The Committee met with the Departments of Health, Sport and Recreation and Cooperative Governance and Traditional Affairs to question them on non-compliance with the Division of Revenue Act.
Members asked the representatives of the Department of Health what had prevented the Department from addressing the Auditor-General’s concerns, when the Department would addressing the inadequate number of members of staff to gather accurate reports from provinces on the spending of grants, and what mechanisms had been established to ensure effective monitoring and evaluation of grant expenditure.
The Department of Sport and Recreation was asked why, in the 2008/09 financial year, the provinces had failed to submit their risk and sustainability plans in relation to their mass participation grants by the deadline of 30 May stipulated in the Government Gazette, and why money was transferred to provinces despite this failure. Members asked further if the Department was satisfied with the use of funds allocated for World Cup stadia, if the mass participation grant was also geared towards schools, and if there was any concern that some of the stadia might not be sustainable in the future.
The Department of Cooperative Governance and Traditional Affairs was asked what progress it had made in relation to the filling of vacant senior management posts, what the difference was between municipal infrastructure grants and special municipal infrastructure grants, why certain municipalities had been given their grants so late in the financial year, and what measures were in place to ensure effective capacity-building. Furthermore, the National Treasury was asked whether, in order to clear up possible confusion, the disaster management funds should not be separated from the municipal infrastructure grants.
The Chairperson observed that the issues raised were not new. Thus far the Division of Revenue Act had been a challenge; it was necessary to ensure accountability throughout the process of disbursing and spending the conditional grants. The Committee would follow up on the outcome.
Department of Health
Mr M Malale (ANC) asked what issues had caused the Department not to address the concerns raised by the Auditor-General.
Ms Precious Matsoso, Director-General, Department of Health, answered that, in relation to the HIV/AIDS grant, costs had increased as a result of Government’s commitment to treating more people. The Department was, however, working on strengthening its prevention strategy in order to reduce the number of people needing treatment. Its forensic pathology grant was aimed at assisting the criminal justice system and ensuring improved and productive mortuary services. As this was one of its poorer performing grants, it had worked together with the criminal justice system as well as the South African Police Service (SAPS) in order to increase personnel. This move was aimed at addressing the backlog which was undermining the criminal justice system. The health professional training and development grant was allocated to all provinces though it was initially meant for only three provinces. The Department was looking at working together with the Department of Higher Education and Training in an attempt to find better ways of training health personnel. The hospital revitalisation programme had seen significant under-spending. A provincial support programme had been set up in order to assist provinces to better spend on this grant.
Mr Malale asked when the Department would be addressing the issue of lack of adequate staff capacity to gather reports from provinces.
Ms Matsoso answered that the first phase of this process, the restructuring of the national department, had been initiated. Staff would be deployed to the provinces in order to assist provincial offices as well as some of the struggling hospitals.
The Chairperson asked when this allocation of personnel was initiated.
Ms Matsoso answered that a report had been complied in the last two months. The Department had realised that the hospital revitalisation programme cost lots of money to implement and the Provincial Support Committee worked with National Treasury in order to address the problems around spending on this grant.
Mr Malale asked why the Department could not verify source documents.
Ms Matsoso answered that the historical approach to how these grants were managed was not effective. The Department was, however, addressing these issues.
Mr Malale asked why there were delays in the submissions of business plans.
Ms Matsoso answered that the Department was in consultation with the provinces about this and was also looking at ways of fast-tracking the process.
Mr Malale asked what mechanisms were in place to ensure effective monitoring and evaluation of these grants.
Ms Matsoso answered that chief financial officers (CFOs) met on a monthly basis when implementation plans were created for each province.
Mr Malale asked whether the Department had effective information systems which interfaced with those of the provinces.
Ms Matsoso answered that information systems within the Department were a challenge. District health information systems were the backbone of any health information system. The Department was looking into ways of securing data interchange by moving away from its current paper-based system.
Mr Malale asked why the funds allocated for these grants were held in a general account from which they could be dispensed for purposes other than what they had been allocated for.
Ms Matsoso answered that this was of concern to the Department. To address this, it had, together with the provinces, discussed that funds set out specifically for these grants should not be redirected to any purpose for which these funds had not been set aside for.
Mr Malale said that, although the Division of Revenue Act allowed for monies to be withheld in cases where they were not correctly spent, this was not happening.
Mr N Singh (IFP) asked what monitoring and evaluation systems existed around the spending of allocated grants. Were any grants withheld from provinces and, if so, why? Were there any interventions on the part of the Department to assist provinces around capacity-related issues?
Ms Matsoso answered that a monitoring and evaluation system had recently been initiated. Though there were no examples of grants being withheld, discussions were being held around possibly reallocating funds in these cases. The Department was following an integrated approach in order to address capacity issues.
Mr P Pretorius (DA) asked whether future reports would include detailed reporting on the monitoring of these grants.
Ms Matsoso answered that they would.
Mr Pretorius asked how the Free State and Northern Cape provinces under-spent on their hospital revitalisation grant as a result of ‘insufficient cash’.
Ms Matsoso answered that there had in these provinces been problems around cash flow management. Systems had since been set up to deal with under-expenditure on this grant.
Ms T Chiloane (ANC) asked how the Department hoped to address the issue of provinces providing inconsistent information in monthly financial and quarterly performance reports.
Ms Matsoso answered that the Department was considering employing data capturers who would ensure that accurate data was captured at provincial level. This data would in turn be analysed at national level.
Mr S Thobejane (ANC) asked why the report was only drawn up two months ago when the problem had existed for more than one financial year. Was there an official dealing with this issue?
Ms Matsoso answered that the analysis should not have taken so long to be conducted, but the Department was currently working on responding adequately.
Mr Pretorius asked whether any money could go missing at provincial level without the national department being aware of it.
Ms Matsoso answered that this was indeed possible and the Department was, in working to address this, holding discussions on this issue with the Auditor-General.
The Chairperson said the issues raised around the conditional grants were long-standing. As opposed to waiting for the Department using the hospital revitalisation programme as a yardstick, the Department should focus on ensuring accurate, quality reporting around all the relevant grants. This would go towards addressing the issue of lack of proper accountability.
Department of Sport and Recreation
Mr Thobejane asked why, in the 2008/09 financial year, in relation to the mass participation grant, there had been no risk and sustainability plan submitted by provinces by the deadline of 30 May stipulated in the Government Gazette.
Mr Vernon Petersen, Director-General, Department of Sport and Recreation, answered that this was largely as a result of poor staffing capacity.
Mr Thobejane asked why money had been transferred to these provinces despite this.
Mr Petersen answered that this was not a requirement prior to these funds being transferred.
Ms L Mashiane (COPE) asked when, in relation to business plans, approval was granted.
Mr Petersen answered that indicative totals were given to the provinces so they were aware of what to expect in this regard. They then went on to prepare their business plans against the grant framework. In addition, regular monitoring meetings were held.
Mr Singh asked whether the Department was satisfied with the use of funds allocated for World Cup stadia. Was the mass participation grant also geared towards schools?
Mr Petersen answered that there had not been complete compliance and that the biggest challenge there was around over-expenditure. This was mainly as a result of provinces not opting for fixed pricing. In cases of over-expenditure loan funding could be provided to municipalities. There was also an issue around maintenance and sustainability.
Mr Singh asked whether there was any concern that some of the stadia might not be sustainable in the future.
Mr Petersen answered that a review was being conducted into this.
Department of Cooperative Governance and Traditional Affairs
Mr M Mbili (ANC) asked what progress the Department had made in relation to the filling of vacant senior management posts.
Mr Elroy Africa, Director-General, Department of Cooperative Governance and Traditional Affairs, answered that it had re-advertised these positions in March and was currently interviewing candidates. It was looking at having filled most of these positions within the next three months.
Mr Mbili asked why there was, as yet, no Chief Financial Officer.
Mr Africa answered that a large part of the reason behind the qualified audit it had received was poor leadership. It was therefore necessary for the Department to terminate the CFO’s contract. It was currently in the process of finding and appointing a new CFO.
Mr Mbili asked why it had taken the Department this long to appoint a new CFO.
Mr Africa said that the post had been vacant for approximately six months. It was difficult to find quality CFOs who were willing to accept the remuneration offered by the Department.
Mr Mbili asked what the difference was between municipal infrastructure grants and special municipal infrastructure grants.
Mr Africa answered the both of these grants were aimed at providing financial support to municipalities for them to provide basic services. The municipal infrastructure grant provided support to local municipalities. Conditions for municipal infrastructure grants for cities were slightly more relaxed. There was no dedicated grant set aside for disaster management.
Mr Mbili asked why certain municipalities had been given their grants so late in the financial year. Could this not be seen as fiscal dumping?
Mr Africa answered that under-expenditure had been a challenge with two of the three conditional grants the Department was responsible for. The Department had nonetheless acted in accordance with the Division of Revenue Act. Where problems had been noted the requisite action was taken. This took the form of either withholding funds from (or completely stopping it from going to) the relevant municipality. There were 23 cases of this kind of action having been taken. This was not a case of fiscal dumping.
Mr Mbili asked whether the Department was wholly satisfied that municipalities could spend their allocated budgets before providing them with their budgets.
Mr Africa answered that the Department did indeed ensure that it was satisfied of this before dispensing funds to municipalities.
Mr Mbili asked why, if this was the case, there had been so many examples of under-spending. Could the under-expenditure be as a result of municipalities being given their funds so late within the financial year?
Mr Africa answered that, as the total municipal infrastructure grant stood at around R9.9 billion, this could not be spent within one financial year. The Department had worked according to a payment schedule which had been agreed upon by all the relevant stakeholders, including municipalities. This was, however, not an excuse for under-expenditure in general. Some of the reasons for under-expenditure included business plans being too ambitious and the lack of adequate capacity at municipal level, especially in relation to engineering, programme and project management.
Mr Mbili asked why municipalities were given the total amount when it was evident that they would not be able to spend all of these funds within one year as this often led to the perception that they had under-spent.
A representative of the Auditor-General’s Office said that certain municipalities were allocated disaster management funds and this was the reason for funds being disbursed to them later in the financial year. Payment schedules should be developed in such a way that funds were transferred closer to the period in which they were needed so as to avoid the perception of under-expenditure. The National Treasury had been trying to determine the total amount by which municipalities had under-spent.
The Chairperson asked representatives of the National Treasury whether the National Treasury had made any findings as yet in this regard.
The National Treasury responded that it had concluded the process and presented these findings to the Minister. The National Treasury would be willing to present these findings to the Committee once the Minister had had signed off on them.
Mr R Ainslie (ANC) asked what measures were in place to ensure effective capacity-building. Instead of withholding funds of local municipalities that were under-spending, could these funds not be given to the relevant district municipalities, if the latter had better spending records?
Mr Africa answered that although the Department’s capacity-building measures had not yielded the desired results, its turnaround strategy was targeted at redressing this situation. There were examples of funds being given to district municipalities in such cases.
Ms Mashiane asked representatives of the National Treasury whether, in order to clear up possible confusion, the disaster management funds should not be separated from the municipal infrastructure grants.
The National Treasury responded that this had caused problems and would need to be addressed.
The Chairperson said that the main issue had been accountability. Where funds were transferred, there had to be systems to ensure that there was proper accountability. Beyond the conceptual frameworks expressed on paper, it had to be asked if, in reality, things were working or not. This was the Committee’s area of concern. So far the Division of Revenue Act had been a challenge. It was the role of the national departmental officials to assist the Committee in ensuring that these grants were given and accounted for. This was why these grants were called conditional grants. They came with conditions that must be fulfilled. The role of the national departments in disbursing these grants was, not withstanding the responsibilities of the provinces and local government, crucial. Although it might not be the director-general of a national department but a deputy director-general or chief director who carried out the work involved, it was necessary to ensure accountability throughout the process for the task that had been entrusted. This was the most important message that the Committee wanted to convey. Monitoring was vital. These were actually issues that were old enough to have warranted the Committee’s convening this hearing. The Committee took the departments at their word, but would be following up on the outcome.
The meeting was adjourned.
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