Auditor General on the use of consultants in the Department of Environmental Affairs

Water and Sanitation

11 March 2013
Chairperson: Mr J de Lange (ANC)
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Meeting Summary

The Committee received a comprehensive briefing by the Auditor-General of South Africa (AGSA) on the use of consultants in government and in the Department of Environmental Affairs (DEA) specifically. General comments were made about the function of a performance audit, scope of the audit and the departments audited, audit focus areas and key challenges across departments. There was also a discussion on the recommendations for all departments, the combined assurance model and commitment to action.

The briefing also looked at DEA specifically in terms of overall expenditure on consultants, audit findings through 15 specific projects, variations per contract and additional projects and contract specific challenges.

A thorough discussion ensued after the briefing with Members raising questions around the definitions of consultants, under-calculation, use of specific contractors and responsibility. There were also concerns around the recommendations, internal capacity and vacancies, extension of contracts, delays and the terms of references and specifications. 

The Chairperson noted many systemic changes. He proposed that the Department meet with the AGSA and National Treasury to talk through the areas of differences of opinion and expectations to find solutions. He wanted a report to the Committee on areas of disagreement and problems.

Meeting report

Introduction
The Chairperson noted that he attended the Convention on International Trade in Endangered Species (CITES) meeting last week at the Minister’s invitation. He was going to use part of the meeting to report back to the Committee on rhino matters included at CITES but most of the Departmental people were still in Bangkok as the meeting only ended this week. This would happen at next week Wednesday’s meeting and noted he wanted a report back from the Department on the managers’ report, hunting indaba and CITES.

The Chairperson noted that the remainder of this week and next week would focus on DEA and their budget. He noted that tomorrow and next week, the Committee would properly look at the budget hearings. Half of next week Wednesday’s meeting would also be a report back on rhino. The week after this would focus on the Department of Water (DWA) and the Water Boards. He said a lot of time, a whole two Committee weeks, would be used for Water. There would also be a week on public hearings for all the press statements sent out on the Bill and Green Paper etc.

He asked the Department why the Inter-Coastal Management (ICM) Bill was not in Parliament yet. He found it ridiculous that it was not. He wanted the Department to write and request to know, in writing, from the State Law Advisers, what the delay with the Bill was. He told the Content Advisor, Ms Shereen Dawood, that the press statement needed to be changed.

Ms Lize McCourt, DEA Chief Operating Officer (COO), apologised and questioned if the matters on conservation should be discussed at next week Tuesday’s meeting on all the entities or on Wednesday to be coupled with the rhinos.

The Chairperson said they could report on everything except the rhino, unless it was related to rhino money matters, but the indaba, CITES and managers' report would come on the Wednesday. He noted he was trying to group subjects together and wanted the Department to look at grouping things together for the different meeting days.

The Chairperson wanted tomorrow’s meeting to start at 09h30 while the meetings next week would start at 09h00.

AGSA Performance Audit of the Use of Consultants at the Department of Environmental Affairs presentation
Mr Naeem Seedat, AGSA Corporate Executive: Special Audits, began by noting the briefing would take the Committee through some of the key findings on the use of consultants by government based on a report tabled in Parliament. He reminded Members that this report was available from the AGSA's website and hoped the Members forgave the AGSA for not printing copies in a bid to be environmentally friendly. He proceeded to look at the reputation, promise/mission of the AGSA.

The Chairperson said that this could be skipped.

Mr Seedat said it was important for Members to know why a performance audit was conducted and how it differed from the usual audits conducted by the AGSA. He said that R120 billion was spent on consultants by government over the past three years which was a significant expenditure and was the reason for the conduction of an audit. He recognised that South Africa faced a skills crisis and that specialised skills were needed but the relationship between third-party service providers and the state must be used correctly. He noted a similar report was tabled in the UK and a number of issues were similar between the SA and the UK reports. This showed this was a universal problem that needed to be tackled in a sustainable manner. He said previous performance audits were conducted on the use of consultants by government in 1996 and 2002 so some of this audit was to follow up on these findings and their progress.

He said this performance audit differed from a regulatory audit in that the latter focused on financial statements, financial management, accounts true and fair and the compliance with the relevant prescripts and legislation which was done on an annual basis. A performance audit focused on the three “Es” – Economy (right value for money in terms of cost), Efficiency (optimal relationship between inputs and outputs) and Effectiveness (achievement of goals set out) and was conducted when problems were identified.

Mr Seedat then moved on to look at the scope of the audit through a graph explaining provincial and national expenditure. He noted that national government accounted for 33% (R33.5 billion over a three year period) of the total (R102.043 billion over a three year period) while provincial government accounted for 67% (R68.5 billion over a three year period) of this total. He noted that similar audits that had been conducted nationally were underway for a provincial level to be tabled within the next couple of months.

Also within the scope of the audit were the departments audited of which there were eight all amounting to the total expenditure on consultants of R24.6 billion over three years. These departments were chosen as they represented good bang for buck based on the scare auditing resources. The choice of departments was also guided by the previous audit work conducted.

The Chairperson wanted a definition for consultants.      

Mr Seedat said the AGSA had adopted a very broad definition of what a consultant was, based on this audit, because any relationship with a third party at an arm’s length nature was considered under the broad term a consultant. 'A consultant' was defined in three ways- a consulting or professional service (specialist services and skills to reach specific objectives), a contractor of a non-specialised nature and so not core to the business, and an agency or outsourced service. For the purpose of this audit, all three definitions were used in the term consultant.

The Chairperson asked if this applied to the use of all services by outsiders. He said it was important to make the right distinctions in an audit and not lump everyone together which the media used and went crazy with. It was important to bear in mind that consultants also included the normal contract work like information technology (IT) etc. He said the AGSA needed to have a distinction especially for people that were not needed for Members to understand. He understood that contractual services were needed but the proper tender processes needed to be followed. He wanted the information to be categorised so that it could be understood. This was especially so when looking at services used which could have come from the Department internally. It would also make it easier to provide explanations as to why this was so. He said this distinction was needed.

Mr Seedat noted a full breakdown of the categories of consultants would follow in the presentation.

H noted all the audit focus areas were looked at –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 and closing and finalising projects. He said there was a bit more detail on in the additional detailed report which would help the Members in looking at the key audit questions they need to be asking.

He looked at the key challenges across departments, which were in the planning and appointment process where comprehensive needs assessments were not done and competitive procurement processes were not followed. Another problem was within the area of internal capacity, where consultants were appointed when permanent capacity should had been and consultants were appointed due to a lack of internal staff capacity. In-service training and the transfer of skills were ineffective; in performance management and monitoring, effective oversight and internal controls were not functioning. The two areas of most significant concern, however, were planning and appointment and performance management and monitoring across all departments.

The AGSA began to look at the specific findings of DEA noting the total expenditure on consultants (2008/09 to 2010/11) was R550.6 million but reminded the Committee the funds spent included both voted funding and donor funding. 15 projects were audited to the value of R57.6 million and the average vacancy rate at the Department (2009/10 to 2010/11) was 30.35%. The AGSA highlighted the graph which gave an indication of the break-down of expenditure per year (2008/09 to 2010/11) within DEA and it was clear from this that most of the money was spent on consultants.

The Chairperson questioned the three categories and wanted to know that consultants meant there.

The AGSA said consultants there was the same as had been discussed earlier. Consultants could also be divided between core and non-core although this had not been done and the audit focused on the normal definition of consultants.

The Chairperson said this did not tell if it was a function which could have been performed by the Department or not.

The AGSA agreed that it could not.

The AGSA then moved onto the audit findings noting the audit looked at the consultants per contract audited, the best available value of the contract and the period of the contract/service. Classifications were done according to the use of consultants, contractors and agency/outsourced services. The different areas where deficiencies were identified during the audit were in the areas of planning and appointment, internal capacity, training and the transfer of skills, performance management and monitoring, extension of contracts and in the closing and finalising of projects.  Looking at the “E” affected by the specific finding, she told the Committee that for “economy”, it did not mean the whole project was not economical.

The AGSA looked at the first project audited as an example. The project was the developing of the National Framework as contemplated in Section 7 of the National Environmental Management: Air Quality Act (No. 39 of 2004) done by the Council for Scientific and Industrial Research (CSIR). The best available value of the contract was R3.8 million and the contract lasted from 22 March 2007/30 April 2008. According to the classification, the CSIR was a consultant in this project and the area of deficiency found was in planning and management while the “E” affected was economy.

The Chairperson asked what this meant.

The AGSA said it meant looking at the right timing, in the right place at the lowest cost. It also meant looking at the difference between the estimated cost and the actual cost of the project.

The Chairperson wanted to know, from the AGSA, which one of the 11 should have been done by the Department itself and not by a consultant.

The AGSA said it would be all the projects with a tick in the column marked “internal capacity” under areas where deficiencies were identified during the audit i.e. the Department should have created the internal capacity.

The Chairperson said this made more sense. He asked if it should be assumed that the project with no ticks under internal capacity meant the Department did not have the capacity to perform the project itself.

The AGSA replied in the negative, it could mean that specialist skills were only needed over a short period of time and the Department did not need to retain those skills. The AGSA said there were also services which needed to be rendered continuously over a number of years where in such cases it would be better to create the internal capacity within the establishment.

The Chairperson noted that under every project the planning and appointment was an identified deficiency except for the 15th project. He wanted more detail as to what was wrong with planning.

The AGSA said this would be looked at in further detail as the presentation went along.

The Chairperson queried what was meant under “training and transfer of skills” under identified deficiencies.

The AGSA said in these instances, there were findings of inefficiency under training and transfer of skills.  

The AGSA then looked at total of the audit findings noting that 14 of the 15 projects audited had identified deficiencies in planning and appointment, two projects had findings under internal capacity, two under training and transfer of skills, two performance management and monitoring, four under extension of contracts and zero projects had findings for closing and finalising of projects.

The AGSA then looked at all the variations per contract and additional projects added under this section namely, the establishment of an inventory assessment of infrastructure and capacity for the development of National Implementation Plans, development of the South African Air Quality Information Systems and support for the development of the Environmental Management Framework. She said it should be noted

The AGSA then moved into the contract specific challenges. Under comprehensive needs determination, ten consultants were identified with a total contract amount of R41.2 million including market related costs and project estimates were not performed resulting in an increase of 81% between estimated project cost and contract cost.

The Chairperson asked if the Department under-calculated.

The AGSA confirmed the Department did under-estimate the cost during the planning process by 81%.

The Chairperson said this sounded very bad and expected the Department to defend this.

Ms Nosipho Ngcaba, DEA Director-General (DG), said this was a bad example but noted the process of the National Environmental Management: Air Quality Act 2004 was conducted at a provincial and not national level and was done on the basis of the available budget.  She said this was the same kind of project as with climate change and the work done by the University of Cape Town (UCT) as consultants doing the long-term mitigation scenarios which was then used as the basis of the policy. She said the important question was whether this could be done otherwise in the public sector and how this was benchmarked. She said this was where discrepancies between the interpretations of the AGSA and the department came into play. She said funding received from National Treasury was not market related but the Department used the available funds to explore the work and develop all the instruments over time. She said this was similarly in the waste project where the Department could not create internal capacity but needed to make use of consultants in municipalities. She said many projects were not permanent but done in support of municipalities.

The AGSA noted the colour coding which had the aim of indicating the level of scrutiny. It referred to intense scrutiny of strategic plans and accountability reports, activities monitored quarterly and follow up on corrective action against action plans. The AGSA discussed the second finding under contract specific challenges,  which was the delay in appointment process where seven contracts with a total contract cost of R27 million where the appointment process took on average seven months due to poorly co-ordinated planning and activities. Looking at specific challenges, the AGSA noted the assistance with the backlog in the approval of waste disposal sites by Jeffares & Green for R4.5 million from 15 January 2009 to14 January 2010. The licence for this project was transferred from the Department of Water Affairs to what was, at the time, the Department of Environment and Tourism. When the AGSA referred to lack of capacity within the Department, it did not always refer to permanent capacity but could be short or medium term. Also, when talking about the minimisation of cost, it meant the minimisation of the cost of the consultant and not the overall cost to the Department.

The next project looked at was the stakeholder publication with Bembani Sustainability Training at a contract value of R1.4 million from 1 September 2008-10 May 2009 (initial contract period was from 1 September 2008-31 August 2011). The terms of reference were not clear and specific on deliverables, which meant that the consultant had to use a production schedule as terms of reference. The contract was terminated well before the three years were over due to the split in the departments and so only two publications were released. 

The AGSA said the next finding revolved around the development of the SA Air Quality Information System by Gondwana Environmental Solutions at the amount of R4.9 million from 1 July 2007-30 September 2009. The consultant did not have the required skills to procure computer equipment and a sub-contractor had to be appointed.

The Chairperson asked what the problem with this was.

The AGSA said the terms of reference was scant on detail to provide the bidder with information on the procurement of equipment. The initial design model was not compatible with the Department’s and the contract period had to be standard by nine months in total.

The Chairperson said such information should be made clear. He asked if the Department was responsible for not giving the correct instructions.

The AGSA confirmed this and said there was only one sentence included in the terms of reference for computer equipment.

The Chairperson said these consequences were important in explaining delays.

The AGSA moved onto the next finding which was the public private partnership (PPP) transaction advisor using the Mi3 Consortium for R10.5 million for a multi-year contract (appointment date: 8 May 2007). In this contract, the bidder with the highest overall score was not appointed.

The Chairperson apologised for his ignorance but wanted to know what the rules were on whether the Department was allowed any discretion.

The AGSA said the Department did have discretion but the specifications in the terms of reference must be 100% correct and adaptable to the Department’s achievements. The Department needed to know how they would evaluate the tender – whether on a cost base or quality and cost base approach. She said a score was reached by adding up the quality, cost and previous disadvantaged record. She said in this case, the Department scored the consultant on cost and quality and went with the higher bid for functionality, or quality, and not for cost or highest overall score. The Department was allowed to do this but within good management minimums. There could be another bidder with an equally high score on functionality and it was difficult for the AGSA to know the Department’s thinking on their choice was without the relevant documentation.

The Chairperson was confused, as the AGSA had said the Department was allowed to do this. He said the AGSA had not explained what was wrong and wanted the AGSA to talk openly.

Ms Ngcaba said the adjudication committee made a decision not on the overall score but on the highest functionality threshold.

The Chairperson said he wanted to hear from the AGSA. He said it was obviously put in as a red light and wanted to know why the AGSA thought the Department was cheating.

The AGSA said the performance audit was not focused on cheats. She said the Department could not change their terms of reference as stipulated in the tender which applied to all bidders to look at both cost and quality. The Department had then turned around and choice the bidder with highest functionality score. Added to this, there was a number of non-compliance found during this specific appointment and this specific consultant did not have all the necessary skills. There was also a delay of up to 1 445 days in achieving the proposed deliverables. The Department needed to document the reasons for not appointing the preferred bidder (bidder with the highest overall score).

The Chairperson said the actual sin was that the Department did not record its reasons, which was a bad enough sin. 

The AGSA agreed and noted a recommendation that the Department do an investigation into any case of non-compliance and take the necessary disciplinary action.

The Chairperson said he would not understand the mind of an auditor as he had a lawyer brain. He noted the overall problem was the delay of 1 445 days.

The AGSA conferred and was told that, as of 2011, the project was still not completed.

The AGSA moved onto the next finding, which was assistance with financial services by GDP Public Finance Consultancy CC. The consultant was appointed various times from 6 December 1999-28 July 2010 for which the consultant was paid an amount of R9 731 491 during that period. The audit deficiency was not focused on issues of compliance, as the Department had followed the required processes in their appointment, but within the period during which the Department made use of the specific consultant due to a lack of internal capacity. The other problem was that the skills transfer was not specified in the terms of reference and the contract.

The Chairperson asked if it was necessary to have given these consultants a clean audit for all these years.

The AGSA looked at the last finding of the 2010 Greening Project using Bembani Sustainability Training for R264 480 from 30 July to 15 September 2007 to assist with the development of a business plan. The problem was that the competitive bidding process was not followed. The project was deemed urgent, which allowed the Department to deviate from the normal process, but it needed to document the reasons why it saw the project as urgent and then deviation could go ahead.

The Chairperson said he wanted to know who the staff were that could not read and write as this was the second case where the Department was lacking documentation.

The AGSA said that when a performance audit was done, there was no opinion formed and the AGSA reported factually only on the projects audited.

The Chairperson said the AGSA should not make an overall statement on the amount spent on the use of consultants when only a certain number of projects were actually audited. The AGSA should be clear, especially to the media, that only a portion of the overall amounts was actually audited. He joked that he should be a consultant. He said that all the information was very useful to see what the issues were and explained that he asked many questions so as to better understand.

Mr Seedat said the audit was not an investigation and extrapolation from projects were not used to explain the entire situation but it was important to identify systemic weaknesses, which formed the basis of the performance audit. He said looking at individual cases allowed for systemic weaknesses to be identified and could explain if there was a trend like planning and appointment.

The Chairperson said that this was the obvious weakness and it was clear that if the Department did not have a clear plan with specification up front it would not be clear to the contractors. He found this astonishing. Another weakness was that the Department did not write down and record its ideas.

Mr Seedat said that the AGSA was not advocating the terminating of consultant contracts but recognised they were useful as long as the process used was robust and that decisions were recorded to ensure value for money.

The Chairperson questioned the choice of the 15 projects and what criteria they were chosen on.

The AGSA explained that the process looked at what was in the media, what was in the internal audit and the supply-chain management and that these criteria were measured against the sample of projects.

The Chairperson found using the media was a big problem for him.

Mr Seedat looked at the recommendations for all departments, which was to consider the cost implication before appointing consultants, timely appointment of consultants, training and transfer of skills, to learn from the past and apply it to the future, investigate possible irregular, fruitless and wasteful expenditure, comprehensive needs assessments, which included accurate cost estimates which should be conducted, developing a strategy governing the use of consultants, and compliance with the legal frameworks, laws, regulations and policies. These would ensure value for money from the use of consultants.

The Chairperson said it needed it be checked whether any of these problems still persisted under current contracts.

Mr Seedat said learning from the past and applying to the future was critical. He then turned to the combined assurance model to recognise that there was a risk in using consultants and mitigating this risk required assurance on three levels – management assurance, (senior management, accounting officers and executive authority) oversight assurance (coordinating/monitoring institutions, internal audit and the audit committee) and independent assurance (oversight, public accounts committee and external audit).

In summary, Mr Seedat said that commitment to action was needed. He said a critical equation was that the private sector formed part of the picture together with the public sector. The appeal was made to the private sector that it should not take advantage of weaknesses in government systems. He said that realising the common goals of economic success required effort by both government and business.

Discussion
Ms M Wenger (DA) thanked the AGSA for the comprehensive presentation. She noted that she stayed in one of the most polluted areas, the Vaal Triangle, where the monitoring station there was not functioning because of inefficient equipment. She wanted to know whether the Department or the municipality was responsible for this. She noted the Department used Bembani a lot while their projects failed using these consultants and wanted to know why this particular company was being favoured. If the contract was awarded, she asked if the Department paid the additional costs when the contract conditions were not met. She also wanted information from the AGSA on meetings being cancelled and their effect.

Mr S Huang (ANC) thanked the AGSA for the detailed presentation. He noted a lot of money was spent on consultants but thought the Department’s use of consultants was good. He said the problem was that departments overspent on the use of consultants. He questioned the three “Es”. He asked the AGSA who took responsibility for the over use of consultants and how government could remedy this situation.

Mr J Skosana (ANC) said the briefing was well presented. He got the perception, from the AGSA’s presentation, that the Department was run by consultants and the Department clearly did not have capacity. He wanted to know when the AGSA first recognised this problem and made it known to the Department because of the long period the AGSA looked at for the performance audit (2007/10 and it was already 2013 today) and what kind of recommendations they put forward. He felt this presentation ruined the good record of the Department so far. He asked why it took so long for these challenges to be made public knowledge.

Ms B Dlomo (ANC) said that she had attended a summit on local government over the weekend where this issue of consultants was emphasised. She noted many municipalities did not have capacity or the skilled municipal managers. She felt a follow-up was needed on all the consultants used.

Ms B Ferguson (COPE) had a number of questions looking forward. She asked what the AGSA recommended in the extension of contracts going forward noting that some contracts had just recently been extended. She was looking for specific recommendations such as on the extension of contracts because of the huge sums of money involved. She was concerned about consultants not having environmental specialists (like the Mi3 Consortium) and questioned if was there was favouritism or nepotism involved in the awarding of these contracts. She wanted more detail on the delays and if delay was felt on the Department or consultant side. She also asked why the terms of reference were not clear especially given the huge sums of money involved. She said the criteria for urgent tenders were important to know as a Committee. She asked if the vacancies of the Department were filled and the opinion of the AGSA on this matter.

Mr Seedat said some questions were perhaps better answered by the Department and reminded the Members that much of the detail they wanted was in the AGSA’s detailed report. Looking at overspending, he noted this was the responsibility of the Department primarily as the fist level of assurance. He said the problems of the use of consultants were picked up before in the performance audits of 1996 and 2002. The main findings of these audits were in the acquisition, monitoring and control of consultants, the responsibility of departments to create environments conducive for consultants to work in effectively and the implementation of deliverables. He said these issues were still prevalent today. For this audit, departments were communicated to as far back as 2010 on preliminary findings. On the extension of contracts, he noted it in itself was not bad and formed part of daily business. However, planning up front was needed and with clear terms of reference. The delays were due to planning issues. Looking at vacancies, internal capacity needed to be looked at carefully and he noted that the AGSA was not advocating against the use of consultants.

The AGSA looked at the PPP noting that specific details were not made clear. In terms of the criteria for urgent matters, these were areas were early delivery were of critical importance and competitive bidding was impossible or impractical. The AGSA emphasised lack of planning was not a justification for an urgent contract and documentation for reasons was needed. Many other questions were explained in the detailed report.

The Chairperson told the DG that he wanted solutions from the Department and wanted it corroborated by the Department’s internal auditor.

Ms Ngcaba said the Department had offered itself as guinea pigs for this performance audit without knowing the consequences. This was also done with the Department of Public Service and Administration (DPSA) to check areas of improvement. She said the Department worked well with the AGSA in general although there were some differences of opinion here and there. One such area was that on forecasting or estimation. The Departmental line managers did not test the market before the budget. The Department worked out a mechanism to work with provinces and a municipality through an ongoing consultation process with provinces on contracting so there was a delay. This was one of the reasons in delays caused. In the area of waste disposal sites, there was no legislative framework after the contract was transferred to the Department from DWA. The Department had to do this with no budget although donor funds were used. Usually when donor funds were used, internal capacity was not created. It was not encouraged in the public service that posts be internally created based on the legal expectation that after a certain amount of time, these people needed to be employed permanently. The only internal capacity was to run and co-ordinate the outside contracts. It was important to do the costing comparisons between creating internal capacity and outsourcing, and, in many cases, it was much more costly to create the internal capacity. Turning to aviation tariffs, the weather service was responsible for setting the terms of reference and so she was unsure about the issue of planning and cost effectiveness and also unsure about the AGSA’s findings on this. Looking at the Greening Framework 2010 event, this was an urgent requirement with certain timelines to be met. It was qualified on the basis that the Department had to respond at an appropriate time. Added to this, it was not a function of the Department and donor funding was used.  She noted some of these issues pre-dated her time as DG. Turning to functionality, she said it may have been an oversight that might have been set at a lower threshold but she needed more explanation on this from the AGSA. She said the Department Adjudication Committee (DAC) was responsible for the assessments made on functionality vs. overall cost. In the GDP contract, due process was followed and the relevant Ministers concurred on the extension, given that the Department was not in a position to create internal capacity for project management. Hereafter, there was a phasing out of consultants, although the transfer of skills occurred when the chief directorate was established. She said the project started small but grew over the years. She highlighted to Members the implications of the split in the Department. She also asked them to keep in mind the use of donor funding and that sometimes the Department had to agree with international donors on which consultants to use.

Ms McCourt said outsourcing was used when the work was not the function or mandate of the Department, so it would not be justified to create permanent capacity as was highlighted to the Committee before. She also noted that the Department fell below (12%) the vacancy numbers of the DPSA, which meant that it did not have a lot of vacant positions. Outsourcing was also used in the short-term, in assisting provinces and municipalities and in accordance with legislative requirements/Cabinet decisions. She gave the example that the Department was forced by law to use the State Information Technology Agency (SITA) (which then outsourced the work to a third or fourth party) and bulk media buying for Human Resources recruitment processing often through the Government Communications and Information Systems (GCIS). She said the Department had all the outsourced work in a detailed database with reasons for outsourcing, the value of the project, and who was responsible. She said there was an attempt to improve needs assessment through benchmarking. There were guidelines out on the terms of reference and scrutiny signed off at a DDG level after supply-chain management had assured that it met the requirements. Outsourced work also went through the accounting officer/DG for budget assurances and to establish uncertainties and estimates. Reasons for the choice of consultant also went through the DG together with complying with National Treasury regulations. For very big projects, requests for proposals were sent out. She said a number of controls were in place especially within the internal audit unit.

The Chairperson asked who signed- off on the specs.

Ms McCourt said the Deputy DG did.

The Chairperson was concerned that this was not enough. He said the DDGs were under pressure to do work and meet deadlines and so signing- off could be rushed. He felt the right answer from the Department should be that this rule should be changed.

Ms McCourt said that it could be changed if the findings were still found after a testing. She said the terms of reference were going through more checks, in terms of compliance.

The Chairperson could not understand the hesitancy to go higher for signing- off by the DG.

Ms Ngcaba said this needed to be thought about. She said the problem was more in terms of National Treasury requirements and budget and not the actual technical specifications.

The Chairperson noted there were problems of planning with every single project audited by the AGSA. He felt very uncomfortable that the DG and Chief Operating Officer were not signing- off.

Ms Ngcaba said the way to resolve this was that when the DDG approved the principle of outsourcing, it must come with specifications, so that they could both look at specifications.

The Chairperson said he would sleep much better at night knowing this was the case.

Ms McCourt noted there were far more processes undertaken before the accounting officer signed off on the principle of outsourcing with specifications going through supply-chain and the technical committee. There was also the role of the evaluation committee in looking into specifications before they were published. She said some of the key changes were in the bid committee where, apart from increasing the number of chairs, there was the implementation of a robust demand management system where the DAC and evaluation committee was driven by a pre-set annual demand plan. DDGs were meant to report to the DG on whether they were meeting these timeframes set at the beginning of the year.

Ms Ngcaba said the difficulty was in costing especially in terms of non-intentional consequences and possible corruption involved with people informing contractors of the price before they tender.

The Chairperson asked whether the correct specs would take this problem away as knowing the price of a tender before bidding took place could not be right.

Ms McCourt said there were the issue of variation and the process of the Department in the past of reflecting the budget allocated for a project in the planning process and reflecting this in the proposal. This was done so that the accounting officer, on approval, had the assurance that there was money to pay the service provider. This was changed through the introduction of estimates where the DG was not bound but was allowed the space of what was reasonably considered for the contract. If the budget was not available, the DAC did not have a mandate to award the tender. The problem was that the Department had a voted budget, which was a limitation.

The Chairperson was pleased with a lot of what was said and he noticed many systemic changes. He proposed the Department meet with the AGSA and National Treasury to talk through the areas of differences of opinion and expectations to find solutions. He wanted a report back on this to the Committee on areas of disagreement. He also wanted the Department’s internal auditor to go through these processes and report back on problematic issues.

He thanked both the AGSA and the Department. He said the process would be made more valuable with fine tuning. He thought the AGSA was trying to pin everything on the word ‘consultant’ as it did not bring clarification. He thought there other clever ways to do the same work. He appreciated that the AGSA reflected their findings in a sample although it should not muddy the water by first talking about an overall picture when only a certain number of cases were actually audited. He noted the Members would not understand, were it not for the explanations and interpretations of the AGSA. He saw the problems coming from specs specifically and in being so precise it was not necessary to highlight the huge umbrella of planning and so suggested the AGSA break the categories down further to be really helpful in holding people to account. He wanted the Department to follow up to see whether things were done correctly according to the AGSA. He also questioned criteria and categories as putting everything under consultants were problematic. He wanted it to be pinpointed where the Department should not have used consultants but instead should have relied on internal capacity, which should be differentiated from contracts and service-providers. He needed to be empowered to hold the relevant people to account through specifics. He said the work was excellent and the Department’s response was good.

The Chairperson had another appointment and asked Mr Skosana to take over as Chairperson.

Ms Ferguson commended and thanked the Department for handing itself over for this audit.

Ms Ngcaba said it was always tough to come before the Committee but she had learnt a lot. She said the AGSA did the audit with integrity and robustness.

The Acting Chairperson said the Department should stick to the recommendations of the Chairperson and compile a report based on this.

He thanked everyone for their attendance and the valuable presentation. He noted had Members were given a package of documents, which they were to bring with them to the next day’s meeting at the Good Hope Chamber.

The meeting was adjourned.

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