1. PRESENTATION TO THE STANDING COMMITTEE ON APPROPRIATION
EXPENDITURE REPORT AS AT THE END OF 3RD QUARTER (31 DECEMBER 2011)

2. OVERVIEW OF THE PRESENTATION
1. Introduction
2. Departmental Expenditure Analysis per Programme
3. Departmental Expenditure per Economic Classification
4. Analysis of the under expenditure for 2011/12 Financial Year per economic classification
5. Measures to improve expenditure
6. Conclusion

3. 1. INTRODUCTION
The purpose of the presentation is to brief Standing Committee on Appropriations on the Departmental Financial Expenditure including measures put in-place to improve expenditure trends.

4. 2. Departmental Expenditure Analysis per Programme
COGTA
AENE Budget 2011
Expenditure 31 Dec 11 (R’000)
Available Budget
Actual Spending as %
1. Administration
71 167
65.3%
2.Policy, Research and Knowledge Mang Support
41 506
24 498
17 008
59.0%
3. Governance and Intergovernmental Relations
28 217
14 903
13 314
52.8%
4. National Disaster Management Centre
41 232
22 907
18 325
55.6%
5. Provincial and Municipal Government Systems
29 651
22 685
6 966
76.5%
6. Infrastructure & Economic Development
42 293
16 032
26 261
37.9%
7.Traditional Affairs
83 769
60 971
22 798
72.8%
Total
62.7%
Transfers and subsidies
South African Local Government Association
25 486
19 114
6 372
75.0%
Municipal Demarcation Board
38 482
28 881
9 601
75.1%
South African Cities Network
5 282
3 521
1 761
66.7%
Community Work Programme
69.7%
UCLGA
4 882
434
4 448
8.9%
Local Government Equitable Share
68.4%
Municipal Infrastructure Grant
Municipal Disaster Relief Grant -
0.0%
Municipal Systems Improvement Grant
14 510
93.4%
Councillor once-off Gratuity
Special Purpose Vehicle (MISA)
87 097
54.7%
65.6%
Grand Total

5. 3. Departmental per Economic Classification
COGTA
AENE Budget 2011
Expenditure 31 Dec 11 (R’000)
Available Budget
Actual Spending as %
Economic Classification
Current expenditure
61.72%
Of which: -
Compensation of employees
75 211
69.77%
Goods and Services
57.52%
Payments for financial assets
500
403 97
80.60%
Transfers and subsidies
65.67%
Provinces and municipalities
65.98%
Departmental agencies and accounts
86 346
64 628
21 718
74.85%
Public corporations and private enterprises
95 327
58 322
62.04%
Non profit institutions
10 164
3 955
6 209
38.91%
Households
44.07%
Payments for capital assets
19 779
4 563
15 216
23.07%
Machinery and equipment
18 019
13 456
25.32%
Software and other intangible assets
1 760
0.00%
Grand Total
65.59%

6. 4. ANALYSIS OF THE UNDER EXPENDITURE
4.1. Overall Expenditure:
The departmental overall expenditure performance depicted 65.5% spending and a standard norm is projected at 75% which reflects 10% under spending. This is largely due to transfers to municipalities that are not transferred every month, but according to payment schedules which the norm is not applicable.
Therefore, according to our projected cash flow, transfers are in line with the payment schedule at 65.6% while Disaster Relief is at 0% due to outstanding assessments reports.

7. 4.2 Compensation of employees:
Allocation: R
Actual expenditure R
Variance R75 211
% Spent %
The department was able to spend 69.7% of its budget allocation as at the end of the 3rd quarter, the under expenditure was due to vacant posts that were filled late in the year such as posts within NDMC, MISA and CWP.

8. 4.3. Goods and services:
Allocation: R
Actual expenditure R
Variance R
% Spent %
Our spending on goods & services reflects 17.5% under-spending.
The under-spending is due to projects that were either withheld or deferred to the next financial year. During the Adjusted Estimates of National Expenditure (AENE) funds to the value of R17 million were set aside to implement the establishment of cooperatives through SANACO. The process to renew the contract was only adjudicated in February 2012

9. 4.4 Payments of Capital Assets:
Allocation: R19 779
Actual expenditure R
Variance R15 216
% Spent %
The department spending reflects an under spending of 51.9%.
This is due to R5.6 million within CWP that is not spent due to the implementing agents being appointed late in the financial year, where the older ones did not want to invest in capital towards the end of their term.
The other allocation is on office furniture and office equipment not procured or delayed as the department is busy trying to acquire office accommodation for TSU.

10. 4.5. Transfers and subsidies:
The following Transfers have been paid according to the payment schedule after the institutions have fulfilled all the conditions and requirements for the transfers:
Municipal Infrastructure Grant %
Municipal Improvement System Grant 93.4%
South African LG Association %
Municipal Demarcation Board %
CRL Commission %
South African Cities Network %
Community Works Program
The program is currently at 69.7% spending; The program is divided into two categories: 10% on Program management (R65.3 mil) and 90% (R588.1 mil) site costs, but the 10% on Program management was reduced to R15.6 million to increase an allocation on site costs to R637.8 mil. The under spending is due to late receipt of invoices from service providers.

11. Transfers and subsidies continue:
The following Transfers are indicating symptoms of under spending:
LG Equitable Share = 68.4%
The LG Equitable Share currently reflects an under-spending of 68.4% whereby National Treasury has indicated an intention to withhold R949 million for non performance of municipalities on other conditional grants in the previous financial years.
Councillor once-off Gratuity = 0%
The process of gazetting, verification of councillors, Tax directive etc took too long to complete. The process was intensified during the 4th quarter of the financial year and there is tangible progress registered
United Cities of LG in Africa = 8.9%
Transfers to UCLGA have been suspended pending discussions between the department and the entity on how to disburse this allocation in future.

12. Transfers and subsidies continue:
The following Transfers also indicates symptoms of under spending :
Municipal Infrastructure Support Agency = 54.7%
The Department signed a contract with Development Bank of Southern Africa (DBSA). The contract entails that most of the procurement processes would be done by DBSA. And the department is invoiced after work is completed. The late billing by DBSA is the reason for the under spending.
Municipal Disaster Relief = 0%
The NDMC has over the period played an active part in assisting the Provinces to process their applications to ensure that the immediate relief funding is processed within the shortest possible period.This is due to assessments processes that took too long to complete. The department and the National Treasury are currently working on best way that can make funds distributed speedily and appropriately in the current financial year.

13. 5. MEASURES TO IMPROVE EXPENDITURE
Budget Committee:
The Budget Committee will serve as an advisory committee to management in reference to their respective responsibilities for the preparation, adoption, administration and monitoring of the budget.
The budget committee will mainly be concerned with the overall financial planning and management issues including assessment of the way the department will be operating and a focused attention on performance against budget and service delivery plans.

14. MEASURES TO IMPROVE EXPENDITURE cont
Project management approach:
The project management approach has been enforced at the level of the budget process thereby linking the budget to performance management. All approved projects have been allocated budgets linked to the various milestones. This will ensure that expenditure movement is in accordance with the projections.
Approved procurement plan:
A procurement plan has been developed linked to the project management model, the timeframes for projects are synchronised with the procurement requirements to ensure that the service providers are in place when required.
The approval of the procurement plan early in the financial year will ensure timeously procurement as well as consistent monitoring at executive management level.
Forward Planning Concept:
The department has committed itself to this concept for all its operations and procurement processes.

15. 6. CONCLUSION
1. Improvement plans were implemented with success. 2. Interim expenditure as at 31st March 2012 stood as follows (R2 billion under expenditure, R1,947 billion of which is transfers and subsidies) 2.1 Transfers and Subsidies - 97% 2.2 Compensation of employees-96% 2.3 Good and Services – 91% 2.4 Capex – 42%

16. THANK YOU