FINANCIAL AND FISCAL COMMISSION 2008/2009 ANNUAL REPORT
The Commission • The Commission consists of: • A Chairperson who is also Chief Executive and Accounting Officer of the Commission • A Deputy Chairperson • Seven other Commissioners • The Chairperson, Deputy Chairperson and two (2) other Commissioners are nominated by the National Executive • Three (3) Commissioners are nominated by Premiers of Provinces • Two (2) Commissioners are nominated by organised local government
The Commission • All appointments are made by the President • The Chairperson and Deputy Chairperson are full-time Commissioners • All other Commissioners are part time • One vacancy (organised local government nominee) as of Commencing July 2009 • The terms of office of current Commissioners are: • Chairperson: September 2005 – August 2010 • Deputy Chairperson and Two (2) non-executive Commissioners: March 2008 – February 2013 • Four(4) non-executive Commissioners: July 2009 – June 2014
Purpose of the Commission • Vision To enhance the developmental impact of public resources through the financial and fiscal system in South Africa • Mission To provide proactive and independent advice through cutting edge research capabilities
Mandate of the Commission • The Commission is established in terms of Section 220 of the Constitution of the Republic of South Africa Act No. 108 of 1996 as amended • The Constitution provides among others that the Commission is an independent, objective, impartial and unbiased advisory institution to Parliament, provincial legislatures, organised local government and other organs of state on • the division of revenue among the three spheres of government • Any other financial and fiscal matters
Enabling Legislation • The Intergovernmental Fiscal Relations Act No. 97 of 1997 as amended, • The Financial and Fiscal Commission Act No. 99 of 1997 as amended, • The Municipal Systems Act No. 32 of 2000 as amended, • The Provincial Tax Regulation Process Act No. 53 of 2001 as amended, • The Municipal Finance Management Act No. 56 of 2003 as amended, • The Intergovernmental Relations Framework Act No. 13 of 2005 as amended, and • The Municipal Fiscal Powers and Functions Act No. 12 of 2007.
Commission Achievements • Conducted research into among others Housing Delivery, the Financing of Health Care, Road infrastructure, Local government Revenue Sources and Electricity, Water Pricing and Sanitation • Published a Technical Report of the research conducted during the reporting period • Conducted training on its Constitutionally Mandated Basic Services Simulation Model • Upgraded its financial reporting and accounting systems and processes so as to entrench performance budgeting • Conducted an annual review of its internal controls as well as its financial and non-financial Risk Management Framework
Commission Achievements • Internalised all adverse internal and external audit findings of the 2007/2008 FY and introduced systems to ensure that there was no recurrence of findings • Engaged with Parliament, Provincial Legislatures and Executives, Organised Local Government, National Government and other organs of state in briefings, hearings and other for a • Adopted a 2009 – 2014 Corporate and Research Strategy that seek to proactively respond to current and future challenges confronting the South African system of intergovernmental fiscal relations conducted research in the following areas among others: • Timeously • Tabled its 2007/2008 Annual Report • Tabled its 2009/2010 Submission on the Division of Revenue • Responded to the 2009 Division of Revenue Bill
Commission Achievements • Some of the recommendations that the Commission made in its 2009/2010 Annual Submission on the Division of Revenue and Government’s Response to them are the following: • Education • Government should take into account the socio-economic circumstances of the learners when national quintile ranking of schools. • Government agreed with this recommendation
Commission Achievements • Financing of Health Care • Gazette Indicative allocations to clinics and other public health care facilities, as and when they fall under provincial control. • Government agreed with this recommendation • Housing Delivery • Government should speed up the process of accrediting municipalities that have the capacity to administer housing programmes. • Government response was it was reviewing the powers and functions of provinces and local government, and this will be addressed as part of this review
Commission Achievements • Augmenting Local Government Revenue • Replacement revenue source for municipalities should be a tax that enhances fiscal autonomy, strengthens accountability of local government, is buoyant and maintains macroeconomic balance. • Government agreed with recommendation in principle but prefers other non tax measures to be evaluated as well. • Electricity Pricing, Generation and Distribution • Government should put in place a financing framework that deals effectively with electricity pricing and a pricing environment reflective of costs, efficiency, stability and externalities. • Government agreed with the recommendation. The implications of higher prices for the cost of providing free basic electricity would be taken into account as part of the division of revenue
Commission Achievements • In its 2009 Commission Response to the 2009/2010 Division of Revenue Bill the Commission had the following concerns at a strategic level: • the increased proliferation of conditional grants instead of a move towards consolidation • instances where policy implementation stalls, resulting in negative impacts on the intergovernmental fiscal system • the design of capacity building grants that do not go through the DORA but through an agency type agreement • the fiscal spillovers associated with the transition phase of the re-demarcation process
Commission Achievements • The Commission also provided detailed technical comment on: • The Money Bills Amendment Procedures and Related Matters Bill 2008 in respect of which it highlighted the introduction of an additional stage in the budget process • The Financial Management of Parliament Bill 2008 which it viewed as unnecessary as the Public Finance Management Act 1999 already catered for the matters therein dealt with • The National Policy for an Equitable Provision of an Enabling School Physical Teaching and Learning Environment 2008
Commission Achievements • The budgetary challenges faced by the Government of Limpopo with regard to the implementation of the provisions Funding for the Traditional Leadership Government Act 2003 • All Commission research and advisory initiatives continue to contribute to the still nascent body of knowledge on developmentally oriented intergovernmental relations. • The Commission has been given • an unqualified audit • with no matters of emphasis.
Challenges • Despite what the Commission has been able to achieve, challenges remain: • On the human resource front - talent remains scarce, staff turnover continues to be way above acceptable levels, investment in employee skills development remains restricted, and meeting employment equity targets continued to be elusive. All of these undermine the Commission’s research and output in terms of breadth and depth • Human Resource Strategies, Policies and staffing plans were however developed to respond to these challenges and the requirements for the implementation of the Commission’s 2009 to 2014 Corporate and Research Strategic Plans
Challenges • The Commission’s information technology infrastructure on which it is highly dependent needs to be replaced • The Money Bills Amendment Procedures and Related Matters Act No. 9 of 2009 has introduced an additional resource intensive step to the budget process for the Commission (sect.9 (7)(a)) • The Framework for the Devolution of Budgets and Associated Accommodation Charges hasdevolved the maintenance; property rates; municipal services and leasing budgets to user entities and no provision has been made for money to follow functions • The cost of compliance continues to rise with audit fees now constituting more than 5% of the Commission’s budget
Challenges • The cost of travel necessitated by the need for stakeholder engagement remains a major constraint • All of the above has required constant reprioritisation and the implementation of austerity measures in order for the Commission to be in a position to at least not default in the discharge of its mandate. • This has the potential to undermine the effectiveness of the Commission in delivery of its mandate.