1. Conditional Grant and Capital ExpenditurePublic Hearings 11 October 2005

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

3. Receipts

4. 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

5. Transfers

6. Transfers Reconciliation of Conditional Grant Payment Schedule

7. 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

8. Monitoring transfers

9. 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)

10. Division of Revenue Act

11. 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

12. 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

13. 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

14. 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

15. Expenditure

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. Monitoring Expenditure

27. 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

28. The Way Forward

29. 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.

30. Questions