1. NATIONAL TREASURY 4 th QUARTER PERFORMANCE FOR 2009/10 STANDING COMMITTEE ON APROPRIATIONS Presenter: Lesetja Kganyago | Director-General | 24 August 2010

2. CONTENT 2009/10 Expenditure Outcome Budget versus Expenditure per Economic Classification Programme Budget versus Expenditure Asset & Liability Management Financial Management & Systems Provincial and Local Government Transfers: NDPG Fiscal Transfers: FIC Way- Forward 2

3. 2009/10 NT EXPENDITURE OUTCOME The final appropriation for the National Treasury for the 2009/10 financial year was R62.8 billion. This excludes statutory amounts. Of the R62.8 billion appropriated: - R1.3 billion for the operational budget (Programme 1 -6); and - R61.5 billion for the transfer budget (Programme 7-9). Actual total expenditure amounted to R62.7 billion (i.e. 99.7% of allocated funds); - R1.2 billion for Programme 1-6; and - R61.5 billion for Programme 7-9. The under expenditure amounted to R176.8 million, which is 0.3% of the total appropriated funds.

4. NT BUDGET VERSUS EXPENDITURE PER ECONOMIC CLASSIFICATION Economic ClassificationBudget 2009/10 R’000 Actuals 2009/10 R’000 Variance R’000 Expenditure in % Variance in % Compensation of Employees 408 554402 0746 48098.4%1.6% Goods and Services787 921728 54459 37792.5%7.5% Transfers and Subsidies61 632 80861 526 463106 34599.8%0.2% Payment of Capital Assets 16 28711 6524 63571.5%28.5% Total62 845 57062 668 733176 83799.7%0.3%

5. PROGRAMME BUDGET VERSUS EXPENDITURE ProgrammeBudget R’000 Actuals 2009/10 R’000 Variance R’000 Expenditure in % Variance in % 1. Administration246 809242 7904 01998.4%1.6% 2. Public Fin & Budget Man 265 150262 9172 23399.2%0.8% 3. Asset & Liability Man60 97453 1747 80087.2%12.8% 4. Fin Man & Systems459 479405 63353 84688.3%11.7% 5. Fin Acc & Reporting138 882137 1101 77298.7%1.3% 6. Eco Pol & Intern Fin Relations 95 86294 4881 37498.6%1.4% 7. Prov & Local Gov Transfers 14 410 63114 327 37383 25899.4%0.6% 8. Civ & Mil Pensions, Contri 4 955 3024 955 140162100%- 9. Fiscal Transfers42 212 48142 190 10822 37399.9%0.1% Total62 845 57062 668 733176 83799.7%0.3%

6. ASSET AND LIABILITY MANAGEMENT (ALM) Programme 3 (Asset & Liability Management) The under expenditure of R7.8 million is mainly due to lower spending on the Capital Structure and Financial Distribution Policy project, delays in the development of the treasury management system; lower spending on operational expenditure mainly training & development, travel and subsistence costs as a result of cost-savings measures and vacancies. 6

7. ALM ESTABLISHMENT AS AT 31 MARCH 2010 % of total establishment 4%17%25%13%24%17% Vacant- not funded % of total -1%3%2%4%3%

8. ALM UNDERSPENDING ON GOODS AND SERVICES

9. FINANCIAL MANAGEMENT & SYSTEMS Programme 4 (Financial Management & Systems) The under expenditure of R53.8 million is mainly due to less than anticipated spending on the IFMS project and transversal systems, lower expenditure on operations (mainly training and development), venues and facilities and on vacancies. The IFMS project implemented asset management modules to the leading sites viz. National Treasury and Limpopo Provincial Treasury. Capacity problems and challenges within the Dept of Defence in terms of asset management resulted in lower spending. The delay in due diligence and protracted contractual negotiations pertaining to the HR COTS and procurement management modules, resulted in lead sites’ preparations commencing late. 9

10. FINANCIAL MANAGEMENT & SYSTEMS (CONTINUED) 2009/10 FINANCIAL YEAR under expenditure R'000 Compensation of Employees1,254 Computer Services48,149 Training1,242 Venues & Facilities1,224 Payment for Capital Assets863 Other (goods & services)1,113 TOTAL53,845 Of which : IFMS33,243 10

11. FINANCIAL MANAGEMENT & SYSTEMS (CONTINUED) Transversal Systems Operating Costs408 Vulindlela1,452 Logis2,927 Persal4,712 BAS3,774 TOTAL13,273 11

12. PROVINCIAL & LOCAL GOVERNMENT TRANSFERS (NDPG) Programme 7 (Provincial & Local Government Transfers) The under expenditure of R83.3 million is mainly due to lower spending by the municipalities for the Neighbourhood Development Partnership Grant (NDPG). Slower spending by municipalities than projected in the milestone payment schedules. This is attributed to: –Staff turnover rates in municipalities compromising Executive buy-in for the grant programme –Delays and irregularities in tender processes –Estimate that a third of NDPG-recipient municipalities need intensive support & monitoring to sustain and ensure quality outputs –Difficulty of accurate cash-flow forecasting for large, multi-stakeholder programmes –NT insistence on municipalities meeting conditions and objectives of the Grant (e.g. submission of business plans, establishing leverage, Operations & Maintenance plans, etc.) as per DoRA –Municipal capacity (budgeting, planning, financial management) 12

13. Programme 7: Neighbourhood Devlopment Partnership Grant (NDPG) Mandate (DoRA) –“To support neighbourhood development projects that provide community infrastructure & create the platform for other public & private sector development, towards improving the quality of life of residents in targeted underserved neighbourhoods (townships generally)” Purpose (DoRA) –“A Technical Assistance [TA] Grant aimed at supporting the development of township development plans –A Capital Grant aimed at supporting nodal investment into the construction or upgrading of community facilities, which may attract private sector investment” NDPG is a hybrid grant –Schedule 6 – direct transfers to municipalities –Schedule 7 – indirect transfers to municipalities’ service providers via PDF trading account 57 municipalities were awarded with NDPG grants: NDPG commitment over the medium-long term of R8.8 billion

14. NDPG Achievements 2007/082008/092009/10 Establishment year →1 st appointment in July 2006, NDP Unit business plan approved NDPG Toolkit 72 awards under management by year-end with value of R7.8bn & anticipated total township investment value of R26.1bn 72 awards under management Municipalities do more planning & start implementing quick wins Now 90 awards in 57 municipalities Despite quick wins underway, some concerns about speed & depth of planning Ops manual under development R892m spent since programme start & doubled on previous year TA spentR3.8mR67.6mR89.9m CG transfersR41.4mR181.5mR508.0m Total NDPGR45.2mR249.1mR597.9m Planned expR295mR374mR661m Use rate15%67%90%

15. 2009/10 EXPENDITURE OUTCOME (NDPG) Item: Actual expenditure 2009/10 Original Allocation 2009/10 Adjusted Allocation 2009/10 Actual 2009/10 % TA (Indirect /Sch 7)R79.4mR110mR89.9m81.6% CG (Direct /Sch 6)R582.0mR551.4mR508.0m92.1% Total NDPGR661.4m R597.9m90.4% Item Transfers from National Treasury 2009/10 Original Allocation 2009/10 Adjusted Allocation 2009/10 Actual transfers 2009/10 % TA (Indirect /Sch 7)R79.4mR110mR70m63.6% CG (Direct /Sch 6)R582.0mR551.4mR508m92.1% Total NDPGR661.4m R578m87.4%

16. FISCAL TRANSFERS Programme 9 (Fiscal Transfers) The under expenditure of R22.4 million is mainly due to less than anticipated transfer payment to the Financial Intelligence Centre (FIC). 16

17. WAY-FORWARD NT The Department surrended the unspent funds of R176.8 million for the 2009/10 financial year to the fiscus. Critical posts are being filled in line with the mandate of the Department. Performance monitoring mechanisms are in place to track and monitor programme’s spending patterns. Continue with the cost saving measures within the Department. IFMS Finalise the roll-out of the asset management module Finalise the roll-out of procurement module to lead sites Finalise the roll-out of HR module to lead sites 17

18. WAY-FORWARD (CONTINUED) ALM Capital Structure and Financial Distribution Policy project will be completed by end December 2010 NDPG Central technical assistance procured for direct Awards support and diagnostics NDP review budget projections based on: –Historical financial information –Secondary data about municipal performance –Qualitative assessments NDP insisting on transfers based on approved Business Plans demonstrating clear value for money, sustainability, and leverage (no more Quick Wins) 18