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Intergovernmental System in South Africa

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Title: 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
71
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72
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. (012) 315-5009
  • E-mail jan.hattingh_at_treasury.gov.za
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