Report of the Select Committee on Finance – 3rd and 4th Quarter Public Hearings on Conditional Grants and Capital Expenditure, dated 14 June 2006:
1. Background
The Select Committee on Finance embarked on the Public Hearings on Conditional Grants and Capital Expenditure (3rd and 4th Quarter Provincial Reports). The MECs of the relevant Departments were required by the Committee to report on the following:
Data on trends in allocations, transfers and actual expenditure of Conditional Grants, capital and infrastructure expenditure of the Department,
A brief assessment of the Departments monitoring capacity, for the financial year 2005,
Overspending / under spending and the capacity constraints that impacted on these events,
Mechanisms that are put in place to deal with these and related challenges,
Whether monthly reports are received from receiving Departments of municipalities and if not, what is that relevant Department doing to ensure compliance,
Whether certified business plans for Conditional Grants have been submitted to the National Treasury for the current financial year 2005/06 as provided for in the Division of Revenue Act (DORA), and
Whether service level agreements have been signed and if so, when were they signed?
2. Introduction
This report of the Select Committee on Finance is divided into two parts. Part one of the report covers key issues that emerged during the course of the 3rd Quarter Public Hearings on Conditional Grants and Capital Expenditure (16-25 January 2006). Part two of the report deals with the 4th Quarter Public Hearings on Conditional Grants and Capital Expenditure and key issues that emerged during those hearings (2-8 May 2006).
The following stakeholders were invited to make presentations before the Committee:
National Treasury
Provincial Treasuries
Provincial Departments of Health
Provincial Departments of Social Development
Provincial Departments of Education
Provincial Departments of Housing
Provincial Departments of Agriculture
Provincial Departments of Sport and Recreation
Provincial Departments of Roads and Transport
Provincial Department of Sport and Recreation
Provincial Departments of Public Works, and
South African Local Government Association (SALGA)
PART ONE
3. Hearings on the 3rd Quarter Conditional Grants and Capital Expenditure: Report by the National and Provincial Treasuries
Report by the National Treasury
The National Treasury gave an overview on the outcome of Conditional Grants and Capital Expenditure. The presentation covered the provincial spending for the first 8 months (1 April to 30 November 2005) of the 2005/06 financial years as follows:
It was reported that the spending was at R136 billion (62,1%) of adjusted (R 219,2, billion).
The highest rate of spending was in Kwazulu-Natal (63,2%), with Northern Cape and Mpumalanga at 63,15.
Free State and Gauteng being the lowest at 60, 8.
3.2. Report by the North-West Provincial Treasury
The North-West f Provincial Treasury reported that the total spending on Conditional Grants in the 3rd quarter was at 65,5%, with the Department of Sport spending less than 50% and the Department of Agriculture being the lowest at 1,2%. The Department informed the Committee that under spending was projected in the Department of Agriculture and also in the Department of Health. The Department indicated that only 1,2% was spent in the Department of Agriculture during the first three quarters and that little spending would take place for the rest of the year. The Department went further to say that in the North West there "was no Department of Agriculture", as the new Head of Department (HOD), Senior Managers and some officials had been on suspension since June 2005.
3.3. Report by the Limpopo Provincial Treasury
The Limpopo Provincial Treasury gave an overview of the cumulative spending patterns for the Health, Social Development, Sport and Recreation, Agriculture Conditional Grants and the Housing and Provincial Infrastructure Grant (PIG). The Department informed the Committee that it had managed to increase the expenditure per quarter as follows:
R40, 67 million (6.27%) in the first quarter,
R106, 391 million (22.1%) in the second quarter, and
R241, 860 million (43.5%) in the third quarter.
On the Provincial Infrastructure Grant, the Department indicated that only 40.2% had been spent. The Department indicated that this was due to the fact that projects started very late because some of the Departmental business plans were changed. The Department concluded by indicating that most of the Departments were unlikely to spend their full Provincial Infrastructure Grants in this financial year.
3.4 Report by the Mpumalanga Provincial Treasury
The Mpumalanga Provincial Treasury gave an analysis on trends in allocations, transfers and actual expenditure of Conditional Grants, capital and infrastructure expenditure as follows:
In some cases more Conditional Grants had been spent than what had been transferred by the National Treasury.
The overall performance of Conditional Grants had improved during the third quarter (ending 31 December 2005).
The Department of Public Works was assisting the Department of Health and Education in managing their infrastructure grants.
All Departments with Conditional Grants had indicated that poor performing grants would be contained as not to exceed the allocated budgets.
3.5 Report by the Northern Cape Provincial Treasury
The Northern Cape Provincial Treasury gave a broad overview as follows:
The total expenditure of the Department amounted to R3, 336 billion.
The projected net under spending was R42 million or 1% of the adjusted budget.
Three Departments projected to under spend on their adjusted budget.
Material under spending is projected to occur in:
Social Development by R45 million, and
The Department of Agriculture and Land Reform by R41 million.
Spending on capital expenditure amounted to R145, 8 million or 42% of the adjusted budget as at 30 November 2005.
The Province projected to under spend on its CAPEX budget by R30, 9 million or by 9% of the adjusted CAPEX.
Expenditure on Conditional Grants amounted to R1, 216 billion as at 30 November 2005.
There was low spending on all Conditional Grants.
The Department spent 60% of the adjusted conditional budget.
The Department conceded that there was slow spending particularly on Conditional Grants by most of the Departments.
3.6 Discussion
The Committee raised the following questions, concerns and comments:
To what extent were the provinces utilising Section 18 of the Public Finance Management Act, which placed the powers on the Provincial Treasuries to assist the struggling Departments.
Has the North West Provincial Treasury established the Budget Committee, as had been indicated by the Department in a previous appearance before the Committee in 2005.
The Committee was particularly concerned about the low spending trends on the Conditional Grants, especially by Department of Agriculture in the North West.
What mechanisms are the provinces going to employ to monitor under spending in their respective provinces.
To what extent are big businesses involved in supplying the required building materials for government projects.
The North West Provincial Treasury was requested to provide clarity on the involvement of the Independent Development Trust (IDT) in some of the infrastructure developments.
Further clarity was sought on financial management problems by the Northern Cape Roads and Public Works, which the Committee had raised in the previous hearings.
The North West, Limpopo, Mpumalanga and Northern Cape Provincial Treasury Departments responded to the questions, concerns and comments raised by the Committee as follows:
The Mpumalanga Provincial Treasury stated that their Department alone could not implement Section 18 of the PFMA. They would also need the intervention and support of the Executive Council, and this issue had been raised in its Provincial Lekgotla.
The North West Provincial Treasury indicated that the interpretation of Section 18 was ambiguous and this issue was still debated in the Province.
The North West Provincial Treasury stated that the Budget Oversight Committee had been established and was operational.
The North West Provincial Treasury reported that it was assisting the Department of Agriculture in addressing its challenges.
The Limpopo Provincial Treasury conceded that, the issue of under spending was affecting poor people on the ground as it affects service delivery; hence the Department had intervened politically to unblock the unblockages.
The Northwest Provincial Treasury indicated that it had approached the South African Management Development Institute (SAMDI) and the Independent Development Trust (IDT) to assist Departments in order to ensure proper planning for infrastructure.
The Northern Cape Provincial Treasury responded that the issue with the Department of Roads and Public Works had been referred to the Premier and the MEC for Public Works.
3.7 Report by the Western Cape Provincial Treasury The Western Cape Provincial Treasury briefed the Committee on the Conditional Grant Allocations, Transfers, Conditional Grant – Cash flow management, Monitoring transfers, Division of Revenue, Expenditure, Monitoring Expenditure, and on Service delivery. On the shortcomings of the Division of Revenue, the Department highlighted the following:
Section 32(2) of the Division of Revenue Act of 2005/6 requires National Departments to notify receiving officers of their intention to withhold transfers, providing opportunity for Departments to submit reasons as to why allocation should not be withheld,
There are no requirements for Provincial Treasuries to be informed while National Treasury only needs to be informed if funds are to be withheld for more than 30 days,
There is an administrative burden of negligible grants, for example the Land Care Grant of 2,5 million with numerous reports required,
Cash constraints are placed upon the Province when funds are withheld as commitments exists,
There is an overlapping of measurable outputs, and
The conditions of grants limit flexibility.
3.8 Discussion
The Committee raised the following questions, concerns and comments:
The Committee proposed that the issue on the shortcomings of the Division of Revenue be raised in the public hearings of the DORA.
Clarity was sought on measures that had been taken by the Department of Health and Education in addressing the issue of infrastructure.
The Committee enquired whether the Provincial Treasury Department expected any under expenditure in the Provincial Departments, and if so what steps had been taken to curb the problem of under spending.
The Provincial Treasury was urged to identify capacity constraints in all the Provincial Departments.
The Western Cape Provincial Treasury Department responded to the questions, concerns and comments raised by the Committee as follows:
The Treasury Department indicated that its recommendations on the Division of Revenue were based on the practical experience with the Bill and that it would welcome any interaction with regard to the amendment of DORA 2006/07.
The Treasury Department reported that it was always engaging the Departments on a quarterly basis, with maintenance of facilities. The Department of Health was also engaging the Department of Public Works on the maintenance and alterations of its buildings.
The Department reported that it projected under expenditure in the Health infrastructure and with all other Departments performing well.
The Department reported that capacity constraints were constantly discussed at the Budget Council Lekgotla.
4. Hearings on the 3rd Quarter Conditional Grants and Capital Expenditure: Report
by National Treasury and Provincial Departments - Health
4.1 Report by the National Treasury
The National Treasury reported that the total Provincial Health spending was at R29, 4 billion or 62, 3% against R47, 1 billion of the adjusted budgets. The Department indicated that there had been an increase of R3, 9 billion or 15, 4% compared to the previous year. The Department stated that the lowest rate of health spending was in Limpopo at 55,6% and Gauteng at 61,6%, with the Northern Cape at 66,1% and Mpumalanga at 65,5% reflecting the highest rate of spending in health. The National Treasury reported that the health personnel spending were at R16, 7 billion or 65, 2% (R25, 6bn of the adjusted budget).
The Department indicated that capital spending was at R1, 7 billion or 42,1%. The Department stated further that there had been an increase of 59, 9% compared to spending for the same period last year. The Department reported that the lowest rate of capital spending was in Limpopo at 27,9% and Free Sate at 35,3% and with Mpumalanga at 58,4% and Kwazulu-Natal at 49% reflecting the highest rate of capital spending in health.
On Conditional Grants it was reported that five or more Provinces had spent less than 50% for the following grants:
Hospital Revitalisation and
Hospital Management and Quality Improvement.
The National Treasury stated that the majority of grants reflected spending within the 50% and 70% range against the Division of Revenue Act.
4.2 Report by the Kwazulu-Natal Provincial Department of Health
The Provincial Department reported that a total of R114, 042 million had been received for the Comprehensive HIV and Aids Grant, and 97% had already been spent on this grant. The Department stated that 35% of a R223, 939 million grant for hospital revitalisation had been spent, a rollover of some R99 million would be requested in 2005\2006.The Department stated that it intended using private developers rather than the Provincial Department of Public Works. The Department said that proposals would be forwarded to the Executive Council for approval.
On the Forensic Pathology Services Grant the Department indicated only 5% of 24,9 million was spent, this was attributed to the late receipt of funding. The Department indicated that a rollover of approximately R22 million would be requested. On Provincial Infrastructure, the Department reported that Ithala had advised that of the approximately R58 million provided, R33 million would not be spent this financial year and would be returned to the Department.
4.3 Report by the Mpumalanga Provincial Department of Health
The Provincial Department of Health gave a summary of the actual expenditure of all Conditional Grants. It was reported that t less than 50% were spent on the following grants:
Hospital Revitalisation (49%), and
Forensic Pathology Services (3%).
The Provincial Department reported that the total expenditure of all the grants at the end of the third quarter was 67%. For under expenditure on the Hospital Revitalization Grant, the Department of Health informed the gathering that it was due to the failure by service providers to obtain guarantees timeously and also due to poor performance by some contractors. The Department had put in place mechanisms to address the problem of under spending of some of the Conditional Grants. The Department assured the Committee that in the 4th quarter the situation would improve.
4.4 Report by the Eastern Cape Provincial Department of Health The Department projected under expenditure with the following grants:
The Department indicated that the projected under spending on the Coroner Services Grant was reported to the Provincial Treasury and EXCO and the Department would apply for rollover funds. The Department reported that under spending on Hospital Revitalisation was due to contract payments not speedily processed and contracts\tenders not finalised. The Department informed the Committee that this grant would under spend by R47 million. The Department would apply for rollover funds.
4.5 Discussion
The Committee raised the following questions, concerns and comments:
Clarity was sought on the use of private developers for hospital revitalisation by the Kwazulu-Natal and Eastern Cape Departments of Health and on why the Provincial Departments of Public Works were not utilised by the Departments in these projects and the financial implications of hiring private developers.
The Committee was concerned about the low expenditure on the Provincial Infrastructure Grant by the Mpumalanga Department of Health and the likelihood of financial dumping.
Clarity was sought on whether the Mpumalanga Department of Health was working with their Provincial Treasury in trying to curb the under expenditure on Hospital Revitalisation.
The Provincial Departments of Health for Kwazulu-Natal, Eastern Cape and Mpumalanga responded to the questions, concerns and comments raised by the Committee as follows:
The lack of capacity by the Kwazulu-Natal Department of Public Works had forced the Department to look elsewhere for their infrastructure development. The Department stated further that Ithala and the Independent Development Trust (IDT) were the other private developers who were being utilised.
The Eastern Cape Provincial Department reported that it was making use of private developers because of the shortage of skills in the Provincial Department of Public Works, which was caused by the "exodus" of skilled workers to private sector.
The Mpumalanga Provincial Department responded that the Premier had intervened by taking over the responsibilities of the Department of Health and Education, as these were the highest spending Departments in the Province. The Department stated further that the Provincial Treasury was also involved in monitoring spending in capital projects. The Department was using the IDT and the Department of Public Works for some of the Hospital Revitalisation projects. The Department of Public Works had entered into a service level agreement with the Department of Health. In terms of this agreement the Department of Public of Works was expected to submit monthly progress reports of each project they were involved in.
4.6 Report by the Free State Provincial Department of Health
The Department indicated that the following grants had an expenditure of less than 50% (as at 31 December 2005):
Hospital Revitalisation (31%),
Hospital Management and Quality Improvement (48%),
Forensic Pathology Services (0%).
The Department reported that on Hospital Revitalisation it was working with the Department of Public Works to reach the agreed target dates.
The Department was concerned about the Revitalisation and Infrastructure Grants, and was giving special attention to try to improve the expenditure on these two grants. The Department indicated that they had a close working relationship with the Department of Public Works, Roads and Transport.
4.7 Report by the North West Provincial Department of Health
The Department gave an overview on the current status of Conditional Grants as follows:
The overall Conditional Grants amounted to 10.82% of the total allocation of the Department for the year (2005/2006).
The National Health Department had withheld an amount of R40 million as per agreement from the Revitalisation Grant.
The percentage expenditure as at December 2005 amounted to 60.7%.
The Department had employed a dedicated manager to monitor the performance of Conditional Grants.
On the Hospital Revitalisation Grant, the Department reported that it was working with the IDT.
The interventions by the Department were being employed to ensure compliance with the Division of Revenue Act.
4.8 Discussion
The Committee raised the following questions, concerns and comments:
The Committee was concerned about the non-utilisation of the Medium Term Expenditure Framework by some of the Provinces. The Committee was of the view that there should be proper planning by the Provinces and the money allocated to them should be spent for the purpose it was intended for.
The Committee was concerned about the amendment of the business plans during the course of implementation. The Committee stated that service delivery should not be compromised.
Clarity was sought on the measures that had been taken by the Free State Department of Health in curbing the problem of under expenditure on the Hospital Revitalisation Grant.
The Free State Department of Health was requested to indicate the progress regarding business plans for the next financial year.
The North West Department of Health was requested to provide an answer as to why R40 million of its Hospital Revitalisation Grant was transferred back to the National Department of Health. Furthermore a question was raised as to whether the Department could transfer the R40 million to one of the Provincial Departments rather that giving it back to the National Department.
The Free State and North West Provincial Departments of Health responded to the questions, concerns and comments raised by the Committee as follows:
The Free State Department indicated that it projected an under expenditure of R23 million on the Hospital Revitalisation Grant and that the amount would be rolled over to the next financial year. The Department responded that business plans were to be approved before 1 April 2006.
The North West Department of Health reported that the R40 million would be returned back to the Department in the next financial year. The Department further indicated that money not spent would be returned to the National Treasury.
4.9 Report by the Limpopo Provincial Department of Health
The Department reported that the Conditional Grants had been the major source of the capital expenditure of the Department with an average of 53% of the funds used being provided from the Conditional Grants and 47% from equitable share.
The Hospital Revitalisation Grant together with the Provincial infrastructure Grant had provided the bulk of the capital used for facility upgrades, maintenance and provision of new clinics.
On the issue of the expenditure of the Hospital Revitalisation Grant, the Department had surrendered R10 million to the National Department of Health with a request to increase the allocations for the 2006/07 years.
The expenditure of the Hospital Revitalisation Grant depended on the progress made by contractors.
The capacity of emerging contractors and the availability of building materials had been a constraint on the completion of the contractors.
4.10 Report by the Northern Cape Provincial Department of Health
The Department briefed the Committee on the performance of Conditional Grants in the Province as follows:
It was reported that there had been a 71% under expenditure on the Hospital Revitalisation Grant and a 48% under expenditure on the Comprehensive HIV and AIDS Grant
The Department indicated that under spending on the Hospital Revitalisation Grant was caused by under performance of contractors, delay of some tendering procedures and also change to supply management.
4.11 Discussion
The Committee raised the following questions, concerns and comments:
The Limpopo Department of Health was requested to indicate mechanisms that were in place to improve the problem of over spending. The Committee was also concerned with the R10 million that had been surrendered to the National Treasury.
The Northern Cape Department was requested to outline its working relationship with the Department of Public Works. The Committee was also apprehensive about the likelihood of over spending by the Department.
The Limpopo and Northern Cape Provincial Departments of Health responded to the questions, concerns and comments raised by the Committee as follows:
The Limpopo Department of Health apprised the Committee that it had a monitoring Committee to oversee the expenditure of Conditional Grants. The funds surrendered to the National Treasury would be returned to the Department in the next financial year.
The Northern Cape Department of Health indicated that it had experienced a number of problems with the Department of Public Works especially on the tendering process for the revitalisation projects. The Department indicated that it did not foresee any over expenditure on Conditional Grants.
4.12 Report by the Western Cape Provincial Department of Health
The Western Cape Provincial Department of Health indicated the following:
The total Conditional Grants expenditure was 72%.
The expenditure for the Hospital Revitalisation Grant was below 50%.
The original budget for the Hospital Revitalisation Grant was R172 million.
The budget was reduced to R148 million in the adjustment budget because of expected under expenditure.
The reasons given for the under spending of the Hospital Revitalisation Grant were as follows:
Slow performance of contractors, and
Late approval of business plans.
61% of the Provincial Infrastructure Grant was spent and the Department was expecting the full budget to be spent.
4.13 Discussion
The Committee raised the following questions, concerns and comments:
The Committee would need to discuss the issue of demographics as it affects planning and service delivery.
Clarity was sought on the R24 million that was transferred back to the National Department.
The Committee would undertake an oversight visit to all the projects that had been mentioned by the Department.
The Western Cape Provincial Department of Health responded to the questions, concerns and comments raised by the Committee as follows:
The Department indicated that the amount surrendered to the National Department of Heath would be rolled over to the next financial year. The Department further reported that the late approval of business plans would no longer be a problem. The Department and the Committee would need to further engage on this issue, in the 4th quarter.
5. Hearings on the 3rd Quarter Conditional Grants and Capital Expenditure: Report
by National Treasury and Provincial Departments Social Development
5.1 Report by the National Treasury
The National Treasury outlined spending in social services, capital expenditure and on Conditional Grants as follows:
Spending was at R37, 4 billion or 62,8% against R59, 5 billion of the adjusted budgets.
There had been an increase of R3, 8 billion or 11,4% compared to the previous year.
The lowest rate of spending was in the Free State at 58,2% and Gauteng at 60%.
Kwazulu-Natal at 65,2% and Limpopo at 64,8% reflected the highest rate of spending.
The sector was projecting under expenditure by R972 million.
The Kwazulu-Natal and Limpopo provinces were projected to overspend by R244, 1 million and R79, 4 million respectively.
The National Treasury reported that the projected under spending was linked to key initiatives to address weaknesses in the grant administration system. The initiatives are as follows:
Investigation and prosecution of fraudulent activities.
Comprehensive review of all temporary disability grants.
Implementation of systems that provide updates on key indicators for how the programme is being administered, including early warning indicators.
Piloting, finalising and implementing a new disability assessment tool.
Social Assistance Administration Grant
Social Development spent R1 743 million or 51,5% of the R3 382 million allocation.
Transfers amounted to 66, 7%.
The highest spending were the Northern Cape at 60,5%; Kwazulu-Natal at 59,5% and the Eastern Cape at 55,1%.
The lowest spending were the Free State at 42, 9%; Gauteng at 43, 5% and Mpumalanga at 44, 2%.
Social Assistance Transfers Grant
Social Development spent R33 409 million or 64,2% of the R52 023 million allocation.
Transfers amounted to 69,3%.
The highest spending were Mpumalanga at 71,2%; Limpopo at 66,7% and the North West at 65,9%.
The lowest spending were the Free State at 59,5%; Gauteng at 60,1% and the Northern Cape at 62,9%.
Integrated Social Development Services Grant
Social Development spent R93, 3 million or 24,1% of the R388 million allocations.
Transfers amounted to 52,6%.
The highest spending was Mpumalanga at 98,3% and Free State at 83,5%.
The lowest spending were Limpopo and Kwazulu-Natal at 0% and the Western Cape at 0,3%. HIV and Aids Grant
Social Development spent R85 million or 61,5% of the R138, 4 million allocations.
Transfers amounted to 90%.
The highest spending being Gauteng at 100, 9%; Mpumalanga at 80,3% and Limpopo at 72%.
The lowest spending were the Free State at 35, 7%; Kwazulu-Natal at 37,3% and the Western Cape at 41,9%.
Report by the Free State Provincial Department of Social Development The Free State Provincial Department of Social Development forwarded the following reasons for the under expenditure on the Capital, HIV and Aids, Integrated Social and Development Services Grants: There was a saving on the Infrastructure Grant due to the slow movement of contractors.
The contract for Monument Secure Care was replaced due to none performance of the contractor. This process delayed payment.
The Department had finalized its IT plan and orders were placed for IT equipment via the State Information Technology Agency (SITA).
Under expenditure on HIV/AIDS was due to the fact that the Memorandums of Agreement were returned late and were incompletely received from NGO’s.
Under expenditure on the Social Assistance Administration Grant was attributed to the critical vacant posts that were not filled due to the Structure of the South African Social Security Agency (SASSA) not having been finalised and approved by the National Department of Social Development.
Under expenditure on the Social Assistance Transfer Grant was due to a Disability Review Programme that was launched which resulted in the savings.
The Department was currently implementing a new monitoring system with the assistance of ABSA Bank, which would improve the monitoring, and evaluation of grants to NGOs. The Department was awaiting approval from the Provincial Treasury before it could be implemented.
The training of NGOs would be done in conjunction with the Provincial Treasury to improve skills for financial management in the NGO sector.
The Department had established a monitoring and evaluation unit for NGOs and CBOs to monitor their performance.
The SITA was currently assisting the Department in obtaining an IT system to assist with the monitoring and evaluation of the NGO performance.
5.3 Report by the Gauteng Provincial Department of Social Development
The Gauteng Department of Social Development briefed the Committee on the current spending of the Conditional Grants as follows:
Social Assistance Grants
61% had been spent of the total allocation as at the end of November 2005.
The Department had projected to spend less than the total allocation by an amount in excess of R 200 million.
The Department had furthermore been spending significantly less than the current R12 million that had been spent on Social Relief of Distress. R 820 000 was spent during 2004/05.
Social Assistance Grants (Administration) 43% of the total allocation had been spent by the end of November 2005 as a result of, amongst others, delay in the appointment of support staff. Posts were advertised in the 3rd Quarter of the Financial Year.
The expenditure was expected to pick up significantly in the last quarter of the financial year as the Unit (i.e. Social Security) is expected to occupy a new building. Thus expenditure will be incurred when the building is prepared for occupation.
Integrated Social Development Services Grant
46% had been spent to date.
It is expected that the total grant would be spent by the end of the financial year as significant preparatory work had to be undertaken in the first portion of the financial year to ensure that organisations that are to be funded are capacitated to deal with the monies to be transferred.
HIV/AIDS Grant The total allocation had been spent by the end of November 2005.
Furthermore commitments would be honored from the R 40 million suspended to the Department of Social Development by the Provincial Department of Health.
Community based services to persons infected and affected by HIV & AIDS as well as orphans and vulnerable children were rendered by 75 NGOs in terms of service level agreements signed at the beginning of the financial year.
The Department concluded its report by indicating that it was improving its capacity to respond to the requirements of the Public Finance Management Act and the Division of Revenue Act.
Report by the Kwazulu-Natal Provincial Department of Social Development
The Department briefed the Committee on the third quarter expenditure of the grants that it was administering, as follows:
The grant numbers had increased by 140 983 when compared to the previous quarter.
The popular grant types included the Disability Grant, Child Support Grant, and the Foster Care Grant.
The expenditure exceeded the allocation by R121.5 million or 4%.
The Department indicated that it had overspent its cash flow by 88%.
The adjusted budget for infrastructure was reported to be at R38, 09 million against the expenditure of R16, 2 million. The remainder was to be spent over the next two months.
It was reported that the Department did not have an allocation for the Food Relief Grant in the beginning of the financial year, as the allocation initially earmarked for this project was converted to the Integrated Social Development Services Grant. However the Department had applied for the roll over of unutilized Food Relief Grant funds for the 2004/2005 financial years.
Discussion
The Committee raised the following questions, concerns and comments:
Provincial Departments of Social Development must explain their working relationship with the Department of Public Works on infrastructure development.
The Free State Department was as asked whether there was any assistance that was rendered to the NGOs on the drafting of business plans.
The Gauteng Department of Health was requested to explain the reduction in the number of beneficiaries between May and June 2005.
The Committee was concerned about the gender balance in the Kwazulu-Natal Department of Social Development.
The Kwazulu-Natal Department was requested to provide an answer on how they were going to deal with the issue of overspending.
The Free State, Gauteng and Kwazulu-Natal Provincial Departments of Social Development responded to the questions, concerns and comments raised by the Committee as follows:
The Gauteng Provincial Department indicated that all the provinces were experiencing the same challenges with regard to the Department of Public Works. There was a need to interact with the Department of Public Works in order to resolve these challenges, as it affected service delivery. There was also a need to build capacity in the Department of Public Works. The reason for the reduction of beneficiaries (between May and June 2005) was due to seven thousand people being taken off the system, in an attempt to curb the problem of fraud.
The Kwazulu-Natal Provincial Department reported that it had a good working relationship with the Department of Public Works. The Department had put measures in place to deal with the issue of over expenditure.
The Free State Provincial Department indicated that it had met with the Department of Public Works in trying to resolve all the problems that the Department had experienced. The Departments had devised a plan and had clustered some of their programmes to ensure that deadlines are met. They had an agreement wherein each Department would submit their projects to the Department of Public Works at the end of November of each year. The Department also reported that they were involving NGOs in their programmes and emphasised the need not only to train NGOs but CBOs as well.
Report by the North West Provincial Department of Social Development
The North West Provincial Department of Social Development gave a brief overview as follows: The Department indicated that expenditure on the Social Assistance Administration Grant was at 54%.
The challenges that were highlighted included, personnel delays in the establishment of SASSA and advertisement for senior personnel were only made in October 2005.
The Department was going to over spend on the Foster Care Grant as a result of backlogs.
100% of the Old Age Grant was going to be spent at the end of the year.
The Department projected a spending of 75% of the budget on the Integrated Social Development Services Grant by 15 February 2006.
60% of capital projects would be spent on the construction of two buildings that were to be completed in June 2006.
Report by the Mpumalanga Provincial Department of Social Development
The Department gave a summary on the expenditure of all Conditional Grants. The expenditure of the HIV and Aids (community based care) Grant was at 74%. The expenditure was reported to be in line with the acceptable target. The Department indicated that the Integrated Social Development Services Grant expenditure was at 80%. The Department indicated that the Administration Grant had spent 50% of the budget. The reasons for the under spending were attributed to the non appointment of staff, delays in the acquisition of office space and the procurement of office equipment, which were dependant on the processes of SASSA.
Discussion
The Committee raised the following questions, concerns and comments:
Clarity was sought on whether community based organisations had received training in business plan drafting.
Further clarity was sought on why only 60% was spent on capital projects. What was going to happen to the remaining 40%?
The Department was asked to outline their working relationship with the Department of Public Works.
The North West Provincial Department of Social Development responded to the questions, concerns and comments raised by the Committee as follows:
The North West Department indicated that it was currently trying to get people who would be assisting communities in drafting the business plans. The remaining 40% of the capital budget would be spent in the next financial year. A Committee had been established to deal with the problems between these Departments.
5.9 Report by the Limpopo Provincial Department of Social Development
The Limpopo Provincial Department indicated the following: The Department was responsible for capital planning while the Department of Public Works was the implementing agency.
The IDT had also been engaged to assist in implementing capital works projects.
The Department projected that the funds on capital work would be fully expended at the end of the year.
The Department further projected that the HIV and AIDS Grant would be utilised by the end of the year.
The SASSA grants would not be utilised and a saving of R74 million was anticipated. This was due amongst other things to the late advertisement of the SASSA posts and not splitting the SASSA function from the Department. 5.10 Report by the Western Cape Provincial Department of Social Development
The Department of Social Development in the Western Cape gave a briefing on the Conditional Grants and on factors influencing spending trends. The Department highlighted the delay in the approval for the establishment of the SASSA and late approval of business plans as some of the factors influencing spending trends with some of the grants.
5.11 Discussion The Committee raised the following questions, concerns and comments:
What mechanisms has the Limpopo Department put in place to rectify the problem of under spending in the province?
A concern was raised about the late approval of business plans.
The Department was requested to give details of the NGOs that were receiving HIV and AIDS Grants and to indicate to whom they account.
The Department was further requested to indicate their working relationship with the Department of Public Works.
The Committee sought clarity on whether there was any likelihood of under expenditure and if so, what steps was the Department taking together with Provincial Treasury in addressing the problem.
The Committee recommended that the Provincial Departments should engage with the National Department regarding the progress and implementation of the SASSA.
The Limpopo and Western Cape Provincial Departments of Social Development responded to the questions, concerns and comments raised by the Committee as follows:
The Limpopo Provincial Department reported that they were involved in negotiations with the National Treasury in order to increase its actual grant provincial allocation.
The Western Cape responded that the issue of late approval of business plans was raised with the National Departments and there was an agreement that this problem should not persist. All the NGOs were accounting to the Department. Furthermore, the Department was enjoying a good working relationship with the Department of Public Works. 6. Hearings on the 3rd Quarter Conditional Grants and Capital Expenditure: Report
by National Treasury and Provincial Departments - Education
6.1 Report by the National Treasury
The National Treasury reported that R46, 7 billion or 64,6% had been spent from the R72, 2 billion adjusted budget. There had been an increase in spending of R4, 5 billion or 10, 7% compared to the previous year. The lowest rate of spending in Education were in the Free State and North West at 63,6%, with the highest rate of spending being in the Northern Cape at 67,4% and Limpopo at 65,6%. The spending on personnel in Education was at R38, 7 billion or 66, 4%.
The National Treasury reported that the capital spending was at R1, 3 billion or 39,6%. There had been a marginal decrease of 0,9% compared to the spending of the previous year. The lowest rates of capital spending were in Kwazulu-Natal at 20,7% and Mpumalanga at 30,8%. The Western Cape at 58,4% and the North West at 56,9% reflected the highest rate of capital spending in Education
The National Treasury reported that the spending on the Education Grant was at 72,5%. Limpopo at 31,6% and North West at 46,9% had the lowest expenditure of the HIV and Aids Grant (Life Skills Education). The Western Cape at 51, 6 and Free State at 61, 9% recorded the lowest spending on the National School Nutrition Programme.
6.2 Report by the Mpumalanga Provincial Department of Education The Department highlighted the following on the perfomance of Conditional Grants:
On the HIV and AIDS Grant, the Department had spent 79% of its allocated amount over a period of 9 months during the 2005/06 financial year and projected that it would spend all funds allocated to it by 31 March 2006.
The relevant stakeholders had been taken on board on the implementation of the Life Skills education in schools.
The Department was to spend all allocated funds for 2005/06 on school nutrition.
The Department had spent only 19% of the allocated amount on infrastructure development projects and 49% of the allocated amount on capital projects for 9 months of the 2005/06 financial year.
The Department’s projects were monitored by Project Managers who were appointed by the Department of Public Works, since the Department did not have the capacity to monitor the projects.
6.3 Report by the Limpopo Provincial Department of Education The Department reported that the expenditure on HIV and Aids Grant was at 32.7%. The Department further indicated that under spending was because HIV and AIDS related education activities took place only during weekends and school holidays in an attempt to avoid disruption on learning and teaching at schools. The Provincial Department indicated that spending on the Provincial Infrastructure Grant was at 51,9%. The reason given for the low expenditure was due to the fact that the business plan, which was available at the beginning of the financial year, was adjusted in order to cater for pressing infrastructure needs like learners under trees and in shacks.
6.4 Report by the North West Provincial Department of Education
The Department reported that as at the end of the 3rd quarter the expenditure on capital was at 68.5%. The Department indicated that the reasons for under expenditure were as a result of problems with the advertised tenders. The Department spent 78.3% on infrastructure by the end of the 3rd Quarter. The Department reported that the spending pattern on infrastructure projects was on track and all projects would be completed on time.
6.5 Report by the Western Cape Provincial Department of Education
The Provincial Department indicated that the Departmental expenditure as at the end of the 3rd quarter was 72,8% of the total available budget. The Department reported that it was doing well in administering the HIV/AIDS and Conditional Grants. The Department further indicated that the HIV/AIDS Conditional Grant allocation to Education had remained relatively static in comparison with broader HIV/AIDS spending.
6.6 Discussion
The Committee raised the following questions, concerns and comments:
The Committee expressed its concern with regard to the under spending on capital projects. The Committee stated further that there was a need for proper planning by the Departments.
The Mpumalanga Provincial Department was requested to indicate how the remaining 81% of the infrastructure grants was going to be spent within two months.
The Committee proposed that the provinces needed to make model plans before any money was allocated to them.
The Departments were asked about their working relationship with the Department of Public Works.
The Committee indicated that service level agreements needed to be adhered to by all the Provincial Departments, so that service delivery could be fast tracked.
The Committee was concerned about the enrolment figures and its impact on budgeting and planning.
The Mpumalanga, Limpopo, North West and Western Cape Provincial Departments of Education responded to the questions, concerns and comments raised by the Committee as follows:
The North West Provincial Department responded that there was an improvement in the infrastructure expenditure. The Department indicated that it would need more money as it had a capacity to spend on infrastructure.
The Limpopo Provincial Department assured the Committee that by the end of the financial year, no child would be learning under a tree.
The Western Cape Department indicated that it had model plans but what affected their implementation were the terrain and the size of the land.
The Mpumalanga Department indicated it was working together with Department of Public Works and had established a task team that would look at the problems regarding plans and tenders. The Department also informed the Committee that tenders were awarded in October and November, which was to lead to some of the remaining 81% of the budget being spent. The Department also indicated that a service agreement had been signed with the Department of Public Works.
The Western Cape Department reported that it had signed a service level agreement with the Department of Public Works.
6.7 Report by the Kwazulu-Natal Provincial Department of Education
The Department projected the total expenditure of 98, 3% of the budget by the end of the financial year. The Department reported that the Conditional Grants represented 3, 8% of the budget for 2005/06. The Department had formed a joint task team with the Department of Public Works, in order to ensure service delivery on infrastructure developments. On the HIV and Aids Grant the Department reported that the expenditure was at 102%.
The reasons forwarded for over-expenditure was because of payment for funds committed in the previous financial year rollover approved by Provincial Treasury for R13, 055,000, which was to cover commitments incurred in the previous financial year.
The Department reported that the reasons for the under expenditure on the National School Nutrition Programme was due to the late transfer of the additional funding in August, which had landed the Department in a situation where not the entire amount would be spent by the end of the financial year. The Department projected 100% expenditure on the grant of the total allocation.
6.8 Discussion
The Committee raised the following questions, concerns and comments:
The Committee sought clarity as to why schools had stopped feeding pupils in November.
The Committee enquired further if the tension between the Kwazulu-Natal Department of Education and the Department of Public Works that was highlighted during the "Taking Parliament to the People" programme in Kwazulu-Natal had been resolved.
Whether there are flushed toilets in all the schools that had been built by the Department.
The Kwazulu-Natal Provincial Department of Education responded to the questions, concerns and comments raised by the Committee as follows:
The Department responded that December was not a feeding month, because most of the schools had closed by that time.
A joint task team between the Kwazulu-Natal Provincial Department of Education and the Department of Public Works had been established, to resolve challenges facing these two Departments.
A joint task team with the Provincial Treasury was also established, in order to deal with over/under expenditure problems.
The Department reported that there was a backlog of about 30 000 toilets, some of the schools had no toilets at all.
The National Treasury reported that the spending on Housing was at R4, 6 billion or 54,3% of an adjusted budget of 8,5 billion. The National Treasury stated that the sector projected to overspend by R188, 3 million or 2, 2%. On the Integrated Housing and Human Settlement Grant, National Treasury indicated that the highest spending was by the Northern Cape at 88,3%, the North West at 81,1% and the Western Cape at 63,3%. The lowest spending was by Limpopo at 53,5%, Mpumalanga at 53,7% and Free State at 55,3%.
On the Human Settlement and Redevelopment Grant, the National Treasury
reported that Housing had spent R31, 1 million or 127,4% of the R24, 4 million allocation. The highest spending being Limpopo at 383,6%; Western Cape at 131,4% and Free State stood at 98%, with Gauteng being the lowest at 6,4%.
7.2 Report by the Free State Provincial Department of Local Government and Housing
The Department highlighted the expenditure of all Conditional Grants that it was administering, as follows:
On the Local Government Capacity Building Grant, the total amount that was available would be spent before the end of the financial year.
The Department had a pilot housing project in Mangaung.
The Department invited the Committee to see the work that had been done by the Department. Furthermore, the Department indicated that it would invite the Committee when the newly built houses were to be handed over to their owners.
7.3 Discussion
The Committee raised the following questions, concerns and comments:
How was the Department dealing with the issue of scarce skills, and whether Project Consolidate was assisting in this regard?
The Committee was concerned about the expenditure that was below 50%.
The Committee enquired whether the Department was working with its Provincial Treasury in trying to curb the problem of over/under expenditure.
The Committee further enquired whether there were any municipalities that had been accredited by the Department.
The Committee expressed its disappointment on the non-attendance by the Kwazulu-Natal, Eastern Cape and North West Housing Departments.
The Free State Provincial Department of Local Government and Housing responded to the questions, concerns and comments raised by the Committee as follows:
A skill analysis was done through the Project Consolidate in all the provincial sectors.
The Department conceded that there had been a lack of communication between the Provincial Treasury and the Department. However, Treasury was now attending the meetings of the Department to observe how the money was being spent.
Most of the municipalities lacked capacity, but the Department was working hard in addressing the issue.
The Department indicated that there had been lots of improvement in the province, and promised the Committee that in the 4th quarter the Free State Department of Housing would give a detailed report on the improved expenditure by the Department.
7.4 Report by the Limpopo Provincial Department - Local Government and Housing
The Department gave an overview on the following issues:
The municipalities re-directing of approved project scope caused delays in implementation of new projects on demarcation of sites.
The shortage of clay bricks in the province was also one of the problems highlighted by the Department.
The contractors who were appointed experienced difficulties in acquiring finance to buy materials for construction.
The delays in the survey of land by the municipality derailed implementation plans of the projects.
In the 2005/2006 financial year, units were distributed along 26 municipalities in the province.
Project Managers were deployed at those 26 Municipalities to manage the projects.
The Department was experiencing capacity problems due to unfilled Project Managers positions.
7.5 Report by the Mpumalanga Provincial Department - Local Government and Housing
The Department gave an overview on the allocations, transfers and actual expenditure of Conditional Grants as follows:
The Department had an under expenditure of R29, 445 million as at 31 December 2005. The total unspent amount was R127, 323 million.
In terms of the projection made, the Department should have had a 75% spending.
The Department achieved a spending of 66%. 52.3% of the contracts were cancelled due to non-performance of the contractors.
The Technical Directorate responsible for project management, engineering services, quality control and inspections had a vacancy rate of 71%. This had resulted in the slow delivery of houses and slow payments of contractors and developers.
The Housing Performance and Human Settlements had a vacancy rate of 68% and 31% respectively.
The Department was constrained by the unavailability of funding to ensure that the posts were filled.
The Department had consulted the Provincial Treasury to revise the equitable share in order to deal with this problem.
7.6 Report by the Northern Cape Provincial Department- Local Government and Housing
The Department stated that the budget allocation for 2005/06 was R79 917 million.84% of that budget had been spent as at December 2005.
The Department reported that the projected budgeted amount for the 3rd quarter was R25 910 million and the actual expenditure was R16 067 million. The Department indicated that there was a lack of capacity at municipal level to implement housing projects. The Department reported that there was an inadequate operational budget to enable it to fill the vacant posts on the approved structure.
The Department stated that the capacity of the data lines in the Province had also affected the on-line subsidy administration in the province.
7.7 Report by the Western Cape Provincial Department- Local Government and Housing
The Department stated that it had R532 million available for the 2005/06 financial year. R76 million had been budgeted for the N2 Ring Fenced Fund. Excluding the N2 Ring Fenced Fund, the Department’s expenditure was reported to be at 78%. 9,394 houses were built and 13,161 sites were serviced by the end of December. The Department indicated that the expenditure exceeded projections at the end of the 3rd quarter. The National Department had deviated from the transfer schedule and transferred extra funding in April/May.
The Department anticipated that 16,000 houses would be built and 18,000 sites would be serviced by March 2006.The Department indicated that the greatest challenge it faced was insufficient funding.
7.8 Discussion
The Committee raised the following questions, concerns and comments:
What role was Project Consolidate playing in addressing the issue of capacity constraints within the municipalities?
Were there any measures that had been taken by the Western Cape Provincial Department of Housing, in addressing the issue of shacks being burnt down, and whether migration was not adversely affecting the planning.
All the Provincial Departments that were present were requested to indicate to the Committee as to how far were they in terms of accrediting municipalities in their respective provinces.
The Mpumalanga Department was requested to provide clarity as to how many vacancies were unfunded.
The Committee was concerned about the low expenditure of Conditional Grants, particularly by the Limpopo Provincial Department.
The Limpopo, Mpumalanga, Northern Cape and Western Cape Provincial Department of Local Government and Housing responded to the questions, concerns and comments raised by the Committee as follows:
The Western Cape Provincial Department indicated that the capacity within the Department was being addressed on an ongoing basis. The Department was working with the National Department on the issue of accreditation and it was receiving the attention it deserves. The Department also highlighted the problem of migration as not only affecting planning but service delivery as well. The Department further reported that informal housing were not erected with due regard to safety concerns, and that the provincial government was addressing the issue. The Department had applied to the National Government for the Emergency Housing Programme to deal with some of these challenges.
The Mpumalanga Provincial Department reported that there were legal technicalities involved in the issuing of accreditation of municipalities. Referring to the Constitution, the Department stated that housing was a national competency. The Department urged the Portfolio and Select Committees to look at this issue. The Department indicated that all the vacancies mentioned in the presentation were part of the staff establishment but not all were funded. Expensive materials such as bricks were a challenge to the Department.
The Limpopo Provincial Department responded that SALGA was requested to do a review on the issue of accreditation, in order to ensure the competency of municipalities in that regard. The Department indicated that 26 municipalities had been engaged by the Provincial Department on the basic stages (level 1) of accreditation. This involved identifying people who were legitimately qualifying for housing subsidies. The Department was assisting the Polokwane Municipality on capacity building.
The Northern Cape Department reported that the Sol Plaatjie Municipality was a pilot for accreditation. The Department indicated that it would give a detailed report on the progress pertaining to the accreditation of the Municipalities in the 4th quarter.
8. Hearings on the 3rd Quarter Conditional Grants and Capital Expenditure: Report by the Provincial Departments - Agriculture
8.1 Report by the Free State Provincial Department - Agriculture
The Department gave a brief overview on all the grants it was administering. These grants were, the Comprehensive Agricultural Support Programme (CASP), the Land Care Programme (LCP), the Agricultural Disaster Management (ADM) and the Provincial Infrastructure Grant (PIG). The Department reported that the progress at farm level was being monitored by the extension staff. The Department had entered into a number of service level agreements with various stakeholders.
8.2 Discussion
The Committee raised the following questions, concerns and comments:
The Committee sought clarity as to why there were rollovers on the CASP and indicated that this was unacceptable as people on the ground were suffering.
The Committee indicated that the Committee indicated that figures supplied by the Department and their Provincial Treasury on the CASP were not the same. The Department was requested to shed some light on the issue.
The Free State Provincial Department of Agriculture responded to the questions, concerns and comments raised by the Committee as follows:
The Department conceded that rollovers were not acceptable as they compromised service delivery.
The Department reported that a moratorium was placed on expenditure which led to under expenditure by the Department.
Furthermore, fluctuations in spending was due to the number of innovations in the implementation of their delivery and supply management.
8.2 Report by the Eastern Cape Provincial Department- Agriculture The Department indicated that advance proper planning was still a challenge. The big proportion of the Department’s budget was a rollover from last year. The Department was providing assistance to emerging farmers. The Eastern Cape Development Corporation (ECDC) was also assisting the emerging farmers in accessing the market. The Department indicated that it was working very closely with Provincial Treasury in making sure that its expenditure was acceptable. On the issue of food security, the Department indicated that it had established a pilot project programme called siyazondla, which based in Umbashe District Municipality.
8.3 Report by the Limpopo Provincial Department- Agriculture The Department briefed the Committee on the perfomance of the Conditional Grants administered by the Department as follows:
Expenditure in the CASP stood at 58%, whilst drought aid was at 100% and Land Care at 51%.
The Department was still experiencing engineering and project management capacity problems on capital projects at municipal level The Department was addressing the issue by putting the necessary mechanisims in order to rectify the constraints.
8.4 Discussion
The Committee raised the following questions, concerns and comments:
The Committee urged the Eastern Cape Provincial Department to visit the project in Kwezana village, which the Committee and the DBSA hadhad visited in 2005.
The Committee enquired how the Department was going to address the issue of its underexpenditure.
Since the Limpopo Department had spent all the Drought Aid, the Committee wanted to know whether the Department was going to request more money.
The Eastern Cape and Limpopo Provincial Department of Agriculture responded to the questions, concerns and comments raised by the Committee as follows:
The Eastern Cape Department responded that there were measures that were in place in order to deal with the problem of under expenditure and that it was working with the Provincial Treasury on that issue.
The Limpopo Department reported that the R20 million that had been allocated to the Province was insufficient .The province had been experiencing drought since the previous year, but by the time it was given the money in September it had already been allocated for certain payments.The Province had to use money from other projects for drought allevation projects.
8.5 Report by the North West Provincial Department- Agriculture The Department reported that R33 million was allocated for the CASP and the expenditure was R1,3 million. Drought relief was allocated R16 million with an expenditure of R0. R0 was spent of the allocated budget of R5 million on the support to communal farmers..The Department stated that the reasons for under funder expenditure would be attributed to the capacity constraints within the Department.
8.6 Discussion
The Committee raised the following questions, concerns and comments:
The Committee enquired what the reasons were for the rollovers and backlogs in the Department.
The Committee made reference to the presentation by the Provincial Treasury, which indicated that there was no capacity to spend in the North West Department of Agriculture. The Department was requested to provide clarity on that.
The Commitee proposed that the the Department needed to also interact with the Standing Committee in the Provincial Legislature.
The Committee accampanied by the DBSA would embark on an oversight visit to get first hand information on the challanges facing the Department.
The North West Provincial Department of Agriculture responded to the questions, concerns and comments raised by the Committee as follows:
9.1 Report by the North West Provincial Department - Sport and Recreation
The Department gave a break-down on the Building for Sport and Recreation Programme (BSRP), by outlining all the projects the Department was undertaking. The Provincial Department indicated that no under-spending was projected for this Programme. The Department reported that the expenditure for the mass participation programme was at 84%.
9.2 Discussion
The Committee raised the following questions, concerns and comments:
The Committee indicated tthat the report did not provide sufficient information on the Department’s spending trends, the percentange of the allocation that was spent and the likelihood of underspending.
The presentation of the Department was silent on the role of the Provincial Department of Public Works with regard to providing infrastrusture in schools and also on the role of municipalities in providing services such as water and ablution.
The Mass Participation Programme seemed to concentrate on schools instead of involving the whole community.
The Committee was concerned that once facilities had been established they were not maintained and sought clarity as to which Department was responsible for the maintanace of those facilities.
Why were no libraries built in 2005/06?
Has the Department concluded a service level agreement with any stakeholder?
Does the Department envisage overspending in the 2005/06 financial year?
The North West Provincial Department of Sport and Recreation responded to the questions, concerns and comments raised by the Committee as follows:
The municipalities were responsible for maintanance of facilities and the Department was responsible for construction and running of libraries.
The Department proposed that the municipalities should take over the running of these libraries, this was an ongoing issue.
The service level agreement for 2006/2007 had not yet been signed. The Department had signed a memorandum of understanding with the Department of Education.
The Department reported that it did not forsee any overspending in the 2005/06 financial year. Monthly reports were submitted to the Provincial Treasury.
9.3 Report by the Limpopo Provincial Department- Sport and Recreation
The Department reported that the Limpopo Siyadlala Programme was allocated R1 million for the 2004/2005 financial year.The programme absorbed 32 coordinators. In the current financial year 38 coordinators were employed. R75 000 out of the total budget of R2,6 million was not spent.
9.4 Discussion
The Committee raised the following questions, concerns and comments:
The Committee noted that all the Provinces identified for the grant were given R4 million each and asked why the alloction was not equitable.
The Limpopo Provincial Department of Sport and Recreation responded to the questions, concerns and comments raised by the Committee as follows:
The Department proposed that the Committee should engage with the National Treasury with regard to the issue of the grant allocation. The National Treasury could provide a broad answer as to why allocations in this grant were all the same. The Department used to get allocation for the building of sporting facilites in the past but now those allocations were part of the IDP support grant.
Report by the Gauteng Provincial Department - Sport and Recreation
The Department briefed the Committee on the mass participation programme, competitive sport and also on capital expenditure as follows:
The Department had received an allocation of R35 million for the upgrade of four competitive stadiums.
Rand Stadium and HM Pitjie Stadium were amongst those stadiums that were to receive upgrading.
The advent of the Municipal Infrastructure Programme impacted on the Departmental allocation of funds towards infrastructure developments projects.
The funding was allocated towards the upgrading of projects linked to the Mass Participation Programme.
The Department gave a number of reasons for under/overexpenditure on some of the Conditional Grants and the interventions thereof to address this problem.
Discussion
The Committee raised the following questions, concerns and comments:
Why was the Provincial Department involved in upgrading stadiums that were financially viable, what would be the role of the South African Football Association (SAFA) in that regard?
The Committee expressed its concern on the involvement of the Provincial Department in competitive sport.
The Department was requested to provide the Committee with its strategic plan that would outline the objectives of the Department’s involvement in competitive sport.
The Gauteng Provincial Department of Sport and Recreation responded to the questions, concerns and comments raised by the Committee as follows:
The Department reported that the stadiums should be upgraded as to encourage all the professional teams in Gauteng to utilise them.
The stadiums belonged to the municipalities and they were working jointly with the Department in maintaining and improving all the sporting facilities mentioned in the presentation.
The Department’s strategic plan would be forwarded to the Committee within three days.
10. Hearings on the 3rd Quarter Conditional Grants and Capital Expenditure: Report by the Provincial Department - Public Transport, Roads and Works and South African Local Government Association (SALGA)
10.1 Report by the Gauteng Department of Public Transport, Roads and Works
The Department outlined the conditional grant expenditure for 2001/2003 to 2005/06 as follows:
The expenditure on infrastructure was at 100% for the 2005/06 financial year. The Department gave a breakdown on the expenditure per project on the Conditional Grants for 2004/05 to 2005/06.
Regular monitoring meetings are held with respect to expenditure against the planned projects to save guard against under/over expenditure.
10.2 Discussion
The Committee raised the following questions, concerns and comments:
The Committee enquired whether any green houses had been built and if so what was the cost involved.
It seemed as if the Department was subsidising the commercially viable stadiums. Clarity was sought clarity as to who actually owned the stadiums.
The Committee asked if the Department could predict over/under expenditure in the 2005\06 financial year.
The Gauteng Provincial Department of Public Transport, Roads and Works responded to the questions, concerns and comments raised by the Committee as follows:
On the ownership of stadiums, the Department reported that the Department of Sport and Recreation would be in a better position to provide that information to the Committee. The Department responded that the information on green houses and on the ownership of the stadiums would be provided to the office of the Chairperson within three days, from the day of the hearings. R35 million overspending had been projected, but no overspending would occur.
10.3 Report by South African Local Government Association (SALGA) on the Accreditation of Municipalities
The South African Local Government Association (SALGA) reported that in the Municipal Housing Indaba held in 2005, it had endorsed the municipal housing accreditation with emphasis on sustainable institutional capacity to manage housing processes and projects and that there was an agreement on the phased in approach to accreditation. SALGA indicated that roles and functions need to be clarified and that capacity building should be at both provinces and prioritised municipalities. The accreditation of municipalities would be based on three levels. Approximately 13 municipalities had been prioritised for accreditation.
10.4 Discussion
The Committee raised the following questions, concerns and comments:
The Committee enquired whether the people on the ground were aware that the municipalities had not been accredited to build houses, given the unrests and protests at local government.
What progress had been made within identified municipalities to complete the accreditation process?
SALGA needed to evaluate the capacity of all the municipalities in delivering houses.
SALGA responded to the questions, concerns and comments raised by the Committee as follows:
SALGA conceded that people were not aware of the legal technicalities involved in this issue. Councillors were always blamed for non-delivery of houses. There was an agreement that the issue of accreditation would be approached in a phase-by phase process. A proper audit would be conducted in all 284 municipalities in order to determine the capacity. The Department emphasised the need to capacitate the municipalities and that the well perfoming ones had to assist the struggling ones.
11. Recommendations
The Committee made the following recommendations: All the Provincial Departments were urged to conduct skills audits, in order to identify skills shortages within their Departments. The Departments were required to give a detailed report on this issue in the 4th Quarter Public Hearings.
The Departments need to utilise the services of the Development Bank of Southern Africa (DBSA) in addressing some of the challenges of capacity building within their Departments.
All the Provinces need to make concerted efforts to improve spending so that service delivery can be accelerated.
Proper planning through the Medium Term Expenditure Framework should be adhered to, by all the Provincial Departments. In order for Departments to operate effectively, there should be better co-ordination between the South African Local Government Association (SALGA), the Provincial Departments and the Provincial Treasuries.
Cooperation between the Departments and Public Works need to be improved by signing the service level agreements.
SALGA should report quartely on the progress made in relation to the municipal housing accreditation.
PART TWO
1. Hearings on the 4th Quarter Conditional Grants and Capital Expenditure: Report by the National and Provincial Treasuries
1.1 Report by the National Treasury
The National Treasury‘s presentation covered provincial preliminary outcomes (as at 31 March 2006) for the 2005/06 financial year. The National Treasury reported that the spending was at R214, 8 billon (98, 0%) of the adjusted budget (R219, 2 billion). The Department indicated that the highest rate of spending was in Kwazulu-Natal at 99, 8%; Western Cape and Eastern Cape at 98, 6%, with Free State at 94, 4% and North West at 95, 8% being the lowest.
Report by the Gauteng Provincial Treasury
The Gauteng Provincial Treasury reported on the spending for the 2005/06 financial year and Conditional Grants spending by stating the following:
Total spending equaled R33, 4 billion, which was 97% of the adjusted budget.
Net under spending amounted to R885 million and represented 3% of the adjusted budget.
Departments contributing to underspending included:
Education at R395 million;
Social Development at R424 million;
Housing at R91 million; and
Finance at R71 million.
The Department that showed significant overspending was the Department of Health at R132 million.
The adjusted budget amounted to R11, 4 billion, which included the provincial rollover of R32, 7 million.
The total expenditure amounted to R10, 7 billion that translated to 94% of the adjusted budget.
The total amount received equals R10, 766 billion, instead of R11, 340 billion, due to the following:
Reduced transfers (R297 million) due to revised payment schedule for the Social Assistance Grant.
Stopping of three infrastructure installments (R277 million) due to low level of spending on infrastructure, late submission of infrastructure reports and plans and submission of incomplete/inaccurate reports.
The Province reflected an under spending of R606 million or 6% of the adjusted budget.
The Department informed the Committee that it had put in place the following measures in order to curb over/under spending in the province:
Continue to hold individual meetings with Departments showing significant under spending and overspending,
Conduct training and address identified gaps,
Create a public finance unit that will specifically focus on monitoring the Departments’ spending and evaluating their performance,
Ensuring value for money and efficiency,
Detailed analysis and interrogating Departments’ expenditure,
Providing guidance and advice to Departments on any issues relating to budgets spending and delivery,
Identifying training needs and providing it where necessary,
Financially assisting Departments to capacitate their Chief Financial Officers, and
Introducing a non-compliance strategy.
Discussion
The Committee raised the following questions, concerns and comments:
A concern was raised regarding the Department having under spent R78 million. The Committee sought clarity as to how the Provincial Treasury was going to monitor under expenditure by the Departments as it had also under spent.
What role was the Standing Committees playing in monitoring the performance of the Departments?
The Committee was concerned that there were no time frames on the interventions that the Department had put in place.
A further question was posed as to when the offices of the Chief Financial Officers (CFOs) were going to be adequately capacitated, and how soon would the Committee expect changes especially with regard to misallocation of funds.
The Gauteng Provincial Treasury responded to the questions, concerns and comments raised by the Committee as follows:
Departments paid R 78 million into the precinct account. The provincial government was planning a precinct from where all Departments would operate. There had been under spending because work on the precinct had not progressed as originally planned.
The Department indicated that the Standing Committees often call Departments to account. The Department also indicated that it would be imperative for the Select Committee on Finance to interact with the Standing Committee on Finance in the province in order to assess the extent to which that Committee was playing its oversight role.
The Department indicated that a Director had been appointed to oversee the implementation of the non-compliance strategy and that the Department would report on the progress in the 1st quarter results of the 2006/7 financial year.
The Department indicated that there was a CFOs Forum in the Province, which dealt with a number of issues, such as that of capacity constraints.
1.4 Report by Free State Provincial Treasury
The Free State Provincial Treasury gave an analysis on the provincial expenditure as follows:
Total preliminary spending was R14, 219 billion (94, 4%) against the adjusted budget of R15, 062 billion.
Preliminary net under expenditure amounted to R843 million (5, 6%).
The Legislature overspent on its budget by R1, 7 million.
Expenditure amounted to R1, 183 billion (82, 7%) against the adjusted budget of R1, 431 billion.
Under expenditure amounted to R247 million or 17,3% of the adjusted budget.
Expenditure on Conditional Grants were as follows:
The provincial adjusted budget amounted to R5, 703 billion.
Preliminary expenditure including Social Security Grants amounted to R5, 078 billion or 89 % of the adjusted budget.
There was a decrease to 87, 3 % of the adjusted budget excluding Social Security Grants.
Net under expenditure amounted to R625 million or 11 % of the adjusted allocation for Conditional Grants.
1.5 Report by the Northern Cape Treasury
The Northern Cape Provincial Treasury gave a broad overview on the expenditure as follows:
The total expenditure amounted to R5, 218 billion, which was 98% of the adjusted Budget.
Net under expenditure amounted to R102 million or 2% of the adjusted Budget.
Departments that showed material under expenditure were:
Social Services at R74 million;
Provincial Treasury at R28, 5 million,and
The Department of Agriculture and Land Reform at R25, 2 million.
Two Departments showed an over expenditure, namely:
Health at R60, 363 million or 6% of the adjusted budget.
Office of the Premier at 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. 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, as at 31 March 2006.
1.6 Report by the Limpopo Provincial Treasury
The Limpopo Provincial Treasury gave an overview on the performance of the Conditional Grants by indicated the following:
The HIV and AIDS Grant was utilised at 82%.
The Conditional Grant was now part of the equitable share and was added to the funds already budgeted for in 2006/07 financial year.
The Department indicated that the expenditure on the SASSA Grants would not be fully utilised, reasons forwarded were:
Late advertisement of posts for the SASSA,
Non-splitting of the SASSA function from the Department resulting in savings, and
Late acquisition of leased property.
On the monitoring capacity of Conditional Grants, the Department stated the following:
The Departments were submitting monthly reports on Conditional Grants spending.
Achievability exercises were conducted in order to look at the spending trends.
The Unit was not fully staffed owing to the evaluation of the newly created posts.
It was envisaged that the Unit would have sectoral analysts looking at all Departments with and without Conditional Grants.
1.7 Committee questions, concerns and comments and responses by Departments
The Committee noted that the Limpopo Province had the Premier Infrastructure Grant, and sought clarity as to where the money came from and the formula used in allocating such money.
The Department indicated that the Premier Infrastructure Grant was not from the Premier’s coffers. The Grant was aimed at facilitating access to water and electricity and the money was part of the equitable share.
The Committee noted that the Limpopo Province spent a total amount of R470, 026 million in March alone. The Committee enquired how such a huge amount of money was spent within one month.
The Committee enquired why the Free State Province had spent only 88% on the Primary School Nutrition Programme.
The Department responded by indicating that the province would have overspent on the School Nutrition Programme had it not been given an adjustment. The province had received R11 million during the adjustment process for the programme and initially there were disagreements on how the money was going to be used as the Department of Education was of the view that it be used to buy capital equipment for the production of food.
The Eastern Cape Provincial Treasury reported the following in its presentation on the performance of the Conditional Grants:
The Province had received a total budget of R13, 2 billion in Conditional Grants and had spent about R13 billion.
There was slow expenditure on the Hospital Revitalization, Forensic Pathology and National Tertiary Grant, which was due to the following:
Late finalisation of business plans,
Litigation in revitalization tender,
In the Social Development Conditional Grants, there had been a slow expenditure due to low intake in beneficiaries.
In the Education Grants, there had been encouraging trends as the expenditure was 98%, increased from 85% in 2004/05.
1.9 Committee questions, concerns and comments and responses by Departments
The Committee sought clarity as to how many days’ learners were fed by the Department of Education under the school nutrition programme.
The Provincial Treasury responded that the number of feedings were no longer 3 days but have now been increased to 5 days.
The Department was requested to explain the under expenditure in the Health Conditional Grants.
The Provincial Treasury reported that the Department of Health had just appointed a Chief Financial Officer and two Directors, and stated further that the COEGA was assisting the Department in relation to its infrastructure budget.
The Committee asked what had happened to the "belt tightening" exercise that the province had been involved in.
The Department responded that according to the estimates, the province had, at the beginning of 2005/06 been exposed to overspending of about R3, 5 billion. It was then decided that there should be a "belt tightening" in the province. Overspending through this exercise had been reduced to R2, 5 billion.
The Committee did not permit the Western Cape Provincial Treasury to present, as neither the MEC nor the HOD was present. The Committee made a decision that the Eastern Cape should be regarded as its special project as soon as there was a clear picture on what was happening in the province.
2. Hearings on the 4th Quarter Conditional Grants and Capital Expenditure: Report by the Provincial Departments of Health
The Department gave a summary on the expenditure of all Conditional Grants as follows: The total amount of R1, 4 billion was allocated to grants from National Government.
There was an under spending in the Hospital Revitalisation Grant due to delays in project implementation as a result of appeals against contracts totaling R99 million. A rollover would be requested.
There was an under spending in the Hospital Management and Quality Improvement Grant due to shortage of capacity at institutions, as spending on grants were decentralized.
The Department had utilised the following agents for its infrastructure delivery:
The Free State Provincial Department of Health gave a brief assessment on the Department’s trends in allocations, transfers, actual expenditure of Conditional Grants, capital expenditure of the Department and monitoring capacity to date, for 2005/06.
The Department reported that the Hospital Revitalisation expenditure was at 82%. The Department said that there had been an agreement with Public Works, Roads and Transport in order to reach consensus on agreed-upon targets. The Department indicated that lack of funding to complete existing projects in the new financial year had impacted on the under spending. Expenditure was at 100% on the Integrated Nutrition Grant..
The Department reported the following in its presentation regarding the performance and administration of Conditional Grants:
The Department manages 8 Conditional Grants.
Conditional Grants constitute 14% of the total budget.
There had been a marked increase in the allocations for the province, with a view of closing the equity gap with other provinces.
Strengthening of project management in relation to Conditional Grants had improved the monitoring capacity.
The total allocation for the year under review was R422, 738 million and the total amount under spent was R36, 322 million, which was 8.59% of the overall allocation.
The Department reported that the Conditional Grants had been the major source of the capital expenditure of the Department with an average of 53% of the funds used being provided from the Conditional Grants and 47% from equitable share.
The Department further reported that the equitable share had provided only 20% of the funds for buildings with 80% being sourced from the Conditional Grants. The Hospital Revitalisation Grant together with the Provincial Infrastructure Grant had provided the bulk of the capital used for facilities upgrades, maintenance and provision of new clinics.
2.6 Report by the Eastern Cape Provincial Department of Health
The Eastern Cape Provincial Department of Health gave an overview on the Conditional Grants Expenditure for 2005/06 by stating the following:
The Expenditure on Health Professionals Grants was under spent by 4.7% of the budget allocation.
The expenditure on HIV and AIDS was 101.56% of the allocation. The Grant was overspent by 1.56%.
The Hospital Management Grant was also overspent by 31.17%.
The Hospital Revitalisation Grant was under spent by 18.5%.
The Nutrition Grant was under spent by 6.31%.
The Tertiary Services Grant was under spent by 4.94%. Subsequent journals passed in late March 2006 would put the expenditure to 100%.
The Forensic Pathology Grant was under spent by 93.1%. The transfer of the grant from National Treasury to Provincial Treasury took place in December 2005. Thus the appointment of a project manager and procurement of vehicles and equipment could not be done before the financial year ended.
2.7 Discussion
The Committee raised the following questions, concerns and comments:
The Committee expressed its concern on the non-attendance by the Accounting Officers from the Western Cape Department of Health.
The Committee noted under spending of the Hospital Revitalisation Grant in all Provinces.
The Committee noted that the Gauteng Department had spent 100% on the HIV and AIDS Grant, but the percentage provided for contradicts the one provided by their Provincial Treasury.
The Kwazulu-Natal Provincial Department was requested to forward reasons as to why there was an overspending on the Infrastructure Grant.
The Committee noted the under spending of the Hospital Management Grant in the Eastern Cape.
The Committee requested the Eastern Cape Department to provide details on the amount that had been removed from the budget.
The Committee asked whether the clinic construction was being funded from the equitable share and the Eastern Cape was further requested to indicate the amount they had received on the Infrastructure Grant.
The Departments were requested to outline their relationship with their respective Provincial Departments of Public Works.
The Kwazulu-Natal, Limpopo, Free State, North West and Eastern Cape Departments of Health responded to the questions, concerns and comments raised by the Committee as follows:
The Eastern Cape Department indicated that R10 million had been removed from the Hospital Revitalisation Grant that was sourced from the National Equitable Share.
The Eastern Cape reported that the Integrated Nutrition Programme had experienced an under spending of R1, 7 million. This was due to the late delivery of food supplements.
The Eastern Cape Provincial Department stated that the total amount of the Hospital Management Grant had been expanded.
The Eastern Cape Department indicated that the HIV and Aids Grant had been under spent by R2, 5 million. This was attributed to the problems with the service levels agreements. No allocation from the Provincial Infrastructure Grant (PIG) had been received.
The Gauteng Department reported that the figures provided for the HIV and Aids Grant were correct and no contradictions existed. The Department indicated that the clinics were constructed from the equitable share. The Department had a good working relationship with their Provincial Department of Public Works.
The Kwazulu-Natal Department indicated that it had a good working relationship with the Provincial Department of Public Works. The Department was working very closely with Public Works and Ithala on the Hospital Revitalisation Grant in sourcing service providers. Clinics were constructed from the Provincial Infrastructure Budget.
The Free State Department reported that the money for building of clinics came from the Provincial Equitable Share. On the late approval of tenders, the Department indicated that weather conditions had played a huge role in the delays for approval of tenders. The Department reported that it had a good working relationship with the Provincial Department of Public Works.
The North West Department indicated that it enjoyed a good working relationship with the Department of Public Works. Clinics were being built from the Provincial Capital Development Fund, which was sometimes supplemented by the Provincial Infrastructure Grant. 60% of the Hospital Revitalisation Grant had been spent. The North West Department indicated that there was a need to reduce rollovers. There was low capacity of contractors for the Hospital Revitalisation Grant.
The Limpopo Provincial Department indicated that sound relations existed between it and the Department of Public Works. The Department reported that clinics were built from the Provincial Equitable Share and also from the Infrastructure Grant.
The Financial and Fiscal Commission (FFC) stated that spending irregularities remained a concern for government. The FFC indicated that a bigger forum was needed in order to address the issue of proper planning as it affected the rate of spending.
The National Treasury reported that the spending was at R58, 0 billion or 96, 7% against R60, 0 billion of the adjusted budget. There had been an increase of R7, 0 billion or 13,8% compared to the previous year. The lowest rate of spending was in the Free State at 89, 4% and North West at 93, 0%
Limpopo at 99, 0% and Kwazulu-Natal at 98, 8% reflected the highest rate of spending. The sector had under spent by R2, 0 billion.
The Department stated that the under spending was linked to key initiatives in order to address the following:
Weaknesses in the grant administration system,
Investigation and prosecution of fraudulent activities,
Comprehensive review of all temporary disability grants,
Implementation of systems that provide updates on key indicators for how the programme was being administered, including early warning indicators, piloting, finalising and implementing a new disability assessment tool.
The HIV and AIDS Grant had increased from R1.601 million to R4.634 million in 2004/05.
The main increases were in respect of new grants that were added, namely:
Social Grants Arrears,
Child Support Grant Extension, and
Food Security / Integrated Social Services.
The Medium Term Expenditure Framework saw the introduction of Social Security Services being fully funded by a conditional grant to prepare for the SASSA.
A full transfer of the budget was received for the period 2001/03 to 2005/06.
The Expenditure of the SASSA Grants had not been fully utilised, with R37,5 million unspent. This was attributed to the following:
Late advertisement of posts for the SASSA and non-filling of the posts due to a SASSA decision.
Non-splitting of the SASSA function from the Department resulting in savings.
The Department briefed the Committee on the expenditure for the fourth quarter on all the grants that it was administering, as follows:
There had been under expenditure on the Disability Grant by R74, 764 million and Child Support Grant by R152, 734 million. These two grants had seen a decline in the beneficiary numbers in April, May, June and July 2005 as a result of the Anti-fraud and Corruption campaign.
Over-expenditure of R29, 936 million was realized in the Foster Care Grant as a result of backlogs as well as higher than expected increase in beneficiaries.
The HIV and Aids Conditional Grant was at 99%. The under expenditure was attributed to administrative expenses as well as equipment.
The National Emergency Food Scheme was at 93%, under spending was attributed to the following:
The service provider was only approved in October 2005.
All food parcels have already been distributed and service provider billed the Department in March 2006.
The whole National HIV and AIDS Grant was spent for the 2005/06 financial year. This could be attributed to long established relationships that existed with service providers that provided services on behalf of the Department. The Integrated Social Development Service Grant was introduced in the financial year under review as a replacement for the Emergency Food Security Programme.
79% of the allocation for the 2005/06 financial year was spent as at the end of the financial year as the business plan for the programme was concluded by the Province and approved by National Department in August 2005.
An allocation on capital and maintenance budget was R 24,420,000 million.
A transfer to the Department of Transport Roads Public Works was at R24, 4 million. 3.5 Report by the Western Cape Provincial Department of Social Development The Western Cape Provincial Department of Social Development highlighted the following issues in its presentation:
On the Integrated Social Development Grant, the Department had funded a total of 64 programmes of which 46 was funded through the Conditional Grant.
100% had been spent on the HIV and AIDS Grant. The Department had funded a total of 85 programmes of which 49 was funded through the conditional grant.
100% gad been spent on the Food Relief Grant.
The Department had funded 5 service providers, procured 26 241 food parcels and 4 549-food supplements.
R3, 896 million was spent on soup kitchens from the allocation of R20, 118 million in 2004/05.
The unspent funds of R16, 222 million was due to the delay in the appointment of service providers for the distribution of food parcels. The Department reported that there had been an expenditure of 106% in the capital acquisition.
The over-expenditure was as a result of expenses towards refurbishment and IT infrastructure development for the SASSA Regional Office.
3.6 Discussion
The Committee raised the following questions, concerns and comments:
Clarity was sought on the under spending of disability grants by the North West and the Western Cape. The Departments were further requested to explain to the Committee how many fraudulent cases had resulted in under spending.
The Committee stated that under spending on Social Welfare was unacceptable due to the levels of poverty in all the provinces.
A question was asked as to whether the Gauteng Provincial Department was providing assistance of any kind towards the establishment of the South African Social Services (SASSA).
A further question was asked as to what mechanisms were in place to ensure that NGOs were reporting back to the North West Provincial Department.
All the Provinces were requested to provide more information pertaining to the number of people arrested as a result of fraudulent claims.
The Committee noted that the Limpopo Department had spent huge sums of money within a period of 3 months, whereas it had failed to do so in a period of 9 months. The Department was requested to provide an answer in this regard.
The relevant Departments responded to the questions, concerns and comments raised by the Committee as follows:
The Limpopo Department reported that about 17000 officials were identified as being involved in fraudulent activities and some of them had already appeared in court. The infrastructure was from the equitable share and no funds were from the Conditional Grants. The Department stated that late tenders were as result of poor applications resulting in the need for the re-advertisement.
The North West Department responded by stating that about 525 officials had applied for indemnity. About 12 27 citizens had applied for indemnity; only 3124 had received a full indemnity.
The Gauteng Department reported that the South African Social Security Agency (SASSA) would be assisted over a period of 3 months. About 7000 citizens had been removed from the system due to the fraudulent claims. The Department was working tirelessly in order to avert the fraudulent claims. The Department stated that it had a no-fee arrangement with ABSA; pensioners were continuously urged to make use of the ABSA bank services when collecting their pensions. The Department reported that infrastructure funding was from the Provincial Equitable Share.
The National Treasury gave an overview on the following: Agriculture spent R47, 7 million or 119,2% (90,1% including provincial roll-overs of the R40 million allocation (R52, 9 million including. provincial roll-overs).
Transfers amounted to 100, 0%.
The highest expenditure was in the Free State at 175, 3%; Eastern Cape at 171, 0% and Mpumalanga at 150, 6%.
The lowest expenditure being the North West at 21, 1% and Northern Cape at 98,1%.
The Department gave a report on the Comprehensive Agricultural Support Programme as follows:
Spending of this grant had been subsumed in the spending of a range of programmes and therefore no reporting was required.
Provinces reported spending of R265, 7 million or 106,3% (86,0% including provincial roll-overs) of the R250 million allocation (R309 million including provincial roll-overs).
Transfers amounted to 100, 0%.
The highest expenditure was in the Free State at 172,9%; Eastern Cape at 141,1% and Limpopo at 125,0%.
The lowest: was the North West at 13, 0%; Northern Cape 69, 7% and Gauteng at 79, 9%.
The Department reported that a total of R81 million from the equitable share of R83 million had been spent. A total of R38 million of the conditional grant allocation of R58 million had been spent.
The Department stated that the Northern Cape Province was struggling to recruit and retain good and relevant scarce skills. Lack of Agricultural Engineers and Industrial Technicians due to competition with industry and recruitment by the private sector was also reported as a problem the Department was facing.
The Department stated that the expenditure on the Comprehensive Agricultural Support programme was at 13% with the Land Care expenditure at 29%. The Department indicated that the under expenditure in relation to both the Land Care and CASP was mainly due to one or more of the following factors:
Misunderstanding between the national and provincial managers about flexibility and power to change projects.
Shortage of specialist skills (project management, economists and engineers).
Constraints imposed by financial delegations at the beginning of 2004/05.
The Department informed the Committee that the Comprehensive Agricultural Support Programme had received R19.26 million with R19, 38 million being spent. The Department reported that an amount of R121 000 had been transferred from the equitable share to make up the short fall. The Department reported that this was due to the lack of capacity to spend. The Department stated further that the budget was not enough to appoint such staff.
The Free State Department of Agriculture gave an overview on the expenditure of the Comprehensive Agricultural Support Grant, Land Care Programme, Agricultural Disaster Management and Provincial Infrastructure Grant. The Department indicated that there were large spikes in spending in the third and fourth quarter due to a problem in the work ethic in the organisation and due to the fact that some of the implementation systems were not up to standard.
The Gauteng Department of Agriculture reported that the total Land Care spending for 2005/2006 was 100%. The budget for the Comprehensive Agricultural Support Programme was R 5 727 000.The grant per farmer was limited to R150 000 00.
Report by the Limpopo Department of Agriculture
The Department briefied the Committee on the perfomance of the Conditional Grants administered by the Provincial Department as follows:
All grants had been fully spent in 2005/06.
There remained a challenge to enhance technical capacity to implement infrastructure projects.
On the Comprehensive Agricultural Support Programme, categories include Land Reform, Livestock, and Crop and Food security projects.
On Land Care:
Three major projects in three districts were implemented.
There was community participation under Extended Public Works Programme.
Discussion
The Committee raised the following questions, concerns and comments:
The Committee expressed its concern on the non-utilization of the Medium Term Expenditure Framework.
The Committee requested the Provincial Department of the North West to provide reasons as to why plans were being changed mid stream, after business plans had been approved and projects started.
The Department responded to the questions, concerns and comments raised by the Committee as follows:
The Department indicated that the reason the plans were changed mid stream was due to a lack of quality assurance of the business plans. The Department did not have enough capacity to interrogate the plans and to ensure that they did what the Department wanted them to do.
5. Hearings on the 4th Quarter Conditional Grants and Capital Expenditure: Report by the Provincial Departments of Roads and Transport
5.1 Report by the National Treasury
The National Treasury reported that the Provinces have spent R4; 72 billion or 108,0% of R4, 35 billion adjusted capital budgets for the Roads and Transport Sector.The Department stated that the lowest rate of capital spending was in the Free State at 77,0% and North West at 95,6%. The National Treasury reported that Gauteng was at 185, 7% and Kwazulu-Natal at 106, 0%, reflecting the highest rate of capital spending. The Department indicated that Gauteng’s spending was constant at 66,8% for December, January and February and had increased by 105,2% in March to 185,7%. The Department indicated the largest capital budgets (adjusted) were for Limpopo at 111, 7% and Free State at 60, 1%. The National Treasury reported that the lowest capital budgets (adjusted) were for Western Cape at 0, 7% and Gauteng at 4, 5%.
The Department informed the Committee that despite the budget increases received over the past years and the increases proposed over the Medium Term Expenditure Framework period the Department remained woefully under funded for the execution of its mandate. The Department said that it required additional funding to address the network backlog. The Department stated further that the backlog had two components viz, securing a minimal equity road network, and restoring the network to its true asset value by increasing the level of maintenance expenditure. The Department informed the Committee that it proposed to implement a 5-year strategy that required an annual additional budget of R2, 4 billion. The Department indicated that its total budget was R1 747 712 with actual expenditure at R1 747 724. This showed 0.001% over expenditure.
5.3 Report by the Western Cape Department of Roads and Transport
The Western Cape Department reported that the actual spending of the Provincial Infrastructure Grant was 100%. The Department stated that it was still facing the problem of capacity constraints. The Department reported that there was shortage of personnel with public transport expertise.
5.4 Discussion
The Committee raised the following questions, concerns and comments:
The Kwazulu-Natal Department was requested to explain how it was dealing with over-expenditure in the Department.
The Western Cape Department was asked how much it was paying, per kilometer when tarring the road.
The Western Cape Department was requested to give more details on the bursaries it was offering.
The Kwazulu-Natal and Western Provincial Departments of Roads and Transport responded to the questions, concerns and comments raised by the Committee as follows:
The Kwazulu-Natal Department responded by stating that the 0,001 over-expenditure was miniscule to the point of irrelevance.
The Western Cape reported that the bursaries were aimed at first and second year students at various tertiary institutions, as the Department had realised that there were shortages of skills in the area of engineering and quantity surveying. The Western Cape stated that it usually cost the Department an amount of between R7 million and R8 million to tar a dual carriage road and between R4 million and R5 million to tar a single lane.
The Northern Cape Department of Roads and Transport reported the following in its presentation:
The Department was during the 2005/2006 financial year allocated a total amount of R338 million and R335 million was spent leaving a saving of R3 million. Of this amount, a total of R253.199million was spent on infrastructure.
Notably, the bulk of the funding was expended on the maintenance and upgrading of roads. These two items accounted for 69% of the total infrastructure expenditure.
Out of the R253 million spent on infrastructure, R113 million was on Conditional Grants.
The Province expended a total amount of R140 million as part of its equitable share.
The Department stated that its infrastructure management was structured as follows:
Road Agency Limpopo (RAL), which constructs road and bridges and also perform the rehabilitative maintenance. The Infrastructure Grant was allocated in full to the RAL. Department’s team that performs the routine maintenance such as bush clearing, pothole patching, grass cutting, re-graveling.
The Limpopo Department of Roads was requested to clarify the role of the Road Agency Limpopo (RAL), and to provide further information regarding the costs involved by having this agency.
The Committee requested the National Treasury to investigate whether the transferring of all the amount of conditional grant was proper or was in line with the Division of Revenue Act.
The Departments responded to the questions, concerns and comments raised by the Committee as follows:
The Limpopo Department indicated that all the money from the conditional grant was transferred to the RAL and some of the money was from the Premiers Provincial Infrastructure Grant.
The National Treasury indicated that there was a Unit within the Department that would be able to investigate the issue, and indicated further that a detailed report in this regard would be submitted to the Office of the Chairperson in due course.
The Committee will have to monitor the compliance with regard to the Division of Revenue Act, especially the section that deals with Provincial Infrastructure Grant.
5.8 Report by the Eastern Cape Department of Roads and Transport
The Department reported that it had spent its whole conditional grant budget of R675330 million for the fourth quarter. The Department indicated that R1, 3 billion was spent on roads infrastructure, which was 49% of their conditional grant allocation.
The Department reported that it was the recipient of the Provincial Infrastructure Grant from National Treasury.
The Department indicated that the grant was used for maintenance and rehabilitation of roads.
An amount of R147 911 million had been received in Conditional Grants, a total amount of R122 117 million had been spent which translated to an expenditure of 83%.
The Committee was concerned that the whole allocation of the Provincial Infrastructure was only given to one Department namely, the Eastern Cape Department of Roads and Transport.
The Committee indicated that the allocation was inconsistent with the Division of Revenue which states that Departments responsible for Health, Education and Roads should benefit from the Provincial Infrastructure Grant. The Committee will have to monitor this issue very closely.
The National Treasury indicated that the Gauteng Department and the other four Provinces had not complied with the Division of Revenue Act, as they had failed to submit reports. This has necessitated the Department to withhold funds.The Department was requested to submit the names of the Provinces whose allocations were withheld due to non-compliance with the Division of Revenue Act.
Hearings on the 4th Quarter Conditional Grants and Capital Expenditure: Report by the Provincial Departments of Local Government and Housing
The average delivery per year was 12 000 of completed houses.
For the 2005/2006 target of 22 000, the Department included a figure of 10 000 for the two pilot projects.
The Department forwarded the following reasons for under expenditure (2004/2005):
Lack of implementation capacity at Municipal level.
Departmental decision 2002.
Management of consultants.
Hands off approach of Department.
Lack of management information.
Non-compliance with contractual conditions.
Blocked projects.
Forward planning.
Delays in processing claims (Province/Municipalities).
The Northern Cape Provincial Department reported that the budget allocation for 2005/06 was R79, 917 million, R82; 524 million (103%) was spent as at March 2006. The Department stated that the budgeted amount for the 4th quarter was R12, 886 million and the actual expenditure was R15, 493 million.
The Department said that the Human Settlement roll-over of 3,180 million from 2004/05 to 2005/06 had been spent.
The Limpopo Department Local Government and Housing gave an overview on the expenditure of the following grants:
Housing Fund expenditure was at 18%,
Human Settlement Redevelopment Programme expenditure was at 76%,
Municipal Support Programme expenditure was at 24%, and
Municipal Infrastructure Grant expenditure at 92%.
The Department reported that in 2005/2006 financial year, units were distributed along 26 Municipalities in the Province. The Department held further that Project Managers were deployed at those 26 Municipalities to manage the projects. The Department informed the Committee that it was experiencing capacity constraints due to unfilled Project Managers positions.
The Department reported that 100% of available funds had been spent. A sum of R 456 million was allocated for Conditional Grants, a sum of R77 million was a roll-over and R40 million was from the Provincial Funds. The Department stated that about 16,053 houses had been built and 18,412 sites serviced.
6.5 Committee questions, concerns and comments and responses by Departments
Clarity was sought as to whether a list of beneficiaries was available and whether the quality of the houses built were a priority.
The Committee enquired how many municipalities had been accredited to deliver houses.
The Committee was concerned about the vacancy rate in the Northern Cape Department.
The Committee was further concerned about the under-spending in the Limpopo Department.
The Limpopo Department indicated that it had a beneficiary list. Some of the beneficiaries were renting out the houses to illegal immigrants. The Department was going to monitor this problem. The Department said that no municipality had been accredited to deliver houses. Land availability had contributed towards the under- pending in housing delivery, as there was no enough land for building houses.
The Northern Cape Department indicated that a beneficiary list was available. The Department said that five districts municipalities had been identified for accreditation. The Department had put mechanisms in place in order to reduce vacancy rate.
The North West Department informed the Committee that the beneficiary list was available before structures were built. No municipality had been accredited at that stage.
The Western Cape Department indicated that the beneficiary list was available. The location of housing developments in remote areas had contributed to the lack of occupancy.
The Committee will closely monitor the progress in addressing blocked projects, as the housing delivery could unlock economic potential and thus contribute to increased standards of living.
7. Hearings on the 4th Quarter Conditional Grants and Capital Expenditure: Report by the Provincial Departments of Education
The Department said that the expenditure on HIV and Aids had improved as the grant had only under spent by R700 000; the under spending was due to the problems pertaining to invoicing. The Department stated further that when they started with the HIV and Aids programme, they had problems pertaining to staffing and the Department was hard at work in trying to resolve this issue of capacity as it had adversely affected the monitoring of expenditure.
Report by the Northern Cape Department of Education The Department indicated that the HIV and AIDS grant was R 2,318 million at the expenditure of 88%. The Department held that the budget for the National School Nutrition Programme wasR 31,033 million and the expenditure stood at 93%. The Department said that the Infrastructure Capital budget was R30, 6 million and the expenditure was 88%.
The Department indicated that Conditional Grants had contributed significantly to service delivery. The Department stated that it intended to make incremental additions from the vote line budget to enable it to eventually become independent of these grants.
The Department indicated that the HIV and Aids budget was R8, 4 million and the expenditure on the grant stood at 94%. On the National School Nutrition Programme, the Provincial Department informed the Committee that the budget was R 68, 5 million with the expenditure of 88,5%. The Department indicated that the budget from own infrastructure grant was R79, 7 million at the expenditure of 92%; Provincial Infrastructure grant budget was R60, 5 million, and expenditure was at 101.7%.
Report by the Limpopo Department of Education
The Department reported that the National School Nutrition Programme had spent R191 million of a budget of R204 million (93%). The Department reported that on HIV and Aids their plans were ineffective as they were unable to spend the whole allocation. The Department assured the Committee that changes would be made for this year’s allocation and the performance of this grant would improve. The Department stated that on infrastructure, R235 million was spent out of budget of R264 million.
Report by the North West Department of Education The Department indicated that the financial performance of the Department had drastically improved in 2005/6 compared to 2004/5.The Department held further that the improved performance was as a result of rigorous monitoring and pressure that had been brought upon by the all responsible managers.
The Department indicated that the performance of Conditional Grants had shown an improvement from 86.5% to 97.4%, capital expenditure from 65.9% to 94.7% and Infrastructure from 67.7% to 98.8%. The Department reported that the expenditure was 97% on the HIV and Aids programme and 98% on infrastructure.
The Department informed the Committee that their initial budget for construction and maintenance was R188, 472 million, but was adjusted upwards to R373, 808 million. The Department stated that R20 million was earmarked for provision of classrooms in "Black African" schools. The Department indicated that an amount of R777 000 had been set aside for the establishment of a Project Management Unit to manage the additional classroom allocation in "Black African "areas.
The Department reported that the Western Cape was receiving approximately 48 000 new immigrants each year. The Department stated further that approximately 18 additional schools needed to be built per year, in order to accommodate the school going children of these immigrants. The Department indicated that the allocated budgets did not provide for this need.
Report by the Kwazulu-Natal Department of Education
The Department reported that an amount of R837 million was spent on infrastructure out of the budget of R854 million. Stated further that the under- spending was in repairs and maintenance. The Department indicated that R44 81 million had been received for HIV and Aids programme had had overspent by 11%.
The Department stated that they had monthly reporting systems and regular meeting were held with districts as the HIV and Aids programme had been spread out to various directorates.
The Department indicated that that the allocation for the National School Nutrition Programme was R198 849 million with R198 980 being spent.
7.8 Committee questions, concerns and commentsresponses by Departments
The Northern Cape was requested to forward reasons as to why the funds were withheld by the National Treasury.
Clarity was sought from the Free State Department on the mode of transport that was being used when transporting learners to their respective schools.
Concerned about the rate of vacancy posts within the Eastern Cape Department, and sought clarity on what was the Department doing in addressing this problem.
Concerned about the late approval of tenders, and also about the failure by most of the Provinces to utilise the Medium Term Expenditure Framework.
Clarity was sought from the Eastern Cape regarding the correct figure that was allocated to the FET colleges as their figure was in conflict with that of their Provincial Treasury.
The Limpopo Department was requested to outline measures that had been put in place in order to make sure that their service providers would deliver specifically with regard to the HIV and AIDS grant.
The Northern Cape responded by stating that the National Treasury withheld the funds because there was an assumption that they were going to under spend.
The Free State indicated that mini-buses and ventures were being used when transporting learners to their schools.
The Limpopo Department said that the figures would be reconciled and held further that the Department would give better results in the first quarter hearings.
The Eastern Cape responded by stating that there was an error in the report of their Provincial Treasury regarding the allocation on the FET colleges.
The Committee urged the Department to reconcile their figures and forward the correct ones to the Office of the Chairperson. The Department indicated that all the vacant posts were to be filled by the end of the year (2006).
The Committee urged the Financial and Fiscal Commission to make a supplementary submission on the impact of school nutrition programme in both primary and secondary school; FFC was further requested to do more research on the FET colleges.
The Committee indicated that Department needed to budget for renovations and maintenance and urged the Departments to prioritize that.
The Committee to monitor the compliance with regard to the Division of Revenue Act, specifically the allocation of the Provincial Infrastructure Grant (PIG).
8. Hearings on the 4th Quarter Conditional Grants and Capital Expenditure: Report by the Provincial Departments of Sport and Recreation
Report by the Eastern Cape Department of Sport and Recreation
The Department reported that the conceptualization of the Siyadlala Mass Participation programme had equipped the Department with an effective tool for resuscitation and development of sports and recreation in the province and the country. The Department stated that the programme allowed for interventions in areas where there was no participation due to lack of resources. The Department gave a detailed presentation on the province’s achievements in terms of performance against goals, budget and quality.
Report by the Northern Cape Department of Sport and Recreation
The Department reported that the budget for the Mass Sport and Recreation Participation Programme was R2, 640 million, with the total expenditure of R2, 492 million (94%).
The Department indicated that the under spending of R148, 000 for 2005/2006 was due to the following reasons:
Resignations of coordinators (due to permanent employment). Delays in appointment of some coordinators.
Savings on some of the budgeted items such as training of coordinators, holiday programmes and other MPP games.
The Department indicated that the programme was sustainable only on the basis of conditional grant and this was proving to be a challenge.
The Department indicated that the budget for the Mass Participation programme was R1 Million and it had increased to R2, 640 million in 2005/06 and had also seen a substantially increase to R10, 7 million for 2006/07.The Department indicated that the number of hubs had increased from five hubs in 2004/05 to nine in 2005/06.The Department stated that the Siyadlala Mass Participation Programme would continue to be treated as a priority programme by the province.
Report by the Western Cape Department of Sport and Recreation
The Department said that there had been an increase in the Conditional Grants from R1 million in 2004/5 to R2, 6 million in 2005/6. The Department stated that it had expanded its programmes in order to cover all six regions. The Department indicated that the decrease in the capital grant allocation made it impossible to cover the backlog in facilities in the disadvantaged communities.
8.5 Committee questions, concerns, commentsand responses by Departments
The Kwazulu-Natal Department was requested to give more details about the Siyadlala Mass Participation Programme and its impact, as their presentation was vague in that regard.
The Kwazulu-Natal was requested to reconcile their figures and forward the correct ones to the Office of the Chairperson within two days.
The Committee was concerned about the Eastern Cape’s failure to spend all the money that was allocated to them.
Clarity was sought regarding the discrepancy in the Western Cape’s Siyadlala Mass Participation Programme figures for the number of schools that were benefiting under the grant.
The Committee urged the Provincial Departments of Sports to interact with the Departments of Education and Public Works in order to make sure that all the new schools that were being built had all the necessary sporting facilities.
The Kwazulu-Natal indicated that the Province was positioned second in the South African Games in 2005; some of the athletes had been trained through the Siyadlala Programme. Futhermore, and the Department stated that during the SA Games the Province had trained an additional 300 volunteers of which some came from the hubs.
The Eastern Cape reported that all the money allocated to the Department had been spent. Furthermore held that the R141 000 that was outstanding had already been committed.
The Western Cape indicated that there had been an error in figures relating to the number of schools that were benefiting under the Siyadlala Programme, and held further that that the figures would be corrected accordingly. The Department indicated that they were ongoing interactions with the Departments of Public Works and Education pertaining to the school sports facilities. The Department stated that the Public Works and Education had made a commitment that all the new schools would have all the necessary sporting facilities.
Following the presentations by the relevant Provincial Departments, the Committee instructed the Departments to comply with the Division of Revenue Act, specifically the section that deals with the Provincial Infrastructure Grant as there were Provinces that were not adhering to that aforesaid section. In the 1st quarter public hearings on Conditional Grants the Committee will focus on the quality of spending, impact of spending and also on the value for money. The Committee will also monitor the expenditure of the Provincial Equitable Share. The Committee was highly disappointed by the non-appearance of all the Mpumalanga Provincial Departments that were requested to brief the Committee.
9. Observations
The Committee concluded the following observations based on the presentations:
There seems to be a general improvement in spending trends by some Provinces.
The Committee was concerned about the March spikes in terms of spending patterns by some of the Provincial Departments.
It appears that there are weak monitoring mechanisms in the National and Provincial Departments.
It appears that National Departments do not use withholding powers, for consistence and material under spending.
Late approval of business plans and tenders.
Business plans that are changed mid-stream.
Lack of understanding of the conditions attached in the associated grants or a deliberate disowning of conditions attached to the grants.
Most municipalities have not yet been accredited to deliver houses.
It appears as if the Home Builders Registration Council (HBRC) lacks capacity in monitoring the quality of houses being built.
10. Recommendations
The Select Committee on Social Services should conduct an oversight visits to the Provinces that had shown the highest rate of capital spending in Health, namely, Gauteng at 114, 4% and Western Cape at 97, 3%. The Select Committee on Social Services should also do an oversight visit to Limpopo and Kwazulu-Natal as these Provinces at 99% and 98, 8%, respectively reflected the highest spending in social services.
The Select Committee on Public Services should conduct an oversight visits to those Provinces that had shown the highest rate of capital spending in the Roads and Transport sector, namely Gauteng at 185,7% and Kwazulu-Natal at 106.0%.
The Select Committee on Land and Environmental Affairs should conduct an oversight visit to the Free State and the Limpopo Provinces, as these two Provinces had overspent on the Comprehensive Agricultural Support Grant by 172,9% and 141,1% respectively.
When conducting such oversight visits, the abovementioned Committees should focus on the availability of projects, the quality of the projects, the impact on communities and value for money.
The Select Committee on Finance should conduct an onsite visits to all the Provinces that had shown a considerable under spending and those that were not complying with the Division of Revenue Act, namely the Limpopo Department of Roads and Transport, the North West Department of Agriculture and the Eastern Cape Departments of Health, Education and Treasury. When conducting such oversight visits the Committee/s should focus on the functioning of the Internal Audit Committees and internal controls within the Departments.
In the spirit of the Intergovernmental Relations Framework Act, all the Mpumalanga Provincial Departments that had failed to appear before the Committee during the 4th quarter public hearings should be afforded another chance to appear before the Committee in order to report on the Conditional Grants and capital expenditure. Should the abovementioned option fail, the Committee should invoke Section 69 of the Constitution.
The perpertual acting capacity of Senior Managers especially the Heads of the Departments (HOD’s) should be addressed urgently, as this issue creates uncertainity and affects service delivery.
The Provincial Departments need to work very closely with their Provincial Treasuries in order to curb the probleum of under/over expenditure.
Provincial Treasuries are urged to improve their capacity to monitor and assist struggling Departments.
National Transferring Departments are urged to improve their monitoring capacity and should alson assist receiving Provincial Departments to build their capacity.
Provincial Treasuries and National Transfering Departments must assist Provincial Departments in multi year planning and financial management.