Finance Select Committee: Training by Auditor-General's Office

NCOP Finance

07 February 2011
Chairperson: Mr C De Beer (ANC, Northern Cape)
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Meeting Summary

The Office of the Auditor General briefed Members on the audit process so as to improve on Parliament’s oversight role over national; provincial departments as well as municipalities. 

Meeting report

The purpose of the meeting was to equip members on the audit process so as to improve on Parliament’s oversight role over national; provincial departments as well as municipalities. The Office of the Auditor General was represented by Mr Cobus Botes, Senior Manager – Auditor-General South Africa (AGSA) and two Senior Technical Managers in the Auditing and Research Development Unit of the AGSA; Ms Tini Laubscher; Mr Prakash Narismulu

Briefing by AGSA
Mr Botes thanked the Committee for the opportunity afforded to the Auditor-General’s Office. He recalled a similar engagement that took place the previous and noted that it had been a fruitful interaction. In addition, he noted that every time the AGSA Office interacted with the Committee, it learned a lot and was trying to make all the material that it produced to be clearer and simpler.

Mr Botes informed Members that the Auditor-General produced annual audit reports on all government departments, public entities, municipalities and public institutions. Over and above these entity-specific reports, the audit outcomes were analysed in general reports that covered both the Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA) cycles. In addition, reports on discretionary audits, performance audit, and other special audits were also produced. The Auditor-General tabled reports to the relevant legislature with a direct interest in the audit, namely Parliament, provincial legislatures or municipal councils. These reports are then used in accordance with their own rules and procedures for oversight.

Ms Laubscher said that the Office of the Auditor-General had offices in all nine Provinces and a very detailed audit process would be undertaken in each province. At the end of July and end of December, auditors prepared their Audit Reports. Although auditors prepared the reports, the AG would be responsible for steering the whole process and issuing orders on the nature of information that should be looked by auditors. She also discussed the Executive Summary, referring from page 3 to page 34. She mentioned summary of audit outcomes and explained in detail on what the Committee should consider as shown in the table 2 page 37 of Consolidated General Report on the Provincial Audit Outcomes document

The Chairperson said both Committees were dealing with Budgets and later in the year focus on Budgetary Review and Recommendations (BRRR). He asked if there was a document that could help the Committee to use as a monitoring tool. He also invited the panel from AGSA to a Committee meeting which would be held on Friday.

Mr Mashile commented that Provinces had many ways of spending with regards to Conditional Grants. Some were spending internally while others transferred to Municipalities. In their books would be registered as a spent yet it was used to other purposes. He felt a need to focus on the flow of funds from National account to the Provincial account and also consider the impact on service delivery. This could give an idea on the nature of problems emanating from flow of funds at National level or Provincial Level.

Mr Narismulu explained that in the past auditors were mainly focused on financial matters but had now adopted a more holistic approach. In other words auditors inspected financial and non financial information. It was easy for the departments and municipalities to obtain unqualified opinions without achieving their service delivery objectives. He then explained in detail the concepts used on the table 2 page 37.

Unqualified Opinion: This was the best possible audit outcome. The report assured the public that the auditor has examined the financial reports and is of the opinion that the financial information is presented fairly and in conformance with Generally Accepted Accounting Principles (GAAP).

Qualified Opinion: This opinion meant that the auditor found the financial reports essentially in conformance with Generally Accepted Accounting Principles, except for one or a few areas where the auditor could not, or did not want to, assert conformance.

Adverse Opinion: This opinion meant that the auditor had concluded that the audited financial statement did not fairly represent the organization's financial position or financial performance, and that there were significant departures from GAAP. In most cases, before publishing an adverse opinion, the auditor would advise the organisation's accountants and officers of the problems and work with them to correct the financial reporting situation, so that an opinion could be published that was either unqualified or qualified rather than adverse.

He elaborated on the common issues that form the basis for the qualified, adverse or disclaimer of opinion on financial statements. As shown on page 7 to page 9. He said the AG had been meeting with the Management of the Departments to perform a check list on the recommendations made in the past year. There was a record of AG intervention which the Committee was entitled to.

Ms Laubscher referred to page 53 and explained the findings and reporting on predetermined objectives. She further discussed supply chain management, unauthorized, irregular as well as fruitless and wasteful expenditure by departments and public entities and computerised information systems. Other points discussed included conditional grants and financial audit outcomes for the sectors.

The meeting was adjourned.


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