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Monitoring Public Expenditure, Service Delivery and Accountability in the Eastern Cape, South Africa Debbie Monitoring Public Expenditure, Service Delivery and Accountability in the Eastern Cape, South Africa Debbie Dalton Researcher: PSAM International Budget Project and Tax Standards Formation Foundation: Caucasus and Central Asia Regional Budget Monitoring Meeting 20 – 21 August 2005 Almaty, Kazakhstan

What is the PSAM? Independent University-based monitoring and research institute dedicated to strengthening democracy What is the PSAM? Independent University-based monitoring and research institute dedicated to strengthening democracy and accountability in South Africa Ø Access, analyse and disseminate information on the management of public resources, delivery of public services and handling of cases of public sector misconduct and corruption – at provincial level in Eastern Cape Ø Advocacy and dissemination of findings via the media in a user-friendly format Ø

What is Accountability? Ø Social accountability is an obligation by elected political leaders and What is Accountability? Ø Social accountability is an obligation by elected political leaders and government officials to answer for the performance of their duties and responsibilities. Not a personal favour Ø Requires that persons explain/justify decisions/actions against set criteria – and take steps to correct errors/faults and prevent their recurrence

Rights-Based Approach to Governance Ø Ø * Citizens are not passive consumers of services Rights-Based Approach to Governance Ø Ø * Citizens are not passive consumers of services but active rights-holders Democratic states are constitutionally committed to ensure the progressive realization of socio-economic rights (such as health care, education, housing etc. ) via the delivery of public services within available resources Public institutions are ‘duty-bound’ to meet public interest and to open themselves to scrutiny Corruption and misallocation of resources are a violation of citizens’ rights* See Ackerman, JM, 2005, Human Rights and Social Accountability.

Accountable Governance and Civic Empowerment Ø Accountable government – empowers citizens to participate in Accountable Governance and Civic Empowerment Ø Accountable government – empowers citizens to participate in policy formulation, budgeting, expenditure tracking and to exercise oversight of government performance and service delivery Ø Civic empowerment – citizens have the skills and ability to hold government to account by getting officials to justify and explain their performance and by sanctioning them accordingly Ø Much more than simple consultation/ participation

The Context of the Eastern Cape South Africa Population: 46. 9 million Size: 1 The Context of the Eastern Cape South Africa Population: 46. 9 million Size: 1 219 912 sq km Unemployment rate: 26. 5% Eastern Cape 72% of the population lives in poverty Ø South Africa: constitutional mandate to progressively realise socio-economic rights within available resources, and one of the best legislative frameworks to give effect to this mandate

Excellent Legislative Framework – Weak Demand for Implementation Tendency to rely on ex-struggle loyalties Excellent Legislative Framework – Weak Demand for Implementation Tendency to rely on ex-struggle loyalties and to treat accountability as personal favour Ø Lack of separation between oversight and implementation arms of government Ø Failure to use legislative provisions and participate in governance processes Ø Tendency to concentrate on macro-economic budgeting & expenditure and neglect site of service delivery Ø

Strategic Planning Legislative Requirements for Strategic Plans: Ø National/Provincial Drawn up by Minister/official responsible Strategic Planning Legislative Requirements for Strategic Plans: Ø National/Provincial Drawn up by Minister/official responsible for department, and must: l l l Ø Include measurable objectives and outcomes for all programmes. Describe core activities. Describe goals and targets. Determine posts necessary to achieve goals. Include details of Service Delivery Improvement Plan. Given this reporting requirement, you can ask the following questions: l l Are programme activities identified on the basis of situational/needs analysis? Is the cost calculation of activities reasonable? Do activities, targets & intended outcomes make sense? Are there clear lines of accountability?

Potential Interventions in the Budgeting and Planning Process 1. 2. 3. 4. 5. Obtain Potential Interventions in the Budgeting and Planning Process 1. 2. 3. 4. 5. Obtain copy of budget - Review Budget Allocations and strategic priorities Obtain copies of strategic plan & business plans – conduct Strategic Plan Evaluation Obtain & evaluate outsourcing contracts and/or service level agreements Obtain & evaluate infrastructure development & maintenance plans Make submissions on Department’s strategic plans to Finance oversight committee in provincial Parliament and to provincial Treasury Medium Term Expenditure Committee (prior to adoption of budgets)

PSAM Expenditure Tracking Ø Track spending by comparing quarterly financial reports (published by Treasury) PSAM Expenditure Tracking Ø Track spending by comparing quarterly financial reports (published by Treasury) with budget allocations (contained in provincial budget & department strategic plans) Ø Compare spending undertakings in budget/strategic plan documents with actual spending as per audited financial statements Ø Track compliance with legislated financial reporting requirements

Legislative Reporting Requirements: expenditure Monthly Financial Reports must include: l Actual revenue and expenditure Legislative Reporting Requirements: expenditure Monthly Financial Reports must include: l Actual revenue and expenditure l Projections of revenue and expenditure. l Information on the spending on conditional grants. l Information on funds transferred outside of the department. l Explanation for under spending/over spending and proposed corrective actions. Ø Quarterly Financial Reports must include: l Monthly information l Actual revenue l An account of current and capital expenditure. Ø Annual Reports must include: l Audited financial statements. l Auditor-General’s report on financial statements. l Audit Committee report. Ø

Example: HIV/Aids ØØ No needs analysis, activities anddata or identification of key Mismatch between Example: HIV/Aids ØØ No needs analysis, activities anddata or identification of key Mismatch between demographic targets organisational challenges Target: train 768 lay counselors Ø Budget for only 317 lay counselors Ø

Example: HIV/Aids Unreasonable costs: l 600 nurses trained at R 400 per day each Example: HIV/Aids Unreasonable costs: l 600 nurses trained at R 400 per day each = R 2, 400, 000 l 1050 nurses trained (to do the same thing) at R 40 per day each Findings: HIV/AIDS Planning between 2000 - 2004 Performance: HIV/AIDS Planning between 2000 = R 84, 000 2004 Ø Failed to produce business plans for almost 40% of HIV/AIDS budget Øbetween 2000 -2004. The Eastern Cape Department of Health failed to account Ø Those plans that were produced between 2000 – 2004 did not 2000 for 73% of its (provincial) HIV/AIDS budget between contain accurate & up to date information on service delivery – 2003 (R 90. 2 m) environment. 26% of budget was unspent (R 33 m) ØØNo evidence of needs analysis. ØØNo evidence of consultation with managers, trade unions or stake Total amount unspent/inadequately accounted for: 99% holders. Ø Failed to produce accurate, costed and time-bound infrastructure & maintenance / capital expenditure plans in this period. Ø

Performance Reporting Requirements Quarterly Performance Reports must include: l Performance against measurable objectives l Performance Reporting Requirements Quarterly Performance Reports must include: l Performance against measurable objectives l Quarterly financial information along with explanations of variances. Ø Mid-Year Performance Reports must include l An account of performance against service delivery targets and Key Performance Indicators. l Progress in addressing problems identified in past years annual report Ø Annual Reports l An account of departmental performance – achievement of desired outcomes, delivery of outputs and the use of resources. l Account of human resource management issues. Ø

PSAM Performance Monitoring Objective – to determine whether public expenditure produces intended outcomes & PSAM Performance Monitoring Objective – to determine whether public expenditure produces intended outcomes & to promote effective service delivery by producing: Ø Scorecard evaluations of department’s performance Ø Detailed Reports – eg Health, Housing, Welfare payments Ø Monitoring Briefs – short overviews of spending, financial controls, audit findings, oversight recommendations etc. Ø Service Delivery Monitoring Briefs - contain on-site inspections of quality of service delivery, interviews, digital photos

Service Delivery Monitoring Brief Ø Ø Ø Educational Infrastructure Crisis in the Eastern Cape: Service Delivery Monitoring Brief Ø Ø Ø Educational Infrastructure Crisis in the Eastern Cape: 2004/05 To eradicate the total infrastructure backlog by 2010 and mud/temporary structure classrooms by 2008, the Department needed to budget R 574 million per annum. MTEF Budget: • R 241 million (2004/05) • R 290 million (2005/06) • R 322 million (2006/07) R 574 million = US$93 million

PSAM Case Monitoring Findings Ø Ø Ø Major service delivery departments in the Eastern PSAM Case Monitoring Findings Ø Ø Ø Major service delivery departments in the Eastern Cape did not have disciplinary databases 691 cases of misconduct in the province, only 62 (8%) deemed resolved 338 of these cases involved corruption, only 28 (8%) deemed resolved 170 of these cases involved maladministration, only 3 (1. 7%) deemed resolved Total amount involved = R 6. 9 billion (US$1. 12 billion) Amount recovered / subsequently accounted for = R 325 million (5%) = US$ 52. 85 million

PSAM Budget Oversight Obtain Committee minutes and track parliamentary oversight of expenditure and implementation PSAM Budget Oversight Obtain Committee minutes and track parliamentary oversight of expenditure and implementation by departments Ø Track Auditor-General’s financial & performance audit findings and monitor audit opinions Ø Monitor implementation of Auditor-General and oversight committee recommendations & resolutions Ø Workshops findings with oversight committees Ø

Eastern Cape Audit Opinions v Budget Allocations 1996 - 2004 Financial Year Amount (R Eastern Cape Audit Opinions v Budget Allocations 1996 - 2004 Financial Year Amount (R 000 s) Disclaimer amount (R 000 s) No of Departments Disclaimed % of budget unaccounted for 1996/1997 16 740 919 16 705 685 10 out of 12 99. 79% 1997/1998 16 478 201 16 446 118 12 out of 13 99. 81% 1998/1999 15 622 907 15 571 041 11 out of 13 99. 67% 1999/2000 16 307 310 16 154 030 10 out of 13 99. 06% 2000/2001 18 162 161 17 398 103 8 out of 13 95. 79% 2001/2002 19 595 327 16 536 483 4 out of 13 84. 38% 2002/2003 24 715 248 9 993 369 2 out of 13 40. 43% 2003/2004 29 671 566 16 639 175 3 out of 13 56. 07% Total 157 293 639 125 444 004 79. 75%

Audits & Oversight of EC Budget Ø Ø Auditor-General issued ‘disclaimer’ audit opinion for Audits & Oversight of EC Budget Ø Ø Auditor-General issued ‘disclaimer’ audit opinion for 80% of budget between 1996 – 2004 ‘Disclaimer’ issued when lack of internal financial control measures, a lack of financial records and the failure to properly record all financial transactions. Not mean that money is lost/stolen. Means the province could not adequately account for its use of R 125 billion (US$ 20 billion) out of R 157 billion (US$25. 5 billion) and effectiveness of service delivery. In 2002 the Auditor-General pointed out that not a single Public Accounts Committee resolution had been implemented between 1995 - 2002

Is the PSAM effective? Is the PSAM effective?

Impact Assessment Ø Improved financial reporting in EC – decrease in audit disclaimers by Impact Assessment Ø Improved financial reporting in EC – decrease in audit disclaimers by over 50% since 2002. Ø Sustained advocacy led to creation of disciplinary databases and the implementation of register of members interests Ø Institution of Joint Anti- Corruption Task Team to prosecute corruption cases and Judicial Commission of Inquiry into financial mismanagement Ø Health crisis report resulted in qualified audit opinion for National Department of Health for 2003/04