Audit outcomes of Department of Public Enterprises and entities for 2013

Meeting report

Dr G Koornhof (ANC) apologised on behalf of the Chairperson who had taken sick leave. He indicated that he would be chairing the meeting in his absence.

Opening remarks
The Acting Chairperson informed Members that the agenda was comprised of two items: a briefing by the AG’s office on the audit outcomes, and the draft BRRR report. The Committee had had a successful meeting with the DPE on the annual report the previous day.  The DPE had been invited and would be allowed to comment if it so wished. But the meeting was for Members to engage the AG on matters it had identified in the annual report. These were matters the DPE would be too familiar with. The second item would be an update on the draft BRRR report. This was work in progress, and was intended to update Members and would be finalised in the next couple of days. Not on the agenda were two sets of minutes that needed to be adopted. He handed over to the AG delegation.

Briefing by Office of the Auditor-General
Mr Carl Wessels, Senior Manager, AG: DPE Portfolio, said the briefing was meant to address the audit outcomes for the 2012/13 financial year. In a one-on-one engagement with the AG, the Chairperson indicated that the Committee would be interested on the SA Express 2011/12 annual report, as it had never been tabled before the Committee. That had been included in the presentation.

The Acting Chairperson indicated that SA Express would appear before the Committee on 22 October, and would be tabling both the 2011/12 and 2012/13 annual reports.

Mr Wessels said the portfolio was made up of eight entities, two of which were audited by the AG. There was an option for the AG to select the audit entities and if it did not, private auditing firms were used. The AG interacted with the private auditors which audited the entities; there were annual briefings of what was expected of them. The private auditors were also provided with a format of how to audit the entities, as well as the kind of information they ought to look for. As a result of these discussions, it did not make any difference if an entity was audited by the AG or not, as the final reports looked the same. There were regular sessions with the internal auditors of the entities, and the AG sat at the audit meetings to get a better understanding of how the entities operated.

Funding for the DPE had increased from the prior year by an amount of about R1.3 billion, and most of the money had then been transferred out for payment of financial assets to Denel and Alexkor. A transfer payment had also been made for an indemnity claim to Denel. DPE was a key department in the National Development Plan (NDP) going forward, given its potential to promote economic growth.

The only entity that achieved a clean audit opinion with no findings on compliance with regulations and predetermined objectives for the current year was Denel.  SA Express still had a disclaimer, but had improved from its previous annual report. There was a regression by SAFCOL; the entity had moved from a clean audit opinion to be qualified.  Alexkor had an unchanged audit opinion, as it still had issues with compliance to laws and regulations.  Broadband was unchanged.   Eskom was also qualified on challenges with compliance with laws and regulations. For South African Airways (SAA), the audit had not been finalised and they would not be part of the briefing.

Mr Wessels said areas of qualification at the entities broadly related to non-current assets, current assets, fruitless and wasteful expenditure, liabilities and other disclosure items. There were significant findings on two entities – SA Express and SAFCOL – on the predetermined objectives. The rest of the portfolio was mostly challenged with complying with laws and regulations. He went through the areas of qualification per entity.

SA Express was qualified on rotable balances; these were parts taken from aeroplanes and could be re-used at the entity once successfully repaired. The AG found there were issues on the rotables and the inventory -- the systems used to manage these items were not comparable to the financial systems. Management was requested to go back to the prior year to do a recalculation of depreciation on these items. This was tested again, and the AG could not agree to the figures that were provided. The entity was thus qualified on that item.

Mr A Mokoena (ANC) interjected and asked what yardstick the AG used to reconcile the figures.

Mr Wessels replied the AG tested the balances, and tried to arrive at a conclusion as to whether it would satisfy itself by all the documentation, to make sure all the values were captured correctly. The AG got all the documentation to see if the value of the items was captured correctly. Invoices were mainly relied on; but the AG also looked at everything that was available at the end of the year and checked whether that was accounted for in the book. When looking at the depreciation of the items, the AG also checked the lifespan of the items.

Mr Mokoena interjected and said the expectation was that the AG would have interacted with the civil aviation experts, as the field was highly technical. This should not have been a simple accounting exercise, if the finding on rotables was to become authentic. Industry experts should have been roped in to give some credibility to the finding.

The Chairperson clarified that auditors only needed to confirm the rotable assets by ensuring that balances were in order, and not the physical mechanical aspects of stock testing.

Mr Wessels concurred and said auditors needed to ensure only that financial statements were free of material mistakes. As part of the auditing process, experts were roped in if they were required. He noted the comment.

Mr Wessels said that the AG had done a stock count with management and there had been differences in the valuation of stock. Management applied the roll forward basis and said these were from the previous year. When the AG went to do the physical count it disagreed with what was reported at year end, in terms of the inventory. The third qualification came in; there also was a concern about the computation of the recognised deferred tax asset that the management had created. This was a technical area of accounting, but the AG could not satisfy itself that this value had been effected in the financial statements. Another area of concern was the Preferential Procurement Policy Framework Act (PPPFA). The PPPFA had come into effect in December 2012, and entities had to comply with the Act. This differed from the past, where entities had to prescribe their own procurement regulations. The PPPFA legislative framework was very prescriptive.

Entities lacked the necessary systems to identify irregular expenditure. This too was a concern, because if one did not know, then one sat with unknown quantities. The aircraft structures were held in the names of trusts. To finalise the statements, the trust had to finalise their financial statements. Currently the trustees had continuously came and gone. The process of registering the trustees had not taken place yet, so the financial statements could not be finalised, and could not be signed off and consolidated into the SA Express financial statements. Therefore the aircraft structures had led the AG to raise a qualification.

The biological assets of SAFCOL had increased in the subsidiary in Mozambique.  When the AG had started looking at these, it had applied a technique of trying to physically count according to the physical areas the company had on record. During this process, differences had been identified between the physical areas, and what was on record. The auditors of the entity could not express an opinion on the biological assets. There was a huge chunk of SAFCOL assets the AG could not express an opinion on. A process was underway to finalise the matters in 2013. The AG emphasised that the issues could be resolved in the next financial statements.

SAFCOL had not been very careful about claiming for taxes. When the entity bought and paid for goods and services, it claimed for the 100% on expenditure for VAT (Value Added Tax) purposes. When the South African Revenue Service (SARS) started looking, it was discovered that tax could not be claimed for some of the goods and services. They could determine the amount, but due to the accounting system, they could not go back and relate it to the individual items on the income statement. They had a one-liner that said “normal loss”, to the value of R9.6 million. The AG had expressed a qualified audit opinion on this item. In the coming financial year, this should not impact on anything, as it had gone to the accumulative profit reserve, and the item would move away.
The last item was capital profit and retirement fund reserve. International accounting standards did not allow for reserve accounting. In the past, the entity had had a retirement fund reserve, a distributable fund reserve and a capital profit reserve. The new financial statements did not  make accommodation for these reserve funds. One had to put them somewhere else, and in the next financial year they would be put elsewhere.

In the previous year SA Express had received a disclaimer, as the entity could not provide sufficient appropriate audit evidence to indicate that the basis for the disclaimer of opinion on the financial statements for the year ended 31 March 2011 had been resolved for account balances, class of transactions and disclosure notes.  A lot of the limitations from the previous year had remained, but things were moving in the right direction in the current financial year. There were many areas that were affected in 2011/12 about which the AG could not express an opinion. He ran the Committee through the items, which included property, plant and equipment, inventory, non-current assets, investment in Congo Express Spri, and trade and other payables and receivables. The qualification had resulted mainly because the entity could not provide documentation on almost all of these items to support what the financial statements contained.

The entity had paid for a maintenance plan on the aeroplanes, but during the year it had written off two-thirds of the amount used to pay for the plan. The AG could not find adequate proof as to why the amount had been written off.   The entity did not have systems in place to identify irregular expenditure. The AG had applied a materiality figure, but had also looked at smaller amounts and started adding up all the small amounts together. They had made for uncomfortable reading and the AG could not express an opinion on those figures. Further areas that had been identified included the intangible assets, repairs and maintenance. The information on the report had already been disclosed by the accounting officers, and the AG merely wanted to alert the readers of the annual reports to the challenges.

The financials and house keeping matters should support the business.  Once one spent too much time on housekeeping matters, one could not attend to the rest of the business. If the chief financial officers (CFOs) were involved in clearing audit issues right to the last minute, it meant they were lagging behind on their work. The entities should attend to housekeeping matters, and then start shifting focus to predetermined objectives. This reflected on the portfolio, as many targets had not been achieved, resulting in service delivery being compromised.

Three areas needed to be cleaned up in the overall portfolio. Predetermined objectives were fairly clean, but the achievement of targets should be the real focus. Other areas were the material adjustments after the auditors had audited.  Auditors were part of the assurance process and had to verify the information availed by management. The last area was supply chain management. These three areas really should be the concern of the Committee.

The AG had issues with the usefulness of the targets set at SA Express, and was now suggesting that when one failed to define targets and indicators, then measuring performance would virtually be impossible. If there were challenges in planning, they were likely to impact and reflect on reporting. The idea was to plan the predetermined objectives before the year started. One then needed to monitor performance quarterly, and once challenges were identified they could be attended to in time. This had been the case with SA Express in both the 2011/12 and 2012/13 financial years. SA Express also had material adjustments to the predetermined objectives. There was an issue with SAFCOL on the reliability of the key performance indicators. On the planning side, things did not go well.   The targets had not been smartly crafted.

There was a challenge through the non-achievement of targets at Broadband Infrastructure, Eskom and Transnet.   Supply chain management continued to dodge governance as a whole. The biggest change in the entities’ environment this year was the PPPFA coming to existence. The irony was that the PPPFA had been there for some time, but had been postponed for a period of 18 months, and brought back in December 2012. It was not as if entities had been taken by surprise -- they should have prepared themselves for this change in legislation.

SA Express, SAFCOL and Alexkor had all been challenged in that all entities’ goods and services had not been procured in a fair and transparent manner. In the case of Alexkor, the poolling and sharing joint venture (PSJV) had gone through a procurement process with mining contractors. A joint venture was an entity created by law and not a registered company, and contractors refused to enter into agreements with joint ventures. Alexkor had signed an agreement with a joint venture, but because joint ventures were not public entities they did not have to comply with the Public Finance Management Act (PFMA), and their procurement process was not based on the PFMA or the PPPFA. The Alexkor contract was irregular.

There was an issue with contingent liabilities relating to the privatisation of the Komatiland Forest. This was the majority of what SAFCOL owned. A third party had been suing the Minister for opting away from the sale, following a settlement with the lawyers of the entity. A submission had been made to the Minister to be signed off, but legal representatives of the Department had indicated that third party lawyers did not have a right to sign. This meant there had been no settlement. When the AG looked at the investment, it had sent out third party confirmations and when those were received, there were two issues on them. The Department was supposed to do the annual valuation of the investment. Government did not do complex group accounting, where it looked at the value. It purely looked at what had been paid.

These were once-off and solvable issues. Management of entities needed to realise that all processes had to be linked to finances at the year end. If one was reporting something on human resources it was important to get the unit to sign off and verify information. When preparing for contingent liabilities for litigation, the entity’s own legal representative should have an input. The entities that traditionally got it right placed much emphasis on preparing financial statements regularly. This approach was advantageous, because it ensured updated and correct information was available. This also built up a discipline.  The more one did things, the better the experience.

The AG had recommended to the entities that they do full financial reporting regularly. National Treasury (NT) also required them to do the reporting, but not the disclosures, to be part of this process. The items were once-off, and entities should get into the mindset of doing them more regularly. However, when looking at the outcomes for the portfolio, there had been a slight improvement and the process was moving in the right direction.

The Minister had put strong emphasis on trying to address the findings. The Minister had started meetings with the chief executive officers (CEOs) and audit committee chairpersons of all entities to start discussions on how to resolve issues and assist each other.  Entities should be moving to auto-pilot -- there should be more regular reporting, and officials should be used to the financial reporting of the predetermined objectives. Sitting through the audit committee meetings of the entities was useful, as a lot of information was picked up there. The AG was privy to a lot of information a lot sooner, and it had been recommended to the DPE that they should consider this as well. The Department held the view that such an exercise would be tantamount to interfering with the independence of entities.

All entities had been requested to provide the DPE with action plans that demonstrated how they were each addressing the findings. The entities would be reporting on a quarterly basis to the DPE, to indicate what they were doing and what processes had they put in place. There was also the internal audit implementation process, to view actions taken by entities to improve the audit outcomes. The Minister had written a letter requesting entities to comply with the recommendations on interim financial statements’ action plans, and the reviews by internal audit. The procurement area was something solvable. If one did it right and provided training, there was no reason not to correct this in the next financial year.

Mr Waheed Omar, Manager AG: Entities, said despite the qualification, there had been an improvement at SA Express. However, the end goal was to arrive at a situation where there were not qualified audit outcomes. Management had taken steps to improve their asset management in particular.  The fruitless and wasteful expenditure policy had been drawn up and would be implemented in the 2014/15 financial year.

Ms Tshamunwe Nesamavi, Manager AG: Entities, said SAFCOL had always received clean audits. The qualification resulted from matters that were solvable. SAFCOL was in the process of implementing the action plan.

Discussion
Mr Mokoena wanted to know the asset value of the forest owned by SAFCOL. He expressed dissatisfaction with SA Express, and said the entity had before made the Committee fools by lying in Parliament. It was important that the AG scrutinise the entity and clean their systems. It was a serious offence for the board of a state-owned company to lie to Parliament. He asked at what stage, if at all, the AG became involved in forensic investigations at entities.

Mr Wessels replied that the net asset value for SAFCOL was R3.1 billion.

Mr Mokoena commented that the AG had downplayed the value of the land and just focused on the trees at the forest. He said he had expected the response from the officials, but it was important that the value of the land occupied by the trees was taken into consideration. If the value of land had been taken into consideration, the value of SAFCOL could well double.

Ms Nesamavi replied that the AG used a very complex methodology when it valued assets. It was not possible to value the trees alone, because the trees were on a piece of land.  The business was valued as a whole.

Mr Mokoena said that he was happy to accept the explanation.

Mr Wessels said the AG tried to be a partner in these processes.

Mr Omar said that he wanted to clarify the “alleged” lie by the board of SAFCOL in Parliament.

Mr Mokoena interjected and said it was not an allegation -- they had lied.

Mr Omar replied that the responsibility of the AG with regards to forensic investigations was to get a report from the accounting authority, and review the reasons why a transgression had occurred.

Mr Gololo asked if the AG conducted its own tests on forensic investigations done by private firms on state-owned entities. Could the AG redo the investigations on a particular entity to satisfy itself of the findings?

Mr Wessels said the responsibility to conduct investigations lay with the accounting officers of the entities. Unless asked to be involved, the AG did not interfere with an investigation’s process. But as part of the audit process, the AG received a report on investigations. The result of the forensic investigation would be to determine if there were liabilities, misconduct or irregularities, willingly or unwillingly. The accounting officer would then have to make a determination as to whether someone ought to be held accountable and whether the monies could be recouped. The audit process took these processes into consideration, and whether the reports were included in the financial statements.

Mr Gololo sought clarity on the statement that the PFMA was applicable only to public entities. He asked if there was an act of law that governed how public entities entered into joint ventures with communities.

The Acting Chairperson sought clarity on the legal status of Alexkor, and what the Committee could legislatively do to address the challenges in that entity.

Mr Wessels replied that the PFMA was applicable only to public entities and departments. When a new entity was created, both the National Treasury (NT) and the Department of Public Service and Administration (DPSA) should be involved. The joint venture had been created through a court order from a land claim. This was not the normal process one would usually follow for an entity. The truth was that Alexkor should be used as an example.  NT should be involved in trying to resolve the matter. It was very difficult now to try and redo the deed of settlement that governed Alexkor currently, and try to align with the PFMA. The community did not want to know anything about the PFMA. Issues around SAFCOL were known.  The process needed to be re-looked, with a particular focus on measures of establishing a joint venture. Thought would be given to this and how NT and the DPSA were involved in the matter. It was important to be proactive.

Mr J Dikobo (AZAPO) commented that everyone wished for clean audits. He found it strange that the AG would sit in meetings with entities and their internal audit committees for the whole year, only to qualify them at the end of the year. How could the AG be party to a process where predetermined objectives were discussed, only later to express an opinion that the objectives were neither smart nor measurable?  Surely there was reason for the AG to sit at the audit committee meetings.  How could the entities strike a balance, by allowing for an input from the AG, without compromising independence of the AG’s Office? The fact of the matter was that the AG was privy to the predetermined objectives information from as early as the first quarter. To come in only later in the year and make an adverse finding was more like ambushing the entities.

Mr Wessels said the AG had started an initiative where it was looking at the next financial year’s predetermined objectives to determine whether they were well defined. The ideal situation that had been recommended to entities was to have enough time for all submission processes.  There was a very good guide prescribed to entities on how to develop achievable objectives. It was important to include the kind of information the guide asked for in the balance scorecard, and factor that down to the level of the staff. This kind of information was sufficient to interrogate whether performance indicators and targets were achievable. The internal audit staff should be the ones interrogating the predetermined objectives.  They had the expertise and knowledge to do it. There was a tendency among public entities to change statements from the previous year, and this reduced the AG to a consultant.

Mr Dikobo said the achievement of targets appeared to be too low. At what point could this occurrence be regarded as unacceptable by the AG. He advocated an education drive on accounting terms, such as irregular expenditure, non-disclosures, and matters of emphasis. A new term was the lack of systems, resulting in inability to make a determination on whether irregular expenditure had occurred or not. He sought clarity on whether emphasis of matter meant irregular expenditure had occurred, but the entity had not disclosed it.

Mr Wessels replied that when targets were not achieved, a determination of a 20% margin was used. If one did not achieve more than 20% of the targets, then attention would be drawn to it. The Committee would agree that once house keeping matters were in order, then the shift of focus could be directed to service delivery.

At SA Express, there were no systems in place and the AG could not get assurance. The AG could investigate irregular expenditure, but testing was done on a sampling basis. Ideally, systems should be in place to detect irregular expenditure. Entities should be able to give information and then the auditors could formulate an opinion. In the absence of information, work for auditors was virtually impossible to perform. Auditors worked according to history and the documents that were provided.

Ms N Michaels (DA) said record keeping at the Department was of concern.   Reference had been made to interventions being made -- what kind of interventions were these?  Were they training-orientated or were they geared more towards holding people accountable?

Mr Wessels replied that interventions included quarterly meetings with accounting officers. Some of the entities were handed the internal dashboard for internal auditors to do. The scorecard document was refreshing to keep. The document was discussed with management and accounting officers. This was how the process was monitored, to make sure correct processes happened. The internal audit had proved to be invaluable at DPE.   It had taken the process over. The Department was there every day, and verified the plan.   They were a very good example of how to do it right.

Ms Michaels asked how the Committee could exercise oversight on SAA when Members did not have an audit report. How could this matter be taken forward? The grid (a colourful graph that indicated if an entity had received a qualification or not) identified financial and performance management as areas that entities were challenged on. When submitting reports to the AG, one expected that these areas had been addressed. None of the entities showed that these aspects were under control, and this was very worrying. How would this be fixed -- where could the Committee put pressure to make sure this was attended to?

Mr Wessels replied one could not report on something one had not seen. This was the same challenge auditors had when it came to SAA. Once the annual report was available, the AG could prepare a short version of the report. The AG could not avail information that had not been formally tabled in front of the Committee. There was a confidential agreement that the AG entered into with entities. As part of any audit process, this agreement had to be signed. Only when the documents had been tabled did the information then became public. Unless officially directed by Parliament to disclose such information, auditors were not allowed to divulge. The Committee was the only body empowered by law to request any information from anyone at anytime.

The Acting Chairperson commented that the Committee would consider the SAA matter and once their annual report was done, Members would come up with a proposal.

Mr Wessels said the Committee was entitled to receive any information from anyone. The only challenge was receiving such information in the correct format. There was no reason why the Committee could not have access to these documents for monitoring purposes. The AG looked at what the internal audit and management said, and then formulated an opinion at the end of the year. The reports submitted to the Minister could well be valuable to the Committee.

Ms Michaels said she found it bizarre that there could be late submissions to the AG. This demonstrated a lack of leadership and general care for the country on the part of the entities. Who could be blamed for late submissions and what action could be taken?   This was unacceptable.  How was it possible that audited entities were allowed to change the information on financial statements once they had been submitted?  Why did these entities change the financial statements?

Mr Wessels replied the PFMA required one to keep full accounting records on predetermined objectives and financial statements. When auditors had identified issues, then adjustments were made to alert stakeholders that the financial statements were not correct. The main concern was that auditors made decisions on information that might not, at the time, be entirely a reflection of what had happened.  Entities were allowed to make changes to statements as part of the audit process.
The methodology was such that samples were tested; and if any of the samples was found to be inaccurate, an assumption would be that many more could be inaccurate in the data. Management would be requested to go back and investigate the entire population that made up the sample. Then management was allowed to adjust to ensure the information was correct, and the information would be tested again. The rule was that if the auditors had identified an inaccuracy, they would mention material adjustments in the report. The audit process allowed for it, but the PFMA wanted accurate information to be provided from day one.

The Acting Chairperson asked what happened after the recommendations had been forwarded to the entity or the departments. Was the implementation of these recommendations monitored by the AG and was there a follow up on them?  This was the most important aspect of the audit reports.

Mr Wessels replied that the AG made recommendations to the entities and requested the entities to monitor the interventions. The AG received evidence provided by management and internal audit, and performed a quarterly dashboard. The main responsibility lay with the Department to implement the recommendations, but the internal audit should be the first stop.  Internal audit should verify if work had been done according to the evidence available. This was a unit that was independent from management, and should verify independently. The challenge was to have an action plan that addressed what went wrong.

The Chairperson said the DPE, according to the graph, had been qualified on the internal controls, specifically on proper record keeping for financial management. The red block indicated intervention was required.  What would the AG’s role be in that intervention, to assist the Department to get out of the red block?

The Acting Chairperson sought clarity on why the PPPFA appeared to be a concern only to Eskom. Could the AG enlighten the Committee as to what the issue was about the PPPFA?  This was a 2000 Act, and there were exemptions that had ended in December 2012.  Could the delegation educate Members about the PPPFA?

Mr Wessels replied that the PPPFA was not applicable to Schedule 2 entities, and this was where all the state-owned entities belonged. The guidance from NT was that one had to have a procurement policy. An entity would be measured against such a procurement policy. The challenge with the PPPFA was that it differed vastly from what entities might have done in the past.  The PPPFA was prescriptive about the steps one had to follow, and most of these entities had been overseeing suppliers. It was a complex situation -- if one advertised anything above a million rand, then the entity had evaluate the contractor; have functionality criteria; specify how a product would be evaluated; and consider how the Broad-Based Black Economic Empowerment (BBBEE) would be evaluated. All these had been brought in to place to protect Government and ensure pre-equitable and transparent procurement processes. This was a shift from what entities were used to. There were documents that one had to include, and there were standard regulations that one had to comply with. Once all of this was done, one had to ensure there was a contract with the provider so that they did not rob the entity. This was a cumbersome process. NT had published all these requirements on its website and always stood ready to help.

Ms G Borman (ANC) sought clarity on the dashboard used for following of the targets. The DPE had the dashboard for following matters, and the Committee was impressed with that. How had the AG found the DPE’s dashboard?  Even if it was inadequate, did that dashboard not cover challenges?

Mr Wessels replied it was the first time he was hearing about DPE’s dashboard, but he would go back and investigate.

The Chairperson asked the Department to comment.

DPE comments
Ms Yoliswa Makhasi, Chief Operating Officer (COO), DPE, said the Department was aware of the issues the AG had raised, as they had been presented to the Director General.  The Department took all the issues seriously. There were operational and strategic issues that the Department needed to be proactive on. She cited Alexkor, and said it was not a good model of how community partnerships should be handled. In the past the Department had not exercised much oversight on monitoring the audit outcomes of entities, but that would change. A close working relationship with the CFOs and COOs of the entities would be forged, and mechanisms were being put in place to foster working relationships, particularly on the issues that the AG had findings on.  The DPE accepted the suggestion of training state-owned entities’ officials.  SAFCOL had indicated that it was shocked by the AG’s findings. Some other entities had raised issues over the PPPFA, and that had since been taken up with NT.

The dashboard monitoring was there, but it had its own challenges. The DPE had reviewed it, and would introduce changes.   Record keeping at the Department had been given much attention. DPE had a monitoring and evaluation unit, but the expectation had been that audits would be handled by the finance unit. There were issues with coordinating efforts within the Department. The issue on predetermined objectives was a challenge, and there would be a need to tighten the wording. The Department did not need to reduce the commitments it had made, and believed they were achievable. The DPE would meet the entities in November to check progress, and the AG would be invited to that meeting. But their audits would remain theirs, and the Department could only support them.

Mr Wessels commented that the challenge in many public entities was the lack of action, and as long as that persisted there would always be the same kinds of challenges. Lack of consequences and a slow response to recommendations would always have an adverse effect on audit outcomes and the performance of the departments. Other challenges in the public service were vacancies in critical positions and focus areas. These were all issue that needed to be looked at as a matter of urgency.
The Chairperson thanked the AG and the Department.

Budgetary Review and Recommendation (BRRR) draft consideration
The Acting Chairperson clarified that the report was a draft, but he wanted Members to have a sense of the work the Committee staff had been doing. He handed over to the Committee Secretary to take Members through the report.

The Committee Secretary highlighted how the report was being prepared, but also emphasised the report would be “tweaked” following the AG’s earlier presentation, and the Department’s presentation the previous day.

The Chairperson said there was a Parliamentary template on how to prepare the BRRR reports, and staff needed to comply with it. The draft report appeared to be different to that template. It would be important for staff to use the correct template. The Committee would mandate both the researcher and the content advisor to finalise the report. There was valuable information from the AG that could be added to the report. Until such time as the report was finalised, there was no need to discuss it. This was only a draft.

Adoptions of minutes
The minutes of 11 and 18 June were considered.

Ms Michael said the minutes of 18 June needed to be detailed, particularly around availing more information to pensioners. The Pension Fund should communicate with pensioners. The 2% issue needed to be clearly articulated and a lot more information should be disseminated to pensioners. As it stood, the recommendation was too vague.

The minutes were adopted with amendments.

The meeting was adjourned.