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Summary of provincial receipts Summary of expenditure by vote & economic classification

PRESENTATION ON eastern cape PROVINCIAL expenditure for 2012/13 select committee on finance 14 may 2013. PRESENTATION OUTLINE. Summary of provincial receipts Summary of expenditure by vote & economic classification Conditional grants performance for the year

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Summary of provincial receipts Summary of expenditure by vote & economic classification

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  1. PRESENTATION ON eastern cape PROVINCIAL expenditure for 2012/13 select committee on finance 14 may 2013

  2. PRESENTATION OUTLINE • Summary of provincial receipts • Summary of expenditure by vote & economic classification • Conditional grants performance for the year • Infrastructure performance for the year • Conclusion

  3. SUMMARY OF PROVINCIAL RECEIPTS • 100% of the Equitable share was received from National • Of the conditional grants a total amount of R286.242 million was not received by the province due to slow spending during the financial year on the following conditional grants: • Health Professions Training and Development grant – R928 thousand • Human Settlements Development grant – R284.813 million • Mass Sport and Recreation Participation Programme grant – R584 thousand

  4. SUMMARY OF PROVINCIAL RECEIPTS (cont’d) • On Provincial Own Revenue, the Province collected R1.019 billion or 131.6% against the adjusted budget of R774.477 million resulting in over collection amounting to R244.557 million mainly from the following departments: • Provincial Planning and Treasury - R141.342 million from interest earned on bank balances • Rural Development and Agrarian Reform - R82.724 million mainly from the surrender by the ECRFC of prior years’ surplus funds • Health - R33.469 million due to the over collection on patient fees

  5. SUMMARY OF PROVINCIAL EXPENDITURE BY VOTE • Overall the Province spent R55.928 billion or 97.4% of its adjusted budget resulting in under expenditure of R1.469 billion or 2.6%

  6. SUMMARY OF PROVINCIAL EXPENDITURE BY VOTE (cont’d) • The following departments mainly contributed to the under spending; • Education R691.939 million (2.6%) • Payment of temporary educators whose contracts were extended until 31 March 2013 • Delay in the payment of the Rural Allowance incentive scheme • Delay in the payment of temporary educators appointed by SGBs • Most of these payments have subsequently been made • Health R169.462 million (1.1%) • Delays in replacing critical posts (medical officers, specialists etc.) vacated during 2012/13 • These posts were advertised in March 2013 and will be filled in the current year • Rural Development & Agrarian Reform R96.183 million (5.7%) • Capacity challenges with emerging contractors and lack of detailed planning and implementation of projects as well as the withholding of the transfer to the public entity that did not surrender surplus funds

  7. SUMMARY OF PROVINCIAL EXPENDITURE BY VOTE (cont’d) • The following departments mainly contributed to the under spending; • Human Settlements R291.725 million (11.3%) • Lack of capacity by contractors, delays in the procurement processes as well as challenges with housing beneficiary administration and provision of bulk infrastructure • Sport, Recreation, Arts and Culture R60.379 million (8.5%) • Non filling of vacant library assistant posts and delays in the procurement processes for modular libraries & sport equipment

  8. SUMMARY OF EXPENDITURE – ECONOMIC CLASSIFICATION • Compensation of Employeeswas the main contributor to the under expenditure of R1.469 billion as per reasons stated above • Furthermore, the Province also employed measures to strictly manage CoE expenditure including; • Scrutinisation of all appointments by the Provincial Coordinating and Monitoring Team (PCMT) • Centralisation of the appointment function for Education and Health in Treasury • Dealing with PILIR cases and other leave management inefficiencies in Education • Head count and personnel verification (HR connect project) in Education

  9. SUMMARY OF EXPENDITURE – ECONOMIC CLASSIFICATION • Goods and services over spent during the year mainly due to budget pressures on key items: • Medicines, NHLS, blood etc emanating from accruals in Health • The centralised procurement and payment of LTSM for section 21 schools (whose budget is under transfers and subsidies) in Education • Communication & lease costs in Social Development • The material under spending in Transfers and Subsidies is attributable to the following departments: • Education (R204.404 million): Payment of LTSM for section 21 schools from Goods and Services as well as outstanding transfers to schools for norms and standards and School Nutrition Programmedue to bank account rejections • Human Settlements (R291.991 million): As previously stated • Payments for Capital Assets under spent by 4.3% in 2012/13, against 16.1 % under expenditure in 2011/12 • This is mainly due to improved infrastructure expenditure • Machinery & equipment spending decreased from 83.8% in 2011/12 to 71% in 2012/13 due to general delays in procurement processes for equipment

  10. CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR

  11. CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d) • Overall the Province spent R9.497 billion or 95.8% of its conditional grants adjusted budget resulting in under spending of R421.712 million. This is an improvement from 2011/12 year where the province spent R7.752 billion or 84.1% of its conditional grants budget, with under spending of R1.088 billion • Comprehensive Agricultural Support Grant (CASP) and Agriculture Disaster Management Grant • The under spending of R22.787 million (11.6%) on CASP and R1.597 million (79.4%) on the Disaster Management Grant is due to lack of detailed planning by the department, credit worthiness and cash flow challenges with emerging contractors which resulted in delays in implementing some projects • An amount of R4.571 million has been recommended for roll over based on verifiable commitments • Ilima/Letsema Projects Grant • The under spending of R5.089 million (11.6%) is due to internal planning challenges that delayed the implementation of the ploughingprogramme • A roll over amount of R1.722 million has been recommended based on verifiable commitments

  12. CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d) • Land Care Programme Grant (cont’d) • The under spending of R1.811 million (10.8%) is due to procurement challenges for the delivery of fencing material thus delaying the implementation of some projects • A roll over of R94 thousand is recommended for roll over based on verifiable commitments • Education Infrastructure Grant • The over expenditure of R21.922 million (2.4%) is due to a misallocation of expenditure between the CG and ES infrastructure projects. Despite the misallocation, the department improved on its overall infrastructure spending through initiatives like Interdepartmental Accounting Model with Public Works as well as close monitoring through the CPMU • National School Nutrition Programme • The under expenditure of R10.324 million (1.1%) is due to late submission of invoices by service providers as well as rejections of transfers to schools due to changes in banking details • R521 thousand has been recommended for roll over

  13. CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d) • HIV and AIDS (Life Skills Education) • The under spending is R989 thousand (2.6%) is due to late submission of invoices by services providers • R500 thousand has been recommended for roll over based on verifiable commitments • Technical Secondary Schools Recapitalisation Grant • The under spending is R14.513 million (43.9%) is due to delays in the procurement processes • A roll over of R2.947 million is recommended against the under expenditure • Comprehensive HIV and AIDS grant • The over expenditure of R41.178 million (3.9%) is due to the misallocation of the Care givers to the conditional grant as well as misallocation of NHLS payments from the NTSG grant. Journals to correct this have been subsequently effected

  14. CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d) • Health Professions Training and Development Grant (HPTD) • The under expenditure of R10.087 million (5.5%) is due to late submission of invoices by service providers. Furthermore, R928 thousand was withheld by National owing to under spending on the grant during the year • A roll over of R1.557 million has been recommended • Hospital Revitalisation Grant (HRG) • The under spending of R45.629 million (9.9%) is as a result of liquidation of a contractor at Frontier and St Elizabeth hospital sites as well as labour unrest at the Cecilia Makiwane site • National Health Insurance Grant (NHIG) • The under expenditure of R3.407 million (29.6%) is due to late submission of invoices for the Facility Improvement and Integrated School Health projects. • R4 thousand has been recommended for roll over

  15. National Tertiary Services Grant (NTSG) • The under spending is R34.270 million (4.9%) is due to delayed procurement processes for the acquisition of 3 MRI scanners and outstanding invoices for work on the upgrading of hospital complexes • An amount of R34.270 million has been recommended for roll over • Nursing Colleges and Schools Grant • The under spending is R2.266 million (15.5%) due to delays in the submission of progress certificates for upgrading of nursing college facilities • The full amount has been recommended for roll over based on verifiable commitments • Further Education and Training Colleges Grant • The under expenditure of R13.693 million (2%) is due to delays in the implementation of KSD’ Cicira College project due to legal disputes with the contractor CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d)

  16. Human Settlements Development Grant (HSDG) and Housing Disaster Relief • The under spending of R200.990 million (9.1%) on the HSDG and R89.964 million (96.9%) on the Housing Disaster Relief is due to poor contractor performance, late start in some projects, adverse weather conditions and beneficiary administration challenges • Devolution of Property Rate Funds Grant • The under expenditure of R5.451 million (2.7%) is due to delays in reconciliation of invoices between the municipalities and the department of Roads and Public Works • Community Library Services Grant • The under spending of R21.978 million (25.1%) is due to challenges with the appointment of library assistants, delays in the procurement processes for the modular libraries and late implementation of infrastructure projects • An amount of R11.840 million has been recommended for roll over CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d)

  17. Mass Sport and Recreation Participation Programme Grant • The under expenditure of R8.546 million (12.6%) is due to the late introduction of a centralised tender for sport equipment and attire by the national department as well outstanding invoices for the national & provincial school athletics championships • An amount of R7.536 million has been recommended for roll over • Provincial Roads Maintenance Grant • The over expenditure of R10.110 million (0.7%) is due to a misallocation of expenditure between the CG and ES infrastructure that will be corrected • EPWP Integrated Grant for Provinces • The over expenditure on the grant is R2.785 million (4.6%) • Social Sector EPWP Incentive Grant for Provinces • The under spending of R2.824 million (12.8%) is mainly in Health due to delays in the replacement Health Community workers CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d)

  18. INFRASTRUCTURE PERFORMANCE – 2012/13 YEAR • The Province spent R6.9 billion or 94% of its total adjusted infrastructure budget of R7.368 billion (equitable share and conditional grants) as at 31 March 2013. Infrastructure spending was at 82% of the adjusted budget at 31 March 2012. • Total infrastructure spending excluding Human Settlements amounts to R4.898 billion or 97% from a total budget of R5.075 billion

  19. INFRASTRUCTURE PERFORMANCE – 2012/13 YEAR (cont’d) • The total under-spending amounts to R468.429 million, however, in respect of Human Settlements the last tranche amounting to R284.813 million was withheld by the National Department for Human Settlements. • In the Eastern Cape Province, the Departments of Roads and Public Works, Human Settlements, Health and Education account for a 96% share of the Infrastructure budget • Smaller departments are generally underperforming in infrastructure spending and Treasury engaged these departments to determine the blockages. The following reasons were cited: • Poor quality of projects delivered • Contractors commencing work without orders being issued • The relevant engagements with respective HoDs and Centralised Project Management Unit (CPMU) have already commenced to resolve the bottlenecks • The Department of Transport has since transferred the project (Mthatha airport project) to the National Department hence there is no progress in the expenditure • In respect of infrastructure related conditional grants, the Province spent 94% of the total adjusted infrastructure budget by the end of March 2013

  20. INFRASTRUCTURE PERFORMANCE – 2012/13 YEAR (cont’d) • Most of the infrastructure gains in Education can be attributable to the improved implementation of the Interdepartmental Accounting Model (IDA) • This is evidenced by 97.88% expenditure against budget • In terms of the model, DRPW pays the suppliers, claims from DoE and thereafter journalizes the expenditure against the credit facility • Robust engagement with project managers responsible for Conditional grants • The establishment of a Cabinet Budget Committee for infrastructure to unlock bottlenecks in the infrastructure value chain

  21. INFRASTRUCTURE PERFORMANCE – 2012/13 YEAR (cont’d) • Infrastructure delivery focus areas going into 2013/14 include; • The capacitation of DRPW and CPMU will continue to be strengthened in order to support the role of DRPW as the formal implementing agent of the Province • The Province has prioritized the improvement of the Provincial Roads network including the access roads to rural schools and clinics. This will be funded through the Provincial fiscus. The Flagship projects will be funded from the local reserves and departments have been requested to submit their costed plans • In order to enhance infrastructure delivery in the Province, focus will be on the promotion of integrated plans, improved coordination to avoid duplication in the 3 spheres of government to ensure optimal utilization of limited resources • Departments will be supported to commence with the 2015/16 financial year plans by June 2013 so that the Province is allowed access to funding incentives for the 2015/16 financial year •  In order to improve value for money in respect of the infrastructure delivered, the infrastructure unit will be conducting site visits. Furthermore there is a focus on evidence based reporting; all infrastructure payments must be supported by payment certificates which are accompanied by photos which show the progress on site including the project management system

  22. Treasury is focusing on institutionalising the lessons learnt particularly on the improved infrastructure spending. These include: • Rolling out of the Interdepartmental Accounting Model to other infrastructure departments • Strengthening of the CPMU/DRPW to facilitate planning and implementation by provincial infrastructure departments • Appointment of infrastructure specialists • Implementation of IDMS • With the improved spending in 2012/13, Treasury will also strengthen its monitoring controls to ensure that the increased spending is commensurate with value created on the ground/impact assessment. These controls include: • Continuation of service delivery site visits • Detailed verification of March expenditure spike • Treasury will continue to institutionalise the Accountability Model wherein letters will be issued to the Executive Authorities to give account on poor performance by their departments CONCLUSION

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