1 Alignment of the Infrastructure Delivery Cycle with the Budget Cycle and Strategic Planning Cycle Prepared by the Infrastructure Delivery Improvement Programme (IDIP)

2 State of the Nation Address 2005 “Certainly it is a reflection of weaknesses in the governance system that the plans to build school infrastructure are unfolding at a much slower pace than envisaged.” “We need massively to improve the management, organisational, technical and other capacities of government so that it meets its objectives.” President Thabo Mbeki – State of the Nation Address 2005

3 State of the Nation Address 2006 “We cannot allow that government departments become an obstacle to the achievement of the goal of a better life for all because of insufficient attention to the critical issue of effective and speedy delivery of services.” “Integration of planning and implementation across the government spheres is therefore one of the prime areas of focus in our programme…” President Thabo Mbeki – State of the Nation Address 2006

4 The Infrastructure Delivery Improvement Programme (IDIP) IDIP is a continuous improvement programme which guides & capacitates to improve infrastructure delivery IDIP is coordinated by National Treasury in partnership with DBSA, DPW & CIDB IDIP provides flexible tools that can be adapted to the province & sector IDIP is a key strategy of government to address inadequate capacity and skills in the infrastructure sector

5 Problem Statement Continuing under expenditure of infrastructure budgets. Inappropriate expenditure patterns characterized by the 4 th Quarter expenditure spike. Currently there appears to be very little alignment between the Infrastructure Delivery Cycle and either the Budget Cycle or the Strategic Planning Cycle. Currently the budget for large multi-year projects is committed to 1 financial year instead apportioning the budget across the MTEF.

6 Overview of Presentation This presentation covers the following topics: –The Strategic Planning Cycle –The Budget Cycle –The current Infrastructure Delivery Cycle –The improvements to the Infrastructure Delivery Cycle –The alignment and interdependence between these 3 cycles –An overview of the Infrastructure Plan, Infrastructure Programme Management Plan (IPMP), & Infrastructure Programme Implementation Plan (IPIP) –Budget allocation for Infrastructure Delivery Programmes –Managing cashflows across years to ensure 100% effective expenditure –Benefits & Challenges

7 Electoral Cycle Five-year Strategic and Performance Plans Fiscal Years Planning & Budgeting Year Election Mandate Election 5 year Strategic & Performance Plan detailing Targets & priorities MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 LEGEND: APP – Annual Performance Plan Annual Performance Plans and Budgets (with 3 Year MTEF)

8 3 Year MTEF Period Budget Day (15 Feb) MTEF Budget Cycle Draft 2 APP Final APP Budget Allocation Letter (Nov)MTEC Hearings (Sept) LEGEND: Planning Processes Implementation Processes Closure Processes ARFinal Budget Update Budget Draft APP Draft Budget Q1 PR Q2 Rep Q2 PR Q3 PR Q3 Rep Q4 Rep AFS Q4 PR 31 Aug Mid Dec 17 Feb Q1 Rep Implement Budget 31 Mar Draft 2 APP Final APP AFS Final Budget Update Budget Draft Budget AR Draft APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Implement Budget Q1 PR Q2 PR Q3 PR Q4 PR Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep AFS Final Budget Update Budget Implement BudgetAR Draft APP Draft Budget Q1 PR Q2 PR Q3 PR Q4 PR Draft 2 APP Final APP Q1 Rep Q2 Rep Final Budget Update Budget Implement Budget Draft APP Draft Budget Q1 PR Financial Reports (Section 32 PFMA) & Non-Financial Data Reporting APP – Annual Performance Plan AFS – Annual Financial Statements AR – Annual Report PR – Performance Report

9 3 Year MTEF Period Budget Day MTEF Budget Cycle Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Budget Allocation Letter These are all the concurrent budget activities that need to be undertaken in any 1 year MTEC Hearings AFS AR AFS AR AFS AR Final Budget Update Budget Final Budget Update Budget Draft Budget Final Budget Update Budget Implement Budget Draft 2 APP Final APP Q1 Rep Q2 Rep Final Budget Update Budget Implement Budget Draft APP Draft Budget Q1 PR Q2 PR Q3 PR Q4 PR Q1 PR Q2 PR Q3 PR Q4 PR Q1 PR Q2 PR Q3 PR Q4 PR Q1 PR Draft Budget LEGEND: Planning Processes Implementation Processes Closure Processes APP – Annual Performance Plan AFS – Annual Financial Statements AR – Annual Report PR – Performance Report

10 3 Year MTEF Period Budget Day MTEF Budget Cycle Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Budget Allocation LetterMTEC Hearings AFS AR AFS Final Budget Update Budget Final Budget Update Budget Final Budget Update Budget Implement Budget AR Implement BudgetAR Draft 2 APP Final APP Q1 Rep Q2 Rep Final Budget Update Budget Implement Budget Draft APP Draft Budget Q1 PR Q2 PR Q3 PR Q4 PR Q1 PR Q2 PR Q3 PR Q4 PR Q1 PR Q2 PR Q3 PR Q4 PR Q1 PR The following information is used as input to prepare the budget: Draft Budget due 31 August Annual Financial Statements from last year due 31 May 1 st Quarter Report from this year due mid July Updated Budget due mid December 2 nd Quarter Report from this year due mid October Final Budget due 17 February Budget Allocation Letter 3 rd Quarter Report from this year due mid January LEGEND: Planning Processes Implementation Processes Closure Processes APP – Annual Performance Plan AFS – Annual Financial Statements AR – Annual Report PR – Performance Report Final Budget Update Budget Draft Budget Budget Allocation Letter

11 Electoral Cycle Five-year Strategic and Performance Plans Fiscal Years Planning & Budgeting Year Election Mandate Election 5 year Strategic & Performance Plan detailing Targets & priorities MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 MTEF (3 years) Year 1 Budget APP For Year 1 Year 2 Budget Year 3 Budget APP For Year 2 APP For Year 3 LEGEND: APP – Annual Performance Plan Annual Performance Plans and Budgets (with 3 Year MTEF) Infrastructure Plan Update (10 Year Plan) Infrastructure Plan Update (10 Year Plan Infrastructure Plan Update (10 Year Plan) Etc, etc, etc

12 Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget 3 Year MTEF Period Current Infrastructure Delivery Cycle Infrastructure Delivery Cycle Better supervision of infrastructure projects undertaken by government will be introduced, to ensure that capital budgets are spent without roll-overs - President Thabo Mbeki - State of the Nation Address % Rollover BudgetTime Cumulative Cashflow With the current Infrastructure Delivery Cycle, expenditure during the 1 st half of the year is virtually impossible since most projects are still in the tender phase. The result is the 4 th quarter expenditure spike and overall under-expenditure.

13 Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget 3 Year MTEF Period Budget Speech Current Infrastructure Delivery Cycle Improved Infrastructure Delivery Cycle LEGEND:O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan Infrastructure Delivery Cycle Infr. Plan update O&S Plan IPMP O&S IPIP O&S Each Infrastructure Delivery Cycle is characterized by under-expenditure and rolled over unspent budgets

14 Infrastructure Programme Management & Implementation Plans (IPMP & IPIP) Client Department (CD) Implementing Agent IA 1 IPMP Update IPIP for IA 2 Implementing Agent IA 2 SDA with IA 1 SDA with IA 2 IPIP for IA 1 FUNCTIONS OF CD: 1.Planning 2.Procurement 3.Programme Management 4.Monitoring & Reporting FUNCTIONS of IAs: IPIPs respond to IPMP 1.Programme Management 2.Project Initiation 3.Procurement 4. Project Implementation 5. Project Completion 6. Monitoring & Reporting IPMP issued to IAs Infrastructure Plan Update

15 Infr. Plan update Project Design Project Tender Project Implementation Project Design Project Tender Project ImplementationPlanned Multi-year Commitments Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget 3 Year MTEF Period Budget Speech Current Infrastructure Delivery Cycle Improved Infrastructure Delivery Cycle LEGEND:O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan Infrastructure Delivery Cycle Eg. Conditional Grant for FET given to DoE by NT Monitoring & Evaluation Infr. Plan update O&S Plan IPMP O&SPlan IPIP O&SPlan

16 Project Design Project Tender Project Implementation 3 Year MTEF Period Current Project Budgeting Best Practice Project Budgeting Infr. Plan update IPMPIPIP Budget Time 100% Retention Period Infr. Plan update Project Design Project Tender Project Implementation Implementation of Roll-Over Budget 100% Commit from Yr 1 Commit from Yr 2Commit from Yr 3 Com- mit from Yr 4 Cumulative Cashflow Monthly Projected Cashflow Implementation of Roll-Over Retention Period Rollover Whole project budget is committed to Yr 1

17 Infr. Plan update Project Design Project Tender Project Implementation Project Design Project Tender Project ImplementationPlanned Multi-year Commitments Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget 3 Year MTEF Period Budget Speech Current Infrastructure Delivery Cycle Improved Infrastructure Delivery Cycle LEGEND:O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan Infrastructure Delivery Cycle Monitoring & Evaluation Infr. Plan update O&S Plan IPMP O&SPlan IPIP O&SPlan Project Design Project Tender Project ImplementationPlanned Multi-year Commitments Monitoring & Evaluation Infr. Plan update O&S Plan IPMP O&S IPIP O&S Project Design Project Tender Project ImplementationPlanned Multi-year Commitments Monitoring & Evaluation Infr. Plan update O&S Plan IPMP O&S IPIP O&S Project Design Project Tender Project ImplementationPlanned Multi-year Commitments Monitoring & Evaluation Infr. Plan update O&S Plan IPMP O&S IPIP O&S These are all the concurrent infrastructure delivery activities that need to be undertaken in any 1 year Departments therefore need to have the capacity to undertake all these concurrent activities.

18 Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep IPMPIPIPProject Design Project Tender Project ImplementationPlanned Multi-year Commitments IPMPIPIPProject Design Project Tender Project ImplementationPlanned Multi-year Commitments IPMPIPIPProject Design Project Tender Project Implementation IPMPIPIPProject Design MTEF Budget cycle Infrastructure Delivery Cycle AFS ARFinal Budget Update Budget Implement Budget AFS ARFinal Budget Update Budget Implement Budget AFS ARFinal Budget Update Budget Implement Budget Final Budget Update Budget Implement Budget These are all the concurrent activities that need to be undertaken in any 1 year by a department Draft APP Draft Budget Monitoring & Evaluation Infr. Plan update O&S Plan Infr. Plan update O&S Plan Infr. Plan update O&S Plan Infr. Plan update O&S Plan LEGEND:O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan LEGEND: APP – Annual Performance Plan AFS – Annual Financial Statements AR – Annual Report PR – Performance Report

19 Draft 2 APP Final APP IPIPProject Design Project Tender Planned Multi-year Commitments MTEF Budget cycle Infrastructure Delivery Cycle AFS ARFinal Budget Update Budget Monitoring & Evaluation Implement Budget Q1 Rep Q2 Rep Q3 Rep Q4 Rep Project Implementation Draft APP Draft Budget Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep AFS ARFinal Budget Update Budget Implement Budget Draft APP Draft Budget Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep AFS Final Budget Update Budget Implement BudgetAR Draft APP Draft Budget Considering a cycle with a common year of implementation It is clear that the Infrastructure Delivery Cycle is a longer cycle & that infrastructure planning leads the budget planning process by 1 year. Therefore Infrastructure Planning & project design also become inputs into the Budget Planning process. Budget Cycle Infrastructure Delivery Cycle Common year of implementation Infr. Plan update IPIPProject Design Project Tender Monitoring & Evaluation Project ImplementationIPMPInfr. Plan update The Draft APP in turn becomes an input into the current year’s infrastructure planning & IPMP update. The inputs to the Budget process are the AFS from last year as well as the Quarterly Reports from this year. IPMP And the project tendering & implementation feed into the implementation of the budget, quarterly reporting & the AFS.

20 IPMPIPIP 3 Year MTEF Period Budget Speech Planned Multi-year Commitments Project Implementation Project Design Project Tender Current year’s infrastructure delivery activities Monitoring & Evaluation Infr. Plan update O&S Plan The Infrastructure Plan sets out the infrastructure priorities for the next 10 years. It is updated annually on the basis of the: Targets and priorities set out in the Strategic Plan & Annual Performance Plan The anticipated MTEF Budget, and The progress of the current projects. Infr. Plan update O&S Plan

21 The IPMP sets out in detail the work for the next 3 years. It is based on the updated Infrastructure Plan as well as the Draft Annual Performance Plan (APP). IPMPIPIPProject Design Project Tender Project ImplementationPlanned Multi-year Commitments Project Design Project Tender Project Implementation Project Design Project Tender 3 Year MTEF Period Budget Speech Planned Multi-year Commitments Project ImplementationPlanned Multi-year Commitments Project Design Project Tender Project ImplementationPlanned Multi-year Commitments In Year 1 (Very detailed) In Year 2 (Less detailed) In Year 3 (even less detailed) Current year’s infrastructure delivery activities Monitoring & Evaluation Infr. Plan update O&S Plan O&S IPMP O&S IPMP O&S IPMP O&S IPIP O&S IPIP O&S Infr. Plan update O&S Plan Infr. Plan update O&S Plan Infr. Plan update O&S Plan IPMP Infrastructure Programme Management Plan (IPMP) NB: The total value of the work in each year must equal the Annual Budget for each year

22 Infr. Plan update IPMPIPIPProject Design Project Tender Project ImplementationPlanned Multi-year Commitments Infr. Plan update IPMPIPIPProject Design Project Tender Project Implementation Infr. Plan update IPMPIPIPProject Design Project Tender Infr. Plan update IPMPIPIP 3 Year MTEF Period Budget Speech Planned Multi-year Commitments Project ImplementationPlanned Multi-year Commitments Project Design Project Tender Project ImplementationPlanned Multi-year Commitments Project Implementation Budget = TOTAL INFRASTRUCTURE BUDGET – Planned Multi-year Commitments – Project Design & Tender (10%) – Infrastructure Planning (1%) – Funding of O&S Plan O&S Plan O&S Infrastructure Budget Allocation

23 Example of Programme Budget to commit entire Annual Budget

24 Infr. Plan updateIPMPIPIP IPMP Planned Multi-year Commitments Project ImplementationProject Design & Tender Project Implementation Project Design & Tender Managing Cashflows Across Years Planned Multi-year Commitments But here we have clusters of projects that have been designed and are ready to go to tender In reality the neat chunks of work shown on the earlier slides are actually individual projects or clusters of projects with different start & end dates Some projects or clusters of projects in the current year can be delayed causing potential under expenditure NB: The total value of the work in this year equals the Annual Budget for this year

25 Infr. Plan updateIPMPIPIP IPMP Planned Multi-year Commitments Project ImplementationProject Design & Tender Project Implementation Project Design & Tender Managing Cashflows Across Years Planned Multi-year Commitments We need to tender these projects earlier and start implementation in Year 1 to offset the potential under expenditure caused by the delayed projects

26 Identified Benefits Better linkage with Strategic Planning is achieved Better alignment of the budget with the targets set out in the Strategic Plan Project planning & design is properly done resulting in achievable & realistic cashflows Multi-Year commitments are planned and budgeted for thereby reducing rollovers Improved clarity of roles & responsibilities between client departments and implementing agents

27 Programme Manager with required skills is required –Planning for built environment –Quality Control –Contract Procurement Commitment by political heads to only implement what is on the Infrastructure Plan Understanding that if a project is entered as a new priority onto an Infrastructure Plan in Year 0 it must follow due process before implementation can begin Infr. Plan update IPMPIPIPProject Design Project Tender Project Implementation Possible Challenges

28 That the Infrastructure Delivery Cycle be amended to include the Infrastructure Programme Management Plan (IPMP), the Infrastructure Programme Implementation Plan (IPIP), and the Service Delivery Agreement (SDA), and that these plans be made mandatory for all departments. That the timeframes of the Infrastructure Delivery Cycle be amended to allow for the alignment of the Infrastructure Delivery Cycle with the Budget Cycle so that departmental budgets are informed by actual projects. This means that plans for projects must be finalized in the year before the budget is prepared. Recommendations (1)

29 That best practice budgeting processes be adopted so that budgets for large projects are appropriately committed across the duration of the project. In other words, multi- year projects must be appropriately budgeted over multiple years, and not budgeted for in a single year only, which results in roll-overs. This will enable budgets to be fully spent each year, and roll-overs to be avoided. It also means that Client Departments and Public Works must be willing to enter into contractual commitments for multi-year projects, and to budget for these projects over multiple years, rather than budgeting for the whole project in the first year. In addition, it must be accepted that this means that a portion of each year’s budget will have to be allocated to commitments from previous years. Recommendations (2)

30 Thank You