Public Audit Bill: deliberations

Public Audit Function

18 November 2003
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Meeting report

AD HOC COMMITTEE ON AUDITING FUNCTION
20 November 2003
PUBLIC AUDIT BILL: DELIBERATIONS

Chairperson:
Mr V Smith (ANC)

Relevant Documents:
Public Audit Bill [B1-2004]
Draft Public Audit Bill - from 24 November 2003
Legal Services Document (awaited)
Proposed Amendment to Clause 21 of Public Audit Bill by Dr Gavin Woods (see Appendix 1)
Committee Introductory Report on Public Auditing Function [final version only] (Appendix 2)

SUMMARY
The Committee had their final meeting on the draft Public Audit Bill, in preparation for the formal introduction of the Bill in the National Assembly on 26 November. They deliberated on the outstanding matter of Clause 21 dealing with Audit Reports on confidential, secret or classified accounts. The matter was finalised, with the Committee deciding to marry Dr Woods' proposed amendment with the current version of the Clause, excluding Subsection (1)(a) and (b). On search and seizure powers, the Chairperson informed the Committee that the ANC had changed its position and were now agreeing to grant these powers to the Auditor General. It was noted that at least eight governmental institutions had these powers and hence it would be unjustifiable to withhold them from the Auditor General. The Committee agreed to this and the clause will be re-introduced into the Bill.

MINUTES
The Chairperson recapped that Clause 21 was the only outstanding matter which the Committee needed to deliberate. He informed the Committee that after the previous sitting (18 November 2003), there had been intensive discussions amongst himself, Dr Woods, and the Office of the Auditor-General. Because the Public Audit Bill was not being introduced to Parliament by a Department, the Ad Hoc Committee would introduce it via the Committee's progress report, as a first reading. Therefore, they would make a short statement to the National Assembly on 26 November, to introduce the Bill.

Clause 21
The Chairperson reported there had been the suggestion for Clause 21(1)(b) that consultations should include the Auditor-General, the Minister of Finance, a line Cabinet Minister, and not the President. The reasoning behind this was that in all likelihood, the Cabinet Minister would consult the President, should s/he deem it necessary. He said that the ANC proposed the retention of consultations with the President, the Finance Minister, and the line Cabinet Minister, but that there be discussion on whether the President should be consulted. The ANC did not feel strongly for or against consultation with the President, but asked that the provision be retained for the present time.

Dr Woods (IFP) felt that the draft provision which the Office of the Auditor-General had drawn up, did not sufficiently capture all lessons learnt in the previous afternoon's informal discussion. Consequently, he had prepared a further draft, in addition to nine points which had been established in the previous day's meeting, against which he had tested his amended draft.

He said that while his amendment had only five lines, it contained everything which the Committee wanted in the Clause, and more. It restored the constitutional roles given to the various arms of Government and the Auditor General.

Dr Woods' amendment had been prepared against the backdrop of what had been learned in the discussion from Mr W van Heerden (Office of the Auditor General) on the previous afternoon, with regard to the inappropriateness of the JSCI as an oversight body. It also took into account the perceived reluctance of the JSCI to expand their mandate beyond intelligence matters.

Some arguments against which his amendment had been tested were:
(1) the Auditor General should ideally be relieved of all responsibility of discretion, and having to make decisions regarding omissions. The Auditor General had to audit and account to the National Assembly. He was an expert on matters of auditing, but whether he was an expert on national interest, was probably debatable.
(2) the provision places the onus on the Executive leaders of Government to consider matters of national interest, and also places the onus on them to request exclusion of matters. In addition, it was appropriate, given current practices. As had been explained many times to the Committee, the Auditor General audited, found facts and findings, and put them into reports. Incorrect processes and actions were included in these reports, which would eventually go through a consultation process. Dr Woods felt that the Auditor General should "stick to" that process. He argued that it was the responsibility of the Executive member of Cabinet to decide to consult the President.

Discussion

Mr B Bell (DA) felt that the two versions, though they had different formats, were very similar, and he was comfortable with both. However, he assumed that matters provided for under Clause 21 were the Security Services Special Account, the Secret Services Account, and the Special Defence Account. All other reports would go elsewhere.

Dr Woods responded that the issue was over money spent by the Defence Force on intelligence, which did not fall under any of the three accounts. Intelligence was now no longer part of the Special Defence Account. Inserting the three accounts might limit the range of things for which secrecy was sought. Dr Woods hoped that the use of the heading, "Audit reports on confidential, secret or classified accounts", would provide for a wider range of matters that could be termed as classified.

Ms K Mothoagae (ANC) questioned the fact that Dr Woods' amendment compelled the Auditor General to exclude, with the word, "will", as opposed to "may", and that he had removed the option for consultation with the President.

On removing the provision to consult with the President, Dr Woods explained that the amendment provided that the Auditor General entertain the request of the Executive, who gave a mandate to a particular Minister. Dr Woods felt it was unnecessary, after that, to consult with the President, since the Minister carried sufficient authority. He added that Ministers were responsible people, and they knew which issues were of national interest. If they felt a matter should go before the President, they would take it to him/her.

Mr B Nair (ANC) said that Clause 21(2) obligated the Auditor General to disclose unauthorised, irregular, fruitless and irregular expenditure. If it was in the national interest not to disclose that information, the Auditor General would, however, not be obliged to make disclosure. However, he was obliged in terms of the Public Finance Management Act (PFMA) to make disclosure. The two pieces of legislation seemed to be in conflict with each other.

The Chairperson felt that although the intention was there that the Auditor General must disclose, it was not sufficiently explicit in Dr Woods' amendment. Furthermore, where Dr Woods' amendment stated that the Auditor General "will" exclude specific findings, that appeared to be in conflict with the Constitution, which provides that the Auditor General is an independent institution, subject only to the Constitution and the law. It also states that no organ of state may interfere with the operations of the Auditor General. If the Bill were to provide that the Auditor General "will" exclude, that indicated he would have no choice, which made it appear that the Executive was interfering with the work of the Auditor General.

Dr Woods responded that the Auditor General was obliged, in terms of the PFMA, to do his normal audit, which was to report on any unauthorised, irregular, or fruitless and wasteful expenditure. According to his amendment, he would. If the Minister requested, in writing, that he remove a matter from the main report, and put it into a separate report, that separate report would still go to Parliament. Dr Woods would still like to see the secret report being brought to the Standing Committee on Public Accounts (SCOPA), although Parliament should decide how, and to what measure disclosure would be made to SCOPA.

On his use of the word "will", Dr Woods agreed that the Auditor General would exclude matters, but that he also would put it into a special and separate report, which would go to Parliament. He thought it unfair to expect the Auditor General to consult with various Executive members of Parliament, who might all differ on the matter at hand, and then to expect the Auditor General on the basis of that, to decide whether to exclude the matter or not. He foresaw complications later on, especially where it might emerge that the Auditor General had made a bad judgement call, with possible repercussions.

Although Mr D Gumede (ANC) agreed with Dr Woods' amendment, he was not clear how the Auditor General would decide 'national interest'. The term required a definition, in order to facilitate matters.

Dr Woods stated that the issue of national interest was always a controversial one. Many countries had exploited it, and used it to advantage. National interest seemed to be a very subjective thing, and there did not appear to be a specific definition for the term. The government of the day would make their own interpretation of national interest. If they got it wrong, they might eventually be removed by the voters. The Executive had to be trusted to interpret what was in the national interest. However, they had to respect the Constitution, and attempt to be as transparent as possible.

Mr P Mosaka (General Manager: Office of the Auditor General) explained that the current Clause 21 did specify those accounts already in existence. Even there, they had tried to capture other secret or classified accounts, and they had specified that those accounts must be established by an Act of Parliament. Therefore, they felt Clause 21(1) should be left as is, since it covered all other Acts. Dr Woods' amendment was too wide. Secondly, the spirit of the Constitution dictated that although the Auditor General would consult on matters, he must be relied upon to make a particular judgement. Either the Executive or the National Assembly would be able to hold him to account for the judgements which he had made. Dr Woods' amendment seemed to say that the Auditor General must report, whereas the Auditor General's amendment required that the Auditor General would state merely that he had limited the report. Since Dr Woods was proposing that sensitive information be submitted in a separate report, Mr Mosaka asked what then would be the need for the first one.

Mr W van Heerden (Legal Section: Office of the Auditor General) confirmed Dr Woods' statement that the Defence intelligence did not fall under any of the accounts mentioned in Clause 21(1). Because it was within the vote of the Department of Defence, it did not have a specific account. However, because the current version of Clause 21(1) mentioned "or any other confidential special account established by any other Act of Parliament", it did cover military intelligence.

In addition, the current version referred to "facts", which would be excluded after consultation, while Dr Woods' proposal mentioned "findings". A "finding" might be an opinion or observation, and he felt therefore that it would be harsh to limit a finding. Mr van Heerden suggested that because the two words meant different things, the Bill should stick to "facts".

Dr Woods agreed with Mr Mosaka that his amendment, if retained, should specify the names of accounts, with the additional words, "or any other confidential special account established by any other Act of Parliament".

On the discretion of the Auditor General, Dr Woods stated that the Auditor General was not all-knowledgeable. He should be knowledgeable, and have total judgement, on financial matters, and any other matters specified by the PFMA. However, he should not have judgement on matters of policy and national interest, especially with the definition of national interest being as amorphous as it was.

Lastly, he thought his amendment made it clear that nothing was excluded from the scrutiny of Parliament. Although it suggested that sensitive information be put into a separate report, there would be no non-disclosure.

The Chairperson invited suggestions from the Committee on how to go about wording Clause 21, in the light of what had been presented to the Committee.

Mr Tarr proposed that the current Clause 21(1) remain as is, and that Dr Woods' amendment be inserted after that. On the matter of consultation, he felt the decision on what should be excluded from reports, should come from the Executive.

The Chairperson proposed that Dr Woods' proposal should replace 21(1)(a) and (b). That would require certain grammatical changes to Dr Woods' proposal. In addition, he proposed changing the word "findings" to "facts". He further proposed that 21(2) remain, but that 21(3) be removed, as that point was covered. Although Dr Woods was of the opinion that the intention of 21(2) was covered in his amendment, it might be argued that it was only implied. He saw no harm in including the words, "Regardless of 21(1) above", the Auditor General must still report.

This proposal did not prescribe to the Executive that there must be consultation with the President. Such consultation would be done if the Executive member thought it prudent to do it. The Chairperson asked Mr van Heerden if it would prove problematic not to include the Minister of Finance in the consultation process, on the understanding that the line Ministry would consult with him.

Mr van Heerden said that consultation with the Minister of Finance was necessary, as the Secret Services Act (No. 56 of 1978) was administered by the Minister of Finance. He would be happy if "the Minister concerned" included the Minister of Finance.

The Chairperson proposed the use of the term "Ministers concerned".

The Chairperson requested that the Committee continue to consider the use of "facts" versus "findings", and that they liase telephonically with regard to its use in the Bill, to prevent the need for another meeting, only on that matter.

Mr van Heerden again pleaded with the Committee to use the term "facts", and not "findings". A finding was an audit opinion that had to be expressed anyhow, and did not influence national interest. However, the facts pertaining to the findings influenced national interest.

Search and seizure powers (previously Clause 16)
The Chairperson re-introduced the matter of the granting of search and seizure powers. Having consulted on the matter, the ANC had found that as many as eight governmental institutions, including the Medical Control Council, the Gender Commission, the Human Rights Commission, the National Prosecuting Authority, and the Department of Water Affairs), all had search and seizure powers. In the light of that, even though the ANC had been vehemently opposed to granting the powers to the Auditor General, their position had now changed. The Committee was in agreement that the Auditor General should be given powers of search and seizure, under the authority of a warrant from a magistrate or judge. The ANC would continue to consider whether there was a proliferation of the powers, and might motivate that those powers be rationalised in the future.

Dr Woods agreed that if many other bodies held search and seizure powers, then it would be unjustifiable to withhold them from the Auditor General. He asked if any research had been done into the powers that had been conferred. For example, he wanted to know how limited were the powers given to other bodies, and if they were allowed to exercise those powers with or without a warrant. He also wanted to have a constitutional opinion on the extent to which those invasive powers were being conferred.

The Chairperson responded that the ANC definitely planned to conduct the kind of research which Dr Woods mentioned.

Mr A Kameldien (Office of the Auditor General) was asked to reintroduce the deleted Clause 16, on search and seizure powers, into the Bill.

The Chairperson was sure that the finalised Draft Bill would be used as an initial introduction document to the House, on 26 November 2003. In January or February 2004, the Committee would return, have final deliberations on the Bill, and after that, formally take a recommendation to the House. He requested that the finalised draft be circulated to all the members before 26 November. The Draft Report of the Ad Hoc Committee would be read to the House on 26 November, as the Committee's progress report, which would simultaneously introduce the Bill to the House.

Committee Report on the Bill
Since the Committee Report was a progress report, and since a final report would eventually be produced, Dr Woods proposed that the Committee produce a one-page report, excluding the recommendations, which could later be introduced in the final report. At that stage, the Committee might have additional recommendations concerning any advice they might have for the National Assembly. The Rules Committee might appreciate the Committee offering their recommendations, having applied their minds to the subject. It seemed to him, in terms of sequence and timing, that such recommendations should be in the final report.

The Chairperson agreed with Dr Woods' recommendation, as did the rest of the Committee. The last sentence of the first page would be accordingly amended.

At this point, the Chairperson thanked the Committee members for the manner in which they had operated as a Committee. He was happy that he could report they were almost in total agreement on their subject matter. The Ad Hoc Committee would meet again in the new year.

Dr Woods expressed his appreciation to the Chairperson for the manner in which he had chaired the Committee. He had been very accommodating towards all the members, and that attitude had enabled the Committee to achieve a very good product.

The meeting was adjourned.

Appendix 1

PROPOSED AMENDMENT
Audit Reports on Confidential, Secret or Classified Accounts
21. On the written request of the Minister concerned, and on the basis of a matter of the national interest, the Auditor General will exclude specific findings from his audit report and submit these particular findings, together with the Minister's written request, in a separate and appropriately titled report to the National Assembly, in accordance with a process established by the National Assembly.

Appendix 2

Report of the Ad Hoc Committee on Public Auditing Function, dated 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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