International Relations & Cooperation Department 2011/12 Annual Report: Auditor-General & Expert Analysis

Meeting report

Opening Remarks
The Chairperson gave apologies for three Members not present at the meeting and said he did not know where some of the other Members were. He was disturbed by the low attendance for the Auditor-General report and expert analysis. This was the one tool which allowed Parliament to use oversight.

Mr B Skosana (IFP) suggested the Chairperson write to Speaker and others about the low attendance. The Chairperson agreed.

The Chairperson welcomed the Department, even though they were not actively taking part in the meeting. He recalled last year’s meeting when the Auditor-General presented and the Department’s body language in response to that report. He reminded everyone to stay relaxed.

Auditor-General SA on Department of International Relations & Cooperation (DIRCO) 2011/12 audit
Mr Vusi Msibi, AGSA Business Executive, reported on the audit outcomes for the Department of International Relations & Cooperation (DIRCO) and African Renaissance Fund (ARF), saying the audit opinion was unqualified with findings on predetermined objectives (PDO) and compliance. There were six key focus areas in the audit for DIRCO and three for ARF (since it uses three of DIRCO’s systems, it did not receive a score in those three key focus areas separately).

▪ Supply chain management (SCM): The Auditor-General noted audit findings in this area and noted no improvement from the previous year. Mr Msibi said there was irregular expenditure because people were not following legislation. Even though rules and processes had been set up, there was not adequate supervision to make sure they were being followed. Deviations in SCM were largely found in venue hire and deviation approvals were post facto.

▪ Predetermined objectives (PDO): The Auditor-General noted audit findings in this area for both DIRCO and ARF. There was also no improvement from the previous year. The PDOs were not specific and it was difficult to measure the extent of success. For both DIRCO and ARF, there was a lack of understanding the National Treasury Framework for managing programme performance information (FMPPI) which resulted in flawed implementation.

▪ HR Management had improved and there were no problems noted.

▪ IT controls was found to have weaknesses and there had been improvement from the previous year. Mr Msibi said the Auditor-General looked at four areas within this focus area: IT Governance Framework; IT Security Policy (and if was approved or not); User account management procedures, and Disaster recovery plan. IT Governance was not a priority and this was shown through repeat audit findings.

▪ Material errors/omissions in the Annual Financial Statements submitted for audit were found to have some improvement for ARF. However intervention was required and there was no improvement for DIRCO. Mr Msibi said the financial statements need to be reviewed before they were submitted for audit by DIRCO. The management was using the audit system to identify errors and then make changes. There was a lack of reviewing accounting information and lack of preparation for this. Mr Msibi said there were challenges within this key focus area because the financial statements were adjusted when they were doing the audit.

▪ Financial Health was found to have no material matters for both DIRCO and ARF.

Mr Msibi noted that another issue that needed to be addressed was payments to creditors not being settled within the 30 day period after receipt of an invoice.

The DIRCO Chief Financial Officer (CFO) had made several commitments in discussion with Mr Msibi. This included the commitment to increase the strength of monitoring and reviews, expenditure planning enhanced for deviations in SCM to follow protocol and get approved, and the consideration to up-skill the finance team through discussions with the training research unit.

No investigations had been necessitated and no performance audits had been done by the AGSA.

Discussion
Ms C September (ANC) stated that the report was unsettling. She questioned if regression has happened instead of movement forward from last year. Why did the Committee have to wait for the Auditor-General to come and tell them all these errors, why did the department not correct itself?

Mr Msibi replied that last year the Auditor-General had reported the same issues. The Accounting Officer had established a unit to monitor and resolve these issues. Mr Msibi said that AGSA sent the recommendations to DIRCO but they were not dealt with. The financial statements were of concern because they needed to be reviewed by an internal audit.

Mr M Booi (ANC) asked had there been progress or regression?

Mr I Davidson (DA) said the Auditor-General has been very vague and not specific enough with the Committee. He said the SCM had not improved and he asked if it had stayed the same or gotten worse? How many instances and what was the total value of these matters? He reiterated that a monitoring unit had been established and he wanted to know when and had it made an impact? He asked for the size of the irregular expenditure. He said the Committee needed specific details.

Ms September said that Parliament had been “misled” by how the Auditor-General explained PDOs. She could not believe Mr Msibi. The law made provision for some flexibility within the department. She wanted a response on the finances and stated they might as well close the meeting and wait until 2013.

Mr Skosana suggested to the Committee a different framework for future discourse. He wanted a triangular discussion with the Auditor-General, Committee and the Department. They needed people responsible for the projects to be present so they could be questioned.

Mr Msibi explained that the auditor’s approach looked at other areas such as PDO and SCM.

Members interrupted Mr Msibi asking if there had been regression and the Chairperson called for Mr Msibi to finish.

Mr Msibi answered that if you compared the two annual reports from this year and the last, the change was stagnant. In assessing improvement this year, he gave the example of quotations. Deviations in quotations had the same issues as the previous year. There was an issue with one certificate that was not provided. He said they could not do a 100% audit because it would be too expensive.

Mr Booi asked with regards to the perception of corruption, how did one measure that?

Mr Msibi said they looked at risk assessment and then they had an auditor approach. When they conduct the audit, if there was a risk of corruption they were required to do more, and recommend investigations.

Mr Davidson did not think that the Auditor-General had proper tools to make judgments on what was going wrong because some of the controls were not working properly or not in place.

Mr Msibi explained that if the internal controls were working, then they did not go as deep in the audit. They only went deeper if there were weak controls.

Mr Booi asked about deviations.

Mr Msibi explained that deviations were allowed by legislation but one could not do deviations just on account of poor planning. And it was here where the Auditor-General decided if it was irregular or not. Irregular did not mean it was fraudulent.

Mr Davidson asked what the size of irregular expenditures was.

The Chairperson asked why deviations would be signed off post facto.

Mr Booi said he did not think that the Auditor-General should be pointing the finger at the Department when he was not satisfied with how the Auditor-General was doing in answering the question about regression. How much regression had there been in the department?

Mr Skosana noted that the AGSA report identified as root causes of the problems identified as being a lack of understanding of procedures and lack of skills.

Ms September asked if there was a risk of the trend turning into the norm and if people would eventually just accept it.

Mr Msibi said, in regards to deviations, that in certain instances you have limited time to make decisions without proper approval. There were business decisions that need to be taken on the spot.

Mr Davidson explained that the AGSA came with an unqualified report and that AGSA had a certain standard. As Parliament, they needed to strive for excellence. He understood there would be deviations but he did not think any judgments could be made without specific details from the Auditor-General.

The Chairperson tried to facilitate order.

Mr Msibi said if attention was not given to these areas then it would lead to a qualified audit. The audit opinion was satisfied with the annual financial statements. There were issues with quotations and deviations. They were dealing with the same issues as last year and the Department needed to do more.

Mr Booi said he was not satisfied with how Mr Msibi had answered whether there has been regression or progress. He asked how the Auditor-General dealt with people who did not comply with laws.

Mr Skosana said that the Department did not pay suppliers within thirty days and this happened a lot in South Africa. What happened in other countries if the Department did not pay within thirty days?

Mr Msibi explained that the audit picked up on risks, it tested controls and picked up on weaknesses. The responsibility of the annual financial statements lay with management. The responsibility of prevention of fraud was with management. The responsibility of compliance with the legislation in DIRCO was with management.

The Chairperson said they had come to the end of the presentation and hoped that the Committee had interrogated it enough to have a conversation with the Department later on. He said the issues were the same as last year, but he did not think it was the place of the Auditor-General to say if regression or progress had happened. Members needed to sit with the Department and decide for themselves.

Mr Booi asked about the reference to the commitments that had been made.

Mr Msibi said that agreements had been made between the Auditor-General and the CFO on how to move forward.

South African Foreign Policy Initiative (SAFPI): Open Society Foundation SA expert analysis
Ms Sanusha Naidu, Senior Researcher, explained that there were five strategic priorities of DIRCO’s work that needed to be aligned with domestic imperatives. The priorities were the consolidation of the African agenda, strengthening of South-South collaboration, strengthening of North-South collaboration, involvement in the global system of governance and strengthening of political and economic relations. The principles underlying South Africa’s international relations were: a commitment to promote human rights, to promote democracy, a commitment to justice and international law, international peace and internationally agreeing on how to come to resolutions, a commitment to economic development through regional and international cooperation, and a commitment to Africa.

The strategic objectives for 2011/12 were to enhance the African agenda and sustainable development, within the Southern African Development Community (SADC), strengthen political and economic integration, strengthen South-South relations and strategic formations of the North, participate in the global system of governance and strengthen political and economic relations.

Ms Naidu looked at outcomes and achievements. There was discourse on peace and stability in Africa and reaffirmed commitments to it by South Africa. There was a key focus on the African continent and because of South Africa’s presence in the United Nations Security Council (UNSC) there was an alignment of AU and UN cooperation in peace support operations and UNSC and AU structures. There was the promotion of the peaceful resolution of conflict and post conflict reconstruction and development (PCRD) was worked towards. There was a commitment to African Peer Review Mechanism (APRM) as a key tool towards the promotion of good governance. Promotion of the South Africa Development Partnership Agency (SADPA) led to the strengthening of the country’s development and technical cooperation. There was an engagement in processes to further economic, political and regional integration processes in the South African Development Community (SADC). South Africa participated as a BRICS (Brazil, Russia, India, China, South Africa) full member in its Third and Fourth Summits. The 17^th Conference of the Parties (COP 17) of the United Nations Framework Convention on Climate Change was hosted and there was continued implementation of the Durban Platform for Enhanced Action. Ms Naidu thought it was interesting how South Africa also approached the LGBTI (lesbian, gay, bisexual, transgender, intersex) community and their rights in the UN.

Ms Naidu highlighted the weaknesses found. She was unsure with the information given that the outcomes were measurable deliverables for its strategic priorities. South Africa participated in many activities but nothing in the Annual Report showed how participation in these activities were concretely aligning with the strategic priorities. She said many things South Africa had done were PR exercises and they were “just there in order to be there”.

Ms Naidu identified weaknesses in promoting the principles in South African foreign policy. There was a disconnect between what was reported and what happened in reality. An example was given of when the SADC Heads of State decided to immobilise the SADC Tribunal. There was a commitment by South Africa to promote the rule of law and a commitment to international law and justice, however this decision questioned those commitments. She explained that the Annual Report highlighted many activities and engagements but these events were not followed up with details and achievements. It was hard to know if they had met targeted outcomes with such vague details. The targets were quite broad, so the achievements and deliverables were quite broad and it was unclear if they matched up with national interests and domestic priorities. There was also a problem found with public diplomacy. There needed to be an effort to explain to the public why South Africa was participating in things that were pertinent to strategic priorities. She cited the example of South Africa giving $2 billion to the IMF fire wall emergency fund, and South Africans were not happy. The lack of public discourse needed to be addressed.

In her overall assessment, Ms Naidu said targeted strategies appeared to be going for positional leadership opportunities however it was unclear how the positions were contributing to discourse in reforming global architecture. She said that going to meetings were not actual performance outcomes, and there needed to be clarity on what was happening at meetings and what would one be doing because of them. There also needed to be a stronger link between South Africa’s global engagements, its domestic priorities and national interests. Ms Naidu said there needed to be increased intensity in Research and Development in order for South Africa to deal with emerging trends and its responses to those trends.

Discussion
Ms C Dudley (ACDP) asked how well did the Department’s efforts transfer in the Annual Report of the Department’s efforts to have interaction locally and nationally.

Mr Davidson wondered if South Africa had a foreign policy and said that no one actually understood it. There was no consistency. He agreed that South Africa was trying to get a seat at the table by obtaining leadership positions, yet it had no thought about the desired outcomes. The problem with South Africa was that it measured inputs not outputs. He did not know what South Africa’s policy was and agreed with the analysis of the Annual Report.

Mr Skosana said that the Committee could not define South Africa’s national interests. South Africa wanted to be at the international table but was not dealing with its own domestic situation.

The Chairperson noted on page 82 of the Annual Report 2011/12 about how one of South Africa’s targets was to participate in summits and G20 processes. He also drew the Committee’s attention to its own Budgetary Review and Recommendation Report 2011 where in section 7.2 it noted that the Report of the Auditor-General had stated, “Indicators on the performance information were not well defined and targets were not specific and measurable”. He wondered if this was because there were no measurable objectives to report as both Ms Naidu and the Auditor-General had pointed out the difficulty in this.

Ms Naidu said that foreign policy was not about central government but could also include local and provincial governments. There was going to be a survey on what public interest was on South African policy and see what drives them. Ms Naidu explained the need for knowledge production and intellectual thought processes to help develop shifting policy, such as that in the Middle East and North Africa (MENA) region.

The Chairperson thanked Ms Naidu and hoped to have another engagement in the near future.