Auditor-General of South Africa v Member of the Executive Council for Economic Opportunities, Western Cape and Another

The Auditor-General audited the Western Cape Department of Agriculture’s financial statements for the 2017 and 2018 financial years and issued qualified audit reports. He found that payments made by the Department to Casidra SOC Ltd and the Deciduous Fruit Producers Trust (Hortgro) were incorrectly classified as transfers and subsidies. Relying on the Modified Cash Standard issued by National Treasury, the Auditor-General concluded that the payments should have been classified as payments for goods and services on the basis that Casidra and Hortgro acted as agents of the Department. The reclassification rendered the expenditure irregular under the Public Finance Management Act 1 of 1999 (PFMA). The MEC for Economic Opportunities, Western Cape, sought to review and set aside the Auditor-General’s findings in the Western Cape High Court under PAJA, alternatively the principle of legality. The High Court found in favour of the MEC and set aside the findings. The Auditor-General appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel.

The case clarifies the correct accounting treatment of transfer payments versus payments for goods and services under the Modified Cash Standard and confirms that the existence of a principal-agent relationship requires authority to bind the principal to third parties. It also authoritatively establishes that the Auditor-General’s audit findings are not administrative action under PAJA, reinforcing the constitutional independence of Chapter 9 institutions and confirming legality review as the appropriate standard.