Threats and intimidation against auditors during recent MFMA audits: AGSA briefing

Standing Committee on Auditor General

04 December 2019
Chairperson: Mr S Somyo (ANC)
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Meeting Summary

The Standing Committee met with the Auditor-General for a briefing on threats of intimidation made against auditing teams while auditing the Municipal Finance Management Act.

The Auditor-General had flagged the threats the year before. The briefing was taking place specifically to avoid reacting only when the incidents hit the headlines. The audit staff were being subjected to unacceptable working conditions. Seven labour disputes, mostly in the Eastern Cape, were flagged. Industrial action meant that the auditors were affected in that they were unable to complete the audit on time and it created some sort of safety risk for the auditors. It also meant that some audits could not be completed timeously and that impacted on the Annual Performance targets of the Auditor-General.

In addition, there had been eight instances of direct intimidation of staff. One was an act of attempted bribery by a Chief Financial Officer in KwaZulu-Natal and another was a serious threat at a Municipality in the Eastern Cape where the Auditor-General had previously raised various findings relating to irregularly awarded tenders which was currently the subject of a fraud and corruption case brought by the Hawks. The current situation related to a possible material irregularity with a R500 million contract. A newspaper article relating to a councillor who had been fatally shot had been placed in the office utilised by the audit team.

The Auditor-General thought that the Committee might wish to bring those individuals, from maybe three provinces, to appear before the Committee, flash the cameras in front of them and exercise Members’ responsibilities in terms of their oversight role.

Members asked if the South African Police Service had assisted the audit teams. Could the police provide bodyguards or ensure safe working spaces? Had any of the cases had been reported to SAPS and had charges been laid? What measures were in place to secure employees in the future? Could the Auditor-General be proactive in trying to secure the teams, such as doing the audit at another site? What could the Committee do to help to resolve the situation? Could the Auditor-General provide details about the individuals so that they could be called to account before the Committee?

Meeting report

Opening remarks
The Chairperson stated that the Auditor-General would be giving a report on incidences of intimidation, bribery and violence that had caused instability during the recent municipal audit process. In Nelson Mandela Bay, the audit team had to leave because they were afraid of the atmosphere of violence, especially when SMMEs stormed the supply chain management (SCM) unit at the Metro armed with guns and threatened the SCM officials. The Auditor-General ought to be allowed to operate in a harmonious environment where auditors felt free and independent to ensure the delivery of credible audit outcomes. After the briefing by the Auditor-General, the Committee would hold a short discussion on the issues.

The Chairperson apologised that Members were late in arriving for the meeting. He explained that the day was a very busy day as Members had to deal with approvals, which the Auditor-General would eventually be checking.

He was hopeful that between the Committee and the Auditor-General, a solution would be found to what was an unacceptable situation.

Briefing by the Auditor-General  
Mr Kimi Makwetu, Auditor-General, thanked the Chairperson for the opportunity. He had flagged the threats the year before but the threats had been coming for some time. He did not want a reaction only when the incidents hit the headlines. There were unusual things in the audit environment and he wanted to be proactive in those matters as his staff were being subjected to unacceptable working conditions. There had been a number of acts of intimidation against his staff members during the current year's audit cycle. The Nelson Mandela Bay incident had reached the headlines in a number of media outlets.
The AGSA was coming to an end of the municipal audits and the auditors had sent in reports of incidents. The AGSA was presenting a schedule of the most serious incidents to the Committee. There were always labour and other disputes. Industrial action meant that the auditors were affected in that they were unable to complete the audit on time and it created some sort of safety risk for the auditors. The situation was being flagged for the attention of the Committee as there would be some audits which could not be completed by the audit date at the end of November. The Committee would find that some of the targets in the Quarterly Performance Reports would not have been met because auditors had had to leave their work when incidents happened. Sometimes they could go back a day or two later but sometimes they had to make arrangements to do the audit elsewhere.
The AG presented a summary of seven strikes that had affected the audit process. One labour-related incident had occurred in Mpumalanga, two in KwaZulu-Natal (KZN) and four in the Eastern Cape.
In other incidents, the auditors were threatened by the staff. One of the issue was that the staff would lose their bonuses if the auditors made findings. At the Rand Water Office in Johannesburg, employees from Rand Water intimidated two AGSA employees working on audit findings and alleged that they were costing the employees their bonuses.

There were also cases where there had been a direct or veiled attempt to bribe the auditors. Auditors were required to report any attempts to bribe them.  In KZN, the CFO from Mpofana Local Municipality offered the
AGSA manager a bribe. That matter was escalated and a case opened with the South African Police Service (SAPS). At Victor Khanye Local Municipality in Mpumalanga, the Municipal Manager informed the audit team that they might be kidnapped due to audit findings on the SCM tenders.

The Nelson Mandela Bay Metropolitan Municipality had received in excess of R3 billion from 2010 to date for the purpose of building and maintaining a public bus transport system. From the inception of that grant, the AGSA had raised various findings relating to irregularly awarded tenders and money spent in contravention of the conditions of the grant. Recently, National Treasury wrote a letter to the Metro informing them that they intended recalling all of the funds paid to date (R3 billion), giving the Metro two weeks to respond. In that letter, the AGSA findings were referenced as a basis for the recall. The letter further referred to a forensic investigation commissioned by National Treasury where the report was issued three years ago but no action had been taken to implement the recommendations. The spending from the grant was currently the subject of a fraud and corruption case brought by the Hawks.

In the same Nelson Mandela Bay Metro, a contract for drain cleaning was awarded to a contractor in December 2018. He subsequently sub-contracted to certain SMMEs. That contract had been the subject of numerous media articles linking the killing/assassination of a number of SMME owners, as well as former councillors, to the tender. That contract was also the subject of a possible material irregularity which AGSA had handed over to the Investigations Business Unit for further guidance. However, a newspaper article was left at the office utilised by the audit team. The article related to a councillor that had been fatally shot. The intention was to threaten and intimidate the audit team.

The AG referred to four other instances of intimidation. He stated that law enforcement agencies were contacted and where there was evidence of a criminal action, a charge was laid.

The primary responsibility of AGSA was the safety of the staff. When it was not safe for the staff to go to the auditee, the auditee was invited to bring the books and information to AGSA where there was a safer environment. It was, however, not always the best way to work.

The Auditor-General was looking for a way to be proactive and to nip it in the bud as that environment had not been encountered before. However, as the AGSA delved deeper into issues following the expansion of the authority of the Auditor-General, one could expect more of the threats.
The Chairperson stated that Members had the information and invited questions and comments.

Mr Z Mlenzama (ANC) had a process issue. He asked if Members could only have questions of clarity.

The Chairperson replied that questions were for clarity and discussion.

Mr J de Villiers (DA) thanked the Auditor-General for his very clear presentation of the situation and said that it was the first time that he had heard of auditors having to work under such conditions. It was totally unacceptable as the effectiveness of the work of AGSA was being threatened and that impacted on accountability. It was important to take the threats seriously. He was aware that, in the Nelson Mandela Bay Municipality, there had been 10 or 12 assassinations related to the tender for drain cleaning that was supposed to have been shared with SMMEs in the area.

Mr de Villiers asked if SAPS had assisted them. Could SAPS provide bodyguards or ensure safe working spaces? The incident highlighted how important it was for the audit team to do the audit as there had to be something untoward going on for there to be such high levels of violence. It was important that the matter was addressed, and the audit conducted, so that the thugs were exposed.
Ms S van Schalk (ANC) agreed with her colleague that it was totally unacceptable that auditors from AGSA had to be subjected to such instances of intimidation and violence in their work. She asked if any of the cases had been reported and whether charges had been laid. What measures were in place to secure employees in the future? The Committee knew that there were areas that were red flagged. Could the Auditor-General be proactive in trying to secure the teams, such as doing the audit at another site? What did the Auditor-General want from the Committee? What could the Committee do to help to resolve the situation.
Mr Mlenzama suggested that the Auditor-General categorise the cases in terms of security risk and escalate the information to SAPS. Secondly, he suggested that the Committee, together with the Auditor-General, should have a broader consultation with South African Local Government Association (SALGA) and the Department of Cooperative Governance and the Department of Traditional Affairs (COGTA). He added that, by law, auditors did not and could not force their way into a company. If the institution refused to have its books audited, there was nothing an auditor could do.

Ms C Seoposengwe (ANC) added that the Committee should include security departments in the broader discussion.

The Auditor-General thought that the Committee would have asked who the culprits were. If he were a Member of the Committee, he might have thought that the Committee would want to deal with the matter directly to nip it in the bud. The consultative meeting was fine but that would not address the trouble makers directly. Would it not be better for the Committee to deal with the individuals and to bring those individuals from maybe three provinces to appear before the Committee, flash the cameras in front of them and exercise Members’ responsibilities in terms of the oversight role? That would act as a deterrent to others. That would bring them much closer to nipping those people who threatened that “people would be hijacked if they continued with their audit”. The people must be asked to explain what they meant when they made those statements. Those were people who thought that they could act with impunity.

Ms Alice Muller, Acting National Leader, AGSA, said that staff had been instructed to raise the red flag when they felt unsafe. It was difficult to put a crime to some things like questions and innuendos and therefore it was difficult to report these to the SAPS. But, nevertheless, those things made the audit team feel uncomfortable and even threatened.

Ms Muller informed the Committee that the AGSA engaged with the Head of Department in each province before the auditors began the audits in that province. The AGSA also required the AGSA Business Executive in the province to make contact with the Provincial Commissioner of SAPS. In addition, the head of the audit team always spoke to the local head of SAPS in the city or area where they were to be conducting an audit. Of the reported incidents, only two had resulted in charges being laid: the bribe offered by the CFO from Mpofana Local Municipality and the Nelson Mandela Bay Metro case.

Ms Muller stated that the AGSA did not send the team back to an environment until SAPS had done a risk assessment of the offices and the environment. SAPS also looked at security measures at guesthouses where the audit team was staying. Incidents of intimidating behaviour that could not be labelled criminal included employees asking the auditors what route they drove home. That made them unsettled in a volatile environment.

The Chairperson said that just after the adoption of the amendments to the Auditor-General Act, it had been expected that there would be a heightening of the levels of intimidation against those who might be able to expose corruption and bring people to book. As a result, AGSA now made arrangements with the security forces in the particular area where they were working. Secondly, Members were saying that the assessment of the risks might mean withdrawing the audit team from the offices of the auditee. Thirdly, in terms of the Standing Committee, it could look into inviting those who had been involved in incidents of intimidation or threats to a sitting in a form of a hearing, which would assist in preventing such occurrences and set an example to others who might have thought of doing something like that and also, there had to be criminal reporting.

The Chairperson agreed that parallel to that, the Committee should have the discussion with SALGA and the Department. He added that corruption thrives where those who were trying to do good were chased away.

He appreciated the work of the Auditor-General. In one of the first sittings in the new year, the Committee had agreed to identify those pockets of corrupt individuals and find ways of dealing with them. The Committee and the Auditor-General should commit to work together. He had noted the interest amongst Members. However, the Auditor-General had to explain certain terminology that was used in the audit reports. At times statements were taken to mean something else and that did not go down well with those being audited. AGSA should say exactly what it meant because some terms could be viewed as threatening.

Mr Makwetu asked if he could add another point. He informed the Committee that he had posted on the electronic environment, a Citizen’s Report written in very friendly language. It was around 20 pages in total and condensed the Auditor-General’s report into a relatively brief and easily digestible document.
He hoped many would gain access to it and make it available to the public. The public needed to be informed and to keep itself informed.

Mr de Villiers requested that the Committee resolve to liaise with the Auditor-General to get the information about the individuals so that they could be called to account before the Committee. He did not want that matter to fall by the wayside.

Ms van Schalkwyk suggested that the Committee should leave aside those who had been referred to the law enforcements agencies and maybe they should focus on those who had not been charged with a criminal offence.

Closing remarks
The Chairperson said the Committee Secretary would liaise with the Office of AGSA to get the names and details of those individuals. A meeting would be set up in the new year to deal with them. He also suggested that the Committee liaise with other relevant Portfolio Committees so that they could work together on tackling the scourge of corruption in the public service.

He thanked the Auditor-General and his team for the briefing and assured him that the matter would be addressed.

The meeting was adjourned.



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