High Level Panel recommendations on Auditor-General SA & Committee Report

Standing Committee on Auditor General

13 September 2018
Chairperson: Mr V Smith (ANC)
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Meeting Summary

High-Level Panel Report

The Speaker of the National Assembly referred the Report of the High Level Panel on the Assessment of Key Legislation and Acceleration of Fundamental Change (High Level Panel Report) to several committees, including the Standing Committee on the Auditor General. The committees are required to consider the findings and recommendations relevant to their mandates, and report to the National Assembly by 28 September.

The Committee noted that many of the recommendations highlighted in the High-Level Panel Report have been addressed in the Public Audit Amendment Bill that was passed by Parliament earlier in the year.

The Committee identified the following matters emanating from the High Level Panel Report, for further action:

-the absence of a mechanism to track and monitor matters referred by the AGSA to other institutions;

-the absence of annual reporting on the number of complaints investigated in the period under review, the outcome of the investigations, and matters referred to other bodies; and

-the appropriate resourcing/funding of Chapter 9 institutions.

The Chairperson said the items regarding financial capacity support; performance audits and the President signing the Amendment Bill being expedited should form part of the recommendations in its response to the High-Level Panel. The Committee approved the report subject to the changes made.

Meeting report

The Chairperson said there is only one agenda for the meeting. The committee staff will brief the meeting on the assessment report of key legislation and acceleration fundamental changes.

Mr N Singh (IFP) asked if the vacancy of the Deputy Auditor-General has been advertised and at what stage the Office of the Auditor-General (AGSA) is in filling the vacancy.

The Chairperson responded that the current term of the Deputy AG comes to an end in February 2019, and the AGSA will be responsible for conducting interviews to fill the vacancy. However, the responsibility to appoint an AG lies with Parliament.

Mr Singh asked if the AG can be reappointed.

The Chairperson responded in the affirmative.

Presentation on the High Level Report recommendations in relation to the Auditor-General

Mr Xolisile Mgxaji, Committee Content Adviser, reported that the High Level Panel made the following recommendations in relation to institutions established in terms of Chapter 9 of the Constitution (Chapter 9 institutions): that the findings and recommendations contained in the Report of the ad-hoc Committee on the Review of Chapter 9 and Associated Institutions (Asmal Report) should be expanded on with the objective of strengthening and ensuring the effectiveness and reach of Chapter 9 institutions; that additional regulating mechanisms should be introduced to the Chapter 9 institutions so as to ensure their independence, and the timeous appointment of the commissioners who serve on them; that, where necessary, the powers of Chapter 9 institutions be strengthened to ensure that their recommendations are taken seriously and are enforced, and that Parliament and government departments cooperate with them and that Chapter 9 institutions are adequately resourced.

In response to the recommendations made by the High Level Panel the Committee believes that the Public Audit Amendment Bill addresses the Asmal report’s recommendation that the legal mandate for the international work performed by the AGSA should be clarified. Clause 5(aA) proposes that the AG may provide audit and audit-related services commonly performed by an independent audit institution to an international association. It should be noted that the AGSA annually develops a five-year performance audit plan. It is approved by a specially-convened performance audit advisory committee which is an internal structure. The plan comprises focus areas around which multi-disciplinary teams integrate with regularity audit teams to provide a more comprehensive assessment through integrated audits.

Section 3(b) of the Public Audit Act, 2004, ensures the AG’s independence as it provides that the Auditor-General has full legal capacity, is independent and is subject only to the Constitution and the law, must be impartial, and must exercise the powers and perform the functions of the office without fear, favour or prejudice. The appointment of the AG is regulated through Section 6 of the Act. Section 6(1) stipulates that the Speaker must initiate the appointment process in the National Assembly (NA), and must call for a person to be recommended to the President for appointment as AG.

The amendments proposed in clause 4 of the Bill will empower the AG to take remedial action so as to ensure that wherever possible losses suffered by the State are recovered, and that certain suspected material irregularities are referred for investigation. These amendments will go a long way towards ensuring that the AGSA’s recommendations are implemented; this will ensure the strengthening of the powers of Chapter 9 institutions.

The Asmal Report found that in order to function independently and in order to exercise their duties without fear, Chapter 9 institutions must have some degree of financial independence. This should not be interpreted to mean that the institutions should decide on their own budgets. However, it should be Parliament, and not the Executive, that carries the responsibility to provide a reasonable amount of money to enable the institutions to fulfil their constitutional and legal mandates. In the case of the AGSA, section 36(1) of the Act provides that its funding comprises money earned as fees for audits or services performed by the AGSA in terms of the Act or any other legislation; and money appropriated by Parliament for the purposes of the AGSA. Section 36(1)(b) of the Act, which allows Parliament to appropriate funds for the purposes of the AGSA has never been invoked. Despite the challenges it has experienced as far as collecting audit fees, the AGSA has always depended on those fees to fund its operations. Outstanding audit fees have been identified as a threat to the AGSA’s financial sustainability and viability.

To summarise, the Committee identified the following matters emanating from the High Level Panel Report, for further action:

-the absence of a mechanism to track and monitor matters referred by the AGSA to other institutions;

-the absence of annual reporting on the number of complaints investigated in the period under review, the outcome of the investigations, and matters referred to other bodies; and

-the appropriate resourcing/funding of Chapter 9 institutions.

Mr Mbuyiselo Hlekiso, Committee Researcher, added that the Committee should add to their recommendations report that the audit performance units needs to be capacitated with human and financial capital. He said that the performance units of the Canadian Auditor-General has12 deputy auditor-generals under the performance units. He advised the Committee to conduct an oversight to the audit performance units to see to that they are well capacitated.

Discussion

Mr Singh said the audit performances should be improved by allocating proper funding, resources and human capital to the units. He suggested that this be added as part of the recommendations list.

Mr M Ntombela (ANC) suggested that the recommendations should also speak to the compliance to time-frames specific to recovery measures.

The Chairperson responded that recovery time-frames will be dealt with in the Public Audit Amendment Bill.

Mr Singh asked if the Public Audit Amendment Bill has been signed by the President.

The Chairperson responded that the Bill has not been enacted - it is awaiting the President to sign it.

Mr Singh suggested that it should be added to the report that both the National Council of Provinces and NA have accepted the Bill, and it is awaiting the President's signature.

Ms N khunou (ANC) said SCOPA suggested that when the AGSA submits its reports it should also present the audit performances of each department to the National Assembly.

The Chairperson responded that the AGSA does an annual report on the audit performance of all departments to the Chairperson’s Forum, therefore there is no need for the report to the made to the NA.

Mr Mgxaji recalled that the Committee had made a resolution that before the AG makes its annual press briefing, it should first brief the Committee on the outcomes of the audit performance.

The Chairperson responded that the Committee is not referring to the Committee report, but to the report that is made to the public. He would not recommend for the AG to make the annual presentation in the NA because it will be like taking up the role of the Speaker.

Ms Khunou said she was not aware that the AG presents its report to the Chairperson’s Forum. Her concern was for all the Chairperson’s of each Committee to be briefed on the audit performance report.

The Chairperson said a meeting was held with all Chapter 9 institutions on 12 September 2018 and a Task Team was set up to try and move the budget process to improve capacity. The feeling amongst some of the Chapter 9 institutions, especially the Gender Commission, is that it took Parliament 10 years to implement the recommendations of Asmal report whereas the institutions have been dealing with capacity problems, amongst other problems, for a long time. The Committee should not look into whether Parliament can enhance capacity for the Chapter 9 institutions, but rather it should recommend that the exercise to shifting of Institutions Supporting Democracy (ISD) Budgets to Parliament be expedited.

 

Ms Khunou said she is also concerned about municipalities and other organisations that are not paying their auditing fees to the AG. The non-payments cause a serious threat to the operations of the AGSA – the Committee should stress the importance of municipalities and departments paying their audit fees.

 

Ms Z Dlamini-Dubazana (ANC) said Ms Khunou has raised an important point, however matters relating to non-payments to the AG are covered by the Public Audit Amendment Bill. The AG meets with National Treasury annually to discuss the non-payment of auditing fees by organisations.

Mr Singh said Treasury should also try to assist the AGSA with financial resources in order for the latter to operate efficiently. He added in view of organisations not paying their audit fees Parliament should appropriate some resources to the office of the AG as a National Treasury contribution. 

Ms Dlamini-Dubazana said that paragraph 4.2 in the assessment report should highlight that half of the key matters highlighted by the Asmal Report are already dealt with in the Amendment Bill.

The Chairperson said the items regarding financial capacity support; performance audits and the President signing the Amendment Bill being expedited should form part of the recommendations.

The Chairperson said he was under the impression that the exercise to move the AG’s budget to Parliament would not only be for operational purposes but it would also cover the AG’s sustainability. He indicated that the Committee Secretary has noted all the amendments to the assessment report. The Committee Secretary will collate all the amendments and send the amended report to the Committee Members for approval – he asked that the Committee responds to the amended assessment report before 17:00pm, and if there are no responses then it can be accepted that the report is approved.

Ms Dlamini-Dambuzana said the Committee should add that it has noted that there have been overlapping between Commissions and Chapter 9 institutions. The Asmal Report mentioned the Gender Commission and Public Service Commission as though they are both Chapter 9 institutions, while it should be noted that these are two different Commissions with different roles and responsibilities.

Ms Khunou said the Committee should make it clear that it does not align itself with the recommendations of an amalgamation recommended in the Asmal Report.

Ms Singh moved for the adoption of the assessment report, subject to the amendments made by the Committee.

Ms Dlamini-Dambuzana seconded the move for adoption; subject to the amendments

The report was adopted with changes.

The meeting was adjourned.

 

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