Portfolio Committee on Public Works

National Parliament

Budget Analysis Workshop

23 March 2010

Facilitated by

AFReCApplied Fiscal Research Centre (Pty) Ltd

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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

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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

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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

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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)].

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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.

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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?

8Need 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.

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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?

10Financial 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

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Weights of allocations per Economic Classification

Increasing allocations to Transfer & Subsidies

Weights of allocations per Economic Classification

0%

10%

20%

30%

40%

50%

2009/10 2010/11 2011/12 2012/13

Compensation of Employees

Goods & Services

Transfers & Subsidies

Payment for Capital Assets

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Increasing trend in Transfers & Subsidies

To what extent has the AO ensured that transfer payments to entities are used for their intended purposes? (PFMA requirement)

To what extent have the following measures to be put in place include (PFMA requirements):• Regular reporting procedures?• Internal and external audit requirements?• Regular monitoring procedures?• Inspection visits and reviews of performance?

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Weights of allocations per Functional Classification

Weights of allocations per Functional Classification

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2009/10 2010/11 2011/12 2012/13

1. Administration

2. Immovable Asset Management

3. EPWP

4. Property & Construction IndustryPolicy Regulation

5. Auxiliary and AssociatedServices

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Year-on-year % growth per Economic Classification

Year-on-year % growth per Economic Classification

-10%

0%

10%

20%

30%

09/10 to10/11

10/11 to11/12

11/12 to12/13

Compensation ofEmployees

Goods & Services

Transfers & Subsidies

Payment for CapitalAssets

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Year-on-year % growth per Functional Classification

Year-on-year % growth per Functional Classification

-50%

0%

50%

100%

150%

200%

09/10 to10/11

10/11 to11/12

11/12 to12/13

1. Administration

2. Immovable AssetManagement

3. EPWP

4. Property & ConstructionIndustry Policy Regulation

5. Auxiliary andAssociated Services

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Non-financial information analysis

Are performance measures and indicators clear and measurable?• E.g. “Percentage of asset register with complete and

accurate data and information out of the present 108 752 properties”

• Yes, provides absolute and relative figures, but • E.g. “Number of youths participating in the national

youth service programme per year”• Not clear what “participating” means.

In general, is there a clear alignment between goals and objectives within and between Strategic and Performance Plan (SPP) and Annual Performance Plan (APP)?• Need for future terms of reference to assess this

There needs be a better differentiation between immediate and intermediate outcomes in the Budget Statement of Vote 6.

17Key Strategic Areas for Public Works

in 2010/11 Budget Statement:

• “Mandate of Department - articulated in GIAMA. Objective of the act is to ensure efficient and effective immovable asset management within government, to improve service delivery.

• Department responsible for:• provision of official accommodation for all national

departments and all MPs, providing construction and property management services to client departments at the national level.

• providing leadership for and coordinating the EPWP” But the Strategic and Performance Plan (SPP)

and Annual Performance Plan (APP) need to clearly articulate strategic goals, objectives and the linkages between programme outputs and outcomes with these predetermined objectives

18Key Strategic Areas for Public Works

in 2009/10: how well did the Department do in terms of these?

“Speeding up growth and transforming the economy to create decent work and sustainable livelihoods;

A massive programme to build social and economic infrastructure;

A comprehensive development strategy linked to land and agrarian reform and food security;

Strengthening the Department’s skills and human resources base (major renewal of its skills and education system);

Intensifying the fight against crime and corruption; Pursuing African advancement and enhanced

international co-operation; Sustainable resource management and use; Building a developmental state including improvement

of public services and strengthening democratic institutions.”

19Expanded Public Works Programme

How can the Department show that the expected increase to R2.5 billion for EPWP over the 2010 MTEF period relate to additional jobs & skills created?• Proper M&E system in place?• Able to report quarterly to

Committee?

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Construction Industry Development Board

“Contractor development” is critical for the increased and sustainable roll-out of public construction projects:• How will the Board prioritise this output?• Has the Board an effective M&E system

in place to evaluate the outputs and outcomes associated with contractor development?

• Will the Board be able to report quarterly on this to the Committee?

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Issues aired by other stakeholders: South African Local Government Association

(SALGA) SALGA Budget Week Workshops:

• Municipal property rate debt owed by Provincial Departments of Public Works to municipalities (for example R40 million in Limpopo); severely constraining small municipalities ability to address backlogs.• Is the Department prioritising the payment of

these debts?• Will the Department facilitate liaison between

Provincial Departments and municipalities?

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Issues aired by other stakeholders: FFC recommendations

FFC proposals/recommendation

National Treasury’s response

Increased and stable flow of funds for maintenance, rehabilitation and addressing backlogs in the long-term.Proposal to possibly include a road infrastructure component within the PES formula.Greater coordination of road management functions across the three spheres of government – revision and modification of the inter-road authority coordinating model to include all municipalities and SALGA.Introduction of a separate conditional grant specifically targeted at building technical capacity within the road management sector of sub-national governments.

This proposal will be dealt with as part of the review of the provincial equitable share formula. The proposal to expand the existing Roads Coordinating Body (RCB) may have merit as it could improve the intergovernmental co-ordination and resolve issues such as Roads Infrastructure Framework of South Africa (RIFSA).Government through its IDIP and Siyenza Manje programmes are stepping up efforts to build infrastructure capacity in provinces and municipalities.

23Post-budget tabling phase: Committee to deal with in-year

reporting Overseeing budget implementation:

• Departmental monthly expenditure reports• Spending money before budget is passed and limits• Alignment of spending with original and revised plans

• Departmental quarterly performance reports• Output achievements in relation to plans

Consideration of supplementary estimates• Unforeseen spending• Virements• Additional capital expenditure requests

24End of year reporting: Committee to deal with

annual reports Consideration of annual reports

• Financial information (SCOPA?)• Non-financial information (evaluations)

Oversight coordination• Work of portfolio committee in relation

to that of SCOPA, Finance Committee and Joint Budget Committee

Reports consideration and debated in the National Assembly

25Requirements for Annual Reports

PFMA, 1999 Public Service Regulations, 2001 (amended 2004) National Treasury Regulation 18.3, 2005:

• “…include information about institution’s efficiency, economy and effectiveness in delivering programmes and achieving its objectives and outcomes against measures and indicators set out in any strategic plan for year under consideration…”

“Guidelines for Legislative Oversight Through Annual Reporting” – National Treasury, 2005:• “Key non-financial performance information is required on

‘programme performance’, which includes reports on extent to which institution delivered on its strategic plans & budget, focusing on, e.a achievement of desired outcomes (i.e. progress made in achieving stated goals & objectives…”

“Treasury Guidelines for Annual Reporting” – National Treasury, 2000:• “The information contained in AR should reflect institution’s

achievements in relation to objectives as set out in year 1 of the institution’s strategic plan and annual budget for the fiscal year in question.

In need of consolidation into single piece of legislation

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Parliament can dictate the format of the Annual Report

National Treasury Regulation 18.3 (2005) “Contents of annual reports” - In preparing the annual report of an institution, the accounting officer must, e.g:• include any additional information required by

Parliament or the provincial legislature. AFReC therefore suggests that the

Committee requires the Department & Entities to:• publish their responses to previous Committee

oversight report; and• publish their progress on priority outputs as

defined by the Committee, on first pages of Annual Report

27Non-Financial: Suggested template for evaluating quarterly and annual

performance

Programmes Number of MOs

Number of

PMs / PIs

Output Performance Measures / Service Delivery Targets

Over achieved

AchievedUnder

achieved

Un-plannedUn-reported (reflected in

APP, not AR)

1. Administration

2. Immovable Asset Management

3. EPWP

4. Property and Construction Industry Policy Regulation

5. Auxiliary and Associated Services

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Suggested fiscal oversight questions (1)

Transversal:1. Have Committee recommendations in Oversight

Reports on previous Annual Reports been implemented and/or reported on?

2. If applicable, how will Auditor-General findings be acted upon?

3. Where are the links between Departmental/Entity goals/objectives and individual Performance Contracts?

4. Is the Performance Management (information) System (PMS) robust, implemented, reported on?

5. Is their a dedicated Monitoring & Evaluation unit within Departments & Entities?

6. Will the Department & Entities be able to furnish info required by the BRRRs (Money Bills Amendment Act)?

29Suggested fiscal oversight questions (2)

Non-Financial:1. How is achievement of Strategic Goals and

Strategic Objectives (as per SPP) measured, evaluated, and reported on in Quarterly and Annual Reports?

2. How will Department & Entities ensure that same goals and objectives targeted in Strategic and Performance Plans and Annual Performance Plans be reported on in Annual Reports, in order to facilitate better oversight?

3. Specific questions related to the outputs and outcomes of EPWP, and work of CIDB.

30Suggested fiscal oversight questions (3)

Financial: Questions related to measures to monitor &

evaluate transfer payments to entities.

How can the Department indicate whether its implementation of the GIAM Act is fully funded?

How will Department ensure that Provincial Departments prioritise the payment of property rates owed to municipalities?

Vacancies, absenteeism, sick leave and employee health strategies: how are they implemented & monitored? Are they effective?

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ENDAFReC

Applied Fiscal Research Centre (Pty) Ltd

021 659 9300

www.afrec.co.za