1. For an Equitable Sharing of National Revenue
Presentation to Portfolio Committee on Human Settlements On Department Of Human Settlements 2011/12 Annual Performance And Audit Outcomes
9 October 2012
For an Equitable Sharing of National Revenue

2. Presentation outline
An overview of the National Department of Human Settlements (NDHS) Strategic Plans in 2011/12
Overview on the NDHS achievements/actual delivery in 2011/12
Financial analysis
Audit Outcomes – Issues raised by the AG
How to ensure continuous improvement
Progress with the implementation of FFC past recommendations
Conclusion and issues for the Committee’s consideration

3. Overview of NDHS Strategic Plans in 2011/12
In terms of the outcomes-based approach of government, HS is outcome 8 (sustainable human settlements and improved quality of household life)
The following measurable outputs with targets are envisaged over the medium term:
A target of housing units per year
Support, assess and monitor development of public rental housing units in provinces towards 2014
Upgrade informal settlements and proper services and land tenure to households by 2014
Assemble and acquire hectares of well-located state-owned land for low-income and affordable housing
Supply affordable housing finance to households in the gap market

4. Actual Delivery in 2011/12
On the target of housing units from 2010 to 2014
The actual number of housing units delivered is not contained in the Annual Report (difficult to determine whether the target has been achieved/not)
However; by December 2011, the number of housing units completed and under construction was (for three quarters) – therefore unlikely that units have been delivered for 2011/12
Furthermore, the actual delivery has never reached units since 2007/08 as shown below
Hence the FFC is of the view that annual performance targets need to be reviewed
Indicator
2007/08
2008/09
2009/10
2010/11
Number of housing units completed

5. Actual Performance...
For 2011/12, the target was to support the development of units
Less than half of this target was achieved as units were delivered
Reason given for failure is limited funding, delays in plan approval and land release
Upgrade informal settlements and proper services and land tenure to households by 2014
No annual target for 2011/12
Actual performance not provided in the Annual Report
Assemble and acquire hectares of well-located state-owned land for low-income and affordable housing
A total of hectares were formally submitted for release (hectares actually acquired not reported)
Actual performance not reported the target to supply affordable housing finance to households in the gap market

6. Financial Analysis - Expenditure Outcomes: 2011/12
Programme
Allocation (R’000)
Expenditure (R’000)
(%) Spent
Administration
75,4
Housing Policy, Research & Monitoring
39 442
32 954
83,6
Housing planning & delivery Support
93,7
Housing development Finance
99,6
Strategic Relations and Governance
63,3
Total
99,0

7. Expenditure Outcomes...
In general, the department’s spending is good (99% of allocated funds)
However, a closer look at expenditure per programme shows under-spending on four of five programmes (ranging from 6,3% to 36.7%)
While under-spending on programme 4 (Housing Development Finance) is 3,4%, a major concern is on RHIG with a high under-spending since its establishment in 2010 and with more than half of what has been spent occurring in March
Where only R187,3 m (73%) of R257,5 m allocated was spent
Recommendations on how to improve performance of RHIG are presented later
Financial Year
Allocation (R’000)
Amount Spent (R’000)
Percentage spent by March
2010/11
100
66.7
33%
2011/12
257.5
187.3
72%

8. Expenditure Outcomes...
An amount of R3m is provided for closure of SHF which was spent. It is, however, reported that this money was not required
Raises questions on the planning and costing of activities (financial and fiscal implications not properly done)
With regards to the grants:
In general, the spending on HSDG is 99% of allocated funds:
Province
Percentage of allocated funds spent
Eastern Cape 82
Limpopo 83
Free State 99
All others
100

9. Expenditure Outcomes...
Unlike in 2010/11, 100% spending by 6 provinces has been achieved without shifting funds between provinces
Concerns are on the EC and LP – with 82% and 83% spending respectively due to a number of reasons including
Unavailability of bulk infrastructure and serviced sites
Cash flow problems
Lack of capacity

10. Expenditure Outcomes...
On the Housing Disaster Relief Grant the spending has been very poor as only 18% was spent by provinces (R of R )
Province
Amount transferred
(R’000)
Amount spent (R’000)
Percentage spent
Eastern Cape
56 700
Free State
44 100
16 631 38
Gauteng 36
KwaZulu-Natal
31 140
3 503 11
Limpopo
21 474
Mpumalanga
360
100
Northern Cape
10 350
North West
15 840
2 368 15
Total
33 212 18

11. Expenditure Outcomes...
On the USDG, 44% (which is R2,7 billion of R6,2 billion allocated) has been spent up to 31 March 2012
Spending ranges from 37% (Nelson Mandela metro) - 81% (Buffalo City)
Though this reported expenditure is 3 months before the end of municipal financial year, municipalities are unlikely to be able to spend remaining 56%
Municipality
Funds allocated and transferred (R’000)
Funds spent
Percentage spent percentage of total amount
Buffalo City
796 99 19
Nelson Mandela 63
Mangaung 40
Ekurhuleni 46
City of JHB
Tshwane 39
eThekwini 51
City of Cape Town 35
Total 44

12. Audit Outcomes – Issues raised by the AG
The AG raised a number of issues:
Material under-spending on RHIG
Under-spending of R of R allocation - the Department has not achieved some of its objectives on sanitation to rural communities
Performance indicators not well defined in some cases
A total of 22% of the indicators relevant to programme 2, 3 and 4 not well defined in that clear, unambiguous data definitions were not available to allow for data to be collected consistently
Performance targets not clearly specified in some instances
A total of 27% of the targets relevant to programme 2, 3 and 4 are not specific in clearly identifying the nature and the required level of performance
Performance targets not measurable
Required performance could not be measured for a total of 28% of the targets relevant to programme 2,3 and 4
Some planned targets not achieved during the year under review (23%)

13. How to ensure continuous Improvement
Issues raised by the AG are as a result of:
None compliance with the National Treasury’s Framework for Managing Programme Performance Information (FMPPI) and
Lack of monitoring and evaluation role that the NDHS should play in the sector
The NDHS should strengthen its monitoring and evaluation role within the sector
In some instances, targets are only set for the MTEF
There is need for a further break down of targets per annum
Variances between targets and the actual performance in some instances are reported without reasons provided, this could be interpreted as poor understanding of underlying reasons
Reasons for such discrepancies need to be researched and understood
This will assist to develop solutions and avoid under-spending in future
MTEF targets could be revised annually based on available funding and associated costs of providing a service in order for targets to remain realistic

14. Progress With Implementation of FFC Past Recommendations
The FFC’s previous work has revealed that the current institutional arrangements, funding and some of the policy issues relating to the delivery of housing have to reviewed
As a result, the FFC has made a number recommendations pertaining to policy (especially acceleration of accreditation of municipalities based on their capacities to administer housing programmes), funding and institutional issues over the past years
Under-spending in some instances results from institutional issues and the flow of funding and this shows that some institutional issues are not yet resolved – for example under-spending on human settlements development grant in the EC (82%) and LP (83% ) is attributed to some extent to these institutional issues

15. Progress with the implementation of the FFC past recommendations
Progress on accreditation recommendation:
Accreditation of municipalities has been very slow over the year and the NDHS has an intention to go beyond just accreditation to shift housing function to six metros (Ekurhuleni, Tshwane, Johannesburg, eThekwini, Nelson Mandela Bay and Cape Town) by 2014
Implications of housing function shift to metros:
Housing function shift – goes beyond accreditation as it involves a permanent devolution of housing function to affected municipalities
Affected municipalities will be fully responsible for the overall housing function including direct flow/ allocation of funding
Improve the ability of municipalities to increase opportunities for the application of innovative planning , coordination and also to improve accountability
Shifting housing function from provinces to municipalities will have implications on assets, liabilities and personnel

16. Progress with the implementation of the FFC past recommendations
FFC is involved in the process housing function shift as required by various pieces of legislation including the FFC Act of 1997
(2A) (a) in particular requiring an organ of state in one sphere of government which seeks to assign a power or function to an organ of state in another sphere of government in terms of a law to first, before assigning the power or function:
Notify the FFC of the fiscal and financial implications of such assignment on the future division of revenue
Request the FFC recommendation regarding such assignment

17. Progress with the implementation of the FFC past recommendations
An initial meeting on the housing function assignment was held by the NDHS and the FFC in April 2012
A technical task team to work on housing function was established (consists of FFC, National Treasury and NDHS)
A formal letter from the Minister of HS was received on 18 June 2012 and the FFC is required to make its submission within 180 days (by mid-December 2012)
There are some delays encountered in this process
For example the NDHS is yet to finalize a number of activities (formal consultations with affected municipalities, implications of function shift on personnel and assets as well as financial implications)
It was indicated that some of this work will take time and this include personnel and financial implications

18. Progress with the implementation of the FFC past recommendations
Consideration should be given to link new housing subsidies with MIG and LES formula to ensure that the LES allocations keep pace with the installation of new housing infrastructure among other things
One of the technical indicators under the strategic outcome-oriented 2 is to facilitate stronger alignment between the MIG and human settlements development

19. Progress with the implementation of the FFC past recommendations
Government should actively and specifically pursue development of a more spatially compact urban form for cities, by developing and adopting appropriate policies and financing instruments
This has also been emphasised in the National Development Plan
The NDHS has set more efficient land utilisation as one of strategic outcome-oriented goal
In practice - there are initiatives already with recent launch of 512 newly build flats for the residents of Jabulani Hostel in Soweto

20. Conclusion and Issues for the Committee’s Consideration
Overall spending in 2011/12 has slightly improved by 0,2% compared to 2010/11 financial year
Concerns on Housing Policy, Research and Monitoring programme as well as Strategic Relations and Governance as they under-spent by 16,4% and 36,7% during the period under review
But there is a slight improvement compared to 2010/11 where under-spending was 25% and 40% respectively
The FFC has itself raised concerns on the overall performance of RHIG during this year and has put some recommendations which include:
A review of grant design - with a view to make it flexible and where necessary and cost effective, repair and maintenance should be considered a priority
Introduction of termination Clauses - A “termination clause” be inserted in all contracts in to manage poor performance
Monitoring and evaluation - The NDHS needs to strengthen their capacity to manage and monitor the RHIG

21. Conclusion and Issues for the Committee’s Consideration
Development of the monitoring system for verification of housing projects delivered in all provinces by instrument needs to be emphasized to improve reporting
Issues raised by AG are issues of compliance with the FMPPI that requires the NDHS urgent attention
The NDHS needs to strengthen its monitoring and evaluation role not only on human settlements grants and the development finance institutions but the sector as a whole
Making both financial and non-financial performance data easily accessible
In general, reporting format makes it difficult to understand the actual delivery in some instances for example hectares formally submitted for release vs assembled and acquired, this needs to be improved

22. Conclusion and Issues for the Committee’s Consideration
Development finance institutions are segregated and are not providing sufficient bridging finance to speed up the delivery of low-income housing
Need to enhance coordination in order to address the scale of the housing requirement
Review of housing needs and financing mechanisms to ensure that development finance functions are appropriately institutionalised and evolve over time

23. Thank you. Financial and Fiscal Commission (FFC)
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Waterfall Park, Vorna Valley, Midrand,
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Presentation to Portfolio Committee on Mineral Resources: 10 Oct 2012