ATC1711Standing Committee on the Auditor-General Memorandum in terms of Rule 273 of the Rules of the National Assembly, dated 16 November 2017

Standing Committee on Auditor General

STANDING COMMITTEE ON THE AUDITOR-GENERAL MEMORANDUM IN TERMS OF RULE 273 OF THE RULES OF THE NATIONAL ASSEMBLY, DATED 16 NOVEMBER 2017
 

The Standing Committee on the Auditor-General (“Committee”) hereby requests, in terms of National Assembly Rule 273(1), the National Assembly’s permission to introduce legislation, namely the Public Audit Amendment Bill, 2017.

 

1.         Particulars of the Bill

1.1        The Bill aims to amend the Public Audit Act, 2004 (Act No. 25 of 2004) so as to provide for additional powers and functions for the Auditor-General; to clarify the mandate of the Auditor-General to perform international audit work and to conduct performance audits; to limit the amount of audit fees that can be defrayed from National Treasury; and to align the Auditor-General’s governance arrangements to current best practice.

 

1.2        It is envisaged that this amendment should be effected through the insertion of new definitions and new sections into the Public Audit Act, 2004 as well as any consequential amendments that may be required.

 

2.         Background and Objects of the Bill

2.1        The Public Audit Act, 2004 (Act No. 25 of 2004) gives effect to the provisions of the Constitution of the Republic of South Africa, 1996 (the “Constitution”) establishing and assigning supreme auditing functions to the Auditor-General. Considering the provisions contained in the Constitution read with the Public Audit Act, 2004, the Auditor-General enjoys a large degree of independence, which allows for freedom to select the most effective ways to execute its constitutional mandate. The Public Audit Act, 2004 does not, however, give it authority to implement its recommendations to investigate undesirable audit outcomes or to recover losses to the State. In this regard, the Auditor-General depends on the executive to implement these recommendations. 

 

2.2        During the past 13 years since the commencement of the Public Audit Act, 2004, the Auditor-General’s efforts to assign consequences for poor financial and performance management through its audit reports has yielded mixed results. Year on year the Auditor-General reports astronomical amounts of unauthorised, irregular and fruitless and wasteful expenditure, yet actions by auditees to recover these have been unsatisfactory. 

 

2.3        It is against this background that the Committee approaches the House for permission to introduce amendments to the Public Audit Act, 2004. 

 

The amendments sought will seek to–

• empower the Auditor-General to refer undesirable audit outcomes arising from audits performed in terms of the Public Audit Act, 2004 to an appropriate body for further investigation;
• empower the Auditor-General to issue a certificate of debt to recover losses in certain instances against the person responsible for those losses;
• provide certainty with regard to the Auditor-General’s discretion to perform certain audits;
• provide for a clear mandate to engage in international audit work;
• clarify the Auditor-General’s mandate to conduct performance audits;
• amend the Auditor-General’s reporting obligations;
• revise the provisions relating to the establishment of the audit committee;
• provide for the establishment, composition and functions of a remuneration committee;
• provide for consultation between the Independent Commission for the Remuneration of Public Office-Bearers and the remuneration committee with regard to the remuneration and benefits of the Auditor-General;
• provide for the Auditor-General and the National Treasury to annually agree on the amount of audit fees that may be defrayed from the National Treasury;
• empower the Auditor-General to make certain regulations; and
• provide for any consequential amendments.

 

3.         Financial Implications for the State

3.1        The estimated cost to implement the additional powers of the Auditor-General is estimated at R33 956 979 million per annum for the first three financial years following the commencement of the Bill. This figure will be adjusted as the new processes mature over time. The remaining amendments will not have a cost implication for the State.

 

4.         Views of the Executive on the objects of the proposed legislation

4.1        The Committee has engaged the Auditor-General and the National Treasury on the proposed amendments to the Public Audit Act, 2004. The Auditor-General has indicated that he is in agreement with these proposals.

 

Report to be considered.