Committee Report on Parliament’s 2015/16 Annual Report; Engagement with a delegation from Assembly of Republic Mozambique’s Board of Administration

Meeting report

Mr Gengezi Mgidlana, Secretary to Parliament, informed the Committee that Parliament has decided to take a new strategic direction and approach. They have decided to move away from a transactional relationship that focuses on process and compliance to a transformative relationship that is results and outcomes oriented. The transactional approach is limited to the MTEF and focuses on incremental budgeting and inputs and outputs. The approach involves zero-based planning and budgeting where everything is planned to the T. It is service and performance oriented.

He pointed out that the Fifth Parliament has five strategic priorities: strengthening oversight and accountability; enhancing public involvement; strengthening co-operative governance; strengthening legislative capacity; and deepening international engagement. To attain these goals and to be able to change the way they have been doing business, they identified five important areas to focus on:
• Business as unusual
• Radical organisational transformation
• Shifting ideational space
• Changing organisational culture to one of results and outcomes
• Refinements in and re-engineering of performance measurement and reporting.
This meant increasing all targets for 2015/16 to 100%, revising performance targets and introducing results-based and outcomes approach, and aligning individual performance with institutional performance.

The Committee was taken through the performance of the five programmes: Administration, Legislation and Oversight, Public participation and International Engagement, Members Facilities, and Associated Services.

Programme 1: Administration
The programme achieved 7 of the 10 planned targets (70%), it met only 7. It has achieved a clean audit for two consecutive years. It recorded an increase in the number of those who accessed Parliament’s website from 1, 5m to 1, 7m. It achieved 100% in the implementation of members’ capacity and development programmes with 147 members participating. The overspending is in respect of parliamentary work that is still not provided for in the baseline. A baseline review has been recommended to National Treasury for consideration during the 2016 Adjustment Budget.

Programme 2: Legislation & Oversight
This programme ensured that the oversight model is aligned to the NDP. It extended the provision of analytical reports, and it recorded an increase in the production and timelines for minutes and reports submission to the Committees. Its focus is on improving the quality of research and timelines of reports. Of the planned 16 targets, it met only 6 (37.5%). Of the R375.458m allocation, it spent R397.216m.

Programme 3: Public Participation and International Engagement
It has made an improvement in communicating the business of Parliament. It hosted the SADCPF Plenary and the IPU conference on statelessness. It has registered improvements in functional internal mechanisms for dealing with international reports. It met 3 targets out of the 5 planned targets. Expenditure is standing at R114.503m from the allocation of R133.304m. The variance is due to international trips undertaken but invoices have not yet been received from the Department of International Relations and Cooperation (DIRCO). Parliament is continually engaging with DIRCO about timely submission of invoices after trips and there has been improvement.

Programme 4: Members’ Facilities
The key issue here is to provide a turn-around strategy to ensure services are provided. All funds were disbursed appropriately. The programme has continued the implementation of enhancements to provide ease of use and reduced process time. It has started the process of reorienting the members’ support function to be member-centric. Of the 2 planned targets, it met one (50%). From the R234.170m allocation, it spent R231.188m.

Programme 5: Associated Services
All transfer payments were made in accordance with policy. It did not achieve the planned target (0%). From the allocated budget of R364.518m, it spent R371.033m.

Financial Performance Analysis
Mr Mgidlana reported that Parliament’s total liabilities are more than its total assets by R978 810 000, which is rather an undesirable financial set up. This resulted from the provision that Parliament makes for retired Members of Parliament and Provincial Legislatures. If it was not for this provision, Parliament would have net assets of R240.522m. National Treasury would be engaged with a view to taking over this liability.

Non-current assets have decreased by 15% which is mainly attributable to depreciation and fewer additions of new assets as compared to the prior year. The current assets are more than the current liabilities and this is an indication that Parliament is able to finance the operating activities from the current assets.

Current liabilities have increased by 45% when compared to the prior year due to the statutory unspent funds that should be surrendered to the National Revenue Fund. In terms of the Financial Management of Parliament and Provincial Legislatures Act (FMPPLA), these funds were not surrendered and upon the implementation of the FMPPLA the provisions regarding direct charges are to be surrendered. Non-current liabilities have increased by 6% as compared to prior year, and this is attributable to the actuarial valuation of the post retirement medical benefit which is done for all members of the legislative sector.

He noted that Parliament has implemented cost-cutting and efficiency measures as recommended by National Treasury to reduce spending. This has been achieved without negatively affecting service delivery through efficiencies. Parliament achieved 0.77% efficiency saving on the 2015/16 budget as a result. The efficiency measures implemented are evidenced by the reduction in spending on the following:
Advertisements (22%)
Operating leases (23%)
Flowers and decorations (47%)
Re-settlement costs (68%)
Venue expenses (22%)

On mitigation strategies for irregular, and fruitless and wasteful expenditure, he stated a committee would in future consider such expenditure to advise the accounting officer on how to deal with these expenditures either through recovery or condonation. A new Bid Committee with senior managers has been established to handle bids within relevant legislation to prevent irregularities. Training has been provided to capacitate such a committee. The Supply Chain Management (SCM) is in the process of being centralised and future procurement would be dealt with by SCM specialists and practitioners.

Parliament’s budget for 2016/17 was reduced by R33m for goods and services following the Medium Term Budget Policy Statement (MTBPS). This is going to affect Parliament’s ability to meet its deliverables as per the Annual Performance Plan.

Compensation of employees’ budget allocation was less than the actual spend. The 2017/18 deficit is projected to be R202m. Included in the compensation of employees expenditure are contributions to the medical aid of former Members of Parliament and Provincial Legislatures.

Concerning the audit report, Mr Mgidlana reported that prior to the submission of the financial statements to the Auditor-General, the annual financial statements were submitted to the Internal Audit for review and all adjustments were addressed and the financial statements were ultimately submitted to the Audit Committee for approval. The financial statements were then submitted on 31 May 2016 to the Auditor-General.
The findings that were raised by the Auditor-General were addressed and the financial statements were adjusted accordingly. As a result, Parliament received an unqualified audit opinion with no findings on compliance and on predetermined objectives.

In his closing, he said for Parliament to go forward it is important to consider the following:
- complete the indicator development for outcomes and outputs to ensure these are clearly articulated
- develop the parliamentary value chain
- align reporting with the value chain
- improve overall institutional performance over time
- implement dashboards to monitor implementation.

(Tables and graphs were shown to illustrate performance for all programmes; 2015/16 appropriation statement; irregular expenditure; statements of financial positions; and 2016/17 allocations and MTEF).

Discussion
Ms T Motara (ANC) asked who is responsible for irregular expenditure, what the nature of it is, and what corrective steps are going to be taken. She asked if the Office of the Secretary has been in contact with the departments that owe Parliament ± R10m and what the nature and age of the debt is.

Mr Mgidlana replied that everything is explained under the Disclosure section. These issues were articulated during public hearings and they would be dealt with one by one when dealing with committees. The “who” part has been identified. Where investigation has been done and wrong identified, actions have been taken already. But what is important is how to prevent these actions from taking place. During the campaign of ‘Taking Parliament to the People’, some of the service providers used did not have tax certificates and that is why Parliament is asking help from SARS to interact with suppliers in the areas Parliament is visiting. Parliament is unable to take its own suppliers when it is embarking on these campaigns.

The Chairperson asked what the time frame is for concluding the investigations.

Mr Mgidlana said he hoped matters would be dealt with before the new financial year. On the nature and age of the debt, he said it is probably two years and the debt stems from the departments and state entities that use Parliament restaurants when they are having activities in Parliament and promise to pay later.

The Chairperson indicated that these services needed to be paid within 30 days.

Mr F Essack (DA) asked for clarity on the matter of arbitration and audit fees.

Mr Mgidlana replied that this matter of arbitration would be reflected in the financial report of this year and his office is still engaging with the CCMA. Concerning audit fees, they were applying good systems of financial governance. Currently, the Auditor-General attends their meetings and relations are good so far.

Mr N Singh (IFP) asked why retired executive members are getting 48 business class plane tickets while existing MPs only get 4 economy class tickets.

Mr Mgidlana replied this is done according to the rules. Parliament pays for all members. If they retire, Parliament takes responsibility for the 48 business class tickets for the executives. These matters are discussed beyond the sphere of the Secretary. The Office of the Secretary merely implements.

Mr M Waters (DA) wanted to establish the cost benefit analysis of using labour consultants, especially related to Communication and Human Resources, and what overseas trips were done.

Mr Mgidlana explained they do an assessment of the organisation first. That could not be done by the organisation itself and that is why they have to find an outsider to do it and make an honest assessment. The structure of the organisation has to be aligned to the strategic goals and objectives of the Fifth Parliament. The same assessments for Communication and HR have to be done and they have to be aligned with the organisational strategy. People cannot assess themselves because that would be a flawed process. The assessors are not going to come here to do the parliamentary officials work, but they would bring their own expertise. Regarding overseas trips, he said this area is very political. The Secretary remains guided by that. If it is about staff trips, you need to compare that with institutions of a similar nature. Unfortunately, there is only one National Parliament. The matter is being guided by the international engagements they have to do and see how other people are doing things. People come to them and they also have to go to them.

Mr C De Beer (ANC) wanted clarity on the disposal of assets and liabilities that amounted to R3.7m and why the whole budget on Programme 2 (Oversight) has been spent but only 37% performance indicators have been achieved.

Mr Mgidlana explained that they track all assets they have. Some got stolen and remain unaccounted for. Others are not in the system or on register. Security remains a challenge to make sure people do not move without a permit. Details would be forwarded to the Committee. On targets partly achieved on Programme 2, he elaborated that if one looks at the APP, the APP reflects strategic interventions and do not detail everything that is in there. The programmes do not tell about the things they do daily, but only reflect strategic interventions. So, they state the performance and the budget goes to operations. That is an area of focus during this year and these issues have been discussed with the Auditor-General. There is a disjuncture between strategic objectives and actual spending on operations.

Mr A Masondo (ANC) wanted to establish what the extent of under-spending and overspending is and what the staff component is. He asked when the disciplinary cases would be concluded, if there are any.

Mr Mgidlana reported that when it comes to overspending, it must be remembered that they are dealing with matters that got carried over. He said they do not return money to Treasury and that some projects are multi-year. Pertaining to staff matters, he said they are faced with the question of resources. The institution needs R33m. The posts are not funded. Non-critical posts are frozen while critical ones are funded. On disciplinary cases, he reported they have cases of different kinds. They have had issues with suspending staff. There were instances of threats and tampering with evidence. There are processes that are followed. These cases are ongoing and this happens within the context of labour laws and the disciplinary code. The suspensions are across the units of Parliament.

Mr Waters wanted to know if line managers who did not perform, got performance bonuses. He asked how the Secretary justifies spending R1.6 million on flowers and antiques. He asked about the R13 000 for traffic fines.

On performance awards, Mr Mgidlana explained that the management did not receive performance awards but only made provision for that. The indicated R24m is for staff below the management. This process is being reviewed. He said it is impossible to give an employee a bonus when the institution is not performing well. With regard to flowers and antiques, he said Parliament has valuable antiques and it has got to protect and maintain these antiques. There is a need for curators to look after these antiques. Flowers are only used at high-level functions like SONA. The Committee would be sent a written response on traffic fines.

Ms E Coleman (ANC) asked if Section 63 of the FMPPLA was applied in the reporting of fruitless and irregular expenditure and if it was communicated between the parties involved. She asked why there was over-expenditure yet targets were not fully met and if the performance plans are aligned to the budget.

Mr Mgidlana, on fruitless and irregular expenditure, stated there was no proper system of dealing with this when he joined Parliament. These matters, it is hoped, would be cleared within this financial year and they are related to work done outside Parliament during oversight especially in rural areas. That is where the challenges are experienced because they deal with micro-enterprises. The executive authority has established a committee to look into these matters for further engagement.

Mr L Gaehler (UDM) asked why the budget was almost spent on Programme 4 and 5 but only 40% of targets were met. He also asked how long the funded posts have been vacant and when they would be filled. He remarked that the money used for the 14 consultants could have been saved if the vacant posts were filled.

Mr Mgidlana stated that Programme 5 Associated Services achieved 50%. Areas noted are those responsible for improving services. Concerning vacancies and consultants, he reasoned that one would still need to hire consultants even if the vacancies are filled. The challenge they have is to make do with what they have because they do not have resources, but resources have to follow what is planned. They are going to have a discussion with the Minister of Finance on this issue.

The Chairperson asked what happened to the money meant for unfilled funded posts, and he asked for clarity on the R19m staff member debt.

On money for funded posts, Mr Mgidlana stated his office would be engaging with National Treasury because if they cut jobs further, this would cripple the work of Parliament and its committees. With regard to the R19m staff debt, this is the money Parliament needed to recover from those people who did not work when they were supposed to be at work. The matter is to be resolved with labour in the near future.

Mr J Mthembu (ANC) stated that they are faced with the difficulty of having an executive seat and a parliament seat. He asked if it is possible to have video conferencing with the executive to engage with them wherever they are. Also, he asked if consequence management is in place for those who fail to perform in Parliament so as to punish them.

Mr Mgidlana replied that video conferencing is part of the plans for ICT support and they are engaging with Treasury on the matter.

Mr De Beer added it is possible to do video conferencing. It has been done before. The challenge is that legislatures have to pay for it.

On consequence management, Mr Mgidlana explained that they do reviews after the audit report. Linkages are drawn between individual performance and institutional performance. The system is being changed though the pace is slow so that there is correlation between the work they do and the budget and targets so as to be able to look at consequence management.

Mr J Steenhuizen (DA) asked what has been the cost benefit analysis of the overseas trip for the administrative staff. He asked what measures are in place in the short term to address vacancies in core function areas. He enquired what the criteria were for ex-gratia payments. Lastly, he asked for clarity on the accommodation paid for senior parliament staff members.

Mr Mgidlana replied that a written report would be sent to the Committee on the objectives and lessons learnt from the overseas trip. On vacant posts, some of the frozen posts were there for a very long time and might not be filled if they are not critical. The ex-gratia payments were approved on the basis of criteria laid out that were in employment at that time. Concerning accommodation, he said that no senior staff member of parliament has that benefit.

Mr Steenhuizen enquired if the people who received 13th cheques have met their targets, and asked who is entitled to use the new vehicles between the staff members and executive, and if they are meant for staff members, it must be stated the category they are in.

Mr Mgidlana, on 13th cheques, stated that any bonus is linked to performance. What is reflected in the presentation are provisions that were made but no payment was done. Concerning the new vehicles, he said a written report would be sent to the Committee.

Ms Coleman asked what the reasons are for the turnover rate especially in high skill levels C to E. She asked what the 42% figure for resignations and early retirement could be attributed to and if there are any remedial actions in place. Lastly, she asked if there is capacity within the internal audit committee.

Mr Mgidlana reported the turnover rate is at 6% and that they have got to guard against the loss of valuable resources. Some of the reasons advanced are that Cape Town is expensive when it comes to accommodation; family matters – the person works here while the family is in another province; and that management posts are five-year contracts and people tend to be uncertain about what is going to happen after that period. Others take the voluntary retirement package, especially after they have reached a particular age. For example, after 25-years service there is an attractive package that is offered to you.

On internal audit capacity, an official from the Office of the Secretary reported there is capacity and appropriate legal and financial skills.

Engagement with Mozambican Delegation
The Chairperson informed the Mozambican delegation that the mandate of the Committee is to analyse the annual report of Parliament in order to promote ethics in the financial management in Parliament and to ensure transparency and sound management of Parliament’s resources.

The Chairperson took the Assembly of the Republic of Mozambique Board of Administration through the processing of the budget and Medium Term Budget Policy Statement. The role of the Parliamentary Budget Office in the processing of the budget and adjustments was also mentioned.

The Committee informed the delegation there is one national budget which is broken down into votes. Each department receives a budget votes. The parliamentary committees exercise oversight on those votes. The Joint Standing Committee on Financial Management of Parliament exercises oversight over Parliament’s budget and the National Assembly exercises oversight over the micro budget.

Mr Vasco, the head of the delegation, thanked the Committee for the opportunity it received to spend two full days and attending fruitful meetings in the RSA Parliament. They had accumulated experience and dealt with skilled people. He hoped the relationship between the two countries would remain excellent and would enable them to keep strong and working well.

The meeting was adjourned.