Auditor-General of South Africa draft 2025-28 Strategic Plan and Budget, and audit directives

Meeting report

Opening Remarks
The Chairperson welcomed members and officials from Auditor-General South Africa (AGSA) to the meeting. He indicated that there had been some connectivity issues.

The Chairperson thanked members for attending the last Committee meeting for the year. The contents of the meeting would conclude the Committee’s work for the year. The Committee would return next year to continue its work.

Apologies
Apologies were received from Ms V Mente-Nkuna (EFF).

Consideration of Minutes
The minutes of the meeting dated 22 November were considered.

The minutes were adopted.

The Chairperson invited AGSA to begin their presentation.

AGSA: 2025-28 Strategic Plan and Budget, and Audit Directives
Ms Tsakani Maluleke, Auditor-General (AG), presented the 2025-28 Strategic Plan and Budget and the audit directives.

The presentation highlighted AGSA’s #cultureshift2030 strategy, which aimed to assist auditees in improving their financial performance, developing organisational cultures conducive to maintaining strong financial management disciplines and improving their service delivery performance.

AGSA highlighted six strategic goals: 1) shift public sector culture, 2) insight, 3) influence, 4) enforcement, 5) sustainability, and 6) efficiency.

Regarding the proposed budget for 2025-26, the AGSA indicated it was committed to delivering on strategic objectives efficiently to ensure that financial sustainability was maintained. Further, it was indicated that cost optimisation initiatives were underway. AGSA’s overhead expenses were projected to remain at the same level as in 2024-25. Over the next six years, AGSA’s plan included a significant investment – R1.7 billion – into the entity’s digital transformation.

In terms of the audit directives, AGSA indicated that there had been an inclusion of what real-time audits, that there be written request for real-time audits, that there be a stipulated criteria to be used, and that the final determination to accept or reject the request would be made by the AG. The directive also clarified that MYAP informed the identification of focus areas and removed sections dealing with the phased-in MI implementation.

(See Presentation)

Discussion
The Chairperson thanked AG for the presentation. He invited members to share questions and engage with the presentation.

The Chairperson said that the AG had referred to the municipality celebrating a qualified audit opinion. In 2012, in Gauteng, there was also a municipality that celebrated a qualified audit opinion. In 2012, the municipality went so far as to print t-shirts and send the Gauteng Premier a t-shirt. The Premier indicated that she could not wear the t-shirt. This shows previous cases where municipalities have celebrated a qualified opinion. However, it also indicates that much needs to be done to educate stakeholders about the terminology. If those involved did not understand the terminology, they would struggle to implement it and improve the audit outcomes.

Mr A Beesley (ActionSA) said that the AG played an important role in the eco-cycle. As Parliament came to a close for the year, what message would the AG like to pass on to Parliament so that Parliament could reflect on the issue over the break? How could Parliament play its role in improving the accountability ecosystem?

Mr Beesley referred to the issue of real-time audits. Who could request a real-time audit? Was there a specific body that could request one, or did the client/auditee need to request one?

Ms E Spies (DA) referred to the culture-shift objective. She requested more detail on how the success of this objective would be measured and the specific indicators that would be used to track the progress.

Ms Spies asked how the AG would leverage digital transformation to enhance productivity, employee well-being, and overall impacts and what timelines were in place for achieving this goal.

Ms Spies asked how the AG would ensure that the strategic objectives were aligned with the needs and priorities of all stakeholders, including citizens, government entities and other accountability institutions.

The Chairperson referred to the Material Irregularities (MI) process appropriation. This was one of the main objectives of the Committee’s postponed engagement with National Treasury, which was to engage on the continued appropriation for the MI process.

Regarding technology, the Chairperson felt including digital transformation in the plan was very important.

The Chairperson referred to the performance targets, specifically maintaining an enabling reputation with stakeholders. He indicated that there was currently a rebranding and assessment process that an external contractor has been appointed to conduct. Was this included in the target? What were the details of this process? He felt that this process could affect the target. The brand and all that it encompassed affected how stakeholders would see the institution and its reputation. What was the timeline of the rebranding process – was it in line with the Strategic Plan? Was the rebranding a multi-year contract?

Mr S Subrathie (ANC) indicated he was experiencing connectivity issues and shared his questions in the chat.

Mr Subrathie asked if the Integrated Annual Report (IAR) recommendations had been taken into account, specifically regarding Information and Communications Technology (ICT) vulnerability, debt collections and capacity for MIs.

Has the recommendation on the external auditors been considered in terms of the audit committee?

Mr Subrathie asked how staff turnover would be reduced.

Mr Subrathie asked if the AG could intervene in the water crisis and the 49% unmetered water.

What was the outcome of the audit done on the Department of Basic Education (DBE), especially in terms of people living with disabilities? Has the outcome of the DBE audit influenced current budget allocations?

Regarding Strategic Goal 2: Influence, intergovernmental government communications created much duplication and inefficiencies. There was also a lack of government-to-government business support. Could the AG intervene to reduce this?

What are the difficulties in identifying MIs? How are these being addressed?

Mr Subrathie asked how AGSA determined the fees for outsourced services to other firms.

Mr Subrathie asked where AGSA was struggling and how the Committee could assist.

Mr Subrathie thanked AGSA for being the vanguard of integrity and protecting South Africa’s democracy through its work.

Real-time audits
Ms Maluleke said that in terms of real-time audits, AGSA’s directive was that requests from specific executive authorities would be considered. If the request came from an accounting officer, it would also be considered. Regarding different institutions throughout the space, AGSA would look at requests through a legislature, portfolio committee, or President. AGSA would not necessarily respond to a real-time audit request from citizens or civil society.

Culture Shift Indicators
Ms Maluleke stated that AGSA had internal targets, which were scary but were also a source of motivation and energy. AGSA set an internal target to shift 30% of auditees by 2030 from one category to another. This would be a tremendous achievement. AGSA has prioritised the impactful auditees. The multi-year audit plan specifically considered metros and value chains of key service delivery departments. It would also be an achievement to move a smaller entity, such as the provincial treasury, from a clean audit to really delivering on its mandate. AGSA believed that focusing on big, high-impact auditees and shifting them along the continuum would be a great achievement.

AGSA has rated these auditees and placed them at different degrees along the continuum. Individual ratings had not been made public. However, there was an engagement between AGSA and the leadership of these institutions. It is important for these institutions to understand the perspective of AGSA and to embrace the recommendations made by AGSA so that these institutions move in the right direction. Principles of better performance, accountability, transparency and institutional integrity informed the right direction. Better institutional integrity includes prioritising ethical conduct, ensuring responsiveness to audit findings of AGSA and internal audits, strengthening internal controls, and implementing consequence management. AGSA has been hesitant to put the information relating to this in the public domain.
           
The goal of the culture shift was ambitious. However, AGSA did not run public institutions; it could only enforce influence and provide better insight. Thus, the target was challenging but energising.

Digital Transformation
Ms Maluleke said that AGSA’s primary digital transformation focus was implementing the audit software project. This was discussed with the Committee when engaging in the Annual Report. AGSA wanted to continue to drive efficiencies internally through smaller investments. Some of what has been done recently included the implementation of robotics into the internal environment to become more efficient in some processes. AGSA would continue to expand such projects to improve efficiency.

The primary goal was to implement very advanced audit software. After that, AGSA will examine the enterprise resource planning (ERP) system.

Regarding the timeline for implementing the audit software project, the Deputy Auditor-General (DAG) would be better equipped to respond. Pilots would begin shortly in different cycles of the audit process.

Alignment of priorities with stakeholders
Ms Maluleke said that in 2024, AGSA conducted a survey that provided feedback from a broad range of stakeholders on how the stakeholders perceived AGSA, how AGSA’s messages were received, the type of recommendations made, the audit process, the behaviour of staff, etc. AGSA took in all of this feedback. In most instances, AGSA received very positive feedback from stakeholders. However, as an institution that wanted to improve, AGSA took into account the weaker areas depicted in the feedback and designed a response plan. The 2025 and 2026 performance years were about implementing these improvement exercises. She was hopeful that when AGSA did another survey in 2027, that improvement could be seen.

Doing these surveys and responding to the feedback meant that AGSA engaged with all stakeholders on a regular basis. AGSA has considered the National Development Plan, the Sustainable Development Goals, the Africa 2063 and the priorities set by the Seventh Administration. AGSA shaped the priority areas of the multi-year audit plan to respond to these priorities and goals. AGSA continued to check that it did not miss anything significant. If AGSA focused its audit effort on things that mattered and were relevant to stakeholders, the needs of stakeholders would be met.

It would be difficult to meet the needs of all stakeholders, but AGSA would continue to work to meet as many as possible.

Recommendations for MIs
Ms Maluleke confirmed that the recommendations for ICT vulnerability, debt collections and capacity for MIs had been taken into account. The ICT vulnerability assessments continue to enjoy the attention of the executive team. Strengthening controls on ICT and bolstering against cyber-attacks are prominent features of the strategic plan. Part of the weakness was that the systems were quite old however AGSA continued to invest in managing this. Implementing a new ERP system in the next year would be wonderful. However, AGSA decided to focus on and prioritise the audit software programme. Once the audit software programme is concluded, the ERP will be prioritised. The bandwidth and the resources that would be needed to manage two big projects were not available.

Recommendations for the Audit Committee
Ms Maluleke believed that the Audit Committee and the Committee would find common ground regarding how external auditors were appointed. Over time, AGSA has found that the pool of external auditors available to serve as external auditors for AGSA was quite small. To get a firm position in the market and the appropriate capability to opt out of conducting contract work or audits in the public sector on behalf of AGSA in favour of serving as AGSA’s external auditor was quite difficult. The current firm has been in use for many years. However, the partner had been rotated. There was an ongoing assessment of the independence of the audit firm. She noted the comments and concerns of the Committee. She indicated that engagement between the Audit Committee and the Committee was important.

Staff Turnover
Ms Maluleke said that AGSA did not have a high staff turnover. The targets included monitoring the turnover of high-potential staff just to ensure that AGSA was monitoring this area. ASGA did not have a history of high staff turnover. Often, AGSA had a lower staff turnover than other institutions.

Intervention in the water crisis
Ms Maluleke said that in the work done by AGSA when auditing municipalities, AGSA flagged the water losses that occurred through inappropriate maintenance levels on existing infrastructure, incorrect billing, or people who accessed water that was not billed for. The water loss number was an area that AGSA has flagged for a long time. All AGSA could do was continue to flag it and link it to other audit messages.

The second part of what AGSA has been doing was to focus more on the water sector as one of the critical value chains. One of the benefits of auditing the department, water trading entities, municipalities and water boards was that AGSA could see the entire value chain. AGSA used this vantage point to give insight into the people responsible for the water sector. AGSA has had many workshops with the executive and administration responsible for water and has been able to share information AGSA had on areas that needed attention. AGSA planned to issue a second stand-alone water sector report towards the end of the first quarter of next year. This would provide greater insight into where the problems are and inform collective actions to address them systematically.

DBE Audit
Ms Maluleke said that the audit done on DBE in terms of people living with disabilities was a special audit. AGSA has not tabled this audit. When the audit was tabled, the Committee could see the outcome. What she had heard from the DG responsible for Women and Youth was a high level of appreciation for the insight that the audit provided as the people responsible for driving the policies that improved access to education for children with disabilities.

She did not think that the audit's outcome influenced the DBE budget.

Intervention into duplication and inefficiency
Ms Maluleke confirmed that AGSA could intervene in dealing with duplication and inefficiencies. When looking at value chains across sectors and institutional boundaries, AGSA highlighted areas of fragmentation in policy and practice and highlighted areas of duplication of effort. Whether it was about how projects were planned for and executed, such as a human settlement development and houses being built, but the bulk infrastructure was not present, citizens did not benefit. This was an area of lack of coordination between two different spheres of government. AGSA was able to highlight this. AGSA was also beginning to raise MIs in this area.

Material Irregularities
Ms Maluleke said that as AGSA has been learning, they had been raising MIs. AGSA started out very small; in the first year, AGSA started with 16 Public Finance Management Act (PFMA) auditees and 9 Municipal Finance Management Act (MFMA) auditees – this has increased across the board. Only now has AGSA been implemented in all of the auditees. She felt that AGSA had done a good job in identifying MIs. Some of the challenges experienced have been slow responses by accounting officers and instability in the area of accounting officers – which required the process to start from the beginning. Internally, AGSA has also learned as it progresses. There were some areas where AGSA could have made quicker decisions on whether the proposed action was adequate and appropriate. She felt that, in too many instances, AGSA gave too much of a benefit of the doubt. AGSA was dealing with internal capacity building and setting standards for handling these matters. It was a transition between external and internal factors.

Outsourcing fees
Ms Maluleke responded to how fees were determined for outsourced services. AGSA set a fee for the amount of money per hour firms were allowed to charge. Firms charged according to how much time was spent on an audit. AGSA paid accordingly. The difficulty was that AGSA took no margins on the outsourced work; outsourced firms took the full margin. There was also an issue regarding the collection, yet AGSA had to pay external firms. There was sometimes the issue where AGSA had paid an external auditor, and the auditee had not paid AGSA, resulting in AGSA having a loss.

Areas of challenges
Ms Maluleke responded to the question about the areas where AGSA was struggling. She requested that the Committee continue to focus on non-payment of fees. Sometimes, the issue was affordability. However, many cases were instances where the auditees did not prioritise paying for this governance aspect of their responsibilities. The discipline of paying for audits has been slipping gradually over many years. It has now reached a point where there needs to be greater advocacy for individual accounting officers and the executive authorities to prioritise this. She noted that some experienced significant cash flow pressure; however, there were many cases of poor discipline. When AGSA raised the issue about how, in local government, there would be money paid to consultants to prepare financial statements, and yet no money was available to pay the audit fee, this was an issue of priorities.

Ms Maluleke indicated that the DAG could respond to the branding issue.

Digital Transformation
Mr V Chauke, DAG, indicated that the digital transformation was a seven-year journey. There were specific focus areas. In terms of audit software, AGSA is currently in the testing phase. There would be a planned roll-out: first, the new software would be piloted during the February PFMA cycle. AGSA did not want to pilot too many to avoid disrupting the audit cycle. The pilot would be extended to the MFMA cycle next year, with the intention of full roll-out in the 2026 audit cycle.

Many other projects were being rolled out. One of them was the Digital Enable Audit Approach. This would allow AGSA to provide 100% coverage. AGSA could do this in 21 entities this year, and it would be rolled out to more. This would allow AGSA to cover 100% of the population and provide the capability to draw the line between various entities. This insight and capability would take AGSA a long way in achieving AGSA’s efficiency goals and provide better insight.

Accessing data in real-time would allow AGSA to explore continuous auditing in the future, which would improve the overall control environment.

Rebranding
Mr Chauke said that a service provider had been appointed. The focus was branding AGSA primarily as the employer of choice. While AGSA did not have a problem with staff turnover, it was found that attracting employees to join AGSA was slightly difficult, especially at the trainee level. AGSA was not usually the top choice when people thought of auditing firms. AGSA wanted to excite young people and encourage them to join AGSA. AGSA needed approximately 400 trainees every year. AGSA struggled to reach these numbers.

Ms Spies referred to the audit directives. Regarding the multi-year audit plan (MYAP), how would AGSA ensure that the focus areas identified through the MYAP are aligned with its strategic objectives? What impact was expected on the audit process?

Ms Spies asked how the AG would ensure the updated directive was flexible enough to accommodate possible emerging issues and risks while maintaining its effectiveness and relevance.

Audit Directives
Ms Maluleke indicated that she had made an error in her response regarding the request for real-time audits. She had erroneously included the accounting officer, who was excluded from making such requests. Accounting officers could put in place internal audit functions that could assist them in achieving the type of vigilance needed in terms of rolling out financial expenditures. AGSA would prefer that accounting officers employ internal auditors rather than request AGSA to conduct real-time audits.

In terms of the directive, AGSA updated the directive every year. Part of the consultation with the Committee was about updating the directive for the upcoming year. If there were matters that AGSA believed needed attention this time next year, AGSA would bring them back with the necessary adjustments. The annual consideration allowed AGSA to respond to any changes in the environment.

In shaping the choices of what would be prioritised in different years in the MYAP. AGSA considered the provisions of the National Development Plan, the Sustainable Development Goals, the Seventh Administration, and the priorities of the Agenda 2063. If anything should change moving forward, AGSA reviewed these choices annually, ensuring that the plan was not stuck in a formulation where that would be the priority for three years. If anything should change, AGSA would have the ability to refocus. This did not mean that AGSA would not audit everybody or that AGSA would not do their best to provide insights. The MYAP aimed to indicate when AGSA’s scarce resources would be deployed and how AGSA would focus on interventions with other players in the ecosystem. She assured the Committee that the MYAP was not static and that AGSA checked it regularly to ensure it was responsive to the country's priorities and budget items.

The Chairperson said that the Committee had received correspondence from National Treasury. Engaging with the AG on this issue was important as it related to the non-payment of audit fees. National Treasury had written to all the municipalities with outstanding fees and engaged with state-owned entities (SOEs) that owed money to AGSA. Treasury indicated that they were engaging with AGSA to determine the audit fee structure due to the growing pause by auditees and that the audit fees were high and growing faster than budgets. Treasury stated that discussions with AGSA included establishing a formal structure to review audit fee calculations as per Section 23.1 of the Public Audit Act. Treasury indicated that AGSA had shared their detailed revenue budget and audit fees recovered per auditee. He requested that AGSA comment on this matter as the Committee would have to consider this issue when engaging with National Treasury.

Audit Fee
Ms Maluleke said that many department budgets had been reduced or increased by less than inflation. However, the trick is that internally, the people AGSA deployed to conduct audits were people whose salaries had been increasing at the rate of inflation. The challenge was balancing all of these different factors. Continuously reviewing the audit programme is needed to limit auditing hours in different environments. Much of the drivers for the audit programme were related to AGSA’s methodology. AGSA continues to look at this matter. This included the audit software, the existing reporting requirements, especially for local government, and their obligations to comply with different regulations and prescripts that AGSA had to audit against. Attention also had to be given to different auditees' preparation for being audited. When AGSA issued its audit reports, AGSA emphasised the quality of the submissions and financial statements. AGSA did provide the opportunity for auditees to improve the quality and credibility of financial statements by responding to the areas highlighted by AGSA and making adjustments. However, this often resulted in an unproductive back and forth. She observed that the quality of financial statements was not improving. Regarding the PFMA audit, 77% published quality financial statements, but the quality submissions were 57%, and MFMA was worse. The discipline of financial management in preparing credible, well-supported financial records for auditing had to be instilled. This would reduce the audit effort.

Ms Maluleke indicated that when next engaging with the Committee, AGSA would share the impact of the work done to differentiate audit efforts to reduce the time spent on auditees. AGSA would also provide insight into the impact it had on reducing the audit effort. AGSA would also share some context to the audit fee charged concerning the budget.

In terms of collections, Ms Maluleke highlighted a culture of non-payment. Some big complainants about audit fees tended to be institutions prioritising other matters over paying audit fees. This crowded out the real concern of those who were unable to pay. There was a distinction between those who were ill-disciplined and those who could not afford the fee. Section 23 of the Public Audit Act required that National Treasury work with AGSA to top up the unaffordable fees to some auditees. There needed to be work to fine-tune the list of auditees, particularly municipalities that did not have the budget to support the audit fees.

AGSA had to audit and audit against the rules that were set. AGSA had to protect its institutional integrity. Part of this was ensuring that AGSA had the people with the right skills to do the work and that the quality of the work was unquestionable. She was satisfied that this would inform the engagement with Treasury and the Committee going forward.

Mr Subrathie asked who oversaw the AG procurement processes of capital and other expenditure, such as leases. (in the chat)

Mr Chauke said that AGSA had many processes in place to ensure that the procurement processes were done in line with the expectations of the Constitution. AGSA was accountable to the Constitution and Public Audit Act. This was supplemented by AGSA developing policies and procedures that allow for this. The PFMA did not govern AGSA, but most of its policies and procedures aligned with the PFMA. AGSA had an internal tender committee that oversaw procurement. Once procurement has gone through the tender committee and has been approved by the tender committee, the matters were taken to the DAG for approval. Recently, AGSA introduced a new committee made up of exco members that assessed the business case of the various investment opportunities. This enabled AGSA to prioritise certain projects for investment. An example was deciding between the audit software project and the ERP. The ERP would go a long way in making AGSA’s internal work easier. However, it was important that AGSA focus on the frontline of auditing, which is why the decision to prioritise the audit software project. Ultimately, the Audit Committee oversees GSA’s procurement processes and internal controls. AGSA worked to ensure that it led by example and that the procurement processes were done in the proper manner.

The Chairperson thanked the AG, DAG, and AGSA for their engagement and for their stellar work supporting South Africa’s constitutional democracy and strengthening accountability. The Committee was proud of AGSA's work.

Mr S Mwali (MK) noted that some auditees were struggling with audit fees due to historical fruitless and wasteful expenditures on which the auditees had to pay interest. For example, some municipalities owed large amounts to Eskom and were charged interest due to the amount owed; this interest added to fruitless and wasteful expenditure. This resulted in some auditees being unable to pay audit fees. All important role-players in this system had to come together to try and assist these auditees and get them back on track so that they were able to pay the audit fees.

The Chairperson noted this. This matter would be further discussed when the Committee engaged with the Treasury.

Closing Remarks
The Chairperson reiterated his thanks to AGSA. He wished them a restful break and thanked them for this past year's work in a changing political environment. He looked forward to engaging with AGSA in the new year and excused them from the meeting.

Ms Maluleke extended well wishes and thanks to the Committee.

The Chairperson indicated that the Committee had received a letter from National Treasury. Treasury had requested a postponement of the engagement that would have taken place during the meeting. This had been granted. The engagement will take place next year. Treasury had provided an update on the currently underway interventions, such as writing to municipalities and SOEs and engaging with AGSA.

The Chairperson indicated that there was also correspondence from the complainant. The Committee had received a complaint which would have been dealt with; however, the Committee had been informed that the complainant had appealed the outcome of the complaint lodged with AGSA. An external service provider handled the appeal. The Committee resolved they could not deal with the complaint until the appeal was finalised. The appeal has now been finalised, and the complainant has been informed of the outcome. The complainant had written to the Committee and indicated that she was unsatisfied with the outcome. As part of the outcome, the DAG offered a mediation process between the complainant and the employee from AGSA’s office about the complaint. He had written back to the complainant to urge her to take part in the mediation process. After the conclusion of the mediation, if the complainant was still unsatisfied, she could come to the Committee with the complaint.

The Chairperson indicated that he would not engage with the draft programme for next term; rather, this could be dealt with early next year. It would be circulated to members. The Committee’s first engagement will occur on 31 January and include a follow-up meeting with the National Treasury.

The Chairperson thanked the Committee for its participation and contributions during the last terms. He thanked members for enriching the committee's work through their contributions and the Committee staff for all their hard work.

Ms Spies thanked the Chairperson, on behalf of the Committee, for his work leading the Committee. She appreciated how he approached meetings and his inclusivity. She thanked him for guiding the Committee forward and executing its duties. She expressed thanks to the Committee staff and thanked them for the professionalism with which they conducted their work in supporting the Committee and assisting them in fulfilling their mandate. She wished the Committee staff and Chairperson a restful break.

The Chairperson wished the Committee and support staff a blessed and safe break. He wished those who were travelling safe travels.

The meeting was adjourned.