The Auditor-General presented and briefed the Committee on the Strategic Plan for 2010-201309, which also included full details of budgets, audit tariffs and directives. The Auditor-General explained the function of his office, noting that it would lead by example, and aimed to produce reports that were easily-understood, clear and relevant.
Members were concerned with the scope of the Auditor-General’s investigations, whether it would report also on performance and would check whether work had indeed been done as suggested by the financial statements. Members were critical of local government who often referred to problems of capacity when in fact the staff were not appropriately skilled to perform the job. The Auditor-General was asked whether it could focus on the Departments of Health, Education and Human Settlements as priorities. Further questions of clarity were asked on the amounts allocated for security, the consultancy retainer, assistance given to staff of OAG for education, amounts for travelling and accommodation refunded to interviewees, and depreciation.
Office of the Auditor-General (OAG): Strategic Plan Briefing
Mr Terence Nombembe, Auditor General, said that the Office of the Auditor-General (OAG) had the mandate to audit entities and people, but the rules and expectations must be clear on all sides. He noted that his office had deliberated for two months on the draft strategic plan before producing the final document. The OAG was guided by the mandate of oversight and good governance of the public sector. If its job was done correctly then the OAG would have contributed positively to the strengthening of democracy. The strategic plan would be used by Parliament to measure the role played. The objectives were to ensure that there were clear audit reports in the public sector. The OAG should lead by example, producing a clean audit itself, and dealing with transformation as a national imperative by redressing the imbalances.
Mr Kimi Makwetu, Deputy Auditor-General, took the Committee through the presentation (see attached document) page by page, and briefly explained that the OAG was committed to simplicity, clarity and relevance of the reports. The OAG was strengthening its human resources strategy, with particular emphasis on the comprehensive trainee auditor scheme. It would be leading by example on matters of risk management, internal controls and transformation. The funding model would ensure a stable margin and cash flow.
Mr Makwetu presented the budget figures, and explained the projected income statement, net surplus, overhead analysis and movement explanation.
Mr Raj Mahabeer, Chief Financial Officer, OAG, described the audit tariffs, recoverable hours and how the hours were calculated, and also described the broad consultation on audit directives.
The Chairperson said that it was not the role of the OAG to name and shame the wrong doers in departments, but merely to express an opinion on the accuracy of the financial statements.
Mr M Steele (DA) said that the Committee would support the OAG in every possible way, and he suggested that the Committee should emphasise the independence of this office.
Mr N Singh (IFP) concurred with Mr Steele.
Mr Nombembe said that the values as set out in of the strategic plan, and the Constitution, clearly stated the independence of the OAG.
Ms S Tsebe (ANC) asked whether the OAG was able to investigate the work done by the institutions being audited. She cited an example of a bridge that, according to the records, had been built, whereas it did not in fact exist at all.
Mr Nombembe explained that the role of OAG was to look at systems, to check whether they were in place, and ensure that everything was done according to the rules. Proper systems could detect or point to clues that showed up failures and the reasons for them. He added that OAG, together with National Treasury, would compile a handbook that would guide ministries and municipalities. If the guidelines were followed to the letter, then this should lead to good systems and performance.
Mr Singh said that some officials did not have the necessary skills demanded by their jobs.
Ms Tsebe concurred, pointing out that government officials would often hide behind the notion of insufficient capacity.
Mr Nombembe replied that “capacity” properly referred to the ability of an individual to do the job that he or she was hired to do. The role of the auditor was to check whether the systems were in place, to investigate what might have led to problems, and suggest remedies to the situation.
Ms Sosibo asked about the steps that would be taken when municipalities could not afford to pay OAG for the services rendered.
Mr Nombembe replied that the inability to pay was a result of inadequate revenue generation.
Ms Tsebe mentioned that parliamentarians faced problems in their constituencies when citizens complained about corruption, yet the mayor might boast that municipal auditors had declared that his council was properly run. The municipal auditors usually collaborated in hiding corruption. She suggested that OAG should look closely at this situation.
Mr Nombembe responded that 40% of the national departments did not have clean audits, and the situation could be worse in the municipalities. He said that OAG would meet with the municipalities, civil society and the traditional leaders and other role players.
Mr Steele wanted to know whether OAG would report instances where a capital asset was being poorly maintained.
Dr D George (DA) asked the meaning of the expression “clean audit”, and questioned when and why it was used.
Mr Nombembe replied that this meant that the audit report was unqualified, and the books were in order.
Mr Singh suggested that OAG should focus on the Departments of Health, Education and Housing, and make a public pronouncement.
Mr Nombembe noted that OAG office chose three entities out of 52 for their focus. The Departments of Health, Education and Human Settlements were high on the list and would receive attention.
Mr Singh asked the reason that OAG used the services of the Deloitte firm as consultants.
Mr Nombembe replied that consultants were used when the staff of the OAG could not attend to the job or were unwilling for some other reason to do so.
Ms Lindelwa Jabavu, Chief Operations Officer, OAG, added that the services of Deloitte were retained to cater for situations where the task was temporary, and therefore did not require the employment of permanent staff.
Mr J Matshoba (ANC) asked the reason for the use of consultants when there were people employed for the job at municipalities, and questioned if this was due to capacity problems.
Ms Tsebe asked whether OAG had powers to act when it discovered problems in municipalities, or if it was limited to suggesting ways in which the situation could be rectified.
Mr Makwetu responded that the OAG would merely express an opinion regarding the financial statements or performance of entities. All Chapter 9 institutions could report on issues, but could not take action themselves. The OAG’s report would be forwarded to the Standing Committee on Public Accounts, who would take the matters further.
Mr Steele asked why the amount for depreciation of the computers was larger than the amount for acquisition. He also said that he failed to understand why the security budget dropped from R 2,2 million in 2009/10, down to R 1,1 million in 2010/11.
Mr Makwetu said that the lifespan of a computer was very short, not more than three years, so that computers would need to be replaced after that time. Depreciation and acquisition were not related, because all the old computers were written off and new ones were acquired. The spending on security was a once-off item, which led to a more secure environment for the following years.
Mr George asked why payments were reflected for interviews, and also sought clarity regarding medical examinations.
Mr Mahabeer said that the medical examinations related to people being sent for medical check-ups by the Employment Wellness Programme. The interview amounts were reflected since OAG would refund the travelling and accommodation expenses of interviewees called for job interviews.
Mr Singh enquired why financial studies assistance for employees had been reduced. He also noted that the provision for bad debt had increased. He found it surprising that executive remuneration would not increase.
Mr Nombembe answered that OAG only assisted the financial studies if employees passed their examination. The assistance was withdrawn from those who did not achieve academically. He noted that executive remuneration was mentioned on page 49 of the full Report.
Ms Sosibo asked if there was mention of provision for insurance.
Mr Singh responded that this was shown on page 65 of the full Report.
The Chairperson asked that remaining questions stand over to the next meeting.
The meeting was adjourned.
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