ATC180913: Standing Committee on the Auditor-General Report on the Auditor-General of South Africa-Related Findings and Recommendations in the Report of the High Level Panel on the Assessment of key Legislation and Acceleration of Fundamental change, dated 13 September 2018
STANDING COMMITTEE ON THE AUDITOR-GENERAL REPORT ON THE AUDITOR-GENERAL OF SOUTH AFRICA-RELATED FINDINGS AND RECOMMENDATIONS IN THE REPORT OF THE HIGH LEVEL PANEL ON THE ASSESSMENT OF KEY LEGISLATION AND ACCELERATION OF FUNDAMENTAL CHANGE, DATED 13 SEPTEMBER 2018
1.1 On 6 June 2018 the Speaker of the National Assembly referred the Report of the High Level Panel on the Assessment of Key Legislation and Acceleration of Fundamental Change (High Level Panel Report) to several committees, including the Standing Committee on the Auditor General (the Committee). The committees are required to consider the findings and recommendations relevant to their mandates, and report to the National Assembly by 28 September 2018.
1.2 The Committee met on 13 September 2018 to consider the findings and recommendations relevant to the Auditor-General of South Africa (AGSA). It should be noted that many of the concerns raised by the High Level Panel have been addressed through the Public Audit Amendment Bill (the Bill) which was approved by Parliament earlier this year. This report should therefore be read along with the Committee’s report on the Bill, which was published on 23 May 2018.
1.3 This report is divided into three parts:
- Part A: Background (including key findings);
- Part B: Response to AGSA-related findings; and
- Part C: Recommendations
2.1 The High Level Panel on the Assessment of Key Legislation and Acceleration of Fundamental Change (High Level Panel) is an independent body of eminent South Africans, which was charged with assessing the content and implementation—specifically the effectiveness and possible unintended consequences—of legislation passed since 1994. It was established in December 2015 by a decision of the Speaker’s Forum.
2.2 The High Level Panel consulted widely. It held public hearings across all nine provinces, commissioned reports from experts in various fields, and held roundtable discussions and workshops.
2.3 The High Level Panel reports that, although some of the outcomes of legislation passed since 1994 have resulted in improvements, and extensive legislative reform notwithstanding, “the evidence presented shows that the ills of the past are being re-produced in post-apartheid society”.
2.4 The High Level Panel made the following recommendations in relation to institutions established in terms of Chapter 9 of the Constitution (Chapter 9 institutions):
- that the findings and recommendations contained in the Report of the ad hoc Committee on the Review of Chapter 9 and Associated Institutions (“Asmal Report”) should be expanded on with the objective of strengthening and ensuring the effectiveness and reach of Chapter 9 institutions;
- that additional regulating mechanisms should be introduced to the Chapter 9 institutions so as to ensure their independence, and the timeous appointment of the commissioners who serve on them;
- that, where necessary, the powers of Chapter 9 institutions be strengthened to ensure that their recommendations are taken seriously and are enforced, and that Parliament and government departments cooperate with them; and
- that Chapter 9 institutions are adequately resourced/funded.
The Committee has considered each of the recommendations in paragraph 2.4. Our response is outlined in paragraphs 3.1.1 to 3.4.3 below.
3.1 Auditor-General of South Africa-related findings in the Asmal Report
3.1.1 The Bill addresses the Asmal report’s recommendation that the legal mandate for the international work performed by the AGSA should be clarified. Clause 5(aA) proposes that the Auditor-General may provide audit and audit-related services commonly performed by an independent audit institution to an international association, body, institution or organisation on condition that such service does not compromise the efficiency, or put an undue strain on the resources, or detract from the constitutional functions of the Auditor-General.
3.1.2 The Asmal Report recommends that the AGSA should continue to develop capacity to conduct performance audits of all national and provincial departments and municipalities. It should be noted that the AGSA annually develops a five-year performance audit plan. It is approved by a specially-convened performance audit advisory committee (PAAC) which is an internal structure. The plan comprises focus areas around which multi-disciplinary teams integrate with regularity audit teams to provide a more comprehensive assessment through integrated audits. Furthermore, on 30 November 2016, the AGSA tabled three stand-alone performance audit reports on the urban renewal programme, water infrastructure provision, and the management of pharmaceuticals. The AGSA’s commitment to developing capacity to produce more performance audit reports is evident in its integration of specialised audit services—provided by experts in, amongst others, engineering, education, infrastructure—in its audit teams. Per the AGSA’s 2015/16 Annual Report its Performance Auditing Unit employed 24 permanent experts.
3.1.3 It was also recommended that the AGSA and the Standing Committee on Public Accounts (SCOPA) should bring persistent disregard of the Auditor-General’s recommendations by government departments and other institutions to the attention of the National Assembly. The main objective of the Bill is to enable the Auditor-General to take remedial action that will ensure that losses suffered by the State are recovered where possible, and to refer certain suspected material irregularities for investigation. The proposed amendment to Chapter 2 of the Public Audit Act, No. 25 of 2004 (the Act), sets out the process to be followed when taking remedial action. It further provides that where a material irregularity resulted in a financial loss to the State, and the accounting officer or accounting authority failed to implement the recommendations contained in an audit report, the remedial action taken by the Auditor-General must include a directive to the accounting officer or accounting authority to recover the loss from the responsible person. Where the accounting officer or accounting authority has failed to implement the remedial action, clause 4 proposes that the Auditor-General must issue a certificate of debt to the accounting officer or accounting authority to repay the amount specified in the certificate. A copy of the certificate must be submitted to the executive authority to collect the specified amount from the accounting officer or accounting authority in terms of the debt recovery process applicable to the executive authority. Finally, the Auditor-General must submit a copy of the certificate of debt to the relevant legislature for tabling.
3.1.4 With regards to the recommendation that the AGSA should continue in its efforts to increase public awareness of its activities, the Committee confirms that as of 2013, active engagement with citizens is a strategic objective aimed at increasing the AGSA’s visibility and impact. In 2016/17 the AGSA engaged with various organisations, individuals and community-based organisations. These engagements included, amongst others, media briefings to share general reports and performance audit reports with the public; speeches and discussions anchored by the Auditor-General and the leadership of AGSA on local and community radios; and distribution of printed material marketing the institution’s services. Plans to educate and empower citizens form part of the AGSA’s citizens’ engagement strategy for the period 2018-2021. This awareness-raising strategy is aimed at ensuring that citizens are able to hold elected representatives to account. Continuing to expand on these initiatives will ensure increased public awareness of the AGSA’s role, mandate and functions.
3.1.5 Lastly, the Asmal report recommends that the AGSA should conclude formal agreements with other Chapter 9 institutions to address possible duplication/overlap in their functions especially in relation to their referral mechanisms. In particular, the AGSA should formalise its relationship with the Public Protector of South Africa (PPSA) and establish a mechanism to track and monitor referred matters. Furthermore, the AGSA should annually report on the number and detail of complaints investigated, their outcome, and any matters it has referred to other bodies. The AGSA has not concluded any formal agreement or memoranda of understanding with the PPSA or any other Chapter 9 institutions. However, the Bill in clause 3 proposes to empower the Auditor-General to refer any suspected material irregularities to a relevant public body for investigation. This, of course, includes referral to the PPSA. Because the AGSA has to date not been empowered in law to refer matters for investigation, it has not had the need for a formal mechanism to track and monitor cases that have been referred. In addition, the AGSA’s integrated annual report does not include information related to the number of complaints investigated, their outcome, or to any matter that may have been referred.
3.2.1 Section 3(b) of the Act provides that the Auditor-General has full legal capacity, is independent and is subject only to the Constitution and the law, must be impartial, and must exercise the powers and perform the functions of the office without fear, favour or prejudice. This provision therefore ensures the AGSA’s independence as a Chapter 9 institution.
3.2.2 The appointment of the Auditor-General is regulated through section 6 of the Act. Section 6(1) stipulates that the Speaker must initiate the appointment process in the National Assembly, and must call for a person to be recommended to the President for appointment as Auditor-General. To date, there have been no delays in Parliament’s appointment of auditors-general.
3.3 Strengthening the powers of the Chapter 9 institutions to ensure co-operation from departments and Parliament, and the implementation of their recommendations
3.3.1 The amendments proposed in clause 4 will empower the Auditor-General to take remedial action so as to ensure that wherever possible losses suffered by the State are recovered, and that certain suspected material irregularities are referred for investigation. These amendments will go a long way towards ensuring that the AGSA’s recommendations are implemented.
3.4.1 The Asmal Report found that in order to function independently and in order to exercise their duties without fear, favour or prejudice, Chapter 9 institutions must have some degree of financial independence. This should not be interpreted to mean that the institutions should decide on their own budgets. However, it should be Parliament, and not the Executive, that carries the responsibility to provide a reasonable amount of money to enable the institutions to fulfil their constitutional and legal mandates.
3.4.2 In the case of the AGSA, section 36(1) of the Act provides that its funding comprises money earned as fees for audits or services performed by the AGSA in terms of the Act or any other legislation (audit fees); and money appropriated by Parliament for the purposes of the AGSA. Section 36(1)(b) which allows Parliament to appropriate funds for the purposes of the AGSA has never been invoked. Despite the challenges it has experienced as far as collecting audit fees, the AGSA has always depended on those fees to fund its operations. Outstanding audit fees have been identified as a threat to the AGSA’s financial sustainability and viability.
3.4.3 Parliament has yet to build internal capacity to allocate funds to the Chapter 9 and associated institutions. Some Chapter 9 institutions still receive their budgets through processes led by the Executive. This compromises their financial independence.
4.1 To summarise, the Committee has identified the following matters emanating from the High Level Panel Report, for further action:
- the absence of a mechanism to track and monitor matters referred by the AGSA to other institutions;
- the absence of annual reporting on the number of complaints investigated in the period under review, the outcome of the investigations, and matters referred to other bodies; and
- the appropriate resourcing/funding of Chapter 9 institutions.
4.2 At the time of reporting the amendments contained in the Bill had not yet been enacted. As illustrated above, the proposed amendments will go a long way towards strengthening the AGSA. The Committee therefore recommends that the Bill be enacted as a matter of urgency.
4.3 With regards to the tracking mechanism, the Committee recommends that upon enactment of the amendments, the AGSA should conclude memoranda of understanding with the public bodies referred to in the Bill. These should allow for, amongst others, the tracking and monitoring of matters that have been referred for further investigation.
4.4 With regards to annual reporting on matters referred for further investigation as well as those investigated by the AGSA itself, the Committee anticipates that once the amendments that empower the Auditor-General to refer any suspected material irregularities to a relevant public body for investigation come into effect, the AGSA would naturally report on the number of cases referred and the progress made in those investigations, in its integrated annual report.
4.5 While the Committee applauds the AGSA’s efforts to create capacity for performance auditing, we do believe that much more capacity is required to ensure that performance audits take place across all government institutions. To this end, all available, and legal avenues should be explored to ensure that the AGSA is provided the financial resources to allow for expansion in this regard.
4.6 The resourcing of institutions such as the AGSA is a transversal matter. The Committee believes it appropriate that the Office on Institutions Supporting Democracy (OISD) facilitates discussions between the relevant stakeholders. The Committee therefore recommends that the process of reviewing the manner in which Chapter 9 institutions are funded—which the OISD has initiated—should be expedited so as to ensure that these institutions are funded in a manner that does not draw their independence into question.
Report to be considered.
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