STRATEGIC OBJECTIVE

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• STRATEGIC OBJECTIVE
• To address the financial management challenges in
  the Department.
• PURPOSE
• To present the financial turnaround strategy that
  is being applied to address financialmanagement
  challenges

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• BACKGROUND
• Concerns about financial management in DWAF after
  financial statements qualified for four years.
• Improvements have been made but the turnaround
  strategy has not been presented in a coherent
  manner.
• This presentation analyses the challenges and
  outlines the actions currently underway to
  address them
• .

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3. BACKGROUND Government Financial management
performed in accordance with Public Finance
Management Act. PFMA gave effect to
Constitution and addressed financial reform
processes initiated since 1994 with introduction
of MTEF in 1996 . MTEF is a multi-year (3 year)
budgeting process PFMA requires adoption of new
accounting processes based on GAAP (accrual
accounting).
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• Implementation of PFMA phased over a number of
  years to allow Departments to plan
• National Treasury recommended seven steps for
  successful application of the Act
• 1. In-year management, monitoring and reporting
• 2. Clear up audit queries
• 3. Establish effective internal controls
• 4. Improve expenditure management and transfers
• 5. Banking arrangements
• 6. Complete financial statements on time
• 7. Delegation of responsibilities

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• Problems leading AG to qualify DWAF included
• Failure to meet reporting requirements, e.g.
  accrual accounting
• Inability to separate accounting transactions and
  budgets of the vote and trading accounts
• Ineffective management of revenue and debt
• Failure to recover loans from boards,
  municipalities and the Land Bank.
• Inability to submit documentation timeously
• Inability to clear previous audit queries on time

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• National Treasury (2000) main requirements for
  implementation of PFMA
• Political will to drive the process
• Buy-in and unconditional support for
  implementation from top management
• Capacity building in Departments
• Sufficient resources

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• National Treasury
• The successful implementation of the PFMA
  depends on strong, entrepreneurial managers. The
  reform of the financial management system
  requires empowered managers to take the
  initiative in revamping operations, reallocating
  resources and pointing their Departments in new
  directions. Without strong management,
  Departments may be in a similar position after
  the reform process, but may have incurred high
  transaction costs and pose greater risk to
  Government."

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