Proceedings of the national assembly


NNP Mr F Beukman (chairperson). ANC



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NNP

Mr F Beukman (chairperson).


ANC
Mr V G Smith

Mr D M Gumede

Mr B W Kannemeyer

Mr P A Gerber

Mr R Mofokeng

Ms P K Mothoagae

Ms N L Hlangwana
DP
Mr M Lowe
IFP
Mr L Vezi
UDM
Dr G W Koornhof
Support staff
Mr L Pakati (Control Committee Secretary)

Ms B I Letompa (Researcher)


D. Meeting with SA High Commissioner in New Delhi, Ms Maite Nkoana-Mashabane, and Deputy High Commissioner, Mr Desmond Nxiweni, on 17 November 2002
The delegation had a brief but informative courtesy meeting with Ms Maite Nkoana-Mashabane and her Deputy, Mr Desmond Monde Nxiweni. After the chairperson had outlined the objectives of the visit, the High Commissioner welcomed the delegation and gave a general briefing about India. Her input covered:
* Democracy in India
* The economy
* Levels of socio-economic development

* The nature of party politics.


She also provided useful hints about how to conduct business in India. She referred to India as a country of a billion people, yet very democratic. Its party politics is robust; it is a shining model of democracy and a country of many opportunities. She mentioned that this is despite abject poverty that engulfs millions of its population. Another positive element about India is that its citizens are very patriotic; they always portray their country in a positive light.
E. Meeting with Controller-General of Accounts and Senior Officials in New Delhi on 18 November 2002 - chaired by CGA, Mrs Usha Sahajpal
The delegation met with a delegation from the CGA. In her input, she mentioned that the accounting work of the government of India is handled by four organisations with distinct identities of their own:
* Civil
* Defence
* Railways
* Posts and Telecommunications.
The CGA also gave an overview of the legal provisions governing public accounts management in India.
1. Legal provisions
Her starting point was the Constitution of India. She mentioned that according to article 150 of the Constitution, the accounts of the Union and the States shall be kept in such form as the President may, "on the advice of the Controller and Auditor-General of India, prescribe". The Constitution further states that the Accounts should be divided into a Consolidated Fund, a Contingency Fund and a Public Account.
(a) Consolidated Fund: All expenditure is incurred from this fund. No amount can be withdrawn from it without authorisation from Parliament.
(b) Contingency Fund: The fund is placed at the disposal of the President to meet unforeseen expenditure, pending authorisation by Parliament. Subsequent to Parliament's approval, the money is obtained and recouped from the Consolidated Fund.
(c) Public Account: The account contains public moneys such as savings, reserve funds, trusts and endowments.

(d) Annual Financial Statement (AFS)


Article 112 of the Constitution prescribes that the President tables the AFS every year in both Houses of Parliament. The AFS must show, separately, expenditure voted and charged to the Consolidated Fund, and distinguish expenditure on revenue account from other expenditure. The Constitution further states that the estimates for Charged Expenditure should not be submitted to the Vote of Parliament, but should be submitted in the form of a Demand for Grants to the House of the People.
2. Roles and functions of CGA
The delegation learnt that critical functions of the CGA were the following:
(a) Consolidation of Monthly Accounts and placing them on the website, with a complete analysis by the last day of each month. This is a requirement of the IMF.
(b) The analysis of receipts, revenue and other accounting figures of the government of India.
(c) Reporting to Parliament every year on the actual expenditure with reference to the budget that was approved by Parliament and the variations between the two (ie actual expenditure and budget, together with reasons for variations).
The Annual Appropriation Accounts is prepared demand-wise. In this sense, it contains a group of functions to be carried out by specific departments/ministries or other administrative authorities, and takes into account supplementary appropriations, reappropriations and surrenders. Another responsibility of the CGA is that of monitoring of the recommendations of the PAC and Audit Reports.
F. Meeting with Comptroller and Auditor-General of India (CAG) and senior officials in New Delhi on 18 November 2002
As the most important instrument of accountability, the CAG has a dual role to perform:
* He acts as an agency to function on behalf of the legislature.
* He acts as an agency to function on behalf of the executive, to ensure compliance by subordinate authorities with the rules and orders issued by the CAG.

The CAG, as head of the Indian Audit and Accounts Department, is thus neither a part of the legislature nor the executive, but is an office created by the Constitution to see to it that diverse authorities, in regard to all financial matters, adhere to the demands of the Constitution and other laws that govern public financial management. To this end, there are several provisions that are enshrined in the Constitution of India, whose aim is to safeguard the CAG's independent functions.


The CAG is appointed by the President of India by warrant under his hand and seal, and the oath of office requires him or her to uphold the Constitution of India and other laws in his or her area of responsibility. He or she can be removed from office only on grounds of proven misbehaviour or incapacity after an address by both Houses of Parliament and supported by a two-thirds majority. His or her administrative powers and the conditions of service of persons serving in the Indian Audit and Accounts Department are prescribed by the rules made by the President, after consultation with the CAG. The expenses of the office are charged to the Consolidated Fund of India and are not voted by Parliament.
1. Role of CAG in other government institutions
The CAG has to undertake special audits in respect of parastatals.
The CAG issues standardised guidelines to auditors on how to look at certain issues during the auditing process of parastatals.
The CAG conducts a supplementary audit on all parastatals after special chartered accountants have performed the audit.
2. Formal body to oversee CAG
There is no formal body that oversees the functions of the CAG in India, like the Audit Commission in South Africa. The Auditor-General is regarded as the final authority to oversee accounts.
The CAG is fully funded by the government of India. To supplement its income, the CAG recovers some of its money from agencies audited by it. There is no connection between the Accounts office and the Audit Office. The CAG deals with Accounts and Audits separately.
3. General observations
Although India is a federal state, the Constitution provides for a Unitary Audit by the CAG, who conducts audits of the accounts of both the Union and the State Governments.

To ensure uniformity in government accounting, the Constitution also prescribes that the accounts of the Union and of the States be kept in a form prescribed by the President on the advice of the CAG.


The CAG plays a fiduciary role in federal financial relations. He or she ascertains and certifies the net proceeds of taxes levied and collected by the Union and assigned to the States or distributed between the Union and the States.
The CAG also authorises the salary and allowances of gazetted officers serving under many State governments, authorises payment of pension and other retirement benefits to employees of most of the State governments, and maintains their Provident Fund Accounts.
G. Meeting at National Institute of Financial Management (NIFM) with Director, P K Brahma, and senior officials on 20 November 2002
The Institute is an autonomous body under the Ministry of Finance. It provides professional training to public officials. The NIFM has collaborative programmes with the World Bank on Procurement Procedures, and with the International Monetary Fund (IMF) on banking sector reforms.
From the academics at the Institute, the delegation learnt that the primary objectives of the public financial management system in India is to ensure the implementation of budgetary and other policy decisions, to obtain reliable financial and other data relating to execution of budgetary decisions, to prevent improper use of public funds, to detect and correct instances of such improper use and to assess the efficiency of operations.
The delegation also learnt that the CAG is regarded as the supreme Audit Institution, according to articles 148 to 151 of the Indian Constitution. It is regarded as a single Audit Authority, for Union and States. Accordingly, they audit all receipts and expenditures of the government of India, States and Union Territories, including expenditures incurred through voluntary organisations or NGOs. Moreover, they audit government companies and other local self-governing bodies.
1. Relationship between PAC and CAG
The PAC considers reports of the CAG tabled in Parliament. During interaction with the members of the PAC, the delegation noted the following:
(a) The role played by the CAG in assisting the PAC has significantly changed over the past years to keep up with the changing demands of the PAC.
(b) For the purpose of assisting the PAC in examining the Accounts, the office of the CAG prepares a document outlining important issues the PAC could look at in respect of each audit.
(c) The CAG is considered as the friend, philosopher and guide of the PAC.
(d) The CAG and its officials attend sittings of the PAC and, by convention, they take their seats by the side of the chairperson.
(e) When scrutinising expenditure, the PAC places greater emphasis on value for money with regard to economy, efficiency and effectiveness.
(f) The supremacy of the Audit Institution ends once the Report has been presented to Parliament.
After finalisation of a report, copies are made available to the Ministry/Department, which is required to inform Parliament's secretariat of the steps taken by them on the recommendations contained in that report within a period specified in the report (six months or less).
2. Challenges facing PAC - view of academics (NIFM)
The academics were of the view that the PAC is sometimes unable to devote sufficient time to examine all reports presented to them. Each report contains a massive amount of complex information, which requires more time.
The PAC is not entirely independent, given that the office of the CAG assists it by coming up with recommendations on all observations highlighted in the Audit Report.
There is continuous interaction between the CAG and the PAC.
H. Meeting at National Institute of Public Finance and Policy (NIPFP) in New Delhi with Prof Om Prakash Mathur and senior officials on 21 November 2002 - chaired by Prof Mathur
The NIPFP is a centre for applied research in public finance and public policy. It was established in 1976 as an autonomous institution. Its aim is to contribute to policy-making in spheres relating to Public Economics. Its governing body is responsible for providing general policy direction to the Institute. The governing body comprises a Chairperson, two representatives of the Ministry of Finance, one representative from each of the Planning Commissions, a representative from the Reserve Bank of India, a representative from the Industrial Credit and Investment Corporation of India, three eminent economists and taxation experts and 12 members representing State governments.
Like most research organisations, the Institute undertakes research on matters relating to tax policy and tax administration, public expenditure and control, public debt and the management thereof, intergovernmental fiscal relations, economics and the pricing of public and industrial enterprises.
Furthermore, the Institute organises training courses, seminars and workshops and facilitates policy dialogue. The aim is to enhance the understanding of public finance and policy.
All the information gathered in the process is published in the form of books, research reports, seminar papers and journals. Moreover, and most importantly, the Institute assists the Minister of Finance by providing research support.
Views of Academics of NIPFP on challenges facing PAC
One of the concerns raised at the meeting by the academics relates to the fact that revenues in India are always overestimated and budgets underestimated. This has become a systematic problem in India. One of the reasons for this is that income tax is relatively small. The GDP from 1997 has also been relatively small, at 17%.
Another concern is a lack of capacity for MPs to engage effectively with loads of complex reports.
Yet another is that the work done by the PAC is seldom debated in the House. On this score, the academics argue that the PAC cannot be seen as a substitute to the House.
They argue that the PAC cannot be seen to be effective if the A-G's reports on the misuse of funds are dealt with three to five years after the problem had occurred.
They were concerned about the fact that few actions are taken on the misuse of funds; sometimes there is virtually no feedback from departments/Ministers.
The PAC has been exposed to other ways of dealing with public expenditure and subsidies, with particular reference to the analysis of trends and structural shifts and its management and control - how to deal with government debt, both at the centre and at State level.
Tax policy and administration, especially in reference to reform in the structure and administration of personal and corporate income tax; customs; excise; sales tax; as well as the impact of tax incentives on particular sectors.
I. Meeting with PAC at Indian Parliament on 20 November 2002 - chaired by Hon Mr Sardar Buta Singh, MP
1. Composition and work methods
The PAC in India historically began during the pre-independence days of British rule. The first public accounts committee was set up in 1921 and consisted of only 12 members. The committee now consists of 22 members, of whom 15 are from the Lok Sabha (Upper House) and seven from the Rajya Sabha (Lower House). By its composition, it is a miniature Parliament, as the members are elected on the basis of proportional representation of political parties in Parliament.
However, once elected, the members cease to function along party-political lines. The committee, through sustained scrutiny, highlights cases involving losses, instances of waste, imprudence and financial irregularities.
When a case of proved negligence is brought to the notice of the committee, the concerned Ministry is called upon to explain what action, disciplinary or otherwise, has been initiated to pin-point responsibility and to prevent recurrence. The committee expresses no opinion on points of general policy, but it is well within its jurisdiction to point out whether there has been extravagance or waste in carrying out policy. The government always takes recommendations of the committee seriously and suitable remedial action is taken.
Being a sentinel on public expenditure, it has been the constant endeavour of successive public accounts committees to ensure that money voted by Parliament is disbursed legally for the intended purposes approved by Parliament and in accordance with the rules and regulations framed by competent authority. Indian Parliamentarians have evolved sound accountability procedure to see to it that public money is well spent. The committee has the proud privilege of eminent leaders having adorned the office of chairperson, including two former Prime Ministers. By convention, the chair of the PAC goes to the leader of the opposition or his or her nominee. The Committee's deliberations have been marked by objectivity and fairness, culminating in unanimity on recommendations.
2. Lessons learnt
The PAC has the privilege of having long-term serving MPs as members. The advantage of this is that it allows for continuity and the accumulation of valuable experience.
At the time of the visit by the delegation, the PAC in India was nine years behind with the processing of some of the reports. In India, the A-G audits all companies in which the State has more than 50% of the shares. Their books and reports are referred to the public enterprise committee, not the public accounts committee.
J. Meeting with International Centre for Information Systems and Audit (ICISA) on 21 November 2002 - chaired by Dr Shri A Prasad
The meeting with ICISA was the last engagement for the delegation in India. They learnt that the CAG of India has been active in upgrading the skills of auditors and financial managers, and this is illustrated by the apparent prevalence of training institutions in India. Since 1979, ICISA has been involved in organising international training programmes in different areas of auditing and accounting. The government sponsors all its programmes.
ICISA does not only cater for Indian students; it attracts students from many countries, including the EU, former Soviet Union Republics, Korea, China, etc. Most important is that the Institute provides direct support to the secretariat and members of the PAC. The government, also, from time to time requires that ICISA do research and look at specific issues that require research.
Challenges facing PAC
Again, the challenges facing the PAC were highlighted and re-emphasised by academics of the Institute. They argued that the PAC is facing monumental challenges. Every year the CAG presents a plethora of reports with massive observations. Among others, they present reports of wide-ranging autonomous bodies with massive loans from the government. In most cases, large sums of government money are channelled through these organizations. Yet, members do not have time to scrutinise these reports, because they have to divide their time between Parliament and their constituencies. To help the PAC deal with these challenges, ICISA assists the PAC to simplify the reports and prioritises them. They also assist in the drafting of committee reports.

K. Other observations
1. India as a democracy faces challenges that are almost similar to those of South Africa, in terms of both socio-economic development and public finance management.
2. Their PAC is almost similarly dealt with to the way in which SCOPA in South Africa is managed and organised.
3. The activities of the committee are largely apolitical. Members totally divorce party politics from committee work.
4. The CAG is facing serious challenges, some bordering on the undermining of their independence. The delegation was told that, at some point, the CAG was called in by Parliament and reprimanded.
5. Like South Africa, India is moving from cash accounting to accrual accounting.
In this context, the Committee feels that it should continue to use some of the lessons learnt in India.
L. Conclusion
The Committee wishes to express its sincere gratitude to the High Commissioner of South Africa in India, members of the PAC of India, officials of various government departments, academics and staff from the office of the High Commissioner, who made the visit such a resounding success.
The Committee would also like to especially thank Mr Linford Andrews for the special assistance rendered to committee members, Ms Ava Dowling and Ms Ntombi Madide for assisting with logistics, and the Department of International Development for sponsoring part of the visit and for assisting with the logistics of the visit.
Report to be considered.
7. Twenty-First Report of the Standing Committee on Public Accounts, dated 25 March 2003:
The Standing Committee on Public Accounts, having considered the Report of the Auditor-General on the Financial Statements of the Robben Island Museum for the year ended 31 March 2002 [RP203-02], tabled on 30 September 2002 and referred to it, reports as follows:
1. Audit opinion
The Committee commends the management of the Robben Island Museum for the unqualified audit opinion expressed by the Auditor-General, and trusts that future audit opinions will be equally unqualified.
The Auditor-General, however, raised several issues of concern:
(a) PFMA noncompliance
The Museum did not comply with the requirement of the PFMA, which requires the submission of annual financial statements to the Auditor-General within two months after the end of the financial year. The Committee also notes the reasons for the late submission as provided by the Accounting Officer to the Auditor-General, and finds the reasons unacceptable.
The Committee recommends that all the sections of the PFMA be complied with and that the management of the Museum implement action plans to ensure that future financial statements fairly present its activities.
(b) Audit Committee
The Committee notes that an Audit Committee was not established as required in terms of the PFMA.
The Committee recommends that the management take urgent steps to rectify the situation, and that the Auditor-General report thereon in his next audit report.
(c) Forensic audit
The Committee notes that a forensic audit was instituted after allegations by individuals that certain procurement policies and procedures were not followed.
The Committee recommends that the final forensic audit report be submitted to it as soon as possible.
(d) Grants
The Committee notes that the acting finance manager requested that additional audit procedures be performed on grants received by the Museum.
The Committee recommends that the final audit report on grants be submitted to it as soon as possible when all the audit requirements/procedures have been completed.
2. Conclusion
The Committee is of the view that no hearing be held for the financial year under review.
Report to be considered.
8. Twenty-Second Report of the Standing Committee on Public Accounts, dated 8 April 2003:

The Standing Committee on Public Accounts, having considered the Annual Report, including the Report of the Auditor-General on the Financial Statements of Vote 21: Independent Complaints Directorate [ICD] for the year ended 31 March 2002 [RP149-02], tabled in Parliament on 25 September 2002 and referred to it, reports as follows:


1. Tabling of Annual Report
The Committee notes that the Annual Report was tabled in Parliament on 25 September 2002, a delay which constitutes noncompliance with the PFMA.
2. Audit opinion
The Committee commends the management of the ICD for the unqualified audit opinion expressed by the Auditor-General, and trusts that future audit opinions will be equally unqualified.
3. Emphasis of Matter
The Committee notes that under "Emphasis of Matter" the Auditor-General has raised an issue of concern which needs the attention of the management and on which the Committee offers comments and recommendations in paragraph 4 below.
4. Responses to Committee's Tenth Report for 2002
The Committee welcomes the Executive Director's speedy response to the issues raised in its Tenth Report for 2002 on the ICD.
The Committee notes:
* That weaknesses were identified during the risk assessment process, relating mainly to reporting lines and the segregation of duties
* That the Human Resources Component was rated as a high risk area within the ICD
* That recommendations for the improvement of the Component will be made.
The Committee recommends that it be kept abreast of such improvements, and that the Auditor-General report thereon in his next report on the ICD.
With regard to the Internal Audit Component's impact on the control environment, the Committee notes that, in addition to implementing the Code of Conduct for Public Servants, the ICD is developing a Code of Ethics to improve corporate governance within the ICD, and that the ICD has completed a Code of Conduct for ICD staff members to further foster integrity within its own ranks.
The Committee requests that copies of the Code of Ethics and the Code of Conduct for ICD staff members be furnished to it by 30 June 2003.
The Committee notes the submission of the minutes of the Audit Committee's two meetings, as requested. It further notes that the Audit Committee could not evaluate the financial statements for the 2001-02 financial year before the Auditor-General approved the effectiveness of internal controls.
The Committee welcomes the plan of action, which has been compiled to improve the effective management of the ICD's assets, within the relevant time-frames, especially in relation to stock-taking and a centrally-driven Assets Register.
The Committee requests that the ICD submit a formal progress report on asset management to Parliament by 30 June 2003.

5. Internal audit function
The Committee notes with concern that, although an internal audit department was established during February 2002, no audit plan was drawn up, and that no audit work was performed for the 2001-02 financial year.
The Committee welcomes the Auditor-General's indication that the internal audit function will be evaluated during the financial year ending 31 March 2003. The Committee recommends that the Auditor-General report thereon on his next report on the ICD.
6. General
In terms of the Introduction by the Executive Director and the Foreword by the Minister of Safety and Security, the Committee notes that:
* During the year under review, the ICD received 3 369 complaints which fell within the mandate of the ICD, representing an increase of 14,9%, compared to the previous year
* The figure for deaths in custody as a result of police action decreased by 12,8%
* The ICD received much acclaim internationally on the basis that it conducts its own independent investigations, and that the South African model of policing oversight has been commended and lauded.
7. Conclusion
Having noted the unqualified audit opinion expressed by the Auditor-General, and having considered the issue raised by him under "Emphasis of Matter", the Committee is of the view that a hearing on the Independent Complaints Directorate for the financial year under review is not necessary.
Report to be considered.

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