Analysis of Mid-year Capital and Conditional Grant Expenditure

1. KZN MEC for Finance and Economic Development Presentation to the Select Committee on Finance 6 November 2007

2. Presentation outline • Analysis of Mid-year Capital expenditure • Analysis of Conditional Grant expenditure • Monitoring Mechanism within Provincial Treasury • Conclusion

4. Actual & Projected Expenditure per Quarter

5. Analysis • Summary • In aggregate total expenditure of R1,9 billion or 41.7 per cent of main budget; • Improvement from 2006/07 when only 36.6% was spent by mid-year; • Projected end-of-year over-exp of R194 million;

6. Analysis – (cont.) • Education • Exp of R428m or 41.4% of budget; • Increase of R277m from 2006/07 mid-year representing 23.5%; • Projected under-exp. of R39m mainly on machinery & equipment due to control measures to identify savings to utilise in other critical areas. • Health • Exp of R592m or 49.9% of budget; • Good spending level despite low exp. on conditional grant projects; • Projected over-exp. of R142m relating to the anticipated roll-over of revitalisation & forensic pathology serv. grants.

7. Analysis – (cont.) • Transport • Largest capex budget representing 44.7% of provincial capex budget; • Expenditure of R787m or 38.6% of budget; • Similar spending trends to previous years which shows spending levels increasing in second half of financial year; • Projected over-exp of only R210,000 • Other • Actual exp. of R94m or low spending of 31.5%; • Low spending mainly in respect of Traditional Admin Centres and Multi-Purpose Community Centres; • Projected over-exp of R90m in respect of:- • Agricultural projects such as Mushrooms Base; and • Software for the province wide monitoring & evaluation system within Office of the Premier. • Departments will apply virement during Adj. Estimates to offset over-exp.

9. Analysis – Economic classification • Buildings & other fixed structures • Spending on target at 44.5 % compared to 38.1% in 2006/07; • Projected over-exp is i.r.o. cond grant roll-over in health • Machinery & equipment • Low spending on machinery & equipment of only 31.4 % • Mostly i.r.o. equipment ordered but delivery will only take place during Quarter 3 and 4. • Projected over-exp to be funded from roll-overs. • Other • Other is mainly for software; • The projected over-exp is related to software for province wide monitoring and evaluation system in the Office of the Premier.

11. Cond. Grant - Analysis • Provincial Infrastructure Grant not included since it forms part of Capex expenditure and i.t.o. DORA does not require separate reporting; • Expenditure of less than 25% of budget on:- • Comprehensive Agric. Support Grant (CASP) - 14%; • Land Care Programme - 19%; • HIV and AIDS (life skills education) – 12%; and • Community library services grant – 24%. • Other grants with fairly low expenditure: • NSNP – 38%; • Hospital Revitalisation Grant – 38%; and • Forensic Pathology Services Grant – 31%. • Projected end-of-year under-exp. in Agriculture; • Health projected over-exp. is related to the roll-over amounts not yet included in the budget.

12. Agriculture – Cond. Grant • Comprehensive Agricultural Support Programme • Spending low at only 14% • Effect of Treasury intervention with cautious spending by dept; • Past trends have shown that expenditure increases in latter part of year; • Projected end-of-year under-expenditure of R24 million; • National has informed province that it would withhold the next transfer. • Land Care Grant • Low spending at 19.2 %, • Procurement review; • Implementation often dependent on progress by Land Affairs • Projected under-expenditure of R2 million • Department has formed a High Performance Team to improve service delivery in department which will also have impact on the conditional grant spending.

13. KZN Education – Cond. Grants • FET Recapitalisation Grant • The total allocation of R58 million received as at mid-year has been transferred to the FET colleges • Actual exp. by colleges is only at R25m. • HIV and AIDS • Low level of spending at 12% of budget; • Affected by the strike action; • Travel invoices for 2nd quarter not processed due to investigation into possible duplication of invoices submitted • Expenditure is historically lower for first half of year; • Projected to fully spend by year-end. • National School Nutrition Grant • Expenditure is low at 38 %; • Affected by strike action; • Dept to implement recovery plan by increasing number of feeding days.

14. KZN Health - Cond. Grants • Expenditure is on target for the following grants:- • Comprehensive HIV and AIDS – 46% of budget; • Health Professional Training and Development – 52% of budget; • National Tertiary Services grant – 52% of budget. • Forensic Pathology Services • Low spending at 31% of budget; • Dept. is addresing this by: • Additional staff are being recruited – to date dept. recruited 500 staff but still short of the target of 725; • Training and dev programme to address lack of required skills; • Fast-track programme to address delays in the upgrading of certain mortuary facilities.

15. KZN Health – Cond. Grant (cont.) • Hospital Revitalisation Grant • 38% of annual budget spent. • Some reasons for slow expenditure: • The site at King George V does not allow for multiple phases of the project to be implemented simultaneously; • if there is a delay in one phase it has ripple effect on the implementation of the others. • Procurement processes not always implemented timeously; • Cut-back in grant allocation for 2008/09 has negative impact on 2007/08 implementation. • Dept. cautious that it does not implement projects that will have a financial impact for 08/09. • Dept. is addressing these by fast-tracking projects that can be implemented this year without negatively affecting 08/09 such as the IT infrastructure.

16. Housing – Cond. Grant • Bulk of the departmental budget relates to the Integrated Housing and Human Settlement Development Grant. • Expenditure is at 42% of budget; • Level of spending has increased from 1st Quarter; • Initial delay in implementation but dept. projecting full expenditure by end-of-year.

17. Arts, Culture & Tourism – Cond. Grant • Community library services grant • Low expenditure at 24% of budget; • Dept. had indicated that expenditure will increase in Quarter 3 and 4; • Initial delays in the following: • Finalisation and approval of business plan, • Appointment of project manager for IT portion of project, and • Procurement of various equipment for the libraries. Problems have resulted in relative low expenditure at 64.9 % • Expenditure has already increased in Quarter 2; • Projecting to spend allocation by year-end.

18. Sport and Recreation – Cond. Grant • Mass Sport & Recreation • Expenditure at 47% of budget; • Implementation is going well after some delay of sport equipment due to inferior quality being delivered by suppliers. • Projecting to spend grant allocation for 2007/08.

19. Monitoring Mechanisms • KZN Treasury closely monitors and evaluates exp. of provincial departments through:- • Monthly IYM report; and • Quarterly meetings between Head of Treasury, Senior Provincial and National Treasury Officials and Departments (HOD, CFO and Senior Line function officials). • The main objectives of quarterly meetings is to: • Monitor performance; • Identify possible areas of risk. • Quarterly reports submitted to:- • Provincial Executive Council, • KZN Portfolio Committee on Finance and Economic Development; and • National Treasury

20. Conclusion • Capex expenditure shows a significant improvement from 2006/07; • Suggests that provincial infrastructure planning and implementation is improving. • Some conditional grants spending needs to be improved through:- • More vigorous monitoring and reporting.

21. THANK YOU!