Debbie Dalton Researcher: PSAM

1. Monitoring Public Expenditure, Service Delivery and Accountability in the Eastern Cape, South Africa Debbie Dalton Researcher: PSAM International Budget Project and Tax Standards Formation Foundation: Caucasus and Central Asia Regional Budget Monitoring Meeting 20 – 21 August 2005 Almaty, Kazakhstan

2. What is the PSAM? • Independent University-based monitoring and research institute dedicated to strengthening democracy and accountability in South Africa • Access, analyse and disseminate information on the management of public resources, delivery of public services and handling of cases of public sector misconduct and corruption – at provincial level in Eastern Cape • Advocacy and dissemination of findings via the media in a user-friendly format

3. What is Accountability? • Social accountability is an obligationbyelected political leaders and government officials to answer for the performance of their duties and responsibilities. Not a personal favour • Requires that persons explain/justify decisions/actions against set criteria – and take steps to correct errors/faults and prevent their recurrence

4. Rights-Based Approach to Governance • Citizens are not passive consumers of services but active rights-holders • Democratic states are constitutionally committed to ensure the progressive realization of socio-economic rights (such as health care, education, housing etc.) via the delivery of public services within available resources • Public institutions are ‘duty-bound’ to meet public interest and to open themselves to scrutiny • Corruption and misallocation of resources are a violation of citizens’ rights* * See Ackerman, JM, 2005, Human Rights and Social Accountability.

5. Accountable Governance and Civic Empowerment • Accountable government – empowers citizens to participate in policy formulation, budgeting, expenditure tracking and to exercise oversight of government performance and service delivery • Civic empowerment – citizens have the skills and ability to hold government to account by getting officials to justify and explain their performance and by sanctioning them accordingly • Much more than simple consultation/ participation

6. The Context of the Eastern Cape South Africa Population: 46.9 million Size: 1 219 912 sq km Unemployment rate: 26.5% Eastern Cape 72% of the population lives in poverty • South Africa: constitutional mandate to progressively realise socio-economic rights within available resources, and one of the best legislative frameworks to give effect to this mandate

7. Excellent Legislative Framework – Weak Demand for Implementation • Tendency to rely on ex-struggle loyalties and to treat accountability as personal favour • Lack of separation between oversight and implementation arms of government • Failure to use legislative provisions and participate in governance processes • Tendency to concentrate on macro-economic budgeting & expenditure and neglect site of service delivery

10. Strategic Planning Legislative Requirements for Strategic Plans: • National/Provincial Drawn up by Minister/official responsible for department, and must: • Include measurable objectives and outcomes for all programmes. • Describe core activities. • Describe goals and targets. • Determine posts necessary to achieve goals. • Include details of Service Delivery Improvement Plan. • Given this reporting requirement, you can ask the following questions: • Are programme activities identified on the basis of situational/needs analysis? • Is the cost calculation of activities reasonable? • Do activities, targets & intended outcomes make sense? • Are there clear lines of accountability?

11. Potential Interventions in the Budgeting and Planning Process • Obtain copy of budget - Review Budget Allocations and strategic priorities • Obtain copies of strategic plan & business plans – conduct Strategic Plan Evaluation • Obtain & evaluate outsourcing contracts and/or service level agreements • Obtain & evaluate infrastructure development & maintenance plans • Make submissions on Department’s strategic plans to Finance oversight committee in provincial Parliament and to provincial Treasury Medium Term Expenditure Committee (prior to adoption of budgets)

13. PSAM Expenditure Tracking • Track spending by comparing quarterly financial reports (published by Treasury) with budget allocations (contained in provincial budget & department strategic plans) • Compare spending undertakings in budget/strategic plan documents with actual spending as per audited financial statements • Track compliance with legislated financial reporting requirements

14. Legislative Reporting Requirements: expenditure • Monthly Financial Reports must include: • Actual revenue and expenditure • Projections of revenue and expenditure. • Information on the spending on conditional grants. • Information on funds transferred outside of the department. • Explanation for under spending/over spending and proposed corrective actions. • Quarterly Financial Reports must include: • Monthly information • Actual revenue • An account of current and capital expenditure. • Annual Reports must include: • Audited financial statements. • Auditor-General’s report on financial statements. • Audit Committee report.

15. Example: HIV/Aids • Mismatch between activities and targets • No needs analysis, demographic data or identification of key organisational challenges • Target: train768 lay counselors • Budget for only 317 lay counselors

16. Example: HIV/Aids • Unreasonable costs: • 600 nurses trained at R400 per day each = R2,400,000 • 1050 nurses trained (to do the same thing) at R40 per day each = R84,000 Findings: HIV/AIDS Planning between 2000 - 2004 • Failed to produce business plans for almost 40% of HIV/AIDS budget between 2000-2004. • Those plans that were produced between 2000 – 2004 did not contain accurate & up to date information on service delivery environment. • No evidence of needs analysis. • No evidence of consultation with managers, trade unions or stake holders. • Failed to produce accurate, costed and time-bound infrastructure & maintenance / capital expenditure plans in this period. Performance: HIV/AIDS Planning between 2000 - 2004 • The Eastern Cape Department of Health failed to account for 73% of its (provincial) HIV/AIDS budget between 2000 – 2003 (R90.2 m) • 26% of budget was unspent (R33 m) • Total amount unspent/inadequately accounted for: 99%

18. Performance Reporting Requirements • Quarterly Performance Reports must include: • Performance against measurable objectives • Quarterly financial information along with explanations of variances. • Mid-Year Performance Reports must include • An account of performance against service delivery targets and Key Performance Indicators. • Progress in addressing problems identified in past years annual report • Annual Reports • An account of departmental performance – achievement of desired outcomes, delivery of outputs and the use of resources. • Account of human resource management issues.

19. PSAM Performance Monitoring Objective – to determine whether public expenditure produces intended outcomes & to promote effective service delivery by producing: • Scorecard evaluations of department’s performance • Detailed Reports – eg Health, Housing, Welfare payments • Monitoring Briefs – short overviews of spending, financial controls, audit findings, oversight recommendations etc. • Service Delivery Monitoring Briefs - contain on-site inspections of quality of service delivery, interviews, digital photos

20. Service Delivery Monitoring Brief • Educational Infrastructure Crisis in the Eastern Cape: 2004/05 • To eradicate the total infrastructure backlog by 2010 and mud/temporary structure classrooms by 2008, the Department needed to budget R574 million per annum. • MTEF Budget: • R241 million (2004/05) • R290 million (2005/06) • R322 million (2006/07) R574 million = US$93 million

23. PSAM Case Monitoring Findings • Major service delivery departments in the Eastern Cape did not have disciplinary databases • 691 cases of misconduct in the province, only 62 (8%) deemed resolved • 338 of these cases involved corruption, only 28 (8%) deemed resolved • 170 of these cases involved maladministration, only 3 (1.7%) deemed resolved • Total amount involved = R6.9 billion (US$1.12 billion) Amount recovered / subsequently accounted for = R325 million (5%) = US$ 52.85 million

25. PSAM Budget Oversight • Obtain Committee minutes and track parliamentary oversight of expenditure and implementation by departments • Track Auditor-General’s financial & performance audit findings and monitor audit opinions • Monitor implementation of Auditor-General and oversight committee recommendations & resolutions • Workshops findings with oversight committees

26. Eastern Cape Audit Opinions v Budget Allocations 1996 - 2004

27. Audits & Oversight of EC Budget • Auditor-General issued ‘disclaimer’ audit opinion for 80% of budget between 1996 – 2004 • ‘Disclaimer’ issued when lack of internal financial control measures, a lack of financial records and the failure to properly record all financial transactions. Not mean that money is lost/stolen. • Means the province could not adequately account for its use of R125 billion (US$ 20 billion) out of R157 billion (US$25.5 billion) and effectiveness of service delivery. • In 2002 the Auditor-General pointed out that not a single Public Accounts Committee resolution had been implemented between 1995 - 2002

28. Is the PSAM effective?

29. Impact Assessment • Improved financial reporting in EC – decrease in audit disclaimers by over 50% since 2002. • Sustained advocacy led to creation of disciplinary databases and the implementation of register of members interests • Institution of Joint Anti- Corruption Task Team to prosecute corruption cases and Judicial Commission of Inquiry into financial mismanagement • Health crisis report resulted in qualified audit opinion for National Department of Health for 2003/04