Auditor-General performance audit on use of consultants: briefing by Deputy Auditor-General

Standing Committee on Auditor General

08 March 2013
Chairperson: Adv M Masutha (ANC)
Share this page:

Meeting Summary

The Office of the Auditor-General gave a briefing on its performance audit on the use of consultants at selected national departments – which was released in January 2013. Performance auditing was 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.

Eight national departments were audited with a total expenditure on consultants of R24.6bn over three years. The Committee was provided with a schematic breakdown of expenditure on consultants as per the eight departments as well as other departments. Of interest was that 20% of national departments represented 74% of the total national expenditure on consultants over the three years.

There were several focus areas in the performance audit: Adequate planning and appointment processes for contracted work were investigated. The internal capacity of departments was looked at to see if capacity was lacking and, if it was present, why consultants were hired. Another focus was whether training and transfer of skills from consultants to employees were taking place. Transfer of skills could be tricky because of the technical nature of some skills but financial management skills were transferable and should take place. An important question was whether performance management and monitoring of consultants was happening. The extension of consultants’ contracts was looked into and whether valid reasons existed for contracts to be extended. The final area which was scrutinised was whether the finalisation of projects had taken place, that is, whether the reason for bringing the consultant on board had been implemented.

The key recommendations by the Office of the Auditor-General based on the audit, were:
▪ There should be proper financial management and control;
▪ Compliance with legal frameworks, laws, regulations and policies needed to be tightened;
▪ There needed to be improved planning for the use of consultants;
▪ Performance had to be monitored and managed;
▪ Training and transfer of skills could be better managed;
▪ Contracts of consultants should only be extended for valid reasons;
▪ Sufficient internal capacity should be created; and
▪ Accounting officers of departments should be held accountable to  achieve the three Es, that is, economy, efficiency and effectiveness.

Members were interested to know what the effect of this performance audit report would be, especially since two previous performance audits had been done in 1996 and 2002. The Committee commented that they eagerly awaited performance audit reports on provincial and local government since the use of consultants pervaded every sphere of government. They asked if training was held on basic contract management principles and noted that staff turnover was part of the problem.

Meeting report

Auditor-General South Africa briefing on performance audit on use of consultants
The delegation comprised of Deputy Auditor-General, Mr Kimi Makwetu, Corporate Executive Mr Naeem Seedat and Mr Tsietsi Telite Senior Manager: Corporate Office.

Deputy Auditor-General Makwetu said that performance auditing was 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. The focus on performance thus looked at the three Es, that is, economy, efficiency and effectiveness. Why the performance audit? Over the last three years there had been significant expenditure of R102bn on consultants. Eight national departments were audited with a total expenditure on consultants of R24.6bn over three years. The Committee was provided with a schematic breakdown of expenditure on consultants as per the eight departments as well as other departments. Of interest was that 20% of national departments represented 74% of the total national expenditure on consultants over the three years. The three financial years covered by the audit were 2008-09, 2009-10 and 2010-11. Members were also given a diagrammatical breakdown of the respective expenditures by the departments in relation to their vacancy rates.

There were several focus areas in the performance audit: Adequate planning and appointment processes for contracted work were investigated. The internal capacity of departments was looked at in terms of whether capacity was lacking and if it was present why consultants were hired. Another area was whether training and transfer of skills from consultants to employees was taking place. Transfer of skills could be tricky because of the technical nature of some skills but financial management skills were transferable and should take place. An important focus was whether performance management and monitoring of consultants was taking place. The extension of consultants’ contracts was looked into and whether valid reasons existed for contracts to be extended. The final area which was scrutinised was whether the finalisation of projects had taken place, that is, whether the reason for bringing the consultant onboard had been implemented. All these focus areas had key challenges attached to them across departments.

Members were given figures on how the departments’ audited were deficient in the areas of focus. The economical acquisition of consultants was negatively affected due to a comprehensive needs assessment not always being done, competitive procurement processes were not always followed, bid documents did not always include clear specifications regarding costs and time, consultants were appointed instead of creating permanent capacity and lastly cost overruns were not always motivated and approved at the correct level.

The efficient use of consultants was negatively affected because expected services, roles 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. The effective use of consultants was also negatively affected as planning for financial and other resources necessary for projects or implementation were not always done, hence in some instances this rendered the work of consultants redundant. When it did take place, skills transfer from consultants to departmental staff were not always effective. Finally, projects were not always analysed to determine whether objectives were met and to determine the benefits received.

Given these findings, the key recommendations by Auditor-General South Africa were:
▪ There should be proper financial management and control;
▪ Compliance with legal frameworks, laws, regulations and policies needed to be tightened;
▪ There needed to be improved planning for the use of consultants;
▪ Performance had to be monitored and managed;
▪ Training and transfer of skills could be better managed;
▪ Contracts of consultants should only be extended for valid reasons;
▪ Sufficient internal capacity should be created; and
▪ Accounting officers of departments should be held accountable to  achieve the three Es, that is, economy, efficiency and effectiveness.

Discussion
The Chairperson asked if the performance audit report would assist management or the executive authority to make a call for a more in-depth investigation in a line spend to detect something that was not within the framework of the law. Or was the report merely giving caution about high risk areas that could lead to transgressions which in turn would lead to forensic investigations. Did the report prompt the affected departments to do such investigations?

He also asked if the Office of the Auditor-General had at any stage stumbled upon instances that were suspicious which necessitated law enforcement to investigate. Systemically going forward, the briefing had alluded to internal audit committees which could be used to zoom into specific areas of work. Was this regarded as an actual tool or was it more facilitative?

Deputy Auditor-General, Mr Kimi Makwetu, responded that the report highlighted areas that required action and also at the same time cautioned about the state of affairs. It identified weaknesses that needed to be fixed. The positive was that actions were under way to address the issues identified in the report.

Mr N Singh (IFP) commented that the contents of the report were alarmist and that Members should take serious note of it. Consultants would always be used in government.  The lack of planning and performance monitoring was concerning. Much of the work outsourced by departments in many instances could be done internally. If internal capacity was lacking, why was it not built up? He observed that a performance audit on the use of consultants had already been done in 1996 and 2002. What was the need for the present report? What had government learnt from the conclusions of the two previous reports? It was encouraging that the Department of Health, even though they needed to use consultants, was trying to reduce their reliance on them. On the other hand the Department of Water Affairs was spending more on consultants than on its salary bill for its financial year. The Department of Water Affairs even presupposed the use of consultants. Mindsets needed to be changed.

He asked if the Office of the Auditor-General had identified areas for prosecution. He noted that there was gross negligence and corruption at the highest level. The efforts of the Office of the Auditor-General was however appreciated. The Committee was eagerly awaiting the performance audit reports on the use of consultants in the provinces and at local government level. He felt that local government especially used consultants far too much. He asked for a timeframe on when the provincial performance audit report would be available to the Committee. In assessing the national departments, were there departments which used few consultants and hence could serve as an example of best practice and be emulated?

Deputy Auditor-General Makwetu replied that the provincial performance audit report on the use of consultants was being finalised and should be available by mid 2013. The Office of the Auditor-General did not specifically look out for a “best practice” department but there were a number of examples of best possible practice of turnarounds. He added that there were instances where consultants added value to a department. An example was the Department of Home Affairs.

The Chairperson stated that Members should be careful about the conclusions which they drew from the facts. Members should not be too judgemental. Members should ask questions but should not yet draw conclusions. It would be preferable that Members did not make pronouncements but only ask questions and allow the experts to fill the gaps.

Ms S Sithole (ANC) appreciated the work done by the Office of the Auditor-General. She asked if it was possible for them to host workshops which taught how the filing of source documents should be done at the lower levels of government. The workshops should not be too heavy and intense.

Mr Makwetu explained that the Office of the Auditor-General in partnership with National Archives had held annual workshops over the last three years. The purpose of which was preserving basic documentation evidence. The workshops would assist with the keeping of records of source documents. The disappearance of documents needed to be investigated. The question was whether the disappearance was deliberate or if it was bad source document management.

Ms Sithole responded that the Committee needed to be invited to the workshops. People should know what was happening. Contracts in municipalities should be properly filed and kept. Knowledge should not be the preserve of only a few. Oversight would only succeed if the person on the street could have oversight over municipalities. The person on the street needed to know how the funds of municipalities were spent.

The Chairperson noted that the previous day a meeting had been convened with chairpersons of parliamentary committees on how to improve the oversight and public participation models. How could people interact better with Parliament? A participatory democracy should be encouraged. Issues of the public needed to filter through. The process would sharpen the democratic system itself.

He encouraged members to attend workshops in order to sharpen their technical skills. Given the staff turnover in the public sector how did it impact upon continuity and contract management? How would it be ensured that the new employee would be briefed on the nuances of existing contracts? He asked to what extent were national officials on top of their game. Was it possible to have a checklist for public officials that they had to complete regarding financial management?

Mr Makwetu said that the Chairperson was referring to basic contract management principles at institutional level. It was not a complex thing to have in place. Staff turnover was always an issue. The skilling of Members on technical issues was something which could be looked at. The Committee would be invited to the workshop previously referred to.

The Chairperson said that due to time constraints and a lack of quorum of members the Committee would not be dealing with its internal administrative matters. The Committee had to still deal with its
Committee Study Tour Report on the visit to Austria and consider its outstanding minutes.

The Committee Secretary informed the Committee that its application to undertake an oversight visit at the end of March 2013 had been turned down as the Committee lacked the budget to do so. Hence the Committee would have to reapply in its next financial year when funds were available.

The Chairperson reacted that the next slot available to the Committee for an oversight visit was only in June 2013. Anything could happen in the time being and an oversight visit at that time was not a definite. In the meeting the previous day, the chairpersons had also discussed how more resources and efforts should be made to make oversight visits possible.

The meeting was adjourned.


Documents

No related documents

Present

  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: