Representatives of the National Treasury briefed the Committee on the Fourth Quarter Expenditure Report for the 2009/10 financial year. To date, the national Departments had spent 98.3% of the payments budget, 99.1% of the transfers budget and 93.2% of the capital assets budget. The preliminary outcome was that 1.2% of the total budget was unspent.
The under-spending by Statistics SA was mainly due to the delay in the implementation of the Census 2011 programme. The Department of Public Works had under-spent by R361 million as a result of the slow implementation of capital projects in the Prestige Portfolio and non-payment of Extended Public Works Programme incentive grants. The Department of Arts and Culture had under-spent by 15.5%, mainly as a result of delays in capital expenditure projects. The Department of Education had under-spent as a result of the withdrawal of the tender for work books. The under-spending by the Department of Health resulted from contractual, legal and planning problems with the Hospital Revitalisation Grant. The most significant under-spending in Justice and Protection Services was by the Independent Complaints Directorate, which had under-spent by 8.9%. The Department of Correctional Services had under-spent mainly as a result of the non-implementation of the occupational-specific dispensation. The Department of Water Affairs had not processed all payments for invoices tendered for water and sanitation projects.
Members asked when the preliminary report would be finalised, why the new Departments were excluded from the report, what the performance auditing tools were in place to verify that objectives were achieved, to what extent the Treasury was involved in the discussions concerning the responsibility for learner transport, what lessons could be learned from the good spending record of SAPS, why the occupational-specific dispensation had not been implemented by the Department of Correctional Services, why the Department of Agriculture, Forestry and Fisheries had spent more than 90% of its budget by the end of the fourth quarter when only 60% had been spent by the end of the third quarter, why the conditional grant of R466 million to the Department of Cooperative Governance and Traditional Affairs was offset when the amount of R5 million allocated was not spent, if the withholding of grants would affect effective service delivery, what the concerns were around the general expenditure trends and if funding was available for capacitating finance officials in Government Departments.
Briefing by the National Treasury
Mr R Clifton (Technical Advisor), Mr S Janari (Director: Education and Related Departments), Mr M Bletcher (Director: Health and Social Development) and Mr R Randela (Director) presented the briefing to the Committee (see attached document).
The total amount tabled for appropriation was R399.6 billion. The adjusted appropriation increased the total amount by R9.2 billion to R408.8 billion. The budget for current payments was R177 billion, R282.2 billion was budgeted for transfers and subsidies and R8.9 billion was budgeted for capital assets.
To date, the national Departments had spent a total amount of R 115.7 billion (98.3%) of the current payments budget, R279.8 billion (99.1%) of the transfers budget and R8.3 billion (93.2%) of the capital assets budget. The preliminary outcome was that an amount of R5.1 billion (1.2%) was unspent.
Statistics SA had spent 91.9% of its budget. The under-expenditure was mainly due to a delay in the implementation of ithe Census 2011 programme. The Department of Public Works had under-spent by R361 million as a result of the slow implementation of capital projects relating to the Prestige Portfolio and non-payment of the Extended Public Works Programme (EPWP) incentive grant. Parliament differed from the other Votes as unspent funds were not surrendered but increased the cash reserves.
The Department of Arts and Culture had under-spent by 15.5% mainly as a result of delays in capital works projects. The Department did not have a Chief Financial Officer (CFO) in place for most of the year. A moratorium had been placed on spending in the Investing in Culture programme by the Minister following a forensic audit. The Department of Education had under-spent as a result of the withdrawal of the tender for work books due to time constraints. The Department of Health had under-spent the Hospital Revitalisation Grant as a result of contractual, legal and planning problems. The Department of Social Development had under-spent on social grants.
In Justice and Protection Services, the most significant under-expenditure was noted by the Independent Complaints Directorate (ICD), which had under-spent by 8.9%. The under-spending was mainly in programme management and research. Delays were experienced in the relocation of offices. The Department of Correctional Services had under-spent as a result of non-implementation of the occupational-specific dispensation (OSD) and the reduction of overtime payments.
The Department of Rural Development and Land Reform had under-spent by 8.4% as a result of a moratorium being placed on buying land in the PLAAS programme. The under-spending by the Department of Water Affairs was caused by the non-payment of invoices submitted for water and sanitation projects. A request to roll-over the funding had been received. The Department of Transport had over-spent its budget as a result of additional spending on the bus subsidies programme. The Department of Communications had under-spent as a result of savings in the contract between Sentech and Telkom for the provision of technology related to the broadcasting of the 2010 FIFA Soccer World Cup. This gain arose because the amount budgeted had exceeded the actual amount negotiated.
Mr M Swart (DA) asked for an explanation of the Prestige Portfolio referred to under the budget of the Department of Public Works. He asked what the balance was in the Parliamentary cash reserve account and what the funds could be used for.
Mr A Donaldson (Deputy Director-General: Public Finance, National Treasury) explained that the Prestige Portfolio referred to heritage buildings, mostly situated in
Mr L Ramatlakane (COPE) asked when the preliminary figures in the report would be finalised.
Mr Donaldson answered that the figures were close to the final amounts. Any changes were expected to be marginal.
Mr Swart asked why the new Departments were not mentioned in the briefing.
Mr Donaldson replied that the new Departments be reported on in the forthcoming fiscal year.
Mr G Snel (ANC) asked what performance auditing tools the National Treasury had in place to verify that Departments achieved their objectives.
Mr Clifton advised that the National Treasury relied on the Auditor-General’s reports for information on departmental performance as well as surveys undertaken by independent evaluators and Statistics South Africa.
Mr Ramatlakane asked what an acceptable under-expenditure rate was.
Mr Donaldson answered that an aggregate under-expenditure level of 1% was considered to be reasonable.
Mr Ramatlakane asked to what extent the National Treasury was involved in the discussions concerning the responsibility for learner transport.
Mr Janari answered that this was a policy issue between the Department of Education and the Department of Transport. Currently, the policy was not applied consistently by all the provinces. The National Treasury had raised the matter with the Minister of Education during the Budget deliberations but the matter had not been resolved.
The Chairperson advised that the Committee would raise the issue with the Departments concerned. He asked for clarity on the problems experienced by the Research Unit of the ICD.
Mr Randela explained that delays had occurred with the relocation of the offices of the ICD. The problem was with the Department of Public Works rather than the ICD.
Mr Snel asked what lessons could be learned from the Police Department’s good spending record.
Mr Randela replied that 70% - 75% of the Department’s budget was for the payment of salaries. The Department had expenditure contingency plans in place as well.
Ms B Ngcobo (ANC) asked why the Department of Correctional Services had not applied the occupational-specific dispensation.
Mr Randela explained that the Department included various OSDs. The OSD applicable to prison warders had been implemented but the OSD applicable to nurses, educators and artisans had not been implemented due to a need to complete skills audits.
Ms Ngcobo asked why the Department of Agriculture, Forestry and Fisheries (DAFF) had spent more than 90% of its budget by the end of the fourth quarter but had only spent 60% by the end of the third quarter.
Mr Donaldson said that a full picture could be formed once the Department had submitted a full annual report. He was aware that there had been complications as a result of the new responsibilities that had been taken over by the DAFF.
Ms Ngcobo asked why the conditional grant amounting to R466 million to the Department of Cooperative Governance and Traditional Affairs had been offset as the Department had failed to spend the R5 million allocated to it.
Mr M Fakir (Chief Director: Urban Development and Infrastructure, National Treasury) explained that many local Government authorities did not spend the full amount of the grants made available. In many cases, the unused funds were not returned as required. As a result, the municipalities received less of the equitable share.
Ms Ngcobo asked if the withholding of municipal grants would affect effective service delivery.
Mr Donaldson conceded that certain municipalities had experienced difficulties as a result of the withholding of funds. The National Treasury and the Department of Cooperative Governance and Traditional Affairs had held discussions over the previous six months on the matter. The National Treasury had been involved in assisting municipalities with their accounts in an attempt to ensure that the delivery of basic services was not hindered.
Mr Ramatlakane asked what concerns the National Treasury had with regard to the general expenditure trends.
Mr Donaldson answered that the standard of financial management across the Departments varied. Improvements in the management of infrastructure and capital expenditure projects were needed. Information technology and financial control systems required improvement.
Ms Ngcobo asked if the National Treasury had funds available to capacitate finance officials in Departments.
Mr Donaldson replied that grants were available and the National Treasury formed partnerships with municipalities, which focused on effective financial management. The Technical Assistance Unit of the National Treasury provided project management advice.
The meeting was adjourned.
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