Processing regulations in terms of section 65(1) of Financial Management of Parliament and Provincial Legislatures Act: Annual Financial Statements submission

Meeting report

Legal Services presentation

Ms Noluthando Mpikashe, Parliamentary Legal Advisor, presented a legal opinion on behalf of the Office of the Parliamentary Legal Services. The legal opinion provided a view on the extension of timeframes for the submission of Annual Financial Statements (AFS) by legislatures. In terms of section 57 of the Financial Management of Parliament and Provincial Legislatures Act (FMPPLA), AFS must be submitted, within two months after the end of the financial year, to the Auditor-General (AG) for auditing and to National Treasury for inclusion in the consolidated financial statements. No exemption from compliance with the FMPPLA was provided for but section 65(1)(q) makes provision for the Executive Authority to issue regulations, if necessary, to allow for exemption from complying with the Act.  

Section 65(6) of the FMPPLA stipulates that regulations made by the Executive Authority in terms of section 65(1) only come into effect after approval by Parliament. The Executive Authority referred the matter to the Committees for consideration, which was the last step in the process. In terms of section 59(1)(a) of the Constitution, the National Assembly was required to facilitate a public participation process to involve the public in the legislative processes of Parliament.  The Legal Advisor emphasised the fact that the regulations needed to be approved by the Acting CFO before 31 March 2022.

Discussion

The Chairperson, Mr J Maswanganyi (ANC), noted Ms Ruby November, Acting CFO Parliamentary Finance Management Office, was not on the platform. He requested a staff member of the Committee to contact her as the meeting could not proceed without her presentation.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, asked if he may use the opportunity while waiting on the Acting CFO, to add to the presentation the need for such a regulation as envisaged in the Act. Similar provisions existed in the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA). Parliament found itself in a difficult position when it could not finalise the AFS on time due to the Disaster Management Act regulations. While the public service could comply, Parliament’s audit was being evaluated against this background of the inability to comply because of a situation that was outside the control of Parliament, as the regulatory framework was not in place. The aim of these regulations was to get consistency within the public sector.
The wording of the regulations was very specific to the cycles within the public sector but the discretion of the Executive Authority in terms of timelines was limited.  This posed a challenge for the current situation considering the fire of 2 and 3 January 2022 which rendered the status of assets unknown. The finalisation of the asset register could not happen with the prevailing circumstances and while access to certain areas of the precinct was prohibited. These regulations would not address this situation. What was needed was a provision in the Act to address an emergency. Adv Jenkins proposed that Members pose questions for him and his colleagues to answer.

The Chairperson thanked Adv Jenkins and requested Members engage with the presentation while waiting on the Acting CFO.

Mr D Ryder (DA, Gauteng) expressed his discomfort about feeling ambushed by the process. His office was requested to provide a view on how to address the issue of extending timeframes for the submission of AFS. He was not sure where the request came from and what the motivation was for the request. Without the Acting CFO putting forward a case and without motivation to support the request, Members were uncertain about what was expected of them.

The Chairperson agreed that Mr Ryder was raising an important point. He referred the Members to a two-page summary, compiled by the Parliamentary Research Unit, setting out the rationale for this request which was made by the Speaker and the Chairperson. The Chairperson asked the legal advisors to explain whether this request was the business of these Committees or the responsibility of the Executive Authority.

Adv Jenkins, in providing background to this matter, explained that administrators, as the Accounting Officer of Parliament, were finding it difficult to comply with the timeframes in the Act due to the Disaster Management regulations. His understanding, based on discussions with Finance, was that the service providers who were contracted to assist with the compilation of the asset register were unable to access the precinct. This created a problem and in reviewing the legislation, the Act provided for the Accounting Officer to periodically review the regulations and when appropriate, draft new regulations and submit them to the Executive Authority for publication. This request was based on a review of the legislation and the Executive Authority asking the Committees to approve the draft regulations. The regulations were following the same path as the Act which was drafted and recommended for approval by the two Standing Committees. The Supply Chain Management regulations also followed this path. The Joint Committees provided specific oversight over the monthly, quarterly and annual reports of Parliament and reported to both Houses. The Joint Committee on the Financial Management of Parliament had a specific mandate to review the Act but needed a specific resolution from both Houses to allow it to make recommendations on amendments to the Act. These matters had been under discussion since 2020 when the Minister of Finance used his discretion in terms of the PFMA to exempt most of the public service entities from complying with timeframes stipulated in the PFMA. Public finances must be consolidated with the AFS of the entire Republic, which meant that all Accounting Officers should be on the same page and working together on consolidating the AFS. When the Minister of Finance allowed exemptions for most of the public entities, it left Parliament out of sync. The AG had its own problems with providing audited AFS within the timeframe back to Parliament. The regulatory framework was needed to accommodate the challenges that the Accounting of Parliament was dealing with.

Ms D Mahlangu (ANC, Mpumalanga) said Adv Jenkins adequately addressed her questions about the background to this matter.

The Chairperson was informed that the CFO of Parliament had since joined the meeting but she was having difficulty communicating on the platform.

Ms P Abraham (ANC) wanted an explanation from the Acting CFO for joining the meeting late. She asked whether the presentation was in line with what was requested and if a presentation of this nature had been done in the past and whether the Committee responsible for parliamentary oversight was briefed.
 
Ms Mahlangu had similar questions and concerns as the Members who spoke earlier in terms of where the responsibility for the approval of the regulations belonged and what the role of the Committees was. She questioned the absence of National Treasury in the process and expressed her dissatisfaction with the conduct of the Acting CFO, which she described as unbecoming and unacceptable.

The Committee Secretary indicated that Mr Henry McGregor, Head of the Treasury Advice Office, offered to brief the Committee in the absence of the Acting CFO.

Adv Jenkins explained that in terms of the Act, the Treasury function was delegated to the Speaker and Chairperson due to the separation of powers principle. The overall function in terms of the consolidation of AFS was still with National Treasury. The Treasury Advisory Office was established to assist the Speaker and the Chairperson.

Mr McGregor said the Treasury advice office in Parliament was established about five months ago with his appointment. He explained the request emanated from the Acting CFO but the background to this request dated back two years ago. At the time, there were engagements between legal services and various role players about the issue of the lack of regulations to provide the Executive Authority with powers to grant an extension to legislators for submitting AFS. The Minister of Finance granted an extension for a period of two months in terms of both the PFMA and MFMA. This meant that an environment was created for local and national government to adapt to an online working environment. Legislators had to adapt quickly to prepare financial statements while working from home which resulted in problems. The AG recommended that Parliament develop regulations that would allow an extension period similar to the MFMA and PFMA regulations. Parliament was facing a disclaimer at that stage and the Treasury Advisory Office did the best it could to support legislators. The regulations were developed as a result of the process to operationalise section 65 of the Act.

The Acting CFO of Parliament explained she was experiencing challenges with her laptop and apologised for joining the meeting late. She had been following the discussion and engagement and confirmed that the background provided by Mr McGregor was correct. The lockdown regulations impacted the late submission of financial statements by Parliament. In terms of the PFMA, late submissions by departments were allowed. Consequently, an agreement was reached with the AG to allow for late submission by Parliament. There was enough motivation for Parliament to not submit AFS on time however the AFS of Parliament had been submitted on time the previous year. Her colleagues addressed the manner in which the matter unfolded but she highlighted the issue of the fire disaster at Parliament which might also have an impact on the late submission for this year.

Adv Jenkins said as a way forward, the Joint Committees needed to decide on the manner of the public participation process, including asking the AG to comment on the provisions.

The Chairperson noted the report should be submitted to the National Assembly and the National Council of Provinces before the end of March 2022. According to the programme of the Committee, there were no free days up until the end of March 2022 and a constituency period was scheduled between 4 and 14 April 2022. He questioned how the timeframes were to be reconciled with the programmes of the two Committees.

The Committee Secretary noted there were days when the Committee had no scheduled meetings, for example, the day of the debate of the Fiscal Framework and days that the Committees did not normally meet, such as on Thursdays, could also be utilised.

The Chairperson acknowledged the input of the Committee Secretary and asked if Members had further questions that needed clarification.

Mr Ryder said without flowcharts and timeframes, Members were unsure of what had been asked of them to agree to. The pros and cons must be evaluated and input from the AG and civil society was needed. He enquired if a permanently extended date was requested or if the extension would be granted on a once-off basis.

Ms Abraham sought clarity on the ownership of the regulation considering that the Executive Authority was responsible for the Act. An expansion of the timeframes was needed to prevent a loophole from being created that could become applicable when times are back to normal and to ensure timely submission to the AG in normal times. There could be a reason why the matter was not accommodated in the Act. She was concerned about the monitoring of random late submissions if the regulations did not specify timeframes.

Dr D George (DA) shared Mr Ryder’s view and was similarly confused about what was expected of Members. He was unsure about the process being followed and even his Chief Whip was not aware of the delay in submitting the AFS. Something needed to be done but the desire to change the law seemed problematic. It must be taken into account that senior management of Parliament was not aware of this situation. The AG and civil society must be consulted for their opinion.

Mr Ryder said the Acting CFO arranged a meeting but came with a legal opinion and without a presentation. She should have used the platform to present her arguments. It seemed this meeting was a last-minute attempt and a matter of the tail wagging the dog. He had a nasty feeling about the process and expected the Acting CFO to present a proper motivation for the regulations.

The Chairperson explained the matter was referred to the two Committees by the Executive Authority.

Ms Abraham said the Acting CFO and her team should not be allowed to continue and proposed rescheduling of the meeting. The Chairpersons of the two Committees should be given the mandate to consult with the leadership of Parliament, the Presiding Officers and officials of the Committees. When they return to brief the Committees on the issue, the context should be clarified and Members would have the mandate to deal with the matter.

Adv Jenkins remarked that the timing of the submission of the financial statements would be affected by the fire at Parliament. However, the amendments emanated from the Disaster Management regulations during the lockdown period. These specific regulations were required to achieve uniformity with the public sector in terms of varying timeframes.

Ms Mpikashe presented a letter to the Members confirming that the regulations had already been approved by the Executive Authority. The approval by the two Committees was the last step in the process.

Ms Mahlangu agreed with the decision to reschedule the meeting.

The Chairperson reiterated the Committees should do what was requested by the Executive Authority. He was concerned about the short timeframe and suggested the matter should be dealt with and should be at an advanced stage by 3 March 2022. He agreed to have a meeting with the Committee Secretary, the Legal Team and the Acting CFO to clarify issues that Members raised. The Chairpersons would find a way to address the concerns of Members so that everybody could be on the same wavelength.

The meeting was adjourned.