Financial Management Support and Unauthorised Expenditure: SCOPA Briefing

1. Briefing to the Standing Committee on Public Accounts (SCOPA) DIRECTOR-GENERAL NATIONAL TREASURY 1 JUNE 2005

2. Contents of Presentation Consolidated financial information (2004) Unauthorised expenditure Role of National Treasury with regard to financial management support to departments Listing of Public Entities in terms of the PFMA Amendments to the PFMA Training of finance staff in the public service SAMDI – Financial Management Training Strategy

3. Consolidated Financial Information Section 8(3) of the PFMA provides for submission of consolidated financial statements Different bases of accounting within reporting entities makes consolidation process complex Two sets of consolidated financial information presented for the 2003/04 financial year Resulted in various qualifications by the Auditor-General Late submission of information to parliament Various measures implemented to address the abovementioned issues

4. Unauthorised expenditure

5. Unauthorised expenditure (continued) • Significant increase in 99/00 • Non-compliance with STB (R18,633 in Public Enterprises) • Over expenditure on Personnel (R43,521 in Justice) • Large increase over 2001/02 and 2002/03 • R41,768 in Public Works (budget less than contractual leasing obligation) • R121,937 overspent on Census (Statistics SA) • R227,008 in Public Works (budget less than contractual obligation) • Some decrease in 2003/04, but still significant • R40,292 for peace keeping operations not budgeted (Defence) • Contractual obligations giving rise to interest payments (DTI – R14,186) • R30,360 in Public Works (budget less than contractual obligation)

6. Unauthorised expenditure (continued) Options: Guided by • Has the State received value for money • Has any individual unlawfully gained • Rulings of STB – an individual has been negligent • Approve unauthorised expenditure and additional funds (NRF) • Approve unauthorised expenditure but recorded as expenditure against future years • Not authorised and should proceed to further investigation and attempt to recover

7. Unauthorised expenditure (continued)

8. Unauthorised expenditure (continued) The way forward: • Detail recommendations by National Treasury per individual case • Need to improve understanding of SCOPA’s requirements • Format of recommendation • Date of submission

9. Financial Management Support to Departments Section 6(2)(d) of the PFMA provides for the National Treasury to assist departments in building capacity for sound financial management CFO forums (including sector specific) to address various financial management related issues Regular visits to departments to discuss issues raised by the Auditor-General Preparation of frameworks (Internal Audit, Risk Management) and related training Preparation of templates for compiling annual financial statements and extensive training Participation in audit committees of departments Internal audit conference for national, provincial and local government Secondment of staff of the Office of the Accountant-General to ensure skills transfer

10. Listing of Public Entities • Section 47 of the PFMA provides for: • The listing of unlisted public entities by Minister of Finance • The accounting authority of a public entity to notify the National Treasury if not listed • Registrar of Public Entities within National Treasury responsible for identification of unlisted public entities • Updated list of public entities published in government gazette and National Treasury’s website on an ongoing basis – latest 11 April 2005 • Public entity review recently completed will improve processes for classification and listing of public entities

11. Amendments to the Public Finance Management Act (PFMA) • Financial management reform process was still in its initial stages of development when PFMA was enacted • National Treasury embark on long process to identify all the issues and challenges facing the PFMA • Number of amendments envisaged are numerous and largely related to: • Governance review of public entities • Alignment with MFMA • Financial management provisions in DORA • Provisions of PFMA included in Public Audit Act • Strengthening of performance accountability • The IMF’s report on South Africa’s Fiscal Transparency • Submission of amendments to parliament – October 2005

12. Training of Finance Staff in the Public Service Formal academic programmes by tertiary education institutions Providers catering for short-term training needs Framework for Future Training in Governmental Financial Management National Treasury’s Validation Board

13. Training of Finance Staff in the Public Service (continued) PFMA related courses to CFO’s and other senior officials Service Level Agreement with IPFA Implementation of reforms and related training Accounting officer’s responsibility to employ, train and retain competent staff

14. SAMDI – Financial Management Training Strategy Fulfill a more meaningful role with effect from 1 April 2005 Training strategy specifically developed for financial management Emphasis on technical financial management training and financial management training for non-financial managers Ensure SAQA compliance of training material. Monitor and evaluate training programmes Key focus areas for financial management training identified by National Treasury National Treasury will provide assistance to SAMDI on matters related to financial management training