ATC121106: Report of the Standing Committee on Appropriations on the Fourth Quarter Expenditure Patterns for the 2011/12 Financial Year, dated 31 October 2012

Standing Committee on Appropriations

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE FOURTH QUARTER EXPENDITURE PATTERNS FOR THE 2011/12 FINANCIAL YEAR, DATED 31 OCTOBER 2012

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE FOURTH QUARTER EXPENDITURE PATTERNS FOR THE 2011/12 FINANCIAL YEAR, DATED 31 OCTOBER 2012

The Standing Committee on Appropriations, having heard briefings and considered the fourth quarter expenditures of national departments for the 2011/12 financial year, reports as follows:

1. Introduction

The Standing Committee on Appropriations (the Committee) was established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act ,No.9 of 2009. The Act requires the Committee to consider and report on spending issues, and on actual expenditure published by the National Treasury. The Committee has adopted a tradition of inviting both National Treasury and the affected departments to account on government spending. This consultative approach gives the Committee an opportunity to interrogate departments on their spending with a view to identify and strengthen gaps in public spending. The Committee is established as a strategic centre to flag issues which might impact negatively on service delivery through scrutiny of government spending. As such, the Committee has taken a decision to move swiftly towards balancing its expenditure monitoring with actual performance.

This report provides a detailed overview of government spending for the period 1April 2011 to 31 March 2012. It intends to highlight spending patterns of national departments and to draw the attention of Parliament and the Executive to findings and recommendations made for improved public spending.

2. The Review of the Total Expenditure

The national departments were allocated an adjusted budget of R505.1 billion for the 2011/12 financial year which excluded the direct charge of R388 billion. An amount of R149.7 billion (29.4per cent) was allocated to current payments (R94.2 billion for compensation of employees and R54.3 billion for goods and services), R343.3 billion (67.9 per cent) to transfers and subsidies, and R12.1 billion (2.4 per cent) to capital expenditure.

2.1 The comparison of overall budgets allocations and expenditure patterns of the three year period

The overall expenditure at the end of the fourth quarter of the 2011/12 financial year was R499.5 billion of the adjusted budget. Total spending by departments has shown a decline from 98.56 per cent in 2009/10 to 97.70 per cent in 2010/11 and a slight increase to 97.77 per cent in 2011/12. Therefore, expenditure by departments has not been able to keep up with the budget increases for the past three years. To improve expenditure, a closer scrutiny on government spending is required and stricter measures need to be put in place to strengthen budget implementation and monitoring. There were indications of a negative (inverse) relationship between budget allocations and expenditure performance. This had the potential to negatively affect service delivery and the delivery of overall government priorities such as education, health, rural development, infrastructure development and job creation. The President of the Republic of South Africa , His Excellency Mr J G Zuma, in his State of the Nation Address (SONA) on 9 February 2011, declared the year 2011/12 as the year of job creation but the decline in the expenditure trends suggests that some of these commitments will not be met. The section below outlines the expenditure by departments at the end of the fourth quarter of the 2011/12 financial year.

National departments reported total under expenditure of R11.4 billion as at the end of the 2011/12 financial year. During this period, the overall under expenditure has increased compared to the past two financial years, i.e. R6.3 billion in 2009/10,
R9.6 billion in 2010/11 and R11.4 billion by 2011/12.

3. Spending by departments at the end of the 2011/12 financial year

National government comprises of 38 budget votes in total, of which 10 departments were identified to have reported under or over expenditure. These departments included: the Departments of Public Works; Basic Education; Communications; Water Affairs; Social Development; Women; Children and People with Disabilities; Cooperative Governance; South African Police Service; National Treasury; and Human Settlements. Table 1 below provides the actual expenditure of the 10 selected departments for the period 1April 2011 to 31 March 2012.

Table 1: Actual expenditure of the 11 selected departments as at 31 March 2012

Department Name

Adjusted Budget

Actual Expenditure 1 Apr 2011 to 31 March 2012

Expenditure

%

1

Department of Public Works

R7.8 billion

R7 billion

90.1

2

Department of Basic Education

R14 billion

R12.8 billion

91.5

3

Department of Communications

R2 billion

R1.7 billion

89.4

4

Department of Water Affairs

R9 billion

R8.2 billion

91.3

5

Department of Social Development

R104.2 billion

R103.1 billion

98.9

6

Department of Women, Children and People with Disabilities

R143.1 million

R165.8 million

115.8

7

Department of Cooperative Governance and Traditional Affairs

R48.2 billion

R46.2 billion

95.8

8

South African Police Service

R58.5 billion

R57.9 billion

98.9

9

National Treasury

R23.8 billion

R21.3 billion

89.6

10

Department of Human Settlements

R22.8 billion

R22.5 billion

99

In light of the above, the Committee invited the following nine Departments for hearings on the Fourth Quarter Expenditure for the 2011/12 financial year:

· National Treasury;

· Department of Water Affairs;

· Department of Women, Children and People with Disabilities;

· Department of Human Settlements;

· South African Police Service;

· Department of Basic Education;

· Department of Social Development;

· Department of Public Works; and

· Department of Communications

3.1 National Treasury (Vote 10)

National Treasury (the Department) was allocated an amount of R23.8 billion for the 2011/12 financial year after adjustment. At the end of the fourth quarter the Department had spent R21.3 billion or 89.6 per cent which resulted in an under expenditure of
R2.5 billion.

3.1.1 Expenditure per programme

The Department’s budget comprises of ten programmes, i.e. Administration; Economic Policy, Tax, Financial Regulation and Research; Public Finance and Budget Management; Asset and Liability Management; Financial System and Accounting; International Financial Regulations; Civil and Military Pensions, Contributions to funds and other benefits; Technical Support and Development Finance; Revenue Administration; and Financial Intelligence and State Security. The Programmes that contributed to the Department’s under expenditure are explained in detail hereunder.

Technical Support and Development Finance: Programme 8 was allocated an amount of R4.6 billion for the 2011/12 financial year. At the end of the fourth quarter the Department had spent R2.8 billion or 61.6 per cent resulting in an under expenditure of R2 billion. The main reasons for this under expenditure were as follows:

· Delays in the implementation of the Employment Creation Facilitation Fund (Jobs Fund) as a result of delays in the signing of the Memorandum of Understanding ( MoU ) with the Development Bank of Southern Africa (DBSA); and

· The slow uptake of new projects by municipalities on the Neighbourhood Development Partnership Grant (NDPG) and unspent surpluses for the previous financial year.

The other reported reasons for the under expenditure in the overall allocations were as follows:

· 122 vacant positions (for specialised skills) mainly due to the Department’s inability to attract suitable skills;

· Unspent/transferred funds to the Technical Assistance Trading Entity for the facilitation of public funds; and

· Late receipt of invoices for lease and municipal service claims.

The Committee expressed concern at the ability of DBSA to effectively implement the roll-out of the Jobs Fund given that it was involved in other significantly large projects such as the Accelerated Schools Infrastructure Development Initiative (ASIDI).Furthermore, the point was made that the Jobs Fund was not properly planned by the Department which resulted in the high degree of under-expenditure of
R1.8 billion out of a budgetary allocation of R2 billion.

The Committee expressed concern that the overall expenditure of the Department has regressed in the past three years even though it was supposed to set an example to other departments given the fact that it was the custodian of the financial regulation frameworks in the country. The Committee made reference to the high vacancy rate within the Department which stood at 122 (for specialised skills) during the period under review and clarity was sought on how it would be addressed since it impacted negatively on service delivery.

The Committee noted the high vacancy rate of the Department and expressed concern about its ability to effectively monitor transfer funds to departments, provinces and municipalities. National Treasury needs to develop mechanisms to address the high vacancy rate within the Department.

3.2 Department of Water Affairs

For the 2011/12 financial year, the Department of Water Affairs (the Department) was allocated R9 billion after adjustments. At the end of the fourth quarter, the Department had spent R8.2 billion or 91.3 per cent resulting in an under expenditure of
R784 million. The recorded under expenditure occurred in a number of programmes which are discussed in the following section.

3.2.1 Expenditure per programme

The Department’s budget comprised of six programmes, i.e. Administration, Water Sector Management, Water Infrastructure Management, Regional Implementation and Support, Water Sector Regulation, and International Water Cooperation. The programmes which have not performed well are discussed in more detail hereunder.

Administration: Programme 1 was allocated R878.3million for the 2011/12 financial year. At the end of the fourth quarter R781.4 million or 89.9 per cent was spent resulting in an under expenditure of R96.8 million. The reasons for the under expenditure were as follows:

· Delays in filling of vacant posts and related items such as computers, furniture and other operational costs for new recruits;

· Delays in the procurement of video conference equipment; and

· Fewer claims received from Members of the Business Process Review Committee.

Water Sector Management: Programme 2 was allocated R852.3 million for the 2011/12 financial year. At the end of the fourth quarter only R511.8 million or
60.1 per cent was spent which resulted in an under expenditure of R340.5 million. The reasons for the under expenditure were as follows:

· Delays in the awarding of tenders for the construction of a water treatment plant for the Acid Mine Drainage project resulting in R250 million that could not be spent; and

· Delays in the transfer of R18 million to the Rand Water Board;

· Unfilled vacant posts including Occupation Specific Dispensation (OSD) posts.

Regional Implementation and Support: Programme 4 was allocated an amount of R4.7 billion and spent R4.3 billion or91.6 per cent at the end of the fourth quarter of the 2011/12 financial year. This resulted in an under expenditure of R398.6 million or 8.4 per cent. The reported under expenditure was due to the following reasons:

· Delays in the implementation of water service projects such as Nandoni pipeline, Hluhluwe and Inyaka because approval took longer than had been anticipated;

· Payment of R20 million that could not be made before the cut-off date for the Moutse Bulk Water Supply;

· Capacity constraints due to the delays in implementation of Occupation Specific Dispensation (OSD) posts; and

· Non-delivery of material for the regional bulk infrastructure projects.

Water Sector Regulation: Programme 5 was allocated an amount of R112.3 million of which R91.1 million or 81.1 per cent was spent at the end of the fourth quarter. This has resulted in an under expenditure of R21.2 million or 18.8 per cent. The under expenditure was mainly attributed to the non-filling of vacant posts, including OSD posts.

The Department reported the following overall challenges which were impacting on its expenditure:

· Data discrepancies delayed the finalisation of the comprehensive reserves;

· The high water levels in the Vaal River delayed the completion of the Klipplaatdrift monitoring station; and

· The implementation of OSD was impacting negatively on the availability of the technical skills required to ensure service delivery within the programme as critical posts could not be filled.

The department had reported that challenges experienced with the mining houses have worsened. The department had requested the intervention of National Treasury in mitigating such challenges and work is under way in this regard. The Committee expressed concern at the aforementioned since it was a recurring issue and it was the Committee’s view that the matter was long outstanding and needed to be addressed expeditiously. The Department reported that there was a possibility of funds being shifted within the programmes during the 2012/13 financial year and that a R200 million roll-over has been requested in respect of the Nandoni Dam project.

The Committee made reference to the legal processes that were underway regarding the Nandoni pipeline project and serious concern was expressed at the delays in that regard. It was reported that the pipelines relating to the legal processes were lying above ground level in the Giyani region and the quality of the pipeline did not meet the required standard.

With reference to the Acid Mine Drainage project, the Committee expressed concern at the under expenditure of the Department thereon since the Minister of Water Affairs indicated that more funding was needed to address the matter throughout South Africa.

3.3 Department of Women, Children and People with Disabilities (Vote 8)

The Department of Women, Children and People with Disabilities (the Department) was allocated an adjusted amount of R143.1 million for the 2011/12 financial year. At the end of the fourth quarter the department had spent R165.8 million or 115.8per cent of the allocation. This resulted in an over expenditure of R22.7 million or 15.9 per cent. The recorded over expenditure occurred in a number of programmes which are discussed in the following section.

3.3.1 Expenditure per programme

The Department’s budget is comprised of four programmes, i.e. Administration; Women Empowerment and Gender Equality, Children’s Rights and Responsibilities, and Rights for People with Disabilities. The programmes that have not performed well are discussed in more detail below.

Administration: Programme 1 was allocated an amount of R42.8 million for the 2011/12 financial year. At the end of the fourth quarter the Department had spent R67.1 million or 156.7 per cent of the budget. An amount of R35.6 million was allocated towards Compensation of Employees out of which R59.7 million or 167.5per cent has been spent. Under Goods and Services an amount of R46 million had been allocated and R55.4 million or 120.4 per cent had been spent during the period under review. The reasons for the over expenditure are as follows:

· The department employed staff outside the approved post establishment.

· A Research Unit was established but was not part of the approved organogram, hence it was unfunded;

· Overspending on Goods and Services was mainly due to travel and subsistence costs.

Women Empowerment and Gender Equality: Programme 2 was allocated an amount of R78.1 million out of which R77.1 million or 98.7 per cent was spent. The under expenditure which amounted to R975 000 was due to unprocessed invoices as a result of delayed procurement processes.

Children’s Rights and Responsibilities: Programme 3 was allocated an amount ofR10.1 million for the 2011/12 financial year. At the end of the fourth quarter, the department had spent R12million or 117.9 per cent which resulted in an over expenditure of R1.8 million. This over expenditure was mainly due to the appointment of personnel which was not funded or at higher than budgeted notches.

Rights of the People with Disabilities: Programme 4, even though the Department has reported over expenditure overall, it should be noted that this programme has reported under expenditure at the end of the fourth quarter. This programme was allocated R11.9 million for 2011/12. At the end of the fourth quarter the department had spent R9.5 million or 79.7 per cent. This under expenditure was mainly due to vacant posts in this programme.

The Committee raised concerns that during the previous engagement with the Department, the Minister of Women, Children and People with Disabilities made reference to investigations that were underway regarding nepotism in the Department and clarity was sought on progress in that regard.

The Department reported that mechanisms have been put in place to monitor its expenditure more effectively and that the issue of overspending would be addressed. This was of concern to the Committee due to the fact that the Department had reported the same during the hearings on the third quarter expenditure report for the 2011/12 financial year. Concern was expressed at the overspending on compensation of employees and the Committee expressed dissatisfaction at the excess spending on areas that were not budgeted for in that regard.

Emphasis was placed on the high expenditure on travelling, catering and advertisements which were recurring issues that needed to be addressed. The Committee noted with concern that during its previous engagements with the Department it was requested that reports be provided on its organogram, and travelling and catering expenditure, to date the said information has not been provided.

3.4 Department of Human Settlements (Vote 31)

The Department of Human Settlements (the Department) was allocated an adjusted amount of R22.8 billion for the 2011/12 financial year out of which R22.5 billion had been spent. This amounted to total under expenditure of R228.9 million or 1 per cent of the available funds during the period under review.

3.4.1 Expenditure per programme

The Department’s budget is comprised of five programmes: Administration; Housing Policy, Research and Monitoring; Housing Planning and Delivery Support; Housing Development Finance; and Strategic Relations and Governance. The programmes that contributed to the Department’s under expenditure are explained in detail hereunder.

Administration: Programme 1 has spent an amount of R166.8 million against an available budget of R233.1 million resulting in an under expenditure of R66.4 million. The under expenditure was mainly due to the change in the mandate of the Special Investigation Unit (SIU) and the non-utilisation of funds for the lease of additional office accommodation.

Housing Development Finance: Programme 4 was allocated an amount of
R22.197 billion out of which R22.105 billion or 99.5 per cent was spent. This resulted in an under expenditure of R92.2 million which was mainly due to the following
:

· Non-filling of vacancies as a result of the undertaking of a Departmental Turn-Around Strategy; and

· Unspent funds on the Rural Household Infrastructure Grant (RHIG).

The Committee sought clarity on whether the Department had systems in place to monitor the spending and performance on conditional grants that were transferred to provinces and municipalities. The Committee made specific reference to the expenditure of provinces on the Housing Disaster Relief Grant (HDRG). The Committee sought clarity on the inhibiting factors affecting the implementation of the HDRG and how these could be addressed.

The Committee expressed concern at the Department’s annual delivery targets of 222 977 serviced sites and top structures for the 2011/12 financial year. The concern was that it seems as if the Department was setting unrealistic targets. The department delivered 172 753 serviced sites and top structures out of a target of 222 977 resulting in the non-delivery of 50 224 serviced sites and top structures. Clarity was sought on the implications of the said targets which could not be met and how it would be addressed.

The Committee sought clarity on the expenditure of 20 per cent (R2.9 billion) of the Human Settlements Development Grant (R14.9 billion) which was earmarked for national priority projects. The Department undertook to furnish the Committee with a comprehensive report on how and in which provinces or municipalities the said allocation had been spent.

3.5 South African Police Service (Vote 25)

The South African Police Service (SAPS) received an adjusted budget allocation of R58.5 billion for the 2011/12 financial year of which R57.9 million or 98.9 per cent had been spent. The SAPS reported an under expenditure of R617 million or 1.5 per cent. It is to be noted that the SAPS reported under expenditure for the first time in 2011/12 after achieving 100 per cent expenditure in the previous four financial years. The recorded under-expenditure occurred in a number of budget items which are discussed in the following section.

3.5.1 Expenditure per Economic Classification

The budget of the SAPS is comprised of five programmes, i.e. Administration, Visible Policing, Detective Services, Crime Intelligence, and Protection and Security Services. The programmes that contributed to the Department’s under expenditure are explained in detail hereunder.

In terms of economic classification, Goods and Services was allocated an amount of R12.7 billion of which R11.9 billion or 93.8 per cent had been spent as at the end of the financial year. The under expenditure on Goods and Services was as a result of the following:

· Under spending in the Technology Management Service was due to the slow implementation of modernisation projects;

· Delays in the completion of new Police Stations;

· Delays in the procurement process of machinery and equipment; and

· Slow spending on Criminal Justice Sector Revamp projects.

Payments for Capital Asset (CAPEX) was allocated an amount of R3.0 billion against which R2.9 billion or 99 per cent had been spent. The reported under expenditure was due to the slow spending on Buildings and Other Fixed Structures because of the non performing contractors and changes in the design and scope of the project by the Department of Public Works. The Department had spent only 71.5 per cent of the R669.9 million funding allocation earmarked for the construction of Police Stations. This was due to delays in the clearance of sites and delays in the awarding of contracts to the contractors to start building police stations.

It should be noted that even though the SAPS has reported overall under expenditure for 2011/12, over expenditure was noted in certain programmes and sub programmes which were as follows:

· R26.8 million or 110.5 per cent spent on Safety and Security Sector Education and Training Authority (SSSETA);

· R133.5 million or 172.4 per cent spent on claims against the State or Civil claims instituted against the Department for possible compensation;

· R651.4 million or 4343.3 per cent spent on the Modernisation of the Integrated Justice System Programme in Programme 1 (IJSP);

· R265.6 million or 316.1 per cent spent on the Modernisation of Integrated Justice System Programme in Programme 3 (IJSP); and

· R12.9 million or 193.8 per cent spent for post-retirement benefits.

In respect of Payments for Capital Assets (CAPEX), the Committee sought clarity on the reported SAPS officials who were benefiting from contracts for the construction of police stations. It was stated that the matter needed to be investigated and that a comprehensive report, inclusive of the costs involved, needed to be submitted to the Committee in that regard. The SAPS responded that there was a status report on the said allegations that could be distributed to members of the Committee.

The Committee expressed concern at the over expenditure of civil claims against the State and it was stated that it needed to be managed more effectively. In addition, concern was expressed at the significant over expenditure in respect of legal services and the fact that most of that funding was spent on legal service providers. A report indicating the costs for legal services that was outsourced over the past five years was requested from the SAPS. The Department was also requested to provide the Committee with a report on the suspended police officers with full pay.

The Committee expressed concern at the under expenditure in respect of the Criminal Justice System (CJS) under which 81 per cent or R1.49 billion had been spent from a total budgetary allocation of R1.85 billion.

3.6 Department of Basic Education (Vote 15)

The Department of Basic Education (the Department) was allocated a total adjusted budget of R14 billion for the 2011/12 financial year. At the end of the fourth quarter, the Department had spent R12.8 billion or 91.5 per cent resulting in an under expenditure of R1.2 billion or 8.5 per cent. The slow expenditure was recorded in a number of programmes which are discussed hereunder.

3.6.1 Expenditure per programme

The Department’s budget is comprised of the following five programmes: Administration; Curriculum Policy, Support and Monitoring; Teachers, Education Human Resources and Institutional Development; Planning, Information and Assessment; and Education Enrichment Services. The programmes under which significant under expenditure was recorded will be discussed in more detail hereunder.

Curriculum Policy, Support and Monitoring: Programme 2 received a budgetary allocation of R1.8 billion for the 2011/12 financial year. The Department had spent
R1.7 billion or 94.6 per cent of the allocated funding resulting in an under expenditure of 5.4 per cent at the end of the fourth quarter. The recorded under expenditure was as a result of the following:

· Delays with regard to the procurement of the Kha Ri Gude Mass Literacy Campaign learner support material was due to the change of procurement model. The Learner Teacher Support Material (LTSM) was previously procured through an Implementing Agent. After concerns were raised by the
Auditor-General which were confirmed by National Treasury on the procurement process, the Department took over the procurement process;

· Delays in the submission of invoices in respect of the Curriculum Review project resulted in the inability to finalise the processing of payments before the end of the financial year;

· The final invoices with regard to the Workbook project were received at the end of the financial year. External Auditors had to verify the invoices before they could be processed. This could not be finalised on time; and

· The withholding of the final transfer for the Dinaledi Schools conditional grant to Limpopo due to slow expenditure.

Planning, Information and Assessment: Programme 4 was allocated an amount of R6.5 billion for the 2011/12 financial year from which R5.5 billion or 84.2 per cent has been spent. This resulted in an under expenditure of R1 billion or 15.8 per cent. The reported reasons for the under expenditure are as follows:

· The final transfer for the Education Infrastructure Grant to the Eastern Cape Province in respect of the construction, rehabilitation, renovation, upgrading and maintenance of school infrastructure was withheld due to slow spending. The province experienced challenges in relation to the lack of capacity to deliver the programme.

· The School Infrastructure Backlog Indirect Grant for the eradication of inappropriate schools and provision of basic services spending was lower than projected due to capacity challenges among implementing agents and contractors. This had an impact on the implementation of approved projects.

· There was under expenditure on the Systemic Evaluation project due to the shifting of the Annual National Assessment (ANA) from February 2012 to September 2012.

· The National Education Evaluation and Development Unit (NEEDU) evaluators were appointed during the latter part of the financial year. The delays in the appointment resulted in under-expenditure on compensation of employees for the project.

The Committee raised concerns regarding one of the reasons for under spending provided by the department which was the late submission of invoices by the service providers. Clarity was sought on at what stage the Department realised that there were challenges regarding the payment of the invoices and whether the officials responsible were held accountable. The Committee noted with concern that the reported under expenditure in some areas of the Department was due to poor or lack of planning such as the late or non-delivery of textbooks to schools.

The Committee made reference to the Transfers of Subsidies economic classification item and clarity was sought on whether there were mechanisms in place to effectively monitor the effective and efficient expenditure of grants by provinces. Concern was expressed at the reported under expenditure of R1.2 billion by the Department and clarity was sought on how this impacted on the scholars who were supposed to be assisted.

The Committee made reference to the poor performance of the Dinaledi Schools conditional grant and concerns were expressed in that regard, especially as it related to the Limpopo Province .

3.7 Department of Social Development (Vote 19)

For the 2011/12 financial year, the Department of Social Development (the Department) was allocated an adjusted amount of R104.2 billion and had spent
R103.1 billion or 98.9 per cent. The Department therefore reported an under expenditure of R1.1 billion or 1.1 per cent. However, it is important to indicate that this Department normally receives the biggest portion of the country’s budget and therefore slight deviations in expenditure versus the budget are significant. The biggest portion of the Department’s budget (R103.7 billion or 98 per cent) comprised of transfers and subsidies to the South African Social Security Agency (SASSA).

3.7.1 Expenditure per Economic Classification

The Department’s budget is comprised of five programmes: Administration; Social Assistance; Social Security Policy and Administration; Welfare Service Policy Development and Implementation Support; and Social Policy and Integrated Service Delivery. The programmes which showed significant under expenditure are discussed hereunder.

In respect of Compensation of Employees, the Department was allocated an amount of R276.6 million and has spent R273.5 million or 98.8 per cent. The reasons for this are as follows:

· Non-filling of vacant posts;

· The appointments of contractors as opposed to permanent employees which yielded savings on compensation of employees.

With regard to the allocation for Goods and Services of R257.7 million, an amount of R249.8 million or 96.9 per cent had been spent. This was due to the following:

· Invoices not submitted on time from service providers after upgrading the boardroom of the Department; and

· Invoices from the State and Information Technology Authority (SITA) and other service providers were also not received on time.

With reference to Transfers and Subsidies an amount of R103.7 billion was allocated during the period under review from which R102.5 billion or 98.9 per cent had been spent. It is important to note that the Transfers and Subsidies budget of the Department constitutes 98 per cent of the overall budget of the Department. The reported under expenditure was due to the following issues:

· Transfer payments for Disability Grants were not 100 per cent transferred;

· Transfer payments for Foster Care Grants were not 100 per cent transferred;

· Transfers payments for Child Support Grants were not 100 per cent transferred;

· Transfer payments for Social Relief Assistance were not 100 per cent transferred; and

· Transfer payments to Non Governmental Organisation (Love life) could not take place due to non compliance with the minimum standard.

The Payments for Capital Assets (CAPEX) economic classification item was allocated an amount of R18.5 million of which R17.5 million or 94.5 per cent had been spent. This CAPEX item is where a significant level of under expenditure (5.5 per cent) had been reported. This under expenditure was due to the non completion of projects including the procurement of computer equipment and other computer software.

The Committee made reference to the reported saving that was made by the Department due to investigations and interventions on fraud that were yielding the desired results. Clarity was sought on whether there were mechanisms in place to clean up the system and make sure that all the beneficiaries of the social grants did in fact qualify for the grants.

The Committee expressed concern at the usage of contractors by the Department and clarity was sought on whether the shortage of social workers in the department has been addressed. Of concern to the Committee was the amount of funding that was spent on court cases and service providers.

3.8 Department of Public Works (Vote 7)

The Department of Public Works (the Department) received an adjusted budget allocation of R7.8 billion for the 2011/12 financial year. At the end of the fourth quarter, the Department recorded a total expenditure of R7.0 billion or 90.1 per cent resulting in an under expenditure of R768 million or 9.8 per cent.

3.8.1 Expenditure per programme

The Department’s budget is comprised of five programmes: Administration; Immovable Asset Management; Expanded Public Works Programme; Property and Construction Industry Policy Regulations; and Auxiliary and Associated Services. This slow spending occurred as a result of the lack of spending on a number of programmes which are discussed in the following section.

Administration: As at the end of the fourth quarter, the total expenditure for Programme 1 amounted to R837.1 million against the adjusted appropriated budget of R777.5 million. This amounted to an over expenditure of R59.6 million or 7.7 per cent. However, after taking virements into account in the programme amounting to R41.6 million, the total over expenditure recorded stood at 2.2 per cent. The Committee expressed concern regarding the overspending on Compensation of Employees and sought clarity on the reasons for this spending which was not budgeted for. The Department indicated that the reported over expenditure in this programme was mainly due to funding provision made for improved conditions of service for departmental staff which was not adequately budgeted for as well as appointments that were made for Property Management Trading Entity and the Compliance Assets and Quotation Unit in response to Auditor-General’s findings on shortage of skills in the Department.

Expanded Public Works Programme (EPWP): Programme 3 was allocated an adjusted budget of R1.5 billion of which R1.1 billion or 73.8 per cent had been spent which resulted in recorded under expenditure of 26.2 per cent. However, after taking virements amounting to R54.7 million from the programme, the total under expenditure was reduced to 23.5 per cent. The main reason for the under expenditure was the lower than anticipated payments for infrastructure incentives to provinces and municipalities. The reasons for the low draw down on the incentive grant were reported as follows:

• Poor or under reporting on Expanded Public Work Programme (EPWP) work opportunities created on projects. The amount of incentive paid to Public bodies is dependent on reporting by Public bodies;

• The low labour-intensity of projects being implemented by Public bodies; and

• Poor technical capacity at Public bodies to design and implement projects intended for labour-intensive jobs.

The reported measures to improve the above patterns of poor performance and low rates of expenditure were as follows:

• EPWP unit officials and Data Capturers were helping Public bodies collect EPWP information for reporting.

• Municipal officials were being trained in labour-intensive methods of construction. Over 1,000 officials had been trained in this regard in the 11/12 financial year.

• Public body officials were being trained on reporting, so that they could have improved capacity to report.

• EPWP incentive grant has been revised from a schedule 8 grant to a schedule 5 and 6 grant for Provincial Departments and Municipalities respectively.
40 per cent of the incentive was being transferred upfront which enabled better planning by Public bodies.

In terms of economic classification, Transfers and Subsidies were allocated an amount of R4 billion of which R3.6 billion or 91.1 per cent had been spent at the end of the period under review. The under expenditure was due to the following:

· Lack of spending on the Energy Efficient programme in government buildings projects (78 per cent);

· Lack of spending on Expanded Public Works Programme Incentive Grant (EPWP) for local government in the infrastructure sector (54 per cent); and

· Lack of spending on Expanded Public Works Programme Incentive Grant (EPWP) for provinces in the infrastructure sector (88.3 per cent).

Payments for Capital Assets was allocated an amount of R1.5 billion for the 2011/12 financial year. At the end of the period under review, the Department had only spent R1.0 billion or 71.9 per cent resulting in an under expenditure of R768.3 million or 9.8 per cent. This under expenditure was attributed to the following:

· The lack of implementation of infrastructure projects due to a lack of expertise (technical expertise);

· Failure by some provinces and municipalities to meet quarterly performance targets and inability to design labour intensive programmes;

· Slow spending on Common Wealth War Graves project.

The Committee wanted clarity on why the department was not going out to tender for leases of buildings but instead it negotiated leases on behalf of other departments. The Committee raised serious concerns at the delays in the finalization of the asset register.

Concerns were also raised on the recurring under expenditure on the Expanded Public Works Programme (EPWP) and whether the department was assisting the municipalities in ensuring that the allocation in that regard was spent. The issue of the Inner City Regeneration project was discussed and the Committee requested more information on the progress of the project. The Committee also expressed its concerns regarding the poor or lack of payment to local authorities for services to the Department.

3.9 Department of Communications (Vote 27)

The Department of Communications (the Department) was allocated an adjusted amount of R2 billion for the 2011/12 financial year. At the end of the fourth quarter the Department had only spent R1.7 billion or 89.4 per cent. Therefore, the department reported under expenditure of R211 million or 10.5 per cent. The Department’s budget is comprised of six programmes, namely administration, Information Communication Technology International Affairs and Trade, Information Communication Technology Policy Development, Information Communication Technology Enterprise Development, Information Communication Technology Infrastructure Development and Presidential National Commission.

The Committee noted that the Department was initially invited to give a full briefing on its expenditure trends on 22 August 2012 but postponed the said meeting at the request of the Director-General: Communications (DG). The reason for the request to postpone was in order to allow the Department to discuss the expenditure of transferred funds with its entities. Thereafter the Department requested to brief the Committee on 4 September 2012. The Department again requested that the meeting be postponed for the same reasons to which the Committee unanimously disagreed. The Committee received an apology from the DG for the scheduled meeting on 4 September 2012. The Department was subsequently informed that the DG needed to attend the meeting; therefore the meeting did not take place.

Serious concerns were expressed by the Committee at the refusal of the DG to attend its meeting.

4. Summary of Findings

After deliberations with the above departments, the Standing Committee on Appropriations made the following findings:

4.1 Overall, national departments have reported a total under expenditure of
R11.4 billion as at the end of the 2011/12 financial year. The pattern of under expenditure has been deteriorating since the 2009/10 financial year. In particular, reported under expenditure was R6.3 billion in 2009/10, R9.5 billion in 2010/11 and R11.4 billion in 2011/12.The major contributing departments to the reported under expenditure include National Treasury, Cooperative Governance, Basic Education, Social Development, Police, Water Affairs and Public Works. The gap between the budget allocation and spending performance seems to be widening.

4.2 The National Treasury recorded a R1.8 billion under expenditure out of budgeted allocation of R2 billion for the Employment Creation Facilitation Fund. This is cause for concern given the fact that job creation is a strategic priority of government. The planning of priority programmes should encompass credible funding estimates for the effective and timeous utilisation of allocated resources.

4.3 National Treasury has reported to have 122 vacant positions. The problem of vacant posts permeates broadly the national sphere of government and negatively affects the effective delivery of government services. National departments continue to cite the lack of capacity as a major reason for the non-delivery of some of their core services.

4.4 The Department of Women, Children and People with Disabilities had recurring over expenditure on Compensation of Employees, travelling, catering and advertisements. The reported over expenditure on the above items was largely located under Programme 1: Administration.

4.5 The South African Police Service recorded an under expenditure of
R617 million. Over expenditure on certain programmes includes R133.5 million or 172.4 per cent spent against R77.4 million on Civil claims against the State and R651.4 million or 4343.3 per cent against R14.9 million which was allocated for Integrated Justice System Programme (IJS) which is a cause for concern.

4.6 There were allegations that some members of the South African Police Service (SAPS) were benefiting from contracts for the construction of police stations. The matter is currently under investigation.

4.7 There was recurring under expenditure recorded by the Department of Water Affairs in relation to Nandoni , Inyaka , De Hoop and Hluhluwe water projects which is a cause for concern.

4.8 Client departments alleged that there were persistent delays in the submission of invoices by the Department of Public Works (DPW) for office accommodations and capital projects.

4.9 There is recurring under expenditure on the Expanded Public Works Incentive Grant and there are concerns on whether the Department is able to support provinces and municipalities in implementing the EPWP programme as well as the effective rollout of the Energy Efficiency project.

4.10 The Director-General: Communications failed to appear before the Committee despite being invited on two occasions to brief it on the Departments’ expenditure as at the end of the fourth quarter of the 2011/12 financial year.

5. Recommendations

In light of the findings set out in section 4 above, the Standing Committee on Appropriations recommends as follows:

5.1 That national departments ensure that there are credible plans in place and that systems of expenditure monitoring are improved upon so as to address the overall levels of under expenditure in the 2012/13 financial year.

5.2 That the Department of Public Service Administration (DPSA) ensures that all departments fill the funded vacant posts. That the DPSA submits quarterly progress reports to the Committee in this regard.

5.3 That the Minister of Women, Children and People with Disabilities ensures that the Department develops and implements a comprehensive plan addressing its over expenditure on Compensation of Employees and travelling, particularly under Programme 1 (Administration).

5.4 That the Minister of Police ensures that the South African Police Service expedites the investigation on the allegations that there were officials benefiting from contracts for the construction of police stations.

5.5 That the Minister of Police ensures that civil claims against the State and Integrated Criminal Justice programme be properly managed so as to prevent future litigations.

5.6 That the Minister of Public Works ensures that the Department submits invoices on time to client departments in respect of accommodation and capital projects.

5.7 That the Minister of Public Works ensures that the Expanded Public Works Programme Incentive Grant and Energy Efficient projects are successfully implemented and that support is given to other implementing agencies so as to ensure proper spending patterns.

5.8 That the Minister of Water Affairs ensures that water capital projects that include the Nandoni , Inyaka , De Hoop and Hluhluwe projects are expedited and finalised so as to utilise budgetary provisions for this purpose efficiently and ensure service delivery.

6. Conclusion

The requested reports by the Standing Committee on Appropriations as per section 5 above should be submitted to the National Assembly within 60 days after the adoption of this Report by the House.

Report to be considered.

Documents

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