CWC Variances for 2007

							               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).
    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.
Group                                                       Vacancy variance
                                                                                   Value
                                                               Hours lost to           (R
                                           Average heads          March 08           '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.
  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                                      724
Recruitment - Internal appointments          130
            - External appointments          460            590
                                                            134

Vacancy 29 Feb. 2008

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 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?