JOINT BUDGET COMMITTEE BRIEFING ON DEPARTMENT OF HOUSING EXPENDITURE FOR 2007/08

JOINT BUDGET COMMITTEE BRIEFING ON DEPARTMENT OF HOUSING EXPENDITURE

FOR 2007/08

06 June 2008

Outlay of presentation

1. Summary of expenditure by programme

2. Summary of expenditure by economic classification

3. Analysis and reasons for current expenditure variances

3.1 Departmental vacancies

3.2 Procurement

3.3 Virements

4. Provincial transfer expenditure and outcomes

5. Medium-term budgeting challenges and risk management strategies

1. Summary of expenditure by programme

PROGRAMME

R thousand

Adjusted Allocation

Exp. as at 31 Mar 2008

Unspent%

Spent

1. Administration 122,419 114,048 8,371 93%

2. Housing Policy Research and Planning 77,979 72,746 5,233 93%

3. Housing Implementation Support 143,926 140,411 3,515 98%

4. Housing Development Finance 8,638,034 8,259,067 378,967 96%

Total 8,982,358 8,586,272 396,086 96%

2. Summary of expenditure by economic classification

ECONOMIC CLASSIFICATION

R thousandAllocation

Exp. as at 31 Mar 2008

Unspent%

Spent

Compensation of Employees 97,796 97,241 555 99%

Goods and Services 271,553 255,741 15,812 94%

Provincial and Local Governments 8,342,946 8,149,869 193,077 98%

Departmental Agencies & Accounts 257,166 77,165 180,001 30%

Foreign Governments & International Organization 1,000 606 394 61%

Households 875 700 175 80%

Machinery & Equipment 10,847 4,848 5,999 45%

Software & Other Intangible Assets 175 102 73 58%

Total 8,982,358 8,586,272 396,086 96%

Analysis of variances and related reasons

• The Department spent R8,5 billion out of its allocation of R8,9 billion.

• Expenditure represents nearly 96% of the voted funds.

• Unspent funds amounts to R396 million or 4.4 % of voted funds mainly as follows:– Funds retained in terms of the retention provisions of

the Division of Revenue Act, 2007 in respect of Eastern Cape and Free State (net R193m);

– Funds provided for the Social Housing Rental Programme allocated for transfer through the SHRA at R180m;


• Compensation to employees– Under-spending amounts to R555 000 and is mainly due to vacant

positions which were not filled during the year • Goods and services

– The total under-spending on this item amounts to R15,8 million.– This under-spending is mainly due to the following:

• Personnel related expenditure• Outstanding portions relating to completion of the following projects:

– Outsourcing execution of some portions of the Internal Audit plan; – Investigation on the development of alternative tenure options;– Savings on the transversal contract to manage the Debtors system

implemented at various provinces;– Evaluation and reporting on the advance tranche payments made to

municipalities to implement approved projects;– Investigation into a possible insurance cover for subsidy houses against

vis major;– The nature of some of the projects is that they were planned to be

completed at due dates that are beyond 31 March 2008 and therefore those projects straddle over two financial years, i.e. 2007/08 and 2008/09, while the commitment can only be created in one year;


• International organizations and Households

– The R394 000 savings are mainly due to the over provision for membership fees paid to the UN Habitat (Habitat Foundation) in US dollars;

– Savings realized from the Capacity Building bursary scheme provision


• Machinery and equipment • The total under-spending of R5,999 million is

partly due to delays in the process of filling vacancies:– Equipment and Furniture provisions for posts that were

in process of recruitment for which delivery was made after year end;

– Generator ordered to provide electricity back-up which supplier experienced stock shortage as the item is imported;

Monthly Drawings and Expenditure Department total

Total Department

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

APR MAY JUNE JULY AUG SEPT OCT NOV DEC JAN FEB MAR

R'0

00

Projections Expenditure

Expenditure per programme as at 31 March 2008

Prog 1: Administration Sub-Programme

Sub Programmes Budget Expenditure Variance%

Spent

Minister 5,077,939 4,853,681 224,258 96%

Management 34,704,370 32,076,131 2,628,239 92%

Corporate Services 74,603,691 69,147,902 5,455,789 93%

Property Management 8,033,000 7,971,072 61,928 99%

Total 122,419,000 114,048,787 8,308,285 93%

Prog 1: Administration Economic Classification

Economic Classification Budget Expenditure Variance%

Spent

Compensation of employees 46,997,691 46,919,492 78,199 100%

Goods and services 69,652,885 63,454,425 6,198,460 91%

Households 180,484 179,646 838 100%

Machinery and equipment 5,587,940 3,495,224 2,092,716 63%

Total 122,419,000 114,048,787 8,370,213 93%

Monthly Drawings and Expenditure Prog 1: Administration

Prog 1: Adminstration

-

5,000

10,000

15,000

20,000

25,000


R'0

00


Prog 2: Housing Policy Research and Planning Sub-Programme


Spent

Management 2,078,857 1,952,874 125,983 94%

Policy 10,664,758 9,694,505 970,253 91%

Research 6,221,623 5,580,873 640,750 90%

Policy & Programme Monitoring 7,336,750 6,822,002 514,748 93%

Information Management 50,677,012 48,089,575 2,587,437 95%

UNHABITAT 1,000,000 606,355 393,645 61%

Total 77,979,000 72,746,184 5,232,816 93%

Prog 2: Housing Policy Research and Planning Economic Classification


Spent



Households 0 0 0 0%

Machinery and equipment 2,315,662 875,804 1,439,858 38%

Foreign governments and international organizations

1,000,000 606,355 393,645 61%

Total 77,979,000 72,746,184 5,232,816 93%

Monthly Drawings and Expenditure Prog 2: Housing Policy Research and Planning

Programme 2: Housing Policy Research and Planning

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000


R'0

00


Prog 3: Housing implementation support Sub-Programme


Spent

Management 2,086,763 2,009,641 77,122 96%

Service Delivery Support 2,554,292 2,459,448 94,844 96%

Rental Housing and People’s Housing Process

3,479,637 3,345,504 134,133 96%

Sector Support Liaison and Stakeholder Management

2,217,440 2,122,442 94,998 96%

Capacity Development 12,939,896 10,820,498 2,119,398 84%

Intergovernmental and international relations

54,646,327 54,394,441 251,886 100%

Special Programme Support 4,324,482 4,311,933 12,549 100%

Communication 61,677,163 60,946,236 730,927 99%

Total 143,926,000 140,410,144 3,515,856 98%

Prog 3: Housing implementation support Economic Classification


Spent



Households 693,651 519,371 174,280 75%


Total 143,926,000 140,410,144 3,515,856 98%

Monthly Drawings and Expenditure Prog 3: Housing implementation support

Prog 3: Housing Implementation Support

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000


R'0

00


Prog 4: Housing Development Funding Sub-Programme


Spent

Management 2,513,336 2,390,220 123,116 95%

Financial & Grant Management

21,340,747 19,489,500 1,851,248 91%

Housing Institutions, Office of Disclosure and Funding Mobilization

14,067,917 10,154,277 3,913,640 72%

Sub Total 1 37,922,000 32,033,997 5,888,003 84%

Departmental Agencies & Accounts

257,166,000 77,164,083 180,001,917 30%

Integrated Housing & Human Settlement Development Grant

8,342,946,000 8,149,869,000 193,077,000 98%

Sub Total 2 8,600,112,000 8,227,033,083 373,078,917 96%

Total 8,638,034,000 8,259,067,080 378,966,920 96%

Prog 4: Housing Development Funding Economic Classification


Spent

Compensation of employees

15,286,816 15,134,357 152,459 99%


Households 500 500 0 100%


Sub Total 1 37,922,000 32,033,997 5,888,003 84%

Departmental Agencies & Accounts

257,166,000 77,164,083 180,001,917 30%

Provincial and Local Governments

8,342,946,000 8,149,869,000 193,077,000 98%

Total 8,638,034,000 8,259,067,080 378,966,920 96%

Monthly Drawings and Expenditure Prog 4: Housing Development Funding

Prog 4: Housing Development Finance

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000


R'0

00


3.1 Departmental vacancies

• By April 2008 the establishment of the Department totaled 406 posts of which 79 were vacant representing a vacancy rate of 19%;

• The new establishment was approved during 2007/08 and the establishment increased to 480 posts of which 140 were vacant, representing a vacancy rate of 29%.

3.2 Procurement

• The Department has a Supply Chain Management Directorate

• Departmental procurement is centralised• A supplier database is maintained as required by

the Framework and acquisitions are made in line with the delegated authority limts set by NT guideline

• A bid adjudication committee is in place• Evaluation committees evaluate all bids and

submit recommendations to the bid adjudication committee.

3.2 Procurement

• The department has a procurement policy which provides guidance on the process.

• Through the database use is made of SMME’s and HDI’s.

• Provinces procurement arrangements tend to vary depending on the Provincial Treasuries guidelines

• Practice of issuing prequalification bidding processes is generally used to save on the time of mamaging acquisitions accepting that the subsidy quantum is predetermined.

Procurement

The following were outstanding projects at year end:• Purchase and installation of a standby generator at Govan

Mbeki House.• Outsourcing execution of some portions of the Internal

Audit plan; • Investigation on the development of alternative tenure

options;• Evaluation and reporting on the advance tranche

payments made to municipalities to implement approved projects;

• Investigation into a possible insurance cover for subsidy houses against vis major.

• Furniture and audio visual equipment purchased before the year end but only delivered after the end of March 2008

3.3 Virements cont.

PROGRAMMEOriginal

AllocationDetails of Virements Total

VirementRevised

Allocation

1. Administration 116,419 6,000 6,000 122,419

2. Housing Policy Research and Planning 89,979 -2,000 -10,000 -12,000 77,979

3. Housing Implementation Support 147,926 -2,000 5,250 -7,000 -3,750 144,176

4. Housing Development Finance 8,523,284 -2,000 -5,250 17,000 - 9,750 8,533,034

Housing Institutions 54,165 - 54,165

NURCHA 22,000 -3,006 18,994

Social Housing Foundation 20,165 -5,041 15,124

Thubelisha Homes 12,000 8,047 20,047

TOTAL 8,877,608 - - - - - 8,877,608

3.3 Virements

• Programme 1: Administration – The net effect of virements is an increase on programme

allocation of R6 million as a result of the following: – R2 million was shifted from compensation of employees in

Programmes 2, 3 and 4 respectively for the payment pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces.

– Within the programme funds were shifted from capital assets to goods and services due to savings on capital assets. The savings was in respect of funds originally provided for the replacement of ministerial vehicles which were purchased in 2005/06 from funds received for the auctioning of a vehicle involved in an accident and savings in the Department.

3.3 Virements cont.

• Programme 2: Housing Policy Research and Planning– The net effect of virements is a decrease on the programme

allocation of R12 million emanating from the following:– R2 million was shifted from compensation of employees to

Programme 1 to be used for pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces. It was a requirement that this contribution is funded from savings within the Department.

– R10 million was shifted to Programme 4 from Goods and Services for Thubelisha Homes to cover its operational expenditure.

– Within the programme the R921 000 was reprioritized to fund the increase in the UNHABITAT contribution in line with the new scale for contributions as per the resolution passed at a conference held with the United Nations during March 2007.

3.3 Virements cont.

• Programme 3: Housing Implementation Support– The net effect of virements is a decrease on the programme

allocation of R3,750 million.– The R2 million was shifted from compensation of employees

to Programme 1 and was used for pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces.

– Savings to an amount of R5,250 million arose due to the process of winding up the People's Housing Partnership Trust commenced to absorb its functions within the Department. The funds were shifted to Compensation of Employees and Goods and Services in programme 3.

– R7 million was shifted from goods and services to Programme 4 for Thubelisha Homes to cover its operational expenditure.

3.3 Virements cont.

• Programme 4: Housing Development Finance– The net effect of virements is a decrease on the programme

allocation of R9,750 million.– The R2 million was shifted from compensation of employees to

Programme 1 and was used for pensionable service costs in the Government Employees Pension Fund (GEPF) for the former members of non-statutory forces.

– R6 million was shifted to Departmental Agencies: Thubelisha Homes to cover its operational expenditure.

– R23 million was reprioritised and shifted to this programme for Thubelisha Homes to fund the operational expenditure of the public entity. R10 million was shifted from Programme 2; R7 million from Programme 3 and R6 million from Programme 4.

– Savings to an amount of R5,250 million arose due to the process of winding up the People's Housing Partnership Trust which commenced during 2007/08 to absorb its functions into the Department. The funds have been shifted to Compensation of Employees and Goods and Services in Programme 3.

3.3 Virements cont.

• Programme 4: Housing Development Finance– A virement amounting to R3 006 667 was shifted from

NURCHA and R5 041 250 from the Social Housing Foundation to Thubelisha Homes for costs borne by that entity in respect of the eviction of illegal occupants at Delft Symphony in the Western Cape.

4. Provincial transfer expenditure and outcomes

Provinces

Voted

Adjustment appropriations and transfers

Total Available

National Level Provincial

Level

R'000Additional

AppropriationsFunds

WithheldFunds

reallocated Appropriated

Eastern Cape 1,052,554 - -500,000 - 43,077 509,477

Free State 653,293 - -100,000 - 215 553,508

Gauteng 2,197,223 - - 350,000 - 2,547,223

KwaZulu-Natal 1,310,555 - - - - 1,310,555

Limpopo 651,705 - - - - 651,705

Mpumalanga 526,286 - -

- 150,000 676,286

Northern Cape 130,976 - - 100,000 60 231,036

North West 766,806 105,000 - - 3,371 875,177

Western Cape 948,548 - - - 229,222 1,177,770

Other - - - 150,000 - 150,000

Total 8,237,946 105,000 -600,000 600,000 339,791 8,682,737

R'000 R'000 R'000 R'000 R'000

Eastern Cape 509,477 509,477 396,438 113,039 113,039 100% 78% 78% 22% 22%Free State 553,508 553,293 474,446 78,847 79,062 100% 86% 86% 14% 14%Gauteng 2,547,223 2,547,223 2,612,566 -65,343 -65,343 100% 103% 103% -3% -3%KwaZulu-Natal 1,310,555 1,310,555 1,311,040 -485 -485 100% 100% 100% 0% 0%Limpopo 651,705 651,705 632,128 19,577 19,577 100% 97% 97% 3% 3%Mpumalanga 676,286 526,286 652,190 -125,904 24,096 78% 96% 124% -24% 4%Northern Cape 231,036 230,976 231,021 -45 15 100% 100% 100% 0% 0%North West 875,177 871,806 785,484 86,322 89,693 100% 90% 90% 10% 10%Western Cape 1,177,770 948,548 1,105,135 -156,587 72,635 81% 94% 117% -17% 6%Other 150,000 Total 8,682,737 8,149,869 8,200,448 -50,579 482,289 94% 94% 101% -1% 6%

Unspent as % of

Transfer-red Funds

Spent as % of

Transferred Funds

Unspent as % of Total

Available

Transfer-red as % of voted funds

Spent as % of Total Available

Total Available

Spent by Provinces

Transferred Funds

Variance Spent vs Total

Available

2007/08Year to date (1 April 2007 - 31 March 2008)

ProvincesVariance Spent vs

Transferred

Spending trends for 12 months over 3 years

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar

R'0

00

Payment Schedule EX 07/08 EX 06/07 EX 05/06

4. Provincial transfer expenditure and outcomes cont.

• Provinces managed to spend R8,200 billion out of a total available of R8,682 billion or a 94% spending rate;

• R8,150 billion was transferred to provinces who spent an average of 100% of these funds (5 provinces spent 100%, while EC spent 78%, FS spent 86%, LP spent 97%, & NW spent 90%);

• R500 million & R100 million respectively stopped from EC & FS to be re-allocated to GP (R350 million) & to NC (R100 million); and

• R150 million was un-allocated.

Transferred funds against expenditure per month for the period 1 April 2007 to 31 March 2008

Eastern Cape transferred funds vs expenditure by month up to 31 March 2008

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

April June August October December February

R`0

00

Payment Schedule Expenditure


Free State transferred funds vs expenditure by month up to 31 March 2008

010,000

20,00030,000

40,00050,000

60,00070,000

80,00090,000

100,000


R`0

00



Gauteng transferred funds vs expenditure by month up to 31 March 2008

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000


R`0

00



KwaZulu-Natal transferred funds vs expenditure by month up to 31 March 2008

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000


R`0

00



Limpopo transferred funds vs expenditure by month up to 31 March 2008

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000


R`0

00



Mpumalanga transferred funds vs expenditure by month up to 31 March 2008

020,000

40,00060,000

80,000100,000

120,000140,000

160,000180,000

200,000


R`0

00



Northern Cape transferred funds vs expenditure by month up to 31 March 2008

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000


R`0

00



North West transferred funds vs expenditure by month up to 31 March 2008

020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000


R`0

00



Western Cape transferred funds vs expenditure by month up to 31 March 2008

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000


R`0

00



• Over the 2008 MTEF the Department’s budget is dominated by transfer payments (95% of total allocation).

• The large growth will require proportional growth in the capacity to spend out of provincial equitable share;

• Challenge of the increasingly changing inflation environment will put immense pressures on the resources and the sector at large;

• Enhancement of monitoring and evaluation for the Housing Sector at provincial and local government levels.


• Improvement and enhancements of the planning by the sector.

• Facilitate and support the development and implementation of recovery plans to unblock stalled projects (in respect of 150 projects).

• Facilitate and support the development and implementation of 120 informal settlement upgrading projects. Development of a pipeline for CoDHI (social housing) projects in all 9 provinces for delivery of at least 7 000 housing units.


• Rationalization of housing institution by the closure of Thubelisha and Servcon Housing Solutions and the establishment of the proposed Housing Development Agency.

• Improvement of access to housing finance and facilitating a single housing market by monitoring trends in housing investment.

• Facilitating the approval of credit linked subsidies to decrease complaints relating to the Home Loan and Mortgage Disclosure Act.

Thanks

JOINT BUDGET COMMITTEE BRIEFING ON DEPARTMENT OF HOUSING EXPENDITURE FOR 2007/08

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Transcript of JOINT BUDGET COMMITTEE BRIEFING ON DEPARTMENT OF HOUSING EXPENDITURE FOR 2007/08