Final Report 31 March 2015
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Public Expenditure and Financial Accountability Assessment PEFA Report Republic of South Africa Gauteng Province Final Report 31 March 2015 Currency Unit - Rand (ZAR) US$ = 11.61565 ZAR @ 20 January 2015 Fiscal Year: FY 2011/12, FY 2012/13, FY 2013/14 Page ii List of abbreviations and acronyms AGSA Auditor-General of South Africa APP Annual performance plan CFO Chief financial officer CFS Consolidated financial statements COFOG Classification of functions of government COTS Commercial off-the-shelf CPI Consumer price index DORA Division of Revenue Act DORB Division of Revenue Bill EPRE Estimate of provincial revenue and expenditure ERP Enterprise resource planning EU European Union FY Fiscal year GDP Gross domestic product GFS Government finance statistics GFSM Government finance statistics manual HLG Higher level of government HOD Head of department IBRD International Bank for Reconstruction and Development IDA International Development Association IDMS Infrastructure delivery management system IFMIS International financial management information system INTOSAI International Organisation of Supreme Audit Institutions IPSAS International public sector accounting standard MAPS Methodology for assessing procurement systems MDA Ministries, department and agencies MFMA Municipal Financial Management Act MTBF Medium-term budgetary framework MTFF Medium-term fiscal framework PAC Public accounts committee PEFA Public expenditure and financial accountability PERO Provincial economic review and outlook PERSAL Personal and Salary Administration System PFC Provincial finance commission PFM Public financial management PFMA Public Financial Management Act PFMAA Public financial management and accountability assessment PFMIS Provincial financial management information system PI Performance indicator PT Provincial Treasury SAIGA Southern African Institute of Government Auditors SAP Systems application products SCM Supply chain management SCOA Standard chart of accounts SCOPA Standing committee on public accounts SITA State Information Technology Agency SNG Sub national government TADAT Tax administration diagnostic assessment tool Page iii Table of contents Summary assessment .................................................................................................................. 1 1. Integrated assessment of PFM performance .................................................................................... 1 2. Assessment of the impact of PFM weaknesses ................................................................................ 3 3. Prospects for reforms ........................................................................................................................ 4 4. PEFA performance indicators (2014) ................................................................................................ 5 Introduction ................................................................................................................................... 7 1.1 Objectives .......................................................................................................................................... 7 1.2 Process .............................................................................................................................................. 7 1.3 Methodology ...................................................................................................................................... 8 1.4 Scope ................................................................................................................................................ 8 Background to the province ...................................................................................................... 10 2.1 Gauteng province: socio-economic background ............................................................................. 10 2.2 Allocation of resources and budgetary outcomes ........................................................................... 11 2.3 Legal and institutional framework for PFM ...................................................................................... 14 Assessment of PFM systems and processes ........................................................................... 19 3.1 Credibility of the budget ................................................................................................................... 19 HLG1: Predictability of transfers from a higher level of government ................................................. 19 PI-1 Aggregate expenditure out-turn compared to original approved budget .................................... 22 PI-2 Composition of expenditure out-turn compared to original approved budget ............................. 24 PI-3 Actual domestic revenue compared to domestic revenue in the originally approved budget..... 27 PI-4 Stock and monitoring of expenditure payment arrears ............................................................... 29 3.2 Comprehensiveness and transparency ........................................................................................... 32 PI-5 Classification of the budget ......................................................................................................... 32 PI-6 Comprehensiveness of information included in budget documentation ..................................... 34 PI-7 Extent of unreported province operations ................................................................................... 35 PI-9 Oversight of aggregate fiscal risk caused by other public sector entities ................................... 40 PI-10 Public access to key fiscal information ................................................................................... 43 3.3 Policy-based budgeting ................................................................................................................... 45 PI-11 Orderliness and participation in the annual budget process .................................................. 45 PI-12 Multi-year perspective in fiscal planning, expenditure policy and budgeting.......................... 47 3.4 Predictability and control in budget execution ................................................................................. 49 PI-13 Transparency of taxpayers’ obligations and liabilities ............................................................ 49 PI-14 Effectiveness of measures for taxpayer registration and tax assessment ............................. 52 PI-15 Effectiveness of tax collection ................................................................................................ 54 PI-16 Predictability in availability of funds for commitment of expenditure ...................................... 56 PI-17 Registration and oversight of cash balances, debt and guarantees ...................................... 58 PI-18 Effectiveness of payroll controls ............................................................................................. 60 PI-19 Competition, value for money and controls in procurements ................................................. 62 PI-20 Effectiveness of internal controls on non-salary expenditure ................................................. 67 Page iv PI-21 Effectiveness of internal audit ................................................................................................. 69 3.5 Accounting, recording and reporting ............................................................................................... 70 PI-22 Timeliness and regularity of accounts reconciliation .............................................................. 70 PI-23 Availability of information on resources received by service delivery units ............................ 72 PI-24 Quality and timeliness of in-year budget reports .................................................................... 74 PI-25 Quality and timeliness of annual financial statements ............................................................ 75 3.6 External scrutiny and audit .............................................................................................................. 78 PI-26 Scope, nature, and follow-up of external audit ....................................................................... 78 PI-27 Legislative scrutiny of the annual budget law ......................................................................... 82 PI-28 Legislative scrutiny of external audit reports .......................................................................... 84 3.7 Donor practices ............................................................................................................................... 86 4 Government reform process ............................................................................................. 87 4.1 Description of provincial government reforms ................................................................................. 87 4.2 Gauteng-specific reforms ................................................................................................................ 88 4.3 Institutional factors supporting the planning and implementation of reforms .................................. 89 4.4 Conclusion and recommendations .................................................................................................. 91 Annexure 1: Detailed calculations for performance indicators .................................................................... 92 Annexure 2: List of contacts 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