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Financial Performance as at 31 December 2014 - Standing Committee on Appropriations

This presentation provides an overview of the financial performance of the Standing Committee on Appropriations as at 31 December 2014, including underspending and remedial actions implemented.

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Financial Performance as at 31 December 2014 - Standing Committee on Appropriations

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  1. STANDING COMMITTEE ON APPROPRIATIONS • FINANCIAL PERFORMANCE AS AT • 31 DECEMBER 2014 Presented by: Office of the CFO 15 April 2015

  2. PRESENTATION LAYOUT Quarter 3 Financial Performance Overview per Economic Classification Programmes 2014/15 Financial Performance Overview per Economic Classification Programmes 2014/15 Spending Challenges Experienced Remedial Actions implemented Principles of Efficiency, Effectiveness and Economy

  3. QUARTER 3 – FINANCIAL PERFORMANCE Overview – Economic Classifications

  4. QUARTER 3 – FINANCIAL PERFORMANCE Overview – per PROGRAMME

  5. Quarter 3 - FINANCIAL PERFORMANCE OVERVIEW • Cumulatively atDec 2014, the Department had withdrawn from the NRF a budget of R5.7 billion • From the above, a total amount of R5.2 billion was utilized, resulting in a budget underspending of R491.3 million or 8.6%. The transfers category accounted for 92% of the total under spending. • Composition of the Quarter 3 under spending • Transfers & subsidies: R454.6m (8.5%) due to the underspending in the INEP Non-grid (R50.7m), EEDSM-Eskom for the SWHP (R300m), EEDSM Municipalities (R27m), INEP Municipalities (R65.7m) as well as international membership fees (R12.1m) • Compensation of employees: R21.3m attributable to vacancies in the Department. This amount includes the notch-increase payments payable to qualifying SMS members

  6. Quarter 3 - FINANCIAL PERFORMANCE OVERVIEW (Cont..) • Goods and services: R14.0m below budget mainly attributable to delayed projects. • The level of underspending decreased per quarter as follows: • Quarter 1 - 69.1% of the budget was utilized • Quarter 2 - spending increased as 95.3% of that quarter’s budget had been utilized by the end of that quarter • Quarter 3 - 110.7% was utilized including unspent funds from Quarter 2 • Comparatively, the total expenditure at the end of Q3 of 2014/15, R5.2 billion, is R1.1 billion or 26.9% higher than that of the same period of 2013/14. This is mainly attributable to an increase in the value of transfers made to Eskom, for the INEP electrification programme and to NECSA. Both these projects were allocated additional funding in 2014/15. NECSA received a once-off allocation for improvements to the SAFARI1 reactor as well as refurbishment of the Pelindaba site. • As a result, the full year budget expended at the end of Q3 is 70.5%, which is higher than the 63.5% reported in the same period of 2013/14.

  7. Quarter 3 - UNDERSPENDING PER PROGRAMME • Energy Policy & Planning • R9.1 million or 22.38% below budget mainly attributable to: • Vacancies in the Branch • Projects that could not be finalized as planned which amongst others are the 20 year liquid fuels road map and data collection for energy planning. • Cost containment measures which were implemented on costs such as venues and facilities, travel and subsistence and advertising contributed to the underspending. • Petroleum & Petroleum Products Regulation • R23.5 million or 37.22% below budget mainly affected by: • Vacancies in the Branch • Delayed commencement of major projects one of them being the Fuel specification testing project • Electrification & Energy Programme & Project Management • R105.6 million or 2.96% budget underspending mainly due to the following: • INEP Non-grid: R50.74 million (58.6%) below budget due to administrative delays which led to the late start of the project in the 2014/15 financial year. • INEP Municipalities: R65.7 million (6.6%) below budget, the direct impact of withholding funds from non-complying municipalities.

  8. Quarter 3 - UNDERSPENDING PER PROGRAMME (Cont..) • Nuclear Energy • R21.6 million or 2.96% below budget mainly due to: • Vacancies in the Branch • The delayed payment of the annual IAEA international membership fee. The payment to the IAEA, which was estimated at R12.1 million, could not be paid as anticipated in December as the Department awaited the release of the formal contribution letter from the IAEA. This has been subsequently paid. • Clean Energy • R336.2 million or 32.02% under budget mainly attributable to the performance of the following projects: • EEDSM Eskom: R300 million (52%) In October 2015, the Department cancelled the contract with Eskom for the implementation of the SWH programme. However at Quarter 4, an amount of R1,1 billion scheduled to be transferred to Eskom was not disbursed as planned. Approval by Cabinet to shift the implementation of the SWH programme back to the Departmentis still underway.

  9. Quarter 3 - UNDERSPENDING PER PROGRAMME (Cont..) • Clean Energy - Continued • EEDSM Municipalities: R27 million below budget due to the withholding of conditional grant payments to some municipalities due to non-compliance to DoRA and conditions attached to grant payments. • Of the twenty six municipalities participating in the 2014/15 EEDSM programme, five municipalities, namely, eThekwini, Greater Tzaneen, Cape Town, Nkonkobe and Tshwane failed to comply with the conditions of the 2014 Division of Revenue Act. As a result, an amount of R 33,5 million was re-allocated to other municipalities during the budget adjustment in October 2014. • In addition, the Clean Energy Directorate has been conducting pre-energy audits in public buildings to determine the level of energy consumption. The pre-energy audit process was dependent on the installation of smart meters through the South African German Energy Programme. However, due to delays in accessing these public buildings for the installation of smart meters, the pre-energy audit service provider was only appointed in February 2015.

  10. 2014/15 SPENDING CHALLENGES EXPERIENCED • Compensation of employees • The Department was appropriated an additional R20 million in the current financial year in order to capacitate its line function Branches with specialized skills. • Delays were experienced in recruiting additional human resources due to the lack of specialised skills available in the Energy Sector, the long recruitment processes, as well as structural change processes which had to be followed. • Goods and services • The budget underspending in 2014/15 is attributable to delayed commencement of projects, and administrative challenges. • As well as orders that were placed, but the expenditure was pending at the end of March as a result of delays in delivery, late receipt of invoices and the consequent delay in the processing of payments. • Transfer Payments • External dependencies also play an important part, when funds are transferred to entities and municipalities.

  11. Spending progress is reported at the Finance Committee meetings, held six times a year, and Branches are advised of the slow spending areas in the Financial Performance Report. • In addition to the above, spending against the Procurement Plan is also monitored and reported at the Finance Committee meeting, for action. • Where spending against the Procurement Plan may not be realized for reasons beyond the control of the Department, funding is redirected to other priority spending areas. • In addition to the monthly BAC meetings, 6 ad-hoc BAC meetings were held to accommodate requests and in order to accelerate spending. • The appointment of services providers for the INEP Non-Grid program posed the most challenges (delays) in previous years. The procurement process for the 2015/16 financial year was commenced in September 2014 in order for the service providers to be appointed by 31 March 2015 (before the commencement of the 2015/16 financial year). • Due to the challenges experienced on the SWH implementation that was handled by Eskom, the Department resolved to terminate the implementing agreement with Eskom, and embark on a more robust SWH implementation model. REMEDIAL ACTIONS IMPLEMENTED

  12. Further to the National Treasury Instruction Note on Cost Containment Measures, the Department ensured that appropriate expenditure control measures were instituted to provide reasonable assurance that all expenditure is necessary, appropriate and paid promptly. • Of the 27 cost containment measures provided for implementation, 22 are directly applicable to national departments and all 22 measures were immediately implemented by the Department. • Of the 15 cost containment measures provided for consideration, 11 measures which were practical and implementable and these were immediately adopted for implementation. • The key areas for savings optimization was the use of consultants, and travel and accommodation. Stringent measures were implemented. • Local travel is limited to economy class tickets for all officials at the level of DDG and below. Similarly only group B vehicles are booked for these officials. • Accommodation is limited to R1300 per night for bed and breakfast. PRINCIPLES OFEFFICIENCY, EFFECTIVENESS AND ECONOMY

  13. The use of consultants is restricted to specific technical services only and requests are considered where such expertise and skills are not available in the department. These are normally short term assignments. • Consultants are remunerated at the rates: (a) determined in the "Guideline for fees", issued by the South African Institute of Chartered Accountants (SAICA); (b) set out in the "Guide on Hourly Fee Rates for Consultants", by the Department of Public Service and Administration (DPSA); or (c) prescribed by the body regulating the profession of the consultant. • The Department was chosen as one of the best performing departments for 30 day payments by DPME in the 2013/14 MPAT process. • In terms of section 217 of the Constitution, all goods and services are procured in a manner which is fair, equitable, transparent, competitive and cost-effective. PRINCIPLES OF EFFICIENCY, EFFECTIVENESS AND ECONOMY

  14. Wherever possible, the Department undertakes price negotiations with recommended bidders in order to achieve a reduction in the total bid price. • The department participates in the SCM Improvement Forum, facilitated by the Office of the Chief Procurement Officer at National Treasury which is developing interventions to address weaknesses in procurement management and operations systems that undermine the efficiency and effectiveness of government procurement. • Cost saving interventions in the ICT environment includes the use of shared printers to reduce printing costs and Voice over Internet Protocol (VOIP) telecommunication systems to reduce telephone costs. PRINCIPLES OF EFFICIENCY, EFFECTIVENESS AND ECONOMY

  15. 2014/15 - FINANCIAL PERFORMANCE Overview - per PROGRAMME– Quarter 4

  16. 2014/15 FINANCIAL PERFORMANCE OVERVIEW – Quarter 4 • The 2014/15 adjusted budget of the Department of Energy was a total of R7.4 billion • As at 31 March 2015, the Department had utilized 83.61% of its adjusted budget, utilized as follows: • Compensation of Employees • Goods & Services • Transfer Payments • Payments for Capital Assets • A budget balance of R1.2 billion remained at the end of the financial year representing 16.39% of the total adjusted budget, a major portion being under the Transfer payments economic classification. 2014/15 FINANCIAL PERFORMANCE OVERVIEW

  17. SPENDING TREND • The Department’s spending in 2014/15 has been negatively impacted by the developments in the implementation of the Solar Water Heater programme (SWH). • The SWH programme’s budget alone, accounted for 22% of the Department’s total budget of R7.44 billion • The figures below, reflect the Department’s spending trend after adjusting to exclude the SWH programme’s figures for comparison purposes.

  18. ROLL OVER APPLICATION - 2014/15 • Quarter 4 - Roll over application • The Department will be making a submission to the National Treasury motivating for a portion of the budget balance remaining to be rolled over into the 2015/16 financial year to enable the completion of some projects which commenced in 2014/15 and are currently underway. • The rollover submission will include the following: • Transfer Payments –budget balance R1.17 billion • R1.14 billion to implement the SWH programme. Approval of the new implementation model in-house has been received from Treasury. • R35.5 million to pay service providers for services rendered under the INEP Non-grid project • Goods and services • R12.16 million is eligible to be motivated as a roll over amount into the 2015/16 financial year for all outstanding payments.

  19. EFFORTS AIMED AT BUILDING INTERNAL CAPACITY TO REDUCE THE USE OF CONSULTANTS • No consultants were used to perform core functions • Review of the Organisational Structure • 847 Approved posts • 204 Unfunded Posts (Core functions) • Unfunded Post Per Branch

  20. EFFORTS AIMED AT BUILDING INTERNAL CAPACITY TO REDUCE THE USE OF CONSULTANTS • Vacancy rate • Training and Development • 2015/16 targeted training focused on Nuclear • Workplace Skills Plan – priority training only

  21. 3rd Quarter Non – Financial Performance Report

  22. PERFORMANCE SUMMARY OF THE 3rd QUARTER 2014/15 AGAINST THE APP • This report presents the performance of the Department of Energy (DoE) during the third quarter of the 2014/15 financial year. DoE implements its Annual Performance Plan (APP) through six programmes; Programme 1 – Administration, Programme 2 – Energy Policy and Planning, Programme 3 – Petroleum & Petroleum Products Regulation, Programme 4 – Electrification & Energy Programme and Projects, Programme 5 – Nuclear Energy and Programme 6 – Clean Energy. • Out of a total of 33 third quarter 2014/15 targets, the Department achieved 7 (21%) of its quarterly targets, 11(33%) partially achieved and did not achieve 15 (46%). • In total, 7 (21%) of branch self-assessments were moderated. Four were moderated from “achieved” to “partially achieved”, two from “partially achieved” to “not achieved” and one was moderated from “achieved” to “not achieved”;

  23. Summary of Final Moderated Branch Progress, 3rd Quarter 2014/15

  24. Inter-Branch Comparison of Moderated Progress, 3rd Quarter 2014/15

  25. Programme 1: Financial Management Services Progress, 3rd Qt 2014/15

  26. Programme 1: Corporate Services Progress, 3rd Qt 2014/15

  27. Programme 1: Corporate Services Progress, 3rd Qt 2014/15 (Ctd.)

  28. Programme 1: Governance and Compliance Progress, 3rd Qt 2014/15

  29. Programme 2: Policy and Planning Progress, 3rdQt 2014/15

  30. Programme 2: Policy and Planning Progress, 3rdQt 2014/15 (Ctd.)

  31. Programme 3: Petroleum and Petroleum Products Regulation Progress, 3rd Qt 2014/15

  32. Programme 3: Petroleum and Petroleum Products Regulation Progress, 3rdQt 2014/15 (Ctd.)

  33. Programme 3: Petroleum and Petroleum Products Regulation Progress, 3rd Qt 2014/15 (Ctd.)

  34. Programme 3: Petroleum and Petroleum Products Regulation Progress, 3rd Qt 2014/15 (Ctd.)

  35. Programme 3: Petroleum and Petroleum Products Regulation Progress, 3rd Qt 2014/15 (Ctd.)

  36. Programme 4: Programmes and Projects Progress, 3rd Qt 2014/15

  37. Programme 4: Programmes and Projects Progress, 3rd Qt 2014/15 (Ctd.)

  38. Programme 4: Programmes and Projects Progress, 3rd Qt 2014/15 (Ctd.)

  39. Programme 4: Programmes and Projects Progress, 3rd Qt 2014/15 (Ctd.)

  40. Programme 4: Programmes and Projects Progress, 3rd Qt 2014/15 (Ctd.)

  41. Programme 5: Nuclear Energy Progress, 3rdQt 2014/15

  42. Programme 5: Nuclear Energy Progress, 3rd Qt 2014/15 (Ctd.)

  43. Programme 5: Nuclear Energy Progress, 3rd Qt 2014/15 (Ctd.)

  44. Programme 5: Nuclear Energy Progress, 3rd Qt 2014/15 (Ctd.)

  45. Programme 6: Clean Energy Progress, 3rd Qt 2014/15

  46. Programme 6: Clean Energy Progress, 3rd Qt 2014/15 (Ctd.)

  47. Programme 6: Clean Energy Progress, 3rd Qt 2014/15 (Ctd.)

  48. Major Achievements and Challenges of 2nd and 3rd Quarter Major Achievements: • Municipalities installed 55 923 new electricity mains connections, while Eskom did 77 305 for a total of 133 228 (both inclusive of roll-overs). In addition, 8 277 homes were electrified with off-grid solar home systems; • The Renewable Energy Independent Power Producer Programme is 99% complete for Bid Window 1 and 57% for Bid Window 2. Twenty-four IPPs have reached their Commercial Operating Date (COD) for Bid Window 1 and 5 IPPs have reached COD for Bid Window 2; • The final scoping report for the Northern Cape solar park has been approved by the Department of Environmental Affairs. The Environmental Impact Assessment will now commence; • The Solar Energy Technology Roadmap (SETRM) has been completed and will now be submitted to stakeholders for their comments; • Fuel sampling and testing was exceeded by 330 units. • 100% (318) invoices were paid within 30 days. • 634 retail site compliance inspections were conducted. Major Challenges: • A number of positions within line function units are not funded.

  49. Thank You!

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