Financial Management of Parliament Bill; Money Bills Amendment Procedure & Related Matters Bill : finalisation

NCOP Finance

09 February 2009
Chairperson: T Ralane (ANC; Free State)
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Meeting Summary

After consideration of the Financial Management of Parliament Bill, the Committee adopted the Bill with amendments. The Kwazulu-Natal Legislature finance committee expressing profound concern with the abbreviated legislative process on this Bill. The constitutionality of skipping negotiating mandates and not allowing provinces the opportunity for public hearings was raised.

Their amendments to the Financial Management of Parliament Bill covered changes to clauses Clause 4, Clause 7, Clause 17. The proposed use of Finance leases and Public Private Partnerships (PPP) would be addressed by the review of the Public Finance Management Act (PFMA). Alternatively, the Bill would have to be redrafted to include clauses on those provisions. Regarding the Office of the Auditor-General, adequate provision had been made for performance indicators in their inclusion in the strategic plan. The request for a weekly reconciliation had been accommodated in Clause 31(2)(b).

 
The legal opinion on the treatment of unspent funds in Clause 23 made the following points: Parliament was a separate arm of government in terms of the separation of powers and was therefore not the same as government departments. The Constitutional Court had confirmed that in their certification judgment. The question then became: why should Parliament return unspent funds to the Treasury when the practice had always been that Parliament retain those funds. Whether Parliament determined to retain the unspent funds or not, they would have to ensure checks and balances were in place on those funds. There was, however, a constitutional imperative for Parliament to keep unspent funds.
 
Some members disagreed that there was a constitutional imperative for Parliament to keep unspent funds. The members felt that this would compromise their integrity in their oversight of underspending departments and government entities.
 
Members pointed out areas of concern for further consideration by the Fourth Parliament:
-        Reallocation of unspent funds in the following financial year.
-        Unauthorised expenditure
-        Treatment of donor funds
-        Investment of funds by Parliament in Clause 24

The Committee considered and adopted the Money Bills Amendment Procedure and Related Matters Bill with amendments.

Matters that still concerned them about the Bill were:
-        The norms and standards for provinces.
-        The appointment of the Director of the Parliamentary Budget Office (PBO) and possible clashes with the position of the Secretary of Parliament.
-        Clause 11(3)(d) was noted because of the practical difficulty of regional and international tax trends.
-        The Bill had not been costed.

Different timeframes were suggested to replace those envisaged in Clause 12. The new timeframes had to be review for the knock on effect on the schedule the National Assembly had determined.

Meeting report

Financial Management of Parliament Bill: Final Mandates
The members present were: Mr T Ralane (ANC; Free State), Ms D Robinson (DA; Western Cape), Mr M Robertson (ANC; Eastern Cape), Mr M Goeieman (ANC; Northern Cape), Mr Z Kolweni (ANC; North West), Ms A Mchunu (IFP; Kwazulu-Natal), Mr E Sogoni (ANC; Gauteng) and Mr D Botha (ANC; Limpopo)

The permanent delegates of the provincial legislatures read their final mandates on the Financial Management of Parliament Bill (the Bill) of Eastern Cape, Gauteng, Northern Cape, North West, Western Cape and Free State. The Chairperson read the final mandates of the Mpumalanga and Limpopo. Kwazulu-Natal had not yet submitted a final mandate. All their final mandates conferred on the delegates, the authority to vote in favour of the Bill.

 
Financial Management of Parliament Bill: Proposed Amendments
Adv Frank Jenkins, Parliamentary Legal Advisor, presented the Bill’s Proposed Amendments:
 

Clause 1 –
Definitions
The proposal was to omit the definition of “joint committee”. The first section summarised the concerns raised by the Secretary to Parliament, specifically that the expansive provision for the joint committee was unnecessary. The Bill would now reference an “oversight mechanism” rather than a “joint committee”

Clause 4 – Joint committee
The provisions that set up the composition of the mechanism and the like would also fall away. The crux was that the presiding officers (the executive authority) should not be members of the oversight mechanism. The Joint Rules would have to provide for that mechanism and this change would be contained in the consequential amendments throughout the Bill.
Regarding the functions of the current joint committee in the Bill, the submission was that the Bill must make it clear that they will not oversee the budget stage, but will oversee the financial management stage. Thus one would omit Clause 4(a) and (b) in the functions list.

Clause 17 – Submission of draft strategic plan, annual performance plan and budget
A consequence of the proposed omission of Clause 4(a) and (b) would be to omit references referring to strategic plan, performance plan, national budget adjustments budget and revisions to the joint committee. Those would be dealt with according to current the practice. The joint committee would receive the audited financial statements. This was to make the separation of functions clear between executive authority and the mechanism set up to prepare the budget of Parliament and the oversight of the budget being the responsibility of the joint committee.

Clause 7 – General financial management functions
Management functions of the Accounting Officer were noted as there was deliberate gross negligence and if he failed to comply, that would amount to a criminal offence. The Secretary of Parliament in his submission said that the provisions about sending senior managers to management training and enforcing a performance management system (Clause 7(e) and (f)) were normal management functions that did not need to be enforced with criminal sanctions.

Clause 46 - Prohibition on contracts. This did not appear in the submission but referring to the discussion of the Committee on. The submission suggested that the vague references in Clause 46(d) and (e) be clarified as this would be difficult to implement. There was therefore no proposal to remove those clauses.

Clause 23 – Treatment of unspent plans
The Financial and Fiscal Commission’s (FFC) main concern was the treatment of unspent funds. In Clause 23(1) the proposal was to omit “not” from the first line. The new position was therefore, that Parliament was required to return those funds. Clause 23(2) and (3) would consequently be omitted.

The National Treasury had raised concerns that there was nothing in the Bill that provided for finance leases and Public Private Partnerships (PPP). These issues would be addressed by the review of the Public Finance Management Act (PFMA). If that were to be in the Bill, it would have to be redrafted to include chapters on those provisions. PPP, although not in the PFMA, was dealt with in the National Treasury regulations. Parliament could follow a similar approach under regulations for supply chain management.

The Auditor-General (AG) had raised concerns that were, in part, already taken up in the Bill. Their recommendation was for the inclusion of performance indicators in Clause 7 of the Bill. In his opinion, adequate provision had been made by their inclusion in the strategic plan. Bringing them into Clause 7 was, once again, making them subject to criminal sanctions.
Critically, the AG had recommended a specific weekly reconciliation of moneys received by Parliament. This would be provided for by amending Clause 31(2)(b) to omit “promptly” and insert “on a weekly basis” after the reference to “section 25(1)(a)”. This change explained specifically what was meant by promptly in the reconciliation requirement.

Mr Jenkins briefly noted the comments on the treatment of unspent funds. At present, unspent funds were not returned by Parliament. Parliament currently fell under the spirit of the PFMA with regard to checks and balances. The PFMA does not require Parliament to return unspent funds to the National Revenue Fund (NRF). Treasury did not require it and Parliament’s spending of its allocated funds could be monitored through the PFMA Section 32 reports in the government gazette. The Bill strengthened that oversight requirement through monthly statements to be tabled in Parliament. It had made this information more accessible and those statements would be referred to the joint committee to evaluate the spending patterns of Parliament.

Consideration of the Financial Management of Parliament Bill
The Chairperson commenced the clause by clause consideration of the Bill:

Clause 4: The members noted that none of the content of the joint committee would be removed but anytime “joint committee” was used it would be replace by “oversight mechanism”.

Clause 11: The Chairperson noted the responsibilities of officials. In Clause 11(1)(c)(iii), he asked if this expenditure was linked with Clauses 20 (Unauthorised Expenditure) and 21 (Unauthorised expenditure of donor funds). He asked if the wording was not too similar.

Adv Jenkins responded that while unauthorised expenditure was not desirable; it did happen. When it happened, it needed to be reported to the Accounting Officer who would then have to report that to the AG. There was always the issue of the financial implications of the unauthorised expenditure and how Parliament would deal with it. The easiest option was to have a way to authorise it through a bill that would have to be introduced by the Minister of Finance.

The Chairperson responded that this was problematic because Clause 21 was a charge against Parliament’s own funds and asked how it could be dealt with.

Adv Jenkins replied that Clause 21 referred to donor funds, which the Minister of Finance could not authorise. Parliament’s own funds included donor funds or the unspent funds of the previous year that had been rolled over. Therefore, any unauthorised expenditure of donor funds would have to be recovered via those sources.

The Chairperson asked if they should keep Clause 21(1) and omit Clause 21(2).

Adv Jenkins replied that Clause 21(1) sought to prevent the instance where Parliament overspent its budget using their own funds. It prevented Parliament from using appropriated funds to cover losses on donor-funded projects. If that overspending were in direct violation of an executive instruction, one would have to hold the responsible official liable to repay that money in terms of Clause 21(2). It was his opinion that both clauses were necessary.

Mr Robertson referred to the practice that donor funds were usually received for a specific project. If those funds were overspent, money could not be taken from another donor allocation to bail out the overspent project.

The Chairperson agreed. This meant that they would have to go into the equitable share of Parliament, in order to deal with the shortfall. He asked if this was what they wanted to happen or whether they wanted to hold someone accountable.

Mr Robertson replied that they should hold someone accountable when taxpayers’ money was involved.

The Chairperson remarked that the reason for the overspending could be poor spending and mis-alignment of priorities. He asked how they would deal with that – if the official had not planned appropriately. He referred Clauses 20(2)(a) and (b). He noted a problem with how these issues linked with Clause 23 (Treatment of unspent funds). Clause 20 indicated a direct charge against the NRF, with no provision for returning the funds to the NRF.

Ms Mchunu suggested that the shifting of funds should be gazetted, thereby providing for it in writing.

The Chairperson responded that the CEO would pick up the projected overspending and alert the executive in writing. His issue was that, in terms of Clause 23, one got to keep unspent money and whilst they had these unspent funds, overspending could occur. Ordinarily Parliament’s unspent funds did not revert to the NRF.

Mr Kolweni asked what would happen to unspent funds. Would the funds be re-appropriated to the same purpose, it was underspent on, in the previous financial year? Would the funds simply be included in a new budget for the next financial year?

The Chairperson responded that this was an issue the Committee had to interrogate. It was unclear whether it would be used for the same purpose in the next budget or not. In respect of departments, the practice was that unspent funds were withheld from the underperforming department, taken into the NRF and reallocated to performing areas.

Adv Jenkins responded that the principle purpose of the Bill was to ensure proper financial planning. Matters could surprise one in the implementation of a set budget (a huge shift in the prices of airline tickets, input prices and changes in exchange controls) – with the consequence of being faced with a demand for spending that the budget could not cover. This could lead to unauthorised expenditure – going over the budget but still within the purposes of the budget. Similarly one could unexpectedly have a saving (underspending). That saving could be used to cover other expenses by virements (upto the 8% limit). In terms of the Bill, that would still be seen as proper planning.

The Chairperson stated that unspent money was equal to underspending. If targets (for performance or delivery) were set and attained, that could be classified as saving. If, however, the target was not met, that could not be classified as a saving. Unforeseen circumstances like the escalation of prices could be dealt with in the adjustment budget in October. He was unclear how that related to this provision.

Mr Goeieman sought clarity on what would happen to the unspent funds.

Adv Jenkins responded that those funds must be part of the budget of the next year. It did not lie in a reserve, contingency or trading account. In terms of the Bill, it had to be appropriated in Parliament’s budget.

The Chairperson commented that this went to the issue of planning.

Mr Botha stated that if a project was budgeted to cost R100 million and that project was completed for R90 million, then the saving of R10 million was in the next year’s budget. If the project was not completed and that R90 million had already been spent, the remaining R10 million would have to be reallocated to the project in the next budget. That 10 million could not be used for another purpose. Donor funds usually had a budget, project plan and business plan to accompany the awarding of those funds. It was not clear whether one would have to account to the donor on a deficit or surplus of the awarded funding.

Adv Jenkins replied that donor funds were an issue between Parliament and the donor. It was not part of the budget. An underspending of donor funds was regulated by the conditions agreed upon between Parliament and the donor. The contractual relationship would guide that process.
Unspent funds referred to Parliament’s revenue sources (appropriated funds and previously unspent funds, excluding donor funds). In terms of Clause 23, unspent funds had to be part of the budget of the next financial year when they would be appropriately allocated. Those funds would not go into a general reserve account.

The Chairperson referred to Clause 24 (Cash management and investment policy) about the investment of money not immediately required. He pointed out the possibility that the unspent money might be invested. Did they want Parliament to be a fund manager. This was taken from the Municipal Financial Management Act (MFMA) and related to a matter they had raised sharply with municipalities. The issue was why money would be invested when it was needed. From the wording of Clause 24, he assumed that the intention was to invest the unspent funds rather than reallocating it in the next year’s budget.

Adv Jenkins replied that if Parliament wanted to take the unspent funds and invest it, Clause 56 (Preparation of financial statements) dealt with this. Clause 56(2)(c) required a summary of all investments of Parliament as at the end of the financial year. Such investment would therefore be appropriately disclosed.

The Chairperson stated that the question was, whether they needed that investment.

Adv Jenkins responded that this question would be asked within the oversight mechanism (joint committee) established by the Bill.

The Chairperson said that it should not be delayed to the consideration of the oversight mechanism. The Committee was set to pass the Bill and this issue should not come back to haunt them. He raised this because of experience with the oversight of municipalities. Municipalities often asked for more money while they had money tied up in investments. He also queried the effect of those invested funds not being available in the event of a financial meltdown.

Adv Jenkins responded that it was more usual for Parliament to plan a project for a financial year. If the hypothetical budget for the project was R 30 million, that amount would need to be paid in installments. If R15 million needed to be paid by the middle of the financial year; could not that R15 million stay in a call-up account in the interim, to collect interest. That would be an investment policy. He suggested that the Committee not cut the Bill short and allow for the possibility of investment with specific prescriptions of checks and balances in the oversight mechanism.

He commented that there were controversial issues about Parliament as the primary oversight body in South Africa “providing for itself” in the Bill and how strongly the Bill did that. His opinion was that this separation was a step in the right direction and practice would determine whether the provisions were strong enough. It was, however, stronger than the mechanism currently in place. Parliament would not fall between two or three pieces of archaic legislation and the partially applicable PFMA

Mr Sogoni expressed concern at the line of discussion. Perhaps the members should have reviewed the minutes of previous discussions on the Bill. The members had raised specific areas of concern on unspent funds. He felt they were starting all over again “reinventing the wheel”.
He commented that whenever the Chairperson did not agree with members’ comments, he interrupted them and did not allow them to finish. The Chairperson could correct members after they had concluded the comment.

Mr Robertson called for a point of order. He remarked that members should not argue with the ruling of the Chairperson from the floor.

The Chairperson responded that they were not reinventing the wheel. The Committee was in the midst of considering the Bill, page by page. They were also raising issues arising from the mandates. He commented that these were issues that would not be resolved at the meeting. Rather, they were matters that had to be noted for further attention going forward.

Mr Sogoni replied that the members had specific reservations about Clause 23. He asked if they should not address the points previously raised.

Mr Goeieman expressed the opinion that they were making progress on the matter of unspent funds. This discussion would ensure that these issues were addressed once the Bill was adopted. He noted the changes in the ‘joint committee’ as an example. He sought clarity on the definition of unspent funds. For what would the money be kept?. The Committee should perhaps be clear on what was supposed to happen to the money and whether the money should be committed to a specific project. He recalled the Committee’s record for lambasting municipalities on their underspending. They could not turn a blind eye to the issue. It was important that Parliament had to set an example to municipalities. The view had been expressed that Parliament was not an implementing agent whereas departments were implementing agents. How did one then view Parliament as spending that money, not being an implementing agent.

Mr Kolweni responded that, in the context of timing, he shared Mr Sogoni’s sentiments. If there should be further deliberations on Clause 23, they should concentrate on the additional submission for direction.

Mr Robertson replied that the Committee was not pressed for time. They had to do the job properly, even if it took a week or two longer.

Adv Jenkins responded that Parliament was a separate arm of government in terms of the separation of powers. Parliament was not the same as the government departments. This principle was critical to our Constitution. The Constitutional Court had confirmed that in their certification judgment. The money that Parliament received should, theoretically, be an appropriation for what Parliament needed. Parliament did not have to ask for handouts or stand in line for a piece of pie. In practice, there were negotiations that influenced the amount of the final Appropriations Bill. Public commentators have said that Parliament should not have to go through that process, it should simply get what it needed. The best case scenario would be that they have a saving on some items and once overspending was balanced by means of virements, there was still a surplus. The question then became: why should Parliament then return those funds to the Treasury? If Parliament decided to legislate the return of the unspent funds to Treasury, the legislation could do that. The principle had always been that Parliament retain those funds. Whatever was decided, Parliament had to ensure that the checks and balances were in place on those funds. This was particularly pertinent to South Africa as a development state where social justice was a critical element throughout the Constitution. There was a constitutional imperative for Parliament to keep unspent funds.

The Chairperson replied that this discussion should not be taken now. He expressed the opinion that it was not a constitutional imperative. There was an unofficial agreement between Parliament and the National Treasury to keep unspent funds – it was not a constitutional principle and it was not in the PFMA. This issue had been pointed out to the Chairperson of the NCOP and the Minister of Finance. This was a matter of Parliament apportioning something to itself that was wrong and therefore would have no moral right to judge others on that. He did not want to legislate for Parliament to underspend and perhaps the next Parliament needed to review that agreement.

Mr Sogoni referred to the discussions with the AG and the Chairperson of the NCOP. He suggested that they might omit Clause 23(1). On Clause 23(2) the reference to 18(1)(b) was not very clear. Perhaps they should use simpler language to make it clear that if funds were already committed to specific project, failing completion, they should be reallocated to the same project.

Mr Botha pointed out that, according to the legal opinion on unspent funds, the principle they had to accept was that Parliament was not a government department. If they accept that principle, then all the other issues fell away; then Parliament had the right to keep unspent funds.

The Chairperson pointed to the possibility that they might not want to accept that principle.

Mr Botha replied that they could not ignore that the Constitution accepted the separation of powers. The Committee could not make a decision to the contrary. It was not then a question of the PFMA. If the Constitution agreed, that was the higher authority.

The Chairperson stated that government had three arms: legislature, judiciary and executive. He was not disputing that Parliament was not a department. The issue they were addressing was the use of public funds. Taxpayers’ money was given to Parliament and departments and government entities alike. They could not argue semantics on the issue because the bottom line was that they were dealing with public finances.

Mr Goeieman replied that the Committee did not deny that. This was the reason he had earlier suggested that they should check if Parliament fell into the implementing agent category. This would serve as an indication of whether departments were the same as Parliament. Departments had targets they needed to deliver on such as the eradication of the bucket system. That was the essential definition of an implementing agent. He felt that the explanation made it quite clear as to what should happen. Members did, however, need to get clarity on certain issues.

The Chairperson decided to move on and continued the page by page consideration.

Mr Sogoni referred to Clause 35 (Transfer of unspent funds) and asked if Parliament had entities.

Adv Jenkins replied that he was not aware of any such entities. The only entity he was aware of would be the proposed Parliamentary Budget Office (PBO) envisaged by the Money Bills Amendment Procedure and Related Matters Bill. Parliament did contribute a subscription to the Inter-Parliamentary Union and the Commonwealth Parliamentary Association which could go through as transfers.

The Chairperson requested Adv Jenkins to check those facts so that they could finish the matter.

Mr Robertson asked if there were criteria attached to donor funds.

Adv Jenkins responded that there were always criteria. One had to qualify for those funds and the same audit requirements were required in South Africa as apply in the European Union. They would require Parliament to have a budget, a statement of purpose and a business plan. These criteria were quite detailed.

Mr Sogoni replied that the payment of a subscription was different to a transfer to an entity.

The Chairperson added that they did not want things in the Bill that were irrelevant. If the issue of transfers did not belong in the Bill then surely, it had to go. Surely the Parliamentary Budget Office would have its own budget.
 
Adv Jenkins responded that the international transfers (the transfer element of the subscriptions) were excluded from the Bill. The transfers the Bill had in mind were those made to political parties in respect of constituency funds and support for members to perform their functions.
 
Mr Sogoni stated that he did not have a problem with the issue of transfers to political parties. The issue he was concerned with was the definition of an “entity” and its applicability to Parliament.

The Chairperson completed the clause by clause consideration of the Bill. He then determined that the Committee should revisit the treatment of unspent funds in the Proposed Amendments to the Financial Management of Parliament Bill.

The Chairperson stated that their mandate was clear. The Committee had highlighted the things that were problematic. In view of Parliament’s dissolution, he did not want to ask for another legal opinion. They could not talk about Parliament as if it were an island. They were interlinked with the other spheres of government. The message they would send to the next Parliament would be that they have to back these issues. For the purposes of passing the Bill, those issues would have to be dealt with in future. The matter of the treatment of unspent funds would require further engagement. They would pass the Bill and urge the 4th Parliament to carry on the discussion. All the issues should be clarified and cleared up in the next five years. As the current Parliament had highlighted these issues, the next Parliament would not have to start afresh.

Mr Kolweni referred to the submission by the Secretary of Parliament on Clause 46 (Prohibition on contracts). The Secretary had specifically requested clarity in Clauses 46(d) and (e). In the briefings to provinces, the North West had noted a problem with Clause 46(c). Their councillors were curious as to why councillors were included in the clause. He further commented on his general sense that the Bill was tramping on the toes of others.

 

Mr Botha agreed with the Chairperson’s suggestion to pass the Bill and moved for adoption. He pointed out that the question still remained as to how constitutional the process had been for this Section 76 Bill. He stated specifically that provinces had not had public hearings or opportunities for inputs.

 

Mr Robertson asked if the Chairperson could assure the Committee that the process was constitutional.

 

Mr Botha asked if the Chairperson thought the President would sign the Bill into law.

 

Mr Sogoni responded to the proposal for adoption. He suggested that they look at the issues raised and correct and make the small amendments before adopting the Bill.

 

Ms Robinson asked if they should ask for another legal opinion on the constitutionality of the provinces not having held public hearings. Was there any point in passing the Bill if it was not perfect. If there were major issues that needed to be looked at, why were they rushing it? She was aware that they were at the end of their term, but if they continued, knowing that the next Parliament would have to review the issue, was the Committee not compromising itself?

 

Mr Goeieman remarked that after all the observations were made and the issues to be reflected on had been raised, they should come to a conclusion, as the Chairperson suggested. He seconded the move for adoption of the Bill. The delegates had been conferred with the authority to vote in favour of the Bill. If Kwazulu-Natal did not do that, then they were just one out of nine and could not prevent the Bill from being adopted.

 

The Chairperson said that balancing all the things that were problematic or unclear, if they did not agree on the Bill now, they would be taking ten steps backward. He suggested that the Committee state that the Fourth Parliament must deal with the problematic issues as they arise.

 

Ms Mchunu stated that the submission of Kwazulu-Natal should be heard.

 

The Chairperson reported that a letter had been submitted by the Secretary of the Kwazulu-Natal Legislature to the Acting Secretary of the NCOP, expressing concern with the process that had been followed with this Bill. They requested clarification on the matter. This letter had received a response that the Committee would proceed that day to consider the final mandates on the Bill.

 

The KZN letter from its finance committee stated” It wishes to express its profound concern with the process that had been followed in consideration of the Bill. Legal advice had been sought on the matter and I attach herewith a legal opinion by one of the legislature’s legal advisors. As could be seen, it expresses the view that the process of bypassing the negotiating mandate and shortening the time given to the provinces to consider the Bill was constitutionally challengeable. The committee had not been able to conclude its discussion on the final mandate on the Bill as yet. In the interests of not delaying the passage of the Bill, the committee had agreed that it would try to get a mandate to the NCOP as soon as possible. The committee is, however, of the view that it would not be prejudiced by any unlawful and unprocedural action taken by the NCOP and request that the matter be taken further by the Speaker of the Legislature. I trust that the above is in order. Signed Mrs B Scott, Chairperson of the Committee.

 

Voting on the Bill
The Chairperson asked that the Committee to agree to pass the Bill as they were scheduled to have the debate on 17 February 2009.

 

Mr Botha proposed that the Chairperson should make the statement on the adoption of the Bill.

 

The Chairperson agreed and clarified that the Bill would be adopted with the amendments contained in the “Proposed Amendments to the Financial Management of Parliament Bill” document.

The Bill was accepted.

 

Money Bills Amendment Procedure and Related Matters Bill

The Chairperson commenced the page by page consideration.

Mr Botha pointed out that this was a Section 75 Bill. As such, any amendments made by the Select Committee have to be referred back to the National Assembly. This meant that the Bill could not be passed now. As there was the possibility that the Bill might come back to the NCOP again, he asked for guidance as to the envisaged timeframe for the completion of the process. If the NA did not agree to the amendment, the Bill would have to come back and there was also the possibility of arbitration. He proposed that they adopt the Bill, as is.

 

Adv Jenkins replied that the amendments the Committee had proposed to the Financial Management of Parliament (Section 76) would go back to the National Assembly. If they accept those changes, the Bill would be sent to the President for assent. If they disagreed with those changes, the Bill would go to mediation.

He said for the Money Bills Amendment Procedure and Related Matters Bill (Section 75), if the amendments made by the Committee  were accepted by the National Assembly, it would be sent to the President for assent. If the NA disagreed, the NA could overrule it and let the Bill lapse.

If this happened after Parliament was dissolved, it was of no consequence. In terms of the Constitution, the NA remained competent to function until the day before polling commenced. The NCOP remained competent to function until the new permanent delegates were appointed. Therefore the NCOP remained competent to function even after the elections.

 

The Chairperson responded that there were still some fundamental issues on the Bill. These issues were: norms and standards for provinces and the appointment of the Director of the Parliamentary Budget Office (PBO). He referred to Clause 15(5)(a), specifically that the Director was to be appointed by a resolution of both Houses. The only other appointment made by a resolution of both Houses was that of the Secretary of Parliament. He felt that the implication was that the Director of the PBO was equal in status to the Secretary of Parliament. They were “creating a monster”. Furthermore a committee of Parliament had to sit to effect this appointment. If they introduced that, it would imply that the Director of the PBO would not technically have to account to the Secretary of Parliament. The terms of employment would be worked out by a committee, not the Secretary of Parliament. The budget of the PBO would ordinarily come from Parliament and it was not clear how a dispute between the PBO Director and the Secretary of Parliament would be resolved, should one arise in terms of the budget. They were going to pass the Bill. But members needed to consciously consider those issues.

 

Mr Sogoni stated that the PBO was acceptable in principle. He suggested that Clause 15(5) downward could be removed as they could not consciously adopt a situation where there were two Secretaries to Parliament. There was co-operation of the sub-offices in Parliament, but they should not elevate the Director of the PBO to the level of the Secretary of Parliament.

 

Mr Goeieman agreed. One could not have two Secretaries. The role of the Director was made clear in the Bill and could not be equated, in role and functions, to the Secretary. It was in fact necessary for the Director to report to the Secretary. If this inconsistency meant that they would have to send the Bill back, they would have to do that, as the Committee should not pass a second bill in the same manner as the Financial Management of Parliament Bill. This would undoubtedly tarnish the Committee’s clean record.

 

Ms Mchunu commented that the employment rules of the public service must be followed. If not, it would be very difficult to discipline the Director of the PBO.

 

Adv Jenkins responded that the lines of accountability should be kept clear. He therefore suggested that Clause 15(1) should stipulate that the Secretary must establish the PBO and Clause 15 provide for full accountability for the functions already set out. The Secretary to Parliament would then be the Accounting Officer for the PBO. In addition to removing the suggested clauses, these changes should prevent confusion between the status of the Director and the Secretary.

 

The Chairperson recommended that the whole chapter on the Division of Revenue Bill (Clause 9 – Passing of the Division of Revenue Bill) should be taken out of the Bill. This clause outlined an existing practice on the Division of Revenue Bill. As it was a Section 76 bill, committees would not change their way of dealing with it. There was already a process and cycle in use and he asked if the Committee would agree to the recommendation, as it was a matter they could not negotiate.

 

A big issue in Clause 11(3)(d) considering regional and international tax trends. He asked how the committee could achieve this in the regional bodies of the Southern African Development Community (SADC) and the Southern African Customs Union (SACU). The other tax regimes in the region were generally very loose. South Africa was the exception with a very strong tax regime. What was meant by the clause.

 

Adv Jenkins responded the provision came from a proposal made by the National Treasury – to have specific tax principles ingrained in the consideration of revenue bills. He agreed that it was somewhat generic to state this when it was true that South Africa had a much stricter tax regime than many of the SADC and SACU countries. They were left with a principle that was probably more applicable to the EU. Did it mean that South Africa would have to relax tax regulations and would Parliament then have the liberty to relax the tax regime. The clause did create a certain ambivalence and the question arose as to whether South Africa should be bound by regional implications.

 

The Chairperson noted that the President had recently rejected the pegging of the Zimbabwean dollar against the Rand. This was a complicated matter and warranted more work.

 

The Chairperson pointed out that another major issue here was that the Bill had not been costed. A general statement was made concerning the financial implications of the establishment of the PBO. This was the first thing to do when a Bill was drafted. All of the issues the Committee had made were then passed on to the legal advisor for consideration.

 

Mr Sogoni referred to Clause 12 and the timeframes envisaged therein. He was not sure from where the timeframes came. He suspected that they were putting themselves in a tight corner that may lead to the danger of making a mockery of the legislation. He suggested that those timeframes be shifted to the regulations, rather than being in the body of the Bill.

 

The Chairperson recalled that the National Treasury and the People’s Budget Campaign had raised the tight time frames at the public hearings. He asked if 30 days for public participation would be problematic. In terms of the response of the Minister, he proposed that the original two days allowed be increased to seven days.

 

The members agreed.

 

Adv Jenkins responded that the time schedule the Portfolio Committee on Finance had in mind was attached to that Committee’s Report. All time frame changes would have a knock-on effect for the schedule. He would consider the changes. The alternative to setting strict timeframes would be to leave it to the rules. The cycle was fixed and there would only be so many days available in the year to complete the work. He would look at both the options.

 

Adoption of Bill
Mr Kolweni moved for adoption of the Bill.

 

Mr Robertson seconded.

 

The Bill was adopted with amendments.

 

The meeting was adjourned.

 
Appendix:

Report of the Select Committee on the Financial Management of Parliament Bill [B74 – 2008] (National Assembly – section 76(1)):

 

The Select Committee on Finance, having considered the above-mentioned Bill, referred to it and classified by the JTM, reports that it has agreed to the Financial Management of Parliament Bill (National Assembly - section 76(1)) with amendments [B74A – 2008].

 

Report of the Select Committee on Finance on the Money Bills Amendment Procedure and Related Matters Bill [B 75B—2008] (National Assembly – section 75), dated 10 February 2009:

 

The Select Committee on Finance, having considered the Money Bills Amendment Procedure and Related Matters Bill [B 75B—2008] (National Assembly – sec 75), referred to it and classified by the JTM as a section 75 Bill, reports that it has agreed to the Bill with proposed amendments:

 

Long title

 

1.                   On page 2, in the long title, after “Parliament” to insert “and for norms and standards for amending money Bills before provincial legislatures”.

 

Clause 4

 

1.   On page 4, in line 18, after “amendments to“, to omit “the Division of Revenue Bill,”.

 

Clause 8

 

1.On page 6, in line 26, after “within” to omit “16” and to substitute “30”.

 

2.On page 6, in line 49, after “at least” to omit “two” and to substitute “seven”.

 

3.On page 6, in line 55, after “within” to omit “16” and to substitute “30”.

 

Clause 9

 

1.            On page 7, from line 6, to omit the whole of clause 9.

 

Clause 12

 

1.On page 9, in line 46, after “at least” to omit “2” and to substitute “seven”.

 

2.On page 9, in line 54, after “at least” to omit “4” and to substitute “seven”.

 

3.On page 10, in line 14, after “at least” to omit “4” and to substitute “seven”.

 

Clause 15

 

1.              On page 10, from line 44, to omit “There is hereby established a Parliamentary Budget Office”, and to substitute “The Secretary to Parliament must establish a budget office within the administration for Parliament”.

 

2.On page 10, in line 45, after “provide” to omit “independent,”.

 

3.On page 11, from line 10, to omit subclauses (3) – (16).

  

New clause

 

1.On page 11, after clause 15, to insert the following new clause:

 

Norms and standards for provincial legislatures

 

16. Provincial legislatures must adhere to the norms and standards for amending money Bills set out in the Schedule.

 

New Schedule

 

1.   To insert the following schedule after clause 16:

 

“Schedule

 

Norms and standards for provincial legislatures

 

Legislation enacted by a provincial legislature to provide for a procedure to amend money Bills must provide that the purpose of amending money Bills is to give effect to resolutions of the legislature on oversight, and must comply with the following principles:

 

(a)   A money Bill sent to the Premier for assent must be consistent with:

(i)           the relevant fiscal framework adopted by Parliament; and

(ii)         the relevant Division of Revenue Bill adopted by Parliament.

 

(b)   When considering an amendment a provincial legislature or any of its committees must ensure that there is:

(iii)        an appropriate balance between revenue, expenditure and borrowing;

(iv)        ensure that debt levels and debt interest cost are reasonable;

(v)          ensure that the cost of recurrent spending is not deferred to future generations;

(vi)        ensure that there is adequate provision for spending on infrastructure

(vii)       development, overall capital spending and maintenance;

(viii)     consider the short, medium and long term implications of the fiscal framework, division of revenue and national budget on the long-term growth potential of the economy and the development of the country;

(ix)       take into account cyclical factors that may impact on the prevailing fiscal position; and

(x)         take into account all public revenue and expenditure, including extra budgetary funds, and contingent liabilities.

 

(c)   In amending revenue Bills and revenue proposals a provincial legislature and its committees must:

(i)           ensure that the total amount of revenue raised is consistent with the fiscal framework approved by Parliament and the relevant Division of Revenue Bill adopted by Parliament;

(ii)         take into account the principles of equity, efficiency, certainty and ease of collection;

(iii)        consider the impact of the proposed change on the composition of tax revenue with reference to the balance between direct and indirect taxes;

(iv)        consider regional and international tax trends; and

(v)          consider the impact on development, investment, employment and economic growth.

 

(d)   The standing rules of the provincial legislature must provide for timeframes to introduce and consider money Bills, with or without amendments, with due regard to

(i)           its constitutional obligation to facilitate public involvement in its legislative and other processes of the legislature and its committees; and

(ii)         comments from the member of the Executive Council who is responsible for financial matters in the province.

 

(e)   The report of a committee of the provincial legislature that proposes amendments to the provincial annual budget must, in respect of each amendment:

(i)           indicate the reason for such proposed amendment;

(ii)         demonstrate how the amendment takes into account the broad strategic priorities and allocations of the relevant budget;

(iii)        demonstrate the implications of each proposed amendment for an affected vote and the main divisions within that vote;

(iv)        demonstrate the impact of any proposed amendment on the balance between transfer payments, capital and recurrent spending in an affected vote;

(v)          set out the impact of any proposed amendment on service delivery;

(vi)        set out the manner in which the amendment relates to prevailing departmental strategic plans, reports of the Auditor General, committee reports adopted by the provincial legislature, reports in terms of section 32(2) of the Public Finance Management Act, annual reports and any other information submitted to the provincial legislature or committee in terms of the standing rules or on request; and

(vii)       include any responses from the member of the Executive Council who is responsible for financial matters in the province or any other member of the Executive Council.

 

(f)     The report of a committee of the provincial legislature that proposes a conditional appropriation of a sub-division of a main division within a vote to ensure that the money requested for the main division will be spent effectively, efficiently and economically must: ;

(i)           consider comments from the member of the Executive Council who is responsible for financial matters in the province or any other member of the Executive Council; and

(ii)         specify the conditions that need to be met before the a provincial legislature may resolve to release the funds.

 

(g)   A provincial legislature may appropriate an amount specifically and exclusively for a purpose mentioned under a main division within a vote.

 

(h)   A provincial legislature must pass, with or without amendments, or reject the provincial annual budget within four months after the start of the financial year to which it relates.

 

(i)     Notwithstanding any provision in this legislation, a provincial legislature or a committee may consider an amendment to a money Bill proposed by the member of the Executive Council who is responsible for financial matters in the province in order to make technical corrections to the Bill.”

 

 

MEMORANDUM ON THE OBJECTS OF THE MONEY BILLS

AMENDMENT PROCEDURE AND RELATED MATTERS BILL, 2008

 

1.              On page 12, at “2. OBJECTS OF THE BILL”, after the last sentence to insert “The Bill requires that legislation enacted by a provincial legislature to provide for a procedure to amend money Bills must comply with norms and standards set out in the Schedule.”

 

2.On page 12, at “3. CONTENT OF THE BILL”, to omit item 3.9.

 

3.              On page 13, at “3. CONTENT OF THE BILL”, after item 3.15, to insert the following new item: “Clause 16 provides that provincial legislatures must adhere to the norms and standards for amending money Bills set out in the Schedule.”

 

4.              On page 13, at “3. CONTENT OF THE BILL”, after item 3.16, to insert the following new item: “The Schedule provides that the legislation of a provincial legislature which provides for a procedure to amend money Bills must provide that the purpose of amending money Bills is to give effect to resolutions of the legislature on oversight, and must comply with the same principles found in the provisions of the Bill.”

 

5.              On page 13, at “6. FINANCIAL IMPLICATIONS FOR THE STATE”, after “budget of Parliament.” to omit the following: “Although the salary and allowance of the Director is linked to the senior management level in the public service, and as such can be estimated accordingly, costs of other personnel and incidental costs such as information systems and consultancy fees depend on the range of functions required from the Office from year to year.”

 

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