ATC191209: Report of the Joint Standing Committee on the Financial Management of Parliament on the Parliament of the Republic of South Africa’s 2018/19 Annual Report, dated 4 December 2019

Joint Standing Committee on Financial Management of Parliament

Report of the Joint Standing Committee on the Financial Management of Parliament on the Parliament of the Republic of South Africa’s 2018/19 Annual Report, dated 4 December 2019

 

The Joint Standing Committee on the Financial Management of Parliament, having considered the Parliament of the Republic of South Africa’s 2018/19 Annual Report, reports as follows:

 

1.         INTRODUCTION

1.1        Section 4 of the Financial Management of Parliament and Provincial Legislatures Act, No 10 of 2009 (FMPPLA) provides for the establishment of an oversight mechanism to maintain oversight of the financial management of Parliament. The Joint Standing Committee on the Financial Management of Parliament (the Committee) was established in terms of the Joint Rules of Parliament. The Committee has the powers afforded to parliamentary committees under sections 56 and 69 of the Constitution. In addition, section 4 of the FMPPLA mandates the Committee to, amongst others, consider Parliament’s Annual Report.

 

1.2        Parliament’s 2018/19 Annual Report was tabled on 30 October 2019, and referred to the Committee on 3 September 2019 for consideration. In its consideration of the report, the Committee received input from the Auditor General of South Africa (AGSA), the Committee Researcher and the Committee Content Advisor. The Acting Secretary to Parliament—the accounting officer—and her senior management team appeared before the Committee in a meeting held on 6 November 2019 during which the institution’s performance for the period under review was interrogated.

 

1.3        This report should be read along with Parliament’s 2014-2019 Strategic Plan, the 2018/19 Annual Performance Plan and budget, as well as the institution’s 2018/19 Annual Report.

 

1.4        This report comprises four parts: Part A, containing a summary of the institution’s financial and performance information for the period under review; Part B, containing the Auditor General South Africa’s key findings; Part C, containing the Committee’s observations; and Part D, containing the Committee’s recommendations.

 

 

 

 

PART A:           Performance in the 2018/19 Financial Year

 

2.         Mandate

2.1        Parliament derives its mandate from:

-           chapter 4 of the Constitution of the Republic of South Africa, No 108 of 1996, which sets out its composition, powers and functions;

-           the FMPPLA which regulates the institution’s financial management;

-           the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009 which provides procedures to amend money bills; and

-           the Powers, Privileges and Immunities of Parliament and Provincial Legislatures Act, No 4 of 2004 which defines and declares the national and provincial legislatures’ powers, privileges and immunities.

 

2.2        Mission and vision

2.2.1     The institution has identified six values according to which it conducts its business: openness; responsiveness; accountability; teamwork; professionalism; and integrity.

 

2.2.2     In pursuit of its vision to be “activist and responsive” so as to improve the quality of life in South Africa and to ensure enduring equality, the institution has, as its mission, to provide:

                        -           a vibrant people’s assembly that intervenes and transforms society and                                      addresses the developmental challenges of the people;

                        -           effective oversight over the Executive by strengthening its scrutiny of actions                             against South Africans’ the needs;

                        -           their participation in the decision-making processes that affect South Africans’                            lives;

                        -           a healthy relationship between the three arms of the State in order to promote                             efficient, cooperative governance, and ensures appropriate links within the                                  region and the world; and

                        -           an innovative, transformative, effective and efficient parliamentary service and                            administration that enables Members of Parliament to fulfil their constitutional                             responsibilities.

 

 

2.3        Strategic Focus Areas: 2014-2019

2.3.1     The Fifth Parliament identified the following strategic focus areas:

-           strengthening oversight and accountability;

-           enhancing public involvement;

-           deepening engagement in international fora;

-           strengthening co-operative governance; and

-           assessing the impact of laws passed.

 

2.3.2     To achieve the above, the Fifth Parliament adopted the following strategic outcome-oriented       goals:

-           to enhance Parliament’s oversight and accountability over the work of the executive to ensure implementation of the objectives of the Medium Term Strategic Framework (MTSF) 2014-2019;

-           to co-operate and collaborate with other spheres of government on matters of common interest and ensure co-operative and sound inter-governmental relations;

-           to enhance public involvement in the processes of Parliament to realise participatory democracy through the implementation of the public involvement model by 2019;

-           to enhance parliamentary international engagement and co-operation;

-           to enhance the ability of Parliament to exercise its legislative power through consolidation and implementation of integrated legislative processes by 2019 in order to fulfil its constitutional responsibility; and

-           to build a capable and productive parliamentary service that delivers enhanced support to Members of Parliament in order that they may efficiently fulfil their constitutional functions.

 

3.         Financial performance

Parliament received an unqualified audit report with no material findings on performance information and compliance with laws and regulations. At the end of the period under review, Parliament had spent R2.430 billion of a final appropriation of R2.455 billion i.e. the institution underspent by R24, 885 million. Table 1 below provides an overview of Parliament’s expenditure per economic classification for the period under review.

 

Line Item	Final Budget R’000	Actual R’000	Variance R’000	Variance in percentage
Compensation of employees	R1, 019, 735	R962, 896	R56, 839	5.57%
Compensation of members	R493, 161	R469, 372	R23, 789	4,82%
Goods and Services	R463, 906	R521, 289	(R57,383)	(12, 37%)
Transfers to non-profit organisations	R455, 860	R454 327	R1,533	0.33%
Acquisition of property, plant and equipment	R19,172	R19,073	R99	0,52%
Purchase of intangible assets	R3,301	R3,293	R8	0,24%
Total	R2,455,135	R2,430,250	R24,885	1,01%

Table 1: Statement of comparison of budget and actual amounts (Source: Parliament of the Republic of South Africa, 2019)

 

3.1        Variances

The reported reasons for variances are outlined below.

 

3.1.1     The 6 per cent under-expenditure in relation to compensation of employees is ascribed to terminations, and the reversal of performance bonus in terms of an agreement with the labour union. The amount not spent was available in the 2019/20 financial year, as section 23(1) of the FMPPLA allows Parliament to retain unspent funds.

 

3.1.2     In respect of the compensation for members, the under-expenditure was ascribed to lower than expected salary increases for parliamentarians. The monies not spent are surrendered to the National Revenue Fund as required by section 23(4) of the FMPPLA.

 

3.2        European Union donations

3.2.1     In 2018/19 Parliament received R52 308 million in a donation from the European Union. The donation was made towards the deepening of public participation and representation, strengthening of the capacity in law-making and oversight, building an efficient and effective legislative sector, and strengthening the sector’s capacity to engage, participate in, and oversee international relations.

 

3.3        Disclosures

3.3.1     The institution reported no irregular expenditure in the 2018/19 financial year. The Governance Assurance Committee that was established in the previous year to ensure the effective processing of irregular expenditure and fruitless and wasteful expenditure, was still investigating the R366 thousand irregular expenditure reported in 2017/18.

 

3.3.2     The institution reported no cases of fruitless and wasteful expenditure in the 2018/19 financial year. However, the Governance Assurance Committee was still investigating the R298 000 such expenditure reported in the previous year.

 

3.4        Deficit

3.4.1     Parliament has recorded a deficit for the 2018/19 and 2017/18 financial years. Such deficit was accompanied by the reduction in cash and cash equivalents i.e. Parliament had reserves to the amount of R282 311 million in 2017/18, and this amount decreased to R148 145 million at 31 March 2019.

 

3.4.2     Parliament has recorded a net deficit of R1 468 billion i.e. its liabilities were greater than its total assets. This could be ascribed to the R1.2 billion provision made to fund the post-retirement medical aid benefits for current and former members of Parliament and provincial legislatures.

 

3.5        Cost-containment

3.5.1     The institution has in recent years implemented a series of cost containment interventions, including a drive to reduce its reliance on paper. Parliament introduced an electronic document distribution system that allows parliamentarians to access presentations and other parliamentary documents via an application installed on their telephones and other devices. By the end of the financial year 302 parliamentarians had had the application installed, and received training on its use. In the period under review the institution spent R3,253 million on computer software, including licence fees for the MyParliamentApp. Despite the introduction of the MyParliamentApp, the printing and stationery costs for the period under review remained high. In 2016/17 the monies spent on printing and stationery amounted to R14 425 million. In 2017/18 the amount came to R15 097 million. By the end of 2018/19 that amount had escalated to R15 725 million.

 

 

 

4.         Performance across programmes

The institution continued to improve its performance in 2018/19; it achieved 11 of the 14 key performance targets set for the period under review. This section summarises the purpose of each of the five programmes, as well as the reported performance against targets.

 

4.1        Programme 1:    Strategic Leadership and Governance

4.1.1     This programme provides for political and strategic leadership, governance and institutional policy, executive communication and co-ordination, and oversight of the development and implementation of Parliament’s strategic plan, annual performance plan and budget. Programme 1 comprises the Office of the Speaker of the National Assembly, the Office of the Chairperson of the National Council of Provinces (NCOP), the Parliamentary Budget Office (PBO), the still-to-be-established Treasury Advice Office and the Office on Institutions Supporting Democracy (OISD).

 

4.1.2     The main strategic objective under this programme was to improve independent, objective and professional analysis and advice related to the budget and other money bills tabled in Parliament by increasing advisory and analytical reports from 8 to 19 by 2019.

 

4.1.3     The institution had only one performance indicator for this programme, and exceeded the set target by a great margin, the PBO produced 36 analytical reports against the targeted 24. The target was exceeded owing to the number of requests received from committees and parliamentarians.

 

4.2        Programme 2:    Administration

4.2.1     The main strategic objectives under this programme were to:

-           improve the usefulness, relevance and accessibility of integrated development programmes for parliamentarians by developing and implementing a Members’ Capacity Building and Development Strategy by 2019; and

-           improve coordination, cooperation and intergovernmental relations between Parliament and provincial legislatures by implementing a revised Sector Strategy by 2019.

 

4.2.3     There were two performance indicators under this programme, and the targets in relation to both were achieved:

                        -           implement six capacity building programmes; and

-           follow-up and action all Speakers’ Forum and Secretaries’ Association of the Legislatures of South Africa (SALSA) resolutions.

 

4.3        Programme 3: Core Business

4.3.1     This programme provides for procedural and legal advice, analysis, information and research, language, content and secretarial and legislative drafting services for meetings of the National Assembly and National Council of Provinces and their committees. It also provides public education, information and access to support public participation. And provides analysis, advice and content support for parliamentary international engagements.

 

4.3.2     The main strategic objectives were to:

-           improve the timelines and quality and advisory information, services and products from 93 to 95 per cent by reducing the average turnaround time for the provision of procedural advice, content advice, research products, minutes and reports; and

-           increase access and improve the quality of participation in the processes of Parliament through enhanced programmes to ensure participatory democracy.

 

4.3.3     The following three indicators/targets were all met or exceeded in the period under review:

-           95.89 per cent of Service Charter services were provided against the targeted 93 per cent;

-           15 per cent of the population had reportedly had access to participate in parliamentary processes (exceeding the targeted 5 per cent); and

-           6,6 per cent of the population had reportedly participated in parliamentary processes (exceeding the targeted 0,6 per cent).

 

4.4        Programme 4: Support Services

4.4.1     This programme provides for institutional communication services, human resource management, information communication technology, institutional support services, and Members’ support services.

 

 

 

 

4.4.2     The main strategic objectives under this programme are to:

-           improve relationships with stakeholders by developing and implementing a stakeholder management plan and by increasing Members’ satisfaction through an integrated and independent scientific survey;

-           improve the communication of the business of Parliament in order to increase public involvement, by developing and implementing a comprehensive communication strategy;

-           leverage current, new and innovative technologies to meet the communication and information needs to parliamentarians and staff by increasing universal access of integrated information services from 40 to 80 per cent;

-           optimise facilities’ usage and provide adequate and appropriate functional space by creating a conducive working environment to achieve an increased level of satisfaction, from 68 per cent to 85 per cent; and

-           increase the availability of strategic competencies, talent and skills by developing and increasing performance on the talent management index by 15 per cent.

 

4.4.3     In respect of the five performance indicators, only three met the targets set:

-           only 71,2 per cent of clients were satisfied with the services received i.e. less than the targeted 72 per cent

-           the number of the population that was aware of the business of Parliament was 27 per cent, far exceeding the 13 per cent target (the increase was ascribed to the implementation of the Comprehensive Communication Strategy);

-           the target in respect of universal access was exceeded by 0,75 per cent;

-           the percentage of clients satisfied with services was 7,9 per cent less than the targeted 75 per cent (owing to a very low response to the surveys); and

-           the targeted 8 per cent increase in the talent management index was exceeded by 1 per cent.

 

4.5        Programme 5: Associated Services

4.5.1     This programme provides travel, communication and other facilities to Members of Parliament to fulfil their duties as elected public representatives. It also provides for financial support to represented political parties, their leaders and constituency offices.

 

4.5.2     The strategic objectives under the programme were to:

-           ensure greater effectiveness of parliamentarians in fulfilling their functions by reviewing the facilities needs of Members and by integrating services into a seamless support service;

-           reduce the average turnaround time for the processing and payment of reimbursements to parliamentarians from 3 to 2,4 working days; and

-           ensure effective financial management by improving payment and compliance of transfer payments.

 

4.5.3     Two of the three indicators set in relation to this programme, met their targets:

                        -           the integrated seamless service was implemented as planned; and

                        -           all transfers to political parties were paid as required.

 

4.5.4     The average number of days it took to reimburse parliamentarians stood at 2.53 days against the targeted 2,4 days. The target was missed owing to slower turnaround times as a result of high volumes in quarters 1 and 2.

 

 

PART B:           Report of the Auditor General of South Africa

 

5.         Audit Outcome

5.1        The AGSA submitted that Parliament has sustained its unqualified audit outcome with no material findings.

 

5.2        The AGSA also evaluated the usefulness and reliability of the reported performance information in accordance with criteria developed from the performance management and reporting framework, in relation to programmes 1 and 3. No material findings were made on the usefulness and reliability of the reported performance information.

 

5.3        The scope of the AGSA’s assessment did not include an evaluation of the completeness and appropriateness of the performance indicators.

           

 

 

6.         Financial health

6.1        As in previous years, Parliament reported an accumulated deficit of R1.468 billion i.e. the total liabilities were greater than the total assets.

6.2        The deficit reported in 2018/19 was attributed to the post retirement employee benefit obligation and exit gratuity that is payable to former parliamentarians. Owing to the 2019 general elections payments made during the 2018/19 financial year exceeded those paid in previous years. This resulted in an increase in the number of members that exited the political office bearers pension fund before or as a result of the 2019 election. The entire post-retirement benefit and exit gratuity is funded on an annual basis by the National Treasury via a direct charge and thus no risk was raised in respect of the going concern assumption for Parliament.

 

7.         Status of Records Review

7.1        The status of records review (SORR) is an assessment that provides an institution’s management with insightful information that allows them to address matters that require their attention timeously.

 

7.2        The AGSA reports that the acting Secretary to Parliament has confirmed that the SORR process highlighted critical issues that should be addressed before financial statements and performance reports were completed. The administration has made certain commitments to the AGSA to address issues that were highlighted during the 2018/19 process.

 

PART C:           Observations

 

8.         Observations

 

8.1        Audit outcome

8.1.1     The Committee welcomes the unqualified outcome with no material findings, which the institution has sustained for the past five financial years.

 

8.1.2     The Committees is pleased that the AGSA has noted concerns around the reporting on performance information. The Committee looks forward to the AGSA in future reporting on the quality institutional performance rather than the current assessment, which only assesses the reported performance against predetermined objectives.

 

8.2        Performance

8.2.1     The Committee notes the institution succeeded in meeting 11 of its 14 targets it had set for the period under review. The increase from 45,87 per cent in 2015/16 to 78,57 per cent in the period under review. This improvement was achieved despite the fact that the institution’s operational budget having declined over the same period.

 

8.2.2     The reported performance in relation to Programme 1 exceeded the target, but the Committee has noted that performance was measured in relation to only one of the sub-programmes/divisions under this programme. No targets were set in relation to the following sub-programmes/divisions: OISD, the Treasury Advice Office or the Executive Authority. A similar trend was also noticeable in other programmes. The Committee acknowledges the fact that the institution cannot list all performance indicators in its annual performance plan, however, core and critical performance indicators for each sub-programme/division should at the very least be included. Such information assists the Committee to understand how each sub-programme/division contributes to the achievement of certain strategic oriented goals of the organisation as set in the Strategic Plan. Measuring each sub-programme assists one to track progress made in implementing or achieving the strategic oriented goal/s that are meant to be pursued.

 

8.2.3     The Committee notes with concern that Parliament has yet again failed to measure some of its performance targets under Programme 3, and all of the performance targets under Programme 4 on a quarterly basis. The inability of Parliament to measure some of its performance indicators and targets on a quarterly basis limits makes it impossible to track on-going performance progress in respect of the implementation of APP and therefore the Strategic Plan of Parliament. Reporting on performance indicators and targets on a quarterly basis provides progress on the implementation of the institution’s plan with particular reference to monitoring service delivery against specific quarterly targets. Furthermore, quarterly performance reporting serves as an important management tool for accounting officers and the Executive Authority, and is an oversight instrument used by the Committee and other oversight bodies.

 

8.2.4.    The Committee notes the good performance achieved by Programme 3 and Programme 1: these programmes exceeded their performance targets despite capacity challenges and significant vacancy rates. Parliament has consistently reported that Sub-programme: PBO was under-capacitated and was significantly understaffed. With respect to Programme 3, Parliament had at the end of 2017/18 financial year reported a vacancy rate of 4.5 percent which had made it impossible to meet its performance target in relation to service provision as per Service Charter. For the 2018/19 financial year, it is reported that the vacancy rate of this Programme stood at 6.4 percent i.e. higher than the 4.5 percent reported in 2017/18 financial year. Despite this increase in the vacancy rate, the Programme managed to exceed the service provision as per service charter performance target by more than 2 per cent.

 

8.2.5     At the end of the 2018/19 financial year, Parliament achieved 11 of 14 key performance targets. The performance targets that were not met include, amongst other, average number of days to reimburse Members. Parliament planned to reimburse Members within 2.4 on average, but only achieved 2.53 days on average.

 

8.3        Financial Management

8.3.1     The Committee is pleased that the institution has not incurred any fruitless and wasteful, or irregular expenditure in the period under review. The Committee is concerned however about the R298 thousand in fruitless and wasteful expenditure, and R366 thousand in irregular expenditure dating back to previous years and which have not yet been condoned or recovered.

           

8.3.2     The Governance Assurance Committee’s slow investigation of the previous years’ irregular, and fruitless and wasteful expenditure, and the institution’s failure to act on material irregularities such as these, created the impression that Parliament was slow impose consequences for violations of its policies.

 

8.3.3     Section 56(2)(d)(iii) of the FMPPLA requires that notes to the financial statements must provide any disciplinary or criminal steps instituted as a result of unauthorised, irregular, and fruitless and wasteful expenditure. Parliament’s Annual Report does not provide this information in the notes to the financial statement. This information is important as it assists the Committee to ascertain whether Parliament implements consequence management for material irregularities.

 

8.3.4     The Committee notes with concern the deficit reported. We further note the reduction in the reserves – cash and cash equivalents – from R282 311 million in 2017/18 to R148 145 million in 2018/19. The Committee assumes that the deficit referred to above was financed through the reserves. The reduction in the reserves is a matter of extreme concern given that the PBO and OISD were not funded by National Treasury and have to date been funded from Parliament’s reserves. The depletion of the reserves may well impact on the future-functioning of these critical offices, and hence Parliament.

 

8.3.5     The Committee notes that while Parliament budgets sufficiently to provide for the post-retirement medical aid benefits for current and former members of Parliament and provincial legislatures, Parliament remains dependent on the National Treasury for its operations. The liability associated with the post retirement obligations poses a concern with regard to the going concern of the Parliament as an institution.

 

8.3.6     The Committee notes that Parliament had R2, 429 million in outstanding debt owed to Parliament by staff and Members of Parliament.

 

Part D:  Recommendations

 

9.         Recommendations

The Executive Authority should, within 30 days of the tabling of this report, provide the Committee with a report on the implementation of the undermentioned, and /or the reasons why implementation is not possible.

 

9.1        Programme performance

9.1.1     The Committee recommends that all sub-programmes/divisions that are budgeted for should be measured through clear performance indicator/s that should be tracked on a quarterly basis.

 

9.1.2     The Committee recommends that all performance targets which are only measured on an annual basis be broken down into key milestones in order for them to be measured on a quarterly basis.

 

9.1.3     The Committee recommends that it be provided with a report on how the limitations imposed by the number of vacancies under Core Services and PBO were mitigated to allow the targets set in respect of the Service Charter and the number of analytic reports produced, to be exceeded.

 

9.1.4     The Committee recommends that the reimbursement process be reviewed and improved. An electronic system would probably result in speedier processing.

 

9.2        Financial Management

9.2.1     The Committee recommends that it be provided with a report on the reasons for the delay in concluding the investigations into previous years’ irregular, and fruitless and wasteful expenditure. The matter should be concluded as a matter of urgency, and until such time, the Committee should be provided with monthly reports on progress made. The first report should reach the Committee on 1 February 2019.

 

9.2.2     The Committee recommends that it be provided with a report on the institution’s internal control system for dealing with irregular and fruitless and wasteful expenditure.

 

9.2.3     The Committee recommends that it be provided with an explanation as to why section 56(2)(d)(iii) of the FMPPLA has not been complied with.

 

9.2.4     The Committee recommends that the challenges in respect of the Parmed Medical Aid Scheme be attended to urgently, and the Committee should be briefed on the outcome of the negotiations when the institution presents its 2019/20 third quarter report. The Committee notes that the administration has proposed that the financial responsibilities in terms of the post-retirement medical aid benefits for current and former members of Parliament and provincial legislatures, be shared by Parliament and the provincial legislatures i.e. that Parliament should be responsible only for former parliamentarians and that the provincial legislatures should bear the responsibility for their former members.

 

9.2.5     The Committee recommends that it be provided with a breakdown of the monies owed, the age of the debt, and why this amount could not yet be recovered from the staff and Members of Parliament who owed it.

9.2.6     The Committee recommends that it should be provided with quarterly updates on the rollout of the MyParliamentApp, and efforts to ensure that the intervention is used. The quarterly updates should include a breakdown of expenditure in respect of printing and stationery.

 

Report to be considered.