Monitoring Public Expenditure, Service Monitoring Public Expenditure, Service Delivery and Accountability in the Eastern Delivery and Accountability in the Eastern

Cape, South AfricaCape, South AfricaDebbie DaltonDebbie Dalton

Researcher: PSAMResearcher: PSAM

International Budget Project and Tax Standards International Budget Project and Tax Standards Formation Foundation:Formation Foundation:

Caucasus and Central Asia Regional Budget Caucasus and Central Asia Regional Budget Monitoring MeetingMonitoring Meeting

20 – 21 August 200520 – 21 August 2005Almaty, KazakhstanAlmaty, Kazakhstan

What is the PSAM?What is the PSAM?

IndependentIndependent University-based monitoring and University-based monitoring and research institute dedicated to research institute dedicated to strengthening strengthening democracy and accountabilitydemocracy and accountability in South Africa in South Africa

Access, analyse and disseminate information on Access, analyse and disseminate information on the management of public resources, delivery of the management of public resources, delivery of public services and handling of cases of public public services and handling of cases of public sector misconduct and corruption – at provincial sector misconduct and corruption – at provincial level in Eastern Capelevel in Eastern Cape

Advocacy and disseminationAdvocacy and dissemination of findings via the of findings via the media in a user-friendly formatmedia in a user-friendly format

What is Accountability?What is Accountability?

Social accountability is an Social accountability is an obligationobligation byby elected elected political leaders and government political leaders and government officials to answer for the performance of officials to answer for the performance of their duties and responsibilities. their duties and responsibilities. Not a Not a personal favourpersonal favour

Requires that persons Requires that persons explain/justifyexplain/justify decisions/actions against decisions/actions against set criteriaset criteria – – and take steps to correct errors/faults and and take steps to correct errors/faults and prevent their recurrenceprevent their recurrence

Rights-Based Approach to Rights-Based Approach to GovernanceGovernance

Citizens are not passive consumers of services but Citizens are not passive consumers of services but active rights-holdersactive rights-holders

Democratic states are Democratic states are constitutionally committedconstitutionally committed to to ensure the progressive realization of socio-economic ensure the progressive realization of socio-economic rights (such as health care, education, housing etc.) via rights (such as health care, education, housing etc.) via the delivery of public services within available resourcesthe delivery of public services within available resources

Public institutions are ‘duty-bound’ to meet public interest Public institutions are ‘duty-bound’ to meet public interest and to open themselves to scrutinyand to open themselves to scrutiny

Corruption and misallocation of resources are a violation Corruption and misallocation of resources are a violation of citizens’ rightsof citizens’ rights**

** See Ackerman, JM, 2005, See Ackerman, JM, 2005, Human Rights and Social Accountability.Human Rights and Social Accountability.

Accountable Governance and Accountable Governance and Civic EmpowermentCivic Empowerment

Accountable governmentAccountable government – empowers citizens to – empowers citizens to participateparticipate in policy formulation, budgeting, in policy formulation, budgeting, expenditure tracking and to exercise oversight of expenditure tracking and to exercise oversight of government performance and service deliverygovernment performance and service delivery

Civic empowermentCivic empowerment – citizens have the – citizens have the skillsskills and and abilityability to hold government to account by to hold government to account by getting officials to justify and explain their getting officials to justify and explain their performance and by sanctioning them performance and by sanctioning them accordinglyaccordingly

Much more than simple consultation/ Much more than simple consultation/ participationparticipation

The Context of the Eastern CapeThe Context of the Eastern Cape

South AfricaSouth Africa: constitutional mandate to progressively : constitutional mandate to progressively realise realise socio-economic rightssocio-economic rights within available resources, within available resources, and one of the best and one of the best legislative frameworkslegislative frameworks to give effect to give effect to this mandate to this mandate

South Africa

Population: 46.9 millionSize: 1 219 912 sq kmUnemployment rate: 26.5%

Eastern Cape

72% of the population lives in poverty

Excellent Legislative Framework – Excellent Legislative Framework – Weak Demand for ImplementationWeak Demand for Implementation

Tendency to rely on ex-struggle loyalties and to Tendency to rely on ex-struggle loyalties and to treat accountability as personal favourtreat accountability as personal favour

Lack of separation between oversight and Lack of separation between oversight and implementation arms of governmentimplementation arms of government

Failure to use legislative provisions and Failure to use legislative provisions and participate in governance processesparticipate in governance processes

Tendency to concentrate on macro-economic Tendency to concentrate on macro-economic budgeting & expenditure and neglect site of budgeting & expenditure and neglect site of service deliveryservice delivery

Strategic PlanningStrategic PlanningLegislative Requirements for Strategic PlansLegislative Requirements for Strategic Plans::

National/Provincial Drawn up by Minister/official responsible for National/Provincial Drawn up by Minister/official responsible for department, and must:department, and must:

Include measurable objectivesInclude measurable objectives and outcomes for all programmes. and outcomes for all programmes. Describe Describe core activitiescore activities.. Describe Describe goals and targetsgoals and targets.. Determine Determine postsposts necessary to achieve goals. necessary to achieve goals. Include details of Include details of Service Delivery Improvement PlanService Delivery Improvement Plan..

Given this reporting requirement, you can ask the following Given this reporting requirement, you can ask the following questions:questions:

Are programme activities identified on the basis of situational/Are programme activities identified on the basis of situational/needs needs analysisanalysis??

Is the Is the costcost calculation of activities reasonable calculation of activities reasonable?? Do activities, targets & intended outcomes Do activities, targets & intended outcomes make sensemake sense?? Are there clear lines of Are there clear lines of accountabilityaccountability??

Potential Interventions in the Potential Interventions in the Budgeting and Planning ProcessBudgeting and Planning Process1.1. Obtain copy of budget - Obtain copy of budget - Review Budget AllocationsReview Budget Allocations and and

strategic prioritiesstrategic priorities

2.2. Obtain copies of strategic plan & business plans – Obtain copies of strategic plan & business plans – conduct conduct Strategic Plan EvaluationStrategic Plan Evaluation

3.3. Obtain & Obtain & evaluateevaluate outsourcing contracts and/or outsourcing contracts and/or service service level agreementslevel agreements

4.4. Obtain & Obtain & evaluate infrastructure development & evaluate infrastructure development & maintenance plansmaintenance plans

5.5. Make submissions on Department’s strategic plans to Make submissions on Department’s strategic plans to Finance oversight committeeFinance oversight committee in provincial Parliament in provincial Parliament and to and to provincial Treasury Medium Term Expenditure provincial Treasury Medium Term Expenditure CommitteeCommittee (prior to adoption of budgets) (prior to adoption of budgets)

PSAM Expenditure TrackingPSAM Expenditure Tracking

Track spending by Track spending by comparing quarterly financial comparing quarterly financial reportsreports (published by Treasury) with (published by Treasury) with budget budget allocationsallocations (contained in provincial budget & (contained in provincial budget & department strategic plans)department strategic plans)

CompareCompare spending undertakings in spending undertakings in budget/strategic plan documentsbudget/strategic plan documents with with actual actual spendingspending as per audited financial statements as per audited financial statements

Track Track compliancecompliance with legislated financial with legislated financial reporting requirementsreporting requirements

Legislative Reporting Legislative Reporting Requirements: expenditureRequirements: expenditure

Monthly Financial ReportsMonthly Financial Reports must include: must include: Actual revenue and expenditureActual revenue and expenditure Projections of revenue and expenditure.Projections of revenue and expenditure. Information on the spending on conditional grants.Information on the spending on conditional grants. Information on funds transferred outside of the department.Information on funds transferred outside of the department. Explanation for under spending/over spending and proposed Explanation for under spending/over spending and proposed

corrective actionscorrective actions.. Quarterly Financial ReportsQuarterly Financial Reports must include: must include:

Monthly informationMonthly information Actual revenueActual revenue An account of current and capital expenditure.An account of current and capital expenditure.

Annual ReportsAnnual Reports must include: must include: Audited financial statementsAudited financial statements.. Auditor-General’s report on financial statements.Auditor-General’s report on financial statements. Audit Committee reportAudit Committee report..

Example: HIV/AidsExample: HIV/Aids No No needs analysisneeds analysis, demographic data or identification of key , demographic data or identification of key

organisational challengesorganisational challenges Mismatch between Mismatch between activitiesactivities and and targetstargets

Target: Target: traintrain 768768 lay counselors lay counselors BudgetBudget for only for only 317317 lay counselors lay counselors

Example: HIV/AidsExample: HIV/Aids Unreasonable Unreasonable costscosts: :

600 nurses trained at R400 per day each = R2,400,000600 nurses trained at R400 per day each = R2,400,000 1050 nurses trained (to do the same thing) at R40 per day each = R84,0001050 nurses trained (to do the same thing) at R40 per day each = R84,000

Findings: HIV/AIDS Planning between 2000 - 2004Findings: HIV/AIDS Planning between 2000 - 2004 Failed to produce business plans for almost 40% of HIV/AIDS budget Failed to produce business plans for almost 40% of HIV/AIDS budget

between 2000-2004. between 2000-2004. Those plans that were produced between 2000 – 2004 did not Those plans that were produced between 2000 – 2004 did not

contain accurate & up to date information on service delivery contain accurate & up to date information on service delivery environment.environment.

No evidence of needs analysis.No evidence of needs analysis. No evidence of consultation with managers, trade unions or stake No evidence of consultation with managers, trade unions or stake

holders. holders. Failed to produce accurate, costed and time-bound infrastructure & Failed to produce accurate, costed and time-bound infrastructure &

maintenance / capital expenditure plans in this period.maintenance / capital expenditure plans in this period.

Performance: HIV/AIDS Planning between 2000 - Performance: HIV/AIDS Planning between 2000 - 20042004

The Eastern Cape Department of Health The Eastern Cape Department of Health failed to accountfailed to account for for 73%73% of its (provincial) HIV/AIDS budget between 2000 of its (provincial) HIV/AIDS budget between 2000 – 2003 (– 2003 (R90.2 mR90.2 m))

26%26% of budget was of budget was unspentunspent ( (R33 mR33 m)) Total amount unspent/inadequately accounted for: Total amount unspent/inadequately accounted for: 99%99%

Performance Reporting Performance Reporting RequirementsRequirements

Quarterly Performance ReportsQuarterly Performance Reports must include: must include: Performance against measurable objectivesPerformance against measurable objectives Quarterly financial information along with explanations of Quarterly financial information along with explanations of

variances.variances. Mid-Year Performance Reports Mid-Year Performance Reports must includemust include

An account of performance against service delivery targets An account of performance against service delivery targets and Key Performance Indicators.and Key Performance Indicators.

Progress in addressing problems identified in past years Progress in addressing problems identified in past years annual reportannual report

Annual Reports Annual Reports An account of departmental performance – achievement of An account of departmental performance – achievement of

desired outcomes, delivery of outputs and the use of desired outcomes, delivery of outputs and the use of resources.resources.

Account of human resource management issues.Account of human resource management issues.

PSAM Performance MonitoringPSAM Performance Monitoring

Objective – to determine whether Objective – to determine whether public expenditure produces public expenditure produces intended outcomes & to promote intended outcomes & to promote effective service delivery by effective service delivery by producing:producing:

ScorecardScorecard evaluations of evaluations of department’s performancedepartment’s performance

Detailed ReportsDetailed Reports – eg Health, – eg Health, Housing, Welfare paymentsHousing, Welfare payments

Monitoring BriefsMonitoring Briefs – short – short overviews of spending, financial overviews of spending, financial controls, audit findings, oversight controls, audit findings, oversight recommendations etc.recommendations etc.

Service Delivery Monitoring BriefsService Delivery Monitoring Briefs - contain on-site inspections of - contain on-site inspections of quality of service delivery, quality of service delivery, interviews, digital photosinterviews, digital photos

Service Delivery Monitoring BriefService Delivery Monitoring Brief

Educational InfrastructureEducational Infrastructure Crisis in the Eastern Cape: Crisis in the Eastern Cape: 2004/052004/05

To eradicate the total To eradicate the total infrastructure backlog by 2010 infrastructure backlog by 2010 and mud/temporary structure and mud/temporary structure classrooms by 2008, the classrooms by 2008, the Department needed to budget Department needed to budget R574 million per annumR574 million per annum..

MTEF Budget:MTEF Budget:• R241 millionR241 million (2004/05) (2004/05)• R290 millionR290 million (2005/06) (2005/06)• R322 millionR322 million (2006/07) (2006/07)

R574 million = US$93 millionR574 million = US$93 million

Major service delivery departments in the Eastern Cape Major service delivery departments in the Eastern Cape did not have disciplinary databasesdid not have disciplinary databases

691 cases of 691 cases of misconductmisconduct in the province, only 62 ( in the province, only 62 (8%8%) ) deemed resolveddeemed resolved

338 of these cases involved 338 of these cases involved corruptioncorruption, only 28 (, only 28 (8%8%) ) deemed resolveddeemed resolved

170 of these cases involved 170 of these cases involved maladministrationmaladministration, only 3 , only 3 ((1.7%1.7%) deemed resolved) deemed resolved

Total amount involved = Total amount involved = R6.9 billionR6.9 billion (US$1.12 billion) (US$1.12 billion)Amount recovered / subsequently accounted for Amount recovered / subsequently accounted for = R325 million (5%) = R325 million (5%) = US$ 52.85 million= US$ 52.85 million

PSAM Case Monitoring PSAM Case Monitoring FindingsFindings

PSAM Budget OversightPSAM Budget Oversight

Obtain Committee minutes and track Obtain Committee minutes and track parliamentary oversight of expenditure and parliamentary oversight of expenditure and implementation by departmentsimplementation by departments

Track Auditor-General’s financial & performance Track Auditor-General’s financial & performance audit findings and monitor audit opinionsaudit findings and monitor audit opinions

Monitor implementation of Auditor-General and Monitor implementation of Auditor-General and oversight committee recommendations & oversight committee recommendations & resolutionsresolutions

Workshops findings with oversight committeesWorkshops findings with oversight committees

Eastern Cape Audit Opinions v Eastern Cape Audit Opinions v Budget Allocations 1996 - 2004Budget Allocations 1996 - 2004

Financial Year Amount(R 000s)

Disclaimer amount(R 000s)

No of Departments Disclaimed

% of budget unaccounted for

1996/1997 16 740 919 16 705 685 10 out of 12 99.79%

1997/1998 16 478 201 16 446 118 12 out of 13 99.81%

1998/1999 15 622 907 15 571 041 11 out of 13 99.67%

1999/2000 16 307 310 16 154 030 10 out of 13 99.06%

2000/2001 18 162 161 17 398 103 8 out of 13 95.79%

2001/2002 19 595 327 16 536 483 4 out of 13 84.38%

2002/2003 24 715 248 9 993 369 2 out of 13 40.43%

2003/2004 29 671 566 16 639 175 3 out of 13 56.07%

Total 157 293 639 125 444 004 79.75%

Audits & Oversight of EC BudgetAudits & Oversight of EC Budget

Auditor-General issued ‘disclaimer’ audit opinion for 80% of Auditor-General issued ‘disclaimer’ audit opinion for 80% of budget between 1996 – 2004budget between 1996 – 2004

‘‘DisclaimerDisclaimer’ issued when lack of internal financial control ’ issued when lack of internal financial control measures, a lack of financial records and the failure to measures, a lack of financial records and the failure to properly record all financial transactions. Not mean that properly record all financial transactions. Not mean that money is lost/stolen.money is lost/stolen.

Means the province could Means the province could not adequately accountnot adequately account for its for its use of use of R125 billion R125 billion (US$ 20 billion) (US$ 20 billion) out of R157 billion out of R157 billion (US$25.5 billion) (US$25.5 billion) and effectiveness of service delivery.and effectiveness of service delivery.

In 2002 the Auditor-General pointed out that not a single In 2002 the Auditor-General pointed out that not a single Public Accounts Committee resolution had been Public Accounts Committee resolution had been implemented between 1995 - 2002implemented between 1995 - 2002

Is the PSAM effective?Is the PSAM effective?

Impact AssessmentImpact Assessment Improved financial reporting in EC – decrease in Improved financial reporting in EC – decrease in audit audit

disclaimers disclaimers by over 50% since 2002.by over 50% since 2002.

Sustained advocacy led to Sustained advocacy led to creation of disciplinary creation of disciplinary databases and the implementation of register of databases and the implementation of register of members interestsmembers interests

Institution of Institution of Joint Anti- Corruption Task TeamJoint Anti- Corruption Task Team to to prosecute corruption cases and Judicial Commission of prosecute corruption cases and Judicial Commission of Inquiry into financial mismanagementInquiry into financial mismanagement

Health crisis report resulted in Health crisis report resulted in qualified audit opinionqualified audit opinion for for National Department of Health for 2003/04National Department of Health for 2003/04