Presentation on theme: "Provincial Budget Analysis Intergovernmental Relations"— Presentation transcript:
1IN-YEAR MANAGEMENT, MONITORING AND REPORTING SYSTEM (SECTION 32 REPORTS) Provincial Budget AnalysisIntergovernmental RelationsNational Treasury08 August 2006
2Outline Background Legal requirements In-year monitoring process Reports generatedPractical examples
3Background Sparked by 1997/98 financial crisis in provinces Provinces overspent by R5,8 billion in aggregateMonitoring system (EWS) approved by CabinetChange in the Budget ProcessIYM to constitute:Expenditure managementRevenue managementCash flow managementMovements in bank balancesSuspense accounts
4Sections 24 to 27 and 29(4) of the Division of Revenue Act, 2006 (CGs) Legal RequirementsSection 32 of PFMAPublishing reports on state of budgetsSection 40(4) of PFMASections 24 to 27 and 29(4) of the Division of Revenue Act, 2006 (CGs)Acts require monthly expenditure and revenue reporting to the provincial treasuries and National Treasury
5In-year Management, Monitoring and Reporting Accountability Cycle:Strategic and Performance PlansBudgetIn-year monitoring (IYM) (Inform SP targets)Quarterly Performance Reports (piloting)Annual ReportsPurpose:Focus on performance against budgetAlert managers where remedial action is requiredReports serve as management toolFeed the Budget ProcessFeed into publications such as the Annual Intergovernmental Fiscal ReviewPolitical level to make decisions
6In-year Management, Monitoring and Reporting Monthly reports facilitate:Flow of informationInternal control measures to deal with problems timeously (Early Warning System)AO is more proactiveUse data to make decisionsCompilation of annual reports and financial statements which completes the accountability cycleAssist the external auditorReduced timeframe for audit - strengthen accountability to legislaturesReports consolidated and published in Government Gazette
7Monthly Reporting Process (1) Accounting officer must submit reports to relevant treasuries and executive authorities within 15 days of the end of each monthTo improve accountability, AOs are required to sign-off on the monthly reports before submitting to relevant treasury or executive authorityContents of reports – legal requirement (S40):Actual revenue and expenditureProjections for remainder of financial yearInformation on conditional grantsAny material variancesFormat determined by the National Treasury in terms of PFMA and annual DoRARevised annually
8Monthly Reporting Process (2) Formats –Require variances between the actual result for the period and that budgetedProjections to the end of the financial yearReasons for deviationsWhat has happened so far?What will happen for the rest of the year?What actions to be taken to achieve agreed plan?
9Monthly Reporting Process (3) Number of steps in the process to convert the millions of individual transactions that occur as a result of government activities into the information to be published monthlyUndertake reconciliationsCheck allocation of transactionsClear errors and suspense itemsBalance various type of accountsReturn date 15th of each month to provincial treasuries and 22nd of each month to National TreasurySystem resources: BAS, PERSAL and VulindlelaFrom 1 April 2004:New Economic Reporting FormatMigration to BASStandard Chart of Account (SCOA)Single version of the truth
10The In-Year Monitoring Process Dept IYM Data file + Dept IYM report signed by HODProvincial TreasuryCollates and imports all departmental IYM data file into treasury IYM Model (built in function) to generate provincial IYM reportProvincial Treasury updates IYM Model with all Dept IYM data files and generates IYM data fileNational TreasuryImports IYM Data file into IYM Model also receives all dept signed IYM summary reports via post before 25th of month + prov treasury spending / variance report
16Reports Generated Section 32 Publication Press Release Technical Committee for Finance (TCF)Budget CouncilPresident’s Co-ordinating Council (PCC)Select Committee for Finance
17Interpretation of Reports (1) 1st Quarter report (practical examples):1st Q 2005/06 to 1st Q 2006/07 spending growthWhy low growth in Education (2,2%), in particular Personnel (1,4%)?Why drop in expenditure from 4th Quarter in 2005/06 (R59,9bn) to 1st Quarter in 2006/07 (R38,4bn)?Are projections a reasonable reflection of likely expenditure outcomes for the financial year?Spending on Social Welfare Services (Social Development) at 17,7% - why lower than aggregated average?
20Interpretation of Reports (2) It should be noted that one cannot necessarily draw meaningful conclusions by only looking at the first quarter financial results given the fact that it is relatively early in the financial yearProvinces are projecting to overspent by R2,1 billionOnce anticipated provincial roll-overs, which will be reflected in the provincial adjustments budgets, are taken into account on the budget side, the overall outcome would changeThe adjustments budgets are reflected in the 3rd quarter and 4th quarter publications