Chairperson, comrades and hon members, it is always with a sense of pride that I come to this podium to present, on behalf of Scopa, reports which are a product of commitment and dedication to the highest interest of our people. We are here to deliver on our mandate as Scopa to, on behalf of this House, exercise oversight on the financials of national departments and public entities.
We are presenting before this House the Eighty-Fifth to the One-Hundred-and- Forty-Third reports; that is, 58 reports. All of them are what we call "Category C" reports. These are reports whose financial audit outcomes are unqualified and have unsubstantive or no matters of emphasis.
These entities are living proof that it is possible to adhere fully to the letter and spirit of the Public Finance Management Act. For this, we thank and congratulate them, and we hope that their future audits will be equally clean. These reports are good examples that serial offending departments and entities can emulate.
What is worth noting is that among these reports are a number of sector education and training authorities. A lot has been said in the past about the administration and management, effectiveness and viability of Setas. While we cannot reflect on the effectiveness of the Setas that are here, we can, however, all attest to their sound financial management, which Scopa believes is the foundation for everything else. Certainly, there can be no timeous and qualitative service delivery without sound financial management.
Whilst we accept that there are Setas that are struggling to properly fulfil their mandate, we believe that these ones are a glimmer of hope that with sufficient will and hard work things can be turned around. We are referring here to the Bank Seta, Chemical Industry Seta, Clothing and Textile Seta, Forestry Industry Seta, Education, Training and Development Seta, the Financial Services Seta, and the Food and Beverage Seta.
On behalf of Scopa, we want to commend these reports to the House. We also want to thank the programming Whips for finding sufficient space for us to present these reports.
The debate on these reports helps us to rally together and mobilise everyone in the fight against mismanagement, maladministration and waste of public resources. It also helps us to bring to the fore the important work that Scopa does. These debates help Scopa to lay bare the indisputable connection between quality and timeous service delivery on the one hand and sound financial management and administration on the other. They help us spread our call for a heightened sense of vigilance and intolerance against corruption and mediocrity. These debates go a long way in strengthening Scopa's hand as the defender of the public purse.
As we present these reports and as the House rises for recess, I want to pay a special tribute to my colleagues and comrades in the committee as well as the staff and the Auditor-General's Office for their hard work and close scrutiny of issues. The sense of purpose and focus in the committee is both commendable and refreshing. With a united and focused Scopa there will be no hiding place for those who do not comply with the laws we pass in this House or National Treasury regulations.
Today, I personally wish to appreciate the opportunity I have had so far to chair this important committee. Twelve months ago, immediately in my first presentation of Scopa reports I gave an assurance that the trust shown in me would not be in vain; and that I took this responsibility with open eyes and that it was a responsibility I would discharge with neither fear nor favour, sparing neither courage nor effort in the service of our people - these being values bequeathed to us in the liberation movement.
Looking back we can say without fear of contradiction that we have lived up to these aforesaid utterances. We said then, as we say now, that corruption is about greed and not poverty. It is the well connected and well off, and not the poor who are the motive force of corruption. It is about a clique of the ideologically corrupted up against the people. It is completely inimical, in sharp pointed contradiction with the ethos and values of the liberation movement; it is against evolutional morality.
As Scopa, we appreciate the support that this House has given us, right across party-political and ideological divides, in the processing of our reports. It is this kind of support that gives us the impetus to keep on keeping on with our work.
The struggle against a lack of respect for laws, policies, regulations, and procedures in public finance management must be fought and won. It is a patriotic duty and it is politically imperative.
Before I leave, I think the last word must surely go to that Vietnamese Revolutionary, Uncle Ho Chi Minh. In discussing matters of this nature he said, and I quote - very liberally:
Embezzlement and waste stem from bureaucracy, from the fact that leading individuals or organs at all levels fail to get down to brass tacks, to supervise and educate ... They pay undue attention to form and fail to tackle the jobs in detail and in depth. They only like to convene meetings, write instructions and read reports, but control nothing thoroughly.
He further exhorts us thus:
Embezzlement, waste and bureaucracy are enemies of the people, the army and government. To oppose embezzlement, waste and bureaucracy are revolutionary acts. To oppose embezzlement, waste and bureaucracy is democracy.
I thank you. [Applause.]
The HOUSE CHAIRPERSON (Ms C-S Botha): Hon Van der Merwe, why are you pointing your fingers like somebody who always wears a hat?
I was merely trying to draw the attention of Marina to look at this. That is all. I was not pointing at you, of course not at you.
The HOUSE CHAIRPERSON (Ms C-S Botha): Well, it is very confusing when you are up here, so rather send her a letter. Thank you very much.
Madam Chair, I am very thankful to have this opportunity to say a few words about public accounts. The work of the public accounts committee has an impact on service delivery. There are 58 reports before us to be confirmed and adopted by this House, starting from the 85th report to the 143rd report. The following fact sheet provides an overview of some of the Scopa reports for the 2006 financial year. All of the entities highlighted in these reports received unqualified audit opinions with no significant matters of emphasis during the year 2005-06. That is very important.
I think one finds that for many years we have had so many reports that were qualified. Some of us who are not used to books of accounts become so happy when we say something is qualified and think that we have done well. In the transactions of books when we talk about qualification it means you have done badly. So most of them normally come with a disclaimer and all of that, but today there is no disclaimer. As a common procedure within the committee there is a standard resolution for all such entities. In the resolution the committee notes the receipt of the annual reports and financial statements for the year under review, and acknowledges the unqualified audit report that the entity receives.
The audit opinion, however, is made from the financial management and regularity point of view, and it is by no means an opinion of the overall performance of the entity, meaning that service delivery is included. It is in this light therefore that the committee brings its report to Parliament, and commends the entities on their performance. This also means that no further interaction with the entity concerned is warranted as they have received unqualified audit opinions with no significant matter of emphasis on issues mentioned. This applies to all 59 reports.
The work of Scopa is not merely about ensuring proper financial management in government, the department and public entities. Scopa's oversight role is important to service delivery. Scopa seeks to ensure improved service delivery by focusing in those areas of poor financial management that are hampering the effective use of the millions of rands annually voted by Parliament to the various departments for them to provide service delivery. By reviewing more than 260 annual reports every year and by holding public hearings nearly every week that Parliament is in session, Scopa examines the financial management performance of departments and entities.
By explaining the following key elements of effective financial management we can assess the ability of the department to manage its finances and conclude whether the department is at an adequate level of financial management to provide a proper environment for effective service delivery. The elements we look at are, firstly, the element of proper controls because without proper controls funds and other assets are not protected or resources properly controlled. Without controls, there is no certainty that the programme of departmental objectives will be achieved or would be sustainable.
Nearly every report of Scopa over the last few years has made recommendations about the improvement of internal controls, and I am glad to tell you that the reports of the Auditor-General indicate that government departments have been showing steady progress in establishing proper controls.
Scopa also examines the quality of financial management information, and determines whether the availability of the management information is reliable or used by the department to get the best out of their resources. Without good management information a director-general is like a blind man. It will be very difficult to make government more businesslike if stronger management information is not well integrated into day-to-day management. Good progress has been made in this area, but Scopa will keep on monitoring it.
A last financial management focus area that Scopa examines is the strategic planning, and how it is linked to resources. In setting strategic targets or objectives and ensuring that these are achieved, and enabling departments to provide the service delivery that they are established for, Scopa has found that a higher number of strategic plans do exist, but they are not always sufficiently linked to resources. Strategic plans also go hand in hand with proper budgeting. Reporting to Parliament on performance will become more and more important as Parliament improves its oversight of service delivery performance.
The annual report promises to become the main accountability mechanism in the hands of the legislature. Scopa therefore seeks to ensure improvement of financial management systems that will enable government to provide quality services. I want to state that we would not be effective without the assistance of an independent Auditor-General, and we welcome the improved legal framework established by the Public Audit Act, which enables the AG to do his or her work even better.
As stated previously, the work of Scopa is not mainly about financial savings, but about ensuring improved service delivery. This is critical, because in the private sector bad service results in more business for competitors. In the Public Service, however, there is simply no alternative.
I am told that Scopa members have a poor reputation as senior public servants, as we are seen as being aggressive. The ANC proposed the adoption of this report. Thank you very much. [Time expired.][Applause.]
Madam Chair, Scopa is very similar to a rowing team. Why do I say this? Rowing is the only sport where you make progress by going backwards. Now in Scopa too we are going forward by looking backwards. Therefore I want to look at where Scopa is today, and do so by looking back to where it was two years ago.
In January 2005 when I became a member of Scopa I had heard so many stories from colleagues, and I had seen so many newspaper articles and news clips on TV about Scopa and how bad it was, that one could feel the tension when I walked into that committee room. One could almost touch the distrust and the suspicion.
Much of this came from the arms deal scandal that almost tore Scopa apart. The controversy resulted in the unfortunate replacement of a Scopa chairperson and many experienced members, and also resulted in a loss of institutional memory. Scopa was not functioning optimally and not holding the executive to account properly. But Scopa members realised their huge responsibility, and they started working.
When the previous NNP Scopa chairperson resigned and a new one had to be elected it became controversial once again. The spectre of possible turbulence in Scopa was raised, but we followed the democratic practice in Commonwealth countries that an opposition member becomes the Scopa chairperson. The new chairperson soon showed that he was committed to the call and responsibility of Scopa.
He started steering the team efficiently through the turbulent waters. A big breakthrough happened with the hearing on the controversial Imvume management in the PetroSA deal. Scopa grilled PetroSA, and unanimously adopted a strongly worded resolution, which was very critical of the Imvume management transaction. Scopa showed that it was taking its watchdog job of protecting the public purse and rooting out corruption seriously. Other hearings followed where erring departments were grilled and serial offenders were identified. Departments and entities with failing financial management were becoming aware that they would be called to account, and that they would be subjected to vigorous questioning.
People started noticing, the media took note, and Scopa started making headlines for the right reasons. The Director-General of the Treasury told Scopa members that Scopa put fear into the hearts of those who appear before it. These were sweet words to the Scopa members. Today Scopa is, once again, a strong and healthy committee. It takes seriously its responsibility of protecting the public purse. I am proud to be a member of Scopa.
However, this does not mean that there are no problems. There are indeed many challenges ahead. Of particular concern is the late submission of financial information to the Auditor-General. By August this year the Auditor-General had not received the annual reports of 19 departments, and that is 56% of all departments. This is causing a delay in the work of the AG, but more serious is that when unlawful behaviour like this takes place at government level the question is: What kind of message is government sending to ordinary citizens? Is it acceptable to break the law?
A second area of concern is that there has been a significant increase in the number of departments that receive qualified audit reports. In the previous financial year there were only seven departments with qualified audit reports, but there are 11 of them now. This is 32% of the total, which is a third of all government departments. It is of serious concern that financial mismanagement of state departments is increasing.
A third concern is the fact that the same erring departments receive negative audit opinions year after year, showing no improvement whatsoever. The worst serial offenders are Correctional Services, Defence and Health, with Home Affairs having now received negative audit reports six years in a row. These departments are facing serious financial mismanagement challenges. Why are they not learning? Why are they not improving on previous bad experiences? The AG tells us that the reason for this sorry state of affairs is that accounting officers are simply not implementing basic elements of financial management.
Who are the political bosses of these departments? They are the Ministers Lekota, Balfour, Nqakula, and Tshabalala-Msimang. It is time that the executive took responsibility for the performance of their departments. Thank you. [Applause.]
Chairperson, the IFP notes that all institutions listed in the reports of Scopa under discussion today received unqualified audit reports from the Auditor-General. We are particularly pleased to note that at least six Setas received unqualified audits.
The IFP therefore supports the reports of the Standing Committee on Public Accounts before this House and we wish you also to note that we support the vision and philosophy that drive the leadership of Scopa, as enunciated so well by Mr Godi, because without that kind of vision, Scopa would not do its oversight work properly. I thank you.
Chairperson, in view of all the Scopa reports in question, the MF has no objection and expresses its gratitude and support for the findings. We trust that the oversight of Scopa is adequate in ensuring the various sectors under their eye are managed efficiently and effectively with a system of checks and balances. The MF supports the reports. Thank you.
Madam Chairperson, as hon members know, the Standing Committee on Public Accounts carries out searching and rigorous assessments of financial administration in the national public sector, so that accounting authorities can be held accountable for their spending of taxpayers' money and their stewardship over public assets.
In their rigorous assessing of the financial administration in the public sector Scopa categorises the annual reports into categories A, B and C; categories C being the reports that Scopa is generally satisfied with and for which there is no need to call the department or entity to a hearing. However, Scopa would like the House to note that it is far from satisfied with the general position regarding public sector financial management.
Scopa looks at the first three levels of financial management capacity in the public sector. A level-one situation is basically a situation in which a department is still at the start-up level and has very little to nothing in terms of policies, procedures, guidance and clarity around how they should be managing the financial affairs in their organisation.
Often you then find no accountability from the point of view that nobody has broken any rule or law because there was no rule or law to break when carrying out their duties.
A level-two financial management capacity is when an entity has fairly good policies, procedures and guidance around financial management and how to manage and run the organisation. But those policies and procedures have not been institutionalised within the organisation and proper training has not been provided to the staff.
What you find in a level-two situation is that you do have policies and procedures but the level of compliance is very low.
A level-three financial management situation refers to a situation at a higher level than level two, where you have very good policies and procedures in place. In fact, a lot of training and education has been put into those policies and procedures. Those policies and procedures have been institutionalised within the organisation to the extent that you could go to the lowest-level person and ask them: "Are you aware of this human resource policy?" They would then be able to say, "Yes, we know of that policy and the policy requires me to do a, b and c." For example, the Auditor-General in his general report, which he tabled, raised the following area of concerned that demonstrate that most departments and entities are still struggling with financial management: 122 cases of policy frameworks that are either weak and/or not yet developed.
This situation represents a need for systems, policies and procedures to be put in place and adequate policies and skills to be made available. Seventy- eight cases are attributable to a lack of monitoring. These issues also indicate a lack of commitment and involvement by, amongst others, management in this important internal control process. The commitment and leadership from management sets the tone for internal control and the control environment within a department and contributes to the fact that issues continue to be reported. Nineteen percent of the total national expenditure represents compensation of employees, yet the departments and entities do not address the vacancy rate at senior management level, and this leads to a lack of monitoring, as I have just explained.
With regard to late submission and resubmission of annual financial statements, as I stand here some entities have still not tabled their annual reports and this issue needs Parliament's immediate intervention.
Asset management remains the major challenge for effective internal control. The issues range from the acquisition of those assets and their recording through to the reconciliation and evaluations. Internal audits, and audits to the committee remain other challenges. The root cause of these issues is the problem of capacity.
Having said that, I would like to call on the portfolio committees to take note of Scopa's resolutions to follow-up and ensure that there is a linkage between the problem areas identified by Scopa and departments' strategic planning, budgeting and performance reporting. Because if proper and effective financial management is not included as a strategic priority by departments, service delivery will always be hampered and South Africa's scarce resources will be wasted or mismanaged.
Before I sit down, I want to thank the outgoing Auditor-General Mr Shauket Fakie for the support and dedication he has shown in supporting Scopa. It would also be a grave mistake for me not to thank our chairperson, Mr Themba Godi, for the commitment and dedication he has shown to Scopa, but to advise all members of Scopa - Mr Pierre Gerber and the lot - to please go and rest. The beginning of next year will be very tough for all of us. Thank you very much.
Debate concluded.
Chairperson, we move that the reports be adopted.
Madam Chair, I thought it would be very useful if we could go through each one of them, because I think the Table staff need some practice at reading and it would be very useful. Could we do that?
The HOUSE CHAIRPERSON (Ms C-S Botha): We would then start again at Order No 5. I am not getting any response from any speaker. I think we would have to proceed. I am sorry.
Madam Chair, I suggest you don't take Mr Ellis seriously.
Madam Chair, I beg your pardon, after my long lecture to our caucus the other day. I would really like to support the Deputy Chief Whip, or the Chief Whip - I am not sure what he is at the moment - of the ANC in his proposal.
The HOUSE CHAIRPERSON (Ms C-S Botha): I am sure he is very thankful.
Madam Chairperson, I am very thankful that I am not a member of the DA and have to endure long lectures by Mr Ellis.
The Deputy Chief Whip of the Majority Party moved: That the Reports be adopted.
Motion agreed to.
Reports accordingly adopted.