Financial Management of Parliament Bill [B74-2008]

Meeting report

The Chairperson pointed out that the late adoption of the Financial Management on Parliament Bill by the NCOP on 18 February 2009, had necessitated this unscheduled meeting of the Portfolio Committee on Finance. There were only three NCOP amendments to be considered.

Adv Frank Jenkins, Parliamentary Legal Advisor, described the first amendment as:
Changing the name of the ‘joint committee’ to ‘oversight mechanism’. There would be a  consequent name change of Part 1 in Chapter 2 in the Arrangement of Sections and the consequent substitution of “oversight mechanism” for “joint committee” throughout Bill.

The Chairperson queried the motivation for this change.

Adv Jenkins responded that the Constitution provided for Parliament to establish an oversight mechanism to maintain oversight over the executive authority of Parliament. This oversight mechanism had been used in other legislation. The best example of that was its use in the Public Audit Act – the oversight mechanism established by that Act was the Standing Committee on the Auditor-General.
1 The substitution constituted a textual amendment and extended to all instances where reference was made to the ‘joint committee’.
2 Omission of Clause 4(1)(a) and (b) dealing with the functions of the oversight mechanism.
The rationale for this change rested on the heading of joint committee. The current Clause 4(1) stated that the joint committee of Parliament must maintain oversight of the financial management of Parliament. The Select Committee was of the opinion that the drafts of the strategic plan, annual performance plan, budget, adjustments budget and draft revisions had little to do with oversight of financial management. The first reason was that the annual report, audited financial statements and audit report were the documents necessary for evaluation of financial management. In his opinion, the more important reason was contained in Chapter 3 – Clause 13. This stated that the executive authority must oversee the preparation of Parliament’s strategic plan, annual performance plan, budget, adjustments budget and were also responsible to table the strategic plan and annual performance plan to Parliament. The question then arose: if the executive authority was responsible for overseeing the preparation of these documents, right up to the point where they are tabled in Parliament; what role could there be for the joint committee (oversight mechanism)? To remove that confusion, the Select Committee proposed the removal of Clauses 4(1)(a) and (b). It was important to note that the implication of the consideration of anything by a committee was that they would report to the House. The way the Select Committee got around this confusion was to recognise that there was an accepted budget preparation process, where the executive authority prepared and tabled these documents and that the process should be retained.

Mr K Marais (DA), asked what the task of the oversight mechanism would then be. The objective was that the oversight mechanism should have insight into the strategic plan in order to be informed and advise on it. Surely they had to ensure that the preparation of the documents conformed to prudent financial management principles. He asked if the oversight mechanism would get instructions or guidelines. He further asked if the oversight mechanism was merely a rubber stamp or an audit committee.

Adv Jenkins responded there was provision for a standard audit committee (Clauses 47 and 48). The specific task of the oversight mechanism was to consider the financial management. They would, first and foremost, consider the annual report containing the audited financial statements and the audit report of the Auditor-General. If one looked at what the annual reports had to contain - Clause 55(3) stipulated that they should be based on the performance plan - this clarified that it was envisaged that the oversight mechanism would play a similar role to the Standing Committee on Public Accounts (SCOPA).

He was not sure if it was ideal to refer to a strategic plan to perform oversight of financial management. If the oversight mechanism wanted to, nothing stopped them from asking questions. These questions would be similar in their mandate to those asked by SCOPA. For example, SCOPA did not have the mandate to ask the Department of Defence if the equipment purchased was the right equipment for their job. SCOPA did have the mandate to question the procurement system if it did not comply with the PFMA and National Treasury regulations. The oversight mechanism’s role and mandate was similar to this.

Mr Marais noted the reference to Clause 17(1) which stipulated that the executive authority should refer the drafts of the strategic plan and annual performance plan and budget to the joint committee. He asked what the purpose of that referral was when these draft documents were removed from the mandate of the joint committee.

The Chairperson responded that the Select Committee had proposed to omit Clause 17(1).

Adv Jenkins replied that consequential to the changes in Clause 4(1)(a) and (b), Clause 17(1) became tautologous and so the Select Committee had decided to remove it. They had left the rest of the clause in tact: the process of submitting the budget and adjustments budget to National Treasury for inclusion in the Appropriations Bill. That was the line they wanted to draw between the oversight mechanism and the executive authority – to make the functions clear.

The third amendment was the omission of Clause 7(e) and (f). One had to read Clause 7 with Clause 69(1)(a)(i). This clause stipulated criminal sanctions for contravention of any of the provisions of Clause 7. The Select Committee saw the provisions of Clauses 7(e) and (f) as ordinary management functions that should not lead to criminal sanctions if contravened. A manager could be fired if he did not perform these duties, but he should not go to jail. The provisions in Clause 7(e) and (f) would be included in regulations and not enforced by criminal sanctions.

Discussion
Mr N Singh (IFP) referred to a submission on the Bill from the Office of the Auditor-General. He asked if these proposals had been considered.

Adv Jenkins replied that the Select Committee had considered those submissions in a video- conference with the Office of the Auditor-General in Pretoria and did not incorporate those changes. He was very familiar with the submission and recalled that one issue raised was access to the confidential part of the Register of Members’ Interest. The confidential part concerned the interests of Members’ spouses and children. It was confidential and was not an audit issue for the Auditor-General.

Mr Marais referred to the introduction of the Bill and remarked that there was no reference to an oversight mechanism being responsible for the financial management of Parliament. In view of the fact that the omission of 17(1) meant that these matters would no longer be referred to the joint committee/oversight mechanism. He asked how they would then be able to do that job.

Adv Jenkins referred to Clause 55, which stipulated that the annual report must be based on the annual performance plan. For the oversight mechanism to make a judgment on the financial management, they would have to have insight into the performance plan. The Budget was an open document, formed part of the Appropriations Bill and would have to be in the Annual Report. The issue of transparency really pertained more to the question of whether they would have all the documents necessary to perform oversight of financial management. Clause 4(4) stated that the oversight mechanism had the power of committees of Parliament, which empowered them to summon any document or person before them to give evidence. This meant that they could get access to anything that was not initially voluntarily provided to them.

Mr B Mnguni (ANC) stated that the three amendments did not water down the principles of accountability and transparency in the Bill. He proposed that the Committee vote to pass the Bill.

The Chairperson added that the current provisions protected members from conflict of interest. The Appropriations Committee could effectively amend the Budget in their favour. This might have posed serious problems and added that he followed the logic of the separation of the joint committee and the oversight mechanism.

Ms N Mokoto (ANC), referred to the A-G proposal on access to the Register of Members' Interests. This pertained to issues of procurement in order to check conflicts of interests. She was of the opinion that the A-G should have access to the relevant documents. The confidential part on members' spouses and children was also pertinent to the Prohibition on Contracts of Clause 46, which set out who was not allowed to contract.

Adv Jenkins responded that there was no prohibition on members' spouses contracting with Parliament, as long as this complied with the provisions of Clause 46.

Ms Mokoto pointed to instances where staff contracted with Parliament. This issue extended further than to just Members of Parliament. The prohibition should be opened up to include parliamentary staff. This was pertinent as there were matters of direct interest and perhaps there should be a form of declaration.

The Chairperson asked Members to concentrate on the three NCOP amendments under consideration. The other issues could be captured in recommendations to the next Parliament.

Mr Marais stated that he could understand the omission of Clause 4(1)(a) and (b), but struggled to understand the rationale behind the omission of 17(1). He asked if this was not an opportunity for the oversight mechanism to acquaint themselves with the draft documents. It would disadvantage the oversight mechanism if there were things in the drafts they did not agree with.

The Chairperson responded that the rationale of the NCOP was to remove the oversight mechanism from the preparation of the budgets and other documents. This part of the process would be drawn up by the executive authority. When the time came for Parliament to account, all the documents would be provided to the oversight mechanism for the evaluation of the financial management.

Ms J Fubbs responded that they should engage further on the separation between preparation and oversight of budgets, as there appeared to be some merit in that.

Adv Jenkins replied that this summation was correct and in line with the thinking of the NCOP. One had to look at what was contained in the Budget and the fact that it provided for the outer years of the Medium Term Expenditure Framework (MTEF). This meant that one could see where Parliament was going with its spending.

He commented on the issue of conflict of interest of Members amending a budget from which they could potentially benefit. The provisions of the Money Bills Amendment Procedure and Related Matters Bill clearly connected to oversight. There was a prerogative on the oversight mechanism to engage properly with the document provided and request the documents that are not given or summon the documents, Parliament did not want to give. In that context, the oversight mechanism would have to come up with resolutions to point out problems in Parliament's budget.

An issue that he had advised the Select Committee on was the treatment of unspent funds. This Bill provided for Parliament to retain its unspent funds. There had been much debate on this in the Select Committee and there was a specific provision for disclosing all revenue sources, including unspent funds. If Parliament wanted to do anything with those unspent funds, they would have to do that by a resolution that must come from the oversight mechanism. There was no watering down of accountability due to the NCOP amendments, legally.

Dr D George (DA) recalled discussions on the Bill in the Portfolio Committee about the understanding that Parliament was an unusual type of institution. It was not just another department. That was how they approached the changes made to the Bill. When the Committee considered the changes proposed by the NCOP, they must bear that in mind.

Ms Mokoto disagreed about the removal of Clause 17(1). She noted that Parliament would, as a whole, always retain the role of oversight of spending and checking that value for money was obtained from this expenditure. On the joint committee issue, she gleaned from Clause 17(1) that the role of the executive authority was to draft the strategic plan, annual performance plan and budgets and once tabled before Parliament, these documents would be referred to the joint committee. Parliament's role here would be to amend the strategic plan if necessary and monitor the implementation of the strategic plan and budgets. The joint committee would exercise oversight and report to Parliament, as it was a committee of the two Houses.

The Chairperson recalled that there was a complaint that MPs were not involved in budget preparation at all. That was the initial reasons for these clauses. The opinion of the Select Committee was that Members should get out of the preparation of the budget documents and allow that to be the prerogative of the presiding officers and take that for consultation with the Minister of Finance. The role of Members would then be to oversee the implementation of the budget.

The original view of the Portfolio Committee was that this was inadequate and Members wanted to be involved in the budget preparation. These were the opposing views on this issue and Members had to decide whether to accept or reject the amendments.

Adv Jenkins replied that the Bill passed by the NA stated that the executive authority would oversee the preparation of the strategic plan, annual performance plan, budget and adjustments budget. It was somewhat confusing to refer draft budget documents to the oversight mechanism. Clause 4(1)(a) and (b) were tautologous and this extended to Clause 17(1).

When oversight was performed, those documents will be available to the oversight mechanism. If Parliament wanted to amend its budget, they would have to have all the documents in terms of the Money Bills Amendment Procedure and Related Matters Bill. The current budget process provided for the parliamentary administration to prepare the budget, which was then given to the executive authority. The executive authority presented that budget to the Parliamentary Oversight Authority, chaired by the presiding officers. Although this was not a big committee, it was a multi-party forum. After that the budget went to the Budget Forum - made up of administrators and top management and senior MPs. Thereafter the budget was finalised and taken to National Treasury. This was where the role of the executive authority would terminate and the oversight mechanism would then call the executive authority to account in their oversight of the financial management.

Mr Marais pointed out that he had not received a response about Clause 17(1). He was still of the opinion that the omission of the clause would place the onus on the oversight mechanism to ensure that they get the information. He would prefer that a provision stated that this information must be disclosed to give the oversight mechanism background to the budget documents.
He noticed that the heading of clause still included: "drafts" and that this needed to be corrected.

Adv Jenkins replied that clearly defining responsibilities and functions was a very important governance principle. When one stated in legislation that a draft must be referred to a committee, it created the impression of an academic reading of the Bill. There was no purpose set out in the Bill for the referral of drafts to the oversight mechanism. The process would run as follows: the oversight mechanism would have input into the draft budget documents, these documents would then be reported to the National Treasury by the executive authority. If the process worked this way, it would create the impression that the executive authority was just a messenger. This fed into the confusion between the roles in terms of accountability. That was a danger whenever oversight is contemplated. There was an ambivalence in that the same people who helped to prepare the budget also had oversight of it.

The heading of Clause 17 was a technical oversight. However, the heading of a provision in law did not determine meaning, unless there was confusion in the law - within the Bill. If it did not change the meaning of the clause or the Bill, a technical amendment could be made.

Ms Fubbs agreed that the heading could be dealt with as a technicality. She noted that although this Bill had a longer life, the Money Bills Amendment Procedure and Related Matters Bill process was virtually parallel. When the Financial Management of Parliament Bill was introduced, the Committee was not yet certain of the ability to amend money bills. The question of overseeing drafts corresponded to the Budget Council, where one had the opportunity to push through things like the Medium Term Budget Policy Statement (MTBPS). Once the ability of Parliament to amend money bills was implemented, the ability to do oversight of draft budget documents might not be necessary.

Mr M Mbili (ANC) referred to the analogy used in the Select Committee of the conflict caused by the same body being both referee and player. He asked why the oversight mechanism had to be part of the process from the inception, when they also had to conduct oversight over the financial management. If that was addressed, all the other issues would fall away. This oversight mechanism would then also have the power to make changes if they were warranted.

The Chairperson responded that this was a critical point. Parliament had oversight over its own financial management but also wielded the power to amend the budget of Parliament. It would therefore not even be necessary to consider the draft budget of Parliament, due to this power to amend the budget of Parliament. He did not think the NCOP amended Bill watered down anything.

Voting on NCOP amendments
The Chairperson asked Members to take a decision of the Bill.

The Members agreed to adopt the Bill.

The Chairperson read the report of the Committee.

The meeting was adjourned.