REQUEST TO TENDER (RTT)

Transcription

1 REQUEST TO TENDER (RTT) Integrated Contract Work Contracting Regularity Audit, Information Systems and Performance Audits for the period on behalf of Auditor-General of South Africa Bid Number: AGSA/2016/CWC/RA/ISA/PA A u d i t o r G e n e r a l S o u t h A f r i c a

2 TABLE OF CONTENTS 1. DEFINITIONS INTRODUCTION BACKGROUND REGULATORY AUDIT Eligibility criteria Qualifying criteria Information to be submitted Work allocation Quality control assessment Allocation of work in provinces Allocation time frame Qualifying minimum score for allocation of work per province Classification of firms Obligation of private firms to complete project close-out report Database maintenance Change in firm structure Ethical and independence requirement Cooling-off period and rotation of partners Use of partner/s for contracted-in work INFORMATION SYSTEMS AUDIT Eligibility criteria Qualifying criteria Information to be submitted Work allocation Quality control assessment Allocation of work in provinces Allocation time frame Qualifying minimum score allocation of work per province P a g e

3 5.9. Classification of firms Obligation of private firms to complete project close-out report Database maintenance PERFORMANCE AUDIT Eligibility criteria Qualifying criteria and information to be submitted Work allocation Basis of work allocation Quality control assessment Allocation of work in provinces Allocation time frame Qualifying minimum score allocation of work per region Classification of firms Obligation of private firms to complete project close-out report Database maintenance GENERAL TENDER PRINCIPLES P a g e

4 1. DEFINITIONS ABU: ACCA: Aggregate score: AGSA: Audit business unit All provincial audit offices and national audit business units of the Auditor- General of South Africa, including Performance Auditing, Investigations and Information Systems Auditing business units. Association of Chartered Certified Accountants The combined quality assessment scores allocated to an audit partner for audit work (both contracted in and contracted out) conducted on behalf of a particular audit business unit. Auditor-General of South Africa APA: Auditing Profession Act, 2005 (Act No. 26 of 2005). Attest audit partner: BBBEE: BE: CA charter: CE: Conflict of interest: Contracted-in work: Contracted-out work: Consortium: A partner in a private audit firm registered with IRBA to perform the attest audit function. Broad-based black economic empowerment. Business executive all heads of AGSA business units as defined. BBBEE sector charter of the chartered accountancy profession. Please note that companies that are not in the CA profession who perform work within the audit process their relevant sector(s) code/charter will be applicable. Corporate executive - all executives within a portfolio to which the head(s) of AGSA business units reports to as defined. Where a firm s interest is conflicted by current and previously provided assurance/consulting work to the auditee for a period shorter than the cooling off period. Also covers any other perceived conflict of interest as generally applied within the profession and business environment. Supply of various levels of staff by the private audit firm to work under the supervision of the AGSA audit management. However the private audit firm management would still be responsible for the development and expected quality output of the staff members. Allocation to the private audit firm of full responsibility, up to draft audit report stage, for the performance of an audit. An association of two or more individuals, companies, organisations or any combination of these entities with the objective of participating in a common activity or pooling their resources for achieving a common goal. Each participant retains its separate legal status and the consortium s control over each participant is generally limited to activities involving the joint endeavour, particularly the division of profits. A consortium is formed by contract, which sets out the rights and obligations of each member. 3 P a g e

5 Database: Emerging firm: Exco: HDI: A list of all approved private audit firms and specialised audit services firms or companies that will perform audits on behalf of the AGSA. An audit firm recently registered (first time registering with AGSA) with SAICA as a training office which has a minimum number of four (4) trainees and does not have public sector auditing experience. Executive committee of the AGSA. Historically disadvantaged individual a South African citizen who, due to the apartheid policy that had been in place, had no franchise in national elections prior to the introduction of the Constitution of the Republic of South Africa, 1983 (Act No. 110 of 1983) or the Constitution of the Republic of South Africa, 1993 (Act No. 200 of 1993) and/or who is a female and/or who has a disability. Provided that a person who obtained South African citizenship on or after the interim Constitution came into effect, is deemed not to be an HDI. Individual audit partner: IRBA: ISA: IS audit work: ISACA: A partner who has performed contract work on behalf of the AGSA in a particular private audit firm. Independent Regulatory Board for Auditors Information systems audit Evaluation of IT general and application controls as an input to regularity audit during the process of expressing an audit opinion in terms of the Public Finance Management Act and Municipal Finance Management Act. Information Systems Audit and Control Association MFMA: Municipal Finance Management Act, 2003 (Act No. 56 of 2003) MoA National leader, the Audit Services: National leader, Internal Operations and Audit Support: Network firms Memorandum of Agreement A national leader to whom all corporate executives of audit business units at AGSA report and who is also a member of Exco. A national leader to whom all corporate executives of support service business units report and who is also a member of Exco. Are affiliated firms that share common names and are guided by a memorandum of understanding (national agreement) that they do not share profits. The firms are reviewed in different cycles and with separate IRBA numbers, including different BBBEE levels. They are treated as separate legal entities for the purpose of work allocation and classification. 4 P a g e

6 New firm: Non-resident partner: A private audit firm that meets the eligibility and qualifying criteria of the tender but has not previously performed audits on behalf of the AGSA and has had insufficient public sector auditing experience (less than 3 years) A partner who does not meet the definition and requirements of a resident partner. PAA: Public Audit Act, 2004 (Act No. 25 of 2004) Performance audit: A performance audit is an independent auditing process to evaluate the measures instituted by management to ensure that resources have been procured economically and are used efficiently and effectively. PPPFA: Preferential Procurement Policy Framework Act, 2000 (Act No. 5 of 2000) Public sector experience: Private audit firms: Private firm or company: Private practitioners: Work done in the three spheres of government and any related entities, including AGSA contract work. Audit firms registered with IRBA Refers to registered legal businesses that operate either an audit firm that is registered with IRBA or one that performs the IT (risk/audit) services work recognised by ISACA or is registered with any recognised professional body. Individuals who are registered with IRBA or individuals auditing independently and have a CISA qualification or an individual who do not have a CISA qualification but has the necessary qualification, experience and competencies as determined by the AGSA. PFMA: Public Finance Management Act, 1999 (Act No. 1 of 1999) RA: Regularity audit Regularity audit work: Annual audits performed to report on financial statements, performance information and compliance with laws and regulations in accordance with the Public Audit Act and the applicable directive issued in terms thereof. Resident partner: An attest audit partner who is linked to/ responsible for the AGSA assignment(s) in a firm and is dedicated/allocated to one office in a particular province/region. SAICA: South African Institute of Chartered Accountants SAIGA: SCMO: Stand-alone training office: Sustainable office: Southern African Institute of Government Auditors Supply Chain Management Office of the AGSA A head office or a branch which has been separately accredited as a training office in terms of SAICA s training regulations. A fully operational office of the private audit firm or specialised audit services company within the region/province registered with SAICA or specialised audit services professional body and carrying on the legal business of rendering audit services or specialised audit services. The office should include proper signage, dedicated office space, permanent staff and communications 5 P a g e

7 infrastructure, including a permanent telephone number and a fixed address. Trainee Auditor: Training office: A person who will be subject to a minimum of three (3) years audit training programme registered by either ACCA/SAICA/SAIGA, commonly referred to as a TA. An organisation, accredited by SAICA in terms of the criteria set out in annexure 2 of training regulations, whether within or outside the borders of South Africa, and refers to an organisation in commerce and industry or public practice or the public sector that is approved by and registered with SAICA as an organization. 6 P a g e

8 2. INTRODUCTION 2.1 The Auditor-General of South Africa (AGSA) has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, exists to strengthen the constitutional democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence. In aligning with its value-add strategic objective and with the intent of ensuring that it creates products and services that add value to its stakeholders so that we strive to deliver value adding audits, the AGSA has evaluated and updated the tender principles. 2.2 The purpose of this enhanced tender process is to detail the criteria and the process to be followed by the AGSA in selecting private firms or specialised audit services companies that will be contracted in and out to conduct audits on behalf of the AGSA. 3. BACKGROUND 3.1 In terms of section 12 of the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA), the AGSA can authorise one or more persons to perform or to assist in the performance of an audit. 3.2 Section 12(2) states that such a person must be: A member of the AGSA staff A private practitioner who: is registered as an accountant and auditor; or is not registered but has the qualifications, experience and competence as determined by the AGSA; and; a person with a non-accountancy qualification, experience and competence to the extent that a person with such qualifications, experience and competence is necessary for any particular audit. 3.3 In order to comply with section 217 of the Constitution of 1996, which requires that all procurement should be done in a manner that is fair, equitable, transparent, competitive and cost-effective, the AGSA should allocate work to private audit firms or specialised audit services companies through a formal tender process. 3.4 In implementing the tender process, AGSA will evaluate: primary criteria to be met by the private audit firms or specialised audit services companies to be included on the approved database under 2 categories of main suppliers and emerging suppliers; the allocation of audit work to the private audit firms or specialised audit services companies on the database for contracted-in and contracted-out audits for the financial years with an option to renew for a further two years (solely at the discretion of the AGSA) to allow for alignment to a 5 year rotation of auditors; principles to be applied during the tender process; and Maintenance of the approved database. 3.5 No guarantee will be given of the amount of work to be allocated in any given year as the amount to be distributed depends on the final budget determined at each financial year by the AGSA based on the extent of work and vacancy levels that exist. 3.6 The document addresses the said tender principles under the following categories of audits: Regularity audit Information systems audits Performance audit 7 P a g e

9 4. REGULATORY AUDIT 4.1. Eligibility criteria The following criteria must be met to be eligible for conducting regularity audit work on behalf of the AGSA: An aggregate score of at least 85% in the latest results of the AGSA s quality assessment by the AGSA engagement manager or all individual audit partners that have previously performed work on behalf of the AGSA The latest satisfactory IRBA firm-level review results or the resident partners latest satisfactory IRBA review score (attained in respect of the inspection conducted during the period of 1 April 2013 to tender closing date) Where IRBA review score is not available, the resident partner(s) must provide proof of public sector experience of at least three years, which should include a cumulative period of 12 months within the last three years plus proof of continuing professional development (CPD) hours attained for public sector training of at least 40 hours and a commitment in the form of a letter from the firm indicating that the partner will receive support from the firm in executing work on behalf of the AGSA Private audit firms should be registered as training offices, in accordance with SAICA s training regulations A private audit firm should have a minimum of four (4) trainee auditors registered for a training contract with either ACCA (audit experience) or SAICA or SAIGA and at least one audit supervisor/management who has completed the relevant training contract. Please Note: Sub-contracting will not be permissible Qualifying criteria Criteria for private audit firms that have previously conducted audits on behalf of the AGSA Firms are required to provide the latest satisfactory IRBA firm-level review score when available In cases where individual audit partners have failed to achieve the 85% aggregate score, such partners will not be allowed to conduct work on behalf of the AGSA, even under circumstances where they move from one audit firm to another during the financial period of failing quality. These partners will be subject to a one-year exclusion from the database and will have to meet the requirements applicable to new audit partners for re-entry into the AGSA database The AGSA will effect a 15% reduction of that partner s firm work allocation each time the outgoing partner fails to achieve the required score The work allocated to the firm will be subject to pre-issuance review and the firm will bear the cost of such pre-issuance review The outgoing audit partner will need to attend training related to audit requirements that caused failure in the quality at their own cost to attain 40 hours of the CPD during the exclusion period and provide evidence thereof to the AGSA In cases where an audit firm has performed both contracted-in and contracted-out work for the AGSA, quantity control (QC) scores must be weighted, namely 30% for contracted-in and 70% for contracted-out, for obtaining the aggregate score of 85%. 8 P a g e

10 4.2.4 Where a firm fails to qualify for contracted-out audit work in a particular province, they will be disqualified for the duration of the contract period In cases where an audit firm has performed either contracted-in or contracted-out work, the QC score should be 85% A service level agreement (SLA) should be signed prior to each audit assignment. All billings submitted should be accompanied by a completed and signed audit fee tracking schedule, supported by an invoice Where AGSA s quality assessment results are not available for work already performed on behalf of the AGSA, satisfactory IRBA file review results will be accepted. Criteria for private audit firms that were not on the AGSA database: New firms are required to provide: the latest satisfactory IRBA firm-level review; OR the resident partners latest satisfactory IRBA review score or, where the IRBA review score is not available, the resident partner(s) must provide proof of public sector experience of at least three years, should include a cumulative period of 12 months within the last three years plus proof of CPD hours attained for public sector training of at least 40 hours; and; a commitment in the form of a letter from the firm indicating that the partner will receive support from the firm in executing work on behalf of the AGSA Newly appointed partners of firms that have previously done work on behalf of the AGSA: The newly appointed resident partner(s) that do not have either an AGSA or IRBA score must meet the requirements for new firms that are not on the AGSA database (refer to paragraph 4.2.8) Information to be submitted Private audit firms who wish to tender to perform regularity audit work on behalf of the AGSA in a particular province will have to submit the following information (The tenders advert invited per province and Gauteng Province represented at Pretoria Head office together with the national business units): All firms are required to submit a complete company profile with the tender The audit firms are to indicate each individual s ID numbers and submit certified copies of identity documents in respect of the partners The latest firm-level review score where available and completion of the public sector experience form Audit firms should provide a listing of TAs with information on qualifications and trainee numbers (indicating all the names and race categories). This includes TAs with ACCA (audit experience) and SAIGA experience The firm s resource structure indicating all the names and race categories of TAs as at the date of submission (SAICA/ACCA/SAIGA trainee numbers to be submitted) per province. The firm will be required to provide confirmation from the relevant institutes that trainees are duly registered and belong to the firm Firms are to provide statistics of staff who will be performing work on behalf of the AGSA as indicated below per province. Such staff should have specific experience in internal/external auditing of the public sector of at least three (3) years ( ), which should amount cumulatively to one year (12 months) in public sector internal/external auditing at the time of 9 P a g e

11 submitting a tender. The firm s staff should be available to dedicate 50% of their annual time to AGSA audit work. The information to be submitted must indicate the experience, qualifications, names and race categories of such staff Work allocation Basis of work allocation The AGSA s contract allocation is based on the gate system, with contracts allocated per province, namely Gate(1) quality control; Gate(2) broad-based black economic empowerment (BBBEE) certificate based on the new sector codes in line with SAICA s requirements (this is considered nationally where applicable); and Gate(3) resources available. The entire allocated amount will split into Quality Control, B-BBEE and Resource pools, as per the relevant percentage. Firms will receive allocated amounts from each pool on a 40:40:20 principles of large, medium, and small respectively. 10 P a g e

12 CRITERIA a. Gate 1:Quality control WEIGHTING 30% Allocation of work based purely on quality, without taking capacity and BBBEE into account. Quality control subject to the following: An aggregate of 85% or more based on the results of the AGSA s QC assessment conducted by the AGSA engagement manager for audit firms that had previously performed audit work on behalf of the AGSA. Should no AGSA quality assessment results be available, satisfactory IRBA file review results will be considered, and will be allocated a score of 85%. For firms with no AGSA or IRBA scores, public sector experience and CPD hours will earn a total score of 60%. QC scores (in respect of audit firms that had performed both contracted-in and contracted-out audit work on behalf of the AGSA) will be weighted 30% for contracted-in and 70% for contracted-out work. Gate 2: Broad-based black economic empowerment 30% Allocation is done purely on BBBEE rating, without taking into account capacity and quality control. BBBEE certificates are issued in accordance to the new sector codes in line with SAICA s requirements. BBBEE verifications in respect of this tender will be conducted in accordance with the generic scorecard under the amended Codes of Good Practice Gate 3: Resources Capacity split between partners and managers 40% Allocation model based on capacity which is measured by the number of resource units. Resource units, includes TAs, professionals and partners) Linear relationship between resources and ability to execute audits on behalf of AGSA in line with the PAA Trainee as a driver (the model penalises firms with a low trainee base compared to partners/managers) In this example, the number of resources is the variable x in the equation Allocation based on ratio of TAs per partner/manager.work to be allocated based on professional staff availability over a 6 months period of the year (50% of the year) for both PFMA and MFMA assuming 3 months for each. Once a firm tenders and gets an allocation it is the responsibility of the firm to deliver quality work within the deadline - firms with no manager/partner with public sector experience will be treated as emerging firms. 11 P a g e

13 4.5. Quality control assessment The QC assessment process in respect of private audit firms that were on the contract work database: A standard questionnaire will be used by the AGSA to determine a score for each audit partner in a particular audit firm The quality of the contracted audit firm s work will be assessed after completion of each audit The assessment will be conducted by the engagement manager who liaises with the audit partner to discuss areas of concern. The assessment results will then be agreed with the audit partner. The work assessment results will be taken into consideration in future allocation of contract work to the contracted audit firm The contracted firm s audit files relating to a specific engagement may be subject to review by the AGSA s QC unit. The audit partner may be requested to assist the engagement manager with matters relating to such a review. The results of such review will be taken into consideration in the future allocation of contract work to the contracted audit firm. The AGSA may use its own discretion to report the audit firm to IRBA for any material transgressions The audit BE will escalate poor quality control assessments relating to specific engagements performed by contracted audit firms to the CE within that portfolio Allocation of work in provinces The private audit firms are required to have a sustainable office in the province to be eligible for work in that province Tenders will be invited per province and the allocations for Gauteng Province and Pretoria Head Office (national audit business units) will be combined. In respect of the Eastern Cape, work will be allocated on a combined basis for Port Elizabeth and the rest of the Eastern Cape firms The AGSA s provincial BEs reserve the right to conduct physical inspections of offices. Where audit firms do not have sufficient capacity to perform audits, work may also in exceptional cases be allocated to firms that have a sustainable office in neighbouring provinces, subject to the AGSA s operational requirements Such firms in neighbouring provinces may be considered by the tender committee on recommendation by the BE and for approval by the CE. The table below applies in terms of recognising neighbouring provinces that would qualify for work allocations as per the clause above. Province/Region Eastern Cape Free State Limpopo Mpumalanga Northern Cape North West Neighbouring province/s recognised Free State/ KwaZulu-Natal/ Western Cape Gauteng Gauteng Gauteng Free State Gauteng 12 P a g e

14 Western Cape Eastern Cape/ Northern Cape Firms in neighbouring provinces will only be eligible for ad hoc allocations subject to the above condition for not more than 5% of the ABU budget Allocation time frame Allocations of audit work to firms will be for a period of three (3) years with an option of a further two years. This means that an auditee would be allocated to the private audit firm for a period of three years with annual review being conducted. Where a change is needed as a result of an outcome of the review or rotation required then a re-allocation would be made as determined by the AGSA at its sole discretion In cases where new firms will be used to perform contracted-in work during the contract period, such firms will be considered as and when ad hoc allocations become available Based on the AGSA s operational and strategic objectives and BBBEE initiatives, the organisation reserves the right to change the allocation of audits at its sole discretion and without consultation with the private audit firm during the three-year period Changes to the database will be effected in cases where audit firms fail the QC assessment On performance of annual reviews, a private audit firm is expected to maintain the same standards or improve in terms of BBBEE contributor level and capacity. Firms will be required to submit certificates confirming their BBBEE contributor level and declaration for capacity, allocation of black trainees in the firm and the percentage spent on skills development in the public sector The AGSA will annually review the status of the firms and will make revisions to the allocations in line with the new information submitted by audit firms All work will be allocated in accordance with the approved AGSA rates that are applicable as issued via the SAICA circular and no discounting of the rates will be allowed Qualifying minimum score for allocation of work per province Qualifying minimum score for allocation of work per province: i. Gauteng and KwaZulu-Natal 50 points ii. North West and Limpopo 33 points iii. All other provinces 40 points Classification of firms For the purpose of allocation, the audit firms are classified according to the following criteria as determined by the AGSA. These classifications will be made on a national basis. National firm Number of attest Number of Number of Maximum work category audit partners TAs CAs allocation per annum Large firms % 13 P a g e

15 Medium firms % Small firms % Partners who are CAs will only be used under the section Number of attest audit partner and not under the section Number of CAs for firm classification. These partners form part the capacity required under the section Resource category 2 for capacity The Number of CAs section of classification includes professional staff engaged in the audit profession, i.e. RGAs/AGAs and ACCAs (for ACCA purposes staff must be articled-trained with two years public assurance experience, with RGAs/AGAs must be those who completed their training contract having two years public assurance experience) The AGSA will reward large and medium firms that participate in mentoring programme of the emerging firms. This will be based on the criteria determined by the AGSA To enable the AGSA to classify the firms correctly, the firms will be required to provide a substantive explanation and supporting/registration/founding document of their registered enterprise type. The explanation should include an indication of the structural composition within the available categories provided for in the South African legal system. These categories may include the following: i. Sole proprietor ii. Partnership iii. Individual firm iv. Group firm with offices in various provinces v. Firm individually/separately owned but using the brand name associated with other firms (i.e. network firms) In the event of a firm migrating from one band to another (e.g. medium firms to large firms) due to corporate activity, the AGSA may at its sole discretion review the above stratification in the context of its strategic objectives of quality and transformation, which may result in a potential change in work allocated Obligation of private firms to complete project close-out report After every audit assignment, private audit firms are obliged to complete an audit close-out report that highlights the reasons for success or areas for improvement, thereby facilitating better planning and alerting the AGSA to issues and elements that may need to be considered in such future assignment/projects. The following must be included in the assignment/project close-out report as a minimum: i. Reasons for budget surplus/deficit (hours/rands) ii. Comparison of actual versus budget (hours/rands) iii. Feedback on stakeholder interaction iv. Feedback on AGSA working papers and audit/isa process v. Confirmation that the audit firm had followed the AGSA s approach in its communications with the auditee vi. Confirmation that the AGSA s QC assessment process had been completed for the relevant cycle, i.e. PFMA/MFMA and further education and training (FET) audits. 14 P a g e

16 4.11. Database maintenance A firm will be allocated the same projects/auditees for the duration of the tender, provided that the firm meets the aggregate QC score of 85% The firm will be removed from the database for a period of one year on disqualification based on not achieving the minimum QC assessment score The firm disqualified due to failure to pass the minimum QC assessment will only be reinstated through submission of their application, which should be based on results that are reviewed independently and which will be subject to evaluation by the AGSA Change in firm structure In cases where firms merge during the tender period, the allocations will remain the same and the initial individual allocations will be combined (tenders will not be re-evaluated). However a review would be done as per above In cases where firms de-merge, the remaining firm initially allocated the AGSA work will retain the allocations. The partner/s that moves to a new firm will not be allowed to move with the audits. In cases where the remaining firm confirms that they are unable to perform the audit work, the work will be reallocated through the AGSA s normal CWC approval process Ethical and independence requirement Cooling-off period and rotation of partners Senior management, including pre-issuance reviewers, must be rotated after a maximum of five years to ensure that independence and objectivity are maintained In the case of regularity audit work, the audit partners must be rotated after a maximum of five years to ensure that independence and objectivity are maintained Contracted-out firms should only be involved in the audit for a maximum of five years. A minimum two -year cooling-off period should be applied prior to possible re-awarding of the contract to the audit firm During that period, the firm may not participate in the audit of the entity, perform pre-issuance review, consult with the engagement team or the client regarding technical issues or otherwise directly influence the outcome of the engagement Use of partner/s for contracted-in work For contracted-in work, the tender process should accommodate the use of a non-resident partner for contracted-in work. This will apply mostly in extreme cases and should not be the norm. Partners are often used when an assignment requires the involvement of an expert or a specialist in a field where the AGSA does not have such a resource available. 15 P a g e

17 5. INFORMATION SYSTEMS AUDIT 5.1. Eligibility criteria The following criteria must be met to be eligible to conduct information system audit work on behalf of the AGSA: A private audit firm or specialised audit services companies with partners with a CISA/CISM/CISSP qualification and ISACA membership Satisfactory results from an annual, ongoing quality assurance and improvement programme for IT audit engagements conducted by the private audit firm or specialised audit services companies at its own cost (with quality assurance reviews of IT audit engagements conducted by independent, objective audit professionals who are at the time of review practising IT auditors and in possession of a valid CISA certification). The onus is on the private audit firm to ensure that its quality assurance and improvement programme is comprehensive, consistently applied and objectively implemented. The AGSA reserves the right to review a firm s quality assurance and improvement programme and the results thereof at any time to determine its suitability in meeting the AGSA s needs if found unsuitable, this may result in the firm not being eligible to perform work on behalf of the AGSA A private audit firm must have at least a senior manager/ managers with a CISACISM/CISSP qualification, with the rest of team members being members of ISACA with IT audit experience For an IT-specialised firm that is not a private audit firm, the firm should have IT specialists with ACL (audit command language) certified data analyst (ACDA) designation IT specialists should have experience and exposure in structured query language (SQL) and ACL Qualifying criteria In order for private audit firms/private practitioners to be included in the ISA contract work database, the following criteria must be met: i. An aggregate score (contracted-in or contracted-out audits) of at least 85% in the latest aggregate (either PFMA or MFMA) AGSA quality assessment results by the ISA engagement manager for all the projects allocated to a private audit firm/ private practitioner (where applicable); and ii. A comply rating on the latest AGSA quality assessment by the AGSA QC unit (where applicable). iii. Should there be no AGSA quality assessment results, independent file review results will be considered; however, under no circumstances shall the firms that are not on the AGSA database meet these criteria without satisfactory majority independent file review results. iv. For private firms or companies that had previously performed ISA work on behalf of the AGSA, the quality assessment score will comprise a score determined by the AGSA based on the QC checklist Information to be submitted Private firms/private practitioners who wish to tender to perform ISA work on behalf of the AGSA in a particular province will have to submit the following information: CISA/CISM/CISSP registration and ISACA membership numbers of the partners/directors. 16 P a g e

18 5.3.2 The letter setting out the latest decision arising from the independent file review for all the audit firms currently not on the AGSA s database The firm s resource structure indicating all the names and race categories of resources on the CISA learnership programme and applicable experience The list of all the resources not under CISA learnership (i.e. managers, supervisors, etc.) within the attest audit unit, indicating each individual s ID number and qualification, per province ACL ACDA registration and certification The letter setting out the latest decision arising from the independent file review for the entire ITspecialised firm currently not on the AGSA s database The IT-specialised firm s resource structure, indicating all the names and race categories of resources with experience and exposure in SQL and ACL Work allocation The AGSA recognises that the implementation of a BBBEE strategy is an essential mechanism in its efforts to meet the objectives as set out in the BBBEE Act to achieve sustainable and inclusive economic development, social stability and labour-absorbing economic growth. Evaluation of tender submissions will therefore be subject to the AGSAs BBBEE strategy Basis of work allocation i. Contracted-in and contracted-out audit work will be allocated based on the criteria as outlined below: ii. Quality control (audit firms to be evaluated per region/province) iii. BBBEE (audit firms to be evaluated per region/province or nationally) iv. Capacity building (audit firms to be evaluated per region/province). CRITERIA Quality control subject to the following: Results of the ISA BU quality assessment by the engagement manager for all the audit firms that had previously performed audit work on behalf of AGSA, and a comply rating on the latest quality assessment conducted by the AGSA QC unit (where applicable). Should there be no AGSA quality assessment results; independent file review results will be considered. Broad-based black economic empowerment WEIGHTING 30% 30% A BBBEE certificate issued in accordance to the new sector codes in line with SAICA s requirements. BBBEE verifications in respect of this tender will be conducted in accordance with the generic scorecard under the amended Codes of Good Practice. Capacity building CISA learnership programme or any other programme in place to enhance the profession: Number of HDI CISA learnerships/ TISA: 20+ trainees - 40% 11 to 20 trainees - 32% 4 to 10 trainees - 28%. 40% 17 P a g e

19 5.5. Quality control assessment For audit firms that had previously performed ISA work on behalf of the AGSA, the quality assessment score will comprise a score determined by the AGSA based on the QC checklist. The following principles apply: A standard QC checklist is currently used by the ISA to determine a score for each audit project in a particular audit firm This QC checklist is agreed to between the ISA and the audit firm on commencement of the audit The QC checklist is to be completed by the ISA engagement manager immediately after the audit has been completed The score will be discussed with the individual audit partner. The QC checklist must be signed off by both the ISA engagement manager and the audit partner of the audit firm being reviewed Escalation principles will apply in the scoring and the audit partner will have the opportunity to escalate any disagreement on a score to a higher level within the AGSA Instances of overall poor performance by a particular private firm will be evaluated by the BE of the relevant audit business unit. Should the private firm dispute the BE s decision, the matter should be referred to an independent reviewer appointed by the AGSA. In the event that the independent reviewer s outcome supports the BE s decision, the private firm will be liable for the time of the independent reviewer. In the event of the independent reviewer s outcome not supporting the BE s decision, the private firm s performance will be reassessed and awarded the independent reviewer s outcome. The time spent by the independent reviewer will be paid for by the AGSA Allocation of work in provinces The tenders will be invited per province and Gauteng Province would be represented at Pretoria Head office together with the national business units. The audit firms need to indicate where they have presence in the provinces Allocation time frame Allocations of audit work to firms or companies will be for a period of three (3) years with an option of a further two years in order to align to the strategic planning period In cases where new firms or companies will be used to perform contracted-in work during the contract period, such firms or companies will be considered as and when ad hoc allocations become available Based on the AGSA s operational and strategic objectives and BBBEE initiatives, the organisation reserves the right to change the allocation of audits at its sole discretion and without consultation with the private audit firm during the three-year period Changes to the database will be effected in cases where audit firms or companies fail the QC assessment On performance of annual reviews, a firm is expected to maintain the same standards in terms of BBBEE contributor level and capacity. Firms will be required to submit certificates confirming their BBBEE contributor level and declaration for capacity, allocation of black trainees in the firm and the percentage spent on skills development in the public sector The AGSA will annually review the status of the firms and will revise the allocations in line with the new information submitted by audit firms All work will be allocated in accordance with the approved AGSA rates that are applicable and no discounting of the rates will be allowed. 18 P a g e

20 5.8. Qualifying minimum score allocation of work per province In order to be considered, the following minimum score of 50 points must be achieved (work will not be allocated to audit firms that do not achieve minimum score) Work will not be contracted out in cases of conflict of interest (issues of independence), and for certain key auditees, e.g. SARS, the National Treasury Classification of firms For the purpose of allocation the audit firms are classified according to the following criteria as determined by the AGSA. These classifications will be made on a national basis. National firm category Number of Number of Number of Maximum work IT audit CISAs/ TISAs allocation per staff or staff with SQL and ACL ACDA registered annum experience Medium firms % Small firms % Obligation of private firms to complete project close-out report After every audit assignment, private firms are obliged to complete an audit close-out report that highlights the reasons for success or areas for improvement, thereby facilitating better planning and alerting the AGSA to issues and elements that may need to be considered in such future assignment/projects The following must be included in the assignment/project close-out report: i. Reasons for budget surplus/deficit (hours/rands) ii. Comparison of actual versus budget (hours/rands) iii. Feedback on stakeholder interaction iv. Feedback on AGSA working papers and audit/isa process v. Confirmation that the audit firm had followed the AGSA approach in its communications with the auditee vi. Confirmation that the AGSA s QC assessment process had been completed for the relevant cycle, i.e. PFMA/MFMA and FET audits Database maintenance A firm will be allocated the same projects for the duration of the tender provided that it meets the aggregate QC score of 85%. 19 P a g e

21 Firms will be removed from the database for a period of one year on disqualification based on failure to achieve the minimum QC assessment score The firm disqualified due to failure to achieve the minimum QC assessment score will only be reinstated through submission of their application which should be based on the results that were reviewed independently and which will be subject to evaluation by the AGSA. 20 P a g e

22 6. PERFORMANCE AUDIT 6.1. Eligibility criteria The following criteria must be met to be eligible to conduct performance audits on behalf of the AGSA: A private audit firm with an attest audit partner responsible for performance auditing The private audit firm must be registered and have a valid tax clearance certificate Footprint principle: The private audit firm must have a sustainable office in the province to be eligible for work in that province The audit firm must provide their BBBEE certificate issued in accordance to the new sector codes in line with SAICA s requirements Qualifying criteria and information to be submitted Private audit firms that wish to tender to conduct performance audits on behalf of the AGSA in a particular province will have to submit the following information: IRBA registration number of both the attest audit partner responsible for performance audit and the private audit firm they belong to The audit firm must provide their BBBEE certificate issued in accordance to the new sector codes in line with SAICA s requirements The private audit firm s valid tax clearance certificate The physical address of the firm, confirmation that the firm is registered by SAICA and the name(s) of resident partners The firm s resource structure indicating names, race and gender categories, years of experience in performance auditing and auditing in the public sector, as well as other fields such as health, education, etc. per staff member. The firms should also indicate the number of performance audits completed in the past 24 months. Please note: Only dedicated performance auditing staff members will be considered (this excludes TAs and staff involved in other disciplines such as regularity auditing) Abridged curriculum vitae of the attest audit partner responsible for performance auditing in the private audit firm, clearly indicating all public sector experience (where applicable) and the office details of the private audit firm where he/she resides A declaration that all members involved in performance audits are members in good standing with their professional bodies such as IRBA, SAICA, Health Professionals Council, etc. 21 P a g e

23 6.3. Work allocation The AGSA recognises that the implementation of a BBBEE strategy is an essential mechanism in its efforts to meet the objectives as set out in the BBBEE Act to achieve sustainable and inclusive economic development, social stability and labour-absorbing economic growth. Evaluation of tender submissions will therefore be subject to the AGSA s BBBEE strategy Basis of work allocation Contracted-in and contracted-out audit work will be allocated based on the criteria as outlined below: CRITERIA Technical and specialised knowledge: Allocation will be based on 30% technical and specialised knowledge for all private firms as follows: Experience in performance auditing (10%): WEIGHTING 30% Average experience of 10 years and more - 10%. Between 8 10 years - 80% x 10% Between 6 8 years - 60% x 10% Between 4 6 years - 40% x 10% 1 4 years - 20% x 10%. Note: The average experience in performance auditing is calculated by adding the total years of experience of all partners and dedicated staff mentioned in the proposal divided by the number of staff. Experience in the public sector (10%): Average experience of 10 years and more - 10%. Between 8 10 years - 80% x 10% Between 6 8 years - 60% x 10% Between 4 6 years - 40% x 10% 1 4 years - 20% x 10%. Note: The average experience in the public sector is calculated by adding the total years of experience of all partners and dedicated staff mentioned in the proposal divided by the number of staff. 22 P a g e

24 Number of performance audits conducted (10%): More than 10-10%. From % x 10% From % x 10% From % x 10% From % x 10%. Note: Scoring will be in accordance with information provided on the number of performance audits conducted in the last 24 months. Broad-based black economic empowerment The audit firm must provide their BBBEE certificate issued in accordance to the new sector codes in line with SAICA s requirements. BBBEE verifications in respect of this tender will be conducted in accordance with the generic scorecard under the amended Codes of Good Practice 70% Firms total/overall score in terms of BBBEE certificate X Quality control assessment Quality assessment process in respect of audit firms that were on the contract work database: The AGSA will use a standard questionnaire to determine a score for each audit partner in a particular audit firm The quality of the contracted audit firm s work will be conducted after completion of the audit The assessment will be completed by the engagement manager who liaises with the audit partner to discuss areas of concern. The assessment results will then be agreed with the audit partner. The work assessment results will be taken into consideration in future allocation of contract work to the contracted audit firm The contracted firm s audit files relating to a specific engagement may be subject to review by the AGSA s QC unit. The audit partner may be requested to assist the engagement manager with matters relating to such a review. The results of such review will be taken into consideration in the future allocation of contract work to the contracted audit firm. The AGSA may use its discretion to report the audit firm to IRBA for any material transgressions The audit BE will escalate poor quality control assessments relating to specific engagements performed by contracted audit firms to the CE within that portfolio 23 P a g e

25 6.6. Allocation of work in provinces Audit firms will be evaluated per province Allocation time frame No guarantee will be given on the amount of work to be allocated and allocations to firms will not be made at the beginning of the financial year but as and when specific skills and /or capacity are required Qualifying minimum score allocation of work per region Technical knowledge and experience: i. Points will be allocated in accordance with the technical knowledge and experience calculated, as per the above-mentioned criteria Criteria for awarding contracts to audit firms in terms of BBBEE: i. Firms total/overall score in terms of BBBEE certificate X 70 ii. Work will not be contracted out in cases of conflict of interest (issues of independence) Classification of firms Firms will not be allocated audit work in accordance with classification as no guarantee will be given of the amount of work to be allocated and work will not be allocated to firms at the beginning of the financial year but as and when specific skills or capacity are required Obligation of private firms to complete project close-out report After every audit assignment private firms are obliged to complete an audit close-out report that highlights the reasons for success or areas for improvement, thereby facilitating better planning and alerting the AGSA to issues and elements that may need to be considered in such future assignment/projects The following must be included in the assignment/project close-out report: i. Reasons for budget surplus/deficit (hours/rands) ii. Comparison of actual versus budget (hours/rands) iii. Feedback on stakeholder interaction iv. Feedback on AGSA working papers and audit/isa process v. Confirmation that the audit firm had followed the AGSA approach in its communications with the auditee vi. Confirmation that the AGSA s QC assessment process had been completed for the relevant cycle, i.e. PFMA/MFMA and FET audits Database maintenance A database of private audit firms to perform performance audits on behalf of the AGSA for the years 2017 to 2019 will be established as a result of the tender process (for both contracted-out and contracted-in audit work). 24 P a g e