Joint Meeting: Finance and Appropriations Comittees Review of the Money Bills Amendment Procedure and Related Matters Act (Act No 9 of 2009) Joint Meeting: Finance and Appropriations Comittees Presentation by Constitutional and Legal Services Office 28 June 2017

Introduction Process to date Suggested changes Time lines Sequencing Budget Office (PBO) Consequential matters Norms and standards for provincial legislatures Way forward Background

Meetings - Discussion document 8 February 2017 2 May 2017 – SCoF 13 June 2017 28 June 2017 Process to date Background

Priority areas Background Timelines Sequencing Budget Office Realistic Moderated Sequencing Referral Reporting Budget Office Legal person Separate entity

Timelines BRRR – S. 5(4) – after adoption of Appropriation Bill, prior to MTBPS report – unchanged MTBPS – S 6(5), (7), (10) & (12) – report 30 days after tabling of MTBPS or as soon as reasonable thereafter– report submitted to Minister within 7 days or as soon as reasonable thereafter. Fiscal Framework – S. 8(3) – 16 days to report or as soon as reasonable thereafter – s. 8(7) adoption of report changed to allow programming but prior to reporting on DoRB s. 9(3) – S. 8(6)(b) Minister has 2 days to respond – unchanged. DoRB – S. 9(3)(A) – 35 days to pass or as soon as reasonable thereafter – S. 9(7)(b) – Minister has 3 days to respond – unchanged. Appropriation Bill – S. 10(5) – conditional appropriation – unchanged – S. 10(7) - pass Bill within four months after FY begins – unchanged – S. 10(9) – Minister given 10 days to respond - unchanged. Background

Timelines (cont.) Proposal moderates timeframes as discussed during meeting of 2 May Deals implicitly with consequences of non-compliance to strict timeframes ‘Reasonable’ is subject to judicial scrutiny Background

Sequencing Fiscal Framework Policy direction Consistency DORB Referral Reporting Appropriation Bill Sequencing Fiscal Framework DORB Appropriation Bill The requirement that the Division of Revenue Bill and the Appropriation Bill may only be referred to relevant committees after the fiscal framework is passed (sections 9(1) and 10(1)) ensure that the consideration of these Bills are consistent with the fiscal framework. The sequencing also leads to the DORB to be passed after 1 April. Review process may consider whether allowing the referral of the Division of Revenue Bill and Appropriation Bill after tabling would allow more flexibility in parliament’s programme. The reporting can be sequenced instead of the referral. The risk of this option is that committees will be operating without the guidance of the Fiscal Framework when considering the Bills as the Fiscal Framework is meant to provide overall direction relevant to any amendment. Similarly, section 10(3) provides that the Committee on Appropriations may only consider amendments to the Appropriation Bill once the Division of Revenue Bill is passed, can be reviewed to provide that the amendments to the Appropriation Bill may only be reported on once the Division of Revenue Bill is passed. The adjustments budget has the same constraints in respect of sequencing (section 12(6)) viz.; the Division of Revenue Amendment Bill and the Adjustments Appropriation Bill may only be referred after the Revised Fiscal Framework has been adopted by the Houses.

Sequencing DoRB – S. 9(1) – referred after adoption of Fiscal Framework – changed to require reporting on Fiscal Framework prior to reporting on DoRB – S 8(3) – reporting on the DoRB after Fiscal Framework is adopted – S. 9(3). Appropriation Bill – S. 10(1) & (3) – referred after adoption of Fiscal Framework – changed to require reporting after DoRB passed – S. 10(3). S. 9(4) and 10(4) - ensures consistency with Fiscal Framework

Adjustments budget National Adjustments budget S. 12(6) – DoRAB referred to joint sitting changed – sequencing changed S. 12(7) – 9 days within which to report on fiscal framenwork or as soon as reasonable thereafter – S. 12(9) – At least 2 days for ministerial response – unchanged S. 12(11) – 9 days to report on the DoRAB – changed to allow programming - S. 12(13) – at least 4 days for ministerial response – unchanged – S. 12(19) 30 days to report or as soon as reasonably therefafter. S. 12(15) – sequencing changed to allow referral of Adjustments App Bill prior to passing DoRAB – repoting only allowed after the DoRAB is passed. S12(17) - At least 4 days for ministerial response – unchanged Adjustments budget

Other money Bills Emergency situations S. 13(4) – implies consistency with the fiscal framwork – non-budget money Bills – constrains Parliament – amendment Proposed S. 13(6) allows amendments to money Bills notwithstanding prevailing fiscal framework – based on section 16 of the PFMA. Time frame for ministerial response – 14 days – unchanged – S. 13(3). Proposal removed – as discussed during 13 July meeting. Other money Bills

Functions and management of the PBO Section 15 of the Act establishes the PBO and sets out the following: Functions (section 15(2)); Appointment and removal of director (sections 15(5) & ((8)); Reporting to Parliament (section 15(11)); and Management of PBO (sections 15(12)-(15)). How can the PBO be aligned to the FMPPLA or include fiduciary duties for the Director as accounting officer for an entity? Functions and management of the PBO Section 15 of the Act establishes the Parliamentary Budget Office (PBO) with a mandate “to provide independent, objective and professional advice and analysis to Parliament on matters related to the budget and other money Bills”. The Act provides further that the Director, as head of the PBO, must be appointed by the Houses on the recommendation of the finance and appropriations committees. These committees must also recommend the conditions of service, such as the salary and allowance for the candidate, which must be “substantially the same as those of the top rank of public service.” Must this specific provision for a salary scale of the Director be reviewed in light of the fact that the PBO is much smaller that a government department?   In addition, the Act stipulates that the Director of the PBO must engage directly with the finance and appropriation committees on administrative matters including the structure of the Office and budget etc. The Act also states that Parliament must transfer funds to the PBO on an annual basis (in a similar way that a department would transfer funds to a state entity) and report directly to the Houses on the use of these funds. In terms of the Financial Management of Parliament and Provincial Act, 2009, (Act No 10 of 2009) (FMPPLA), the Speaker of the National Assembly and the Chairperson of the National Council of Provinces, acting jointly, constitute the Executive Authority of Parliament. The Executive Authority is accountable to the Houses for the financial management of Parliament. As such, the Executive Authority should have a relationship with the Director. To overcome these difficulties, the Committee may consider alignment with the FMPPLA: for example; that the Director be appointed after the Executive Authority initiate the process by directing the relevant committees on finance and appropriation. Furthermore, that the Director reports to the Executive Authority and the latter submits the reports to Parliament. Provision should be made to clarify the position that the PBO is an entity and the Director is the accounting authority. The Director’s fiduciary duties as accounting authority must be provided for. The structure and conditions of service of the staff of the PBO could be a function of a similar structure such as a board consisting of the relevant House Chairpersons and the chairpersons of the committees on finance and appropriations. Such proposals reflect the present situation.

Aligned to the FMPPLA – proposal from sections 53 and 55 of the Financial Sector Regulation Bill Clarity on whether the PBO is an entity that receives a transfer of funds – legal person Responsibility of Director for the fiduciary duties, financial management and human resource management Reporting through the Presiding Officers, and included in Parliament’s annual report. Presiding Officers submit reports to Houses Chairpersons of finance and appropriations committees and relevant House Chairpersons act as advisory board to consult about structure and conditions of service of PBO – option. Advisory board to appoint person to act as Director when vacancy exist. 2 May meeting resolved to include a provision enabling a member to request advice form the PBO through the Committee – S.15(3) PBO (cont.)

Consequential matters The language used in the Act can be improved to be consistent with language used in parliamentary processes (e.g. definitions). Certain areas of the Act requires further consideration (e.g. Whether section 3 is necessary? Correction of section 11(4)(c), which incorrectly refers to subsection (7) instead of (6)). Correction to section 12(6) to ensure constitutionality of legislative process. Other corrections to the latest terminology used in performance reporting (section 5(1)) and typographical corrections (section 6(2)(d)). Insertion of words to clarify meaning (e.g. definitions, sections 6 to 11). Consequential matters Definitions required to be added: “Executive Authority”, “Financial Management of Parliament Act”, “MTEF” and “tax and revenue proposals” Section 3 of the Act deals with the application of the Act. It provides that the Act applies to all proposed amendments to money Bills before Parliament. However, the Act provides a procedure to consider all money Bills before Parliament and not just amendments to these. The Act does not provide for the referral of the review of actual spending (section 6(2)(f)). The proposal is to referrer this to the committees on appropriations and, in addition, to any other committee. Correction of section 11(4)(c), which incorrectly refers to subsection (7) instead of (6)). Adjustments budget envisages a joint sitting of Committees of Appropriations to consider Division of Revenue Amendment Bill (section 12(6)). As this is a section 76 Bill, the Committees cannot sit jointly and vote jointly, which impression is created by this provision. A correction is therefore required. Other corrections are indicated on the draft working document.

Norms and standards for provincial legislatures Section 16, read with the Schedule to the Act provides for norms and standards for provincial legislatures. Section 120(3) of the Constitution provides that provincial legislatures must pass provincial legislation to set out a procedure to amend provincial money Bills. Section 116 (1) of the Constitution provides that a provincial legislature may control and determine its internal arrangements, proceedings and procedures. Section 16 of the Act must be consistent with the Constitution – changed to allow discretion. Norms and standards for provincial legislatures Submission from KZN Provincial Legislature.

Way forward Policy decisions for Committee Develop and consider a draft amendment Bill Gazette Public hearings on draft amendment Bill Report with a draft amendment Bill after public hearings for purpose of introducing a committee Bill Way forward