Financial Management of Parliament Bill

NCOP Finance

21 October 2008
Chairperson: Mr T Ralane (ANC Free State)
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Meeting Summary

The Parliamentary Legal Advisor presented the Financial Management of Parliament Bill to the Committee, and noted that this could be seen as a combination of a Section 75 and 76 Bill, and that the provinces were to ensure that they passed similar legislation concerning funding of political parties and management. The provincial mandates in the whole Bill made it applicable to the provinces, and accordingly it was to be regarded as a Section 76 Bill. He noted that the Preamble set out that Parliament was to be governed in accordance with the democratic values and principles in the Constitution, and to maintain a high standard of professional ethics in the financial management of Parliament, to promote efficient economic and effective use of resources, and to ensure the transparent, accountable and sound management of the revenue, expenditure and assets and liabilities of Parliament. The separation of powers was emphasised. The norms and standards required of money Bills in general were also required of this Bill, but with the addition that Parliament must oversee the norms and standards in State departments, including in the provinces. There was provision for a Joint Committee to oversee the financial management of Parliament, but this could summon the Accounting Officer, who was the Secretary of Parliament, to appear before it, which was analogous to the types of powers exercised at the moment by the Standing Committee on Public Accounts.  The Accounting Officer, in terms of Clause 7, was also to perform a performance management assessment, and could take disciplinary measures against any official deemed not to be performing satisfactorily. There was provision for an Acting Accounting Officer. An Executive Authority would oversee Parliament, and the Joint Committee would approve the budget. In respect of the queries around the separation of powers, Senior Counsel believed that there would be no conflict if Parliament acted as a treasury itself.

The Bill emphasised the requirements of the PFMA, and provided checks and balances to ensure that there was adherence to fiscal policy. Any unauthorized expenditure would have to be investigated and would eventually be a charge against Parliament’s own funds. Unspent funding would not be required to be returned to National Treasury, but there were provisions around the approval for their use in subsequent years, as well as for auditing and an annual report. There was a chapter on cash management and banking accounts. The Executive Authority, after consultation with the Minister of Finance, must determine a process for requisitioning appropriated funds that provided for sound cash-flow management. Chapter 5 set out the provisions for financial management, and responsibility rested with the Accounting Officer. Clause 34 provided for support for Members and political parties, and the requirements, which emphasised transparency. Transfer of funds was required to be fully supported by a paper trail. Expenditure must be in accordance with the budget and revenue was carefully monitored.  This would require consultation with the Speaker, the Chairperson of the NCOP, and interested parties in accordance with regulations to be agreed upon and published, in the interests of transparency. The provisions around supply chain management were aimed at closing any gaps and vulnerable points, and no Member of Parliament was permitted to be a member of any tender Board evaluating or approving any matters for Parliament. There was provision made in Chapter 7 for Audit Committees, and an internal Audit Unit, which was to be independent. There were detailed provisions around reporting. Regulations were to be published and approved in order to meet the constitutional imperative of transparency.

Members noted that they still had some doubts as to various provisions in the Bill. They believed that they would still need input from the Financial and Fiscal Commission and discussions with other the Auditor General and National Treasury, and there would be a need for public hearings. Particular areas of concern related to whether there was sufficient and effective separation of powers, the fact that detailed norms and standards had not been spelt out, including those for performance management, whether some of the functions should not have been assigned to SCOPA, the fact that there was only one Accounting Officer, who was the Secretary of Parliament, the vague wording of certain clauses, and potential challenges relating to the Provincial Legislatures, the role of the National Treasury and the potential for federalist tendencies to creep in. The difference in the applicability of Schedules 5 and 2 was queried. Issues of unspent funds and the rollover of unspent funds were also of concern. The Legal Advisors stressed that although this Bill could be viewed as having the potential for political problems, only one budget must be administered and controlled, and the Joint Committee would be analogous to an enlarged SCOPA. It was decided that time would be given for Members to study the Bill and the written submissions by the Auditor General, and that an opinion paper was due to be presented to the Speakers’ Forum, and that the Bill and probably also the provincial Bills should be the subject of workshops.

Meeting report

Financial Management of Parliament Bill (the Bill): Parliamentary Legal Adviser’s briefing
The Chairperson noted that Adv Frank Jenkins, Parliamentary Legal Adviser, had worked for a long time upon the Financial Management of Parliament Bill (the Bill) that was now before the Committee and one purpose of the briefing was to ensure that the provinces passed similar, but separate, legislation concerning the funding of the political parties. While this Bill was more inclusive the problem was how to deal with the issues in all provinces. He also thanked the other legal advisers and research staff, who provided invaluable assistance.

Mr D Botha (ANC Limpopo) asked whether the Bill really affected the provinces, as he viewed it as a Bill affecting parliament in Cape Town. He was of the opinion that the provinces would make their own Bills, as he would find it difficult to brief provinces if they were neither involved nor affected.

The Chairperson replied that the provincial legislatures were included in the term “Parliament”, which was in the title of the Bill. The issue was around the norms and standards to be adopted. This Bill did indeed affect the Provinces, and at the end of the day the norms and standards of one province should not differ from another. The Bill impacted upon the
legislation governing the funding of political parties, and on budgeting, and as such impacted upon the Provinces. There had been some issues around the definitions of Accounting Officer and Executive Authority. He regarded this Bill as somewhat problematic, since it combined elements of Section 76(1) and also Section 75 of the Constitution, and so it might require amendments before it was assented to. Section 76 of the Constitution required that this Bill be taken back to the provinces for negotiation, but the question was how this was to be done, and how the NCOP was to be regarded, whether separately or integrated with other participants. He suggested that the Committee proceed to hear the briefing on the Bill and thereafter engage with Adv Jenkins.

Mr S Botha then pointed out that the Secretary of Parliament was the Accounting Officer. Although the NCOP had a Secretary such functionary was not the Accounting Officer. The question remained, therefore, whether there was one budget or two.

Adv Jenkins then said that he had prepared a power point presentation but in view of developments he intended to present a summary of it. In addition, he needed to deal with the submissions by the Auditor General. He noted that he intended to illustrate or clarify certain points regarding Public Finance Management Act (PMFA) management, and whether there was separation of issues of National and Provincial Governments as separate issues. In terms of the National Treasury Control, this might be regarded as a Section 75 Bill, but with elements of Section 76, and in his opinion this was not provided for explicitly in the Constitution. After amendment, it would fall under Section 76(4), if Chapter 13, relating to General Finance matters, was applicable, for it related to powers from any sphere of Government. The fact was that this was now one Bill, which touched upon the provinces, and must be handled under Section 76. A provincial mandate was required.

He submitted that the main question was whether the provinces acted as stipulated in Section 76. This Bill contained reference to the provinces, with Clause 3 of the Bill providing that the Provinces were to manage their monies in terms of the provisions of Schedule 1. Thus the provincial mandates in the whole Bill, read as one, made it applicable to the provinces, and accordingly Section 76 of the Constitution.

Adv Jenkins drew the attention of the members to the Preamble, and the requirement that Parliament was to be governed in accordance with the democratic values and principles in the Constitution. This further made mention of the need to maintain a high standard of professional ethics in the financial management of Parliament, to promote the efficient economic and effective use of resources allocated to Parliament; and to ensure the transparent, accountable and sound management of the revenue, expenditure and assets and liabilities of Parliament. The Bill was to be read in the light of the provisions of the PFMA but it should also be noted that in the Objects of the Bill the separation of powers was emphasised. He also pointed out that in terms of the PFMA the Minister of Finance was in charge of any monies, and that the norms and standards required of money Bills were also required by this Bill. However, there was the additional requirement the Parliament oversee all norms and standards in any Department of State, inclusive of provincial legislatures.

Chapter 2 provided for the mechanisms, and in this regard there was provision for a Joint Committee to oversee the financial management of Parliament. This immediately impinged upon the doctrine of the separation of powers. Parliament was not wholly independent, for in terms of Clause 4(3) the joint committee may summon the Accounting Officer (the Secretary of Parliament) and any other official of Parliament to appear before it. This was analogous to SCOPA, and the question was why such powers were not delegated to SCOPA. This was deliberately not done because of a need to balance the structures.

Clause 7 related to General financial management, and he pointed out that subclause (e) required that the Accounting Officer was also to perform a performance management assessment, while subclause (h) said that he or she could take disciplinary measures against any official deemed not to be performing satisfactorily. This was the requirement of an audit report.

Clause 9 provided for an acting Accounting Officer. This appointment was not automatic but was required to be designated in writing by the Executive Authority.

Clause 10 dealt with delegation of powers and duties by the Accounting Officer. This must be achieved in terms of policy and it must never be overlooked that there was a fiduciary aspect and responsibility attached to the delegation of these powers, as emphasised in terms of Clause 12(1)(c), which set out that such officials were to try to prevent any prejudice to the financial interests and good reputation of Parliament.

The Planning and Budgetary requirements were set out in Chapter 3. The strategic plan for Parliament must cover the following five years or another period determined by Parliament, and must include performance measures and indicators for assessing the administration's performance in implementing the strategic plan, as also an annual budget for multi-years, in accordance with the principles of the PMFA.

Adv Jenkins noted that this gave rise to an Executive Authority overseeing Parliament, which reported to a Joint Committee of Parliament to approve the Budget, which was countenanced by the Appropriations Committee.

The doctrine of the separation of powers was a major issue. The opinion of Senior Counsel had been obtained, which was to the effect that Parliament was both subject to Treasury control, yet also in control of the Provincial Legislatures and Parliament itself, and that there would be no problem if Parliament acted as a treasury itself. This required harmony between the various structures, and the control of Parliament was to be the function of Parliament.

Clause 17(2)(a) emphasised the requirements of the PMFA, and thus control must rest ultimately with Parliament, failing which there was no real and effective separation of powers. It was necessary to keep in mind the objects of consultation required in terms of Section 76 and the National Government’s policy to keep everybody in line with fiscal policy. This was an indication of the checks and balances required by the Constitution.

Clause 20 provided for the instances where there was unauthorised expenditure. This must be read together with the provisions of the PFMA. Any unauthorised expenditure must be approved eventually, failing which it would be a charge against Parliament's own funds, or recovered from the persons responsible.

Clause 22 made provision for virement between appropriations.

Clause 23 provided for treatment of unspent funds, and this was not in line with the provisions of the PMFA, for Parliament was not required to return to National Treasury any money appropriated or approved and not spent. However, such funds must be regarded as emanating from Parliament's own revenue sources, and approval for their use in subsequent years must be in accordance with the provisions of Section18 (1)(b). The PFMA required the auditing of these funds and an annual report. This was regarded as a contradiction.

Chapter 4 dealt with Cash Management. This was to be by the Executive Authority and in accordance with Section 65 and the Regulations envisaged in terms of this Act. There must be an appropriate policy regarding effective banking and cash management and the investing of money not immediately required. The Accounting Officer was responsible for establishing systems and procedures for the effective implementation of any policy prescribed.

Clause 25 governed the opening of bank accounts, which could not be in foreign countries, and must be with an institution registered in terms of the Banks Act. There may be other bank accounts as necessary for the effective and efficient management of Parliament's funds. Sub clause (3) provided that any bank account opened in terms of this section did not form part of the Central Revenue Fund.

Clause 29 provided that the Executive Authority must, after consultation with the Minister of Finance, determine a process for requisitioning appropriated funds that provided for sound cash-flow management. This again might be construed as a diminution of the effective doctrine of the separation of powers.

Chapter 5 related to Financial Management. The Accounting Officer was responsible for managing Parliament's assets, safeguarding and maintaining assets and liabilities, maintaining an accounting and information system that accounted properly for assets and liabilities, with the valuation to be done in accordance with generally recognised accounting practices. There must be an internal system of control over such assets and liabilities, inclusive of a register. This Chapter also provided for revenue and debtor management and said that debts may only be written off in accordance with Section 65. Interest was to be charged on any outstanding debts owing to Parliament.

Clause 34 provided for support for Members and political parties. This would require consultation with the Speaker, the Chairperson of the NCOP, and interested parties in accordance with regulations to be agreed upon and published, in the interests of transparency.

Clause 35 provided regulations for the transfer of funds so that a paper trail was established, and could be followed easily in the interests of transparency.

Clause 36 provided that expenditure was to be in accordance with the Budget as agreed upon, and revenue was carefully monitored.

Clause 38 made provision for action in the event of shortfalls and overspending, and compliance with any remedial measures imposed by the Executive Authority.

Chapter 6 dealt with Supply Chain management. Adv Jenkins said that this was regarded as a vulnerable point. Every effort was therefore made to circumvent any vulnerability, in accordance with the regulations to be established and published in terms of Clause 65. Any policy arrived at was to be in line with the provisions of Schedule 3. Where tenders were not recommended, this decision must be notified to the Auditor-General and the Executive in writing.

To a degree the difficulties that were originally foreseen with this clause had been ameliorated. The State was a major employer. The original wording would have excluded any State employee from participating in tendering, which was seen as unduly onerous and discriminatory. Therefore, regulations were now to deal with it, to be updated in accordance with the PFMA. In terms of Clause 44 no member of Parliament may be a member of a tender board evaluating or approving tenders, quotations, contracts or other bids for Parliament.

Chapter 7 governed Audit Committees. These were to be independent and consist of at least three persons with the minimum experience and knowledge. No more than half of the members of the Audit Committee were to be employed by Parliament, the State or Members of Parliament, a provincial legislature or a municipal council, and must have no personal or financial interest in any matter related to Parliament. The Executive Authority must appoint one of the members as Chairperson of the Committee. The remuneration was to be determined in accordance with a tariff agreed upon between the South African Institute of Chartered Accountants and the Auditor General and tariffs determined by National Treasury. Further, in terms of Clause 50 an Internal Audit unit was to be established and prepare operating procedures, a three year risk based audit plan, and an internal audit programme for each year, setting out the proposed scope of each audit. Quarterly reports must be made to the Accounting Officer on the performance as against the annual audit plan of the Audit Committee. The Unit must be independent. It would have access to the financial records and other relevant information of Parliament.

Chapter 8 provided for in-year reporting on a monthly basis, for quarterly performance reports and mid year budget and performance assessments. The Executive Authority must table these reports within five working days of receiving them. These activities were to be viewed in the light of the provisions of the PFMA, and action was provided for should the officials be responsible for late reports.

Chapter 9 provided for regulations, which were to be published and approved in order to meet the constitutional imperative of transparency.

Chapter 10 provided for the consequences of misconduct, and was applicable to the Accounting Officer and officials.

Chapter 11 provided that anything done or exercised in good faith would not accrue consequences.

Clause 72 covered the repeal of prior legislation, save for elements of the Exchequer Act which were to be operative against this Bill and its provisions. This provided areas for further comment by the Portfolio Committee.

Discussion
The Chairperson stated that public hearings were to be held some time and the Financial and Fiscal Commission (FFC) was also to comment on this Bill. However, he added that his own concern related to whether there was in fact sufficient and effective separation of powers. He pondered what the response would be if the judiciary, for instance, were to express a wish for its own financial management, especially if this Bill was applied mechanistically and not dynamically.

Mr Botha expressed a concern about the norms and standards required, and asked whether these should not be spelled out.

Mr Botha also referred to the Joint Committee with the power to call officials before it, and expressed the reservation that this was akin to the functions of the Standing Committee on Public Accounts (SCOPA).  He wondered why then SCOPA did not have the powers.

Mr Botha asked, with regard to the provisions of Clause 34 and the question around the Provinces, he asked whether a joint committee at provincial level was also now required. He further asked for elucidation on what exactly constituted a joint committee, and whether this was constituted of the National Assembly and the National Councils of Provinces. He asked whether there should be an Accounting Officer of one or two Houses, since it appeared that the Accounting Officer of the National Assembly was the Secretary of Parliament but the Chairperson of the National Council of Provinces was not an Accounting Officer, and if there was only one Accounting Officer, whether he or she would control two budgets. If so, then the Chairperson of the NCOP was not to be held accountable. He saw the provision relating to the composition of the Audit Committee as problematic and said that the Bill did not spell out clearly who would be the Chairperson of this Committee. Clause 47 provided only for a minimum of three members, but not for the appointment of a Chairperson. Additionally he found Clause 46 to be vague and impossible to make workable.

Mr M Robertsen (ANC, Eastern Cape) stated that he felt that this was a very vague Bill. He pointed out that there was reference to a Joint Committee and he too wondered why the oversight accorded to this Joint Committee was not left with SCOPA, which already has acceptable procedures and practices.

Another Member foresaw difficulties with the principle of accountability for Parliament, whilst Parliament was required to comply with the existing norms as set out in the PFMA. He also foresaw problems with the exercise of the oversight function by the Executive Authority but without proceeding to the National Assembly. He thought that there would be potential problems or challenges with the Provincial Legislatures, and he was concerned that all possible ambiguity should be removed. Provinces should be able to comply. However, he expressed concern that there was little in the Bill regarding the determination of performance management, and that the Bill was silent on what were norms and standards for performance management. He added that while the Bill was comprehensive in setting out the legal framework for the funding of political parties, he nonetheless felt that there might be problems of implementation. The role of the National Treasury and the NCOP, in his opinion, required clarification. He pointed out that the NCOP was to be representative of provincial interests and he expressed concern lest the NCOP be subsumed into the National Assembly, which was clearly contrary to the principle of an upper house.

Another member, referring to the funding of political parties, wondered why it was set out differently in this Bill, and he asked what exactly was envisaged by this Bill. Most of the provisions already appeared to be current practice, but he did not see that much had in fact been clarified. He thought that the PFMA provided the principle that there was to be a report to the Auditor General (AG) who must audit annually and he wondered why there was now no explicit reference to that function. He feared that the Bill was providing a window, through the emphasis on the NCOP, for federalist tendencies to creep in. He emphasised that South Africa was a unitary, not a federal State, even although there were two Houses. There should be no disjuncture between the National Assembly and the provinces, and he thought that the Bill could be problematic in that regard.

In respect of tenders, he decried the tendency of political office bearers to participate in business, and expressed the opinion that the provisions prohibiting this were welcome. Otherwise, there was a tendency to “careerism” in each five-year term of Parliament. He said that the Rules were to be applied strictly.

Another two Members expressed agreement that there seemed to be problems with the application to provincial legislatures.

Mr Botha then noted that he could foresee the potential for problems between the Executive Authority and the Accounting Officer, who was the Secretary of Parliament, and the Joint Committee, which had the power to call anyone before it to provide explanations. He sought clarity on the difference between applicability of Schedule 5 and Schedule 2. In respect of the adoption of norms and standards, he enquired how norms and standards for the provincial legislatures were to be determined. He noted that Limpopo was halfway to completing its own norms and standards and he felt that neither the National Assembly nor the NCOP could interfere in a provincial legislature. He agreed that there were too many gaps which could allow that a federal system creep in. 

The Chairperson posed the question as to whether the references to the PFMA were not a breach of the Separation of Powers doctrine, but said also that this could be an issue of semantics, pointing out that the funds referred to were public funds emanating from the single source of the taxpayer. The essence of the Bill lay in maintaining probity and the fiduciary duty in dealing with such funds. He added that he was concerned about the unauthorised expenditure of donor funds, and felt that provisions should be set out for dealing with such a situation. He was also concerned with the issue of unspent funds, saying that in his opinion these should not revert to the National Revenue Fund but be retained by Parliament. Budgets must be credible and should in fact leave little scope for unspent funds. He added that there was no provision in the Bill for rolling over of unspent funds, and he saw this as a potential problem.

Adv Jenkins then explained that the PFMA had been promulgated in 1999, and that the Secretary to Parliament had expressed a concern about the applicability of the this Act to Parliament. The conclusion was that the PFMA did not wholly apply to Parliament, only to specific areas where it had repealed the former Powers and Privileges of Parliament Act. Some provisions of that latter Act were carried forward as if incorporated. Thus, the situation existed where provisions from legislation of 1963, 1975 and 1999 were being read together, with equally widely scattered regulations across differing schedules. It was felt that the dignity of Parliament demanded a fully comprehensive and unitary Act, which this Bill sought to achieve. This Bill was first drafted in 2004 but had lain in abeyance for a while, then was studied as against other legislation. The Bill now before the Committee had been redrafted, had been contrasted with the Powers and Privileges of Provincial Legislatures Act of 2004, and had been through the Portfolio Committee on Finance procedures.  As it was partly a money Bill it was now referred back to this Committee for further amendment.


A Member expressed concerns that in view of the time constraints there would be little time and opportunity for public hearings on the Bill. He noted that the FFC, the Auditor General and the National Assembly would be required to make further input into the final form of the Bill. He saw this Bill as governing the appropriation of funding to Parliament, and although there was a single budget required, Parliament still consisted of the two houses. There would be no separate budget for the NCOP, and there was provision for only one accounting officer. Since the NCOP had its own interests and needs, including taking Parliament to the People, there was the potential for huge problems. He further felt that the provisions for an Acting Accounting Officer begged the question of exactly where the responsibility would lie, and what could be done if there was a need for disciplinary action against any official.

The Chairperson pointed out that the Chairman of the NCOP was not the equivalent to the Secretary of Parliament. The latter could not be an accounting officer for the NCOP.

Mr Botha added that there was provision in the Bill for only one budget and one budget vote. He asked if then the budget for the NCOP was envisaged as being a sub budget, and where this was catered for in the Bill. He also queried where the provisions around the Accounting Officer would be found.

Adv Jenkins explained that notwithstanding the apparent separate function of the NCOP, it was still required to approach the Secretary of Parliament for authorisation to spend funds. He conceded that this might cause political problems, yet there was only one budget which must be administered and controlled. The real questions to be considered were the oversight of spending, and who retained control of the funds and accounted for the expenditure of those funds and reported to the Executive Authority. The Joint Committee referred to in the Bill was a joint Committee of both Houses. In answer to the various issues around SCOPA, he noted that a decision had been taken to include both the National Assembly and the NCOP. The Joint Committee could in a sense be regarded as analogous to an enlarged SCOPA. The Auditor General could audit such Joint Committee. There was some concern that in the past, the AG would express his concerns year after year about the same matters, without perceptible improvement, and this Joint Committee was thus further an attempt to overcome this state of affairs.

The Chairperson asked for careful consideration of the impact upon other areas and legislation, to ensure that there would be no unintended consequences.

Adv Jenkins then asked that the issues of principle be borne in mind.

A Member requested that in a situation where funds had been appropriated for a purpose in the Budget, but not spent, then the reason for the non-spending must be found out, and dealt with appropriately. He added that he felt that Parliament, which had oversight responsibilities over the whole country, should set an example. He expressed concerns about Parliament descrying the non-spending of funds by Departments yet itself not showing good spending patterns, as Parliament should be setting a good example.

The Chairperson agreed that Parliament should lead by example.

Another Member expressed concern that there would be a difference between what was being presented orally and what would be the final result of the application of the Bill.

The Chairperson interposed, and said that the intention was to be fair to all concerned. He requested that Members must take another look at the Bill, particularly in light of the written submissions by the AG regarding the norms and standards to be applied. He added that he was aware that the Speaker of the Western Cape legislature was working on an opinion paper, which would be presented to the Speakers’ Forum the following week, and he was of the opinion that the Committee should not preemptively influence other bodies. There were many stakeholders whose interests were to be considered, and he expressed the opinion that this Bill should be workshopped.

A Member expressed the opinion that the draft Provincial Bills should also be workshopped.

The Chairperson noted that this was a matter of priority.

The meeting was adjourned.

 

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