Cape Town - Parliament’s standing committee on the auditor general on Friday morning grappled with proposed amendments to the Public Audit Act, aimed at allowing government to recover misspent funds by departments and entities from the accounting officers responsible.
The committee is on a mission to ensure that the office of the Auditor General is able to impose consequences on department and state-owned enterprise (SOE) accounting officers found to have failed in protecting taxpayers’ money from irregular and unauthorised as well as fruitless and wasteful expenditure.
Auditor General Kimi Makwetu last year found that irregular expenditure across the state was as high as R45.6bn. Despite these violations of the Public Finance Management Act, no one has ever been jailed or received a fine.
The amendment bill intends to empower the AG to compel the accounting officer of an errant entity to pay back the costs of monies misspent. This would change the responsibility of the office considerably from that of a monitor of accounting principle compliance, to a fiscal watchdog.
The committee debated whether the office of the Auditor General would be the appropriate office to recover the funds that it found were misspent by government departments and entities. They also explored the possibility of a mediation mechanism if accounting officers contest the AG’s findings.
Legal adviser to the committee Xolisile Mgxaji told the committee that inputs received ahead of their public hearings outlined new proposals for the AG’s functions. These include dispute resolution mechanisms when accounting officers wish to contest the office’s findings.
The AG currently does not have a debt collection mandate and this would bog the institution down with an additional burden, thus distracting it from its core function, said Mgxaji. He also mentioned recommendations that recovered funds be transferred to the National Revenue Fund and reallocated by the National Treasury.
Committee chairperson Vincent Smith said the current recommendations for debt recovery do little to address the lack of consequence management if the funds are recovered and reallocated to the very same entity which misspent them, or even under the same accounting officer who approved them.
“My view is that if I argue against what you are saying, money is lost through maladministration. If the AG picks it up, recovers the funds and gives it back to the same department, what are the consequences?” Smith asked.
Committee member for the Inkatha Freedom Party Narend Singh said National Treasury should be allowed the discretion to decide what happens with monies recovered after the AG’s findings are implemented and enforced.
“If someone has unfairly gained R1m, then that money should go back to the department via Treasury. If the AG administers this recovery mechanism, what do they get out of it? If the AG can get a kind of retainer for the work it is doing, they will be compensated for these demanding activities,” said Singh.
Committee member for the Congress of the People Deidre Carter suggested that National Treasury be given an opportunity to give input from Treasury on the matter during the public hearings starting next week.
Regarding mechanisms for contesting the AG’s findings, Smith said a number of inputs were of the view that rather than using the high court to appeal findings by the Auditor General, a mediator be used to resolve disputes departments have with the AG’s findings.
While committee member for the African National Congress Madala Ntombela agreed with the idea of introducing a mediator, David Topham of the Democratic Alliance said introducing a mediator to replace the courts may blur the consensus that PFMA violations are indeed criminal.
The committee will hear from organisations including Accountability Now, the Independent Regulatory Board of Auditors and the South African Institute of Chartered Accountants. The AG’s findings have been contested and referred to review by departments, including the Department of Water and Sanitation.* SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.