Transcript Document

Alignment of the
Infrastructure Delivery
Cycle
with the
Budget Cycle
(Abridged Version for
Prepared by the
Infrastructure Delivery Improvement Programme
(IDIP)
NATIONAL TREASURY
REPUBLIC 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
National Treasury
2
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
3
MTEF Budget Cycle
Year 0
3 Year MTEF Period
Year 1
Year 2
Year 3
Year 4
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 J
Implement Budget
Preparation of Annual
Performance Plan (APP)
Quarterly Reporting
Budget Day
Budget Preparation
Process
Closure
Processes
These are all the
concurrent budget
activities that need to
be undertaken in any 1
year
Closure
Processes
Budget Preparation
Process
Implement Budget
Preparation of Annual
Performance Plan (APP)
Quarterly Reporting
Currently it would appear that annual
budgets are prepared by updating last
years budget with a factor for inflation
Budget Preparation
Process
Implement Budget
Preparation of Annual
Performance Plan (APP)
Quarterly Reporting
The annual budgets submitted to
treasury do not appear to be informed
by actual projects to be implemented in
the following year.
Closure
Processes
Budget Preparation
Process
Imple
Preparation of Annual
Performance Plan (APP)
Quart
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Infrastructure
Delivery Cycle
Year 0
3 Year MTEF Period
Year 1
Year 2
Year 3
Year 4
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 J
Current Infrastructure Delivery Cycle
Infrastructure
Planning
Project
Design
Project
Tender
Project
Implementation
Rollover
Budget
100%
Cumulative Cashflow
Implement
Rolled Over
Unspent Budget
Time
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.
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”
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Improved Infrastructure
Delivery Cycle
Year 0
3 Year MTEF Period
Year 1
Year 2
Year 3
Year 4
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 J
Current Infrastructure Delivery Cycle
Infrastructure
Planning
Project
Design
Project
Tender
Infrastructure
Planning
Project
Implementation
Project
Design
Rolled Over
Unspent Budget
Project
Tender
Infrastructure
Planning
Each Infrastructure Delivery Cycle is
characterized by under-expenditure
and rolled over unspent budgets
Project
Implementation
Project
Design
Rolled Over
Unspent Budget
Project
Tender
Project
Implementation
Improved Infrastructure Delivery Cycle
Infrastructure
Planning
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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Rolled
Unspent
Infrastructure Programme Management &
Implementation Plans (IPMP & IPIP)
Client Department (CD)
FUNCTIONS OF CD:
1. Planning
2. Procurement
3. Programme
Management
4. Monitoring &
Reporting
Infrastructure
Plan Update
IPMP
Update
IPMP
issued to
IAs
Implementing Agent
IA 1
1.
2.
3.
IPIP
for IA 1
IPIPs
respond to
IPMP
IPIP
for IA 2
Implementing Agent
IA 2
FUNCTIONS of IAs:
Programme Management
4. Project Implementation
Project InitiationNational Treasury5. Project Completion
Procurement
6. Monitoring & Reporting
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Improved Infrastructure
Delivery Cycle
Year 0
3 Year MTEF Period
Year 1
Year 2
Year 3
Year 4
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 J
Current Infrastructure Delivery Cycle
Infrastructure
Planning
Project
Design
Project
Tender
Infrastructure
Planning
Project
Implementation
Project
Design
Rolled Over
Unspent Budget
Project
Tender
Infrastructure
Planning
Project
Implementation
Project
Design
Rolled Over
Unspent Budget
Project
Tender
Project
Implementation
Improved Infrastructure Delivery Cycle
Infrastructure
Planning
IPMP
IPIP
Project
Design
Project
Tender
Project Implementation
Planned Multi-year
Commitments
Monitoring & Reporting
The Infrastructure Plan
sets out the infrastructure
priorities for the next 10
years. It is updated
annually by the Client
Department.
IPIP = Infrastructure Programme Implementation Plan
Prepared 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.
IPMP = Infrastructure Programme Management Plan
Prepared by Client Department and given to Implementing Agent.
Contains list of projects for the next 3 years and where they are located.
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Rolled
Unspent
Alignment of the Infrastructure Delivery Cycle
& the Budget Cycle
Year -2
Year -1
Year 0
Year 1
Year 2
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 J
MTEF Budget Cycle
Budget Preparation
Process
The improved Infrastructure
Delivery Cycle now facilitates the
alignment of the Infrastructure
Delivery Cycle with the Budget
Cycle.
Closure
Processes
Implement Budget
Currently Infrastructure Planning is
undertaken too late to facilitate
effective 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.
Current Infrastructure Delivery Cycle
Infrastructure
Planning
Project
Design
Project
Tender
Project
Implementation
Rolled O
Unspent B
Improved Infrastructure Delivery Cycle
Infrastructure
Planning
IPMP
IPIP
Project
Design
Project
Tender
Project Implementation
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Planned
Comm
Required Capacity for Departmental Infrastructure Units
Year 0
Year 1
Year 2
Year 3
Year 4
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 J
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.
Improved Infrastructure Delivery Cycle
Infrastructure
Planning
IPMP
IPIP
Project
Design
Project
Tender
Project Implementation
Planned Multi-year
Commitments
Monitoring & Reporting
Infrastructure
Planning
IPMP
IPIP
Project
Design
Project
Tender
Project Implementation
Planned
Comm
Monitoring & Reporting
Infrastructure
Planning
IPMP
IPIP
Project
Design
Project
Tender
Pr
Implem
Monitoring & Reporting
Infrastructure
Planning
LEGEND: IPMP – Infrastructure Programme Management Plan
IPIP – Infrastructure Programme Implementation Plan
IPMP
IPIP
Proje
Desig
Monitor
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Example of a Programme
Budget to commit the entire
Annual Budget
Department's Annual Budget =
( ,000)
PROJECT
TOTAL PROJECT
BUDGET
R 50,000
BUDGET FOR
YEAR 1
R 60,000
BUDGET FOR
YEAR 2
R 70,000
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
R0
Project 5
R 10,000
R 5,000
R 5,000
R0
Project 6
R 20,000
R 11,000
R 4,000
R 5,000
R 120,000
R 50,000
R 40,000
R 30,000
R 20,000
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R 40,000
Amount Committed
Amount remaining for new projects National Treasury
( = Annual Budget less Amount Committed)
R0
Managing Cashflows Across Years
In reality the neat chunks of work shown
Some projectsYear
or clusters
of projects
Year
0
Year
1
2
on the earlier slides are actually individual
in the
D J projects
F M or
A clusters
M J ofJ projects
A S with
O N D J F M A
M Jcurrent
J A year
S O can
N be
D delayed
J F M
causing potential under expenditure
different start & end dates
plementation
gn & Tender
Planned Multi-year Commitments
Project Implementation
Planned Multi-year Commitments
Project Design & Tender
Project Implementation
IPIP
But here we have clusters of
Infr. been
Plan update
projects that have
designed
and are ready to go to tender
IPMP
IPIP
National Treasury
NB: The total value of the work in this year
equals the Annual Budget for this year
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Managing Cashflows Across Years
Year 0
D J
Year 1
F M A M J
plementation
gn & Tender
J A S O N D J
Year 2
F M A M J
J A S O N D J
F M
Planned Multi-year Commitments
Project Implementation
Project Design & Tender
Planned Multi-year Commitments
Project Implementation
IPIP
We need to tender these projects earlier
Infr. Plan update
IPMP
IPIP
and start implementation
in Year
1 to
offset the potential under expenditure
National Treasury
caused by the delayed projects
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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
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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.
National Treasury
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THANK YOU
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