ATC200716: Report of the Portfolio Committee on Defence and Military Veterans on the 2020 Special Adjustments Budget For Vote 26 Military Veterans dated 15 July 2020
Defence and Military Veterans
REPORT OF THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS ON THE 2020 SPECIAL ADJUSTMENTS BUDGET FOR VOTE 26 MILITARY VETERANS DATED 15 JULY 2020
The Portfolio Committee on Defence and Military Veterans (PCODMV), having considered the Special Adjustments Budget of Vote 26 Military Veterans, on 8 July 2020, reports as follows:
1. INTRODUCTION
1.1 Aim of the Special Adjustments Budget
National Treasury indicated on 24 June 2020 that the Special Adjustments Budget’s (Supplementary Budget Review) aim as follows:
“This special adjustments budget sets out government’s initial economic and fiscal response to COVID-19. It fast-tracks normal processes to provide resources to frontline services, provincial and local government, and firms and households, with a focus on the most vulnerable South Africans. It also underlines our commitment to stabilise the public finances and enact reforms that will promote trade, investment and job creation. This document is a bridge to the October 2020 Medium Term Budget Policy Statement, which will set out Cabinet’s proposals to strengthen the public finances and to accelerate economic growth in the context of a changed global economy.
This budget will be distinct from the normal adjustment budget, usually introduced in October, due to its nature and timing.
1.2 Process
The Portfolio Committee considered the Special Adjustments Budget of Vote 26 Military Veterans on 8 July 2020 by engaging the Department of Military Veterans (DMV) after the presentation of the adjustments in their budget. The Committee made several observations that led to recommendations to the DMV to address the impact of the special adjustments budget on their annual targets and performance.
2. ANALYSIS OF THE REVISED BUDGET ON EACH PROGRAMME
2.1 Budgetary allocation for FY2020/21 and revisions by Special Adjustments Budget
The DMV received a budgetary allocation of R682.1 million for the FY2020/21, of which 58.77 % (R401m) of the budget is allocated to Programme 2, while Programme 3 is allocated the second largest portion of the budget with 20.95% (R143m)and 20.28% (R138m) to Programme 1. The Summary of adjustments by Vote, indicates that the DMV’s budget has been revised downwards by R137m to R546m. The DMV has been subjected to a suspension of funds for Covid-19 purposes to the amount of R137m. Unlike the Department of Defence where the majority of their funds have been reallocated internally, the DMV’s funds are exported from the Vote. The reductions are as follows:
- Programme 1 - a decrease of R15 m resulting in its total allocation being R123 527 000
- Programme 2 – a decrease of R90 m resulting in its total allocation being R311 404 000
- Programme 3 – a decrease of R32 m resulting in its total allocation being R111 142 000
Table 1: DMV Special Adjustments Budget 2020
|
Programme
R thousand |
Main Budget 2020/21 |
Suspension of Funds (Covid-19 purposes) |
Total net change |
Total allocation |
|
Administration |
138 138 527 |
-15 15 000 |
-15 15 000 |
123 123 527 |
|
Socioeconomic support |
401 401 404 |
-90 90 000 |
-90 90 000 |
311 311 404 |
|
Empowerment & Stakeholder Management |
143 143 142 |
-32 32 000 |
-32 32 000 |
111 111 142 |
|
Total |
683 683 073 |
137 137 000 |
137 137 000 |
546 546 073 |
Specifically, the Budget Adjustments were effected in:
- Operational Expenditure which saw a net change of R47m which is explained as involving the implementation of new provincial offices, the relocation of the Head Office and associated procurement of ICT infrastructure that have been suspended due to restrictions of economic activity.
- Transfers to Households saw a net change of R90m which involves the expected reduction in houses to be built and bursaries required for military veterans and their dependants.
The DMV indicated in their presentation to the PCODMV that they form part of the Social Cluster Departments which were used for comparative purposes due to similar mandate. It appears that historical spending of the DMV was used to derive the size of the budget adjustment and hence DMV suffered most, namely a reduction of 20.1% (See table below). A sizeable increase of 12.9% and 5.2% for Social Development and Health mainly due to these regarded as Frontline Departments. It was therefore not easy for DMV to withstand the reduction based on its historical spending.
Table 2: DMV budgetary reductions in context
2.2 Risks associated with the Special Adjustments Budget by programme
- Programme 1: Administration
|
Risk/s Identified |
Impact |
Mitigation |
|
Inability to pay for contracted costs including office rental and utilities
|
Budget reduced by R4m - DMV will be unable to secure Provincial Offices and new HQ Offices in this FY - Service delivery through improved reach to military veterans will not be possible - Usage of DMV HQ which is none compliant with Occupational Health requirements |
None identified |
|
Inability to pay for legal costs |
Budget reduction of R3m -DMV will be unable to resolve long outstanding legal matters |
Potential negotiation to delay payments as this is Inter-Governmental Debt |
|
Inability to fulfil the Workplace Skills Plan (WSP) |
Budget reduction by R2.5m - Officials may be denied an opportunity to improve their skills through progressive training and development |
None identified |
|
Inability to provide adequate funding for Statutory Bodies (SANMVA, Advisory Council and Appeals Board)
|
Due to the DMV allocation letter not Earmarking Funds for Statutory Bodies, -DMV is unable to meet funding expectations of the Statutory Bodies. -Impacts on the relationship between the DMV and the Statutory Bodies.
|
Engage Treasury to clear funding model for statutory bodies
|
- Programme 2: Socio-economic Support
|
Risk/s Identified |
Impact |
Mitigation |
|
Inability to pay all the medical claims – Healthcare Support |
Budget reduction of R10m but the target stands
|
Obtain COD approval to write off accruals Request a relief on payments for claims during the Pandemic period |
|
Inability fund and support continuous learning – Education Support |
Budget reduction of R60m -Inability to lift the moratorium on new intake of beneficiaries -Inability to achieve the target |
Encourage student to apply through NSFAS for access to Free Education Engage Provincial Departments of Education to pass financial relief for MV |
|
Inability to meet the targeted number of houses – Housing Support |
Budget reduction of R10m and the target revised down to 500
|
- None identified in terms of the number of units to be delivered. Request a relief on current payments by engaging with National and Provincial DHS. Clear the backlog on Accruals
|
- Programme 3: Empowerment and Stakeholder Management
|
Risk/s Identified |
Impact |
Mitigation |
|
Inability to implement the targeted Heritage Sites |
Target of 3 x sites frozen (R5m), budget reprioritised towards Burial Support -Unplanned delays in memorialising fallen military veterans |
In anticipation for the rise in deaths, funds have been moved towards Burial Support |
|
In ability to host and fund the three (3) elective conferences (MK, SANMVA and SACC) |
Budget reduced by R21m Existence will continue to be legally challenged due to lapsed term of office |
None identified |
|
Reduced budget for Covid 19 |
Budget reduction of R2m leading to the inability to procure sufficient PPE and materials for Covid 19 Pandemic end point cannot be predicted which may have further budget implications |
None identified |
The DMV requested the Portfolio Committee to note the 2020 Special Adjustment Budget for further direction and guidance. It also asked the Committee to note the risk associated with the potential reduction in the baseline, considering that DMV has only assumed the status of an independent Vote as from the 01 April 2020.
2.3 How will the revised budget impact on the recommendations made during the Budget Votes?
The following related recommendations were made in the 2020 Budget Vote Report:
- The Committee commended the Department on the internal measures taken to combat the spread of the pandemic and encouraged it to further enhance and follow through on these efforts.
- While welcoming these measures to assist military veterans and their dependents, the Committee recommended that the department develop and finalise the reprioritisation as soon as possible in order to support the military veterans’ community and give feedback to the Committee on this aspect.
As can be noted in the table above, one identified risk is the reduced budget for Covid-19 by R2 m. Of concern is that no mitigation strategy has been identified.
- The Committee welcomed the response regarding access to military hospitals and sickbays and directed that the Department should continuously ensure that military veterans have such access and that challenges in this regard should be dealt with expeditiously.
The associated risk is listed above as the “Inability to pay all the medical claims – Healthcare Support” and this is a major concern for the Committee, as access to healthcare should currently be prioritised for military veterans.
- The Department indicated that they co-managed the delivery of houses through the National Department of Human Settlement and that this does not require Service Level Agreements with provinces. Given the under-performance of the Department in delivering houses, the Committee recommended that the Department update it on a quarterly basis on the progress to meet this year’s housing target (710) and to inform it timeously of challenges in this regard.
The risk identified is stated as “Inability to meet the targeted number of houses – Housing Support” and given that housing for military veterans is an issue that the Committee has continuously prioritised, it is anticipated that this is a temporary measure.
iv. The Committee recommended that the Department should give it feedback on the revised education policy and whether it has encountered any challenges in this regard, as well as the budgetaryallocations for these institutions, at the next quarterly meeting.
The risk identified relates to the “Inability fund and support continuous learning – Education Support” and given that the education benefit is one of the primary benefits, it is hoped that this will only be a temporary reduction given the importance of education.
v. The Department indicated that the Appeals Board has been in place for five years and that it is currently chaired by Mr Mavuso Msimang. The Committee recommended that a meeting with the Appeal Board be scheduled as soon as possible to address its concerns. The Committee subsequently met with the Appeal Board and one of the major challenges facing this body related to funding.
The Committee welcomed the initiative to engage National Treasury and will monitor developments in this regard.
3. COMMITTEE OBSERVATIONS
During deliberations with the DMV, Members of the PCODMV made several observations related to Special Adjustments Budget and the following were noted:
- It was noted that the downwards budgetary adjustment will impact on the DMV’s ability to reach its annual targets as set out in its Annual Performance Plan, especially as it relates to the Programme 2, the main service delivery programme, as well as the other two programmes.
- The Committee was concerned about the reduction in educational support to military veterans and their dependents and wanted to know whether the consultations with National Student Financial Aid Scheme (NSFAS) also included consultations with the Department of Higher Education and Training (DHET).
- Questions were raised around the reduction of R21m for elective conferences and what the initial amount for these conferences were. It was indicated that the amount was based on historical spending as well as cost per person and that given the current financial restrictions, they will encourage the associations to scale down on these costs through for instance virtual meetings and reducing the number of attendees. Clarity questions were asked around the South African Cape Corps Military Veterans Association (SACCMVA) and the response was that they wanted to be removed from the Council for Military Veterans’ Organisation (CMVO), and that the South African National Military Veterans Association (SANMVA) is currently dealing with their application as a full member of SANMVA.
- The illegal occupation of houses designated for military veterans was raised as a serious concern and the Committee wanted to know how the Department is dealing with this issue. It was indicated that a military veteran is currently being allocated a site before the construction starts and she/he is then aware on progress with the house and this will assist to avoid illegal occupation. These efforts are in collaboration with the national and provincial departments of human settlement.
- The Committee enquired about the allocation for the Appeal Boardbased on its interaction with the agency and its concerns in this regard.
- Concern was expressed regarding the impact on the establishment and funding of provincial offices given the central role they play to allow military veterans access to the Department. Three provincial offices still need to be established and the delays in their establishment will be negatively affected while the six other provincial offices will be impacted through challenges with connectivity, furniture, computers, etc.
- The Committee was also concerned about the accessibility of military veterans to health facilities, especially the military hospitals and sickbays, against the background of the pandemic. It was indicated that the DMV is working well with the SAMHS to avail military hospitals and sickbays that military veterans can attend, and where this is not possible, they utilise private or public sector health facilities.
4. COMMITTEE RECOMMENDATIONS
- The Committee noted the revised budget of the DMV and the implications thereof on the annual targets and budget and encouraged it to monitor the in-year spending to avoid underspending at the end of the financial year. Fiscal discipline in the Department will be of the utmost importance going forward. The DMV is similarly strongly encouraged to implement a zero-based budgeting approach within the Medium-term Expenditure Framework.
- The DMV stated that they have a Service Level Agreement with NSFAS as well as a specific employee who liaises with NSFAS in Cape Town. The Committee recommended that the DMV should endeavour to minimise the impact on military veterans and dependants given the importance of education, especially the potential to render recipients less reliant on the Department.
- The Committee understood the importance of regular elective conferences for the military veterans’ associations and encouraged the Department to find ways to address the various challenges to inter alia avoid legal challenges due to the expiry of terms of the incumbents.The Committee recommended that the Department should indicate the baseline amount from which the R21 million reduction was effected.
- The Department was encouraged to further enhance its efforts in collaboration with national and provincial human settlement departments to stop illegal occupations of houses, and that it should keep the Committee informed of developments in this regard as some Members have received related enquiries in their constituencies. The Committee further recommended that the DMV should clearly indicate what actions were taken to reclaim houses that were illegally occupied.
- The Committee recommended that the budgetary allocation to the Appeal Board should be determined upfront and ring-fenced, to allow the Appeal Board to monitor its expenditure in terms of the allocation.
- The Committee stressed that the provincial offices should be prioritised because of the difficulties military veterans experience to access the Department and recommended that the Department should minimise the impact on these offices.
- The Committee was encouraged that the Department is assisting military veterans to access health facilities all over the country, be it SAMHS facilities, public or private facilities, and encouraged it to ensure that these processes are as seamless as possible for military veterans.
- The Committee further expressed its continued concern regarding the inability of the Department to effectively and efficiently deliver benefits and services to military veterans and their dependants. This inability has led to recurring underspending as well as the motivation for National Treasury to subject the Department to hefty budgetary cuts in its annual allocation. The Committee therefore recommended that the Department should institute the recommendations it has made at the 2020 Budget Hearings to stabilise the organisation.
5. CONCLUSION
The Committee thanked the Department for its efforts to support military veterans and their dependents and wished the Department well with the execution of its mandate. It however also expressed concern regarding the impact of the Special Adjustments Budget on the ability of the Department to deliver benefits and services and encouraged it to continuously monitor its in-year spending.
Report to be considered
Documents
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