1. Association of Public Accounts Committees (APAC) BUDGET FORMULATION PROCESS: The Role of Legislatures/PAC’s Hon JT Beukes APAC Chairperson SADCOPAC Conference 2013 Arusha, Tanzania 3 September 2013

2. RSA Budget Formulation Process: Background The preparation of the Budget in South Africa is vested with the Executive Legislative Authority, i.t.o the Constitution of RSA (1996), is vested in Parliament and Provincial Legislatures Sections 44 and 104 confers these powers Section151 confers legislative and executive powers to municipalities Sections 73 and 119 states that: Only a Cabinet member or a Deputy Minister, or a member of committee or Executive member, introduce a Bill …; BUT only the Executive member responsible for national financial matters may introduce a money Bill in the Assembly or Legislature. A Money Bill is defined as A Bill that appropriates money or imposes taxes, levies or duties and may not deal with any other matter except a subordinate matter incidental to the appropriation of money or the imposition of taxes, levies or duties The Legislative Sector In the RSA Developed a Standardised Oversight Model which seeks to: To detect and prevent abuse, arbitrary behaviour or illegal and unconstitutional conduct on the part of the government and public agencies the government to account in respect of how the taxpayers’ money is used ensure that policies announced by government and authorised by parliament and provincial legislatures are actually delivered

3. Introduction Budgeting in the RSA is known as Performance-based budgeting as the Budget seeks to: Ensure the realization of policy objectives or effectiveness of government towards achieving good economic and socio- economic outcomes Ensure VALUE - FOR – MONEY meaning; economic, efficiency and effective use of the Country’s financial resources by Public Services Ensure service delivery performance – the quality, quantity and urgency thereof – and its overall contribution towards the achievement of predetermined outcomes The Budget Process involves various stakeholders; amongst others: Institutions supporting Democracy in the RSA e.g. the Financial and Fiscal Commission (FFC) - a Constitutional Mandated organisation assisting the Executive and supporting the Legislative Authority Public involvement by way of suggestions (from Civil Society and the broader public) to the Minister responsible for Finance Public Involvement through Legislatures by way of Public Hearings

4. Regulatory Framework Governing the Budget in the Republic of South Africa The Constitution of the RSA 1996: Promotes transparency, accountability and the effective financial management of the economy, debt and the public sector Budgets MUST contain: estimates of revenue and expenditure, differentiating between capital and current expenditure; proposals for financing any anticipated deficit for the period to which they apply; and an indication of intentions regarding borrowing and other forms of public liability that will increase public debt during the ensuing year The Division of Revenue Act equitable division of revenue raised nationally among the national, provincial and local spheres of government The Appropriations Act Appropriates revenue to Public Service (Departments: Executive and Legislatures) The Public Finance Management Act Provides for the efficient and effective use of public finances in South Africa

5. Budget Formulation process 1. Receipt of revised policy objectives/priorities 2. Strategic planning by Executive – Five year forecast planning 3. Approval of Strategic Plan by Executive 4. Revision of Medium Term Expenditure Framework (MTEF) – three year budget projections 5. Approval of MTEF by Executive 6. Receive confirmation of annual budget allocation from Treasury 7. Finalisation of Annual Budget 8. Approval of Annual Budget by Parliament, legislature, Council 9. Monitoring of Expenditure by Parliament, legislature, Council through In-Year Reports (Monthly and Quarterly Expenditure reports) as well as Annual Report and Annual Financial Statement

6. PUBLIC SECTOR FINANCE MANAGEMENT REFORM MODEL 1. PLANNING AND FORMULATION STAGES2. OPERATIONAL AND CONTROL STAGES (CURRENT YEAR) 3. ACCOUNTABILITY AND OVERSIGHT STAGES POLICY OBJECTIVES STRATEGIC PLANNING RISK ASSESSMENT MTEF 1 – 2 - 3 BUDGET (MONTHLY / ANNUAL) ------------------------------- EXPENDITURE ---------------------------- INCOME STATEMENT ---------------------------- BALANCE SHEET BUDGET (MONTHLY / ANNUAL) ------------------------------- EXPENDITURE ---------------------------- INCOME STATEMENT ---------------------------- BALANCE SHEET FINAL COSTING planned MEASUR- ABLE OUTPUTS GFS/SDDS GAAP/GRAP (ACCRUAL) GFS/SDDS GAAP/GRAP (ACCRUAL) ACCOUNTS (MONTHLY / ANNUAL) ------------------------------ EXPENDITURE ------------------------------ INCOME STATEMENT -------------------------------- BALANCE SHEET ACCOUNTS (MONTHLY / ANNUAL) ------------------------------ EXPENDITURE ------------------------------ INCOME STATEMENT -------------------------------- BALANCE SHEET achieved MEASUR- ABLE OUTPUTS PROCUREMENT SUPPLY CHAINS STOCKS/ INVENTORIES WORKING CAPITAL PLANNED RESULTS (DOCUMENTED) REPORTED RESULTS (DOCUMENTED) ANALYSIS/ ACTION INITIAL COSTING INTERNAL CONTROLS Incl. risk and corruption controls PERSON NEL EXPENSES

7. Extensive Budget Co-ordination process TimeframeActivity Jan Cabinet Lekgotla issues broad fiscal and budget priorities of government and issues a revised MTSF Apr National dept’s receive National Treasury guidelines regarding budget preparation Provincial dept’s receive Provincial Treasury guidelines re budget preparation May FFC submits DoR recommendations, BC considers FFC recommendations and makes preliminary DoR decision, N and P/depts receive preliminary DoR decision May MinComBud discusses Medium Term policy and priorities, Ministerial letters sent to dept’s re policy priorities, PEC’s and Councils plan priorities. May National dept.’s begin compiling MTEF budget proposals using MT policies and priorities issued via ministerial letters, and ito strategic plans finalized in January. May Prov dept.’s begin MTEF budget proposals using MT policies and priorities and initial DoR proposals and as per MEC meetings. Dept’s strategic plans are also applied. July Cabinet lekgotla re dept priorities.

8. Budget Co-ordination process by National and Provincial governments DECISION-MAKING AND COORDINATION ACTIONS TimeframeActivity Aug Nat dept.’s submit MTEF budget proposals to N/T and MTEC., Prov dept’s submit MTEF budget proposals to P/T’s and MTEC. Aug N/T reviews budget submissions, N/T prepares supporting documentation, N/dept.’s prepare supporting documentation. Aug Workshop reviews DoR and macro economic and fiscal frameworks., MinComBud reviews effects of DoR, macro economic and fiscal framework re Govt. priorities. N/dept.’s respond to N/T queries and comment. P/T’s submit prelim MTEF’s to N/T for MTBPS Sept Budget Com meeting. Sept N/dept.’s submit requests for program changes – to N/T, N/T evaluates and finalises these N/dept.’s requests. Sept - Oct MTEC evaluates effectiveness and equitabilities of Dept’s spending allocations and plans. Makes recommendations. P/ MTEC’s evaluates P/dept’s spending allocations and plans. Makes recommendations. Oct BC’s final decision of horizontal DoR. Extended Cabinet considers M/E and Fiscal framework and DoR in terms of government priorities. MinComBud considers macro economic and fiscal frameworks and DoR. Also considers MTEC recommendations. Extended Cabinet meets to discuss revised Memo on M/E, fiscal framework and DoR. N/dept.’s submit 3 year corporate plans and budgets of Public Entities – to N/T. N/T studies recommendations from MTEC hearings. MinComBud considers MTEF allocations to N/dept.’s. Final adjustments to N and P budgets MinComBud considers draft MTBPS. Cabinet briefed on MTBPS. MTBPS presented to Parliament.

9. Process of Legislating in South Africa Minister/Executive Member tabling the Budget (Bill) in Parliament/Legislatures – budget referred to relevant Committee Appropriations/Finance (Budget) Committees deliberate on Budget Budget Public Hearings Conducted Inputs processed and considered Bill debated and adopted by Parliament/Legislatures

10. Committees of Parliament/Legislatures Committees examines budget proposals against policy priorities Appropriations Committee appropriates the nationally raised revenue Provincial Finance/Budget Committees examines Provincial Budget proposals Local Government participates in the budget process Parliament/Legislatures appropriates the budget amongst Provinces and/or Departments

11. PAC’s Role in the Budget Process PAC Conduct In-year and after-the-fact oversight focusing on expenditure against planned activities and budgets PAC’s works closely with the Auditor-General PAC also works with other Functional Portfolio Committees PAC makes recommendations on expenditure patterns which is authorized at the House

12. Monitoring Of Expenditure South Africa Developed a Legislative Sector Oversight Models which seeks to: evaluate of the efficacy of public service programmes and the appropriateness of financial resource allocations and management PAC’s and Portfolio Committees receiving and reviewing quarterly financials and performance

13. THANK YOU