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Select Committee on Finance Provincial Budgets and Expenditure as at 31 December 2013. National Treasury. Adjustments to main budgets: 2013/14. 2. 2. Provincial aggregated budgets and expenditure as at 31 December 2013. 3. Cash position of provinces (Bank Balances).
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Select Committee on Finance Provincial Budgets and Expenditureas at 31 December 2013 National Treasury
Provincial aggregated budgets and expenditure as at 31 December 2013 3
Cash position of provinces (Bank Balances) • Provinces in general are in a healthy in-year fiscal position, with none currently utilising overdraft facilities at the Exchequer level. • Mpumalanga continues to have higher balances at the PMG level than at the Exchequer (PRF) level • Exchequer balances in the Free State are extremely low • Development of cash management guidelines is proceeding.
Components of Provincial Expenditure • Within G&S, the above items usually represent critical service delivery items that need to be targetted for efficiencies rather than cuts • However, other lower ticket items (e.g. catering, travel and subsistence) can be cut in terms of targeted cost containment
Are provinces controlling Personnel? • Recruitment in social services is typically seasonal (Jan – Dec) and therefore it is usually more useful to compare calender years rather than financial years • In the 3 years from December 2009 to December 2012, provincial staff numbers grew from 875 731 to 931 471 • However, the 2013 calendar year has seen a significant reversal in staffing trends, with December 2013 numbers standing at 919 741 • Therefore, provinces such EC, KZN and LIM should be commended for at least controlling the overall staffing numbers, notwithstanding internal challenges within certain departments (particularly Education)
Proportion of Budgets spent on COE and on Administration Proportion of budget spent on COE Proportion of budget spent on Administration • Budget and spending composition has seen COE grow from 54% in 2009/10 to an estimated 60.9% in 2014/15 • In most cases, provinces who have higher spending on COE also tend to have higher spending on admin. • EC, FS and LIM spend the highest proportions of their budgets on Administration • WC, GT and MP spend the least on Administration in proportion
G&S Non-Core Items Quarterly spending growth • The two graphs compare the pace of spending growth in non-core items in the first 3 quarters of this year • The two biggest components of the “non-core” selected items are Catering and T&S are growing slower in Q3 than they were in Q1 and Q2. • This is, however, an aggregate observation and individual provinces must observe their own performance
Provincial expenditure and projections by month for 2013/14 10
NT assessment of likely provincial outcomes • Assessment by the National Treasury (including historical trends) indicates that provincial projections are unreliable. • Spending trends are not dissimilar to those of 2012/13 (Q3). At the end of that financial year, provinces under-spent by R7.5bn (1.9%) • Specific interventions that have been highlighted by provinces include: • Implementation of cost-containment measures in line with MTBPS directive is being adopted by all Provincial Treasuries; • Headcount verifications and biometric controls are being rolled out in various provinces, in order to fix the COE spending and budgeting; • SCM reforms are being consolidated, under the oversight of the Chief Procurement Office. • Strategic procurement approaches will likely have a significant influence on the future spending on Goods and Services
KwaZulu-Natal issues • Total provincial spending was on track the third quarter at 75.8%, with projected pressures amounting to R563.5m. • Management of Education personnel must improve: COE pressures amount to R427m 435 mopre people were hired between October and December 2013. The Headcount exercise instituted by PT is currently in the last phase and will help in understanding the extent of the problem in the department. • Health is projecting over-expenditure because of Medicines (mainly ARVs). There is also a high spending on litigation costs (medico-legal claims) which is currently at R80.6m. • Economic Dev. also contributes to the spending pressures by R113m mainly from the hosting of events. • Arts and Culture also projects to over-spend due to hosting of various unfunded events such as Africa Day Celebration, KZN youth wind band (trip to China), Battle of Isandlwana re-enactment etc. The Department was instructed by the PT to absorb these pressures within its budget through cost-cutting. • Rationalisationof entities which are doing similar work in the province such as Growth Fund, Small Business Development Agency and IthalaDev. Finance Corporation (all supporting the businesses in the province) is important. Currently all the entities in the province still rely on government funding and they are unable to sustain themselves. KZN transfers about R1.2 billion per year to its entities, and this is the highest in the country. • Notwithstanding the fiscal risks raised above, overall provincial financial management is on track and the projected over-expenditure is likely to reduce drastically at year-end due to the cost-cutting measures implemented.
Mpumalanga spending as at 31 December 2013 (Section 32) 14 14
Mpumalanga issues • The province has spent R25 381 million or 75.1 per cent of adjusted budget of R34 185 million and projecting a pressure of R764.9 million mainly in Health, Office of the Premier and Education. • Projected over expenditure on core items like LTSM and Medicine and medical supplies is a concern. While departments will be able to absorb the pressures for now, poor planning and budgeting for this items need to be addressed while also dealing with inefficiencies. • The province is struggling to fill senior and specialised positions hence an under spending on compensation of employee. • While Education has spent all funding for infrastructure grant, Department of Agriculture, Rural Development have only spent 3 per cent of funds allocated for Illima/Letsema conditional grant. Poor spending might lead to funds being surrendered back to national, and thus proper planning is essential. • More needs to be done by the province to ensure alignment between spending and performance (especially in Health – HIV and infrastructure delivery). In addition, there is evidence of waste and inefficiency in certain areas.
Western Cape Issues • Most of the current spending pressures had been adequately addressed through the 2013 Adjusted Budget. Currently the province is not reflecting any material overspending risks. • A well developed personnel management strategy enables the province to accurately budget for Compensation of Employees. The provincial aggregate COE grows at 8.3 per cent last year and at 6.7 per cent over the MTEF while the national averages are 5.7 per cent in the first year and 6.0 per cent over the MTEF. The personnel management system coupled with maintaining control over the compensation budget address the major challenge of presenting a credible provincial budget is already won. • In-migration pressures will require a significant focus on Education funding in respect of teacher numbers, facilities and LTSM • Goods & Services budget in Health compromise transparency and accurate projections aligned to planning documents. It also compromises analysis that could be executed in respect of goods and services. • A Corporate Governance Review and Outlook (CGRO) was introduced to improve overall governance and to achieve improved audit outcomes. In 2012/13 5 departments received clean reports and 9 unqualified with matters – there were no qualifications • Social evils like gansterism and drug abuse are major challenges for a safe environment; this impacts on the socio-economic landscape of the province. The concern is whether current allocations are sufficient to address this challenge. The province has indicated that management and co-ordination issues will be addressed first before finalising the social development funding issues. • The province is well on its way to realize efficiency savings by minimizing spending on non-core spending items.
Observations • School Nutrition Programme - The high unit costs in Gauteng and KZN are surprising and should be assessed, given the expectation of higher economies of scale and the benefits of higher densities • Scholar transport – Mpumalanga Education needs to take direct responsibility for reporting, regardless of where the function lies. • HIV/AIDS – While provinces are in general not achieving the targets with regard to the total clients remaining on ART, Mpumalanga’s planning and target-setting appears to lack credibility. In addition, Mpumalanga and Limpopo have the worst reported record of placing TB-HIV co-patients on ART. • New housing units completed – Free State did not plan for housing units in the first quarter and underachieved against planned targets in both the second and third quarters. A majority of provinces are not reaching their targets.
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