RETENTION OF SURPLUSES AND COST CONTAINMENT MEASURES

CFOR FORUM AND AFS TRAINING RETENTION OF SURPLUSESAND COST CONTAINMENT MEASURES Office of the Accountant-General Presenter: Moipone Ramoipone | National Treasury | 02 March 2016

RETENTION OF SURPLUSESLEGISLATIVE FRAMEWORK • Section 53(1) of the PFMA – AA for 3A and 3C public entity must submit to the EA responsible for that public entity, a budget of estimated revenue and expenditure for that financial year for approval of the EA; and • Section 53(3) of the PFMA – schedule 3A and 3C public entities may not budget for a deficit and may not accumulate and retain surpluses unless the prior written approval of the National Treasury has been obtained.

BACKGROUND • The National Treasury issued a Treasury Instruction 03 of 2015/2016 on 12 August 2015 dealing with retention of surpluses; • The aim of this instruction was to amongst other: • Enforce the provisions of section 53(3) of the PFMA; • Ensure a consistent interpretation and application of section 53(3) of the PFMA; • Ensure correct declarations, payments and reporting

PROCESS TO BE FOLLOWEDBY ACCOUNTING AUTHORITIES 31 July 30 Sep 31 May 31 Aug 31 March Adjustments 2nd Request if AFS were adjusted Year End Declaration of deficits/ cash surplus: and Request to retain cash surplus from the previous year Surrender cash surplus if approval to retain was not granted by the relevant Treasury No cash surplus, declare “Nil” return Audit report

COST CONTAINEMENT MEASURES THE COST CONTAINMENT MEASURES INDICATED IN THE BELOW SLIDES REFLECT THE REVISED AND PROPOSED COST CONTAINMENT MEASURES

ENGAGEMENTS OF CONSULTANTS A new provision – • Institutions must include a clause in their bid documentation that consultants will be remunerated in line with the rates determined by the body indicated in the Treasury Instruction on cost containment.

ENGAGEMENTS OF CONSULTANTSCONTINUED • Current Treasury Instruction - consultants to be remunerated at rates not exceeding those determined: • by the DPSA ; • by AGSA and SAICA; and • by the body regulating the profession of the consultant • Above prescribed rates will not apply to international consultants remunerated in foreign currency; and • Institutions must always use the lowest consultancy rates;

ENGAGEMENTS OF CONSULTANTSCONTINUED • Rates of consultants must be task based and not based on the individual(i.e. partner performing manager`s work should be charged at a manager`s rate); • Agency/outsourcing obligations must be managed – ensure that it does not cost more than in-house performing the same tasks; and • Professional person providing construction & infrastructure services must remunerated strictly using the rates prescribed by the body regulating their profession;

ENGAGEMENTS OF CONSULTANTSCONTINUED • Consultants travel arrangement must follow the government travel cost containment measures (air travel, vehicle hire, accommodation rates, claiming of Kilometres be in line with rates set by the Department of Transport); • AO/AA to ensure that when consultants are appointed on a time and cost basis, both the AO/AA and the consultant agree on an overall ceiling figure prior to the contract being concluded indicating if the total price will be inclusive of consultants travel and subsistence cost or not; • A different travel & subsistence arrangement be utilized for international consultants – must also be subject to cost containment measures.

TRAVEL AND SUBSISTANCE A new provision – • Institutions must include a clause in their bid documentation that travel agencies will only be allowed to make bookings for travel arrangements of government employees in line with the government cost containment measures dealing with: • Purchasing of air travel tickets; • Booking of domestic hotel accommodation; • Hiring of vehicles; and • Claiming of kilometres. Travel agencies must be aware and use lower tariffs for government and use correct booking codes

TRAVEL AND SUBSISTANCEAIR TRAVEL • All employees of institutions must only purchase economy class air tickets for all flight that are less than 5 hours; • Business class air tickets may be purchased for the following additional functionaries : • non-executive members serving on any governance committee of departments and constitutional institutions- for flights exceeding 5 hours.

TRAVEL AND SUBSISTANCEAIR TRAVEL: CONTINUED • AO/AA are permitted to purchase business class tickets for non-qualifying persons only in certain circumstances: • for employees with disabilities; • for employees with special needs; or • where economy class ticket is not available • Support staff of Ministers including personal assistants will not be permitted to purchase business class air tickets for flight less and above 5 hours; and • VIP protection unit will also not be permitted to purchase business class air tickets for flights less and above 5 hours. Approval of the AO/AA will be granted after verification of supporting documents supporting the existence of these exceptions

TRAVEL AND SUBSISTANCEDOMESTIC HOTEL ACCOMODATION • Domestic hotel accommodation is revised from R1300 per person per night (including dinner, breakfast and parking) to the following new rates which focuses on a reduction of commission charged by travel agents:

TRAVEL AND SUBSISTANCEVEHICLE HIRE VEHICLE HIRE LIMITED TO CATEGORY B VEHICLE • The next higher group category of a vehicle may only be hired if: • three (3) or more employees are travelling together for the same official business; and • employees return trip to be travelled exceeds 400 kilometres; • Employees can accept upgrades on vehicles hired only if its offered free or at a lower charge than a group B category vehicle.

CATERING EXPENSES • Revised provision on catering- allows catering for meetings which lasts for 5 continuous hours or more; • This provision will not apply to the hosting of: • Conferences, workshops, indabas, courses, forums, training sessions and hearing; • Meetings related to commissions and committees of inquiry; and • Meetings arranged by accounting officers of public entities, including governance committee meetings.

SOCIAL FUNCTIONS TEAM BUILDING, YEAR END FUNCTIONS AND OTHER SOCIAL RELATED FUNCTIONS ARE PROHIBITED • Farewell function is permitted for employees: • proceeding on retirement after reaching the qualifying age limit of a minimum of 10 or more years working in the public sector; or • proceeding on retirement due to ill health. • Farewell functions are not permitted for employees who have: • been dismissed; • accepted a voluntary severance package; and • approached the end of their contracts • This provision will not apply to AO/AA and heads of departments (appointed on a contractual basis)

ENTERTAINMENT ALLOWANCE LIMITED TO THE MAXIMUM OF R2 000 PER QUALIFYING PERSON • Amount of R2 000 to be retained for qualifying persons; • Increase the amount of R2 000 to R 4 000 for the following persons: • Accounting Officers; • Accounting Authorities; and • CEO’s.

COST CONTAINMENT MEASURES RELATED TO THE HOSTING AND ATTENDANCE OF CONFERENCES

HOSTING OF CONFERENCES WITHIN THE BORDERS OF SA Review of planned conferences • AO/AA to conduct a review of costs to determine anticipated conference expenditure by 31 March of each year for the ensuing financial year Hosting of a conference • Conference expenditure – maximum of: • These amounts will be reviewed periodically by the National Treasury;

HOSTING OF CONFERENCES WITHIN THE BORDERS OF SA: CONTINUED • DEVIATION- AO/AA must seek prior written approval of the National Treasury if the expenses related to the hosting of the conference exceeds R350, 480, and 565 per delegate per day for a 3 star, 4 star and a 5 star hotel respectively; • The motivation for the deviation must include; • The nature of the conference; • Total number of anticipated delegates; • Targeted audience; • Attendance cost per person; • Breakdown of conference expenses; • How the conference contributes to the mandate of the institution.

HOSTING OF CONFERENCES WITHIN THE BORDERS OF SA: CONTINUED • AO/AA must consider utilising government owned facilities and resources when hosting conferences within the boarders of SA; • The cost of R350, R480, or R565 per delegate per day will exclude costs related to other services required by the conference organizers: • Hiring of the venue and rooms; • Usage of other equipment; • Printing costs; • Transportation of equipment; and • Speaker fees and other costs

ATTENDANCE AT EXTERNAL CONFERENCES (WITHIN SA) • AO or AA to consider the following when approving attendance of a conference with SA: • Consistency with institution or division/business unit objectives; • Appropriate level of official; • Contribute to developmental needs of employee; and • Funds are available • The AO/AA should also consider the number of conferences attended by employees in a year

ATTENDANCE AT EXTERNAL CONFERENCES (WITHIN SA) • Conference expenses not exceeding R2500 per person per day (this amount will be reviewed periodically by National Treasury); • The R2500 excludes costs of air travel, accommodation and related expenses which must be in line with the cost containment measures • The R2500 will be inclusive of: • Conference registration costs; • Incidental costs; and • Other expenses incurred in relation to the conference • Amounts exceeding R2500 will require approval AO or AA

ATTENDANCE AT EXTERNAL CONFERENCES (OUTSIDE SA) • AO/AA may consider granting approval for employees to attend conferences hosted outside South Africa provided that: • the expenses related to the conference do not exceed R60 000 per person per conference • If expenses exceed R60 000 per person per conference, the AO may consider granting approval for approval • All approvals granted by AO/AA for expenses that exceed R60 000 per person per conference must be disclosed in the annual report

MONTHLY AND ANNUAL REPORTING • AO/AA will be required to report on a monthly basis on the implementation of the cost containment measures to the National Treasury and the Department of Performance Monitoring and Evaluation; • All conferences hosted by institutions must be disclosed in detail in the annual reports of institutions; • AO/AA to disclose in the annual report all deviations from cost containment measures; and • Internal Auditors of institutions must verify compliance with the cost containment measures.

NEW COST CONTAINMENT MEASURES TO CONSIDER Travel and Subsistence • Motor vehicle travel claims - be restricted to the actual distance travelled in excess of the normal distance from the employee’s residence to his or her place of work. • Alternative means of reaching decisions face-face must be considered (use of conference calls or video conferencing) to reduce the number of flights, accommodation and vehicle hire.

NEW COST CONTAINMENT MEASURES CONTINUED Travel and Subsistence • Institutions - make use of shuttle services if the cost of such service is below the cost of hiring a vehicle; • AO/AA should consider using shuttle services if the cost of kilometres claimable by an employee and the cost of packing at the airport is higher; and • Air travel - be properly planned for restricted airline tickets are used as opposed to the more expensive flexible tickets.

NEW COST CONTAINMENT MEASURES CONTINUED INVENTORY • Corporate branded items availed to employees - be recovered at full cost; • The National Treasury to consider a transversal contract to address printing of publications by government institutions and only certain number of publications must be printed (i.e. MP`s); and • All newspapers and other publications for employees - be discontinued.

NEW COST CONTAINMENT MEASURES CONTINUED COMMUNICATION AND ADVERTISING • Allowances to employees for private calls - be limited to a reasonable value or be limited to zero; • Allocation of cellular phones and data facilities to employees -be based on the nature of the employee`s work as opposed to the positions held; • Advertisements for vacancies -be placed through bulk advertisements, with job spec content of advert posted in detail on the institution`s website; and

NEW COST CONTAINMENT MEASURES CONTINUED Debts and losses to the state • Debt owed to the state and losses to the state - be recovered before giving any consideration to writing off those debts; Hiring of venues • Meetings, workshops, forums, conferences and similar events - be held in-house or at alternative facilities at other government institutions Training course • Only pre-approved service providers – be utilised to provide employees with sufficient quality of training and derive value for money. • E-Learning methods should be considered for in-house training.

WAY FORWARD • The revised Treasury Instruction on cost containment will be published to take effect from 01 April 2016; and • The travel policy will be published to take effect from 01 April 2016.

Graph 1: Comparison of expenditure in national departments for the periods April 2013- December 2013 and April 2014 to December 2014

Graph 3: Comparison of expenditure in national departments for the periods January 2014 to December 2014 and January 2015 to December 2015

THE END THANK YOU

RETENTION OF SURPLUSES AND COST CONTAINMENT MEASURES