Auditors General of France and Philippines: briefing

STANDING COMMITTEE ON PUBLIC ACCOUNTS
27 February 2002
AUDITORS GENERAL FRANCE AND PHILIPPINES

Chairperson: Mr Gavin Woods (IFP)

SUMMARY
Auditor General was invited to report on the process of accountability within government of South Africa. The Auditor General of the Philippines Republic, and the Auditor General of France accompanied him. They shared their processes with the Committee in the hope of assisting the South African Auditor General's office to be as efficient as it could be.

MINUTES
Mr Shauket Fakie (Auditor General) worked with the two officials on the Joint Audit arranged by the United Nations, and he felt that they would provide useful information to SCOPA. He introduced Mr Francois Logerot, the Premier President of the National Court of Accounts in France, and Mr Gulemo Carague, the Chairperson of the Commission of Audits in the Philippines.Â

Mr Woods (IFP) asked the Auditor General to inform the Committee of the degree of information regarding the South African system that he had given to the guests.

Auditor General stated that he had given them a high level overview of the working relations. Thus the guests were reasonably familiar with the operation of public accounts.

Mr Logerot, Premier President of National Court of Accounts (France)
Mr Logerot presented a brief overview of the French system. The French National Court of Accounts auditors were magistrates who had the task of assisting the government and Parliament (the National Assembly and the Senate) in overseeing the implementation of the annual Budget Act and the annual Social Security Financing Act. He would be handing over an annual public report on the Court of Accounts, which had been personally given to him three weeks ago. He hoped that this would assist him in giving the Committee a full overview of their system.

Mr Carague, Chairperson of Commission of Audits (Philippines)
Mr Carague introduced his team making particular reference to Mr Raul Flores and Mr Emmanuel Dalman, he stated that in the Philippines they referred to that branch as the Commission. There were three branches of government, namely the Executive, the Legislature (the upper house called the Senate and containing 24 nationally elected Senates, and the lower house called the House of Representatives elected by congressional districts and containing approximately 200 members), and the Supreme Court of the Philippines made up of fifteen justices. In addition, there were three Constitutional Courts, namely the Commission on Audit, the Commission on Election, and the Civil Service Commission. In terms of the Constitution this commission was independent and heads could only be removed through impeachment.

Mr Carague explained that the Commission had a seven year term on a staggered basis. They had the task of auditing all government agencies, which normally means the National Government Agencies such as the Department of Public Works, and Local Government Agencies (made up of provinces, between 60 and 65 cities, and approximately 1500 municipalities). Commission also audits Government Corporations such as the Social Security System (currently a figure of approximately 200). It prepared reports for each of the three agencies, and copies would be given to the office of the President and to Members of Parliament. Most of these reports would be accessible on the internet, thereby allowing the public to have access to them.  Commission had the task of disallowing transactions deemed irregular, such as actions carried out without budgetary authority, and overpricing. Persons responsible for such acts of irregularity would be held personally liable. Nevertheless,the decision reached by the Commission would not be finally enforceable, and accused persons had the right to challenge the Commission in court. Commission did not have the power to unilaterally enforce its decisions, and there was a prosecutorial office to which all cases would be referred. Commission would usually recommend when to prosecute, and the prosecutorial office was entitled to seek their assistance when reaching a decision.

Mr Carague stated that the Commission had a total labour force of 10000. Approximately 9000 persons actually engaged in auditing. There was a support system of approximately 3000 persons. He said that the audit teams were assigned to different government agencies in order to prevent them from becoming too familiar with the process in specific government agencies.

Mr Woods (IFP) asked Mr Logerot and Mr Carague to elaborate on the interaction between their offices and the other spheres of government.

Mr Carague explained that the nearest comparison in the lower house was the Committee on Appropriation. The Senate had a Committee on Finance that operated on the same level. These bodies would normally co-ordinate with the Commission in order to determine proprietary uses of government finance. There were various departments in the office of the President (Ministries). The Department of Finance would propose the budget through close co-ordination with the Legislature. The yearly budget would be given to the President for preliminary approval. Following this the lower house would call the heads of the different government agencies to discuss their budgets. Once approved, the same process would be carried out in the Senate. Where differing opinions arose between both houses, the Joint Committee set up to reconcile differences would attempt to resolve the conflicts. The final budget would then be referred back to the President in order for him to sign it. The President would either approve the budget in its entirety or partially.Â

Mr Gillette (a member of the French team) explained that the question and answer approach mostly occurred with Committee members. He said that four years ago, the somewhat equivalent of the South African Public Accounts Committee was created in France. This body had the task of raising issues that would then be addressed to the Court of Accounts. He added that the court considers contributions made by the Committee in certain cases.

Discussion
Ms Taljaard (DA) asked about extent to which their degree of independence had been entrenched.

Mr Carague related this question to the independence of the Philippines. He said that the authority of the Commission of Audit was based on a provision in the Constitution that granted 'exclusive authority over accounting and auditing matters' to the body. However, he explained that the Commission did not personally perform the accounting, but were allowed to prescribe the accounting system. The Commission had designed the accounting system, as was the case in many accounting firms worldwide. As long as this occurred, the Commission could not be accused of auditing its own work. No government agency could replace the Commission because it had its own budgetary appropriation through Congress.

Mr Logerot explained that France had a jurisdictional system of auditing which therefore made the Court of Accounts independent. The auditors were magistrates, about 60% of which were graduates from the National School of Administration. He added that the only criteria for appointment into the system would be the personal choice of the persons concerned. The remaining 40% of employees would be appointed by the President in agreement with the First President of the Court of Accounts (a magistrate). The Constitution guaranteed the independence of the court. Magistrates were allowed to have jobs in the public sector so long as they complied with the guarantee of competence.

Ms Taljaard referred to the interface between the Executive and the auditors, and stated that she felt that the Enron issue had highlighted the risks of allowing these bodies to have too close a link. Had there been any debate surrounding this?
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Mr Carague explained that the International Organisation of Supreme Audit Institutions would interact with the Commission. The Asian Organisation of Supreme Audit Institutions was also there to assist. The Commission was independent of the audit team. However, corrupt auditors could exist, hence the constant reshuffling between agencies.

Mr Logerot stated that the European Court of Auditors was the only competent authority for auditing the implementations of the European budget and not the National budget. The European Court of Auditors was not the head of the National Court of Accounts.

Mr Gillette added that there was increasing co-operation between the links. Although the inherent risk posed by the Enron situation was present, a number of built in safeguards existed in an attempt to avoid the risks. He listed them:
-Life appointment of magistrate
-Court divided into seven Chambers, a Senior magistrate sitting in each Chamber. The -Chambers would deliver judgements thus maintaining a degree of distance between the auditor and auditee.
-System of sanctions imposed
-Account in France done by a separate line of accounts, assigned by the Treasury. This maintained independence from the Ministry.
-Fines, of up to two years, imposed.
-Rotation system.
He added that the greater risk lay in the fact that the Court contained only 300 magistrates on the national level, and 30 magistrates on the local level, as opposed to the 12000 officials in the Philippines.

Ms Taljaard asked the French office to what extent the Court of Accounts was based on the German system. What would happen to transversal funds.

A member stated that it was not clear to her what role Parliament had in France.

Mr Logerot explained that both the National Assembly and the Senate had the right to ask the Court of Accounts to undertake specific auditing on particular matters. However, this possibility was not largely used as approximately four enquiries had been received in 2001. Â

Mr Smith (ANC) stated that France basically had the equivalent of SCOPA, which would be able to call the cabinet to account. What was the composition of 'SCOPA' and who chaired it?

Mr Logerot replied that four years ago the final Committee of the National Assembly created an Evolution and Control Mission on the model of the Committee on Budgetary Questions used in the United Kingdom House of Commons. The body consisted of two Chairmen, one from the majority party and the other from a minority party. Although the system was experimental, it had afforded some good results. Of among twelve subjects, such as professional training and road policies, Ministers themselves came before the court and discussed in the presence of the auditors. He suggested that this system was a good one to follow up because the court would not participate in the discussions in the presence of the Minister.

Mr Smith (ANC) asked Mr Carague which political party chaired the Commission and what the composition of the reviewing body was.

Mr Carague explained that in both houses the Committees were normally chaired by members of the majority parties, and in some cases there would be a collusion of various parties. Both houses could only request investigations and explained that this was an aid in legislation.

The meeting was adjourned.