Democratic Alliance Request for Investigation: discussion; Auditor-General’s General Report: briefing

Meeting report

STANDING COMMITTEE ON PUBLIC ACCOUNTS
1 February 2006
DEMOCRATIC ALLIANCE REQUEST FOR INVESTIGATION: DISCUSSION; AUDITOR-GENERAL’S GENERAL REPORT: BRIEFING

Chairperson: Mr T Godi (PAC)

Documents handed out:
SCOPA Business Plan
SCOPA Draft Programme
SCOPA Annual Report
Letter from Democratic Alliance
Auditor-General’s General Report presentation
A-G General Report
Parliament of South Africa Budget 2006/7
Official Minutes from Parliament
(please email [email protected] for documents)

SUMMARY
Members debated the recent letter received from the Democratic Alliance requesting an investigation by the Committee into the Deputy President’s trip to the United Arab Emirates. The DA was of the opinion that an urgent investigation would clear the Deputy President’s name. Various inconsistencies in past attempts at explanation had created a level of uncertainty that heightened the controversy. The Committee decided that the Auditor-General would investigate the matter during the normal course of business and report back to the Committee later in the year.

The Auditor-General presented an overview of his General Report that evaluated the financial reports of all Departments, public entities and provincial and local government. Departments should focus on three core areas to improve financial management. Education, Health and Social Development had experienced a slight increase in qualified statements. Members asked numerous questions including why vacancy rates within senior management positions were so high; whether vacancies in core government departments had a knock-on effect on other departments; the general level of compliance with financial management regulations; the poor state of affairs at the Diamond Board; the incomplete list of public entities and the role of asset management in departmental financial reporting.

MINUTES

Administrative matters
The Chairperson referred to the procurement and disposal system of Parliament and stated that a letter had been sent to the Joint Rules Committee regarding the disposal of unwanted items in Parliament. The Speaker of Parliament had responded that decisions regarding the disposal of resources in Parliament were the responsibility of the Oversight Authority to which the matter had been referred. The Committee should have further interaction with the Secretary to Parliament to clarify certain issues. Scopa would submit a resolution to the Joint Rules Committee in February containing suggestions on how to remedy the situation. The formulation of a resolution would occur at the next Committee meeting.

Mr E Trent (DA) sought clarity on the status of parastatals with regard to the stipulations of the Public Finance Management Act (PFMA). Telkom, for instance, was of the opinion that certain provisions were not applicable to their financial management requirements.

The Chairperson stated that a follow-up would be conducted to ascertain the status of the parastatals. The matter would be discussed at the next meeting.

Mr P Gerber (ANC) provided a report-back on possible hearings to be conducted by the Committee during the year.

Ms Mashiane (ANC) also provided feedback on the second working group. She recommended that the relevant Portfolio Committees be invited to attend planned hearings.

Mr Trent stated that the Committee would receive replies from certain departments and public entities in due course.

The Chairperson confirmed that the Speaker’s Office had dispatched resolutions to the various departments and responses would be available after the Local Government elections. A workshop would be held in March to heighten Members’ understanding of the mission of the Committee. The Draft Annual Report of Scopa, the business plan and the budget would be considered at the next meeting.

Democratic Alliance request for investigation

The Committee had received a letter from Mr Morgan of the DA requesting an investigation of the recent trip undertaken by the Deputy President. Mr Trent stated that the Auditor-General should investigate the matter as a matter of urgency. The party had prepared a draft resolution for the benefit of Members. The office of the Deputy President had been under attack for some time and the integrity of the position had to be resurrected as soon as possible. The Auditor-General was the best person to conduct an investigation to determine whether the provisions of the PFMA had been adhered to. The DA requested a report-back on the investigation within three weeks.

Mr B Pule (ACDP) declared that Members required more facts to reach a definite conclusion on the matter. The true nature of events had to be established. The security of political leaders was a non-negotiable requirement but accountability and transparency had to be maintained in parallel. The trip had involved the expenditure of a large amount of taxpayers’ money.

Mr V Smith (ANC) asserted that the matter could be dealt with within Scopa without any special investigation. The Auditor-General could investigate the matter during the year as per normal and report back to Scopa through the relevant Departmental reports. No distinction was made between private and business trips when considering security concerns. The Auditor-General would determine whether the expenditure was fruitless and irregular. A special investigation within a shorter time frame was unnecessary. Scopa had never requested directives from accounting officers for presidential trips before. Scopa should not be used to further the interests of any political party particularly before an election.

The Chairperson noted the counter-proposal from the ANC that specified no special investigation from the Auditor-General.

Mr Pule concurred that the security of political leadership should not be compromised but accountability and transparency were necessary requirements. The nature of the trip warranted an immediate investigation. The general public deserved answers to the controversy as soon as possible.

Ms Dreyer reminded Members of Scopa’s mission statement to maintain vigorous oversight over the spending of taxpayers’ money. An investigation was needed to uncover all the facts and to determine whether certain key material was outstanding. The Auditor-General had to conduct an investigation now.

Mr Gerber stated that the Deputy President undertook trips in accordance with specific rules. The matter should not have been brought before the Committee and should be handled by the Auditor-General as normal.

Mr Trent added that the matter had to be resolved urgently to reduce the levels of uncertainty and doubt.

Mr D Gumede (ANC) stated that security concerns prevailed irrespective of the nature of the trip undertaken. The costs referred to in the media were travel expenses incurred by the Air Force and not holiday expenses. The DA was attempting to make political capital out of the incident prior to the local government elections.

Mr H Bekker (IFP) agreed with the sentiments expressed on security responsibilities but disagreed with the presence of guests during the trip. He asked whether the guests had paid for their own accounts.

Ms Dreyer stated that the name of the Deputy President had been tainted and an investigation was required to resolve the issue. The ruling party should be seen to be serious about good governance.

Mr Trent declared that the PFMA was explicit on the matter and political leaders did not have free use of state resources for personal reasons. The trip had to be evaluated in terms of the definition of fruitless expenditure. Scopa had to determine whether resources had been spent appropriately.

Mr Pule asked whether guidelines for official trips were in place. The Auditor-General should be instructed to confirm the presence of relevant guidelines and inform Members of the findings.

Mr Smith declared that the Committee had to determine whether taxpayers’ money had been utilised correctly. The key question was whether a directive for the trip had been obtained. A simple phone-call could determine this. No special investigation was required. The Auditor-General could investigate the matter during the normal course of events.

Mr Trent asked why the Auditor-General could not investigate the matter now.

The Chairperson noted that the debate should have occurred at working group level within the Committee to avoid hostility and disagreement at the Committee level. Party political positions within Scopa had to be avoided. Inconsistencies in past explanations had created uncertainty around the issue. The key issue was when an investigation by the Auditor-General should occur. The Committee would recommend that the Auditor-General should investigate the matter during normal duties and responsibilities and report back to the Committee later in the year. Scopa would inform the Public Protector that no special investigation would occur within Scopa.

Mr Trent responded that the general public would be the ultimate judge of the decision to avoid an early investigation.

Auditor-General’s Presentation on General Report
Mr S Fakie (Auditor-General) stated that the General Report provided an overview of all financial audits of Departments, public entities and provincial and local government. The overall intention was to determine whether expenditure was in line with regulations. Provincial and local government had limited financial information at this stage. A separate report on local government would be issued during the first quarter. The root causes of financial management problems had to be determined in order to formulate appropriate solutions. Departments had to focus on three specific areas to improve financial management namely, the appointment of people with relevant skills, adequate processes and suitable governance arrangements. Detail was provided on the performance information review. The late submission of Departmental Annual Reports hindered the auditing process. The provision of a guidance framework to departments would assist in improving audits. A review of national public entities had been conducted. The number of matters emphasised had decreased. The provincial overview focused on three specific departments namely Education, Health and Social Development. Education had experienced a slight increase in qualifications issued. Approximately 60% of Local Authorities had received qualified reports. A more thorough analysis of Local Government financial management would be forthcoming in three months.

Discussion
Ms Dreyer asked why vacancy rates in senior management were so high and whether independent auditors tended to conduct less critical reports of public entities. She asked why the education sector was experiencing an increase in asset management and personnel problems.

Mr Trent asked whether high vacancy rates in certain key departments such as National Treasury had a knock-on effect on other departments. He sought further clarity on level one, two and three departmental categories. He asked whether current local government audit figures were available.

Mr R Ndou (ANC) asked whether departments could put a balanced budget forward if asset management was not in order.

The Chairperson referred to the finance management capability model and asked whether a general observation on departmental compliance could be made.

Mr Fakie responded that no detailed analysis of reasons for the high vacancy rate existed but a number of factors were involved. The caliber of applicants for senior management positions had to be reconsidered. The job description had to be clearly explained to govern the recruitment process. The vacancy rate had a knock-on effect on other departments. Independent auditors tended to audit public entities from a private sector perspective. The Public Audit Act enabled the Auditor-General to determine standards for private sector firms when auditing departments. No exact reasons were available to explain the increase in emphasis of matter. The imposition of additional reporting requirements would have increased the need for greater understanding in various departments. The appropriate level of understanding had to still be attained in certain departments. Level one departments were those that had no policies or procedures in place. Level two categorised those that had policies in place but a low level of understanding. Level three departments had policies and guidelines in place with a reasonable level of understanding but inadequate levels of compliance. Most departments were situated between levels two and three. Detail on local government audits and the number of qualified statements could not be provided at this stage. Asset registers were not a core component of financial statements at this stage. A change from cash to an accrual basis of accounting in the near future would necessitate the attachment of the values of all assets to the financial statement.

Mr Gumede noted the potential for the fostering of a relationship between management and auditors that could impact negatively on levels of accountability and transparency.

Mr Gerber asked for a total breakdown of all budgeted unfilled posts within the public sector. Firearms in museums had to be controlled in a more effective manner. He asked what steps would be taken to improve the financial state of the Diamond Board.

Mr Trent asked whether the compromising of data within the State Information Technology Agency had an adverse impact on other departments.

Mr Fakie stated that any public entity had to obtain the consent of the Auditor-General to appoint external auditors. The total value of saving on the budget with regard to senior management vacancies would be forwarded to Members in due course. Corrective measures would be taken in museums to better control firearms and other weapons. A meeting would be facilitated between the Auditor-General and all roleplayers regarding the poor financial management conditions at the Diamond Board. A separate report on the State Information Technology Agency had been tabled recently and would be forwarded to Members.

Mr Trent referred to the list of public entities and asked whether the list was complete or contained omissions.

Mr Fakie responded that the list was not inclusive of all public entities. A registrar of public entities would be created to oversee the process and ensure that all newly-created entities were included. The PFMA stipulated that all public entities be listed as soon as possible.

Mr F Nomvulo (Accountant-General) declared that working groups were in place to address the problem of public entities. All departments had to notify National Treasury when a new entity was created. Regular audits tended to uncover unregistered entities. Departments had been informed of the governance framework to be applied to public entities and the appropriate classification process. Accountability and transparency were key components of the framework. Departments would deal with cases of individual non-compliance.

The meeting was adjourned.