NATIONAL TREASURY 4th QUARTER PERFORMANCE FOR 2009/10

STANDING COMMITTEE ON APROPRIATIONS

Presenter: Lesetja Kganyago | Director-General | 24 August 2010

CONTENT

• 2009/10 Expenditure Outcome• Budget versus Expenditure per Economic Classification• Programme Budget versus Expenditure• Asset & Liability Management • Financial Management & Systems• Provincial and Local Government Transfers: NDPG• Fiscal Transfers: FIC• Way- Forward

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2009/10 NT EXPENDITURE OUTCOME

• The final appropriation for the National Treasury for the 2009/10 financial year was R62.8 billion. This excludes statutory amounts.

• Of the R62.8 billion appropriated:

- R1.3 billion for the operational budget (Programme 1 -6); and

- R61.5 billion for the transfer budget (Programme 7-9).• Actual total expenditure amounted to R62.7 billion (i.e. 99.7% of

allocated funds);

- R1.2 billion for Programme 1-6; and

- R61.5 billion for Programme 7-9.• The under expenditure amounted to R176.8 million, which is 0.3% of the

total appropriated funds.

NT BUDGET VERSUS EXPENDITURE PER ECONOMIC CLASSIFICATION

Economic Classification Budget

2009/10

R’000

Actuals

2009/10

R’000

Variance

R’000

Expenditure in %

Variance in %

Compensation of Employees

408 554 402 074 6 480 98.4% 1.6%

Goods and Services 787 921 728 544 59 377 92.5% 7.5%

Transfers and Subsidies 61 632 808 61 526 463 106 345 99.8% 0.2%

Payment of Capital Assets

16 287 11 652 4 635 71.5% 28.5%

Total 62 845 570 62 668 733 176 837 99.7% 0.3%

PROGRAMME BUDGET VERSUS EXPENDITURE

Programme Budget

R’000

Actuals

2009/10

R’000

Variance

R’000

Expenditure in %

Variance in %

1. Administration 246 809 242 790 4 019 98.4% 1.6%

2. Public Fin & Budget Man

265 150 262 917 2 233 99.2% 0.8%

3. Asset & Liability Man 60 974 53 174 7 800 87.2% 12.8%

4. Fin Man & Systems 459 479 405 633 53 846 88.3% 11.7%

5. Fin Acc & Reporting 138 882 137 110 1 772 98.7% 1.3%

6. Eco Pol & Intern Fin Relations

95 862 94 488 1 374 98.6% 1.4%

7. Prov & Local Gov Transfers

14 410 631 14 327 373 83 258 99.4% 0.6%

8. Civ & Mil Pensions, Contri

4 955 302 4 955 140 162 100% -

9. Fiscal Transfers 42 212 481 42 190 108 22 373 99.9% 0.1%

Total 62 845 570 62 668 733 176 837 99.7% 0.3%

ASSET AND LIABILITY MANAGEMENT (ALM)

Programme 3 (Asset & Liability Management)• The under expenditure of R7.8 million is mainly due to lower

spending on the Capital Structure and Financial Distribution Policy project, delays in the development of the treasury management system; lower spending on operational expenditure mainly training & development, travel and subsistence costs as a result of cost-savings measures and vacancies.

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ALM ESTABLISHMENT AS AT 31 MARCH 2010

% of total establishment

4% 17% 25% 13% 24% 17%

Vacant- not funded % of total

- 1% 3% 2% 4% 3%

4

17

25

12

20

101

2

2

2

6

7

1

3

2

3

3

0

5

10

15

20

25

30

35

Num

be

r o

f p

osi

tion

s

Vacant - not funded - 12

Vacant - funded - 20

Filled - 88

ALM UNDERSPENDING ON GOODS AND SERVICES

317 268

358

882

857

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Advertising Communication Training Travel & subsistence Consultants Computer services

R th

ou

sa

nd

3 8972 912

• Lower computer services:• Delays in back office project deliverables due to

additional requirements, data migration and re-engineering of payment process

• Delays in signing of monthly support agreement for back office

• Lower payment on consultants:• Capital structure and dividend project could not be

finalised due to time taken to obtain buy-in of departments. Revised finalisation date 31 December 2010

• Cost cutting measures:

FINANCIAL MANAGEMENT & SYSTEMS

Programme 4 (Financial Management & Systems)

• The under expenditure of R53.8 million is mainly due to less than anticipated spending on the IFMS project and transversal systems, lower expenditure on operations (mainly training and development), venues and facilities and on vacancies.

• The IFMS project implemented asset management modules to the leading sites viz. National Treasury and Limpopo Provincial Treasury.

• Capacity problems and challenges within the Dept of Defence in terms of asset management resulted in lower spending.

• The delay in due diligence and protracted contractual negotiations pertaining to the HR COTS and procurement management modules, resulted in lead sites’ preparations commencing late.

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FINANCIAL MANAGEMENT & SYSTEMS (CONTINUED)

2009/10 FINANCIAL YEAR

under expenditure

R'000

Compensation of Employees 1,254

Computer Services 48,149

Training 1,242

Venues & Facilities 1,224

Payment for Capital Assets 863

Other (goods & services) 1,113

TOTAL 53,845

 Of which :  

IFMS 33,243

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FINANCIAL MANAGEMENT & SYSTEMS (CONTINUED)

Transversal Systems  

Operating Costs 408

Vulindlela 1,452

Logis 2,927

Persal 4,712

BAS 3,774

TOTAL 13,273

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PROVINCIAL & LOCAL GOVERNMENT TRANSFERS (NDPG)

Programme 7 (Provincial & Local Government Transfers)

• The under expenditure of R83.3 million is mainly due to lower spending by the municipalities for the Neighbourhood Development Partnership Grant (NDPG).

• Slower spending by municipalities than projected in the milestone payment schedules. This is attributed to:– Staff turnover rates in municipalities compromising Executive buy-in for the

grant programme– Delays and irregularities in tender processes– Estimate that a third of NDPG-recipient municipalities need intensive support

& monitoring to sustain and ensure quality outputs– Difficulty of accurate cash-flow forecasting for large, multi-stakeholder

programmes – NT insistence on municipalities meeting conditions and objectives of the

Grant (e.g. submission of business plans, establishing leverage, Operations & Maintenance plans, etc.) as per DoRA

– Municipal capacity (budgeting, planning, financial management)

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Programme 7: Neighbourhood Devlopment Partnership Grant (NDPG)

• Mandate (DoRA)– “To support neighbourhood development projects that provide community infrastructure

& create the platform for other public & private sector development, towards improving the quality of life of residents in targeted underserved neighbourhoods (townships generally)”

• Purpose (DoRA)– “A Technical Assistance [TA] Grant aimed at supporting the development of township

development plans – A Capital Grant aimed at supporting nodal investment into the construction or

upgrading of community facilities, which may attract private sector investment”

• NDPG is a hybrid grant– Schedule 6 – direct transfers to municipalities– Schedule 7 – indirect transfers to municipalities’ service providers via PDF trading

account

• 57 municipalities were awarded with NDPG grants: NDPG commitment over the medium-long term of R8.8 billion

0

100

200

300

400

500

600

700

Actual TA (Rm) Actual CG (Rm) Target All NDPG (Rm)

2007/08 2008/09 2009/10

Establishment phase (start July 2006)

First appointments in July 2006

NDPG Toolkit Applications for Rounds 1, 2

& 3 concluded NDP Business Plan

approved Municipalities start grappling

with the grant

Applications for Round 4 concluded

Municipalities do more planning and spend some capital on quick wins

17 staff 91 awards in 57

municipalities 106 projects started More spending on quick

wins, some concerns about progress of overall planning

Operations manual for municipalities

R892M spent since programme start

TA spent R3.8m R67.6m R89.9m

CG transferred R41.4m R181.5m R508.0m

Planned NDPG R295m R374m R661m

Planned total NDPG

Capital Grant transferred

Technical Assistance spent

Rands (millions)

NDPG Achievements

2007/08 2008/09 2009/10

•Establishment year →1st appointment in July 2006, NDP Unit business plan approved•NDPG Toolkit•72 awards under management by year-end with value of R7.8bn & anticipated total township investment value of R26.1bn

•72 awards under management•Municipalities do more planning & start implementing quick wins

•Now 90 awards in 57 municipalities•Despite quick wins underway, some concerns about speed & depth of planning•Ops manual under development •R892m spent since programme start & doubled on previous year

TA spent R3.8m R67.6m R89.9m

CG transfers R41.4m R181.5m R508.0m

Total NDPG R45.2m R249.1m R597.9m

Planned exp R295m R374m R661m

Use rate 15% 67% 90%

2009/10 EXPENDITURE OUTCOME (NDPG)

Item:

Actual expenditure

2009/10

Original Allocation

2009/10

Adjusted Allocation

2009/10

Actual

2009/10

%

TA (Indirect /Sch 7) R79.4m R110m R89.9m 81.6%

CG (Direct /Sch 6) R582.0m R551.4m R508.0m 92.1%

Total NDPG R661.4m R661.4m R597.9m 90.4%

Item

Transfers from National Treasury

2009/10

Original Allocation

2009/10

Adjusted Allocation

2009/10

Actual

transfers

2009/10

%

TA (Indirect /Sch 7) R79.4m R110m R70m 63.6%

CG (Direct /Sch 6) R582.0m R551.4m R508m 92.1%

Total NDPG R661.4m R661.4m R578m 87.4%

FISCAL TRANSFERS

Programme 9 (Fiscal Transfers)• The under expenditure of R22.4 million is mainly due to less than

anticipated transfer payment to the Financial Intelligence Centre (FIC).

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WAY-FORWARD

NT• The Department surrended the unspent funds of

R176.8 million for the 2009/10 financial year to the fiscus.• Critical posts are being filled in line with the mandate of the Department.• Performance monitoring mechanisms are in place to track and monitor

programme’s spending patterns.• Continue with the cost saving measures within the Department.

IFMS• Finalise the roll-out of the asset management module• Finalise the roll-out of procurement module to lead sites• Finalise the roll-out of HR module to lead sites

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WAY-FORWARD (CONTINUED)

ALM• Capital Structure and Financial Distribution Policy project will be

completed by end December 2010

NDPG• Central technical assistance procured for direct Awards support and

diagnostics• NDP review budget projections based on:

– Historical financial information – Secondary data about municipal performance– Qualitative assessments

• NDP insisting on transfers based on approved Business Plans demonstrating clear value for money, sustainability, and leverage (no more Quick Wins)

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