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TRANSCRIPT
MARCH 2013
PRESENTATION OF THE AUDITOR-GENERAL
TO THE PORTFOLIO COMMITTEE
ON A PERFORMANCE AUDIT OF THE USE OF CONSULTANTS AT THE DEPARTMENT OF HEALTH
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.
Reputation promise/mission
2
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.
3
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
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
Why a performance audit on the use of consultants by government
How do performance audits differ from other audits?
Performance
auditing
Regularity
auditing vs
Performance audit at a glance
4
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
5
Scope of the audit
The departments we audited and why others were not audited
20% of national departments represent 74% of the total national expenditure on consultants over the 3 years
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
6
Key focus areas of the audit
Focus areas
crucial in ensuring
the Economical,
Efficient and
Effective use of
consultants by
departments
7
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
8
Key challenges across departments
• Comprehensive needs assessments not done
• Competitive procurement processes not followed
• Expectations on milestones, timelines and cost not clearly specified
Planning and appointment
process
• Consultants appointed where permanent capacity should have been created
• Consultants appointed due to lack of internal staff capacity Internal capacity
• Skills transfer was ineffective 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
Performance management and
monitoring
• Contracts extended due to lack of project management and monitoring Extension of
contracts
• Failure to retrospectively analyse projects Closing and
finalising projects
9
Department of Health
Total expenditure on consultants (2008-09 to 2010-11) R416 million
Number of projects audited 7
Value of projects audited R301,6 million
Average vacancy rate (2009-10 to 2010-11) 28,8%
20
40
60
80
100
120
140
160
2008-09 2009-10 2010-11
R'm
illi
on
Total expenditure per year at Health
Agency and support/ outsourced services
Consultants
Contractors
10
Audit findings
DEPARTMENT OF HEALTH 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
Co
nsu
ltan
ts
Co
ntr
acto
rs
Ag
en
cy/o
uts
ou
rced
serv
ices
Pla
nn
ing
an
d
ap
po
intm
en
t
Inte
rnal cap
acit
y
Tra
inin
g a
nd
tran
sfe
r o
f skil
ls
Perf
orm
an
ce
man
ag
em
en
t an
d
mo
nit
ori
ng
Exte
nsio
n o
f
co
ntr
acts
Clo
sin
g a
nd
fin
ali
sin
g o
f
pro
jects
Eco
no
my
Eff
icie
ncy
Eff
ecti
ven
ess
Audit all public sector nursing colleges 7 862 763
1. Genius Management Solutions 7 862 763 Oct 2009 - Mar 2010
Containment of wild poliovirus infectious
material 896 810
2. Health Development Africa 896 810 Jan 2009 - Jun 2010
Development of National Infection
Prevention and Control Manual 873 411
3. University of KwaZulu-Natal 873 411 Aug 2008 - Mar 2009
Situational and needs analysis towards the
development of a national call centre 476 320
4. Diphale Connexions (Pty) Ltd 476 320 Feb 2008 - Feb 2009
Non-government organisations 291 500 000
5. LifeLine 42 500 000 Financial year 2007-08
to 2009-10
6. Soul City 47 000 000
7. LoveLife 202 000 000
Total 301 609 304 1 0 0 5 0 4
11
Contract specific challenges
Audit all public sector nursing colleges
Genius Management Solutions
R7 862 763
October 2009 - March 2010
Deliverables not effectively implemented
due to a lack of permanent staff
Containment of wild poliovirus infectious
material
Health Development Africa
R896 810
January 2009 - June 2010
Work done by consultant not reviewed on time,
resulting in deficiencies not being identified and addressed in a timely
manner
Inadequate human resource planning and the moratorium on the
filling of vacancies resulted in dedicated
posts not being created for the periodic monitoring and
evaluation of the laboratories after the
completion of the project
Development of National Infection Prevention and
Control Manual
University of KwaZulu-Natal
R873 411
August 2008 - March 2009
Specialised internal capacity not created to
coordinate and evaluate the results of the draft National
Infection Prevention and Control Manual for vetting
and input purposes
Lack of specialised internal capacity to facilitate the future implementation of
the content of the Manual. This will hinder the
attainment of the project’s objective
Intense scrutiny of strategic
plans and accountability
documents
Activities should be
monitored quarterly
Follow up on corrective
action against action plans
12
Contract specific challenges
Situational and needs analysis towards the development of a national call centre
Diphale Connexions (Pty) Ltd
R476 320
February 2008 – February 2009
During the planning, factors such as the extent and availability of provincial role
players were underestimated.
Non-governmental organisations
LifeLine, Soul City and LoveLife
R291,5 million
Financial years 2007-08 to 2009-10
Lack of formal and structured processes to verify performance-related statistics
and data provided by the non-government organisations (NGOs)
No formal guidelines to assess the feasibility of the objectives/ targets as set
out in the business plans of the NGOs
Intense scrutiny of strategic
plans and accountability
reports
Activities should be
monitored quarterly
Follow up on corrective
action against action plans
Key recommendations: how government can remedy
the current situation
Value for money
from the
use of
consultants
Improved planning for the
use of consultants
Formulate a policy, strategy and
applicable guidelines governing
the use of consultants
Create sufficient internal
capacity to enable training
and transfer of skills
Manage and monitor
performance
Learn from the past, apply in the future
Proper financial
management and control
13
Combined assurance: extensive assurance needed
at all levels
Oversight assurance
Second level of assurance
Coordinating /
Monitoring
institutions
Internal
audit
Audit
committee
Extensive Extensive 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
Management assurance
First level of assurance
Senior
management
Accounting
officers/
authority
Executive
authority
Required assurance levels
Extensive Extensive 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
Independent assurance
Third level of assurance
Oversight
(portfolio
committees /
councils)
Public
accounts
committee
External
audit
Extensive Extensive 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
Better value for money
when using consultants
National Treasury
Audited department
Minister
Portfolio Committee
Department of Public Service and
Administration
15
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
- Organisational structure has been revised and a new cluster was created to manage and monitor human resource gaps at nursing colleges
- Internal capacity was created for the containment of the wild poliovirus infectious material and the future implementation of the content of the National Infection Prevention and Control Manual
- The national healthcare worker hotline was established to render support to the healthcare workers countrywide on clinical HIV and AIDS issues
- Monitoring and support visits to the NGO’s are conducted to monitor to monitor progress against the agreed upon deliverables
- NGO framework and guidelines are being reviewed and business plans revised
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
16
It takes two to tango: the private sector also needs to
come to the party
Public
sector
Private
sector
Enhanced
citizen
value + =
A critical part of this equation
• 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
Realising the common goals of economic success requires effort by both government and
business
The creation of citizen value is
enhanced through a balanced
partnership equation
17
Thank You
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