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STANDING COMMITTEE ON APPROPRIATION

STANDING COMMITTEE ON APPROPRIATION. Presented by Mr Onesmus Ayaya Chief Financial Officer Department: Water Affairs (DWA) 2 November 2009. Presentation Outline. Comments on MTBPS MTEF Allocations Efficiency Savings Earmarked Funding – MTEF PERIOD Budget Bids

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STANDING COMMITTEE ON APPROPRIATION

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  1. STANDING COMMITTEE ON APPROPRIATION Presented byMr Onesmus AyayaChief Financial OfficerDepartment: Water Affairs (DWA)2 November 2009

  2. Presentation Outline • Comments on MTBPS • MTEF Allocations • Efficiency Savings • Earmarked Funding – MTEF PERIOD • Budget Bids • Departmental Allocation Before and After Transfer of Functions • Rollover of Funds • Virement • Unforeseeable and Unavoidable Expenditure • Earmarked Funding - Current Financial Year • Transfer of Functions • Re-Scheduling of Earmarked Funds 2

  3. COMMENTS ON MTBPS 1. Job Creation Create jobs in rural areas under construction and EPWP Filling of vacant post in regions to be less dependant on consultants Appointment of SMMEs to create jobs and trigger economic growth 3

  4. Comments on MTBPS 2. Rural development focus • Targeted procurement to support economic opportunities for HDIs • Increased allocations to Working for Water and Working for Fire • Preferential employment opportunities in rural areas where DWA projects are implemented • Utilisation of SMMEs to encourage their contribution to economic growth • Investments in in water resource infrastructure to make more water available for economic growth and development in selected rural areas 4

  5. COMMENTS ON MTBPS 3. FIGHTING CRIME AND CORRUPTION • Firm action on findings emanating from investigation of all fraud hotline-reported cases • Targeted internal audit focus on controls around supply chain management • Implementation of awareness campaigns to address fraudulent activities • Use of regular payroll audits to prevent and identify ghost employees 4. ENHANCING THE QUALITY OF EDUCATION • Learning academy established and bursary scheme used to support young engineer • Use of interns to expose young graduates to the world of work 5

  6. Comments on MTBPS 5. Contribution to improved health outcomes • Purchase of packaged plants in the fight of Cholera outbreaks • Support to provision of clean running water • Rehabilitation of reticulation and treatment works • Implementation of water conservation and demand management is selected municipalities • Eradication of bucket system in line with human settlement plans • Targeted support to municipalities to address water and sanitation bottlenecks 6

  7. MTEF BUDGET ALLOCATION -2010/11-2012/13INCLUDING EARMARKED FUNDING R’000 7

  8. MTEF BUDGET ALLOCATION -2010/11-2012/13INCLUDING EARMARKED FUNDING 8

  9. RECOMMENDED EFFICIENCY SAVING BY NATIONAL TREASURY -2010/11-2012/13 9

  10. MTEF BUDGET ALLOCATION -2010/11-2012/13EXCLUDING EFFICIENCY SAVINGS 10

  11. EARMARKED FUNDING -2010/11-2012/13 11

  12. MTEF BUDGET ALLOCATION -2010/11-2012/13EXCLUDING EARMARKED FUNDING AND EFFICIENCY SAVING 12

  13. REQUEST FOR ADDITIONAL FUNDING CURRENT EXPENDITURE – PRIOR TO BUDGET SCALED DOWN 13

  14. REQUEST FOR ADDITIONAL FUNDING CAPITAL EXPENDITURE – PRIOR TO BUDGET SCALED DOWN

  15. REQUEST FOR ADDITIONAL FUNDING CURRENT EXPENDITURE – AFTER BUDGET BIDS SCALED DOWN 15

  16. REQUEST FOR ADDITIONAL FUNDING CAPITAL EXPENDITURE – AFTER BUDGET BIDS SCALED DOWN

  17. Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) 17

  18. Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) 18

  19. Reason for under spending • Late submission of invoices in respect of services already rendered. • Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at tender phase, the expenditure is anticipated to increase in the third quarter of this financial year • Non-payment of general wage increase, it was anticipated (As projected) that the expenditure will kick in July 2009. These increases are now anticipated to be paid in October as per DPSA directive • Protracted delays in reaching agreements with municipalities to transferring staff and water schemes. 19

  20. Departmental Allocation- After transfer of functions 20

  21. DEPARTMENTAL ALLOCATION – AFTER TRANSFER OF FUNCTIONS Economic Classification 21

  22. Rollover of Funds from 2008/09 Financial Year Def: Funds appropriated but not spent in a particular financial year may be rolled over to a subsequent year subject to approval of the National Treasury 22

  23. Reason why funds were not spent -Rollover of funds • Delays in the conclusion of the negotiations to finalise the memorandum of agreement with the 23 different mines. • Exceptional high rainfall prevented contractors from making anticipated progress • Late submission of invoice in respect of Regional Bulk Infrastructure with multiple errors on calculation of bill of quantities 23

  24. Virement (Shifting of Funds in terms of Section 43 of PFMA • During a financial year, some deviations between actual expenditure and the allocated budget for that specific financial year may occur. • Unforeseen circumstances may require the revision and subsequent adjustment of the original planned projects and/or estimated costs involved in the execution of activities. • Virement is subject to the following • Shifting between programmes may not exceed eight percent (8%) • Virement may not be applied to amount appropriated for transfer to institution • Virement may not be applied to amount appropriated for capital expenditure to defray current expenditure • Virement may not be applied to earmarked funds 24

  25. Virement (Shifting of Funds in terms of Section 43 of PFMA Virement – 2009/10 financial year 25

  26. Reason for Virement • Programme1: Administration 1.1 Budget of R 14.086 million was shifted to Water Services due to reallocation of inflationary adjustment that was initially allocated during Estimate of National Expenditure process in this programme. • Programme2: Water Resource management 2.1 Budget of R65.386 million was shifted to Water Services and Forestry due to the following reasons: 2.1.1 Unfilled positions as a result of newly created structures; 2.1.2 Re-allocation of water use conservation and water demand management to the respective regions. 2.1.3 Funds were incorrectly allocated under goods and services in this programme for the purchase of machinery and equipment 3 Programme3: Water Services 3.1 Budget of R77.466 million was shifted to this programme as result of re-allocation of inflationary adjustment that was initially allocated in programme 1: Administration as well as re-allocation of water use and conservation and water demand management 26

  27. Unforeseeable and Unavoidable Expenditure • Section 30(2)(b) of the PFMA and Treasury Regulations 6.6, provides for the allocation of additional funds through an adjustment budget to finance unforeseeable and unavoidable expenditure • Unforeseeable and Unavoidable expenditure relates to expenditure that could not be anticipated at the time of finalising the budget (ENE) • National Treasury has recommended an amount of R124,144 million to Cabinet for approvals. Below are the details 27

  28. Unforeseeable and Unavoidable Expenditure The difference means that the department must reprioritise the budget and shift budget (virement) to fund the shortfall 28

  29. EARMARKED FUNDING • Earmarked funding are allocations earmarked by National Treasury for a specific purpose and may not be used for other purposes. Below are earmarked allocations for 2009/10 financial year before adjustments • Total of earmarked funds amount to R3 170 163 000 • Rent of buildings 138 331 000 • Working for Water 455 724 000 • Working on Fire 123 608 000 • Refurbishment of water scheme 30 000 000 • De Hoop Dam (Phases 2B to 2G) 600 000 000 • Additional capacity: Internal Audit and Finance 6 000 000 • Sanitation at school and clinics 350 000 000 • Regional Bulk infrastructure 611 500 000 • Operating subsidy (Water Services) 855 000 000 • Total earmarked funding 3 170 163 000 29

  30. 2009/10: Earmarked Vs Un- earmarkedBefore Adjustments 30

  31. TRANSFER OF FUNCTIONS • The president of Republic of South Africa has announced during his state of the nation address that functions of Sanitation services and Forestry will reside with the Dept. of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. • Where a function is to be transferred between votes during a financial year, National Treasury must be consulted in advance to facilitate any request for the resulting transfer of funds voted for that function in terms of section 33 of the PFMA. In the absence of an agreement between the affected departments on the amount of funds to be transferred, National Treasury will determine the funds to be shifted. • Transfer of functions: National Treasury approval must be obtained before seeking approval from the Minister of Public Service Administration for a transfer of a function to another sphere of government 31

  32. TRANSFER OF FUNCTIONS (cont.) • Budget of R519,186 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. 1.2 Department of Agriculture and Fisheries 1.2.1 Operational budget in the Office of DDG: Forestry R3.934 million 1.2.2 Forestry Budget (as per ENE) R485.641 million 1.2.3 Compensation of employees in respect of support services R27.605 million 1.2.4 Forest land management R2.006 million TOTAL 519.186 million 32

  33. RE-SCHEDULING OF FUNDS EARMARKED FOR INFRUSTRACTURE PROJECTS(DE HOOP DAM) FOR OTHER PURPOSE • National Treasury has granted the Department to reschedule earmarked funds of R502 million owing to. 1.1 Delays in signing Memorandum of Agreement with the mining sector 1.2 Delays in reaching Water Supply agreements with individual mines due to the global economic crisis • As result of this, the Department will only be able to spend R98 million of R600 million • The Department therefore requested the National Treasury to utilise R502 million as follows 33

  34. RE-SCHEDULING OF FUNDS EARMARKED FOR INFRUSTRACTURE PROJECTS(DE HOOP DAM) FOR OTHER PURPOSE • DWA requested the National Treasury to reschedule R502 million as follows 2.1 To further the following infrastructure projects - R297 million 2.1.1 Nandoni Water Treatment Works 2.1.2 Inyaka Water Treatment Works 2.1.3 Hluhluwe Regional Water Scheme 2.2 Augmentation to the Water Trading Entity – R205 million is a result of infrastructure projects undertaken by WTE in 2008/09 financial year 34

  35. I thank you 35

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