In-Year Financial Monitoring

1
In-Year Financial Monitoring

• Briefing provided by the National Treasury for
  the Joint Budget Committee
• October 12, 2007

2
Outline

• Year-to-Date Expenditure Trends (900-1000)
• Consolidated
• National
• Provinces (including conditional grants)
• Analyzing In-Year Monitoring Reports
  (1000-1300)
• Background, Legal Requirements and IYM Processes
• Section 32 Monthly National Report
• Projected Cashflow and Expenditures Report
• National Programme Economic Classification
  Quarterly Report (new)
• Section 32 Quarterly Provincial Budgets and
  Expenditure Report
• Overview Provincial Quarterly Performance
  Process
• Vulindlela

3
YTD Consolidated Expenditure

• The ENE budget for FY 2007-08 totals R533.9
  billion of which
• Current R90 billion
• Transfers subsidies R202.6 billion
• Capital R6.6 billion
• Direct charges R231.7 billion (mostly equitable
  share)
• Contingency R3 billion
• Year to date (April - Aug or 41.6) expenditures
  total R218.1 billion of which YTD
• Current R32.4 billion 36
• Transfers subsidies R85.9 billion 42
• Capital R1.6 billion 24
• Direct charges R98.3 billion 42
• Total 41.3

4
Provincial Budgets and Expenditure as at 31
August 2007

• The presentation covers provincial spending for
  the first five months of 2007/08 (as at 31 August
  2007)
• Based on IYM Models submitted by PTs by 22 Sep
  2007
• In aggregate, provincial spending is on track
  with 38,1 or R80,3bn spent of their budgets
• Provinces projecting to overspend by R2,3bn
• Should be viewed against anticipated roll-overs
• Multi-term agreement on ICS
• Spending on conditional grants (CGs) is generally
  lower at 30,7 against CGs budget

5
IYM Background

• Sparked by 1997/98 financial crisis in provinces
• Provinces overspent by R5,8 billion in aggregate
• Monitoring system (EWS) approved by Cabinet
• Change in the Budget Process
• IYM to constitute
• Expenditure management
• Revenue management
• Cash flow management
• Movements in bank balances
• Suspense accounts
• Legal Requirements
• Section 32 of PFMA
• Publishing reports on state of budgets
• Section 40(4) of PFMA - formats
• Sections 12 and 31(5) of the Division of Revenue
  Act, 2007 (CGs)
• Acts require monthly expenditure and revenue
  reporting to the provincial treasuries and
  National Treasury
• Circular issued with regard to submission dates

6
In-year Management, Monitoring and Reporting

• Accountability Cycle
• Strategic and Performance Plans/Annual
  Performance Plans
• Budget
• In-year monitoring (IYM) (Inform SP targets)
• Quarterly Performance Reports
• Annual Reports
• Purpose
• Focus on performance against budget
• Alert managers where remedial action is required
• Reports serve as management tool
• Feed the Budget Process
• Feed into publications such as the Annual
  Intergovernmental Fiscal Review
• Political level to make decisions

7
Monthly Reporting Process

• Accounting officer must submit reports to
  relevant treasuries and executive authorities
  within 15 days of the end of each month
• To improve accountability, AOs are required to
  sign-off on the monthly reports before submitting
  to relevant treasury or executive authority
• Contents of reports legal requirement (S40)
• Actual revenue and expenditure
• Projections for remainder of financial year
• Information on conditional grants
• Any material variances
• Format determined by the National Treasury in
  terms of PFMA and annual DoRA
• Revised annually

8
What is the Section 32 Monthly National Report

• Monthly publication by NT
• Time periods covered
• Audited outcomes of the previous financial year
  (2005/06)
• Current financial year 1 month lag (Jan 07
  report refers to Dec 06)
• Summary table of national revenue, ezpenditure
  and borrowing
• Table 1 Revenue SCOA compliant, tax (SARS)
  dept revenue from Vulindlela (Gov MIS) shows
  all the tax revenue plus departmental receipts
  (budgeted vs. actual)
• Table 2 Expenditure per vote, per main econ.
  classification budgeted vs. actual, spending to
  date
• Table 3 Revenue fund receipts and direct
  payments
• Table 4 Detailed information on borrowing needs
  including how the debt gets financed domestic/
  foreign market, loans, bonds (short term or long
  term)
• Table 5 Reconciliation of cash book (where the
  transactions are captured) and bank accounts (PMG
  NRF balances)

9
Purpose and Analysis of Section 32 Monthly
National Report

• Track the implementation of the Appropriation Act
  (and after October, the Adjustments Appropriation
  Act)
• Provides a detailed analysis of national
  government accounts thereby increasing
  transparency and accountability
• Also provides high level snap shot view of the
  link between expenditure, revenue and borrowing
• Public document published in the government
  gazette. Mainly used by Parliament, financial
  institutions (SARB, IMF, WB, investors etc.)
• Comparison of current month (and year to date)
  with the same period in the previous financial
  year wrt
• Exp by vote and main economic classification
• current payments, transfers and subsidies and
  payment for capital assets
• Rev collection by SCOA categories
• Debt deficit plus extraordinary rev and payments
• Financing of the Debt details by debt instrument

10
Projected Cashflow and Expenditure Report

• What is it Provides a snap-shot of projected
  cashflow needs and expenditures per vote per
  month for the fiscal year
• Purpose To assist Parliament to assess
  departmental planning in relation to cashflow and
  expenditures for the year
• Analysis Compare projections with actual
  spending on a monthly or quarterly basis. Also
  provides an early warning system when departments
  are either under or over-spending.

11
National Programme Economic Classification
Quarterly Report

• What is it Provides detailed quarterly in-year
  spending information in a readable format
  including
• Consolidated
• Actual spending compared to budget per vote and
  year-on-year trends
• Actual spending compared to budget per economic
  classification and year-on-year trends
• Accumulated cashflow balances per month
• Vote
• Programmatic actual spending compared to budget
  and projected expenditure including variance from
  projection with reasons from departments for
  abnormal deviations
• Economic classification actual spending compared
  to budget
• Departmental receipts
• Cashflow
• Departmental cash management information
  including monthly balances, drawings and
  expenditure with carry-overs

12
National Programme Economic Classification
Quarterly Report

• Purpose To assist Parliament to scrutinize
  departmental financial performance more closely
  and consistently
• Analysis Facilitates various analysis including
• Programmatic spending
• Economic classification spending such as
• compensation of employees
• goods and services
• transfers to provinces
• transfers to public entities
• infrastructure spending
• Departmental receipts
• Departmental cashflow management

13
Section 32 Quarterly Provincial Budgets and
Expenditure Reports

• Reports Generated
• Section 32 Publication
• Press Release
• Technical Committee for Finance (TCF)
• Budget Council
• Presidents Co-ordinating Council (PCC)
• Select Committee for Finance
• Provincial Quarterly Reports for Joint Budget
  Committee
• Quarterly Section 32 Publication
• Press Release/narrative report
• Selective tables (dataset)

14
Interpretation of Reports

• Current spending trends against projected outcome
• Are projections a reasonable reflection of likely
  expenditure outcomes for the financial year?
• Spending on Social Welfare Services (Social
  Development) at 33,5 - why lower than aggregated
  average (38,1), etc?

15
Conditional Grants

• CG budgets total R31,5 billion with health making
  up the bulk of R11,3 billion
• Excludes spending on general purpose CGs
  (Schedule 4 grants) such as the National Tertiary
  Services and Provincial Infrastructure grants
• In terms of 2007 Division of Revenue Act (Section
  29(4)(b))
• Total budget, excluding Schedule 4 grants, is
  R18,0 billion, against spending of 30,7 or
  R5,8bn
• Specific grants that show low rates of spending
  include
• Community Library Services (7,7)
• HIV and AIDS (Life Skills Education) (19,3)
• Land Care Programme Grant Poverty (19,9)
• National School Nutrition Programme (23,4)
• Mass Sport and Recreation Participation Programme
  (27,0)

16
Conditional GrantsSpending Rates

• 5 or more provinces have spent less than 30 of
  their grant budget for the following grants
• Land Care Programme
• Community Library Services Grant
• HIV and AIDS (Life Skills Education) and
• Mass Sport and Recreation Participation Programme
• Although the rate of spending is encouraging and
  reflects an improvement over previous financial
  years, overall spending still lies below total
  provincial spending

17
Interpretation of Reports

• It should be noted that one cannot necessarily
  draw meaningful conclusions given the fact that
  it is relatively early in the financial year
• Provinces are projecting to overspent by R2,3
  billion
• Once anticipated provincial roll-overs, which
  will be reflected in the provincial adjustments
  budgets, are taken into account on the budget
  side, the overall outcome would change
• The adjustments budgets are reflected in the 3rd
  quarter and 4th quarter publications

18
Overview Provincial Quarterly Performance Process

• Outcome assessment of provincial state of
  implementation of performance management concepts
• Managing of Quarterly Performance Reports
• Standardising of performance measures for
  non-service delivery departments
• Review of performance measures of service
  delivery departments
• Managing of Quarterly Performance reports 2007/08
• Use an enhanced Excel based database for the
  gathering of non-financial data per quarter
  main objective of enhancement is to improve the
  quality of data
• Aligned submission dates of non-financial data
  with financial reporting dates to integrated the
  two sets of data enhancing budget analysis

19
Vulindlela

• What is it In 1997 National Treasury launched
  the development of a new management information
  system known as Vulindlela. The result is a
  database that consolidates financial information
  of many different sources including finance,
  personnel, logistics, procurement and paymaster
  general systems.
• Purpose Provides a central repository of very
  detailed spending and budget information going
  back as far as FY 2001/02 for each vote and
  provincial department including
• Programme
• Subprogramme
• Standard Chart of Accounts (SCOA) (e.g., econ.
  class, element, item, project)
• Also provides revenue and asset liability
  (i.e., financial statement) information.