1. Briefing to Standing Committee on Appropriations on s43 and s30(2) of the PFMA

2. 2 Public Finance Management Act, Act 1 of 1999 (PFMA), section 30(2), states that the adjustments budget may provide for: Significant and unforeseeable economic and financial events affecting the fiscal targets Unforeseeable and unavoidable expenditure recommended by a committee of Cabinet Any expenditure in terms of section 16 Money to be appropriated for expenditure already announced by the Minister during the tabling of the annual budget The shifting of funds between and within votes Utilisation of savings under a main division of a vote to be used to defray over-expenditure on another main division in terms of section 43 Roll-over of unspent funds from the preceding financial year Components of an adjustments budget

3. Virements Reductions under one programme in a department’s budget may be used to offset excess spending in another programme in that department, within the following parameters: –no more than 8 per cent of the appropriated amount for a programme may be shifted –amounts appropriated for capital expenditure such as payments for capital assets may not be used to supplement spending under current payments –amounts specifically and exclusively appropriated for a particular purpose or amounts that were appropriated to be transferred to another institution cannot be shifted in this way either, unless approved in terms of legislation or by the relevant treasury Virements provide accounting officers with a budget management tool Allow accounting officers to move funds when budgeted activities don’t unfold fully according to plan 3

4. Virements process Governed by section 30(2)(f) and section 43 of the PFMA, Treasury Regulation 6.3 and section 5 of the Appropriation Act, 2010 In cases where virements require the approval of the National Treasury, a submission is made to the relevant Pubic Finance Budget Analyst, which then considers the request according to applicable legislation and general practice A recommendation is then made to the Deputy Director General: Public Finance for approval Virement applications that require the approval of Parliament are tabled, together with other virements, in the Adjustments Appropriation Bill and detailed in the Adjusted Estimates of National Expenditure publication 4

5. Section 43 of the PFMA Section 43 of the PFMA legislates the following regarding virement between main divisions within votes: –(1) An accounting officer for a department may utilise a saving in the amount appropriated under a main division within a vote towards the defrayment of excess expenditure under another main division within the same vote, unless the relevant treasury directs otherwise –(2) The amount of a saving under a main division of a vote that may be utilised in terms of subsection (1), may not exceed eight per cent of the amount appropriated under that main division –(3) An accounting officer must within seven days submit a report containing the prescribed particulars concerning the utilisation of a saving in terms of subsection (1), to the executive authority responsible for the department and to the relevant treasury 5

6. Section 43 of the PFMA cont. –(4) This section does not authorise the utilisation of a saving in— (a) an amount specifically and exclusively appropriated for a purpose mentioned under a main division within a vote (b) an amount appropriated for transfer to another institution (c) an amount appropriated for capital expenditure in order to defray current expenditure. –(5) A utilisation of a saving in terms of subsection (1) is a direct charge against the relevant Revenue Fund –(6) The National Treasury may by regulation or instruction in terms of section 76 regulate the application of this section 6

7. Section 6.3.1 of the Treasury Regulations Section 6.3.1 of the Treasury Regulations states that for purposes of section 43(1) of the PFMA – –(a) compensation of employees and transfers and subsidies to other institutions, excluding transfers and subsidies to other levels of government for purposes of paying levies and taxes imposed by legislation, may not be increased without approval of the relevant treasury –(b) new transfers and subsidies to other institutions may not be introduced without the approval of the relevant treasury –(c) allocations earmarked by the relevant treasury for a specific purpose (excluding compensation of employees) may not be used for other purposes, except with its approval –(d) virement of funds from compensation of employees to transfers and subsidies for the payment of severance/exit packages are excluded from the provisions of (a) and (b) 7

8. Section 5 of the Appropriation Act, 2010 Section 5 of the Appropriation Bill 2010 states: –Notwithstanding section 43(4)(b) and (c) of the Public Finance Management Act, the National Treasury may approve the utilisation of a saving in - (a) an amount appropriated for transfer to another organ of state or to an organisation or body outside of government (b) an amount appropriated for payments for capital assets, if the saving is to be utilised for other categories of expenditure The National Treasury has also been considering ways of improving departmental practices in respect of the application of virements, for example: –Making the limits percentage apply also to the main division of the vote receiving savings –Changing the limit percentage 8

9. Roll-overs: Process for rolling over funds Requests for roll-overs must be submitted by departments to the relevant treasury on or before the last working day of April The Senior Management Committee within the National Treasury considers the requests made by national departments and makes recommendations to the Minister of Finance taking into account Treasury Regulation 6.4 which states that: –Payments for capital assets: Unspent funds on payments for capital assets may only be rolled over to finalise projects or asset acquisitions still in progress –Transfers and subsidies: Savings on transfer payments and subsidies may not be rolled over for purposes other than originally voted for –Current payments: Savings on compensation of employees may not be rolled over. A maximum of five per cent of a department’s payments for goods and services may be rolled over Funds for a specific purpose may not be rolled over for more than one financial year unless approved in advance by the relevant Treasury 9

10. Criteria for evaluating requests In addition, the following criteria are normally applied by the National Treasury when evaluating roll-over requests: –Roll-overs that are not considered for recommendation: Services that will result in recurring expenditure Expenditure items that were not ready for payment at the close of a financial year, such as telephone accounts Services that appear to be unforeseeable and unavoidable as such requests are subject to a separate process Requests that are small in monetary value and represent an insignificant percentage of the total budget of the department 10

11. –Roll-overs that are considered favourably for recommendation: Funds allocated in the previous financial year for a new policy that was approved and launched, and that is expected to positively impact on service delivery Where cash flow projections had indicated that expenditure would have been realised before the end of the previous financial year Where there was a reasonable expectation that services would have been rendered before the end of the previous financial year Funds required for the completion of projects, which started in the previous financial year 11 Criteria for evaluating requests cont.

12. Approval of requests The Minister of Finance considers the requests and tables approved roll- overs, which are included in the Adjustments Appropriation Bill Section 6 of the Appropriation Act, 2010, provides that the Minister of Finance has the power to approve the types of expenditure provided for under section 30(2) of the PFMA before an adjustments budget is passed Specific limits are set to the total amount of expenditure which may be approved: approved expenditure may not exceed the total amount set aside as the contingency reserve in the approved fiscal framework 12

13. Approval of requests cont. Expenditure approved in terms of Section 6 becomes a direct charge against the National Revenue Fund until such time as the 2010 adjustments appropriation bill is enacted The Minister of Finance uses this section as roll-overs represent funds that were already appropriated by Parliament, in the 2009 financial year Roll-over funds are normally required by departments early in the financial year so that they can finalise the activities the funds were originally appropriated for 13

14. Money Bills Amendment Procedure and Related Matters Act, 2009 (“the MBAPRMA”) The MBAPRMA provides for a framework in terms of which Parliament may exercise its authority to amend money bills It sets out detailed procedures regarding the processing of each of the major pieces of budget legislation, revenue legislation, and other money bills The MBAPRMA provides that Parliament may amend the budget legislation – there are certain limits on the extent to which the various pieces of budget legislation may be amended, for example, when proposing amendments to the fiscal framework, Parliament and its committees must ensure that the requirements set out in section 8(5) of the MBAPRMA are satisfied Once the fiscal framework is approved, the budget legislation is amended within the scope of that approved fiscal framework 14

15. The MBAPRMA cont. In terms of section 10(10), in respect of any proposed amendments to the Appropriations Bill, the Committee on Appropriations in its report, in respect of each proposed amendment, must indicate: –the reason for the proposed amendment –how the amendment takes into account the broad strategic priorities and allocations of the relevant budget –the implications of each proposed amendment for an affected vote and the main divisions within that vote –the impact of any proposed amendment on the balance between transfer payments, capital and recurrent spending in an affected vote –the impact of any proposed amendment on service delivery –the manner in which the amendment relates to prevailing departmental strategic plans, reports of the Auditor General, committee reports adopted by the House, reports in terms of section 32 of the PFMA, annual reports, and any other information submitted to a House or committee in terms of the standing rules or on request 15

16. The MBAPRMA cont. The procedure in respect of the adjustments budget is not explicitly stated in the MBAPRMA, but the same procedure is presumably implied in respect of committee reports relating to proposed amendments to the Adjustments Appropriation Bill, as are specified in section 10(10) These powers are limited to the extent that the Minister of Finance approves expenditure by utilising section 6 of the of the Appropriation Act 2010, however: –The Minster of Finance cannot approve expenditure that is in excess of the approved contingency reserve –Expenditure must be in terms of section 30(2) of the PFMA –It is envisaged that the Minister of Finance will only utilise section 6 to approve expenditure in instances where delaying the approval of such expenditure would be prejudicial to the public interest, such as in the case of roll-overs (section 30(2)(g)) and in the case of certain unforeseeable and unavoidable expenditure ((section 30(2)(b)) such as in the case of disasters 16

17. The MBAPRMA cont. In respect of all Parliamentary Committee reports dealing with proposed amendments, the Minister of Finance is to be permitted an opportunity to respond to any proposed amendments, and those responses will be tabled in Parliament along with the committee reports In light of this it is proposed that there is cooperation between the National Treasury and the parliamentary committees so that consistency can be applied in administering these reports 17

18. Roll-overs approved by the Minister of Finance per vote: The Presidency 18

19. Cooperative Governance and Traditional Affairs 19

20. Home Affairs 20

21. International Relations and Cooperation 21

22. Public Works 22

23. Public Enterprises 23

24. Public Service and Administration 24

25. Statistics South Africa 25

26. Arts and Culture 26

27. Basic Education 27

28. Health 28

29. Higher Education and Training 29

30. Labour 30

31. Social Development 31

32. Sport and Recreation South Africa 32

33. Correctional Services 33

34. Independent Complaints Directorate 34

35. Justice and Constitutional Development 35

36. Agriculture, Forestry and Fisheries 36

37. Communications 37

38. Energy 38

39. Environmental Affairs 39

40. Human Settlements 40

41. Mineral Resources 41

42. Rural Development and Land Reform 42

43. Science and Technology 43

44. Trade and Industry 44

45. Transport 45

46. Water Affairs 46