Provincial Treasury Western Cape NCOP Select Committee on Finance Public Hearings Conditional Grants and Capex - PowerPoint PPT Presentation

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Provincial Treasury Western Cape NCOP Select Committee on Finance Public Hearings Conditional Grants and Capex

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Title: Provincial Treasury Western Cape NCOP Select Committee on Finance Public Hearings Conditional Grants and Capex


1
Provincial Treasury Western Cape NCOP Select
Committee on FinancePublic HearingsConditional
Grants and Capex
  • 16 January 2006

2
Outline
  • Conditional grant allocations
  • Transfers
  • CG cash flow management
  • Monitoring transfers
  • Division of Revenue Act
  • Expenditure
  • Monitoring expenditure
  • Service delivery agreements
  • The way forward

3
Conditional Grant Allocations
4
CG Allocations
Conditional grant allocations 2005/06
5
CG Allocations (2)
6
Conditional Grant Transfers
7
CG Transfers
Reconciliation of Conditional Grant Payment
Schedule
8
CG Transfers (2)
  • Health
  • Health grants withheld/delayed from time to time.
    This includes the National Tertiary Services
    Grant and the Health Professions Training and
    Development Grant which according to DORA 2005
    may not be withheld
  • Reasons cited by the National Department of
    Health include
  • National Tertiary Services Grant Internal
    problems within the National Department of
    Health
  • Health Professions Training and Development
    Grant systems were down
  • Hospital Revitalisation Grant slow spending by
    the Provincial department of Health
  • Hospital Management and Quality Improvement
    Grant Provincial Department of Health failed to
    submit the required quarterly report

9
Conditional Grant - Cash Flow Management
10
CG Cash Flow Management
  • Conditional Grant transfers mostly received
    according to payment schedule issued by National
    Treasury
  • Funds are transferred directly to the exchequer
    account
  • Money transferred to accounts on a regular basis
    to cover scheduled payments
  • Liaise with Provincial and National Departments
    if transfers delayed to establish problem
  • Action with relevant parties to address
    accordingly
  • Continuous follow-up to ensure scheduled transfer
    effected

11
Monitoring Transfers
12
Monitoring transfers
  • The Western Cape has experienced some problems
    with the late transfer of Conditional Grant
    payments in 2005/06
  • As there is no formalised process for monitoring
    these transfers, cash management only becomes
    aware of the intention to withhold transfer on
    day transfer expected as per payment schedule
  • PT recommended a more formalised process to NT to
    ensure PT alerted of a national departments
    intention to withhold funds timeously, this
    recommendation was subsequently taken up in
    Practice Note 3 of 2005

13
Monitoring transfers (2)
  • This process requires National Departments to,
    when giving a receiving officer notice of its
    intention to withhold funds, send a copy of the
    notice to National Treasury, who will inform
    Provincial Treasury of the intended delay
  • National Departments are still failing to comply
    with DORA 2005 and Practice Note 3 requirements
  • Provincial Treasury subsequently proposed that
    National Treasury
  • ensure that transferring departments are aware of
    conditions placed on them in terms of DORA and
    Practice Note 3 of 2005
  • Explore ways to ensure that transferring
    departments adhere to the payment schedule and
    take necessary precautions to ensure that
    provinces receive funds timeously

14
Monitoring transfers (3)
  • All 2005/06 business plans have been approved and
    Service Level Agreements signed
  • Provincial Treasury in the process of contacting
    departments to ensure that business plans for
    2006/07 have been submitted to their national
    counterparts for approval in accordance with the
    conditional grant frameworks.

15
Division of Revenue Act
16
Division of Revenue Act
  • Shortcomings in Division of Revenue Process
  • Section 33(2) requires National Departments to
    notify receiving officers of intention to
    withhold transfers, providing opportunity for
    Departments to submit reasons as to why
    allocation should not be withheld
  • No requirement for Provincial Treasuries (PT) to
    be informed while NT only needs to be informed if
    funds are to be withheld for more than 30 days
  • Administrative burden of negligible grants i.e.
    Land Care Grant R2,5 million with numerous
    reports required
  • Cash constraints place upon Province when funds
    withheld as commitments exist
  • Overlapping of measurable outputs
  • Conditions of grants limit flexibility

17
DORA review process
  • Intergovernmental fiscal relations act (Act 97 of
    1997) requires National Treasury to consult
    provinces and municipalities when drafting DOR
    bill
  • Treasury circular sent to line departments
    requesting departmental concerns and
    recommendations regarding DORA 2005 to be
    considered in DORA 2006.
  • Meetings were to be scheduled with line
    departments where deemed necessary based on
    inputs received from departments.
  • Consolidated input to be sent to National
    Treasury, awaiting first draft on DORA 2006 to
    make additional comments

18
Expenditure
19
CG Expenditure - Agriculture
Agriculture CG Expenditure as at 31 December
2005
20
CG Expenditure Agriculture (2)
  • Challenges to overcome
  • Provincial infrastructure (PIG)
  • Planning and survey of projects and the approval
    of plans by the engineering section is time
    consuming and must take place before the tender
    process can commence
  • Difficulties experienced with tender process,
    tender applications were referred back by the
    tender committee and have to be re submitted
  • Seasons harvest time of crops during the fourth
    quarter leads to increased procurement, repair
    and maintenance of capital equipment

21
CG Expenditure Agriculture (3)
  • Land care grant
  • The eradication of invasive plants is seasonal as
    they start growing in summer.
  • Project execution is dependent on farmers who
    manage the project and only commences once
    farmers have harvested their crops
  • Comprehensive agriculture support programme
  • Lack of community participation and agreement on
    projects
  • Difficulty in getting commitment from communities
    when discontinuing a project the process of
    finding alternative projects and reallocating
    funds is a lengthy process
  • Seasonal expenditure some projects can only
    commence in planting season
  • Memorandum of agreement between Department and
    implementing agents is lengthy this process
    must be finalised before transfer payments can be
    made

22
CG Expenditure - Education
Education CG Expenditure as at 31 December 2005
23
CG Expenditure Education (2)
  • Challenges to overcome
  • Provincial infrastructure (PIG)
  • The Department received additional funds in the
    adjustments estimate for projects that will
    commence in January 2006
  • Inefficient planning processes and delays in
    technical tendering processes are being tackled
    systematically
  • National school nutrition programme
  • Delay in the submission of claims by service
    providers results in slow payment by the
    department
  • Moving forward the Department will transfer funds
    directly to schools to allow them to set up
    mobile kitchens with the assistance of EMDCs for
    the distribution of feeding schemes

24
CG Expenditure - Health
Health CG Expenditure as at 31 December 2005
Comprehensive HIV and Aids R10 million over
expenditure to be funded through equitable share
funds
25
CG Expenditure Health (2)
  • Challenges to overcome
  • Provincial infrastructure grant (PIG)
  • On site problems
  • The late submission of claims
  • Journalising of expenditure wrongly classified
  • Limited project management capacity to manage
    vast number of projects
  • Hospital management and quality improvement
  • The creation of additional posts took longer than
    expected

26
CG Expenditure - Health (3)
  • Hospital revitalisation programme
  • Slow performance of contractors on various
    projects
  • Worcester Hospital a shopping centre is being
    built in the same area resulting in competing for
    resources results in delay in construction
  • Paarl hospital Delay in the approval of the
    business plan
  • The Department proposed the purchase of two
    linear accelerators for Tygerberg Hospital to
    offset the under expenditure but as no business
    plan had been approved this was not possible
  • Integrated nutrition programme
  • Claims outstanding from the City of Cape Town and
    rural regions

27
CG Expenditure - Health (4)
  • Forensic pathology services
  • Voted in the 2005/06 adjustments estimate
  • First tranch received in December
  • R5 million transferred to the Department of
    Transport and Public Works for the purchase of
    motor vehicles
  • Expenditure for the remaining R9,583 million is
    dependent on approval by the National Department
    of Public Works, the National Department of
    Health and SAPS.

28
CG Expenditure Local Government and Housing
Local government and Housing CG Expenditure as
at 31 December 2005

29
CG Expenditure Local Government and Housing
(2)
  • Challenges to overcome
  • Human settlement and redevelopment grant
  • Tender approval process taking longer than
    expected
  • Maintenance projects that will not be completed
    by the end of the financial year
  • Disaster relief
  • Funds will only be transferred in March 2006

30
CG Expenditure Social Services
Social services and poverty alleviation CG
Expenditure as at 31 December 2005
31
CG Expenditure Social Services (2)
  • Challenges to overcome
  • Integrated Social Development Services
  • Looking at more a integrated way of poverty
    alleviation (working together with other
    departments and local government) resulted in
    delays
  • Lag between IYM figures and actual spending,
    substantial spending has taken place
  • Social Assistance Administration
  • Establishment for support services staff for
    SASSA has not been approved by National
    Department of Social Development
  • Social Services pay administrative costs and
    claim back from SASSA

32
CG Expenditure Transport and Public Works
Transport and public works CG Expenditure as at
31 December 2005
The Department has spent 94.4 per cent of the
budgeted amount for the grant as at 31 December
2005. This is above the national spending
benchmark of 75 per cent.
33
Capital Expenditure
Capital expenditure as at 31 December 2005
Capital expenditure is within an acceptable range.
34
Infrastructure Expenditure
Preliminary infrastructure expenditure as at 31
December 2005
35
Infrastructure Expenditure (2)
  • Challenges to overcome
  • Bottlenecks in the procurement process
  • Inefficiencies in the link between planning,
    budgeting and implementation
  • Capacity constraints

36
Monitoring Expenditure
37
Monitoring Provincial Expenditure
  • Monthly reports to NT
  • Quarterly reports to Top Management, Exco and
    Legislature (SCOF)
  • Quarterly narrative reports to AOs and CFOs
  • Frequent interaction with departments on spending
    performance and general issues
  • Quarterly meetings between MECs for finance,
    education, health and public works to discuss
    infrastructure spending and other difficulties
  • Continuous engagements with departments in a
    co-operative manner to jointly seek solutions

38
Monitoring Local Government Expenditure
  • 24 municipalities directly and 6 municipalities
    indirectly.
  • S71 of MFMA Monthly reports to PT NT and
    quarterly Provincial Legislature.
  • IYM introduced in municipalities 1 July 2005 to
    monitor the budget outcomes.
  • Various municipal financial systems and capacity
    make it difficult for municipalities to comply.
  • Provide assistance to municipalities which could
    enable them to comply.
  • 11 municipalities submit the full IYM model while
    19 municipalities submit a summary version of the
    IYM.
  • Developed a provincial IYM database.
  • Discussions with NT access to NT database.
  • Currently assessing the IYM and due to submit a
    report.
  • Assessed all municipal revenue and expenditure to
    determine the affordability of increases in
    Councillor remuneration.
  • CFO Forum PT with municipalities, quarterly on
    financial matters.

39
Service Delivery Agreements
40
Service Delivery Agreements
  • Agreements concluded between implementing agent
    (Department of Transport and Public Works) and
    client department (Departments of Education and
    Health)
  • Key aspects covered include
  • Scope of Delivery
  • Roles and responsibilities
  • Programme and project control
  • Service levels
  • Resolution of differences and disputes

41
The Way Forward
42
The way forward
  • Build on financial and non-financial quarterly
    reports to Legislature, Exco and Top Management
    to better inform engagement with departments
  • Paradigm shifts for alignment of infrastructure
    cycle with the budget cycle
  • Legislation needs to be more enabling
    conditions result in delay in service delivery
  • There needs to be certainty regarding funding
    levels and the flow of funding, this is
    especially relevant for infrastructure spending
  • Ensure the early sign off of business plans
  • Care should be taken to ensure that conditions
    placed on conditional grants do not impact on
    service delivery

43
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