1. Budgetary Review and Recommendation Report (BRRR)
September 2014

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

3. 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.

4. 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.

5. 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

6. 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/ BRRR Training 2014

7. 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.

8. 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.

9. 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.

10. 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

11. 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/ BRRR Training 2014

12. 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

13. 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.

14. 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

15. 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.

16. 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.

17. 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.

18. 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?

19. 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

20. 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.

21. 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

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

23. 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

24. 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

25. 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.

26. 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

27. 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

28. 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

29. 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

30. 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.

31. 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

32. 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

33. 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

34. Service Delivery Performance DHS 2013 BRRR
Programmes
Final Allocation
Expenditure
Variance
% Spent
Planned Targets
Achieved Targets
Variance/
Targets not achieved
% Targets achieved
Administration
76% 25 20 5
80%
HS Delivery Frameworks
81% 12 3 9
25%
HS Strategy and Planning 21 11 10
52%
Programme Management Unit 28 15 13
54%
Office of the CFO
98%
Office of the COO
88% 8
62%
Total
97%
128 73 55
57%

35. 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?

36. 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/ BRRR Training 2014

37. 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/ BRRR Training 2014

38. 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/ BRRR Training 2014

39. 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/ BRRR Training 2014

40. 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/ BRRR Training 2014

41. 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

42. 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.

43. 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

44. 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

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

46. 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

47. 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/ BRRR Training 2014

48. 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.

49. Thank you
Questions