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PUBLIC FINANCIAL MANAGEMENT REFORMS What really works? A South African Perspective Sithembiso F Nomvalo Accountant-General - South Africa National Treasury 1 – 3 December 2008TRANSCRIPT
PUBLIC FINANCIAL MANAGEMENT REFORMS
What really works?
A South African Perspective
Sithembiso F NomvaloAccountant-General - South Africa
National Treasury1 – 3 December 2008
ICGFM ConferenceWashington D.C
2
Contents
• Old financial management regime
• Structure of SA government
• Reforms at a glance
• What makes it work?
• Challenges
• Conclusion
3
Old Regime
• Exchequer Acts – no uniformity in FM
• Rule based – treasury instructions
• Three houses of parliament
• No strategic plans
• No governance structures
• Annual reports done very late
4
Structure of the SA Government
55
Legislative Framework
• Chapter 13 of the Constitution especially Sec 216(1)
• PFMA– Focus on performance, outputs & responsibilities
– Flexibility with accountability & transparency
– Efficiency, Effectiveness & Economy
– Clarity of roles
• Let managers manage
• and hold them accountable
6
2. AGREEMENT - OUTCOMES
6. MANAGERIAL ACCOUNTABILITY
3. PERFORMANCE CONTRACT - OUTPUTS
1. ACCOUNTABILITY for OUTCOMES
Accountability Framework
LEGISLATURE
A O
Line managers
MINISTER 4. DELEGATION - OUTPUTS
5. STATUTORY ACCOUNTABILITY - OUTPUTS
Governance & Control Framework in SA
Legislature
Executive Authority(Accountability)
Accounting Officer/Authority(Responsibility)
Office of the Auditor-General
(External Auditors)
Audit CommitteeRisk Management
Committee
Internal Audit
Internal Control
Other Management
Activity
Risk Management
Management
Watchdog for the citizens
Cabinet Member or Provincial
MEC accountable to Legislature
Has ultimate responsibility for
the execution of policies, plans
and objectives of the entity
Provides advice to AO on enterprise RM
Reviews and provides assurance over internal
control, risk management and governance processes
Management activity
must include internal
control & risk
management
8
Reforms at a glance
99
1010
Planning, budgeting and reporting cycle
11
Relationship between Strategic Plans & Annual Performance Plans
Reconciliation withBudget
Whole of Department
Sub-programme
Programme
Changes to StrategicGoals
Changes to OverallStrategic Objectives
Measurable Objectives
RevisedSituation Analysis
Situation Analysis
Part A
Part B
Situation Analysis(if required)
Annual Performance Plan
Whole of Department
Sub-programme
Programme
Strategic Goals
Overall StrategicObjectives
Measurable Objectives
Situation Analysis
Situation Analysis
Resource Information
Part A
Part B
Part C
Analysis of Service Delivery Environment
Organisational and Institutional Environment
Background Information
Situation Analysis(if required)
Five-year Strategic and Performance Plan
Performance Measures
Performance Targets
Analysis of Changes to Programmes
Part C
12
MTEFFive-year Strategic & Performance Plan
Developing Strategic PlansMedium Term Strategic FrameworkT
op
-do
wn
Lin
kages
Local Government IDPs
Local Government IDPs
Local Government IDPs
Bo
tto
m-u
p L
inka
ges
National Spatial Development Perspective Provincial Growth &
Development Strategy
Sectoral Strategies
President’s ‘State of
the Nation’ address
13
Updating Strategic Plans
MTEF
Medium Term Strategic Framework
National Spatial Development Perspective Provincial Growth &
Development Strategy
Sectoral Strategies
Local Government IDPs
Local Government IDPs
Local Government IDPs
To
p-d
ow
n L
inkag
es
Bo
tto
m-u
p L
inka
ges
Current Planning and
Budgeting Cycle
Next Year’s Part A of the
Annual Performance Plan
President’s ‘State of
the Nation’ address
Activities and Timeframes
National Treasury developsMedium Term Fiscal Framework
National Budget ProcessSetting the Fiscal Framework
and Revenue Sharing Provincial Budget Process
Executive Committees set provincial priorities
Departments develop Strategic Plans and initial MTEF estimates
Medium Term Policy Prioritiesset by MinComBud FFC makes division of
revenue recommendations
National Treasury refines fiscal framework and makes division of revenue proposal
Budget Council and Forum considerdivision of revenue proposals
Medium Term Policy Priorities presented to Cabinet
Draft provincial MTEFs presented to Executive Committees and MinMEC’s
Cabinet sets Medium Term PolicyPriorities and makes indicative allocations
Departments adjust Strategic Plans and MTEF’s
and submit to National Treasury
Sectoral teams (10X10’s) review policies and work out budget implications for concurrent functions
March
April
May
June
July
August
Prioritisation
Preparation &
review of M
TE
F subm
issions
Review
of fiscal framew
ork & D
oRMedium Term Strategic Framework andPresident’s State of the Nation Address
Budget Council considersMedium Term Fiscal Framework
February
Sectoral teams (10X10’s) review policies and spending pressures
on concurrent functions
Departments develop Strategic Plans and initial MTEF estimates
National Treasury issues Budget Guidelines
Departments adjust Strategic Plans and MTEF’s
MTEC reviews Departments’ MTEF’s
MinComBud reviews the MTEC recommendations Budget Council and Forum make
final division of revenue proposals
Extended Cabinet finalises macro and fiscal framework and division of revenue
Division of Revenue Workshop on macro and fiscal framework
MTBPStabled in Parliament
Departments finalise annual budgets and MTEF’s
Departments finalise annual budgets and MTEF’s
Cabinet approves finalnational budget and MTEF
Executive Committees approves provincial budgets and MTEF’s
National Treasury finalises annual fiscal framework
MinComBudmakes pre-final MTEF allocations
Executive Committees make pre-final allocations
Publication of Division of Revenue Bill
Make final adjustments and preparenational budget documentation
Make final adjustments and prepare provincial budget documentation
Minister of Financetables Division of Revenue Bill
and national budget in Parliament
MEC’s for Financetable provincial budgets
in legislatures
August
September
October
December
November
February
January
MT
EF
recomm
endations
Final decisions
Preparation of budget docum
ents
Technical Committee on Finance reviews division of revenue proposals
Provincial MTEC reviews Departments’ MTEF’s
Provincial MTEC reviews Departments’ MTEF’s
Activities and Timeframes
National Budget ProcessSetting the Fiscal Framework
and Revenue Sharing Provincial Budget Process
Review
of fiscal framew
ork & D
oR
1616
Key Role Players
• Parliament & Legislature
• Treasury
• Executive Authorities
• Accounting Officers, Accounting Authorities
• Auditor General
• Accounting Standards Board (ASB)
1717
• Less restrictive than previous Treasury
Instructions and Financial Regulations
• Focus on principle rather than detail
• More autonomy to accounting officers
in financial decision making
• Enable accounting officers to manage
better
PFMA environment
1818
Accounting Standards Board
• Establishment in 2002, started work 2003
• Sets standards of GRAP
• Prepare & publish directives and guidelines
• Recommend effective date of implementation of
GRAP standards
Financial Statements consists of ..
• Statement of financial performance
• Statement of financial position
• Statement of changes in Net Assets
• Cash flow statement
• Notes to the annual financial statements
• Disclosure notes and annexures
Value realisedonly in an accrualenvironment
Accrual information
31 March
31 May
Complete reporting template
Annual reporting
Submit AFS to AG &relevant treasury
31 August
External audit
Submit annual report & AFS to relevant treasury & EO
31 JulyAudit report to AO
31 September
Table in Parliament/Legislature
31 March
31 June
Consolidations
Submit consolidation to AG
30 September
Submit audited consolidation to
treasury
31 October
Table consolidation in Parliament/Legislature
31 May Consolidation of reporting templates
31 July
2222
Why it works?
• Legal framework underpins the reforms
• Legislation clarifies the roles and responsibilities
• Process relied on broad consultation
• Compulsory to report progress on implementation
• Clearly defined reporting timeframes enabling effective oversight
• Sufficient political will
2323
Challenges
• Cash Accounting in departments
• Relevance & understandability of annual reports
• Sufficient buy-in
• Skills availability
• Information systems
• Reporting deadlines
• Strengthening governance & oversight
2424
Way forward
• Secure sufficient buy-in
• Focus on capacity building
• Transition to a more comprehensive accounting basis
• Explore possibility of government wide reporting
• Strengthening governance & oversight
2525
Although the South African Government
has made great strides in transforming
financial management, there are still
considerable challenges to be overcome.
Conclusion
Thank you