1. Introduction

Departmental expenditure has been fairly consistent throughout the financial year. However, it is evident that Departments increased their expenditure in the last quarter, as was the case in the last financial year. The Department of Communications, in particular, always spends more than half of its budget in the last month of the financial year. These two departments, together with the Department of Sports and Recreation, increased their expenditure significantly in March 2004.

The Department of Communications had only spent 41.29% of its budget at the end of the third quarter, leaving it with 58.71% to spend in the last quarter. However, in a period of one month (March 2005) the Department managed to spend 50.09% of its budget, bringing its total expenditure to 98.22% by the end of the financial year. Likewise, the Department of Foreign Affairs had spent 47.48% by the end of the third quarter and increased its expenditure significantly towards the end of the financial year.

It is worth mentioning that the same trend was evident in the expenditure of the Department of Communications for the past three financial years. For example, in February 2003, the Department had only spent 45.75% of its budget, and then managed to spend 49.72% in the last month of that financial year (March 2003). Similarly, in February 2004, the Department had spent 45.67% of its budget, and then spent 50.75% in the last month of the financial year.

Table 5 (Appendix 1) indicates that Departments underspent by R 6.3 Billion, which is lower than the R8 Billion underexpenditure from the 2003/04 financial year. In addition, Figure 1 indicates that Departmental spending has been gradually decreasing over the past three financial years.

Figure 1: Average departmental Spending trends

2. Analysis Of Expenditure Per Quarter

2.1. First Quarter

In the first quarter of the financial year, some departments were disbursing funds to institutions and their budgets reflected these transfers. Most notable was the Department of Education, which spends most of its budget during the first and second quarters. Another example is the Department of Social Development.

The First quarter expenditure report showed a gradual decline in expenditure from April to June 2004. Average expenditure declined gradually from 9.84%, 7.80% to 6.75% in April, May and June 2004 respectively.

The Department of Education was the highest spender in the first two quarters and the Departments of Foreign Affairs and Communications were already lagging behind with their spending.

2.2. Second and Third Quarters

The second quarter indicated some fluctuation of expenditure in certain departments, notably the Departments of Social Development, Public Enterprises, as well as Provincial and Local Government. These Departments transfer a large portion of their funds in certain months and thus present highly fluctuating expenditure from month to month. The Department of Social Development, for example, spent 24.43% of its budget in October 2004 and only 0.56% in November 2004. In addition, while the Department of Provincial and Local Government spent only 2.42% of its budget in October, it spent 18% of its budget in November.

The Department of Minerals and Energy was the highest spender in December 2004, spending 27.92% of its budget in this month. The department explained that the increase in expenditure was attributed to a huge payment of R447.688 million made to ESKOM for the National Electrification Programme.

The Departments of Communications and Foreign Affairs had spent only 41.29% and 47.48% of their budgets at the end of the third quarter. The Department of Communications was still a cause for concern at the end of the third quarter, as had been the case in the preceding two financial years. The Department however, had increased its expenditure marginally from 32.52% in the third quarter of the 2003/04 financial year, to 41.29% at the end of the third quarter of the 2004/05 financial year. The Department of Communications’ expenditure has continuously been a cause for concern for the Committee due to the department’s trend of under spending on its budget and then spending a huge chuck of the budget in the last month of the year. The Committee has previously recommended that the Department appear before it.

The Departments that had spent highest on their budget were: the Departments of Education (91.19%), Defence (79.36%), Parliament (76.56%) and GCIS (74.87%). The expenditure of Departments was consistent and fairly predictable throughout the first three quarters; with Departments spending slightly lower than they did in the same periods of the previous financial years.

The ratio in spending between current and capital expenditure remained unchanged in the second and third quarters. Although some Departments had increased their capital expenditure, the average remained the same, with Departments spending 72.76% on current expenditure, 71.39% on Transfers and 65.82% on capital expenditure.

The social services sector was the highest spending sector with an average expenditure of 77.52%. Departmental expenditure had dropped slightly from the 2003/04 financial year from 71.67% in the third quarter of the 2003/04 financial year to 69.71% in the third quarter of the 2004/05 financial year. In addition, Departments are consistent in terms of their spending trends, and there are no major changes from the last financial year.

2.3. Fourth Quarter

During the last quarter of the financial year, departments increased their expenditure tremendously, most notably the Department of Communications. Similar to the last financial year, the Department had spent lowest by February 2005, and then spent a huge chunk of its budget in the last month of the financial year.

Departments increased their average expenditure from 10.14% in January to 11.65% in March 2005. Tables 1 and table 2 indicate the highest and lowest spenders at the end of the financial year. Although the Department of Communications does not appear on these tables, it was the lowest spender for the first three quarters of the financial year, but then spent 50.09% of its budget in the last month of the financial year (March 2005). The same trend had been evident in the preceding two financial years.

3. Analysis of Average Expenditure as at 31 March 2005

3.1. Highest spending Departments

Table 1

Table 1 indicates that Parliament and the Department of Safety and Security have spent their total budget, as was the case in the previous financial year. The only Department that overspent on its budget is the Independent Complaints Directorate (ICD), which overspent by 1.03%. Expenditure trends indicate that Departments have generally decreased their expenditure, particularly the lowest spending Departments.

Figure 2: Average Expenditure of highest spending Departments

3.2. Lowest spending departments

Table 2: Lowest Spenders

Only three Departments spent their total budgets, as opposed to five in the last financial year. In addition, more departments underspent with a higher margin in the last financial year and Departments such as the South African Management Development Institute (SAMDI) and the Department of Public Service and Administration spend a large amount of their budgets in the last month of the financial year.

The Departments of Home Affairs and Public Service and Administration have been among the lowest spenders for three consecutive financial years, and SAMDI for two consecutive financial years.

4. National Current, Transfer and Capital Expenditure

Departments spent most in capital expenditure rather than transfer or current expenditure. This is a huge shift as it is the opposite trend to the last two financial years, wherein Departments have been spending most on their current and less on their capital budgets. In the 2004/05 financial year, Departments exceeded the average capital expenditure, spending an average of 106.33%, 98.28% and 96.11% in Capital, Transfer and Current Expenditure respectively.

This represents a decrease in current and an increase in capital expenditure from the last two financial years.

4.1 Current Expenditure

The lowest spenders of current expenditure are the Departments of Provincial and Local Government (59.03%), Sports and Recreation South Africa (66.49%), Stats SA (72.21%), SAMDI (72.38%) and education (73.14%).

The highest spenders of current expenditure are the Departments of Public Enterprises, which overspent by 4.52%, Defence overspent by 3.76%, Public Works by 3.28%. Parliament reported an expenditure of 100% on current expenditure.

4.2 Transfers

The lowest spenders of transfer expenditure are the Public Service Commission (0%), the Departments of Public Enterprises (29.82%), Public Works (73.48%), Sport and Recreation South Africa (79.87%), Foreign Affairs (88.52%).

Several Departments overspent tremendously on their transfer expenditure. These are the Departments of Correctional Services, which spent five times more than its original transfer budget, the ICD, which spent more than double its allocated transfer budget. In addition, Statistics South Africa overspent on its transfer budget by 12.12%, Public Service and Administration by 5.63% and Justice and Constitutional Services by 3.28%.

4.3 Capital Expenditure

The lowest spenders of capital expenditure are Arts and Culture (3.35%), National Treasury (29.33%), Home Affairs (39.17%) and Stats SA (40.53%).

Several Departments overspent tremendously on their capital expenditure. Departments which underspent most on capital expenditure are the Departments of Sport and Recreation, which spent R56.9 Million from a budget of R2.6 Million. The Department of Science and Technology (521.88%) spent five times more

than its original budget. Other Departments that spent more than double their allocated capital funds are

the Independent Complaints Directorate, SAMDI and the Department of Housing.

Figure 4: Average current, transfer and capital expenditure

1. Provincial Expenditure

Most provinces underspent marginally on their budgets. Provincial expenditure increased from an average of 98.72% in 2002/03, to 99.47% in 2003/04, and again decreased to 96.94% in the 2004/05 financial year. The trend is illustrated in figure 5.

Table 3 indicates the expenditure of provinces at the end of the financial year. The North West Province was the lowest spending province, underspending by 5.22%. Other provinces that underspent on their budgets are Mpumalanga (4.7%), Free State (4.55%), Northern Cape (3.99%) and Gauteng (3.09%). These are the lowest spending provinces. These provinces, with the exception of the Northern Cape province, were also the lowest spenders in the 2003/04 financial year.

Figure 6: Provincial Expenditure: 2003/04 and 2004/05

Current, Transfer and Capital Provincial Expenditure

The spending trends regarding current and capital provincial expenditure has not changed from the preceding two financial years. Provinces are still spending more on their current expenditure and less on capital expenditure. This is depicted in table 4.

Figure 7: Economic classification of provincial expenditure: 2004/05 financial year

Departmental spending trends indicate that Departmental expenditure is decreasing gradually and there is more underspending than there was in the previous two financial years. This is indicated by the gradual decrease in expenditure, from 98.64% in the 2002/03 financial year, 98.04% in the 2003/04 financial year, and 97.65% in the 2004/05 financial year. However, it is important to note that the same Departments that were conspicuous in their spending patterns in the last two financial year, such as Communications, Foreign Affairs, and Home Affairs, as well as SAMDI, are still so in this financial year.

At the beginning of the last financial year, the Parliamentary Research Unit contacted Departments in order that they provide it with their strategic plans and cash flow projections. Not all Departments responded to this request. However, even those who did, could not be very helpful in explaining the spending trends of their Department. This was due to the following reasons:

• Firstly, the cash flow projections only indicate month-by-month expenditure, and do not distinguish between current and capital expenditure. It is would be beneficial if the cash flow projections distinguished between current and capital expenditure and also if they reflected the Department’s goals and objectives, as outlined in the strategic plans of Departments.
• Secondly, few Departments spend according to the cash flow projections that they provide to the Parliamentary Research Unit. It is thus difficult to keep track of the spending patterns of these Departments.

• The Department of Communications has indicated in the past that it does not have cash flow projections and that programmes are funded as the need arises. This makes it even more difficult to monitor expenditure in the Department.

In view of the fact that there has not been much change in the spending of departments from the last financial year, the same recommendations that were made in the last financial year still stand, with a few amendments. These are:

• Further capacity building of Committees and Departments has to be built into financial management procedures, especially regarding the Public Finance Management Act of 1999, to ensure compliance with this Act.
• Strategic plans of departments have to be scrutinised in order to ensure the redress of underspending and overspending. This would entail that the Joint Budget Committee work closely with Portfolio and Select Committees in order to alert them of any queries in the spending patterns of Departments. In addition, 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. Furthermore, the speaker’s office should ensure that strategic plans are referred to Portfolio Committees.
• 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. This could also relate to administrative support structures of committees.
• The Joint Budget Committee should facilitate public hearings and invite consistently underspending and overspending National Departments and provinces to Parliament for scrutiny.
• The Joint Budget Committee, together with the sector committees, should interrogate the quality of spending to detect fiscal dumping in those Departments that are underspending at the early stages of the financial year and suddenly spend heavily towards the end of the financial year. Examples in this regard are the Departments of Communications, Foreign Affairs and Sport and Recreation.
• It would be favourable for Departments to be called to appear before the Committee when applying for rollovers and additional funding. While scrutinising the requests of Departments, it is important for the Committee to have knowledge of how Departments are conducting their budgets at that time. For example, the Committee should keep track of departments who apply for additional funds even though they are struggling with their budgets.
• The Joint Budget Committee should undertake study tours to those provinces that are experiencing underspending or overspending problems. Alternatively, the Committee can look at other avenues of alerting provinces, such as alerting their legislatures of the over/underspending.
• 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.
• Continuous technical and research support should be given to the Joint Budget Committee and other sector committees to ensure that they conduct their work smoothly.
• The cash flow projections of Departments should be tabled in Parliament and presented to Parliament and the Committee simultaneously with the strategic plans.

• Statements of National and Provincial Revenue, Expenditure and Borrowing, January to March 2005, National Treasury.

1. Name of the Committee: Joint Budget Committee (JBC)
2. Mandate of the Committee (vision, mission etc)

1. List of Entities Reporting to the Committee

Departments and reports to Parliament quarterly.

1. Chairperson’s overview (summary for the year)

The year 2004 was very short for the Committee. The new Committee was established on 25 June 2004, however, it was formally constituted on 8 October 2004 because of the delay by authorities in allocating members to the Committee. The National Assembly allocated its members to the Committee on 26 August 2004 and the National Council of provinces on 30 September 2004.

During the period covered by this report the Committee still faced the problem of most members serving in it being core members of other busy Committees as it was the case with the previous Committee. This tends to hamper progress with the work of the Committee as it is, in most instances, difficult to get full attendance. As a Committee which is still in the developmental stage it is crucial to get all members on board. We would like to appeal to authorities to look into this matter and resolve it.

We have also observed that Parliament regards this Committee as other joint Committees whose main task is monitoring and may therefore not need to meet frequently. According to the scheduling of meetings these Committees are scheduled to meet on Fridays only. In this regard we would also like to appeal to Parliament to reconsider this situation as it clear that this Committee has such a huge mandate.

2. Core objectives (responsibilities)

The Committee’s Terms of Reference are very broad and the Committee intends holding a series of workshops in order to unpack them and then formulate its vision/mission and core objectives.

1. Legislation

1. Matters other than mandated legislation:

1. International agreements

None

2. Hearings on matters of national interest, if any…

1. Annual Reports

2. Implementation of legislation

3. Institutional Oversight

1. Committee activities

• Budget Council

1. Conferences

- Catering = R 8 141

- Attendance of Budget Council meetings = R20 216

- Newspaper Adverts = R57 300

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Balance (as at 25 November 2004) R164 343*

* The big figure reflected in the balance is as a result of the Committee operating for a short period of time in 2004 and therefore should not be construed as underspending. Moreover, part of this amount would be used for Committee activities during the period from January to March 2005.

1. Appendices

indicates an alternate member