ATC110208: Report 2010/11 First Quarter Expenditure Report, dated 08 February 2011
Report of the Standing Committee on Appropriations on the 2010/11 First Quarter Expenditure Report, dated 08 February 2011
Having received a briefing from the National Treasury on the first quarter expenditure report for the financial year 2009/10 and having considered the contents thereof, the Standing Committee on Appropriations reports as follows:
As required by the Money Bills Amendment Procedure and Related Matters Act, No.09 of 2009, the National Treasury tabled the first quarter expenditure report to the Committee on 24 August 2010 for its consideration. This report provided expenditure trends for the end of the first quarter of the 2010/11 financial year. A number of issues that require the attention of the Executive emanated from this report. Some challenges that were noted and reported upon in the previous reports still recur in the 2010/11 first quarter expenditure of government. It should, however, be noted that the Committee has adopted a number of follow-up initiatives in its recent reports to ensure that the issues raised by the Committee are addressed.
This report focuses on the spending trends by different departments and highlights in detail some challenges that still exist in the implementation of budget. Ten Departments were identified for the analysis of their expenditure trends with the focus being on the departments that reported high and slow spending. These include the departments of Home Affairs, International Relations and Cooperation, Public Enterprise, Sports and Recreation, Communications, Energy, Environmental Affairs, Rural Development and Land Reform, Trade and Industry and Water Affairs.
2. Expenditure Trends at the End of First Quarter of 2010/11 Financial Year
National departments were allocated R461.5 billion in the 2010/11 financial year, excluding direct charges against the National Revenue Fund. This included R128.7 billion (27.88 per cent) for current payments, R302.6 billion (65.68 per cent) for transfers and subsidies, R9.3 billion (2.01 per cent) for capital expenditure and R20.9 billion (4.53 per cent) for payments for financial assets. The departments transferred R21.6 million and R3 million from current payments as well as transfers and subsidies, respectively to capital payments. The transfer of funds early in the financial year is noted as an indication of unrealistic budgets and lack of proper planning by departments.
National departments have spent R105.5 billion (22.86 per cent) at the end of the first quarter. An expenditure of R26.9 billion (20.87 per cent) was reported on current payment, R72.4 million (23.94 per cent) on transfers and subsidies, R1.1 billion (11.37 per cent) on capital expenditure and R5.2 billion (24.67 per cent) on payments for financial assets. The year-on-year spending comparison reflected a declining trend of 2.07 per cent. The national departments spent 24.93 per cent of their budgets in the first quarter of 2009/10 financial year. This decline in spending is reflected in all economic classifications except the newly introduced payments for financial assets. Approximately 23 departments have spent below the general quarterly benchmark of 25 per cent while 5 departments have spent above 30 per
cent of their budgets. Different factors have contributed to this spending trend and they differ from Department to Department.
Furthermore, information was not provided regarding the spending of the Department of Women, Children and People with Disabilities. A budget was allocated to this Department but expenditure could not be determined due to a lack of reporting systems within the Department. The National Treasury indicated systems were being developed and it was expected that the Department would be able to report through these systems in the second quarter of the financial year. The Committee notes with concern that the lack of reporting systems introduces new financial management risks. Accountability is central in exposing misuse of funds and the lack of these systems minimises the levels of accountability by the Department. In view of this fact, the Committee will pay more attention to this Department during the next expenditure reporting in order to satisfy itself that all transactions were in accordance with set prescripts during the development and implementation of systems.
3. Spending trends for the Selected Departments
The departments have reported different levels of spending on their budgets. While the Department of Cooperative Governance and Traditional Affairs reported a lowest spending in the first quarter, it was not selected for scrutiny of its expenditure for the purpose of this report. A substantial number of the departmental budget was allocated for transfers to other spheres of government. Due to the misalignment of the financial years, for municipalities were not transferred.
The Department of Communications is among the lowest spending departments. It spent 9.86 per cent of its budget while the Department of Sports and Recreation is the highest spending department at 57.49 per cent. Among the departments with abnormal spending trends, the following were selected for further scrutiny to identify challenges faced in the implementation of budgets.
Table 1: Spending Trends per Department
Source: National Treasury (2010)
3.1 Department of Home Affairs
The Department of Home Affairs was allocated R5.7 billion in the 2010/11 financial year. This budget supported a number of policy initiatives identified by government. These included:
· Strengthening birth registration and ID campaigns.
· Access to excellent levels of service.
· Improving security of business processes and systems, including permitting system for temporary and permanent residence permits and section 22 asylum permits.
· Sustaining the turnaround strategy through improved leadership, management and governance, skilled staff, integrated business processes and systems, and facilitative infrastructure.
· Implementing of strategies to prevent, detect and take action against corruption.
An amount of R942.4 million (16.48 per cent) was spent at the end of the first quarter. The Department has reported an expenditure of less than 25 per cent in all of its programmes. The lowest spending of 9.66 per cent was reported on the Administration programme while the Department spent 16.27 per cent of the Immigration Services budget. The Administration programme was allocated R1.5 billion but only spent R142 million as payments for rates and taxes to municipalities are made at the end of each quarter. On numerous occasions municipalities have expresses their concern at the lack and/or non-payment of rate and taxes owed by government departments which was a contributing factor to their poor levels of revenue collection. Municipalities have always maintained that any negative impact on their revenue collection affects the delivery of services. It is not clear whether the arrangement of quarterly payments was formally agreed upon with municipalities.
Furthermore, of the R1.4 billion allocated to the Immigration Services programme only R198.4 million (16.27 per cent) was spent by the end of the first quarter. This was attributed to delays in the payment of Advance Passenger Processing (APP) rollout for improving operations at key ports of entry. The APP was aimed at ensuring clearance of about 8 million travellers during 2010 FIFA World Cup. Other factors that contributed to the slow spending by the Department included:
· Payments to Government Printing Works of approximately R100 million for new passports were not finalised.
· Late payments for the introduction of Late Registration of Birth (LRB) on the spot adjudication campaign.
· Quarterly spending for the Master Rental Agreement with GijimaAst which was withheld in the first quarter.
· Funds which were not transferred to the Independent Electoral Commission (IEC) following a request by the IEC that such funds be deferred to the fourth quarter.
While the Department reported that the payment to GijimaAst was withheld, no reason was provided for the withholding of these funds. The Committee will further interrogate this matter and obtain the required explanation. It is its view that this will provide a full picture of any challenges experienced regarding GijimaAst. It is envisaged that this might also afford the Committee an opportunity to suggest early intervention to avoid any risks that might be associated with this payment.
3.2 Department of International Relations and Cooperation
The Department of International Relations and Cooperation was allocated R4.8 billion in the 2010/11 financial year. A substantial portion of this budget amounting to R2.9 billion was allocated to the International Relations and Cooperation programme, which is responsible for implementing foreign policy and supporting diplomatic missions abroad. The Administrative programme was allocated R1 billion. The Department’s budget priorities include:
- Consolidation of the African agenda: This includes the strengthening of the African Union, promoting integration and development through Southern African Development Community (SADC) as well as supporting peace, security and post conflict reconstruction.
- Strengthening South-South relations: this intends to promote solidarity and interdependence among developing countries.
- Strengthening North-South relations: the Department planned to focus on trade agreements with North America, the North American Free Trade Area and the European Union. It also intended to participate in new forums promoting North-South cooperation.
- Participate in the global system of governance: continue participating in international dialogues on disarmament, non-proliferation and arms control, and climate change, and in the G8 summits.
- Strengthening political and economic relations: strengthening South Africa’s bilateral relations, particularly with African countries.
The Department had spent R716.9 million (14.86 per cent) at the end of the first quarter. This was less than 25 per cent in all of its programmes. It reported the lowest spending of less that one per cent in International Transfers programme. This programme was allocated R784.7 million but only R3.7 million (0.47 per cent) was spent at the end of the first quarter. The low spending was attributed to delays in transfer payments to international agencies and organisations which are made at the end of the financial year. The other contributing factors for the department’s spending trend included:
- Slow spending on capital assets as some capital projects were not implemented on the Foreign and Domestic Property Management sub-programme.
- Delays in capturing the expenditure incurred by the missions.
3.3 Department of Public Enterprise
The Department was allocated R350.6 million in the 2010/11 financial year. This budget supported policy priorities and strategic focus of the Department, which include the following:
- Aligning State Owned Enterprises’ (SOEs) planning and performance with the national policy priorities.
- Assessing and strengthening corporate governance of SOEs to promote compliance with the new Companies Act.
- Assisting in improving efficiencies in the management of SOEs.
- Systematic integration of key SOE programmes into the broader industrial policy and economic cluster programme.
The Energy and Broadband Enterprises programme, which is responsible for aligning the corporate strategies of Eskom, Pebble Bed Modular Reactor and Broadband Infraco with government’s strategic intent and targets received a substantial share of R150.4 million of the budget.
The Department had spent R165 million (47.07 per cent) of its budget at the end of the first quarter. An amount of R140.8 million (93.66 per cent) was spent on Energy and Broadband Enterprises programme. This was influenced by a R138.6 million (100 per cent) transfer to Broadband Infraco for the national long distance fibre optic network. The high level of spending by the Department was mainly due to this transfer. The Department had under-spent in the majority of its programmes. It spent less than 18 per cent in five programmes. The Administration programme was allocated R101.3 million but spent R17.9 million (17.64 per cent). The Legal, Governance and Transactions programme received R54.4 million but spent R1.2 million (2.19 per cent) while the Manufacturing Enterprises programme received R16.2 million but spent R1.1 million (6.63 per cent) of its budget. An amount of R36 million was allocated to Alexor for the funding the shortfall in respect of the Alexander Bay township development programme but no funds had been transferred at the end of the first quarter. The Department indicated that the following factors resulted in its slow spending:
- Operational expenditure was committed but invoices were still outstanding.
- Less than anticipated travel expenditure.
- Office accommodation claim not yet made by the Department of Public Works.
- Posts budgeted for on one programme were moved to other programmes within the Department. Posts were moved from both Transport Enterprises, and Legal, Governance and Transactions programmes.
- Legal claims projected to be paid in April were not received from the Department of Justice.
- Vacant posts in the Manufacturing Enterprises and Joint Projects Facilities programme.
3.4 Department of Sports and Recreation
The Department of Sports and Recreation was allocated R1.2 billion in the 2010/11 financial year. A substantial amount of these funds amounting to R1 billion was for transfers and subsidies. The remaining budget of approximately R200 million was allocated for the administration of the Department. The transfer budget included transfers to sport federations, Departmental agencies and conditional grants. The budget supported three focus areas of the Department, including:
- Mass Participation: Among other things, the Department planned to strengthen relations with Department of Basic Education in delivering school sports programmes.
- Sports Development: This includes the identification and monitoring of talent, and scientific support to talented athletes from disadvantaged areas. It is also aimed at developing clubs and rolling out the national sports facilities plan.
- High performance: The Department aimed to improve South Africa’s international ranking in selected sports through partnership with the South African Sports Federation and Olympic Committee.
The Department had spent R716 million (57.49 per cent) of its budget at the end of the first quarter. The highest spending of the budget was reported on the transfers and subsidies category. An amount of R680.8 million (64.99 per cent) was transferred to receiving agencies. The high spending on transfers and subsidies was attributed to the 100 per cent transfer of conditional grants to municipalities under the FIFA World Cup Unit programme. These included the 2010 FIFA World Cup Development and 2010 World Cup Host City Operating grants. Furthermore, this high spending was influenced by the 100 per cent VAT refund of R40 million to FIFA for the FIFA World Cup tickets. As a result of these transfers, R554.7 million (99.29 per cent) of the 2010 FIFA World Cup Unit budget had been spent at the end of the first quarter. However, transfers were not made to other agencies, including sports federations, Boxing SA and Lovelife. It was indicated that these were to be transferred from the second quarter onwards.
While the Department reported a high overall spending, it should be noted that its expenditure was still too slow in some of its programmes. The Department spent less that 14 per cent in half of its programmes, as shown below:
- The Sport Support Services programmes was allocated R102.1 million but only R8.1 million (7.92 per cent) had been spent at the end of first quarter..
- The International Liaison and Events programme was allocated R23.3 million but R2.4 million (10.29 per cent) had been spent. As per the explanation provided by National Treasury, expenditure for this programme was higher than its projections due to the early payment of registration fees for South Africa’s participation in the SCSA Zone VI under 20 Youth Games inSwaziland.
- The Facilities Coordination programme was allocated R6.6 million but R911 000 (13.71 per cent) had been spent.
The following are the reasons provided by the Department for under-spending in certain programmes:
- Delays in identifying an appropriate service provider to procure learning material for the training and development programmes.
- Delays in placing orders for the scientific support programmes.
- Spending for capital asset under the Facilities Coordination programme had not started as business plans were not received from municipalities for the use of mobile gyms. The mobile gyms are only purchased after business plans have been submitted and approved.
3.5 Department of Communications
The Department of Communications was allocated R2.1 billion in the 2010/11 financial year. An amount of R1.6 billion (76.95 per cent) of the Department’s budget was allocated to transfers and subsidies. The ICT Enterprise Development programme consumed 98.65 per cent of the transfer budgets. These included transfers to Departmental agencies and public corporations. The Departmental budget supported the following strategic goals:
- Ensuring accessible, robust, reliable, affordable and secure ICT infrastructure: This was aimed to ensure transition from analogue to digital broadcasting by November 2011. The Department planned to finalise the strategy for the set top box manufacturing sector development during 2010/11. It further aimed to develop a scheme for ownership support of set top boxes to allow approximately 4.5 million poor television owning households to afford a set box.
- Strengthening oversight of public entities: Implementation of specific interventions aimed at improving the performance of public entities in the ICT sector.
- Facilitating the building of an inclusive information society.
The Department had spent R208.5 million (9.86 per cent) of its budget at the end of the first quarter. There was a slow spending in the transfers and subsidies category that constitutes a substantial share of the budget. The Department has only spent R147.5 million (9.07 per cent) of the R1.6 billion budget allocated to transfers and subsidies. Funds for almost all the departmental agencies and public corporations had not been transferred at the end of the first quarter. Only R147.4 million was transferred from the ICT Enterprise Development programme against the projected outflow of R454.7 million. The slow spending was attributed to:
- An amount of R71 million that was earmarked for the Digital Terrestrial Television (DTT) project which was not transferred to Sentech as no request was submitted for these funds. The request was not submitted because of the delays in finalising the spectrum frequency plan by ICASA. This impacted negatively on the digitisation of the broadcasting infrastructure.
- The non-transferral of the last tranche for the close-out of the 2010 FIFA World Cup projects to Telkom. The reasons for the non-transfer were not provided by the Department.
While the Department gave explanations in two areas where the funds could not be transferred, these explanations did not cover all the areas where funds were not disbursed. Transfers were not made to agencies, including the SABC, South African Post Office, National Electronic Media Institute of South Africa, Universal Service and Access Agency of South Africa and no explanations were provided. Other reasons provided by the Department for slow spending, included the following:
· Vacant positions in the Administration, International Affairs and Trade, ICT Policy Development and Infrastructure Development programmes.
· Delays in finalising projects in the Administration programme. The Broadband Digital Migration Awareness projects was started in 2009/10 but was deferred upon instructions by the Department’s leadership.
· Delays by international organisations to submit annual membership invoices.
· Withholding of international follow-up trips at the Director-General’s instruction in ICT International Affairs and Trade programmes.
· Delays in implementing projects due to the delayed tender processes in the ICT Policy Development programme.
· Delays in project implementation in the ICT Infrastructure programme. These included the Spectrum Audit, World Radio Communication Conference, Critical Information Infrastructure Regulation, Accreditation of Authentication service providers as well as the establishment of cyber inspectorate.
· Delays in implementing projects that were undergoing Bid Committee adjudication processes under the Presidential National Commission programme. These projects included the E-barometer, Foresight and Planning Centres of Excellence, development of hospital websites in seven provinces, digitisation content of military veterans and the national digital repository.
It should be noted that the Department was among the departments that reported high under-expenditure levels in the 2009/10 financial year. An amount of R15.5 million for ICT Infrastructure Development programme was not spent due to delays in converting PPP processes to national PPP. The Department recorded an under-spending of 6.82 per cent in 2009/10 due to a number of factors that have recurred in the first quarter of the 2010/11 financial year. These included:
· Number of vacancies.
· Non-disbursement of funds to receiving entities.
· Development of website for hospitals.
3.6 Department of Energy
The Department of Energy received an allocation of R5.53 billion in the 2010/11 financial and it had only spent R684.5 million or 12.3 per cent of the allocation. The under expenditure was due to the lower than expected expenditure on Current Payments. This category was allocated an amount of R202.1 million but the Department had only spent R42.9 million or 94 per cent of its projected expenditure in this economic classification at the end of the first quarter. Initially the Department had projected to spend R45.7 million in the first quarter on Current Payments. The Department had thus under spent on current payments by 0.6 per cent. The lower than projected expenditure was on goods and services. This was due to the outstanding payments which were not paid to the Department of Mineral Resources. The two Departments had been sharing a lease agreement for accommodation. They were therefore supposed to share the costs however the Department of Mineral Resources ended up paying for the lease agreement with the understanding that the Department of Energy would compensate it later.
This high level of under expenditure has also emanated from programme 2 (Hydrocarbons and Energy Planning). This programme had only spent R12.8 million or 0.82 per cent of its budget in the first quarter as a result of delays in the transfer of R1.5 billion which still had to be made to the Transnet Pipeline Construction of a petroleum pipeline. These delays were attributed to ongoing negotiations by the Department towards the signing of contracts as part of its service level agreement with the Transnet Pipeline. These also included conditional grants such as National Electrification Programme Grant, Electricity National Electrification Programme Grant, electricity Demand side, Working for Energy, and the conditional Grant to Eskom.
While there has been an overall under expenditure , there are certain programmes which have spend beyond their projections. The expenditure on goods and services has gone faster than projected. The Department had allocated R8.7 million for goods and services but it had spent R4.0 million or 46 per cent of the total allocation for goods and services at the end of the first quarter. This was due to the financial pressures encountered as a result of an insufficient operational budget to cover for the day to day expenses related to inspection and verification that had to be conducted under the Integrated National Electrification programme (INEP).
The Department was allocated R3.4 billion in programme 4 (Associated Services) and it had projected to spend R530.9 million but spent up to R640 million which was more than its projection for the first quarter. In view of this over expenditure, the National Treasury indicated that the Department had submitted a request to revise its monthly drawings from the National Revenue Fund (NRF) in June 2010 but the Department failed to submit required supporting documents to outline the number of electrification connections that would be delivered per month in order to justify the increase in the funding requirements of their implementing agents (Eskom and Municipalities).
3.7 Department of Environmental Affairs
The Department of Environmental Affairs was allocated a total budget of R2.6 billion in the 2010/11 financial year, the Department had spent R443 million or 17 per cent of the original budget at the end of the first quarter. The Department had project to spend up to R469 million in the first quarter but only R443 million was spent. This under expenditure was due to the low spending on capital payments which resulted from the non-payment for computer equipment that was supposed to be made in the first quarter. The under spending was also attributed to the slow spending on programme 1. The Department had projected to spend R62 million in the first quarter for programme 1 (Administration) but only R40 million was spent. This meant that the Department had under spent by R20 million in this programme. It was indicated that accommodation invoices that had note been received from the Department of Public Works were a key contributor to this under expenditure. .
The Department had projected to spend up to R25 million in programme 4 (Climate Change) in the first quarter but had spent R19 million or 75 per cent of this projected spending. The slow spending was due to the late payments to Smit Amandla for operational costs of SA Aghulas Polar Research Vessel.
A number of transfers to certain entities had not yet been made in the period under review; this meant that there was a zero expenditure on the following:
- South African Nation parks ( Parks Development and establishment and roads),
- Council for Scientific and Industrial Research (Research Contracts),
- Global Environmental Fund (Membership fee),
- Expanded Public Works Programme: Environmental projects targeting the unemployed, youth women, the disabled and small, micro and medium enterprises,
Even though most of the programmes in the department had under spent, some had over spent. Programme 3, Ocean and Coastal Management was allocated an amount of R44 million to spend in the first quarter but the Department had spent up to R53 million or 120 per cent of the allocation at the end of the first quarter. This meant that the Department had over spent its budget for the first quarter by 20 per cent. According to the National Treasury, this level of over expenditure was due to the fact that the DEA had to pay compensation of employees, performance bonuses, over time and sea going allowances for the Department of Agriculture, Fisheries and Forestry (DAFF) staff members in relation to the Fisheries function for 2010. The amount was, however, refunded by the DAFF in July 2010.
3.8 Department of Rural Development and Land Reform
The Department of Rural Development was allocated a total budget of R6.7 billion for the 2010/11 financial year. It had projected to spend at least 25 per cent of the entire budget in the first quarter but could only spend R851 million or 13 per cent of the entire budget. This meant that the Department had under spent by 12 per cent of the entire budget in the first quarter. The slow expenditure was mainly on household transfer expenditure which was meant to be utilised for settling of new claims but instead was utilised to settle outstanding restitution court cases.
The Department had also spent R552 million or 35 per cent in programme 4 (Restitution) in the first quarter. This was attributed to the large number of restitution court cases that needed to be settled by the Department in the first quarter. Payments under the Transfers and Subsidies programme amounting to R1.1 billion had not been made to departmental agencies such as Agricultural Land Holdings Account for Land Acquisition.
The Department had allocated an amount of R4.1 billion for programme 5 (Land Reform) but had spent R162 million or 4 per cent of this budget at the end of the first quarter. This slow expenditure on this programme was due to the fact that bulk of expenditure under this programme was used for operational expenditure. The rest had been shifted to the Restitution programme since the Department was focusing on resolving restitution court cases. The need to focus on the restitution programme was triggered by the fact that the Department had been issued with a notice of property attachment as a result of failure to settle restitution claims. In order for the Department to be able to deal with these settlements, funds needed to be shifted from the Land Reform programme to the Land Restitution. This shifting of funds, however, impacted negatively on other programmes resulting in the reduced spending on them. Furthermore, the high level of shifting of funds also defeated the original purpose of certain programme as the initially intended targets and objectives are not met by the end of the financial year.
3.9 Department of Trade and Industry
The Department was allocated an amount of R6.1 billion in the 2010/11 financial year. The Department had projected to spend about 25 per cent of the budget in the first quarter but only R1.01 billion or 16.6 per cent of the budget had been spent at the end of the first quarter. This meant that the department had under spent by 8.4 per cent when compared to its projections. This slow spending in the Department was attributed to the under expenditure on the following economic classifications:
At the end of the first quarter the Department had only spent R196 million or 17.3 per cent of R1.1 billion which was allocated for current payments. The under expenditure in this category was attributed to the high volume of vacant positions in the department for the period under review. A further contributor to the under expenditure was the slow spending on goods and services due to a number of outstanding invoices, lower demand for contractors, consultancy services and lower spending on advertising.
The Department had spent R820 million or 16.4 per cent on transfers and subsidies in the first quarter of 2010/11. The slow spending on transfers was mainly due to the non compliance of some receiving entities which did not submit required documents before the transfer could be made. The National Treasury indicated that the Department was going to engage with these entities to enforce compliance with service level agreements. Transfers could thereafter be made.
The Department had only spent R1.3 million or 7.2 per cent of its allocated budget by the end of the first quarter. The slow spending emanated from the non payment of computer equipment since the delivery of such had not taken place on time.
The Department indicated that most of the reported under expenditure has occurred in various incentive schemes and some of these schemes were still under the investigation or review. The Department also indicated that the under expenditure in the first quarter was inevitable since most of the claims were made in the second quarter of the financial year. The fact that certain incentive schemes were still new in the Department also meant that there was less demand for such schemes hence the under spending. The Department, through its in-year monitoring report was anticipating an under expenditure at the end of the financial year. According to the report of the National Treasury the Department had indicated that it would under–spend by R395 million or 6.4 per cent of the total budget at the end of the financial year. The anticipated under expenditure of R55.r million would emanate from the current payments programme due to vacancies and unspent funds for goods and services. An under expenditure of R334.1 million on transfers and subsidies and R5.7 million on capital payments were also anticipated. This meant that the Department would spend about R5.8 billion or 93.6 per cent at the end of the 2010/11 financial year.
3.10 Department of Water Affairs
The Department of Water Affairs was allocated a total amount of R7.9 billion in the 2010/11 financial year. In the first quarter the Department had projected to spend R1.9 billion of its budget but only spent R1.2 billion or 15.9 per cent of the allocation. This meant that the Department had under spent by R724 million or 9 per cent of the projected amount in the first quarter. This under expenditure was due to the slow spending which was experienced by the Department in all economic classifications despite having projected to spend at least 25 per cent of its budget in the first quarter.
The Department had allocated an amount of R3.6 billion for current payments but only spent R523 million or 14.4 per cent of its budget by the end of the first quarter. This reflected an under expenditure of 10.6 per cent in the total budget. The lower than expected expenditure on current payments was attributed to savings of R50 million on vacant posts. Some levels of under expenditure were due to the delays in advertising vacant posts, especially those that were classified as occupation specific dispensation (OSD) positions. The slow spending was also due to unspent funds for goods and services as a result of outstanding invoices for the use of Government motor transport by the Department. The newly introduced Supply Chain Management process has also contributed to delays by not issuing orders on time.
The Department had allocated about R3.2 billion for transfers and subsidies in the 2010/11 financial year. In the first quarter the Department had only managed to spend R742 million or 22.9 per cent of its budget. This resulted in an under expenditure of R14.2 million or 2 per cent in the first quarter. The lower than expected expenditure in this category was attributed to the non transfer of funds to Departmental Agencies and to De Hoop Dam due to outstanding invoices.
The Department had allocated an amount of R1.1 billion towards capital payments for the 2010/11 financial year. As of the first quarter the Department had only managed to spend R9.5 million or 24.1 per cent of capital budget. The under expenditure was due to delays in the signing of contracts between Department of Water Affairs and the service providers of certain capital projects in relation to Regional Bulk Infrastructure Grant and Accelerated Community Infrastructure Project (ACIP) for the provision of water services. The project was a rapid intervention focusing on three areas namely, Community Infrastructure, Water Conservation, Demand Management and Waste Water Infrastructure Refurbishment programme. The programme was targeting five provinces namely, Mpumalanga, Limpopo, Eastern Cape, KwaZulu-Natal and Northern Cape Province. Essentially, it targeted only those areas which had water related challenges such as cholera, water shortage, water loss, water wastage as well as the demand and supply of water in general. The bulk of this capital budget had been allocated to programmes such as Masibambane programme which provided water services in rural areas, the poverty alleviation programmes such as Working for Water, Working on Fire programme and the Municipal Drought Relief Grant.
4. Committee Findings:
- There is a persistently high level of vacancies across departments generally. These vacancies impact negatively on the delivery of services and compromise government priorities including fight against poverty and unemployment.
- There are persistent delays in payments for goods and services allegedly due to the non submission of invoices by service providers timeously. This culture has been noted in the following departments: Department of Energy, Environmental Affairs, Trade and Industry and Water Affairs. This is in contravention of the Public Finance Management Act (PFMA). This brings to question the capacity of the Department to manage its programmes on land restitution.
- The Committee found that the Department of Rural Development had only spent 13 per cent of its budget in the first quarter while the rest of the budget was shifted to make settlement of court cases for restitutions programme. This compromises the funds of certain programmes since funds are shifted to deal with settlements as ordered by court.
- The Committee notes with concern the persistent under-spending by certain departments including the Department of Water and Environmental Affairs whose under-spending can largely be attributed to failure to transfer funds to agencies and projects including the De Hoop Dam Project.
Having considered the above report, the Committee recommends as follows:
- The departments of Trade and Industry and Water and Environmental Affairs should fill all funded vacancies within the next three months.
- The departments of Energy, Water and Environmental Affairs as well as Trade and Industry should consolidate and strengthen their procurement processes and ensure that service providers are paid without delays.
- The Department of Water and Environmental Affairs should, within three months, present to Parliament a clear plan or measures taken to address the issue of under expenditure on transfers and subsidies. The Committee will monitor the implementation of these recommendations.
Report to be considered.
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