IDT on Poverty Relief Programme

Meeting report

WELFARE PORTFOLIO COMMITTEE
14 April 2000
POVERTY RELIEF PROGRAMME: BRIEFING BY THE IDT

Documents handed out
Briefing document by the Independent Development Trust [e-mail [email protected] if required]

Relevant Website:
Independent Development Trust (IDT)

SUMMARY
The IDT allayed many of the fears which members had that the R205 million which had been set aside for poverty relief was not being effectively spent. They assured the committee that, while all the money had not been spent, all the money was in fact ''committed''.

The amount of R205 million is to be paid out to the IDT in three tranches. This is to be done in amounts of 40%, then 50%, then 10%. The IDT has already received the first two tranches.

Provincial projects were assessed before the first tranche was paid to them, to determine if they were ''ready to receive''. The IDT did this, even though it is beyond there contractual obligations. The result was that many projects were weeded out. This was not done with the national projects, and the result was that some national projects did not effectively spend their first tranche. For this reason, the second tranche is being withheld from these projects until they deal with their incapacities (this money is with the IDT). The IDT is waiting for the third tranche from the Department.

The IDT emphasised that their role did not relate to monitoring the projects or to their ground level spending. This role remains with the Department. They said that they had in fact encouraged the Department to include this in their obligations but the Department decided not to. They also noted that all the projects have signed contracts with the Department of Welfare in respect of what their obligations are.

The IDT pointed to many lessons learnt from their rapid review of the 1997/98 disbursement of funds by the Department of Welfare. These included: the capacity of the Department was inadequate to cope with the work of the programme, that information about the programme was not adequately disseminated amongst all levels of government, the system of monitoring projects was insufficient. Further the programme was implemented too quickly without a well-developed poverty alleviation policy in place. These problems were further exacerbated due to a severe lack of capacity and poor financial management within the projects themselves.

Despite the Department's incapacity, the Department had refused the IDT's proposals that IDT monitor and evaluate the projects and widen their scope of involvement in the Programme. The Department decided instead to limit their role. The IDT would be willing to take a more active role.

MINUTES
Independent Development Trust presentation
The 1994 government reorganised the IDT and redefined their mandate. They are not a grant-making institution anymore, but a public entity regulated by the Public Finance Management Act (PFMA). They emphasised that they are not an NGO. Approximately 99% of their work is related to government.

Poverty Relief Programme and the Role of the IDT
They were requested to assist with the Poverty Relief Programme by the Department of Welfare and an agreement was signed in March 1999. The IDT had no role in the definition of the program as it was conceptualised and designed by the Department. The partners in the program were also decided by the Department. These are:
1) the Welfare Department at a national level (the overall responsibility was taken by them, they had to play the oversight role.)
2) the Welfare Department at a provincial level (this includes the regional district level)
3) IDT
4) Cluster Coordinators (NGOs and CBOs appointed by provincial departments to monitor and support groups of projects.

The IDT's three main responsibilities are:
Disbursement of funds
The IDT must disburse funds after projects are approved by the Department. They emphasised that these projects were identified, appraised, and approved by the Department. The IDT's role is only to disburse the funds to the projects.

Capacity building of cluster co-ordinators
The department identified entities (NGOs and CBOs) called cluster co-ordinators that provide support to projects. For example, in the Eastern Cape there are approximately 600 projects. Certain NGOs and CBOs were assigned to monitor and assist a cluster of projects. These clusters are geographical and not sectoral The IDT must provide support to these cluster co-ordinators so that they can provide better support to the projects. The IDT assessed the capacity of these cluster co-ordinators and the report was submitted to the Department. The IDT does not interact with the projects directly.

The review of the 97/98 program
This program had a value of R50 million. The IDT was not involved in this program, but they suggested the review to identify mistakes which may have been made, so as to avoid repetition. They emphasised that it was not an audit or an evaluation, they simply looked at what systems were used, so that they could ''draw lessons''. The audit was done in 3 weeks.

Funding process
IDT received the first tranche of funds into a specially designated account on 8 April 1999. The amount of R203 million was to be received by them in 3 tranches. The first tranche was 40%, the second 50%, and the final tranche 0%. The separate account was opened so that the money could be audited by the client and so that the account could draw interest. The interest which comes from the account has not been paid back to the Department, it gets recapitalised into the project. The Department has the account number and they get monthly statements.

The IDT received the second tranche on 19 October 1999. They also received an additional amount of R14 million to pay the cluster co-ordinators a project administration fee. This money comes from the rollover of the 99/2000 budget (the R50 million) and has nothing to do with the R203 million. This is the only involvement that the IDT has with the R50 million.

There are national projects and provincial projects. Provincial projects were identified by provincial departments and not the national department. They were then recommended for approval by provincial departments to the national department, but were ultimately approved by the national department.
In respect of national projects, NGOs engage directly with the national department. After authorisation from the national department, funds go directly from the IDT to the project. The IDT has a complete database of all the projects.

IDT has assumed other responsibilities beyond their contractual obligations for expediency. Amongst others these include:
1) Database - When they started there was a lot of missing information. The information was sufficient for the Department, but it was not sufficient for the IDT. They have updated the information systems and are maintaining it for the department. The information is contained in the system of the IDT and the Department.

2) They assisted the Department to finalise the program implementation plan (the business plan).

3) They assisted the Department to put together contracts so that all the projects have a contractual agreement with the Department. Provincial and national projects signed a legal agreement with the national Department (approximately 2000 contracts).

4) They were involved in an assessment of project readiness. The Department was not sure how ready the projects were and had to determine whether they were in fact ''ready to receive''. They did this at the start with provincial projects, and approximately 250 projects were weeded out because they were not ready to receive. This was not done with the national projects, and the result was that some projects did not spend their first tranche effectively. Therefore, the second tranche has been withheld from these projects until they dealt with their incapacities.

5) They also assisted the Department with a management plan to effectively manage the Programme. This relates to what procedures would be followed.

6) They developed a project status assessment tool in order to rapidly assess the status of projects. The department had not put into place a monitoring system in order to assess whether projects were ready to receive the second tranche. In terms of the obligations of the IDT, this is not their role. The IDT captured and analysed the information and produced a payment authorisation form where applicable for each project.

There is an administration cost for handling these projects. This comes from the IDT fund, where 10% of that fund was earmarked specifically for this purpose. It does not come from the R205 million nor the interest.

Discussion
Ms Cupido (DP) asked if the 10% that was given to IDT for its role in the Poverty Relief Programme came out of the Department's budget?

Ms Gwagwa, CEO of the IDT, responded that the money came from IDT's own resources at no cost to the Department. The Board of Trustees agreed to the amount after considering standard international management fees. Ms Gwagwa reminded the committee that the IDT had been granted a one-time sum of R2 billion from the government to manage the implementation of its policies. The IDT's operating expenditures come from the interest that had accrued on the R2 billion as well as from profits on investments.

Professor Mbadi (UDM) asked for clarification on the claim by the Minister of Welfare that R50 million had disappeared?

Ms Gwagwa responded that she was unaware of what had happened to the money, since the IDT had not been managing the Poverty Relief funds at that time. The R50 million was from the 1997/98 budget. The IDT had offered to do an audit of that budget to determine where the money had gone, however, the Department insisted on doing their own audit. Ms Gwagwa was unaware of the results of that audit.

Professor Mdabi asked for clarification on the R203 million budget of 1998/99. Ms Gwagwa was "absolutely confident" that the entire sum had been committed to various projects, but said much of the money had yet to be spent. The Chair asked for a breakdown of what amounts had been spent.

Ms Gwagwa replied that the IDT was unable to provide that information. She explained that the distribution of funds occurred in four stages. The first stage was to allocate the necessary funds. The second stage was to identify to which projects the money would go. Both of these stages were completed. The third stage was to disburse the funds to each project. Ms Gwagwa stated that this stage was 67% complete. The fourth stage was for the projects to spend the money. Since there were no monitoring and evaluation systems in place, it was impossible to determine what had already been spent.

Dr Mbulawa (ANC) asked what lessons the IDT had learnt from the "rapid review" of the National Department of Welfare's 1997/98 budget?

Mr Nkwali, Senior Programme Manager of IDT, replied that many lessons had been learnt despite the fact their review was constrained by time. These lessons included that the capacity of the Department was inadequate to cope with the work of the programme, that information about the programme was not adequately disseminated amongst all levels of government, and that the monitoring system was insufficient. Further the programme was implemented too quickly without a well-developed poverty alleviation policy in place. These problems were further exacerbated due to a severe lack of capacity and poor financial management within the projects.

Mr Solo (ANC) asked if the IDT would be willing to assist the national Department in working on these weaknesses, due to its obvious lack of capacity?

Ms Gwagwa responded the IDT needed to look at their contractual obligations. The Department had previously decided that they did not want the IDT to monitor and evaluate funding within the provinces. Ms Gwgwa was critical of the Department for taking the IDT out of the "final financial loop", arguing that they were completely capable of performing such a function. Even after the IDT expressed their desire to perform this function, the role was given to the provinces.

On the Department's capacity, Ms Gwagwa stated that the Department had never been involved in this type of program before, and would thus need time to develop the required capacity.

Ms Ramotsamai (ANC) asked if it was necessary for the provinces to get authority from the national Department to disburse funding?

Ms Gwagwa argued that it was essential that the national Department authorized the expenditures of all projects. This was due to the fact that contracts had been signed between the projects and the National Department. The provincial Department did not enter into a contract with the projects. The role of the provincial Departments was twofold. First, solely to appraise, approve, and recommend projects to the national Department, and secondly, to disperse funds to the provincial projects. The national Department was solely responsible for dispersing funds to national poverty programs.

Professor Mbadi (UDM) asked what were the exact reasons that the second and third tranche payments to the projects were halted?

Ms Gwagwa clarified the question by stating that payments had only been withheld from national programs and not provincial programs. The reason for the delays was that an assessment of the programs had occurred in November 1999 and it was found that many problems were unable to carry out their mandate. The payments to the provincial programs were not withheld because an assessment had been conducted prior to the first payment being released. The Department is holding the remaining payments. She added certain projects had been given additional funding, but that it did not constitute the third tranche, but rather it resulted in the second tranche payments being insufficient.

Mr Nkwali added that their report (see appendix) detailed which national programs had received a second payment, and which had not. The report also stated the reasons why the second payments were being withheld. IDT was unaware of when the third payments would be released.

Professor Mbadi (UDM) asked if the projects had to meet certain requirements to receive the final payment?

Ms Gwagwa replied that there were no requirements, but that the IDT had recommended to the Department that monitoring and evaluating systems be put in place to check the progress of the projects.

Mr Kannemeyer (ANC) questioned the financial accountability of the IDT. He asked how the IDT could not be aware of how the funds had been spent if they had done an assessment of the status of the projects. He challenged the delegates to state why the second trenche payments had been disbursed without any knowledge of how well the funds from the first payments had been used.

Ms Gwagwa explained that they were in a position to note how the money had been spent, but that it was not part of their contractual obligation. The information had been passed on to the Department.

The ANC asked who the cluster coordinators were, and what mechanisms were in place to assess their work?

Mr Nkwali responded that the cluster coordinators were appointed by the Provincial Departments of Welfare. As such, their performance was subject only to each province's criteria. He added that the coordinators came mainly from non-governmental organizations (NGOs) and community based organizations (CBOs). The IDT's role with the coordinators was to ensure that they fulfilled their contractual obligations.

Ms Rajbally (MF) asked whether the NGOs and CBOs had fulfilled their criteria? The IDT said the Department would have to answer that question.

Ms Ghandi (ANC) asked why almost 86% of the administration budget had not been spent? She further asked how projects could be deemed viable without sufficient administrative support?

Ms Gwagwa replied the money in the administration budget was allocated to the provinces for use by the projects for capacity building and for affording technical training for staff. The low expenditure was because the funds were only released when the projects requested that specific type of funding. To date, only 14.09% had been requested.

Ms Ghandi questioned why the projects had not been made aware of this funding. Ms Gwagwa stated the onus was on the provincial Departments for informing the projects, since they were more aware of the status of each of the projects. It was not the role of the IDT to issue funding to the projects, since there were no direct relationships between the two.

Ms Tsheole (ANC) asked whether there were any mechanisms to help build capacity within the projects, so that they could pass the re-assessment process and receive more funding?

Ms Gwagwa stated there were no real mechanisms. She suggested that contracts could be signed between the projects and the Department, as long as the contracts did not interfere with the disbursement of funds from the national level.

Dr Jassat (ANC) asked whether outsourcing would be a viable solution to the IDT's inability to find a suitable finance manager?

Ms Gwagwa responded that this would not be possible. The expectation of the IDT was that the finance manager would be responsible for both the management of the poverty relief programme as well other financial matters within the IDT. As such, it was necessary that the position be filled by someone who would work within the organization.

Ms Cupido (DP) asked how long the IDT's contract agreement was with the Department, and to whom the IDT was accountable?

Ms Gwagwa responded that the contract was for two years, which began in March 1999, and that as a public entity, the IDT was accountable to the Department of Public Works.

The Chair asked if the IDT had discussed the Department's capacity to monitor and evaluate the programs during their early discussions?

Ms Gwagwa replied that they had extensively engaged the Department on the issue. It was made very clear that the IDT had an interest in monitoring and evaluating the projects. The IDT also submitted concrete suggestions to the Department on specific roles that they could perform within the programs structure. Discussions also centered on the possibility of renewing their contract with the Department to widen the scope of their involvement. The Department decided instead to limit their role. The Chair asked if the IDT would be willing to take a more active role in the programmes. The delegates stated they would.

The meeting was adjourned.