Joint Budget Second Quarter Expenditure Report 2008/09 : deliberations

Meeting report

Deliberations on Second Quarter Expenditure Report

Introduction and Summary of Findings
Chairperson Mabe informed Members that the cut-off date for Departments’ responses to the Committee’s questions was on 9 February 2009.

Mr Phelelani Dlomo, a Parliamentary Researcher, stated that only six out of the nine Departments had responded to the Committee’s queries. The three that did not respond on time were the Department of Water Affairs and Forestry (DWAF), the Department of Labour (DoL) and the Department of Communications (DoC).

Chairperson Mabe noted that the pages of the report were not numbered; however, she asked Members to take a minute to look over the report’s introduction and summary of findings.

Chairperson Sogoni asked the researchers to explain what was meant by “However, this increase (in second quarter aggregate expenditure) does not imply efficiency in government spending; it only shows an extent to which budget is implemented by departments.” in the summary of findings. 

Mr Dlomo explained that the statement meant that an increase in government spending did not necessarily mean that there would be value for money and this meant that the increase could be ineffective.

Ms J Fubbs (ANC) suggested that the researchers reword the statement. She wondered what the public’s perception of government spending would be if they read that statement. She asked the researchers to further unpack and explain the statement in the report, as not everybody had a clear understanding of the budget concept.

A Member stated that she understood that the Committee needed to say that more should be done; however, they did not want to be negative by saying that an increase in government spending could be inefficient.

Chairperson Sogoni suggested that the statement be included at the end of the report.

Mr G Schneeman (ANC) suggested that the entire summary of findings be included at the end of the report. He also suggested that the Departments’ efficiency should be measured against their strategic objectives.

Chairperson Mabe noted that in previous reports the findings and recommendations were included at the end of the report. She was uncomfortable with it being inserted at the beginning.

Ms Fubbs reminded Members that they had taken the decision that each quarterly report would try to focus on specific matters. There was no harm in including the findings at the beginning.

A Member stated that it was just that one specific sentence that bothered her. She did not want to change the whole summary, just that one sentence.

Chairperson Mabe suggested that the researchers briefly indicate what the situation was in the previous quarter and what the situation was in the current quarter.

Chairperson Sogoni noted that it was necessary to give readers an understanding of the report in the summary; however, knowing where to include the summary of findings was a point of contention.

Chairperson Sogoni addressed the second bullet about vacancies in the summary of findings. He suggested that researchers should rephrase the paragraph and talk about the state of affairs with vacancies.

Mr Schneeman noted that only one comment had been made about vacancies in previous departmental reports. He thought that the findings should be based on the actual expenditure report. This finding seemed to be misplaced, as there was no evidence of it.

Chairperson Mabe stated that Departments’ seemed to be shifting funds from compensation of employees to other things. This meant that funds were being spent in other areas.

Ms Fubbs suggested that the paragraph be rephrased to say that there were a number of challenges regarding vacancies that needed to be addressed and that the findings in the report would help the Committee to trace the failures. She did not want to remove the bullet; she wanted to link it to findings or evidence.

Mr M Swart (DA) suggested that the bullet say that the Committee expressed concern that certain departments had too many vacancies.

Chairperson Mabe noted that the Committee had spent too much time focusing on the summary of findings. She proposed that the Committee address the summary of findings later and pay more attention to new areas included in the report.

The Committee agreed.

Chairperson Mabe also noted that the reason there were so many problems with the format of the report was because the Committee’s secretary, Mr Perron Hahndiek, had left the Committee. Mr Hahndiek had always attended to the report and its format.

Review of the Total Expenditure for National Departments and Current Payments
Mr Sizwe Nyenyiso, a Parliamentary Researcher, reminded the Committee that it had wanted an explanation from the DoC about underspending because of capacity challenges. He informed the Committee that the researchers were unable to get any further response from the Department regarding capacity challenges.

The Department of Public Enterprises (DPE) slow spending was due to payments not being made to some projects in the Manufacturing Enterprise programme.

The Department of Minerals and energy (DME) was the least-spending department at the end of the second quarter. Underspending occurred primarily on the Integrated National Electrification Programme (INEP), rehabilitation projects and claims in respect of pumping subsidies payable to marginal mining companies.

Ms Fubbs asked if the DME had clarified how many schools were given electricity.

Mr Nyenyiso stated that he did not know that accurate number of schools that were given electricity and what the backlog was.

The Chairperson stated that the Committee would recommend that the Department go back and redo their statistics.
 
Mr Nyenyiso reminded Members that they had also been concerned the Department of Public Works (DPW) had underspent on their budget due to delayed payments of infrastructure and delays in transferring Conditional Grants to provinces. He informed the Committee that delays in payments were due to changes and additions to initial specifications from clients.

Mr Dlomo added that the DPW had issues of vacancies. So far, it had only filled 5341 posts out of 6008 vacancies.

In terms of the Department of Agriculture (DoA), underspending had been due to payments not being made to the Land Bank regarding AgriBEE. The delay in transferring rollover funds to the Comprehensive Agricultural Support Programme (CASP) was due to incomplete construction of projects by all provinces.

The Department of Public Service and Administration (DPSA) had underspent because it had underspent in its first quarter, transfers had not been made to receiving entities and because there were delays in processing certain invoices.

The Committee was concerned that DWAF had shifted funds from Compensation of Employees to developing training materials on water conservation and demand management in the domestic sector. The Department had given not given the Committee any response about this matter.

Mr Nyenyiso informed the Committee that the Department of Home Affairs’ (DHA) slow spending was due to foreign mission expenditure that had not yet been paid to the Department because of unprocessed vouchers and higher levels of savings that were accumulated from the number of vacant posts.  

Mr Swart noted that there were so many issues with vacancies with many of the Departments; it was therefore important that the matter be reported in the summary of findings.

Mr Y Wang (ANC) thought that it was unfair to say that departments’ had to spend a certain amount every quarter, as this was not how businesses worked. Departmental spending had to be measured according to its cash flow. This would be a better indicator of how the department was performing.

Chairperson Mabe agreed that the National Treasury sometimes confused the Committee. She also noted that benchmarks for departmental spending were based on projections.

Ms Fubbs noted that the report was too confusing. The statements that were made in the report had to explain the data included in the tables in the report.

Mr Swart stated that the report was confusing because one had to look at both the first and the second quarter reports to have a better understanding.

Chairperson Mabe noted that Mr Hahndiek’s leave of the Committee had put Members in a predicament. These were issues that had already been discussed. Members were stuck at issues that they should already have moved past.

Chairperson Sogoni stated that he was sure that the researchers were now informed of how the Committee wanted the expenditure report to look. Sometimes the Committee did not give exact guidelines as to the exact format of the report.

Chairperson Mabe noted that the researchers had actually done a good job with the report; they just needed to format it to the Committee’s specifications.

A Member noted that all the important information was already included in the report; however, it just had to be written the way it used to be. The researchers were not to blame. She suggested that the Committee ask the new secretary to look over old expenditure reports and to structure this report the old way.

Ms R Mashigo (ANC) suggested that the Committee ask Mr Hahndiek to come in an assist with the structuring of the report.

Chairperson Mabe agreed saying that Mr Hahndiek had promised to make himself available to assist with the Committee’s reports. She suggested that the Committee look over the report so that Members could point out issues with the report once Mr Hahndiek was there.

Ms Fubbs stated that there were many grammatical errors in the report that needed to be corrected.

Transfers and Subsidies
Chairperson Sogoni noted that it was good that the DoL was reviewing all Sector Education and Training Authorities SETAs. He wondered how the Committee could meet up with colleagues in the DoL to discuss what had to be focused on before the end of the next quarter.

Chairperson Mabe agreed. She stated that if SETAs did not have Chief Executive Officers (CEOs) or Chief Financial Officers (CFOs) then they were non-functioning entities.

Ms Fubbs suggested that all the information about the SETAs’ problems should be included in the report. The report should include what concerns there were regarding SETAs and what these concerns meant.

Mr Swart suggested that the report say that the DoL was looking in to the functionality of all SETAs.

Chairperson Mabe wondered if there was any use in giving SETAs money when some of them were not functional. Even the Minister of Labour had reported that many SETAs were not functioning. The Committee had to meet with the DPSA and the DoL to discuss why SETAs were given funding when they were not functional.

Mr Schneeman wondered what would happen to funds if they were not transferred to the SETAs.

Chairperson Mabe stated that he should ask the DPSA that question. However, she noted that if funds were not utilised they would be transferred back to the National Treasury.

Ms Fubbs stated that the Committee had to call on the DPSA and DoL to discuss the SETAs’ failures, as the Committee could not condone non-functionality for two years.   

Mr Nyenyiso stated that the researchers had a document from the National Treasury (NT) saying that discussions were taking place between the NT, the DPSA and the DoL on the SETAs’ functionality. This document had not been included in the report.

Chairperson Mabe informed the Committee that they needed to move on from the discussion; however, she noted that there were complaints that the SETAs were not very helpful. People wanted to know that there was value for money.

Chairperson Sogoni agreed, saying that it was the Committees view that many SETAs were non-functional. The DPSA had to look in to this matter, as the government did not want to waste public funds.

Mr Z Kolweni (ANC, Western Cape) suggested that a recommendation from the Committee be attached to the report.

Chairperson Mabe noted that the Public Service Education and Training Authority (PSETA) was dysfunctional. The DPSA and the DoL had to follow up on this matter, as funds should not be transferred to non-functional SETAs.

Ms Fubbs addressed the electrification issue. She noted that the Department of Education (DoE) had stated that there were 5000 schools without electricity, but after further investigation this figure was seen to be inaccurate. She wondered if it was accurate to say that 2500 schools would be given electricity during the 2008/09 financial year.

Mr Nyenyiso stated that the DME had only electrified 456 schools as at 30 January 2009. It would be almost impossible to reach the 2500 target.

Ms Fubbs stated that she was questioning the information’s reliability.

Chairperson Mabe stated that the Committee could not know for sure; however, Members could question the reliability of the information that was given by the DoE and the DME.

Mr Swart noted that the DPE had not made transfer payments amounting to R130 million to Alexkor, as they had not yet submitted their business plan. He asked if the researchers knew when the DPE would be receiving the business plan.

Mr Wang suggested that the DPE not transfer any funds to Alexkor if they did not submit any business plan.

Ms Fubbs suggested that the report be more explanatory, as some of the information included in the report was very sensitive.

Ms Fubbs also noted that when the DHA tried to expedite remaining transfer payments to the Independent Electoral Commission, the NT had advised that the Department should adhere to cash flow projections. At the end of December 2008, the DHA had already transferred R589.877 million to the IEC. She stated that she would have liked to know what measures the DHA had taken to overcome this challenge.

Recommendations
Chairpersons Mabe and Sogoni were not present for this section of the meeting. Mr Wang was asked by Chairperson Mabe to chair the meeting temporarily.

Mr Wang suggested that the Committee draft a recommendation on Alexkor. This would be added to the other recommendations already included in the report. He proposed that the NT should withdraw funding for Alexkor if it missed the deadline for submitting its business plan again. This should not be seen as a punishment. The money could be used for other priorities identified by the government.

The Committee addressed the first recommendation which stated that funds should be transferred to receiving entities after the departments’ had satisfied themselves that business plans were in place and designed according to required standards. Necessary mechanisms had to be put in place to monitor funds and ensure money was being used for its intended purposes.

Mr Wang wondered why the recommendation was so long.

Mr Nyenyiso explained that the recommendation explained funding at depth, as there was a general concern about the monitoring of funds with regard to projects.

Ms Mashigo wondered if there was any specific format for business plans.

Mr Wang answered that there was not; there was just a guideline. He noted that there were many mechanisms available to monitor funds that were transferred. He suggested that the researchers write the paragraph out in a simpler way so it was easy for everybody to understand. He proposed, “Department’s or entity performers should be measured against cash flow projections that accompanied business plans”.

Mr Dlomo stated that the sentence would be added in.

The second recommendation stated that an integrated approach was needed among all spheres of government and public entities during planning, implementation and reporting of government programmes. Any overlap of functions was to be carefully resolved in a manner that did not compromise service delivery.

Ms Mashigo noted that most spheres wanted to work independently and eventually they would all start blaming one another if something went wrong.

Mr Wang replied that there were problems because the spheres were not working together. This was why the recommendation was included in the report.

Mr Dlomo stated that it was important that all the spheres of government communicated. The spheres had to be more cooperative and interactive.

Ms Mashigo stated that there should be more joint planning on common issues.

Mr Wang agreed and suggested that the key word in the recommendation be “communication”.

Mr Dlomo stated that the recommendation would read that an “integrated approach and communication” was needed among all spheres.

The third recommendation read that departmental budget plans had to be based on accurate and credible information.

Mr Wang suggested that the word “information” be replaced with “data”.

The Committee agreed.

The fourth recommendation stated that necessary steps needed to be taken to improve efficiency in the Supply Chain Management processes of government departments to ensure that payments and invoice processing was made in compliance with the available legislative framework.

Mr Wang noted that this recommendation was made in previous expenditure reports.

Mr Dlomo replied that this recommendation was made many times before. It was made as a result of supply chain management processes not being adhered to due to delays in procurement payments.

Mr Wang suggested that they keep the recommendation for the time being. He did not have any problem with the contents of the recommendation. He suggested that the Committee add a sentence to the recommendation saying that “Departments should consider using electronic solutions to streamline supply chain management”.

The fifth recommendation stated that the high level of overspending in some standard items should be closely monitored and that more financial planning and control was needed from some departments.

The Committee did not have any problems with the recommendation.

The sixth recommendation stated that the departments should embark on proper feasibility studies before executing projects.

Mr Wang stated that the recommendation should be a bit stronger in its instruction. The word “should” had to be replaced with “must”.

Mr Wang noted that there were no other amendments.

The seventh recommendation stated that urgent attention was needed to address the vacancies that were instrumental in accelerating service delivery.

Mr Schneeman suggested that the recommendation read that “urgent steps must be taken to fill critical vacant posts”.

Mr Wang noted that there were no further amendments. He suggested that the researchers liaise with the Chairperson to fill them in on what was discussed.

The meeting was adjourned.