Appropriations Standing Committee: Research Unit Analysis of 1st quarter Expenditure Report
Meeting Summary
The Parliamentary Research Unit presented an analysis on the first quarter 2010 Expenditure Reports of various departments, and isolated certain departments who had either under or over spent on their budget allocations. Most departments attributed delays to late transfers of payments and subsidies to agencies, large numbers of vacant posts, and non payment for goods and services, due to late submission of invoices, including from the Department of Public Works.
The expenditure for the Department of Women, Children and People with Disabilities could not be determined, due to lack of the reporting systems in that Department, but this fact alone exposed the Department to financial management risks and reduced its accountability. The Department of Home Affairs had spent only 16.48% of budget, and had failed to pay as budgeted for rates and taxes to municipalities, which then affected the municipalities’ revenue collection. The Independent Electoral Commission had requested that funds be deferred to the fourth quarter. Members were particularly concerned about non-payment for printing of passports by the Department to the Government Printing Works. The Department of International Relations and Cooperation attributed its underspending (14.8%) to lack of transfers to foreign missions, and low spending on capital assets locally and abroad, as well as delays in capturing expenditure of foreign missions. The Department of Public Enterprises, who transferred the bulk of its budget to State Owned Enterprises, noted that its reasons for under expenditure included vacancies, lower-than-anticipated travel costs, and legal claims not yet received. Members wished to question this Department about the references to the Pebble Bed Modular Reactor, and pointed out that State Owned Enterprises had the potential to create jobs.
The Department of Sport and Recreation had overspent, which was attributed to high spending on subsidies and transfers, as it had to transfer 100% of conditional grants to municipalities in terms of the World Cup arrangements, although some other agencies did not receive their transfers. Some programmes showed expenditure as low as 14%, apparently due to delays in identifying service providers, or delays by municipalities in submitting business plans. Members were critical of the under spend on some programmes, thought that this Department had used the World Cup as a convenient excuse, and commented that it should have insisted on business plans in order to make proper estimates. The Department of Communications had spent only 9.8% of its budget at the end of the first quarter, which had included transfers to agencies and the public corporations. It had deferred the Broadband Digital Migration awareness programme, and ICT programmes. However, this explanation did not cover all the discrepancies, and it had also under spent in the previous year. Members asked the Research Unit to do a comparison of the previous and current year’s expenditure, by programme, were worried that the SABC was likely to ask for another bail-out, and noted that unfilled vacancies had been a recurrent problem.
The Department of Energy had spent only 12.3%, and had explained that there were outstanding payments still to be made to the Department of Mineral Resources. However, a number of other transfers had not been done, despite their being critical to job creation and delivery. The Department of Environmental Affairs spent only 17% of the overall budget, because of low spending on capital payments, non-payment for computer systems, and low spending in the Climate Change programme and failure to transfer to a number of entities. The Department of Rural Development and Land Reform had spent only 13% of its allocation, noting that the amounts budgeted for settling new claims had been held back to settle outstanding restitution court cases. This Department, while focusing on land restitution, had neglected other programmes. Members were critical of this, noting that the failure to delivery could lead to explosive social situations and would not allow the economy to grow. The Department of Trade and Industry claimed that its underspending was the failure by its own entities to submit claims on time, and failure of customers to submit invoices on time. There was lower spending on advertising and contractors, and suspension of spending on some incentive schemes. Members wanted the Committee to follow up on service delivery agreements and noted that the suspension of incentive schemes did not make sense, since they created jobs. The Department of Water Affairs had only spent 15.9% in the first quarter, which was attributed to outstanding invoices, slow spending on current payments, savings on vacant posts, and delays in signing contracts for capital projects and non-payment to the De Hoop Dam. Members asked that the Research Unit do a follow-up on the De Hoop Dam and noted that the challenges noted by this Department were ever-recurrent.
Members suggested that the Departments should be asked whether the Medium Term Expenditure Framework was serving their needs, suggested that the reports must be tabled in the House so that issues could be raised with Ministers and officials, and noted that many of the departments had not followed up on issues raised by committees over the preceding years. They also questioned the tools used to measure performance bonus and the annual appraisals, commented that funds which could have been used for poverty alleviation were not spent at all, but yet were still included in budgets.
Meeting report
Parliamentary Research Unit 1st quarter 2010 Expenditure Report
Mr Sizwe Nyenyiso, Parliamentary Research Unit, explained that he had identified some departments, from the 1st quarter expenditure reports for 2010, whom it would be useful for the Committee to engage with during public hearings. A number of issues emanated from the 1st quarter Expenditure Report (the report) that required attention by the Executive. He said that some of the challenges that were identified in the previous report resurfaced in the current report. Ten Departments were selected for analysis on the basis that they either under spent or overspent. The expenditure for the Department of Women, Children and People with Disabilities could not be determined, due to lack of the reporting systems in that Department, but this fact alone exposed the Department to financial management risks and reduced its accountability.
He then outlined the spending trends for various departments.
Department of Home Affairs (DHA)
The Department of Home Affairs (DHA) was allocated R5.7 billion in 2010/11, and spent only R942.4 million (16.48%) during the first quarter. The under spending was attributed to lower spending on departmental programmes, such as the Administration Programme, which used only 16% of its budget. Out of R1.5 billion, only R142 million was spent on payments for rates and taxes to municipalities, This then affected the revenue collection of the affected municipalities. Other factors that contributed to low spending included late payments for the introduction of the Late Registration of Births campaign and the On the Spot Adjudication Campaign. The quarterly payment for the Master Rental Agreement with GijimaAST was withheld in the first quarter. No explanation was given for the withholding of funds. Some funds were not transferred to the Independent Electoral Commission (IEC), as the IEC requested that such funds be deferred to the fourth quarter.
Discussion
The Chairperson explained that the DHA had made it clear that GijimaAST did not deliver on the services as promised. He said that he was worried about non payment to the Government Printing Works for the printing of passports, because issuing of passports was related to non delivery of services by the DHA.
Department of International Relations and Cooperation (DIRCO)
The DIRCO was allocated R4.8 billion in the 2010/11 financial year but had spent only R716.9 million (14.8%) at the end of the first quarter. The under spending was attributed to the departmental programmes which dealt with transfers to foreign missions. Less than 1% was spent on transfers to international agencies and organisations. Other contributing factors for the Department’s spending trends included the low spending on capital assets on foreign and domestic property management, and delays in capturing the expenditure incurred in the foreign missions.
Discussion
Mr G Snell (ANC) commended the work of the Research Unit and the Committee Section and he said that the Committee would also strengthen the work already done.
Mr J Gelderblom (ANC) asked for clarity on under spending in respect of foreign transfers.
Mr Nyenyiso replied that he could not reply on behalf of the Department, and he suggested that Members could ask such questions directly of the departments concerned.
The Chairperson explained that the non alignment of systems of payments between the DIROC and the foreign missions could be the cause. Foreign missions were based in other countries that were using other systems.
Mr D Mavunda (ANC) asked the reason that the Committee was being asked to focus only on the departments that had been spending less than expected.
The Chairperson explained that the over and under spending Departments were selected so that Members could help them to seek and solve the underlying problems, and offer help.
Department of Public Enterprises (DPE)
The Department of Public Enterprises transferred the bulk of its budget to the strategic State Owned Enterprises. Only R165 million (47%) out of the budgeted annual amount of R360.6 million was spent at the end of the first quarter. The Department had mentioned that under spending was a result of various factors. It noted that the Department had committed to operational expenditure, but invoices were still awaited in order to pay. Its travel expenditure had been less than anticipated. Office accommodation claims had not yet been made by the Department of Public Works. Vacancies had not been filled in the Manufacturing Enterprises and Joint Projects Facilities programme. Legal claims that were projected to be paid in April were not received from the Department of Justice.
Discussion
Mr M Swart (DA) said that he was baffled by the fact that the Pebble Bed Modular Reactor had been mentioned in the Department’s report, as he had understood that this venture was supposed to have been put on hold.
The Chairperson suggested that maybe the funds that had not been used were meant for the actual folding of the entity. He added that the Department could provide a correct answer to that question.
Department of Sport and Recreation (SRSA)
The Department of Sport and Recreation (SRSA) had overspent by 57% at the end of the first quarter. Overspending was attributed to the high spending on subsidies and transfers. The Department was required to transfer 100% of conditional grants to municipalities under the FIFA World Cup Unit. Transfers were not made to other agencies such as Boxing South Africa and LoveLife. In some programmes, the expenditure was too low, sometimes as low as 14%. The Sport Support Services allocation was projected at R102 million, but only R8.1 million was transferred in the first quarter. The International Liaison and Events programme spent only 10% of its allocation. The reasons that were provided by the Department in certain programmes included delays in identifying appropriate service provider to procure learning material for training and development programmes, and delays in purchasing the mobile gyms due to late submissions of business plans by the municipalities.
Discussion
Ms R Mashigo (ANC) said that she could not understand under spending in regular sports programmes, and the fact that the Department blamed the Soccer World Cup for everything.
Mr Gelderblom asked the Research Unit to compare this Department’s spending for the financial years 2009/10 and 2010/11, to clearly see which programmes were neglected.
The Chairperson suggested that Department of Sport and Recreation should be dealt with at a later date.
Mr Swart indicated that he had many questions for Boxing South Africa.
Mr Mavunda said that when municipalities were not providing business plans for mobile gyms then service delivery would be hampered.
Mr Snell was baffled by the fact that the Department had budgeted for mobile gyms without proper business plans, as this was tantamount to simply guessing the amounts that were needed.
Department of Communications
The Department of Communications had spent R208.5 million (only 9.8%) of its budget at the end of the first quarter. The expenditure had included transfers to agencies and the public corporations. Reasons given by the Department for low transference rate included the large number of unfilled vacancies, and the fact that the Broadband Digital Migration awareness programme was deferred, upon instruction of the leadership. The Director General had instructed officials to postpone to the international forums on ICT. However, these explanations for under spending did not cover all areas. This Department was among those that had reported high underspending in the 2009/10 financial year. The reasons provided then were that there were a number of vacant positions, and non disbursement of funds to entities. There were some delays in the development of hospital websites.
Discussion
Mr Swart felt strongly that this Department was not performing properly, and it lacked planning.
Ms B Ngcobo (ANC) suggested that the Committee should track the Departmental spending trends also in the first quarter of the 2009/10 financial year, and should invite officials to account.
The Chairperson said that the Department did not make transfers to the South African Broadcasting Corporation (SABC) and this entity would come back and ask for another bail-out. He then suggested the flagging of the DOC expenditure report.
Mr Snell asked whether the vacant posts were affected by the austerity measures.
Ms B Ngcobo (ANC) said that if the Department had problems with unfilled vacancies it should inform the Committee of this fact.
The Chairperson explained that some Departments were unable to carry out their tasks, due shortage of personnel, but those Departments would have to explain the reasons that they could not fill vacancies.
Department of Energy
The Department of Energy had spent only R684.5 million (12.3%) of the R5.53 billion allocated for the 2010/11 financial year, in the first quarter. The reasons given for under expenditure included the lower than expected expenditure on current payments for goods and services. There were some outstanding payments to the Department of Mineral Resources, as the two Departments had been sharing premises. The costs for accommodation were supposed to be shared, but the Department of Mineral Resources had been paying for the lease agreement. The Department of Energy would then compensate the Department of Mineral Resources at a later stage. The Hydrocarbons Programme had only spent 0. 82% of its budget in the first quarter, as a result of delays in transferring R1.5 billion to the Transnet Pipeline. There were number of transfers which had not been done, such as Working for Energy, Renewable Energy and National Electrification. All of these transfers were crucial in job creation and delivery.
Discussion
The Chairperson said that some of the things said by the Researchers did not appear on the document and Members could easily forget them. He urged the Research Unit to include everything in writing in its next report.
Department of Environmental Affairs
The Department of Environmental Affairs was allocated a budget of R2.6 billion in the 2010/11 financial year, but spent only R443 million (17%) of the overall budget in the first quarter. Under expenditure was due to the low spending on capital payments and the non payment on computer systems. A second reason was the low payment on Programme 1 (Administration), where only R40 million was spent out of R62 million budgeted. The reason given was that accommodation invoices had not been received from the Department of Public Works. In Programme 4 (Climate Change) the Department aimed to spend R25 million, but managed to only spend R19 million for the first quarter. A number of entities had not received their transfers in the period under review. Programme 3 (Ocean and Coastal Management) was allocated R44 million but spent up to R53 million in the first quarter.
Discussion
The Chairperson and Ms Ngcobo asked for clarity on the overspending on Programme 3 (Ocean and Coastal Management)
Mr Nyenyiso replied that the overspending of R53 million related only to the first quarter and said that this was the only programme that spent more than the amount allocated.
The Department of Rural Development and Land Reform and (DRDLR)
The Department of Rural Development and Land Reform was allocated R6.7 billion for the 2010/11 financial year but spent only R851 million (13%) of it for the first quarter. The main reason for under spending was given that household transfer expenditure, which was supposed to be used for settling new claims, had not been spent but had been held back to settle outstanding restitution court cases. Transfers and subsidies for other programmes, budgeted at R1.1 billion, had not yet been made to the Departmental agencies such as the Agricultural Land Holdings Account for Land Acquisition. In Programme 5 (Land Reform) the Department had only spent R162 million (4%) of its budget for the first quarter. The Department had been focusing mostly on land restitution cases and had neglected other programmes.
Discussion
The Chairperson suggested that Portfolio and Select Committees should be trained so that they were equipped to deal with financial reports.
Mr Gelderblom said that the ruling power had been in power for more than a decade. However, even such a crucial area as Rural Development was not performing well. He added that the Government would pay dearly for non delivery. He said that the economy would not grow to the levels that could reduce poverty, without land reform.
Mr Swart explained that the Departmental budget was too small for such a strategic sector. He warned that this whole matter could “explode in our faces” if it was not given the attention it deserved.
Department of Trade and Industry (dti)
The Department of Trade and Industry was allocated R6.1 billion and spent R.01 billion at the end of the first quarter. The reasons for under spending included late transfers and payment of subsidies to entities. The reason for late transfers was apparently that the receiving entities did not submit their claims on time. The Department spent little on goods and services, due to a number of outstanding invoices, a lower demand for contractors and lower spending on advertising. Spending on some incentive schemes was also suspended.
Discussion
Mr Gelderblom said that he could not understand the delays in purchasing computers in the Department.
Mr Snell asked for clarity on the continued use of consultants while the Department complained about lack of capacity.
Ms Ngcobo suggested that the Committee should follow up on service delivery agreements. She asked the reasons that the claims for the fourth quarter were made in the first quarter of the following year.
Ms Mashigo enquired about the lack of demand for the Departmental incentive schemes. The dti was supposed to play a leading role in implementing the incentive schemes that would create jobs.
The Chairperson explained that some Director-Generals knew that the Public Finance Management Act allowed the Departments to under spend by 8%, and they exploited that loophole.
Mr Gelderblom said that countries like
The Chairperson said that the Committee should focus on dealing with clusters because the Departments in the same clusters had similar challenges.
Department of Water Affairs
The Department of Water Affairs was allocated R7.9 billion and spent only R1.2 billion (15.9%) in the first quarter of 2010/11 financial year. Under expenditure was due to slow spending on current payments and savings on vacant posts. There were some unspent funds on goods and services, due to outstanding invoices for the use of Government Motor Transport. The Department had been slow to transfer funds to agencies and to the De Hoop Dam Project. Some of the unspent funds were attributed to the delays in signing of contracts between the Department and the service providers of certain capital projects, like Regional Bulk Infrastructure.
Mr Nyenyiso said that the Departments of Water Affairs and of Trade and Industry had high vacancy rates that contributed significantly to underspending. Another persistent factor was the delay in payments of goods and services. The Department of Rural Development had focused solely on land restitution and compromised programmes.
Discussion
The Chairperson asked that the Research Unit should do a follow up on the De Hoop Dam. He was frustrated by the Department of Water Affairs, because it had recurring challenges.
The Chairperson said that the Committee should ask the Departments whether the Medium Term Expenditure Framework (MTEF) worked for them, because they were always under spending.
The Chairperson recommended that reports should be forwarded to the House, not for the purposes of naming and shaming, but in order to raise issues with Ministers and officials in a joint sitting.
Ms Mashigo suggested that Party Whips should also be informed when their Members were invited to discuss quarterly reports.
Mr Gelderblom explained that most Departments had not done a follow up on most of the matters that were raised by Committees in the last five years.
Mr Snell asked about the tools that were used to measure performance bonus against the Departmental Annual Performance Appraisal.
The meeting was adjourned
Present
- We don't have attendance info for this committee meeting
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.