kzn mec for finance and economic development

KwaZulu-Natal Provincial Treasury

“Be the Centre of Excellence in Fiscal and Financial Management in the Country” 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



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



KZN Expenditure by DepartmentTable 1 Summary of Provincial expenditure analysis by Vote - Quarter 1: 2008/09

R000 Projected Actual % Projected Under/ %

1st Quarter 1st Quarter Spent 2nd Quarter 3rd Quarter 4th Quarter Actual (Over) Spent

1. Office of the Premier 100 400 143 493 142.9 100 393 97 485 89 922 431 293 431 293 - 33.3 2. Provincial Legislature 54 593 47 924 87.8 58 036 51 704 51 660 209 324 208 708 (616) 23.0 3. Agriculture and Environmental Affairs 442 643 423 725 95.7 371 262 450 204 417 587 1 662 778 1 665 752 2 974 25.4 4. Economic Development 637 116 556 073 87.3 538 973 1 214 492 355 731 2 665 269 2 646 518 (18 751) 21.0 5. Education 4 717 143 5 417 381 114.8 5 509 106 5 621 812 5 415 851 21 964 150 21 389 127 (575 023) 25.3 6. Provincial Treasury 246 752 237 338 96.2 118 233 87 517 89 056 532 144 522 072 (10 072) 45.5 7. Health 3 887 353 3 924 732 101.0 4 279 760 4 158 174 4 276 627 16 639 293 15 042 826 (1 596 467) 26.1 8. Housing 404 788 279 665 69.1 396 425 543 365 580 238 1 799 693 1 799 693 - 15.5 9. Community Safety and Liaison 23 366 42 303 181.0 25 315 18 931 17 473 104 022 104 022 - 40.7 10. The Royal Household 10 250 10 388 101.3 10 275 9 816 9 822 40 301 39 356 (945) 26.4 11. Local Government and Traditional Affairs 105 749 108 358 102.5 369 741 262 647 287 070 1 027 816 1 027 816 - 10.5 12. Transport 864 088 1 132 863 131.1 886 963 908 082 827 374 3 755 282 3 755 282 - 30.2 13. Social Development 275 802 263 672 95.6 296 882 314 792 340 144 1 215 490 1 198 113 (17 377) 22.0 14. Works 114 347 110 546 96.7 207 787 218 892 220 433 757 658 733 087 (24 571) 15.1 15. Arts, Culture and Tourism 83 425 86 594 103.8 88 672 88 288 94 633 358 187 355 260 (2 927) 24.4 16. Sport and Recreation 52 681 32 618 61.9 58 957 61 499 64 569 217 643 215 492 (2 151) 15.1

Total 12 020 496 12 817 673 106.6 13 316 780 14 107 700 13 138 190 53 380 343 51 134 417 (2 245 926) 25.1

2008/09Projections

Budget

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.



KZN Expenditure by Economic ClassificationTable 2 Summary of Provincial expenditure analysis by economic classification - Quarter 1: 2008/09

R000 Projected Actual % Projected Under/ %

1st Quarter 1st Quarter Spent 2nd Quarter 3rd Quarter 4th Quarter Actual (Over) Spent

Current payments 8 921 939 9 727 774 109.0 10 378 682 10 269 524 10 405 925 40 781 905 38 380 587 (2 401 318) 25.3 Compensation of employees 6 503 289 7 231 365 111.2 7 586 476 7 858 533 7 969 951 30 646 325 28 309 058 (2 337 267) 25.5 Goods and services 2 418 650 2 496 278 103.2 2 792 206 2 411 025 2 435 974 10 135 483 10 071 529 (63 954) 24.8 Other - 131 - - (34) - 97 - (97) -

Transfers and subsidies to: 1 923 391 2 027 339 105.4 1 660 759 2 244 288 1 306 821 7 239 207 7 219 537 (19 670) 28.1 Local government 304 710 205 808 67.5 308 910 229 245 206 140 950 103 947 953 (2 150) 21.7 Non-profit institutions 1 116 556 1 360 890 121.9 570 566 1 349 792 253 012 3 534 260 3 531 795 (2 465) 38.5 Households 247 008 194 004 78.5 292 943 341 603 484 763 1 313 313 1 307 273 (6 040) 14.8 Other 255 117 266 637 104.5 488 340 323 648 362 906 1 441 531 1 432 516 (9 015) 18.6

Payments for capital assets 1 175 166 1 062 560 90.4 1 277 339 1 593 888 1 425 444 5 359 231 5 534 293 175 062 19.2 Buildings and other fixed structures 972 599 808 187 83.1 1 143 863 1 297 869 1 143 048 4 392 967 4 546 264 153 297 17.8 Machinery and equipment 201 115 253 144 125.9 129 428 295 038 281 645 959 255 982 223 22 968 25.8 Other 1 452 1 229 84.6 4 048 981 751 7 009 5 806 (1 203) 21.2

Total 12 020 496 12 817 673 106.6 13 316 780 14 107 700 13 138 190 53 380 343 51 134 417 (2 245 926) 25.1

2008/09Projections

Budget



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.



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.



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.



Capital Expenditure by DepartmentTable 3: Summary of Provincial Capital Expenditure as at 30 June 2008R'000

DepartmentActual as at

Jun 08Projection

Total estimated

actual

Main Budget

Variance% spent to

date

(1) (2) (3) (4)=(2)+(3) (5) (6)=(5)-(4) (7)=(2)/(5)Education 124 631 1 137 581 1 262 212 1 259 549 (2 663) 9.9 Health 185 224 1 018 269 1 203 493 1 253 493 50 000 14.8 Transport 712 012 1 695 710 2 407 722 2 535 993 128 271 28.1 Other 40 693 445 111 485 804 485 258 (546) 8.4 Total 1 062 560 4 296 671 5 359 231 5 534 293 175 062 19.2



Actual & Projected Expenditure per Quarter



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.



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.



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.



Capital expenditure by economic classification

Table 4: Summary of Provincial Capital Expenditure as at 30 June 2008 per economic classificationR'000

ItemActual as at

Jun 08Projection

Total estimated

actual

Main Budget

Variance% spent to

date

(1) (2) (3) (4)=(2)+(3) (5) (6)=(5)-(4) (7)=(2)/(5)

Buildings & Other fixed structures 808 187 3 584 780 4 392 967 4 546 264 153 297 17.8 Machinery & equipment 253 144 706 111 959 255 982 223 22 968 25.8 Other 1 229 5 780 7 009 5 806 (1 203) 21.2 Total 1 062 560 4 296 671 5 359 231 5 534 293 175 062 19.2



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 department’s 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.



Conditional GrantsTable 5: Analysis of Conditional Grant Expenditure (Excluding Infrastructure Grant to Provinces) as at 30 June 2008

R'000

DepartmentActual as at

Jun 08Projection

Total estimated

actual

Main Budget

Variance% spent to

date

(1) (2) (3) (4)=(2)+(3) (5) (6)=(5)-(4) (7)=(2)/(5)

Agriculture 3 984 91 399 95 383 95 382 (1) 4.2 Comprehensive Agric Support Programme 2 768 85 270 88 038 88 037 (1) 3.1

Land Care Programme: Poverty Relief & infrastructure 1 216 6 129 7 345 7 345 - 16.6

Education 154 460 422 559 577 019 577 019 - 26.8 FET Recapitalisation Grant 81 486 81 488 162 974 162 974 - 50.0

HIV and AIDS 3 318 34 292 37 610 37 610 - 8.8

National School Nutrition Programme 69 656 306 779 376 435 376 435 - 18.5

Health 376 971 1 781 535 2 158 506 2 158 506 - 17.5 Comprehensive HIV and AIDS 43 006 586 688 629 694 629 694 - 6.8 Forensic Pathology Services 18 174 109 583 127 757 127 757 - 14.2 Health Professional Training and Dev. 3 660 208 432 212 092 212 092 - 1.7 Hospital Revitalisation 8 494 277 172 285 666 285 666 - 3.0 National Tertiary Services 303 637 599 660 903 297 903 297 - 33.6

Housing - Integrated Housing & Human Settlement 221 921 1 353 665 1 575 586 1 575 586 - 14.1 Works - Devolution of property rate funds grant - 210 846 210 846 210 846 - - Arts, Culture & Tourism - Community library services grant 1 633 24 562 26 195 26 195 - 6.2 Sport & Recreation - Mass Sport & Recreation 9 901 49 834 59 735 59 735 - 16.6 Total 768 870 3 934 400 4 703 270 4 703 269 (1) 16.3



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%.



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 year’s spending pattern;

– Implementation often dependent on progress by Land Affairs;– Projecting to spend full budget.



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.Table 6. Transfers to FET Colleges

FET College Amount ReceivedAmount spent at

end of June % spentCoastal 9 000 000 1 398 819 15.54 Elangeni 10 357 500 5 554 321 53.63 Esayidi 10 329 500 2 982 647 28.88 Majuba 8 050 001 4 289 697 53.29 Mnambithi 6 765 999 287 682 4.25 Umfolozi 10 500 000 2 081 544 19.82 Mthashana 9 090 000 1 888 953 20.78 Thekwini 6 700 000 886 676 13.23 Umgungundlovu 10 695 000 6 485 377 60.64 Total 81 488 000 25 855 716 31.73



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.



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.



• 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.

Health – Conditional Grant (2)



• 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.

Housing – 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.

Works – Conditional Grant



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.



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.



• 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.

Monitoring Mechanisms



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



THANK YOU!

kzn mec for finance and economic development

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