ATC090217: Report on Second Quarter Expenditure of the 2008/09 financial year
Budget Committee on Appropriation
National Assembly and National Council of Provinces
Report of the Joint Budget Committee for the Second Quarter Expenditure of the 2008/09 financial year, dated 17 February 2009
The Joint Budget Committee (JBC), having considered Government expenditure for the second quarter for the 2008/09 financial year, reports as follows:
1. Introduction
In accordance with the Committee’s mandate, this report examines departments’ expenditure for the second quarter of the 2008/09 financial year, as reflected in Section 32 reports published in terms of the Public Finance Management Act (PFMA) and the Quarterly National Programme and Economic Classification Report, and makes a number of findings and recommendations.
National government managed to increase its aggregate expenditure in the second quarter of the year compared to the same period last year. Spending relative to the budget has increased by 3.29 percent compared to last financial year in the same period. In terms of the economic classifications, national departments spent a total of 47 percent of the current budget, 49 percent on transfers and subsidies and 53 percent of the available capital budget.
Whereas the increased levels of expenditure are indeed positive, and reflect a long-term trend, the Committee was not convinced that this spending has translated into expanded services or promoted value-for-money. The Committee further noted ongoing concerns, including the prevalence of vacancies and delayed payments to certain entities, which continue to comprise budget implementation. These challenges suggest that departments have not fully inculcated the (former) President’s appeal for extra-ordinary efforts to address the evident administrative challenges and accelerate service delivery. With the worsening of economic climate and the increased pressure of the fiscus, greater efforts will be needed in the remaining quarters of the year.
2. REVIEW OF THE TOTAL EXPENDITURE FOR NATIONAL DEPARTMENT
National departments were allocated R605.095 billion for the 2008/09 financial year. Funds appropriated to national departments amounted to R345.307 billion excluding a direct charge of R259.788 billion. At the end of the second quarter (April to September), national departments had spent R301.388 billion or 49.81 percent of the allocated budget. This represents an expenditure increase of 11.9 percent as compared to 37.93 percent, which was reported during the same period in the 2007/08 financial year.
The departments spent R265.035 billion or 50.13 percent of the total budget at the end of the second quarter (April to September). Of this expenditure, R145.849 billion was for the appropriated funds and R119.186 billion was for direct charges. The following table represent overall spending of national departments per economic classification, as at 31 September 2008.
Table 1: Second Quarter Overall Expenditure by Economic Classification
|
Economic Classification |
Available Budget |
Actual Expenditure (April-September) |
Percentage |
|
Current Payments |
99 895 405 |
47 195 327 |
47.24% |
|
Transfers and Subsidies |
237 941 322 |
118 213 936 |
49.68% |
|
Capital Payments |
7 470 839 |
3 976 122 |
53.22% |
|
Appropriated Funds |
345 307 566 |
169 385 385 |
49% |
|
Direct Charges |
259 788 340 |
132 002 620 |
50.81% |
|
Total Expenditure |
605 095 906 |
301 388 005 |
49.81% |
National Treasury, 2008
Capital payments reported the highest expenditure of 53.22 percent of the allocated budget at the end of the second quarter, while current payments recorded the lowest at 47.24 percent. Table 2 below reflects the spending patterns of the selected departments and highlights variances from their year-to-date benchmarks.
Table 2: Highest Variance between YTD Benchmark and Actual Expenditure
|
Departments R thousand |
Total Budget |
Actual Expenditure (April- Sept) |
YTD Benchmark |
Variance |
|
|
|
|
Amount |
% |
|
|
|
Public Enterprise |
3 007 862 |
1 580 272 |
52.54% |
76.90% |
24.36% |
|
Mineral & Energy |
3 595 423 |
1 118 099 |
31.10% |
49.94% |
18.84% |
|
Agriculture |
2 534 671 |
1 172 046 |
46.24% |
61.30% |
15.06% |
|
Communications |
1 723 605 |
660 590 |
38.33% |
50.20% |
11.87% |
|
Public Services and Administration |
412 306 |
163 725 |
39.71% |
49.50% |
9.79% |
|
Public Works |
4 141 402 |
1 709 583 |
41.28% |
50.40% |
9.12% |
|
Labour |
9 262 511 |
4 241 703 |
45.79% |
49.80% |
4.01% |
|
Home Affairs |
4 505 019 |
1 721 417 |
38.21% |
41.98% |
3.77% |
|
Water Affairs & Forestry |
6 699 276 |
2 985 095 |
44.56% |
47.86% |
3.30% |
Source: National Treasury, 2008
The Department of Public Enterprise (DPE) spent 52.54 percent of its budget at the end of the second quarter, which is 24.36 percent less than its year to date benchmark. This slow spending was as result of payments not being made to some projects in the Manufacturing Enterprise programme. Such projects were not yet finalised, which include SAAB indemnity, Missile Strategy Business Plan, Sector Strategy and Denel End-State implementation. The Department indicated that it initially intended to use external resources to execute these projects, however, the decision to use internal resources to initiate some projects resulted to slow spending. These funds will still be used to complete the planned projects.
The Department of Minerals and Energy (DME) recorded lowest expenditure relative to its budget at the end of the second quarter. It only spent 31.10 percent of the budget, which is 18.84 percent less than its year-to-date benchmark. This under-spending was primarily on Integrated National Electrification Programme (INEP), Rehabilitation projects and claims in respect of pumping subsidies payable to marginal mining companies. The Department indicated that the delays in the Rehabilitation project were mainly due to the process of awarding a contract, which was still being finalised during the reporting period. Furthermore, the late submission of claims by the marginal mining companies for pumping of water affected the spending during the second quarter. More information regarding INEP is provided under Transfers and Subsidies section of this report.
The Department of Agriculture (DoA) spent 46.24 percent of its budget allocation. This was 15.06 percent less than its year-to-date benchmark. The under-spending was as a result of payments not being made to the Land Bank regarding AgriBEE. More information with regard to delayed transfers is provided under the Transfers and Subsidies. Furthermore, approved rollover funds to Provinces for Comprehensive Agricultural Support Programme (CASP) and additional funds for Agriculture starter packs were to be paid after adjustments budget. The delay in transferring rollovers was due to the incomplete construction of projects by all provinces.
The Department of Communications (DoC) was allocated R1.723 billion in the 2008 financial year. It spent 38.33 percent of its budget allocation at the end of the second quarter, which is 11.87 percent below its projections. This was due to capacity challenges which delayed the execution of certain projects in ICT Policy Development programme, and delays by some entities in submitting detailed cash flow projections and progress reports as required by the department. Further attempts to get more information with regard to the reported challenges in the Department were not successful, as no response was received on our letter dated 29 January 2009.
The Public Services and Administration (DPSA) spent 39.71 percent of its budget at the end of the second quarter. This is an under-spending of 9.79 percent as compared to its year-to-date benchmark, partly due to the effects of under-spending during the first quarter. It was largely due to some transfers not been done to receiving entities and delays in processing certain invoices. More information with regard to delays in transfers is provided under Transfers and Subsidies.
The Department of Public Works (DPW) was allocated R4.141 billion in the 2008/09 financial year. It only spent R1.709 billion or 41.28 percent of the allocated funds as at 30 September 2008. The Department had under-spent by 9.12 percent as compared to its year-to-date benchmark. This under-spending was mainly attributed to the delayed payments on infrastructure and delays in transferring Conditional Grants (Property Rates) to Provinces. The delays in payments on infrastructure were due to the changes and additions to the initial specifications from the clients. More information regarding delays with the Devolution of Property Rates Grant is provided under Transfers and Subsidies.
The Department of Home Affairs (DHA) only spent R1.721 billion or 38.21 percent of the allocated budget. This is an under-spending of 3.77 percent compared to 41.98 percent year-to-date benchmark. This slow spending was attributed to, among other things, a foreign mission expenditure that has not yet been paid to Foreign Affairs due to unprocessed vouchers and unspent funds have been accumulated from the number of vacant posts. The DHA has indicated that the vouchers for foreign mission were not processed as the Department was still waiting for claims from the Department of Foreign Affairs. In terms of vacancies, the Department indicated that it has embarked on a Turnaround process which resulted in the creation of a new organisational structure. The department identified 700 critical positions to be filled in the 2008/09 financial year. It indicated that, of the 700 positions, 609 are on different stages of the recruitment process with 493 already filled. The Department envisages finalising its recruitment process by 31 March 2009.
The Department of Water Affairs and Forestry (DWAF) was allocated R6.699 billion in the 2008/09 financial. At the end of the second quarter, the Department spent R2.985 billion or 44.56 percent of its budget.[1] This was due to the unspent funds that have been accumulated from the vacant posts.[2] Some funds have been shifted from Compensation of Employees to be used for developing training materials on water conservation and water demand management in the domestic sector. Further attempts to get more clarity with regard to the reported challenges in the Department were not successful, as no response was received on our letter dated 29 January 2009.
3. CURRENT PAYMENTS
Current expenditure is categorized into various components, namely, Compensation of Employees, Goods and Services, Interest and Rent, Financial Transactions and Unauthorized Expenditure. It has two major components, namely, Compensation of Employees as well as Goods and Services. The following table reflects spending trends within current payments at the end of the second quarter.
Table 3: Categories of Current Expenditure
|
Current Expenditure R’000 |
Total Budget |
Actual Expend. (April-Sept) |
Percentage Spent |
|
Compensation of Employees |
61 746 834 |
30 072 249 |
48.70% |
|
Goods and Services |
38 147 764 |
17 097 146 |
44.82% |
|
Interest and Rent of Land |
804 |
112 |
13.93% |
|
Financial Transactions and Assets and Liabilities |
- |
25 821 |
|
|
Unauthorized Expenditure |
- |
-1 |
|
Source: National Treasury, 2008
The total budget for Current Payments amounts to R 99.895 billion in the 2008/09 financial year. Of this amount, R61.746 billion was allocated to Compensation of Employees and R38.147 billion was for goods and services. The departments had spent 47.24 percent of its current budget, R30.072 billion on Compensation of Employees and R17.097 billion on Goods and Services. The following table reflects the departments that under-spent or over-spent in current payments during the second quarter.
Table 4: Current Payments Expenditure Second Quarter
|
Departments |
Current PMT Budget |
Q2 Expenditure (July-Sept) |
Overall Expenditure (April- Sept) |
||
|
|
|
Amount |
% |
Amount |
% |
|
Public Works |
1 580 315 |
474 392 |
30.02% |
901 571 |
57.05% |
|
Communications |
363 814 |
106 987 |
29.41 |
184 469 |
50.70% |
|
Public Enterprise |
164 837 |
45 564 |
27.64 |
76 259 |
46.26% |
|
Mineral & Energy |
645 584 |
147 041 |
22.78% |
293 367 |
45.44% |
|
Agriculture |
1 021 785 |
229 798 |
22.49% |
432 082 |
42.29% |
|
Water Affairs & Forestry |
3 786 771 |
786 557 |
20.77% |
1 390 129 |
36.71% |
The DPW recorded the highest spending of 57.05 percent in current payments at the end of the second quarter. It indicated that this is due to R132 million transfer that was made to the Property Management Trading Entity to augment trading account as well as R63 million for accommodation costs. The Department had accumulated some accruals from the previous year, which were paid in the first quarter of this financial year.
With regard to filling of vacant positions, the Department has 662 vacancies (11 percent) in level 1 up to 12 and 38 vacancies (28 percent) in senior management level. The Department anticipates exceeding its personnel budget by R90 million by the end of the financial year. This would increase to R154 million if all vacant positions can be filled. The projected over expenditure was mainly due to the fact that the Department did not receive additional funds to implement job creation and skills development initiatives. These include, National Youth Service, Learnership, Internship, and Young Professionals Programmes, and Cuban Technical Advisory Programme.
The DPE spent 24.36 per less than its year-to-date benchmark. This under spending was partly attributed to a long process that legal actions run before the matter goes to Court. The payments to State Attorney and Advocates get delayed since the billing process is done and forwarded to the Department after the matter is being finalised.
4. TRANSFERS AND SUBSIDIES
National departments were allocated R237.941 billion for transfer and subsidies during the 2008/09 financial year. At the end of the second quarter (April-September), the departments reported an expenditure of R118.213 billion or 49.68 percent, an increase of 3.96 percent compared to 45.72 percent reported during the same period in the previous year. The following table reflects both second quarter expenditure and expenditure incurred to date (April to September) in Transfers and Subsidies category.
Table 5: Expenditure on Transfers and Subsidies
|
Receiving Entities |
Total Budget |
Q2 Expenditure (July – Sept) |
Overall Expenditure (April - Sept) |
|||
|
|
|
Amount in R'000 |
% |
Amount in R'000 |
% |
|
|
Provinces and Municipalities |
80 602 843 |
23 762 443 |
29.48% |
37 935 503 |
47.06% |
|
|
Dept. Agencies and Accounts |
42 522 993 |
11 237 144 |
26.43% |
20 427 885 |
48.04% |
|
|
Universities and Technikons |
13 588 474 |
3 708 155 |
27.29% |
10 616 355 |
78.13% |
|
|
Public Corporations and Enterprises |
18 876 723 |
4 857 520 |
25.73% |
9 823 095 |
52.04% |
|
|
Foreign Governments and Organizations |
976 138 |
211 345 |
21.65% |
278 292 |
28.51% |
|
|
Non-Profit Institutions |
1 683 767 |
292 473 |
17.37% |
543 365 |
32.27% |
|
|
Households |
79 690 384 |
19 509 623 |
24.48% |
38 589 441 |
48.42% |
|
|
Total Expenditure |
237 941 322 |
63 578 703 |
26.72% |
118 213 936 |
49.68% |
|
Source: National Treasury, 2008
The second quarter expenditure report indicates that Transfers and Subsidies category is the second highest spending economic classification. At the end of the second quarter, the departments transferred R118.213 billion to receiving entities. In particular, R63.578 billion was transferred during the second quarter. The largest transfer of R23.762 billion was made to provinces and municipalities, while only R292.473 million was transferred to non-profit organisations. Table 6 shows an expenditure incurred by the Departments on Transfers and Subsidies
Table 6: Expenditure on Transfers and Subsidies
|
Department |
Allocated Budget |
Q2 Expenditure |
Overall Expenditure |
||
|
|
|
Amount |
% |
Amount |
% |
|
Justice & Constitutional Dev. |
1 081 410 |
356 599 |
32.98% |
602 856 |
55.75% |
|
Public Enterprise |
2 842 650 |
609 260 |
21.43% |
1 503 958 |
52.91% |
|
Labour |
450 431 |
42 037 |
9.33% |
231 649 |
51.43% |
|
Agriculture |
1 473 338 |
372 724 |
25.30% |
727 730 |
49.39% |
|
Public Works |
1 512 706 |
335 354 |
22.17% |
474 484 |
31.37% |
|
Home Affairs |
1 132 060 |
119 694 |
10.57% |
354 989 |
31.36% |
|
Minerals & Energy |
2 939 959 |
321 477 |
10.93% |
821 719 |
27.95% |
|
Public Service & Admin. |
21 731 |
979 |
4.51% |
1 101 |
5.07% |
Source: National Treasury, 2008
The Department of Justice and Constitutional Development reported the highest spending of R602.856 million on its transfers and subsidies budget at the end of the second quarter. The Department of Minerals and Energy (DME) spent 27.95 percent, while the Department of Public Service and Administration (DPSA) reported a lowest expenditure level at 5.07 percent of the allocated budget.
The Department of Public Enterprise (DPE) allocated R2.842 billion of its budget to transfers and subsidies. These funds were earmarked for public corporations and private enterprises. A substantial amount of R1.750 billion was allocated to Pebble Bed Modular Reactor (PBMR), while R377 million was allocated to Broadband Infraco.
The Department transferred R1.503 billion to its receiving entities at the end of the second quarter.[3] As in the previous quarter, transfer payments amounting to R130 million were not made to Alexkor as the business plan was still outstanding. The Department indicated that R30 million for the township development had already been transferred during the third quarter. However, the transfer of R100 million for the Pooling and Sharing Joint Venture (PSJV) was dependent on the submission of a business plan. The development of this business plan was delayed due to the mobilisation of appropriate resources by PSJV, but it is envisaged that business plan will be submitted by the end of February 2009 and that transfers will be done by the end of March 2009.
Furthermore, a once-off transfer payment of R585 million earmarked for the recapitalisation and operations of South African Express Airways (SAX) could not be effected as compliance issues necessary to effect payments were still to be finalized.[4] The Department envisaged concluding agreements on the final, relevant terms and conditions early in 2008 to allow finalisation of the transfer. The transaction framework has been resolved and this amount is expected to be transferred in full at the end of the financial year.
The Department of Labour allocated R450.431 million of its budget to transfers and subsidies. Of the allocated funds, the Department spent R231.649 million at the end of the second quarter. The deviation in spending is attributed to, among other things, the delays in establishing the Quality Council for Trade and Occupations. Further attempts to get more clarity with regard to the establishment of Quality Council for Trade and Occupations was not successful, as no response was received on our letter dated 29 January 2009.
The Department of Agriculture was allocated R1.473 billion for transfer payments. The Department has only transfer R727.730 million, which is 49.39 percent of the transfer payments budget at the end of the second quarter. The Department indicated that the payment was not made to the Land Bank since the requirement of section 38(1)(j) of the Public Finance Management Act (PFMA) was not observed by the Bank. The Department is still waiting for a written assurance from the Land Bank, confirming that it has implemented effective, efficient, and transparent management and internal control systems.[5] However, the Bank indicated to the Department that such an assurance will be submitted in few days and transfer will thus be made during February 2009.
The Department of Public Works delayed its transfers for the Devolution of Property Rates Grants to Provincial Treasuries. It indicated that the first transfer was supposed to take place on August as per the approved schedule by National Treasury. The Department was only able to transfer the first payment in September due to difficulties experienced in getting and registering some of the banking details provided by Provincial Treasuries. This challenge was resolved and transfers were now taking place according to the approved schedule.
The Department of Home Affairs allocated R1.13 billion of its budget to transfers and subsidies. Departmental accounts and agencies comprising the Film and Publication Board, Government Printing Works and the Electoral Commission received a highest share of approximately R1.13 billion. Of the allocated funds, R959.15 million was earmarked for the 2009 national and provincial elections. At the end of December 2008, the Department had transferred R27.836 million or 86 percent to the Film and Publication Board, R589.877 million or 56.8 percent to the Independent Electoral Commission (IEC), and R137.425 million or 100 percent to Government Printing Works. The Department indicated that when it tried to expedite remaining transfer payments to the IEC, National Treasury advised that it should adhere to the cash flow projections.
The Department of Minerals and Energy allocated R2.939 billion of its budget to Transfers and Subsidies.[6] This included, among other things, transfers for the Renewable Energy Subsidy Scheme and Integrated National Electrification Programme (INEP). In particular, R595.637 million was allocated to municipalities for INEP grant. Of the allocated funds, only R9.374 million or 1.57 percent was transferred to municipalities as at 30 September. The Department was further allocated R1.150 billion for INEP (Eskom) grant and R90 million for the backlogs in the electrification of school grants. The Department envisaged spending 49.22 percent on INEP (Eskom) grant and 38.89 percent on backlogs in the electrification of schools by the end of the second quarter. However, no expenditure was reported in these two grants at the end of the second quarter.
It should be noted that DME could not provide accurate statistics on the number of schools without electricity. It indicated that the figure of 5 000 provided by the Department of Education (DoE) proved to be incorrect after further investigations.[7] The Department envisaged electrifying 2 500 schools during the 2008/09 financial year and no target was set for clinics in the Departmental strategic plan, as all the clinics are already electrified.[8] The Committee further questions the reliability of 2500 target as the information used for the planning might have been inaccurate. The DME has since electrified 456 schools (rural schools) as at 30 January 2009[9] regardless of the fact that no expenditure was incurred for the eradication of electrification backlogs in clinics and schools (as per section 32 report). The current pace in eradicating electrification backlog at schools signals that the Department might not achieve its target of 2500 schools for the current financial year. The slow spending in electrification programme weakens government efforts to accelerate universal access to electricity and it compromises the standard of education.
The DPSA allocated R21.375 million for the Public Service Education and Training Authority (PSETA) during the 2008/09 financial year. This was intended to develop a coordinated framework for the provision of appropriate and adequate public service and education training. These funds were not transferred to the PSETA for both quarters (first and second quarter) due to its non-functionality.[10] The DPSA with the assistance of Labour is in a process of solving this non-functionality. It indicated its intention to manage PSETA’s finances and incur all PSETA expenditure on its behalf. In further communicating with the Department, it disputed that PSETA is dysfunctional as suggested by the explanation received from National Treasury. It indicated that it only provides support services according to the Memorandum of Understanding it signed with PSETA. The appointment of Chief Executive Officer and CFO remains a challenge which further resulted in the lack of capacity to implement systems and internal controls. The DPSA could therefore not transfer funds to PSETA as this would be considered as non compliance with section 38 of PFMA. The decision whether the PSETA should be merge with the functioning SETA might only be taken in 2010 after the DoL has conducted a review process of all SETAs (since all the powers are vested to the DoL).
The Committee is of a view that PSETA is dysfunctional since critical posts for its existence are vacant. It further undertakes to communicate this problem to the portfolio committees on Labour and Public Service and Administration to ensure that remedial actions are taken.
It is important to note that spending deviations on Transfers and Subsidies for both Departments of Public Enterprise, and Minerals and Energy recurred from the first quarter to the second quarter.
5. CAPITAL PAYMENTS
National departments were allocated R7.470 billion for capital assets in the 2008/09 financial year. A substantial amount of this budget, amounting to R3.900 billion was allocated to building and to other fixed structures, while R2.531 billion was allocated to machinery and equipment.
Table 6 below represents departmental spending for both the second quarter and the year–to-date period.
Table 6: Expenditures on Capital Payments
|
Items |
Total Budget |
Q2 Expenditure |
Actual Expenditure |
|||
|
(July – Sept) |
(April - Sept) |
|||||
|
|
|
Amount R'000 |
% |
Amount R'000 |
% |
|
|
Building & other Fixed Structures |
3 900 588 |
1 371 689 |
35.17% |
2 149 898 |
55.12% |
|
|
Machinery & Equipment |
2 531 226 |
658 644 |
26.02% |
942 484 |
37.23% |
|
|
Cultivated Assets |
595 |
1 091 |
183.36% |
2 482 |
417.14% |
|
|
Software & other Tangible Assets |
185 757 |
12 960 |
6.98% |
15 753 |
8.48% |
|
|
Land & Subsoil Assets |
852 673 |
617 744 |
72.45% |
865 505 |
101.50% |
|
|
Total |
7 470 839 |
2 662 128 |
35.63% |
3 976 122 |
53.22% |
|
Source: National Treasury, 2008
The departments had spent 53.22 percent at the end of the second quarter (April to September). Both Cultivated Assets and Land and Subsoil Assets exceeded their allocated budget. Cultivated Assets spent 417.14 percent of its budget, while Land and Subsoil Assets 101.50 percent at the end of the second quarter.. The high spending in Cultivated Assets was largely influenced by over-spending on police dogs and horses, which exceeded its budget by R1.136 million. Other departments that did not budget for such assets incurred actual expenditure of R871 thousand. These included Departments of Correctional Services, Defence, Agriculture and Water Affairs and Forestry. Furthermore, the Departments of Land Affairs and Minerals and Energy contributed to over-spending in Land and Subsoil Assets. The DLA exceeded its annual budget for this item by R12 million while DME spent R798 thousand that was not budgeted for.
The Department of Water Affairs and Forestry (DWAF) recorded the highest level of spending at R77.756million or 185.75 percent of its capital budget. This was due to the upgrading and improvement of security control systems at DWAF offices in KwaZulu-Natal (KZN). It is also important to note that the Department was experiencing delays in approving construction designs on projects for the regional bulk infrastructure grant due to invoices not submitted by contractors for work done. Further attempts to get more information with regard to the need to improve security system in KZN office were not successful, as no response was received on our letter dated 29 January 2009.
The departments of Labour and Home Affairs recorded an expenditure of R24.941 million or 10.05 percent on capital payments. This slow spending was attributed to the unprocessed invoices amounting to R67.301 million for the maintenance of Information Service Infrastructure. These invoices were not yet processed due to the delays from suppliers.
The Department of Labour had spent R3.233 million or 7.23 percent of its capital budget at the end of the second quarter. This was due, among other things, to the suspension of infrastructure projects at INDLELA (Institute for National Development of Learnerships Employment Skills and Labour Assessment) as a result of the discovery of Dolomite on the building site. Further attempts to get more clarity from DoL to ascertain whether feasibility study was conducted prior to the beginning of the project were not successful, as no response was received on our letter dated 29 January 2009.
The Department of Public Enterprise reflected an expenditure of –R150 thousand on its capital spending. This affected an overall spending over the six month period, which decreased from R205 thousand or 54.67 percent in the first quarter to R55 thousand or 14.67 percent at the end of the second quarter. The department reserves some transactions from the previous quarter, as they were incorrectly classified under capital.
6. SUMMARY OF FINDINGS
The following is a summary of findings for the period under review:
6.1 The second quarter aggregate expenditure for the national departments has increased from 45.76 percent to 49.05 percent, as compared to the same period in 2007/08 financial year. This shows an increase in the total expenditure of 3.29 percent in the current period. Nevertheless, it is still required for the Committee to evaluate the efficiency of government spending. It is evident corrective actions are needed to improve budget implementation.
6.2 Although government undertook to accelerate the filling of vacant position (State of the Nation Address 2008). The Committee has noted with concern a high rate of vacancies in many government departments. This indicated that previous recommendations made by the Committee with regard to filling of vacant positions were not seriously considered by some departments.
6.3 As indicated in the previous reports of the Committee, some of the government programmes are not properly aligned between the national, provincial and local spheres. This results to the misalignment of Integrated Development Plans and other service delivery programmes designed to benefit communities.
6.4 There is no adequate reporting mechanism on Transfers and Subsidies. Funds are transferred to receiving entities with insufficient monitoring of programmes and reporting of results. This also impacts on the oversight work of Parliament, as no useful reports are provided to the parliamentary committees regarding receiving entities in order to measure their programme performance against their budgets.
6.5 A number of departments delayed their procurement process as a result of untimeous submission and processing of invoices. This resulted in departments taking too long to finalise payments, as required by the relevant legislation.
6.6 There are instances where the departments utilised funds for purposes that were not budgeted for. The Department of Communications shifted funds that were allocated for Compensation of Employees to develop training materials. These funds were transferred regardless of the fact that the Department still has a number of vacancies.
6.7 The PSETA is dysfunctional as there is no Chief Executive Officer and a Chief Financial Officer, therefore the DPSA manages its finance
7 Recommendations
Based on the Committees observation and findings it recommends that:
7.1 Funds should be transferred to the receiving entities only after the departments have satisfied themselves that appropriate business plans are in place. Furthermore necessary mechanisms must be in place to monitor funds that are allocated to receiving entities. National Treasury should intervene in cases where funds are transferred without proper accounting systems.
7.2 An integrated approach and effective communication is needed among all spheres of government and public entities during the planning, implementation of, and reporting stages of government programmes. Government institutions should complement each other when implementing such programmes and any overlap of functions should be carefully resolved in a manner that does not compromise service delivery.
7.3 Departmental budget plans must be based on accurate and credible data. Parliament and the public rely on such information in making important decisions, it is therefore important for departments to maintain and submit accurate information. Those departments that could not provide the requested information for completing this report include the Department of Minerals and Energy with regard to the current backlog in the electrification of schools and clinics.
7.4 National Treasury needs to review the Supply Chain Management processes to ensure that payments and invoicing are done in accordance with legislative prescript. All suppliers should be familiarised with such legislation and adhere to it. Payments to service providers should be done on time.
7.5 National Treasury and the relevant departments should take account of the high levels of over-spending in some standard items. Such spending must be closely monitored.
7.6 All departments should embark on proper feasibility studies before the execution of projects. A number of departments have not yet finalized certain projects due to the late discovery of obstacles like wet land, dolomite etc. in the construction site. e.g. The construction of INDLELA by the department of Labour and the construction of a prison by the Department of Correctional Services only to discover an obstacle such as wetland without initially performing a proper feasible study.
7.7 National Treasury should withhold funds allocated to Alexkor if a business plan is not provided and the Department of Public Enterprises should assist and intervene.
7.8 DPSA and DoL should review the necessity of the continued existence of PSETA.
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