Cost containment measures
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COST CONTAINMENT MEASURES. OFFICE OF THE ACCOUNTANT-GENERAL. Presenter: Jonas Shai | Office of the Accountant General, RMS | August 2014. Spirit of the Instruction. Outline. Background Current Climate Why the CRO and Expectation Treasury Instruction Conclusion. Background.

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COST CONTAINMENT MEASURES

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Cost containment measures

COST CONTAINMENT MEASURES

OFFICE OF THE ACCOUNTANT-GENERAL

Presenter: Jonas Shai | Office of the Accountant General, RMS | August 2014


Spirit of the instruction

Spirit of the Instruction


Outline

Outline

  • Background

  • Current Climate

  • Why the CRO and Expectation

  • Treasury Instruction

  • Conclusion


Cost containment measures

Background

  • Section 38(1)(c)(iii) and 51(1)(b)(iii) of the PFMA – accounting officers and accounting authorities must manage available working capital efficiently and economically;

  • Accounting officers and accounting authorities – ensure key expenditure control measures are in place and working as planned;

  • Cabinet resolution of 23 October 2013 - all public sector institutions to contain operational costs and eliminate all non-essential expenditure;


Current climate

Current Climate

  • Quarterly Labour Force Survey: Unemployment rate 25.5 per cent.

  • Consumer inflation: 6.6 per cent

  • Labour unrest

  • NDP: alignment of allocation of resources & strategic objective


Why the cro

Why the CRO?

  • Risk-Based

    • Risk assessments

    • Internal Audit rely on this for their work

  • Protect your organisation

  • Protect your Accounting Officer/Authority

  • Key focus/audit area


Risk universe

Risk Universe


Expectation

Expectation

Source: EY : Expecting More from Risk Management


Expectation1

Expectation

  • Understanding of the whole business

    • All assessment sessions should be speaking this language

  • This is not a CFO instruction

    • Silo mentality demolishing

  • Advice on process design

    • Review of system descriptions/ operating procedures


Expectation2

Expectation

  • Ability to identify “what could go wrong”

    • Risk Assessment process

  • Ability to identify assertion deficiencies

    • Occurrence, Completeness, Accuracy, Cut-off

  • Ability to suggest process improvements

    • E.g. King Code: Information Technology


Engagement of consultants

Engagement of Consultants


Engagement of consultants1

Engagement of Consultants

  • Gap analysis

    • Innovation and area of efficiency gains

  • Rates payable

    • Assist Internal audit’s risk based plans

  • Penalty clauses in contracts to curb poor performance;

    • Risk Monitoring Activities

  • Consultancy reduction plans before 31 March of each year;

    • Risk Monitoring Activities


Risk monitoring activities

Risk Monitoring Activities

  • Chapter 9

  • Allocated responsibilities are being executed effectively

  • Response strategies are producing the desired result of mitigating risks or exploiting opportunities; and

  • A positive correlation exists between improvements in the system of risk management and institutional performance


Travel and subsistence

Travel and subsistence


Travel and subsistence1

Travel and Subsistence

  • Domestic hotel accommodation

    • Ask the question

    • Review of the process/documentation design

  • Car hire – Only Group B or any other lower class of vehicle

    • Ask the question

    • Review of the process/documentation design

  • Flights


Travel and subsistence2

Travel and Subsistence

  • Official or Parliamentary duties – limited to 3 employees

    • How many of you are here


Credit debit cards

Credit/ Debit Cards

  • Amendment to Treasury Regulation 15.10.3 & 31.2

  • Prohibit useof credit or debit card

  • May retain or obtain credit or debit card for other specific purposes

  • National Treasury may grant exemption

    • Ask the question during risk assessments


Catering and events expenses

Catering and Events Expenses


Catering and events expenses1

Catering and Events Expenses

  • No catering for internal meetings, unless approved by AO or AA;

  • Entertainment allowance – may not exceed R2000 per financial year;

  • Team building exercises and year-end functions;

  • In-house strategic, corporate and related planning sessions;


Guidelines on cost containment

Guidelines on Cost Containment

  • Travel and Subsistence

    • Limiting international travel only for meetings – absolutely essential;

    • Using corporate voyager miles to acquire air tickets;

    • Three quotes for all international travel;

    • Prohibit claims for meals if already included in hotel arrangements;

    • Inventory

    • Bulk purchases of related items;

    • Settlement discounts;

    • Full cost recovery on promotional items;


Guidelines on cost containment1

Guidelines on Cost Containment

Inventory- continued

  • Minimizing printing costs;

  • Use of electronic mail other than registered mail;

  • Prohibit of newspaper and magazine allowances, existing contracts not to be renewed;

  • Water and Electricity

    • Prudent use to lower utility costs;


  • Guidelines on cost containment2

    Guidelines on Cost Containment

    • Communications

      • Private calls – Limit allowances to reasonable value;

      • Cellular phones and 3G – Consider nature of work;

      • Telephone calls – Distinguish between private and official calls;

      • Tele and/or video conferencing – To avoid travel and subsistence costs;

    • Financial assets

      • Debts write-off – limit - impact on savings;


    Guidelines on cost containment3

    Guidelines on Cost Containment

    • Miscellaneous measures

      • Avoid duplication of activities, processes and efforts;

      • Optimize capacity use of machines by sharing between divisions;

      • Extend warranties – Motor vehicles and computer equipment;

      • Prohibit unnecessary new furniture or office refurbishments;

      • E-learning – In-house training;

      • Transversal contracts – Procurement of goods and services;


    Cost containment measures

    Conclusion

    • AO and AA - appropriate expenditure control measures in their respective institutions;

    • Limited resources be applied effectively and efficiently to achieve economic means;

    • Institutions to implement measures to contain operational costs and to eliminate all non-essential expenditure;

    • The Treasury Instruction note is applicable to all public sector institutions - Effective from 01 December 2013;


    Cost containment measures

    Questions and Answers

    • Technical Queries with regards to the Instruction

      Jayce Nair

      Chief Director

      Office of the Accountant General

      [email protected]

      (012) 315 5482


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