1. 22 FEBRUARY 2013 PRESENTATION OF THE AUDITOR-GENERAL of SOUTH AFRICA
TO THE PORTFOLIO COMMITTEE OF HUMAN SETTLEMENTS
ON A PERFORMANCE AUDIT OF THE USE OF CONSULTANTS AT SELECTED NATIONAL DEPARTMENTS
22 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. Legislative Requirements
Performance Audit
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.
Definition
Legislative Requirements
Constitution
Section 195 (1)(b) of the Constitution of the Republic of South Africa states:
Public administration must be governed by the democratic values and principles enshrined in the Constitution, including the following principle(s):…
(b) Efficient, economic and effective use of resources must be promoted.

4. Performance Audit
Why a performance audit on the use of consultants by government?
Significant expenditure - over past 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. Guiding principles of the audit
Economy
Includes a competitive procurement process for the appointment of consultants and the creation and maintenance of a permanent staff capacity where required
Efficiency
An optimal relationship between the outputs produced by consultants and the resources expended by departments to remunerate these consultants.
The management of the process to achieve this relationship
Effectiveness
The achievement of the objectives that informed the appointment of consultants

6. The term ‘consultants’
What did the term “consultant” include for the purpose of this audit?
Specialist services and skills required for the achievement of a specific objective, with the aim of providing expert and professional advice on a time and material basis
Consulting/professional services:
Required to provide services that are of a non-specialised nature that are not core business of the department
Contractors:
Services where the relevant department ordinarily has the capacity and expertise to carry out these services, but for some reasons are not using their own staff
Agency/outsourced services:

7. Audit focus areas Focus areas 1. Planning and appointment processes
2. Internal capacity at departments
3. Training and transfer of skills from consultants to employees
4. Performance management and monitoring of consultants
5. Extension of contracts
6. Closing and finalising projects

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

9. Comprehensive needs assessments not always being done
Key findings: economy
The economical acquisition of consultants was negatively affected due to:
Comprehensive needs assessments not always being done
Consultants being appointed instead of creating permanent capacity or consultants performing duties which formed part of departments’ daily operations
Competitive procurement processes not always being followed and departments not ensuring that consultants complied with all the qualifying criteria
Cost overruns not always being motivated and approved at the correct level
Bid documents not always including clear specifications regarding costs and time

10. Key findings: efficiency
The efficient use consultants was negatively affected because:
Expected services, roles, responsibilities and deliverables relating to milestones, timelines and applicable measures were not always clearly specified
Effective oversight and internal controls were not executed before authorising payments
A lack of proper project management and monitoring of consultancy projects contributed to the extension of a number of projects

11. Key findings: effectiveness
The effective use consultants was negatively affected because:
Planning for financial and other resources necessary for projects/ implementation not always done. In some instances, this rendered the work of consultants redundant
Skills transfer from consultants to departmental staff were not always effective
Projects were not analysed to determine whether objectives were met and to determine the benefits received

12. Key recommendations: how government can remedy the current situation
Compliance with legal frameworks, laws, regulations and policies
Improved planning for the use of consultants
Proper financial management and control
Manage and monitor performance
Learn from the past, apply in the future
Leadership accountable for three Es
Training and transfer of skills
Value for money
from the
use of
consultants
Create sufficient internal capacity
Extend contracts for valid reasons only

13. 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

14. Commitment to action needed from Stakeholders
Better value for money when using consultants
National Treasury
Entities
Minister
Portfolio and Public Accounts Committees
Department of Public Service and Administration

15. Way forward by departments
Better value for money when using consultants
Greater emphasis must be placed on planning for the use of consultants
Staff development and training through the transfer of skills must be monitored
Compliance with supply chain management practices and contract administration must be ensured
Sufficient internal capacity must be provided to enable the departments to deliver on their mandates
Prescripts issued by the National Treasury and the Department of Public Service and Administration must be adopted and customised
The performance of consultants must be monitored to ensure that contractually agreed deliverables are met
Extension of contracts must only be granted in exceptional cases and based on valid and documented reasons
Procedures for closing consultancy contracts must be enforced

16. Comments from other role players
National Treasury
Guidelines will be reviewed in an attempt to strengthen the process for appointing consultants and Treasury Regulations will be enhanced
The monitoring of compliance with legal frameworks related to consultants will be emphasised
Department of Public Service & Administration
The annual departmental submissions of HR plans will be increased to a 100% compliance rate to support the HR planning Strategic Framework for the Public Service by 2014
Research will be conducted and appropriate interventions developed by March 2014 to reduce the vacancy rate and improve the recruitment processes
Information on skills in the public service in relation to job requirements will be provided to contribute towards addressing the skills gap in the public service

17. AUDITOR-GENERAL of SOUTH AFRICA
Way forward
AUDITOR-GENERAL of SOUTH AFRICA
Role Player
Ineffective management of consultants;
Unnecessary/ continuous contract extensions;
Consultants appointed for requirements which can be addressed by internal resources;
Over dependency on consultants as a result of unfilled vacancies;
Lack of transfer of skills resulting in continued dependence on consultants
Lack of implementation of the results of consultant’s work.
Focus Areas
Develop procedures to address identified Focus Areas to be performed as part of Regularity Audit at all Departments for the 2012/13 financial year, also including SCM procurement testing.
Reporting of material findings noted from audits
Way forward

18. Thank You