MPUMALANGA PROVINCIAL GOVERMENT

1. MPUMALANGA PROVINCIAL GOVERMENT CONDITIONAL GRANT REPORT FOR THIRD QUARTER ENDING 31 DECEMBER 2005

2. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • FOCUS ON THE FOLLOWING: • DATA TRENDS IN ALLOCATIONS, TRANSFERS AND ACTUAL EXPENDITURE OF CONDITIONAL GRANTS, CAPITAL AND INFRASTRUCTURE EXPENDITURE • ASSESSMENT OF DEPARTMENTS’ CAPACITY TO MONITOR (CONSTRAINTS) AND AN INDICATION OF STATUS OF EXEPENDITURE. • MECHANISMS TO DEAL WITH CHALLENGES & OUTCOMES OFTHESE MECHANISM • RECEIPT OF MONTHLY REPORTS. • CERTIFIED BUSINESS PLANS FOR CONDITIONAL GRANTS • SERVICE LEVEL AGREEMENTS

3. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • ANALYSIS INDICATE THAT: • ACTUAL EXPENDITURE, IN SOME CATEGORIES, IS USUALLY HIGHER THAN THE AMOUNTS TRANSFERRED, BY NATIONAL GOVERNMENT, AS CONDITIONAL GRANTS. • THERE IS AN IMPROVEMENT IN OVERALL PERFORMANCE ON CONDITIONAL GRANTS DURING THIRD QUARTER ENDING 31 DECEMBER 2005 • DEPARTMENTS ARE HAVE STARTED STRENGTHENING THEIR CAPACITIES TO MONITORING. • EXECUTIVE COUNCIL REVIEWS PERFORMANCE ON CONDITIONAL GRANTS AND ISSUE INSTRUCTIONS TO DEPRTMENTS TO IMPLEMENT CORRECTIVE MEASURES. • DEPARTMENTS HAVE INDICATED THAT POOR PERFORMING GRANTS WILL DRASTICALLY PICK UP IN THE FOURTH QUARTER AND THOSE THAT DEMONSTRATE A LIKELIHOOD OF OVERSPENDING WILL BE CONTAINED WITHIN THE ALLOCATED BUDGETS. . • DEPARTMENTS SUBMIT MONTHLY REPORTS ON CONDITIONAL GRANTS AND INFRASTRUCTURE AND NONSUBMISSION RESULTS IN TRANSFERS BEING WITHHELD. • THE TOTAL AMOUNT FOR CONDITIONAL GRANTS IS R5,087 BILLION (INCLUDING ROLLOVERS) AND AN AMOUNT OF R3,328 BILLION HAS BEEN SPENT BY THE 31ST OF DECEMBER 2005. THIS ACCOUNTS FOR 65% OF THE TOTAL AMOUNT OF R5,087 BILLION.

4. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • BUSINESS PLANS: • ALL CERTIFIED BUSINESS PLANS FOR CONDITIONAL GRANTS WERE SUBMITTED TO NATIONAL TREASURY. • IMPLEMENTATION OF THE PROJECTS AS OUTLINED IN THE BUSINESS PLANS REMAINS A CHALLENGE TO THE PROVINCE

5. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • SERVICE LEVEL AGREEMENTS: PUBLIC WORKS DEPARTMENT ASSISTS DEPARTMENTS OF HEALTH AND EDUCATION IN MANAGING THEIR INFRASTRUCTURE PROJECTS. • TWO SERVICE LEVEL AGREEMENTS SIGNED AMONGST DEPARTMENTS, ON MANAGEMENT OF INFRSTRUCTURE PROJECTS: • BETWEEN DEPARTMENTS OF HEALTH AND PUBLIC WORKS. • BETWEEN DEPARTMENTS OF EDUCATION AND PUBLIC WORKS.

6. CONDITINAL GRANT REPORT – THIRD QUARTER ENDING 31 DECCEMBER 2005 • HEALTH CONDITIONAL GRANTS:

7. CONDITIONAL GRANTS REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • HEALTH CONDITIONAL GRANTS (CONTINUED) • Only two categories of the conditional grants spent more than 75% of their allocations within the 9 months of the financial year, i.e. Health Professions Training & Development and National Tertiary Services. • Forensic Pathology Services has spent 3% of the available amount. This so because the allocation was only done during the adjustment budget, and the expenditure will without any doubt pick up the fourth quarter. • Comprehensive HIV/AIDS is in line with National Transfer Schedule. • Hospital Management & Quality Improvement Grant is slightly below target. This resulted from delays in delivery of e-health system. However, all other projects under this category are on target. • Hospital Revitalisation Grant’s under-spending resulted from appointed contractors’ inability to submit guarantees and their failure to commence with projects in time hence failure to meet time lines. • Integrated Nutrition Programme’s spending was affected by delays in crockery delivery to hospitals. • Health Professions Training & Development is higher than what was received from national government. Spending trends are monitored to ensure that total spending is within allocated budget. • National Tertiary Services Grant is also in the similar position as Health Professions Training & Development. • Provincial Infrastructure Grant’s expenditure is at acceptable target of 75%. The Department expects to have exhausted the allocated funds (reached a 100% ) by the end of the 2005/2006 financial year. • The reason for the low expenditure of Forensic Pathology Services is that the funds were allocated at halfway mark of the third quarter (during the Adjustment Appropriation budget). Processes to appoint specialised and support staff, and to acquire machinery and equipment are in progress.

8. CONDITIONAL GRANT REPOERT – THIRD QUARTER ENDING 31 DECEMBER 2005 • SOCIAL SERVICES CONDITIONAL GRANT:

9. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • SOCIAL SERVICES CONDITIONAL GRANT (CONTINUED): • The under expenditure on Social Assistance Administration grant results from delays in appointment of staff and that effect has a direct impact on expenditure for compensation of employees and expenditure on goods and services. • Expenditure on Social Assistance Transfer grant is slightly below target. Strict monitoring and adherence to business plan will hopefully assist in detecting what the reasons may be for this trend.

10. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • EDUCATION CONDITIONAL GRANTS: • There had been challenges for the Department of Education to comply with conditions of the infrastructure grant that lasted up end of the third quarter, resulting in National Treasury withholding funds. These funds will be transferred during the fourth quarter.

11. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • LOCAL GOVERNMENT & HOUSING CONDITIONAL GRANTS: • The slightly below target expenditure for Integrated Housing & Human Settlement Grant resulted from teething problems with contractors. The effects of corrective measures are starting to be apparent. • Human Settlement & Redevelopment expenditure is slightly low. This result from savings, of R796 000, on completed projects. This amount will be redirected to other projects.

12. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • AGRICULTURE & LAND ADMINISTRATION CONDITIONAL GRANT: • Land Care Programme’s expenditure are higher and a stricter monitoring and control will be necessary to ensure that it remains within allocated amounts. • Comprehensive Agricultural Support Programme’s underspending resulted from delays in the implementation of the CASP projects in Nkangala Region. • Funds were only allocated for Agriculture Disaster Management in the halfway mark of the third quarter hence the low percentage spent.

13. CONDITIONAL GRANTS REPORT – THIRD QUARTER ENDING 31 DECEMBER 2005 • ROADS & TRANSPORT CONDITIONAL GRANTS: • The allocated budget has already been exhausted (100%). The 2% overspending resulted from misallocation of expenditure between conditional grants projects and equitable share projects. This misallocation error will be rectified before end January 2006.

14. CONDITIONAL GRANT REPORT – THIRD QUARTER ENDING 2005 • CULTURE, SPORT AND RECREATION CONDITIONAL GRANT: • The slight below target expenditure resulted from stipends for volunteers not paid in time for December 2005, and other activities that slowed down in the same month.

15. CONDITIONAL GRANT REPORT - THIRD QUARTER ENDING 31 DECEMBER 2005 • CAPITAL BUDGET: • Department of Health was allocated R265,398M towards payment of capital assets. R184,196M, representing 69.4%, has already been spent. • Department of Education was allocated R342,078M towards payment for capital assets. R115,517M, representing 33.8%, has already been spent. Department of Public Works is managing all infrastructure projects for both Departments of Education and Health. CONCLUSION: The Select Committee on Finance is hereby requested to note this report on conditional grants and capital expenditure for third quarter ending 31 December 2005.