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FINANCE SELECT COMMITTEE
10 November 2005
CONDITIONAL GRANTS SECOND QUARTER: EASTERN CAPE HEALTH DEPARTMENT; FREE STATE SOCIAL DEVELOPMENT DEPARTMENT
Chairperson: Mr T Ralane (Free State)
Documents handed out:
Eastern Cape Department of Health report
Free State Department of Social Development presentation
The Eastern Cape reported that the Department of Health expenditure was 39.93% for the first six months in respect of conditional grants. The slow start was mainly attributed to tenders being awarded in the latter part of this period. The Department was confident that the spending would pick up during the second half of the financial year and it would spend the grants. Expenditure monitoring occurred weekly, assessing the expenditure and budget included Conditional Grants. The Department was in line with its monthly and quarterly reporting requirements in terms of the Division of Revenue Act. There were capacity constraints that affected capital expenditure. Also there were delays in awarding tenders to the value of R412 million which meant that contractors were not on site. As a remedial step, all small projects for the next financial years were brought forward.
The Free State said that reasons for under-expenditure in the HIV/AIDS grant were the late return of Memoranda of Agreement and some received from participating non-governmental organisations were incomplete. The Social Assistance Administration Grant could not be fully utilised. Reasons for this was that critical posts were not filled as the structure of South African Social Security Agency was not yet in place and approved by the National Department of Social Development. The Department was currently implementing a new monitoring system with the assistance of ABSA Bank to improve the monitoring and evaluation of grants to non-governmental organisations.
Eastern Cape Department of Health Presentation
Mr A Mboya, Superintendent General, said that Department expenditure was 39.93% for the first six months in respect of conditional grants. The slow start was mainly attributed to tenders being awarded in the latter part of this period. The Department was confident that the spending would pick up during the second period and it would spend the grants. There was a spending of 32.22% for capital expenditure. The under-spending was mainly due to the Department not being able to procure office furniture as suitable office accommodation had not be found.
Projects in the pre-tender phase were halted in the previous financial year due to the austerity measures implemented in the Province. The tender process only commenced during the current financial year and the expenditure would increase during the second half of the financial year. The Department had also been informed of a decrease of R10 million in the Revitalisation Grant by the National Treasury.
Expenditure monitoring occurred weekly, assessing expenditure of budget including Conditional Grants. The most recent Basic Accounting System (BAS) report was used as a monitoring tool, with the programme managers answerable in terms of achievements, challenges, proposed corrective actions, and a way forward. The corrective actions were then monitored the following week.
The Department was in line with its monthly and quarterly reporting requirements in terms of the Division of Revenue Act. Quarterly reports were being submitted to the Treasury for the first and second quarter for all grants. These reports had been amended in consultation with the Treasury to accommodate the Provincial Treasury reporting and monitoring requirements. There were capacity constraints in the spending of the Conditional Grants. For example, the tender process for the payment of HIV/AIDS stipends was delayed, and the Integrated Nutrition Programme (INP) Grant was affected as there was a shortage of dieticians and a delay in the accreditation of anti-retroviral (ARV) sites because of a lack of clinicians and INP staff and a lack of monitoring resulting in the relapse of many cases.
Remedial mechanisms were in place. The tender had been awarded for the HIV/AIDS Grant and the order number to authorise the payment had been obtained. Arrangements had been made with the HIV directorate to advertise for posts for dieticians and monitors had been trained to monitor the management of severe malnutrition. Weaknesses had been identified in financial management, and the Head Office was addressing this problem.
There were capacity constraints that affected capital expenditure. There were delays in awarding tenders to the value of R412 million which meant that contractors were not on site. The affected projects were clinics and hospitals. There was a delay in the awarding of provincial medical equipment in the Health Department and the contracts were finally awarded at the end of September 2005, so no orders had been placed and some of the contractors had failed so two hospital and six clinic projects had to be re-tendered. As a remedial step, all small projects for the next financial years were brought forward.
Ms D Robinson (Western Cape) was concerned about the low level of spending on HIV/AIDS especially given the extent of the problem in South Africa. The percentage of expenditure here was unacceptable.
Mr D Botha (Limpopo) asked if the Department used non-governmental organisations (NGOs).
Mr Mboya replied that they did use NGOs and entered into service level agreements with monitoring of them taking place also.
The Chairperson asked if the Department had resolved the issue of tenders to achieve the increase in spending that they had predicted. Why had Treasury reduced their budget by R10 million? Had the vacant posts been filled, and were the service level agreements signed?
Mr Mboya admitted that their relationship with the Department of Public Works was not perfect. There were delays in tendering and in the adjudication process. The shortage of staff was an ongoing problem. Recently they had a moratorium on the hiring of new staff to address a problem of over-expenditure in this area. This problem had been resolved so hiring had now continued. They had concluded their service level agreements after they had resolved some of their issues with the larger municipalities.
Ms S Sooklal, from the Treasury Intergovernmental Relations, said that there had been a request by the National Department of Health to reduce the Hospital Revitalisation allocation to the Eastern Cape and other provinces because they were not able to use all of the money.
Free State Department of Social Development Presentation
Mr R Rakgoala said that reasons for under-expenditure in the HIV/AIDS grant were the late return of Memoranda of Agreement and some received from NGOs were incomplete. For the Integrated Social Development Services Grant, a call for all service plans to be in from the Non-profit Sector was made in September 2005, and measures would be put in place to ensure that all funds were used by 31 March 2006. The Social Assistance Administration Grant could not be fully utilised as critical posts were not filled due to the structure of SASSA not yet being in place and approved by the National Department of Social Development.
The Department was currently implementing a new monitoring system with the assistance of ABSA Bank to improve the monitoring and evaluation of grants to NGOs. The training of NGOs would be done in conjunction with the Provincial Treasury to improve their financial management skills and a separate bank account was to be opened to manage the transfer of payments to NGOs. An auditing firm was to be appointed to ensure the timeous submission of annual financial statements by NGOs.
Monthly reports were signed by the Accounting Officer and were sent to the Provincial Treasury and the National Department of Social Development as prescribed. The Department also received reports on a monthly basis from NGOs. Business Plans had been submitted to the National Treasury and the National Department of Social Development as prescribed.
The Chairperson asked what steps they had in place to cure their over and under-expenditure given the Department’s optimism that they would achieve their targets.
Mr Rakgoala replied that their plans emanated from the issues raised by the Auditor General and consultations with NGOs and they were geared to achieve all of their goals.
The Chairperson noted that they would analyse their progress at the end of the financial year to see if they met these goals.
The meeting was adjourned.
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