Public Sector Governance and Accountability Series: Budgeting and ...

524 Alta Fölscher
Shortening of the budget cycle
The PFMA shortens the budget cycle to bring audited actual spending information
to Parliament seven months after the end of the financial year. This
timing means that public accounts committees can deal with much more
recent matters, thereby enabling improved oversight and allowing audited
information to be used more effectively in the assessment of departmental
spending plans. The shortening of in-year time horizons for capturing transactions
assists in bringing early, accurate financial information to be used as a
management tool. Whereas previous regulations and accounting systems
allowed transactions to be written to a specific financial month up to three
months after month-end, this period has been shortened to 10 days. Given
that departments are required to provide cash-flow projections, that their cash
use is made transparent through the monthly reporting system, and that the
limits on virement and rollovers (see the next section) are by and large
enforced, the new system has sharpened incentives for effective and efficient
accounting practices considerably.
Provision of limited in-year flexibility
Given the uncertainty of revenue requirements and policy needs, the PFMA
allows flexibility, within a framework, to make adjustments to budgets. The
act, supported by the treasury regulations, provides several rules to manage
this flexibility, to support incentives for sound planning, and to control for
behavior that, in aggregate, could compromise fiscal policy. Managers are
allowed to vire (that is, shift) funds between subdivisions of a vote (up to
8 percent of any subdivision total). However, further limits hold; for example,
funds may not be vired from capital to recurrent spending, and
personnel compensation may not be increased without prior approval by
the National Treasury. Accounting officers are required to report to the
National Treasury and to their minister within a week on any virement
within the 8 percent limit.
Certain funds may be rolled over from one year to the next. Unspent
funds on payments for capital assets may be rolled over only to finalize projects
still in progress. Savings on transfers may not be rolled over for purposes
other than those originally voted for, and savings on employee compensation
may not be rolled over. Although there is no restriction on what types
of other recurrent expenditure may be rolled over, a limit of 5 percent of a
department’s nonpersonnel recurrent expenditure applies.
Emergency expenditure must be authorized by the minister of finance.
Moreover, it may not exceed 2 percent of the total national budget, must
be reported to Parliament and the auditor general within 14 days, must be
made public, and must be attributed to a vote.