Honourable speaker
Honourable Premier
Members of the Executive Council Auditor General, Mr Dirk Strydom
Leaders of Opposition Parties
Traditional Leaders present
Director-General and Heads of Departments
Head of Provincial Treasury, Mr Gavin Pratt
Mr Monde Tom, Section 100, 1(b) Administrator
Comrades, friends, ladies and gentlemen
Allow me to table the 2013/14 Budget Vote for Provincial Treasury together with the attached Summary of Payments and Estimates for consideration by this Honourable House.
Provincial Treasury (Vote 5) has been allocated a budget of R384.7 million for the 2013/14 financial year. The budget allocation represents an increase of 21% when compared to the main appropriation tabled for 2012/13.
Before I outline how we intend to utilise this budget, allow me honourable speaker to report on key tasks we have undertaken in the last financial year.
Notwithstanding challenges that we may have encountered, the department working together with the National Intervention Team, has made a lot of progress in the year 2012/13 in line with the departmental vision, the PFMA and broader government socio-economic programs.
Revenue generation
Last year we made a commitment that the province will increase its own revenue. Indeed, Honourable Speaker, by the end of February 2013 an amount of R600.7 million had already been collected against the original annual budget of R509.9 million.
This has come about through the revenue enhancement strategies in departments under the leadership of the provincial treasury. In the 2013/14 financial year, we envisage implementing the Provincial Revenue Enhancement Strategy more intensively by embarking on revenue enhancement projects within departments and public entities, and continue to revise the rates and tariffs that are in the reasonable interest of the public and government.
Cost containment measures
Honourable Speaker, we all know that our government has limited financial resources. In the last financial year we did not only emphasise the need to spend within our means, but we also took actions through cost containment measures to curb unnecessary expenditure without sacrificing the provision of services to our people.
To this end, we have issued the Provincial Treasury Instruction Note 1 of 2012, which has tightened controls and restricted expenditure on certain non-core expenditure items such as travel and subsistence, accommodation, catering usage of external conference facilities, mobile phones and 3G cards, printing and overtime work.
Due to our austerity measures, we managed to save R199.2 million which was re-allocated during the adjustment estimate in November 2012 to fund critical priority shortfalls in Education and the personnel costs in Health.
Banking and Cash-Flow Management
Last year we identified the problem of departments “inability to do proper cash flow projections, thus putting us in a difficult cash-flow position.
The Provincial Treasury has improved cash flow management controls. Currently, Treasury stringently monitors each department's cash flows and bank balances and also all payment-runs are now certified and approved by the Accounting Officer and Chief Financial Officer of each department before they are released from the BAS system by Provincial Treasury.
The Treasury has also issued each department with their respective monthly cash allocations and departments may not exceed these allocations in their respective pay runs. This process has produced good results and as a province we ended the year within a cash positive situation.
Unauthorised expenditure
Honourable Speaker, you will recall that the unauthorised expenditure which dates back to 2001, was at R2.7 billion in 2011. Since then we have reduced it by R1,3 billion of which R822 million has been funded from the Provincial Revenue Fund and the balance funded through the various departmental budgets. Today, the unauthorised expenditure is at R1,5 billion and we intend to finance R640 million in 2013/14 and the balance over the MTEF.
Curbing irregular, wasteful, fruitless and unauthorised expenditure
Curbing irregular, wasteful, fruitless and unauthorised expenditure is one of our critical priorities. To this end, Provincial Treasury has strengthened the Supply Chain Management (SCM) support to departments and the SCM compliance assessment methodologies to identify SCM transgressions. Non compliance reports are issued to the departments in which these issues are identified for Accounting Officers to take the required corrective actions.
The Provincial Treasury has also improved cash flow management controls and the analysis of the departmental in year monitoring reports in order to detect any possible budget pressures experienced by departments.
Increasing the generation of our own revenue, curbing irregular, fruitless and expenditure will enable us to deal with wastage in our government system thus enabling us to direct more resources to areas of poor people's needs and with high economic impact. Our ability to do so will always show in annual audit outcomes.
Clean Audit Strategy
The audit outcomes in the province have unfortunately not shown a positive trend expected in order to achieve the objective of Clean Audit 2014. We have reported a regression in the audit outcomes in provincial departments, public entities and municipalities.
In 2011/12 we recorded a regression in four departments, two going from qualified to disclaimed opinions and two departments losing their clean audit status to unqualified opinions. We did however record one improvement from qualified to unqualified. For the public entities, in the same financial year, we recorded two regressions, one from clean to unqualified and the other from unqualified to qualified and one improvement.
Honourable Speaker
The main reason for the Provincial Treasury's inability to attain a clean audit outcome was due to the Traditional Levy account. In the past Provincial Treasury was unable to prepare the required financial statements and submit the same for audit, due to the fact that the opening balances of the former “homeland” traditional levy accounts could not be verified and confirmed.
We are pleased Honourable Speaker to report that the Traditional levies submission to adopt 2003/04 balances was adopted and approved by legislature on the 11th of October 2012. The department is thus enabled to prepare and submit Annual Financial statements for the traditional levies account for the financial years 2003/04 up to 2011/12. This we hope will improve the departments audit opinion from unqualified, as the levies have been in the epicentre of us not achieving a clean audit opinion.
We also hope that in this financial year we will bring to date financial statements of Traditional Levies and Trust Account and to additionally formulate accounting policies that would regulate the financials of the account.
Municipal audit outcomes
The status of our municipality audit outcomes is of major concern. For the 2011/12 financial year we still have fourteen municipalities with disclaimed, twelve with qualified and one with adverse audit opinions.
Provincial Treasury has noted this trend and as a result restructured the MFMA support team in the Treasury, in order to provide better support to the municipalities. Dedicated MFMA support teams have now been established to support a particular district and its locals, thereby getting a better understanding of the issues in the allocated municipalities.
We have also noted the better cooperation between the two support departments, namely CoGHSTA and Provincial Treasury, MFMA teams. Provincial Treasury is also in the process of appointing a General Manager to support the Treasury MFMA teams and improve liaisons with National Treasury.
Despite our interventions, the 2011/12 audit outcomes by AGSA still show that ten of the municipalities in the province regressed, such has made many sceptical of the realisation on the Clean Audit 2014 project. But we are still very hopeful about this strategy.
The proper accounting for the assets of the municipalities and the accounting for water transactions remain the key issues that are hampering our progress towards clean audit.
We as the Provincial Treasury, working together with COGSTA are already putting in place interventions to address these challenges.
Compensation of Employees (COE)
The preliminary expenditure outcomes for 2012/13 show that Compensation of Employees (COE) will account for 69 percent of the provincial expenditure.
In order to manage the COE expenditure the province established the Human Resource Task Team (HRTT) whose primary role was to consider the merits for filling posts in a particular department and ensure that a budget was available to fund such posts.
The Department of Health and Education together account for 85 percent of the total COE in the province. It is for this reason why we conducted head counts in both these department are being undertaken; and a COE task team has been established to analyse the COE cost drivers in the provincial administration.
Building of the Provincial Treasury to perform its functions
Honourable Speaker, building and strengthening of the Provincial Treasury is on-going. In 2011 a number of senior managerial posts were vacant. I am happy to report that we have since filled 29 positions in the Provincial Treasury, and we continue to do so in this financial year.
Indeed, the vacancy rate had been a problem. The other problem had been institutional in that the Provincial Treasury HOD was not only responsible for heading provincial Treasury as the department, but also had to support the entire provincial government including municipalities. Indeed, this is a mammoth task. Therefore, with the assistance of the National Department of Public Service and Administration and the National Intervention Team we are in a process of restructuring the Provincial Treasury. This process has also identified the need to appoint a Chief Operations Officer to support the Provincial Treasury HOD and also to fill the other four senior executive positions in the Treasury to head the transversal support functions of the department.
Provincial Treasury's support to departments to increase efficient and effective infrastructure spending
The Limpopo Provincial Treasury is the leader in the implementation of the Infrastructure Delivery Management System (IDMS) in the province. The focus in 2012/13 was on building capacity to plan, deliver and monitor infrastructure projects and in 2013/14 the capacity building will be ramped up and the IDMS will be institutionalised throughout the province.
In the 2012/13 financial year EXCO approved the Limpopo IDMS and the implementation of the supporting Human Resource Capacitating Programme.
The process was started in the departments of Roads and Transport, Education, Health, Treasury and Public Works.
In the 2013/14 financial year the IDMS and the supporting HR Capacitating Programme will be completed in all the departments that are implementing infrastructure.
The Treasury will provide additional support to the municipalities on the implementation of the Municipal Infrastructure Grant (MIG) and also continue to provide support to both the departments and the municipalities on Public Private Partnerships (PPP).
Payment within 30 days
The province has strived to pay suppliers within the prescribed 30 days from date of receipt but in the current financial year only two departments have achieved full compliance in some months during the year. For the year under review an average of 71 percent of the invoices paid by all departments in the province were paid in compliance to the requirement. Eight departments achieved an average compliance rate of above 90 percent, however the two large departments Education and Health compliance rates were less satisfactory at 57 and 56 percent respectively.
Provincial Treasury and the Office of the Premier have met with all non-complying departments to share best practices and identify the root causes for the non-compliance. Continuous monthly monitoring of these departments will continue to improve the payment turnaround times.
Allow me Honourable Speaker to outline how we have allocated the total budget to our departmental programs to consolidate our achievements so far and advance to new frontiers.
Programme 1: Administration
Program 1, Administration is allocated R121.5 million to provide effective and efficient Strategic management, administrative support and sound financial management to the Provincial Treasury.
Programme 2: Sustainable Resource Management
Sustainable Resource Management is allocated R50.7 million in order to inform financial resource allocation, manage the provincial budget and to support and monitor provincial departments, municipalities and public entities for efficient and effective use of the province's fiscal resources.
The department will continue to do this through conducting economic research, to ensure that financial allocation is targeting areas of high socio- economic impact and need. This analytical research assists in identifying alternative budgeting, revenue and expenditure scenarios on selected key economic growth and social development indicators.
Through this program, we will also continue to provide support municipalities and their entities in the implementation of the Municipal Finance Management Act.
Programme 3: Assets, Liabilities and Provincial Supply Chain Management (ALSCM)
Program 3 which deals will Assets, Liabilities and Provincial Supply Chain Management (ALSCM) receives an allocation of R73.7 million.
This allocation will be utilised to provide policy direction and facilitate the effective and efficient management of assets, liabilities, financial systems and provincial supply chain management processes.
The implementation and monitoring of the provincial inventory and asset management policies in the province is crucial to obtaining an unqualified audit opinion. The common problem in departments that are qualified is still Asset Management.
In the interim, there will be a rollout of National Treasury LOGIS financial system which will replace the finest system in the province. The initial rollout will be in the Departments of Health, Education and Provincial Treasury. The LOGIS system is a National Treasury financial system which interfaces to the National BAS system. LOGIS has integrated procurement, inventory and assets modules and the use of this system will assist Limpopo greatly with the asset register challenges faced in Limpopo.
A bank overdraft strategy implementation will continue in the 2013/14 financial year. The strategy seeks to improve efficiency and accountability by provincial departments, improved budget preparation processes within provincial departments, more rigorous monitoring of expenditure and cash balances.
To date, we have published 46 editions of the provincial tender bulletin which are available at no costs and are available at Provincial Treasury District offices and the departmental website. A total of plus or minus 1700 people have been trained on the completion of Standard Bidding Documents. This is an on-going project of the Provincial Treasury and will continue well into the 2013/14 financial year.
Programme 4: Financial Governance
Financial Governance programme is allocated R138.7 million. This allocation will be utilised to:
- Ensure sound financial management and financial accountability in the province through capacity building, financial reporting, financial management policies development and support of oversight structures/bodies.
- Ensure that all departments and public entities have implemented effective risk management and internal control processes.
- Provide internal audit services to all Limpopo provincial departments in compliance with the approved internal audit plan.
The development of skilled and capable work force in financial management is a key responsibility of the programme.
Honourable Speaker, I am pleased to report that there is progress in project on skills audit project in the Chief Financial Officers. Finally a service provider has been appointed to undertake this task in our provincial government departments. This will go a long way in our efforts to determine the financial skills level within the province and programs to address skills deficit in this regard.
Recovery projects to departments
The financial skills audit is part of the whole program to provide hands-on support to our provincial departments. Out of the abovementioned total budget for Provincial Treasury, R78.2 million has been allocated to fund special projects to assist with the recovery for the five departments put under administration.
The recovery projects include a head count in the Department of Health, Audit assistance to seven departments in the province to address recurring Auditor General findings, the rollout of the national Treasury LOGIS financial system, strengthening the capacity and skills in Provincial Treasury, project based learning initiatives, improving financial management and supply chain management processes in the province.
Conclusion
As the Provincial Treasury we are tasked with an important role of allocating, monitoring and managing our provincial funds to ensure that they have the desired impact. In the last financial year, a lot has been done. But we are fully aware that a lot still needs to be done.
As provincial Treasury we continue to do our utmost best to ensure proper and sound financial management and governance in line with the PFMA and MFMA are progressively realised.
Thank you.
