1. FINANCIAL AND FISCAL COMMISSION
2009/2010 ANNUAL REPORT

2. The Commission
The Commission is coordinated by the Minister of Finance and consists of:
Full time Chairperson and Deputy Chairperson (nominated by National Government)
The Chairperson is also the Chief Executive and Accounting Officer of the Commission
Seven other Commissioners (two national, three provincial and two Organised Local Government [SALGA] Nominees)
All appointments are made by the President of the Republic
Current Vacancies:
Chairperson (term expired end of August 2010)
Local Government nominee (term expired June 2009)
National nominee (Member accepted appointment but never took it up- matter has been communicated to the President and Minister for attention)

3. Purpose of the Commission
Vision
To enhance the developmental impact of public resources through the financial and fiscal system in South Africa
Mission
To provide proactive, expert and independent advice on promoting a sustainable and equitable IGFR system, through the formulation and collation of policy relevant analysis, in order to realise the values of the Constitution

4. Mandate of the Commission
The Commission is established in terms of Section 220 of the Constitution of the Republic of South Africa Act No. 108 of 1996 as amended
Key enabling legislation includes:
The Financial and Fiscal Commission Act No. 99 of 1997; the Intergovernmental Fiscal Relations Act No. 13 of 2005; Provincial Tax Regulation Process Act N0 53 of 2001 and Municipal Fiscal Powers and Functions Act No. 12 of 2007
Various other pieces give effect to the Commission’s mandate on specific issues (see full report)
The primary mandate is to provide recommendations to the three spheres of government and other organs of state on
the division of revenue between and among the three spheres of government and,
Any other financial and fiscal matters

5. Commission Achievements
In the discharge of its Mandate, the Commission
Timeously
Tabled its 2009/2010 Annual Report
Tabled its 2011/2012 Submission on the Division of Revenue
Responded to the 2009 Medium Term Budget Policy Statement
Responded to the 2010 Division of Revenue Bill
Commented on the 2010 Fiscal Frameworks and Revenue Proposals
Commented on the 2010 Appropriations Bill in April 2010
Individual Commissioners and Staff published technical reports based on the work of the Commission in academic journals and thus contributed to the knowledge base on IGFR issues to the broader community

6. Commission Achievements
Implementation of the Current Research Strategy
The Commission is in the second year of implementing its 5 Year Research Strategy which extends focus from first generation issues relating to revenue sharing formulae to include second generation issues relating to the impact of the intergovernmental system on development outcomes
2009/2010 Research and the 2011/2012 Submission on the Division of Revenue focus on:
The processes necessary to adjust to the recession and global economic crisis from which the South African economy is emerging.

7. Commission Achievements
The need for cushioning the vulnerable and laying the foundations for future growth and development in this environment.
The fiscal adjustments and reprioritisation that the State will need to make in order to take the economy back to where it was before the recession without compromising access to basic services by the vulnerable groups in our society.
The Commission successfully conducted an annual review of its internal controls as well as its financial and non-financial Risk Management Framework
20011/2012 Submission on the Division of Revenue

8. Commission Achievements
The Commission once more received an unqualified audit opinion from the Auditor General
The Commission continued to engage with Parliament, Provincial Legislatures and Executives, Organised Local Government, National Government and other organs of state in briefings, hearings and other forums on its recommendations when invited to do so.

9. Commission Achievements
Some of the recommendations that the Commission made in its 2010/2011 Annual Submission on the Division of Revenue and Government’s Response to them are the following:
Provincial Equitable Share (PES): Principles
Expenditure assignments between provinces and national government should be clarified beyond what is covered under Schedule 4 of the Constitution
There should be a clear separation of instruments in the transfer system
Government indicated that these recommendations will be considered as part of a Government-wide review of the PES.

10. Commission Achievements
Provincial Equitable Share (PES) Review: Reform Options
In the short term reform of the PES formula stay within the confines of the current constitutional dispensation
In the medium to long term the reforms should depart from the realisation that fixing the PES as a pool requires the fixing of other aspects of the current fiscal decentralisation system
Government indicated that these recommendations will be considered as part of a Government-wide review of the PES.

11. Commission Achievements
Public Infrastructure Investment and Social Assistance
Government should develop and implement a comprehensive national infrastructure maintenance strategy
Government should develop appropriate funding mechanisms through intergovernmental coordination to facilitate, integrate and sequence infrastructure planning and delivery
Social assistance should be managed in such a way as to eventually reduce dependency on the social grants
Government should use infrastructure expansion to provide opportunity for workfare programmes as well as activities identified in the Expanded Public Works Programme (EPWP)
Government agreed with all these recommendations

12. Commission Achievements
Management and Financing of Road Infrastructure
There should be an increased and stable flow of funds for maintenance, rehabilitation and addressing backlogs in the long-term
There should be greater coordination of road management functions across the three spheres of government
Priority should be given to addressing the lack of technical skills in the road management sector of sub-national governments
Government indicated that these recommendations will be considered as part of a Government-wide review of the PES.

13. Commission Achievements
Local Government Capacity Building
Local government should be central to setting the agenda for capacity-building programmes
Government must establish an intergovernmental-wide framework for understanding what constitutes a lack of capacity within the context of local government
When capacity-building interventions are undertaken with respect to different functional areas, there should be a clear separation of responsibilities, as well as coherent interface, between service authority and the service providers
Government agreed with these recommendations

14. Commission Achievements
The Commission also made detailed Submissions on:
2009 Medium Term Budget Policy Statement
2010/2011 Fiscal Framework and Revenue Proposals
2010 Appropriation Bill
Financial Management of Gauteng Provincial Legislature Bill
Seventeenth Constitution Amendment Bill
Eighteenth Constitution Amendment Bill
Money Bills Amendment Procedures and Related Matters Bill
A National Treasury Request for Comment on the Possible Continuation and/or Lapsing of Municipal Taxes (other than Property Rates) that Existed prior to the Municipal Fiscal Powers and Functions Act

15. Financial Performance and Position Indicators
Description
Movement
Variance
Remarks
Revenue
1.0%
Lower inflation adjustment
Employee Costs
16.1%
Migration to DPSA Structure
Depreciation
20.0%
Obsolete computer equipment
Professional Fees
36%
Financial constrains
Operating Expenses
12.6%
Austerity Measures imposed
Asset Base
50.0%
Liabilities
18.0%
Reduction of financial obligations
Cashflow
78.0%
Inadequate baseline allocation

16. Revenue

17. Personnel Costs

18. Professional Fees

19. Operating Expenses

20. MTEF

21. Challenges
The attraction, development and retention of appropriate skills
The Commission has had to scale down on certain necessary research projects while others have had to be put on hold because they could not be accommodated in the existing resource envelope
Implementation of the Money Bills Amendment Procedures and Related Matters Act No. 9 of 2009 has placed higher demands on the Commission by stakeholders which require extra resources if the Commission is to be able to respond effectively to the demands

22. Challenges
The Commission is, irrespective of size, obliged to comply with several pieces of legislation and these have significant budget implications
Compliance with legislated auditing requirements for example requires an ever increasing investment in internal and external audit fees currently standing in excess of five percent (5%) of the Commission’s current budget
While the Commission received an increase in the baseline, that has been transient since the bulk of the resources went towards addressing past problems.
The tight national fiscal framework and the Commission’s response
The Commission is reviewing the operating model with a view to increasing efficiencies
Budget constraints and the imposition of austerity measures will severely impact on the interaction with stakeholders

23. Challenges
The Performance Monitoring and Evaluation Approach based on Twelve Key Outcomes which has been recently adopted by Government
The approach requires a review of the broader intergovernmental transfer system in view of the cross-cutting nature of outcomes and the concomitant budget implications
The Commission as an institution has generally been left out of these processes and because of that it has to respond in after the fact to changes in the system of government and identify its position in the evolving arrangements
Corporate Governance issues afflicting the Commission that require review
Alignment of the Financial and Fiscal Commission Act to later pieces of legislation that impact on the effective exercise by the Commission of its power and authority
Reviewing the Corporate governance model implied by the FFC Act and ensuring that it conforms to good corporate governance practices such as ensuring accountability, etc

24. The End