Audits, Annual Reports and BRRRs
Parliament will be particularly busy when it resumes business for the fourth and final term as it deals with the annual task of poring over the Annual Reports of Departments and public entities within the ambit of each parliamentary committee. Together with these Annual Reports go the annual audited financial and non-financial performance results of the Departments and entities. This is when Parliament, and the public, find out whether the funding appropriated to Departments and entities have been used as intended. Looking at the public audit in more detail, the audits examine whether there is:
- Fair presentation and absence of significant misstatements in financial statements
- Reliable and credible performance information for predetermined objectives
- Compliance with all laws and regulations governing financial matters
It is during this process that the importance of parliamentary oversight and accountability will be on full display, or ideally should be. Committees will hold the Departments and entities they oversee accountable for audit outcomes achieved particularly when it comes to overall non-financial performance (predetermined objectives) and expenditure of funds. Committees and MPs focus on the following themes, although not an exhaustive list, during the Annual Report hearings:
- Quality of performance information
- Technical quality of Annual Reports
- Economy, efficiency and effectiveness of service delivery
- Implementation of the Department’s/entity’s service delivery improvement plan
- Evaluating management’s explanations for why service delivery was not in line with targets
- Financial probity and corporate governance
- General Report of the Auditor General
- Compliance with the PFMA
- Unauthorised and irregular expenditure
- Fruitless and wasteful expenditure
- Internal control and risk management systems
- Supply chain management and debt write offs
- Major financial losses suffered
- Payments within 30 days to service providers
It is particularly on the point of irregular, fruitless and wasteful expenditure picked up during the audits that the role of Parliament’s Standing Committee on Public Accounts (SCOPA) is paramount. SCOPA may investigate matters during hearings and the accounting officer and/or Minister must explain how problems highlighted by the AGSA are going to be responded to.
Committees use the time spent analyzing Annual Reports and audit outcomes, and hearing directly from the Departments and entities themselves, to formulate Budgetary Review and Recommendation Reports (BRRRs) to assist Departments and provide recommendations for the improvement of performance. The BRRRs are a key oversight mechanism as they help ensure that amendment debates are based on a reliable analysis of departmental performance. The BRRR may include recommendations on future use of resources. The Reports provide insight on what Departments have done i.e. services delivered and those not. The BRRR also reflects on whether the Committee, after considering relevant reports, is satisfied with the Department’s performance.
This process is followed by the Medium Term Budget Policy Statement (MTBPS) presented to Parliament in October each year. The MTBPS includes spending estimates for the first half of the year, adjustments to the proposed revenue and spending estimates for the second half of the year and outcomes of the previous year. Together with the MTBPS come the Division of Revenue Amendment Bill and Adjusted Appropriations Bill.
Spare a thought for the MPs and parliamentary staff as they undertake this important task – there are sure to be many lengthy meetings and equally lengthy PMG reports