MTBF: South African Experience
description
Transcript of MTBF: South African Experience
MTBF: South African Experience
Ekram AhmedProject DirectorDMTBF Project
Study tour to South AfricaBackground
SA follows a mixture of developing and developed economic policies and processes
SA is a leading country in financial management reform
A pioneer in introducing MTBFA team of GoB officials visited SA in 2005 to
gain experience in SA MTBFVisit to SA in 2011 to see the progress/change
made during last 6 years after the earlier visit
Principles of PFM reforms in SAComprehensiveness and integrationPolitical oversight and a focus on policy
prioritiesUsing information strategicallyChanging behaviour by changing incentivesEnsuring budget stability and predictability
while facilitating change at the margin
Spheres of government Constitution
Establishes three distinct but interrelated spheres of government, each with an elected executive
Assigns powers and functions to each of the three spheres
Forces spheres to cooperate in the delivery of concurrent functions
Assigns revenue sources by sphere
• 1 national budget, 9 provincial budgets and almost 300 municipal budgets
• Executives decide on where to allocate resources
Functions of the spheres
National share
Provincial Share
Local Share
National Government:
• Delivers policing, foreign affairs, defence, higher education
• Makes policy
• Sets priorities through legislation, norms and standards of political statements
Provinces:
• Deliver school education, health, social welfare
• Generally fund national priorities
Municipalities:
• Deliver water, sanitation, refuse removal
• Have more autonomy on what their resources are spent on
Aspects of Budget ReformsBudget must meet three functionsSpending, Taxation and Borrowing must
support economic objectivesResources must be allocated to where
political priorities areBudget and Budget information must be tools
to improve quality and effectiveness of spending
Budget submissions review process• MTEF starts in June-July with baseline analysis
• Information sessions over the MTFC and Capital Planning guidelines including key dates are held throughout July of earlier.
• By end of July, projects from Public Entities and department with detail supporting documents are submitted to each line Ministry of
consolidation.
• Budget submission from line Ministry are then submitted to National Treasury for evaluation.
• Recommendations from the PPP unit and PF are submitted to the Medium Term Expenditure Committee (MTEC) for consideration.
• Minister’s Committee on the Budget (MinComBud) considers MTEC recommendations for submission to Cabinet
• Cabinet considers MinComBud recommendations for endorsement
• February Minister of Finance tables budget in Parliament
Role-players in the budget processRole-players in the Executive Medium Term Expenditure Committee (MTEC) Minister’s Committee on the Budget (MinComBud) Cabinet Extended Cabinet• Departments• Required by the Constitution and Intergovernmental Fiscal Relation Act: - Financial and Fiscal Commission (FFC) - Provincial governments - the Budget Council - Organised local government - the Budget Forum - Various intergovernmental forums exist at both the executive and official
level to give effect to the constitutional imperative for cooperative governance
• Relevant entities and donors• Legislatures - Portfolio Committees, Finance Committees, Appropriations Committees - National Assembly - National Council of Provinces• Provincial Legislatures
Aspects of budget reformStabilising intergovernmental system
Legislated frameworks, not specificsIntegrating intergovernmental system and
annual budget processPredictable and transparent allocative processIntergovernmental forums to improve
allocationsUse of formulae to maximise transparency and
predictability
Aspects of budget reformAdopting a multi-year budget framework and
a top-down budget processFiscal policy drives expenditure envelopesCentral role of budget frameworkCredible macro-assumptions and revenue
targetsMTEF process, the annual budget processDisciplined top-down processCounting forward projectionsUse of contingency reserve
Aspects of budget reformFocus on the margin and outer yearsPolitical oversight of the budget processAligning strategic policy development and
budgeting at sector levelUsing budget documents strategicallyA considered budget process
Aspects of budget reformA new framework for public financial
management and reportingResponsibility of individuals and ensuring
checks and balancesFinancial responsibility of executive authorityLegal underpinning for the role of Treasuries
in the budget processSystematic in-year monitoring, management
and reporting
Aspects of budget reformShortening budget cycleProviding for, but limiting, in-year flexibilitySetting clear sanctionsInternal control framework and regulating
support for accounting officersProviding for effective cash managementMindful implementation
Aspects of budget reformImproving the classification system
New economic reporting formatImproved quality of functional classificationImproved programming classificationMindful implementation
Improving budget management for service deliveryMeasurable objectives and output performance
measures
Way Forward for PFM reformMore stable public finance environmentImproved political involvement and oversightImproved policy environment and improved
performanceGreater transparency
ChallengesStrengthening the planning, budgeting and
reporting linksImproving capacity throughout the systemImproving parallel systemsReforming the financing of specific servicesIncreasing the planning and budgeting horizonIntegrating donor financing into the budgetImproving intergovernmental coordination
furtherImproving municipal financing and budgeting
1997 1
998 1999
2000
2001
2002
2003
2004 2005
MFMA
SCOA
Publication of Section 32 & CG information, MTSF
Estimates of National Expenditure & Provincial Budget Statements 1 & 2
Public Finance Management Act
Medium Term Budget Policy Statement Intergovernmental System
Medium Term Expenditure Framework
National Expenditure Survey & IGFR & MinComBud
Publication of Quarterly Performance Information
Measurable objectives
SP tabled
AR tabled
• Accounting Reform• Procurement Reform
Improving Operational& allocativeefficiency
• Stage 1: Workgroups make recommendations on the proposed budget baselines and non-recurrent expenditure for the Medium Term Expenditure Framework (MTEF) by function (disaggregated by votes within a function) and by economic classification • Align current budgets to the outcomes identified for each department • Examine the following areas to identify funding that can be reprioritized:
- Non core service delivery expenditure items
- Underperforming or non-performing programs! projects! entities
- Surpluses housed at entities
- Revenue raising! cost recovery efforts • Stage 2: Workgroups make recommendations on the MTEF additional
expenditure proposals by departments in their submissions to the National Treasury • Ensure that the recommendations proposed to the MTEC fall within the available spending envelope for the particular sector that is within the net change indicated for the sector
• To ensure that:
- multi year budgeting, with 3 year framework
- enhance consultation and cooperation with stakeholders
- budget process, starting from allocation of division of revenue
- political oversight is enhanced and focus is on key policy priorities
- top-down budgeting discipline
- budget stability and predictability
- reprioritization over time
- value for the money spent
- planning, budgeting, reporting and policy are aligned to get better service delivery within budget
- information is used strategically to improve public policy, funding choices and enable accountability
• Prior to the introduction of the MTEF and the program budgeting approach:
- There was little political oversight over budgeting
- No transparency about the budget process
- Poor information systems, inadequate to inform the budget process
- Hidden spending
- Lack of accountability by public sector managers
- Lack of macroeconomic and fiscal sustainability
- Spending not aligned across departments
- Resources not appropriately allocated to priorities
• Provide the overall Fiscal Framework based on the macroeconomic forecast.• Propose the Division of Revenue between the 3 spheres based on the above and decisions made at a political level on priorities. • Provide the technical guidelines for budget submissions. • Conduct the evaluation of those budget submissions. • Ensures that submissions reflect key government priorities. • Maintains on going communication with other central government departments. • Make recommendation to Budget Council and Minister’s Committee on the Budget (who in turn make recommendations to Cabinet and Extended Cabinet).
April
May
June
July
Aug
Sept
Oct
Policy review Departmental planning Parliament
And budgeting
Review, evaluate and decide on newmajor policyproposals
Departments prepare budget,including detailed spending
plans for new proposals
Division of RevenueAct passed
Propose fiscal and budgetframework and division
of resourcesIntergovernmental and
technical forums
Sector and focused budgethearings
Appropriation Billand Revenue Bills
passed
Table Medium TermBudget Policy Statement
Executive/s considerframeworks and divisionof resources
Nov
Dec
Jan
Feb
March
Policy review Departmental planning Parliament
And budgeting
Cabinet approvesnew MTEFallocations
National Budgettabled (includes
response to BRRR
Provincial budgets are tabled (14 days
after National budget is tabled)
Strategic Planstabled
Departments revisemedium term plans andfinalise budget inputs
Portfolio committeessubmit BRRR
reports, adopt fiscal framework, pass
Money Bills
Adoption of fiscalframework
• Should be 5-year plan aligned to broader government strategic-ideally aligned to
the electoral cycle.
• Should ideally not be changed over the 5-year period unless there are significant
policy changes relating to the mandate or the service delivery.
• Amendments: (1) a new plan can be tabled in the next tabling period or (2) an
annexure to the Annual Performance Plan.
• Strategic Plans do not replace the need for long-term planning or other more
specific plans should be used to priorities and plan the progressive
implementation of its other plan.
• Focus on strategically important issues.
• Part A: strategic overview, vision, mission, values and the strategic goals over a
5-year period.
• Part B: strategic objectives, resource implications and the risks.
• Part C: links to other plans e.g. long-term infrastructure plan, conditional grants,
review of public entities, ppp’s.
IMPACTS
OUTCOMES
OUTPUTS
ACTIVITIES
INPUTS
Manage towardsAchieving these
results
Plan, budget implement and
monitor
The developmental results of achieving
Specific outcomes
The medium-term results for specificBeneficiaries that are the consequence
Of achieving specific outputs
What we aim to change?
What we wish to achieve?
The final products, or goods and services produced for delivery
What we produce of deliver?
The processes of actions that use a range of inputs to produce the desired outputs and
ultimately outcome
What we do?
The resources that contribute to the production and delivery of
outputs
What we use to do the work?
• Aim to link the plans, budgets and the performance of an institution.• Presents program performance indicators and targets-to achieve goals
& objectives over MTBF. • Part A: recent developments in the operational environment & link
budget - for achieving strategic goals and objectives. • Part B: strategic objectives, performance indicators & targets for
programs/subprograms. • Part C: budget for infrastructure projects, changes to conditional grants, public entities and ppp’s. • Quarterly performance reports will be expected based on the quarterly
targets set in the APPs. • APPs will inform Annual Reports.
1. Improve quality of basic education.
2. A long and healthy life for all South Africans.
3. All people in South Africa are and feel safe.
4. Decent employment through inclusive economic growth.
5. A skilled and capable workforce to support an inclusive growth path.
6. An efficient, competitive and responsive economic infrastructure network.
7. Vibrant, equitable, sustainable rural communities with food security for all.
8. Sustainability human settlements and improved quality of household life.
9. A responsive, accountable, effective and efficient Local Government system.
10. Environmental assets and natural resources that are well protected and continually enhanced.
11. Create a better South Africa and contribute to a better and safer Africa and world.
12. An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship.
Specify performance indicators
Strategic planning
Implementation and in-year reporting
End-year reporting
Operational planning and
budgeting
Policy development
Oversight By Parliament, provincial legislature or municipal council
INSTITUTION
Identify desired impacts
Set targets and allocate resources
Monitor and take corrective action
Assess and adjust
Medium Term Strategic Framework
Local Government IDPs
Information from district Office
Strategic Plan
Premier’s State of the Province’ address
Sectoral Strategies and other plans
National Plans and Planning Frameworks
Annual Performance Plan
President’s State of the Nation’ address
Programme of Action
Provincial Growth and Development Strategy
Develop/Revise Measures and
Budget Programme Structures
Develop Performance Projections/Targets
Report and Asses Performance
Revise targets and Estimate performance
Budget Development
Budget ImplementationPerformance
Monitoring
Strategic Planning
Annexures: Revisions to Strategic Plan (if any)Annexures: Revisions to Strategic Plan (if any)Annexures: Other relevant informationAnnexures: Other relevant information
Part C: Links to other plansPart C: Links to other plansPart C: Links to other plansPart C: Links to other plans
Part B: Programs / sub-programsPart B: Programs / sub-programsPart B: Strategic ObjectivesPart B: Strategic Objectives
Part A: Whole department/public entityPart A: Whole department/public entityPart A: Whole department/ Public entityPart A: Whole department/ Public entity
Annual Performance PlanAnnual Performance PlanStrategic PlanStrategic Plan
VisionMissionValues
StrategicGoals
LegislativeAnd other mandates
Situational AnalysisContextual Environment Institutional Capacity
Primarily SMART Impact and Outcome Statements
with 5-Year Targete
Programme purpose StrategicObjectives
ResourceConsiderations
Risk management
Primarily SMART Output Statements with 5-Year
Targete
For
eac
h P
rogr
amm
e(a
nd s
elec
ted
sub-
Pro
gram
me)
Links to the long term infrastructure plan
Conditional grants
Public enitites and PPPs
Updated SituationalAnalysis
Revisions to legislative and other mandates
Overview of Budget and MTEF estimates
Programme purpose SMART Annual and MTEF Targets for Strategic
Objectives
Reconciling Performance Targets and Budget
For
eac
h P
rogr
amm
e(a
nd s
elec
ted
sub-
Pro
gram
me)
Links to the long term infrastructure plan
Conditional grants
Public enitites and PPPs
Programme Performance Indicators with SMART Annual and Targets
Quarterly targets for indicators (if possible)
• National Treasury issue Treasury Guidelines for the preparation of the MTEF budget process in May/June of each year.
• The guidelines amongst other things stipulates the submission dates and also start and end dates of the budget process.
• Flexibility has been provided in the budget period in order to accommodate Parliament's unique budget process which include consultation with the Minister of Finance and National Treasury, this is not the case with national and provincial departments.
• The following process is followed with respect to Parliament's submission to the National Treasury:
Parliament meet with Public Finance in a program meeting in May/June where Parliament submit its request for baseline adjustment;
Public Finance assess and evaluates the request for additional funding and make recommendations to the Minister of Finance;
Minister of Finance meet with the Speaker of Parliament and Chairperson of the NCOP to consider recommendations in August/September;
Minister of Finance approves the recommendations for additional funding and informs Public Finance;
Public Finance submit the recommendations to MTEC Committee and MinComBud;
Parliament submit the database including the additional request for funding;
Allocation letters are issued in November in preparation for the Estimate of National Expenditure (ENE);
ENE database an chapter first drafts are submitted in December and second drafts submitted in January;
ENE process finalized beginning of February and Minister of Finance tables his/her budget speech in February including the tabling of the Appropriation Bill and Division of Revenue Bill.
In 2009 Parliament passed the Financial Management of Parliament Act, (Act No.10 of 2009).
• The Act aims to:
- Promote and maintain a high standard of professional ethics in the financial management of Parliament;
- Promote the efficient, economic, and effective use of resources allocated to Parliament;
-Ensure the transparent, accountable and sound management of the revenue, expenditure, assets and liabilities of Parliament.
• Chapter 3 : Planning and Budgeting deals with the following:
- Submission and preparation of Strategic Plan;
- Submission and preparation of Annual Performance Plan;
-Submission and preparation of the Annual Budget;
- Consultation with the Finance Minister and National Treasury with regard to the Budget.
• Budget analysts from the National Treasury work closely with institutions throughout the Budget process depicted above to assist them in finalizing
their budget submissions
• The Budget Office in the National Treasury are the coordinators of the budget process and issue budget guidelines and templates for expenditure estimate submissions at different stages in the budget cycle
• Public Finance and Intergovernmental Relations Divisions in National Treasury contains Budget analysts who liaise with departments, assist them in the preparation of expenditure estimates in accordance with guidelines issued and monitor budgets and policies
• Each department has a Finance/Budget Division with their own staff complement
• These departmental staff members communicate with relevant Treasury units during the budget process
• PFMA implementation plans included performance management
• PFMA gave departments responsibility to spend within approved
budgets and against policy/performance commitments
• PFMA requires measurable objectives by program
• VFM is arguably the hardest thing to achieve through the budget
• NT has no direct say in how a department spends its money or how services are delivered, and cannot impose sanctions for poor spending
• Our philosophy has been that if we force departments to report on performance alongside spending, then parliament, the public, the media can play a role in improving the quality of spending
- It's all about accountability, which is not a financial management issue
but a political issue
• Many budget reforms deal with reporting on performance in some way - Parliament not always equipped to deal with these reports
• The value for money agenda is an area where we have made progress, this is the area where the Treasury spends most of its resources and is the area of major focus in budget reform agenda
• Using various indicators in conjunction with financial information, it is then only possible to assess optimality of resource allocation
• Different levels of indicators are useful for different purposes
• For our concerns the following indicators will be of use: crime rates, cases to court, number of police officers, number of officers having completed specific training courses
• Optimal resource mix may differ from one geographical area to another
• Considers financial and non-financial information which best describes the policy objectives and plans of spending
program and an assessment of whether the objectives and targets have been achieved thus far.
• Data sources:
- use the previous year's Estimates of National Expenditure (ENE)
- the Strategic Plan
- the Annual Report of the department
• Framework provides for:
- Structures, systems and processes required for performance information
- Roles and responsibilities for performance information:
Departments, Presidency, National & Provincial treasuries, Stats SA and Public Service and Administration, among others
- Promoting accountability and transparency by providing Parliament, with timely, accessible and accurate performance information
- Standardizing terminology on performance information
The Framework for Managing Performance Information provides guidance on Programme Performance Information which is part of the Government-wide Monitoring and Evaluation System (GWM&E)
Programme Performance Information
Evaluations
Census andSurvey Information
• Department of Performance Monitoring' under the President's Office is responsible for monitoring national outcome indicators (12 such outcome indicators have been set by the present government).
• Line departments (ministries) are responsible for monitoring output indicators set for agencies working under them and have to report to the Treasury in prescribed format periodically.
• Treasury centrally oversees the actual achievements against targets and reports to the Parliament on regular basis.
• Auditor General's Office verifies authenticity and correctness of information sent to the Treasury by line ministries/agencies on achievement of performance of the output indicators.
In-year reporting on non-financial results
• The purpose is to report on overall progress made with the implementation of the department’s performance plan both on a quarterly and an annual basis.
• QPR allows Accounting Officers to track progress against what has been planned and what is actually achieved to service delivery outputs.
• The Treasury Regulations have been amended to reflect the requirements of the Framework.
• Departments must submit a copy of their quarterly performance reports to National Treasury & DPME within 30-60 days after end of each quarter.
• Owing to weakness in many departments management systems, institutions may in the interim revise their reported numbers for a given quarter in the following quarterly performance report.
Formal requirement for end-year reporting
• Ultimate accountability document in government.
• Aligned with other planning document.
• Provides information to legislatures so they can exercise proper oversight –
linked to what was originally planned in annual performance plans.
• Records, reports and evaluates the past year’s performance
- Part A: Legislative Oversight Role
- Part B: Performance (Non-financial Data)
- Part C: Financial Statements – Auditors Report
- Part D: Human Resource Data
• Publish information so that civil society can engage with government
meaningfully.
• National Treasury provides ‘Guidelines for Annual Reporting’
• Analyzing alignment and consistency between what is reported in the SP,
APP, QPR, Budget documents and Annual Reports.
• Information reported for a 7-year period (i.e. 3-year history, current year
and MTBF).
• In-year progress report during the AENE process.
• Annual Report to reflect on what is reported in the plans and budget
documents.
• Parliamentary portfolio committees analyze the Annual Reports and engage
with specific departments.
• The Auditor General has started with Auditing of Performance Information - department then have to improve their processes.
Supply Chain Management
Asset Management
Extended Asset Management
Inventory Management
Finance
General Ledger
Bank
Interface
Business Intelligence/
Management Information
System
Master Data Management
Item
Identification
Standard Chart of
Accounts
OracleDB2
IFMS Hub - Glassfish
Procurement Management
Module
Oracle
Fusion
Human Resource
Management
SAP
PI
• Financial Management Reform (PFMA)
• User requirement specifications
• Institutional re-organization (Change management of SITA as PSI).
• Architectural design
PAYROLL(Develop)
HUMAN RESOURCE MANAGEMENT (Buy
COTS)
ASSETMANAGEMENT
STOREMANAGEMENT
OTHERSCM
MODULES
PROCUREMENT(Buy COTS)
SUPPLY CHAIN MANAGEMENT
Develop
GENERAL LEDGER/ FINANCIAL MANAGEMENT
(Develop)
BUSINESS INTELLIGENCE /MIS
(Develop)
OTHER DEPARTMENTALCORE SYSTEMS(Not part of IFMS)
• National Treasury, South Africa used a homegrown macroeconomic model composed of a group of supplementary models.
• Parliament extensively participates in the budget formulation process through a committee system.
• Citizen participation in the budget has been institutionalized in South Africa through an organization called ‘Nedlac’.
• Initiate the process of replacing its old fashioned line budgeting with program budgeting to establish a more visible linkage between government’s policy.
• Introduced a technical evaluation system for budget bids so that projects can be efficiently identified and funded accordingly.
ConclusionPolitical commitment to budgeting and financial
management reform is a mustNeed a simple framework and transparent normsNeed comprehensive implementationMaking sure that PFM reform mattersConvince stakeholders about its seriousnessStrong central agency responsibility for reformsBuilding capacity on demand and support its
developmentEarly demonstration of success