Legislative institutions set to manage their own financial affairs

In line with the recent passing of the Financial Management of Parliament Amendment Act (No 34 of 2014) (FMPA), the Parliament Executive Authority of Parliament have prescribed a new set of Regulations to regulate the Supply Chain Management of Parliament and Provincial Legislatures. The Amendment Act and the approved SCM Regulations will come into effect from 01 April 2015 as published in the government gazette (GG No. 38564 and GG No. 38565). In the past, Parliament and Provincial Legislatures operated under the spirit of the PFMA.

Background

Efforts to draft a separate financial management legislation for Parliament and Provincial Legislatures started during the 3rd Parliament term and were fully realised during the 4th Parliament term when the Financial Management of Parliament Act was passed in 2009. Subsequently, the provincial legislatures in Gauteng, Eastern Cape, Free State, North West and Mpumalanga proceeded to pass their own financial management Acts to regulate their own financial matters.

However, the Premier of the Limpopo Province referred the Financial Management of the Limpopo Provincial Legislature Bill to the Constitutional Court, after expressing doubts about the competence of the Provincial Legislature to pass a Bill dealing with its own financial management.

When passing judgement, the Constitutional Court held that Provincial legislatures did not have the authority to pass legislation with respect to their own financial management. The Court held that this authority resides with Parliament and ordered Parliament to remedy the defect by incorporating Provincial Legislatures under the national legislation.

This ruling set in motion a series of consultations between Parliament and Provincial Legislatures which culminated in the passing of the FMPA Amendment Bill in July 2014, which the President later signed into law in September 2014 into law as the Financial Management of Parliament Amendment Act.

Implications of the new Amendment Act

The new FMPA Amendment Act of 2014 is applicable to Parliament and Provincial Legislatures and deal with the financial management of Provincial Legislatures. Also, and perhaps more importantly, the new Act assign treasury responsibilities to the Speaker of the National Assembly and the Chairperson of the National Council of Provinces as the Executive Authority of Parliament at national sphere and Speakers of Provincial Legislature at provincial sphere. The new Act also requires establishment of the oversight mechanism of financial management and thereby require Parliament and Provincial Legislatures to review their Governance Models to incorporate the required oversight mechanism committee.

Issuing of applicable regulations

According to the FMPA Amendment Act, only the Executive Authority of Parliament, namely the Speaker of the National Assembly and the Chairperson of the National Council of Provinces, have the authority to prescribe regulations of section 65 of the principal Act and once they are prescribed and approved, they can become applicable to both Parliament and Provincial Legislatures.

A new regime for supply chain management

The prescribed regulations governing supply chain management system in Parliament and Provincial Legislatures will come into effect on 01 April 2015. Previously, the Legislatures operated under the ambit of the National Treasury regulations to guide procurement of goods and services in the sector. However, new SCM Regulations make specific reference to Legislative Sector-specific procurement in relation to emergencies and exceptional circumstances such as sectoral Parliaments, State of the Nation Address, Taking Parliament to the People and the establishment of a new Parliament.

In line with the new SCM Regulations, a number of workshops were held throughout the country for senior officials from all Legislatures to gain a better understanding of the new regulations so that they could be applied consistently across the South African Legislative Sector.

Paving the way forward

Taking their cue from decisions of the Speakers’ Forum of South Africa, all Legislatures are mandated to review the governance models to incorporate the oversight mechanism in line with section 4 of the FMPA of 2009, which states that an oversight mechanism of Parliament must maintain oversight of the financial management of Parliament.

Also, the prescription of regulations concerning the allocation and use of any funds provided by Parliament to political parties or to Members of Parliament must be in line with section 34 of the FMPA of 2009. Consequently, the Executive Authority must ensure that a draft of any proposed legislation regarding the above matter is published for public comment.

Finally, Parliament is in the process of drafting the required regulations in the areas that deal with Parliament and Provincial Legislatures’ draft budgets, cash management and investment policies, expenditure management and procedures to recover fruitless and wasteful and unauthorised and irregular expenditure. All the above are expected to be finalised during the 2015/2016 financial year.