Unauthorised Expenditure Presentation by: National Treasury to PCOF March 2007

Outline of Discussion Definition of unauthorised expenditure Principle for dealing with unauthorised expenditure Criteria for approval/non approval of unauthorised expenditure Finance Bill 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.

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 spent 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 occurrence 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 permitting the expenditure

Criteria For Non Approval Of Unauthorised Expenditure No disciplinary steps were taken against officials responsible for permitting 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

Summary Unauthorised Expenditure Schedule 1 + 2 of the Finance Bill Clusters Preceding Years 1998/ 1999 1999/ 2000 2000/ 2001 2001/ 2002 2002/ 2003 2003/ 2004 Total Central Government Administration 792 71 747 32 001 27 082 5 898 2 569 - 140 089 Financial and Administrative 36 204 97 121 937 4 370 1 591 164 199 Social Services 1 362 439 822 10 2 633 Justice Services 2 899 586 50 227 1 364 41 642 96 718 Economic Services 6 940 16 526 33 655 12 345 69 466 TOTAL 48 197 89 395 116 705 28 456 140 180 48 581 473 105

Finance Bill SCOPA Recommendation: R313,6 million (schedule 1 of Finance Bill) unauthorised due to deviations from tender procedures in terms of Exchequer Act (These funds were previously surrendered and will have no additional expenditure implications) R159,5 million (schedule 2 of Finance Bill) due to overspending in terms of PFMA (This will become an additional charge against the NRF) Finance Bill (section 77 Bill) to give effect to SCOPA recommendation Funds will be withdrawn as a direct charge against the National Revenue Fund

Conclusion Annual process will be formalised by the Budget Office to monitor and evaluate the unauthorised expenditure for the annual SCOPA meetings The next finance act will deal with few cases still outstanding from 1998/99 – 2003/04 and new cases emanating from 2004/05, 2005/06 Unauthorised expenditure for 2006/07 will only be considered after the financial statements have been audited