Portfolio Committee on Public Works National Parliament Budget Analysis Workshop 23 March 2010

1. Portfolio Committee on Public WorksNational ParliamentBudget Analysis Workshop23 March 2010 Facilitated by AFReC Applied Fiscal Research Centre (Pty) Ltd

2. 2 Outline Recap of fiscal oversight function of Portfolio Committees Financial and Non-Financial Budget Analysis Oversight over implementation of PFMA, Money Bills Amendment Procedure and Related Matters Act, Government Immovable Asset Management Act Oversight over Department�s and Entities� new Strategic and Performance Plans (2009-2014) Oversight over the Key Strategic Areas for Public Works for 2009 � 2014 Suggested Fiscal Oversight Questions to ask

3. 3 Re-cap of fiscal oversight functions of Portfolio Committee on Public Works Consider bills introduced Deal with departmental budget votes Money Bills Amendment Procedure and Related Matters Act (2009) Public Finance Management Act (PFMA) 1999) Oversee the work of the department they are responsible for: Strategic and Performance Plans, Annual Performance Plans, Budget Analysis, MTBPS statements, Annual Reports, Quarterly Reports, Site Visits, etc. Government Immovable Asset Management Act (GIAMA) (2007) Enquire and make recommendations on any aspect of the department and its entities

4. 4 Oversight: PFMA (1999) Section 27(4) of PFMA: Measurable Objectives for each main division (programmes) to be submitted when annual budget is tabled by the AO. Treatment of personnel costs: Personnel costs must be met within the departmental budgetary allocation for the MTEF Transfer payments: AO must ensure that transfer payments to entities are used for their intended purposes Measures to be put in place include: Regular reporting procedures Internal and external audit requirements Regular monitoring procedures Inspection visits and reviews of performance

5. 5 Oversight: the Money Bills Amendment Procedure and Related Matters Act (2009) Describes procedures to amend money Bills before Parliament Division of Revenue Bill Appropriation Bill Adjustments Appropriation Bill Taxation Laws Amendment Bill Other money Bills Administrative support Committees to submit Annual Budgetary Review and Recommendation Report (BRRR) after the adoption of the Appropriation Bill and prior to adoption of reports on the Medium Term Budget Policy Statement (MTBPS) [Section 5(4)]. The procedure hinges on the constitutional obligation of Parliament to maintain oversight of the exercise of national executive authority. [see Preamble and section 2.] Therefore the annual assessment of national departments by the National Assembly through its committees provides the starting point of the procedure. In this respect the Act requires committees of the Assembly to submit annual budgetary review and recommendation reports (BRRR) after the adoption of the Appropriation Bill and prior to the adoption of the reports on the Medium Term Budget Policy Statement (MTBPS) [Section 5(4)]. This period is usually between June and November. The Minster of Finance and the relevant member of Cabinet are informed of the assessment. Parliament�s reporting on the MTBPS is the next oversight element in the procedure [Section 6 ]. The BRRR and the reports on the MTBPS serve as an indication whether amendments might be proposed to the fiscal framework and the budget Bills when these are introduced the following year. In fact, when the Minister of Finance introduces the national annual budget, a report to Parliament setting out how the Division of Revenue Bill and the national budget give effect to, or the reasons for not taking into account, the recommendations contained in the BRRR and the reports on the MTBPS. [Section 7(4)]. The context to amend the fiscal framework, and thereafter the Division of Revenue Bill, is now set. Reference: Parliament, 2010The procedure hinges on the constitutional obligation of Parliament to maintain oversight of the exercise of national executive authority. [see Preamble and section 2.] Therefore the annual assessment of national departments by the National Assembly through its committees provides the starting point of the procedure. In this respect the Act requires committees of the Assembly to submit annual budgetary review and recommendation reports (BRRR) after the adoption of the Appropriation Bill and prior to the adoption of the reports on the Medium Term Budget Policy Statement (MTBPS) [Section 5(4)]. This period is usually between June and November. The Minster of Finance and the relevant member of Cabinet are informed of the assessment. Parliament�s reporting on the MTBPS is the next oversight element in the procedure [Section 6 ]. The BRRR and the reports on the MTBPS serve as an indication whether amendments might be proposed to the fiscal framework and the budget Bills when these are introduced the following year. In fact, when the Minister of Finance introduces the national annual budget, a report to Parliament setting out how the Division of Revenue Bill and the national budget give effect to, or the reasons for not taking into account, the recommendations contained in the BRRR and the reports on the MTBPS. [Section 7(4)]. The context to amend the fiscal framework, and thereafter the Division of Revenue Bill, is now set. Reference: Parliament, 2010

6. 6 Annual Budgetary Review and Recommendation Report (BRRR) Section 5(4): �An assessment of Department�s service delivery performance given available resources; an assessment on the effectiveness & efficiency of Department�s use and forward allocation of available resources; and may include recommendations on the forward use of resources. Implication for Committee oversight: need for proper budget analysis and in-year Monitoring & Evaluation on delivery of outputs and outcome as per Departmental plans.

7. 7 Oversight over the Government Immovable Asset Management Act (GIAMA) (2007) AFReC advises that the Committee acquires an independent costing of the Act. Without this estimate, it is problematic to determine whether the Department and its Entities receive sufficient funds to progressively comply with the Act. E.g., what would be the cost for government to have fully updated and operational asset registers in place? E.g., what would be the cost to monitor the implementation and evaluate the impacts of the Act on service delivery?

8. 8 Need for analysis of non-financial performance projections of department Budget Statement should stipulate performance information, namely strategic goals, strategic objectives, and performance indicators (measuring outcomes) and performance measures (measuring outputs). Strategic and Performance Plan (SPP) should indicate long-term goals and objectives. Annual Performance Plan (APP) should link SPP and budget with annual planned targets. Poor specification of performance information invariably results in non- and/or under-reporting in quarterly and annual reports. To achieve effective oversight, depts. & entities must have quantified core outputs with associated timelines.

9. 9 Budget Analysis: analysis of financial and non-financial information Financial analysis: deals with the size, weights, and trends in budgets E.g.: are the MTEF allocations to DPW sufficient to meet predetermined objectives? Are the splits and trends in functions (budgets per programmes) and economic classification (Compensation of Employees, Goods & Services, Transfers & Subsidies, Capital Payments) sufficient to address predetermined objectives? Non-financial analysis: deals with the performance against predetermined objectives E.g.: are Department�s and Entities� strategic goals/objectives clear and linked to 2010/11 priorities? E.g.: is the staff compliment and skills sufficient to implement the programmes?

10. 10 Financial Budget Analysis: Committee to deal with the Budget of Vote 6 Consideration of main estimates (DoRA and ENE): Division of Revenue Bill - info on grants to institutions (evaluate spending of grants and outputs), and Appropriation Bill � info on spending per individual departmental programme and their aims per standard chart of accounts (SCoA) Departmental ENE (budget vote/statement) � info in appropriation bill in a format that mimics info in an annual performance plan

11. 11 Weights of allocations per Economic Classification Increasing allocations to Transfer & Subsidies