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A comprehensive review of departmental expenditure outcomes, major variances, infrastructure projects, program budgets, and under-expenditure reasons from the 2012 Medium-Term Budget Policy Statement.
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Standing Committee on Appropriations 2012 Medium term budget policy statement Presentation by Ms O N V Fundakubi Chief Financial Officer 07 November 2012
Outline • Expenditure outcome as at 31September 2012 • Reasons for major variances • Declaration of saving • Unfilled vacant posts • Infrastructure Projects • Progress on Nandoni pipeline and project performance • Way forward
Expenditure as at 30 September 2012: Per economic classification
Programme 1: Administrations The programmes’ spending is at 49% and is within the acceptable spending level although the following issues needs to be addressed as matter of urgency: • The Ministry’s expenditure is currently at 82% of its total allocation, and it is anticipated that its budget will be exhausted in the coming two months as a result of the expansion of the organisational structure. Additional funding which amounts to R15 million (R7,6 million on Compensation of Employees and R7,5 million on Goods and Services) is needed. • Over expenditure in Internal Audit is anticipated due to the rollout of special investigations. • The implementation of Business Re-Engineering Process Project is underway and was not adequately budgeted for. Even though the rollover has been approved there will still be a shortfall.
Programme 2: Water Sector Management • Unfilled vacant posts as result of strict requirements for appointments of Occupational Specific Dispensation (OSD) • The National Water Resource Strategy has been gazetted and is currently being rolled out to the public, and workshops are being conducted • Transfer of funds to Inkomati and Breede-Overberg Catchment Management Agencies will be done later in the financial year
Programme 4: Regional implementation and Support • The Department has not yet spent funds earmarked for Acid Mine Drainage (AMD), and hence the under expenditure. The reasons are as follows: • TCTA is awaiting approval/authorization from the Department to proceed with the implementation of the short-term intervention; • TCTA is awaiting confirmation that sufficient budgetary provision is available to proceed with the awarding of the contract for the construction of the works; • Awaiting approval to proceed with the conclusion and signing of relevant agreements with the mines to allow implementation of the works; • Awaiting authorisation by the Minister for TCTA to proceed with the construction pending the issuance of an environmental authorisation or exemption;
Programme 4: Regional implementation and Support (Continued) • TCTA is reluctant to award the contract for implementation of the short term solution given the funding uncertainty for 2013/2014. In this regard, a proposal to use the LHWP borrowing programme to provide bridging finance for the implementation of the short term intervention is pending the outcome of the Minister's meeting with the Minister of Finance. • Some of the short-term intervention (e.g. the Eastern Basin) will be deferred for implementation pending the outcome of the Long Term Feasibility study. (TCTA is ready to implement once the contract has been awarded and the budget will be spent as planned).
Programme 4: Regional implementation and Support • Water Services Projects spent R60 million against the budget of R620 million, which includes rollover funds of R176 million. These projects are implemented by Infrastructure Branch (in Water Trading Entity) on behalf of the Main Account. Water Trading Entity financial system indicates that an amount of R228 million has already been spent and they are in the process of invoicing Main Account for the work done. These invoices are expected to be processed in the coming months . Over and above, the Water Trading Entity has projected that R827 million will be required to finalise all these project in the current financial year, which translates to over R200 million budget shortfall it is anticipated that the budget will be spent as planned.
Programme 4: Regional implementation and Support (Continued) • Delayed and/or slow procurement processes in Municipalities; • Legal implications on the cancellation of one contractor part of the Greytown BWS have delayed the progress of the project and the contractor has taken the WSA to court; • Progress on some contracts has been delayed due to financial instability of appointed contractors. For example, 9CE company (SanyatiCivils) is in litigation and yet was appointed on three schemes; namely, Hlabisa, Mthonjaneni and Jozini. Another contractor (Amanzi) has financial problems and was issued notice of cancellation. It is also responsible for two schemes, (such as Hlabisa and Greater Eston); • Lack of Project Management capacity in implementing agencies.
Programme 5: Water Sector Regulations • Unfilled vacant posts • Late submission of invoices in respect of Compulsory Licensing, Framework for monitoring and auditing as well as Water Research Commission has contributed to under spending
Programme 6: International Water Co-operation • As result of the appointment of the Director and cost incurred to acquire resources for him only from the 2nd quarter • In the 3rd Quarter cost will be incurred for the JICA Seminar, Donor Round table • The Expenditure for the trip to Japan which took place in the 2nd Quarter and still awaiting the DIRCO expenditure • Delays in the procurement of assets and stationery • A strategic session to be conducted in the 3rd quarter only. • Two Bilateral to China and Malaysia was planned for but have not been approved • Delays in the procurement of assets and stationery • Payment for the rental of ORASECOM office to be processed by the end of 2nd quarter, • Transfer payment for membership fees for AMCOW only payable upon receipt of the invoice for the AMCOW Secretariat
Programme 6: International Water Co-operation • The expenditure incurred for delegates who attended International Water Week in Stockholm is still to be submitted by DIRCO • Official trips planned for Bonn & Bangkok by the end of the 2nd quarter have not been approved yet. • There is under expenditure in COE as a result of slow filling of vacant posts • All training courses have been scheduled to be undertaken during the 2nd and 3rd Quarter • Computer Software(MS Projects) to be procured in the 3rd Quarter • Payment of Registration fees for WWC & OECD Membership submitted to be processed • Membership for IWA only to be paid be the end of the 2nd quarter upon receipt of the invoice
Requests and approval of rollover for 2012/13 financial year
Requests and approval of rollover for 2012/13 financial year
Reasons for virement Programme1: Administration Funds have been shifted to implement Women in Water Programme as well as to newly created structure as well as procurement of computers and furniture for newly appointed personnel. Programme 4: Regional Implementation & Support Funds have been shifted to this programme for the implementation of 2012 Women in Water Programme Programme 6: International Water Co-operation Funds have been shifted to fund newly created structure as well as procurement of computers and furniture for newly appointed personnel
Reasons: declarations of savings Compensation of Employees • Unfilled vacant posts as result of strict requirements for appointments of OSDs • Savings have been declared due to higher vacancy rate, however the department is in the process of fast tracking recruitment processes Goods and Services • Cost saving measures implemented on the following goods and services spending line items • Catering • Consultants • Venues and Facilities • Travel and Subsistence • Machinery and Equipment
Reasons: declarations of savings Infrastructure projects – R 22 million NB: The project expenditure is not measured on straight basis but measured based on the monthly cash flow projection. Savings have been declared on Infrastructure projects due to the following: • The Industrial action – De Hoop Dam • Slow delivery of the pipes for Bulk Distribution System (BDS), due to poor quality. • Delay in the appointment of PSP for DSRP Projects. • Cost optimisation measures implemented in respect of infrastructure projects of the Water Trading Entity
Reasons: declarations of savings Machinery and equipment Savings have been declared on Machinery and Equipment due to: • Funds have been budgeted for procurement of laptops, computers and office furniture, as result of unfilled vacant posts the allocation of budget was declared as savings. • Delays in delivery of procured office furniture and IT Equipments
Water Trading Entity Capital projects Expenditure report as at 30 September 2012
Nandoni water treatment works , distribution & pipes • The Shortfall amounting to R101 million will be funded through reprioritisation and saving from other projects. The business is currently reviewing the annual budget.
Reasons for under expenditure • The project expenditure is not measured on straight-line basis but measured based on the monthly cash flow projection. The YTD budget and YTD actual indicates an under expenditure of 20%, the straight-line measurement requires WTE to be on 50% of the total budget. • The under spending of 20% for the 2nd quarter is due to the following: • The Industrial action – DeHoop Dam • Slow delivery of the pipes for Bulk Distribution System (BDS), due to poor quality. • Delay in the appointment of PSP’s for Dam Safety Rehabilitation Programme (DSRP) Projects.
Reasons for under expenditure • An estimated amount of R22 million was declared as saving under Programme 3 for financial year 2012/13 due to the following: • WTE is required to pay 25% as a social contribution on Mokolo Crocodile Water Augmentation Project (MCWAP). The budget for 2012/13 is R87 million. • During the financial year end 2011/12 WTE paid TCTA 25% social component and as a results the R87 million budgeted for is no longer required by the project. • The allocation of R87 million has been reprioritised as follows: • R65 million has been transferred to other projects • R22 million has been declared as a savings.
Plan of action to address under spending on projects • Recovery plan has been drafted in order to recover the man hours lost during the industrial action at De Hoop Dam. • WTE is in the processes of establishing a database of PSPs that has various engineering skills needed. • The acquisition of BDS pipes and power supply has been prioritized and is estimated to cost R600 million. The delivery of pipes and payment of power supply are anticipated from the 3rd quarter. • The PSPs to upgrade and configure ERP system has been appointed and expenditure will be incurred during the 4th Quarter. • Detailed project plans have been developed • Project scheduling per activity
Plan of action to address under spending on projects • Demand plans have been developed • Speed up procurement process without deviating from the PFMA and National Treasury regulation • Ensuring that contractors invoice WTE on time • Regular progress meeting reviews with the Minister and the DG • Establishment of CAPEX Committee
Progress on the performance of the Nandoni Distribution and Pipeline
