Department of Arts and Culture 2nd Quarter 2011 Performance Report: briefing

Meeting report

Department of Arts and Culture 2011/12 Budget  2nd Quarter Expenditure Trend Presentation
Ms Veliswa Baduza, Chief Operations Officer, Department of Arts and Culture, presented on the Department's 2011/12 Second Quarter performance and budget, including the appropriations, rollovers, virements and anticipated adjustments in the Department's programmes - Administration, Arts and Culture in Society, National Language Service, Cultural Development and International Cooperation, Heritage, and Archives, Records, Libraries and Heraldic Services.

In total the main appropriation to the programmes was R2 468 577 000. The total roll-overs and adjustments were R68 356 000 and the anticipated adjusted appropriation was R2 536 933 000 (table, slide 2).

In Administration the addition of R18 215 000 was obtained from a shift from other programmes in respect of compensation of employees budget.  Rollovers were received from 2010/11 'savings', specifically from Social Cohesion (slide 3).

Additions, reductions, and roll-overs were explained in respect of the Arts and Culture in Society, Cultural Development and International Co-operation, Heritage, and Archives, Records, Libraries and Heraldic Services programmes. This last programme received rollovers from 'savings' from the conditional grant for  community libraries (slides 3-4).

The Department provided its budget per economic classification on Compensation of Employees, Goods and services, Provinces and Municipalities, Department Agencies and Accounts (Current), Department Agencies and Accounts (Capital), Non-Profit Organizations, Households, and Machinery and Equipment (table, slide 5).

In the Compensation of Employees classification additional funds were received for the difference in General Salary increases and original budgeted amount. In addition, funds were transferred from Goods and Services for the appointment of Information Technology (IT) staff.

Goods and Services received rollovers from 2010/11 'savings' and funds were transferred from Investing in Culture (Households) for Mzansi Golden Economy. (Slide 6)

The crux of the presentation was the expenditure per Economic Classification . Compensation of employees had spent 45% of its budget, whilst Goods and Services had spent 34%, Provinces and Municipalities 50%, Department Agencies and Accounts (Current) 55%, Departmental Agencies and Accounts (Capital) 9%, Non-Profit Organizations 59%, Households 30%,  and Capital Assets 33% (table, slide 8).

Explanations of the Expenditure Trends per Economic Classification were provided. The Compensation for Employees budget was under severe pressure and left very little room for additional staff. However, the Department reported that expenditure was only at 45% at the end of the 2nd Quarter. The Department was still to incur expenditure relating to performance bonuses, general salary increases and pay progression.
Notwithstanding these expenditures, the Department indicated that it was anticipated savings of R10 million due to the fact that posts that had been vacated had not been filled, pending a prioritisation exercise.

The Department explained that the three main areas of focus on Goods and Services covered were Goods and Services (normal departmental activities), Property Management and Mzansi Golden Economy.  The Property Management budget related to the reimbursement of payments made by Department of Public Works (DPW)  for the Municipal Accounts and Property Leases on behalf of the Department and its Public Entities. The reason for the slow spending in this area, the Department explained, was due to the delay in the submission of monthly accounts by DPW. Given past history and current commitments it was anticipated that the budgeted amount would be spent by 31 March 2012.

On the Mzansi Golden Economy, the Department explained that approval had been obtained from the National Treasury to transfer R81 million from the Investing in Culture Budget to be redeployed for the purpose of the Mzansi Golden Economy (Households). A Business Plan had to be developed which would dictate the spending areas and processes to ensure spending by 31 March 2012.

On the Normal Departmental activities the Department explained that the expenditure of the remainder of the Goods and Services Budget was pegged at 51% for the 2nd Quarter. The Department projected to 31 March 2012 that no under or over expenditure was anticipated but expenditure would be carefully managed to avoid any possible over expenditure for the remainder of the financial year.

The Expenditure Trends on Provinces and Municipalities on the Conditional Grant on Community Libraries, was explained. In total 50% of the budget was transferred to the various Provinces in the 2nd Quarter. Funds transferred to the various provinces were based on their needs. By implication spending was not managed by the Department directly. In order to stimulate spending the Department was working closely with the Technical Assistance Unit of the National Treasury. The Department also encouraged the provinces to increase capacity to expedite expenditure. It also had regular meetings with the provinces, collectively and individually to iron out erratic expenditure (slide 18). 

The Department provided an explanation on the expenditure trends on Departmental Agencies Accounts. Expenditure related to subsidies paid to the Department’s Public Entities. Expenditure was at 55% after the 2nd Quarter. Payments to the Playhouses were made every trimester based on a third of their total subsidy. This was the reason why the expenditure percentage was at 55%. Payments to Heritage Institutions and Libraries were done monthly based on a twelfth of the total subsidy. The Department noted that no over or under expenditure was anticipated under the economic classification as at the end of the 2nd Quarter only 9% of the budget had been spent (slide 20).

The Department reviewed the Capital expenditure trends of the Departmental Agencies and Accounts. The expenditure item related to the maintenance, upgrading, and refurbishment of the Department’s Public Entities as well as for Heritage Legacy Projects. The Department had for the past two financial years under spent the budget although it had improved markedly. Approximately 50% of the budget was managed by the DPW which was directly related to the infrastructure projects of the museums and heritage institutions. Delivery by the DPW remained problematic and the Department would be appointing its own implementing agency such as the Independent Development Trust (IDT) to ensure the fast tracking of new projects. The Department was also in the process of appointing the Technical Assistance Unit of the National Treasury to assist in the Project Management of the Capital Works Programme. In addition the Department had recently received approval from the National Treasury  to transfer funds directly to Playhouses, National Film and Video Foundation, National Library of South Africa and the South African Heritage Resources Agency (SAHRA)  within the  current financial year. Funds allocated to the Heritage Legacy projects would be accelerated through the appointment of the IDT (slides 22-23).

The Department considered expenditure on Non-Profit Organisations. It explained that expenditure related to the subsidies to Business and Arts South Africa (BASA), Blind South Africa (Blind SA), and the Engelenburg Art Collection. At the end of the 2nd Quarter expenditure was at 59%. As in the case of the Playhouses, BASA received a third of its subsidy in April. No over or under expenditure was anticipated under this item (slide 25).

The Expenditure Trends on Households was analysed. The Department stated that it related to all the financial assistance projects the Department funded during the financial year and included the Investing in Culture Project (IIC). Only 30% of the total budget had been spent in the 2nd Quarter. Spending on IIC had remained problematic since the forensic investigations. The Department realised that the IIC Project was very important as it contributed to Government priorities on Job Creation (slide 27). It was however of the view that the redeployment of the funds to the Mzansi Golden Economy would stimulate job creation on a broader scale of arts, culture and heritage.  The National Treasury had therefore been approached to redirect some of the IIC funds for the purposes of kick starting the Mzansi Golden Economy Strategy in relation to the Art Bank Resource, Cultural Events, Public Art Resources and Touring Ventures.  The remainder of the Households funding all the funds had been committed and would be spent by 31 March 2012.  (Slide 28)

Lastly, expenditure on Capital Assets was described. It  related to the purchasing of machinery and equipment including IT equipment. Although only 33% of the budget had been spent at the end of the 2nd Quarter, the Department’s Chief Information Officer had established a Procurement Plan for the purchasing of IT equipment and upgrading of systems for all programmes. Consequently no over or under expenditure was expected under this item (slide 30).

Discussion
The Chairperson opened the floor for questions.

Mr P Ntshiqela (COPE) asked why there were no page numbers on the presentation.

Mr Ntshiqela, further, requested clarity on the months covered by the Quarterly Report.

Mr Ntshiqela also asked about the R68 million recorded on the roll-overs, what the purpose of the amount was in terms of performance and whether the Department had anything to do with this amount.

Ms P Duncan (DA) appealed to the Department to include the various projects it had explained but which were not in the presentation and requested a copy of information on these projects to be sent to the Committee. She commended the Department for the clear presentation.

Ms Duncan commented that the roll-over of R68 million was a very small amount, and effective use of the money would be seen when the audit report came out.

Ms Duncan requested clarity on the virements and shifts per programme and whether all amounts had been added and whether the numbers tallied.
 
Ms Duncan further requested an organogram from the Department.
 
On the shift of economic classification funds, Ms Duncan asked why the funds transferred were not put directly into the programme and why the amounts did not fall under Goods and Services.

Ms F Mushwana (ANC) asked on the projects mentioned, how far had these projects gone, noted that some of the projects like the Muyeshe Project had been adopted a long time ago, and asked what was the status of these projects. Were they new projects or continuations of projects which were already in existence?

Mr D Mavunda (ANC) asked how far the Department was with the various issues reported on.

Mr Mavunda noted with concern the issue of roll-overs, and how these were usually linked with under spending; he expressed concern that in so many programmes there had been shifts of funds; he explained that he understood that the Department was aware of what it was doing, but requested clarity as to what was happening in the Department.
 
Mr Mavunda further asked concerning the Goods and Services spending, for reasons why the Department had been slow in payments to the Department of Public Works. He noted that he recognised the various challenges faced by the Department of Public Works (DWP) and how it was in the spotlight for administration problems and asked what the Department was doing in light of the problems and whether there were any specific Departmental plans in place to rectify the situation.

Mr Mavunda further asked concerning the provinces and municipal grants; he noted that the implication of the presentation was that spending in these was not managed by the Department. He asked if provinces had been given funds and conditional grants, who held them accountable and what were the implications of the statement.

Mr Mavunda further asked about the Agencies’ Account in which 9% had been spent already; he asked whether the Department was  reaching the threshold and whether it was going to meet the threshold; there was need for a report on this.
 
Ms H Msweli (IFP) requested for an explanation of the abbreviations BASA, Blind SA and the IIC.

Ms Msweli further asked why the IIC had remained a problem.

Mr L Khoarai (ANC) was concerned about performance bonuses, asked who qualified for them. He was most concerned with the high number of people employed by the Department in senior positions who were still in acting positions. He stated that the all the vacant positions in the Department needed to be filled. 

Mr Mike Rennie, Acting Chief Financial Officer, Department of Arts and Culture, apologized for failing to put page numbers on the presentation.

Mr Rennie replied that the Quarterly Expenditure was from the end of September.

Mr Rennie explained that the additional rollover funds were necessary and were going to be used in the various new projects which the Department was engaged in like the Investing in Culture Project. He further explained that some funds were to be used in the Community Library projects and others in the Social Cohesion programme. He noted that if no additional amounts had been received the Department would have exceeded its budgets in other areas.

Mr Rennie conceded to a discrepancy of R1 million on the amounts recorded on the Compensation of employees, explained that there was a typing error and the total addition was supposed to be R12 million.

On the R68 million rollover amounts, Mr Rennie, stated that the Department did not receive all the roll-over amounts it had actually requested and noted that this was a small amount given the work that the Department had to do.

Mr Rennie, stated,  on the question of the R81 million investing in Culture money going to Mzansi Gold,  that the money used to fall under Households and the National Treasury, after application, had recommended it  to  be shifted to  Goods and Services. 

Mr Rennie further replied on the question on why the Department had rollovers; he noted that this was a good question as the Department was not supposed to be asking for rollovers and was supposed to be spending all the allocated money. He assured Members that the Department was putting in mechanisms to improve expenditure; however, noted that  one of the biggest challenges was in Capital expenditure and he was actually nervous that there was a possibility of over spending. He, however, assured the Committee that the Department would spend its allocated funds adequately.

The Chairperson interjected, noting a question from Ms Duncan.

Ms Duncan asked concerning the shifting of funds and rollovers; she asked  how much real money the Department had and how much it had actually received from the National Treasury. She expressed hope that the Department would not overspend. 

Mr Rennie replied that there was no additional money which the Department had received from the  National Treasury; he explained that during the course of the year departments could only receive extra money for unforeseen events and they had to follow the set procedures by the National Treasury. The Department had not yet applied for this, but going forward into 2012 the Department had applied for more new money and prospects of success were quite high.

Mr Mavunda interjected, asking the reasons why rollovers were taking place, and whether they were there because of lack of capacity or other reasons.

Mr Rennie explained that two of the rollovers were received from Goods and Services and others from the Social Cohesion project. He explained that the funds from the projects were ring-fenced and could not be used for anything and so the Department requested for the amounts to be rolled over. In other instances, he further explained, money was obtained from under spent provincial budgets and also from various projects which had been cancelled or postponed like the Investing in Culture Project.

Mr Rennie replied that there had been delays in the Property managements from the Department of Public Works; however this did not affect the accounts as by the end of the financial year all payments were usually paid on time.

Mr Rennie explained that the acronym BASA meant Business Arts South Africa which was a Section  21 company with which the Department worked. Blind SA was an organization for the Blind which was involved in the production of brail and IIC stood for Investing In Culture.

Dr Mbulelo Jokweni, Acting Director-General: Arts, Culture, Promotional Development, and Chief Director: National Language Service, Department of Arts and Culture, explained why Investing in Culture was still a problem. From an independent Audit, it was discovered that some funds had been allocated to the projects which were non-existing and recommendations were made that before any money was paid out there was to be project verification. He explained that in some instance, the verification process took longer than was expected and thus resulted in a delay in payments in Investing in Culture projects. He emphasized that the Department needed to be sure before making payments as it did not want to make payments for projects which did not exist.

Ms Baduza agreed that she had elaborated on projects which had not been provided in the presentation and apologized to the Committee for not including them in the presentation as she had assumed that the Committee was aware of the various projects. A presentation would be done to the Committee explaining the various projects.

Ms Baduza replied concerning the request for an organogram that much progress had been made in drafting the structure and it was in the planning stage with all stakeholders. The Department had a proposed draft presentation in place and was awaiting an invitation from the Committee to come and present on this.

Ms Baduza agreed with Ms Mshwana that the Muyeshe Project had been set up by the President for every Department and as far as culture was concerned was one of the 2010 legacies. The Department had faced various challenges in the project concerning building a library as it had been argued that this was not the Department’s competence. After much challenge the Department had managed to obtain the necessary permission and building was scheduled to start soon and the Department was committed to finalizing the project.

Ms Baduza on monitoring and evaluation of Community Libraries explained that the Department played a regulatory role to the libraries and was not involved in their management directly. Meetings occurred occasionally with the provinces.

Ms Baduza noted the guidelines on performance bonuses; she explained in detail the process which was provided Chapter 4 of the Senior Management Guideline which guided the Department on the measurement criteria for pay. The process also included ‘acting’ personnel and they were evaluated in the same manner as ordinary employees.

The Chairperson excused herself and Ms Mushwana took over.

Ms T Nwamita-Shilubana (ANC) asked concerning Community Libraries whether after Business Plans were submitted if the Department made any follow ups to see the areas proposed for the buildings. 
 
Mr Khoarai noted the President’s concern about Departments having acting officials and asked why the Department had failed to take heed of this and he asked why it still employed a lot of people in acting positions.

Ms Duncan added concerning acting positions that the Department had to avoid the habit of hiring people in acting positions because the people acting were actually doing the job for that position.  She noted that the Public Service Act was very clear on how long people were to act and observed that what the Department did was that they terminated the positions just to stay in line with the Act and then re-employed the people again for the same position. If someone was acting for six months and doing a great job in that position,  she asked, why were they not employed full-time in the position. It was not good practice to put people in acting positions for endless durations. It was not good for both the Department and the individual involved.

Ms Duncan noted that Parliament had an Outcome Based approach to rollovers, meaning all Departments were supposed to have strategic plans and policies in which they set their targets. The Departments were supposed to implement these programmes and meet their targets and if they failed to meet their targets that was when shifts and rollovers occurred. She was greatly concerned with the Department’s rolling over amounts and the use of the money to implement unbudgeted new programmes. She stated that it was not good practice to rollover money and it was necessary for the Minister of Finance to look into the matter.

Ms Duncan had considered the recommendation by the  Minister of Finance concerning the National Students Financial Aid Scheme; she asked if the Department had made contributions to this scheme.

Ms Duncan further noted that 84% of the Department’s budget went to the entities, and asked if the monitoring and evaluation unit of the Department was adequate to ensure oversight ensuring that money was wisely spent. She observed that the Department had stated that it was working closed with the National Treasury, and stated that was also necessary for the Department to ensure that the entities delivered on the money which had been allocated to them.
 
Ms Baduza replied that the Business Plans provided all information concerning where the Community Libraries were to be built and all other details. The Department did an oversight function to make sure that the information provided was actually accurate.

Ms Baduza explaied that there were challenges to when the Department was going to finalize the acting process; however, the Department was trying its best to ensure that all acting positions were filled. It was unfortunate that there was still an acting  chief financial officer (CFO). She explained that the person who had been hired for that position had left after twomonths for a better offer and so the Department had to appoint an acting person. Last year the Department had advertised for various positions but finalization was slowed by the redeployment of the political principals and the unfortunate suspension of an internal applicant. This slowed down the hiring of the Director-General. She also noted that the Department had in place various programmes to ensure that people were not in acting positions for too long. It had been the Department’s intention to finalise the process by March 2011; however due to various challenges the Department had failed to meet the targets. However some progress had been made and she assured the Committee that the Department was dealing with the issue.  The Department was finalizing the re-alignment process. it was work in progress.

Ms Baduza agreed that targets had been set during the planning stage and it was important to monitor progress on these targets so as to avoid rollovers. However, in some cases rollovers were inevitable as some of the things which had been planned for had to be cancelled or shifted due to circumstances beyond the Department’s control. Meetings were done with the Senior Managers looking at the things that they would not be able to fulfill during the year so as to re-align the Department’s targets and objectives. There was to be a meeting with the Director-General reporting on the progress of the various projects. Various mechanisms which had been put in place had ensured that the Department was more accountable than previously.

Ms Baduza explained that the the Monitoing and Evaluation Unit had just appointed a Director from 1 April and the Department had a turnaround strategy to reinforce the Unit. Now, she explained, the Department had finalized a shareholder’s compact and this was to be sent to the Institutions.

Mr Rennie replied that he had not seen the Finance Minister’s report but  would however look into the matter and follow up the issue of funding.

Ms Duncan interjected replying that the funding scheme was on page 15 of the Budget Speech 2011.

Mr Rennie said he would look into the matter.

Ms Mushwana said that three provinces were covered in the issue of National Dialogue; there were six outstanding provinces; when was the Department going to cover the other provinces. She also noted that some sections had not provided Quarterly reports; what was going to be done about this and also about the draft funding model for entities?

Ms Baduza replied that the Department had now covered all provinces and reports had been made on all provinces concerning Dialogue. However, the magnitude of the consultations in the Departments differed from province to province as some provinces had worked extremely hard to ensure implementation.

Mr Rennie replied that a draft funding model was in the planning stage and would be in place by 2013/14. The issue of funding was a complex issue which needed various factors to be taken into account and the proposed model was also complex.

Concerning submission of reports, Mr Rennie noted that most of the entities had submitted their quarterly reports, with 95% of public entities having submitted reports.  There were some late submissions but these were significantly less.

The Chairperson asked if they were any other outstanding questions. 

Mr Ntshiqela asked concerning monitoring and evaluation; the Department had mentioned Municipalities and Provinces; he asked if the Department was providing money to municipalities directly and how the process worked.

Mr Ntshiqela noted that the Department had only mentioned non-profit organisations (NPOs) and asked if it also included non-governmental organisations (NGOs) and what the selection criteria was in this.

Mr Ntshiqela asked on expenditure per programme concerning cultural development, and raised concern  that cultural development was broad and requested the level of the Department’s involvement in these. 

Mr Ntshiqela asked what the meaning of the Department Agency Account was, what implementing agency meant, and if there was no overlap with other Departments.
 
Ms Baduza replied that the Division of Revenue Act did not allow the Department to fund provinces and municipalities. She clarified that the funding provided under the municipalities and provinces referred to conditional grant funds for Community Libraries which were facilitated by municipalities and provinces. She recognized that many municipalities had been accused of municipal dumping in which they transferred money which had been set aside for building libraries into their own account. She assured Members that the issue was being dealt with.

Mr Rennie added that it was a normal economic classification and no funding was provided to municipalities directly.
 
Ms Baduza further replied on Cultural Development and the level of focus on emerging enterprises. The programme on Cultural Development focused on three areas - international relations, investing in culture, and cultural development. Under cultural developments there were seven genres managed. The main focus of the Department was to drive and provide an enabling environment for those areas to develop. The role of the Department was to provide the right legislative, policy and strategic framework for these genres. Given this, the bulk of the budget was transferred to the various agencies responsible for implementing the programmes. However, through the investing in culture programme, the emerging entrepreneurship programme had also provided a framework for direct involvement in these areas. It was unfortunate that the programme faced challenges, although despite this some progress had still been recorded.

Ms Baduza stated concerning the issue of agencies that the Department had been using some Independent agencies to run some projects. The Technical Assistance Unit, National Treasury, was going to assist in providing support for the technical aspects of the projects so that the Department was not too dependent on the Department of Public Works.

The meeting was adjourned.