REPORT ON THE JOINT BUDGET COMMITTEE
THIRD
QUARTER NATIONAL EXPENDITURE 2006/07 FINANCIAL YEAR
1.
INTRODUCTION
Quarterly reports serve as an
early warning instrument on actual expenditure in relation to estimated
expenditure. Having studied the Third Quarter National Expenditure 2006/07 The
Joint Budget Committee is of the opinion that inadequate corrective measures
have been taken by departments to address under expenditure of their capital
expenditure.
Departments often have a keen appreciation of the budgetary constraints
that will impact negatively on the effective expenditure for targeted delivery
to address social deficits and expand the economy. Lack of capacity to achieve
the strategic expenditure objectives has been identified as significant delivery
impediment, by several departments.
The Committee believes that a risk analysis linked to the strategic plan
and the identification of critical success factors should be urgently developed
and practiced by departments. This should be linked to the implementation of an
effective monitoring system to identify problems before they lead to under or
over expenditure.
The Committee report focuses on departments and expenditure issues that
give cause for concern in the achievements of outputs and outcomes, and
compliance with financial management principles and practices. Patterns in
capital and current expenditure and transfers are examined and finally
assessing these patterns against budget projections. The Committee is
disappointed to learn that many of the departments, which were called upon to
develop corrective measures to bring expenditure back on track have not taken
account of the comments and recommendations made in the first and second
quarter expenditure reports.
2.
TOTAL EXPENDITURE
By the end of the third quarter of the 2006/2007 financial year,
departments spent an average of 70.46% of their total budgets. During the first
quarter departments spent 21.44%, during the second quarter they spent 24.80%
and during the third quarter they spent 25.31% of their total budgets. They
spent R55.7 billion during the first quarter, R64.5 billion during the second
quarter and R67.3 billion during the third quarter. To date departments spent
R187.6 billion. Table 1 represents departments’ total expenditure as at the end
of the third quarter.
The cash flow projections provided by National Treasury indicates that
departments plan to spend R75.38 billion or 28.32% of the total national budget
during the final quarter of the financial year. It also predicts under expenditure
for the 2006/07 financial year to be R3.193 billion or 1.2% of the total
national budget.
|
|
Total Budget |
Total Expenditure to date |
% Total Expenditure to date |
Projected Expenditure in final quarter |
Projected % Expenditure in final quarter |
Projected Over/ Under Expenditure |
Projected % Under/ Over Expenditure |
|
|
R'000 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
Voted Amounts |
266,163,164 |
187,595,513 |
70.48% |
75,383,831 |
28.32% |
3,193,609 |
1.20% |
|
|
|
|
|
|
|
|
|
|
|
|
Central Government Administration |
35,372,602 |
20,754,244 |
58.67% |
14,110,170 |
39.89% |
544,472 |
1.54% |
|
|
The Presidency |
238,865 |
156,078 |
65.34% |
74,787 |
31.31% |
8,000 |
3.35% |
|
|
Parliament |
782,133 |
505,683 |
64.65% |
156,570 |
20.02% |
135741 |
17.36% |
|
|
Foreign Affairs |
3,042,149 |
1,849,944 |
60.81% |
1,172,209 |
38.53% |
20,000 |
0.66% |
|
|
Home Affairs |
2,800,405 |
1,709,002 |
61.03% |
741,972 |
26.50% |
349,430 |
12.48% |
|
|
Provincial and Local Government |
25,392,288 |
14,441,154 |
56.87% |
10,948,820 |
43.12% |
2,313 |
0.01% |
|
|
Public Works |
3,116,762 |
2,092,383 |
67.13% |
1,015,812 |
32.59% |
8,564 |
0.27% |
|
|
|
|
|
|
|
|
|
|
|
|
Financial and Administrative
Services |
21,654,212 |
14,434,407 |
66.66% |
6,879,791 |
31.77% |
340,014 |
1.57% |
|
|
Gov. Communications and Info. Services |
294,580 |
209,498 |
71.12% |
85,081 |
28.88% |
0 |
0.00% |
|
|
National Treasury |
16,729,581 |
11,578,659 |
69.21% |
4,869,976 |
29.11% |
280,946 |
1.68% |
|
|
Public Enterprises |
2,869,923 |
1,579,769 |
55.05% |
1,290,153 |
44.95% |
0 |
0.00% |
|
|
Public Service and Administration |
442,426 |
297,138 |
67.16% |
145,290 |
32.84% |
0 |
0.00% |
|
|
Public Service Commission |
97,003 |
70,482 |
72.66% |
25,901 |
26.70% |
620 |
0.64% |
|
|
S A Management Development Institute |
58,918 |
40,260 |
68.33% |
18,659 |
31.67% |
0 |
0.00% |
|
|
Statistics |
1,161,781 |
658,601 |
56.69% |
444,731 |
38.28% |
58,448 |
5.03% |
|
|
|
|
|
|
|
|
|
|
|
|
Social Services |
91,919,174 |
73,719,567 |
80.20% |
17,543,417 |
19.09% |
651,935 |
0.71% |
|
|
Arts and Culture |
1,330,139 |
1,005,783 |
75.61% |
320,073 |
24.06% |
0 |
0.00% |
|
|
Education |
14,299,176 |
13,024,956 |
91.09% |
1,274,219 |
8.91% |
0 |
0.00% |
|
|
Health |
11,453,993 |
8,326,993 |
72.70% |
3,029,648 |
26.45% |
97,350 |
0.85% |
|
|
Labour |
1,493,495 |
1,052,858 |
70.50% |
398,187 |
26.66% |
42,451 |
2.84% |
|
|
Social Development |
62,382,425 |
49,910,022 |
80.01% |
11,960,300 |
19.17% |
512,134 |
0.82% |
|
|
Sport and Recreation |
959,946 |
398,955 |
41.56% |
560,990 |
58.44% |
0 |
0.00% |
|
|
|
|
|
|
|
|
|
|
|
|
Justice and Protection Services |
72,800,200 |
48,873,138 |
67.13% |
23,237,026 |
31.92% |
651,813 |
0.90% |
|
|
Correctional Services |
9,831,512 |
6,293,616 |
64.01% |
3,380,900 |
34.39% |
157,000 |
1.60% |
|
|
Defence |
23,902,904 |
15,328,624 |
64.13% |
8,633,680 |
36.12% |
-59,400 |
-0.25% |
|
|
Independent Complaints Directorate |
65,906 |
45,484 |
69.01% |
20,420 |
30.98% |
0 |
0.00% |
|
|
Justice and Constitutional Dev. |
6,478,647 |
4,062,194 |
62.70% |
1,824,015 |
28.15% |
592896 |
9.15% |
|
|
Safety and Security |
32,521,231 |
23,143,220 |
71.16% |
9,378,011 |
28.84% |
0 |
0.00% |
|
|
|
|
|
|
|
|
|
|
|
|
Econ. Services &
Infrastructure Dev. |
44,416,976 |
29,814,157 |
67.12% |
13,613,427 |
30.65% |
1,005,375 |
2.26% |
|
|
Agriculture |
2,367,630 |
1,532,883 |
64.74% |
834,748 |
35.26% |
0 |
0.00% |
|
|
Communications |
1,322,306 |
944,920 |
71.46% |
372,107 |
28.14% |
5,280 |
0.40% |
|
|
Environmental Affairs and Tourism |
2,061,804 |
1,700,511 |
82.48% |
361,291 |
17.52% |
0 |
0.00% |
|
|
Housing |
7,333,726 |
5,482,497 |
74.76% |
1,433,229 |
19.54% |
418,000 |
5.70% |
|
|
Land Affairs |
3,730,196 |
2,298,958 |
61.63% |
1,431,237 |
38.37% |
0 |
0.00% |
|
|
Minerals and Energy |
2,635,100 |
1,840,648 |
69.85% |
794,452 |
30.15% |
0 |
0.00% |
|
|
Science and Technology |
2,617,093 |
1,958,562 |
74.84% |
658,530 |
25.16% |
0 |
0.00% |
|
|
Trade and Industry |
3,942,028 |
2,449,373 |
62.13% |
1,452,223 |
36.84% |
40,433 |
1.03% |
|
|
Transport |
13,746,790 |
8,782,992 |
63.89% |
4,759,137 |
34.62% |
204,662 |
1.49% |
|
|
Water Affairs and Forestry |
4,660,303 |
2,822,813 |
60.57% |
1,516,473 |
32.54% |
337,000 |
7.23% |
Department of Education
The priority of education as a transformation driver is reflected in its
significant R14 billion departments allocation. At the end of the third
financial quarter Education had spent R13 billion or 91.09%, which together
with cash flow projections, indicates they are on track. This pattern also
reflects the previous financial year’s expenditure trends. However the bulk of
the funds are transfers of R12.7 billion. Universities and Technikons get
R10.36 billion and R1.4 billion goes to provinces and municipalities.
Current expenditure of R273 million or 46.97% continues to pose cost
driver challenges linked to projects such as reading books for schools,
bursaries to and the payment for examiners and moderators of the grade 12
teachers examination in 2006. Expenditure on the last two items, given their
defined calendar year cycle, is usually in January and February that is the
fourth financial quarter. However delivery of IT equipment and expenditure
related to improvements in the examination marking systems run the risk of
roll-overs with further delivery delays.
Department of Social Development
The bulk that is 99% of the Department of Social Development allocation
of R61.5 billion is allocated to Programme 3 Social Security Transfers and
Administration, which aims at improving and sustaining the integrity of the
social grant administration and ensuring that SASSA becomes fully operational.
At the end of the third quarter the department has spent R49.9 billion or
80.01% of its budget and plans to spend a further R11.96 billion or 19.17% of
its budget in the final quarter. This projection is likely to lead to under
expenditure of about R512 million or 0.8% of the total budget. However the
department has indicated that R496 million of this projected under expenditure
was earmarked for transfers to households.
Department of Arts and Culture
The renewed emphasis this financial year on development of social
cohesion and nation building has put particular emphasis on the expenditure of
the Department of Arts and Culture.
At the end of the third quarter this stood at 1.005 billion or 75.61% of
the adjusted appropriation compared to 62.26% during the first nine months of
the 2005/06 financial year. The Department plans to spend R320 million or
24.06% of its budget during the final quarter. Of this final expenditure R267
million will be transferred to departmental agencies and accounts as well as
households. However the Committee has identified an under expenditure risk in
Programme 5 for Heritage, which has committed R10 million in each of the three
MTEF years to the construction of the national Archives.
Department of Science and Technology
One of the main pillars of the government’s growth and development is
their realisation of science and technology in social and economic development
through research and development of human resources. This underpins the
significant increase in the Departments budget. At the end of the third quarter
R1.96 billion or 74.84% of the adjusted appropriation of R2.61 billion had been
spent.
A projected expenditure of R6.25 million or 25.6% has been confirmed by
the department during the final quarter. Transfers of R588 million for
departmental agencies and non-profit institutions have been committed, A
possible delay in the completion of the information systems programme 5 has
been noted as a possible risk of under expenditure which the Committee is
unlikely to impact negatively on the Department’s critical outputs.
Department of Sport and Recreation
The focus of the Joint Budget Committee is on the 2010 commitments of
the Department, which at the end of the third quarter had spent 41.56% or R339
million of its budget, making the lowest spender at the end of the third
quarter. At the end of the third quarter of the 2005/06 financial year the
department spent less of its total budget, i.e. 25,92%. The current pattern of
expenditure if not addressed may lead to the same problem as reflected in the
previous financial year where the Department spent 65% of its total budget
during the last month of the financial year.
Based on the cash flow projections the department plans transferring
R424 million to provinces and municipalities during the last quarter of the
financial year. It is important to note that the department received and
additional R600 million via the adjusted estimates for the construction of
stadiums for the 2010 FIFA world cup. The Department also plans spending 42% of
its compensation of employees budget during the final quarter of the year.
Reasons for the slow rate of expenditure are given in sections two, three and
four.
Department of Public Enterprises
The Department of Public Enterprises spent R1.58 billion or 55.05% of
its total budget by the end of the third quarter. It is important to note that
the department received and additional R2.186 billion through the adjusted
estimates. The Department plans spending R1.29 billion or 44.95% of its budget
during the final quarter. Of this amount R1.255 billion is transfer
expenditure. The Chief Financial officer of the department explained that
receipt of the additional funding specifically in respect of the transfer
payments did affect the percentage spent up to the end of the third quarter.
Other factors that influence expenditure are issues around VAT in
respect of transfer payments made to State Owned Enterprises (SOE) provided in
the adjusted estimates. The question that arises is whether capital payments
should be “vatable”. National Treasury advised the Department to “hold back” on
this payment pending their consultation with SARS on the matter. At the time of
concluding Committee deliberations on the third quarterly report the Department
were still liaising with SARS in this regard. The Department has also not yet
transferred the funds to INFRACO at the “express instruction from National
Treasury”, pending various matters, which they have raised. Other reasons given
for the slow spending is that payment will only be made when the projects are
finalized in the last quarter of the financial year. However operational
funding during this period is within the required percentage. The Committee
would like to engage SARS directly to obtain a clarification on issues around
vat.
Statistics
Statistics
A significant allocation has been made to Programme 3 Population and
Social Statistics which includes, the important, community survey, which will
provide strategic data for prior to the 2011 census and pave the way to more
robust statistics. Seventy Seven percent of the Programme’s budget is allocated
to this project, which should therefore be considered a risk for under
expenditure. There will be 6,000 field workers and 1,400 vehicles involved on
this project. StatsSA will spend R20 million on the labour force re-engineering
survey and R8 million on the household survey during February. The Committee
will be engaging StatsSA during the final quarter to evaluate how better to
have improved the cash flow in relation to the final phase of the community
survey.
Department of Provincial and Local Government
The Department of Provincial and Local Government’s strategic mission is
to ensure the constitutional imperative of co-operative governance and
maintaining robust support for the provinces and local government. At the end
of the third quarter the Department had spent R14.44 billion or 56.87% of its
budget. This slow expenditure is due to
the transfer schedule of the equitable share, which is now paid every four
months instead of every three months. The first payment of R6.77 billion was
made during July, the fourth month of the financial year and the second payment
of R5.1 billion was made during November the eighth month of the financial
year. The final payment of R8.5 billion will be made in February.
Of the R14.44 billion spent thus far by the Department, R14.23 billion
was transfer expenditure of which almost the entire amount transferred to
provinces and municipalities. The Committee accepted that the nature of the
Department’s mission explains the high percentage of transfers. The Department
plans spending R10.9 billion or 43.12% of its budget during the final quarter
of the financial year of which R10.8 billion is budgeted for provinces and
municipalities.
Department of Water Affairs and Forestry
The Department of Water Affairs and Forestry which aims to ensure
available and accessible supply of water to facilitate equitable and
sustainable community development had spent R2.8 billion or 60.57% of it budget
at the third quarter of the financial year. The Departments plans spending an
additional R1.5 billion or 32.5% during the final quarter. This will result in
an under expenditure of R337 million or 7.23%.
The planned restructuring of the Department will implement among other
matters the devolvement of a number of functions to “more appropriate levels of
government and institutions”. This will enable the department to focus on
policy, planning and regulation. The Committee was not surprised to learn that
the Department predicts under expenditure on both Goods and Services of R65
million and compensation of employees of R16 million.
The Department also predicts under expenditure, in this case, for
departmental agencies and accounts by R265 million related to the delay in the
construction of the De Hoop Dam, mainly because of evidence it could cut off
essential water supplies to the
3.
CURRENT EXPENDITURE
Table 2 represents departments’ overall current expenditure per quarter
for the 2006/07 financial year. Departments spent on average 67.24% of their
current budgets by the end of the third quarter. They spent on average 19.7% of
their budgets in the first quarter, 23.91% during the second quarter and 23,45%
during the third quarter. At the end of the third quarter of the 2005/06
financial year departments spent on average 67.77% of their current budgets.
This expenditure pattern shows no significant decrease in the average
percentage of expenditure by departments during the 2006/07 financial year as
at the end of the third quarter.
Table 2: Current Expenditure
|
|
First Quarter Cur. Exp |
% Cur. Exp for 1st Quarter |
Second Quarter Cur. Exp |
% Cur. Exp for 2nd Quarter |
Third Quarter Cur. Exp |
% Cur. Exp for 3rd Quarter |
Total Current Budget |
Current Expenditure to date |
% Current Expenditure to date |
|
|
R'000 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Voted Amounts |
16,036,692 |
19.70% |
19,473,113 |
23.91% |
19,012,916 |
23.45% |
81,091,278 |
54,522,721 |
67.24% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Government Administration |
1,271,229 |
19.86% |
1,689,221 |
26.38% |
1,525,827 |
23.21% |
6,575,103 |
4,486,277 |
68.23% |
|
|
The Presidency |
38,247 |
17.13% |
47,008 |
21.06% |
49,883 |
23.97% |
208,118 |
135,138 |
64.93% |
|
|
Parliament |
107,989 |
17.96% |
189,368 |
31.49% |
164,065 |
27.29% |
601,208 |
461,422 |
76.75% |
|
|
Foreign Affairs |
426,813 |
19.77% |
565,208 |
26.18% |
483,724 |
21.62% |
2,237,586 |
1,475,745 |
65.95% |
|
|
Home Affairs |
366,758 |
19.89% |
471,596 |
25.57% |
466,529 |
25.40% |
1,836,732 |
1,304,883 |
71.04% |
|
|
Provincial and Local Government |
60,475 |
18.75% |
70,042 |
21.71% |
71,201 |
22.34% |
318,753 |
201,718 |
63.28% |
|
|
Public Works |
270,947 |
21.65% |
345,999 |
27.64% |
290,425 |
21.16% |
1,372,706 |
907,371 |
66.10% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial and Administrative
Services |
731,172 |
17.39% |
862,220 |
20.50% |
903,725 |
21.99% |
4,109,004 |
2,497,117 |
60.77% |
|
|
Gov. Communications and Info. Services |
41,084 |
21.29% |
46,546 |
24.13% |
45,041 |
22.66% |
198,786 |
132,671 |
66.74% |
|
|
National Treasury |
413,499 |
17.03% |
467,523 |
19.26% |
462,835 |
20.99% |
2,204,877 |
1,343,857 |
60.95% |
|
|
Public Enterprises |
19,873 |
19.50% |
22,951 |
22.52% |
27,710 |
27.34% |
101,336 |
70,534 |
69.60% |
|
|
Public Service and Administration |
62,213 |
19.26% |
61,326 |
18.98% |
93,890 |
25.89% |
362,710 |
217,429 |
59.95% |
|
|
Public Service Commission |
20,235 |
21.38% |
23,830 |
25.17% |
25,868 |
27.14% |
95,329 |
69,933 |
73.36% |
|
|
S A Management Development Institute |
6,913 |
20.66% |
8,283 |
24.75% |
6,194 |
18.51% |
33,460 |
21,390 |
63.93% |
|
|
Statistics |
167,355 |
16.22% |
231,761 |
22.47% |
242,187 |
21.77% |
1,112,506 |
641,303 |
57.64% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social Services |
555,031 |
17.40% |
701,628 |
22.00% |
596,541 |
19.14% |
3,116,775 |
1,853,200 |
59.46% |
|
|
Arts and Culture |
105,578 |
45.31% |
72,331 |
31.05% |
77,504 |
32.29% |
239,994 |
255,413 |
106.42% |
|
|
Education |
70,024 |
12.16% |
113,651 |
19.74% |
89,495 |
15.38% |
581,778 |
273,170 |
46.95% |
|
|
Health |
107,793 |
13.33% |
155,739 |
19.25% |
130,565 |
16.76% |
778,896 |
394,097 |
50.60% |
|
|
Labour |
202,077 |
18.09% |
259,613 |
23.24% |
217,332 |
20.24% |
1,073,731 |
679,022 |
63.24% |
|
|
Social Development |
52,856 |
19.06% |
78,139 |
28.18% |
59,199 |
22.26% |
265,913 |
190,194 |
71.52% |
|
|
Sport and Recreation |
16,703 |
9.42% |
22,155 |
12.50% |
22,446 |
12.72% |
176,463 |
61,304 |
34.74% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Justice and Protection Services |
12,143,545 |
20.31% |
14,421,959 |
24.11% |
14,096,246 |
23.80% |
59,225,284 |
40,661,750 |
68.66% |
|
|
Correctional Services |
1,776,857 |
19.24% |
2,044,134 |
22.14% |
1,992,843 |
23.09% |
8,630,038 |
5,813,834 |
67.37% |
|
|
Defence |
2,845,356 |
19.10% |
3,705,361 |
24.88% |
3,476,169 |
23.31% |
14,912,947 |
10,026,886 |
67.24% |
|
|
Independent Complaints Directorate |
13,838 |
21.61% |
15,436 |
24.11% |
15,146 |
23.68% |
63,970 |
44,420 |
69.44% |
|
|
Justice and Constitutional Dev. |
833,783 |
16.65% |
1,099,312 |
21.95% |
1,110,434 |
21.96% |
5,055,825 |
3,043,529 |
60.20% |
|
|
Safety and Security |
6,673,711 |
21.81% |
7,557,716 |
24.70% |
7,501,654 |
24.55% |
30,562,504 |
21,733,081 |
71.11% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Econ. Services &
Infrastructure Dev. |
1,335,715 |
17.07% |
1,798,085 |
22.97% |
1,890,577 |
23.44% |
8,065,112 |
5,024,377 |
62.30% |
|
|
Agriculture |
127,615 |
14.47% |
175,630 |
19.90% |
203,272 |
21.58% |
941,914 |
506,517 |
53.78% |
|
|
Communications |
62,031 |
20.38% |
69,831 |
22.95% |
71,658 |
23.14% |
309,628 |
203,520 |
65.73% |
|
|
Environmental Affairs and Tourism |
117,131 |
19.04% |
142,948 |
23.24% |
137,713 |
24.59% |
560,093 |
397,792 |
71.02% |
|
|
Housing |
33,535 |
8.98% |
45,482 |
12.18% |
67,835 |
25.86% |
262,307 |
146,852 |
55.98% |
|
|
Land Affairs |
149,290 |
15.07% |
223,584 |
22.57% |
221,267 |
22.47% |
984,731 |
594,141 |
60.34% |
|
|
Minerals and Energy |
88,601 |
16.56% |
110,433 |
20.65% |
124,491 |
23.90% |
520,952 |
323,525 |
62.10% |
|
|
Science and Technology |
46,010 |
25.45% |
44,886 |
24.83% |
42,747 |
20.87% |
204,861 |
133,643 |
65.24% |
|
|
Trade and Industry |
113,610 |
14.76% |
147,309 |
19.13% |
166,033 |
21.00% |
790,635 |
426,952 |
54.00% |
|
|
Transport |
105,194 |
19.52% |
184,614 |
34.26% |
126,394 |
17.44% |
724,802 |
416,202 |
57.42% |
|
|
Water Affairs and Forestry |
492,698 |
18.69% |
653,368 |
24.79% |
729,167 |
26.37% |
2,765,189 |
1,875,233 |
67.82% |
Department of Arts and Culture
The pattern of expenditure by Department of Arts and Culture is
currently much the same as the previous financial year when final over
expenditure was nearly 10% and the Committee expressed its concern. At the end of the third quarter 06/07 the
Department had already spent R225 million or R106.42% of its current budget by
the end of the third quarter. The Committee believes that measures should, if
they have not already, be taken to address this pattern of over expenditure.
The Department’s explanation for this pattern of expenditure is, that they
received a lot of additional responsibilities during the year for which they
had not budgeted.
Examples of this are the anniversary of the Woman’s
March and the 16 June youth uprising (National Youth Day). The
Department asked National Treasury for an additional R37 million to finance
these activities but only received R5 million. Using virements the Department
shifted money between projects to fund these events. In the Committee’s opinion
given the nature of these events, which appear to be closely related to the
development of social cohesion and preservation of South African culture, it
should have been raised during the budget planning process.
At
the end of the third quarter the Department pattern of expenditure of R190
million or 71.52% of its current budget appears to be on track. However given
the over expenditure of 136.75% in the previous financial year, the Department
should track its commitments, and cash flow more closely against its planned
strategic expenditure and outputs plans.
Department
of Safety and Security
The
Department’s current expenditure at the end of the third quarter of the
financial year was R21.7 billion or 71.11%. The Department plans spending R8.5
billion during the final quarter of the financial year. The pattern of
expenditure for the Department is on track and reflects the robust expenditure
related to strategic planning and outputs of the previous financial year.
However the Department is projecting over expenditure on Goods and Services by
R385.6 million and under expenditure of R712 million on Compensation for
Employees. However the Committee also noted that the Department spent R2.68
billion or 10.06% of its R32.56 billion budget during the last month of the
previous financial year.
The
Department of Sport and Recreation
The
Department is the lowest spending department with expenditure at R61.3 million
or 34.74% of its current budget. Goods and services slow expenditure of only
28% was not satisfactorily explained. However, delays in the finalisation of
staff appointments and “savings” incurred by not filling the vacant posts were
given by the Department as the reason for the slow expenditure of 42% for
Compensation of Employees.
The
reference once again, by a department, to savings to explain slow expenditure
is not considered valid by the Committee, when it refers stated planned targets
not been met, for whatever reason. In the Committee’s opinion the current
pattern of expenditure reflects the under expenditure pattern of the previous
financial year and therefore gives cause for concern. The Committee will be
engaging the Department during the final quarter to evaluate the degree of
impact this under expenditure will have on its outputs and stated targets. The Committee also noted that the Department
only spent 79.5% of its current budget in the 2005/06
financial year.
Department
of Education
The
Department’s slow expenditure R273 million, or 46.95% of the current budget is
directly related to Goods and Services which had only spent R127 million 34.9%
of its budget of R364 million. This line item includes consultants,
contractors, maintenance repairs and running costs, operating leases, travel
and subsistence, and printing and publications. Reasons given by the Department
for its slow expenditure on its current budget are that many projects are still
in process and payment will be made on completion during the final quarter.
Department
of Health
This Department
is also experiencing slow expenditure of R394 million or 50.6% on its current
budget at the end of the third quarter. During the 2005/06 financial year the
Department only spent 81.8% of its goods and services budget. According to the
Chief Financial Officer of Health the major portion of this slow expenditure is
the delay in the delivery of back orders of condoms, which was also given as a
reason to explain the slow expenditure in the third quarter. The Committee believes
measures should be taken to address this challenge.
The
Department of Agriculture
Goods
and Services 53.35% and compensation of employees 62.8% are the culprit line
items for slow expenditure at the end of the third quarter. An explanation
given by the Department for Goods and Services are the number of receipts
outstanding, relating to the “classical swine disease” outbreak. So called
“savings” on vacant posts were given as the
reason for slow expenditure on compensation of employees. The Cash flow
projections received from National Treasury shows under expenditure of its
current budget of R62 million. The Committee noted this given the pattern
during the 2005/06 financial year when the Department spent only 82.8% of its
goods and services budget and 83.9% of its compensation of employees budget.
Appropriate measures should be taken to arrest the trend in the next financial
year.
Department
of Trade and Industry
Current
expenditure at the end of the third quarter of the financial year was R427
million, or 54% of the budget. Thus far the Department spent 44.9% of its goods
and services budget. During the 2005/06 financial year the Department spent
only 77.5% of its goods and services line allocation. The Committee intends engaging the Department
to further obtain a better understanding of this recurrent expenditure pattern.
After examining the Department’s commitments the Committee is of the opinion
that the capitalisation of the National Empowerment Fund poses a risk in
relation to under expenditure given the nature of the commitment.
4.
TRANSFER PAYMENTS
The critical
success factor in transfer payments is the appropriate timing of the transfers
to ensure optimum expenditure in relation to targeted deliverables by recipient
spheres of government, and or agencies and institutions. Table 3 represents
departments’ transfer expenditure as at the end of the third quarter of the
2006/07 financial year. As indicated departments transfer expenditure averaged
72.54% at the end of the third quarter. The averages in the first, second
quarter and third quarter were 22.66% and 25.6% and 26.01% respectively. The
department reflecting the highest percentage of transfer payments is Public
Service and Administration.
Table 3: Transfer Payments to date
|
|
1st Quarter Tran. Exp |
% Tran. Exp for 1st Quarter |
Second Quarter Tran. Exp |
% Tran. Exp for 2nd Quarter |
3rd Quarter Tran. Exp |
% Tran. Exp for 3rd Quarter |
Total Transfer Budget |
Transfer Expenditure to date |
% Transfer Expenditure to date |
|
|
R'000 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Voted Amounts |
39,111,755 |
22.66% |
44,194,094 |
25.60% |
46,563,109 |
26.01% |
179,040,127 |
129,868,958 |
72.54% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Government Administration |
1,668,539 |
6.22% |
8,127,379 |
30.29% |
6,098,011 |
22.31% |
27,335,372 |
15,893,929 |
58.14% |
|
|
The Presidency |
7,371 |
27.91% |
4,897 |
18.55% |
4,815 |
19.77% |
24,350 |
17,083 |
70.16% |
|
|
Parliament |
0 |
0.00% |
0 |
0.00% |
40,160 |
25.35% |
158,439 |
40,160 |
25.35% |
|
|
Foreign Affairs |
170,064 |
35.02% |
20,609 |
4.25% |
81,490 |
16.74% |
486,668 |
272,163 |
55.92% |
|
|
Home Affairs |
129,109 |
35.75% |
76,575 |
21.20% |
78,290 |
21.34% |
366,869 |
283,974 |
77.40% |
|
|
Provincial and Local Government |
886,638 |
3.61% |
7,477,791 |
30.43% |
5,871,179 |
23.42% |
25,065,919 |
14,235,608 |
56.79% |
|
|
Public Works |
475,357 |
38.76% |
547,507 |
44.65% |
22,077 |
1.79% |
1,233,127 |
1,044,941 |
84.74% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial and Administrative
Services |
2,997,448 |
21.71% |
3,513,538 |
25.45% |
5,393,904 |
30.89% |
17,464,158 |
11,904,890 |
68.17% |
|
|
Gov. Communications and Info. Services |
34,278 |
36.83% |
39,150 |
42.05% |
815 |
0.87% |
93,284 |
74,243 |
79.59% |
|
|
National Treasury |
2,833,028 |
21.61% |
2,936,831 |
22.41% |
4,459,459 |
30.75% |
14,504,429 |
10,229,318 |
70.53% |
|
|
Public Enterprises |
120,041 |
20.66% |
459,996 |
79.16% |
927,596 |
33.53% |
2,766,752 |
1,507,633 |
54.49% |
|
|
Public Service and Administration |
3,918 |
957.95% |
71,783 |
17550.85% |
33 |
0.04% |
75,670 |
75,734 |
100.08% |
|
|
Public Service Commission |
41 |
44.57% |
23 |
25.00% |
7 |
7.61% |
92 |
71 |
77.17% |
|
|
S A Management Development Institute |
5,850 |
25.37% |
5,750 |
24.93% |
5,729 |
24.83% |
23,069 |
17,329 |
75.12% |
|
|
Statistics |
292 |
35.96% |
5 |
0.62% |
265 |
30.74% |
862 |
562 |
65.20% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social Services |
28,035,327 |
32.10% |
21,885,096 |
25.06% |
21,863,575 |
24.65% |
88,712,069 |
71,783,998 |
80.92% |
|
|
Arts and Culture |
218,649 |
20.23% |
251,483 |
23.27% |
280,200 |
25.82% |
1,085,349 |
750,332 |
69.13% |
|
|
Education |
6,629,915 |
48.94% |
3,497,409 |
25.82% |
2,620,515 |
19.12% |
13,708,060 |
12,747,839 |
93.00% |
|
|
Health |
2,525,565 |
24.21% |
2,693,736 |
25.82% |
2,655,162 |
24.98% |
10,631,194 |
7,874,463 |
74.07% |
|
|
Labour |
125,585 |
33.67% |
41,277 |
11.07% |
190,943 |
47.69% |
400,408 |
357,805 |
89.36% |
|
|
Social Development |
18,475,028 |
29.93% |
15,353,557 |
24.88% |
15,887,718 |
25.58% |
62,110,322 |
49,716,303 |
80.05% |
|
|
Sport and Recreation South Africa |
60,585 |
35.16% |
47,634 |
27.64% |
229,037 |
29.49% |
776,736 |
337,256 |
43.42% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Justice and Protection Services |
861,374 |
8.75% |
2,602,396 |
26.43% |
2,542,887 |
25.67% |
9,906,665 |
6,006,657 |
60.63% |
|
|
Correctional Services |
11,311 |
34.97% |
6,403 |
19.79% |
10,692 |
32.13% |
33,277 |
28,406 |
85.36% |
|
|
Defence |
545,663 |
6.32% |
2,320,840 |
26.87% |
2,277,948 |
26.21% |
8,691,707 |
5,144,451 |
59.19% |
|
|
Independent Complaints Directorate |
24 |
33.33% |
13 |
18.06% |
-8 |
-12.31% |
65 |
29 |
44.62% |
|
|
Justice and Constitutional Dev. |
221,208 |
27.55% |
199,752 |
24.87% |
186,249 |
23.11% |
805,888 |
607,209 |
75.35% |
|
|
Safety and Security |
83,168 |
22.14% |
75,388 |
20.06% |
68,006 |
18.10% |
375,728 |
226,562 |
60.30% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Econ. Services &
Infrastructure Dev. |
5,549,067 |
15.94% |
8,065,685 |
23.17% |
10,664,732 |
29.94% |
35,621,863 |
24,279,484 |
68.16% |
|
|
Agriculture |
209,338 |
20.08% |
400,263 |
38.40% |
361,564 |
26.33% |
1,373,213 |
971,165 |
70.72% |
|
|
Communications |
68,788 |
7.10% |
231,332 |
23.88% |
438,907 |
43.64% |
1,005,688 |
739,027 |
73.48% |
|
|
Environmental Affairs and Tourism |
551,151 |
39.68% |
418,217 |
30.12% |
314,560 |
21.18% |
1,484,869 |
1,283,928 |
86.47% |
|
|
Housing |
1,398,014 |
21.56% |
2,016,801 |
31.11% |
1,919,149 |
27.16% |
7,065,891 |
5,333,964 |
75.49% |
|
|
Land Affairs |
317,423 |
8.34% |
486,845 |
12.79% |
773,479 |
30.08% |
2,570,985 |
1,577,747 |
61.37% |
|
|
Minerals and Energy |
264,688 |
13.18% |
600,420 |
29.89% |
648,086 |
30.72% |
2,109,432 |
1,513,194 |
71.73% |
|
|
Science and Technology |
474,141 |
20.62% |
605,540 |
26.33% |
600,366 |
26.46% |
2,268,551 |
1,680,047 |
74.06% |
|
|
Trade and Industry |
330,237 |
11.44% |
839,873 |
29.09% |
840,015 |
26.93% |
3,119,065 |
2,010,125 |
64.45% |
|
|
Transport |
1,745,837 |
14.20% |
2,190,766 |
17.82% |
4,401,167 |
33.90% |
12,984,052 |
8,337,770 |
64.22% |
|
|
Water Affairs and Forestry |
189,450 |
11.60% |
275,628 |
16.88% |
367,439 |
22.40% |
1,640,117 |
832,517 |
50.76% |
Public Service and Administration
The
Department’s transfer budget increased from R409 thousand to R75.7 million
through the Adjusted Estimates. However this increase was to enable the
Department to transfer R70 million to the Government Employees Medical Scheme
(GEMS) to enable GEMS to meet its financial obligations. A further transfer of
R5 million was made to Public Corporations and Private Enterprises. In the
third quarter the Department met its final transfer obligation of R33 thousand,
for this financial year.
Department
of Education
At the end of
the third quarter the Department transferred R12.7 billion or 93% of its
adjusted transfer budget of R13.7 billion. The Department plans additional
transfers of R964 million over the next three months, R628 million to
universities and technikons and R310 million to provinces and municipalities.
The transfer expenditure pattern at the end of the previous financial year was
99% and this financial year the transfer trend is similar.
Department
of Labour
The
Department of Labour’s transfer expenditure at the end of the third quarter of
the 2006/07 financial year was R357.8 million, or 89.36% of its transfer
budget. The Department transferred nearly half of its budget during the third
quarter of the financial year. The Department plans transferring R42 million
during the final quarter of the financial year. The service challenges in
Programme 2 and the Employment and Skills Development in Programme 3 pose a
potential risk to under expenditure if the outputs are not more closely tracked
to expenditure.
Department
of Correctional Services
Given
the previous financial year’s over expenditure transfer trend of R68.86% the
Committee is concerned at the current pattern. Transfers are standing at R28.4
million, or 85.36% of its adjusted transfer budget of R33 million with a
planned final quarter expenditure of R7 million which poses the risk of
departmental over expenditure in 2006/07 financial year.
Department
of Sport and Recreation South Africa
The
2010 priority department’s transfer budget increased from R172 million to
R776.7 million through the Adjusted Estimates. An additional R600 million for
the construction of 2010 FIFA World Cup stadia in host cities was received by
the Department, which was announced in the budget speech by the Minister of
Finance. The Departments transfer expenditure at the end of the third quarter
was R337 million, or 43.42% of its adjusted transfer budget.
The
Committee noted with concern that provinces and municipalities would have to
spend these transferred funds before the end of their financial year. The
reason given by the Department for the slow rate of transfers is the
outstanding documentation from a number of sport federations’. In the
Committee’s opinion such delays impact significantly on expected construction
progress and are a potential risk.
The
transfer expenditure of the Directorate at the end of the third quarter was R29
thousand or 44.62% of its transfer budget of only R65 thousand. At the end of
the third quarter of the previous financial year the Department spent 45.64% of
its transfer budget and eventually spent 85.91% of its budget by the end of the
2005/06 financial year. The Committee recommends that this transfer pattern of
slow expenditure should be reviewed by the department for its impact on service
delivery by recipients.
Department
of Water Affairs and Forestry
The
Department had transferred R833 million or 50.76% of its transfer R1.6 billion
budget. Although functions in the Water Services programme have been shifted to
Local Government and the appropriate water service institutions the Committee
has not yet been able to ascertain whether the funds have followed this shift.
The Department plans to transfer an additional R589 million in the final
quarter of the financial year. This will result in under expenditure on the
transfer budget of R265 million, more specifically the departmental agencies
and accounts budget within the transfer budget. The main reason given by the
Department for the predicted under expenditure is the delay in the construction
of the De Hoop Dam.
Late
last year a range of organisations, including the South African National Parks,
lodged appeals against the 21-story-high De Hoop Dam, mainly because of
evidence that it could cut off essential water supplies to the Kruger National
Park and neighbouring Mozambique. The Committee believes these environmental
impact issues should have been factored into the project time frames to avoid
such delays. The Committee intends to engage the Department more closely on
this issue during the final quarter of the financial year.
Department
of Public Enterprises
The
significant increase in the Department’s transfer budget from R581 million to
R2.766 billion through the Adjusted Estimates was allocated for the Corporate
Strategy and Structure programme. This “once off payment” for the Pebble Bed
Modular Reactor and money allocated to InfraCo is intended to procure a full
service national long distance network from Eskom/Transtel. At the end of the
third quarter R1.5 billion or 54.49% had been transferred. A further transfer
of R1.256 billion has been committed during the final quarter. The Chief
Financial Officer of the Department confirmed the focussed additional funding
which he added had affected the percentage transferred at the end of the third
quarter.
Once
again the Committee intends engaging further with National Treasury on amounts
related to transfers for VAT payments by SOEs which are provided for in the
adjusted estimates. The question remains whether SOE capital payments are
vatable or not. National Treasury had advised the Department to “hold back”
this payment pending consultation with SARS on the matter. The Department is
still liaising with them in this regard. In addition, the Department has not
transferred the funds to INFRACO at the express instruction from National
Treasury, pending various matters, which they have raised. Finalisation and
payments of projects in the final quarter had also contributed to the low
transfer levels, according to the Department.
5.
Capital Expenditure
(capex)
Departments’
spent on average 53.12% of their capital budgets at the end of the third
quarter. They spent on average 9.86% of their capital budgets during the first
quarter, 13.82% during the second quarter and 29.65% during the third quarter.
The Department of Health spent the highest percentage of its capital budget by
the end of the third quarter. Average
departmental expenditure on capital budgets is much lower than current 67.24%
and transfer expenditure, which is 72.54%.
Table 4 represents departments overall capital expenditure at the
end of the third quarter 2006/07 financial year. This reports has focussed on
the departments with significant over and under expenditure especially when
priority projects are involved.
|
|
1st Quarter Cap. Exp |
% Cap. Exp for 1st Quarter |
Second Quarter Cap. Exp |
% Cap. Exp for 2nd Quarter |
3rd Quarter Cap. Exp |
% Cap. Exp for 3rd Quarter |
Total Capital Budget |
Capital Expenditure to date |
% Capital Expenditure to date |
|
|
R'000 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Voted Amounts |
589,412 |
9.86% |
825,833 |
13.82% |
1,788,589 |
29.65% |
6,031,759 |
3,203,834 |
53.12% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Government Administration |
80,876 |
4.96% |
73,186 |
4.49% |
219,976 |
15.04% |
1,462,127 |
374,038 |
25.58% |
|
|
The Presidency |
126 |
2.01% |
1,835 |
29.23% |
1,896 |
29.64% |
6,397 |
3,857 |
60.29% |
|
|
Parliament |
2,384 |
10.49% |
1,257 |
5.54% |
460 |
2.05% |
22,486 |
4,101 |
18.24% |
|
|
Foreign Affairs |
14,178 |
3.56% |
33,447 |
8.41% |
54,411 |
17.12% |
317,895 |
102,036 |
32.10% |
|
|
Home Affairs |
21,766 |
3.66% |
29,726 |
5.00% |
68,653 |
11.50% |
596,804 |
120,145 |
20.13% |
|
|
Provincial and Local Government |
477 |
7.87% |
639 |
10.55% |
2,712 |
35.61% |
7,616 |
3,828 |
50.26% |
|
|
Public Works |
41,945 |
6.96% |
6,282 |
1.05% |
91,844 |
17.98% |
510,929 |
140,071 |
27.41% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial and Administrative
Services |
9,116 |
14.42% |
10,599 |
16.78% |
12,685 |
15.65% |
81,050 |
32,400 |
39.98% |
|
|
Gov. Communications and Info. Services |
704 |
34.90% |
967 |
47.95% |
913 |
36.37% |
2,510 |
2,584 |
102.95% |
|
|
National Treasury |
1,066 |
8.49% |
1,550 |
12.35% |
2,868 |
14.15% |
20,275 |
5,484 |
27.05% |
|
|
Public Enterprises |
234 |
50.21% |
900 |
193.14% |
468 |
25.50% |
1,835 |
1,602 |
87.30% |
|
|
Public Service and Administration |
1,163 |
53.50% |
1,230 |
56.57% |
1,582 |
39.10% |
4,046 |
3,975 |
98.25% |
|
|
Public Service Commission |
170 |
10.75% |
125 |
7.90% |
183 |
11.57% |
1,582 |
478 |
30.21% |
|
|
S A Management Development Institute |
891 |
37.30% |
354 |
14.81% |
296 |
12.39% |
2,389 |
1,541 |
64.50% |
|
|
Statistics South Africa |
4,888 |
11.63% |
5,473 |
13.03% |
6,375 |
13.17% |
48,413 |
16,736 |
34.57% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social Services |
7,391 |
10.53% |
16,109 |
22.95% |
58,869 |
65.17% |
90,330 |
82,369 |
91.19% |
|
|
Arts and Culture |
0 |
0.00% |
0 |
0.00% |
38 |
0.79% |
4,796 |
38 |
0.79% |
|
|
Education |
1,757 |
26.88% |
1,209 |
18.49% |
981 |
10.51% |
9,338 |
3,947 |
42.27% |
|
|
Health |
3,255 |
11.61% |
5,778 |
20.60% |
49,400 |
112.52% |
43,903 |
58,433 |
133.10% |
|
|
Labour |
667 |
2.95% |
8,278 |
36.63% |
7,086 |
36.61% |
19,356 |
16,031 |
82.82% |
|
|
Social Development |
1,639 |
29.06% |
720 |
12.77% |
1,166 |
18.84% |
6,190 |
3,525 |
56.95% |
|
|
Sport and Recreation South Africa |
73 |
2.83% |
124 |
4.82% |
198 |
2.93% |
6,747 |
395 |
5.85% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Justice and Protection Services |
414,991 |
11.20% |
614,904 |
16.59% |
1,174,836 |
32.03% |
3,668,251 |
2,204,731 |
60.10% |
|
|
Correctional Services |
79,995 |
5.87% |
197,751 |
14.49% |
173,630 |
14.86% |
1,168,197 |
451,376 |
38.64% |
|
|
Defence |
37,303 |
12.51% |
49,716 |
16.67% |
70,268 |
23.56% |
298,250 |
157,287 |
52.74% |
|
|
Independent Complaints Directorate |
578 |
32.11% |
222 |
12.33% |
235 |
12.56% |
1,871 |
1,035 |
55.32% |
|
|
Justice and Constitutional Dev. |
131,400 |
28.63% |
96,144 |
20.94% |
183,912 |
29.81% |
616,934 |
411,456 |
66.69% |
|
|
Safety and Security |
165,715 |
10.47% |
271,071 |
17.12% |
746,791 |
47.18% |
1,582,999 |
1,183,577 |
74.77% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Econ. Services &
Infrastructure Dev. |
77,038 |
15.20% |
111,035 |
21.92% |
322,223 |
44.14% |
730,001 |
510,296 |
69.90% |
|
|
Agriculture |
16,403 |
49.62% |
18,961 |
57.35% |
19,837 |
37.78% |
52,503 |
55,201 |
105.14% |
|
|
Communications |
1,317 |
18.84% |
827 |
11.83% |
229 |
3.28% |
6,990 |
2,373 |
33.95% |
|
|
Environmental Affairs and Tourism |
6,540 |
46.51% |
7,001 |
49.78% |
5,250 |
31.17% |
16,842 |
18,791 |
111.57% |
|
|
Housing |
527 |
13.40% |
400 |
10.17% |
754 |
13.64% |
5,528 |
1,681 |
30.41% |
|
|
Land Affairs |
2,486 |
4.49% |
12,299 |
22.22% |
112,285 |
64.35% |
174,480 |
127,070 |
72.83% |
|
|
Minerals and Energy |
308 |
6.53% |
1,666 |
35.33% |
1,955 |
41.45% |
4,716 |
3,929 |
83.31% |
|
|
Science and Technology |
9,880 |
7.38% |
1,005 |
0.75% |
133,987 |
93.25% |
143,681 |
144,872 |
100.83% |
|
|
Trade and Industry |
1,429 |
16.14% |
8,160 |
92.17% |
2,707 |
8.37% |
32,328 |
12,296 |
38.04% |
|
|
Transport |
767 |
2.02% |
2,341 |
6.17% |
25,912 |
68.30% |
37,936 |
29,020 |
76.50% |
|
|
Water Affairs and Forestry |
37,381 |
17.98% |
58,375 |
28.07% |
19,307 |
7.57% |
254,997 |
115,063 |
45.12% |
Department
of Health
At
the end of the third quarter the Department had spent R58 million or 133% of
its capital budget of R43.903 million including an increase of R15.8 million
through the Adjustment Estimates. Further the bulk of this expenditure occurred
during the third quarter with capex of R49.4 million. The Committee noted that this is more than
the Department’s total capital budget for the 2006/07 financial year. While the
Committee recognises the commitments to hospital revitalisation programme it intends
engaging the Department further during the next quarter to obtain a better
understanding of these capital expenditure patterns.
Department
of Agriculture
The
Department’s capital budget increased from R33 million to R52.5 million through
the adjusted estimates. Capital expenditure at the end of the third quarter was
R55.2 million, or 105.14%. During the 2005/06 financial year the Department
spent 222.1% of its capital budget of R44 .6 million budget leading to capital
over expenditure of R56 million. In the Committee’s
opinion the functions of the Department and the high risk posed by natural
disasters it is imperative that the Department pursues its stated intention of
developing more robust management in this regard.
At
the end of the third quarter the GCIS had utilised R2.58 million or 102.95% of
its R2.51 million capital budget. An additional R1.3 million is planned during
the final quarter of the financial year.
This over expenditure trend in the capital budget also occurred in the
previous financial year when the Department over spent by 13.84%. The incorrect
classification of items under the capital budget was responsible for this
expenditure pattern. The Committee hopes this will be corrected in the next
financial year.
Department
of Science and Technology
The
Department of Science and Technology’s capital budget increased from R133.8
million to R143.6 million through the adjusted estimates. Capital expenditure
at the end of the third quarter was R144.8 million, or 100.83% of its capital
budget. The Department spent R134 million of its capital budget during the
third quarter and plans spending R77 thousand during the final quarter. An
amount of R133 million, under the line item of Buildings and other fixed
structures, was allocated to the Department for the construction of a new head
office. However the Committee noted the 235% over expenditure in the
Department’s capital budget at the end of the 2005/06 financial year. This
pattern of over expenditure notwithstanding stated reasons should be
immediately arrested to avoid in the following financial year.
The
capital budget for the Department of Arts and Culture is R4.8 million of which
only R38 thousand or 0.79% was spent by the end of the third quarter compared
to 1.72% in the previous financial year. The Department plans spending R4.4
million during the final quarter of the financial year. However the Department
expected large claims during the final quarter of the financial year for the
development of Freedom Park. In view of this commitment the Committee believes
the Department is on track, which is underpinned by the pattern in the previous
financial year when the Department spent 100.3% of its capital budget.
Department
of Sport and Recreation South Africa
The
Department’s entire capital budget of R6.7 million, which includes more than
R4.1 million through the Adjustment Estimates, is intended for machinery and
equipment. However capital expenditure at the end of the third quarter was only
R395 thousand, or 5.85% of its capital budget compared to 12.01% during the
previous financial year. The explanation given by the Department for the slow
rate of expenditure is a delay in the procurement of an identified ITC system.
The Committee learned that the Department plans spending R6.4million during the
final quarter. It was noted that the Department overspent its capital budget by
114% at the end of the 2005/06 financial year. The Committee is of the opinion
that stronger measures should be implemented by the Department to manage the
alignment of its strategic outputs to its pattern of expenditure.
The
critical constitutional support role of the vote of Parliament to ensure
members of Parliament enjoy effective services and sound support facilities and
systems is acknowledged by the Committee. This imperative informed the
Committee’s deliberations on the budget generally and specifically, in relation
to the capital expenditure, which reflected a particular pattern. At the end of
the third quarter Parliament had spent R4 million or 18.24% of its capital
budget of R22.5 million compared to 210% during the previous financial year.
Cash flow projections show that Parliament plans spending an additional R2.3
million during the final quarter.
However
the committee noted that R22.4 million of Parliament’s capital budget is
allocated to machinery and equipment. The Committee intends engaging with
Parliament during the final quarter to improve its understanding of its expenditure
patterns.
Department
Home Affairs
This
Department aims to maintain the constitutional integrity of people living in
South Africa. The Committee had hoped to engage the Department more thoroughly
during its sectoral oversight to obtain a better understanding of the
expenditure patterns in relation to its functions. Unfortunately this had not
been possible.
The
capital budget for the Department Home Affairs is R596.8 million of which only
R120 million or 20.13% was spent by the end of the third quarter compared to
47.7% at the end of the third quarter of the previous financial year. Cash flow
projections shows that the Department is expected to under spend its capital
budget by R230 million. In the previous financial year 2005/06 the Department spent
92.5% of its capital budget. The Department stated that it could not utilise
the R213 million which had been suspended by National Treasury. The expenditure
pattern at the end of the third quarter gives the Committee cause for concern,
as it poses risk of under expenditure. The Committee intends engaging with the
Department in the next quarter to clarify this pattern.
National
Treasury’s capital budget increased from R12.6 million to R20.3 million through
the adjustment estimates. These are funds shifted from compensation of
employees to buy furniture and used for software for internal auditing and the
integrated document management system. Capital expenditure at the end of the
third quarter was R5.5 million, or 27% of its capital budget. National Treasury
plans spending R14.8 million during the final quarter of the financial year. At
the end of the previous financial year National Treasury spent 80.6% of its
capital budget. The capital expenditure pattern at the end of the third quarter
gives rise for concern, as it poses a risk of under expenditure. The Committee
intends monitoring Treasuries expenditure over the next quarter.
6.
CONCLUDING COMMENTS
Departments spent
on average 67.24% of their current budgets, 72.54% of their transfer budgets
and 53.12% of their capital budgets by the end of the third quarter of the
2006/07 financial year. This translates to a total expenditure of R187.6
billion or 70.48%. Cash flow projections provided by National Treasury show
that departments’ forecast spending R75.4 billion during the final quarter.
Based on these forecasts an under expenditure of R3.2 billion or 1.2% can be
expected in the national budget.
Having studied the
expenditure patterns the Committee has identified several areas that required
departments attention. The Committee also notes that very few departments have
taken note of the call for such attention in previous quarterly expenditure
reports and hopes the concerns expressed after deliberating on the third
quarter 2006/07 will be taken more seriously as they do impact negatively on
outputs translated into peoples delivery.
The Committee intends clarifying its mandate with
departments with whom it engages to ensure a better understanding of its
requirements and expectations when conducting oversight on quarterly
expenditure reports which have been compiled from Section 32 monthly reports.
We welcome
National Treasuries proposal to develop a system of tracking project
expenditure commitment against output and linked to it the projected project
cash flow.
7.
RECOMMENDATIONS
7.1
It is imperative that departments begin to track their expenditure more
closely to their strategically planned outputs against stated timelines and
ensure cash flow alignment. This would make for tighter linkages between
policy, planned expenditure and output achievements leading to robust budget
implementation.
7.2
Intergovernmental and interdepartmental co-ordination together with
co-operative planning should be factored into the process of transfers to
provinces, municipalities and other agencies.
7.3
Risk analysis should be conducted more robustly and the development of
appropriate risk management instruments should be more effectively employed to
address the challenges that continue to be posed by under and over expenditure.
7.4
Slow expenditure in capital allocations should be monitored more closely
and action taken sooner to arrest delays in this area.
7.5
Statement of
the National Revenue, Expenditure and Borrowing (Section 32 reports) produced
on a quarterly basis by National Treasury linking expenditure to outputs would
enable more effective oversight by the Joint Budget Committee.
·
Budget Speech of
Minister Trevor Manuel 2006/2007
·
Statements of National
and Provincial Revenue, Expenditure and Borrowing, October 2006, National
Treasury.
·
Statements of National
and Provincial Revenue, Expenditure and Borrowing, November 2006, National
Treasury.
·
Statements of National
and Provincial Revenue, Expenditure and Borrowing, December 2006, National
Treasury.
·
Cash Flow projections
2006/07 financial year.
·
Estimates of National
Expenditure 2006
·
Join Budget Committee
terms of reference
·
Joint Budget Committee
strategic plan