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PUBLIC FINANCE MANAGEMENT ACT NOLS DU PLESSIS PFMA IMPLEMENTATION UNIT NATIONAL TREASURY. CONTENTS. Introduction & Background Overview of the Public Finance Management Act Overview of the Treasury Regulations Accountability & Responsibility under the Act Implementation of the PFMA - PowerPoint PPT Presentation
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PUBLIC FINANCE MANAGEMENT ACT
NOLS DU PLESSISNOLS DU PLESSISPFMA IMPLEMENTATION PFMA IMPLEMENTATION
UNITUNITNATIONAL TREASURYNATIONAL TREASURY
CONTENTS
Introduction & BackgroundOverview of the Public Finance
Management ActOverview of the Treasury RegulationsAccountability & Responsibility under
the ActImplementation of the PFMAPerformance Management
Introduction and Background - Public Finance Management Act and Treasury Regulations
Why a new approach?
RDP: maximise service deliveryLimited resources vs. 'Unlimited' demands
Satisfy constitutional obligationsTransparency and accountability (s216)
Budget Reforms Since 1994
Budget decentralisation
Shift to multi-year budgeting
In-year management - early warning
Less focus on inputs
International classifications
Where Were We Starting From?
Financial administration : rule-boundAO passiveFocus on inputsNeed to transform the public servicesFiscal constraints vs. Service backlogs
In summary,
Need to improve value for money
Components to Change
FinancialAdministration
Financialmanagement Technical
Line managers
Procedures Transactional Accounting
The Solution
Modernising financial managementEnabling managers to manage - better information Make managers accountable
Clearer definition of rolesMinister/MEC responsible for outcomes DG /HOD responsible for output
Greater transparency & accountabilityBetter information & reporting; improved
managementResult -
Improved value for money & service delivery
How Will Things Change – Practicalities
Budgeting by outputs -From an "input" to "output" budget
(Legislature will always 'vote' on cash)Formats changes to 'standard form'
Introduce service standards & costing systemsGreater responsibilities over transfersInterdepartmental charges (eg public
works)Role of programme managers emphasised
Clarity of Roles: Minister & DG
‘Executive authority’(Minister/ MEC)Policy mattersOutcomesPresentation & approval of Departmental budget & report
Clarity of Roles: Minister & DG (Continue)
Accounting officer (DG/ HOD/ board)Outputs & implementationAccountable to parliament for financial
managementImplementation of departmental budget
What Are the Act’s Benefits? Greater flexibility, within frameworkBasis for assessing achievementsLinkages between planning & budgetFocus on outputs & responsibilitiesBetter accountabilityClarity of role of accounting officerA basis for - Better use of resources & improved
delivery of services
Desired Outcomes : Long Term
Sound financial management systems and processes
Transparent budgeting process
Effective management of revenue, expenditure, assets and liabilities
Unqualified consolidated financial statements, prepared on the accrual basis
Accountability of public entities & external agencies
Overview of the Act
What Does the PFMA Do?
Repeals or overrides 10 exchequer acts
Establishes national treasury Provides frameworks in place of
proceduresOversight over public entities Accounting Standards BoardTreasury regulations
The New Act : Modalities
Coverage National departments & constitutional
institutionsProvinces & provincial departments‘Public entities’ Excludes universityExcludes local govt: similar bill to follow
Phased implementation Mostly 1 April 2000Planning for future ‘qualitative’ changes
National & Provincial Treasuries
Broad national powers to monitor and enforce
FrameworksCash management, banking and investmentProcurement
Leadership in financial management: Design, guidance, support
Consolidation of financial statements Importance of provincial treasuries
Budgets
Outputs and measurable objectivesVoting by main division
Monthly reportsPublication of information
Virement & adjustments budgets Approving unauthorised
expenditureUnfunded mandates
Executive Authorities
Statutory responsibilitiesConsider monthly reportsReporting to cabinet/ executive councilTabling of annual report & audit
opinionOversight over public entitiesWritten explanations of failure to tableDirectives with financial implications
Role of Accounting Officer
All departments and constitutional institutionsPerformance contracts
DutiesMaintaining efficient, effective & transparent
systems of financial managementEnforcing discipline
DelegationsCFO and others
Schedule 2 entitiesReport directly to parliament via ministerManagerial autonomyProvide info on budget and corporate planBorrowing powers - annual limits
Schedule 3 entitiesGovt. Business enterprises may have
autonomyNon-business entities treated as
departments
Public Entities
Loans and Guarantees
Restricted authority to borrow or ‘guarantee’- Minister of Finance, MEC of finance,
accounting authority (for public entity)Foreign liabilities and borrowing
illegalState not bound by individual
‘organs’
General Treasury Matters
Norms and standardsTreasury regulations
Financial misconduct Disciplinary procedures & criminal
sanctions
Accounting Standards BoardGRAP
OVERVIEW OF THE TREASURY REGULATIONS
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
New Treasury Regulations
Chief Financial Officer Must appoint a CFO no later than 1 April 2001 CFO is directly accountable to the AO
Management arrangements
Audit Committees Constituted so as to ensure independence Report to the Accounting Officer May communicate any concerns to Executive Authority and/or the Auditor-General
Internal Controls and Internal Audit May be contracted to external body Treasuries may establish shared Internal Audit units Independent with no limitation on accessing information
Investigation of alleged financial misconduct AO must ensure that disciplinary proceedings are carried out to investigate alleged financial misconduct Investigation must be conducted within a reasonable period If an AO is alleged to have committed financial misconduct the treasury must ensure appropriate disciplinary proceedings
Criminal Proceedings
AO must advise Treasury and AG of any charges laid for criminal financial misconduct Treasury may direct an institution to lay charges of criminal financial misconduct
Reporting AO must advise Treasury and AG of any disciplinary proceedings instituted AO must report to Treasury and the Auditor-General of outcome Advise Treasury of any changes to its systems of financial and risk management
Financial misconduct
Strategic Plan 3 Year rolling plan consistent with MTEF Programme objectives and outcomes identified by Minister Key performance measures and indicators Include requirements of Public Service Regulations Form the basis for annual reports First date of submission is 30 June 2001
Strategic planning
Evaluation of Performance
Establish procedures for quarterly reporting
Quarterly reporting to Executive Authority
Must form the basis for report of the institution in the annual report
Strategic planning
Comply with annual circular issued by Treasury AO must ensure that budget submissions of constitutional institutions & public entities receiving transfers via departments are included Estimates of expenditure and revenue must conform to formats prescribed by National Treasury Virement * Max 8% of savings * Personnel expenditure and transfer payments * Allocations earmarked not to be used for other purposes Unspent funds may be rolled over subject to certain limitations and conditions Additional funds through an Adjustment Estimate
Budgeting and related matters
AO must manage revenue efficiently and effectively Implementing appropriate processes for * Identification * Collections * Safeguarding * Recording Must review fees and charges annually Information of tariff policy must be disclosed in Annual Report
Revenue management
AO must ensure that internal procedures and control measures are in place for payment approval Official may not spend or commit to spend except with express approval of a properly delegated officer
Payments due to creditors must be settled within 30 days
No contract can be cancelled or amended to the detriment of the State without prior Treasury approval
Expenditure management
AO making or receiving grants to or from other spheres of governments must comply with reporting require- ments of the division of Revenue Act
AO must ensure that institutions receiving grants submits with its certificate of compliance (sec 38(I)(j)) the most recent audited statements and any annual report before any funds are transferred
Approving transfer payments includes, ensuring that: * beneficiary complied with conditions attached to previous year's assistance * continued financial aid are still necessary * agreed objectives were attained * transfer payment expense provide reasonable value for money
Expenditure management
Overspending of a Vote or Main Division
Expenditure not in accordance with purpose of Vote or Main Division
Must be reported to Treasury on discovery
Recover expenditure if not authorised by Legislature
Amounts must be disclosed in annual financial statements
Unauthorized expenditure
Not in accordance with PFMA or Procurement Legislation or Regulations
Must be reported to Treasury or Procurement Authority on discovery
Treasury or Procurement Authority may condone
If not condoned losses must be recovered
Amounts must be disclosed in annual financial statements
Irregular expenditure
Expenditure in vain that could have been prevented
Must be reported to relevant Treasury
Expenditure must be recovered
Must be disclosed in annual financial statements
Fruitless and wasteful expenditure
AO must ensure that proper control systems exists
Preventative mechanisms are in place to eliminate theft, losses, wastage and misuse
Stock levels are at an optimum and economical level
Sale of immovable property must be at market value
Letting of immovable State property must be at market- related tariffs and reviewed annually by AO
Asset management
AO must take effective and appropriate steps to collect money due to the Institution
Debts owing to the State may at discretion of AO be recovered in installments
Interest must be charged on all debts to the State
Debt may only be written off after reasonable steps have been taken to recover
All debts written off must be disclosed as a note in Annual Financial Statements
Management of debtors
Complexities are taken out of the prescripts
AO can deal with losses without referral to Treasury
Losses or damages for which an official is liable must be recovered
Debts arising from losses and claims must be dealt with in terms of chapter on Management of Debtors
Management of losses and claims
The executive authority of a provincial department may not issue a guarantee, security of indemnity except with written approval of MEC for Finance
AO must ensure that no official borrow money on behalf of the department
Should the AO be responsible for transgressions with regard to borrowings the treasury must initiate misconduct proceedings
Loans, guarantees and other commitments
Framework issued by National Treasury in terms of the PFMA
Framework deals with a whole host of issues * Deposits into revenue funds * Withdrawals from and investment of funds * Surrender of surplus funds
AO must establish processes for efficient and effective cash management
CFO must monitor cash management on a regular basis and report monthly to the AO
Treasury must report monthly to Minister on its Revenue Fund
Banking, cash management andinvestment
Private party perform departmental function on behalf of department
AO must do a feasibility study
Obtain National Treasury approval
AO is responsible for ensuring that a PPP agreement is properly enforced
Public private partnerships
AO must submit to Treasury a break-down of expenditure and revenue by end of February for the following year
Institutions may not draw funds in excess of amounts approved by Treasury
Institutions must submit to Treasury and Minister within 15 days of end of month * Actual revenue and expenditure * Projections for remainder of year * Reasons for any deviation and steps to remain within budget
AO effecting transfer payments must submit quarterly reports to Treasury outlining, per organisation, funds transferred
Financial reports
Departments in accordance with GRAP * For 2000/01 still on a cash basis
Unaudited financial statements must be submitted to Treasury 2 months after year end
Financial statements must be submitted to Treasury and Minister not later than 5 months after year end
Minister must table financial statements in legislature within 1 month after receipt
Annual financial statements
Report is on activities of department and must comply with requirements of PFMA
Comply with requirements prescribed in PSR
Include information about the institution's efficiency, effectiveness in delivering programs and achieving its objectives (1 April 2002)
Report on the use of foreign aid assistance
Information on transfer payments per organisation including compliance with sec 38(1)(j)) of the Act
Minister must table in legislature 1 month after receipt
Annual Reports
Money and property held in trust
Trading entities
Commission and Committees
Gifts, donations and sponsorships
Payments, refunds and remissions as an act of grace or favour
Public entities
Other issues covered in TreasuryRegulations
Accountability & Responsibility Under the Act
Accountability & Responsibility Under the Act
Accountability relationshipsElements of accountabilityAccountability instruments Political & statutory accountabilityHow will accountability change?Support mechanisms for the AOEmpowering managers
LegislatureLegislature
Auditor-GeneralAuditor-General ExecutiveExecutive
Independent, objective information
Transparency
Audit
Aud
it Rep
ortin
g
Con
stitu
tiona
lly e
mpo
wer
s
Con
stitu
tiona
lly e
mpo
wer
s Conferred R
esponsibility
Accountability reporting
Accountability relationships
Political Operational
2. AGREEMENT - OUTCOMES
6. MANAGERIAL ACCOUNTABILITY
3. PERFORMANCE CONTRACT - OUTPUTS
1. ACCOUNTABILITY for OUTCOMES
ELEMENTS OF ACCOUNTABILITY
LEGISLATURE
A O
Line managers
MINISTER 4. DELEGATION - OUTPUTS (BUDGET)
5. STATUTORY ACCOUNTABILITY - OUTPUTS
The legislature, as representatives of the people and custodian of their resources
Portfolio committees - role in planning, budgeting & monitoring
Standing committee on public accounts - proxy for parliament
Auditor-General - parliament’s independent and objective assurance provider
Accountability Instruments
Political & Statutory Accountability
Political accountabilityPolitical accountabilityConvention and
tradition, leading to political sanction
Political direction & policy (outcomes)
Statutory accountabilityStatutory accountabilityStatutory sanction
Execution of political direction within legislative criteria (outputs) & operational policy
Political & Statutory Accountability (Continue)
Political Political accountabilityaccountability
Relationship with cabinet, parliament and voters
Statutory Statutory accountabilityaccountability
Relationship with parliament
Single point and collective
Single point
Changes for the Executive Authority
For departmentDelegate to AO, performance contract to specify outputsReceive & consider monthly & quarterly reportsMonitor performance of AO against contractPresent financial statements, annual report & audit
opinion to legislatureFor public entity
Approve budget of Schedule 3 non business entitiesReceive & consider monthly & quarterly reportsTable financial statements, annual report & audit
opinion in legislature
Responsibilities of Ministers From 1 April 2000
Ensure delegations to AO in terms of PSA regulations
Monthly monitoring of AO’s budget performanceEnsure that AO submits in-year monitoring report to
TreasuryAssess the reasons for any over- or under-spendingAssess performance on conditional grantsConsider whether any appropriate steps required
Responsibilities of Ministers From 1 April 2000 (Continue)
Ensure AO ready to submit completed financial statements to Auditor-General by 31 May 2001
Ensure AO submits annual report by 31 August 2001 for Minister to table
Responsibilities of Ministers From 1 April 2000 (Continue)
Ensure AO enforces disciplinary measures Ensure in-year oversight over public
entities Ensure that the accounting authority of a
public entity (board) exercises its fiduciary responsibilities
Ensure receipts of corporate plans and budget from public entities
What Will Change for the AO?
Accountability becomes explicitProcedural controls replaced by frameworksAccountable for outputs, not only inputsPlanning responsibilities linked to budgetSpecific assignment of AO responsibilitiesCFO with greater competence Specific statutory timeframes & sanctionsObligatory transparency – not left to AG to
discover ‘sins’
Obligations on Accounting Officers From 1 April 2000
Monthly in-year reportingUse monthly information to manage
departmentTo Minister by main division, with appropriate
steps to address any problems identifiedTo treasury for reporting to CabinetTo treasury for monthly publication
Submission of financial statements to Auditor-General by 31 May 2001
Submission of annual report and financial statements to Minister by 31 Aug 2001
Obligations on Accounting Officers From 1 April 2000 (Continue)
Expenditure in line with the purpose votedAppropriate steps to prevent unauthorised
expenditureInternal control system, internal audit &
audit committees functioning during 2000/1
Enforce disciplinary measuresObligations over transfers
Conditional grants - monthly reporting requirements in terms of Div of Revenue Act
Other transfers - certificate on internal controls
What Do the Changes Mean?
Business not as usual
Competent line and financial managers Mechanisms to ensure proper assessments
of risk and focus management attention on high risk areas
Appropriately qualified CFO, with necessary infrastructure, to provide expert assistance
Clearly defined responsibilities for all officials
Internal audit and audit committee
Support for the Accounting Officer
Systems and procedures must be:Effective, efficient, economic and
transparentPrevent unauthorised, irregular, fruitless
and wasteful expenditure as well as fraudBe well documented, Regularly evaluated, Made available to all
Empowering Responsible Managers
User friendly rules required to impose effective sanctions, if needed
Let managers manage But hold them accountable
Empowering Responsible Managers