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Introduction

Public expenditure is one of the critical ingredients in any country's overall development strategy. To make public expenditure effectual, it is essential that resource allocation decisions are guided by sound analysis and there is therefore a need for an appropriate fiscal and institutional framework for the effective execution of policy.

Honourable Speaker, we have come a long way in pursuit of the above stated principles given the chaotic, unequal and prejudicial methods of resource allocation that we inherited in 1994. The Department of Finance played a central role in transforming the public expenditure landscape in our Province to ensure that it is line with the needs of our people in a democratic society.

Our tract record speaks for itself. I therefore feel very honoured to present our Department's budget here this morning.

Without being presumptuous, I know that I can depend on honourable members' sense of reason for its endorsement.

The mandate given to us by this honourable house has always been carried out with diligence and high levels of professionalism. Just as a reminder, our Department received unqualified reports from the Auditor General for three years in succession, a proud achievement by any standards.

We have indeed translated our vision into practical reality i.e. "We will be the ultimate authority and advisor on fiscal matters to the North West Provincial Administration in pursuit of transparency, good governance and accountability to stakeholders."

The Department of Finance, like all other departments, has been subjected to a rigorous transformation agenda over the last nine years, both in terms of its core responsibilities e.g. budget reform, PFMA implementation, and the general thrust of the public service transformation.

To sustain the momentum we have no intention to bask in the glory of past achievements. We are mindful of the fact that financial management is quite a dynamic environment with ever-changing approaches and technological advancements. Not forgetting that at the heart of all our endeavours is the satisfaction of the needs of our people; the extents to which we provide appropriate responses to their legitimate expectations.

Honourable Speaker, allow me to outline our plans for the new fiscal year.

The 2003/04 plan

Mr Speaker, our medium term strategic plan outlines both our strategic goals and objectives.

This plan will guide our business activities in the medium term. I believe that the attainment of our strategic goals will fulfil the achievement of our mandate and by so doing have a positive impact on other departments to deliver services efficiently. Our core responsibility, being the overall management of financial and material resources of the Province, puts us in a crucial position that will determine the success or failure of the entire provincial government.

This business plan is funded to the tune of R250, 858 million to ensure that we realise our goals.

I will now discuss our business plan broadly in the context of our strategic goals to be achieved through addressing strategic objectives in the medium term.

1. Provide effective and efficient budgeting and resource control services to the North West Provincial Administration.

An amount of R35, 910 million has been budgeted towards the attainment of this strategic goal.

Fiscal policy can only be sound if the civil service structures for budget management operate well. The state must have the ability to plan and forecast revenues and expenditure and to monitor them accurately.

Our objective in the coming year is to continue to improve the integration of planning and budgeting both interdepartmentally and with local government.

Effective integration of planning and budgeting will result in long-term benefits for the province in that economies of scale can be realized.

The Department is busy re-looking at the Budget Office to align it to the requirements of the PFMA. The new responsibilities will involve an oversight function on financial performance in the provincial administration, government supported institutions and local authorities, which will not look at micro financial management but strategic plans and macro financial management in these departments and institutions.

I see the role of the Budget Office as follows:

* Undertake budget planning and the implementation of budgets.
* Management of expenditure trends in departments.
* Provide professional advice to departments on budget matters.
* Develop budget policy guidelines for use by departments.
* Implementation of norms and standards
* Revenue and cash flow management.

The management of expenditure is supported by the following functions:

* Forensic accounting to devise strategies for fraud prevention and investigate cases of fraud and corruption
* Procurement

Contrary to the announcement in the main budget speech the Tender Board Act, which would give way to the system of decentralised procurement, could not be repealed with effect from 1st April 2003.

The reason for the non-repeal is that the province is awaiting the promulgation of the Framework for Supply Chain Management from National Treasury.

This framework will provide guidelines on how procurement will be conducted in the post-Tender Board period.

As a result I have extended the services of the Board by three months ending 30 June 2003 with the hope that the framework will have been promulgated. In the meantime we have increased delegations to Departments to deal with smaller acquisitions.

2. Provide professional accounting and financial management services for the North West Provincial Administration, coupled with an effective resource control management service in the department.

An amount of R29, 131 million has been budgeted for the attainment of this strategic goal.

This objective will be driven primarily from the Office of the Accountant General whose role will include the following:

* Provide accounting services to government departments.
* Implement accounting norms and standards
* Compile financial statements in accordance with PFMA and accounting standards.
* Prescribe financial systems.
* Provide financial management training in the province.

Our focus is on the unfolding of the implementation of PFMA, which poses many challenges that need to be overcome if we are to achieve prudent financial management.

Members will recall that the Minister of Finance in 1999 promulgated that the PFMA be implemented in phases.

We completed phase one in March 2002. However, there are still weaknesses in some departments because they did not deal with the following issues properly in phase one:

* the timeous clearing and reconciliation of suspense accounts.
* appointment of Chief Financial Officers and their support staff.

Regardless of these outstanding issues in some departments we embarked on phase two, which deals with financial management capacity building programme.

The programme has already addressed the following issues:

* Completed a skills gap analysis
* Developed training manuals
* Finalised a numeracy programme for non-financial officials who are performing financial functions.

Other critical areas to be addressed by the programme includes strategic financial management for Chief Financial Officers and a mentoring programme which will start after the numeracy programme.

The centralised creditor payment is operating well. Currently five department i.e. Safety and Liaison, Finance, Office of the Premier, Social Services, Arts Culture & Sport and Local Government & Housing are in the system.

Departments of Health, Agriculture, Economic Development & Tourism, Transport and Roads & Public Works have been taken on board with effect from 1 April 2003.

District offices for Creditor Payments have been established in the following centres to facilitate prompt payment to clients:

Rustenburg: Bojanala
Vryburg: Bophirima
Potchefstroom: Southern

Given the vastness and the high level of Government activities in Bojanala an additional office will be opened in Mabopane.

The centralised creditor payments has benefited government in the following manner:

* Creditors are paid on time.
* We implemented electronic funds transfer which minimises opportunities for fraud. This is however, limited to the amount of R1 million and above. Smaller amounts will be catered for during the course of the financial year.
* Payment to only legitimate creditors.

3. Provide effective and efficient internal audit services to the North West Provincial Administration.

An amount of R29, 333 million has been budgeted for purposes of providing internal audit services to government departments. This mount is R17, 371 million or 145% more than the previous year's budget.

The reason for the higher than normal increase is due to the fact that capacity is still being built in the internal audit to make sure that this division renders full internal audit services to all government departments.

Forty-four posts will be filled in the next three months to increase the number of filled posts from forty six (46) to ninety, a move which is aimed at bringing the function to a realistic operational level.

Key programmes of internal audit are:

* Risk review and assessment.
* Comprehensive risk-based audits in departments
* Specialised audits and assignments.

The main challenge faced by this division is that since the last risk mapping was done in departments most departments have not implemented risk management plans.

4. Provide Information Technology strategy direction, leadership and advisory service to the North West Provincial Administration.

We live in an era of technological revolution - a revolution which influences our daily lives in many ways.

Managers are problem - solvers who are responsible for analysing the many challenges confronting organisations and for developing strategies and action plans.

Information system is one of their tools, delivering the information that is required for solutions. Information systems both reflect management decisions and serve as instruments in changing the management process. Qualitative information will also go a long way to positively influence the policy environment.

An amount of R97, 710 million has been budgeted for realising this strategic goal.

This amount is R34, 246 million or 54% more than the 2002/03 budget of R63, 464 million.

The huge increase is as a result of many requests from departments to connect various sites electronically.

On this basis our network will have to be expanded to take up new sites particularly in education and social services where 300 and 119 sites respectively will be connected.

I am pleased to announce that the information technology achieved the following:

* Implemented the asset management system.
* Implemented over 3 000 e-mail accounts throughout the province.
* Finalised the disaster recovery plan and improved recovery capability.
* Upgraded mainframe security.
* Rolled out a provincial virus solution.
* Designed and implemented Internet security solution.
* Upgraded the Provincial website.

However, it is important to point out our constraint in information technology:

* The high rate of staff turnover disrupts implementation of our plans.
* The inevitable takeover of our network by SITA creates uncertainty.

Our contention is that we own the network infrastructure and we want to be assured that once SITA has taken it over we will not pay more than what we are paying currently lest we are going to erode our budget in favour of SITA.

Negotiations are underway between the department and SITA and hopefully we will know the outcome by October 2003.

Additionally, various projects other than the network expansion will be implemented.

The first project, which was launched already in January 2003, is the Master Systems Plan and is targeted to be completed in September 2003. This plan will assist us to align government's business strategy with information technology. It will further assist us to realise economies of scale through the standardisation and integration of islands of technologies in the administration.

Our project of rolling out the Internet will continue and the plan is to connect 3 000 new Internet sites during 2003/04.

5. Provide effective human resource and administrative support.

An amount of R12, 481 million has been budgeted to manage our human resources policy.

As we are all aware people are our most valuable assets and their contribution to the department will be enhanced only if they are trained and developed.

We have recorded some significant successes on transformation issues.

* We are one of the few departments who completed the skills development plan in time.
* We have a fully functional employment equity forum.
* We are one of the first departments to adopt an internship programme to create learning opportunities for new graduates.

However, we still have challenges to address:

* The rapid turnover of financial and information technology staff given the limited skills base available for recruitment of new entrants.
* Design and implementation of a performance management system at all levels which will facilitate a better management of resources and reward for performance.

We are on track with the implementation of Resolution 7 to ensure that appropriately equipped officials are performing relevant functions.

6. Foster working relations with provincial departments and promote services to departments and stakeholders

An amount of R3, 450 million has been budgeted towards achieving this strategic goal.

The crux of the PFMA is to place accountability where it belongs. It moves away from roles driven approach to an outcome and output-based approach.

To translate the letter of the PFMA into the spirit of the PFMA warrants careful management of current realities and futuristic expectations.

Current realities dictate that there are still serious capacity gaps in some departments and Government Supported Institutions where the role of the institutions of oversight e.g. The Auditor General, Treasury, Legislature etc. becomes crucial in the transition.

In terms of our role, we have positioned ourselves more towards capacity building than compliance; not that the latter will be compromised. We have geared ourselves to be facilitative in helping Departments come to grips with the complexities of their new responsibilities.

The following are examples of our enabling role to client departments:

* Accountant General's Forum

The Accountant General's forum, which was established in 2000, plays an important role in coordinating work and discussing problems in departments. This forum has been instrumental in ensuring the timeous closure of books of account. Its membership is made up of Chief Financial Officers.

* Revenue Committee

The Revenue Committee is chaired by the Senior Manager Revenue. This forum whose membership is made up of departmental revenue managers was instrumental in raising the revenue budget by 10% in the 2002/03 financial year.

* Budget programme managers

With the unfolding of the PFMA we have structured our budgeting functions in terms of programmes. We have assigned a programme manager for each cluster.

This approach is preferable because departments know who they are dealing with in treasury on cluster specific issues.

* Building financial management capacity in the province

The current financial management capacity building programme promotes both the technical knowledge and culture of prudent financial management.

This programme is funded through a conditional grant of R14 million which was carried over from the previous financial year.

We have established a new directorate whose role is to manage financial management training and financial systems. This division is funded to the tune of R11, 833 million.

* Procurement Reform

A Compliance Unit with oversight function has already been established to assist departments.

Departmental tender committees have been trained increased delegations to have been given departments.

* Local Government Finance

We are keenly looking forward to the implementation of the Municipal Finance Management Bill. With our colleagues in Local Government we want to render assistance to local authorities in a consistent and coherent manner.

The Bill makes clear provisions for the Departments of Finance and Local Government to enhance financial management capacity in local authorities.

7 Statutory payments

Government owed SARS an amount of R178 million which it has been repaying in instalments.

In the coming year an amount of R34, 460 million has been budgeted to repay the SARS debt.

This is the final settlement of the debt and in later years government will have discretion in the use of the R34, 460 million which was a fixed commitment.

Issued by Department of Finance, North West Provincial Government

7 April 2003