A turnaround advisory mandate is a terms of reference defining diagnostic scope, governance interfaces, deliverables, and milestone acceptance criteria for technical advisers.
When an accounting authority or chief financial officer (CFO) of a public entity listed under Schedule 2 or Schedule 3 of the Public Finance Management Act 1 of 1999 (PFMA) commissions external advisory support, defining governance boundaries is essential. External advisory engagements provide diagnostic analysis and process recommendations, operating as advisory methodology rather than statutory rules.
Under Section 51(1)(c) of the PFMA, the accounting authority retains responsibility for the entity’s financial management, requiring the accounting authority to "safeguard assets and manage revenue, expenditure and liabilities of the public entity" (National Treasury Instruction No. 4 of 2022/2023, page 2 of 4).
Commissioning an advisory turnaround requires navigating public sector reporting rules. These include compliance reporting obligations for irregular and fruitless expenditure outlined in National Treasury Instruction No. 4 of 2022/2023.
The RACI does not replace the Accounting Authorities' responsibilities under the PFMA
— Western Cape Provincial Treasury, Public Entity Governance Guidelines, p. 7
Public entities must account for provincial oversight arrangements, such as the Western Cape Provincial Treasury Public Entity Governance Guidelines, which provide provincial framework guidance for Schedule 3C and 3D entities rather than universal national law. Delineating advisory roles ensures technical support assists the entity without displacing board governance.
Scoping the diagnostic review and identifying funded options
An effective commissioning mandate begins with a diagnostic phase evaluating operational performance, financial risks, and internal control breakdowns. The terms of reference must direct advisers to examine baseline records, financial commitments, and expenditure controls rather than high-level summaries. Diagnostic workstreams evaluate financial viability and budget execution against approved corporate plans.
Following diagnostic review, advisers must formulate realistic, funded turnaround options that align with statutory mandates and fiscal resources. The options paper should explain its baseline, cost assumptions and implications for the approved planning and budget cycle. Turnaround options must present costed interventions respecting cash flow limits, transfer agreements, and approved borrowing limits.
Establishing board and executive interfaces while retaining decision rights
A turnaround advisory mandate must establish explicit governance interfaces between external advisers, executive management, and the accounting authority. The Western Cape Provincial Treasury Public Entity Governance Guidelines suggest using a RACI matrix (Responsible, Accountable, Consulted, Informed) to clarify stakeholder participation across project tasks and decisions. Applying structured interface tools ensures operational roles remain transparent.
Crucially, the commissioning mandate must reinforce that the brief should identify reserved decisions and any lawful delegations. External advisers may analyse options and recommend fixes, but should not approve budgets, alter strategic plans or authorise expenditure simply by virtue of an advisory appointment. Reserving decision rights preserves board fiduciary responsibility under Section 50 of the PFMA.
To ensure seamless project governance, the accounting authority should establish clear interface requirements:
- Formal read-only system access protocols for advisory diagnostic teams.
- Scheduled monthly progress briefings with the CFO and executive management team.
- Structured submission channels for presenting advisory technical reports to board sub-committees.
- Written sign-off procedures for executive management to review and verify findings.
- Clear escalation protocols for reporting identified financial risks to the accounting authority.
Defining workstream outputs, dependencies and acceptance evidence
To deliver institutional value, an advisory mandate must define concrete workstream outputs linked to verifiable acceptance evidence. The terms of reference should break the engagement down into discrete workstreams, such as financial baseline reconstruction, internal control review, and reporting compliance alignment. Workstreams produce documented technical artefacts, such as reconciliations reviewed by management, revised risk registers, and updated operating procedures.
Workstream execution involves sequential dependencies across administrative units that must be explicitly mapped in the project plan. For example, formulating a recovery option depends on completing sub-ledger reconciliations and verifying supplier invoices. Requiring objective acceptance evidence—such as signed management review logs—before accepting outputs ensures deliverables meet institutional standards.
Structuring milestone payment evidence, knowledge transfer and the commissioning matrix
Connecting contract milestone payments to verified technical evidence protects public funds and ensures contractor performance. The contract should specify who may accept each deliverable and authorise payment under applicable delegations rather than simple elapsed time or draft report submissions. Invoices should only be authorised upon receipt of complete evidence proving acceptance criteria are met.
The proposed advisory mandate should incorporate an explicit knowledge-transfer component to build internal capability. External advisers must conduct workshops, co-perform reviews with finance staff, and deliver operational manuals. Including verified knowledge transfer in acceptance criteria helps test whether permanent personnel can maintain controls independently after the engagement concludes.
The table below presents an advisory commissioning matrix connecting project phases, workstream deliverables, key dependencies, and milestone payment acceptance evidence.
| Project phase | Workstream deliverable | Primary operational dependency | Milestone payment acceptance evidence |
|---|---|---|---|
| Diagnostic review | Baseline financial and risk assessment report | Access to general ledger and sub-ledger files | Approved diagnostic report signed by CFO and board committee |
| Option formulation | Costed turnaround options and MTEF budget model | Verified expenditure commitments and revenue forecasts | Technical options paper and MTEF model approved by accounting authority |
| Control review | Revised internal control SOPs and compliance logs | Management review of SCM and payment workflows | Documented SOPs and verified compliance logs signed by line heads |
| Governance alignment | Updated RACI matrix and oversight templates | Executive agreement on delegation frameworks | Finalised RACI matrix and M&E reporting pack accepted by board |
| Handover & close-out | Capacity building workshops and close-out manual | Finance staff participation in coaching sessions | Signed staff training sign-off logs and close-out report approved by CFO |
What good looks like
A well-commissioned turnaround advisory mandate establishes an operational framework that strengthens public entity performance while respecting statutory governance boundaries. By defining precise diagnostic scopes, preserving board decision rights, tying milestone payments to objective acceptance evidence, and embedding agreed knowledge transfer, accounting authorities and CFOs can evaluate whether the engagement has strengthened internal capability and financial stewardship.
Sources
Define milestones as acceptance decisions, rather than dates alone. Each milestone should state the deliverable, evidence to be reviewed, accountable reviewer, dependencies and action if the work is incomplete. A diagnostic milestone should not be treated as proof that the entity has recovered; an implementation milestone should show the agreed control or process operating over the tested period.
Frequently Asked Questions
How does an advisory turnaround mandate differ from statutory PFMA responsibilities?
An advisory turnaround mandate is a contractual terms of reference defining advisory methodology and technical deliverables for advisers . It does not alter the statutory responsibilities of the accounting authority under Section 50 and Section 51 of the PFMA to maintain effective financial management and internal controls .
What should a turnaround diagnostic deliver before options are considered?
It should establish an evidenced baseline of operational performance, commitments, financial risks and control breakdowns. The resulting options should identify costs, funding assumptions, dependencies and the decisions required from the entity’s authorised leadership.
How do provincial governance guidelines apply to national public entities?
Provincial guidelines, such as the Western Cape Provincial Treasury Public Entity Governance Guidelines, provide provincial oversight frameworks for provincial public entities (Schedules 3C and 3D) within that province . They serve as provincial guidance rather than universal statutory law for all national entities .
Why must statutory decision rights be retained by the accounting authority during a turnaround?
An advisory contract does not itself transfer statutory accountability. The brief should identify reserved decisions, lawful delegations and the authorisation process applicable to the institution; it should not assume every delegation is prohibited.
How can a public entity ensure that advisory knowledge transfer is effective?
The commissioning mandate must make knowledge transfer an explicit deliverable tied to milestone payments . Advisers should co-perform reviews with internal staff, conduct coaching, and submit signed capability logs before final contract sign-off .
Read the wider context in financial sustainability and recovery.