Auditor-General on 2011 audit results of local government

Standing Committee on Auditor General

27 July 2012
Chairperson: Adv M Masutha (ANC)
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Meeting Summary

The Auditor-General reported the results from the audits of Local Government against a clear target aimed for as a country which was to achieve universally clean audits by 2014. During the discussion, he criticised Parliament ignoring attempts by his Office to assist in implementing non-fragmented, consistent, quarterly oversight by both the NCOP and the Portfolio Committees over the whole of government. Oversight was crucial.

Out of 343 municipalities, only 13 (5%) had unqualified audits; 45% had unqualified audits with findings; 18% had qualified audits and 19% had disclaimers, while 13% had audits outstanding.

The AG identified the reasons for the state of affairs as three issues:
• There was no political will amongst the leadership to change the situation
• There were no consequences for non-performance
• The municipalities in many cases were staffed by people who lacked the requisite skills.

In order to achieve the universal clean audit by 2014, the leadership had to have the will to change the situation, there had to be accountability and consequences for non-performance at all levels of staff, and the skills had to be acquired to do the work.
At the moment there was a trend in the opposite direction, because many municipalities, including metros, that had achieved clean audits in the past, had regressed.

Most municipalities, 234 in all, were dependent on consultants. In 91% of cases consultants were hired on top of people in posts who did know what their functions entailed. This painted a clear picture of the skills situation in municipalities.

The AG emphasised that clean audits were possible and the target for 2014 was not a pipe dream. Proof of this was the 13 municipalities that achieved clean audits. They did this through applying the basic simple accounting principles learnt in Std 6 accounting, accountable leadership, and only appointing people who were qualified for those positions.

The AG urged the Members to act on the information they had received in order to turn the tide on the downward slide in the administration of municipalities nationally.

Members discussed the situation and came up with proposals for the way forward. Members proposed that the Committee singularly, or in conjunction with other committees in the governance cluster, table a document with recommendations on how to reverse the downward slide in the administration of municipalities. This document would have to be discussed in the House and the recommendations put forward would become resolutions of the House. These resolutions would have to be implemented.

Members proposed that oversight by this committee had to be coordinated with oversight by other committees with overlapping areas of oversight in order to achieve synergy, or to be more effective.

The AG emphasised the need for consequences for non-performance and contravention of the
Municipal Finance Management Act; consequences to the degree of being criminally charged. The Committee would need to consult the prosecuting agencies in order to establish the mechanism through which this would be done.

The AG stated that he reported the same issues year after year and made recommendations. Yet there was never any response to his reports. Failure to act earlier brought about the current situation. He drew the attention of the meeting to the fact that the institution of the Auditor-General spent R3b per year. If his recommendations were constantly ignored by government, it meant that the R3b spent by his office was fruitless and wasteful expenditure.

Members asked whether the AG’s mandate was adequate in order for him to fulfil his role; if there was a system at municipal level for councillors and key municipal officials, especially supply chain officials, could declare their business interests; how municipalities were supposed to pick up conflicts of interest in the supply chain process if it could not compare suppliers and service providers against the
Companies and Intellectual Property Commission (CIPC) or PERSAL databases; and why the current auditing system did not audit value-for-money. Importantly, the Committee mapped the way forward in detail in order to take seriously the Auditor-General’s plea for effective oversight.

Meeting report

Municipal Finance Management Act (MFMA) Consolidated General Report on audit outcomes of Local Government
Auditor-General, Mr Terence Nombembe, introduced his team focusing on Ms Tsakani Maluleke, National Leader of Audit Operations, who was appointed a month ago. She was a qualified chartered accountant and an ex-president of the Association for the Advancement of Black Accountants (ABASA). She sat on the Transformation Committee of the profession. The delegation included Feleka Baliso, Business Executive and Senior Managers, Siyanda Jaki and Cobus Botes.

Auditor-General said there had been a preliminary review of these outcomes. At the time the Office of the Auditor-General was still consulting with the leadership throughout the country in the form of the Speaker’s Forum, the various legislatures, the Premier’s Coordinating Fora, which involved the Mayors and the heads of executives in the provinces as well as Cabinet and coordinating ministries at a national government level. The highlight was when the Auditor-General met with the NCOP, with representatives from the provinces and some Committees in the National Assembly. Except for SALGA, the AG had consulted with every leadership structure in the country that had anything to do with local government. SALGA had received the written report, but there had been no debate or discussion on what its response would be to the report. On 23 July there was an opportunity to present the report to the nation. The AG had opportunities, through various media channels to respond to some of the responses from the public on the report. Over and above the media briefing by the AG, there had been media briefings in each province, with only the Free State outstanding, led by the Premiers, amplifying the messages contained in this report. Every corner of the country had the opportunity to get the message.

He referred to the last page of the presentation. This presentation highlighted three fundamental issues. It highlighted the fact that the AG was reporting results against a clear target aimed for as a country. The target was to achieve universally clean audits by 2014. It gave a barometer for how far the country was from achieving that target. In order to achieve the target of a clean audit by 2014, a few actions needed to be taken. At the moment only 13 municipalities and municipal entities had achieved this target. A few, but only a few, had regressed. Three metros had achieved clean audits in the past. If he remembered correctly, Ethekwini achieved a clean audit four years ago, but had regressed due to supply chain management issues; Johannesburg Metro had clean audits in 2009 and 2010. It lost its status because it migrated to a new computer system to do its billing and the project management was not efficient enough to facilitate a seamless migration. It was still trying to recover. Cape Town achieved clean audits 2009 and 2010, but lost its status in 2011 due to procurement issues.

There were two small municipalities in the Northern Cape that used to be in this clean space: Kareeberg Municipality and Francis Baard Municipality. Kareeberg was still in that space, while Frances Baard lost its status due to supply chain issues and an unusual cash flow balance not adding up. He emphasised this to make the point that once clean audits were achieved, everything had to be done to maintain the standards and to stay in that space. Although only a few municipalities achieved clean audits, they were an inspiration to others to rise to the occasion. There were three small municipalities in Mpumalanga which achieved clean audits both in 2010 and 2011. Another municipality, Gert Sibande District, had joined them. He was highlighting how confident he was that these municipalities had a sustainable platform for many years to come to stay on the right course. They had what it took to achieve a clean audit. They had the interest to achieve clean audits, they took direct ownership of operations, they employed people with the right qualifications and had sound performance management and practices. He wanted to point out that the culture of accountability was the norm within these municipalities and he wished all municipalities could replicate this quality in their own modus operandi. These were not difficult concepts. These were concepts of will. It depended on the interest of the leadership to do the right thing in terms of the mandate of local government, which was delivering services to the citizens. In Limpopo there were two small municipalities that were clean, one of which was Fetakgomo. When he spoke to the Mayor and Councillors, he got a sense of pride in the fact that there were municipalities in SA that found the rhythm of how to do things right. He was aware that these were few, but he emphasised them, because they showed that it was possible to achieve.

He emphasised the success stories and did not speak about clean audits only in passing; it needed to be emphasized to show that it was possible. The 45% in the yellow block could fix the problem themselves. They could do what the small percentage of municipalities that achieved clean audits, were doing. Excellence had to be driven by the municipalities themselves. They did not have to wait for the auditors to come and point out the errors they made, to then fix them, in order to rise to the occasion in a questionable manner.

The question was asked: Why make a fuss about municipalities not performing well when 154 municipalities were close to performing well? They 154 had
obtained unqualified audit reports, but with concerns. These municipalities received unqualified reports after corrections during the audit process. The AG noted that the 154 had only been corrected at the eleventh hour. It meant if the auditors were not there, the citizens would have been misled. He told municipalities: Don’t run your business in local government to satisfy auditors. Run municipalities to satisfy your citizens. Inculcate practice and culture of doing the right thing without the auditors being present. The other half needed a lot of work to be done to correct the errors. 18% had no proof of what they were saying. This was a serious situation as the norms of transparency and accountability had been flouted to the highest degree.

Referring to the red and green bar graph at the bottom, he explained that municipalities had been behaving like this for many years and there was no real incentive for municipalities to perform differently. In March when this Committee sat, this statistic had not been quantified. In 73% of municipalities, there were no consequences for officials who did not perform their duties. The AG paid quarterly visits to municipalities and gave clear instruction. Nothing was done about it and there were no repercussions for not doing their duties.

In these municipalities the leadership was not taking responsibility. There were no penalties for contravening the MFMA. These two practices created this state of affairs. Unless this was taken care of, one could not expect change in the outcomes. Another cause of the situation was the lack of suitable skills. The AG identified the municipalities which had no hope of improving, until their skills profile was fixed.

Most municipalities, 234 in all were dependent on consultants. In 91% of cases, consultants were hired on top of people in posts who did know what their functions entailed. This painted a clear picture of the skills situation in municipalities. He agreed that consultants were a quick solution to improve record keeping, but they had to be brought in on time for document archiving, their performance had to be managed and they had to have a clear brief as to what they should be doing. Document filing, document maintenance, document capturing were what was needed and these were the basic accounting principles learnt in Std 6 accounting.

The three root causes were analysed. The three were inseparable. Not one councillor said it was impossible. It needed the will to do it and accountability.

At the level of administration, the councillors had to invoke it. At the level of politicians, the politicians had to deal with other politicians. There needed to be the right level of consequences for people not doing their work in municipalities. Unless these issues were fixed, there would be no movement.

Five areas needed to be fixed:

• Supply chain management – errors and deviations. The notion and principle of equity was compromised heavily in the area of supply chain.
• The accuracy of the information produced needed to be fixed.
• Reporting on service delivery - 70% of municipalities did not have the correct systems in place to report on service delivery programmes. There was no correlation between the Integrated Development Plans (IDPs) and delivery budgets.
• IT controls – platform where municipal records were kept regarding security controls and restricted access.
• Human Resources Management controls.

All these issues resulted in internal controls which were essentially weak, only a third of municipalities had fair internal controls.

This was a high level analysis of what should be done. One could not run a business with flawed administration. He could not see evidence that the administration in municipalities was good enough to result in good governance.

The Chairperson said at this point in time the issues were clear. The question was how did they take the issues forward? The same issues recurred year after year. These were opportunities for engagement.

Mr N Koornhof (COPE) said it was depressing to listen to this type of reporting for the last five years. He served on the Finance Portfolio Committee and he asked if the AG need that Committee to pass legislation to proactively do something about the situation? If it was the case, the Committee had to aggressively pursue the development of such legislation to rectify the situation.

The Chairperson elaborated on the question and asked whether the AG was satisfied that his mandate as defined in the law, gave him sufficient muscle to assist in making a difference.

Ms F Bikani (ANC) said the same issues recurred every year. Did the AG have enough teeth in terms of its mandate? She observed that there were great improvements at some stage before the current decline. She said more laws were not needed, but action had to be taken in terms of sanctioning some municipalities.

She said Members needed ways to oversee their own municipalities. Change could be spurred on by a debate in Parliament; it could be through naming and shaming or by arresting errant municipal officials, if the laws were in place. Unless some action was taken, she did not see any change happening and the Committee would be repeating itself in the next cycle. Budgets were allocated specifically for the improvement of financial management systems. What happened to those budgets? Those areas needed to be queried instead of just stating the same problems every year without resulting improvements.

The AG replied that in his personal capacity, he believed the institution had an adequate mandate. He believed it fulfilled the mandate set out for it in the Constitution, adequately. It went beyond the call of its mandate. It got to a point where it lent a hand to government in all its structures from the executive to the oversight structures, where it assisted in finding solutions to the challenges posed.

The AG was picking up additional mandates from its colleagues internationally. As part of the responsibilities of supreme audit institutions, the Office of the AG needed to be seen to be making a contribution towards building the confidence of the citizens of the nation. It could not do this, as long as its reports and the messages contained therein, were not taken seriously and acted upon. Its mandate was to bring about complete insights as to the status of the government of the country. The AG could not prosecute. The AG was an auditor, not a prosecutor. Its mandate and its legislation were adequate. It could not do the work of other arms of government. There were jurisdictions where the AG was given powers of prosecution, but he believed that there were competent prosecutors in South Africa and that the AG’s mandate as it stood suited South African conditions.

He referred to page 90 in the Report. It was a graphic which showed the respective problem areas of the PFMA such as IT, HR and supply chain management, the level of government which was supposed to play a role in improving it, and whether there was some improvement in the 2010/11 outcomes or not. In most cases there was no improvement, indicated by red. The AG highlighted this point last year. Unless this situation got fixed and the other players in the constitutional framework started doing their jobs, he would not change the legislative framework of the AG. When he talked about consequences, he talked about consequences right up to the National Assembly. When Members of Parliament did not do their jobs, what happened to them? When members in the provincial legislature did not do their job, what happened to them? What were the consequences? The AG was not a guru in law or issues of legislation, but worked from a common sense perspective. If there were no consequences, there was no hope of changing the current situation. This year the report highlighted the superficial reasons for the situation as it stood. The next report, if nothing had changed, would go deeper into why things had not changed. The bottom line was: Unless people started doing what they were being paid to do, a process of collective self-introspection was needed. He as the AG was willing to take criticism if he was in the wrong anywhere. He was not patting himself on the back as the AG. He was forthcoming about his shortcomings.

The AG said the Members asked the AG questions but the questions the Members asked him, they should be asking themselves. The report was in front of them. They needed to act on it. The answers to these questions were self-evident. The questions did not need a response from him.

The AG pointed out that he had given the NCOP an opportunity to sit with the AG every quarter in order to be given the detail and status of internal control in every municipality in the country. The NCOP did not avail itself for these sessions. He told the NCOP if Parliament could not find time in its diary to be briefed on what was happening on the ground, how was it ever going to fulfil its oversight function. The Chairpersons of Portfolio Committees should be briefed on the issues of the whole of government, so that they have a broader picture when they do oversight. It was a constant struggle to achieve this. They did not avail themselves.
He was engaging with the National Assembly House Chairperson on Oversight on this matter and hoped that the engagement would bear fruit. He was trying to highlight obstacles that Parliament was putting in its own way in doing its work adequately. He became frustrated when the Office of the AG offered support and Parliament did not avail itself. Provincial parliaments were equally guilty.

The issue the AG was raising was that there could never be effective oversight in SA unless Public Accounts Committees and Portfolio Committees worked together as a unit. As long as the fragmented approach persisted, the current situation would persist, because each oversight body got an incomplete picture. This had been a consistent recommendation for three years in a row. It was an attempt to get the executive to run the affairs of government in an orderly way. This team tried to get Parliament to work as a collective unit.

The AG had an oversight model. If it could only be put into practice and if Parliament could listen to and work with the institutions which could offer some insight, the AG amongst others, the issues on the table could be dealt with.

2014 was not a pipe dream. It was achievable to transfer the red to green. It could happen overnight. It was like flipping a coin. The question was: How do you flip that coin and get all the relevant institutions to do oversight and administration in a coordinated way?

Mr N Singh (IFP) said it was extremely depressing although not unexpected. It confirmed the low level to which the administration in municipalities had sunk. In the foreword by the AG, there were three areas that he had identified as the main reasons why this picture had been painted. One of the things suggested by the AG on p14 read: “In conjunction with the relevant departments, my Office has actively participated in providing input into the development of solutions to the challenges highlighted in this report. “ He asked which interventions the Office of the AG proposed.

Mr Singh said when one looked at the MFMA, a heavy responsibility rested on MECs and provinces as well as National Treasury in terms of assisting local government. This was not happening to the level which it should. He read in the papers that Mike Suttcliffe, ex-Municipal Manager of the Ethekwini Municipality, said provincial treasuries and provinces were not supporting municipalities, while National Treasury was. Could the AG shed light on what the duties of provincial treasuries were towards municipalities?

The AG replied that his Office was doing a lot of work on interventions. Parliamentary oversight, nationally and provincially was one type of intervention. A lot of work was done with the coordinating ministries, the Ministries of Finance and Cooperative Governance and Traditional Affairs (CoGTA) in the provinces. These ministries had to beef up their capacity, for unless their capacity was boosted, they would have limited ability to monitor municipalities and they would have limited capacity to support and provide guidance to municipalities.

The AG’s interaction with the coordinating national ministries gave them the confidence that the coin could be flipped. It was about building the pillars which were fundamental enough to get everything else to start working correctly. This report looked at those pillars of strategic significance.

This answered the question on the AG’s legislative mandate.

Examples of transgressions were easily picked up when you have a model of oversight and supervision which was well structured. Cases of transgressions could be dealt with. Day to day monitoring had to be strengthened. If transgression occurred, there would be evidence to build a case with. There had to be checks and balances every step of the way. The AG provided recommendations, but they were omitted. They got omitted because the people responsible were not doing their job.

The AG told councillors to subject their information to checks and balances before continuing with a meeting. This way they would not have to reverse decisions based on wrong information. Elements of the culture of governance needed to be strengthened.

Mr Singh said, in a question to the President, he asked about what had been done to take Directors General to task for contravention of the Public Finance Management Act (PFMA). The President asked him to give an example of a DG who clearly contravened the PFMA. Could the Office of the AG provide examples of people who should be put in jail? There were many takers who belonged behind bars. Whose responsibility was it? It applied likewise to mayors and councillors.

Mr Singh referred to Section 36 of the PFMA which dealt with virements and variation orders. This was where supply chain processes went awry. What was done to legislate this area? At a national level the limit seemed to be 8%, while at the municipal level there were no limits. He wanted the AG to comment.

The AG agreed with criminal charges, but the administration processes to prove it were weak. The internal audit committee could exist and work well, but if management was not doing its job, an audit was unnecessary.

Mr J Steenheissen (DA) thanked the AG and team for the report and presentation. The three Cs were key: Consequences, Capacity and Cleanliness. There was a lack of consequences for non-compliance and dealing with the AG reports on an annual basis. He argued for criminal charges to be brought against officials, councillors and accounting officers. He asked the Minister of CoGTA for a list of municipal officials jailed for criminal offences in terms of the MFMA. He did not think the list would be long, if not a blank page. There was a need to inculcate a culture of accountability. If wrongdoing was identified, there had to be a criminal charge for it. Only a few prominent officials needed to be jailed for the rest to get the message that the regulations were serious and needed to be taken seriously.

There needed to be political consequences for non-compliance. Essentially councillors had to do oversight during the course of the year. A new way of doing salary increases had to be implemented for councillors, where the increase would depend on whether key requirements were in place, one of which had to be, a clean audit. When it affected them in the pocket, oversight would improve dramatically.

He agreed that capacity was a sore point in many municipalities as found on visits with CoGTA. Many municipalities had CFOs without experience, who would never be able to oversee the audit process adequately. There was no hope of them ever achieving a clean audit, because the audit trails and controls were not followed up.

Regarding cleanliness he asked the AG for suggestions on how to improve internal and external audit functions within a local council. He served as a councillor for 10 years in Ethekwini and for three of those at an executive level. He never saw an internal audit report tabled at an executive committee meeting, or discussed an audit report at a political level. These things had to be done throughout the year, and not be left for when the auditors came around. The problems lay with a lack of capacity and a lack of seriousness of controls.

Mr Steenheissen said municipalities would in all likelihood miss the 2012 target of 60% clean audits and wondered what needed to be done to reach the target of 100% in 2014. He noted irregularities in the supply chain process were a major problem for municipalities. They did not have access to the databases which the AG and other levels of government had access to and could not do comprehensive background searches on prospective service providers. They lacked an efficient CIPC search function and could not search the PERSAL database. He asked the AG for advice on how to assist the municipalities with that function.

The AG agreed that municipalities had to have access to databases to see whether there were conflicts of interest. Engagement with provincial treasuries would assist municipalities to overcome this obstacle, but provincial treasuries did not have adequate capacity at this stage. Provincial treasuries had to be capacitated to enable them to support municipalities better. Database scrutiny would help, otherwise audits would pick up conflicts of interest when it was too late.

Mr Steenheissen said value for money was another angle that needed to be looked at, because he identified it as a weakness in the auditing as it was done currently. The Bitou Municipality was given a clean audit, but it had a feeding scheme which was buying bread at R25 per loaf. Audits had to make sure the ratepayer received value for money. He asked for advice on how this could be addressed.

The AG agreed that issues of value for money were important. At the moment there was so much wrong at a basic level. This made it easy for value-for-money transgressions to slip through. If the basics could be fixed, It would be possible to scrutinise the information more intensely, and the more subtle irregularities, like overpricing, would be picked up.

Ms S Sithole (ANC) said she was not depressed. She thanked the AG for giving the Committee the tools with which to do their work. The Committee had enough tools, the PFMA, the MFMA and the Supply Chain Management legislation. The AG had outlined in detail that the legislation that governed municipal finances had not been adhered to. The Constitution allowed the Committee to table a report in Parliament with recommendations on what had to be done. No extra laws were needed. Action needed to be taken and the Committee had to table a report and demand a debate and to give it to the Leader of Government Business, the Deputy President.

Prof L Ndabandaba (ANC) thanked the AG for the report. He asked why healthy municipalities could not help weaker ones to improve – the ‘Each-one-teach-one’ principle.

The AG replied that the “Each-one-teach-one” comment was a positive one and one the AG would support whole heartedly. The few unqualified audits showed that it could be done. Leadership, skills and consequences were the key areas. It was a question of political and leadership will. Everyone in local government and in the ministries which are their funders, knew what the right approach was.

Ms W Nelson (ANC) noted in the last few years many municipalities, of which the bulk was from the North West province, did not submit financial statements. Did these reports come in at a later stage or were they never audited?

The AG replied that the late submissions of financial statements had been raised with the leadership in North West province, including the Premier and progress was made. Plans were in place to curb its recurrence. It happened with the Northern Cape and Western Cape provinces, but plans were in place there as well to curb its recurrence. It had happened in other provinces as well, but predominantly in these three.

Mr K Moloto (ANC) asked how sustainable the use of consultants was and was there a significant transfer of skills from the consultant to the municipal officials? On page 38 in the report the AG stated in terms of oversight over municipal finances, executive mayors and councillors had to insist on monthly financial statements. He asked whether this was prevalent amongst financially healthy municipalities. He asked why there were no sanctions and penalties for errant municipal accounting officers by National and Provincial Treasuries referring to page 48.

On page 86, regarding the establishment of an audit committee and municipal public accounts committee, he noted some audit committees did not meet frequently.

Phasing in period 2013, who is supposed to ensure enforcement if it was not done at municipal level?

The evaluation of non-current assets was one area of non-compliance. There was no system to evaluate the non-current assets.

The AG replied that consultants were a layer of support which was relevant and important. They could assist to address vulnerabilities and get the basics right. He wanted to emphasise that he was not against the use of consultants. He was against using them in ways that are not helpful. District municipality could help to manage them.

Mr Moloto asked why, according to page 86, municipalities in the Western Cape and Free State were not establishing audit committees.

The AG said that municipal public accounts committees had been established in all provinces except for the Free State and Western Cape. He hoped that they would be established there as well. They could assist council with verifying the credibility of information.

Mr Moloto noted, on conflict of interest, that at a national level, Members of Parliament and officials had to declare their business interests to avoid unethical situations. Was there a system at municipal level where councillors and key municipal officials, especially supply chain officials, could declare their business interests? If it did not exist, how could it be put in place?

The Chairperson said he agreed with the view of Ms Sithole, that the Constitution gave mandates. What did it expect? How serious did the overseers take their own constitutional mandates? This Committee had taken a decision, although it was not SCOPA, to go out and see the auditors, in order to see what was happening. What more should this Committee be doing in order to turn the situation around?

A year or two ago in the Old Assembly there was a meeting where the key law enforcement agencies, the Asset Forfeiture Unit, the National Prosecuting Authority, the Public Protector, and the Office of the AG were present. SCOAG and these organs of state asked how transversality could be ensured in order to address these issues. SCOAG had the Accountant General before it, to discuss the accounting system and capacity building in auditees. In 2011 the Public Service Portfolio Committee convened the cluster where the Public Service Commission presented its report and the Forum of South African Directors General (FOSAD) was there to respond to that report. The cluster asked itself what more it could do to improve the situation. The AG started to give a list of consultative processes at leadership level that had been done, following the presentation in March, leading to the release of this report. That was something that happened every year. Where to from here?

The Chairperson said the question now was what SCOAG was going to do about this situation as a Committee and more broadly as a collective of parliamentary committees, as the NCOP and as Parliament. When he assumed his duties, he was told this Committee met twice a year and he would have very little to do, and he accepted other responsibilities. He served on the Magistrates Commission and on the Rules Committee. From his experience on the Rules Committee he had an overarching picture of the engineering of the institution. He had been asking question about the institution and its engineering. One of the questions he had been asking and which came out in this meeting was the question about the oversight model which had been adopted.

The Rules Committee had to ask itself: Given the fact that we have adopted the oversight model, had it been implemented to the letter and was it successful? Answering this question might begin to give some of the answers to the questions which were emerging.

Even though auditors did not report to this Committee directly, each sphere of government was distinctive but interdependent, according to Chapter 4 of the Constitution. It meant that Treasury and CoGTA had the duty to capacitate at a municipal level. In the draft minutes of the 7 March 2012 there were bullet points and one of the bullet points stated that the provincial government level did not supporting municipalities. The principle was that, as an employee of the state, irrespective of the sphere of government, a civil servant had to be held accountable to do his job.

SCOAG visited afflicted municipalities and engaged with mayors and speakers. They were very cooperative. They welcomed the Committee and engaged with it. What more needed to be done? SCOAG did not go to the local government sphere, due to the enormity of the task in local government. It still had to engage with the provinces as well as with the national departments.

SCOAG needed to ask itself how far it could go and how much it was willing to do. It still needed to call Treasury. It needed to interact with CoGTA. It needed to look at the AG, Public Protector, and the Prosecuting Authority. If a case of misconduct or criminality was found, who was responsible for laying the charge? If the person responsible failed, who had to intervene? How did the transversality of the system work?

All Committees and organs of Parliament with overlapping oversight functions had to coordinate their work in order to work synergistically. If wrongdoing were discovered, disciplinary action needed to be taken. Charges had to be laid with existing law enforcement agencies, using existing protocols.

The Chairperson said that enforcement was a key issue that come to the fore strongly. What more could be done to ensure it? Portfolio Committees, SCOAG included reported to the House. The Committee could submit a report to the House. The recommendations in the report could become resolution of the House. These resolutions were pursued to their natural conclusions. Portfolio Committees had to report on progress made in the implementation of these resolutions. If there had been no implementation, those concerned had to be held to account. The Committee had to look at a method in the system of Parliament of achieving that. That was an area where the current oversight model had to be beefed up. If it was already in the model, it had to be ensured that the model was fully implemented.

The Department which was responsible for a function had to make sure that the function happened. There had to be a clear commitment to ensure that where disciplinary action needed to be taken, it was taken or where charges had to be laid with law enforcement, the charges were laid.

Existing protocols and memoranda of understanding between law enforcement and prosecuting agencies had to be enforced and pursued. There had to be a way in which the blatant negligence and criminality exposed by the AG’s Report could be acted upon by the law enforcement agencies. Law enforcement did not need the permission of anybody to enforce the law.

As SCOAG, the Committee agreed to, together with other related bodies and Committees in the spirit of collaboration and co-operation, make a submission to the House. The submission had to list the actions that had to be taken for Committees of Parliament to do effective oversight. A template could be developed. Did Committees get quarterly reports regularly and did they engage with them? Did Committees make sure that the department under their oversight followed the prescripts of the PFMA and the MFMA? Did they schedule their activities so that they pursued these issues? SCOAG needed to give input on these issues at an institutional level. It had to develop a template with a list of things for Portfolio Committees to do when they do oversight.

Mr Singh agreed that the situation required a joint response. SCOAG had to be wary not to box above its weight division. This Committee had the responsibility of a facilitating role, because the report emanated from an organ over which this Committee had oversight. SCOAG’s role was to say it was satisfied with the work the AG did and it was extremely so. It had to look at the challenges the AG faced while busy doing the work. It had to see how it could assist the AG in overcoming those challenges. SCOAG could not directly ask CoGTA what it was going to do. It could convince the House Chairperson to ask CoGTA what it was going to do. The provincial colleagues involved in this matter had to be involved. He suggested that a mini-conference had to be convened to address this issue, as it was very serious.

Ms Bikani said that Parliament, in particular the governance cluster, was a starting point. It was already a group of relevant Committees which could decide which approach it would use. Auditing involved all three spheres of government and coordination between the three. Certain processes at local government were run from province and national levels. She agreed with the mini-conference or indaba. The main outcry was leadership, which affected this Committee as well as the governance cluster, flowing down to the other levels.

Mr Moloto felt SCOAG had to find a way of interacting with the NCOP because it could not interact with provinces and municipalities directly. The issue here was to develop a comprehensive report, which had to be presented to Parliament for debate after which resolutions would have to be taken. Resolutions would include certain actions which would have to be taken.

Ms Sithole said she agreed with what the other members suggested, but she wanted to restrict it to the SCOAG itself. SCOAG had to table a report to the legislature. The report had to be debated. There would be recommendations. The AG had said it would brief SCOAG on a quarterly basis. If there was no improvement, the Committee could address questions to the Leader of Government Business in the House, the Deputy President. SCOAG had to ask relevant questions as a follow-up after submitting a report to the House.

Mr Steenheissen said CoGTA had to be brought on board. He thought the starting point was to get audit response plans from municipalities. He was not sure whether SCOAG was empowered to do it, or whether CoGTA needed to do it. They had to be asked what they planned to do and they had to be held accountable. They could be monitored on the basis of what they promised to do. With summits and big meetings, one often got bogged down with high-level issues, while the municipalities themselves had to be tackled.

The Chairperson said this was the reason why SCOAG went down to municipalities themselves. Nothing prevented SCOAG from visiting municipalities.

Mr Moloto said it was important to collaborate with the NCOP in order to get the relevant answers. SCOAG could not interfere on the territory of the NCOP. It was important to collaborate with the NCOP, so when a joint hearing was called, SCOAG would be empowered to call the provinces, or the metros. The same approach would have to be used with the law enforcement agencies. SARS had an interest in this report, because there were companies which benefitted from tenders from municipalities, but they were not on the SARS database.

The AG supported collaborations with other institutions. SARS for instance had a great interest in this report for reasons of supply chain information. The Finance and Fiscal Commission, the Budget Council, the Public Service Commission all had great interest in this report and collaborations with all these organs would be necessary in order to resolve the current crisis.

SCOAG as the oversight committee needed to highlight the impact of the current situation and it continuance for the institution. The Office of the AG spent in excess of R3b per year. If the reports and recommendations of the AG were consistently ignored, as had been the case until now, this spending could be classified as fruitless and wasteful expenditure. This angle could be used to argue with the House Chairperson in order to get action on the matter. The independence of the Office of the AG could be seriously compromised if it made all these findings, but nobody took it seriously.

The Chairperson said that a way forward had been outlined.

Mr Singh asked whether SCOAG was the first Committee to be briefed on this finalised report.

The AG replied that the NCOP was briefed in detail. The NA Committees had not been briefed yet, but would still be briefed. Hon C Frolick, House Chairperson: Committee, Oversight & ICT in the National Assembly and
Hon N Magadla, House Chairperson: Committees in the NCOP, had been there. SCOAG would communicate with them in terms of taking the issue forward.

Auditor-General succession
The Chairperson said that the 30 November 2013 would be the last day on which the current AG would occupy the position. SCOAG had to make recommendations to the President regarding the appointment of a new AG. Neither the Act nor the Rules provided the SCOAG with guidelines as to what procedures had to be followed. Most or all of the members were new and had no experience of appointing a new AG. The question was: Did the Public Audit Act as it stood require major tweeking in terms of appointing a new AG? In terms of the Act, SCOAG did not recommend to the Assembly, but directly to the President. Was it correct? Was it ideal? Should SCOAG press for the amendment of the Act before a new AG was appointed?

He was not sure how SCOAG was going to proceed on the matter. Could there be a session where there could be memory exchange by senior people in the Office of the AG who had been through this process before? He wanted to draw on institutional memory to assist in plotting the path towards the appointment of a new AG. How best could SCOAG deal with the issue? The matter was becoming urgent and SCOAG could run out of time.

Mr Moloto proposed setting up a team to look at the issues. Their brief would be to come up with possible amendments to the legislation.

Mr Singh proposed that SCOAG asked the Office of the Auditor-General whether it had any amendments to propose. It would enlighten the Committee. They together with a small political team and some parliamentary legal advisers could assist the Committee.

The Chairperson said that the Audit Commission pre-existed this Committee. It probably produced the Public Audit Act (PAA) in terms of which this Committee had been established. The current AG was appointed under the Act of 2004.This Committee did not pass legislation, but it could be empowered to do so by the House. He agreed with the view of letting the Office of the Auditor-General make the first input on the matter.

The AG said that the appointment of the AG itself was more of a constitutional matter than the Public Audit Act matter. The conditions of employment related to the PAA. He did not believe that amendments to the Act would be needed. What was needed was a clear policy within the Office which could be approved in terms of its approval framework by SCOAG. It would provide a clear interpretation of what the Act meant by the conditions of employment of the AG. It could save SCOAG the burden of having to amend the Act and delaying the process. By December 2012, he wanted to know who the next AG would be, so that it could become clear who the next Deputy AG would be. For the first six months of his tenure as AG, he had to fulfil both roles. The succession process had to be done 18 months in advance in the interest of stability.

The Office of the Auditor-General did have a list of the issues that needed to be amended in the Act. It had been available since the time of the Committee which preceded this one, the one chaired by Hon Hogan and Hon Smith. It dealt mainly with housekeeping issues.

Mr Moloto noted that the AG said he wanted to know who his successor was by December 2012. His term only expired by November 2013. Why so long in advance. How did the arrangement work? Did appointing a new AG mean that a new deputy AG needed to be appointed?

The Chairperson said that a thorough discussion was needed on the matter and would happen on the 17 August 2012. SCOAG would discuss whether the prescripts under which it operated needed to be amended or not. If so, to what extent? The relevant documentation would be at hand. If the Office of the Auditor-General had something to contribute, it would do so. These issues needed a proper discussion. Senior people from the Office of the AG could come and brief the Committee on how the process was approached before. The information ideally had to come from SCOAG, but SCOAG was in a precarious situation, because historical documents did not shed light on the matter. Institutional memory could provide a way forward. He expected that the appointment of a new AG would take longer than the remainder of the year.

Committee Housekeeping
The minutes of 7 March 2012 meeting were discussed but not adopted. The Committee Secretary took the meeting through the programme for the third term. The only date which could not change was Friday 31 August 2012 when there would be an overview by the AG Audit Committee on the AGSA Annual Report. Looking at progress with the planned Study Tour, the committee secretary reported that the Committee submitted an application for funding for the international tour to the House a month and a half ago. He wrote a follow-up letter during the recess upon which the House Chairperson replied that he did not respond to non-urgent matters during that time. The Austrian AG informed SCOAG that it would be available to host it from 9 -15 October 2012. The House Chairperson had to be made aware of that. This was the week of the
Budgetary Review & Recommendation Report (BRRR), but this Committee was exempt from BRRR. He did not know whether the application would be refused due to BRRR or whether it would be granted.

The Chairperson said that this Committee would have to meet on Fridays as meetings on other days were impossible.

The meeting was adjourned.


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