Committee Report on AGSA Integrated Annual Report and related matters

Standing Committee on Auditor General

26 November 2021
Chairperson: Mr S Somyo (ANC)
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Meeting Summary

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Tabled Committee Reports

In a virtual meeting, the Committee considered the Integrated Annual Report of the Auditor-General of South Africa and related matters, and adopted Committee minutes.

Figures in the financial performance section of the Integrated Annual Report were amended. Members of the Committee recommended that it needed to put a timeframe on the transformation targets of the Auditor-General in relation to external auditors. It was determined that the Committee must be provided with a quarterly progress report on the Auditor-General’s transformation goals. The Committee needed to ensure that the Auditor-General remained compliant with transformation objectives. Members of the Committee highlighted the issue of external auditors because the Auditor-General indicated that certain state-owned entities had long contracts with the same external auditors. After the Public Audit Act (PAA) was amended, the SOEs were reluctant to terminate their long-standing relationships with these external auditors. The Committee indicated it needed to monitor these entities.

The Integrated Annual Report, as well as the draft strategic plan, budget and audit directives of the Auditor-General, were adopted with minor amendments. 

The Committee also adopted the minutes of 12 and 19 November 2021 without any amendments

Meeting report

Opening Remarks
The Chairperson welcomed Members of the Committee and said that it would not be a long meeting. He said that the purpose of the meeting was for the Committee to adopt the annual report of the Auditor-General of South Africa (AGSA) for the financial year of 2020/21. He hoped that the Committee was familiar with the documents because they came from previous deliberations the Committee had with the AGSA. The main objective of the Committee is to ensure that the AGSA does its work as outlined in the Public Audit Act (PAA). The AGSA must also be able to maintain its independence and sustainability.

The Chairperson then took the Committee through the meeting agenda.

The agenda was considered and adopted. 

Report of the Standing Committee on the Auditor-General on the Integrated Annual Report of the Auditor General for the Financial Year 2020/21
The Chairperson took the Committee through the report  

The Secretary of the Committee indicated that the figures in the opening line of the financial performance information were amended. He said that it stated R0.4 billion and then changed to R3.4 billion.

Mr O Mathafa (ANC) referred to the last paragraph of the financial performance information and said that the year 2022/21 was incorrect.

The Secretary of the Committee amended the year to 2020/21.

Mr Mathafa referred to the observations and findings section of the report and said that the Committee commended the transformation targets of the AGSA. He said that in the recommendation section of the report the Committee must put a time-frame on the transformation targets of the AGSA.

The Chairperson referred to section 7.1 of the Committee’s recommendations and said that the AGSA must provide a report on its progress on transformation within six months.

Mr Mathafa agreed with the Chairpersons proposal and said that the requirement of transformation was tabled by external auditors. He said that there was partial compliance on transformation targets and that reporting on it stopped. He said that putting a timeframe on the progress report will ensure compliance from the AGSA. The AGSA was doing good work, however the same efforts must be applied to appointing officials to reach transformation requirements.

Ms P Mpushe (ANC) said that external auditors must look at the example set by the AGSA on transformation. She then said that black women and people with disabilities must be included in transformation goals. The Committee needed to ensure that the AGSA remained compliant with these goals.

The Committee Researcher agreed with the statements made about timeframes. He raised concerns about the six month progress report. He said that the Committee requested that the AGSA must provide the Committee with quarterly progress reports regarding transformation goals on the appointment of an external auditor. He referred to section 1 of the Committee’s recommendations and said that the words “The Auditor-General” must be amended to be “audit committee” because the AGSA does not appoint external auditors. In 2017, the AGSA was not satisfied with transformation in the appointment of external auditors and it was agreed upon that the audit committee provide a quarterly report on transformation.

Mr Mathafa agreed and said that the AGSA must provide the Committee with a quarterly report on the progress of transformation. Transformation was a requirement in the appointment of external auditors by the AGSA. The audit committee needed to be urged to implement measures where the AGSA fails to comply with transformation goals. The reason the AGSA must provide quarterly progress reports is because it might shed light on non-compliance.

Mr N Singh (IFP) referred to section 7.3 of the Committee’s recommendations and said that the first sentence needed to be amended. He said that it needed to state “…efforts made by the AGSA to expand its audit portfolio to include large and complex state owned entities (SOEs)”.

The Secretary of the Committee made the necessary amendment.

One of the Committee members indicated that after the PAA was amended the AGSA failed to agree with the SOEs that were not in the AGSAs portfolio in relation to the appointment of private auditors. He said that the AGSAs report identified risks in terms of the relationships between a number of SOEs and private auditors. The AGSA then issued an instruction that in the financial year of 2021/22, the SOEs identified must change their private auditors. He said that he highlighted this issue because in the AGSAs report it was indicated that SOEs were reluctant to change their private auditors.

The Chairperson said that the Committee needed to get from the AGSA a list of the SOEs who were reluctant to change their private auditors.

Ms C Seoposengwe (ANC) agreed with the Chairperson and said that the Committee needed to monitor the SOEs who did not comply with the AGSAs regulation to change their private auditors.

The Committee report was adopted with amendments.

Committee minutes
The minutes of 12 and 19 November 2021 were considered and adopted.

AGSAs Draft Strategic Plan and Budget and Audit Directives
The Chairperson took the Committee through the annexure of recommendations on the AGSAs Draft strategic plan and budget, and audit directives.

Mr Singh indicated that the resolution under section 2 of the recommendations needed to be amended. It needed to state “…a gradual shift from regularity audits towards value for money audits”.

The Chairperson indicated that emphasis must not be taken away from the financial accounting of the AGSA. 

The Secretary of the Committee made the necessary amendment, per Mr Singh’s request.

The Chairperson referred to recommendation 3 and said that “salary increase” needed to be amended to “audit fee increments”.

The Secretary of the Committee made the necessary amendment.

The report was adopted with these minor amendments.

Closing Remarks
The Chairperson said that the Committee would have a joint meeting with the Standing Committee on Public Accounts. He said it was a very important meeting which would deal with the Public Finance Management Act. He thanked Members who were present at the meeting.

The meeting was adjourned.
 

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