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FINANCE PORTFOLIO COMMITTEE
9 MAY 2006
DELIBERATIONS ON THE FINANCIAL MANAGEMENT OF PARLIAMENT BILL
Chairperson: Mr N Nene (ANC)
Documents handed out:
Overview of the Financial Management of Parliament Bill: PowerPoint presentation
Response to comments on the draft Financial Management of Parliament Bill
The Committee was briefed on the Financial Management of Parliament Bill as gazetted in November 2005. The briefing was aimed at refreshing the Committee’s mind on the contents of the Bill. The Committee also considered a submission made by National Treasury. There were two overarching principles that informed the drafting process of the Bill. The first was Parliament’s status as an independent branch of government and the second was the constitutional commitment to a transparent, accountable and effective administration. The Bill would regulate the financial management of Parliament and provide norms and standards for provincial legislatures for the regulation of the financial management.
The Bill would not cover provincial legislatures because the Committee did not want to encroach on the powers of provinces to regulate or govern their own affairs. However, it would contain general norms and standards that provincial legislature would be expected to follow.
The Committee disagreed with the proposal that the Bill should allow the executive authority to approve departures from regulations and condonation of non-compliance with regulations on good grounds.
The Committee was briefed on the Financial Management of Parliament Bill as gazetted in November 2005. The Chairperson said that the Committee had received comments from the Secretary to Parliament and National Treasury. The Office of the Auditor General (OAG) was also interested in making a submission before the Committee.
Overview of the Bill
Mr C Barberton (Cornerstone Economic Research) and Mr P Benjamin (Legal drafter) attended the meeting. Mr Barberton gave a brief overview of the Bill. (See document attached). There were two overarching principles that informed the drafting process of the Bill. The first was Parliament’s status as an independent branch of government and the second was the constitutional commitment to a transparent, accountable and effective administration. The Bill would regulate the financial management of Parliament and provide norms and standards for provincial legislatures for the regulation of the financial management. The Speaker and the Chairperson would jointly constitute the Executive authority of Parliament and the Secretary to Parliament would be the accounting officer.
He said that questions had been raised on the application of the Bill on provincial legislatures and constitutional institutions. The Committee had decided that the Bill should be limited to the national Parliament. A lot of work would have to be done should the Committee change its decision and decide to cover provincial legislatures’ constitutional institutions. There would be a need for extensive consultation with the affected parties. The Committee should also consider new proposals regarding party funding and comments received on the Bill.
Mr A Moloto (ANC) said that a lot had been said about a policy on party funding. He had never seen such a document. He requested that members should have a copy of the document before the meeting was adjourned.
Ms J Fubbs (ANC) said that there was a suggestion about including constitutional institutions within the scope of the Bill. She asked how far they could possibly be included in the current framework of the Bill. She felt that the institutions could, at this stage, be left to Treasury to deal with. It was acknowledged that the Bill was concerned with norms and standards and one should hesitate to go little a further due to the constitutional provisions regarding provinces and legislatures.
The Chairperson said that the Committee should not open discussion on the inclusion of provincial legislatures. The Committee should also respect decisions that it had already taken.
Mr Y Bhamjee (ANC) said that the Executive authority would be responsible for the management of Parliament and was accountable to Parliament, represented by the ‘joint committee’ established in terms of clause 15 and the Public Accounts Committee. He asked what would be the role of the joint Committee. Would the Chairperson and Speaker meet regularly with the joint Committee? Would the Committee report in the manner that Ministers reported to the Committee on a relatively regular basis? Who would play the oversight role on the Committee should it form part of the Executive authority? It was important to have an oversight mechanism even if it was Parliament that was initiating structures.
The Chairperson urged members to resist the temptation to begin to engage with the Bill at this stage. The briefing was to refresh the Committee’s mind on contents of Bill.
Mr Bhamjee said that there was a provision that required that the majority of members of the Audit Committee should come from outside Parliament. He asked if there was precedence on this in Parliament. The Bill should contain definitions of concepts like government, for instance.
Mr Barberton replied that the Constitution outlined four branches of government: Parliament and provincial legislatures, the Judiciary, the Executive and constitutional institutions specified in Chapter nine and other provisions of the Constitution. These operated independently from each other but also in a co-operative manner. All these constituted government.
Mr L Johnson (ANC) said that the accounting officer should submit a draft of the budget and strategic plan to the Executive authority ten months before the beginning of a financial year. He asked what the current practice was. Was this happening at the moment? There was an Audit Committee and an internal Audit Committee that was independent. He asked how the internal Audit Committee would be constituted for it to be independent. He also asked the presenter to give examples of financial misconduct and abuse of position as contemplated in the Bill.
Mr Barberton replied that in terms of good governance practice as set out in the King II report and the Public Finance Management Act (PFMA), Audit Committees were usually constituted of members from the organisation and people external to the organisation being audited. In the case of Departments one would have people who had experience in auditing financial management appointed from the private sector. The model followed in the Bill was simply following good governance practice. The Bill had a provision that required that members of the Audit Committee might not have any financial relationship with Parliament. The idea was to ensure that they were highly independent and could serve on the committee objectively.
With regard to the internal Audit Committee, he said that one did not have an internal Audit Committee but an internal audit unit composed of employees of the organisation. Their independence was ensured by the fact that their audit plan was approved by the Audit Committee and not the accounting officer. The unit reported to both the Audit Committee and the accounting officer. There was a measure of external reporting to ensure independence. Other mechanisms were the provisions of the Bill that required them to have access to all information and to operate in terms of an audit charter that was drawn up by the Audit Committee. The audit charter would outline what they were expected to and how to do it in order to ensure their independence.
On the submission of the Strategic Plan, he said that he could not comment on current practice. The reason to bring the time period to ten months was to allow the joint committee to comment on the Strategic Plan before the budget process was too far down the line. The joint Committee should be able to influence the process. It was often a problem in governments where the budget process was like a steam train which could not be stopped easily. The risk was that the joint Committee's comments would only reach the budget process at a stage where they could no longer be practically incorporated. In order to avoid such a situation, the Bill was putting in place a mechanism that would ensure that the Committee would have adequate time to influence content of the Strategic Plan and budget. This issue was discussed in the Committee in May 2005 and the original proposal was six months. The Committee had then decided to change the period to ten months.
Mr Barberton said that the provisions on financial misconduct were concerned with the responsibilities of the accounting officer. The accounting officer was responsible for ensuring that certain things were done. For instance, the accounting officer had to ensure that the budget was submitted in time. If the budget was submitted late and this was due to negligence, the officer could be charged with financial misconduct. With respect to abuse of position, different officials had responsibilities and made decisions that affected Parliament and people contracted to it. They were placed in a position of trust. Abuse of position would include issues like the subversion of the supply chain management and making decisions that were contrary to the interests of Parliament.
Submission on the Bill
The Chairperson invited the drafters to take the Committee through the comments on the Bill and indicate if they could be accommodated. The Committee had received submissions from National Treasury and the Secretary to Parliament.
Mr P Benjamin took the Committee through comments made by Treasury on the Bill. (See document attached). It was recommended that the Bill should provide for transfer payments to constitutional institutions on the vote of Parliament. These institutions were accountable to the National Assembly, and must report on their activities and the performance of their functions to the Assembly. There was a Constitutional Court judgement to the effect that the current oversight position of constitutional entities was not consistent with the Constitution. He supported the suggestion that constitutional entities should be covered by the Bill. However, this would require lengthy process to deal with adequately. He proposed that the Bill should go ahead in its current form and that a new Bill should be drafted to address this issue.
Mr Moloto said that the suggestion had far reaching implications. There might be a need to change the title of the Bill should the suggestion be accepted because one could not only talk about financial management of Parliament when the Bill also referred to constitutional institutions. He appealed for members to apply their minds to the suggestion before making a decision.
The Chairperson said that Parliament was working on a process of oversight and accountability. There was a model that was currently serving before the Oversight and Accountability Task Team that was also looking at chapter nine institutions. He agreed that the issue should be left to a separate process.
Mr Barberton said that in terms of the Bill, the executive authority had the power to make regulations or issue instructions that were not inconsistent with the Bill. Regulations and instructions might prescribe that the prior approval of the executive authority should be obtained. Treasury had submitted that a provision should be included in the Bill to allow for approval by the executive authority of departures from regulations and condonation of non-compliance with regulations on good grounds.
The Committee asked the presenter to clarify the proposal.
Mr Barberton gave an example of a supply chain management policy which would essentially be an instruction to the Accounting officer to apply a policy that had certain objectives in mind. One might find that the proposals for a particular service did not fall directly in line with the policy. In those instances one would like to give the Executive authority the power to approve a decision that was still in the best interests of Parliament but not directly in line with the supply chain management policy.
Mr Moloto found the proposal puzzling. He was of the view that all regulations that would be made would be in the interests of Parliament. He did not understand the need for a condonation of anything.
Mr Bhamjee said that the proposal was extremely dangerous. Regulations were subordinate legislation and could not supersede the enabling legislation. There were instances where Committees had rejected clauses only for those clauses to resurface by way of Regulations. This was extremely dangerous and meant that legislative ethos would be brought into question.
Mr Davidson said the clause did not make sense. In terms of the provision the Executive authority could make regulations. Regulations and instructions could prescribe that prior approval of the Executive authority should be obtained. It seemed like the Executive authority would be talking to itself. The Speaker and the Chairperson constituted the Executive authority. One would assume that the Authority would only consult itself when making the Regulations. Who else was it supposed to consult?
Ms Fubbs struggled to understand the clause. Regulations and instructions would not be inconsistent with the Bill. Why would one need a departure if the Regulations and instructions would not be inconsistent with the Bill?
Mr Moloto said that all regulations would be approved by Parliament and the deviations would also be approved by Parliament. He did not understand what was going on.
The Chairperson said that the view of the Committee was that the suggestion should not be allowed.
Mr Benjamin said that the Committee was making a mountain out of a molehill. There was no question that this did not enable any action that was contrary to the Bill or any other Act. All it did was to allow for a situation in which, for instance, there was a situation wherein political parties had to apply for funding for their constituency offices by 15 May and a party submitted its application on the 16th of May. There might be very good grounds as to why the application was not submitted on time. The Executive authority should be able to condone such a deviation if there were good grounds for doing so. The Executive authority would be forced to reject the late application should this provision be rejected.
The Chairperson asked if there was an equivalent provision in legislation like the PFMA.
Mr Benjamin replied that Treasury submission provided that there was an equivalent provision in the PFMA.
Mr Bhamjee said that the example given would go down as an irregular expenditure that could be regularised. One could argue that there was an emergency and the Executive authority had to use his discretion. One should not create precedence and actually provide for it in the Bill. It was normally assumed that Regulations were made in good faith but it was often the case to find provisions that went against the grain of the enabling legislation. It was important to ensure that check and balances were put in place. Regulations were legislation and could be used to do a whole range of things. The Committee should carefully apply its mind to the issue and should be convinced that this was a proper route to take.
The Committee flagged the proposal for further discussion.
Mr Barberton said that Treasury had submitted that a similar provision as contained in section 40(4)(a) of the PFMA should also be included in the Bill. This proposal was covered under clause 27 of the Bill.
Mr B Mnguni (ANC) that the provision in the PFMA was more prescriptive than clause 27 of the Bill.
Mr Barberton said that the Bill was informed by the status of Parliament as an independent body. It was not prescriptive in the sense that Parliament should submit cash flow projections by certain dates.
Mr Barberton said that another proposal was that paragraph (b) of the definition of overspending should allow for virement as authorised by clause 19 of the Bill. This was consistent with the definition of overspending in the PFMA where virement was not regarded as overspending. He recommended that the proposal should be included in the Bill. There was also a concern around the definition of unauthorised expenditure. The current definition as contained in the Bill sought to make any expenditure of any of Parliament's funds that was not in accordance with the objectives for which they were approved unauthorised expenditure. Treasury was of the view that the word "authorise" only applied to funds that were appropriated from the National Revenue Fund. It did not cover the expenditure of funds that were approved for expenditure by Parliament and should not apply to Parliament's own funds or donor funds received and spent by Parliament.
He was of the view that the intention of extending the definition to cover all expenditure by Parliament was that in the budget process Parliament approved the funds for particular purposes. This involved two processes. The first was the appropriation of funds from the National Revenue Fund and the second was the approval of funds that were already in Parliament's bank account. The way of overcoming this was to use a word different to 'unauthorised' or to use a composite term such as "unauthorised and unapproved expenditure".
The Chairperson said that Treasury had submitted that donor Funding should be dealt with in accordance with the Reconstruction and Development Programme Fund Act, 1998 (Act no. 79 of 1998).
Mr Barberton replied that the drafting team had not yet looked at the Reconstruction and Development Programme Fund Act (RDP Fund Act) and therefore could not comment on the submission.
Mr Bhamjee said that the Bill was trying to sanction the use of moneys that went into the banks of Parliament. There was a need to understand the contents of the Strategic Plan. The Strategic Plan should give an indication of how much money would come in terms of the appropriation and donor funding. A lot would depend on the proposed Joint Committee playing its oversight role when the Strategic Plan was presented to ensure that all allocations went to the right projects.
Ms Fubbs said that she did not know the RDP Fund Act that well. She was aware of legislatures having to "return" excess or surplus funds that had not been spent to the Revenue Account. Donor funds went into the legislatures' accounts because they were not received from the Revenue Account. She wondered how the interest on donor funds was separated from interest on money from the Revenue Account.
Mr Mnguni said that usually there were conditions attached to donor funds. There would be no case of unauthorised expenditure should Parliament comply with the conditions. It would get in touch with and account to the donors should it deviate from the conditions.
Mr Barberton referred the Committee to the definition of unauthorised expenditure as contained in the Bill. The intention was to define instance where officials had spent money in a manner that was not authorised or in line with donor agreements. One was trying to identify instances wherein officials who be considered to have acted out of line. The issue raised by Treasury was around the word 'unauthorised'. The feeling was that extending the definition of unauthorised to cover approved and donor funding was inappropriate. The Committee should look for an alternative word to unauthorised or simply define the word for the purposes of this Bill.
Mr Moloto agreed with Mr Barberton on the point that the Committee could simply provide for a definition of 'unauthorised' for the purposes of the Bill. The intention was good and people should account for all moneys received.
Mr Davidson wondered if the Committee agreed with Treasury’s comment about the RDP Fund Act. Should the Act have any interaction with donor funds? He was of the view that it should not. The most appropriate way of dealing with the matter was to expand the definition of 'unauthorised expenditure'.
Ms P Mokoto (ANC) said that the issue was unauthorised expenditure and not donor funding. The definition of unauthorised expenditure was very clear and the Committee was only required to relate it to donor funds. Parliament should account for all funds it had received. The Committee should look at the RDP Fund Act to get more clarity on the proposal by Treasury.
Mr Barberton said that perhaps the Committee was dealing with a vacuum that existed within government. Government did not actually account to Parliament on how it had spent donor funds. The funds were listed in the Annual Reports but there was no actual accountability regarding them. The definition of unauthorised expenditure would push the boundaries of accountability. This was good and should possibly be looked at when amending the PPFMA. The definition of unauthorised expenditure as contained in the PFMA should be reviewed.
He said that the next issue was the proposal that the words "in material respects" should be deleted in the definition of standards for generally recognised accounting practice. The main issue was compliance with accounting standards.
Mr Barberton said that Treasury had submitted that clause 17 of the Bill should be deleted. The current provision in section 29 of the PFMA was adequate and applicable and should not be repeated in the Bill. He agreed with the proposal.
In relation to clause 19 of the Bill, Treasury had argued that the current provision in the PFMA was impractical. Savings should be used subject to approval by the executive authority. Clause 19 was intended to govern the movement of funds between one sub-programme to another. The management of Parliament would be allowed to make certain adjustments in cases where there was underspending in one programme and overspending in another. There was a restriction as to the extent to which the adjustments could be made. Funds appropriated for particular purposes could not be shifted. Treasury was indicating that provisions of this nature had been found to be impractical in the PFMA and had resulted in funds being returned to the National Revenue Fund even though they could have been used appropriately. Treasury had suggested that it should be possible to shift the kinds of funds mentioned in the clause but only with the express authority of the executive authority.
The Chairperson wondered if the clause was put in place in order to align the Bill with the PFMA. It is was the case then the Committee would have to carefully apply its mind to it especially given that the PFMA was in the process of being amended.
Mr Bhamjee said that the Strategic Plan contained plans for the future. It was on this basis that the National Treasury would support a Department's request or budget. There would be something wrong with planning should the Department ended up with a surplus. The Strategic Plan was introduced to ensure that there was accountability and that the Executive was not given too much discretion. He did not support the proposal.
Mr Moloto said that he would prefer deferring the matter to people who were responsible for the implementation of the PFMA.
Ms Fubbs said that it would be helpful to have some deliberations on the matter. The Bill would probably be amended over time. The PFMA would be amended but the Committee also wanted the process on the Bill to go forward. The PFMA was a financial management framework but the Committee could still prepare its own clause. She conceded that the Committee's provision might not be as robust as the amendment to the PFMA would be but at least the Committee would have taken account to some of the problems raised. The Committee could not wait for the PFMA amendments.
Mr Barberton said that the proposal was not that the executive authority should be given unfettered decision making powers over the use of the particular funds. It would still be bound by sub-clauses (1) and (2). The money could only be used to defray expenses in another main division of the Vote. The executive authority would still be allowed to transfer only 8% of the funds. Planning was not a precise science and allowing an 8% level of flexibility was still within the normal margins of management and did not show bad planning by any means. Circumstance that obtained when drawing the plans might differ to circumstances that would obtain when implementing them. He agreed with Treasury that some degree of flexibility was required. The proposal that the transfer should be made with the express approval of the executive authority meant that it was not simply the decision of the accounting officer.
Mr Bhamjee asked what the definition of the express authority of the executive authority was.
Mr Barberton replied this would, at the minimum, require written authority so that there would be a paper trail.
The Committee agreed that it would seek more clarity from Treasury before deciding on the matter.
Mr Barberton said that when clauses 20 and 21 where drafted, the drafting team was under the impression that Parliament operated under the same regime with government departments and that unspent moneys had to be returned to the National Revenue Fund. Treasury had indicated that this was not the case and that any payments from the Fund in relation to direct charges were made against actual expenditure. In other words in was a reverse process. Treasury proposed that clauses 20and 21 should be deleted. He disagreed with the proposal and was of the view that the framework should be revised. The provisions should be redrafted to ensure that the current situation regarding unspent appropriated funds was fixed in legislation. The provisions should require that Parliament should first approve the use of such unspent funds. The unspent funds would have to be redefined because they were no longer appropriated funds but paid into Parliament's bank accounts. They would then become part of Parliament's own resources.
Mr Bhamjee asked what would happen should Parliament have a surplus each year. Would the amount be allowed to simply increase?
Mr Moloto said that the Joint Committee would have to do its work.
Mr Davidson said Treasury would take the surplus into account in future appropriations to Parliament.
Mr Mnguni said that clause 16(b) provided that Parliament would have to approve the funds from time to time.
Mr Bhamjee said that one was looking at the autonomy of Parliament. What would happen in cases where Parliament was doing its work properly but still making savings? Should it be punished for being prudent and making savings? It would be unwise for Parliament not to take maximum amount of money from Treasury. There should be a provision to deal with how to account for surplus.
The Chairperson said that the normal process of the approval of rollovers should be followed. One could not have an undefined surplus. There would be a surplus because Parliament or a Department had not spent on a certain programme for reasons that would justify the failure to spend and the roll over.
Mr Davidson wondered if the clause was saying what the Chairperson had said. He agreed with the question raised by Mr Bhamjee. Could one allow the amount to increase beyond reasonable proportions?
Mr Barberton said that the current situation was untenable. Funds were appropriated, paid into Parliament's bank accounts and remained unspent at the end of the financial year. There was no process by which the administration of Parliament needed to get permission to spend those funds in the following year. Parliament approved rollovers in the case of all other government Departments or institutions but this was not the case in relation to its own administration because the arrangement was informal. The proposed clause 20 sought to formalise the current situation and to change the definition of those funds from appropriated funds to funds from own revenue so that Parliament would not have to appropriate but approve them when it wanted to use them.
On the issue of accumulating surpluses, the process by which the Speaker and the Minister agreed on what the budget of Parliament should take Parliament's own revenue into account. This would include money generated through selling various items and use of venues for other purposes. The surplus would simply be another source of own revenue that would also be taken into consideration. The likelihood of having a pool of money swimming around in Parliament's bank accounts was very unlikely. Parliament had needs that were not being met and national interests dictated that funds were used optimally.
Mr Mnguni agreed with the views expressed by Mr Barberton.
Mr Bhamjee asked if the clause would prevent the possibility of having a bottomless pit of surpluses. Would there be checks and balances to ensure that the surplus did not accumulate beyond reasonable proportions?
The Chairperson said that the presenter had indicated that surpluses would be taken into account when determining Parliament's budget for the next financial year.
Mr Moloto said that there was a need for a strong Committee that would decide on the budget of Parliament and hold it accountable. This is where the real checks and balances would be.
Mr Barberton said that Treasury was of the view that the word "indemnity" should be deleted from clause 26(1)(b). This word also appeared in the PFMA but Treasury had to issue Regulations in order to allow for exceptions for a similar provision in the Act because it was too restrictive. He anticipated that the provision contained in the PFMA would be revised during the process of amending the Act. The clause provided that one might not sign a document that had an indemnity in it. The point that was being made was that indemnities worked both ways: they could be to the benefit of Parliament.
Mr Davidson asked how the word staff was defined for the purposes of clause 26(1(a). Did this include Members of Parliament? It might well be that Parliament might wish to give housing allowances or approve a car allowance scheme for its staff.
The Chairperson said that Treasury had not made any submission on clause 26(1)(a). He appealed to members to focus only on the submissions made. Members would have an opportunity to raise questions on all clauses at a later stage.
Mr Barberton said that Treasury had also submitted that clause 26(3)(b) should be limited to operational lease agreements. In terms of the standards for generally recognised accounting practice finance leases was classified as a form of borrowing. The Committee agreed with the proposal.
Mr Barberton said that clause 36(3) was a controversial provision that was also contained in the PFMA. Treasury was of the view that the current provision in the PFMA did not achieve its objectives. The intention was that requiring the Executive authority to put something down in writing would serve as a break on the desire to spend money outside the parameters of the budget. Treasury had found that Accounting officers simply regarded this as a formality. Treasury was proposing that the Bill should contain a slightly more restrictive conditions in order to put in place more effective brakes on the desire to spend outside the parameters of the budget. It was proposed that one should define the kind of expenditure the Executive authority might incur with reference to something like "unforeseeable or unavoidable expenditure". One could also put a mechanism in place for reporting such expenditure to the oversight mechanism as soon as possible. The drafters were working on a new wording of the clause. In essence it would provide that the Executive authority might not recommend expenditure other than expenditure related to direct instructions from Parliament. The Executive authority would be responsible for tabling the written instructions in Parliament.
Mr Bhamjee said that this should not be a regular practice. He asked why there was no duty placed on the Chief Executive Officer to record such things so that the oversight Committee could clearly see what had happened.
Mr Barberton replied that in terms of the PFMA it was the Accounting officer who had to submit the written instructions to the National Treasury and the Auditor General (AG). This placed some pressure on the Accounting officer. He proposed that the duty should be moved to the Executive authority since they were the ones making the decisions. There would always be tensions between the Executive authority and the Accounting officer should the duty be placed of the Accounting officer. The Executive authority would say to the Accounting officer: "are you really going to submit this to Parliament? Are you going to place me in a bad light by submit this to Parliament"? Placing the duty on the Executive authority would mitigate the tensions.
Treasury had also argued that the report that assessed the performance of Parliament’s administration during the first half of the financial year and recommendations whether an adjustments budget might be necessary should be aligned with the process to finalise the adjustments budget. The question was how did the recommendations from the report feed into the adjustments budget. The submission was related to clause 16(2) and could be adequately be addressed in that clause.
Mr Barberton said that clause 52 required all financial interests of all parliamentary employees to be disclosed in the annual financial statements. Treasury had pointed out that this was probably an impractical arrangement and suggested that it should be restricted to the Accounting officer and senior managers. He supported the proposal.
Mr Moloto agreed with the proposal. Even institutions like the Financial Services Board reported on interests of senior managers and the Chief Executive Officer.
Mr Barberton said that Treasury was of the view that the notes to the annual financial statements should include particulars of all unauthorised expenditure and not only material expenditure. The question was whether the notes should give all particulars of the unauthorised expenditure or only material expenditure. There would be a need to define "material" more closely should the Committee decide to focus on material expenditure only. He agreed that the total amount of unauthorised expenditure should be disclosed.
Mr Bhamjee said that the Committee should be guided by the dictates of the Standing Committee on Public Accounts (SCOPA) and the AG.
Mr Benjamin said that the problem could be solved by prescribing a minimum amount in Regulations so that it could be adjusted easily. The term "material" was difficult to work with and there would always be questions as to what was material.
Mr Barberton said that there was a precedence for the use of the word material in the PFMA. He referred to section 55 of the Act. He disagreed that the word material should be deleted.
Mr Bhamjee asked what was the meaning of express authority in the context of the PFMA.
Mr Barberton replied that this would, at the minimum, require written authority so that there would be a paper trail.
He said that Treasury had also made a submission on the wording of clause 57(3). The issue was who was allowed to change financial statements. He agreed that nobody (including the AG) should be allowed to amend the financial statements after they had been audited. Treasury was also of the view that the Annual Report, which included the audited financial statements and the audit report, should be referred to both the Committee on Public Accounts and the Joint Committee. He agreed with this proposal. The current provisions of the Bill provided that only the financial statements and the audit report had to be submitted to SCOPA.
The Committee agreed with the submission.
Mr Barberton said that Treasury was of the view that the requirement that the executive authority should approve the regulations might be impractical. Draft regulations should be published for public comment in the National Government Gazette before their enactment. This submission struck at the heart of what the Committee would want the proposed Joint Committee to do. Did the Committee want the Committee to be responsible for approving the Regulations issued by the Executive authority or should there be an alternative mechanism in terms of which the Regulations would simply be published for comment in a prescribed document?
Mr Moloto said that Parliament had also set precedence in the form of a document called the L19. He felt that Regulations should be approved by Parliament. The Committee agreed with Mr Moloto.
Mr Barberton said that there was no indication of where the Regulations should be published. Publication of the Regulations was important because the Regulations also impacted upon people who supplied services to Parliament. They should be accessible to the general public.
The Chairperson said that the Regulations could also be published in the Announcements, Tablings and Committee Reports (ATC) in Parliament. He wondered if it was necessary to specifically provide that it should be tabled in the ATC because the name of the document could change at any time. The Regulations should be tabled in Parliament and the government gazette.
Mr Bhamjee said that the integrity of all Members of Parliament (MPs) would be brought into question should they not be informed in terms of the actual content of the Regulations. He hoped that all MPs would become familiar with the Bill and Regulations that would be made under it.
Mr Barberton said that there were also proposals in relation to clauses 65 and 66. The clauses dealt with criminal proceedings and misconduct. The application of these provisions should be extended to staff who had financial management responsibilities in terms of clause 9 of the Bill. This was a logical extension and a drafting error that had to be corrected.
He said that Treasury agreed with the norms and standards contained in Schedule one. However, they wanted to extend them to issues of form rather than substance. At the moment the norms and standards dealt with principles of good financial management. The suggestion by Treasury was that certain norms should be drawn up to ensure that the way in which the principles were given effect was specified. In other words they were suggesting that there should be an Accounting officer. The question was how detailed should be the norms and standards. There was no objection to increasing the level of detail but the problem was that the list given by Treasury was not comprehensive.
The Chairperson said that the Committee should apply its mind on the issue. The extent of the norms and standards should not have the unintended consequences of legislating for provincial legislatures.
Mr Mnguni said that the Committee had once decided to remove all issues that were related to provinces because of the impact such reference could have on the constitutionality of the Bill. He suggested that the Committee should stick to the original discussion of taking out reference to provincial legislatures.
Mr Moloto asked the presenter to refresh the Committee's mind of the decisions taken in relation to legislating for provinces.
Mr Barberton said that the decision was not to create a financial management framework for provinces or that not the entire Bill should be applicable to them. The Bill should rather specify financial norms and standards that provinces would be expected to follow and to keep the norms at a general level to ensure that there was no infringement of their independence. One should look at the existing norms prescribed in the Schedule and the suggestions put forward by Treasury in order to evaluate if they were overly prescriptive or of a general nature.
Mr Moloto was more inclined to agreeing with the views of Treasury but said the Committee should be careful when addressing the issue so that it did not infringe on the independence of provinces.
Mr Barberton suggested that the Committee should proceed to deal with support for political parties.
The Chairperson said that the Committee Clerk had just circulated a policy document on allowances to political parties. The Committee had not yet studied the document and still had to verify the official position of the document.
Mr Barberton said that the document had been signed off by the Speaker and Secretary to Parliament. He was of the view that it had been approved.
Mr Moloto felt that the Committee should address the matter at a later stage. The effective date of the document was not even specified. Did political parties know about it and had they agreed to it? The Chairperson appealed to members to allow the presenter to proceed with the submission.
Mr Barberton said that there were different types of party funding. There was support for leaders of the opposition parties in Parliament and support for constituency offices. The proposal was that the Bill should not restrict Parliament in the kind of support it could give to political parties. The most important thing was to regulate how parties were supported. The proposed clause (a replacement of clauses 32 and 33) sought to outline principles and process that were essential to ensure that all funds given to political parties were regulated in a proper manner.
Mr Moloto said that the proposed clause had omitted the role of the AG. The initial draft had provided that the AG should audit the books of the political parties that had received funds from Parliament. The AG should report to Parliament on the audit outcomes and recover the costs of the audit from Parliament and not the parties audited.
The Chairperson said that political parties should also be given an opportunity to comment on this matter.
Mr Moloto said that the AG should audit the funds in relation to the policy on party allowances. The policy should be developed in consultation with the political parties.
The Chairperson said that the Committee should investigate if the document had the full support of all parties. He said that the Committee would deal with submissions from the Secretary to Parliament tomorrow.
The meeting was adjourned.
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