Financial Management of Parliament Amendment Bill [B-2013]: input by Secretary to Parliament, Auditor-General of South Africa, and National Treasury briefings

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Finance Standing Committee

13 August 2013
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The Committee heard presentations from the Secretary to Parliament, the Auditor-General of South Africa, and National Treasury on the Financial Management of Parliament Amendment Bill [B-2013] whereby it was proposed to amend the Financial Management of Parliament Act (FMPA) (No.10 of 2009).

Secretary to Parliament Presentation
The Secretary to Parliament wanted to raise issues on oversight matters and performance information. He sought that the Speaker, the Deputy Speaker and the Chairperson and Deputy Chairperson of the National Council of Provinces (NCOP) not be excluded from representation on the oversight mechanism. It proposed that it was unnecessary to include or amend performance information and there was sufficient provision in the Act.

Members asked why the oversight mechanism was being amended given that it had never been established. It was wrong for the executive to sit on the oversight committee. Members said the restriction on the Speaker and the Deputy Speaker of the National Assembly being part of the joint committee was in place in the current Act but the Bill removed that restriction and therefore the DA opposed it as the restriction had to remain. Members said that the current Section 4 of the FMPA established the oversight mechanism, which was a committee of Members of Parliament to oversee the budget crafted by the executive of Parliament. Section 4(2) stipulated that the Deputy Speaker of the National Assembly and the Deputy Chairperson of the NCOP might not be on the committee that did oversight. The legal advisor was asked what the negative effect would be if they were not on the oversight mechanism. Members said that there was no problem with the law written in 2009. The problem was that the oversight mechanism had never been established and enforced. Members said that the Committee was dealing with something it was not supposed to debate - whether the executive authority had to be held accountable to MPs. The Committee had no locus standi to pronounce on the establishment of a committee that sought to make the executive authority accountable. Members said there was a sincere effort to achieve accountable management of Parliament. The legal advisors needed to make the draft Bill more explicit. Members outlined what the Committee was expected to do as per the court judgement.

Auditor-General of South Africa
The Auditor-General of South Africa said that its concern was on performance management and finance leases. The intention of the Auditor-General of South Africa in including the performance management in the Bill was because it felt financial management should be more prominent. It wanted the legislative deadline for the submission of the financial statements and the annual performance report regarding predetermined objectives to be considered for inclusion in the Act. There was no reference in the Act or the regulations to a framework that would be used to manage and report on performance information. This should be considered for inclusion in the Amendment Bill. The Committee should consider including a reference to finance leases. Including these provisions in the Bill would clarify the accounting treatment and the reporting of finance leases.

Members agreed with all the Auditor-General of South Africa’s positions. Members asked when the Committee would receive a draft of the Bill that included the Auditor-General of South Africa’s requests. Members moved that the Auditor-General of South Africa’s proposed amendments be included in the draft bill.

National Treasury
National Treasury supported the proposed amendments. All appropriated funds received by legislatures from the provincial revenue fund but which were not spent, did not have to be returned. The proposal was that this be removed from the Public Finance Management Act (PFMA) (No. 1 of 1999) and that it be dealt with by the FMPA.  National Treasury proposed that Parliament make legislation for all legislatures to ensure uniformity but that the power to issue instructions be left to the provincial legislatures to cover the implementation of the FMPA and its regulations. It proposed a new process for the appropriation of funds for the provincial legislatures. It proposed that direct charges against the revenue fund which were not funds appropriated for the legislature and should not be regarded as part of the legislature’s funds could be construed as being part of the revenue and so amendments needed to be made to make it clear. 

Members asked the legal advisor for his opinion on the National Treasury’s input. Members said it appeared that one would need to go to the provinces to proceed with the amendments.  Could the matter be deferred or was it so important that it had to be done within the time stipulated? Members were worried about processes that needed to be followed given the deadline of the 9 September 2013.

Members said the Speaker should also give a briefing.
 

Meeting report

Input by Secretary to Parliament
Mr Michael Coetzee, Secretary to Parliament, said that there were two main issues - oversight matters and performance information. The joint committee oversaw financial management and considered strategic, performance and budget plans. The draft Bill sought to rationalise these plans and the oversight thereof and it could be made more explicit although sufficient provision existed. Thus it sought that the Speaker and the Deputy Speaker of the National Assembly and the Chairperson and Deputy Chairperson of the National Council of Provinces (NCOP) not be excluded from representation on the oversight mechanism. Schedule 2 of the Financial Management of Parliament Act (No. 10 of 2009) (FMPA) dealing with the code of ethics and the joint rules could allow for the resolution of any conflict of interest that might occur. It was proposed that it was unnecessary to include or amend performance information. There was sufficient provision in the Act. There had been discussions with National Treasury and the Auditor-General of South Africa (AGSA) on the predetermined objectives and auditing.

Discussion
Mr N Koornhof (COPE) asked why there was a conflict of interest. He could not see why the Speaker and the Deputy Speaker, as those who took ultimate responsibility, could not appear before the Committee just as ministers appeared on the basis that they were responsible for their departments.

Mr T Harris (DA) asked why the oversight mechanism was being amended given that it had never been established. It was wrong for the executive to sit on the oversight committee.
 
Dr Luyenge (ANC) said the role of the executive was to intervene rather than to interfere.

Mr Koornhof said he understood that there would be a new joint oversight committee and the Speaker and the Deputy Speaker could not sit on that committee, but the committee must be able to summon not only the Secretary but also the Speaker and the Deputy Speaker. 

Mr Harris said the restriction on the speaker and the deputy speaker being part of the joint committee was in place in the current act but the Bill removed that restriction and therefore the DA opposed it, as the restriction had to remain.

Ms Z Dlamini-Dubazana (ANC) asked who was doing oversight over whom.

Mr Coetzee said the Act did provide for an oversight mechanism but it has not been established. The Amendments proposed that the oversight mechanism be removed and the joint rules committee propose an oversight mechanism as well the composition of this mechanism.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, said when the Act was passed in 2008, parliament had a governance structure that advised on issues of planning and budgeting. Draft strategic, performance and budget plans were submitted to the executive authority. But it stopped there and did not say what the executive authority must do with the drafts. In 2008 the drafts indicated it had to go to the oversight mechanism. This was removed, as there was an existing oversight body. The current Section 17 heading indicated that something had been removed, namely the referral and consideration of the drafts. The draft Bill wanted to rationalise the governance structure of Parliament by making the oversight mechanism also the oversight authority. The draft Bill wanted to bring the functions together because these budgeting and planning functions needed the input of the executive who were responsible and accountable for those documents. This was the motivation to not limit the membership of the oversight mechanism.

Regarding the joint rules, the matter of the conflict of interest therefore had to comply with schedule 2 in the ethics code so the executive had to comply with schedule 2 which allowed it to be made clear when they had to declare a conflict of interest and for the committee to decide how to deal with it on a case by case basis. If the conflict of interest was material then the executive had to recuse themselves. The principal was that the matter would be dealt with by the joint rules. 

There was an anomaly that the Deputy Permanent Chairperson of the NCOP and the Deputy Speaker of the National Assembly could not be part of the oversight mechanism.

There was nothing wrong in bringing something in to the draft to indicate that the joint rules make provision for a procedure to deal with a conflict of interest. This was the option that Parliament supported.

Regarding Dr Luyenge’s comment, he said that the issue of the management of Parliament was the accounting officer’s responsibility. The issue of final accountability rested with the executive authority and an oversight mechanism comprising both Houses.

Regarding Ms Dlamini-Dubazana’s question, he said that the Committee was not the oversight committee. The oversight mechanism would have an oversight report, which would go to the two Houses.

Mr Harris said that the current Section 4 of the FMPA established the oversight mechanism, which was a committee of Members of Parliament to oversee the budget crafted by the executive of Parliament. Section 4(2) stipulated that the Deputy Speaker of the National Assembly and the Deputy Chairperson of the NCOP might not be on the committee that did oversight. He asked Adv Jenkins what the negative effect would be if they were not on the oversight mechanism.

On the joint rules, he said representation had to be according to the Joint Rules of Parliament. There was no problem with the law enacted in 2009. He felt that the problem was probably because the oversight mechanism had never been established and enforced.

Mr Koornhof agreed

Mr Coetzee said when the governance model of parliament was designed it made provision for the parliamentary oversight authority which was a multi-party structure to review the budget and strategic plan. In 2009 the FMPA specified how the oversight of Parliament’s budget and strategic plan would be done.
Section 4(1) created the oversight mechanism. Section 4(2) dealt with representation on the oversight mechanism. Parliament was proposing that these two processes be rationalised. The way for the rationalising proposed was through amendments to the Act, which would allow for the representation to be dealt with by the Joint Rules Committee. This was to ensure that it was consistent with what the two Houses had adopted. The other option would be to get the Joint Rules Committee to rescind or change its decisions regarding composition.

Adv Jenkins replied to Mr Harris’ question by saying that the oversight mechanism had a role to play other than oversight and that was to give input.

Mr Koornhof asked if this was not what the budget forum was doing currently.

Adv Jenkins said all that one was trying to do was put back certain functions that would assist in rationalising Parliament’s structures. He did not disagree that there were inherent conflicts but he wanted to deal with those matters through the Joint Rules.

The reason why the oversight committee was never established was because of overlapping governance institutions in Parliament.

Mr Harris said he would be proposing that a Clause be written into the Bill that the oversight committee had to be established. He asked Adv Jenkins his views on the Committee’s adding a Clause to force the oversight mechanism to be established. Would he be opposed to the accounting officer’s being accountable to the oversight mechanism as well as to the executive authority?

Adv Jenkins advised against it. The oversight mechanism as formulated had oversight over Parliament. It was implicit and it was not necessary for it to be placed in the Bill as it was already in place. Section 5 said that the executive authority was accountable to Parliament for the financial management. The accounting officer could be called on to appear and on occasion the executive authority could be invited.

Ms Dlamini-Dubazana said it was her understanding that the Committee was making amendments that would impact on the provincial legislatures because of the Limpopo province problem. Now the Committee was being asked to make changes to the oversight mechanism, which had been shelved and never been put into practice.

Mr Harris said that the amendments required by the Constitutional Court were not the controversial ones. He was sure that in 2009 the intention was that the oversight mechanism would have been implemented by now. This was an opportunity to implement it. Regarding Adv Jenkins reply, he said that he was not referring to Section 5 but to Section 6 where the accounting officer was accountable to the executive authority and the oversight committee.

Dr Luyenge said that the Committee was dealing with something it was not supposed to debate - whether the executive authority had to be held accountable to MPs. The Committee had no locus standi to pronounce on the establishment of a committee that sought to make the executive authority accountable.

Mr D Ross (DA) said that there was a sincere effort to achieve accountable management of Parliament. The legal advisors needed to make the draft Bill be more explicit.

The Chairperson outlined what the Committee was expected to do as per the court judgement. The Court’s declaration of invalidity had been suspended for 18 months regarding provincial matters and asked the Standing Committee on Finance to review the Act and to provide amendments if necessary and to evaluate the application of the Act. Therefore the entirety of the Act had to be looked at.

Adv Zuraya Adhikarie, Chief Parliamentary Legal Advisor, said one had to guard against such a position. The accounting officer was accountable to the executive authority and it would not create a good governance structure. 

Adv Jenkins said that the Joint Rules Committee was the more appropriate forum to take a decision on the governance of parliament.

Auditor-General of South Africa
Ms Anishia Silent, AGSA Legal Advisor, said she would focus on performance management and finance leases. The intention of the AGSA in including the performance management in the Bill was because it felt financial management should be more prominent.

Mr Lesley Holland, Deputy Business Executive, AGSA, said the Act did cover performance information adequately but one wanted the legislative deadline for the submission of the financial statements and the annual performance report regarding predetermined objectives to be considered for inclusion in the Act.

The second matter was about the framework that was used to manage and report on performance information. There was no reference in the Act or the regulations to a framework. This should be considered for inclusion the Amendment Bill.

Ms Silent said that the Committee should consider including a reference to finance leases. National Treasury had said that it would publish the regulations but the AGSA had not received feedback from National Treasury to date.

Mr Holland said that government institutions were not prevented from entering into operating leases but were prevented from entering into finance leases which would result in irregular expenditure which had to be disclosed or condoned. Including these provisions in the Bill would clarify the accounting treatment and the reporting of finance leases.

National Treasury
Adv Empie van Schoor, National Treasury Chief Director: Legislation, said that National Treasury supported the proposed amendments. All appropriated funds received by legislatures from the provincial revenue fund that were not spent did not have to be returned. The proposal was that this be removed from the PFMA and that it be dealt with by the FMPA.

National Treasury wanted to make proposals on the amendments. Firstly, regarding the speaker of the legislature, the provincial legislature might provide or issue instructions in terms of Sections 65 and 66 of the FMPA. It wanted to propose that Parliament make legislation for all legislatures to ensure uniformity but that the power to issue instructions be left to the provincial legislatures to cover the implementation of the FMPA and its regulations.

There was an additional proposal for a new process for the appropriation of funds for the provincial legislatures.  Lastly there was a proposal on direct charges. Direct charges against the revenue fund were not funds appropriated for the legislature and should not be regarded as part of the legislature’s funds. Any unspent funds should not be retained. In the FMPA it could be construed as being part of the revenue and so amendments needed to be made to make it clear. 

Discussion
Mr Harris agreed with all the AGSA’s positions. He asked when the Committee would receive a draft of the Bill that included the AGSA’s requests.  

Mr D Van Rooyen (ANC) asked the legal advisor for his opinion on the National Treasury’s input.

Mr Koornhof said that it appeared that one would need to go to the provinces to proceed with the amendments.  Could the matter be deferred or was it so important that it had to be done within the time stipulated.

Mr Holland responded on the consistency between the PFMA and the FMPA regarding performance information, financial statements and performance. The AGSA wanted this taken further and include a framework for performance management, as Parliament did not have its own defined framework on performance management.

Regarding the oversight mechanism, the AGSA had consistently reported that the oversight mechanism had not been established. In discussions with the executive authority there were indications that it would be looked at. The AGSA wanted it to be appropriately defined and implemented with specific time frames.

The AGSA also agreed that matters of conflict of interests were appropriately addressed and supported the view of the Committee.

Regarding Mr Koornhof's questions on the deferment of the amendments, the AGSA supported consultation with relevant stakeholders although there was an urgency to have the matters finalised. 

On the oversight mechanism, Adv Empie van Schoor said there was nothing wrong with the Joint Rules Committee’s determining the composition of the oversight committee but she did want to highlight that members of the executive authority could still participate on invitation, even if the current Act excluded them as members of the oversight committee.
 
National Treasury had not consulted Parliament or the provinces regarding possible amendments to appropriation. 

Regarding the authority to make regulations and to what extent provincial legislatures could be made autonomous, she said it was essential to have uniform rules, as for example on the budget format.

Adv Jenkins said that one of the amendments proposed by the AGSA related to the adjustment budget of the provincial legislature and he agreed it should be in the draft Bill. Any recommendations from the National Treasury or the AGSA could be included in the draft bill.

Mr Van Rooyen said he was worried about processes that needed to be followed given the deadline of 09 September 2013.

Adv Jenkins replied that he was busy with a draft bill and he could be instructed to include other amendments. Once the draft bill was ready then it would be reported to the House and when the House approved it then it would be sent to the NCOP where it followed a Section 76 procedure and the joint tagging procedure. He said that there would come a time when a progress report would have to be prepared for the Constitutional Court at around the end of August and this report should include when Parliament expected the Bill to be finalised. At issue here was when the Act should come into operation. It would only become operative at the beginning of the financial year so it would not be disruptive if it were not competed by 09 September. However the Constitutional Court had declared five provincial acts inconsistent with the Constitution and suspended the invalidity for 18 months, which period would end on 21 September. Parliament was currently busy with an application for the Court to reconsider and extend the suspension to the beginning of the financial year.

Adv Adhikarie said it was important that it be finalised so provinces could put in place new structures.

Ms Dlamini-Dabuzana moved that the AGSA’s proposed amendments be included in the draft bill.

Mr Harris said the Speaker should also give a briefing.

The Chairperson said he had spoken to the Speaker who had indicated that his position was included in the Secretary to Parliament’s briefing. He said that Adv Jenkins should, by the following week, summarise and present a draft incorporating the AGSA’s and National Treasury’s recommendations and what had been discussed for further deliberation.

The meeting was adjourned.
 

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