1. IN-YEAR MANAGEMENT, MONITORING AND REPORTING SYSTEM (SECTION 32 REPORTS)
Provincial Budget Analysis
Intergovernmental Relations
National Treasury
08 August 2006

2. Outline Background Legal requirements In-year monitoring process
Reports generated
Practical examples

3. Background Sparked by 1997/98 financial crisis in provinces
Provinces overspent by R5,8 billion in aggregate
Monitoring system (EWS) approved by Cabinet
Change in the Budget Process
IYM to constitute:
Expenditure management
Revenue management
Cash flow management
Movements in bank balances
Suspense accounts

4. Sections 24 to 27 and 29(4) of the Division of Revenue Act, 2006 (CGs)
Legal Requirements
Section 32 of PFMA
Publishing reports on state of budgets
Section 40(4) of PFMA
Sections 24 to 27 and 29(4) of the Division of Revenue Act, 2006 (CGs)
Acts require monthly expenditure and revenue reporting to the provincial treasuries and National Treasury

5. In-year Management, Monitoring and Reporting
Accountability Cycle:
Strategic and Performance Plans
Budget
In-year monitoring (IYM) (Inform SP targets)
Quarterly Performance Reports (piloting)
Annual Reports
Purpose:
Focus on performance against budget
Alert managers where remedial action is required
Reports serve as management tool
Feed the Budget Process
Feed into publications such as the Annual Intergovernmental Fiscal Review
Political level to make decisions

6. In-year Management, Monitoring and Reporting
Monthly reports facilitate:
Flow of information
Internal control measures to deal with problems timeously (Early Warning System)
AO is more proactive
Use data to make decisions
Compilation of annual reports and financial statements which completes the accountability cycle
Assist the external auditor
Reduced timeframe for audit - strengthen accountability to legislatures
Reports consolidated and published in Government Gazette

7. Monthly Reporting Process (1)
Accounting officer must submit reports to relevant treasuries and executive authorities within 15 days of the end of each month
To improve accountability, AOs are required to sign-off on the monthly reports before submitting to relevant treasury or executive authority
Contents of reports – legal requirement (S40):
Actual revenue and expenditure
Projections for remainder of financial year
Information on conditional grants
Any material variances
Format determined by the National Treasury in terms of PFMA and annual DoRA
Revised annually

8. Monthly Reporting Process (2)
Formats –
Require variances between the actual result for the period and that budgeted
Projections to the end of the financial year
Reasons for deviations
What has happened so far?
What will happen for the rest of the year?
What actions to be taken to achieve agreed plan?

9. Monthly Reporting Process (3)
Number of steps in the process to convert the millions of individual transactions that occur as a result of government activities into the information to be published monthly
Undertake reconciliations
Check allocation of transactions
Clear errors and suspense items
Balance various type of accounts
Return date 15th of each month to provincial treasuries and 22nd of each month to National Treasury
System resources: BAS, PERSAL and Vulindlela
From 1 April 2004:
New Economic Reporting Format
Migration to BAS
Standard Chart of Account (SCOA)
Single version of the truth

10. The In-Year Monitoring Process
Dept IYM Data file + Dept IYM report signed by HOD
Provincial Treasury
Collates and imports all departmental IYM data file into treasury IYM Model (built in function) to generate provincial IYM report
Provincial Treasury updates IYM Model with all Dept IYM data files and generates IYM data file
National Treasury
Imports IYM Data file into IYM Model also receives all dept signed IYM summary reports via post before 25th of month + prov treasury spending / variance report

11. Screen Shots – IYM Model

13. Screen Shots – Section 32 Publication

14. Screen Shots – Press Release

15. Screen Shots – IYM Dataset

16. Reports Generated Section 32 Publication Press Release
Technical Committee for Finance (TCF)
Budget Council
President’s Co-ordinating Council (PCC)
Select Committee for Finance

17. Interpretation of Reports (1)
1st Quarter report (practical examples):
1st Q 2005/06 to 1st Q 2006/07 spending growth
Why low growth in Education (2,2%), in particular Personnel (1,4%)?
Why drop in expenditure from 4th Quarter in 2005/06 (R59,9bn) to 1st Quarter in 2006/07 (R38,4bn)?
Are projections a reasonable reflection of likely expenditure outcomes for the financial year?
Spending on Social Welfare Services (Social Development) at 17,7% - why lower than aggregated average?

18. Movement from 1st Quarter 2005/06 to

19. Provincial Aggregated Expenditure

20. Interpretation of Reports (2)
It should be noted that one cannot necessarily draw meaningful conclusions by only looking at the first quarter financial results given the fact that it is relatively early in the financial year
Provinces are projecting to overspent by R2,1 billion
Once anticipated provincial roll-overs, which will be reflected in the provincial adjustments budgets, are taken into account on the budget side, the overall outcome would change
The adjustments budgets are reflected in the 3rd quarter and 4th quarter publications

21. Thank You