Report of the Standing Committee
on Appropriations on the Third Quarter Expenditure for the 2010/11 financial
year, dated 26 May 2011
The
Standing Committee on Appropriations, having heard briefings and considered
third quarter expenditures of national departments for the 2010/11 financial
year, reports as follows:
1.
Introduction
The
Standing Committee on Appropriations (the Committee) was established in terms
of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act
No. 9 of 2009. The Act requires the Committee to consider and report on
spending issues, and on actual expenditure published by the National Treasury.
The Committee has adopted a tradition of inviting both National Treasury and
the affected departments to account on government spending. This consultative
approach gives the Committee an opportunity to interrogate departments on their
spending with a view to identify and strengthen gaps in public spending. The
Committee is established as a strategic centre to flag issues which might
impact negatively on service delivery through scrutiny of government spending.
As such, it agreed during its business planning session to move swiftly towards
balancing its expenditure monitoring with actual performance.
This
report provides a detailed overview of government spending for the period 1
April 2010 to 31 December 2010. It intends to highlight spending patterns of National
departments and draws the attention of Parliament and the Executive to findings
and recommendations made for improved public spending.
2.
The
Review of the Total Expenditure
The
national departments were allocated an adjusted budget of R466, 8 billion for
the 2010/011 financial year, which excludes direct charge. Of the appropriated
funds, R134 billion was allocated to current payments, R301,6 billion to
transfers and subsidies, and R9,3 billion to capital expenditure. An overall
expenditure at the end of the third quarter is R342,7 billion (73,4 per cent)
of the adjusted budget. The government
spending has decreased by 0,9 per cent compared to the same period in the 2009/10
financial year. In the third quarter of the 2009/10 financial year, government departments
had spent R304 billion or 74,4 per cent of the available budget, while in the
third quarter of the 2010/11 financial year, government has only spent R342,8
billion or 73,5 per cent. However, close scrutiny of
government spending suggests that stricter monitoring systems should be put in
place to strengthen budget implementation.
An
amount of R229,6 billion (76,1 per cent) was transferred to the receiving
entities at the end of the third quarter of the 2010/11 financial year. The
expenditure of R92,7 billion (68,7 per cent) was reported on current payment,
while R4,4 billion (47,7 per cent) was spent on capital expenditure. The
consolidated expenditure of national departments reflects a slow spending in
both current and capital expenditure, while the overall expenditure trend for
transfers and subsidies is on track. However,
it should be noted that national departments record expenditure when funds are
transferred to receiving entities and this does not mean that these funds are
spent for their intended purposes. The implementation of transfers and
subsidies is executed by receiving entities and accounted for in terms of their
accountability instruments. The national departments provided a synopsis of their
spending trends.
Taking
into account the direct charge, in aggregate, national departments spent R601
billion, or 73,5 per cent of the adjusted R817,8 billion for the first nine
months of the 2010/11 financial year.
3.
Spending
by the Selected National Departments
After
the restructuring of government, its overall budget comprises 37 Votes. All
these departments have reported different expenditure patterns, with the Department
of Higher Education and Training reporting the highest expenditure of 93,4 per
cent and the Department of Communications being the least spending department
at 45,1 per cent. The reason for high expenditure in the Department of Higher Education
and Training was due to transfers of subsidies to tertiary institutions that
were made before the third quarter. After considering government priorities and
the spending patterns, the following departments were identified (refer to
Table 1 –below).
Table 1: Actual Expenditure for
the period 1 April 2010 to 31 December 2010
|
Department |
Adjusted Budget (R'000) |
Actual Expenditure 01 Apr 31-Dec 2009 |
|
|
|
Amount |
% |
|
|
Communications |
2 138 001 |
965 280 |
45, 1 |
|
Water Affairs |
8 203 193 |
5 072 003 |
61, 8 |
|
Public Works |
7 364 797 |
5 280 648 |
71, 7 |
|
Police |
53 529 740 |
38 993 670 |
72, 8 |
|
Rural Development and Land Reform |
7 308 243 |
4 860 156 |
66, 5 |
|
Statistics |
1 973 398 |
2 101 379 |
50, 4 |
|
Department of Women, Children and
Persons with Disabilities |
97 790 |
- |
- |
|
National Treasury |
50 209 414 |
35 017 392 |
69, 7 |
As
seen from the Table 1 above, the Department of Women, Children and People with
Disabilities has not been reporting to National Treasury. However, it is
reported that, according to Basic Accounting System (BAS) [Vulindlela], as from
November 2010 to 09 February 2011, the Department has spent R50, 784 million of
its available budget, which is 48 per cent of the budget (National Treasury, 9
February 2011)
3.1
Department of Communications
The
Department of Communications (DoC) was allocated a total budget of R2,1 billion
in the 2010/11 financial year. The departmental budget comprises six programmes
namely, Administration, information & communication technology (ICT)
International Affairs and Trade, ICT Policy Development, ICT Enterprise
Development, ICT Infrastructure Development and Presidential National
Commission. The highest share of the departmental adjusted budget was allocated
to the ICT Enterprise Development programme. This programme was allocated R1,6
billion.
The
DoC reported an expenditure of R965 million or 45,14 per cent at the end of the
third quarter. The major under-spending was on ICT Infrastructure Development
due to the decision to close down the 122 Emergency Call Centre project which
was allocated R111,9 million. The project was however in the process of being
revived.
The
DoC indicated that the reason for the slow spending was mainly due to the high
vacancy rate which came about as a resulted from the organisational review and
a moratorium on the filling of senior posts. It was reported that there were
delays in the implementation of projects due to instability, especially in the
Department’s Bid Committee but that it has since been addressed. The point was
made that the introduction of key internal controls also resulted in slow
expenditure within the Department.
The
DoC mentioned that six priority projects have been identified for the 2011/12
financial year and that the Strategic and Business Plans for that period have
been finalised. It was also mentioned that all projects were now in line with
the Department’s Strategic Plan.
The
DoC reported the following reasons for slow spending on transfers to entities:
|
Entity |
Reasons for under spending |
|
Universal Service and Access Agency of |
Funds were withheld due to the lack of spending by
USSASA as a result of projects not being implemented on time. The Management of USAASA has been engaged
by the Department to rectify the situation. |
|
Universal Service Access Fund (USAF) |
The under spending was mainly due to the delay in
the finalization of the Digital Terrestrial Television (DTT) standards. This
matter has been finalized and the standards were pronounced by the Minister. |
|
South African Broadcasting Corporation (SABC) [Public Broadcaster] |
Lengthy lead times on the procurement of DTT
equipment and education content. The SABC has been engaged to effect
improvement on their spending. |
|
Sentech |
The under spending (capital expenditure & dual
illumination) was caused by the delay in the DTT standards and this has now
been corrected. |
The
Committee felt that the DoC needed to furnish it with an organogram for the
period starting from the end of September to the end of December 2010 in order
to enable it to analyse the recruitment of senior staff during that period. It
was also stated that the list of posts that were filled during the third term
of the 2010/11 financial year needed to be provided to the Committee. The point
was made that a list of the six priority projects needed to be forwarded to the
Committee.
The
DoC undertook to furnish the Committee with a comprehensive report on the 122
Emergency Call Centre and the Federation of International Football Association
(FIFA) legacy projects.
3.2 Department of Water Affairs
The
Department of Water Affairs (DWA) was allocated a total budget of R8,2 billion
in the 2010/11 financial year. The departmental budget consists of five
programmes. These are Administration with a budget of R967.498 million, Water
Management with R402.939 million, National Water Resource Infrastructure
programme with R2,2 billion, Regional Management with R4,3 billion and Water
Sector Regulation being the lowest with R240.182 million. The DWA has under
spent in most programmes for current payments with only 19,83 per cent of its
budget being spent by the end of December 2010. In respect of the Regional Bulk
Infrastructure Development and the Water Services Refurbishments programmes, it
was reported that there was a lack of or no technical and management capacity. With
reference to the Masibambane Donor Funding, it was reported that there was no
common understanding within the DWA on how to spend the conditional funding
which led to the slow expenditure thereon.
To this end, the Committee requested the DWA to submit a detailed report
to Parliament on how the Masibambane funding had been spent.
The
DWA reported that the reasons for the slow spending were as follows:
The
DWA reported that mechanisms have been put in place to fast track delays in the
planning processes, especially project designs, and the inaccuracies of
invoices submitted by contractors. The DWA was working closely with the
Department of Cooperative Governance and Traditional Affairs (CoGTA) in order
to address its capacity challenges at a municipal level. The point was made
that the De Hoop Dam project in the
The
Committee noted and expressed concern at the poor planning by the department
since it only reported halfway through the financial year that it did not have
the capacity to spend its total allocated budget. Specific reference was made
to the Moutse Bulk Water Supply project in Limpopo and the Arcornhoek Bulk
Water Supply project in
3.3 Department of Public Works
The
Department of Public Works (DoPW) was allocated a total budget of R7,3 billion
in the 2010/11 financial year. The Department is responsible for five
programmes, namely, Administration, Immovable Asset Management, Expanded Public
Works Programme, Property and Construction Industry Policy Regulation and
Auxiliary and Associated Services. The Expanded Public Works Programme (EPWP)
showed the slowest expenditure by the Department at R777 million or 50 per cent
of its total budget allocation.
In
respect of earmarked funds, the Extended Public Works Programme (EPWP)
Incentive to Provinces showed an expenditure of R129 million or 27 per cent,
with EPWP Incentives to municipalities at R255 million or 44 per cent, and the
Construction Education Training Authority (CETA) [Human Resources], Energy
Efficiency, Compensation of Losses, Distress Relief, and Loskop Settlement all stood
at 0 per cent by 31 December 2010. The DoPW attributed the slow expenditure on
Energy Efficiency to the protracted bidding process which resulted in the late
awarding of the bid and the lack of capacity to manage the project.
With
regard to expenditure on capital budget-infrastructure, the DoPW reported that
Dolomite Risk Management stood at R7,8 million or 6 per cent and Inner City
Regeneration showed an expenditure of R67,8 million or 11 per cent. Slow
expenditure in respect of Dolomite Risk Management was largely attributed to
the fact that the spending in that area was largely directly related to the Repair
and Maintenance Programme (RAMP) projects which were put on hold pending the
assessment and restructuring of projects.
The
Committee noted a lack of integrated planning between the DoPW, provinces and
municipalities which resulted in delays of service delivery. To this end, it
was proposed that a planning committee inclusive of officials from the
national, provincial and local government be established. It was also noted
that the DoPW requested adjusted budgets without having adequate plans in place
for spending the additional funding. Concern was expressed at the slow
expenditure of the EPWP programme given its potential contribution on job
creation which was a priority of government. In addition, it was stated that
the DoPW needed to do things differently to enhance job creation to which it
undertook to furnish Parliament with a comprehensive report thereon. The point
was made that this report be inclusive of how the Department of Public Works
would assist the smaller municipalities financially since most of them did not
have the funding for it. Reference was made to Inner City Re-generation,
especially the Re Kgabisa Tswane Accommodation Programme, and it was felt that
the DoPW was piloting projects for extensive periods of time.
3.4 Department of Police
The
Department of Police (DoP) was allocated a total budget of R53,5 billion in the
2010/11 financial year. The DoP reported a total expenditure of R38,9 billion
or 72,8 per cent, by the end of December 2010. Payments for Capital Assets and,
Goods and Services under Current Payments showed the slowest expenditure at
R1,6 billion or 59,6 per cent and R8 billion or 67,7 per cent, respectively.
The
DoP ascribed the reasons for the slower expenditure under Goods and Services
mainly to the slow expenditure of the Integrated Justice System (IJS) and the
Criminal Justice System (CJS) which stood at 37,8 per cent and 11,9 per cent respectively,
at the end of December 2010. The Committee expressed concern at the lack of
cooperation between the Departments of Correctional Services, Justice and
Constitutional Development, Defence and Military Veterans, Home Affairs, State
Security and Police in respect of the IJS.
It was further stated that the relevant Portfolio Committees needed to
facilitate the collaboration between the officials from the different
departments who were involved in this system. The spending of Payments for
Capital Assets was in accordance with the planning at the beginning of the 2010/11
financial year since the delivery of vehicles took place in the second half of
the 2010 calendar year.
Clarity
was sought in respect of the shifting of funds from Payments to Capital Assets
to Current Payments and it was reported that the National Treasury was within
the prescripts of Section 43 (6) of the Public Finance Management Act 1 of 1999
(PFMA) and the Adjustment Appropriation Act. The point was made that Parliament
would engage with the National Treasury in respect of Section 43 of the Public Finance
Management Act since that section has led to confusion and that the shifting of
funds would be monitored closely by this Committee and attempts would be made
to cooperate with the Portfolio Committee on Police in monitoring the shifting
of funds.
The
DoP reported that the Case Management System (that is E-docket –documents stored
electronically) would be rolled-out in the next financial year and that most of
the funding has been committed. With regard to Exhibit Management, 75 per cent
of all exhibits would be processed electronically by December 2011 and that
visible policing units would report thereon on a continuous basis for the
various police stations. In respect of the organisation structure, it was
reported that on the eve of the 2010 Federal of International Football Association
(FIFA) World Cup, the DoP had to increase the number of Police members due to
the withdrawal by the private security companies and that this impacted on the
budget. It was however stated that the DoP still needed to be compensated for that
by the Local Organising Committee (LOC).
3.5 Department of Rural Development and Land Reform
The
Department of Rural Development and Land Reform (DoRDLR) was allocated a total
budget of R7,3 billion for the 2010/11 financial year. The DoRDLR showed a
total expenditure of R4,8 billion or 66, 5 per cent by the end of December
2011. By the end of the third quarter, Current Payments showed an expenditure
of R1,3 billion or 56, 6 per cent, Transfer and Subsidies was at R3,8 billion
or 71,5 per cent and Payments for Capital Assets stood at R17 million or 61,2 per
cent.
The
DoRDLR attributed the slow expenditure under Current Payments to the
restructuring process to align its organisational structure and resources to
the new mandate and the moratorium on the filling of vacant posts, which has
been lifted in January 2011. The National Rural Youth Service Corps (NARYSEC)
was implemented in September 2010, with the planning and activities taking
place during the third quarter but payments would be made in the fourth quarter
only. Under Payment for Capital Assets, the slow expenditure was attributed to
the delay in ICT Infrastructure expenditure which only took place in February
2011 due to delays in finalising the lease agreement for newly leased office
buildings with the Department of Public Works. In respect of Total Transfers
and Subsidies, the Restitution budget had already been depleted with
outstanding court cases to be settled. Therefore, savings from other programmes
had to be used to settle excessive expenditure in the Restitution Programme in
order to prevent the accrual of interests and possible fruitless and wasteful
expenditure. It was also reported that the DoRDLR shifted R2 billion from Land
Reform Grants and R500 million was rolled-over in order to pay for urgent court
orders and to finalise critical outstanding claims.
The
Committee noted the lack of commitment by the DoRDLR towards land reform with
concern since that funding was shifted towards land restitution claims. It was
also noted that there was a lack of planning by the DoRDLR which was evident by
the extent of roll-overs and reprioritisation of funding for programmes.
Concern was also expressed at the lack of monitoring of spending patterns by
the DoRDLR. A medium to long term plan, inclusive of targets, needed to be
developed by the DoRDLR in respect of land claims and land reform since that
was the core business of the Department. There also needed to be an improved
collaboration between the Department of Rural Development and Land Reform, and
the Department of Agriculture, Forestry and Fisheries in respect of food
security. Concern was expressed at the fact that the DoRDLR was considering
de-gazetting some farms that have already been claimed since it was burdened by
a high number court cases. It was noted that the National Treasury also needed
to attend the Portfolio Committee meetings in order to improve its
understanding of the challenges facing departments.
The
DoRDLR reported that it had gazetted more farms than the amount budgeted for
that function which led to that specific power being removed from land
commissioners and that it was vested in the Minister of Rural Development and
Land Reform. The existing court cases stood at plus or minus 300 and were on
the increase. The Committee undertook to engage the DoRDLR and the National
Treasury in order to address this issue.
3.6 Statistics South Africa
Statistics
South Africa was allocated a total budget of R2, 1 billion for the 2010-11
financial year. By the end of December 2010, it showed a total expenditure of
R1 billion or 50, 4 per cent. The Corporate Relations Programme showed an
over-expenditure of 5 per cent which amounted to R16, 7 million. The reasons for
that was the cut of R30 million on the Income and Expenditure Survey and the
overspending on Compensation for Employees of R22, 02 million. It was reported
that Survey Operations showed slow expenditure of R194 million or 24 per cent
which was attributed to that delays in expenditure for Census 2011. The actual unit
costs that have decreased materially as compared to the budgeted unit costs and
the economies of scale contributed to the slow spending. It was reported that
the majority of expenditure in respect of Census 2011 would take place in
October 2011. The Committee expressed concern at the poor planning of
Statistics South Africa since a significant amount would be requested to be
rolled-over to the 2011/12 financial year.
3.7 Department of Women, Children and People with Disabilities
The
Committee expressed great concern at the fact that the DoWCPD was not able to
report on its spending patterns to the National Treasury on a monthly basis as
required by the PFMA. National Treasury has not received any expenditure
analysis from the DoWCPD since it had been established. The DoWCPD attributed
that to its capacity challenges and also to the fact that it was a relatively
new department which was proclaimed in May 2009. Also, the DoWCPD operated
under the President’s Office during its inception phase and therefore submitted
its reports to the latter and not to the National Treasury. To this end, the DoWCPD
was requested to indicate to this Committee how the National Treasury could
assist in order to improve its efficiency.
The
DoWCPD reported that it needed the National Treasury to assist in the following
manner:
It
was also reported that the appointment of the Chief Financial Officer and
financial support staff, internal auditors, audit committee and human resources
employees would be completed by the end of June 2011. The DoWCPD would operate
independently from the Presidency and the LOGIS transversal system would be
implemented by 1 June 2011. The annual performance plans, aligned to the
allocated budget of the DoWCPD as well as monthly and quarterly reports would
be submitted to the National Treasury in future. The DoWCPD would relocate to its
own offices by mid April 2011 and office equipment including IT infrastructure
would be purchased. Finally, the audited annual financial statements for the
2010/11 financial year would be submitted by 31 March 2011.
The
DoWCPD also reported on its expenditure as at 28 February 2011, which would be
included in the Committee’s Fourth Quarter Report on Spending Patterns. Goods
and Services showed fast expenditure of R31 million against a budgeted amount
of R26, 5 million, mainly due to travel and subsistence for international
trips. The second highest spending item at 28 February 2011 was advertising,
mainly due to advertising of vacant posts, advocacy and public awareness
campaigns.
The
Committee expressed dissatisfaction at the high expenditure for international
trips and advertising and undertook to monitor it on a continuous basis. The
point was made that the DoWCPD would be invited to the public hearings on the
Fourth Quarter Expenditure Patterns for the 2010/11 financial year in order to check
whether it has delivered on its commitments that it has made during this
process. Concern was noted in respect of the differences between the DoWCPD and the National Treasury around the permanent secondment
of a Chief Financial Officer from the National Treasury. Also, there was
uncertainty around the adoption of the DoWCPD’s strategic plan by the Portfolio
Committee on Women, Children and People with Disabilities.
3.8 National Treasury
The
National Treasury was allocated a total budget of R50,2 billion for the 2010/11
financial year. An amount of R35 billion or 69,7 per cent has been spent
against its total budget allocation by the end of December 2010. With regard to
Payments for Capital Assets, only R4,3 million or 27 per cent has been spent
against a budget of R16,2 million. An amount of R39,8 million or 39,9 per cent
has been spent against a budget of R100 million for the Infrastructure Delivery
Improvement Programme (IDIP) by the end of December 2010.
It
was also reported that an amount of R2,4 billion would be requested to be
rolled-over to the next financial year under the Infrastructure Grant to
Provinces (IGP) due to poor spending and non-adherence to the conditions by
provinces. Due to poor performance, an amount of R1,8 billion was withheld as
part of the fourth instalment of the IGP in terms of section 16 of the 2010
Division of Revenue Act. Furthermore,, an amount R3 billion was withheld from
the fifth instalment in terms of section 16 of the 2010 Division of Revenue Act
due to consistent poor performance.
The
National Treasury attributed the reasons for the notable slow expenditure to
the following:
·
Slow spending by municipalities on
the capital projects funded by the Neighbourhood Development Partnership Grant
(NDPG).
·
Slow spending on IDIP was because
of delays in the drafting of contracts, provinces generally not meeting the
minimum criteria and a limited number of adequately qualified consultants to
provide technical assistance.
·
Delays in procurement have
resulted in slower spending on transversal systems, including the Integrated
Financial Management System.
·
Unfilled positions, particularly
in the Accountant General’s Office, due to difficulties in attracting suitably
qualified persons, as well as decreased operational expenses emanating from the
implementation of cost containment measures.
The
Committee expressed concern at the slow expenditure of the grants and stated
that the National Treasury needed to monitor the expenditure thereof more
efficiently. The point was made that the National Treasury needed to provide
more support to provinces and municipalities regarding technical capacity to
successfully apply for these grants since the successful expenditure thereof
would result in job creation. The National Treasury had a responsibility to
ensure that local government and provinces were capacitated and trained
regarding grants. Also, the processes involved in applying for grants needed to
be simplified.
4. Summary
of Findings
The
analysis of the third quarter expenditure for the 2010/11 financial year has
identified a number of challenges in relation to the budget implementation and
expenditure monitoring. The following findings were identified by the Committee
during its scrutiny of public spending:
4.1 There was a lack of planning by some national
departments on how to spend their budgets;
4.2 There was a delay in the processing of Environmental
Impact Assessment applications which hampered service delivery;
4.3 There was a lack of collaboration
between the Departments of Correctional Services, Justice and Constitutional
Development, Defence and Military Veterans, Home Affairs, State Security and
Police in respect of the Integrated Justice System. The portfolio committees responsible for
these departments needed to facilitate the collaboration between these
departments in order for the expenditure thereon to improve;
4.4 There was a lack of integrated planning
between the national, provincial and local spheres of government on the
implementation of the Expanded Public Works Programme which led to slow
expenditure;
4.5 The Department of Rural Development and
Land Reform shifted R2 billion from Land Reform Grants and a further R500
million was rolled-over in order to pay for urgent court orders and to finalise
critical outstanding claims. This showed that the Department was burdened by a
high number of court cases which resulted from an extensive number of farms
being gazetted for claims;
4.6 The Department of Women, Children and
People with Disabilities was not able to report on its expenditure patterns to
the National Treasury on a monthly basis as required by section 32 of the
Public Finance Management Act, since its establishment due to capacity
challenges. The Department did however
operate under the Office of the Presidency during its inception stage and
therefore also reported to it and not to the National Treasury;
4.7 The
withholding of funds by the National Treasury in respect of the Infrastructure Grant
to Provinces (IGP) and the proposed roll-over of R2, 4 billion was concerning
since job creation was one of the priorities of Government;
4.8 There was poor budget expenditure by a
considerable number of National departments which needed to be addressed by
Parliament through the introduction of stricter monitoring mechanisms; and
4.9 A number
of departments of including Communications,
Water Affairs, Rural Development and Land Reform, Women, Children and People
with Disabilities and the National Treasury indicated that their reason for
slow expenditure was, amongst others, due to a high vacancy rate. This needed
to be addressed in order to be in line with the State of the Nation Address.
5. Recommendations
In
light of the findings contained in the section 4 above, the Standing Committee
on Appropriations recommends the following:
5.1 That the Department of Communications
submits the following reports to Parliament within 60 days after the adoption
of this report by the House:
5.1.1 A progress
report on the revival 122 Emergency Call Centre project, and
5.1.2 A
comprehensive report on the 2010 FIFA World Cup legacy projects;
5.2 That the Department of Water Affairs
submits a detailed report to Parliament within 60 days (after the adoption of
this report by the House) on how the Masibambane Donor Funding had been spent.
Furthermore, the Department should include a list of all the municipalities
that have applied for that funding;
5.3 That the Department of Environmental
Affairs introduces effective mechanisms in order to expedite the processing of
Environmental Impact Assessment (EIA) applications. The report on the
mechanisms to be introduced should be tabled in Parliament within 60 days after
the adoption of this report by the House;
5.4 That the Department of Rural Development
and Land Reform develops a medium to long term plan, inclusive of targets, in
respect of land claims and land reform. The report should be tabled in
Parliament within 60 days after the adoption of this report by the House; and
5.5
That the Departments of
Communications, Water Affairs, Rural Development and Land Reform, Women,
Children and People with Disabilities and the National Treasury submit to
Parliament plans (including timeframes) on the filling of funded critical
vacancies within 60 days after the adoption of this report by the House.
Report
to be considered.