PRESENTATION OF THE AUDITOR-GENERAL

TO THE PORTFOLIO COMMITTEE

ON A PERFORMANCE AUDIT OF THE USE OF CONSULTANTS AT THE DEPARTMENT OF ENVIRONMENTAL AFFAIRS

MARCH 2013
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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.

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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.

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Performance audit at a glance
Why a performance audit on the use of consultants by government

Significant Public sector Previous

SA’s skills crisis A relationship of
expenditure - can benefit - if performance
– we have a national
R102 billion over consultants used audits – follow
need importance
3 years correctly up on progress

How do performance audits differ from other audits?

Focus on performance – the three Es Focus on finances

•Economy •Financial statements
•Efficiency •Financial management
•Effectiveness Performance Regularity •Accounts true and fair
auditing
vs auditing
Done when problems are Done annually
identified

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Scope of the audit
The departments we audited and why others were not audited
Focus of this report –
national departments
R33,5 billion

Similar provincial audits

conducted – to be
tabled in due course
R68,5 billion

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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
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Key focus areas of the audit

Focus areas
crucial in ensuring
the Economical,
Efficient and
Effective use of
consultants by
departments

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Key challenges across departments

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Department of Environmental Affairs
Total expenditure on consultants (2008 ‑09 to 2010-11) R550,6 million

Number of projects audited 15

Value of projects audited R57,6 million

Average vacancy rate (2009-10 to 2010 ‑11) 30,35%

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Audit findings

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Audit findings (continued)

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Audit findings (continued)

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 Variations per contract

Original amount Compliance with

Contractor of contract Variation amount procurement policy Comments
Pubic Private Partnership The Consortium did not have
transaction advisor environmental and heritage
Mi3 Consortium specialists as required by the
R9 000 000 R1 500 000 Yes
terms of reference, which had
to be procured by means of a
variation order
Establishment of an
inventory assessment of
infrastructure and
Not applicable
capacity for the R4 538 552 Yes
(time extension)
development of National
Implementation Plans
BKS (Pty) Ltd
Development of the
South African Air Quality Not applicable
Approved by deputy director-
Information Systems R4 874 800 Yes general: environmental quality
(time extension)
Gondwana Environmental and protection
Solutions (Pty) Ltd
Support the development
of the Environmental Not applicable
Approved by deputy director-
Management Framework R1 530 069 Yes general: environmental quality
(time extension)
SRK Consulting (South Africa) and protection
(Pty) Ltd

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Contract specific challenges

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

Intense scrutiny of strategic

plans and accountability
reports

Activities should be
monitored quarterly

Follow up on corrective
action against action plans 15
Contract specific challenges

Intense scrutiny of strategic

plans and accountability
reports

Activities should be
monitored quarterly

Follow up on corrective
action against action plans

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 Key recommendations: how government can remedy
the current situation

Compliance with legal frameworks, laws, regulations Consider cost implications before appointing
and policies consultants

Develop a strategy
governing the use of Timely appointment of
consultants
consultants Value for money
from the
Comprehensive needs
assessments, which
use of
include accurate cost consultants Training and transfer of
estimates should be skills
conducted

Investigate possible irregular, fruitless and wasteful

Learn from the past, apply in the future
expenditure

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 Combined assurance: extensive assurance needed
at all levels

Management assurance Oversight assurance Independent assurance

First level of assurance Second level of assurance Third level of assurance

Oversight
Accounting Coordinating / Public
Senior Executive Internal Audit (portfolio External
officers/ Monitoring accounts
management authority audit committee committees / audit
authority institutions committee
councils)

Required assurance levels Required assurance levels Required assurance levels

Extensive Extensive Extensive Extensive Extensive Extensive Extensive Extensive Extensive

Management’s assurance role Oversight’s assurance role Role of independent assurance

•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
•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
•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

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Commitment to action needed

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Commitment given

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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 A critical part of this equation
partnership equation

Enhanced
Public
sector + Private
sector = citizen
value

• Must not take advantage of weaknesses in government • Take steps to stop malpractices
systems • Strong governance support by broader
• Rather be good corporate citizens with a good corporate private sector is critical
conscience

Realising the common goals of economic success requires effort by both government and
business

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Thank You

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