Financial and Fiscal Commission

Strategic Plan

2011/2012

Standing Committee on FinanceMay 25 2011

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Mandate of the Commission

• The Commission is established in terms of Section 220 of the Constitution of the Republic of South Africa Act No. 108 of 1996 as amended

• The Constitution provides among others that the Commission is an independent and impartial advisory

institution to Parliament, provincial legislatures, organised local government and other organs of state on– The division of revenue among the three spheres of government– Any other financial and fiscal matters

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Enabling Legislation

• The Financial and Fiscal Commission Act No. 99 of 1997 as amended

• The Intergovernmental Fiscal Relations Act No. 97 of 1997 as amended

• The Borrowing Powers of Provincial Government Act No. 48 of 1996 as amended

• The Provincial Tax Regulation Process Act No. 53 of 2001 as amended

• The Municipal Systems Act No. 32 of 2000 as amended

• The Municipal Finance Management Act No. 56 of 2003 as amended

• The Intergovernmental Relations Framework Act No. 13 of 2005 as

amended

• The Municipal Fiscal Powers and Functions Act No. 12 of 2007.• The Money Bills Amendment Procedure and Related Matters Act No 9

2009

VisionTo enhance the developmental impact of public resources through the financial and fiscal system in South Africa

Mission

To provide proactive, expert and independent advice on promoting a sustainable and equitable IGFR system, through the formulation and collation of policy relevant analysis, in order to realise the values of the Constitution

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Strategic Goals: 2011/2012Strategic Goals: 2011/2012

The following are the major strategic goals or key focus areas of the Commission:

1. Providing advice and/or reporting to Parliament, provincial legislatures, organised local

government and other organs of state in compliance with the Commission’s legislative

mandate

2. Facilitating choices that would improve the Intergovernmental Fiscal Relations (IGFR) system

and its development outcomes

3. Influencing the IGFR agenda to respond to challenges in the (global and domestic) socio-

economic environment

4. Engaging with government, stakeholders and citizens as regards the progressive realisation

of rights through public financing

5. Best practise management of talent (i.e. the recruitment, development, and retention of the

best talent), facilities and finances to deliver

6. A focus on leadership and the development a positive organisational culture

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Strategic Objectives 2011/2012Strategic Objectives 2011/2012

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Internal Business Processes Stakeholder Learning and Innovation FinancialGenerate quality, innovative, pioneering research that informs key IGFR strategic debates and choices

Profile the Commission with a special focus on:•The Commission’s Mandate, Vision, Mission and Role•The Commission’s Short- and Long-Term Strategy•The Commission’s position on specific issues•The Commission’s Challenges and Achievements

Create new knowledge, institutionalise such knowledge and transfer it to other role players within the intergovernmental fiscal relations system

Prudent and transparent management of financial resources

Progressive and innovative management of human resources that attracts, develops and retains key talent, and leverages external expertise

Access to alternative sources of funding

Coordinated, coherent, high-quality, innovative and cost-effective approach to ICT that meets the needs of the Commission, the Commission Secretariat and stakeholders

Promote, inform and influence grassroots, intergovernmental, legislative and intellectual discourse and thought on Commission-relevant IGFR issues

Coordinated, cost-effective and innovative management of Commission assets in support of delivery on the Commission’s mandate

Facilitate engagement between stakeholders (government legislatures, interest groups, academia and citizens) on key IGFR issues

Coordinated, cost-effective and innovative acquisition and management of Commission data, information and knowledge resources in support of delivery on the Commission’s mandateCompliance with legislation and adherence to relevant corporate governance best practiseEffective and responsible leadership with specific focus on integrity, transparency and accountability, as well as on the development a positive organisational culture

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Stakeholder Engagement Strategic Objective 2011/2012

1. The profiling of the Commission with a special focus on the

Commission’s Mandate, Vision, Mission and Role, the Commission’s

Short- and Long-Term Strategy, the Commission’s position on specific

issues, the Commission’s Challenges and Achievements

2. The promotion, informing and influencing of grassroots,

intergovernmental, legislative and intellectual discourse and thought

on Commission-relevant IGFR issues

3. The facilitation of engagement between stakeholders (government,

legislatures, interest groups, academia and citizens) on key IGFR

issues

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Talent Management Strategic Objective 2011/2012

• The progressive and innovative management of human resources that

attracts, develops and retains key talent, and leverages external expertise

• Implementation of progressive talent management Strategies, Policies

and Procedures

– Review, innovation and continuing implementation of the Commission Recruitment Strategies, Policies and Procedures

– Review, innovation and ongoing implementation of the Commission’s Remuneration Strategies, Policies and Procedures

– Review, innovation and ongoing implementation of Commission’s Performance Management and Bonus Systems

– Review, innovation and ongoing implementation of the Commission’s Education and Training Policies and Procedures

– Partnership and collaboration with other institutions that are looking into the same issues as the Commission to exploit economies of scale

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ICT, and Facilities Management Strategic Objective 2011/2012

• The coordinated, coherent, high-quality, innovative and cost-effective

approach to ICT that meets the needs of the Commission, the

Commission Secretariat and stakeholders

• The coordinated, cost-effective and innovative acquisition and

management of Commission data, information and knowledge

resources in support of delivery on the Commission’s mandate

• The coordinated, cost-effective and innovative management of

Commission assets in support of delivery on the Commission’s

mandate

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Objectives and Functions of Research

• Conduct and foster basic and applied IGFR research which positively

influences developmental impact

– Informed by:

• Main government priorities and the fiscal framework

• South Africa as a developmental state

• Ensuring fiscal sustainability

• Provide advice to Commission on IGFR research priorities, promotion and

utilisation

• Help build research capacity in IGFR for our stakeholders

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Research Themes and Projects 2011/12

• Equitable Growth Paths, Distribution of Public Resources and Policy

Outcomes

– Review of division of Revenue Bill

– Review of Equitable Sharing

– Large Scale Modelling for Interregional Policy Analysis in South Africa

– Fiscal Decentralisation and Economic Growth

– The Impact of No Fee Schools on Equity, Funding and Learner Performance

– Estimating Costs of Municipal Services

– Measuring Municipal Fiscal Capacity

– Short Term Forecasting Model for South Africa

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Research Themes and Projects CONT ...

• Accountable Institutions and Policy Outcomes

– Evaluation of Public Transport Operating Subsidies in South Africa

– An Evaluation of Sustainability and Fiscal Burden in the Current Human

Settlements Delivery System in South Africa

– Understanding the Dynamics of Capacity Challenges at Local Government

– The Impact of Climate Change on the Agriculture Sector, Water and Food

Security in Rural South Africa

– Alternative Service Delivery Arrangements: The Case of SPVs

– Assessing Gender Responsive Budgeting in the Local Government Sphere

in South Africa

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Research Themes and Projects CONT ...

• Accountable Institutions and Policy Outcomes Cont.

– Role of IGFR in Promoting Innovation

– National Government Budget Analysis

– Provincial Budget Analysis

– Local Government Budget Analysis

– Identifying Gaps and Progress Made with Government Outcomes: A Spatial

Approach

– Identifying Data Gaps in the IGFR System

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Research Themes and Projects

• Stakeholder Requests (flexible/ad hoc)

– Financing of Natural Disasters

– Legislation proposals with a financial and fiscal impact

– Other unforeseeable referrals

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Enhanced developmental impact of public resources through the financial and fiscal Enhanced developmental impact of public resources through the Enhanced developmental impact of public resources through the

financial and fiscal system in South Africafinancial and fiscal system in South Africasystem in South Africa

Proactive, expert and independent advice

provided on promoting a

sustainable and equitable IGFR

system.

Effective and efficient secretariat support compliant with the relevant

legislation

Stakeholders value and act upon FFC policy advice to

realise the values of the Constitution

Effective management of FFC research project portfolio in line with Research Strategy

Effective packaging and dissemination of policy advice

Quality, innovative policy-relevant research conducted

Stakeholders intensively engaged on key IGFR policy decisions

Domestic and international partnerships, networking and collaboration

Good, responsible, ethical leadership and management

Good practice corporate governance compliant with legislation

Accountable, transparent financial management

Coordinated, cost effective asset management

Human Resource management that attracts, develops and retains talent, and leverages external expertise

Coordinated, cost-effective knowledge, and information management

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Analytical information

• Since establishment revenue grant grew by average of 20% with a healthy reserve ratio of 1:2.

• In 2003/4 FFC experienced a 19.4% deficit over revenue and baseline was increased by 45% and maintained at inflation linked rate.

• In 2006/7 FFC experienced another 14% deficit due to business growth thus resulting in erosion of reserves. All time low acid test ratio of 0.006 reported.

• Business growth was evidenced by 34% increase in headcount and 13% increase in personnel costs, 40% in audit fees and steady increase of stakeholder management costs.

• Acid test ratio has never recovered since, indicating technically insolvency at low level of 0.049 by end 2010/11.

• Recently grant funding grew by less than 10% while OPEX remains higher than growth rate resulting in budget pressures.

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Way Forward

• New Delivery model was adopted to reduce non-research

staff complement from 34 to 26 over the medium term.

• The focus will be on continuity and special skills are to be

sought at a rate similar to current employment costs

• Initial 47% budget increase is required to address the liquidity

issue and maintain new delivery model and stabilize at 5%

increase over the medium term

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Budget

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1.064 1.061 1.055

Strategic Pillars Divisional Strategic Objective Divisional contributions BUDGET 2010/11 MTEF

2010/11 2011/12 2012/13 2013/14

Internal Business Processes

The carrying out of Commission's Mandate, vision mission and role and mission regarding fiscal and IGFR issues and comply with legislation and corporate governance.

Corp Services Budget 7,038,082 7,633,389 8,070,571 8,552,290

Commission Budget 4,220,060 6,189,839 6,567,419 6,928,627

RRP Budget 7,351,823 9,132,220 9,689,286 10,222,196

Finance 1,705,120 1,838,326 1,950,463 2,057,739

TOTAL 20,315,085 24,793,774 26,277,739 27,760,852

Stakeholder Focus Promote, inform and Influence intergovernmental, legislative & intellectual discourse and thought on Commission-relevant IGFR issues and facilitate engagements between stakeholders on key IGFR Issues.

RRP Budget 2,723,101 3,616,830 3,837,456 4,048,516

Commission Budget 3,740,275 5,248,730 5,568,903 5,875,193

TOTAL 6,463,376 8,865,560 9,406,359 9,923,709

Stakeholder Focus Budget 26,778,460 33,659,334 35,684,098 37,684,561

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Budget cont …

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Divisional Strategic Objective Divisional contributions BUDGET 2010/11 MTEF

Learning and Innovation

Benchmarking of Commission research and governance against that of the best institutions in the intergovernmental fiscal relations arena

Commission Budget 1,113,941 2,334,392 1,726,069 1,821,003

RRP Budget 1,168,803 2,554,455 2,710,276 2,859,342

Corp Services 400,000 425,600 451,562 476,397

TOTAL: Learning and Innovation 2,682,744 5,314,447 4,887,907 5,156,742

Financial Prudent and transparent management of financial resources

- - -

Finance 2,024,397 2,310,365 2,412,451 2,545,136

- - -

TOTAL: Financial 2,024,397 2,310,365 2,412,451 2,545,136

GRAND TOTAL 31,485,601 41,284,145 42,984,457 45,386,439

Budget Allocation by NT 31,391,000 33,400,000 35,437,000 37,386,000

Shortfall -94,601 7,884,145 7,547,457 8,000,439

% Increase 23.61% 21.30% 21.40%

11/12 12/1313/14

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10 YR Financial Position Analysis

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Financial Performance ProjectionDescription 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Government Grant 9,258 12,038 12,679 18,382 19,899 21,705 27,496 26,125 26,580 31,391 46,059 44,808 47,194 Other Income 646 248 108 53 208 780 500 240 97 192 230 224 236 Revenue 9,904 12,286 12,787 18,435 20,107 22,485 27,996 26,365 26,677 31,583 46,289 45,032 47,430 Grant increase % -100% 30% 5% 45% 8% 9% 27% -5% 2% 18% 47% -3% 5%

Staff Costs 5,101 5,731 7,191 7,935 8,463 12,759 16,223 15,879 17,641 20,236 21,283 22,645 23,890 Depreciation & Amortisation 719 650 1,094 878 909 1,035 1,079 977 780 618 543 486 434 Professional Service 845 559 601 511 508 343 1,004 3,913 2,501 3,898 5,549 5,710 6,025 Other Operating Expenses 2,812 4,231 6,070 7,392 9,139 11,344 8,248 6,993 6,111 8,187 15,007 15,967 16,845 Interest 4 226 318 166 27 44 57 145 158 - TOTAL 9,481 11,397 15,273 16,883 19,046 25,525 26,611 27,906 27,190 32,939 42,382 44,808 47,194 Surplus/ Decificit 423 889 -2,486 1,553 1,060 -3,040 1,385 -1,541 -513 -1,356 3,907 224 236

19 20 23 22 29 39 35 30 34 34 Headcount increase % 5% 15% -4% 32% 34% -10% -14% 13% 0%Personell as % of total costs 53.8% 50.3% 47.1% 47.0% 44.4% 50.0% 61.0% 56.9% 64.9% 61.4%Annual Rate of pay 268 287 313 361 292 327 464 529 519 595 Staff Costs % increase 12% 25% 10% 7% 51% 27% -2% 11% 15%Increase % of Expenditure -100% 20.21% 34.01% 11% 12.82% 34.01% 4.25% 4.87% -2.6% 21.14%% of surplus/ deficit to revenue 4.27% 7.24% -19.44% 8.42% 5.27% -13.52% 4.95% -5.85% -1.92% -4.29%

Financial PostionAsset Base- Non Current 426 2,126 1,872 1,037 2,020 3,132 2,363 1,474 919 794 1,095 1,157 1,242 Asset Base- Current 1,263 1,854 347 1,366 1,730 22 323 706 182 183 54 -702 -551 Total Assets 1,689 3,981 2,219 2,402 3,750 3,155 2,686 2,180 1,102 977 1,149 455 691

Capital contribution 919 919 919 919 919 919 919 919 919 919 1 1 1 Accumulated Deficit/ surplus 371 1,260 -1,226 327 1,388 -1,652 -267 -1,808 -2,321 -3,677 230 455 690 Total Liabilities 399 1,802 2,526 1,156 1,444 3,888 2,035 3,069 2,504 3,735 - - Total reserves & Liabilities 1,689 3,981 2,219 2,402 3,750 3,155 2,686 2,180 1,102 977 231 455 691

Acid Test 3.168 1.029 0.138 1.181 1.198 0.006 0.159 0.230 0.073 0.049 1 1 1Acid Test Movement 0.540 -2.138 -0.892 1.043 0.017 -1.193 0.153 0.071 -0.157 -0.024

Audited Results Turn around projections

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Thank You