Delegations from the Office of the Auditor General and National Treasury briefed the Committee and the Joint Budget Committee on the differences between Regularity and Performance Auditing.
The Auditor-General gave reasons why there was a need for a separate approach. National Treasury outlined why it was imperative for performance to be measured and gave a brief description of the key aspects of Performance Auditing and Auditing Performance Information.
Members were unanimous that Performance Based Auditing was a good mechanism to test the ability of government departments to spend their money efficiently, economically and effectively. However, they expressed their concern with the institutional framework of Performance Based Auditing as auditors were employed to audit, not do evaluations. They were also concerned about the lack of skills and the competency of the Office of the Auditor-General to deal with both Performance and Regularity Auditing.
Members posed various questions on the capacity of the AG’s Office to handle Performance Based Auditing, skills shortage, time frames and guidelines. They also sought clarity on the terminology used by the National Treasury and related questions to Performance Based Auditing.
Delegations from the Office of the Auditor General and National Treasury briefed the Committee and the Joint Budget Committee on differences between Regularity and Performance Auditing. The Auditor-General, Mr Terence Nonbembe, accompanied by the Deputy Auditor-General, Mr Thembekile Kimi Makwetu, gave the reasons why there was a need for a separate approach.
Dr Kay Brown (Chief Director: Budget Office) explained the differences between Regularity and Performance Auditing and outlined why it was imperative for performance to be measured. She then described the key aspects of Performance Auditing and Auditing Performance Information.
Mr E Trent (ANC: Eastern Cape) said he found it unacceptable that reports issued by the Office of the Auditor-General did not consist of objectives that were measurable. He called on the AG's Office to concentrate on interim reports that focus on special or singular problematic issues at that time, such as with Justice or Housing, as this might highlight key problems at an early stage.
Mr Kimi Makwetu (Deputy Auditor-General) replied that this was an issue that had concerned the AG as well as the Treasury. The AG's Office would engage with role players on this issue. He agreed with Mr Trent about interim reports. He said that the AG's Office would release more reports of such a nature in future.
In response to a question from both Mr Trent and Ms L Mabe (Chairperson: Joint Budget Committee) on whether it was possible for the AG to conduct both performance and regularity auditing, whilst there were still problems with the latter, Mr Terence Nombembe (Auditor-General) replied that it would be possible for his Office to conduct both audits at the same time. He stressed that it was important for Treasury to add conditions to the funds they allocate to departments to make it easier for his Office to audit their books. He said once this was in place, then it would help in defining clear objectives.
Ms Mabe noted that Performance Auditing needed specialised skills and was concerned that there might be a lack of these necessary skills in South Africa.
Mr Nombembe said that there was no scarcity of specialized skills in South Africa as there were ample specialized experts. He said it was just a question of establishing a proper network to get these experts on an ad hoc basis.
Mr M Stephens (DA) asked how the AG was sure that the reports it issued were not a distortion of the truth.
Mr Nombembe replied that experts needed to come in and define the benchmarks as well as outcomes of their reports. At the moment it would be disastrous if policies were set against the wrong norms and that these norms were not clearly defined.
Mr Freeman Nomvulo (Accountant General) added that performance based auditing would work very well with new programs, but would fail to adequately audit older programs. In some cases the objectives set by departments did not make business sense, but that this often occurred due to the importance of such objectives at socio-economic level.
Ms B Hogan (ANC) noted that one of the central challenges to performance based auditing seemed to be centered around what the norms were or should be. It was important that departments investigate what their norms were in order to ensure better spending of their funds.
She questioned the partiality of experts involved in performance based auditing and stated that experts usually came from various streams of thought with their own ideological perspectives and thus this should be taken into account when experts were hired on a consultancy basis.
She said that an intensive information session needs to be conducted between SCOAG and the Joint Budget Committee to familiarise themselves with performance based auditing.
Dr G Woods (NADECO: Western Cape) said that government departments needed to have proper guidelines in place where their budgets were concerned. He called on the AG to give assurances that the complexities of performance based auditing would be confronted.
Mr Nombembe replied that his Office had been working vicariously in trying to ensure that all systems were up and running to address the complexities.
Ms Mabe noted that it was unfortunate that Portfolio Committees did not get enough support from government departments and wondered whether the AG would be able to engage with departments.
Mr Stephens said that it was not very good for auditors to do evaluations as this was what performance based auditing came down to. It was best for the experts to concentrate on performance based auditing as it was more an evaluation of money spent and whether targets and service delivery were met.
Ms K Brown (National Treasury) replied that Treasury wanted more than the three Es (efficiency, economy and effectiveness) and that given South Africa's history a standardized framework needed to be introduced.
Dr Woods said it was very difficult to understand the terminology employed by the Treasury and AG's Office.
Ms Brown referred Dr Woods to Treasury’s document, Framework for Managing Programme Performance Information, where the terminology was explained.
Mr Trent asked Treasury if there were detailed interactions between Treasury and the AG's Office.
Mr Nomvulo replied that there were regular meetings between these two state entities. He added that meetings were also scheduled with government departments to give them updates on performance auditing.
Ms Hogan stated that it was very important for the AG Office as well Treasury to crystallize performance auditing in more detail.
Adv Frank Jenkins, a parliamentary legal advisor, added that the vision behind performance auditing should be guided by the Constitution.
Mr Nombembe replied that the various phases were and would be introduced from year to year and that his Office was aware that they might encounter problems about clarity. Information should be standardized and they hoped to meet their target by 2010. He said that this target was achievable.
In reply to a question on who was responsible for Local Government performance auditing, Mr Nomvulo replied that in some cases the provincial government took responsibility, but Treasury was the main oversight body when it came to auditing.
Ms Hogan concluded the meeting.
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