Financial Management of Parliament Bill Presentation to the Portfolio Committee on Finance National Treasury – 30 May 2008

Background Parliament is currently subject to the Public Finance Management Act In keeping with Constitution’s requirement for uniform treasury norms and standards Core objective of the Bill appears to be to provide for independent financial management of Parliament In Treasury’s view, this can fully be provided for in the PFMA National Treasury 2

General comments Structure of Bill is sound and main public finance requirements are covered Clear roles of executive authority and accounting officer Planning, Budgeting and Reporting Financial management and audit requirements Special provisions for support for political parties & members Bill draws extensively on PFMA and MFMA provisions Bill is well-drafted National Treasury 3

Underlying principles Separation of powers: Legislature, Executive, Judiciary Independence of Parliament Need to ensure adequate resources for Parliament’s legislative and oversight responsibilities Avoidance of “treasury oversight” of Parliament’s budget National Treasury 4

Concerns Bill appears to be founded on a misunderstanding of the PFMA – Independence of the legislature is not compromised by common financial norms and standards Constitution requires a single national Revenue Fund and an integrated treasury Separate legislation cannot sidestep the requirement for agreement between Presiding Officers and Minister of Finance over budget allocation National Treasury 5

Practical difficulties Unnecessary duplication of the PFMA: Complications will arise over time as PFMA is amended National norms & standards will be subject to separate interpretations Implications for provinces are unclear: fragmentation of public finance practice is likely to arise Problematic precedent: Will separate legislation for judiciary, constitutional entities come under consideration? National Treasury 6

Alternative approach Provide for independent status of legislatures in PFMA Presiding Officers as executive authorities Planning & budgeting not subject to treasury procedures and guidelines Retention of revenue and self-contained financial management Detail planning, budgeting and accountability procedures in Rules National Treasury 7

Specific concerns Sect 16-18: Amount to be appropriated for Parliament has to be agreed between Executive Authority and Minister of Finance – Bill provides for consultation but not for agreement or resolution of disputes Sect 16ff: Bill attempts to preserve identity of “appropriated” funds and own revenue: monies are fungible Sect 19: Unsatisfactory PFMA provisions on expenditure before appropriation is passed are reproduced Sect 28: Restrictions on borrowing will effectively cut Parliament off from debt or PPP funding for major projects Sect 35: Provisions relating to entities reporting to Parliament are incomplete Sect 43: “other than the one recommended as best value for money” (as provided in schedule 3 (h)) Sects 44,46: Exclusion of MPs from tender committees and bans on contracts may be impractical as worded Sect 50, 56: Inappropriate for EA to prescribe internal audit standards; financial reporting formats No provision is made for regulation & alignment of remuneration and other benefits No provision is made for financial management arrangements relating to other organs of State: Public Works; Safety and Security; NIA; Presidency; research councils Financial implications of international agreements are inadequately covered National Treasury 8

Conclusion Bill is subject to Constitutional challenge as chapter 13 envisages a single treasury Practical difficulties will arise in respect of alignment with PFMA Fragmentation of the regulation of public finances sets up an unfortunate precedent, eg in respect of provinces, judiciary Determination of amount to be appropriated for Parliament will remain potential source of conflict Separate legislation will effectively exclude Parliament from wider provisions of PFMA, such as borrowing, PPPs, guarantees, public entity oversight National Treasury 9