ATC210528: Report of the Joint Standing Committee on the Financial Management of Parliament on the Parliament of the Republic of South Africa’s 2019/20 Annual Report, dated28 May 2021
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 2019/20 Annual Report, dated28 May 2021
The Joint Standing Committee on the Financial Management of Parliament, having considered the Parliament of the Republic of South Africa’s 2019/20Annual 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 2019/20 Annual Report was tabled in November 2020, andreferred to the Committee for consideration. In its consideration of the report, the Committee received input from the Auditor General of South Africa (AGSA) which presented its findings on 26 February 2021. On the same day, the acting Secretary to Parliament—the accounting officer—and her senior management team appeared before the Committee torespond to questions related to the institution’s performance in the period under review. In addition, on 5 March 2021, the Committee was briefed on progress made in implementing the audit action plan responding to concerns the Auditor-General had raised.
1.3 This report should be read along with Parliament’s 2014-2019 Strategic Plan, the 2019/20 Annual Performance Plan and budget, the institution’s 2019/20 Annual Report, as well as the Committee’s quarterly reports on the institution’s performance in the 2019/20 financial year.
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 2019/20 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 to efficientlyfulfil their constitutional functions.
3. Financial performance
3.1 Overview
3.1.1 Parliament received an unqualified audit report with no material findings on performance information and compliance with laws and regulations.
3.1.2 In 2019/20 Parliament’s approved budget amounted approximately R2 billion. The direct charges which is a statutory appropriation amounted to R528 million, which was later adjusted to R600 million.
3.1.3 In addition to the appropriated budget the institution also reported the following other revenue streams which resulted in other revenue amounting to R28.2 million, which decreased by R1.8 million from the previous year:
- departmental revenue, i.e. sales of goods amounting to R11.4 million, and mainly derived from the catering services; and
- interest received financing activities amounting to R16.8 million.
Table 1: Statement of comparison of budget and actual amounts
|
Line Item |
Final Budget R’000 |
Actual R’000 |
Variance R’000 |
Variance in percentage |
|
Compensation of employees |
R1,113,692 |
R1,061,824 |
R51,868 |
4.66% |
|
Compensation of members |
R600,518 |
R622,703 |
-R22,185 |
-3.69% |
|
Goods and Services |
R493,938 |
R455,174 |
R38,764 |
7.8% |
|
Transfers to non-profit organisations |
R473,730
|
R471,268 |
R2,462 |
0.52% |
|
Acquisition of property, plant and equipment |
R9,052 |
R8,348 |
R704 |
0.52% |
|
Purchase of intangible assets |
R4,598 |
R4,494 |
R104 |
7.78% |
|
Total |
R2,695,528 |
2,623,811 |
R71,717 |
2.66% |
(Source: Parliament of the Republic of South Africa, 2020)
3.1.4 Table 1, above,provides a breakdown of the received and spent budget per line item, including the variance between the budget received and the actual expenditure. It reflects over-expenditure in relation to all but the ‘Compensation of members’ budget which overspent by 3.69 per cent.
Compensation of employees
3.1.5 The 4.66 per cent underspendingon compensation of employees is ascribed to resignations and/or terminations, and vacancies in critical posts. The reduction in the budget in recent years has led to the decision to freeze certain positions. Monies that have been underspent will be retained for use in 2020/21. This is in line with the provisions in sections 16(2)(b)(iii) and 23(1) of the FMPPLA.
Compensation of members
3.1.6 The 3.69 per cent over-expenditure is ascribed to the payment of exit and loss of office gratuities made to parliamentarians who lost their seats after the 2019 general elections. The overspending will be refundedin terms of section 23(4) of the FMPPLA.
Goods and services
3.1.7 The 7.8 per cent under-expenditure in relation to goods and services is ascribed to the time it took to establish committees after the 2019 general elections which resulted in fewer oversight activities. In March 2020 certain oversight activities such as the NCOP’s Taking Parliament to the People and public hearings in relation to constitutional amendments were cancelled owing to the outbreak of the COVID 19 pandemic. Monies that have been underspent will be retained for use in 2020/21. This is in line with the provisions of section 23(1) of the FMPPLA.
Transfers to non-profit organisations
3.1.8 The 0.52 per cent under-expenditure is ascribed to monies that were withheld from political parties that had spent monies in contravention of the policy on transfers to political parties.Monies that have been underspent will be retained for use in 2020/21. This is in line with the provisions in section 23(1) of the FMPPLA.
3.2 Financial position
3.2.1 Parliament reported a net liability of R1.655 475 billion owing to the post medical provision made for former members of Parliament and of the provincial legislatures. In 1999 Parliament approved that the medical aid contributions for former parliamentarians and members of the nine provincial legislatures will be paid by Parliament. At the end of 2019/20,1 165 former members had received the subsidy. The contribution made by Parliament amounted to R81.563 million, which was paid from the appropriated budget.
3.2.3 The institution reported that it has on numerous occasions written o National Treasury with a request that it take over the management and payment of the post-retirement medical aid benefit. National Treasury, however, explained that as Parliament was outside the scope of its post-retirement medical scheme, the possibility of decentralising the liability to the provincial legislatures should be explored.
Parliament’s financial position without the post-retirement medical aid liability, will reflect a net liability of R263.211 million.
3.2.4 Included under the non-current liabilities are provisions of R89.969million, and R166.255 million for members’ loss of office, and exit gratuities respectively. These are paid from the direct charges budget. The non-current liabilities also include R132.891 million for former Members and Minister’s post travel benefits. In 2019/20 R11.375 million was paid towards this benefit from the annual appropriation.
4. Performance across programmes
The institution reported a 75 percent performance for the 2019/20 financial year, which represents a3.57 per cent reduction compared to 78.57 percent achieved in the 2019/20 financial year. Of the 16 indicators set in 2019/20 financial year, only 12 met or exceeded targeted performance.This section summarises the purpose of each of the five programmes, and 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 Office on Institutions Supporting Democracy (OISD), and the still-to-be-established Treasury Advice Office.
4.1.2 The main strategic objective under this programme isto 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 onlyone performance indicator for this programme i.e. the number of budget-related analytical reports per year. In 2019/20 the target was 24 analytical reports; this targetwas exceeded by 8. As in the previous year, the PBO’s over-performance is ascribed to the larger than anticipated number of requests received from committees and parliamentarians. It should be noted that since 2017/18 performance the number of reports has decreased from 45 to 24.
4.1.4 In terms of the percentage of strategic, procedural, legal advice and support provided within stipulated timeframes – 100 per cent in seven days – the institution reported a 20 per cent under performance. Although all 60 advisory documents were prepared, only 48 were produced within the seven-day timeframe.
4.1.5 All analyses on ISD-related matters, and reports on IS-related resolutions were developed within the agreed to timeframes.
4.2 Programme 2: Administration
4.2.1 The main strategic objectives under this programme are 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; andimprove 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 as in the previous year,the targets in relation to both were achieved:implement six capacity building programmes; andfollow-up and action all Speakers’ Forum andSecretaries’ 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 analyses, advice and content support for international parliamentary engagements.
4.3.2 The main strategic objectives are to: improve thetimelines 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; andincrease access and improve the quality of participation in the processes of Parliament through enhanced programmes to ensure participatory democracy.
4.3.3 The targeted 94 per cent of information being available as per Service Charter levels was not met. The 2.43 per cent under performance was ascribed to Hansard and Documentation respectively having performed at 23 and 50 per cent below target.
4.3.4 The percentage of the population targeted to have access to participate in parliamentary processes was exceeded by 3 per cent.
4.3.5 In respect of the targeted percentage of the population having access to participate in parliamentary processes, the target was exceeded by 1 per cent. Actual participation in public education workshops, parliamentary sittings, committee meetings, tours, calls for submissions on petitions and visits to the three parliamentary democracy offices increased. Approximately 10 per cent fewer people responded that they had not participated in any activities of Parliament.
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 withstakeholders 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 of 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 The targeted 62 percentage of clients satisfied with service levels was exceeded by 4,35 per cent. The over-achievement is ascribed to high satisfaction levels with ICT services, procedural advice and language and library services. High levels of dissatisfaction were reported in respect of claims processing, and cleaning and maintenance services.
4.4.4 The 27 per cent target in respect of the population who is aware of the business of Parliament was not met. The 4 per cent under-achievement was ascribed to the fact that the survey measures fairly or extremely good awareness and does not take into account those who may know only a little about the business of the institution. The survey revealed that some do not differentiate between the legislative and executive arms of state.
4.4.5 The targeted 80 per cent universal access was exceeded by 14.12 per cent. The over-achievement is ascribed to the implementation of iProcurement, Staff Disclosures on the ERP, the ARIS business process mapping tool and the use of the Microsoft Teams meeting platform.
4.4.6 The targeted 68 per cent client satisfaction was exceeded by 1 per cent as a result of improved human resource management with a focus on appropriate skills and better stakeholder management.
4.4.7 The targeted 1 per cent increase in the Talent Management Index was exceeded by 8 as a result of improved recruitment and selection processes, and more active participation by employees in various training programmes.
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 are 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 The targeted 2.5 average number of days to reimburse members was not met. The high volume of claims at the end of the 5th term of Parliament and the start of the 6th term of Parliament let to slower turnaround times in processing claims i.e. on average 3.61 days.
4.5.4 The percentage of transfer payments made in compliance with the policy was met: all payments were made as required.
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 Programme 2: Core Business. No material findings were made on the usefulness and reliability of the reported performance information.
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 the 2019/20financial yearis attributed to the post retirement members benefit obligation and exit gratuity that is payable to former parliamentarians. Owing to the large number of non-returning members after the 2019 general elections,payments made during the 2019/20 financial year for loss of office and exit gratuities exceeded the budgeted amount. Importantly, .the entire post-retirement benefit and exit gratuity is funded on anannual basis by the National Treasury via a direct charge from the National Revenue Fund and thus no risk was raised in respect of the going concern principle for Parliament.
7. Report of the Audit Committee
The Committee notes the following concerns raised by the Audit Committee.
7.1 Although the institution’s ongoing efforts to improve controls over institutional performance management processes were encouraging, the Audit Committee remained concerned about the asset management controls and the financial health of the institution, particularly as budget constraints continue to threaten the Parliament’s ability to deliver on its mandate.
7.2 In terms of risk governance the Audit Committee raised concern about inadequate skills to ensure the implementation of a robust risk management programme, and recommended further improvement of risk management practices. In particular, the administration should improve risk governance processes, including the functioning of the Risk Management Committee and use of the organisational redesign process that is underway to determine the most suitable resourcing model for Parliament’s governance, risk management and compliance functions.
7.3 The Audit Committee continues to be concerned about the structure and resourcing of the Internal Audit Unit. The frozen positions impacted negatively on the unit’s ability to cover the institution’s audit needs and to fully deliver on its mandate.
7.4 The responsibility to oversee combined assurance has been delegated to the Audit Committee in terms of the Charter. Combined assurance was a new concept to the institution, and the Audit Committee has undertaken to work with the administration to ensure that overtime assurance provision across all lines of assurance would be streamlined and fully-integrated. The internal Audit Unit is facilitating the development of a combined assurance framework.
7.5 The Committee reviewed the quality and the content of the quarterly management reports, including financial and non-financial performance. The Committee is encouraged by the progress made in improving the quality of financial and non-financial performance reporting. This includes an increase in the overall achievement of set performance targets as well as the availability of documentation to support the reported performance. However, a robust monitoring and evaluation process is still required to sustain these improvements.
7.6 Although the Audit Committee was encouraged by progress made in improving the quality of financial and non-financial performance reporting, a robust monitoring and evaluation process was still required to ensure progress made was sustained.
7.7 Parliament had failed to submit its annual financial statements for auditing by 31 May 2020 as prescribed by section 57 of the FMPPLA. Consequently, it could not comply with section 59 of the FMPPLA either. Although the impact of the national lockdown and the restrictions on access to and movement on the parliamentary precinct had contributed to the non-compliance. The Audit Committee was concerned about the resilience of the institution’s business continuity plans and the administration was encouraged to be make every effort to ensure that it was always able to adhere to the applicable laws and regulations.
PART C: Observations
8. Observations
8.1 The Committee welcomes the unqualified outcome with no material findings, which the institution has sustained for the past six financial years.
8.2 The Committee is pleased that concerns around the lack of reporting on the quality of performance/services has been noted, and that it will be addressed going forward.
8.3 The Committee noted the under-achievement in respect of the percentage of people aware of Parliament’s business. That only 23 per cent of those who participated in the survey were satisfactorily aware is of concern, especially as the Sixth Parliament’s strategic plan is about to be implemented.
8.4 The Committee notes efforts underway to increase public access to Parliament’s business and activities, particularly through broadcasting. Of concern, however, is the fact that there only three parliamentary democracy offices across the country which understandably impedes efforts to deliver awareness-raising campaigns and bridge the gap between the citizens and their representatives.
8.5 The Committee has noted that Parliament has, through a donation from MultiChoice, acquired its own studio on the parliamentary precinct. While the Committee welcomes any effort that may contribute to greater public participation, it is concerned that the donation might compromise any discussions around airing parliamentary business on a free-to-view SABC channel, instead of DSTV’s Channel 408.
8.6 In respect of payment of invoices, the Committee is pleased that the challenges that had led to many invoices not being paid have been addressed, and emphasises that every effort should be made to ensure that invoices are verified against service provider information and paid timeously.
8.7 The Committee remains deeply concerned about the institution’s financial position , particularly the medical aid contributions of members of parliament and provincial legislatures, which is a liability carried by Parliament The responsibility distorts Parliament’s baseline, and the impact is particularly damaging in light of the budget reductions National Treasury is likely to impose over the next three years.
8.8 The Committee continues to be concerned about Parliament seemingly being at National Treasury’s mercy for its budget allocation. Being dependent on the National Treasury to that extent, and being subjected to budget reductions that are seemingly decided without any meaningful input from Parliament, has the potential to undermine parliamentary oversight. Of concern too is the lack of progress as far as determining a well-documented budget process for Parliament which could form the basis for deliberations with National Treasury.
8.9 The Committee notes the overspending on statutory appropriations due to the payment of loss of office and exit gratuities to non-returning members after the 2019 General Elections. More members than anticipated lost their offices, which resulted in actual payments exceeding the budget for this item.
8.10 The Committee notes that for the 2019/20 financial year, Parliament incurredfruitless and wasteful expenditure amounting to R12000. Importantly, at the end of this financial year, Parliament recorded an amount of R311000 as fruitless and wasteful expenditure. This amount includedthe fruitless and wasteful expenditure, which was incurred in the 2017/18 financial year (R299, 000) and the R12 000, incurred during this financial year. This expenditure was due to incidents such as traffic fines admin fees, cancellation fees and damaged/lost hired goods.
Part D: Recommendations
9. Recommendations
The Executive Authority should,within 30 days of the adoption of this report, provide the Committee with a report on the implementation of these recommendations, and /or the reasons why implementation is not possible.
9.1 The Committee recommends a thorough exploration of the reasons for the minimal awareness of parliamentary business in order for a strategy to be developed to increase knowledge.
9.2 The Committee is acutely aware of the budgetary constraints, but nevertheless recommends that every effort be made to expand public participation efforts, particularly through community radio stations and free-to-view television channels.
9.3 In respect of the MultiChoice infrastructure donation, the Committee should receive a report on the terms of the donation, if any, as well as on progress made in attempts to have parliamentary business made more accessible to more members of the public.
9.4 The Committee should receive quarterly updates on the payment of invoices, particularly any challenges that may be experienced.
9.5 The Committee recommends that the Parmed Board expedites discussions around how to resolve the Parmed matter so as to ensure Parliament does not bear the liability which it can no longer afford. The Parmed Board should provide the Committee with a report on progress made in this regard before Parliament submits its next budget proposal to the National Treasury.
9.6 The Committee recommends that the Executive Authority and the Minister of Finance find a constructive solution to the budgetary challenges that will ensure that Parliament is able to deliver on its constitutional mandate. The Committee further acknowledges that Parliament’s negotiations with National Treasury would benefit from an well-informed budget process, that includes processes to guide negotiations with Ntaional Treasury, and recommend that it be developed and tabled for the Committee’s information within 90 days of the adoption of this report.
9.7 It is worth noting that in terms of the section 23(4) of the FMPLPLA, the unspent statutory appropriation must be surrendered to the National Revenue Fund, and i, the overspending statutory appropriation must be claimed from the National Revenue Fund. Therefore, the Committee recommends that it should be kept abreast of the progress in recouping the over-expenditureon Direct Charges (R22.185 million).
9.8 The fact that Parliament’s financial statements reflect fruitless and wasteful expenditure, which was incurred in the previous three financial years, points to either lack of internal controls to deal with fruitless and wasteful expenditure or lack of consequence management. In this regard, the Committee recommends that the Parliament must submit a written explanation on why these monies were not yet recouped from the culprits or written off in the event that they cannot be recouped.
Report to be considered.
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