Presentation to Portfolio Committee

Progress on the Departmental Under-Expenditure and Recovery Plans

-Mr. T. Zulu

Director-General

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Contents

1. Departmental Programme Expenditure2. Transfer Payments3. Underspending Challenges and Mitigation

Measures 4. Human Settlements Development Grant5. Delivery Performance6. USDG Expenditure and Performance

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Context1. Departmental operational expenditure is less than satisfactory

but steps have been taken to address poor expenditure. SITA Office Accommodation Vacancies SIU RHIG

2. Provincial expenditure has improved since the last appearance before the Portfolio Committee

3. There is still challenges on expenditure patterns in the USDG and steps to review current expenditure patterns is underway

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Preliminary Expenditure per Programme as at 28 February 2013

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Programmes Final Allocation1

Commitments2

Expenditure3 Variance = 1 - 3

% Spent

1. Administration 256,606,000 18,815,160 136,163,889 120,442,111 53%

2. Housing Policy, Research and Monitoring 46,719,000 514,940 29,012,437 17,706,563 62%

3. Housing Planning and Delivery Support 224,460,000 1,912,184 124,273,594 100,186,406 55%

4. Housing Development Finance 24,440,076,000 179,238,266 22,838,361,488 1,601,714,512 93%

5. Strategic Relations and Governance 169,944,000 22,646,971 102,762,857 67,181,143 60%

Total 25,137,805,000 223,127,521 23,230,574,265 1,907,230,735 92%

Preliminary Operational Expenditure

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Programmes Final Allocation Commitments Expenditure Variance % Spent

1. Administration 256,606,000 18,815,160 136,163,889 120,442,111 53%

2. Housing Policy, Research and Monitoring 46,719,000 514,940 29,012,437 17,706,563 62%

3. Housing Planning and Delivery Support 215,460,000 55,898 115,236,480 100,223,520 53%

4. Housing Development Finance 68,478,000 3,456,985 46,373,903 22,104,097 68%

5. Strategic Relations and Governance 168,944,000 21,363,238 102,762,857 66,181,143 61%

Total 756,207,000 44,206,221 429,549,567 326,657,433 57%

Note: Expenditure excludes all Transfer payments.

Grants and Transfer Payments 28 February 2013

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Payments Total Allocation Expenditure Variance % Spent

Human Settlements Development Grant 15,725,959,000 14,421,857,000 1,304,102,000 92%

Urban Settlements Development Grant 7,392,206,000 7,392,206,000 0 100%

Social Housing Regulatory Authority: Operational 21,096,000 21,096,000 0 100%

Social Housing Regulatory Authority: Capital Restructuring Grant 647,401,000 647,401,000 0 100%

Rural Housing Loan Fund 31,975,000 31,975,000 0 100%

Housing Development Agency 92,336,000 69,252,000 23,084,000 75%

National Urban Reconstruction and Housing Agency 120,000,000 120,000,000 0 100%

Bursaries Scheme 9,000,000 9,037,114 -37,114 100%

UNHABITAT 1,290,000 1,283,733 6,267 100%

Rural Households Infrastructure Development 340,625,000 88,200,584 252,424,416 26%

Total 24,041,263,000 22,714,107,847 1,579,579,569 94%

Under Spending - Personnel Costs

Reasons for Under Spending • Non/Slow Filling or of Vacancies.

• Turn Around Strategy • Additional Office

– Actions taken• 95% of vacancies have been advertised and are in a process of being

filled. • Payment of outstanding performance rewards for SMS members

payable before year end will improve expenditure for personnel costs.

– Projected spending and possible under-spending• It is projected that 92% of the personnel budget will be spent leaving

an approximate R55 million of under spending for the year.

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Under Spending- Goods and services

• The primary contributing factor to the under spending of goods and services is the delay in filling of personnel vacancies.

• It is expected however that 74 % will be spent on goods and services, and an amount of approximately R109 million will not be from the goods and services budget.

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• Delays in the implementation of the NUSP program – Initial delays were experienced in the finalization of the approval

process .– Actions taken

• 5 bids for the appointment of service providers to develop an informal settlement upgrading programme in various areas have been advertised on 2 November 2012 bulletin with closing date of 27 November 2012.

• The above bids have been referred for re-evaluation • 5 other bids of less than R 500 000 amounting to about R2 million

for the development of an informal settlement upgrading programme in various smaller municipalities have been awarded.

– Projected spending and possible under-spending

• It is projected that 4% will be spent leaving an approximate R55 million under spent for the year.

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• Lack of Invoicing from Special Investigation unit.– Initial challenges were experienced with SIU not

providing the Department with invoices due to changes required to SIU legislation

– Actions taken• A review on the proclamation and the

finalization of the Service Level Agreement between the Department and SIU.

• Some invoices have since been received and paid with the last invoice for the year for R14.5 million still to be processed.

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– Projected spending and possible under-spending• The total expenditure for the SIU thus far is

R8.1 million or 18% of total allocation. The invoice of R14.5 million will bring the total expenditure for the year to R22.6 million which is 52% of total expenditure and R 18 million of the budget has been shifted to other operational items that required funding.

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• SITA Services to the HSS environment– Challenges

• Initially problems were experienced with the signing of the service level agreement between SITA and the Department.

• SITA is only able to provide limited servicing of the HSS environment

– Action taken• The service level agreement was signed and SITA was requested

to provide invoices. The process of receiving invoices is still slow– Projected spending and possible under-spending

• Of the adjusted budget of R43.8 million for HSS maintenance, R17.4 million (42%) has been paid. It is projected that 74% will be spent leaving an amount of R11 million unspent.

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• Additional office accommodation– Challenges

• Although the additional office accommodation was secured delays were experienced in the landlord complying to Departmental installation requirements and other refurbishments which resulted in the Department not being able to utilize the accommodation and consequently not able to make payment.

– Action taken• Challenges within Public Works delayed the finalization of

negotiations with the landlord• Engagements between the two the Departments to resolve the issues

is now yielding results.• The outstanding matters have been resolved and the office

accommodation is currently receiving attention and indications are that it will be finished in four months time.

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– Projected spending and possible under-spending– R1 million has been paid in January bringing the

total expenditure to R14.2 million or 37%. It is projected that 50% will be spent leaving an amount of R19 million unspent.

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• Rural Household Infrastructure Grant– Challenges

• Slow performance in terms of delivery by the existing contractors has been experienced in respect of this grant.

• Delays in the appointment of the additional contractors– Action taken

• A task team has been established to address issues related to the slow delivery performance by Mvula and IDT including the project manager

• Additional 6 contractors have been appointed to speed up delivery

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– Projected Spending

• Of an adjusted budget of R340.6 million, a total of R88.2 million (26%) has so far been expended.

• At least R27.2 million has been paid in February 2013 to the two service providers, and a marked increase in payments is being experienced as work progress towards completion and subsequent invoicing.

• It is projected that a approximately R164 million will not be spent by 31 March 2013.

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Projected Under Spending– It is projected that the operational budget expenditure will

reach R611 million or 81% by March;– Taking the above projected expenditure into consideration is it

anticipated that the Department on its operational budget will surrender about R144 million or (19%) of its operational budget;

– If the funds on the HSDG are not transferred to two Provinces (Limpopo and Eastern Cape) underspending will amount to R578 million on the HSDG;

– On the RHIG the underspending is projected to be R164 million;

– It is estimated that the total amount to be surrendered will amount to R886 million which is approx 4% of the total budget allocation of the Department.

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Human Settlements Development Grant

– Eastern Cape and Limpopo Provincial Human Settlements Departments declared savings of R284 and R294 million respectively and;

– This amounts to a total of R578 million which translate into 4% of the total allocation of the HGDG.

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Preliminary Human Settlements Development Grant Expenditure

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Total Available

Year to Date 1 April 2012 to 28 February 2013

Transferred Funds Spent by ProvincesVariance Spent vs

Transfer-red

Variance Spent vs Total

Available Unspent as % of Total Available

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

Eastern Cape 2,292,859 2,008,046 88% 1,603,593 70% 404,453 689,266 30%

Free State 961,619 937,571 97% 773,748 80% 163,823 187,871 20%

Gauteng 4,003,776 3,631,287 91% 3,471,077 87% 160,210 532,699 13%

KwaZulu-Natal 2,915,297 2,687,271 92% 2,521,962 87% 165,309 239,335 13%

Limpopo 1,471,617 1,425,503 97% 980,712 67% 444,791 490,905 33%

Mpumalanga 965,127 811,084 84% 810,900 84% 184 154,227 16%

Northern Cape 339,551 299,435 88% 274,911 81% 24,524 640,640 19%

North West 1,050,933 996,540 95% 1,009,422 96% -12,882 54,393 4%

Western Cape 1,725,180 1,625,120 94% 1,470,637 85% 154,483 254,543 15%

Total 15,725,959 14,421,857 92% 12,916,962 82% 1,504,895 2,808,997 18%

Delivery Performance – 31 January 2013

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Urban Settlements Development Grant Expenditure - 31 January 2013

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MunicipalitiesTotal Allocated Funds

R'000 R'000 R'000 % R'000 R'000Buffalo City 499,474 224,843 45% 111,862 50% 112,981 387,612 22% 78%Nelson Mandela 592,870 415,009 70% 226,135 54% 188,874 366,735 38% 62%Mangaung 485,967 342,984 71% 244,416 71% 98,568 241,551 50% 50%Ekurhuleni 1,212,537 727,522 60% 455,922 63% 271,600 756,615 38% 62%City of JHB 1,290,748 774,449 60% 273,624 35% 500,825 1,017,124 21% 79%City of Tshwane 1,051,070 683,215 65% 460,938 67% 222,277 590,132 44% 56%eThekweni 1,287,560 596,547 46% 274,801 46% 321,746 1,012,759 21% 79%City of Cape Town 971,980 590,000 61% 344,867 58% 245,133 627,113 35% 65%Total 7,392,206 4,354,569 59% 2,392,565 55% 1,962,004 4,999,641 32% 68%

Year to Date (1 JULY 2012 -31 JANUARY 2013)Transferred

FundsSpent by

MunicipalitiesVariance Spent vs

Transferred Funds

Variance Spent vs

Total Allocated

Funds%

Spent as % of Total

Allocation Funds

Unspent as % of Total Allocation

Funds

USDG - Delivery Performance

MUNCIPALITIESWATER SERVICE AND SANITATION

HOUSING AND HUMAN SETTLEMENTS

ELECTRICTYROADS AND STORMWATER

LAND (SERVICED AND ACQUIRED OTHER

Buffalo City 47,139,382 12,923,870 - 28,658,972 - 7,153,070Nelson Mandela 123,987,871 71,989,848 - 10,524,744 134,512,616Mangaung - - - 70,946,539 126,089,315 17,899,232Ekurhuleni 140,574,669 4,739,179 67,820,596 181,493,526 - 8,636,244City of JHB 95,953 103,667 18,176 20,542 - 10,589,000City of Tshwane 116,588;787 186,083,634 7,535,043 - - 142,811,519eThekweniCity of Cape Town 82,850,238 76,017,973 35,384,288 88,186,274 13,976,327 34,437,491

Achievement not linked to costs

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Thank You

END

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