Public Audit Amendment Draft Bill: briefing on public comments

Standing Committee on Auditor General

02 March 2018
Chairperson: Mr V Smith (ANC)
Share this page:

Meeting Summary

In the run up to the public hearings on the 6, 7 and 9 March, the Standing Committee on the Auditor General (SCOAG) was briefed on the public submissions on the Draft Public Audit Act Amendment Bill by the Committee’s legal and content advisors which were grouped into themes.

A significant number of submissions raised the proposed new powers of the Auditor General (AG) to recover debt. There were concerns that the ability may over-extend the role of the AG, and that it might represent a duplication of roles. Others questioned whether this was constitutional. The parliamentary legal advisor said that it was a grey area, but overall concluded that the Bill most likely fell within the constitutional mandate of the AG. There were also concerns about to which body the recovered monies would be given.

Several submissions were concerned about who would set the remuneration of the AG. Members agreed that the remuneration committee should not have the final say on remuneration. Rather, the remuneration committee should make recommendations to an independent third party, who then determines salaries and amounts with the recommendations in mind.

Stakeholders suggested that an alternative mediating body should be created should the debtor wish to question decisions of the AG. However, Members generally agreed that the High Court was the most appropriate place and that the Bill should not be changed on this.

Meeting report

The Chairperson said that public hearings would be held on the 6, 7 and 9 March. He explained that all who wanted to speak to the Committee would be allowed to do so at the public hearing.

Policy issues emanating from public submissions
Mr Xolisile Mgxaji, Content Advisor, noted that SCOAG had resolved to publish the Committee Draft Bill for public comments and 35 public comments had been received. He distilled the key policy issues emerging from submissions the Committee needed to consider:

• Clause 3(b) inserting Section 5(1B)(e) states that upon receipt of payment by the debtor, the AG must deposit the money into the National Revenue Fund (NRF) or the Provincial Revenue Fund (PRF), as the case may be. Submissions raised concerns on whether this was appropriate in the case of a debtor that is self-funded, or one that is governed by the Municipal Finance Management Act (MFMA). If a self-funded entity suffers a loss that is then recovered, how does the party get the money back into its account?

• Submissions were concerned about the need for a dispute mediation agent. Clause 3(b) inserting Section 5(1B)(g) provides that a debtor aggrieved by the AG’s decision to recover any loss may approach the High Court for a judicial review of the decision in terms of the Promotion of Administrative Justice Act. Stakeholders felt that there should be an alternative independent mediating body that can be approached in these scenarios.

• Clause 3(b) inserting Section 5(1B)(a) empowers the Auditor-General to recover from the responsible accounting officer or accounting authority any loss resulting from unauthorized, irregular, fruitless and wasteful expenditure. The concern was that the ability of the AG to recover debts would undermine its capacity to function independently as mandated by the Constitution. Recovery is currently the role of other institutions as stipulated by the Public Finance Management Act (PFMA). How would this function of the AG work in the context of the existing legislation?

• Clause 3(c) inserting Section 5(2)(bA) provides that the AG must establish a remuneration committee which will make recommendations to the Independent Commission for the Remuneration of Public Office Bearers on the salary, allowances and benefits of the AG. Stakeholders raised the concern that there is a conflict of interest if the AG establishes a remuneration committee. This was the most common concern raised by stakeholders. If the AG appoints and sets the salary of the remuneration committee does this not represent conflict of interest on the part of the AG?

• Clause 9 amending Section 40(1)(b) empowers the Deputy Auditor-General to appoint the members of the audit committee. The primary function of the audit committee is to provide oversight of financial management, risk and performance. The audit committee is the accounting office of the Office of the AG. If the AG appoints the members of the audit committee, that is supposed to oversee the AG, there is again a conflict of interest.

Mr N Singh (IFP) suggested the recovered monies should go back to the party who the money was wrongly taken from. The AG needs some reward for its work, but not the full amount recovered. Rather this reward should be something like a retainer. But the money itself should not go to the AG; this would indeed prejudice the AG.

The Chairperson argued the AG should not give all the money to the party that lost the funds as submissions had raised because this rewards them for abusing the money. Money should go to the National Revenue Fund (NRF) and become part of the fiscus as managed by National Treasury.

Ms D Carter (Cope) agreed with the Chair and suggested that having representation from the Treasury present would be useful.

The Chairperson raised the concern about the need for a dispute mediation agent. People do not want to go to the High Court and would prefer a mediator.

Mr M Ntombela (ANC) said that the matter should go to the High Court which has the appropriate legal tools.

Ms Carter pointed out that the High Court takes very long to process cases, and it is a very costly process. This is likely why many people would prefer a mediator.

Mr B Topham (DA) said that there is no other legal method available to deal with these cases. There is no alternative elsewhere in law which establishes such a mediator. Therefore, the High Court is the only appropriate recipient.

The Chairperson agreed. In most cases it is the accounting authority of municipal or provincial branches that have breached their obligations, which is a criminal offence. This is a provision laid out in Section 86 of the PFMA which states that in these cases, criminal steps are to be taken. These people naturally resist because no one wants to be prosecuted for their crimes. But it is a criminal offence and therefore they must be tried appropriately in court. The Committee needs to implement Section 86 of the PFMA.

Mr Topham pointed out that it is not an entire municipality or council that money is recovered from, but rather it is an individual who is responsible. This is the risk they take when they become accountants. They know they risk going to court if they carry out illegal actions.

Ms Carter mentioned that physical danger and assassination threats are a reality for accounting officers. Individuals may be under duress when they break the law.

The Chairperson responded that the Committee cannot legislate against assassination and political duress. This is not the Committee’s responsibility – it is to protect taxpayers’ money.

Mr Singh disagreed and said that the High Court should be a last resort for these cases. Steps should be taken before taking matters to the High Court. Uganda and Kenya have very harsh laws for individuals that waste public money. These can be applied without taking the matter to the High Court. The Committee should learn from these examples.

The Chairperson asked if it is appropriate that the AG appoint the remuneration committee, or should it not be done by someone else, such as SCOAG?

Mr Singh pointed out that SCOAG currently recommends the remuneration of the AG. If this is changed by the Amendment Bill, whatever ultimate decision is made, SCOAG should still be consulted on the remuneration as this provides checks and balances.

Mr Ntombela agreed with the public and said that the AG appointing the remuneration committee would reflect a serious conflict of interest. His view was that it would better for SCOAG to perform this work.

Mr Topham explained that the clause sets out that the remuneration committee makes a recommendation to the Independent Commission – it does not set the salaries itself. Salaries are decided by the Commission and not the remuneration committee.

Ms N Mente-Nqweniso (EFF) agreed that the final decision must be made by an independent commission to avoid bias.

The Chairperson agreed. The principle that the AG’s remuneration cannot be determined by someone solely appointed by the AG is clear.

Mr Mgxaji was not sure if the remuneration committee or SCOAG is a more appropriate body to set the AG’s remuneration.

Mr Topham said the Act needs to define the term “independent commission”. On a different matter, the current Act says that the Deputy AG appoints the audit committee in consultation with the AG. It should not be the deputy AG who appoints the audit committee.

Mr Ntombela referred back to the recovered monies that were lost by self-funded entities. He pointed out that State Owned Enterprises (SOEs) are partially funded by government which complicates the situation. They are somewhere between self-funded and government funded. However, he still found nothing wrong with the AG treating them the same as government-funded, as they are supposed to do the work of the government. If SOEs lose monies and the monies are recovered, the amounts should be given back to the state.

Mr Singh said that the Committee needs to be consistent in its approach to how audit committees are appointed. If it is decided that it is the responsibility of the AG it should at least be noted.

Ms Carter asked the legal advisors to give more detailed and analytical feedback on the submissions.

Mr Topham reiterated that the AG should not appoint the audit committees of departments. If that is the current situation it should be changed. The audit committee should be independently appointed.

The Chairperson agreed with Mr Topham and noted that the AG may be ‘too close’ to be independent in appointing audit committee members. He agreed with Mr Ntombela that more audits by the AG into SOEs are a good thing. SOEs should not be given special treatment in this regard or any other.

Parliamentary Legal Advisor briefing
Ms Fatima Ebrahim, Parliamentary Legal Advisor, spoke about the themes raised in public submissions.
The presentation comprised three parts. The first was matters related to referrals for investigation and the recovery of losses. The second dealt with other aspects in the draft Bill. The third dealt with aspects not covered in the Bill. There were 11 matters raised about investigation and recovery of losses:

A  Referrals for investigation and the recovery of losses
1. The functions and powers for the referral for investigation of undesirable audit outcomes and the consequent recovery of losses in the Bill exceeds the constitutional mandate of the AG. She quoted Section 188 of the Constitution and raised two questions: does subsection (4) limit the powers and functions to matters related to auditing and reporting? If so, can the referral for investigations and the recovery of losses be deemed to be part of the auditing regime or does it go beyond?

There were international examples of other supreme audit institutions who have investigative and/or recovery powers. The AG’s Office has done a comprehensive benchmarking exercise. However, the Ghanaian example is distinguishable in two regards: firstly, the Ghanaian Constitution itself provides the power to surcharge and disallow; sSecondly, their AG does not enjoy the power to do the recovery.

Ms Ebrahim explained a comment that auditors are registered with the Independent Regulatory Board of Auditors and the AG extended powers may be in contravention of IRBA accepted auditing standards. As such it is necessary to find out what those standards are and if there is any way to work around them. Of course, such standards do not have the status of law. Lastly, the Chief Justice in the Nkandla case concluded that it is pointless having regulatory institutions if they cannot take remedial action when they make findings. The remedial powers of the Public Protector are therefore binding. This principle applied to all Chapter 9 institutions. Her opinion was that the Bill was not in violation of the Constitution.

2. The concern was that the independence of the AG will be compromised because the AG will become accountable to National Treasury for recovered funds. There is the added responsibility to account to Parliament. She agreed with Ms Carter that Treasury input would be useful. National Treasury should advise on why it is not sufficient for the AG to account for recovered funds to Parliament as opposed to Treasury directly. Why is it necessary to report to Treasury? There were several practical issues to be resolved. What will be the accounting implications if the AG deposits monies into the National or Provincial Revenue Fund? How will the transfer be treated and accounted for? Will the monies be considered revenue?

The precept that the AG should report to Parliament is non-problematic as already this is constitutionally required. However, a relevant question is whether the AG would have to account to Parliament in the case when the AG has failed to issue a certificate? Currently, the Bill states that the AG may issue a certificate. How will this impact on the AG’s independence to determine when the issuing of a certificate is worth pursuing? It is practically impossible to issue one in every case. Is there not a risk of political interference with the AG being put under pressure to issue certificates or not. Is “may” the appropriate term?

3. There were many questions about the link between investigations and the issuing of a certificate, which was unclear in the Bill. Does the issuing of a certificate depend on investigations? If so, what would the role of the investigating body be vis-à-vis the AG? Also, what does an “appropriate body” mean? Other organs of state are tasked with investigation or recovery of misappropriated funds. Is it envisaged that processes will run parallel? What is the effect of multiple competing claims? If the intention is to co-operate with these other institutions, what guarantee is there that investigating bodies will cooperate with the AG? What if they refuse to sign Memorandums of Understanding (MOUs) with the AG? An appropriate body could include a private body. Can we place reliance on private bodies, or should it be limited to public bodies only? What happens if a referral is rejected or delayed due to a lack of capacity or funds or any other reason? Why is there discretion to refer an undesirable audit outcome for investigation? Should it not be mandatory? Does this discretion not affect the impartiality of the AG?

4. Many submissions asked why the Bill made provision for recovery from the accounting officer (AO) or accounting authority only and not from officials who, in many cases, are the cause of the loss? They felt that blame was being heaped on the accounting officer? Also, why does the definition of debtor include previous occupants of the position? She mentioned several other points of clarification. The intention of the issuing of a certificate is as a final attempt to recover a loss - by its nature it is an extreme remedy. The AO still remains responsible for attempting to recover loss prior to this as provided for in law. This is meant to deal with a situation where the AO has not followed proper procedure. The intention was not to bypass the official who must be held accountable. Rather, the point is to say that it is the AO who should hold officials responsible. If the AO fails in this duty, that is when the AG will step in. The Bill should make this clear.

Ms Ebrahim continued: Can the AG be expected, during the course of an audit, to always identify the source of the loss? Her understanding was that the role of the AG was merely to identify the loss while it is the role of the AO to determine the cause thereof. She asked whether this interpretation was correction. This is why the PFMA allows for investigations of this nature. Surely this is not the role of the AG, which does not have the capacity to investigate within departments?

Other comments were that the Bill will have the effect of dissuading people from taking up the position of AO because they will become guarantors of trading risks. The view of the legal advisors was that the responsibility of the AO to implement sound financial management practices and systems already existed and must be honoured regardless of this Bill. AOs are already guarantors.

5. The practical and procedural steps to be followed in issuing a certificate. The Bill has not stipulated time-frames, the steps to be followed, communication methods, and so on. Some of these decisions will be made by regulators but it is useful to the Committee to contemplate the following. Who quantifies the loss and how? There will not always be a loss – there may be cases of irregular expenditure when the proper people had not authorized procurement, but there is no loss suffered as the department still receives value for money. Sometimes it is easier to quantify the loss and sometimes more difficult. There is no time-frame and it is not clear when the AG’s process starts. The law says that the AO has a duty to recover but it does not specify in what timeframe it should do so; there is no time-frame for recovery of losses in financial management law. The outcome of an investigation could take years.

Stakeholders felt strongly about the question of whether the AG should be burdened with the additional task of debt collecting. This is especially in light of the fact that departments have their own debt collecting branches and access to state attorneys. Will the additional task of debt collecting detract from the AG’s core functions? Another issue raised was on the status of internal audits; why is there no provision made to place reliance on these audits?

6. There was a concern that existing legislation (in particular in the MFMA and the PFMA) was already sufficient to prevent the mischief the Bill seeks to address. Recovery processes are contained in financial legislation. Are these sufficient? By way of example, if the AO commits an act of financial misconduct in breach of the PFMA - is this not sufficient to act against the AO if it fails to recover? Why are AOs not being acted against if legislation is clear enough? Perhaps there is too much legislation but not enough “bite”. Additionally, submissions asked where the recovery process would fit in, in relation to the financial management processes provided for in law. Is it not duplication of roles? The legal advisors held that the recovery process would happen in the absence of action by the AO. So AG action would substitute for AO action. Lastly, she asked whether financial legislation such as the PFMA and the MFMA should rather provide for more consequent and clearer actions to solve the problem.

7. The definition of “undesirable audit outcome” should include material non-compliance with laws and not speak only to financial loss. Many felt that the present definition is wide and vague. There were many related questions. Can environmental non-compliance be quantified? What would the certificate contain if not reference to a monetary debt? Is the concept of an “undesirable audit outcome” widely understood? If not, what is a more acceptable and relevant term? There were many suggestions for a better definition.

8. There was an observation that the MFMA contains sufficient provisions and processes for debt recovery. Section 32(2) of the MFMA provides that a municipality must recover from the person liable for that expenditure. An immediate question is: who is “the municipality”? Is it the AO or the municipal council? Where does responsibility rest? The AG cannot act if the accounting officer is no longer responsible.

Municipalities need to explain practically how these recovery processes would unfold. There is variation between municipalities. If the matter has been referred for investigation, the responsible body can be considered to be dealing with the loss and to Ms Ebrahim it then seems the AG does not need to step in to deal with the loss. The MFMA provides for monies to be withheld from non complying municipalities who are not performing their functions. Is this not deterrent enough? Government should be withholding funds from delinquent municipalities. Its failure to do so is part of the problem but this is outside of the scope of the AG. However, Ms Ebrahim noted that there is a constitutional concern about the withholding of funds as this may lead to the cutting-off of services and the punishing of innocent taxpayers.

9. Practical considerations about time and money spent as well accounting consequences for the identification of debtors. Who would pay the litigation costs? It is assumed that when you are acting against an AO that is currently in office, the AO will simply claim that it is the department who must pay the legal costs. However, the certificate is going to be issued in a personal capacity, rather than to the accounting officer. Ms Ebrahim therefore did not think there was a basis to argue that the department should pay for the litigation. Another concern was that the AG will be “bogged down” in court battles that will detract from the AG’s core functions. There are thousands of transactions that result in losses; should there not be some sort of threshold that determines which cases warrant referral? Another comment was that debt collection is a burdensome task that could be more effectively done elsewhere. Is the Bill perhaps encouraging a duplication of responsibilities and therefore wasting resources? Lastly, will the AG need to register as a debt collector with the National Credit Regulator?

10. The Bill fails to provide for a proper audi alteram partem process. The term “satisfactory” in relation to the AG’s personal satisfaction with the explanation is open to abuse. Submitters asked whether there should be an actual hearing or if written submissions were sufficient? Should the AG draw the sole power to determine whether to issue a certificate or could there possibly be a board of some sort to issue a more collective decision? Perhaps this could be a referral committee consisting of external experts to help minimise the risk of subjectivity. In law the decision that the AG makes would have to be a rational, reasonable decision, otherwise it would be challenged in the High Court. So, this will deter the AG from the improper issuing of certificates. Should there be criteria to determine what will be “satisfactory”? The Bill could define “satisfactory” to include particular steps for example.

11. There was a concern that the power of referral and recovery will not be applicable to audits that the AG has opted out of. The AG does discretionary audits – it can opt out of audits. If this is allowed, are you not inadvertently letting other regulatory institutions off the hook? Submissions noted that the AG would assist in choosing a private auditor and questioned whether these audit reports could be trusted. She asked if there is a reason not to rely on private auditors for issuing certificates? Lastly, should the AG be allowed to opt out?

B  Matters related to other aspects in the Bill.
1. There was a concern about whether international audits by the AG should be allowed. This was raised strongly by the Public Protector. Its view was that international audits should not be allowed as these institutions are not funded by the South African government and will not contribute to strengthening democracy. Are international audits, however, reasonably linked to the auditing function of a supreme audit institution? Is there a possibility that the independence of the AG may be compromised because the permission of the oversight mechanism (SCOAG) must be obtained first? The Bill states that international audits cannot proceed until the Committee provides a go-ahead. Is this allowing Parliament to encroach on the functions of the AG? Is there a possibility of international conflict or perceived conflict flowing from a refusal by the Committee? Do international audits add value to the Office of the AG? What is the cost-benefit proposition for and against international audits? She highlighted some pros and cons. Another point was whether there should there be additional criteria in the Bill? For example, audits must not compromise the independence of the AG or detract from the core function of the AG. A key question is whether international audits have the effect of increasing the status and relevance of the AG thereby instilling international confidence in the quality of audit reports. She wanted to know the AG’s view on the reputation of international audits.

2. Stakeholders suggested that the Bill should contain a maximum agreed amount or percentage in relation to the audit fees that can be defrayed from the Treasury Vote. She noted that Committee had amended section 23 of the Bill. Currently, the Treasury defrays 100% of the costs that an auditee cannot pay if the auditee is in financial difficulty. The amendment seeks to put a cap on the amount that Treasury would pay. Parties then need to reach agreement on what that amount should be. If they are not going to carry 100%, who will be liable for the balance of fees currently carried by Treasury? The AG is under a constitutional obligation to audit many auditees that are in financial distress and not able to pay their fees. How does one balance the obligation with the practical financial implications for the AG? Lastly, what if no agreement is reached on the percentage or amount?

3. There was a comment that the AG should not be allowed to draft his own regulations as this represents a conflict of interest. Ms Ebrahim asked how this is different from line function ministers who have the power to draft regulations. Is this power better given to the Committee or is it suitable in the hands of the AG? Can mischief be prevented by additional requirements for the drafting of regulations such as publication and public participation processes? This may solve the problem.

4. Submissions asked if the AG should be allowed to engage in limited assurance engagements and review engagements, as opposed to reasonable assurance. This is the content of section 20. Ms Ebrahim’s understanding was that it was a slightly lower auditing standard. The concern is the standard applied by the AG is lowered if this proposition goes into the Act. Clarity is needed on this topic. Do limited assurance engagements and review engagements meet audit obligations? Are these an acceptable standard of audit? Would it dilute the value of audits and the responsibility to audit? Does it increase the risk of non-compliance and/or loss of public resources?

5. Submissions felt that the status of certificates should be clear. Is a certificate final or only prima facie proof? The Bill states that the certificate stands as prima facie proof. This is a valid concern – final proof would mean that the AG could act on the certificate alone, and that an objection could happen only by an administrative review process. Conversely, if the certificate is considered to be prima facie evidence, it is conceivable that the court would need to ascertain whether the debt exists.

C  Matters not covered in the current Bill
• The AG does not utilise the South African Statements of Generally Recognised Accounting Practice (GRAP) as do other constitutional institutions. In 2017 it used the International Financial Reporting Standards (IFRS) instead. The first thing to consider is that AG is not a constitutional institution as provided for in Schedule 1 of the PFMA so the GRAP provision is not legally applicable. There may have been a good reason for this. However, one should consider what pros and cons are associated with following another regime such as IFRS instead of GRAP. Section 41(2) of the Act stipulates that the financial statements must be in accordance with South Africa’s Statements of Generally Accepted Accounting Practice (GAAP) or other international best practice approved by the oversight mechanism. Why was this choice initially granted?

• An internal submission from the AG’s Office stated that practically, access to information needed to be better considered. There should be consequences for failure to comply with an engagement letter. Auditees do not submit information on time or they do not cooperate fully. In any event non-cooperation is a criminal offence, so it is not clear why the AG does not act in these cases of non compliance.

• There was a comment that the AG should approve members of the audit committee in all organs of state. This is dealt with in the PFMA; such an amendment would thus need to be done in the financial management legislation and not in this Bill. It is also not clear how the AG can practically be responsible for appointing audit committees in every single government department and institution.

• Another comment was that the audit committee within a department should brief the AG on its application of the AG’s recommendations. There is nothing in law to stop the AG from requesting such briefing in any case. As such it does not seem it needs to be legislated.

• It was suggested that recovery should be extended to recovery of funds paid in contravention of the requirements of the BBBEE Act. In her view, a contravention of that Act would be irregular in any case. Not all irregular or fruitless expenditure stems from supply chain management functions. A distinction is necessary.

• A submission asked the Committee to consider the power of the National Assembly to withdraw a certificate in relation to the administrative review process. At present the AG does not have the power to withdraw a certificate itself.

• Another comment was that the Bill should increase the penalties for the offence of interfering with the work of the AG. Currently there are financial penalties and a maximum prison sentence of 12 months. A practical question is to consider what sentences the AG has given out in the past.

• Another Parliamentary Legal Advisor discussed submissions that raised drafting issues. Many related to the style of language. However, one should remember that an Amendment Bill usually takes its cue from the style of the Act it is amending (here the Public Audit Act of 2004). There were several useful comments. For example, the definition of “this Act” has been improved following stakeholder input. Superfluous wording has been removed. Some stated that the definition of “undesired audit outcome” was too vague.

Mr Singh asked if there had been any discussion about a unit within the Office of the AG that could be responsible for debt collection. He had in mind a “quasi-independent” internal unit. In his view, private auditors work under the auspices of the Office of the AG. Therefore, if they provide an audit it is as if it came from the AG.

Mr Topham wanted to clarify that there is a difference between GAAP and GRAP. The AG is obliged to use GAAP. IFRS is seen as GAAP in South Africa. Therefore, this point can be ignored as it confuses the two.

Mr Topham discussed the constitutionality of subsection 4. He agreed that subsection four went beyond what was necessary. Auditors should rely on what has been used internationally as a standard. The extra power being given to the AG to perform debt collection would be significant. Perhaps the AG should issue the certificate to a separate entity such as the State Attorney, who then was the power to go and collect the monies. The reason the AG is proposed to do debt collection is because there is no one else currently doing it. Perhaps there is another entity, such as the State Attorney’s Office, that could take up this responsibility. He clarified that it is perfectly possible for an entity to have two roles; there is theoretically nothing stopping the AG from being auditor as well as having another role of debt collection for the state.

On point 2 of Part A, Mr Topham explained that it would be the accounting officer that would be responsible for paying the additional legal fees in the case where Treasury does not defray 100% of the costs. In any case, the High Court will give an order deciding who will pay for legal proceedings. If the AG issues a certificate, the AG will take the debtor to court. Then the court decides on the payment of fees. He suggested that it may help to allow the debtor to question the legitimacy of the certificate in this court case; perhaps allowing the High Court to consider whether administrative law has been applied correctly in the issuing of the certificate. This would provide a better balance between parties.

On point 11 of Part A, Mr Topham said that the AG had to be allowed to opt out. The AG has a limited capacity and cannot be expected to act on every finding.

The Chairperson sought to clarify point 1 on the AG’s powers of referral. His understanding was that the AG would refer after he has done an audit and found unauthorized, fruitless or wasteful expenditure. In other words, there is prima facie evidence. He did not understand why submissions had a problem with this system. The AG’s referral is necessary to hand the matter to more competent bodies for investigation. The independence of the AG must be guarded at all costs. The AG reporting to SCOAG rather than the Treasury may be a preferable arrangement.

The Chairperson explained that the complaints that it is the AO and not officials that are dealt with is not valid as the PFMA clearly states that it is the AO that is responsible. There is nothing wrong with the fact that the buck stops with the AO. On point 2 in Part B, he said that it is perfectly acceptable for the AG to create regulations, which can be ratified by SCOAG.

The Chairperson stated that the Bill does need to articulate more clearly that more power is being given to the AG. What is the mischief that the AG’s new powers will address? This is what SCOAG must make clear to provide a convincing case that the Bill is useful. He agreed that the Committee needed to clarify “undesirable”. On the internal submissions from the AG, particularly those stressing that the Bill encroached on the PFMA, he explained that again, clarifying what mischief the Bill aimed to address would help resolve these complaints. The question of who should pay for the litigation would have to returned to as it is important and complex. Departments need to be discouraged from litigating too frequently.

The Chairperson stated that the issuing of the certificate should be the responsibility of the AG. The AG is a Chapter 9 institution that can be put on review if it oversteps its responsibilities. As Mr Singh pointed out, private auditors are subcontractors of the AG, and the AG can never outsource his responsibility. The answer to whether the AG should be able to do international work seems clear; the country is part of the United Nations , which from time to time requires the AG to do work for it. Should we turn down these requests? The AG itself relies on international standards. Allowing the AG to “play” in the international arena is useful and is not constitutionally problematic. He added that drafting issues would be covered in subsequent meetings.

The Chairperson reminded Members that the purpose of the meeting was to ‘gear up’ for the upcoming stakeholder consultations. None of the comments made were binding.

Ms P Bhengu-Kombe (ANC) raised the judgement on the Public Protector’s Nkandla Report. The AG is a Chapter 9 institution whose decisions are binding. Does it make sense to say that the National Assembly (NA) should be the one whose decision is binding for issuing of certificates? It is clearly the role of the AG.

Mr Topham stated that SCOAG must consider prescription; if no timeline is specified, common law prescription would apply. As such SCOAG may want to extend prescription in the Bill. He appreciated Mr Singh’s idea of rewarding the AG for debt recovery on a retainer basis. He responded to the Chair’s comments about the “mischief” the Bill aimed to solve. The introduction of the Bill says that the purpose of the Bill is to recover money from responsible persons. The Principal Act states that the money is taken from the AO. His view was the intention of the [existing] law is that the AG only acts against an AO who fails to recover the money from officials or employees in the relevant department. The ability of the AG to recover money from particular individuals is an additional power. At present the Bill says that the AG will pursue an AO if the AO has itself failed to recover monies from a relevant individual. SCOAG must decide if it wants to extend AG powers to allow it to recover money in this fashion; this would require more work on the Bill.

Ms Ebrahim responded to Ms Bhengu-Kombe on the Nkandla judgement. Section 182 that established the Public Protector is a distinguishable section from the one that establishes the AG. The Public Protector has remedial powers as given by the Constitution. The section that deals with the AG does not include such provisions for the AG. The constitutional question that then arises is whether giving the AG remedial powers to recover would constitute an unconstitutional extension of the AG mandate or not. In her opinion it is a fine line but based on her research she felt the Bill fell within the constitutional mandate of the AG.

Ms Ebrahim agreed that the withdrawal of the certificate by the NA seems like an unnecessary responsibility to give to the NA. It seemed to her to be an unnecessary politicization of an administrative task. The AG should not make the decision to withdraw either as it might be politically influenced. Thus, the power of withdrawal should lie with a third party such as the High Court.

Mr Topham clarified that the way the Bill was worded, it did not allow the NA to withdraw a certificate. The NA can only condone a certificate – it cannot withdraw it. Only the High Court can force the AG to withdraw a certificate.

The Chairperson closed by reiterating the roadmap for the Committee, and the dates of the upcoming stakeholder consultations. The deadline for finalising the Bill is 29 March.

The meeting adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: