Plans to improve performance & comply with the PFMA: briefing by Department of Women, Children and Persons with Disabilities; National Treasury on its 3rd Quarter Performance for 2010/11

Meeting report

The Chairperson welcomed the delegation from the Department of Women, Children and Persons with Disabilities (DWPCD). He highlighted that the Department had been asked to present before the Committee because of its failure to provide a financial statement in September 2010. The Department was required by the Public Finance Management Act of 1999 to account for its expenditure and provide statements unless otherwise stated by National Treasury. He noted that the DWPCD was a new Department and there might be existential challenges but the Committee required an explanation of where the Department was spending its allocated money. 

Presentation by the Department of Women, Children and Persons with Disabilities on its plans to improve its performance
Ms Nonhlanhla Mkhize, Director General, DWPCD, reported on the Department’s plans to improve its performance. The Department had come into existence in May 2009 and had been incubated under the Presidency. The Department did however have a budget vote for the 2010/11 financial year. There were challenges facing the Department around capacity. The Department had submitted its quarterly reports via the Presidency due to the fact that the DWPCD had not yet begun to operate independently from the Presidency. As of November 2010 the DWPCD had begun the process of operating independently from the Presidency.

The Department would be receiving two more staff members seconded from the National Treasury to assist it with its implementation of the Logistical Information Systems (LOGIS). National Treasury would also be assisting the Department with appointing members of its audit committee, including the chairperson. The Department would endeavour to improve its performance by appointing a permanent Chief Financial Officer and additional support staff by the end of June 2011. The Department would aim to appoint human resources management staff by 1 June 2011 and implement the LOGIS transversal system by the same date. The Department would be fully independent of the Presidency by 1 June 2011 and would submit annual performance plans in line with its allocated budget. It would submit all monthly and quarterly reports to National Treasury. The Department would be moving to its own leased building by mid April 2011. It would table and submit its audited annual financial statements for the financial year ending 31 March 2011.

The DWPCD had compensated its employees with R19.2 million of its allocated R21.1 million for employees as of February 2011. The under-spending had been due to unfilled posts within the Department. The Department was in the process of filling critical posts and most of the posts would be filled in the next financial year (2011/12). The expenditure under goods and services was R31 million against a budget of R26.5 million. The Department had overspent on travel and subsistence. The travelling and subsistence costs had been incurred by the Department whilst responding to international obligations such as the UN Convention on the Elimination of all forms of Discrimination against Women (CEDAW) amongst other international conventions. The Department had also spent money on advertising of vacant posts, advocacy and public awareness campaigns.

The DWPCD had spent R51.947 million of the R51.949 million allocated to transfers. Most of the money had been transferred to the Commission on Gender Equality (CGE). The transfers were made on a monthly basis to the CGE per the request for drawings received from the Commission at the beginning of each financial year. The outstanding transfer of R2 000 would be made to the CGE by 31 March 2011. The Department had spent R22 000 of its allocated R6.5 million on capital expenditure. That expenditure represented 0.3% of the total allocation, this was predominantly due to the fact that the Department was yet to move out of the Union Buildings therefore no furniture or office equipment could be purchased. The Department had started the procurement process for furniture for its new building which it would be moving into in April 2011. The Department showed an overall expenditure of R102.2 million against a budget of R106.1 million.

Discussion
The Chairperson asked the National Treasury representatives present to comment on the Department’s presentation and the relationship between National Treasury and the DWPCD.

Ms Gillian Wilson, Chief Director: Administrative Services: National Treasury (NT) replied that NT had built a relationship with the Department. The Department faced many challenges including vacancies in key posts. NT had assisted the DWPCD with working through the budgetary process and issues around that process. The NT had allocated resources in line with the capacity of the Department to spend. The Department was making progress through the appointment of the Director General. The Department had struggled to get through the MTEF period but had reformed its plans and formalised them to ensure that it could carry out what it set out to do. The NT would assist the Department to ensure that there was no over or under-spending. The Department had a solid foundation to build on for its future work.

Mr M Mbili (ANC) asked whether the Department had presented its strategic plan to the Portfolio Committee on Women, Children and Persons with Disability and whether it had been adopted. What did the Department want to achieve by the end of the current financial year? Lastly, he asked whether the DG had signed her performance agreement with the Minister of Women, Children and Persons with Disabilities.

Ms Mkhize replied that the Department had submitted its strategic plan on 9 March 2011. The document outlined the Department’s targets and goals. The detailed performance agreements were yet to be finalised but she had signed a performance contract. The agreements would be signed by 31 May 2011. The Department had had several meetings with the NT to sort out its budgetary planning. There was therefore an alignment with the budget, strategic plan and performance agreements.   

Ms L Yengeni (ANC) asked four questions. Firstly, she asked who the Department accounted to. Secondly, she asked where the NT had given the Department capacity assistance. Thirdly, she sought clarity on the expenditure on goods and services. Finally, she asked why the Department had not been able to account for its expenditure.

Ms Mkhize replied that the Department initially accounted to the Presidency after its proclamation. The Department now accounted to the relevant portfolio committee. The Department would submit a detailed breakdown and organogram of expenditure to the Committee in writing.

Ms Unathi Ndobeni, Acting Chief Financial Officer, DWPCD, responded that the Department had been unable to account for its expenditure because there was a lack of capacity at that time in the Department. The Acting CFO was at the Department on a part time basis but also held a post at the National Treasury.

Ms R Mashigo (ANC) sought clarity on the Department’s expenditure on travel and subsistence and the use of consultants.

Ms Mkhize replied that the travelling and subsistence costs had been incurred through both local and international travels. This matter was of concern to both the Minister and the DG. The reports the Department submitted to international bodies such as the UN were important and relevant to the work the Department conducted on a daily basis. The Department needed to reassess the sizes of the delegations sent to conventions. The Department had used outsourced services for issues of research, audits and workshops.

Mr J Gelderblom (ANC) commented that the document was not a good advertisement for a public institution. He asked for an organogram from the Department on its expenditure and asked what the spin-offs of the international conventions which the DWPCD undertook would be for the local populace.

Ms Mkhize replied that the Department would submit a detailed breakdown and organogram of expenditure to the Committee in writing. The reports the Department submitted to international bodies such as the UN were important and relevant to the work the Department conducted on a daily basis. The implementation of the policies which were relevant to women, children and people with disabilities were dependant to an extent on the information gleaned from the Department’s international and domestic travels.  The Department acknowledged that it needed to reassess the sizes of the delegations sent to conventions. The delegation which had gone to New York had been cut; contrary to the stories that had been reported in the media. The figures quoted in the media included officials from Non-Government Organisations (NGO’s) and members of Parliament that had gone to New York on separate business. With the organogram in mind, the Department had 195 approved posts and more would be provided to the Committee in writing.

The Chairperson said that there was nothing that showed that the Department had been established in 2009 as key systems were still not in place. It was worrying that the Department had not submitted a report in October 2010. He suggested the session be ended due to the obvious lack of systems at the Department. It was nearly two years since the establishment of the Department and yet there were no systems in place at the Department. International conventions would be of no use if they did not benefit South African people which appeared to be the case. He could not understand why Ms Ndobeni was still working as an Acting CFO. The way in which the Department was operating was unacceptable. The Department had to operate in accordance with the PFMA, and yet things were moving at a snail’s pace at the Department.

Mr G Snell (ANC) said that the Department was either going to fail on its mandate or under-spend its allocated budget. He asked what the National Treasury was doing to prevent the Department from failing to deliver on its mandate or from under-spending.

The Chairperson said that he wanted recommendations for the Department and the National Treasury rather than to go back to a question and answer format.

Mr Snell said that he was happy with the Department’s expenditure if it had been approved by the National Treasury and worked out in conjunction with the Treasury. If the figures had not been approved by the Treasury however, he recommended that the National Treasury play a role in assisting the Department in working up realistic expenditure goals.

The Chairperson questioned whether the Department’s strategic plan had been approved by the Portfolio Committee on Women, Children and Persons with Disability Presentation.

Ms Mashigo asked when the Department would be able to employ people in key positions and when it would deal with the majority of its outstanding problems. She voiced concern about the Department’s use of consultants, they were an unnecessary expense. The Department should only employ consultants if their skills could be cultivated and developed by the Department for its own staff. She expressed doubt about whether the Department could achieve some of the goals it had set out by June 2011. There should be a short term and a long term plan to address the issues mandated for the Department.

Mr Mbili said that he believed the Department’s strategic plan had been approved by the relevant portfolio committee. If that was incorrect then the DG was lying and she should be charged for that.

The Chairperson still needed to check with the Chairperson of the Portfolio Committee on Women, Children and Persons with Disability whether the Department’s strategic plan had been approved. He was under the impression that the Committee had merely discussed the plan and was yet to approve it.

Mr Mbili commented that it was unfortunate that the matter had been raised in the manner it had because it created the impression that the DG was misrepresenting the status of the strategic plan.

The Chairperson said he would have to check whether the strategic plan had been approved by the Portfolio Committee on Women, Children and Persons with Disability.

Ms Marion Mthembu, Deputy Director General for Corporate Services: National Treasury said that Ms Ndobeni had been seconded on a permanent basis to be Acting CFO at DWPCD and that the NT had never seconded a person on a temporary basis.

Ms Wilson said that the NT had done a lot of work on behalf of the Department due to a lack of capacity at the Department. The NT had done more than what the PFMA mandated and had been at the Department’s beck and call when the Department still had capacity issues.

Ms Yengeni said that she wanted clarity on what the status of Acting CFO was as it was patently unclear after the contradicting responses.

The Chairperson said that he would want to speak to the Department’s representatives at the end of the meeting.

Ms Mkhize reiterated that the strategic plan had been approved by the Portfolio Committee on Women, Children and Persons with Disability. The figures in the strategic plan were the exact figures allocated by National Treasury. The Department had indeed been proclaimed in 2009; however the Department did not have a budget vote for 2009/10 as it was part of the Presidency. Due to that the reporting of expenditure was happening under the Presidency. The Department only had to independently report on expenditure in 2010/11 but there had been no compliance on that due to the capacity issues at the Department. The Department’s organogram had been approved by Cabinet. The Department had received assistance from the NT’s Technical Assistance Unit in formulating its strategic plan, the Department would return to the Committee to submit on issues which were outstanding and work to improve its standing.

The Chairperson thanked the Department for its attendance and comprehensive closing statement. He added that Members ultimately wanted the Department to succeed in its endeavours.  

National Treasury Presentation on 3^rd Quarter Performance Briefing
Mr Dalu Majeke, Chief Financial Officer, National Treasury, briefed the Committee on the Infrastructure Grant to Provinces (IGP), Infrastructure Delivery Improvement Programme (IDIP), Neighbourhood Development Partnership Grant (NDPG) and its vacancies.

The Infrastructure Grant to Provinces (IGP) was a conditional grant that supplemented the existing infrastructure budgets of the provincial departments of education, health and roads & transport. The funds were released based on performance and conditions being met. The total IGP budget for the 2010/11 financial year amounted to R11.3 billion. However an amount of R2.47 billion was not transferred due to poor spending performance and non-adherence to the conditions. This process was carried out in terms of sections 16 and 17 of the Division of Revenue Act of 2010. Treasury had spent R6.6 million of an allocated R11.3 million on the IGP which represented 58.9%. The Treasury projected an overall saving of R2.4 million. 

National Treasury had withheld funding to provinces for education, health and roads and transport due to persistently poor performance on spending. A cumulative amount of R3 billion had been withheld from the fifth instalment of the IGP in terms of section 16 of the DORA 2010. Based on the responses received from provinces, an amount of R536million was subsequently transferred to provinces.

Provinces had provided explanations for the poor expenditure trends. The Eastern Cape stated that poor spending in education was due to the withholding of R438 million by the Provincial Treasury. The province also stated that poor performance was affected by the province running a deficit which meant that capital budgets from the equitable share would be cut. Health was under-spending on both its equitable share and the Hospital Revitalisation Grant. The Free State stated that it anticipated under-spending on their infrastructure budgets. Poor performance was due to the late appointment of service providers by the Department of Public Works. The province had also overcommitted its budgets to the roads sector, which negatively affected performance in the other two sectors.

Mpumalanga stated that under-spending in education was due to delays by the Implementing Agent (Department of Public Works) in awarding tenders for Grade R, inclusive schools and the Eradication of Mud & Inappropriate Structures Programme. The Roads & Transport projected to spend R377.7 million or 40.4 % of its R934.9 million budget in the last quarter of 2010/11.The Provincial Health Department’s motivation was not substantive enough except to mention that the problems were not in IGP, but in the Hospital Revitalisation Grant. The Northern Cape cited poor performance in education due to delays in the supply chain management process within the Department of Public Works. Under-spending in health was due to delays in the implementation of two major hospital projects. Under-expenditure in roads is due to the delays in the Department of Public Works which resulted in projects starting late.

Gauteng had the worst performing Education department in terms of spending performance (27.7%), while spending in Health was better at 42% of its allocated budget. The province acknowledged that there had been poor performance in 2010/11 and expected under-expenditure on infrastructure budgets. Concerns were raised about the capacity of sector departments and Department of Infrastructure Development which had an over-reliance on external service providers. Limpopo had been affected by poor payment processes (after the appointment of a new CFO) and unclear roles and responsibilities which negatively impacted expenditure on education. Under-spending in roads & transport was due to among other reasons, late planning and implementation of projects in 2010/11, shortage of asphalt material and cancellation of projects due to cash flow problems and poor performance of contractors.

The North West indicated that it had brought forward projects from 2011/12 and handed them over to IDT, this did not guarantee that spending would occur. The province also indicated that the senior managers (Chief Director and Director) were placed on precautionary suspension negatively impacting education expenditure. The Western Cape reflected poor spending for roads due to delays in the commencement of projects due to administrative processes. There were also challenges associated with the supply of materials (bitumen) to complete projects. There were however commitments on maintenance projects. Under-spending was however anticipated on the Disaster Management Grant.

The Treasury had spent R39 858 of the R100 000 allocated for the Infrastructure Delivery Improvement Programme (IDIP), it expected to save R50 000. Phase III of the IDIP commenced in April 2010. However deployment of Technical Assistants only started in July 2010. There were a range of reasons behind the slow spending. These included late start of IDIP III due to the programme having to shut down (thus compiling a close out report) at the end of the last financial year. Provinces did not respond in time to IDIP III as the programme was voluntary. IDIP III required that provinces submit letters of acceptance and departmental work plans. The establishment of the procurement database by TAU, with adequate skills sets to meet IDIP’s needs, took longer than anticipated. The Treasury’s NDPG plan faced problems around fast implementation due to issues arising out of the high turnover of key members of staff in certain municipalities and the multi-departmental nature of NDPG planning and implementation amongst other reasons.

The Treasury had 180 vacant posts and had spent a total of R358 014 on vacancies in total. One of the main reasons to explain the rate of vacancies was that National Treasury salaries were not competitive at Assistant Director and Deputy Director levels where most NT niche vacancies were.

Discussion
Mr Gelderblom noted that the problems that were highlighted seemed to be recurring every year. He asked how successful coordination between Treasury and other Departments was. There seemed to be a lack of coordination which was not clearly explained.

Mr Sipho Nkosi, Director: IDIP, NT, replied that Treasury had had a detailed discussion with various departments and had highlighted the need for them to establish a point of reference to work with a Treasury representative to deal with issues involving grants and implementation. This would improve coordination. 
Mr Mbili asked whether the Treasury was suggesting that when the NDGP was first established, not enough consideration was put into whether or not there was capacity to implement the grant. In addition, he asked whether the roll over related to the NDGP had been granted.

Ms Mthembu replied that the NDGP and the other grants provided by the Treasury were provided upon the request of a particular Province, they were pool grants. Upon the request made by a Province, there were problems around monitoring of the administration of the grant because there were issues around capacity in some Provinces where they did not have the relevant staff to monitor the grants but the Treasury had systems in place to deal with such an occurrence. A roll over could only be requested at the end of a financial year so there was no way that the Treasury could know about a roll over as yet.   

Ms Yengeni said that if the same problems kept arising on an annual basis at the Treasury then when would there be a change in the trend. She commented that the Treasury’s Technical Assistance Unit did not do enough to train and impart some of its skills to municipalities where it assisted thus the problems which had existed in that municipality would reoccur. Under-spending was a problem and it negatively affected lots of people, the Committee wanted to hear solutions to that specific problem.

Ms Mthembu replied that she was not in a position to answer because there were a multitude of parties involved in particular areas where the Treasury’s role was minimal.

The Chairperson said that the problem of under-spending was a serious problem which needed to be seriously addressed. The infrastructure grant to provinces needed to be better monitored and administered to stop the problem of under-spending in that area. He asked whether the NDGP was being stopped and if so why.

Ms Mthembu replied that the monitoring of the infrastructure grant to Provinces was done on two levels. The monitoring was carried out at a municipal level and at a provincial level depending on the nature of the grant and the area which was being monitored. This level of monitoring was largely successfully carried out but in cases where it was not, there were specific reasons why this was so, such as bad administrative practices, record keeping and late submission of reports. 

The Chairperson expressed his unhappiness at the Treasury withholding grants to Provinces and asked why this was done.

Mr Michael Rammabi, Deputy Director General: Provincial Government Infrastructure, NT, explained that the Treasury withheld money to Provinces where there were instances of administrative malpractice and suspension of key officials who were in charge of implementation. That was part of Treasury’s monitoring role. Treasury allocated money according to project plans provided by a particular Province.

Mr Nkosi added that the Treasury was putting in place new policies to improve infrastructure grant processing. Treasury had had a detailed discussion with various departments and had highlighted the need for them to establish a point of reference to work with a Treasury representative to deal with issues involving grants and implementation.

Mr Mbili asked what the Treasury had done to intervene where problems had arisen with the grants.  

Mr Rammabi responded that the Treasury intervened by interacting with Provinces that were under-spending after the submission of a particular Province’s quarterly report. Treasury would then provide assistance to the Province depending on what the reasons for its under-spending were. The third phase of IDIP was being implemented as a voluntary programme to provide support where provinces specifically requested it.

A member sought clarity on the Treasury’s retention strategy.

Mr Nkosi replied that retention would be at the cost of the hosting Department and the Treasury would only provide guidelines in close cooperation with the Department of Public Service and Administration.

Ms Mthembu said that the grants had grown over time and service delivery will improve with time.

The Chairperson said that the Committee did not deal directly with other Departments but with the Treasury and that some of the responses had been inadequate. He thanked the Treasury for their participation.  

The meeting was adjourned.