Post on 10-Feb-2016
description
Alignment of theInfrastructure Delivery
Cyclewith the
Budget Cycle(Abridged Version for
Prepared by the Infrastructure Delivery Improvement Programme
(IDIP)
2National Treasury
NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA
The Infrastructure Delivery Improvement Programme
(IDIP)• IDIP is a continuous improvement programme which
guides & capacitates to improve infrastructure delivery
• IDIP is coordinated by National Treasury in partnership with DBSA, DPW & CIDB
• IDIP provides flexible tools that can be adapted to the province & sector
• IDIP is a key strategy of government to address inadequate capacity and skills in the infrastructure sector
3National Treasury
Problem Statement• Continuing under expenditure of infrastructure budgets.
• Inappropriate expenditure patterns characterized by the 4th Quarter expenditure spike.
• Currently there appears to be very little alignment between the Infrastructure Delivery Cycle and either the Budget Cycle or the Strategic Planning Cycle.
• Currently the budget for large multi-year projects is committed to 1 financial year instead apportioning the budget across the MTEF.
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A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J JYear 4Year 0 Year 1 Year 2 Year 3
These are all the concurrent budget
activities that need to be undertaken in any 1
year
3 Year MTEF Period
Budget Day
MTEF Budget Cycle
Preparation of Annual Performance Plan (APP)
Budget Preparation Process
Closure Processes
Quarterly Reporting
Implement Budget
Preparation of Annual Performance Plan (APP)
Budget Preparation Process
Closure Processes
Quarterly Reporting
Implement Budget
Preparation of Annual Performance Plan (APP)
Budget Preparation Process
Closure Processes
Quarterly Reporting
Implement Budget
Preparation of Annual Performance Plan (APP)
Budget Preparation Process
Quarterly Reporting
Implement Budget
Currently it would appear that annual budgets are prepared by updating last years budget with a factor for inflation
The annual budgets submitted to treasury do not appear to be informed by actual projects to be implemented in the following year.
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A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J JYear 4Year 0 Year 1 Year 2 Year 3
Infrastructure Planning
Project Design
Project Tender
Project Implementation
Implement Rolled Over
Unspent Budget
3 Year MTEF Period
Current Infrastructure Delivery Cycle
Infrastructure Delivery Cycle
President Thabo Mbeki in his 2006 State of the Nation Address said, “Better supervision of infrastructure projects undertaken by government will be introduced, to ensure that capital budgets are spent without roll-overs”
100% Rollover
Budget
Tim
eCumulative Cashflow
With the current Infrastructure Delivery Cycle, expenditure during the 1st half of the year is virtually impossible since most projects are still in the tender phase. The result is the 4th quarter expenditure spike and overall under-expenditure.
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A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J JYear 4Year 0 Year 1 Year 2 Year 3
Project Design
Project Tender
Project Implementation
Rolled Over Unspent Budget
3 Year MTEF Period
Current Infrastructure Delivery Cycle
Improved Infrastructure Delivery Cycle
Improved Infrastructure Delivery Cycle
Infrastructure Planning
Infrastructure Planning
Project Design
Project Tender
Project Implementation
Rolled Over Unspent Budget
Infrastructure Planning
Project Design
Project Tender
Project Implementation
Rolled Over Unspent Budget
Infrastructure Planning
Each Infrastructure Delivery Cycle is characterized by under-expenditure and rolled over unspent budgets
The Infrastructure Plan sets out the infrastructure priorities for the next 10 years. It is updated annually by the Client Department.
7National Treasury
Infrastructure Programme Management & Implementation Plans (IPMP & IPIP)
Client Department (CD)
Implementing AgentIA 1
IPMP Update
IPIPfor IA 2
Implementing AgentIA 2
SDA
with IA
1 SDA with IA 2
IPIPfor IA 1
FUNCTIONS OF CD:1. Planning2. Procurement3. Programme
Management4. Monitoring &
Reporting
FUNCTIONS of IAs:
IPIPs respond to
IPMP
1. Programme Management2. Project Initiation3. Procurement
4. Project Implementation5. Project Completion6. Monitoring & Reporting
IPMP issued to
IAs
Infrastructure Plan Update
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A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J JYear 4Year 0 Year 1 Year 2 Year 3
Project Design
Project Tender
Project Implementation
Project Design
Project Tender
Project Implementation Planned Multi-year Commitments
Rolled Over Unspent Budget
3 Year MTEF Period
Current Infrastructure Delivery Cycle
Improved Infrastructure Delivery Cycle
Improved Infrastructure Delivery Cycle
Infrastructure Planning
IPMP IPIPInfrastructure Planning
Project Design
Project Tender
Project Implementation
Rolled Over Unspent Budget
Infrastructure Planning
Project Design
Project Tender
Project Implementation
Rolled Over Unspent Budget
Infrastructure Planning
IPMP = Infrastructure Programme Management PlanPrepared by Client Department and given to Implementing Agent.Contains list of projects for the next 3 years and where they are located.
IPIP = Infrastructure Programme Implementation PlanPrepared by Implementing Agent and submitted to Client Department for approval.Contains the details of how the list of projects issued by the Client Department will be implemented.
Monitoring & Reporting
The Infrastructure Plan sets out the infrastructure priorities for the next 10 years. It is updated annually by the Client Department.
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A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J JYear 2Year -2 Year -1 Year 0 Year 1
Budget Preparation Process
Closure ProcessesImplement Budget
MTEF Budget Cycle
The improved Infrastructure Delivery Cycle now facilitates the alignment of the Infrastructure Delivery Cycle with the Budget Cycle.
The budget preparation process can now be strengthened by actual projects identified during Infrastructure Planning.
IPIP Project Design
Project Tender
Planned Multi-year Commitments
Improved Infrastructure Delivery CycleProject ImplementationIPMPInfrastructure
Planning
Alignment of the Infrastructure Delivery Cycle& the Budget Cycle
Project Design
Project Tender
Project Implementation
Rolled Over Unspent Budget
Current Infrastructure Delivery CycleInfrastructure
Planning
Currently Infrastructure Planning is undertaken too late to facilitate effective alignment of the Infrastructure Delivery Cycle with the Budget Cycle.
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A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J JYear 4Year 0 Year 1 Year 2 Year 3
Project Design
Project Tender
Project Implementation Planned Multi-year Commitments
Improved Infrastructure Delivery Cycle
LEGEND: IPMP – Infrastructure Programme Management PlanIPIP – Infrastructure Programme Implementation Plan
Required Capacity for Departmental Infrastructure Units
Monitoring & Reporting
These are all the concurrent infrastructure delivery activities that need to be undertaken in any 1 year.
Departments therefore need to have the capacity to undertake all these concurrent activities.
IPMP IPIPInfrastructure Planning
Project Design
Project Tender
Project Implementation Planned Multi-year Commitments
Monitoring & Reporting
IPMP IPIPInfrastructure Planning
Project Design
Project Tender
Project Implementation
Monitoring & Reporting
IPMP IPIPInfrastructure Planning
Project Design
Monitoring
IPMP IPIPInfrastructure Planning
National Treasury 11
Example of a Programme Budget to commit the entire
Annual BudgetR 50,000 R 60,000 R 70,000
PROJECT TOTAL PROJECT BUDGET
BUDGET FOR YEAR 1
BUDGET FOR YEAR 2
BUDGET FOR YEAR 3
Project 1 R 30,000 R 10,000 R 10,000 R 10,000
Project 2 R 20,000 R 5,000 R 10,000 R 5,000
Project 3 R 25,000 R 7,000 R 8,000 R 10,000
Project 4 R 15,000 R 12,000 R 3,000 R 0
Project 5 R 10,000 R 5,000 R 5,000 R 0
Project 6 R 20,000 R 11,000 R 4,000 R 5,000
Amount Committed R 120,000 R 50,000 R 40,000 R 30,000
R 0 R 20,000 R 40,000
Department's Annual Budget =( ,000)
Amount remaining for new projects( = Annual Budget less Amount Committed)
National Treasury 12
Year 0D J F M A M J J A S O N D J F M A M J J A S O N D J F M
Year 1 Year 2
Infr. Plan update IPMP IPIP
IPIPIPMP
Planned Multi-year Commitments
Project ImplementationProject Design & Tender
Project Implementation
Project Implementation
Project Design & Tender
Managing Cashflows Across Years
Planned Multi-year Commitments
But here we have clusters of projects that have been designed
and are ready to go to tender
In reality the neat chunks of work shown on the earlier slides are actually individual
projects or clusters of projects with different start & end dates
Some projects or clusters of projects in the current year can be
delayed causing potential under expenditure
NB: The total value of the work in this year equals the Annual Budget for this year
National Treasury 13
Year 0D J F M A M J J A S O N D J F M A M J J A S O N D J F M
Year 1 Year 2
Infr. Plan update IPMP IPIP
IPIPIPMP
Planned Multi-year Commitments
Project ImplementationProject Design & Tender
Project Implementation
Project Implementation
Project Design & Tender
Managing Cashflows Across Years
Planned Multi-year Commitments
We need to tender these projects earlier and start implementation in Year 1 to offset the potential under expenditure
caused by the delayed projects
14National Treasury
Identified Benefits
• Better linkage with Strategic Planning is achieved• Better alignment of the budget with the targets set out in
the Strategic Plan• Project planning & design is properly done resulting in
achievable & realistic cashflows• Multi-Year commitments are planned and budgeted for
thereby reducing rollovers• Improved clarity of roles & responsibilities between client
departments and implementing agents
15National Treasury
STATEMENT ON THE CABINET MEETING OF 21st February 2007.
Cabinet approved a framework to align infrastructure delivery cycles with the MTEF budget cycle in order to improve planning, implementation and better cash-flow management that would, among other things, deal with the fourth quarter expenditure spike. This framework accommodates the long lead time before infrastructure projects reach the construction stage. The infrastructure delivery cycle will be amended to include an Infrastructure Programme Management Plan (IPMP) and an Infrastructure Programme Implementation Plan (IPIP) which will be mandatory for all departments. Best practice approaches will be adopted to include budget cycles that commit funds for the duration of the project without leading to the so-called roll-overs. This framework will require the appointment of appropriately skilled built-environment professionals across all relevant departments, provinces and local government.
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THANK YOU