PFMA Chapter Review

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Questions and Answers

What is the main purpose of Chapter 5 in the PFMA?

Appointment of accounting officer at national and provincial institutions, outlining their responsibilities and implications of not adhering to them.

What is the main difference between Schedule 2 and Schedule 3 in the PFMA?

Schedule 2 lists public entities with autonomy, while Schedule 3 lists those with lesser autonomy.

Who are referred to as the executive authorities in the PFMA?

Ministers and MECs.

What is the purpose of Chapter 8 in the PFMA?

It regulates government borrowing, including who can borrow on behalf of national or provincial government entities. Signup and view all the answers

What is the role of the Accounting Standards Board established in Chapter 11?

To determine generally recognized accounting practices for the public sector. Signup and view all the answers

What happens to public officials guilty of gross financial misconduct?

They can face criminal prosecution. Signup and view all the answers

What is the purpose of Chapter 10 in the PFMA?

It defines financial misconduct and outlines procedures for disciplining public officials guilty of financial misconduct. Signup and view all the answers

What is the main purpose of Chapter 9 in the PFMA?

It outlines National Treasury regulations and instructions, and obligates the appointment and composition of audit committees. Signup and view all the answers

Within what timeframe must the MEC for finance table the national annual budget?

Not later than two weeks after the tabling of the national budget Signup and view all the answers

What are the estimates that must be included in the annual budget format?

Estimates of revenue, current expenditure, interest and debt servicing charges, capital expenditure, and others Signup and view all the answers

What is the purpose of a multi-year budget projection?

To estimate revenue and expenditure for each year of the multi-year period Signup and view all the answers

What must the Minister contain in the annual budget?

The Minister's key macro-economic projections Signup and view all the answers

What must the accounting officer for each department submit when the annual budget is introduced?

Measurable objectives for each main division within the department's vote Signup and view all the answers

Who can approve an extension of the budget tabling timeframe?

The Minister Signup and view all the answers

What is the purpose of the annual appropriations budget cycle?

To allocate funds for the financial year Signup and view all the answers

What must the multi-year budget projection include?

Estimated revenue and expenditure for each year of the multi-year period Signup and view all the answers

What is one of the benefits of PFMA?

Provides for greater flexibility Signup and view all the answers

What is a national department according to the Public Service Act, 1994?

A department listed in Schedule 1, excluding the Office of a Premier Signup and view all the answers

What is the financial year according to the PFMA?

A year ending 31 March, or a different financial year approved by the National Treasury Signup and view all the answers

What is included in financial statements?

A balance sheet, an income statement, a cash-flow statement, and any notes to these statements Signup and view all the answers

What is generally recognized accounting practice?

An accounting practice complying with standards issued by the Accounting Standards Board Signup and view all the answers

What is fruitless and wasteful expenditure?

Expenditure made in vain and would have been avoided had reasonable care been exercised Signup and view all the answers

What is unauthorized expenditure?

Overspending of a vote or a main division within a vote, or expenditure not in accordance with the purpose of a vote Signup and view all the answers

What is irregular expenditure?

Expenditure incurred in contravention of or not in accordance with a requirement of any applicable legislation Signup and view all the answers

Who exercises ownership control of a national government business enterprise?

The national executive Signup and view all the answers

What is the main characteristic of a national government business enterprise in terms of financing?

Financed fully or substantially from sources other than the National Revenue Fund or by way of a tax, levy or other statutory money Signup and view all the answers

What is the main purpose of a national public entity?

To provide goods or services in accordance with ordinary business principles Signup and view all the answers

What is the main characteristic of a trading entity?

Established within the administration of a department for the provision or sale of goods or services Signup and view all the answers

What is the object of the PFMA?

To secure transparency, accountability, and sound management of the revenue, expenditure, assets and liabilities Signup and view all the answers

What powers constitute ownership control of an entity?

The ability to appoint or remove board members, CEOs, or control voting rights Signup and view all the answers

What is the main characteristic of a national government business enterprise in terms of operation?

Carries on a business activity in accordance with ordinary business principles Signup and view all the answers

What is the main characteristic of a national public entity in terms of funding?

Fully or substantially funded from the National Revenue Fund or by way of a tax, levy or other statutory money Signup and view all the answers

What is the main function of the National Treasury in relation to the budget preparation process?

To manage the budget preparation process. Signup and view all the answers

What is the purpose of the Division of Revenue Act?

To provide for an equitable distribution of nationally raised revenue between national, provincial and local government. Signup and view all the answers

What is the role of the National Treasury in promoting transparency and effective management?

To promote and enforce transparency and effective management in respect of revenue, expenditure, assets and liabilities of departments, public entities and constitutional institutions. Signup and view all the answers

What is the purpose of the National Treasury's power to prescribe uniform treasury norms and standards?

To ensure uniformity and consistency in financial management and reporting across national departments, public entities and constitutional institutions. Signup and view all the answers

What is the role of the National Treasury in monitoring and assessing the implementation of the Public Finance Management Act?

To monitor and assess the implementation of the Act in provincial departments, public entities and constitutional institutions. Signup and view all the answers

What is the purpose of the National Treasury's power to investigate systems of financial management and internal control?

To identify weaknesses and improve financial management and internal control systems in departments, public entities and constitutional institutions. Signup and view all the answers

What is the main function of Parliament in relation to the budget?

To discuss and pass the Budget. Signup and view all the answers

What is a budget, in simple terms?

An annual plan for what government wants to achieve and how it will spend money to achieve those goals. Signup and view all the answers

Study Notes

PFMA Overview

Provides for the appointments of accounting officers at each national and provincial institution, as well as publicly owned entities.
Outlines the responsibilities of the accounting officer and provides implications and consequences where such responsibilities are not adhered to.

Chapters 5-12

Chapter 5: Deals with the appointments of accounting officers and their responsibilities.
Chapter 6: Lists all public entities in Schedule 2 and Schedule 3, with Schedule 2 listing public entities with autonomy and Schedule 3 covering other public entities with lesser autonomy.
Chapter 7: Covers the responsibilities of Ministers and MECs, referred to as executive authorities of departments and public entities.
Chapter 8: Regulates how and when government should borrow funds and determines who can borrow on behalf of national or provincial government entities.
Chapter 9: Outlines National Treasury regulations and instructions, and obligates the appointment and composition of audit committees.
Chapter 10: Defines financial misconduct and deals with procedures for disciplining those guilty of financial misconduct, with criminal prosecution applying where there is gross financial misconduct.
Chapter 11: Establishes an Accounting Standards Board, which determines generally recognized accounting practices for the public sector.
Chapter 12: Deals with transitional aspects related to the implementation of the PFMA.

Benefits of PFMA

Provides for greater flexibility.
Outlines the basis for assessing achievements.
Provides a link between government plans and budgeting.
Focuses on outputs.
Provides better accountability by clarifying roles and responsibilities.

Definitions

Executive authority: National department, provincial department, national public entity, or provincial public entity.
Financial year: Year ending 31 March, or a different financial year approved by the National Treasury.
Financial statements: Balance sheet, income statement, cash-flow statement, and notes to these statements.
Generally recognized accounting practice: An accounting practice complying with standards issued by the Accounting Standards Board.
MEC for finance: Member of the Executive Council responsible for finance in a province.
National department: A department listed in Schedule 1 to the Public Service Act, 1994, excluding the Office of a Premier.
Fruitless and wasteful expenditure: Expenditure made in vain, which could have been avoided had reasonable care been exercised.
Unauthorised expenditure: Overspending of a vote or main division, or expenditure not in accordance with the purpose of a vote or main division.
Irregular expenditure: Expenditure incurred in contravention of or not in accordance with applicable legislation.

Government Expenditures

National government business enterprise: A juristic person under the ownership control of the national executive, with financial and operational authority to carry on a business activity.
National public entity: A national government business enterprise or a board, commission, company, corporation, fund, or other entity established in terms of national legislation, fully or substantially funded from the National Revenue Fund or by way of a tax, levy, or other statutory money.
Ownership control: The ability to exercise powers to govern the financial and operating policies of an entity in order to obtain benefits from its activities.
Trading entity: An entity operating within the administration of a department for the provision or sale of goods or services, established with the approval of the National Treasury or relevant provincial treasury.

Object of the Act

To secure transparency, accountability, and sound management of revenue, expenditure, assets, and liabilities of institutions to which the Act applies.
To promote government's fiscal policy framework.
To coordinate macroeconomic policy and intergovernmental financial relations.
To manage the budget preparation process.
To facilitate the Division of Revenue Act, which provides for an equitable distribution of nationally raised revenue between national, provincial, and local government.

National Treasury

Functions and powers:
- Promote and enforce transparency and effective management in respect of revenue, expenditure, assets, and liabilities.
- Monitor the implementation of provincial budgets.
- Co-ordinate inter-governmental financial and fiscal relations.
- Prescribe uniform treasury norms and standards.
- Enforce the Act and prescribed norms and standards.
- Monitor and assess the implementation of the Act.
- Assist departments and constitutional institutions in building their capacity for efficient, effective, and transparent financial management.
- Investigate any system of financial management and internal control.

National and Provincial Budgets

A budget is an annual plan for what government wants to achieve and how it will spend money to achieve those goals.
The MEC for finance must table the provincial budget not later than two weeks after the tabling of the national annual budget.
The Minister may approve an extension.

Annual Appropriations Budget Cycles

Annual budget format must include:
- Estimates of all revenue expected to be raised.
- Estimates of current expenditure for that financial year per vote and per main division within the vote.
- Estimates of interest and debt servicing charges, and any repayments on loans.
- Estimates of capital expenditure per vote and per main division within a vote.
- The projected financial implications of that expenditure for future financial years.
- Estimates of revenue excluded.
- Estimates of all direct charges against the relevant Revenue Fund and standing appropriations.
- Proposals for financing any anticipated deficit.
- An indication of intentions regarding borrowing.
- Projected revenue, expenditure, and borrowing.
Multi-year budgets projection:
- The Minister and the MEC for finance in a province must annually table a multi-year budget projection.
- The estimated revenue expected to be raised during each year of the multi-year period.
- The estimated expenditure expected to be incurred per vote.
- The Minister's key macro-economic projections.
When the annual budget is introduced in the National Assembly, the accounting officer for each department must submit measurable objectives for each main division within the department's vote.

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Test your understanding of the Public Finance Management Act (PFMA) with this quiz, covering topics such as executive authorities, financial misconduct, and accounting standards.