Social Development Budgetary Review & Recommendation Report 2010

Social Development

20 October 2010
Chairperson: Ms Y Botha (ANC)
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Meeting Summary

The Portfolio Committee on Social Development met to discuss and adopt the draft Social Development Budgetary Review and Recommendation Report 2010. The Children’s Institute was afforded an opportunity to provide expertise on recommendations for inclusion in the Committee’s BRR Report.  The recommendations included that the Child Support Grant amount should be increased in the MTBPS to keep pace with inflation, that the equitable share formula should be reviewed to recognise the new service delivery obligations on provinces as a result of a range of new social development laws, and that that national Financial Awards for NPOs should be finalised as a priority, in consultation with NPOs, to ensure fair funding of NPOs for delivering services that the state is obliged to fund under various social development laws. The Committee agreed to include some of the recommendations in the Report.

Meeting report

Children’s Institute input on the Budget Review and Recommendations Report
Ms Paula Proudlock (Manager of the Child Rights Programme at the Children’s Institute, University of Cape Town) informed members that the Children’s Institute had been analysing the budgets of the provincial departments of social development since 207 to assess the allocations for delivering on the Children’s Act. While most of the challenges lay at a provincial level and thus fell under the oversight responsibility of provincial legislatures, there were areas where national parliament could make changes to improve the provincial budgets.

The first issue was with regards to the equitable share.
The equitable share formula is the formula that is used by National Treasury to decide how to divide the state revenue between the national government, provincial governments and local governments. Social development services for vulnerable groups are mainly delivered at a provincial level, which means that is it important that the provincial departments’ of social development receive adequate budget to enable them to fulfil their service obligations. However, evidence shows that social development services (as opposed to social assistance grants, education and health) are not adequately budgeted for at provincial level. One reason for this could be attributable to the fact that the equitable share formula does not include a component that recognises the costs to the provinces of new legislative mandates imposed by national social development legislation. The formula includes components for health, education, poverty, basic services, economic, and institutional. It does not have a component for social services to vulnerable groups. The result of the formula is the annual Division of Revenue Bill which is presented to National Parliament in February every year.
 
Ms Proudlock stated that the Financial and Fiscal Commission had previously made recommendations to National Treasury in 2006  to include a social development services component in the formula. Besides the equitable share problem, another problem is that .social development services is not a national priority (as opposed to for example education and health). Furthermore, the budget is based on historical expenditure.  Education was allocated over R100 billion by government per year, conversely, social development services have had a historic under-funding problem and the Children’s Act budget allocation for example is less than R4billion per year. That historic under-funding was said to have made it difficult for the representatives of social development to lobby for more funds. Treasury had not yet responded to the 2006 recommendations of the FFC. However a review of the equitable share was currently happening.. The Institute recommended that the Portfolio Committee should get involved in the review process because if the distribution patterns persisted, the provinces would not have enough money to implement the Children’s Act and other social development legislation that the Portfolio Committee has passed in recent years. Another recommendation to the Committee was that the Treasury should be invited to address the members and to explain how the formula works.. The Children’s Institute also recommended that the BRRR report should recommend that the review of the equitable share should make certain that a social development services component was included.
Additionally, the committee was advised to recommend the increase of the Child Support Grant by an additional R10 per grant in the October MTBPS to bring the amount in line with inflation. in the February budget speech of 2010, the Child Support Grant was not increased on a par with inflation. She pointed out the inflation was 6.4% at beginning of 2010  yet  the Child Support Grant was only increased by 4.4%. However, the Old Age Pension and all other grants were increased with inflation. The lack of an inflation related increase for the CSG was explained by the Minister of Finance to be because the grant was being extended to children under 18 and a trade off had to be made. However, the same trade off was not made for the Old Age Pension which was also being extended to men aged 60 (age had been decreased from 65 to 60 for men using a phased approach) yet was still increased in line with inflation.

Another issue the Children’s Institute brought to the attention of the Portfolio Committee was that of Non Profit Organisation (NPO) funding. Approximately 60% of social development services for vulnerable groups  were delivered by NPOs. .
However, the NPOs receive only partial funding from the provincial departments of social development to perform these services. They have to fund raise from local and foreign donors to make up the shortfall. In contrast, if government runs the service itself, government funds the service at full cost. If government contracts a private (for profit) organisation (eg BUSASA) to run a child and youth care centre (eg a place of safety or a secure care centre), they pay BUSASA cost plus profit.

In the NAWONGO judgment1 the Free State High Court ruled that the state’s partial funding policy for NPOs is unfair and unreasonable and ordered the Free State Department of Social Development to review its policy and write a new one. The judgment gives the example of child and youth care centres (CYCCs). It notes that the Department acknowledges that about 2 000 CYCC beds are needed in Free State for children found in need of such care by courts, yet only 1 085 beds are currently available. Of the 1 085 currently available beds, only about 320 are provided in government-run CYCCs, while the rest are provided by NPOs. The Department pays on average R5800 per month/child for the homes that it runs itself. In contrast, the subsidy paid to NPOs is only about R2 000 per month per child. The judgment notes that this means that NPOs are expected to provide three meals per day for each child for only R11,84 per day. The judgment gives similarly worrying estimates in respect of shelters for children living and working on the streets.

The judge ordered the Free State Department of Social Development to revise its policy on financial awards to NPOs. While the judgment is against the Free State Department of Social Development, it is relevant to all provincial departments of social development because the Free State’s NPO funding policy is the same as the national policy.

On 13 October a member of the Portfolio Committee asked the DG a question about this court case. The DG’s answer appears to indicate that each province is going to develop its own financial awards policy. However, the national department is also developing a national policy that is supposed to guide the provinces.  Would it not be better for the National Department to lead the way by finalising its national policy as a priority so that the provinces can act in unison? If the different provinces adopt different policies this will mean inequity for vulnerable groups living in different provinces.  A further consideration is that if the National Department does not lead the way, some provinces may not review their financial awards policy as the judgment does not bind them directly. If NPOs in these provinces see that there is no progress happening, they will be obliged to go to court to get justice for the children, women, elderly and disabled people that they provide services for. This will result in litigation costs for both NPOs and the State.

A recommendation was made that the Portfolio Committee should invite the National Department to present on the matter. Another problem was that the NGOs did not have a platform or forum to voice their concerns. Therefore it would be help if Parliament held hearings to allow the NPOs concerns to be heard.

Discussion
In relation to the Child support Grant, Ms H Lamoela (DA) asked what the obligation of the father was to support children financially. She was concerned that fathers were not taking responsibility to support children and the state was taking on the responsibility.

Ms Proudlock answered that in most instances, children receiving the Child Grant were raised by their mother where the fathers were either unknown or absent. She stated that the Maintenance Courts had not been functioning up to scratch and that waiting periods were lengthy, therefore fuelling poverty.

Ms Lamoela (DA) stated that it was highly unsustainable to expect government to fund children whose fathers had the duty and ability to do so.

Ms Proudlock answered that it was indeed the duty of both parents to take care of their children, however the state should assist if the parents are unable to provide for the child.

Ms Tshwete (ANC) stated that the review of the equitable share formula was essential as in most cases the “readymade” allocations were not ideal. The Portfolio Committee should have an active role in influencing the allocations, especially the equitable share.

Ms Proudlock recommended that the Portfolio Committee request the Financial and Fiscal Commission to come and brief them on their recommendations with regards to reforming the equitable share.

Ms Nelson (ANC) stated that the oversight of the Committee should extend to hearing the complaints of the NGOs as there were many complaints.
 
Ms Lamoela (DA) stated that the struggling NGOs should be assisted in terms of compliance by the social workers as that was one of their duties.

The Chairperson agreed that the money allocated to NGOs was not enough and did not promote development however was concerned that the committee should not get in the middle of the debate as it was an administrative justice issue.

The Committee went through the draft Budget Review and Recommendations Report page by page and made amendments and additions [a detailed report on this discussion will be provided here soon]. They inserted three of the recommendations made by the Children’s Institute in relation to the Child support Grant inflation increase, the equitable share, and the need for the National Department to prioritise the Financial Awards Policy in consultation with the NGOs.

The Social Development Budgetary Review and Recommendation Report 2010 was then adopted subject to the amendments expressed by the committee in the meeting.

The meeting was adjourned. 

[1
National Association of Welfare Organisations and Non-governmental Organisations and Others vs the Member of the Executive Council for Social Development, Free State and Others. Case no: 1719/2010. Free State High Court]

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