Parliament ‘s risk management strategy & implementation of action plans to address concerns raised in 2019/20 Annual Report

Joint Standing Committee on Financial Management of Parliament

05 March 2021
Chairperson: Ms B Mabe (ANC)
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Meeting Summary

Video: Joint Standing Committee on the Financial Management of Parliament, 05 March 2021

The purpose of the virtual meeting was for the Committee to be briefed by the Acting Secretary to Parliament on the institution’s Risk Management Strategy, and the implementation of action plans to attend to the concerns raised in the 2019/20 Annual Report of Parliament by the Auditor-General.

It was reported that Parliament’s annual budget for the financial year of 2020/21 was reduced by R80 million during the Special Adjustment Budget in June 2020. In addition, further budget cuts were scheduled for September and October 2020 amounting to R115 million (including R60.32 million for the compensation of employees, R30.68 million from direct charges, and R24.78 million for goods and services). This resulted in a reduced budget by R195 million. Further budget cuts between 2020 and 2024 are proposed by National Treasury amounting to a budget reduction of R892 million. From the financial year of 2021/22, the compensation for Members remains the same at the allocated budget of R471.71 million for the next three years. The budget for the compensation of employees will be reduced in the next three years by R443 million. The Acting Secretary to Parliament reported that there continues to be extensive engagements with National Treasury regarding the distortion of Parliament’s budget of including aspects such as the remuneration of retired MPs or the costs of public participation processes and consultations. Members expressed concern regarding the issue of requiring all Members of Parliament (MPs) to belong to the same medical aid scheme. Legislative reform in this regard is necessary in light of the budget cuts.

It was reported that upon the finalisation of the annual audit by the AGSA, the audit findings are consolidated into one tracking sheet, usually compiled in August of the year. An analysis of the internal control deficiencies is then conducted, as identified by the AGSA, and then a root-cause analysis for each finding is conducted. After consultations with the Audit Task Team and the relevant managerial members, the list of agreed-upon actions to be taken is finalised by mid-September. During the last financial year, the AGSA has made various audit findings against Parliament. This included two findings relating to compliance with laws and regulations, one finding relating to trade payables, one finding relating the benefits of MPs, one finding relating to heritage assets, two findings relating to human resource management, two findings relating to contract management, three findings relating to an audit of predetermined objectives, and two findings relating to the ICT-controls of Parliament.

Meeting report

Chairperson Mabe convened the virtual meeting and welcomed Members to the virtual meeting. Ms Penelope Tyawa, the Acting Secretary to Parliament, was in attendance as well. She stated that the purpose of the virtual meeting was for the Committee to be briefed by the Acting Secretary to Parliament on the institution’s Risk Management Strategy, and the implementation of action plans to attend to the concerns raised in the 2019/20 Annual Report of Parliament. Another item on the agenda was for the Committee to consider and adopt its outstanding minutes of its previous meetings.

Briefing on Parliament’s Risk Management Strategy:

The first item on the agenda was for the Committee to be briefed by the Acting Secretary to Parliament on the institution’s Risk Management Strategy. Ms Penelope Tyawa presented the briefing to Members.

The strategic and institutional risk register:

The Strategic Risk Register covers the key institutional risks linked to Parliament’s strategic outcome-oriented goals as per the Strategic Plan of Parliament. It is developed as part of the strategic planning process, which is documented in the Integrated Framework on Strategic Planning. The responsibility for the Strategic Risk Register lies with the Risk Management Committee which is comprised of the entire Executive Management Team. The updating and mitigations to the Strategic Risk Register is done on a quarterly basis, and the Risk Management Unit facilitates this process. Operational Risk Registers cover the key operational risks that sits within the divisions of Parliament. However, some operational risks may cut across the institution and feature in the Strategic Risk Register. Divisional managers are responsible for updating their registers, including the applicable risk ratings, controls, mitigations, and identification of emerging risks. Divisional managers subsequently report their recorded risks to the Risk Management Committee.

Plans to enhance risk management maturity:

There was a need to enhance Parliament’s knowledge of risk management, and as such a Senior Manager for Risk and Compliance was appointed with a commencement date of 1 March 2021. The terms of reference for the Risk Management Committee were updated to ensure its effectiveness. Another set of terms of reference was drafted for the Risk Management Forum to enhance risk capability within operational business units. The establishment of the Risk Management Forum is set to be concluded in April 2021, and it is comprised of operational managers in the various divisions of Parliament.

In addition, two specialised risk management courses were developed by an external service provider regarding operational risks and risk management.

Annual budget reductions:

Parliament’s annual budget for the financial year of 2020/21 was reduced by R80 million during the Special Adjustment Budget in June 2020. In addition, further budget cuts were scheduled for September and October 2020 amounting to R115 million (including R60.32 million for the compensation of employees, R30.68 million from direct charges, and R24.78 million for goods and services). This resulted in a reduced budget by R195 million. Further budget cuts between 2020 and 2024 are proposed by National Treasury amounting to a budget reduction of R892 million. From the financial year of 2021/22, the compensation for Members remains the same at the allocated budget of R471.71 million for the next three years. The budget for the compensation of employees will be reduced in the next three years by R443 million.

Discussion

Mr N Singh (IFP) thanked the Acting Secretary for the briefing made. He asked whether the Auditor-General of South Africa (the AGSA) pointed out any risks in its report that needs to be ameliorated. How will the additional risks be mitigated regarding the extra resources that will be required when MPs retire or resign? The underfunding of Parliament has positive and negative risks. One of the positive risks that Parliament has experienced during the COVID-19 pandemic is the reduced expenses for MPs flights, transport, and accommodation as a result of travel being prohibited during certain stages of the national lockdown. Have these savings been incorporated into the reduction figures presented to the Committee?

Mr B Radebe (ANC) appreciated the briefing and stated that it is good to have a clear strategic plan to deal with the risks of Parliament’s finances. However, he expressed concern about the image the budget will represent to ordinary South Africans when it appears as if Parliament takes care of itself while the people of the country continue to struggle in the currently dire economic conditions. This poses a reputational risk to Parliament that will impact the public’s faith in the institution. The high costs associated with requiring MPs to belong to the same medical aid scheme and the continued remuneration of previous MPs must be addressed. Parliament, as the representatives of the people of South Africa, must take a hard look and fully understand the extent of the impact of the COVID-19 pandemic on the people on the ground.

Ms O Maotwe (EFF) asked that the Committee be provided with the documents of Parliament that was referenced in the briefing by the Acting Secretary. She appreciated that the Risk Management Committee is responsible for the overall management of Parliament’s risks that would be identified. Who manages the official Strategic Risk Register and how frequently is it updated? The reduced budget for the compensation of employees is a grave concern because it will exacerbate South Africa’s already-high rate of unemployment.

Mr M Moletsane (EFF, Free State) agreed with Mr Radebe regarding the issue of requiring all MPs to belong to the same medical aid scheme. Legislative reform in this regard is necessary in light of the budget cuts.

Mr X Qayiso (ANC) concurred with Mr Moletsane regarding the issue of requiring all MPs to belong to the same medical aid scheme. He stated that the issue remains a grave concern and is a burden on the MPs.

Chairperson Mabe agreed with the Members on the issue of the parliamentary-required medical aid scheme. She stated that this issue must be addressed by the Committee in its upcoming meetings and engagements.

Ms N Mahlo (ANC) concurred with the Members and stated that the issue of the required medical aid scheme must be addressed urgently and cannot be dragged out any longer.

Responses from the Acting Secretary

Ms Tyawa responded that the AGSA’s report did raise risks and it will be adapted into Parliament’s Risk Management Strategy. She stated that the issue of the required medical aid scheme has been raised before. It was explained to the Executive Authority that MPs have expressed dissatisfaction on this issue. There must be a platform of consultation in this regard, as the enabling legislation was enacted in the Apartheid-era. She suggested that the Committee makes a written submission in this regard. She agreed with Mr Singh regarding the risk of extra resources when MPs leave Parliament and stated that officials often leave the institution after an election. There continues to be extensive engagements with National Treasury regarding the distortion of Parliament’s budget including aspects such as the remuneration of retired MPs or the costs of public participation processes and consultations. She stated that the Committee will be provided with the requested parliamentary documents. She stated that there is an independent Audit Committee appointed by the Executive Authority. The issue of vacant positions is being addressed through a skills-map analysis.

Briefing on the implementation of the Audit Action Plan for Parliament

The second item on the agenda was for the Committee to be briefed by the Acting Secretary to Parliament on the implementation of action plans to attend to the concerns raised in the 2019/20 Annual Report of Parliament. Ms Tyawa presented the briefing to the Committee.

Background and context:

The Audit Action Plan is developed annually to assist the Secretary to Parliament in fulfilling their duties and responsibilities in terms of section 61 of the Financial Management of Parliament, Act 10 of 2009. This requires that the Accounting Officer must promptly address any issues raised by the AGSA and to advise the Executive Authority of the steps taken to address the issues.

Upon the finalisation of the annual audit by the AGSA, the audit findings are consolidated into one tracking sheet, usually compiled in August of the year. An analysis of the internal control deficiencies is then conducted, as identified by the AGSA, and then a root-cause analysis for each finding is conducted. After consultations with the Audit Task Team and the relevant managerial members, the list of agreed-upon actions to be taken is finalised by mid-September.

The findings of the AGSA for the last financial year:

During the last financial year, the AGSA made various audit findings against Parliament. This included two findings relating to compliance with laws and regulations, one finding relating to trade payables, one finding relating the benefits of MPs, one finding relating to heritage assets, two findings relating to human resource management, two findings relating to contract management, three findings relating to an audit of predetermined objectives, and two findings relating to the ICT-controls of Parliament.

The following findings were raised by the AGSA:

  • The findings relating to compliance with laws and regulations pertained to invoices being paid in excess of 30 days, and that Parliament’s annual financial statements were not submitted for audit by the deadline as a result of the lack of mobility of staff members during the nationwide lockdown.
  • The finding relating to trade payables involved invoice numbers being incorrectly recorded on the accruals listing when compared to the actual invoice inspected as audit evidence.
  • Regarding the finding relating to employee benefits, the AGSA reported that deceased MPs were included in the list provided for the actuarial valuation for post-employment travel benefits.
  • Regarding the finding relating to heritage assets, it was reported that assets were found based on its description, but that the asset barcodes differed to the asset number on the asset register.
  • Regarding the findings made in relation to human resource management, the AGSA reported that the acting allowances and group life benefits were incorrectly classified as basic remuneration in the annual financial statements. The findings of the AGSA raised the issue of a lack of an approved policy on the retainment of work experience (annual leave entitlement) by employees who transfer from governmental entities to Parliament.
  • Regarding the findings relating to an audit of predetermined objectives, the actual achievements as reported in the Annual Performance Report did not agree with the totals per the listings which were provided to support the actual achievements for various indicators. These findings related to the accuracy of actual performance, the accuracy of listing provided, and inadequate evidence provided.
  • The findings relating to the ICT-controls of Parliament pertained to the lack of formal documentation of physical access and environmental controls for the server room, and the non-compliance with user access rights review procedures.

Chairperson Mabe thanked the Acting Secretary to Parliament for this briefing. She appreciated the pro-activity and imitative in preparing this briefing item without the Committee having to specifically request it.

Committee minutes

The next item on the agenda was for the Committee to consider and adopt its outstanding minutes of its previous meetings. Members were briefed on the contents of the minutes for each meeting. The Committee adopted the minutes of its previous meetings for 26 February 2021 and 2 December 2020.

 

The meeting was adjourned.

 

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