Justice Administered Fund Bill [B26-2015]: Department response to submissions

Meeting report

Opening Remarks
The Chairperson said the meeting was to receive responses to submissions on the Justice Administered Fund Bill. Mr Johan De Lange, Principal State Law Adviser, DOJ & CD, would take the Portfolio Committee through the process.

Mr De Lange said his role would not be that intensive as he would rely on the assistance of his colleague Adv Alta Van der Walt, State Law Adviser, DOJ& CD who was principally responsible for the drafting of the Bill. The Committee had been briefed on the piece of legislation towards the end of March 2016. What the Bill sought to do was to provide sound legal basis for the practice that had been followed since the old exchequer Act had been repealed by the PFMA which left the Nation in a grey area for some time. With the assistance, insistence and persistence of the National Treasury, they had given birth to this piece of legislation. This was to put the practice taking place at the moment on a sound legal footing.

Department briefing on the Justice Administered Fund Bill and its Response

Adv Van der Walt said there was only one comment from the General Council of the Board (GCB). It was clear from the comment that the GCB assumed that the Bill also catered for the Guardian Funds, which was not the case. There were concerns that the Bill was talking about all maintenance which was also not the case.

This Department’s response to the GCB’s concern was that Section 3(a) of the Bill provided as follows

“3      The following monies on behalf of third parties must be administered through the Fund,

 (a) money received in terms of maintenance Act, 1998 (Act No. 99 of 1998)”

The Maintenance Act provided for orders to be made by the presiding officer.  If the court finds the person liable for paying maintenance, it will make an order for the amount of maintenance to be paid.  The court will also determine when and how maintenance payments must be made.

The maintenance referred to in clause 3(a) of the Bill was maintenance money that a court directs shall be paid at the local magistrate's court and not all maintenance.

It was submitted by the GCB that the Bill did not make it clear as to what amount was required to be paid into the Fund.

The Department responded that the amounts were determined by the court and could not be specified in the Bill. The money in the Justice Administered Fund comprised bail, fines, maintenance, money not immediately identified and interest. This was not new.   It reflected the current situation. The Bill merely incorporated in legislation the current position to give it a legal basis as requested by the Auditor-General. 

Adv van der Walt added that the Justice Administered fund was previously called the Deposit Accounts under the Exchequer Act. When the exchequer Act was repealed, the AG said there was no legal basis and legislation was needed to form a basis for it. The current position was made into a Bill. There was nothing new about what had been done

The Chairperson welcomed contributions from the other officials from the Department.

Mr Nico Van Harmelen, Director, TPF, DOJ &CD, said in 1999, with the introduction of PFMA, the Department of State Expenditures as it was then known said the moneys were no longer for the Government but held in Trust. From April 2000, Commercial Bank accounts were opened for all the courts throughout the country. Since 2001/2002 financial year, there had been a hammering by the office of the AG to say there was no legal basis to manage the money. Today was the end product of the concern raised by the AG.

The GCB recommended that clause 3(a) and (d) should be amended to make reference to receipt of monies received by particular persons and/or entities, for example the clerk of the maintenance Court.

The response of the Department was that it would not be advisable to list the persons who must receive money.  In the legislation referred, the specific Act stipulated whether it should be paid to the clerk of the court or the court or the maintenance officer.  

The GCB said Clause 3(c) appeared to contemplate, inter alia, monies currently paid into the Guardians Fund.

The Department responded that the Rules of Court referred to the Rules made by the Rules Board for Courts of Law. The Guardian's Fund was a separate trust fund established and operated in terms of the Administration of Estates Act.

Adv van der Walt said there were no comments on clause 4

The GCB also said in contrast to clause 5(1), section 86(2) of the Administration of Estates Act provided that whenever any monies were accepted or received by the Master under that Act or any other law or in pursuance of an order of Court, the Master “shall open in the books of the guardian’s fund an account in the name of the person to whom that money belongs or the estate of which that money forms part: Provided that if it is not known to whom any such money belongs. If it was more convenient, the account may be opened in the name of the person from whom that money had been received. Clause 5(1) of the Bill granted a wide discretion to the Accounting Officer to open and maintain bank accounts as she or he saw fit.  In regard to monies held in the Fund for and on behalf of third parties there did not appear to be any legally sustainable basis for the Accounting Officer to have a wide discretion as opposed to a narrowly prescribed discretion.

The response of the Department was that it should be noted that the Guardians Fund was one trust account opened at a banking institution. There was not a separate bank account opened for each person. This was done administratively within the financial system of the Department.  The same principle applied to the Justice Administered Fund. The Department did not agree that the Accounting Officer had too a wide discretion in the opening of bank accounts. The discretion was necessary in view of section 7 of the PFMA which provided that National Treasury must prescribe a framework within which departments, public entities listed and constitutional institutions conducted their cash management.

The GCB said Clause 5(4) of the Bill appeared to contemplate that unclaimed monies held in the Fund become forfeit (presumably to the State, although the Bill does not expressly so provide), ten years after such monies have been paid into the reserve account in terms of clause 5(4)(i) of the Bill. On the other hand, section 93 of the Administration of Estates Act provided for the forfeiture to the State of unclaimed monies in the Guardians Fund after a period of thirty years as from the date upon which a person became entitled to claim the said money from the Guardians Fund.

The GCB added that there did not appear to be any rational basis for such a drastic reduction in the period within which monies may be claimed from the Fund in a particular circumstance.

The Department responded that the Guardian's Fund did not fall within the ambit of the Bill. Clause 4(b) dealt expressly with unclaimed money and money which cannot be allocated into the categories listed in clause 3(a) – (c).

National Treasury indicated that, considering the risk of running a huge fund, Treasury was amenable to the idea of setting the maximum limit on the reserve account rather than keeping funds in the reserve account for a period of 30 years. The clause was amended and a term of 10 years was agreed upon.

The GCB commented that in regard to the payment of monies from the Fund, clause 6(1)(b) of the Bill merely provided that money held in the Fund in terms of sections 3(a) to (d) “must be paid directly from the Fund to the party entitled to the payment in question”. In contrast, sections 90 and 90A of the Administration of Estates Act made detailed provision for the circumstances in which payments may be made

The Department responded that that the Bill did not apply to the Guardian's Fund.  The persons/institutions to whom or which payments were made in terms of the Administration of Estates Act differed considerably from the persons/institutions in the Justice Administered Fund.

The Chairperson asked if Adv van der Walt was responsible for all legislative interactive or just this one.

Adv van der Walt replied that she was responsible for this one, the Amendment to the Debt Collectors Act and the Amendment to the Sheriff Law. Specific Bills were assigned to different officials and she was assigned to this one.

The Chairperson said the reason he had asked was because the Committee was usually taken by surprise and suddenly there was a Bill. The Committee usually did know the motivation for such Bills. The Committee would want a list of all the Bills the Department had in mind so that the Department could prepare for it.

 Mr De Lange said he would ensure the Committee got the latest updates.

The Chairperson said the Committee would appreciate that.

Discussion

Ms C Pilane-Majake (ANC) said the Committee would like the Department to indicate what was the problem and how the Bill would deal with such. The Third Party Funds had a problem of accounting and this was why they were disqualified.

Adv van der Walt replied that in terms of the Exchequer Act 1974, The Department opened various accounts such as the Vote Account, the Guidance fund and the Deposit Account. The deposit account was what was being dealt with now. In the Deposit Account was the money received which could not be allocated immediately, money paid as compensation for suspended sentence, bail money, Fines and maintenance. Since the PFMA came into operation the AG said the Legal basis for the Deposit account (which became known as the third Party Account and now known as the Justice Administration Fund) which was in terms of the exchequer Act no longer existed. The AG said the legal basis must be created which was what was intended to be done with the compliance of National Treasury.

 Ms M Mothapo (ANC) asked whether the comments received from the General Council for the Bar were the only ones received so far. In the first bullet point “money received which could not be immediately allocated”.  What kind of moneys were those? She was aware that the Department had received an unqualified audit report for the Third Party Fund. Could the Department comment on that?

Mr Harmelen replied that money that could not be immediately allocated were moneys paid into the Bank accounts by the public or by post and if it was not immediately clear what the money was for, it was kept in a separate account until it could be identified what the purpose of the money was.

Mr W Horn (DA) said in relation to the question by Ms Mothapo, his understanding from the briefings by the AG on this issue, was that this claim and opinion were not based only on the legal basis but how money was handled in terms of bookkeeping and so on. The Department was addressing only the legal issues. Could the report tell the Committee how the other issues raised by the AG would be addressed so that the Department could move away from adverse audit opinions?

Mr Harmelen replied that it was true that there were problems in Third Party Fund environment. The Department was taking further steps to clean that up. For the TPF, the Department had always had a disclaimed opinion. For the 2015/16 financial year it received a qualified opinion, one step away from an unqualified audit. The Department was rolling a new system for the administration of TPF. It would replace the Legacy system. The Department had consulted with the AG and National Treasury extensively.

 Ms Pilane-Majake asked if there were any consultations made with the office of the AG towards the development of the Bill as it was an attempt to address the concerns of the AG in terms of the money that the Department was receiving.

Mr De Lange replied that the Bill had been drafted in consultation with those parties. Only one response which was from the GCB had been received. All the other interactions were made in the process of drafting the Bill. There was an empowering provision to lay down the law in terms of how these should be done. This had been the problem as there had been no legal basis for the things the Department should be doing.

Adv van der Walt added that the Bill was drafted in consultation with National Treasury and the Auditor General. It was done sitting with these Parties as a round table.

Ms Pilane-Majake said the Committee was looking at the legalistic aspect of the Bill. The Committee did not hear how the finances were going to be properly accounted for so that in future it would assist the Department to get unqualified audits. The Mandate was broad and also complicated. There was no full control of this in terms of understanding. She did not understand how much of money per annum was actually put together. What happened to unclaimed funds? It was a Bill that dealt with other Departments and the National Treasury. There was a need to be properly sensitised.

The Chairperson said this question from Ms Pilane-Majake called for further explanation as not just a regulation was to be dealt with. Issues of financial management should also be addressed in the Bill.

Mr Harmelen replied that the Department had taken steps to ensure that the moneys the Department owned were accounted for in a transparent manner. There were 45 positions in the regional offices. The officials were trained to make sure there were oversights over these moneys. This was not like the previous systems. This was a precise system that was built on sound technology. There was an assurance that it would give a definite financial framework. A standard operating procedure had also been introduced. The Act alone could not fix the problems; there were a lot of other things the Department was doing to fix the problems.

The Chairperson said the question boiled down to how the Department was going to oversee what was happening. There was no way of knowing what those systems, training and instructions were as the Committee was left out of the picture as it was in house. Was the Committee going to await the regulation? Were the systems going to be defined in the regulation as it seemed the legal basis was not enough?

Adv van der Walt replied that the whole purpose of this piece of regulation was to provide the legal basis. All other operatives would be addressed by the Department of Finance instruction which was made in consultations with the Ministry of Finance. The instructions were modified and put in the regulations. Mr Harmelen would give details of what was currently in the TPF.

 Mr Harmelen said the Department received R3bn and it was fully paid out in the financial year. It was R3bn in and R3bn out.

Adv van der Walt said this was the extent of the comment received. It was very complex and difficult to legalise the fund. She could fully understand the questions that had arisen.

Mr De Lange said there was nothing secret about the fund and the Department would be accountable to Parliament who would have a comprehensive insight.

The Chairperson said at the end of every year, Universities produced black Law Graduates of Africans, Indians, and coloureds. Was there a programme in the division to train such graduates in legislative drafting? There was a great need to de racialise the Department and also create capacity for Legislators in the Municipalities. If black graduates were trained there would be reserves to send to the municipalities

Mr De Lange replied that there had been several initiatives to assist the local government and the provinces.

Adv van der Walt said there were internship programmes in the Department of Justice in the past 2 years. The Department started with 4 interns. 2 of them applied and were already employed. They were employed for one year and trained on how to do research and drafting. There were interns in all the divisions of the Department.

The Chairperson said 20 years after the breakthrough of democracy, the Department was basically saying that it had not been able to train black graduates who would come into Parliament to learn and fit into roles of drafting legislation in the future.

Adv van der Walt replied that the Department was doing its best for those who were permanently employed. The idea was that these employed interns would come with the other officials to Parliament but there were serious budgetary problems. Not everyone was interested in legislative drafting as it was very boring to a lot of people. The chances that the interns were appointed for vacancies were higher than outsiders. As far as the political aspect was concerned, she could not answer. 

Mr De Lange added that there were 6 other eligible colleagues who could have come to handle his assignment in Parliament. He was asked to come in because he lived in Cape Town and for cost saving.

Ms Pilane-Majake said the Department should evaluate the system with a view on how to change it as the Committee would want to see the black people getting jobs in the Department.

Adv van der Walt replied that she was not involved in decision making and could not answer all the questions. She added that the interns were all blacks.

The Chairperson asked if the Department knew of an organisation of unemployed law graduates. There was a lot of unrest amongst young people. The Department should not only develop black graduates but employ them as well. The Committee was not blaming the Department but would want to develop a non-racial institution. The Department should communicate with the Principals about this matter. The Portfolio Committee would write to the Minister and ask for a full briefing as the Committee was in the business of creating a non-racial environment. He thanked everyone for the various inputs.

The meeting was adjourned.