6: Departmental strategic planning checklist
Developing and integrating
strategic plans
into the budget process
Comments on this document should be submitted to Shirley Robinson
Tel: (012) 315-5959 E-mail:
Developing and integrating
strategic plans
into the budget process
National Treasury
Republic of South Africa
April 2001
ISBN: xxx
To obtain additional copies of this document, please contact:
The Librarian
National Treasury
Private Bag X115
Pretoria
0001
South Africa
Tel: +27 12 315 5948
Fax: +27 12 315 5160
E-mail:
The document is also available on the Internet at: www.treasury.gov.za
PREFACE
At the national Treasury, we are committed to developing and implementing a world-class financial management and budgeting system that improves accountability and transparency as we work towards better delivery of public services to all our people.
To this end, Treasury has issued a series of guidelines on various issues, including Public-Private Partnerships, preparing MTEF Budget submissions and the Revised budget format – the Estimates of National Expenditure. These guidelines aim to assist departments in understanding and implementing recent initiatives, such as the Public Finance Management Act, 1999 (PFMA) and the norms and standards laid down in the new Treasury Regulations. The financial management framework embodied in the PFMA and the Treasury Regulations signifies Government’s efforts to:
· Ensure that government departments and staff who spend public money are held accountable for how this is done and recorded, and for the results achieved
· Provide the best possible services within the constraints of affordability
· Ensure that money is spent on the services for which it was made available
· Spend tax money economically, efficiently and effectively, to benefit all in South Africa
In terms of Chapter 5 of the Treasury Regulations, each accounting officer must develop a strategic plan for the forthcoming Medium-term Expenditure Framework (MTEF) period, for approval by the relevant executive authority. This guideline – Developing and integrating strategic plans into the budget process – seeks to assist accounting officers in compiling departmental strategic plans. Treasury requirements for the contents of these plans are set out in line with the move towards budgeting for service delivery under Government’s budget reform programme. Strategic plans should be updated annually, and should fulfil the requirements of Chapter 1, Part IIIB of the Public Service Regulations of 1999.
Integrating strategic planning into the budget process is integral to medium term budgeting. It strengthens the link between the policy choices Government makes, the budget it decides on, and what services it delivers to people. Political decision-making and accountability to ordinary people are therefore stronger. Political choices and trade-offs are explicit. Spending decisions are affordable in the medium term. And there is better management of public finances over time.
During the next few years, as Government changes the way it manages its finances, all citizens will share the benefits of enhanced accountability, greater transparency and better value for money. The magnitude of the task should not be underestimated. While the goal may be clear, the implementation may not always be smooth.
For most, these changes highlight the need to learn new concepts, new jargon, and a different approach to budgeting. Implementing public finance management reforms is more than merely introducing new technical systems. It’s about bringing people – political and administrative, senior management and clerical staff – on board. It’s about building understanding about the concepts and what Government is aiming to achieve. Most importantly, implementing public finance management reforms is a team effect and their success largely depends on the understanding and commitment of those involved.
Maria Ramos
Director-General: National Treasury
ABBREVIATIONS
KPA / Key performance areaMEC / Member of the Executive Council (of a province)
MTEF / Medium-term Expenditure Framework
PEST / Political, economic, social, technological
SWOT / Strengths, weaknesses, opportunities, threates
PFMA / Public Finance Management Act, 1999
CONTENTS
PREFACE 2
ABBREVIATIONS 3
1. Introduction 5
2. Treasury and Public Service Regulations 5
Treasury Regulations 5
Public Service Regulations 6
3. Integrated strategic plans 7
Departmental strategic plans 7
Benefits to accounting officers 7
Strategic planning and performance budgeting 8
Integrating strategic planning into the budgeting cycle 8
Linking a strategic plan with other documents 8
4. Strategic planning process 9
1. Commitment analysis 10
2. Stakeholders analysis 11
3. Vision formulation 11
4. Formulation of a mission 11
5. Functional analysis 12
6. Environmental/situational analysis 12
7. Formulating strategies/action plans 14
8. Financial planning 15
9. Writing the strategic plan 15
10. Consultation and agreement 15
11. Implementation 15
12. Revision 16
5. Minimum content requirements for a strategic plan 16
Contents of strategic plans 16
Detailed specifications for the first year of a strategic plan 18
Developing lower-level operational plans 18
6. Departmental strategic planning checklist 19
Strategic plans 19
Checklist 19
Annexure A: Pro forma of a departmental strategic plan 23
1
INTRODUCTION
Government uses the money it receives from taxes to take economic and social actions that aim to benefit all people in South Africa. To this end, it must make informed political choices in deciding the what, why, where, who, when, how and amounts of public spending within the bounds of existing legislation and the available money. Departments must report to Parliament on how the money is being spent, enabling the legislature to assess departmental performance on behalf of the citizens and ensuring that steps to rectify non-performance are taken in good time. This implies that Parliament must be informed about what departments are achieving with their budgets, and whether their programmes and outputs, that contribute to meeting Government’s objectives.
The strategy to improve financial management in Government considers not only accounting and budgeting issues, but also the design and operation of systems of internal control and the provision of adequate information to support sound decisions. The strategy is based on the recognition that departments must be judged on their ability, within agreed parameters, to deliver goods and services, and must be held accountable. The strategy also involves a change in culture, attitudes and values regarding financial management, to include all aspects relating to the utilisation of resources for achieving the departmental objectives and, in so doing, also Government’s priorities.
The reforms to public sector financial management and budgeting practices have become a reality with the introduction of the Public Finance Management Act (PFMA) of 1999, and the subsequent Treasury Regulations. These reforms are a cornerstone of Government’s policies, supporting the delivery of basic services to previously disadvantaged communities, bringing prosperity to all through steady growth in the economy, and ensuring the successful implementation and sustainability of the projects needed to transform South African society.
The PFMA emphasises that financial management is an integral part of management, not just the concern of a few specialists. As all managers in Government are trustees of public resources, they are accountable for how they deliver their programmes and services. The Treasury Regulations complement the PFMA and embody the norms and standards required by the Constitution. Issued in terms of section 76 of the Public Finance Management Act, they will result in:
· Better reporting to the legislatures, allowing for better scrutiny and control, thus improving the quality of information used in decision-making
· Clear definitions of programmes and outputs, clarifying the direction departments are taking in fulfilling their mandates and allowing them to allocate resources responsibly
· Greater departmental flexibility and access to better financial information and control mechanisms
2
Treasury and Public Service Regulations
Treasury Regulations
The following is an extract from Part 3, Chapter 5 in the Regulations, as it relates to strategic plans.
5.1 Date of implementation
5.1.1 This Chapter takes effect from 1 April 2002. The first date for submission of strategic plans is 30 June 2001 for the Medium-term Expenditure Framework (MTEF) period commencing 1 April 2002.
5.2 Strategic plans
5.2.1 The accounting officer of an institution must prepare a strategic plan for the forthcoming MTEF period, for approval by the relevant executive authority.
5.2.2 The approved strategic plan must be forwarded to the relevant treasury no later than 30 June each year.
5.2.3 The strategic plan must:
– Cover a period of three years and be consistent with the institution’s input to the MTEF
– Include the programme objectives and outcomes identified by the executive authority, as well as the Service Delivery Improvement Programme
– Include the multi-year projections of revenue and expenditure for the forthcoming budget
– Include the key performance measures and key indicators of the Service Delivery Improvement Programme for assessing the institution’s performance in delivering the desired outcomes and objectives
– Be updated annually on a rolling basis
– For departments, include the requirements of Chapter 1, Part IIIB of the Public Service Regulations, 1999
– Form the basis for the annual reports of accounting officers in terms of section 40(1)(d) and (e) of the Act.
Public Service Regulations
The following is an extract from Part III: Planning, Work Organisation and Reporting of the above document, as it relates to strategic plans.
B. Strategic planning
B.1 As the strategic plan for a department, an executing authority shall establish a medium-term programme that includes a description of –
(a) The department’s core objectives, based on constitutional, legislative and functional mandates, and the Service Delivery Improvement Programme developed in accordance with regulation IIIC
(b) The core and support activities necessary to achieve the core objectives, avoiding duplication of functions
(c) The functions the department will perform internally and those it will contract out
(d) Information systems to enable the executing authority to monitor fulfilment of the department’s core objectives
B.2 Based on the strategic plan of the department, an executing authority shall –
(a) Determine the department’s organisational structure in terms of its core and support functions
(b) Grade proposed new jobs according to the job evaluation system referred to in regulation IV
(c) Define the posts necessary to perform the relevant functions while remaining within the current budget and Medium-term Expenditure Framework of her or his department, which shall constitute the department’s approved establishment
(d) Utilise the human resource plan described in regulation IIID to plan to meet the resulting human resource needs
B.3 To implement the strategic plan, the head of a department shall –
(a) Promote the efficient, economic and effective use of resources, and improve the functioning of the department
(b) To that end, apply such working methods as the reallocation, simplification and/or coordination of work and the elimination of unnecessary functions
Integrated strategic plans
Departmental strategic plans
Each accounting officer of a government department must understand why the department exists and what it should achieve over the short, medium and long term to support Government’s priorities, as set out in policy documents and legislation. Each accounting officer should also, from time to time, consider the changing environment of their department and prepare to meet possible challenges.
The strategic planning process is one of the key responsibilities of accounting officers. It is central to their responsibility in terms of section 38 of the PFMA, relating to the effective, efficient, economical and transparent use of the resources of their departments. As such, the strategic planning process should be driven by the accounting officers, with full participation by other senior managers.
Benefits of strategic plans
The strategic plan, formulated from the mission statement, addresses a few key areas on which the organisation must focus in support of government policy, as well as the strategies to achieve them. It is an essential tool, enabling accounting officers and managers better to achieve government objectives, to address financial management and service delivery problems, and to ensure that services are delivered in the most economical, effective and efficient manner. It provides a sound framework for future improvements in the strategic management of a department. The strategic planning process further promotes communication between the accounting officer and the relevant Minister or Member of the Executive Council (MEC) of a province, ensuring commonality of understanding and purpose in the department’s pursuit of government objectives and outcomes.
The strategic planning process will assist departments in:
· Formally communicating their mission and vision statements
· Focusing management and staff on achieving their department’s objectives through various programmes and outputs
· Indicating how their departments will utilise their medium-term budget allocations to achieve their objectives over the relevant three financial years, by revealing the strategies to link financial and programme objectives in a medium-term plan
· Developing service delivery indicators for each strategy and programme to measure the achievement of departmental objectives, thereby establishing a basis for continuous improvement to meet clients’ evolving needs
· Facilitating and reflecting specific planning arrangements between departments where more than one department is responsible for completing a project (cross-cutting functions), by creating a unified approach to service delivery
· Demonstrating externally that the needs of the department’s clients are being addressed
· Generating information that will meet reporting requirements
Managers may feel that planning is unnecessary, as they “know what they are doing”, planning seems complicated or too financially oriented, or they do not have enough time. Yet, a lack of planning is the major contributing factor to business failure.
Strategic planning and budgeting for service delivery
Published strategic plans make government operations transparent to the legislatures and are key instruments in the accountability and budgeting process. In future, they will provide essential information for the legislatures to assess proposed programmes and funding. They will also, through providing service delivery or performance measures and indicators, enable them to evaluate service delivery when these measures and indicators are published in annual reports. Strategic plans therefore lay the foundation for the implementation of budgeting for service delivery.
Integrating strategic planning into the budgeting cycle
Integrated planning, budgeting and performance monitoring, coupled with effective financial information and advice, will help line managers to appreciate the link between the services they render and the cost and benefits of such services. In future, accounting officers will annually submit strategic plans with their budget submissions at the end of June. The information in the strategic plans will be taken into consideration when budget allocations are discussed. Final strategic plans, after adjustments to budget allocations, must be tabled before the legislative committees for discussion following tabling of the national Budget in Parliament.