Association of Public Accounts Committees (APAC)

BUDGET FORMULATION PROCESS: The Role of Legislatures/PAC’s

Hon JT BeukesAPAC Chairperson

SADCOPAC Conference 2013Arusha, Tanzania

3 September 2013

RSA Budget Formulation Process: Background

The preparation of the Budget in South Africa is vested with the Executive Legislative Authority, i.t.o the Constitution of RSA (1996), is vested in Parliament

and Provincial Legislatures Sections 44 and 104 confers these powers Section151 confers legislative and executive powers to municipalities

Sections 73 and 119 states that: Only a Cabinet member or a Deputy Minister, or a member of committee or

Executive member, introduce a Bill …; BUT only the Executive member responsible for national financial matters may introduce a money Bill in the Assembly or Legislature.

A Money Bill is defined as A Bill that appropriates money or imposes taxes, levies or duties and may not deal with any other matter except a subordinate matter incidental to the appropriation of money or the imposition of taxes, levies or duties

The Legislative Sector In the RSA Developed a Standardised Oversight Model which seeks to: To detect and prevent abuse, arbitrary behaviour or illegal and unconstitutional conduct

on the part of the government and public agencies the government to account in respect of how the taxpayers’ money is used ensure that policies announced by government and authorised by parliament and

provincial legislatures are actually delivered

Introduction Budgeting in the RSA is known as Performance-based budgeting

as the Budget seeks to: Ensure the realization of policy objectives or effectiveness of

government towards achieving good economic and socio-economic outcomes

Ensure VALUE - FOR – MONEY meaning; economic, efficiency and effective use of the Country’s financial resources by Public Services

Ensure service delivery performance – the quality, quantity and urgency thereof – and its overall contribution towards the achievement of predetermined outcomes

The Budget Process involves various stakeholders; amongst others: Institutions supporting Democracy in the RSA e.g. the Financial and

Fiscal Commission (FFC) - a Constitutional Mandated organisation assisting the Executive and supporting the Legislative Authority

Public involvement by way of suggestions (from Civil Society and the broader public) to the Minister responsible for Finance

Public Involvement through Legislatures by way of Public Hearings

Regulatory Framework Governing the Budget in the Republic of South Africa

The Constitution of the RSA 1996: Promotes transparency, accountability and the effective financial management of the

economy, debt and the public sector Budgets MUST contain:

estimates of revenue and expenditure, differentiating between capital and current expenditure; proposals for financing any anticipated deficit for the period to which they apply; and an indication of intentions regarding borrowing and other forms of public liability that will increase public debt during

the ensuing year The Division of Revenue Act

equitable division of revenue raised nationally among the national, provincial and local spheres of government

The Appropriations Act Appropriates revenue to Public Service (Departments: Executive and Legislatures)

The Public Finance Management Act Provides for the efficient and effective use of public finances in South Africa

Budget Formulation process1. Receipt of revised policy objectives/priorities2. Strategic planning by Executive – Five year forecast planning3. Approval of Strategic Plan by Executive4. Revision of Medium Term Expenditure Framework (MTEF) –

three year budget projections5. Approval of MTEF by Executive6. Receive confirmation of annual budget allocation from Treasury7. Finalisation of Annual Budget8. Approval of Annual Budget by Parliament, legislature, Council9. Monitoring of Expenditure by Parliament, legislature, Council

through In-Year Reports (Monthly and Quarterly Expenditure reports) as well as Annual Report and Annual Financial Statement

PUBLIC SECTOR FINANCE MANAGEMENT REFORM MODEL

1. PLANNING AND FORMULATION STAGES 2. OPERATIONAL AND CONTROL STAGES (CURRENT YEAR)

3. ACCOUNTABILITY AND OVERSIGHT STAGES

POLICY OBJECTIVES

STRATEGIC PLANNINGRISK ASSESSMENT

MTEF1 – 2 - 3

BUDGET(MONTHLY / ANNUAL)

-------------------------------EXPENDITURE

----------------------------INCOME STATEMENT

----------------------------BALANCE SHEET

BUDGET(MONTHLY / ANNUAL)

-------------------------------EXPENDITURE

----------------------------INCOME STATEMENT

----------------------------BALANCE SHEET

FINAL COSTING

planned

MEASUR-ABLE

OUTPUTSGFS/SDDSGAAP/GRAP(ACCRUAL)

GFS/SDDSGAAP/GRAP(ACCRUAL)

ACCOUNTS(MONTHLY / ANNUAL)

------------------------------EXPENDITURE

------------------------------INCOME STATEMENT

--------------------------------BALANCE SHEET

ACCOUNTS(MONTHLY / ANNUAL)

------------------------------EXPENDITURE

------------------------------INCOME STATEMENT

--------------------------------BALANCE SHEET

achieved

MEASUR-ABLE

OUTPUTS

PROCUREMENT SUPPLY CHAINS

STOCKS/INVENTORIES

WORKINGCAPITAL

PLANNED RESULTS(DOCUMENTED)

REPORTED RESULTS(DOCUMENTED)ANALYSIS/

ACTION

INITIAL COSTING

INTERNAL CONTROLSIncl. risk and corruption controls

PERSON NEL EXPENSES

Extensive Budget Co-ordination process

Timeframe Activity

Jan Cabinet Lekgotla issues broad fiscal and budget priorities of government and issues a revised MTSF

Apr National dept’s receive National Treasury guidelines regarding budget preparation Provincial dept’s receive Provincial Treasury guidelines re budget preparation

May FFC submits DoR recommendations, BC considers FFC recommendations and makes preliminary DoR decision, N and P/depts receive preliminary DoR decision

May MinComBud discusses Medium Term policy and priorities, Ministerial letters sent to dept’s re policy priorities, PEC’s and Councils plan priorities.

May National dept.’s begin compiling MTEF budget proposals using MT policies and priorities issued via ministerial letters, and ito strategic plans finalized in January.

May Prov dept.’s begin MTEF budget proposals using MT policies and priorities and initial DoR proposals and as per MEC meetings. Dept’s strategic plans are also applied.

July Cabinet lekgotla re dept priorities.

Budget Co-ordination processby National and Provincial governments

DECISION-MAKING AND COORDINATION ACTIONS Timeframe Activity

Aug Nat dept.’s submit MTEF budget proposals to N/T and MTEC., Prov dept’s submit MTEF budget proposals to P/T’s and MTEC.

Aug N/T reviews budget submissions, N/T prepares supporting documentation, N/dept.’s prepare supporting documentation.

Aug Workshop reviews DoR and macro economic and fiscal frameworks., MinComBud reviews effects of DoR, macro economic and fiscal framework re Govt. priorities. N/dept.’s respond to N/T queries and comment. P/T’s submit prelim MTEF’s to N/T for MTBPS

Sept Budget Com meeting.  

Sept N/dept.’s submit requests for program changes – to N/T , N/T evaluates and finalises these N/dept.’s requests.

Sept - Oct MTEC evaluates effectiveness and equitabilities of Dept’s spending allocations and plans. Makes recommendations. P/ MTEC’s evaluates P/dept’s spending allocations and plans. Makes recommendations.

Oct BC’s final decision of horizontal DoR. Extended Cabinet considers M/E and Fiscal framework and DoR in terms of government priorities.MinComBud considers macro economic and fiscal frameworks and DoR. Also considers MTEC recommendations. Extended Cabinet meets to discuss revised Memo on M/E, fiscal framework and DoR .N/dept.’s submit 3 year corporate plans and budgets of Public Entities – to N/T. N/T studies recommendations from MTEC hearings. MinComBud considers MTEF allocations to N/dept.’s. Final adjustments to N and P budgets MinComBud considers draft MTBPS. Cabinet briefed on MTBPS. MTBPS presented to Parliament.

Process of Legislating in South AfricaMinister/Executive Member tabling the Budget (Bill) in

Parliament/Legislatures – budget referred to relevant Committee

Appropriations/Finance (Budget) Committees deliberate on Budget

Budget Public Hearings ConductedInputs processed and consideredBill debated and adopted by Parliament/Legislatures

Committees of Parliament/Legislatures Committees examines budget proposals against

policy prioritiesAppropriations Committee appropriates the

nationally raised revenueProvincial Finance/Budget Committees examines

Provincial Budget proposalsLocal Government participates in the budget

process Parliament/Legislatures appropriates the budget

amongst Provinces and/or Departments

PAC’s Role in the Budget ProcessPAC Conduct In-year and after-the-fact

oversight focusing on expenditure against planned activities and budgets

PAC’s works closely with the Auditor-General

PAC also works with other Functional Portfolio Committees

PAC makes recommendations on expenditure patterns which is authorized at the House

Monitoring Of Expenditure

South Africa Developed a Legislative Sector Oversight Models which seeks to:evaluate of the efficacy of public service

programmes and the appropriateness of financial resource allocations and management

PAC’s and Portfolio Committees receiving and reviewing quarterly financials and performance

THANK YOU