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AFReC-TUT RESEARCH CONSORTIUM Understanding the impact of the PFMA: A long term research agenda Research areas 1. Integrating planning and budgeting 2. Towards performance budgeting 3. In-year management 4. Non-financial information 5. Asset valuation 6. Risk management 7. Financial performance INTEGRATING PLANNING & BUDGETING: A PFMA PERSPECTIVE Presented by Tania Ajam Introduction PFMA says what should be done, not how to do it • Advantages and disadvantages Everybody agrees that plans should be integrated with budgets Yet this link is seldom very rigorous. Why? • Conceptual issues • Practical implementation issues PLANNING BUDGETING Dominant Transformative and Incremental in the orientation change oriented, sense that budgets concerned with seldom fluctuate taking decisions drastically over time. today which will Personnel, debt contribute to a service costs, desired future state entitlements and of affairs. other statutory non- discretionary expenditures inhibit radical reprioritisation over the short term. Takes the status quo as a starting point Orientation Forward looking Backward looking Time frames Long term, medium Primarily short term and short term with occasional medium term focus Resource Budget constraints Budget constraints constraints often ignored, and often the over-riding therefore unrealistic emphasis Main drivers Political priorities Fiscal pressures and and social needs compliance Risk profile More risk tolerant, Conservative and seeks opportunities prudential Implementation issues Systems • Financial and non-financial data, levels of aggregation, timeframes of process, control and compliance vs planning and management focus, budget structure, stratplans not smart, “rules” to force planning and budgeting to converge (eg. Ex ante budget constraints) Structures • Silos, programme vs organisational design tension, change management Processes • External enforcement of pace and sequence of budget process but not planning, horizons Leadership - Political and managerial: incentives Information Culture – budgeting as a technical vs social process (eg of MBO) TOWARDS PERFORMANCE BUDGETING IN SA : Building on PFMA Foundations Presented by James Nkoana & Pumla Bokoda Introduction What is performance budgeting Why performance budgeting? Implementation phases Programme budgeting Output-based budgeting Outcome based budgeting International Good Practice Case Studies - Australia - Singapore South African Experience Box 1 Before the PFMA implementation 11--1 Vote 11 Education Begrotingspos 11 Onderwys R4 330 395 000 AIM: To develop a national framework for the promotion of education and training Accounting Officer: Director General: Education Transfers Total Presentations according Oordragte to programmes Current Capital Lopend Kapitaal Current Capital Lopend Kapitaal Main divisions 1995/96 1994/95 1995/96 1994/95 1995/96 1994/95 1995/96 1994/95 1995/96 1994/95 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 1 Administration 29 808 18 779 250 100 2000 000 230 058 18 879 2 Education and training systems and resources 7 567 6 538 100 98 270 7 370 7 937 14 006 3 Education and training programmes 16 603 5 590 200 84 3 566 054 3 439 226 506 754 131 365 4 089 611 3 576 265 4 Auxillary and associated services 2 758 453 31 54 50 2 789 561 AMOUNT TO BE VOTED 56 736 31 360 581 340 3 766 324 3 446 596 506 754 131 415 4330 395 3 609 711 Increase 25 376 241 319 728 375 339 720 684 Decrease Source: SA Budget Review, 1995 After the PFMA implementation Source:National Treasury Estimates of National Expenditure, 2002 After the PFMA implementation Source: National Treasury Estimates of National Expenditure, 2002 Conclusion Progress-in integrating policies with budget through programmes and subprogramme Need to move beyond Programme budgeting Greater technical capacity building is required-especially in relation to costing Integrated management information system required to manage financial and non- financial data Success of PB will depend on willingness from government officials, executives and legislatures to use performance information INTEGRATED IN-YEAR MANAGEMENT A synthesis of seemingly unrelated issues Presented by Donald Maphiri Problem statement In-year management reports difficult to get out on time (especially quarterly reports) Where these get out on time, they are not linked to financial reports Propose system for facilitating production of integrated in-year management reports Key issues Fundamental questions for IYM Transforming operational plans into living documents Integrating dynamic operational plans with flexible budget profiles Observations - essentials Non-financial performance measurement framework In-year management analysis and control frameworks Leadership and management control MONITORING OF NON- FINANCIAL INFORMATION: A PFMA Perspective Presented by Henlo van Nieuwenhuyzen Background Principles of Good Governance Management of Performance Delivery of Results Enhanced Focus on Performance Auditing by AG International Good Practice Chile • Government-Wide Monitoring System • Role of Champions • Organisational Structure Argentina • Government-Wide Monitoring System • Role of Champions • Involvement of Stakeholders Implementation Issues Legislative Framework Departmental Structure Departmental Processes & Systems Departmental Leadership & Culture VALUATION OF PUBLIC ASSETS: Are we getting it right? Presented by: Ghalieb Dawood & Juan Bester Background Move from cash – based accounting to accrual accounting • No record of assets • Asset Registers – valuing assets Valuation methods • Underlying assumptions Categories of Public Sector Assets International Best Practice United Kingdom • Fixed assets – Nett replacement Cost • Infrastructure & Community – H.C • Specialized – DRC Australia • No specific valuation method recommended New Zeeland • DRC method used but infrastructure not depr. Sweden • DRC method used, artificial market for PS assets created SA legislative context Prior to PFMA • Acquisition vs maintenance, fixed asset registers PFMA reforms • Acquisition: due diligence and equity vs fair value • Disposal: replacement costs at market rates PFMA regulations • Disposal management implications MFMA and local government reforms • Fair value • Property Rates Act implications RISK MANAGEMENT IN THE SOUTH AFRICAN PUBLIC SERVICE: TOWARDS NPM MODEL Presented by Batandwa Siswana Problem statement Public sector reforms Narrow approach Capacity PFMA „compliance mind‟ Organisational Culture Managerial and Political leadership Rationale Context: NPM model Shift from narrow to broader perspective Introduce integrated approach International perspective:AU/NZ, Canada & OECD countries in general Organisational dynamics Integrated: Canadian model 2. Assessing key 1. Risk areas Identifying issues Setting context 3. Measuring 9. (likelihood, impact) Monitoring Evaluating and Adjusting Practice integrated Risk management -From corporate strategy 4. and plans to front-line Ranking risks operations … 8. … people and processes Implementing the Strategy 5. Setting Desired Results 7. Selecting a Strategy 6. Developing options Adapted from: TBS (2001) in Hill and Dinsdale (2001) Concluding points Public sector reforms:structurally and operationally NPM impact on financial management, strategic planning, risk management Integrated RM to support P/Sector reforms Organizational culture and systems (Resistance) a shift from financial to non-financial-RM PFMA, integrated RM approach & context ?
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