1. Page 1 The statutory framework for financial oversight Select Committee on Finance, 13 April 2010 Annexure B

2. 2 Reputation promise/mission The Auditor-General has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

3. 3 Content of presentation Constitution Public Finance Management Act Municipal Finance Management Act Public Audit Act

4. 4 Constitution …a multi-party system of democratic government, to ensure accountability, responsiveness and openness (sect. 1) In terms of principles of co-operative government: All spheres of government and all organs of state within each sphere must …provide effective, transparent, accountable and coherent government (sect. 41)

5. 5 Constitution (cont.) The NCOP or any of its committees may — summon any person to appear before it to give evidence on oath or affirmation or to produce documents; require any institution or person to report to it; compel any person or institution to comply with a summons, and receive petitions, representations or submissions from any interested persons or institutions (sect. 69)

6. 6 Constitution (cont.) Members of the Cabinet are accountable collectively and individually to Parliament for the exercise of their powers and the performance of their functions Members of the Cabinet must provide Parliament with full and regular reports concerning matters under their control (sect. 92)

7. 7 Constitution (cont.) There is a National Revenue Fund into which all money received by the national government must be paid, except money reasonably excluded by an Act of Parliament. Money may be withdrawn from the National Revenue Fund only— in terms of an appropriation by an Act of Parliament; or as a direct charge against the National Revenue Fund, when it is provided for in the Constitution or an Act of Parliament. (sect. 213)

8. 8 Constitution (cont.) The Auditor-General must audit and report on the accounts, financial statements and financial management of — all national & provincial state departments & administrations; all municipalities; and any other institution or accounting entity required by national or provincial legislation to be audited by the AGSA The AGSA must submit audit reports to legislatures with an interest in the audit, and to any other authority prescribed by national legislation. All reports must be made public. (sect. 181)

9. 9 Constitution (cont.) The NCOP may disapprove an intervention by the national or a provincial executive in a province or a municipality The NCOP must, while the intervention continues, review the intervention regularly and may make any appropriate recommendations to the national or provincial executive (sections 110 and 139)

10. 10 Public Finance Management Act The key objects of the PFMA are to: Regulate financial management in the national and provincial government spheres Provide for the responsibilities of persons entrusted with financial management Ensure that all public revenue, expenditure, assets and liabilities are managed efficiently and effectively

11. 11 Public Finance Management Act (cont.) The annual report, including information on financial and non-financial performance, as well as the audit report thereon, must be tabled in the legislature by the relevant executive authority within prescribed time (sect. 65) A key feature of an accountability process is to report against intended or pre-determined performance, whether financial (budgets) or service delivery outputs (strategic and operational plans. [The reporting framework is prescribed by National Treasury]

12. 12 Public Finance Management Act (cont.) 30 days after the end of each month, the National Treasury must Gazette a statement of actual revenue and expenditure with regard to the National Revenue Fund (sect. 32) The responsibilities of accounting officers are covered in sections 38 – 42 Financial misconduct is dealt with in sections 81 – 86 Hyperlink: PUBLIC FINANCE MANAGEMENT ACT The PFMA is supported by detailed Treasury Regulations Hyperlink: Treasury Regulations

13. 13 Municipal Finance Management Act The main objects of the MFMA are to: Secure sound and sustainable management of the financial affairs of municipalities and other institutions in the local sphere of government, and Establish treasury norms and standards for the local sphere of government Ensure transparency, accountability and appropriate lines of responsibility in the fiscal and financial affairs of municipalities and municipal entities

14. 14 Municipal Finance Management Act (cont.) The Cabinet member responsible for local government must, as part of the report referred to in section 48 of the Municipal Systems Act, annually report to Parliament on actions taken by MECs for local government to address issues raised by the Auditor-General in audit reports on financial statements of municipalities and municipal entities Hyperlink: Municipal systems Act

15. 15 Municipal Finance Management Act (cont.) Primary responsibility for resolution of financial problems (sect. 135) Types of provincial interventions (sect. 136) Discretionary provincial interventions (sect. 137) Criteria for determining serious financial problems (sect. 138)

16. 16 Public Audit Act The objects of the PAA are to — give effect to the provisions of the Constitution establishing, and assigning supreme auditing functions to an Auditor- General; provide for the auditing of institutions and accounting entities in all three spheres of the public sector; and provide for an oversight mechanism to oversee the AGSA and to ensure its independence, impartiality, dignity and effectiveness, but also its accountability

17. 17 Public Audit Act (cont) The PAA further provides for – Appropriate, internationally comparable standards and quality assurance processes to apply to AGSA audits Adequate power of the AGSA to be able to perform its functions The protection of information where necessary Different types of enabling, progressive audit reports (see also Annexure D)

18. 18 Discussion and/or questions?

19. 19 Reputation promise/mission The Auditor-General has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.