SECOND QUARTER CONDITIONAL GRANTS AND CAPITAL REPORT FOR 2005/06

1. SECOND QUARTER CONDITIONAL GRANTS AND CAPITAL REPORT FOR 2005/06 Select Committee on Finance 16 January 2006

2. Contents • Conditional grants • Transfers • Actual spending • Capital Expenditure • Allocations • Actual spending • Assessment of department monitoring capacity • Reporting by departments • Submission of conditional grants business plans

3. Conditional grants TRANSFERS

4. Conditional grants cont.

5. Conditional grants cont.

6. Conditional grants cont. • Installment for infrastructure grant was not received due to • Non-submission of plans for 2006 MTEF by Education, Health, Finance • Non-submission of 2nd quarter report by Education, Finance • Inaccurate and incomplete reports

7. Conditional grants cont. ACTUAL SPENDING

8. Conditional grants cont.

9. Conditional grants cont.

10. Conditional grants cont. • Overall the province has spent 48,3% of the available budget for Conditional Grants as at the end of Q2. • DACE spending low on both grants • Comprehensive Agricultural Support Grant’s no Q1 expenditure due to delays in the receipt of quotations for irrigation system, provision of bore holes and fencing foe supported emerging farmers • Land Care Programme low spend due to the finalisation of 2004/05 projects incl. effects of planning for 2005/06 projects • Education • School nutrition grant programme grant-44% spent after the second quarter • HIV/AIDS-Life Skills grant-16% spent due to late distribution of budgets to district offices

11. Conditional grants cont. • Health • Hospital management and improvement grant-5,8% spent (awaiting approval of business plans from National Health) • All other grants spending is on track • Hospital revitalisation grant (allocation for 2005/06 drastically reduced) – has already overspent after the second quarter • Projected over expenditure on revitalisation projects estimated at R78m, (partially defrayed by rollover of R22,8m) • Received R71m for Revitalisation from National during the adjustment

12. Conditional grants cont. • Housing • Integrated housing grant spent 47%, • Human settlement grant spent 26% in context comprehensive plan - merger of grants; grant funding remaining commitments • Land distribution’s 0% expenditure emanates from prolonged planning activities from the first quarter for the acquisition of land for the Alex low cost housing initiative, expenditure is projected to effect during third quarter

13. Conditional grants cont. • Overall provincial infrastructure grant spending is at 29% • Transport spent 29% (R43,5m) of budget (R147,9m) and project to under spend by R12,4m • Health spent 56% (R41m) of budget (R84,7m); projected over spending of R10,8m • Education spending at 16% of budget although projections show that entire budget will be spent

14. Conditional grants cont. • Social Development • Other grants spending is on par except for the Social assistance administration grant-32% spent • The Social assistance grant spending influenced by the indemnity campaign launched by the National Minister of Social Development that resulted in the cancellation of more than 7,000 cases of fraudulent beneficiaries in Gauteng alone. • HIV/AIDS grant shows 95% expenditure due to the incorrect allocation of Health’s HIV/AIDS grant spending to the department; to be corrected in the next report

15. Capital Expenditure ALLOCATIONS

16. Capital Expenditure cont. Departmental Allocations (Before adjustment) * Includes Gautrain ( (R900m), Blue IQ projects (R146m) and Cradle of Humankind and Dinokeng (R144m)

17. Capital Expenditurecont. Some of the changes during Adjustmentincludes • Health • Funds to purchase equipment for Pretoria Academic Hospital (R270m) • Maintenance backlog (R70m) for maintenance and rehabilitation of health facilities • Revitalization projects (R23m) • Medical Equipment was delivered late (R29m) • Education • Capex rollover of R60m due to pay contractors after the completion of the 3 months retention period

18. Capital Expenditurecont. • Transport and Public Works • Funds suspended from Dace and Social development for various projects (R22m) • Finance and Economic Affairs • Gautrain budget reduced by R300 to fund pressures in the social sector • Dinokeng and Cradle of Humankind reduced by R58m • Housing • Housing fund, Alex and Human settlement conditional grants (R18m) to accommodate capital projects in progress • Kliptown project R75m

19. Capital Expenditurecont. ACTUAL SPENDING

20. Capital Expenditurecont. Compliance • PLANS: Formats of the IDIP plans which all departments are expected to comply with have been given to departments; however, • DFEA & Sports submitted plan in Jan 06 • Housing initially indicated that they do not consider building houses as infrastructure therefore no plan was submitted • We continue to follow up with the aforementioned departments to ensure their final strategic plans include these infrastructure plans. • INFRASTRUCTURE REPORTING: • 8 departments contribute in the provincial infrastructure: DFEA, Health, Educ, SocDev, Housing, DPTRW, DACE & SRAC • No report submitted by DFEA & Education submitted Q2 in Dec 05 • However, NT reported material gaps in the information provided (Q1 & Q2) • Expect information to be complete for Q3 report

21. Capital Expenditure cont. Health • Infrastructure spend till end Dec 2005 • Maintenance – 62,2% spent • Infrastructure grant – 76,1% spent • Provincial Infrastructure – 67,8% spent • Revitalization grant – 84,6% spent • Dept indicate spending on track i.t.o allocation • Measures to accelerate infrast. delivery • Appointment of project manager to increase capacity to monitor, manager & expedite • Management meetings on cash flow management • Dedicated revitalization project managers to strengthen manage capacity • Early Warning System for routine reporting

22. Capital Expenditure cont. • Measures to accelerate infrast. Delivery • Flagship projects identified for special attention • SLA with health institutions • Closer cooperation and communication implemented for user requirements

23. Capital Expenditure cont. Education • Infrastructure spend till end Nov R174m • Maintenance - R53m • Schools – R75m • GautengOnline R46m • Projected spend till year end R267m • Measures to accelerate infrast. Delivery • Turnkey approach - advertised 45 schools in Nov grouped in clusters • Response not good – few contractors submitted tenders & prices very high • Re- advertised tender for 22 schools and tender closes in Jan • Use IDT to build 23 schools and tender closes in Jan • Appoint a project management company in Jan to facilitate the process of ensuring that projects are delivered on time

24. Capital Expenditure cont. Transport and Public Works • Infrastructure spend as at the end of Sept R195m • Maintenance R109,3m • Upgrade R86m • Public Works portion was not submitted • Measures to accelerate infrast. Delivery • Developed a supplier database to assist in evaluating the capacity and expertise of contractors • Developed a programme to improve technical capacity of contractors on site

25. Capital Expenditure cont. Housing • The budget for Conditional Grant (Capex) is R1,340 billion 2005/06; Spending as at 30 November 2005 is R834m • The Projected Spending Dec 2005 to March 2006 is R876m. • Estimated over expenditure amounts to R370 million • There is a huge projected expenditure for the month of March amounting to R344 million. • Continued 3rd quarter monitoring to validate credibility of spending.

26. Capital Expenditure cont. • Key concerns • Partial/ Non submission by: • Public Works (Partial) • Education • DFEA • Inaccurate and/or incomplete reports

27. Capital Expenditure cont. • Action by Treasury – drafted letters to all HODs & CFOs: • Detailed Q1&2 trend analysis on revenue (incl. CG) and expenditure • Highlighted key spending concerns • Requested departments to clarify issues of concern • Requested departments to formulate remedial plans for low spending areas • Reported spending to Exco; Premier requested remedial plans from each HOD of low spending dept • Key interventions to be implemented included in previous slides

28. Assessment of departments monitoring capacity • CFO’s offices not properly capacitated – delay in submissions of reports, incomplete reports • Fiscal management unit responsible for monitoring has increased its capacity • Will continue to increase its capacity in the coming financial year

29. Reporting by departments • Receive monthly reports from departments • Submit to National Treasury • Submit quarterly reports to National Treasury and the Legislature • Provide feedback to departments on a quarterly basis • Presented 2nd quarterly report at the 2nd budget Lekgotla • Premier had discussions with the Departments on the 2nd quarter report

30. Business plans for conditional grants • Business plans are submitted by departments directly to National Departments • Approval of plans are done by the relevant national department

31. Way Forward • Continue to monitor spending against budget • Hold individual meetings with departments showing significant underspending and overspending • Capacitate CFO’s office and Treasury in 2006/07 • Facilitate delivery between planning and implementing agencies • Establishment of dedicated M&E function within Public Finance Unit at Provincial Treasury

32. Thank you!!!