National revenue fund act

Part C: Provincial Public Entities

Note that some technical corrections have been incorporated below

  1. Centre for Investment and Marketing in the Eastern Cape
  2. Eastern Cape Agricultural Bank
  3. Eastern Cape Appropriate Technology Unit
  4. Eastern Cape Arts Council
  5. Eastern Cape Consumer Affairs Court
  6. Eastern Cape Development Corporation
  7. Eastern Cape Development Tribunal
  8. Eastern Cape Gambling and Betting Board
  9. Eastern Cape Local Road Transport Board
  10. Eastern Cape Museums
  11. Eastern Cape Provincial Housing Board
  12. Eastern Cape Provincially Aided Libraries
  13. Eastern Cape Regional Authorities
  14. Eastern Cape Socio-Economic Consultative Council
  15. Eastern Cape Tender Board
  16. Eastern Cape Tourism Board
  17. Eastern Cape Township Board
  1. Free State Mangaung Nursing College
  2. Free State Rural Foundation
  3. Free State Rural Strategy Unit
  4. Free State Liquor Board
  5. Free State Gambling and Gaming Board
  6. Free State Tender Board
  7. Free State Tourism board
  8. Free State Youth Commission
  1. Gauteng Economic Development Agency
  2. Gauteng Gambling Board
  3. Gauteng Tourism Authority
  4. Gauteng Consumer Affairs Court
  5. Gauteng Development Tribunal
  6. Gauteng Education and Training Board
  7. Gauteng Municipal Demarcation Board
  8. Gauteng Provincial Housing Board
  9. Gauteng Services Appeal Board
  10. Gauteng Townships Board
  1. KwaZulu-Natal Appeals Tribunal
  2. KwaZulu-Natal Development & Services Board
  3. KwaZulu-Natal Development Tribunal
  4. KwaZulu-Natal Gambling Board
  5. KwaZulu-Natal House of Traditional Leaders
  6. KwaZulu-Natal Monuments Council
  7. Natal Sharks Board
  8. KwaZulu-Natal Private Townships Board
  9. KwaZulu-Natal and Regional Planning Commission
  10. KwaZulu Natal Townships Board
  11. KwaZulu Natal Provincial Peace Committee
  12. KwaZulu-Natal Tender Board
  13. KwaZulu-Natal Tourism Authority
  14. KwaZulu-Natal Liquor Board
  15. KwaZulu-Natal Conservation Services
  16. KwaZulu-Natal Local Roads Transportation Board
  17. KwaZulu-Natal Marketing Initiative
  18. KwaZulu-Natal Economic Council
  19. KwaZulu-Natal Taxi Task Team
  20. KwaZulu-Natal International Airport Development Initiative
  21. S.A. Life Saving
  22. Natal Trust Fund
  23. Natal Arts Trust
  1. Mpumalanga Gambling Board
  2. Mpumalanga Housing Board
  3. Mpumalanga Parks Board
  4. Mpumalanga Tender Board
  1. Northern Cape Economic Development Unit
  2. Northern Cape Gambling Board
  3. Northern Cape Housing Board
  4. Northern Cape Liquor Board
  5. Northern Cape Local Transportation Board
  6. Northern Cape Provincial Tender Board
  7. Northern Cape Tourism Authority
  8. Northern Cape Youth Commission
  1. Northern Province Agricultural and Rural Development Corporation
  2. Northern Province Appeal Tribunals
  3. Northern Province Development Tribunals
  4. Northern Province Panel of Mediators
  5. Northern Province Planning Commission
  6. Northern Province Provincial Tender Board
  7. Northern Province Tourism Board
  8. Northern Province Gaming Board
  9. Northern Province Liquor Board
  10. Northern Province Local Business Centres
  11. Northern Province Housing Board
  12. Northern Province Investment Initiative
  13. Gauteng Gateway International Airport

(note correction by replacing of "Gauteng" in this line)

  1. NW Agricultural Services Corporation
  2. NW Arts Council
  3. NW Communication Service
  4. NW Mmabana Cultural Foundation
  5. NW Ombudsman
  6. NW Gambling Board
  7. NW Tender Board
  8. NW Parks and Tourism Board
  9. NW Housing Corporation
  1. WC Investment and Trade Promotion Agency
  2. WC Provincial Tender Board
  3. WC Tourism Board
  4. WC Gambling and Racing Board
  5. WC Housing Development Board
  6. WC Liquor Board
  7. WC Provincial Development Council

Any subsidiary or entity under the ownership control of all the above public entities

Part D: Provincial Government Enterprises

  1. Algoa Bus Company
  2. Mayibuye Transport Corporation
  3. Free State Agri-Eco (Pty) Ltd
  4. Free State Development Corporation
  5. KwaZulu Finance & Investment Corporation
  6. KwaZulu Mjindi Farming (Pty) Ltd
  7. Mpumalanga Development Corporation
  8. Mpumalanga Finance Corporation
  9. NW Development Corporation
  10. Natal Trust Farms (Pty) Ltd
  11. Northern Province Development Corporation
  12. Any subsidiary or entity under the ownership control of the above public entities.

EXCLUSIONS FROM REVENUE FUNDS

In terms of section 13 (1) or 22(1)

1. SA Schools Act (covering school fees)

DIRECT CHARGES AGAINST NATIONAL REVENUE FUND

Payments in terms of the following Acts -

    Remuneration of Public Office Bearers Act, 1998 (Act 20 of 1998) (Covering the President's salary - and the salaries of members of Parliament section 2(7) and 3(7));

Remuneration and Allowances of Deputy Presidents, Ministers and Deputy Ministers Act, 1994 (Act 53 of 1994) (Covering the salary of the Deputy President - section 4(a));

REPEAL OF LEGISLATION

No. and year of act

Short title

Extent of repeal

(a) Act No. 66 of 1975

Exchequer Act, 1975

The whole, except sections 28, 29,30

Act No. 106 of 1976

Financial Arrangements with the Transkei Act, 1976

The whole

Act No. 93 of 1977

Financial Arrangements with Bophuthatswana Act, 1977

The whole

Act No. 105 of 1979

Financial Arrangements with Venda Act, 1979

The whole

Proclamation No. R.85 of 1968

South-West Africa Constitution Act, 1968 (Act No. 39 of 1968)

Part 3

Act No. 67 of 1980

Railways and Harbours Acts Amendment Act, 1980

Section 19

Act No. 29 of 1981

Railways and Harbours Acts Amendment Act, 1981

Section 21

Act No. 118 of 1981

Financial Arrangements with Ciskei Act, 1981

The whole

Act No. 100 of 1984

Exchequer and Audit Amendment Act, 1984

The whole

Act No. 9 of 1989

Legal Succession of the South African Transport Services Act, 1989

Schedule 2 Part 6 of the Act insofar as it relates to the Exchequer Act, 1975

Act No. 120 of 1991

Finance Act, 1991

Sections 14, 15 and 16

Act No. 96 of 1992

Part Appropriation Acts Abolition Act, 1992

The whole

Act No. 69 of 1993

Exchequer Amendment Act, 1993

The whole

Act No. 123 of 1993

Finance Act, 1993

The whole

Act No. 142 of 1993

Exchequer Second Amendment Act, 1993

The whole

Act No. 182 of 1993

Exchequer Third Amendment Act, 1993

The whole

Act No. 41 of 1994

(b)Act No 93 of 1992

Finance Act, 1994

Reporting by Public Entities Act, 1992

Sections 17 and 18

(c) Act No. 66 of 1975

Exchequer and Audit Act, 1975

The whole insofar as it is in force in the area of the former Republic of Transkei

Act No. 102 of 1976

Finance Act, 1976

Sections 23, 24 and 25 insofar as it is in force in the area of the former Republic of Transkei

(d) Act No. 29 of 1992 (Bophuthatswana)

Exchequer Act, 1992

The whole

Act No. 16 of 1993 (Bophuthatswana)

Exchequer Amendment Act, 1993

The whole

(e) Act No. 66 of 1975Act No. 111 of 1977

Finance Act, 1977

Sections 9, 10 and 11 insofar as it is in force in the area of the former Republic of Venda

Act No. 94 of 1978

Finance Act, 1978

Sections 12, 13 and 14 insofar as it is in force in the area of the former Republic of Venda

Proclamation No. R.85 of 1979

Exchequer and Audit Proclamation

Sections 16 and 17 insofar as it is in force in the area of the former Republic of Venda

Act No. 21 of 1983 (Venda)

Exchequer and Audit Amendment Act, 1983

The whole

Act No. 18 of 1987 (Venda)

Exchequer and Audit Amendment Act, 1987

The whole

Act No. 28 of 1989 (Venda)

Exchequer and Audit Amendment Act, 1989

The whole

Proclamation No. 25 of 1993 (Venda)

Exchequer and Audit Amendment Act, 1993

The whole

(f) Act No. 28 of 1985 (Ciskei)

Exchequer and Audit Act, 1985

The whole

MEMORANDUM ON THE OBJECTS OF THE PUBLIC FINANCIAL MANAGEMENT BILL, 1999

The Public Financial Management Bill, 1999, gives effect to sections 213, 215, 216, 217, 218 and 219 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996). These sections require national legislation: to establish a National Treasury, to introduce generally recognised accounting practices, to introduce uniform treasury norms and standards, to prescribe measures to ensure transparency and expenditure control in all spheres of government, and to set the operational procedures for borrowing, guarantees, procurement and oversight over the various National and Provincial Revenue Funds.

This Bill is being split into two bills to comply with the constitutionally determined procedures for the passage of bills which affect both the national and provincial governments. The Bill is being passed as a section 75 Bill which will only apply to the national government, with most references to provinces removed from this Bill. The numbering of the consolidated bill is being retained, hence the missing numbers in the section 75 Bill. A second Bill will amend the section 75 Act after its enactment - it is this bill that will broaden the provisions to apply to provinces. This second bill will be introduced in Parliament in terms of the section 76(1) procedure as outlined in that section of the Constitution.

2.1 CURRENT POSITION

2.2 National departments are governed by the Exchequer Act (No 66 of 1975), whilst provinces are governed by their own provincial Exchequer Acts. Other public entities are governed by their own legislation or the Reporting of Public Entities Act

2.2 Financial accountability is undermined by the fact that different legislation applies for different entities. Further, existing legislation regulating financial management is narrowly focused on expenditure control.

3. BACKGROUND AND APPROACH

3.1 The Public Financial Management Bill gives effect to section 216 (1) of the Constitution of the Republic of South Africa, 1996 (Act 108 of 1996), which requires national legislation to "establish a national treasury and prescribe measures to ensure both transparency and expenditure control in each sphere of government, by introducing -

(a) generally recognised accounting practice;

(b) uniform expenditure classifications; and

(c) uniform treasury norms and standards".

3.2 The Bill also gives effect to other sections in Chapter 13 of the Constitution. These sections are:

(a) Section 213 that limits exclusions and withdrawals from the National Revenue Fund through an Act of Parliament.

(b) Section 215 which notes that budgets and the budgetary process "must promote transparency, accountability and the effective financial management of the economy, debt and the public sector" and for national legislation to "prescribe" budget formats for all the spheres of government.

(c) Section 217 on procurement to be "in accordance with a system which is fair, equitable, transparent, competitive and cost-effective".

(d) Section 218 on the conditions for the issue of guarantees by a government in any sphere.

(e) Section 226 that limits an exclusion from a provincial revenue fund through an Act of Parliament.

(f) Sections 100 and 216 on intervention by the national government when an organ fails to perform an executive function related to financial management, circumstances under which funds may be withheld.

3.3 The Bill adopts an approach to financial management which focuses on outputs and responsibilities rather than the rule-driven approach of the current Exchequer Acts.

3.4 This Bill assumes that the political head of a department (Cabinet Minister or a provincial MEC) is responsible for policy matters and outcomes; this includes seeking Parliamentary (or provincial legislature) approval and adoption of the line-function budget vote. The head official (Director-General of a national department or provincial head of department) is responsible for outputs and implementation, and is accountable to Parliament for the financial management in the implementation of that budget. This approach is in line with the approach of the new Public Service regulations, which relies on a performance-driven system based on measurable outputs.

3.5 The Bill is part of a broader strategy on improving financial management in the public sector. The Bill itself assumes a phased approach towards improving the quality of financial management in the public sector. This Bill lays the foundation for the first phase, as it focuses on the basics of financial management, like the introduction of proper financial management systems, appropriation control and the accountability arrangements for the management of budgets. Subsequent phases will focus on the efficiency and effectiveness of programmes and best-practice financial management - these can only be systematically introduced after the basics of financial management are in place.

3.6 This Bill will replace or override the national and provincial Exchequer Acts, and supersede any other financial management provisions in other Acts.

4. KEY POLICY ISSUES

4.1 Application of this Act: Departments and Public Entities

This Bill gives effect to section 216 and other sections of the Constitution. This Bill will apply to the national and provincial spheres, and public entities under their ownership control. Parliament, provincial legislatures and independent institutions established by the Constitution are also covered in this Bill.

An important objective of this Bill is to put in place a more effective financial accountability system over public entities. All entities are required to be listed - the major public entities are listed in Schedule 2, and enjoy full managerial autonomy, with the government only able to intervene though its power as a shareholder. Other public entities are listed in Schedule 3, and enjoy various degrees of autonomy.

4.2 Composition of the National Treasury

The National Treasury comprises of the Minister together with the Departments of Finance and State Expenditure. The Minister is the head of the Treasury.

4.3 Powers of the National Treasury

The Constitution confers extensive powers on national government to determine the financial management framework over all organs of state, in all spheres of government. National government must, through national legislation, determine uniform treasury norms and standards.

The National Treasury is further expected to monitor and enforce these norms. The National Treasury, therefore, not only implements the budget of the national government, but plays an oversight role over the practices of other organs of state in all spheres of government.

4.4 Establishment of Provincial Treasuries - their Role and Function

This Bill establishes provincial treasuries, which are responsible for preparing and managing provincial budgets, and enforcing uniform treasury norms and standards as prescribed by the National Treasury and this Act. Note that this chapter is excluded in the first bill as it applies to provinces, and has to be in the second section 76 Bill.

4.5 This Bill confers specific responsibilities on accounting officers. The Bill vests four key responsibilities, which are:

(a) the operation of basic financial management systems, including internal controls in departments and any entities they control

(b) to ensure that departments do not overspend their budgets;

(c) to report on a monthly and annual basis, including the submission of annual financial statements two months after the end of a financial year; and

(d) to publish annual reports in a prescribed format which will introduce performance reporting.

Accounting officers who are negligent and make no effort to comply with these responsibilities will face strict disciplinary sanctions, including dismissal. Similar sanctions will apply to treasury officialsfailing to carry out their responsibilities. The new Public Service Act regulations and the trend towards performance contracts will complement this approach.

Similar fiduciary responsibilities and sanctions are also outlined for the boards (called accounting authorities) of public entities.

4.6 Voting by main division and virement

The Bill requires Parliament to vote by programme("main divisions within a vote") rather than departmental votes. This will require further information on outputs per programme, and limit the powers of accounting officers to move funds between programmes. Such movement or virement is restricted to 8% of the total allocation for a programme.

4.7 Improved information and timely submission of financial statements

The Bill aims to address the problem of the late submission of financial statements within government, to comply with the constitutional obligations for generally recognised accounting practices and greater transparency, and to improve financial management and accountability through better and more timely information flows.

5. SUMMARY OF BILL

Chapter One of the Bill deals with definitions, objects, application and amendment of this Bill. The Bill will apply to national and provincial government institutions, which includes national and provincial departments, and the entities under their ownership control. Key definitions to note are those of ownership control, government enterprises, main division within a vote, unauthorised, irregular and fruitless and wasteful expenditure. A procedure to amend this Bill is included and is intended to prevent other Acts of Parliament from amending or inadvertently by-passing the provisions of this Bill.

Chapter Two of the Bill establishes the National Treasury, deals with its composition, functions, powers and responsibilities. The National Treasury is comprised of the Minister and the Departments of Finance and State Expenditure. The Minister is empowered to delegate the day-to-day operations of the Treasury to the heads of the two departments. The National Treasury is empowered to develop the overall macroeconomic and fiscal framework, coordinate intergovernmental fiscal relations and the budget-preparation process, manage the implementation of a budget and promote and enforce revenue, asset and liability management. The National Treasury is also empowered to determine a banking and cash management framework, and is empowered to require banks to provide information on the banking accounts of national and provincial institutions. The chapter also gives effect to sections 213 of the Constitution, on the management of the National Revenue Fund, any exclusions to depositing money received, and the authorization required before any expenditure.

Chapter Three establishes provincial treasuries and deals with their composition, powers and functions, and the management of provincial revenue funds.

Chapter Four on the Budget process gives effect to section 215 of the constitution on the timing and content of national and provincial budgets, and the reporting requirements that will promote greater transparency in the implementation of a budget. It also outlines what adjustments budgets must deal with, and also outlines the minimum content for multi-year budgets. This section also contains a clause on unfunded mandates.

Chapter Five ensures that all national and provincial institutions and entities have accounting-officers, and spells out their responsibilities, and the disciplinary sanctions that will apply in the event of negligence in fulfilling these responsibilities. This chapter obligates accounting officers to produce monthly and annual financial reports for their political heads (executive authority), and outlines the responsibilities for political heads and accounting officers to prevent overspending on budgets. The shifting of funds between programmes (or main divisions within a vote) or virement is also dealt with in this bill.

Chaper Six of the Bill ensures that all public entities are listed in two Schedules. Schedule 2 covers the major public entities, and confers maximum autonomy to these entities. Schedule 3 covers all other public entities with varying degrees of autonomy. This chapter oulines the fiduciary and other responsibilities of the governing boards of these entities, similar to the responsibilities of accounting officers.

Chapter Seven covers the responsibilities of Ministers and MECs, who are referred to as the executive authorities of departments and public entities.

Chapter Eight of the Bill outlines general principles on borrowing and the issuing of guarantees. This chapter gives effect to section 218 of the Constitution on the issuing of guarantees. The chapter also regulates the borrowing operations of the national government, and determines the person who can borrow on behalf of any national or provincial government entity. It makes illegal any other forms of borrowing or financial commitment, with strict sanctions applying.

Chapter Nine of the Bill lists the areas over which the National Treasury is empowered to issue uniform norms and standards.

Chapter Ten of the Bill defines financial misconduct, and deals with the procedures for disciplining those public officials guilty of financial misconduct. It also includes a provision for criminal prosecution to apply where there is gross financial misconduct.

Chapter Eleven establishes an Accounting Standards Board which will have the power to determine the generally recognised accounting practices for the public sector.

Chapter Twelve deals with transitional and other miscellaneous issues related to the implementation of this Bill and when it takes effect. Some of the provisions of the Bill cannot be implemented immediately, and could take up to five years to implement fully (eg the sections relating to consolidated financial statements). The transitional arrangements will allow the Minister to phase in such provisions.