Introduction
The Joint
Budget Committee (JBC) was established by resolution of both Houses with a
mandate to, amongst other things:
·
On a regular basis monitor monthly-published actual revenue
and expenditure per department and ascertain whether they are in line with
government projections
In
monitoring expenditure the JBC has typically utilized expenditure figures as
provided in monthly and quarterly National Treasury Statements on National Revenue,
Expenditure and Borrowing, published in terms of Section 32
of the Public Finance Management Act (PFMA) and reported to the Houses
quarterly.
PFMA Section
32 reports are an important resource as they provide a high-level overview of
expenditure the information they contain is nevertheless limited. This affects
the “in-year” monitoring capability of the JBC and other committees; especially
in respect of determining and tracking expenditure.
In response
to a JBC recommendation National Treasury undertook to revise and expand the
content of Section 32 reports. Together with the development of the Framework
for Managing Programme Performance Information, the refinement and expansion of
Section 32 reports is considered an important initiative in consolidating
Parliament’s monitoring and oversight functions.
On Friday 12
October the Joint Budget Committee held a workshop with National Treasury to
assess progress made with the revision of Section 32 reports. To introduce and
contextualize the meeting, Treasury was requested to provide a short briefing
on the latest expenditure reports – from April to August – of the current
financial year. Owing to the importance and consolidation of “in-year”
monitoring as an aspect of parliamentary oversight, the Chairpersons of all
portfolio and select committees as well as relevant procedural and research
staff were invited to attend.
Amongst the
key issues noted during the workshop was the need for the JBC to further
consider and clarify its monitoring role in relation to other committees. In
addition, as Treasury reporting practices are still being developed, further
engagements with National Treasury and other stakeholders will be required in
future. This report should therefore be considered interim – to be followed by
supplementary reports once
The report
is accordingly divided into two sections. The first provides a brief summary of
year-to-date expenditure whilst the second examines the revision of PFMA
Section 32 reports.
Section One: Year-to-Date
Expenditure – April to August 2007
The presentation by National
Treasury examined year-to-date expenditure – for five months from April to
August 2007 - in terms of consolidated, national and provincial categories.
Figures for September were still being compiled and were therefore excluded
from the analysis.
National Expenditure
According to the Main Appropriation
Act and 2007 Estimates of National Expenditure, the budget for the year totals R534
billion, of which R90 billion was allocated for current expenditure, R202.6 billion for Transfers and
Subsidies and R6.6 billion
for capital. R231 billion were Direct Charges, mostly comprised on the
equitable share, with the remainder set aside as contingency.
To date, total expenditure appears
on track at R218 billion, 41.3% of the budget – 0.3% below the five-month
benchmark of 41.6%. Of this, current expenditure is at R32.4 billion, 36% of
the allocated budget – R5 billion or 5.6% below the benchmark. Capital expenditure
is at R1.6 billion, 24% of the budget, R1.1 billion or 17.1% below the
benchmark.
In terms of departmental
expenditure, departments with the largest variances between actual and
projected spending include:
Provincial
Expenditure
In aggregate, provincial spending
also appears on target with expenditure of R80.3 billion or 38.1% of their
budgets. Treasury noted that the provinces were expected to overspend their
budgets by a total R2.3 billion but this should be considered against
anticipated roll-overs and the impact of recent multi-year
salary agreements.
In terms of specific provincial
expenditure, the
Conditional grant spending, although
showing improvement over previous years, was also noted as relatively low at 30.7%
of the allocated budget. Specific grants that showed rates include:
The Committee observed that
expenditure figures were not available for general purpose or Schedule 4 Grants
- provided though Section 29 of Division of Revenue Act. Despite technical
reasons for this, the Committee stressed that this posed a challenge for
effective monitoring and oversight.
The Committee further noted that
provincial forecasting required attention, with many forecasts seemingly not an
accurate reflection of likely expenditures. One explanation for possible
inaccuracies could be that, on the basis of inflated projections, provinces
could request additional funds during the Adjustments Budget.
Section Two: The Revision of PFMA
Section 32 Reports
Budget reforms and the adoption of
the Public Finance Management Act (PFMA) in 1999, specifically Sections 32 and
40, established the framework for “in-year” reporting and monitoring. This
framework serves as an early warning system and allows for the tracking and
management of government expenditure, revenue, cash flows and movements in bank
balances.
In terms of parliamentary oversight,
“in-year”
monitoring provides a bridge between the strategic and appropriation phase, which usually
occurs in the first and second parliamentary terms, and the annual
performance review, in the last term. Monitoring expenditure therefore presents
one fundamental way through which Parliament can track government performance
and provides an important starting point for more detailed enquiries into
policy outcomes and delivery.
Section 32 of the PFMA prescribes
the following:
1. Within
thirty days after the end of each month, the National Treasury must publish in
the National Government Gazette a statement of actual revenue and expenditure
with regard to the National Revenue Fund.
2. After
the end of a prescribed period, but at least quarterly, every provincial
treasury must submit to the National Treasury a statement of revenue and expenditure with regard to the revenue
fund for which the treasury is responsible, for publication in the National
Government Gazette, within 30 days after the end of the prescribed period.
3. The
statements must specify the following amounts and compare those amounts in each
instance with the corresponding budgeted amounts for the relevant financial
year:
a) The
actual revenue for the relevant period, and for the financial year up to the
end of that period;
b) The
actual expenditure per Vote (distinguishing between current and capital
expenditure) for that period, and for the financial year up to the end of that
period and;
c) Actual
borrowings for that period, and for the financial year up to the end of that
period
4. The
National Treasury may determine –
a)
The format of the statement of revenue and expenditure; and
b) Any other detail the statement the must
contain.
Section 40(4) states:
The Accounting Officer of a Department must –
a)
each year before the beginning of
the financial year provide the relevant Treasury in the prescribed format with
a breakdown per month of the anticipated revenue and expenditure of the
department for that financial year and;
b) each
month submit information in the prescribed format on actual revenue and
expenditure in the preceding month and
the amounts anticipated for that month in terms of (a); and
c)
within 15 days of the end of each
month submit to the relevant Treasury and the executive authority responsible
for the department –
i)
the information for that month;
ii) a projection of expected expenditure and
revenue collection for the remainder of the current financial year; and
iii) when necessary, an explanation of any
material variances and a summary of the steps that are taken to ensure that the
projected expenditure and revenue remain within budget.
National Treasury
has generally met its obligation in terms of PFMA and published monthly and
quarterly reports within the specified period. In addition to the Section 32
Reports, the Adjusted Estimates of Expenditure, released in October, also
include details of departmental spending for the first half of the year whilst
the main Estimates, tabled with the Appropriation Bill, include preliminary
expenditure outcomes.
Although
Section 32 reports provide a high-level “snap-shot” of expenditure, revenue and
borrowing, the information they contain in nevertheless limited. In response to
a JBC recommendation that the content of Section 32 Reports be revised and
expanded – noted in the JBC Workshop Report on Budget Analysis, tabled on 16
May (ATC 44-2007) and the Expenditure Report for the First Quarter of 2007/08 –
National Treasury proposed the introduction of a quarterly National Programme
and Economic Classification Report.
According to
Treasury, the purpose of this report is to provide detailed “in-year” spending
information in a readable format. The proposed report would include
figures on:
•
Actual spending compared to budget per vote and
year-on-year trends;
•
Actual spending compared to budget per economic; classification
and year-on-year trends;
•
Accumulated cash flow balances per month.
·
Expenditure by Vote:
•
Programmatic actual spending compared to budget and
projected expenditure including variance from projection with reasons from
departments for abnormal deviations;
•
Economic classification actual spending compared to
budget;
•
Departmental receipts
•
Departmental cash management information including
monthly balances, drawings and expenditure with carry-overs.
The
introduction of the quarterly National Programme and Economic Classification
Report in the prescribed format will assist Parliament to scrutinize
departmental financial management and performance more closely and
consistently. To ensure that these reports include the necessary detail and assist
Parliament, it was noted that further engagements with Treasury on the format
of reports may be necessary.
In terms of
the format it was noted that PFMA quarterly provincial reports include
narrative-style analysis. In addition to the detail that will be provided in the
quarterly National Programme and Economic Classification Reports, the
possibility of a quarterly narrative-style report pertaining to the national
sphere could be developed over the long-term. The possibility of amending the
PFMA to formalize new practices and the option of tabling Section 32 reports as
opposed to publication in the Government gazette also require further
consideration.
The
Vulindlela Management Information System
In
presenting on framework for “in-year” reporting and monitoring,
National Treasury also briefed Members on the Vulindlela Management Information
System launched in 1997. Vulindlela consists of a database of consolidated financial
information derived from different sources. It therefore provides a central
repository of detailed spending and budget information, from 2001/02 financial
year, for each Vote and provincial department and is in accordance with the
Standard Chart of Accounts. It furthermore provides revenue and asset and
liability information.
Treasury
indicated that training was offered on the Vulindlela Management System. Given
the apparent usefulness of such a system for Parliamentary monitoring and
oversight, consideration could be given to training Parliamentarians, staff and
researchers on use of the database.
Conclusion: Monitoring
Expenditure and the Role of the Joint Budget Committee
As noted in the
introduction to this report, the pending revision of PFMA Section 32 reports
has important implications for Parliamentary “in-year” monitoring and oversight
generally but specifically in relation to the functions and practices of the
JBC visa-a-vi other committees.
In
fulfilling its monitoring and reporting functions and reviewing government
expenditure through Section 32 reports – to date the JBC has focused on
expenditure rather than revenue, payments or cash flows – the Committee adopted
the approach of analysing general trends and, in respect of concerns
identified, issued recommendations. To alert the Houses to areas of concern
the Committee identified,
and solicited explanations from, the highest and lowest spending departments in
terms of total, current, transfer and capital expenditure.
The revision
of Section 32 reports, and specifically the inclusion of explanatory detail,
will therefore allow for more comprehensive and timely reporting by the JBC to
include, for example, reflections on government revenue and
cash flows.
Finally, the expansion of Section 32
reports will assist other parliamentary committees in their oversight work.
Importantly, as noted by the JBC in previous proceedings, although
the JBC is specifically mandated to monitor government revenue and spending, it
is nonetheless apparent that the various portfolio and select committees could
themselves benefit from first-hand engagements with “in-year” reports, making
enquiries were necessary.
Report
to be noted.
THE JOINT BUDGET COMMITTEE WORKSHOP
DATE: 12 OCTOBER 2007
TIME: 09H00-13H00
VENUE: OLD ASSEMBLY CHAMBER
Documents
I.
Treasury Presentation on In-Year
Monitoring: Outline and Annexure
II.
Statement of the National Treasury
Revenue: Expenditure and Borrowing as at 31 August 2007
III.
Draft National
Programme and Economic Classification Report
Co-Chairpersons
LL Mabe (NA) (ANC)
BJ Mkhaliphi (NCOP) (ANC)
Joint Budget Committee: Attendance
LL Mabe (NA) (ANC)
R Mashigo (NA) (ANC)
G
Schneeman (NA) (ANC)
B Mkongi (NA) (ANC)*
Y Wang (NA) (ANC)
M Swart (NA) (DA)
L Zita (NA) (ANC)*
BJ Mkhaliphi
(NCOP) (ANC)
Z Kolweni (NCOP) (ANC)
T Ralane (NCOP) (ANC)
D Robinson (NCOP) (DA)
Apologies
L Chikunga (NA) (ANC)
J Fubbs (NA)(ANC)
J Schippers
(NA) (ANC)*
M Van Dyk (NA)
(DA)
M Robertson (NCOP)
(ANC)
Joint Budget Committee Support Staff
P Hahndiek (Committee
Secretary)
L Nxelewa (Committee
Assistant)
K Mfono (Research
Unit)
Delegation from National Treasury
R
R Lemmer (National
Treasury: Director Provincial Budgets)
* Alternates
**
The meeting was also attended by
a number of other parliamentary staff and guests.
Members of Parliament
J
Cronin (PC
Transport)
M
Rubben (PC Agriculture
and Land Affairs)
C
Johnson (PC Justice
and Constitutional Affairs)
O
Kasienyane (PC Labour)
C
Nkuna (PC
Agriculture and Land Affairs)
D
Bloem (PC
Correctional Services)
B
Komphela (PC Sports and
Recreation)
N Newhoudt-Druchen (JMC:
Improvement of Quality of Life and Status of Children, Youth and Disabled
Persons)
S
Erasmus (SC Sports and
Recreation)
L Balie (PC
Correctional Services)
G
Oliphant (PC Science
and Technology)
G
Gomomo (PC Public
Services and Administration)
M
Booi (PC Safety and Security)
M Morutoa (JMC: Improvement of
Quality of Life and Status of Women)
P
Tshwete (PC Arts and
Culture)