3rd Quarter Conditional Grants Report by National Treasury: Engagement with Provincial MEC’s

NCOP Finance

18 January 2006
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Meeting report

SOCIAL SERVICES SELECT COMMITTEE

FINANCE SELECT COMMITTEE
19 January 2006
3RD QUARTER CONDITIONAL GRANTS REPORT BY NATIONAL TREASURY: ENGAGEMENT WITH PROVINCIAL MEC’s

Chairperson:
Mr T Ralane (Free State)

Documents handed out:
National Treasury Presentation on 3rd Quarter Conditional Grants
Mpumalanga Presentation on 3rd Quarter Conditional Grants
Limpopo Presentation on 3rd Quarter Conditional Grants
North West Presentation on 3rd Quarter Conditional Grants
Western Cape Presentation on 3rd Quarter Conditional Grants
Kwa-Zulu Natal Presentation on 3rd Quarter Conditional Grants

SUMMARY
The National Treasury presented the Committee with its report on the provinces’ departments of education performance in the third quarter regarding Conditional Grants. Overall spending was at R46.7 billion against a R72.2 billion adjusted budget, which was an increase in R4.5 billion from last year. The lowest rates of spending in education were in the Free State and the North West at 63.6% respectively. The Conditional Grant allocation stood at 74.6% for all provinces. The lowest rate of spending was on the National School Nutrition Programme (NSNP) at 56.7%.

Mpumalanga said that with regards to the HIV/AIDS and NSNP grants, the province was not doing too badly. However, the expenditure on capital projects was very poor as the unit responsible for conceptualising and planning was not operating well.

Limpopo said that capital expenditure was at 51% which was partly caused by the failure of some of the strategic units in the province to plan and spend effectively. Some of the work of the unit had been queried which meant that a lot of the work that needed to be done began late.

North West said that the province was at 78.3% of expenditure for the third quarter. The reasons for under expenditure for the NSNP had been the receipt of an additional R17 million but there were plans in place to use it. Capital expenditure was at 68.5 and the reasons for the under expenditure were the same as those for Limpopo.

Western Cape said that a major change was that the capital budget which had been located in Public Works was now in the education budget. This also led to a service level agreement between the province and Public Works. This assisted the province in having more control and influence over the process which was beneficial.

Kwa-Zulu Natal said that the province had spent 53.7% of their budget with two-thirds of the financial year gone. They projected that they would spend 98.3% of their total budget for the year. The Department had formed joint task-teams with Public Works and the Provincial Treasury to ensure that monthly performance monitoring was carried out. The province under spent on the NSNP because not all claims were received in time as schools stopped feeding in November. However, these would be finalised during January 2006.

Members of the Committee commented that there was too much under spending on capital projects. This problem had persisted since 1994 and the provinces still had the same planning problems that they had had then.

MINUTES
National Treasury
Mr C Adams (Intergovernmental Relations, National Treasury) said that overall spending was at R46.7 billion against a R72.2 billion adjusted budget, which was an increase in R4.5 billion from the previous year. The lowest rates of spending in education were in the Free State and the North West at 63.6% respectively. Education personnel spending was at R38.7 billion of a R58.2 billion adjusted budget. Learner Support Materials were at R3.9 billion of a R7.2 billion adjusted budget. The Capital spend budget was at R1.3 billion, which represented a marginal decrease of 0.9% from last year. The Eastern Cape, Kwa-Zulu Natal, Limpopo, and Mpumalanga all overspent on their education budgets, with Gauteng under spending. The remaining provinces had balanced budgets. The result was a net overspend of R834 million. In terms of the year-on-year growth, Gauteng was at 3.3%, Limpopo was at 7.3%, the Eastern Cape at 6.5% and the Northern Cape was at 9.6%.

The Public Ordinary Schools Programme had the largest budget with spending at R39.3 billion of R60.5 billion adjusted budget. The lowest rate of spending was in Mpumalanga and Gauteng, with the highest in the Northern Cape and Limpopo. The projected overspend in this programme was R837.8 million. The Early Childhood Development Programme and the Auxiliary and Associated Services Programme had the lowest rate of spending at R254 million and R919 million respectively.

Provincial personnel spending was at R63.3 billion of a R96.7% adjusted budget which was 5.1% increase on last year. Education personnel spending was at R38.7 billion of R54.2 billion adjusted budget, with a net overspend of R375 million or 9.2% growth in last year. The Free State, Limpopo and Mpumalanga all overspent in this regard, with the remaining provinces all under spending. This resulted in a net over expenditure of R223.6 million. The only province that overspent on capital assets was Limpopo at R16.8 million.

The Conditional Grant allocation stood at 74.6% for all provinces. The lowest rate of spend was on the National School Nutrition Programme (NSNP) at 56.7%. Limpopo, the Western Cape and the North West had spent less than 50% on the HIV/AIDS grant, while no province spent less than 50% on the NSNP.

Mpumalanga
Mr S Masango (MEC) said that with regards to the HIV/AIDS and NSNP grants, the province was not doing too badly. However, the expenditure on capital projects was very poor as the unit responsible for conceptualising and planning was not operating well. They had taken advantage of technical assistance from The National Treasury to improve on their incapacity and service delivery.

The Chairperson said that the Mpumalanga Provincial Treasury had noted that their spending on infrastructure was at 19% which was very poor.

Limpopo
Dr A Motstsoaledi (MEC) said that the province had spent 55% of its budget on the NSNP and predicted that they would actually overspend by the end of the year by about R4 million. Capital expenditure was at 51% which was partly caused by the failure of some of the strategic units in the province to plan and spend effectively. Some of the work of the unit had been queried which meant that a lot of the work that needed to be done began late. Work was finally under way to build 1800 classrooms and they were at 88% completion. Schools were collapsing in Limpopo at a worryingly fast rate so the 51% expenditure would undoubtedly increase.

North West
Rev O Tselapedi (MEC) said that the province was at 78.3% of expenditure for the third quarter. The reasons for under expenditure for the NSNP had been the receipt of an additional R17 million but there were plans in place to use it. Capital expenditure was at 68.5 and the reasons for the under expenditure were the same as those for Limpopo.

The Chairperson said that their own Provincial Treasury projected under expenditure on Conditional Grants. Rev Tselapedi agreed that the possibility did exist that there would be under expenditure but they were confident that their remedial measures would be successful to enable them to spend all of the money.

Western Cape
Mr C Dudmore (MEC) said that a major change was that the capital budget which had been located in Public Works was now in the education budget. This also led to a service level agreement between the province and Public Works. This assisted the province in having more control and influence over the process which was beneficial. The original allocation was R188 million but as there was such a back-log of work more money was needed, so a further R184 million was received. They had spent 72.8% of this total amount in the third quarter which enabled the province to build 15 more schools.

They had spent 68.8% of their Conditional Grant budget so far and were confident of reaching their targets. There had been a steady increase in the NSNP allocation and had spent 66.8% of this and were on track to use the full amount. An extra allocation of R8 million was received and this would be used on a capital project of the NSNP such as buying stoves and other equipment.

Discussion
Mr B Tolo (ANC, Mpumalanga) said that he was worried why there was so much under spending on capital projects. This problem had persisted since 1994 and the provinces still had the same problems of planning that they had then. He questioned why this was so. How did Mpumalanga think it was going to be able to spend the remaining 81% of their infrastructure grant in two months? A suggestion would be for the provinces to make model plans even before they had received any money. Once their budgets were set they could merely amend the plans to suit the budget rather than running around only once they had received the money.

The Chairperson said that the question was what Mpumalanga and their Provincial Treasury were doing about this problem as there was no way they would be able to spend the remaining 81%, and what were the implications of this for their people. This emphasised the importance of proper planning.

Rev Tselapedi replied that the North West was spending on infrastructure and was getting better. They had also learned how to plan and manage better from other provinces.

Mr Dudmore said that the Western Cape did have model plans but what affected their implementation was the terrain and the size if the land. One of the things that speeded up building was the issuing of bulk tenders to build a number of schools at one time.

Mr Masango said that in Mpumalanga some of the problems were that the transition from the tender board to the bid committee was beset by delays. The management and leadership capacity of that department was poor. The tardiness had to be stopped. Public Works claimed that the province sent them plans late but it was Public Works that held onto them for too long without a response. To get around such problems, a task-team was established by the province and Public Works. To ensure that it works, it was important that monitoring took place. Tenders had been awarded in October and November which would spend some of the remaining 81% of the budget.

Mr Z Kolweni (ANC, North West) said that the provinces’ business plans had to be drawn up in such a way as to be able to absorb rolled-over money. Why was the roll-over in the North West unspent?

Rev Tselapedi said that there was actually a danger of overspending the roll-over as more schools still needed to be built and they had the capacity to finish the work.

Ms D Robinson (ANC, Western Cape) asked MEC Dudmore why there was so much inefficient planning. She wanted more information on this.

Mr E Sogoni (ANC, Gauteng) said that Public Works was responsible for all infrastructure work in the country but they simply did not have enough capacity to do all of the work. They needed help.

Rev Tselapedi replied that the capacity of Public Works determined how much work they gave them, and they currently had a good working relationship with the Department.

Mr Dudmore said that the Western Cape had a service level agreement with Public Works and some of the work will be done on an agency basis to speed up the process.

Mr Masango said that a service level agreement had been signed with Public Works, but as Mpumalanga had a new arrangement with them, new considerations had to be factored into the agreement.

Kwa-Zulu Natal
Dr Lebese (Head of Department) said that the province had spent 53.7% of their budget with two-thirds of the financial year gone. They projected that they would spend 98.3% of their total budget for the year. The province had set itself the target of building 1350 classrooms and 2300 toilets in the third quarter. At present, 1324 classrooms and 1503 toilets had been built so they were well on course to complete their task.

The Department had formed joint task-teams with Public Works and the Provincial Treasury to ensure that monthly performance monitoring was carried out. They had also formed an internal delivery committee and reported monthly and quarterly to the National Department of Education and the Treasury.

They overspent on the HIV/AIDS grant as they had to pay for funds committed in the previous financial year. They projected expenditure of 100% of their total allocation. The province under spent on the NSNP because not all claims were received in time as schools stopped feeding in November. However, these would be finalised during January 2006.

Discussion
The Chairperson asked why schools had stopped feeding in November.

Ms I Cronje (MEC) said that schools closed on the third of December which meant that December was not really a feeding month. They were fed throughout November and the individual schools fed their children for the first three days of December.

Mr Sogoni said that it seemed that Kwa-Zulu Natal was spending well according to their report. Many classrooms and toilets were built, but in their rush to build them, was the quality of the work acceptable?

Ms Cronje replied that they never compromised on the quality of the work. A lot of quality control took place and they were happy with the quality of the work at present.

Mr Tolo asked if they built any whole schools with laboratories and administration blocks instead of just concentrating on classrooms and toilets.

Ms Cronje replied that they did build whole schools, but she could not give an exact figure.

Ms J Masilo (ANC, North West) asked if the toilets were flush toilets or pit latrines.

Ms Cronje replied that the majority of them were pit latrines as the availability of water and electricity in many of the rural areas was still major problem. There was also a major back-log of about 30,000 toilets, and in many cases, no toilets existed as all, so something had to be done to get some sanitation.

The meeting was adjourned.






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