Proposed changes to PFMA will bring sanity, if enforced

0
661

The government two weeks ago gazetted amendments to the Public Finance Management Act (PFMA). The amendments, gazetted on November 23, 2015 are mainly targeted at bringing sanity to the public enterprise sector, which has persistently drained the fiscus of scarce resources through poor corporate governance practices and rampant abuse, and theft of public funds and assets.

Of key importance in the Public Finance Management Bill is the insertion of a new section (51A), that tries to address conflict of interest in the supervisory functions of line ministries over public entities. Employees of public entities and ministries are no longer allowed to act in any manner or receive any monetary or other benefit that compromises the supervisory or regulatory role of the ministry, or infringes on the autonomy of the public entity.

This provision comes against the background of cases of some senior officials in ministries receiving benefits such as brand new vehicles and various forms of allowances from the public entities that they are supposed to supervise. This obviously compromised or weakened their supervisory role. One cannot be paid by the public entity for doing the job that he/she is already paid to do by the ministry.

The new section provides examples of some of the benefits outlawed as follows: management committee allowances, trustee or trustee representative allowances, travel allowances, fuel coupons or holiday allowances.

There are many cases whereby ministers and senior government officials of the line ministry approved obscene salaries and perks for senior management of public entities. Zimbabwe Broadcasting Holdings and Premier Services Medical Aid Societies are classic examples. This is no longer permitted under section 51A (3). The provision says no accounting or member of the civil service, employed in an appropriate ministry is responsible for approving the remuneration and allowances of any member or employee of a public entity, shall approve such remuneration or allowances without first obtaining written clearance from Treasury.

Patrick-Chinamasa-on-a-budget-day

But what happens if these provisions are breached. Section 51A (4) says, any person who wilfully or with gross negligence contravenes those provisions shall be guilty of an offence and liable upon conviction to a fine not exceeding level 10, or to imprisonment for a period not exceeding five years or to both such fine and such imprisonment. Level 10 is equivalent to $700.

This punishment can be deterrent enough, if enforced. However, this country is notorious for not enforcing some of these statutes, mainly due to political expediency.

The current Public Finance Management Act (Chapter 22:19) has similar provisions for punishing errant behaviour in the management of public funds. Section 91 says accounting officers found guilty of financial misconduct shall be liable to a fine not exceeding the same level 10, or to imprisonment for a period not exceeding five years, or to both such fine and such imprisonment. I cannot recall any accounting officer being imprisoned or fined for wilful or gross negligence in the exercise of his/her financial duties. I, therefore, have no reason to believe that this will happen to officials of public entities and their supervisors in line ministries.

Members of Parliament should intervene to ensure that such punitive measures are applied. Recommendations from portfolio committees must be specific and include such sanctions already provided for in the Act.

Even additional measures to curb public resource leakage, announced by Finance and Economic Development minister Patrick Chinamasa when he presented the 2016 Budget statement to Parliament last Thursday, will not bear fruit unless they are implemented. The minister has proposed to establish another unit within the Accountant-General’s department, mandated to analyse the Auditor-General’s reports, enforce issues of compliance raised by the Auditor-General and ensure that government is responsive to issues raised by the Auditor-General and Parliament through the Public Accounts Committee. He added that the mandate of this other unit would also embrace compliance and accountability of ministries and departments, in line with their obligations under the PFMA with regards to public resources.

While a separate unit in the Finance ministry to enforce implementation of Auditor-General’s recommendations is welcome, I am not confident that this unit will have the powers to enforce compliance. This is because these are mainly political decisions that a mere bureaucrat may find very difficult to enforce. An independent body such as Parliament is better placed to play that role. The minister should, therefore, provide adequate resources to the Public Accounts Committee of Parliament to effectively play that oversight function. In any case, the Constitution is explicit that all government entities are accountable to Parliament.

Chinamasa, in the budget statement, also announced that government was finalising work on a Corporate Governance Bill, which would establish corporate governance and performance principles for state-owned enterprises. The legislation is expected to be enacted by the first half of 2016.

He further announced that pending centralisation of control and the implementation in full of the reforms that have been proposed, responsible line ministries should ensure that State enterprises under their jurisdiction comply fully with the National Code of Corporate Governance. The key tenets of the Code of Corporate Governance include holding of annual general meetings and remittance to Treasury of 50% of after tax profits.

I am not sure how they will be able to remit profits to Treasury, when most of them are making losses and relying on the fiscus for bail-out.

Parliament must, therefore, strengthen its oversight constitutional mandate in order to ensure that all these legal provisions and measures announced by the Finance minister are enforced. Otherwise, it will be the same old story come the next budget statement in November 2016.

l John Makamure is the executive director of the Southern African Parliamentary Support Trust. Feedback: john.makamure@gmail.com