Voices

Kimi Makwetu: AG’s new powers will bolster our democracy

2019-04-11 00:01

New powers are not meant to be punitive, but are a change of gear, writes Kimi Makwetu

Parliament’s unanimous vote to give the office of the Auditor-General extended powers has assumed centre stage in our public discourse.

This debate reached a crescendo in November when President Cyril Ramaphosa signed into law and endorsed the changes that will expand our public sector audit mandate.

Subsequently, the president proclaimed April 1 as the commencement date of the Public Audit Amendment Act.

The public has boldly ventured its views on the signed amendments to the act, which is the legislation that determines not only the nature and scope of our audits, but the internal operations of the Auditor-General of South Africa.

These strong opinions hailed the new powers as a long-awaited answer to their persistent calls for the Auditor-General to be given “more teeth” or “more bite instead of a bark”.

Before the amendments, we audited and reported the outcomes only to Parliament, the provincial legislatures and municipal councils, and relied on the executive to address our findings and implement our recommendations.

There have been some – chiefly public servants and academics – who welcomed the revisions but also raised their concerns that the amendments might result in our “overreaching” our key constitutional mandate, thus infringing on the work of those charged with public sector administration, such as accounting officers and authorities.

Our mandate to audit with integrity, without fear or favour

As the country’s supreme audit institution it is our job to audit and report on how government spends taxpayers’ money.

It does this by examining the accounting records and related transactions to support financial statements and report on the manner in which finances are managed, handled and reported on by institutions funded from the public purse.

Rationale for mandate extension

In 2016, concerned by the extent of irregular, unauthorised, fruitless and wasteful expenditure reported every year, the standing committee on the Auditor-General initiated the process to expand our mandate beyond auditing and reporting.

The committee, fully backed by Parliament and the presidency, felt that expanding our mandate would go a long way to further support other existing legislations – such as the Public Finance Management Act and the Municipal Finance Management Act – that are aimed at ensuring good governance and clean administration in the public sector.

These amendments will serve to elevate the existing responsibility of line managers as they were envisaged when the Public Finance Management Act and Municipal Finance Management Act were promulgated about 20 years ago.

How will these amendments work?

The Auditor-General’s activities are much the same as they had been before the latest amendments, except for three key additional steps that we can now take – beyond our traditional mandate of auditing and reporting.

The amendments introduce the concept of a material irregularity – which is the central feature of this amendment.

The focus on material irregularity is to identify, isolate and pursue other common errors or deficiencies putting the public purse at risk of financial loss.

A material irregularity means any fraud, theft, breach of a fiduciary duty or non-compliance with or contravention of the law that could result in a material loss, the misuse or loss of a material public resource or substantial harm to a public sector institution or the public.

Read: Who will save us when governance decays?

This means the focus of an audit will have to assess thoroughly the existence or otherwise of material irregularities in transactions or balances.

This is important as it eliminates speculation or doubt about the nature and substance of matters leading to, say, irregular expenditure or lack of proper accounting rigour.

Once a material irregularity has been identified or suspected under the Public Audit Act, the Auditor-General may now take the following extended actions:

. Refer a suspected material irregularity to a public body – such as Public Protector, Special Investigating Unit or police – with a mandate and powers that are suitable for the nature of the specific suspected material irregularity. The agencies would deal with the matter within their own legal mandate and take appropriate action when necessary;

Make recommendations in the audit report on how a material irregularity should be addressed, within a stipulated period of time. If these recommendations have not been implemented by the stipulated date, the Auditor-General must take binding remedial action; and, if the material irregularity involves a financial loss, issue a directive to the accounting officer or accounting authority to quantify and recover the loss from the responsible person;

If the accounting officer or accounting authority fails to implement the remedial action, including a directive to quantify and recover a financial loss, the Auditor-General must issue a certificate of debt in the name of the relevant accounting officer or accounting authority.

It is the responsibility of the relevant executive authority such as a minister, a member of the executive council or a municipal council, to recover the loss from the accounting officer or authority.

These three steps come with many checks and balances, giving the public entity or the department concerned enough opportunity to fix the flagged problem before it gets to the issuing of a certificate of debt.

That action would be taken only if and when those charged with governance fail to act.

In essence, the primary responsibility to identify and action material irregularities still remains with the line management of the audited institution.

No part of their statutory responsibilities is transferred to the Auditor-General who, through these amendments, provides a transparent and reliable source of evidence and monitors the proper restoration of an accountable system of financial management.

Audit teams will note these breaches during our annual audits. This means there will be no need for us to increase the audit scope to identify a material irregularity.

Some might rightfully ask what will happen to those who had in the past incurred irregularities that could be deemed as material irregularities by the new amendments.

The amendment act does not apply retrospectively.

However, in the case of long-term contracts that are still operative when the material irregularity is detected, the Auditor-General’s right to refer or take remedial action will apply.

This means that if a material irregularity that occurred in the past is detected in an audit that results in an audit report issued after the commencement of the amendments, it can still attract the extended powers of the Auditor-General.

For decades now, our office has been part of a national drive towards wholesale good governance in our public sector.

These amendments therefore are not meant to be punitive, but are just a gear shift in this critical developmental journey.

And we are buoyed that the majority of South Africans are fully behind us as we embark on this phase of the drive to further bolster our democracy through clean governance.

Makwetu is the Auditor-General of South Africa


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April 5 2020