PAYMENTS TO SUPPLIERS WITHIN 30 DAYS

Presenter: Sandiso Thutshini | Director: PFMA Compliance | 6 Aug 2015

LEGISLATIVE REQUIREMENTS

Section 38(1)(f) of the PFMA - “accounting officers must settle all

contractual obligations and pay all money owing within the prescribed or

agreed period”;

Treasury Regulation 8.2.3 – prescribed period is 30 days from receipt

of an invoice or another time period, as agreed;

Instruction Note No. 34 dated 30 November 2011 – requires

departments to submit monthly information to the relevant treasuries by

the 7th day of each month.

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INSTRUCTION NOTE 34

On 30 November 2011, the National Treasury issued Instruction Note

34 which requires departments to submit monthly information relating to

the following by the 7th day of each month:

Number and value of invoices paid after 30 days;

Number and value of invoices older than 30 days and not paid;

Reasons for late or non payment of invoices

Revised Instruction Note:-

Total number and value of invoices received in each month;

Total number and value of invoices paid within 30 days;

With effect from 1 February 2012, the National Treasury is reporting to

FOSAD Bi-monthly on the status of compliance.

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CABINET RESOLUTIONS

02 December 2009 –Executive Authorities must ensure that their

institutions implement mechanisms to pay invoices timeously;

31 May 2010 – National Treasury issued a Circular to institutions

urging improved compliance with Treasury Regulation 8.2.3;

22 November 2010 – Cabinet re-iterated its previous decision of

2 December 2009. Departments were also required to implement

mechanisms to track the receipt and payment of invoices.

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EXCEPTIONS REPORTS SUBMISSION RATE

NATIONAL AND PROVINCIAL

5

0%

10%

20%

30%

40%

50%

60%

70%

80%

64% 60%

66%

76%

39%

58%

73%

63% 67%

56% 56%

44%

Timeous submission of exception reports

National Departments Provincial Treasuries

NUMBER OF INVOICES PAID AFTER 30 DAYS

6

-

5 000

10 000

15 000

20 000

25 000 22 873

14 956 14 817 13 905

15 967

9 789 8 673

6 391 7 803

5 306 3 805 3 902

National Departments Number of invoices not paid within 30 days

Invoices paid after 30 days Invoices older than 30 days which not paid

RAND VALUE OF INVOICES

PAID AFTER 30 DAYS

7

-

100 000 000

200 000 000

300 000 000

400 000 000

500 000 000

600 000 000

700 000 000

800 000 000

900 000 000

382 M 384 M 382 M 378 M 377 M

255 M

143 M

225 M

860 M

664 M

591 M

147 M

National Departments Rand Value of invoices not paid within 30 days

Invoices paid after 30 days Invoices older than 30 days not paid

NUMBER OF INVOICES OLDER THAN

30 DAYS AND NOT PAID

8

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

24 380 25 144

31 174

24 231

33 745 34 157

22 132

35 918 35 774

40 651

43 989 41 162

Provincial Departments Number of invoices not paid within 30 days

Invoices paid after 30 days Invoices older than 30 days not paid

RAND VALUE OF INVOICES

OLDER THAN 30 DAYS AND NOT PAID

9

-

500 000 000

1 000 000 000

1 500 000 000

2 000 000 000

2 500 000 000

3 000 000 000

3 500 000 000

4 000 000 000

944 M

1.4 B

1.8 B

3.8 B

2.0 B 1.9 B

1.1 B

2.2 B

2.7 B 2.7 B 2.8 B

3.3 B

Provincial Departments Rand Value of invoices not paid within 30 days

Invoices paid after 30 days Invoices older than 30 days not paid

MAIN REASONS FOR THE

LATE AND/OR NON-PAYMENT OF INVOICES

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Standard Chart of Accounts (SCoA) related system problems;

Inadequate internal capacity to process payments timeously

Unresolved Supply Chain Management related queries;

IT system (BAS, LOGIS and SafetyWeb) related issues;

Delays in the submission of invoices for processing;

Delays in the timeous approval of payments;

Inadequate budget/cash flow management;

Incorrect banking details of suppliers;

Unresolved invoice discrepancies; and

Tax clearance certificate issues.

THE EFFECTS OF NON-COMPLIANCE

WITH TR 8.2.3

Impact on the cash flow positions of SMME’s;

SMME’s - forced to borrow money to meet their contractual obligations;

Retrenchments & forced closures due to constrained cash flow positions;

Contrary to NDP and NGP intentions – creation of sustainable jobs;

Corruption factor; and

Reputational risk to Government.

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FOSAD AND CABINET RESOLUTIONS

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DPME – establish unit to monitor and engage with transgressing depts;

Establishment of hotline for suppliers;

Minister of PME and PSA – submit quarterly progress reports to Cabinet;

National Treasury, DPSA and DPME – investigate appropriate sanctions

to hold accounting officers accountable;

The National Treasury, DPSA and DPME - convene workshop with CFO’s;

National Treasury, DPSA and DPME - develop a guideline.

WORKSHOP ON PAYMENTS WITHIN 30 DAYS

FOSAD resolution - workshop with Chief Financial Officers to develop

strategies to improve compliance with TR 8.2.3:

Date: 20 August 2015,

Venue: 40 Church Square,

Survey on payment to suppliers within 30 days; and

Formal communication and details to follow.

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NATIONAL TREASURY INTERVENTIONS

Development of a web based system to collate monthly information;

Standing item on the CFO Forum;

Liaison with Statistics SA - develop Invoice Tracking System;

Collation of information from departments via anonymous survey;

Improved monthly and annual reports to FOSAD; and

Supplier queries on late/non-payment of invoices;

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CONCLUSION

The number and Rand value of unpaid invoices - unacceptably high;

Inadequate internal controls and systems to track invoices;

Inadequate consequence management;

Inadequate management oversight of the payment process;

Late submission of information to the National Treasury – impacts on

completeness of information submitted to FOSAD; and

Inadequate effort and capacity to rectify continuing situation of unpaid

invoices.

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THANK YOU

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