1. Conditional Grant and Capital Expenditure Public 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 Housing Provincial Infrastructure Grant
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 Reasons for under-expenditure Land Care PIG
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) Reasons for under expenditure
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) Reasons for under expenditure
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) Reasons for under expenditure
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) Reasons for under expenditure
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) Reasons for under expenditure
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