Remuneration of Auditor-General; Committee Report on Oversight visit to the Auditor-General of South Africa (AGSA) Head Office

Standing Committee on Auditor General

01 June 2011
Chairperson: Adv M Masutha (ANC)
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Meeting Summary

The Committee considered and adopted outstanding minutes and the report on its visit to the Auditor General’s headquarters. The adoption of the Committee Programme was shelved due to impracticality of some meeting dates. Members then dealt with issue of putting the remuneration of the Auditor General to be on an equal level with that of the Chief Justice as the law required. Members comments included the fact that the AGSA contract was for seven years while that of the Chief Justice was for fifteen years. Therefore their termination pensions could not be the same. Some Members felt that the AGSA could easily be employed after the contract expired, while the Chief Justice could not work anywhere else. Others felt that the Committee should simply do what the law stipulated and the others pointed out that the Committee should consider legislative review regarding the matter. There was no consensus within the Committee therefore no decision was taken on the matter.

Meeting report

Outstanding Minutes
The Chairperson tabled the minutes dated 28 February 2011 for consideration. He noted that Members had received the document beforehand and could immediately identify if any changes needed to be made.

In the absence of any comments Prof L Ndabandaba (ANC) moved for the adoption of minutes and Mr M Steele (DA) seconded the motion. The minutes were adopted without amendments.

Committee Report on Oversight visit to the Auditor-General of South Africa (AGSA) Head Office
The Chairperson tabled the report for consideration. In addition, heapplauded the good work done at the head office and commented that the skills development programmes that enabled young graduates to be trained in different fields of accounting was developing much needed skills.

Dr G George (DA) expressed concern that the AGSA was owed a lot of money by the municipalities that it helped.

The Chairperson suggested that the Committee should deal with all the challenges faced by the AGSA when it appeared before the Committee to do a proper presentation.

Mr M Steele (DA) referred to bullet point 6.2 said that he was surprised by the 68% to 70 % of auditing staff time that was lost due to leave.

The Chairperson felt that Mr Steele‘s concern should also be flagged for that presentation meeting.

Dr George moved for adoption and Prof L Ndabandaba (ANC) seconded the motion.

The report was adopted without any changes.

Committee Programme
The Chairperson informed Members that the Committee was tasked with organising an event for Parliament.

Mr N Koornhof (COPE) pointed out that the first week of July was impractical Committee because it was difficult to hold meetings during the last week of the term.

The Chairperson replied that the Secretariat would reorganise the date for that last meeting.

The Chairperson mentioned that the Auditor-General did not have a platform to present and engage with the Committee; he was only allowed to table his report. He then suggested that the research team could try to look at what other countries were doing about the presentation of the AG’s report.

Mr Koornhof concurred with the Chairperson suggestion.

The second term programme was not adopted because the dates of the last meeting for the quarter had to be rearranged.

Finalisation of the Alexander Forbes matter on the remuneration of the Auditor- General
The Chairperson mentioned that the AG’s salary needed to be adjusted to be in line with the salary, allowances and benefits of that of the Chief Justice (CJ). To allow objectivity and transparency in dealing with this matter, a team of Actuaries who specialised in remuneration and pension benefits from Alexander Forbes were requested to undertake the exercise. The Chairperson of the AGSA Remuneration Committee conducted a benchmark study with some Chapter Nine Institutions, as well as those where skills, competencies and experience required were the same as what was needed for a person to be appointed in the position of the Auditor General.

The Chairperson added that the Chief justice received a housing allowance, in   the Auditor General no benchmarks were done with other countries on the same level.

Alexander Forbes Presentation
Mr Jaco Langner, Corporate and Actuarial Services Executive, Alexander Forbes, mentioned that the company had been requested to compare the total remuneration package of the AG and the CJ in order to make the salary package provided to the former similar to that of the latter. The suggested changes to the package of the AG would be required in order to comply with the Public Audit Act Chapter 2 Part 2 Section 7.2 (b).

Certain assumptions had been made in assessing the required adjusted remuneration package of the AG. These included:
•The AG would serve the public for 7 years in total, starting on 1 December 2006
•The AG and CJ were the same age at the calculation date
•The CJ would not receive a Post Retirement Medical Aid Subsidy in addition to his pension and that the CJ did not pay contributions to a fund for a pension benefit from his package

The presentation outlined the calculation methodology and the different scenarios considered by the company. (See document)

Mr Goolam Manak, Director: Public Entities, National Treasury, explained that the Remuneration Committee of the AGSA had stipulated that the AG’s salary package should be substantially similar to that of the Chief Justice. In line with this, Treasury suggested that the legislative framework that guided the remuneration of the Auditor General should be reviewed.

Mr Koornhof asked why the AG received terminal pension if he could work after he finished his seven year contract with the government. He added that the AG could easily get employment with his experience and impressive CV. The Chief Justice’s lasted for fifteen years. After that, he could not work anywhere else except for commissions of enquiry. He concluded that COPE did not support the increment of the AG’s remuneration to R23 million over seven years from the amount of R1, 7 million per annum.

Mr K Moloto (ANC) explained that the current legislative framework limited the powers of the Committee. The legislation required that the AG should get an equal package as the Chief Justice. He then asked why the AG did not get accommodation allowance like the Chief Justice.

The Chairperson enquired whether the Committee agreed with what the law stipulated.

Mr Koornhof explained that the law said that the AG and the Chief Justice should get ‘substantially the same” package, not exactly the same. The law was silent on the whether the AG could or could not work after the seven year contract had expired.

Mr Steele mentioned that the Chief Justice contract continued for up to fifteen years or up to retirement. He argued that the AGSA Remuneration Committee did not have legal argument that would support the raising of the salary.

Mr Moloto asked whether the AG would get termination pension for life if he was reemployed.

The Chairperson asked a rhetorical question, “what was the package awarded to the Chief Justice over a period of seven years”. He then explained that if the AG could serve for fifteen years then he qualified for a pension for life.

Mr Koornhof voiced concern that the AG would receive a pension of R10 million, the R3 million package was enough for the Auditor.

Mr Manak reiterated his position on the revisiting of legislation.

The Chairperson concluded by saying that there was no consensus within the Committee therefore the Committee could not make take any decision. He said that the Constitution guided the way forward, and the decision of the Committee had to comply with the law. The Committee could not constitute a quorum therefore a conclusive decision could not be made.

Mr Koornhof suggested that the Committee should invite Alexander Forbes, Remuneration Committee (Remco) and the Treasury in the next meeting.

The Committee agreed and the meeting was adjourned


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