ATC160413: Report of the Standing Committee on the Auditor-General on the Integrated Annual Report of the Auditor General of South Africa for the Financial Year 2014/15, dated 16 March 2016

Standing Committee on Auditor General

REPORT OF THE STANDING COMMITTEE ON THE AUDITOR-GENERAL ON THE INTEGRATED ANNUAL REPORT OF THE AUDITOR GENERAL OF SOUTH AFRICA FOR THE FINANCIAL YEAR 2014/15, DATED 16 MARCH 2016.

The Standing Committee on the Auditor-General, having considered the Integrated Annual Report of the Auditor-General 2014/15, referred to it, reports as follow:

 

1. Introduction

 

The Auditor-General of South Africa (AGSA) serves Parliament by providing audit reports which Parliament uses to oversee government activities and hold the executive to account for its management of public funds.  AGSA audits a range of activities that are performed by all spheres of government. The general opinion of the audit committee and the external auditor provided assurance that the AGSA has discharged its duties in all respects.

The Public Audit Act (the Act) compels the Auditor-General (AG) to submit the annual report, the financial statements and the audit report on those statements within six months after the financial year to which they relate, to the Standing Committee on Auditor-General (the Committee) and to the Speaker for tabling in the National Assembly.

The AGSA satisfied the afore-said requirements by submitting the Auditor-General of South Africa’s (AGSA) annual report, financial statements and audit report to the Committee and to the Speaker for tabling in the National Assembly.

 

2. Debt Collection

Collection of outstanding audit fees from debtors remain a challenge to AGSA. The total outstanding debts have increased to R709 million for the current period under review. More than half (52 percent / R366) is as a result of debtors from local government. This increase has occurred despite a variety of new debt collection initiatives that were implemented by AGSA in the 2014/15 financial year.

These debt collection initiatives which were directed at local government, include amongst others:

• Invoking section 23(2) of the Public Audit Act (PAA), which requires auditees to settle their accounts for audit fees within 30 days from the date of invoice, failing which AGSA would promptly take legal steps to recover the amounts, unless it is not practical to do so. Subsequently, AGSA has started to litigate some municipalities.
• Introduction of ring-fenced payment agreements, whereby municipalities enter into an agreement with AGSA to pay their old debt over an agreed period

 

AGSA reported that these initiatives have bear some fruits, for example as at 31 March 2014, about 27 municipal auditees with debts totalling R99 million have entered into agreements with AGSA.

3.1 Surplus

 The AGSA generates revenue by charging its auditees for the amount of work required to complete an audit, based on a publicly available, transparent, annually revised structure of audit fees. The defined percentage of margin made by the organisation is used to maintain its operations.

Section 38 (4) of the PAA authorise the AGSA to retain any surplus or a portion thereof, following consultation with the National Treasury and after approval by SCOAG. If approved, such surplus is used for working capital and general reserve requirements. The portion of a surplus not retained is paid back into the National Revenue Fund.

The AGSA has generated a surplus of R138 million for the year under review. The increase from 1.15 percent (R99m in 2013/14) to 5.2 percent actual resulted from the net effect of R20 million in contract work and saving on overheads.

The AGSA also reported that its cash balance increased from R496 million to R510.

 

3.2 Resource allocation

AGSA reported that it currently employs about 3 435 employees , of which 305 is employed in the Eastern Cape followed by the Western Cape (250), Kwa Zulu Natal (235), Gauteng (244), Free State (191), Limpopo (171), Mpumalanga (157), North West (154) and Northern Cape (149). Based on this information, the Committee propose that in the provinces where there are significant challenges in attaining “good” audit outcomes, those provinces should be more resourced than those that perform better. As such in provinces like Limpopo, North West and Mpumalanga, AGSA should have deployed more employees than provinces like Western Cape and Gauteng.

 

4. Committee Recommendations

1. The Committee recommends that Parliament approves the re-appointment of the current External Auditors: Kwinana Equifin Incorporated.

 

1. That Parliament supports and approves the retention of the total AGSA Surplus as a general reserve. 

 

1. The AGSA should exempt all low capacity municipalities with little revenue base from paying for auditing performed.

 

1. The AGSA must deploy its staff in a manner that ensured they were able to perform their tasks – irrespective of the number of staff, the AGSA must deploy its staff equitably.

 

The Standing Committee on the Auditor General is satisfied by the performance of the AGSA for the 2014/15 financial year and recommends that the National Assembly approves the Integrated Annual Report of the AGSA.

 

 

Report to be considered.