Understanding and Using this Act > Guide for Accounting Officers > 12. Implications for executive authorities

This Guide focuses on the responsibilities the Act places on accounting officers, and does not attempt to spell out the role of the executive authority in any detail. However, several Ministers and MECs have requested advice on the implications of the PFMA for executive authorities, and this chapter provides this information in the broad context of the role of a political head of department.

Scope of the Act

The Act does not legislate the role of the executive authority, nor the relationship between the executive authority and the legislature: it is assumed that these are best dealt with by political processes.

However, PFMA does differentiate between the responsibility of the executive authority for policy and outcomes, and of the accounting officer for achieving outputs and for financial management.

Role of the political head

In general terms, the political head of a department may be expected to fulfil a range of functions including:

•	Policy formulation: The executive authority must take overall responsibility for developing a five-year vision; develop policy and obtain approval for the outcomes within the political collective; and engage with the relevant legislature and portfolio committee.

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Budget proposals: The executive authority will oversee and approve departmental budgetary submissions made to the relevant treasury, ensuring that the outputs to be delivered are specified and consistent with the desired (political) outcomes. The outcomes must accord with policy and fit within the MTEF framework. The executive authority and the accounting officer must determine the extent to which departmental activities can be reshaped to fit new priorities in the operational plan, which will form the basis for the accounting officer’s performance contract.

•	Monitoring: During the year, the executive authority will review the accounting officer’s progress against the agreed performance contract. This will require the executive authority to examine both budgetary and service delivery information.

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Oversight of public entities: The executive authority must ensure that any public entities controlled by the department are listed in the appropriate schedule to the Act. In most cases, the executive authority is in the position of a shareholder and has an arms-length relationship with the public entity. The fiduciary responsibility will lie with the Board, which is accountable to the executive authority via the head of department. In future, annual plans are to be approved by the executive authority. During the year, the performance of the public entity must be monitored.

•	Exercising discipline: Should the accounting officer commit any offence, the executive authority must ensure that the necessary steps are taken to instigate any investigation.

•	Reporting to Cabinet/Exco: A variety of reports may be appropriate. Some will be a direct responsibility of the executive authority, such as:

- Monthly and quarterly financial reports

- A mid-term performance review

- Progress against the departmental implementation plan for the PFMA

In other cases, the executive authority will report to Cabinet/Exco on matters such as concerns raised by the audit committee or Auditor-General (possibly on the progress of the internal audit unit), or the extent to which audit queries have been addressed.

Contract with accounting officer

The successful implementation of the PFMA in a department is critically dependent on the relationship between the executive authority and the accounting officer. In line with the initiatives of the Department of Public Service and Administration, the PFMA facilitates this relationship by encouraging an explicit performance contract that clearly specifies outputs.

In addition to preparing and monitoring the performance contract, the executive authority must also consider information required in terms of the Act. Much of this information (monthly and annual reports) is basic to helping the executive authority assess the performance of the head of department (this is spelt out in more detail below). The critical challenge facing executive authorities is to complement these statutory reporting requirements with measures and reports (even if only once a year) on service delivery indicators.

Political executive

The role of the executive authority should also be seen in the context of the functioning of Cabinet or a provincial Exco. Such a body may request regular reports for assessing the performance of that Government. For example, the Presidency is considering a system of mid-year reviews for assessing the performance of all national departments.

Relationship with legislature

Another important relationship is between the executive authority and the legislature. At national level, Parliament (through the finance and public accounts committees) requires the national Treasury to report on the implementation of the PFMA, and to produce quarterly reports on progress. Provinces may follow similar practices.

Legal sanctions

While the sanctions in the Act apply mostly to accounting officers, some, such as unauthorised borrowing or the issuing of a guarantee or security, apply to any person (including an executive authority). A guilty person could face a five-year jail sentence.

Statutory obligations

While the Act focuses mostly on the responsibilities of accounting officers, it places some statutory responsibilities on executive authorities. These are described in the following paragraphs and summarised in the table below.

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Monthly reports: The executive authority must consider the monthly reports specified in section 32 of the Act. These reports must indicate any undercollection or shortfall in budgeted revenue (as this may impact on the department’s ability to spend and therefore deliver services), as well as any overspending (this would eventually become unauthorised expenditure). The report must also project expenditure and revenue for the remainder of the year, and show any remedial action proposed by the accounting officer.

•	Annual report: The executive authority must table the department’s annual report, financial statements and audit report in the relevant legislature. Should this not be achieved within six months of the year-end, a written explanation must be provided to the relevant legislature.

•	Disciplinary board: Should any disciplinary action for financial misconduct be taken against the accounting officer, the executive authority must table the findings in the relevant legislature.

•	Directive with financial consequence: When an executive authority issues a directive that has a financial consequence (which will include almost all), this must be put in writing.

•	Public entity: The executive authority must ensure that all public entities controlled by the department are included in the appropriate schedule to the Act and comply with the timescales for submitting business plans, monitoring reports and annual financial statements.

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In the case of a payment made under guarantee by a Cabinet Minister: While only the Minister of Finance may authorise the issuing of a guarantee, section 70 requires that a member of Cabinet making a payment under the terms of a guarantee, indemnity or security, reports the fact to the National Assembly.

Table 7: Statutory responsibilities of executive authorities

Responsibility	Actions required	When?	Reference
Monthly reports	Consider monthly reports regarding under collection or shortfall in budgeted revenue, overspending, the actual financial information for a month and a projection of expenditure and revenue for the year	Monthly	S 63(1)(b)
Annual reports	Table the annual report, financial statements and audit report in the relevant legislature	Within a month after audit report received	S 65(1)(a)
Written explanation	Table a written explanation in the relevant legislature if failing to submit the information within six months after the end of the year	Within six months of the end of the financial year	S 65(2)
Disciplinary board	Table in the relevant legislature the findings of any disciplinary proceedings against an accounting officer for financial misconduct	No specific time stipulated	S 65(1)(b)
Directive with financial consequence	Put in writing	No time stipulated	S 64(1)
Public entities	Ensure listing in appropriate Schedule to Act. Approve business plan, monitor performance during year, and table financial statements in the legislature	Various	S 46-6262._Duties_and_powers_of_Auditor_General
Payments under guarantee by Cabinet Minister	Report to the National Assembly on payments made under guarantees, indemnities or securities issued	At least annually	S 70(4)

Other implications

In addition to the legal requirements above, the PFMA also implies several other responsibilities, mostly in relation to the interaction with and monitoring of the accounting officer. These are as follows:

•	The executive authority must agree on a written performance contract with the accounting officer, which ensures that the measurable outputs are consistent with the agreed (political) outcomes. The contract should include a KPI that relates to the financial management of the department.

•	The executive authority should monitor and evaluate the performance of the accounting officer against this contract, ensuring that appropriate incentives are in place to encourage good performance.

•	Should the accounting officer be in contravention of the Act, the executive authority must initiate appropriate action, including disciplinary procedures, as necessary.

•	The executive authority must be satisfied that departmental budget submissions reflect agreed outcomes and policy priorities.

•	The executive authority must ensure that the accounting officer manages the department appropriately, conforms to the reporting requirements of the PFMA and achieves progress against the departmental implementation plan.

•	Before financial statements are submitted to the Auditor-General, the executive authority must ensure that the audit committee has scrutinised these statements and that they are of a suitable quality.

•	The executive authority could submit to the Cabinet/Exco a midterm (around October) progress report, if so requested by that body.

Public Finance Management Act, 1999 (Act No. 1 of 1999)

Understanding and Using this Act

Guide for Accounting Officers

12. Implications for executive authorities