Financial Management of Parliament Bill [B 74–2008] 28 October 2008

1. Financial Management of Parliament Bill [B 74–2008] 28 October 2008

2. Background Background • PFMA promulgated in 1999. • Applies to Parliament and provincial legislatures “to the extent indicated” [s. 3(1)(d)]. • Applicable provisions must be read so that “any controlling and supervisory functions” of National Treasury are performed by the Speaker and Chairperson, acting jointly, or, in the case of a provincial legislature, the Speaker of such legislature [s. 3(2)]. • In addition, regulatory framework applicable to Parliament includes, Exchequer Act 66 of 1975 (s. 7, 14, 33, & 34), incorporated by reference in section 33 of the Powers and Privileges of Parliament Act 91 of 1963, which is kept in operation by section 31 of the Powers, Privileges and Immunities of Parliament and Provincial Legislatures Act 4 of 2004. • In 2000 the Secretary to Parliament advises the Presiding Officers that such regulatory framework requires a review either with a separate Act or as amendment to the PFMA. • Mandate is given to Portfolio Committee on Finance to draft a separate Bill. • Local Government: Municipal Finance Management Act 56 of 2003 promulgated in 2003. • Finalisation of draft Bill stood over for 3rd Parliament. • Draft Bill published in Government Gazette No. 28166, 28 October 2005. • Portfolio Committee assisted in its consideration by Prof C Murray, Mr C Barberton and Mr P Benjamin up to 2 August 2006. • Portfolio Committee reported to Assembly on 18 September 2008 – introduction. • Bill passed by Assembly and referred to Council on 26 September 2008.

3. Principles of Bill • Constitutional status of Parliament • Separation of powers – see Ex parte Chairperson of the Constitutional Assembly: In re Certification of the Constitution of the RSA, 1996 1996 (4) SA 744 (CC) at par [106]; • Houses control their own internal arrangements, proceedings and procedures – including control of finances - see sections 57 and 70 / provinces section 116; • PFMA recognises this position – see s. 3(2) and similar to position under section 31 of Powers and Privileges of Parliament Act, 1963; and • Legal opinion confirms this position and advises that section 216 of the Constitution must be read to mean that the treasury control in the case of Parliament and provincial legislatures is subject to the authority over finances. • Compliance with the constitutional values of transparency, accountability, and effective financial management with reference to uniform expenditure classifications and uniform treasury norms and standards – see section 215: • Format of budget - clause 16 (see especially clause 16(2)(h) referring to maintaining consistency with other organs of state); • Format of financial statements – clause 56(1); and • Uniformity with reference to audit committee and internal auditr unit (clauses47(5) and 50(1)).

4. Chapter 1: Interpretation and Objects • Definitions • Objects of Act • Transparency, accountability, sound management • Consultative relationship with NT • Oversight • Norms and standards for provincial legislatures – clause 3 and Schedule 1

5. Chapter 2: Oversight, Executive Authority and Administration of Act • Joint committee (similar function as SCOPA, but only with reference to Parliament’s audited financial statements – SCOPA would not automatically be appropriate as it reports only to Assembly) • Executive Authority – Speaker and Chairperson acting jointly • Secretary to Parliament is Accounting Officer • Accountable to Executive Authority • Subject to oversight by joint committee • General financial management functions • Written performance agreement • Acting accounting officer appointed by Executive Authority • System of delegation • Fiduciary duties – clause 12

6. Chapter 3: Planning and Budgeting • Accounting Officer prepares: • Strategic plan • Annual performance plan • Annual budget • Executive Authority tables for referral to joint committee • Expenditure before annual budget is passed • Unauthorised expenditure • Virement – Executive Authority may make regulations • Unspent funds – position is same as section 13 of PFMA: i.e. unspent funds not returned to National Revenue Fund

7. Chapter 4: Cash management and investment • In accordance with policy that Executive Authority must prescribe • Accounting Officer must establish systems and procedures • Bank accounts • Restrictions on borrowing • Requisitioning of funds

8. Chapter 5: Financial management • Asset and liability management • Revenue management • Debtor management – policy for write-off and interest • Expenditure management – creditors • Method of payment • Within 30 days of receiving invoice • Accounts closed monthly and reconciled • Regulations by Executive Authority for support to Members and political parties. • Transfers • Executive directives with financial implications

9. Chapter 6: Supply chain management • Executive Authority prescribes policy – Accounting Officer implements • Consideration of unsolicited offers only in terms of policy. • Tenders not recommended • Members barred from serving on tender committees • Prohibition on contracts – definition of “person in the employ of the state” – borrowed from MFMA regulations • Schedule 3 peremptory

10. Chapter 7: Audit committee and internal audit • Audit Committee appointed by Executive Authority • Audit charter • Accounting Officer must establish and internal audit unit which must report quarterly on its performance against the audit plan

11. Chapter 8: Reporting and auditing • Monthly, quarterly, and mid-year • Annual report • Based on performance plan • Annual financial statements • Auditor-General’s report • Audit Committee’s report • Tabled and referred to joint committee

12. Other • Chapter 9: Regulations and instructions • Chapter 10: Financial misconduct and Offences • Chapter 11: Miscellaneous (Good faith provision, Repeal of legislation, Short title and Commencement – also transitional arrangements in Schedule 4)

13. Applicability to provincial legislatures • Clause 3 read with Schedule 1 • Peremptory norms and standards • Wording used is wide in respect of executive authority and accounting officer

14. Code of Ethics for Executive Authority • Additional to Code of Conduct for Assembly and Permanent Council Members • Does not apply to provincial legislatures

15. Classification of Bill • Memorandum: Bill must be dealt with in accordance with the procedure established in section 76(1) of the Constitution as it provides for legislation envisaged by Chapter 13 of the Constitution and includes provisions ‘affecting the financial interests of the provincial sphere of government’ (see section 76(4)(b) of the Constitution). • The PFM Bill was split when Parliament considered it, because in 1999 s. 76 (4) provided that - • “A Bill must be dealt with in accordance with the procedure established by subsection (1) if it provides for legislation … envisaged in Chapter 13, and which affects the financial interests of the provincial sphere of government.” • Section 76(4)(b) of the Constitution was amended in 2003 by the addition of the words ‘includes any provision’ to avoid the need to split such bills – • “A Bill must be dealt with in accordance with the procedure established by subsection (1) if it provides for legislation … envisaged in Chapter 13, and which includes any provision affecting the financial interests of the provincial sphere of government.” [Para. (b) substituted by s. 1 of Act No. 3 of 2003.] • Because Bill gives effect to section 216 of the Constitution, which is part of Chapter 13, and because it includes provisions that affect the financial interests of provincial sphere of government, namely, provincial legislatures, the whole Bill must be considered in accordance with the procedure establish by section 76(1).

16. Consultation • Memorandum: Bill published for public comment in GG No 28166 on 28 October 2005. • Auditor-General, National Treasury, Parliamentary Service. • Amendment to PFMA – Minister of Finance consulted on clauses 23, 25 and 72 – as required by the PFMA [see s. 4 and 13(3)].