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SESSION 3 INTRODUCTION TO CURRENT PAYMENTS AND TRANSFERS AND SUBSIDIES

SESSION 3 INTRODUCTION TO CURRENT PAYMENTS AND TRANSFERS AND SUBSIDIES PRESENTED BY: NATIONAL TREASURY. DEFINING PAYMENTS. Current payments Transfers and subsidies. DEFINING CURRENT PAYMENTS. There are 4 main payment categories: Compensation of employees Goods and services

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SESSION 3 INTRODUCTION TO CURRENT PAYMENTS AND TRANSFERS AND SUBSIDIES

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  1. SESSION 3 INTRODUCTION TO CURRENT PAYMENTS AND TRANSFERS AND SUBSIDIES PRESENTED BY: NATIONAL TREASURY

  2. DEFINING PAYMENTS • Current payments • Transfers and subsidies

  3. DEFINING CURRENT PAYMENTS • There are 4 main payment categories: • Compensation of employees • Goods and services • Interest and rent on land • Financial transactions in assets and liabilities

  4. COMPENSATION OF EMPLOYEES • Salaries and wages • Remuneration of staff on payroll • Payable at regular weekly or monthly intervals • Includes basic salaries and overtime • Supplementary allowances • Housing allowances and camping allowances • Ad hoc bonuses • Incentive bonuses like performance awards and birthday bonuses • Social contributions payable by employee • Values of social contributions and income taxes by the employees is also included S&W

  5. COMPENSATION OF EMPLOYEES • Excluded from this category is: • Expenses incurred by the employee out carry out their duties for e.g. tools, equipment and uniform • Resettlement cost for e.g. traveling and moving cost • Payments for travel and subsistence • Payments for services for e.g. consultants and contractors • Social benefits which will be part of transfers to households

  6. COMPENSATION OF EMPLOYEES • All the payments mentioned above will form part of payments for goods and services • It serves to be mentioned that the detail of all compensation payments are catered for in the PERSAL system • Detail PERSAL codes are linked to summarised categories of payments in the financial system, the Basic Accounting System and the chart of accounts

  7. COMPENSATION OF EMPLOYEES • Social contributions • Government’s contribution to social insurance funds • Pension, medical aid, UIF and payments to bargaining councils on behalf of employee

  8. GOODS AND SERVICES • Includes: • All payments for stand alone G&S by a government unit • Goods for resale • Postcards for resale by a government owned museum • Payments for research • Payments for research are treated as goods and services and not as a transfer seeing that the paying unit receives a good and service directly in return for the payment made

  9. GOODS AND SERVICES • Typical payments included in this category will be, communication cost, computer services, bank charges, consultants and professional services and contractors as just a few to mention • Excludes: • Purchase of capital assets • These payments are included in the category payments for capital assets • However it is important to mention that the purchases of G&S items a part of capital projects also be purchased from the item list, the distinction if it is current or capital will be made in the project segment where the economic classification is vested. More details will be provided in a later presentation on the project segment

  10. INTEREST AND RENT ON LAND • Interest: total value of payments on debt • Cater for interest payable on overdue accounts and government debt • Rent on land: total value of payments for the use of land owned by another party • Important to note that payments for rent on land not be included in G&S • However if impossible to make the distinction for the rental of the fixed structures and the rental of land the whole amount should be allocated to G&S

  11. FINANCIAL TRANSACTIONS IN A & L • Financial transactions that create or increase a debtor’s account • Is expense items but not market orientated • Example: loans extended to public corporations for policy purposes • Included in this category is also the allocation of payments made for theft and losses • This category of the chart of accounts will cater for accrual type payments made in a cash basis of accounting

  12. DEFINING TRANSFERS & SUBSIDIES • Transfer payments and subsidies are unrequited payments made by government • Payment is unrequited provided that the government unit making the payment does not receive something of similar value directly in return for transfer to the other party • Both current and capital transfers • When recording transfers and subsidies, they are classified according to recipient agent

  13. TRANSFER CATEGORIES • Provinces • Transfers to provinces includes payments to the provincial revenue funds for e.g. provincial equitable shares and provincial conditional grants • Municipalities • Transfers to municipalities includes payments to municipal bank accounts for municipal equitable shares and municipal conditional grants • This category also includes payments for rates and taxes and vehicle licenses. These payments are transfers and not G&S as the payment of taxes opposed by one level of government to another are treated as transfers

  14. TRANSFER CATEGORIES • Departmental agencies and accounts • Includes payments made to departmental agencies listed in the PFMA for budgetary support and social security funds i.e. the UIF, Compensation Fund and RAF • Universities and Technikons • Mostly to be used by the department of education for the transfer of budgeted funds for U&T, i.e. UNISA, UCT • Foreign governments and international organisations • Transfers made to FGIO for the payment of annual subscription fees

  15. TRANSFER CATEGORIES • Public corporations and private enterprises • Details will be provided in slides to follow • Non-profit institutions • Transfers made to non-profit institutions like churches, non profitable social and welfare institutions and privately owned educational institutions • Households • Details will be provided in slides to follow

  16. TRANSFERS TO PUBLIC CORPORATIONS AND PRIVATE ENTERPRISES • Subsidies on products or production • The payment must be made to a business-like entity • Subsidies influence either price or volume • Is of current nature • In the department of transport payments are subsidised for bus subsidies to bus companies as there is such a great demand for public transport • Other transfers to public corporations and private enterprises • The purpose of these transfers are not to subsidise products or production • It will be payments for purchase of capital assets and to cover large operating deficits accumulated, these will be treated as capital transfers

  17. TRANSFERS TO HOUSEHOLDS • Social benefits • Current transfers to protect individuals against events that negatively affect their social welfare • E.g. child support and old age grants • Other transfers to households • Bursaries • Fines and penalties to households • Compensation for injury on duty • Compensation for damage of personal items in the execution of duties (ex-gratia payments) • Any other payment to households for which government do not get something of similar value directly in return, e.g. sponsoring individuals of a soccer team for spending money at a international event

  18. EXAMPLE 1 • Mrs Khumalo based at the department of health Head office in Pretoria is paying ABC consulting services PTY (LTD) for services rendered to the department, how will the spending be allocated in the decision tree • Requited payment, goods and services

  19. EXAMPLE 2 • Mrs Naidoo of the department of Public Works is paying the monthly rates and taxes bill how would the expenditure be allocated in the decision tree • Unrequited payment, Transfers and subsidies, provinces and municipalities

  20. For any additional questions or issues for clarification, please contact the National Treasury SCOA Technical Committee at: • Call centre: (012) 315 5311 • E-mail: scoa@treasury.gov.za • Website: http://scoa.treasury.gov.za

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