Oversight Role of Parliament: Budgets and Annual Reports

1
Oversight Role of Parliament Budgets and Annual
Reports

• Presentation based on the Guideline for
  Legislative Oversight through Annual Reports

Nols du Plessis National Treasury 23 February 2005
2
Overview of Presentation

• Background
• Part 1 Strategic plans and budgets
• Part 2 Tabling process for Annual Reports
• Part 3 Roles in the Oversight of Annual Reports
• Part 4 Annual Report Oversight Process
• Part 5 Interrogating Evaluating Annual Reports
• Conclusion

3
Background
4
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.

5
Recent Reforms Facilitate Oversight

• PFMA provides financial management framework
• focus on accountability through improved
  information
• Better planning information
• Strategic and Corporate Plans
• Clear performance measures and performance
  targets
• Improved Budget documentation
• Budget Review
• Estimates of National Expenditure
• In-year monitoring information
• Monthly financial reports
• Quarterly performance reports
• Improved end-year reporting
• Detailed Annual Reports (with annual financial
  statements)
• Available soon after end of financial year

6
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

7
Closing the accountability loop

• Entities produce Strategic/Corporate Plans
  setting out performance
• measures and targets for the coming financial
  year
• Through the Budget the executive indicates what
  funds are required to
• implement these Strategic/Corporate Plans
• The legislatures approve the Budget, and so
  appropriate funds for the
• implementation of the Strategic/Corporate Plans
• The Annual Reports indicate how the executive
  have used the
• appropriated funds to implement the
  Strategic/Corporate Plans
• The legislatures should exercise oversight of the
  Annual Reports to check
• whether the executive has performed acceptably
  and used the
• appropriated funds for the intended purposes

8
Why is oversight role of legislature so important?

• Legislature is last point of accountability
• If legislature does not threaten to take action,
  then everyone above the
• chain will have less incentive to perform
• Executive should take more responsibility for
  performance
• Officials should take primary responsibility
• If management processes earlier in the chain
  fail, the legislature should be
• able to act even when all else fails

9
Part 1 Strategic/Corporate Plans Budgets
10
Key problems

• Limited resources to fund various programmes of
  Government
• Many programmes perform poorly
• Is lack of capacity really the problem?
• Key problem - do we tolerate poor performance?
• Poor governance means poor service delivery

11
Evaluating Strategic Plans Budgets

• 1. Are the entitys objectives and performance
  targets linked to governments overall aims?
• 2. Are the objectives and targets sufficiently
  comprehensive?
• 3. Do the performance targets drive continuous
  improvement?
• 4. Is there continuity in the performance targets
  between years?
• 5. Does the entity have too many performance
  targets?
• 6. Are any additional/alternative performance
  measures and targets needed?
• 7. How well do the performance targets measure
  the delivery of outputs and the achievement of
  outcomes?
• 8. Does the entity have the right balance between
  output and outcome performance targets?
• 9. Are effective information systems in place to
  measure performance?

12
Evaluating Corporate Plans Budgets

• Capital expenditure programmes
• Job creation
• Economic growth
• Procurement (BEE, local content)
• Three year borrowing programmes
• New investment plans for entities
• Risk Management
• Revenue targets
• Debt service cost
• Foreign exchange transactions
• Social and transformation issues
• Electricity roll-out
• BEE
• Safety, Health and the environment
• Commitment to prevent workplace accidents
• Health issues are critical to an entities success
• Environmental and other legislation imposes duties

13
Weaknesses to address

• Information to measure performance not available
  / quality needs to
• improve
• Submission of corporate plans budgets of public
  entities to parliament
• In year management, monitoring and reporting
• Management on a monthly basis to be pro-active
• Legislature on a quarterly basis to deal with
  problems if management fails

14
Part 2 Tabling Process for Annual Reports
15
Legislative requirement for tabling

• Section 65(1) of PFMA
• the Minister responsible for a department or
  public entity must table in the relevant
  legislature no later than 30 September 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 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

16
Timely Tabling Process

• 1. Clerk of Papers must maintain databases of all
  the entities required to submit annual reports in
  terms of the PFMA
• 2. The Minister must inform the Clerk of Papers
  by letter of intention to table an annual report
  and send the required number of copies
• 3. The Clerk of Papers must issue a receipt and
  record receipt on the database
• 4. Ministers may table their annual reports at
  any time prior to 30 September, which is the
  final deadline for timely tabling
• 5. The Clerk of Papers must record the tabling of
  each annual report in the Order Paper (or ATC at
  the national sphere) at the earliest opportunity
• 6. On 1 October the Clerk of Papers must prepare
  a special Order Paper that
• Lists the entities for which annual reports
  have been tabled prior to the deadline.
• Lists the entities for which annual reports
  have not been tabled, but where a written
  explanation has been submitted
• Lists the entities for which annual reports
  have not been tabled and no written explanation
  has been submitted
• 7. On 2 October the Speaker should table the
  special Order Paper in the House
• 8. Legislatures should designate 30 September the
  Day of Delivery

17
Late Tabling Process

• 1. Each Friday, after the 30 September, the Clerk
  of Papers should submit to the Speaker for
  tabling in the House a report that
• Lists the entities for which annual reports were
  tabled during the preceding week.
• Lists the entities for which annual reports are
  outstanding, but where a written explanation
  setting out reasons for the delay has been
  submitted
• Lists the entities for which annual reports are
  outstanding, and for which no written explanation
  has been submitted
• 2. This process should continue every Friday
  until the last entitys report is tabled
• 3. In first week of October, the Speaker should
  communicate with Ministers on a formal basis as
  regards the late tabling of annual reports and
  the tabling of written explanations
• Use standard letters
• Put in place a mechanism to follow-up on
  communication
• 4. Once all annual reports have been tabled, the
  Speaker should make a special announcement in
  the House to record the completion of the tabling
  process

18
Part 3 Roles in the Oversight of Annual Reports
19
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

20
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 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, public
  entities and constitutional institutions
• (x) The consolidated financial statements of
  government, and the National Treasurys adherence
  to its deficit targets

21
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 plans
• (iii) The quality of the performance information
• (iv) 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
• (v) The equity of service delivery
• (vi) The implementation of the entitys service
  delivery improvement plan
• (vii) Evaluating managements explanations why
  service delivery was not in line with targets set
  in the strategic plans and budgets
• (viii) Investigating under or over expenditure,
  the impact on service delivery and the measures
  taken to comply with the Budget
• (ix) Commenting on the Ministers evaluation of
  the accounting officers performance, and the
  appropriateness of a performance bonus or sanction

22
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

23
Input by other role-players (1)

• Auditor-General
• Auditing of annual financial statements
• Auditing of performance information
• Performance audits of selected entities
• Support for public accounts committees
• Expert witness during oversight hearings
• National and provincial treasuries
• Annually prepare a Summary Guide to the technical
  requirements for annual reports
• Evaluate whether departments comply with
  technical requirements for annual reports
• Programme officers available to participate in
  oversight hearings
• Constitutional institutions
• Provide inputs to the oversight hearings dealing
  with issues within their mandate

24
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

25
Part 4 Annual Report Oversight Process
26
Overview of Oversight Process
27
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

• Hold hearings during period 15 to 31 October
• Request Minister to give performance overview of
  the department and all public entities in
  portfolio
• 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

29
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

30
Tabling of Oversight Reports

• Oversight Reports should be tabled in the House
  not later than
• 14 November or, at latest, before the December
  recess
• 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

31
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

32
Part 5 Interrogating Evaluating Annual
Reports
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Aim of Portfolio Committees Oversight

• Clear understanding of purpose of oversight helps
  to achieve objectives
• Fulfil constitutional obligation to hold
  executive accountable
• Ensure departments and public entities are
• Producing high quality services, economically,
  efficiently and effectively
• Complying with constitutional and/or legislative
  mandates, strategic plans and budgets
• Contributing to the realisation of governments
  objectives
• Gather information on the views of customers and
  clients
• Make recommendations on improving the quality and
  responsiveness of services

34
Preparing to exercise oversight
Oversight Preparation Checklist
Be ready - think about the issues and
information needs well in advance of the
start of the oversight process. Be disciplined -
set clear start, interim milestones and
completion targets Be aware - know about
other oversight processes that may be
relevant, e.g. of other departments or entities,
or of provincial department. Be focused -
tailor the oversight process to where it can have
the most impact, i.e. set clear
priorities. Be intelligent - be flexible enough
to take on board new issues and options
should they arise in the course of the
oversight process. Be open - consult with
outside experts, organisations and clients
throughout. Be forward looking - remember that
the purpose of oversight is to improve
service delivery in the future.

• The committee needs to work as a team in
  exercising oversight.
• The oversight process is about the legislature
  exercising oversight of the executive in
  accordance with the Constitution
• It is NOT about opposition parties exercising
  oversight of government

35
Oversight of technical quality of Annual Reports
36
Aim of overseeing technical quality

• To check that entities annual reports comply
  with the legal and policy
• frameworks for
• the structuring of the annual reports
• the compilation of information
• tabling of annual reports

37
Necessary background information

• Guide for the Preparation of Annual Reports
  issued by National Treasury
• Familiarity with the technical terms and methods
  used to
• describe service delivery performance
• especially economy, efficiency and effectiveness
• describe human resource issues
• Strategic plans and budgets for the entity

38
Typical technical focus questions

• (i) Was the report delivered on time?
• (ii) Is the report in line with the prescribed
  formats?
• (iii) Does the layout of the report facilitate
  understanding?
• (iv) Is the information communicated simply and
  clearly?
• (v) Is the report original, or are key portions
  copied from previous reports?
• (vi) Does the report deal faithfully with each
  aspect of the strategic plan?
• (vii) Is each measurable objective specified in
  the strategic plan reported on in the report?
• (viii) Is the service delivery information
  presented in the report reliable?
• Are the performance measures robust?
• Can the performance information be verified?
• Can the human resource information be verified?
• (ix) Was an excessive amount spent on the
  production of the annual report?

39
Oversight of entities performance
40
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?
41
Necessary background information

• Information on the entity
• its mandate,structure, way of operating,
  strengths and weaknesses
• The entitys strategic plan and budget
• Information on external and internal challenges
  faced by the entity
• Information from clients

42
Organisational concerns and options

• How effectively does the entity contribute to the
  delivery of government
• objectives, as reflected in its mandate?
• Should the mandate be changed to better reflect
  the priorities of
• government, and the needs of clients?
• Is there a continuing need for the functions
  being delivered by the entity
• as a whole, and by each of its programmes?
• If not, can the entity be closed down, or certain
  of its programmes be
• terminated?
• 4. Is there a need for new programmes?

43
Overspending and other poor audit outcomes

1. At what point did the accounting officer become
   aware of the risk of overspending?
2. At what point did the accounting officer inform
   his/her Minister of this risk?
3. Do the section 40(4)(c) PFMA reports, submitted
   by the accounting officer on 15 September and 15
   October before the adjustments budget, project
   any over expenditure?
4. Do the section 40(4)(c) PFMA reports submitted by
   the accounting officer before the end of the
   financial year project any over expenditure?
5. Why were the adjustment budget process or section
   16 of the PFMA not utilised to deal with the
   pressures that led to the overspending?
6. Were the Cabinet/EXCO made aware of potential
   overspending before it occurred
7. What is the outcome of the departments audit?
   Apart from overspending, does the audit identify
   any other unauthorised expenditure?
8. What corrective steps have been taken or are
   being taken to address poor audit outcomes?
9. What disciplinary steps have been taken against
   erring officials?
10. Have criminal investigations been instituted
    against erring officials?

44
Evaluating Past Performance

• 1. Is the annual report transparent about the
  entitys performance?
• Or is it simply a public relations document?
• 2. Has the entity met its aims, objectives and
  performance targets and quality standards?
• What were the reasons for any failures?
• 3. Have the entities performance targets changed
  over time?
• Are targets increasing with increases in funding?
• 4. Are there examples of good practice in how the
  entity has delivered its services?
• 5. What changes have been made in the services
  provided to clients?
• How can greater client choice be provided in
  future?
• 6. What are clients views on the nature and
  quality of services?
• Have these views altered over time?

45
Evaluating Efficiency of Performance

• 1. Are there systems to identify clients needs
  and monitor the extent to which they are met?
• 2. Has the entity delivered value for money?
• Over time, is it delivering its outputs at
  reduced cost?
• 3. Has the entity been innovative in managing
  costs and improving performance?
• What steps has it taken in this regard?
• Is there any scope for increased efficiency
  savings?
• 4. Are staff hampered by internal bureaucracy?
• What has been done to encourage greater
  flexibility and creativity in delivering
  services? What can still be done?
• 5. How effective have the relationships with
  other entities operating in the same or related
  areas been?
• 6. Have service delivery risks been managed
  adequately?
• 7. Does the entity comply with the Access to
  Information Act?

46
Developing effective partnerships

• 1. What links does the entity have with other
  organisations?
• 2. What reasons has the entity given for being
  involved in its current partnership(s)? How
  persuasive are these?
• 3. Has the entity reviewed its partnerships?
• 4. How does the entity measure whether its
  partnerships are contributing positively to the
  realisation of its objectives?
• 5. What do the entitys partnerships cost it?
• To what extent are these costs justified by the
  benefits that the partnership delivers?
• 6. Where could the entity develop further
  joint-working arrangements with other bodies to
  enhance the efficiency and effectiveness of
  service delivery?

47
Making better use of new technology

• To what extent is the entitys management aware
  of the development of
• the governments IT strategy and acting in
  accordance with it?
• How can the entity make better use of new
  technology to improve the
• delivery of its services and functions?
• To what extent has the entity ensured that all
  its staff have adequate IT
• training and can make full use of its systems?
• If an entity has decided to use IT in new ways,
  has it ensured that it has
• an adequate statutory basis for any new use of
  personal data?

48
Human resource development

• 1. Has progress been made with the implementation
  of the Service Delivery Improvement Plan?
• Is there evidence that services are improving as
  a result?
• 2. What has been done to fill key vacancies?
• What more can be done?
• 3. What progress has been made with employment
  equity?
• What strategies have been adopted to promote
  greater equity?
• 4. What is the status of the skills development
  programme?
• Is the programme making a difference to staffs
  ability to deliver services?
• 5. How much was paid out in performance bonuses?
• How much did the accounting officer and other
  senior managers receive as performance bonuses?
• Are these rewards in line with the entitys
  delivery performance?
• 5. How many disciplinary matters are outstanding?
• What is the age profile of these complaints?
• What is the entity doing to ensure the speedy
  conclusion of matters?
• 6. How many senior management posts do
  consultants fill?
• How will the entity reduce its reliance on
  consultants for routine functions?

49
Conclusion
50
Taking the process forward

• Each legislature needs to develop a systematic
  approach to reviewing
• annual reports that meets its own circumstances
• This approach needs to be documented, and where
  necessary changes
• need to be made to the House Rules
• Extensive training is required both for members
  and for committee
• support staff

51
Questions?