The Office of the Auditor General (AG) provided comments on specific clauses of the Financial Management of Parliament Bill that had auditing implications. They did not take a view on whether they were in favour of the Bill or not. They also did not state whether the Public Finance Management Act (PFMA) should be the only legislation used for financial management.
Clause 23 on the treatment of unspent funds was debated at length. The Committee was broadly not in favour of the clause as it would negatively affect Parliament's oversight of underspending departments – a view shared by the Chairperson of the NCOP. The members felt that they would be legislating for Parliament to underspend – a move tantamount to poor planning and mis-alignment of spending priorities.
The comments on Clauses 39 to 46, concerning supply chain management, were contentious as the Office of the Auditor-General wanted access to the confidential part of the Members' Register of Interests, to ensure that Members of Parliament, their spouses and family members were not involved in businesses that had procured work from Parliament. This was for the purposes of validating the audit findings
Clause 3 was raised as it created problems with the potential for provinces to enact their own legislation. It was unclear how this process would be aligned at provincial level.
Clause 5 raised the concern about the reliability of the joint accountability of the Speaker of the National Assembly and the Chairperson of the National Council of Provinces. This pertained to how accountability was maintained when individuals were acting jointly. The AG sought more clearly defined roles and responsibilities as to how this arrangement will be managed, especially in terms of reporting arrangements.
Clause 7(c) related to the general financial management functions of the Accounting Officer. The AG would like this included in the responsibilities of the Accounting Officer. This would allow the AG to hold the Accounting Officer accountable in the audit of performance information.
The request for a weekly reconciliation in Clause 31(2)(b) was unopposed by members as was the recommendation for Clause 34 (3)(g), concerning regulations and support for members and political parties.
Ms Marissa Bezuidenhout, Legal Advisor: Office of the Auditor General, recapped that the first comments the Office of the Auditor General (AG) had made on the Bill were received by Adv Jenkins in September 2008. Despite the interaction, the AG had not changed any of the comments previously agreed upon by their management.
The comments on clause 3 concerned norms and standards for provincial legislatures. In view of the suggestion for separate legislation for this, there had to be a very consistent process for that and no contravention of the Public Finance Management Act.
The Chairperson agreed that this could end up being a major issue.
Clause 5 raised a concern about the executive authority, pertaining to the joint accountability of the Speaker of the National Assembly (NA) and the Chairperson of the National Council of Provinces (NCOP).
Mr E Sogoni (ANC; Gauteng) referred to the Parliamentary Oversight Authority (POA), headed by the Speaker and the NCOP Chairperson, acting jointly. He asked if the POA's functions were not adequate to deal with that concern.
The Chairperson responded that although he understood the point on the POA, the big issue was that they were still dealing with individuals. Anything was possible with individuals. He agreed with the concern in that context and asked how they could deal with people who accounted jointly.
Mr D Botha (ANC; Limpopo) pointed out that the Speaker and the NCOP Chairperson were actually politically accountable for Parliament. The Secretary of Parliament was financially accountable.
The Chairperson clarified that the main issue was the joint nature of the executive authority and how accountability was maintained in this scenario.
Mr Prakash Marismula, Office of the Auditor-General, responded that he was accustomed to the PFMA which dealt with the Accounting Officer and the Executive Authority. The Executive Authority was understood to be the head of a department. The AG sought more clearly defined roles and responsibility as to how this arrangement will be managed, especially in terms of reporting arrangements.
Adv Frank Jenkins stated that the PFMA viewed the political head of Parliament as both the Speaker of the National Assembly and the Chairperson of the National Council of Provinces. That was in place since 1999. He asked if there had been any problems with the joint accountability since then. South Africa did have a bicameral Parliament and one did have parity between the presiding officers. In terms of the Constitution, they had to have shared responsibility. That responsibility would be equal. For example, if there was a problem with accounting in the NCOP, the intention was not for the Speaker to answer to that. Parliament also had one Accounting Officer, which took into account that there was a certain level of sharing and certain matters that pertained to a particular House. As far as he was aware, there had been no problems with the structure thus far.
Mr Marismula conceded that there had been no problems with the arrangement in the past and if the new Bill was a continuation of the past accountability arrangement, the AG had no objections.
The comment on Clause 7(c) dealt with the general financial management functions of the Accounting Officer. Mr Marismula reported that this was really an administrative matter, pertaining to their audit of the NA, NCOP and other government departments, in terms of performance information which they would like included in the responsibilities of the Accounting Officer. This would allow the AG to hold the Accounting Officer accountable in the audit of performance information. In the next audit, they would provide an opinion on the performance information and this would be useful to that end.
Ms Bezuidenhout reported that they had gleaned from Adv Jenkins that the wording would be adjusted to include performance information.
Adv Jenkins queried the comment document from which this was taken.
Ms Bezuidenhout responded that the source was an internal memorandum based on an informal discussion with an AG legal advisor. This was feedback from the session in October 2008.
Adv Jenkins responded that there was such a provision in Clause 14(2)(e), pertaining to the strategic plan. His comment there was that this information had been included in the Bill. The audit of government was moving in the direction of including performance management indicators. The AG would then give an opinion on whether they were attainable. In his opinion that was included in the Bill and he was unsure if there was a need for any further provisions in the Bill. It was not included in Clause 7(c). It was included in the provision for a strategic plan. It could perhaps be included in the responsibilities of the Accounting Officer. That could be discussed.
Ms Bezuidenhout agreed but thought that its prominence was so strong that they recommend that it be included in Clause 7. This was, however, up to the Committee to decide.
Pertaining to Clause 23 – treatment of unspent funds – Mr Marismula stated there were no objections to the retention of funds, as proposed. It would have minor effects on the audit and Parliament would then have to account for retained income and reserves.
The Chairperson responded that there should be objections.
Mr Sogoni noted a clause in the Division of Revenue Act that stated that if funds were unspent, the entity could apply for the retention of the unspent funds. He asked that if the AG saw that as a minor feature, did that mean that it would not lead to a qualification.
Mr M Robertson (ANC; Eastern Cape) pointed out that if Parliament allowed a minor qualification for itself due to unspent funds, would that not set a precedent for other government entities.
The Chairperson noted that unspent money was underspent money. They were in essence, legislating for Parliament to underspend. That would be tantamount to poor planning and mis-alignment. He asked what moral high ground Parliament would then have to hold underspending departments accountable. Part of the bigger issue was that this would allow for budget gains. He stated that the AG should be worried about this and it should not be reduced to a minor audit issue.
Mr Botha queried the possible reasons that would make it acceptable for Parliament to retain appropriated funds. He noted the possible cumulative effect of funds retained year after year. He felt this could cause audit problems due to a growing surplus on the accounts.
Mr Z Kolweni (ANC; North-West) quoted the clause and asked what the possible merits of the provision could be.
Ms Bezuidenhout thought they should separate the legal and audit implications. On the legal side, they recognised why members were uncomfortable with the provision. One was that Parliament prescribed to departments that any unspent funds should be paid into the National Revenue Fund. Why should Parliament then be treated differently if they were there to set an example.
The second was that if Parliament retained these funds, it meant underspending on budget, which in turn meant under-delivery. She noted that the AG could retain funds but there was a very strict process to be followed to obtain approval from the National Treasury and the Standing Committee on the Auditor-General. It did not seem that there was such a strict process applied in the Bill. This was a possible compromise on the provision.
The Chairperson reported on a conversation with the NCOP Chairperson, who agreed that the provision was wrong. The tacit agreement between Parliament and the National Treasury that Parliament could retain funds was something that they would still have to deal with.
Ms Bezuidenhout continued. On Clause 31(2)(b) – revenue management – they recommended that a weekly reconciliation take place where weekly receipt of money be matched by a weekly deposit.
Clause 34 (3)(g) dealt with regulations and support for Members and political parties. This had practical audit implications and similar to unspent funds, they had set the benchmark across national, provincial and local departments to submit within a certain timeframe – for auditing and reporting deadlines to be met.
Adv Jenkins responded that the intention was to put such a provision in the regulations. The present practice was that if a party did not submit in time, the money would be spent. It seemed that the AG had a preference for legislation over regulations as this was already provided for in the regulations.
Mr Marismula agreed that if a specific timeframe was in the regulations, the AG would find this acceptable.
The comment on Clauses 39 to 46 related to supply chain management. It was noted that this was perhaps one of the most contentious issues in the Bill. The AG applied international standards in auditing. If they wanted to comply with these standards, they needed full disclosure in terms of related partner transactions. In the previous audit, the Register of Members’ Interests was not made available to the AG. This was of concern, as it limited scope to express an audit opinion. The Public Audit Act stated clearly in Section 15, that the Auditor- General had unrestricted access to any information that can elucidate the business of the auditee. Parliament’s argument was that the members’ register was confidential and could not be made available for auditing purposes.
The Chairperson noted that the Secretary of Parliament had raised the same issue strongly.
Mr Sogoni remarked that a similar requirement was in the Municipal Finance Management Act (MFMA) and he did not think that it should be different for Parliament. They had to be very transparent in procurement.
Ms A Mchunu (IFP; Kwazulu-Natal) agreed that this would help Parliament maintain its integrity. If they were not seen to display honesty and integrity, that would be a sad day for South Africa.
Adv Jenkins referred to Clause 46 that dealt with the prohibition on people with which Parliament may do business. There was an absolute prohibition as to Members of Parliament, the Members of provincial legislatures and municipal councillors. Clause 46(e) expanded the provision and that information could be obtained from the Register of Companies. The general part of the Register was open. The confidential part contained information on members’ spouses and family members and certain disclosed facts. He was further unclear as to how these two parts could be used to ascertain if Parliament complied with the PFMA.
Mr Marismula responded that auditors attempted to audit from both side (auditee and businesses and persons doing business with the auditee). He stated that it would be useful and would not be a limitation to have access to what members were disclosing to validate their audit findings.
The meeting was adjourned.
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