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TRANSPARENCY AND PARTICIPATION IN BUDGET PROCESS
South Africa: A Country Report
ANNEXES

Alta Forscher
Idasa: Budget Information Service


Table of Contents

Appendix 1: Questionnaire

Appendix 2: Legal Framework for Fiscal Responsibility

Appendix 3: Comprehensiveness of Budget Information


APPENDIX I


TRANSPARENCY AND PARTICIPATION IN BUDGET PROCESS SURVEY

(ANSWERS TO QUESTIONS THAT LIST OPTIONS ARE IN BOLD)

SECTION 1
Legal framework for transparency

Legal basis for the fiscal transparency requirements of the Executive

  • Does legislation set out fiscal transparency requirements for the Executive arm of government 30
      to a limited extent or not at all
    1. moderately well
    2. very well
  • Are the accountability and transparency provisions of the law observed in practice
      to a limited extent
    1. moderately well
    2. very well
      Please note that the accountability and transparency provisions of the new fiscal transparency legislation is still untested. The score of moderately well reflects that past provisions have been observed, as well as doubts as to the immediate ability of government to comply with the new provisions.

Legal basis for all key aspects of fiscal management?

  • Does a legal framework exist that clearly defines the roles and responsibilities for all key aspects of fiscal management?
      to a limited extent,
    1. most aspects with significant gaps,
    2. comprehensive?

  • How clear is the definition of fiscal management roles of the Executive and Legislature?
      unclear or emerging,
    1. established with significant areas of uncertainty,
    2. well established with capacity to resolve issues Legal basis for roles and responsibilities of sub- national governments

  • How clear is the taxing and expenditure responsibilities of sub- national governments defined in law?
      unclear or emerging
    1. main functions clear but subject to ad hoc negotiations
    2. comprehensive allocation of powers and transfer mechanisms

Legal basis for taxes

  • Is there a legal basis for taxes?
      widespread discretionary concessions or negotiated tax and customs
    1. explicit and clear statutory basis for liability or concession in most tax and customs laws
    2. explicit and clear statutory basis for liability or concession in all tax and custom laws

  • How clear are the tax regulations and procedures?
      generally unclear
    1. unclear for some taxes
    2. clear for all taxes
  • Is there a significant difference between the law and tax incidence?
    1. to a limited extent
    2. moderately well
    3. very well
  • Is there an officials' code of conduct or process protection
    1. for none or few taxes
    2. some taxes
    3. most or all taxes
  • Is there a code governing taxpayers rights and obligations?
    1. none or few taxes
    2. some taxes
    3. most or all taxes

OVERALL ASSESSMENT OF SECTION
Medium overall but strong in the area of taxes.

SECTION II
Clarity of subnational expenditure responsibilities in practice?

  • How clear is subnational expenditure responsibilities in practice?
    1. unclear or emerging
    2. main functions clear but subject to ad hoc negotiations
    3. comprehensive allocation of powers and transfer mechanisms

OVERALL ASSESSMENT OF SECTION
Weak

SECTION III
Public availability of information

Comprehensiveness of budget documentation 31

Budget Framework Information

a) Forecast of fiscal aggregates for budget year plus two years?Yes
b) As above but with forecast by individual agency?Yes
c) Formal rolling medium term baseline (3-5 yrs) baseline?Yes
d) Estimates of revenue are maintained in (c)? Within reason
e) Statement of government's medium-term fiscal policy
objectives and priorities?
Yes
f) Explicit targets set for budget policy in the medium-term:
  • Expenditure / GDP
  • Revenue / GDP
  • Current Balance
  • Deficit / GDP
  • Debt / GDP
  • Other
 
 
No
Yes
No
Yes
Yes
Provincial equitable shares

Indicators of Fiscal Stance

  • Which of the following indicators of fiscal stance are provided in fiscal policy statements?
(i) Overall balance Yes
ii) Overall balance, less asset sales Yes
(iii) Current balance Yes
(iv) Primary balance Yes
(v) Operational balance No
(vi) Public debt Yes
(vii) Contingent liabilities Yes
(viii) Quasi-fiscalities No
(ix) Tax Expenditures No
(x) Statement of financial assets and liabilitiesYes
(xi) Net worth (or other balance sheet indicator)No

Note: There was some concern from respondents as to the coverage of the public debt and contingent liabilities tables in the policy statements.

  • Are they monitored ex-post?
    1. Limited or not at all
    2. To some extent
    3. To a great extent
  • Are similar indicators applied to subnational government or general government policy statements?
    1. limited or not at all
    2. to some extent
    3. to a great extent

  • What are the main summary indicators of the government's financial position in the annual budget presentation?

    (i) No indicators presented with the annual budget? No
    (ii) Central government overall balance?Yes
    (iii) Central government underlying balance?Yes

  • As above, with limited additional supporting analysis and indicators?
  • As above, with extensive additional supporting analysis and indicators?……………… No

Forecasts

  • Is information given on the macro-economic and fiscal forecasts used as the basis of fiscal policy and budgeting?
    1. not at all
    2. to a limited extent
    3. comprehensively
  • Are these in the medium term?
    Yes
  • As above, with analysis of assumptions and parameters?
    1. No analysis
    2. Some analysis
    3. Thorough analysis
  • As above and open to independent and expert assessment?
    No
    Note: While budget documentation contains thorough analysis of the forecasts, the assumptions and parameters of the models on which the analysis is based, is not open to public scrutiny.
  • How accurate are the medium-term macro-forecasts?
    1. Unrealistic
    2. Moderately
    3. Very reliable
  • How frequently are the medium-term assumptions updated and published?
    1. Never
    2. One a year
    3. Twice a year

Classifications

  • Which of the following classifications are provided in budget documentation?
(i) Expenditure classified by individual administrative agency? Yes
ii) Individual program budgets? Yes
(iii) Line items within programs? Yes
(iv) Capital / current expenditure breakdown within above? Yes
(v) Classification of revenues, financing and debt in a way that is compatible with GFS or other international standard? Yes
(vi) GFS / SNA functional classification of expenditures?Yes

Extra-budgetary institutions

  • What is the extent of coverage of extra-budgetary activities in budget documentation?
    1. not at all
    2. to a limited extent
    3. comprehensively
  • How clear are the mechanisms for co-ordination and management of budgetary and extra-budgetary activities
    1. not well defined
    2. sufficiently defined to enable effective control of budget and EBF spending
    3. well defined

    Note: Although the Public Finance Management Act requires reporting on a comprehensive net of extra-budgetary institutions, there are no mechanisms to make public or debate the nature and scope of extra-budgetary activities ex ante. There is no aggregate reporting on extra-budgetary activities.

Availability of actual spending information

  • How frequent and timely is fiscal reporting?
TimeHow soon afterLevel of Government By Content Dissemination
MonthlyWithin 30 days
after month end
National/
provincial
DepartmentsExpenditure for month
Expenditure up to date
for fiscal year
Treasury
Monthly Within 30 days
after month end
National/Provincial TreasuriesAggregate expenditure
for month
Aggregate Expenditure up
to date for fiscal year
Public (via Government Gazette)
AnnuallyWithin 7 months
after end of
fiscal year
National/ ProvincialDepartments
Treasuries
Public
enterprises
Parastatals
Audited statementsLegislatures
  • How soon after the close of the financial year does the auditing body provide an annual assessment?
    1. Within 6 months
    2. Within 1 year
    3. More than 1 year

Reliability

  • Does the budget presentation formally incorporate information on risks to the fiscal position?
    1. not at all
    2. to a limited extent
    3. extensively
  • How reliable are the budget expenditure and revenue estimates?
    1. unrealistic
    2. moderately reliable
    3. very reliable
  • Is a clear statement made on the accounting basis (e.g.: cash or accruals) and the accounting policies adopted in the budgets and accounts of government?
    Yes

Usefulness

  • Is a statement of objectives to be achieved by government programs provided with budget documentation?
    1. not at all
    2. some reporting of objectives
    3. general reporting of objectives
  • As above with expected indicators of performance.
    No indicators

OVERALL ASSESSMENT OF SECTION
Medium to strong in most areas, with the exception of extra-budgetary institutions, where the information is weak.


SECTION III
Independent Checks and Balances of Budget Execution and Government Data

Independent national auditing and statistics offices

  • Is there a national, independent auditing body?
    Yes
  • What is the impact of the recommendations and findings of the independent audit body?
    1. No follow-up and rectification
    2. Some follow-up and rectification
    3. Consistent follow-up and rectification
  • Does the national statistics office have institutional independence?
    Yes

Procurement regulations

  • Do regulations require open tendering processes for public supply contracts?
    1. are not in place
    2. are in place but unclear or incomplete
    3. satisfactory
  • To what degree are tender regulations observed in practice?
    1. not observed
    2. only partially observed
    3. are followed rigorously

Early warning system for over-expenditures

  • Is there an early warning system for over-expenditures?
    1. No warning system
    2. Some system, but ineffective
    3. A comprehensive and effective system
  • Does this exist at national and / or subnational government? National. Provincial level not consistently so.

Emergency expenditures

  • Are there procedures and rules governing emergency expenditures?
    1. No rules
    2. Some rules leaving either scope or nature of spending discretionary
    3. Comprehensive rules that enable tight control over scope and nature of spending
  • Is reporting required on emergency expenditures?
    No reporting required
    Only audit reporting after end of fiscal year
    Timely reporting before end of fiscal year

OVERALL ASSESSMENT OF SECTION
Medium

SECTION IV
Participation in the Budget Process

Availability of information during drafting process

  • Which of the following fiscal policy decision-making tools are publicly released during the budget
    drafting stage and when?
Macro-assumptionsYes3 months before Budget day
Interdepartment allocations NoOnly on Budget Day
Tax optionsNoOnly on Budget Day
NOTE: The inter-provincial allocations + expected aggregate sectoral and economic classification of the budget is released together with the macro-assumptions.

Legislature participation

  • What are the opportunities for and incidence of legislature participation in the budget?

(i) How much time is available to the legislature to review the budget? One month
(ii) What are the amendment powers of the legislature? Legislature has no amendment powers, can only pass budget or individual votes in total or reject them in total.
(iii) What is the ratio of legislature budget / finance committee debate relative to general budget debate in the House?Finance Committee has 6 days, house has 3 to 4 weeks.
(iv) What is the independent analysis capacity of the legislature? 1 Researcher to Finance Committee
1 Researcher to Public Accounts
Committee
ie. Very weak
(v)Can the legislature hold public hearings and who may it call to appear?Yes. Up to the discretion of the legislature. Members of civil society and the executive branch.

Civil society participation in the budget

  • Is there any independent space in the budget process for civil society participation?
    1. No independent space
    2. Limited space but ineffective
    3. Effective space -- ie participatory budget processes

  • If civil society takes part in the budget process through the legislature

To what extent does civil society take part in legislature hearings? Submissions have grown from 3 to 14 from 1997 to 1999. Extent of participation restrained by time committee has to hold hearings and the effectiveness of participation
To what extent does civil society undertake independent analyses of the budget? The media and financial community have always analysed the budget. Recent years have seen an increasing number of non-governmental organisations undertaking analysis. Often this is focused on the budget framework and macro-economic issues rather than on the allocative level.

OVERALL ASSESSMENT OF SECTION
Weak


SECTION IV
Participation in the Budget Process

Availability of information during drafting process

  • Which of the following fiscal policy decision-making tools are publicly released during the budget drafting stage and when?
Macro-assumptionsYes3 months before Budget day
Interdepartment allocationsNoOnly on Budget Day
Tax optionsNoOnly on Budget Day
NOTE: The inter-provincial allocations + expected aggregate sectoral and economic classification of the budget is released together with the macro-assumptions.

Legislature participation

  • What are the opportunities for and incidence of legislature participation in the budget?
i) How much time is available to the legislature to review the budget? One month
(ii) What are the amendment powers of the legislature?Legislature has no amendment powers, can only pass budget or individual votes in total or reject them in total.
(iii)What is the ratio of legislature budget / finance committee debate relative to general budget debate in the House?Finance Committee has 6 days, house has 3 to 4 weeks.
(iv) What is the independent analysis capacity of the legislature?1 Researcher to Finance Committee
1 Researcher to Public Accounts
Committee
ie. Very weak
v) Can the legislature hold public hearings and who may it call to appear?Yes. Up to the discretion of the legislature. Members of civil society and the executive branch.

Civil society participation in the budget

  • Is there any independent space in the budget process for civil society participation?
  1. No independent space
  2. Limited space but ineffective
  3. Effective space -- ie participatory budget processes

  • If civil society takes part in the budget process through the legislature
    To what extent does civil society take part in legislature hearings? Submissions have grown from 3 to 14 from 1997 to 1999. Extent of participation restrained by time committee has to hold hearings and the effectiveness of participation
    To what extent does civil society undertake independent analyses of the budget? The media and financial community have always analysed the budget. Recent years have seen an increasing number of non-governmental organisations undertaking analysis. Often this is focused on the budget framework and macro-economic issues rather than on the allocative level.

    OVERALL ASSESSMENT OF SECTION
    Weak

    APPENDIX II
    Section I
    Legal Framework for Fiscal Transparency
    Definition of Roles and Responsibilities for Key Aspects of Fiscal management

    Key aspectWho?Defined byRemarks
    Regulate the flow of money through the National Revenue FundThe National Treasury32 Chapter 2 of the PFMA33 The Treasury is responsible for the control of the revenue fund; money can only be withdrawn through an Act of Parliament or as a direct charge, which is defined in the PFMA.
    Put in place a pro-transparency budget process that promotes accountability and effective financial management of the economy, debt and public sector The National Treasury; Provincial Treasuries34 Chapter 2 of the PFMA Chapter 2 of the PFMA sets out the rights and obligations of the National Treasury. Amongst other it is required to coordinate fiscal and macroeconomic policy; manage budget process; exercise control over budget implementation; monitor provincial budgets; promote and enforce transparency; prescribe uniform norms and standards; prepare consolidated financial standards. The provincial treasuries are obliged to perform similar functions on a provincial level.
    Prescribe budget formats for all spheres of governmentThe National Treasury; Provincial Treasuries Chapter 2 of the PFMA The Treasury is required to prescribe uniform norms and standards for all spheres of government and enforce uniform norms and standards in national departments; public entities and constitutional institutions. Provincial Treasuries are responsible for enforcing uniform norms and standards on a provincial level.
    Prescribe fair, equitable, transparent, competitive and cost-effective procurement procedures National Treasury; Accounting officers and accounting authorities35 of departments; public entities; constitutional institutions Chapter 3, 5, 6 and 9 of the PFMA. Accounting officers and authorities must ensure that the Department, public entity or institution under their control has in place fair, equitable, transparent, competitive and cost-effective procurement procedures. The National Treasury may determine framework to ensure appropriate systems (Chapter 9).
    Set Conditions for the issue of guarantees by all spheres of government The National Minister of Finance; Provincial Members of Executive Council for Finance; Provincial Borrowing Powers Act. Chapter 8 of the PFMA. The National Minister must approve all guarantees by national departments, public entities and public enterprises, as well as provincial public enterprises and entities. The Provincial MEC of Finance must approve all provincial guarantees. The PFMA and the Provincial Borrowing Powers Act sets conditions for the issue of guarantees by the respective spheres of government.
    Regulate Fiscal Relations between the Spheres of Government The National Treasury; The Budget Council36 Chapter 2 of the PFMA; the Intergovernmental Relations ActThe national treasury is tasked with regulating intergovernmental fiscal relations in the PFMA; the Intergovernmental Relations Act assigns specific duties in this regulation to the Budget Council and other intergovernmental forums.
    The budget should be comprehensiveThe National Department of Finance is tasked with coordinating the budget. Provincial treasuries with coordinating the provincial budgets.PFMA, Chapter 4 The minimum information included in the national and provincial annual budgets is prescribed. Although the roles and responsibilities are clear, the net is not thrown wide enough to include all activities of a fiscal nature nor all spheres of government: formats are not prescribed for extra- budgetary institutions nor for local government.
    Budget transactions should be shown in gross terms The Accounting Standards Board; National Treasury and Provincial Treasuries; accounting officers of departments and institutions; the Auditor General Guidelines set by the ASB and the National Treasury; The PFMA. The Accounting Standards Board is tasking with setting generally recognised accounting practices and the National Treasury with further norms and standards; national and provincial treasuries, national and provincial accounting officers and national and provincial accounting authorities are tasked with implementing these. The Auditor General is tasked with auditing compliance with all standards. The PFMA is the legal basis for this framework.
    A minister responsible for finance should be so designated and given effective power of budget management National Minister of Finance; Provincial Members of Executive Council (MECs) for Finance PFMA establishes a national and provincial treasuries and outlines the duties of the executive authority dealing with finances 
    Individual agencies should be held accountable for collection and/or use of resources by these agenciesCollection of Revenue: The National Minister of Finance for the collection of most revenue including income tax, VAT, customs and excise duties; Some agencies are responsible for the collection of user charges and provinces take responsibility for the collection of other own revenue fees and levies. Expenditure: Accounting officers of national and provincial departments and institutions; accounting authorities of public entities and enterprises. used to the accounting officers of spending agencies. PFMA Chapters 5, 6 and 7. The PFMA sets out the obligations of accounting officers and accounting authorities. Financial misconduct refers to any contravention of the general, budgetary control of reporting duties of accounting officers or accounting authorities. Internal disciplinary procedures are provided for in the case of willfull or negligent financial misconduct. Criminal proceedings allowing up to 5 years imprisonment are provided for in the case of willfull or grossly negligent financial misconduct. The penalties apply jointly and severally to members of the boards of public entities.
    Contingency provisions should specify clear and stringent conditions for use of such fundsCabinet decides on the use of the contingency reserve, on the advice of the Minister of Finance No legal requirements exist for the use of the contingency reserve.  
    Audited reports should show clearly how public funds have been used The Auditor General has responsibility to draw up audit reports; in the case of public entities external auditors may be appointed with the approval of the auditor general. Auditor General Act; PFMA.  



    APPENDIX III
    Detailed table for SECTION III
    The Public Availability of Information

    The following table indicates where, how often and since when specific budgetary data are published. It is supplementary to the answers provided in Appendix I.

    Comprehensiveness of budget documentation

    Budget Framework Information

    RequirementYes / No Time period37 Where, published by whom &frequencyCoverage
    (spheres of government)
    Notes
    i) Forecast of fiscal aggregates for budget year plus two yearsYes 1994-99The Medium Term Budget Policy Statement (MTBPS); The Budget Review; The National Estimates of Expenditure Provincial Budget Reviews and Estimates of Expenditure. By the National and Provincial Treasuries 2 x a year. November and March Provincial38 , national 39 and consolidated government40 The extent and format of medium term framework information have not been standardised, making comparison difficult. Some provinces have medium term fiscal aggregates for expenditure, but not for revenue.
    ii) As above, but with forecast by individual agencyYes1994-1998 The Budget Review and the Estimates of Expenditure for national government; provincial budget reviews and estimates for provincial governments. By the national and provincial treasuries. Once a year, on budget day.National and ProvincialExtent and format of information differs between provinces, making comparison difficult. Two provinces, North West and Mpumalanga, do not publish agency (vote) level medium term framework information.
    iii) Formal rolling medium term baseline (3-5 yrs)Yes1994-99 The MTBPS reviews the formal rolling medium term baseline for consolidated government. The Budget Review again reconciles the new medium term framework with the previous year's budget numbers. National Budget The MTBPS formally reviews adjustments to the fiscal aggregates against a rolling baseline. Enough information is published in the national and provincial Budget Reviews and Estimates of Expenditure to repeat the exercise for lower levels of data.
    iv) Statement of government's medium term fiscal policy objectives and priorities Yes1994-99 The MTBPS (November), updated in the Budget Review (March) for consolidated government. Some provinces set out policy objectives and priorities in their budget documentation, either in the budget speech or in the review. National Budget. Some provinces. 
    v) Explicit targets set for budget policy in the medium term
    Expenditure/GDP
    Revenue/GDP
    Current balance
    Deficit/GDP
    Debt/GDP
    Other



    No
    Yes
    No
    Yes
    Yes
    See Notes
    1994-99The targets are published by the Minister of Finance in the MTBPS, and again in the Budget Review.National Budget Targets are set in the macroeconomic policy document, GEAR (published in 1996) , but are updated every year in the budget documentation.


    Provincial equitable share targets have been set, with the aim of redistributing resources from previously advantaged provinces to previously disadvantaged provinces.



    Indicators of Fiscal Stance
    Which of the following indicators of fiscal stance are provided in fiscal policy statements?

    RequirementYes / NoTime period Where, published by whom &frequencyCoverage
    (spheres of government)
    Notes
    • Overall balance

    • Overall balance less asset sales
    • Current balance
    • Primary balance
    • Operational balance
    • Public debt








    • Contingent liabilities




    • Quasi-fiscalities
    • Tax expenditures
    • Statement of financial assets and liabilities
    • Net worth
    Yes

    No

    Yes
    Yes
    No
    Yes








    Yes




    No
    No
    Yes


    No
      Budget Review ; Table 5a


    Budget review
    Budget review

    Budget review








    Budget Review, Chapter 3 on Public finances




    Budget Review, Chapter 3 on Public Finances
    National Budget



    National Budget
    Primary balance

    Table 9 Debt of central government, excluding extrabudgetary institutions and social security funds. Chapter 3 provides information on the total public sector borrowing requirement.

    For National Government
    Excludes provincial
    Liabilities




    For national government only
    1998 Budget Review published balances (outcome or projected) from 1989 to 2000/01 Data is not strictly GFS comliant -- GFS comliant data is published by the Reserve Bank in the Quarterly Bulletins








    Some correspondents felt that coverage of contingent liabilities is not wide enough. Consolidated statement on public sector contingent liabilities is not available.

    Classifications

    RequirementYes / NoTime period Where, published by whom &frequencyCoverage
    (spheres of government)
    Notes
    • Expenditure classified by individual administrative agency

    • Individual programme budgets


    • Line items within programmes


    • Capital/current expenditure breakdown

    • Classification of revenues, financing and debt in a way that is compatible with GFS

    • GFS/SNA functional classification of expenditures
    Yes



    Yes


    Yes


    Yes


    No



    Yes
    Pre-1994



    pre-1994


    Pre-1994


    Pre 1994


    Pre 1994



    1994-1999
    National and provincial Estimates of Expenditure


    National and provincial Estimates of Expenditure

    National and provincial Estimates of Expenditure

    National and provincial Estimates of Expenditure





    National and provincial Estimates of Expenditure give a functional classification of spending on vote level. A new classification system will extend this to programme level.
    National departments, provincial departments

    National and Provincial

    National and Provincial

    National and Provincial





    National and Provincial

    Notes

    1. Appendix II contains a table listing significant aspects of fiscal management in accordance with the South African Constitution, as well as further aspects identified by the IMF Manual on Transparency. For each item the table records who is responsible according to which legislation.

    2. Appendix III contains a table listing each of the requirements below, whether information is published, where and how frequently.

    3. The National Treasury consist of the National Minister of Finance and the national department(s) responsible for financial and fiscal matters (currently the Department of Finance; State Expenditure and the South African Revenue Services).

    4. Public Finance Management Act

    5. Provincial Treasuries consist of the Provincial Member of Executive Council for Finance and the provincial department responsible for financial matters.

    6. Accounting officers are the heads of departments; trading entities and institutions; accounting authorities are the board that is accountable for public entities or, in cases where there is no board, the executive officer of such entities. Public entities are public enterprises (state ownership with financial and operational authority and not financed by public funds) or other entities which is established in terms of national legislation, accountable to parliament and fully or substantially funded by public funds.

    7. The Budget Council consists of the national Minister of Finance and the Provincial MECs for Finance.

    8. For convenience three time periods are designated: pre-1994, 1994- 1999, 2000-. The 2000- period has been included for cases where a commitment to data availability has been made (often in the PFMA) of which the implementation is in the future.

    9. Provincial government budgets include all provincial expenditure and revenue transfers from national government plus provincial own revenue.

    10. The National Budget covers all revenues and borrowing to cover expenditure by national government departments, and all monies transferred to provincial funds, local government and extra-budgetary institutions originating from the national revenue account.

    11. Consolidated government covers national and provincial budgets.

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