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Department of Housing Expenditure Briefing for 2007/08 - Analysis, Variances, and Outcomes

This briefing provides a summary of the Department of Housing's expenditure for the year 2007/08, including analysis of variances and reasons for current expenditure differences. It covers expenditure by programme and economic classification, as well as challenges in medium-term budgeting and risk management strategies.

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Department of Housing Expenditure Briefing for 2007/08 - Analysis, Variances, and Outcomes

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  1. JOINT BUDGET COMMITTEE BRIEFING ON DEPARTMENT OF HOUSING EXPENDITURE FOR 2007/08 06 June 2008

  2. Outlay of presentation • Summary of expenditure by programme • Summary of expenditure by economic classification • Analysis and reasons for current expenditure variances 3.1 Departmental vacancies 3.2 Procurement 3.3 Virements 4. Provincial transfer expenditure and outcomes 5. Medium-term budgeting challenges and risk management strategies

  3. 1. Summary of expenditure by programme

  4. 2. Summary of expenditure by economic classification

  5. Analysis of variances and related reasons • The Department spent R8,5 billion out of its allocation of R8,9 billion. • Expenditure represents nearly 96% of the voted funds. • Unspent funds amounts to R396 million or 4.4 % of voted funds mainly as follows: • Funds retained in terms of the retention provisions of the Division of Revenue Act, 2007 in respect of Eastern Cape and Free State (net R193m); • Funds provided for the Social Housing Rental Programme allocated for transfer through the SHRA at R180m;

  6. Analysis of variances and related reasons • Compensation to employees • Under-spending amounts to R555 000 and is mainly due to vacant positions which were not filled during the year • Goods and services • The total under-spending on this item amounts to R15,8 million. • This under-spending is mainly due to the following: • Personnel related expenditure • Outstanding portions relating to completion of the following projects: • Outsourcing execution of some portions of the Internal Audit plan; • Investigation on the development of alternative tenure options; • Savings on the transversal contract to manage the Debtors system implemented at various provinces; • Evaluation and reporting on the advance tranche payments made to municipalities to implement approved projects; • Investigation into a possible insurance cover for subsidy houses against vis major; • The nature of some of the projects is that they were planned to be completed at due dates that are beyond 31 March 2008 and therefore those projects straddle over two financial years, i.e. 2007/08 and 2008/09, while the commitment can only be created in one year;

  7. Analysis of variances and related reasons • International organizations and Households • The R394 000 savings are mainly due to the over provision for membership fees paid to the UN Habitat (Habitat Foundation) in US dollars; • Savings realized from the Capacity Building bursary scheme provision

  8. Analysis of variances and related reasons • Machinery and equipment • The total under-spending of R5,999 million is partly due to delays in the process of filling vacancies: • Equipment and Furniture provisions for posts that were in process of recruitment for which delivery was made after year end; • Generator ordered to provide electricity back-up which supplier experienced stock shortage as the item is imported;

  9. Monthly Drawings and Expenditure Department total

  10. Expenditure per programme as at 31 March 2008

  11. Prog 1: Administration Sub-Programme

  12. Prog 1: AdministrationEconomic Classification

  13. Monthly Drawings and Expenditure Prog 1: Administration

  14. Prog 2: Housing Policy Research and Planning Sub-Programme

  15. Prog 2: Housing Policy Research and PlanningEconomic Classification

  16. Monthly Drawings and Expenditure Prog 2: Housing Policy Research and Planning

  17. Prog 3: Housing implementation support Sub-Programme

  18. Prog 3: Housing implementation supportEconomic Classification

  19. Monthly Drawings and Expenditure Prog 3: Housing implementation support

  20. Prog 4: Housing Development Funding Sub-Programme

  21. Prog 4: Housing Development FundingEconomic Classification

  22. Monthly Drawings and Expenditure Prog 4: Housing Development Funding

  23. 3.1 Departmental vacancies • By April 2008 the establishment of the Department totaled 406 posts of which 79 were vacant representing a vacancy rate of 19%; • The new establishment was approved during 2007/08 and the establishment increased to 480 posts of which 140 were vacant, representing a vacancy rate of 29%.

  24. 3.2 Procurement • The Department has a Supply Chain Management Directorate • Departmental procurement is centralised • A supplier database is maintained as required by the Framework and acquisitions are made in line with the delegated authority limts set by NT guideline • A bid adjudication committee is in place • Evaluation committees evaluate all bids and submit recommendations to the bid adjudication committee.

  25. 3.2 Procurement • The department has a procurement policy which provides guidance on the process. • Through the database use is made of SMME’s and HDI’s. • Provinces procurement arrangements tend to vary depending on the Provincial Treasuries guidelines • Practice of issuing prequalification bidding processes is generally used to save on the time of mamaging acquisitions accepting that the subsidy quantum is predetermined.

  26. Procurement The following were outstanding projects at year end: • Purchase and installation of a standby generator at Govan Mbeki House. • Outsourcing execution of some portions of the Internal Audit plan; • Investigation on the development of alternative tenure options; • Evaluation and reporting on the advance tranche payments made to municipalities to implement approved projects; • Investigation into a possible insurance cover for subsidy houses against vis major. • Furniture and audio visual equipment purchased before the year end but only delivered after the end of March 2008

  27. 3.3 Virements cont.

  28. 3.3 Virements • Programme 1: Administration • The net effect of virements is an increase on programme allocation of R6 million as a result of the following: • R2 million was shifted from compensation of employees in Programmes 2, 3 and 4 respectively for the payment pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces. • Within the programme funds were shifted from capital assets to goods and services due to savings on capital assets. The savings was in respect of funds originally provided for the replacement of ministerial vehicles which were purchased in 2005/06 from funds received for the auctioning of a vehicle involved in an accident and savings in the Department.

  29. 3.3 Virements cont. • Programme 2: Housing Policy Research and Planning • The net effect of virements is a decrease on the programme allocation of R12 million emanating from the following: • R2 million was shifted from compensation of employees to Programme 1 to be used for pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces. It was a requirement that this contribution is funded from savings within the Department. • R10 million was shifted to Programme 4 from Goods and Services for Thubelisha Homes to cover its operational expenditure. • Within the programme the R921 000 was reprioritized to fund the increase in the UNHABITAT contribution in line with the new scale for contributions as per the resolution passed at a conference held with the United Nations during March 2007.

  30. 3.3 Virements cont. • Programme 3: Housing Implementation Support • The net effect of virements is a decrease on the programme allocation of R3,750 million. • The R2 million was shifted from compensation of employees to Programme 1 and was used for pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces. • Savings to an amount of R5,250 million arose due to the process of winding up the People's Housing Partnership Trust commenced to absorb its functions within the Department. The funds were shifted to Compensation of Employees and Goods and Services in programme 3. • R7 million was shifted from goods and services to Programme 4 for Thubelisha Homes to cover its operational expenditure.

  31. 3.3 Virements cont. • Programme 4: Housing Development Finance • The net effect of virements is a decrease on the programme allocation of R9,750 million. • The R2 million was shifted from compensation of employees to Programme 1 and was used for pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces. • R6 million was shifted to Departmental Agencies: Thubelisha Homes to cover its operational expenditure. • R23 million was reprioritised and shifted to this programme for Thubelisha Homes to fund the operational expenditure of the public entity. R10 million was shifted from Programme 2; R7 million from Programme 3 and R6 million from Programme 4. • Savings to an amount of R5,250 million arose due to the process of winding up the People's Housing Partnership Trust which commenced during 2007/08 to absorb its functions into the Department. The funds have been shifted to Compensation of Employees and Goods and Services in Programme 3.

  32. 3.3 Virements cont. • Programme 4: Housing Development Finance • A virement amounting to R3 006 667 was shifted from NURCHA and R5 041 250 from the Social Housing Foundation to Thubelisha Homes for costs borne by that entity in respect of the eviction of illegal occupants at Delft Symphony in the Western Cape.

  33. 4. Provincial transfer expenditure and outcomes

  34. 4. Provincial transfer expenditure and outcomes cont. • Provinces managed to spend R8,200 billion out of a total available of R8,682 billion or a 94% spending rate; • R8,150 billion was transferred to provinces who spent an average of 100% of these funds (5 provinces spent 100%, while EC spent 78%, FS spent 86%, LP spent 97%, & NW spent 90%); • R500 million & R100 million respectively stopped from EC & FS to be re-allocated to GP (R350 million) & to NC (R100 million); and • R150 million was un-allocated.

  35. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  36. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  37. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  38. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  39. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  40. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  41. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  42. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  43. Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

  44. 5. Medium-term budgeting challenges and risk management strategies • Over the 2008 MTEF the Department’s budget is dominated by transfer payments (95% of total allocation). • The large growth will require proportional growth in the capacity to spend out of provincial equitable share; • Challenge of the increasingly changing inflation environment will put immense pressures on the resources and the sector at large; • Enhancement of monitoring and evaluation for the Housing Sector at provincial and local government levels.

  45. 5. Medium-term budgeting challenges and risk management strategies • Improvement and enhancements of the planning by the sector. • Facilitate and support the development and implementation of recovery plans to unblock stalled projects (in respect of 150 projects). • Facilitate and support the development and implementation of 120 informal settlement upgrading projects. Development of a pipeline for CoDHI (social housing) projects in all 9 provinces for delivery of at least 7 000 housing units.

  46. 5. Medium-term budgeting challenges and risk management strategies • Rationalization of housing institution by the closure of Thubelisha and Servcon Housing Solutions and the establishment of the proposed Housing Development Agency. • Improvement of access to housing finance and facilitating a single housing market by monitoring trends in housing investment. • Facilitating the approval of credit linked subsidies to decrease complaints relating to the Home Loan and Mortgage Disclosure Act.

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