National Treasury Portfolio 2022/23 Audits; with Auditor-General

Meeting report

The Auditor-General, Ms Tsakani Maluleke, and her team presented.  

National Treasury audit outcomes
• The Portfolio Committee is commended for providing effective oversight over the year to National Treasury and its entities on implementation of AGSA audit recommendations and the Integrated Financial Management System (IFMS) project.
• There has been significant improvement in the audit outcomes in the portfolio compared to 2021/22. This can be attributed to enhancements in the control environment and implementation of audit action plans.
• Progress has been made in filling critical vacant positions reported in the prior year.     
• Notable improvements in reducing irregular and fruitless & wasteful expenditure in the portfolio. There were no new irregular contracts, and no fruitless and wasteful expenditure was reported in the IFMS. The only areas of non-compliance were in consequence management at GPAA and CBDA.
• The IFMS matter is still in progress, with National Treasury (NT) intending to pursue legal recourse. The Special Investigating Unit (SIU) issued its investigation report and discussed with Standing Committee on Public Accounts (SCOPA) on 13 September 2023.

The portfolio achieved 11 clean audits (unqualified opinions with no findings), representing a significant increase from the prior year with six audits improving from unqualified with findings to clean audits, while five audits maintained their clean outcomes. This success is due to strong leadership, robust financial and performance management processes, and effective governance structures, supported by well-resourced and skilled officials. However, one entity, Land Bank, regressed from a clean audit to unqualified with findings due to material misstatements in financial statements Three entities maintained unqualified opinions with findings: PIC, Government Pensions Administration Agency (GPAA), Co-operative Banks Development Agency (CBDA) and one had a qualified opinion with findings (NT). These entities struggled with compliance due to inadequately addressed internal control deficiencies from prior year action plans. Non-compliance was identified in consequence management (GPAA, CBDA), supply chain management (GPAA), material misstatements in financial statements (NT, LB), and asset management (PIC). While PIC addressed previous non-compliance, it continued to struggle with assets under management policy compliance for monitoring external managers. In 2022/23, there was no non-compliance in expenditure management, indicating improvement, with reduced non-compliance leading to less irregular expenditure. No fruitless and wasteful expenditure was incurred on the IFMS by NT.

The PIC and CBDA improved in performance information, reporting no material findings on predetermined objectives. GPAA showed improvement with no findings on financial statements and reduced non-compliance findings in supply chain management. However, the audit outcome of NT (qualified with findings on compliance) remained the same, mainly due to non-disclosure of prior year fruitless and wasteful expenditure in the financial statements. The department did not agree with the AGSA on this matter, despite fewer financial statement findings and improved performance information. No material findings on performance information were reported in the portfolio, signalling enhanced usefulness and reliability. Five of the eleven auditees with clean audits achieved more than 80% of their targets. The remaining six achieved 50% to 79% of targets, emphasising the need for improved performance management.

The portfolio audits outcomes were detailed across nine focus areas, including performance against MTSF targets, governance, financial statements, expenditure management, irregularities, consequence management, financial health, and information technology.

Key root causes and recommendations
• Inadequate review and monitoring controls were implemented for financial statement preparation.
• The accounting officer/authority was ineffective in developing and monitoring action plans.
• Critical positions within the portfolio remained vacant.

Key recommendations:
• Develop and implement effective audit action plans to address audit findings.
• Monitor performance and consequence management.
• Fill key executive positions with skilled and experienced personnel.

Discussion
The Chairperson thanked the Auditor-General and her team for the presentation. He also thanked them for tabling the report in time, unlike the previous encounter. Sometimes the people who did their work under very difficult circumstances to provide a report like this were not appreciated. AGSA colleagues spent sleepless nights going through all sorts of papers and sometimes there was no cooperation from government officials. It was either there was no cooperation or they were given the wrong information. He thanked AGSA for doing its work for all government departments and entities. Credit had to be given because if the Committee did not do this, people from the AGSA would not know if they were doing the right thing. The Committee was pleased that it produced the report in time. Last time, it was amongst the few where the reporting was not done in time, which affected the Committee’s timeframes in tabling its BRRR. He thanked the Department and its entities for the improvement in administration. Officials had spent sleepless nights to ensure they presented credible information to the AG to the extent that there was an improvement from six to eleven clean audits.

It seemed there was a challenge with money in the fiscus and he was not sure if people would be given their bonus despite good performance. This was why people sometimes ran away from state organs because they were not appreciated. These people should be taken out to lunch or called to staff meetings to show appreciation for what they do. People kept quiet and continued as normal. Next, these people were recruited by the private sector. Even an unqualified audit was a positive audit outcome. He thought this should be emphasised.

The issue of the municipalities could not be dealt with now. The Portfolio Committee on Cooperative Governance and Traditional Affairs would deal with that. Although the Committee was committed to dealing with finance when it dealt with the Medium-Term Budget Policy Statement (MTBBS) in November where it would go into details about the municipalities. Today, it would confine itself to the National Treasury and its entities.

Dr D George (DA) thanked AGSA for the presentation. On the disclosure of fruitless and wasteful expenditure, the AG mentioned that it did not get full disclosure. Is that related to the dispute? If so, how will this dispute be resolved? The Committee needed to know about fruitless and wasteful expenditure. If there is a dispute, when will it be done so the Committee gets the information on this wasteful spending? Generally, this was a major problem.

His second question was about the Land Bank. AGSA mentioned that the Land Bank had an exemption on their plan. The Committee had an oversight visit to the Land Bank which spoke very excitedly about its plans and getting itself out of the rather messy situation it was in. His understanding of the Land Bank was that it borrowed a lot of money from a lot of institutions and could not pay it back. The Committee knew the Land Bank defaulted and then there was some type of recovery. At the time, he asked about the total liabilities of the Land Bank. What is their total liability? Do you know that? This was vital. There needed to be some kind of plan to fix that if it was at all fixable and then pay the money back to the institutions. How big is that hole that the Land Bank is in?

Lots of things were written about the Public Investment Corporation (PIC). Has AGSA looked at the loans and investment portfolio performance? The PIC borrowed money and it invested that money. It seemed in many instances it did not get the money back or received little to no return. Did AGSA audit that? In particular, the compliance with lending and investment criteria and then the return on that. Do it look at who gets the funding and if they are contracting with politically connected individuals or companies?

National Treasury was responsible for the financial management of the people’s money, and this included the municipalities. The Committee saw a spectacular failure of a large number of municipalities. Does AGSA look at how National Treasury manages, oversees, and intervenes? It seemed nobody had a handle on this. Does it belong to National Treasury? What is its plan for this?

Ms M Mabiletsa (ANC) welcomed the AG report saying that this was an outcome of working together. The Committee heard the Integrated Financial Management System (IFMS) matter was in progress because the AG received a letter from the DG indicating that Treasury was referring the matter for legal recourse. The Committee would wait for the outcome of that. It also knew that the AG had classified the IFMS matter as fruitless and wasteful expenditure and that this led to the qualified audit opinion. However, there was a significant improvement by Treasury on the audit action plan; the Department was performing well.

As the clean audit outcomes were being celebrated, this should be translated to services in the country. The AG had also indicated that if an entity received a clean audit with no service delivery, then it meant nothing. Improvements in service delivery needed to be seen, and this contributed to a healthy economy and country. There should be continuous support and oversight of the local government because there were a lot of challenges. The Committee knew that support work was being done; it should not stop. The AG mentioned some of these challenges. The Committee agreed there should be improved coordination between all role players within the three spheres of government to ensure a deliberate focus on the improvement of municipalities. The municipalities should not be forgotten about.

She supported the filling of executive posts. If these posts were not being filled, there was not going to be consequence management. If these posts were filled, there would be consequence management. The Committee welcomed the report and it knew Treasury worked very hard and did visits to some of the entities.

Mr M Manyi (EFF) appreciated the presentation and the professional manner in which it was prepared and presented. This was very crisp reporting, factual, and bold. The AG’s Office continued to be the pride of the nation and continued to be one of those few institutions. He said this without casting aspersions on other institutions. AGSA continued to hold its own in being true to its mandate and not being captured or compromised. He asked it to maintain that posture. He asked when the extensive presentation was submitted as he had only received it from Parliament yesterday. When exactly did AGSA send the report to Parliament? Committee members needed more time to examine it before the meeting.

When can we expect to hear more on the IFMS? He noted that there was agreement between AGSA and SIU about its fruitless and wasteful expenditure despite National Treasury saying there was not. He asked for a timeline on when the Committee can expect to hear more.

He welcomed that AGSA interrogated and ensured a substantive clean audit, and not because people managed them a certain way. Does AGSA do in loco inspections to verify these clean audits and the actual service delivery?

On the R2.6 billion spent on IFMS-1 to date, what is its comment on the value for money? He noted the AG flagged the R400 million for licences. For now, he was interested in the R2.6 billion on IFMS-1. In 2018, there was a statement from Parliament that about R1.8 billion had gone down the drain. The internal auditor used some very descriptive words. It was something about catastrophic findings and those findings were listed. Are you aware of that internal audit report that noted those catastrophic findings? What is your view on those findings? He asked for AGSA's comments on the SIU report findings made on 13 September 2023.

Mr Manyi said that the presentation indicated a 69% clean audit outcome. The 69% did not sweep him off his feet as 31% were not clean audits. The entities in this portfolio were crucial and it should be 95%-100%, this was the minimum standard. The Committee should clap its hands for. He was nervous about this and he asked AGSA for comfort on this.

Going through some of these entities, SARS was A+. However, in the media reports, there were complaints about SARS not paying people back on time. He was not taking away from the good SARS was doing, but these were public representatives. What is the AGSA audit finding on this? On the Cooperative Banks Development Agency (CBDA) and Government Pensions Administration Agency (GPAA), did it have specific examples of the procurement issues that caused the misstatements? He asked this so Committee oversight could be properly guided. On the Financial Intelligence Centre (FIC), there were reports not on the FIC itself, but he thought FIC needed to have had sight of these reports on illicit financial outflows. FIC should identify these outflows and do something. Are FIC controls effective? He was not sure the war against massive illicit financial outflows was being won. Is FIC managing to track those proactively?

On the slide that spoke about key messages on service delivery, Mr Manyi asked how many municipalities are currently under administration.

Mr G Skosana (ANC) said the audit outcomes were a good story to tell because there were several significant improvements compared to last year moving from six to 11 clean audits, which constituted 69%. This was commendable and the Committee should join the AG in appreciating the work done by the accounting officers and authorities in those entities, not to mention the role played by National Treasury in supporting them. He appreciated the fact that 60% of the entities achieved 80% or more of their targets which was also commendable. He gave special recognition to SARS and the fact that it was amongst the best-performing entities. SARS was a big entity and it was difficult for big entities to get clean audits compared to smaller entities. It should be congratulated that it continued to improve on revenue collection. Every year there were improvements in revenue collection to assist government in delivering services to the people.

On non-compliance, there were entities that still experienced challenges in consequence management. If they did not adhere to consequence management, they would be in the same position year after year. When there were audit findings, these matters had to be addressed through an audit action plan, and consequence management needed to ensue. Those found wanting should be brought to book. Those entities that had non-compliance and lack of consequence management had to implement this and an audit action plan.

Mr Skosana said it was quite painful that National Treasury found itself again with a qualified audit opinion because of the IFMS and Treasury's dispute with AGSA on IFMS expenditure classified as fruitless and wasteful. There were a lot of improvements presented in National Treasury. This included the reduction in irregular expenditure. However, all this good done by Treasury to improve on the previous audit opinion was overshadowed by the IFMS dispute. As long as this matter was unresolved, Treasury would continue to receive a qualification even if it did everything else correctly. That was painful and discouraging.

Mr Skosana noted that National Treasury was taking a legal route to resolve the matter. He asked if AGSA and Treasury are unable to sit down and convince each other instead of going to a court of law and letting it make a determination on whether it was fruitless and wasteful expenditure? Legal processes took time; it could take years before the matter was concluded. This continued to dent the image of National Treasury.

Mr Skosana welcomed the AG’s comment that from now onwards AGSA would look at service delivery as it did the audit and encourage entities to perform well and achieve a clean audit. As much as the books needed to be clean, these entities were still expected to deliver services. The leadership of a municipality cannot celebrate a clean audit while its residents are unhappy because of poor service delivery. There needed to be a balance between obtaining a clean audit and complying with all the laws and ensuring service delivery was addressed. He agreed with the presenter that it was easier to obtain a clean audit if nothing was done. If less was being done, then less would be spent, and the fewer chances of unauthorised, irregular, or fruitless and wasteful expenditure (UIFWE). The more spent, the more likely it was. Similarly there would be more material misstatements and so on. One needed to strike a balance between the two. Those who ended up not spending their budgets wanted to play it safe and ensure they obtained a clean audit. They ended up getting obsessed with it and this compromised the responsibility to deliver services to the people.

The Chairperson noted that the Tax Ombudsman was present in the meeting and he wanted her to be properly recognised.

Ms Yanga Mputa, Tax Ombudsman, thanked the Chairperson for recognising her and said the Office of the Tax Ombudsman had to be present and listen because AGSA was reporting on National Treasury and the entities that fell under the finance family. The Tax Ombudsman annual report would be presented tomorrow.

Ms P Abraham (ANC) appreciated the work of AGSA which was reaching out to government to work together so it could improve. The issue was service delivery to the citizens of South Africa. It was an effort to better their lives. Therefore, the decline in UIFWE was a positive development and signified overall progress. She commended National Treasury for this.

She noted Annexure A to National Treasury instruction No 4 of 2022/23 on the PFMA compliance and reporting framework. This came into effect on 3 January 2023 dealing with UIFWE. What are the implications of this National Treasury instruction on the ability of entities to table credible financial statements with disclosure? What does the AG recommend about the effects of the note?

The AG spoke about issues that affected performance information which stood at 67% at this point. The Committee did not think that National Treasury’s performance was outstanding per se. She agreed with Mr Manyi that more was expected. The Committee had always been saying that National Treasury should lead by example. She also thought the Committee should check with the AG on the implementation of the District Development Model, where it spoke about one budget, one plan.

The Committee consistently spoke about how it thought the National Treasury should lead by example. As the Chairperson correctly highlighted, the Committee did not want to go to the mandate and competence of other portfolio committees and see itself giving oversight on local government per se. However, it had to ask what the process was. How are we forging ahead in the implementation of the District Development Model?

On capping of government debt, the AG noted that this related to government guarantees. National Treasury needed to ensure that there was adequate oversight over government spending and the increasing government debt. It also noted that adequate funds were available to stimulate the South African economy which had been severely impacted by the COVID-19 pandemic. Although this was a true statement, is that not a macroeconomic policy matter and therefore not within the parameters of the AG? She asked the AG to unpack this for the Committee.

Her last question was on the AG’s observation on the non-compliance of GPAA, CBDA, PIC, National Treasury, Land Bank. What is the position of National Treasury in this particular finding linked to the rationale of the National Treasury instruction referred to previously? How do the affect the performance of these entities? How do the critical vacancies in GPAA and CBDA affect the performance of these entities?

Auditor-General response
Auditor-General, Ms Tsakani Maluleke, replied that there was indeed a dispute between the AG and National Treasury on the classification of fruitless and wasteful expenditure. National Treasury raised the dispute in the previous year. The dispute resolution mechanism that are in place was used; however, that mechanism did not resolve the matter. In that dispute resolution process, the two institutions were to have joint legal counsel look at both arguments of the matter and then come up with an opinion. However, National Treasury was not willing to do the joint legal counsel on this matter. Hence, the matter was now taken to the next stage. The AG had previously done a joint legal counsel in 2021 on the same IFMS matter and the results of that was in agreement with AG view.

On Land Bank, yes, money was borrowed which the Land Bank defaulted on in 2020 which caused a cross-default on all of Land Bank’s borrowings. The Land Bank, with its accounting authority and newly appointed CEO, was working really hard with the lenders to resolve the matter and restructure that debt and find a liability solution. So that discussion was underway.

On PIC, yes, AGSA did audit the assets under management and the investments that were disbursed in the form of investments and loans. There were criteria in place on what was key. There was a mandate between the client and the PIC. When she spoke about 'the client', she spoke about the Unemployment Insurance Fund (UIF), the Compensation Fund, and government. There was a mandate signed with these two entities on how the money should be invested and the PIC was following this. There were areas where the funds were being disbursed to entities where either the board or the owner were regarded as politically exposed people. The AG looked at that. However, there was a politically exposed policy in place in the PIC on enhanced due diligence and enhanced monitoring processes that needed to be in place.

When it came to National Treasury and the financial management of municipalities, the mandate of National Treasury was to support the municipalities. Treasury did reviews and identified that in some municipalities there were unfunded budgets and it raised concerns with those municipal councils, including the key municipal executives. Both National and Provincial Treasury reviewed and made submissions on that. However, the key issue at the municipal level included some municipalities not addressing what Treasury raised and not fixing poor financial management where the municipal budget was approved by the council with unfunded budget line items. That area of work had been done by Treasury. AGSA was at work on the municipal audits which was currently underway and a full review would show the outcome of that. She noted the comments of Ms Mabiletsa on ensuring clean audits translated into service delivery, the filling of vacancies, and the importance of coordination of all spheres of government.

On when this presentation was submitted, AGSA had an internal process to send the documents to its parliamentary liaison officer which it did. The presentation was submitted to the parliamentary liaison officer last week for submission to Parliament.

On the IFMS, there was an SIU report. There was the AGSA view on the classification of the payments made. National Treasury and the SIU were still discussing and deliberating on the SIU report as Treasury did not agree with some of the findings. She would rather not discuss that because the report was still being discussed and deliberated on by the two entities.

The Auditor-General confirmed that AGSA visited infrastructure projects. It employed engineers to visit various sites to inspect projects.

The team would give the Committee more detail on the R2.6 billion on the IFMS. The R1.8 billion that was mentioned related IFMS-1, which was abandoned, the remainder related to IFMS-2.

On the media report whether SARS was making timely refund payments due to people, AGSA's view was the payout of the 2022/23 refunds had increased compared to 2021/22. Her colleagues would give more detail on the payout amounts compared to last year, but overall that was done.

The Auditor-General noted Mr Skosana's comments on clean audits and if they translated to service delivery, the commendation of accounting officers for their good work, SARS being one of the most important entities in the country and his discomfort about some entities still struggling with non-compliance. On the legal recourse and why the two were unable to resolve this matter, AGSA followed the dispute resolution process and would continue engaging National Treasury on this matter to ensure it was resolved. It planned to have a meeting with the new DG to further discuss the matter and how it could be resolved amicably.

On the recent Treasury Instruction Note on disclosing irregular and fruitless and wasteful expenditure in the financial statements. Auditees were no longer required to disclose the historical balances in their financial statements. Those historical balances should only be disclosed in the annual report. The only item disclosed in the AGSA audit was the amount for the prior year and current year. AGSA focused on refined audit approaches to uphold transparency and accountability in its audits. It continued to audit the irregular, fruitless and wasteful expenditure registers of historical balances and any disclosures included in the annual report. The Auditor-General thought it was important when annual reports were tabled, for the Committee to exercise oversight on those numbers that were disclosed about the historical balances.

Mr Lwazi Kuse, AGSA Executive, emphasised that AGSA did receive the internal audit report filings on the IFMS and National Treasury. However, it used various information and procedures, not only internal audit reports, to arrive at its own independent opinion and conclusion. It did reflect on the internal audit, but the opinion AGSA made and the findings it issued were independently formulated. This was done to the extent that the IFMS project itself spanned over 20 years.

The assessment of the value for money consideration was undertaken annually on the expenditure incurred. To be more specific about the IFMS R2.6 billion expenditure and its breakdown, one would have to reflect on AGSA records over 20 years. What was critical about what AGSA raised on the IFMS project was that two types of expenditure were incurred. There was expenditure on the IFMS-2 project that was capital in nature and this related to expenditure on items such as the acquisition of licences. There was also operational expenditure, which included support and maintenance. The assessment of fruitless and wasteful expenditure on these two categories was separate and different. In capital expenditure, one can only determine that and assess it conclusively at the end of the project. To the extent that the project was abandoned, there could be a conclusive position. At this point, AGSA had not concluded or made findings on the initial capital expenditure. This would deferred in the event Treasury no longer wished to implement the IFMS. Then, that expenditure would be assessed for value. The intention of the auditee played a role in assessing fruitless and wasteful expenditure. If there were still plans to implement a project, one could not discount that there might not be value today, but there could be value tomorrow, which derived from such expenditure.

Mr Kuse said that for operational expenditure, one could make conclusive assessments on that type of expenditure. Hence, the AG could state that R400 million worth of IFMS for licences, support and maintenance, was fruitless and wasteful.

On the entire R2.6 billion expenditure, AGSA would have to embark on an exercise to look at the 20-year’s worth of information to be able to provide further classification of that expenditure.

The CBDA audit findings on consequence management were due to the evidence AGSA was not presented with. This evidence pointed to prior cases of non-compliance being investigated and appropriate action undertaken. The lack of evidence was largely because there was a vacancy at the level of the Managing Director, an equivalent of a Chief Financial Officer. That vacancy impacted the consequence management that needed to be undertaken. Commitments were made by the accounting authority that in the next financial year, it would reflect on the backlog of outstanding cases. It also committed to implementing consequence management.

The GPAA audit findings largely related to the bid evaluation process by various committees and the allocation of points to bidders. AGSA noted that when it redid the scoring in those tender processes, there were discrepancies. It also noted instances where new requirements were included during the evaluation and not necessarily when the bid was advertised. This was similar to changing the rules of the game while the game was in progress. The scale of the non-compliance had reduced. AGSA raised material non-compliance in the GPAA procurement process and there was a need to strengthen this process. The other findings were in the segregation of duties and the structuring of the procurement functions and delegations where it found that some of the user departments performed procurement activities and functions. This exposed the entity to risks in that, if procurement functions were performed by those in operational environments, they might not apply the legislation and policy requirements which created non-compliance. All those root causes were raised with the entity and commitments were made to address these.

Mr Kuse referred to the AGSA statement about the national debt and if that statement was within its scope. The Office of the Auditor-General engaged on these matters. It did so while appreciating its mandate and that it should not encroach or overstep in any statements it made. It had to be within the audit framework and the mandate it had. The reflections it made on the national debt were consistent with its mandate as auditors of the consolidated financial statements of government and the National Revenue Fund. This was where the national revenue debt was reported. The Auditor-General raised the risks associated with the increase in debt and the pressures that contributed to the increase. The debt the country was an outcome of budget deficits. Where the economy was not performing, this translated to an increase in debt. Those findings and recommendations were raised in that context. One should always be mindful that one did not want to venture into the policy space. Therefore, its statements were within those limited parameters.

Mr Tshidiso Thiphe, AGSA Senior Audit Manager, replied about the refunds and revenue collection from a SARS perspective. SARS revenue collection was R2 trillion in the previous year. R381 billion of those were refund payments, which was an increase from the previous year which was R321 billion.

The Auditor-General replied that AGSA did work on the District Development Model programme. from the COGTA perspective. It looked at the progress made in delivering on that programme to ensure there was the One Plan by government. This was undertaken and the AG would deliver those insights on the progress to the COGTA Portfolio Committee. Another issue related to the municipalities was AGSA had identified 66 dysfunctional municipalities.

Follow-up discussion
Mr Manyi commended the Auditor-General for the full responses and he was happy with them. He was interested to know if FIC had the right controls to stem illicit financial flows whether inflow or outflow. Has FIC got a handle on this? It worried him receiving reports elsewhere that illicit financial flows were getting out of hand. Everyone heard about the Phala Phala saga. What is happening? FIC was meant to be the best with intelligence. Why is it that we have these Phala Phala dollars and yet nobody seems to know what is happening in that space?

He was not questioning how much SARS collected versus how much it paid out in refunds. He was merely talking about some of the complaints that were in the media. When it came to those payments, the public was complaining about the delays in SARS payouts. He asked if AGSA had heard from SARS what the challenges it could be experiencing with that. He asked the Chairperson to speak to his office to forward things timeously. The report was sent last week but he received it only yesterday on Monday.

The Chairperson said he would do that. He asked if Mr Manyi wanted AGSA to go into detail on SARS because SARS was present and should speak for itself. AGSA audited SARS, but SARS had to speak for itself on its operations. It could either speak now or tomorrow. He was not stopping the Auditor-General from answering the questions.

On the matter of the IFMS, the Committee had visited the State Information Technology Agency (SITA) complex in Centurion with the Auditor-General and National Treasury and made findings and recommendations. The following day it met with the Minister and raised the question of the IFMS. The Minister had replied that he wanted to develop an approach to dealing with this matter.

The Chairperson said that the Committee had not followed up on this. He had thought the Minister was on top of the situation because he was meeting with the Minister and Department of Public Service and Administration (DPSA). At some point, DPSA withdrew its participation. Is National Treasury questioning your methodology of auditing the IFMS? Or was Treasury saying that IFMS was operational at the SITA complex? What is Treasury questioning about AGSA which is the highest supreme audit institution in the country? He asked AGSA to clean and tell the Committee what Treasury was questioning. National Treasury was not an audit institution; it was a department responsible for the fiscus. Does it not want to be audited on certain aspects? Is it coming with its own audit rules? What is at stake? The Committee would be meeting National Treasury next week. Auditing is the AG’s responsibility in terms of the law. What is the problem? What is the problem statement that National Treasury is raising on the audit of IFMS? The Committee wanted to fully understand what the problem was. The Committee had raised the matter with the Minister. SCOPA had also dealt with the issue. He asked for a response.

AGSA follow-up responses
The AG replied that the disagreement with National Treasury was on the interpretation of the definition of fruitless and wasteful expenditure. The AGSA view was that the National Treasury payments on this programme were fruitless and wasteful expenditure. Those payments were made in vain; there was no value for money. This was the dispute and main issue with the project.

On SARS not paying refunds on time, there were capacity challenges for SARS in responding to cases. She knew SARS was trying. Currently, strategies were being deployed to ensure the cases were responded to on time. This was what she could say on the matter – that strategies for the capacity challenges were being implemented to respond to cases.

AGSA would provide a written response on the FIC questions to address them adequately.

Closing remarks
The Chairperson thanked the AG for tabling this report on time so the Committee could complete its BRRR. He thanked the auditees who improved by obtaining clean audits and those who received unqualified audits. As Parliament, Members should provide support to Chapter 9 institutions that supported democracy. The AG derived its mandate from the Constitution and was the supreme audit institution. It was guided by the legislative framework in the Public Audit Act. That Office should be respected and given the necessary support it deserves. The Committee called on the AGSA to strengthen democracy by assisting Parliament in conducting oversight, accountability, and governance in the public sector.

When he was a member of the Standing Committee on the Auditor General (SCOAG), the AGSA strategic plan spoke to a value-add audit to ensure that what entities said it did, they would be asked to show it. Last week, he read about a municipality that spent R2 million on laptops procured from a company that did not have an address. The AG had to say there was no problem because there was value. It was wrong; this should not be condoned. This should be infused in the auditing methodology. The audit should extend to physical oversight on the money spent. In value-add auditing there needed to be a portfolio of evidence. Municipalities were obtaining clean audits, but there was no water for the residents in those same municipalities. If an auditee did not show evidence that there was value added to the lives of the people, then a finding on this had to be made. The Committee members were not auditors but public representatives and they were interested in seeing services being provided on the ground.

The AG had to assist Parliament in ensuring that when it did oversight, it had the facts because Parliament could not conduct audits. This was why he asked the question on IFMS. Does National Treasury question the AGSA methodology or is Treasury saying that the IFMS is there? This matter would be taken forward next week with Treasury.

This matter had continued to be discussed over the last five years; this could not be. Committee members were not IFMS cadres or propagandists who only focussed on IFMS. There were many things that it had to focus on such as serious budget problems. The Committee had to deal with that when it dealt with the MTBPS. The Sixth Parliament was coming to the end of its five-year term and there needed to be closure on this item so the Committee could focus on issues of significant importance to the masses.

The Committee was satisfied with how the audit outcomes were presented by AGSA. The auditees should see to it that they stick to the methodology. Those who implemented their audit action plans improved from six to 11, which was commendable. The Committee congratulated the officials who spent long hours ensuring they complied with the AGSA audit recommendations. It would be wrong as parliamentarians when state institutions improved not to say anything and only speak when something was wrong. He commended those who worked hard and congratulated their good work.

Meeting adjourned.