Basic accounting records and related issues

The Regulations require each department to maintain a ‘main ledger’ for all voted money under its control, including certain control accounts. All transactions must be supported by authentic and verifiable source documents that clearly indicate the approved accounting allocation.

Use of control accounts

Only in exceptional circumstances should it be necessary to account for revenue and expenditure transactions in a control account. Such amounts must be cleared and correctly allocated to the relevant cost centres each month, and any uncleared items must be reported to the CFO.

Availability of financial information

Accounting officers must, subject to the provisions of the National Archives of South Africa Act, 1996, retain all financial information in its original form for 12 months after the audit report for the financial year has been tabled. Information that relates to more than one financial year must be retained for 12 months beyond the date of the audit report for the last relevant financial year. For certain types of records, longer periods are specified in Part 7 of the Regulations.

After the expiry of the these retention periods, the information may be secured in an alternative form that maintains the integrity and reliability of the data and ensures that the information can be reproduced, if necessary, as permissible evidence in a court of law.

Changes to financial systems

Departments may not amend existing or institute new computerised systems that will affect financial administration without first consulting the national Treasury.

Trading entities

The accounting officer or a designated official will be the ‘head of the trading entity’, and must ensure compliance with the Act and the Regulations. The head of the trading entity is accountable to the accounting officer of the department operating the entity and must forward the required reports or approvals via this accounting officer.

Pricing decisions

In determining charges for goods or services, the head of the trading entity must aim to recover the full cost of providing the goods or services, unless the relevant treasury approves lower charges. Trading entities must justify their pricing decisions. The methodology for cost collection and pricing procedures must be documented and costing must reflect all resource components as comprehensively as possible.

Trading entities should analyse the impact of changes in any cost components when preparing annual estimates of revenue. Charges should be justifiable based on changes in costs or market conditions.

Appropriate charges will depend on factors such as the nature of the particular service and its market environment. To maintain a level playing field when comparing private sector costs, additional costs incurred by the public sector for regulatory or social policy functions, or any cost privileges (or disadvantages) of the private sector must also be considered.

Where charges do not reflect full costs, trading entities must nevertheless accurately attribute those costs to ensure accountability.

Correct identification of costs ensures that the value of a reduction in price is transparent to both supplier and consumer, and allows trading entities to compare the costs of market rates with the full costs of producing or buying a service.

Bank accounts

Trading entities allowed to open bank accounts may not borrow for bridging purposes and may not run overdrafts on their banking accounts unless approved otherwise, in writing, by both the accounting officer and the relevant treasury.

Disposal of assets

When assets are disposed of other than in the normal course of the business, the relevant treasury must approve the transaction.

Notification of financial result

An accounting officer of a department operating a trading entity must, at the end of each financial year and after books of account have been closed, declare any surplus or deficit to the relevant treasury. The treasury may correspondingly reduce any proposed allocation to the trading entity, or require that all or part of the surplus be redeposited into the relevant revenue fund.

Treatment of deficit

Where a trading entity suffers a deficit in trading, the relevant accounting officer must investigate whether:

Oversight of public entities

The Board of a public entity will hold the fiduciary responsibility for the entity and will be accountable to the Director-General of the department, who will report to the executive authority.

Additional reporting requirements

The accounting officer of a department that controls a public entity is required to consider its budget proposals from 2001/02. Additional requirements for monitoring the performance of such entities during the year include specified information for the annual report. In future, annual plans are to be approved by the relevant executive authority.

A department controlling any public entities must include in its annual report a list of such entities, a statement of their functions, as well as the accountability arrangements.

Commissions and Committees of Inquiry

Taking into account market-related rates, the accounting officer can determine remuneration packages in consultation with the executive authority and after consulting the relevant treasury, provided that:

Gifts, donations and sponsorships

To record and control gifts (which includes donations and sponsorships) granted and received by the state, accounting officers must maintain a register of the date, persons involved, detailed descriptions and approvals given (if applicable), and the location or the application of the proceeds. Other requirements include:

Payments, refunds and remissions as an act of grace

An act of grace payment is a special gift of money by the state for a ‘grace or favour’. Such a payment falls outside any statutory entitlement, government-approved scheme (such as a grant-in-aid) or payment of a legal liability (e.g. a settlement).

An act of grace payment is often a way of providing compensation to an unfairly disadvantaged individual who has no legal claim against the state. However, should the possibility of such a claim exist, no act of grace payment should be made. As each act of grace payment sets a precedent for future requests, accounting officers must exercise this power with discretion.

If more than R100 000 is involved, the accounting officer must seek legislative approval by including the item separately in the estimates.

Departments and trading entities should maintain a suitable register of act of grace payments and disclose these as a note to the annual financial statements.