Audit outcomes of National Treasury &Statistics South Africa; Draft Financial Management of Parliament Bill: Report-back by Parliamentary Legal Advisor

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Finance Standing Committee

14 October 2013
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The Auditor General of South Africa (AGSA) reported that National Treasury had received an unqualified audit with findings, and the following areas should receive attention: supply chain management, human resource management, information technology control, the quality of submitted financial statements, the quality of performance reports and financial health. AGSA recommended that action should be taken to improve leadership, financial and performance management, and governance.  In general, all those areas had improved, but some key officials lacked appropriate competencies, and the leadership was not effective.   

Treasury should commit itself to refining the performance management system, enabling improved consequence management, through regular interaction with the relevant stakeholders on critical compliance matters.  There should also be regular meetings of the Chief Financial Officers (CFOs) forum to share knowledge and seek the common goal of achieving clean administration, and six-monthly forum meetings between AGSA, the Ministry and management to monitor and provide feedback on progress being made towards achieving clean audit outcomes. 

Statistics South Africa (Stats SA) had received an unqualified audit with findings, and the following areas of should receive attention: supply chain management, human resource management, information technology control, the quality of submitted financial statements, the quality of performance reports and financial health.  Action needed to be taken in the areas of leadership, financial and performance management, and governance. 

 In general, all those areas had shown some improvement, but in future management should prepare quarterly financial statements that consisted of disclosure notes, and those notes should be reviewed for accuracy and completeness.  The officials who were responsible for the preparation and review of disclosure notes should be held accountable through the performance management process.  The review of the annual performance report needed to be reviewed to prevent material misstatements in the reported information. Stats SA should improve performance and consequence management, and prepare monthly financial statements.

Adv Frank Jenkins, Senior Parliamentary Advisor, provided clarity on Chapter 2, which dealt with oversight, executive authority and administration of the Financial Management of Parliament Act.

Members raised questions about the status of compliance with relevant legislation, such as the Public Finance Management Act (PFMA) by both the National Treasury and Statistics South Africa.  It was emphasised that both public entities should, through their compliance, lead by example,  Members also wanted more clarity on the oversight mechanism in Chapter 2 of the Financial Management of Parliament Act, 2009, to establish how powerful it was in strengthening the oversight role of Members of Parliament.
 

Meeting report

Auditor General on audit outcomes of National Treasury
Mr Hein de Wet, Senior Manager: Auditor General of South Africa, said that in 2010-11, 2011-12 and 2012-13, National Treasury had received an unqualified audit with findings.  Its status of compliance with relevant legislation stood at 4%in 2010-11, 5% in 2011-12, and 2% in 2012-13, with findings.  In 2010-11, the National Treasury’s annual performance report had no findings, but in 2011-12 and 2012-13 the Department had findings.

The following areas of National Treasury should receive attention: supply chain management, human resource management, information technology control, the quality of submitted financial statements, the quality of performance reports and financial health.  Actions that should be taken included an improvements in leadership, financial and performance management, and governance.  In general, all those areas had improved, but some key officials lacked appropriate competencies and the leadership was not effective.

National Treasury should commit itself to refining the performance management system, enabling improved consequence management, through regular interaction with the relevant stakeholders on critical compliance matters.  There should also be regular meetings of the CFO forum to share knowledge and seek the common goal of achieving clean administration, and six-monthly forum meetings between AGSA, the Ministry and management to monitor and provide feedback on progress being made towards achieving clean audit outcomes.  The Portfolio Committee Chairperson should follow up with the Department on whether the new Service Level Agreements (SLAs) with the State Information Technology Agency (SITA) had been signed, follow up with the Department on the implementation of the Integrated Financial Management System (IFMS) project, and  engage with the Department on action plans to ensure that it improved the audit outcomes.

Auditor General on audit outcomes of Statistics South Africa
Mr Thami Dibishi, Business Executive, AGSA, said that at in 2010-11, 2011-12 and 2012-13, Statistics South Africa (Stats SA) had received an unqualified audit with findings.  Its annual performance report had no findings during this period.

Mr Dibishi said that the following areas of Statistics South Africa should receive attention: supply chain management, human resource management, information technology control, the quality of submitted financial statements, the quality of performance reports and financial health.  Action needed to be taken in the areas of leadership, financial and performance management, and governance.   In general, all those areas had shown some improvement, but in future management should prepare quarterly financial statements that consisted of disclosure notes, and those notes should be reviewed for accuracy and completeness.  The officials who were responsible for the preparation and review of disclosure notes should be held accountable through the performance management process.  The review of the annual performance report needed to be reviewed to prevent material misstatements in the reported information. Stats SA should improve performance and consequence management, and prepare monthly financial statements.

Report-back by Adv Frank Jenkins: draft Financial Management of Parliament Bill
Adv Frank Jenkins, Senior Parliamentary Advisor, provided clarity on Chapter 2, dealing with oversight, executive authority and administration of the Act.  Part 1: Oversight Mechanism required that Parliament should  maintain oversight of the financial  management of Parliament by, among other things, (a) considering instructions issued by the Executive Authority in terms of Section 37(5); (b) considering the annual report submitted to Parliament in terms of Section 60; (c) considering instructions issued by the Executive Authority in terms of Section 66; and (d) performing any other functions specified in this Act or by the Rules of Parliament, or consistent with the objects of this Act. Representation on the oversight mechanism should be in accordance with the Joint Rules of Parliament, except that the members of the Executive Authority, the Deputy Speaker of the National Assembly and the permanent Deputy Chairperson of the National Council of Provinces: (a) might not be members of the oversight mechanism; and (b) might only participate in the deliberations of the oversight mechanism at the request of the oversight mechanism. The oversight mechanism might require the Accounting Officer and any other official of Parliament to appear before it.  The oversight mechanism had the powers that committees of Parliament had under Sections 56 and 69 of the Constitution.

Discussion
The Chairperson noted that both National Treasury and Stats SA presentations had been useful, because the information presented had covered findings arising from the annual reports. He wanted clarity on the lack of appropriate experience, as indicated in the audit outcomes of the National Treasury.

Mr D Ross (DA) said that the National Treasury was moving to the right direction. However, the National Treasury had not really complied with the Public Finance Management Act (PFMA), and that was not acceptable. The Committee expected the National Treasury to lead by example, by making sure that it complied with PFMA.  Stats SA had not really shown good progress. 

Mr T Harris (DA) wanted clarity on the status of compliance with relevant legislation of National Treasury.

 Ms J Tshabalala (ANC) wanted clarity on the recommendation of the commitment required by Stats SA to improve performance and consequence management.

Mr Dibishi replied that the Auditor General of South Africa had not conducted a full audit, and the issue of leadership ineffectiveness was open for discussion and engagement with Stats SA. There were action plans in place that would guide Stats SA.

Mr De Wet said that a number of non-compliance findings were the result of technical matters.

Dr Z Luyenge (ANC) said he agreed with Advocate Jenkins’s explanation of Chapter 2 of the Act -- oversight, executive authority and administration -- and suggested that the chapter should remain the way it was.

Ms Z Dlamini-Dubazana (ANC) said that Members of Parliament were performing the oversight function, and asked for further explanation of “oversight mechanism.”

Mr Ross commented that Chapter 2 strengthened the oversight role of Members of Parliament, and therefore any changes to Chapter 2 should not undermine this role.

Ms Tshabalala suggested that Members needed to stick to their mandate of oversight, and if Chapter 2 allowed members to do this, then there was no need to change it.   Members should find out what the problem was, before making any changes.

Mr Harris said that the oversight mechanism meant the oversight of Members on various matters, and the aim of the chapter was to established new oversight mechanisms.  Chapter 2 of the Financial Management of Parliament Act 2009 had been passed by Parliament and was a powerful piece of legislation.   He suggested that it should be left as it was, as it left the oversight work of Parliament to its Members.

The Chairperson agreed with the general thrust of Committee Members’ views, and suggested that there should not be changes as there were still issues that needed to be looked at.

The meeting was adjourned
 

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