Public entities are required to report on a quarterly basis to their Executive Authority. Treasury Regulations 5.3.1, 29.3.1 and 30.2.1 require the accounting officer of an institution and accounting authority of a public entity to establish procedures for quarterly reporting to the executive authority in order to facilitate effective performance monitoring, evaluation and corrective action. These guidelines are aimed at improving transparency and enhancing oversight over the financial and non-financial performance of constitutional institutions and public entities. This requires public entities to provide quarterly reports not only to their Executive Authorities but also to other government stakeholders. The guidelines provide details on the nature and timing for submission of quarterly reports by constitutional institutions and public entities listed in Schedules 2, 3A and 3B of the Public Finance Management Act (PFMA), 1999. National Treasury Instruction note No.2 of 2014/15 introduced a consistent approach to quarterly reporting issued in terms of section 76 (4) (g) of the PFMA.

A uniform system of collecting, storing, consolidating and analysing in-year financial and non-financial information is essential for efficient public financial management. The quarterly reporting system is meant to reduce the reporting burden on public entities and constitutional institutions by providing a single reporting template that can cater for the information requirements of the National Treasury, the South African Reserve Bank, Statistics South Africa and the Department of Planning, Monitoring and Evaluation. Section 38(1)(b) of the PFMA states that Accounting Officers of constitutional institutions are responsible for ensuring the effective, efficient, economical and transparent use of the resources in the institution. Section 51(1)(f) of the PFMA states that Accounting Authorities of public entities are responsible for the submission of all reports, returns, notices and other information to Parliament or the relevant provincial legislature and to the relevant Executive Authority or the National Treasury as may be required by the Act. Quarterly reporting will enable institutions1 to review progress towards the achievement of financial and non-financial performance on a regular basis in a particular financial year.

In South Africa, uniform Treasury norms and standards, as implied by the Constitution, facilitate the deregulation of financial controls by providing a framework of principles and accountability requirements. The National Treasury Regulations establish fundamental best practice management principles (the norms and standards required by the Constitution), rather than specifying detailed procedures and processes. The National Treasury assists national and provincial departments with the preparation of quarterly and annual reports by providing a reporting guide for ease of use for the accounting officers and/or authority. This guideline incorporates annual reporting requirements as set out in the various policy documents namely the Constitution, 1996; the Public Finance Management Act (PFMA); 1999, the Division of Revenue Act (DoRA), 2003; the Treasury Regulations, 2002; and the Public Service Regulations, 2001.

One of the key aspects of the Public Finance Management Act is to provide information on a regular basis to management, the appropriate Minister, the National Treasury, Cabinet and Parliament. Fourie (2002:120) argues that reporting can be considered according to two basic principles. Firstly, there is reporting on strategic issues on a quarterly basis to the Minister. This reporting must evaluate the extent to which the objectives have been met against the performance indicators that were set in the budget documents to Parliament. This reporting also forms the basis of the annual report of the department to Parliament. Secondly, reporting to the Minister and Treasury on a monthly and quarterly basis on expenditure and revenue figures against the budgetary provisions.

Management should use the reports to take corrective steps to prevent over-expenditure/under-expenditure and the under collection of revenue. Furthermore, these reports will form the basis of the regular reporting by Treasury to Cabinet on expenditure and revenue figures against budgets by the national and the provincial departments. The reports also form the basis of the consolidated national and provincial expenditure and revenue figures against budgets that must be published quarterly by Treasury in the Government Gazette.

All quarterly information must be signed off by the Accounting Officer, the Accounting Authority or the Chief Executive Officer of the institution and submitted in the required format, to the Executive Authority and to the National Treasury within 30 days after the end of each quarter. Information reported must include validated accurate data. In the event that the submission date falls on a non-working day, the quarterly report must be submitted on the first working day following the submission date. The due dates for submission are as follows:

Quarter	Due date for submission
Q1: Quarter ending 30 June	31 July
Q2: Quarter ending 30 September	30 October
Q3: Quarter ending 31 December	31 January
Q4: Quarter ending 31 March	30 April

The historical context

The Exchequer Act of 1975 was the financial management regulatory tool used by the previous government. The Act prescribed rules and systems of expenditures and approval that were centrally based. Through the Exchequer and Audit Act, financial processes were controlled by centrally prescribed bureaucratic rules that allowed little scope for managerial discretion. In fact, it was more financial administration, regulating how money was used to ‘buy’ inputs, and diverting attention from the delivery of the outputs that the inputs were intended to achieve. This approach did not clearly define responsibilities and resulted in poor accountability and no value for money. The incremental8 (one year) budgetary system undermined planning and their budgets during the financial year and did little to avoid overspending and under spending. This was compounded by delays in producing financial information, which was often only available well after the end of the financial year (National Treasury, Republic of South Africa, 2000:3).The budgets were further centralised within departments promulgating an opinion that Fourie (2002: 101) states as:

• that finances were for financial people;
• the fact that line managers were performing their functional responsibilities, main objectives and activities, and
• the preoccupation of line managers with delivering services.

This meant that finances were deliberately prepared with the intention of lay people not being able to understand the budget. It disassociates people from finances and the management thereof. This cultivated a culture wherein finances were disliked and to an extent feared as a phenomenon above the ordinary person. This culture created many problems, and still does, to the post-1994 administration as it strives to inform and educate that financial management is the responsibility of everyone.

The 1994 transition to a democratic state brought with it many challenges for managing public finances in South Africa. The new constitutional dispensation laid down a changed structure and distribution of power in the state. This had implications for the way in which public funds were allocated and used. The new government had a critical political commitment to improving the coverage and quality of public service delivery to the majority of the population.

It was only post-1994 that the new government could assess the full extent of the task that lays ahead. The task of basic service delivery to the masses was immense, and the importance of redressing the inequalities of the past was highlighted. In order to redress the racially based distortions of the past, Fölscher and Cole (2004: 109) explain that the annual budgeting system the government inherited provided inadequate tools with which to stabilise fiscal balances and manage the required policy shifts. It was highly fragmented, not only in terms of a de-linking of policy, budgeting and implementation, but also institutionally, increasing budgeting uncertainty, lack of clarity and the scope for budget. The budget process planned and controlled for inputs and cash, with limited opportunity for systematic assessment of the effectiveness and efficiency of spending, or for relating allocations directly to policy. The fiscal policies were not transparent, with poor underlying information systems, hidden spending and inadequate mechanisms to extract good information for use in the budget process and for accountability purposes. The budget process itself was largely incremental, offering insufficient opportunity for the new government to identify ongoing non-priority activities and to create fiscal room for higher priorities. Accountability was procedural9, and the system was plagued by deeply entrenched inefficiencies that ultimately led to the misuse and/or abuse of state funds. The visible lack of accountability structures was problematic to the new government. These shortcomings resulted in the government, post-1994, reforming procedures focused on accountability and financial reporting. One of new government’s first landmark achievements was the integration of the three spheres of government into the budgetary process.

The highlight of the reform programme has been the roll-out of a new intergovernmental system that requires all three levels of government to formulate and approve their own budgets. In addition to detailing the structure of the state, expenditure and revenue assignment and setting out key institutions, roles and responsibilities, it establishes the principle of co-operative governance, which set the tone for a consensus-seeking budget process. Chapter 13 s (215) 1 of the Constitution states that the three spheres of government must be involved in the budgetary processes.

In 1998/1999, South Africa adopted a three-year budgeting system. This impacted on the national, provincial and municipal budgets. This also meant a change in financial reporting systems and that budget and reporting processes were decentralized. This meant that each level of government was responsible for its own budgets and that grant certainty or revenue generation had to be assured by National Treasury. This was supported through the Division of Revenue Act, which scheduled all national allocations per province, per municipality for each of the three years.

The Public Finance Management Act of 1999 assisted in assuring that financial management and reporting in the public sector would be modernized. Each province is awarded an upfront allocation, which is guaranteed, and no ad hoc in year allocations are made. This change in fiscal discipline challenges departments to develop their provincial fiscal framework. As stated earlier, in 1998, South Africa shifted from one-year incremental budgets to three-year rolling budgets. This meant that budgets were published for three years but only appropriated for one year. The outer two years are used as baseline budgets for the following year. Any additional funds are awarded from contingency reserves or new revenue collected by the province. This lays the basis for better planning, more consultative budget processes and better intergovernmental fiscal relations.

Treasury sets the regulations that departments must follow. These regulations outline the following:

• Strong internal control which includes risk management and fraud management;
• Financial planning;
• In-year management and monitoring, and
• Reporting and accountability.

These regulations set out the various reports that are necessary so that departments can be accountable for the resources they receive. Every month departments must report on financial performance and must include the following:

• Cash management performance;
• Expenditure against budget;
• Revenue against target;
• Projected expenditure and revenue;
• Variances between planned and real targets and actions, and
• Uncleared items, including items that are not allocated to the correct cost centre.

Every quarter (three months), the department must report on all transfer payments done. Then, naturally, it reports annually and this includes the following reports:

• Annual financial statements of expenditure and revenue (within two months of the closing of the financial year). These must be audited by the Auditor-General’s office;
• Information on efficiency, equity, effectiveness and economy;
• Transfer payments and compliance to transfer agreements;
• Report on write-offs and losses;
• Report on expenditure that is unauthorized, irregular or fruitless and wasteful, and
• Report on disciplinary actions related to misconduct and fraud.

Questions 1

1.1 Why are many provincial and national departments not able to meet the basic reporting deadlines prescribed by the Public Finance Management Act (1999)?

1.2 What lessons can be learned from the system used in South Africa?

1.3 What can be done to assist provincial and national departments to comply with the legislation?