Committee Report on Fourth Quarter Expenditure Report for 2009/10: consideration

Standing Committee on Appropriations

30 August 2010
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Committee examined the spending patterns in various departments, including the Departments of Public Works, Arts and Culture, Education, Health, Communications, Rural Development and Land Reform, and Minerals and Energy. Of great concern to the Committee was the under-spending by all the Departments except Transport. The Department of Arts and Culture under-spent the most, by 15.47%. High vacancy rates in Departments hampered service delivery. There was also slow spending on capital payments, rolling-over of funds and unsatisfactory spending on conditional grants.

The Committee was also concerned with the extent of the practice of virements which allows Departments  virements of up to 8% of their budgets. This might be an indication of a lack of proper budgeting by Departments, as virements and shifting of funds were being effected as early as the first quarter of the financial year. In the Department of Arts and Culture there was a lack of proper monitoring of projects. This had resulted in the embezzlement of funds. Some of the individuals who were dismissed from Arts and Culture had been provincial co-coordinators responsible for the monitoring and evaluation of these projects. In the Department of Education there was a late delivery of workbooks, and the Committee was concerned about this. The Committee welcomed the initiative of an internally developed workbook and the savings that would be made as a result.

In the Department of Health there was a close monitoring of capital projects to prevent wasteful expenditure. The Committee supported this plan but questioned its role in ensuring spending by provinces. The Department of Communications under-spent by 6.82%. It was indicated that this under-spending was due to, among other things, the R 116 billion savings on the contractual agreements for the 2010 FIFA World Cup infrastructure- related projects entered into by Sentech and Telkom. In the Department of Rural Development and Land Reform a number of critical posts were not filled. The Committee was concerned about this and wanted to know what the Department was going to do to address this problem. The Department of Minerals and Energy under-spent by 3% due to delays in the submission of invoices from beneficiaries of the mining subsidy.

Meeting report

The Chairperson asked the Members to focus on the underlined sentences in the draft report. The new additions were the areas of engagement between the departments and the Committee. Each section of the draft report was to be dealt with one-by-one and the Members would comment if they felt it necessary.

Introduction:
Mr D Mavundla (ANC) pointed out that it was not section 32 of the Public Finance Management Act (PFMA), but section 43 of the Act that dealt with virements and that the Committee was concerned with the extent of the practice of virements by departments.

Expenditure Trends at the end of 2009/10   
Mr M Swart (DA) wanted the word “and planning” to be inserted after “under-spending” in the first underlined sentence of the section.

Spending trends for the selected Departments:


3.1 Department of Public Works
Mr Swart wanted to know where the Dolomite and Accessibility projects were conducted.

The Chairperson commented that the Accessibility project was geared towards the disabled.

Ms R Mashigo (ANC) felt that the Committee needed to state its concerns and that the Department was protecting itself. The Department was delaying matters and showed a lack of confidence in its abilities. They were not doing their work and there was also the question concerning the data capturers. She wanted the Department to write a better report and present it to the Committee. Public Works also felt that other departments were delaying them from carrying out its job.   

The Chairperson wanted to know where the 90 data capturers were placed.

3.2 Department of Arts and Culture
Mr L Ramatlakane (COPE) wanted the word “fired” on page four, paragraph four to be replaced with the word “dismissed”. He felt that this was the correct labour term to use.

Ms Mashigo wanted the sentence on page four, paragraph four: “It further required that a proper turnaround strategy be developed to counter the repeat of this phenomenon in future” to be deleted.

The Chairperson commented that the Director General had actually admitted that there was a lack of proper monitoring of projects in the Department.

Mr Ramatlakane commented that there was an inappropriate Risk Management Strategy and that the Department did not develop a sufficient Risk Management Strategy.

The Chairperson commented that this lack of a proper risk management plan resulted in the embezzlement of funds.

Mr Swart wanted a proper turnaround strategy from the Department.

The Chairperson further commented that he had found the Director General very frank in discussions with the Committee.

Mr Mavundla wanted the Department's audit committees to be strengthened.

The Chairperson commented that internal audit committees assisted departments within Government.

Mr Ramatlakane said that each Department had its own internal audit committee as a support structure and that these committees worked together with the Chief Financial Officer and supply-chain management.

Mr G Snell (ANC) commented that if one looked back at the previous year’s annual report, the Department had said that it was “functioning perfectly”. It brought up a broader thing: did Members want to look specifically at this particular audit committee in this Department or more broadly in terms of findings and recommendations? To reduce risk these things had to function.

The Chairperson said that the Committee was aware of the challenges that the Department faced. This Department was the worst in terms of under-spending. If the Department was dysfunctional, what could be done? Many internal audit committees were not functioning properly.

Mr Ramatlakane commented that one could not be sure when the turnaround strategy was developed.

3.3 Department of Education
Mr Ramatlakane said that the Department could not tell the Committee any implications of new strategy, or what the costs or savings were. Even National Treasury could not ascertain whether there would be costs or savings. National Treasury had referred the matter back to the Department. Further, the question of the roll-over: both National Treasury and Education could not determine whether there would be costs or savings as well as what the implementation implications would be. The issue of what the budget book said and what was done did not correspond. The whole plan was not implemented.

Mr Mavundla agreed with Mr Ramatlakane that the whole budget was not implemented.

The Chairperson wanted to know whether the Department had the capacity to implement the roll-out. There were a lot of tender irregularities. Implementation was taking long. On the issue of vacancies, the Department was cutting corners because staff members were not appointed. The Department could not implement its programmes properly as a result of the high vacancy rate. The Department should not cut corners in the interest of savings. Savings should be savings.

3.4 Department of Health
Mr Mavundla was not sure whether the second paragraph on page six: “The Department seemed to be experiencing……………of the National Health Insurance system” was the Committee's findings or whether it was the Department which had  stated this.

The Chairperson commented that this was an observation by the Committee.

Ms Mashigo said that the Committee should know the basis of its information because this was one of the Departments that were not called to appear before the Committee.

3.5 Department of Communications
The Chairperson commented that the Department under-spent by 6.82% and that there were a number of things not carried out by the Department.

Mr Ramatlakane said that one of explanations given for under-spending was the result of the delay in the Public Private Partnership PPP) processes. This was not a proper explanation but an old strategy that the Department used to explain under-spending. The issue of PPP was not new.

3.6 Department of Rural Development and Land Reform
Mr J Gelderblom (ANC) wanted to know whether the Department had brought the further information the Committee had  requested.

The Chairperson wanted to know what was happening with the Department's drive to build internal capacity.

Mr Ramatlakane was concerned about the employee leave gratuity. The Department was asked about this question and could not give a proper answer. Also, he queried the second last paragraph of section 3.6 on page eight “The Committee expressed its displeasure…………and for developmental grant”. The number of applications remaining was not quantifiable. The implications could be in billions of rands. This was a great concern for the Committee.

The Chairperson said that the previous Director General had given some estimation on this cost. There were huge backlogs in the Department yet the money was not spent. Departments committed themselves and then parked their commitments because they could not deliver.

Mr Ramatlakane said that the R12 billion that spoke to the backlog was contested by the Committee. That figure was thrown in and one could not know how the figure was determined.

The Chairperson said that proper engagement with National Treasury should take place. The less spent on litigation, the better.

3.7 Department of Minerals and Energy
Mr Gelderblom asked whether this section reflected correctly what had happened that day and whether there was outstanding information that had been sent to the Committee.

The Chairperson said that no further information had been received.

Mr Ramatlakane commented that the Committee had asked for answers in writing from the Department.

Mr Swart commented that municipal budgets were approved in March and the final budgets were approved in May. The departments could plan in the interim while waiting for the final budget approval.

The Chairperson thanked the Members for their respective inputs.

The meeting was adjourned.



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