FINANCIAL AND FISCAL COMMISSION

1
FINANCIAL AND FISCAL COMMISSION

• SUBMISSION FOR THE DIVISION OF
• REVENUE 2008/09
• August 2007

2
Performance of Provincial Government

• Fiscal performance and capacity were measured on
  the basis of the evaluative criteria in Section
  214(2) a-j of Constitution e.g. national
  interest, developmental needs, stable and
  predictable revenue shares.
• Quantitative aspects of analyses involve
  comparing budgeting/spending trends over the past
  three FYs (2003 to 2005), the current FY with
  MTEF period (2007 to 2009).

3
Performance of Provincial Government

• RECOMMENDATION 1 Stable and Predictable Growth
  Paths
• To ensure stable and predictable allocations of
  revenue shares between different
  programs/categories of spend, national/provincial
  treasuries should aim for stable budget growth
  paths over a 7 yr period - from the recent past
  3 yrs through to the forthcoming medium term
  budgeting and planning cycle
• RATIONALE and EXAMPLES
• Often with newly estab./smaller programmes -
  trend of policy prioritisation, overbudgeting,
  underspending, followed by cut-backs in the
  following years budget. This is especially true
  of budgeting for infrastructure and skills
  training which are priorities established by
  AsgiSA and JipSA. Particular examples include
  ABET, FET, ECD, welfare, farmer support and road
  construction.
• Result cycle of erratic acceleration,
  deceleration, even declines in budgets/spending.
  Unpredictable funding flows delay effective
  planning, implementation and service delivery.

4
Performance of Provincial Government

• RECOMMENDATION 2 Prioritised programmes to show
  above average growth
• The policy prioritization of objectives and
  targets of a department, programme,
• or category of spending should be supported by
  higher than average annual
• budget growth
• RATIONALE and EXAMPLES
• To ensure alignment between policy
  objectives/goals and budgets/spending, identified
  priority areas should grow by a higher than
  average growth rate.
• In accordance with AsgiSA and JipSA, most
  provinces have prioritized infrastructure and
  skills training. Exceptions include FET, ABET,
  conditional grants for health professional
  training.
• RECOMMENDATION 3 Entrenchment of best practice
• The further institutionalization of best practice
  project planning budgeting
• methods (which separate planning from
  implementation and align them to the fiscal year)
  should be encouraged.
• RATIONALE
• Under-spending caused by excessive adjustments,
  late disbursements and end-of-year fiscal dumping
  is more pronounced when different spheres or
  departments are responsible for budgeting and
  delivery.
• N.T. has projects in place to strengthen
  technical ability in provinces (IDIP).

5
Performance of Provincial Government

• RECOMMENDATION 4Reporting of service delivery
  programmes
• Every departmental service delivery programme
  should be defined by and
• reported in the PBER, according to
• - actual and targeted beneficiaries
• - personnel numbers and budgets by occupational
  skills level
• - current items capital assets used in service
  delivery
• Provincial departments should report on these
  non-financial indicators on behalf of their
  service delivery agents.
• RATIONALE
• To facilitate an assessment of performance i.t.o
  progressive realisation, efficiency and
  effectiveness, non-financial data is required
• RECOMMENDATION 5 A measure for determining
  socio-eco impact
• A methodology to measure socio-economic impact of
  government capital/
• current spending should be standardized across
  govt. depts./programmes
• RATIONALE
• Without a measure of impact, it is impossible to
  determine whether what is being delivered is
  positively changing intended recipients lives

6
Framework for Assessing Function Shifts in South
Africas IGFR System

• Background
• Continuous shifting of functions between
  government departments and between spheres of
  government since the promulgation of the
  Constitution
• May have financial and fiscal implications
• Un/under-funded mandates
• Amended FFC Act requires the Commission to assess
  and make recommendations on such function shifts
• Financial and fiscal implications
• FFC has developed a framework for performing this
  requirement
• Provides and outlines various criteria and
  factors to be taken into account when assessing
  function shifts

7
Framework for Assessing Function Shifts cont.

• Concepts, principles and guidelines for assessing
  function shifts
• Function shift refers to a function previously
  assigned by Constitution or any law made by
  Parliament or Provincial Legislature to any
  organ of state is reassigned to a different
  organ of state
• Organs of state are all national departments, all
  national provincial department, all
  municipalities, public entities established under
  schedule 2,3, and 4 of the PFMA and
  Constitutional institutions

8
Framework for Assessing Function Shifts cont.

• Principles applying to shifting of functions
• Co-operative government
• The decision to assign/delegate a function should
  be appropriate for the whole country not only for
  particular sphere/government or organ of state
• The delegating sphere/organ of state accept the
  funding requirements or support necessary to
  execute delegation successfully
• Assigning/delegating department/sphere/organ
  should constantly monitor the assigned function
• Consensus should be reached by both parties
• contractual agreements are the most preferred

9
Framework for Assessing Function Shifts cont.

• Enhancing subsidiarity
• Function assigned to a municipality must be the
  one that would be most effectively administered
  locally and the municipality has the capacity to
  administer the function
• Transfer of the authority role
• Authority role must be transferred in full
• As much as possible, functions must not be split
  between two spheres of government, between a
  district and a local municipality or between a
  government department and a public entity
• Where this is unavoidable, clear lines of
  responsibility should be drawn
• Efficient, effective and sustainable delivery of
  services
• Equitable, efficient, affordable, economical
  among other principles should be considered when
  evaluating a shift of a function

10
Framework for Assessing Function Shifts cont.

• Definition of terms
• Authority for execution of functions
• Primary assignment which is determined by the
  Constitutional mandate
• Delegation
• The temporary transfer of power/function by a
  province/national legislature to another organ of
  state in accordance with Chapter 238 (a) or (b)
  of the Constitution
• Assignment
• General assignment is the one that is either
  transferred by national sphere to all provinces
  or all provinces to municipalities
• Asymmetric general assignment results when only
  certain provinces/municipalities receive an
  assignment
• Specific assignment is the transfer of statutory
  power in provincial/national legislature to a
  specific municipality according to Sec 99 126
  or 154 of the Constitution

11
Framework for Assessing Function Shifts cont.

• Checklist and manual
• The checklist and manual are important documents
  that will assist the FFC when making
  recommendations on the shifting of function from
  one sphere to another
• The first part of the checklist and manual deals
  with the policy and legal issues
• The second part deals with the process of
  shifting the function

12
Framework for Assessing Function Shifts cont.

• The FFC noted that
• A proper preparation for a shift may persuade a
  proponent that a shift is not viable or the best
  solution
• Such a proposal could have positive results as it
  could save both time and resources

13
Framework for Assessing Function Shifts cont.

• The Commission conducted a research on the
  principles and guideline and agreed to
• Adopt the check list and manuals as tools to be
  used for assessing proposed function shifts
• Accept that the framework will be updated
  continuously
• Distribute the document to all organs of State in
  order for them to use it in their proposals for a
  function shift.

14
The Transfer of Water Services

• Progress to date.
• Progress can be summarised as follows (to 31
  August 2007)
• 53 agreements signed (91)
• 1888 staff transferred (27)
• 4864 staff seconded (71)
• 1695 schemes with a total asset value of
  approximating R5,932 million transferred (83),
  and
• Refurbishment total expenditure R433million
  (61).

15
Allocation of Resources

• Allocations for 2007/08 reflected in
• Schedule 6 Specific Purpose Recurrent Grant
  allocation, R550,000 million (where transfer
  agreements have been concluded)
• Schedule 7 Allocation in kind to
  Municipalities for designated programmes,
  R490,025 million (where transfer agreements are
  still under negotiation and staff still on the
  payroll of the DWAF ).

16
Proposed FFC CMBS Model

• Model aim to solve 3 policy issues identified in
  FFC 2002 submission
• how to balance the need to provide
  constitutionally mandated basic services (CMBS)
  with macroeconomic constraints that limit the
  available resources.
• how to objectively determine the equitable
  sharing of available revenue among the three
  spheres of governments.
• what resources need to be allocated to capital
  spending in a way that is consistent with the
  answers to the first two questions.
• An over-arching economic model that addresses all
  of these issues in a coherent fashion was
  constructed.

17
FFC CMBS Modelling Project Flow Chart
18
The Model Dynamics

• Transition of recurrent spending on a service in
  a given region

19
The Model cont.

• Main value to policy analysts, dependant on how
  the model is used
• provide estimates of what level of service
  provision could be achieved under differing
  assumptions, made by the policy maker, about the
  size of the allocations available.
• provide estimates of size of allocations required
  to achieve particular target levels of service
  provision, specified by policy maker, over a
  specified period.