2011/12 unaudited close-out and 2012/13 first quarter budget performance reports

2011/12 Unaudited Close-outand

2012/13 First Quarter Budget Performance Reports

Presentation to Select Committee on Finance14 August 2012

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KwaZulu-Natal

Provincial Treasury

Presentation Outline

• 2011/12 Unaudited– 2011/12 Provincial Budget Summary– Unaudited Provincial Own Revenue– Unaudited Budget Performance

• Summary of provincial expenditure• Conditional grants• Infrastructure

• 2012/13 First Quarter – Provincial Own Revenue– Budget performance by Vote– Conditional grants– Infrastructure

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2011/12 Unaudited Outcome

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2011/12 Provincial Budget Summary

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Table 1: Provincial budget summary

Provincial receipts

Transfer receipts from National 76 241 101 76 935 750 76 932 260 96.6 Equitable share 62 927 556 63 584 195 63 584 195 79.8 Conditional grants 13 313 545 13 351 555 13 348 065 16.8

Provincial own receipts 1 942 965 1 942 965 2 714 941 3.4 Total provincial receipts 78 184 066 78 878 715 79 647 201 100.0 Provincial payments

Current payments 60 813 457 60 680 709 61 942 487 78.8 Transfers and subsidies 9 262 713 9 928 852 9 560 739 12.2 Payments for capital assets 7 210 771 7 707 332 7 120 006 9.1 Payments for financial assets 13 070 15 142 26 265 0.0

Total provincial payments 77 300 011 78 332 035 78 649 497 100.0 LendingSurplus/(deficit) before financing 884 055 546 680 997 704 Financing of which: 63 953 401 328 401 328

Provincial roll-overs 63 953 255 216 255 216 Allocations from provincial cash resources 142 603 142 603 Surplus Own Revenue surrendered 3 509 3 509

Surplus/(deficit) after financing 948 008 948 008 1 399 032

% of total Preliminary actual R thousand Main

Appropriation Final

Appropriation

2011/12 Provincial Budget Summary• Bulk of provincial receipts relate to ES, contributing 79.8% of total revenue with CG

at 16.8% and provincial own revenue making up the balance of 3.4%• The unaudited actual shows that KZN received R13.348bn CG funding, which is a

shortfall of some R3.490m when compared to the Final Appropriation. This is due to not all EPWP Incentive grant and Social Sector EPWP grants funding being transferred to depts, due to poor spending

• Final Appropriation includes a reduction of R55m by the National Dept. of Public Works against the Devolution of Property Rate Funds Grant for Provinces which was withheld from KZN and allocated to other provinces. This was formalised by way of a Second Adjustments Estimate which was tabled in the Provincial Legislature on 9 March 2012. The savings arose from a dispute in respect of properties which the eThekwini Metro had included in the dept’s list of properties for the payment of rates. These properties were found to not belong to provincial depts but to national depts and the metro itself

• The province over-collected against provincial own receipts, collecting R2.715bn compared to the budget of R1.943bn. This over-collection of R771.976m is discussed in more detail later

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2011/12 Provincial Budget Summary• As such, actual receipts for 11/12 amounted to R79.647bn compared to Final

Appropriation of R78.879bn, resulting in a surplus of R768.486m• The unaudited actual provincial payments amount to R78.649bn, of which

current payments is the largest proportion at 78.8%, followed by transfers at 12.2% and capital payments at 9.1%

• KZN’s surplus at the end of 11/12 amounts to R1.399bn and results from the following:– KZN budgeted for a surplus of R948.008m in 11/12– KZN over-spent its budget allocation by R317.462m in aggregate in 11/12– KZN over-collected its own revenue when compared to the Final Appropriation

by R771.976m– Mitigating this to an extent, is the fact that NT did not transfer R3.490m in

respect of the EPWP Incentive Grant for Provinces and Social Sector EPWP grant, due to slow spending by some departments

• The Committee is reminded that the budgeted surplus of R948.008m results from not allocating the full ES allocation to depts

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Provincial Own Revenue

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Table 2: Summary of provincial own receipts by Vote - 2011/12Unaudited Final Over/ % collected

Actual Appropriation (Under)(1) (2) (3) = (2) - (1) (4) = (1) / (2)

1. Office of the Premier 396 879 366 761 30 118 108.2 2. Provincial Legislature 1 554 601 953 258.6 3. Agriculture, Environ. Affairs & Rural Dev 22 687 17 273 5 414 131.3 4. Economic Development & Tourism 1 182 46 281 (45 099) 2.6 5. Education 89 105 54 835 34 270 162.5 6. Provincial Treasury 289 253 8 848 280 405 3 269.1 7. Health 207 998 227 798 (19 800) 91.3 8. Human Settlements 269 168 1 136 268 032 23 694.4 9. Community Safety & Liaison 70 53 17 132.1 10. The Royal Household 150 93 57 161.3 11. Co-operative Governance and Traditional Affairs 1 854 2 083 (229) 89.0 12. Transport 1 409 482 1 207 948 201 534 116.7 13. Social Development 16 417 4 720 11 697 347.8 14. Public Works 6 101 4 120 1 981 148.1 15. Arts and Culture 2 647 360 2 287 735.3 16. Sport and Recreation 394 55 339 716.4

Total 2 714 941 1 942 965 771 976 139.7

R thousand


• The aggregated unaudited revenue collected by KZN depts amounted to R2.715bn compared to the Final Appropriation of R1.943bn, resulting in a substantial over-collection of R771.976m or 39.7%

• The depts largely responsible for the provincial over-collection are Provincial Treasury, followed by Human Settlements and then by Education and Transport

• Counter-acting the over-collection by these depts is fairly significant under-collection by Economic Development and Tourism and Health

• Provincial Treasury over-collected by R280.405m. This over-collection is mainly in relation to interest earned on positive cash balances due to the improvement in the funds in the PMG and IGCC accounts. These accounts have been cash positive since May 2010 due to cost-cutting and tight cash management in KZN

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• Human Settlements over-collected by R268.032m due to:– R85.228m returned to the PRF by an implementing agent (Thubelisha Homes) who

had gone into liquidation. These funds have been appropriated back to the dept in 12/13 for the continuation of these projects

– Also contributing to the over-collection is R176.105m in respect of the Wiggins and Bonela project. R126.859m relates to accumulated interest which the dept has asked to be allocated back to them for the construction of a head-office. This is still under discussion. Guidance was sought from NT regarding keeping the capital amount of R49.248m in the province, to be used for housing projects and this has been approved by NT

• Transport over-collected by R201.534m largely due to higher than anticipated new motor vehicle licences and higher than anticipated applications for learners’ and drivers’ licences, as well as the improved registration in respect of classification of vehicles, such as abnormal and special vehicles

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Provincial Own Revenue• Education over-collected by R34.270m mainly due to higher than anticipated

commission on PERSAL deductions relating to insurance and garnishees, discounts received from LTSM suppliers and higher than anticipated recoveries of staff debts

• Office of the Premier over-collected by R30.118m mainly against Casino taxes and Horse racing taxes due to conservative budgeting

• Economic Development and Tourism on the other hand under-collected by R45.099m. This is mainly due to the low revenue collected from Liquor licences which, at the end of March 2012, only showed collection of 2.6% of the dept’s annual budget. Certain portions of the KZN Liquor Licensing Act cannot come into effect until DTI has repealed the current Act. As a result of these sections not coming into operation, the tariffs for liquor licences could not be reviewed and increased as was projected in the budget

• Health under-collected by R19.8m due to over-budgeting based incorrectly on previous’ years collection that included non-recurrent collections such as backlogs in respect of claims from the RAF 10

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Summary of Expenditure

Table 3: Summary of Provincial expenditure analysis by Vote - 2011/12Unaudited Adjusted Final Under/ % spent

Actual Appropriation Appropriation (Over)(1) (2) (3) (4) = (2) + (3) (5) = (4) - (1) (1) / (2)

1. Office of the Premier 485 600 491 105 - 491 105 5 505 98.9 2. Provincial Legislature 381 038 401 373 - 401 373 20 335 94.9 3. Agriculture, Environ. Affairs & Rural Dev. 2 475 378 2 481 989 - 2 481 989 6 611 99.7 4. Economic Development & Tourism 1 534 168 1 577 558 - 1 577 558 43 390 97.2 5. Education 33 799 217 33 227 001 - 33 227 001 (572 216) 101.7 6. Provincial Treasury 390 325 510 024 - 510 024 119 699 76.5 7. Health 24 791 118 24 669 096 - 24 669 096 (122 022) 100.5 8. Human Settlements 3 043 574 3 084 991 - 3 084 991 41 417 98.7 9. Community Safety and Liaison 145 239 150 139 - 150 139 4 900 96.7 10. The Royal Household 59 409 60 643 - 60 643 1 234 98.0 11. Co-operative Gov. & Traditional Affairs 1 105 904 1 155 995 - 1 155 995 50 091 95.7 12. Transport 6 639 855 6 628 044 - 6 628 044 (11 811) 100.2 13. Social Development 1 938 831 1 952 956 - 1 952 956 14 125 99.3 14. Public Works 1 182 253 1 267 970 (55 000) 1 212 970 30 717 97.5 15. Arts and Culture 369 752 369 818 - 369 818 66 100.0 16. Sport & Recreation 307 836 358 333 - 358 333 50 497 85.9

Total 78 649 497 78 387 035 (55 000) 78 332 035 (317 462) 100.4

R thousand Virement Post

Adj. Est.

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• The aggregated actual expenditure for the year amounts to R78.649bn compared to the Final Appropriation of R78.332bn, resulting in over-expenditure of R317.462m

• While the over-expenditure is not alarming when compared to previous years, it is worth noting that Comp of empl was over-spent by R1.335bn due mainly to the carry-through effects of the shortfall in funding for OSD for educators, the reversal of the ‘no work, no pay’ journal amounting to R576m under Education, the increase in stipends for ECD practitioners, the increased hourly rate of ABET practitioners and the conversion of 600 teacher assistants to teacher aids, as the dept was paying less than the national norms. This over-spending takes into account the additional funding allocated to the dept to partially off-set spending pressures in respect of OSD for educators (Discussed in detail later)

• The unaudited year-end over-exp is an improvement to some extent when compared to the last few years where KZN showed substantial over-expenditure, with the exception of 10/11. Important to note is that these are only unaudited numbers and that KZN will be preparing an Audited IYM now that the annual audit has been completed

• 3 depts over-spent their budget at year-end, with the most significant by far being Education at R572.216m and Health at R122.022m

• Provincial Treasury reflects the most significant under-spending at R119.699m, followed by Sport and Recreation at R50.497m

Expenditure

Expenditure• Education over-spent its budget by R572.216m, even after additional funding was

provided to the dept in the 11/12 Adj Est, due to the carry-through effect of the shortfall in funding for the OSD for educators and previous years’ wage agreements, increase in ECD and ABET rates and the conversion of teacher assistants to teacher aids. The year-end over-exp includes the reversal of the journal processed in the latter part of 10/11 (amounting to R576m) relating to the ‘no work, no pay’ deductions relating to the 2010 strike action, and this has added to the cost pressure under Comp of empl (which was at R1.449bn at end March 2012)

• Education and PT are working on a detailed sector analysis comparing KZN’s Education dept to the other 8 provinces as most other Education depts are not showing spending pressures at the level that KZN is. In fact, the next highest over-exp was recorded by EC at some R353m (prelim numbers) and Limpopo at R122m (prelim numbers)

• This sector analysis contains a number of recommendations to the dept in terms of controlling its expenditure and reprioritising its budget going forward

• The sector analysis is at an advanced stage and has already been presented to the MEC for Education in KZN. The next step is to present it to the officials of the department for them to adopt the recommendations going forward

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Expenditure• Health over-spent its budget by R122.022m despite having reflected projected under-

spending in prior IYMs

– This over-expenditure relates partly to the increased cost of NHLS related to an agreement to increase the monthly pmt from R34m to R43m, until such time as the dispute is finalised, as well as an agreed to once-off pmt of R50m towards HIV and AIDS costs. The negotiations with NHLS regarding the contract are currently underway. An arbitration process is almost complete and a decision is expected in 12/13

– Also contributing to the over-expenditure is an additional payment of R70m on the PPP, made by Inkosi Albert Luthuli Central Hospital to address backlogs in quarterly payments as the dept had been paying a quarter in arrears in previous years and rectified this in 11/12 by making 5 payments

– Also contributing was over-spending against Comp of empl attributed to the ongoing processing of various OSDs (occupational therapists, advanced maternity staff and artisans) which will be concluded in 12/13

– Apart from this over-expenditure which is mainly against Goods and services, the dept under-spent against Machinery and equipment due to delays in the delivery of medical equipment

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Expenditure• Transport over-spent by R11.811m, due to the higher than anticipated cost of repairs to

roads and infrastructure damaged by floods, mainly in the Ladysmith area, in December 2010 and January 2011. In addition, the higher than anticipated rehabilitation of roads undertaken in line with a detailed technical analysis of the road conditions in KZN also contributed to the over-exp

Counteracting the over-expenditure by these departments, was under-expenditure by the following departments:

• Provincial Treasury under-spent by R119.699m. This relates mainly to unused allocation of interest on overdraft resulting from improvement in funds in PMG and IGCC accounts. Also contributing were delays in appointing service providers under the Municipal Support Programme and initial slow uptake of Infrastructure Crack Team by depts and municipalities

• Sport and Recreation under-spent by R50.497m due to delays in filling posts and due to delays in implementation of new organisational structure. There were delays in moving head office from Dbn to Pmb due to difficulty in finding suitable office space. The dept also under-spent due to challenges in obtaining appropriate bidders for the construction of futsal and combination courts which resulted in delayed implementation of projects

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Expenditure• COGTA under-spent by R50.091m as a result of delays in various projects, such as the

construction of houses for amakhosi due to longer than anticipated consultation with traditional leaders with regard to approval of plans and designs, and 3 Traditional Administrative Centres (TACs) due to negotiation of the wages for local labour taking part in these projects taking longer than anticipated. Also contributing were delays in the filling of vacant posts due to the internal moratorium linked to the dept’s restructuring

• DEDT under-spent by R43.390m mainly due to delays in filling vacant funded posts and delays in the establishment of the KZN Liquor Entity

• Human Settlements under-spent by R41.417m mainly due to under-spending against the Housing Disaster Relief grant (R21.637m) which is explained in detail later, and the non-filling of vacant posts due to the review of the organisational structure due to it creating offices at a district level in order to bring services closer to the people. Also contributing was a delay in the implementation of the rectification of pre-1994 housing stock as the National Home-Builders Registration Council (NHBRC) was in the process of compiling rectification scoping reports which will indicate exactly what rectification will be done to what properties

• Public Works under-spent by R20.335m mainly due to delays in filling posts and under-sp under the Devolution of Property Rates grant due to late receipt of invoices from municipalities. Also contributing were delays by contractors and slow progress on projects such as the Southern regional office, head office, Dundee and Greytown district offices, among others 16

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Conditional GrantsTable 4: Summary of conditional grants by Vote - 2011/12

Unaudited Final Under/ % spentActual Appropriation (Over)

(1) (2) (3) = (2) - (1) (1) / (2)

Agriculture, Environ. Affairs & Rural Development 242 022 242 727 705 99.7 EPWP Incentive Grant for Provinces 8 316 8 316 - 100.0 Comprehensive Agricultural Support Programme grant 164 691 164 691 - 100.0 Ilima/Letsema Projects grant 60 000 60 000 - 100.0 Land Care Prog Grant: Poverty Relief and Infra Dev. 9 015 9 720 705 92.7

Education 3 180 593 3 210 108 29 515 99.1 Dinaledi Schools grant 12 320 12 320 - 100.0 Education Infrastructure Grant 1 175 956 1 175 956 - 100.0 HIV and AIDS (Life-Skills Education) grant 45 114 45 114 - 100.0 National School Nutrition Programme grant 1 144 368 1 172 082 27 714 97.6 Technical Secondary Schools Recap grant 36 762 38 563 1 801 95.3 FET College Sector grant 765 537 765 537 - 100.0 EPWP Incentive Grant for Provinces 536 536 - 100.0

Economic Development and Tourism - 536 536 - EPWP Incentive Grant for Provinces - 536 536 -

Health 4 452 785 4 453 090 305 100.0 Comprehensive HIV and Aids grant 1 907 312 1 907 312 - 100.0 Forensic Pathology Services grant 161 550 161 550 - 100.0 Health Infrastructure Grant 358 471 358 471 - 100.0 Health Professions Training and Development grant 249 917 249 917 - 100.0 Hospital Revitalisation grant 547 698 547 698 - 100.0 National Tertiary Services grant 1 201 831 1 201 831 - 100.0 EPWP Incentive Grant for Provinces - 536 536 - Social Sector EPWP Incentive Grant for Provinces 26 006 25 775 (231) 100.9

R thousand

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Conditional GrantsTable 4: Summary of conditional grants by Vote - 2011/12

Unaudited Final Under/ % spentActual Appropriation (Over)

(1) (2) (3) = (2) - (1) (1) / (2)

Human Settlements 2 773 312 2 801 547 28 235 99.0 Human Settlements Development grant 2 769 871 2 769 871 - 100.0 Housing Disaster Relief grant 3 441 31 140 27 699 11.1 EPWP Incentive Grant for Provinces - 536 536 -

Transport 2 157 272 2 157 272 - 100.0 Provincial Roads Maintenance grant 1 236 648 1 236 648 - 100.0 Public Transport Operations grant 773 473 773 473 - 100.0 Transport Disaster Management grant 29 736 29 736 - 100.0 EPWP Incentive Grant for Provinces 117 415 117 415 - 100.0

Social Development 4 047 4 494 447 90.1 Social Sector EPWP Incentive Grant for Provinces 4 047 4 494 447 90.1

Public Works 494 163 507 841 13 678 97.3 Devolution of Property Rate Funds Grant to Provinces 489 480 505 880 16 400 96.8 EPWP Incentive Grant for Provinces 4 683 1 961 (2 722) 238.8

Arts and Culture 49 444 48 971 (473) 101.0 Community Library Services grant 49 444 48 971 (473) 101.0

Sport and Recreation 87 694 87 694 - 100.0 Mass Sport and Recreation Participation Programme 87 694 87 694 - 100.0

Total 13 441 332 13 514 280 72 948 99.5

R thousand

Conditional Grants• The conditional grant allocation for KZN is under-spent by R72.948m, with the main

contributors to this under-spending being Education, Human Settlements and Public Works

• Education under-spent its conditional grant funding by R29.515m:

– The main contributor being the NSNP grant which was under-spent by R27.714m, largely due to delays in the receipt of March invoices, as is the norm every year. A roll-over has been requested and approved by NT

– The Technical Secondary Schools Recapitalisation grant under-spent by R1.801m, due to delays in delivery of technical equipment and furniture for schools. A roll-over has been requested and approved by NT

• Human Settlements was under-spent by R27.699m due to the database of service providers to deal with emergencies taking longer than anticipated. A roll-over was requested but not approved as the dept failed to provide evidence that the funds were committed before year-end

• Public Works under-spent its Devolution of Property Rate Funds Grant to Provinces by R16.4m due to the late receipt of invoices and insufficient information in respect of invoices received from some municipalities for property rates 19

Conditional Grants• The EPWP Incentive Grant for Provinces was under-spent as follows:• Economic Development and Tourism did not spend this grant funding as they were

unable to identify projects which would meet the required criteria• Health did not spend the grant allocation due to difficulty in obtaining the necessary

supporting information from its implementing agents to enable the dept to claim against this grant

• Human Settlements did not spend this allocation as they did not have sufficient staff to run with this project

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Infrastructure

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Table 5 Summary of Infrastructure expenditure analysis by Vote - 2011/12R thousand Unaudited Final Under/ %

Actual Appropriation (Over) Spent

1. Office of the Premier 1 905 1 905 - 1 905 - 100.0 2. Provincial Legislature 1 514 13 554 - 13 554 12 040 11.2 3. Agriculture, Environ. Affairs & Rural Dev 125 490 119 390 8 438 127 828 2 338 98.2 4. Economic Development & Tourism 507 970 507 970 - 507 970 - 100.0 5. Education 2 198 134 2 216 097 51 2 216 148 18 014 99.2 6. Provincial Treasury 31 264 39 038 - 39 038 7 774 80.1 7. Health 1 765 981 1 831 516 - 1 831 516 65 535 96.4 8. Human Settlements 2 751 707 2 702 375 - 2 702 375 (49 332) 101.8 9. Community Safety and Liaison - - - - - - 10. The Royal Household 4 527 11 528 - 11 528 7 001 39.3 11. Co-operative Governance & Trad. Affairs 28 569 34 177 9 405 43 582 15 013 65.6 12. Transport 4 627 392 4 570 280 100 520 4 670 800 43 408 99.1 13. Social Development 179 977 204 479 17 209 221 688 41 711 81.2 14. Public Works 51 593 83 275 (514) 82 761 31 168 62.3 15. Arts and Culture 52 492 51 752 (1 205) 50 547 (1 945) 103.8 16. Sport and Recreation 30 909 41 521 597 42 118 11 209 73.4

Total 12 359 424 12 428 857 134 501 12 563 358 203 934 98.4

Adjusted Appropriation

Virement Post Adj. Est.

Infrastructure• Table 5 gives a breakdown of infrastructure expenditure by department and category of

project against the 11/12 infrastructure budget• Actual infrastructure expenditure was at 98.4% of budget, showing under-spending of

R203.934m against the Final Appropriation. It must be noted that this amount is made up of various under- and over-spending in depts, as indicated below:

• Health under-spent by R65.535m, mainly due to poor planning and design in respect of the Ekhombe Hospital and the consolidation of a number of plans for the Natalia building into one project, which resulted in delays. Also contributing were delays with the tender for the re-organisation of the Northdale Hospital pharmacy project

• Transport under-spent by R43.408m due to delays in some routine maintenance projects due to the high turnover of Zibambele contractors

• Social Development under-spent by R41.711m due to delays by implementing agents in terms of procurement processes (Public Works and IDT)

• Education under-spent by R18.014m due to slow progress in implementing new projects , such as ECD facilities and special schools, due to unacceptable performance by implementing agents. The dept over-spent against other infrastructure categories by addressing backlogs with regard to rehabilitation, renovation and upgrading of existing schools 22

2012/13 First Quarter Report

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Table 6 Summary of provincial own receipts by Vote - Quarter 1: 2012/13

R thousand Projected Actual % Projected Main Over/ %1st Quarter 1st Quarter Collected 2nd Quarter 3rd Quarter 4th Quarter Actual Budget (Under) Collected

1. Office of the Premier 93 663 107 240 114.5 96 510 99 342 100 973 404 065 404 110 (45) 26.5 2. Provincial Legislature 133 264 198.5 123 126 133 646 629 17 42.0 3. Agriculture, Environ Affairs & Rural Dev 3 590 4 550 126.7 7 357 6 042 4 151 22 100 18 136 3 964 25.1 4. Economic Development & Tourism 380 4 624 1 216.8 227 277 5 097 10 225 48 595 (38 370) 9.5 5. Education 22 674 26 625 117.4 10 066 10 720 10 990 58 401 57 819 582 46.0 6. Provincial Treasury 48 480 65 657 135.4 49 697 49 701 49 699 214 754 185 505 29 249 35.4 7. Health 53 528 61 493 114.9 53 508 53 489 53 500 221 990 213 992 7 998 28.7 8. Human Settlements 309 9 497 3 073.5 309 311 350 10 467 1 250 9 217 759.8 9. Community Safety and Liaison 11 12 109.1 13 14 13 52 52 - 23.1 10. The Royal Household 24 23 95.8 24 24 27 98 98 - 23.5 11. Co-operative Governance and Traditional Affairs 486 3 855 793.2 486 1 158 575 6 074 2 703 3 371 142.6 12. Transport 343 374 345 586 100.6 348 450 354 117 347 697 1 395 850 1 395 850 - 24.8 13. Social Development 1 053 3 319 315.2 1 053 1 053 1 068 6 493 4 227 2 266 78.5 14. Public Works 1 217 2 124 174.5 1 232 1 140 1 150 5 646 5 498 148 38.6 15. Arts and Culture 87 184 211.5 101 75 93 453 394 59 46.7 16. Sport and Recreation 21 18 85.7 24 24 29 95 95 - 18.9

Total 569 030 635 071 111.6 569 180 577 613 575 545 2 357 409 2 338 953 18 456 27.2

2012/13Projections


• Actual revenue for Q1 amounted to R635.071m, which is 11.6% higher than projected for the same period. Most depts over-collected when compared to Q1 projections

• Projected actual own revenue shows that KZN will collect R18.456 million more than the amount budgeted for 12/13

• Only DEDT is projecting to significantly under-collect against its revenue budget at year-end. This is primarily due to revenue from Liquor licences not being realised as the dept has noted that fees in terms of the new Liquor Act will only come into effect when the current Liquor Act is repealed by Minister of DTI

• Provincial Treasury makes up the larger part of the projected over-collection, due to higher than anticipated collection in respect of interest from the IGCC and PMG accounts

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Table 7 Summary of Provincial expenditure analysis by Vote - Quarter 1: 2012/13

R thousand Projected Actual % Projected Under/ %

1st Quarter 1st Quarter Spent 2nd Quarter 3rd Quarter 4th Quarter Actual (Over) Spent

1. Office of the Premier 200 202 155 886 77.9 157 363 144 330 138 521 596 100 596 100 - 26.2 2. Provincial Legislature 100 046 102 972 102.9 111 417 105 347 101 094 420 830 420 830 - 24.5 3. Agriculture, Environ Affairs & Rural Dev 604 088 716 481 118.6 627 224 632 398 678 436 2 654 539 2 654 539 - 27.0 4. Economic Development & Tourism 657 240 455 208 69.3 444 397 404 105 355 013 1 658 723 1 658 803 80 27.4 5. Education 8 581 013 8 699 100 101.4 9 128 511 8 606 599 8 863 040 35 297 250 34 794 148 (503 102) 25.0 6. Provincial Treasury 114 095 99 134 86.9 150 195 129 796 212 585 591 710 585 774 (5 936) 16.9 7. Health 6 239 672 6 253 314 100.2 7 007 689 6 649 691 6 644 656 26 555 350 26 555 350 - 23.5 8. Human Settlements 699 770 585 935 83.7 903 882 996 693 814 425 3 300 935 3 300 935 - 17.8 9. Community Safety and Liaison 40 595 19 430 47.9 46 049 47 435 48 420 161 334 161 334 - 12.0 10. The Royal Household 15 469 17 014 110.0 13 534 13 895 15 128 59 571 59 566 (5) 28.6 11. Co-op. Governance & Traditional Affairs 190 184 167 772 88.2 532 932 218 390 296 409 1 215 503 1 210 403 (5 100) 13.9 12. Transport 1 853 618 1 803 889 97.3 1 852 063 1 967 661 1 867 260 7 490 873 7 418 873 (72 000) 24.3 13. Social Development 503 128 377 279 75.0 532 555 536 878 566 220 2 012 932 2 047 812 34 880 18.4 14. Public Works 182 717 155 615 85.2 437 155 420 675 313 151 1 326 596 1 311 171 (15 425) 11.9 15. Arts and Culture 84 489 63 690 75.4 215 801 93 172 98 189 470 852 470 852 - 13.5 16. Sport and Recreation 76 904 54 570 71.0 101 993 120 370 106 055 382 988 382 988 - 14.2

Total 20 143 230 19 727 289 97.9 22 262 760 21 087 435 21 118 602 84 196 086 83 629 478 (566 608) 23.6

2012/13Projections

Budget


• Table 7 reflects that total spending for Q1 was at 97.9%, which is 2.1% lower than projected, with 11 of the 16 depts showing lower than projected expenditure. In aggregate though, KZN seems to be on track having spent 23.6% of the annual budget during Q1, which is close to the straight-line benchmark of 25% for the same period

• Aggregated projected expenditure for the year amounts to R84.196bn compared to the budget of R83.629bn, resulting in a projected over-expenditure of R566.608m at year-end

• 6 depts are projecting to over-spend their 12/13 budget allocation, 2 depts project to under-spend, with all other depts projecting to break-even their budget allocations at year-end

• The 6 depts that are projecting to over-spend at year-end are Education, Provincial Treasury, Co-operative Governance and Traditional Affairs, Transport and Public Works and are discussed in more detail below:

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Summary of Expenditure• Education is projecting to over-spend its budget by R503.102m at year-end. The

bulk of the over-spending is projected against Prog 2, particularly Comp of employees. This over-expenditure is mainly due to the carry-through effects of shortfalls in funding for OSD for educators and various wage agreements dating back to 2008 (excluding 2011), conversion of teacher assistants to teacher aids, payment of rural allowances, and increase in stipends for ECD practitioners and hourly rate of ABET practitioners in 11/12 without funding, as previously explained

• Transport is projecting to over-spend by R72m due to higher than anticipated claims on public transport subsidies relating to bus subsidies due to increases in fuel prices and hence, increased transportation costs. The dept’s contracts with the bus operators include an escalation clause linked to labour and fuel indices, among others and these are currently not covered by the Public Transport Operations grant

• Public Works is projecting to be over-spent by R15.425m due to 3 projects where orders were placed but not received in time for payment before the end of 11/12 and for which a roll-over has been requested, but not yet approved. The projects are the Ixopo Office Park, the Southern regional office and the head office project28

Summary of Expenditure• Provincial Treasury is projecting to over-spend by R5.936m. The projected over-

expenditure is mainly attributed to forensic investigation commitments not paid during 11/12, which are now required to be paid in 12/13 and payment toward the reconfiguration of office space. Also contributing, are payments incurred with regard to the upgrading of the Richards Bay airport and the payment of bursaries for non-employees as agreed to by Cabinet. The dept has requested a roll-over of funds in respect of 11/12 commitments which should cover this proj over-exp

• Co-operative Governance and Traditional Affairs is projecting to over-spend by R5.1m due to the payment of 4 computer servers ordered in 11/12. The servers have been delivered, installed and paid for in Q1. The dept requested a roll-over of R5.2m in respect of these computer servers

• Social Development is reflecting a projected under-spending of R34.880m due to expenditure on maintenance of buildings which has not been processed due to delays by Public Works. Also contributing to the under-spending are the delays in finalisation of SLAs with new NGOs due to strict application of Section 38(1)(j) of the PFMA

29

Conditional Grants

30

Table 8 Summary of conditional grants by Vote - Quarter 1: 2012/13



Vote 1 - Office of the Premier - - - - - - - - - - EPWP Incentive Grant for Provinces - - - - - - - - - -

Vote 3 - Agriculture & Environmental Affairs 54 202 48 209 88.9 63 918 80 517 84 799 277 443 277 443 - 17.4 Comprehensive Agricultural Support Programme 44 940 47 917 106.6 32 437 44 546 58 826 183 726 183 726 - 26.1 Land Care grant 1 564 292 18.7 13 806 4 356 2 555 21 009 21 009 - 1.4 EPWP Integrated Grant for Provinces 2 310 - - 5 728 3 980 - 9 708 9 708 - - Ilima/Letsema Projects grant 5 388 - - 11 947 27 635 23 418 63 000 63 000 - -

Vote 4 - Economic Development and Tourism - - - - - 1 000 1 000 1 000 - - EPWP Integrated Grant for Provinces - - - - - 1 000 1 000 1 000 - -

Vote 5 - Education 797 033 857 866 107.6 899 423 768 615 801 992 3 327 896 3 374 316 46 420 25.4 Education Infrastructure grant 271 817 413 398 152.1 199 665 385 638 248 776 1 247 477 1 247 477 - 33.1 HIV and AIDS (Life-Skills Education) grant 1 311 1 600 122.0 15 417 16 528 13 261 46 806 46 806 - 3.4 National School Nutrition Programme grant 303 943 227 779 74.9 302 283 282 317 290 815 1 103 194 1 179 358 76 164 19.3 FET College Sector grant 214 544 214 398 99.9 363 127 67 211 224 845 869 581 839 837 (29 744) 25.5 Technical Secondary Schools Recap. grant 1 203 - - 10 408 12 392 19 491 42 291 42 291 - - Dinaledi Schools grant 3 965 691 17.4 8 023 4 279 4 554 17 547 17 547 - 3.9 EPWP Integrated Grant for Provinces 250 - - 500 250 250 1 000 1 000 - -

Vote 7 - Health 978 147 1 154 544 118.0 1 238 916 1 207 256 1 220 133 4 820 849 4 820 849 - 23.9 Comprehensive HIV and AIDS grant 387 303 547 798 141.4 554 899 545 660 577 066 2 225 423 2 225 423 - 24.6 Health Infrastructure grant 89 276 84 262 94.4 106 443 102 736 99 926 393 367 393 367 - 21.4 Health Professions Training and Dev grant 65 466 65 466 100.0 65 466 65 466 65 462 261 860 261 860 - 25.0 Hospital Revitalisation grant 136 156 164 257 120.6 156 029 134 493 111 826 566 605 566 605 - 29.0 National Health Insurance grant - - - 7 900 10 600 14 500 33 000 33 000 - - National Tertiary Services grant 297 245 292 761 98.5 343 437 343 437 343 479 1 323 114 1 323 114 - 22.1 Nursing Colleges and Schools grant 2 701 - - 4 742 4 864 6 874 16 480 16 480 - - EPWP Integrated Grant for Provinces - - - - - 1 000 1 000 1 000 - -

2012/13Projections

Budget

Conditional Grants

31

Table 8 Summary of conditional grants by Vote - Quarter 1: 2012/13



Vote 8 - Human Settlements 568 041 526 978 92.8 850 568 841 242 696 509 2 915 297 2 915 297 - 18.1 Human Settlements Development grant 568 041 526 978 92.8 850 568 841 242 696 509 2 915 297 2 915 297 - 18.1

Vote 9: Communinty Safety and Liaison 278 - - 753 585 335 1 673 1 673 - - Social Sector EPWP Incentive Grant for Provinces 278 - - 753 585 335 1 673 1 673 - -

Vote 12 - Transport 558 423 635 443 113.8 607 778 604 325 598 194 2 445 740 2 373 740 (72 000) 26.8 Provincial Roads Maintenance grant 407 542 441 215 108.3 371 828 367 629 320 499 1 501 171 1 501 171 - 29.4 Public Transport Operations grant 134 818 176 181 130.7 220 026 220 153 263 919 880 279 808 279 (72 000) 21.8 EPWP Integrated Grant for Provinces 16 063 18 047 112.4 15 924 16 543 13 776 64 290 64 290 - 28.1

Vote 14 - Public Works 13 186 3 032 23 257 351 219 721 72 504 552 608 552 608 - 1 Devolution of Property Rate Funds grant 12 787 3 280 25.7 256 237 219 400 72 183 551 100 551 100 - 0.6 EPWP Integrated Grant for Provinces 399 -248 -62.2 1 114 321 321 1 508 1 508 - (16.4)

Vote 15 - Arts and Culture 11 562 3 145 27.2 26 542 9 311 9 621 48 619 48 619 - 6.5 Community Library Services grant 11 562 3 145 27.2 26 542 9 311 9 621 48 619 48 619 - 6.5

Vote 16 - Sport and Recreation 12 839 14 439 112.5 30 191 23 542 23 950 92 122 92 122 - 15.7 Mass Participation and Sport Development grant 12 590 14 190 112.7 29 942 23 292 23 698 91 122 91 122 - 15.6 EPWP Integrated Grant for Provinces 249 249 100.0 249 250 252 1 000 1 000 - 24.9

Total 2 993 711 3 243 656 108.3 3 975 440 3 755 114 3 509 037 14 481 574 14 457 667 (25 580) 22.4

2012/13Projections

Budget

Conditional Grants• Conditional grant allocation for KZN is projected to be over-spent by R25.580m, with

only Education and Transport projecting over-expenditure at this stage• FET College grant under Education is projecting to over-spend by R29.744m due to the

carry-through of the shortfalls in funding for the higher than anticipated wage agreements. Also contributing to this over-expenditure is the fact that FET colleges continue to offer two curricula simultaneously and these are under-funded by the grant

• Projected year-end over-expenditure of R72m under Transport is against the Public Transport Operations grant and is due to higher than anticipated claims on public transport subsidies relating to bus subsidies due to increases in fuel prices and hence, increased transportation costs. The dept’s contracts with the bus operators include an escalation clause linked to labour and fuel indices, among others. These are not currently covered by the grant

• The projected under-spending of R76.164m against NSNP due to the extension of contracts for service providers being signed before the new higher rate was communicated to the dept. As such, the allocation per learner per day remains at R2.15 and R3.05 instead of R2.18 and R3.08 for primary and secondary schools. Also, the payment for food handlers remained the same at R640 instead of R720 per 200 learners. The savings will be utilised to feed learners in quintile 4 and 5 schools 32

Infrastructure

33

Table 9 Summary of Infrastructure expenditure analysis by Vote - Quarter 1: 2012/13



1. Office of the Premier 4 750 523 11.0 4 093 5 000 1 456 11 072 11 000 (72) 4.8 2. Provincial Legislature 3 318 493 14.9 5 181 4 954 3 389 14 017 14 017 - 3.5 3. Agriculture, Environ Affairs & Rural Dev 25 375 39 110 154.1 38 137 34 957 26 420 138 624 138 624 - 28.2 4. Economic Development & Tourism 321 585 288 308 89.7 124 599 48 599 33 420 494 926 494 926 - 58.3 5. Education 782 127 648 464 82.9 634 897 509 445 611 348 2 404 154 2 404 154 - 27.0 6. Provincial Treasury 3 822 10 781 282.1 6 000 9 000 19 547 45 328 39 315 (6 013) 27.4 7. Health 470 558 527 657 112.1 623 583 393 969 342 062 1 887 271 1 885 949 (1 322) 28.0 8. Human Settlements 595 390 517 068 86.8 842 274 866 992 662 515 2 888 849 2 888 849 - 17.9 9. Community Safety and Liaison - - - - - - - - - - 10. The Royal Household 3 050 3 162 103.7 3 150 3 557 4 514 14 383 14 349 (34) 22.0 11. Co-op. Governance & Trad. Affairs 2 650 1 612 60.8 3 291 8 895 13 150 26 948 26 948 - 6.0 12. Transport 1 367 948 1 342 497 98.1 1 255 100 1 371 290 1 204 031 5 172 918 5 172 918 - 26.0 13. Social Development 43 430 14 255 32.8 58 309 57 814 61 615 191 993 190 378 (1 615) 7.5 14. Public Works 18 603 8 789 47.2 15 585 21 372 59 735 105 481 90 744 (14 737) 9.7 15. Arts and Culture 9 400 3 518 37.4 22 262 10 800 13 855 50 435 50 435 - 7.0 16. Sport and Recreation 8 535 3 003 35.2 11 719 21 699 14 367 50 788 50 788 - 5.9 - Total 3 660 541 3 409 240 93.1 3 648 180 3 368 343 3 071 424 13 497 187 13 473 394 (23 793) 25.3

2012/13Projections

Budget

Infrastructure• KZN is projecting to over-spend its infrastructure budget by R23.793m at year-end. KZN

has spent 25.3% of the annual infrastructure budget at the end of Q1 which is slightly higher than the straight-line benchmark of 25% for the same period

• 6 depts are projecting to over-spend at year-end while the others reflect a balanced budget

• Spending against 4 depts (Agriculture, Environmental Affairs and Rural Development, Provincial Treasury, Health and The Royal Household) was higher than projections for Q1 mainly due to outstanding commitments from 11/12 which were paid for in Q1, such as the construction of a satellite mushroom base, transfers payments in respect of the upgrading of the Richards Bay airport which was due to be completed in 11/12 but could not be completed due unfavourable weather conditions, etc. Also contributing to the higher than projected spending was the faster than anticipated progress in various projects under Health, as discussed below

• Provincial Treasury reflects projected over-spending of R6.013m due to payments incurred with regard to the upgrading of the Richards Bay airport, which was due to be completed in 11/12, but was delayed as a result of unfavourable weather conditions, as previously mentioned. The dept has requested a roll-over in this regard and, if approved, it will offset the projected over-expenditure 34

Infrastructure• Health reflects projected net over-expenditure of R1.322m relating to the over-

spending against New and replacement assets attributed to faster than expected progress at the Pomeroy and Dannhauser CHCs, as well as office and residential accommodation lease agreements being higher than initially forecast. Upgrades and additions project to over-spend as a result of increased costs for laundry and essential health technology equipment, King George V Hospital TB surgical out-patients project, as well as Ngwelezana Hospital for the upgrade electrical reticulation

• Social Development reflects projected over-spending of R1.615m due to outstanding invoices from 11/12 from IDT, which will be processed in the current financial year. The department has requested a roll-over of funds from 11/12 in this regard

• Public Works reflects projected over-spending of R14.737m due to commitments from 11/12, for which roll-overs have been requested. This includes the Ixopo Office Park, the Southern regional office and the head office project

35

Cashflow Management

Thank you

37

2011/12 unaudited close-out and 2012/13 first quarter budget performance reports

Documents