Background and Context

It is impossible to manage any organisation without the information to develop plans, evaluate alternatives, and where necessary, to institute corrective actions. Traditionally, managers in government have placed too little importance on receiving and acting upon accurate and up-to-date data – particularly financial data - with the result that accountability has been undermined and available resources have been used to less than their maximum potential.

The Public Finance Management Act (Act No 1 of 1999 as amended by Act 29 of 1999) stresses the need for accounting officers (and those to whom managerial responsibilities have been delegated) to regularly monitor and report on the performance of their Departments against the agreed budget for the year. However, this is not a mechanistic requirement to ‘tick boxes’, but one element in a process designed to improve the use of limited financial resources in the delivery of services to communities.

The Act stresses the need for regular monthly monitoring reports to be produced by the accounting officer for submission to the Minister or MEC and the relevant treasury. The intention is to develop a single process (based on the ‘Early Warning System’ which has evolved over the past two years) to meet the information needs of managers and satisfy the reporting requirements of the PFMA, as well as the provisions of the Division of Revenue Act (No 16 of 2000: DoRA).

The reports will focus attention on performance against budget and against service delivery plans, and will alert managers where remedial action is required. In addition, reports will be consolidated and published monthly for National Departments and quarterly for Provinces in the national Government Gazette, in line with international best practice. These monthly reports will facilitate the compilation of the year-end financial statements and annual report, and the reduced timeframe for audit procedures will strengthen accountability to legislatures.

Legal requirements

In brief, the reporting requirements specified in sections 32 and 40(4) of the PFMA, and also in sections 7 to 9 of DoRA, require that expenditure and revenue information for all programmes be provided each month to the national Treasury (see Annexure A). Failure to provide this information is not only illegal and grounds for the sanctions under the Act to take effect, but also reflects poor management.

Regardless of these legislative requirements, the monitoring of financial data is an essential element in managing the performance of any spending agency. Unless managers receive appropriate information on the services for which they are accountable, effective management and governance is impossible.

Concepts

Three basics questions arise during the ‘monitoring’ phase of the management process:-

At present, managers are not always able to address these questions in an informed manner, as the data they receive is often inaccurate or only available after a long delay. One of the most crucial aspects of implementing the PFMA will be improving the quality of information available to managers. Ideally, the information generated by a management information system should be:- ·  accurate, for meaningful decisions and steps to be taken;

While no system will ever be ideal and there will always be scope for improvement, the accounting systems currently in place throughout government (e.g. FMS, BAS) are capable of providing managers with sufficient data to allow them to discharge their responsibilities. The improvements that are necessary will be stimulated by managers interrogating the information presented to them.

Best practice internal reporting

Just as the qualities of information are important, so is the manner in which it is communicated.

Complex financial data, presented in endless columns and rows of figures may meet all the qualities outlined above, but still prove ineffective if managers are unable to access and hence use it to assist in the decisions they take.

Information to managers and Ministers of MECs (referred to as Executive Authorities in the Act) is usually presented in internal reports, which should be designed to facilitate:-

Internal reports must achieve a balance between presenting sufficient detail to be meaningful without overburdening the preparer or swamping the reader; focussing on critical outputs with accurate and timely data, presented attractively and concisely.

‘Best practice’ internal reporting suggests that management information should include:-

The PFMA specifies that a variety of reports (some monthly, others quarterly, and finally, at the year-end) be produced, and there are different responsibilities for Executive Authorities and Accounting Officers. While the information specified in the Act may be seen as an increase on that currently produced, it represents the minimum that a manager will need to manage, and must be seen in this light: Accounting Officers must use the information before passing it to the relevant treasury – simply producing it to satisfy a legal requirement will be an exercise in futility. The intention is that there ought to be a single process for ensuring that effective management, monitoring and reporting can take place within a Department and then the same information be submitted to the (relevant) Treasury in order that it may discharge it’s monitoring and publication responsibilities.