Presentation to SCoAG on the CWC variances for 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 The AG had a budgeted figure for contract work for the 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).

GroupVacancy variance Average heads Hours lost to March 08 Value (R '000) BUSINESS EXECUTIVE000 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 ,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 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 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 manager127 - Assistant manager160 - Trainee accountants 1 st and 2 nd year303 - Trainee accountants 3 rd 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 Recruitment - Internal appointments External appointments Vacancy 29 Feb Vacancy as a result of internal appointments 130 Labour turnover during period 245 Newly created positions 283 Abolished 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 R,000 Contract work: 20% norm % vacancy % international % – 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 (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?