Presented by Themba P Wakashe

Director-General

REPORT ON THE UNSPENT BUDGET 2009/10

TO

STANDING COMMITTEE ON APPROPRIATIONS

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Major areas of underspending

1. Capital Works budget: R351,679 million

2. Investing in Culture: R41,060 million

3. 2010 FIFA World Cup: R12,883 million

4. Machinery and Equipment: R1,535 million

The total unspending for the Department as per the Appropriation Statement as at the end of March 2010 amount to R407 179 million

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Capital Works BudgetBackground

The Department of Arts and Culture has 28 Institutions

which are situated in all the Provinces. The immovable

assets that are occupied or held by DAC Institutions are 135.

These immovable assets range from offices, museums,

performing art centres, libraries, art galleries, monuments

and grave yards.

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Capital Works BudgetBackground (Cont.)

The National Department of Public Works (NDPW) is the

custodian of DAC immovable assets with the exception of

Playhouses and the South African Heritage Resources Agency (SAHRA). The NDPW as custodians, are

responsible to acquire, dispose and manage immovable

assets (managing includes the implementation of the

capital works projects and maintenance).

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Capital Works BudgetProcess to implement Capital Works Projects

• DAC Institutions submit needs assessments to DAC

• The Director-General approves the projects recommended by the Capital Works Committee

• DAC sends Procurement Instructions (PIs) to NDPW for each project with specifications, time frames and confirmation of funds

• NDPW sends the PIs to different Regional Offices of NDPW to initiate the projects

• DAC monitors the implementation of projects till final delivery

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Capital Works BudgetProcess to implement projects

NDPW manages the tendering process, appoints consultants and contractors, pay them and claim the funds from DAC on a recovery basis

Capital Works Expenditure as atMarch 2010

2009/10 Allocation R601 3652009/10 Expenditure R249 686Total under spending R351 679

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Capital Works BudgetFactors contributed to underspending

• Cancellation of the contract to build new Archives building due to insufficient funds (R150 million)

• Insufficient capacity in NDPW

• Delay in approving additional funding for existing projects

• Delay in approving sketch plan documents and tenders in the NDPW

• Cancellation of contracts due to under performance

• Projects not implemented within agreed time frames and specifications by NDPW

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Factors contributed to underspending

• Communication breakdown amongst the stakeholders• Lack of monitoring of projects• Inexperienced Project Managers in the NDPW• Delay in approving funds for the new project• R100 million committed for 2010 Infrastructure Legacy Projects

due to undefined roles between 2010 and Facilities Management Directorates

• Insufficient capacity in the Facilities Management Directorate (FMD)

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Plan of action to eliminate underspending

• Due to the appointment of the COO, roles between the 2010 and Facilities Management Directorates were defined in respect of 2010 Infrastructure Legacy Projects

• COO, CFO and the DG prioritize the submissions to approve the funds for capital works projects

• Client Forums amongst DAC, NDPW and the Institutions were formed. These forums convene bimonthly/quarterly to discuss the projects

• Ad hoc site visits conducted to monitor projects and expenditure

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Plan of action to eliminate underspending

• Increase capacity in the FMD by 31 August 2010

• Capital Works Committee chaired by COO was formed in May 2010 to assist in managing and monitoring capital works budget

• Assistance from the National Treasuries Technical Assistance Unit (TAU)

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Investing in CultureBackground

• The Investing in Culture (IIC) programme was adopted in 2005

• The IIC programme provides empowerment opportunities for unemployed people from the second economy through training and job creation in arts culture and heritage

• Its objectives are to support the previously disadvantaged group

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Investing in CultureDevelopment in 2009/10

• Moratorium placed on IIC around August 2009

• Forensic investigation followed

• Recommendations of the investigation were executed

• The SIU is doing further investigation with a view to recovering funds where financial losses were incurred

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Investing in CultureInterim arrangements

• Priority high on further handling of existing projects

Project Categories

• New – total of 30 (Free State 3, Gauteng 1, Eastern Cape 8 and KZN 18)

• Cleared projects - 12 out of a sample of 100 (KZN 2, Eastern Cape 2, Free State 4, Limpopo 2 and North West 2)

• Questionable status and others: The rest from the sample (88) and unsampled. The location is across all the provinces

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Investing in CultureFurther handling of projects

• Phased in approach in conjunction with the provinces (Initiated,cleared and questionable status and others)

• Involvement of the provinces to strengthen DAC teams for verification of the new projects

• Payments disbursed to new projects with active accounts

• Beneficiaries of inactive accounts requested to activate them

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Investing in CultureFurther handling of projects

• Cleared projects to be verified next

• Funds will be disbursed soon as verification visits are finalized

• Funds to questionable status projects to be disbursed if the DAC is satisfied

• Will request assistance from the National Treasuries Technical Assistance Unit with regard to Project Management

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2010 World Cup

The 2010 World Cup realized a underspending of R12 883 million in the 2009/10 financial year.

• Fly the Flag for Football Campaign (R3 million)

• Africa Day (R1 million)

• Public Viewing Areas (R6 million)

• African Village (R2 million)

The delay in spending was largely due to the fact that the event was only held from June 2010 . Roll over funds were requested from the National Treasury

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Machinery and Equipment

• An amount of R1 535 million had been under utilised for the purchase of furniture and equipment. The PFMA does not allow the use of capital assets budget for any other purpose.

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ThankThankYouYou