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Guideline for Legislative Oversight through Annual Reports

Author: Conrad Barberton
Date: 2005-01-26

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Research Paper commissioned by the National Treasury on the process for using annual reports as a key oversight tool. This paper was published as a guide for debate by Parliament and provincial legislatures.  The guide discusses timelines involved in the oversight process, mechanisms that parliament and provincial legislatures can develop and the roles of various committees.

The Constitution vests the National Assembly and provincial legislatures with the power of oversight over their respective executives, in addition to their legislative and other powers (eg choosing the President and Premiers).

Section 55(2) outlines the oversight powers of the National Assembly, by requiring that it “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 by the national executive authority, including the implementation of legislation; and any organ of state.” Provincial legislatures are provided with similar oversight powers as the National Assembly in section 114(2), but over provincial executive organs of state. The National Assembly is also empowered with the power of “scrutinizing and overseeing executive action” by section 42(3) of the Constitution. In order to facilitate Parliament’s oversight of the national executive organs of state, section 92(3)(b) of the Constitution requires that “Members of Cabinet must provide Parliament with full and regular reports concerning matters under their control.” The parallel section for the provincial sphere of government is section 133(3)(b) of the Constitution, which requires that “Members of the Executive Council of a province must provide the legislature with full and regular reports concerning matters under their control.”

The oversight powers of the National Assembly and provincial legislatures are particularly important for the process of considering annual reports, as they are the ‘regular reports’ referred to above. The processes that legislatures follow in considering annual reports are the subject of this Guide.

The Constitution recognises that legislatures have a critical role to play in overseeing better performance by departments and public entities. The challenge facing members of Parliament and provincial legislatures is to improve the capacity of portfolio committees to hold departments and entities to account for their performance, using their strategic plans, budget documents and annual reports.

The Public Finance Management Act (PFMA), 1999 gives effect to financial management reforms that place greater implementation responsibility on managers in the public service, and makes them more accountable for their performance. In the first instance, it is left to the Minister/MEC or the Executive (Cabinet/EXCO) to resolve any management failures – however, thereafter, the National Assembly and provincial legislatures are vested with the power to oversee both the administration and the executive.

Annual reports allow Parliament to evaluate the performance of a department after the end of the financial year. To date the end-year or ex post oversight mechanisms in legislatures have been relatively weak, as legislatures have focused on narrow financial oversight only, through the public accounts committee process. Before 2000, there was no oversight over non-financial service delivery performance, and departments only tabled their financial statements and Audit Report, rather than an annual report.

Reforms since 2000, enacted through the PFMA and Public Service Act, now require accounting officers to table performance targets for each main division of the Vote before the start of the financial year. Section 65 of the PFMA requires the Minister/MEC of each department (and public entity) to table an annual report in the legislature within 6 months of the end of each financial year.

Annual reports are the key reporting instruments for departments to report against the performance targets and budgets outlined in their strategic plans, read together with the ENE (for the national sphere) and Budget Statement Two (for the provincial sphere). Annual reports are therefore required to contain information on service delivery, in addition to financial statements and the audit report. It is meant to be a backward-looking document, focusing on performance in the financial year that has just ended. It reports on how the budget for that financial year was implemented.

Given this new practice of tabling annual reports, the National Assembly and provincial legislatures have yet to develop a formal, systematic process (and rules) to consider such reports, similar to their processes for considering national and provincial budgets.

It is envisaged that legislatures will develop a process for overseeing annual reports similar to the process for considering the budget, particularly the second reading process. Ideally all portfolio committees should consider the respective departments’ annual reports soon after their tabling so to assess the performance of departments in the past financial year. Portfolio committees should aim to complete the oversight process on annual reports by mid-November, so that their recommendations can also be taken into account for the following year’s budget allocation process.

The challenge facing portfolio committees is that they need to ensure that departments provide good quality service delivery information in their strategic plans with tight performance targets and then to ensure that departments report against those targets in their annual reports.