This report analyses the expenditure trends of the first quarter of 2003/04 financial year. Since this is the initial part of the financial year and some departments are disbursing funds to institutions, the expenditure trends will reflect the pattern of these disbursements. Some departments, for example the Department of Education, will necessarily spend most of its budget early in the financial year.

As indicated in appendix 5, total departmental expenditure reflects a gradual decline from April to June 2003. These declined from an average of 9.84% in April to 7.80% in May and 6.75% in June 2003. This trend is evident in all the Departments that had the highest expenditure in April (See appendix 4) i.e. the Departments of Education, Public Enterprises, Social Development and Parliament.

The Department of Education explained that the high expenditure reflected in the initial months of the quarter is caused by subsidy transfers to Institutions of Higher Learning. These subsidies account for more than 90% of the Department’s budget.

The Department of Social Development clarified that the high expenditure reflected in April was caused by the disbursement of the first part of the Extension of the Child Support Grant. This trend will be evident when the Department disburses funds for its special allocations.

Contrary to the downward trend, the Department of Environmental Affairs and Tourism increased its expenditure dramatically from 6.18% in May to 22.57% in June 2003. On the other hand, eleven departments have consistently spent less than the monthly average throughout the quarter. At the extreme of these are the Departments of Foreign Affairs and Communication, spending less than 3% of their budgets. The Department of Communication initially spent the least in the last financial year and only increased its expenditure dramatically (49.72%) in the last month of the year.

The reason given for the low expenditure reflected in the Department of Foreign Affairs is that the bulk of the Department’s expenditure takes place abroad and there is a time lag of 2 to 3 months between the period of expenditure and financial reporting. In addition, the data forwarded to National Treasury was distorted because of the problems experienced with the Basic Accounting System. Attempts to obtain clarification from the Department of Communications have not been successful at the time of drafting the report.

Similar to last quarter, expenditure trends fluctuated dramatically in some departments in this quarter. The Department of Environmental Affairs and Tourism, Minerals and Energy, Provincial and Local Government, Defence, Health and Public Enterprises experienced the greatest expenditure fluctuations.

The months under review are April, May and June 2003.

For April 2003, the average amount spent by each department constitutes 9.84%, with 24 votes spending less than this average. The Department of Housing spent the least (0.11%) during this month.

Source: Compiled by author using National Treasury data.

Of the lowest spending departments in the above table, the Departments of Housing, Provincial and Local Government, Foreign Affairs, Communications and Sport and Recreation South Africa were the worst, spending less than 1% of their budgets in April 2003/04.

As illustrated in the table above, the Department of Education and Public Enterprises reflected the highest expenditure in April 2003/04. The Department of Education spent more than a quarter (26.06%) of its budget in one month. The explanation given for this is that transfers to Institutions of Higher Learning were made in this month.

For May 2003, the average amount spent by each department constitutes 7.8% with 26 out of 34 votes spending less than this average.

In contrast, eight departments spent more than the average. Of these, the Department of Education spent more than a fifth of its budget (20.4%) in one month. The explanation given in April applies to May as well.

Source: Compiled by author using National Treasury data.

Table 3 illustrates that the Departments of Foreign Affairs, Health, Minerals and Energy, Government Communications and Information Systems, Justice and Constitutional Development, Communications, Labour, Defence and Arts and Culture are the least spending.

Source: Compiled by author using National Treasury data.

The Departments of Education, Provincial and Local Government, Parliament, Public Service and Administration and Social Development are the votes that reflected the highest expenditure in May 2003/04. The Department of Education has spent more than a fifth of its budget in one month. This has been explained.

For June 2003, the average amount spent by each department for the month of June constitutes 6.75%, with 21 votes spending less than this average. The Department of Social Development spent only 0,56% of its total budget in June 2003/04. This was explained in the initial part of the report.

In contrast, 12 departments spent more than the average. Of these, the Department of Environmental Affairs and Tourism spent 22.57% of its budget in one month. An explanation for this has not yet been obtained.

Source: Compiled by author using National Treasury data.

Table 5 illustrates that the Department of Social Development has spent the least in June 2003/04. Other lowest spending departments are Provincial and Local Government, Foreign Affairs, Land Affairs, Science and Technology, Water Affairs and Forestry, Government Communications and Information Systems and Arts and Culture. Of these lowest spending departments, the Department of Foreign Affairs has only managed to spend 4.93% of its total budget since the beginning of the 2003/04 financial year.

Source: Compiled by author using National Treasury data.

The Departments of Environmental Affairs and Tourism, Minerals and Energy, Correctional Services, Transport, Public Service and Administration, Housing and Public Works spent the highest in June 2003/04. While the Department of Education is not one of the highest spending departments in June, its total expenditure of 54.01% in three months, remains the highest. This means that the Department has spent more than half of its budget in one quarter. The explanation given is that the disbursements to Institutions of Higher Learning are made in the first quarter of the year.

The average percentage spending as at 30^th June 2003 was 21.97 % of their budgets.

Table 7 indicates the percentage of the total budget that has been allocated to provinces for the year and the total expenditure that has been spent.

Table 8 provides the percentage expenditure on both Current and Capital Budgets.

Table 9 indicates the spending of provinces on both capital and current budgets:

Appendix 7 and 8 provide demonstrations of the information contained in tables 9.

 RECOMMENDATIONS

In view of the observations made on the expenditure trends of departments, the following are recommended:

• Given that some departments disburse conditional grants to institutions, the National Treasury’s statements of revenue, expenditure and national borrowing should reflect the actual expenditure by departments separately. They should have an additional column or a different table showing whether the expenditure incurred was for special allocations or normal operational.
• In order to compare monthly planned expenditure to actual expenditure, the Joint Budget Committee should request cash flow statements of departments.
• Further capacity building has to be built into financial management procedures especially regarding the Public Finance Management Act of 1999, to ensure compliance with this Act.
• Formally structured co-operation between the Joint Budget Committee and other sector committees of Parliament should take place to allow for the flow of information in respect of peculiar Departmental spending patterns.
• The Joint Budget Committee should collaborate with the sector committees in interrogating the nature and quality of expenditure for those departments that have peculiar expenditure trends.
• The National Treasury should ensure timely publication of the monthly statements of revenue and expenditure to give the Joint Budget Committee sufficient time to scrutinise and report on these.
• The National Treasury should have a contact person who is capable of handling queries on the data in the statements of revenue and expenditure.
• Continuous technical and research support should be given to the Joint Budget Committee to ensure that it conducts its work smoothly.
• Capacity building in financial oversight should be a priority to the members of the Joint Budget Committee.

Source: Compiled by author using National Treasury data.