1

Alignment of theInfrastructure Delivery Cycle

with the Budget Cycle

andStrategic Planning Cycle

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

Prepared by the Infrastructure Delivery Improvement Programme

(IDIP)

2

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

State of the Nation Address 2005

“Certainly it is a reflection of weaknesses in the governance system that the plans to build school infrastructure are unfolding at a much slower pace than envisaged.”“We need massively to improve the management, organisational, technical and other capacities of government so that it meets its objectives.”

President Thabo Mbeki – State of the Nation Address 2005

3

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

State of the Nation Address 2006

“We cannot allow that government departments become an obstacle to the achievement of the goal of a better life for all because of insufficient attention to the critical issue of effective and speedy delivery of services.”

“Integration of planning and implementation across the government spheres is therefore one of the prime areas of focus in our programme…”

President Thabo Mbeki – State of the Nation Address 2006

4

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

5

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.

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

6

Overview of Presentation

• This presentation covers the following topics:– The Strategic Planning Cycle– The Budget Cycle– The current Infrastructure Delivery Cycle– The improvements to the Infrastructure Delivery Cycle– The alignment and interdependence between these 3 cycles– An overview of the Infrastructure Plan,

Infrastructure Programme Management Plan (IPMP), & Infrastructure Programme Implementation Plan (IPIP)

– Budget allocation for Infrastructure Delivery Programmes– Managing cashflows across years to ensure 100% effective

expenditure– Benefits & Challenges

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

7

Electoral Cycle

• Five-year Strategic and Performance Plans

Fiscal Years

Planning & Budgeting

2004 20122006 2007 2008 2009 2010 20112005 2013 2014 2015 2016

5 Year Election Mandate 5 Year Election Mandate 5 Year Election Mandate

Election Election Election

5 year Strategic & Performance Plan detailing Targets & priorities

5 year Strategic & Performance Plan detailing Targets & priorities

5 year Strategic & Performance Plan detailing Targets & priorities

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

APPFor

Year 2

LEGEND: APP – Annual Performance Plan

• Annual PerformancePlans and Budgets(with 3 Year MTEF)

8

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

3 Year MTEF Period

Budget Day (15 Feb)

MTEF Budget Cycle

Draft 2 APP

Final APP

Budget Allocation Letter (Nov)MTEC Hearings (Sept)

LEGEND: Planning Processes

Implementation Processes

Closure Processes

ARFinal Budget

Update Budget

Draft APP

Draft Budget

Q1PR

Q2Rep

Q2PR

Q3PR

Q3Rep

Q4Rep

AFS

Q4PR

31 Aug

Mid Dec

17 Feb

Q1Rep

Implement Budget

31 Mar

Draft 2 APP

Final APP

AFSFinal Budget

Update Budget

Draft Budget

AR

Draft APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Implement Budget

Q1PR

Q2PR

Q3PR

Q4PR

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

AFSFinal Budget

Update Budget

Implement Budget AR

Draft APP

Draft Budget

Q1PR

Q2PR

Q3PR

Q4PR

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Final Budget

Update Budget

Implement Budget

Draft APP

Draft Budget

Q1PR

Financial Reports(Section 32 PFMA)

& Non-Financial Data Reporting

APP – Annual Performance Plan

AFS – Annual Financial Statements

AR – Annual Report

PR – Performance Report

9

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

3 Year MTEF Period

Budget Day

MTEF Budget Cycle

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Budget Allocation Letter

These are all the concurrent budget

activities that need to be undertaken in any 1 year

MTEC Hearings

AFS AR

AFS AR

AFS AR

Final Budget

Update Budget

Final Budget

Update Budget

Draft Budget

Final Budget

Update Budget

Implement Budget

Implement Budget

Implement Budget

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Final Budget

Update Budget

Implement Budget

Draft APP

Draft APP

Draft APP

Draft APP

Draft Budget

Draft Budget

Q1PR

Q2PR

Q3PR

Q4PR

Q1PR

Q2PR

Q3PR

Q4PR

Q1PR

Q2PR

Q3PR

Q4PR

Q1PR

Draft Budget

LEGEND: Planning Processes

Implementation Processes

Closure Processes

APP – Annual Performance Plan

AFS – Annual Financial Statements

AR – Annual Report

PR – Performance Report

10

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

3 Year MTEF Period

Budget Day

MTEF Budget Cycle

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Budget Allocation Letter MTEC Hearings

AFS AR

AFS

AFS

Final Budget

Update Budget

Final Budget

Update Budget

Final Budget

Update Budget

Implement Budget

Implement Budget AR

Implement Budget AR

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Final Budget

Update Budget

Implement Budget

Draft APP

Draft APP

Draft APP

Draft APP

Draft Budget

Draft Budget

Draft Budget

Draft Budget

Q1PR

Q2PR

Q3PR

Q4PR

Q1PR

Q2PR

Q3PR

Q4PR

Q1PR

Q2PR

Q3PR

Q4PR

Q1PR

The following information is used as input to prepare the budget:Draft Budget due 31 August•Annual Financial Statements from last year due 31 May•1st Quarter Report from this year due mid July

Updated Budget due mid December•2nd Quarter Report from this year due mid October

Final Budget due 17 February•Budget Allocation Letter•3rd Quarter Report from this year due mid January

LEGEND: Planning Processes

Implementation Processes

Closure Processes

APP – Annual Performance Plan

AFS – Annual Financial Statements

AR – Annual Report

PR – Performance Report

Final Budget

Update Budget

Draft Budget

Budget Allocation Letter

11

Electoral Cycle

• Five-year Strategic and Performance Plans

Fiscal Years

Planning & Budgeting

2004 20122006 2007 2008 2009 2010 20112005 2013 2014 2015 2016

5 Year Election Mandate 5 Year Election Mandate

Election Election

5 year Strategic & Performance Plan detailing Targets & priorities

5 year Strategic & Performance Plan detailing Targets & priorities

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

MTEF (3 years)

Year 1Budget

APPFor

Year 1

Year 2Budget

Year 3Budget

APPFor

Year 2

APPFor

Year 3

LEGEND: APP – Annual Performance Plan

• Annual PerformancePlans and Budgets(with 3 Year MTEF)

Infrastructure Plan Update (10 Year Plan)Infrastructure Plan Update (10 Year Plan)

Infrastructure Plan Update (10 Year PlanInfrastructure Plan Update (10 Year Plan)

Infrastructure Plan Update (10 Year Plan)Infrastructure Plan Update (10 Year Plan)

Etc, etc, etc

12

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

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

3 Year MTEF Period

Current Infrastructure Delivery Cycle

Infrastructure Delivery Cycle

Better supervision of infrastructure projects undertaken by government will be introduced, to ensure that capital budgets are spent without roll-overs - President Thabo Mbeki - State of the Nation Address 2006

100%

RolloverBudget

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.

13

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

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

3 Year MTEF Period

Budget Speech

Current Infrastructure Delivery Cycle

Improved Infrastructure Delivery Cycle

LEGEND: O&S Plan – Organisation & Support PlanIPMP – Infrastructure Programme Management PlanIPIP – Infrastructure Programme Implementation Plan

Infrastructure Delivery Cycle

Infr. Plan update

O&S Plan

IPMP

O&S

IPIP

O&S

Each Infrastructure Delivery Cycle is characterized by under-expenditure and rolled over unspent budgets

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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

15

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

Infr. Plan update

Project Design

Project Tender

Project Implementation

Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

Rolled Over Unspent Budget

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

3 Year MTEF Period

Budget Speech

Current Infrastructure Delivery Cycle

Improved Infrastructure Delivery Cycle

LEGEND: O&S Plan – Organisation & Support PlanIPMP – Infrastructure Programme Management PlanIPIP – Infrastructure Programme Implementation Plan

Infrastructure Delivery Cycle

Eg. Conditional Grant for FET

given to DoE by NT

Monitoring & Evaluation

Infr. Plan update

O&S Plan

IPMP

O&SPlan

IPIP

O&SPlan

16

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

3 Year MTEF Period

Current Project Budgeting

Best Practice Project BudgetingInfr. Plan update

IPMP IPIPBudget

Tim

e

100%

Retention Period

Infr. Plan update

Project Design

Project Tender

Project Implementation

Implementation of Roll-Over

Budget

Budget

100%

Commit from Yr 1

Commit from Yr 2 Commit from Yr 3 Com-mit

from Yr 4

Cumulative Cashflow

Cumulative Cashflow

Monthly Projected Cashflow

Implementation of Roll-Over

Retention Period

RolloverRolloverWhole project budget is

committed to Yr 1

17

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

Infr. Plan update

Project Design

Project Tender

Project Implementation

Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

Rolled Over Unspent Budget

Infr. Plan update

Project Design

Project Tender

Project Implementation

Rolled Over Unspent Budget

3 Year MTEF Period

Budget Speech

Current Infrastructure Delivery Cycle

Improved Infrastructure Delivery Cycle

LEGEND: O&S Plan – Organisation & Support PlanIPMP – Infrastructure Programme Management PlanIPIP – Infrastructure Programme Implementation Plan

Infrastructure Delivery Cycle

Monitoring & Evaluation

Infr. Plan update

O&S Plan

IPMP

O&SPlan

IPIP

O&SPlan

Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

Monitoring & Evaluation

Infr. Plan update

O&S Plan

IPMP

O&S

IPIP

O&S

Project Design

Project Tender

Project Implementation

Monitoring & Evaluation

Infr. Plan update

O&S Plan

IPMP

O&S

IPIP

O&S

Project Design

Monitoring & Evaluation

Infr. Plan update

O&S Plan

IPMP

O&S

IPIP

O&S

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.

18

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

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

IPMP IPIP Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

IPMP IPIP Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

IPMP IPIP Project Design

Project Tender

Project Implementation

IPMP IPIP Project Design

MTEF Budget cycle

Infrastructure Delivery Cycle

AFS ARFinal Budget

Update Budget

Implement Budget

AFS ARFinal Budget

Update Budget

Implement Budget

AFS ARFinal Budget

Update Budget

Implement Budget

Final Budget

Update Budget

Implement Budget

These are all the concurrent activities that need to be

undertaken in any 1 year by a department

Draft APP

Draft APP

Draft APP

Draft APP

Draft Budget

Draft Budget

Draft Budget

Draft Budget

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Infr. Plan update

O&S PlanInfr. Plan update

O&S PlanInfr. Plan update

O&S PlanInfr. Plan update

O&S Plan

LEGEND: O&S Plan – Organisation & Support PlanIPMP – Infrastructure Programme Management PlanIPIP – Infrastructure Programme Implementation Plan

LEGEND: APP – Annual Performance Plan

AFS – Annual Financial Statements

AR – Annual Report

PR – Performance Report

19

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

Draft 2 APP

Final APP

IPIP Project Design

Project Tender

Planned Multi-year Commitments

MTEF Budget cycle

Infrastructure Delivery Cycle

AFS ARFinal Budget

Update Budget

Monitoring & Evaluation

Implement Budget

Q1Rep

Q2Rep

Q3Rep

Q4Rep

Project Implementation

Draft APP

Draft Budget

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

AFS ARFinal Budget

Update Budget

Implement Budget

Draft APP

Draft Budget

Draft 2 APP

Final APP

Q1Rep

Q2Rep

Q3Rep

Q4Rep

AFSFinal Budget

Update Budget

Implement Budget AR

Draft APP

Draft Budget

Considering a cycle with a common year of implementation

It is clear that the Infrastructure Delivery Cycle is a longer cycle & that infrastructure planning leads the budget planning process by 1 year. Therefore Infrastructure Planning & project design also become inputs into the Budget Planning process.

Budget Cycle

Infrastructure Delivery Cycle

Common year of implementation

Infr. Plan update

IPIP Project Design

Project Tender

Monitoring & Evaluation

Project ImplementationIPMPInfr. Plan update

The Draft APP in turn becomes an input into the current year’s infrastructure planning & IPMP update.

The inputs to the Budget process are the AFS from last year as well as the Quarterly Reports from this year.

IPMP

And the project tendering & implementation feed into the implementation of the budget, quarterly reporting & the AFS.

20

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

IPMP IPIP

3 Year MTEF Period

Budget Speech

Planned Multi-year Commitments

Project Implementation

Project Design

Project Tender

Current year’s infrastructure delivery activities

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Infr. Plan update

O&S Plan

The Infrastructure Plan sets out the infrastructure priorities for the next 10 years. It is updated annually on the basis of the:• Targets and priorities set out in the Strategic Plan & Annual Performance Plan• The anticipated MTEF Budget, and• The progress of the current projects.

Infr. Plan update

O&S Plan

21

The IPMP sets out in detail the work for the next 3 years.It is based on the updated Infrastructure Plan

as well as the Draft Annual Performance Plan (APP).

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

IPMP IPIP Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

Project Design

Project Tender

Project Implementation

Project Design

Project Tender

3 Year MTEF Period

Budget Speech

Planned Multi-year Commitments

Project Implementation Planned Multi-year Commitments

Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

In Year 1(Very detailed)

In Year 2(Less detailed)

In Year 3(even less detailed)

Current year’s infrastructure delivery activities

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & EvaluationMonitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Monitoring & Evaluation

Infr. Plan update

O&S Plan O&SIPMP

O&SIPMP

O&SIPMP

O&S

IPIP

IPIP

O&S

IPIP

O&S

O&SInfr. Plan update

O&S PlanInfr. Plan update

O&S PlanInfr. Plan update

O&S Plan

IPMP

Infrastructure Programme Management Plan (IPMP)

NB: The total value of the work in each year must equal the Annual Budget for each year

22

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

Infr. Plan update

IPMP IPIP Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

Infr. Plan update

IPMP IPIP Project Design

Project Tender

Project Implementation

Infr. Plan update

IPMP IPIP Project Design

Project Tender

Infr. Plan update

IPMP IPIP

3 Year MTEF Period

Budget Speech

Planned Multi-year Commitments

Project Implementation Planned Multi-year Commitments

Project Design

Project Tender

Project Implementation Planned Multi-year Commitments

Project Implementation Budget = TOTAL INFRASTRUCTURE BUDGET– Planned Multi-year Commitments– Project Design & Tender (10%)– Infrastructure Planning (1%)– Funding of O&S Plan

O&S Plan

O&S Plan

O&S Plan

O&S Plan

O&S O&S

O&S O&S

O&S O&S

O&S

Infrastructure Budget Allocation

23

Example of Programme Budget to commit entire Annual Budget

R 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 =

Amount remaining for new projects( = Annual Budget less Amount Committed)

24

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

25

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

26

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

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

27

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 MYear 0 Year 1 Year 2

• Programme Manager with required skills is required– Planning for built environment– Quality Control– Contract Procurement

• Commitment by political heads to only implement what is on the Infrastructure Plan

• Understanding that if a project is entered as a new priority onto an Infrastructure Plan in Year 0 it must follow due process before implementation can begin

Infr. Plan update

IPMP IPIP Project Design

Project Tender

Project Implementation

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

Possible Challenges

28

• That the Infrastructure Delivery Cycle be amended to include the Infrastructure Programme Management Plan (IPMP), the Infrastructure Programme Implementation Plan (IPIP), and the Service Delivery Agreement (SDA), and that these plans be made mandatory for all departments.

• That the timeframes of the Infrastructure Delivery Cycle be amended to allow for the alignment of the Infrastructure Delivery Cycle with the Budget Cycle so that departmental budgets are informed by actual projects. This means that plans for projects must be finalized in the year before the budget is prepared.

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

Recommendations (1)

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• That best practice budgeting processes be adopted so that budgets for large projects are appropriately committed across the duration of the project. In other words, multi-year projects must be appropriately budgeted over multiple years, and not budgeted for in a single year only, which results in roll-overs. This will enable budgets to be fully spent each year, and roll-overs to be avoided. It also means that Client Departments and Public Works must be willing to enter into contractual commitments for multi-year projects, and to budget for these projects over multiple years, rather than budgeting for the whole project in the first year. In addition, it must be accepted that this means that a portion of each year’s budget will have to be allocated to commitments from previous years.

NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

Recommendations (2)

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NATIONAL TREASURY REPUBLI C OF SOUTH AFRICA

Thank You