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Analysis of the Annual Report – Parliament 2015/16

Analysis of the Annual Report – Parliament 2015/16 Presented to the Joint Standing Committee on Financial Management of Parliament 12 October 2016 Presenter: Presented by Mbuyiselo Hlekiso and Phelelani Dlomo Research Unit: Contact: (021) 403 8340/8355. PRESENTATION OUTLINE.

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Analysis of the Annual Report – Parliament 2015/16

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  1. Analysis of the Annual Report – Parliament 2015/16 Presented to the Joint Standing Committee on Financial Management of Parliament 12 October 2016 Presenter: Presented by Mbuyiselo Hlekiso and Phelelani Dlomo Research Unit: Contact: (021) 403 8340/8355

  2. PRESENTATION OUTLINE • Performance Information • Programme Analysis • Human Resource • Issues for Consideration • Financial Performance • Governance Issues • Issues for Consideration

  3. Parliament mandate • Parliament derives its mandate from the following: • Constitution - chapter 4 sets out its composition, powers and functions and how it should work, • Financial Management – regulates the financial management of Parliament, • Money Bills Amendment Procedure and Related Matters, and – provides procedure to amend bills tabled before Parliament, • Powers and Privileges and immunities of Parliament and Provincial Legislatures Act, 2004 – defines and declare powers, privileges and immunities of Parliament and Provincial Legislatures,

  4. Five policy priorities • Strengthening oversight and accountability, • Enhancing public involvement, • Deepening engagement in international for a, • Strengthening co-operative governance, • Strengthening legislative capacity,

  5. Five strategic objective • Improve programmes of capacity building for members, • Improve timelines, quality and overall value of information, • Improve the usage of and management of limited space and facilities of Parliament, • Harness the strengths and opportunities within the legislative sector,

  6. Programme performance Vs Expenditure Performance – 2015/16 financial year

  7. PERFORMANCE TARGETS

  8. ADMINISTRATION

  9. LEGISLATIVE OVERSIGHT

  10. PUBLIC PARTICIPATION

  11. MEMBERS FACILITIES

  12. ASSOCIATED SERVICES

  13. HUMAN RESOURCE MANAGMENT

  14. ISSUES FOR CONSIDERATION • Stakeholder development plan was also not quantified as a target and therefore could not be measured. • The Committee should establish as to why the stakeholder development plan was not achieved. • What is the risk mitigating factor for not achieving 53 per cent of performance targets going forward? • The 1 per cent savings was not achieved, Committee should establish whether there were proper measures taken to ensure that all managers are contribute to this target. • Programme 1, overspent by 26.1 per cent of its allocation, and yet only achieved 5 or 62.7 per cent of its targets. • Programme 2, managed to spent almost the while budget allocation, and yet only achieved 37.5 per cent of its targets, and • Programme 4 and 5, also spent almost the whole budget but only achieved 50 per cent of its performance targets.

  15. ISSUES FOR CONSIDERATION CONT…… • This could be attributed to poor planning or the capacity challenges given the high level of vacancies, particularly in programme 2. • Programme shows the highest level of funded vacancies which amounts to 212 or 22.9 per cent of the total vacancies in the structure. How long have these been vacant, and whether there are measures taken to address these in the new financial year. • Programme 2, which is the core business of the institution has the second highest vacancy rate compared to other programmes. This is the programme that only achieved 37.5 per cent of its targets.

  16. Presentation Outline • Introduction • Statement of Financial Performance 2.1 Snapshot Table to the Income Statement 2.2 Income Highlights 2.3 Expenditure Highlights • Snapshot to the Balance Sheet • Disclosure in the Notes to the Financial Statements • Governance Issues • Issues to be Considered by the Committee

  17. 1. Introduction • The Auditor-General has made an independent assessment of the financial statements of Parliament and given professional opinion that these statements give a fair representation of Parliament’s financial position. Therefore, although there are more than two financial statements, the analysis pays special attention on two key financial statements known as the Income statement and balance sheet. • These statements are an encounter in the oversight role of the Joint Standing Committee on Financial Management Act of Parliament (JSCFMAP). The bottom line is that overseeing the financial affairs of Parliament is the key responsibility of the JSCFMAP.

  18. 2. Statement of Financial Performance (Income Statement) • This is a statement of operations (sometimes called “Income Statement” or “Income and Expenditure Statement” • The income statement compares the actual income to the actual expenditure at the end of the financial year.

  19. 2.1 Snapshot Table to the Income Statement

  20. 2.2 Income Highlights • Parliament is heavily dependent on fiscus, it is indicated that more than 90 percent of its budget funded from the National Revenue Account (NRA). • Parliament generates less than 10 percent revenue which includes earned interest from its investments, donations and debtors. • Parliament generated a total revenue of R 29,897 (million) in 2015/16 decreasing by R5,814 (million) from R35,711 (million) in 2014/15. • Parliament’s revenue gradually decreased from R53,876 (million) in 2013/14 9 (million) by R18,165 (million) to R35,711 (million) in 2014/15. • Parliament also receives annual appropriation which amounts to R1,594,238 (billion) increasing by R86, 068 (million) from R1,508,170 (billion) in 2015. In 2014 Parliaments annual appropriation amounted to R1,419,359 (billion) which increased in 2015 by R88,811 (million). • In addition to the annual appropriation Parliament receives statutory appropriationwhich is allocated for the remuneration of Members of Parliament. Unlike the annual appropriation, the statutory allocation is a direct charge from the National Revenue Account. • Statutory allocation amounts to R440,296 (million) in 2016 decreasing by R40,710 (million) from R481,006 (million) in 2015.

  21. Income Highlights (cont.) • Statutory appropriation in 2014 amounts to R453,779 (million), which increased by R27,227 (million) to R481,006 (million) in 2015. • Donation amounts to R38,950 (million) in 2016. In 2014 and 2015 the financial statements do not reflect donations as a stand alone item. Therefore the amounts donated in those years are unknown. • Parliament total income amounts to R2,103,381 (billion) in 2016 increasing by R86,068 (million) from R2,024,887 (billion) in 2015. • In 2014 total income of Parliament amounts to R1,927,014 (billion), which increased by R116,038 (million) in 2015. • The total income of Parliament includes the annual appropriation, statutory appropriation, revenue generated (earned interest and revenue from operations) and donations.

  22. 2.3 Expenditure Highlights • Parliament expenditure exceeds income over the three consecutive years that are under review. • Total expenditure in 2016 amounts to R2,209,880 (billion), in addition loss on disposal assets amounts to R3,773 (million) exceeding total income of R2,103,381 (billion). This results to a deficit of R110,272 (million) in 2016. • In 2015 total expenditure amounts R2,162,903 (billion) plus the loss on disposal assets which amounts to R6,099 (million) exceeding the total income of R2,024,887 (billion). Therefore deficit in 2015 amounted to R144,115 (million). • In 2014 total expenditure of R2,107,732 (billion) plus the loss on disposal assets of R2,426 (million) exceeded the total income of R1,927.014 (billion). This results to a deficit of R183,144 (million) in 2014. • The total deficit for 2016,2015 and 2014 amounts to R437,531 (billion) at 31 March 2016.

  23. 3. Snapshot to the Balance Sheet • The statement of financial position compares the accumulated total assets versus the total liabilities over many years. • This is the statement of financial position which sometimes is called “Balance Sheet”. • On 31 March 2016 the financial position statement of Parliament recorded total assets of R537,371 (million) versus the total liability of R1,516,181 (billion) which results to the accumulated deficit of R978,810 (million) over many years. • As at 31 March 2015 the total assets amounts to R519,739 (million) was recorded to offset total liabilities of R1,387,249 (billion) which results to a deficit of R867,510 (million) over many years. • On 31 March 2014 the financial position statement of Parliament recorded a total assets of R613,710 (million) to offset the total liabilities of R1,287,391 (billion) which results to a deficit of R673,681 (million) over a couple of years.

  24. 4. Disclosure in the notes to the Financial Statements • Irregular expenditure that was incurred in 2016 amounts to R653,000. • However the accumulated irregular expenditure over years amounts to R15,483,000. This includes the following irregularities: • Tax certificates not provided amounts to R245,000 • Supply chain management process not followed amounts to R2,133.000 • Use of service provider after contract expired amounts to R11,751,000 • Procurement of goods without prior approval amounts to R1,119,000 • Procurement without formal contract amounts to R11,000 • Local content not specified amounts to R191,000 • No approval to deviate amounts to R33,000

  25. Disclosure in the notes to the Financial Statements (cont.) • Fruitless and wasteful expenditure that was incurred in 2016 amounts to R276,000. • However, the fruitless and wasteful expenditure that was incurred over years amounts to R830,000. This amount includes the following expenses: • Cancellation fees for investigation amounts to R206,000 • Interest on late payment amounts R218,000 • Damaged lost hired goods amounts to R18,000 • Unaccredited course amounts to R116,000 • Traffic fines and administration fees R13,000 • Backlog due to unavailability of Parliament staff amounts to R257,000 • Other amounts to R2,000. • As at 31 March 2016 a loss on disposal assets of R3,773 (million) was recorded in the income statement. • On 31 March 2015 a loss on disposal assets amounts to R6,099 (million). • On 2014 a loss on disposal assets amounts to R2,426 (million).

  26. 5. Governance Issues • Audit committee of Parliament did not take into account the fact that parliament operated on deficit more than three years and in all its reports (2014, 2015 and 2016) did not realise that a deficit may pose risk to Parliament of not meeting its obligations in terms of paying its creditors. • The risk management process has not fully matured due to the fact that the risk management policy, risk management framework and risk management strategy are still in the developing stage. • The internal audit unit has conducted audit which identified opportunities for further improvement. • Audit committee viewed internal controls as need attention in the following areas: • Strengthen the performance management and reporting system to ensure quality reporting, thus enhancing the delivery against strategies and plans; • Normalise labour relations; and • Enhance the institutional image in the eyes of key stakeholders; • Audit committee indicated that special attention also need to be paid on the quality and contents of the In-Year Monitoring reports of the Accounting Officer and the quarterly performance reports of the management.

  27. 6. Issues to be considered by the Committee • Parliament operated on deficit during the years under review (2016, 2015 and 2014) • As at 31 March 2016 Parliament had a deficit of R110,272 (million) while it had a vacancy rate of 19.6 percent which translates to 336 active vacant positions. • On 31 March 2015, deficit amounts to R144,115 (million) while the vacancy rate ranges at 18 percent which translates to 291 active vacant positions. • As at 31 March 2014 deficit amounts to R183,144 (million), the vacancy rate of 8 percent which translates to 124 active vacant positions. • The total amount of deficit over the period of three years (2016, 2015 and 2014) add up to R437,531 (million). The balance sheet reveals that deficit had been created even prior 2014 as it reflects the accumulated deficit of R978,810 (million) as at 31 March 2016. • Parliament is a non-profit organisation, therefore it is not expected to make profit, however, it is also not expected to operate on deficit as this may pose the risk of not meeting its obligations. • The recurring occurrence of deficit should be avoided as it may prevent Parliament from achieving its mission and objectives.

  28. THANK YOU

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