Auditor General on Outstanding Reports: briefing

Meeting report

PUBLIC ACCOUNTS STANDING COMMITTEE
13 March 2002
BRIEFING BY THE AUDITOR-GENERAL ON OUSTANDING REPORTS

Chairperson: Mr F Beukmann (NNP)

MINUTES
[This is a transcript produced by the Public Accounts Committee Secretariat.]

[Mr V Smith (Acting Chairperson)] I declare the meeting open. It was indicated that we will have a briefing on the outstanding Reports by the Auditor-General. We have asked him to brief the Committee on all outstanding Reports. We have a Report on the oversees trip that we are hoping to adopt today. We have asked Dr Gavin Woods to present SCOPA's budget and he is aware that he is supposed to do that today and we have the agenda. We are suggesting that between the briefing of the Auditor-General and the oversees trip we slot in resolutions. We have the resolution of Justice that we have to formally adopt in this Committee. Mr Gumede, are you going to talk to us about your Land Affairs Resolution today? We will work through the Land Affairs and the Justice Resolutions as point no. 2; the overseas trip as point no. 3 and the presentation of the draft Budget becomes point no. 4. Are there any other items that members want to include onto the Agenda? If not, can we then accept that this agenda with its amendment has been adopted or accepted by the House?

[Mr K Botes] The draft programme that was submitted to you yesterday, are you going to cover it under general or would you want to make it a specific item?

[Mr V Smith] We have a draft programme that the Auditor-General's Office circulated to us. Can we put that under general? There are copies available for distribution.

[Mr M Lowe] Can I just ask where we approved minutes of previous meetings, we received a copy of some minutes of the 5^th of March 2002, would those form part of the agenda or are those recognized and approved as a matter of course?

[Mr V Smith] I thought we have approved the minutes yesterday. You are saying there is another set of minutes that we have received.

[Mr M Lowe] Yes, on the 5^th of March 2002, Minutes of Proceedings.

[Mr V Smith] With your permission, can we look at those minutes next Tuesday? I am not sure everybody has the minutes, but we normally approve the minutes the meeting afterwards. Mr Fakie the floor is yours.

Briefing by the Auditor-General on Delays in Tabling of Annual Reports
[Mr S Fakie] Let me take this opportunity firstly to thank the Committee for inviting me to come and brief them on the delays in the tabling of the Annual Reports. The Report has been distributed. It is a special Report which we have distributed to the members this morning. I would also like to mention to the members that this Report has also almost simultaneously been handed over to the Speaker's Office for tabling in Parliament. So, it has got to have the referral process still coming through to SCOPA and that has not yet taken place. I do not think there is any problem with us dealing with the contents of the Report, because this Report is also been submitted at the request of SCOPA. So the referral process - we just need to take cognizance of the fact that the referral has not taken place yet. If I can take you through the Report and perhaps for the benefit of the members, this Report we published so late, because initially the thinking that I had was that the year 2000/2001 was the first year of the implementation of the PFMA (Performance Finance Management Act) by the departments. It is a transitional period and we should try and see what progress they have made. During this transitional period - one - in terms of submitting the financial statements on time, and I did produce a Status Report to this Committee some time last year. Secondly, to also see what progress they are making as far as the tabling of these Reports are concerned. Initially the idea was that I would include a very brief paragraph in the General Report relating to this matter, but on reconsideration we thought it would be appropriate, and especially in the light of the request that came through from SCOPA, that we do put our Special Report and hence there is this Special Report that has been put forward to Parliament for your consideration once it is referred to you. Also for the benefit of the members, there is some critical timeframes that are specified in the PFMA? Firstly, there is the two (2) month timeframe by when the departments needs to get their financial statements finalized, signed off and submitted to us for auditing. Then there is a two (2) month timeframe within which the Auditor-General needs to audit and finalize his audit. That gives you four (4) months after year-end. And then there is a one (1) month timeframe within which the department needs to do the printing and get the Reports printed and have them tabled in Parliament. The tabling of the Report is the responsibility of the Executive Authority. In actual fact, the timeframes laid down in the PFMA is that within five (5) months after the year-end the Report should be coming through to Parliament for tabling. If the Report has not come through to Parliament for tabling within six (6) months, in other words if there is another month's delay and the five (5) months of course is the deadline is 31^st August 2002, if by September the Report has not been tabled in Parliament the executive authority has a responsibility to provide explanations as to why the Report has not been tabled in Parliament. So against that backdrop and background this Report in actual fact has been prepared on the basis of informing Parliament and SCOPA specifically on what the status of the various National Departments are together with the public entities and constitutional bodies that the response will fall and what the situation is regarding the Schedule 2 Public Entities. I will take you through the Report briefly based on that background. Page one, to a large extent provide you with the background of exactly what Section 65 want, what responsibility it places on the executive authority and the timeframes within which the Reports needs to be tabled in Parliament. Section 65 (2) - states that the Auditor-General may issue a Special Report on the delays and that is exactly what we are doing here. It is basically saying that it is in terms of Section 65 (2)(b) that I have decided to table this Report in Parliament. Also in my Status Report and General Report that I tabled in Parliament last year I have indicated that it is a transitional period. I was quite pleasantly surprise at the submission of financial statements on a timely basis by both National and Provincial Departments. Of course, the Constitutional and Public Entities were not as successful. And then if I move on to page 2, we have prepared the Report in basically two (2) tables which gives you a situation of which departments have complied in terms of tabling and which have not. And those ones that have not, which ones have actually provided explanations, etc. We have got Table A and Table B and each one of these tables have four (4) columns to them, columns 1 to 4. Columns one (1) gives you a situation of which departments have complied in submitting their financial statements by 31 August 2001 and tabling them in Parliament. You will see that for the year under review, which is the 2000/2001, three (3) Table A Reports were tabled within this deadline and two (2) Table B Reports. Three (3) out of a total of well over 40 Reports that were supposed to be tabled within the timeframe there were only 3 Reports that were tabled within that timeframe. And 2 Table B Reports were submitted within the timeframe. Table A covers National Departments, Statuary Bodies and Constitutional Entities falling within the National Departments. Table B relates to public entities listed in terms of Schedule 2 of the PFMA. Then we have a column two (2) on the table which states which departments have not tabled their Report after six (6) months of the financial year and without an explanation by the Executive Authority. What we have found is that there were fourteen (14) Table A Reports that were tabled in this deadline and three (3) Table B Reports that were submitted within this deadline. Table two (2) basically says that the 30^th of September is the latest date by which the Report must be tabled without an explanation being forwarded. They have got a one-month grace period. Column 3 of the Table A and B states that if Reports are tabled after 30^th September there needs to be an explanation provided by the executive authority on the reasons for the delays, and column 3 actually depicts that situation. What we have found there is that there were fourteen (14) Table A Reports that were tabled after 30^th of September, but in only two (2) of those cases were written explanations provided giving reasons for the delay in tabling by the Executive Authority. In the case of Table B seven (7) Reports were tabled after the six (6) months and in only one (1) case was a written explanation provided as to why there was a delay in submitting those financial statements. Then we have a column, which is an extremely bad column, Column 4. It illustrates that as of 28 February 2002, which is eleven (11) months after the year-end, what is the status as far as tabling of Reports is concerned. What you will find there is that five (5) Annual Reports out of a total of thirty six (36) for National Government Departments were outstanding and seven (7) Annual Reports out of a total of ten (10) possible constitutional entities. At the National Government Departments the percentage is quite low, it is five (5) out of thirty six (36), but for the constitutional entities there is seven (7) out of ten (10) Reports that are still outstanding at 28 of February 2002. In the case of four (4) of those Reports explanations for the delays were tabled. Now out of this total of twelve (12) Reports that have not been tabled as of 28 of February 2002 only four (4) of them provided explanations as to why they were late and we will go through the table now. With regard to Table B, which is the Schedule 2 Public Entities, you will find that six (6) Annual Reports out of a possible of eighteen (18), and SA Abattoir Corporation have been excluded, because it has been delisted, were outstanding in respect of the 2000-2001 financial year. And in this one only in one (1) case was a written explanation tabled in Parliament. There is a very clear indication from this Report and from the tables that are provided as to which departments and entities are involved. We can go through that in a little more detail, but there is a very clear indication that - one - in many cases Reports are not being tabled timeously and, secondly, that when they are not tabled timeously the prescripts of the PFMA are not being complied with in the sense that departments or the Executive Authorities responsible for those departments or public entities are not providing explanations as to why those Reports were not tabled. If I can very quickly, having given you an overview of what Table A and B is, if you go onto page 3 that is where the table is and that is where the four (4) columns are, I think the columns which are of crucial importance to consider non-compliance will be Columns 3 and 4, headed "Tabled after 30^th of September 2001" explanation for delay required and the last column Annual Reports outstanding as at 28 February 2002. You will find that all the departments have been listed and the ones with the star (*) next to it, for example on page 3,Column 3, if you look at Vote 20 - Land Affairs and Vote 34 - Water Affairs, those were the two departments which have provided an explanation for the delay in tabling of the Reports. And if you go to Column 4 you will find that it is only Vote 26 - Public Works that provided an explanation for the delays in tabling the Reports. On the next page it is exactly the same sort of situation, you will find that in Column 3 there were none there, but in Column 4 there was an Independent Electoral Commission and the IBA (now ICASA) and the Pan South African Language Board that provided explanations. Table 2, as I have explained, is the Schedule 2 Public Entities. It is exactly the same format that we have used as Table A regarding those 4 columns and the timeframes within that and the thing is self explanatory. Again the real area of concern would be Table 3 and 4 in terms of looking at the number of departments or public entities that did not table the Report after six (6) months and those that did not even provide and explanation. As you would see from Column 3, Transnet was the only one that provided an explanation for the delay. In Column 4, it was the Post Office that provided an explanation. The public entities, I must say, are sitting in a fairly bad situation as far as either tabling the Reports timeously or even providing explanations for those delays. I do not know how you are going to take it? Do you want me to stop there for a little while so that we can engage with Table A and B and what I have provided as an overview before I go with Chapter 3 onwards? There is another area of concern that I have that I need to bring to the Committee's attention. I will be guided by you Chair?

[Mr M Lowe] If it is in order, could I address the Auditor-General with a number of questions?

[Mr V Smith] No, we wanting to decide do we stop at this point and go through the first 3 pages, or do we allow him to go throughout the Report and then address questions. My view is that we stop at this point and discuss what had been tabled and then carry on to the next, but I will be guided by the House.

[Ms N Hlangwana] I was thinking that if we do that, our questions might assume what is going to be given to us in proceeding with the Report. I will propose that we let the Auditor-General finalize the Report and then all the questions.

[Mr M Lowe] I will take an alternative view. Given the serious matters before us it is important that we ask questions now on Table A and B and let us deal with those and if we could move on to Table C and thereafter.

[Mr B Kannemeyer] Could I just get clarity from the Auditor-General? Page 7 comments on the nature and content of some of the Section 65 explanations. Would that not impact on some of the indications that were given earlier on pages 2 and 3? I would then think that we would be better served if at least we can deal with that, because Table C and what follows on that is something else. If we want to concentrate on the main Report first I would suggest that the Auditor-General take us through the comments. I can remember last time there was some of these Section 65 notices or explanations that the Auditor-General have exactly said might have not been a correct reflection of why Annual Reports were not tabled on time. I do not know if that would come up there.

[Mr D Gumede] In supporting Ms Hlangwana, I think that it is better to finish the Report and then in line with what Mr Lowe is saying, then we deal with it section per section when we deal with the Report, but let the Auditor-General finished first. My fear is that we are going to ask questions on issues that are addressed in the later sections of the Report.

[Mr S Fakie] There is a link between the page 7 that Mr Kannemeyer refers to and the explanation that I have provided on Table A and B in the sense that it is the qualitative aspects of the explanation. There is a linkage from that perceptive. But the fact that an explanation was provided, I thought that I highlight that aspect on Tables A and B. In the light of the discussion I leave you to make the ruling on it, but if you wanted to I could go through the Report and perhaps suggest that we leave the Lessons Learnt, because we can then deal with the Lessons Learnt after we have had a bit of a discussion on the Report and just go through the actual findings of the Report first and what I have put on the Report and then we can deal with the Lessons Learnt after we have had a deliberation on that.

[Mr V Smith] Can members then make notes as we go along and ask Mr Fakie to go through the entire Report? We will come back and we can deal with it in greater detail after he is through with the Report?

[Mr S Fakie] If I can go onto an area which I think is perhaps also of concern to the Committee as well as to the Office, is relating to the Schedule 3 Public Entities and that is covered in page 5, paragraph 3, where we have indicated that in the light of the unreliability of the information to Schedule 3 Public Entities, we are not in a position to report to the same extent of detail and comprehensiveness as we have done on Tables A and B. The contributory factors are the uncertainty regarding the completeness of Schedule 3 in terms of the listings gazetted by the National Treasury. We have been engaging quite intensively with National Treasury to try and get a complete listing in this regard. If I may pre-empt, mentioning to the Committee that my next General Report is going to be focusing quite intensively on the fact that we have got a fairly serious problem around the completeness of a list, both for ourselves and for Treasury and Parliament, on all the Schedule 3 Public Entities and I will be dealing with that in my General Report. The other factors that is causing the uncertainties also, the dissolution of some of these listed public entities, renaming of some of these entities, there is a non-standard financial year-ends. There are some public entities with year-ends December, June, September and all those kinds of things. The PFMA affects some of these public entities and does not affect some of these public entities depending on what the year-end is. Only this year could be the first year for some of those public entities who are subjected to the PFMA legislation. There is also the incorporation of some of those public entities with other entities in amalgamations and so forth. There is all these things happening out there and it is becoming extremely difficult, and if not an impossible task, for us as the Auditor-General's Office to keep abreast and in touch of what is happening, because it is widespread. We have in a way attempted with Table C to list Schedule 3 Public Entities that Parliament through the Standing Committee of Public Accounts has been monitoring over the last few years and has also indicated that it wishes to look at and review more closely. I cannot give the certainty and the assurance that every single Schedule 3 Public Entities is listed there. We have made our best efforts in terms of what we could lay our hands on and get information in trying to provide that tables. So I do want to make it very clear that the reliability of the information on Schedule C is perhaps not as good as we would like it to be. If I move on to Table C - you will find that we have attempted to try and provide a similar set of information to you around all the Schedule 3 Public Entities. And again, I am not sure how you compare this in relation to the total pubic entities picture, but it is very clear that, again, we need to focus on Columns 3 and 4. You will find that there are seven (7) public entities and I think there was about four (4) of them that provided explanations for the delays in tabling of the Report. And on the ones that have not yet submitted financial statements as at 28 February 2002 there were only two of them that provided explanation for the delays in submitting those financial statements. This particular table here, which is the ones that have provided explanation for the delays in Column 4, which are SITA (State Information Technology Agency) and the Bala-Bala Farms Pty Ltd, are ones that I would like to refer specifically when I am dealing with the paragraph on page 7 around the quality of the explanation that was provided. I will come back to those more specifically when I am dealing with that. On page 7, paragraph 4 - the important aspect here that I would like to raise is, firstly, there is a serious problem, in my view, of those entities and departments that do not submit the financial statements for tabling within six (6) months and do not even provide an explanation. I think that is a worse case scenario. I would like to move on to the other category of those entities and departments that do not submit the financial statements within six (6) months, but do provide an explanation. I looked at a lot of those explanations and I have done a lot of my own factual research on actually what is happening. I would like to comment on that, and I have indicated that in paragraph 4 where I said that the reasons and explanations provided are not always factually correct. I would just like to elaborate more on that. We have a file here where we tried to search all the explanations that we have provided. What is happening is that very often the Office of the Auditor-General is being given as a reason for the delay? In some cases that may be true and in many cases that has not been true. I want to ensure this Committee that in respect of each one of these cases where the Office has been implicated I have satisfied myself that both the Office and the staff have acted within the framework of the PFMA and the Auditor-General Act. We have got a file with all the supporting schedules, so if there is any details that the Committee requires we are prepared to share that with them. If I can just cite three (3) examples that I know on the top of my head around some of these issues just giving you a feel for me making that statement that the explanation provided is not always factually correct. I would like to cite three (3) examples being the Public Works, SITA and Bala-Bala Farms Pty Ltd. If we start off with the situation on the Public Works - we had a situation around September last year. Public Works were late with the submission of the financial statements from day one full stop. They did not submit the financial statements to us on the 31^st of May 2001. When we went in and did the audit round about October 2001, we were in an extremely uncomfortable situation as the External Auditors at Public Works simply because of the vast volume of documentation that was not available for audit. When we requested it, it cannot be traced, there were no documents available. We had a choice of doing one of two things. We had a choice of either reporting that and bring that to Parliament and putting our Report on the basis that we are not able to issue an audit opinion, because of the lack of documentation that has been provided us the audit evidence that we needed. In actual fact we did communicate with the Director-General of Public Works that that is where we are at the moment and that is what the outcome is going to be. We wanted a reasonable explanation from him as to why those documentations are not available. He asked us for a bit of time to go and look into the matter as to why those documents were not available and came back and said that in actual fact the documents are available. We need to give him a little more time, so that the matter can be addressed. We asked him how much time do we need to give him and he indicated about 3 to 4 weeks. We had to make a call on this and it is not an extension that we granted to Public Works. It is an opportunity that we granted Public Works to bring documentation available for auditing. I would like to make that very clear. I think there may be a misconception that we granted to Public Works an extension. We do not have the right to do that. What we have done is we have granted Public Works the opportunity to make those documents available and we did that on a couple of reasons. One is being the first year, and it has got nothing to do really to some extent with the PFMA, but being the first year of the PFMA implementation we needed to show some element of flexibility and allow people to try and strive towards complying with audit requirements. The second reason why we did that, we do not believe that not making documents available promotes accountability. In our view it was far better for us to wait for 3 to 4 weeks to get the documents and ensure accountability takes place, because there is less accountability that would take place without the documents. And it was our view that if we lay our hands on the documents we would be able to pick up things that would promote accountability far more. And it was on those principles that we have agreed that we will wait for those documents. It so happened that the 4 weeks went by, we followed up on why those documents are still not available and they were in transit, because they were sitting in all the branches of Public Works. We have given them a deadline for 15^th March 2002 that we are going to finalize the audit and submit the Audit Report, whether the documents do come through or do not come through. If you look at the explanation that was provided for the delay in the submission of financial statements, you will find that quite clearly the blame is being leveled at the shoulders of the Auditor-General. We just tried to be a bit more flexible and allow more accountability to take place. That is one example of the quality of the explanation that does come through to Parliament giving reasons why the delays have occurred. The second example l would like to cite, is the Bala-Bala Farm Pty Ltd. The explanation that has been provided for Bala-Bala Farm Pty Ltd, the Minister has submitted an explanation to the Speaker that the reasons why the delay occurred was, firstly, we did not appoint the contract Auditors to go out and do the audit and the set of accounts for the year 2000 was ready around about June 2001. There was a whole lot of other explanation around tabling of the previous reports for Bala-Bala Farm Pty Ltd. There were factual inaccuracies on that submission that was made to such an extent that it made it necessary for me to write a separate letter to the Speaker putting the fact forward. I have done that also contacting the Minister and letting her know that she has been misinformed around the reasons for the delay of Bala-Bala Farms Pty Ltd. I have sent her a copy of the letter that I did submit to the Speaker as well. The factual situation there is that there was a claim made that the Report for Bala-Bala Farms Pty Ltd for 1998/1999 was never tabled neither in the National Parliament or Provincial. That is not true, because it was tabled in the North West Province and, in fact, there was a resolution that was passed against it. Regarding the 2000/2001 financial year, there is a firm of Accountants that are writing up the books for Bala-Bala Farms Pty Ltd. We have received a letter from that firm some time in February 2002, saying that they are still busy writing up the books for 2000/2001. So how the explanation that would come through to Parliament that their financial statements for the year 2000 was ready in June 2001 and in actual fact we did not appoint the Auditors to go and do the audit. I find that quite puzzling, because the actual person who is writing up the books for Bala-Bala Farms saying in February 2002 we have not yet finalized the writing up of the books. There is this huge factual inaccuracies around explanations that are being provided by some of these departments and public entities. If I can give you other example of SITA, I do not have the details. I do not know if Mr Botes would like to brief the Committee around some of the inaccuracies on that particular submission that was made in terms of the explanation.

[Mr K Botes] Just one element, for example, is the submission of the financial statements to the Auditor General's Office for auditing which should take place two (2) months after the end of the financial year being then the end of May. The Board of SITA only approved the financial statements on the 29^th of August and then submitted it for auditing, which really means that they approved the statements two (2) days before it should have been tabled in Parliament, and you have to allow after that another two (2) months for auditing and another month for publication. That is just one (1) example of some of the background on SITA. I do not think that one should go into more detail.

[Mr S Fakie] There has been interaction between SITA and ourselves, because one of the things that we have asked the departments and you will find from the "Lessons learnt" we actually highlight that. We have said to the departments that just before they go to print their financial statements they must make a copy available, because we have a responsibility to make sure that the contents of the Annual Report does not conflict with what we have mentioned in our Audit Report in the final thing. We have had sights of drafts of their Annual Report, but not the final one that goes to print. And it will be embarrassing if they have made significant changes to their Annual Report and we later discover that there is a conflict between what we say in our Audit Report and what they are saying in the Annual Report. And as an External Auditor in terms of auditing standards we have a duty to make sure that we do not audit the Annual Report, but just make sure that the contents of the Annual Report is not something that we feel uncomfortable about in terms of what we have picked up during the course of the audit. SITA has done the right thing in making those Annual Reports available to us before they went to print and the reasons that they provided is that we took so long to come back to them. A lot of departments have not done the right thing. I have got evidence here that we took 7 or 8 days to turn that around and the explanation that SITA has provided is we sat on it for almost four and a half weeks, that is not correct. In actual fact, there was so much of inaccuracies in that Annual Report that we picked up that we sent the Annual Report back to SITA and they had to fix it up. They had to fix up all those inaccuracies that they had in the Annual Report and that is what really caused the delay, but, again, because we picked up the inaccuracies and we have asked them to fix it up the blame has been shifted to us. I do not want to do blame shifting here. I think there is a serious problem with the factual accuracy of the explanations that have been provided. I am prepared to take responsibility if we are responsible as an Auditor-General's Office, but there has got to be evidence that we are responsible for those delays. I think we have been unfairly blamed for a lot of the delays that has been submitted and it is something that the Committee needs to consider in their resolution. I would like to stop there, because we did say that we will first open up for debate at this point before we look at the "Lessons Learnt" and I would like them to touch on the "Lessons learnt", if that is alright with you.

[Mr V Smith] We are going to allow for input, but I think the input should be directed towards where we take it from here as opposed to just blaming for blaming sake or asking questions for asking question's sake. At the end of the day we want to come up with some resolutions as to how we take it forward.

[Mr M Lowe] Could I just preface my comments by a question and perhaps I could just ask the Auditor-General to withhold an answer until I have finished my comments? What are the consequences, if any, for non-compliance? We have got to a stage where departments or entities have not complied. They have provided explanations that are either satisfactory or not, or they have not provided them at all. Where do we go from here either as an executive authority, as the Office of the Auditor-General or even as this Committee? Is there a sanction involved? If so, who initiate that sanction and what are the sanctions? The suggestions that I am going to make are in respect of particularly outstanding Reports. We need more information from the Auditor-General. We need to know in respect of each of those outstanding Reports when the explanation was furnished and if it was satisfactory or not. It is covered in the body of the Report. I think we need to tease it out in respect of each and every entity listed there. We need to know if that explanation provided was satisfactory? If it was not, why was it not? You have given some examples of those. Why I say that, is that I would like to suggest that in respect certainly of Columns 3 and 4 explanations required which we received late or outstanding Reports, that we write to each of those entities and request information. I would like to use the word "demanded" that, perhaps it is not proper, but we need to make it very clear that this is not satisfactory. We want an explanation before this Committee. In respect of situations that the Auditor-General has indicated that the explanations are right off the ballpark and that they are factually incorrect, or misleading or whatever, there were three (3) given, there may well be others. I believe we need to summons those departments or entities before this Committee and ask them direct questions. It does go back to the question what are the sanctions if any and where do they stem from?

[Mr P Gerber] The first thing I would like to ask the Auditor-General is that the allegations were made that there were delays at the Auditor-General's Office and he has answered that in a quite satisfactory way. My first question would be - some of these entities make use of External Auditors and are there any delays being experienced for the tabling of an Annual Report of a department because of the delays by private audit firms on top of that where you have to then again draw up your own Report based on that. The other thing which is upsetting to me is the fact that one of our key institutions in our democracy is the Auditor-General's Office and we are sitting with a situation at the moment where the departments and whoever is guilty has created that the Auditor-General have to come here. I do not think we should have a democracy where departments should complain about the Auditor-General, because it is a prime institution. I think it is very unhealthy.

[Mr B Kannemeyer] Firstly, whose responsibility in the whole parliamentary complex is it to ensure compliance with this particular clauses of the PFMA in terms of compliance with the various dates put on there? I am asking that because I do see some sort of role for SCOPA, but I want to be sure that what we are doing are within our remit. I am using the example of the parliamentary vote that has been out there, that has been tabled, but which we could not interact with because it has not been referred to us. We are looking at this now and it is something that we need to deal with. Who exactly is responsible to follow up on that? Would it be Treasury? Would it be, as in the case we are dealing now with, the Auditor-General's Office or SCOPA? Where does that responsibility lay? Secondly, once we have established that, I think it would be useful if we can also find out the explanations provided in Section 65 if we have the type of evaluation of all of those as we have been given examples of three (3) now, so that one can develop a more fuller understanding, because those that do supply the explanations they may comply with the Provisions of the Act, but as now has been pointed out there is at least three (3) where the use of that particular Clause may be just to comply but then the devil is buried in the detail. The last question, and I think it does not concern the Auditor-General's Office, what I want clarity on is if this Table is absolutely correct, because you are saying that Parliament's vote has been tabled 31 August 2001 and that was the one that the cluster that I am working on, it has only been referred to us some time last week. That was one of the Vote Reports that we had to enquire and even write letters on. I do not know what is happening or where is the delay, because in one way or the other our work is delayed with a Report being tabled but not referred to the relevant committee and in most cases which would be our Committee.

[Mr D Gumede] I think once it is important to criticize we have got to contextualise the matter. I think this is happening for the first time in departments and the vast majority of departments have complied. It is not as if the majority of departments have not complied. It is only two or four departments, talking about departments now, that have not complied. I think because it has been the first time that it is happening the implementation has been a resounding success, except for those two or three departments. I think that has got to be accepted as a fact. However, it does not mean that we should not do anything towards the departments that have not complied. I think, on our side, because it has been tabled already in Parliament, our role then becomes to process it within Parliament and put it to the attention of the Speaker the problem and the obstructive nature to our work that these presents.

[Mr S Fakie] I take it that Mr Gumede's was a comment to me. If I can take the first question around the consequence of the non-compliance and what sort of sanctions are available? My understanding is that in the PFMA itself regarding the non-tabling - there is not any specific sanctions spelt out there per se. I think it is left open in a way as well, and I speak under correction, for Parliament now to take a decision what sanction or consequence they would like to impose as a result of people not complying. So the ball is squarely in the hands of Parliament to decide how they would like to deal with it. There is not a specific provision in the PFMA that say if you do not table by such and such a date this is what will happen to you. All the PFMA says is that it puts the requirement for people to table by such and such a date. And for me to apply my discretion to report to Parliament on such delays, and which is what we are doing now, and then for Parliament to decide how they would like to take the matter forward. That is the response to the questions. I know that the first speaker did put some proposals around exactly what SCOPA needs to do. I think it is linked to the question which Mr Kannemeyer is asking who is responsible to ensure that we get explanations? I would like to link those two questions, because there are some linkages between what was suggested in the first part. My understanding is, and it has happened, that Parliament has been chasing up a lot of those departments for explanations. For example, the explanation that was provided by the Minister on Bala Bala Farms Pty Limited was as a result of the Speaker's Office writing to the Minister saying he has not tabled this Report on due date. Can you provide the explanation? And that explanation was provided not purely on the basis of the six months having gone by, but as a result of a request that came through. As far as I know, Parliament has been chasing them up, but whether they have been chasing up every single institution I do not know. I do not know the process that has taken place there. It would appear that they are taking that responsibility to a large extend and running with it in terms of chasing up and asking departments and tell them that six (6) months has gone by and we have not yet received an explanation on why there has been delays. The second question that Mr Gerber asked around private audit firms being responsible for a lot of these entities, that is true, and have they not been responsible for the delays? We do not know. We are not chasing up all these private entities to find out now why did you not submit your financials on time and why did you not provide an explanation? I think that is the responsibility of the executive authority under whose wings that particular public entity falls. All we are trying to do here is to list those entities that are Schedule 2 public entities and Schedule 3 public entities and those that have or have not provided it. We have not gone into finding out now you have not done that because the audit has delayed it. I think they need to provide that explanation as to what cause the delays. We have not followed that one up. We have not gone that far with the situation. I think there have been also quite a bit of concern, perhaps rightfully blamed on the quality of the explanation provided and the fact that the Auditor-General's Office is being blamed. I think we need to just measure this in a balanced way. As Mr Gumede has mentioned, it is a first year for people submitting and there is a lot of teething problems. When you look at it from the start when we went in and we produced the Annual Report people are going through a learning process. I am not sure if all these explanations were provided and we were blamed with the view to genuinely blaming us or was it done innocently. I do not know what the motives behind that was. All I said is I would like to put the facts and the record straight. You need to bear that in mind. You also need to bear in mind the fact that who do you hold truly accountable, because technically speaking the Executive Authority, being the minister, is responsible for providing the explanation. And again, there has been confusion there. I have explained that in my Report. There are times when the Accounting Officers are providing the explanation. The PFMA says the executive authority shall provide the explanation. So they are going through a teething problem, not because they want to take control over the situation, but it is because they are going through a learning process. I think we need to be mindful of that and allow for some flexibility on that basis whilst at the same time we need to also make sure that people are accountable and understand what their accountability requirements are. So to strike a balance, for example, the executive authority is responsible. And what I picked up when I interacted, I contacted the Minister for Bala Bala Farms Pty Ltd and said to her that Minister the explanation you provided to Parliament is not factually correct. She was quite surprised. The thing is that she was advised incorrectly by people within the department as to what the explanations are. I know that the executive authority does need to take the responsibility for what they provide as an explanation, but you would find in a lot of the cases that we followed up it was not done with the intention to mislead Parliament or to distort the facts. They accepted the information that was provided by the officials in good faith and they presented that explanation to Parliament. I am saying that maybe you need to just take that into account and say, as SCOPA, how do you pass or submit a resolution that will strengthen that kind of arrangement. I think there is something that I am suggesting under the lessons learnt to try and address some of those issues. I think I tried to address all the questions. If I have not then they can remind me.

[Mr V Smith] Can I appeal to members that their inputs be focused on the way forward? I think we have sufficient clarity on the explanation. I think what we need to do is to consider the proposals put on the table by Mr Lowe in the light of the explanations of who is supposed to be doing the follow-up and the chasing and to who exactly. There is a proposal that says we need to maybe take the departments that have not complied in Columns 3 and 4 and write letters. What I think we need to decide is that if we agree to that, clearly ours is to write a letter to Madam Speaker and for her to write a letter to the Executive, because it is Parliament to the Executive. I think that is the type of decisions that we want to take. Now I do not know that anything else is going to help us take the process forward. There has been non-compliance. How do we take it forward?

[Mr M Lowe] Could I just ask that we flag the issue of public entities and the incomplete schedule for some sort of discussion as well. I have concerns that exist and I want to know if Treasury is to be blamed or when are we going to get that done. Coming back to the issue before us, could I just ask if before we write letters we need to know from the Auditor-General's Office specifically which departments or entities have provided explanations that is factually correct and there is no problem with them and they make sense and he is happy with them, and those that seems to be misleading. We need to get serious here about what information has gone out and then we can decide about writing letters or even have Hearings. I wanted to just comment on the question of the first time that we are dealing with the PFMA, the teething problems etc. I do have some sympathy with that view. I also think we need to remind ourselves that it is not new for any department or entity to have to provide financial statements every year. There is nothing new in that. I do not think that is a good enough excuse. The PFMA has been around for a long time, maybe not legislated, but everybody knew it was coming. It has been in place for some time. That is a very weak excuse. Thirdly, we need to remind ourselves that the PFMA is very user friendly. It is very specific. I find it very hard to accept that Chief Financial Officers, whoever, cannot simply see what their responsibilities are. To simply not respond, as it appears many have done, to just not provide any explanation, not put in financial statements is simply a dereliction of duty. There is no question of being lenient there. if they have attempted to do something and maybe done it incorrectly or it is a learning curve, that is something else. That is why we need more information, because I think that underneath all of this we are going to find that there has been willful misleading, perhaps to the Executive, there has certainly been dereliction of duty and I think that is where we need to step down hard.

[Mr A Blaas] I think I would fully agree with the principle that the first step would be a letter and those are in the cases where people have not reacted and not submitted and ask explanations for that. That is the first round, taking into consideration the fact that it is a learning curve. In cases where we are aware of the fact that there was an incorrect submission of facts, I think we must try and establish whether it was intentionally or non-intentionally. That can either be done in writing or by a questioning. Do we ask the Speaker to arrange it? Whose responsibility is it? Is it ours? I think we need to protect the Auditor-General in this process. We must also set a standard for future reference as to how it would be handled. My recommendation would be in support of the fact that the first exercise would be writing letters asking them explanations why not and what they intend to do to prevent this happening again? Secondly, where we are supplied with conflicting information to establish whether it was intentionally or by accident. That can be done also through a written request or if we feel it is necessary by an open enquiry.

[Mr D Gumede] I want to second Mr Blaas if he was making a proposal.

[Mr B Nair] I do not want to repeat what Mr Blaas has said. Remember that these Reports ultimately will be coming before us in Parliament and they will be referred to us by Parliament, obviously with explanation for delays. It then may become necessary for us to tackle the particular departments who have defaulted. But in the interim, I agree, that we should ask for reasons for the delay in regard to the outstanding Reports. Secondly, with regard to the learning curve, I agree that the PFMA has been with us for a few years now, but there is the first time where departments and public entities have been compelled to meet the requirements of the PFMA. For instance, if we go to page 7, the Auditor-General deals with it amongst other things. It is essential for us to remember that, as he has cautioned us, many of these public entities were unaware of the requirements of the PFMA. Now this is obviously the responsibility of the Executive authority, the Ministers. We have been given the assurance at the level of the Finance Standing Committee and also at our level, Public Accounts, that there are seminars and lectures where all the Director-Generals and the senior staff were being groomed into handling the PFMA. That was the reason for the delay in implementing the requirements of the PFMA. Now that the responsibility rear, and I think we should draw attention to the Speaker as well, that the Executive must improve that. Are they really exercising proper oversight over their Director-Generals with whom they are contractually bound? Now Mr Lowe raised the issue of sanctions. Now if a Director-General or any of those in charge of the public entities do not fulfill the requirements of the contract, they must be fired. I am not saying that they must be instantly fired, but they are not fulfilling their responsibilities, but ultimately the responsibility is that of them. We were given assurances at all levels. In fact, we have had a lengthy discussion on it. Now where we were given assurances they are going through a process of bringing their senior staff to speed and they are all going to be contractually bound, in fact contracts exist, and one of the simple requirements are not being met. I think we must remind the Executive through the Speaker that there is something wrong. All the other problems that have been listed by the Auditor-General of them being unaware, the public entities are not being aware of the requirements of the PFMA. It becomes ridiculous. Who are ultimately responsible? That is why what we should do while we at the one level ask for the Speaker, at the other level we should agree that we do not have somebody from the Treasury here, Finance, the Executive and others also, to give us explanations and to put to writing which we find wrong. I think the Auditor-General also should draw the attention of the Executive to the problem that we are confronted with.

[Mr B Kannemeyer] In agreeing with Mr Nair that if and when we are going to have engagement or Hearings with some of these departments in the processing of those Reports, some of the matters we can take up during those Hearings. One question that is still unanswered to me, or I have not put it to be fair, is the actual status of the Special Report, whether it is just in the form, because it was a request also from us? What I would want to suggest is apart from the letters, which I support, is that we do as SCOPA pass a resolution based on this actual Report. I am sharing the opinion raised by Mr Nair and Mr Lowe, I am less sympathetic to the departments. The PFMA has exactly been implemented on a standard basis to allow for preparation. During all our Hearings we have asked what is your state of readiness to implement and to adhere to the requirements of the PFMA? We have had reports from departments that training schedules were there, that they have been sending their staff to various training courses, that senior management have been exposed to the inner and most important aspects of the PFMA. So in terms of that, the question of non-compliance with regards to some of these, I really think our departments could have done more. They have done quite well in terms of the number, but that is my point. If other departments were ready to be able to comply with them, what is the problem with others then to not have been able to do so? I do not want to go into the details, but from what I hear, some of the reasons why these reports are not there has got nothing to do with readiness to implement. It is a question of documentation that is supposed to be there to support the work of the Auditor-General and that type of thing. I would propose that we pass a resolution based on this Report, because in three (3) weeks time it is the end of this financial year. So that with the resolution such as I am proposing we would send a very strong message that Parliament is taking compliance with the PFMA very and absolutely seriously.

[Ms N Hlangwana] I totally agree with what has been proposed that we need a resolution. Perhaps we could also use the Hearings that we are going to have to get more information with regards to the delays. I think today was specifically for us to get more information from the Auditor-General and as he has indicated this Report has been tabled in Parliament but it has not been referred to us as yet. Now I propose that maybe we can make it a draft resolution or programme of action to follow-up on these issues, but we wait for the referral of the Report, so that by the time it is being referred maybe we would be ready. I think some of the issues need more discussions then we could be ready to have a resolution at that time. I am proposing that we wait until the Report has been referred to us.

[Mr V Smith] You are complicating my life. Let me try and summarise what I thought this meeting was saying. One, it was saying that there are at least eight (8) departments or entities that submitted their reports or eight (8) that are in Column 3 and 4 that have submitted explanations. I thought I was understanding Mr Lowe to say that the Auditor-General's Office must give us an indication of those explanations how many of them are factual and how many of them are not? Secondly, the meeting is saying for all those departments we need to write a letter asking them to explain what is happening via Madam Speaker. And also for us to draft a resolution to the effect that late or non-compliance with the PFMA is a problem for this Committee. That is what I understood the meeting to say. Ms Hlangwana has now suggested that we do that or we can start that preparation, but we wait until this Report is referred to us by Madam Speaker. I do not know that these two things are necessarily contradictive. I am saying we could do all that spade work. All I think we need to do is to have a deadline. If it has not been referred to us by a certain date then we need to kick in plan B. I am hoping that the Auditor-General will submit this Report to Parliament and then to us within a short period of time, but I do think we need to do this before we go in recess. It might be in conflict to what Ms Hlangwana is saying in terms of that we must wait for the referral from Madam Speaker. That is what I think we need to clear.

[Mr S Fakie] I just want to let the Committee know, as I have mentioned in my opening comment, that we have handed a copy of this Report this morning almost simultaneously at the same time when it was being handed to you as members, it was handed over to the Speaker's office. And my Office has also indicated to the Speaker that the Committee would like to deal with this matter as urgently as possible, so if they can do the referral to you as soon as possible. Mr Botes, I do not know if there was any indication from their side, but they did say that they will treat it as a matter of urgency. I am hopeful that within the next couple of days that this Report should be referred through to you, but we have prompted the sense of urgency on the part of Parliament to refer it to you.

[Mr V Smith] Can we agree that we do exactly what we have said that we ask the Auditor-General to give us an indication of the eight (8) responses of how many of those responses are genuine and how many are off the mark? Can we in the meantime also agree that we prepare a draft letter to Madam Speaker asking her to write to the relevant Executive Authorities highlighting this and can we prepare a draft resolution on this matter? and at the same time we can follow up with Madam Speaker in terms of will this thing come to us. I do not think there is too much for us to discuss and debate. Are we happy with that approach?

[Mr M Lowe] I am very happy. There was just a further link to my proposal, which again perhaps we just need to hold back a little bit, but I would just like to put it on the table again. That is where there is indication that there has been a misleading information given or where inaccurate information has been given and the Auditor-General has already indicated that there were three (3) areas where that has happened. Perhaps I should use the word "consider". I believe we need to consider having a Hearing with those entities or bodies going one step further in just sending them a letter and to have them come here and explain themselves, because it really is a serious situation. Perhaps they can just hold off until the letters have gone out and we have had the indication from the Auditor-General. I would like to have that noted so that we can come back to that.

[Mr V Smith] If I can assist you, just off the top of my head, two (2) of those that the Auditor-General use as an example, I think we are planning a Hearing anyway. So when the Hearing happens we can do that as opposed to pulling them into two Hearings. Certainly the Public Works we have agreed to have a Hearing and clusters that are dealing with SITA and Bala Bala, if you could consider that so that when they come here we can further interrogate them.

[Mr S Fakie] One of the things that I thought would be quite good, and again it is in the hands of the Committee on how they wish to deal with it, in addition to putting a resolution of the concern the Committee has around the non-compliance with the PFMA Regulations, it would have been nice if the Committee could also apply its mind, in whichever way, and pass a resolution around the concern the Committee has regarding the factual accuracy of the explanation that is being provided to Parliament. I think that is a critical issue that you need to consider in putting your resolution now. Whether you are going to be able to do it after you deal with each vote or whether you will have sufficient information once I have provided you on which of these explanations I concur or do not concur and I am prepared to provide you all the documents to support why I do not agree with the factual accuracy of the explanation that is provided and whether that will put you in a position to come to that resolution or whether you need to call people in to get more explanation. I do not know, but personally I feel it would be good if this Committee can also apply its mind in terms of including in its resolution its concern around the factual accuracy of explanations that has been provided.

[Mr V Smith] I agree 100%.

[Mr B Nair] On the very issue that Mr Fakie raised, I think what we should do is instead of having a Hearing or asking for factual explanations from the Director-General or whoever is in authority coming before us, rather we should get verification from the executive authority as with the case of Bala Bala Pty Ltd where Mr Fakie teased that out with the Minister of Agriculture who was surprised. So ultimately, whether the Minister agrees with the cock and bull story that the Director-General or whoever is in authority is giving us. This is the issue.

[Mr V Smith] I do not think there is anything wrong when Mr Fakie and his Office do the verification. If you could just run it pass the executive authority as opposed to the Director-General? What we will do is in our resolution we will incorporate - one - our uneasiness with the late plus the quality of the response in our resolution. Two - we will also draft a letter to Madam Speaker highlighting the departments and asking her to write letters to those departments. Thirdly - we will in our Hearings with the departments that happen to be guilty of being in Column 3 and 4 further raise the matter. So we will do that and we are agreeing that this will happen before we rise next week Wednesday if it is possible. We will follow-up with Madam Speaker. I want to close this at that point. Mr Lowe asked us to flag the completeness or otherwise of Public Entities, if I remember well. I do not know if you were just asking that they could come back with an answer for that or if you would want to talk to that?

[Mr M Lowe] I just wanted to ask the Auditor-General for a little bit more clarity there. It seems that there is a great deal of confusion around exactly what these entities or how many there are. Now the PFMA emanates from the National Treasury initially and it went through a lot of other processes, but surely it is for the National Treasury to come back and tell us that they have …………….. Act what are these bodies and I think an explanation is required. It is unacceptable to simply say there is all this confusion and if it is not the Auditor-General's department then it is somebody elses and it is National Treasury. We cannot continue like this. They need to come and give us …………..

[Mr S Fakie] I think that is correct. When I was briefing you on this I did say that I am focusing quite extensively on that particular aspect in my General Report which will be tabled shortly in the next two or three weeks. I think there will be a lot coming out of the General Report specifically to that matter. So I think if we can just hold that aspect when we do deal with the General Report because there is some recommendations that I am also making in the General Report.

[Mr V Smith] Mr Lowe is very comfortable with that approach. I close this matter now.

Justice and Constitutional Development Draft Resolution
The Committee deliberated on the draft and adopted it with the amendments proposed in the previous meeting.

Draft Report on the Study Tour to Germany, Britain and Ireland
The chairperson gave an overview of the report on the study tour that the Committee undertook in January 2002 to Ireland, Germany and Britain. The Committee adopted the report.

Budget
The Chairperson stated that Dr Woods was supposed to present the 2003/04 budget, but he has tabled a document and then left without excusing himself from the meeting.

Mr Kannemeyer proposed that the drawing of the new budget be done under the leadership of the new chairperson and suggested that information be obtained from the chairperson of Committees on how much has been allocated to the Committee before planning takes place.

The Committee agreed that the matter be deferred until next week Tuesday and that the information regarding how much money is available for the remainder of this financial year and what has been allocated to the Committee for the 2002/03 financial year be provided. The Committee also agreed that the one page document from Dr Woods regarding the 2003/04 budget also be discussed next week.

Draft programme
Mr Botes tabled a document on the draft program for the Committee and gave a brief overview on it.

The Committee deliberated on it and decided that work groups should look at matters which fall within their brief on the program, discuss them and incorporate them in their report backs; Clusters to also indicate which reports they are not going to have hearings on and indicate how they should be processed; and indicate when was the last time a particular department came before SCOPA for a hearing.

The meeting adjourned at 11:50.