ATC151124: Report of the Standing Committee on Appropriations on the Finance Bill [B31-2015] (National Assembly – Section 77), dated 18 November 2015
REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE FINANCE BILL [B31-2015] (NATIONAL ASSEMBLY – SECTION 77), DATED 18 NOVEMBER 2015
Having considered the Finance Bill [B31 – 2015], referred to in terms of Section 13 of the Money Bills Amendment Procedure and Related Matters, Act No. 9 of 2009, the Standing Committee on Appropriations reports as follows:
Section 213(2) of the Constitution of the Republic of South Africa, provides that money may be withdrawn from the National Revenue Fund only in terms of an appropriation by an Act of Parliament. In addition, Section 34(1)(a) and (b) of the Public Finance Management Act No.29 of 1999 outlines the procedure that should be followed for authorisation of unauthorised expenditure as a direct charge against the National Revenue Fund.
In following this procedure, the Standing Committee on Appropriations, hereinafter referred to as the Committee, also took into account Section 13 (2) of the Money Bills Amendment Procedure and Related Matters Act, No. 9 of 2009 which states that the Committee has a responsibility to hold public hearings on any money bills and report thereon to the National Assembly. To this end, radio promotions at local radio stations ran from 02 to 06 November 2015 inviting general public comments on the Finance Bill, hereinafter referred to as the Bill, and no submissions were received. In addition to the National Treasury which briefed the Committee on the Bill in its entirety, the Financial and Fiscal Commission (FFC) was also invited for comment.
- Background and Overview of the Finance Bill
This Bill is aimed at implementing the recommendations recorded in the first, second, third and fourth reports of the National Assembly’s Committee on Public Accounts, dated 3 February 2015, that Parliament authorises the unauthorised expenditure and approve a funding mechanism. The recommendations were adopted by the National Assembly on 23 June 2015.
In summary, a total amount of R110.22 million in unauthorised expenditure was incurred by the Presidency, Department of Women, Children and people with Disabilities, Social Development and Trade and Industry in different years.
Of the total unauthorised expenditure incurred, R46.67 million refers to overspending that will result in additional allocations to votes while the remaining R63.55 million is a reimbursement to votes that previously surrendered funds to the National Revenue Fund.
2.2 Provisions of the Finance Bill
The total amount of R46.6 million referred to in Schedule 1 to the Bill, is classified as unauthorised expenditure in terms of section 34(1)(a) of the PFMA due to the overspending of the vote of, namely:
- Presidency (2008/09) - R14.51 million - The overspending was due to National orders ceremony; legal fees; travel and subsistence costs and leave gratuity.
- Presidency (2010/11) - R28.43 million - The overspending was as a result of creation of additional Ministries for National Planning, and Performance Monitoring and Evaluation; legal fees; travel and subsistence; Presidential hotline and leave gratuities.
- Women, Children and People with Disabilities - (2010/11) - R3.73 million - The overspending was due to operational expenditure not initially provided for such as the hosting national days and travel and subsistence.
The amount of R63 547 218.15 referred to in Schedule 2 to the Bill, is unauthorised in terms of section 34(1)(b) of the PFMA due to an overspending of main divisions (programmes) in the vote of Trade and Industry (R37 379 505.54) and the vote of Social Development
(R26 167 712.61), during the 2004/05 and 2007/08 financial years, respectively.
- Trade and Industry (2004/05) - R37.38 million - The overspending was due to irrecoverable general export incentive scheme debt of R31.1 million and legal award of R6.2 million for non-detection and non-prevention of the destruction of the property at Pumlani Lodge.
- Social Development (2007/08) - R26.17 million - The overspending was due to an increase in expenditure on social assistance grants, which was driven by an increase in the number of child support grant beneficiaries.
2.3 Hearings on the Finance Bill
In its submission, the Financial and Fiscal Commission (FFC) indicated that it supports the condonement of unauthorised expenditure as provided for in the Finance Bill though it would like to emphasise that dealing with unauthorised expenditure should not be dragged out unnecessarily as executing consequences for unauthorised expenditure may be more difficult.
National Treasury’s submission to the Committee on the Finance Bill outlined the following key issues:
- For the Presidency, expenses incurred in 2010/11 were for travel and subsistence stemming from increasing international commitments in conflict resolution processes on the continent which were not planned for and fell outside of the adjustments budget process
- The most significant cost relates to the DTI’s General Export Incentive Scheme. The scheme had loose documentary requirements with subsequent audit findings related to over claiming and raised debtors. The debtors were tracked and many could not repay the full amount due to their financial circumstances and some debts were written off.
- The Department of Trade and Industry is the custodian of the Bilateral Investment Treaties and thus rulings against the state are paid from the Department’s allocation. In this instance, the Tribunal had found the State liable and awarded damages following damage to property.
- For the Department of Social Development, overspending in the social assistance budget was under the Old Age, Foster Care, Care Dependency and the Child Support Grant. The main driver of over-spending was the Child Support Grant (CSG). This can be attributed to CSG’s age extension policy at the time as CSG age-eligibility was extended from 11 year olds up until 14 years old. This led to large fluctuations in reported CSG beneficiaries leading to uncertainty on year-end CSG numbers and thus affecting budget estimates. However, it is important to note that the overspending constituted less than 0.1 per cent of social assistance budget.
3. Committee Findings and Observations
Having considered all the submissions made by the above stakeholders on the Finance Bill, the Standing Committee on Appropriations makes the following findings and observations:
3.1 The Committee emphasises that for public financial management to remain responsive, it is important that the processing of unauthorised expenditure should be expeditious.
3.2 The Committee views the need for strengthened planning mechanisms over resource allocations to all the affected Departments as critical especially given the budget reprioritisation emphasis contained in the 2016 Medium Term Budget Framework.
The Standing Committee on Appropriations, having considered the briefings and comments by invited stakeholders on the Finance Bill, recommends as follows:
4.1 That the Minister of Finance should ensure that the National Treasury continues to support and enhance budget planning systems in the Presidency, Department of Trade and Industry and the Department of Social Development.
5. Committee Recommendation on the Bill
Notwithstanding the recommendation in section 4 above, the Standing Committee on Appropriations recommends that the National Assembly adopts the Finance Bill [B31-2015], without amendments.
The responses to the recommendations as set out in section 4 above by the relevant Executive Authority must be submitted to Parliament within 60 days of the adoption of this report by the National Assembly.
Democratic Alliance (DA) reserves its right not to support the Bill.
Report to be considered.
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