ODA and the Budget Planning Process

ODA and the Budget Planning Process 29 November 2007

Overview • ODA Definition and types • 2003 Policy Framework and Procedural Guidelines on ODA Management • How ODA was reported in the Budget Review and ENE in previous years • How ODA reported in the datasheets received prior to the MTEC meetings and compare this with the 2008 Treasury Guidelines • Pointers for compiling ODA schedules for the 2008 ENE • Inform on a Study that is presently being done on Aid and the Budget Planning Process

1.ODA Definition and Types • OECD/DAC definition "...(resource) flows to developing countries and multilateral institutions provided by official agencies including state and local govt or their exec agencies which is(1) administered for the promotion of economic development, (2) concessional in character and (3) contains a grant element of at least 25 %“ • Policy framework and Procedural Guidelines refer to ODA as "...official resource flows from the international donor community to SA in the form of grants, tech coop and financial coop where SA govt is held at least partially responsible or accountable for management of such resources“ • Money that flows from donors to NGOs is done directly therefore we are not accountable...

1.ODA Definition and Types, continued • ODA comes in different forms – grants (actual non-repayable funds, technical cooperation (expertise) and financial cooperation (loans and credit guarantees etc) • Donors – refer to foreign official donations (as opposed to private agencies) including states and international organisations that provide ODA to SA • Although donations can also come from private sector companies, organisations, trusts etc.

2. What do know about ODA reporting? • The 2003 Policy Framework and Procedural Guidelines for the Management of ODA, states that: • ODA in the form of grants or technical assistance is regarded as donations to the state; • Donor support is extra-budgetary – not part of the National Revenue; • Grants and technical assistance (training and capacity building) is additional to parliamentary appropriations for departmental programmes and activities; • ODA has to have a strategic focus – where such a framework should come about as part of the normal MTEF/budget planning and prioritisation process;

2. What do we know about ODA reporting? continued • This focus must be based on strategic frameworks developed at implementing agency level in accordance with the requirements of the PFMA, Act N01 of 1999 • All cash donations have to be paid into the RDP Fund Account; • All donations have to be stipulated in a separate note to the annual financial statements such as the Annual Financial Report of the RDP Fund prepared by the Accounting General and in Annual Reports of the Implementing Agency • All donations have to be declared in writing to the relevant CFO and he/she is supposed to keep a register of it

2. What do we know about ODA reporting? continued • In the Budget Review (2007) there are tables showing the: • Main budget framework which reflects revenue that is received in the National Revenue Fund; • Consolidated national budget framework which consists of finances from the main budget framework plus extra-budgetary funds such as ODA and social security (UIF and Compensation Funds, such as the Road Accident Fund)

2. What do we know about ODA reporting? continued • In the Estimates of National Expenditure Document, ODA is recorded in a summary table for each Vote. • Reporting has not been consistent over the years. • In the 2007 ENE, department votes did not record ODA at all • In 2004, 2005 & 2006 ENE, ODA was recorded per project, per donor.

2. What do we know about ODA reporting? continued • Main criticism was that private cash and in-kind donations to a department was reflected in the same table as official development assistance. • In some Votes there was a clear distinction between local and foreign donations, whilst in others both was lumped together.

3. 2008 Treasury Guidelineson ODA • ODA should be reported per Department programme in rand terms • Donor funded programme should be output and outcome based in line with the notion of result based management and the performance management system • ODA used to leverage innovation, best practices, risk taking and piloting to address development challenges in a sector

3. 2008 Treasury Guidelines on ODA, continued • The ODA programme reporting process should follow the same budgetary reporting system of the department unless agreements stipulate additional specific reporting requirements • Stakeholders requested to show how and where donor resource applications add value • Operational plans for implementation should incorporate actual deliverables breakdown of committed and disbursed resources covering direct donor expenditure, including technical cooperation and grants in addition to funds disbursed to governments

4. 2008 MTEC Submissions & Bid Documents • The data sheets show ODA per programme which was in accordance to the 2008 Treasury Guidelines but not sure if the numbers reflect cash receipts only or if it is cash receipts and technical assistance. • Departments did not explain where and how donor resource applications would add value, especially how it will be used to leverage innovation, best practises, and encourage risk taking to address developmentchallenges. • Departments also did not explain donor aid in relation to domestic spending and against plans

4. 2008 MTEC Submissions & Bid Documents, continued • Only one Department - the Department of Water Affairs and Forestry made a request for additional funds to replace of donor funds (Masibambane Programme) • Departments did not provide a breakdown of committed and disbursed resources for the current year • No explanatory note was provided on forecasts of ODA over the MTEF period

5. What do we want to see and say? • Programme Coordinators should communicate to their Chief Financial Officers donor activity • In future MTEF documents and budget bids must also include plans for donor programmes and projects, especially for future ones • It must provide information (narrative) on what donor funds would be used for and is being used for • It must provide explanatory notes on how forecasts in the MTEF period for ODA was obtained, where possible

6. Pointers for 2008 ENE • For the 2008 ENE guidelines: • Tabulated information on donor activity per agreement, per type (cash or kind), with historical data for audited outcomes and amounts transferred from the RDP Fund plus the medium term expenditure estimates • Trends, numbers and figures contained in the table should be explained where applicable • Explanatory notes for the forecasts of donor funds over the MTEF period must be provided • Information (narrative) on current, past and future donor programmes should be provided, including output and outcome based information

6. 2008 ENE, continued • Departments must explain where and how donor resources add value especially with respect to how it can be used to leverage innovation, best practise, encourage risk taking and piloting to encourage development; • For each agreement Departments must explain progress to date and provide a breakdown of committed and disbursed resources and achievements to date. • Departments should provide a table on their engagement in trilateral activities and other continental-wide programmes through voted money of the ARF for example.

7. The Study–Aid and the Budget Planning Process • The purpose of the study is to undertake an analytical assessment of how ODA could BEST be incorporated into the budget planning process without affecting its integrity • Objectives of the study are: • To analyze current reporting of ODA in the financial management systems of South Africa (ENE and Departmental Reports) and other mechanisms of official reporting DCIS and OECD/DAC, and to explore the consolidation and integration of the different mechanisms for reporting • To conduct analytical and comparative works on the pros and cons of programme support and project based support against the changing role of ODA to meet the current and future priority needs of South Africa

6. The Study–Aid and the Budget Planning Process, cont. • What has happened so far? • Consultants have completed their interviews with CIDA, DFID, GTZ, JICA, Netherlands, NORAD, SIDA, USAID, EU. • Still need to interview individuals from the Swiss Development Cooperation, KZN Provincial Coordinators, Education, DEAT,DTI, SAPS, National Treasury • Delivered an Aid Memoire on progress of the team in data gathering and analysis and presented some preliminary findings • Final Draft of the Study is expected by the 30 November 2008 and it will be circulated to departments

Thank you Contact person Jayanthi Basdew/Robin Toli/ Denise Marais International Development Cooperation National Treasury www.dcis.gov.za Tel: 012 315 5069/315 5478/315 5968

ODA and the Budget Planning Process