MPUMALANGA PROVINCIAL TREASURY

1. PRESENTATION TO THE SELECT COMMITTEE ON FINANCEON CONDITIONAL GRANT SPENDING FOR THE PERIOD ENDED 30 JUNE 2008 MPUMALANGA PROVINCIAL TREASURY “Always Stretching Our Arm, to Accelerate Service Delivery”

2. Conditional Grant Spending as at 30 June 2008

3. Conditional Grant Spending as at 31 July 2008

4. AGRICULTURE AND LAND ADMINISTRATION • The department of Agriculture and Land Administration continues to be the lowest spender in the province. • No expenditure was recorded on the Land Care grant during the first three months and spending on CASP only at 1 percent • Land care has spent 1 % in July 2008 and CASP only 7% The low expenditure is due to the following: • The department has terminated the services of the implementing agent Mpumalanga Agricultural Development Corporation (MADC) Infrastructure projects have come to a stand still. A forensic investigation has already commenced • The department is having challenges with procurement processes and a lack of Supply Chain Management systems. • The following set of recommendations were presented at the Executive Council Lekgotla that was held on 20-22 August 2008. • The department must speed up the appointment of an alternative implementation agent so that service delivery is not compromised by the termination of the MADC services.

5. AGRICULTURE AND LAND ADMINISTRATION • Reconciliations of funds already transferred and unspent must be surrendered to the Provincial Revenue Fund. Already R13 million will be surrendered. • The department must revisit the projections as the projected break-even in spending is not realistic. • With respect to Infrastructure grant, the department must indicate to the Provincial Treasury how much can be redirected to other departments that have capacity to spend. • A detailed list of projects on which funds have been spent by MADC should form part of the report.

7. Utilization of the Infrastructure Grant for Department of Education

8. 2008/2009 PROJECTS ON PLANNING STAGE (21) • Spending at end of first quarter -30% • Spending at 31 July 2008-42% • Expenditure of 30% has exceeded the benchmark of 25% for the first quarter of the financial year • The analysis of the expenditure reflects that the funds have been spent on old project that have been in implementation for the past three years. • This is of concern to the Provincial Treasury and an audit of the payments on old projects has already commenced • 6 Projects with no scope change, designs and tender documents to be complete 15th August 2008 • 15 Projects with scope change – “a meeting is to be scheduled with between DPW, DoE & Consultants and way forward will emanate on findings and resolutions of the meeting” • Projects staying long at retention stage

9. Utilization of the Infrastructure Grant for Health

10. Infrastructure Grant for Health • Infrastructure Programme Management Plan (IPMP) received in December 2007 without scope definition. • Revised IPMP received in April 2008 and scope definition finalized in June 2008. • Serious failures at planning stages • Delays in awarding of tenders • Slow spending • Which then results in withholding of grant by National Treasury • Maintenance in hospitals need urgent attention • Barberton hospital –operation postponed due to theater equipment not functioning

11. Utilization of the Forensic Pathology Grant

12. Utilization of the Forensic Pathology Grant Evander – (M2 mortuary 0-249 postmortems-24 shelves) • The contract was awarded in June 2008. Site was handed over to the contractor on 26 June 2008. The department of Health and Social Services has waited since 2006 for the awarding of this contract by the implementing agent Public Works. Ermelo – (M3 mortuary 250-499 postmoterms-36 shelves) • The contract was awarded on 21 September 2007. The estimated completion date is October 2008. Middleburg (M3 mortuary 250-499 postmoterms-36 shelves ) • The contact was awarded during August 2008. The appointment letters were only signed by Public Works on Tuesday 26 August 2008. The verification of sites has already commenced. The estimated completion period is February 2009.

13. Utilization of the Hospital Revitalization grant

14. Hospital Revitalization grant • Infrastructure Programme Management Plan (IPMP) received in December 2007 without scope definition. • Revised IPMP received in April 2008 and scope definition finalized in June 2008. • Wrong appointments of contactors and consultants by Public Works (appointment of contactors who have failed in previous projects to manage even larger projects –Rob Ferreira ) • Lack of proper monitoring of consultants by the Department of Public Works • Delays by Public Works in dealing with issues of poor performance by contractors and consultants • Failure by Health to monitor the SLA between Health and Public Works • Absence of a dedicated manager for revitalisation projects or a dedicated infrastructure unit • Poor planning by the user Department • Budget for 2008/09 not all allocated

15. Infrastructure Challenges in the department of Education and Health Delays in concluding the Key Programme Documents The Operational Support Teams have expressed concerns over the delays in concluding the programme management and implementation plans for the 2007/08 and 2008/09 financial years. The Provincial Treasury has initiated discussions on these issues with affected departments and has already engaged the department of Agriculture and Land Administration, Department of Education, Department of Public Works and the department of Health and Social Services.

16. Infrastructure Challenges in the department of Education and Health • Lack of forward planning and poor alignment of planning and budgeting cycle for infrastructure projects • Budgets for large multi-year projects are committed to one financial year instead of apportioning the budget in accordance with planned cashflow requirements for the project across the MTEF • Late submission of infrastructure plans to the implementing agents. • Bidding processes too long as the projects are not staggered and thus the evaluation and bid committees are overloaded with a large number of bids. • The risk of placing too much reliance on the OSTs, needs to be carefully managed by the Heads of Departments. The issue of limited capacity of the departments is contributing to this risk through prolonged recruitment processes.

17. Infrastructure Challenges in the department of Education and Health • Timeous and quality reporting on service delivery outcomes • Unavailability of land • Late or poor planning and ineffective communication between the Department of Public Works and Client departments • Shortage of internal project managers and project management units • High rate of variation orders • Lack of accountability both internally and externally with regards to project completion and quality reporting

18. Provincial TreasuryMonitoring Mechanisms • Monthly reports to the Budget and Finance Committee; • Submission of quarterly reports to the Portfolio Committee on Office of Premier, Finance and Safety and Security; • Frequent interaction by Provincial Treasury with departments on spending performance and general financial management issues; • Provincial Infrastructure Committee (PIC) meetings between HOD for Finance and the seven HODs responsible for Infrastructure delivery departments • Provincial Programme Steering Committee (PPSC) meetings between MEC’s for Finance and the seven MEC’s responsible for Infrastructure delivery departments • PPSC and PIC meetings are viewed as crucial in the provincial infrastructure delivery as they allow a critical interaction on the growth and development of the province through infrastructure delivery. • Site visits are conducted to verify spending against physical progress (this needs to be enhanced as there are limited number of officials who go out on site)

19. Provincial Treasury Intervention • Continuous engagements with departments in a co-operative manner to jointly seek solutions; • Seven identified departments are fully participating in the initiative. • The impact of the OST support in ensuring that the infrastructure plans are developed and submitted is evident in that all the infrastructure plans for 2008/09 financial year have been prepared and submitted to the National Treasury in line with the grant framework timeously. • The department of Public Works, Education and Health is supported at a strategic level by the Provincial Technical Assistants teams who have been seconded by the National Treasury. • The intervention was introduced during 2006/07 financial year whereby 1 % was used to provide capacity to all seven infrastructure delivery departments • When the DORA increased the provision for capacity building to 4% , this increased the funds that are available to fund the capacity that is provided to departments. • Intervention done without capacitation plans in place • Not yet yielded the desired results (over-reliance, delays in filling of vacant positions)

20. Recommendation • It is recommended that the Select Committee on Finance notes the report on Conditional Grants and Capital Spending for the Mpumalanga Province for the period ended 30 June 2008.

21. Thank you!