GPG STATE OF FINANCES REPORT 3RD QUARTER OF 2013/14

GAUTENG PROVINCIAL TREASURY

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CONTENTS

• Provincial equitable share and conditional grant receipts YTD

• Summary of ring-fenced funds at Q3

• Summary of funds requested against budget

• Payment of invoices

• Summary of GPG Revenue Collections

• Summary of GPG Expenditure

• Recommendations

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PROVINCIAL EQUITABLE SHARE AND CONDITIONAL GRANTS RECEIPTS YTD

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PROVINCIAL EQUITABLE SHARE AND CONDITIONAL GRANTS RECEIPTS YTD

• As at 31 December 2013, a circa R61 billion was received from the both National Treasury and GPG departments (Own Revenue).

• Of the cash receipts from National, equitable shares amounted to R46 billion and conditional grants totalled to R11.9 billion.

• A total of R3.2 billion was collected from different provincial own revenue sources.

• Total provincial receipts amounted to R61.1 billion.

• During the same period under review, all GPG departments projected to spend R58.3 billion; however R58.6 billion was requested.

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SUMMARY OF RING-FENCED FUNDS AT Q3

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SUMMARY OF RING-FENCED FUNDS AT Q3

• YTD, a total amount of R3 billion has been ring fenced as a result of under spending.

– The majority of this for conditional grant (R2.2 billion)

– Infrastructure projects accounted for R278 million

– Critical Services R584 million

• The following departments have not utilized their ring-fenced resources:

– Human Settlements

– Education

– Health

– Road and Transport.

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FUNDS REQUESTED VS BUDGET AND BALANCE OF VOTED FUNDS

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FUNDS REQUESTED VS BUDGET AND BALANCE OF VOTED FUNDS

• Ideally, provincial cash requisitions per department should be at 75 per cent of the total voted funds as at the end of December 2013 (Using a straight line projection).

– The actual provincial cash requested stand at 73.72 per cent.

• The following departments lagged behind in terms of meeting the above mentioned target:

– Office of the Premier (63.09%);

– Cooperative Governance and Traditional Affairs (58.93%);

– Department of Human Settlements (55.84%);

– Road and Transport (65.19%); and

– Finance (63.03%).

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FUNDS REQUESTED VS BUDGET AND BALANCE OF VOTED FUNDS

• The following departments’ cash requirements were over and above the monthly target: DED (81.24%); and Gautrain (77.99%).

– DED. This is as a result of transfers to the agencies within the department

– Gautrain. This is as a result of payment of the last instalment on the OCD 2

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SUMMARY OF REVENUE COLLECTED

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SUMMARY OF REVENUE COLLECTED

•The GPG has projected to collect R4.081 billion for 2013/14, this shows an increase of R90.068 million as compared to 2012/13 post-audit revenue collections;

•GPG collected R3.255 billion or 79.76% at the end of the third quarter, which is in line with the targeted collection of 75% as the end of December 2013;

•For the remainder of the 2013/14 financial year, an amount of R826 million or 20.13% should be collected to meet the adjusted appropriation of R4.081 billion.

•Overall, GPG is performing well and should be able to reach its set target for revenue collection.

PAYMENT OF INVOICES

• There is an emergence of invoices dated 2011/12 financial year and prior years especially at GDoH, GDE, GDHS and GDID which erode the purchasing power of the current financial year’s budget.

• GPT has since requested all departments to submit proof of prepayment audit of old invoices dated 2011/12 financial year and prior years before effecting payment.

• During the 3rd quarter, invoices worth R81.1 million relating to 2012/13 and prior years were paid by different service providers.

• In the remaining months, GPT will continue to ensure that departments prioritise all posted invoices older than 30 days.

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SUMMARY OF GPG EXPENDITURE

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SUMMARY OF GPG EXPENDITURE

• The total GPG main spending budget was adjusted upwards by R3.5 billion, of which the additional allocations were mainly for the following;− Goods and Services in health− Procurement of Learner-Teacher Support Materials in Education,− Compensation of employees,− Infrastructure delivery in Education, − Provincial Roads Maintenance grants and the Gautrain’s operational

requirement− The extension of the Gauteng On Line contract.

• The overall expenditure of GPG amounted to R57.4 billion; this shows a rate of 72 percent against the adjusted budget.

• A net amount of R1.568 billion is projected as an over-spending that will be incurred at year-end.

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SUMMARY OF GPG EXPENDITURE

• The following department are projecting to spend above their adjusted budget:

– Health (R1.0 billion)

• Payments for the Cuban doctoral programmes and re-grading of clerical posts have also added pressure on the department of Health’s budget.

– Education (R456 million)

• Personnel spending in the Department of Education and pressures in goods and services (that resulted from payment of accruals)

– OoP (R70 million)

• Within the OoP, the projected over-spending relates to the costs incurred during the state funerals that took place in the course of the financial year, which was unforeseen and unavoidable

– Roads and Transport (R18.7 million)

• Pressure in their operational budget

SUMMARY OF GPG EXPENDITURE ON INFRASTRUCTURE

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SUMMARY OF GPG EXPENDITURE ON INFRASTRUCTURE

• The GPG infrastructure programmes recorded an expenditure of R5 billion (54 percent) at the end of Q3,− Projecting to spend R5.1 billion in the remaining three months of the

financial year − Projected outcome of an over-expenditure of R735.8 million. − This presents a variance of 9 percent from the cash-flow projection

presented at the beginning of financial year.

• The Department of Human Settlements, Roads and Transport, Infrastructure Development and Social Development contributes to the projected over-expenditure outcome.

• The Department of Education recorded expenditure of 66 percent whilst the Department of Health recorded an expenditure that is below 50 percent at the end of Q3.

• Expenditure on conditional grants is only 55 percent of the allocated funds and 68 percent for the allocated provincial equitable share funds.

SUMMARY OF GPG EXPENDITURE ON INFRASTRUCTURE

• The projected outcome at the end of the financial year and the projections for the remainder of the financial year are not commensurate with the pace of delivery on the ground, when considering that there is only three months remaining before the end of the financial year.

• The Department of Human Settlements, Health, Roads & Transport and Infrastructure Development are projecting to spend 50 percent and above of their budgets in the remaining months ( which is unrealistic).

• Inadequate performance on several of infrastructure programmes is evident and will adversely affect the end of the financial year outcome.

• The key risk is that some of these programmes are funded from conditional grants and have legislated budgets that cannot be reprioritized to other performing programmes.

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2013/14 Q3 CONDITIONAL GRANTS EXPENDITURE

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Conditional GrantMain

allocationAdjusted allocation

Actual YTD Expenditure

Actual YTD Expenditure

YTD Balance

Projection 1 January - 31

Mar 2014Outcome

R’000’ R'000 R’000’ % R’000’ R’000’ R’000’

AGRICULTURE AND RURAL DEVELOPMENT 79,581 79,581 50,186 63% 29,395 29,395 - Comprehensive Agricultural Support Programme grant 55,880 55,880 39,276 70% 16,604 16,604 - Il ima/Letsema Projects grant 17,538 17,538 6,081 35% 11,457 11,457 - Land Care Programme Grant: Poverty Relief and Infrastructure Dev 6,163 6,163 4,829 78% 1,334 1,334 - EDUCATION 1,874,567 1,923,124 1,570,200 82% 352,924 352,924 - Dinledi Schools Grant 21,244 21,244 10,366 49% 10,878 10,878 - Education Infrastructure Grant 537,892 537,892 518,113 96% 19,779 19,779 - HIV and Aids (Life Skil ls Education) grant 30,012 34,803 19,937 57% 14,866 14,866 - National School Nutrition Programme grant 585,157 616,516 518,265 84% 98,251 98,251 - Technical Secondary Schools Recapitalisation grant 26,375 35,609 17,254 48% 18,355 18,355 - Further Education and Training Colleges grant 673,887 677,060 486,265 72% 190,795 190,795 - HEALTH 7,105,499 7,187,684 4,310,564 60% 3,452,036 3,452,036 - Comprehensive HIV and Aids grant 2,258,483 2,258,483 1,323,410 59% 935,073 935,073 - Health Facility Revitalisation grant 771,033 844,238 272,368 32% 571,870 571,870 - Hospital Infrastructure 86,816 91,928 37,945 41% 53,983 53,983 - Hospital Revitalisation component 677,371 743,736 229,788 31% 513,948 513,948 - Nursing Colleges and Schools component 6,846 8,574 4,635 54% 3,939 3,939 - National Professions Training and Development grant 765,202 765,202 486,468 64% 278,734 278,734 - National Health Insurance grant 4,850 13,830 6,258 45% 10,618 10,618 - National Tertiary Services grant 3,305,931 3,305,931 2,222,060 67% 1,083,871 1,083,871 - HUMAN SETTLEMENTS 4,108,399 4,108,399 2,202,177 54% 1,906,222 1,906,222 - Human Settlements Development grant 4,108,399 4,108,399 2,202,177 54% 1,906,222 1,906,222 - INFRASTRUCTURE DEVELOPMENT 33,815 43,258 22,749 53% 20,509 20,509 - EPWP Integrated Grant for Provinces 6,163 15,606 3,024 19% 12,582 12,582 - EPWP Social Sector Incentive 27,652 27,652 19,725 71% 7,927 7,927 - SPORT, ARTS, CULTURE AND RECREATION 151,739 151,739 110,767 73% 40,972 40,972 - Community Library Services grant 63,470 63,470 45,078 71% 18,392 18,392 - Mass Sport and Recreation Participation Programme grant 88,269 88,269 65,689 74% 22,580 22,580 - ROADS AND TRANSPORT 2,147,392 2,369,592 1,490,408 63% 879,184 879,184 - Provincial Roads Maintenance grant 433,048 655,248 369,460 56% 285,788 285,788 - Public Transport Operations grant 1,714,344 1,714,344 1,120,948 65% 593,396 593,396 -

15,500,992 15,863,377 9,757,051 62% 6,106,326 6,106,326 -

2013/14 Q3 CONDITIONAL GRANTS EXPENDITURE

• As at 31st December, GPG has spent R9.8bn (62%) of the R15.9bn adjusted budget.

• Grants that have recorded the highest expenditure are the following:- Education Infrastructure Grant (96%)- School Nutrition (84%)- Land Care (78%)

• On average, Health grants’ spending is at 60% due to slow infrastructure spending.

• Roads and Transport grants are also performing slower that expected.

• Despite all grants showing that they will be fully spent, its very likely that the following grants will not be spent in full; − Health Facilities Revitalisation grant, − Roads Maintenance grant and− NHI.

RECOMMENDATIONS

• The Committee to note the presentation.

• GPG is projecting to possibly over spend by R1.5 billion in the 2013/14 financial year.

• Slow progress on the delivery of infrastructure projects.

• GPT and the OoP have taken decisive steps in an attempt to fast track delivery of projects especially in the Department of Human Settlements.

• GPT is currently looking at ways to reduce/eliminate accruals which reduces the buying power of the tabled budget especially in the Department of health.

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THANK YOU

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