Conditional Grant and Capital Expenditure Public Hearings

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Conditional Grant and Capital ExpenditurePublic
Hearings

• 11 October 2005

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Outline

• Receipts
• Transfers
• Monitoring transfers
• Division of Revenue Act
• Expenditure
• Monitoring expenditure
• The way forward

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Receipts
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Receipts

• Conditional grants form 33,1 per cent of
  Provincial budget in 2005/06
• DORA result in a number of difficulties for
  Province, mainly as a result of withholding of
  grants
• Withholding mainly results from late submission
  or late approval of business plans in
  contradiction to deadlines given in CG frameworks
• Implications of withholding funds on provincial
  expenditure and cash flow management results in
  Province having to contain expenditure to match
  receipts

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Transfers
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Transfers
Reconciliation of Conditional Grant Payment
Schedule
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Transfers (2)

• Health grants
• No transfers received in April
• Payment made for NTSG, HPTDG, HRP in May albeit
  late
• First payment for Comprehensive HIV and Aids
  Grant received in August
• Housing
• IHAHSD April transfer received late
• Human Human settlement and redevelopment grant
  withheld in April, May and June
• Provincial Infrastructure Grant
• Transfer due in May, received in June and July
• Education
• HIV and Aids (Life Skills Education) Grant due in
  April transferred in May
• Resultant loss in revenue R3,471 million

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Monitoring transfers
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Monitoring transfers

• No formalised intergovernmental process for
  monitoring transfers
• Cash management receives transfers only aware
  of intention to withhold transfer on day transfer
  expected as per payment schedule
• Contact relevant department and resolve situation
• PT has now recommended more formalised process to
  NT to ensure PT alerted of intention to withhold
  funds timeously (discussed later)

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Division of Revenue Act
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Division of Revenue Act

• Shortcomings in Division of Revenue Process
• Section 33(2) requires National Departments to
  notify receiving officers of intention to
  withhold transfers, providing opportunity for
  Departments to submit reasons as to why
  allocation should not be withheld
• No requirement for Provincial Treasuries (PT) to
  be informed while NT only needs to be informed if
  funds are to be withheld for more than 30 days

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Division of Revenue Act (2)

• Further shortcomings
• Administrative burden of negligible grants i.e.
  Land care grant R2,5 million with numerous
  reports required
• Overlapping of measurable outputs
• PT forced to approve rollover requests on CG even
  though under spending is imminent
• Conditions of grants limit flexibility

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Division of Revenue Act (3)

• PT submitted a letter to NT recommending that NT
• Submit monthly reports to PT indicating which CGs
  will be withheld and motivation for withholding
• Submit revised payment schedules to PT
• Advise PTs as to when Provincial Departments have
  met requirements of CG frameworks
• These recommendations have subsequently been
  taken up in a practice note

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Division of Revenue Act (4)

• PT has also recommended that PTs should play an
  oversight role in the development of 2006/07
  business plans, thereby ensuring business plans
  are approved timeously thereby ensuring no repeat
  of the problems encountered in 2005/06.
• Recommended procedure includes
• National Departments submit schedules for
  completion of business plans, preferred formats
  as well as names of persons responsible for
  drafting business plans to NT
• NT compiles this information and forwards it to
  relevant PTs
• National Departments inform their provincial
  counterparts of PTs oversight role

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Expenditure
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Expenditure
Agriculture CG Expenditure as at 30 June 2005

• Reasons for under-expenditure
• Land Care
• - Slow start up in spending
• PIG
• - Lack of community participation and agreement
  on projects
• - Prolonged tendering process

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Expenditure (2)
Education CG Expenditure as at 30 June 2005

• Reasons for under-expenditure
• HIV and Aids (Life Skills Education)
• - Expenditure slow in first quarter and picks up
  in third quarter when learner materials are
  purchased for following school year
• - Late approval of business plan
• National School Nutrition Plan
• - Delay is submission of claims by service
  providers results in slow payment by department
• PIG
• - Weather conditions delaying construction
  usually slow in first quarter, gathering steam
  later in the year

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Expenditure (3)
Health CG Expenditure as at 30 June 2005

• Reasons for under expenditure
• Hospital management and quality improvement
• - Budget split between items was not allocated on
  BAS by 1 April for payments to be made against
  expenditure items
• Comprehensive HIV and Aids
• -Late approval of business plan

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Expenditure (4)

• Hospital Revitalisation Programme
• Difficulties with Vredenburg project, part of
  which must go out on tender
• Delay in approval in Paarl hospital business case
• PIG
• Weather conditions delaying construction
  usually slow in first quarter, gathering steam
  later in the year

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Expenditure (5)
Housing CG Expenditure as at 30 June 2005

• Reasons for under expenditure
• Weather conditions delaying construction
  usually slow in first quarter, gathering steam
  later in the year
• Late submission of claims by municipalities

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Expenditure (6)
Social services and poverty alleviation CG
Expenditure as at 30 June 2005

• Reasons for under expenditure
• HIV and Aids (Community Based Care)
• - Spending focused on the appraisal of service
  proposals and the consolidation of partnerships,
  spending will pick up once this process is
  complete

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Expenditure (7)

• Integrated Social Development Services
• Previously called Food Emergency Relief Grant
  tender has now been approved spending will
  commence shortly
• Business plan for Integrated Social Development
  Services Grant has only been approved recently
  which will improve spending in the remainder of
  the financial year
• Social Assistance Administration
• Establishment for support services staff for
  SASSA has not been approved by National
  Department of Social Development
• Social Services pay administrative costs and
  claim back from SASSA spending in second
  quarter will improve

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Expenditure (8)
Transport and public works CG Expenditure as at
30 June 2005

• Reasons for under expenditure
• Weather conditions delaying construction
  usually slow in first quarter, gathering steam
  later in the year

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Expenditure (9)
Cultural Affairs and Sport CG Expenditure as at
30 June 2005

• Reasons for under expenditure
• Most of the events funded by the grant take place
  towards the end of the year
• Non/late-filling of vacant posts

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Expenditure (10)
Capital expenditure as at 30 June 2005

• Reasons for under expenditure
• Weather conditions delaying construction
  usually slow in first quarter, gathering steam
  later in the year
• Long Supply Chain Management (SCM) Processes
• Paradigm shift need to take place in depts -
  start with SCM process in the previous financial
  year as part of the MTEC 3 year budget
  allocations

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Monitoring Expenditure
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Monitoring expenditure

• Monthly reports to NT
• Quarterly reports to Top Management, Exco and
  Legislature (SCOF)
• Quarterly narrative reports to AOs and CFOs
• Frequent interaction with departments on spending
  performance and general issues
• Trawling exercise allows for shifting of PIG
  funds between departments i.e. from performing to
  non-performing departments

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The Way Forward
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The way forward

• PT will have one day workshop on DORA and CG
  frameworks to streamline DORA in order to enhance
  delivery at provincial level
• Outcomes to be communicated to NT
• Financial and non-financial quarterly reports to
  Legislature, Exco and Top Management to inform
  engagement with departments
• Paradigm shifts need to take place in depts
  regarding SCM process to start earlier as part
  of 3 year allocations.

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Questions