PRESENTATION TO THE PORTFOLIO COMMITTEE PRESENTATION TO THE PORTFOLIO COMMITTEE ON RURAL DEVELOPMENT & LAND REFORMON RURAL DEVELOPMENT & LAND REFORM

DATE: 13 APRIL 2011DATE: 13 APRIL 2011

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THIRD QUARTER EXPENDITURE REPORT THIRD QUARTER EXPENDITURE REPORT FOR THEFOR THE

2010-2011 FINANCIAL YEAR2010-2011 FINANCIAL YEAR

VENUE: M514, PARLIAMENTVENUE: M514, PARLIAMENTTIME: 09H30TIME: 09H30

PurposePurpose

The purpose of this presentation is to brief the Portfolio Committee on Rural Development & Land Reform on the Third Quarter Expenditure Report for 2010-2011.

The presentation will provide explanations and reasons for:

The under-spending of R621m or 8.50% against linear target, more especially the 56.65% spent against current paymentsThe shifting of funds from the Land Reform to Restitution Programme

It will also provide progress to date on the plan that was implemented by the Department to address the above under-spending.

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Appropriation for 2010-2011Appropriation for 2010-2011

Per Economic Classification

Main Appropriation

Roll overUnforeseeable & unavoidable

Adjustment Estimate

Adjusted Final Appropriation

R’000 [A] [B] [C] [D] [E]

Current payments 1,878,142 8,266 28,100 470,459 2,384,967

Transfers and

subsidies 4,871,603 487,461 - (478,509) 4,880,555

Payments for capital

assets 19,809 - - 8,050 27,859

Payments for

financial assets 1 - - - 1

TOTAL 6,769,555 495,727 28,100 - 7,293,382

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Appropriation for 2010-2011Appropriation for 2010-2011

A total rollover of R495.7m was approved by National Treasury in November 2010.

R487.5m was approved for the Restitution Programme and R8.3m for year-end accruals

(good & services not paid by year-end)

A further allocation of R28.1m was made to the Department to cater for salary increases

following the public sector wage strike.

An amount of R478.5m was reprioritised during the Adjustment Estimate process from

Transfers & Subsidies to augment the following departmental priorities:

R8.1m for ICT infrastructure & furniture for office buildings.

R470.5m for current payments – goods & services

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Appropriation for 2010-2011Appropriation for 2010-2011

The R470.5m current payments for goods & services funded the following departmental

priorities:

The newly created components, the establishment & the equipping of newly leased office

buildings, including associated ICT infrastructure

Rural Disaster Mitigation & Management and Technology Research & Development in

support of the new rural development mandate to implement the Comprehensive Rural

Development Programme (CRDP)

Funding of the National Rural Youth Services Corps (NARYSEC)

The Occupational Specific Dispensation (OSD) and Job Evaluation (JE) costs to improve

the services of Geospatial, Cadastral and Spatial Planning (specialists services)

Augmentation of the insufficient allocation of office accommodation budget

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33rdrd Quarter Spending for 2010-2011 Quarter Spending for 2010-2011

Spending Per Economic Classification

Main Appropriation

Adjusted Final

Appropriation

Third Quarter

Spending

% Spent against MainAppropriation

% Spent against

Adjusted Appropriation

R’000 [A] [B] [C] [D] [E]

Current

payments 1,878,142 2,384,967 1 ,351 ,056 72% 56.65%

Transfers and

subsidies 4,871,603 4,880,555 3 ,489 ,898 72% 71.51%

Payments for

capital assets 19,809 27,859 17, 071 86% 61.28%

Payments for

financial assets 1 1 382 - -

TOTAL 6,769,555 7,293,382 4,858,407 71.77% 66.61%

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The linear target for the Third Quarter is 75%. The current payment spending is 72% against the Main Appropriations and 56.7% against the Adjusted Appropriations .

Analysis of 3Analysis of 3rdrd Quarter Performance Quarter Performance

Current Payments:

The Department has undergone a restructuring process to align its organisational

structure and resources to the new mandate. A moratorium on the filling of vacant posts

was put in place which was lifted in January 2011.

The moratorium delayed spending on the compensation of employees and related goods

and services expenditure, hence the 56.65% spent in the 3rd Quarter.

The National Rural Youth Services Corps (NARYSEC) was implemented during

September 2010; the planning for the training and activities took place during the 3rd

Quarter, whilst payment is being made during the 4th Quarter.

Savings from Current Payments will be utilised to augment excessive expenditure in line

with section 43 of the PFMA.

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Analysis of 3Analysis of 3rdrd Quarter Performance Quarter Performance

Payment for Capital Assets: The less than linear target expenditure was attributable to the delay in ICT infrastructure

expenditure which was projected for September 2010 but only took place in February 2011

due to delays in finalising the lease agreement for newly leased office buildings with the

Department of Public Works.

Total Transfers and Subsidies: The Restitution Grant budget is already depleted and there are still outstanding court cases to

be settled.

In order to prevent the accrual of interest and possible fruitless and wasteful expenditure,

savings from other programmes will be used to settle the excessive expenditure in the

Restitution Programme.

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Shifting of Funds from Land Reform Shifting of Funds from Land Reform to Restitution Programmeto Restitution Programme

Restitution budget decreased from R3.6b in 2007-2008 to R2.5b in 2011-2012. The reduction

in budget was because the programme had been expected to be completed by 2008.

Sections 38 & 39 of the PFMA place a responsibility on the accounting officer to ensure that

effective and appropriate steps are taken to prevent unauthorised expenditure and to ensure

that there is effective risk management in place to prevent such from happening.

Given the restitution exposure to date, the Department was compelled to reprioritise an

amount of R2b to pay urgent court orders and finalise critical outstanding claims.

The R2b was funded by R1.5b shifted from Land Reform Grants and R0.5b received from the

rollover of funds as approved by NT.

The shifting of these funds was requested through section 30 of the PFMA i.e. during National

Adjustments Budgets.

Fiscal funding still remains a challenge, particularly for the Restitution Programme. Over the

MTEF period the Department has committed itself to finalise restitution claims within the

allocated baseline. However, court orders will continue to be a challenge. 9

44thth Quarter Spending for 2010-2011 Quarter Spending for 2010-2011(as at 24 March 2011)(as at 24 March 2011)

Spending Per Economic Classification

Adjusted Final Appropriation

Adjusted Appropriation

Current Budget

Spending to Date

24 March 2011

% Spent against Adjusted

Appropri-ation

% Spent against Current Budget

R’000 [A] [B] [C] [D] [E]

Current

payments 2,384,967 2,337,678 1,959,298 82.2% 83.8%

Transfers and

subsidies 4,880,555 4,899,694 4,858,987 99.6% 99.2%

Payments for

capital assets 27,859 56,009 29,034 146.6% 51.8%

Payments for

financial assets 1 1 2,320 - -

TOTAL 7,293,382 7,293,382 6,849,639 93.9% 93.9%

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Progress to Date on Expenditure &Progress to Date on Expenditure &ConclusionConclusion

The 4th Quarter Expenditure Report depicts progress to date.

Spending trends have been monitored on a regular basis by the Executive Management

Committee of the Department.

Intervention Teams were put in place to improve turnaround times and to reduce red tape in

the departmental processes.

As a result, total spending increased from 66.6% in the 3rd Quarter to 93.9% as at 24 March

2011 (4th Quarter).

This is already an improvement from the previous year’s actual results which recorded final

actual spending of 91.6% for the 2009-2010 financial year.

To prevent the accrual of interest and possible fruitless & wasteful expenditure, savings from

other programmes will be utilised to settle the deficit/ over-expenditure in Restitution

Programme.

The Department is confident to spend at least 95% of its appropriated final budget in line with

the limitation imposed by PFMA in terms of shifting funds post Appropriation Process.11

THANK YOU!THANK YOU!

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