about the continent and its future that their counterparts that have not made the investment jump yet. The question therefore, “is this trend due to the real return of invest that the Africanised Multi- Nationals expect or is this due to an unwillingness to accept a bad investment decision?”

As our wise Kenyan quipped – “in Africa you have to think without a box” so we need to follow this advice to be successful.

  • South Africa is not Africa.
  • What has worked in London, New York, Frankfurt or Johannesburg will not necessary work in Nairobi, Kampala or Accra.
  • You cannot sit in your air-conditioned office in London, New York, Frankfurt or Johannesburg and try to set up / run a business in Nairobi, Kampala or Accra – you have to be there!
  • Being there is not the only measure for success – you have to partner with local vendors who intrinsically understand the market, and have access to the tightly knit network of entrepreneurs that spans Africa.
  • Do not come with the objective to do what happened in the time of colonisation – to take and not to put back – the stringent work permit legislation is there for a reason; it is to ensure that hordes of resources that cannot find work due to the developments in Spain, Greece and other European markets do not migrate southwards like grasshoppers and once the tide turns up north migrate back and leave nothing but dusty dry land!
  • Be constantly aware of possible instability and unrest – and are prepared to react. But react does not mean pack your bags and run, it means – adjust your business plan in order to turn a negative into a positive.

Your advisory partner in Africa needs to have global reach but a true local knowledge. He must be able to get you access to the country politicians when required, need to understand the impact of Ramadan on your business and be able to too engage on a discussion of the rainfall forecast and the impact on the sales of your product e.g. soft drinks .

Africa has it dark side but it has an overwhelming message of positivity as well. You have to understand this and know how to read the signs like a skilled bush tracker to ensure you reach your goal. This is key when thinking without a box!

For more information on doing business in Africa, contact Marius van Jaarsveld (Director of Deloitte Africa JV) directly on mvanjaarsveld@deloitte.co.ke

Do you have any comments? We welcome your feedback. If you derived value from this article we invite you to share it with your colleagues!

Is your security capability evolving with your business strategy?

Any experienced leader knows that little is accomplished by those who try to get things done. That’s because good leaders don’t confuse effort with results. Yet when it comes to security risks associated with technology, where a critical breach can bring a business to its knees, there’s a great deal of trying going on. And not nearly enough doing.

Not surprisingly, many executives today believe their organizations are well-protected. With broad policies in place for technology governance, risk and compliance, most have assigned responsibility for security to their IT shops, confident that their fiduciary and legal obligations are being met. But a closer look at the real risks and threats reveals a different picture. Organizations that take a compliance-oriented approach to enterprise and IT risk may not be managing many of the threats that matter most.

It’s not uncommon for companies to equate compliance and security. That’s what happened recently when a major retailer was hacked, exposing several million debit and credit card numbers to the risk of theft. The company appeared to have a rock-solid compliance program in place, asserting that they followed all the security requirements mandated by the credit card brands and others. But that wasn’t enough. A number of back-end systems were left unpatched, leaving some of their software vulnerable to exploitation. Hackers were able to penetrate the company’s systems despite their most diligent compliance efforts. Thousands of cases of fraud were linked to the breach, exposing the company to legal, reputational and financial risks.

A risk-based approach using a layered defense could have helped prevent such an incident.

Download the full article . . . .  Evolve or fail

We welcome you to visit the Deloitte South Africa Technology Risk Advisory website. If you have any questions or require a more detailed conversation, contact Cathy Gibson at cgibson@deloitte.co.za

Your feedback and comments are most welcome. Please share this article!

Businesses are embracing mobility but now comes the hard part

Rapid technology developments in wireless connectivity and mobile devices marked the beginning of the mobility revolution. Next came the apps renaissance, when intuitive, engaging pieces of software, tailored for smartphones and tablets, began to change our day-to-day lives. The revolution has now reached business. Many organizations today find mobile initiatives popping up in every business unit, in every region and in every department. The floodgates have opened. Now what?

For some, the path forward might begin by pushing existing solutions and processes to mobile channels, without blue-sky thinking of how business might change if location constraints disappeared. For others, disciplined experimentation can reveal compelling scenarios, which can lead to doing traditional things differently, as well as doing fundamentally different things. When left to its own devices, each faction – individual, department or organization – will struggle through the learning process towards its own vision of mobile enlightenment.

In this chaotic environment, CIOs face three challenges. First, they need to build capabilities to deliver intuitive, user-friendly mobile applications that can meet or exceed expectations set by consumer technologies. Mobile delivery requires new skills, new mindsets, new application architectures, new methodologies and new approaches to problem-solving. Above all, solutions must focus on usability – design-led thinking with mobile mentalities. Scope should be reined in to create well-defined, elegant solutions that address explicit problems, not broad collections of functionality. User experiences should be mobile-centric, based on touch/swipe/talk, not point/click/type. Leonardo da Vinci’s description of simplicity as the ultimate form of sophistication might be a foreign concept to many central IT departments today, but it is also a prime directive. As mobile becomes increasingly important in customer and employee interactions, the complexity of applications, or apps, will naturally grow with heightened integration, security and maintenance needs.

The second challenge for CIOs is to help the business deliver innovative applications with significant potential for positive disruption. Experimentation can be a good way to show progress and help crystalize opportunities, but many use cases remain uncharted. Until users interact with an early prototype, they may not know what they want, much less what they need. CIOs can become beacons of big-picture thinking and tactical adjudication by embracing the proliferation of mobile initiatives, and accelerating the mobile adoption learning curve across the organization.

The third challenge is that mobility introduces yet another level of complexity that CIOs must manage and support at an enterprise scale. What’s an effective way to deal with pressure to get behind each “next big thing”? Should employee-owned devices be allowed on enterprise networks? And if so, what data, applications and services should they be permitted to access? How should IT practices change to support mobile applications? True enterprise-class mobility requires governance, security, privacy and compliance policies – with effective management of mobile devices, enterprise app stores, mobile middleware and more. The trick is to build a solid foundational infrastructure without throttling the business. As you likely know, the business can’t – and won’t – wait for a fully formed mobile enablement roadmap to be defined and put into place.

If you have any questions relating to this article, or require a more detailed discussion, contact Kamal Ramsingh (Head of Technology – Deloitte South Africa) at kramsingh@deloitte.co.za

Would you like to read the full article? Click Here to download Deloitte Tech Trends 2012

Do you have any comment or feedback? We would love to hear from you!

 

Integrated Reporting practices based on findings from 100 JSE-listed companies

I have provided an introduction below to a publication (which applies to all members of the C-Suite) prepared by the Deloitte Integrated Reporting and Sustainability team, which discusses the state of Integrated Reporting practices in South Africa. The publication contains the key findings of the empirical research conducted on 100 companies listed on the Johannesburg Stock Exchange.

The analysis covered 7 subjects, 58 principles and 160 questions seeking to assess actual performance against good practice. The publication includes practical observations on certain topical subjects which appear to be a challenge for companies. I have provided an excerpt below and will send you the full report upon request.

If you would like to discuss the contents of the report in more detail, please contact Bertie Loots (bloots@deloitte.co.za), Nina le Riche (nleriche@deloitte.co.za), Johan Erasmus (jerasmus@deloitte.co.za) or Jaco Pretorius (japretorius@deloitte.co.za).

Integrated Reporting: Navigating your way to a truly Integrated Report

Integrated Reporting is the new kid on the block … and like many new kids there are great hopes for its future including the ultimate achievement of embedding a strategy that preserves long-term value, simplifying reporting and adding more meaningful information to a wide range of users. But where does the idea come from? What is it trying to do? And what is the current state of development?

And before you think this is just for the accountants, think again. Integrated Reporting aims to incorporate everything from strategy through to risk management; from financial reporting to the inclusion of usage of other capitals (think societal and environmental impacts). And it aspires to meet the needs of a wider group of stakeholders – employees, customers, suppliers and others. So everyone associated with an organisation in a significant way is likely to be touched by it.

At Deloitte, we see Integrated Reporting as enabling a process which enhances and preserves long-term sustainability in all its dimensions, without unduly sacrificing short-term performance. The Integrated Report is in turn an annual report that comprises a holistic and integrated representation of the entity’s efforts to enhance and preserve long-term sustainability in all its dimensions, without unduly sacrificing short-term performance.

Deloitte has released its second quarterly report on the state of Integrated Reporting in South Africa. The report reveals that Integrated Reporting standards have been adopted by more than half of South Africa’s listed companies. Although it is now necessary for these JSE-listed companies to include a statement of compliance with the principles set out in the King Code on Governance Principles (King III) in their annual reports, many companies are still scoring surprisingly low on corporate governance matters.

Download the publication . . . .  Integrated Reporting – Navigating your way to a truly Integrated Report

We value your comments and feedback. If you have any questions, do not hesitate to contact us!

 

Why do 90% of organisations fail to effectively execute their strategies?

This paper (prepared by Vanessa Vermeulen and Nomzamo Ntuli at the Deloitte Consulting Results Management Unit), talks about the move from process to outcome management for strategic project execution, using the Results Management Office (RMO) approach. I have provided an introduction to the paper below and a link to download the full document at the end of this post. Contact Vanessa or Nomzamo at vvermeulen@deloitte.co.za or nntuli@deloitte.co.za if you have any questions or require additional information.

It’s all about the results – Moving from process to outcome management for strategic project execution with the Results Management Office

Most business strategy authorities agree that the majority of organisations fail to effectively execute their strategies. In fact, research 1 indicates that 90% of organisations fail at strategy execution, losing the competitive advantage identified during the strategic planning process. When analysing the strategic management process, it becomes clear that a lot of energy and focus is placed on the definition of strategic imperatives, with little focus on the execution and measurement of these initiatives. Typically organisations do not have comprehensive, disciplined systems for managing the implementation of their strategies.

Strategy implementation requires a different approach to the typical IT project management; however, it still this does not dispute the need to build a rigorous system to support and monitor the implementation.

Deloitte has identified four main areas that typically impact the success of strategy execution.

Limited people management and organisational readiness

Organisations often underestimate the importance of organisational factors in translating a growth strategy into reality. Strategic projects are the engines of growth, while people are the engine of projects. The strategic importance of human capital has grown exponentially as the workforce has changed to knowledge workers.

Most project problems are not technical problems. They are people problems! That is not because project teams and stakeholders comprise difficult personalities, but rather because they are subjected to organisational processes and policies that are counterproductive and they are naturally conservative to embrace change.

We have found that communication, stakeholder management, change management and training are often forgotten or have a low priority when implementing complex strategy projects.

Heavy programme and project administration and governance

Programme Management Offices are perceived as adding administrative costs and bureaucracy without a clear correlation to business benefits. Research indicates that even effective PMOs are designed to have limited reach or mandates to manage and embed change within organisations. These PMOs are essentially paper tigers or post offices and have little understanding of inter-dependencies, competency requirements and the complexity of managing strategic change or influencing the outcomes of programmes outcomes.

Skills shortage and competency gap

In the South African context, the skills gap in programme management environment is significant. The Chaos report shows that two out of three projects fail to deliver their full scope, with the most frequent cause being the lack of project management skills. Many organisations utilise the contractor model to staff projects; however, this has a major impact on the institutional knowledge and initiative sustainability.

Alternatively, employees are allocated project management responsibility in addition to their normal delivery. These resources have limited or no training on how to effectively manage projects and align the performance management process.

Limited Strategic alignment

The ability to achieve strategic alignment and integrate results from programmes has proven to be very challenging. In-flight projects often continue even though it is difficult to understand the strategic intent and despite benefits not being delivered or measured.

Download the paper . . . .  Moving from process to outcome management for strategic project execution

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Navigating your way to a truly Integrated Report

Deloitte sets out to analyse trends and areas of excellence in integrated reporting among South Africa’s listed companies

 

Johannesburg, 10 October 2011-Following the September release of the International Integrated Reporting Council (IIRC) discussion paper, Towards Integrated Reporting – Communicating Value in the 21st Century, Deloitte can reveal the findings of the first Deloitte quarterly report on Trends in Integrated Reporting in South Africa.

While guidelines have been established, there are no generally accepted set standards on integrated reporting making this a potential minefield for listed companies which need to know what is regarded as best practice and how to achieve it.

Deloitte has undertaken substantial research into the quality and extent of integrated reports produced during the transition from the traditional annual financial report, supported by a sustainability report, to the inclusive integrated report as recommended by the JSE.

The initial research examined the reporting documents of 50 companies, split between those with year-ends before the 1 March 2011 cut-off for integrated reports (pre-regulation companies) and those with a year-end subsequent to the deadline) post-regulation companies). Of those examined, some were early adopters: those companies which had produced an integrated report prior to the introduction of the requirement. The analysis covered seven subjects, 58 principles and 160 questions seeking to measure actual performance against best practice.

Nina Le Riche, Director Risk Advisory and Competency Lead for Integrated Reporting, Deloitte who convened the research explains, “This research reveals that there is no definitive integrated report at this stage: no company can be singled out as having a report that excels in all aspects of Integrated Reporting. However, we found that there are pockets of excellence within the documents studied. For example, one company may cover stakeholder engagement with distinction, whereas another may be outstanding in reporting on sustainability implications of the supply chain”

Significantly, companies are no more than half way towards adequate integrated reports. The average level of adoption of Deloitte’s interpretation of Integrated Reporting stands at 48%.  This indicates that companies in general have embarked on the journey, but have been generally slow in demonstrating the integration of the principles into their business model.

Overall, companies performed worst in terms of demonstrating a commitment by management to synthesizing environmental, social and governance issues (ESG) into strategy and ensuring that suitable structures are in place to ensure execution, with an average score of a mere 34% for this metric. The extent to which companies succeeded in engendering credibility to the non-financial information reported also scored poorly. With a score of 54%, communicating the corporate context proved to be the best achieved.

By contrast, the companies that subscribe to the principle of IR stand out. The early adopters (those companies which produced Integrated Reports prior to regulation) are doing relatively well with an average score of 63%.

Deloitte found that any window dressing was fairly obvious to identify. Many companies still do not yet see the relevance or value of integrated reporting. An astonishing 46% of listed companies with year ends on or after March 2011 that had reported by the time of the Deloitte review made no attempt to publish an Integrated Report. Only 42% produced an integrated report and the balance issued a variation of one.

Perhaps a crucial factor is that companies are grappling with setting measurable non-financial targets. Only a third of companies analysed were willing to disclose tangible targets linked to its strategy and stakeholder concerns.

To some extent, independent assurance of non-financial information is becoming more prevalent:  there was a modest rise from 35% for the pre-regulation companies to 38% for the post regulation companies.  The percentage noted was however significantly higher than in prior years.  As audit committees are becoming more aware of their responsibility to ensure that credible non-financial information is produced, the prevalence of independent assurance over key indicators is increasing, but is still at a relatively low level.

It appears that companies are trying to shorten the integrated reports with some success.

Of the pre-regulation reports reviewed, 35% were shorter than 50 pages (excluding financial results) whereas the post-regulation percentage is 42%.

Contrary to popular belief the response to King III is not as strong as many boards believe.

Deloitte’s research showed an average disclosure score of 51% for listed companies with year ends commencing on or after 1 March 2010. Responsible boards should pay attention to this in anticipation of institutional investors adopting the recently-released Code for Responsible Investing in South Africa (CRISA) from February 2012 onwards.

A most common weakness lies with companies’ response to IT risk management and the effectiveness of its compliance programmes. More than half (54%) of them failed to contain specific information relating to IT risk management. Given that King III devotes a chapter to the governance of IT, this is of concern.

“Having established a benchmark, we will be able to build on the findings on a quarterly basis and plot the trends emerging in integrating reporting. Armed with the results, it is important companies seek guidance in the compilation of Integrated Reports and specifically, input on what constitutes best practice and how companies should go about  their Integrated Reporting concluded Bertie Loots, Director leading the National Integrated Reporting team.

For more information, please contact Lana Pike.

Lana-Jane Pike

External Communication

+27 (0)11 209-6214

lpike@deloitte.co.za

The broken triangle – Improving the relationship between internal audit, management and the audit committee

The disconnect between internal audit, executive management, and the audit committee is nothing new. The broken triangle has existed for decades at many organizations, with varying degrees of severity. But dysfunction that was deemed tolerable in the ’80s, ’90s, and ’00s is unacceptable today. The stakes — both personal and corporate — have been ratcheted to a new level. Regulators, analysts, stakeholders, and even litigators all have a keen interest in how well this corporate trio, so essential to good governance and effective risk management, works together to protect and propel the organization.

What are the symptoms of a broken triangle? Financial restatements. Material weaknesses. Regulatory noncompliance. Contentious or ineffectual board meetings. Voluntary and involuntary turnover. Missed earnings. Excessive litigation. Failed partnerships and alliances. Unmitigated risk. And so on. If your organization exhibits any of these symptoms, you have an obligation to seek a cure. A good place to start may be to examine the structural integrity of the triangle.

Read the full article . . . . The Broken Triangle

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