Treasury Guidelines

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Budget Reform and Policy Implementation(Universi
ty of Pretoria)
National Treasury 14 July 2009
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Contents

• Overview of the budget
• What existed in the 1990s
• What guided the changes
• Changes and achievements over the years
• Current reforms
• Budget documents
• Planning, budgeting and reporting documents

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Overview of the budget

• The budget is a process through which choices
  have to be made about competing priorities
• Allocative efficiency, fiscal stability and
  service delivery are key in budgeting
• Budgeting is a political exercise that starts
  with political choices about priorities and ends
  with political choices about which programmes and
  projects get funded
• There are three interrelated spheres of
  government, that should cooperate in delivering
  concurrent functions
• Division of revenue outlines resources allocated
  to the three spheres based on revenue collected
• Have a three-year rolling budget, informed by key
  govt priorities, strategic plans of depts and
  fiscal stance

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• What existed in the 1990s

• The budget moved from line item budgeting to
  accommodate programmes
• Departments had to get treasury approval for
  certain expenditures even if they were budgeted
• Budget had two dimensions programmes and
  standard items
• Standard item classification had little economic
  meaning
• There was only one year budgeting
• No medium term budget policy statement
• Provincial budgets were made by national
  departments
• There was no provincial equitable share and
  conditional grants
• There was no purpose descriptions, objectives or
  indicators for programmes
• There was little political oversight over the
  budget process
• Officials had a greater influence in making
  allocations to departments
• Centralised state tender board existed

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What guided the changes

• The following principles guided the changes
• Fostering macroeconomic stability
• Transforming public expenditure, ensuring that
  funds are allocated towards political priorities
• Equitable redistribution of resources
• Ensuring value for money
• Enforcing accountability through reporting
  legislation
• Alignment of planning, budgeting and policy
  introduced multi-year planning (MTEF)
• Management of inputs ?outputs ?outcomes

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Changes and achievements over the years

• Between 1996-1999
• Provinces were allowed to set their own budgets
• Medium Term Budget Policy Statement (MTBPS),
  Budget Review and ENE were introduced and
  published
• MTBPS policy document that link government
  priorities to spending and budget
• Budget Review outlines economic outlook, fiscal
  policy, tax policy, budget priorities, medium
  term expenditure and division of resources
• ENE All national departments and entities,
  policy developments service delivery
  achievements and 7-year expenditure information
• The three year budget was published
• Expenditure reviews were initiated
• The Public Finance Management Act was enacted
• Ministers Committee on the Budget was introduced

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Changes and achievements over the years (cont..)

• From 2000 onwards
• Economic classification replaced standard items
• Intergovernmental fiscal review was introduced
  and published
• Concepts of measurable objectives were introduced
• Continuous changes to appropriation acts
• Continuous changes to the Treasury guidelines
• Continuous changes to the ENE format, to improve
  quality of information
• Ongoing changes on the classification system
• Introduction of the Framework for Managing
  Programme Performance Information (FMPPI)
• Achievements
• There is strong political oversight
• Resources are focused at key priorities
• In-year monitoring system exists
• Standard charts of accounts allows for better
  analysis of spending
• Cluster forum, which manages and coordinates
  relevant government priorities
• Performance information (MOs, indicators
  targets) is available to give of sense of outputs
  /outcomes achieved
• Introduced the Medium Term Strategic Framework
  (MTSF), which outlines broad govt priorities,
  translating governing partys election manifesto

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Changes and achievements over the
years(cont..)We do well Open Budget Index -
transparency
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Current reforms

• Value for money continues to be the focus
• Review of the programme budget structures for
  department
• Definition of programmes
• Roles and positions of programme managers
• Purposes and objectives of programmes (including
  subprogrammes)
• Accountability and performance related to
  programmes
• Refinement of the performance indicators and
  targets as well as measurable objectives
• In-depth analysis of departmental baselines to
  inform decisions relating to budget submissions
  and allocations
• Introduction of the Money Bills Amendment Bill
  and Related Matters Act and its implementation
• Powers for full participation in the budget
  process
• Strengthen the oversight role
• Focus on comprehensive expenditure reviews, which
  are aimed to analyse and assess programme
  performance
• Identify programmes that are not achieving the
  outputs and recommend rescheduling, cutting,
  reprioritising or measures to address
  inefficiencies
• Departments can self-evaluate or subject
  programmes to central evalaution

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Current reforms - cont.. (specific focus)

• (1) Performance information
• Performance information is important to
• Assist in identifying and addressing
  underperformance/lack of service delivery in
  government programmes
• measure value-for-money (economy, effectiveness,
  efficiency and equity)
• improve linkage between strategic planning,
  budgeting, implementation and reporting
• improve accountability and oversight of
  legislatures
• Monitor and evaluate overall government
  performance
• FMPPI provides for
• Structures, systems and processes required for
  performance information
• Roles and responsibilities for performance
  information Departments, Presidency, National
  Provincial treasuries, Stats SA and Public
  Service and Administration, among others
• Promoting accountability and transparency by
  providing Parliament, with timely, accessible and
  accurate? performance information
• Standardising terminology on performance
  information

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Current reforms - cont.. (specific focus)

• Performance information (cont..)
• FMPPI is part of the Government Wide Monitoring
  and Evaluation System

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Current reforms - cont..(specific focus)

• Performance information (key concepts)

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Current reforms - cont..(specific focus)

• Performance information (cont..)
• Reporting on performance information emphasised
  in the Treasury (MTEF and ENE) guidelines
• Reporting formats for ENE changed to improve
  quality (2007-2009)
• Reporting on performance information also in the
  AENE
• And for all entities in the 2009 ENE
• In the process of upgrading guidelines for
  developing Strategic Plans and Annual Performance
  plans, to include
• Strategic goals for department or entity
• Strategic objectives at programme level
• Indicators and targets at programme level
• Relationship between plans and budgets, at
  programme level

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Current reforms - cont..(specific focus)

• Performance information (cont..)
• Auditor Generals role
• AG has started with auditing of performance
  information in 2009/10, to audit the integrity of
  systems and processes to generate performance
  indicators
• Important definitions of indicators and targets
  should be clear, and there should be consistency
  on the information reported in different
  accounting documents
• Regular engagement with AG on auditing concerns

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Current reforms - cont..(specific focus)

• (2) Assessment of baseline budgets
• Identification of non-recurrent items at
  programme, subprogramme activity level. Include
  cost escalations for non-recurrent allocations
  rescheduled to next fin year
• Reprioritisation shifting funds from lower
  priority to higher priority programmes and
  explanation relating to targets and outputs
• Slow spending programmes that may have not met
  their targets over the years
• Underperforming programmes assessment of actual
  outputs against targets
• Rescheduling of projects or activities could
  result in savings or financial implications
• Efficiency savings reducing non-essential
  spending and redirecting funds to service
  delivery

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Current reforms - cont..(specific focus)

• (3) Capital / infrastructure budgeting
• Enhanced requirements for additional funding
• Need for new projects to go through a detailed
  appraisal system
• Departments to demonstrate how capital projects
  will enhance service delivery outcomes
• Needs analysis, options analysis and cost benefit
  analysis required
• Identify potential risks
• Proper and detailed costing
• Explore alternative funding mechanisms e.g. PPPs
• Implementation readiness should be displayed
• Emphasis on monitoring and evaluation of
  infrastructure projects

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Current reforms - cont..(specific focus)

• (4) Donor funding
• Currently less than 1 of the budget
• Efforts made to enhance the monitoring of donor
  assistance, cash and in-kind
• Reporting requested from departments at programme
  level and by economic classification
• Outputs achieved or planned presented for each
  project
• Need to include in the budget process
• Need for a comprehensive central data for
  monitoring donor funding and outputs on the
  spending
• Enhance the relationship with donors regarding
  contracts to be funded
• Consider central approval of projects

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Budget documents

• Appropriation Bills
• Current, capital and transfers
• Amounts exclusively appropriated
• Adjustments appropriation bills
• ENE
• All national departments and agencies
• Policy developments and service delivery
  achievements and commitments alongside 7 year
  numbers
• Includes financials on select number of public
  entities
• Peoples Guide
• A popular version of the main points in the
  budget
• Enhanced requirements for additional funding

• Division of Revenue Bill
• How national raised revenue is divided between
  levels of government
• Conditions of certain types of expenditure
• Budget review
• Economic outlook
• Fiscal Policy
• Tax policy
• Budget priorities
• Medium term expenditure and division of resources
• In year reports
• Monthly and quarterly spending and revenue
  reports

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Planning, budgeting and reporting documents

• Strategic Plans
• Should be consistent with the period covered by
  the MTSF, covering at least 3 to 5 years be
  consistent with the published medium term
  estimates. Should also include the following
• constitutional, other legislative, functional and
  policy mandates
• policy developments and legislative changes that
  influence programme spending plans over the MTEF
  period
• objectives and measures, expected outcomes,
  programme outputs, indicators and targets for
  institutions
• asset management processes
• service delivery improvement programme
• It forms the basis for the Annual Report, and
• Should be tabled to Parliament at least 10 days
  prior to the discussion of the budget votes
  (usually in June)

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Planning, budgeting and reporting documents

• Adjusted Estimates of National Expenditure
• Its an in-year process that allows for the
  allocation of additional funds for particular
  types of spending prescribed by Sec 30 (2) of the
  PFMA
• These are
• roll-over of unspent funds from the preceding
  financial year,
• unforeseeable and unavoidable expenditure,
• virements Sec 43 of the PFMA,
• money to be appropriated for expenditure already
  announced by the Minister during the tabling of
  annual budget,
• unforeseable economic and financial events that
  affects the fiscal targets set by the annual
  budget,
• shifting of funds between and within votes or to
  follow transfer of functions Sec 42 of the PFMA
• Funds required for emergency situations Sec 16
  of the PFMA
• Should include reporting on expenditure for the
  1st 6 months of a financial year, mid-year
  performance and estimates of expenditure for the
  rest of the financial year
• Tabled to Parliament in October

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Planning, budgeting and reporting documents

• Annual Reports
• Provide financial statements and performance
  information, to account on activities of
  departments for a financial year
• Should demonstrate the link between strategic
  plans and annual budgets
• Include Auditor Generals comments, including
  matters of emphasis
• Parliament should check if
• Service delivery is in line with the mandate,
  plan and budget
• Targets were met and outputs achieved
• Spending was in line with the budget
• Issues raised by the AG in previous reports have
  been addressed
• Are tabled in Parliament in September

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THANK YOU