EDITORIAL: Teeth for the auditor-general
A relatively small change to the Public Audit Act could have a big impact
Everyone would agree that the office of the auditor-general has done an admirable job in auditing government books. The office has maintained its independence, integrity and professionalism in the face of an onslaught of corruption on state institutions, which has seen the criminal justice system hollowed out and state capacity weakened.
Everyone would also agree that the Public Finance Management Act is a beautiful piece of legislation, designed in accordance with the Constitution to protect the public finances. The Treasury, which is the overall enforcer of the act, has also done an admirable job in safeguarding the nation’s resources. But despite the strength of these institutions and a strong legal framework that has been in place since 1999, irregular, unauthorised and wasteful expenditure amounts to billions every year.
In the 18 years that the Public Finance Management Act has been in force, not a single case has been prosecuted
The auditor-general reported last week that irregular expenditure in national and provincial government entities reached R45bn in 2016-17. As not all entities reported their financial results by September 30, as required, the auditor-general estimates that irregular expenditure could be about R65bn. Within this mountain of expenditure, there are countless cases in which a prima facie case for criminal prosecution exists.
But in the 18 years that the Public Finance Management Act has been in force, not a single case has been prosecuted. Despite fastidious auditing and warnings from the Treasury, there has been no accountability for public servants, just like there has been none for their political principals.
Furthest from compliance are those 26 entities that just didn’t report at all. Several of these are state-owned enterprises, which dare not report as their status as going concerns is in doubt and they are hoping for further support from the Treasury.
Others – like the South African Revenue Service (SARS) – are in dispute with the auditor-general over their financials. In the case of SARS, the argument is over bonuses paid to executives, which the auditor-general wants classified as irregular due to a governance breach.
State-owned entities, in general, showed drastic deterioration, with irregular expenditure tripling over the past four years.
That’s why a new amendment to the Public Audit Act, which has been quietly worked on in Parliament is so important. The amendment bill emanates from the committee on the auditor-general, chaired by energetic ANC MP Vincent Smith, who also led the SABC inquiry.
The amendment will give the auditor-general the authority to refer adverse findings to an investigation agent, such as the Hawks or the Special Investigating Unit. Up until now, it has been up to the executive authority – the cabinet minister in charge – to refer findings to the criminal justice authorities. Should the executive authority fail to act after a reasonable period, the auditor-general can issue a certificate of debt to recover the losses.
The amendment also gives the auditor-general’s office more flexibility to prioritise work according to its importance. So very small public entities, with limited cash flows will not need a full audit every year and a report from the auditor-general’s office will be considered adequate.
The committee must first get the permission of the speaker of Parliament to table its amendment bill, which it hopes to do on November 17. After that, it hopes to process and finalise it before Parliament rises for the year. If passed and made into law, this relatively small change could have a big impact.
It is unusual for a bill to originate in a parliamentary committee. Most legislation comes via the executive and is then introduced into Parliament.
In the face of the deterioration of our public institutions and Parliament’s lackadaisical approach to accountability, the tabling of this bill is evidence that there are MPs from the governing party who still take seriously their role of holding the executive and government administration to account.