Social Development: Budgetary Review and Recommendation Report 2010

Meeting report

Budgetary Review and Recommendation Report
Ms Yolisa Nongena, Content Advisor to the Portfolio Committee on Social Development, presented the draft Committee Report.  Once adopted, the report would be sent to the Finance Committees of Parliament.  The deadline for the adoption of report was 22 October 2010. The bulk of the report was compiled from the presentations made to the Committee on 12 and 13 October 2010.

She referred to the analysis of the Section 32 Expenditure Report, under the heading Preliminary Expenditure at the end of the 2009/10 financial year.  The Department of Social Development had spent 99,3% of the total budget of R86.5 billion by the end of March 2010. The reason provided for the under-spending was that less social grant beneficiary applications were received than anticipated.

Expenditure on Programme 1 (Administration) was 99,8% of the revised budget of R177.3 million. The under-spending related mainly to staff turnover and related operational expenditure.

Expenditure on Programme 2 (Comprehensive Social Security) was 99,3% of the revised budget of R85, 653,631. The main reason for the under-spending related to the uptake rate of social assistance grants by beneficiaries.

Expenditure on Programme 3 (Policy Development, Review and Implementation Support for Welfare Services) equalled the budget for the programme.

Expenditure on Programme 4 (Community Development) was 99% of the revised budget. Under-spending mainly related to transfers and subsidies that were not transferred because of the non-compliance of institutions. The impact of the cost of saving measures implemented contributed to a decrease in expenditure on travelling, accommodation and professional services.

Expenditure on Programme 5 (Strategy and Governance) equalled the amount budgeted for the programme.

The second segment of the presentation dealt with notably higher or lower than expected economic classification spending. With regard to the compensation of employees, a preliminary under-spending was reflected as a result of staff turn-over during the financial year. In respect of goods and services, a preliminary under-spending was reflected due to the cost saving measures that were implemented during the financial year to scale down on travelling and accommodation costs. The preliminary under-spending on transfers and subsidies mainly related to the lower uptake rate for social assistance grants by beneficiaries as a result of social assistance policy amendments. A final reconciliation of actual expenditure was in progress. The under-spending in transfers to Non-Profit Organisations (NPO’s) had resulted from the non-compliance of certain organisations.  The transfers to these NPO’s were withheld. With regard to capital transfers; the preliminary under-spending was as a result of the cost-saving measures implemented for the procurement of capital assets and furniture.

The analysis of the Department’s 2009/10 annual report, financial statements and programme performance was compiled by the Committee Researcher and the Financial Adviser. The aim of programme 1 was to provide policy and strategic direction to the Ministry and top management of the Department as well as to provide overall management and support services to the Department.  99,8% of the revised budget of R177.307 million was spent in the 2009/10 financial year. During the 1st quarter of 2010/11, 19,7% of the total budget of R180.766 million was spent. The projected expenditure percentage for the 1^st quarter of 2010/11 was 25%.  The rate of expenditure was also lower than the 31,8% spent in the 1^st quarter of 2009/10. The lower spending rate in 2010/11 was mainly as a result of delays in the submission of invoices by the Department of Public Works for office accommodation rental and water and electricity usage.

A portion of Programme 1 related to International Relations. In the annual report, the Department had stated that it had entered into cooperation agreements with China and Mali. The agreements with Zimbabwe, Uganda, Tunisia, Brazil and Benin were at various stages of development. There was also an agreement between South Africa and Cuba, in terms of which six Cuban professors were contracted to train the youth in the provinces under the Masupatsela Youth Pioneer Programme. In terms of the impact assessment of the participation in international and global governance institutions, the Department could not achieve the target set due to the lack of compliance with the requirement to submit a report on its international activities.

One of the key issues identified in the 2009 State of the Nation Address was to strengthen skills and human resources base. The relevant programme was Human Capital Management. The vacancy rate had been reduced to 10%, which exceeded the target set. In terms of the directive of the Department of Public Service and Administration (DPSA), each department was expected to place a number of interns equal to 5% of the total staff complement. The Department exceeded the target by placing 64 interns, which was 9.4% of the staff complement.

With regard to Costing, Finance, Forecasting and Modelling, the Department had developed a database to administer social grants during 2009/10. The Department reported that the aim to implement a costing policy framework could not be achieved due to delays with the finalisation and approval of the draft costing policy. In addition, progress on the Activity Base Costing (ABC) model was not satisfactory. The reason for the deviation was that the model could not be completed in one year. The Department had indicated that the data required for financial forecasting for the welfare services was a challenge.

With regard to the Financial Monitoring of Public Entities and other Funded Institutions, one of the Department’s objectives was to monitor the financial performance of public entities and other funded institutions in line with prescriptions. The Department planned to assess the levels of financial management of funded institutions and to facilitate the development and implementation of improvement plans. The Department reported that PMGII accounts were reconciled. The Department also reported that the South African Social Security Agency (SASSA) could not provide monthly monitoring reports on the unforeseen system challenges.

With regard to Internal Audit and Internal Control, the Department was responsible for the introduction and maintenance of appropriate and improved financial risk management controls. One of the Department’s achievements was the development of a draft audit policy and an anti-corruption and fraud strategy. However, the Quality Assurance Review (QAR) recommendations were not completed due to financial constraints.

With regard to Budget Planning and Monitoring, the Department had set measurable objectives to manage the departmental financial planning process. The Department aimed to implement an integrated financial planning policy framework, guidelines and a procedure manual. However, the Department could not finalise the approval of the policy framework, guidelines and procedure manual on budget planning due to staff turn-over and other unforeseen distractive delays.

With regard to Information Management System and Technology (IMST), the user requirement specifications for the integration of Computer Peripheral Repairs (CPR) and the Child and Youth Care Application (CYCA) were completed. However, the Department did not meet the target set for the implementation of the Social Development Information Management System (SDIMD) in all the provinces. The system was only implemented in seven provinces. All the targets set for Legal Services were achieved. The Department had finalised and implemented the Contract Management Strategy. The Regulations under the Children’s Act, the Older Persons’ Act and the Social Assistance Act were finalised and implemented.

The strategic goal of Programme 2 was to ensure the provision of a comprehensive package of social security measures and interventions, focusing on income support.  The programme developed policies and programmes to provide income support to children, the elderly, the disabled and households in distress through social assistance.  Other policies dealt with the mandatory contributions made by employed persons to social insurance.  Social insurance provided protection in the event of loss of income as a result of unemployment, sickness, disability and death. 99,3% of the revised budget of R85,653,631 was spent during the 2009/10 financial year. In the 1^st quarter of 2010/11, the Department had already spent 27.1% of the total budget of R95 million. Advance payments were made in March 2010 for the 2010/11 Social Assistance Transfers. The spending rate during the 1^st quarter was 1% greater than the spending rate during the 1^st quarter of the 2009/10 financial year.

Under the section in the Committee Report dealing with the consideration of the reports of the Select Committee on Public Accounts (SCOPA), it was noted that the Money Bills Amendment Procedure and Related Matters Act required the Committee to consider performance assessment reports and invite the SCOPA to comment on these reports. In addition, the Committee could invite SCOPA to comment on its report. However, SCOPA might not have received the annual report and financial statements of the Department in time as the reports were only due at the end of September of each year. It was recommended that SCOPA was requested to consider the annual report of the Department before the reports of the public entities.  Because the Department had not appeared before SCOPA in the previous year, the Committee could not include a comment under this section of its report.

Under the section dealing with the consideration of Other Sources of Information, it was noted that the achievements reported in the Department’s annual report clearly reflected the adherence to the priorities set in the 2009 State of the Nation Address. The priorities included the linking of social assistance with sustainable livelihoods, combating crimes against women and children, strengthening skills and the human resource base, fast tracking the Community Work Programme (Phase 2 of the Expanded Public Works Programme), establishing a single public service and enhancing international co-operation.  

The report of the Financial and Fiscal Commission (FFC) was considered.  The Commission had found that social security grants were an important source of income for poor households, especially in the rural areas. The grants accounted for up to 50% of total income for households headed by the elderly. Social grants in South Africa were well targeted because the grants were reaching the poor, i.e. children, the aged, the physical and mentally disabled and caretakers. Social security grants had significantly reduced the incidence of poverty. The Commission acknowledged the significant role of the Child Support Grant in reducing the effects of poverty on children.

The FFC had made recommendations concerning the division of revenue.  The Commission recommended that Government limited the growth in entitlement spending to those programmes that had demonstrably worked while focusing expenditure to ensure better coordination and to deepen access by focusing on improved service quality. The Commission recommended that Government continued to expand the Child Support and Old Age Pension Grants.

With regard to the report of the Auditor-General, it was noted that the Department had received a qualified audit opinion.  The reasons for the opinion included the finding by the Auditor-General concerning social assistance grant expenditure with an approximate value of R10.5 billion. A number of grant beneficiary files requested from SASSA were not presented for audit purposes. Numerous files presented by SASSA did not contain the necessary information that was required to form the basis for a valid grant payment. Despite the social assistance grant expenditure being reported in the annual financial statements of the Department, a dual accountability relationship existed between the Department and SASSA over the social assistance grants. The status of the current relationship had resulted in certain actions of SASSA having an impact on the audit report of the Department concerning the social assistance grant expenditure. The Auditor-General could not audit the Human Resource Oversight Reports because these reports did not form part of the financial statements.

With regard to the Technical Aspects of the Report, it was noted that the annual report of the Department was well structured, easy to read and user-friendly. The report was submitted on time and in accordance with the Parliamentary and National Treasury guidelines for the submission of annual reports.

With regard to the section in the Committee Report that dealt with fact-finding visits (i.e. oversight visits), the Committee reported that it was found during an oversight visit to Mpumalanga that certain HCBC centres needed to be strengthened in terms of capacity, financial support and resources. The Committee found that caregivers did not have kits that could be used when attending to the sick and resorted to using condoms as gloves. The Department’s successes in registering NPO’s and introducing a monitoring and evaluation system for the HCBC centres were noted. The Committee hoped that the issue of provincial discrepancies in the funding models of NPO’s and HCBC would be addressed.  The Committee hoped that the integrated monitoring and evaluation system would address the concerns over the stipends, funding and resources provided to the HCBC. These issues were not mentioned in the annual report.

Concerning the Millennium Development Goals (MDGs), it was noted that the Department played a critical role in the achievement of the goals, i.e. eradicating extreme poverty and hunger, promoting gender equality and women empowerment, combating HIV and Aids and developing global developmental partnerships.

The Committee had observed that the Department had set a performance measurement in its 2009-2012 Strategic Plan to ensure that SASSA became an effective and efficient social assistance delivery institution. This target was critical in view of the fact that the Department transferred approximately 90% of its budget to SASSA for the payment of social grants. The comments made by the Auditor-General were therefore of significant concern. The Department needed to urgently ensure that SASSA strengthened its internal controls to address the issues raised by the Auditor-General. The Committee was concerned over the dual accountability in the relationship between the Department and SASSA.

The Committee noted that the five funding accounts (i.e. the Disaster Relief Fund, the Refugee Relief Fund, the Social Relief Fund, the State President’s Fund and the High School Vorentoe Disaster Fund) had been dormant for some time.

The Committee had noted the court ruling in favour of NAWONGO, when the NGO challenged the basis of financial awards made to NGO’s by the Free State Department of Social Development. The court ruling had a bearing on the policy of the national Department, which had been implemented differently by the provincial Departments. The variances in the implementation of the policy had resulted in discrepancies in the funding models applied to NGOs.

The Committee noted with concern that the Memorandum of Understanding with the Department of Justice and Constitutional Development for the Child Protection Register that had not been finalised. The Committee was concerned was that the delay would have a negative impact on the targets set for the Child Protection Register.

Despite the above, the Committee was satisfied with the Department’s overall achievements in meeting its targets. The annual report demonstrated a good performance of the Department. However, the Committee noted that a number of targets set under programmes 1 and 2 were not met. Reasons for the failure to meet these targets were provided by the Department. The Committee hoped that the forthcoming 2010 strategic review report would outline the measures put in place by the Department to address the targets that were not met. The Committee was concerned over the qualified audit opinion by the Auditor-General and it was essential that the Department had a corrective action plan in place to address the audit comments.

The Committee’s recommendations were in line with the observations made.  The Committee recommended that the issue of dual accountability between the Department and SASSA was addressed. The Department should consider the establishment of a SASSA Board, which would be responsible for overseeing the functions of SASSA. The Board would be accountable to the Minister. The SASSA Act should be amended to make provision for the establishment of the Board. The amendment should clearly outline the process of the appointment of the members of the Board, the functions of the Board and the role and responsibilities of the Department and SASSA. These measures would eliminate the existing shortcomings of the unclear roles and responsibilities between the two entities. SASSA and the Department had to enhance and improve the internal controls in order to ensure that SASSA functioned effectively, particularly with regard to the administration of funding, cash flow and file management. SASSA had to consider replacing the current filing system with an electronic filing system to eliminate the problem of missing and incomplete files.

The Department was expected to present quarterly expenditure and performance reports from the 2010/11 fiscal year.  The reports would allow the Committee to compile its Budgetary Review and Recommendation Report. The Department should consider amendments to the Social Relief Act to address the matter of the five dormant relief funds. The Department could consider merging the funds into a single fund.

The Department should provide the Committee with a detailed report on all the matters that were raised, including the action that would be taken to ensure that the shortcomings were adequately addressed.

Discussion
Ms H Lamoela (DA) was aware that certain Non-Governmental Organisations (NGO’s) had to submit documents to the Department more than once.  It was saddening that some NPO’s and NGO’s were on the verge of closing down due to a lack of funding and she appealed to the Committee to find a solution to that particular problem.

Ms S Kopane (DA) said that the prevalence of NGO’s and NPO’s closing down was a matter for concern. The unavailability of funding was a recipe for disaster for the country that it would be difficult to reverse if the problem was not adequately attended to.

The Chairperson pointed out that the representatives of the relevant organisations had the right to approach Members of Parliament so that appropriate steps could be taken. She suggested that the Committee engaged on the matter of the funding for NGO’s and NPO’s with the National Council of Provinces (NCOP) as it involved the provinces.

Ms J Masilo (ANC) said that under-spending by the Department was unacceptable.  The situation of the people on the ground was dire and the Department could not justify any under-spending whatsoever.

The Chairperson said that the lack of kits provided to caregivers needed to be addressed.  The Department was mandated to provide relief but the training of caregivers and the provision of kits were the responsibilities of the Department of Health. The problem should be brought to the attention of the relevant provincial MEC of Health.

The Chairperson referred to an article published in Die Burger newspaper about the disappearance of an amount of R10 million from the Department. The journalist reporting the story had apparently misconstrued the information provided. She suggested that the Office of the Auditor-General responded to the article and set the record straight.

Ms M Mofolo (ANC) said that the Portfolio Committee on Social Development was justified in responding to the newspaper article as the matter was brought to the attention of the Committee.

The Committee decided to postpone the deliberations on the draft Budget Review and Recommendations Report to 21 October 2010.

The Chairperson informed the Members that the report on the Committee’s study tour to Brazil had been delayed as the document had to be translated. The adoption of the report on the study tour was postponed to 26 October 2010.

The meeting was adjourned.