Annual Reporting process: National Treasury briefing

Meeting report

Briefing by National Treasury on the Annual Reporting process

Mr Jayce Nair, Chief Director: Governance Monitoring, National Treasury, took the Committee through a presentation on the Annual Reporting process. As per the Financial Management Model of the Public Finance Management Act (PFMA), roles of Select Committees and Public Accounts Committee (PAC) involve closing the accountability loop by exercising oversight on service delivery. The focus should be on the following: the technical quality of the annual reports; the quality of performance info; the economy, efficiency and effectiveness of service delivery; implementation of the entity’s service delivery improvement plan; and evaluating management’s explanations why service delivery was not in line with targets.

The Public Accounts Committee serves as ‘protector of the public purse’, with particular focus on the financial probity and corporate governance of government departments. Links between various committees were identified. Committees need to share information to improve the overall effectiveness of oversight. Select committees should consider holding joint hearings. Public Accounts Committee should provide information to other committees on key issues raised in the AG’s General Report. Portfolio committees may consider appointing rapporteurs to brief the Public Accounts Committee on important issues it has identified in its oversight process. Other stakeholders also have a role to play in the evaluation process. The Auditor-General’s role includes auditing of annual financial statements and performance of selected entities. National Treasury annually prepares: a Guide to the technical requirements for annual reports; Framework for the Management of Programme Performance Information; as well as a consolidated report for Cabinet on audit outcomes. Constitutional institutions provide inputs to the oversight hearings dealing with issues within their mandate.

Committee researchers were expected to: be familiar with the challenges, policies and other developments; review strategic plans, budgets, in-year reports and previous annual reports; and monitor developments in their area of focus on an on-going basis.

Proposed Oversight Process

Preparations were expected to start well before 30 September yearly, and Committee staff should: ensure Members have access to all relevant documents; and identify and contact subject experts for hearings. As part of their preparations, Members were expected to: read all relevant documents; compare current year’s performance with outcomes - previous oversight process; and consult with subject experts and other stakeholders. Committees should also meet prior to hearings to: identify key issues; identify what they want to get out of the hearing; and prioritise certain key questions.

Oversight Hearings Phase

Hearings were expected to be held between 15 and 31 October yearly. MECs would be requested to give an overview of the performance of the department. Options for structuring the oversight hearings were as follows:

• Presentation by the MEC and/or the accounting officer and then a page-by-page review of the annual report
• Presentation by the MEC 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
• Presentation by the MEC and/or the accounting officer followed by inputs by invited experts or stakeholder organisations, followed by a question and answer session.
• Presentation by the MEC and/or the accounting officer followed by a full-scale public hearing, followed by a question and answer session

Oversight Report-Writing Phase

During the oversight report-writing phase, each portfolio committee should prepare an Oversight Report for each entity. Oversight Reports should deal with: compliance with the tabling deadlines; compliance with the technical requirements for annual reports; the entity’s reported performance; the entity’s human resource situation and policies; key issues regarding the entity’s performance; and recommendations in relation to any of the issues noted above.

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 MEC for response to resolutions.

Follow-up phase

Legislatures need to put in place systems to manage and track resolutions. The aims of such systems were: to bring resolutions regularly to the attention of MECs; to ensure MECs respond to resolutions; and to ensure issues raised in resolutions get resolved.

Oversight of technical quality of Annual Reports

As part of Committees’ oversight of the technical quality of Annual Reports, typical technical focus questions would be as follows: Was the report delivered on time; is the report in line with the prescribed formats; does the layout of the report facilitate understanding; is the information communicated simply and clearly; is the report original, or are key portions copied from previous reports; does the report deal faithfully with each aspect of the strategic plan; are measurable objective in the strategic plan reported on in the report; 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; was an excessive amount spent on the production of the annual report? Performance in annual reports should focus on:

• Background information
• Organisational concerns and options
• Evaluating past performance
• Evaluating future performance
• Evaluating efficiency of performance
• Evaluating human resource development

On organisational concerns and options, the following should be interrogated: 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; was 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; is there a need for new programmes?

On evaluating efficiency of performance, Members could ask the following questions:

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

Discussion

Ms C Beerwinkel (ANC) said National Treasury, in a sense, was speaking to the converted as most of the processes identified were being carried out by committees, particularly SCOPA. The processes being prescribed were being exercised effectively by Members, especially from the opposition. What did Treasury understand as a hearing, and what should be done at a public hearing? The aim of the oversight committee was to hold the executive to account. However, this was not happening as most of the Members were praise-singers. This curtailed the exercise of oversight responsibilities. The purpose of oversight should be to identify issues before they happen. She added the Committees could do little as they were unable to amend the Money Bills. There were defensive walls that the Committees have to get past most of the times to effectively exercise their oversight role.

Ms M Gillion (ANC) pointed out that Treasury was the custodian of the public purse. She expressed concern about delays in the tabling of annual reports by Members of the Executive Council (MECs). What measures were in place to avoid such delays? What was National Treasury doing about this?

Mr P Uys (ANC) made reference to the legal framework guiding the work of departments in carrying out their constitutional obligations. What forms of support was National Treasury affording departments in terms of the Public Finance Management Act to ensure they deliver on their mandate effectively. For instance, there had been delays in the tabling of annual reports particularly by the MEC for Agriculture. He asked for reflections on this. 

The Chairperson responded to some of the Members’ comments. He pointed out that the work of the Provincial Legislature was open to the public. Public hearings are advertised and comments are invited from stakeholders all the time.

Mr Uys interjected and indicated Members had directed their questions to Treasury. The Chairperson should not attempt to respond on Treasury’s behalf. Treasury should be given an opportunity to give responses. The Chairperson should not be defensive.

The Chairperson said it was his responsibility to reflect on some of the concern and comments raised by Members. National Treasury was not expected to comment on Committee processes. The correct information should be shared.

Mr Nair, in response, said public hearings referred to in the presentation were meetings held between the Committee and departmental MECs and accounting officers. National Treasury had no role to play in the tabling of annual reports by MECs. It was up to the relevant Committee to decide on when to receive the reports. On what National Treasury was doing to assist provincial departments, this was done through various information-sharing platforms and peer-learning forums. On the Provincial Department of Agriculture’s failure to table its annual reports timeously, this was up to the relevant Committee to follow it up and determine if there were valid reasons for such delays.

Mr Harry Malila, DDG: Fiscal and Economic Services, Provincial Treasury, explained the delays in the tabling of annual reports. He identified a standing dispute between the Provincial Department of Agriculture and the Auditor-General (AG) regarding the former’s 2016/17 and 2017/18 audit outcomes. It was agreed upon that the Committee would engage the said Department further during the last meeting. Provincial Treasury was also having ongoing discussions with them. Provincial Treasury was convinced that accounting officers must submit their reports before deadlines; whether or not they agreed with the AG’s opinions. That was the position which had been taken up to departments and legal services.

Ms N Nkondlo (ANC) said the work of the Provincial Legislature should not be curtailed by the identified standoff between the Provincial Department of Agriculture and the AG. What recourse does the Provincial Legislature have in the event of such non-compliance? How were departments setting low targets and performance baselines as a means of setting themselves up to receive performance bonuses being dealt with? On efficiency evaluations, how does National Treasury assess departmental transformation benchmarks and equity plans?

Mr T Simmers (DA) asked for National Treasury’s comments on public participation in budget processes as per its guidelines.

Mr Nair said the common reasons for late submission of annual reports were delays in finalisation of audits as well as going concern issues. The recourse Provincial Legislature could take would be as per its rules and guidelines. MECs who fail to submit their annual reports timeously should provide reasons for non-compliance with the budget framework. The realisation of equity plans and transformation targets needed to be assessed on the basis of benchmarks and set targets.

The Chairperson appreciated the engagements and said the Committee would take the presentation from Provincial Treasury as submitted. The Committee would receive a briefing from the Auditor-General on 8 October at 2:00pm.

The meeting was adjourned.