Provincial Expenditure as at 31 March 2006 (Preliminary Outcome): briefing by National Treasury & Provinces

Meeting report

FINANCE SELECT COMMITTEE
2 May 2006
PROVINCIAL EXPENDITURE AS AT 31 MARCH 2006 (PRELIMINARY OUTCOME): BRIEFING BY NATIONAL TREASURY AND PROVINCES

Chairperson: Mr T Ralane (ANC) [Free State]

Documents handed out
National Treasury Presentation
Western Cape Provincial Treasury Presentation
Limpopo Cape Provincial Treasury Presentation
Free State Provincial Treasury Presentation
Gauteng Provincial Treasury Presentation

SUMMARY
The National Treasury reported on provincial expenditure for the 2005/06 financial year. The overall spending stood at R214, 8 billion (98, 0%) of the adjusted budget of R219, 2 billion. There was underspending of R4, 4 billion. Provinces had spent relatively better compared to the 2004/05 financial year where there was R4, 7 billion underspending. R4, 4 billion was still a very large sum of money. The highest rate of spending was recorded in Kwazulu-Natal (99, 8%) and the lowest rate was in the Free State (94, 4%). All provinces had underspent and there was an overall 2% underspending of the total adjusted budget. Spending in the social services sectors was as follows: education was at R72, 0 billion (99, 6%), health was at R46, 9 billion (99, 5%) and social development was at R58, 0 billion (96, 7%). Personnel and capital expenditure stood at R95, 7 billion (99, 0%) and R13, 1 billion (94, 0%) respectively.

The North West, Limpopo, Mpumalanga, Northern Cape and Western Cape Provincial Treasuries then presented detailed breakdowns of their expenditure per line department, and indicated the challenges and capacity constraints that resulted in under-expenditure on certain grants. They all agreed with the observations made by National Treasury. Most of the underspending in provinces was due to poor project planning and selection.

The Committee urged provinces to be honest when reporting on expenditure trends so as to enable it to assist where necessary. The Chairperson singled out the Eastern Cape as one province that still needed special attention. He emphasised the importance of following the Division of Revenue Act especially when dealing with the various conditional grants and capacity constraints that related to them.

MINUTES
The Chairperson welcomed everybody to the meeting. The purpose of the meeting was to look at the performance of provinces during the 2005/06 financial year. Various Members of Executive Councils (MECs) had made certain commitments during hearings on the third quarter expenditure outcomes. They had promised that there would be some improvements in the spending patterns. The Committee should start evaluating the performance on conditional grants and the equitable share in the first quarter of this financial year.

National Treasury Presentation
Mr J Hattingh (Intergovernmental Relations, National Treasury) briefed the Committee on the preliminary provincial expenditure outcomes as at 31 March 2006. (See document attached). The figures might be revised as national and provincial departments finalise and reconcile their financial statements by 31 May 2006 for submission to the Auditor-General. The overall spending stood at R214, 8 billion (98, 0%) of the adjusted budget of R219, 2 billion. There was underspending of R4, 4 billion. Provinces had spent relatively better compared to the 2004/05 financial year where there was R4, 7 billion underspending. R4, 4 billion was still a large sum of money. The highest rate of spending was recorded in KwaZulu-Natal (99, 8%) and the lowest rate was in the Free State (94, 4%). All provinces had underspent and there was an overall 2% underspending of the total adjusted budget. Spending in the social services sectors was as follows: education was at R72, 0 billion (99, 6%), health was at R46, 9 billion (99, 5%) and social development was at R58, 0 billion (96, 7%). Personnel and capital expenditure stood at R95, 7 billion (99, 0%) and R13, 1 billion (94, 0%) respectively.

The Chairperson said that it was important to determine the quality and impact of provincial spending.

Gauteng Provincial Treasury Presentation
Ms QD Mahlangu, Gauteng MEC for Local Government, appeared on behalf of Mr P Mashatile, MEC for Finance and Economic Affairs, who could not attend the meeting. She was accompanied by Ms N Tshabalala (Head of Finance). The province had always raised issues around the continuous introduction of conditional grants. There was continuous underspending on conditional grants across provinces. Provinces were spending well on the equitable share. It had always been argued that National Treasury should impress upon national Departments not to continue to introduce conditional grants but give the money to provinces as part of the equitable share. There could be a move towards completely doing away with conditional grants if Treasury was to look at the reasons for underspending of conditional grants.

Ms Tshabalala made the presentation. (See document attached). She agreed with the observations made by National Treasury. There was a lack of proper planning across Departments in relation to procurement. The total spending equaled R33, 4 billion (97%) of the adjusted budget. There was a net underspending of R885 million (3%) of the adjusted budget. The following Departments had underspent: Education – R395 million, Social Development – R424 million, Housing – R91 million, and Finance – R71 million. The Department of Health had over spent by R132 million. The underspending in social development could be attributed to the slower uptake of grants by beneficiaries.

With regard to conditional grants expenditure the adjusted budget amounted to R11, 4 billion and this included a provincial rollover of R32, 7 million. The total expenditure amounted to R10, 7 billion (94%) of the adjusted budget. The province had a total amount of R10, 766 billion instead of R11, 340 billion. The transfer to the province was reduced by R297 million following the revised payment schedule for social assistance grant and the low number of beneficiaries. Three infrastructure installments (R277m) were stopped due to low levels of spending on infrastructure, late submission of infrastructure reports and plans and submission of incomplete/inaccurate reports. The province had an underspending of R606 million or 6% of the adjusted budget

The province was experiencing the following challenges, amongst others:
- quarterly reports on conditional grant and infrastructure report were in most cases either late, partially done or not submitted at all.
- Submissions were in most instances incomplete and inaccurate and this made comparison between In-Year Monitoring (IYM) and performance achievements difficult or impossible.
- There were issues relating to the credibility of departmental projections in IYM.
- The offices of Chief Financial Officers were not adequately capacitated.

The provincial Treasury would continue to hold individual meetings with departments showing significant underspending and overspending. It would conduct training and address identified gaps. A public finance unit that would specifically focus on monitoring the departments’ spending and evaluating their performance, ensuring value for money and efficiency and conducting detailed analysis and interrogate departments’ expenditure would be established. It would also financially assist departments to capacitate their Chief Financial Officer (CFO) offices. A non-compliance strategy would be introduced to ensure that departments complied with deadlines.

Discussion
The Chairperson said that it seemed that there were problems in Gauteng province. The province had raised a whole range of interventions with which they wanted to help other provinces. The provincial Treasury had an underspending of R78 million. The question was how it could police underspending in other departments if it was also experiencing the very same problem.

Ms Mahlangu replied that the R78 million was money paid by departments into the precinct account. The provincial government was planning a precinct from where all departments would operate. There had been underspending because work on the precinct had not progressed as originally planned.

Mr M Robertson (ANC)[Eastern Cape] said that there were reports that children could not get to schools when the schools reopened early this year because the bus companies had not been paid and yet there was underspending on Education. He asked the presenter to give clarity on the matter.

Ms Mahlangu replied that there was a dispute between the provincial Department of Education and the service provider. The submission of documentation was not done appropriately and did not comply with the prescribed standards. The issues had since been resolved.

Ms B Mkhaliphi (ANC)[Mpumalanga] asked if the challenge relating to disagreements on the implementation of the Integrated Quality Management system (IQMS) with educators was unique to the province.

Ms Tshabalala believed that the problem was common to all provinces. In Gauteng unions had proposed that there should be a blanket payment to all educators for pay progression and incentives. The Department felt that this would not form a good basis for performance appraisal in future. It had run an exercise in terms of which it collated quantitative data from different schools. Educators would be paid in terms of the performance of their schools. In some instances some schools had submitted that certain educators had performed beyond 85%. However, when looking at the performance of their schools one would find that the schools were not performing well. The Department had realised that there was a problem and that there was a need to get proper information that could be used as the basis for appraisal. This had resulted in delays in payments. The Department felt that it was better to delay payment rather than to pay based on information that was not credible. It was in the process of interrogating the data and it was hoped that payment would be made by the end of the first quarter of this financial year.

Mr D Botha (ANC)[Limpopo] said that one of the challenges identified was the strengthening of monitoring and evaluation of performance by departments. He asked what the roles of provincial Standing Committees were. The Treasury had indicated different interventions that it would make but the sad part of it was that there were no timeframes attached to them.

Ms Mahlangu replied that Portfolio Committees in the provincial legislatures had roles to play and often called Departments to come and account. There was monitoring and evaluation of the performance of Departments. It might be better for the Select Committee to have a meeting with the provincial Committee on Finance and look at the extent to which that Committee was playing its role. A Director had been appointed to see to the implementation of the non-compliance strategy and its was envisaged that the province would be able to report on the interventions when reporting on the second quarter results of this financial year.

Mr E Sogoni (ANC)[Gauteng] said that it was interesting to hear the MEC saying that there was a need for discussions on the continued introduction of conditional grants. He asked when the Treasury noticed that the offices of Chief Financial Officers (CFOs) were not adequately capacitated. How soon could the Committee expect to see changes especially with regard to misallocation of funds between conditional grants and the equitable share? The Committee had been informed that the number of beneficiaries who were accessing grants had stabilised. He wondered if this meant that the budget would also stabilise. The provincial Department of Education was using the Independent Development Trust (IDT) and not the Department of Public Works (DPW) as an implementing agency but schools were still incomplete. He asked if there were reasons for using the IDT as opposed to the DPW. Some provinces had used the IDT due to lack of capacity in the Public Works Departments.

Ms Mahlangu replied that there was a CFOs forum in the province. Capacity issues had often been raised and some CFOs were overloaded with other kinds of work. For instance, the CFO in the Department of Local Government had other responsibilities like the management of facilities. There had been capacity problems in DPW and this was the reason why the Department of Education was allowed to go out and look for a service provider in order to fast track the building of schools. National Treasury was best placed to indicate measures that were put in place to ensure that DPW had the necessary capacity.

Ms Mchunu (IFP)[KwaZulu-Natal] commended the province for overspending on Anti-retroviral drugs. It had saved the nation by taking on 13 000 people who were not budgeted for. Gauteng was a melting pot where unemployed people often go to seek employment. Some of the people ended up ill because they did not get enough food. She asked if there were volunteers who were helping in following up people who were on the anti-retroviral drugs. Were there any incentives for such people? Volunteers needed money for food and transport.

Ms Mahlangu was not aware of any specific programme to support volunteers. The province offered support to people who were involved in home-based care.

Ms D Robinson (DA) was concerned that the number of people infected with HIV was on the increase and that a number of them were not catered for. She was concerned about statistics on the needs of the people. How did the province get statistics on the needs of the people? She was also concerned about the integrated nutrition programme. Nutritional supplements ordered and delivered were not according to specifications. Questions could be raised in relation to monitoring processes on this issue. From who did the government get the supplements? Why were the supplements not up to standard? It was important for young people to get what they needed. The reason for underspending in the forensic pathology grant was that the full allocation was received during the adjustment and that the process of transferring staff and assets from the South African Police Services had not been finalised. This was worrying because forensic pathological services were vital.

Ms Mahlangu replied that the statistics were based on information received from clinics and hospitals in the provinces. The statistics indicated that there was an increase from 25 000 to 38 000 people. Issues of poverty were related to the problem of HIV/AIDS and government programmes should respond to poverty and HIV/AIDS. Details on the Integrated Nutrition Programme could be obtained from the Department of Education.

With respect to forensic pathology, she said that the issue had been under discussion for a very long time and it was only during the adjustment period that resources were properly transferred to the Department of Health. One could not expect provinces to have spent all the resources between the adjustment estimates and now. Some of the mortuaries were not in a good state and there would be changes over time.

Ms Mahlangu said that in some cases service providers were not honest enough to indicate that they did not have the necessary capacity to carry out certain tasks. In some cases capacity problems were only identified when the project was under implementation. Such problems could be solved at an earlier stage should service providers indicate their capacity problems. The province had an Enterprise Propeller that was responsible for giving support to small and medium enterprises.

Mr M Goeieman (ANC)[Northern Cape] said that the presenter had identified a number of weaknesses that had resulted in underspending but was unclear on interventions or measures to address them.

The Chairperson supplemented the question by asking what the province had done for the purposes of Section 18 of the Public Finance Management Act (PFMA).

Mr Robertson asked for clarity on rollovers received by the province.

Ms Tshabalala replied that rollovers on conditional grant were related to funds that were committed in the previous year.

Mr Sogoni noted that there were challenges in relation to procurement. There was a need for more clarity on this given that the province had a division called the Gauteng Shared Services Centre (GSSC) which was supposed to deal with procurement.

Ms Mahlangu replied that the role of the Gauteng Shared Services Centre was to ensure that small and medium enterprises that had rendered services to the government were paid within 15 days. This meant that the government had to ensure that people understood what kind of documents had to be submitted. The province was improving its internal processes through the GSSC. GSSC simply collated information and Departments were still responsible for deciding which was the best tender. In the long term all departmental procurement units would migrate to the GSSC.

The Chairperson said that there was a problem of overspending in the 2004/05 financial year in the Department of Transport and Roads. The provincial Treasury should have serious concerns around this issue. The Department had experienced the same problem in the year under review and the question was what the provincial Treasury was doing to assist the Department. From the presentation one could not get a sense of how the Provincial Infrastructure Grant (PIG) was performing in the province. A question could be raised as to how the Treasury had made an allocation to the Department of Health whilst knowing very well that the Department had no capacity to spend. This question was important given the provisions of the Division of Revenue Act (DORA). DORA required the province to consider the capacity requirements of a receiving Department in administering the allocation when making any allocation. The province should also take into account the capacity of the receiving provincial department to spend on and manage infrastructure. It was obvious that the province did not follow Section 13 of the Act and the question was why? Section 13 (2) provided that:

"A province must ensure that its provincial departments responsible for education, health and roads—
(a) are responsible for all capital and maintenance budgets and spending for those functions;
(b) enter into, implement and manage service delivery agreements with provincial departments responsible for public works or public entities, where such departments and entities manage or undertake construction or maintenance on their behalf".

The Chairperson asked if there was no relationship between the Departments of Public Works and Education. Why did the province not comply with the law? It was important for provinces to comply with the law as they administered the Provincial Infrastructure grant (PIG). National Treasury had guidelines in relation to the PIG and there were legal provisions in terms of how to deal with the grant. A question was asked as to what was supreme between the guidelines and the law. Treasury had agreed that the law was supreme. A lot of questions could be raised around planning in the province. He asked how many unfilled posts existed in the provincial Treasury and what their impact was on the ability of the Department to deliver on its mandate.

Ms Mahlangu replied that in the past there was one Department for Finance and Economic Affairs. Things had changed from 1 April 2006 and Treasury and Economic Affairs were now two separate Departments. The unfilled posts were related to the Economic Affairs Department. In some cases vacancies were as a result of the government's inability to attract the relevant skills. She gave an example of her Department's inability to get a person who would be responsible for monitoring and evaluation, policy and research.

Ms Tshabalala replied that in Gauteng, the Department of Education had its own Public Works section. With effect from this financial year, there had been a migration of the function and the Department would use the Department of Public Works as its implementing agency.

The Chairperson said that the Gauteng Department of Health was going from one extreme to another. It was in the extensive care unit during the third quarter of the last financial year in terms of their spending patterns. There was a huge underspending and the situation had changed to one of overspending at the end of the financial year. The Committee should carefully investigate this matter.

Free State Provincial Treasury Presentation
Mr P Makgoe (Finance MEC) said that there had been some improvements in terms of spending. There were some grants in which the province had achieved 100% spending for the first time. The question was what was the impact of the spending and this was something that the province would investigate in the near future. Underspending in social grants was a saving. He said that he had written a letter to the Minister of Social Development to request that the money should be released to provinces. The truth was that the money was not released to provinces. The provincial Department of Housing did not do well and there were big contract management problems. At one stage it was said that the money for housing was over committed. Spending in the Department was around 75% and the province was surprised that it had reached such a percentage. The problem has since been solved.

Mr J Phukuntsi (Senior Executive Manager) made the presentation. (See document attached). The province had spent R14, 219 billion (94%) of their adjusted budget of R15, 062 billion. Preliminary under-expenditure amounted to R843 million or 5, 6% of the adjusted budget. The Department of Social Development accounted for an amount of R464 million of the total underspending.

Northern Cape Provincial Treasury Presentation
Mr P Dikgetsi, Northern Cape MEC for Finance and Economic Affairs, said that there was a need for National Treasury to understand the challenges faced by provincial treasuries. This was especially the case when dealing with the withholding of capital monies to provinces. In the 2004/05 financial year there was a huge overspending in the whole administration. Certain measures were put in place to deal with overspending. Not all Departments had overspent and it was decided that there would be no collective punishment for overspending. There were indications that some Departments would underspend on their budget and it seemed that the answer would be collective punishment. Collective punishment should be avoided.

Mr S Mokoko, Northern Cape Provincial Treasury Head of Department (HOD), provided an overview of the Northern Cape Province expenditure outcomes as at 31 March 2006. (See document attached). The total expenditure amounted to R5, 218 billion, which is 98% of the Adjusted Budget. Net under expenditure was R102 million or 2% of the Adjusted Budget. Departments that showed material under expenditure were: Social Services - R74 million; Provincial Treasury - R28, 5 million and the Department of Agriculture and Land Reform - R25, 2 million. Two departments had shown an over expenditure namely: Health - R60, 363 million or 6% of the adjusted budget and the Office of the Premier - R0, 359 million or 4% of the adjusted budget. Total Spending on Capital Expenditure amounted to R314, 9 million or 90% of the adjusted budget. There was an under expenditure of R34 million or 10% of the adjusted budget. Expenditure on conditional grants amounted to R1, 918 billion or 99.7% of the available funds.

He said that budgeting was based on a three-year medium term expenditure framework. Departments were given monies for a current financial year and indicative figures of what they would receive in the coming years. Under normal circumstance the indicative figures were not revised downwards but upwards. In the past the province used to run huge bank overdrafts because of the over expenditure mainly in the Department of Social Services. The overdraft had to be financed and money was needed to pay interest on the overdraft. The province even went to the extent of requesting an additional R90 million from National Treasury and this also had to be serviced. It could not budget for the interest to service loans in any way other than factoring it into its budget. This explained the savings in the provincial Treasury.

Limpopo Provincial Treasury Presentation
Dr J Mashamba, Limpopo Finance MEC, thanked the Committee for the opportunity to come and account before it. She agreed with the observations given by National Treasury. She welcomed conditional grants but there was a need to look at some of the conditions attached to them as they had given rise to some problems. Mr M Mphahlele, Limpopo Provincial Treasury HOD, made the presentation. (See document attached). The total budget amounted to R28, 6 billion and R28, 2 billion had been spent. There was overspending in the Departments of Education and Transport. The rest of the Departments had a fair amount of under expenditure. Overspending occurred mainly in relation to the compensation of employees and underspending was mainly in capital transfers and payments for capital goods.

Discussion
The Chairperson noted that the Limpopo province had the Premier Infrastructure Grant which had huge sums of money. All other provinces did not have this type of grant. He asked where the money came from and who was responsible for the grant. What was the formula for allocating the money and how was it monitored? He also asked why social development was included under the PIG.

Dr Mashamba replied that the Premier Infrastructure Grant was not from the Premier's coffers. It might be helpful to give it another name seeing that the Committee was beginning to raise questions about it.

Mr Mphahlele replied that during one of the provincial Lekgotlas it became evident that the province was taking a beating from a protracted drought. Access to basic services was still a problem in some areas. It was evident that there was need for some intervention and it was decided surplus funds should be set aside to deal with these issues. The grant was aimed at facilitating access to water and electricity in rural areas.

The Chairperson said that the Departments of Minerals and Energy and Water Affairs and Forestry had been invited to appear before the Committee. He asked if the money came from the two Departments.

Mr Mphahlele replied that the money was part of the equitable share.

Mr Hattingh agreed that the money formed part of the equitable share. Traditionally there were national contingency reserves for things like droughts. The province could have secured funding from the reserves but had opted to find the money from other sources. They had decided to use their own money at a cost to themselves instead of bargaining for money at the national level.

The Chairperson wondered which programmes had suffered as a result of this. The Minister of Water Affairs had underspent in relation to the provision of water.

Mr Mphahlele replied that no programme was compromised.

The Chairperson asked what kind of formula was used in disbursing the PIG. Was there a decision not to use the law? Why was there a flat rate in the PIG between the Departments of Agriculture and Education? Did the Departments have equal capacity? The MEC for Agriculture had spent all the money she had during the third quarter and wanted more money. The province had set aside R40 million for drought relief. Somebody had decided to ask for the R40 million following some rain in the province.

Mr Makgoe replied that the money was aimed at helping the Department to deal with issues of improving paypoints. There was also the secure centres programme that was aimed at dealing with children who were in conflict with the law.

Mr Botha noted that a total amount of R470, 026 million was spent in March alone in Limpopo province. He asked the province to explain how such a huge sum of money was spent in one month.

Mr Sogoni said that the Free State province had spent 88% on the Primary School Nutrition Programme grant. There was a need to feed school children in the province. He asked why only 88% of the grant was spent. There was underspending in various grants across provinces. He asked if this was due to lack of proper planning. What was Treasury doing to assist provinces to spend properly? The Northern Cape was more of an agricultural province but only 63% of the budget for agriculture was spent. Comprehensive Agriculture Support only spent 57% of the budget. What was capital expenditure? Was maintenance part of capital expenditure? He said that there was underspending on personnel in Limpopo. He wondered if this was due to vacancies. In most cases provinces were unable to spend a lot of money during the first nine months of the financial year. Expenditure during the last three months of the financial year seemed to be bigger that what was recorded during the first nine months. He asked provinces how this had happened.

Mr Makgoe replied that the province would have overspent the nutrition grant had it not been given an adjustment later in the year. The province received R11 million during the adjustment process for the programme. One of the critical problems was that it seemed that there was no agreement on how to use the money. The MEC was of the view that the money should be used to increase the number of schools or children in the programme. The National Department of Education was of the view that the money should be used to buy capital equipment for the production of food. He reminded the Committee that schools were closed in December and the money was received in November. All primary schools that needed the programme were covered since the beginning of the new school year. The province was moving towards the hot meals project. Some schools were still receiving fortified biscuits.

With regard to capital expenditure, he said that the problem of slow spending was linked to planning. However, it seemed that the problem had more to do with culture than with planning. There was a tendency to do things just to keep people busy.

Dr Mashamba replied that underspending was mostly in personnel and goods and services. There was a need for proper planning if the government was to deliver services as expected. Limpopo was fortunate in that it had a provincial planning unit composed of people from various Departments.

Mr Mphahlele agreed that there was underspending in some departments and this was partly due to their inability to attract the relevant skills. Poor planning remained the main reason for underspending. Project planning was very important and should subscribe to the key deliverables as set in the provincial strategy. The planning unit would mop up all the planning activities within the government so that it could synchronise action and concentrate resources with a view to getting maximum impact.

Mr Mokoko replied that maintenance and capital expenditure were two different things. Maintenance was included under capital expenditure because in the past it seemed like there was no maintenance taking place in the province particularly in relation to roads. The province wanted to allay fears that there was no maintenance by including maintenance under capital expenditure.

The Chairperson said that the province had once reported that the Department of Education had made some savings by ensuring that all educators collected their cheques in person. It was important for the province to be specific in terms of which Departments had underspent on personnel. The Division of Revenue Act provided that national transferring Departments should communicate any intention to withhold moneys to provincial treasuries. He asked if provinces, in the context of capacity building, implemented Section 13(3)(c) of the Division of Revenue Act.

Mr Makgoe replied that Free State had not implemented the provision. Only the Department of Health had problems but he was not convinced that they were related to capacity and therefore necessitated action in terms of the provision. Hospital Revitalisation had problems and the national Department of Health had outlined some of the problems it was facing.

Dr Mashamba replied that the province had not used the section. Mr Mokoko replied that his department had also not invoked the provision. The Eastern and Western Cape provinces had also not used the section.

The Chairperson said that the financial year had ended and it was now time to evaluate if there was value for money in all the expenditure that had taken place. It seemed like there was too much expenditure on personnel and this raised a question about service delivery. The Committee would have to visit some provinces and investigate if value for money was being received.

Eastern Cape Provincial Treasury
Professor N Kusi (Head of Department) made the presentation. (See document attached). The MEC could not attend the meeting. Professor Kusi said that the province had received a total of R13, 2 billion in conditional grants and had spent about R13 billion. He proceeded to give a breakdown of expenditure per grant and per Department. There were encouraging trends in the Department of Education as the expenditure had reached 98%, increasing from 85% in 2004/05. There was slow expenditure in the Departments of Social Development and Health.

Discussion
The Chairperson asked for how many days the Department of Education fed schools kids under the Nutrition programme. He also asked for a comment on the belt tightening exercise in which the province was involved and the underspending in the Department of Health.

Prof Kusi replied that the Department of Education fed school children for five days. He said that there were problems in the Department which necessitated a meeting between him, the MEC and the Department. He was told that the Department was head-hunting for a Chief Financial Officer because there was none in the Department. The person had been found and had already assumed duties. The Department had also appointed two people to their finance office. The Department would also get assistance from COEGA engineers and architects in relation to planning and monitoring of its infrastructure budget.

He said that at the beginning of 2005/06 the province, according to the estimates, was potentially exposed to overspending of about R3, 5 billion. It was then decided that there should be some belt tightening in the province and this involved an amount of R1, 6 billion from the provincial equitable share. This was to be followed by R899 million from the current financial year. The over exposure had been reduced to R2, 5 billion. The province did not actually owe anybody. It was just that some Departments had overspent.

The Chairperson said that the Committee should regard the Eastern Cape as a special project until such time there was a clear picture of what was happening in the province. The MEC for Roads and Transport had pleaded poverty in the three quarters in which he appeared before the Committee.

Mr Sogoni said that it was important for the provinces to give a true reflection of the situation as it was on the ground. There was no intention on the part of the Committee to crucify anybody.

Western Cape Provincial Treasury Presentation
The Western Province Treasury was not allowed to make a presentation because neither the MEC nor the Head of the Department had attended the meeting. The MEC and the HOD were on municipal visits. The Treasury had sent a Senior Manager (Provincial Government Finance) in the Department to come and make the presentation. The Chairperson did not allow the Senior Manager to make a presentation since he was not the accounting officer of the Department.

The Chairperson asked all presenters to indicate what was supreme between the law and Treasury guidelines in dealing with conditional grants.

All presenters agreed that the law superseded guidelines. The Chairperson stressed the importance of complying with the Division of Revenue Act.

The meeting was adjourned.