Reputation%20promise

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Reputation promise

• The Auditor-General has a constitutional mandate
  and, as the Supreme Audit Institution (SAI) of
  South Africa, it exists to strengthen our
  countrys democracy by enabling oversight,
  accountability and governance in the public
  sector, thereby building public confidence.

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Content

• Budget Assumptions
• Projected Income Statement
• Income statement commentary
• Overhead
• Overhead commentary
• Audit Income movement
• Net surplus as of Audit Income
• Strategies to achieve a net surplus of 6
• Training and development
• 10.Sensitivity analysis
• 11.Debtors current position
• 12.Suggestions of improving cash collections

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Budget Assumptions

• No limitations applied to tariffs
• Budgeted for anticipated headcount rather than
  predefined vacancy percentage
• Tariffs determined by applying mark-up factor of
  2.22 to direct costs.
• Available hours reduced from 2025 to 2009 per
  head
• Tariff increases impacted by market related
  salary increases.
• Recovery rate percentage reduced from an average
  of 70 to 68.7

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Income statement Commentary

• FC 08/09 skills shortage results in the increase
  in contract work and hence reduction in gross
  profit to 25
• B 09/10 is based on available and achievable
  resources
• 35.1 increase in own hours rates
• Salary expenditure inflationary increase of 15

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Overhead
Operating cost Staff Remuneration support Other personnel expenditure Contract Work Irrecoverable Accommodation Liaison Professional Assistance Technological Services Auxiliary Services Other Forecast 08/09 368,950 135,090 28,447 19,601 41,928 17,363 54,805 26,451 11,621 33,644 Budget 09/10 493,905 198,017 35,521 18,120 47,970 29,142 79,737 32,616 14,468 38,314 Movement Budget 124,955 62,927 7,074 (1,481) 6,041 11,779 24,932 6,165 2,846 4,670 34 47 25 (8) 14 68 45 23 24 14
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Overhead commentary

• Increase in overhead is mainly driven by support
  service increase in staff numbers and a 15
  budgeted salary increase compared to 7 the
  previous year.
• The increase in professional assistance is as a
  result of re introduction of compulsory technical
  training for audit staff

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AUDIT INCOME MOVEMENT 2008-09 vs. 2009-10 BUDGET

• Audit income grows 32 versus PY. The increase in
  own hours is largely attributable to increase in
  tariffs..CWC increase is due to 8.2 shortfall
  in own hours capacity.

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Net Surplus as of Audit Income
Forecast 31 March 2009 Budget 31 March 2010 Budget 31 March 2011 Budget 31 March 2112
Net Surplus / ( deficit) (34,4) 66 86.8 93.3
Net surplus as of Audit Income (3) 4 5 4
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Strategies to achieve a net surplus of 6

• Reduce contract work to less than 30 of Audit
  income
• Develop and retain key skills
• Introduce control measures to reduce the
  escalation of overhead cost.

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Training and development hours
Available Hours Training Hours
Business executives 38,171 3,059 8
Operational leaders 6,027 483 8
Senior managers 261,170 20,930 8
Audit managers 679,042 68,276 10
Auditors 807,618 114,172 14
Trainee accountants 1,815,028 302,064 17
Total 3,607,056 509,784 15
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Debtors current position

• The collection of debtors remains a major
  challenge especially with local authorities and
  provincial governments whose average debtors
  days have increased by 39 and 13 days
  respectively. (Refer to table below)
• The poor payment history by local authorities is
  putting strain on cash flow.

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Suggestions of improving cash collections

• Building relationships with Provincial Premiers
  and Director Generals. This would enable a quick
  and favourable response if Section 23(5) of the
  Public Audit Act (PAA) were to be invoked. This
  section states that a relevant Provincial
  Treasury may after consultation with the
  Auditor-General direct that audit fees
  recoverable from an auditee be defrayed from a
  vote on the provincial budget identified by the
  relevant provincial treasury.
• Letters of demand sent to auditees ( after 60
  days) should be copied to the relevant Provincial
  Treasury , as an early warning flag of a
  potential debt which could end up being paid by
  the Provincial Treasury.
• Business Units which have assigned a Senior
  Manager as a debtors champion have proven to be
  more successful in cash collections than those
  who have not assigned one. The debtors follow up
  processes in these BUs are similar and most
  important achieve results. These good practices
  should be rolled out to other Business Units.