Division of Revenue Bill; Education and Health Departments: Conditional Grant hearings

NCOP Finance

04 March 2007
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Meeting Summary

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Meeting report

 

 

FINANCE SELECT COMMITTEE
5 March 2007
DIVISION OF REVENUE BILL; EDUCATION AND HEALTH DEPARTMENTS: CONDITIONAL GRANT HEARINGS

Chairperson:
Mr T Ralane, (ANC, Free State)

Documents handed out:
Financial and Fiscal Commission submission on Division of Revenue Bill
National Department of Education response to NCOP questions
Eastern Cape Department of Education Conditional Grants and Capital Expenditure presentation
National Department of Health : DORA presentation
Western Cape Department of Health: Forensic Pathology presentation
Eastern Cape Department of Health: Forensic Pathology Conditional Grant presentation
National Treasury presentation on spending

SUMMARY
The Financial and Fiscal Commission commented briefly on the spending patterns of the Departments of Education and Health, indicating that in some areas they would have expected greater spending in line with what had been identified as focus areas.

The Department of Education had been asked to appear to justify why the conditional grant funding should not be reduced for Mpumalanga, why the school nutrition grant in Eastern Cape and North West should not be reduced and why the HIV / Aids conditional grant should not be reduced in Limpopo and Kwazulu Natal, in light of their under performance. The Department detailed progress on the School Nutrition Programme, the HIV/Aids education and the Further Education and Training colleges. The Department could not afford to have any of these programmes cut as they were producing tangible and substantial benefits. A budget exercise had been done with the provinces to try to improve the matter.

Members indicated that credibility of business plans and spikes in spending were cause for concern. Questions were asked on the funding for school electrification and the sanitation programme time frames. It was noted that spending changed according to school calendar needs. Kwazulu Natal described its restructuring and said that great disservice would result if funding were removed. Limpopo described challenges in capacity. Mpumalanga noted that expenditure on grants was now on track, but that there were challenges in dealing with the Department of Public Works as the main implementing agent. Members raised questions on the awarding of tenders and the screening process, the need to do assessments of numbers on the ground, whether the 2010 demands were affecting small contractors and taking them away from work, the need for control of conditional grants, and the computer programmes for HIV/Aids. The Department of Health had been asked by the Committee to answer why the Conditional Grants for Mpumalanga should not be reduced, in light of its failure to respond on performance last year, why the hospital revitalisation grant for KwaZulu Natal, North West, Northern Cape and Limpopo should not be reduced, and the grant for forensic pathology should not be reduced or withdrawn, in light of poor spending patterns. The Department detailed performance by Mpumalanga province, spending on the hospital revitalisation grant, the fact that some provinces had used resources from the equitable share, so that there had not in fact been over spending on the grant, and the problems that had caused the slow spending in the forensic pathology services. It was noted that there could be over spending on ARV treatment depending on the response by the public. The Provincial Departments of Health then addressed the Committee. Limpopo said that roll-overs must be taken into account, and noted that it was impossible to spend the capital grants in one year. They noted that the changes to the allocations and late approval of roll-overs made planning very difficult. Mpumalanga explained that apologies had been given for the failure to appear before. The figures showed good spending, except in forensic pathology, where the under spending arose from delay in infrastructure. The particular problems involved in the take over of this function from S A Police were outlined. Eastern Cape noted that there had been skills shortages and detailed how the problems had been tackled and the steps taken. Western Cape similarly described the steps it had taken. There were some concerns that the budget might not match the eventual costs. Members asked questions on the delayed approval of roll-overs, the reason for the upgrading process on the mortuaries. National Treasury was asked to comment on the roll-overs, and asked for further details from Departments. The equitability of grants would need to be addressed at a separate meeting. 

National Treasury tabled a number of spending trends, broken down by province across the various grants. It was noted that Mpumalanga had outperformed other provinces in several respects, but was still low in regard to forensic pathology and agriculture. Its budget allocations had been stopped in the last year and this measure was effective, forcing an improvement. National Treasury would like to maintain the impetus and suggested that the withdrawal of funding should only be a very last resort, that was probably not called for at present.

MINUTES
Financial and Fiscal Commission (FFC) Briefing: Expenditure of Department of Education

Mr Conrad van Gass, FFC Programme Manager: Budget Analysis, noted that the Commission had compared the spending figures over the previous three years against the growth of budget for the Medium Term Economic Framework (MTEF) period. The FFC would do its calculations on the real growth rate, with inflation taken out of the picture, to try to look at provincial spending. The average growth rate was around 5% and this had been used as a benchmark. Where the Departments' spending was higher, FFC would assume that the particular areas or projects had been prioritised, and this was then checked back against the various policy priorities set.

Mr van Gass stated that the Department of Education (DOE) had a growth rate 44% lower than the average. The budgets were lower for 2007. Provincial departments would be growing less, at 3.8%. FFC had noted that the personnel, training, machinery and equipment spending had declined in real terms over the past three years. Provincial staff figures were rising. The data on training was patchy, and it was doubtful what reliance could be placed on the figures. Training for provincial departments' staff was declining. The future projected growth for personnel and training was under average for the Department, but the budget for capital infrastructure was at 9%. Most of the programmes related to public schools, taking 84% of the budget.  Provincial and national departments were growing at about the same rate. It seemed that early childhood development programmes (ECD) had been de-prioritised, but was now given 7% for next 3 years. Adult literacy and training programmes (ABET) was budgeted to grow less than the national average. The budget for further education and training (FET) showed a 1.6% growth. This was despite the fact that both ECD and FET should have been prioritised. The School Nutrition Programme (SNP) was projected to grow only at 1.8%, which was below the Department average. Although there was not a great deal of under spending, particularly on personnel, there was under spending on training, particularly if this was to form the basis of the programmes under the Joint Initiative for Priority Skills (JIPSA), Capital expenditure was high. There was under spending in ECD and adult FET. National Department of Education (DOE): Response to Committee
Mr Duncan Hindle, DOE Director General, indicated that representatives were present from Eastern Cape, Mpumalanga, and Kwazulu Natal. North West and Limpopo had apologised that they were unable to attend. The Department had been asked to address the Committee to justify why the conditional grant funding should not be reduced for Mpumalanga, why the school nutrition grant in Eastern Cape and North West should not be reduced and why the HIV / Aids conditional grant should not be reduced in Limpopo and Kwazulu Natal, in light of their under performance.
 
Mr Hindle said that the two longest-running grants were in relation to School Nutrition and HIV/Aids education. The FET college grants were fairly new. He appealed to the Committee to understand the critical importance of the programmes, in particular SNP, which was feeding 5 million children. The number of feeding days did not yet match the number of school days, and he mentioned that SNP had not reached the status of a proper nutritional programme. DOE was trying to improve the quantity and quality and was under pressure to expand the programmes, in particular to secondary schools. Some provinces had already targeted certain schools DOE could not afford to have this grant cut. Management was aware of its responsibilities to improve the running of the programmes and assured the Committee that it would be taking appropriate steps. 

The HIV /Aids programme had been running the longest as a life skills programme, and it was critically important to expose the learners to this information. The latest information suggested that attitudes and behaviour of the 19 to 24 year old age group was changing as a result of the programme and it was vital to continue it in the interests of learners and youth.

Mr Hindle added that DOE had this year engaged in a budget standards exercise, working with each province to try to ensure proper budgets were drawn, incorporating national priorities, and conveyed to provincial treasuries. There had been a significant improvement. The FFC had indicated that ECD was now a priority area although it had been neglected for a while. Any adjustments to the proposed budgets for the provinces would ultimately lead to a decline in programme delivery and national priorities would not be achieved. Therefore he appealed that the conditional grant figures should remain untouched, and DOE would commit itself to proper growth.

Mr Johnny Makgatu, MEC of Education: Eastern Cape, indicated that the provinces would similarly commit themselves to following the approaches set out by the National DOE.

Discussion
The Chairperson was happy that management was committed to ensuring that matters were properly done. In regard to the provinces, he pointed out that late approval of business plans would need to be addressed.

Mr D Botha (ANC, Limpopo) noted that the Committee was taking its work seriously, and that service delivery was vitally important.

Mr E Sogoni (ANC, Gauteng) corroborated that the national departments must take the provincial departments on board at every stage. The plans in many national department programmes were hindered by poor spending at provincial level. The question was whether planning and monitoring were correctly carried out. One province should not be operating differently from others. He said that there needed to be more focus on FET and asked what bursaries were available. He would like to see tighter coordination generally, and realisation of objectives.

The Chairperson remarked that the credibility of the business plans was an issue and the projected over spending was also a problem that he would like to see changed. The changing of plans midstream was a difficulty. There should be a clear balance between spending and delivery right from the first quarter. The Committee was unhappy with the "spikes" in spending that were showing in the last quarter.

The Chairperson asked a specific question on funding for school electricity. The Department of Minerals and Energy had said that there was no credible data for schools that lacked electricity. He asked that DOE must work with DME directly to sort this out

Mr Hindle replied that DOE was already working closely on the issue of electrification, although water and sanitation were more important priorities. DOE was in the final stages of completing an electronic audit of each school for the National Electronic System. In regard to the comment that provinces operated differently, he noted that there were no national norms that infringed on provincial competency. The poorest received the most, according to need, but the budget standards exercise had started to bring about better coordination on the non-personnel and non-capital amounts, although these remained a provincial responsibility.

He noted that the provinces and DOE worked closely together in planning and preparation for all National Treasury (NT) business. In the first year of the conditional grants NT had given a funding allocation and the largest sums came in the following years. He confirmed that conscious planning was being done on college recapitalisation and the spending would take place in this year. All provinces confirmed that plans were in place for the spending and it was expected that a high percentage of the FET grant would be spent. NT had given R20 million to undertake planning and preparatory exercises for ABET and the roll out would be taking place next year. There was R100 million for FET bursaries and this would double the next year. He assured Mr Sogoni that DOE would be able to double the number of enrolments at FET Colleges. There was no doubt that business plans needed to be credible He cautioned that some provinces were in fact using their own money, so although it looked as if they had over spent the conditional grant, this was not so. It was not a question of mismanagement but a deliberate decision to put more money into the programme. The conditional grant for SNP had received a further boost, in November 2005, when R200 million was added. This forced a review of the business plan to accommodate the extra amounts and some provinces had not managed to use the full amount in the short time available until the end of the financial year.

Mr Hindle said that there had been some issues of capacity. Some was related to capacity outside the government. For instance, the school building programme had managed to get compliant tenders for only about 20 schools. Many private contractors would not wish to build schools and there was little that could be done by the Department to force the issue.

Mr Hindle said that he was hoping that the first quarter report for the next financial year would show even spending. However, the realities in DOE were that there were certain busy times that were based on the school calendar. In November more matric paper markers were paid, and in February and March the bulk of deliveries took place in readiness for the school year.

Mr Sogoni said that the over spending on the conditional grant could not be ignored.

The Chairperson clarified that the provinces had compromised their equitable share to try to address needs. Last year the Committee had asked the provinces to start talking to the FFC and it was clear that there needed to be some process on this. The HOD had said that ideally the nutrition programme should expand and should be a national initiative.

Mr Botha asked for a time frame when the sanitation of schools would be completed. Seven out of twelve schools in Limpopo had no sanitation. He asked that schools must put the SNP in schools immediately without any waiting period.

Mr Hindle replied that by end of 2008 all schools would have adequate water and sanitation.

Provincial Department of Education (PDE) briefings
Mr Johnny Makgato, MEC: Education, Eastern Cape said that the issue of water and sanitation was quite a thorny one. Whilst the water and sanitation were clearly intended to benefit the learners, in practice many of the schools had no fences and would find that the surrounding village inhabitants would simply use the facilities outside school hours. Therefore it was difficult to try to make comparisons between national and provincial "norms and standards" as these were enormously difficult to define. Eastern Cape clearly had fewer facilities than other provinces and what was regarded as a "standard" science laboratory in one province was way out of reach of another. The budget for SNP included a suspended payment. Forensic auditors were still investigating the SNP allegations and the rights of children were affected. There was a clear link between quality nutrition and school learning, especially in Grades R to 3. Child headed homes were another problem and although all children tried to go to school they were faced with huge challenges. HIV and Aids infected children were further in need of services. He explained that five senior officials who were to drive the SNP had been suspended pending disciplinary hearings, and there were allegations of collusion between administration, suppliers and service providers. DOE and the Department of Social Development were collaborating to look at the nutrition and health aspects. Qualitative and quantitative measures would be employed, and non financial information could also be brought into discussion. It was unfair that two siblings at different schools should be treated differently as their needs were the same. There was a need to redesign the SNP and build in monitoring and reporting. The logistics of food delivery was a further problem as sometimes bread would only be delivered once a week and would go mouldy and stale by the end of the week. He felt that unannounced monitoring visits should be done

Ms Lulama Mbobo, Acting Senior Manager, Kwazulu Natal PDE said that there had been changes at the top level of the Department with the establishment of a Chief Financial Officer's post, and there was improvement in the management of services She commented that the province was hardest hit by HIV and Aids. There was political will to deal with the problem. The Department was in the process of developing a new strategy. She said that it would be a disservice if funds allocated to the Department were to be taken away. As of 1 March all the information was captured. There had been delay in submission of invoices from suppliers but the full budget would be spent by year end.

Mr N Mthombeni, Senior Manager, Limpopo PDE stated that the province had experienced challenges of capacity. Last year key positions were advertised and efforts were put in place to try to deal with conditions, but there had been resignation of the programme manager. The matter was now in the hands of the general manager. The province had managed to spend about 47% of the conditional grants and efforts were continuing. The province was also dealing with the challenges in staffing.

Mr Ray Tywakadi, HOD, Mpumalanga PDE said that most of the details were contained in the DOE national presentation. The non-attendance by this province before prior meetings of the Committee was highlighted as a problem. He apologised for the MEC, who had had a prior commitment. He said that the expenditure on grants was on track. The SNP and HIV / Aids spending was high. The infrastructure grant showed about 65% expenditure. This was a radical departure from the past trends. The Department appreciated the collaboration and partnership with National Treasury and technical assistance that had helped with capacity issues. However, it must be noted that for infrastructure the Department of Public Works (DPW) was the main implementing agent. Private building industry capacity was limited in Mpumalanga, and sometimes the plans had to be changed. The province was on track on terms of expenditure, and had improved expenditure patterns across the programmes. The new business plans had been checked for the forthcoming financial year for credibility and implementability.

Discussion
Mr Botha felt it would be useful for the Committee to visit the Eastern Cape to try to assist.

Mr Z Kolweni (ANC, North West) commented that in the past questions had been asked in the Eastern Cape about community involvement. He asked whether the school governing bodies were assisting. He was not sure what took place before awarding of tenders and whether there was proper screening.

The Chairperson wondered whether Eastern Cape's biggest problem had not been under estimation of the numbers, as it seemed that halfway through the year it appeared there were more learners than the funding allowed. He noted that there should be assessments done on the ground.

Mr Makgatu said that he held this Committee in high esteem. It would be putting a monitoring and evaluation team in the office of the MEC and noted that samples would be used. He told Mr Kolweni that the problem in the SNP had been collusion and fraud,  and that was the reason why the monitoring unit was needed, reporting to the highest office. The service level agreements now provided that if the tender conditions were not met, the contractor would be dismissed. There was no room for faulty service delivery. The Department would be strong in its approach in defence of the children. In the latest process, 742 tenders were received. A vetting exercise already reduced that number to around 300, identifying and eliminating those with dummy companies, or who had not received tax clearance, or were fronting. 54 contractors were finally appointed. However, even the vetting process would not be able to assess the motives nor the efficiency, and that was why the monitoring and evaluation was being introduced. In respect of the numbers and the number of days the children were fed, he noted that when DOE took over the programme from Department of Health (DOH) some amounts were still outstanding, and an amount of R50 million was to be paid to DOH. In the previous years the programme should have been covered in the equitable share of the Department, but this had not happened. The shortfall meant that the DOE could only afford to feed for three days. There would be joint verification of numbers in future at ground level, to ensure correct numbers of children were captured, and could be supported, to enable them to further their education. Greater coordination between primary and high schools was being developed.

Mr Kolweni asked for details of what Kwazulu Natal's restructuring entailed. 

Ms Mbobo responded that previously the finance section had fallen under human resources and the CFO was not appointed at a commensurate level in terms of the skills and capacity required. One person was managing a huge budget. Now the department had restructured to allow the CFO to be appointed at the level of Chief Director, and to assume responsibility for other issues, such as integrating supply chain management issues. In addition the former strategy was neither clear nor integrated. Various activities, for example, addressed HIV and Aids, across the curriculum, but now it was intended that all these activities be integrated. This programme was being refined at present

Mr Botha noted that many provinces were now raising the issue of capacity because of the demands being placed on contractors for 2010 building. He pointed out that the contractors who would build the stadiums would all be large firms, and he was not sure how 2010 would affect the small contractors. There were a number of small contractors who would not be tackling the larger projects. Most of the stadium building had not yet started.

Mr Tywakadi responded that provincial departments would also tend to use the larger contractors. Construction development programmes were in place.

Mr Sogoni felt that there should be stricter control of conditional grants. If the equitable share was used, that was another issue. The disparities should be narrowed. The national department had mentioned planning, and this was welcomed. The Committee would want to check on capacity building. He asked for more detail on the HIV/Aids programme of Limpopo was mentioned, but more detail was needed.

Mr Botha asked how the computer programme in Limpopo would assist with HIV and Aids, and whether the Department was convinced that it could be implemented properly and carried over to learners.

The Chairperson asked Limpopo to prioritise its staffing issue. The trends of under spending could not be perpetuated..

Mr Mthombeni responded that the programmes would be implemented in primary schools and would concentrate on HIV/Aids and life skills education. The computer programmes would be geared at the classroom level, although some materials would also be produced. The programmes would be rolled out in selected schools initially.

The Chairperson said that the Committee was pleased that engagements were taking place earlier in the year in regard to the (recently renamed) Infrastructure Grants to Provinces (IGPs)

Financial and Fiscal Commission (FFC) Briefing: Expenditure of Department of Health (DOH)
Mr van Gass indicated the growth of spending of the DOH over the past two years to 2005, and compared it to the projected growth from 2007 to 2009. He noted that FFC would look to various categories and compare growth against stated priorities. If spending and budgeting was below average it would appear that the matters had not been prioritised. Over the past three years the average growth for provincial governments had been just over 5%. The Department of Health (DOH) had been growing at 27%, and spending slightly less than budget.

The breakdown by personnel, training and capital expenditure helped to focus on the priorities of the Accelerated Shared Growth Initiative for South Africa (ASGISA) and JIPSA. FFC also would look at personnel as that was a major component of the trend. DOH spending on personnel had been higher than the departmental average. The training on spending had been around 5% and seemed to have dropped, although some provinces did not appear to budget for training. The indication was that training was de-prioritised. There had been strong growth in capital spending and the similarly the growth of budgets had been higher than average. The programmes in the provincial health departments showed that the primary healthcare system seemed to have been prioritised, jumping to 16% over the 2007 MTEF. However, the primary healthcare system was absorbing the municipal clinics so it might not be expanding substantially. The provincial and district hospitals had declined over the past three years and not been prioritised in the new budgets. The tertiary hospitals had been growing strongly at nearly 10% over the past three years and  were budgeted at 4%. The HIV / Aids component had grown rapidly because it was a new programme. The important conditional grants showed that training and development had been declining and this was projected to continue. This would not be in the interests of skills formation. The training and development grant was higher than the reported spending. The hospital revitalisation grant had been growing fast, projected at nearly 16%.

With regard to spending, over the past three years, DOH had not under spent substantially. Personnel spending was on track, being under spent by only 0.5%. In terms of infrastructure there had been 12% under spend on average over the past three years. The HIV / Aids programme showed slightly over 5% of under spending. In regard to the conditional grants, hospital revitalisation had under spent. The projected over spending was based on spending up to December and did not include the February and March spike.

National Department of Health response to Committee questions
Mr Thami Mseleku, Director General, National DOH, indicated that there were also representatives from the provinces present. He wished to clarify the training and development grant that appeared not to have been prioritised. He explained that this grant was not the cost of training per se, but was intended to offset the costs of equipment and disposables used to train students in the hospitals, such as additional bandages    used in the training process. It was a misnomer to call it a training grant.

Mr Mseleku referred to the specific issues that the Committee had asked DOH to focus upon. These were why the Conditional Grants for Mpumalanga should not be reduced, in light of its failure to respond on performance last year, why the hospital revitalisation grant for KwaZulu Natal, North West, Northern Cape and Limpopo should not be reduced, and the grant for forensic pathology should not be reduced or withdrawn, in light of poor spending patterns. The first question related to the non-attendance of the Mpumalanga province to respond on the under performance on the conditional grants. Secondly, the Committee had asked about under spending on the hospital revitalisation grant. .Mr Mseleku noted that 67.5 % of the total allocation from DORA had been spent. In fact the allocation against payments showed 85% expenditure. Only 67.5% was shown as spent because R385 million represented roll-overs which had been approved as late as November 2005. When dealing with capital projects, it was not possible to spend the money before year end if it was only approved in November or December. That was a major problem, and accounted for the under spend in Kwazulu Natal, Limpopo and North West. Many projects were delayed due to lack of funding. The lack of funding also meant that projected expenditure in DORA for 2008/09 would be affected. He wished to clarify that all provinces had a problem that hospitals might have been announced by the Premiers or Mecca as being due for building, on the basis of approved business plans. Some might have political significance for the particular province. The issue was that the budget for revitalisation was growing, but not at the same pace as the number of business plans approved. When there was under spending two years ago, this was given as justification for not allocating more money. DOH argued that business plans had been put in place but not approved. The response was that the business plans would therefore now be approved, and the provinces accelerated submission of business plans. There was now an over production of business plans overtaking the financial performance. The budget for 2008/09 therefore looked at the projects already on site, and said that because there were contractual obligations they must be dealt with. There was no funding for certain hospitals in the Western Cape, Northern Cape and KwaZulu Natal. Groundwork had been done, the business plans were in place, but the projects could not be continued because of lack of funding. The provincial departments had significantly improved their spending on capital projects, compared with the last financial year. That percentage could have increased if the figures had shown the DORA spending, and had not taken into account the late approval of funding that could not be spent.

Mr Mseleku noted that Limpopo showed over spending, but noted that this was a reflection of resources used by the province from its own equitable share. It was not overspending on the conditional grant. The province was spending to deal with existing contractual obligations.

With regard to the forensic pathology services, Mr Mseleku noted that there was currently consistent slow spending. This grant covered the refurbishment of the mortuary services, in conjunction with the National Department of Public Works. DOH had taken over the mortuaries from the South African Police and many had required extensive refurbishing. New mortuaries had to be built, and they had to be equipped with vehicles, staff and other equipment. There was a roll over of R93 million that was only approved in December 2005, and spending had been hampered by the involvement of DPW, who had failed to submit  invoices. There had been poor recording of expenditure. Some of the spending needed to be approved in the provinces and there were delays. This was a new area and DOH had recently taken over the grant. It was likely that there would be improvements in performance as the matter was better known.

The health sector welcomed the Division of Revenue Bill as it showed greater improvement for its own budget, especially in the HIV and Aids arena. At some point the grant was related to the performance of the provinces with regard to the uptake on anti retroviral (ARV) treatment. If it was faster than the projections, and if more people came forward for treatment,  there might be over spending. Western Cape already indicated that a budget shortfall as DOH was being overtaken by its own performance on HIV and Aids.

The Chairperson indicated that there was concern that provinces did not appear to have known their entitlement on infrastructure grants. He asked that the provinces should comment.

Provincial Department of Health (PDH) briefings
Mr Seaparo Sekoati, MEC for Health, Limpopo said that in addition to the budget a roll over of R6.3 million must be taken into account. There was only one structure that could be taken over. New facilities had been constructed and more were due in the next year. R81 million had been budgeted and the total expenditure was 81%. There were two facilities that had been delayed. The hospital revitalisation grant had been clarified by the Director General. It was not the intention to over spend on that, and the grant would be used for health technology and improvements. It was the sole source of funding within the province. He noted that the capital projects took up to four years to complete and the changing MTEF allocations had make it difficult to manage the projects. The MTEF budget should allow planning for future implementation. He indicated what some of the figures had been in the past years. The MTEF budget had been cut in 2006/07, and the 2007/08 budget had also been changed. The Department would be spending the funds. It believed that budgeted funds would be utilised as contractors had been appointed and payments had already been allocated. In the present financial year the department had received R48 million and there was a roll over. He set out the commitments and said there was an anticipated shortfall.

Dr Esthras Moloko, HOD, Mpumalanga PDH, stated that there had been no appearance before the Committee to explain performance on conditional grants. However, the Department of Provincial and Social Services had sent an apology to the Committee. He gave a summary of expenditure in the current and previous financial years. He said that R27 million from the previous financial year had been spent at the end of the third quarter. The budget and expenditure was lower than the expected target, but the expenditure had improved to about 80%, except for hospital revitalisation and infrastructure grants. The budget and expenditure for the current year showed that at the end of February the comprehensive HIV /Aids spending was at 86%, the health professions spending at 82% and hospital infrastructure spending at about 70% Forensic pathology services spending was low, at 43%. The comprehensive HIV /Aids grant spending had improved to 86%. The Department had a business plan and available funds would be spent to pay the services. There were a number of activities that had used the equitable share that amounted to about R4.1 million. There were regular weekly and monthly monitoring sessions and quarterly reports to ensure that the department was complying with the business plan. The health professions training and development grant had risen, and the variance represented a hospital transferred to Limpopo province. . The Department would manage the transfers and would ensure that all funds were spent. The hospital revitalisation grant had risen to 76% spending and the previous figures were as a result of slow progress at one of the sites. There was a difficulty with Forensic Pathology. At the heart of the challenge was planning, which was a limiting factor. The National Department of Health and NT were assisting provincial departments and social services to ensure it was corrected.

The provincial structure training grant was on track. Forensic pathology showed a challenge of under expenditure. The under spending was mainly due to delays in the infrastructure process. Some services would only be completed in the next financial year. Some solutions included better planning, and annual planning calendars, so that people could know what was expected of them. The provincial and technical teams would assist in the introduction of  three years planning cycles. The programme for forensic pathology would be privatised. There would be a cluster approach to infrastructure delivery. There would have to be a 20% reduction in infrastructure backlog, including clinics, hospitals, schools and libraries. That was part of the social sector cluster. The Department was awaiting the turnaround strategy. Dr Gistasap Khan, Director, Forensic Pathology Services: Eastern Cape PDH, said that the background to the forensic pathology grant was that from April to December 2006 there was an acting manager. PDH had  relied on DPW and there was a shortage of skills. The appointment of the principal agent was late. That resulted in recruitment and appointment delays, so that only R2 million out of the R79 million grant could be  spent in the first six months. A project team was appointed on 1 October. A number of contractual appointments were made, plus administrative support staff, a forensic pathologist and human resource staff.  The province had identified an alternative implementing agent, Coega Development Corporation. There was now an approved organogram of 211 posts and 203 staff had been appointed. This included 3 forensic pathologists. Infrastructure assessments showed that X-ray machines were needed and these had been installed. A R11.6 million tender was awarded on 23 February for fridges and other equipment. Refurbishment of mortuaries had begun, and tenders closed on 19 February. It was expected that construction would last till August. 17 new mortuaries were constructed. Twenty of the fifty vehicles needed had been acquired. The MEC summarised that the budget was R79.9 million, and that a further R11 million had been awarded in December. There had been R17.2 million expenditure, amounting to 18.7%. The major drives were refurbishment, contractors and staffing. There were commitments for the end of March. Construction would begin in the new financial year. 26% of the budget related to staff, ad the expenditure would be spread over the next ten months. The total contractual commitments would be R98.1 million of which R52 million would be a roll over. The costs were still in estimate stage and the Department was convinced that any cuts in the grants would seriously hamper the programmes already planned. Ms Vonita Thompson, Director, Forensic Pathology Services, Western Cape PDH, said that the Western Cape had received R68.6 million and there was an R8.8 million roll over. In 2006/07 various activities and outputs were committed to. Infrastructure was concerned with seven pathology departments being built at a cost of R28.6 million. Five tenders had already gone out and there were others in the process of being awarded. The total budgeted programme costs amounted to R14 million. Expenditure of R57 million was expected. Equipment and facilities were on track and budgets for this would be spent. 52 vehicles would be utilised. There would be appointment in time of 170 staff but this had not yet been achieved, with only 141 posts being filled.  Five projects had gone to tender and the Department was awaiting approval for payment. Construction was ready to start in five other venues. There was concern that the new project costs would exceed the budgeted costs. There were some constraints in conversion of the vehicles, which was done through Government Motor Transport. 198 posts were being created for the next financial year and some were already being advertised. Some employees had been seconded from the S A Police Services for six months and the Department was still awaiting the invoice in relation to their payment. The business plans for 2007/08 had been submitted and approved.

Discussion
Mr Kolweni and Mr Botha were concerned with the delayed approval of roll-overs and asked what the problems had been.

Mr Botha asked whether he mortuaries taken over from SA Police were in poor condition and whether they had not been able to be used.

Mr Mseleku said that the mortuaries were in many cases unfit for use. The problem was exacerbated by the fact that the negotiations took about three years and during this time S A Police were unwilling to spend money on maintenance and infrastructure. Many deteriorated badly in this time. The legislative requirements were also changed so that renovations to comply with the legislation were necessary. A further problem had been negotiations about which staff should be transferred to DOH. This had now been sorted out and implementing processes were in place.

Mr Sekoati added that many of the mortuaries had not originally been designed as forensic mortuaries and had to be built to specifications.

Dr Moloko confirmed that many of the mortuaries did not meet the needs so that they had to be redesigned to meet the service delivery requirements. The population needed to be consulted. Proper planning was needed to ensure success.

Mr Kolweni noted Limpopo's concerns that the allocation of the budgets altered in the MTEF cycle. He asked for further details.

The Chairperson suggested that this was a matter to be followed up with the provincial Treasuries to note that the alteration to the MTEF allocations was causing problems in planning.

Mr Sekoati said that the approvals for allocations were very late and it was impossible to effect the spending in the last two months of the financial year. The allocations were not always consistent with expectations which made it very difficult to plan properly for continuation of projects over the cycle.

The Chairperson mentioned that Section 25 of the Division of Revenue Act (DORA) dealt with the powers of transferring officers, and indicated that if there had not been notification that a problem existed, but there was simply no compliance, the allocations could be withheld.

The Chairperson asked for comment from National Treasury.

Mr Kenneth Brown, Chief Director, Intergovernmental Policy, NT said that the discussions on moving the forensic pathology function  from S A Police to DOH had commenced in 2001. In regard to the roll-overs, Mr Brown said that there should be a distinction between national and provincial government. Nationally the DOH had transferred all the money to provinces so there was no need for the national department to ask NT for a roll over. NT had the power to allow transfers from one project to another if here were savings in some areas . This would take place between May and October, when the Minister would then table the Medium Term Policy Statement.

Mr Brown said that it would be useful if the Department could provide details. If the additional funding was indeed allocated so late it would be unfair to expect spending by the end of the year. NT would want to follow up on this and try to improve the systems. However, he noted that if the national department realised that there would be a problem, it should not have transferred the funds, This was another issue to be discussed in another forum. National Treasury could take up the matter with provincial treasuries. He noted that the money related to a conditional grant and therefore provincial treasury should transfer if the money could be spent. Mr Brown noted that there should not be confusion between the revision to the baseline budget and roll-overs. The budget allocation must have included the roll over on spending. Looking at this trend would explain how the allocations were being determined. This was a bone of contention. National Treasury needed to find a way of dealing with the allocation. However there was also a problem how the allocations had been determined and the money had been moved around. The Budget Council had to agree on this and needed to review how to deal with the hospital constraints in general. Provincial departments should not be relying on the national government for funding.

Mr Mseleku said that he had already dealt with the constraints on the projects. He pointed out that no department would want to lock money into a specific project so tightly that it could not be touched. It was useful to be able to reallocate from one project that might have a long drawn out dispute that was blocking the spending to another that was in need of funding now. The Department should have the flexibility to spend in the most appropriate way.

In regard to the inter provincial relationship he said that if one province had under expenditure on a project it should be allowed to transfer to another province that was in need of the money. He stressed that construction formed a major part of the expenditure and it was a particularly difficult area that would not respond well to a rigid approach.

Mr Sekoati noted that there were two separate challenges; one of the allocations being changed, and the other of the late approval of roll-overs. The problem was that there was no consistency. If a province underspent in one year through lack of capacity but then appointed personnel to capacitate it in the next year, it might be told that the funding would not be approved because of the previous under spending.

The Chairperson raised the question of the equitability of grants and said that this too was a matter that needed to be discussed in another forum.

The Chairperson commented that the Committee had been pleased with the input from provinces. He noted that the spending must match the circumstances. It was no use to build clinics if there were no roads leading to them. Full implications of the spending were not always thought out in advance. He suggested that the Director General should check the statistics on electrification of clinics with the Department of Minerals and Energy.

Supporting infrastructure delivery management: National Treasury (NT) briefing
Mr K Brown commented on the previous presentations to the effect that the departments were budgeting for the infrastructure of water, sanitation and the like, but often the budgets only took into account the services to the point of the clinic or school and did not take account of the internal reticulation needs. He said that sometimes more careful budgeting was needed by the provinces.

National Treasury had provided R8 billion for provincial infrastructure over the last cycle and nearly three years later the figure had doubled. The Infrastructure Delivery Improvement programme had by and large been successful.

Mr Brown said that some caution had to be exercised when dealing with the provinces. It was very difficult to stop the capital grants, as one had to look to sustainability issues. He respected the NCOP's views and oversight role. Where provinces did not conform to the standards set there was a problem in trying to assess how best to deal with it without adversely affecting the system.

The Infrastructure Grants to Provinces (IGPs) were a small contribution and the funding stood presently at about R4 billion. Quarterly reports were required on these grants. The main appropriation had been R11.9 billion for the IGP and adjustments were made, bringing the total to R14 billion. The spending amounted to R13.03 billion, leaving R938 million underspent.

In regard to the infrastructure grant, it was anticipated that the provinces would underspend. However there was an increase in spending as against the previous year. The trajectory on spending was relatively high, but still not fast enough. NT had decided to use the provisions of DORA and R57 billion was withheld from five provinces. Eventually the stopped funds were transferred. Mpumalanga had been included in the funding stopped. The stopping had proved effective. The grants for 2006/07 had been increased.

In regard to the 2006/07 budget there had been a total allocation of budget plus adjustment of R18.8 billion. By September spending was only at 38%. However, by December it had increased to 64.6% and Mpumalanga, by comparison, had spent 71% of the total infrastructure budget. NT would like to maintain the trajectory and therefore would not recommend the stopping of these funds.

For education the national average was 52.8% spending. Mpumalanga had spent R78.8%. Western Cape, despite being one of the largest provinces, was under spending and some funding had been re allocated to them at the end of the last year.

In regard to health, the annual budget was R3.8 billion. The provinces had averaged 42.1% spending and the budget was adjustment to R4.1 billion. As at the end of December R2.9 billion had been spent, which was 69% of the total budget. Mpumalanga had been one of the good performers.

National Treasury said that although the spending figures were shown, it remained to be seen how the spending had affected matters on the ground and there still needed to be an assessment of whether the spending had attracted value and was achieving the goals.

In regard to roads and transport Mr Brown said that infrastructure spending had improved, with 64.8% having been spent by December as much of the transport system was now privatised.

The key to economic and rural development was agriculture and R640 million had been spent. However the capacity of the sector to absorb funds was a problem. Mpumalanga was not doing well in this area, having spent only 33% of the budget.

In summary, Mr Brown said that Mpumalanga had performed relatively well and had no  outstanding transfers. NT would not advocate that money should be taken away from this province. He hoped that alternative methods could be found to persuade them to comply fully since taking grant funding away should be a last resort only. Over the next three years the IGP would provide around R4.3 billion of additional funding. It would be expected that the provinces must contribute to the provincial infrastructure. 

The meeting adjourned.

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