Division of Revenue Bill: negotiating mandates

The mandate agreed to the Bill but with the some proposed amendments.

Mr Kahla (Legal advisor, Treasury) thanked the province for its thorough work and responded to the proposed amendments by the province:

Clause 1: Mr Kahla said that it must be read in accordance with other legislation and the definition of a municipal manager must be taken into account. He added that a municipal accounting officer is the same as the municipal manager.

Clause 11: He agreed that to ensure consistency, "installation" must be replaced by "construction".

Clause 20(1) (f): The Portfolio Committee on Finance had corrected this clause.

Clause 25(3) and (5): Mr Kahla clarified that this deals with erroneous transfers and not reallocations.

Clause 27(4): The proposed change would be made for consistency.

Schedule 3: The spelling error would be corrected.

Schedule 6A: The spelling error would be corrected.

Western Cape
Mr Durr (ACDP) thanked the Treasury for the accommodation of seven of their nine previous proposals. He stated that Section 17(1) does not make provision for the publishing in the Government Gazette of allocations for additional amounts or the reallocation of amounts. He mentioned the example of a disaster relief fund that would have to be reallocated if there were no disasters. He expressed uncertainty whether this could be dealt with through normal budgeting processes or whether it must be gazetted.

Mr Kahla replied that Section 9 allows for other allocations at a later stage in the form of adjustment budgets.

Their mandate agreed to the Bill.

KwaZulu-Natal

Mr Ralane (ANC) stated that KwaZulu-Natal would like to send a representative to this committee.

Ms Mahlangu replied that she has raised that issue before and will do so again.

Their mandate agreed to the Bill.

Gauteng
Dr Conroy (NNP) stated that they are happy with the Bill.

Their mandate agreed to the Bill.

Eastern Cape
Mr Kahla stated that most of the Eastern Cape negotiating mandate consists of general comments. On their suggestion in 5.2 on clause 20 he said he would rather not comment on issues dealing with the Auditor General without him being present. He added that these issues have been thoroughly discussed.

On their amendment to bring back clause 15(2) he said that clause 17(1) in the new Bill covers it.

Their mandate agreed to the Bill.

Northern Cape
Their mandate agreed to the Bill.

Limpopo
Due to technical reasons no mandate was received. Assurance was given that discussions were held in the province.

Mpumalanga
The Chair remarked that the Mpumalanga representative, Mr Taabe (ANC), had indicated he was coming to the meeting but had not appeared. No apologies were tendered. She added that he had told her that they had problems with the scheduling of such a meeting. The chair said that she was concerned about Mpumalanga's lack of capacity.

Mr Ralane voiced his concern that members are using up travel allowances but are not doing the work they should be doing in the provinces. He stated that Mr Taabe had been in Parliament the day before.

General comments
The Chairperson expressed her personal view that the quality of the negotiating mandates was disappointing. The Free State, Gauteng and Eastern Province were the exceptions. The other mandates were very vague or said nothing. She added that they could not even be sure that discussions on the bill had taken place at provincial level.

Mr Kahla suggested that a new format be sought for negotiating mandates. He added that currently everyone is making sure they comply with the legal requirements. A new format might be needed to align the process.

Appendix 1:
FREE STATE LEGISLATURE
DIVISION OF REVENUE NEGOTIATING MANDATE

1. INTRODUCTION
The Division of Revenue Bill [B9 -2003] was referred the Finance Committee by the Prioritising Committee.

This Bill provides for the equitable division of revenue anticipated to be raised nationally among the national provincial and local spheres of government for the 200312004 financial year. It further provides for the reporting the requirements for allocations pursuant to the division of revenue.

2. MEMBERS OF THE COMMITTEE
The Committee comprises of the following Members:

Aucamp, I (Member)
Dlungwana P (Member)
Makgoe, P. (Member)
Marais, A (Chairperson)
Monareng, N (Member)
Oosthuizen, A. P (Member)
Worth, D (Member)

3. PROCEDURE OF THE COMMITTEE

On the 17 and 18 March 2003, the Finance Committee held meetings to consider the Division of Revenue Bill B9-2OO3.

The Division Revenue Bill [B9-2003] was referred to the Finance Committee on 04 March 2003 by the Prioritising Committee for consideration and report back.


4. AMENDMENTS
The Committee effected the following amendments on the Division of Revenue Bill,

CLAUSE I

1 Page 2 in line 13 after the word "municipal", to delete the word "manager" and to substitute "accounting officer'.

Motivation: Defined words are used in the body of the bill, not defining words.

CLAUSE 11

Page 6 in line 39 before the word "installation" to insert the word "construction".

Motivation: Page 33 schedule 6A allocation under "Purpose" provision is made for construction of new facilities.

CLAUSE 15(b) and (C)

Page 8 in line 15 after "reported on"1 to insert "and for the financial year up to the end of that month"

Page 5 in line 16 after "allocation"1 to insert "and for the financial year up to the end of that month".

Motivation: See clause 15(a).

CLAUSE 20(1) (f)

Page 10 in line 19 to delete "act" and to substitute "Act".

Motivation: Capital letter "A" inserted.

CLAUSE 25(3) and (5)

Page 11 in line 39 after '"schedule" to insert "or any other transfer".

Page 11 in line 46 after to insert "or any other transfer".

Motivation: The bill recognizes payment to provinces and local sphere of government outside of the schedules in accordance with clause 6(3). Clause 23 also provides for reallocation between municipalities.

CLAUSE 27(4)

Page 12 in line 17 before "obligation" to insert "function or".

Motivation: Clause 27(1) refers to functions and obligations1 not only obligations.

SCHEDULE 3

Page 19 under Motheo District Municipality to delete "Mansopa" and to substitute "Mantsopa".

Motivation: correct spelling error.

SCHEDULE 6A

Page 33 under "Purpose", to delete the word "construction" and to substitute the word "constructions"

Motivation: correct spelling error.

5 RECOMMENDATIONS
The Finance Committee recommends that:

5.1 Authority be conferred to the Free State Delegation, to vote for the adoption of the Division of Revenue Bill [B~2003] with aforementioned amendments.

5.2 The Portfolio Committee on Finance be authorised by this House to consider amendments proposed the Select Committee National Council of Provinces
(NCOP).

5.3 The Portfolio Committee on Finance on Finance be authorised by this House to confer the final mandate to the NCOP.

Appendix 2
EASTERN CAPE PROVINCIAL LEGISLATION
STANDING COMMITTEE ON FINANCE AND PROVINCIAL EXPENDITURE
Report on mandate to present the Province's position on the Division of Revenue Bill [B9B-2003]

1. Terms of reference
The Division of Revenue [139B-2003] was referred to the Standing Committee on Finance and Provincial Expenditure by the NCOP

2. Briefing
On 17 March 2003, Mr Sogoni, Member of the Select Committee, NCOP, briefed the committee about the legal implications of the Bill.

3. Consultation
There is no need to invite inputs from any stakeholders.

4. The Committee considered the Bill

5. Committee's Inputs

The Committee has made the following inputs:

5.1 Clause 5 - Equitable share for local government
The spirit cooperative governance and inter-governmental relation has been captured in this clause The couching in this clause takes care of planning and budgeting where local government is expected to produce and IDP( Integrated Development Plan) that is matched with Budget. The local government now knows

four months before their financial year what funds would flow from national raised revenue. This practice not only takes care chapter 3 of the Constitution but also takes care of Section 154(1) of the Constitution as well as Clause 13 of the Division of Revenue (139B-2003)

5.2 Clause 20 - Duties of Auditor-General
Among the duties of the Auditor-General, an addition needs to be made that the Auditor-General should issue a special report on conditional grants that flow from National Departments to Provinces as well as in Municipalities for purposes of accountability and effectiveness of service delivery where these conditional grants are concerned.

The sub-clause 20(2), needs to be taken out but rather insert that the Auditor-General in the normal auditing of National and Provincial departments should pronounce on the value for money and the effectiveness of the internal audit of the respective departments.

This sub-clause should be captured under a separate title as a standalone.

5.3 Clause 27 - Funds to follow transfer of functions or obligations
Notwithstanding what is captured in Section 35 of the PFMA on unfounded mandates which exclude the local government, we should include clear terms in the Division of Revenue Bill, Clause 27, that mandates given by National and Provinces to Local governments should be done in the spirit of Section 35 of the PFMA.

6. General Comments
6.1 Clause 2(b)- Objections of Act
The committee welcomes the improvement of this sub-section as compared to previous Division of Revenue.

6.2 Clause 7(5) (6) (7)- Other Allocations to Provinces and Municipalities
These sub-clauses are more elaborative and are very welcomed as an improvement. They show that there is an effort to assist provinces and local governments.

6.3 Clause 8- Transfers to entities
The change captured in this clause is welcomed because it takes the spirit of Chapter 3 and Section 154 of the Constitution.

6.4 Clause 12(c) - Transfer of assets to municipalities
The sub-clause is welcomed because it brings the element of accountability.

6.5 Clause 13(3)- Municipal capacity building allocations
The committee is of the view that monitoring should not be done annually but also quarterly. Therefore, Clause 13(3) line 29, should read as follows:
"....in the quarterly report as well as annual report of the department"

This sub-clause is also welcomed as an improvement on accountability

6.6 Clause 15- Duties of transferring provincial officer
The subclause 15(2) which appeared on the 2002 Division of Revenue should be brought back because it served to curtail the dumping of funds between municipalities.

6.7 Clause 16(3) (4)- Duties of receiving officer
The inclusion of these sub-clauses are welcomed and also serve to curtail the damping of funds between municipalities.

6.8 Clause 17(1) (2)- Duties of provincial accounting officers
The inclusion of these duties of provincial accounting officers is welcomed which is in line with Section 38 & 39 of the PFMA.

18 March 2003

1. The concerns raised by the Department of Provincial and Local Government (DPLG) need for the provisions to align programmatic and conditional grant planning and budgeting across the three spheres of government is shared by this Finance Committee.
2. A further concern raised by DPLG on funding mechanisms for nodes and funding for policy changes is also shared by this Finance Committee. While the committee supports the policy imperatives raised by the President and detailed by the Minister of Finance there is a need for this bill to address the funding mechanism.
3. The decision of National Treasury to take greater cognisance of the fiscal imbalances faced by many municipalities and the greater need for service delivery by this sphere has been addressed through an increase of 12.2 percent growth in local government transfers. Over the MTEF this represents R7.3 billion more. The equitable share grows from 45 percent to 53 percent of total transfers in the MTEF to municipalities and the conditional grants make up the balance.
4. The committee welcomes the decision of Treasury that the contingency reserve for the two outer years includes both a policy reserve and an emergency reserve for unforeseeable and unavoidable expenditure and that in the next budget these funds are then divided between the new spending priorities and in-year emergency reserve.
5. The committee is of the view that the National Department of Social Development and the Department of Public Service and Administration in conjunction with Provincial Governments should pay closer attention to the institutional arrangements of the establishment of the National Grants Agency so as to ensure efficient delivery of Social Security payments. Given the concerns raised by Gauteng last year about the efficiency of centralising the payment of social grants, the committee is of the opinion that robust mechanisms should be developed and the implementation plan scrutinised for efficacy in quality delivery through the proposed National Grants Agency.
6. The committee remains concerned about the timing of the tabling of the Division of Revenue Bill. It is suggested that this be reviewed within the budget reform process so that it occurs prior to the Medium Term Budget Policy Statement.

• There should be a greater interaction between the departments with respect to conditional grants which address programmes that complement each other.
• The committee is of the opinion that the allocations in respect of non-infrastructural funding should reflect the details of the breakdown of the 65 percent rural and 35 percent urban grant for identified nodal development.

J L Fubbs

Chairperson: Finance Standing Committee