Categories: News

Tackling Fiscal Obstacles: Guidelines on Cost Containment Measures for the 2023/24 Financial Year

Overview

In response to the fiscal challenges currently impacting government departments and provincial treasuries, the National Treasury released a letter on 31 August 2023 highlighting specific measures necessary to attain savings and avoid resource constraints during the latter part of the 2023/24 financial year. This article serves as a guide for accounting officers and authorities on the implementation of the measures discussed in the August letter. It is crucial to note that both the August letter and these guidelines are meant to provide guidance, not issue directives.

Rationale

The fiscal challenges are predominantly due to a substantial drop in government tax revenue collections, which totaled an estimated R22 billion in the first five months of the year, and stricter financial conditions that have limited the government’s borrowing program. Further complicating these constraints is the public service wage agreement, which was signed in March 2023 and not factored into the Budget Review 2023. As a result, the guidelines are applicable to national departments, schedule 3 entities, and provinces for the remainder of the 2023/24 financial year. Executive authorities and accounting authorities of schedule 2 public entities are also encouraged to adopt similar measures.

Recommendations

1. Employment

A cooperative team consisting of the National Treasury and the Department of Public Service and Administration (DPSA) has been created to investigate funding options for the 2023/24 wage agreement. Executive authorities must collaborate with the Minister for the Public Service and Administration on all organizational structure changes, the establishment and filling of vacant positions, and ensuring that the demand for new roles aligns with department objectives. Further information will be provided in an upcoming directive from the Minister for Public Service and Administration.

2. Transportation

These guidelines do not pertain to typical one-day travel without overnight stays or flights. Exemptions from these guidelines include critical service delivery items, travel arrangements requested or approved by the President or Premier, travel mandated due to a request by Parliament, and travel arrangements funded through external resources. Accounting officers and authorities should explore alternative options to travel, such as virtual meetings, and submit unified travel plans for monitoring purposes.

3. Meetings, Workshops, and Catering

Events funded by external resources, such as meetings, conferences, workshops, and similar engagements, are exempt from these guidelines. However, organizing meetings outside government facilities and providing catering should be avoided unless approved by the accounting officer.

4. Capital Expenditure

Capital projects that have completed procurement processes or contract awards recommended by a bid adjudication committee are exempt from these guidelines. Accounting officers and authorities should consider delaying the implementation of capital projects that have not yet started until 31 March 2024, while managing legal risks and ensuring government liability remains protected. Projects already in progress or with completed procurement processes and contract awards should continue.

5. Additional Factors

Institutions should evaluate the effects of these measures on their Annual Performance Plan (APP) for the 2023/2024 financial year. Compliance reports may include information on the implemented measures without incurring irregular expenditure. Surplus and unspent funds will be subject to requirements outlined in National Treasury Instruction 12 of 2020/21 and Treasury Regulation 15.8.1.

Closing Thoughts

In the face of considerable fiscal challenges during the 2023/24 financial year, these guidelines offer a pathway for accounting officers and authorities to maneuver through the uncertain times ahead. By adhering to these measures, departments and entities can attain savings and mitigate resource constraints, ensuring the ongoing delivery of vital services to the public.

Aiden Abrahams

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