Departmental reports. In South Africa, national and provincial government departments report on a modified cash basis. This means that they report cash revenue and cash expenses and a partial balance sheet showing financial assets and liabilities, but not physical assets or liabilities such as those that are sometimes recognized in relation to PPPs. So the issue of whether PPPs are on or off the public-sector balance sheet does not arise. But since the 2006 review of the management of the contingent liabilities related to PPPs, the National Treasury's accounting guidelines for departments require the presentation of a "disclosure note" on PPPs.
For example, the National Department of Trade and Industry, which has entered into a PPP for office accommodation (appendix 2), includes a two-page note on its PPP in its annual report for 2007/08. The note describes the arrangement in some detail and discloses the payments that DTI has made for the services in each of the last two years, and the basis on which those payments were determined. It does not, however, say anything about contingent liabilities associated with the PPP, such as those relating to contract termination.
The Department of Transport and Public Works of the Western Cape, the public contracting agency for the Chapman's Peak PPP, includes the following note in its 2007/08 annual report.
A concession agreement was concluded for the design, construction, financing, operating, and maintaining of Chapman's Peak Drive as a toll road for 30 years. At the end of the concession period the road is returned to the Provincial Government of the Western Cape in a clearly defined condition. The agreement, which provides for both renewal and termination options, was signed on 21 May 2003. The partnership has been operational since 21 December 2003. However, in terms of Section 21.1.2 of the concession agreement a designated event26 has been in place since the opening of the toll road. The designated event will remain in place until such time that the Record of Decision for the construction of the permanent toll plazas that was issued on the 3 July 2005 is either confirmed or amended by the Minister of Environmental Affair and Tourism in response to appeals against the Record of Decision. This ruling is a perquisite for the transfer of commercial risk to the Concessionaire. Until then, the Province remains responsible for shortfalls in toll income.
The note includes a table that shows that because of the "designated event," the department paid the concessionaire 12.745 million rand in 2007-08 and 8.747 million rand in 2006−07.
In its annual report for 2008, the Gauteng Department of Public Transport, Roads, and Works, the contracting authority for the Gautrain, states that, according to its accounting policies, "A description of the PPP arrangement, the contract fees and current and capital expenditure relating to the PPP arrangement is included in the disclosure notes." But, although the report describes aspects of the Gautrain project, it does not include a disclosure note on PPPs. This may reflect the difficulty of complying with all accounting requirements (the report runs to 424 pages as it is) and the fact that payments under the patronage guarantee have not yet been required.
Plans for accrual accounting. South African government departments may in future adopt modern accrual accounting. New accrual standards have in fact already been produced by the South African Accounting Standards Board, which generally follows international accounting standards. Among other things, the ASB has produced a guideline on accounting for PPPs (ASB 2008, Botha 2008), which follows the approach of IFRIC 12: the public contracting agency must recognize the PPP project's assets, and an associated liability, on its balance sheet if the agency controls the assets.
In addition to formal reporting, the National Treasury regularly publishes a table of PPPs undertaken in terms of Treasury Regulation 16, along with an estimate in most cases of their cost (see appendix 2).
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26 The previous year's annual report added a footnote explaining "designed event:" "In terms of the designated event all toll revenue accrues to the Province; the Concessionaire is paid a fix sum monthly based on the financial base case; the Province is responsible for the construction of the temporary toll structure, additional costs relating to the operation of the temporary toll structure, and escalation in relation to the construction of the permanent toll plaza."