NORTHERN CAPE PROVINCE
MEMORANDUM TO SELECT COMMITTEE ON FINANCE
: T/G 4/2/2 (2004/05)
: 14 JUNE 2005
: 2004/05 CONDITIONAL GRANTS PRELIMINARY BUDGET OUTCOME
To brief and to invite the Select Committee on Finance to -
- Note the preliminary aggregate expenditure outcome.
- Note the analysis on the 2004/05 conditional grants preliminary outcome as reflected in this memo;
- Note that this is a preliminary analysis and will be updated in accordance with the annual financial statements.
2. This report is based on the In-Year Monitoring System (IYM) for the 2004/05 financial year, as at 31 March 2005, as published in terms section 32 of the PFMA.
3. Table 1 below shows the provincial preliminary aggregate position.
- The following comments can be made in relation to the state of the Northern Cape Province financial position:
- The total expenditure amounted to R4, 456 billion, which is 96% of the Adjusted Budget, and an under-spending of R185 million or 4% of the Adjusted Budget.
- All departments under-spent their adjusted budgets. However, material under-spending occurred in Health, Social Services & Population Development, Transport, Roads and Public Works, Finance, Housing and Local Government and Agriculture.
- Material under-spending on conditional grants are in the following categories.
- Agricultural Disaster Management Grant at R13,7 million;
- Local Government Capacity Building Grant at R10,6 million;
- Hospital Revitalisation Grant at R20,9 million;
- Regulation 11 Backpay (rollover from 2003/04) at R19,3 million;
- Food Emergency Relief Grant at R9 million
(iv) Material under spending on capital was on social sector which represents 94% of capital under spending while the other sectors are attributable to the remaining 4%.
2004/05 Conditional Grants Budget Outcome
- Table 2 shows the preliminary conditional grants expenditure as at 31 March 2005.
- Of the total available funds of R669, 541 million, R585, 404 million or 87 per cent has been spent, which means funds available have been under-spent by R84, 137 million.
The Department received R40, 176 million including provincial rollovers. During the year under review only R21, 638 million was spent which amounts to 54% of the adjusted budget.
The Agriculture Disaster Management grant funds were received late in January 2005 in the trench of R26 million hence the department was unable to spent the entire amount in the last two months of the financial year.
With regard to Land Care grant, certain projects were only approved by National Department of Agriculture in February 2005. The department, however, is foreseeing to spend the entire amount by the end of June 2005.
With regard to Comprehensive Agriculture Support Programme grant the department cited capacity constraint within the department.
A total amount of R24, 655 million was allocated to the department for conditional grants of which R23, 411 million or 95% was spent. The reason for the 5% under-spending is attributed to the non filling of posts in district offices to administer food nutrition programme. The district personnel has since been appointed in this regard.
A total amount of R207, 395 million was allocated to the department and only 90% or R186, 487 million was spent for the period under review excluding provincial infrastructure grant. The under-expenditure was on Hospital Revitalization grant (R20, 908 and the reason for under-spending on the grant is, according to the department is due to the delay in construction process.
Housing and Local Government
The Department received R123, 359 million of conditional grants of which R109, 089 million or 89% of the adjusted budget was spent. The under spending is mainly attributed to the Human settlement grant (R3,180 million) and Local Government Capacity Building Grant (R10,593 million).
The under spending on the Human Settlement Grant is attributed to, according to the department, the management of the tender process which delayed the undertaking of projects. However, Treasury holds the view that it is rather the poor planning on the part of the department.
56% of The Local Government Capacity Building Grant was spent. The reason for under spending, according to the department, is attributed to the delay of the appointment of consultants by the Municipalities.
Social Services & Population Development
During the 2004/05 financial year the department was allocated an amount of R102, 921 million. The total expenditure for the year amounts to R73, 746 million or 72% of the adjusted budget. The R29, 175 million under spending is attributed to two grants namely; Food emergency grant (R9,021 million) and Regulation 11 Social Security Areas Grant (Back pay) (R20, 154 million).
The under-expenditure on the Food Emergency grant is attributed to delay in the finalization of the tender process under the auspices of the National Department of Social Development. The tender was only awarded in February 2005.
The under-expenditure on the Regulation 11 grant is attributed to the fact that no claimants applied for back pay.
Provincial Infrastructure Grant
The total amount allocated for provincial infrastructure amounted to R170, 035 million which includes provincial rollover of R10, 721 million for the department of Health. During the preparation of the preliminary outcome the departments reported that the entire amount has been spent. However, Provincial Treasury analysis based on the Annual Financial Statements as at 31 May 2005 depicts a different position.
The table below shows the breakdown per department
Department of Education.
The department has an under expenditure of R0, 629 million which is already committed to unfinished projects. The reason for under spending is the delay in the commencement of the project due to the tender process.
Department of Transport, Roads & Public Works
The conditional grant allocated for the 2004/05 year to the department was R106, 990 million, of which R97,569 million or 91% was spent.
The under spending is attributed to the non completion of the following projects.
Upgrading of the 57 KM of gravel road between Adriesvale and Transfrontier Park, Riemvasmak Bridge, Sutherland project and Kommagas. These projects were allocated R96, 052 million of which R86, 627or 90% was spent.
Department of Health
The department received R21, 575 million of which R10, 302 million or 48% was spent. The department reported that it experienced problems in the administration of tenders which caused delays in the commencement of capital projects. Most of these projects are on the initial stage resulting in the department having to incur under-expenditure. These relates to the upgrading of Kimberley Hospital, the departmental office block and the Garies Hospital.
Provincial Treasury does not implement any of the conditional grants explained above; however, the role of Provincial Treasury is to monitor the implementation of these grants and to report on the performance of the different grants.
During the current financial year, Provincial Treasury will be advertising and appointing a person with construction and building industry skills and knowledge to assist in the monitoring of capital projects to ensure that these projects are implemented in a manner that is effective and efficient in order to reach the desired objectives.
This move will enhance the capacity of Provincial Treasury to monitor the implementation of the capital projects and to enable Provincial Treasury to meaningfully participate in the deliberation during the performance evaluations of the projects implemented by the line function departments.
Monthly reports are received regularly from receiving departments and certified business plans have been submitted to the National Treasury. Spending in the current financial year is available for the month of April 2005 only. See attached April 2005 actual and projection schedule.
Most of the reasons provided by the departments indicate that generally the state of planning is generally poor in line function departments. There seem to be a need for line function departments to have strategic planners who will drive and continually assess the level of coordination between planning and budgeting to ensure that resources are correctly aligned to the planning for various projects.
During the current financial year, Provincial Treasury will, in partnership with National Treasury, be rolling out to all departments with provincial infrastructure grant the Infrastructure Development Improvement Programme (IDIP) Toolkit to assist departments better plan for the delivery of infrastructure in the province. This approach will be supported by the deployment of technical assistants to the affected departments
MEC for Finance & Economic Affairs