Joint Budget Committee 30 June 2008 Liesel C. Eksteen

1. 2007/08 Preliminary Expenditure OutcomesAdministrative ServicesDepts: Parliament, DPSA, Presidency, Public Works, SAMDI, PSC, GCIS, Foreign Affairs, National Treasury, StatsSA, Home Affairs Joint Budget Committee 30 June 2008 Liesel C. Eksteen

2. SCOPE • Preliminary expenditure outcome summary per department • General spending trends per major dept • Spending highlights • Last quarter spending trends and explanations • Spending/ Performance issues • Virements • Major underspending/deviations • Major current expenditure virements • Vacancy rates on critical posts

3. Exp outcome - summary per dept

4. Last quarter spending

5. Major underspending/deviations

6. Spending Highlights: Foreign Affairs • Spending data shows an increased capacity to spend • 2006/07: 96.8% spending (R2.945bn) vs 2007/08: 98.8% spending (R4.069bn) with a significant growth in allocation • Major increases in spending: • ARF transfer (double 2006/07’s allocation) • Capital projects (almost 2.5 times 2006/07’s allocation) • Goods and services for higher exchange rates and mission spending • Clear improvement in the planning and implementation of capital projects • 2006/07: 68.5% spending (R218m) with approx. R100m underspending • 2007/08: 95% spending (R733m) with approx. R39m underspending, although R367m of the R733m is for the early works construction • Restructuring of the asset management division to create dedicated project management capacity • Unique challenges • Annual underspending of international transfers (mainly the voluntary portion of the AU membership fees) • Q4 spending influenced by capital project payments and mission accounts being processed

7. Major Spending/ performance issues: Foreign Affairs • Mission Accounts: Still have to anticipate exchange rate fluctuations, spending growing with no. of missions, connectivity 96% complete • Cash flow problems/ overdrawn bank accounts • Unanticipated contingents from government arriving at foreign missions; ill-defined verification process – MOUs drafted in 2008/09 • Huge outstanding claims not paid by government departments • Holding back of Home Affairs revenue • Virements out of compensation (12.5%-15% of main appropriation) supplementing mission spending • African Renaissance Fund • Pressure on the budget for post conflict reconstruction and aid in Africa • Further thinking around international best practice on organising aid and the role of the ARF • ARF Management framework requiring clearer principles and a technical approval process (including capacity)

8. Spending Highlights: Home Affairs • Spending data shows an increased capacity to spend • 2006/07: 90.9% spending (R2.547bn) vs 2007/08: 92.1% spending (R3.242bn) with a significant growth in allocation • Major increases in spending in all categories, mainly: • Transfer to the IEC for election preparation (40% increase on 2006/07’s allocation – R135m) • New transfer to GPW for the new passport machine and the development of a new passport process (R110m) • Turnaround initiatives and the professional team’s fees • Personnel (also takes into consideration occupational class review for immigration) • Progress on turnaround initiatives • Customer service centre up and running, attempt to concentrate on ID documents but queries are wide ranging, need for faster ramp up particularly 2nd line support • Track & Trace system ensuring greater control of security docs • Redesign of current ID processes has organised the application process and reduced turnaround time • Re-thinking of refugee affairs, in 2007/08 on the permit process and the clean-up of reception offices • Majority of under spending on earmarked project funds (Smart Card, passport system) and RAMP

9. Major Spending/ performance issues: Home Affairs • IT projects • Planning gaps: Still a tendency to plan to use Smart Card funds to kick-off other IT projects; new projects often kick started/ before complete business cases are compiled to consider policy impact and full lifecycle costs (and before a dedicated budget allocation has been made) • Contract and project management is poor: Approval of project scope changes with financial implications not being approved via the budget process; little benefit (not deliverables) tracking; cost overruns common • Repair and maintenance programme: implementation extremely slow; year after year rollovers delaying the crucially needed revamp of offices • Issues still to be addressed (Turnaround planning in progress) • Policy (immigration, refugee, civic) review in the current context of SA needs • Implications of the Future model vision and design of DHA still to be fully explored and understood • Broader IT architecture to support the Future model and design needs to be understood as well as the longer term plan to integrate existing systems into this broader architecture • 2010 Planning: need to see innovative planning on how the influx will be managed (little conceptualisation around systems and temporary measures)

10. Spending Highlights: Public Works • Spending data shows a slight increase in Rand spending although a lower % of available funds spent • 2006/07: 97.1% spending (R3.026bn) vs 2007/08: 90.5% spending (R3.404bn) • Major increases have been on the transfer of funds mainly for rates, personnel and capital • The main area of underspending (R353m) is the Provision of land and accommodation, spending was as follows:

11. Major Spending/ performance issues: Public Works • Concern around the virements after the AE: • Virement of R124m (4%) out of prog 2 (core function to whole of government) to departmental functions needs to be further understood • 13% increase in the allocation for Admin • 21% increase in the allocation for the National Public Works Prog (significant increases in capacity for EPWP from 48 to 128 – anticipation of phase 2?) • EPWP on target for 1 million job opportunities, proposed redesign for a phase 2 is in progress • Need to review the options analysis process given the changing departmental needs/ accommodation specifications • Lack of implementation of RAMP projects a key reason cited for a significant portion of departments’ underspending on capital – DPW capacity? • Needs to be more detailed project plans (defined timelines for delivery) submitted at the beginning of the year and monitored in-year • Need to monitor the trading account

12. Spending Highlights: National Treasury • Spending data shows an increase in Rand spending although a slightly lower % of available funds spent • 2006/07: 96.5% spending (R16.171bn) vs 2007/08: 96% spending (R18.966bn) • Major increases have been in: • Provincial and local government transfers (all conditional grants: the infrastructure grant to provinces, the neighbourhood partnership development grant and the local government financial management and restructuring grants) • Fiscal transfers • The above 2 areas are also the main areas of underspending • For conditional grants, R254m was not transferred due to delays in funding agreements with municipalities and R137m withheld ito DORA due to non-compliance with reporting requirements (mainly around explanations and remedies for underspending) • Fiscal transfers were lower than anticipated • Financial management and systems under spending was due to savings on the maintenance of transversal systems and challenges in the implementation of IFMS

13. Major Spending/ performance issues: National Treasury • DORA provisions • Have allowed for re-allocation between provinces (those spending well and those still needing to mobilise project management capacity) and between social infrastructure categories (schools, hospitals, roads) • Allows for greater opportunities for spending the conditional grant allocations • May have some elements of skewed spending • Still a need for provinces to ensure dedicated (administrative and technical) capacity to drive programmes • Provincial Treasuries need to more actively identify areas of low versus high spending as well as the infrastructure needs and engage with provincial departments • Slow disbursement on the NDPG • High vacancy rate (according to Vulindlela)

14. Major current expenditure virements

15. Vacancy rates (main source: Vulindlela 23 May)