Parliament of South Africa

10/11/2024 | News release | Distributed by Public on 10/11/2024 07:05

Let’s Act Now to Uphold Auditor-General’s Financial Viability and Independence

The Office of the Auditor-General is owed well over R1 billion in unpaid audit fees. The major culprits contributing to the debt are Denel, South African Airways and financially distressed municipalities. This prompted the Standing Committee on Auditor-General to call upon the National Treasury to brief it today on possible interventions to collect the outstanding debt and to discuss an appropriate funding model for the office going forward.

These steps are important to safeguard the Auditor-General's Office's financial sustainability and its independence so that it can continue to fulfil its constitutional mandate of overseeing state expenditure in an independent manner free from government interference.

The Accounting-General of South Africa, Mr Shabeer Khan, explained that one of the current interventions is to "defray excess audit fees from auditees that are in financial difficulty as a direct charge against the National Revenue Fund". A memorandum of agreement (MOA) between the National Treasury and the AG has been signed to implement a 1% audit fee charge in terms of section 1 of the Public Audit Excess Fee Act, 2019.

Mr Khan further explained that the debt owed the Auditor-General is due to the constrained fiscal environment, both locally and globally, and audit fees that are growing at a faster pace than the appropriated budget. The latter is an issue often raised by municipalities and Mr Khan cautioned that these municipalities should not be put in a position in which they are forced to divert funds from service delivery to audit fees.

As Mr Khan stated, "The Office of the Auditor-General does not have an option but to audit all government entities, departments and municipalities regardless of their credit risk." This fact has given rise to another view that the Office should be funded through appropriations. However, the model has shortcomings, in that the AG would then be subjected to budget reviews and cuts like all other public institutions. This model may also impair the Auditor-General's independence.

In responding the National Treasury's report on the matter, one committee member, Ms Ligaraba Livhuwani, said that the National Treasury should consider deducting the fees owed to AG from either the Equitable Share or the National Revenue Fund allocated to the provincial budget of the municipality concerned.

The Deputy Auditor-General, Mr Vonani Chauke, stated that the Auditor-General's office is in the process of streamlining its auditing processes in an attempt to reduce the fees charged for auditing, particularly for distressed municipalities. The Auditor-General's office is also busy digitising its work. This is because much of the audit fee's structure is accrued from the cost of the auditor's time spent auditing their clients, which would be reduced if processes were digitised.

The Chairperson of the Committee, Mr Wouter Wessels, expressed his grave concern about the lack of clear strategic interventions to deal with the matter at hand. He painted a poor picture of South Africa's current fiscal position, so dire "that many rural municipalities are not financially viable. They owe third parties billions of rands. Sadly, the audit fees are at the bottom end of their concern," he said.

He stressed that the committee wants decisive plans and interventions to address this situation while keeping the Auditor-General's office independent of any executive interference. He then asked the National Treasury how the issue should be addressed while navigating the constrained national budget.

"Without audits our country's national budget would be less viable and would be eroded by irregularities. As a result, more money would be lost from our fiscus. This shows how crucial is AG to our country's financial health and to our collective future. Let's act now to uphold AG's financial viability and Independence," Mr Wessels concluded.

Abel Mputing
11 October 2024