Parliament 2017/18 Annual Report; with AGSA & experts input

Meeting report

Auditor-General South Africa (AGSA) briefing on 2017/18 Parliament Audit Report
Ms Sharonne Adams, AGSA Business Executive, reported that Parliament has received an unqualified audit opinion with no finding. Two misstatements related to employee benefits and goods and services have been corrected. There was no material finding in terms of compliance with regulations. Instead there have been some improvements. On leadership, there have been improvements, especially when looking at the audit action plan. There were no material misstatements. Governance has been a given a green light by the AG. There has been an improvement compared to previous years on the quality of performance information of the institution. Irregular expenditure has recorded a decrease. Assurance providers such as the executive authority, senior managers and internal audit have provided assurance. The financial health of Parliament was the same situation as last year. Technically, Parliament was not a going concern.

Committee Researcher briefing
Mr Mbuyiselo Hlekiso, Committee Researcher, said he disagreed with AGSA on compliance although he agreed there were slight improvements. He focused on the two programmes the AG concentrated on. In Programme 1: Strategic Leadership and Governance, the target for governance documents for referral to this Committee was not met. There was no compliance with regulations. There was a lack of coordination in the Office of the Secretary to Parliament. The 100% target set for governance schedule implementation was not met as EXCO did not hold meetings in the first and second quarter of 2017/18.

In Programme 3: Core Business, there had been three performance indicators before, but now there were 16. A target was set for 95% but actual performance was 90.85%. The reason for underperforming was attributed to staff vacancies and increased work volumes.

Policy Advice had a 100% target but actual performance was 43.86%.  The reason given for under-performing is that in the first and second quarter, there was no tracking system; therefore, performance could not be identified. Minutes had to be produced within three days and the target was set at 90%, and the actual performance was 95.84%. Reports had to be  produced within eight days and the target was set at 95%, and the actual performance was 91.91%.  The reason given for this was that competing priorities and challenges as a result of vacancies resulted in underperformance.

Parliament management said there was a need for equal research support for NA and NCOP Committee demands.  Therefore, management was intending to review the research model for Parliament to leverage the benefit of the available subject expertise.  They believe this was an important support to Parliament’s oversight and accountability role.

Committee Content Adviser briefing
Mr Xolisile Mgxaji, Committee Content Adviser, highlighted some anomalies emanating from the 2017/18 Annual Report. The rationale was to get clarity from the management of Parliament on these identified concerns. These anomalies were emanating from both non-financial performance and financial performance. He reported over-achievement in the Talent Management Index which measured dimensions such as talent acquisition, talent growth and talent retention. In its efforts to attract the right skills and expertise, Parliament reported it has experienced some challenges as applicants were reluctant to accept offers due to the challenges created by the fixed term nature of employment contracts and the cost of living in Cape Town. Even though Parliament has put in place some attractive benefits to retain its employees, in the past few years, many professional staff have resigned from Parliament, citing reasons such as  fixed-term employment contracts, expensive accommodation in Cape Town, a non-conducive working environment and unsatisfactory working conditions. The Committee had engaged with Parliament and resolved that Parliament should ensure that it deals with the issue of fixed-term contracts, but nothing has been done up to now.

At the end of 2017/18, Parliament recorded irregular expenditure of R336 000 which was due to the tender awarded to a  Member of Parliament and local content was not specified. This irregular expenditure was down from R2.443 million from 2016/17. During 2017/18, prior irregular expenditure of R2.446 million was condoned. The irregular expenditure incurred in 2017/18 was as a result of an irregular tender. Reasons for the condonement of the prior irregular expenditure were not given to the Committee.

For 2017/18 Parliament recorded wasteful and fruitless expenditure of R1.324 million. This amount represents a 24% increase compared to the R1.067 million recorded in 2016/17. During 2017/18, Parliament reported it has written off a prior amount of R1.053 million. The Committee needed to know the nature of this fruitless expenditure and whether it was recoverable or not.

Note No.3 in the annual financial statements shows R2.260 million owed by staff and Members of Parliament, denoted as “Staff and Members debt”. It would be important for Parliament to unpack the nature of this debt. Note No. 30 in the AFS show Parliament has paid R15.462 million for ‘Consulting and Professional fees” for 2017/18 which represents a 100% increase compared to the R7.996 million in 2016/17.  Therefore, Parliament would need to explain the nature and the motive for these fees to ascertain if they were justified and to get clarity on why this expense doubled. The same note revealed a noticeable increase in Printing and Stationery for 2017/18 of R15.094 million from R14.450 million in 2016/17. Such a trend was not expected since during 2017/18 Parliament introduced the My Parliament digital app to curb printing costs. Note No 11 has R23.364 million for Trade payable or Creditors which is a 24% increase compared to R18.882 million in 2016/17. This trend means Parliament was increasingly not complying with the 30-day payment rule to suppliers.

Discussion
Mr N Singh (IFP) asked how detailed was the AG's audit on performance. He asked if the audit looked at value for money; and if the AG had found any repeats of maladministration.

Ms Adams replied that the audit focused on Programmes 3 and 5 only. The audit was satisfied with usefulness of information because it was valid and complete. On value for money, they did not perform a value for money audit. They focused only on regulations and compliance. On maladministration, not all information was disclosed in the financial statements. Accurate information would be given when the investigation is completed.

Mr M Waters (DA) asked if the salary being paid to the suspended former Secretary to Parliament was not irregular expenditure.

Ms Adams replied  once the investigation is completed, the AG would determine if it was irregular expenditure.

Mr A Shaik Emam (NFP) asked if the accelerated study tours that were being undertaken were not measured as wasteful expenditure.

Ms Adams replied  that in such cases the AG would see if the budget was appropriated and approved for that. If it was approved, it would not be measured as irregular and wasteful expenditure because the tours were planned and budgeted for.

The Chairperson asked for the AG's comment on irregular expenditure that arose from prior years.

Ms Adams replied  the current irregular expenditure comes from the previous year. It was carried forward. Detailed information on that irregular expenditure was stated in the Annual Report.

Mr Shaik Emam asked how the AG was going to classify underspending.

Ms Adams replied  they usually meet with the leadership for explanations on why an appropriated budget has not been spent because if such a trend continues, that has an impact on internal controls.

Mr Waters asked for clarity on the increase in expenses for consultant contract services.

Mr Macebo Ntsomi, AGSA Assistant Audit Manager, explained this was a result of tenders that came in for training and coaching of Parliament management. The second item was the former President Kgalema Motlanthe Project where certain members of staff had to visit areas where the projects were happening.

The Co-Chairperson asked who was advising the executive on what to do and not to do.

Mr Hlekiso replied that the Secretary to Parliament was advised by the CFO on financial matters only, but there was no one advising the Secretary to Parliament.

Mr Singh remarked that in their last meeting with Treasury, there was an assurance that Treasury would work with Parliament, but that assurance appeared to have fallen by the wayside.

Mr Mgxaji replied that there were advertisements that have appeared in newspapers about vacancies in the Treasury Advice Office. This meant the matter was being taken care of.

Mr Shaik Emam commented that the Minister of Finance had talked about reducing the government wage bill. He wondered how the vacancies and performance was going to be balanced because most departments and Parliament have vacancies which were used as an excuse for underperformance.

Mr F Essack (DA) remarked that in the next six months it is likely there would be a decrease in the number of ministries, and the vacancies would be filled as a result of that. However, no one knows what would happen to the surplus people.

The Co-Chairperson suggested the Committee should make recommendations on how this should be implemented to help the executive find solutions.

Mr Singh pointed out that if ministries were reduced, that would have an impact on Parliament as well. This means Parliament should not rush to employ more people.

Consideration of the matter of the late Mr Lennox Garane
The Chairperson said this was a labour matter and it would be discussed in the next meeting. The Committee had received the submission from Mr Garane.

Mr Waters pointed out that the letter from Mr Garane was communicated only to the Committee Co-Chairs but unfortunately not to committee members. This serious matter needed to be investigated as it looked like Parliament had failed him. It was not clear who would lead the inquiry into his death.

The Committee decided it would take up the matter with the senior management of Parliament when it presents its Annual Report to the Committee.

Afternoon session

Parliament 2017/18 Annual Report: presentation by Acting Secretary to Parliament
Ms Penelope Tyawa, Acting Secretary to Parliament: RSA Parliament, noted that Parliament has received a clean audit opinion for four consecutive years. In the core work of Parliament, spoke about accountability work, particularly enquiries around the SOEs and filling of positions of various boards. She reported that only 18 Bills had been passed in 2017/18. The High Level Panel on Assessment of Key Legislation and Acceleration of Fundamental Change had public engagements that comprised of an average of 500 to 700 participants per province. Parliament would put processes in place to consider the report delivered by the Panel. She noted that the Public Participation Model has been integrated into the Oversight and Accountability Programme, Taking Parliament to the People (TPTTP) and other public education initiatives and programmes. Management has extended the reach of communicating the work of Parliament through radio and web services. Digital migration of the work of Parliament was being done through the MyParliament App. The IPSOS Survey results showed an increase in the public’s awareness of Parliament. Parliament was deepening its international engagement. It has participated in the establishment of the Regional Executive Committee of SADC. It was campaigning to strengthen the legislative powers of the Pan-African Parliament (PAP) and has facilitated and participated in the establishment of parliamentary forums for BRICS and IBSA.

According to its performance indicators, Parliament’s overall performance has also seen a steady improvement during the last three years. Performance increased from 45.45% in 2015/16 to 57.89% in 2017/18. The provision of advisory and information products and services rose from 85.36% in 2016/17 to 91.28% in 2017/18, in supporting Members to carry out their constitutional obligations. Parliament has brought the performance on minutes to 95%, and that of reports to 91%, from the base of 26% at the end of the Fourth Parliament. She outlined performance indicators for the five programmes of Parliament:

Programme 1: Strategic Leadership and Governance
Of the three targets, only one was achieved. Increased demands from Members of Parliament for analysis reports resulted in more than 100% increase in predetermined annual targets. The analysis reports dealt with a range of matters and included the status of the implementation of the NDP; ownership and independence of central banks; the integration of the NDP with departmental annual performance plans; regulations protecting South Africans against fraud; and preliminary expenditure information on the 2018 budget. 

Programme 2: Administration
Eight Member capacity building programmes were implemented against eight set targets. Eight Speakers Forum and Secretaries Association of the Legislatures of South Africa (SALSA) resolutions were actioned against eight set targets. Compliance with prescripts and regulations was at 100%. For quarter 1, 3 and 4, 100% compliance was achieved. For quarter 2, 1 document was submitted late. There has been significant improvement from 50% in 2016/17 to 95% during 2017/18. Of the 4 targets set, only 1 was not achieved.

Programme 3: Core Business
Staff vacancies and increased work volumes have contributed to performance challenges. Recruitment processes were addressing the challenges. There has been 6% achievement in terms of population participating in parliamentary processes against a 10% target. How questions were asked left a gap for respondents’ personal interpretation. Of the three targets set, 2 were not achieved.

Programme 4: Support Services
Client satisfaction level was 70%. A satisfaction level of 70% is above the level of most industries. The full implementation of the stakeholder management plan was expected to increase satisfaction level. 24% of population was aware of the business of Parliament against a target of 11.75%. The implementation of the Comprehensive Communication Strategy focused on the execution of improved communication activities supporting the Parliament programme. With regard to creating an enabling environment, a comprehensive communication strategy was developed and implemented. Enabling technologies were provided to MPs to effectively discharge their responsibilities. Effective business processes were improved. Access has been increased to the public and key stakeholders in parliamentary processes. A conducive physical and social environment has been created by providing adequate and appropriate functional spaces. Measures have been improved to safely secure Parliament. Of the 5 targets set, 3 were achieved.

Programme 5: Associated Services
Six of seven milestones were met. The milestone to refurbish the MPs’ service lounge was not met. The Ministerial Handbook was published on 31 October 2017. There has been 100% compliance with transfers to political parties. Of the 4 targets set, 3 were achieved.  

Financial Report
There has been continual monitoring of the implementation of audit action plans. There were adequate reviews before annual financial statements were submitted. Improvement has been continual in the Supply Chain Management. The Compensation of Employees has a variance of 6%. Parliament's budget for compensation of employees has always been less than the compensation value of the filled positions and the shortfall was funded from unspent funds of previous years which were retained in line with section 23(1) of the FMPPLA.

The executive authority has referred the underfunding to the Minister of Finance for consideration of the baseline review in the next Medium Term Budget Policy Statement and the 2019/20 budget allocation. The baseline for the compensation of Members was historically overstated since 2009/10, where many Members of Parliament were paid the loss of office gratuity after they lost their seats after the 2009 general elections. The underspending was surrendered to the National Revenue Fund (NRF) in terms of section 23(4) of the FMPPLA. For 2018/19, R95m has been shifted from direct charges to compensation of employees to minimise the underspending of direct charges and fund the shortfall in the compensation of employees.

The variance on goods and services was a result of unpaid goods and services close to year end. The unspent funds would be used to pay for these goods and services in the next financial year. Parliament's budget for transfers to political parties represented in Parliament has always been less and the shortfall was funded from unspent funds of previous years retained in terms of section 23(1) of the FMPPLA. The executive authority has referred the underfunding to the Minister of Finance for consideration of the baseline review in the next Medium Term Budget Policy Statement and the 2019/20 budget allocation.

The budget for property, plant and equipment was less than the required funds for capital expenditure.  During the financial year, Parliament purchased office furniture, office equipment, computer equipment and motor vehicles. The shortfall had to be funded from unspent funds of previous years. The executive authority has referred underfunding to the Minister of Finance for consideration of the baseline review in the next Medium Term Budget Policy Statement and the 2019/20 budget allocation.

Parliament was a net liability amounting to R1 243 475bn due to the post-retirement medical aid provision made for former Members of Parliament and Provincial Legislatures. During 1999, Parliament approved that the medical aid contribution for former Members of Parliament and Provincial legislatures would be paid by Parliament. There were 961 former members who received the subsidy at the end of the financial year. The contribution made by Parliament was R56.726m during the year and was funded from the annual appropriation.

Parliament wrote to National Treasury to take over the management and payment of the post-retirement medical aid (PRMA) benefit for former Members of Parliament and Provincial Legislatures. National Treasury responded that it has limited scope to take over the liability of retired Members as Parliament as it falls outside the scope of National Treasury’s post retirement medical scheme. It advised that the investigation of the underlying structure and risk profile of PARMED and financial modelling be conducted.

The Parliament’s financial position without the post-retirement medical aid liability would be in net liability of R99.738m. Included under non-current liabilities were provisions of R127.150m and R162.337m for Members’ loss of office and exit gratuities which are paid from direct charges. During 2015/16, the CCMA ruled in favour of researchers and ordered Parliament to pay them an amount of R38m. Parliament has appealed the ruling in the labour court and won. The only remaining contingent liability relates to protection service officers and the case was still in the labour court. These resulted in staff litigation decreasing by 90%. Potentail liability in litigation against Parliament increased by 28% - due to more pending cases against it.

Ms Tyawa reported that irregular expenditure has decreased by 86% and this was attributed to the introduction of the Governance and Assurance Committee which continued to look at the non compliance cases, interrogated them and advised Secretary to Parliament of the actions to be taken. Prior irregular expenditure of R2 446m was condoned by the executive authority. Fruitless and wasteful expenditure decreased by 75% and this was also attributed to the Governance and Assurance Committee. Prior fruitless and wasteful expenditure of R1 053m was written off by the executive authority. The following controls have been put in put in place to prevent irregular and fruitless and wasteful expenditure:
- Supply Chain Management regulations were presented to managers and members of bid committees.
- Formal training was conducted to up-skill officials and bid committees.
- Sampling of purchase orders was conducted to check and confirm compliance.
- Purchasing has been centralised for committees and events.

In conclusion, Ms Tyawa stated there has been a steady increase in improving the institution’s performance. However, indications were that they were continuing to operate in a constrained fiscal environment that impedes service delivery. They would continue on looking for ways to improve performance through efficiency initiatives and innovation. This was a key focus area for the Sixth Parliament. The drive to fill funded critical positions would continue to move forward with urgency whilst bearing in mind the medium to long term sustainability of the institutional balance sheet. They do not want to overburden Parliament with lots of warm bodies in case Cabinet shrinks. As a result, Parliament had to reconfigure the area of content advisor and researcher. Lastly, she reminded the Committee of the need to use the budget vote to help ensure Parliament obtained the necessary funds to meet its constitutional obligations.

 Discussion
The NA Chairperson, Dr M Motshekga (ANC), asked if there has been an audit on heritage assets and if Parliament differentiates between good and bad heritage assets.

Ms Tyawa replied that they do have an audit of the artwork. Some has been moved to Paarl and other assets were still in Parliament.  She was not aware of any offensive heritage assets.

Mr N Singh (IFP) asked for clarity on the compensation of MPs that was ±R100m and the over-budgeting.  He requested a breakdown of Parmed payments made to former Members of Parliament and Legislatures.  Had an investigation been done to recover money from those officials implicated in irregular and fruitless expenditure? Why were so many people resigning from Parliament as the resignation rate was at 59%?  He asked for an update on the investigation of the suspended Secretary to Parliament who was still receiving a salary.

Mr Manhenzhe Manhenzhe, Parliament CFO, explained there has been over-budgeting on direct charges because most Members that did not return after 2009 were paid an exit gratuity which raised the baseline.  The Parliament has returned money to Treasury for three consecutive years according to the Act.  The breakdown on Parmed would be forwarded in writing to the Committee.

On irregular expenditure, Ms Tyawa replied they received a report about managers that have been reckless.  Sometimes fruitless expenditure was outside the internal controls of Parliament.  For example, there is change of venues during oversight visits and finding service providers to provide furniture, tables and chairs when venue has been changed. They have a detailed report on this which would be sent to the Committee.  The case involving the suspended Secretary to Parliament was still on-going and the executive authority would be asked to update the Committee. The case was at a point where submissions and evidence were going to close.  The chairperson of the disciplinary case would like to be fair in his work and a report from the executive authority would be sent to the Committee. She said that an analysis report on the resignations and retention of staff would be sent to the Committee. She said it was not true that most people were leaving Parliament. She added that they have revisited their policies.  For example, there was no need for content advisers to be on contracts because that work was not going to change and would continue to be needed.  A skills audit would be done and skills would be matched according to jobs to be done.  She noted that Parliament was not receiving new ideas and that was why some people do not stay for a very long time.

Mr Shaik-Emam (NFP) remarked he was not pleased with the underspending and overspending because allocations were prepared and done. He asked for clarity on the R282m that has been idling in the bank account before the end of the financial year seeing that there was a limited budget from Treasury. What was going to be done to cut down costs given the budget constraints? He wanted to understand how the wage bill was going to be addressed because the Minister of Finance said it needed to be dealt with.  He wondered how things were going to be balanced because there were vacancies that needed to be filled while the very same vacancies were used as an excuse for poor performance. He asked for clarity on finances for study tours.

Mr Manhenzhe said the R282m has not been transferred to Treasury at the end of the year.

Ms Tyawa reported they have automated many things in Parliament as a means of cutting down costs. For example, there were shared printers now. Many printers have been discarded, and catering has been reduced.  On the wage bill, she said Parliament is delivering through people.  They would always have committees with secretaries, content advisers, researchers, but not all committees would have a legal adviser.  A written breakdown on international travel would be sent to the Committee.

The NA Chairperson remarked that the Mr Garane incident should be characterised as a tragedy. He wanted to understand the nature of the process that would be set up by the executive authority and who the competent person would be to drive the process.  Parliament owed SA and the family of Mr Garane an explanation.

Ms Tyawa said the executive authority visited the family of Mr Garane and committed that Parliament would do an investigation of the matter.  The Committee needed to get a report on what the executive authority committed to do.

Mr Shaik-Emam remarked that the senior management of Parliament was irresponsible because Mr Garane's death happened inside the premises.  Mr Garane wrote to many people in Parliament for intervention, but nothing was done.  His death was a protest.

Mr F Essack (DA) said the Committee needs concrete feedback on the case of the suspended Secretary to Parliament. He said the funding of critical posts seemed to be a problematic scenario. One got the impression that there were certain individuals who were doing their work while others were just drawing a salary.  The Fifth Parliament was left with only two months before expiration.

Ms E Coleman (ANC) stated that the quality of financial statements has regressed and irregular expenditure has decreased. The core work of Parliament should be strengthened which were its committees. Expectations were that Parliament should perform better than provincial legislatures.  Committees were supposed to help Parliament do its work better. There were serious matters confronting the work of the committees. In some committees there were more staff people while others remained understaffed. Catering in Parliament was very expensive when you look at the platters served which were not doing a favour to their health. The food they were given made them sleepy and not able to function properly. When she came to Parliament she was in a good, beach body shape, but now she has gained weight immeasurably. Items like printers and toners have to do with planning. Her office does not have a printer and her secretary has to run around Parliament looking for a place to print, and this was not only happening in her office. She asked if the case involving money owed to researchers had been concluded by the court.

Ms Tyawa explained that Parliament did not owe the researchers money. The court judgement was in favour of Parliament. Researchers were informed of the result of their appeal because they were the ones that took Parliament to court. Parliament has a wellness programme by Metropolitan which has provided Parliament with better service and there was a clinic in Parliament which had a doctor once a week.

The NA Chairperson remarked that newspapers have reported about the recent dumping of Bills on Parliament. This meant the quality of work left much to be desired. The word out there was that Parliament was passing legislation that was of poor quality. He wanted to understand how management was going to ensure there was time for Parliament to do its work.

Mr Masibulele Xaso, Secretary for the National Assembly, stated he does not have information on the number of Bills assented to. There were Bills that were still pending. The details would be sent to the Committee. He stated that 17 Bills had been prioritised and 11 of these Bills had been finalised by National Assembly committees. The Programme Committee was responsible for ensuring that time would be allocated for Parliament to look at these Bills.

Mr N Paulsen (EFF) asked who was responsible for determining Parliament’s strategic objectives. He asked for clarity on social media for Parliament and asked if Parliament was not reaching only a few on its DSTV channel.

Ms Tyawa replied that the multi-party committee was the one looking at policy priorities. The strategic objectives were derived from the two Houses of Parliament. They were in control of social media. They realised they were reaching only a few with their DSTV channel and tried to have discussions with the SABC TV, but they realised the SABC has too many problems. Parliament was now making use of the public service radio stations. More details would be sent to the Committee.

Mr A Masondo (ANC) asked for clarity on the enquiries instituted on political party funding. He asked for the sample size of the customer satisfaction survey. The case involving the suspended Secretary to Parliament was not completed by the expected month. Difficulties in the case should be stated upfront to the Committee.

Ms Tyawa said that constituency support money was given to political parties to buy furniture for their constituency offices. No monitoring was done, but the management was relying on audited statements being submitted to Parliament for these funds. The sample size for the customer satisfaction survey comprised of 3 500 people aged 16 years and upwards. It was a scientific method of research. Other information came from the HSRC on how people perceived Parliament.

The NCOP Chairperson, Mr D Monakedi (ANC), asked for clarity on the 10% target for public participation.

Ms Tyawa replied the 10% was derived from the Markinor Survey where 3 500 households were randomly sampled. The report explained the methodology employed and is available in all SA languages.

Mr Singh was concerned about security in Parliament. A full report needed to be given to the Committee about people who were harassed while they were in Parliament in order to engage with a Committee. He wanted to understand how the effectiveness of key internal controls was managed. He was not happy with the answers on resignations and the investigation of the suspended Secretary to Parliament

Ms Tyawa said that a perpetual audit finding was on collating information. Document management was very poor and there have been no supporting documents. However, the matter has been improved now because Parliament was using uVimba which was a system of archiving documents. A report would be submitted to the Committee regarding the security matter.

The meeting was adjourned.