Budgetary Review and Recommendation Report (BRRR) September 2014

Objectives of presentation Background Legislative requirements Translating legislation into practice Processes Conclusion: Lessons learnt

Sources of Powers and Privileges Background Constitution, 1996 Accountability and oversight Oversight mechanisms of National Assembly (section 55) Public Finance Management Act, 1999 Reporting on planning and budgeting Financial management, including AG Report.

Legislative requirements Money Bills Amendment Procedure and Related Matters Act, 2009 – to amend the National Budget Pursuant to section 77(3) of the Constitution Based on oversight obligation of Parliament Section 5 of the Money Bills Amendment Procedure and Related Matters Act provides that: The NA through its Committees must annually assess performance of each national department. Each year, Committees must submit BRRR reports for each Department for tabling in the NA.

May include recommendations on the forward use of resources BRRR Report Assess department’s service delivery performance given available resources. Assess effectiveness and efficiency of department’s use and forward allocation of available resources. May include recommendations on the forward use of resources

Chain of accountability measures Regular engagement with the executive through including budget reports – quarterlies Accessible budget related documentation Non-financial performance information that is directly linked to strategic plan of action This should not only include for example how many meetings were held it is what was purpose the identified outputs and the final outcomes Compliance with Public Finance Management Act Cost drivers to be unpacked during engagements 02/09/2014 BRRR Training 2014

Stakeholders and timelines A committee must submit its BRRR for tabling in the NA after the adoption of the Appropriation Bill and prior to the adoption of the reports on the MTBPS (i.e. October). After the NA adopts the BRRR, the BRRR must be submitted to the Minister of Finance and relevant member of Cabinet, prior to the adoption of the reports on the MTBPS.

Purpose of BRRR Tabling of National Budget – Minister of Finance must respond in a report to Parliament how the Division of Revenue and the national budget give effect to, or the reasons for not taking into account, the recommendations contained in the BRRR (section 7). A report recommending amendments to the Division of Revenue Bill (section 9) or the Appropriation Bill (section 10) must refer to service delivery improvements; and, specifically other reports adopted by the House in the latter case.

Translating legislation into practice BRRR provides an opportunity to influence budget formulation through recommendations. Ensure service delivery to improve the quality of life of the people. A tool that answers the following critical questions: Has the department achieved its strategic objectives? How effective and efficient was the use of financial resources? How effective and efficient was the use of non-financial resources? Whether there was value for money in services delivered? Service delivery performance given available resources.

Overlapping process 2013/14 2014/15 2015/16 SONA, Section 32 Expenditure Reports, 2014/15 Budget Votes, Annual Reports MTBPS Tabling on 22 October 2014 BRRR Recommendations Backward Current Forward

BRRR is an ongoing process The BRRR does not begin in August or September it is an ongoing process involving regular engagement with the department and the DDG’s and their respective responsibilities. SONA yes, the Annual Report the AGs Report previous budget performance and Budget reports and strategic plans as well as annual Performance plans. 02/09/2014 BRRR Training 2014

Scope of the Money Bills Act S 5(1) states that the NA, through its Committees, must annual assess the performance of each national department, with reference to the ff: Medium-Term Estimates of Expenditure (ENE) of each national department, its strategic priorities and measurable objectives; The expenditure report in terms of section 32 of the PFMA; Financial Statements and Annual Report of such department; and The reports of the SCOPA relating to a department; and Any other information required by or presented to the House of Parliament

BRRR Requirements Timelines: the Act states that a Committee reporting to the NA must submit its BRRR after the adoption of the Appropriation Bill (Feb/June) and prior to the adoption of the reports on the Medium Term Budget Policy Statement (tabling in Oct and submitted by a Committees 30 days after tabling). Submission: Any BRRR must be submitted to the Minister and the member of Cabinet responsible for the Budget Vote to which the report applies after its adoption by the NA.

Purpose BRRR looks at 2013/14-2015/16 financial years Committees assess and evaluate expenditure in 2013/14; 2014/15 and make recommendations for 2015/16 Review 2013/14 BRRR - any follow-up issues or recommendations that haven’t been addressed

Mandate of Committee Committee’s Constitutional mandate Mandate according to the Rules of Parliament Oversight role - to ensure a quality process of scrutinising and overseeing Government’s action The Committee monitors whether the Department fulfils its mandate. E.g.: Portfolio Committee on Social Development: conducts oversight of any organ (s) of the state and constitutional institution(s) falling within its portfolio - engages in any activities and programmes aimed at the development and delivery of quality social development to all South Africans.

Mandate of Committee Legislative – Committees process and approve legislation E.g. Social Development: portfolio Committee considers legislation referred to it and confers with the NCOP on social development legislation, including section 76 Bills; International - Consider international agreements. International protocols and conventions relating to the sector. Budgetary: Consider budget of department and entities falling within committee’s portfolio.

Mandate of Department Dept. of Social Development Department derives its mandate from: Legislation and policies - White Paper for Social Welfare (1997); Population Policy (1998). Department’s mission - “to ensure provision of comprehensive social protection services against vulnerability and poverty within the constitutional and legislative framework, and to create an enabling environment for sustainable development.

Expenditure Priorities – 2014/15 Maintaining explicit expenditure ceiling Real increases in spending within a set expenditure ceiling: 2014/15 - R1.03 trillion and 2015/16 – R1.11 trillion; Expenditure ceiling set at main budget levels - departments must operate only within their current funded establishments as much as possible Reprioritisation of funds - identify potential savings opportunities to achieve this, Do departments comply with National Treasury’s set cost-containment measures, e.g. maximum remuneration rates for consultants?

Expenditure Priorities – 2014/15 Limit current spending - saving on Goods and Services Tight control of goods and services budget – cuts on travel, catering, consultants, conferences, etc Protect goods and services for core areas of service delivery – e.g. Educational materials, medical supplies

BRRR Process Financial Performance (Cont.) Provide consolidated analytical overview of all planning documents and expenditure statements (i.e. SONA, Strategic Plan, Annual Performance Plan, Budget, committee reports, oversight reports, department’s and external stakeholder’s presentations, etc.

Annual Performance Plan BRRR Processes Annual Performance Plan Budget Strategic Plan Section 32 Reports Annual Reports Performance Reports SCOPA And SCOA Reports Committee Reports Adjusted Estimates

Financial Performance – Quarterly Expenditure Reports DHS Budget Expenditure – 2013 BRRR

Financial Performance – Quarterly Expenditure Reports Trends to highlight: Under-expenditure/over-expenditure Expenditure informed by planning documents Fiscal Dumping Spending on identified priorities without deviation

Financial Performance – Adjusted Estimates of National Expenditure Tabling of the Adjusted Estimates of National Expenditure Departments apply budget adjustments at mid- year – should be monitored to assess budget planning, management and execution. Roll-over of funds: unspent funds from incomplete projects, for which commitments have been made with service providers. Unforeseeable and unavoidable expenditure: couldn’t have been anticipated at tabling of the main budget. Savings: determine if this really is a saving or under-expenditure

Financial Performance – Adjusted Estimates of National Expenditure Virements/shifts: virements should not be more than 8% of divisional budget. Department should not move Capital expenditure or transfer expenditure to fund current expenditure - section 43 of PFMA. Function shifts - functions are shifted to another vote or institution in terms of legislation and/or following the reassignment of responsibility for the functions, the associated assets and liabilities also need to be shifted. Such shifts can also happen between main divisions (programmes) within a vote. Mid-Year performance status –reflects the Department’s mid-year service delivery performance progress against its full-year projected performance indicators.

BRRR process Financial Performance Expenditure patterns – virements, additional funds/surrender of funds, etc. Budget planning, management, and administration Expenditure trends over a period of years Compliance – Public Finance Management Act and Treasury Regulations

Financial Performance – Auditor General’s Report Audit outcomes and areas of qualification based on: Drivers of Audit Outcomes - Leadership Procurement/contact management, material losses, expenditure management Unauthorised, irregular, wasteful and fruitless expenditure Internal controls Material misstatements corrected Non-compliance with laws and regulations Predetermined objectives – performance Effective Leadership culture Oversight Responsibility HR Management Policies and Procedures IT Governance

Financial Performance – Auditor General’s Report Drivers of Audit Outcomes - Financial and Performance Drivers of Audit Outcomes - Governance Proper record keeping Processing and reconciling controls Reporting Compliance IT Systems Controls Risk Management Internal Audit Audit Committee Annual Financial Statements and notes

Service Delivery Performance Provides assessment of department’s service delivery performance, given available resources; Analysis must focus on: - Programme performance - Key reported achievements - Key reported challenges - Quarterly performance assessments - Findings during oversight visits - Stakeholder concerns: public hearings and other public participation programmes - Relevant external research assessing service delivery of the department

Finance and Service Delivery Performance Assessment – Value for Money Expenditure performance should be linked to service delivery performance Assesses whether departments have obtained maximum benefit from the goods and services it both acquires and provides with available resources. Takes quality into account value outcomes, as well as cost, resource use, fitness for purpose, timeliness and convenience Valuing outcomes include development impact and sustainability, while inputs entail costs including time, effort, financial resources Requires well-planned thorough and clear approach to activities. Accurate planning and management minimises risks of project failure when implementing programmes.

Finance and Service Delivery Performance Assessment – Value for Money Includes timeliness of service delivery Weigh up and compare overall benefit of an activity with the overall cost Procurement and SCM processes must be open and transparent. Good reporting and properly documented planning, monitoring and assessment – transparency and accountability Compliance with regulatory framework – e.g. PFMA

Assessing Value for Money Other Influences Objectives Outcomes (intended and unintended) Resources Inputs Processes Outputs Effectiveness Extent to which objectives are achieved Relationship between intended and actual impacts of service delivery Efficiency Relationship between outputs, e.g. Services, and the resources used to produce them Economy Measuring the costs of resources used while having regard to quality Cost Effectiveness Optimal use of resources to achieve the intended outcomes

Assessing overall Performance: Questions to be answered Service Delivery Performance – Analysis may entail obtaining answers to the following questions and more: To what extent has the Department met its aims, objectives and performance targets and (e.g. How many targets achieved and not achieved and why?) Quality standards? What were the reasons for any failures? - committee and research reports, and oversight visits can reveal this

Service Delivery Performance DHS 2013 BRRR Programmes Final Allocation Expenditure Variance % Spent Planned Targets Achieved Targets Variance/ Targets not achieved % Targets achieved Administration 340 197 526 257 367 884 82 829 642 76% 25 20 5 80% HS Delivery Frameworks 41 576 039 33 540 682 8 035 357 81% 12 3 9 25% HS Strategy and Planning 41 846 287 33 275 460 8 570 827 21 11 10 52% Programme Management Unit 167 709 194 86 521 850 81 187 344 28 15 13 54% Office of the CFO 24 440 076 000 23 958 807 231 481 268 769 98% Office of the COO 106 399 954 93 758 589 12 641 365 88% 8 62% Total 25 137 805 000 24 463 271 696 674 533 304 97% 128 73 55 57%

Aims Economy – minimising the cost of resources used (required) – spending less Efficiency – Relationship between output from goods and services and the resources to use them – spending well Effectiveness – relationship between the intended and actual results of public spending (outcomes) - to what extent have the outcomes been achieved and have the outputs of the policy, programme or project contributed to achieving its intended outcomes? - Spending wisely Equity – extent to which services are available to and reach all people that they are intended to - spending fairly? Sustainability - to what extent can the positive changes be expected to last after the programme has been terminated?

Process pursued by Committee Presentations by support staff Researchers provide detailed briefings to the Committee in preparation for almost ALL meetings. Including contextualising issues and analysis (including questions that could be posed by the Committee). Critically staff are provided with an opportunity before each meeting with the Department to verbally present the research to the Committee to ensure that Members are sufficiently empowered to oversee the issue effectively. 02/09/2014 BRRR Training 2014

Process of Committee continued 2. Civil Society or engagement with entities/SOE One day is spent on public hearings with invited stakeholders who present mainly on their analysis of the Annual Report of the Department. Opportunity to bring to attention of the Committee any issues or concerns that they are experiencing re functioning and or performance re how they are spending their funds. Unions are also invited as well as the Office of the Auditor General. Outside experts/academics may also be requested to attend. 02/09/2014 BRRR Training 2014

BRRR is an ongoing process As already stated the BRRR does not begin in August or September it is an ongoing process involving regular engagement with the department and the DDG’s and their respective responsibilities. SONA yes, the Annual Report the AGs Report previous budget performance and Budget reports and strategic plans as well as annual Performance plans. 02/09/2014 BRRR Training 2014

Ensuring Accountability of the Department 3. Thorough engagement with the Department The for at least three full days, noting the other divisions where possible. More than one full day focusing on the financial spending and Administration Programme Maximum of two Programmes are discussed per day (and a full day is allocated to the larger Programmes). 02/09/2014 BRRR Training 2014

Request info - Future spending requirements Request the Department to present on future financial requirements and to outline: Challenges with current allocation and spending How this impacts on performance Whether they have asked Treasury for additional funds On the basis of this requested information as well as all other information the PC has at its disposal the Committee can make targeted recommendations in the BRRR on whether they think that the Department indeed requires more or less money in the forthcoming financial year. 02/09/2014 BRRR Training 2014

LESSONS LEARNT 1. BRRR as a Process Performance assessment and compilation of the BRR Report is a process rather than a once off event Continuous process throughout the year, especially for support staff Links financial and non-financial performance, therefore can be incorporated as part of oversight activities Promote uniformity: ensure that support staff use current and/or updated template, and Compilation of the report ideally began as soon last BRRR is tabled

LESSONS LEARNT Cont… 2. Understanding the Purpose of the BRRR Shift in understanding of how BRRR process works and why it is important Move from a backward looking approach only to one that is both backward as well as forward looking. “E.g. focus was on the AG reports and annual reports” Key purpose of the BRRR is to make recommendations on future budget allocations based on past performance and expenditure. Move to an understanding that all the work that the Committee has done (in oversight visits, budget hearings, expenditure hearings, oversight meetings etc) informs the recommendations contained in the BRRR.

LESSONS LEARNT Cont… 3. Structure of the Report A template has been developed and amended to reflect best practice and improvements made over time. Promote uniformity: ensure that support staff use current and/or updated template, and Responds to the requirements of the Act – headings & sub-headings Provide analytical input e.g. oversight, budget, strategic plans, APPs, etc

LESSONS LEARNT Cont… 4. Expenditure Trends Financial performance for the financial periods covered is assessed /analysed separately There should be a consolidated overview and analysis of financial performance over a period of time to identify trends and patterns in expenditure that need to be addressed Ideally, consolidated view of financial and service delivery performance of department should be eminent to assess value for money

PERFORMANCE INFORMATION What does the information mean? What does it reveal? Linking use of financial resources to service delivery is important

ADDITIONAL INFORMATION Committees should on a continuous basis: identify and review publications or reports by external sources relevant to their sectors where these consider service delivery and spending performance This information should be included in the BRRR where relevant

Recommendations The Committee does have the opportunity to make recommendations that may amend the budget. Recommendations go to the Appropriations Committee. Something to keep in mind is that if the departmental budget is not been adopted as it is by the Committee then Recommendations are referred to the Appropriations Committee. However if the budget figures remain unchanged the Committee may make other recommendations For example service delivery identified challenges in short non-financial recommendations 02/09/2014 BRRR Training 2014

Forward Use of Resources Eliminate ineffective or wasteful expenditure - target spending on policies and programmes with greatest developmental impact Consider 2014/15 budget priorities for public service Inform forward allocation of available resources - BRRR may include recommendations on the forward use of resources.

Thank you Questions