1. INTRODUCTION

The Public Audit Act (Act No 25 of 2004) came into effect on 14 December 2004. The objects of the Act as indicated in Section 2 are:

1. to give effect to the provisions of the Constitution establishing, and assigning supreme auditing functions to, an Auditor-General;
2. to provide for the auditing of institutions and accounting entities in the public sector; and
3. to provide an oversight mechanism established in terms of section 10 (3)-
1. to assist and protect the Auditor-General in order to ensure the independence, impartiality, dignity and effectiveness of the Auditor-General; and
2. to advise the National Assembly (our emphasis).
2. FUNCTIONS OF OVERSIGHT MECHANISM

In its report, dated 4 February 2005, the Ad Hoc Committee on Auditor-General listed specific functions to be performed by the oversight mechanism (ATC, 15/02/05). These functions in addition to others listed in the Act could be distinguished between what the Auditor-General must do, after consulting the oversight mechanism, what the oversight mechanism must do, and reporting, notification and submission of documents by the Auditor-General/Deputy Auditor-General.

The Auditor-General must consult the oversight mechanism on:

• standards to be applied in performing audits, the nature and scope of such audits, and procedure for handling complaints when performing these audits (Section 13(1));
• the bases for calculating audit fees (Section 23(1));
• the retention of any surplus (Section 38(4));
• the appointment of the Deputy Auditor-General (Section31(1));
• the issuing of a Code of Conduct for authorized auditors (Section12(3)(b)); and
• regulations submitted to the Speaker for tabling in the National Assembly (Section 52(2)).

The oversight mechanism must:

• appoint the external auditor on an annual basis (Section 39(1));
• consult the recommended candidate for appointment as Auditor-General in order to make recommendations to the President regarding his/her conditions of employment (Section 7(1));
• receive any concerns of the Audit Committee established in terms of the Act (Section 40(6)(b)(iii));
• consider the budget and business plan and within two months of receipt thereof submit its recommendations to -

1. the Speaker for tabling in the National Assembly; and
2. the National Treasury (Section 38(3)); and

• approve international best practice relating to financial statements submitted by the Auditor-General which must be in accordance with South African Statements of Generally Accepted Accounting Practice (Section 41(2).

• the Auditor-General must at least six months before the start of a financial year submit the budget and business plan to the oversight mechanism (Section 38(2));
• the Auditor-General must submit the annual report, the financial statements and the audit report on those statements within six months after the financial year to which they relate to the oversight mechanism and to the Speaker for tabling in the National Assembly (Section 41(5));
• the Deputy Auditor-General must report to the Auditor-General and the oversight mechanism on any actual or impending –

1. under-collection of revenue due;
2. shortfalls in budgeted revenue; and
3. overspending of the budget or expenditure not in accordance with the budget (Section 43 (5)(b)); and

• the Deputy Auditor-General must notify the external auditor and the oversight mechanism of any decision on the part of the Auditor-General to proceed with the implementation of a decision which is likely to result in irregular or fruitless and wasteful expenditure (Section 45(3)).

To set up the oversight mechanism the Rules Committee should initially in principle decide on the nature of the proposed mechanism and its mandate. The Rules Subcommittee could then be instructed to draft appropriate Rules. The Rules should cover, inter alia, composition, chairperson, appointment procedures, alternates, term of office and quorum.

The oversight mechanism could be a fully-fledged committee or it could take some other form, such as a component of an existing committee. It should be noted that at the time when the Ad Hoc Committee on Public Auditing Function reported to the House on the Public Audit Bill, the committee recommended that the Assembly, through its Rules Committee, should establish a (dedicated) committee of the House with, as its sole mandate, conducting oversight over the Auditor-General. At the time the committee report was noted by the House (17 February 2004).

If the oversight mechanism needs to be set up urgently, relevant rules could be prepared and taken directly to the House for adoption.

30/03/05