1. Unauthorised Expenditure
Presentation by:
National Treasury, SA
19 June 2006

2. Outline of Discussion Definition of unauthorised expenditure
Principle for dealing with unauthorised expenditure
Procedure for the treatment of unauthorised expenditure
Criteria for approval of unauthorised expenditure
Criteria for non approval of unauthorised expenditure
Additional funding / against funds allocated for future years
Cluster discussion
Conclusion

3. Definition of unauthorised expenditure
Pre 2000/01 in terms of the Exchequer Act 1996
Overspending of a vote or a main division within a vote
Expenditure that was not made in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the purpose of the main division

4. Principle for dealing with unauthorised expenditure
Unauthorised expenditure must be authorised by the relevant legislature (before it can become a charge against a Revenue Fund) either by providing additional funds or as a charge against funds allocated for the subsequent financial years.
Unauthorised expenditure should be treated as a current asset in the statement of financial position until such expenditure is approved by the relevant authority, recovered or written off as irrecoverable

5. PROCEDURE FOR THE TREATMENT OF UNAUTHORISED EXPENDITURE
Unauthorised expenditure discovered by the accounting officer
Accounting officer must immediately report in writing in terms of sec 38(1)(g) to National Treasury and in terms of Treasury Regulation (TR) in the monthly report as required in terms of sec (40)(4)(b)
Accounting officer must in terms of sec 38(1)(h) take effective and appropriate disciplinary steps (in determining steps, TR must be taken into account)

6. PROCEDURE FOR THE TREATMENT OF UNAUTHORISED EXPENDITURE
Unauthorised expenditure must be reported in the annual report (as a note to the financial statements) in terms of TR 9.1.5
Division: Budget Office in consultation with the Division: Public Finance submit a report to Parliament (SCOPA) on unauthorised expenditure as reported in departmental annual reports and advise on
approval/non-approval
additional funds/charge against funds allocated for future financial years
(sec 34)

7. PROCEDURE FOR THE TREATMENT OF UNAUTHORISED EXPENDITURE
either or
Parliament does not approve unauthorised expenditure in terms of sec 34
SCOPA recommends to Parliament to approve unauthorised expenditure in terms of sec 34(1) & (2)
Additional funds;
Charge against future years
Unauthorised expenditure must be recovered from the person responsible in terms of TR 12.7
Prepare legislation for tabling in Parliament (normally by way of a Finance Bill)
If the amount is irrecoverable, the accounting officer can write the debt off in terms of TR Amounts written off must be disclosed in the annual financial statements.

8. Criteria For Approval Of Unauthorised Expenditure
Effective and appropriate disciplinary steps against officials who made or permitted an unauthorised expenditure
Funds in excess of appropriation were spend in accordance with the programme descriptions of the department on essential services which could not be avoided (value for money)
Remedial steps taken by the accounting officer to prevent further occurance of unauthorised expenditure
Funds not spent in accordance with the purpose of a main division or a vote but related to the objectives of the department (technical transgression)
No fraudulent / corrupt activities present in making or permiting the expenditure

9. Criteria For Non Approval Of Unauthorised Expenditure
No disciplinary steps were taken against officials responsible for or permitted an unauthorised expenditure
Funds spent in excess of the vote on non-essential services (wasteful)
Funds not spent in accordance with the purpose of a main division or a vote and which are unrelated to the objectives of the department
Unauthorised expenditure where fraudulent / corrupt activities were present

10. Additional funding / Against funds allocated for future years
Availability of funds within the total expenditure framework
Ability of department to fund approved unauthorised expenditure within future years allocations
Unauthorised expenditure not approved must be recovered or written off as irricoverble against future years allocations

11. National Departments Unauthorised Expenditure
Clusters
Preceding Years
1998/ 1999
1999/ 2000
2000/ 2001
2001/ 2002
2002/ 2003
2003/ 2004
Total
Central Government Administration
67 019
5 519
32 001
39 104
48 647
30 360
Financial and Administrative
37 774
7 249
18 664
4 154
4 370
1 591
Social Services
11 705
979
822
1 263 -
14 769
Justice Services
38 609
61 013
3 683
25 350
41 092
Economic Services
7 681
9 887
16 065 7
12 345
32 246
78 230
TOTAL
62 243
48 211

12. National Departments Unauthorised Expenditure
Status
Finance Act
SCOPA Recommend Direct Charge
SCOPA
Not Recommend
Outstanding
TOTAL
Central Government Administration
982
46 893
Financial and Administrative -
Social Services
12 135
2 634
-0,4
14 769
Justice Services
30 078
Economic Services
928
43 240
34 062
78 230
44 123

13. Central Government Administration Unauthorised Expenditure
Status
Finance Act
SCOPA Recommend Direct Charge
SCOPA
Not Recommend
Outstanding
TOTAL
Presidency
982
5 120 - 16
6 118
Foreign Affairs
12 256
6 879
19 136
Home Affairs-
15 281
Provincial and Local Government
66 388
Public Works
41 044
46 893
Total

14. Presidency and Foreign Affairs Unauthorised Expenditure
Overspending
Financial statement was revised
(R15,3 thousand)
Foreign Affairs
Increased protocol services (R6,9 million)

15. Public Works Unauthorised Expenditure
Overspending
Provision of land and accommodation for amounts exceeding budget (R144.1m)
Theft and losses
Replacement value (R111.7m)
Savings (R28.7m)

16. Central Government Administration Unauthorised Expenditure
Status
Outstanding
Recommended
Not
recommended
Presidency 16
Direct Charge Additional Funds -
Foreign Affairs
6 879
Home Affairs-
Provincial and Local Government
Public Works
Total

17. Financial and Administrative Service Unauthorised Expenditure
Status
Finance Act
SCOPA Recommend Direct Charge
SCOPA
Not Recommend
Outstanding
TOTAL
GCIS -
6 965
National Treasury
167
Public Enterprises
26 165
SAMDI
4 370
Statistics SA
Total

18. Social Services Unauthorised Expenditure
Status
Finance Act
SCOPA Recommend Direct Charge
SCOPA
Not Recommend
Outstanding
TOTAL
Heath
10 468 -
Labour
1 260
-0,4
1260
Social
Development
1 667
540
2 208
Sport and Recreation
833
Total
12 135
2 633
14 769

19. Justice and Protection Services Unauthorised Expenditure
Status
Finance Act
SCOPA Recommend Direct Charge
SCOPA
Not Recommend
Outstanding
TOTAL
Correctional Services
29 438
42 656 -
72 094
Defence
20 346
48 066
Justice and Constitutional Development
640
46 565
Total
30 078

20. Defence Unauthorised Expenditure
Non-compliance: procedure and regulations
Rental of photocopiers (R5,5 million)
Overspending
Peace support operations (R26,0 million and R14,3 million)

21. Justice and Constitutional Development Unauthorised Expenditure
Non-compliance: procedure and regulations
Personnel expenditure increased (R5,2 million)
Witness Protection Unit entered into lease agreements (R0,8 million)
Overspending
Administration of courts – personnel (R23,9 million)
Administration of courts – (R63,0 million and R46,1 million) is not recommended
Although the state did not suffer losses, better budget control could have prevented overspending
Budget shortage addressed in 2003/04 budget

22. Justice and Protection Services Unauthorised Expenditure
Status
Outstanding
Recommended
Not
Defence
48 066
Direct Charge Additional Funds/Con.
Budget 2006/07 -
Justice and Constitutional Development
Total

23. Economic and Infrastructure Dev. Unauthorised Expenditure
Status
Finance Act
SCOPA Recommend Direct Charge
SCOPA
Not Recommend
Outstanding
TOTAL
Agricultural -
663
Communication 9
Environmental Affairs and Tourism
673
100
773
Housing
642
Land Affairs
254
1852 7
2 113
Trade and Industry
1 787
33 383
35 171
Transport
23 970
Water Affairs and Forestry
14 889
Total
927
43 240
34 062
78 230

24. Economic and Infrastructure Dev. Unauthorised Expenditure
Status
Outstanding
Recommended
Not
Agricultural
663
Direct Charge Additional Funds/Con. -
Communication 9
Environmental Affairs and Tourism
Housing
Land Affairs 7
Budget 2006/07
Trade and Industry
33 383
Direct Charge Additional Funds
Transport
Water Affairs and Forestry
Total
34 062

25. Agricultural and Communication Unauthorised Expenditure
Overspending
Exceeded delegations (R136 thousand)
Additional workshops and seminars
(R527 thousand)
Communication
Non-compliance: procedure and regulations
Filling of post without advertising
(R9,0 thousand)

26. Land Affairs, and Trade and Industry Unauthorised Expenditure
Overspending
Lephotsoana II Trust open day celebrations (R7,0 thousand)
Trade and Industry
Tender procedures (R0,376 million) - not recommend
National Pavilions1999/2000 (R0,6 million) - not recommend
EMIA Exhibition (R11,5 million) - recommend
GEIS-Intershore (R14,2 million) - recommend

27. Conclusion
Amounts recommended by SCOPA will be captured in a Finance Act
Practice note will be issued to provide specific rules and procedures relating to unauthorised expenditure, to be applied by an entity in preparing and presenting financial statements.
Annual process will be formalised by the Directorate; Expenditure, Budget Office to monitor and evaluate the unauthorised expenditure for the annual SCOPA meetings