Nols du Plessis

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LEGISLATIVE OVERSIGHT THROUGH ANNUAL REPORTS
Nols du Plessis National Treasury 13 September
2005
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Overview of Presentation

• The Constitution and oversight
• PFMA requirements for tabling of annual reports
• Structuring of the oversight process
• Roles of Portfolio Committees and SCOPA
• Other role-players in evaluation process
• Proposed phases during evaluation process
• Conclusion

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The Constitution and Oversight
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The Constitution and Oversight

• Section 55(2) says the National Assembly
• must provide for mechanisms to ensure that all
  executive organs of state in the national sphere
  of government are accountable to it and to
  maintain oversight of the exercise of national
  executive authority, including the implementation
  of legislation and any organ of state.
• Section 92(3)(b) requires that
• Members of Cabinet must provide Parliament with
  full and regular reports concerning matters under
  their control.

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PFMA requirements for tabling of Annual Reports
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PFMA requirements for tabling

• Section 40(1)(d) 55(1)(d)
• The Accounting Officer/Authority must submit
  within five months of the end of the financial
  year to the Minister responsible for that
  Department/Public Entity an Annual Report on the
  activities of the Department/Public Entity
• Section 65(1) of PFMA
• the Minister responsible for a department or
  public entity must table in the relevant
  legislature within one month after the Accounting
  Officer/Authority received the audit report the
  annual report, financial statements and audit
  report
• Section 65(2)(a) of PFMA
• a Minister who fails to table an annual report
  for an entity by 30 September (6 months
  after year end) must table a written explanation
  in the legislature setting out the reasons why
  the report was not tabled and indicating when the
  report will be tabled

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Structuring of the Oversight Process
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Structuring the Oversight Process

• Legislatures establish committees to facilitate
  their work
• Division of labour allows for specialisation and
  more time to be spent on research and actual
  oversight work
• Division of labour between the portfolio
  committees works very well in relation to the
  oversight of the Budget
• Each portfolio committee is responsible for a
  Vote and related public entities
• The division of labour works less well when it
  comes to end-year oversight of Annual Reports
• the public accounts committee oversees all
  department and public entity annual financial
  statements and audit reports
• although annual reports are referred to portfolio
  committees there is no structured system of
  oversight
• Portfolio committees are well place to play a
  greater, more structured role in the oversight of
  annual reports given their involvement in policy
  development, the budget and in-year oversight
• Need to develop a systematic oversight process to
  complement the budget approval process

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Defining roles in the House Rules

• House Rules should define the roles of the
  different players in the oversight of Annual
  Reports
• The Speakers responsibilities in managing the
  tabling processes
• The procedure for referring the annual reports to
  the relevant portfolio committee and the public
  accounts committee
• The respective roles of the portfolio committees
  and public accounts committee in exercising
  oversight of annual reports
• The processes of oversight that the portfolio
  committees and public accounts committee may
  follow
• The expected outputs of the oversight process
• The time periods within which the different
  oversight processes should take place and when
  the different oversight outputs must be tabled in
  the House
• Note that the absence of such House Rules is not
  an obstacle to the implementation of the proposed
  oversight process

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Proposed Oversight Process
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Roles of Portfolio Committees and SCOPA
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Role of the Public Accounts Committee

• Specialised role of protector of the public
  purse
• Focus on the following
• (i) The General Report of the Auditor General
• (ii) Financial probity (e.g. fraud)
• (iii) Compliance with the PFMA and associated
  Treasury Regulations
• (iv) The interrogation of over-expenditure
  (relative to appropriations), and other instances
  of unauthorised expenditure
• (v) The interrogation of fruitless and wasteful
  expenditure
• (vi) The functioning of internal control and risk
  management systems
• (vii) Supply chain management and procurement,
  particularly large tenders, large capital
  projects and Public Private Partnership deals
• (viii) The disposal of significant state assets,
  and any major financial or related losses
  suffered by government
• (ix) Corporate governance of departments and
  public entities

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Role of Portfolio Committees

• Close accountability loop by exercising oversight
  of service delivery
• Focus on the following
• (i) The technical quality of the annual reports
• (ii) Whether reports cover all performance
  targets set out in strategic/corporate plans
• (iii) The quality of the performance information
• The economy, efficiency and effectiveness of
  service delivery as measured by the performance
  indicators or by the AG in a performance audit,
  or by way of other information
• The implementation of the entitys service
  delivery improvement plan
• Evaluating managements explanations why service
  delivery was not in line with targets set in the
  strategic plans and budgets
• Investigating under or over expenditure, the
  impact on service delivery and the measures taken
  to comply with the Budget

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Links between Committees

• Committees need to share information to improve
  the overall effectiveness of oversight
• Portfolio committees in the various clusters
  should consider holding joint hearings
• The public accounts committee should provide
  information on key issues raised in the AGs
  General Report to the other committees
• Portfolio committees may consider appointing
  rapporteurs to brief the public accounts
  committee on important issues it has identified
  in its oversight process

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Other role-players in Evaluation Process
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Input by other role-players (1)

• Auditor-General
• Auditing of annual financial statements
• Auditing of performance information
• Performance audits of selected entities
• National Treasury
• Annually prepare a Guide to the technical
  requirements for annual reports
• In process to develop a framework for non
  financial information
• Treasury do prepare a consolidated report for
  Cabinet on Audit Outcomes
• Constitutional institutions
• Provide inputs to the oversight hearings dealing
  with issues within their mandate

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Input by other role-players (2)

• Departments with public entities
• Produce an overview of the performance of the
  various public entities within the Ministers
  portfolio
• Committee researchers
• Be familiar with the challenges, policies and
  other developments
• Review strategic plans, budgets, in-year reports
  and previous annual reports
• Monitor developments in their area of focus on an
  ongoing basis
• Talk to the relevant treasury, auditors and other
  stakeholders
• Stakeholders and the public
• Request subject experts to evaluate entities
  performances
• Accounting Officers
• Written explanation to Minister on poor audit
  outcomes
• Corrective steps
• Preparation of annual reports should be part of
  annual performance evaluation process
• Executive Authorities
• Minister should approve corrective steps
• Annual report must be used to assess performance
  of accounting officers

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Proposed phases during Evaluation Process
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Oversight preparation phase

• Start preparations well before 30 September
• Committee staff must ensure
• members have access to all relevant documents
• identify and contact subject experts for hearings
• Members preparations
• read all relevant documents
• review current years performance compared to
  outcome of previous oversight process
• consult with subject experts and other
  stakeholders
• prioritise issues and questions
• Committee should meet prior to hearing to
• identify key issues
• identify what they want to get out of the hearing
• prioritise certain key questions

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Oversight hearings phase

• Options for structuring the oversight hearings
• 1. A presentation by the Minister and/or the
  accounting officer and then a page-by-page review
  of the annual report
• 2. A presentation by the Minister and/or the
  accounting officer followed by a presentation by
  a designated member of the committee dealing with
  key issues as identified by the Committee,
  followed by a question and answer session
• 3. A presentation by the Minister and/or the
  accounting officer followed by inputs by invited
  experts or stakeholder organisations, followed by
  a question and answer session.
• 4. A presentation by the Minister and/or the
  accounting officer followed by a full-scale
  public hearing, followed by a question and answer
  session

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Oversight report-writing phase

• Each portfolio committee should prepare an
  Oversight Report for each
• entity they oversee
• Oversight Reports should deal with
• Compliance with the tabling deadlines
• Compliance with the technical requirements for
  annual reports
• The usefulness of the General Information section
• Comments on the entitys reported performance
• Comments on the entitys human resource situation
  and policies
• Key issues that the committee would like to draw
  to the entitys attention as regards its
  performance
• Recommendations in relation to any of the issues
  noted above

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Tabling of Oversight Reports

• Oversight Reports should be tabled in the House
• In certain circumstances the House may consider
  debating certain issues contained in the Reports
• Once accepted, Reports should be sent to the
  relevant Minister for response to resolutions

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Follow-up phase

• Legislatures need to put in place systems to
  manage and track resolutions
• Aim of such systems
• to bring resolutions regularly to the attention
  of Ministers
• to ensure that Ministers respond to resolutions
• to ensure issues raised in resolutions get
  resolved

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Conclusion
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Aim of overseeing performance

• To test whether the annual report is an accurate
  record of the entitys performance
• To evaluate whether the reported performance is
  in line with the entitys strategic plans and
  budgets
• To evaluate whether performance is acceptable
  given the operating environment
• To assess how the entity might improve on its
  performance in future
• Focus is on
• How can the entity deliver services better in
  future?

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Accountability Instruments

• Strategic / Corporate plans
• Estimates of National Expenditure
• Guide for the preparation of Annual Reports
• Guide to understand oversight reports of
  Departments
• Audit Report issued by external Auditor
• General Report of the Auditor-General on Audit
  Outcomes

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QUESTIONS?