Public Audit Bill: deliberations

Meeting report

FINANCE SELECT COMMITTEE
24 August 2004
PUBLIC AUDIT BILL: DELIBERATIONS

Chairperson: Mr T Ralane (ANC)

Documents handed out:
Legal opinion on the Public Audit Bill
Public Audit Bill [B1-2004]

SUMMARY
The Committee intended to adopt the Bill. However, it was felt that committee members should first engage with their provinces because these structures would also be audited by the Auditor General. A process has been initiated to get their views on the Bill. The meeting mainly focused on clauses 7 and 10.

The critical issue in clause 7 is the consultation between the person recommended for appointment as the Auditor General and the Oversight Mechanism. The question is whether consultation should be with the Oversight Mechanism or with the Minister of Finance. The Committee would seek legal opinion on this. The Office of the Auditor General feels that a perception might arise that the Office is not independent if AG has to consult with Minister.

It is agreed that the AG should report to Parliament. Questions were raised whether the Bill should also make the AG report to the National Council of Provinces. Currently it states that the AG reports to the National Assembly. The Office of the AG said that it has no problems reporting to both Houses. However, the Constitution clearly stated that the AG reports to the National Assembly.

There was general agreement amongst members that some framework should be established to determine the salaries of heads of Chapter Nine institutions.

MINUTES
Mr W van Heerden (Corporate Executive Manager), Mr C Benjamin (Corporate Executive Manager) and Mr C Botes (Senior Manager) represented the Office of the Auditor General.

Clause 7
The Chairperson said that there is a problem around the Auditor General (AG) accounting to the National Assembly (NA) only. It was felt that the NCOP should be included as well. He indicated those clauses in which the Bill speaks of the AG reporting to the NA.

Clause 7(1) needs to be overhauled. There is a feeling that clause 7(2) is covered by s219(5) of the Constitution. The critical issue in clause 7(1) is the consultation between the person recommended for appointment as the AG and the Oversight Mechanism. The Chairperson was of the view that the Minister of Finance (and not the Oversight Mechanism) should consult with the AG before making recommendations to the President for the determination of the conditions of employment of that person. One does not want the Oversight Mechanism to be both player and a referee at the same time.

Mr Van Heerden said that the Office of the AG took its cue from the Constitution. The President appoints the AG after a process followed by the NA. The Minister of Finance was not involved in that process. The involvement of the Minister might give rise to perceptions that the AG is not independent. The Office's budget fees are also determined by the AG himself and not in consultation with the Minister.

Mr Benjamin added that unlike the old Acts, the Bill strongly relies on the Constitution. The main purpose of drafting this legislation is to align the law with the Constitution and other recent legislation. The Constitution is very clear on the independence of the AG and other Chapter 9 institutions.

Mr D Botha (ANC) agreed that the Constitution is clear. He asked who does the interviews of candidates before the NA recommends a person to the President.

Mr Botes replied that the incumbent AG was appointed in terms of the Constitution. Parliament advertised the post and an ad hoc committee was constituted to review the applications, conduct interviews and recommend a candidate. The writers of the Constitution saw it fit to task legislatures with the job of protecting democratic processes. In this case it is the protection of public money. This implies that the NA would be obliged to ensure that they are involved in the appointment of the person.

Mr E Sogoni (ANC) said that the previous Bill made a provision for the Audit Commission and now this Bill seeks to do away with the Commission. Both the AG and the Minister of Finance perform oversight functions over the Departments. There might be feelings that the Minister is interfering with the functions of the Office of the AG.

The Chairperson asked how the Oversight Mechanism would be constituted. The Audit Commission used to do this kind of appointment. The AG indicated that the Audit Commission was not a parliamentary committee per se because it had representatives from the public. One does not want to tamper with the independence of the AG.

Mr van Heerden replied that there are several instances in which the Bill refers to the Oversight Mechanism. There should be a legal opinion from the parliamentary advisors on how this body should be constituted. The Office of the AG is happy to have an oversight body but is not prepared to get involved in how to structure it. It is very important that the Minister of Finance is not involved directly so as to ensure the independence of the Office.

The Chairperson said that the Bill says that the Oversight Mechanism must consult the person recommended and this is a problem. The Mechanism must play oversight and at the same time has to take part in the appointment of the person. This is one dilemma that should be resolved. Chapter 9 institutions present major problems as some do not know to whom to account or who employs them.

Mr E Sogoni (ANC) noted that clause 7(3) prohibits the President from altering the conditions of employment of the AG without the AG's consent. He asked if there is any justification for this. What happens if Parliament feels that there are some powers that are not suitable for the AG and seeks to withdraw them. He felt that the section interferes with the authority of the President.

Mr Botes replied that this is just a basic principle of fairness. Such unilateral change of terms and conditions of employment is not permitted in South African law. There might be economic reasons for wanting to change the terms and conditions but the parties must engage each other before a decision is taken.

Mr Ralane asked if there was agreement that clause 7(2) is covered by section 219(5) of the Constitution.

Mr Botes replied that at the moment there is no salary determination framework for determining the salary of the AG. The clause provides such a framework.

Mr Sogoni asked if there is any other law or document that sets the salaries of heads of other Chapter 9 institutions. He also asked why the salary of the AG has to be substantially similar to that of a senior judge and not, for instance the Public Protector.

The Chairperson asked if it would not be better to have a framework that deals with all kinds of Chapter 9 institutions.

Mr Botes replied that it is an international norm to compare the salary of the AG to that of a senior judge. There is specific reason why it should not be similar in all Chapter 9 institutions. Parliament has the power to make a decision on this matter.

Clause 10: Accountability reports to the NA.
It is not clear as to whom the various Chapter 9 institutions account. It is agreed that the AG should report to Parliament. The Constitution was passed in 1996 and the National Council of Provinces (NCOP) emerged in 1997. Perhaps this is one reason why the Constitution says that the AG reports to the NA. It seems like there might be a need to make some amendments to the Constitution.

Mr van Heerden agreed that reports should also be tabled with the NCOP. The AG did not have any reservations about reporting the NCOP.

Mr Botha agreed that the clause raises some constitutional issues. He wondered if it is not possible to insert a clause that would ensure that the AG also reports to the NCOP rather than waiting for the amendment of the Constitution.

Mr Z Kolweni felt that the best way to deal with this is to amend the Constitution if necessary.

Mr van Heerden replied that section 188(3) of the Constitution provides that the AG must submit audit reports to any legislature that has a direct interest in the audit of any authority prescribed by national legislation. In terms of this section, the NCOP would be entitled to receive some report when it comes to provincial and local government reports.

Mr Botes added that since 1995, reports have been tabled in both Houses of Parliament. The NCOP used to have a Public Accounts Committee but the Committee was ineffective.

Ms Robinson asked if it was not time to revive the Committee.

Mr Benjamin replied that this idea was mooted but provincial Public Accounts Committees were opposed to it.

Mr Sogoni said that a province would have a direct interest in a report on its audited books. He wondered if it could be said that the NCOP would also have a direct interest in the report.

The Chairperson ruled that the best approach would be to seek legal opinion on this matter.

Clause 10(3) should be rephrased since it was agreed that there should be a parliamentary committee. The clause should make it clear that Parliament must appoint a committee to have oversight over the AG.

Clause 13(1) should also be rephrased. It would be appropriate for the AG to consult the Minister of Finance before making the determinations referred to in the clause.

Ms D Robinson (DA) asked if the confidentiality of audits on secret accounts as provided for in clause 22 would be revisited.

The Chairperson relied that the question had already been addressed in the previous meeting he asked the presenters to take note of the question.

Legal Opinion on the Public Audit Bill
The Chairperson referred to an opinion on the Bill prepared by the Parliamentary Legal Advisors.

Opinion on clause 7(1)
The Committee had suggested that the Minister of Finance must consult the person recommended and make recommendations to the President, instead of the Oversight Mechanism.

The legal advice says that:
"section 193 of the Constitution provides that the President, on the recommendation of the National Assembly, must appoint, inter alia, the Auditor-General. This section is, however, silent on the procedure for the determination of the conditions of employment of the Auditor- General. However, because it is the National Assembly that recommends the appointment, we are of the view that it makes sense to impose the responsibility of consulting the person recommended on the Oversight Mechanism. Notwithstanding our view above, this is a matter for policy decision".

The Chairperson asked the presenters to comment on the silence of the section on the issue of procedure and on the fact that this is a policy matter.

Mr van Heerden opined that everything in the Bill is a policy matter that Parliament has to decide upon. One of the reasons for the Bill is to plug the gap caused by the silence of the section on the procedure. One does not want appointment processes to be complicated by lack of procedure.

Opinion on clause 13(1)
The Chair noted that the Parliamentary Legal Advisors were of the view that should a decision be taken to replace "Oversight Mechanism" with "Parliamentary Committee", it will be necessary that the definition of "Oversight Mechanism" be deleted as well.

The Office of the AG indicated that they would be happy to abide with that decision.

The meeting was adjourned.