Finance Bill [B5-2007]: briefing & adoption; Amended Regulations on Strategic Plans for Public Finance Management Act

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Finance Standing Committee

13 March 2007
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Meeting report

FINANCE PORTFOLIO COMMITTEE
14 March 2007

FINANCE BILL: BRIEFING & ADOPTION; AMENDED REGULATIONS ON STRATEGIC PLANS FOR PUBLIC FINANCE MANAGEMENT ACT

Chairperson: Mr N Nene (ANC)

Documents handed out:
Treasury Presentation on Unauthorised Expenditure
Finance Bill [B5- 2007]
Treasury Presentation on Treasury Regulations
Amendments to Treasury Regulations

SUMMARY
The Committee was briefed on and adopted the Finance Bill which dealt with the unauthorised expenditure of departments in previous years. The Public Finance Management Act (PFMA) defines unauthorised expenditure as overspending of a vote or expenditure that was not made in accordance with the purpose of budget vote. Unauthorised expenditure had to be authorised by the relevant legislature before it could become a charge against the National Revenue Fund either by providing additional funds or as a charge against funds allocated for the subsequent financial years. The Committee objected to the mere rubber stamping expected of them in accepting the Finance Bill. Treasury assured them that the Standing Committee on Public Accounts had followed a thorough process in reaching their recommendations but promised to provide more detail in future.

The Standing Committee on Public Accounts had recommended that an amount of R313, 6 million was unauthorised due to deviations from tender procedures in terms of the Exchequer Act. These funds were previously surrendered and would have no additional expenditure implications. There was unauthorised expenditure of R159, 5 million due to overspending in terms of the PFMA. This amount would be an additional charge against the Revenue Fund. The next Finance Bill would deal with a few outstanding cases from 1998/99 to 2003/04 and new cases that emanated from 2004/05 and 2005/06 financial years. Unauthorised expenditure for 2006/07 would only be considered after the financial statements had been audited.

Section 76 of the PFMA allows for National Treasury to issue regulations to facilitate effective application of the Act. Treasury Regulations on Strategic Planning were initially issued during 2002 and published again during 2005. The revised wording of the these regulations would provide for flexibility and for specific circumstances within departments. The regulations became effective the moment they were published in the government gazette.

MINUTES
Briefing by Treasury on the Finance Bill

Mr Nols du Plessis (Chief Director: National Treasury), Ms Lesley Fisher (Director: Budget Office) and Ms A Viljoen (Deputy Director: Budget Office) attended the meeting. Ms Fisher made the presentation. (See document attached). She said that the Public Finance Management Act (PFMA) defined unauthorised expenditure as overspending of a vote or a main division within a vote or an expenditure that was not made in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the purpose of the main division. Unauthorised expenditure should be authorised by the relevant legislature before it could become a charge against the National Revenue Fund either by providing additional funds or as a charge against funds allocated for the subsequent financial years. She gave a breakdown of the unauthorised expenditure per department. The Standing Committee on Public Accounts (SCOPA) had compiled a detailed report on the unauthorised expenditure.

Mr Y Bhamjee (ANC) said that the Committee should know what it was approving before approving it. It was not helpful for the presenter to tell the Committee that SCOPA had compiled a report.

The Chairperson said that the details in relation to the amounts were contained in the Finance Bill. The reports of SCOPA were tabled in Parliament. He imagined that Treasury was of the view that members had access to the reports once tabled in Parliament.

Mr Bhamjee said that the Bill was not self-explanatory and this meant that members had to consult other documents in order to understand it.

The Chairperson said that there was a problem with process because the House had already adopted the report. SCOPA had held intense hearings on the expenditure. However, the Bill was a Finance Bill so therefore had to come to this Committee for adoption. The SCOPA reports were available and the Committee could go through them if it wanted to, even though SCOPA had already done the work.

Mr I van Dyk (DA) sympathised with Mr Bhamjee. The Committee had a whole range of figures before it. It should reconcile itself to the fact that for finance bills, it was nothing more than a "rubber stamp" committee. It should not bother to even have hearings on such bills if it was a rubber stamp committee. The Committee might want to interrogate the figures instead of simply rubber-stamping everything. He referred to unauthorised spending of R36 million by Statistics South Africa. One might want to know how the amount came to be an unauthorised expenditure. SCOPA had taken its view on this but this Committee could come to a different view. He was happy to let it go this time but people should be made aware that the Committee would not accept a similar process in future. The Committee was not a rubber- stamping committee and members wanted to know details about the expenditure. None of the Committee had access to the SCOPA reports.

The Chairperson accepted the views expressed by Mr Davidson but added that members of the Committee were members of the very same House that adopted the SCOPA reports.

Mr L Johnson (ANC) said that at the heart of the problem was communication and coordination. The Committee was not given any background to the issues under discussion.

Mr A Moloto (ANC) proposed that the Committee should proceed and adopt the Bill. A wrong precedent had been set and in future the Committee should be given a full report to consider.

Mr B Mnguni (ANC) said that the Committee could not reverse the decision taken by SCOPA once the House had passed the report. The solution would be for the Committee to consider issues with SCOPA before they were referred to the House for adoption.

The Chairperson sensed that there was general consensus that the Committee would rubber-stamp the Bill.

Ms Fisher said that Treasury would in future make the reports and recommendations available to the Committee. Treasury had assumed that the documents were freely available and had just proceeded to draft the Bill. The SCOPA reports were detailed and in most instances departments were told to show plans of actions to deal with unauthorised expenditure. SCOPA took a strong view that it was not simply going to authorise unauthorised expenditure. There were a number of instances where it did not approve unauthorised expenditure. Departments were requested to conduct further investigation in relation to the unapproved unauthorised expenditure and provide detailed information.

Mr Bhamjee said that SCOPA processes were very thorough.

Ms Fisher continued with the presentation. She said that SCOPA had recommended that an amount of R313, 6 million was unauthorised due to deviations from tender procedures in terms of Exchequer Act. These funds were previously surrendered and would have no additional expenditure implications. There was unauthorised expenditure of R159, 5 million due to overspending in terms of PFMA. This amount would be an additional charge against the Revenue Fund. She proceeded to give a breakdown of unauthorised expenditure per cluster and identifying the Departments concerned. SCOPA had compiled a detailed report on the expenditure and the schedules to the Bill gave a breakdown of the amounts per Department. The next Finance Bill would deal with few outstanding cases from 1998/99 to 2003/04 and new cases that emanated from 2004/05 and 2005/06 financial years. Unauthorised expenditure for 2006/07 would only be considered after the financial statements had been audited.

Discussion
Mr Davidson said that overspending was listed as a charge against the National Revenue Fund. He understood the presenter to have said that the R313 million unauthorised expenditure was put in a suspense account. He could not understand how this could have happened. His view was that unauthorised expenditure meant that there had been an unauthorised use of money. The expenditure had taken place and therefore there was no money to put into the suspense account.

Mr du Plessis replied that the PFMA provided that an unauthorised expenditure could not become a charge against the Revenue Fund. Departments were forced to repay the unauthorised expenditure usually from their savings because they did not spend their total allocations. In some instances the unauthorised expenditure could result in an overdraft in the paymaster general (PMG) account. The money would then be paid back to the Department once approved by Parliament.

Mr Bhamjee asked if there were amounts that would be recovered from officials.

Mr Fisher replied that there were small amounts recovered from officials. No monies had been recovered from officials in cases where there was value for money from the expenditure, no undue benefit to anyone and there was no corruption involved in the spending.

The Chairperson read the Committee report on the Bill and members agreed to the Bill.

Briefing on Treasury Regulations: Strategic Planning
Mr Nols du Plessis made the presentation (see document attached). Section 76 of the PFMA allows for National Treasury to issue regulations to facilitate effective application of the Act. Treasury Regulations regarding strategic planning were initially issued during 2002 and published again during 2005.

The revised wording of the regulations would provide for flexibility and for specific circumstances within the various departments. The revised regulations included amongst other the following requirements:
- That the accounting officer should prepare a strategic plan that was consistent with the period covered by the Medium Term Expenditure Framework (at least 3 years).
- To facilitate the annual discussion of individual votes the accounting officer should provide Parliament with the institution’s medium term strategic plan.
- Strategic plans of departments should be available to Parliament at least 10 days prior to discussion of vote.

Discussion
Mr Bhamjee said that the regulations provided that the accounting officer of an institution should prepare a strategic plan that was consistent with the period covered by the MTEF for approval by the relevant executive authority. The executive authority had the duty to table the strategic plan to Parliament once it had been approved. The regulations seemed to be saying that the accounting officer had the duty to table the plan to Parliament. The accounting officer was not accountable to Parliament but to the relevant executive authority. It was important to get the wording of the regulations correct because regulations were subordinate legislation and could not supersede the enabling legislation.

The Chairperson said that there was some ambiguity in relation to who should table the strategic plan to Parliament.

Mr du Plessis agreed that the PFMA was ambiguous and one had to resort to wide provisions of the Act. The intention was to provide for flexibility and only the Minster could table a new strategic plan. The accounting officer should be able to table an update to the plan. This issue should be clearly addressed in the PFMA.

Mr Davidson said that an analysis of strategic plans had indicated that certain plans in terms of programmes had been dropped or that there had been changes in figures. The question was what were the reasons for the drop or changes. The Committee should be advised of the changes and informed of the reasons for the changes otherwise the strategic plan became an academic document.

Mr Bhamjee asked when the regulations would come into effect and if it would create major problems if Treasury could address the issue he had raised before adopting the regulations.

Mr du Plessis replied that the regulations became effective the moment they were published in the government gazette. The Minister of Finance could determine regulations that should be published for comments and become effective of the date in which they were published in the government gazette. Mr Bhamjee's concerns could be accommodated during the revision of the regulations.

Mr Bhamjee said that the government gazette should indicate the date in which the regulations would come into effect. Mr du Plessis agreed.

Mr Johnson said that the Municipal Financial Management Act (MFMA) had guidelines in a range of issues. There were talks about incorporating those into the PFMA. He asked for comments on this.

Mr du Plessis replied that there were various reasons for amending the PFMA. Some of the amendments were technical and another reason was to incorporate some of the provisions of the MFMA. The PFMA was enacted in 1999 and the MFMA in 2003. Treasury already had a lot of experience when enacting the MFMA. There would be a separate chapter on supply chain management and this would necessitate amendments to Treasury regulations. The PFMA was the enabling legislation and regulations had to be issued in accordance with it. There should be amendments to the PFMA before there could be complete revisions of the Treasury regulations.

The Chairperson asked for clarity on section 78 of the PFMA in relation to the coming into force of the regulations. The presenter had indicated that the regulations were already in force.

Mr du Plessis replied that the regulations were published for public comments in December 2006 and comments were received until mid January. Amendments were made to the regulations before final publication on 20 February 2007.

The Chairperson said that December and January was a recess period for Parliament and therefore the Committee did not have time to comment on the regulations. The Committee had raised the issue of publication during the recess period a number of times and it was strange that it had happened again.

The meeting was adjourned.
 

 

 

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