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Presentation to Select Committee on Finance (SCOF) on Provincial Budget and Expenditure Outcomes for the Period Ended 31 December 2013. Mpumalanga Province -. Background.

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Presentation to Select Committee on Finance (SCOF) on Provincial Budget and Expenditure Outcomes for the Period Ended31 December 2013

Mpumalanga Province -


Background
Background

The Province held its EXCO Lekgotla on the 14th to 16th October 2013 in which reports on Departments’ performance and compliance areas were considered.

The Provincial Treasury had to find the relevant section in the Public Finance Management Act (PFMA).

The PFMA recognises the presence of an Executing Authority as well as Accounting Officer and hence the invoking of the provisions of section 18(2)(g) of the PFMA.

Section 18(2)(g) of the PFMA makes provision for Provincial Treasuries to intervene by taking appropriate steps to address a serious or persistent material breach of the said Act by a provincial department or a provincial public entity

The Provincial Treasury is also intervening in the Department of Health

The intervention in the Department of Health is also in line with section (18) (2) (g) of the PFMA and is more of providing assistance in in specific areas such as Compensation of employees and look at the causes of accruals and assist the department not to collapse. We needed to come up with solutions on its projected overspending on compensation of employees and any other areas that may be causing the department not to be stable.


OUR REPORT IS PRESENTED IN THE FORM OF STEPS OF COMPARISON - GRAPHS

What is critical and in line with the Budget Reform agenda, is that provincial departments demonstrate explicitly how they intend to link this information with the targets set in their 2013/14 Annual Performance Plans.

Quarterly targets on performance have been set specifically in the provincial Annual Performance Plans alongside with financial information during the new financial year.

The Provincial Treasury engages with departments with regards to the cashflow projections on a monthly basis and comparison is made between the APP, projections, actual expenditure as well as cashflow projections.

What is key is our ability a departments to cost activities accurately and plan the timing of the activities accordingly as to limit any negative impact on available cashflows.

Currently we are left with 4 weeks before the systems close for the 2013/14 financial year, hence our focus will mostly be on amounts spent vis a vis cash that remains.


BEFORE MTEC GRAPHS

AFTER MTEC


Benchmark = 75% GRAPHS

Projected over-expenditure in Education – storm damages and LTSM

Health – projects to overspend on goods and services – huge over-expenditure that was reported after adjustment had been concluded – PT not in a position to assist given the magnitude of the overspending

Office of the Premier – emergency situation which by its nature had to be attributable to the Office




Department of Health - GRAPHSCompensation of employees

When the work commenced a task team was established which had to deal with overspending on compensation of employees which was reported at R252 million at 30 September 2013 –certain items of expenditures had to be stopped in order to stay within the budgets in 2013/14 financial year and these are:

Leave discounting

Variable overtime although there is a 3 months backlog relating to officials who worked and were not paid overtime.

Commuted overtime payable to doctors could not be stopped as it forms part of the conditions of employment.

Performance bonuses - The department has been advised that no bonuses should be paid until the financial situation improves.

Correction of OSD underpayments- The Department had a challenge in implementing the Nursing OSD during 2007 which resulted in a number of under and over payments. The Department has been negotiating the correction of the under and overpayments with the Unions and an agreement was reached that the Department will correct the notches of the officials who were under paid as from 1 November 2013.

Procurement of subsidised vehicles – This item of expenditure has a portion that is funded from compensation of employees. The Department has 15 orders issued for new subsidized vehicles but arrangements were made with the suppliers to supply these vehicles in April 2014 to reduce pressure on the current compensation bill.

In order to stay within budgets certain expenditure had to be deferred to 2014/15 financial year. This is not the best solution as this is merely shifting the problem to a later date as all these expenditures will still have to be paid in 2014/15 financial year.

The Province has started funding the department very close to the norm of 27 percent. The Province will be compelled to provide more funds to Health in order to normalise the budget of 2014/15

Currently the projected overspending has reduced from R252 million to R3.1 million.

This is dependent on the implementation of issues indicated above


Health Personnel numbers per salary level GRAPHS

It was found that 7024 personnel were out of adjustment with a huge financial implication

Posts with a lesser budget are utilised to appoint officials who earn much higher salaries

This puts a pressure on the compensation of employees budget


HEALTH GOODS AND SERVICES GRAPHS

In Health we are still not winning as other problems that are arising make the situation worse off like the R 328 m deficit on the balanced budget that needs an urgent action.

The Department reported on 4 January 2014 that the department will overspend the goods and services budget by R343 million and that a bulk of that amount is in the goods and services budget in the medicine account

The request is made after adjustment were already concluded. There is unfortunately no available funds in the Provincial Revenue Fund that can fund the new pressure. The pressure is on the medicine account. Health has not service the account as the department is constantly running out of cash

The Provincial Treasury is monitoring the risk that funds must not be depleted to a point of not being able to pay March 2014 salaries in the Department of Health

The bank statements drawn on 15 February 2014 reflects an overdraft of R80 million. The Department was cautioned not to take payments to the bank when it is aware that cash is not adequate.

The medicine account remains a major problem


Benchmark =75% GRAPHS

Report on underspending on transfers and subsidies at 33%.


Benchmark = 83% GRAPHS

Report on underspending on transfers and subsidies at 44.6%.


DARDLA GRAPHSCompensation of employees

Overspending on compensation of employees has been a challenge over a number of years

The compensation of employees budget was projecting to be overspent by R12 million at 30 September 2013.

The Department has employed 92 officials that were not budgeted for. In order to correct the projected over-expenditure, the following cost curtailment measures had to be put in place :

Moratorium on filling of posts

Stopping of all acting allowances

Overtime to be paid in extreme cases

Leave discounting and all employees encouraged to take leave

Due to implementation of the measures indicated above , the Department is no longer projecting to overspend on compensation of employees budget.

The Department is currently projecting underspending at 31 December 2013 of approximately R8.8 million


December 2013 GRAPHS

January 2014


Department has been struggling with spending its grant funding

The spending has not been stable as department has revised its business plan on 6 January 2014 after adjustment budgets had been tabled


RECOMMENDATION funding

The Committee is request to note the report


THANK YOU funding


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