AGSA briefing: Real-time disaster audit plan

Ad Hoc Joint Committee on Flood Disaster Relief and Recovery

25 May 2022
Chairperson: Mr J Nyambi (ANC, Mpumalanga) & Mr C Frolick (ANC)
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Meeting Summary


The Ad-Hoc Joint Committee on Flood Disaster Relief and Recovery, (National Assembly and National Council of Provinces) was briefed by the Auditor-General (AG) on the real-time disaster audit plan. The AG highlighted that they would be performing real-time audits in KwaZulu-Natal (KZN) and the Eastern Cape (EC) because of the floods in the two provinces.

As a response, the audit department had designed a series of real-time audits which they had already started. The aim of the real-time audits was to prevent and detect weaknesses in controls and report on findings within a short space of time. They aimed to report on their work in a way that enhanced transparency, accountability and governance. The key process in the audit process was prevention, detection and reporting. Also, the KZN Provincial Treasury had taken pre-award assessments of procurement processes. The AGSA would be looking at three spheres of government, national, provincial and local, in KZN and EC.

During the deliberation, Members of the Committee asked about the power to refer matters to the Hawks and the National Prosecuting Authority (NPA). They also had concerns about relaxations issued by the Treasury, the estimated cost of the real-time audits, the turnaround time periods, and the availability of staff to handle the real-time audits.

The AG assured Members that they had the staff to perform the task, and would ensure their regular work was not negatively impacted. Regarding the funding of the work, the AGSA would work based on Section 23 of the Audit Act, which was to charge the particular auditees affected. Also, the AG's Office was aiming to have a report by August 2022.

Members said they had concerns about the suspicious activities around the water tankers, whether there would be qualitative audits after a tender had been awarded, and if there would be a monthly report on issues relating to abuses in procurement.

The AG highlighted that the powers allowed them to refer matters to the Hawks, the Finance Intelligence Centre (FIC), the Special Investigating Unit (SIU), the National Prosecuting Authority (NPA), and more. Also, the KZN audit team working on the auditees would look into the matter of the tankering services. Regarding the implementation of the AGSA’s work after the money had been spent, the AG said that the best thing they could do was push for accounting officers to be responsible and responsive at this moment.

Meeting report

Auditor-General on Real-Time Disaster Audit Plan
Ms Tsakani Maluleke, Auditor-General (AG), said that she would provide clarity as to why she would be presenting on the audits departments’ work with regard to governments’ response to the flood disaster in KwaZulu-Natal (KZN) and the Eastern Cape (EC). As a result of the floods in the two provinces, government had declared a National State of Disaster. Government's response had been extended to cover the North West and Northern Cape, but the work of the audit department had been focused on the KZN and EC regions.

The response was based on the three phases announced by the President in April 2022. The phases covered the immediate humanitarian relief, the stabilisation and recovery efforts, and the reconstruction and rehabilitation efforts. Similar to the Covid-19 response, the President had asked the National Audit Office to be an oversight mechanism to ensure that the allocated resources were protected and used for the intended purposes. As a response, the Audit Department had designed a series of real-time audits, which they had already started.

As the supreme audit institution, the Auditor-General of South Africa (AGSA) provided independent assurance that public funds were appropriately accounted for. The AGSA audits and reports on three areas: the credibility of financial statements, the reliability and usefulness of performance information, and compliance with key laws and legislation regarding financial performance and management. As part of their work, they assess and comment on the state of internal controls across the auditees they engage with. AGSA sees their role as providing independent, timely and credible insight into how funds have been managed.

They aim to report on their work in a way that enhances transparency, accountability and governance. They were to provide independent assurance on how government operations were being managed. The AG did not run government operations. Also, they did not replace the role of the executive, the accounting officer or authority. They did not aim to stand in the way of government operations. AGSA was there to support the system through independent, timely and credible insight on whether the initiatives were being implemented in a way that was consistent with their design; benefits were reaching intended beneficiaries. They identify unnecessary duplication, fragmentation or inefficiency in the implementation of government programmes. AGSA's goal was to be responsive to the demands of the environment; shape its work so that its relevance continued to grow while operating within its mandate.

Accountability Ecosystem
The current environment required the AGSA to be agile and responsive to safeguard public funds. It could not do this alone. The AGSA was part of an accountability ecosystem, with different players. Those who run the government were responsible and key to accountability, and were elected and appointed to be stewards of public funds. The accounting officers, senior management and staff supported by internal auditors and audit committees were trusted with safeguarding and deploying resources to fulfil their intended purpose, ensuring that government programmes were run efficiently and cost-effectively.

The Executive, the Mayors and Ministers, were responsible for monitoring, supporting and supervising. Also, coordinating departments -- the Office of the Premier, Cooperative Governance and Treasury -- were responsible for monitoring and support. The Council, legislators and National Parliament were responsible for oversight. The ecosystem also included public bodies mandated to deal with investigations and enforce the law. An active citizenry that was fully engaged and invested, directly or indirectly, in the success of government, was central to the ecosystem

The creation of the ad hoc Committee was evidence that Parliament wanted to enhance its oversight activities so that they were timely and effective. The AGSA was always ready to work with the Committee to ensure that they gave effect to real-time oversight. All parties had to work together in a complementary manner and collaborate to build public trust by delivering benefits that accrue to citizens.

AGSA's role
In the current disaster, there was a concern by many across society that public funds should be protected -- that the response initiatives were well designed to respond to the needs, but were implemented appropriately. To respond to the key risks relating to procurement and contract management, the AG had shaped a series of real-time audits to respond to those risks. Also, the audit work would look at compliance with laws and regulations, as well as consider matters relating to value for money. The AG would look at whether goods and services were delivered at the right place, at the right time and with the right quality, and if the benefits reached the intended beneficiaries.

The real-time audit was an early audit that aimed at preventing and detecting weaknesses in controls and reporting on findings in a short space of time. It was done so as to ensure that the key parts of the accountability ecosystem were enabled to do their work. It would allow accounting officers to take corrective measures to protect resources to prevent further fraud or wastage and take corrective action so that programmes were rolled out as designed and benefits reached intended beneficiaries on time.

The executive would be able to use the real-time audit insights and assess how programmes were being implemented so that they could monitor effectively and act and support where required. Oversight was important because public bodies could act quickly and implement consequences and safeguard resources by giving effect to their mandates for investigations and law enforcement.

The audits and reports would be done in a short space of time. The accounting officers, accounting authorities and boards of public entities, would be provided with reports on a timely basis. The reports would also be shared with executives with coordinating responsibilities. Councils, Provincial Legislatures and Parliament would benefit from the audit reports, which would also be shared with other organs of state as provided for in the legislation.

If the oversight mechanisms did their part, the impact of the audit would be felt and effective by taking swift, consistent and effective steps to execute their duties. The lesson the AG had learnt from the real-time audits for Covid-19 was that success was possible when there was responsiveness and action on the part of accounting officers, and authorising and monitoring from the executive when there was swift and effective oversight that insisted on timely corrective action. Success depended on coordination and collaboration across various players.

Another lesson from Covid-19 was that there could be a real benefit when there was an active citizenry playing a constructive role in highlighting problems and advocating for swift action when there were leakages in the system. Lessons had also been learnt from other countries that had to deal with complex projects that ran across multiple agencies.

Audit process
The key process in the audit process was prevention, detection and reporting. Regarding prevention, the AG had leveraged its reach and the relationship they have with accounting officers/authorities to point out the risks in the environment, and the importance of maintaining controls and maintaining records. The accounting officers were often reminded of the value of using internal auditors to good effect. The AG had issued a number of letters to accounting officers at various entities of the state that they were auditing for the real-time audit. They had highlighted various controls, especially in the area of procurement and infrastructure spending.

The KZN Provincial Treasury had reiterated the same message as the AG, and had taken pre-award assessments of procurement processes. The KZN Provincial Treasury would be verifying compliance with the procurement regulations before they awarded contracts, especially for programmes related to goods and services, infrastructure and a value of more than R1 million. The AGSA would test controls and highlight the risks in a quicker time frame. The AGSA should not, and could not, replace the role of the accounting officers. They could not be an obstacle to reaching affected citizens, or stand in the way of a government programme being rolled out. The AGSA could advise, assess, give findings, and give recommendations. The role of the accounting officers remained the same because they were the stewards of public funds and over public institutions.

What AGSA would audit
The AGSA would be looking at three spheres of government: national, provincial and local government. The main focus was on the KZN and EC provinces. With regard to the Northern Cape and North West province, they had not been scoped in the real-time audit yet. The provinces would not be subjected to a real-time audit, but when there was expenditure through the provisional departments or municipalities in the two provinces, the AG would catch the section of the audit during the annual regularity audit.

The process of reprioritising budgets was underway in different institutions that must respond to the disaster. The AG had identified many institutions and was already working with the accounting officers about keeping on track with the reprioritisation of budgets and expenditure. The presence of the AG was felt in each institution when they could respond quickly and reach extensively. Their report would provide insight into what had been reprioritised, allocated, spent and how the spending was happening. Also, the AGSA would look into the effectiveness of the programme interventions, including quality of service, coordination across government entities, and integration of databases. They would also assess the efficiencies of how spending was done, cost-effectiveness and value for money.

The key programmes they would be focusing on would be human settlements, the temporary new residential units, new houses built, infrastructure repair and rebuilding efforts at schools and hospitals, water and sanitation infrastructure, and programmes on railways and roads. Also, they would look at the procurement process of tankering services, distribution and installation. They would also look at the social relief initiatives, like the food parcels and funeral expenses programmes being managed.
Other considerations
The AGSA would ensure that there was effective coordination and collaboration by looking to the accountability ecosystem. As an audit office, they would leverage past experiences and lessons and would report with timely, credible and independent insights that audiences could act on. The AG emphasised that “even in the midst of a crisis, transparency and accountability must not be ignored.”. Accounting officers must be responsible and responsive, set the ethical tone, put in place preventative controls, and respond to the audit (internal or external) outcomes. They should also act decisively and swiftly to prevent further leakage and ensure programmes were implemented in the manner in which they had been designed.

It would be important for the Executive and the coordinating departments to monitor and support the activities of the accounting officers so that they could deal with the complexity and urgency of the moment, and execute their duties in a way that was consistent with the provisions of Section 195 of the Constitution, being responsive, efficient, effective, accountable and transparent. It was important that oversight oversaw the accounting officers to ensure that they were responsible and responsive. All players needed to execute their duties and responsibilities and be accountable. This was the way to ensure that those affected by the disaster got the relief they needed and were enabled to rebuild their lives.

Chairperson Nyambi said he agreed with the AG that in the midst of a crisis, the ad hoc Committee could not compromise on accountability and transparency concerning abuses in this crisis. It was very important to have the AG present their plan before the Committee went to KZN for their mammoth task.

Chairperson Frolick said the presentation was clear on the role of the AG concerning the real-time audits, as well as of the accounting officers in the different government departments. It was important to note that the AG was not taking over the responsibilities of the accounting officers (AOs). The AOs were responsible for accounting and providing credible information so that the AG was familiar with the work. The AG could not be the accounting officer as well, because the scope of government was too big.

Mr T Brauteseth (DA, KZN) said the presentation had provided assurances. Had any relaxations been issued by Treasury? The relaxations noted by the Treasury with regard to Covid had led to a lot of trouble. Regarding the quick turnarounds and time periods, he asked for an estimation or indication of the time periods. He asked if the time periods for when they should expect reports from the AG would be monthly, bimonthly or quarterly. Did the AG have the authority to refer matters for prosecution, or for recovery? With its current authority had it briefed the relevant government bodies like the Hawks to be ready for such referrals? The Hawks should be fully briefed so that in the case someone steals money during this time of crisis, it would not take a long time to act. How often would the AG report to the Committee?

Mr M Hlengwa (IFP) said that the presentation on the plan had borrowed some of the experiences from Covid, personal protective equipment (PPE) corruption and auditing that took place in the international practice. The model and framework presented by the AG covered all the bases. It set the Committee in a good state in terms of the oversight they wanted to do. How many staff had been made available for this period and work? Would the ordinary work and course of the AG be hindered in any way in terms of the regulatory auditing? Currently, the AG was auditing the National government and Provincial Departments, with municipalities closing their books.

What were the estimated costs for the real-time audits? It cost money to prevent corruption, recover money, investigate and prosecute. It was important to know the magnitude of what it meant to have preventative action and proactive steps. He said what the AG had planned was a solid outlook.

Mr F du Toit (FF+, Free State) quoted the AG saying that “the real-time audit was an early audit aimed at preventing and detecting weaknesses in controls and reporting their findings.” He had some concerns. He said there was a need for eyes when tenders were given to companies. Who would be the real-time watchdog to ensure there would be no tender corruption in this whole process? Who would ensure that contractors were vetted and money was spent correctly in real time?

Mr C Dodovu (ANC, North West) said that the presentation demonstrated the unflinching commitment of the AG in helping to support the issue of financial management of the expenditure spent for a particular project. Had the AG set up, or was it going to set up, a team to deal with material irregularities? Would there be a specialised way to identify the misuse of funds and failure to perform and exercise fiduciary responsibilities from those involved in the law enforcement agencies? Had the AG set up a team to ensure that related processes were expedited or not?

AGSA's response

Ms Maluleke said that the AGSA could not do everything themselves because they could not respond to some things at the moment, and had to prioritise. There was a staff complement of 3 600 people operating in the country. KZN had a team responsible for auditing the provincial and local government in the province, similar to the EC. The teams in these provinces would be the ones doing the work and would be working alongside experts. These were specialists in information systems management, forensics, fraud detection, etc, who understood the infrastructure space better than a typical financial auditor. The specialists in Pretoria would work with the teams that were already in the two provinces. This meant there would be reprioritising, which may cause pressure in terms of churning out the normal annual Public Finance Management Act (PFMA) audits for year-end March 2022. The AG said that they would do their best to catch up and get the work done to limit the negative impact on the accountability processes. She said that Members should anticipate a delay in some instances.

Regarding the funding of the work, the AGSA would work based on Section 23 of the Audit Act, which was to charge the particular auditees affected. The AG Department would try to minimise the costs related to the initiative to optimise their available resources so that they did not end up as a significant burden. She asked the Members of the Committee for their support in ensuring that the initiatives were being paid for to ensure the capabilities of the National Audit Office. The AG could not provide an estimate of how much it would cost because they were in the process of finalising the estimate. This was a moving target, so they were trying to ensure that they covered everything that needed to be covered to provide the type of assurance that would be of value.

The AG highlighted the role of the coordinating departments in the provinces. In KZN, the Provincial Treasury acted based on a provincial Cabinet resolution to conduct pre-assessments or pre-award assessments to ensure procurement exercises at the value of a million rand and above. This was an important initiative to safeguard the system, which allowed the Provincial Treasury to look at the awards before they were awarded. An independent audit like the one in the Office of the AG could happen only once there had been a transaction. They could not pre-empt a transaction. What they found to work well was when the accounting officers were responsible -- the internal audit was effective and the province did its part of monitoring controls, and the AG issues the findings. When the findings were made, the main goal was to respond to them. In an emergency, not everything went perfectly, but the AG wanted to ensure that they created controls to prevent problems so that they hoped to detect the small problems and act on them. The AG had to rely on the provincial government and their role to support the process of safeguarding resources. Some responsibilities sat at the national level.

Regarding the turnaround time, the AG's Office was aiming to have a report by August 2022. They hoped to have a report by then to help the ad hoc Committee to use in implementing their oversight responsibilities, The AG would also talk about how often they would provide a report in August 2022.

On National Treasury relaxations on procurement, National Treasury had issued guidance and practice notes to accounting officers to make it effective for accounting officers to be responsive and act quickly in an emergency. The ecosystem should be dedicated to supporting the accounting officers to be responsive and responsible. They must provide the support that would reach citizens in a responsible way that did not compromise transparency or accountability.

Further discussion
Mr H Hoosen (DA) said that at the presentation at the Standing Committee on the Auditor General (SCOAG), he had asked the AG to look into Section 36a in the Ethekwini Municipality. Since then, he had received information about suspicious activities around the water tankers and water distribution by private contractors in the northern part of Durban, as well as electrical contractors/sub-contractors doing the emergency reconnections around the electricity outages. He appealed to the AG to look closer to Section 36 awards on electrical contractors and private water tankers contracted to the municipality. There was information about ghost tankers that did not exist. The issue was that officials were telling communities they had placed 17 tankers, but the communities had seen only three or four tanks.

Mr I Groenewald (FF+) said that the main thing the people of South Africa should get assurance on was that the money was being spent well and wisely. Would there be qualitative audits after a tender had been awarded? Regarding relying on departments to ensure that money was being spent wisely, the finance department in Natal and the Treasury had been accused in the Mail & Guardian of corruption and shady deals. Was there another way that the AG could assess that money was spent well and correctly?

Ms D Direko (ANC) said that the policies and control measures were tight, but there were people who would take the opportunity to abuse the system. These people knew that it would take time to hold them accountable because by the time audits were being done, they would have had the opportunity to change some of the things they could have done. Was it possible to have a system where procurement could generate a report on the monthly procurement in order to detect an issue earlier?

Mr Brauteseth asked again about the authority the AG had to refer other prosecutions or recoveries. Had it had any engagements so far with government bodies like the Hawks and the National Prosecuting Authority (NPA) so that they were ready and waiting for any referrals?

AGSA's response
Ms Maluleke said AGSA's powers allowed them to refer matters to the Hawks, the Finance Intelligence Centre (FIC), the SIU and NPA, and more entities that were part of the fusion centre. The AG had found that during the Covid-19 audit, sharing of their insights, information, findings and analysis on databases had worked and given the different bodies an opportunity to act on them. She highlighted an instance where people who tried to defraud the South African State Security Agency ((SASSA) had been held accountable quickly within months of the AG’s work. They did the work in April/May and reported in June. As such, there were people in the dock by the year-end holidays in terms of SASSA and the Unemployment Insurance Fund (UIF) Temporary Employer/Employee Relief Scheme (TERS). What the AG had learned was that they could deepen their relationship with public bodies and refer matters as allowed by the law. The AGSA would implement those powers and give effect to the standing arrangements with those public bodies (NPA, Hawks, SIU) to ensure their collaboration worked even better than it did in the initial phase.

Regarding Section 36, the KZN team working on the auditees would look into the matter. It was important to note that the tankering services had been scoped in the AGSA audit. They would look at compliance and value for money in terms of the costs associated with the tanks, the installation, the quality of the work and the costs of keeping the tanks filled. They had done this type of work before and would provide quick insight on the matter.

She said that the AGSA would provide findings to the accounting officers, the executive authority and Parliament. She encouraged the ad hoc Joint Committee to insist on quick corrective action by accounting officers. The best way to protect a system was by acting on the findings and recommendations from auditors decisively and quickly. She cautioned that in an emergency not everything would be a hundred percent all the time, but if an issue or error had been identified, the accounting officer must be responsive and act quickly in dealing with the matter to stem leakages.

The KZN Provincial Treasury was charged with particular responsibility in that province. She asked and insisted that the Treasury was supported in executing its responsibility and held accountable for the effective delivery of its mandate. The pre-award assessment that would be conducted by the KZN Provincial Treasury would help deal with instances of leakage. They would have to ensure that the KZN Provincial Treasury was effective in fulfilling that mandate. Also, anything that may hinder the Provincial Treasury from executing its mandate should be taken away.

Regarding the implementation of the AGSA’s work after the money had been spent, the AG said that the best thing they could do was push for accounting officers to be responsible and responsive at this moment. They should also be dedicated to ensuring that public funds were deployed quickly, efficiently, effectively and operating within the bounds of the law. She said that in an emergency, accounting officers had to work and make decisions quickly, but should make sure that their decisions were within their responsibilities as set out in Section 38 of the Public Finance Management Act.

Chairperson Frolick emphasised that the relationship between the AGSA, Parliament, National Assembly and the National Council of Provinces (NCOP), was based on years of mutual respect and cooperation.

In-house matters
Mr Brauteseth raised a matter on behalf of Mr D Macpherson (DA) regarding the issue of an in-person engagement with the KZN Cabinet and the eThekwini Exco during the upcoming oversight visit during the weekend of 27 May. He said it was very important that the Committee met with the two bodies and engaged with them face-to-face to find out what exactly they had done and what their plans were going forward. It concerned him that this engagement did not form part of the programme. It would also be vital to the work of the Committee to engage with the two executive authorities.

Mr Hoosen said that the programme was quite tight, considering the number of requests from Members to include other oversight areas. However, an executive or a representative of the executive should be available to the Portfolio Committee to explain some of their activities on behalf of the municipalities and the Provincial Cabinet, because they would have direct involvement in disaster management through expenditure provided to various communities and municipalities in the province. If possible, he asked that the Mayor, Deputy Mayor or senior politicians in the Provincial Legislature be included in the programme so that the Committee had an opportunity to exercise their responsibility of oversight and accountability.

Mr Hlengwa asked if the research team could look into the Committee's interactions between now and its oversight visit. He asked if there were any similar oversight mechanisms to the Committee’s set-up in the various jurisdictions they would be meeting, particularly in KZN and EC. While it was good to interact with the Provincial Legislature, they must be able to impress on the legislature or identify within the existing legislature committees, or set up a committee. The interaction also extended to the legislature which was responsible for oversight in the jurisdictions.

Ms M Lesoma (ANC) asked if they could be walked through the programme, because it was possible to accommodate everyone. The programme stated that they would be meeting with the principals of the province and the municipalities. It seemed like Members were differing while they were on the same page.

Chairperson Nyambi said he thought Mr Macpherson was raising a matter that was urgent and going to assist and enrich their programme. The matter of Mr Hlengwa was the only matter that was different and could be considered. Everything for their oversight visit to KZN would be catered for.

Chairperson Frolick assured Members that they were actively working on the programme to accommodate different inputs from the different Members of the ad hoc Committee. The political principles must be secured in the different areas. They would ensure that they did not spend the whole day sitting in meetings while they had to do oversight work. They were expecting a reply from the Premier of KZN, eThekwini municipality and other municipalities. The final programme would be presented soon, and they were aware that the different role players had different tasks to perform as well, as the ad hoc Committee. However, they would all try to accommodate each other to make the programme effective.

Chairperson Frolick said the matter raised by Mr Hlengwa was an important point. There was a view that oversight was just the domain of the National Assembly and the NCOP, but there was also the legislature, with Members of the Provincial Legislatures, councillors and Members of the Mayoral Committee in different areas. Oversight was a joint responsibility. In the spirit of working together and non-interference in the programmes of the different legislatures, they would be looking into oversight mechanisms and if they were not there yet, they would ensure they must be started.

Regarding Mr Hoosen’s input about referring specific instances to the AG, he said that they were looking at ways they could channel the experiences of Members from the areas in KZN, the northern part of the EC and the Northern Cape, where they could channel all the experiences into a central system to submit to the relevant offices in the case of possible malfeasance. This would allow them to guide the process and benefit from the responses. He said that the programme would not have a hit-and-run approach, and that there was a need to stop trying to specify a programme and show up for a photo opportunity. The programme would factor in the travelling time between sites to ensure that there was meaningful engagement with the people and officials. For the visit, it was likely they would split the delegation of 20 Members of Parliament with support staff to have a meaningful engagement and cover more areas. For key briefings, they would ensure that they were not long-winded briefings, and discussions would be pointed and could be enriched from the discussions and cover areas recommended by Members. They would provide Members with the progress made in this regard.

Ms Nola Matinise, Committee Secretary, said that the logistics teams had already been sent to Members and flights had been secured. In terms of accommodation, the delegation would be staying at the Fire and Ice Hotel in Umhlanga. The protection service had given the Committee a delegation of colleagues who would assist with protection, and have spoken to the South African Police Service (SAPS) and the Metro, so they were secure going to KZN.

She said that the support team had split themselves into two. One group would travel with Members, while the other would be in KZN as early as possible to ensure everything was going well on that side and have some engagement with the colleagues from the municipalities.

The meeting was adjourned

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