Department of Transport First Quarter 2013/14 expenditure briefing: to be re-presented

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10 September 2013
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

Officials from the Department of Transport (DOT) tabled and started to take Committee Members through the first quarter 2013/14 expenditure report. However, Members soon voiced their concern with the way in which the figures were presented, saying that the presentation was not clear and the figures ended up giving a misleading picture. The Department had presented, instead of a month-by-month breakdown, cumulative totals, and admitted at one point that some of the figures were simply arrived at by taking cumulative totals and dividing them equally between the months. The Committee said that part of its oversight involved a close investigation of what money had been spent, on what projects, and this must be compared to the expectations, and this manner of presentation made it impossible to check the true situation. Furthermore, the Committee was very concerned at the assertion, early on in the presentation, that the underspending of R1.3 billion in this quarter was due to the withholding of funding from provinces, particularly the North West, who had failed to comply with conditions. It was made quite clear that this Committee did not support withholding of funds, as it impacted upon service delivery and ability of local government to perform its tasks, with the result that, firstly the people on the ground were not receiving services, and secondly, national departments tended to dump money on municipalities at the end of March, and the municipalities faced a huge task in trying to spend before their financial year ends in July. These points were reiterated several times.

Although the Committee granted a short adjournment to allow officials to decide how to proceed, the presentation was soon brought again into question, when the Department dealt with payments to agencies and Schedule 3 entities. At this point some Members suggested, and the Chairperson agreed, that it would be preferable for the Department to be released in order to re-draw the presentation in a more acceptable format. The Committee was at pains to point out that it was not attempting to be confrontational but that it needed the full picture in order to exercise its oversight responsibilities properly. It was agreed that another date would be set for the new presentation.

The Committee adopted its minutes of 20 and 21 August.

Meeting report

Department of Transport First Quarter 2013/14 expenditure briefing
Mr Mawethu Vilana, Deputy Director General, Department of Transport, apologised on behalf of the Acting Director General and other officials who were not able to attend the meeting.

Mr Thabane Mthembu, the Parliamentary Liaison Officer for the Ministry, also apologised that his colleague was unable to attend the meeting.

Mr Dan Pretorius, Acting Chief Financial Officer, Department of Transport, noted that he would present the budget and comparison of expenditure for the first quarter of the 2013/14 financial year. He presented slides 1 to 4, but Members interrupted at this point.

Mr I Ollis (DA) wanted clarity on the manner in which the budget was compiled. He commented that the figures presented for the respective months April, May and June did not add up.

Mr Vilana explained that the figures shown comprised the cumulative totals, so the figures for May in fact represented figures for both April and May.

The Chairperson queried this method of compiling the presentation. The Members of this Committee were not accountants and would therefore prefer matters to be presented in layman’s terms or clear language, so that they could see clearly exactly how the money allocated by Parliament was being spent. She suggested that the Department should separate each month, and clearly set out the spending, then provide a column which indicated the cumulative amount of the three months. She also noted that she had done her own calculations and was also concerned that some of the figures did not correlate.

Mr Vilana said that the budget could not be presented in a linear form and that what the Department of Transport (DOT or the Department) had done was instead to take a cumulative total, and then divide it by four.

The Chairperson commented that this was a misleading and incorrect way to present the figures. It did not correctly reflect the projects undertaken, and in fact she commented that there was an element of “laziness” in taking the amount and dividing it by four. The Committee had a duty to carefully examine what amounts of money were being spent, and in what manner, in order to determine if the people on the ground were getting proper service delivery.

Mr L Suka (ANC) also raised a concern about the format, saying that it was difficult to understand and would have to be reviewed.

Mr Pretorius, having been asked to continue with the presentation, noted that in the first quarter his Department had underspent by R1.3 billion because it had withheld funds from certain provinces who had not provided the necessary documentation. One example was North West.

The Chairperson said it was alarming when funds were withheld from provinces, because that translated to provinces and municipalities not being able to deliver services to people. She was speaking from her experiences as a Deputy Mayor, and noted that withholding of funds meant that municipalities ended up unable to pay the contractors they hired in order to provide services to the people. She said that the people who suffered in the end were those that were supposed to receive the services, not the lazy officials who failed to compile the necessary documentation to support the request for funding. This was clearly not fair on the people who relied on those services, as well as the municipality who would be blamed with non-delivery. She firmly stated that the practice of withholding funds was detrimental to intergovernmental relations, and the Committee did not condone this.

Mr Vilana tried to explain that the reason why the Department withheld the funds was because the respective provinces did not comply with legitimate requests in order to be justifiably given the money. He added that even if the money budgeted were to have been handed over, this would not necessarily translate into services being provided. The provinces were already failing in some respects and that was why they were not being given the money.

The Chairperson reiterated her view that withholding funds was not an appropriate solution. This failed to address in depth why those provinces were not performing in the first place. Provinces like Limpopo were rural in nature and needed a lot of support. The money was budgeted to be utilised for people to receive the services they needed, and withholding money merely meant the projects that were meant to happen would not be effected. That meant, in turn, that the Department had failed to achieve its work. The only way in which the Department’s work would be measured was by spending on projects that would provide services to people.

Ms N Mdaka (ANC) said that she was not clear on the structure of the presentation and said that if she was being expected to vote on anything, it should be able to be clearly understood.

Mr Ollis added that his further concern was that the huge amount of underspending was a clear  indication that no work was being done on the ground.

Mr Suka agreed with Mr Ollis, and said that there was a huge problem if such large amounts remained unutilised. He suggested that instead of the Department merely withholding funds, it should perhaps look at the procedures and documentation that it required for release of funding, and come up with some other options. He reiterated that withholding of funds affected ordinary people, who desperately needed services to be delivered to them.

Mr Msondezi Futshane, Chief Director: Road Engineering Standards (RES), Department of Transport, noted that the practice of withholding had been used before, particularly with provinces such as the North West, and he said that it was effective.

The Chairperson said that the Committee was not questioning whether the Department was doing its job adequately, or questioning the methods that it used, other than in the context that what it was doing resulted in lack of service delivery to ordinary people, because the funding to carry out projects was not released. Local governments had found themselves unable to function properly when this practice was used, and could not be adequately evaluated on their performance, since they were not given the necessary funds to operate. Another problem was that the departments ended up by doing fiscal dumping at the end of their financial years, and this then hindered the municipalities, who had to rush matters and try to spend the money dumped on them before their financial years ended in July. She said that this was an unfair practice.

Mr Suka suggested that the Department officials should be given some time to discuss the matter now, and come up with a way to move forward. The meeting was not proceeding as it should.

The Chairperson agreed and ordered a five-minute adjournment.

On resumption, Mr Pretorius continued with the presentation. He noted that the Passenger Rail Agency of South Africa (PRASA) had been given R230 million under the budget and that the DOT would review the expenditure schedule for PRASA each month. In the previous year, PRASA had underspent on capital expenditure, and this new system was introduced to ensure that the capital allocations were being spent.

In respect of the line item for agencies and accounts, DOT had overspent against the projection of 25% of total budget for this quarter, mainly because there had been an advance payment to the Railway Safety Regulator of South Africa, in agreement with the National Treasury.

Mr Suka was interrupted by Mr Suka, who sought clarity on what was meant by overexpenditure on agencies.

Mr Pretorius clarified that when speaking of “agencies” he was in fact referring to the Schedule 3 public entities, which were all the public entities, excluding PRASA.

Mr Pretorius then continued from slide 4. He explained that the presentation set out the cumulative totals of money transferred to the provinces and the agencies.

The Chairperson stopped Mr Pretorius again and said that the manner in which the presentation was being given was very misleading, referring to it as “misleading accounting”. The presentation should have set out the budget, then the payment schedules and these should correspond to what the Department had actually done in the quarter.  The whole document needed to be reviewed.

Mr Vilana added that the DOT would take the recommendations of the Committee into account. He apologised for the manner in which the budget and expenditure was presented, and asked that the DOT be given another opportunity to make a correct presentation.

Mr Suka noted that the DOT was dealing with huge amounts, with a R60 billion rand budget. Mr Pretorius was hard put to explain exactly what was happening. He suggested that this meeting be postponed and that the Department be given another opportunity to present. He asked the officials to use another format for the presentation, which was more user-friendly. He did not want the credibility of the department to be questioned, so the meeting should stand over until a revised document was prepared.

The Chairperson stated that the Committee was not wanting to be confrontational, either to Mr Pretorius or the Department, but the main concern was that services were not being delivered to the people, and the impact of late transfers of money that resulted in fiscal dumping.

Mr Suka amplified that the Committee’s task was to do oversight, on behalf of Parliament, and that it was attempting to ensure that the Department was doing its job properly, and presenting something substantial.

Mr G Krumbock (DA) concurred with Mr Suka’s suggestion that the meeting be adjourned.

The Chairperson noted that intergovernmental relations were a key feature of the democracy and that they needed to be upheld. She noted that local government experienced many difficulties as a result of national and provincial governments not complying with intergovernmental relations.

Mr Vilana said that he appreciated the Committee’s continued support, and promised to revise the presentation.

The Chairperson then excused the Department from the meeting.

Adoption of minutes
The Chairperson tabled the minutes of meetings on Tuesday 20 August and Wednesday 21 August 2013.

Members adopted both sets of minutes.

Committee’s draft report on oversight visits
The Chairperson stated that she would circulate the draft report on the Committee’s oversight visit, and requested that Members read through it and be ready for discussion at a future meeting.

The meeting was adjourned.


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