JOINT BUDGET COMMITTEE BRIEFING ON DEPARTMENT OF HOUSING EXPENDITURE FOR 200708

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JOINT BUDGET COMMITTEE BRIEFING ON DEPARTMENT OF
HOUSING EXPENDITURE FOR 2007/08

• 06 June 2008

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Outlay of presentation

• Summary of expenditure by programme
• Summary of expenditure by economic classification
• Analysis and reasons for current expenditure
  variances
• 3.1 Departmental vacancies
• 3.2 Procurement
• 3.3 Virements
• 4. Provincial transfer expenditure and outcomes
• 5. Medium-term budgeting challenges and risk
  management strategies

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1. Summary of expenditure by programme
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2. Summary of expenditure by economic
classification
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Analysis of variances and related reasons

• The Department spent R8,5 billion out of its
  allocation of R8,9 billion.
• Expenditure represents nearly 96 of the voted
  funds.
• Unspent funds amounts to R396 million or 4.4 of
  voted funds mainly as follows
• Funds retained in terms of the retention
  provisions of the Division of Revenue Act, 2007
  in respect of Eastern Cape and Free State (net
  R193m)
• Funds provided for the Social Housing Rental
  Programme allocated for transfer through the SHRA
  at R180m

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Analysis of variances and related reasons

• Compensation to employees
• Under-spending amounts to R555 000 and is mainly
  due to vacant positions which were not filled
  during the year
• Goods and services
• The total under-spending on this item amounts to
  R15,8 million.
• This under-spending is mainly due to the
  following
• Personnel related expenditure
• Outstanding portions relating to completion of
  the following projects
• Outsourcing execution of some portions of the
  Internal Audit plan
• Investigation on the development of alternative
  tenure options
• Savings on the transversal contract to manage the
  Debtors system implemented at various provinces
• Evaluation and reporting on the advance tranche
  payments made to municipalities to implement
  approved projects
• Investigation into a possible insurance cover for
  subsidy houses against vis major
• The nature of some of the projects is that they
  were planned to be completed at due dates that
  are beyond 31 March 2008 and therefore those
  projects straddle over two financial years, i.e.
  2007/08 and 2008/09, while the commitment can
  only be created in one year

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Analysis of variances and related reasons

• International organizations and Households
• The R394 000 savings are mainly due to the over
  provision for membership fees paid to the UN
  Habitat (Habitat Foundation) in US dollars
• Savings realized from the Capacity Building
  bursary scheme provision

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Analysis of variances and related reasons

• Machinery and equipment
• The total under-spending of R5,999 million is
  partly due to delays in the process of filling
  vacancies
• Equipment and Furniture provisions for posts that
  were in process of recruitment for which delivery
  was made after year end
• Generator ordered to provide electricity back-up
  which supplier experienced stock shortage as the
  item is imported

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Monthly Drawings and Expenditure Department total
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Expenditure per programme as at 31 March 2008
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Prog 1 Administration Sub-Programme
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Prog 1 Administration Economic Classification
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Monthly Drawings and Expenditure Prog 1
Administration
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Prog 2 Housing Policy Research and Planning
Sub-Programme
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Prog 2 Housing Policy Research and Planning
Economic Classification
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Monthly Drawings and Expenditure Prog 2 Housing
Policy Research and Planning
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Prog 3 Housing implementation support
Sub-Programme
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Prog 3 Housing implementation support Economic
Classification
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Monthly Drawings and Expenditure Prog 3 Housing
implementation support
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Prog 4 Housing Development Funding Sub-Programme
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Prog 4 Housing Development Funding Economic
Classification
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Monthly Drawings and Expenditure Prog 4 Housing
Development Funding
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3.1 Departmental vacancies

• By April 2008 the establishment of the Department
  totaled 406 posts of which 79 were vacant
  representing a vacancy rate of 19
• The new establishment was approved during 2007/08
  and the establishment increased to 480 posts of
  which 140 were vacant, representing a vacancy
  rate of 29.

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3.2 Procurement

• The Department has a Supply Chain Management
  Directorate
• Departmental procurement is centralised
• A supplier database is maintained as required by
  the Framework and acquisitions are made in line
  with the delegated authority limts set by NT
  guideline
• A bid adjudication committee is in place
• Evaluation committees evaluate all bids and
  submit recommendations to the bid adjudication
  committee.

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3.2 Procurement

• The department has a procurement policy which
  provides guidance on the process.
• Through the database use is made of SMMEs and
  HDIs.
• Provinces procurement arrangements tend to vary
  depending on the Provincial Treasuries guidelines
• Practice of issuing prequalification bidding
  processes is generally used to save on the time
  of mamaging acquisitions accepting that the
  subsidy quantum is predetermined.

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Procurement

• The following were outstanding projects at year
  end
• Purchase and installation of a standby generator
  at Govan Mbeki House.
• Outsourcing execution of some portions of the
  Internal Audit plan
• Investigation on the development of alternative
  tenure options
• Evaluation and reporting on the advance tranche
  payments made to municipalities to implement
  approved projects
• Investigation into a possible insurance cover for
  subsidy houses against vis major.
• Furniture and audio visual equipment purchased
  before the year end but only delivered after the
  end of March 2008

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3.3 Virements cont.
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3.3 Virements

• Programme 1 Administration
• The net effect of virements is an increase on
  programme allocation of R6 million as a result of
  the following
• R2 million was shifted from compensation of
  employees in Programmes 2, 3 and 4 respectively
  for the payment pensionable service costs in the
  Government Employees Pension Fund (GEPF) for the
  former members of non-statutory forces.
• Within the programme funds were shifted from
  capital assets to goods and services due to
  savings on capital assets. The savings was in
  respect of funds originally provided for the
  replacement of ministerial vehicles which were
  purchased in 2005/06 from funds received for the
  auctioning of a vehicle involved in an accident
  and savings in the Department.

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3.3 Virements cont.

• Programme 2 Housing Policy Research and Planning
• The net effect of virements is a decrease on the
  programme allocation of R12 million emanating
  from the following
• R2 million was shifted from compensation of
  employees to Programme 1 to be used for
  pensionable service costs in the Government
  Employees Pension Fund (GEPF) for the former
  members of non-statutory forces. It was a
  requirement that this contribution is funded from
  savings within the Department.
• R10 million was shifted to Programme 4 from Goods
  and Services for Thubelisha Homes to cover its
  operational expenditure.
• Within the programme the R921 000 was
  reprioritized to fund the increase in the
  UNHABITAT contribution in line with the new scale
  for contributions as per the resolution passed at
  a conference held with the United Nations during
  March 2007.

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3.3 Virements cont.

• Programme 3 Housing Implementation Support
• The net effect of virements is a decrease on the
  programme allocation of R3,750 million.
• The R2 million was shifted from compensation of
  employees to Programme 1 and was used for
  pensionable service costs in the Government
  Employees Pension Fund (GEPF) for the former
  members of non-statutory forces.
• Savings to an amount of R5,250 million arose due
  to the process of winding up the People's Housing
  Partnership Trust commenced to absorb its
  functions within the Department. The funds were
  shifted to Compensation of Employees and Goods
  and Services in programme 3.
• R7 million was shifted from goods and services to
  Programme 4 for Thubelisha Homes to cover its
  operational expenditure.

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3.3 Virements cont.

• Programme 4 Housing Development Finance
• The net effect of virements is a decrease on the
  programme allocation of R9,750 million.
• The R2 million was shifted from compensation of
  employees to Programme 1 and was used for
  pensionable service costs in the Government
  Employees Pension Fund (GEPF) for the former
  members of non-statutory forces.
• R6 million was shifted to Departmental Agencies
  Thubelisha Homes to cover its operational
  expenditure.
• R23 million was reprioritised and shifted to this
  programme for Thubelisha Homes to fund the
  operational expenditure of the public entity.
  R10 million was shifted from Programme 2 R7
  million from Programme 3 and R6 million from
  Programme 4.
• Savings to an amount of R5,250 million arose due
  to the process of winding up the People's Housing
  Partnership Trust which commenced during 2007/08
  to absorb its functions into the Department. The
  funds have been shifted to Compensation of
  Employees and Goods and Services in Programme 3.

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3.3 Virements cont.

• Programme 4 Housing Development Finance
• A virement amounting to R3 006 667 was shifted
  from NURCHA and R5 041 250 from the Social
  Housing Foundation to Thubelisha Homes for costs
  borne by that entity in respect of the eviction
  of illegal occupants at Delft Symphony in the
  Western Cape.

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4. Provincial transfer expenditure and outcomes
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4. Provincial transfer expenditure and outcomes
cont.

• Provinces managed to spend R8,200 billion out of
  a total available of R8,682 billion or a 94
  spending rate
• R8,150 billion was transferred to provinces who
  spent an average of 100 of these funds (5
  provinces spent 100, while EC spent 78, FS
  spent 86, LP spent 97, NW spent 90)
• R500 million R100 million respectively stopped
  from EC FS to be re-allocated to GP (R350
  million) to NC (R100 million) and
• R150 million was un-allocated.

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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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Transferred funds against expenditure per month
for the period 1 April 2007 to 31 March 2008
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5. Medium-term budgeting challenges and risk
management strategies

• Over the 2008 MTEF the Departments budget is
  dominated by transfer payments (95 of total
  allocation).
• The large growth will require proportional growth
  in the capacity to spend out of provincial
  equitable share
• Challenge of the increasingly changing inflation
  environment will put immense pressures on the
  resources and the sector at large
• Enhancement of monitoring and evaluation for the
  Housing Sector at provincial and local government
  levels.

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5. Medium-term budgeting challenges and risk
management strategies

• Improvement and enhancements of the planning by
  the sector.
• Facilitate and support the development and
  implementation of recovery plans to unblock
  stalled projects (in respect of 150 projects).
• Facilitate and support the development and
  implementation of 120 informal settlement
  upgrading projects. Development of a pipeline
  for CoDHI (social housing) projects in all 9
  provinces for delivery of at least 7 000 housing
  units.

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5. Medium-term budgeting challenges and risk
management strategies

• Rationalization of housing institution by the
  closure of Thubelisha and Servcon Housing
  Solutions and the establishment of the proposed
  Housing Development Agency.
• Improvement of access to housing finance and
  facilitating a single housing market by
  monitoring trends in housing investment.
• Facilitating the approval of credit linked
  subsidies to decrease complaints relating to the
  Home Loan and Mortgage Disclosure Act.

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Thanks