The Western Cape Provincial Treasury had a virtual meeting with the Committee to present its preliminary performance outcomes for the fourth quarter of the 2019/20 financial year. The Covid- 19 had an impact in delaying the finalising of the pre-audit numbers.
Provincial Treasury indicated that about 99.2% of the adjusted budget was spent, representing underspending of R518 million. The underspending was in the Departments of Education (R203 million), Health (R107 million), Transport and Public Works (R68 million), the Department of the Premier (R21.4 million), as well as Social Development (R30 million). Public entities spent 97.7% of the adjusted budget. The underspending was mainly at the Western Cape Liquor Authority, the Gambling and Racing Board, Wesgro, and the Saldanha Bay IDZ. The entire Infrastructure budget has been spent.
Members asked how virements and rollovers would be handled. How much of the underspending is as a result of Covid-19? Can the underspent funds be considered savings and then diverted to Covid-19 relief?
The Committee adopted its final mandate on the 2020 Division of Revenue Amendment Bill – the province did not support the Bill.
The Chairperson welcomed everyone to the virtual meeting and asked the Members of the Committee and the delegation from the Provincial Treasury to all introduce themselves.
Presentation by the Western Cape Provincial Treasury: Preliminary Performance Outcomes for the Fourth Quarter of 2019/20 Financial Year
Ms Analiese Pick, Director: Provincial Government Finance – Expenditure Management, Western Cape Provincial Treasury, said that the report was a preliminary report on expenditure because of the impact of Covid-19 in delaying the finalising of the pre-audit numbers. The numbers would be available after 01 August 2020.
She indicated that R67.5 billion of the R68 billion budget had been spent, equating to 99.2% of the adjusted budget and underspending of R518 million. This was spread out as follows:
- The Department of Education underspent by R203 million mainly on compensation of employees. This was related to the delay in the filling of posts. There was also an issue of aging staff and retirement.
- The Department of Health underspent by R107 million, mainly due to goods and services and health technology, as well as the maintenance project like the Tygerberg Hospital Project.
- The Department of Transport and Public Works underspent by R68 million; this was due to the delay in the relocation of the Department of Education to its alternative building.
- The Department of Social Development underspent by R30 million due to compensation of employees.
- The Department of the Premier underspent by R21.4 million due to less international travel and slower rollout of projects.
She then indicated that the public entities spent 97.7% of the adjusted budget of R843 million, amounting to a net underspending of R19.2 million. The Gambling and Racing Board spent 86.2% of its budget; the Liquor Authority spent 90.2%; the Saldanha Bay IDZ spent 95%; and Wesgro spent 98.3% of its budget.
The Western Cape Nature Conservation Board had R5.9 million of over-expenditure. This was an accounting transaction and was due to depreciation. Infrastructure spent 100% of its budget.
Presentation document showed charts and graphs to illustrate the figures.
Preliminary non-financial performance data for the Western Cape Government
Ms Naadia Ismail, Director: Strategic and Operational Management Support, Western Cape Provincial Treasury, said that the average preliminary achievement for a Department was 82% performance targets achieved. The actual achievement was usually higher.
She said that reporting of targets had changed and preliminary results would no longer be captured. Going forward, only actual performance would be reported.
Charts and Graphs illustrated the figures for the departments as well as the entities.
Ms N Nkondlo (ANC) wanted clarity on whether any apologies had received from the MEC as well as the HOD. She also asked why Members of the Committee only received the presentation only minutes before the start of the meeting.
The Chairperson pointed out that the MEC normally did not attend the quarterly meetings; she requested the MEC’s attendance in future meetings if this was how the Committee was to proceed. She confirmed she did not receive apologies from neither the MEC nor the HOD. Regarding when the presentations were usually made available to the Committee, she said that this matter had been raised before and the Provincial Treasury would address the question in its responses.
Ms Nkondlo asked about the preliminary numbers – if the Committee would receive the final numbers in time to engage with the individual reports. She also asked about the virements and whether or not the process of moving funds was not just ‘creative accounting’.
She asked if the provincial government had conceded that the filling of posts and compensation of employees were consistently going to be issues; asked where Members could get the age profile for Western Cape Government employees.
The Chairperson corrected an earlier statement she made regarding the presentation. She clarified that the document that was received before the start of the meeting was a summarised version of the document that was emailed to Members on 15 July 2020.
Mr L Mvimbi (ANC) asked why the Committee was still dealing with a preliminary version four months down the line. He also asked if the underspending could be viewed as savings so that it could be redirected to Covid-related expenditure.
Mr Anthony Phillips, Western Cape Provincial Treasury, relayed a message from the HOD, sending his apologies. He said that departments sometimes did not find suitable candidates internally and this led to delays in filling posts; this had knock-on effect when it came to compensation of employees (CoE). He said that the presentation was still in a preliminary phase because Provincial Treasury was waiting for the Auditor-General to pronounce on the audit. Adjustments could be done once the audit was completed.
Ms Pick responded that the presentation was still in a preliminary phase due to the impact of the pandemic. National Treasury had extended reporting timelines by two months while Provincial Treasury had not yet received the final numbers from each Accounting Officer and it would not be possible to finalise the presentation before this process took place. According to section 43 of the Public Finance Management Act, virements were allowed. The issue with the CoE was perennial but it was sometimes impossible to have 100% spending in some of the larger departments. She said that a good example of this was the Education Department that needed to account for permanent as well as reserve teachers. Departments could apply to Provincial Treasury to use rollover expenditure; they were also given an opportunity to apply to address Covid-19 pressures being experienced.
Ms W Philander (DA) asked if there was an inter-departmental process for rollovers. What is the timeline for departments that have sent their submissions to Treasury?
Ms Pick responded that Provincial Treasury would have the final numbers by the first week of August, and this was when the applications would be evaluated. Applications related to Covid-19 had already been dealt with in the adjustments budget that would be tabled on 23 July 2020. The outlook for the current and next two financial years saw a drastic change. There was currently a three-phase budget review under way, with the aforementioned adjustments budget being the first phase. The second phase would be a policy-led review of the entire 2020 budget, which would be reprioritisation from a policy standpoint. The third phase would deal with other applications by the Department and would essentially be a review of the policy-led review.
Ms Nkondlo wanted to know the percentage of the budget was affected by the Covid- 19 pandemic. She asked this because the period under discussion was before the lockdown began. What will happen to the R538 million that was underspent? Will the funds be integrated into the 2020 budget? She also asked if the Committee would be getting another presentation once the final numbers were in, and what conversations would be had if there was a deviation from the preliminary numbers.
The Chairperson asked if the public entities were on the accrual or cash payment system. She asked if the change in reporting non-financial performance details was similar to the discussion in the Committee in 2019. This was to ensure that the performance brought before the Committee, including the feedback, was happening in line with the Key Performance Indicators in the reports that were read on yearly basis. She asked for a breakdown of the 0.8% in underspending when it came to CoE. How much of the amount was affected by Covid-19? With regards to the two-month extension for departments, she wanted to know if the numbers were from National Treasury or the Auditor. Did all provinces receive the extension regarding these figures?
Ms Ismail said the data had not yet been subject to review or quality control. The cycle did not include preliminary data. Validated performance would provide actual performance as there was no more estimate performance.
Ms Pick said Provincial Treasury would provide the Committee with a breakdown, per department. About R64 million of the expenditure was the amount related to Covid- 19, mainly utilised by the Department of Health. All departments received the extension and were on the accrual system.
She said that the R538 million would be considered during the adjustments budget; the rest would be part of the review due to the change in the fiscal framework. She indicated that provinces never received any funding from national government to combat Covid-19; so the budget needed to be reviewed.
The Chairperson thanked the Provincial Treasury delegation and allowed them to leave the meeting or stay online as members of the public.
Consideration and adoption of the final mandate: Division of Revenue Amendment Bill, 2020
Mr D Mitchell (DA) said the Bill had not changed and proposed that it not be supported.
Ms Philander seconded the proposal.
Mr Mvimbi asked why the province did not provide a recommendation, just criticism.
The Chairperson explained that the Western Cape did not make recommendations but provided reasons for not supporting the Amendment Bill.
Mr Mvimbi raised an objection.
The Chairperson put the matter to the vote.
The Members that voted not to support the Bill were: Mr Mitchell, Ms Philander and Ms D Baartman (DA).
Mr Mvimbi voted in favour of supporting the Bill.
Mr G Brinkhuis (Al Jama-ah) said he would not vote as he was not in the meeting at the time of the vote.
The Committee voted not to support the Bill.
Ms Nkondlo requested that a communique be sent to Treasury regarding sending of content that would be presented to the Committee, as well as the attendance of the HOD and/or MEC. This also extended to the R538 million that was underspent. She asked about the protocols related to virements and rollovers.
Consideration and adoption of minutes
The minutes for the meeting held on 16 July 2020 were considered.
Ms Philander moved for the adoption of the minutes and Mr D Mitchell seconded the motion.
The minutes were adopted.
The minutes for the meeting held on 22 May 2020 were considered.
Mr Mitchell moved for the adoption of the minutes; Ms Philander seconded.
The minutes were adopted.
Consideration and adoption of the quarterly report
The quarterly report was considered and no amendments were proposed.
Ms Philander moved for the adoption of the report and Mr Mitchell seconded the motion.
The quarterly report was adopted.
The Chairperson thanked everyone who attended the meeting.
The meeting was adjourned
- Preliminary Performance Outcomes for Fourth Quarter of 2019/20 Financial Year
- Letter to Standing Committee on Virement (28-7-2020)
- Addendum surrenders practice note 20-21
- Treasury Circular 23 2006 Virement (original signature)
- Treasury Circular No 13 of 2020 Rollover of Unspent Funds and Retention with Annexure
- Virement high level summary updated
- WC CoE under spending breakdown_31 March 2020 (prelim outcome)
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