Public Audit Bill: deliberations

Public Audit Function

23 September 2003
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Meeting report

AD HOC COMMITTEE ON AUDITING FUNCTION

AD HOC COMMITTEE ON AUDITING FUNCTION
23 September 2003
PUBLIC AUDIT BILL: DELIBERATIONS

Chairperson:
Mr V Smith (ANC)

Documents handed out
Proposed changes to the Public Audit Bill: by Dr G Woods (IFP) (email
info@pmg.org.za for document)
Draft Public Audit Bill - working draft as of 19 September 2003
Public Audit Bill - draft of 23 September 2003
Opinion by Rose-Innes: Functions of Audit Commission In Relation to Auditor General

SUMMARY
The Committee took the decision to make a case for the setting up of a special Parliamentary Committee to audit the Auditor General rather than having an Audit Commission. Dr Gavin Woods of the Inkatha Freedom Party was tasked with drafting the motivation to support the case for the establishment of this specialised Parliamentary Committee.

MINUTES
The Chair reported that he had consulted the Speaker on the matter of establishing an Standing Committee and that she had indicated that in principle there is nothing stopping the Committee from going that route. He pointed out as the ANC, it has been decided that the Bill is far too important to be rushed through and that it was critical to consult widely around this matter. He reported that the Speaker advised the Committee to consult the Chair of the Oversight and Accountability Ad Hoc Committee to ensure that there is concurrence in the process. He added that the Speaker had expressed dissatisfaction at the manner in which public audit mechanisms were currently structured and that there was a process to deal with this apparent deficiency. She therefore noted that the Committee's work would go along way in assisting this process.

Mr Tarr (ANC) noted that the Bill would in effect create a standing committee but that the Rules Committee is the only organ tasked, under Parliamentary rules, to establish such a structure. Therefore this Ad Hoc Committee would be usurping the role of another Committee.

Dr. Woods explained that the Rules Committee had been moving towards the direction of a specialised parliamentary oversight mechanism and that the only outstanding question is whether the Committee desires the structure to be separate from others that deal with Chapter 9 institutions or not. He ventured that the proper way to go was to create a separate structure to deal with the audit of Chapter 9 institutions. He noted that the Committee has a powerful argument in favour of the creation of such a structure and that the Office of the Auditor General was so fundamental as to be taken as the very cornerstone of accountability.

The Chair said that the Speaker was particularly concerned with the possibility of an overlap between these structures.

Mr Bell agreed with Dr. Woods and noted that it would not be terribly difficult to create another commission that would overlap the Auditor General's work. He lamented that most Chapter 9 institutions had performed dismally in the implementation of the Public Finance Management Act (PFMA) mandate and that such an overlap was necessary to deal with this persistent malaise.

Dr. Woods said that there was a need to craft a persuasive argument to convince the House to agree to the creation of such an institution in order to strengthen accountability on the part of Chapter 9 institutions. The Chair agreed that it would be necessary to motivate the need for the creation of such an institution otherwise it would be difficult to convince the House to give that special dispensation.

The Committee then tasked Dr. Woods to come up with the first draft, which members would approve for tabling in Parliament.

Mr Beukman (NNP) pointed out that it seems the Committee is going to suggest to the House that this Audit Commission should be ranked higher in hierarchy than other Committees of the House.

Dr. Woods objected to this characterisation and clarified that all the Committee would be saying is that the function of auditing is far more technical and therefore specialised to be entrusted to the ordinary parliamentary oversight mechanisms. He said that such a task would require a highly specialised unit to be able to effective deliver on its mandate and hence the necessity for an Audit Commission.

Deliberations on the Bill
The Committee went over the latest amendments of the Bill as dated 23 September.

Mr P Gerber (ANC) pointed out that the Preamble differs significantly from the constitutional provision and queried the reference to external and not internal auditing functions.

Dr. Woods (IFP) agreed with Mr Gerber and advised that it is important to achieve consistency with the Constitution. He asked the Auditor General to differentiate between external and internal audit functions.

Mr Steele (DA) also agreed with Mr Gerber that it is important to make a clear distinction between the external and internal audit functions.

Ms Lenzy, legal adviser, undertook to take another look at the provision with a view to addressing members' concerns.

Mr Bell (DA) noted that the Constitution had been written way back in 1998 before the PMFA came into operation and that the later provides for internal and external audits functions whilst the former does not. The Constitution should be upgraded to cover this new development.

Mr Mosaka (Office of the Auditor General) noted that the Auditor General had out-sourced the drafting of the Bill and that the drafters did not incorporate every provision in the Constitution.

Dr. Woods pointed out that Clause 2(c) must change in view of the changes that have been effected to Chapter 5.

The Chair suggested that all consequential amendments to Chapter 5 should be highlighted until such a time that agreement has been reached on the proposed establishment of the Audit Commission.

Mr Gerber said that the use of the term 'consulted' at the end of Clause 4 is inappropriate and that the same should be removed.

Mr Mosaka explained that the purpose of consulting with the Auditor General is to ensure that his Office is always kept updated on developments in law in order to carry out its functions more effectively.

Mr Gerber insisted that provision for consulting as used in the clause means nothing in view of the fact that any Member of Parliament could give a motion to change the law without necessarily consulting with the Office of the Auditor General.

Dr. Woods agreed with Mr Gerber that it is constitutionally futile to erect barriers in the manner Parliament wishes to amend any legislation.

Mr Gerber referred to Clause 5(a) and questioned the legitimacy of the limitation that is placed on the Auditor General in the performance of his duties.

The Chair said there had been an exhaustive argument regarding Clause 5(a) and that it was decided that the provision should remain so as to preserve the integrity of the Office of the Auditor General.

Mr Gerber pointed out that the term 'credible' in Clause 5(d) should be removed. The Chair agreed.

Mr Mosaka noted a typographical error in Clause 10.

Mr Bell (DA) noted that the term 'consulting' in Clause 13(1) should be removed as suggested earlier . The Committee agreed with the Chair directing the drafters to remove reference to such 'consulting' whenever it appeared in the Bill.

Dr. Woods reminded the Chair that the Committee had requested further details on the status of special accounts as specified in Clause 22.

The Chair said that the Committee would seek advice on Clause 22 and then decide on the way forward with regard to the status of special accounts.

Mr Bell referred to Clause 23(5) and asked the Auditor General to explore a more appropriate wording that would strengthens the clause.

Mr Woods inquired why Clause 23(1) gives the Treasury discretion and not the power to draw funds from an audited entity in order to pay the Auditor General for services rendered.

Mr Mosaka explained that the provincial treasuries had requested that they be given this discretion since the department's funds are under their control. The same power is provided for in the PMFA, which calls upon National Treasury to come to the Auditor General's rescue where this is absolutely necessary.

Mr Woods countered that the parliamentary vote has a rider that prohibits unauthorized expenditure and noted that therefore Treasury cannot divert funds set aside for a specific development activity to pay for the audit fees.

Mr Gerber faulted Clause 25(1) for not making provision for consultation, as is the case with the PMFA.

Mr Mosaka said that the Auditor General audits all government entities and so there was no need to provide for consultations.

Mr Bell agreed with Mr Gerber and pointed out that Clause 25(1) introduces a new concept that would open a can of worms.

Mr Tarr (ANC) observed that Clause 25(2) provides for consultations and therefore covers members' concerns.

Mr Gerber insisted that it was important to maintain consistency with the PMFA and that provision should be made for a once-off consultation.

Mr Gerber suggested a rider to Clause 28(3), which would require the Auditor General to endorse reports audited by external firms.

Mr Mosaka objected to this proposal and argued that such a requirement would be in conflict with the PMFA, which forbids the Auditor General from endorsing, or signing a report compiled by somebody else. He added that the PMFA has given responsibility to the executive authority to table such a report.

Mr Bell said that Clause 31(1) should be removed since it deals with consulting the Audit Commission, which has been disbanded. He asked if the Deputy Auditor General performs any other functions.

Mr Mosaka replied that in terms of the PMFA, the Auditor General is allowed to delegate his powers to whomsoever he decides.

Mr Bell suggested that in view of the extensive changes that have been effected to the Bill, it is advisable to publish the new version so as to update interested members of the public.

Mr Gerber agreed with Mr Bell's suggestion and noted that he sees no harm in having the Bill published once again.

The Chair raised an objection to this suggestion noting that the Bill as it stands is incomplete and that it would be misleading to publish such an incomplete piece of legislation.

Dr. Woods agreed with the Chair's ruling and noted that it is prudent to seek the direction of the House as to the level of public participation required so that when the final version is released, the Committee can take full responsibility for the Bill as the people's representatives.

In view of the progress on the amended version of the Bill and the extension on passing this Bill, the final two meetings of this parliamentary session were cancelled. However the Chair did ask members to fast-track the business of legislating the Bill so that it is published sooner rather than later. He asked the technical team to effect the suggested amendments so that the Committee is in possession of the amended version when Parliament resumes after the recess. He then adjourned the meeting.

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