Defence budget process: briefing

DEFENCE JOINT STANDING COMMITTEE
22 September 1999
DEFENCE BUDGET PROCESS: BRIEFING

Documents handed out:
Financial Management Cycle of the State (Key Finance Reports: Estimate of Expenditure 00/01 - 02/03; Vote/Programme 99/00; Expenditure Survey; Projected Expenditure 99/00; Appropriation Statement 98/99)

SUMMARY
The Department of Defence : Finance Division briefed the committee on the Financial Management Cycle of the State as background to its involvement in the Defence Budget process.

MINUTES
The Chairperson said that the budget would be dealt in phases: this meeting would address the financial processes involved. The Department of Defence : Finance delegation responsible for the briefing comprised of Mr J Grundling (Chief of Finance), Mr J April (Chief Director: Budget Management), R Adm R Hauter (Director: Planning), Mr A Visser (Director: Budgeting and Ms E Molekane (Deputy Director: Budget Control).

Transformed Financial Structure (Mr J April)
The Department of Defence : Finance Division strives to be an independent force only reporting to the Chief of Finance, who in turn reports to the Secretary of Defence. The operational structure of the Department of Defence changed in 1998. Before 1998 the Chief of the National Defence Force was the Head of Department, the Accounting Officer and the Commander of the Defence Force. After 1998 a Defence Secretary was introduced as the Head of Department and the Accounting Officer, the Chief of National Defence Force retained the position as Commander. This in effect means that now the Secretary delegates finance-related matters to the Chief of the National Defence Force.

The Department of Defence : Finance has undergone several changes in the following areas:
1. Authority
- movement from military command to civilian line, in that a large number
of the staff was taken from the different services (army, navy and airforce) 2. Funds
- movement from public and non-public funds to only public funds
3. Operating Concept
- from combined activities to segregated activities
4. Financial Delegations
- movement from four levels to two levels
5. Accounting policy
- movement from differentiated to a standard accounting policy.

Defence Policy, Programme and Budget relationship
Rear Admiral Hauter said that before the Department of Defence's Finance Division drafts a budget there are the following processes: policy, strategy, planning stages.

The policy is based on the Constitution, the White Paper on Defence, the Defence Review, the Financial Management Act and the Public Service Act.
Strategising is nothing other than problem solving. The most common way of looking at it is by considering that :
(i) there are ends to meet,
(ii) to achieve ends there are ways which must be identified
(iii) and then there are elements of means to be considered.
The result of output of strategising is the Department of Defence : Finance plan which contains clear objectives, which must be translated into activities of the department.
The last step would then be to draft the budget.

Programme Budget Compilation
Mr Visser said in drafting the budget the following Defence programmes and accounts must be taken into account:
1. ADMINISTRATION
To conduct the overall management of the Department by formulating policy, providing strategic direction and organising the department in terms of its force design and structure.

2. LANDWARD DEFENCE
To provide prepared and supported landward defence capabilities for the defence and protection of the RSA by providing strategic direction for landward defence and establishing, training and maintaining prepared combat and auxiliary services and facilities.

3. AIR DEFENCE
To provide prepared and supported air defence capabilities for the defence and protection of the RSA by providing strategic direction for air defence and establishing, training and maintaining prepared combat and auxiliary services and facilities.

4. MARITIME DEFENCE
To provide prepared and supported maritime defence capabilities for the defence and protection of the RSA by providing strategic direction for maritime defence and establishing, training and maintaining prepared combat and auxiliary services and facilities.

5. MILITARY HEALTH SUPPORT
To provide prepared and supported medical combat elements and services by providing strategic direction for military health support, establishing, training, providing and maintaining operationally essential medical services to members of the SANDF and their dependants as well as establishing and maintaining auxiliary services and facilities.

6. DEFENCE INTELLIGENCE
To provide a defence intelligence and counter-intelligence capability establishing, training and maintaining prepared military intelligence services, auxiliary services and facilities.

7. JOINT SUPPORT
To provide and maintain a centralised infrastructure for the provision of common supplies and services as well as providing a channel for grants-in-aid to specified organisations.

8. COMMAND AND CONTROL
To provide and maintain an operational command and control capability for the operational employment of combat forces.

9. SPECIAL DEFENCE ACCOUNT
To augment the Special Defence Account for financing special defence activities and purchases.

Programme Budget Execution
Ms Molekane said that they have an obligation to ensure that expenditure is authorised and controlled and urged members of the Committee to take cognisance of how the department spends money received. This is important for members to know especially when coming to estimate adjustment voting, so that members know exactly what they are voting on.

Ms Molekane said that expenditure is calculated for the period 1 April to 31March. The Department Programme Budget execution is as follows:
* Period April to June
- prepare monthly early warning report
* Period July to September
- prepare 1^st Financial control report
* Period October to January
- prepare 2^nd Financial control report
* Period February to March
receive feedback on adjustment estimate from Treasury

Ms Molekane said that members should take note of the periods and read reports drafted for each period. This will allow the Committee to be up to date with the budget execution as it progresses and can intervene or call for explanations where the need arises.

Questions from members:
Chairperson : During deployment of the Defence Force in Lesotho it was said that the Department did not have money to cater for the activities of the Defence Force in that particular operation. How was this possible when you actually have a budget?
Response (R Adm Hauter): It is difficult to budget for peacekeeping operations as the level of operation and the numbers to be deployed cannot be foreseen at budgeting time. Furthermore should we budget for peacekeeping operations and no such operations materialise, at the end of the financial year we will have that money that could have been put to use in other needy areas of government. So therefore it is not budgeted for. What usually happens when the Executive makes a decision to have peacekeeping operations is that the costs are calculated and money is then made available by national government.

Mr L Ncgulu (ANC) : Mention was made of budgetary considerations for auxiliary services and when discussing the draft Defence Bill yesterday we had a problem with these services. Could you please give some examples of these services?
Response (R Adm Hauter): Having a Navy background, I will give you an example of navy auxiliary services such as the service provided in cleaning the docks at Navy bases.

Brig Gen Schalkwyk (DP): What is catered for in the Special Defence Account?
Response (Mr Visser): In this account we cater for the purchase of special equipment, that is, special equipment for the Special Forces. This account is not used to cover expenses in peacekeeping operations.

In conclusion, the Chairperson told members that further meetings will be called with the Department of Defence's Finance Division. These are:
Defence Estimate of Expenditure – 22 October 1999
Printer’s Proof and Explanatory Memorandum – 20 January 2000