National Treasury Instruction Note 4 2022/2023 regarding the exemption of SOEs from reporting irregular expenditure; with Minister of Finance

Public Accounts (SCOPA)

06 September 2023
Chairperson: Mr M Hlengwa (IFP)
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Meeting Summary

The Standing Committee on Public Accounts convened in Parliament to discuss the National Treasury Instruction Note 4 regarding exempting state-owned enterprises (SOEs) from reporting irregular expenditure.

Treasury explained the Note's purpose as a framework to enhance compliance and reporting standards for irregular expenditure. It emphasised that this Note did not exempt SOEs from their responsibility to report irregular expenditure, but aimed to align reporting procedures with international standards and Public Finance Management Act mandates. It clarified its specific objectives, with a particular focus on consequence management. The presentation also offered a comprehensive overview of the coordination and reporting processes involved in handling cases of irregular expenditure.

Several Members expressed reservations and scepticism about Instruction Note 4 and its underlying purpose. They stressed the need to delve into its utilisation, particularly by the National Treasury, to grant exemptions to entities like Transnet. They also expressed a desire for more transparency and information regarding the application of Section 92, and other entities which had received similar exemptions. It was argued that providing such mechanisms without proper leadership and accountability in place would be ineffective. They highlighted the contradiction where these entities aimed to borrow money while facing internal problems that had not been addressed. They criticised the lack of intention to fix these internal issues, and the absence of effective leadership.

The Committee Chairperson acknowledged that the principle behind the proposed changes was to establish greater flexibility and agility in dealing with financial matters. While the principle was important, it should align with international standards and best practices. He commented that the government should be cautious about granting exemptions, especially when they involve substantial amounts of money.

Meeting report

The Chairperson offered a cordial welcome to all participants, including representatives from National Treasury and the Minister. He outlined the primary focus of the meeting, which would receive an update from Treasury regarding Instruction 4. This specifically pertained to the exemption granted to state-owned enterprises (SOEs), relieving them from the obligation of including irregular expenditure in their financial reports. He referred to a previous discussion that had involved Transnet and a similar exemption scenario. The Chairperson stressed the importance of the Minister's presence and the delegation's presence in addressing this matter, ensuring effective oversight.

He outlined the meeting's structure, which would begin with a straightforward presentation, followed by a question-and-answer session. He cautioned Committee Members about an impending scheduled load shedding at 10 am, and emphasised the need for efficient time management during the meeting.

Update on Treasury Instruction Note 4

Mr Shabeer Khan, Accountant General, National Treasury (NT), described the vital reporting procedures regarding irregular expenditure and unauthorised spending within the framework of the country's state-owned enterprises (SOEs) and the Public Finance Management Act (PFMA). He emphasised the crucial role of adhering to PFMA regulations, particularly section 55(2)(b), which requires comprehensive inclusion of information concerning unauthorised expenditure and the actions taken to rectify it in annual reports and financial statements. He particularly highlighted the necessity laid out in Treasury Regulation 9.1.5, which mandates transparent disclosure of unauthorised irregular expenditure within financial statements.

Further, the presentation introduced Instruction Note 4, explaining its purpose as a framework to enhance compliance and reporting standards for irregular expenditure. Mr Khan emphasised that this Note did not exempt SOEs from their responsibility to report irregular expenditure, but aimed to align reporting procedures with international standards and PFMA mandates. He clarified the specific objectives of Instruction Note 4, with a particular focus on consequence management. The presentation also offered a comprehensive overview of the coordination and reporting processes involved in handling cases of irregular expenditure.

Mr Khan acknowledged existing challenges related to reporting, such as operational inefficiencies and poor financial performance. He outlined ongoing reforms designed to improve reporting standards and address issues related to corruption and financial management. As part of forward-looking initiatives, the presentation emphasised essential future steps, which encompass distinguishing between acts of corruption and minor violations, bolstering endeavours to detect corrupt behaviour, and strengthening internal control mechanisms to mitigate irregular expenditure.

(See attached presentation).


Mr A Lees (DA) voiced his reservations about Instruction Note 4 and its underlying purpose. He sought clarification on whether this instruction had broader implications, such as for Basic Education, as indicated in the presentation. His specific focus was on slide 22 which, in his view, addressed the issues or challenges that Note 4 aimed to address. He requested a more detailed explanation of the specific problems or "mischief" that Note 4 aimed to tackle. He stressed that slide 22 seemed to outline these concerns, and sought confirmation of his interpretation. He was particularly interested in understanding the precise problem that Note 4 intended to resolve, especially if it involved altering reporting practices in annual statements. He also inquired about the rationale behind issuing Note 4 in the first place.

Mr Khan responded by explaining that the purpose of Instruction Note 4 was to align with the changes brought about by Treasury Regulation 14. The Ministry had issued two instruction notes within the past two months, one of which was Note 4, was focused on compliance efforts. Note 4 had been introduced to address various compliance areas, including payments, supply chain management (SCM), extensions and deviations. The goal was to enhance accountability and introduce a compliance report as part of the reporting process. This clarification aimed to emphasise the importance of compliance and reporting in line with the changes in Treasury Regulation 14 and the broader context of financial accountability.

In response, Mr Lees conveyed his appreciation for the clarification. However, he proceeded to voice his reservations about Instruction Note 4, indicating that while it may not necessarily have negative intentions, it did not appear to effectively tackle the challenges or "mischief" outlined in the presentation. Instead, Mr Lees suggested that it might potentially exacerbate these issues. He raised questions about the underlying motivation for the instruction, as it seemed to him that it strengthened the challenges rather than comprehensively addressing them. Additionally, he pointed out Section 92 as a matter of significant concern, emphasising the need to delve into its utilisation, particularly by the National Treasury, to grant exemptions to entities like Transnet. He also expressed a desire for more transparency and information regarding the application of Section 92, and other entities which had received similar exemptions.

To provide further clarity regarding Section 92, Mr Khan explained that it did not pertain to exemptions, but primarily dealt with reporting extensions. Its purpose was to grant extensions to entities subject to oversight committees, particularly in the context of compliance extensions. There had been some confusion surrounding the role of Section 92 and its connection to reporting irregular expenditure. It was crucial to emphasise that Instruction Note 4 did not offer exemptions for reporting irregular expenditure. While they did receive exemption requests, these requests were primarily related to specific sections of the Public Finance Management Act (PFMA) or the annual report, rather than the reporting of irregular expenditure. Mr Khan illustrated this with an example involving a recent request from the Government Printing Office, which sought exemptions for certain sections of the national report due to challenges in producing accurate financial statements. However, these exemption requests were typically evaluated, based on key PFMA principles, with a strong focus on transparency objectives. For entities such as Eskom and Transnet, exemption requests were considered in light of their individual circumstances, including financial health and adherence to governance principles. Ultimately, the decision to grant an exemption was made with the overarching goal of upholding transparency and maintaining the integrity of financial reporting.

Mr Lees raised additional concerns in his follow-up. He expressed scepticism about whether the issues mentioned in Slide 22, such as misalignments and inefficient operations, could be effectively resolved by issuing exemptions, even under Section 92. He argued that exemptions might serve to conceal these problems rather than address them, potentially leading to a loss of support from international financial institutions and investors who prioritise transparency. Referring to the Government Printing Office example, he highlighted the risk of entities deliberately seeking exemptions to avoid reporting, and suggested that such practices could pose significant risks.

He went on to argue that Instruction Note 4 appeared to make reporting even more burdensome, and he remained unconvinced of its benefits given the ongoing use of Section 92 as a potential loophole. He questioned the motivation behind withdrawing the instruction, and sought clarification on why it was initially issued and then withdrawn, emphasising the need to understand the differences in approach. His concerns revolved primarily around transparency and accountability in financial reporting.

Mr Khan responded by referencing the context of the Eskom consultation, and the Minister's decision to withdraw the exemption. He explained that the industry and stakeholders had expressed numerous concerns during this consultation. The discussion centred on the practical implications and the potential agency concept that could arise from the exemption. He noted that the concept of irregular expenditure was unique in the practical context, and many other jurisdictions did not have similar reporting requirements. He also highlighted that not all irregular expenditure transactions resulted in a loss, and in many cases, value for money was still achieved. To address this, the Auditor-General introduced the concept of material irregularities, looking not only at compliance but also at whether there was an actual financial loss to the state. This distinction was important, especially in cases where losses had been reported in prior years, as it allowed for a more targeted approach to addressing irregularities.

Regarding the Transnet case, Mr Khan said that after the exemption was approved, there had been a shift in the organisation's approach to remedial actions and managing irregular transactions. The exemption had provided Transnet with the space and incentive to deal with these issues more effectively. Additionally, it had led to a decrease in qualification requests, as stakeholders recognised the commitment to addressing the problems.

Mr Khan concluded by emphasising the importance of continuous engagement and the need to focus on fixing the root problems associated with irregular expenditure, rather than seeking exemptions.

Mr Lees concluded his remarks with a final critique of the presentation. He expressed his inability to discern a significant difference between the losses incurred and the information provided, suggesting that the capital investments may not vary substantially. He noted that the Reserve Bank and other stakeholders were closely involved in working with entities like Transnet, and questioned the need for additional oversight from the Committee. He indicated that he was not convinced by the presentation, highlighting that he had long been a supporter of National Treasury. However, he remained unconvinced by the notion that National Treasury could oversee matters more effectively than the Committee. He emphasised that the message seemed to imply that the Committee should simply trust that everything would go smoothly with National Treasury's involvement. Despite his respect for National Treasury, he reserved his judgment on the matter.

Mr Lees conveyed the challenge he faced in distinguishing a substantial difference between the incurred losses and the information provided, suggesting that the capital investments may not exhibit significant variation. He pointed out the active involvement of entities such as the Reserve Bank and other stakeholders in collaborating with organisations like Transnet, which raised questions about the necessity for additional oversight from the Committee.

Mr Enoch Godongwana, Minister of Finance, responded by addressing the issues and disparities identified during the discussion. He recognised the imperative to enhance the reporting standards of SOEs to align with international financial norms, enabling them to effectively access funding on the global market. He stressed the significance of managing deviations from reporting standards while remaining vigilant about compliance. He underscored that these deliberations should be regarded as opportunities to augment transparency and accountability, rather than limitations on oversight.

He acknowledged the pivotal role of the Committee in overseeing SOEs, emphasising its contribution to upholding transparency. Regarding the Government Printing Works case, where data seemed lost, he proposed a conversation about the regulatory framework. He admitted that the current framework mandated disclosure in financial reports, but urged discussions about its enhancement to ensure comprehensive reporting. Ultimately, he emphasised the continuous need for dialogues and reforms to bolster the reporting requisites for SOEs, while preserving transparency and accountability in their activities.

Ms V Mente (EFF) requested additional clarification, and presented inquiries pertaining to the ongoing discourse. She conveyed her interpretation that the proposed approach -- particularly the utilisation of Section 92 of the PFMA -- seemed to offer a method of bypassing specific challenges. She highlighted that Eskom had already demonstrated its incapacity to save funds, and the measures undertaken by Treasury did not appear to have altered this result.

She raised concerns about implementing this regulation, particularly in the instance of Transnet, which she characterised as consistently demonstrating ineffectiveness over the years. She stressed her confusion about the purpose of these actions, pointing out that while the entities might still disclose their irregular expenditure, the disclosure would be removed in that particular year. She questioned the rationale behind this approach, and why it was not focused on holding entities accountable for their actions. In essence, she sought to understand the motivation behind these actions and the desired outcomes, expressing concerns about accountability and transparency in financial reporting by SOEs.

Minister Godongwana responded to Ms Mente's concerns by emphasising government's perspective. He acknowledged the essential point that the chosen approach might lead to unintended consequences, but clarified that these measures were being contemplated to tackle unprecedented economic hardships. He elaborated on government's efforts to inject funds into the economy, a measure of a magnitude not previously undertaken. Substantial revenue losses had negatively affected the economy, and they were exploring means to finance various initiatives. While recognising that these measures might entail technical complexities that required addressing, the primary focus remained on discovering ways to stimulate economic growth and recovery. Government had expressed willingness to establish reporting mechanisms for monitoring progress and implementing necessary interventions when institutions failed to demonstrate improvement. In essence, he underscored that government's actions were driven by the imperative of addressing economic challenges and remaining receptive to adjusting their approach based on observed outcomes and impacts. He emphasised the necessity of considering the broader economic context influencing these decisions.

Ms Mente continued to express her concerns, and said that while there might be unintended consequences, the government should not overlook the fact that SOEs were expected to release their financial statements and annual reports to the public. She pointed out that these entities were striving to appear competitive in the market and raise funds but were grappling with organisational and leadership issues. She argued that providing mechanisms without proper leadership and accountability in place would be ineffective. She highlighted the contradiction where these entities aimed to borrow money while facing internal problems that had not been addressed. She criticised the lack of intention to fix these internal issues, and the absence of effective leadership.

Minister Godongwana interrupted to seek clarification on whether the stated losses of SOEs had been entirely integrated into their financial statements, or if there were underlying structural issues contributing to these losses. He proposed that the matter might extend beyond mere financial losses, and could be linked to management and other structural elements that warranted attention. He then asked Mr Khan to offer additional elucidation on this matter.

Mr Khan provided additional clarification, underscoring the expectation that individuals appointed to oversee SOEs were tasked with presenting solutions to tackle the challenges. He acknowledged that the exemption in question had been granted over a year ago, with its primary objective being to grant SOEs a competitive edge in the market, particularly in light of their historical difficulties. He clarified that the exemption aimed to ensure transparency and accountability within the domain of irregular expenditure. One condition of the exemption was that SOEs were required to report the state of irregular expenditure to their boards and management. However, in some instances, boards did not take collective action to address these issues effectively. He also suggested that reporting to oversight bodies such as Parliament and the Scopa could be contemplated to elevate the importance of the information provided in the reports. In summary, he reiterated that the exemption was designed to offer a market advantage, but would not resolve all the multifaceted challenges confronting SOEs.

Ms Mente disagreed with Mr Khan's explanation, highlighting her concerns about the competence of certain individuals in key positions within the SOEs, and questioned how the exemptions and qualifications would help when there were fundamental issues, such as the inability to produce accurate financial statements. She pointed out specific issues in the bullet points within the presentation, including the qualification-related concerns. She argued that the individuals in charge of these institutions were incompetent, and questioned how the proposed solutions would address the underlying problems overall. She expressed scepticism about the effectiveness of the exemptions and qualifications in addressing the core issues within the SOEs, particularly when key financial information was lacking or inaccurate.

In his effort to assist the deliberations, the Chairperson stressed the importance of explaining the Transnet matter within its specific context, to avoid any misunderstanding among the Committee Members.

Mr Khan provided clarification, emphasising the distinction between the Transnet exemption and Instruction Note 4. He clarified that the Transnet exemption was governed by Section 92, whereas Instruction Note 4 focused on implementing a compliance framework for inclusion in the annual report. He stressed that Instruction 4 continued to be applicable to all state entities, including national and provincial departments, public entities, and others. Additionally, he noted that the specific exemption granted under Section 92 had a duration of three years. He acknowledged the importance of ongoing monitoring and evaluation to assess the effectiveness of these measures, and expressed agreement with the Chairperson's remarks regarding the underlying principles of the matter.

Ms Mente reiterated her concerns about the financial outcomes, and highlighted the necessity of implementing a different set of rules to address the current circumstances. She said certain challenges, such as awaiting approvals, could result in significant delays during critical situations. She expressed her discontent with the existing approach, asserting that it failed to tackle the problem of incompetence, and may have severe repercussions for the country. She also advocated adopting more precise and targeted measures, rather than a broad exemption approach.

Mr S Somyo (ANC) started by expressing his concerns about the limitations of the proposed measures. He mentioned the need for compatibility, and asked about the specific criteria used to determine which entities were granted exemptions. He also highlighted the importance of assisting entities to move away from such exemptions and towards better financial management. He suggested that an assessment should be made to identify institutions failing to meet the standard of operation. He emphasised the need for transparency and accountability in the process. Finally, he questioned how the proposed measures would have incentivised performance and ensured accountability in the affected entities.

Mr Khan responded that the matter was currently undergoing deliberation within the Treasury. These discussions primarily revolved around determining the most effective model for reforming the use of deviations. The objective was to grant accounting officers the authority to make decisions that benefited their organisations, all the while upholding transparency and accountability through a well-defined reporting framework. He elaborated that prior experiences had highlighted challenges tied to decentralising deviations, which had resulted in corruption issues. Consequently, there was a shift toward centralising decision-making within the Treasury. However, this centralised approach sometimes led to delays in the decision-making process. Therefore, the ongoing conversation sought to strike a balance that empowers accounting officers without unfairly penalising contractors. These discussions represented a segment of ongoing reforms, and the dialogue would persist as they progressed toward introducing these reforms in Parliament.

Mr Somyo responded, expressing his agreement with the idea that minor errors should not discourage positive work and should be viewed as opportunities for improvement. He said that good intentions should not be penalised severely, as it might deter productive work. He noted the importance of not constraining freedom and decision-making at various levels of operation, giving the example of how excessive control could hinder efficiency. He agreed that there should be a balance between accountability and allowing for minor errors. He encouraged the presentation to define clear structures within the constitutional framework and to manage these minor issues in a way that ensured the fair handling of funds while maintaining legal constraints. He suggested that the presentation should take responsibility for addressing these issues, and turning them into opportunities for improvement rather than relying solely on statements.

Mr Khan acknowledged the importance of the principle discussed. Also, he mentioned that the Office of the Auditor-General provided norms and standards that served as a framework for financial reporting, and granted accounting officers the ability to make decisions within the state. He emphasised the need for a fine balance between allowing flexibility and ensuring consequences for breaking the law.

Mr B Hadebe (ANC) raised some concerns about the presentation, particularly regarding slide 22. He raised the issue of state-owned entities' (SOEs') reporting requirements, and how these conversations could help improve financial frameworks. He mentioned the challenges in defining terms and criteria for reporting, and stressed the need for transparency and accountability.

Mr Khan responded by acknowledging the complexities involved in these discussions. He expressed a desire for ongoing conversations to find the best way to balance the need for reporting with transparency and accountability in SOEs.

Ms Moipone Ramoipone, Director: Public Finance Management Act, National Treasury, .provides further explanation on the topics raised. Prior to delving into legislative reforms, she addressed the necessity for harmonising the Treasury Framework and Accounting (TFA) instructions with the Public Finance Act (PFA). She said the initial phase of this alignment process held significant importance. She embarked on a more detailed explanation, shedding light on the alterations introduced by Section 426 and Section 35 in financial statements. This noteworthy transformation had been absent from the previous framework, resulting in challenges. She said certain institutions grappled with issues arising from their limited capacity to handle historical data and identify current processes, consequently incurring additional costs associated with external expertise. She delved into the process of accessing institutional tools, and stressed the importance of aligning with various standards. To address these hurdles, the principle of 'materiality' in financial statements was invoked, aimed at preventing excessive disclosure and striving for clarity.

Ms Ramoipone also mentioned Treasury's review of the definition of confirmation losses and criminal activity, which were found to be complex but lacking clarity and accessibility. As a result, they decided to incorporate these aspects into the instructions. This process had taken considerable time, with seven hours dedicated to it, and further discussions were planned for the next day. Additionally, Treasury has issued numerous instructions recently, leading to difficulties in managing and tracking them all. This resulted in non-compliance and irregular expenditures. Their review had focused on elevating the importance of these instructions, as anything not qualifying as a guideline needed restructuring. To provide clearer guidance, they had opted to create specific regulations for various institution categories, including constitutional amendments. Lastly, she touched on restructuring Treasury's instructions and structure, and noted their intention to seek public comment for additional input and feedback on these changes.

Mr Khan provided further clarification, stating that they had been working on aligning certain principles and practices over the years. Some principles were being phased out, while new ones were being introduced to enhance accountability. They were engaging with legal teams on this matter. He mentioned the idea of public consultation before issuing an instruction notice, considering that public consultation had proved effective in making informed decisions. He emphasised the importance of taking public comments into account.

Ms N Makamba-Botya (EFF) asked if the exemption conditions involved relocating specific information from the annual financial statements to a different section dedicated to consequence management and related matters.

Mr Khan confirmed that the exemption conditions did include such relocation of information. He said that this adjustment aligned with the evolving requirements of the reporting framework and served the intended objectives.

Ms Makamba-Botya provided further context on the Transnet exemption, highlighting the issues related to historical disclosure and the entity's efforts to identify past transgressions. She said that public agencies were required to develop a materiality framework, and this decision depended on Transnet's capacity to identify specific transgressions. There had been discussions with National Treasury to ensure that performance and transparency were maintained. She also mentioned criteria for evaluating exemption requests, and the need to determine how far back entities should respond to these requests, rather than granting blanket exemptions.

Ms Ramoipone addressed the question about exemptions, and said there was a need for monitoring and oversight in the exemption process. She could not definitively claim that exemptions would lead to corruption without thoroughly examining an institution's financial statements and records to assess whether they had achieved their goals.

Ms A Beukes (ANC) sought additional clarity on the matter, expressing reservations about the existing process. She asked whether the current instruction was established, based on best practices adopted elsewhere, and whether there were effective measuring tools in place to assess the success of the action, or if these tools were merely superficial.

Ms Ramoipone explained the purpose and process behind the instructions. She said the accounting officers needed to receive assistance in identifying issues and challenges. The instructions aimed to guide them in conducting assessments to pinpoint problems and potential solutions, especially when initial identifications might prove misleading or insufficient. She also mentioned a determination stage related to financial losses, which appeared to be influenced by implementation challenges.

Ms Beukes expressed her concerns and frustrations regarding the challenges in financial reporting, specifically the issues related to monthly reporting and timely payments. She questioned whether a more effective tool or a dedicated coordinating institution was needed to address these problems. She highlighted the need to address the issues identified as hindrances to effective financial management and reporting.

Mr Khan explained that Treasury's focus had shifted towards performance information and compliance within the reporting framework. They now required organisations to provide more detailed information, allowing them to assess the need for assistance and training. This marked a departure from the traditional reporting framework, which concentrated primarily on performance information. The new approach included compliance reporting, aligning it with the Auditor-General's reporting framework. This compliance report aided in oversight and enabled compliance support. He pointed out the significance of this progressive requirement in identifying areas requiring intervention and improvement, while also ensuring comprehensive oversight in line with the Auditor-General's mandate.

Ms Beukes said she was concerned about the effectiveness of monitoring and reporting mechanisms within the government. She gave an example related to conditional grants, where it was discovered only after the financial year that certain grants were not being spent due to inadequate reporting. This raised a concern about the government's ability to monitor, legislate and implement effective oversight. She sought clarification on what would be different now, and whether a specific tool or mechanism would be in place to address these challenges and ensure more effective monitoring and reporting.

Mr Khan said improving the visibility and intervention within government organisations was important. He mentioned the publication of findings as part of the process, specifically concerning the quarterly report instruction. The quarterly report process was managed within the office of the Auditor-General (AG), and he highlighted their continuous efforts to understand and address transgressions. He pointed out that the AG's office had specialised processes for addressing transgressions and could mobilise capacity-building teams when necessary. However, he acknowledged that monitoring and evaluation of the effectiveness of these efforts remained a challenge, and called for the development of tools to enhance the monitoring process.

Mr Lees sought further clarity on the details of the tool mentioned in the discussion, and requested copies of the current exemptions and applications from Transnet. He then raised a specific concern about Transnet facing a covenant default in July 2022. He questioned whether the exemption granted in March 2020 was related to Transnet's ability to refinance a $1 billion debt due in July. Finally, he inquired about the clarity and transparency of the transfer process.

Ms Mente requested additional clarification on the monitoring process, and raised concerns about individuals with improper financial conduct, despite having plans to rectify their situation. She stressed the importance of a clear process for ensuring a smooth transition, including recovering funds from individuals involved in disputes. She also inquired about the accountability measures in place to address issues related to monthly reporting and financial conduct.

Mr Somyo voiced his support for the rationalisation of various financial instructions and requirements, highlighting the inconsistency in standards and reporting processes across different spheres of government. He emphasised the importance of aligning and rationalising these processes to streamline financial management and accountability, ultimately improving functionality in the financial space.

The Chairperson shared his views on the matter, commending the principle of creating business agility and competitiveness, and emphasising the need to address South Africa's unique financial challenges while maintaining accountability. He noted the importance of moving from annual financial statements to quarterly reporting on irregular expenditure and ensuring that consequences were accurately tracked. He highlighted the significance of proper consultation and the need for instruction notes to align with legislative requirements and accountability principles. In summary, he stressed the importance of transparency, accountability, and aligning financial practices with South Africa's specific context.

He also expressed his views on how National Treasury should issue instruction notes of this nature. Maintaining the integrity of legislation and the need for proper parliamentary oversight and consultation was important. He cautioned against the misuse of instruction notes, which could result in fundamental changes without due process.

He referred to the significance of checks and balances and the need for instructions to align with governance standards and accountability principles. He also mentioned the importance of transparency and avoiding shortcuts in the governance process. There was a need for a responsible and consultative approach to issuing instruction notes to ensure they were in line with legislation and promoted good governance standards.

In his concluding remarks, he acknowledged that the principle behind the proposed changes was to establish greater flexibility and agility in dealing with financial matters. While the principle was important, it should align with international standards and best practices. The application for an exemption that had resulted in the Minister of Finance not granting the exemption was an important point. He also noted that the government should be cautious about granting exemptions, especially when they involve substantial amounts of money.

He also emphasised the importance of parallel monitoring processes and performance measures to ensure the new system functions effectively. There was a need to reflect, review and consult further on the proposed changes before moving forward. He urged caution and a thorough consideration of the implications of any exemptions or changes to financial processes, and encouraged a consultative approach to decision-making.

In his closing remarks and responses to the concerns raised by Scopa Members, Mr Khan reiterated the significance of streamlining the instruction process within National Treasury. He highlighted their ongoing efforts to review Treasury regulations to enhance the efficiency of instruction issuance. He acknowledged the importance of reducing the volume of instructions and simplifying the process, as an excessive number of instructions could result in unnecessary expenditures. He reaffirmed his commitment to addressing the issues brought up during the discussion and pledged to provide the required information in response to the Committee Members' requests.

He acknowledged the questions and concerns raised during the discussion. He said that while he did not have specific information about the $1 billion debt mentioned by Mr Lees, he promised Members that they would look into it. He also addressed the concern about the timing of refinancing, and indicated that it would be considered. Regarding the monitoring processes of Instruction Note 4 and Section 92, he clarified that these instructions did not introduce new requirements, but emphasised that accounting officers had to take steps to recover debt. He explained the existing process involving internal or control functions and legal processes for debt recovery.

In response to Mr Somyo's comments about rationalising the MFA into the PFMA, Mr Khan stressed the complexity and importance of the current system, noting that it dealt with various aspects, including SOEs, contracts and property leases. The current legislative framework allowed for greater public consultation and alignment with provincial and national regulations. While there may be a need to streamline and consolidate some aspects, having two separate pieces of legislation served specific purposes and addresses different requirements.

 He also discussed the ongoing efforts to improve the accounting framework, which would enhance visibility and insights into government financial data through a unified accounting structure across different government entities.

Finally, he highlighted the importance of recognising expenses in the appropriate financial year, emphasising that all expenditures must be accounted for correctly. He acknowledged the need for accountability in financial management, suggesting that streamlining the process should not compromise accountability. He mentioned that ensuring the correct recognition of expenditure and irregularities was crucial as they moved forward with changes and reforms. He expressed the commitment of Treasury and the Office of the Accountant-General to address any outstanding questions or concerns raised during the discussion.

Chairperson’s closing remarks

The Chairperson expressed gratitude to the Minister, the representatives of National Treasury and all the Members for the constructive deliberations.

The meeting was adjourned.

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