Audit Outcomes on Defence Portfolio: AGSA briefing; Third Term Committee Programme

Meeting report

Third Term Committee Programme
The Chairperson presented the Committee’s programme for 14 October to 28 November 2014, and asked for suggestions and questions concerning the programme. He reminded the Committee that it was e-mailed to them a week ago and they should, therefore, have had the opportunity to go through the document and come up with suggestions and questions.

Mr D Maynier (DA) said that on 1 October 2014 he had written a letter to the Chairperson with suggestions on how the programme should be scheduled, but it did not appear as if his letter had been taken into consideration in drafting the programme. He asked why the letter had not been presented to the Committee for discussion, and whether the letter would, at a later stage, be taken into consideration when the programme was being drafted.

The Chairperson responded that the letter has been distributed to the Committee Members, and it would be the discussed later as they went through the programme.

Mr Maynier said he would have liked his letter to have been given to the Committee to allow them to make deliberations and suggestions on its contents before discussing the programme.

The Chairperson asked the Members if they preferred the presentations to be done separately, which would be followed by a discussion, or whether all the presentations should be done at the same time.

Mr D Gamede (ANC) suggested that the presentations be done separately and that Members should feel welcome to ask questions if they did not understand something.

Mr Maynier suggested that they start with the presentation from the Auditor-General as this was the main concern for the meeting.

The Chairperson started going through the Committee’s programme, starting from the 15 October 2014.

Mr Maynier interrupted the Chairperson, and said he had submitted a detailed counter-proposal on the programme to the Committee, which included specific details on how to deal with annual reports. He felt that the Committee could not deal with the annual reports without considering the letter.

The Chairperson responded that he had already indicated that the letter would be dealt with during the presentation of the programme. He continued with the presentation, and said that everything detailed in the programme was straightforward. He went through each day of the programme with their activities as indicated by the programme. He added that once the programme had been adopted, the Committee would move on to discussing the letter that had been written by Mr Maynier. He asked Mr Maynier whether his letter was opposing the programme, or whether it was a plan on how the programme should be scheduled.

Mr Maynier responded that the letter was simply a detailed structure of how he thought the programme should be scheduled -- it did not oppose any of the information or details in the programme. He also said that the Committee could not adopt the programme without considering his letter, and recommended that they did not adopt the programme for now.

Mr Gamede said that Mr Maynier's letter was directed at the annual report, rather than the programme. He did not understand why the Committee should consider the letter before adopting the programme.

The Chairperson responded by saying the Committee would have to give Mr Maynier an opportunity to present the letter to them, which would be followed by a discussion on the details of the letter. He reminded the Committee that the letter was not opposing the annual report, but rather gave details of how it could be presented.

Mr Maynier said it is obvious the Committee had not read his letter before attending the meeting and asked if the letter could be tabled.

The Chairperson reprimanded Mr Maynier, and said they would not be tabling his letter.

Mr Maynier asked the Chairperson on what basis he was refusing to table and circulate the letter.

Mr M Mncwango (IFP) said he thought the Committee should move on to adopting the programme and the letter could be discussed at the next meeting. It was very important that they carry on with the work that was planned for the day.

Mr S Esau (DA) said the problem with this specific Committee was that Members were not given the opportunity to ask follow-up questions and their time was, at times, limited as to how many questions they were allowed to ask.

The Chairperson said they had circulated the letter to the Members and would give Mr Maynier an opportunity to present his letter. He did not think that Members were given enough time to ask questions -- indeed, more time should be spent on certain discussions, and follow-up questions should be answered.

Mr Maynier said he would like to be given the opportunity to present his letter with the objections to the programme.

Mr Mncwango said discussion of the letter was delaying the process of the meeting, and they must move on to adopting the programme.

The Chairperson asked if Members had read the letter, and if so, did they have any further suggestions or amendments concerning the letter.

Mr Maynier interrupted the Chairperson, saying he was not aware that the letter had been circulated to the Members.

Mr M Booi (ANC) responded, saying Mr Maynier should respect the Chairperson.

Mr Gamede referred to page five of the programme, and said it was not possible for Mr Maynier to present his letter at the same time that AGSA would be presenting their annual report, since his letter dealt with issues of reporting. It would also not make sense, because the issues were in contrast.

Mr B Bongo (ANC) said he felt Mr Maynier's letter was very personal, especially the part where he said the Minister did not attend certain meetings.

Mr Maynier responded that his letter and the programme were not the same thing. They could not deal with the annual report, which contained eight sub-programmes, and the budget review of R40 billion, in one meeting. There would not be enough time to deal with these issues, and that was what his letter addressed. They should look at the way the Police Committee dealt with their reports, and should consider adopting some of their ways of doing things.

Mr Bongo said Mr Maynier should rather focus on this specific Committee and move on to making changes to the programme, as it was their main focus for the moment.

Mr Maynier suggested they first deal with the annual report and this should be done for two consecutive days, and not on two separate days. The Minister should also be present during the presentation of the annual report, since ministers should be accountable for the expenditure of their departments.

Mr S Mncwabe (NFP) proposed the adoption of the programme.

Mr B Nesi (ANC) proposed for the adoption of the report.

Mr Maynier said he opposed the adoption of the programme, and would lodge a complaint with the Chair of Chairs.

The Chairperson handed the presentation over to the Auditor-General.

Audit Outcomes on Defence Portfolio: AGSA briefing
Mr Musa Hlongwa, Business Executive: AGSA, introduced his team which consisted of Manager, Mr Warren Koen, and Auditor, Mr Lawrence van Vuuren. Mr Hlongwa gave the Committee an overview of what the defence portfolio consisted, of as indicated on page 2 of the Public Finance Management Act (PFMA) audit outcomes for the 2013-14 financial year. The Department of Military Veterans (DMV) audit was not included in the presentation, because the audit had taken place before 30 September 2014 -- before the DMV documents could be finalised for the audit. He said Mr Koen would be giving the presentation on the financial year for 2013/2014.

Mr Koen said the audit outcomes for the portfolio indicated that there were outstanding audits from financial statements, compliance with legislation and the performance reports. The audit also showed that only one-third of financial statements proved to be qualified, while two-thirds were unqualified. The performance reports showed that one-third of the reports had outstanding audits and another one-third showed that there were no findings in the report, which suggested there was no maladministration in the Department overall. He also discussed the assurance levels within the portfolio, and explained in which portfolio each level had an effect on, and to what extent each level performed according to the audit. The key controls within the portfolio where there was audit done were the financial statement, performance reports and compliance with legislation. The audit reports showed that effective leadership within financial reports was good, but human resources controls were concerning and ICT governance and controls required some intervention. This would also be true for proper record keeping, and review and monitoring compliance.

The Chairperson asked Mr Koen to explain to the Committee what the different colours in the report indicated.

Mr Koen explained to the Committee that on page 13 of the PFMA audit outcomes, the green code indicated that the condition of the key area had not improved, such as supply chain management, financial health and human resource management in the Department of Defence. The red code indicated that the condition in the portfolio had not improved from its previous condition -- this was found in Armscor’s supply chain management area. The grey indicated that the key area was not applicable to that portfolio, such as the supply chain management and IT controls in the SA National Defence Force (SANDF) Fund.

Mr Hlongwa also explained the key areas that they, as AGSA, reported on. He explained that there had been a non-compliance with registration at Armscor, which affected supply chain management, but in other key areas, Armscor seemed to perform well.

Mr Koen presented the status of key commitments by the Minister. These included filling the vacant posts of the DoD internal audit unit by the end of the financial year 2015, to provide a schedule of future meeting dates with AGSA, to improve governance and set clear expectations and responsibilities, and to establish a culture of respect and accountability. The areas that had been addressed were ensuring that all IT-related audit findings were addressed, to bring the other categories of assets to the same level as the three categories disclosed in 2011/12, and to improve key internal controls through monitoring and regular meetings. The process of ensuring accountability included an oversight role (Parliament, provincial legislature or municipal council), policy development, strategic planning and operational planning and budgeting, amongst others.

Discussion
Mr Bongo said the presentation should have also included the Department's desired outcomes.

Mr Maynier referred to page 27 of the report, and wanted to know whether the total amount of fruitless and wasteful expenditure included the cancellation of contracts. On page 28, on the section of investigations, had AGSA received all the relevant documents from the Department that would be used to process the investigation involving former Minister Lindiwe Sisulu, who had spent millions on a private jet.

Mr Esau asked if AGSA could explain what type of fruitless expenditure was found in the Department.

Mr Hlongwa responded that the Department had not given them all the relevant documents to continue with the investigation. They were not in a position to say whether the cancellation of contracts was included in the fruitless and wasteful expenditure, and asked if the Committee could give them a week to respond.

Mr Maynier said he was satisfied and was willing to wait until next week, but suspected that the cancellation of contracts was included in wasteful expenditure.

Mr Koen said the details of fruitless expenditure could be found in the long report on page 146 in paragraph 12, as well as on page 209, under section 25.2, and in the Special Defence Account (SDA) section on page 247 in paragraph 12.

Mr Maynier suggested that for the next AGSA briefing, it would be better if the Committee could provide the Auditor-General with questions before they presented, so that AGSA would know which areas the Committee was most interested in.

The Chairperson reminded both the AGSA and the Committee that there are some outstanding answers which the AGSA had to provide within the next week.

The meeting was adjourned.