Nols du PlessisNational Treasury20 October 2006

Overview of Presentation

The Constitution and oversight

PFMA requirements for tabling of annual reports

Proposed oversight process

Roles of Portfolio Committees and SCOPA

Other role-players in evaluation process

Annual report oversight process

Interrogating & evaluating annual reports

Oversight of technical quality of annual reports

Oversight of entities performance

Conclusion

The Constitution andOversight

The Constitution and Oversight

Section 55(2) says the National Assembly:

“must provide for mechanisms to ensure that all executive organs of state in

the national sphere of government are accountable to it; and to maintain

oversight of the exercise of national executive authority, including the

implementation of legislation; and any organ of state.”

Section 92(3)(b) requires that:

“Members of Cabinet must provide Parliament with full and regular reports

concerning matters under their control.”

PFMA requirements for tabling of Annual Reports

PFMA requirements for tabling

Section 40(1)(d) & 55(1)(d)

– The Accounting Officer must submit within five months of the end of the financial

year to the Minister responsible for that Department an Annual Report on the

activities of the Department.

Section 65(1) of PFMA

– the Minister responsible for a department must table the annual report in the

relevant legislature within one month after the Minister received the annual report.

Section 65(2)(a) of PFMA

– a Minister who fails to table an annual report for an entity by 30 September (6

months after year end) must table a written explanation in the legislature setting

out the reasons why the report was not tabled and indicating when the report will

be tabled

Annual Reports:Closing the accountability loop

Departments produce Strategic Plans setting out performance measures and targets

for the coming financial year

Through the Budget the executive indicates what funds are required to implement

these Strategic Plans

The legislatures approve the Budget, and so appropriate funds for the

implementation of the Strategic Plans

The Annual Reports indicate how the executive have used the appropriated funds to

implement the Strategic Plans

The legislatures should exercise oversight of the Annual Reports to check whether

the executive has performed acceptably and used the appropriated funds for the

intended purposes

Proposed oversightprocess

Proposed Oversight Process

Review of AG’s General Report

Timely tabling process

Late tabling process

Preparation PhaseJoint

Workshops(provincial concurrent

functions)

Report Writing PhaseAnnouncement of

completion of tabling process

Annual Report Tabling Processes

Referral to Portfolio Committees

Tabling of Oversight Reports

Ongoing Oversight Processes

Timeline

30 September

First two weeks in October

Third week in October

First week in November

Second week of November

Follow-upPhase

Preparation Phase

Referral to Public Accounts Committee

Annual Report Oversight ProcessPortfolio Committee

process

Public Accounts Committee

process

Day of Delivery

Tabling of a weekly

update of outstanding

Annual Reports

Recommendations for the

preparation of the Finance Bill

Before 31 March

Hearings Phase

Last week in October

Roles of Portfolio Committees and SCOPA

Role of the Public Accounts Committee

Specialised role of ‘protector of the public purse’

Focus on the following:

(i) The General Report of the Auditor General

(ii) Financial probity (e.g. fraud)

(iii) Compliance with the PFMA and its associated Treasury Regulations

(iv) The interrogation of over-expenditure (relative to appropriations), and other

instances of unauthorised expenditure

(v) The interrogation of fruitless and wasteful expenditure

(vi) The functioning of internal control and risk management systems

(vii) Supply chain management and procurement, particularly large tenders, large

capital projects and Public Private Partnership transactions

(viii) The disposal of significant state assets, and any major financial or related

losses suffered by government

(ix) Corporate governance of departments and public entities

Role of Portfolio Committees

Close accountability loop by exercising oversight of service delivery

Focus on the following:

(i) The technical quality of the annual reports

(ii) Whether reports cover all performance targets set out in strategic/corporate

plans;

(iii) The quality of performance information

(iv) The economy, efficiency and effectiveness of service delivery as measured

by the performance indicators or by the AG in a performance audit, or by way

of other information

(v) Implementation of the entity’s service delivery improvement plan;

(vi) Evaluating management’s explanations why service delivery was not in line

with targets set in the strategic plans and budgets;

(vii) Investigating under or over expenditure, the impact on service delivery and

the measures taken to comply with the Budget

Links between Committees

Committees need to share information to improve the overall effectiveness of

oversight

Portfolio committees in the various clusters should consider holding joint hearings

The 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 role-players in Evaluation Process

Input by other role-players (1)

Auditor-General

– Auditing of annual financial statements

– Auditing of performance information

– Performance audits of selected entities

National Treasury

– Annually prepares a Guide to the technical requirements for annual reports’

– In process to develop a framework for non financial information

– Treasury do prepare a consolidated report for Cabinet on audit outcomes

Constitutional institutions

– Provide inputs to the oversight hearings dealing with issues within their mandate

Input by other role-players (2)

Committee researchers

– Be familiar with the challenges, policies and other developments

– Review strategic plans, budgets, in-year reports and previous annual

reports

– Monitor developments in their area of focus on an ongoing basis

– Talk to the relevant treasury, auditors and other stakeholders

Stakeholders and the public

– Request subject experts to evaluate the performance of entities

Annual Report Oversight Process

Overview of Oversight Process

Review of AG’s General Report

Timely tabling process

Late tabling process

Preparation PhaseJoint

Workshops(provincial concurrent

functions)

Report Writing PhaseAnnouncement of

completion of tabling process

Annual Report Tabling Processes

Referral to Portfolio Committees

Tabling of Oversight Reports

Ongoing Oversight Processes

Timeline

30 September

First two weeks in October

Third week in October

First week in November

Second week of November

Follow-upPhase

Preparation Phase

Referral to Public Accounts Committee

Annual Report Oversight ProcessPortfolio Committee

process

Public Accounts Committee

process

Day of Delivery

Tabling of a weekly

update of outstanding

Annual Reports

Recommendations for the

preparation of the Finance Bill

Before 31 March

Hearings Phase

Last week in October

Oversight preparation phase

Start preparations well before 30 September

Committee staff ensure:

– members have access to all relevant documents

– identify and contact subject experts for hearings

Members’ preparations:

– read all relevant documents

– review current year’s performance compared to outcome of previous oversight

process

– consult with subject experts and other stakeholders

– prioritise issues and questions

Committee should meet prior to hearing to:

– identify key issues

– identify what they want to get out of the hearing

– prioritise certain key questions

Oversight hearings phase

Hold hearings in period 15 to 31 October

Request Minister to give an overview of the performance of the department

Options for structuring the oversight hearings:

– A presentation by the Minister and/or the accounting officer and then a page-by-

page review of the annual report

– A presentation by the Minister 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

– A presentation by the Minister and/or the accounting officer followed by inputs by

invited experts or stakeholder organisations, followed by a question and answer

session.

– A presentation by the Minister and/or the accounting officer followed by a full-

scale public hearing, followed by a question and answer session

Oversight report-writing phase

Each portfolio committee should prepare an Oversight Report for each entity they

oversee

Oversight Reports should deal with:

– Compliance with the tabling deadlines

– Compliance with the technical requirements for annual reports

– The usefulness of the General Information section

– Comments on the entity’s reported performance

– Comments on the entity’s human resource situation and policies

– Key issues that the committee would like to draw to the entity’s attention as

regards its performance

– 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 Minister for response to

resolutions

Follow-up phase

Legislatures need to put in place systems to manage and track resolutions

Aim of such systems

– to bring resolutions regularly to the attention of Ministers

– to ensure Ministers respond to resolutions

– to ensure issues raised in resolutions get resolved

Interrogating & Evaluating Annual Reports

Aim of Portfolio Committees’ Oversight

Clear understanding of purpose of oversight helps to achieve objectives

Fulfil constitutional obligation to hold executive accountable

Ensure departments and public entities are:

– producing high quality services, economically, efficiently and effectively

– complying with constitutional and/or legislative mandates, strategic plans and

budgets

– contributing to the realisation of government’s objectives

Gather information on the views of customers and clients

Make recommendations on improving the quality and responsiveness of services

Preparing to exerciseoversight

The oversight process is about the legislature exercising oversight of the executive in accordance with the Constitution

It is NOT about opposition parties exercising oversight of government

The committee needs to work as a team in exercising oversight

Oversight Preparation Checklist

Be ready - think about the issues and information needs well in advance of the start of the oversight process.

Be disciplined - set clear start, interim milestones and completion targets.

Be aware - know about other oversight processes that may be relevant, e.g. of other departments of entities, or of provincial departments.

Be focused - tailor the oversight process to where it can have the most impact, i.e. set clear priorities.

Be intelligent - be flexible enough to take on board new issues and options should they arise in the course of the oversight process.

Be open - consult with outside experts, organisations and clients throughout.

Be forward looking - remember that the purpose of oversight is to improve service delivery in future.

Oversight of technical quality of Annual Reports

Aim of overseeing technical quality

To ensure that entities’ annual reports comply with the legal and policy frameworks

for:

– the structuring of the annual reports

– the compilation of information

– tabling of annual reports

Necessary background information

Guide for the Preparation of Annual Reports issued by National Treasury

Familiarity with the technical terms and methods used to

– describe service delivery performance

esp. economy, efficiency and effectiveness

– describe human resource issues

Strategic plans and budgets for the entity

Typical technical focusquestions

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?

Is each measurable objective specified 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?

Oversight ofentities’ performance

Necessary backgroundinformation

Information on the entity

– its mandate, structure, way of operating, strengths and weaknesses

The entity’s strategic plan and budget

Information on external and internal challenges faced by the entity

Information from clients

Organisational concerns and options

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?

Is 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?

Evaluating Past Performance

Is the annual report transparent about the entity’s performance?

- Or is it simply a public relations document?

Has the entity met its aims, objectives and performance targets and quality

standards?

- What were the reasons for any failures?

Have the entities performance targets changed over time?

- Are targets increasing with increases in funding?

Are there examples of good practice in how the entity has delivered its services?

What changes have been made in the services provided to clients?

- How can greater client choice be provided in future?

What are clients’ views on the nature and quality of services?

- Have these views altered over time?

Evaluating Future Performance

Are the entity’s objectives and performance targets linked to government’s overall

aims?

Are the objectives and targets sufficiently comprehensive?

Do the performance targets drive continuous improvement?

Is there continuity in the performance targets between years?

Does the entity have too many performance targets?

Are any additional/alternative performance measures and targets needed?

How well do the performance targets measure the delivery of outputs and the

achievement of outcomes?

Does the entity have the right balance between output and outcome performance

targets?

Are effective information systems in place to measure performance?

- How could these be improved?

Evaluating Efficiency of Performance

Are there systems to identify clients’ needs and monitor the extent to which 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 and 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?

Human resource development

Has progress been made with the implementation of the Service Delivery Improvement Plan? – Is there evidence that services are improving as a result?

What has been done to fill key vacancies?– What more can be done?

What progress has been made with employment equity? – What strategies have been adopted to promote greater equity?

What is the status of the skills development programme?– Is the programme making a difference to staff’s ability to deliver services?

How much was paid out in performance bonuses?– How much did the accounting officer and other senior managers receive as

performance bonuses? – Are these rewards in line with the entity’s delivery performance?

How many disciplinary matters are outstanding?– What is the age profile of these complaints?– What is the entity doing to ensure the speedy conclusion of matters?

How many senior management posts do consultants fill?– How will the entity reduce its reliance on consultants for routine functions?

Conclusion

Aim of overseeing Annual Reports

To test whether the annual report is an accurate record of the entity’s performance

To evaluate whether the reported performance is in line with the entity’s strategic

plans and budgets

To evaluate whether performance is acceptable given the operating environment

To assess how the entity might improve on its performance in future

Focus is on:

How can the entity deliver services better in future?