Conditional Grants Second Quarter: Treasury and Eastern Cape Social Development Department

Meeting report

FINANCE SELECT COMMITTEE
9 November 2005
CONDITIONAL GRANTS SECOND QUARTER: TREASURY AND EASTERN CAPE SOCIAL DEVELOPMENT DEPARTMENT

Chairperson: Mr T Ralane (Free State)

Documents handed out:
National Treasury Presentation on the Outcome of Conditional Grants and Capital Expenditure
Eastern Cape Department of Social Development Presentation
National Treasury Press Release on Provincial Budget 2005/06
Department of Housing, Local Government and Traditional Affairs: Expenditure Trends

SUMMARY
The National Treasury said that spending was at R100.1 billion which was 46.8% of the budget of R213.7 billion. There was a projected over-expenditure in education personnel linked to pay progression and the incentive system for educators. The social services budget was at R175.8 billion, or 82.3% of the total Provincial budgets. The Provinces had spent R83.9 billion which was 15% more than compared to last year. Educational spending was at R28.9 billion or 50.3%. There was projected over-expenditure here of R1.3 billion due to pay progressions. In health, there was spending of R21.7 billion which was 18.5% more than last year. The lowest rates were in Limpopo and the Western Cape, while the Eastern Cape and the Northern Cape had the highest. Provinces tended to be optimistic about the capacity of line departments to plan and implement infrastructure budgets. The figures underscored the need to build capacity among all departments.

The Eastern Cape said that to assess the Department’s monitoring capacity of Social Assistance Grants, the Contract Management Centre was established to monitor payments of social grants by third parties such as All Pay and Cash Pay Master Services. All funded projects were expected to submit community profiles, compile business plans and enter into service level agreements with the Department. Some of the challenges were that there was not accurate management information and statistics which made making projections difficult. The high turnover rate of social workers was a further limitation in the rolling out of foster care programmes. As a corrective measure, the Department had developed its provincial-specific guidelines such as business plan formats, service level agreements and pre-numbered forms for beneficiaries.

MINUTES
National Treasury Presentation
Ms Sandra Sooklal, from Treasury's Intergovernmental Relations, said that spending was at R100.1 billion which was 46.8% of the budget of R213.7 billion. The highest rate of spending was in Mpumalanga at 49.8% and the Northern Cape at 49.3%, while the lowest was in Limpopo at 45.4% and the North West at 45.8%. There was a projected over-expenditure in education personnel linked to pay progression and the incentive system for educators. Personnel spending was at R47.1 billion and capital expenditure was at R4.8 billion.

The social services budget was at R175.8 billion, or 82.3% of the total provincial budgets. The provinces had spent R83.9 billion which was 15% more than compared to last year. The North West Province had the lowest rate of spending while the Northern Cape and Mpumalanga had the highest. In education, there was spending of R34.4 billion against a budget of R70.2 billion. There was low spending in the North West and Mpumalanga while the Northern Cape and Gauteng had the highest spending rate in education. Educational spending was at R28.9 billion or 50.3%. There was projected over-expenditure here of R1.3 billion due to pay progressions. Capital spending was at R978.8 million with a low rate of spend in Kwa-Zulu Natal and the Northern Cape, while the North West and the Western Cape had the highest.

In health, there was spending of R21.7 billion which was 18.5% more than last year. The lowest rates were in Limpopo and the Western Cape, while the Eastern Cape and the Northern Cape had the highest. Health personnel spending was at R12.3 billion and capital spend was at R1.2 billion, which was an increase of 61.3% from last year. Limpopo and the North West were the lowest spenders and Gauteng and Kwa-Zulu Natal the highest.

In social development, there was spending of R27.8 billion which was an increase of R3.2 billion from last year. The lowest rate of spend was in the Free State and the North West, while the Mpumalanga and the Gauteng had the highest. There was a projection of under-spending of R1.1 billion, with Limpopo and the Western Cape projecting that they overspend by R162.6 million R19 million respectively. The projected under-spending was linked to key initiatives to address weaknesses in the grant administration system such as piloting, finalising and implementing a new disability assessment tool and investigating and prosecuting fraudulent activities.

Provincial personnel spending totalled R47.1 billion which was an increase of 12.2% from last year. There was projected over-expenditure of R787.5 million due mainly to education Departments waiting for additional allocations for pay progression to educators to be rolled over from 2004/2005. The lowest rate of spending was in the Free State and the Western Cape, with the Eastern Cape and Limpopo the highest. In payments for capital assets, the provinces had spent R4.8 billion which was an increase of R1.1 billion. The largest provincial capital budgets were in public works, roads and transport and there was a projection of over-spend of R417.7 million. Provinces tended to be optimistic about the capacity of line Departments to plan and implement infrastructure budgets. The figures underscored the need to build capacity among all Departments.

Discussion
The Chairperson said that Limpopo Province had to be brought before Committee to explain their poor performance and lack of ability to spend.

Mr M Goeieman (Northern Cape) said that the Committee needed reports that outlined the practical implications of the funds. The Committee needed to see how and if the money was being used. What support was being given to the provinces by Treasury to ensure that the money was being spent?

Ms Sooklal said that she agreed with this. For example, Treasury had still not received a first quarter report from the Department of Land Affairs and the Department of Housing. Treasury did give the provinces some support, such as helping them with their business plans and their Grant Frame Indicators.

Eastern Cape Presentation
Ms F Macingwane, the Acting Head of Social Development Department, noted that the Child Support Grant had been introduced to replace the state maintenance grant. In its first year of inception it had targeted children from zero to seven years old. In the subsequent three year period it was extended to the ages of under nine, under eleven and under 14 respectively (see document for full details).

To assess the Department’s monitoring capacity of Social Assistance Grants, the Contract Management Centre was established to monitor payments of social grants by third parties such as All Pay and Cash Pay Master Services. The Management Information System monitored the workflow and turnaround time for social grant applications. A monthly Conditional Grant Monitoring template was supplied to the National Department of Social Development. The Department had also developed an appropriate monitoring tool aligned to a logical framework format and tailored to track progress on time, cost, quality and value for money funded. All funded projects were expected to submit community profiles, compile business plans and enter into service level agreements with the Department.

There was under-spending in the Social Assistance Grants due to 40 499 beneficiaries’ records being inactive as many of them were deceased. For 2003/04, the extension targets in the province were very high (230 000 targeted) and when taking applications in the communities, it was discovered that children’s figures were much lower than predicted. For the current financial year, they were projecting and over-expenditure in the Child Support Extension. In 2002/03, HIV/AIDS reflected an under-spend of R1.567 million due to the shortage of staff as the programme was coordinated by only one person at provincial level. The under-spending of R274 000 in 2004/05 was a result of delays in the appointment of Assistant Directors responsible for monitoring and coordination of HIV and AIDS at a provincial level.

Some of the challenges were that there was not accurate management information and statistics which made making projections difficult. The high turnover rate of social workers was a further limitation in the rolling out of foster care programmes. Obtaining the necessary documentation such as IDs and Birth Certificates from Home Affairs was still problematic. Some grants such as the HIV/AIDS grant were allocated without an administration budget, and in most cases, the Conditional Grants were received at the end of the first quarter which presented a challenge for performance and Conditional Grants were allocated without clear guidelines. As a corrective measure, the Department had developed its provincial specific guidelines such as business plan formats, service level agreements and pre-numbered forms for beneficiaries.

Discussion
Mr E Sogoni (Gauteng) said that he thought that Conditional Grants could only be given after plans had been approved and so forth. What did Ms Macingwane really mean? The Eastern Cape had some of the poorest people in the country but they spent very little on them in areas such as HIV/AIDS. This was not right.

Ms Macingwane began by saying that things were really not as bad as they seemed in the Eastern Cape. There was expenditure but spending was affected by the fact that the money was received in tranches.

Mr B Mkhaliphi (Mpumalanga) said that he thought that the Eastern Cape would have been at the forefront of poverty alleviation and spending, and expected them to overspend every year in helping people, but this was not the case.

The Chairperson asked if the Eastern Cape Department put in their business plans in time.

Ms Macingwane said that the process of developing business plans for next year had already begun. They had learned that they could not make plans during the implementation period and decided to make plans in advance.

Mr D Botha (Limpopo) said that there seemed to be a planning problem in the Department and this was affecting service delivery substantially.

The meeting was adjourned.