Deputy Chairperson, on 24 February 2010, the Financial and Fiscal Commission, FFC, presented its annual reports for the period of 2007- 08 and 2008-09 to the Select Committee on Finance and Appropriations. The 2007-08 FFC Annual Report could not be finalised by the previous Select Committee on Finance before the end of the committee members' term of office. The FFC delegation comprised of Dr Setai, the Chairperson of the FFC, Mr Khumalo, the deputy chairperson, and Mr Vokwana, the chief financial officer of the commission. The previous committee could not adopt the 2007-08 commission report because the format of the report did not contain certain items.
Another outstanding issue raised by the previous committee on the 2007-08 annual report was the position of the audit committee chairperson who was also a part-time commissioner with the FFC. Although the Financial and Fiscal Commission Act provides that the chairperson of the audit committee should be a commissioner, the previous committee raised a concern that such an arrangement would compromise the independence of the audit committee chairperson. In its presentation to the commission, the committee indicated that the audit committee chairperson had since stepped down and an independent person was appointed to the position of the audit committee chairperson.
The 2007-2008 annual report of the commission showed that the financial statements of the commission received an unqualified audit opinion from the Auditor-General. The commission, however, incurred a net loss of R3,1 million in the year ended 31 March 2007. Furthermore, the commission's liabilities exceeded its assets as of that date by R733 549. This showed the fact that the commission's ability to continue as a going concern depends largely on the continued support of government by means of an annual grant.
The major contributors to the commission's deficit were reportedly rental amounting to R1 million on premises which were previously paid for by the Department of Public Works, increased remuneration for the executive commissioners that accounted for the increase of up to 51% in staff-related costs, increased commissioned research, an upgraded security system and an increase in audit fees. The 2008-09 annual report showed that the commission received an unqualified audit opinion on its financial statements for the year reviewed.
Both the 2007-08 and 2008-09 annual reports showed that, due to financial constraints, certain key performance measurements and indicators were partially achieved while others were not achieved at all. The 2008-09 report further indicated that financial constraints during the financial year impacted on key aspects of the commission's human resource management. The staff vacancy rate stood at 48,4%. This means that out of 64 posts, only 33 were filled. A major impact in this regard is reportedly evidenced in the area of recruiting for key aspects of the commission's constitutional mandate.
The commission highlighted the following challenges. Firstly, the commission's information technology infrastructure - on which it is highly dependent - needs to be replaced. Secondly, the Money Bills Amendment Procedures and Related Matters Act has introduced an additional responsibility on the budget process of the commission. Thirdly, the cost of compliance continues to rise with audit fees constituting more than 5% of the commission's budget. Finally, the cost of travel necessitated by the need for stakeholder engagement remains a major constraint. All of the above have required constant reprioritisation and the implementation of austerity measures in order for the commission to at least not default in the discharge of its mandate. This has the potential to undermine the effectiveness of the commission in the delivery of its mandate.
The select committee made the following findings. Firstly, the committee observed a need for the adjustment of the commission's budget. Secondly, provinces were not making use of the commission as it was there to assist them. Since 2005, only three out of the nine provinces interacted with the FFC. In this regard, the chairperson of the Select Committee on Finance wrote a letter to the Chairperson of the NCOP, hon Mahlangu, who in return wrote a letter to all the Speakers of the provincial legislatures, sensitising them to interact with the FFC. That was done.
The matter of the high staff turnover and high vacancy rate will negatively impact on the work of the commission. There was a need for the commission to have relationships with the Human Sciences Research Council and Statistics South Africa.
The committee recommends that the National Treasury should consider increasing the budget of the commission as they were now unable to fulfil the mandate as required by section 220 of the Constitution. The committee recommends that all provinces should make use of the commission as the commission is playing a meaningful role in the Division of Revenue Bill. The committee moves that the House support the report. I thank you.
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.