Auditor-General on 2001-2002 Reports: briefing; Resolution on Legal Aid Board: adoption

Meeting report

STANDING COMMITTEE ON PUBLIC ACCOUNTS
21 August 2002
AUDITOR-GENERALON 2001-2002 REPORTS: BRIEFING; RESOLUTION ON LEGAL AID BOARD: ADOPTION

Chairperson: Mr F Beukman (NNP)

Documents handed out:
The Audit Process by the Auditor-General Presentation
Final resolution on Legal Aid Board document (see Appendix)

SUMMARY
The Auditor-General briefed the Committee on the public sector audit process and the 2001/2002 audit reports. The first part of his briefing dealt primarily with the auditing concepts. The second part focussed mainly on the actual audit process and the audit reports for 2001/2002. Thereafter, the Committee ran through the pending resolution on the Legal Aid Board and subsequently adopted it unanimously. Nothing could be done in terms of adoption or otherwise on the pending resolution on Environmental Affairs and Tourism as it was said to be unavailable.

MINUTES
The chairperson welcomed the new permanent member of the IFP Mr E T Vezi whom he announced as replacing the former committee chairperson Dr GG Woods, who was no longer part of the committee; the Auditor-General Mr Shauket Fakie and the committee members at large.

He explained that Mr Shauket Fakie's briefing was a culmination in particular of a feeling by the committee members to have an input on the public sector audit process. The chairperson further explained that the input they were hoping to get from the Auditor-General was going to help a great deal on their planning for the rest of the term and the beginning of the next year.

Briefing by Auditor-General
The Auditor-General covered the general auditing concepts, the actual audit process and the audit reports for 2001/2002. [For the Auditor-General's actual briefing kindly refer to the attached copy entitled The Audit process by the Auditor-General presentation document]

Discussion
Ms P Mothoagae (ANC) referred to what she regarded as a perception that the public sector auditors in comparison to the private sector were struggling to deal with corruption and asked for the Auditor-General's opinion on the issue. She also wanted the Auditor-General's view on what she defined as a perception that the private sector was dealing with corruption better than the public sector. How was the Office of the Auditor-General (OAG) was coping with the underfunding?

Auditor-General said there was no clear answer on the private/public sector comparison. The OAG had invested a lot of money training accountants. Money and resources had been put into the Accountants Training Scheme. The OAG was generally recognised to be the registered training ground for chartered accountants. The private sector was attractive because it offered opportunities for its staff to be able to go and work overseas. He said that there was a need to generally accept that the staff invested in the public sector was going to be lost at some time.

Regarding the question on the view that corruption was more rife in the public sector compared to the private sector, the Audit-General stated that it was a mere perception. He told the committee members to remember that private sector corruption was not widely as was the case in the public sector for fear of its damaging consequences to business. Public sector issues of accountability were far more prevalent compared to private sector. He said that that was where the perception of corruption was emerging from. He also said that often when corruption took place in the public sector, the culprits were in the private sector.

Replying to the question on the funding of the OAG, the Auditor-General said that that was in the media soon after the OAG's release of its budget report. He said that he had deliberated with the Audit Commission on the matter. And that the issue was related to cash-flow difficulties the OAG had resulting from late payments. He however stressed the funding his office generally got was not a problem at all.

Mr Mark Lowe (DP) asked to be enlightened on the use of the staff from the private sector by the OAG. He also asked the Auditor-General to shed some light on the international work his office was also involved in. He asked for the Auditor-General's comment on the current controversy that had befallen the auditing profession, and wondered what role the Office of the Auditor-General could play in that debate.

On the question on the use of staff from the private sector by the OAG, the Auditor-General's answer was that indeed the OAG was using staff from the private sector as part of both outsourcing and insourcing. He mentioned as well that 40% of all the OAG's work outsourced went to black emerging firms.

Regarding the question on OAG's involvement in international work, the Auditor-General answered by saying that they were doing international work which that started a while ago. He said that South Africa was first appointed one of the external auditors of the International Organisation of Supreme Auditors. About six years ago was also appointed external auditors of the World Health Organisation for four years which was subsequently extended and renewed by another four years. In addition to that, the Auditor-General said the OAG had been appointed as external auditors of the United Nations. Committee members that for the international work South Africa's taxpayers were not paying a cent. The main driver behind the OAG's involvement in international work was that South Africa was so highly regarded in the auditing discipline. They were looking at the benefits of international work without compromising their domestic responsibility. He made it clear that for the OAG to recruit a lot of chartered accountants they had to offer their staff international auditing experience.

On the current controversy surrounding the auditing profession, the Auditor-General said that the issue was a matter of serious concern. The OAG's report released in March this year touched on the matter. In the main the local profession could not escape that fact that the controversy was here. He said that, fortunately for the Auditors-General, the issue was less of a risk than it was for the private sector because the credibility of the Auditors-General had not been dragged into the controversy. He said that he was looking at playing an active role through his office to restore stability in respect of the matter.

Mr VG Smith (ANC) lamented what he said was a problem of government departments going through SCOPA and the latter's inabilities to detect fraud and corruption in the affected departments. He referred to the performance audit as going to be to crucial and however expressed his doubt on whether SCOPA could do the performance audit on its own without it integrating with the other agencies dealing with such issues as policy for example.

Regarding the question on SCOPA and its detection of corruption, the Auditor-General's said that the question was a difficult but an appropriate one. He said that sometimes there were unrealistic expectations on the role of the auditor. He said the expectation was that if the auditor issued an audit report he would have detected all the fraud. This was unrealistic. He expressed a need for a look for better ways of assessing risks. There was a need to accept that there would always be a risk exposure and to find out how fraud could be detected better and how to manage the expectations better.

In respect of the question on the performance audit, the Auditor-General said that his office had a policy of never questioning policy. He said that his office always tried to accept the policy given and not look at the merits and demerits of any policy. They never criticised policy itself.

The draft resolution on the Legal Aid Board
Mr Vincent Smith ran through the draft resolution on the Legal Aid Board. After that the chairperson invited comments in terms of suggested changes from the committee members. Mr Mark Lowe of the Democratic Party suggested two minor wording of the draft Legal Aid Board resolution. In the light of no further suggested changes to the draft resolution, the committee then unanimously adopted the resolution on the Legal Aid Board. [For the adopted resolution on the Legal Aid Board, refer to Appendix].

The pending resolution on the Environmental Affairs and Tourism could not be dealt with as it was said to be unavailable.

Meeting was adjourned.

Appendix
RESOLUTION
LEGAL AID BOARD

The Standing Committee on Public Accounts, having heard and considered evidence on the Report of the Auditor-General on the financial statements of the Legal Aid Board for the year ended 31 March 2001, and certain papers referred to it, reports as follows:

The Committee wishes to acknowledge the good work done by the Chief Executive Officer and his team in turning the Legal Aid Board (LAB) around from where it was two years ago.

However, the Chairperson, Chief Executive Officer and Chief Financial Officer of the LAB gave evidence before the Committee on 15 May 2002 on unsatisfactory matters as set out in the first column below.

In view of the evidence before the Committee that numerous recent developments at the LAB have resulted in improvements not necessarily reflected in the latest audit report, the Committee recommends that the LAB report to Parliament on a quarterly basis on progress made in respect of the areas listed.

The Committee has noted further assurances by the LAB that will be verified by the Auditor-General during the 2001-2002 audit, and will monitor when dealing with the said report.