Public Audit Bill: deliberations on Clause 21

Public Audit Function

17 November 2003
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Meeting report

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTOFORLIO COMMITTEE

AD HOC COMMITTEE ON AUDITING FUNCTION
18 November 2003
PUBLIC AUDIT BILL: DELIBERATIONS ON CLAUSE 21

Chairperson:
Mr V Smith (ANC)

Relevant Documents:
Draft Public Audit Bill
Draft Committee Report (not available)
Finalised Committee Report as of 25 November 2003 (see Appendix)

SUMMARY
The Committee met once again to attempt to conclude deliberations on the proposed Public Audit Bill. Two matters were dealt with: (1) the Committee Report on the Bill to be presented to the National Assembly on 26 November 2003, which had been drafted by both Dr Woods and the Chair; and (2) Clause 21, the only provision which was still incomplete. The Committee needed assurance that the Joint Standing Committee on Intelligence had oversight over all procurement going through the Special Defence Account, and not only intelligence and counter-intelligence-related matters. The Chair of the Joint Standing Committee on Intelligence appeared before the Committee to provide clarity. He was tasked to establish if it was viable to amend the Intelligence Services Control Act in order to extend the mandate of the JSCI to include oversight over all matters in the Special Defence Account.

MINUTES
Draft Committee Report on the Bill
The Chair presented the Committee with a draft Committee Report on the Bill, prepared by himself and Dr Gavin Woods. He stated that the report attempted to show how the proposed parliamentary oversight body should operate. The Bill had provided for its existence only by simply stating that it should be a structure implemented by the National Assembly, but the Committee had agreed to elaborate on it in the report, along with other issues which the Committee had discussed.

Various changes were proposed to the report by the committee members.

Mr M Tarr (ANC) mentioned there was a general complaint that Parliament had too many committees. He could not see how confining a committee to the Auditor General only, would produce a committee with a decent workload.

The Chair responded that the Bill states that the National Assembly must set up an appropriate structure. The Committee Report expressed merely the view of the Committee itself, and would not necessarily tie the National Assembly to the Committee's perspective, but it provided recommendations. He did not regard the matter as a crisis.

Dr G Woods (IFP) said the oversight body would probably meet only about four times a year. He suggested that the Rules Committee should be informed of that fact. If the Rules Committee chose not to set up an exclusive Committee, Dr Woods suggested that "second prize" would be for the Standing Committee on Public Accounts (SCOPA) to take on the mandate of oversight.

The Chair was certain that members from this Ad Hoc Committee would be part of the team tasked with setting up the oversight mechanism, and they would be able to suggest that, should the team decide against an exclusive committee, that the oversight of the Auditor General not be given to a Committee which already monitored other Chapter 9 institutions. He instructed the Committee Secretary to make these amendments to the Committee Report:
- in line 5, "urges" would be changed to "recommends".
- in the last sentence of paragraph 3, the words, "In addition" would be changed to "In this regard".
- the following sentence would read "the Committee also recommends that the new Rules Committee consider that the oversight mechanism's sole mandate is oversight over the Auditor General".

Clause 21 (previously Clause 22)
The Chair stated that the only outstanding matter was the clause on the mandate of the Joint Standing Committee on Intelligence (JSCI), and whether they provided oversight over the Special Defence Account (SDA). He asked for input from Parliament's Legal Services Office.

Ms Z Adhikari (Senior Legal Adviser) understood the problem to be that a situation could arise where some matters of financial administration, management and expenditure by the Department of Defence would not be subjected to proper reporting to Parliament. The question being asked was whether Clause 21 (previously Clause 22) covered all procurement going through the Special Defence Account, or whether only intelligence and counter-intelligence-related matters were covered by it.

The Legal Services Office had discovered that the concerns were valid, because in relation to matters of financial administration, only intelligence and counter-intelligence matters were actually covered by Clause 21. However, the Auditor General was obliged, in terms of other legislation, specifically the Auditor General Act 12 of 1995, and the Constitution, to report to SCOPA on all other matters of procurement. The Legal Services Office was therefore satisfied that Parliament, in the event of all matters of procurement, was included in the reporting structure.

Mr M Steele (ANC) asked if, in Clause 21(1)(b), there was still some ambiguity. He said that it appeared that acceptance of the legal opinion offered by Ms Adhikari would require amendments to Clause 21. This was especially since it appeared that the Auditor General had always had a different interpretation of the clause. He was taking all matters relating to the Special Defence Account to the President and the Minister of Finance, where discussions would occur on whether or not there would be omissions. It had been accepted that all matters relating to the Special Defence Account would go through the JSCI.

Dr Woods proposed an amendment to Clause 21(1)(b), so that the omission which existed, according to the legal opinion, would be accommodated. The proposed amendment would also remove any doubt from the Auditor General's mind as to which parliamentary body he should approach with the issue. Other considerations would of needs ensue, because there might be some insistence, should the Auditor General bring a matter before SCOPA, that the Standing Committee only deliberate the matter in camera.

The Chair was certain that matters of intelligence would not be brought before SCOPA. He found Dr Woods' reasoning to be problematic.

Mr B Bell (DA) stated that the Ad Hoc Committee had to ensure that if tender procedures in the procurement of goods had not been properly carried out, then somehow disclosure must be made.

Ms D Lenzie (Parliamentary Legal Adviser) stated it was not likely that "matters would fall through the cracks". The starting point was that Auditor-General was obliged to report to Parliament on matters of financial management, administration, and expenditure, and this was normally done through SCOPA. However, there were instances where legislation required that matters be excluded from SCOPA, and reported elsewhere. In terms of the Intelligence Services Control Act, those would be matters of intelligence and counter-intelligence, including the financial management of those matters.

She explained that if the current Clause 21 of the Bill was adopted as is, it would exclude the Auditor-General from reporting to SCOPA, matters that came under the special accounts. If procurement were to fall under the special account of any of the Services, then it would go to the Joint Standing Committee on Intelligence (JSCI). She was confident that all matters in the special account would go through the JSCI.

Mr Bell still felt that the provision was worded in such a manner, that it remained open to interpretation.

The Chair responded that reading the provision in conjunction with the other Acts, would reveal that all matters were covered. He understood that the Committee needed to be absolutely assured that the Clause was sufficiently worded, so that there would be no situation by which a transaction by the Executive would not be subject to the scrutiny of Parliament.

Ms Adhikari responded, once again, that the provision was sufficient. She further attempted to clarify the matter to the Committee by saying that the provision did not relate to reporting, and that it did not limit the reporting process. The provision related to a much earlier stage in preparing the report, where the Auditor General felt that certain matters could affect national interest, and that it might be necessary to exclude those matters, which would eventually be reported to Parliament, from the report. Because the JSCI was the correct committee to discuss sensitive intelligence issues with, that would be the parliamentary committee to consult with on whether or not something could be excluded from the report.

Mr Bell was concerned that the JSCI should be in no doubt as to the implications for them, of Clause 21. They should be clear on their responsibilities in terms of the SDA.

The Chair had no doubt that the JSCI understood their brief with regard to the SDA, because it had been enacted that intelligence reports should no longer go to SCOPA, but to the JSCI. However, what had been questionable, was whether there were members on that Committee who were competent enough to interpret the Auditor-General's financial data in the reports. However, that could not be legislated for. The different political parties represented on the Committee would have to ensure that they chose people for that Committee who were sufficiently qualified. He suggested that Mr Bell speak to the DA's representative on the JSCI, to get an understanding of their operations with regard to SDA matters.

Mr Bell responded that having spoken to a DA representative on the JSCI, he learnt that at the present time, they were not even being allowed to see the South African National Defence Force Budget.

The presence of the Chair of the JSCI, Dr S Cwele, was sought, in order to give further clarity to the Committee.

Dr S Cwele arrived, and was asked if the procurement of a weapon via the SDA, which would normally be disclosed to SCOPA, but which the Executive did not want to be disclosed to the general public as a matter of intelligence, and of national interest, would be reported to the JSCI. The Committee wanted to be assured that, even if the matter were not reported to SCOPA, it would be subjected to some form of parliamentary oversight.

Dr Cwele responded that the SDA was quite a broad account, covering many issues which were not necessarily intelligence issues. The JSCI entertained all SDA issues which pertained to intelligence. The JSCI had "unfettered access" to information regarding those issues. However, there were some issues which he defined as being "grey-line" issues, over which the JSCI did not have complete certainty. A case in point was outstanding matters regarding special projects in the Wouter Basson case, over which the JSCI had posed some questions. Having finalised an overall report which also included that particular matter, they were informed that had not been part of their mandate, even though they had been issued with information regarding the case, and had been involved in the matter for several years. Whether the acquisition of strategic defence weapons, which did not necessarily fall under intelligence, should be made public, was governed by Defence laws.

He continued that the Committee was attempting to determine how it would separate policing matters from intelligence matters. Their agreement with the Auditor-General with regard to the issue, was for the present time to concentrate specifically on intelligence matters. They had not applied their minds to what would happen to the broader issues.

Mr L Chiba (ANC) explained that the issue at hand was the disclosure of financial management information which were not deemed to be in the national interest. Would the JSCI examine that information?

Mr Bell asked how other matters not under intelligence, relating to procurement, where incorrect activities had occurred within those purchases, and which were not necessarily in the national interest to hide, would be handled with regard to oversight.

Although Mr Cwele was prepared to offer a preliminary view on the matter, he asked for the opportunity to do some consultation on the matter, and to re-address the Committee, either verbally, or in written form. He explained that the Auditor-General had freedom to audit any matter. No law existed which prevented him from making disclosure on any of those matters, unless they contained issues that were possibly of national interest. Should there be such considerations, the Auditor-General would consult with the Minister of Finance and the President. Should they decide that there were elements of national interest, then the matter could be reported to a relevant Committee which was entitled to that information. Mr Cwele continued that when a institution or department made themselves guilty of performing an incorrect act, they could not hide behind secrecy legislation, claiming national interest. He did not believe that the Auditor-General would merely accept a declaration of national interest, merely on somebody's "say-so".

The Chair referred to Clause 21(1)(b), which provided that the Chair "may consult" on what must be excluded, and which did not bind him to consulting as to whether to exclude the facts. Subclause 2 provided that Subclause 1 "must not prevent the disclosure of any audit finding". This provided for all matters to go before Parliament. The consultation was to determine whether the matter was sufficiently sensitive to remain behind closed doors, or if it could go into the public domain. He put Mr Bell's concern before Dr Cwele, as to whether the JSCI was capacitated to authoritatively interpret the Auditor-General's report. However, the Chair felt this was not the Auditor-General's problem, but the problem of Parliament.

On a point of correction, Ms Adhikarie pointed out that Clause 21(1)(b) provided that the Auditor-General "must consult", but that he "may exclude" after consulting.

Dr Woods sought assurance that matters of procurement coming under the SDA which did not go to the JSCI, would go to SCOPA. Additionally, he asked if SCOPA would be informed of an issue which the President regarded as too sensitive to be contained in a report. He wanted to know if there would be any matters which could come to the JSCI, for which the Committee might claim that it did not have the mandate to cover. Where would such matters go to?

Dr Cwele wanted to research which matters from the SDA would be excluded from the oversight of the JSCI, and in what forum those matters would be scrutinised.

Dr Woods proposed an amendment to the Intelligence Services Control Act, to expand the mandate of the JSCI to cover all issues under the SDA. Apart from that, the ability of the JSCI to handle issues of procurement also had to be addressed.

Dr Cwele responded that although the Committee did not have full capacity yet, they were building that capacity. Furthermore, capacity would again have to be built when the new parliament came into effect in 2004. However, he did not see the matter as a constraint.

Mr Tarr concurred with Dr Woods that the matter be addressed by an amendment to the Intelligence Services Control Act. He further suggested that the Committee should recommend Dr Woods' proposal in its Committee report.

Dr Woods asked if Clause 21(1)(b) actually expanded the mandate of the JSCI, and if this would mean that in future, the JSCI would be guided by two Acts of Parliament, or if the two Acts would be seen to be in conflict with each other.

Ms Adhikari explained that as the latter legislation, the provisions of the Public Audit Bill would take precedence over the Intelligence Services Control Act.

Ms Lenzie did not see any contradictions between the two Acts. The Public Audit Bill would be adding to the functions of the JSCI, which in essence were not far removed from the general functions of the JSCI.

Mr Mosaka (Office of the Auditor General)) informed the Committee that all matters pertaining to the SDA were being reported to SCOPA, unless they were matters of intelligence. Only those issues which, after consultation, the Auditor-General was convinced were intelligence matters, were excluded, and were taken to the JSCI.

Dr Cwele said that the JSCI limited themselves to matters of secrecy and intelligence. He continued that there were other laws, not necessarily initiated by the JSCI, which gave certain functions to the Committee. However, as ordinary members of the public, and not lawyers, they would prefer to be governed by as few laws as possible.

He promised to have more reliable information by noon of the following day.

The Chair asked him to consider, in his consultation, whether it was viable to amend the Intelligence Services Control Act, by extending the mandate of the JSCI to include everything in the SDA. He felt that option would be an adequate solution to the oversight dilemma.

The Chair asked if Mr W van Heerden would be able to address the Committee at their next sitting, with regard to the reporting of the Auditor General on the SDA, in order to give assurance to the Committee that all matters were subject to the parliamentary oversight process.

The Chair reminded the Committee that on 26 November, the Ad Hoc Committee would appear before the National Assembly to present their Committee Report and the Bill would be formally tabled.

The meeting was adjourned.

Appendix:
Report of the Ad Hoc Committee on Public Auditing Function, 25 November 2003:

The Ad Hoc Committee on Public Auditing Function was established by resolution of the House (see Minutes of Proceedings of National Assembly, 24 June 2003, p 700) and mandated to introduce a bill on the objects contained in a legislative proposal reviewing the public auditing function, which was submitted to the Speaker by the Audit Commission (see Announcements, Tabling and Committee Reports, 2 June 2003, p 518).

The Ad Hoc Committee wishes to submit a progress report as follows:

Prior notice of the introduction of the draft bill was given in the Government Gazette, No 25064, dated 5 June 2003, by this Parliament, and an explanatory summary of the draft bill was published in the same Gazette.

The Gazette also contained an invitation to interested persons and institutions to submit written representations on the draft legislation to the Secretary before 25 June 2003. The Committee duly considered the submissions and conducted public hearings thereafter.

In addition, the Committee consulted with the chairperson of the Joint Standing Committee on Intelligence (JSCI), the chairperson of the Portfolio Committee on Defence, the Auditor-General, the Speaker of the National Assembly, The Presidency, the National Department of Intelligence, the National Department of Defence, the South African Police Service and the National Treasury. In this regard, the Committee wishes to take this opportunity to thank those who willingly provided invaluable input.

The Committee has now approved the final draft of the bill, and will introduce the bill when it is ready for publication by publishing a final report and submitting a copy of the bill to the Speaker in terms of Rule 243.

In conclusion, we recommend that, upon introduction, Members be afforded an opportunity to debate the bill in the House.

Report to be considered

V G Smith
Chairperson

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