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Select Committee on Finance Provincial Budgets and Expenditure as at 31 December 2013. National Treasury. Adjustments to main budgets: 2013/14. 2. 2. Provincial aggregated budgets and expenditure as at 31 December 2013. 3. Cash position of provinces (Bank Balances).
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Select Committee on Finance Provincial Budgets and Expenditureas at 31 December 2013 National Treasury
Provincial aggregated budgets and expenditure as at 31 December 2013 3
Cash position of provinces (Bank Balances) • Provinces in general are in a healthy in-year fiscal position, with none currently utilising overdraft facilities at the Exchequer level. • Mpumalanga continues to have higher balances at the PMG level than at the Exchequer (PRF) level • Exchequer balances in the Free State are extremely low • Development of cash management guidelines is proceeding.
Components of Provincial Expenditure • Within G&S, the above items usually represent critical service delivery items that need to be targetted for efficiencies rather than cuts • However, other lower ticket items (e.g. catering, travel and subsistence) can be cut in terms of targeted cost containment
Are provinces controlling Personnel? • Recruitment in social services is typically seasonal (Jan – Dec) and therefore it is usually more useful to compare calender years rather than financial years • In the 3 years from December 2009 to December 2012, provincial staff numbers grew from 875 731 to 931 471 • However, the 2013 calendar year has seen a significant reversal in staffing trends, with December 2013 numbers standing at 919 741 • Therefore, provinces such EC, KZN and LIM should be commended for at least controlling the overall staffing numbers, notwithstanding internal challenges within certain departments (particularly Education)
Proportion of Budgets spent on COE and on Administration Proportion of budget spent on COE Proportion of budget spent on Administration • Budget and spending composition has seen COE grow from 54% in 2009/10 to an estimated 60.9% in 2014/15 • In most cases, provinces who have higher spending on COE also tend to have higher spending on admin. • EC, FS and LIM spend the highest proportions of their budgets on Administration • WC, GT and MP spend the least on Administration in proportion
G&S Non-Core Items Quarterly spending growth • The two graphs compare the pace of spending growth in non-core items in the first 3 quarters of this year • The two biggest components of the “non-core” selected items are Catering and T&S are growing slower in Q3 than they were in Q1 and Q2. • This is, however, an aggregate observation and individual provinces must observe their own performance
Provincial expenditure and projections by month for 2013/14 10
NT assessment of likely provincial outcomes • Assessment by the National Treasury (including historical trends) indicates that provincial projections are unreliable. • Spending trends are not dissimilar to those of 2012/13 (Q3). At the end of that financial year, provinces under-spent by R7.5bn (1.9%) • Specific interventions that have been highlighted by provinces include: • Implementation of cost-containment measures in line with MTBPS directive is being adopted by all Provincial Treasuries; • Headcount verifications and biometric controls are being rolled out in various provinces, in order to fix the COE spending and budgeting; • SCM reforms are being consolidated, under the oversight of the Chief Procurement Office. • Strategic procurement approaches will likely have a significant influence on the future spending on Goods and Services
Free State Issues • As at December 2013 the provincial projected overspending relates mainly to over expenditure on Compensation of Employees (CoE) in Education • As agreed at Budget Council in 2013, the province must realign its spending plans in line with the demographic trends reflected in the Census. Funds to cushion the fiscal blow have been given only until 2015/16 • Events in the last four years reveal that numerous decisions must be better assessed and better costed in this province: • Awarding of bursaries to additional students; • Provincial-specific initiatives within the Roads and Agriculture sector; • In-sourcing of contract staff; • Appointment of additional Cuban doctors; • Strategy for funding the MACUFE festival • Departments routinely reference these and other initiatives as a reason for cost pressures, which suggests a need to deal with the decision-making processes in the province. • Accruals (unpaid invoices) have grown from R43 million to R257 million in the last four years. • Conditional Grants spending is low, especially Agriculture (CASP = 46% and IIima/ Letsema = 46%), Arts and Culture (Libraries = 53%), Education (EIG = 51%), Health (Health Facilities Rev Grant = 36%) • Recently, the province has taken steps to deal with officials involved in incurring irregular expenditure and financial misconduct (Roads and Human Settlements).
Gauteng issues • The province is projecting to overspend its 2013/14 budget by R1 568 million after the adjustment. • The pressure in Education is on compensation of employees and relates mainly to the appointment of new teachers to accommodate the growth in learner numbers. Education is planning to appoint 1 054 teachers in 2014 but these posts are as yet unfunded. • Additional funding has been made available by the National Treasury to the province in line with the demographic trends highlighted in Census 2011 (additional R9.6bn in 2013 MTEF). This funding must be directed towards the critical service priorities. • Spending pressures in Health are mainly in medicine, medical supplies and property payments. The operationalisation of the new Zola and Natalspruit hospitals is also contributing to the current pressures which signals the lack of life-cycle costing to assess affordability before the decision to construct a new facility is taken. • The implementation of the Infrastructure Delivery Management System (IDMS) must be carefully monitored and supported, as this initiative is designed to remedy these challenges.
Mpumalanga spending as at 31 December 2013 (Section 32) 16 16
Mpumalanga issues • The province has spent R25 381 million or 75.1 per cent of adjusted budget of R34 185 million and projecting a pressure of R764.9 million mainly in Health, Office of the Premier and Education. • Projected over expenditure on core items like LTSM and Medicine and medical supplies is a concern. While departments will be able to absorb the pressures for now, poor planning and budgeting for these items need to be addressed while also dealing with inefficiencies. • The province is struggling to fill senior and specialised positions hence an under spending on compensation of employee. • While Education has spent its funds for infrastructure grants, the Department of Agriculture, Rural Development have only spent 3 per cent of funds allocated for Illima/Letsema conditional grant. Poor spending might lead to funds being surrendered back to national at the end of the year, or even withheld. Thus proper planning is essential. • More needs to be done by the province to ensure alignment between spending and performance (especially in Health – HIV and infrastructure delivery). In addition, there is evidence of waste and inefficiency in certain areas.
Observations • School Nutrition Programme - The high unit costs in Gauteng and KZN are surprising and should be assessed, given the expectation of higher economies of scale and the benefits of higher densities • Scholar transport – Mpumalanga Education needs to take direct responsibility for reporting, regardless of where the function lies. • HIV/AIDS – While provinces are in general not achieving the targets with regard to the total clients remaining on ART, Mpumalanga’s planning and target-setting appears to lack credibility. In addition, Mpumalanga and Limpopo have the worst reported record of placing TB-HIV co-patients on ART. • New housing units completed – Free State did not plan for housing units in the first quarter and underachieved against planned targets in both the second and third quarters. A majority of provinces are not reaching their targets.
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