briefing to standing committee on appropriations on s43 and s30(2) of the pfma

Briefing to Standing Committee on Appropriations on s43 and s30(2) of the PFMA

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• Public Finance Management Act, Act 1 of 1999 (PFMA), section 30(2), states that the adjustments budget may provide for:

• Significant and unforeseeable economic and financial events affecting the fiscal targets

• Unforeseeable and unavoidable expenditure recommended by a committee of Cabinet

• Any expenditure in terms of section 16 • Money to be appropriated for expenditure already announced by

the Minister during the tabling of the annual budget • The shifting of funds between and within votes• Utilisation of savings under a main division of a vote to be used

to defray over-expenditure on another main division in terms of section 43

• Roll-over of unspent funds from the preceding financial year

Components of an adjustments budget

Virements

• Reductions under one programme in a department’s budget may be used to offset excess spending in another programme in that department, within the following parameters: – no more than 8 per cent of the appropriated amount for a programme may

be shifted– amounts appropriated for capital expenditure such as payments for capital

assets may not be used to supplement spending under current payments– amounts specifically and exclusively appropriated for a particular purpose

or amounts that were appropriated to be transferred to another institution cannot be shifted in this way either, unless approved in terms of legislation or by the relevant treasury

• Virements provide accounting officers with a budget management tool• Allow accounting officers to move funds when budgeted activities don’t unfold

fully according to plan

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Virements process

• Governed by section 30(2)(f) and section 43 of the PFMA, Treasury Regulation 6.3 and section 5 of the Appropriation Act, 2010

• In cases where virements require the approval of the National Treasury, a submission is made to the relevant Pubic Finance Budget Analyst, which then considers the request according to applicable legislation and general practice

• A recommendation is then made to the Deputy Director General: Public Finance for approval

• Virement applications that require the approval of Parliament are tabled, together with other virements, in the Adjustments Appropriation Bill and detailed in the Adjusted Estimates of National Expenditure publication

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Section 43 of the PFMA

• Section 43 of the PFMA legislates the following regarding virement between main divisions within votes:– (1) An accounting officer for a department may utilise a saving in the

amount appropriated under a main division within a vote towards the defrayment of excess expenditure under another main division within the same vote, unless the relevant treasury directs otherwise

– (2) The amount of a saving under a main division of a vote that may be utilised in terms of subsection (1), may not exceed eight per cent of the amount appropriated under that main division

– (3) An accounting officer must within seven days submit a report containing the prescribed particulars concerning the utilisation of a saving in terms of subsection (1), to the executive authority responsible for the department and to the relevant treasury

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Section 43 of the PFMA cont.

– (4) This section does not authorise the utilisation of a saving in—

(a) an amount specifically and exclusively appropriated for a purpose mentioned under a main division within a vote

(b) an amount appropriated for transfer to another institution

(c) an amount appropriated for capital expenditure in order to defray current expenditure.

– (5) A utilisation of a saving in terms of subsection (1) is a direct charge against the relevant Revenue Fund

– (6) The National Treasury may by regulation or instruction in terms of section 76 regulate the application of this section

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Section 6.3.1 of the Treasury Regulations

• Section 6.3.1 of the Treasury Regulations states that for purposes of section 43(1) of the PFMA –– (a) compensation of employees and transfers and subsidies to other

institutions, excluding transfers and subsidies to other levels of government for purposes of paying levies and taxes imposed by legislation, may not be increased without approval of the relevant treasury

– (b) new transfers and subsidies to other institutions may not be introduced without the approval of the relevant treasury

– (c) allocations earmarked by the relevant treasury for a specific purpose (excluding compensation of employees) may not be used for other purposes, except with its approval

– (d) virement of funds from compensation of employees to transfers and subsidies for the payment of severance/exit packages are excluded from the provisions of (a) and (b)

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Section 5 of the Appropriation Act, 2010

• Section 5 of the Appropriation Bill 2010 states:– Notwithstanding section 43(4)(b) and (c) of the Public Finance Management

Act, the National Treasury may approve the utilisation of a saving in -

(a) an amount appropriated for transfer to another organ of state or to an organisation or body outside of government

(b) an amount appropriated for payments for capital assets, if the saving is to be utilised for other categories of expenditure

• The National Treasury has also been considering ways of improving departmental practices in respect of the application of virements, for example:

– Making the limits percentage apply also to the main division of the vote receiving savings

– Changing the limit percentage

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Roll-overs: Process for rolling over funds• Requests for roll-overs must be submitted by departments to the relevant

treasury on or before the last working day of April• The Senior Management Committee within the National Treasury considers the

requests made by national departments and makes recommendations to the Minister of Finance taking into account Treasury Regulation 6.4 which states that: – Payments for capital assets: Unspent funds on payments for capital assets

may only be rolled over to finalise projects or asset acquisitions still in progress

– Transfers and subsidies: Savings on transfer payments and subsidies may not be rolled over for purposes other than originally voted for

– Current payments: Savings on compensation of employees may not be rolled over. A maximum of five per cent of a department’s payments for goods and services may be rolled over

• Funds for a specific purpose may not be rolled over for more than one financial year unless approved in advance by the relevant Treasury

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Criteria for evaluating requests

• In addition, the following criteria are normally applied by the National Treasury when evaluating roll-over requests: – Roll-overs that are not considered for recommendation:

• Services that will result in recurring expenditure • Expenditure items that were not ready for payment at the close of

a financial year, such as telephone accounts• Services that appear to be unforeseeable and unavoidable as

such requests are subject to a separate process• Requests that are small in monetary value and represent an

insignificant percentage of the total budget of the department

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– Roll-overs that are considered favourably for recommendation:• Funds allocated in the previous financial year for a new policy that

was approved and launched, and that is expected to positively impact on service delivery

• Where cash flow projections had indicated that expenditure would have been realised before the end of the previous financial year

• Where there was a reasonable expectation that services would have been rendered before the end of the previous financial year

• Funds required for the completion of projects, which started in the previous financial year

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Criteria for evaluating requests cont.

Approval of requests

• The Minister of Finance considers the requests and tables approved roll-overs, which are included in the Adjustments Appropriation Bill

• Section 6 of the Appropriation Act, 2010, provides that the Minister of Finance has the power to approve the types of expenditure provided for under section 30(2) of the PFMA before an adjustments budget is passed

• Specific limits are set to the total amount of expenditure which may be approved:• approved expenditure may not exceed the total amount set aside as

the contingency reserve in the approved fiscal framework

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Approval of requests cont.

• Expenditure approved in terms of Section 6 becomes a direct charge against the National Revenue Fund until such time as the 2010 adjustments appropriation bill is enacted

• The Minister of Finance uses this section as roll-overs represent funds that were already appropriated by Parliament, in the 2009 financial year

• Roll-over funds are normally required by departments early in the financial year so that they can finalise the activities the funds were originally appropriated for

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Money Bills Amendment Procedure and Related Matters Act, 2009 (“the MBAPRMA”) • The MBAPRMA provides for a framework in terms of which Parliament

may exercise its authority to amend money bills• It sets out detailed procedures regarding the processing of each of the

major pieces of budget legislation, revenue legislation, and other money bills

• The MBAPRMA provides that Parliament may amend the budget legislation – there are certain limits on the extent to which the various pieces of budget legislation may be amended, for example, when proposing amendments to the fiscal framework, Parliament and its committees must ensure that the requirements set out in section 8(5) of the MBAPRMA are satisfied

• Once the fiscal framework is approved, the budget legislation is amended within the scope of that approved fiscal framework

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The MBAPRMA cont.

• In terms of section 10(10), in respect of any proposed amendments to the Appropriations Bill, the Committee on Appropriations in its report, in respect of each proposed amendment, must indicate:– the reason for the proposed amendment

– how the amendment takes into account the broad strategic priorities and allocations of the relevant budget

– the implications of each proposed amendment for an affected vote and the main divisions within that vote

– the impact of any proposed amendment on the balance between transfer payments, capital and recurrent spending in an affected vote

– the impact of any proposed amendment on service delivery

– the manner in which the amendment relates to prevailing departmental strategic plans, reports of the Auditor General, committee reports adopted by the House, reports in terms of section 32 of the PFMA, annual reports, and any other information submitted to a House or committee in terms of the standing rules or on request

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The MBAPRMA cont.

• The procedure in respect of the adjustments budget is not explicitly stated in the MBAPRMA, but the same procedure is presumably implied in respect of committee reports relating to proposed amendments to the Adjustments Appropriation Bill, as are specified in section 10(10)

• These powers are limited to the extent that the Minister of Finance approves expenditure by utilising section 6 of the of the Appropriation Act 2010, however:– The Minster of Finance cannot approve expenditure that is in excess of the

approved contingency reserve– Expenditure must be in terms of section 30(2) of the PFMA– It is envisaged that the Minister of Finance will only utilise section 6 to

approve expenditure in instances where delaying the approval of such expenditure would be prejudicial to the public interest, such as in the case of roll-overs (section 30(2)(g)) and in the case of certain unforeseeable and unavoidable expenditure ((section 30(2)(b)) such as in the case of disasters

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The MBAPRMA cont.

• In respect of all Parliamentary Committee reports dealing with proposed amendments, the Minister of Finance is to be permitted an opportunity to respond to any proposed amendments, and those responses will be tabled in Parliament along with the committee reports

• In light of this it is proposed that there is cooperation between the National Treasury and the parliamentary committees so that consistency can be applied in administering these reports

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Roll-overs approved by the Minister of Finance per vote: The Presidency

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R thousand Requested Approved1 The Presidency 10 704 1 281

Presidential Hotline 1 281 1 281 Procurement of information technology equipment 6 444 0 Isigodlo Trust 2 979 0

Cooperative Governance and Traditional Affairs

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R thousand Requested Approved

3 550 679 548 991 Computer equipment for new Department of Traditional Affairs

2 978 2 978

National Disaster Management Centre for 2010 FIFA World Cup

1 680 1 680

Withheld equitable share funds* 509 000 509 000 Command and control call centre 35 333 35 333 IT system and infrastructure 1 688 0

Cooperative Governance and Traditional Affairs

* Conditionally approved: Department needs to justify the amount owed to municipalities

Home Affairs

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4 Home Affairs 56 704 56 704 Movement control legacy system facilitating movement of travelers' and goods at selected ports of entry into the country

56 704 56 704

International Relations and Cooperation

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5 619 800 149 800 Restoration of the Pan African Parliament building's construction site to its original state*

500 000 30 000

Construction of Chancery and Official Residence in Lesotho 2 800 2 800 Renovations on official residence in Athens 1 000 1 000 2010 Shanghai World Exposition 89 500 89 500 Construction of Chancery and Official Residence in Abuja 26 500 26 500

International Relations and Cooperation

* Conditionally approved: Dependant upon verification of funds required for restoration

Public Works

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6 Public Works 145 414 120 037 Ministerial residential accommodation 30 024 26 591

Upgrading of a building to host dignitaries during the 2010 FIFA World Cup

46 522 39 000

Installation of security measures 59 355 54 446 Accessibility to government buildings for disabled people 5 462 0 Energy efficiency 4 051 0

Public Enterprises

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10 Public Enterprises 1 363 1 363 Review of the supplier development procurement strategy 630 630

Advisory panel providing guidance on the monitoring of the remuneration of board members and executive managers at State Owned Enterprises

733 733

Public Service and Administration

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11 Public Service and Administration 6 034 2 569 Human Resource Connect project 2 569 2 569 Severance packages 865 0 Single public service change readiness assessment project 2 600 0

Statistics South Africa

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12 Statistics South Africa 116 106 104 681 Identification of rural dwellings by putting up number plates 7 793 7 793 Census 2011 pilot project 96 888 96 888 Office furniture, equipment and computer hardware 11 425 0

Arts and Culture

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13 Arts and Culture 326 687 326 687 2010 FIFA World Cup Projects 12 000 12 000 Investing in culture projects 18 625 18 625 Upgrading and maintenance of heritage infrastructure* 296 062 296 062

* Conditionally approved: Dependant upon Department providing credible cash-flow projections

Basic Education

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14 Basic Education 478 979 1 000 National Schools Nutrition Programme Awards ceremony 1 000 1 000 Monitoring of quintile 2 secondary schools 259 0 Learner nutrition baseline study 500 0

Oversight, management and evaluation of Technical Secondary Schools Recapitalisation grant

1 200 0

Workbooks for school learners 476 020 0

Health

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15 Health 413 891 116 695 2010 FIFA World Cup emergency medical services unit 3 203 3 203 Tuberculosis day event 1 200 1 200 H1N1 influenza vaccines 4 424 4 424

Installation of information technology infrastructure in Civitas building

11 000 11 000

Audit of primary health care facilities 13 000 13 000 Improvement of hospital revitalisation management and systems

- 17 000

Hospital Revitalisation grant: Free State province* 66 868 66 868 Hospital Revitalisation grant: Kwazulu-Natal province 160 696 0 Hospital Revitalisation grant: Mpumalanga province 136 500 0

* Conditionally approved: Dependant upon Department presenting a comprehensive capital programme plan

Higher Education and Training

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16 Higher Education and Training - * 16 306 Start-up costs for skills development function as well as for the establishment of the Quality Council for Trade and Occupation

- 16 306

* Requested by the Department of Labour in respect of the Skills Development function which shifted to the Department of Higher Education and Training

Labour

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17 Labour 20 903 * 4 434 Research monitoring and evaluation agenda 4 597 4 434

*Of this amount, R16 million was requested in respect of the Skills Development function which shifted to the Department of Higher Education and Training

Social Development

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18 Social Development 16 616 5 600 Outstanding commitments in respect of disaster funding 5 600 5 600 Disaster funding in respect of 2010 FIFA World Cup 7 900 0 National Association of People Living with HIV and Aids 745 0 National Association of Burial Societies of South Africa 1 100 0 Legal costs 1 271 0

Sport and Recreation South Africa

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19 Sport and Recreation South Africa 7 900 7 900 Residential and medical intervention programme and training camps

2 131 2 131

Internal audit services 1 100 1 100 National School 2010 Football World Cup tournament 4 669 4 669

Correctional Services

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20 Correctional Services 48 768 22 532 Feasibility study for Public Private Partnership correctional facilities

22 590 22 532

Occupational Specific Dispensation for Psychologists 4 902 0 Occupational Specific Dispensation for Educators 21 276 0

Independent Complaints Directorate

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22 Independent Complaints Directorate 1 095 0

Office furniture and equipment 1 095 0

Justice and Constitutional Development

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23 23 894 0

Implementation of phase 2 of the Occupational Specific Dispensation in Legal Aid South Africa

23 894 0

Justice and Constitutional Development

Agriculture, Forestry and Fisheries

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25 Agriculture, Forestry and Fisheries 18 629 15 629 Membership fees to the Consultative Group in International Agricultural Research

3 710 3 710

Procurement of foot and mouth vaccines 8 000 8 000 Classical Swine Fever campaign 3 919 3 919 Excellence model for upcoming farmers 3 000 0

Communications

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26 Communications 157 297 19 802 Community radio stations 20 000 5 000 Broadcasting Digital Migration Awareness campaign 2 200 2 200 Organisational review 5 000 5 000 Meraka e-Skills Institute 2 852 2 852 Remuneration guidelines for State Owned Enterprises boards 500 500 Payable to consultants after the 2010 FIFA World Cup 2 200 1 955

Electronic Document Management System and lonosonde Station

750 750

Hospital websites 1 045 1 045 Municipal websites 500 500

Laboratory for conformance testing of locally produced set-top boxes

2 500 0

Telkom and Sentech for ICT infrastructure for 2010 FIFA World Cup

116 000 0

National Electronic Media Institute of South Africa 3 000 0 e-Literacy Training programme 750 0

Energy

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28 Energy 87 710 61 000

Integrated National Electrification programme 82 710 56 000

Working for Energy programme 5 000 5 000

Environmental Affairs

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29 Environmental Affairs 3 053 0 Replacement of polar research vessel 3 053 0

Human Settlements

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30 Human Settlements 270 508 82 678 Software licenses 1 900 1 900 File server 5 252 5 252 Establishment of Social Housing Regulatory Authority 34 999 34 999 Impact Evaluation Study 1 209 1 209 Completion of tenders 7 798 7 798 Rural Sanitation Services Infrastructure programme -* 31 520 Furniture 350 0 Audit of beneficiaries occupying subsidised houses 8 000 0 Community Outreach programme 50 000 0 Integrated Human Settlement Conditional grant 161 000 0

* Requested by the Department of Water Affairs in respect of the sanitation function which shifted to the Department of Human Settlements

Mineral Resources

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31 Mineral Resources 5 000 5 000 Rehabilitation of ownerless asbestos mines project 5 000 5 000

Rural Development and Land Reform

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32 Rural Development and Land Reform 532 346 495 727 Erection of fences in Mpumalanga 3 000 3 000 Land Rights Management Facility 2 300 2 300 Information technology services 2 966 2 966 Settlement of restitution court cases 487 461 487 461 Procurement of information technology infrastructure 2 672 0 Establishment of two new offices 1 178 0 Creation of a new structure for the Department 32 769 0

Science and Technology

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33 Science and Technology 19 151 15 717 Business Global Change: Inkaba ye Afrika 2 465 2 465 Resource based industries research programme 3 322 3 322 Research Management Information System 9 930 9 930 Regional Initiative for Capacity Development 3 434 0

Trade and Industry

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35 Trade and Industry 42 200 29 400 Intsimbi National Tooling Initiative 32 400 29 400 National Consumer Commission 9 800 0

Transport

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36 Transport 23 469 9 981 2010 FIFA World Cup Intercity Bus Services 10 500 8 336 Bus contract model 1 300 1 300 Performance management system 345 345 Inter-modal transport arrangements 166 0

Socio economic impact of the open skies and Yamoussoukro decision

400 0

Impact study of low cost airlines in South Africa 201 0 Target setting framework for sector performance 457 0

Monitoring and evaluation framework to oversee internal performance

1 645 0

Procurement and distribution of 15 000 Shova Kalula bicycles 8 455 0

Water Affairs

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37 Water Affairs 123 636* 79 001 Water Services Operating Subsidy grant 10 000 10 000 Working for Water programme 4 127 4 127 Accelerated Community Infrastructure programme 43 444 43 444 National Water Resource Strategy 4 100 4 100 Hartbeespoort dam remediation project 9 500 9 500 Water use licence application programmes 7 830 7 830 Office space in Limpopo 3 547 0 National Youth Services 3 200 0 Rain harvesting tanks 6 368 0

*Of this amount, R32 million was requested in respect of the sanitation function which shifted to the Department of Human Settlements

briefing to standing committee on appropriations on s43 and s30(2) of the pfma

Documents

terms of section

capital expenditure

unavoidable expenditure

main divisions

main division3

terms of legislation

terms of subsection

annual budget