1. EXERCISING OVERSIGHT IN TERMS OF THE PFMA & TREASURY REGULATIONS
APAC TRAINING WORKSHOP JULY 2012
EXERCISING OVERSIGHT IN TERMS OF THE PFMA & TREASURY REGULATIONS
Presentation to APAC
Presenter: Freeman Nomvalo | National Treasury | 31 July 2012

2. CONTENTS PFMA at a glance Key definitions
Responsibilities of Accounting Officers
Supply Chain Management
Issues raised by AGSA
Financial misconduct
Conclusion

3. PFMA AT A GLANCE CH 1 –Interpretations and application(s1-4)
CH 2 –National Treasury and National Revenue Fund(s5-16)
CH 3 –Provincial treasuries & Provincial Revenue Funds(s17-25)
CH 4 –National & provincial budgets(s26-35)
CH 5 –Departments and constitutional institutions(s36-45)
CH 6 –Public entities (s46-62)

4. (CONT……….) CH 7-Executive Authority (s63-65)
CH 8-Loans, guarantees & other commitments (s66-75)
CH 9-General Treasury Matters(s76-80)
CH 10-Financial Misconduct (s81-86)
CH 11-Accounting Standard Board (s87-91)
CH 12-Miscellaneous (s92-94)
Schedules 1, 2, 3, 4, 5 & 6
4th E = equity

5. KEY DEFINITIONS Unauthorised expenditure- means Vote-means
overspending of a vote or a main division within a vote;
expenditure not 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.
Vote-means
One of the main segments into which an appropriation Act is divided and which-
specifies the total amount which is appropriated per department;
is separately approved by Parliament or provincial legislature

6. (DEFINITIONS CONT………..)
Irregular Expenditure – means
expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation including-
PFMA, state tender board Act & provincial legislation providing for procedures in that provincial government
Fruitless and Wasteful Expenditure – means expenditure which was made in vain and would have been avoided had reasonable care been exercised

7. RESPONSIBILITIES OF ACCOUNTING OFFICERS
Section 38- General Responsibilities of Accounting Officer
Must have and maintain a system of;
Risk management
Internal audit
Procurement system which is fair, equitable, transparent, competitive & cost effective
Use of resources in line with the 3E`s
Safeguarding & maintenance of assets
Settling all contractual obligations and pay all money owing, including intergovernmental claims, within the prescribed or agreed period
Discovering, reporting & preventing on the three unwanted expenditures
Take appropriate disciplinary steps against an official who fail to comply with the Act, permits or makes unauthorized, irregular, fruitless & wasteful expenditure

8. (CHAP 5 CONT………….)
Section 43- virement between main divisions within a vote
Accounting officer may utilise a saving to defray excess expenditure under another main division within the same vote
Three conditions
Existence of a saving in one main division
Under spending in another main division-
Threshold condition of 8% under that main division
Note! National Treasury’s approval is obtained when utilizing savings from transfers and subsidies and from amounts appropriated for payment of capital assets(sec5(1)App Act)

9. THE THREE UNWANTED EXPENDITURES
Exceed
Vote
Main division UE
Expenditure
NOT
In accordance UE
Vote
Main division
Exp NOT in accordance with PFMA & other relevant leg
Expenditure
Test for UE
Irregular Exp
If Not
UE & violates prescripts
F&W
Expenditure
Made In
Vain
Could it be avoided ?
Yes
If reasonable care was exercised

10. REPORTING OF IRREGULAR EXPENDITURE
Discovered by AO & the AGSA
AO report in writing to treasury, sec 38(1)(g)
AO to report monthly treasury, TR & sec 40 (4)(b)
Investigate the nature & extent
Record IE in the register
Raise debt,
TR12.7
Is anyone liable
Irrecoverable
Yes No
Write off debt, TR11.4
Recoverable
Disclose in AFS
Relevant Authority to consider condoning IE
Revenue
Condoned No
AO to consider financial misconduct
Expenditure remains in relevant programme till condoned

11. SUPPLY CHAIN MANAGEMENT (TR16A)
Accounting officer or accounting authority must ensure that;
Establishment and maintenance of an SCM system (TR 16A.3-5)
Procurement within the threshold values (TR 16A.6.1)
Bid process including advertisement in Government Tender Bulletin (TR 16A.6.3)
Impractical to invite competitive bids (TR 16A.6.4)
Transversal contracts facilitated by the treasury (TR 16A.6.5)
Participation in bids arranged competitively by other spending agencies (TR 16A.6.6)
Disposal and letting of state assets (TR 16A.6.7)
Disclosure of interest (TR 16A.8.4)

12. (SCM CONT……….)
The accounting officer or accounting authority must – (TR16A9.1)
take all reasonable steps to prevent abuse of the SCM system;
investigate any allegations against an official or other role players
take steps against such official or other role player and inform the relevant treasury
report any conduct that may constitute an offence to the SAPS
check the restricted suppliers database prior to awarding any contract
reject any bid from a supplier who`s tax obligations are not in order
cancel a contract awarded to a supplier if he/she committed any corrupt or fraudulent act

13. ISSUES REPORTED BY AGSA
Expenditure Management
Payments to creditors not paid within 30 days (sec38(1)(f)& TR 8.2.3)
Expenditure incurred without proper delegation(sec44 & TR 8.2.1)
Lack of systems to detect & prevent unauthorised, irregular, fruitless & wasteful expenditure(sec 38(1)(c)(ii) & TR 9.1.1)
PPP contracts not properly implemented, managed, enforced & monitored (TR16.7.1)

14. (ISSUES: CONT…….) Governance
No audit committees in certain departments
Internal Audit not under the control of Audit committees
Risk assessments not done
Action plans to address control deficiencies were not monitored
Lack of evidence to determine if the AO ensured that investigations into all allegations of financial misconduct were conducted
Leadership
Several of policies were not developed or were not in place
Annual reports not aligned with strategic plans
Lack of sufficient oversight regarding financial reporting over capital assets, compliance & related controls

15. (ISSUES: CONT……. Key SCM ISSUES
Awards to state officials and their close family members
Uncompetitive or unfair procurement processes
Inadequate contract management
Contracts amended or extended without approval
Contracts renewed to circumvent competitive bidding process
Payments in excess of approved contract price
Inadequate controls
Inadequate controls to ensure that interest is declared
No supply chain policies

16. FINANCIAL MISCONDUCT Investigation of alleged financial misconduct
Investigation must be conducted within a reasonable period
Disciplinary proceedings must be carried out
If AO commits FM – treasury to ensure EA takes appropriate steps
Criminal Proceedings
Treasury may direct an institution to lay criminal charges against a person should AO fail to take action
Reporting
AO advise EA, RT and AGSA on any disciplinary proceedings instituted
AO to inform EA, RT,DPSA, PSC of the outcome of criminal proceedings

17. CONCLUSION
“If we have chosen the position in life in which we can most of all work for mankind, no burdens can bow us down, because they are sacrifices for the benefit of all, then we shall experience no petty, limited, selfish joy, but our happiness will belong to millions, our deeds will live on perpetually at work, and our ashes will be shed the hot tears of noble people”
Karl Marx, 1837

18. THE END
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