|**Corporate Governance Benchmark**|**Evaluation of DBSA**|
|---|---|
|The board causes the SFI to employ a_professional,_<br>_independent external audit firm_.<sup>121</sup>The board or its<br>audit committee has established clear procedures<br>for the selection of the audit firm, which ensures<br>the firm is independent of management and the<br>state (as shareholder), among other criteria.<sup>122</sup>The<br>audit firm utilizes international accounting and<br>auditing standards. The audit firm reviews internal<br>control processes related to the public disclosure of<br>financial statements.|Under the Article 17 regulations the Board shall<br>recommend annually to the Minister of Finance,<br>as shareholder representative, the appointment of<br>the external auditors, at remuneration that the<br>Board determines.<br>The 2005/06 financial statements<sup>123</sup>were audited<br>by KPMG Inc, and Gobodo, Inc., both Registered<br>Accountants and Auditors in South Africa, in<br>accordance with International Standards on<br>Auditing, the South African Statements of<br>Generally Accepted Accounting Practice, and the<br>Accounting and Disclosure requirements of the<br>Companies Act, as well as other reporting<br>requirements in the PFM Act.|
|The board ensures the SFI has a_professional_<br>_internal audit function_that reports directly to the<br>audit committee and has unrestricted access to the<br>Chairperson of the board and all board members.<sup>124</sup><br>The internal audit plan is based on a formal risk<br>assessment. The board requires timely correction<br>of problems identified by internal auditors.|The Treasury regulations issued pursuant to the<br>PFM Act specify detailed requirements for a risk-<br>based internal audit function.<sup>125</sup>The<br>independence, standards, functions and roles of<br>the Bank’s internal audit are further specified in<br>an Internal Audit Charter approved by the Board.<br>The Bank conducts an external review of the<br>internal audit function. In 2005 this review was<br>undertaken by the Institute of Internal Auditors<br>which determined the function was independent<br>and conformed to international best practice.|

> 114 **_Good Practice_** : The Chairperson of the board is not a member of the audit committee, but could be invited to attend audit committee meetings as necessary by the Chairperson of the audit committee.

> 115 **_DBSA_** : Section 27.1.

> 116 **_DBSA_** : The Audit and Finance Committee has additional responsibilities with respect to risk management, which are discussed below in the body of this report.  In addition, it reviews and approves the annual budgets and annual and interim financial statements.  It advises the Board on i) appropriate financial policies, investment limits and funds mobilization strategies, ii) the annual income, expenditure and capital budget requirements, and iii) compliance and procurement policies.

> 117 **_DBSA_** : Under the Board Charter, all Board members have authority to meet with any senior staff member.

> 118 **_DBSA_** : As noted, the Chairperson of the Audit Committee is a signatory to the Shareholder Compact.

> 119 **_DBSA_** : Treasury regulations issued pursuant to the PFM Act, Section 27.1.11.

> 120 **_DBSA_** : In line with the provisions of the Public Finance Management Act.

121 Audits by the state supreme audit entity are not considered a substitute, in part because such entities usually focus mainly on the use of public funds and budget resources.

> 122 **_Good Practice_** : Such criteria include limits on the provision of consulting services by the firm to the SFI, and periodic rotation of engagement partners and audit firm.  BCBS P5.

> 123 **_DBSA_** : Year-end March 31, 2006.

124 Though the internal auditor may report administratively to the CEO.

> 125 **_DBSA_** : Section 27.2.

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