A summary of this committee meeting is not yet available.
FINANCE SELECT COMMITTEE AND JOINT BUDGET COMMITTEE
17 February 2005
CONDITIONAL GRANT EXPENDITURE HEARINGS: HOUSING AND EDUCATION DEPARTMENTS’ SUBMISSIONS
Documents handed out:
Press release by National Treasury
Provincial 2003 Budget Statements and Strategic and Performance Plans (offsite link)
Submission by the National Housing Department:
Submission by the KwaZulu-Natal Housing Department
Provincial Budget Report (offsite link)
Intergovernmental Fiscal Review (offsite link)
The Departments of Housing and Education reported to the Committee on the spending of their conditional grants. Certain provinces had been asked to attend, but not all of them responded. The Committees raised concerns about underspending by departments, especially in the HIV/AIDS lifeskills programme run by the Department of Education. The quality of housing was also a discussion point and the Committees felt they should visit provinces to investigate various projects.
The Chairperson explained that these hearings had been convened because there was concern about the rate of underspending of conditional grants. The underspending in three provinces was particularly worrying: KwaZulu-Natal had spent under 40% of its HIV/AIDS and lifeskills budget, the North West had also under spent and the primary school nutrition programme in the Eastern Cape was of concern. The Committee had invited the National Minister to establish what was being done about this. The respective provinces would also be asked to explain what was being done and Treasury would also respond on this issue.
Education Department submission
Ms N Pandor, the Minster of Education, gave an overview of the situation in the provinces. There had been significant improvements. The report that had been released by National Treasury was up to the end of December 2004. Since schools had opened, there had been increased spending and utilisation of the funds. In 2002/03 the provinces had managed to spend 92% of its grants. In 2003/04 they had spent 88% of the conditional grants. There was better spending at the moment since there was an improvement in the human resources. The Early Childhood Development grant had showed some challenges with respect to its implementation. In the first year it was being implemented and therefore there was a low expenditure. In the second year, the spending year had increased from 28% in the first year to 65% in the second. In the third year there had been an improvement to 75%. This was normally the trend that as the human resources developed and people became more adept at spending, there was an increase in the spending.
The reasons for underspending were varied across the provinces but they were normally due to a lack of personnel or there were no action plans. Referring to the HIV/AIDS programme she said that this grant was introduced in the supplementary budget in 2000/01. In 2004, Treasury had indicated that the expenditure patterns for this grant was low. An investigation had ensued and the following reasons had emerged. In the Eastern Cape the slow tender process and the slow processing of payments had caused huge discrepancies between commitment and expenditure. The understaffing at head office and the districts had also lead to low spending levels. In the Free State the slow processing of payments had been the cause of underspending. This was being attended to and spending in the last quarter of 2004 would improve. In the North West province, the restructuring of the department had meant that 66 of the 75 HIV/AIDS trainers had left the programme and only 45 of the 65 new people could be trained up to the reporting date. There was therefore a lack of personnel that had also lead to a delay in appointing service providers. This was now being done and there should be an acceleration of expenditure in the last quarter of 2004. In KwaZulu-Natal the development of the Revised National Curriculum Statement (RNCS) learner support materials had taken longer than anticipated. The training had therefore been delayed. The Department planned to train 400 master trainers and 10 000 educators to deliver the programme to learners in the present financial year. At present, 4959 master trainers had been trained and 38 000 educators had been trained in life skills. The Department had trained 34 950 educators and learners as peer educators as at the 31 December 2004. She pointed out that sometimes it seemed as if not much was being done when one looked at the financial figures. The non-financial figures however showed a different picture. The programme is therefore actively being implemented. The learner support material had been delivered to over 50 000 learners and over 5 000 sites had been visited for support and monitoring.
Referring to the primary school nutrition programme, the Minister explained that the Department of Education had taken over this programme from the Department of Health on 1 April 2004. By January 2005 five million learners were being fed in 16 000 schools on each school day. This programme had been consolidated by the appointment of nine provincial co-ordinators. The Department had trained 200 district officials in school support and monitoring. National guidelines for this programme had also been drawn up. Of the schools being serviced, 4 248 had been visited and monitored. The Department had also paid a modest honorarium to 40 000 unemployed women who helped in delivery of the programme. The programme has contracted 316 Samll Medium Micro Enterprises (SMMEs) to help in the programme. In the Eastern Cape the programme had not moved. It was a concern that some children only receive food three times a week. In all the provinces the lack of water and sanitation infrastructure hampered the programme.
Ms P Tyobeka, DDG: Quality Promotion and Development, Department of Education, said that since the Department had taken over the nutrition project they had managed to steer it in a national direction so that it was reaching the poorest of the poor. The programme had had its challenges but there was now an improvement in expenditure rates. At the end of January 2005, claims had totalled 73%. She informed the Committee that they had spent 100% but that not everything had been paid out yet. Those services delivered in January might not be paid out by end of March.
Ms L Moyane, Director: School Education (GET), Department of Education and project manager of the HIV/AIDS and lifeskills programme, said that the HIV/AIDS and Lifeskills programme was an ongoing one. Its aim was to bring about a change in learners’ behaviour. There were indications that these changes were taking place. The peer education part of the programme was increasing and they were very happy with the progress made so far.
Mr N Nene (ANC - KZN) asked what monitoring mechanism was used to evaluate the programs. He also asked if it was possible to have the cash flow projection when the strategic plans were tabled.
Mr E Sogoni (ANC – Gauteng) said that the non-financial figures with the financial figures gave much more information. He pointed out that the trend in department was to have slow spending all year and then a sudden increase in the last quarter. He wanted to know what could be done to address this. Referring to the lack of water and sanitation in the Eastern Cape, he asked if other departments were attending this to.
Mr A Manyosi (ANC –Eastern Cape) asked if the business plans submitted by the provinces were submitted in time and whether they were up to standard. He also wanted to know if any corrective action was taken in the Eastern Cape so that feeding would happen more often than three times a week.
Mr M Robertson (ANC – Eastern Cape) pointed out that in his province they had had a problem with farm schools. In one particular case a school had a teacher for only three out of eighteen months. He had gone to various officials to attend to the problem. It was very frustrating when doing constituency work as it took very long to see progress.
Ms Pandor said that she was also horrified by the lack of responsiveness from officials. She encouraged members to alert her to problems faced in the provinces so that she could attend to them. One of the areas in which there had been under spending was on infrastructure. The development of posts in the Eastern Cape had also been a problem for a long time. These issues needed to be brought to the Department’s attention so that it could be dealt with. She said that it was frustrating at times for the national Department to intervene in the provinces. She considered whether it would be necessary to use Section 100 of the Constitution to do this. In this case she would need Parliament’s support. She agreed that the non-financial information was very important. Sometimes the percentage of spending might seem low, but it had actually achieved much.
Ms Tyobeka said that project managers were appointed in each province to monitor the progress of the programs. The national Department had also seconded people to the provinces to assist the provinces in the implementation of the different projects and to assist in the financial monitoring of the projects. She said that because the national Department had strengthened capacity in the provinces, they were adhering to guidelines for the business plans. These plans were usually of a good quality. The Eastern Cape still presented some challenges. There was a slow improvement. One of the problems in this province was to work with credible data. There was movement here though. They had bought 22 cars to help with monitoring the feeding programme. The increase in spending in the last quarter was inevitable in some cases especially in the nutrition programme. The problem existed, because they were using small service providers, who lacked the capacity to submit and process invoices. In some cases they did not have bank accounts.
Mr P Benade, Chief Financial Officer in the Department of Education, said that for a good administrative system to work, it was important to have a good database from which to work. This database should have the information of all service providers and schools that needed to be fed. This had received much attention in the last few months. In most provinces this was now in place. In the Eastern Cape there was no clear database. In this province they were feeding more than 5 000 schools. Because of the problems that existed here, assistance was being given to them. They had now managed to catch up with 80% of the backlog that existed. There was the possibility here that payments would in future be made to schools, in which case they would use the community to provide the meals. In this case the proper facilities needed to be in place with regard to sanitation and hygiene.
Mr M Goeieman (ANC – Northern Cape) asked what plans were being put in place to see that the funds for HIV/AIDS were being used in KwaZulu-Natal and the North West Province.
Mr D Botha (ANC – Limpopo) asked what process was followed in the case where a province was under spending. The Treasury report showed that the spending was less than 40% by the end of December in KwaZulu-Natal, North West and the Eastern Cape. This did seem to link up with what the Department was saying
Dr P Rabie (DA) asked if the peer educator programme was based on a South African model and whether the Department could be sure that the children were receiving the food and not other people.
Mr Z Kolweni (ANC – North West) suggested that more unemployed be used in the programs, as the level of community involvement was very important.
Mr Sogoni (ANC – Gauteng) said that the expenditure on infrastructure in schools was important. In some cases some provinces had only spent 13% of their budget on capital expenditure. This was unacceptable and he wanted to know the reason for this.
The Chairperson asked if there were similar norms and standards across the provinces for the feeding programme. He also asked the Department to comment on the use of the education component of the conditional grant for the HIV/AIDS programme.
Ms Pandor replied that conditional grants were very important when new programs were initiated particularly in education. With respect to the ECD conditional grant, all the funds had been utilised. Government was now planning an integrated plan for ECD. This would be run jointly between the Departments of Education, Health and Social Development. There was a document at present that had been drawn up by the three ministers. This document would be submitted to Cabinet soon for comment. There were national norms and standards for the nutritional programme. She expressed concern that the government was giving a lot of money for this programme, but she was not sure if children were getting what they should be getting. She was therefore keen to look at the payments being made to service providers. The preferred route would be to use the community to provide this service. This would also be more cost effective. Monitoring was important and the Department had gone a long way to improve this. Referring to the infrastructure spending, she said that she wished the money had been spent on this in the Eastern Cape. Much of this money had reverted back to the provincial treasury and was not used for classrooms.
Ms Moyane said that the peer educator programme was a South African programme. It was closely related to the curriculum and was designed by the Departments of Health and Social Development and non governmental organisations (NGOs).
Ms Tyobeka added that in the peer education programme, they were working very closely with youth groupings in the schools and outside them. She pointed out there had problems around water and sanitation connected to the nutrition programme. They were now considering putting up pilot nutrition centres from which a cluster of schools would be fed. In this way the food would be prepared under more hygienic conditions. To ensure that the proper children received the food, feeding was taking place in entire schools and not to individual children. The Department was also seeking to entrench the food programme by establishing food gardens. There would 90 new gardens established in 2005 across the provinces. Extension officers had also been appointed to work in the provinces to ensure food security. She said that there would probably be rollovers in the following financial year, as some invoices had not yet been processed.
The Chairperson commended the Department of Education on stabilising the situation, especially in the food and nutrition programme. The Committee would continue to monitor expenditure, especially the conditional grants.
Mr Hattingh, from the Treasury, agreed with the Minister that conditional grants were one of the only ways to introduce new programs at a provincial level. He explained that the ECD was now forming part of the equitable share and was therefore shown as a zero in Table 14 of the press release. In the current year they were going to try and get provinces and national departments to give a quarterly non-performance reporting. This would be part of having an early warning system to track spending. He went on to explain that the Eastern Cape’s budget had been cut by R125 million. This was done because of pressures that the Eastern Cape was facing.
KwaZulu-Natal Department of Education briefing
The Chief Financial Officer of the KwaZulu Natal Department of Education addressed the Committee and said that as far the HIV/AIDS programme was concerned, R2 million out of the R29 million was spent. There were a number of reasons for this. One was the slow printing of materials. Training in school hours had also had its difficulties. This was suspended and there was now a catch-up process underway in January and February. The implementation of the BAS accounting system also caused a misallocation of some expenditure. As a result of this, the administration expenditure was very high. Some of this expenditure however was supposed to be charged to the HIV/aids programme. This was now being shifted over. The health kits for schools would be delivered to schools late in February and early March 2005. This would also then increase the spending in this area. He pointed out though that there would probably still be under spending.
As far as the nutrition programme was concerned, 70% of the grant was spent so far. There were problems in the beginning and the expenditure was behind in the first quarter of the year. The take-over of the programme had coincided with the introduction of the BAS accounting system. The system had also required that there be a database for all schools. Some of the schools could not get bank accounts due to credit records. The Department of Health had been writing out cheques to the schools when they had been running the programme. This had been changed around in June 2004 and suppliers were being paid directly. This had meant that the suppliers had to be put onto a database. The system had therefore been changed quite successfully and the Department had issued all service providers with a standard invoice. By the end of December 2004, the programme had under spent by R11 million. Of this amount, R9 million had been administration costs and was being moved over to this account. This would mean that the programme was under spent by R2 million.
Feeding had only started in late January or early February 2005. This meant that February’s accounts would be paid in March. There would therefore be a problem with the March accounts as it would seem as if there was an under spend. They would try to accelerate payment so that most of the accounts could be paid by the 31 March. At present 1 275 million children were being fed five days a week. Feeding had to be done before ten o’clock and there were spot visits to see that feeding was taking place. There was a tender out at the present moment that would seek to use the communities more in delivering the service. In responding to written question received from the Committee, he said that the Auditor-General had qualified the financial report because he was unable to determine if the conditional grant had been spent correctly.
The Chairperson added that perhaps it would be a good idea for the Committee to visit the provinces themselves in the coming year to see firsthand what was happening.
Mr Sogoni (ANC - Gauteng) remarked that the prevalence of HIV/AIDS in KwaZulu-Natal was very high yet the spending by the Department did not correspond with this. He also wanted to know what the Department was doing about schools that did not have bank accounts. He asked that the figures given rather be presented as percentages, as they would have more meaning.
Mr Goeieman (ANC – Northern Cape) was concerned that the reason for under spending in the HIV/AIDS programme was due to the slow printing of materials. This was not acceptable, as the Department should have planned beforehand.
Mr Botha (ANC – Limpopo) commented on the fact that there would be a rollover into the next financial year. How much would it be and what would be the plans for the following year?
Mr Nene (ANC – KwaZulu-Natal) asked what the extent was of the misallocation of funds. He also asked for clarification about the new tenders.
Mr Stephens (UDM) said that the inaccurate budgeting could lead to under or over expenditure. He questioned whether this was perhaps the case in the province.
Mr Kolweni (ANC – North West) asked the presenter to repeat what programs would be repeated in the coming year.
The Chairperson asked if there was capacity in the province to spend the funds. He also asked if any changes had been done to the system since it had been taken over from the Department of Health.
The Chief Financial Officer from KwaZulu-Natal said that as at the end of December less than 10% had been spent in the HIV/AIDS programme. This will be corrected however because of the accounting system and the catching-up that was taking place. He explained that a number of schools did not have bank accounts because the credit records of the governing body could not be established. Referring to business plans; he said that he had reviewed business plans before the new financial year. Each responsibility manager would then receive a letter with the budget allocation and plan for the year. In 2005/06 these responsibility managers would be asked to plan for 2006/07 and 2007/08. He could not explain why the problem had arisen with the printing of the materials. On the nutrition programme, he estimated that the rollover would be around R10 million that would be approximately 5 - 6%. In the HIV/AIDS programme, he was not able to estimate the rollover. He said that the problem with the implementation of BAS was not that significant. In the new tender, for the primary school nutrition programme, the aim was to try to centralise or decentralise depending on the location. The communities would do the delivery. The districts would do the monitoring of the programme but the payment would be centralised. The grant however was not enough for the province so they had to keep the overhead costs down. There was no inaccuracy in the budget allocation, but rather in trying to keep the costs of the meals down and to minimise the overheads. The delay in training in the HIV/AIDS programme arose because training had been planned to take place during school hours. This however could not be done and there was therefore a delay. Training was now taking place over weekends. As far as the nutrition programme was concerned, the Department had the capacity to spend and envisaged that all the money would be spent. As far as the HIV/AIDS programme was concerned, he also felt that there was the capacity to spend. The problem was not around capacity, but rather around the changes in circumstance that had affected the department in the previous year. This had now been stabilised. The format of the programs had been accepted as is when it was taken over and nothing was changed in the first few months. When problems arose however, changes were made. The programmes were working well, but there was a plan to involve the communities more.
The Chairperson asked the presenter to take back the questions which he could not answer and inform the Committee of its answers before the end of the following day.
Mr Goeieman (ANC – Northern Cape) said that he did not feel that the province should send the answers to the Committee. It had been aware of the process and they should therefore have sent a delegation to answer the questions. The fact that some questions remained unanswered was not good. He suggested that the province returned the following week with the answers. The Committee’s findings, when it had visited the province, differed from that which was being presented. He also wondered what the children were actually getting as food. A figure of 0.90 c per meal had been mentioned. He felt that not much could be given for this price.
Mr Botha (ANC – Limpopo) also questioned the type of meal that was given to children. The catch-up in January and February of the conditional grant should have a business plan as "dumping" could take place.
Mr Sogoni (ANC – Gauteng) said that the province had spent only 13% on capital expenditure. This was a cause for great concern. It was important that the Committee be informed of the problem.
The Chairperson suggested that the Committee should visit the provinces in April 2005 to see what was happening.
Mr D Mogajane, from Treasury, said that he was familiar with KwaZulu-Natal and said that were problems in the province. One of these problems was the way the Department was structured. It was his experience that the province would not always have proper representation when Treasury requested it to be present at meetings. Most times it was only the CFO that was present.
Mr Hattingh, from Treasury, added that of the R29 million that was made available for the HIV/AIDS programme, R21 million had actually been transferred to the province. Of this amount, R2.2 million had been spent. There was no indication at present that there would be any over or under spending on this grant. On the primary school nutrition programme, the indications were that there would be an overspend of R50 million. He explained that the introduced of BAS had been a major problem, but this should only have caused problems in the first quarter of the financial year. Referring to business plans, he said that Treasury had done an assessment and had found that in reality, some plans were only approved mid-year. Treasury had therefore now asked that provinces submit five-year strategic plans with a complementary three year annual performance plan with very explicit quarterly targets. This would facilitate quarterly reporting. It had also become clear in the assessment that the departments saw conditional grants as an add-on item and was not part of the mainstream of activities. They had therefore asked the departments to go back and address this. He referred members to the presentation where problems with capital expenditure were addressed.
The Chairperson thanked Treasury and said that it was clear that there were problems that had to be attended to. The Committee would visit the provinces to see for themselves what the problems were. The Chairperson noted that the other provinces (North West, Eastern Cape) that had been asked to come to the meeting were not present. He therefore asked that they move over to the issue of housing.
Department of Housing briefing
Mr Hattingh said that there had been a big improvement in this area. The only problem that still existed was around the human settlement and redevelopment programme. The numbers suggested that at 31 March 2005, only 43% of this grant would have been spent.
Mr M Dlabantu, Chief Financial Officer and Acting Deputy Director General: Strategic Support in the Department of Housing, addressed the Committee as in the Powerpoint presentation attached. He pointed out that there had been two grants in 2004/05. These were the housing subsidy grant and the human settlement redevelopment grant. There was plans to merge the two grants into one. As far as the housing subsidy grant was concerned, there had been a big improvement. Project managers had been appointed in the four provinces that had been struggling. The North West Province had been experiencing big problems for the last two years. Funds were now being withheld. The problems here related to skills. The Department was now assisting them with project managers in this area. It was expected that spending would increase in 2005. The human settlement and redevelopment grant had been a pilot project and had experienced some problems. These problems had been linked to a misunderstanding of the criteria.
Ms N Qhobosheane, Chief Director Project Management in the KwaZulu-Natal Department of Housing, addressed the Committee. She explained that the formula used for the grant was linked to the provincial priorities and the State of the Nation address. The focus had largely been on slum areas and the rural areas. In terms of the Division of Revenue Act, the number and type of houses per district is gazetted. The efficiency and capacity of municipalities was also taken into account. Processing of payments was based on the invoices submitted. Monitoring is done through the deputy directors who oversee the different municipalities. In the 2003/04 financial year, all the money had been spent. They had actually overspent the budget by 8% - which was within the acceptable range. The subsidy grant was divided into three programs. These were the new business, the hostel upgrades and old business. The new business was the new housing projects that were initiated. The province still had hostels and these had to be upgraded regularly. The old business related to the rental houses that were being sold on the discount system. There had been a number of projects that had been blocked because the subsidy was not aligned to inflation. Of these projects, 52 had now been unblocked. The slum clearance project had been initiated in 2001. The goal of MECs is to eliminate slums within six years. As part of this project, a number of people had already been given houses.
Mr Hattingh said that the biggest concern was around quality of houses, this needed to be addressed. He expressed concern about the huge increase in spending in Mpumalanga. There was a concern that the province would run into problems and run out of funds.
Mr Nene (ANC – KZN) referred to the national Department’s presentation and asked for explanation about the beneficiary numbers, as they seemed wrong. He also asked for clarity from the province about the rollovers and overspending.
Mr Dlabantu said that some projects were still ongoing and therefore the numbers seemed incorrect. This was because of the time lag between the approval and implementation of projects.
Ms Qhobosheane said that during 2002/03 there and been under spend of R7 million which was rolled over. In 2003/04 this amount with the budget resulted in R903 million being available which was then all spent plus R8.8 million which was overspent.
Mr Kolweni (ANC – North West) said that the North West had been having problems such as prosecutions and arrests for fraud. This had lead to a number of unfinished projects. This needed to be attended to.
Mr Kaliphi (ANC – Mpumalanga) commented that the unfinished projects in his province were serious and frustrating. This needed urgent attention. He wanted to know how KwaZulu-Natal would eliminate slum areas in six years.
Mr Manyosi (ANC – Eastern Cape) asked the national Department if the information in the Treasury’s press release was correct. What were the plans about the human settlement and redevelopment grant? He was concerned that there might be fiscal dumping.
Mr Sogoni (ANC – Gauteng) asked wondered if the figures were accurate. If the human settlement and redevelopment grant was discontinued, he wanted to know where these projects would then operate.
Mr Botha (ANC – Limpopo) said that the tables indicated projects done, but some of them were incomplete or discontinued. He was concerned about the quality of houses built. Site visits had shown that some of these houses were not fit to stay in.
Mr Goeieman (ANC – Northern Cape) referred to blocked projects in his province. He pointed out that there had been a project in the province costing R41 million built with mudstones. He asked the national department whether the quality of the houses were according to the norms and standards.
The Chairperson asked the Department to provide the Committee with a list of all the projects in each province so that they could check up on these projects. He also asked what contingency plans were in place to address risks.
Mr Dlabantu replied that the over spending in Mpumalanga was under discussion. The problems had largely been around contractors. These contracts were now being renegotiated. Some projects had been discontinued and some of these were related to corruption as well. Monitoring and evaluation had greatly improved as capacity had been increased. There were however problems at the inspection level. In the Eastern Cape things had changed. Certain senior management had been changed which had led to an improvement in quality. He expressed interest in the problem in the Northern Cape and said that he would investigate it as there were norms and standards that needed to be adhered to. In the North West, the Department had dealt with the problems and certain officials had been taken to task. The human settlement and development programme was a pilot project. A report would be done in which the failures would be discussed. The project would be amalgamated into the housing subsidy programme. Referring to fiscal dumping, he said that this was a real risk. Each province would be expected to submit a progress report. Local governments did most projects in line with their business plans. Funds would not be transferred for which there was no commitment.
The Chairperson asked Mr Goeieman to get more information on the project. Further interaction was also needed with Mpumalanga and North West, as they had to control the quality of their spending. There were huge challenges still ahead and the information which the Committee had received would be shared with the Select Committee dealing with Housing. The Committee would draw up a programme to visit the provinces. It was therefore important that they be supplied with the list of projects in the provinces.
The meeting was adjourned.
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