Oversight from a Financial perspective: Workshop with Auditor-General: Day 2

NCOP Finance

13 April 2010
Chairperson: Mr C De Beer (ANC; Northern Cape)
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Meeting Summary

The Committee continued its workshop with the Auditor General South Africa (AGSA) to clarify its oversight duties. AGSA noted the distinction between General Reports, being reports on the consolidated outcomes of national government department, public entities and constitutional entities, provincial departments, public and other entities as well as municipalities and municipal entities (which were of great use in ensuring effective oversight by the NCOP committees) and Annual Reports, which were produced by the executive authorities in National and Provincial Cabinets. Annual reports from municipalities were required in terms of the Municipal Finance Management Act. The various issues related to programme performance were described.

Members asked about the difference between the Auditor-General’s audit reports and the reports by Departments’ audit committees, and asked what recommendations AGSA made regarding Departments who received qualified audits year-on-year, including whether any punitive action was taken. Members also asked whether AGSA made proposals around training of any of the relevant stakeholders, the timing of performance evaluations, and whether municipalities using consultants were given qualified audit opinions due to these consultants not having sufficient time within which to collate records. The Chairperson suggested that once management officials had completed any training, they should be tested so as to assess whether this training had been successful. Members commented that often it was rampant corruption, not lack of training, which was the cause of ineffective financial management in municipalities, saying this constituted a looting of public finances. Members suggested that punitive action should be taken against senior officials in the cases where their entities who were underperforming failed, within specified timelines, to improve.


Meeting report

Auditor-General South Africa (AGSA) presentation on Reports that enable accountability and oversight
Mr Paul Mosaka, Business Executive, Auditor-General South Africa said that two types of reports enabled accountability and oversight. The Auditor-General of South Africa (AGSA) produced General Reports, which were broadly reports on the consolidated outcomes of national government departments, public entities and constitutional entities, provincial departments, public and other entities as well as municipalities and municipal entities. The consolidated Provincial and Municipal General Reports were useful documents for NCOP Committees to ensure effective oversight.
In addition to the Auditor-General’s Preface, General Reports on consolidated provincial audit outcomes noted audit outcomes for the financial year, key systemic issues, an analysis of audit qualifications areas and their root causes, warning signals requiring attention, and results of audits of information systems. They would also contain significant findings from audits of human resources management and compensation of employees, an audit of performance information, consolidated financial statements, the status of tabling of annual reports, and a status report on performance audits, investigations and special audits. In addition, there were annexures to the General Report. Annexure 1 contained a listing of areas qualified in financial statements of legislatures, departments and entities, Annexure 2 contained a listing of legislatures, departments and entities with emphasis of matter and ‘other matters’ findings, Annexure 3 had a listing of five-year audit opinions and Annexure 4 listed those audits finalised late or outstanding.

The General Reports on Consolidated Municipal Audit Outcomes noted the audit outcomes for the financial year, remedial action taken on audit outcomes of previous years, an analysis of audit areas qualified and their root causes, warning signals requiring attention, other reporting responsibilities, and consolidated financial statements and tabling of annual reports. The Annexures to these reports were also set out. Annexure 1 contained the listing of audit outcomes for municipalities (including the metro and municipal entities). Annexure 2 was the listing of five-year audit opinions, Annexure 3 listed the municipalities (including the metro and municipal entities) with non-compliance findings, and Annexure 4 included a list of material losses, unauthorised expenditure, fruitless and wasteful and irregular expenditure (including under-spending of budgets and unspent government grants). Annexure 5 contained the listing of municipalities with non-compliance findings related to performance information.
 
Mr Mosaka explained that the Constitution required executive authorities in the national and provincial Cabinets to provide the legislatures with “full and regular reports concerning matters under their control” – an Annual Report.  Annual reports from municipalities were required in terms of the Municipal Finance Management Act (MFMA). The structure of annual reports had to be consistent with the strategic plan and its contents should, as proposed by the National Treasury, consist of general information, department/ programme performance, service delivery improvement plans, human resource management, finance, statutory bodies and organisational structure.

Mr Mosaka noted that these annual reports gave certain pointers, and when considering them, the Committees should note whether the department or entity had achieved the objectives it had stated that it would achieve when presenting its strategic plan and budget for that year. If there was non-achievement, then the Committee must consider whether the explanations for non-achievement were credible or acceptable, whether the actual achievements reported reconciled with information Members had regarding what was happening on the ground within constituencies.

Discussion
Mr T Chaane (ANC, North-West) asked whether it would not be possible to include, as a permanent feature of Annual Reports, a section listing, in simple form, whether what was planned had been achieved.

Mr Mosaka answered that reports were supposed to follow this format. The Committee could demand this from the Executive.

Mr Chaane asked what the difference was for the difference between the Auditor-General’s audit reports and the reports by Departments’ audit committees.

Mr Mosaka said that the law was clear on what the role of audit committees was. Standing Committee on Public Accounts (SCOPA) would be making these committees a focus area.
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Mr S Montshitsi (ANC, Gauteng) asked what recommendations AGSA made regarding departments who received qualified audits year-on-year, and whether AGSA would recommend punitive action in this regard. He also asked if AGSA made proposals around training any of the relevant stakeholders.
 
Mr Mosaka answered that budgets of “serial offenders” who received qualified audits could be reduced, though such powers were only in the hands of the legislature. As it was the duty of management to pick up problems first, AGSA could not make recommendations around training programmes.

The Chairperson said that once management officials had completed any training, they should be tested so as to assess whether this training had been successful.

Mr Montshisti said that it was rampant corruption, and not lack of training, that was the cause of ineffective financial management in municipalities. This constituted a looting of public finances.
 
Ms T Memela (ANC, KwaZulu Natal) asked when evaluations were done in order to assess the skills and competencies of officials.

Mr Mosaka answered that performance evaluations were, as a general rule, done twice a year.

Mr B Mashile (ANC, Mpumalanga) asked whether municipalities who utilised consultants were given qualified audit opinions due to these consultants not having sufficient time within which to collate records. He also asked how Chief Financial Officers who utilised consultants could be sure that these consultants had completed their tasks successfully, given that these officials did not have the necessary skills in this regard.
 
Mr Mosaka answered that there should ordinarily not be any problems if the terms of reference were clear, especially around outputs and deliverables.

Mr S Mazosiwe (ANC, Eastern Cape) said that the legislature should give those entities that consistently underperformed a timelines within which to improve. If it was seen that they were not improving within these timelines, punitive action should be taken against senior officials.

The meeting was adjourned.



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