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PFMA Exemption on Financial Statements Under the Spotlight

April 12, 2021

National Treasury

National and provincial departments have been exempted from complying with section 40(1)(b) of the Public Finance Management Act for five years.

National treasury announced the exemption in Government Gazette 44426.

Section 40(1)(b) stipulates that accounting officers for departments, trading entities or constitutional institutions “must prepare financial statements for each financial year in accordance with generally recognized accounting practice”.

The exemption also applies to government components that apply the modified cash standard.

The exemption came into effect on the date of publication.

Meanwhile, the South African Reserve Bank (SARB) has published a discussion document on the proposed requirements for funding in resolution for comment.

According to the SARB, the discussion document expands on the proposals set out in the 2019 discussion paper published by the SARB entitled ‘Ending too big to fail: South Africa’s intended approach to bank resolution’.

The SARB also points out that the discussion document outlines proposed requirements for designated institutions to estimate, assess and develop ex ante funding arrangements to finance their liquidity needs and preserve the critical functions in a resolution and proposed arrangements to be put in place by the SARB as a participant in the financial safety net.

Discussion documents on a resolution framework in South Africa will be adapted into a regulatory instrument upon conclusion of the consultative process and after promulgation of the Financial Sector Laws Amendment Bill tabled in parliament in August 2020.

In an earlier statement, treasury indicated that the bill is “part of the Twin Peaks reform of the financial regulatory system applicable to the financial sector”.

The bill proposes to designate the SARB as the Resolution Authority and strengthens the SARB’s regulatory tools designed to ensure stability of the financial system.

The bill is currently before the standing committee on finance.

Comment on the discussion document is invited until 3 May 2021.