Presentation to SCoAG on the

CWC variances for

2007

8 APRIL 2008

The reputation promise of the Auditor-General

“The Auditor-General 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, thereby building public confidence.”

Definition

• Contract work represents that portion of the audit work of the AG that is contracted out to private audit firms who then perform the audit on behalf of the AG.

Budgeted figure 2007-08

The AG had a budgeted figure for contract work for the 2007-08 financial year of R250,5m which represented 26% of total audit income. The budget was based on a vacancy assumption of 5% (1612 billable staff).

Actual for 11 months plus 1 month forecast

The actual contract work for the 11 months ending February 2008 and 1 month forecast to 31/03/2008 is R377,9m representing 37% of total audit income. This represents an increase of 11% of total audit income and an increase of R127,3m in contract work income. The increase is the result of a weighted average actual vacancy rate of 12% (1469 billable staff).

Group Vacancy variance

  Average headsHours lost to

March 08

Value (R

'000)

BUSINESS EXECUTIVE 0 0 0

SENIOR MANAGER -6 -7,569 -6,792

MANAGER -45 -64,080 -39,136

AUDITOR -26 -38,153 -11,072

TRAINEE -66 -96,589 -13,301

Total -143 -206,390 -70,302

The above indicates that 206,3 thousand hours has been lost due to vacancies over and above the 5% budgeted vacancy rate as per 07-08 budget. This effectively represents an average vacancy rate of 12% for the year.

Lost hours and revenue

As a result of the increase in vacancies, the AG has lost 206 390 own hours revenue amounting to R70,3m and increased the revenue contract hours by R93,1m.

Additional cost of audit

Because of the higher average rate per hour of R450 charged by audit firms compared to the average rate per hour of R305 by the AG, the cost of audits increased by R22,8m.

Challenge

It is difficult to find top calibre professionally qualified candidates suitable for the core business of the AG in a competitive global market.

Vacancies existed mainly at the following levels:

- Senior manager 18

- Audit manager 127- Assistant manager 160- Trainee accountants 1st and 2nd year 303

- Trainee accountants 3rd year 99

Recruitment

The AG has embarked on a concerted recruitment drive to fill vacancies and bring the vacancy level within the budgeted assumption of 5%.

- Reduced turnaround time

- Additional recruitment service providers

- Dedicated team within HC

Recruitment is a key deliverable (product) on the BSC of Human Capital.

Recruitment (continued)

The recruitment drive yielded the following positive results:

Vacancies as at Sept. 2007 724Recruitment - Internal appointments 130 - External appointments 460 590 134

Vacancy 29 Feb. 2008

Vacancy as a result of internal appointments 130Labour turnover during period 245Newly created positions 283Abolished positions (75) 592

A more detailed progress report on the recruitment project is available.

Management of contract work

- Vacancy variances are tracked on a monthly basis.

- Allocation of contract work has to be fully motivated and approved by the relevant CE and one other CE (now HoA).

- Contract work expenditure is monitored on a monthly basis against the original approvals.

- Contract work is allocated for critical periods of the audit only.

Budget 2008-09

R

,000

Contract work: 20% norm 242 813

10% vacancy 101 595

1% international 4 180

31% 348 588 – 39% increase over previous year

Conclusion

• Our recruitment drive would continue to yield better results.

• We are confident that vacancy levels would be managed within the budget assumptions as contained in the business plan for 2008-09 (Blue Book).

• The retention strategy would also yield better results and thereby reduce staff turnover.

• We aim to develop more trainee accountants in-house and retain them in higher positions.

QUESTIONS?