Financial Management of Parliament Bill: workshop

NCOP Finance

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

The Committee held a workshop on the Financial Management of Parliament Bill. The Speaker’s Forum, the Office of the Auditor-General and the Financial and Fiscal Commission attended the workshop. For the benefit of members and these bodies, the Parliamentary Legal Adviser gave a brief synopsis of the Bill.

The Speaker’s Forum proposed that Schedule 1 of the Bill, which spoke about norms and standards for provincial legislatures, should be amended to say that the Speaker would be responsible for controlling the revenue, expenditure, assets and liabilities of the legislature. They also proposed that references to the Public Finance Management Act and all other references to provincial legislatures be removed so that the Public Finance Management Act would be completely inapplicable to legislatures. Members were concerned that the Forum wanted to give too much power to the Speaker. They queried to whom the Speaker would be accountable, questioned why legislatures should be treated differently to government departments, since they both used public funds, and commented that the wording of the Forum’s submission was too vague and that they had to work with legal advisers to draw up a proper proposal.

The Office of the Auditor-General made comments on Clause 3, 5, 7(c), 23, 31(2)(b), 34(3)(g) and Chapter 6 of the Bill. There were no queries from the Committee on this submission.

The Financial and Fiscal Commission noted that it had not yet had sufficient time to interact on the Bill but noted many of the concerns raised in the workshop. The Commission understood that the legislation had to be constitutionally acceptable and had to show proper separation of powers. A concern was raised that there were certain constitutional entities whose independence was being compromised, as there was conflict with certain provisions in the Public Finance Management Act. The Chairperson gave the Commission two weeks in which to provide the Committee with a proper submission, and noted that the Bill contained some serious matters and he would like to give the Committee sufficient time to debate and settle them.

 

Meeting report

Financial Management of Parliament Bill (the Bill): Workshop
The Chairperson noted that the Office of the Auditor-General (OAG), the Speaker’s Forum and the Financial and Fiscal Commission (FFC) were present at the meeting. They would make recommendations on the Financial Management of Parliament Bill. Adv Frank Jenkins, Parliamentary Legal Adviser, would brief the Committee on the Bill again for the benefit of the three presenters.

Mr D Botha (ANC, Limpopo) stated that the Bill was a Section 76 Bill, but questioned why this was so since, to his mind, it did not affect the Provincial legislatures but only national Parliament. He also queried why provinces were requested to look into the Bill. .

The Chairperson answered that the Bill discussed the issue of party political funding extensively. Provinces had a separate piece of legislation; a political party legislation that was already in place. He asked Adv Jenkins to take the Committee through the Bill.

Adv Frank Jenkins Presentation on the Bill
Adv Jenkins informed the Committee that the Portfolio Committee on Finance had introduced the Bill to the National Assembly (NA) on 18 September 2008. The NA passed the Bill and referred it to the National Council of Provinces (NCOP) on 26 September 2008. The principles of the Bill were concerned with the Constitutional status of Parliament. The Bill spoke about separation of powers and stated that Houses controlled their own internal arrangements, proceedings and procedures, including the control of finances. A legal opinion advised that Section 216 of the Constitution had to be read to mean that the Treasury control, in the case of Parliament and provincial legislatures, was subject to the authority over finances.

Adv Jenkins briefed the Committee on the Chapters 1-11 in the Bill. [See document for full details]. He set out what each Chapter contained, and gave a summary of what it was intended to address.

He also looked at the applicability of the Bill to provincial legislatures. He explained that Clause 3, read with Schedule 1 in the Bill, applied to provincial legislatures. Clause 3 and Schedule 1 spoke of norms and standards for provincial legislatures. He also explained that the Bill gave effect to Section 216 of the Constitution, which was part of Chapter 13 of the Constitution. This included provisions that affected the financial interests of the provincial sphere of government, which included provincial legislatures. Therefore the whole Bill had to be considered by the Select Committee in accordance with the procedure established by Section 76(1) of the Constitution.

The Speakers’ Forum Presentation on the Bill
Mr M Mawasha, Advisor in the Speakers’ Forum stated that the Forum wished to suggest some changes to the Schedules in the Bill, and suggested that the role of the Speaker should be strengthened.

Mr Mawasha addressed Schedule 1 of the Bill, which looked at Norms and Standards for Provincial Legislatures. The Forum wanted to amend the Schedule so that the Speaker would be responsible for controlling the revenue, expenditure, assets and liabilities of the legislature, instead of having a body or individual as the executive authority that would be responsible for it. The Speaker would be accountable to the legislature and would determine a process for submitting strategic plans, annual performance plans, the budget and adjustments to the Provincial Treasury. This would happen after consultation with the Member of the Executive Council (MEC) responsible for financial matters in the province. The Speaker would determine the budget of the provincial legislature, after consultation with the MEC responsible for financial matters in the province.

The Speakers Forum also proposed that other references to the Public Finance Management Act (PFMA) and provincial legislatures be removed, so that the PFMA would be completely inapplicable to legislatures.

Discussion
Mr M Goeieman (ANC, Northern Cape) stated that the Forum’s proposals would be giving one person a lot of power. He wondered to whom the Speaker would be accountable at the end of the day. He was of the view that it was inappropriate to grant such substantial powers to one person.

Mr Botha noted that the Forum’s proposal did not provide for an accounting officer. This was not clear in the proposal. The Speaker was the political accounting officer, but the Secretary of Parliament was the accounting officer for financial spending. Mr Botha also did not understand the proposal by the forum that addressed the Speakers consultation with the Finance MECs. HE asked what would happen if the two did not agree after the consultation, and who would make the final decision. He was also not clear as to what would happen if the legislatures under spent on their budget. He believed that the wording of the proposal was too vague.

Mr M Robertsen (ANC, Eastern Cape) queried why legislatures should be treated any differently to government departments, as they were dealing with government money. Parliament had to return unspent money to the Treasury. He proposed that the Committee not accept the Forum’s proposal, as it was too “murky”.

The Chairperson stated that legal advisers had considered that the Committee could not make a law that had no real substance to it, but had to make laws that addressed principles and would apply no matter what the situation was. The processes in the Bill had to be transparent and had to take in to account the needs of the legislatures. There were many fundamental duties that had to be performed by a legislature, such as popular participation where everybody was involved in creating legislation. The Bill had to ensure that there was proper service delivery. This meant performing oversight on service delivery. The legislatures had to ensure that there was quality service delivery, value for money and sustainability. The Committee had to find a way to ensure that when they passed legislation, this would empower the legislatures so that they would be able to receive and spend resources efficiently. However, the Committee did not want to create a precedent that said that legislatures could keep any unspent funds. All legislatures had to be able to plan their budgets appropriately so there was no under spending. The Committee could not allow budget gains in any institution. The money that the Bill referred to was public funding, by way of taxpayer’s money, and essentially it dealt with the management of public funds. He added that both the Speaker and the Secretary had to account to the legislatures. He agreed that the suggestion that the Speaker had to control revenue and expenditure would create problems.

Submission from the Office of the Auditor-General (OAG)
Ms Anishia Silent, Legal Adviser in the Office of the Auditor-General (AG) read out the AGs submission. (See attached presentation document).

Ms Silent addressed Clause 3 of the Bill, which looked at norms and standards for provincial legislatures, and which noted that provinces must enact legislation. The OAG stated that it was unclear how this Bill would achieve parity between all the legislatures.

Clause 5 looked at the Executive Authority. The OAG stated that it was unclear how joint accountability to Parliament would be enforced. Clear regulations, directions or guidelines would have to be issued in this regard.

Clause 7(c) looked at general financial management functions of the Accounting Officer. The OAG noted that such a system of performance information was recommended to support the audit of performance information, which formed part of the annual report.

Clause 23 described the treatment of unspent funds. This would have minor audit implications. Retained funds would have to appear on the statement of financial position, which would have to be audited annually.

Clause 31(2)(b) looked at revenue management. It was recommended that the time mentioned here be aligned to clause 31(2)(e), which would require all revenue to be reconciled on a weekly basis.

Clause 34(3)(g) looked at regulations on support for Members and political parties. The OAG thought it would be prudent to require political parties to submit their audited financial statements within a specific timeframe.

The OAG also looked at Chapter 6 in the Bill (Clauses 39-46), which described supply chain management. There was a concern about audit access to the register of Members’ interests and the possible limitation of scope, should the auditee restrict access. The adoption of Generally Recognised Accounting Practice (GRAP) required that the ISA 800 standard was applied, and this included full consideration of related parties.

Members accepted the submissions but did not raise any comments or queries

Financial and Fiscal Commission (FFC) Comment
The Chairperson asked Mr Bongani Khumalo, Deputy Chairperson of the FFC, to comment on some issues that he thought were important.

Mr Khumalo stated that the FFC had not had sufficient time to go through the matter and he therefore was not able to interact with Members on the Bill. He however had noted, from the comments that were made, that there seemed to be some issues around powers given to certain people. There were matters of principle that were raised that were very important, such as ensuring that legislation was constitutional and that there was proper separation of powers. The legislation was concerned with creating an environment for sound financial management, dealing with public funds, but more importantly it was about making choices about where nationally raised resources should go. The sound financial management principles needed to be considered just as much as the legal side of the Bill.

Mr Khumalo noted that the Committee had queried why this particular legislation was needed for legislatures, as opposed to keeping everything within the bounds of a single PFMA. He explained that the Constitution created a lot of entities, which were supposed to be independent entities. The FFC was one of these institutions, and in itself it had a problem because the Chairperson was also recognised as the Chief Executive Officer (CEO) and the Accounting Officer. These Constitutional entities were supposed to report to national and provincial legislatures, but they themselves contained certain conflicts with certain provisions in the PFMA, which could be interpreted as compromising the independence of those institutions.

The FFC asked the Committee to issue a time frame within which the FFC could provide the Committee with a written submission on the Bill.

The Chairperson stated that Mr Khumalo had made some very valid points, and there was a problem with the independence of certain structures. The Committee needed to look in to this issue. The FFC itself was supposed to be an independent structure, independent of government. These were complicated matters and therefore the Committee had to be cautious when dealing with them. He informed the FFC that they should submit a written submission to the Committee within two weeks.

The Chairperson also suggested that the Committee look at defining certain terms, such as the “Speaker”, “the Accounting Officer” and the “Executive” in the Bill.

He said that the Committee also had to look at Clause 21, concerning unauthorised spending of donor funds. This was a particularly worrying issue, as it was a serious matter. The Committee needed to find stricter measures to deal with unauthorised spending.

Mr Robertsen thought that Adv Jenkins could sort out the matter regarding the Standing Committee On Public Accounts (SCOPA). He proposed that three or four Members from the NCOP sit in on SCOPA matters, or that the NCOP have its own SCOPA.   

Mr Botha stated that the Speakers’ Forum had to work with legal advisers as well as Adv Jenkins to draw up a proper submission that the Committee could consider.

The Chairperson advised the Forum and all other presenters to ensure that the issues that they were raising were correct. It was clear that there were some outstanding queries to be resolved. . He did not want to rush to complete the Bill, as the Committee had to take some time to reflect on these matters.

The workshop was adjourned.


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