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Alignment of the Infrastructure Delivery Cycle with the Budget Cycle and Strategic Planning Cycle

Alignment of the Infrastructure Delivery Cycle with the Budget Cycle and Strategic Planning Cycle. Prepared by the Infrastructure Delivery Improvement Programme (IDIP). State of the Nation Address 2005.

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Alignment of the Infrastructure Delivery Cycle with the Budget Cycle and Strategic Planning Cycle

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  1. Alignment of theInfrastructure Delivery Cyclewith the Budget CycleandStrategic Planning Cycle Prepared by the Infrastructure Delivery Improvement Programme (IDIP)

  2. State of the Nation Address 2005 “Certainly it is a reflection of weaknesses in the governance system that the plans to build school infrastructure are unfolding at a much slower pace than envisaged.”“We need massively to improve the management, organisational, technical and other capacities of government so that it meets its objectives.” President Thabo Mbeki – State of the Nation Address 2005

  3. State of the Nation Address 2006 “We cannot allow that government departments become an obstacle to the achievement of the goal of a better life for all because of insufficient attention to the critical issue of effective and speedy delivery of services.”“Integration of planning and implementation across the government spheres is therefore one of the prime areas of focus in our programme…” President Thabo Mbeki – State of the Nation Address 2006

  4. The Infrastructure Delivery Improvement Programme (IDIP) • IDIP is a continuous improvement programme which guides & capacitates to improve infrastructure delivery • IDIP is coordinated by National Treasury in partnership with DBSA, DPW & CIDB • IDIP provides flexible tools that can be adapted to the province & sector • IDIP is a key strategy of government to address inadequate capacity and skills in the infrastructure sector

  5. Continuing under expenditure of infrastructure budgets. Inappropriate expenditure patterns characterized by the 4th Quarter expenditure spike. Currently there appears to be very little alignment between the Infrastructure Delivery Cycle and either the Budget Cycle or the Strategic Planning Cycle. Currently the budget for large multi-year projects is committed to 1 financial year instead apportioning the budget across the MTEF. Problem Statement

  6. This presentation covers the following topics: The Strategic Planning Cycle The Budget Cycle The current Infrastructure Delivery Cycle The improvements to the Infrastructure Delivery Cycle The alignment and interdependence between these 3 cycles An overview of the Infrastructure Plan,Infrastructure Programme Management Plan (IPMP), & Infrastructure Programme Implementation Plan (IPIP) Budget allocation for Infrastructure Delivery Programmes Managing cashflows across years to ensure 100% effective expenditure Benefits & Challenges Overview of Presentation

  7. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) Year 1 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 2 Budget Year 3 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 1 Budget Year 2 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 1 Budget Year 2 Budget Year 2 Budget Year 3 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 3 Budget APP For Year 1 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 1 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 1 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 1 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 3 Fiscal Years Election Election Election 5 Year Election Mandate 5 Year Election Mandate 5 Year Election Mandate Electoral Cycle Planning & Budgeting 5 year Strategic & Performance Plan detailing Targets & priorities 5 year Strategic & Performance Plan detailing Targets & priorities 5 year Strategic & Performance Plan detailing Targets & priorities • Five-year Strategic and Performance Plans • Annual Performance • Plans and Budgets • (with 3 Year MTEF) LEGEND: APP – Annual Performance Plan

  8. Draft Budget Update Budget Final Budget Implement Budget AFS AR Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft APP Draft 2 APP Final APP Q1 PR Q2 PR Q3 PR Q4 PR Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Q1 PR Q2 PR Q3 PR Q4 PR Draft Budget Update Budget Final Budget Implement Budget Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q1 PR 3 Year MTEF Period MTEF Budget Cycle 31 Aug Mid Dec 17 Feb 31 Mar Financial Reports (Section 32 PFMA) & Non-Financial Data Reporting Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Q1 PR Q2 PR Q3 PR Q4 PR Budget Allocation Letter (Nov) MTEC Hearings (Sept) Budget Day (15 Feb) LEGEND: Planning Processes Implementation Processes Closure Processes APP – Annual Performance Plan AFS – Annual Financial Statements AR – Annual Report PR – Performance Report

  9. 3 Year MTEF Period MTEF Budget Cycle These are all the concurrent budget activities that need to be undertaken in any 1 year Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Q1 PR Q2 PR Q3 PR Q4 PR Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep MTEC Hearings Budget Allocation Letter Q1 PR Q2 PR Q3 PR Q4 PR Budget Day Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep LEGEND: Planning Processes Q1 PR Q2 PR Q3 PR Q4 PR Implementation Processes Draft Budget Update Budget Final Budget Implement Budget Closure Processes APP – Annual Performance Plan Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep AFS – Annual Financial Statements Q1 PR AR – Annual Report PR – Performance Report

  10. Budget Allocation Letter 3 Year MTEF Period MTEF Budget Cycle • The following information is used as input to prepare the budget: • Draft Budget due 31 August • Annual Financial Statements from last year due 31 May • 1st Quarter Report from this year due mid July • Updated Budget due mid December • 2nd Quarter Report from this year due mid October • Final Budget due 17 February • Budget Allocation Letter • 3rd Quarter Report from this year due mid January Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Q1 PR Q2 PR Q3 PR Q4 PR Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft APP MTEC Hearings Budget Allocation Letter Q1 PR Q2 PR Q3 PR Q4 PR Budget Day Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft Budget Update Budget Final Budget Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep LEGEND: Planning Processes Q1 PR Q2 PR Q3 PR Q4 PR Implementation Processes Draft Budget Update Budget Final Budget Implement Budget Closure Processes APP – Annual Performance Plan Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep AFS – Annual Financial Statements Q1 PR AR – Annual Report PR – Performance Report

  11. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) MTEF (3 years) Year 1 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 1 Budget Year 2 Budget Year 2 Budget Year 3 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 1 Budget Year 3 Budget Year 2 Budget Year 3 Budget APP For Year 1 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 1 APP For Year 2 APP For Year 2 APP For Year 3 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 1 APP For Year 3 APP For Year 2 APP For Year 3 Fiscal Years Election Election 5 Year Election Mandate 5 Year Election Mandate Electoral Cycle Planning & Budgeting 5 year Strategic & Performance Plan detailing Targets & priorities 5 year Strategic & Performance Plan detailing Targets & priorities • Five-year Strategic and Performance Plans • Annual Performance • Plans and Budgets • (with 3 Year MTEF) Infrastructure Plan Update (10 Year Plan) Infrastructure Plan Update (10 Year Plan) Infrastructure Plan Update (10 Year Plan Infrastructure Plan Update (10 Year Plan) Infrastructure Plan Update (10 Year Plan) Infrastructure Plan Update (10 Year Plan) LEGEND: APP – Annual Performance Plan Etc, etc, etc

  12. Infrastructure Delivery Cycle Rollover Budget Cumulative Cashflow Time 3 Year MTEF Period Current Infrastructure Delivery Cycle Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget 100% Better supervision of infrastructure projects undertaken by government will be introduced, to ensure that capital budgets are spent without roll-overs - President Thabo Mbeki - State of the Nation Address 2006 With the current Infrastructure Delivery Cycle, expenditure during the 1st half of the year is virtually impossible since most projects are still in the tender phase. The result is the 4th quarter expenditure spike and overall under-expenditure.

  13. Infrastructure Delivery Cycle Each Infrastructure Delivery Cycle is characterized by under-expenditure and rolled over unspent budgets Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update IPMP IPIP O&S Plan O&S O&S 3 Year MTEF Period Current Infrastructure Delivery Cycle Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Improved Infrastructure Delivery Cycle Budget Speech LEGEND: O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan

  14. Infrastructure Programme Management & Implementation Plans(IPMP & IPIP) Client Department (CD) • FUNCTIONS OF CD: • Planning • Procurement • Programme Management • Monitoring & Reporting Infrastructure Plan Update SDA with IA 1 IPMP Update SDA with IA 2 IPMP issued to IAs Implementing Agent IA 1 Implementing Agent IA 2 IPIP for IA 1 IPIP for IA 2 IPIPs respond to IPMP FUNCTIONS of IAs: • Programme Management • Project Initiation • Procurement 4. Project Implementation 5. Project Completion 6. Monitoring & Reporting

  15. Infrastructure Delivery Cycle Infr. Plan update IPMP IPIP O&S Plan O&SPlan O&SPlan 3 Year MTEF Period Current Infrastructure Delivery Cycle Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Eg. Conditional Grant for FET given to DoE by NT Improved Infrastructure Delivery Cycle Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation Budget Speech LEGEND: O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan

  16. Rollover Rollover Budget Time Budget Budget 3 Year MTEF Period Current Project Budgeting Infr. Plan update Project Design Project Tender Project Implementation Implementation of Roll-Over Implementation of Roll-Over Retention Period Whole project budget is committed to Yr 1 100% Cumulative Cashflow Best Practice Project Budgeting Infr. Plan update IPMP IPIP Project Design Project Tender Project Implementation Retention Period Commit from Yr 2 Commit from Yr 3 Com-mit from Yr 4 Commit from Yr 1 Monthly Projected Cashflow 100% Cumulative Cashflow

  17. Infrastructure Delivery Cycle Infr. Plan update Infr. Plan update Infr. Plan update Infr. Plan update IPMP IPMP IPMP IPMP IPIP IPIP IPIP IPIP O&S Plan O&S Plan O&S Plan O&S Plan O&S O&S O&S O&SPlan O&S O&SPlan O&S O&S Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation 3 Year MTEF Period Current Infrastructure Delivery Cycle These are all the concurrent infrastructure delivery activities that need to be undertaken in any 1 year Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Departments therefore need to have the capacity to undertake all these concurrent activities. Infr. Plan update Project Design Project Tender Project Implementation Rolled Over Unspent Budget Improved Infrastructure Delivery Cycle Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation Budget Speech LEGEND: O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan

  18. Infr. Plan update Infr. Plan update Infr. Plan update Infr. Plan update O&S Plan O&S Plan O&S Plan O&S Plan These are all the concurrent activities that need to be undertaken in any 1 year by a department MTEF Budget cycle Draft Budget Update Budget Final Budget Implement Budget AFS AR Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft APP Draft 2 APP Draft Budget Update Budget Final Budget Implement Budget AFS AR Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft APP Draft 2 APP Draft Budget Update Budget Final Budget Implement Budget AFS AR LEGEND: APP – Annual Performance Plan Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep AFS – Annual Financial Statements AR – Annual Report Draft Budget Update Budget Final Budget Implement Budget PR – Performance Report Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft APP Draft 2 APP Infrastructure Delivery Cycle IPMP IPIP Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation IPMP IPIP Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation IPMP IPIP Project Design Project Tender Project Implementation Monitoring & Evaluation LEGEND: O&S Plan – Organisation & Support Plan IPMP – Infrastructure Programme Management Plan IPIP – Infrastructure Programme Implementation Plan IPMP IPIP Project Design Monitoring & Evaluation

  19. Considering a cycle with a common year of implementation Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep Draft APP Infr. Plan update IPMP IPIP Project Design Project Tender Project Implementation Monitoring & Evaluation Infrastructure Delivery Cycle Budget Cycle Common year of implementation The inputs to the Budget process are the AFS from last year as well as the Quarterly Reports from this year. MTEF Budget cycle It is clear that the Infrastructure Delivery Cycle is a longer cycle & that infrastructure planning leads the budget planning process by 1 year. Draft Budget Update Budget Final Budget Implement Budget AFS AR Draft APP Draft 2 APP Final APP Q1 Rep Q2 Rep Q3 Rep Q4 Rep And the project tendering & implementation feed into the implementation of the budget, quarterly reporting & the AFS. Therefore Infrastructure Planning & project design also become inputs into the Budget Planning process. Infrastructure Delivery Cycle Infr. Plan update IPMP IPIP Project Design Project Tender Project Implementation Planned Multi-year Commitments Monitoring & Evaluation The Draft APP in turn becomes an input into the current year’s infrastructure planning & IPMP update.

  20. Infr. Plan update Infr. Plan update O&S Plan O&S Plan 3 Year MTEF Period Current year’s infrastructure delivery activities Planned Multi-year Commitments Monitoring & Evaluation Project Implementation Monitoring & Evaluation Project Design Project Tender Monitoring & Evaluation IPMP IPIP • The Infrastructure Plan sets out the infrastructure priorities for the next 10 years. It is updated annually on the basis of the: • Targets and priorities set out in the Strategic Plan & Annual Performance Plan • The anticipated MTEF Budget, and • The progress of the current projects. Budget Speech

  21. Infrastructure Programme Management Plan (IPMP) Infr. Plan update Infr. Plan update Infr. Plan update Infr. Plan update O&S Plan O&S Plan O&S Plan O&S Plan IPMP IPIP O&S O&S IPMP IPIP O&S O&S IPMP IPIP O&S 3 Year MTEF Period Current year’s infrastructure delivery activities • The IPMP sets out in detail the work for the next 3 years. • It is based on the updated Infrastructure Plan as well as the Draft Annual Performance Plan (APP). Planned Multi-year Commitments In Year 1 (Very detailed) Monitoring & Evaluation Project Implementation Planned Multi-year Commitments In Year 2 (Less detailed) Monitoring & Evaluation Monitoring & Evaluation Project Design Project Tender Project Implementation Planned Multi-year Commitments In Year 3 (even less detailed) Monitoring & Evaluation Monitoring & Evaluation Monitoring & Evaluation IPMP IPMP IPIP Project Design Project Tender Project Implementation Planned Multi-year Commitments O&S O&S Monitoring & Evaluation Monitoring & Evaluation Monitoring & Evaluation Project Design Project Tender Project Implementation Monitoring & Evaluation Monitoring & Evaluation Project Design Project Tender Budget Speech Monitoring & Evaluation NB: The total value of the work in each year must equal the Annual Budget for each year

  22. Infrastructure Budget Allocation 3 Year MTEF Period Project Implementation Budget = TOTAL INFRASTRUCTURE BUDGET – Planned Multi-year Commitments – Project Design & Tender (10%) – Infrastructure Planning (1%) – Funding of O&S Plan Planned Multi-year Commitments Project Implementation Planned Multi-year Commitments Project Design Project Tender Project Implementation Planned Multi-year Commitments Infr. Plan update IPMP IPIP Project Design Project Tender Project Implementation Planned Multi-year Commitments O&S Plan O&S O&S Infr. Plan update IPMP IPIP Project Design Project Tender Project Implementation O&S Plan O&S O&S Infr. Plan update IPMP IPIP Project Design Project Tender Budget Speech O&S Plan O&S O&S Infr. Plan update IPMP IPIP O&S Plan O&S

  23. Example of Programme Budget to commit entire Annual Budget

  24. Managing Cashflows Across Years In reality the neat chunks of work shown on the earlier slides are actually individual projects or clusters of projects with different start & end dates Some projects or clusters of projects in the current year can be delayed causing potential under expenditure Project Implementation Planned Multi-year Commitments Project Design & Tender Project Implementation Planned Multi-year Commitments Project Design & Tender Project Implementation IPMP IPIP But here we have clusters of projects that have been designed and are ready to go to tender Infr. Plan update IPMP IPIP NB: The total value of the work in this year equals the Annual Budget for this year

  25. Managing Cashflows Across Years Project Implementation Planned Multi-year Commitments Project Design & Tender Project Implementation Planned Multi-year Commitments Project Design & Tender Project Implementation IPMP IPIP We need to tender these projects earlier and start implementation in Year 1 to offset the potential under expenditure caused by the delayed projects Infr. Plan update IPMP IPIP

  26. Better linkage with Strategic Planning is achieved Better alignment of the budget with the targets set out in the Strategic Plan Project planning & design is properly done resulting in achievable & realistic cashflows Multi-Year commitments are planned and budgeted for thereby reducing rollovers Improved clarity of roles & responsibilities between client departments and implementing agents Identified Benefits

  27. Programme Manager with required skills is required Planning for built environment Quality Control Contract Procurement Commitment by political heads to only implement what is on the Infrastructure Plan Understanding that if a project is entered as a new priority onto an Infrastructure Plan in Year 0 it must follow due process before implementation can begin Possible Challenges Infr. Plan update IPMP IPIP Project Design Project Tender Project Implementation

  28. That the Infrastructure Delivery Cycle be amended to include the Infrastructure Programme Management Plan (IPMP), the Infrastructure Programme Implementation Plan (IPIP), and the Service Delivery Agreement (SDA), and that these plans be made mandatory for all departments. That the timeframes of the Infrastructure Delivery Cycle be amended to allow for the alignment of the Infrastructure Delivery Cycle with the Budget Cycle so that departmental budgets are informed by actual projects. This means that plans for projects must be finalized in the year before the budget is prepared. Recommendations (1)

  29. That best practice budgeting processes be adopted so that budgets for large projects are appropriately committed across the duration of the project. In other words, multi-year projects must be appropriately budgeted over multiple years, and not budgeted for in a single year only, which results in roll-overs. This will enable budgets to be fully spent each year, and roll-overs to be avoided. It also means that Client Departments and Public Works must be willing to enter into contractual commitments for multi-year projects, and to budget for these projects over multiple years, rather than budgeting for the whole project in the first year. In addition, it must be accepted that this means that a portion of each year’s budget will have to be allocated to commitments from previous years. Recommendations (2)

  30. Thank You

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