Introduction

Once the reporting requirements of the PFMA and DoRA have been satisfied, managers will need to decide on the actions they must instigate. At a minimum, variations resulting from errors at the data input stage must be corrected, and allowances made for transactions not captured at the time the report was processed. Changes may also be required to budget ‘profiles’ for the remainder of the year.

However, the greatest management attention must be devoted to those situations where actual events do not accord to those anticipated in the operational plan (and noted either as a variation in the accounting report or from other sources); in other words, to address the question, what actions must be taken to achieve the agreed plan? In financial terms, some or all of the following actions may become necessary:

Each is considered in the paragraphs below.

Virement

Virement means that under certain conditions, a budgetary allocation is transferred from one main division to another (without increasing the total departmental budget). Unless the relevant treasury directs otherwise, an accounting officer may utilise a saving of up to 8 per cent of the amount appropriated under a main division (i.e. programme) for defraying excess expenditure under another main division within the same vote. This must be reported to the executive authority and the relevant treasury within seven days.

Illustration of the exercise of Virement

Department of XXX

Unless an adjustments budget change increased the total allocation by R200 million, and also increased the allocation for programme A and decreased the original allocation to programme B, the Auditor-General's audit opinion will note that the total budget was overspent by R200 million, and that this is unauthorised expenditure. It will highlight that the budget for programme A (which is a main division of a vote) was overspent by R400 million, compared to the original allocation. Section 42 of the PFMA on virement does allow the accounting officer to shift R80 million (8 per cent of R1 000 million (although there are limitations specified in Section 43 (4), and personnel expenditure and transfers by departments may not be increased without prior approval of the relevant treasury) from programme B to A. Had this been done, only R320 million of the additional R400 million spent on programme A would have been unauthorised. Further, programme B is underspent by R200 million (or R120 million had the virement been exercised).

Rollovers

A particular problem in recent years has been the amount of money ‘rolled over’ from one financial year to the next. This is generally the result of poor planning, and Government intends to reduce the amount of rollovers in future. Accounting officers must recognise that, in most cases, the failure to utilise funds allocated by a legislature represents underperformance.

However, there may be instances where a project or activity is likely to ‘slip’ into the next financial year, and the Act allows for this. Appropriated funds that have not been spent in a particular financial year may be ‘rolled over’ to a subsequent year in certain circumstances, and subject to approval by the relevant treasury. Capital funds may be rolled over to finalise projects still in progress or for other capital purposes. Transfer payments may not be rolled over for purposes other than originally voted. A maximum of 5 per cent of a department’s current expenditure may be carried into the next financial year.

Transfer of functions

Before seeking formal approval from the Minister of Public Service and Administration or the Premier of a province for a transfer of functions to another sphere of government, the transferring accounting officer must first obtain the approval of the relevant treasury for any funding arrangements.

Additional funds through an adjustments budget

The Act provides for an adjustments budget to deal primarily with matters that are unavoidable and were unforeseeable at the time the budget was compiled. Any department requesting additional funds through an adjustments budget must submit a memorandum to the relevant treasury, the Cabinet/EXCO Secretariat and any treasury subcommittee of the Cabinet/EXCO.

Curtailment of expenditure on a programme In some situations, it may become necessary to curtail expenditure on an agreed programme, as the circumstances have changed to such an extent from those anticipated at the time the operational plan was agreed, or in order to avoid unauthorised expenditure being incurred. This situation must be reported to the Executive Authority and relevant treasury as soon as the Accounting Officer becomes aware of the situation.