In a virtual meeting, the Auditor-General of South Africa briefed the Standing Committee on the Auditor-General on its 2022/25 draft strategic plan and audit directives.
The Auditor-General’s six strategic goals included, firstly, the drive of a public sector culture-shift in which the AG would deploy focused programmes in the audit portfolio to build sustainable relationships with partners and leveraging their capabilities to drive collective impact.
The second strategic goal would provide unique insight to stakeholders through the Auditor-General's plans to develop and enhance audit services, products and delivery methods for greater effectiveness at generating insights that more readily drive and enable action by auditees and stakeholders. This would allow the institution to make better decisions on the economic acquisition of resources and the efficient and effective application thereof.
The third strategic goal looks to influence stakeholders to move from awareness to action and advocacy. The Auditor-General plans to move stakeholders from mere awareness of messaging to action and the advocacy thereof in a manner that drives a public sector culture-shift.
The fourth strategic goal looks to accelerate the roll-out of the MI process: the Auditor-General would implement the full provisions of its extended mandate across its entire client portfolio and ramp up towards a sustainable volume of high-quality MIs.
The fifth strategic goal looks to execute the Auditor-General’s mandate efficiently. The Auditor-General would, through this goal, unlock latent capacity in the existing resource base through disciplined prioritisation, coordination and sequencing of initiatives and activities.
The final strategic goal looks to sustain the AGSA’s operations. Here, the Auditor-General would make certain that the organisation is in a position of mindset and capability readiness to execute an integrated programme of driving a culture shift in targeted segments of the audit portfolio.
Members commended the work and efforts of the Auditor-General, and also for implementing the principles of the Broad-Based Black Economic Empowerment. The Committee indicated that the Auditor-General should maintain its drive for transformation.
Members asked what the current situation was concerning outstanding fees and how the Auditor-General planned to assist clients who could not pay these fees. Members indicated that on a regular basis the Committee was informed that recurring transgressions take place. Members then asked if the Auditor-General’s office had the capacity to ensure that previous audit outcomes were looked at when a new audit cycle commences. Members asked whether the Auditor-General had the capacity to carry out the financial implications and, if so, how the Committee could assist with implementing the plan.
Members queried how an institution could receive a clean audit if there were findings on its failures. They asked how the Auditor-General planned to deepen the audit of non-financial information on institutions with substandard performance.
Members asked what additional tools had been provided in terms of legislation concerning certificates of debt, and what report the Committee could receive in the terms of this legislation. South Africans had indicated their concerns on a lack of service delivery. The Auditor-General had the additional responsibility to ensure that the concerns of South Africans were addressed. The Auditor-General indicated that small entities tend to achieve clean audits whereas big entities tend not to. This should not be the case because big entities have the ability to employ more professional officials in the financial management sector.
Members asked the Auditor-General if it would be wise to look at value-for-money in institutions which were doing well in respect of financial management. The public would see that the Auditor-General was moving gradually beyond financial management to value-for-money auditing. There would be great revelations in this regard because it was found that during the pandemic, prices of items were inflated. The Committee requested that the Auditor-General send its strategy on how it will incorporate value-for-money auditing because it indicated that it was looking into it.
The Auditor-General indicated that local municipalities were regressing in performance. The Committee engaged other stakeholders about financial management and value-for-money auditing because it would provide South Africans with some comfort that local municipalities were improving.
Members also asked the Auditor-General what it planned to do to protect its auditors from intimidation which, however, had been on the decline due to the need to work on virtual platforms during the pandemic.
The Chairperson welcomed everyone to the Committee meeting and invited the Office of the Auditor-General of South Africa (AGSA) to commence with its briefing.
Ms Tsakani Maluleke, Auditor-General (AG), took the Committee through a detailed report on its draft strategic plan and audit directives.
AGSA: Strategy 2030
Ms Maluleke said that in the last couple of years, the AGSA’s operating environment had undergone significant shifts, not only as a result of the Covid-19 pandemic but also because of simultaneous developments in many aspects in the local and global scenes. These recent developments, viewed together with certain long-term trends and considerations, constituted a difficult environmental context.
Strategic Commitments of the AGSA for 2022-2025
She said that since she took custodianship of the institution, she spent a great deal of time working with the leadership and the entire organisation to take stock of the challenges and changes impacting on the audit work and to co-create a new strategy that will guide the AGSA in achieving a stronger correlation between what it does and the lived realities of ordinary South Africans. The strategy has incorporated the thoughts and voices of all staff as well as those of external stakeholders.
The long-standing 4V Strategy was underpinned by aspirations to see the public sector characterised by commitment to robust financial and performance management systems, preventative controls, oversight, accountability and ethical behaviour. Indeed, it was aimed at empowering the accounting officers and accounting authorities and has served well to establish the concepts of value-adding auditing and visibility for impact.
Visibility programmes were aimed at empowering and influencing a broad spectrum of selected stakeholders.
The AGSA’s Strategy 2030 builds on the successes and gains that we realised collectively through the implementation of the 4V Strategy. The elevation is found on two fundamental levels which includes:
1. A strategy until 2030 which is aimed at intensifying influencing and collaboration with all players in the accountability ecosystem in South Africa.
2. It recognises that even the most perfect financial and performance management systems will not be sufficient to advance the ambitions of our people for a decent life if we do not influence positive change in the accountability culture in the public service.
Ms Maluleke indicated that the 2022-25 strategic plan is the first three-year rolling plan based on the AGSA’s Strategy 2030. As the accounting officer of the AGSA, her role is to ensure that the organisation is fully aligned with the strategy outlined by the AGSA. Together with the capable leadership of the organisation, the AGSA will rigorously drive high levels of strategic alignment to ensure that it influenced the public sector to achieve high-impact outcomes.
The AG indicated that it had six strategic goals in its strategic plan which included the following:
Goal 1: Drive a public sector culture-shift
The AGSA will deploy focused culture-shift programmes of the audit portfolio, building sustainable relationships with partners and leveraging their capabilities to drive collective impact. The performance targets of Strategic Goal 1 includes:
• For 2022/23: The AGSA planned formulating and approving a public sector culture baseline and related culture-shift action plan.
• For 2023/24: The AGSA planned to achieve the execution of 80 to 100 percent of planned culture-shift programmes and report on the outcomes of the one year of implementation of the culture-shift programme.
• For 2024/25: The AG planned to execute 80 to 100 percent of planned culture-shift programmes, and report on the outcomes of the 2 year of implementation of the culture-shift programme.
Goal 2: Provide unique insight to stakeholders
The AG plans to develop and enhance audit services, products and delivery methods for greater effectiveness at generating insights that more readily drive and enable action by auditees and stakeholders, allowing them to make better decisions on the economic acquisition of resources and the efficient and effective application thereof.
The performance targets of Strategic Goal 2 includes the following:
• For 2022/23: Approving and implementing 80 to 100 percent of planned collaboration programmes with CSOs. Report on the outcome of the programme and develop and approve a plan for new insight based products offered by the AGSA to various stakeholders and implement 80 to 100 percent of the planned actions for 2022/23.
• For 2023/24: Implementing 80 to 100 percent of planned collaboration programme with CSOs. Report on the outcome of the programme and implement 80 to 100 percent of the planned actions for 2023/24 and demonstrate the use of new insights in the selected products or programme.
• For 2024/25: Implementing 80 to 100 percent of planned collaboration programme with CSOs and report on the outcome of the programme. Implement 80 to 100 percent of the planned actions for 2024/25 and demonstrate the use of new insights in the selected products or programmes
Goal 3: Influence stakeholders to move from awareness to action and advocacy
The AGSA plans to move stakeholders from mere awareness of our messaging to action and advocacy in a manner that drives a public sector culture shift. The performance targets for Strategic Goal 3 includes:
•For 2022/23: Establish stakeholder sentiment baseline rating and approve accountability ecosystem framework.
• Implement identified actions and achieved organisational objectives.
• For 2023/24: Implement 80 to 100 percent of the planned actions to improve or maintain the stakeholder rating, implement identified actions to improve the performance of the accountability ecosystem, and report on the performance thereof and achieved organisational objectives.
• For 2024/25: Achieve 5 to 8 percent improvement in stakeholder sentiment baseline rating and implement identified actions to improve the performance of the accountability ecosystem. Report on the performance thereof and achieved organisational objectives.
Goal 4: Accelerate the roll-out of the MI process
The AGSA will implement the full provisions of our extended mandate across the entire client portfolio and ramp up towards a sustainable volume of high-quality MIs. Performance targets for strategic goal four includes:
• For 2022/23: Achieve target of 40 to 60 percent auditees and achieve organisational objectives. Establish the baseline for the organisation’s productivity level and define measures for improvement. Establish the organisation’s audit efficiency baseline and define measures for improvement. Establish the organisation’s business efficiency baseline and define measures for improvement.
• For 2023/24: Achieve target of 70 to 80 percent auditees, achieve organisational objectives and 2 to 3 percent improvement against the baseline.
• For 2024/25: Achieve target of 90 to 100 percent of auditees and achieve organisational objectives. Achieve 4 to 6 percent improvement against the baseline.
Goal 5: Execute our mandate efficiently
The AGSA will unlock latent capacity in the existing resource base through disciplined prioritisation, coordination and sequencing of initiatives, activities, efficiency, and productivity gains. Performance targets for strategic goal five includes:
• For 2022/25: Achieve 1 to 4 percent of net surplus and 2 to 3 months forward cover for a sustainable margin.
• For 2022/23: Achieve a 50 to 55 percent staff engagement index.
• For 2023/24: Implement actions to improve or maintain the staff engagement index.
• For 2024/25: Achieve a 56 to 60 percent staff engagement index.
Goal 6: Ensure sustainability of our operations
The AGSA will make certain that the organisation is in a position of mindset and capability readiness to execute an integrated programme of driving a culture-shift in targeted segments of the audit portfolio. The performance targets for strategic goal six include:
• For 2022-25: 80 to 90 percent (C1, C1#, C2 and C3 rating).
• For 2022-23: Full implementation of the ISQM standard.
• For 2023-25: 80 to 90 percent adherence to identified processes.
The Committee was then taken through the draft budget of the AGSA (See attached for detail).
The Chairperson commended the AG on the presentation because it was very elaborate and useful for the Committee. The presentation highlighted the achievements and the compliance issues. He asked if the members had any comments or questions about the AG’s presentation.
Mr O Mathafa (ANC) commended the presentation and the work of the AG. He referred to the six strategic goals of the presentation. It gave the Committee a clear understanding of the environment of the AGSA regarding the previous audit outcomes of the various municipalities. On the goal that referred to shifting public sector culture due to the fact that public sector culture had been driven by non-accountability, wastage and poor service delivery: How would the AG turn this around and ensure that the strategic goals of enforcement are achieved? He based the question on the persistent challenges of audit fees outstanding. He asked what is the current situation and how will the AG plan to assist its clients who cannot pay the outstanding fees. The AG is planning increments of the outstanding audit fees and this comes with its own challenges. He based his second question on operations and said that when the AGSA is operating in the client’s space, a management letter is issued. When a new cycle of auditing takes place does the AG look at the existing management letter issued linking it with the new pre-determined objectives? On a regular basis the Committee is informed that recurring transgressions take place. He asked if the AGSA has the capacity to ensure that previous audit outcomes are looked at when the new audit cycle takes place. He then asked if the AGSA did not have the capacity if it would increase capacity which carries financial implications. He asked that if a plan is presented how the Committee could assist with implementation of the plan.
Ms Maluleke replied to the question on outstanding fees that the AGSA does assist its clients with ring fencing arrangements in order for clients to pay outstanding debts. The AGSA has considered the input of members on its ring fencing agreements in a previous engagement with the Committee. She said that three fundamental things need to happen to deal with affordability issues. Firstly, the AGSA needs to reduce its audit bills and, with the National Treasury, relook at the reporting litigation of the municipalities.
Secondly, the AGSA needs to accept that it cannot afford municipalities to resubmit information for audit outcomes. The AGSA cannot allow municipalities the license to do this because it just increases costs and serves no benefit to them. She highlighted that it could lead to the regression of audit outcomes in the initial period if the AGSA allows corrections to be made. Thirdly, the AGSA needs to work with municipalities to ensure they get the basics right and better manage their resources and the finances.
She replied to the question on operations: In previous years when an audit report was done, a management report is sent and the AGSA expects an audit action plan (AAP) by that audit team. The regulations by the Department of Cooperative Governance and Traditional Affairs requires that the particular MEC accept the AAP. It was found that some AAPs are not of good quality, or when they were of adequate quality they were not implemented. It is for this reason that there are recurring audit findings and the inconsistency of municipalities to respond to the AG’s findings.
The capacity in Mr Mathafa’s question must speak to the capacity of the municipalities. It is not only about new officials being appointed or new positions created. It is about ensuring that the correct staff are appointed, supervised, monitored and held accountable on deliverables. This will build a culture of following-up of audit findings and consistency in improving the internal control environment. To deal with with issues at the auditee level, it is insufficient to place the responsibility to follow-up on the AGSA. These issues involve the ability to follow-up on previous audit findings.
The Chairperson highlighted the responses of the AG and asked how the Committee could determine the performance of municipalities. It is found that the municipalities have control mechanisms through institutions that already exist. The municipalities have an audit committee in place and risk-related assessors, however there is still no accountability. It should assist to improve deficient areas of accountability.
Considering the AGSA’s six strategic goals, he asked how it enhanced the functionality at the institutional level of the auditee. Institutions do have the mechanisms of control in place and are paying for it. The Committee received a report on infrastructure from an institution whose performance was judged on its ability to provide a service that has numerous pitfalls and then it found that the audit finding failed to highlight this. The question that arises is how can such an institution be judged on such performance considering the failure of a key service on which the institution is based? The balance is between financial and non-financial information for audit.Another question that arises is how such institutions receive a clean audit if there is minimal findings on its failures. He asked the AGSA how it can deepen the audit of non-financial information on institutions with failed performances.
The AG said she agreed and that the AGSA had the opportunity to rethink how it deals with audits of performance information. A lot of the information that the Committee looks for are in the audit reports and in management reports. There is no reason why the AGSA cannot think about briefing the Committee responsible for oversight because it has the benefit of having the information that the AGSA has.
She suggested that the Committee might engage with the auditees on the substance of the APP. If the auditees provide the Committee with a useful and reliable APP, the AGSA will determine in its audit if this is the case.
She said that if the auditee’s performance objectives are not shaped in a way that facilitates delivery on its mandates, the AGSA would struggle to demonstrate that the public institution is delivering on those mandates.
If the AGSA can sort out the rhythm of engaging with the APPs, it will start winning. This is part of the AGSA’s work program.
On control mechanisms, she said that the AGSA has published a preventative controls guide which assists the Accounting Officer (AO) with strengthening all stakeholders in area of oversight. It allows AOs to focus on oversight measures. The AGSA looks for the opportunity to publish similar guides and elevate its usefulness and accessibility to individuals who have oversight responsibilities. The AG acknowledged the Committee’s comments on performance information.
Ms C Seoposengwe (ANC) said that the visibility of the AGSA has an impact on South Africans because people are beginning to understand what is happening in municipalities. She commented on the R186 billion that vanished in municipalities over the last ten years. The enforcement legislation available to the AG must ensure that individuals are held accountable.
She commended the AGSA for implementing principles of the BBBEE for three consecutive years. It is important for South Africa because when it comes to finances it has been predominantly a white environment. She expressed her happiness for the 30 percent of audit firms that are owned by black women. She then commended the AG for the level of transformation shown. The Committee appreciates the work of the AG because people have a better understanding of the financial terminology used by the AGSA.
The AG appreciated the comments made by Ms Seoposengwe. The AGSA would sustain its visibility and simplicity of its usage of language. The AG will not lose focus on driving transformation and demonstrating that principles of the BBBEE can be implemented in the context of clean administration and sustain its impact on its intended beneficiaries.
Mr N Singh (IFP) wanted to know about the additional “teeth” that has been given to the AG in terms of legislation with certificates of debt. He then asked what report the Committee could request in the terms of this legislation.
He highlighted the comments made by the Chairperson on audited institutions. South Africans have spoken on 1 November 2021, indicating that they are fed-up with a lack of service delivery, corruption and wasteful expenditure. The AG has the additional responsibility to ensure that the concerns of South Africans are addressed.
He said the AG indicated that small entities achieved a clean audit and big entities did not. This should not be the case because big entities have the ability to employ more professional officials in the financial management sector. He based his question on value-for-money audits and asked if it will not be better if the AG looks at value-for-money at institutions which were doing well in its financial management. The public will see that the AG is moving gradually away from financial management to value-for-money auditing. There would be great revelations in this regard because it was found that during the pandemic, prices of various items were inflated. He requested that the AG send its strategy on how it would incorporate value-for-money auditing because it indicated that it is looking at it. The AG indicated that local municipalities are regressing which, he said, was not good. He requested that the Committee engage with other stakeholders about financial management and value-for-money auditing because it will provide South Africans with some comfort that local municipalities are improving.
On the question of additional “teeth”, the AG said that the AGSA had a planned meeting with the Committee and SCOPA next week, which would address how the AGSA planned to implement its strategy regarding new audit cycles. The AGSA needs to assist AOs to understand how audits help them solve their problems and not see audits as a headache but rather embrace the process. AO would be able to see how audits could assist them with service delivery issues.
She said that the AG would heed the Committee’s call to provide a detailed program that illustrates the incremental shifts of value-for-money audits. She said that once an institution’s audit outcome was clean, the AGSA did not need to spend as much time auditing that institution. The AGSA could have fruitful engagements with institutions on its mandate.
The Chairperson said that these matters were important and a meeting had been scheduled where the Committee would deal with these issues. The Committee and AGSA needed to ensure that the Public Audit Act (PAA) amendments were implemented.
Ms S Kopane (DA) said that she had hope knowing that individuals were working hard to move South Africa forward as indicated by the AG’s presentation. She highlighted the overview by the deputy AG about intimidation. Over the years there have been cases of intimidation of AGSA officials being obstructed from performing their constitutional duties. She asked what the AG planned to do to protect its officials because such intimidation would affect their morale. There were cases in the Free State where officials were killed for doing their jobs.
She said that the pandemic had affected everyone and asked what impact it had on the oversight work of the AGSA. She then asked what contingency plans the AGSA had in place if the pandemic worsened.
On the protection of officials, the AG said that no criminal charges from its officials were received. The only case where an official was killed was three years ago. The AG is not complacent about this issue because working remotely for the last two years has reduced cases of intimidation against its officials. She said that the AG had three strategies in place to protect its officials. Firstly, the AGSA works closely with the SAPS in different provinces to highlight the risks and to ensure officials are protected. Secondly, it works closely with the leadership of the auditees to ensure that the physical spaces in which its officials work were appropriately secured. Thirdly, the AGSA trains its staff about how to keep themselves safe, to be alert, and to know how to respond if they identify threats.
On the impact of the Covid, she said that the pandemic conditions pushed its office because it has done more work than ever before. The office has been able to innovate and operate differently and collaborate virtually with auditees to share information about audits. The AG continues to learn on how to operate under the pandemic.
Mr Vonani Chauke, Deputy AG, added to the AG’s response about working remotely. He highlighted a section in the presentation on its investment which enabled officials to access relevant data remotely. The AGSA had data on an entire population instead of working on a sample basis with the auditee. The AG’s data analysts are able to access data on an entire population and the AGSA will focus on implementing it on the bigger auditees also. There will be a number of benefits if this strategy is applied across the entire audit population. One of the AG’s goals is to change the culture of sharing the correct insight. On value-for-money, he said that this technology for analysing data would enable the AGSA to do more with less, and share more information. When the pandemic ends, the AGSA would continue leveraging this technology because it will assist the institution to do more audits and provide the Committee, and other stakeholders, with deeper insights.
The Chairperson commended the AGSA for its strategy. He appreciated that the presentation showed a graphic representation of some auditees moving from being very bad to doing better – this could point to better work ethic in terms of financial capabilities. More can be done to improve the level of education and absorption into streams of local government, which might alert stakeholders of the required improvement of the standard of performance (SOP). It must still be determined if this will have a positive impact. The Committee wished for more active participation from citizens which ensure that the government is held accountable and encouraged to improve on its performance.
He indicated that the Committee had received the AG’s draft strategic plan and highlighted areas of concern. He said that the AG should make the necessary adjustments to the strategic plan and present it to the Committee at a later stage. The AGSA must gazette its SOP as required by the relevant regulations.
He had a discussion with the Minister of Finance on the permanent position of the Accountant General because it would enhance the observation of the SOP which are observed when conducting audits. This will allow a quick response from National Treasury when there are areas that need intervention from the AGSA. This would ensure that if the AGSA required intervention from other institutions the response time would be quicker so that the independence of the AG is not interfered with.
The Chairperson thanked everyone who was present for the meeting and for their contributions. The Committee would continue to work with the AGSA to ensure accountability and ethical conduct.
The meeting was adjourned.
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