Unauthorised Expenditure Presentation by: National Treasury, SA 19 June 2006

Outline of Discussion Definition of unauthorised expenditure Principle for dealing with unauthorised expenditure Procedure for the treatment of unauthorised expenditure Criteria for approval of unauthorised expenditure Criteria for non approval of unauthorised expenditure Additional funding / against funds allocated for future years Cluster discussion Conclusion

Definition of unauthorised expenditure Pre 2000/01 in terms of the Exchequer Act 1996 Overspending of a vote or a main division within a vote Expenditure that was not made in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the purpose of the main division

Principle for dealing with unauthorised expenditure Unauthorised expenditure must be authorised by the relevant legislature (before it can become a charge against a Revenue Fund) either by providing additional funds or as a charge against funds allocated for the subsequent financial years. Unauthorised expenditure should be treated as a current asset in the statement of financial position until such expenditure is approved by the relevant authority, recovered or written off as irrecoverable

PROCEDURE FOR THE TREATMENT OF UNAUTHORISED EXPENDITURE Unauthorised expenditure discovered by the accounting officer Accounting officer must immediately report in writing in terms of sec 38(1)(g) to National Treasury and in terms of Treasury Regulation (TR) 9.1.2 in the monthly report as required in terms of sec (40)(4)(b) Accounting officer must in terms of sec 38(1)(h) take effective and appropriate disciplinary steps (in determining steps, TR 9.1.3 must be taken into account)

PROCEDURE FOR THE TREATMENT OF UNAUTHORISED EXPENDITURE Unauthorised expenditure must be reported in the annual report (as a note to the financial statements) in terms of TR 9.1.5 Division: Budget Office in consultation with the Division: Public Finance submit a report to Parliament (SCOPA) on unauthorised expenditure as reported in departmental annual reports and advise on approval/non-approval additional funds/charge against funds allocated for future financial years (sec 34)

PROCEDURE FOR THE TREATMENT OF UNAUTHORISED EXPENDITURE either or Parliament does not approve unauthorised expenditure in terms of sec 34 SCOPA recommends to Parliament to approve unauthorised expenditure in terms of sec 34(1) & (2) Additional funds; Charge against future years Unauthorised expenditure must be recovered from the person responsible in terms of TR 12.7 Prepare legislation for tabling in Parliament (normally by way of a Finance Bill) If the amount is irrecoverable, the accounting officer can write the debt off in terms of TR 11.4. Amounts written off must be disclosed in the annual financial statements.

Criteria For Approval Of Unauthorised Expenditure Effective and appropriate disciplinary steps against officials who made or permitted an unauthorised expenditure Funds in excess of appropriation were spend in accordance with the programme descriptions of the department on essential services which could not be avoided (value for money) Remedial steps taken by the accounting officer to prevent further occurance of unauthorised expenditure Funds not spent in accordance with the purpose of a main division or a vote but related to the objectives of the department (technical transgression) No fraudulent / corrupt activities present in making or permiting the expenditure

Criteria For Non Approval Of Unauthorised Expenditure No disciplinary steps were taken against officials responsible for or permitted an unauthorised expenditure Funds spent in excess of the vote on non-essential services (wasteful) Funds not spent in accordance with the purpose of a main division or a vote and which are unrelated to the objectives of the department Unauthorised expenditure where fraudulent / corrupt activities were present

Additional funding / Against funds allocated for future years Availability of funds within the total expenditure framework Ability of department to fund approved unauthorised expenditure within future years allocations Unauthorised expenditure not approved must be recovered or written off as irricoverble against future years allocations

National Departments Unauthorised Expenditure Clusters Preceding Years 1998/ 1999 1999/ 2000 2000/ 2001 2001/ 2002 2002/ 2003 2003/ 2004 Total Central Government Administration 67 019 5 519 32 001 39 104 48 647 229 657 30 360 452 308 Financial and Administrative 37 774 7 249 18 664 4 154 121 937 4 370 1 591 195 739 Social Services 11 705 979 822 1 263 - 14 769 Justice Services 431 564 38 609 61 013 3 683 25 350 152 865 41 092 754 175 Economic Services 7 681 9 887 16 065 7 12 345 32 246 78 230 TOTAL 555 743 62 243 128 566 48 211 208 279 386 892 105 289 1495 221

National Departments Unauthorised Expenditure Status Finance Act SCOPA Recommend Direct Charge SCOPA Not Recommend Outstanding TOTAL Central Government Administration 982 140 089 46 893 264 343 452 308 Financial and Administrative - 195 739 Social Services 12 135 2 634 -0,4 14 769 Justice Services 30 078 109 567 427 411 187 119 754 175 Economic Services 928 43 240 34 062 78 230 44 123 491 269 474 304 485 506 1495 221

Central Government Administration Unauthorised Expenditure Status Finance Act SCOPA Recommend Direct Charge SCOPA Not Recommend Outstanding TOTAL Presidency 982 5 120 - 16 6 118 Foreign Affairs 12 256 6 879 19 136 Home Affairs- 15 281 Provincial and Local Government 66 388 Public Works 41 044 46 893 257 448 345 385 Total 140 089 46 893 264 343 452 308

Presidency and Foreign Affairs Unauthorised Expenditure Overspending Financial statement was revised (R15,3 thousand) Foreign Affairs Increased protocol services (R6,9 million)

Public Works Unauthorised Expenditure Overspending Provision of land and accommodation for amounts exceeding budget (R144.1m) Theft and losses Replacement value (R111.7m) Savings (R28.7m)

Central Government Administration Unauthorised Expenditure Status Outstanding Recommended Not recommended Presidency 16 Direct Charge Additional Funds - Foreign Affairs 6 879 Home Affairs- Provincial and Local Government Public Works 257 448 Total 264 343

Financial and Administrative Service Unauthorised Expenditure Status Finance Act SCOPA Recommend Direct Charge SCOPA Not Recommend Outstanding TOTAL GCIS - 6 965 National Treasury 167 Public Enterprises 26 165 SAMDI 4 370 Statistics SA 158 072 Total 195 739

Social Services Unauthorised Expenditure Status Finance Act SCOPA Recommend Direct Charge SCOPA Not Recommend Outstanding TOTAL Heath 10 468 - Labour 1 260 -0,4 1260 Social Development 1 667 540 2 208 Sport and Recreation 833 Total 12 135 2 633 14 769

Justice and Protection Services Unauthorised Expenditure Status Finance Act SCOPA Recommend Direct Charge SCOPA Not Recommend Outstanding TOTAL Correctional Services 29 438 42 656 - 72 094 Defence 20 346 427 411 48 066 495 823 Justice and Constitutional Development 640 46 565 139 053 186 258 Total 30 078 109 567 187 119 754 175

Defence Unauthorised Expenditure Non-compliance: procedure and regulations Rental of photocopiers (R5,5 million) Overspending Peace support operations (R26,0 million and R14,3 million)

Justice and Constitutional Development Unauthorised Expenditure Non-compliance: procedure and regulations Personnel expenditure increased (R5,2 million) Witness Protection Unit entered into lease agreements (R0,8 million) Overspending Administration of courts – personnel (R23,9 million) Administration of courts – (R63,0 million and R46,1 million) is not recommended Although the state did not suffer losses, better budget control could have prevented overspending Budget shortage addressed in 2003/04 budget

Justice and Protection Services Unauthorised Expenditure Status Outstanding Recommended Not Defence 48 066 Direct Charge Additional Funds/Con. Budget 2006/07 - Justice and Constitutional Development 139 053 Total 187 119

Economic and Infrastructure Dev. Unauthorised Expenditure Status Finance Act SCOPA Recommend Direct Charge SCOPA Not Recommend Outstanding TOTAL Agricultural - 663 Communication 9 Environmental Affairs and Tourism 673 100 773 Housing 642 Land Affairs 254 1852 7 2 113 Trade and Industry 1 787 33 383 35 171 Transport 23 970 Water Affairs and Forestry 14 889 Total 927 43 240 34 062 78 230

Economic and Infrastructure Dev. Unauthorised Expenditure Status Outstanding Recommended Not Agricultural 663 Direct Charge Additional Funds/Con. - Communication 9 Environmental Affairs and Tourism Housing Land Affairs 7 Budget 2006/07 Trade and Industry 33 383 Direct Charge Additional Funds Transport Water Affairs and Forestry Total 34 062

Agricultural and Communication Unauthorised Expenditure Overspending Exceeded delegations (R136 thousand) Additional workshops and seminars (R527 thousand) Communication Non-compliance: procedure and regulations Filling of post without advertising (R9,0 thousand)

Land Affairs, and Trade and Industry Unauthorised Expenditure Overspending Lephotsoana II Trust open day celebrations (R7,0 thousand) Trade and Industry Tender procedures (R0,376 million) - not recommend National Pavilions1999/2000 (R0,6 million) - not recommend EMIA Exhibition (R11,5 million) - recommend GEIS-Intershore (R14,2 million) - recommend

Conclusion Amounts recommended by SCOPA will be captured in a Finance Act Practice note will be issued to provide specific rules and procedures relating to unauthorised expenditure, to be applied by an entity in preparing and presenting financial statements. Annual process will be formalised by the Directorate; Expenditure, Budget Office to monitor and evaluate the unauthorised expenditure for the annual SCOPA meetings