1. SESSION 5 INTRODUCTION AND REASONS FOR REFORM SCOA TONING PRESENTED BY: NATIONAL TREASURY

2. 2 OUTLINE OF THIS SESSION Sessions 1 to 4 focused on Economic Reporting Format Introduced in the budget documentation Remaining sessions to focus on implementation of Economic Reporting Format in SCOA Practical application of ERF and SCOA Systems presentation – Shows reporting in BAS Aim of the reform Why did we change Focus areas of “Toning” project Benefits of reform

3. 3 AIM OF THE PROJECT SCOA first implemented in 2004 First time we had a standardised chart Based on various principles discussed in Session 1 Further enhancements required 3 years after implementation clear that enhancements were required Initiated a project called the “Toning” of SCOA Team appointed by Technical Committee Finance prepared proposals

4. 4 AIM OF THE PROJECT Adjusted version implemented 1 April 2008 Aim: To improve the ability to extract meaningful data for monitoring Government expenditure How: Adjustments to BAS to modify specific areas in the SCOA

5. 5 SCOA REVIEW FOCUS AREAS Improved reporting on infrastructure expenditure Alignment of programme structures between budget documentation and BAS Recording of the economic classification in an appropriate segment in the chart Classification and categorisation of Goods & Services item structure Improvement of the functional classification Monitoring Science and Technology Activities

6. 6 INFRASTRUCTURE SPENDING Substantial increase in infrastructure budgets Budget Review 2008 shows 10.3% real increase up to 2007/08 and a further 9.5% real increase over the MTEF Reporting on Infrastructure spending difficult Cannot extract data directly from BAS Old Project segment data was not standardised Problem addressed by: Standardised structure in BAS project segment Developed reporting models for data extraction

7. 7 ALIGNMENT OF PROGRAMME STRUCTURES Misalignment between budgets and systems Programmes and sub programmes in BAS different to those in the Appropriation Act Duplication of programmes on the system Investigation shows many duplications in BAS Old programmes still active Programme structures from previous financial years active Departments still posted against such programmes

8. 8 ALIGNMENT OF PROGRAMME STRUCTURES Complicates reporting Difficult to extract Section 32 reports Unable to use functionality in IYM model to upload actual spending data directly 1 April 2008 NT locked highest levels of objective in BAS Complete alignment between BAS structures and the budget Controlled by the National Treasury to ensure consistent application Departments allowed to create lower level detail

9. 9 27 active Programmes in BAS, 4 Programmes in Budget, Numerous duplications

10. 10 AUDIENCE QUESTION If a department needs another programme or sub-programme added, how should they go about getting it created in the Objective Segment? All requests for new programmes or sub-programmes must first be approved by the Relevant Treasury Once approved, these will be created within the budget during the next budget process, which could either be during the annual appropriation or the adjustments appropriation Once created as part of the appropriation process the SCOA Committee will create the appropriate structures within BAS

11. 11 GOODS & SERVICES ITEMS Analysis of G&S indicated review required Too many items, some very small 80% of spending occurs on 10 high level items Inventory & Consultants largest spending items, with limited sub level details available Inventory 27% and Consultants 14% Meaningful data for policy analysis requires appropriate detail Need to group data together like spending on Medicine SCOA item list streamlined 6 000 items down to 3 000 Inputs from CFO forums TCF SCOA Task Group

12. 12 RECORDING ECONOMIC CLASSIFICATION Misconception that Item list is the economic classification Only part of economic classification ERF recorded across different segments of BAS Classification conflicts exist within the structure For example, Transfers objectives recorded with “Current” type items Item list often only source of data for completing reports and budget submissions Economic classification created duplication in objective 4 types of objectives Moved economic classification to project segment

13. 13 FUNCTIONAL CLASSIFICATION Internationally recognised functional categories Government expenditure measured according to 10 internationally recognised functional categories Example Health in Defence Functional a subset of BAS objective structure Indicators created in BAS to identify functional classification Functions assigned to lowest level of objective Departments must do an initial identification National Treasury will review with Statistics South Africa

14. 14 MONITORING SCIENCE & TECHNOLOGY Cabinet approved Science and Technology framework Requires annual expenditure plan Data required in appropriate categories NT to provide platform for data capture within budget process and financial system Most S&T spending via projects S&T Projects to be identified during the budget or as implemented Monitoring of project implementation through indicators in BAS Monitoring process managed by Department of Science and Technology

15. 15 BENEFITS OF “TONING” PROJECT Improved data flow and data quality Annual Financial Statements, In Year Monitoring, Infrastructure Reporting, etc. Clean up of the system Redundant items and objectives, Suspense accounts, BAS User review Improved economic classification Recording of own account transactions Improved systems performance

16. 16 For any additional questions or issues for clarification, please contact the National Treasury SCOA Technical Committee at: Call centre: (012) 315 5311 E-mail: scoa@treasury.gov.za Website: http://scoa.treasury.gov.za