2006/07 CONDITIONAL GRANTS AND CAPITAL EXPENDITURE (SECOND

QUARTER)

Gauteng Treasury20 November, 2006

PRESENTATION OUTLINE

• Financial Performance of the Province• Conditional Grants Allocation and

Expenditure• Conditional Grants Expenditure and Service

Delivery Per Program • Capital Budget Allocation and Expenditure• Challenges in Implementing Conditional

Grants • Interventions by Treasury

Purpose

To provide the National Council of Provinces (NCOP) an overview of Conditional Grant and Capital Expenditure performance for the Gauteng province during the second quarter of 2006/07 Financial year.

Consolidated Revenue & Expenditure

R thousand

Actual until Main Estimated YTD actual

exp/rev Projected

end of Sep BudgetExpenditure/

Revenue % Budget (Over)/Under

Revenue        

Transfers from National

14,725,411 32,105,943

32,105,943 45.87%

Equitable share

12,148,078

23,361,686

23,361,686 52.00%

Conditional grants

2,577,333

8,744,257

8,744,257 29.47%

Provincial Own Revenue

1,032,853 1,758,263

1,950,791 58.74%

(192,528)

Less: Public Office Bearers charges 40,417 40,417

Total Revenue

15,758,264

33,823 ,789

34,016,317 46.59%

(192,528)

Expenditure          

Total Expenditure

14,468,131

34,459,739

35,525,078 41.99%

1,065,339

Surplus/(Deficit)

1,290,133

(635,950)

(1,508,761)  

(872,811)

Revenue Position

• A total of R34,016 billion is estimated at the end of the financial year :

• This consist of : • R1,951 billion of own revenue.• R8,744 billion of conditional grants.• R23,362 billion from the equitable shares.

• Predicted over collection of own revenue amounts to R192,6 million (driven by motor vehicle licences and casino taxes)

• A Total revenue of R7,466 billion was received for the second quarter ending in September, 2006. (R15.758 billion cumulative)

Expenditure position

• R7,999 billion was spend this quarter (R14.468 billion cumulative)

• There is a projected overspending of R1,065 billion

• The department of health is the primary driver of over-expenditure (projecting an over expenditure of R971,5million).

Conditional Grants Receipts 2006/07

• R 8,744 billion was allocated to the province as conditional grants for 2006/07 financial year .

• R2,6 billion has been received to date

• R401,2 million was received from National Departments during the month September against R809,4 million as per payment schedule.

• Instalments for infrastructure grant was with-held by National Treasury due to reporting compliance problems by some departments.

• All funds will be released during the third quarter after a series of discussions with National Treasury

Conditional grant expenditure, 2006/07

Department

Grant 2006/07(DORA)

Payment Schedule

(Y-T-D Sep End

Sep)

Transfers from

National((Y-T-D End

Sep)

Spent by Province(Y-T-D

End Sep)

% of Total

Budget spend(Y-T-D

End Sep)

Spent & Projectio

n

% Varian

ce

Agriculture  

Comprehensive Agricultural Support Programme

6,873 3,094

3,193

2,179

31.7

6,484 5.7

Land Care Programme

3,115

1,4021,402

21

0.01

3,136 (0.7)

Education  

Further Education and Training college sector recapitalization 106,000 53,000 53,000 53,000 50.0 77,749 26.7

HIV and Aids (Life Skills Education)

20,012

10,006 10,006

4,457

22.2

20,455 (2.2)

National School Nutrition Programme

99,921

49,961 49,961

35,889

35.9

91,931 8.0

Health    

Comprehensive HIV and Aids

252,695

126,348 126,348 122,395 48.4

252,695 -

Forensic Pathology services 76,752 38,376 38,376 16,592 21.6 76,752 -

Health Professions Training and Development

554,039

277,020 277,020

277,020

51.0

554,039 -

Hospital Revitalization

327,525

163,762 168,762

168,165

51.3

438,321 (33.8)

National Tertiary Services

1,866,094

933,048 933,048

933,048

50.0

1,866,094 -

Conditional grant expenditure, 2006/07 ( Continue )

Department

Grant 2006/07(DORA)

Payment Schedule

(Y-T-D Sep End

Sep)

Transf

ers from

National

((Y-T-D End

Sep)

Spent by Province

(Y-T-D End Sep)

% of Total Budg

et spen

d(Y-T-

D End

Sep)

Spent &

Projection

% Variance

Housing

Integrated Housing and Human Settlement Development

1,757,666

911,295

911,29

5

768,739 43.7

1,757,66

6 -

Alexandra Urban Renewal Project

8,000

8,000 2,000

25

8,000 -

ED, Do H, and DPTRW

Provincial Infrastructure

407,745

203,872 143,425 35.2

431,427 (5.8)

Sport and Recreation SA

Mass Sport and Recreation Participation Programme

16,820

12,056 9,922

1,129 6.7

16,820 -

TransportGautrain Rapid Rail Link 3,241,000 512,552 - 0

3,241,000

100.0

Total  

8,744,257

3,303,792 2,577,

333 2,526,059 28.9

9,035,3

56 36.0

Overall Conditional Grants Performance , 2006/07 (Second Quarter)

• Aggregate Spending Position– R 2,526,059 billion was spent against the projections of

R3,067,240 billion (under spending of R541,161 million or 36 %)

– The Gautrain Rapid Rail Link accounts for 97 % of the projected under spending.

– If Gautrain is excluded, the overall under spending will be 1. 1 % .

• Lowest performance : Landcare (R21,000 or 0.01%), Mass Sport and Recreation participation (R1,129 million or 6.7%), Life skills education (R4,457 million or 22.2%) and Forensic Pathology Services (R16,592 million or 21.6%).

• High Performance FET ( R53,000 million or 50%) , PTD (R277,020 million or 51%), Hospital Revitalisation ( R168,165million or 51.3%) and National Tertiary Grants ( R933,048 million or 50%).

Conditional Grants Performance , 2006/07

(Agriculture)Department

Grant 2006/0

7(DORA)

Payme

nt Sched

ule(Y-T-D

Sep End

Sep)

Transf

ers from National

((Y-T-D End Sep)

Spent by

Province

(Y-T-D End

Sep)

% of Total Budg

et spen

d(Y-T-D End Sep)

Spent &

Projection

% Variance

Agriculture  

Comprehensive Agricultural Support Programme

6,873 3,094

3,193

2,179

31.7

6,484 5.7

Land Care Programme

3,115

1,402

1,402

21 0.01

3,136 (0.7)

Financial Performance• Both Grants show slow expenditure , more worrying is LCP;• There is risk of under spending;• The variances can be attributed to delays in the procurement process

Service Delivery•Limited service delivery information •THE Procurement process has been completed • Treasury has appointed infrastructure specialists to monitor and assist departments to accelerate spending and quality of service delivery

Conditional Grants Performance , 2006/07 ( Education)

Department Conditional Grant R’000

2006/07

Payment Schedule

Spent by Province

% of Total budget spend

Projection

Spent & Projection

% U/spend +/O/spend (-)

Education  

Further Education and training college sector recapitalization 106,000 53,000 53,000 50.0 24,479 77,749 26.7%

HIV and Aids (Life Skills Education) Grant

20,012

10,006

4,457

22.2

15,998

20,455 (2.2%)

National School Nutrition Programmer Grant

99,921

49,961

35,889

35.9

56,042

91,931 8.0%

Financial and Service Delivery Performance

Financial Performance • Low Spending is observed on Life Skills Education program , but

projects an overspending of 2.2%. ThIS is attributed to delay in processing payments for services already provided

• NSNP projects to underspend by 8% - Attributed to BAS technical problems

• High spending performance of FET ( 50%) , ensure achievement of targets

Service Delivery• Life Skills education

• 599 educators have been trained• 1237 learners have been trained on life skills• 16 Learners trained on health and wellness

• National School Nutrition Programme• 1143 new learners identified for the nutrition program • 47 schools participated • Reached 98% of needy learners

• Further Education and training college sector – No Information

Conditional Grants Performance , 2006/07 -

HealthDepartment

Conditional Grant R’000

2006/07

Payment Schedule (Y-T-D End –SEP)

Spent by Province (Y-T-D End –SEP)

% of Total budget spend (Y-T-D End –SEP)

Projection

Spent & Projection

% U/spend +/O/spend (-)

Health    

Comprehensive HIV and Aids Grant

252,695

126,348

122,395

48.4

130,300

252,695 0.0%

Forensic Pathology services 76,752 38,376 16,592 21.6 60,160 76,752 0.0%

Health Professions Training and Development Grant

554,039

277,020

277,020

51.0

277,019

554,039 0.0%

Hospital Revitalization Grant

327,525

163,762

168,165

51.3

270,156

438,321 (33.8%)

National Tertiary Services Grant

1,866,094

933,048

933,048

50.0

933,046

1,866,094 0.0%

Financial and Service Delivery Performance (Health)

Financial performance• Low spending on Forensic Pathology services ( 21.6%, this attributed

to the delay in transfer of other functions from the SAPS and there is risk of Under spending)

• Hospital Revitalisation program projects an over-expenditure of R110,8 million

Service Delivery• Comprehensive HIV/Aids - 50,777 patients are on ART

» All PHC With MOUs are offering PMTCT (100%) • Forensic Pathology Services - The transfer process was completed in

July» Filling of medical staff is 88% completed.

• Health Professions Training and Development• Nursing Graduates(1247), Emergency care staff (12) , nursing

students ( 4018)• Hospital Revitalization – Report available from DoH• National Tertiary - Detailed report available from Department of Health

Conditional Grants Performance , 2006/07

(Housing)Departme

nt Grant

2006/07

Payment

Schedule

((Y-T-D End –SEP)

Transfers from Nationa

l (Y-T-D End –SEP)

Spent by

Province

(Y-T-D End –SEP)

% of Total

Budget

spend

Spent &

Projection

% Variance

Housing

Integrated Housing and Human Settlement Development

1,757,66

6

911,295

911,295

768,739

43.7

1,757,6

66 -

Land Distribution: Alexandra Urban Renewal Project

8,000

2,000 8,000 2,000

25

8,000

100.0Financial Performance

• 43,7 percent of the DORA allocation for 2006/07 has been spent on the Integrated Housing And Human Settlement Development programme• Projects to spend all budget by end of financial year• Expenditure on the Alexandra Urban Renewal Project ( 25% ) .Service Delivery

•No Information

Conditional Grants Performance , 2006/07 ( Provincial Infrastructure

Grant (PIG)Department

Grant 2006/07 Paymen

t Schedul

e(Y-T-D End –SEP)

Transfers from Nationa

l(Y-T-D End –SEP)

Spent by

Province

(Y-T-D End –SEP)

% of Total

Budget

spend

Spent &

Projection

% Variance

DoED, DoH &DPTRW

Provincial Infrastructure Grant

407,745

203,872 143,425 35.2

431,427

(5.8)

Financial Performance • R 143, 4 million was spent by the participating Dept’s ( Educ, Health, Transport) during the 2nd Q• No transfers were received from National for the 1st & 2nd Q (Due to Non reporting -compliance by departments)

• Treasury provided support to departments in cleaning the database for infrastructure and populating the Infrastructure reporting model • R 136, 595 million released in quarter three and a total amount of R 238,531 million is still withheld by NT due to non reporting compliance.

Service Delivery • Detailed IRM models and reports available • GT is also in the process of strengthening the CFO offices.• Infrastructure specialists have been appointed to monitor and strengthen service delivery

Conditional Grants Performance , 2006/07

( Sports and Culture)

Department

Grant 2006/07

Payme

nt Schedu

le

Transf

ers from

National

Spent by

Province

% of Total

Budget

spend

Spent &

Projection

% Variance

Sport and Recreation SA

Mass Sport and Recreation Participation Programme

16,820

12,056 9,922

1,129 6.7

16,820 -

Financial Information• Significant under-spending in Sports has been observed this quarter ( 6.7%);• Reason for variances can be ascribed to in adequate capacity to drive the programme;• Department Projects to spend the entire allocation by the financial year end.

Service Delivery • no information

Department of Public Transport, Roads &Works

Department

Grant Allocati

on 2006/07

Payment Schedule

Transfers from

National

Actual by grant

expendi

ture

% of Total

Budget spend

Spent &

Projection

% Varian

ce

Transport

Gautrain Rapid Rail Link

3,241,000 512,552

3,241,000 100.0

• No spending recorded on Gautrain this quarter;

• Construction began in October and spending is expected increase in the next quarter.

Capital Budget Receipts 2006/07

• Capital programme includes payments for capital assets within departments and Capital Transfers.

• Capital transfers includes housing programmes and special infrastructure development projects (to accelerate economic growth)

• Total capital budget allocation amounts R9,322 billion of which the department of Public Transport, Roads and Works account for 55,9 %, Housing (21%), Health(10,1%) and Education (9,3%).

Capital Allocation and expenditure ( 2006/07)

DepartmentBudget 2006/07 Q2 Spending

Accumulated Expenditure 2006/07 Variance

Percentage

  R’000 R’000 R’000  R’000 %

Education 870,679 95,595 203,484 667,195

23

Health 943,756 232, 269 482,648 461,108

51

Social Development 31,489 4415 4,440 27,049

14

Office of the Premier

2,235 234 1,305 930

58

Provincial Legislature 17,073 932, 2,855 14,218

17

Finance and Economic Affairs 145,538 82,684 83,346 62,192

57

Housing 1,955,384 499,399 809,167 1,146,217

41

Local Government 27,145 12 179 26,966

1

Public Transport Roads and Works 5,209,051 506,487 1,055,610 4,153,441

20

Community Safety 20,100 593 780 19,320

4

Agriculture, Conservation and Environment 8,069 2,171 8,521 -452 106

Sports and Recreation 59,919 18,451 18,545 41,374

31

Gauteng Shared Service Centre 31,952 6,677 19,916 12,036

62

Gauteng Provincial Treasury 386 618 641 -255 166

SUBTOTAL 9,322,776 1,217,336 2,691,437

6,631,339

29

Capital expenditure performance

• R2,691 billion or 29 percent has been as of the end of September, against the projection of R4,661billion or 50 percent

Low Capital Spending departments

• DPTRW 20% of its total budget ( R5,2billion)– Low spending in DPTRW is attributed to a delay in the sign-off of the financial

implications of the Gautrain project .

• Social Development (23%);

• Community Safety ( 4%)

• Local Government ( 1%)

• Provincial Legislature

• Education ( 23%)

• Risk of Under spending in these departments

High CAPEX performance

• Department of Health ( 51%) – Including PIG and Hospitalisation grants expenditure;– The department is experiencing budget pressures on

Infrastructure projects, due to increase in construction costs and fast tracking of projects

• Department of Agriculture ( 106%)– Over spending is attributed to refurbishment of office

space, acquisition of office equipment for the additional staff.

• Gauteng Treasury (166%) – Due restructuring and expansion.

• funds have already been shifted during the adjustment budget to cover shortfall in the capital budget

Challenges: Conditional Grants and CAPEX

• Conditional grants spending is general low ( 29 percent).

• Capital expenditure needs to be accelerated;• Risk of Under spending in both CAPEX and

Conditional Grants;• Missing of Variance explanation and proposed

corrective measures from departments reports;• Efforts to obtain comprehensive information from

departments proves to be difficult;• Failure to submit service delivery performance

information by some departments;• Risks associated with overspending by the

Department of Health; • Risks associated with March Spike.

Proposed Interventions by Gauteng Treasury

• Appointment of infrastructure specialists to monitor and strengthen capacity to spend and increased service delivery of infrastructure and other capital projects;

• Developed an improved reporting format;

• Treasury officials will be discussing expenditure projections with departments in order to prevent March spike;

• Comprehensive 3rd Q analysis to inform credibility of projections and actual expenditure. This will inform potential to relocate funds between departments / priorities.

End of Presentation

Thank You