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LABOUR PORTFOLIO COMMITTEE
13 September 2005
TREASURY REGULATIONS FOR ANNUAL REPORTS: BRIEFINGS
Chairperson: Ms O Kasienyane (ANC)
Documents handed out
Treasury briefing: Legislative Oversight through Annual Reports
Treasury briefing: Guide for the Preparation of Annual Reports
Members heard two presentations from the National Treasury dealing with legislative oversight through Annual Reports, and the preparation of Annual Reports. Possible operational changes might include the election of a rapporteur from the Committee to link with the Standing Committee on Public Accounts, and arranging cluster hearings for the Sector Education and Training Authorities (SETAs) rather than individual ones. The opposition parties focussed mainly on issues of enforcement and how to hold the Executive and accounting officers accountable through Parliamentary action.
Treasury briefing on Legislative Oversight through Annual Reports
Mr Nols du Plessis (National Treasury Chief Director: PFMA Specialist Functions) told the Committee that the Public Finance Management Act (PFMA) placed the responsibility for ensuring that Parliament fulfilled its role of oversight over executive action and organs of state, on both the National Assembly and the Cabinet. National Assembly House Rules should define the roles of different players in the oversight of the Annual Reports, but the absence of any such rules should not pose an obstacle to the implementation of the proposed oversight process.
For the Committee, the proposed process entailed receiving the Annual Report at the end of September, followed by a two-week preparation phase and a week of joint workshops with concurrent provincial functions. Hearings would happen in the last week of October, while the writing and tabling of oversight reports should be completed by the second week of November. The period up until 31 March of the next year would then constitute a follow-up phase.
The Committee had to exercise oversight over service delivery by the entities within its ambit. It had to focus on the technical quality of Annual Reports, and whether the reports covered all performance targets set out in the strategic plans. It had to assess the quality of the performance information, and the economy, efficiency and effectiveness of service delivery. The implementation of the entity’s service delivery improvement plan and any remedial steps to correct under-performance in any area should also be assessed.
Treasury briefing on preparation of Annual Reports
An Annual Report needed to contain an acknowledgement of its formal submission to the executive authority, an introduction by its accounting officer and a mission statement. Mr Du Plessis indicated that it also needed to include the relevant information on the Ministry under which the entity fell, as well as on its legislative framework and mandate.
Programme performance information needed to encompass key measurable objectives, programmes and achievements. It needed to contain an overview of the entity’s strategy and key policy developments for the financial year. Also of importance were information on transfer payments to other institutions and public entities; narrative reports on service delivery and –provision; and, capital investment, maintenance and asset management.
The entity’s Audit Committee had to identify any legal, regulatory or internal control issues and provide an assessment of its in-year management and annual financial statements. Management had to outline the state of the entity’s financial affairs, its activities and its results. Any qualification or "emphasis of matter" needed to be followed up and discussed, while notes to the annual financial statements also had to contain information on unauthorised, irregular and fruitless and wasteful expenditure. A section on human resource management also had to be included and structured according to the requirements of Public Service Regulations.
The Chairperson noted Mr Du Plessis’ suggestion of appointing a rapporteur from the Committee to the Standing Committee on Public Accounts (SCOPA) to ensure a more informed and focussed effort in the Committee’s oversight activities. She asked for greater clarity on this suggestion and when to engage stakeholders and the public.
Mr Du Plessis responded that it would be beneficial for the Committee to choose a representative from its own ranks to attend relevant SCOPA meetings. In so doing, the Committee could provide a mutually beneficial link for information exchange between the two committees. In this regard, it was important to acknowledge that there was duplication and also to take into account that the evaluation cycles of SCOPA allowed for greater depth in their assessments.
Prince N Zulu (IFP) questioned the value of Mr Du Plessis’ suggestion of group assessments of Sector Education Training Authorities (SETAs), since all 25 served different sectors. He also asked why there was such a high prevalence of under-spending, budgetary "roll-overs" and unauthorised expenditure in Government departments.
Mr Du Plessis told the Committee that, although the activities of each SETA were sector specific, their purposes and aims were generic. Besides liberating space in the Committee’s programme, the grouped approach would also include the advantage of peer learning for the SETAs. Other type of entities such as the Unemployment Insurance Fund (UIF) and the National Productivity Institute (NPI) would necessitate separate assessments because of their incongruent natures.
The high prevalence of under-spending, roll-overs and unauthorised expenditure was the result of weak financial control enforcement. Parliament was the only institution that could approve unauthorised expenditure and could therefore be highly effective in dealing with such cases by taking strict resolutions. This fell within the ambit of SCOPA, whose work was supported by reports and recommendations from National Treasury.
Unauthorised expenditure might not always be unavoidable, fruitless or wasteful, but the PFMA was very clear that accounting officers could not overspend on their overall budget. Procedures were in place to deal with cases where over-expenditure was a possibility. There was an opportunity for a department to motivate for over-expenditure in its monthly expenditure reports to Treasury.
In practice, the monthly departmental expenditure reports were not always very accurate, and many instances of unauthorised expenditure normally only surfaced towards the end of the financial year. In the case of irregular, fruitless and wasteful expenditure it was the responsibility of the National Treasury to enforce the provisions of the PFMA very strictly. It needed not to wait for the relevant Department to institute corrective measures first. This was something that the Treasury needed to improve on.
Mr C Lowe (DA) stated that it was often difficult to effect year-on-year improvements in the running of Government Departments and related entities through parliamentary oversight. He stated that oversight efforts were often frustrated by the indifference of these entities to receiving audit reports that were qualified or that raises "emphasis of matter", and to being subjected to parliamentary hearings. He further indicated that it was often difficult to get substantial- or any responses at all from Ministers to questions by opposition Members. He asked whether National Treasury could propose any remedies to address these problems.
Mr Du Plessis responded that currently the PFMA did not recognise the strong link between extra-departmental public entities and the accounting officers of the relevant Departments, as it did the link between the Minister and the extra-departmental entities. In practice, the accounting officers of Departments were responsible for transfer payments to extra-departmental entities, to evaluate their budgets and expenditure, and to ensure the maintenance and enforcement of any service-level agreements with them. This would be the subject of propositions for amendments to the PFMA for next year.
Mr Du Plessis stated that it would be difficult to comment on the issue of questions to Ministers from an executive side. That was essentially an issue that had to be addressed by the legislature. In accordance with the PFMA, a distinction should be made between the accounting officer, who carried statutory accountability, and the executive officer who was politically accountable. While the accounting officer appeared before SCOPA and other Committees there was no better place than in Parliament to hold political heads accountable on the basis of oversight- and Annual Reports.
Mr L Maduna (ANC) wanted to know what would happen where the Committee had not completed its oversight work by the time the oversight reports had to be tabled. He asked whether it would be possible for the Committee to table its oversight reports, or additions to these reports, after the proposed second week of November until the end of the financial year. He also wanted to know who decided what issues needed further debate on the tabling of every report; whether the Committee was responsible for this, or whether it merely had to forward its recommendations?
Mr Du Plessis stated that issues concerning the timeframes for tabling oversight reports were subject to the Rules of Parliament and had to be dealt with as such. Though it was possible to table oversight reports without having had heard all the relevant Departments, it was not advisable. Furthermore, it was the responsibility of Committees to isolate issues for further debate in the National Assembly in the tabling of each of its oversight reports.
Ms N Mcengwane (ANC) endorsed a rapporteur link between the Committee and SCOPA, as it would make it easier for the Committee to identify problem areas in assessing the achievements and activities of state entities against their budget allocations.
Ms S Rajbally (MF) asked whether it was not possible to shorten the six months provision for the tabling of Annual Reports to Parliament. She also asked whether it was not possible for the relevant Minister to be present at the tabling of reports to the Committee so that any questions directed at the political head could be answered then and there.
Mr Du Plessis told the Committee that the view was that the time period for the submission of Annual Reports should be brought forward so that it could timeously inform the Adjustments Estimates. The latter was compiled during October for submission to Parliament at the end of October. On the other hand, there was still a great need to improve the quality of the Annual Reports, and this had to take precedence.
Mr M Mzondeki (ANC) asked whether the National Treasury had any suggestions or was in any way able to assist Parliament and the Members of Parliament to increase the research support available to them.
Mr Du Plessis acknowledged the problem of research support to Members and committed National Treasury to assist Parliament as far as it was able to. The concerns were mostly capacity related and he urged Members to request the necessary assistance from the Executive in this regard. Mr Du Plessis stated that capacity was needed in the National Treasury to assist Committees with the assessment of the quality of the non-financial reporting in Annual Reports. It would also be beneficial to enpower the Auditor-General’s (A-Gs) office with the necessary capacity to assist other Committees in the same manner that it assisted SCOPA.
In answering a question from Mr G Anthony (ANC), Mr Du Plessis stated that the PFMA covered all institutions that fell under the National and Provincial Governments, while local governments were covered by the Municipal Finance Management Act.
Mr Lowe aired his concern over the apparent indifference of senior civil servants and accounting officers to their slow compliance with and transgressions of the PFMA. He stated that there had to be consequences for such individuals. He asked what the powers of Parliamentary Committees were in this regard.
Mr Du Plessis reiterated that it was a case of firmer enforcement of the PFMA. He stated that if there was non-compliance with the Act to the extent that it constituted misconduct then, depending on the situation, it was up to executive officers to take action against the accounting officers, and accounting officers to take action against their subordinates. Where executive officers failed to take action, it was the responsibility of Parliament to come to really firm resolutions. Where accounting officers failed to take action within their own Departments, the onus was on the National Treasury.
It was noted in a recent public service report that there was a trend for public service accounting officers not to act against their subordinates for misconduct; financial or otherwise. The report recommended that the institution of disciplinary procedures also be linked to the performance evaluations and, therefore, performance bonuses apportioned to senior public service management.
Mr L Maduna (ANC) wanted to know what the procedure was for Departments to make budgetary provision for unforeseen expenditure such as in the case of disasters. He also asked whether there were any guidelines provided to Accounting Officers with regards to the apportionment of performance bonuses.
Mr Du Plessis stated that the regulations provided for instances of unforeseen expenditure. Where there was, for example, a disaster, a Department could submit a memorandum to the Treasury Committee which would then provide the necessary funds from a contingency reserve set aside by the Minister of Finance. Otherwise the Act provided for instances where it would be more appropriate to move funds between programmes within a Department.
Mr Du Plessis stated that the Public Service and Administration Department set a maximum threshold in the region of 1.5% of the total salary bill of a Department for apportionment as performance incentives. The payment of such bonuses should be closely linked to the performance of the Department, and not merely serve as salary top-ups.
The meeting was adjourned.