South Africa Northern Cape Province 2015

Summary assessment 
1. Integrated assessment of PFM performance
Annual deviation of actual total HLG transfers (equitable share and conditional grants) from the original total estimated amount provided by the National Treasury to the Northern Cape provincial government for inclusion in the latter’s budget is very low (FY2011/12 through FY2013/14). That means that amounts budgeted have been disbursed.
Overall National Treasury has complied with timetables for in-year distribution of disbursements agreed prior to the start of the period (FY2011/12 through FY2013/14). Delays have occurred but they are due to the departments not fulfilling the conditions for disbursements.
Credibility of the budget
Within the Northern Cape the PEFA evaluation has shown that the budget is realistic and is implemented as intended. In fact, both aggregate expenditure out-turn and the composition of expenditure out-turn compare well to original approved budget (FY2011/12 through FY 2013/14). In addition, the aggregate revenue out-turn compares fairly well to the original approved budget for the same period. Moreover the stock of expenditure payment arrears is low (2013) and the latter are regularly (annually) monitored.
Comprehensiveness and transparency
Overall the budget of Northern Cape and the fiscal risk oversight are comprehensive and fiscal and budget information is accessible to the public.
In Northern Cape, the budget formulation and execution meet international standards. Both are based on administrative, economic, programme and sub-programme classification that can produce consistent documentation according to GFS/COFOG standards. In addition the information included in budget documentation is comprehensive and there are no unreported government operations.
Intergovernmental fiscal relations are fully transparent. The horizontal allocation of almost all transfers from the Northern Cape to its municipalities is determined by transparent and rules based systems. In addition municipalities are provided with reliable information on the allocations to be transferred to them two months before completing their budget proposals, so that significant changes to the proposals are still possible. Moreover complete ex-ante and ex-post fiscal information that is consistent with provincial government fiscal reporting is collected for all municipalities (by value)’ expenditure and consolidated into annual reports within three months of the end of the fiscal year
All public entities submit quarterly fiscal reports to their respective ministries as well as annual audited accounts to the Northern Cape Treasury Department. The latter consolidates the report, which is part of the annual financial statements. Fiscal risk issues, if any, are always emphasised in the reports. Municipalities cannot generate fiscal liabilities for provincial and national government. In addition the Provincial Treasury collects monthly revenue and expenditure statements from municipalities, indicating actual borrowings, and is in a position to identify fiscal risks, which could inform remediation or interventions. The Provincial Treasury publishes quarterly a consolidated budget outcomes report on the individual and consolidated annual municipal budget execution reports in terms of revenue per source and expenditure per vote, broadly in terms of the national economic and functional classification system.
Overall, in Northern Cape, the public has very good access to key fiscal information.
Policy-based budgeting
A clear and fixed budget calendar is elaborated by the Northern Cape Provincial Treasury (Provincial Treasury) to all provincial departments, their entities and municipalities. Provincial departments have at least six weeks from receipt of the budget circular to complete their detailed budget estimates (for FY 2014/15 and the 2015 MTEF). The budget circular issued by Provincial Treasury to provincial departments is clear and comprehensive, and reflects ceilings approved by the province's executive council prior to the circular’s distribution to these departments. In all the three years reviewed (FY2012/13 through FY2014/15), the budget was signed into law after more than two months after the start of the fiscal year.
Detailed multi-annual revenue and expenditure forecasts for each provincial department up to the programme level are provided in the province’s EPRE 2012, 2013 and 2014, disaggregated in terms of economical and functional classifications. These forecasts are directly linked to the MTEF forecasts of national government.
Four provincial departments representing more than 80 per cent of the total provincial expenditure estimates, were tabled alongside the budget documentation each year in the Northern Cape Provincial Legislature. The fiscal forecasts contained in the province’s main budget document mirrors the EPRE. These forecasts are by law required to be aligned to the respective departmental Strategic plans. Annual performance plans (APP) detail the reconciliations between multi-year financial projections and performance information (including output and outcome) targets up to at least the programme level for each vote (sector), and are therefore considered costed sector strategies.
province’s EPRE 2012, 2013 and 2014 contain the medium-term infrastructure expenditure (capital as well as maintenance expenditure) estimates for individual service delivery facilities (e.g. schools and clinics), with four departments accounting for close to 80 per cent of the total expenditure of the province. These departments’ APPs reconcile the MTEF budget estimates with the investment projects planned for in departmental Strategic Plans.
Predictability and control in budget execution
In the Northern Cape, a cash flow forecast is prepared for the fiscal year, and is updated monthly on the basis of actual cash inflows and outflows. The exercise is rigorous and it allows departments to plan and commit expenditure for at least six months in advance in accordance with the budgeted appropriations. An in-year adjustment to budget allocations (5 per cent to 7 per cent of the original budget) takes place (only once in a year) and is carried out in a transparent and predictable way.
The Northern Provincial Government has no debt (and/or no loans). The Northern Cape has 70 accounts. All cash balances are calculated daily and consolidated. This exercise excludes the Provincial Legislature (2nd department). Provincial government’s contracting of loans and issuance of guarantees are always approved by a single responsible government entity, but are not decided on the basis of clear guidelines, criteria or overall ceilings.
The legal framework for procurement is fairly good although it does not systematically make key procurement information available to the public. Data on contracts awarded by methods other than open competition are not available and it is impossible to establish whether they are justified in accordance with the legal requirements. Only two procurement elements - bidding opportunity and contract awards - are accessible to the public. In addition the procurement complaint system does not involve representatives of the public sector and civil society. Moreover the processes for submission and resolution of complaints are not clearly defined.
Control systems for salary expenditures are of good quality. Overall expenditure commitment controls are in place in Northern Cape. These controls effectively limit commitments to actual cash availability and approved budget allocations for most types of expenditures. In addition to commitment controls the current legislation considers other internal control rules and procedures. However there is doubt whether these procedures are widely understood and followed, given the results of the external audit. Rules are complied with in a significant majority of transactions, but there are several cases of use of simplified/emergency procedures in unjustified situations.
In the Northern Cape, the function of internal audit is operational for all provincial government entities, and generally meets professional standards. It is focused on systemic issues (at least 50 per cent of staff time). All audit reports adhere to a fixed schedule and are distributed to the audited entity, Provincial Treasury and the supreme audit institution (which is the AGSA). Based on recommendations formulated in the reports, prompt and comprehensive action is taken by many (but not all) managers.
Accounting, recording and reporting
In Northern Cape, bank reconciliations for all provincial government bank accounts is a routine exercise, taking place at least monthly at aggregate and detailed levels. Reconciliation is usually carried out within four weeks of end of the period. As far as reconciliation and clearance of suspense accounts and advances are concerned, this is a daily exercise. It should be mentioned, however, that a significant number of accounts have uncleared balances brought forward.
In-year budget execution reports are prepared quarterly and issued within a maximum of six weeks of end of quarter. In the reports, only comparison to the adjusted budget is possible (for administrative and economic headings). Reported expenditures in the reports are captured at payment stage only. Overall the reports are considered to be very useful although there are some concerns about the integrity of the data. 
In Northern Cape a consolidated provincial government statement is prepared annually. It includes full information on revenue, expenditure and financial assets and liabilities. The statement is consolidated for external audit on time and in conformity with the current legislation (within three months of the end of the fiscal year). IPSAS or corresponding national standards are consistently applied for all yearly financial statements.
External scrutiny and audit
In Northern Cape, all entities of provincial government are audited annually with the audit exercise covering revenue, expenditure, assets and liabilities. A full range of financial audits and some aspects of performance audit are regularly performed. These generally adhere to auditing standards, focusing on significant and systemic issues. Audit reports are submitted to the legislature on time and in conformity with the current legislation (within eight months of the end of the period covered and in the case of the financial statements from their receipt by the audit office). As far as the audit recommendations are concerned a formal response is made in a timely manner, but overall there is little evidence of systematic follow up.
Simple procedures exist for the legislature’s budget review and are respected. They include internal organisational arrangements, such as specialised review committees, and negotiation procedures.
Clear rules exist for in-year budget amendments by the executive. There are strict limits on the extent and nature of amendments that are consistently respected.