Legislative Framework and Institutional Arrangements Nols du Plessis PFMA Implementation Unit National Treasury 21 June 2007

Content Principles supporting Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA) Institutional Arrangements Financial Management Model

Principles supporting PFMA & MFMA

Why a new approach with Implementation of PFMA & MFMA? Satisfy constitutional obligations Transparency and expenditure control (s216) Maximise service delivery Limited resources vs ‘unlimited’ demands

Approach before Implementation of PFMA & MFMA Financial administration : rule-bound Accounting Officer’s passive Focus on inputs Need to transform the public services

PFMA and MFMA as part of the solution Modernising financial management Enabling managers to manage Make managers accountable Clearer definition of roles Minister/Major responsible for outcomes Accounting Officer responsible for outputs Greater transparency & accountability Improved information & reporting Result - Improved value for money & service delivery

Desired Outcomes : Long Term Sound financial management systems and processes Transparent budgeting process Effective management of revenue, expenditure, assets and liabilities Unqualified financial statements, prepared on the accrual basis

Institutional Arrangements

National & Provincial Treasuries Prescribe uniform treasury norms and standards Enforce the PFMA and MFMA and any prescribed norms & standards Monitor and assess implementation of PFMA & MFMA May assist institutions in building capacity May investigate any system of financial management Must intervene by taking appropriate steps to address a serious breach of PFMA & MFMA

Executive Authorities Oversees strategic planning and approve budget submissions Consider monthly reports & quarterly reports Reporting to Cabinet/Executive Council Tabling of annual report & audit opinion Oversight over public entities Written explanations of failure to table Directives with financial implications

Accounting Officers Responsible for effective, efficient, economical and transparent use of resources Maintaining efficient, effective & transparent systems of financial management and internal control Effective system of internal audit under control of an audit committee Appropriate procurement and provisioning system Strategic planning and budgeting Exercise proper budgetary control Submission of various reports

Financial Management Model

PERFORMANCE ASSESSMENT FINANCIAL MANAGEMENT MODEL LEGISLATURE/ COMMUNITY INTERNAL CONTROL Policies & Priorities STRATEGIC PLANS Outcomes/Outputs PERFORMANCE REQUIREMENTS Medium Term Budget Process Statement of Service Delivery DELEGATIONS SERVICE DELIVERY IMPROVEMENT PROGRAMME (Standards) EXECUTIVE AUTHORITY (Outcomes) IN-YEAR MANAGEMENT AND REPORTING (Financial & non- financial) Performance Agreement ACCOUNTING OFFICER (Outputs) BUDGET (Outputs) FINANCIAL STATEMENTS/ ANNUAL REPORT Performance Agreement SENIOR MANAGERS REVIEW AND ASSESSMENT PERFORMANCE ASSESSMENT OF STAFF ASB - GRAP - GAAP INTEGRATED FINANCIAL MANAGEMENT SYSTEM - Compilation of medium term budgets and costing of outputs - Accounting system (accrual) - Creditor, Debtor, Stock and Asset Systems - Human Resource Management System - Management information system (Financial and non-financial)

DISCUSSION