ATC231128: Report of the Joint Standing Committee on the Financial Management of Parliament on the 2022/23 Annual Report of the Parliamentary Budget Office, dated 28 November 2023

Joint Standing Committee on Financial Management of Parliament

Report of the Joint Standing Committee on the Financial Management of Parliament on the 2022/23 Annual Report of the Parliamentary Budget Office, dated 28 November 2023

The Joint Standing Committee on the Financial Management of Parliament, having considered the 2022/23 Annual Report of the Parliamentary Budget Office, 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 of the Republic of South Africa, No 108 of 1996 (the Constitution).

1.2 The 2022/23 Annual Report of the Parliamentary Budget Office (PBO) was tabled on 31 August 2023 and referred to the Committee on 4 September 2023. The report was presented to the Committee in a meeting held on 10 November 2023 at which the Advisory Panel and the Director of the PBO briefed the Committee on the office’s performance.

1.3 The PBO is a juristic entity of the Parliament of the RSA and is funded through a transfer from Budget Vote 2 (Parliament).

1.4 This report, which should be read along with the PBO’s 2022/23 Annual Report, comprises four parts: Part A, an overview of the role and mandate of the PBO; Part B, containing performance information for the period under review; Part C, containing financial performance information for the period under review; and Part D, containing the Committee’s observations and recommendations.

Part A

2. Role, Mandate and Functions

2.1 Mandate

2.1.1 The PBO was established in 2013 in terms of the section 15 of the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009 (the Money Bills Act). It is a juristic entity of Parliament’s with a director serving as its accounting officer.

2.1.2 The accounting officer is accountable to the NA and the NCOP through the Executive Authority. Additionally, the PBO is required to consult an advisory board comprising the House Chairpersons responsible for the committees of the NA and the NCOP, and the chairpersons of the Finance committees in the NA and the NCOP, on specific governance and management matters.

2.1.3 The PBO is required to provide independent, professional and objective research, analysis and advice to support Parliament’s fiscal oversight processes.

2.2 Vision and Mission

2.2.1 The PBO has its vision building an effective PBO that contributes to strengthening the oversight capacity of Parliament. It aims to do so through providing independent economic and fiscal advice to parliamentary committees to ensure that recommendations made as part of their oversight of public finances were well-informed.

2.2.2 The PBO is guided by the values of independence, professionalism, transparency, accountability, efficiency, innovation and collaboration.

2.3 Core Functions

2.3.1 The core functions of the PBO are as follows:

- undertaking research and analysis for the finance and appropriations committees in the NA and the NCOP;

- on an annual basis providing reviews and analysis of the documentation tabled in Parliament by the Minister of Finance;

- providing advice and analysis on proposed amendments to the fiscal framework, division of revenue, and money bills, and on policy proposals with budgetary implications;

- monitoring and synthesising matters and reports with budgetary implications, tabled and adopted by the houses of Parliament with particular emphasis on reports by other committees;

- keeping abreast of policy debates and developments in key expenditure and revenue

areas;

- monitoring and reporting on potential unfunded mandates arising out of legislative, policy and budgetary proposals;

- undertaking any other work deemed necessary by the director to support the implementation of the Money Bills legislation.

2.4 Service Level Agreement between the PBO and the Parliamentary administration

2.4.1 In 2021, as an interim measure, the PBO and the parliamentary administration service entered into a service level agreement for the PBO to operate under the service’s corporate function. The conditions of the service level agreement were:

that the PBO would be supported to build its own corporate function capacity given the transition;
that the PBO would collaborate with the institution’s research and other structures;
that the PBO would be supported to fulfil its governance and reporting requirements.

2.4.2 The interim arrangement has worked to a degree but not without significant challenges and inefficiencies that have adversely impacted the functioning of the PBO as follows:

- rendered it unable to support Parliament in line with the Money Bills Act;

- weakened it as far as fulfilling its governance, accountability and management responsibilities; and

- created and environment for potential interference with the functioning of the PBO in line with section 15 of the Money Bills Act.

3. Key Challenges

3.1 The PBO highlighted the following challenges that impact its ability to deliver on its mandate:

- inadequate budget and other resources resulting in the PBO being disempowered to give full effect to section15 of the Money Bills Act, in particular support to other sectoral committees such as those overseeing education, health, economic development; monitoring and reporting on potential unfunded mandates coming from legislation; and advising on the process to be considered when proposing budget amendments;

- non-compliance with the Money Bills legislation in respect of the PBO’s funding;

- inadequate budget and human capacity to fulfil its mandate and fulfil governance and reporting responsibilities;

- inadequate budget making it impossible to recruit talent to ensure the PBO operates effectively; and

- excessively bureaucratic recruitment processes that are inappropriate for an entity of the PBO’s size and impacts its ability to fill vacancies with the necessary speed.

Part B

4. Performance Information

4.1 Strategic Planning Framework

4.1.1 The 2022/23 strategic planning framework for PBO identified five main performance indicators with associated demand and supply-driven performance outputs. The performance indicators and associated performance outputs and targets were aligned with the mandate as set out in section 15 of the Money Bills Act.

4.2 Non-Financial Performance Information

4.2.1 As reflected in Table 1 below, the PBO met all performance targets for 2022/23.

Strategic Outcome		Strengthening the capacity of Members and Committees in exercising oversight of Public Finances
Performance Indicators		Annual Target	Actual Annual Performance	Variance		Reasons for variance and mitigating factors
2.2	Number of analytical reports per year	28	36	8	Cyclical variations in performance outputs arising from demand-driven requests.

Table1: PBO 2022/23 Performance (Source: PBO Presentation on its 2022/23 Annual Report)

4.2.2 Per the above the PBO performed positively, delivering 36 outputs against the 28 outputs targeted. The PBO’s performance information was influenced by cyclical variations in demand-driven requests, which resulted in the performance variance.

4.2.3 Unlike Parliament, the PBO did not set targets to measure the satisfaction and the perception of Members of Parliament about its performance.

4.3 Service Delivery Overview

4.3.1 In the period under review the PBO delivered various research and analysis briefs to committees of Parliament including:

- a budget analysis addressing the mismatch between strategic development framework and budget framework;

- a brief on macro-economic analysis;

- analyses of the socio-economic and budget context; tax policy; government underspending; of proposals for a parliamentary committee to oversee the Presidency;

- a brief on the industrial policy and the dysfunctional structure of the South African economy;

- briefs on macro-economic, and trade and industrial policy reforms; business bounce-back support and the credit loan guarantee schemes for small, micro and medium enterprises (SMMEs);

- an overview and analysis of conditional grants across the Social Development, Health, Basic Education, Transport and Human Settlement, and Agriculture sectors;

- a briefing on the 2022 draft Preferential Procurement Regulations – Public Procurement Bill 2023; and

- various policy briefs related to the 2019-2024 medium term strategic framework (MTSF).

Part C

5. Financial Information

5.1 Overview

5.1.1 The Money Bills Act requires that the PBO be provided with a three-year budget to fulfil its mandate. Parliament has not complied with this provision. Failure to provide the budget makes it impossible for the PBO to fully deliver on its mandate and may be regarded as interference with the functioning of the office.

5.1.2 In 2022/23 the PBO received a gross annual budget of R18 403 330 across the three main expenditure categories. The budget comprised R17 118 330 for compensation of employees; and R1 285 000 for goods and services. The PBO reported an annual 88 per cent aggregate spending rate across the three main expenditure categories.

5.1.3 Delays in procurement and human resources processes resulted in the PBO being unable to complete planned procurement including economic modelling, recruitment, and performance reviews, as well as the purchasing of tools of trade and the maintenance of the office.

5.1.4 Table 2 below illustrates the PBO’s spending across the main expenditure categories.

Financial Year

Compensation of Employees

Recruitment Expenses

Access to information and data

ICT/Comms costs

International Travel

Domestic Travel

2022/23

Personnel costs: entire staff complement

Subscription Expenses

Cellphone, data and landline costs

Various engagements

R15 428 797.24

R68 599.80

R128 846

R46 564

R369 783.38

R47 325

Table 2: Spending across expenditure categories (Source: Presentation on the PBO’s 2022/23 Annual Report)

5.1.5 The legislative mandate of the PBO is research based and the Office is a knowledge-based organisation. As illustrated above the main cost drivers incurred in 2022/23 related to the discharge of the PBO’s legislative mandate. The PBO discharges its legislative mandate through its workforce hence a significant proportion of the allocated budget goes towards the compensation of employees.

5.1.6 The PBO subscribes to annually paid economic information systems that enable it to mine economic-econometric data, package and analyse the data, and present the complex data to parliamentarians in an understandable format.

5.1.7 The PBO engages in domestic, continental and international stakeholder relations to strengthen existing stakeholder relations and to establish new ones. These relationships assist to ensure that that the office stays abreast of best practices, and accesses topical information and data needed to enhance the services it delivered.

5.1.8 Table 3 below sets out the range of other goods and services the PBO utilised in 2022/23.

Budget Line Items	2022/23
Budget Allocation	R18 403 330.00
A: Operational Expenditure A1: COE + A2: G&S’s	R16 210 463
A1: Compensation of Employees	R15 428 797.00
Recruitment Expenses	R68 600.00
Training, Workshops and Seminars	R1 595.00
Research: Access to information & data: subscription services	R128 846.00
Communication expenses: Landline, Mobile & data	R46 564.00
Office supplies; Stationery; printing; printing paper and other expenses & other expenses	R16 396.00
Local Travel	R47 325.00
International Travel	R462,754.83
Catering	R9 585.00
A2: Surplus before capital expenditure	R781 665.74
B: Capital Expenditure	R0.00
Total surplus for the Year	R2 192 867

Table 3: Goods and Services Expenditure (Source: Presentation on he PBO’s 2022/23 Annual Report)

Part D

6. Observations and Recommendations

6.1 Observations

6.1.1 The Committee welcomes the tabling and referral of the PBO’s financial and performance information for consideration and report. The Committee recognises the PBO as a key resource in Parliament’s ability to scrutinise and amend departmental budgets. The Committee also recognises that Parliament’s own budgetary constraints impacted its ability to provide the PBO with the financial and other resources it requires.

6.1.2 The Committee notes the accounting officer’s comments that the Money Bills Act adequately provided for the PBO to operate as envisaged, and that it was non-compliance with section 15 of the legislation that impacted the effectiveness of the PBO.

6.1.3 The Committee notes that the PBO consults an advisory panel on certain governance and performance matters but that few of the challenges facing the PBO have been addressed including concerns around compliance with governance and management requirements.

6.1.4 The Committee congratulates the PBO on its performance but notes that it did not set targets to measure the satisfaction and the perception of Members of Parliament about its performance.

6.1.5 The Committee notes that the PBO did not present financial statements in its annual report. This represents a failure to disclose and account for how the budget it received though a transfer from Parliament spent.

6.2 Recommendations

6.2.1 As recommended in reports related to the performance of Parliament, the Committee recommends that efforts to resolve shortcomings related to Parliament’s own budget process, and to negotiate with the Minister of Finance to secure an adequate budget for Parliament must be redoubled.

6.2.2 The Committee recommends that the Executive Authority investigates the impediments to the full implementation of the provisions of the Money Bills Act relating to the PBO, and reports to the Committee how these may be remedied before the start of the Seventh Parliament.

6.2.3 The Committee should be provided with a report detailing the role and responsibilities of the PBO Advisory panel, the matters governance and concerns brought to its attention, and its efforts to have these resolved.

6.2.4 The Committee recommends the PBO consider measuring the satisfaction and perception of Members of Parliament in the same way that the non-financial performance of Parliament was measured to ensure Members’ satisfaction with the support services it received.

6.2.5 The Committee recommends that the PBO ensures that it complies with requirements to report on its financial performance in its annual reports.

Report to be considered.

Documents