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Departmental Guide

FINANCIAL ACCOUNTING AND REPORTING GUIDE

Transfer of Functions

For the year ended 31 March 2011

Transfer of Functions – Financial Accounting & Reporting Guide

Page 2 of 55 December 2010

Contents

1. INTRODUCTION ..................................................................................................................................... 4

1.1 Purpose ......................................................................................................................................... 4

1.2 Approach ....................................................................................................................................... 4

2. ACRONYMS ........................................................................................................................................... 5

3. DEFINITIONS .......................................................................................................................................... 6

4. LEGISLATIVE PRESCRIPTS ...................................................................................................................... 8

5. SUMMARY OF KEY PRINCIPLES ............................................................................................................. 9

6. IDENTIFYING THE TRANSFEROR AND THE RECIPIENT DEPARTMENT ................................................. 10

7. RENAMING OF A DEPARTMENT .......................................................................................................... 13

7.1 Accounting Matters .................................................................................................................... 13

8. NEW DEPARTMENTS ........................................................................................................................... 14

8.1 Accounting Matters .................................................................................................................... 14

9. TRANSFER AND RECEIPT OF FUNCTIONS ............................................................................................ 15

9.1 Summary for the transferor department .................................................................................... 15

9.2 Summary for the recipient department ...................................................................................... 19

10. QUESTIONS AND ANSWERS ............................................................................................................ 22

10.1 Q & A relating to the POS ............................................................................................................ 22

10.1.1 Unauthorised expenditure .................................................................................................. 22

10.1.2 Fruitless and wasteful expenditure ..................................................................................... 24

10.1.3 Irregular expenditure .......................................................................................................... 25

10.1.4 Cash and cash equivalents .................................................................................................. 26

10.1.5 Investments ......................................................................................................................... 26

10.1.6 Loans to public entities ....................................................................................................... 27

10.1.7 Staff advances ..................................................................................................................... 27

10.1.8 Travel and subsistence ........................................................................................................ 28

10.1.9 Prepayments ....................................................................................................................... 28

10.1.10 Recoverable expenditure ................................................................................................ 29

10.1.11 Staff debt ......................................................................................................................... 31

10.1.12 Advances received .......................................................................................................... 33

10.1.13 Clearing accounts ............................................................................................................ 33

10.1.14 Capitalisation reserve...................................................................................................... 33

10.1.15 Recoverable revenue ...................................................................................................... 33

10.2 Q & A relating to the PER ............................................................................................................ 34



10.2.1 Revenue and expenditure ................................................................................................... 34

10.3 Q & A relating to disclosure notes .............................................................................................. 40

10.3.1 Contingent liabilities ........................................................................................................... 40

10.3.2 Commitments...................................................................................................................... 40

10.3.3 Accruals ............................................................................................................................... 40

10.3.4 Employee benefits .............................................................................................................. 40

10.3.5 Lease commitments ............................................................................................................ 41

10.3.6 Provisions ............................................................................................................................ 41

10.3.7 Transfer of Functions Disclosure Note ................................................................................ 42

10.4 Q & A relating to other matters .................................................................................................. 46

10.4.1 Legal matters ....................................................................................................................... 46

10.4.2 Other ................................................................................................................................... 47

ANNEXURE A ............................................................................................................................................... 48

ANNEXURE B ............................................................................................................................................... 55



These three types of changes have characteristics of a transfer of functions and will be referred to as such hereafter

1. INTRODUCTION

1.1 Purpose

The restructuring of the Executive earlier this year has resulted in significant changes at a departmental

level from both a reporting and accountability perspective. The purpose of this guide is to establish a

uniform approach and outline principles to account for the impact of the new administration in the

accounting records and financial statements of the affected departments.

The different types of changes that occurred in departments are as follows:

Renaming of departments

Formation of new departments

Splitting of departments

Transfer of functions to/from other departments

A combination of two or more of the above

1.2 Approach

This document provides guidance on each of the types of the changes with regards to each element of

the annual report, specifically the annual financial statements, for the current and prior financial periods

Only financial principles are dealt with in this guide. Other matters such as legal and audit implications

are dealt with by the respective subject experts and are thus specifically excluded from this document.

The principles established in this guide may be used at a provincial level where a similar type of

restructuring has occurred.



2. ACRONYMS

ACRONYM MEANING

AFS Annual Financial Statements

AGSA Auditor-General of South Africa

AR Asset Register

CFS Cash Flow Statement

DN Disclosure Notes

DPSA Department of Public Service and Administration

ENE Estimates of National Expenditure

F&WE Fruitless and Wasteful Expenditure

GRAP Generally Recognised Accounting Practice

IE Irregular Expenditure

NRF National Revenue Fund

NT National Treasury

OAG Office of the Accountant-General

PER Statement of Financial Performance

PFMA Public Finance Management Act, No. 1 of 1999

POS Statement of Financial Position

PRF Provincial Revenue Fund

REAL Revenue, Expenditure, Assets, Liabilities

SCOA Standard Chart of Accounts

TR Treasury Regulations

UE Unauthorised Expenditure



3. DEFINITIONS

Accounting policies are the specific principles, bases, conventions, rules and practices applied by an

entity in preparing and presenting financial statements. (GRAP 1)

Agency agreement is an arrangement whereby an entity (acting as the agent) provides goods and or

services on behalf of another entity for a predetermined fee (if at all) and where the agent is not

exposed to the significant risks and rewards associated with the sale of goods or the rendering of

services. These arrangements are also referred to as Service Level Agreements (SLAs) or a

Memorandum of Understanding (MOU).

Assets are resources controlled by an entity as a result of past events and from which future economic

benefits or service potential are expected to flow to the entity. (GRAP 1)

Binding arrangement is any arrangement arising out of a contract, legislation or an operation of law;

which has clear economic consequences that either party has little or no discretion of avoiding and

conveys either legal rights or legal obligations on either party, which are enforceable by law.

Capital asset is an asset that costs more than R5,000 (all inclusive) per item. Capital assets also comprise

of intangible items such as computer software with a cost exceeding R5,000 (all inclusive).

Current period is a consecutive twelve month period over which the entity determines its financial

performance and financial position as at the reporting date.

Expenses are decreases in economic benefits or service potential during the reporting period in the form

of outflows or consumption of assets or incurrences of liabilities that result in decreases in net assets,

other than those relating to distributions to owners. (GRAP 1)

Function is an integrated set of activities conducted and managed for the purpose of achieving an

entity’s objectives. A function consists of inputs, processes to be applied to those inputs, and resulting

outputs.

Generally Recognised Accounting Practice (GRAP) means an accounting practice complying in material

respects with standards issued by the Accounting Standards Board. (PFMA section 1)

Liabilities are present obligations of the entity arising from past events, the settlement of which is

expected to result in an outflow from the entity of resources embodying economic benefits or service

potential. (GRAP 1)



Minor capital asset is an asset that costs less than R5,000 (all inclusive) per item. Minor assets need to

be managed and safeguarded and recorded in a register.

Prior period is the period preceding the current reporting period.

Recipient department is an entity that gains control of certain functions of another entity (the

transferor). The recipient is also referred to as the receiving department.

Reporting date means the date of the last day of the reporting period to which the financial statements

relate. (GRAP 1)

Revenue is the gross inflow of economic benefits or service potential during the reporting period when

those inflows result in an increase in net assets, other than increases relating to contributions from

owners. (GRAP 1)

Shared services are services provided by one institution to one or more institutions resulting in funding

or resources being shared by the institutions involved.

Substantiating records are records that provide evidence of the ownership of the assets or liabilities of

the entity (for example a signed off asset register and not necessarily the invoice, receipt, goods

received note, etc.)

Transfer of functions is a reallocation of government activities and responsibilities between entities by

bringing together separate entities or functions into one reporting entity or by transferring functions

between entities

Transferor transfers control over certain of its functions to another entity (the recipient). Transferor is

also referred to as relinquishing department.



4. LEGISLATIVE PRESCRIPTS

Part III, H of the Public Service Regulations:

H. TRANSFER OF FUNCTIONS BETWEEN DEPARTMENTS

If the Minister or a premier of a province makes a determination regarding the transfer of functions

between departments (a) the relinquishing department shall transfer all concomitant resources,

including personnel, to the receiving department; (b) the recipient department shall co-ordinate the

transfer; (c) the recipient department shall accept accountability for the functions on the date of the

transfer; (d) the accounting officer of the relinquishing department shall retain accountability for

matters originating prior to the date of transfer; (e) the transfer of personnel shall take place with due

regard to the requirements of the Labour Relations Act; and (f) the transfer of funds shall take place in

accordance with the requirements of paragraph 6.5 of the Treasury Regulations.

Treasury Regulations

6.5 Transfer of functions [Section 42 of the PFMA]

6.5.1 Where a function is to be transferred between votes during a financial year, the relevant

treasury must be consulted in advance, to facilitate any request for the resulting transfer of

funds voted for that function in terms of section 33 of the Act. In the absence of agreement

between the affected departments on the amount of funds to be transferred, the relevant

treasury will determine the funds to be shifted.

6.5.2 Should the Minister of Public Service and Administration or a Premier of a province make a

determination regarding the transfer of a function between departments in terms of the Public

Service Act, 1994, that determination must accompany a request for the transfer of funds as per

paragraph 6.5.1. Should the Minister of Public Service and Administration or a Premier approve

a function transfer after the finalisation of the adjustments estimates, it must be dealt with on a

recoverable basis.

6.5.3 Before seeking formal approval from the Minister of Public Service and Administration or the

Premier of a province for any transfer of functions to another sphere of government, the

transferring accounting officer must first seek the approval of the relevant treasury or treasuries

on any funding arrangements.



5. SUMMARY OF KEY PRINCIPLES

The key principles in determining how the changes should be effected are as follows:

5.1 All transfers of functions made by the date of the adjustment budget and reflected in the adjustments

budget are effective retrospectively from the beginning of the financial year unless stipulated otherwise

in legislation.

5.2 Transfers of functions made after the adjustment budget will be reflected in subsequent budget

legislation.

5.3 For all transfers of functions, the transferor as well as the recipient department must be identified.

5.4 All associated resources such as staff debt, payables, capital assets, commitments and accruals, must

follow the function transferred to the recipient department.

5.5 Agency agreements drawn up between the transferor and the recipient department must set out the

roles and responsibilities of each entity including the accountability arrangements.

5.6 Prior period figures need not1 be restated.

5.7 Prior period figures shall be presented in the financial statements of the transferor department only and

not in the financial statements of the recipient department.

5.8 Current year figures should be compiled in accordance with the departmental financial reporting

framework.

5.9 An additional disclosure note will be added to the financial statements of both the transferor and the

recipient department. The amounts disclosed by the two departments must reconcile.

1 This provision applies to all function shifts that took effect on or after 1 April 2009.



6. IDENTIFYING THE TRANSFEROR AND THE RECIPIENT DEPARTMENT

For purposes of the transfer of functions, the transferor and the recipient department must be

identified. The following examples are included to assist in the identification of the transferor and

recipient department.

Scenario 1: a programme is transferred from one department to another

Department A (transferor)

Department B (recipient department)

Programme 6

In the above illustration, Department A transfers Programme 6 to Department B. Department A is the

transferor and Department B is the recipient department.

Scenario 2: an entity receives programmes from more than one department

Department C (transferor) Programme 7

Department A (recipient)

Programme 4 Department B (transferor)

In the above example, Department A is the recipient department for both Programme 4 and Programme

7. The transferors are Department B and Department C respectively.



Scenario 3: an entity receives and transfers a programme

Department A (Transferor & recipient

department)

Programme 3

Department C (transferor)

Programme 9

Department B (recipient department)

In the above example, Department A is the recipient department of Programme 3 whilst it is the

transferor with regard to Programme 9. Department C is a transferor and Department B is a recipient

department.

Scenario 4: there is a split of functions and 2 new departments are created.

Department A

New Dept BNew

Dept C

Recipient DepartmentTransferor

A transferor and a recipient department must always be identified. Where there is uncertainty, the

transferor must be determined using one or more of the criteria listed below. The transferor is the

department that:

retains the majority of the activities from the “old department”;

retains a majority of the employees from the “old department”;

retains a significant part of the budget from the “old department”;

remains in the building, if both departments are not accommodated in the same building

anymore. In instances where both are in the same building, the transferor occupies a

significant part of the building;



retains a higher value of the capital assets;

Departments are requested to contact their National Treasury representative for guidance where uncertainty still

exists after due consideration of the above indicators (refer to Section 11).

Scenario 5: new department is formed to take on activities previously carried out by another

department.

Department A (transferor)New Department B

(recipient department)

Programme 2

Although there is a new department, the activities carried out by this department are not new. New

Department B is the recipient department and as such should follow the guidance provided for all

recipient departments.

Scenario 6: two (or more) departments merge to form a new department.

Department A (transferor)

Department B (transferor)

New Department C (recipient

department)



7. RENAMING OF A DEPARTMENT

Where there is only a name change and no function change (i.e. the purpose and activities of the department remain the same).

7.1 Accounting Matters

Ref. Report / Statement Guidance

7.1.1 Annual Report The department must use the new name of the department throughout its annual report.

7.1.2 Report of the Accounting

Officer

Add a paragraph stating that the department’s name has changed.

7.1.3 Annual Financial Statements The department must:

use the new name of the department throughout its financial statements.

compile both prior and current period figures in accordance with the departmental

accounting framework (no adjustments are made to the prior period figures).



8. NEW DEPARTMENTS

A new department is one that did not previously exist and none of its activities were previously performed by another department.

8.1 Accounting Matters

Ref. Report / Statement Guidance

8.1.1 Annual Report The department must use the new name of the department throughout its annual report.

8.1.2 Report of the Accounting

Officer

Add a paragraph stating that the department is new and has no predecessor where its

functions were performed.

8.1.3 Annual Financial Statements As the department is new, no prior period figures are available, thus none will be shown.

Current year figures should be compiled in accordance with the departmental accounting

framework.



9. TRANSFER AND RECEIPT OF FUNCTIONS

Departments that fall into this category are those whose activities and responsibilities have been reallocated to another department or those

that have acquired activities and responsibilities from another department.

9.1 Summary for the transferor department

The transferor shall report its prior year and current year figures as follows:

Ref. Report / Statement Comparative figures Current year figures

Key principle Prior year figures need not be restated. To be compiled in accordance with the departmental

accounting framework.

9.1.1 Annual report Not applicable. To be compiled in accordance with the departmental


9.1.2 Report of the

Accounting Officer

Not applicable. Additional paragraph stating:

the nature and activities of the department

before and after the transfer of functions;

the department’s previous name for information

purposes (where relevant); and

detail of the functions transferred (and received

if relevant)




9.1.3 Appropriation

statement

As per restatement in the Adjustment

Appropriation Act or as presented in

Appropriation Statement in the prior period.

As per the Adjusted Estimates of National

Expenditure, and in accordance with the

departmental accounting framework.

9.1.4 Statement of

financial

performance

As per audited PER of the prior period.

Refer to Section 10 for further guidance.

To be compiled in accordance with the departmental

accounting framework and

Includes:

revenue and expenditure relating to the

principle activities of the department

Excludes:

revenue received and expenditure incurred by

the department in its capacity as an agent for

the recipient department.

9.1.5 Statement of

financial position

As per audited POS of the prior period.

Refer to Section 10 for additional guidance.



Includes:

assets and liabilities relating to the principle

activities of the department;

any amount recoverable from and/or due to the

recipient department.




Excludes:

any assets acquired and liabilities incurred by the

department acting as an agent for the recipient

department.

9.1.6 Statement of changes

in net assets

As per audited statement of changes in net

assets of the prior period.

Refer to Section 10 for further guidance.



Includes:

net assets relating to the principle activities of the

department

Excludes:

those that arise as a result of the department in

its capacity as an agent for the recipient

department.

9.1.7 Cash flow statement As per audited CFS of the prior period To be compiled in accordance with the departmental





9.1.8 Accounting policies Not applicable To be compiled in accordance with the departmental


9.1.9 Notes to the Annual

Financial Statements

As per audited notes of the prior period.



9.1.10 Disclosure Notes to

the Annual Financial

Statements

As per audited disclosure notes of the prior

period.



Additional Disclosure Note on Transfer of Functions

showing the line items that changed in the two primary

statements namely the statement of financial

performance and statement of financial position to be

included.

9.1.11 Annexures As per audited annexures of the prior period. To be compiled in accordance with the departmental




9.2 Summary for the recipient department

The recipient department shall report its prior year and current year figures as follows:

Ref Report / Statement Comparative figures Current year figures

Key principle Prior year figures need not be restated To be compiled in accordance with the


9.2.1 Annual report Not applicable To be compiled in accordance with the


9.2.2 Report of the

Accounting Officer

Not applicable Additional paragraph stating:

the nature and activities of the department

before and after the transfer of functions;

the department’s previous name for

information purposes (where relevant); and

detail of the functions received or transferred

(minimum level of disclosure to be prescribed).

9.2.3 Appropriation

statement

As per restatement in the Adjustments

Appropriation Act.

As per the Adjusted Estimates of National

Expenditure, and in accordance with the


9.2.4 Statement of financial

performance

As per audited PER of the prior period. To be compiled in accordance with the

departmental accounting framework and




Includes:

revenue and expenditure relating to the

principle activities of the department

revenue received and expenditure incurred by

the transferor in its capacity as an agent for the

department.

9.2.5 Statement of financial

position

As per audited POS of the prior period.



Includes:

assets and liabilities relating to the principle

activities of the department;

any assets acquired and liabilities incurred by the

transferor acting as an agent for the department;

any amount recoverable from and/or due to the

transferor.




9.2.6 Statement of changes

in net assets

As per audited statement of changes in net assets

of the prior period.



Includes:

net assets relating to the principle activities of

the department and includes those that arise as a

result of the transferor in its capacity as an agent

for the department.

9.2.7 Cash flow statement As per audited CFS of the prior period. To be compiled in accordance with the departmental


9.2.8 Accounting policies Not applicable To be compiled in accordance with the departmental


9.2.9 Notes to the Annual

Financial Statements

As per audited notes of the prior period.



9.2.10 Disclosure Notes to

the Annual Financial

As per audited disclosure notes of the prior period. To be compiled in accordance with the departmental


9.2.11 Annexures As per audited annexures of the prior period. To be compiled in accordance with the departmental




10. QUESTIONS AND ANSWERS

10.1 Q & A relating to the POS

10.1.1 Unauthorised expenditure

a) How should the transferor deal with any unauthorised expenditure relating to a programme that was

transferred to another department?

The unauthorised expenditure remains with the transferor.

For example, Programme A in Department X overspent by R20 million in 2009/10. This amount was

recognised by Department X as unauthorised expenditure on the face of the POS as at 31 March 2010.

During the 2010/11 financial year the activities relating to Programme A were transferred to

Department Y. The unauthorized expenditure on the programme transferred will remain with the

transferor.

Extract of the POS for the transferor (Department X) for the 2009/10 financial year

Note 2009/10 2008/09

R'000 R'000

ASSETS

Current assets

Unauthorised expenditure xy 20 -

Extract of the POS for the transferor department (Department X) for the 2010/11 financial year

Note 2010/11 2009/10

R'000 R'000

ASSETS

Current assets

Unauthorised expenditure xy xx 20

Extract of the POS for the recipient department (Department Y) for the 2010/11 financial year

Note 2010/11 2009/10

R'000 R'000

ASSETS

Current assets

Unauthorised expenditure xy - -



b) How should the transferor deal with any unauthorised expenditure relating to a programme that was

transferred to another department but where the transferor acted as an agent for the recipient

department?

Where the transferor acts as an agent for the recipient department, any unauthorised expenditure is the

responsibility of the recipient department.

For example, Programme A in Department X is transferred to Department Y in the current financial year.

According to a SLA, Department X continues to administer Programme A on behalf of Department Y. At

the end of the year (2010/11) Programme A overspent again by R2 million. Although Department X

acted as an agent for Department Y, the responsibility for the activity was transferred to Department Y

and therefore the unauthorised expenditure is accounted for by Department Y.

Extract of the POS for Department X (as per example in (a) above):

Note 2010/11 2009/10

R'000 R'000

ASSETS

Current assets

Unauthorised expenditure xy - 20

Extract of the POS for Department Y:

Note 2010/11 2009/10

R'000 R'000

ASSETS

Current assets

Unauthorised expenditure xy 2 -



10.1.2 Fruitless and wasteful expenditure

a) How should the transferor deal with any fruitless and wasteful expenditure incurred in the prior

period but relating to a programme that was transferred to another department in the current

period?

where the amount is recoverable from an employee that has been transferred to the recipient

department then the debt should be transferred to the recipient department2;

Entry by the Transferor

(in the current financial year)

Entry by the Recipient department


None in the POS - the fruitless and wasteful

expenditure was disclosed in the notes to the

AFS and was not recognised in the POS3.

In the DN – the fruitless and wasteful

expenditure should be reduced by the amount

transferred.

Dr Staff debt

Cr Recoverable revenue

where the amount is recoverable from a supplier or an outside party (such as an ex employee) the

transferor will remain responsible for the recovery of the funds;

Fruitless and wasteful expenditure previously disallowed and recognised in the POS (according to the 2008/09

accounting prescripts) will remain the responsibility of the transferor unless a portion thereof is recoverable from an

employee transferred to the recipient department.

b) How should the transferor deal with any fruitless and wasteful expenditure relating to a programme

that was transferred to another department but where the transferor acted as an agent for the

recipient department (i.e. it arose in the current period)?

All such amounts must be disclosed by the recipient department as per the guidelines relating to

fruitless and wasteful expenditure.

2 Only the recoverable portion is transferred to the recipient department.

3 If the transferor already raised a debt then the procedures set out in 10.1.12 (a) below should be followed.



10.1.3 Irregular expenditure

a) How should the transferor deal with any irregular expenditure incurred in the prior period but relating

to a programme that was transferred to another department in the current period?

The irregular expenditure must be cleared by the transferor in accordance with Practice Note 4 of

2008/09.

Where an amount is recoverable from an official that was transferred to the recipient department then

the debt should be transferred to the recipient department.





Dr Claims recoverable/Bank

Cr Staff debt

Dr Staff debt

Cr Recoverable revenue/Bank

If the debt was not previously recognised by the transferor the transferor must inform the recipient

department in writing of the amount recoverable with all the relevant supporting documentation

attached.

The accounting entries will be as follows:





None. Dr Staff debt

Cr Recoverable revenue/Bank

b) How should the transferor deal with any irregular expenditure relating to a programme that was

transferred to another department but where the transferor acted as an agent for the recipient

department (i.e. it arose in the current period)?

All such amounts must be disclosed by the recipient department as per the guidelines relating to

irregular expenditure.



10.1.4 Cash and cash equivalents

a) How should a transferor deal with any rollovers (including retentions) on incomplete capital works of

a programme that has been transferred in the current year to the recipient department?

It is recommended that the SLA address the issue of capital work-in-progress by identifying the party to

take responsibility for completing the project. If the transferor continues to oversee the project until

completion then it will be acting as an agent for the recipient department and will recover costs on an

agency basis4. Any rollover money will remain in the bank account of the transferor for utilisation on

the project5.

Where the recipient department takes over the project completely, the transferor surrenders the

unspent funds to the revenue fund where it will be paid over to the recipient department thereafter.

The recipient department takes responsibility for the completion of the project and accounts for the

capital expenditure as and when incurred in accordance with the existing departmental guidelines.

10.1.5 Investments

a) How should the transfer of investments in public entities to the recipient department be done?

When the transferor originally recognised the investment, the accounting entry would have been:



Dr Investment (shares)

Cr Capitalisation reserve

The accounting entries to be made by the transferor and recipient department are therefore as follows:





Dr Capitalisation reserve

Cr Investment (shares)

Dr Investment (shares)

Cr Capitalisation reserve

4 It is accepted that the project may be a long-term project which may take a number of years to complete.

5 An assumption is made that the rollover has been approved by the treasury.



10.1.6 Loans to public entities

a) How should loan balances be transferred to the recipient department?

When the loans are transferred to the recipient department, the accounting entries are as follows:





Dr Recoverable revenue

Dr Recoverable interest

Cr Loan

Dr Loan

Cr Recoverable revenue

Cr Recoverable interest

10.1.7 Staff advances

a) How should outstanding staff advances be dealt with by the transferor and the recipient department?

The different scenarios that may arise are identified below:

Scenario A: staff responsible for the activities of the transferred programme move to the recipient

department.

Step 1: the transferor must identify the debt relating to the staff transferred to the recipient

department;

Step 2: the transferor must determine (as per Treasury Regulation 11) the recoverability of the debt;

Step 3: the transferor and recipient department should agree on the amount to be taken over by the

recipient department (this amount should be limited to the recoverable debt)6

Step 4: the recipient department should refund the transferor for the debt taken over;





Dr Claims recoverable/bank

Dr Staff advances

Dr Staff advances

Cr Claims payable/bank

6 The agreement may stipulate that the transferor will continue to collect the outstanding debt from the individual



Step 5: the transferor will write-off any irrecoverable debt after complying with the relevant

legislative prescripts;

Scenario B: staff responsible for the activities of the transferred programme remain with the transferor

No further accounting entries are required. The transferor will continue to recover the debt from the

official.

Scenario C: staff responsible for the activities of the transferred programme remain with the transferor

as the transferor acts as an agent for the recipient department


official.

Scenario D: staff are no longer in the employ of the transferor (and are also not employed by the

recipient department)


individual.

10.1.8 Travel and subsistence

a) How should outstanding travel & subsistence advances be dealt with by the transferor and the

recipient department?

Refer to 10.1.7 (a) above.

10.1.9 Prepayments

a) How should outstanding prepayments be dealt with by the transferor and the recipient department?

Is the prepayment (or a portion thereof) directly attributable to

a transferred programme?

The prepayment(s) remains with

the transferor

NO

Was the transferor acting as an agent on behalf of the


YES

The recipient

department records

the prepayment(s)

The Prepayment(s) remains

with the transferor until

expensed or transferred to the

recipient department

YES NO



Original entry by the transferor

Entry 1: when the prepayment was made

Dr Prepayments

Dr Bank

Entry 2: when the goods or services are rendered

Dr Goods and services (relevant account)

Cr Prepayments

When the recipient department takes over the prepayment, the recipient department must reimburse

the transferor because the actual amount paid will not be recovered in cash and furthermore, the

transferor is no longer the recipient of the goods/service. The balance of any prepayments to be

transferred to the recipient department is done as follows:

Entry by the Transferor Entry by the Recipient department


Dr Prepayments

Dr Prepayments


10.1.10 Recoverable expenditure

a) How should claims against another department be dealt with by the transferor and the recipient

department?

Is the claim (or a portion thereof) directly attributable to


The claim(s) remains with the

transferor

NO



YES

The recipient

department records

the claim(s)

The claim(s) remains with the transferor until the money is

recovered or the claim is transferred to the recipient

department

YES NO

Original entry by the transferor

Entry 1: when the claim was raised

Dr Claims recoverable

Dr Bank/expenditure

Entry 2: when the money was recovered

Dr Bank

Cr Claims recoverable



Prior to transferring any claim to the recipient department, the transferor is required to assess the

recoverability thereof. Both the transferor and the recipient department must agree on the amounts to

be transferred thereafter. The transferor must ensure that this amount corresponds with the records of

the 3rd party (any differences between the amount recognised by the transferor and the 3rd party must

be addressed by the transferor). Any irrecoverable amounts must be dealt with by the transferor in

accordance with the relevant legislative prescripts.

The balance of any claims to be transferred to the recipient department is done as follows:


Dr Claims recoverable/bank*

Dr Claims recoverable (3rd party)

Dr Claims recoverable (3rd party)


*this debt is raised in the name of the recipient department using the matching fields whilst the credit leg clears the

debt in the books of the transferor

The departments may agree to only clear the inter-entity accounts when the funds have been recovered

from the 3rd party in which case the entries will be as follows:


Entry 1: when the funds are received from the

transferor

Dr Bank


Entry 1: when 3rd party pays the recipient

department

Dr Bank

Cr Claims recoverable (3rd party)

Entry 2: when the transferor is reimbursed

Dr Claims payable

Cr Bank

b) How should recoverable expenditure be dealt with by the transferor and the recipient department?

Staff disallowances – refer to section 10.1.11



General disallowances – if the funds must be recovered from an official then the guidance in section

10.1.11 should be followed, otherwise the treatment of these balances should be agreed between the

transferor and the recipient department.

10.1.11 Staff debt

a) How should outstanding staff debt be dealt with by the transferor and the recipient department?

The different scenarios that may arise are identified below:

Scenario A: staff responsible for the activities of the transferred programme move to the recipient

department.

Step 1: the transferor must identify the debt relating to the staff transferred to the recipient

department;

Step 2: the transferor must determine (as per Treasury Regulation 11) the recoverability of the

debt;

Step 3: the transferor and recipient department should agree on the amount to be taken over by

the recipient department (this amount should be limited to the recoverable debt)7;

Step 4: the recipient department should refund the transferor for the debt taken over;

The accounting entries vary depending on how the debt was originally recognised by the transferor.

The entry below is made when the debt was originally recognised as follows:

Dr Debt account

Cr Expenditure



Dr Debt account

Dr Debt account


The entry below is made when the debt was originally recognised as follows:

7 The agreement may stipulate that the transferor will continue to collect the outstanding debt from the individual

The debt is recognised in the year in which the expenditure is incurred



Dr Debt account

Cr Debt recoverable income

Cr Debt recoverable interest



Dr Debt account

and

Dr Debt receivable income

Dr Debt receivable interest

Cr Departmental revenue

Dr Debt account


Step 5: The transferor will write-off any irrecoverable debt after complying with the relevant

legislative prescripts;

Scenario B: staff responsible for the activities of the transferred programme remain with the transferor


official.

Scenario C: staff responsible for the activities of the transferred programme remain with the transferor

as the transferor acts as an agent for the recipient department


official.

Scenario D: staff are no longer in the employ of the transferor (and are also not employed by the

recipient department)


individual.

The debt is recognised in a year subsequent to the period in which the expenditure was recognised



10.1.12 Advances received

a) How should advances received be dealt with by the transferor and the recipient department

Refer to the decision tree below:

Is the advance (or a portion thereof) directly attributable to


The advance(s) remains with the

transferor

NO



YES

The recipient

department records

the advance(s)

The advance(s) remains with the transferor until service/

good is delivered

YES NO

10.1.13 Clearing accounts

a) How should the clearing accounts be dealt with by the transferor and the recipient department?

The transferor department should be responsible for the clearing accounts. Where items in the clearing

accounts relate to the recipient department the guidance relevant to that item should be followed.

10.1.14 Capitalisation reserve

a) How should the capitalisation reserve be dealt with by the transferor and the recipient department?

Refer to 10.1.5 (a) above. The corresponding entry will depend on the item being transferred.

10.1.15 Recoverable revenue

a) How should recoverable revenue be dealt with by the transferor and the recipient department?

Refer to 10.1.6 (a) above. The corresponding entry will depend on the item being transferred.



10.2 Q & A relating to the PER

10.2.1 Revenue and expenditure

a) How should the expenditure incurred to hire new Ministers, Deputy Ministers and DGs, pay their

salaries, establish their offices, and appoint their staff, be accounted for?

Refer to the principles in Annexure A and the Cost Containment Guidelines issued by the National

Treasury, July 2009 for the treatment thereof.

b) How should the expenditure incurred by the transferor be shifted to the recipient department when

the transfer of the function and funds occurred prior to and through the adjustment budget process?

The journal entries to take on the expenditure incurred by the transferor from 1 April 2010 until the

adjustments budget are as follows:

Entry by the transferor


Entry by the recipient department

(in the current financial year

Dr General Account of the Vote

Cr Exchequer Grant Account

Dr Exchequer Grant Account

Cr General Account of the Vote

To effect the amendment of the available funds in

accordance with the Adjustment Estimate Budget

(Decrease)

To record the Adjustment budget for the transfer

of the function in the books of the recipient

department


Cr Expenditure (individual expenditure accounts)

Dr Expenditure (individual expenditure accounts)

Cr Claims payable / bank

To transfer the expenditure to the recipient

department

To record the expenditure, incurred by the

transferor in the books of the recipient department

(when written confirmation of the claim is

received)

Dr Exchequer Grant Account


Dr Claims payable


Once confirmation has been received that the After the expenditure has been allocated the







recipient department has recorded the expenditure

the debt account (Claims Recoverable) is cleared

against the Exchequer Grant Account of the

department.

Exchequer Grant Account of the department is

increased to reflect the fact that the function has

been transferred (Funds already requested by

transferor)

The expenditure numbers to be processed by the recipient department will be based on a detailed BAS

expenditure report submitted by the transferor. Both parties must agree on the numbers prior to

effecting the transactions in the financial systems. Approval will be evidenced by signatures from both

Accounting Officers/CFOs on the BAS expenditure report.

The signed BAS expenditure report is considered to be the document supporting the journal entry

passed. All other supporting documentation relating to the actual payments made during the period will

remain with the transferor. The audit of the expenditure (by either the internal auditors of the

transferor/recipient department or the AGSA) will therefore be conducted at the premises of the

transferor.

The accountability arrangements between the transferor and the recipient department must be set out

in the MOU between the two departments.



If after the adjustment budget the transferor still executes the function on an agency basis the proposed

entries will be:





Dr Bank Account

Cr Bank Exception Account

The recipient department request the available

funds of the transferred function on Safety web

and it interfaces from NT

Dr Bank Exception Account (BAS online)

Cr Bank Adjustment Account (BAS online)

Online function perform by the department

Dr Bank Adjustment Account

Cr Fund Requisition Account

Journal passed by department for control purposes

Dr Fund Requisition Account


To record funds requested from NT

Dr Bank Account

Cr Advances received (from recipient department)

Receipt of advance from the recipient department

to cover costs to be incurred by the transferor

Dr Advances (to transferor)

Cr Bank Account

The recipient department will have the funds which

it will advance to the transferor in lieu of

expenditure

Dr Expenditure

Cr Bank Account

Transferor record expenditure against items to be

able to provide a BAS report to the recipient

department







Dr Advances received (from recipient department)

Cr Expenditure

Transferor provide a claim to recipient department

Dr Expenditure

Cr Advances

Recording of expenditure incurred – claim received

from transferor

Even though the transferor is acting on behalf of the recipient department, it does not absolve the

transferor from being accountable for the expenditure incurred.

c) How should the recipient department deal with differences between the financial management

policies and procedures of the transferor and the recipient department?

The approved financial management policies and procedures of the recipient department at the date of

the transfer will prevail over those applied by the transferor. The Accounting Officer of the recipient

department may however take over certain contractual obligations resulting from the differences in the

policies for example cell phone contracts of transferred employees who in terms of the department’s

own policies would not qualify for a departmental cell phone.

d) If the funds relating to a function were not shifted in the adjustment budget process who should

account for the activities of the function?

The activities pertaining to a function must be recorded in the books and financial statements of the

entity that has the budget. In most instances the recipient department executes the function using the

funds allocated to the transferor at the start of the financial year in the Appropriation Act.

For reporting and accountability purposes for the 2010/11 financial year the two departments are seen

as follows:

a) the transferor has the funds allocated in its vote and is therefore the principle;

b) the recipient department has the responsibility for executing the function and is therefore deemed

the agent of the transferor (or the principle);



It is recommended that both departments agree on who will take responsibility for the administrative

function and the associated costs (such as accommodation, IT, cleaning services etc).

The agreed responsibilities should be formalized in a Memorandum of Understanding (or Service Level Agreement)

and signed by the Accounting Officer of both departments. Where no MOU/SLA exists the Accounting Officer of

transferor remains solely responsible for the performance and activities of the function.

The accounting entries will be as follows:

Entry by the transferor (the principle)


Entry by the recipient department (the agent)


Dr Bank Account

Cr Bank Exception Account

The recipient department request the available

funds of the transferred function on Safety web

and it interfaces from NT

Dr Bank Exception Account (BAS online)

Cr Bank Adjustment Account (BAS online)

Online function perform by the department

Dr Bank Adjustment Account

Cr Fund Requisition Account

Journal passed by department for control purposes

Dr Fund Requisition Account


To record funds requested from NT

Dr Advances (to agent)

Cr Bank Account

The principle will have the funds which it will

advance to the agent in lieu of expenditure

Dr Bank Account

Cr Advances received (from principle)

Receipt of advance from the principle to cover

costs to be incurred by the agent







Dr Expenditure

Cr Bank Account

Agent records expenditure

Dr Expenditure

Cr Advances

Recording of expenditure incurred – claim received

from agent

Dr Advances received (from recipient department)

Cr Expenditure

Transferor provide a claim to principle

Refer to Annexure A for guidance on how to use the Agency Fund and allocate the expenditure against the seven

segments in BAS.

The process illustrated above should be executed on a monthly basis and any disputes should be

resolved timeously. Departments may use BAS reports to substantiate the numbers. All original source

documentation should remain with the agent.

Departments may elect to use the claims recoverable model as an alternative to the advancing funds on

a monthly basis. This approach could strain the cash resources of the agent and should rather be

applied on an exceptional basis. The entries applied will be as follows:





Dr Expenditure

Cr Bank Account

Agent records expenditure

Dr Expenditure (individual expenditure accounts)

Cr Claims payable / bank

To record the expenditure, incurred by the

transferor in the books of the recipient department


Cr Expenditure (individual expenditure accounts)

Agent submits a claim to the principle



10.3 Q & A relating to disclosure notes

10.3.1 Contingent liabilities

a) How should contingent liabilities be dealt with by the transferor and the recipient department?

Any contingent liabilities relating to a transferred function should also move to the recipient

department.

10.3.2 Commitments

a) How should commitments be dealt with by the transferor and the recipient department?

As a general principle, the any commitments should follow the function. Contract implications should

be considered in line with guidance provided by the Legal Workstream of the National Macro

Organisation project.

10.3.3 Accruals

a) How should accruals be dealt with by the transferor and the recipient department?

Any accruals relating to a transferred function should also move to the recipient department.

10.3.4 Employee benefits

a) How should employee benefits be dealt with by the transferor and the recipient department

Employee benefits comprise of leave entitlement, thirteenth cheque, performance awards as well as

capped leave commitments.

The benefits relating to employees transferred to the recipient department must follow suit. It is

important for both the transferor and the recipient to agree on the current value of these benefits prior

to the actual transfer of the individuals for budgeting and cash flow purposes.



10.3.5 Lease commitments

a) How should lease commitments be dealt with by the transferor and the recipient department?

It may be costly to renegotiate lease agreements. Where renegotiation of the lease does not take place

then the transferor continues to pay the lessor for the use/acquisition of the assets but recovers a

portion of the cost from the recipient department.

The amount recoverable from the recipient department is proportionate to –

the number of assets used/held by the recipient department; or

the extent to which the recipient department occupies the asset.

To simplify the accounting and disclosure requirements of the above, it is recommended that the

transferor sub-leases the assets (or part thereof) to the recipient department.

The accounting entries are as follows -


Dr Lease payments

Cr Bank

None as the transferor pays the external party.

Dr Bank

Cr Lease payments

Recovery of funds from the recipient department

Dr Lease payments

Cr Bank

Payment made to the transferor

10.3.6 Provisions

a) How should provisions be dealt with by the transferor and the recipient department?

Any provisions relating to staff debt or any other debt transferred to the recipient department should be

communicated to the recipient department. The recipient department may use this information in

addition to its own assessment to either increase or decrease the provision at the end of the current

financial year.



10.3.7 Transfer of Functions Disclosure Note

a) How should transfer of functions be disclosed in the disclosure note?

As per the key principles, prior period figures shall not be restated. This means that the audited financial

statements of the previous financial year must be shown as comparative information of the current

financial year without any changes. In cases where a department splits, the key principles also state that

a transferor and a recipient must be identified. Only the transferor needs to show the comparative

information in the financial statements. However, the disclosure note must be completed by both the

transferor and the recipient. The transferor must show prior year audited figures in the column with the

heading “Bal per Dept AFS 2009/10 before transfer”, whereas the recipient will show RNil in the column.

Example: Transfer of Functions Disclosure Note (without figures)

Department A was split to form two departments, namely Department B, the transferor, and

Department C, the recipient. Function 3 (which was programme 3 of Department A) was transferred

from Department A to Department K. Furthermore, Function 1 (which was programme 1 of Department

Z) was transferred from Department Z to Department B.

A Z

K C B

1 3

A Splits Transfers 1 Transfers 3



The disclosure note in B’s financial statements for the year ended 31 March 2011, which consists of a

split, transfer to and transfer from the department, will be as follows:

DEPARTMENT B

Disclosure Notes to the Annual Financial Statements

for the year ended 31 March 2011

45. TRANSFER OF FUNCTIONS

On 01 April 2010 Department A was split into two departments namely, Department B and Department C.

Function 3 (programme 3) was transferred to Department K and function 1 was transferred from

Department Z to Department B. The annual financial statements were not restated. The following reflects

the impact the transfer of functions would have had on the statement of financial position of the previous

financial year:



45.1 Statement of Financial Position Note

Bal per dept

2009/10 AFS

before

transfer

Functions

transferred to

C & K

Functions

received from

Z

2009/10 Bal

after transfer

2009/10

2009/10

2009/10

2009/10

R'000

R'000

R'000

R'000

ASSETS

Current Assets

xxx

(x)

x

xx

Unauthorised expenditure

xxx

(x)

x

xx

Fruitless and wasteful expenditure

xxx

(x)

x

xx

Cash and cash equivalents

xxx

(x)

x

xx

Other financial assets

xxx

(x)

x

xx

Prepayments and advances

xxx

(x)

x

xx

Receivables

xxx

(x)

x

xx

Loans

xxx

(x)

x

xx

Aid assistance receivable

xxx

(x)

x

xx

Non-Current Assets

xxx

(x)

x

xx

Investments

xxx

(x)

x

xx

Loans

xxx

(x)

x

xx

Other financial assets

xxx

(x)

x

xx

TOTAL ASSETS

xxx

(x)

x

xx

LIABILITIES

xxx

(x)

x

xx

Voted funds to be surrendered to the Revenue Fund

xxx

(x)

x

xx

Departmental revenue and NRF Receipts to be surrendered to the Revenue Fund

xxx

(x)

x

xx

Direct Exchequer Receipts to be surrendered to the Revenue Fund

xxx

(x)

x

xx

Bank overdraft

xxx

(x)

x

xx

Payables

xxx

(x)

x

xx

Aid assistance repayable

xxx

(x)

x

xx

Aid assistance unutilised

xxx

(x)

x

xx

Non-Current Liabilities

xxx

(x)

x

xx

Payables

xxx

(x)

x

xx

TOTAL LIABILITIES

xxx

(x)

x

xx

NET ASSETS

xxx

(x)

x

xx



Example: Transfer of Functions Disclosure Notes (with figures)

Using the same illustration as above, figures are added to further illustrate the disclosure note

requirements. Note that the figures used relate to Net Assets. This is only to simplify the illustration.

Department A which had R550m net assets was split to form two departments, namely Department B,

the transferor which was left with net assets R300m from Department A, and Department C, the

recipient, which received net assets of R200m. Function 3 with R50m net assets, (programme 3 of

Department A), was transferred from Department A to Department K. Furthermore, Function 1 with

R100m net assets, (programme 1 of Department Z) was transferred from Department Z to Department

B.

Z

R400m

K

R50m

C

R200m

B

R300m

1

R100m

3

R50m

A Splits Transfers 1 Transfers 3

A

R550m



The Net Assets will be shown as follows in the Disclosure Note of departments B, C, K and Z:

45.1 Statement of Financial Position

Bal per dept

2009/10 AFS

before

transfer

Functions

per dept

transferred

Functions

per dept

received

2009/10 Bal

after

transfer

2009/10

2009/10

2009/10

2009/10

R'000

R'000

R'000

R'000

NET ASSETS

B (Transferred to C & K, received from Z) 550,000

(250,000)

100,000

400,000

C (Received from A) -

-

200,000

200,000

K (Received from A) -

-

50,000

50,000

Z (Transferred from A) 400,000

(100,000)

-

300,000

10.4 Q & A relating to other matters

10.4.1 Legal matters

a) How does the name change of the department impact any binding arrangements of the department?

Refer to guidance issued by the Legal Workstream for direction with regard to the impact of the name

change on any binding arrangements of the department.

b) What are the legal matters to consider when a new department is established?

Refer to guidance issued by the Legal Workstream for direction on the legal matters.

c) How should contracts for services that cut across programmes of splitting departments be treated?

The accounting guidance will follow from the guidance provided by the Legal Workstream.



10.4.2 Other

a) Who is responsible for authorising subsistence and travel claims and expenses of employees

conducting work in respect of a function which now falls under a new department where the actual

transfer of such employees has not yet been finalised?

The employee’s line manager is responsible. This should be confirmed through the MOU/SLA

between the transferor and the recipient department.

b) How should virements between programmes of splitting departments/transferred functions be

treated (if the split/transfer takes place during the financial year and not at the beginning of the

financial year)?

Once the budget is actually allocated to a department, the department should operate as an entity on

its own. From then forth virement requirements as per PFMA will apply to the newly established

department.

c) Where a new dept was proclaimed and transfer of functions took place except a vote was not

allocated to the new department (recipient), which accounting officer signs the AFS and which

department prepares the annual report?

One set of AFS will be prepared by the transferor but both accounting officers (transferor and recipient)

must sign the AFS as both are accountable. A descriptive paragraph pertaining to non-allocation of a

vote to the receiving department must be added. The transferor and the recipient must report

separately on activities of the financial year in the rest of the annual report.



ANNEXURE A

The information provided below is an extract of the communication issued by the National Treasury to the relevant

departments on funding provided for the establishment of the new ministries

ALLOCATION OF EXPENDITURE INCURRED ON BEHALF OF A NEW MINISTRY WITHIN A CURRENT

DEPARTMENT FOR THE FINANCIAL YEAR 2010/11

Refer to the letter that addresses the formal process to be followed with regard to the creating of

structures (new subprogramme for new Ministers and Deputy Ministers) within the current Programme

1, Administration of the current department.

The Minister of Education and the newly created Ministry of Higher Education and Training will be used

as an example for this purpose.

Note that this annexure provides guidance for two options:

a) Option A: expenditure incurred by the current department on an “agency service” basis on behalf

of the new Ministry given that it will be recovered within the same financial year

b) Option B: expenditure incurred and not recovered during the current financial year from the newly

established department.



OPTION A: Expenditure incurred on an ‘agency service’ basis and recovered during the same financial

year

Allocation of expenditure incurred by the Minster of Education on behalf of the Ministry of Higher

Education and Training and given that the structure of the new Ministry is included and approved in the

Adjusted Budget for 2009/10.

Segment Account name Segment

number

Notes

Fund Agency Service 664 (NP) The following accounts should be created in

this segment by the department:

[level 2] Agency service expenditure (non-

posting)

[level 3] Ministry of Higher Education and

Training (posting level)

Objective Programme 1:

Administration

New subprogramme

for Minister: Minister of

Higher Education and

Training

Non Posting

level to be

created by

SCOA

Committee –

Posting level

Unique to the

department

All expenditure incurred by a department for

the Ministry is usually allocated against

programme 1 of the department. The SCOA

committee will create the codes with input

from departments for the new

subprogramme and the department will

create the sub activities of the

subprogramme.

Responsibility As per existing or

structure within new

Ministry

Unique to the

department

The department may either use the existing

responsibility structure or create specific

accounts for the Ministry of Higher Education

and Training. This should be in line with

creation of new subprogramme codes

created.

Item Relevant expenditure

item

As per item

code list

The existing accounts are used, for example

salaries and wages, resettlement costs,

travel and subsistence etc.

Asset Either: Non-asset

related

Or: allocated to the

relevant asset

category

31 (P) As per

asset code list

Expenditure other than for the acquisition of

assets should be allocated against “Non-

asset related”.




number

Notes

Project Either: Stand alone

current

OR: Stand alone

capital

16 (P)

17(P)

In most cases the expenditure will be

allocated against “Stand alone current”, and

capital expenditure will be against “Stand

alone capital”. Any costs incurred for

infrastructure assets for the Ministry of

Higher Education and Training will be

allocated against the relevant infrastructure

project accounts.

Region National Functions:

Whole of Country

Domestic

447 (NP) Department to create posting level details.

Recovery of expenditure from the Ministry of Higher Education and Training (after the adjustment

budget process and in the current financial year)

The department processes a journal entry for the expenditure incurred as follows:

Dr Claims recoverable: National Departments [segment number 1369]

Cr Relevant expenditure as per table above

When the funds are recovered:

Dr Bank




OPTION B: Expenditure incurred by the Department of Education and not recovered during the current

financial year from the newly established department.

Allocation of expenditure incurred by the department where it is not recoverable from the newly

created Department at the time of the Adjusted Budget for 2009/10.


number

Notes

Fund Voted funds 559 (P) Due to the fact that the expenditure will be

absorbed by the Department of Education

and will not be recovered from the Ministry of

Higher Education the expenditure is

allocated against “voted funds”.

Objective Programme 1:

Administration New

subprogramme for

Minister: Minister of Higher

Education and Training

Non

Posting

level to be

created by

SCOA

Committee

– Posting

level

Unique to

the

department

All expenditure incurred by a department for

the Ministry is usually allocated against

programme 1 of the department. The SCOA

committee will create the codes with input

from departments for the new

subprogramme and the department will

create the sub activities of the

subprogramme.


structure within new

Ministry

Unique to

the

department



accounts for the Ministry of Higher Education

and Training. Bring in line with creation of

new subprogramme codes created.

Item Relevant expenditure item As per

item code

list


salaries and wages, resettlement costs,

travel and subsistence etc.

Asset Either: Non-asset related


relevant asset

category

31 (P)

As per

asset code

list



asset related”.




number

Notes

Project Either: Stand

alone current

Or: Stand alone capital

16 (P)

17 (P)





infrastructure assets for the Ministry of

Higher Education and Training will be

allocated against the relevant infrastructure

project accounts.


Whole of Country

Domestic




Where the transferor acts as an agent for the recipient department the same principles as set out above applies.

Further guidance for the allocation of general expenditure is provided below.


number

Notes

Fund Agency Service 664 (NP) The following accounts should be created in

this segment by the department:

[level 2] Agency service expenditure (non-

posting)

[level 3] <Name of recipient department>

(posting level)

Objective Relevant programme or

sub-programme (still active

in the database of the

department)

As per

objective

code list

Or

As created

by the

SCOA

Technical

Committee

A new programme/subprogramme will be

created where the function is made up of a

number of activities that cut across a number

of programmes/sub-programmes


structure within recipient

department

Unique to

the

department



accounts for the recipient department. This

should be in line with creation of new

programme/subprogramme codes created.

Item Relevant expenditure item As per

item code

list


salaries and wages, resettlement costs, travel

and subsistence etc.

Asset Either: Non-asset related


relevant asset category

31 (P)

As per

asset

code

list



asset related”.




number

Notes

Project Relevant project code 16 (P)

17 (P)





infrastructure assets for the recipient

department will be allocated against the

relevant infrastructure project accounts.


Whole of Country

Domestic


Recovery of expenditure from the recipient department (after the adjustments budget process and in

the current financial year)

The department processes a journal entry for the expenditure incurred as follows:

Dr Claims recoverable: National Departments [segment number 1369]

Cr Relevant expenditure as per table above

Note: the expenditure will be disallowed against the “Inter-departmental Services / Advance Fund” in the fund

segment. The transferor should select the appropriate posting level account (i.e. the account that corresponds with

the name of the recipient department)

When the funds are recovered:

Dr Bank




ANNEXURE B

The list indicates items that have were updated since the 2009/10 Transfer of Functions Guide issued in March 2010.

The list excludes cosmetic updates.

Nature of Update Page

Added Key Principle: 5.7 Prior period figures shall be presented in the

financial statements of the transferor department only and not in the

financial statements of the recipient department.

9

Added a detailed example on completion of the Transfer of Functions

Disclosure Note.

42

Added Q & A 10.4.2 c) on preparation and signing powers a department

created without a vote.

47

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