The Standing Committee on Public Accounts having considered the Legal Opinion of the Parliamentary Legal Advisers on the legality of unsigned audit reports submitted to Parliament for tabling, and the validity of audit reports signed by means of an electronic signature or a company rubber stamp reports as follows:

The Committee has been experiencing a practice by some of the Parastatals/Departments where Annual Reports containing unsigned audit reports from external auditors are tabled in Parliament. This practice is of a great concern to the Committee as it might have legal implications on the status of these reports.

These led to the Committee requesting a legal opinion from the Parliamentary Legal Advisers on the validity of such reports and the validity of an audit report signed by means of an electronic signature or a company ’s rubber stamp.

From the legal Opinion received, it is clear that such reports might be in contravention of the Common law, South African Audits Standards (SAAS) and the Electronic Communications and Transactions Act, 2002.

The Committee therefore recommends that:

An audit report tabled in Parliament must be signed by an authorized auditor either in his/her personal name or in the name of the Company;

If an electronic signature is used the report must be certified to be correct by an officer in the service of the Company;

Where a Company uses a rubber stamp, an official of the company must also sign the report;

That Departments and Parastatals should comply with these requirements; and

Reports that do not conform to these standards will be rejected and sent back.

Report to be considered.

The Standing Committee on Public Accounts having considered the report of the Correctional Services reports as follows:

The Auditor-General was unable to verify the validity, accuracy and completeness of medical expenditure amounting to R630 million paid to Medcor.

The Committee recommends that the Accounting Officer:

Immediately takes all appropriate steps to finalise the outstanding agreement with Medcor, as well as all other outstanding matters currently limiting the extent to which Auditor-General can audit the Medcor expenses;

Ensures that full and complete records of payments made to Medcor for the 2004/05 financial year audit are provided to the Auditor General;

Compiles and maintains an accurate membership database;

Limit the employer' contributions to the maximum amount permissible per member per month in line with the rest of the public service;

Ensures compliance with schedule 7 of the Income Tax Act (Act No. 58 of 1962) relating to taxation of medical aid fringe benefits;

Considers the possible liability to the state should Medcor not have the necessary funding levels that are required in terms of section 35 of the Medical Schemes Act, Act No. 131 of 1998.

Internal control shortcomings were reported for the third year in a row, including a lack of management reviews, and non-compliance with laws and regulations.

The Committee is aware of a number of corrective actions that the Accounting Officer can consider, including –

Revisiting and updating all policies and procedures;

Ensuring proper monitoring structures and accountability at all levels;

Implementing and monitoring proper management controls, especially in terms of overtime;

Ensuring that individual performance contracts of staff include measurable key performance areas that are revised on an annual basis; and

Investigating alternative systems to address the control shortcomings with respect to leave administration especially relating to process flows for approval. .

However, these are regular management actions required of accounting officers and should not be pointed out by a committee of Parliament.

The Committee therefore recommends that the Accounting Officer ensures that;

He takes all appropriate steps to fully comply with the requirements of section 38 of the Public Finance Management Act, or run the risk of being guilty of financial misconduct in terms of section 81 of the Act.

If the Accounting Officer is unable to comply with any of the responsibilities determined for accounting officers in the aforementioned section, he must promptly report the inability, together with reasons, to the Minister and the National Treasury. 1

The Accounting Officer should inform the Committee and the Auditor General of the progress made with regard to addressing the problems of internal controls capacity.

A number of weaknesses were reported by the Auditor General regarding co-ordination on management levels between the Department and the State Information Technology Agency (SITA) with respect to the various software and hardware needs of the Department.

The Committee recommends that the Accounting Officer urgently ensures –

proper consultation and co-ordination with SITA;

an appropriate service level agreement with SITA;

proper consideration of the cost benefit analysis relating to the change over to Microsoft solutions, including aspects such as the purchasing costs of software/hardware and data conversions required;

compliance with the SITA Act; and

The finalisation of the IT strategic plan, which has to incorporate the finalisation of a disaster recovery plan.

The Committee is concerned about the return on investment received for the Department ’s training expenditure of R4,471 million during the year in question. The Committee is also concerned that the Department had apparently overlooked the opportunity to make use of the services of the SA Management Development Institute (SAMDI) – the designated public sector management training institution – seeing that the training related to leadership development of junior and middle managers.

The Committee recommends that in future the Department ensures that they give full consideration to the services available from public sector institutions such as SAMDI and National Treasury.

There was no unauthorised expenditure disclosed for the 2003/2004 financial year. With respect to the unauthorised expenditure of R41,642 million incurred during the previous year, the Committee took note that the funds were spent on essential services for prisoners.

In the light thereof that the Accounting Officer managed to contain excess expenditure during the last year, the Committee recommends that Parliament authorise the amount of R41,642 million in respect of the previous year.

However, the Committee noted that in numerous instances of virement in the various programmes and sub-programmes which seem to indicate lack of proper planning and budgeting controls.

The Committee recommends that the Accounting Officer:

Improves the budgetary controls within the Department; and

Take disciplinary actions against all officials causing overspending.

The Committee is not satisfied with the slow progress being made with the investigation into possible fraudulent qualifications. The extent of overpayment and unjustified remuneration is still unknown.

The Committee is of the opinion that this investigation, reported in 2000/01 already, has to be completed. If this is not possible, reasons must be provided to Parliament, as well as a commitment to a finalisation date.

In the case of three comparable departments, the following information was disclosed to Parliament in their respective annual reports for 2003/04 financial year

The Committee wishes to emphasize the responsibility of the Accounting Officer for the management of leave and overtime in terms of the PFMA and the Public Service Act. The Committee will in future focus on the proper management of leave and overtime, specifically whether -

proper compliance with policies and procedures in respect of leave and overtime and the necessary controls to enforce compliance are in place to ensure that leave and overtime are not misused;

the responsibility for monitoring and authorizing overtime is clearly assigned;

human resource information exist, capable of meeting the needs of management with regard to various issues as such leave use and cost; and

all reasonable means of eliminating the need for overtime has been assessed.

In view of the monitoring role of the Audit Committee as determined by the PFMA and the Treasury Regulations pertaining to the internal control environment, the Committee wishes to recommend that the Audit Committee, on a quarterly basis, monitor and evaluate the progress made with respect to all of the above areas of concern identified. The Audit Committee must report thereon in the next annual report of the Department.

The Annual Report indicated that out of an approved and funded staff establishment of 35,675, only 32,832 departmental posts were filled at the end of the financial year under review. An additional number of posts have subsequently been approved, bringing the approved establishment to 48,674.

The Committee recommends that the Portfolio Committee on Correctional Services consider:

monitoring the progress with the filling of all vacancies, especially critical top management positions;

ensuring that, overall, the issues raised by the Committee in this Report, are addressed in the Department’ s next strategic plan, and are monitored for implementation.

Report to be considered.

Report of the Standing Committee on Public Accounts (SCOPA) on the 6th Annual Conference of the Association of Public Accounts Committees (APAC) held in Nelspruit, Mpumalanga Province from 3– 6 October 2004.

The SCOPA having attended the Conference report as follows:

The SCOPA was invited to attend the 6th Annual ACPAC Conference and the Annual General Meeting held in Nelspruit, Mpumalanga Province from 3 to 6 October 2004. The Committee was represented by the multiparty delegation consisting of the following members:

Mr. F Beukman (NNP: Chairperson);

Mr. V Smith (ANC);

Ms. L Mabe (ANC);

Mr. D Gumede (ANC);

Mr. R Mofokeng (ANC);

Mr. G Madikiza (UDM);

Dr. M Van Dyk (DA);

Mr. E Trent (DA);

Mr. B Kannemeyer (ANC);

Mr. E Pule (UCDP);

Mr. P Gerber (ANC);

Mr. E Molefe (Support Staff);

Mr. L Pakati (Support Staff);

Mr. P Netshendama (Support Staff); and

Mr. D Ramurunzi (Support Staff)

The APAC was established in July 1997 with the intention of empowering members of the Standing Committees of Public Accounts and their support Staff. This would be achieved by offering orientation to newly appointed members of the Public Accounts Committees, training and commissioning research on matters of interest to the Association. However the ultimate mission of APAC is to assist members in understanding oversight processes and principles within the South African Constitutional framework and parliamentary practices, as well as the financial management and performance management systems.

The APAC holds an annual Conference and General Meeting where progress in oversight by its members is monitored and experiences are shared. The 2004 Conference, with a theme ‘Celebrating 10 yrs of Transparent Public Accountability and Moving towards effective oversight and Accountability in the next decade’ which was held in Nelspruit, Mpumalanga from the 3-6 October was attended by representatives from, Australia, Provincial Public Accounts Committees, SCOPA National and the following SADCOPAC members (Botswana, Lesotho, Seychelles, Tanzania, Malawi, Mozambique, Zimbabwe, Swaziland and Kenya).

The Executive Mayor of Mbombela Municipality, Ms. R Mhaule welcomed the delegates and thanked APAC for its decision to host its 2004 Annual Conference in Nelspruit. The Conference was officially opened by the Chairperson of the Association Mr. V Smith, MP, who encouraged delegates to critically examine and unpack the concept of accountability, oversight and performance and come with solutions on how APAC could make difference in improving the life of ordinary citizens of this country.

The Conference was divided into three Commissions viz. (Strengthening oversight ability and effectiveness of the legislature; An African Perspective on oversight by Legislatures; and Implementation challenges of the Municipal Finance Management Act.) with each Commission allocated three Guest speakers.

There were further two guest speakers who presented papers on general themes of interest to the Conference, viz. ‘Relationship between SCOPA and the Accounting Standard Board’, which was presented by the CEO of the Board, Ms. E. Swart and ‘Celebrating 10 yrs of Transparent Public Accountability and moving towards effective oversight and Accountability in the next decade’ which was presented by the Auditor-General, Mr. S Fakie.

Commission/ Theme 1: Strengthening oversight ability and effectiveness of the legislature.

Ms. S Lucas, APAC EXCO member, chaired the discussions and the panelists were, Prof. T Sono (APAC EXCO member), Ms. M.N Matladi (Chairperson of the SCOPA, North West Legislature) and Prof. Stan Sangwena (Chairperson of the Public Service Commission).

In their presentations the panelists noted critical areas that are an essential part of improving the oversight ability of legislatures and they identified the following as main priorities for action:

Appropriate Skills of members;

Committees should be suitably resourced;

Awareness Programs on ethics and Good Governance;

That legislatures and Parliaments should ensure that section 92 and 133 of the Constitution of 1996 which relates to Cabinet and Executive Council’s accountability to both Parliament and Legislatures are effectively and continuously complied with;

That Parliament and Legislatures should clarify the roles of those who have to account to them;

Performance measurement must be employed as a tool to enhance accountability;

The effectiveness of Statutory bodies must be maximized;

Promotion of intergovernmental co-ordination viz. to monitor performance of a particular sector across the provinces e.g Education;

The roles of SCOPA should be reviewed especially in regard to budget process;

Lack of follow-ups on previous Committee Resolutions; and

Conflict between party loyalty and the obligation to hold government accountable;

Commission 1 resolved that subject to the availability of resources, the following resolutions should be implemented by SCOPA as soon as possible:

Appropriate skilling, capacity building & empowerment of MPLs/MPs and support staff;

Provision of resources to committees and support staff (equipment, etc);

Follow up & effective tracking system on resolutions of SCOPA & involvement of Treasury and the Office of the Auditor-General in order to assist on the implementation of resolutions and checking the implementation of the previous year's resolutions during the next audits (Chapter 9 institutions, e.g Public Service Commission) and reporting by the Audit Committee to SCOPA in terms of the implementation of resolutions;

Strengthen the working relationship between the Public Accounts Committees and other portfolio committees;

Refining the House rules of the different Legislatures to give maximum support to committees;

Sharing of information by SCOPA (bringing SCOPA committees' reports from Legislatures to APAC);

Assistance to provincial Public Accounts Committees by APAC, e.g. capacity building workshops; and

Establishing Memoranda of Understanding with external institutions where it assists SCOPA to operate effectively.

Mr. M Seloane, APAC EXCO Member, chaired the discussions on this theme with panelists of Dr. H Mateme (APAC EXCO Member), Mr. Z Mkabile (Chairperson, Public Accounts Committee, Eastern Cape) and Mr. P Loney (Member of Lara, Deputy Speaker, Australia).

The Panel in their presentation noted the following:

There is no distinctive difference on African perspective on oversight. Principles of oversight are the same, and conditions of dealing with oversight are different;

For any oversight function of a legislature to be efficient and effective, certain standards and norms must exist. These basic norms includes, conducive legal framework, appropriate institutions and structures for implementation and other instruments to enhance implementation;

There is a need for oversight as it deepen democracy, promote good governance, reinforces transparency, monitors alignment between policy, planning, budgets and implementation, ensures the effective, efficient, economical and equitable delivery of services and hold the executive accountable;

That although liberalization from Colonialism in Africa started in the 1960’s, literature indicate that the concept of oversight in African governments started showing only in the 1990’s;

That African Governments are not the only one grappling with the issue of oversight;

That structures such as APAC, SADCOPAC and other related organisations on the Continent should find their way into PAP and in unison with other government structures make good governance a reality on the African Continent;

Concerned with the quality of responses put forward by the accounting authorities on matters raised by the legislature and in some cases responses had not been forthcoming at all;

The presence of the Executive Authority at the oversight meetings might give rise to an improvement to the quality of the responses put forward;

The investigative power of the Public Accounts Committees should be backed up with a legislated power to summons witness and demand the production of documents; and

If Public Accounts Committees are to achieve the objective of being the primary mechanism for scrutiny of government, members working on Parliamentary Committees need to be able to distinguish between their roles as members of Parties, and their role as a Committee member;

Commission 2 resolved that:

There is a need for a research on the structures and processes of financial oversight by Parliaments and Legislatures in Africa.

Ms. R Mabena, APAC EXCO Member, chaired the discussions on this theme with panelists of Mr. K Kumar (Chairperson, IMFO), Ms. N Hlangwana, (Mayor, Mafikeng) and Ms. J Downs (APAC EXCO Member).

The Panel in their presentation noted the following:

That the MFMA is going to assist in improving the accountability of local government;

That in order for it to be successfully implemented we need to be aware of possible constraints and problems in order to plan for them and to make provisions for capacity building and extra budget allocations where necessary;

That there would be major challenges in the implementation of the MFMA. These relates to:

Severe capacity constraints at several levels;

There are no uniform information systems set up to facilitate the reporting required either for the PFMA or the MFMA;

Weak Internal Audit and Audit Committees. It might be difficult to find properly qualified people in rural municipalities where salaries may not attract people with the requisite skill levels. The same applies to Audit Committees, there may not be people living in rural areas who are able to serve on an Audit Committee;

Oversight Committees. Those municipalities that set up public accounts or oversight committees will more than likely be starting with very low levels of experience and skill;

Provincial Governments has often been reluctant to intervene in local government and may be slow to make the necessary interventions.

Frequent reporting requirements and unrealistic deadlines;

Implementation performance expectations are based on the performance of the more developed municipalities; and

The Act is very generic and does not address the unique needs or crisis facing various municipalities such as: 139 interventions, Lack of Capacity etc.

3.3.3.2 Commission’s Recommendations.

Commission Three resolved that:

There should be the establishment of a forum where the Premier and/or MEC for Local Governments meet with mayors on the one hand and a collective forum of the above and the Head Of Department’s of Local Governments department and municipalities;

There should be a uniform interface for Information Technology Systems. The National Treasury would be requested to issue guideline on the software, ensure a uniform interface capacity building and SCOPA’s should assess the impact of capacity building programs;

SCOPA’s Public hearings should include municipalities in order to hear their assessment of the programs;

National Treasury and all relevant role-players must set in their regulations minimum qualifications as standards for officials.

SCOPA’s should monitor the MFMA’s implementation and ensure that enough attention is given at all three spheres to cost drivers;

APAC should strongly support Public Accounts Committees in Local Government;

APAC should raise funds to hold workshops for representatives from national and provincial Public Accounts Committee’s and representatives from Local Government’s Public Accounts Committee’s;

APAC is uniquely positioned to assist Local Government Public Accounts Committee’s with training and the new EXCO should consider interaction with Local Government and National Treasury regarding the guidelines to be issued by National Treasury; and

APAC EXCO to investigate and report to relevant authority on the Accountability arrangements.

Mr. F Beukman, member of the APAC EXCO formerly introduced a booklet on Municipal Finance Management Act (MFMA) to APAC members. The booklet deals with the role of the national and provincial public accounts committees at the local government level.

Election of the Office Bearers

The following members were elected to serve on the Executive Committee of the Association:

Chairperson: Mr. V Smith (SCOPA: National);

Deputy Chairperson: Ms. R. T Mabena (Mpumalanga);

General Secretary: Ms. N Abrahams (Eastern Cape);

Deputy Secretary General: Ms S Lucas (Northern Cape);

Treasurer: Mr. M Seloane (Gauteng);

Mr. M Holford (Limpopo);

Mr. D Ngidi (Kwazulu-Natal);

Mr. T Marais (Northern Cape);

Mr. J Geldenblom (Western Cape);

Ms. S Kekana (Limpopo);

Prof. T Sono (Gauteng);

Ms. S Mereeotlhe (Mpumalanga);

Mr. Z Mkabile (Eastern Cape); and

Ms. J Downs (Kwazulu-Natal).

The members of the delegation would like to extent their appreciation to the organizers of the events and the Mpumalanga Public Accounts Committee for their hospitality.

Report to be considered.

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Competition Commission for the year ended 31 March 2004, tabled in Parliament on 22 September 2004 and referred to it, reports as follows:

The Committee noted the unqualified audit opinion expressed by the Auditor-General, and trusts that future audit opinion shall be equally unqualified.

retained accumulated surplus funds, but that approval from National Treasury has not yet been obtained; and

had more than doubled its depreciation charge from R919 612 to R2,147 754 owing to the office relocation of the Commission, which may also lead to a penalty for the cancellation of lease the agreement of which penalty will amount to approximately R7,2 million during the next financial year.

the reply by National Treasury to their request for retention of the accumulated surplus funds , and if permission has been denied the Commissioner must furnish the proof that the surplus funds have been returned.

The Committee is of the view that except for the aspect highlighted above, no further interaction with Competition Commission would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

The Standing Committee on Public Accounts, having considered the Annual report and the Report of the Independent Auditors on the Financial Statements of the South African Reserve Bank for the year ended 31 March 2004, tabled in Parliament on 28 September 2004 and referred to it, reports as follows:

The Committee noted the unqualified audit opinion expressed by the Independent Auditors, and trusts that future audit opinions shall be equally unqualified.

The Committee is of the view that no further interaction with the accounting authority of South African Reserve Bank is necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Independent Auditors.

Report to be considered.