Presentation to Parliament’s Select Committee on Finance 14 August 2012

1. Presentation to Parliament’s Select Committee on Finance 14 August 2012

2. PRESENTATION OUTLAY • 2011/12 Pre - Audit Budget Outcome • Snapshot of Key Provincial Economic Indicators • 2012/13 1st Quarter Budget Outcome • Fraud & Corruption

3. 2011/12 PRE-AUDITED BUDGET, EXPENDITURE AND REVENUE OUTCOME

4. 2011/12 PROVINCIAL BUDGET SUMMARY • 2011/12 adjusted budget amounts to R24.203 billion: • Equitable Share = R18.154 billion (75%) • Conditional Grants = R5.277 billion (22%) • Own Revenue = R771.6 million (3%) • Economic Classification • Current payments = R18.0 billion (74.6%) • Of which Compensation = R14.1 billion (78.1%) • Payments cap assets = R2.6 billion (10.9%) • Transfer payments = R3.5 billion (14.5%) • Social vs other departments • SHE departments = R17.5 billion (72.4%) • Other departments = R6.7 billion (27.6%)

5. DEPARTMENTAL PERFORMANCE –PRE-AUDIT MARCH 2012 Audited = R23.761 billion

6. ECONOMIC CLASSIFICATION – PRE-AUDIT MARCH 2012

7. EXPENDITURE ON COMPENSATION – PRE-AUDIT MARCH 2012

8. EXPENDITURE ON GOODS & SERVICES – MARCH 2012

9. CAPITAL EXPENDITURE – PRE-AUDIT MARCH 2012

10. 2011/12 - INFRASTRUCTURE PRE-AUDIT MARCH 2012

11. CONDITIONAL GRANTS – PRE-AUDIT MARCH 2012

12. PROVINCIAL UNDER EXPENDITURE TRENDS

13. REVENUE PERFORMANCE – 2011/12

14. KEY PROVINCIAL ECONOMIC INDICATORS

15. ECONOMIC STRUCTURE

16. FREE STATE AND SOUTH AFRICA’S GDP REAL GROWTH (2005 prices) • Average provincial growth between 2001 and 2011 = 2.7%

17. UNEMPLOYMENT RATE BY PROVINCE 1 1 3

18. 2012/13 1st QUARTER EXPENDITURE AND REVENUE OUTCOME

19. 2012/13 PROVINCIAL BUDGET • 2012/13 allocated budget amounts to R24.870 billion: • Equitable Share = R18.531 billion (75%) • Conditional Grants = R5.520 billion (22%) • Own Revenue = R819.3 million (3%) • Economic Classification • Current payments = R18.913 billion (76.0%) • Of which Compensation = R15.1 billion (60.7%) • Payments cap assets = R2.4 billion (9.8%) • Transfer payments = R3.5 billion (14.2%) • Social vs other departments • SHE departments = R18.3 billion (73.6%) • Other departments = R6.5 billion (26.4%)

20. DEPARTMENTAL PERFORMANCE –JUNE 2012

21. ECONOMIC CLASSIFICATION – JUNE 2012

22. EXPENDITURE ON COMPENSATION – JUNE 2012

23. EXPENDITURE ON GOODS & SERVICES – JUNE 2012

24. CAPITAL EXPENDITURE – JUNE 2012

25. INFRASTRUCTURE EXPENDITURE – JUNE 2012

26. CONDITIONAL GRANTS – JUNE 2012

27. REVENUE PERFORMANCE – JUNE 2012

28. REMEDIES/ MEASURES IMPLEMENTED • Preliminary provincial budget process forwarded to departments • Instruction notes and circular issued to improve efficiency and compliance • Provincial rollover meeting held with all affected departments – improve compliance • Provincial CFO forum – discussion on financial management and sharing of best practices • Refocusing the strategic intent of the Provincial Treasury Committee • Provincial workshop on 2013 MTEF database – better understanding of the model • Provincial Treasury implemented the section 18 of the PFMA in the Department of Police, Roads and Transport.

29. REMEDIES/ MEASURES IMPLEMENTED • Provincial Revenue Enhancement Strategy (PRES) & Revenue Enhancement Allocation • Monthly revenue reports • Site visits • Quarterly meetings • Revenue Workshop • Revenue Bilateral • Weekly payments into Provincial Revenue Fund • Issue of Instruction Notes & Guidelines

30. PLANNED REMEDIES/ MEASURES • Introduction of Provincial Pre-benchmark Exercise to improve the level of readiness for the January Benchmark • Impose budget cut to the departments that are not able to demonstrate on how they will deal with accruals in phases • The province to undertake a process which will improve the quality and reliability of the projections • Individual departmental visits to discuss spending trends, priorities and proposed measures to improve overall spending • Provincial Budget Workshop on MTEF Databases, EPRE and APPs • Review of Cost Containment Measures

31. PLANS /SYSTEMS TO DETER FRAUD AND CORRUPTION

32. CAPACITY BUILDING • Training Chief Risk Officers(CRO): Managing Fraud in Work place • Guideline issued on Fraud prevention and detection • Concept Fraud prevention policy developed and provided to all departments and entities • Key Performance Indicators on fraud management were also developed – assessments bi-annually from 2012/13. • During 2011/2012, Provincial Treasury has partnered with JGL, UFS, ACFE and PWC during International Fraud Awareness Week. One day session for Executive Authorities, Executive Mayors, Mayors and Management of provincial departments, public entities and municipalities and a second day session for Businesses. This will be held annually.

33. GOVERNANCE • Risk management committees appointed in all departments • CRO’s appointed in all departments • Composition of Audit Committees for departments reviewed in 2011/12. No government official serve on Committees. Improve effectiveness of Audit Committees. • Finance and SCM Delegations reviewed to prescribed minimum level for delegations and ensure segregation of duties. • Delegations also issued for all transactions on the Transversal systems namely BAS, PERSAL and Logis • SCM forums held every quarter to highlight fraud issues that affects Departments

34. PROCUREMENT • Hotline • Central Supplier database • Capacity building: urgent and emergency delegation • Reporting of tenders allocated • Departments report on expansion and variations of contracts Treasury • Departments submit procurement plans in April each year and report monthly on deviations • Certain goods a procured through a transversal contract arranged by Treasury • Departments report monthly on payments made in 30 days

35. SYSTEM CONTROLS • Budget blocking • Sundry payments outside of LOGIS are limited to specific payments which are not provided for on LOGIS/PERSAL • System Controllers for BAS is situated in the Provincial Treasury. • Access control both functional and password

36. CASH MANAGEMENT AND PAYMENTS • Provincial Treasury handle all registration of banking detail and second verification is done by the bank before it is captured on systems. • Computer printed cheques are only printed by Provincial Treasury while hand cheques are also only issued by Provincial Treasury • All supplier payments above R1 m and PERSAL payments above R5m [BCT] are verified and approved by Treasury before implementation by the bank • Provincial Treasury must approve all Business online and FOREX payments before it can be processed • Use Aggregated limits [ total and item] • Verify all signing authorities on quarterly basis • Payment control checklists were implemented

37. OTHER • Monthly reporting of unauthorised, irregular and fruitless expenditure. Including progress with investigations and indication if disciplinary actions are taken. • Physical verification is done on all Provincial Assets • Mandates are continuously confirmed with SARB. • Only the HOD of Treasury can amend these mandates by a written instruction to the Bank, and specimens of all authorised signatories are at the Bank • Officials are encouraged to maintain secrecy of passwords • Resetting of passwords only done by SARB, by direct contact on e-mail with the affected user.

38. Thank you