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

Country Case Study: South Africa 525
The PFMA allows for a committee within the National Treasury to
approve additional expenditure and deviations from expenditure, but only
if the expenditure is recommended as “unforeseeable and unavoidable” by
the cabinet. The treasury regulations further define “unforeseeable and
unavoidable” as excluding (a) an expenditure that was submitted and not
approved in the budget preparation process, (b) an increase in a tariff or
price, and (c) an extension of existing—or initiation of new—services. The
adjustment estimates approve rollovers, virements, allocations for unforeseeable
and unavoidable expenditures, and savings.
Checks on the checks and balances
Accounting officers can be subjected to disciplinary proceedings if they permit
unauthorized, irregular, fruitless, or wasteful expenditure or if they fail
to comply with any of the requirements regarding implementing the budget,
setting up the financial management systems, and reporting. If they are
found to be grossly negligent, criminal proceedings can be instituted. In
addition, any loss accruing to the state on account of negligent or willful
action by an official must be recouped from the individual.
The treasury regulations require all departments to appoint chief financial
officers, to whom accounting officers can delegate some of their functions
under the act. As part of risk management, all departments must also set up
internal audit committees and formulate three-year rolling internal audit plans
that assess and address key areas of risk, as well as fraud prevention plans.
Provision for effective cash management
The South African budget is implemented in an environment of relative revenue
certainty. In practice, departments can expect to receive their full
budget allocation in a fiscal year. Any shortfalls in revenue are absorbed by
the National Treasury. One of the key challenges in the system is to extract
relatively accurate predictions of cash-flow requirements from spending
departments so that these predictions can be matched with expected fluctuations
in revenue collection and so that unnecessary borrowing or the
unnecessary and inefficient practice of locking up cash in departmental
accounts can be avoided. The regulations require departments and provincial
treasuries to submit predictions of monthly cash-flow requirements at
the start of the financial year. These estimates are updated monthly, throughout
the year, but departments need to justify any changes to the approved
cash flow to the National Treasury.
The PFMA made provision for its phased implementation over five years.
Similar to the development of the MTEF, the approach was to put in place the
scaffolding of a holistic system and then allow quality improvements to