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

Country Case Study: South Africa 527
However, to take into account the specific nature of the South African environment,
certain modifications to the structure of the accounts and the
labeling of receipt and payment items have been made. Most significantly,
South Africa still operates a cash-based accounting system, although it is a
modified cash base with entries for national budget data made in the time
period in which transactions are captured on the financial systems, rather
than when the actual cash flow occurs. The intention is to eventually move
to accrual-based accounting.
The new format, which is used consistently for making budget estimates
and for recording and classifying the economic nature of transactions in the
revised chart of accounts, organizes the multitude of government transactions
into three broad categories: receipts, payments, and financing. The
budget deficit or surplus is calculated as receipts less payments; by definition,
it is equal to net financing, but with the opposite sign. Payments are
also divided into three broad categories: current payments (for example,
employee compensation, goods and services, interest, and rent); transfers
and subsidies (funds that are transferred to other institutions, businesses,
and individuals and are not final expenditure by the spending unit); and
payments for capital assets (buildings and fixed structures, machinery, cultivated
assets, intangible assets, and land and subsoil assets).
Improved functional classification
The functional classification is complementary to the economic classification.
It serves to distinguish transactions by policy purpose or expense by
output. Its main purpose is to clarify how government spending contributes
to social, economic, and other objectives. In the budget structure, four broad
categories of functional classification are used: general government services,
protection services, social services, and economic services.
Improved programmatic classification
In cooperation with spending departments, the National Treasury has been
systematically improving the programmatic classification of the budget, to
strengthen the link between policy objectives and financial information. One
intervention has been to standardize vote structures across provinces to
enable coordination of policy implementation and monitoring.
Mindful implementation
Although the careful redesign of the budget structure and chart-of-accounts
framework is a necessary input to improving the quality of budget and financial
information, it does not guarantee that spending departments, which are