Sport Provincial Conditional Grants and CapEX: Third Quarter 2006/07 Spending

NCOP Finance

21 February 2007
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Meeting report

PORTFOLIO COMMITTEE ON SPORT AND RECREATION

FINANCE SELECT COMMITTEE
22 February 2007
SPORT PROVINCIAL CONDITIONAL GRANTS AND CAPEX: THIRD QUARTER 2006/07 SPENDING

Chairperson:
Mr TS Ralana (ANC, Free State)

Documents handed out:
National Treasury presentation on Sport, Arts and Recreation
KwaZulu-Natal Third Quarter Report: Mass Participation Programme Grants
Limpopo Province Mass Participation Programme Grants
North West Department of Sport, Arts and Culture presentation
Western Cape Cultural Affairs and Sport presentation
Gauteng Department of Sport, Arts, Culture and Recreation presentation
Gauteng Conditional Grants Capital Expenditure December 2006
Mpumalanga Province Report on Grants and Capital Expenditure

SUMMARY
Provinces had spent about 70% of their respective budgets. The normal spike of spending towards the end of the financial year was happening a bit earlier than usual.

KwaZulu-Natal had experienced capacity constraints which had seen the Mass Participation Programme (MPP) start later than planned, and also had delays in procuring equipment. Some municipalities had not signed agreements with the province.

Limpopo reported underspending due to the late implementation of the MPP, problems with procurement and the late appointment of hub co-ordinators.

North West reported major underspending on its school sports programme due to lack of co-operation with the Department of Education. Municipalities were diverting funds intended for sports facilities to other areas. A further problem was the lack of expertise in the department.

Western Cape still had several activities planned before the end of the financial year. Equipment was also still on order.

The other five provinces were not present, although Gauteng did tender a written presentation.

Members questioned the lack of business plans. Service agreements needed to be signed. More co-operation was needed with the Department of Education regarding school sport. The nature of the conditional grant was discussed. Treasury might consider withdrawing funding if the provinces were unable to spend the money.

MINUTES
National Treasury presentation

Mr Tony Phillips (National Treasury) compared the figures of the 2005/06 Financial Year to that of the 2006/07. In 2005/06, provinces had spent 70.6% of their allocations, and the figure for the current year was 70.7%. He described the March spike, which referred to the increased spending that took place towards the close of a financial year. R 1.2 billion had been spent in the first nine months. The projection was that all provinces would spend their budgets with the possible exceptions of Northern Cape and Mpumalanga. There was now a rush to spend the budgets before the end of the financial year, as only 51% of the budgets had been spent in the first nine months.

Discussion

The Chairperson questioned the four provinces present on the meaning of capital expenditure.

Mr D Botha (ANC, Limpopo) suggested that the provinces did not know the meaning of capital expenditure. He asked if they had any business plans.

The Chairperson said that for the awarding of the conditional grants, business plans were needed. National government needed to know what the expected outcomes were. Attention had to be paid to the upgrading and creation of sporting facilities in previously disadvantaged and rural areas. As this was not obvious, he needed to know where the money was going. He found himself in a quandary when questioned by the press. There was a dilemma in funding, and he wondered if funds should not be redirected to more deserving areas if they were not going to be spent. The national department must persuade financial authorities that money could be spent by the provincial sports departments. The picture for 2006/07 was still bleak.

KwaZulu-Natal presentation

Ms Sumayya Khan (Head of Department (HoD), KwaZulu-Natal (KZN) Department of Sport), said that the province had spent R 13.65 million to date, which represented 73% of its budget. One reason for underspending was a capacity constraint. Its MPP was due to have begun in April 2006, but had been delayed until July. Logistical problems had been experienced, especially with the procurement of equipment. The Department had tried to follow the supply chain management model, but some companies which offered tenders were unable to supply what they had promised.

She said that up to 40 hubs had been established. Each had between five and ten activities. The number of volunteers had increased. The majority of municipalities in the province supported the programme and there was an increase in activities. During the third quarter, 395 people had been trained in sport and recreation administration. There had been training for 390 coaches, and first aid and life skills training had been conducted. Support had been given to 571 clubs. All in all, over a million persons had benefited from the programme.

Ms Khan added that the programme was being managed by the office with the assistance of coaches throughout the province. Four regional co-ordinators had been appointed who also acted as hub co-ordinators. Regular meetings were held, but there were administrative constraints. Skills development and training had to be looked at. Some municipalities had not fully embraced the programme.

By the end of the third quarter, 64.53 % of the budget had been spent and she hoped that the full budget would be spent by the end of the financial year (FY). Much of this was committed in the form of salaries. Equipment should be delivered by the end of the FY. Other areas would be prioritised, such as the training of volunteers. Cash flow was being monitored on a weekly basis.

Hub games and festivals would be held in February and March. Capital projects were taking place in partnership with municipalities. R 14 million had gone towards facilities. Of this R 8 million had been spent by the end of the third quarter, which was 57% of the capital expenditure budget. Payments were made on the basis of progress. Certain agreements were due to be signed the next day.

Discussion

The Chairperson commented on the five municipalities that had not signed agreements. Sport and Recreation Departments were only agents in the process of building stadiums. Most municipalities were unable to spend all of their infrastructure budgets. Clarity was needed on the relationship of Sport and Recreation funding to the Municipal Infrastructure Grant (MIG) as to what money was being used for which purpose.

Limpopo presentation

Ms Mashamba (MEC, Limpopo) said that her province’s presentation would focus on the Siyadlala campaign, and handed over to her HoD.

Ms Msangeza (HoD, Limpopo Sport and Recreation) said that hubs had been created in each district of the Limpopo province. There were five of these, but they were looking at increasing this number. There were 35 co-ordinators in the provincial capital, 35 in Kopane and between 26 and 28 in Venda. There were also six at the Department’s office, and a total of 175. Capacity building was taking place. There had been training for 779 coaches and referees, and basic administrative training for 106 persons. The programmes were continuing.

Ms Msangeza said that MPP2 had been launched at 84 schools in collaboration with the Department of Education (DoE). There was a difficulty in that the service level agreement with DoE was problematic, although there was some progress.

She said that there was a challenge in expenditure. To date, 57% of the funds for MPP1 had been spent but only 29% of the funds for MPP2. This did not include other commitments, delivery of which was expected by 15 March. She expected that 100% of the MPP1 funding would be used, but only about 90% of the MPP2 funds. Reasons for the underexpenditure included the late approval of MPP2. There was also a problem with the procurement process. Co-ordinators were appointed late, and some were leaving already. The challenges were to find more co-ordinators to be deployed in the new FY, and recruitment was already under way. The supply chain management process should also be expedited.

North West presentation

Mr N Duma (MEC, Sports, Art and Culture, North West) said that in terms of the MPP, his province had created 24 hubs in four districts. They had looked at social problems and challenges. The hubs should contribute towards fighting the challenges faced by the community such as crime, teenage pregnancy, HIV, poverty and unemployment. They faced a challenge of recruitment. Training had been presented for basic sports and recreation management, coaches, referees, event managers, life skills and volunteers.

He said there was a challenge of conceptualisation amongst the community, leadership and councillors, especially those in charge of sport. Several meetings had been held to discuss the program, but the underspending was about 50%. In school sport, the under-performance had been to the order of 55.5%. The main reason had been a delay with the local DoE getting together with their sports counterparts. Even now, the DoE was still not 100% on board. School hubs were being established.

Another challenge was the stipend paid to the volunteers. Many had been lured away by more lucrative offers and had to be replaced. This was a monthly occurrence. Payment systems were also difficult as there was a lack of communication between the different systems. Equipment was still on order, and he was confident that the budgets for both the MPP and school sports would be spent by the end of the final quarter.

Mr Duma said that a meeting had been held the previous week to analyse the spending patterns of the different municipalities in terms of the MIG. Of the 22 municipalities in the province, only four had used the MIG for sport facilities. These were the better-off municipalities who were self-funding. The rest all had other priorities, and sports facilities were not considered in favour of housing, roads, water supply and so on. He did not see any change in this trend in the future, as there were still huge backlogs in these sectors. He felt there was a need to review the use of the MIG.

The second challenge was that the Department of Sports, Art and Culture was not designed for sport. When facilities were built the Department had to interact with outside artisans. An in-house capacity was needed. Even the Public Works Department was outsourcing. Much of the capital budget was directed to the building of libraries, and infrastructure for cultural activities was needed. He did not see the arts making an impact on the budget.

The Chairperson said that new money for libraries would be channelled directly to the provinces rather than the municipalities. The Division of Revenue Bill would also have an impact when passed. More money was also being set aside for the film industry.

Western Cape presentation

Mr Mxolisi Linde (HoD, Culture, Arts and Sport, Western Cape) said that the Western Cape had been allocated R 12.1 million. Of this R 7.25 was channelled towards the Siyadlala programme and the rest towards school sport. The Department had established 31 hubs and nine clusters of schools. By the end of the third quarter 62.37 % of these allocations had been spent which represented 50.42 of the total budget. These figures did not include several activities which had been held during the December school holidays. Expenditure incurred with the training of sports assistants would only be reflected in the final quarter expenditure. Responsible factors were the slow placement of MPP contracts. It had taken some time to cover the six regions.

Mr Linde said that a number of activities were planned for February, including several festivals and athletics events. The scheduling was often out of the department’s hands and was instead dictated by the school calendar. Areas had been identified where activities would be rolled out, and outlets would be put in place. The Department wanted to avoid the situation where nothing happened in the first quarter of the FY. Equipment had been ordered, and he expected delivery by early March.

Discussion

The Chairperson recognised the challenges presented by the provinces, but said that certain mindsets existed which needed attention.

Mr Botha noted that the Western Cape had spent only 50% of its budget. Outstanding commitments meant nothing. In the North West, agreements with the DoE were not in place. There was a need to bring these activities under one roof, as South Africa was not a federal state. He questioned the equipment orders, and wondered if deliveries would indeed be made before the FY cut-off at the end of March. If not, roll-overs would result. He observed that the KZN presentation was directed at the National Assembly rather than the National Council of Provinces. There did not seem to be any real understanding in terms of spending. He asked if these expenses were included in the province’s business plan. Municipalities were not signing service agreements, but this must be done before money could be allocated to projects. It seemed to him that money was being transferred to municipalities without a service agreement being in place. Some of the municipalities had shown that they were unable to spend their own money. He asked if facilities were included in the Integrated Development Plan. He asked if the branding and promotion material mentioned by Ms Khan had been delivered by 10 February. Real facts were needed. He was glad to see a new hard broom in the MEC’s seat in Limpopo. Nevertheless he was unhappy with the province’s 2006/07 performance. Perhaps this would come right, and the Committee had to give the MEC support. He stressed that the nature of this Committee was support rather than policing. More money was on its way for sport, but he wondered how the provinces would be able to handle the increased funding on the current figures. Provinces needed to submit honest reports.

Mr A Manyosi (ANC, Eastern Cape) said that the main issue seemed to be inferior planning. All the lamentations reflected poor initial planning. Interaction was needed with the different role players. There was an issue of ring-fencing allocations for sports facilities, as these seemed to be disappearing into the MIG. This was not only the case in North West, and had been raised in other fora as well. The indicated outputs were not necessarily the outcomes. He asked if the departments’ efforts were not just producing paper expenditure. The DoE should not be so concerned about the entry of sport into their domain. Talented young players were the potential professional players of the future. He was disturbed by the way the funds in the Western Cape had been allocated in equal sizes amongst the different regions. The equal allocations reflected a one-size-fits-all approach. Over the years there had been an emphasis on equity, but some redress was now needed.

The Chairperson asked how equitable the conditional grant was. He did not want to see an uneven allocation perpetuated. The rural areas had to benefit. The issue kept coming up. He asked from where the stipend was coming, as there seemed to be no retention of the trained assistants. He asked whether the Department of Sport and Recreation (SRSA) or the DoE was responsible for school sport. While the government needed and talked integration, he asked why the DoE found it so difficult to get involved. He sketched a model of a school with everything, including sports facilities. There was also an Infrastructure Grant to Provinces, and there was money available in this resource. Assets were not being delivered. He asked the reason for the late approval of the MPP in some areas, and about the lack of business plans. KZN hoped to spend their budget, but the issue should be reality rather than wishes.

Ms Mashamba said more needed to be done to foster the relationship between Sport and Education. This had been addressed at Cabinet level. It should also be dealt with at provincial cabinet level. It looked like the DoE was protecting its own turf, although it could be a wrong impression. However, learners were being deprived of opportunities to become involved in sport. The model of the complete school and the planning process were key to what needed to be done. Planning was a problem. She asked where the jurisdiction was for school sport. There was a joint responsibility for the provincial Sport Department to play a meaningful role. She asked if there was a uniform approach to stipends among all provinces. It was a departmental role to create jobs in a meaningful manner. Officials would be haunted by the fact that they had not delivered, as they were following a mindset of waiting to be told what to do. The time had come to deliver.

The Chairperson said that in the Eastern Cape there were many clinics that had been built without any roads leading to them. An integrated approach was needed.  Provinces had a tendency to parachute projects into an area without any supporting infrastructure. There was an urgent need for planning. The Integrated Development Plan was reviewed annually.

Mr Duma (MEC, Sports, Art and Culture, North West) said that school sport was a partnership with the DoE. There was an agreement at national level, which should have cascaded down to the provinces. The issue was commitment, which was lacking at the DoE. Sport was not the key role of the DoE, which had its own pressures to deliver on its own key issues. This was not a problem of politicians fighting each other, but rather a question of a department concentrating on its core business. Equipment supply was on adjudication. He disagreed that the picture was bleak. He agreed that forward planning was a problem in government. About three months were needed to start implementing the budget. His department was attending to this problem seriously. An acute problem was that the provincial government and municipalities had different dates for their respective FY’s. This should be co-ordinated. He wanted the spending patterns to change. He asked whether the Siyadlala campaign was primed towards recreation or talent creation.

The Chairperson said that in the fourth quarter there would be a joint meeting between Sports and Recreation South Africa (SRSA) and DoE. There was a direct link between the two functions, and the question was how to harness funding. The matric results should not be seen in isolation.

Ms Khan said that there was a co-operation agreement which provided for the joint use of facilities. While agreements had not being signed, it did sometimes happen that facilities were sometimes not available. The provincial Department was working with municipalities to identify the poorest areas, where there was the most need for development. The MPP was benefiting the people of KZN in terms of job creation. Some went on to permanent jobs. Often the stipend was the volunteer’s only income. School Sport was an exciting programme. There was some co-operation with their counterparts in the United Kingdom, and skills transfer projects were being undertaken. International exposure was happening. She felt the need to re-introduce the culture of physical education to schools. The supply chain management process was in place. Funds had been committed and equipment orders had been placed.

Mr Linde said that the MPP was contributing positively towards the social ills in the province. Their had been positive consequences in terms of drug abuse. The school sports programme interfaced with school safety programmes. Good results were being seen. The province had to ensure that efforts were intensified to satisfy the conditions of the grant. Certain plans were in place to deal with the equipment issues. Orders were placed, and he would ensure that delivery took place within two or three weeks. Funds were being allocated to the rural areas, and figures were dictated by areas where support was needed. The province needed to see how much consultation was needed in order to lead up to a decision. The activities happening at present would help the Department to reach its budget target.

The Chairperson asked what the link was between school and mass sport.

Mr Greg Fredericks (Chief Director, SRSA) was puzzled by what was happening on the ground as opposed to expenditure. There was evidence that the communities were participating in numbers. The Portfolio Committee had said that the programme was exploding, but expenditure seemed to be lagging. It was not correct that provinces were only now asking for equipment. Money was transferred according to cash flow. The area of equipment procurement was a minefield. Quality was a major issue. For example, no soccer balls were manufactured in South Africa. Imports came from India and Korea.

Mr Fredericks said that more than 1 300 people had been trained as volunteers. He feared that some youngsters would see this as a job. A lot was spent on training, and it was disruptive that volunteers took up other employment. However, this could be seen as SRSA’s contribution to job creation. People were flocking to make use of these opportunities and not just the youth.

He said the Minister had raised the question of the allocation of funding. SRSA had spoken to the provinces. Local authorities felt that they should get the money for capital projects. He disagreed, but would consider it if the local authorities gave sport a greater priority in terms of their MIG spending. The silo mentality was being broken down. A joint MinMEC meeting was planned where the territorial problem would be discussed.

Mr Fredericks said that physical education should fall under the DoE. However, he felt that competitive sport, even at school level, should fall under SRSA. The programme should rather be referred to as Sport in Schools rather than School Sport. The joint MinMac should address this question as well.

While programme assistants were paid stipends to cover their expenses, they were not employees. They offered a service only, and should not consider this a job. The first prize would be to absorb these people into SRSA when and where possible.

The equitable share formula initially gave the same amount of money to all provinces. They were now working on an equal base, with the rest of the grant being decided on the equitable share formula. Nothing was being given to the provincial departments for capital expenditure.

The MPP was seen as being a programme for all ages, shapes and sizes. It was recreational in nature, and initially non-competitive.  Two programmes had emerged, one sports based and the other activity based. The latter was a resounding success, but was generally being turned into a sports-based programme. As people became more competent in basic skills, they needed to move on. Therefore SRSA had instituted a Club Development programme to cater for people wishing to further their skills in a particular sporting code. There was a danger of people dropping out of sport if they were unable to compete at a higher level.

The school sports programme was used to develop the skills of players, coaches and officials. Six target codes had been identified. The stipends for the volunteers were paid out of the conditional grant.

Mr Fredericks said that provinces complained that they had no capacity. At a meeting with National Treasury, it had been stated that not all the funds could go to stipends. Money from the equitable share grant should be used instead. Some of the money had been diverted to high performance programmes.

He said that it was untrue that approval of business plans had been late. This was guided by the Division of Revenue Bill, and approval had been given on 5 February. This should be completed. Provinces were not planning to spend. This situation could only improve.

Ms Julia de Bruin (Chief Director: Social Services, Public Finance: National Treasury) said that it was her job to ask the Minister for money. She had to answer for the provinces. She was not here to punish the citizens. The grants were for development funding. It was clear that the provinces knew what the outcomes should be. It would up to the Minister to decide whether to withdraw funding or not. She assumed that all stakeholders had been consulted on all aspects. A meeting had been held in June. A business plan was required to receive the conditional grant. She assumed that all provinces started their planning cycle on 1 April.

The issue of supply chain management was a government-wide problem. A harder look had to be taken at financial management issues. Bad payments were an issue. The Public Finance Management Act stipulated that invoices should be issued not later than 30 days after delivery.

She said that SRSA believed that the provinces could spend their budgets. Provinces should employ someone to administer the grant to ensure it was managed properly. Outcomes could then be better monitored. Stipends were paid as part of the national youth service. These people did not have a job, but were volunteers who received some money to cover their expenses, and should be seen as being in training for some future employment.

Ms de Bruin reiterated that the conditional grant was not intended to cover capital works. There was a huge lack of coordination between municipalities and provincial departments regarding the conditional grant. There was also a lack of coordination with the DoE and Public Works.

She said that the system had to work with the business of provinces. The idea was to start with a smaller conditional grant, and consideration should be given to reducing the current figure. She was the bleeding heart of the Treasury, but needed honest feedback in order to put pressure on the decision-makers. There were a lot of requests on SRSA. Support was needed, while capacity building and monitoring must all happen. She would consult with the provincial treasuries regarding spending.

The Chairperson said matters would be resolved before the Division of Revenue Bill was passed. One extreme was to allocate all funds up front, in which case the unspent money could sit in the bank. The other was to take back all unspent funds and give them back to the provinces in small chunks. There would be a possible constitutional problem with the latter approach. SRSA should be satisfied that the provinces had the capacity to spend before disbursement took place. He was happy that the conditional grant had started small and had been increased as the situation improved. However, it still looked like the provinces were struggling.

The meeting was adjourned.


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