Intergovernmental System in South Africa

1
Intergovernmental System in South
Africa

• PMIG Meeting
• 7 December 2005

2
Overarching role of treasuries

• Establish and enforce
• Aggregate fiscal discipline
• Budgets must be respected like all laws
• Fiscal aggregates stay within set limits
• Allocative efficiency
• Resource allocation in line with priorities
• Good programmes get more and vice versa
• Operational efficiency
• Delivering more outputs for less resource outlays
  

3
Fiscal Responsibility in South Africa
4
Introduction

• SA is not a federal country, but a unitary
  country that is highly decentralised
  administratively and fiscally since 1994
• Three spheres of government, with local
  government distinct sphere, not a creature of
  provinces
• Focus of presentation is on initial lessons after
  only 11 years of democracy
• Too early to draw conclusive lessons
• Lessons apply to SA, and cannot be applied to
  another country

5
System of Governance in SA

• National, 9 Provinces, and 284 Municipalities
• Provinces
• School education, health, social grants (Social
  services)
• Housing, Provincial Roads, Agriculture
• Poor fiscal capacity (own revenue 4, national
  grants 96)
• Local government
• Water, electricity, refuse removal, housing
  infrastructure, municipal roads
• Significant fiscal capacity, but varies between
  municipalities (Urban metros over 95 own
  revenue, Rural 30)
• National government
• Over half actual spending on defence, justice
  (courts), prisons and police
• Other higher education, admin, policy,
  regulatory

6
Fiscal capacity and functions

• Non-interest R362,6 bn out of R417,8 bn budget
  for 2005/06
• Servicing debt at R53,1 bn, contingency reserve
  R2bn
• Provinces receive R209,3bn (57,7)
• 9 provincial budgets aggregate to R215 bn
• Own Revenue only 4 Motor car license fees,
  gambling
• Local Government receives R17,1bn (4,7)
• Only one third of spending on public goods (no
  revenue)
• Two thirds spending user charge services
  (water/electricity)
• Taxes Property taxes, regional levies (to be
  phased out)
• Own revenue around R90bn
• National Govt budget is R109bn (37,6)
• Revenue-sharing system (Constitution)
• Size of grant depends on functions fiscal
  capacity

7
Division of revenue
8
Constitution of SA

• Section 214 requires annual Division of Revenue
  Act
• One national law applies to all provinces and
  municipalities
• No need for each province or municipality to have
  separate legislation on fiscal responsibility
• PFMA applies to all national and provincial
  govts, and MFMA applies to all municipalities
• How do we get consistency in fiscal
  responsibility objectives between states and
  between national govt?
• Uniformity and precedence of national economic
  policy, taxes etc

9
Tax Assignment

• National govt has 4 biggest taxes
• Personal Inc Tax, Corporate Tax, VAT, fuel levy
• Provinces can legally impose a surcharge on PIT
  and fuel levy, but do not as prefer
  revenue-sharing arrangement
• Provinces have motor car license fees
• Municipalities have property taxes and surcharge
  on electricity/water
• National legislation can regulate exercise of
  taxation powers of sub-national govts, given need
  for tax harmonisation and national economic
  policy objectives

10
Borrowing Powers

• Provinces and municipalities can only borrow for
  capital beyond a financial year
• Provinces and municipalities can borrow for
  bridging purposes within a financial year
• Provincial borrowing regulated by legislation
• Provinces have non-revenue generating activities,
  and minor tax powers
• Should they really borrow?
• We are open to giving more tax and borrowing
  powers in future, but need to ensure expenditure
  efficiency first

11
Intervention powers

• Specified and narrow intervention powers where a
  province or municipality fails to exercise its
  powers or responsibilities
• National govt can intervene in a province in
  terms of section 100 of Constitution
• Province can intervene over municipality ito
  section 139 of Constitution

12
Key Fiscal legislation in SA

• Constitution
• Chapter 13 of Constitution
• National Acts of Parliament
• Intergovernmental Fiscal Relations Act
• Provincial Tax Regulation Process Act
• Borrowing Powers of Provincial Govt Act
• Public Finance Management Act (PFMA)
• Municipal Finance Management Act (MFMA)
• Annual Budget Acts of Parliament
• Annual Division of Revenue explanatory
  memorandum extensive tables
• National and provincial appropriation Act
• Tax legislation (Taxation and Revenue Laws
  Amendment Acts)

13
Fiscal Responsibility in SA
14
How do we understand fiscal responsibility in SA?

• Rules and legislation are necessary but not
  sufficient
• Can easily get around (ex-ante or ex-post?)
• Budget a plan at start of fin year, and actual
  may be significantly different
• Co-operation and buy-in are more important
• Budget preparatory process must be DEEPLY
  consultative process
• Between national and sub-national governments
• Between departments in each government
• Budget is a POLICY process, driven by policy
  priorities and spending pressures

15
Transformation in first 5 years of democracy
1994-1999

• SA in a fiscal mess in 1994, with deficit close
  to 10 and inflation around 20
• First priority of new Mandela government was to
  get macroeconomic policy right
• Achieved with stunning success but low growth
• Second priority was to make the budget process
  more transparent and consultative
• Key budget reform was introduction of 3 year
  budgeting, debt management reforms
• Had to transform and modernise a bean-counting
  treasury with antiquated practices into a SMART
  treasury with policy assessment capacity

16
Budget Reforms since 1994

• Three-year budgeting system
• National and provinces (1998/99 Budget),
  Municipalities
• Budget decentralisation and CERTAINTY
• Own budgets by provinces and Local Govt, grant
  certainty
• Division of Revenue Act and schedule of all
  national allocations per province, per
  municipality for each of three coming years
• Public Finance Mgt Act and Mun Fin Mgt Act
• modernising financial management in public sector
• Minister responsible for outcomes and policy,
  administrative head of dept responsible for
  implementation and outputs
• No bail-out/guarantees for provinces/LG
• Up-front allocation certainty, no ad-hoc in-year
  allocations
• Development of provincial/local fiscal framework

17
Low inflation and interest rates
18
Debt service costs as per cent of GDP
19
Debt to GDP
20
Medium term outlook
21
Three year budgeting

• In 1998 shifted from one-year incremental budgets
  to three-year rolling budgets
• Publish 3 year budgets, but appropriate only for
  one year only
• Use outer 2 years as baseline for next budget,
  and allocate only additional funds from
  contingency reserve and new revenue
• We ignored nay-sayers who said not possible
• Lays basis for better planning, more consultative
  budget processes and better intergovernmental
  fiscal relations

22
Intergovernmental Budgeting

• SA has grant certainty
• Three year allocations per province, per
  municipality, for EVERY grant
• Equitable share allocation main allocation to
  provinces (64)
• Clear formula to divide funds
• Provincial formula linked to key social sectors
• Local govt formula linked to poor households
• Conditional grants
• Social grants (27, previously from eq share)
• Infrastructure, tertiary hospital services
• Different formula for each conditional grant
• Annexure E in Division of Revenue Bill

23
Budget is a policy process

• Budgeting is at heart of policy-making, and needs
  to be consultative
• Budgets require prioritising of policies, which
  is essentially a POLITICAL process
• Minister of Finance requested Cabinet to form-
• a Ministers Committee on the Budget (sub-com of
  Cab)
• Budget Council and Budget Forum, for provinces
  and municipalities
• Compulsory consultations for Division of Revenue
  process and exercise of sub-national fiscal
  powers
• No outside or independent agency can determine
  budget or allocations

24
Budgeting harder under decentralised system

• Need to co-ordinating policy, planning, budgeting
  processes
• National depts responsible for policy, prov/LG
  for implementation
• Setting up of sectoral Ministerial forums
  (MinMECs) between Ministers of national and
  provincial governments for education, health,
  welfare, housing
• Challenge of co-ordinating sectoral and budget
  forums, as each sector wants to maximise its
  funds
• Reducing sectoral collusion and allegations of
  unfunded mandates
• How do we link Budgets to PERFORMANCE?

25
Performance and Accountability challenges

• We are still striving to get more performance
  accountability
• Budget reforms to facilitate greater performance
  in public sector as a whole
• Has 3 year budgeting reached lower down to the
  level of project or facility?
• How do we get better customer accountability?
• How can we get better political accountability
  through legislatures
• Does pol failure increase risk of service
  delivery failure?

26
Budget preparation process pre-year

• Independent FFC makes (advisory) proposals
• Consultations with provinces and LG
• Budget Council of national/provincial Ministers
  of Finance
• Budget Forum incorporates local govt
• National Cabinet makes final allocations to 3
  spheres of govt in October
• Equitable share formula used to divide funds
  between provinces and local govt (also
  conditional grant formulae)
• Pre-budget in Nov, followed by Budget in Feb
• Division of Revenue Bill tabled, to be passed by
  Parliament
• Contains memo explaining formulae
• Contains or ensures up-front payment schedule for
  transfers
• Provinces table own three year budgets in
  Feb/March
• National govt publishes Intergovernmental Fiscal
  Review in April

27
Key Budget documents

• Budget Review and Division of Revenue (DoR) Bill
  all part of National Budget
• contains memo explaining formula
• contains/ensure upfront payment schedule for
  transfers
• Intergovernmental Fiscal Review
• 1x month after national and provincial budgets
  tabled
• discusses 9 provincial budget trends for 7 years
• in year (2002/03), three years to follow, three
  years past
• covers LG information for current financial year
• Quarterly and monthly budget info on provinces
• 30 days after end of each quarter
• Strategic plans of departments tabled with
  budgets
• Annual reports of departments in Sept
• NT website www.treasury.gov.za

28
Initial Lessons from SA
29
First Lesson from SA

• Budget reform goes with fiscal decentralisation
• It is even more important for fiscally
  decentralised
• Co-ordinating policy and sector interests across
  tiers of government is really difficult but
  necessary
• Ignore the nay-sayers and implement 3 year
  budgets
• Budgets should not require line-item political
  and legislative approval
• Reserve line-item budgets (to the extent they are
  even necessary) for internal management purposes
  only

30
Budget Reforms and Fiscal Decentralisation

• Budget reforms are even more important for
  fiscally decentralised countries
• Are budgets sustainable?
• Is consolidated tax to GDP stable or declining?
• Is consolidated borrowing or deficit sustainable
  (ie consolidated debt to GDP stable or declining)
• Are provincial budgets comparable with each
  other?
• Standard chart of accounts, uniform budget
  formats etc
• How quickly can we produce consolidated budget
  information?
• How much are we spending on school education?
• Need to aggregate school budgets from 9 provinces

31
Second Lesson Intergovernmental Grants

• Money is fungible, so unconditional grants work
  better than conditional grants, focusing on broad
  priorities related to entire budget
• Resist sectors who prefer conditional grants
• Cond grants for social grants and infrastructure
• Horizontal equitable share formula is
  redistributive between provinces
• How do we achieve equalisation?
• Needs versus performance?
• Data problems is it possible to get comparable
  usage and cost data for all provinces or
  municipalities?

32
Third Lesson Transparency, Information and
Accountability

• It is a continual struggle to get all levels of
  government to publish information
• Start with budget implementation information,
  through monthly reports
• Opens up possibilities for greater accountability
  by Parliament, public etc
• Information delayed is accountability denied!
• Culture of publishing ALL relevant info on
  website on same day
• How quickly do we collect and publish
  information?

33
Regular reporting

• Financial management improves dramatically if we
  start
• Publishing of monthly in-year reports on budget
  implementation
• Requiring financial statements from all
  departments and entities to submit for audit
  within 60 days of end of fin year, and audited
  and tabled in Parliament within 6 months
• Many benefits follow from above, including
  in-year accountability, better management and a
  further feedback mechanisms to improve budget
  allocation process

34
Fourth Lesson Build Treasury capacity

• Fourth lesson is to reform all treasuries to play
  a leadership role in budget process
• Budgeting is too important to leave to
  accountants! It is positively dangerous
• National Treasury must develop its policy
  assessment capacity to inform budget allocation
  process
• National Treasury also needs to create an
  enabling framework for better governance,
  management and accountability

35
National Treasury capacity

• In a decentralised country, National Treasury in
  SA has dedicated unit for intergovernmental
  fiscal relations
• Dedicated unit to work with provinces and
  municipalities
• Assessing credibility of provincial budgets
  (informal and perhaps to publish such assessment)
• Printing Intergovt Fiscal Review (IGFR) and
  consolidated budgets
• Ensure each (nat, prov or mun) treasury prepares
  quarterly reports for its Cabinet or Exco
• Ensure that national Treasury do a consolidated
  quarterly report for all provinces?

36
Key challenge is to ensure Budget Credibility

• National Treasury assesses provincial budgets as
  an advisory service to provide an independent
  perspective, and point out budget risk
• Is tabled budget credible?
• Are projections realistic?
• Is the deficit fully funded? Focus on a balanced
  budget rather than a deficit target?
• Continual challenge is to ensure implementation
  is according to planned budget

37
Fifth lessonOne collection agency

• Success of one national collecting revenue agency
  (SARS) for the major taxes
• You cannot spend or divide revenue that you fail
  to collect!
• We divide revenue ANTICIPATED to be collected
  before the start of the financial year

38
Last lesson Check relevance of Conventional
Assumptions

• To what extent does conventional theory of fiscal
  decentralisation really work in a developing
  country?
• Does greater tax capacity lead to better
  accountability?
• Do developing countries have effective
  accountability and auditing mechanisms?
• How can we get better financial or service
  accountability when we have a shortage of
  auditors, doctors etc?

39
Theory and practice

• SA has clear expenditure and tax assignment, and
  GRANT CERTAINTY
• Why are provinces fiscally more responsible than
  municipalities?
• Provinces have weak tax powers, municipalities
  have strong tax powers
• What further taxes do we devolve?
• Why should be move away from one tax collector?
• Why should we prioritise tax rate autonomy over
  other taxation reforms?
• What need for borrowing if govts struggling to
  spend on capital?

40
Other factors also impact Public Service

• Subnational governments tend to have personnel
  intensive functions like teachers, nurses, and
  personnel expenditure a high proportion of their
  budget (e.g. in education 80)
• Bargaining system for public service
  centralised or decentralised?
• Mobility and uniformity in conditions of service
  between states?
• Are public servants under one pension fund? Is it
  a benefit fund? How do you share burden of
  funding shortages?

41
Local Government

• We are still implementing our reforms with
  municipalities, so not as developed as with
  provinces
• Have undergone three major transitions (including
  change in boundaries) since 1993
• Provincial govt should do unto municipalities
  what they want central govt to do unto them!
• Every govt has a propensity to be gate-keeper
  over funds they control
• Need three year grant certainty, predictability
  etc for local govt as well, and also for projects
  that you control

42
Conclusion

• Has decentralisation worked in SA?
• Dont know, too early to tell
• Reform process still not completed
• Short-term assessment vs medium to long-term
• Has decentralisation led to better delivery?
• Would delivery have been better if centralised?
• No, if national depts with delivery
  responsibilities are taken into account
• Not clear if provinces or local govt would do
  better!
• Mixed story of early successes and failures
• No easy solutions to complex problems

43
Budget Reform
44
Budget Reforms in SA
1997 1998 1999 2000 2001 2002
2003 2004 2005

• Accounting Reform
• Procurement Reform

Publication of Quarterly Performance Information
Improving operational allocative efficiency
MFMA
Measurable objectives
SCOA
SPP tabled
Publication of Section 32 CG information
AR tabled
Estimates of National Expenditure Provincial
Budget Statements 1 2
Public Finance Management Act
National Expenditure Survey IGFR
Medium Term Expenditure Framework
Intergovernmental System
45
ACCOUNTABILITY CYCLE
5 years Updated annually Includes budget
information Covers critical areas for department
Environmental changes Expenditure outcomes and
new budget allocations Strategic direction changes
Detailed focus on first year of strategic
plan Includes output and service delivery
information
Expenditure trends 3 year forward
estimates Strategic direction explained Previous
year outcome incorporated when deciding resource
allocation
Staff have performance contracts individual
development plans Linked to departmental key
objectives and outputs Indicate individual
contribution towards achieving departmental
objectives
Performance against budget and strategic
plan Meeting reporting requirements - Treasury
PS Regulations
Progress against budget implementing strategic
plan Highlights departmental performance
(financial non-financial) against targets
46
Budget Process
47
Chapter 13 of Constitution

• Chapter 13 sets fiscal framework
• SA government system a revenue sharing one
• Fiscal powers of provinces and municipalities
  (taxation and borrowing) s228-230
• s214 on division of revenue between three spheres
  of govt (national, provincial, local)
• Sections 215 and 216 on budget transparency and
  fin management
• Establishment and mandates of National Treasury,
  FFC, SA Reserve Bank

48
Legislative context

• Public Finance Management Act (PFMA)
• Covers national and provincial depts and entities
• Municipal Finance Management Act (MFMA)
• Intergovernmental Fiscal Relations Act
• Gives effect to consultative processes on
  division of revenue
• Establishes Budget Council and Budget Forum
• Other chapter 13 legislation on provincial/LG
  taxes, borrowing, FFC, SARB
• Numerous pieces of financial sector legislation
  (banks, fin institutions etc)

49
Budget Process

• Budget process at the heart of government
• Guided by policies, priorities making
  trade-offs
• Not a bean-counting process
• Co-ordination between planning, budgeting, policy
  development and implementation
• Budget Preparation
• Collectively agreed in Cabinet / EXCO
• Involves consultation with provinces and LG
  through Budget Council, Budget Forum and Extended
  Cabinet (Premiers and SALGA)
• Budget approval after tabling
• Role of finance portfolion and standing
  committees, Joint Budget Committee
• Role of all portfolio committees

50
MTEF budget process
Medium term policy review
Macroeconomic framework, fiscal policy DoR
Preparation of MTSF
MTBPS
Cabinet lekgotla
Cabinet lekgotla
Jan April July
Oct 2003
Departmental and agency planning budgeting
Preparing budget submissions
MTEC review recommendations to Cabinet
Preparation of Budget Documents
May Aug Nov
Feb 2004
51
MTEF budget process
MTEC hearings
Table MTBPS
Prepare budget documentation
Cabinet approves new MTEF
National and provincial budgets tabled
52
How 3 year budgeting works

• Additions to baseline
• Revised macroeconomic and fiscal framework
• Drawdown on contingency reserve
• 3rd year forecast inflationary increase on 2nd
  year

53
Fiscal policy and the budget framework
Draw down of contingency reserve and revised
macroeconomic forecast
Additional allocation

• MTEF Baseline
• comprises
• Fiscal policy and macroeconomic framework of
  prevous year
• Years 2 and 3 of previous MTEF

New spending plans based on baseline (resource
envelope)
New spending plans, policy priorities and
framework determines increase to baseline
54
Factors affecting fiscal policy

• Level of taxation
• Rise in tax burden may impede economic growth
• Slowdown in tax burden may require higher
  borrowing or less spending
• Level of borrowing
• Borrowing for investment may boost longer-term
  growth
• Interest costs may crowd out other expenditure in
  the long term
• Too much Govt. borrowing pushes up interest rates
• Balance between capital and recurrent spending

55
Key indicators of fiscal policy
56
Policy priorities and public expenditure
MTEF budget process strengthens link between
policy priorities and expenditure

• Budget decisions informed by
• Priorities
• Evaluation of service delivery achievements
• Credible spending plans
• Annual reports on outputs and targets inform
  budget decisions
• Medium-term outlook allows greater policy and
  planning certainty

Child support grant extended to poor children
under 14 phased in over the 2003 MTEF period.
Priority is to reduce poverty and vulnerability
57
Political oversight of the budget process

• Executive responsible for early policy
  prioritisation and trade-offs
• MTEF budget process ensures political oversight
• Manage the tension between competing policy
  priorities and budget realities

Trade-off between extending child support grant
to children up to 14 years or increase spending
on school books, or can both be accommodated
within approved fiscal framework
58
Budgeting for service delivery

• MTEF deepens medium to long-term certainty
• Budget certainty supports policy for the
  phasing-in of CSG
• Allows for medium-term reprioritisation
• Legislative reforms provide manager with greater
  flexibility accountability for use of resources
• Budget documents contain service delivery
  commitments
• Measurable objectives and output targets included
  in national and provincial budgets

Goal is to ensure that Thandi receives the Child
Support Grant, possily till the age of 14 years
59
MTEF budget process

Medium term policy review

Departmental and agency

planning budgeting


Jan 04

Cabinet lekgotla

February

March

April

Departments

prepare budget
May

Cabinet lekgotla

proposals

June

Consider new

July

spending
Revise framework,
August

fiscal policy and
priorities

September

DoR

MTEC hearings



October

Table MTBPS


November

Prepare budget
Cabinet approves
new MTEF

December

documentation


Jan 05

National Budget and provincial
February

budgets tabled

March


60
Medium Term Expenditure Framework

• Based on four principles
• Fiscal policy and the budget framework
• Policy priorities and public expenditure
• Political oversight of the budget process
• Budgeting for service delivery

61
Budget Process Stages

• Four periods / stages
• Period One 1 March to 31 May
• (Preparation and Reprioritisation)
• Period Two 1 June to 31 August
• (Division of Revenue)
• Period Three 1 Sept to 30 November
• (Allocation of Resources)
• Period Four 1 Dec to 31 March
• (Finalisation of Documentation)

62
Key Role Players

• Parliament / Provincial Legislatures
• Cabinet / Provincial Exco
• FFC
• MinComBud
• Treasury Committee
• Extended Cabinet
• Budget Council
• Budget Forum
• TCF
• Spending Agencies

63
Important Intergovernmental Fora

• Sector Specific CFOs Fora (Quarterly)
• 10 x 10s
• 4 x 4s
• Joint MinMecs
• TCF (Six times a year)
• Budget Council (Quarterly)
• Budget Council Lekgotla (Annually)
• Budget Forum
• Technical PCC
• PCC

64
Major Budget Events

• Bi-laterals with departments (April to May)
• 10 X 10 (June)
• 4 X 4s (July)
• Cabinet Lekgotla (July)
• Provincial Visits (End July)
• Budget Council Lekgotla (End August)
• National and Provincial MTEC (September)
• Division of Revenue Workshop/Peer Reviews
• Joint Minmecs (October)
• Extended Cabinet (20 October)
• MTBPS (27 October)
• Budget Day (23 Feb 2005)
• Provincial Budgets (within two weeks)

65
Budget documentation

• Budget legislation
• Division of Revenue Bill
• Appropriation Bill
• Revenue laws
• Budget documentation
• Budget Speech
• Budget Review
• Estimates of National Expenditure
• Estimates of National Revenue
• Provinces have own budget documents
• Intergovernmental Fiscal Review (post-budget)
• Adjustments Appropriation Bill (post-budget)
• MT budget policy statement (pre-budget)

66
Departmental budget documents

• Portfolio committees can use budget docs to
  improve oversight over depts
• Strategic and performance plans and ENE
• Outputs and measurable objectives and targets
• In-year quarterly and end-financial year
  performance targets
• Annual report requires reporting against these
  measurable objectives
• Many depts provide poor performance info
• Section 32 PFMA monthly and quarterly reports
  allow for in-year monitoring

67
Budget process challenges

• Deepen political oversight
• Focus on credibility of second and third year of
  MTEF
• Information overload (SPP, BS, IYM, OPR, AR) and
  alignment of all tables in documentation
• Unresolved policy issues
• Poor programme costing
• Unfunded policy mandates
• Long budget cycle
• Weak interdepartmental coordination
• Inadequate policy analysis
• Quarterly Performance Information
• Alignment between Planning Cycle, Budget Cycle
  and Project Cycle

68
Provincial Strategic and Performance PlansA
five year perspective
69
Planning, Budget andReporing Cycle
70
Planning, budgeting and reporting cycle for
2005-2010
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Legal Framework

• Treasury Regulations (TR) date 25 May 2002
• R 5.1 Annual preparation of strategic plans
• 5.1.1 Each year, the accounting officer of an
  institution must prepare a strategic plan for the
  forthcoming MTEF period for approval by the
  relevant executive authority.
• TR 5.2 Submission and contents of strategic
  plans
• 5.2.1 In order to facilitate the discussion of
  individual votes, the approved strategic plan
  must be tabled in Parliament or the relevant
  legislature at least 7 days prior to the
  discussion of the departments budget vote.

73
Legal Framework

• TR 5.2.2 The strategic plan must
• TR 5.2.1 The strategic plan must form the basis
  for the annual reports of accounting officers as
  required by sections 40(1)(d) and (e) of the Act
• TR 5.3 Evaluation of performance Section 27(4)
  read with 36(5) of the PFMA
• 5.3.1 The accounting officer of an institution
  must establish procedures for quarterly reporting
  to the executive authority to facilitate
  effective performance monitoring, evaluation and
  corrective action.
• Public Service Regulations
• Treasury regulations require strategic plans to
  comply with Chapter 1, Part III B of the Public
  Service Regulations, 1999, and also include
  information on the Service Delivery Improvement
  Plan

74
Strategic Planning as a foundation

• MTEF strengthens link between policy priorities,
  planning, budgeting, implementation and reporting
• Departmental strategic planning aligned with
  medium-term policy priorities
• Budget submissions based on strategic and
  performance plan and policy priorities
• Budgets evaluated by Treasury on basis of
  Governments priorities and expected outputs
• Five year perspective to SPP linked to electoral
  cycle and alignment of Infrastructure Planning
  through infrastruture delivey toolkit

75
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78
Proposed Generic Format 2005

• Part A Strategic Overview of the Dept and Sector
• Vision, mission, values, broad policy priorities,
  goals and objectives. Focus mainly on service
  delivery
• Part B Detailed planning information per
  programme and sub programme
• Measurable Objectives, Performance Measures
• Performance targets, Budget information
• (reconciliation of budget vs plan)
• Part C Background information
• Analysis of service delivery environ,
  organisational and institutional environ,
  Analysis of challenges

79
Annual Process

• First draft SPP Provincial Budget Statement to
  be submitted by 31 August
• take account of 2004/05 actual outcome contained
  in AFS and and 1st quarter actual expenditure for
  2005/06 Section 32
• January and July lekgotla
• Budget requests beyond baseline
• MTBPS - October
• Second draft SPP Provincial Budget Statement to
  be submitted by 02 December
• take account of 2nd quarter actual expenditure
  for 2005/06 Section 32 and final tabled Annual
  Reports (previous years actual performance)
• Provinces table Budget Statements two weeks after
  National Budget 15 February 2006
• SPP must be tabled in Parliament or the relevant
  legislature at least 7 days prior to the
  discussion of the departments budget vote
• Final allocations available plus 3rd quarterly
  actual expenditure 2005/06
• 2005 IGFR

80
Progress to date

• All 116 provincial departments have implemented
  SPP from the 2002 Budget
• Measurable objectives
• Performance Measures
• Performance targets (Quarterly)
• The alignment of SPP and Budget is done through
  the Budget and Programme Structure
• What appears on the face of budget documentation
  should reflect the services a department renders
  to the community in terms of its legal mandate,
  and not the organisation structure of the
  department

81
Progress to date

• Uniform Budget and Programme structures for eight
  provincial sectors
• Education Health Social Development
  Agriculture Housing Local Government Public
  Works, Roads and Transport and Sport, Arts and
  Culture
• Customised and Generic Strategic and Performance
  Plans for seven provincial sectors
• Target for the 2005 Budget
• Provincial Legislatures, Environmental Affairs
  and
• Provincial Treasuries
• Uniform Budget and Programme Structures
• Customised strategic and performance plans
• Generic organisational model

82
In-year Management, Monitoring and Reporting(IYM
or Section 32 of PFMA)
83
(No Transcript)
84

• Screen Shots IYM Model

85

• Screen Shots Section 32 Publication

86

• Screen Shots Press Release

87

• Screen Shots IYM Dataset

88
Quarterly Performance ReportingThe link between
the strategic plans and the annual reports and
the complement to the monthly financial statements
89
Link between plans, budgets and reports
These are in place!
These are in place!
These are in place!
These are in place!
Are these in place?
These are in place!
These are in place!
These are next

90
Place of QPRs in Reporting Cycle

• State of the Nation Address
• Provide in-year information on performance
  against measurable objectives and performance
  targets
• Complement the monthly financial reports by
  providing a service delivery perspective on
  performance
• Integral to monitoring, reporting and evaluating
  the AOs performance against their performance
  agreement/contract to implement the departments
  operational plan
• Feed into the departmental performance section
  of the annual report

91
Reforms introduced for the 2004 Budget

• Migration to BAS
• Single source of truth for users of data (Reserve
  Bank, NT and others)
• Exceptions NW and two national departments
• Standard Chart of Accounts (SCOA)
• New Economic Reporting Format
• Consolidation of Financial Statements (after AR
  for 2003/04)

92
Budgets vs Annual Report

• Budget is FORWARD-LOOKING
• Budget is essentially a policy approval process
• Pre-financial year document
• Sets out policy priorities trade-offs for
  coming 3 yrs
• Sets performance targets for each of the 3 years
• Annual Reports are BACKWARD-LOOKING
• Not a policy approval process, but a performance
  report for financial year just ended
• Post-financial year document
• 2005 Annual Reports tabled by 30 Sept 2005 report
  on 2004/05 financial year
• 1 April 2004 to 31 March 2005
• Compare to 2004 Budget (NOT 2005 Budget)

93
Commercial

• Note
• all 2005 provincial Budget Statements and
  Strategic and Performance Plans (SPP)
• 2005 provincial Budget Statements are available
  on NT Website and
• 2004/05 Annual Reports to follow soon.
• www.treasury.gov.za
• Contact Details
• Jan Hattingh
• Chief Director Provincial Budget Analysis
• Intergovernmental Relations
• National Treasury
• Tel No. [phone]
• E-mail jan.hattingh_at_treasury.gov.za