Limpopo Provincial Treasury

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Limpopo Provincial Treasury

• Presentation to the NCOP
• 20 November 2006

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Table of Contents

• Conditional Grants spending as at 30 September
  2006
• Observations on Conditional Grants
• Capital Provincial Infrastructure Grant
  spending as at 30 September 2006
• Observations on Capital Provincial
  Infrastructure Grant
• Reasons for under spending

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Observations

• The capacity to spend has improved as department
  spent 11 more as compared to the same period of
  the previous financial year.
• The area of concern is on the following Grants
• Education
• HIV/AIDS 24

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Observations cont.

• Health
• NTSG 28
• FPSG 37
• Housing
• IHHSD 31
• Sport
• MSRPP 17
• Agriculture
• CASP 28

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Observations cont.

• The following conditional grants shows a healthy
  spending trends
• Education
• FET 50
• Health
• Hospital Revitalization 57
• Agriculture
• Land Care Programme 50
• The under spending clearly demonstrate that
  departments approved poor business plans or there
  is lack of capacity to implement programmes and
  projects

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Corrective Action

• All Conditional Grants business plans for 2007/8
  MTEF will be evaluated by treasury in
  consultation with departments to ensure that they
  are easy to implement and monitor

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Infrastructure Expenditure Trends
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Expenditure Sept 06
11
Expenditure Sept 06 incl. rollovers
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Provincial Infrastructure Grant
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Provincial Infrastructure Grant Incl.
adjustments
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Observations

• Expenditure has been slow to pick up across all
  sectors - the momentum is been slow to build up
  due to late project starting times (expenditure
  in subsequent months is affected)
• Total expenditure at 39 (with 50 of the time
  gone) versus 28.7 for the same period last year
• Spending on PIG is at 30 versus 23.8 for the
  same period last year
• When rollovers and other adjustments are
  considered, picture changes for the worse
• With total spending going down to 32 (2005/06
  24.9) and PIG to 23.1 (2005/06 23.0)

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Observations

• Spending on capital continues to be a challenge
• Key hiccups identified are
• Infrastructure planning (selection of the
  projects and business cases not done on time
  etc.)
• Delay in the procurement processes
• Delays to handover sites due to geo-tech
  assessment tests being performed just before
  construction as a result of poor planning
• Departments not meeting their own cash flow by
  projections

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Corrective action

• Multi-year planning processes need to be
  strengthened within departments (to avoid
  procurement of projects in year of
  implementation)
• Departments need to review their technical
  capacity requirements, i.e. staff
• Close monitoring and imposition of heavy
  penalties on underperforming contractors

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Corrective action cont.

• Education
• The department has procured the services of a
  short-term Technical Assistant to support
  infrastructure delivery in the department
• The department has also advertised (June 06) for
  the services of an infrastructure operational
  support team (short-term). The bid was evaluated
  in October and an award will be made in due
  course.
• Health Social Development
• Close monitoring of implementing agents and
  contractors.
• With hospital projects, these have been packaged
  in two lots to speed up delivery.
• Established developers are being encouraged to
  form joint ventures with CIDB registered emerging
  contractors.

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Corrective action cont.

• Agriculture
• A work scheduled was drawn up proposing for the
  service providers to do resource audit as well as
  drawing a Masterplan within 15 days on whose
  basis explicit permission would be given for
  final designs and actual physical implementation
  of projects. Again it took a long time for
  service providers to comply.
• Due to the above problems, a decision was taken
  to break the Masterplans into implementable
  elements without compromising the quality and
  integrity of the whole project. Items such as
  soil and land surveys, enlargement and lining of
  leydams, repairing of bulk water conveyance
  systems and repair or replacement of pumps is now
  done separately.
• The analysis of the unit costs submitted by
  Service Providers during tendering has been
  completed and one-to-one meetings have been
  arranged with Service Providers. Resolution of
  this matter will help expedite the submission of
  acceptable Bills of Quantity (BoQ) costs and
  speedy processing of invoices.

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Corrective action cont.

• Agriculture
• An additional engineer from ARDC (state-owned
  entity within the department) has been drafted in
  to help with the processing of designs and
  related technical work.
• The Bid Committee has ratified the appointment of
  the Construction Supervision Service Provider in
  yet another effort to expedite projects
  implementation

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Corrective action cont.

• Roads Transport
• Proactive management of projects, e.g. shifting
  of funds to fast-moving multi-year projects that
  are already running when delays are encountered
  in new projects.
• The projects are outsourced to the private sector
  with the Roads Agency doing project management.
  This enables the department to deliver much
  quicker, despite the legal challenges experienced
  this year which delayed project implementation,
  the department projects to spend all its budget.
• The department has a very good project management
  capability within the Roads Agency.
• In the prior financial year, some districts in
  the province experienced very heavy rains and
  this affected certain projects, this was also
  compounded with the fact that most of the big
  contracts were awarded in September. The
  department was still able to spend 95 of its
  budget.

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Corrective action cont.

• Infrastructure Delivery Improvement Programme
  (IDIP)
• Phase II of IDIP has commenced (November 2006)
• Two Technical Assistants (TAs) have been seconded
  to the departments of Public Works and Education
• The TAs will help the departments streamline
  planning and delivery processes during the 12
  month Technical Assistance programme
• This intervention is expected to have an impact
  on infrastructure expenditure and delivery in the
  medium to long-term as it seeks to address
  systemic shortcomings in departments
  infrastructure delivery mechanisms, e.g. planning
  processes, procurement planning, capacity issues,
  etc

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Corrective action cont.

• IDIP..
• A TA will be deployed to the department of Health
  in the new year
• The Department of Roads Transport enjoys
  limited support from a Technical Assistant
  stationed at National Treasury.
• IDIP also seeks to institutionalize multi-year
  planning processes in departments to prevent
  planning, procurement and implementation being
  done in the same year - this inevitably leads
  delays. IDIP extends planning horizons of
  departments.
• It is expected that once departments are fully
  aligned with IDIP principles (e.g. proactive
  multi-year planning), under-expenditure will be
  eliminated.

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ENDTHANK YOU!!!
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Conditional Grant reasons for under spending
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Reasons for underspending provided by the
department

• Education
• HIV AIDS
• Programmes and workshops are run and conducted
  only during school holidays thus hampering
  substantial progress as the same target group is
  trained on Revised National Curriculum Statement
  which is a national priority.
• National School Nutrition Programme
• There is always delays in submission of
  suppliers invoices and some of those submitted
  are erroneous and have to be referred back for
  rectification thus causing delays in processing
  payments.

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Reasons for underspending provided by the
department--contd

• Health
• HIV and AIDS
• Enormous exercise of verification and payment
  processes of 287 NGOs at R 12,5million per
  quarter
• Delay in filling of vacant posts for which
  interviews were conducted. Recommended candidates
  had to serve notices at their previous
  workstations.
• Delay in completion of fixed structures
  (Buildings/Containers) intended to increase
  working space.
• 26 Buildings/Containers on construction. Payment
  progress certificates started in the second
  quarter.
• Shortage of qualified medical personnel in posts
  earmarked for ARV and Step Down Facilities

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Reasons for underspending provided by the
department--contd

• Health
• Forensic/Pathology Services.
• Delay in delivery of purchased vehicles due to
  conversions required on same vehicles to suit
  mortuary specifications. These processes take
  longer than five months.
• Phased/stepped purchases of 19 mortuary vehicles
  to the total amount of R 3,2 million for the year
  is in progress. At the end of the quarter
  purchases orders for 12 vehicles amounting of
  R2,6 million were issued.

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Reasons for underspending provided by the
department--contd

• Health
• National Tertiary Services.
• Shortage of qualified medical personnel in posts
  earmarked for Specialists at the Tertiary
  Hospital.
• Delay in drawing of Specialists Medical
  Equipments due to lack of Specialists knowledge
  on type of equipments required for specific jobs.
  Overall amount involved is R 22 million, and list
  of equipments in question follows hereunder
• - 2 Portable Ventilators , 2 Bispectral Index
  Systems, 4 Infusion pumps, 2 ICU Ventilators, 2
  fibre-optic and light source.
• Delay in delivery of purchased equipments due to
  their extent of sophistication and buildings
  alterations needed on installation points. The
  statement is with regard to an amount of R7, 2
  million on orders as at the end of the quarter.
  Another amount of R 3 million worth of
  equipments could not be processed for payment at
  the Tertiary Hospital due to alterations needed
  to be made on the building.

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Reasons for underspending provided by the
department--contd

• Health
• Health Professional Training and Development.
• Delay encountered in recruitments and
  verifications for appointments of Specialists in
  Tertiary and Regional Hospitals.
• Delay in delivery of purchased equipments due to
  their extent of sophistication and buildings
  alterations needed on installation points. This
  statement is with regard to the total amount of R
  2, 3 million committed on purchases orders placed
  by Regional/Provincial and the Tertiary
  Hospitals. Lists of break down of commitments on
  these orders include amongst others Anaesthetic
  Machines, Transport Incubators, Ventilator icu,
  Fluid warmers, x-ray machine, Craps, mobile x-ray
  units,
• Training and development process that follows
  specific schedules with external service
  providers.
• Sizable payments of bursaries for deserving
  students will be effected in January/February
  2007

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Corrective measures

• Appointment of staff done. Staff linked directly
  with the Conditional Grants to avoid delays in
  expenditure posting.
• Suppliers are being contacted to provide invoices
  on completed work in order to allow a progressive
  payment that matches with the grants cash flow.
• Follow ups are constantly made with Suppliers of
  Vehicles. First trench delivery is expected in
  the third quarter.
• Specification process has been completed.
  Adjudication of Specialist Equipments Tender in
  progress. Purchases orders will be placed in the
  third quarter.
• Department has entered into partnership with
  United Nations Volunteers in order to intensify
  staff recruitment programmes through its program,
  UNDP.

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Reasons for underspending provided by the
department--contd

• Local Government and Housing
• Integrated Housing and Human Settlement
  Development
• The under expenditure is mainly due to late
  submission of Geo-tech reports, late
  identification of development areas, internal
  project management capacity, shortage of building
  material (bricks), late submission of beneficiary
  forms by municipalities and late pronouncement of
  subsidy quantum.

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Corrective measures

• Engineers and contractors are closely monitored
  to ensure adherence to project implementation
  time table.
• Creation of additional project management
  capacity, i.e. PMU establishment and hiring of
  more Project Managers.
• The department use trilateral agreement to
  purchase building materials for the Developers
  (Bricks).

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Reasons for underspending provided by the
department--contd

• Agriculture
• CASP
• The underspending resulted from building of
  crush pens, auction pens, dipping tanks, piggery
  houses, and holding pens which require more than
  a month to be completed.

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Corrective measures

• Due to the above problems, a decision was taken
  to break the Masterplans into implementable
  elements without compromising the quality and
  integrity of the whole project. Items such as
  soil and land surveys, enlargement and lining of
  leydams, repairing of bulk water conveyance
  systems and repair or replacement of pumps is now
  done separately.
• Additional Capacity
• Internal staff members have undergone training in
  Irrigation Design as well as Project Management
  during July /September 2006.
• An additional engineer from ARDC has been drafted
  in to help with the processing of designs and
  related technical work.
• Repriotization plans are in place to implement
  the Biofuels project for R6, 5mill in Sekhukhune.
  Reprioritization to pressing Land reform project
  of Tea Estates in Vhembe
• Engineering Companies have been contracted under
  the RESIS program to support other programs on
  engineering related activities.
• Project Management system - PS Next has been
  adopted acquired in September 2006 to improve on
  the Database and Reporting.
• A shift from micro projects to clustering,
  massification and mega projects to improve on the
  resource use and impact visibility has been
  adopted. The numbers of projects are reduced in
  line with HR capacity to implement.
• The department has also embarked on the project
  massification approach which will also speed the
  processes in term of bulk management and spending

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Reasons for underspending provided by the
department--cont

• Sport
• Mass Sport and Recreation Participation Programme
• Underspending as a result of delay in the
  advertisement and awarding of tender for sport
  equipment.

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Corrective measures

• The tendering process will be finalized in
  November and purchases will be done during the
  same month. Payments thereof will be done within
  the first two weeks of December 2006.

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Capital and Infrastructure reasons for
underspending
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Reasons for under-spending

• Education
• Late project starting times.
• Schools under trees 95 total cost R102, 3M
• 28 projects awarded and handover was delayed due
  to the completion of Geo-Tech assessments.
• 16 projects under construction
• Award of 15 projects was only finalised at the
  end of July 2006.

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Reasons for under-spendingcontd

• Education
• Storm Damaged Schools 239 total cost R272M
• Adjudication of bids for 70 projects was only
  finalised during the last week of June 2006.
• Adjudication of bids for 67 projects was
  finalised during the second week of July 2006.
• Bids for 2 x 8 schools advertised on the 15 July
  2006 and site hand over in August 2006.
• Bids for 40 schools were advertised in the
  bulletin of 30 June 2006. Sites were handed over
  in August 2006.

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Reasons for under-spendingcontd

• Education
• New Schools 3 total cost R47M
• Contractors took sites in July 2006. surety

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Reasons for under-spendingcontd

• Roads Transport
• The department undertakes new capital projects
  through the Roads Agency Limpopo (RAL), an agency
  within the department.
• Late in the 2005/06 financial year, the agency
  was taken to court by bidders who challenged its
  procurement policies and awards for certain
  projects. This forced the agency to refine its
  procurement policies and procedures and awards in
  line with the court decision.
• The projects that had been advertised in March
  2006 were withdrawn/cancelled to enable the legal
  department to incorporate the new guidelines into
  the advertisements to avoid further legal
  challenges.
• The number of projects that had to be
  re-advertised is 52 projects with a value of
  R322, 5M.

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Reasons for under-spendingcontd

• Health Social Development
• Late appointment of contractors which led to
  projects starting late.
• Clinic Upgrade Programme 20 2006 - 2007
  total cost R49, 6M
• Bids for 10 clinic projects were advertised on 30
  June 2006 and handed over in August 2006.
• Bids for 6 projects were advertised on the 15
  July 2006 and sites handed over in August 2006.

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Reasons for under-spending cont.

• Health Social Development
• Mortuaries
• Site handed over for Tshilidzini project on 3rd
  July 2006 cost R7, 6M.

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Reasons for under-spending cont.

• Agriculture
• Revitalisation of Smallholder Irrigation Schemes
  (RESIS) total cost R170M
• R70 mil was budgeted for bulk infrastructure
  services at various schemes. R100 mil was
  budgeted for installation of infield
  infrastructure. The plan envisaged the
  appointment of Turnkey Service Providers by 1st
  April 2006 to perform work on 57 schemes some of
  whom were work carried over from 2005.
• Due to the experience of 2005 where-in it was
  found that Service Providers were using dubious
  prices and unacceptable mark-ups, it was decided
  to include the provision of pre-approved unit
  prices by prospective bidders during the
  tendering stage. It took a longer time for
  bidders to comply with this requirement as it
  negatively impacted on their profit margins.

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Reasons for under-spending cont.

• Agriculture
• Because of the new tender process as explained,
  service providers were only officially appointed
  at the end of June 2006.
• Tenders for poultry houses were concluded and
  cancelled due to inability of the service
  provider to deliver.
• Some delays are caused by the hesitation from
  others to take-over work previously done by other
  service providers whose contracts were terminated
  by LDA in 2005. These service providers site such
  issues as professional liabilities for integrity
  of designs done by others, to lack of adequate
  information from previous reports, e.g. land
  surveys not being geo-referenced, etc

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Reasons for under-spending cont.

• Local Govt. Housing
• Review of all service providers contracts led to
  delays in projects starting times

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Reasons for under-spending cont.

• Public Works
• R 1 million for land development has not been
  spent. Tenders for the development of landscaping
  projects closed on 10th July 2006 and they are at
  adjudication stage. Expenditure is expected to
  start in October 2006.
• An amount of R3, 5 million for the refurbishment
  of the Parliamentary village was not spent
  because the projects are at tendering stage.
  Expenditure is expected to start in October 2006.
• Other projects linked to the construction of 11
  MECs houses amounting to R2, 369 million, were
  started in July 2006, and planning design of
  the relocation of Legislature to Polokwane is
  still continuing.
• Construction of 11 MEC houses only started in May
  2006 with the first claim for the project
  submitted at the end of June 2006 for payment.