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FINANCE SELECT COMMITTEE
11 October 2005
CONDITIONAL GRANTS AND CAPITAL EXPENDITURE: INPUT BY WESTERN CAPE, LIMPOPO, MPUMALANGA TREASURIES
Documents handed out:
National Treasury Outcome of Conditional Grants and Capital Expenditure at 30 June 2005
Conditional Grants and Capital Expenditure Public hearings
Western Cape presentation
Mpumalanga: 2005 Provincial Budget Pressures
The National Treasury presented the Committee with the provincial spending trends for the first quarter. For capital expenditure, the forecast was that the provinces were going to over-spend R765 086 000, and Treasury was concerned about this figure. Treasury had issued a practice note to inform national departments of when to produce their quarterly results to the Committee. Treasury was unsure of which provinces had complied but asked the Committee to be harsh on those who had not done so.
The Western Cape, Limpopo and Mpumalanga provincial treasuries then presented their reports to Committee. The Western Cape said that a major reason for slow delivery was the failure to receive grants as a result of the failure to present business plans and/or their late approval. Placing conditions on grants limited the flexibility of the Provincial Treasury to make use of the funds. In Limpopo under-spending in HIV/AIDS care was the result of the journal for pharmaceuticals not being finalised. Capital expenditure for education was under-spent as projects started later than anticipated. The business plan was reworked and changed to reflect changes in political priorities. In Mpumalanga, the conditional grant that had performed well during the first quarter was the hospital and improvement grant as it had spent 25, 8% of its available budget. The other grants did not perform well due to poor planning and/or poor implementation of their projects. The Department of Finance did not have the capacity to monitor the capital projects.
Members of the Committee noted that many of the problems mentioned in the presentation concerned communication. It was evident that there were serious problems in Mpumalanga, especially with the infrastructure in schools. There had been no progress as there was still under-spending.
National Treasury presentation
Mr J Hattingh, the Chief Director of Provincial Budget Analysis, presented the spending trends for the first quarter. The amount allocated to Provincial Governments was R213 679 466. Up to 30 June 2005, R 46 874 402 had been spent. For capital expenditure, the forecast was that the provinces were going to over-spend R765 086 000. Treasury was concerned about this figure. Many of the provinces had spent less than 10% of their conditional grant budgets. The second quarter results would be available on 28 October. The Treasury had issued a practice note to inform national departments of when to produce their quarterly results to the Committee. Mr Hattingh had no idea who had complied with this note so far and asked the Committee to be harsh on those who had not done so.
Western Cape MEC for Finance presentation
Ms Lynne Brown, the MEC of Finance, said that a major reason for slow delivery was the failure to receive grants as a result of the failure to present business plans and/or their late approval. For example, R257 000 of the Social Assistance grant was still outstanding from March. This made it difficult for the province to plan and manage its funds, as well as leading to a loss of revenue from interest. There was no formal inter-governmental process to monitor monetary transfers. The Department had written a letter to the National Treasury for adequate notice for when transfers were going to be withheld. Line functions had to be given the opportunity to contest the withholding of funds also. Placing conditions on grants limited the flexibility of the Provincial Treasury to make use of the funds.
There was under-spending in land care because of slow-start-ups. There was under-spending in HIV/AIDS expenditure because of the late approval of the business plan, and the fact that expenditure usually picked up in the second quarter. The hospital revitalisation programme was delayed as a result of poor weather conditions affecting access to the area. There were also issues with capacity in municipalities which affected delivery.
The transport and public works programme was also affected by inclement weather. Most of the spending for sports took place in the second half of the year, so this would pick up. The under-spending in the capital expenditure was because of the poor weather and the lengthy supply management processes.
The Chairperson said that it was worrying that business plans were submitted late when the poor needed service delivery.
Mr E Sogoni (Gauteng) asked why the conditions on the grants had to be relaxed. They were necessary to ensure that the provinces used the funds for the correct purpose.
Ms Brown said that in certain situations it would be better to have some flexibility in the conditions.
Mr M Goeieman (Northern Cape) asked what measures the Western Cape had put in place to make sure that applications for funding were not late.
Ms Brown said that it was technical in nature why the business plans were not written in certain ways.
Ms D Robinson (Western Cape) said many of the problems mentioned in the presentation concerned communication and problems to do with the weather were foreseeable. The province had to come up with ways to get around this problem.
Ms Brown replied that weather conditions were a big issue especially with regards to construction. Communication was important and the province would continue speaking with the Treasury and other provinces and Departments.
Limpopo Provincial Treasury MEC presentation
Ms H Mashamba, the Provincial Treasury MEC, said that she was not going to conceal the truth regardless of the image it portrayed. She said her Department was less than a year old and had just finalised and approved the Department’s structure on 14 September and was about to fill some of the vacancies as a matter of urgency. Through the Executive Council, the Department was exerting pressure on spending agencies to ensure that they closed gaps in order to negate poor service delivery and the inherent under-spending it brought.
She said that the under-spending in HIV/AIDS care was a result of the journal for pharmaceuticals not being finalised. These were distributed in bulk and then the Department passed them on to identify spending specifically for HIV/AIDS drugs. Under-spending in hospital revitalisation was a result of payments that were dependent on stages of construction and would pick up in the second quarter. Under-spending in the integrated nutrition programme was a result of not having signed any agreements with NGO’s.
In social development, there was under-spending for HIV/AIDS as a result of unapproved business plans that were referred back to the Provincial Department for correction in the first quarter. The plans had been approved and spending would pick up in the second quarter. Under-spending in the social assistance administration grant was a result of the delay in filling critical posts, as well as having to share resources and services with other Departments.
Ms Mashamba said that there was under-spending in the education of HIV/AIDS as these activities took place during school holidays to avoid any disruption of learning at schools. Under-spending in the Primary School Nutrition Programme was due the delay in the submission of invoices by service providers.
Capital expenditure for education was under-spent as projects started later than anticipated. The business plan was reworked and changed to reflect changes in political priorities. In health, contractors were appointed late and there were delays in the supply of medical equipment for hospital projects. Spending on clinics was hampered by delays in the documentation phase of project implementation. For social development, disbursements were made on a percentage of completion. Most projects had just begun so spending was low.
The Department of Education had developed some intervention strategies which included engagement with the Department of Public Works to finalise business plans for education. The Department of Education had undertaken a project to do a complete register of needs to highlight the needs and conditions of individual schools. To address its problems, the Department of Health had brought forward the appointment of consultants for some projects to pre-empt possible delays. The Department of Health and Social Development had produced a capacitation plan to address the problem of lack of capacity in the document.
The Chairperson thanked the MEC for her honesty in her report.
Mpumalanga MEC for Finance presentation
Ms E Coleman, the MEC for Finance, said that in the area of health, the conditional grant that had performed well during the first quarter was the hospital and improvement grant as it had spent 25,8% of its available budget. The other grants did not perform well due to poor planning and/or poor implementation of their projects.
For social services, the Department had spent less than what was received and only two conditional grants were close to their straight-line target of 25%. In education, only one grant performed well in the first quarter. No funds were received from the National Treasury for the infrastructure grant as the Department of Education had not complied with the conditions for the grant.
Health was allocated R228, 966 million towards the payment of capital assets. Only R28, 083 million had been spent. The Provincial Treasury did not visit any health projects during the first quarter. Education was allocated a capital budget of R252, 974 million and R 41,226 million had been spent. The Department did not have the capacity to monitor the capital projects.
Ms Coleman said that the health and education Departments had been requested to beef up their monitoring capacity and the Department of Public Works was requested to manage all infrastructure projects for the Departments of Health and Education.
Mr Sogoni said that even from last year it was evident that there were serious problems in Mpumalanga, especially with the infrastructure in schools. There had been no progress as there was still under-spending. Serious action had to taken.
The Chairperson agreed, especially given that the Department had not provided a business plan for infrastructure development. This had to be condemned.
The meeting was adjourned.
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