Public Finance Management Act (PFMA) for Accountants Guide – UNISA, CUT & SA Public Sector Courses

This study guide provides comprehensive, exam-focused notes on the Public Finance Management Act (PFMA) tailored for South African public sector accounting and finance students. It is particularly aligned to typical syllabus requirements for UNISA and Central University of Technology (CUT) modules such as FAC3703 Public Sector Accounting, PUB2602 Public Financial Management, MNG2601 General Management, and ACCY372 Public Sector Accounting and Auditing. The content is written from an accountant’s perspective, emphasizing how PFMA requirements translate into daily financial management, reporting, control, and audit responsibilities in national and provincial departments and public entities.

The guide assumes familiarity with basic accounting and introduces PFMA concepts in a structured way, linking them to ASB & GRAP standards and common exam questions. Examples and scenarios use the South African public sector context to help you prepare effectively for tests, assignments, and final assessments.

1. PFMA in the South African Public Sector Framework

1.1 Position of PFMA in South African Public Financial Management

The Public Finance Management Act, 1999 (Act No. 1 of 1999) is the central law that governs financial management in the national and provincial spheres of government in South Africa. From an exam point of view, you must be able to:

Define PFMA and its purpose.
Place PFMA in relation to the Constitution, Treasury Regulations, Division of Revenue Act (DORA) and Municipal Finance Management Act (MFMA).
Explain how PFMA interacts with GRAP (Generally Recognised Accounting Practice).

Key constitutional link:

Section 215 of the Constitution of the Republic of South Africa, 1996 requires national, provincial and municipal budgets to:
- Promote transparency.
- Be comprehensive.
- Be in line with the national legislation that prescribes budget formats and procedures.

PFMA is that legislation for the national and provincial public sector.

Scope:

Applies to:
- National departments (e.g., National Treasury, Department of Health).
- Provincial departments (e.g., Free State Department of Education).
- Constitutional institutions (e.g., the Public Protector).
- Public entities listed in Schedule 2 (major public entities), Schedule 3A (national public entities) and Schedule 3B (national government business enterprises), and equivalent provincial entities.
Does not apply to:
- Municipalities and municipal entities (governed by MFMA).
- Private sector companies (governed by the Companies Act).

For UNISA FAC3703 and PUB2602 type exams, multiple‑choice and short‑answer questions often test your ability to distinguish between PFMA (national/provincial) and MFMA (municipal).

1.2 Objectives and Principles of the PFMA

PFMA’s core objectives (often tested in 10‑mark discussion questions) are:

To secure transparency, accountability, and sound management of the revenue, expenditure, assets and liabilities of the institutions to which it applies.
To modernise the system of financial management in the public sector.
To ensure spending is in line with the Constitution, policy priorities and approved budgets.
To clearly assign responsibilities to accounting officers (AOs) and accounting authorities (AAs).

These objectives translate into practical principles that accountants must internalise:

Regularity: All expenditure must be authorized by an appropriation or other law; no spending outside approved funds.
Transparency: Clear, timely reports and open processes, including public availability of annual financial statements (AFS).
Accountability: Named individuals (Ministers, MECs, AOs, CFOs) must take responsibility for financial decisions and outcomes.
Value for money: Efficient, economical, and effective use of resources (often summarized as the “3 Es”).

Link to ASB & GRAP:

PFMA requires the use of accounting standards set by the Accounting Standards Board (ASB).
For public entities and departments using accrual-based reporting, this means applying GRAP standards, for example:
- GRAP 1: Presentation of Financial Statements.
- GRAP 17: Property, Plant and Equipment.
- GRAP 23: Revenue from Non‑exchange Transactions (Taxes and Transfers).

Exams in modules such as UNISA FAC3703 and CUT ACCY372 Public Sector Accounting and Auditing frequently test the interaction between PFMA and GRAP, e.g., explain why PFMA‑compliant reports must also comply with GRAP.

1.3 PFMA vs MFMA and Other Key Legislation

Although this guide focuses on PFMA, you must understand its position in relation to MFMA, DORA, and Treasury Regulations. Examiners often test these differences in scenario questions.

PFMA vs MFMA:

Aspect	PFMA	MFMA
Sphere of government	National & provincial	Local (municipalities, municipal entities)
Act number & year	Act 1 of 1999	Act 56 of 2003
Treasury oversight	National Treasury, provincial treasuries	National Treasury, provincial treasuries (MFMA)
Main focus	Departments & public entities	Municipal financial management
Accounting framework	Mostly cash with accrual‑like notes; GRAP/IFRS for entities	Full GRAP/IPSAS‑aligned accounting

Division of Revenue Act (DORA):

Passed annually to detail how revenue raised nationally is divided between:
- National government.
- Provincial governments.
- Municipalities.
PFMA requires that transfers be handled in accordance with DORA conditions.

Treasury Regulations:

Issued in terms of PFMA (section 76).
Provide detailed operational rules on:
- Cash management.
- Supply chain management (SCM).
- Internal audit and risk management.
- Budget formats and submission dates.

From a CUT ACCY372 or UNISA PUB2602 point of view, you must be able to state that PFMA is the enabling legislation, while Treasury Regulations operationalize it.

1.4 National and Provincial Treasuries: Roles Under PFMA

PFMA gives significant powers and duties to the National Treasury and provincial treasuries. Financial accountants in departments interact with treasuries on:

Budget submissions and adjustments.
Reporting formats and timelines.
Approvals for virements and roll‑overs.
Banking and cash management practices.

Key PFMA‑based functions:

Issue Treasury Instructions and Regulations:
- Standardize financial procedures across departments.
- Determine the format of Annual Financial Statements (AFS) and monthly reports.
Set Accounting Standards for Departments:
- Through ASB and GRAP for entities.
- For departments, typically prescribe modified cash‑basis reporting aligned with GRAP presentation.
Monitor and Enforce Compliance:
- Review monthly and quarterly reports.
- Approve borrowing by certain public entities.
- Intervene when institutions are in serious financial distress or non‑compliance.
Capacity building:
- Provide guidelines, training, and templates (e.g., Standard Chart of Accounts – SCOA).
- Support initiatives like Infrastructure Delivery Management System (IDMS) and Integrated Financial Management System (IFMS).

For exam purposes, especially in UNISA FAC3703 and PUB2602, be prepared to match specific functions to either National Treasury or provincial treasury in multiple‑choice and short structured questions.

2. PFMA Roles, Responsibilities & Governance – What Accountants Must Know

2.1 Executive Authorities and Accounting Officers

The PFMA distinguishes clearly between Executive Authorities (EAs) and Accounting Officers (AOs).

Executive Authority:
- At national level: the Minister responsible for a department.
- At provincial level: the Member of the Executive Council (MEC).
- For certain public entities: the responsible Minister or MEC.
- Responsibilities under PFMA:
  - Policy direction.
  - Approving strategic plans and budgets.
  - Oversight over AOs and AAs.
Accounting Officer (AO):
- Typically the Head of Department (HoD) in a national or provincial department.
- Directly responsible for:
  - Effective financial management.
  - Safeguarding of assets.
  - Implementation of PFMA and Treasury Regulations.
- Has personal responsibility, including the potential for disciplinary action under PFMA for serious or persistent non‑compliance.

Exam‑style question examples for UNISA FAC3703 or CUT ACCY372:

“List five responsibilities of an Accounting Officer in terms of the PFMA.”
“Explain the difference between an Executive Authority and an Accounting Officer.”

Common AO PFMA duties (summarised):

Maintain effective, efficient and transparent systems of financial and risk management and internal control.
Ensure compliance by the department with PFMA, Treasury Regulations and other applicable legislation.
Prevent unauthorised, irregular, fruitless and wasteful expenditure (UIFW).
Manage revenue, expenditure, assets and liabilities of the department.
Prepare and submit annual financial statements within two months after the end of the financial year.
Establish an internal audit function and an audit committee (where required).

2.2 Accounting Authorities for Public Entities

For public entities (Schedule 2, 3A, 3B, etc.), PFMA uses the term Accounting Authority (AA) rather than Accounting Officer.

The AA is usually:
- A board of directors (for a corporate public entity), or
- A Chief Executive Officer (CEO) where there is no board.

The AA’s responsibilities mirror those of AOs but adjusted for a more corporate structure:

Ensure entity has and maintains:
- Effective, efficient and transparent systems of financial and risk management.
- Adequate systems of internal audit and internal control.
Approve policies on:
- Supply Chain Management (SCM).
- Risk management.
- Investment and borrowing (within PFMA limits).
Oversee:
- Compliance with PFMA, Companies Act (if applicable) and other sector legislation.
- Quality of financial reporting (annual reports, including integrated reports if adopted).
Sign off on:
- Annual Financial Statements prepared under GRAP or IFRS, as directed by ASB or National Treasury.

Exams in UNISA PUB2602 and FAC3703 often test the difference between AOs and AAs, especially in multiple‑choice questions using scenario‑based descriptions (e.g., a state‑owned company with a board vs a national department headed by a Director‑General).

2.3 Chief Financial Officers and Finance Units

While PFMA does not specifically define the role of a Chief Financial Officer (CFO), in practice and in Treasury Regulations the CFO is the principal financial management support official to the AO or AA.

Key CFO responsibilities (highly examinable for public sector accounting courses):

Budget preparation and monitoring:
- Coordinate compilation of the Medium‑Term Expenditure Framework (MTEF) budget.
- Monitor expenditure against the budget and report variances.
Financial reporting:
- Ensure timely and accurate in‑year reports (monthly, quarterly) and annual financial statements.
- Align reporting with PFMA, Treasury Regulations and GRAP.
Internal control and SCM:
- Design and oversee internal financial controls.
- Support SCM processes (bid adjudication, contract management).
Compliance and risk:
- Identify PFMA compliance risks and work with the internal audit and risk management units.
- Co‑ordinate responses to Auditor‑General South Africa (AGSA) findings.

In exam questions in modules such as UNISA FAC3703 Public Sector Accounting and CUT ACCY372 Public Sector Accounting and Auditing, you may be required to:

Identify weaknesses in a hypothetical CFO’s approach.
Draft recommendations to strengthen PFMA compliance structures around the CFO.

2.4 Internal Audit, Audit Committees and Risk Management

PFMA places strong emphasis on internal audit and audit committees as governance structures which support PFMA objectives. These two features are often tested in public sector auditing‑oriented modules.

Internal Audit:

Required for:
- National and provincial departments.
- Public entities listed in Schedules 2 and 3.
Functions:
- Provide independent, objective assurance on risk management, control and governance processes.
- Review internal controls around:
  - Revenue collection.
  - Expenditure control.
  - Asset management.
  - Compliance with PFMA and Treasury Regulations.
- Produce internal audit reports and an annual internal audit plan.

Audit Committee:

Composition:
- Majority of members must be external (not in the employ of the institution).
- Chaired by an external person with appropriate financial or auditing expertise.
Key responsibilities:
- Review annual financial statements and provide an opinion to the AO/AA.
- Review internal and external audit reports and monitor implementation of recommendations.
- Advise AO/AA on:
  - Financial management and reporting.
  - Risk management.
  - Internal controls and accounting policies.

Risk Management:

While PFMA does not prescribe detailed risk management frameworks, Treasury Regulations and King IV principles are used.
For exams, know that AOs/AAs must ensure:
- Identification and assessment of risks.
- Implementation of risk mitigation strategies.
- Integration with internal audit’s risk‑based planning.

Typical exam tasks in CUT ACCY372 or UNISA FAC3703:

“Discuss the role of the audit committee in supporting PFMA compliance.”
“Explain why an internal audit function is vital for PFMA and GRAP‑based reporting in a national department.”

2.5 Lines of Accountability and Reporting Chains

From an accountant’s perspective, understanding who reports to whom is critical, especially for scenario‑based questions.

Typical national department accountability chain:

Chief Director: Financial Services / Director: Finance / Senior Accountant:
- Prepares detailed accounting records and reconciliations.
CFO:
- Consolidates departmental financial information.
- Prepares in‑year monitoring reports and draft AFS.
AO (Head of Department):
- Sign‑off authority for AFS and other statutory reports.
- Directly answerable to the Executive Authority (Minister).
Executive Authority:
- Presents departmental annual report (including AFS and AGSA audit report) to Parliament.
Parliament / Provincial Legislature:
- Exercises oversight through portfolio committees and public accounts committees (e.g., SCOPA).
National Treasury / Provincial Treasury:
- Provide oversight on the financial management and adherence to PFMA.

This chain is examinable in modules like UNISA PUB2602 Public Financial Management. Understanding it helps you answer questions about who is ultimately accountable for PFMA compliance in a department, and where responsibility for specific reporting obligations lies.

3. Budgeting, In‑Year Reporting & Annual Financial Statements Under PFMA

3.1 PFMA Budgeting Framework – MTEF and Annual Appropriation

Accountants in public sector environments must understand how PFMA embeds Medium‑Term Expenditure Framework (MTEF) principles and the annual Appropriation Act.

Key concepts frequently tested in UNISA and CUT exams:

MTEF (3‑year budgeting):
- Departments prepare budgets for the upcoming financial year and two outer years.
- Aligns spending with medium‑term policy priorities.
Annual Appropriation Act:
- Authorises expenditure for each vote (department) by:
  - Main division, often aligned to programmes.
- Any spending beyond this authorization is generally considered unauthorized expenditure.
Budget cycle under PFMA:
1. Strategic planning and MTEF submissions.
2. Budget negotiations with National or Provincial Treasury.
3. Finalisation and tabling of budget in Parliament/Legislature.
4. In‑year monitoring and Adjusted Estimates.
5. Year‑end reporting and audit.

As an exam candidate in UNISA FAC3703 or PUB2602, you must be able to sketch this cycle and identify the PFMA justification at each stage.

3.2 In‑Year Reporting: Monthly and Quarterly Reports

PFMA and Treasury Regulations require strict in‑year reporting to ensure that problems are identified and corrected early.

Monthly and quarterly reports include:

Monthly expenditure reports:
- Actual spending per programme vs. projected.
- Explanation of material variances.
- Submitted to National or Provincial Treasury, usually within 15 days after month‑end (exact deadlines depend on Treasury Instructions).
Quarterly performance reports:
- Link financial data to non‑financial performance (outputs and outcomes).
- Provide a comprehensive picture for oversight.

For public entities, reporting typically includes:

Statements of financial position (balance sheets).
Statements of financial performance.
Cash flow statements.
Comparison of budgeted vs. actual revenue and expenditure.

These reports must align with GRAP or IFRS where applicable.

Why this matters for accountants:

They maintain the underlying accounting records and general ledgers.
They prepare or support the preparation of in‑year reports.
They must ensure the correct application of SCOA and accounting policies.

In exams, e.g., UNISA FAC3703, you might be asked:

To identify the PFMA requirements relating to monthly reporting.
To suggest steps an accountant should take to ensure timely submission of reports.

3.3 Annual Financial Statements (AFS) Under PFMA

Under PFMA, AOs and AAs must submit annual financial statements within two months of the end of the financial year (31 March for most departments).

For departments, the AFS are typically prepared on a modified cash basis but must reflect certain accrual‑type information in notes, as prescribed by National Treasury and aligned to some GRAP principles.

Typical content of departmental AFS:

Statement of Financial Performance.
Statement of Financial Position (mainly showing cash and short‑term obligations).
Statement of Changes in Net Assets (where applicable).
Cash Flow Statement.
Notes with:
- Details of revenue (appropriation, departmental revenue).
- Details of expenditure (compensation of employees, goods and services, transfers).
- Disclosure of unauthorized, irregular, fruitless and wasteful (UIFW) expenditure.
- Contingent liabilities and commitments.

For public entities (Schedule 2 and 3 entities):

AFS must be prepared on accrual basis using GRAP or IFRS.
Key PFMA requirements:
- Submit AFS to AGSA, relevant treasury, and Executive Authority.
- Include in the entity’s annual report.

Link with ASB & GRAP (important for the “Public Sector Accounting (ASB & GRAP Standards)” category):

PFMA itself does not define how to recognise assets, liabilities, income, and expenses; it delegates to the ASB.
For example:
- GRAP 17 requires that property, plant and equipment be capitalised and depreciated.
- GRAP 23 governs accounting for taxes and transfers as revenue from non‑exchange transactions.

Exam questions in UNISA FAC3703 and CUT ACCY372 may require:

Explaining why departmental financial statements are not fully accrual‑based.
Interpreting a GRAP‑based AFS extract of a public entity in a PFMA context.

3.4 Timelines and Accountability for AFS

Because PFMA is strict on reporting deadlines, knowledge of timelines is examinable:

Year‑end: 31 March.
AFS submission:
- Departments and public entities submit AFS to AGSA within two months (by 31 May).
Audit completion:
- AGSA aims to complete audits by 31 July or specific dates publicised annually.
Annual report:
- Must be tabled in Parliament/Legislature within one month after AGSA has issued its audit report or by a date prescribed.

The AO/AA signs the AFS, taking responsibility for their accuracy and completeness. Late submission can signal weak financial management and may be cited in the AGSA report.

In exam scenarios, for instance in UNISA PUB2602, you may be asked to identify PFMA breaches in a timeline where a department submits AFS late or fails to table its annual report on time.

3.5 Linking Budgeting and Reporting to Performance Information

PFMA promotes not only financial accountability, but also performance accountability.

Strategic plans and Annual Performance Plans (APPs) must link:
- Objectives.
- Outcomes.
- Measurable outputs.
- Budget allocations.
Annual reports must compare:
- Planned performance indicators and targets vs. actual performance.
- Budget versus actual expenditure.

Accountants increasingly support the integration of finance and performance information, including:

Designing systems for collecting reliable performance data.
Reconciling financial and non‑financial information (e.g., number of clinics built vs capital expenditure on infrastructure).

For exams in UNISA modules such as FAC3703 and PUB2602, conceptual questions might ask you to:

Describe the role of PFMA in promoting performance‑based budgeting.
Explain why an accountant must understand performance information when compiling AFS and reports.

4. Control, Compliance & Irregular Expenditure – PFMA’s Enforcement Mechanisms

4.1 The Four Key Expenditure Classifications Under PFMA

PFMA and Treasury Regulations focus strongly on unauthorized, irregular, fruitless and wasteful expenditure (UIFW). These concepts appear in almost every exam dealing with PFMA.

1. Unauthorized Expenditure

Definition:
- Expenditure that is not in accordance with the purpose for which funds were appropriated or budgeted.
- Includes:
  - Overspending of a vote or main division within a vote.
  - Spending that is not authorised by the Appropriation Act or another law.
Example (exam‑type):
- A department’s vote includes R100 million for Programme 1. Actual expenditure on Programme 1 is R110 million, and the additional R10 million is not funded by any approved virement or adjustment. The R10 million is unauthorized expenditure.

2. Irregular Expenditure

Definition:
- Expenditure that is not in compliance with:
  - PFMA.
  - Treasury Regulations.
  - A procurement policy (e.g., SCM procedures).
  - Other legislation (e.g., Preferential Procurement Policy Framework Act, PPPFA).
Example:
- Awarding a contract without following the required competitive bidding process when it should have been followed (e.g., directly appointing a supplier for R10 million without going to open tender).

3. Fruitless and Wasteful Expenditure

Definition:
- Expenditure that was made in vain and would have been avoidable had reasonable care been taken.
Example:
- Paying interest and penalties on late payment of invoices.
- Hiring a venue for a conference that is cancelled and cannot be refunded.

4. Irrecoverable Revenue Losses (less central in exams but related):

Losses due to theft, fraud, damages, or negligence.
Require investigation and possible recovery from responsible persons.

In UNISA FAC3703 and CUT ACCY372, you might get an AFS disclosure note with a mixture of UIFW items and be asked to classify each expenditure and explain the PFMA implications.

4.2 Preventing UIFW Expenditure – Internal Control Measures

PFMA expects AOs and AAs, supported by CFOs and accountants, to prevent UIFW expenditure, not just identify it afterwards.

Control strategies include:

Delegations and Segregation of Duties:
- Clear delegations of authority for approving commitments, payments, and contracts.
- Separation between:
  - Requisitioning.
  - Ordering.
  - Receiving goods.
  - Approving payments.
Pre‑audit Checks:
- Confirmation of:
  - Budget availability.
  - Alignment with appropriation purpose.
  - Compliance with SCM rules.
- Often integrated in financial systems such as BAS, LOGIS, or integrated ERP packages.
Training and Awareness:
- Regular PFMA training for finance and SCM officials.
- Circulars summarising new Treasury Instructions.
Monitoring and Exception Reporting:
- Daily or weekly exception reports to identify:
  - Over‑expenditure trends.
  - Deviations from procurement process.
- Immediate intervention before year‑end.

In exam questions, for modules like UNISA PUB2602, you may be asked to recommend internal controls to reduce irregular expenditure in a given scenario.

4.3 Reporting, Investigation and Consequences of UIFW Expenditure

When UIFW expenditure occurs, PFMA and Treasury Regulations require:

Immediate reporting:
- To the AO/AA.
- To the relevant treasury.
- Often to law enforcement if criminal conduct is suspected.
Investigation:
- Determine:
  - Cause of the UIFW.
  - Whether any official was negligent or dishonest.
  - Whether the amount is recoverable.
Disciplinary and Recovery Actions:
- Impose disciplinary measures where applicable.
- Attempt to recover losses from responsible individuals.
Disclosure in AFS:
- Show opening balance of UIFW.
- Additures (new UIFW during the year).
- Reductions (amounts condoned, written off as irrecoverable, or recovered).

Example of AFS disclosure extract (simplified):

Category	Opening balance (R’000)	Additions (R’000)	Condoned (R’000)	Recoveries (R’000)	Closing balance (R’000)
Unauthorized expenditure	2,000	500	0	0	2,500
Irregular expenditure	5,000	3,000	1,000	500	6,500
Fruitless & wasteful spend	500	100	50	0	550

This kind of note is often used in exam case studies for UNISA FAC3703 and CUT ACCY372, where you might be asked to interpret the movement in UIFW balances and discuss PFMA compliance.

4.4 Role of Auditor‑General South Africa (AGSA) in PFMA Enforcement

The Auditor‑General South Africa (AGSA) plays a crucial role in enforcing PFMA compliance through annual audits of:

National and provincial departments.
Public entities under PFMA.
Constitutional institutions.

Types of audit opinions (testable in both public sector accounting and auditing modules):

Unqualified opinion: Financial statements are fairly presented in all material respects.
Qualified opinion: There are material misstatements or limitations on the scope of audit, but not pervasive.
Adverse opinion: Financial statements are materially and pervasively misstated.
Disclaimer of opinion: AGSA cannot express an opinion due to inability to obtain sufficient appropriate audit evidence.

AGSA also issues:

Findings on compliance with laws and regulations, especially PFMA and Treasury Regulations.
Findings on performance information (reliability and usefulness of key performance indicators).

For exam purposes, particularly in CUT ACCY372 and UNISA FAC3703, AGSA’s role may be tested through questions like:

“Explain how the audit opinion reflects PFMA compliance.”
“Discuss the implications of a disclaimer of opinion for a department’s PFMA responsibilities.”

4.5 Consequences of Persistent PFMA Non‑Compliance

Repeated PFMA breaches have several consequences:

Reputational damage:
- Negative media coverage.
- Loss of public confidence.
Oversight action:
- Parliament or provincial legislatures may summon officials to account.
- Committees such as SCOPA (Standing Committee on Public Accounts) issue recommendations.
Administrative and disciplinary action:
- AOs and AAs may face suspensions, dismissals, or reprimands.
- CFOs and other officials may face disciplinary procedures.
Intervention by Treasury:
- Under certain circumstances, National or Provincial Treasury may:
  - Withhold transfers.
  - Impose financial management plans.
  - Place entities under stricter oversight.

Exam‑style application:

In UNISA PUB2602, you might be given a case where a department has received consecutive disclaimers of opinions and large irregular expenditure. You would then be asked to propose remedial actions in line with PFMA.

5. Practical PFMA Application for Accountants in UNISA & CUT Courses

5.1 PFMA in UNISA Modules – FAC3703, PUB2602, MNG2601

At UNISA, PFMA features prominently in several modules under Accounting and Public Administration faculties.

Common modules where PFMA is critical include:

FAC3703 – Public Sector Accounting:
- Focus on:
  - Departmental financial statements.
  - Application of PFMA to financial reporting.
  - GRAP‑based reporting in public entities.
- Exam application:
  - Interpretation of AFS extracts.
  - Classification of expenditure as authorized/unauthorized, regular/irregular.
  - Understanding how PFMA shapes reporting formats and deadlines.
PUB2602 – Public Financial Management:
- Focus on:
  - Full PFMA framework and budget processes.
  - Oversight mechanisms, AOs, AAs.
  - In‑year reporting and accountability.
- Exam application:
  - Essay questions on PFMA principles.
  - Case studies on budgeting and expenditure control.
MNG2601 – General Management (in a public sector context):
- For students taking the public administration path, PFMA is:
  - Linked to management functions: planning, organising, leading, controlling.
  - Integrated with performance management and governance.

Typical UNISA‑style PFMA exam question:

“Explain, with reference to PFMA, how an Accounting Officer should respond when unauthorised expenditure is discovered in a national department. (20 marks).”

Your answer should:

Define unauthorized expenditure.
Explain immediate reporting obligations to treasury and EA.
Outline investigation and possible disciplinary measures.
Mention disclosure in AFS.
Refer to responsibility of AO under PFMA sections.

5.2 PFMA in CUT Modules – ACCY372 & Related Courses

At the Central University of Technology (CUT), PFMA is central to modules in Public Sector Accounting and Auditing, such as:

ACCY372 – Public Sector Accounting and Auditing:
- Focus on:
  - PFMA and MFMA comparison.
  - Preparation and analysis of public sector financial statements under GRAP.
  - Understanding of AGSA audit reports.
Other public administration or financial management modules:
- Might treat PFMA from a policy and management angle rather than detailed accounting.

In CUT examinations, PFMA is often integrated into case‑study questions where you must:

Evaluate a department or public entity’s compliance with PFMA and Treasury Regulations.
Identify control weaknesses that led to irregular or fruitless expenditure.
Recommend improvements in internal control and governance.

Example exam scenario:

A provincial public entity prepared its AFS on a cash basis and did not disclose irregular expenditure. As an accounting student, you must:
- Explain why this is non‑compliant with PFMA and GRAP.
- Propose corrective actions.

Your answer must emphasise:

ASB mandate to require GRAP for public entities.
PFMA duty of AA to implement appropriate accounting standards.
Need to identify, investigate, and disclose irregular expenditure.

5.3 GRAP, ASB and PFMA – Integrating Standards and Legislation

This guide falls under the collection “Public Sector Accounting (ASB & GRAP Standards)”, so it is essential to link PFMA with ASB and GRAP.

Key integration points:

PFMA imposes the obligation to maintain proper financial records and prepare AFS.
ASB sets the specific accounting standards (GRAP) that define:
- Recognition and measurement of assets, liabilities, revenue, expenditure.
- Presentation and disclosure of financial information.
National Treasury prescribes the applicable framework:
- Departments: Modified cash basis with GRAP‑informed presentation.
- Public entities: GRAP or IFRS, depending on classification.

From a student’s perspective in modules like UNISA FAC3703 and CUT ACCY372:

You must understand:
- How PFMA is the legal framework.
- How GRAP provides technical accounting rules.
And be able to answer questions such as:
- “Why is GRAP 17 relevant for PFMA reporting on infrastructure assets in a public entity?”
- “Explain how GRAP 23 supports PFMA requirements for transparency in revenue reporting.”

Examples:

A Schedule 3A entity uses GRAP 17 to capitalise and depreciate buildings. PFMA requires management of assets and transparent reporting; GRAP 17 ensures:
- Reliable recording of cost and accumulated depreciation.
- Disclosure of asset movements (additions, disposals).
- This information supports PFMA goals of safeguarding assets and preventing losses.

5.4 PFMA Case Study Examples for Exam Practice

Case Study 1: Departmental Unauthorized Expenditure

Scenario:

The Department of Infrastructure in Province X has a voted allocation of R500 million for capital projects (Programme 2) and R300 million for recurrent expenditure (Programme 1). Due to poor planning, it overspends Programme 2 by R50 million and underspends Programme 1 by R30 million. No virement or adjusted appropriation is processed. The overspending of R50 million is discovered at year‑end.

Exam requirements:

Identify the type of expenditure issue.
Explain PFMA implications.
Suggest steps for the AO and departmental accountant.

Outline of a high‑quality answer:

The R50 million overspent on Programme 2 is unauthorised expenditure because it exceeds the main division allocation for that programme without legislative approval.
Under PFMA:
- The AO must report this to the relevant provincial treasury and MEC.
- An investigation must be conducted.
- The amount must be disclosed in the AFS as unauthorized expenditure.
- The department may request that the legislature authorise the excess in a subsequent Appropriation Act, but until then it is unauthorized.

Case Study 2: Irregular Expenditure in a Public Entity

Scenario:

A Schedule 3B government business enterprise, “Free State Water Services Entity”, awards a R20 million contract for water infrastructure upgrades without competitively inviting tenders, claiming “urgency” without proper justification.

Exam requirements:

Classify the expenditure.
Explain PFMA and SCM rules breached.
Discuss the AA and CFO responsibilities.

Key points:

The R20 million is likely irregular expenditure due to non‑compliance with SCM regulations (no competitive process where one was required).
The PFMA obligations include:
- AA must ensure investigation.
- Report expenditure to National Treasury and Executive Authority.
- Consider disciplinary actions against responsible officials.
- AFS must disclose the R20 million irregular expenditure.
CFO must:
- Strengthen SCM controls.
- Train staff on SCM rules.
- Implement pre‑award compliance checks.

These illustrative case studies reflect typical exam scenarios in UNISA FAC3703, PUB2602 and CUT ACCY372.

5.5 Study and Exam Strategy for PFMA‑Related Modules

To succeed in PFMA‑based exams at UNISA, CUT, and other South African universities and colleges, apply the following strategies:

Master Key Definitions and Sections:
- Learn and be able to write out:
  - Definitions of unauthorized, irregular, fruitless and wasteful expenditure.
  - Roles of AO, AA, CFO.
- Know at least the high‑level purposes of PFMA and links to the Constitution.
Link PFMA Theory to Accounting Practice:
- When you study GRAP, always ask:
  - How does this improve transparency, accountability and PFMA compliance?
- Practise reconciling departmental budget information with AFS extracts.
Work Through Past Papers and Tutorial Letters:
- For UNISA FAC3703 and PUB2602, pay attention to:
  - Short essay questions on PFMA principles.
  - Case‑study‑based calculations or classifications of UIFW.
- For CUT ACCY372, focus on:
  - Audit and compliance questions linked to PFMA and AGSA reports.
Use a Question‑Focused Approach:
- Break down exam questions into parts that map to:
  - Definition.
  - PFMA requirement.
  - Accounting implication.
  - Recommendation or conclusion.
Keep Up With Treasury Circulars (Conceptually):
- You do not need to memorise every circular, but you must:
  - Understand that Treasury Regulations operationalise PFMA.
  - Know that Treasury can change formats and timelines through Instructions.
Practice Integrated Answers:
- Combine PFMA + GRAP + internal control knowledge in a single coherent answer.
- For example, when asked about asset management, mention:
  - PFMA requirement to safeguard assets.
  - GRAP 17 for recognition and disclosure.
  - Internal controls over asset registers, verification, and impairment reviews.

By connecting PFMA legal requirements to day‑to‑day accounting processes and to GRAP‑based financial statements, you will be well‑positioned for examinations in the field of Public Sector Accounting (ASB & GRAP Standards) across South African universities, particularly UNISA and the Central University of Technology (CUT).