REVIEW OF GOVERNANCE FRAMEWORK FOR PUBLIC ENTITIES

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1

REVIEW OF GOVERNANCE FRAMEWORK
FOR PUBLIC ENTITIES



Portfolio Committee Meeting




Department of Public Service and Administration





January 2004

Slide
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CONTENT



Background

o

Problem Statement

o

Primary Objectives & Expected Outcomes

o

Projected Timeframes

o

Scope



Work Streams



Project Organisation



Progress to Date



Communication Plan & Stakeholder Management



Strategic Impact



Way Forward


Summary



Closure

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Background:
Problem statement


There are inadequate and inconsistent corporate governance
arrangements


Public entities do not always account to the legislature or the executive
as expected but to an appointed board


They compromise the existence of single public service as a
constitutional requirement making the restructuring of public service to
become cumbersome


Public enterprises have made some progress working with DPE but
there was potential for improvement ( e.g. Development of a protocol
on Corporate Governance)

After several years of establishing public entities and enterprises to enhance service

delivery, government realised the following weaknesses in them:

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Background :
Problem statement


Fragmented regulatory frameworks


PEs are established in terms of their Enabling Acts or the Companies Act all with
their own requirements


Various corporate forms exist


Trusts, Trading Entities, Section 21, Companies


Remuneration and conditions of service are provided for in Enabling Acts and not
the Public Service Act which lead to inconsistent interpretations


Current Classification framework are no longer sufficient to provide for
flexible institutional options to support service delivery ( Schedules 3A and
3B of PFMA)


Governance arrangements are ineffective

i.t.o


Departments do not attend to managing performance adequately


Inconsistencies in the levels of remuneration of Board members and staff across
PEs


Governance arrangements (King Code) are applied differently by PEs


There is little regard for preferential procurement policy which lead to



unfair application of tender processes

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Background:
Primary objectives


DPSA and NT are jointly executing the review project with the following
primary objectives:


To design a coherent regulatory framework supported by sound
governance practices


To promote unified (not uniform) machinery of government in line with
Constitutional values and principles for public administration


To improve knowledge of applicable legislation in public entities

The panel to evaluate public business cases is also operational and is


comprised of officials from both departments.

As a result , Cabinet mandated DPSA and NT in 2002 to review governance
frameworks of all non
-
business PEs (Schedule 3A) and GBEs (Schedule 3B).

DPSA and NT were also mandated to establish a panel to review all business cases
for entities to be developed by departments prior to establishment.

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Background:
Expected Outcomes


Improve classification framework (Definition, Types)


Assess the role of PEs in their current corporate form


Develop preferred corporate forms
-

Sect 21 companies, Trusts


Proposals for PEs to evolve to new corporate forms


Improve corporate governance, accounting arrangements and fairness
of procurement procedures


Improve Performance Management and HRM


Perf mang corporate level & staff


Grading, remuneration, fringe benefits
-

board and staff


Collective bargaining arrangements


Review the appropriateness of regulatory frameworks in relation to PEs
and propose amendments

After implementation of the recommendations of the project, government
expects the following outcomes:

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Background:
Project Timeframe

Phase 1

Phase 2



Corporate Status



Legislative Review



Corporate Governance


Aug 03

Jan 04

May 04

Phase 1

Phase 2



Data
Gathering





C
lassification Framework





Performance Management

& Review


Aug 03

Jan 04

May 04

We are here!

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Departments

National Sphere

of Government

Provincial Sphere

of Government

Government Clusters


Provincial

Administrations


33 Departments

Organisational


Components

Constitutional

Institutions

National

Public Entities


Provincial

Public Entities

Major Public Entities

Business Enterprises

Business Enterprises

Public Service

Public Entities

Head

Office

District


Office

Regional

Office

Head

Office

Regional


Office

District

Office

Concurrent Functional Competencies

Exclusive Functional Competencies

Background:
Scope


185 entities of total (recorded) 336 where there’s a transfer of funds totaling R15bn

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Background:
Scope



Provincial entities will be reviewed following a separate process after
liaison with relevant stakeholders. Provincial Directors
-
General and
Treasuries will be requested to conduct complementary reviews of
public entities within their provinces.


The provincial process will leverage lessons learnt from the current
project


The current project will not cover all entities but will be limited to
Schedule 3A (
e.g.. SETAs, SITA, Legal Aid Board)
and 3B entities
(
GBEs egg. Water Boards, SABS)



The current project will not focus on the review of individual entities but
their overall status quo

The following are the exclusions from the scope of the current project:

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Work Streams


Data Gathering
,
gather data from the whole population under study, collate it and provide
preliminary findings. Questionnaires for Departments, Chairmen of controlling bodies of P.Es and
CEOs were used as primary tools to gather data. Workshops and interviews were for follow
-
up.


Classification Framework
,
gather data on international practices of classification of public
entities, analyse the data, workshop with key stakeholders and recommend a new framework



Corporate Status,

based on the findings of data gathered and researched best practice,
recommend a new framework for corporate status determination


Corporate Governance Review,

based on the findings of data gathered and researched best
practice, recommend a new framework for corporate governance standard / code


Legislative Review,

based on the findings of data gathered and researched best practice,
revise the current legislative framework accordingly


Human Resource Management(HRM) and Performance Management(PM)
Review,

based on the findings of data gathered and researched best practice, determine a new
policies for HRM & PM

The following are the primary focus of each work stream of the project

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Project Organisation

Project Manager / Secretariat
Classification Framework
Data Collection Teams
Phase 1
Legislative Review (1)
Corporate Governance (3)
Corporate Status (2)
Performance Management (4)
Phase 2
Project Steering Committee
Cabinet
Ministers: Finance / Public Service and Admin / Governing Ministeries
The project is jointly managed between the DPSA/NT with the assistance of local
and international service providers in close co
-
operation with government
departments and PEs

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Progress to Date:
Phase 1

Phase 1(August 2003


January 2004)



Data Gathering


o

data gathering by means of structures questionnaires, interviews and workshops have been
completed

o

a data
-
set is being finalised

o

a workshop was held to review the first draft of the findings and analysis

o

a final report will be submitted and presented to the project steering committee in January 2004



Classification Framework,

o

international and local research has resumed

o

a workshop was held with the steering committee to clarify expectations.

o

the final report will be delivered in March 2004.



Reports from both the Data Gathering and Classification Framework will input to


phase 2 of the project


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Phase 2 (January 2004


May 2004)



Corporate Status



Governance




Legislative review



Human Resource Management & Performance Management


Progress to Date:
Phase 2

As indicated earlier, consultants have just resumed their duties and thus far they
have presented their work
-
plans. They have been introduced to the service
providers of phase 1 for liaison on their work

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There seems to be misalignments between departments and their respective
public entities on the corporate governance arrangements


There seems to be limited understanding of the legislative framework by some
of the controlling bodies and CEOs of public entities


Although there seems to be procurement policies in place, these are mainly not
aligned to the Preferential Procurement Policy (PPP)


Some public entities are not clear about their reporting lines and the reporting
process they should follow, including frequency etc.


It seems that the strategies of PEs are driven more formally by their enabling
legislation rather than performance management and service level agreements


70 unlisted PEs have been identified and their information is being incorporated

Progress to Date:
Preliminary findings from
phase 1 work

On the overall the findings are validating the concerns on the public entities. A
significant amount of the data have not been
analysed

and therefore the findings
presented below are preliminary:

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Communication Plan & Stakeholder
Management


Portfolio Committee, Ministers, Cabinet, MECs and social partners to
be kept informed of progress


Project Steering Committee submits findings and proposals through
DPSA / NT , and relevant department


to the Executive, and then


to Cabinet for decision making


Provinces will be encouraged to undertake similar exercise

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Good corporate governance in Public Entities enables improved service
delivery in line with Batho Pele principles


Public Entities with good corporate governance are better placed to deliver
on other government priorities such as poverty alleviation


Compliance to international practices will lead to improved assessment of
the S.A economic status by global bodies (e.g. International Monetary
Fund). This can result in improved rankings and help attract Foreign Direct
Investment.


Achievement of these is a step towards fulfillment of NEDLAC
commitments in relation to the
Growth and Development Summit

(GDS) by
Government
.

Strategic Impact

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Follow
-
up communication sessions with key stakeholders on
progress and deliverables


Interrogation of deliverables


Closure report at the end of the project


Encouraging provincial governments to
review of Provincial
entities in co
-
operation with provincial stakeholders

Way Forward

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The primary objectives of the review project is to design a coherent
regulatory framework and establish the required institutional
mechanisms to support service delivery.


The outcomes of the review would contribute to improving


the regulatory framework that governs PEs


the oversight of Government over PEs; and


The corporate governance of entities including performance management,
human resource practices, accounting arrangements and fairness of
procurement procedures

Summary

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Q & A Session


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