Parliament on its Quarter 3 performance

Joint Standing Committee on Financial Management of Parliament

17 February 2017
Chairperson: Mr V Smith (ANC) and Mr S Mohai (ANC)

Meeting Summary

The Secretary to Parliament, Mr. G Mgidlana (ANC), presented a comprehensive briefing on the performance and expenditure of Parliament in the third Quarter of 2016/17 (1 October 2016 and 31 December 2016). It was reported that Parliament achieved 46 percent of its targets for the period, while 54 percent were ‘In Progress’ or ‘Not Met’. During the period April to December 2016, Parliament’s total expenditure amounted to R1.57 billion: 88 percent of its R1.76 billion budget. Around R214 million was therefore underspent during the period, while Mr. Mgidlana predicted there would be underspending of around R100 million at the end of the financial year. This surplus would be surrendered to the National Revenue Fund (NRF), in accordance with Section 23(4) of the FMPPLA.

During the same period, Parliament spent R322 million on compensation of Members, underspending by 19 percent. Associated Services used 96 percent of its R467 million budget for the period. Of this, R296 million was spent on transfers to political parties, while R150 million was allocated to Members’ facilities. Overspending was reported only in the Office of Institutions Supporting Democracy (103 percent) and the Office of the Registrar (105 percent). Despite general underspending in most branches, Mr. Mgidlana stated that the budget proposed by the Minister of Finance fell short of what was requested, as well as what was budgeted in previous years. He argued that the prevailing economic conditions in the country necessitated cost-cutting, however work was still required in getting Parliament and Treasury to agree on resources.

Members inquired on the prospect of relocating National Parliament, a notion that was circulating in the media. In this regard, Mr. Mgidlana stated that an initial study on “re-basing” was done in 2004, however he admitted that it was necessary to conduct a more recent assessment. In this regard, a comprehensive socio-economic assessment of the project was undertaken, estimated to cost around R6.5 million. The results of the socio-economic assessment were yet to be confirmed.

The Chief Financial Officer of Parliament, Mr. M Manenzhe, reported that the total budget for the current financial year was around R2.382 billion, which included unspent funds from the previous financial year, as well as donor funds. The appropriated funds from Treasury amounted to around R2.189 billion. He stated that the budget discrepancy (around R193 million) was explainable by the inclusion of unspent funds and donations in the budget figure presented to the committee. Members also raised questions relating to the funding of the ‘Taking Parliament to the People’ Programme: the budget was reported at around R18 million, of which R11 million was spent, leaving a net saving of around R6 million.

A DA Member criticised the unclear nature of performance reporting during the presentation, a point that Mr. Mgidlana recognized. He admitted the need for more effective results-based reporting, and that Parliament’s qualitative performance was often shrouded by obscure quantitative information and under-reporting.

It was revealed that the Secretary to Parliament had not yet signed a performance agreement for the current financial year, in contravention of the FMPPLA Section 8(1 & 2). 

Meeting report

Mr Smith began by conveying apologies on behalf of five absent Members; namely Ms N Mente (EFF), Ms T Motara (ANC), Mr F Essack (DA), and Ms C September (ANC).

After some confusion regarding the meeting’s agenda, the Chairperson requested the Secretary to Parliament, Mr Gengezi Mgidlana (ANC) to present the performance and expenditure of Parliament in the third Quarter of 2016/17.

Briefing on Parliament’s Third Quarter Performance for 2016/17
Mr Mgidlana outlined six principle goals for the institution during the period, some of which included to enhance capacity for oversight and accountability, stimulate public involvement to realize participatory democracy, enhance its legislative powers, and build a capable and productive parliamentary service. Furthermore, he stated that Parliament continued to facilitate co-operative governance on an inter-governmental and international level. With regards to the latter, Mr Mgidlana noted that the Parliament of South Africa sought to advance bilateral engagements with Argentina, China, Nigeria, Mozambique and Russia, as well as further multilateral engagement with Belgium, Egypt, Kenya, Morocco, Namibia, Switzerland, Tanzania, The United Kingdom and Zimbabwe specifically.

In terms of the overall 3rd Quarter performance, Mr Mgidlana noted that Parliament achieved 46 percent of its targets, while 54 percent were ‘In Progress’ or ‘Not Met’. During the period April to December 2016, Parliament’s expenditure amounted to R1,57 billion: 88 percent of its R1,76 billion budget. Around R214 million was therefore underspent during the period, while Mr. Mgidlana predicted Parliament would underspend around R100 million at the end of the financial year. This surplus would be surrendered to the National Revenue Fund (NRF), in accordance with Section 23(4) of the Financial Management of Parliament Act (FMPPLA) of 2009. During the 3rd Quarter, Parliament had spent R322 million on compensation of Members, underspending by 19 percent. Moreover, expenditure on goods and services amounted to a meager 73 percent of the R385 million budgeted. Mr. Mgidlana explained this underspending by highlighting the long recess around the local government election period of 2016, as well as delays in implementing the ‘Back to Basics’ project.

Mr Mgidlana broke down performance and expenditure trends further by analyzing six Parliamentary branches. In terms of the Strategic Leadership and Governance Programme, Parliament overspent their budget for ‘Office of the Institutions Supporting Democracy’ by 103 percent in the period April to December 2016. He explained this by noting that an appointment was made and not budgeted for, as the position was vacant at the beginning of the financial year. It was also noted that the Office of the Speaker only spent 84 percent of its budget, owing to the recent dismissal of two officials. Overall, the strategic leadership and government branch spent 90 percent of its budget in the nine-month period.

The Administrative branch exhibited generally positive performance trends for the third Quarter of 2016/17, with the exception of ‘Compliance with prescripts and regulations’ (63 percent). In terms of expenditure, the Registrar of Members’ Interest overspent its budget by five percent, however this was explainable by the contract appointment of a coordinator, which was not initially budgeted for. The Secretary’s Office and the Legislative Sector spent only 69 percent and 60 percent of their respective budgets. Only 81 percent of the budget for ‘Projects’ was spent during the period, explainable by delays in finalization of ‘My Parliament’ software and video broadcast projects. The administrative branch spent 78 percent of its R140.3 million budget for the period April to December 2016.

The Core Business of Parliament had positive performance trends during the third Quarter of 2016/17. In terms of expenditure for the period April to December 2016, the branch spent 91 percent of its R424 million budget. The National Assembly (NA) and National Council of Provinces (NCOP) spent 88 percent and 89 percent of their respective budgets. International Relations and Protocol spent 89 percent of its budget, due to the delayed submission of invoices by the Department of International Relations and Cooperation (DIRCO). Only 3 percent of the budget for the Office of the Deputy Secretary was spent during the period, as the position remained vacant and the only expenditure being the acting allowance.

The Parliamentary Support Services branch was unsuccessful in implementing the stakeholder management plan during the third Quarter, while field work was reportedly still in progress for improving client satisfaction and enhancing awareness of the business of Parliament. Accessibility of web-based and mobile platforms remained relatively low (63 percent). Overall, the branch spent 85 percent of its R274 million budget for the period April to December 2016. Human Resources underspent their budget by 36 percent, explainable by the impending finalization of the ‘Back to Basics’ Programme. Parliamentary Communication Services spent only 84 percent of its budget. Mr. Mgidlana stated that this underspending was a result of invoices for radio broadcasting that were received late from the service provider.

The Associated Services branch received positive performance results for the timely reimbursement of members, as well as the percentage of payments made compliant to policy. The branch was also able to successfully finalize the publishing of the Parliamentary handbook during the third Quarter. Associated services exhausted 96 percent of its R467 million budget for the period April to December 2016. Of this, R296 million was spent on transfers to political parties, while R150 million was allocated to members’ facilities. For Direct Charges of members’ remuneration, only 81 percent of the R397 million budget was spent in the period. The remaining budget would therefore be surrendered to the NRF. Mr. Mgidlana argued that underspending in this branch was a result of an incrementally increasing budget for direct charges since 2009.

Discussion

Mr Smith thanked Mr Mgidlana for his comprehensive presentation, and allowed the committee to pose questions in relation thereto.

Mr C de Beer (ANC) inquired as to what informed the estimated expenditure for the remainder of the financial year, considering the estimate that Parliament would underspend by around R100 million at the end of the period. Was the budget for April to December 2016 adjusted according to the estimates, or were the estimates informed by the remaining budget? What was the basis for the adjustments? Furthermore, with regards to performance trends vs. targets, he inquired as to the methodology and implementation supporting the performance figures presented. He noted that the performance agreements for the accounting officers were due to be completed on the 7th of April last year – were they completed? Lastly, he noted that donor funds were not reflected on the report on revenue collection, and asked whether the Secretary could inform the committee as to the details of donor funds to the institution.

Mr J Steenhuisen (DA) inquired as to the progress of Parliament’s Enterprise Resource Planning (ERP) strategy. He requested information on the budget and progress for the proposed relocation of Parliament. How much was spent to date? Was a feasibility study conducted? With regards to the overspending at the Registrar of Members’ Interests, how did this overspending come about, considering the static nature of the Registrar? He was critical of the manner in which information was presented during the briefing, arguing that real performance trends were difficult to gauge. He requested that in future, performance be quantified in a manner that clearly expressed outcomes.

Mr M Waters (DA) noted that the total budget reported was R1.85 Billion, yet Parliament’s report to Treasury stated that the total budget was around R1.59 Billion. What accounted for the difference of around R200 million? Did Parliament appropriate or allocate the funds received from the NRF? Moreover, what accounted for the reduction in compensation of employees and the increase in capital expenditure? Mr. Waters inquired as to whether the Secretary of Parliament signed a performance agreement, and whether a progress report on the areas highlighted by the Audit committee would be made available.

Mr N Singh (IFP) requested expenditure figures for the visit to the Eastern Cape for the ‘Taking Parliament to the People’ Programme. Were the relevant officials in attendance? Would this visit be considered good value for money? Secondly, with regards to capital expenditure during the period April to December 2016, he highlighted the fact that Parliament used only 51 percent of its budget. Were there any plans for the appropriation of these remaining funds? Did this expenditure include the upgrades to the ICT server?

Mr Singh criticized the “appalling” availability of internet services around Parliament. Was Parliament looking at finding a new service provider? Regarding underspending on compensation of employees, he inquired as to the status of discussions regarding employee performance bonuses. Furthermore, he requested more background information on the removal of two employees from the Speaker’s Office.

Mr A Shaik-Emam (NFP) raised a question relating to overspending on the Institutions Supporting Democracy. How did this impact the performance quality of these offices? He highlighted the fact that underspending was apparent following the internal audit last year. How did this consistent underspending impact the performance of Parliament more generally? Regarding the late payments of invoices for radio broadcasts, he inquired as to the role of the South African Broadcasting Commission (SABC) in this particular instance. In terms of the allocated budget for political parties, he noted that often Members did not return to Parliament despite the money already being budgeted. He argued that this was a recurring problem, and requested to know why it was not resolved. Lastly, Mr Shaik-Emam noted that despite the positive performance feedback regarding public participation, inconsistency in the education system remained a serious obstacle, as “people cannot participate if they cannot comprehend”.

Mr S Mohai (ANC) followed up on Mr. Singh’s earlier question regarding the visit to the Eastern Cape for the ‘Taking Parliament to the People’ Programme. Were the costs of this visit shared between Parliament and provincial legislatures, or were these officials invited to attend as guests? He noted that public presence during the high-level panel discussions was much greater than expected. Was Parliament allocating funds towards assisting ordinary people to participate in the political system? Lastly, regarding the budget from April to December 2016, he stated that the assumption would be that in the third Quarter only 75 percent of the budget would have been spent, however this figure stood at 88 percent. With this considered, it remained unclear how the Secretary would expect underspending at the end of the financial year.

Mr de Beer stated that on 9 March 2017 there would be a debate on ‘Taking Parliament to the People’ in the National Council of Provinces (NCOP) and a report would be made available. He requested that Members be in attendance, as the report was directly pertinent to education challenges in the Eastern Cape.

Mr Steenhuisen raised another question relating to compliance with recruitment procedures, specifically whether the acting Deputy Secretary of Parliament (Core Business), Adv. M Phindela signed a performance contract.

Mr Waters inquired as to how Parliament would ensure fair representation of all political parties during ‘Taking Parliament to the People’ events. Since the programme was funded with taxpayers’ money, how could Parliament ensure the programme did not become a party rally for the ruling party? Will the programme reflect representation within the NCOP?

Mr Smith allowed Mr Mgidlana to respond to the questions posed by the committee.

With regards to the budget adjustments and allocations referred to by Mr. de Beer, Mr Mgidlana stated that the Appropriations document tabled by the Minister of Finance featured the lump-sum budget figure for Parliament. In preparation of the budget, engagement between the Minister and the Executive Authority of Parliament was required by law. He reminded the Committee that in terms of the Financial Management of Parliament and Provincial Legislature Act (FMPPLA), Treasury was the Executive Authority. He stated that this engagement assured that the budget was drafted in terms of the Constitution, ensuring the separation of powers, and that allocations were accommodated by the fiscus. From a legal perspective the budget was drafted with full compliance to the FMPPLA and the Constitutional parameters. The lump sum proposed by the Minister fell short of what was requested, as well as what was budgeted in previous years. He argued that the prevailing economic conditions in the country necessitated cost-cutting and work was still required in getting Parliament and Treasury to agree on resources.

Mr Mgidlana stated that Parliament sought to minimise the inefficiencies within the institution. To this extent, all printing, with the exception of Bills, was being done internally, while the daily purchasing of flowers was rolled back and reserved for more significant occasions. With regards to travel expenditure, the late purchasing of tickets (at higher prices) could be mitigated by streamlining flight and accommodation spending, in particular. With regards to vacant posts within the institution, some for up to two years, he stated that reflection should be done as to whether these posts were necessary for the functioning of Parliamentary democracy.

Mr Mgidlana stated that a strategy of revenue generation was discussed, considering the decreasing number of events taking place on Parliamentary grounds. There was also discussion about re-opening the memorabilia store to generate income and create jobs. He emphasised the point that Parliament was not prepared to compromise its service as an institution in the interest of cost-cutting, therefore a movement towards conducting business in a more innovative manner was essential.

Regarding the performance agreements mentioned by Mr Steenhuisen, Mr Mgidlana stated that the agreements was prepared, however not all were signed. He stated that he was engaging with the Executive Authority on the subject. The Acting Deputy Secretary of Core Business had in fact signed a performance agreement, according to Mr. Mgidlana. He stated that he hoped to see all performance agreements signed before the start of the 2017/18 financial year.

In terms of relocating national Parliament, an initial study on “re-basing” was done in 2004, however Mr Mgidlana admitted that it was necessary to conduct a more recent assessment. In this regard, a socio-economic assessment of the move was undertaken, estimated to cost around R6.5 million. Relocation would be contingent on two processes, he explained: internal discussion and consultation based on credible, scientific information, and subsequently Parliament’s engagement with Treasury and Department of Public Works (DPW). He stated that these institutions understood the real costs of running Parliament and its supporting services. The results of the socio-economic study were yet to be confirmed.

In terms of funding for the high-level panel, R6 million was allocated from Parliament’s budget, a further R1.5 from the United Nations Development Programme (UNDP), and around R3.6 million from the European Union (EU).

Mr Mgidlana explained the 5 percent overspending in the Office of the Registrar was as a result of invoices from the previous year being accrued to the current financial year. He stated that it as unlikely that there would be significant overspending in that particular office at the end of the current financial year.

With regards to the criticism laid by Mr Steenhuisen pertaining to the quality of the report in reflecting performance trends, Mr. Mgidlana stated that he fully agreed. He stressed the need for more effective results-based reporting, and that Parliament’s qualitative performance was often shrouded by obscure quantitative information and under-reporting. He noted that the Audit Committee raised the same issue, and that he was currently engaging with Adv. Phindela on the matter.

On the advice of several Members of the committee, the Chairperson deferred the other agenda items in the interest of scrutinising the third Quarter report comprehensively.
 
Mr M Manenzhe, Chief Financial Officer of Parliament, addressed Mr Singh’s question on the budget for the ‘Taking Parliament to the People’ Programme. He reported that costs were in fact shared with provincial legislatures, and that the amount budgeted for the event was around R18 million, of which around R11 million was spent, leaving a net saving of around R6 million. In terms of the feedback received from Members of Parliament and provincial officials, he stated that the Programme was a useful exercise that highlighted key provincial issues.

Mr Mgidlana assured Mr Waters that the Speaker of Parliament and he were taking the necessary steps to ensure that the programme reflected the concern of the Committee, with fair representation of all political parties.

Addressing Mr Singh’s question on Parliament’s ICT service provider, Mr. Mgidlana noted that in the current system, Members had individual arrangements with a variety of service providers. This put the institution at a disadvantage in streamlining ICT connectivity. For this reason, Parliament approached a number of these service providers in the interest of managing contracts on behalf of Members, to ensure better service and support.  He stated that in this regard, service providers were enthusiastic about adding value to the institution.

In terms of the questions raised by Members relating to staff, Mr Mgidlana stated that there was engagement in the bargaining chamber between management and unions. He assured the Committee that the situation normalised somewhat, however further negotiation was imperative. Regarding the staff performance bonuses, he highlighted the fact that in the report for the previous financial year, only 46 percent of targets were achieved, a performance not particularly warranting staff bonuses.

Mr Shaik-Emam raised a question relating to the financing of the enhanced presence parliamentary security personnel. Were these enhanced security measures paid for by Parliament?

Mr Singh inquired as to why there was no budget or spending in the Treasury Advisory Office, despite the inclusion of the office in the presentation.

Mr Mgidlana clarified that the functions of the Treasury Advisory Office were already being fulfilled by the CFO. He said that although the post was vacant, the service was nonetheless being provided.

Mr Steenhuisen presented a follow-up question relating to the Office of the Registrar. He stated that the late invoices received were legal invoices, therefore it should be regarded as fruitless and wasteful expenditure. Was there a possibility of recovering any of the overspending in this office? Was there sufficient oversight over legal decision-making, and if so, who decided what went to court and what did not? Secondly, he inquired as to the ongoing dispute surrounding performance bonuses between management and staff; was there any consensus? How far were they in the negotiations?

Mr Singh asked if the Secretary could provide a timeframe for the tabling of the report on the relocation of Parliament before the Executive Authority. Would there be consultation with Members in compiling this report?

Mr Waters inquired as to whether the Secretary signed a performance agreement at the beginning of the current financial year, or following his appointment to the position in December 2014.

Mr de Beer requested a progress report on the recommendations from the audit committee in the third Quarter report.

Mr Manenzhe stated that the capital expenditure figure primarily related to video broadcasting and the ‘My Parliament’ project, which should be paid for at the end of the financial year. Regarding the question relating to budget discrepancies, he stated that Parliament’s reported budget for the financial year was around R2.382 billion, which included unspent funds from the previous financial year, as well as donor funds. The appropriated funds from Treasury amounted to around R2.189 billion, therefore the discrepancy (of around R193 million) was explainable by the inclusion of unspent funds and donations in the budget figure presented to the committee.

Ms E Coleman (ANC) requested that the Secretary elaborate on the “old revenue” accrued from the previous financial year.

In response to Mr Steenhuisen’s question about the Office of the Registrar, Mr Mgidlana stated that the process of going to court was not undertaken by divisional managers within the office, but rather these managers made recommendations, which subsequently went to the Secretary, and thereafter the Executive Authority. For this purpose, legal action was undertaken on the basis of information provided by all actors involved. With regards to the status of the performance bonus negotiations, he stated that there was no reason for great concern, as the process of engagement has normalized somewhat.

Addressing Mr Singh’s question relating to the timeframe of relocating Parliament, Mr. Mgidlana stated that the socio-economic study would be conducted for around 3-6 months, as nobody had conducted a study of this magnitude previously. He stated that he signed a performance agreement upon his appointment in 2014, however he did not sign a performance agreement for the financial year 2016/17. He reiterated that he would like to see all performance agreements signed before the end of the current financial year, however the logical framework thereto had not been established.

Mr Waters stated that he was shocked that the Secretary had not signed a performance agreement for the 2016/17 financial year, considering there are only six weeks until the current period ended. He quoted the FMPPLA Section 8(1), “The Executive Authority and the Accounting Officer must conclude a written performance agreement for the Accounting Officer annually.”, and Section 8(2), “The performance agreement referred to in subsection (1) must be concluded within a reasonable time after the Accounting Officer is employed and thereafter within one week after the start of each financial year.” Mr. Waters asked the Chairperson if the Secretary received any bonus for 2016/17? If so, how was the Secretary’s performance assessed?

The Chairperson stated that the seriousness of the matter should not be underplayed. He allowed the Secretary to provide a response.

Mr Mgidlana stated that he did not receive any performance bonuses for the current financial year, nor did any other staff. Furthermore, he stated that the performance agreements were ready to be signed, and that the matter should be looked at by the Chairperson and the Speaker of Parliament.

Mr Shaik-Emam requested to know who owned the Parliamentary Village properties. Who was in charge of the maintenance of these properties? Secondly, what was the total travel cost for airline flights? Was there a dedicated travel agent in charge of scheduling and booking flights for officials?

Mr. de Beer stated that there must be compliance to the FMPPLA regarding performance agreements. He requested that the Co-Chairpersons meet with the Executive Authority and report back to the Committee on the matter.

Mr Steenhuisen stated that the FMPPLA held the Secretary accountable to the Committee. Moreover, given the evidence of “material non-compliance” to the Act, the Secretary should appear before the Committee to explain why there was compliance.

The Chairperson closed the discussion for further questions, and requested that the Secretary respond to some of the Committee’s unaddressed questions.

Mr Mgidlana stated that the Parliamentary Villages were owned and maintained by the DPW, however Parliament was responsible to the management of these facilities.

The Chairperson stated that key issues were flagged on the third Quarter report, and deferred the remaining agenda items for a later date.

The meeting was adjourned.