1. FEBRUARY 2013 PRESENTATION OF THE AUDITOR-GENERAL
TO THE PORTFOLIO COMMITTEE
ON A PERFORMANCE AUDIT OF THE USE OF CONSULTANTS AT THE DEPARTMENT OF TRANSPORT
FEBRUARY 2013

2. Reputation promise/mission
The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

3. Performance auditing
An independent auditing process to evaluate the measures put in place by management to ensure that resources have been procured economically and used efficiently and effectively.

4. Performance audit at a glance
Why a performance audit on the use of consultants by government
Significant expenditure - R102 billion over 3 years
SA’s skills crisis – we have a need
A relationship of national importance
Public sector can benefit - if consultants used correctly
Previous performance audits – follow up on progress
How do performance audits differ from other audits?
Focus on performance – the three Es
Economy
Efficiency
Effectiveness
Done when problems are
identified
Focus on finances
Financial statements
Financial management
Accounts true and fair
Done annually
Performance
auditing
Regularity vs

5. Scope of the audit
The departments we audited and why others were not audited
Focus of this report – national departments
R33,5 billion
National total over 3 years - R33,5 billion
Provincial total over 3 years - R68,5 billion
Similar provincial audits conducted – to be tabled in due course
R68,5 billion

6. Scope of the audit
The departments we audited and why others were not audited
Eight national departments were audited - total expenditure on consultants R24,6 billion over 3 years
Selection also guided by outcomes of financial audits and other assessments
20% of national departments represent 74% of the total national expenditure on consultants over the 3 years

7. Key focus areas of the audit
Audit focus areas
Planning and appointment processes
Internal capacity at departments
Training and transfer of skills from consultants to employees
Performance management and monitoring of consultants
Extension of contracts
Closing and finalising projects
Focus areas crucial in ensuring the Economical, Efficient and Effective use of consultants by departments

8. Key challenges across departments
Planning and appointment process
Comprehensive needs assessments not done
Competitive procurement processes not followed
Expectations on milestones, timelines and cost not clearly specified
Internal capacity
Consultants appointed where permanent capacity should have been created
Consultants appointed due to lack of internal staff capacity
Training and transfer of skills
Skills transfer was ineffective
Performance management and monitoring
Effective oversight and internal controls not executed prior to payments
Lack of proper project management and monitoring
Cost overruns not motivated and approved
Extension of contracts
Contracts extended due to lack of project management and monitoring
Closing and finalising projects
Failure to retrospectively analyse projects

9. Department of Transport
Total expenditure on consultants (2008‑09 to )
R1,86 billion
Number of projects audited 16
Value of projects audited
R1,884 billion*
Average vacancy rate ( to 2010‑11)
22,25%
* Includes three high-value long-term contracts of R640m (7 years), R594m (5 years) and R235m (5 years)

10. Audit findings DEPARTMENT OF TRANSPORT Classification
Areas where deficiencies were identified during the audit
E affected
Consultants per contract audited
Best available value of contracts
Period of the contract/ service
Consultants
Contractors
Agency/outsourced services
Planning and appointment
Internal capacity
Training and transfer of skills
Performance management and monitoring
Extension of contracts
Closing and finalising of projects
Economy
Efficiency
Effectiveness
Development of eNaTIS 1.
Tasima consortium
Jun May 2007* ü
Taxi recapitalisation project (TRP) 2.
Siyazi consortium
May Sep 2013
Maritime pollution prevention response and services 3.
Smit Marine South Africa
Sep Aug 2008**
Events management project 4.
Groove Consultants
Sep Oct 2007
Management of October transport month 5.
Puisano Business Development Group (Pty) Ltd
Sep Oct 2008
Formulation of National Airports Development Plan (NADP) 6.
Kaiser International (Pty) Ltd
Oct Feb 2009
Formulation of National Transport Master Plan (NATMAP) 7.
Various consultants
Aug Apr 2010
Operational model for the acquisition and operation of buses for the 2010 FIFA World Cup™ Ω 8.
Arcus Gibb consortium
Oct Feb 2008
Technical Support Transport Demand Model Ω 9.
Axio Consulting
Nov Jun 2008
* Contract continued on a month-to-month basis from June 2007 after expiry of the contract
** Contract was extended from 1 Sep 2008 onwards. Consultant was later re-appointed after conclusion of a new tender process
Ω Finding was not included in the public report due to the non-material nature of the findings and/or after further evaluation took place

11. Audit findings (continued)
DEPARTMENT OF TRANSPORT
Classification
Areas where deficiencies were identified during the audit
E affected
Consultants per contract audited
Best available value of contracts
Period of the contract/ service
Consultants
Contractors
Agency/outsourced services
Planning and appointment
Internal capacity
Training and transfer of skills
Performance management and monitoring
Extension of contracts
Closing and finalising of projects
Economy
Efficiency
Effectiveness
Conference organisers for the AFRI RAN project Ω
10.
Mbali G and Associates
Oct Nov 2008 ü
Drafting a policy discussion document on anti-train surfing, train suicides and related issues Ω
11.
Nosanda Management Solutions
Jan Feb 2009
Project management services for the Public Transport Infrastructure and Systems grant Ω
12.
Panel of experts - various consultants
Jul Mar 2010
Program management preparations for the 2010 FIFA World Cup™ Ω
13.
Safiri (Pty) Ltd
Dec Jan 2010
Non-motorised infrastructure project Ω
14.
Sektor Consulting Engineers
Nov Feb 2010
Technical assistance during the implementation of the TRP Ω
15.
Transpay consortium
Jun Nov 2007***
Women and gender audit
16.
HSRC
Limitation of scope
Total 9 6 7 8 3
*** Consultant was re-appointed on 22 Nov 2007 at a ceiling amount of R
Ω Finding was not included in the public report due to the non-material nature of the findings and/or after further evaluation took place.

12. Variations per contract
Project / consultant
Original amount of contract
Variation amount
Compliance with procurement policy
Comments
Development of eNaTIS
Tasima consortium R
Escalation cost of
R increased the contract value of
R to R No
According to a legal opinion obtained by the department, the extension of contract in May 2010 should have been subjected to a competitive procurement process.
Maritime pollution prevention response and services
Smit Marine South Africa R R
Yes
The DG approved the three extensions.
Events management project
Groove Consultants R R
No competitive bidding process was followed before awarding additional services to the consultant.
Formulation of National Airports Development Plan (NADP)
Kaiser International (Pty) Ltd R
Additional stakeholder consultation fees of
R increased the contract value of
R to R
Variation submitted to the bidding committee for approval to fund additional stakeholder consultation.
Conference organisers for the AFRI RAN project
Mbali G and Associates R R
The bidding committee approved the request for the extension of scope.
Program management preparations for the 2010 FIFA World Cup™
Safiri (Pty) Ltd R R
The DG approved the extension.
Non-motorised infrastructure project
Sektor Consulting Engineers R R
The extension was approved by the bidding committee.
Technical assistance during the implementation of the TRP
Transpay consortium R R
The contract was extended via a closed bidding process.

13. Contract specific challenges
Development of eNaTIS
Tasima consortium
R594m
Jun 2002 – May 2007
No transfer management plan to the department on the eNaTIS and related services after five years
Paid R936,2m for additional services which did not form part of the original contract
The extension of contract was not subjected to a competitive procurement process
Taxi recapitalisation project
Siyazi consortium
R639,9m
May 2006 – Sep 2013
Project was not properly planned by the department and resulted in an increased budget of R2,1b
Scrap metal proceeds could not be accounted for
Consultant’s progress reports were lacking
Maritime pollution prevention response and services
Smit Marine South Africa
R333,2m
Sep 2003 – Aug 2008
Poor planning resulted in three extensions over 21 months costing R98m
Intense scrutiny of strategic plans and accountability reports
Activities should be monitored quarterly
Follow up on corrective action against action plans

14. Contract specific challenges
Events management project
Groove Consultants
R50,05m
Sep Oct 2007
Departmental staff changed project scope without approval resulting in additional cost of R4,3m
Management of October transport month
Puisano Business Development Group (Pty) Ltd
R14,3m
Sep 2008 – Oct 2008
Appointment was made only five days before the start of the project
Consultant had access to information prior to bid invitation
Only 11 days granted for tenderers to submit proposals
Consultant notified of appointment three days before evaluation process was finalised
Formulation of National Airports Development Plan (NADP)
Kaiser International (Pty) Ltd
R10,1m
Oct 2007 – Feb 2009
Appointment made because department lacked adequate staff and available personnel did not have the skill and time to develop the deliverable
The plan has not yet been approved by Cabinet for implementation
Formulation of National Transport Master Plan
Various consultants
R64,3m
Aug 2006 – Apr 2010
Insufficient positions on the staff establishment for the implementation, monitoring and editing of the NATMAP which resulted in reliance on consultants
Intense scrutiny of strategic plans and accountability reports
Activities should be monitored quarterly
Follow up on corrective action against action plans

15. Key recommendations: how government can remedy the current situation
Compliance with legal frameworks, laws, regulations and policies
Indicate maximum contract value and number of hours
Develop a strategy governing the use of consultants
Manage and monitor performance
Formal needs assessments should be conducted
Training and transfer of skills
Create sufficient internal capacity
Investigate possible fruitless and wasteful expenditure
Value for money
from the
use of
consultants
Extend contracts for valid reasons only
Learn from the past, apply in the future

16. Combined assurance: extensive assurance needed at all levels
Management assurance
First level of assurance
Senior
management
Accounting
officers/
authority
Executive
Required assurance levels
Extensive
Management’s assurance role
Senior management – take immediate action to address specific recommendations and adhere to financial management and control systems
Accounting officers/ authority – hold officials accountable for the use of resources and report annually on the use of consultants
Executive authority – monitor the use of consultants and enforce accountability and consequences
Oversight assurance
Second level of assurance
Coordinating /
Monitoring
institutions
Internal
audit
Audit
committee
Extensive
Required assurance levels
Oversight’s assurance role
National Treasury/ DPSA – monitor compliance with laws and regulations and enforce appropriate action
Internal audit – follow up on management’s actions to address specific recommendations and conduct own performance audits on the use of consultants
Audit committee – monitor the implementation of commitments on corrective action made by management as well as significant spend on consultants
Independent assurance
Third level of assurance
Oversight
(portfolio
committees /
councils)
Public
accounts
committee
External
audit
Extensive
Required assurance levels
Role of independent assurance
Oversight (portfolio committees/ councils) – review strategic and business plans as well as the accounting officer’s reports on the use of consultants
Public accounts committee – exercise specific oversight on a regular basis
External audit – provide independent assurance on the credibility of reported information and identify instances of irregular, fruitless and wasteful expenditure on consultants

17. Commitment to action needed
Better value for money when using consultants
National Treasury
Audited department
Minister
Portfolio Committee
Department of Public Service and Administration

18. Commitment given Better value for money when using consultants
National Treasury
- Guidelines will be reviewed to strengthen the process of appointing consultants
- Emphasis to be placed on the monitoring of compliance with legal frameworks related to the appointment, management and use of consultants
Audited department and Minister
- eNaTIS contract – a determination would be done on whether there is a need for further software development or only maintenance of current software
- Taxi recapitalisation programme – submission of quarterly reports will be enforced by withholding payments to the service provider
- Department will consider execution and finalisation of projects based on its priorities
Portfolio Committee
- The following should be implemented:
HR planning should have short-, medium- and long-term objectives
Long –term career planning should be incorporated into the human resource plans
- Department should have its own specialists to identify areas where consultants are needed, to properly plan for the use of consultants and to monitor the work performed by consultants
Department of Public Service and Administration
- Information on skills in public sector will be provided
- Research will be conducted and interventions developed by March 2014 to reduce vacancy rate
- Annual departmental submission of HR plans will be increased to 100% compliance

19. It takes two to tango: the private sector also needs to come to the party
The creation of citizen value is enhanced through a balanced partnership equation
A critical part of this equation
Realising the common goals of economic success requires effort by both government and business
Public
sector
Private
sector
Enhanced
citizen
value + =
Must not take advantage of weaknesses in government systems
Rather be good corporate citizens with a good corporate conscience
Take steps to stop malpractices
Strong governance support by broader private sector is critical

20. Thank You