KZN MEC for Finance and Economic Development

1
KZN MEC for Finance and Economic Development

• Presentation to the Select Committee on Finance
• On 1st Quarter Expenditure of 2008/09

• 26 August 2008

2
Presentation outline

• Analysis of 2008/09 first quarter
• Analysis of Personnel
• Analysis of Non-Personnel
• Analysis of Capital expenditure
• Analysis of Conditional Grant expenditure
• Monitoring Mechanism within Provincial Treasury
• Conclusion

3
KZN Expenditure by Department
It should be noted that the table above includes
the approved provincial roll over of R33.491
million relating to Amafa and is reflected
against the Office of the Premier.
4
KZN Expenditure by Economic Classification
5
Analysis

• Summary
• In aggregate total expenditure at end of 1st
  quarter of R12.8 billion or 25.1 per cent of main
  budget
• Projected end of year over expenditure of R2.245
  billion.

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Analysis (2)

• Personnel
• Expenditure at the end of 1st quarter of R7.2
  billion or 25.5 per cent of main budget
• Projected end of year over expenditure of R2.337
  billion
• The high level of spending against Compensation
  of employees was mainly due to the Departments of
  Education and Health recording higher than
  anticipated expenditure resulting from
  implementation of the respective Occupational
  Specific Dispensation for these two sectors. A
  number of departments have also indicated that
  the agreed-to 10.5 per cent wage agreement, which
  exceeded the budgeted 7.1 per cent, was also
  placing pressure on the personnel budgets.

7
Analysis (3)

• Non-Personnel
• Goods and services, Other and Transfers and
  subsidies largely on track with expenditure at
  approximately 25 after the end of the 1st
  quarter
• Projecting to be minimally over spent by year
  end
• Capital Payments analysed in the following
  slides.

8
Capital Expenditure by Department
9
Actual Projected Expenditure per Quarter
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Analysis

• Summary
• In aggregate total expenditure at end of 1st
  quarter of R1.063 billion or 19.2 per cent of
  main budget
• Projected end of year under expenditure of R175.1
  million.

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Analysis (2)

• Education
• Expenditure of R124.6m or 9.9 of main budget
• Despite low level first quarter expenditure,
  minimal projected end of year over expenditure of
  R2.7m
• Further, department has indicated that correcting
  journal entry of R40m will be passed from
  maintenance to capital.
• Health
• Expenditure of R185.2m or 14.8 of main budget
• Projected under expenditure of R50m against
  Machinery and equipment mainly due to drive by
  department to reduce projected over expenditure
  by the department
• Despite fairly low level of expenditure in first
  quarter, department is projecting to fully spend
  budget against Buildings and other fixed
  structures
• Low level of expenditure in 1st quarter relates
  to late submission of invoices by implementing
  agents.

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Analysis (3)

• Transport
• Largest capex budget representing 45.8 of
  provincial capex budget
• Expenditure of R712m or 28.1 of budget
• Similar spending trends to previous years which
  shows good spending levels
• Projected under expenditure of R128.3m at year
  end against capex budget
• This projected under expenditure results from the
  misclassfication emanating from SCOA toning. This
  will be corrected by journal entries.
• Other
• Actual expenditure of R40.7m or 8.4 of the main
  budget
• Low spending mainly in respect of Department of
  Agriculture and Environmental Affairs where
  invoices were received late from one of the
  implementing agents
• Fairly minimal projected over expenditure of R546
  thousand at year end.

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Capital expenditure by economic classification
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Analysis Economic classification

• Buildings other fixed structures
• Spending fairly low at 17.8 at the end of the
  first quarter
• Projected under expenditure is mainly in respect
  of Transport where correcting journal entries
  will be passed (SCOA Toning).
• Machinery equipment
• Spending on machinery equipment on target at
  25.8 of main budget at the end of the 1st
  quarter
• Projected under expenditure at year end resulting
  mainly from enforced savings by Health to reduce
  the departments projected over expenditure.
• Other
• Other is mainly for software and purchases of
  land
• Spending largely on track at the end of the 1st
  quarter at 21.2 of the main budget
• The projected over expenditure is fairly minimal
  at R1.2m at year end and relates mainly to land
  purchased by Housing for construction of a head
  office complex in Pmb for which savings were
  identified in other areas and a virement will be
  processed.

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Conditional Grants
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Conditional Grant - Analysis

• Infrastructure Grant to Provinces not included
  since it forms part of Capex expenditure and
  i.t.o. DORA does not require separate reporting
• Expenditure at less than 25 of budget at end of
  1st quarter on-
• Comprehensive Agric. Support Programme (CASP)
  3.1
• Land Care Programme 16.6
• HIV and AIDS (life skills education) 8.8
• National School Nutrition Programme 18.5
• Comprehensive HIV and AIDS grant 6.8
• Forensic Pathology Services 14.2
• Health Professionals Training and Development
  1.7
• Hospital Revitalisation 3.0
• Integrated Housing and Human Settlement 14.1
• Devolution of property rate funds grant 0.0
• Community library services grant 6.2 and
• Mass Sport Recreation 16.6.

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Agriculture Conditional Grant

• Comprehensive Agricultural Support Programme
• Spending low at only 3.1 of main budget
• Follows similar trends to previous years and is a
  concern to KZN Treasury
• Historically trends have shown that expenditure
  increases in latter part of year but does not
  catch up completely by year end
• Department has indicated that expenditure will
  improve once Food Security packs tender has been
  finalised (R44m) and once standing contracts for
  land reform projects are in place
• Projecting to fully spend budget by year end.
• Land Care Grant
• Low spending at 16.6 of budget, yet an
  improvement on prior years spending pattern
• Implementation often dependent on progress by
  Land Affairs
• Projecting to spend full budget.

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Education Conditional Grants

• FET Recapitalisation Grant
• Spending on target
• Full amount received to date (R81.486 million)
  has been transferred to FET Colleges
• Department is projecting to fully spend the
  budget by year end
• Table below indicates the amounts actually spent
  by the colleges at the end of the 1st quarter.

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Education Conditional Grants

• HIV and AIDS (Life Skills)
• Low level of spending at 8.8 of budget
• Spending affected by delay in finalisation of
  tender relating to printing of life skills
  material
• Department is projecting to fully spend the
  budget by year end.
• National School Nutrition Programme Grant
• Expenditure seems low compared to budget at 18.5
  but department indicated that 1st quarter
  projections were exceeded as a result of invoices
  from prior year being processed
• Department is projecting to fully spend the
  budget by year end.

20
Health - Conditional Grants

• Comprehensive HIV and AIDS
• Low level of spending at 6.8 of budget
• Spending low due to delay in interface between
  BAS and MEDVAS
• Department projecting to fully spend the budget
  by year end.
• Forensic Pathology Services
• Low spending at 14.2 of budget
• This grant historically has had low expenditure
• Department attributes 1st quarter low expenditure
  to delays in receiving invoices from the
  Department of Works
• Four sites have been handed over to contractors
  in the 1st quarter and expenditure is expected to
  improve over the next three quarters
• Department is projecting to fully spend the
  budget by year end.

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Health Conditional Grant (2)

• Health Professional Training and Development
• Low level of spending at 1.7 of budget
• Expenditure low due to journals not timeously
  passed to the grant
• The department is projecting to fully spend the
  budget by year end.
• Hospital Revitalisation Grant
• Low level of spending at 3 of budget
• Department attributes this to late invoicing by
  one of its implementing agents
• The department is projecting to fully spend its
  budget by year end.
• National Tertiary Services Grant
• Good level of spending at 33.6 of budget
• Department is projecting to fully spend its
  budget by year end.

22
Housing Conditional Grant

• Bulk of the departmental budget relates to the
  Integrated Housing and Human Settlement
  Development Grant
• Expenditure is low at 14.1 of budget
• Level of spending lower than projected due to
  delays in payment of transfers to eThekwini for
  the Hostel Redevelopment programme
• Level of spending is expected to improve in next
  three quarters and the department is projecting
  to fully spend its conditional grant budget by
  year end.

23
Works Conditional Grant

• Devolution of property rate funds grant
• Department did not project to spend any funds in
  the first quarter
• Department is projecting to spend full
  conditional grant over remaining three quarters
  of the year.

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Arts, Culture Tourism Conditional Grant

• Community library services grant
• Low expenditure at 6.2 of budget
• Low level of spending can be attributed to delays
  in the purchase of books due to the
  implementation of a new book buying strategy,
  delays in the payment of consultants fees in
  respect of the Mbazwana library building project,
  as well as delays in the invoicing of
  connectivity costs by SITA
• Department is projecting to fully spend
  allocation by year end.

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Sport and Recreation Conditional Grant

• Mass Sport Recreation
• Expenditure at 16.6 of budget
• This is in line with historical trends, where
  expenditure in the beginning of the year is
  usually slow but picks up in the latter part of
  the year
• Department is projecting to fully spend
  allocation by year end.

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Monitoring Mechanisms

• KZN Treasury closely monitors and evaluates
  expenditure of provincial departments through-
• Monthly IYM report and
• Quarterly meetings between Head of Treasury,
  Senior Provincial and National Treasury Officials
  and Departments (HOD, CFO and Senior Line
  function officials).
• The main objectives of quarterly meetings is to
• Monitor performance
• Identify possible areas of risk.
• Quarterly reports submitted to-
• Provincial Executive Council
• KZN Portfolio Committee on Finance and Economic
  Development and
• National Treasury.

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Conclusion

• Capex expenditure at 19.2 marginally below the
  straight line benchmark for the quarter of 25 per
  cent
• Suggests that provincial infrastructure planning
  and implementation is improving
• KZN Treasury working to improve the claims and
  payment process between Works and other
  implementing agents to ensure that payments are
  captured properly and on time on BAS.
• Most conditional grant spending needs to be
  improved through-
• More vigorous monitoring and reporting
• KZN Treasury is putting in place specific
  measures to improve the performance of
  conditional grants

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THANK YOU!