1. PSIRA – lease of the building
Debriefing the Portfolio Committee
18 September 2012

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. Outline Requirements applicable and process followed
Illustrating the process followed when auditing the lease building
Management responses
Conclusions made

4. Legislative Requirements – in cases of an emergency or sole provider
TR16A6.4
If in a specific case it is impractical to invite competitive bids, the accounting officer or accounting authority may procure the required goods or services by other means, provided that the reason for deviating from inviting competitive bids must be recorded and approved by the accounting officer or accounting authority

5. Requirements – Process flow
Decision is taken to opt and use TR 16A6.4 (emergency route) by the auditee (approved by AO/ AA and procure)
Compliance with Practice note 6 of 2007/08 – report needs to be provided within 10 days after procurement (> R1 million) to National Treasury and the AGSA
The relevant treasury and the Auditor-General will consider the report and take appropriate actions if and when necessary
Appropriate action by the AGSA: To evaluate the risk associated with this specific procurement and if applicable include this process (tender) in our sample

6. Auditor’s process auditing the deviation
Relevant information was obtained – which included but are not limited to :
The engineer’s report
Management explanations
Round robin – provided to council for approval
Lease contract
All information obtained was audited / evaluated
A Technical consultation (in-house) was obtained
Finding was provided to management for their formal responses

7. Auditor General - Finding
The time frame in which the contract for Eco Glades 2 was procured does not indicate that the emergency deviation was appropriately used.
Below is a basic time-line of events:
Engineer report
Meeting held
Date of Resolution
Date Contract signed
Occupation date
November 2010
4 February 2011
8 April 2011
15 April 2011
1 August 2011

8. Initial finding: Management comments
Firstly, although management received the engineer’s report only in December 2010, the period between December 2010 and the Council meeting held on the
4 February 2011 cannot be considered as part of the process of securing the building as the decision to procure was not yet made.

9. Initial finding: Management comments (continue)
Secondly, the period between 15 April 2011 and 1 August 2011 (date of occupation), involved preparing the building for occupation. This phase included
partitioning of offices,
setting up IT infrastructure and telecommunication.
Irrespective of which procurement process was followed, the same time frames would have applied.

10. National Treasury – List of examples of irregular expenditure
The AGSA in consultation with National Treasury, compiled a list of examples of deviations that will result in irregular expenditure (legal process was followed to determine if irregular…)
Deviations from competitive bidding were approved on the basis of it being an emergency, even though immediate action was not necessary and/or sufficient time was available for bidding process.
Irregular expenditure if it can be factually proven beyond reasonable doubt that immediate action was not necessary or there was sufficient time available for bidding process.

11. Auditor’s conclusion after comments received
We do understand the indication of the emergency of the project

12. National Treasury acknowledged the notification on the
Closing argument
A meeting was held with management and the chairperson of the board to conclude on this matter – the following facts were discussed:
The emergency route was chosen, in light of the fact that the AGSA, accepts the “emergency” – PSIRA did comply
National Treasury is the standard setter for recognition of “irregular expenditure” .
No indication of any concerns raised by NT when PSIRA reported the deviation indicating that the implications will be R61,2 million.
National Treasury acknowledged the notification on the
1 July 2011

13. Lease of the building: Conclusion
As PSIRA used the emergency route, and we cannot factually prove beyond reasonable doubt that immediate action was not necessary or there was sufficient time available for bidding process, the lease of the building is NOT IRREGULAR and the finding was closed (not included in the final management letter)