1. The Budget Process, Documents and the Appropriation Bill
NATIONAL TREASURY
Dr Kay Brown : Expenditure Planning
22 February 2011

2. Overview
The budget is a key statement of the policy of the government.
It is a process through which choices have to be made about competing priorities
The budget must fulfil 3 functions:
Spending, taxation and borrowing must support economic objectives
Resources must be allocated to political priorities
Budget and budget information must be tools to improve quality and effectiveness of spending for service delivery

3. How the MTEF works
Since 1997, Government runs a rolling 3 year budget process
Lets assume the police budget published in 2010 is as follows
R100 in 2010/11, R105 in 2011/12 and R110 in 2012/13
For the 2011 budget, the R105 and the R110 are the budget baseline figures for police
To get the new third year, we increase the R110 by 6% for example, lets call it R116 in 2013/14
Now we have a MTEF baseline of R105 in 2011/12, R110 in 2012/13 and R116 in 2013/14
MTEF budget baselines are then thoroughly examined to identify possible savings and areas which require additional funding

4. Government priorities
The medium term strategic framework (MTSF) is a statement of government’s chosen priorities. It is adopted by Cabinet every five years and then updated annually
Within the Fiscal Framework - the Budget transfers resources in line with priorities
Outcomes Approach:
sets out 12 clear measurable outcomes which are to lead the attainment of government’s priorities
and thus form the focus of government policy and service delivery implementation and targeting
Government has prioritised its efforts and resources more rigorously to support particularly following government outcomes, namely:
Job creation specifically focused on youth employment
Education and skills development
Health
Integrated and sustainable human settlements
Vibrant, equitable and sustainable rural communities

5. National Treasury’s technical role
Provide the overall Division of Revenue proposal between the 3 spheres based on the decisions made at a political level on priorities and on further analyses
Provide the technical guidelines for budget submissions
Conduct the evaluation of those budget submissions
Maintain ongoing communication with other government departments and agencies throughout the budget process
Make recommendations on the budget that should be proposed

6. Criteria for assessment of budget submissions
The following factors are considered when assessing budget submissions:
link of budget submission proposal to broad government priorities
research on policy options for delivering
funding in previous MTEF periods
evidence of underspending and/or unwise spending
proper plans and proper costing
appropriately aligned implementation and spending plans
appropriate monitoring and evaluation
execution according to budget planning, seen in strategic planning documents, etc

7. Role players in the budget process
The MTEC is an interdepartmental committee - comprising of representatives from NT, DPSA, Planning Commission, DPME and DCog
MTEC considers the allocation of funds in respect of each grouping of departments, in line with the outcomes approach (previously individual departments were not grouped by government function for budgeting)
Departments
Intergovernmental technical forums
Relevant entities and donors
Ministers’ Committee on the Budget
Budget Council (Minister and provincial MECs for Finance)
Budget Forum (Budget Council plus local government)
Cabinet
Financial and Fiscal Commission
Legislatures
Portfolio Committees, Finance Committees, Appropriations Committees

8. Key milestones
Policy review Departmental planning Parliament & budgeting
Departments prepare budget, including detailed spending plans for new proposals
April
June
July
Aug
Sept
Oct
Review, evaluate and decide on new major policy proposals
Division of Revenue Act passed
Intergovernmental and technical forums
Propose fiscal and budget framework, and division of resources
Appropriation Bill and Revenue Bills passed
Executive/s consider frameworks and division of resources
Sector and focused budget hearings
Table Medium Term Budget Policy Statement

9. Key milestones
Policy review Departmental planning Parliament & budgeting
Portfolio committees submit BRRR reports, adopt fiscal framework, pass Money Bills
Nov
Dec
Jan
Feb
March
Cabinet approves new MTEF allocations
Departments revise medium term plans and finalise budget inputs
Departments revise medium term plans and finalise budget inputs
National Budget tabled (includes response to BRRR)
Strategic Plans tabled
Provincial budgets are tabled (14 days after National budget is tabled)
Adoption of fiscal framework

10. Budget documents
Parliament’s recommendations are considered and allocation letters are sent in November/December, including the earmarking of certain amounts or stated conditions
Budget documents are then prepared:
Budget Speech
Budget Review
Peoples’ Guide
Appropriation Bill
Estimates of National Expenditure
Division of Revenue Bill

11. Estimates of National Expenditure layout
Introduction
Summary of additional allocations to departments
Summary tables
Main budget framework
Additional allocations to national votes
Expenditure by national vote
Expenditure by economic classification
Amounts to be appropriated to national votes for 2011/12 by economic classification
Conditional grants to provinces and municipalities by national vote
Training expenditure per vote
Infrastructure spending per vote
Personnel expenditure per vote
Departmental receipts per vote
Guide to information contained in each chapter

12. ENE layout One chapter per vote
38 votes with selected public entities and other agencies
Votes arranged according to functional groupings
Functional groupings:
Central government administration
Financial and administrative services
Social services
Justice, crime prevention and security services
Economic services and infrastructure
More detailed information for each vote available on More comprehensive coverage of vote specific information, particularly goods and services, transfers, donor funding, public entities and lower level institutional information

13. Information contained in each chapter
Budget summary
2011/12
2012/13
2013/14
Total to be
Current
Transfers and
Payments for
R million
Appropriated
payments
subsidies
capital assets
financial assets
Total
MTEF allocation
Programme name
Subtotal
Direct charge against the National Revenue Fund
Item
Total expenditure estimates
Executive authority
Minister
Accounting officer
Director-General / Chief Operating Officer
Website address

14. Information contained in each chapter
Expenditure allocation for 2011/12 (corresponds with 2011 Appropriation Bill information)
Appropriation: the approval by Parliament of spending from the National Revenue Fund, or by provincial legislature from a Provincial Revenue Fund
Totals disaggregated into current payments, transfers and subsidies, payments for capital assets and payments for financial assets
Current payments are payments made by a department for its operational requirements
Transfers and subsidies are payments made by a department for which the department does not directly receive anything in return
Payments for capital assets are payments made a department for an asset that can be used for more than one year and from which future economic benefits or service potential are expected to flow.
Payments for financial assets mainly consist of payments made by departments as loans to public corporations or as equity investments in public corporations. The reason for expensing the payments rather than treating them as financing is that, unlike other financial transactions, the purpose of the transaction is not profit oriented. This column is only shown in votes where such payments have been budgeted for. Payments for theft and losses are included in this category; however these payments are not budgeted for and will thus only appear in the historical information, which can be seen in the expenditure estimates table.
Estimates for 2012/13 and 2013/14

15. Information contained in each chapter
Aim – department’s strategic objectives
Programme purposes
Strategic overview: 2007/08 – 2013/14
Policy and mandate developments and legislative changes
Department’s contribution to the achievement of outcomes attributed to it and related outputs listed in Service Delivery Agreements
Savings and cost effectiveness measures – details of reprioritisation of budgets effected and savings and cost reduction measures

16. Information contained in each chapter
Table of selected performance indicators
Indicators are numerical measures that track a department’s or entity’s progress towards its goal
Programme column links indicator to the programme associated with it
Indicator
Programme
Past
Current
Projections
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14

17. Medium-term expenditure estimate
Information contained in each chapter
Expenditure estimates
Programme
Adjusted
Revised
Audited outcome
appropriation
estimate
Medium-term expenditure estimate
R million
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
1. Programme name
2. Programme name
3. Programme name
Subtotal
Direct charge against the National Revenue Fund
Item
Total
Change to 2010 Budget estimate
Economic classification
Current payments
Economic classification item
Transfers and subsidies
Payments for capital assets
Payments for financial assets

18. Information contained in each chapter
Expenditure trends
Main expenditure trends and vote programme structure changes from 2007/08 financial year to 2013/14 financial year described
Spending focus over the MTEF period
Nominal annual growth rates calculated for the full or MTEF period
Real annual growth rates – growth rate deflated by CPI - calculated in certain instances
Summary of new (additional) allocations to the baseline budget
Personnel information
Summary of personnel posts per programme by salary level
Infrastructure spending
Expenditure on existing, new and mega infrastructure

19. Medium-term receipts estimate
Information contained in each chapter
Departmental receipts
Departmental receipts for MTEF period described in relation to receipts for 2010/11
Adjusted
Revised
Audited outcome
estimate
Medium-term receipts estimate
R thousand
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
Departmental receipts
Economic classification item
Total

20. Information contained in each chapter
Detailed discussion by programme
Programme objectives and measures
Objectives and measures shown for each programme (except programme 1: Administration)
Example: Improve the provision of services and products to eligible citizens and residents (strategic intent/objective) by reducing the time taken to issue passports and travel documents (specific intervention) from 10 days in 2010/11 to 5 days in 2013/14 (progress measure)
Purposes and activities of subprogrammes in respect of the programme
Expenditure estimates per programme table
Expenditure trends per programme

21. Information contained in each chapter
Public entities and other agencies
Additional tables
Summary of expenditure trends and estimates per programme and economic classification (2 years)
Details of approved establishment and personnel numbers per salary level
Summary of expenditure on training (by category)
Summary of departmental public private partnerships projects
Summary of expenditure on infrastructure (by type)
Tables available on
Summary of conditional grant payments
Departmental specific tables
Summary of donor funding (including spending focus)

22. The Appropriation Bill
Bill provides for the appropriation of money from the National Revenue Fund in terms of section 213 of the Constitution and section 26 of the PFMA
Bill sets out allocations by Vote and main division within votes
An aim is set out for each vote and a purpose is set out for each programme
Headings group some listed items
Allocations marked with an * refer to specifically and exclusively appropriated amounts
Conditional grants are specifically and exclusively appropriated and are also listed in the Division of Revenue Bill
Spending is subject to the PFMA and provisions of the Appropriation Bill
Section 29 of the PFMA applies, until Appropriation Act signed
Key tool for oversight and management

23. Thank-you

24. Critical dates in the 2010 budget process
Cabinet Lekgotla discusses broad government and cluster priorities
January 2010
Departments receive Medium Term Expenditure Committee (MTEC) guidelines and database templates
May 2010
Information sessions on expenditure estimate guidelines
June 2010
Departments submit revised drawings after rollovers
July 2010
Submission of capital/infrastructure funding requests
7 July 2010
Cabinet Lekgotla discusses policy priorities and Medium Term Strategic Framework
20-22 July 2010
Departments submit expenditure estimates and database
28 July 2010
MTEC starts
16 August 2010
Departments submit requests for additional funds due to unforeseeable and unavoidable expenditure
25 August 2010
Departments submit requests for National Treasury approval for the shifting of funds to follow a function shift
1 September 2010
Departments submit Adjusted Estimates of National Expenditure (AENE) chapter and database
15 September 2010
Departments submit monthly expenditure report as at August 2010
MTEC ends
17 September 2010

25. Critical dates in the 2010 budget process cont.
Treasury Committee
28 September 2010
Allocation letters to departments
4 October 2010
Departments that requested additional unforeseeable and unavoidable funds submit final updates to AENE chapters and databases (including approved additional funds)
8 October 2010
Departments submit expenditure and receipts in separate database and the monthly expenditure report for September 2010
Departments submit annual performance estimates for first six months of 2010/11
AENE tabled in Parliament
27 October 2010
National Treasury distributes Estimates of National Expenditure (ENE) guidelines to departments and public entities
12 November 2010
National Treasury provides information sessions for departments and public entities
National Treasury distributes databases to the departments and public entities
16-19 November 2010
National Treasury sends allocation letters to departments
26 November 2010
Departments and Public Entities submit:
- first draft ENE database, including Appropriation Bill inputs
- first draft ENE chapter
- public entities annual report
8 December 2010
- second draft ENE database
- second draft ENE chapter
13 January 2011
Departments sign off chapters and the Appropriation Bill
8 February 2011
Budget day
23 February 2011

26. Functional groups for budgeting
Functional Classification
Department(s)
Outcome(s)
Economic Affairs
Government Communication and Information System [9], Public Enterprises [11], Agriculture, Forestry and Fisheries [26], Economic Development [28], Energy [29], Environmental Affairs [30], Mineral Resources [32], Rural Development and Land Reform [33], Science and Technology [34], Tourism [35], Trade and Industry [36], Transport [37]
Outcome 4: Decent employment through inclusive economic growth Outcome 5: A skilled and capable workforce to support an inclusive growth path Outcome 6: An efficient, competitive and responsive economic infrastructure network Outcome 7: Vibrant, equitable and sustainable rural communities with food security for all Outcome 10: Environmental assets and natural resources that are well protected and continually enhanced
Housing and Community Amenities
Human Settlements [31], Water Affairs [38]
Outcome 4: Decent employment through inclusive economic growth Outcome 7: Vibrant, equitable and sustainable rural communities with food security for all Outcome 8: Sustainable human settlements and improved quality of household life Outcome 9: A responsive, accountable, effective and efficient local government system
Education
Basic Education [15], Higher Education and Training [17]
Outcome 1: Improved quality of basic education Outcome 5: A skilled and capable workforce to support an inclusive growth path
Health
Health [16]
Outcome 2: A long and healthy life for all South Africans

27. Functional groups for budgeting
Social Protection
Women, Children and People with Disablities [8], Labour [18], Social Development [19]
Recreation, Culture and Sport
Arts and Culture [14], Sport and Recreation South Africa [20]
Outcome 12: An efficient, effective and development orientated public service and an empowered, fair and inclusive citizenship
Public Order and Safety
Correctional Services [21], Independent Complaints Directorate [23], Justice and Constitutional Development [24], Police [25]
Outcome 3: All people in South Africa are and feel safe Outcome 11: Create a better South Africa and contribute to a better and safer Africa and World Outcome 12: An efficient, effective and development orientated public service and an empowered, fair and inclusive citizenship
Defence
Defence and Military Veterans [22]
Outcome 3: All people in South Africa are and feel safe Outcome 11: Create a better South Africa and contribute to a better and safer Africa and World
General Public Service
Presidency [1] , Parliament [2], Cooperative Governance and Traditional affairs [3], Home Affairs [4], International Relations and Cooperation [5], Performance Monitoring and Evaluation [6], Public Works [7], National Treasury [10], Public Service and Administration [12], Statistics South Africa [13], Communications [27]
Outcome 9: A responsive, accountable, effective and efficient local government system Outcome 11: Create a better South Africa and contribute to a better and safer Africa and World Outcome 12: An efficient, effective and development orientated public service and an empowered, fair and inclusive citizenship