The Auditor-General of South Africa (AGSA) came before the Committee to submit its proposed amendments to the Public Audit Act, which aimed to strengthen its mandatory role in the public sector in order to hold government departments to account.
Some pivotal amendments included the proposal to expand the AG’s discretion to opt out of mandatory audits on low risk audits for small and low turnover auditees; a bold provision that mandated the AG to conduct performance audits, besides financial audits, and to report on them; a clear articulation of the referral mechanism in the enabling statute to ensure that the AG adhered to the principle of legality when referring undesirable audit outcomes to other agencies for further investigation and remedial action; to limit the source of requests or complaints to legislatures, committees of legislatures, executive authorities, accounting officers or accounting authorities, as this was more sensible; the insertion of a mandate in the Act to conduct international audits, as the previous clause was very broad and unclear on the AG’s stance on international audits; the amendment of section 36 to create a special account in which the National Treasury could retain local government audit fees, for the benefit of the AGSA, (although the Chief State Law Advisor did not support this proposal and suggested that this matter had to be accommodated in a Money Bill passed in accordance with section 77 of the Constitution); and that the Public Audit Act (PAA) be amended to provide for the budgeting of funds to pay for investigations performed by other investigating agencies. Requesting an appropriation for the purpose of these investigations was another option under section 36(1)(b). This was proposed in relation to investigations referred by the AG to other agencies which had the capacity and personnel to carry out investigative tasks, such as the Public Protector.
Members asked questions about whether the referral of investigations would be done in consultation with other stakeholders, or if it was going to be done in silos, and whether there should be political oversight on what the AG did at that stage of the game or not. How would the referral of investigations be achieved to ensure that there was no conflict of interest between the office of the Auditor-General and the department that the AG had investigated? What process would be followed after the investigation – could the AG prescribe what an undesirable audit outcome was so that the departments were very clear about the issue? How did the amendments relate to other relevant legislation that might have a bearing on the PAA, like the Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA)? At which point would the AG decide on whether a particular department qualified for certain punitive measures in terms of its investigations, taking into account the gravity of the offences? Why were the recommendations of AGSA, a chapter nine institution, not binding like those of the Public Protector? Had the AG considered an investigative unit that would be established internally to ensure it was sufficiently empowered to do the prerequisite investigation before referrals?
The Committee briefly considered its strategic plan, but due to the fact that Members had not received the document prior to the meeting, the Committee content advisor switched to highlighting certain issues about the role of the Committee to empower the AG. He also pointed out AGSA’s retention of a surplus, and how the failure of auditees to pay audit fees may cripple the AG’s ability to pay the SMMEs to which it outsourced to conduct the audits of smaller stakeholders.
Members agreed with the amendments proposed by the AG on the PAA, and the general consensus was that the AG must be empowered and its recommendations made enforceable so that the transgressors in government departments could be held to account. The AG said that the institution could not in itself also become an investigative body because audit teams may be undertaking audits concurrently in the departments that it was being asked to investigate, and this may in turn jeopardise the mandatory statutory audits. Therefore, solid partnerships needed to be established with institutions that had the resources and capacity to carry out investigative work, and the AG should play a referral role in terms of issues or transactions that needed to be investigated beyond the scope of audits.
The Committee would reconsider its strategic plan at its next meeting, and seek legal counsel to ensure that any recommendations made by Members were still within the confines of the law.
Briefing by the AG on the review of its powers
Mr Thembekile Makwetu, Auditor-General of South Africa (AGSA) took the Members through the the proposed amendments to the Public Audit Act Amendment Bill. He highlighted that in the review of the audit portfolio of the AG, the challenge was that too many very low risk audits were compulsory for small auditees or auditees with a minimal turnover, and this diverted the AGSA’s focus from higher risk areas which were closely linked to service delivery and the achievement of government goals. The AG then proposed to expand the AG’s discretion to opt out of mandatory audits on low risk audits for small and low turnover auditees. This could be lawfully implemented, according to the Chief State Law Advisor.
The challenge with the mandate to conduct stand-alone performance audits was that this was not clearly described in the current legislation prescript, and some auditees argued that findings may be raised only as part of a regularity audit. The AG therefore proposed a bold provision that mandated it to conduct performance audits and to report on them. With regards to the system of the referral of undesirable audit outcomes, the Public Audit Act (PAA) mandated the AG to ‘cooperate with persons, institutions and associations, nationally and internationally’, but the problem with this provision was that it was very broad, and may be subject to challenges by those departments, entities and other stakeholders, which were affected by the referral. In order to mitigate the challenge, the AG proposed that a clear articulation of the referral mechanism in the enabling statute would ensure that the AG adhered to the principle of legality when referring undesirable audit outcomes to other agencies for further investigation and remedial action.
With regards to investigations, section 5(1)(d) mandated the AG to perform investigations into the affairs of any institution referred to in sections 4(1) and 4(3) of the PAA, or when the AG considered it to be in the public interest or upon receipt of complaint or request. However, this was a challenge because the scope was too broad and led to too many requests to perform investigations, which in turn placed a severe strain on resources. Therefore, a proposal to limit the source of requests or complaints to legislatures, committees of legislatures, executive authorities, accounting officers or accounting authorities, was more sensible. The Chief State Law Advisor (CSLA) suggested that the AG must retain the discretion to receive complaints and requests from all sources, but insert a clause that required regulation of the AG’s discretion in written policy to ensure absolute certainty. It should be noted that such a policy already existed, and that the reference in the bill served the purpose of further clarifying the discretion of the AG.
In the scope of international audits, the challenge was that the ad hoc committee had found in 2007 that the PAA did not mandate the AG to perform international audits, and that section 5(2)(a) was insufficient justification for those audits. The proposal was simple in this case -- to insert a mandate in the Act to conduct international audits.
With regard to the recovery of audit fees, the bulk of the AG’s revenue consisted of fees, but fee collection -- especially at the local government level -- remained a huge challenge and the AGSA had to look for alternative ways of collecting outstanding audit fees. The best proposal that the AG team could come up with was the amendment of section 36, to create a special account in which the National Treasury would retain local government audit fees, for the benefit of the AGSA. The CSLA had advised against the proposed amendment to create an account of this nature, because this matter had to be accommodated in a Money Bill passed in accordance with section 77 of the Constitution. Funding of matters referred for investigation to other agencies or stakeholders was important, but the challenge may be the ineffectiveness of the referral mechanism if recipient agencies lacked the resources to perform investigations into those referrals. Therefore, another option under section 36(1)(b) was the proposal that the PAA be amended to provide for the budgeting of funds to pay for investigations performed by other investigating agencies, and requesting an appropriation for the purpose of these investigations.
All outdated references would be addressed, and once the Bill was finalised, the definition clause would be reconsidered.
Mr N Singh (IFP) shared an example about Uganda, where the police would sit in on the committee meetings and have a list of all the transgressions perpetrated by government officials and departments, and the amounts attached to the transgressions, so that they could be held to account and pay. In South Africa there were no consequences in the system, so there was a need to tighten controls up. It was apparent that a lot of responsibility had been placed in the AG’s office, because things that would have to be done by the internal structures in the departments had become things that now had to be done by Charted Accountants in the office of the AG, where their expertise was not being utilised effectively and efficiently. Some of the findings were often about basic internal controls, and that was the job of the internal structures in the departments. In all these amendments, there was a cost implication in terms of financial resources and infrastructure resources, because all of this would come with those consequences. More action needed to be taken internally, rather than waiting on whistle-blowers to come forward about the corruption that was happening in government departments, then being referred to the public protector, etc.
The AG had mentioned that the amendments would refer undesirable audit outcomes. Was this done in consultation with other stakeholders or was it done in silos, and should there be political oversight in what the AG did at that stage of the game, or not? How would this be achieved to ensure that there was no conflict of interest between the office of the Auditor-General and the department that the AG was investigating? There had to be a clear separation of responsibilities or duties, so that when there was an outcome there would be action taken in respect of that outcome. In Austria, when Members had gone to the corruption office – they had a whole office called the “Corruption Office,” the Members had been briefed about what that office did. He proposed that perhaps the Committee should consider establishing something similar to that -- a fully independent unit that dealt with corruption matters of a financial nature emanating from departments. After an investigation was completed, what was the chain that should be followed thereafter, because very few were punished for their wrong-doing or corruption?
Ms S Hlope-Sithole (ANC) supported all the proposed amendments, and said that they were necessary. After 23 years of democracy, there had been no improvement in how AGSA’s mandate should be carried out. People employed in departments were qualified, but there was just no willingness to improve because there were no consequences. The amendments would assist in this regard. There was no growth, and unless the loose screws were tightened up, this country would fall apart. In Austria, there was an institution that trained people for anti-corruption in government -- it was not an oversight body.
Ms Z Dlamini-Dubazana (ANC) referred to page 3, section 4, and said the insertion there was very important, as the sentence which read, ‘falling below a threshold determined by the Auditor-General’ (clause 4) was still general. It was not giving proper powers, because if one looked at Chapter 12 of the Public Finance Management Act (PFMA), those entities that the AG was supposed to audit were many, so why was the Committee not being direct on the clause, taking into consideration it had acknowledged that there were municipalities that had been owing the AG for years, but did not pay the auditing fees? This would ensure that the above clause became relevant. On clause (b), of section 5, why not rather change the word ‘policy’, as stated there, to ‘regulation,’ because regulation was more enforcing than a policy. She agreed with the proposals, subject to taking into account the above suggestions.
Ms N Mente-Nqweniso (EFF) was troubled by the technicalities that were used in law. For example the Anti-Corruption Task Team (ACTT) investigated corruption that started from a level of R5 million, and there was an implicit indication that anything below that was not important, or it could be ignored. Now, with the undesirable audit outcomes and the technicalities that they carried in terms of law, the AG could prescribe what was an undesirable audit outcome so that the departments, when they wanted to tackle the AG in terms of the law, could not say that they did not know what an undesirable outcome was.
Mr T Mpanza (ANC) asked how the amendments related to other legislation that were relevant and might have a bearing, like the PFMA and Municipal Finance Management Act (MFMA). Were these pieces of legislation considered in the process of drafting the amendments?
Mr M Ntombela (ANC) asked about a preventative control mechanism. Did the AG consider the frequency or consistency of a particular department’s behaviour or performance – the serial offenders -- and at what point did the AG say it qualified for certain punitive measures, taking into account the problems and the gravity of the offences of that department uncovered by its investigations? Was there going to be consistency in the definitions of the irregularities in departments? He was under the impression that the AG was a Chapter Nine institution, so why were the recommendations of a chapter nine institution not binding like those of the Public Protector? Maybe as a way of positioning itself, this should be considered.
Mr B Topham (DA) asked for clarity regarding undesirable outcomes. If one presumed that the accounting officer had the responsibility to report unlawful actions and they failed to do so, that would fall under undesirable outcomes, so would the amendment go as far as making it a clear cut issue in terms of losses to the entity as a result thereof? Was the word ‘refer’ strong enough to enable the AG to open up a docket with the SA Police Service (SAPS), and if upon further investigation it was found the issue was quite complex, would the AG require the investigative unit to ensure that it was empowered enough to carry out such a complex investigation? Could it then refer to the authority body mandated to institute further action, because it did not have the in-house capabilities to do that itself?
The Chairperson said that with undesirable audit outcomes, the AG needed to elaborate further on what it meant, because departments would come forward and say that it was not fruitless expenditure, but was irregular. It was also an undesirable outcome for departments to pay inflated prices, and it was understandable to incur unforeseen irregular expenses, but generally irregular expenditure occurred due to poor planning in departments and municipalities, and irregular expenditure gave a back-door exit for condoning. All the relevant structures needed to think about this.
The AG had stated that it would refer matters it identified to the Public Protector’s office. Had the AG thought about these practices that had been creeping in, where auditees challenged the AG’s findings? Could the AG first challenge its own findings before referral? What was the deadlock breaking mechanism on this and who eventually decided which version must be supported -- the AG or the department in question? The AG had also stated that it needed a policy to investigate further because it became difficult, so could the AG elaborate on what was actually difficult? Was the AG going to be accused of being the investigative officer and the prosecutor because it had done the initial audit, which would then be referred to the Public Protector’s office, but which might say that they did not have the capacity that the AG had. In the arms deal investigation, there had been combined chapter nine institutions in order to broaden the capacity to investigate. One found departments that had undesirable outcomes, and would then establish that these departments had investigation cases that had been pending for a long time. This gap needed to be completely closed. How was the AG planning to do this?
Ms Hlope said that there was correspondence between the AG and the auditee in the form of management letters. This was a space for people to explain to the AG what they thought the AG did not understand, so excuses needed to be eliminated completely now, as there was a general excuse that the AG may have misunderstood the department on certain issues.
The Auditor-General said that with regards to undesirable audit outcomes, most knew what was undesirable. If someone asked about the synonyms that described integrity, one heard words like virtue, morality and goodness. These were unlike the antonyms, which could range from corruption and deceit, to disrepute, and the AG was still in that space when talking about undesirable outcomes. The AG needed to think in line with the comments shared by the Committee. The general practice by departments was that they would provide all the relevant documentation in one year, but in subsequent years fail to do so to substantiate transactions, because the accounting officers and officials knew that the consequences for their actions were very slight, and that they could get away with non-compliance. So this would fall into those outcomes at the moment. The AG was still combining a list of things that would form part of the basket of what constituted undesirable outcomes, and relevant legislation would be consulted in this process too.
Extending the independence of the institution was worthwhile. To ensure that there was no undue interference, it would be appropriate to allow the audit institution to apply itself independently in respect of the insight that had been obtained in the audit. This was because when a final evaluation of audit outcomes was done, the AG did engage with its teams and interrogate observations during the audit at a deeper level than what was in the report of the audit. Typically, there would be continuing disclaimers and persistent deviations in the supply chain on the basis of ‘emergency’ -- surely if there was a supplier with a contract and there were multiple emergencies about transactions that were done every year, there had to be something undesirable about the behaviour. If one looked at what the supply chain regulations prescribed, it would have been an ‘emergency’ at the beginning, but the subsequent actions around the same transactions ought to not be an emergency as well, unless planning was not in place. If one went through a deeper root cause analysis, one needed to understand why there had been no planning, because surely not having planned was a bit suspect, or might be a deliberate attempt not to have things done accordingly.
The current experience dictated that these things happened pre-investigation. He quoted the example of the South African Broadcasting Corporation (SABC) when they appeared before Standing Committee on Public Accounts (SCOPA), which had said that this year when the AFS (Annual Financial Statements) were finished they would be handed over to the AG by 31 May, and then they would be audited and an audit report would surface at the end of July. After the AG received the AFS, we would trigger a process of investigation that would ultimately result in consequences subsequent to the end of July. That was the mechanism that could work if matters were to be dealt with diligently, because it meant that an institution which had the technical tools to maintain accounting records but failed to do so, felt that it was easier to hide the things that it did not want to be seen, as there was no proper oversight over those records.
AGSA needed to gear up on the exercise that was attempting to bridge the accountability gap, and if there were consistent issues involving supply chains, those needed to be noted. Once they went through the process of investigation, the reasons that would absolve or recommend further action would surface, because currently they did not. The AG was always on call to deal with those that were charged with governance, to do something about it, but very little happened to take action.
Looking at the comments on the issue of additional costs, AGSA was keen to limit the extent of the financial obligations, because as far as the instruments that resulted from this schedule, AGSA may list the name of the entity, the province where it was and the nature of transactions picked up during the audit and substantive documentation, to support its concern over those transactions. It would not want to do additional work, other than to say part of its request would be for a limited quantum of appropriations that would be at its disposal so that the institutions charged to investigate further would not come up with an excuse in terms of financial constraints.
AGSA certainly was not seeking an additional level of oversight on the political side. What it was trying to do was to extend its ability to take the audit conclusion to the next level, and hoped that the system would trust its capacity to do that. Therefore, the policy had to be elevated so that whoever was in the institution in the future knew that after audit reports were signed off, there was a policy which prescribed that a team of the executive, together with the key people who ran the audit, would sit down and evaluate based on the audit evidence gathered up to the reporting of the AFS. The team would assess the eligibility of certain entities or institutions whose transactions had been inspected during the audit, and required to be further examined, so it did not become a limiting factor for anybody else who may have an idea about another transaction that the team many not have picked up. For example, for all the audit opinions signed at the office, the AG himself did not have the authority to influence someone to change the opinion expressed on the AFS, because it wanted to make sure that people exercised their professional judgment. AGSA knew that it could make mistakes, but it had sufficient internal controls to minimise them.
It would be a detailed exercise on AGSA’s side. It would work to ensure that the mechanism involved in this ensured that anyone with the same capacity and available information would come to the same decisions as the AG when assessing the exercise. Looking at the suggestion of a special unit, it may come at its own costs but it would be heading in the right direction.
The AG would ensure that it scrutinised the legal outcomes and technical issues in order to come up with the best suitable outcomes. It wanted to find a decent word to use to put in the amendment act. Short of having a list of things that could define undesirable outcomes, it wanted the element of surprise in order to prevent people from predictive behaviour.
If one looked at the PFMA and the MFMA, they prescribe clearly how people ought to conduct themselves in financial matters, but AGSA’s proposal was about how to stretch its ability to exercise the hand of oversight over those disciplines to ensure that there was an unlikelihood of conflict. An audit was inherently a contested space, and AGSA never walked away from any of these audits without having busted a gut, because it knew for an audit to be successful there had to be an active auditor and auditee. Some stretched this beyond a reasonable level, and contestations would always be found, but there were sufficient mechanisms to ensure that these were dealt with. If the AG had to exercise a referral, hopefully it would be for reasonable issues that normally arose out of an audit which required ventilation between an auditor and an auditee. Should there be remaining matters, AGSA would exercise the standards that were required of auditors to deal with them, one being the refusal to sign the AFS due to the persistent issues that had continuously arisen from the audit in light of the evidence that the auditor had uncovered. The Amendment Act would point to the criteria in terms of how the policy would evolve, where consistent outcomes that were leading to disclaimers, such as issues pertaining to ongoing supply chain purchases where deviations were the order of the day.
Regarding whether the AG would consider doing the investigation part itself, it had decided to separate the roles of prosecutor and investigator, because its mandate was to audit and report. It was closing the loop on the chain of reporting, and did not want to set up a department which would be too costly. There could be capacity in the combination of institutions, where the AG would brief the institutions and provide all the relevant information about the issues pertaining to the audit outcomes and ascertain whether that particular institution was able to do the investigation within a prescribed period set out. This was an attempt for the AG to minimise costs and give the responsibility to the people who had the appropriate tools. Some of these institutions had the tools readily available to carry out the job, avoiding the AG having to set up a unit responsible for investigation which would require funds that were already constrained.
People often requested the AG to conduct an investigation on financial matters that may have surfaced through the media in some particular department. When it evaluated these matters, it often came to the conclusion that it was unable to conduct the investigation because it was not worth the effort, simply because it may be undertaking an audit in that particular department. The audit team was there and sitting with the CFO and all the relevant executives in that department, and then later on a team from the AG would come to speak to the executive about conducting an investigation in that particular department. This became a problem, as it caused unnecessary deviations in the statutory audit, because there were specific procedures and processes between an investigator and an auditee. Just as in the case between an auditor and an auditee, it caused difficulty because the scope of work for an auditor was based on a sample of a selection of transactions and items, in the same context that one would be conducting an investigation, so it should rather be another independent institute with the capacity, personnel and resources. This was why one needed to make sure that the policy elevated this. When the AG received such requests from the public, it now recommended to the interested party to write to another institution such as the Public Protector in order to avoid situations where the AG may be put in a position to compromise the statutory audit that its team was currently undertaking in that particular department.
An official from the Auditor-General welcomed the question about the threshold. The AG received many request for an opt-in audit at many state-owned entities (SOEs), such as South African Airways (SAA), and these large audits put a lot of pressure on its resources, so when the opportunity came up to re-look at the Bill, the AG had decided to look at the entire portfolio of the audits of the AG. There were smaller entities which also required a lot work, and they were often in the lower risk areas, so the thinking behind the threshold was how the AG could strategically focus its attention on the very big audits. The thinking was therefore to make the smaller entities opt-out audits. Amending section 20 allowed for a review of the smaller entities, and also provide for the audits not to be conducted on yearly basis, but perhaps every three years.
Mr Singh said that the issue of performance audits had been raised before, and the AG’s response had been that it was not easy to progress to performance auditing very quickly, because specific skills and a variety of disciplines were required and it was a systematic process. He suggested a specialised unit within the office of the AG could possibly be considered, which would focus on performance auditing side by side, in order to catch up without affecting the financial audits. In respect of management reports, the response from the AG had been that there was no written convention on management reporting. There had been an issue that management reports were not produced by government officials and accounting officers in departments and made available to the Committee, and perhaps this needed to be made official and a written convention be formulated, because these reports were very important. A case in point was the SABC inquiry that he had sat on.
Mr Ntombela asked for comments from the AG about its recommendations not being enforceable. There could be disputes arising out of the irregularities and undesirable audit outcomes, but why would the AG’s comments most of the time be ignored? On the international arena, he was of the opinion that as the AG picked up problems locally, it was also positioned to pick up problems internationally, so did that not have any bearing on the sovereignty of the country in respect of the manner in which things were being done?
Ms P Bhengu-Kombe (ANC) asked about the risk audit committees in departments, and whether there was a role played by the AG in assisting those committees, because of the consistency of the misappropriation of funds and government resources amidst the presence of risk audit committees in the departments.
Mr Topham said that the AG should not be scared to ask for more power to enhance its mandatory role. He welcomes the fact that the term ‘refer’ may not be strong and enforcing, and something definitely needed to be done about it.
Ms Dlamini-Dubazana agreed with the amendment regarding the Remuneration Committee clause, and said that it was well crafted. With regard to the threshold, the AGSA needed to apply its mind on this one.
Ms Shope-Sithole strongly supported the proposals as they were.
Mr Mpanza also supported the proposals, but his question on the proposal regarding regulation over policy – that perhaps going for the enforceable one would be in the best interests of the AG – had not been responded to. He said that perhaps the AG could assist the SOEs in the management of their funds and appropriations.
Ms N Khunou (ANC) shared her concerns about the recommendations of the AG not being taken seriously by departments, and the fact that something needed to be done to ensure that they were binding had to be addressed speedily.
Ms D Carter (COPE) said that there was a need to clamp down more on the achievement of targets in departments, because if the funds were there to meet those targets and the targets were not met, was the fundamental reason because the funds were being misappropriated? Certainly, the AG needed to be given more teeth.
The Chairperson said that departments could not outsource accountability. If money was given to a department and that department outsourced, it must be held to account and understand that it bore the risk of accountability, even though it may have outsourced the work.
Ms Shope-Sithole said that when departments came to SCOPA and say that they had outsourced, this should not be the problem of the AG because the PFMA was very clear. If the head of the department outsourced a responsibility, it did not remove accountability from them. There was no way in which the head of a department could come to Parliament and absolve himself from taking accountability for the failure of outsourced work.
Ms Khunou said that the legislation was there, but no one was implementing it. Time must be allocated to go through the legislation, as most legislation passed before 1994 was difficult to implement and needed to be tightened up. This should be taken into account, because it delayed service delivery. There were accounting officers that were not law abiding, and no one seemed to be taking that into consideration.
Ms Bhengu said that when the AG met with the executive, and having identified the irregularities in a particular department, did it follow up on the matter and suggest implementable measures to rectify the problem? In terms of fruitless expenditure due to vacancies that were still unfilled, what were some of the AG’s interventions in this regard?
The Auditor-General said that as far as the international work was concerned, the AG’s commitment was now largely to the African continent. The biggest audit work had been for the United Nations, which the AG had been doing for 12 years up to 2012, and now it had none of this work, as those audits were self-funding and there was no money coming from the fiscus which had funded those audits. What the AG was involved in now was largely work that was happening in Africa, like the African Union (AU) which was audited with four other countries in the four regions of the continent. The AG also collaborated with two other countries in the Southern African Development Community (SADC) region, but it was not a big project – it was mainly pro bona work, but it paid for out of pocket expenses. It was a contribution which the AG had agreed with the Minister of the Department of International Relations and Cooperation (DIRCO) that it would want to contribute to this as far as it could. Even in terms of advocacy work in the international space, the level of involvement was around various levels of leadership across various audit institutions. Previously, the AG did not have the capacity and the skill level that it now had, so now that it had geared up it was obligated to assist other countries that were still in the developmental state in terms of retaining and developing the skills.
Regarding management reports, the AG had had a chat with one of the mayors who had said that one of the accounting officer managers had told him that he was not entitled to get a management report as a mayor. This was problematic and was an indication of a broken system which needed to be repaired. A management report was an official document of feedback to the institution to ensure that those that were charged with governance engaged with the issues that were in the audit report, and outlined controls in the institution that were broken and what could be done to fix them.
The issue of enforceability of the AG’s recommendations was two-fold. If one looked at section 182 (1)(c) of the Public Protector Act, it specifically says that one must require remedial action, but there was no such requirement in the Audit Act. This did not mean that the enforceability of the recommendations of the AG could not be exercised by those charged with oversight, and if the people who were charged with oversight had raised the bar, they would have been able to enforce the recommendations without giving that instrument to the audit office, because that was where the power lay.
For members of risk and audit committee, and those who were in the executive, the AG had a programme that had been running for many years now where it provided support on issues that had been raised in reports and engaged extensively. This would programme would continue, and to make sure that that level of accountability was deepened, the AG had incorporated issues around performance audits and had gone even further on this to strengthen it.
The Public Audit Act had two strings to which funding could be attached. AGSA was making the effort to grow performance audit units, but it got stuck because one could not bill directly as it was not a mandatory statutory exercise. It had now proposed that AGSA had to trigger access to that appropriation so that it was not a prerogative of the accounting officer as to whether the performance audit should be done or not, because that quantum of funds would empower the AG go ahead with it.
The Chairperson said the lack of political will was at the centre of the problem, because the PFMA was very clear on what the accounting officers were responsible for, so both the public sector representatives and those in the legislature should take some of this responsibility.
He highlighted that the Committee invited the Researcher, Mr Xolisile Mgxaji, to present the strategic plan f the Committee – the Committee does not meet regularly as other committees, so it was important that the Committee capitalises on this time to have its strategic plan re-looked and for Members to submit their inputs should they have any.
Standing Committee on Auditor-General: Mandate and legislative role
Mr Xolisile Mgxaji, Committee Content Advisor, took the Committee through its strategic plan, and said that the plan was supposed to have been drafted five years ago, but the current strategic plan covered only from three years back. There were some keys issues picked up by the team relating to legislation in terms of some of the issues that had been raised by the Auditor-General.
The Committee’s powers were derived from the Constitution and the Public Audit Act. It was empowered by the Constitution in terms of section 56 to summon any institution within the borders of South Africa, to ensure that it performed its oversight role and fulfilled its mandate. Some of the Committee’s functions included the approval of the Auditor-General’s budget – it had to consider the submission and then within two months of receiving it, it had to report to the National Assembly and National Treasury. It also had to appoint the external auditor for AGSA and present the annual report of the AG to the National Assembly, along with the audit report. The Committee was also empowered to approve the audit tariffs/fees of the Auditor-General.
Ms Carter asked if it would not be advisable to have Advocate Frank Jenkins, Senior Parliamentary Legal Adviser, to go through the document because some of the issues highlighted by the content adviser sounded like a personal view.
Ms Dubazane said that the content adviser had been talking about some of the things had been addressed by the AG on the amendments. Members had not had the opportunity to engage the document prior to the meeting.
Mr Mpanza said that it seemed the content adviser was going through the report word by word, and should perhaps provide just an executive summary on his document, due time constraints.
Mr Mgxaji then discontinued his initial plan, and spoke on the retention of the AG’s surplus and how in some audits that were not large in scope, the AG appointed small, medium and micro enterprises (SMMEs) to undertake those audits. However, it was unclear how the AG had a surplus, because some of its auditees defaulted significantly in the payment of audit fees and this could potentially affect the financial viability of the AG and the consequent payments to the SMMEs. He said that perhaps the consideration of a 30-day payment plan by auditees should be implemented. In terms of the provision of capacity for Members of the Committee this would be achieved through study tours and workshops.
The Chairperson said that the Committee’s role was to oversee the AGSA, as it carried its mandate as a means of effective oversight, so when the Committee did its work it needed to look at whether the AG was doing what it supposed to do. It was meant to be an institution that supported democracy, so the Committee needed to answer whether the quality of work and the capacity of the AG was achieving that goal, and as the protector of the AG, the Committee had to ensure that it was a going concern. If the AG did not pay SMMEs that it outsourced to perform statutory audits to smaller government entities, this was because other larger government stakeholders or municipalities did not pay the audit fees due to the AG.
Ms Bhengu-Kombe suggested that in the future the document had to be circulated to the Members prior to the meeting so they could refer to some of the issues that the document had identified and ask the AG questions while he was in the meeting.
Ms Carter said that when the AG was giving his report on issues at local governments and municipalities, should the Committee not be the first body to know about such things, and not hear about them on media platforms? The Committee needed to give itself a tighter grip, because it had an oversight role to play.
Mr Ntombela said that it was incumbent upon the Committee that if it came to the push, it would have to engage with the leader of government business so that its recommendations could be of substance in making sure that the AG was protected.
Ms Bhengu-Kombe referred to the surplus that the AG had retained, and asked where it was coming from and who was not being paid in order for that money to be there. This should be cleared up, because it was a bit disturbing. If the AG did not get the audit fees from the very same departments that it had to go and audit again, and SMMEs remained unpaid, this was a significant issue. As AGSA was a chapter nine institution, if the Committee could dig deeper into legislation it might find some way to empower the AG in the interim to be binding, and its recommendations to be respected by departments.
Mr Topham said that the AG charged its auditees for audits, and it had a budget for expenses, so if it had a surplus that meant that it made a profit and there were no SMMEs that were not being paid. The AG’s role was to not make a decision, but report on the fairness and objectivity of the AFS of the departments, so if the AG had the power to enforce certain things or measures, that would infringe on its mandatory independence role.
Ms Shope-Sithole referred to AGSA being a Chapter Nine institution, and said the Committee needed time to read the relevant legislation to get a clear understanding on the powers of the AG. When the Committee deliberated, Advocate Jenkins should be present. Regarding the question about people not abiding by the AG’s recommendations, she said the AG was an entity to assist the oversight structures to hold the relevant departments to account, and it was not the responsibility of the AG to hold departments to account.
Mr Mpanza said that the report was very informative and had pointed out some very important issues. Regarding the empowerment of the AG, he suggested that at the next meeting the Committee should request a report on the state of the AG’s human resource capacity, as well as the tools of trade that it needed in order to function effectively. This would help the Committee to get a sense of what it needed, and also to come up with the appropriate recommendations to assist the AG.
Ms Khunou said that there could be legislation year after year, but if the legislation was not implemented, then the Committee would be running around circles as the oversight structure. She suggested that there were policies and legislation in place that were good but were not being implemented, so there should be joint committee meetings to discuss these issues and come up with solutions. If the Committee were to go through the content adviser’s document along with some legal expert, perhaps it would get somewhere.
Ms Carter proposed that the Committee should for now remain meeting quarterly, unless there was legislation before it that needed to be looked into, and there could be additional meetings as well in order to scrutinise audit outcomes. There were departments that were spending their budgets but were not meeting targets, and if the system was effective, some of the issues that had surfaced in government departments -- such as the SA Social Security Agency (SASSA) situation, for instance -- would have been foreseen, so the system needed to be looked at again as a whole. She suggested that the AG should furnish the Committee with a combined findings register for all the departments. This would assist the Standing Committee on Public Accounts (SCOPA) to ensure that the rest of the departments did not commit the same mistakes.
Mr T Godi (APC), Chairperson of SCOPA, said that in the past there had been several departments that had pushed the Auditor-General to its limits, so enhancing the office of the AG was very timely, because there were departments that were acting with absolute impunity at this very moment. It was so ironical that when February of each year came and the budget speech was delivered by the Minister of Finance for the distribution of the fiscus, the entire country came to a stand-still, but when it came to how that money was spent, it was virtually a non-event or considered a meagre event. So when the AG presented its annual report, one needed to come up with a way that could also made it a huge event.
Systems had to be created that would respond to the challenges facing South Africa. Last year, SCOPA had taken a decision that it wanted Parliament to be the centre of the fight for sound governance, and would seek to bring the capacities and knowledge of all the relevant stakeholders to rally behind SCOPA so that it could use this to fight for good governance. One of these entities was the Anti-Corruption Task Team, which had pointed out that it did not make sense that the AG was not part of the team, because the findings of wrong-doing and the quantification of the amount of money that had been involved without following due processes, was in the hands of the AG. However, the money that was being investigated by law enforcement was very little compared to what the AG was reporting, because there was no referral system. SCOPA had in principle encouraged that and agreed with it, and would provide whatever assistance was necessary to assist in the process.
The Chairperson said that the AG would come back in September to present its annual report and it was only then, after the presentation of all the matters that were in the report, could they be responded to by the Committee and a way forward proposed. It was not the AG’s fault that there was recurring irregular expenditure -- it was Parliament that was not doing its oversight job properly. The Committee was meeting in August to hear the AG’s recommendations and perhaps the meeting could be jointly planned with SCOPA.
Ms Shope-Sithole suggested that the internal audit reports needed to be insisted upon by Committees or Parliament, because those reports contained very critical and important information. She asked the Chairperson to share this information at the Chairpersons’ committee meetings, and ensure that Chairpersons of Committees insist on the reports.
The Chairperson declared the meeting adjourned.
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