Public Audit Amendment Draft Bill: report-back on audit fees; new draft version

Meeting report

The Chairperson noted that the Committee would meet on 11 May to look at the final amendments and adopt each clause. It would be the last meeting before the Committee adopted the Bill on 22 May. Alternatively, if the Committee was happy with what was presented today, then the Committee could adop the Bill on 11 May. Those were the two scenarios.

Office of the Auditor-General (OAG) report back on audit fees
Adv Marissa Bezuidenhout, Business Executive: Legal Services in Office of the Auditor-General, reported that essentially there had been a very good agreement between the Office of the Auditor-General and the Office of the Accountant-General in National Treasury.

She reminded the Committee that in November 2017, Treasury had made a submission to the Committee about the unpredictability of excess audit fees that it had to stand in for annually. This related to all those auditees in financial distress. The Committee had decided to insert a proposal drafted by Treasury into the Bill and see what the public comments would be. While the OAG understood Treasury's challenge in budgeting annually for those excesses, the Auditor-General had raised a number of concerns in his response to the Committee in March. Those concerns spoke to the potential threat of the proposed amendment to Section 32 to the natural independence of the OAG and that it might be out-of-pocket as a result of non-agreements between the Treasury and the OAG on what that the fee would be. The Committee had dealt with the matter on three occasions: where Treasury had presented, where the Auditor-General had presented and again in the meeting of 20 March 2018. Ultimately, the Auditor-General had been required to meet with Treasury to come up with an agreed approach to address those concerns in a manner that would not pose a threat to the Auditor-General.

The Auditor-General was very happy to report back that the engagement with Treasury had really paid off and what the Committee saw in the revised version up for discussion today was a verbatim copy of the proposal the Auditor-General and Treasury had agreed upon.

Currently, Treasury had to fund the excess audit fee from the Treasury Vote. Treasury had several other obligations and the excess audit fees were not always a priority, or rather they were a competing priority. The benefit of what they had agreed to was that, provided a proper consultation process occurred between the Auditor-General and Treasury, the excess audit fee would be a direct charge against the National Revenue Fund. The benefit would be that the burden would be distributed across all beneficiaries of the National Revenue Fund, instead of only National Treasury carrying the burden.

That was good news for the Office of the Auditor-General. Hopefully, it would report in its Annual Report that the challenge of defraying excess audit fees for struggling municipalities had been taken care of as those audit fees would be charged against the National Revenue Fund.

This change to charge excess audit fees against the National Revenue Fund would require a Money Bill to be adopted by Parliament. The Auditor-General had been presented with a concept Money Bill by Treasury. Treasury’s undertaking was that, should the Committee be satisfied with how it was positioned in the Public Audit Amendment Bill, it would take the Money Bill through Parliament. The final amendment that would also have to take place was that the audit fees would have to be lifted as a direct charge against the Revenue Fund in Schedule 5 of the Public Finance Management Act (PFMA).

Adv Bezuidenhout assured the Chairperson that the agreement had been properly consulted and the leadership had signed off on the agreement. The Office of the Auditor-General was quite satisfied, and the Deputy Director-General had been present at the meeting who could respond should there be any other financial questions.

The Chairperson thanked the presenter but noted that it was all in legalese and asked what she was saying in layman’s language. What would the OAG and Treasury sit down and do at the beginning or the end of the year? What should Members say to their caucuses?

Adv Bezuidenhout explained that the agreement meant that annually, on a pre-determined date, the Auditor-General and Treasury would meet, and that meeting would be a consultation around the frequency of the audit so that Treasury could understand where the OAG was going. Obviously, the Auditor-General retained the final say in respect of the frequency and scope of the audits. But Treasury would have a voice and would be able to suggest items that should be considered by the Auditor-General. The focus of the annual consultation would be to determine the excess audit fee of struggling auditees.

Thereafter the Auditor-General would have a process that the OAG was going to design on how the bidding would work. OAG wanted to take the bidding seriously and wanted to incorporate this process into its regulations: what the consultation should look like, what the bidding process should be, what the timeframes should be. That would happen on an annual basis and be recorded through the reporting mechanisms to Parliament on an annual basis. The bottom line was that the Auditor-General would then be forced into regularly consulting Treasury and Treasury would have to assist the Auditor-General to defray those fees from the National Revenue Fund.

Discussion
The Chairperson reminded Members that the mischief was that, especially when it got to local government, the Auditor-General had been out-of-pocket because local government had been unwilling or unable to pay the fees, and if the Auditor-General was out-of-pocket, the Auditor-General could not do the work. That was what the Committee had been trying to address. The potential solution was in Section 10 of the document.

Mr N Singh (IFP) was pleased that the Auditor-General and Treasury had been able to find each other. He asked who would levy the charge and how it would be done, and whether provision would be made for it in the budget. Would monies be provided for that to the Auditor-General? He said it was all well and good for Treasury to pay, but how and when was an auditee in distress? An auditee could spend its money inappropriately instead of budgeting for the audit. He did not want auditees to get away willy-nilly because someone else would pay if the auditee could not pay. Had that aspect been discussed?

Mr M Ntombela (ANC) asked if the billing process had to be done annually. Why annually? Was it not going to invite litigation?

Mr A McLoughlin (DA) asked if the auditees were going to be let off the hook entirely, or would there still be a process to collect from the auditees? At what stage did one change from being a paying auditee to being part of this process? Was the Auditor-General not going to pursue auditees for payment anymore? The bottom line was that what was paid to the Auditor-General would no longer come out of an appropriation or the budget from Treasury but would come from the National Revenue Fund which meant less money for budget appropriations. How was that going to be addressed? Where was the additional amount going to come from? It had to come from somewhere. The Bill would result in money being shifted around but somewhere there was going to be a shortage.

Ms R Adams (ANC) stated that she had been covered by the questions raised by other Members.

The Chairperson stated that his fear was that, if there were a blanket approach to funding all those who could not afford the audit fees, sooner or later, the national departments and everyone else was going to follow the same route. There needed to be criteria which determined when the audit would be paid for by National Revenue. It was an entity’s obligation to pay the audit fee. The Auditor-General was not doing a favour by auditing. Should audit fees be ringfenced? The Committee welcomed the fact that the Auditor-General was no longer going to be indebted with loss of money, but at the same time, the Committee should not punish South Africans. Had the Auditor-General had that discussion?

Adv Bezuidenhout responded to the questions, saying that funds would be budgeted as part of the process. The Auditor-General had received confirmation of that from Treasury. Annually when the national budget was prepared, that amount would be budgeted for as part of that process.

The Chairperson noted that if it was going to be budgeted for, it fell into the cycle almost a year earlier. So, funds would be set aside almost a year before the funds were required for payment.

Adv Bezuidenhout replied about the criteria for determining when an auditee was in financial distress. It was an important consideration and it had been a challenge for the Auditor-General and Treasury to determine who really fitted the criteria. The problem had been the absence of criteria. If one looked at the Public Audit Act, there was a legal obligation on Treasury to make a determination annually of those auditees which were in financial distress. In practice, that had not happened until the previous year. That was the first time that it had occurred. So, if it was a legal obligation on Treasury, what she proposed was that the determination of the criteria should be part of the legislation that the Committee wished to craft, just to ensure that there were criteria. Treasury was quick to say that the Auditor-General was in a very good position to identify whether an auditee was in a financial position of distress or not. It might be a very good opportunity for the Auditor-General and Treasury to cooperate and to sign off on the consultation process with a determination of financial distress.

Mr McLoughlin was concerned about the Auditor-General deciding who could pay and who could not. It might be in the interest of OAG to fiddle things a little as it would be much easier to get the money. His concern was that the Auditor-General might be criticised about conflict of interest.

The Chairperson assumed that there would have to be regulations and that they would have to be brought to the Committee. His point was that the Committee would, at least, get an opportunity to look at the criteria. Once the Committee had agreed on the principle, it was not necessary to get into the detail. It would be important to state exactly the minimum standards for the criteria, and at which level. All that had to be done was one had to comply.

Ms Tsakani Ratsela, Deputy Auditor General, said that the formulation of the criteria was something that would have be agreed upon by Treasury. It would not be solely up the Auditor-General or the Committee. It would be part of formalising the process of engagement before the budget cycle and again towards the end of the audit cycle. That would help to determine who fell into the pot of financial distress and who had been involved in financial mismanagement, as Mr Singh had indicated. It would also be an opportunity to talk about the frequency of audits because one of the concerns Treasury had raised was about the type of audits conducted for the smaller entities such as the museums. It provided a mechanism, without taking away from the independence of the Auditor-General, for an agreement with Treasury and to discuss items such as how the Auditor-General audited smaller entities in a way that did not give up the principles of driving accountability and transparency but ensured efficiency in the audit.

What should the Auditor-General look at? What was important? It would deal with some of the discomfort in the system where the numbers hit Treasury at a time that they could not be pre-empted. It allowed the Auditor-General and Treasury a mechanism for planning together and to discuss who the Auditor-General was going to audit, how and what it would audit, and determining the mechanism for identifying who was financially distressed and who was not and then also what amount of money should be set aside through a Money Bill for that particular audit cycle.

Ms Ratsela informed Mr Ntombela that this annual engagement would allow the Auditor-General to bill auditees on an annual basis because the Auditor-General would know upfront what those specified audits were likely to cost.

Mr Ntombela asked whether, in the determination of the culprits, so to speak, the OAG would engage with the Department of Cooperative Governance and Traditional Affairs or the provincial Departments of Local Government because many of the auditees in financial distress were at local government level. He did not want the auditees to challenge the auditor. In the plans, would the relevant entities be engaged so that any resistance would be pre-empted?

Mr Singh requested the numbers of distressed auditees over the past few years. OAG had been writing off the costs of a number of audits, so did it have the numbers for the Committee? He note that very careful attention would have to be given to the criteria for those who would be declared unable to pay. He cautioned that even ring-fenced grants to municipalities were used for other things, such as buying the mayor a beautiful car. Auditees should not be allowed to get away with wasting money elsewhere, knowing that there was a cushion which would give them a soft landing as NRF would pay. That was the point that Committee Members were trying to make.

The Deputy Auditor General could not recall offhand the number of distressed auditees but the difficulty was that the number was growing all the time in a way that made it very difficult for OAG and Treasury to manage together, partially because they had not been engaging as regularly as they should have. So the requirement for engagement would be now cast in stone to determine who was guilty of mismanagement and who was financially distressed. The Auditor-General and Treasury would also be able to use the opportunity to discuss reporting formats.

She said if Mr Ntombela was suggesting that the Auditor-General engage with local government via SALGA, the answer was that the formulation did not envisage the Auditor-General engaging with SALGA on audits beforehand. Engagement with Treasury was envisaged because Treasury had to pay for the audits. The Auditor-General engaged regularly with SALGA about challenges found in the system of local government during the audits, what the root causes were and the response of the municipalities. That was post-audit.

The Chairperson noted that the Committee was in the final leg and everyone was welcome to contribute.

The Committee Content Advisor, Mr Xolisile Mgxaji, noted that each year Treasury issued a list of distressed municipalities according to certain criteria. The criteria were there, and Treasury could apply them.

The Chairperson noted the point but said that the criteria should be submitted to the Committee each year so that Members knew what the criteria were.

He summarised the discussion by saying that the Auditor-General had no discretion and had to audit everything by law, whether entities were in distress or not. The Auditor-General could not be out-of-pocket because of the ripple effects. But in the consultation with Treasury, effectiveness and efficiency should also not be compromised. The measuring stick had to be whether paying the Auditor-General from the NFR would result in corners being cut. His opinion was that everything had been covered in the Amendment Bill. It was also about scrutinising the regulations when they came out. Was that a fair reflection of where the Committee was in the process? In essence, the Committee was saying no further work was necessary on this clause.

Ms Fatima Ebrahim, Parliamentary Legal Adviser, was of the opinion that it would require a slight re-writing. What it currently said was the Auditor-General had to come up with criteria so the drafting did not make sense when it stated that ‘Treasury was of the opinion’. It would have to be changed to state Treasury had been consulted and the auditee had financial difficulties according to the criteria. However, the legislation was then empowering the Auditor-General to regulate on the matter. On the other hand, Treasury had an opinion. The two were irreconcilable. Criteria suggested a scientific process, whereas an opinion was not. Treasury should respond to that point. The change would deal with any challenges as the challenger would have to be specific.

The Chairperson said that the Auditor-General and Treasury should agree on criteria or what the process was for the National Revenue Fund to pay the audit fees. People should not be able to decide willy-nilly that they could not pay. He agreed that it had to be measured against criteria and therefore there could not be an opinion. If someone challenged a decision, that person had to indicate precisely which criteria were incorrectly assessed. That clause had to be changed.

Mr McLoughlin noted that the words ‘the Act’ appeared twice on page16. Did it imply that the Act was not yet in existence and was still to happen?

Adv Bezuidenhout explained that the referenced Act was the Money Bill that she had referred to earlier. Treasury was taking that Bill through the process.

The Chairperson asked by how much the Auditor-General was out-of-pocket in 2016/17. The Committee would need sight of the figure when the Bill was adopted. The Committee would be interested in what had been outstanding for 30 days, 90 days etc.

The Deputy Auditor General replied that the OAG was getting about 40% of audit fees owed, if that, and it charged Treasury for excess audit fees or distressed municipalities that could not pay audit fees. A large amount had been outstanding but, at the end of March 2018, Treasury had paid R150 million in settlement of unpaid audit fees. She was apprising the Committee because the balance sheet would not accurately reflect the situation.

Legal Advisor presentation of changes made to the Bill
Ms Fatima Ebrahim, Parliamentary Legal Adviser, said she would not discuss the minor technical amendments but would address the more significant changes, such as the long title. She would focus on legal principles as the clause by clause discussion would take place on 11 May.

The Chairperson asked Adv Ebrahim to go through clause by clause but then realised that the Committee did not have quorum. He wanted as little as possible left for the 11 May meeting.

Adv Ebrahim stated that she would go through most of the changes made.

Definitions in Section 1 of the principal Act
In Section 1(c), the correct Auditing Professions Act had been inserted and the incorrect Act omitted.

In Section 1 (e), the Executive Authority was defined as the responsible person for debt collection.

There had been quite a bit of public comment on the findings of the audits and so the clauses had been inserted referring to material irregularities identified by the Auditor-General and the consequences thereof in 6(b)(1A) and (1B).

Section 4
No new changes. The version at the previous meeting had been accepted by the Committee.

Section 5
The Committee had agreed that there was no constitutional reason for the Auditor-General not to perform international audits. Adv Ebrahim had also included comments from the Kader Asmal Report on Chapter 9 Institutions and the wording indicated that international audits were acceptable as long as they did not compromise efficiency, did not put a strain on resources or detract from the Auditor-General’s constitutional responsibilities. Those additions addressed concerns expressed by the Committee.

Also, Section 5 had been amended to state that, although the Auditor-General could request an investigation when there were material irregularities, he had to be ready to proceed immediately in cases where an investigation was not needed. The example given was where a car was missing. There was no need for an investigation to prove that the car was missing. However, more complex cases would be referred to a ‘relevant public body’ for investigation.

The Committee had also noted in the previous version that the Auditor-General had to investigate alleged cases. The word ‘alleged’ had been removed as the Auditor-General was likely to be flooded with allegations from every Tom, Dick and Harry. The Office of the Auditor-General could act on allegations if it had suspicions and chose to do so, but there was no obligation to act on every single allegation.

The Auditor-General was given power to take remedial action. The difference between ‘financial’ loss and an irregularity had been noted as there would be cases where auditees suffered a loss of funds for reasons other than deliberate wrongdoing.

The Chairperson asked for clarity. He noted that Section 5(1A) suggested that the Auditor-General may refer a case to the Hawks for them to act. Section 5(1B) would be where the Auditor-General takes action.

He asked why it stated that the Auditor-General ‘may’ refer. Should it not state that the Auditor-General ‘must’ refer?

Adv Ebrahim explained that it had to be ‘may’ as there was an option. The Auditor-General could either refer a case or could go ahead without an investigation. The OAG was working on regulations for when to refer and when not to refer.

The Chairperson referred to the certificate of debt that was to be issued. He asked the legal advisor how she had dealt with ensuring that the accused had a chance to make representations.

Adv Ebrahim explained that Part 1A Remedial Action in Chapter 2 ensured that the person was given an opportunity to explain. Those details had been set out in a new section.

Mr Singh asked about financial loss versus paying exorbitant costs. When would the stage be reached where a value-for-money audit could be done? How would that be dealt with?

Adv Ebrahim said that nothing stopped the Auditor-General from doing internal investigations or referring an investigation to the Hawks. The Hawks would do an investigation to get a market-related cost. It was not prevented in the legislation.

Deputy Auditor General Ratsela stated that the Auditor-General could do one of two things. The Auditor-General would do a value application and then separately do a value-for-money audit. Over the years the Auditor-General had tried to look at the monetary valuation and then a value-for-money audit.

Adv Ebrahim stated that the Auditor-General had to, after a reasonable period of time, follow up on the recommendations made in the audit report about any material irregularity that had to be investigated within the timeframe stipulated in the audit report.

The first thing that had been done was to allow the Auditor-General to make recommendations in an ordinary audit report. The Auditor-General had the power to specifically put recommendations in the report. Those recommendations would have a timeframe. That was the issue in the previous meeting where Adv Ebrahim had disagreed with the set timeframes that the Director General had inserted in the proposed three-tier system. This was because there were some things that could be rectified in a short space of time and others required quite a bit of investigation and would take longer. The audit report which followed the management letter could contain one or more recommendations. The recommendations did not have to be financial. It could be, for example, that HR had to put certain systems in place.

After that stage, if the implementing authority had failed to implement the recommendations in the report, that was when the Auditor-General had to take remedial action to address that failure. What would be appropriate remedial action would be different in different cases. The intervention of the Hawks, the President or provincial government would be required to manage the remedial action.

Section 5A Issuing remedial action
Where the irregularity had resulted in a financial loss to the state, and the accounting officer (AC) or accounting authority (AA) had failed to implement the recommendations in the report within the timeframe, the official interaction with the AO or AA had to include a directive to the AO/AA to determine the amount of the loss, if not yet determined, and to recover the loss. Where there was a financial loss to the state, there would always be a directive to the AO/AA to make good on the loss.

Mr McLoughlin noted a problem with the wording. One could not ‘issue’ remedial action. One could ‘take’ remedial action.

The Chairperson asked if it was a problem for the Auditor-General to make recommendations.  In the Annual Report, there would have to be specific recommendations. Was that doable?

Adv Bezuidenhout, OAG Legal Services, clarified that it was 'may' not 'must' make recommendations. The Auditor-General’s question was why it should be restricted to the two areas of compliance auditing and performance information and not make recommendations about financial statements. 

Adv Ebrahim indicated that she could change the wording to include financial statements.

Section 5B Failure to comply with specific remedial action
Adv Ebrahim stated that if recommendations did appear, there had to be compliance with the recommendation. If there had not been compliance with the recommendations, one reached the second stage which was the ‘failure to comply with the specific remedial actions of the recommendations. The Auditor-General could take someone or some entity to court for failing to comply, or approach Parliament via a particular Portfolio Committee. However, where an accounting officer had not complied with remedial actions in respect of financial losses, that accounting officer would be issued with a certificate of debt. The Regulations would provide more details of what the certificate of debt would look like. The Auditor-General had to submit a copy of the certificate of debt to the responsible Executive Authority, i.e. the relevant Minister in the case of National departments, to collect the amount specified in the certificate of debt from the accounting officer or accounting authority.

One of the big issues was how the money was to be collected. Initially, in the first draft, when the Auditor-General had to collect the money, some of the provisions were in the policy itself but because the Executive Authority would be collecting the debt, it would have to be collected in respect of available resources and how the department recovered debt. The bottom line was that the debt had to be recovered and the Executive Authority had to keep the Auditor-General informed of progress made in collecting the amount due. The only obligation of the Executive Authority was to collect the debt and to keep the Auditor-General informed of progress. There was nothing built-in for a situation where the Executive Authority did not do his or her job, but it assumed that the Auditor-General would approach Parliament. There was no discretion for the Minister as to whether to collect the monies or not.

In order to determine whether to collect the debt or not, the Auditor-General had to consider representations made by the entity as per the audi alteram partem rule and the details of those representations in terms of form, time etc. would be specified in the Regulations. The Auditor-General might also have due regard to written representations and the final forensic report conducted internally by the Auditor-General in terms of Section 29, or the outcome of any investigation or any factor. The Auditor-General could act when he felt that an investigation had gone far enough, and he did not have to wait for an investigation to be complete. The Auditor-General could act even where there was no investigation if he was satisfied that, on paper, there was a loss.

If the Auditor-General still wished to issue a certificate of debt, even after written representation, there had to be a second oral representation (audi). Inputs from the public had suggested that the legislation could give the Auditor-General too much power. An advisory structure had, therefore, been set up in Section 5B(5)(a). The Act provided that the Auditor-General might set up an external committee and the accounting officer or accounting authority would be afforded the opportunity to make oral representations. The Auditor-General would not be part of that committee. That Committee would provide written recommendations to the Auditor-General who had to consider the recommendations before taking a final decision. The purpose was to ensure that the Auditor-General’s discretion was somewhat tempered. If the matter ever went to court, it was a way of protecting the Auditor-General by showing that he had given opportunities for representation and had taken advice on the matter.

Thereafter, the Auditor-General had to submit the certificate of debt to the Speaker for tabling in the National Assembly. The purpose was ‘naming and shaming’.

The Chairperson asked for comments. He asked about the problem of asking the executive authority to take action when, as many had said, it was actually the mayor him or herself who was the problem in dysfunctional municipalities. What would they do about it? Was it the City Manager who was responsible?

The Chairperson asked to whom one gave the certificate and with whom should it be followed up. It was clear in local government, it should be the Municipal Manager. It needed to be clear to everyone. Was everyone comfortable that the municipalities had been adequately addressed?

Mr Ntombela asked if the accounting officer was charged in his personal capacity or as an accounting officer. His understanding was that the legislation was meant as a deterrent rather than to catch people.

Mr McLoughlin suggested that the Advisory Committee should be defined in the definitions section.

Adv Ebrahim responded to the question of the Executive Authority in relation to the local authority. The legal advisors had spent more than three weeks researching the issue and there was definitely confusion about that matter. In terms of Municipal Systems and Structures Act, the responsible authority was the Council. Every municipality had a Council. Where there was an executive mayor, as in the larger municipalities, the Council would take a decision to delegate should a certificate of debt be received. In the smaller municipalities, Council would act by using the staff in the administration for that purpose.

In respect of who the accounting officer was, she stated that every institution had an accounting officer as defined in the Public Finance Management Act and in the Municipal Finance Act. In a national department, it would be the Director-General, in local government, it would be the Municipal Manager. In companies like Eskom, it would be the Board. It was always defined in law who the accounting officer was, so there should be no confusion there.

Mr Ntombela asked about a person who had failed to execute remedial actions. Was that person liable for that and what about someone outside the institution who had not complied with that which he had to comply with. Who took the responsibility there? Did it mean what had to be paid came from the caucus of the council? The issue should be addressed to a person as a person had to be held accountable. What happened in the case of a Council?

The Chairperson suggested that the Committee needed to get an understanding. His own view, if one looked at provinces and national, was that the person who had to feel the pain was the DG because it was the DG’s job. However, if the accounting authority was the council, the legislation should state ‘council members’ because council was different from council members or councillors. There had to be consequence management. That was what SCOPA kept talking about. An individual had to be held accountable. The legislation could not require the city of Johannesburg to pay back the money because then the citizens of Johannesburg were the ones being deprived. That needed to be clarified. It had to be debated and a decision made.

Adv Ebrahim suggested that the Committee was getting confused with the terminology. There were two centres of power: the one was the administrative centre of power and the other was the political centre of power. What the amendments were seeking to do, was to be a deterrent to, or to punish, the administrative centre of power, which was the accounting officer. In a municipality, that would be the municipal manager. The executive authority, which was political, merely had the obligation in terms of the amendment to collect the money. There would be no need to act against the council. If the municipal manager did not collect the money, the Auditor-General would write to the council to collect the money. That was covered under the prevailing policy.

The Chairpersons accepted that position but asked that the legal advisor put in the legislation that, at local government level, the municipal manager was accountable so that it was clear to everyone.

Adv Ebrahim explained that the legislation applied to a wide range of entities and many had their own titles for the accounting officer. For example, in Parliament, it was the Secretary of Parliament. The legislation therefore stated that an accounting officer was the person defined in the PFMA or the Municipal Finance Act or any person designated as an accounting officer in terms of any other law as the case might be.

The Chairperson declared the Committee satisfied.

In terms of the advisory committee being referred to, Adv Ebrahim noted that the existing Act already provided for the Auditor-General to appoint advisory and other structures outside of the administration of the OAG to provide specialised advice to the Auditor-General. There was a cross-reference to that section. That committee did not have the power to take a decision as it was intended merely to assist the Auditor-General to take a decision.

Section 5C Judicial review
The judicial review was that process for those accounting officers or accounting authorities that were dissatisfied or aggrieved by the decision of the Auditor-General. They could approach the High Court for a judicial review in terms of the Promotion of Administrative Justice Act. The Act provided the procedural steps for a judicial review. In the event that an accounting officer or accounting authority approached the court, the requirement to collect the debt would be suspended until the High Court decided otherwise.

The Chairperson asked the Committee to confirm the decision that it had taken that, despite submissions about cost etc, the process would be to go directly to court. The Committee did not want to include an ombudsman in the process.

Mr Singh agreed. He asked about the person who had left the municipality and gone somewhere else. Could the accounting officer still pursue the debt if the person was no longer with the organisation? Did the process of the judicial review not have to be articulated in the legislation? He was concerned about the wording of the sentence that said that a person could go to court if one were aggrieved with the decision of the Auditor-General.

The Chairperson asked if it was necessary to elaborate on the process of judicial review or was that the normal process when one was aggrieved. Should the legislation not state that one had a specific number of days to address a grievance?

Mr Singh comment that a traffic fine gave a date for indicating that the matter would be taken to court.

Mr McLoughlin stated that the debt could be recovered from someone who had left the entity in terms of common law. However, the legislation on which the Committee was working would establish the debt and then it was simply a matter of recovery, regardless of where the person was working. He was concerned that stipulating that the only action an aggrieved person could take was to go on judicial review could fall foul of the Constitution in that it limited a person’s rights. He thought that it would be best to allow people to take whatever action they chose, as long as the Auditor-General was informed within a specified number of days.

Adv Ebrahim agreed that the AO/AA could pursue a debt even if a person had left the employ of the entity or department. It was an excuse frequently put forward at SCOPA. The Amendment stated that if the person had left and the AO/AA had done nothing, then he or she would be responsible. The intention was for the AO/AA to find the person. The PMFA allowed an AO/AA to write off a debt if the necessary steps had been followed to recover the debt. She agreed that it was not necessary to tell a person that he or she could take the Auditor-General’s decision on review. She was also concerned that including the stipulation of a judicial review could lead to a Constitutional Court challenge. Section 5C could be removed.

Adv Bezuidenhout stated that the OAG agreed with the decision to remove Section 5C. It would, in any event, be the process that people would have to follow. It would be a Part A and a Part B review. Part A would be an interdict against the executive authority, preventing him from executing the debt certificate. So, there would be no problem.

Section 7
Adv Ebrahim noted that Section 7 was to do with the setting up of the remuneration commissions, which had been done in an earlier section. An independent commission had been set up to deal with the salaries of all Chapter 9 Heads, judges and so on. The Committee would add in its legislation that, when the salary of the Auditor-General was considered, the recommendations of the remuneration commission had to be taken into account by the independent commission, but it was not bound by those recommendations

Section 10
The Auditor-General would have to include the additional information in his Annual Report. The Report should state which matters had been referred for investigation, any remedial action taken, and any certificate of debt issued so that Parliament could hold the relevant Ministers accountable.

Section 12
There was only a minor change. The word ‘prescribed’ had been removed because it meant that it was governed by regulations. The term ‘setting out’ had replaced ‘prescribed’.

Section 20
Section 20 dealt with audit reports. A report had to reflect an opinion, a conclusion or finding. The word ‘annual’ had been removed from ‘annual financial statements’ had been removed as the Auditor-General might want to audit certain auditees every second or third year.

Section 23
Section 23 had been explained in detail by Adv Bezuidenhout and the recommended changes would be made, and regulations written on the financial distress issue.

Section 27
The change was from ‘Public Accounts and Auditors Act’ to ‘Auditing Professionals Act’.

Section 41
The change was to the Auditor-General’s own financial statements. It initially referred to GAAP, but GAAP no longer existed, and the Bill indicated that it had to be best international practice. That was so that the legislation was not too prescriptive.

Section 52
Section 52 dealt with all the regulations that had to be drafted so that the Auditor-General could not use the powers unless specific regulations had been promulgated.

Mr Singh asked if there was a timeframe for when the regulations had to be promulgated.

Adv Ebrahim stated that a timeframe had not been included in the Amendments. It was not ideal to give specific dates in an Act. Besides which, regulations changed from time to time. The drafters suspected that for the first couple of years, the Auditor-General might want to test out the initial regulations, and then might want to amend them.

Mr Singh pointed out that without the regulations, the Act could not be implemented and so he asked if the OAG had given thought to that aspect.

Adv Bezuidenhout stated that the plan was to implement Regulations by 1 April 2019. OAG was beginning that process and would undertake consultations before promulgating the Regulations.

The Chairperson suggested that rather than a specific date, the legislation should state that it had to occur within a specified number of days.

Amendment of certain expressions in Act 25 of 2004
Adv Ebrahim explained that the section contained the ‘Amendment of certain expressions in Act 25 of 2004’. She had explained 16(a) which was the change to ‘Auditing Professionals Act’. The term ‘executive authority’ had been used in the Act even though it had not been defined. Executive authority had been used in the meaning of the PFMA. The assumption was that only those organisations that were subject to the PFMA had an executive authority. The change was to simply use the expression ‘executive authority’ and to exclude the words ‘within the meaning of PFMA.’ That would capture all executive authorities.

Amendment of the arrangement of sections to Act 25 of 2004
Adv Ebrahim stated that it was a contents clause.

There were no further changes.

Mr Singh and the Chairperson worried about being specific about the date for Regulations, especially as 2019 was an election year.

Adv Ebrahim said that she would change the date to ‘a date proclaimed by the President’.

The Chairperson assumed that it was a joint project between the parliamentary legal advisor and the OAG legal advisor and so there would be no changes or surprises from the Auditor-General’s side when it came to adopting the Amendment. He was assured that it was so.

Closing remarks
The Chairperson asked the legal advisor to provide the revised version by Thursday so that the Committee could adopt it on the Friday and then formally adopt on 22 May 2018.

Mr Singh stated that the Bill was not on the programme for the National Assembly. Did the Committee want it done before the recess in June? Otherwise it could only be done in August.

The Chairperson responded that it had to be done in the lifetime of the Fifth Parliament as it was a legacy Bill for this Committee. He would prefer that it were done before the recess and he and Mr Singh would speak to the relevant persons about the National Assembly vote.

The meeting was adjourned