Draft Financial Management of Parliament Amendment Bill [B-2013]: Parliamentary Legal Services briefing

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Finance Standing Committee

09 September 2013
Chairperson: Mr D Van Rooyen (ANC)
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Meeting Summary

A Senior Parliamentary Legal Adviser briefed the Committee on the draft Financial Management of Parliament Amendment Bill. Both the Auditor-General and National Treasury had suggested some further changes. The Auditor-General had suggested that references to “performance management” be included in the Long Title of the Bill, but the legal advisers felt that this was not appropriate, since this was not one of the aims of the Bill, and that it would be a tool, and not a statement of intent. National Treasury had suggested a number of amendments to definitions, which would clarify the referencing in the current Act with the new intention that this should also apply to provincial legislatures. It also suggested that:
- Representation on the oversight mechanism must be in accordance with the joint rules of Parliament, with the addition that no member may attend a deliberation on a matter in which that member has a material interest.
-
Parliament must appropriate money received through the annual national budget for the financial year subject to any amount specifically and exclusively appropriated in the annual national budget, and the previous financial year, but not spent in that year.
- Parliament must approve the use of unconditional donations and its own revenue contemplated in section 16(2)(b)(ii) and (iii) and approved for the previous financial year but not spent in that year.
- Any appropriation or approval in terms of subsection 16(1) may be for a specific and exclusive purpose.
- Any revision of an appropriation contemplated in section 16(2)(b)(1) must be made (a) by a national adjustment budget referred to in section 30 of the Public Finance Management Act; and (b) in accordance with the procedure set out in section 17(2).
- Any revision of an appropriation or approval in terms of subsection 18(1) must be approved by Parliament.
- Any unauthorised expenditure of funds derived from Parliament’s own resources, including donor funds that Parliament approved, should become a charge against Parliament’s own funds.
- Any unauthorised expenditure of funds derived from Parliament’s own resources, including donor funds that Parliament did not approve, must be recovered from the person responsible for the unauthorised expenditure.
- Parliament should not be required to return to the National Revenue Fund any money appropriated, in terms of section 16(2)(b)(i), for a particular financial year, but not spent in that year.
- Parliament must surrender to the National Treasury funds that were a direct charge against the National Revenue Fund for any requirements related to Parliament in terms of any legislation for a particular financial year, but not spent in that year.

The Auditor-General proposed the following amendments:
- Substitution of section 34(4)(b), and the insertion of a new subsection 34(4A) to clarify the meaning of a “qualified opinion”.
- Substitution of section 48(1)(c)(iii)
- Substitution of section 56(1)
- Substitution of sections 58(1)(b) and (2) and (3), as well as the insertion of a new subsection (2A) requiring the Executive Authority to promptly table the section 58(2) report in Parliament.”
- Substitution of the existing section 59
- Substitution of section 60(1).

Members asked questions of clarity on some of the wording proposed, and the Legal Adviser noted that in some instances, the Committee would have to make a decision in principle and instruct the drafters what it wished to have included. Members asked what was currently done with unspent moneys, and how irregularities would be disclosed. One Member thought that section 4 was acceptable as it stood. A proposal was made that the Bill should include a provision to force the establishment of an oversight mechanism over Parliament’s budget, and that this should then apply to sections 43 and 64.  It was proposed that in section 6, dual accountability be enforced In section 64 it was proposed that the Accounting Officer comply not only with requests by the Executive Authority and Auditor-General, but also by MPs. It was suggested, under section 67, that a new subsection be added that would require the Executive Authority to inform the oversight mechanism of any investigations of financial misconduct. More information was requested on unspent direct charges, unauthorised expenditure and how it was dealt with, what Parliament’s own revenue sources comprised. Further clarity was sought on the arguments behind the Long Title wording, and whether there were differing norms and standards.
 

Meeting report

Draft Financial Management of Parliament Amendment Bill: Parliamentary Legal Adviser’s briefing
Advocate Frank Jenkins, Senior Parliamentary Legal Advisor, briefed the Committee on the draft Financial Management of Parliament Amendment Bill (the Bill). The objectives of the Bill were to amend the Financial Management of Parliament Act (FMPA), 2009, to deal with the financial management of provincial legislatures. It intended to align the provisions dealing with the oversight mechanism with the Public Finance Management Act (PFMA) for purposes of reporting and auditing. The Bill would repeal certain sections of the Powers and Privileges Act (PPA) of 1963; delete certain references to “provincial legislatures” in the FMPA, 1999.

Various suggestions had been made as to inclusions or changes. The Auditor-General (AG) had wanted to include “references to performance management” in the Long Title of the Bill, but Parliament felt that the reference to performance management was a tool, and not a statement of intent as was the rest of the long title.

The following amendments were proposed by National Treasury (NT) for the main Act:

Section 1:
National Treasury suggested the amendment of the definition of “approved budget” to read “approved budget means the total amount of funds contemplated in section 18”. It also suggested the insertion of the definition of “a person in the employ of the state”. It suggested that “Parliament” be specified as the National Assembly and the National Council of Provinces referred to in section 42(1) of the Constitution. The definition for “provincial annual budget” should mean a provincial annual budget as referred to in section 27(2) of the Public Finance Management Act. NT also suggested that “provincial legislature be described as a provincial legislature as referred to in section 104 of the Constitution of the Republic of South Africa.

Section 3
National Treasury noted that the Bill, with the necessary changes would apply to provincial legislatures. NT suggested that, among others, that the Speaker of the National Assembly or the Chairperson of the National Council of Provinces, must be construed as a reference to the Speaker of the provincial legislature concerned and that a Member of Parliament must be construed as reference to a member of the provincial legislature concerned (see report for full list of reference changes). It also suggested that section 30 of the Public Finance Management Act must be construed as a reference to section 31 of that Act and that a national adjustment budget should be construed as a reference to a provincial adjustment budget.

Section 4
NT suggested that subsection 4(2) be amended to read: “Representation on the oversight mechanism must be in accordance with the joint rules of Parliament, which must provide that no member may attend a deliberation on a matter in which that member has a material interest.”

Section 16
NT proposed that the word “funds” be changed to “money”, in section 16(2)(b)(i) and “funds that are a direct charge against the National Revenue Fund” to “conditional and unconditional donor funds” under section 16(2)(b)(ii). It also proposed removal of “excluding donor funds” from section 16(2)(b)(iii) and “contain a schedule of planned expenditure under Parliament’s donor funded projects; and” from section 16(2)(g).

Section 18
NT suggested that, in essence, direct charges should be removed from Parliament’s budget. It suggested that Parliament must, according to main divisions, appropriate money received through the annual national budget for:
- The financial year, subject to any amount specifically and exclusively appropriated in the annual national budget, and
- The previous financial year, but not spent in that year.

Parliament should approve the use of unconditional donations and its own revenue, both as contemplated in section 16(2)(b)(ii) and (iii); and that was approved for the previous financial year but not spent in that year.

NT further suggested that any appropriation or approval in terms of subsection (1) may be for a specific and exclusive purpose.

NT proposed that any revision of an appropriation contemplated in section 16(2)(b)(1) must be made by a national adjustment budget referred to in section 30 of the Public Finance Management Act; and in accordance with the procedure set out in section 17(2). Any revision of an appropriation or approval in terms of subsection (1) must be approved by Parliament,

Section 20 amendments
NT noted that this section applied to any unauthorised expenditure incurred by Parliament, other than the unauthorised expenditure of funds derived from Parliament’s own resources, including donor funds.

Section 21
NT noted that this section referred to unauthorised expenditure of own resources. It suggested that any unauthorised expenditure of funds derived from Parliament’s own resources, including donor funds that Parliament approved, should become a charge against Parliament’s own funds. Any unauthorised expenditure of funds derived from Parliament’s own resources, including donor funds that Parliament did not approve, must be recovered from the person responsible for the unauthorised expenditure.

Section 22
This section referred to the retention of unspent funds for direct charges. Parliament was not required to return to the National Revenue Fund any money appropriated in terms of section 16(2)(b)(i), for a particular financial year, but not spent in that year. It was suggested that Parliament must surrender to the National Treasury funds that were a direct charge against the National Revenue Fund for any requirements related to Parliament in terms of any legislation for a particular financial year, but not spent in that year.

Mr Jenkins then moved on to describe other amendments that were proposed by the Auditor-General.

Section 34
The AG suggested the substitution of subsection 34(4)(b) to read: “(b) in instances of a qualified opinion in respect of such funding, until adequate measures are put in place to rectify the qualification.”

It also suggested the insertion of a new subsection (4A), to read: “(4A) For the purposes of this section “qualified opinion” means “an adverse opinion or can also be given or the opinion can be disclaimed”.”

Section 48
The AG proposed the substitution of section 48(1)(c)(iii) with the following: “the quality of the annual financial statements, performance reporting and compliance with the applicable laws and regulations.”

Section 56
The AG proposed the substitution of section 56(1) to read:  “For each financial year, the Accounting Officer must prepare annual financial statements in accordance with the Standards of Generally Recognised Accounting Practice and, in the absence of an applicable standard, in accordance with standards prescribed by the Executive Authority for the purpose of maintaining consistency with other organs of state.”

Section 58
The AG proposed the substitution of section 58(1)(b) to read: “(b) submit an audit report on those statements to the Accounting Officer within two months of receiving statements.”

It also proposed the substitution of subsection 58(2) to read: “(2) If the Auditor-General is unable to complete an audit within two months of receiving the financial statements or the annual performance report, the Auditor-General must promptly submit a report outlining the reasons for the delay to the Executive Authority and the Accounting Officer.

The AG proposed the insertion of a new subsection (2A) reading: “(2A) The Executive Authority must promptly table the report referred to in subsection (2) in Parliament.”

The substitution of section 58(3) was proposed, as follows: “(3) Once the Auditor-General has submitted an audit report to the Accounting Officer, no person may alter the report or the annual financial statements to which the report relates.”

Section 59
The AG proposed the substitution of the existing section 59 with a new wording, as follows: “59. The Accounting Officer must submit the annual report of Parliament, including the audited financial statements for that financial year and the audit report on those statements and the annual performance report to the Executive Authority within five months of the end of the financial year concerned.

Section 60
The AG proposed the substitution of section 60(1) with: “60. The Executive Authority must table the annual report, including the audited financial statements for that financial year and the audit report on those statements and the annual performance report, in Parliament within one month after the Accounting Officer received the audit report.

Discussion
Mr Z Luyenge (ANC) said Mr Jenkins had spoken at length about unspent monies, especially the core revenue of Parliament. He wanted to know what was done with the unspent monies currently.

Advocate Jenkins replied that he could not give a direct answer on what was done with the unspent monies. He assumed that they were kept in a suspense account. Parliament’s Annual Report should clarify what was done with the money.

Mr T Harris (DA) said that the proposal by Parliament would not solve the conflict of interest between the Executive Authority and the oversight mechanism. He said there was nothing wrong with the original text  of section 4, and proposed that it should be left as it currently read.

Advocate Jenkins replied that this would be a decision of the Committee.

Mr Harris proposed that a clause should be inserted in the Bill which would force the establishment of an oversight mechanism over Parliament’s budget.

Advocate Jenkins replied that again, this was something that the Committee must deliberate on in principle. This would have to be done before the budget was passed.

Mr Harris referred to section 6, which stated that the Accounting Officer had to be accountable to the Executive Authority. He proposed that dual accountability should be enforced.

Mr Harris referred to section 43, noting that the Accounting Officer was meant to notify the Auditor-General and the Executive Authority if there were problems with tenders. He proposed that the oversight mechanism should be included.

Mr Harris said that section 63 required the Accounting Officer to report wasteful expenditure to the Executive Authority. He proposed that this should also be reported to the oversight mechanism.

Mr Harris referred to section 64, which stated that the Accounting Officer had to comply with any request by the Executive Authority or the Auditor-General. He suggested that “members of Parliament” should be added to the list.

Mr Harris referred to section 67(2B) and suggested that another subsection should be added, which would require the Executive Authority to inform the oversight mechanism of any investigations of financial misconduct.

Advocate Jenkins responded to Mr Harris’s proposals above by stating that many of the issues mentioned, such as tender irregularities, could be found in the Annual Report. The oversight mechanism could then conduct oversight on those issues.

Mr D Ross (DA) wanted clarity on how Parliament investigated irregularities.

Advocate Jenkins replied that irregularities were reported on in the Annual Report. Government departments also had to answer to the houses through the Standing Committee on Public Accounts on the investigations that had been done to deal with certain irregularities.

Mr Ross asked for more information on the unspent direct charges.

Advocate Jenkins replied by quoting what the Minister had said on direct charges: “Unspent charges must be returned to the relevant revenue fund after the financial year”. He said unspent charges were not part of the budget of Parliament.

Ms J Tshabalala (ANC) referred to the provisions around unauthorised expenditure, and asked who was responsible for taking ownership of this.

Advocate Jenkins replied that unauthorised expenditure was not deliberate, but happened because of fluctuations in prices. Where there was unauthorised expenditure, the reasons for it had to be detailed, and Parliament had to authorise this expenditure. The issue of unauthorised expenditure should be reported to Parliament or a provincial legislature, in line with the PMFA. Unauthorised expenditure for a government department or a provincial government department must be approved before it could be put into an adjustment budget to “plug the gap”.

Ms Z Dlamini-Dubazana (ANC) asked why “performance management” was not included in the Long Title of the Act.

Advocate Jenkins replied that the Act was not about performance management as such, but about the financial management of Parliament. There were a few references to performance management in the Act, but Parliament felt that it would not achieve anything by putting a more specific reference into the Long Title of the Act; performance management was not one of the primary objects of the Act and it did not make sense to include it. However, if the Committee felt that it must be included, then Parliament would take the necessary instructions and include it.

Ms Dlamini-Dubazana referred to section 16, regarding the annual budget. She asked what was meant by “funds derived from Parliament’s own revenue sources’.

Advocate Jenkins replied that funds derived from Parliament’s own sources were essentially interest on money that was held in bank accounts, as well as money that was accrued through investments in the Reserve Bank.

Ms Dlamini-Dubazana referred to section 17, where it was proposed that the draft annual performance plan and draft budget of Parliament must be submitted to the NT. She asked if Parliament expected NT to use Parliament’s norms and standards, or its own framework.

Advocate Jenkins replied that there were two sets of norms and standards. As any other organ of state, Parliament followed the generally recognised accounting standards as the norms and standards for budgeting and financial statements. Should there be no norms and standards, then the Executive Board would set the norms and standards.

The meeting was adjourned.
 

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