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2015/16 Unaudited Close-out Budget Performance Report. Presentation to Select Committee on Finance 16 August 2016. Presentation Outline. Provincial growth 2015/16 Provincial Budget Summary 2015/16 Unaudited Provincial Own Revenue 2015/16 Unaudited Budget Performance
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2015/16 Unaudited Close-out Budget Performance Report Presentation to Select Committee on Finance 16 August 2016
Presentation Outline • Provincial growth • 2015/16 Provincial Budget Summary • 2015/16 Unaudited Provincial Own Revenue • 2015/16 Unaudited Budget Performance • Provincial expenditure • Emphasis on main programmes for each department, especially Education and Health • Conditional grants • Infrastructure • Economic classifications • Bank balances • Accruals • Unauthorised • Irregular • Wasteful expenditure
South African economy contracted by 1.2% in the 1st quarter of 2016 down from a positive growth rate of 0.4% in the previous quarter, while the economy of KZN contracted by less than the national rate at -0.48% • Mining sector is the major contributor to this negative growth rate of both the national and provincial economy at -18.1% and -4.86%, respectively • The main reason for high negative growth in the mining sector is due to lower production in the platinum group metals and iron ore. If mining is excluded, the economy of SA would have experienced a positive economic growth rate of 0.5% • In addition to mining, other sectors that contributed negatively are agriculture, transport and electricity • The contraction in the agricultural sector both nationally and provincially emanates from lower production of field crops and horticultural products marred by drought condition Provincial Growth
The decline in the Transport sector emanates from lower economic activity in land transport, both passenger and freight • The decline in the Electricity sector is because the electricity generated and consumed both declined • The marginal increase in the Construction sector is due to an increase in civil construction works (bridges and road construction) • The increase in the Manufacturing sector is due to an increase in wood and wood products (paper, publishing and printing), as well as basic iron and steel (i.e. non-ferrous metal products, metal products and machinery). However, food and beverage products contributed negatively • Trade’s positive contribution emanates from increased economic activity in the wholesale, retail, catering and accommodation aspects, however, there was a decline in the sale of motor vehicles • Finance showed increased economic activity (banks, investment companies, insurance companies, etc.) Provincial Growth
2015/16 Provincial Budget Summary • A Second Adjustments Estimate was tabled in the Legislature on 10 March 2016 where R308.377m allocated to Human Settlements: • In compliance with Section 19 of the DORA, 2015 (Act No. 1 of 2015), the National Department of Human Settlements stopped the transfer of funds to Gauteng to the value of R908.377m in respect of the Human Settlements Development Grant (HSDG) • In compliance with Section 20 of DORA, 2015, as amended, the National Department of Human Settlements re-allocated these funds to KwaZulu-Natal (R308.377m), Eastern Cape (R400m), Northern Cape (R100m) and North West (R100m) for the HSDG, following revised allocations by the national Department of Human Settlements
2015/16 Provincial Budget Summary • The 4th tranche of the Provincial Roads Maintenance grant amounting to R275.691m, which was to be transferred in January 2016, was withheld by the National Department of Transport and not transferred to the provincial Department of Transport • This was due to non-compliance by Transport with reporting requirements of the grant • However, the department had already spent R245.450m of that amount, although the actual cash had not been received by year-end • The department is currently engaging with the National Department of Transport and, if successful, the funds will be transferred in 16/17 • There is ongoing communication between National Treasury and Provincial Treasury, and invoices showing that the bulk of the withheld funds were spent were sent to National Treasury on 10 May 2016. Provincial Treasury is awaiting a response as to how to proceed in this regard
Provincial Own Revenue • The bulk of the province’s own revenue is usually derived from five main sources, being Motor vehicle licences by Transport, Health patient fees by Health, and Casino taxes, Horse racing taxes and Interest, dividends and rent on land by Provincial Treasury • The aggregated unaudited revenue collected by the provincial departments amounted to R3.260bn compared to the Final Appropriation of R2.995bn, resulting in a substantial over-collection of R265.346m or 8.9% • The departments largely responsible for the provincial over-collection are Human Settlements, Economic Development, Tourism and Environmental Affairs, Provincial Treasury, Education and Transport followed by COGTA, Public Works and the Provincial Legislature
Provincial Own Revenue • Health shows an under-collection of R14.364m, mainly against Health patient fees due to cash flow challenges encountered by the Road Accident Fund (RAF). Furthermore, an under-collection is also noted against Sale of capital assets as a result of an auction of vehicles and equipment which did not materialise • To a lesser extent, Social Development under-collected at year-end by R514 000 due to over-budgeting against Interest, dividends and rent on land and an auction of vehicles which did not materialise under Sale of capital assets
Provincial Own Revenue • This under-collections was mitigated by various over-collections in respect of 13 departments, and the main over-collections are discussed below: • Human Settlements reflects an over-collection of R166.023m. The main collection was derived from the National Housing Finance Corporation (NHFC) and Ithala Limited in respect of a recall of previous years’ funding of R118.440m and R12.532m, respectively. As at the end of 14/15, NHFC and Ithala had not completed the projects for which the funding was transferred and therefore had to repay any unspent funds together with interest earned to the department • Economic Development, Tourism and Environmental Affairs reflects an over-collection of R40.877m mainly in respect of R30.800m recovered from Ithala. This amount was earmarked in 14/15 for the construction of a retail centre and petrol filling station at Ndumo. However, approval was not received from the Ingonyama Trust to occupy the land, and these funds were subsequently returned to the Provincial Revenue Fund pending such approval, with the understanding that the funds would be allocated back to the department once the approval process was finalised. The remainder of the over-collection was from staff debts. Liquor licences were also over-collected in relation to registration and renewal of annual licence fees, due to the implementation of the new tariffs as per the amended Liquor Licensing Act
Provincial Own Revenue • Provincial Treasury reflects an over-collection of R29.877m, relating to R107.883m over-collected against Interest, dividends and rent on land mainly in respect of interest earned on positive cash balances because of continued implementation of cost-cutting measures by departments and entities. This is partly offset by an under-collection against Casino taxes of R69.102m and Horse racing taxes of R13.235m, due to a decline in gambling activities as a result of the constrained economic environment in the country • Education reflects an over-collection of R12.273m, which was mainly from Sale of capital assets as the department had an auction sale of redundant vehicles which was not originally planned, as well as over-collection from Transactions in financial assets and liabilities due to various recoveries
Provincial Own Revenue • Transport reflects an over-collection of R11.473m, which can be attributed to an auction of redundant vehicles which yielded higher than budgeted revenue, as well as over-collection against Fines, penalties and forfeits from motorists that contravene the Road Traffic Act. There was also over-collection of Motor vehicle licences due to higher than anticipated applications for new and renewals of motor vehicle licences, which is dependent on the vehicle population registered in the province • COGTA reflects an over-collection of R10.057m, relating to funds returned by Mtubatuba Municipality in respect of the Corridor Development programme, being funds transferred in 08/09 and 09/10 which were not fully utilised, and also funds returned by Mkhambathini Municipality due to savings on a project completed in 13/14. Also included in the over-collection is an amount of R1.115m against no budget, relating to donations received from various companies and municipalities in respect of the Women in Leadership Dialogue. The department requested that the funds returned by Mtubatuba Municipality, as well as the sponsorship for the Women in Leadership Dialogue be returned to them, and this was returned to the department in the 15/16 Adjustments Estimate
Summary of Provincial Expenditure • A number of departments applied further virements after the tabling of the Adjustments Estimate and the Second Adjustments Estimate. The extent of these virements is in line with S43 of the PFMA, S6.3 of the Treasury Regulations, as well as National Treasury guidelines, and these virements are reflected in the AFS of the departments • Agriculture and Rural Development’s baseline was reduced by R1 000 due to the fact that, when the Adjustments Estimate was tabled, Provincial Treasury erroneously excluded an adjustment of R1 000 to the Ilima/Letsema Projects grant. The department was therefore required to show this as a post Adjustments Estimate virement to reduce the Ilima/Letsema Projects grant from R69.402m to R69.401m. This explains the reduction of R1 000 in the department’s baseline, as well as in the provincial baseline • As at the end of 2015/16, the unaudited aggregated expenditure for the year amounts to R104.351bn compared to the Final Appropriation of R105bn, resulting in under-expenditure of R649.605m at year-end, or 0.6%
Summary of Provincial Expenditure • The unaudited year-end under-expenditure is an improvement when compared to the projected outcome contained in the mid-year reports, where the province showed substantial projected over-expenditure, especially against Health • These are only the unaudited numbers, and departments are currently being audited by the A-G and these figures could thus possibly change after the audit • 14 out of the 15 departments under-spent against the Final Appropriation with the largest under-expenditure being portrayed by Education, Social Development, Agriculture and Rural Development, Provincial Treasury and COGTA, followed by Office of the Premier, Arts and Culture, Provincial Legislature and Economic Development, Tourism and Environmental Affairs, respectively • Health is the only department that over-spent
Summary of Provincial Expenditure • Provincial Treasury held meetings with Health, where they were instructed to devise and implement an internal cost containment plan to reduce their projected over-expenditure. In addition, considering that some of the spending pressures experienced by Health were beyond their control, such as the increase in medico-legal claims and the changes in the NHLS payment mechanism from a flat-fee to a more expensive fee-for-service payment method, an amount of R368.979m was allocated to the department by Provincial Treasury in the 15/16 Adjustments Estimate to assist with the pressures experienced against their budget • However, it would seem that, although Health’s over-spending was reduced compared to the projected over-spending reported during the year, the department has merely postponed expenditure to 16/17 and this is substantiated by the considerable amount of commitments reported by the department of over R1bn from items such as municipal clinics in the Metro, medicines, medical supplies, infrastructure, etc. These commitments will put pressure on the 16/17 budget and will require careful management of the budget in order to avoid over-spending
Summary of Provincial Expenditure • The paragraphs below provide a brief analysis of the departments showing the highest levels of year-end under- or over-expenditure: • Health reflects over-expenditure of R140.732m mainly due to: • NHLS fee-for-service payments which were more expensive than originally budgeted. In the 15/16 Adjustments Estimate, the department was allocated R270.500m to defray NHLS spending pressures, however, the department indicated R148.056m as an additional NHLS spending pressure • Over-spending was also reported against Compensation of employees largely due to an under-estimation of the costs of the housing allowance adjustment, as well as an increased uptake of this allowance by staff • Audit/forensic costs and the purchase of critical hospital linen also contributed to the over-spending • Mitigating this over-spending were savings made on medicines and medical supplies, due to deferral of payments to 16/17, as well as the reduction in payments to the Medicine Trading Account • It should also be noted that the department under-spent part of its specifically and exclusively appropriated funding by R110.358m and conditional grants by R3.297m, meaning that these ring-fenced funds were utilised to absorb spending pressures in other areas, and this compounds the department’s over-expenditure. Thus, if these are taken into account, the department actually over-spent its budget by more than R257m
Summary of Provincial Expenditure • Education reflects under-expenditure of R274.959m, mainly due to: • Non-filling of posts to accommodate anticipated budget pressures from the shortfall in the carry-through costs of the above-budget 2015 wage agreement. There were delays in capturing temporary educators which were appointed in the new school year (January 2016), resignations and retirements, as well as non-payment of backdated home-owners allowance to employees whose applications were still in progress pending provision of proof of home-ownership. This resulted in under-spending against Compensation of employees by R151.001m • Delays in the bid process for the procurement of equipment for technical schools • Non-compliance to transfer requirements by some schools, as well as the in-year reduction in learner numbers for independent schools led to under-spending against Transfers and subsidies • This under-spending was mitigated to some extent by over-spending of R12.695m under Buildings and other fixed structures for higher than budgeted upgrades and new infrastructure projects for schools and non-school buildings, as well as the payment of outstanding invoices for the various infrastructure projects which were stopped in 14/15 • Social Development shows under-expenditure of R98.929m mainly due to: • Compensation of employees (R62.096m) due to the non-filling of posts as a result of the moratorium • Building and other fixed structures (R28.574m) due to delays in the procurement processes of infrastructure projects such as the purchase of the Greytown and Utrecht service offices, the Bulwer/Hlanganani and Harding service offices • There was also a reduction in the number of events held in line with cost-cutting, which reduced costs related to service providers used by the department to organise events • Transfers to:Non-profit institutions also contributed to the under-spending (R15.548m) because the department took a decision not to fund new projects due to projected over-expenditure at mid-year
Summary of Provincial Expenditure • Agriculture and Rural Development shows under-spending of R93.292m, mainly due to: • The Microsoft migration process from Novell to Microsoft not being finalised as anticipated due to SITA not being able to procure the server on time • Farming supplies such as livestock fodder and animal medicine that were ordered but not delivered or paid for by year-end • Limited farming activities by the Communal Estates, as a result of the drought, as well as slow progress of the Nyonende Hatchery project • Slower than anticipated implementation of drought relief interventions such as boreholes, stock watering dams and dip tanks due to high demand and thus short supply of service providers. The funds were fully committed at year-end and the service providers are on site • Provincial Treasury reflects under-expenditure of R76.822m mainly due to: • Non-filling of funded vacant posts • Delays in the procurement of state vehicles • The relocation of the PERSAL mainframe time function from Pietermaritzburg SITA to National Treasury SITA which resulted in significant savings of approximately R2m per month • Municipal Support Programme invoices being withheld as a result of unsatisfactory service delivery by service providers • Delays because the Infrastructure Crack Team was not operational for the first half of the year due to SIU investigations and, as a result, orders, such as the comprehensive electrification implementation plan for Mtubatuba Municipality, IALCH floor project, etc., were only issued in the second half of the year • The department also had savings due to strict adherence to cost-cutting measures
Summary of Provincial Expenditure • COGTA reflects under-expenditure of R63.075m due to: • Delays in the filling of vacant posts • Slow spending in respect of the 2016 local government elections programmes, such as the provision of water, electricity, sanitation and municipal roads at voting stations, due to the late announcement of the election date • Delays encountered with the completion of the Provincial Disaster Management Centre • Arts and Culture reflects under-expenditure of R45.228m, mainly due to: • Challenges experienced with the construction of the Port Shepstone and Manyiseni library which were funded by the Community Library Services grant • Slow tender processes delayed the commencement of the construction of the Port Shepstone library. The department had to re-advertise the tender due to an omission of advertising it on the CIDB website • The construction of the Manyiseni library was delayed as a result of internal disagreements within the joint venture appointed by the department • The department has requested a roll-over in respect of these infrastructure projects, and NT has provisionally approved R22.952m relating to the Port Shepstone library, while R16.024m was not approved for roll-over due to the fact that the department was requesting a roll-over for the same project (Manyiseni) for two consecutive years (approval for roll-over of 14/15 funds to 15/16 had been granted by NT previously) • The under-spending was also due to the moratorium on the filling of vacant posts, as well as a delay in the delivery of motor vehicles ordered and payment could not be made by year-end
Summary of Provincial Expenditure • Office of the Premier shows under-expenditure of R45.727m, mainly due to: • Delays in the filling of vacant posts as well as the moratorium on the filling of non-OSD posts • Delays in the implementation of projects such as the Citizen Satisfaction Survey, the Poverty Eradication Master Plan, and delays in the repairs and renovation of the royal palaces • There was also under-spending by the department due to delays encountered in securing a suitable service provider to implement the security access system for the department’s administration buildings, as well as the Premier’s Parkside residence • Provincial Legislature’s under-spending of R43.125m was mainly due to: • Savings emanating from the Legislature’s cost containment plan in respect of advertising, travel and subsistence and venues and facilities costs • Outstanding commitments in respect of events that were held in the last few months of the year, such as the official opening of the Legislature • In some instances, orders were placed but invoices were not received in time for payment by year-end, such as operating payments and the purchase of minor assets and stationery, printing and office supplies • Costs relating to consultants and professional services were under-spent, largely due to the Legislature withholding a payment to the SAP consultants pending clarification of the amounts claimed • Delays in the renovations to the Law Society building (which had been damaged by fire), as the revised estimate of R6m received from Public Works was far higher than the original estimate of R1.500m
Summary of Provincial Expenditure • Transport reflects under-expenditure of R28.068m: • As mentioned, the National Department of Transport withheld R275.691m being the 4th tranche of the Provincial Roads Maintenance grant which was to be transferred in January 2016. The department had already spent R245.450m of that amount, although the actual cash had not been received by year-end • This accounts for the under-expenditure of R30.241m which was offset by over-spending in respect of the equitable share against Buildings and other fixed structures which was over-spent due to the higher than budgeted costs of construction projects and various river bridges which were fast-tracked • The funds were withheld due to non-compliance by the department with DORA in respect of reporting on the Infrastructure Reporting Model (IRM) • Economic Development, Tourism and Environmental Affairs reflects under-expenditure of R13.534m, largely due to: • Non-filling of vacant posts as a result of the moratorium on the filling of non-critical vacant posts • Delays in receiving invoices for building leases from Public Works • An allocation for the Nelson Mandela Golf Championship was not spent, due to delays in the finalisation of the Headline Partner in 2015 and the service provider had to re-apply for new dates. The event has been postponed to December 2016 • Non-transfer of funds for the Digital Television project to the KZN Film Commission (KZNFC) due to delays in the process of finalising the MOU with the KZNFC
Summary of Provincial Expenditure • Public Works reflects under-expenditure of R6.691m mainly due to: • The moratorium on the filling of non-critical vacant posts • Delays in the implementation of GIAMA projects ascribed to delays in the appointment of consultants to undertake these projects • This under-spending was reduced to some extent by pressures in respect of arrear payments for electricity costs relating to the previous year which were not budgeted for in 15/16, as well as higher than anticipated fleet services costs for vehicle repairs, fuel and oil, property payments for lights, among others • Furthermore, Transfers and subsidies to: Provinces and municipalities was over-spent due to unanticipated arrear payments in respect of property rates, which is ascribed to newly identified properties including schools situated in the eThekwini Metro, uMgungundlovu, Uthukela, Amajuba, Umzinyathi, Zululand, uThungulu, Ilembe and Harry Gwala District Municipalities, where the department is liable for property rates • To a lesser extent, minor under-spending was reported by Human Settlements, Sport and Recreation, as well as Community Safety and Liaison of R322 000, R331 000 and R234 000, respectively, mainly due to the moratorium on the filling of vacant posts and adherence to cost-cutting measures
Conditional grants • Table 3 shows the Unaudited Actual expenditure incurred in 15/16 on national conditional grants by department and grant, against the budget • The Final Appropriation takes into account the increase of the Human Settlements Development grant by R308.377m that was tabled and formalised in the Second Adjustments Estimate • It should be noted that the Final Appropriation of conditional grants of R17.206bn includes an amount of R19.653m comprising of approved conditional grant roll-overs from 14/15 to 15/16 that National Treasury allowed the province to keep in the Provincial Revenue Fund and re-allocate to departments in 15/16 • Furthermore, as previously mentioned DARD’s baseline and Ilima/Letsema Projects grant were reduced by R1 000, in order to correct an error made by PT when the 15/16 Adjustments Estimate was tabled • The conditional grant allocation for the province was under-spent by R71.904m, with the main contributor to this under-spending being Arts & Culture and Transport
Conditional grants • The spending is 99.6% of the budget, and the grants that reflect significant over- and under-spending are discussed below: • The Community Library Services grant shows significant under-spending of R38.995m, due to challenges experienced in the construction of the Port Shepstone and Manyiseni libraries, as mentioned previously • The Provincial Roads Maintenance grant shows under-spending of R30.241m. This was due to the fact that National Transport withheld R275.691m of the conditional grant funding from the department, as previously mentioned. However, the department had already spent R245.450m of that amount, although the actual cash had not been received by year-end. The funds were withheld due to non-compliance with DORA in respect of reporting on the IRM, non-submission of Disaster Fund business plans, as well as monthly and quarterly expenditure reports for disaster projects • The National Health Insurance grant, which provides financial support for the development of projects directed at improving health delivery in line with the requirements of the introduction of the NHI, was under-spent by R6.363m, for which a roll-over has been requested and provisional approval was received from NT for the committed expenditure
Infrastructure • Table 4 indicates actual infrastructure expenditure at 99.1% of the budget, showing an under-spending of R109.665m. This amount is made up of various over- and under-spending in departments: • Education reflects over-spending of R12.695m. The over-spending is mainly due to additional classrooms that had to be built in schools in trying to eliminate unsafe and improper structures, as well as to cater for increased learner enrolment where mobile classrooms had been removed. This includes upgrades to non-school and school buildings. The department accelerated implementation on these projects to fast-track their completion since many of the projects were stopped in 14/15 in order to offset pressures against Compensation of employees • Human Settlements reflects over-spending of R7.431m mainly because of transfers to municipalities which caters for the operational costs for accredited municipalities. This over-spending was partly offset by under-spending relating to the Social and Economic Amenities programme which was under-spent by R6.330m as a result of the termination of contracts in Umkhanyakude, Amajuba and uMgungundlovu due to poor performance of the contractor in respect of the construction of a community hall, a crèche and sport fields with change rooms, respectively
Infrastructure • The following departments under-spent against their infrastructure budgets: • Arts and Culture reported under-spending of R35.064m and this mainly relates to slow spending on infrastructure projects related to the Community Library Services grant, such as the Port Shepstone and Manyiseni libraries, as already discussed • Agriculture and Rural Development shows under-expenditure of R27.733m due to the construction of boreholes, stock watering dams and dip tanks not being finalised. At year-end, 12 boreholes were completed and 53 were projected to be completed by May 2016. Of the 53 boreholes, only 6 need to be drilled and 47 need equipping. With regard to the dams, 27 were completed and 46 will be completed by August 2016. In terms of dip tanks, 39 dip tanks are projected to be completed by the end of August 2016 • COGTA reported under-spending of R21.702m as a result of delays with the completion of the PDMC. Only R5.448m was committed and a roll-over of this amount has been requested. Furthermore, the department incurred lower than budgeted costs for the renovations of various CSCs and houses for Amakhosi
Infrastructure • The following departments under-spent against their infrastructure budgets: • Social Development reported under-spending of R20.402m due to lengthy planning and procurement processes with the implementing agents, including Public Works and COEGA. Projects affected include the Government Garage building in eThekwini and Valley View place of safety. Roll-overs have been requested for these and other projects. In addition, the department experienced delays with upgrading eThekwini Metro buildings to be used as a service office, an ECD and youth centre. The delays are due to planning issues within the Metro. The under-spending was partly offset by over-spending againstmaintenance due to the department prioritising the maintenance of existing buildings, to attend to historical neglect of maintenance • Transport reflects under-spending of R17.141m. The under-spending was mainly against Maintenance and repairs: Current which under-spent by R30.241m, in respect of the non-spending of the disaster portion of the Provincial Roads Maintenance grant that is housed against this category, as explained before • Office of the Premier shows under-spending of R8.499m due to delays in the upgrades and refurbishment of royal palaces. As the repairs and renovation costs that were provided by Public Works were considered exorbitant, Provincial Treasury was requested to assist in resolving bottlenecks around the project and this included the review of the maintenance plan and the costing of the project. As such, the repair work only began in the 4th quarter
Economic classification • With regard to KZN’s Unaudited expenditure at economic classification level: • Compensation of employees reflects under-expenditure of R106.918m, mainly by Social Development (R62.096m), Provincial Treasury (R20.508m) and Education (R151.001m), attributed to the moratorium on the filling of posts, lengthy recruitment processes, high staff turnover as a result of resignations and retirements and fluctuating educator numbers in Education. • Only Health over-spent against their Compensation of employees budget (by R167.216m) mainly due to an under-estimation of the costs of the housing allowance adjustment, as well as an increased take-up of the allowance following the increase. The increase in this allowance formed part of the 2015 wage agreement
Economic classification • With regard to KZN’s Unaudited expenditure at economic classification level: • Goods and services reflects under-expenditure of R131.089m mainly due to: • Under-spending by Education of R42.216m. Education implemented internal cost-containment measures against various items such as training and development, consultants and business advisory services and LTSM (due to the utilisation of the transversal contract which resulted in savings as prices for materials were lower) • Provincial Treasury attributed its under-expenditure of R52.157m to the relocation of the Persal mainframe time function from Pietermaritzburg SITA to National Treasury SITA, Municipal Support Programme invoices being withheld as a result of unsatisfactory service delivery by service providers and delays in infrastructure related projects due to the Infrastructure Crack Team not being operational for the first half of the year due to SIU investigations • COGTA’s under-spending of R28.489m was largely attributed to slow spending in respect of the 2016 local government elections programmes, such as the provision of water, electricity, sanitation and municipal roads at voting stations, due to the late announcement of the election date • Transport had under-spending of R30.241m against this category, due to the portion of the grant which was not transferred to the department, as mentioned • Departments also had savings from items such as Catering,Contractors, Advertising, Travel & subsistence due to strict adherence to cost-cutting measures • The under-spending against Goods and services was mitigated to some extent by the over-spending reported by Health (R100.063m) due to spending pressures in respect of NHLS fee-for-service payments, and pressure related to the purchase of hospital linen
Economic classification • With regard to KZN’s Unaudited expenditure at economic classification level: • Transfers and subsidies to: Provinces and municipalities reflects under-spending of R60.998m mainly due to Health’s decision to delay March payments (R75.650m) to the eThekwini Metro for municipal clinics in order minimise over-spending for the vote as a whole. This under-spending was mitigated to some extent by over-spending reported by Human Settlements resulting from the higher than budgeted operational costs of the accredited municipalities due to accelerated performance by some municipalities, as well as the development of new units in hostels in the Metro • Transfers and subsidies to: Public corporations and private enterprises reflects under-spending of R44.886m. This was largely as a result of Agriculture and Rural Development’s under-spending against this category by R19.865m, due to limited farming activities by the Communal Estates as a result of the drought, as well as slow progress of the Nyonende Hatchery project • Transfers and subsidies to: Non-profit institutions reflects under-spending of R68.697m mainly related to Education, ascribed to the department not making transfers to schools due to some schools not complying with the transfer requirements, such as submission of financial statements. Social Development also contributed to the under-spending by not introducing new projects
Economic classification • With regard to KZN’s Unaudited expenditure at economic classification level: • Transfers and subsidies to: Households has over-spending of R42.678m, largely due to Health over-spending against this category due to leave gratuities, medico-legal claims, as well as the Cuban Doctors’ programme • Buildings and other fixed structures reflects under-spending of R110.501m mainly due to: • Arts and Culture’s under-spending of R35.064m ascribed to challenges experienced with the construction of the Port Shepstone and Manyiseni libraries, as mentioned • Social Development under-spent by R28.574m mainly due to projects not proceeding as expected. These included the purchase of the Greytown and Utrecht service office buildings currently rented by the department, as well as projects delayed by lengthy land acquisition processes, such as the Bulwer/Hlanganani and Harding service offices • COGTA’s under-spending of R21.702m was mainly due to delays with the completion of the PDMC, as mentioned
Economic classification • With regard to KZN’s Unaudited expenditure at economic classification level: • Machinery and equipment reflects under-spending of R174.670m, mainly due: • Health’s under-spending of R104.635m due to deferral of projects/orders to 16/17 to address pressures elsewhere in the budget • Education reflects under-spending of R38.954m attributed to delays in the finalisation of the procurement strategy and procurement of office furniture for newly constructed schools, as well as late delivery of ordered vehicles, as a result of the unavailability of the vehicles from the suppliers. Furthermore, the department implemented enforced savings in order to mitigate over-spending in some economic categories • Agriculture and Rural Development under-spent by R18.660m attributed to delays in appointing a service provider for the installation of a server for the migration to Microsoft, as well as laboratory equipment as there were no successful bidders identified
Bank balances as at 31 March 2016 The table below reflects the bank balances of the last three months against the agreed limits
Bank balances as at 31 March 2016 Two departmentsexceeded the adjusted overdraft limits as at the end of March 2016: • Department of Health: The department exceeded the agreed overdraft limit by R130m due to spending pressures and the department has overspent its budget. Cash blocking stopped payments on Goods and services, thus increasing commitments at year-end • Department of Sport and Recreation: The department exceeded the agreed overdraft limit by R696 000 due to a slight under provision of its cash flow for February and March 2016 due to amounts in the suspense account not reflected in expenditure. The department has, however, remained within budget • The Department of Public Works and the Department of Human Settlements are the only other departments in overdraft, but they are well within the agreed limits
Accruals • It should be noted that these amounts were taken from the depts’ Unaudited AFS and may therefore change during the audit process • The amounts were taken from the Accruals Notes of the AFS and include Accruals, as well as Payables not recognised
