Public Sector Budget Cycle

Public Sector Budget Cycle Audio Lesson Notes

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Public Sector Budget Cycle Audio Lesson Notes Contents 1. Introduction 4 2. Phase 1: Budget Formulation 4 3. Phase 2: Budget Enactment 5 4. Phase 3: Budget Execution 6 5. Phase 4: Budget Audit and Assessment 6 6. Conclusion 7 © Pro-Active Publishing (Pty) Ltd 3

Public Sector Budget Cycle 1. IntroduCtIon This discussion focuses on the following four main phases of the budget English: Budget cycle: Afrikaans: Begroting isiZulu: Ibhajethi/Isabiwomali • Budget formulation; isiXhosa: Uhlahlo lwabiwo-mali • Budget enactment; • Budget execution; and English: Accountability • Budget auditing and assessment. Afrikaans: Aanspreeklikheid/ Verantwoordingspligtigheid The monitoring of the government's budget, in a democratic country, isiZulu: Ukwethembeka should focus on all four stages of the budget cycle. Effective public isiXhosa: Ukuphenduliswa sector financial management, including budgeting, is heavily reliant on accountability and transparency. Transparency and accountability is mainly English: Transparency achieved through compliance with financial management legislation, Afrikaans: Deursigtigheid stakeholder engagement and regular reporting. isiZulu: Ukwenza izinto ekukhanyeni isiXhosa: Ukungabi nazimfihlo 2. Phase 1: Budget FormulatIon English: Financial Year Afrikaans: Boekjaar The executive branch of government makes an important contribution isiZulu: Unyaka wezimali towards the development of the budget for a forthcoming financial isiXhosa: Unyaka-mali year. The following are the main role-players in the executive branch of government that deals with budget related matters: • Minister of Finance; • Executive authorities with portfolios; • Accounting Officers; and • Cabinet. The budget formulation process starts 12 months before the start of a new financial year. In practical terms this means that during April 2015 government started with the formulation of the 2016/17 budget which commences on 1 April 2016. The political executive identifies medium-term spending priorities between April 2015 and September 2015. During this process the executive ensures that spending constraints and budget pressures of the different levels of English: Treasury government are considered during the new budget formulation process. Afrikaans: Tesourie isiZulu: UsiKhwama isiXhosa: Unondyebo Departments prepare their medium-term expenditure framework budgets from May 2015 to August 2015, in terms of provisional baseline amounts, for the new medium-term. The medium-term expenditure framework English: Cabinet budgets are submitted to the relevant treasury for review, consideration Afrikaans: Kabinet and recommendation will be made to Cabinet. isiZulu: IKhabhinethi/Isigungu Esiphezulu Sikahulumeni The macro-economic framework, fiscal framework and the division of isiXhosa: Ikhabhinethi revenue is revised between the levels of government between July 2015 and August 2015. Recommendations are made to Cabinet after this revision English: Revenue processes have been completed. Afrikaans: Inkomste isiZulu: Imali/Izimali In October 2015 the Cabinet meets to consider this fiscal and macro- isiXhosa: Irhafu economic framework and the division of revenue, including conditional © Pro-Active Publishing (Pty) Ltd 4

Public Sector Budget Cycle grants. The Medium Term Budget Policy Statement is also published in October 2015. The Minister of Finance formally tables the Medium Term English: Medium Term Budget Budget Policy Statement in Parliament. The tabling of the Medium Term Policy Statement Afrikaans: Mediumtermyn- Budget Policy Statement is referred to in the media as the mini-budget Begrotingsbeleidsverklaring speech of the Minister of Finance. isiZulu: Isitatimende Senqubomgomo Yebhajethi Yomnyango Sesikhathi Esiphakathi During November 2015 the Cabinet makes a final recommendation to isiXhosa: ISibhengezo soMgaqo- Parliament on the new medium-term allocations to the different levels nkqubo woHlahlo lwaBiwo-mali of government. The relevant treasuries communicate the final baseline lweMinyaka emiThathu amounts for the new medium-term period to the respective departments, after these baseline amounts were approved by Parliament. English: Minister of Finance Afrikaans: Minister Van Finansies Departments finalise their individual annual budget submissions between isiZulu: UNgqongqoshe Wezezimali November 2015 and January 2016 for its inclusion in the Minister of isiXhosa: UMphathiswa weMali Finance’s budget speech which is normally scheduled for late in February. The Minister of Finance tables the budget before the start of the 2016/17 English: Parliament financial year. The Minister of Finance introduces two money bills, namely, Afrikaans: Parlement the Division of Revenue Bill and the Appropriation Bill, in Parliament with isiZulu: IPhalamende isiXhosa: IPalemente the budget speech. Every Minister tables their individual budget votes in Parliament for debate. Parliamentarians are afforded the opportunity to pose questions relating to a department’s strategic plan and associated budget allocation. This process may also be viewed a means of providing the public with access to the planning of public sector institutions. The legislative authority passes the required legislation after all the budget votes have been debated and voted on by members. 3. Phase 2: Budget enaCtment The process mainly involves the debating of the individual budget votes, affecting possible alterations and finally approving the annual Appropriation Act by the legislative branch of government. This legislative process is divided into three time frames. Time Frame 1: Sixteen (16) Days After the Tabling of the National Annual Budget The parliamentary committee on finance reports its acceptance or amendment of the fiscal framework and revenue proposals that were included in the national annual budget that was tabled in Parliament. Time Frame 2: Thirty Five (35) Days After the Adoption of the Fiscal Framework And Revenue Proposal Parliament should review the recommendations related to the fiscal English: Annual Division of Revenue Act framework and revenue proposals and thereafter pass the annual Division Afrikaans: Jaarlikse Wet op die of Revenue Act, which is signed by the President, after which the Act is Verdeling van Inkomste published in the government gazette. isiZulu: UMthetho Wokwabiwa Kwezimali Mnyaka Yonke Yomnyango Sesikhathi Esiphakathi Time Frame 3: Four (4) Months After the Start of the Financial Year isiXhosa: ISahlulo soNyaka soMthetho we-Rhafu Executive authorities are afforded the opportunity to debate their individual budget votes in Parliament. After all the votes have been debated, the legislative authority should pass, with or without amendment or reject the annual Appropriation Bill. © Pro-Active Publishing (Pty) Ltd 5

Public Sector Budget Cycle 4. Phase 3: Budget exeCutIon Government policies which are reflected in the budget figures of individual departmental budget votes are executed by the government in spending these allocations as approved in terms of the Appropriation Act. Spending agencies are required to monitor their spending and the achievement of objectives on a monthly, quarterly and annual basis Monthly reports include detail on actual expenditure against the budget. Monthly reports also contain projections for the remaining period of the financial year. The main purpose of monthly reports is to ensure that budget allocations for the year will not be overspent or under spent and to implement corrective measures as soon as possible. English: Performance Indicators Afrikaans: Prestasie-Aanduiders Quarterly reports include the monitoring of actual performance against isiZulu: Izinkomba mayelana nokwenziwa komsebenzi the performance indicators and targets which were included in the annual isiXhosa: IzaLathisi zokuSebenza performance plan. The main purpose of quarterly reports is to monitor actual performance against planned performance and to employ remedial actions where necessary. English: Annual Performance Plan Afrikaans: Jaarlikse Annual reports focus on reporting the actual performance of the Werkverrigtingsplan isiZulu: Uhlelo Lokusebenza department in terms of the implementation of the annual performance Lonyaka plan as well as the implementation of the budget by means of the audited isiXhosa: IsiCwangciso soNyaka annual financial statements. Annual reports are subjected to political sokuSebenza oversight by means of the public accounts committees. Public accounts committees have the power to request Accounting Officers to give account on the matters that are reported on in the annual reports. 5. Phase 4: Budget audIt and assessment Accounting Officers are ultimately held accountable by the legislative authority for the spending of the budget as well as comparison of the actual performance of the department against the planned performance. The final stage of the accountability cycle in government is mainly vested in the annual report. The content of the annual report may be divided into the following components: • Report on departmental performance, or stated differently, the reporting on the success with the implementation of the annual performance plan. • Audited annual financial statements, include details on the financial affairs of the department as well as the final result in implementing the English: Auditor-General budget. Afrikaans: Ouditeur-Generaal • Audit reports - a report from the Auditor-General on the annual isiZulu: UMcwaningimabhuku- Jikelele financial statements as well as a report by the departmental audit isiXhosa: Umphicothi-zimali Jikelele committee. Annual reports are subjected to political oversight and scrutiny by public English: Audit Committee accounts committees. Public accounts committees requires accountability Afrikaans: Ouditkomitee from accounting officers on the total management of the department, isiZulu: Ikomidi lokucwaninga isiXhosa: Ikomiti yophicotho-zimali especially the proper financial management of the organisation. Public accounts committees may also make recommendations to accounting © Pro-Active Publishing (Pty) Ltd 6

Public Sector Budget Cycle officers or areas of concern which are reported on in the annual reports. These recommendations are aimed at preventing similar irregularities and addressing weak performances in the future. 6. ConClusIon Officials who are interested in learning more about the topics that have been discussed may purchase more voice lessons on our APP or may consider attending the following training programmes which are offered by Pro-Active College: • Government Budgeting including SCoA • Financial Management for Non-financial Managers • Cash Flow and Budget Management Pro-Active College excels in the education, training and development of public sector officials. With its strong focus on practical workplace skills, Pro-Active College strives to facilitate measurable improvements in the productivity of client organisations. © Pro-Active Publishing (Pty) Ltd 7