DRAFT REPORT OF THE JOINT BUDGET COMMITTEE ON THE WORKSHOP HELD IN STELLENBOSCH ON 02 AND 03 JUNE 2006

(i) Purpose of Workshop

1. Introduction

The purpose of the workshop that was held from 2 to 3 June 2006 was to clarify the working relationship of the Joint Budget Committee with relevant stakeholders, as well as to clarify its internal mechanisms and its approach to oversight work. The first day of the workshop consisted of presentations from the main organisations working closely with the Joint Budget Committee. The presentations included:

1.       National Treasury: Improving the oversight role of Parliament.

 

2.       Auditor General: Budget-monitoring principles that could be utilized to enhance Parliament's oversight function.

 

3.       Financial and Fiscal Commission (FFC): The budget process and the FFC.

2. Strategic Plan of the JBC

The 2005 strategic plan of the Joint Budget Committee sets out the Committee's strategy for developing its role in the budget process in practice, and for engagement in the current Medium Term Expenditure Framework (MTEF) and budget cycle. The document aims to address when and how the Committee could engage with the budget process in order to fulfill its mandates 1. The most important objective of the strategic plan is to guide the Joint Budget Committee in influencing the budget as effectively as possible.

The main priority of the Committee is to impact on the efficiency of expenditure and planning in national and provincial government. In achieving this, the Committee should aim to influence the process through:

 

1)       Increased interaction with the executive, particularly the National Treasury.

 

2)       Interaction with Portfolio and Select Committees. In doing this, it is important for the Committee to clarify its role in relation to Portfolio and Select Committees. The Joint Budget Committee's role should be seen as mainly that of coordination in fiscal and expenditure activities.

 

3)        'Strengthen the Committee's capacity.

 

4)       Interaction with other monitoring and oversight organisations such as the Financial and Fiscal Commission (FFC) and the Auditor General (AG).




















useful for effective in year monitoring of departments.

1 .2.2. The Joint Budget Committee will interact with sector Committees to alert them on irregular spending patterns identified in Section 32 reports. 1.2.3. It is important for Committees to focus on the outer years of departmental budgets.

 

1.2.4 The Joint Budget Committee must submit a pre-budget report to the executive before Min-ComBud.

 

·         1.2.5. It is important for Ministers, MECs or Accounting Officers to accompany departments appearing before the Joint Budget Committee.

2. Auditor General

The Auditor General's presentation incorporated the following:

2.1. Budget monitoring principles that could be performed on financial data

It is important for the Joint Budget Committee to review spending trends. The Committee should evaluate past spending trends of departments to ascertain whether they have demonstrated poor planning and organization of functions. For example if a department has continuously demonstrated significant "savings" at year-end, this could be attributed to the lack of service delivery and rollout of project initiatives. On the other hand if a department has continuously demonstrated significant deficits at year-end, this could be attributed to poor planning and possible inefficiencies in the department

The Committee should also evaluate the current spending of the department for the year under review to assess their progress against planned activities. If a department demonstrates "savings" for a significant portion of the year, the Committee should raise the concern with them to evaluate whether the department would be able to deliver on the planned initiatives for the year. On the other hand if a department demonstrates deficits for a significant portion of the year, the Committee should raise a concern with them to evaluate the risk of incurring unauthorised expenditure.

Departments are required to report to National treasury on a monthly basis regarding their actual spending incurred and projected spending for a particular financial year. The Committee should evaluate the projections being reported to identify whether the departments are constantly revising projections. The constant revision of projections could be attributed to lack of planning and the delayed initiation of projects within a particular department.

During the transition from cash basis of accounting to accrual basis of accounting, departments are required to quantify their future obligations in terms of contracts entered into, unpaid invoices and future liability in terms of employee benefits. The Committee should evaluate whether departments have considered these future liabilities and that they have been provided for in the budget exercise.



















evaluations and considerations by the Portfolio Committee could assist in understanding why a department might be under spending or overspending.

The Standing Committee on Public Accounts (SCOPA) evaluates departments' financial management. The Joint Budget Committee could consider obtaining the resolutions passed by SCOP A, which could assist in the budget monitoring role when evaluating actual spending against budgets.

2.4. The utilization of audit products that will be useful for the committee's oversight purposes.

In interrogating Annual Reports, the Committee will have to thoroughly evaluate the following:

2.4.1. Technical Qualitv of the Annual Report.

The aim of evaluating technical quality is to ensure that it complies with the legal and policy framework for the structuring, compilation and tabling of such reports.

2.4.2. Performance information as presented in the Annual Report.

The aim of this aspect of the oversight process is to test whether the Annual Report is an accurate record of Departments performance and to evaluate whether the Annual Report is in line with the Departments Strategic Plans, budgets and the operating environment.

3. Financial and Fiscal Commission (FFC)

The presentation focused on the role of the FFC in the budget process and how its work could contribute to the oversight work of the Joint Budget Committee.

3.1. The budget process and the FFC

The FFC was established in terms of Section 220 of the Constitution of the Republic of South Africa (Act 108 of 1996, as amended), and of the Financial and Fiscal Commission Act (99 of 1997) as an advisory body with a mandate to make recommendations on financial and fiscal matters to Parliament, the Provincial Legislatures, and other institutions of government when necessary. The FFC is independent from government and can therefore perform impartial checks and balances between the three levels of government. It facilitates co-operative government on intergovernmental fiscal matters.

Section 214 (1) of the Constitution provides for an Act of Parliament to provide for:

·         The annual division of revenue between national, provincial and Local Government.

 

·         The division of revenue between the nine provinces of South Africa.




















National Revenue fund, and any conditions on which those allocations should be made.

3.2 The FFC and the Joint Budget Committee interactions regarding the FFC’s recommendations

The FFC mentioned a number of ways their work could contribute to the work of the Joint Satnding Committee. These include:

 

·         Comments on the outer years of the Medium Term Expenditure Framework in line with item 2 of the Joint Budget Committee's terms of reference.

 

·         Comments on the development of budgets and allocations in accordance with Constitutional requirements in line with item 3 of the Joint Budget Committees terms of reference

 

·         Assessments on expenditure performance of government Departments against governmental projections of Intergovernmental Fiscal Relations systems (JBC-T.O.R (4)).

 

·         FFC comments on the Medium Term Budget Policy Statement (MTBPS) with respect to expenditure and revenue policy issues. (JBC-T.O.R(5)).

 

·         FFC comments during the hearing process(JBC-T.O.R (6))

 

·         The possible incorporation of FFC comments/assessments into the Joint Budget Report.

 

·         The FFC facilitate matters of interest pertaining to other committees for their attention.

 

·         FFC interaction on the MTBPS, MTEF, Budget Policy Review.

 

A number of important points were raised after the presentation, including the following:

 

·         Protocol needs to be developed on how the FFC recommendations on the Division of Revenue should be dealt with after tabling in Parliament. For example, what would be the focus of each committee? Le. Portfolio and Select Committee on Finance and the Joint Budget Committees.

 

·         Performance reports for all spheres of government produced by the FFC on a quarterly or half yearly basis will be forwarded to the Joint Budget Committee.

 

·         The FFC to provide feedback and comments on the Joint Budget Committee's reports if required to do so.

 

·         The FFC will provide training to the Joint Budget Committee on how to make use of their research reports.

 

·         The FFC will provide research to the benefit of the Joint Budget Committee if the matter to be researched falls within its mandate.

 

(iii) Work Method, Division Of Labour and Oversight












Committees.

2.4. The Committee should also include Development Nodes when going on such visits.

2.5. The Committee should identify an area of focus for the year.

2.6 International study tours should also be undertaken.