Department of Arts and Culture on Quarterly Expenditure Reports and Performance Review

Meeting report

Overview of Quarterly Expenditure Reports
Ms Fiona Clayton, Committee Researcher, gave a brief overview of what the Members should look out for in the Department’s quarterly report presentation.  Among issues highlighted were the Department of Public Works invoicing, as well as under-expenditure.

The Chairperson said it was important to look at this report, as it laid the foundation for the upcoming term and would also make the Committee’s presence felt by the Department.  Things that used to happen needed to change, and it was this Committee that had to ensure this.  The Committee needed to lay its own foundation and alter the manner in which the Department worked.   She appreciated Ms Clayton sensitizing the Committee on the issues.

Mr Mxolisi Dlamuka, Committee Content Advisor, contended that the within the first quarter one needed to set an example, as it determined how the later quarters would be tackled.  Although there was a shortfall in terms of operations, it gave the Committee an opportunity to conduct oversight and assist the Department to recover from the shortfall.

He warned the Committee not to allow the Department to ‘derail its expenditure’ within the third quarter, which was what sometimes happened. In the first three quarters, the bulk of the expenditure needed to take place so that there was not a rush in the last quarter.

He highlighted the fact that of the nine projects not achieved, eight related to the Mzansi Golden Economy (MGE), which was seen as a key strategy in unlocking the potential of the sector.  The question was how the Department would meet this objective if these projects were not achieved, as this was supposed to be a key job creator.

Mr Dlamuka said his sense was that some of the problems that led to a lack of execution were planning, leadership and coordination.

The Chairperson said that there was a need for a strategic planning session in order for the Committee to gain greater understanding, as the Department was extensive and complicated as well. There was a need for a strategic planning session in order to understand each and every section of the Department. Due to the busy nature of the schedule, the strategic planning session may need to be during a weekend. This would allow time for the Department to ask informed questions.

The Chairperson said she had told the Department that the Committee should receive the documents ten days before the sitting of the Committee in order for them to engage with them in a deliberate manner before the meeting.

Ms A Matshobeni (EFF) said there was a need to engage with the documentation in order to ensure that Members fully understood the issues.

The Chairperson said oversight work was not done in committee rooms, but where the people were.
Presentation on 1^st Quarter 2014/15 Performance Report
The Chairperson noted that the team from the Department was not gender sensitive. She also stressed that the Department held the hopes and dreams of South African society and everyone present needed to be cognisant of that.

When the Committee had interacted with the documents, they had been worried.  The Department was at the centre of society as it ministered to a number of government priorities, so under-expenditure was unacceptable.   She urged the Department to convince the Committee that they were doing the best they could.

Mr Sibusiso Xaba, Director General of the Department, said the delegation had had to be split today, as some had had to go to Treasury. That is why the team was comprised in the manner it was.

He began the performance review by saying that 66% of the fourth quarterly targets had been achieved, and outlined the performance for the specific programmes.  The number of targets differed in different quarters, as some activities were conducted only in certain quarters.

He gave a summary of the total budget versus expenditure per programme and a summary of the total budget versus expenditure per economic classification. He said the substantial under-expenditure in goods and services would be explained, as would the over expenditures.

Mr Xaba gave an explanation of the expenditure variance per economic classification, saying that goods and services had moved from one service provider within the country to 18 service providers in each of the provinces.  There had been under-expenditure in the installation of flags, in the Mzansi Golden Economy, community libraries and other goods and services.

In terms of the programmes, administration had spent 30%, institutional governance had spent 21%, arts and culture promotion and development 19%, and heritage promotion and preservation had spent 20%.   All of this amounted to a total expenditure of R2 813 611.

He said compensation of employees included remuneration in cash, social contributions by the employer, basic wages and salaries, overtime, remuneration of nightshift, cost of living allowances, house allowances, bonuses, pension, and medical aid.  An amount of R53 million (25 percent) had been incurred as at 30 June 2014.  A total of 15 posts had been advertised since February 2014 (in two phases) and a total of four posts had been filled to date.  The other posts were in the process of being filled.

A total amount of R105 million (22 percent) had been spent as at 30 June on goods and services -- including payment for financial assets and interest on land.  He said the under-expenditure was mainly due to the process towards allocating support for MGE projects being delayed.  The adjudication process was in progress and had been set to end by 8 August.

In terms of provinces and municipalities (conditional grants for community libraries), Mr Xaba said that the funds were transferred to the various provinces on a quarterly basis. An amount of R174 million (17%) had been transferred during the first quarter of the financial year, based on the business plans. Due to late approval of the Division of Revenue Act (DORA), the funds had been transferred to the provinces on 17 May, which had resulted in provinces not having sufficient time to spend the funds during the first quarter ending in June.

Mr Xaba gave a breakdown of the province and municipalities’ conditional grants on community libraries, stating that 8.4% of the total amount available had been paid.

The Departmental agencies and accounts (current transfers) expenditure item related to subsidies to the Departments’ public entities.   The performing arts institutions’ transfers were processed quarterly, and libraries and heritage institutions on a monthly basis.  An amount of R312 million (28%) had been spent as of 30 June.  The percentage spent had been high due to the fact that performing arts institutions, the Pan South African Languages Board and National Heritage Council had been paid quarterly, in line with their cash flow projections.

The Departmental agencies and accounts (capital works) expenditure item related to the maintenance, upgrade and refurbishment of the Department’s playhouses, museums and libraries, as well as the construction of legacy projects. An amount of R35 million (6%) had been spent as at 30 June.  The Department had realised that some of the projects included in the User Asset Management Plan (UAMP) were not planned properly, and the infrastructure unit had then been tasked to revise the project list to include only those with realistic projections and outputs.  Funds would be transferred to the entities in the second quarter.

Expenditure under non-profit institutions (NPIs) related to subsidies to the Business and Arts South Africa (BASA), Blind SA, Engelenburg House Art Collection and MGE projects. Higher Education expenditure related to transfer payments to tertiary institutions in the form of a bursary.  MGE funds would be transferred as soon as Treasury approval had been obtained. No funds had been transferred to education institutions as at 30 June. This budget would be re-allocated to Households during the Adjusted Estimates of National Expenditure (AENE), as the beneficiaries of the funds were students and not universities or colleges.  Funds for the heritage bursaries had been allocated in October.

The Households expenditure item related to all the financial assistance projects that the Department funded during the financial year. An amount of R12 million (42%) had been spent as at 30 June.  A virement of R 8.4m would be requested to shift funds from the NPI to Households in respect of financial assistance in Programme 2 (Institutional Governance).

Mr Xaba said the capital asset budget related to the purchasing of machinery and equipment, including IT equipment, as well as the acquisition of a building and other fixed structures. An amount of R3.9 million (53%) had been incurred as at 30 June.  The high spending was due to the procurement of production environmental servers for head office and national archives.

The Department had spent R711 million (20%) as at 30 June.  The spending had been in line with the target set for the first quarter. All the virement requests had to be processed as soon as the Appropriations Bill was enacted by Parliament, in order to accelerate spending. The deviations would be minimized and procurement of goods and services would be done through supply chain management (SCM). The capital works projects needed to be closely monitored in order to curb under-expenditure.

Mr Xaba gave an overview of selected indicators, such as the number of artists placed in schools per year, the number of cultural events supported per year, the number of language practice bursaries, and the number of flag poles installed per year. In terms of flags, he noted that there had been a request for the service provider to complete the work by the end of the year.


Discussion
Expenditure
Mr Grootboom said that there was some discrepancy in terms of the overall expenditure, as in one case there had been expenditure of 239%.  The Department could therefore not boast that they had spent 95%, as this needed to be taken into account.

Mr T Makondo (ANC) said under-spending needed to be tackled because it spoke directly to the issue of creating jobs.

Mr M Rabotabi (DA) said the 5% under-expenditure was unacceptable.

Mr Xaba replied that the under-expenditure was something that the Department regretted.  It would have loved to have spent all the money. as there were needs out there that had to be met.  However this had not been possible, and the Department was making every provision to ensure this matter was corrected.

Withdrawal of funds from provinces
Mr Rabotapi asked about the funds that had been withheld from Limpopo and whether they would be distributed once the issues that had been resolved, as this rural province needed these resources.

Ms N Bilankulu (ANC) asked what was done when a province showed an inability to spend the money they were given.  Was assistance given and what was done in order to help them?  She noted that some of these provinces had rural areas that badly needed these funds, yet they had been withdrawn.  She emphasised the need for support being given to these provinces.

Mr Xaba replied that when provinces did not perform, funds were not just withdrawn -- work was done with the provinces within various forums.  Before funds had been withdrawn from Limpopo, there had been engagement with them in order to determine what the problems were and what the way forward was.

Presentation of Fourth Quarter Performance Report
Mr Xaba presented on the Fourth Quarter Report, saying that 68% of targets had been achieved. As they had become better at measuring targets, the Department had realised they would rather do more with fewer targets. Some programmes had been merged to make the number of projects four, instead of six.

He gave a summary of total budget versus expenditure per programme. The administration programme had spent 100% of its budget, performing arts 95%, the national languages service 100%, cultural development 99 percent, heritage promotion 88% and national archives and library services 96%. In total 95% of the budget had been spent.

An amount of R190.7 million had been spent on compensation of employees, and there had been no variance as the amount represented 100% spending of the budget.  A total amount of R303 million (69%) had been spent on goods and services, including the payments for financial assets. A material variance of R137 million was due to the under-expenditure of R44 million for the installation of flags, R26 million for Mzansi Golden Economy, R527 000 for community libraries, a R62 million correction of office accommodation for the institutions, which was re-classified from goods and services to transfer payments; and R4 million for other goods and services.

An amount of R594,7 million (99.%) had been transferred to community libraries, based on their business plans. The variance of R6 million was due to the re-classification of goods and services (MGE projects) to transfers (emanating from an audit finding). A roll-over had been requested from Treasury for the unspent amount of R3 million in respect of the Eastern Cape Province.

A breakdown of provinces’ and municipalities’ conditional grants for community libraries showed that 91.2% of the total available (R637 435) had been paid.

Mr Xaba gave a detailed explanation for the budget expenditure variances, by economic classification.

He said an amount of R1 billion (105%) had been spent on transfer payments to DAC institutions. The reason for the over-expenditure was due to the R62 million correction of office accommodation for the institutions which had been re-classified from goods and services, to transfer payments.

An expenditure of R325 million (77%) had been incurred for capital works projects. A material budget variance of R95 million had been caused by slow spending on capital projects.

An expenditure of R154 000 had been incurred for gifts, donations and sponsorship of state money and other movable property in the interest of the state.

An amount of R102 million (93%) had been transferred to NPIs. There was a material variance of R8 million, but a roll-over of only R4 million has been requested from Treasury for MGE projects.

Higher education institutions’ expenditure related to transfer payments to tertiary institutions in the form of bursaries, and R3 million (80%) had been transferred.

An amount of R81 million (98 percent) had been spent on Households. 

R12.6 million had been spent on intangible assets.  The over-expenditure was due to the correction of the development of IT software, which had been re-classified from goods and services to intangible assets.  This had emanated from the audit finding.

R6,9 million (100%) had been spent on machinery and equipment, while R14 million had been spent on building  and other fixed structures. The expenditure variance was due to the reclassification of the Nelson Mandela statue as capital asset, instead of a transfer.

Mr Xaba said highlights were that an expenditure of R2,7 billion (95%) has been achieved in the 2013/14 financial year, and a virement approval had been granted by National Treasury for the MGE projects, which had been re-classified from goods and services to NPIs.   A virement approval of R66 million had been granted by Treasury from capital works projects to goods and services for the installation of flags at schools project. 

At year-end, a total amount of R159 million had been under-spent.  A roll-over amount of R51 million had been requested from Treasury, which included R4 million related to MGE projects, R3 million in respect of conditional grants for the Eastern Cape; and R44 million for the installation of flags at schools project. 

Mr Xaba gave a breakdown of selected indicators, including the number of arts practitioners placed in schools, number of public art programmes supported; number of language practice bursaries awarded per year; number of bursaries in heritage studies awarded per year; number of handheld flags distributed per year; number of flags and poles installed at schools per year; number of community libraries upgraded per year; number of new community libraries built per year; number of jobs created through support to arts, culture and heritage events per year; number of touring venture projects supported per year; number of cultural events supported per year; number of heritage (legacy/monuments) projects supported per year.

He broke down the selected indicators according to objectives, with the first being enhanced governance and accountability.  The second was developing, promoting and protecting all official languages through policy formulation and implementation. The third was developing, preserving, protecting and promoting South Africa’s cultural heritage through policy development. The last was archives and record management.

Discussion
Unemployment
Ms V Mogotsi (ANC) thanked Mr Xaba for the presentation but stated that as a South African who knew that unemployment was a problem, the unfilled positions in the Department made her worry about how it functioned at the higher post levels. One had to ask how long a post had not been filled.

Mr Grootboom asked if the jobs that had been created were sustainable, or were they short term jobs.

Ms Matshobeni asked how jobs were going to be created if the Mzansi Golden Economy was not meeting its targets.

The Chairperson asked how the Department was going to employ people if it had already spent the money elsewhere.

Mr Xaba replied that restructuring had happened when he had first joined, so that the structure was aligned with the budget. This had meant holding off the appointment of Deputy Directors General. He wanted to give this background so that the Committee could see that the Department had come very far, as there had been five Deputy Director posts vacant. The Department had ‘had to do what they had to do’ in order to eradicate some posts and work with the resources they had.  Since he had joined the Department there had been no Chief Financial Officer, as keeping a good financial manager was difficult because they were often given offers which the Department would have to try and counter.  The position had been advertised three times.

Persons with disabilities
Ms Mogotsi said she had been in the Social Development Committee, and the Department needed to answer why persons with disabilities were not being included and employed when they were available.

Mr Conrad Greve, Acting Deputy Director General of Corporate Services, replied that some persons with disabilities had been employed and there had been some movement towards the target. It was a case of attaining the 2%, and then maintaining it over the years.

Governance
Ms Mogotsi said that issues of good governance needed to be tackled, as this was important to South Africa.

Gender Based Violence
Ms Mogotsi said gender violence was very high, and the Department was not assisting. There were Departments that could work with the Department on this issue -- they did not have to do it alone.

Mr Xaba replied that although there were no specific targets, some of the social cohesion targets dealt with the issue -- for example, the community conversations that took place.

Meeting international 2015 targets
Ms Mogotsi asked how the country was going to meet it post-2015 targets if the Departments were failing in a number of areas.

Flags
Ms Mogotsi asked why urban areas were not doing well in terms of rolling out flags?  Rural areas seemed to be doing better.  When she had been doing social work, she only had seen one flag at a white school. Was the Department doing oversight, or was it just waiting on the provinces to give reports?

Mr Rabotapi said he did not understand why there needed to be a service provider planting poles when it could be done within school communities by students and those within the school.  He argued that it was a relatively simple task from his point of view.  The Department should begin liaising with their counterparts within the Department of Education.

Mr Xaba replied that he had never thought of school communities implanting the flags themselves, and this could be explored. The view had been taken to give the job to one provider and there had been a turnaround in terms of the number of flags distributed. The Department had also sought to bridge the rural/urban divide, and had thus focused its energies within the rural areas.  Part of what had been done with the installations had been to circulate information such as national symbols, the preamble to the Constitution and the proliferation of the national anthem. There was a programme in schools called ‘Values in Education’ which gave a history of the flag, the national anthem and the Constitution.  This was taught as part of Life Orientation. He said more information would be provided by the Department on this issue.

Mr Vusithemba Ndima, Deputy Director: General Heritage, Promotion and Preservation, added that it was prudent to indicate that when the project had been started, the obstacles to implementation --especially within rural areas -- had not been foreseen. That is why there had been an emphasis within these areas.

Expenditure
Mr Rabotapi said that ever since the Director General had joined the Department, there had been poor expenditure, especially in 2012 and 2013. He had not seen a Department that planned to spend so little within a quarter.

Mr Grootboom said he was concerned about the positions that had been advertised and not filled. Had they been filled, there would have been over-expenditure.

Mr Xaba replied over the last few years there had been a growth in the budget of the Department, but personnel had not grown. This had meant that more work had been done with less budget.  The Department had attempted to improve expenditure while also meeting goals. There had been an improvement in these areas.

Bursaries
Mr Grootboom asked whether bursaries were given to an institution or directly to the students.

Ms Matshobeni asked for more information on the bursaries that had been awarded, saying that if the Committee was to engage, then there was a need have this information.

Goals
Mr Makondo said it was difficult to conduct oversight on the Department when goals kept changing. He asked how the Department was going to meet the targets they had set themselves.

Payment of service providers
Ms Matshobeni asked why service providers had not been paid within 30 days.

Mr Xaba replied that most service providers were actually paid within 26 days.  There had been issues where some invoices had been received late, and they had had to wait for the next financial year. He stressed that payment within 30 days was for valid invoices, and some invoices had missing information.

Community dialogues
Ms Bilankulu asked what the Department wanted to achieve with their community conversations that targeted the youth?

Mr Xaba replied that they were meant to serve as a platform on which South Africans could engage with issues that were often discussed, such as identity, xenophobia and other issues. There was a need for communities to engage on these issues. They were also meant as a place to discuss what communities would do to remedy the issues identified, with the support of government.

Comments
The Chairperson said she wanted to see the impact of the programmes on people on the ground.   Issues like under-expenditure and unemployment were having a great impact on peoples’ ability to work and bring about change within society.

Future documents
The Chairperson stated that it was important for the Department to outline the number of jobs created and whether they were sustainable, as well as where those jobs were. This was so that the Committee could assess the impact they had.  There was also a need for concrete information on the flags -- where the flags were installed, how many still needed to be installed and where they needed to be installed.  This issue had to be dealt with by the end of this financial year. She wanted to know where the community conversations took place and why they were happening in that area, so the Committee could go and listen and find out what the people were saying. There was a need to check if taxpayers’ money was being spent in the way that it was meant to be spent. Those present were holding the dreams of the people in their hands.

The meeting was adjourned.