1. 2006/07 CONDITIONAL GRANTS AND CAPITAL EXPENDITURE (SECOND QUARTER ) Gauteng Treasury 20 November, 2006

2. PRESENTATION OUTLINE Financial Performance of the Province Conditional Grants Allocation and Expenditure Conditional Grants Expenditure and Service Delivery Per Program Capital Budget Allocation and Expenditure Challenges in Implementing Conditional Grants Interventions by Treasury

3. Purpose To provide the National Council of Provinces (NCOP) an overview of Conditional Grant and Capital Expenditure performance for the Gauteng province during the second quarter of 2006/07 Financial year.

4. Consolidated Revenue & Expenditure R thousand Actual untilMainEstimatedYTD actual exp/revProjected end of SepBudgetExpenditure/ Revenue% Budget(Over)/Under Revenue Transfers from National 14,725,411 32,105,943 45.87% Equitable share 12,148,078 23,361,686 52.00% Conditional grants 2,577,333 8,744,257 29.47% Provincial Own Revenue 1,032,853 1,758,263 1,950,79158.74% (192,528) Less: Public Office Bearers charges40,417 Total Revenue 15,758,264 33,823,789 34,016,31746.59% (192,528) Expenditure Total Expenditure14,468,131 34,459,739 35,525,07841.99% 1,065,339 Surplus/(Deficit) 1,290,133 (635,950) (1,508,761) (872,811)

5. Revenue Position A total of R34,016 billion is estimated at the end of the financial year : This consist of : R1,951 billion of own revenue. R8,744 billion of conditional grants. R23,362 billion from the equitable shares. Predicted over collection of own revenue amounts to R192,6 million (driven by motor vehicle licences and casino taxes) A Total revenue of R7,466 billion was received for the second quarter ending in September, 2006. (R15.758 billion cumulative)

6. Expenditure position R7,999 billion was spend this quarter (R14.468 billion cumulative) There is a projected overspending of R1,065 billion The department of health is the primary driver of over-expenditure (projecting an over expenditure of R971,5million).

7. Conditional Grants Receipts 2006/07 R 8,744 billion was allocated to the province as conditional grants for 2006/07 financial year. R2,6 billion has been received to date R401,2 million was received from National Departments during the month September against R809,4 million as per payment schedule. Instalments for infrastructure grant was with-held by National Treasury due to reporting compliance problems by some departments. All funds will be released during the third quarter after a series of discussions with National Treasury

8. Conditional grant expenditure, 2006/07 Department Grant 2006/07 (DORA) Payment Schedule (Y-T-D Sep End Sep) Transfers from National ((Y-T-D End Sep) Spent by Province (Y-T-D End Sep) % of Total Budget spend (Y-T-D End Sep) Spent & Projection % Variance Agriculture Comprehensive Agricultural Support Programme 6,8733,0943,1932,17931.7 6,4845.7 Land Care Programme 3,115 1,402 210.01 3,136(0.7) Education Further Education and Training college sector recapitalization106,00053,000 50.077,74926.7 HIV and Aids (Life Skills Education) 20,012 10,006 4,457 22.2 20,455(2.2) National School Nutrition Programme 99,921 49,961 35,889 35.9 91,9318.0 Health Comprehensive HIV and Aids 252,695 126,348 122,39548.4 252,695- Forensic Pathology services76,75238,376 16,59221.676,752- Health Professions Training and Development 554,039 277,020 51.0 554,039- Hospital Revitalization 327,525 163,762 168,762 168,165 51.3 438,321(33.8) National Tertiary Services 1,866,094 933,048 50.0 1,866,094-

9. Conditional grant expenditure, 2006/07 ( Continue ) Department Grant 2006/07 (DORA) Payment Schedule (Y-T-D Sep End Sep) Transfers from National ((Y-T-D End Sep) Spent by Province (Y-T-D End Sep) % of Total Budget spend (Y-T-D End Sep) Spent & Projection % Varian ce Housing Integrated Housing and Human Settlement Development 1,757,666 911,295 768,739 43.7 1,757,666- Alexandra Urban Renewal Project 8,000 2,00025 8,000- ED, Do H, and DPTRW Provincial Infrastructure 407,745 203,872 143,42535.2 431,427(5.8) Sport and Recreation SA Mass Sport and Recreation Participation Programme 16,820 12,0569,922 1,1296.7 16,820- TransportGautrain Rapid Rail Link3,241,000512,552-03,241,000100.0 Total 8,744,257 3,303,7922,577,3332,526,05928.9 9,035,35636.0

10. Overall Conditional Grants Performance, 2006/07 (Second Quarter) Aggregate Spending Position –R 2,526,059 billion was spent against the projections of R3,067,240 billion (under spending of R541,161 million or 36 %) –The Gautrain Rapid Rail Link accounts for 97 % of the projected under spending. – If Gautrain is excluded, the overall under spending will be 1. 1 %. Lowest performance : Landcare (R21,000 or 0.01%), Mass Sport and Recreation participation (R1,129 million or 6.7%), Life skills education (R4,457 million or 22.2%) and Forensic Pathology Services (R16,592 million or 21.6%). High Performance FET ( R53,000 million or 50%), PTD (R277,020 million or 51%), Hospital Revitalisation ( R168,165million or 51.3%) and National Tertiary Grants ( R933,048 million or 50%).

11. Conditional Grants Performance, 2006/07 (Agriculture) Department Grant 2006/07 (DORA) Payment Schedule (Y-T-D Sep End Sep) Transfers from National ((Y-T-D End Sep) Spent by Province (Y-T-D End Sep) % of Total Budget spend (Y-T-D End Sep) Spent & Projection % Varia nce Agriculture Comprehensive Agricultural Support Programme 6,8733,0943,1932,17931.7 6,4845.7 Land Care Programme 3,115 1,402 210.01 3,136(0.7) Financial Performance Both Grants show slow expenditure, more worrying is LCP; There is risk of under spending; The variances can be attributed to delays in the procurement process Service Delivery Limited service delivery information THE Procurement process has been completed Treasury has appointed infrastructure specialists to monitor and assist departments to accelerate spending and quality of service delivery

12. Conditional Grants Performance, 2006/07 ( Education) DepartmentConditional Grant R’000 2006/07 Payment Schedule Spent by Province % of Total budget spend Projection Spent & Projection % U/spend +/O/spend (-) Education Further Education and training college sector recapitalization106,00053,000 50.024,47977,74926.7% HIV and Aids (Life Skills Education) Grant 20,012 10,006 4,457 22.2 15,998 20,455(2.2%) National School Nutrition Programmer Grant 99,921 49,961 35,889 35.9 56,042 91,9318.0%

13. Financial and Service Delivery Performance Financial Performance Low Spending is observed on Life Skills Education program, but projects an overspending of 2.2%. ThIS is attributed to delay in processing payments for services already provided NSNP projects to underspend by 8% - Attributed to BAS technical problems High spending performance of FET ( 50%), ensure achievement of targets Service Delivery Life Skills education 599 educators have been trained 1237 learners have been trained on life skills 16 Learners trained on health and wellness National School Nutrition Programme 1143 new learners identified for the nutrition program 47 schools participated Reached 98% of needy learners Further Education and training college sector –No Information

14. Conditional Grants Performance, 2006/07 - Health DepartmentConditional Grant R’000 2006/07 Payment Schedule (Y-T-D End – SEP) Spent by Province (Y-T-D End –SEP) % of Total budget spend (Y-T-D End – SEP) Projecti on Spent & Projection % U/spend +/O/spend (-) Health Comprehensive HIV and Aids Grant 252,695 126,348 122,395 48.4 130,300 252,6950.0% Forensic Pathology services76,75238,37616,59221.6 60,160 76,7520.0% Health Professions Training and Development Grant 554,039 277,020 51.0 277,019 554,0390.0% Hospital Revitalization Grant 327,525 163,762 168,165 51.3 270,156 438,321(33.8%) National Tertiary Services Grant 1,866,09 4 933,048 50.0 933,046 1,866,0940.0%

15. Financial and Service Delivery Performance (Health) Financial performance Low spending on Forensic Pathology services ( 21.6%, this attributed to the delay in transfer of other functions from the SAPS and there is risk of Under spending) Hospital Revitalisation program projects an over-expenditure of R110,8 million Service Delivery Comprehensive HIV/Aids - 50,777 patients are on ART »All PHC With MOUs are offering PMTCT (100%) Forensic Pathology Services - The transfer process was completed in July »Filling of medical staff is 88% completed. Health Professions Training and Development Nursing Graduates(1247), Emergency care staff (12), nursing students ( 4018) Hospital Revitalization – Report available from DoH National Tertiary - Detailed report available from Department of Health

16. Conditional Grants Performance, 2006/07 (Housing) Department Grant 2006/07 Payment Schedule ((Y-T-D End –SEP) Transfers from National (Y-T-D End –SEP) Spent by Province (Y-T-D End –SEP) % of Total Budget spend Spent & Projection % Varian ce Housing Integrated Housing and Human Settlement Development 1,757,666 911,295 768,739 43.7 1,757,666- Land Distribution: Alexandra Urban Renewal Project 8,000 2,000 8,0002,00025 8,000100.0 Financial Performance 43,7 percent of the DORA allocation for 2006/07 has been spent on the Integrated Housing And Human Settlement Development programme Projects to spend all budget by end of financial year Expenditure on the Alexandra Urban Renewal Project ( 25% ). Service Delivery No Information

17. Conditional Grants Performance, 2006/07 ( Provincial Infrastructure Grant (PIG) Departme nt Grant 2006/07 Payment Schedule (Y-T-D End –SEP) Transfers from National (Y-T-D End –SEP) Spent by Province (Y-T-D End – SEP) % of Total Budget spend Spent & Projection % Varian ce DoED, DoH &DPTRW Provincial Infrastructure Grant 407,745 203,872 143,42535.2 431,427(5.8) Financial Performance R 143, 4 million was spent by the participating Dept’s ( Educ, Health, Transport) during the 2 nd Q No transfers were received from National for the 1st & 2 nd Q ( Due to Non reporting -compliance by departments) Treasury provided support to departments in cleaning the database for infrastructure and populating the Infrastructure reporting model R 136, 595 million released in quarter three and a total amount of R 238,531 million is still withheld by NT due to non reporting compliance. Service Delivery Detailed IRM models and reports available GT is also in the process of strengthening the CFO offices. Infrastructure specialists have been appointed to monitor and strengthen service delivery

18. Conditional Grants Performance, 2006/07 ( Sports and Culture) Department Grant 2006/07 Payment Schedule Transfers from National Spent by Province % of Total Budget spend Spent & Projection % Varia nce Sport and Recreation SA Mass Sport and Recreation Participation Programme 16,820 12,0569,922 1,1296.7 16,820- Financial Information Significant under-spending in Sports has been observed this quarter ( 6.7%); Reason for variances can be ascribed to in adequate capacity to drive the programme; Department Projects to spend the entire allocation by the financial year end. Service Delivery no information

19. Department of Public Transport, Roads &Works Department Grant Allocation 2006/07 Payment Schedule Transfers from National Actual by grant expenditure % of Total Budget spend Spent & Projection % Variance Transport Gautrain Rapid Rail Link3,241,000512,5523,241,000100.0 No spending recorded on Gautrain this quarter; Construction began in October and spending is expected increase in the next quarter.

20. Capital Budget Receipts 2006/07 Capital programme includes payments for capital assets within departments and Capital Transfers. Capital transfers includes housing programmes and special infrastructure development projects (to accelerate economic growth) Total capital budget allocation amounts R9,322 billion of which the department of Public Transport, Roads and Works account for 55,9 %, Housing (21%), Health(10,1%) and Education (9,3%).

21. Capital Allocation and expenditure ( 2006/07 ) DepartmentBudget 2006/07Q2 Spending Accumulated Expenditure 2006/07VariancePercentage R’000 % Education870,67995,595203,484667,195 23 Health943,756232, 269482,648461,108 51 Social Development31,48944154,44027,049 14 Office of the Premier 2,2352341,305930 58 Provincial Legislature17,073932,2,85514,218 17 Finance and Economic Affairs145,53882,68483,34662,192 57 Housing1,955,384499,399809,1671,146,217 41 Local Government27,1451217926,966 1 Public Transport Roads and Works5,209,051506,4871,055,6104,153,441 20 Community Safety20,10059378019,320 4 Agriculture, Conservation and Environment8,0692,1718,521-452 106 Sports and Recreation59,91918,45118,54541,374 31 Gauteng Shared Service Centre31,9526,67719,91612,036 62 Gauteng Provincial Treasury386618641-255 166 SUBTOTAL9,322,7761,217,3362,691,437 6,631,339 29

22. Capital expenditure performance R2,691 billion or 29 percent has been as of the end of September, against the projection of R4,661billion or 50 percent

23. Low Capital Spending departments DPTRW 20% of its total budget ( R5,2billion ) –Low spending in DPTRW is attributed to a delay in the sign-off of the financial implications of the Gautrain project. Social Development (23%); Community Safety ( 4%) Local Government ( 1%) Provincial Legislature Education ( 23%) Risk of Under spending in these departments

24. High CAPEX performance Department of Health ( 51%) – Including PIG and Hospitalisation grants expenditure ; – The department is experiencing budget pressures on Infrastructure projects, due to increase in construction costs and fast tracking of projects Department of Agriculture ( 106%) – Over spending is attributed to refurbishment of office space, acquisition of office equipment for the additional staff. Gauteng Treasury (166%) – Due restructuring and expansion. funds have already been shifted during the adjustment budget to cover shortfall in the capital budget

25. Challenges: Conditional Grants and CAPEX Conditional grants spending is general low ( 29 percent). Capital expenditure needs to be accelerated; Risk of Under spending in both CAPEX and Conditional Grants; Missing of Variance explanation and proposed corrective measures from departments reports; Efforts to obtain comprehensive information from departments proves to be difficult; Failure to submit service delivery performance information by some departments; Risks associated with overspending by the Department of Health; Risks associated with March Spike.

26. Proposed Interventions by Gauteng Treasury Appointment of infrastructure specialists to monitor and strengthen capacity to spend and increased service delivery of infrastructure and other capital projects; Developed an improved reporting format; Treasury officials will be discussing expenditure projections with departments in order to prevent March spike; Comprehensive 3 rd Q analysis to inform credibility of projections and actual expenditure. This will inform potential to relocate funds between departments / priorities.

27. End of Presentation Thank You