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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

COST CONTAINMENT MEASURES

OFFICE OF THE ACCOUNTANT-GENERAL

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

outline
Outline
  • Background
  • Current Climate
  • Why the CRO and Expectation
  • Treasury Instruction
  • Conclusion
slide4

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
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 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 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 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;
slide24

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;
slide25

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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