PUBLIC SECTOR INNOVATION AWARDS LAUCH 2017 SOUTHERN SUN ELANGENI& MAHARANI, DURBAN LIMPOPO REVENUE ENHANCEMENT PROJECT 1
Outline of the presentation Introduction and background Triggers of LP Revenue Enhancement Strategy Innovation of the Project Impact of the Strategy - Yields Contribution to service delivery Sustainability of the project Replicability Challenges and lesson learned Conclusion 2
Introduction and background Government plays an important role in the economy in gathering and allocation of resources and ensuring efficient utilization of the available resources. This happen duly because of the economic problem scarcity factor. On account of scarcity of resources it has become increasingly important for government to raise revenue and ensure its sustainability. Provincial receipts comprises of Equitable Share, Conditional Grants and own revenue. In terms of Section 228(1) of the Constitution, Provincial Governments have the authority to raise Own Revenue. Own revenue is collectible from 13 Depts. and 3 Public Entities. 3
What triggered the development of Revenue Enhancement Strategy? Limpopo own revenue contribution to the total provincial receipts was assessed and found to be low at 1.4 percent in 2012/13 as compared to the National norm of 4 percent. The declining provincial share of revenue also considered it necessary for Limpopo to develop strategies for own revenue enhancement. Own revenue collection is essential to augment the declining equitable share. Cash flow challenges encountered in 2011/12 financial year. Provincial Revenue Enhancement Strategy was developed in consultation of Depts. and Public Entities. 4
Limpopo Revenue Enhancement Strategy : Executive Summary Provincial Revenue Enhancement Strategy was endorsed by EXCO per decision no. 60 of 2013/14. The Strategy serves as a turnaround plan to maximize provincial own revenue. The ambition of the strategy was that the provincial collection target should reach R1 billion mark by 2017/18 financial year. The Strategy was rolled out to departments and public entities through the Budget and Revenue Forum, CFO forum and HOD forum. The R1 billion mark was attained in 2014/15 resulting from Strategy implementation. Provincial revenue contribution to the total provincial receipts also improved from 1.4 percent in 2012/13 to 1.9 percent in 2016/17 financial year compared to the current national norm of 3 percent. 5
What is innovative about the project? Development of Provincial Revenue Enhancement Strategy endorsed by EXCO. Prior to the 2013/14 financial year the Province did not have the revenue enhancement strategy. The Strategy was not developed due to a requirement of any Policy or directive. Seven strategic objectives identified to support and fulfill revenue enhancement 6
What is innovative about the project? 1. Monitor surrender of accumulated surpluses and own revenue for Public Entities 4. Support revenue generating endeavours 7. Ring-Fencing of funds 2. Provide support on the review of SLA s between departments and Entities 5. Improve revenue information management systems 3. Conduct research on alternative revenue streams 6. Promote High road forecasting 7
Revenue Enhancement Innovation Monitor the transfer of own revenue and surrender of surpluses by Schedule 3C Public Entities into the Provincial Revenue Fund (PRF). Schedule 3C Public Entities retained funds and spent without being appropriated by Legislature as required by the Legislations. Provincial Treasury Instruction note number 2 of 2013/14 was issued enforcing Entities to surrender accumulated surpluses into the PRF. Monitor the development and review of revenue collection Service Level Agreements between Departments/Entities andagencies. Assessment of SLA agreement to ensure own revenue collected is transferred into the Provincial Revenue Fund Facilitated the review of Service Level Agreements (SLA) entered into between Economic Development and Public Entities. 8
Revenue Enhancement Innovation cont. Conduct research on alternative revenue streams. Desktop Research on multipurpose centres, weighbridges and health patient fees management (provide support to departments regarding identification of new sources of revenue) Provide capacity, support and guidance to departments and entities in their revenue generating endeavours. Revenue inspection/support visits, Revenue and budget forum, Revenue Enhancement Bilateral Meetings, Expenditure review bilateral meetings, workshops conducted on monthly and quarterly basis. 9
Revenue Enhancement Innovation cont. Promote high road forecasting of own revenue Departments should provide conservative and optimistic own revenue estimates Departments provides high revenue estimates predicting the performance in the case collection blockages are removed. This provide opportunities to identify Revenue Enhancement Projects. The Strategy encourages Departments and Public Entities to identify revenue enhancement projects (new revenue sources). 10
Revenue Enhancement Innovation cont. 6. IMPROVE REVENUE MANAGEMENT INFORMATION SYSTEMS IN CONSULTATION WITH DEPARTMENTS Department of Transport Revenue Information Management Systems for management of Motor Vehicle Licences. Department of Health Patient administration management system improve system performance Electronic Data Interchange (EDI) and Patient Verification System (PVS) to improve turnaround time on billing and submission of claims and ensuring correct classification of patients. 11
Revenue Enhancement Innovation cont. 7. RING-FENCING OF FUNDS FUNDS ARE ONLY UTILISED FOR INTENDED PURPOSES The ring-fencing of funds which is called Revenue Enhancement Budget Allocation ensures that Limpopo Province invest in the identified provincial government feasible projects and systems that have potential for generating more revenue 12
Revenue Enhancement Innovation cont. High Road Forecasting Department of Economic Development Financial Year Conservative budgeting Projects 2015/2016 R131 737m Revision of Gaming fees, increase number licences, improve resorts infrastructure and sale of live game. High road R153 647m 2016/2017 R138 324m Improve resorts infrastructure R163 287m 2017/2018 R145 240m Improve resorts infrastructure R174 439m 2018/2019 R152 502m Improve resorts infrastructure R189 161m 13
Revenue Enhancement Innovation cont. RING-FENCING OF FUNDS FUNDS ARE ONLY UTILISED FOR INTENDED PURPOSES DEPARTMENT FINANCIAL YEAR PROJECT Transport 2013/14 Rollout of motor vehicle licencing function to 50 Post Offices Upgrading of 4 provincial traffic stations at Mokopane, Thohoyandou, Northam and Dilokong Conducting of feasibility study for construction of weigh bridges AMOUNT R3.1 million R0.870 million R2.0 million 2014/15 Construction of three weighbridges R30.0 million 2015/16 Construction of weighbridges acquisition of / procurement of Revenue Information Management System for Motor Vehicle Licencing administration R30.0 million 14
Revenue Enhancement Innovation cont. RING-FENCING OF FUNDS FUNDS ARE ONLY UTILISED FOR INTENDED PURPOSES DEPARTMENT Economic Development, Environment and Tourism (LEDET) FINANCIAL YEAR PROJECT 2013/14 Support implementation of Provincial Treasury Instruction Note of 2012/13 and 2013/14 on surrender of accumulated surpluses by Schedule 3C public entities. 2014/15 Support implementation of Provincial Treasury Instruction Note of 2012/13 and 2013/14 on surrender of accumulated surpluses by Schedule 3C public entities. Funding of operational needs for 11 resorts (LTA) and reconstruction of access bridge at Mphephu Resort(collapsed due to floods) 2015/16 To cater for operational needs of the eleven resorts for Limpopo Tourism Agency (Public Entity). AMOUNT R14.9 million R17.1 million R5.2 million R14.6 million 15
Revenue Enhancement Innovation cont. RING-FENCING OF FUNDS FUNDS ARE ONLY UTILISED FOR INTENDED PURPOSES DEPARTMENT FINANCIAL YEAR PROJECT Health 2013/14 Appointment of two contract case managers and nineteen temporary billing clerks Recruitment of fifty revenue critical posts. Improvement of Patient Administration System functionality 2014/15 Appointment of revenue critical posts Case managers and revenue billing staff. Improvement of Patient Administration System functionality Procurement of patient verification system and Electronic Data Interchange AMOUNT R3.5 million R15.2 million 16
Revenue Enhancement Innovation cont. RING-FENCING OF FUNDS FUNDS ARE ONLY UTILISED FOR INTENDED PURPOSES DEPARTMENT FINANCIAL YEAR PROJECT AMOUNT Health 2015/16 Appointment of revenue critical posts and the improvement of hospital management administration system. R15.3 million 17
Results from implementing Enhancement Strategy: Impact Departmental Own Receipts Actual receipts Actual receipts % growth Actual receipts % growth Actual receipts % growth Actual receipts % growth Main appropriation Adjusted appropriati on R thousand 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Departmental Own Receipts Office of the Premier 2 691 1 823-32.3% 1 369-24.9% 1 069-21.9% 1 836 71.7% 755 1 239 Provincial Legislature 679 323-52.4% 176-45.5% 188 7.1% 316 67.7% 207 331 Education 48 755 41 845-14.2% 40 179-4.0% 38 192-4.9% 63 782 67.0% 43 395 63 673 Agriculture 10 336 6 228-39.7% 5 050-18.9% 7 419 46.9% 13 221 78.2% 8 074 9 956 Provincial Treasury 29 771 124 373 317.8% 190 997 53.6% 299 231 56.7% 302 846 1.2% 180 129 362 528 Economic Development, Environment & Tourism 46 626 50 035 7.3% 97 577 95.0% 146 423 50.1% 124 556-14.9% 143 324 156 883 Health 115 684 130 618 12.9% 121 559-6.9% 137 643 13.2% 135 609-1.5% 174 076 174 076 Roads & Transport 301 926 301 569-0.1% 349 981 16.1% 397 788 13.7% 419 630 5.5% 449 064 465 198 Public Works 20 342 34 599 70.1% 27 624-20.2% 382 482 1284.6% 156 872-59.0% 56 699 193 210 Safety, Security & Liaison 395 351-11.1% 362 3.1% 254-29.8% 254 0.0% 104 160 Co-operative Governance, human Settlement &Traditional Affairs 5 363 6 772 26.3% 4 560-32.7% 3 135-31.3% 35 987 1048.1% 2 800 6 079 Social Development 3 303 3 272-0.9% 3 832 17.1% 6 888 79.7% 3 424-50.3% 3 273 18 948 Sport, Arts & Culture 702 1 448 106.3% 1 108-23.5% 1 682 51.8% 1 688 0.3% 1 204 2 788 Total Own Receipts 586 573 703 256 19.9% 844 374 20.1% 1 422 395 68.5% 1 260 021-11.4% 1 063 103 1 455 069 18
Results from implementing Enhancement Strategy: Impact 1600000 000 Own Revenue Collection trends 1400000 000 1200000 000 1000000 000 800000 000 600000 000 Main Appropriation Audited Outcome 400000 000 200000 000-2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 19
Results from implementing Enhancement Strategy: Impact Transport LEDET Extension of Motor Vehicle Licences to 50 Post Offices. Post Offices levy a commission of 11% compared to 20 percent of municipalities. Upgrading of provincial traffic stations at Mokopane, Thohoyandou, Northam and Dilokong increased accessibility of services and thus revenue (registration and licensing). Infrastructure improvement of Limpopo Wildlife Resorts. Construction of Mphephu resort bridge provided public access to recreational facilities and thus revenue. Purchase of bedding, consumables and maintenance of facilities improved client satisfaction and retention. 20
Results from implementing Enhancement Strategy: Impact Health Agriculture Appointment of Case Managers and temporary billing and record staff improved collection and record management. Appointment of Debt collector improved recovery of Road Accident Fund patient fee debts. Upgrading of Health Billing System improved server performance. Redirecting revenue collected by two agricultural colleges into the provincial revenue Fund. Surrendering of accumulated surpluses by public entities at year end as well as unspent funds by implementing agencies. 21
National Collection Trends Summary of Province's Own Receipts Trends 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Average % increase 2010/11-2015/16 Average % increase 2010/11-2016/17 R'000 Audited Outcome Current Medium-term estimates Eastern Cape 747 565 845 876 1 100 678 1 074 612 919 640 964 711 1 182 222 1 182 222 1 290 265 4.3% 6.3% Free State 809 355 865 214 858 279 889 019 900 855 949 677 1 029 710 1 029 710 1 062 519 2.7% 6.1% Gauteng 2 838 931 3 615 241 3 991 740 4 345 877 4 265 929 4 568 931 5 060 965 5 060 965 5 369 746 8.3% 7.3% Kwazulu-Natal 2 041 364 2 726 959 2 642 483 2 804 786 2 783 644 2 994 279 3 026 189 3 026 189 3 176 723 6.6% 4.2% Limpopo 584 676 599 841 703 255 844 374 1 422 395 1 260 021 1 063 103 1 180 729 1 180 729 13.7% 11.8% Mpumalanga 528 141 561 161 667 819 771 926 762 819 799 688 864 531 864 531 909 415 7.2% 5.6% Northern Cape 216 340 225 666 269 908 425 878 279 438 294 499 313 602 313 602 331 843 5.3% -8.0% North West 598 489 718 235 944 833 1 158 968 961 452 1 019 208 1 074 720 1 074 720 1 146 121 9.3% -0.4% Western Cape 2 067 681 2 228 649 2 236 385 2 460 390 2 139 999 2 170 624 2 435 813 2 435 819 2 438 505 0.8% -0.3% Total Own Receipts 10 432 542 12 386 842 13 415 380 14 775 830 14 436 171 15 021 638 16 050 855 16 168 486 16 905 866 6.3% 4.6% Provinces collecting below Limpopo Province 2 2 2 3 5 5 4 22
Contribution to service delivery Provincial own revenue forms part of the total Provincial Share of Revenue that are allocated to departments to address provincial spending priorities. Augments the share of revenue, i.e. equitable share and conditional grants and ultimately contributes to improvement of service delivery for the people of Limpopo Province. Thus the increase in revenue lessens the provincial budget pressures and contribute to an improved provision of services to the people of the Province 23
Contribution to service delivery The extension of motor vehicle license function by Transport to Post Offices (SAPO) contributed to improved service delivery as follows: Enhanced public access to services and reduced customer waiting time Increased provincial own revenue Capacity building to SAPO officials (Training on E-Natis) Creation job opportunities (poverty alleviation) Appointment of critical revenue staff (Health) Creation of job opportunities (Case managers, Revenue billing and record staff) Capacity building Improved record management and accounts reconciliation Improved audit findings in 2014/15 financial year Increased provincial own revenue 24
Contribution to service delivery Improvement of Health patient billing system Improved collection of revenue though accurate billing system Improved waiting time Job creation and economic empowerment (poverty alleviation) Capacity building of officials Software infrastructure development Construction of an access bridge (Mphephu Resort) and increased budget for resort operational needs (Limpopo Wildlife Resorts): Improved access to services Creation of job opportunities and alleviation of poverty Improved infrastructure tourists inflow and thus increased revenue collection 25
Project Sustainability To sustain the project, Provincial Treasury obtained Executive Approval which requires implementation by all departments and public entities. Revenue Enhancement bilateral meetings are scheduled quarterly with departments and public entities to ensure continuous monitoring of the project particularly potential revenue generating departments (Health, Public Works, Transport, LEDET, Public Entities and Agriculture). Provincial Treasury, departments and public entities determine revenue targets jointly and the collection performance is monitored on monthly basis. Provincial Treasury provides both support and monitoring to ensure achievement of revenue targets and sustainability of revenue enhancement project 26
Project Sustainability cont. Revenue enhancement is a standing item in Provincial forums (budget and revenue forum, CFO forum, HOD forum, MECs performance review meetings). The Province has commenced the reviewing of the Revenue Enhancement Strategy to include an Incentive Scheme for retention of revenue surpluses. Moreover, the Unit work as a team and share the same sentiments of providing support and monitoring department on revenue generation endeavors. 27
Provincial collection trends Actual own receipts as at 31 March 2012 Actual own receipts as at 31 March 2013 % growth 11/12-12/13 Actual own receipts as at 31 March 2014 % growth 12/13-13/14 Actual own receipts as at 31 March 2015 % growth 13/14-14/15 Actual own receipts as at 31 March 2016 (Pre- Audit) % growth 14/15-15/16 MTEF Description R thousand 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Departmental Own Receipts Office of the Premier 2 691 1 823-32.3% 1 369-24.9% 1 069-21.9% 1 836 71.7% 755 777 821 Provincial Legislature 679 323-52.4% 176-45.5% 188 7.1% 316 67.7% 207 218 233 Education 48 755 41 845-14.2% 40 179-4.0% 38 192-4.9% 63 782 67.0% 43 395 45 472 47 739 Agriculture 10 336 6 228-39.7% 5 050-18.9% 7 419 46.9% 13 221 78.2% 8 074 8 497 8 678 Provincial Treasury 29 771 124 373 317.8% 190 997 53.6% 299 231 56.7% 302 846 1.2% 180 129 188 133 197 885 Economic Development, Environment & Tourism 46 626 50 035 7.3% 97 577 95.0% 146 423 50.1% 124 556-14.9% 143 324 152 240 159 503 Health 115 684 130 618 12.9% 121 559-6.9% 137 643 13.2% 135 609-1.5% 174 076 182 996 193 610 Roads & Transport 301 926 301 569-0.1% 349 981 16.1% 397 788 13.7% 419 630 5.5% 449 064 474 267 501 774 Public Works 20 342 34 599 70.1% 27 624-20.2% 382 482 1284.6% 156 872-59.0% 56 699 58 783 62 192 Safety, Security & Liaison 395 351-11.1% 362 3.1% 254-29.8% 254 0.0% 104 114 120 Co-operative Governance, human Settlement &Traditional Affairs 5 363 6 772 26.3% 4 560-32.7% 3 135-31.3% 35 987 1048.1% 2 800 2 694 3 190 Social Development 3 303 3 272-0.9% 3 832 17.1% 6 888 79.7% 3 424-50.3% 3 273 3 438 3 637 Sport, Arts & Culture 702 1 448 106.3% 1 108-23.5% 1 682 51.8% 1 688 0.3% 1 204 1 274 1 347 Total Own Receipts 586 573 703 256 19.9% 844 374 20.1% 1 422 395 68.5% 1 260 021-11.4% 1 063 103 1 118 904 1 180 729 28
The project is replicable to: Replicability Other Units : Presentation made to Municipal Finance Unit for best practices. Other Departments: Departments and public entities are developing own revenue enhancement strategies. Other Provinces : LPT presented during the National Revenue Workgroup for best practices as requested by National Treasury 29
Challenges The directorate experienced some resistance during the implementation of the Strategy Comfort Zone Resistance to Change (Focus was on expenditure compared to revenue generation and management) Inadequate capacity to implement revenue enhancement projects (Poor planning by departments and lack of proper feasibility study). Some departments and public entities consider revenue collection as the responsibility for Provincial Treasury. Inadequate human resource capacity (staffing of the Fiscal Development unit) to explore maximally. 30
LESSONS LEARNED It s critical to effectively manage change before and during the project implementation processes. Inadequate project planning and capacity led to some departments and entities refraining from implementing revenue enhancement projects. Hard work and perseverance is a good recipe for success. Research is critical prior and during implementation of the project. Continuous research in the identification of new sources of revenue and to keep abreast with current trends. Departments, Public Entities and Provincial Treasury must work together to realize the objectives of the Revenue Enhancement Strategy. 31
Conclusion The Limpopo Provincial Own Revenue Enhancement Strategy remains an instrument to enhance revenue, strengthen existing control processes and creates initiatives ways for new revenue streams. The implementation of the Revenue Enhance Strategy has yielded positive results and it remains the main tool to augment the equitable share. It is worth noting that, in order for Provincial Treasury to obtain necessary support and share common understanding with relevant stakeholders, extensive communication both in writing and through meetings were necessary. Meetings assisted in ensuring that Provincial Treasury, departments and public entities have common understanding on the importance of revenue generation. 32
Revenue Enhancement project: Mphephu Resort old bridge 33
Revenue Enhancement project: Mphephu Resort New bridge 34
Own revenue not Rubbish 35
LPT: DEPT INNOVATOR 2016 36
CPSI: 2016 INNOVATOR OF THE YEAR 37
CPSI: 2016 INNOVATOR OF THE YEAR 38
Thank you 39