National Treasury's Expenditure Report at end of 4th Quarter 2012/13; Department of Performance, Monitoring & Evaluation 4th Quarter Expenditure 2012/13

Standing Committee on Appropriations

18 June 2013
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

National Treasury reported that against estimated revenue of R782,5 billion, actual expenditure had been R962.7 billion, of which 44.1% had been for the provincial equitable share, state debt costs and other direct charges against the national revenue fund.  The expected deficit was just under R180 billion.   National government had spent R538.4 billion, which amounted to 98.5% of the appropriation ceiling of R546.4 billion. Overall, national government expenditure had increased by 7.8% when compared to the 2011/12 year. An amount of R8 billion had been retained by the exchequer. The majority of expenditure had come under the categories of transfers and subsidies.

All departments had under-spent their available budgets in 2012/13, with total under-spending amounting to just under R8 billion. The Departments of Cooperative Governance and Traditional Affairs, Basic Education, Social Development and Human Settlements, had under-spent the most. The reasons for the under-expenditure varied from municipal infrastructure grants being withheld from municipalities, to delayed school grants and infrastructure projects, and delays in receiving invoices.

Significant achievements included an increased local government equitable share, increased social grant payments, improved conditions of service for the police and military, higher university subsidies and increased grant funding for HIV/Aids and school infrastructure projects, as well as for urban and human settlement development.

Responding to a question about the taxi recapitalisation programme, the NT said the budget for this programme during 2012/13 was about R430 million for the scrapping of about 6 000 taxis. However, the problem was that taxi owners had not brought their taxis forward to be scrapped and this has led to them not meeting the target. One should not think that this programme would be finished in 2014. The level of spending -- R430 million a year -- was not a bad investment to ensure that the country had safer vehicles on its roads.

The Department of Performance, Monitoring and Evaluation (DPME) reported that it had spent 92% of its overall budget by the end of the financial year. There had been an increase in expenditure towards the end of the financial year, largely due to expenditure on IT equipment, evaluations and research projects. The Department had now settled into multi-year budgeting and expenditure, with planning and preparations scheduled to take place the year before expenditure takes place. For the budget for the 2013/14 financial year, the chief financial officer had played a more direct role in engaging with programme managers to ensure that budgets were realistic. It had also introduced monthly budget and expenditure meetings to ensure more accurate budgeting and more rigorous monitoring. The Department expected its expenditure to be more evenly spread over the financial year, and be within 2% of the budget.

The Department had under-spent 8% of its budget. The reasons given were delays in delivery of ICT equipment and the delays in the finalisation of software development. There had been a 1.6% under-expenditure on compensation of employees. This was the result of difficulties in finding suitable candidates for specialist positions, positions being filled internally, delays in implementing a Bargaining Council resolution on salary levels, delayed appointments due to security clearance issues and delays in implementing a head of department assessment programme. Under-expenditure of 1.9% had occurred on “Hotline” expenditure, due to lower than expected SITA and call costs

The Department had filled 173 posts by March 2013 and this had increased to 185 posts by June 2013. The majority of newly created posts had been filled, and the remaining vacancies were mostly as a result of staff turnover. All remaining vacant funded posts had been advertised and were in the process of being filled.

The Department spent 92.1% of its goods and services budget. For the 2012/13 budget, the Department had requested additional funding for the late payment hotline. The funding was needed for additional call centre capacity, increased service from SITA and for calls made to the toll-free number. The actual SITA costs and toll-free number costs have turned out lower than estimated, resulting in a saving of R2.9 million against budget.

During discussion, the DPME was asked why the evaluation of the National School Nutrition Programme had been withdrawn. It was a much-needed programme that the country could ill afford to be without. The Department responded that there had been a problem with the evaluation, in that the service provider had not performed. The DPME had agreed with the Department of Basic Education that the contract with that service provider should be terminated. A new service provider would be appointed.  The DPME hoped to get the evaluation started again as soon as possible.
 

Meeting report

National Treasury’s Expenditure Report as at end of 4th Quarter 2012/13: briefing
Mr Andrew Donaldson, Deputy Director General: Public Finance, National Treasury (NT), briefed the Committee on its revenue and expenditure report for the 2012/13 financial year.  Against an estimated revenue of R782,5 billion, actual expenditure had been R962.7 billion, of which 44.1% was for the provincial equitable share, state debt costs and other direct charges against the national revenue fund.  The expected deficit was just under R180 billion.   National government had spent R538.4 billion, which amounted to 98.5% of the appropriation ceiling of R546.4 billion. Overall, national government expenditure had increased by 7.8% when compared to the 2011/12 year. An amount of R8 billion had been retained by the exchequer. The majority of expenditure had come under the categories of transfers and subsidies.

There had been less spending this year than last, with all departments having under-spent on their available budgets in 2012/13. The total under-spending had been just under R8 billion. The Departments of Cooperative Governance and Traditional Affairs, Basic Education, Social Development and Human Settlements, had under-spent the most. The reasons given for the under-expenditure were varied. In the Department of Cooperative Governance and Traditional Affairs, a portion of equitable share and municipal infrastructure grants had been withheld from municipalities, while there were delays with the School Infrastructure Backlogs Grant in the Department of Basic Education, and a lower take up of social grants than projected in the Department of Social Development. The Human Settlement Development Grant had been withheld from the Department of Human Settlements due to slow spending in the Eastern Cape and Limpopo provinces. There were funded vacancies and lower procurement of IT infrastructure than expected in the Department of Correctional Services, and delayed implementation of various turnaround projects and infrastructure projects in the Department of Public Works. The Department of Water Affairs had had to wait for invoices submitted for materials and equipment ordered outside the country for the Regional Bulk Infrastructure Grant and acid mine drainage projects.

The Department of Social Development had spent R111.1 billion -- the most of all departments. This represented a 7.7% increase, compared to spending in 2011/12. The majority of its expenditure was on social grants. The Department of Cooperative Governance and Traditional Affairs had spent R53.4 billion by year end, an increase of 15.6% compared to last year. The spending was primarily on transfers for the local government equitable share and the Municipal Infrastructure Grant. The Department of Police had spent R63.2 billion, 9% more than 2011/12. The money had been spent mostly on salaries and equipment, to improve conditions of service. The Department of Defence and Military Veterans had spent R37.7 billion, a nominal increase of 9.8%, on salaries and equipment to improve conditions of service. The Department of Higher education had spent R31.6 billion by year end, a nominal increase of 11.7%. The majority of the increases were for transfers to higher education institutions for increased enrolment and graduations at universities. The Departments of Health, Basic Education and Human Settlements had spent R27.9 billion, R14.8 billion and R24.5 billion respectively, with each department registering a nominal increase compared to the previous year. The majority of the increases were for the HIV/Aids grant, school infrastructure programmes and urban and human settlement developments. The Department of Trade and Industry had spent R8.3 billion -- a nominal increase of 21.8% compared to 2012/13. The majority of the increase was for manufacturing development incentives.

However, Statistics South Africa and the Department of Transport had shown a decrease of 52.1% and 4.5% respectively in spending compared to the 2011/12 year. This was mainly due to a cessation in survey operations for the census, and reductions in transfers to the Road Traffic Infringement Agency.

Discussion
Mr Ramatlakana (ANC) referred to the Taxi Recapitalisation Programme and asked what amount had been set aside for it.   What stage was the programme at currently?

Ms Ulrike Rwida, Director, NT, replied that the budget for this programme during 2012/13 was about R430 million for the scrapping of about 6 000 taxis. However, the problem was that taxi owners had not brought their taxis forward to be scrapped and this has led to them not meeting the target of scrapping 6 000 taxis.

Mr Donaldson said that the Taxi Recapitalisation Programme, which had been in place for about eight years, was an ongoing programme. One should not think that this programme would be finished in 2014. The level of spending (R430 million a year) was not a bad investment to ensure that the country had safer vehicles on its roads.

Ms R Mashigo (ANC) asked if NT had taken into account the third quarter report when it compiled its appropriation presentation.

Mr Velile Mbethe, Chief Director, NT, replied that NT had considered the third quarter report when it recommended allocations to departments.

Mr Donaldson said he could not explain exactly how it had been done, as this was the job of NT’s budget analysts.

Ms Rwida said budget analysts spent a lot of time going through programmes on a monthly basis.  The NT did not take into consideration only what had happened in the year, but also what had taken place in prior years, when making recommendations.

The Chairperson said that the presentation showed that departments were almost spending their budgets. Could one say that there had been improvement in that area?

Mr Mbethe replied that the quality of departments’ spending had improved in terms of value for money.

Mr Donaldson replied that there had been improved delivery against spending targets from departments. This value for money could be attributed to tighter fiscal conditions.

The Chairperson asked whether withholding municipal grants was the right thing to do.

Mr Donaldson said he was reluctant to comment on this issue, as it was not the NT’s area of responsibility. There had been discussions between the NT and municipalities over the years about conditional grant money that went unspent. Municipalities needed to be more accountable, as this arrangement where money was allocated but not spent could not continue. However, he understood that when municipalities were in difficulty, they needed time to make the required adjustments.

Mr Donaldson concluded that the NT needed to give more thought to the issues raised by the Committee. Perhaps the NT should present more detailed reports which would help the Committee to get a more rounded picture?  NT could also do more to keep the Committee updated on how municipalities were spending money.  Another issue NT would be dealing with was to increase its reporting on spending by agencies and public entities. There were also some plans afoot for a new reporting format, and the Committee’s advice in this regard would be welcomed.

Department of Performance, Monitoring & Evaluation 4th Quarter Expenditure 2012/13: briefing
Mr Sean Phillips, Director General: Department of Performance, Monitoring and Evaluation (DPME), briefed the Committee on its fourth quarter expenditure for the 2012/13 year.  The Department had spent 92% of its overall budget by the end of the financial year. There had been an increase in expenditure towards the end of the financial year, largely due to expenditure on IT equipment, evaluations and research projects. The March “spike” was not due to fiscal dumping, but was the result of the DPME finding its feet as a new Department. The following reasons were given why expenditure had taken place mostly at the end of the financial year:

The Department was required to engage with SITA to plan their IT infrastructure requirements. These engagements had been finalised only in June 2012, and the procurement of IT equipment could start only after that. The evaluation programme was still relatively new.  The National Evaluation policy Framework had been approved in November 2011 and the 2012/13 national evaluation plan had been approved only in June 2012.  The DPME had been requested to carry out the 20-year review and Forum of South African Directors-General (FOSAD) research project on norms and standards after the beginning of the financial year. Expenditure on these two projects had therefore taken place towards the end of the financial year.

The DPME had now settled into multi-year budgeting and expenditure, with planning and preparations scheduled to take place the year before expenditure took place. For the 2013/14 financial year budget, the Chief Financial Officer (CFO) had played a more direct role in engaging with programme managers to ensure that budgets were realistic. The department had also introduced monthly budget and expenditure meetings to ensure more accurate budgeting and more rigorous monitoring. He expected DPME expenditure to be more evenly spread over the financial year and that expenditure would be within 2% of the budget.

The Department had under-spent 8% of its budget. The reasons given were delays in delivery of ICT equipment and the delays in the finalisation of software development. There had been a 1.6% under-expenditure on the compensation of employees. This was the result of difficulties in finding suitable candidates for specialist positions, positions being filled internally, delays in implementing a Bargaining Council resolution on salary levels, delayed appointments due to security clearance issues and delays in implementing a HoD (Head of Department) assessment programme. Under-expenditure of 1.9% had occurred on “Hotline” expenditure, due to lower than expected SITA and call costs.

The Department had filled 137 posts (against 195 funded posts) by 31 March 2012 and had created new posts in July 2012 to provide additional capacity for local government performance monitoring, while other posts were unfunded. The total number of funded posts had increased to 197. The Department had filled 173 posts by March 2013 and this had increased to 185 posts by June 2013. The majority of newly created posts had been filled, and vacancies were mostly the result of staff turnover. All remaining vacant funded posts had been advertised and were in the process of being filled.

The Department had spent 92.1% of its goods and services budget. For the 2012/13 budget, the DPME had requested additional funding for the late payment “Hotline”, which had been transferred to the Department from the Presidency on 1 October 2011. The funding was needed for additional call centre capacity, increased service from SITA and for calls made to the toll-free number. The required call centre capacity had been put in place during 2012 and the increased services were being provided by SITA. The actual SITA costs and toll-free number costs had turned out lower than estimated, resulting in a saving of 2.9 million against budget.

Quarter four performance 2012/13
Programme 1: Administration
Under this programme, 16 of the 21 targets had been achieved, three targets had been partially achieved and two targets were not achieved. The three targets which were partially achieved were:

The third quarter risk management report, which had been compiled and presented to the risk management committee and the audit committee. The risk management committee had not met as regularly as planned.

The detailed improvement action plan, based on the second Management Performance Assessment Tool (MPAT) assessment, had been approved by management and implemented by 31 March 2013.  MPAT results had been challenged and final scores were now awaited.

Enhancement and maintenance had been implemented according to the projects’ dashboard application system. Skeletal intranet sites had been deployed and were operational. The annual performance plan (APP) module of the application was still in a testing phase.

The two targets not achieved had been the development indicators application prototype, which had been developed but deferred to the next financial year due to delays in the design of the plan, and the help desk service application had been incorporated into a broader project to develop a system for corporate services.

Programme 2: Outcomes Monitoring and Evaluation (OME)
Under this programme, 11 of the 12 targets had been achieved, while one had been partially achieved. The partially achieved target related to the nine evaluation reports that had been approved by the steering committee. Eight proposals for evaluations had been recommended to, and approved by, Cabinet. Two reports had been approved by the evaluation steering committees in May 2013. Two would be approved in July 2013 and one in August 2013. One would be approved in December 2013 and one in January 2014. One (National School Nutrition Programme) had been withdrawn by the department responsible.

Programme 3: M&E Systems
Nine out of 12 targets have been achieved under this programme. One target had been partially achieved and two had not been achieved. The partially achieved target related to the development indicators report that had been produced. The report had not been published yet because editing had taken longer than anticipated.

Targets that had not been achieved were:
The draft Results Bill submitted to Cabinet for approval by March 2013. There were different views on the need for a Results Bill among government departments. The Department was now working on a green paper on monitoring and evaluation (M&E) as a possible precursor to a Results Bill.

The GWME framework, approved by Cabinet in March 2013, had now been combined with the process of producing a green paper.

Programme 4: Public Sector Oversight (PSO)
Under this programme, 17 out of 18 targets had been met successfully and one had been partially achieved. The partially achieved target was the presentation of a final citizen-based monitoring (CBM) framework to Cabinet. The framework had been signed off by the Minister and tabled at the Governance and Administration (G&A) cluster. Cabinet had requested that it be processed through a G&A working session.

Overall, 53 of the Department’s 63 targets had been achieved, six had been partially achieved and four targets had not been met.

Discussion
Mr M Swart (DA) asked why the evaluation of the National School Nutrition Programme had been withdrawn. He said it was a much-needed programme that the country could ill afford to be without.

Mr Phillips replied that there had been a problem with the evaluation, in that the service provider had not performed. The DPME had agreed with the Department of Basic Education that the contract with that service provider should be terminated. A new service provider would be appointed.  The DPME hoped to get the evaluation started again as soon as possible.

Mr J Gelderblom (ANC) asked if DPME had succeeded in its quest to find suitable candidates for specialist positions.

Ms Kaarjal Soorju, Director, Human Resource Management, DPME, said that the specialist positions in question had been filled.

Mr Gelderblom asked what the delays were in implementing the Bargaining Council resolution regarding salary levels.

Ms Sourju replied that the resolution had been concluded in July last year. However, a public directive had had to be issued, and this had been done only in February this year.

Mr Gelderblom remarked that he was also worried to hear that the National School Nutrition Programme had been withdrawn. He was looking forward to an explanation.

Dr S van Dyk (DA) referred to the corrective measures the Department had introduced to address under-expenditure. How was the Department going to provide feedback to the Committee on this?

Mr Phillips replied that there was a need to translate the National Development Plan (NDP) into measurable indicators and targets. The DPME was trying to set up a system where the DPME and Parliament would be able to track and monitor the implementation of the NDP.  The DPME was currently in the process of doing that as part of the 2014-2019 medium-term framework. The first draft of that framework would be presented to Cabinet in July.

The Chairperson referred to the delay in the implementation of the Heads of Department (HoD) assessment programme that was supposed to have been done by the Department of Public Service and Administration (DPSA).  How far is it now?

Mr Phillips replied that the DPSA had not yet issued the new policy framework. The Department would have to wait and see how the processes continue.

The Chairperson asked how the evaluations were done. Were there time constraints to evaluations? Was there a time when evaluations would start?

Mr Phillips replied that the best way to get evaluations implemented was to get programme managers to buy into them. It should be a collaborative effort, as this was the best way to get ownership from leaders of programmes. The DPME also encouraged departments to suggest programmes which it wanted evaluated. Once an evaluation programme had been approved by Parliament, it was then implemented together with the department. The start date for an evaluation would be decided once the terms of reference had been negotiated with a department.

Ms A Mfulo (ANC) asked why savings on compensation had been moved to the 20-year review project. Had the Department not budgeted for this project?

Mr Phillips replied that DPME had not budgeted for the 20-year review, because it had historically been done by the presidency. It was only after the budget had been finalised that the DPME had been told by the presidency to manage the 20-year review project.

The Chairperson asked why the risk management committee had neglected to meet as regularly as planned.

Mr Phillips replied that these meetings had been cancelled purely as a result of other commitments. This had been addressed by rescheduling the risk management meetings to coincide with main meetings, so that everyone could attend.

The meeting was adjourned.
 

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