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GUIDELINES ON VIREMENTS prepared for the Standing Committee on Public Accounts (SCOPA) 13 JUNE 2018. Presentation Objectives. What are virements? Why do we do virements? What are the relevant rules? When are virements effected? Some DotP specifics for 2017/18. Introduction.
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GUIDELINES ON VIREMENTS prepared for the Standing Committee on Public Accounts (SCOPA) 13 JUNE 2018
Presentation Objectives What are virements? Why do we do virements? What are the relevant rules? When are virements effected? Some DotP specifics for 2017/18
Introduction • WCG departmental votes, through the budget process and associated Appropriation bill; are appropriated funds by the Provincial Parliament; • The budget of a department/vote is a quantification of the strategic priorities of the department; • The division of the vote’s budget into the different programmes is therefore indicative of strategic objectives of the department; • Parliament therefore appropriates funds for the achievement of departmental objectives.
Introduction (contd) The PFMA places greater responsibility for planning on Accounting Officers (AO’s); Effective planning & implementation involves the accurate allocation of funds to the various programmes within a vote; The AO is responsible for effective monitoring of expenditure and must take corrective action when operations do not happen as planned; From time to time operational requirements may therefore require a programme’s budget to be changed.
What are virements & why do we do them? • Section 43(1) of the PFMA, allows AO’s to effect such changes to the budget and reallocate funds amongst the programmes; • This reallocation of funds between programmes within the Vote is known as VIREMENTS and may be defined as: • “The utilisation of savings in the amount appropriated under a main division (programme) towards the defrayment of excess expenditure under another main division within the same vote” • To discourage weak or no planning, the amount to be vired is limited to 8 per cent of the relinquishing programme’s appropriation.
Example of Virements • The budget for programmes 1&3 were overspent by R39 000 & R41 000 respectively; • Programme 2 underspent by R200 000; • Section 43(1) of the PFMA allows for R80 000 (8 per cent of R1 million) to be shifted from programme 2 to programmes 1 & 3.
Virement rules Departments may not do the following via virements, without the relevant treasury’s approval: increase cost of employees; increase transfers and subsidies to other institutions; introduce new transfers and subsidies to other institutions.
Virement rules (contd) Departments are not allowed to shift savings from the following via virements: an amount specifically and exclusively appropriated for a purpose mentioned under a programme within a vote; an amount appropriated for transfer to another institution; an amount appropriated for capital expenditure in order to defray current expenditure.
The timeline for virements The timeline for virements are illustrated in the diagram below:
Some DotP Specifics for 2017/18 A final virement of R15 000 from Provincial Strategic Management to Executive Support post the Adjustments Budget for purposes of a donation to DEAFSA; A final virement of R360 000 from Corporate Assurance to People Management post the Adjustments Budget for purposes of drought preparations; A final virement of R500 000 from Corporate Assurance to CeI post the Adjustments Budget for purposes of an increased transfer to Cape Access Centres; These amounts are detailed in the “Virement” column of the Appropriation Statement which forms part of the 2017/18 Annual Report.
Conclusion The primary intention of Section 43(2) on virements is to: ensure proper planning & allocation of funds; ensure that spending is in accordance with appropriations made by Legislatures to address the specific needs of the public; The amount of savings in section 43(1) may not exceed 8% of the amount appropriated under a specific programme and must be approved by the AO or relevant treasury depending on the limitations; The Act does not provide for the relevant treasury to approve shifts in excess of 8% - such shifts may only be approved by the legislature through the Adjustments Budget process; Further virements of 8% savings are also allowed after the adjustments are enacted, due to the fact that an Adjustments Appropriation Bill is enacted. These are reflected in the Appropriation Statement.
