RABS Bill: Department responses to submissions; Auditor General on its Assurance Model

This premium content has been made freely available

Transport

28 August 2018
Chairperson: Ms D Magadzi (ANC)
Share this page:

Meeting Summary

Auditor General South Africa (AGSA) spoke on its Combined Assurance Model which has been in action for the past seven years which assessed the effectiveness of the assurance providers of a state of organ auditee. It was derived from the King III Code of Corporate Governance. The assurance providers included the Portfolio Committee, the Public Accounts Committee and the National Assembly. The AG assesses the Portfolio Committee to ascertain its effectiveness on its oversight function in holding the department accountable.

The Model included three levels of assurance: management, oversight and independent assurance. The Portfolio Committee was grouped under the independent group of assurance providers. AGSA explained that this exercise would ensure that effective oversight, governance and accountability was carried out. After the Portfolio Committee is assessed on its oversight, AGSA shares the findings with the Committee Chairperson.

Some Members were not happy about Parliament being assessed by a Chapter 9 institution. Some even suggested the Auditor General was overstepping its mandate as this created an impression that Parliament should account to the AG. Members asked where the AG got the mandate to do this. The AG accounts to the Standing Committee on the Auditor General and to Parliament at large - not the other way around. If the AG based on its sampling assessed that Parliament did not execute its oversight role effectively – what would the recourse for Parliament be? Members said that the 21 question assessment should include a question on the availability of resources. Sometimes Committees were not able to carry out their oversight function over departments due to the lack of resources – was this factored in?

The Department of Transport (DoT) presented its responses to the public hearings on the RABS Bill:
- DoT agreed the current claim process is too cumbersome and takes too long to conclude. It stated that the claim process in terms of the Bill will be less cumbersome and quicker. Fault need not be proven and the apportionment of fault does not apply. Benefits are defined and paid incrementally. Litigation will be less.
- DoT agreed that claimants struggle to access RAF offices. Despite RAF having extended its footprint substantially in recent years, access is still a challenge for many. The national network of contracted healthcare service providers provided for in the Bill will add to the existing RAF footprint.
- DoT in response to the complaint that the amounts claimable should be specified in the Bill, indicated that the formulas that determine how a benefit is calculated is specified in the schedule to the Bill. The benefit design results in different levels of benefits depending on a number of variables, consequently no fixed amount applies to all claims. Lastly, it is not practical to “hardcode” amounts in an Act.
- DoT in response to the comment that the Bill must cap the percentage of fees that may be charged by an attorney, said the Contingency Fees Act already contains the cap. A 25% cap applies, calculated on the capital damages award. Apart from the fee, disbursements are also recovered from the capital award and the party-and-party costs. Neither the RAF nor the future RABS Administrator has jurisdiction to deal with overreaching.
- On the comment that the law society must assist in tracing and dealing with attorneys that abscond with the claimant’s funds, DoT said that this is a matter for the police. Law societies deal with the disciplinary aspects.
- Many commented that fraud and corruption in the RAF administration should rather be addressed then there would not be need for the new DoT replied that fraud and corruption is a reality in the RAF operations. It is recognized as one of the major risks of the organization. However, that is not the only challenge.
- On how government would afford RABS as the fuel levy is already high, DoT responded that apart from the fuel levy the scheme will be funded from the general fiscus. If the RAF dispensation is not replaced continued fuel levy increases will be required.

Members expected the Department to present a full report of its responses from the beginning until the last day of the public hearings. The Committee requested DoT compile a comprehensive report for scrutiny.

Meeting report

The Chairperson requested that AGSA present. Although, AGSA was reluctant to do so in the presence of the Department, it did continue.

Auditor General South Africa on the Combined Assurance Model
Mr Eugene Zungu, AGSA National Leader: Audit Services, outlined the constitutional mandate that as the supreme audit institution (SAI) exists to strengthen the country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence. The AGSA performs its functions without fear and favour. Section 188 of the Constitution outlines the functions of the AGSA, it audits all three spheres of government as well as any institution funded from the Revenue Fund and other institutions funded from public money. AGSA has a further discretion to conduct special audits on the entities that must be audited. When AGSA makes use of its discretion it must be according to the law.

AGSA adopted the Combined Assurance Model based on King Three; it was adopted to look into the extent of governance in departments and government entities. If you wish to achieve accountability in any organization it is important to plan properly and ensure that targets are well defined. Secondly, one looks at the robustness of internal controls and supervision scrutinizing if the entity is implementing all the basics. Thirdly, AGSA ensures that there is a monitoring system in place and effective internal controls are being implemented.

The Combined Assurance Model was adopted seven years ago during Terence Nombembe's tenure and AGSA has been implementing it ever since. There are three levels of assurance; the first level of assurance refers to management such as senior manager, accounting officers and the executive authority. These are individuals that live and breathe entity and have to provide the highest level of assurance because they are playing a bigger role to ensure that the accountability cycle continues. However, these people are not entirely independent because they are invested in the entity.

The second level refers the oversight function such as monitoring institutions, internal audit and audit committees. They pay a much closer look into the department – these institutions or individuals are slightly removed from the entity but they play specific roles and provide a sense of comfort to anyone that is a stakeholder of the entity.

The third level of assurance refers to independent assurance such as the Portfolio Committee, the Public Accounts Committee and the National Assembly – these institutions are not well vested into the entity and play a role of independent assurance.

Therefore, it is through the Combined Assurance Model that AGSA deemed it necessary that institutions that exercise oversight over the department should be “audited” to evaluate and assess the effectiveness of its oversight function. After the Portfolio Committee has been assessed, there is an opportunity to share the findings with the Committee Chairperson on whether the Committee effectively carries out its oversight function over the department to ensure effective governance and accountability.

Mr Zungu noted that when invited there was an expectation by the Committee that AGSA would talk about the 2017/18 audit outcomes but these will be covered in October during the BRRR sessions. During this time the 2016/17 audit outcomes of PRASA would also be tabled.

Discussion
Mr C Hunsinger (DA) said that he understood the engagement with AGSA would include a discussion about Treasury’s engagement on the RABS Bill.

The Chairperson replied that the Committee had agreed that it would deal with Treasury’s input as a submission.

Mr Hunsinger said to AGSA that it did not make sense that the Committee is the third level of assurance and AGSA assesses all the assurance providers. He asked where the AG gets the mandate to position the Committee on the third level of assurance providers, and where the model was derived from.

Mr T Mpanza (ANC) said that previously there was a debate about whether the AG had the mandate to assess the Portfolio Committee, but that discussion never came to finality. He wanted to know the difference between senior management and accounting officers as stipulated on Level One of assurance providers.

Mr L Ramatlakane (ANC) said in the first discussion about assurance, the AG was not very clear why it seems worried about Parliament’s work, particularly the oversight function, because it is very clear that the Model was designed to address the AG’s concerns about Parliament’s work, but those concerns were never shared by the AG. He suggested that those concerns should have been shared first, particularly the role of the Portfolio Committees in holding the departments accountable in respect to corruption. Secondly, when the AG made its lengthy presentation about its constitutional mandate it seems that it gravitates towards a defence mechanism to explain why it is assessing Parliament’s work. He found this worrisome. Level 3 of the Model did not include only the Portfolio Committee but also Parliament as the third tier level of assurance provider. The AG in its report can outline if Parliament has failed to execute its accountability role – and when such a report is issued stating that Parliament has failed; would that mean that Parliament has failed holistically to hold departments and entities accountable thereby implying that the only trusted institution in South Africa to hold departments accountability is AGSA. If that happens, what will the recourse for Parliament? If there is a disagreement, would this then have to be taken to a review? AGSA audits are based on sampling that may lead to that conclusion. The main concern is the implication of this model. AGSA must remember that Parliament is the supreme body that makes law in the country and the AG is a Chapter 9 institution with a term as prescribed in the Constitution. He emphasized that he was deeply troubled by this. Perhaps the Portfolio Committee should be privy to the 21 question assessment. For effective oversight function, the starting point would include budget availability for the Committee to be able to execute its oversight function. Resources may not be adequate to carry out some of its work effectively, particularly the function of oversight.

Mr M Sibande (ANC) said this has been discussed before and he was concerned. AGSA should perhaps convince Members about the difference between a Chapter 9 institution and Parliament which is elected by the people. So are we accounting to a Chapter 9 institution through this exercise?

Mr Mpanza said that the Auditor General is overstepping its mandate because if the AG had the powers it says it has, why is there a parliamentary oversight committee over AGSA? Would it also assess the Standing Committee on Auditor General, and how would the AG do that? It accounts to the Standing Committee itself.

Mr M De Freitas (DA) said that he thought AGSA was here to comment on the Road Accident Benefit Scheme (RABS) Bill by adding more meat on the RABS endeavour.

The Chairperson said as legislators the key function is to deal with legislation. She had decided to accommodate AGSA, but the Committee needed to continue with its core function, which at the moment was the RABS Bill. The Portfolio Committee is on the third level of assurance providers. For the past five years, she has been hearing one audit outcome which is always on the cards from AG. Is it the Portfolio Committees' fault that departments do not implement the audit recommendations of the AG?

Mr Zungu replied that the AG was guided by policy such as the oversight model of the National Guidelines, as well as Treasury guidelines. And it is within that context that work of the Portfolio Committees is evaluated. When he spoke about the AGSA mandate, the understanding was that it is not a defence mechanism but rather outlines why the AGSA carried its functions in the manner that it did. It is deemed important that the mandate of the AG is understood.

On the difference between senior management and accounting officers, the Public Finance Management Amendment Act (PFMA) has specific requirements for each of these roles. Hence, they are also separated in the model.

AGSA is driven to do this because it is of that view that to foster improvement of the PFMA in the public sector, various roleplayers must play their part. Historical audit outcomes on departments have indeed not been great. We know that the AG has a part to play, but there are also all these other role players that must play their part. This is the model designed by the AG was informed by the work that was done through the King III Code of Corporate Governance. The Portfolio Committee has an important role to play.

On inadequate resources, if the AG evaluates or assesses that there were insufficient resources available for the Committee to execute its oversight function that would be outlined very clearly on the report.

Mr Polani Sokombela, Business Executive: AGSA said the AG is not looking at whether Parliament should be accountable to the AG per se. The approach is that the mandate of the AG be realised. Parliament is a key player but it is not necessarily implying that Parliament would account to AGSA. The reason the Portfolio Committee is placed on the third level of assurance providers is because it is not directly involved in these entities. What AGSA looks at is whether the right questions are asked, the oversight function is effective, etc. We need to find a way to work together to achieve positive audit outcomes in various departments and entities – this is where the AGSA is coming from.

Mr Solly Sekgooa, Corporate Executive: AGSA said the outcome of the assessment is to not issue a report but it is strictly limited to financial governance, looking at the effectiveness of the assurance providers in that respect. There will be no overall report issued. As for Standing Committee on the Auditor General, that Committee will continue holding the Auditor General accountable – that will not change.

Ms S Xego (ANC) said she was confused about the timing of the presentation because the Committee is currently in the middle of the RABS Bill. She asked if AGSA was invited.

The Chairperson said that the Office of the Auditor General requested the meeting with the Chairperson but she felt that it would be more productive to discuss this with the Members as whole. Therefore, it was not the Auditor General’s fault.

Department of Transport on the RABS Bill – responses to the public hearing comments
Advocate Johannes Makgotho, DoT Chief Director: Road Regulation, went through the Department’s responses to the RABS public hearing comments. Some of the responses he highlighted were:

The Department of Transport (DoT) presented its responses to the public hearings on the RABS Bill:
- DoT agreed the current claim process is too cumbersome and takes too long to conclude. It stated that the claim process in terms of the Bill will be less cumbersome and quicker. Fault need not be proven and the apportionment of fault does not apply. Benefits are defined and paid incrementally. Litigation will be less.
- DoT agreed that claimants struggle to access RAF offices. Despite RAF having extended its footprint substantially in recent years, access is still a challenge for many. The national network of contracted healthcare service providers provided for in the Bill will add to the existing RAF footprint.
- DoT in response to the complaint that the amounts claimable should be specified in the Bill, indicated that the formulas that determine how a benefit is calculated is specified in the schedule to the Bill. The benefit design results in different levels of benefits depending on a number of variables, consequently no fixed amount applies to all claims. Lastly, it is not practical to “hardcode” amounts in an Act.
- DoT in response to the comment that the Bill must cap the percentage of fees that may be charged by an attorney, said the Contingency Fees Act already contains the cap. A 25% cap applies, calculated on the capital damages award. Apart from the fee, disbursements are also recovered from the capital award and the party-and-party costs. Neither the RAF nor the future RABS Administrator has jurisdiction to deal with overreaching.
- On the comment that the law society must assist in tracing and dealing with attorneys that abscond with the claimant’s funds, DoT said that this is a matter for the police. Law societies deal with the disciplinary aspects.
- Many commented that fraud and corruption in the RAF administration should rather be addressed then there would not be need for the new DoT replied that fraud and corruption is a reality in the RAF operations. It is recognized as one of the major risks of the organization. However, that is not the only challenge.
- On how government would afford RABS as the fuel levy is already high, DoT responded that apart from the fuel levy the scheme will be funded from the general fiscus. If the RAF dispensation is not replaced continued fuel levy increases will be required.

Discussion
The Chairperson stated that Members did not have the DoT response document.

Ms Xego referred to point 18 about the no-fault system resulting in the increase of accidents and more claims, saying this would be seen as an advantage to some people of course. She said that the driver may be wrong, but if the driver was the breadwinner at home, the Bill extends the benefit to the driver's dependents which is not an immoral thing to do. On doing away with lump sum payments, this was an advantage to the scheme itself because you have the Road Accident Fund that has always been bankrupt. When you pay someone in instalments that avoids a situation like that.

Mr N Seabi (ANC) asked the department to expand its response on whether government can afford RABS when the fuel levy was already high.

Mr Ramatlakane said that he thought the Department would respond to everything that has been submitted by the different stakeholders as it has not yet responded to those comments. He asked when the Committee can have a comprehensive response to the public comments from day one up until the last day of the public hearings. If Members were to engage with what has been presented today, it would be bits and pieces – a full comprehensive response should be given to the Committee. The Committee would have not have an impression based on what has been presented today. When would the Committee have a full comprehensive report of responses?

Adv Makgotho replied that on 6 June DOT provided a 44 page response which forms part of the responses. It even went as far as making references to jurisdictions outside the country such as Namibia. On the process unfolding today, DoT was not effectively guided by the Secretariat on what to prepare. With regards to the public participation, DoT was only offering assistance to the Committee and as a result it had put together the thematic report presented today.

DoT Acting Director General, Chris Hlabisa, said that the Department does not have a comprehensive report here as requested by Mr Ramatlakane; but it will put it together and that will include what has been presented today and furnished to the Committee. DoT will ensure that this document is compiled and provided to the Committee this afternoon.

Ms Valerie Carelse, Committee Secretary, said that the agenda was clear that the Department was due to respond to the public hearings and participation. Today's document was also submitted late

The Chairperson remarked that more than anything the concern from Members was that the document was received too late and limited time was granted for preparation.

Mr Sibande requested that perhaps the Committee deliberate on the fuel levy. He wanted to know how the Bill was going to protect the people. The biggest concern were the fees charged by the lawyers – they are too much. In addition, the pace at which the RAF dealt with victims was not as anticipated. Therefore, it created the wrong image and that may impact on RABS as well. Lastly, the investigation of powers needs to be elaborated by the Department.

The Chairperson indicated that Members needed to indicate if they wanted to continue with the meeting as there was a sense of discontinuity.

Mr Ramatlakane said that the Committee may continue and speak about general themes, concerns about specific issues, but a full and comprehensive report was needed for scrutiny by the Committee. Therefore, the Department should be released to go and prepare that.

Mr Mpanza supported Mr Ramatlakane’s view as did both Mr De Freitas and Mr Hunsinger.

The Acting DG said that the DoT welcomed the Committee’s view and it would do as instructed.

The Chairperson declared 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: