Second Quarter Expenditure Report for 2010/11 financial year

Standing Committee on Appropriations

17 February 2011
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Chairperson stated that the Committee needed to raise the bar on oversight. Departments needed to buck up. What was the Committee trying to achieve with its quarterly reports? The Committee made recommendations in each report. The recommendations were about departments being requested to get back to the Committee on certain issues. Many a time departments simply did not respond to the Committee’s requests. He felt that the Committee should monitor the recommendations that it had made and do follow-up. The Committee was in agreement with the sentiments expressed by the Chairperson.

The non-adherence by departments to section 43(2) of the
Public Finance Management Act was also discussed at length. Where a department made a transfer or a virement which was in excess of 8% it should be referred to Parliament for approval. In practice, departments did not adhere to the requirement and National Treasury condoned it.  The Committee felt it was high time that the issue should be addressed and had this reflected in its recommendations.

The Report was adopted as amended.

Meeting report

Second Quarter Expenditure Report for 2010/11: consideration
The Chairperson stated that he needed some direction on what the Committee intended to do with reports like the one presently before the Committee. It was clear that the Committee was engaged in compliance but the question was about what more could the Committee do. The process was repeated over and over again. Now that the Second Quarter Report was complete, the Committee was making recommendations for the third quarter again. Each quarter the Committee made recommendations but not much changed. The Committee was not sending a clear message. The Report had made a great deal of reference to adjustments. The Committee once again made recommendations but at what time did the Committee measure that a department has not performed. What was the consequence? The way things were going it was just an exercise in compliance which he surely believed not to be the intention. The Committee had to monitor its own recommendations.

Ms R Mashigo (ANC) noted that the third quarter report would be debated in the House. The Committee would then have the opportunity to state what had been requested of departments and that no responses had been received. She felt that perhaps deadlines should be set for departments.

Mr M Swart (DA) agreed that the Committee should give departments three months within which to respond to requests by the Committee. It should be stipulated that if no response was obtained within the given time, the issue would be referred to Parliament.

The Chairperson stated that the Department should be given time within which to respond to the Committee’s requests. If Committee requests were not met, the Committee could decide on what appropriate action should be taken. He felt that a formulation to this effect should be included in the recommendations of this Report. He suggested that the Committee work in a systematic way. There must be a properly structured approach. The Third Quarter Report also identified many challenges. It would seem that expenditure could not be translated into service delivery.

Ms Mashigo stated that the Committee was performing a monitoring function per quarter. The departments knew what the Committee expected of them. The Committee could not turn a blind eye on problem areas. Departments had to respond to Committee requests. Failure to respond meant that the Committee needed to take action.

The Chairperson stated that the Committee needed to raise the bar on oversight. Departments needed to buck up. He placed the Report before the Committee for consideration.

Mr Swart stated that he was satisfied with the Report.

Dr P Rabie (DA) and Mr J Gelderblom (ANC) shared the same sentiments.

Ms Mashigo informed the Committee that Mr G Snell (ANC) had left recommendations with her to forward to the Committee for incorporation into the Report.

Mr L Ramatlakane(COPE) stated that the Report reflected the same excuses that were given by departments in each report, that they had not spent funds.

The Chairperson said that Departments like Trade and Industry and Arts and Culture had been asked by the Committee why they should get adjustments when they were under spending. It was something that the Committee needed to think about. The Committee had held hearings on adjustments.

Mr Ramatlakane noted that the fact remained that the Committee did engage departments on expenditure patterns.

The Chairperson agreed that the Committee had interacted with a number of departments. The Department of International Relations and Co-operation had to still appear before the Committee.
The Chairperson referred to page two of the Report and asked how the Report could state that there was an improvement in expenditure if the expenditure in the previous year was 49.7% and the expenditure for the current year was 48.2% of the budget.

Mr Pelelane Dlomo, the Committee Researcher, explained that the percentage expenditure of the total budget might have decreased but the actual amounts in rand value spent had increased. The percentage of total spend was creating the confusion. If the Committee wished, it could be removed.

The Chair confirmed with the Committee Researcher that the percentage expenditure was less but the actual amounts in expenditure were more. He asked that the paragraph be reworded for clarity.

Dr Rabie said that the Committee needed to do a follow-up oversight visit to the De Hoop Dam to check on what changes had taken place.

Mr Ramatlakane referred to the Committee Findings in the Report and stated that where there was non-compliance with section 43 of the Public Finance Management Act (PFMA) regarding the shifting of funds during the adjustments period. It should be reflected in the Report that such non-compliance was condoned by National Treasury.

Ms Mashigo said that even though the practice was taking place generally, mention must be made of those departments that were doing it during a specific quarter.

Mr Dlomo said that specific mention was made in the Committee Findings in the Report that the departments guilty of the non-compliance for the quarter in question were the Departments of Science and Technology, Trade and Industry and Rural Development. Section 43(2) of the PFMA stated that if more than 8% of funds needed to be shifted, parliamentary approval should be obtained.

Mr Ramatlakane said that the matter needed to be discussed with National Treasury.

Ms Mashigo noted that the Committee had already complained to National Treasury about the issue. It was not a new issue. It was perhaps a good thing to mention the issue in the Report. She gave the example of the Department of Rural Development requesting a rollover of funds for land restitution but later it shifted the funds for use in current payments.

Mr Swart added that the Department of Rural Development had also been requested to furnish the Committee with a list of all contracts that had been entered into on the Department’s behalf by junior officials. The Committee was still waiting for the list.
He did not dispute the shifting of funds by National Treasury but the requirement was that Committee should be informed about it and approve it. When the budget was changed, the issue of money bills came into play and hence Parliament had to pass the bills.

The Chairperson said that where more than 8% of funds were shifted, parliamentary approval was required. National Treasury was approving the shifting of funds without obtaining parliamentary approval. The Committee tended to let things slide.

Mr Gelderblom said that the Committee needed legal advice on the matter. The successful functioning of the Committee depended on adherence to section 43 of the PFMA. If not dealt with the issue would recur every year.

Mr Ramatlakane asked whether the Committee should not consider including in the recommendations, a suggestion for further engagement with National Treasury about section 43(2) where the Budget approved by Parliament was being changed. He agreed that legal opinion on the matter was needed.

Mr M Mbili (ANC) also felt that if not addressed, the issue would come up every year. The changing of budgets was complex. Capacity was an issue that needed to be taken into consideration. There were many technical issues to consider. There might even be an impact on service delivery. The Committee had not used its powers. Engagement and guidance was needed in order for the Committee to know which appropriate action it should take.

Mr Swart said that the transfers took place throughout the year but never came to the Committee for consideration. He suggested that National Treasury should be required to give the Committee monthly reports on any virement or transfers that took place. It should then be referred to Parliament’s Budget Office for approval.

The Chairperson asked whether Mr Swart was recommending that virements be monitored every month by the Committee.

Mr Swart responded that it could not as yet be placed in the Report as a recommendation as the Committee lacked the required capacity to perform the function. Once the Budget Office was up and running, the Committee could take on the task.

The Chairperson questioned whether the Committee would have the capacity to deal with monthly reports on virements. He suggested that perhaps only virements over 8% should be considered by the Committee. Section 43 of the PFMA would consequently be applicable.

Mr Ramatlakane said that the Budget Office had an important role to play in assisting the Committee. He expected the Budget Office to come into operation within six months.

The Chairperson suggested that a provision be included in the recommendations within the Report on the Committee’s intention to engage with National Treasury on transfers over 8%.

Mr Ramatlakane noted that the Budget was approved by Parliament. It was approved in terms of legislation. The Budget could consequently only be changed by legislation, hence the provision of section 43 of the PFMA. Currently, however, that law was being changed by government officials without Parliament’s approval.  Something needed to be done. Sooner or later the Committee had to confront the reality of the practice.

The Chairperson said that the Committee agreed with what Mr Ramatalkane was saying in principle. The question was how to word or formulate something to reflect the Committee’s intention. He suggested that perhaps a workshop should be held where the Committee could elicit help with the matter. Should National Treasury be asked to address Parliament on virements that were greater than 8%? It was an important issue.

Mr Ramatlakane was confident that the Committee would come up with a formulation.

Mr Mbili referred to the Committee recommendation in the Report that the Departments of Trade and Industry, Statistics SA and Water Affairs should fill all funded vacancies within the next six months.  He suggested that the vacancies should be filled within three months.

The Chairperson felt it better to leave it at six months.

Mr Gelderblom agreed with the suggestion of three months as it was in line with what President Zuma had stated.

The Chairperson said that the legislative requirement was six months whereas the President had stipulated three months. Which one to follow?

Ms Mashigo suggested the three month period and if need be it could be extended.

The Chairperson said that the Committee recommendations had to reflect that departments should stipulate why vacant posts could not be filled. Was the Committee in agreement with the three-month period?

The Committee agreed to the three-month period.

Mr Dlomo pointed out that most of the recommendations spoke to the Committee’s findings. The recommendations should correspond with the findings. The recommendation would be worked on.

Ms Mashigo suggested that the departments had to put systems in place to ensure compliance and that the Committee should monitor such compliance.

The Chairperson referred to the last recommendation about the Department of Communications in the Report on page 16 and asked for comment.

Mr Ramatlakane asked why was the term “entities” used in the paragraph. He referred to the submission of business plans by entities and suggested that a time limit be set of 30 days within which to submit it.

Mr Dlomo said that entities should not be confused with department programmes. Telkom, the SA Post Office and Sentech were entities.

Mr Swart suggested that the recommendation be left as it was but that the 30-day time limit be incorporated.

The Committee agreed.

The Committee adopted the Report as amended.

The meeting was adjourned.



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