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TRC Final Report
Page Number (Original) 535
Paragraph Numbers 58 to 68
Audit limitations and risks
58 Until the time of the information scandal in 1979, expenditure relating to secret services was not audited by the Auditor-General. The minister concerned could simply issue a certificate certifying that all funds involved had been spent for the purpose for which they were originally budgeted. Following the information scandal, Parliament decided that all secret services had to be audited by the Auditor-General.
59 The Exchequer and Audit Act No 66 of 1975 and the various Special Account Acts were appropriately amended to provide for such an audit. However, although the audits were nominally assigned to the Auditor-General, various limitations still existed which, in practice, limited the scope of the audit. The Auditor-General cited following examples:
When in view of the confidential nature of an account it appears desirable that such account be excluded from a detailed audit by the Auditor-General, the Minister of Finance may, after consultation with the Auditor-General, determine to what extent the audit thereof shall be carried out and what vouchers shall be made available to the Auditor-General.
60 The need-to-know principle (that is, the auditing of small segments of the whole by specially selected members of the Auditor-General’s staff, to prevent anyone outside from gaining an overall picture) constituted a further serious constraint. This was eventually acknowledged by the SADF, who accepted the need for change, but the audit office lacked the necessary staff undertake the task.
61 By way of compromise, the Auditor-General agreed during 1981 to the contractual appointment to his department of a retired SADF general who, without disclosing to the Auditor-General the content of projects, would issue an audit certificate on his behalf concerning the Special Defence Account. (This stipulation of nondisclosure was later disputed by the SADF.) It was realised, however, that this arrangement was probably ultra vires and a new solution had to be sought.
62 Following consultations between the Auditor-General and the relevant interested parties in the Finance and Intelligence Departments as well as the SADF, and after having appraised the contents of a combined financial/operational file relating to a certain sub-project which amounted to R23 million in 1983–84, the Auditor-General accepted the SADF's proposals. This allowed specially selected members of the audit staff of the Auditor-General to audit ultra-sensitive portions of the Special Defence Account in terms of the 1986 agreement. Access was, however, limited to financial files. It did not extend to operational files. The SADF, however, assured the Auditor-General that he personally would at all times be granted absolute and unfettered access to all documentation. A better understanding later developed and the auditors concerned were able to gain access to operational files – with the exception of the CCB, in which case access to operational files was consistently denied by the managing director of the CCB.
63 After continued efforts by the Auditor-General to improve audit evidence, the entire Special Defence Account became ‘open’ for auditing, and sections 42(7) or 45(1A) of the Exchequer and Audit Act were not used again during the 1985–86 to 1988–89 financial years. Both sections were repealed by the Auditor-General Act No 52 of 1989 and replaced with section 6(3) of the latter Act as from 26 May 1989.
64 Although the 1989 Auditor-General Act stipulated the role and functions of the Auditor-General, that Act still contained the following limitation as far as the reporting phase of the audit was concerned: Section 6(3)(a) "shall limit such report to the extent which the Minister of Finance, in consultation with the State President and the Auditor-General may determine".
65 The office of the Auditor-General became increasingly concerned at the low level of assurance that accompanied its audit opinion. This resulted in a qualified audit opinion being given with effect from the 1990–91 financial year. The wording of the audit opinion reads as follows :
As regards the auditing of the Secret Service Account and the Special Defence Account, it should further be noted that, owing to the nature of some of the income and expenditure and the circumstances in which it is incurred and recorded, as well as the utilisation of assets, the level of audit assurance that can be furnished will often be lower than is normally the case in ordinary audits.
66 After obtaining legal opinion, it was decided to further qualify the audit opinion. As of the 1991–92 financial year, the Auditor-General’s reports to Parliament contained the following qualification:
As regards the basis of reporting in connection with the proviso to section 6(3) of the said Act, a legal opinion was obtained to confirm what actions constitute, for audit purposes, irregularities which must be reported. The legal opinion states, inter alia:
… that if the Auditor-General has performed all aspects of ‘regularity auditing’ [see below] as stated in the report, he has done his duty.
There is no obligation on him (the Auditor-General) to indicate culpable contravention of statutes, instructions or the common law unless he is of the opinion that, in the commission of such contravention, the scope of the authority to incur expenditure was exceeded. Finally it should be borne in mind that auditing is, in the first and last places concerned with compliance with financial authorisation, i.e. the authority to perform certain actions and to utilise public money for the performance of authorised actions. The (Auditor-General) Act does not concern itself with the penal nature of the actions nor with the ‘moral reprehensibility’ of the actions as such.5
Current position of the Auditor-General
67 Chapter 9 of the Constitution of the Republic of South Africa Act No 108 of 1996 provides for the establishment of a number of state institutions in support of constitutional democracy. In section 181(1)(e) the Auditor-General is listed as one of these institutions. Further provisions of this section also address the independence and protection of the powers and functions of these institutions. Section 188 of the 1996 Constitution Act further elaborates on the functions of the Auditor-General and continues to strengthen the constitutional authority of the AuditorGeneral’s office.
68 The Auditor-General Act No. 12 of 1995, effective from July of that year, amended the 1989 Act to provide for more independent reporting by the Auditor-General. The Auditor-General now reports after consultation with the President, Minister of Finance and the responsible Minister and not in consultation as was required previously. Furthermore, the reports may not be limited as regards unauthorised expenditure or any other irregularity, except in respect of the disclosure of facts which will be to the detriment of the national interest.5 The report of the Auditor-General provides an overview of the various levels of financial authority exercised by the various departments as reported to him, noting that his office has not performed an audit on these levels.