The Budget Process Documents and the Appropriation Bill

The Budget Process, Documents and the Appropriation Bill NATIONAL TREASURY Dr Kay Brown : Expenditure Planning 22 February 2011

Overview • The budget is a key statement of the policy of the government. It is a process through which choices have to be made about competing priorities • The budget must fulfil 3 functions: – Spending, taxation and borrowing must support economic objectives – Resources must be allocated to political priorities – Budget and budget information must be tools to improve quality and effectiveness of spending for service delivery 2

How the MTEF works • Since 1997, Government runs a rolling 3 year budget process • Lets assume the police budget published in 2010 is as follows – R 100 in 2010/11, R 105 in 2011/12 and R 110 in 2012/13 • For the 2011 budget, the R 105 and the R 110 are the budget baseline figures for police • To get the new third year, we increase the R 110 by 6% for example, lets call it R 116 in 2013/14 • Now we have a MTEF baseline of R 105 in 2011/12, R 110 in 2012/13 and R 116 in 2013/14 • MTEF budget baselines are then thoroughly examined to identify possible savings and areas which require additional funding 3

Government priorities • The medium term strategic framework (MTSF) is a statement of government’s chosen priorities. It is adopted by Cabinet every five years and then updated annually • Within the Fiscal Framework - the Budget transfers resources in line with priorities • Outcomes Approach: – sets out 12 clear measurable outcomes which are to lead the attainment of government’s priorities – and thus form the focus of government policy and service delivery implementation and targeting • Government has prioritised its efforts and resources more rigorously to support particularly following government outcomes, namely: – – – Job creation specifically focused on youth employment Education and skills development Health Integrated and sustainable human settlements Vibrant, equitable and sustainable rural communities 4

National Treasury’s technical role • Provide the overall Division of Revenue proposal between the 3 spheres based on the decisions made at a political level on priorities and on further analyses • Provide the technical guidelines for budget submissions • Conduct the evaluation of those budget submissions • Maintain ongoing communication with other government departments and agencies throughout the budget process • Make recommendations on the budget that should be proposed 5

Criteria for assessment of budget submissions • The following factors are considered when assessing budget submissions: – link of budget submission proposal to broad government priorities – research on policy options for delivering – funding in previous MTEF periods – evidence of underspending and/or unwise spending – proper plans and proper costing – appropriately aligned implementation and spending plans – appropriate monitoring and evaluation – execution according to budget planning, seen in strategic planning documents, etc 6

Role players in the budget process • • • The MTEC is an interdepartmental committee - comprising of representatives from NT, DPSA, Planning Commission, DPME and DCog MTEC considers the allocation of funds in respect of each grouping of departments, in line with the outcomes approach (previously individual departments were not grouped by government function for budgeting) Departments Intergovernmental technical forums Relevant entities and donors Ministers’ Committee on the Budget Council (Minister and provincial MECs for Finance) Budget Forum (Budget Council plus local government) Cabinet Financial and Fiscal Commission Legislatures – Portfolio Committees, Finance Committees, Appropriations Committees 7

Key milestones Policy review April June July Aug Departmental planning & budgeting Review, evaluate and decide on new major policy proposals Propose fiscal and budget framework, and division of resources Sept Executive/s consider frameworks and division of resources Oct Table Medium Term Budget Policy Statement Departments prepare budget, including detailed spending plans for new proposals Intergovernmental and technical forums Parliament Division of Revenue Act passed Appropriation Bill and Revenue Bills passed Sector and focused budget hearings 8

Key milestones Policy review Nov Cabinet approves new MTEF allocations Dec Jan Feb March National Budget tabled (includes response to BRRR) Provincial budgets are tabled (14 days after National budget is tabled) Departmental planning Parliament & budgeting Portfolio committees Departments revise medium term plans and medium term plans finalise budget inputs and finalise budget inputs submit BRRR reports, adopt fiscal framework, pass Money Bills Strategic Plans tabled Adoption of fiscal framework 9

Budget documents • Parliament’s recommendations are considered and allocation letters are sent in November/December, including the earmarking of certain amounts or stated conditions • Budget documents are then prepared: • Budget Speech • Budget Review • Peoples’ Guide • Appropriation Bill • Estimates of National Expenditure • Division of Revenue Bill 10

Estimates of National Expenditure layout • Introduction • Summary of additional allocations to departments • Summary tables • • • Main budget framework Additional allocations to national votes Expenditure by national vote Expenditure by economic classification Amounts to be appropriated to national votes for 2011/12 by economic classification Conditional grants to provinces and municipalities by national vote Training expenditure per vote Infrastructure spending per vote Personnel expenditure per vote Departmental receipts per vote • Guide to information contained in each chapter 1

ENE layout • One chapter per vote • 38 votes with selected public entities and other agencies • Votes arranged according to functional groupings • Functional groupings: 1. 2. 3. 4. 5. Central government administration Financial and administrative services Social services Justice, crime prevention and security services Economic services and infrastructure • More detailed information for each vote available on www. treasury. gov. za. More comprehensive coverage of vote specific information, particularly goods and services, transfers, donor funding, public entities and lower level institutional information 2

Information contained in each chapter • Budget summary 2011/12 R million Total to be Current Transfers and Payments for Appropriated payments subsidies capital assets financial assets 2012/13 2013/14 Total MTEF allocation Programme name Subtotal Direct charge against the National Revenue Fund Item Total expenditure estimates Executive authority Minister Accounting officer Director-General / Chief Operating Officer Website address 13

Information contained in each chapter • Expenditure allocation for 2011/12 (corresponds with 2011 Appropriation Bill information) • Appropriation: the approval by Parliament of spending from the National Revenue Fund, or by provincial legislature from a Provincial Revenue Fund • Totals disaggregated into current payments, transfers and subsidies, payments for capital assets and payments for financial assets • Current payments are payments made by a department for its operational requirements • Transfers and subsidies are payments made by a department for which the department does not directly receive anything in return • Payments for capital assets are payments made a department for an asset that can be used for more than one year and from which future economic benefits or service potential are expected to flow. • Payments for financial assets mainly consist of payments made by departments as loans to public corporations or as equity investments in public corporations. The reason for expensing the payments rather than treating them as financing is that, unlike other financial transactions, the purpose of the transaction is not profit oriented. This column is only shown in votes where such payments have been budgeted for. Payments for theft and losses are included in this category; however these payments are not budgeted for and will thus only appear in the historical information, which can be seen in the expenditure estimates table. • Estimates for 2012/13 and 2013/14 14

Information contained in each chapter • Aim – department’s strategic objectives • Programme purposes • Strategic overview: 2007/08 – 2013/14 • Policy and mandate developments and legislative changes • Department’s contribution to the achievement of outcomes attributed to it and related outputs listed in Service Delivery Agreements • Savings and cost effectiveness measures – details of reprioritisation of budgets effected and savings and cost reduction measures 15

Information contained in each chapter • Table of selected performance indicators • Indicators are numerical measures that track a department’s or entity’s progress towards its goal • Programme column links indicator to the programme associated with it Indicator Programme Past 2007/08 2008/09 Current 2009/10 2010/11 Projections 2011/12 2012/13 2013/14 16

Information contained in each chapter • Expenditure estimates Programme Audited outcome R million 2007/08 2008/09 2009/10 Adjusted Revised appropriation estimate 2010/11 Medium-term expenditure estimate 2011/12 2012/13 2013/14 1. Programme name 2. Programme name 3. Programme name Subtotal Direct charge against the National Revenue Fund Item Total Change to 2010 Budget estimate Economic classification Current payments Economic classification item Transfers and subsidies Economic classification item Payments for capital assets Economic classification item Payments for financial assets Total 17

Information contained in each chapter • Expenditure trends • • Main expenditure trends and vote programme structure changes from 2007/08 financial year to 2013/14 financial year described Spending focus over the MTEF period Nominal annual growth rates calculated for the full or MTEF period Real annual growth rates – growth rate deflated by CPI - calculated in certain instances Summary of new (additional) allocations to the baseline budget Personnel information • Summary of personnel posts per programme by salary level Infrastructure spending • Expenditure on existing, new and mega infrastructure 18

Information contained in each chapter • Departmental receipts for MTEF period described in relation to receipts for 2010/11 Audited outcome R thousand 2007/08 2008/09 2009/10 Adjusted Revised estimate 2010/11 Medium-term receipts estimate 2011/12 2012/13 2013/14 Departmental receipts Economic classification item Total 19

Information contained in each chapter • Detailed discussion by programme • Programme objectives and measures – Objectives and measures shown for each programme (except programme 1: Administration) – Example: Improve the provision of services and products to eligible citizens and residents (strategic intent/objective) by reducing the time taken to issue passports and travel documents (specific intervention) from 10 days in 2010/11 to 5 days in 2013/14 (progress measure) • Purposes and activities of subprogrammes in respect of the programme • Expenditure estimates per programme table • Expenditure trends per programme 20

Information contained in each chapter • Public entities and other agencies • Additional tables – Summary of expenditure trends and estimates per programme and economic classification (2 years) – Details of approved establishment and personnel numbers per salary level – Summary of expenditure on training (by category) – Summary of departmental public private partnerships projects – Summary of expenditure on infrastructure (by type) – Tables available on www. treasury. gov. za – Summary of conditional grant payments – Departmental specific tables – Summary of donor funding (including spending focus) 21

The Appropriation Bill • Bill provides for the appropriation of money from the National Revenue Fund in terms of section 213 of the Constitution and section 26 of the PFMA • Bill sets out allocations by Vote and main division within votes • An aim is set out for each vote and a purpose is set out for each programme • Headings group some listed items • Allocations marked with an * refer to specifically and exclusively appropriated amounts • Conditional grants are specifically and exclusively appropriated and are also listed in the Division of Revenue Bill • Spending is subject to the PFMA and provisions of the Appropriation Bill • Section 29 of the PFMA applies, until Appropriation Act signed • Key tool for oversight and management 22

Thank-you 23

Critical dates in the 2010 budget process Cabinet Lekgotla discusses broad government and cluster priorities January 2010 Departments receive Medium Term Expenditure Committee (MTEC) guidelines and database templates May 2010 Information sessions on expenditure estimate guidelines June 2010 Departments submit revised drawings after rollovers July 2010 Submission of capital/infrastructure funding requests 7 July 2010 Cabinet Lekgotla discusses policy priorities and Medium Term Strategic Framework 20 -22 July 2010 Departments submit expenditure estimates and database 28 July 2010 MTEC starts 16 August 2010 Departments submit requests for additional funds due to unforeseeable and unavoidable expenditure 25 August 2010 Departments submit requests for National Treasury approval for the shifting of funds to follow a function shift 1 September 2010 Departments submit Adjusted Estimates of National Expenditure (AENE) chapter and database 15 September 2010 Departments submit monthly expenditure report as at August 2010 15 September 2010 MTEC ends 17 September 2010 24

Critical dates in the 2010 budget process cont. Treasury Committee 28 September 2010 Allocation letters to departments 4 October 2010 Departments that requested additional unforeseeable and unavoidable funds submit final updates to AENE chapters and databases (including approved additional funds) 8 October 2010 Departments submit expenditure and receipts in separate database and the monthly expenditure report for September 2010 Departments submit annual performance estimates for first six months of 2010/11 8 October 2010 AENE tabled in Parliament 27 October 2010 National Treasury distributes Estimates of National Expenditure (ENE) guidelines to departments and public entities 12 November 2010 National Treasury provides information sessions for departments and public entities National Treasury distributes databases to the departments and public entities 16 -19 November 2010 National Treasury sends allocation letters to departments 26 November 2010 Departments and Public Entities submit: - first draft ENE database, including Appropriation Bill inputs - first draft ENE chapter - public entities annual report 8 December 2010 Departments and Public Entities submit: - second draft ENE database - second draft ENE chapter 13 January 2011 Departments sign off chapters and the Appropriation Bill 8 February 2011 Budget day 23 February 2011 25

Functional groups for budgeting Functional Classification Economic Affairs Department(s) Government Communication and Information System [9], Public Enterprises [11], Agriculture, Forestry and Fisheries [26], Economic Development [28], Energy [29], Environmental Affairs [30], Mineral Resources [32], Rural Development and Land Reform [33], Science and Technology [34], Tourism [35], Trade and Industry [36], Transport [37] Outcome(s) Outcome 4: Decent employment through inclusive economic growth Outcome 5: A skilled and capable workforce to support an inclusive growth path Outcome 6: An efficient, competitive and responsive economic infrastructure network Outcome 7: Vibrant, equitable and sustainable rural communities with food security for all Outcome 10: Environmental assets and natural resources that are well protected and continually enhanced Housing and Community Amenities Human Settlements [31], Water Affairs [38] Outcome 4: Decent employment through inclusive economic growth Outcome 7: Vibrant, equitable and sustainable rural communities with food security for all Outcome 8: Sustainable human settlements and improved quality of household life Outcome 9: A responsive, accountable, effective and efficient local government system Education Basic Education [15], Higher Education and Training [17] Health [16] Outcome 1: Improved quality of basic education Outcome 5: A skilled and capable workforce to support an inclusive growth path Outcome 2: A long and healthy life for all South Africans 26

Functional groups for budgeting Social Protection Women, Children and People with Disablities [8], Labour [18], Social Development [19] Recreation, Culture and Sport Arts and Culture [14], Sport and Recreation South Africa [20] Outcome 12: An efficient, effective and development orientated public service and an empowered, fair and inclusive citizenship Public Order and Safety Correctional Services [21], Independent Complaints Directorate [23], Justice and Constitutional Development [24], Police [25] Outcome 3: All people in South Africa are and feel safe Outcome 11: Create a better South Africa and contribute to a better and safer Africa and World Outcome 12: An efficient, effective and development orientated public service and an empowered, fair and inclusive citizenship Defence and Military Veterans [22] Outcome 3: All people in South Africa are and feel safe Outcome 11: Create a better South Africa and contribute to a better and safer Africa and World General Public Service Presidency [1] , Parliament [2], Cooperative Governance and Traditional affairs [3], Home Affairs [4], International Relations and Cooperation [5], Performance Monitoring and Evaluation [6], Public Works [7], National Treasury [10], Public Service and Administration [12], Statistics South Africa [13], Communications [27] Outcome 9: A responsive, accountable, effective and efficient local government system Outcome 11: Create a better South Africa and contribute to a better and safer Africa and World Outcome 12: An efficient, effective and development orientated public service and an empowered, fair and inclusive citizenship 27