Guideline on
Provincial Budget Formats,
2003

National Treasury

Republic of South Africa

September 2002

To obtain additional copies of this document, please contact:

Chief Director: Provincial Budget Analysis

National Treasury

Private Bag X115

Pretoria

0001

South Africa

Tel:+27 12 315 5009

Fax:+27 12 315 5045

E-mail:

Preface

The foreword offers an opportunity for the MEC responsible for finance to present the political priorities on which the budget is based, together with general information on economic and financial developments in the province. It should clearly state that the budget is more than just numbers. It should explain how the budget reflects government’s policies and priorities, and how these will be translated into the delivery of services to citizens.

xxxxx

MEC for finance

CONTENTS

Preface

Budget Statement 1: Budget Overview

1.Budget strategy and aggregates

  • 1.1 Introduction
  • 1.2 Summary of budget aggregates
  • 1.3 Financing

2.Budget process and the Medium-Term Expenditure Framework

3.Socio-economic outlook

  • 3.1 Demographics
  • 3.2 Socio-economic indicators
  • 3.3 Economic indicators

4.Revenue

  • 4.1 Overall position
  • 4.2 Equitable share
  • 4.3 Conditional grants
  • 4.4 Total provincial own revenue
  • 4.5 Donor funding

5.Expenditure

  • 5.1 Overall position
  • 5.2 Expenditure by vote
  • 5.3 Expenditure by economic classification
  • 5.4 Expenditure by policy area
  • 5.5 Infrastructure expenditure
  • 5.6 Transfers to public entities
  • 5.7 Transfers to local government

Annexure A to Budget Statement 1

  • Table A 1: Information relating to section 4.3: Conditional grants
  • Table A 2: Information relating to section 5.4: Details of expenditure by policy area
  • Table A 3: Information relating to section 5.5: Details of expenditure for infrastructure
  • Table A 4: Information relating to section 5.7: Details of transfers to local government

Budget Statement 2: Departmental Estimates

1.Introduction

  • 1.1 Economic classification
  • 1.2 Common issues for the Votes

Votes

1.Overview

2.Review of the current financial year

3.Outlook for the coming financial year

4. Revenue and financing

  • 4.1 Summary of revenue
  • 4.2 Departmental revenue collection

5.Expenditure summary

  • 5.1 Programme summary
  • 5.2 Summary of economic classification

6.Programme description

  • 6.1 Description and objectives
  • 6.2 Service delivery measures
  • 6.3 Other programme information

Annexure B to Budget Statement 2

  • Table x.x: Specification of revenue collected by the department
  • Table x.x: Summary of expenditure and estimates (GFS classification): Programme X
  • Table x.x: Summary of expenditure and estimates (standard item classification): Programme X

Annexure C: Definitions

Appendix A: Manual on GFS Classification

Appendix B: Classification of the Functions of Government

1

Guideline on provincial budget formats, 2003 Budget Statement 1

Budget Statement 1: Budget Overview

The purpose of this statement is to provide a high-level overview of the main components of the annual budget. It should comprise tables of the main aggregates, as well as text explaining the provincial government’s strategic policy objectives to be met from budget funding. This should include:

  • Political prioritisation
  • Present conditions (economic outlook)
  • Size and sources of revenue to meet the prioritised objectives
  • Funding of the deficit or utilisation of the surplus, if applicable
  • Estimates and expenditure according to the functional and economic classifications of the budget

1.Budget strategy and aggregates

1.1Introduction

This section should set out the provincial government’s main strategic policy direction underlying the budget. It should note key initiatives that will be provided for, as expressed in:

  • Government’s strategic plans, including major sectoral policy statements and infrastructure plans
  • The provincial government’s contribution to nationally mandated programmes, including GEAR, the RDP, and national norms and standards
  • The government’s election manifesto
  • Major policy decisions of the Executive Council, that have been publicly announced

The statement should include only major policy statements and directions, as well as a brief description of new expenditure and revenue initiatives that provide the resources for these policies. In particular, it should refer to the overall service delivery outcomes envisaged under these initiatives. Detailed service delivery outputs should be presented in the programme presentation of each Vote.

1.2Summary of budget aggregates

Table 1.1 should present estimates of the main budget components (current and capital revenue and expenditure, lending, and budget surplus or deficit) in the Government Finance Statistics (GFS 1986) framework of the International Monetary Fund. The functional classification has been changed for the 2003/04 budget in line with the new 2001 GFS. A classification guide presenting the economic and functional classification has been distributed as part of the budget guideline (see Appendix A for GFS classification and Appendix B for functional classification).

The table should not include provincial extra-budgetary agencies (i.e. agencies that are controlled by the government and receive a significant proportion of their funding from it). Entities that form part of the general government sector should be included in the provincial budget only to the extent that they conduct transactions with budget departments.

The revenue and expenditure estimates of public financial institutions and non-financial public enterprises (i.e. government-owned or controlled bodies, often corporate in structure, that provide goods and services to the public on a large scale) should not be included. They similarly affect budget statistics only to the extent that they conduct transactions with budget departments.

Because information about the operations of extra-budgetary agencies and public enterprises would provide a fuller picture of the extent of the public sector, consideration will be given to including them in future budgets. For this year, the institutions and amounts transferred to them should be listed in section 5.6.

In section 5.7 a summary of all transfers to local government (by category) must be presented. In Budget Statement 2, details of all transfers to municipalities must be presented for each programme.

Table 1.1: Provincial budget summary

R 000 / 2000/01
Actual / 2001/02
Actual / 2002/03
Est. actual / 2003/04
Voted / 2004/05
MTEF / 2005/06
MTEF
National transfers
Equitable share
Conditional grants
Own revenue
Total revenue
Current outlays
Capital outlays
Transfer payments
Unallocated contingency reserve
Total expenditure
Lending
Surplus (deficit)

Main changes between the actual, estimated actual and budget figures should be discussed, as should the financing of budget deficits or the utilisation of surpluses.

1.3Financing

This section should cover:

  • The method of financing of a proposed deficit, whether through a bank overdraft or a draw-down of cash balances or deposits
  • The use of funds generated by a projected surplus, i.e. to increase cash balances or deposits, or to lower bank overdrafts
  • Any bridging finance used for temporary liquidity purposes
  • Any other changes in financing not influenced by the budget result, e.g. using cash balances to reduce overdrafts
  • A statement of the total debt position of the provincial government, including a table of debt types, where appropriate

The Budget Council has agreed that provinces should refrain from borrowing for the time being, except for temporary purposes. If, in the future, the Budget Council agrees that provinces may borrow, then details of the types, amounts, and terms and conditions of new borrowings should be provided here.

In deriving the estimated actual figures for the current year, treasuries will generally use the corresponding Adjustment Estimates figures. However, when more up-to-date estimates of the likely outcomes (e.g. because of under-spending or over- or underachievement of revenue targets) become available from financial systems or other sources, these figures should be included in the final table.

2.Budget process and the Medium-Term Expenditure Framework

This section should explain the provincial strategic planning andbudget process. It should describe the respective roles and responsibilities of the provincial treasury and line departments, the appropriation process, and parliamentary scrutiny of the budget, including relevant parliamentary committees.

Any newly introduced methods should be described, including those resulting from the MTEF, the Public Finance Management Act, the budget reform programme, own-development initiatives and strategic workshops.

3.Socio-economic outlook

This section is optional, but it is useful to reflect on important social and economic parameters in the province. The outline below is just an example, as there is no prescribed format. Provinces should collect information from approved sources to give a realistic picture of economic and social conditions.

3.1Demographics

The objective here is to discuss how demographic factors affect the development and economy of the province, using data from the latest Census and other available sources.

Table 3.x: Population size and distribution between regions

Region / Total population / Percentage
A / 0 / 0
B / 0 / 0
C / 0 / 0
D / 0 / 0
E / 0 / 0
F / 0 / 0
Total / 0 / 0

Further discussion could include a comparison with other provinces, expected growth, as well as gender and age distribution, and the level of education, as per the examples below.

Table 3.x: Gender and age distribution

Age group / Male / Female / Total / Percentage
Unspecified / 0 / 0 / 0 / 0
Below 15 / 0 / 0 / 0 / 0
15 to 17 / 0 / 0 / 0 / 0
18 to 25 / 0 / 0 / 0 / 0
26 to 35 / 0 / 0 / 0 / 0
36 to 45 / 0 / 0 / 0 / 0
46 to 65 / 0 / 0 / 0 / 0
66 + / 0 / 0 / 0 / 0
Total / 0 / 0 / 0 / 0



3.2Socio-economic indicators

Certain data from the latest household survey can be used to indicate the quality of life for provincial households. The proportion of households with specified services can be compared with the average for the whole country. The following services can be chosen, for example:

  • House or brick structure on a separate stand or yard (represented by “House” on the graph below)
  • Piped water in the dwelling (“Water”)
  • Flush toilet or chemical toilet (“Flush toilet”)
  • Refuse removal by local authority at least once a week (“Refuse”)
  • Telephone in the dwelling/cellular phone (“Telephone”)


3.3Economic indicators

Similarly, economic indicators can be chosen from the latest household survey, such as income distribution, gross geographic product and level of investment. The latter can explore, for example, the possibility of new direct investment expected per sector and envisaged new job opportunities.

Table 3.x: Income distribution

Annual income per household / Percentage of households
Less than R7 000 / 0
R7 001 to R12 500 / 0
R12 501 to R24 000 / 0
R24 001 to R52 800 / 0
More than R52 800 / 0


Table 3.x: Gross geographic product by sector (1995)

Sector / Percentage
Mining and quarrying / 0
Agriculture and fisheries / 0
Manufacturing / 0
Electricity and water / 0
Construction / 0
Trade: Wholesale, retail and accommodation / 0
Transport, storage and communication / 0
Finance, insurance, real estate and business services / 0
Government and community services / 0
Other / 0
Total / 0

4.Revenue

4.1Overall position

This section should include a general discussion on total provincial revenue (referring to growth rates, real growth rates and comparisons). Treasuries should complete Table 4.1 and briefly describe changes between the estimated actual receipts for the current year and estimated revenue for the budget year. Agency payments from the national government should be treated outside the provincial budget and not included in revenue totals. Receipts collected on an agency basis by local authorities (e.g. vehicle registration fees) should be included in budget revenue under the appropriate category.

Table 4.1: Summary of provincial revenue

R 000 / 2000/01
Actual / 2001/02
Actual / 2002/03
Est. actual / 2003/04
Voted / 2004/05
MTEF / 2005/06
MTEF
National payments
Equitable share
Conditional grants
Total national payments
Provincial own revenue
Current revenue
Tax revenue
– Casino taxes
– Motor vehicle licences
– Horseracing
– Other taxes (specify)
Non-tax revenue
– Interest
– Health patient fees
– Reimbursements
– Other sales
– Other revenue (specify)
Capital revenue
Sale of land and buildings
Sale of stock, livestock, etc.
Other capital revenue (specify)
Total provincially sourced revenue
Total provincial revenue

A brief description of the different kinds of revenue and reasons for changes between the current year and the MTEF years should be included.

4.2Equitable share

In this subsection, the following should be discussed:

  • The allocation process under section 214(2) of the Constitution
  • Arrangements for phasing in the equitable share distribution through 2003/04 and the province’s nominal (R million) and percentage shares in the MTEF years
  • The amount of equitable share funding in the forthcoming budget and the nominal and percentage increase from the current year

4.3Conditional grants

This section should include a discussion on conditional grants providing details of:

  • Total conditional grants to be made available in the forthcoming budget year
  • Priority spending areas to be addressed by conditional grants
  • Analysis of discrepancies between budgets, actual transfers and actual expenditures

Table 4.3: Summary of conditional grants by grant

R 000 / 2000/01
Actual / 2001/02
Actual / 2002/03
Est. actual / 2003/04
Voted / 2004/05
MTEF / 2005/06
MTEF
1. grant name
2. grant name
…
14. grant name
Total: Conditional grants

The detailed information on conditional grants should be presented in Table A.1 in Annexure A to Budget Statement 1.

4.4Total provincial own revenue

This section should include a trend analysis from provincial own revenue.

Table 4.4: Summary of provincial own revenue by Vote

R 000 / 2000/01
Actual / 2001/02
Actual / 2002/03
Est. actual / 2003/04
Voted / 2004/05
MTEF / 2005/06
MTEF
1. Office of the Premier
2. Provincial legislature
…
14. Works
Total: Provincial departments

4.5Donor funding

Should a province receive any foreign aid assistance, details should be presented here, indicating amounts and purposes.

5.Expenditure

5.1Overall position

This section should include a discussion on total provincial expenditure as well as a discussion on priority spending areas for the province as a whole (referring to growth rates, real growth rates and comparisons). Treasuries should complete Table 5.2 and briefly describe the changes between the estimated actual expenditure for the current year and estimated expenditure for the budget year.

Total outlays for provincial programmes are budgeted at:

  • Financial year 2003/04: R000 million
  • Financial year 2004/05: R000 million
  • Financial year 2005/06: R000 million

5.2Expenditure by vote

Table 5.2 should summarise the total budget for each Vote. This action may include a brief discussion on the expenditure trends in departments, specifically relating these trends with the policy priorities of government.

Table 5.2: Summary of expenditure and estimates per Vote

R 000 / 2000/01
Actual / 2001/02
Actual / 2002/03
Est. actual / 2003/04
Voted / 2004/05
MTEF / 2005/06
MTEF
1. Office of the Premier
2. Provincial legislature
…
14. Works
Total: Provincial departments

5.3Expenditure by economic classification

Table 5.3 should show actual or estimated expenditure for 2000/01 to 2002/03 and budgets for the MTEF period by economic classification, based on the 1986 GFS manual. The strategy for the economic classification is to implement the 2001 version when the new Chart of Accounts has been implemented. If provinces prefer to also present the full economic classification in standard item structure, this may be included here. However, in the programme presentation of each department only the summary classification (refer to table 6.2 of Budget Statement 2 for an example) that is either standard item or GFS compatible should be used. Full GFS and standard item must only be presented in annexures to each vote.

Table 5.3: Summary of expenditure and estimates: Economic classification for the province

R 000 / 2000/01
Actual / 2001/02
Actual / 2002/03
Est. actual / 2003/04
Voted / 2004/05
MTEF / 2005/06
MTEF
Current
Compensation of employees
Salaries and wages
Other remuneration
Use of goods and services
Interest paid
Transfer payments
Subsidies to business enterprises
Local government
Extra-budgetary institutions
Households
Non-profit organisations
Total: Current
Capital
Non-financial assets
Buildings and structures
Machinery and equipment
Non-produced assets
Other assets
Capital transfers
Local government
Other capital transfers
Total: Capital
Total expenditure
Lending
Total Economic classification
Expenditure definitions
Current expenditure
Salaries and wages are remuneration paid to employees in exchange for work provided.
Other remuneration includes of contributions to social insurance schemes.
Use of goods and services consists of goods and services consumed by the provincial government in the production of goods and services, as well as goods purchased for resale.
Interest paid isexpense incurred for the use of financial assets.
Transfer payments are thecurrent unrequited transfers that a provincial government makes to local government, extra-budgetary institutions, households or non-profit organisations.
Subsidies are unrequited current payments made to private and public enterprises.
Capital expenditure
Buildings and structures include capital expenses on buildings (excluding land), infrastructure (such as roads and bridges), as well as water and sewerage projects.
Machinery and equipment include expenses on movable equipment such as cars, computers, furniture or labour-saving equipment, with a lifespan of more than a year and a value in excess of R5 000.
Capital transfers to local government are transactions in which a department transfers money to local government, specifically for acquiring capital assets.
Other capital transfers are similar, but are to a third party (not local government)
Non-produced assets include expenses for land and other tangible or intangible assets, such as subsoil water resources or goodwill.

Table x.x: Summary of expenditure and estimates (standard item classification)

R 000 / 1999/2000
Actual / 2000/01
Actual / 2001/02
Est. actual / 2002/03
Voted / 2003/04
MTEF / 2004/05
MTEF
Personnel
Administrative expenditure
Stores and livestock
Equipment: Current
Equipment: Capital
Land and buildings: Current
Land and buildings: Capital
Professional and special services
Transfer payments: Current
Transfer payments: Capital
Miscellaneous
Total: Current
Total: Capital
Total standard item classification

This table should only be included if provinces prefer to still publish standard item information.

5.4Expenditure by policy area

Table 5.4 should show actual or projected expenditure for 2000/01 to 2002/03, and budgets for the MTEF period, by government purpose or policy area. Each programme should be classified, and its expenditure shown, according to the policy areas in the table. The detailed classification will depend on the programme and subprogramme structure of the Votes in a province. Where a programme spans more than one function, the expenditure should be assigned by subprogramme and not only by programme. A bridging table (see the example in Annexure A) may be useful in this regard. The development of expenditure and budgets for the different policy areas should also be discussed.

Note that the structure of the functional classification has changed from GFS 1986 to GFS 2001. The guideline on functional classification as presented in the Annexure to Chapter 6 of the new 2001 GFS manual dealing with the functional classification, must be used as the base for this classification (included as Appendix B to this guide).