The Committee was briefed on drafting changes to the Bill based on the Committee’s suggestions at its previous meeting:
• The definition of executive authority had been revised and that, generally, executive authority was used in reference to national ministers, but legal services had introduced a catch-all phrase to ensure that executive authority referred to all legislatures as well as the national ministers. The Committee noted that the Bill stated that the Auditor-General had to submit a copy of the certificate of debt to the Speaker for tabling in the National Assembly. The phrase ‘and relevant legislatures’ was added, with an explanation to the Committee that a municipal council was also a legislature in constitutional terminology.
• It was noted that the Committee requested that the criteria for when the auditee was in distress were to be in Regulations. However, the Auditor-General could not regulate on a matter that fell under the Minister of Finance as that would create a conflict of interest. Therefore, it was decided that the Auditor-General and National Treasury would together determine the criteria to be applied. Despite a reluctance by the Committee to get involved if National Treasury and the Auditor-General did not agree, the Committee would have to resolve the matter, as the principal Act stated that one of the obligations of the Committee was to assist the Auditor-General to be effective and efficient.
• All of the matters on which the Auditor-General had to issue regulations were listed individually and not simply with a catch-all as suggested by Members, as the Act could not be implemented unless all matters in that specific list of activities had been addressed by the Auditor-General.
The Committee approved the clauses in the Bill. The Committee will adopt the Bill on 22 May 2018 and it will be presented to the National Assembly, preferably before House rose for recess in June. As long as the Bill was passed before the end of calendar year, it would be in order. The Committee was leaving a legacy by giving the AG teeth.
The Chairperson asked the Auditor-General to finalise an agreement with Treasury to finance the R30 million necessary for the implementation of the Act by 22 May 2018.
The Chairperson said that the meeting was essentially about proof reading and making sure that the Bill said what it should say in the final version. He noted that the meeting was quorate so decisions could be made. Once the changes had been adopted, it would be sent for translation. The Committee would meet on 22 May and adopt the Bill.
The Chairperson went through the Bill page by page. The Parliamentary Legal Advisor, Adv Fatima Ebrahim, offered to indicate when the Committee came to changes that she had made since the previous meeting. The Chairperson thought that Members would have familiarised themselves with the changes but they could ask for her input, whenever necessary.
There were no changes on Pages 1 to 3.
P4: Mr N Singh (IFP) noted that his question on the definition of executive authority had been cleared up. Generally, executive authority was used in reference to national ministers, but the legal advisors had used a catch-all to ensure that it referred to all legislatures as well.
Pages 5 and 6: No changes.
P7: The Chairperson referred to the top line: ‘whether appropriate and adequate measures had been taken to ensure that resources are to be procured…’ Was there a better word for resources or was it the appropriate word? He was not sure. Resources referred to money and people. Adv Marissa Bezuidenhout, Business Executive: Legal Services in the Office of the Auditor-General stated that ‘resources’ was the word used for performance audit and it captured everything, assets as well. It was best to leave it in the Bill. The Committee agreed.
P8: No changes.
P9: Mr Singh asked how it was going to be formatted. Could the heading ‘Part 1A: Remedial Action’ be moved to the following page? Adv Ebrahim explained that all formatting would be done by Creda Printers.
P10: Mr A McLoughlin (DA) asked for clarity. Under 5B, it said ‘subject to subsection (4) and (5)’. Part of which section was being referred to? Adv Ebrahim explained that drafting convention determined there was no reference to a section number if the subsection referred to was within the same section.
P11: Mr Singh noted that ‘The Auditor-General must submit a copy to the Speaker for tabling in the National Assembly’. What happened for other spheres of government? Where did one table with other spheres of government? Adv Ebrahim suggested adding ‘or relevant legislatures’. Mr Singh asked if a municpal council was a legislature or not? Adv Ebrahim confirmed that a council was a legislature. The Chairperson requested that the change be made to ensure that it applied to all the spheres - local, provincial and national.
P12: No changes.
P13: The Chairperson asked if the second ‘and’ in the second last line was a mistake or not. Adv Ebrahim stated that the ‘and’ was referring to the next sub-section in the Act and was correct.
P14: Ms Z Dlamini-Dubazana (ANC) asked if the first clause on the page referred to the new agreement between National Treasury and the Auditor-General. Adv Ebrahim confirmed that it did but added that there was a further reference to that agreement later in the Bill. The Chairperson explained that the agreement had been discussed in extensive detail in the previous meeting.
P14: Mr Singh noted a split infinitive that had to be corrected. The agreed upon phrase was ‘must consult annually’.
P15: Ms Dlamini-Dubazana said that there needed to be clarity on the oversight mechanism, but she could not find where that had been included. The Chairperson explained that the Standing Committee, as a sub-unit of the National Assembly, was the oversight mechanism.
P16: Adv Ebrahim explained that Members had wanted the criteria for when the auditee was in distress to be in the Regulations. It was the legal view that the Auditor-General could not regulate on a matter that fell under the Minister of Finance as that would create a conflict of interest. It was, therefore, decided that when the Auditor-General and National Treasury had agreed upon a date and the process, they would together determine the criteria to be applied. There was, currently, a set of criteria which looked at budgeted and actual revenue, expenditure trends, current liabilities, operating expenses, etc. but that would change from time to time depending on the economic climate and circumstances. If National Treasury and the Auditor-General did not agree, they would bring the criteria to the Committee for resolution.
P16/17: Ms Dlamini-Dubazana asked whether the same oversight mechanism should apply if they did not agree on the annual date. Adv Ebrahim referred the Committee to 7 (b) and (c) which indicated the need to come to agreement on the date, the criteria and the process, and that the oversight mechanism would be to resolve a deadlock between National Treasury and the Auditor-General. The Chairperson asked if it meant that the Committee would get sight of the criteria? Would the Committee have sight of what the Minister of Finance finally agreed upon as the criteria? His question was how the Committee would make sure that entities would not plead poverty just to get out of paying audit fees. It was fine for the Minister to determine the criteria but, at some stage, would the Committee see the criteria? The Committee would like to be informed if the criteria changed or the Minister wanted to change the criteria to satisfy his or her constituency?
Adv Ebrahim explained that only the issue of a deadlock between the Auditor-General and National Treasury was covered. She suggested an addition to 7(a): ‘the Auditor-General and National Treasury had, after consultation with the oversight Committee, to agree in writing.’ But they would still have to go back to the table to reach agreement.
The Chairperson stated that another option would be for the Auditor-General and National Treasury to present the criteria to the Committee once they had agreed on the criteria. How else was the Committee going to measure the process? The Committee did not want to get involved in the role of the executive or the Auditor-General, but it had to see the criteria so that Committee could tick all the boxes, from a practical point of view. The Committee should be able to challenge it, if an entity said it could not pay audit fees but the criteria had not been fulfilled.
Ms N Mente-Nqweniso (EFF) said that Committee ought to find a way to give the Auditor-General powers to get the fees. She had seen on the previous page that the Committee was exempting municipalities and provinces, but as much as there was a crisis in some municipalities, there should be a law that was binding on municipalities to pay the Auditor-General so that he got his money. The criteria would determine who could not afford to pay, but the Auditor-General should not be left to the mercy of the criteria only.
Ms Dlamini-Dubazana heard what her colleague was saying but she supported Adv Ebrahim. If there was a lapse between National Treasury and Auditor-General, the oversight mechanism had to determine the arrangements. The two should determine the criteria and the Committee should only get engaged when someone had failed to adhere to that agreement.
The Chairperson asked if the Committee got involved on that level, would it not be tampering with the separation of powers. If the Committee got involved at a management level, the Auditor-General could come back and say that legislature told them to do that way. He believed that it was cleaner if the Committee kept its distance and operated simply from an oversight position. The Committee agreed to leave the Auditor-General and the Minister of Finance to determine the criteria.
The Chairperson explained to Ms Mente-Nqweniso that the Committee was trying to manage the debt of the Auditor-General. He noted that she was asking if it was clear enough and were the powers specific enough and asked for input on the point.
Adv Ebrahim explained that the principal Act stated that the auditee was responsible for settling the account within 30 days. It was a contractual relationship and the Auditor-General would always have recourse to act against an auditee. It also stated that the National Treasury or relevant provincial Treasury might, after consulting the Auditor-General, determine that the audit fees not be defrayed from the Vote of the auditee.
National Treasury was offering to assist with excess audit fees to avoid the Auditor-General having to go to court or for there was to be a defrayment from the budget.
The Chairperson explained to Ms Mente-Nqweniso that Treasury was going to be surety for the costs. Somebody had to pay for the audit costs and that would be the auditee, or the auditee would pay a portion and Treasury pay the excess. The Auditor-General should not be the one running around looking for money or taking people to court.
Mr McLoughlin stated that, if he understood the Chairperson correctly, the oversight committee should not be involved in nuts and bolts but on p16, the Committee became the arbitrator when the Auditor-General and National Treasury could not reach a decision. Maybe it should not be that the Committee performed that function.
Mr Singh suggested it was indirect involvement. The Committee did not want to get into the fray, certainly not in the beginning, but it would assist them to reach a resolution.
Adv Bezuidenhout agreed with Mr Singh because the Act stated that one of the obligations of the Committee was to assist the Auditor-General to be effective and efficient. She would capture it under that phrase.
The Chairperson recapped. The Committee would not get involved in the processes between the Auditor-General and National Treasury, but it would certainly prod them along as required by the principal Act.
P18: Mr Singh said that 14(2) referenced international accounting best practice and referred to GAAP or another accounting system being approved. Why could the legislation not simply state that the accounting practice had to be in accordance with international accounting best practice but not require approval? The Chairperson agreed and suggested that a full stop be inserted after ‘best practice’ without being prescriptive of which best practice. The Committee did not want to be prescriptive, especially as accounting practices changed from time to time.
P19: Ms Dlamini-Dubazana said that the Regulations were tabled in the National Assembly. Provincial legislatures should also table them. Adv Ebrahim explained that the clause referred to the tabling of the Regulations, so that was tabled in Parliament only.
The Chairperson referred to 1(a) which stated that the Auditor-General had to make Regulations on discretionary audits. Had the Committee not agreed that the Minister of Finance was responsible for the regulations? Adv Ebrahim explained that the section listed all of the matters that the Auditor-General had to issue regulations on for discretionary audits. Mr Singh asked if it was not possible to have a catch-all as there was the risk of leaving something out. Adv Ebrahim explained that the Act could not be implemented unless that specific list of activities had been addressed. The remedial actions could not take place unless the actions had been undertaken. Therefore, the word ‘must’ had been used and a ninety-day period attached to the requirements. The Act allowed the Auditor-General to make any other regulations, but those regulations had to be done for the full implementation of the Act. Failure to do so would mean that the Act was a blunt sword. The Chairperson asked if Mr Singh’s concerns were covered elsewhere in the Act. Adv Ebrahim explained that Section 52 covered his concerns.
Pages 20 and 21: No changes.
The Chairperson put pages 1 to 21 to the Committee as a package. He asked for a proposal for adoption of the clauses 1 to 21. Ms D Carter (COPE) proposed the adoption and the entire Committee seconded the proposal.
The Chairperson explained that the Committee Secretary and Adv Ebrahim would do as requested by the Committee. Thereafter the language people would work on the Bill and a final version would be presented to the Committee a day or two before 22 May 2018. The Committee would meet on 22 May and adopt the Bill. He and other Members would lobby to have the Bill presented in the House of Assembly before it rose for recess in June. If not, the Bill would be prioritised for presentation in the House in September 2018. However, as long as the Bill was passed before the end of calendar year, it would be in order and would give teeth to the Auditor-General. He assumed that it would be necessary to have a debate in the House.
Mr Singh stated that he had concerns about 3(4) on Page 24: “… the executive authority to collect the amount...” He understood what was being said but asked if it was phrased correctly because responsibility was being put on the executive authority to collect. The Chairperson reminded the Committee that this issue had been debated. The buck ended with the Minister. He had to collect the money. If he did not, the Auditor-General would come to the Committee and ask the Committee to fight with the Minister. The Committee agreed with the principle. However, he asked if it was written in the best English.
Adv Ebrahim stated that Legal Services could look at it, but she could not think, offhand, how it would be changed without losing some of the meaning. She asked Mr Singh to explain what clarity was required, or was the sentence too long?
Mr Singh was concerned that the responsibility was on the Minister whereas the accounting authority should be the first port of call.
Adv Ebrahim explained that the certificate of debt was issued to the accounting officer as the person liable to pay. If there was a query about a transaction during the audit, an investigation might be launched, and the accounting officer had to claim the money from the responsible person. If the accounting officer had done nothing, the Auditor-General issued the DG with a remedial action, stating that he was going to issue the accounting officer with a specific action as he was going to collect the money. The last step was that the DG became liable to pay the debt. As the DG was the highest administrator in the department, the next step up was the executive authority, the Minister or MEC, who was required to collect the debt from the accounting officer. The accounting officer attracted personal liability.
The Chairperson agreed with the Legal Advisor but suggested that it should say that ‘in the event of the accounting officer not having done so.’ Adv Ebrahim pointed out that it did say so in the sentence above. The issuing of the certificate was the step prior to claiming the money from the accounting officer. The Chairperson asked that Legal Services look for a neater way to phrase it. The principle was correct.
Ms D Carter (COPE) suggested that, if Members went through the Bill again, they could contact the Legal Advisor and suggest places in which the document could be tweaked.
The Chairperson agreed but instructed that comments had to go through the Secretary so that she could share the suggestions with everyone in the Committee. If all Members agreed, the suggestion would go to Legal Services.
Mr Singh asked about the financial implications as the Bill required about R30 million to implement. One has to know that the money was available. Had National Treasury agreed to provide for it?
Adv Bezuidenhout replied that the Auditor-General had had initial discussions with National Treasury, but a formal agreement had not yet been reached, as the discussions had not been taken that far. The principal Act allowed the Auditor-General to get an appropriation for certain functions, and that was what Auditor-General was going to ask for. However, a formal agreement had not yet been agreed on and the Auditor-General would have to pursue that.
The Chairperson requested that by 22 May 2018, the Auditor-General should provide an indication of such an agreement. He was aware that parliamentarians who did not agree with the Bill would find things that had not been done and use that to reject the Bill. They would ask how a Bill could be put before the House without the money to pay for it. He asked for a response from the Auditor-General as soon as possible so that Members could start lobbying for the passing of the Bill, otherwise all the work would have been in vain. R30 million or so was necessary.
The Chairperson thanked the Committee for the focused hard work that had been put into the drafting of the Bill. At least, everyone would have left a legacy by giving the AG teeth. He acknowledged and thanked everyone who had played a part. The Committee was one step away from giving the Auditor-General the teeth that everyone thought was necessary. Members would receive the final copy a day or so before the next meeting on 22 May 2018.
Ms Dlamini-Dubazana, as Whip of the Committee, thanked the Chairperson for his leadership and stewardship. He was fair and to the point, and the Members appreciated that.
The meeting was adjourned
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