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FINANCE SELECT COMMITTEE
13 October 2005
CONDITIONAL GRANTS AND CAPITAL EXPENDITURE: NORTH WEST, MPUMALANGA AND KWAZULU-NATAL SOCIAL DEVELOPMENT DEPARTMENTS
Chairperson: Mr T Ralane (ANC)
Documents handed out:
North West Provincial Department presentation
North West Provincial Financial Management
Mpmumalanga Provincial Department presentation
Limpopo Provincial Department presentation
Kwazulu-Natal Provincial Department presentation
The Provincial Social Development Departments of North West, Mpmumalanga presented details of levels of expenditure within key conditional grants such as food emergency relief and HIV/Aids in the first and second quarters. Officials provided reasons for under-expenditure. Departments reflected an increase in expenditure during the second quarter. Neither the MEC or Head of Department were part of the Kwazulu-Natal delegation of three officials and thus the Chairperson did not allow this province to present.
Members asked various questions including the serious implications for the indigent of underspending, the presence of rollovers within conditional grants, the trend of low expenditure for Aids programmes, the linkage of business plans to conditional grants, the standard of reporting of provincial governments, concern at lack of expenditure in vital social assistance programmes and what steps could be taken to rectify anomalies.
National Treasury presentation
Mr D Mogajane (Director-Provincial Budget Analysis) notified the Committee of trends discerned during the second quarter of the current financial year. Overspending was likely to occur. Underspending was also expected within certain provincial social development budgets. Detail was provided on social grants within each province. Information on budgets would be published in accordance with section 32 of the Public Finance Management Act (PFMA). The presenter provided detail on conditional grants. Transfers from national to provinces were shown with spending for conditional grants at 20%. Publication dates for provincial reports were provided. Provincial governments had received detail on the quarterly performance reporting process. Spending patterns for social development grants was elucidated. Integrated development grants and HIV grants were explained.
Mpmumalanga Social Development presentation
Mr H Verachia (Head of Department) stated that 6% of the allocated HIV/AIDS conditional grant had been spent during the first quarter but improved spending had occurred during the second quarter. Health and Social Services merged into one department which caused certain administrative problems. Grant expenditure had improved dramatically. The rollover for HIV/AIDS was spent in the first quarter. Detail on social security was presented. Officials provided reasons for under-expenditure and displayed the various types of grants received by the department. Business plans had been submitted to the National Treasury for approval.
Mr B Mkhaliphi (ANC) stated that the presentation indicated some positive developments but certain worrisome trends remained. Under-spending by provincial departments translated into an absence of much-needed service delivery to the indigent.
Mr M Robertson (ANC) sought clarification on social assistance grants provided to the province and whether the finances had been part of a rollover as no budget was recorded.
Mr D Botha (ANC) noted a small amount spent on AIDS community based care within all provincial departments. He asked for reasons for the low spending on AIDS care initiatives.
The Chairperson asked whether the department worked on a regular basis with relevant NGOs and requested a list of such organisations. Detail on financial disbursements to NGOs should be provided to Members. He asked whether the department was projecting under or over-expenditure in the current financial year. What steps were planned to deal with the under or overspending. Under-spending on AIDS programmes had an adverse impact on needy communities. An audit of beneficiaries should be conducted to determine the efficacy of the assistance programmes. The impact of home-based care units had to evaluated. Dramatic changes in expenditure between the first and second quarter had to be further explained. He asked whether double payments for service rendered occurred in the province.
Mr P Pasha (Provincial MEC) stated that the Auditor-General’s report had been received and comments expressed would be used to rectify problem areas. Provincial Treasury would be included within executive-committee meetings to foster tighter control of spending patterns.
The Chairperson asked whether the provincial treasury had taken steps to assist all provincial departments in complying with PFMA stipulations.
Mr Verachia concurred that lack of spending would impact negatively on service delivery. Reasons for slow spending in the first quarter would be clarified. The low expenditure of AIDS conditional grants in the first quarter was due to the lack of adequate verification of the number of child-headed households and orphanages within the province. A team engaged in research activity to verify the applications for financial assistance from designated groups. Expenditure increased in the second quarter following the verification process that authorised the spending of resources. Finances were provided to NGOs and Members would be provided with a list. Projections for under-expenditure currently existed within the administration grant.
The Auditor-General conducted a study in the 2004/05 financial year to determine value-for–money expenditure for AIDS programmes. The study considered the types of services rendered to communities. The provincial department had strengthened monitoring mechanisms to facilitate sound oversight of expenditure. An internal audit unit had been established to detect double payments that might occur and institute recovery action. The administration grant involved transaction fees to the service providers and logistical arrangements to set up office space and employ additional staff. The Provincial Treasury had a dedicated staff member that interacted on a constant basis with all departments to ensure compliance with the PFMA. The Provincial Treasury and the executive-committee constantly reviewed the budget and key challenges had been identified. Details would be provided to Members in due course.
Mr Botha referred to the low spending on AIDS in the first quarter and asked whether beneficiaries had received assistance after the verification process had been completed.
The Chairperson noted that beneficiaries had received monies in the first quarter and the verification process had increased the number of beneficiaries that resulted in an adjusted disbursement.
Mr Verachia replied that legitimate organisations received financial assistance in the first quarter but the verification exercise resulted in a substantial increase in the amount of financial assistance in the second quarter. Accounting reports were submitted to the Provincial Treasury on a monthly basis. The link between the National Treasury and Provincial Treasury would be investigated to determine the flow of information.
The Chairperson stated that a letter would be written to the Mpmumalanga Provincial Treasury to furnish proof that the accounting report in question was submitted to National Treasury.
Mr R Mnisi (Chief Financial Officer) stated that grants in aid were provided from the equitable share during the conversion to conditional grants. 739 beneficiaries had been identified. Provincial and National Treasuries would provided the money as the service had been rendered for some time and had to continue.
Mr E Sogoni (ANC) stated that grants should be provided in accordance with clear business plans and a decision to increase spending in the second quarter to remove slow expenditure in the first quarter was unacceptable. A specific need for service should dictate the provision of conditional grants.
The Chairperson concurred that the business plan served as the basis of grants. Second quarter reports would have to be scrutinised to determine reasons for fluctuations in amounts.
Mr S Lerumo (Chief Financial Officer) explained expenditure trends for conditional grants during the first quarter. Low expenditure was reflected during this period. The food emergency relief grant had recorded zero expenditure during the first quarter and a rollover had been awarded. The Integrated Social Development Services Grant had also recorded zero expenditure during the first quarter. Transfer to a new financial system had resulted in accounting problems. Expenditure on conditional grants had increased during the second quarter.
Mr Botha expressed concern that no expenditure could occur in food emergency relief despite
widespread poverty. Lack of expenditure implied that no poverty existed which was clearly not the case. A strategy was required to rectify the situation. Representatives of the North-West Treasury should be present to explain the situation.
The Chairperson asked the national department officials present to explain what steps had been taken to improve the levels of expenditure.
Mr Sogoni asserted that provincial reports should show that government was actively striving to address socio-economic issues. Clarity for lack of spending was requested. A response from the National Department of Social Development was eagerly awaited. Provincial reports required more financial information and assessment of the benefits of social assistance.
Ms Robinson (DA) declared that the lack of expenditure in the first quarter was despicable and urgent intervention was needed to reduce levels of poverty.
The Chairperson requested that North-West provide a list of NGOs used to implement assistance programmes. Members would assess the efficacy of the North-West budget committee in due course. The Committee would make recommendations on appropriate steps to alleviate the problems.
Mr Mkhaliphi asked where the source of the problems in North-west lay. Oversight trips to the region had indicated that significant programmes were in place such as home-based care training and the provision of food. He asked whether certain successes were not being reported.
Mr Z Kolweni (ANC) declared that far-flung rural areas were being ignored and extensive poverty existed.
The Chairperson asked what steps had been taken with Provincial Treasury to address the problems and whether overspending was projected. Clarity was sought on the quality of spending and whether targets had been reached. A suitable plan was required to address the challenges.
Mr Morule (Head of Department) agreed that the budget for the ultra-poor had to be spent and faults had to be eradicated. Events had to be considered in the proper context. Service providers for food relief were organised at the national level and spending allocations were determined at that level. A rollover had been approved that allowed for an extension of beneficiaries. The second service provider had been identified and the remainder of the R21 million rollover could be spent. Permanent solutions would be formulated together with DSD. The business plan would be linked to the allocation of conditional grants. The bulk of the amount of annual conditional grants would be received at the beginning of the year to facilitate increased expenditure in the first quarter. The quality of the quarterly reports would be improved. DSD had produced a list of NGOs used at the provincial level. National Treasury would be informed of potential spending problems that might arise. A consultancy would be employed to evaluate the value and efficacy of expenditure. Tender submissions would be carefully evaluated to check the potential quality of the service to be rendered.
Mr S Jehoma (National Department Acting Deputy Director-General) stated that the intention of the department was to spend public funds in an effective manner without wasting public resources. Provincial governments submitted tender proposals to render the required service. Certain requirements had to be adhered to such as the need for business registration, BEE and the PFMA. Most recommendations were overturned at the national level due to blatant flouting of the rules. A Bid Committee at the national level had been created to improve the quality of recommendations from the provinces. Criteria had to be met in order to avoid escalating levels of corruption. Tenders had been awarded in all provinces and improved service delivery was expected.
Ms S Mokgothu (Chief Director-Integrated Development Support) added that challenges in reporting did exist but a strategy had been devised to rectify the situation. A unit had been established in the Director-General’s office to monitor and evaluate tender applications and improve levels of reporting. Business plans would be reconciled with allocated resources. A management information system had been established to allow interface with provincial departments.
Mr Mogajane indicated that low levels of spending remained a concern and sufficient data had to be available to ascertain efficacy of programmes. Provincial departments would be involved in strategy formulation.
The Chairperson reiterated that service delivery levels had to dramatically improve and Members had to ensure that this occurred. The use of accumulated interest from capital accounts had to be explained. Sufficient resources were available to met demand.
The meeting was adjourned.
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