Social Development Provincial Reports

NCOP Finance

17 January 2006
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Meeting Summary

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Meeting report

Select Committee on Finance

FINANCE SELECT COMMITTEE
18 January 2006
SOCIAL DEVELOPMENT PROVINCIAL REPORTS

Chairperson:
Mr T Ralane (ANC) [Free State]

Documents handed out

National Treasury presentation on conditional grants and capital expenditure November 2005
Conditional Grants Expenditure per Province as at 30 November 2005
Free State Department of Health and Social Services presentation
Mpumalanga Department of Health and Social Services presentation
Western Cape Department of Social Services and Poverty Alleviation presentation
Limpopo Province presentation
Gauteng Department on Social Development presentation
KZN Social Welfare and Population Development presentation
Opening Remarks by KZN MEC – Conditional Grants (see Appendix)
Programme For the Conditional Grant hearings

SUMMARY
National Treasury examined the social services sector (Education, Health and Social Development) budgets and third quarter expenditure for 2005/6 per province and then examined Social Development expenditure by programmes. He then analysed spending on conditional grants, personnel and capital assets. The deadlines for provincial quarterly reporting were explained as well as national department obligations in this regard.

The Committee was briefed by the provincial Members of the Executive Council dealing with Social Development on the expenditure of their overall budgets, Conditional Grants and Capital Expenditure for the financial year's third quarter ended 30 November 2005. Those provinces that presented were: Free State, Mpumalanga, Western Cape, Limpopo, Gauteng and KwaZuluNatal. The Conditional Grants included the South African Social Security Agency (SASSA) grant, Integrated Social Development Grant (ISDG), HIV/AIDS grant and the food relief grant. The provinces explained about the factors that influenced the expenditure trends.

The provinces asked the provincial departments to explain the steps being taken with their provincial treasury to address underspending and over-expenditure problems. The Chair expressed his disbelief at the request from the Limpopo Department that it be allocated more funds when it was already under-spending. Some members felt that the Department of Public Works should be present at meetings in future as some of the spending delays were caused by that department. The Western Cape was asked if it envisaged another roll-over of its food relief grant allocation as it had spent only 47% in 2005. Concern was raised at the late advertisement of posts for SASSA by some departments.

MINUTES
National Treasury presentation
Mr Chris Adams, National Treasury: Intergovernmental Relations, explained that the National Treasury assessed the credibility of provincial budgets and ensured production of quarterly budget reports by provincial treasuries. The National Treasury then prepared a consolidated quarterly report for all provinces.

He examined the social services sector (Education, Health and Social Development) budgets and third quarter expenditure for 2005/6 per province and then examined Social Development expenditure by programmes. He then analysed spending on conditional grants, personnel and capital assets. The deadlines for provincial quarterly reporting were explained as well as national department obligations in this regard.

He noted that there was an increase by 11,4% in social development spending from the previous financial year. The Free State and Gauteng Social Development departments exhibited the lowest spending rates at 58,% and 60% respectively, with the Kwazulu-Natal and Limpopo departments reporting the highest spending rates at 65,2% and 64,8% of their total allocation. The social development sector as a whole was projecting an underspend of R972 million, which was linked to weaknesses in the grant administration system.

Free State Province presentation
Ms Zanele Dlugwana, Free State MEC for Social Development, said that the reasons for under spending on Capital Expenditure was due to the slow movement of contractors. The contract for Monument Secure Care was replaced due to non-performance of the contractors. This process had delayed payments. The department had finalised its IT plan and orders were placed for IT equipment via SITA. The HIV/AIDS under expenditure was due to the Memorandums of Agreement that was returned late and was not completed by NGOs . A call for service plans from the Non-Profit Organisation (NPO) sector was made in September 2005 and that the closing date for this was 31 October 2005. Measures would be put in place to ensure that funds were utilised by 31 March 2006. Critical vacant posts had not been filled due to the fact that the structure of South African Social Security Agency (SASSA) had not been finalised and approved by the National Department of Social Development.

A disability review programme was launched which resulted in the indicated savings. The department was currently implementing a new monitoring system with the assistance of ABSA Bank, which would improve the monitoring and evaluation of grants to NGOs. Approval was awaited from the Provincial treasury before it could be implemented. NGOs would be trained in conjunction with the Provincial Treasury to improve skills for financial management in the NGO sector. A separate bank account would be opened for the management of transfer payments to the NGO sector. An auditing firm was to be appointed to ensure the timeous submitting of annual financial statements by the NGO sector. Monthly reports were signed by the Accounting Officer and sent to Provincial Treasury and the National Department of Social Development, as prescribed. The department received reports on a monthly basis from NGOs as required. Business plans for conditional grants have been submitted to National Treasury and the National Department of Social Development as required. The department currently hads an acting Head of Department, and not a permanent position.

The Chairperson was concerned about the fact that there is an acting Head of Department. He said that the MEC has admitted that her department is not stable. He hoped that at the next meeting there would be more stability in the department.

Gauteng Province presentation
Mr Bob Mobaso, Gauteng MEC for Social Development, said that most of the challenges are similar. He said that they have close to a million beneficiaries and that they have implemented an anti corruption mechanism. The department worked together with the Department of Health.

Mr Bheki Sibeko, Head of Department (HOD), said that although the department had spent 61% of the total allocation as at the end of November 2005, of the social assistance grants, the department still expected to spend less than the total allocation, in excess of R200m. This could be attributed to the unanticipated uptake in beneficiaries who qualified for social grants especially the child support and disability grants. The department’s total allocation for the HIV/AIDS grant had been spent by the end of November 2005. The conditional grant would in future form part of the province’s equitable share and the department was in the process of revisiting the post structure to ensure effective management and service delivery.

Kwazulu Natal presentation
Inkosi Ngubane, Kwazulu-Natal MEC for Social Development, said that despite the challenges faced by his department, its performance with regard to conditional grants had improved and it had reported a saving of 2,3%. However, the department had not done well with the HIV/AIDS and food parcels grants. The department still faced many challenges with other grants, especially the HIV/AIDS grant.

The Chief Financial Officer of the department said that there was a shortfall on the social service assistance grants. There was an increase in the amount of beneficiaries receiving social grants. A total of R6 million had been recovered from the HIV/AIDS grant. At the start of 2005 the department did not have a budget for the food relief grant, as the national Social Development Department had only approved the grant in September 2005.

The Head of Department explained that during the 2004/05 financial year the food relief grant could not be utilised because the national department felt that there were some flaws. The funds then allocated for the grant was then rolled over to the next year. The tendering process was done at national level and the provincial department was informed in August 2005 that the service provider had been approved. One of the tender applicants instituted legal proceedings against the department because they felt that they were left out, and had since won the case. Those funds could thus not be used until the court case had been finalised. The department had already identified the beneficiaries, but those might now have to be re-evaluated.

Discussion
Mr D Botha (ANC) [Limpopo] was concerned that the Free State Department of Public Works not delivering. He felt that that department should be present. He asked the Free State Socail Development MEC to explain the steps e had taken to address the problem with that department.

Mr E Sogoni (ANC) [Gauteng] extended the same question to the MEC of Gauteng and wanted the role of that Department of Public Works put into context. He asked whether the Gauteng Social Development department followed up on the work it handed over to the Public Works Department. It was clear that there would be overspending in KwaZulu-Natal, and sought clarity on the steps taken to address the problem.

Ms J Masilo (ANC) [North West] was concerned about the gender balance in the department. She sought a the breakdown of under expenditure in the Free State department and whether the department assisted NGOs with their business plans. She also asked for a list of NGOs. She wanted to know why there was a zero under grant aid and child support grant.

Mr B Tolo (ANC) [Mpumalanga] commented that the Department of Public Works was not playing ball, and wanted to be informed of their activities. He asked whether it would be possible to get other role players involved. It appeared that that department was not concerned with ensuring proper service delivery, but instead wanted to ensure that money is spent.

The Free State department had spent R31 million in nine months, and asked the MEC to explain how R28 million was spent in three months. The department should plan to spend those funds as soon as they knew how much they were going to get and should not wait until the funds were paid over to them.

Mr Tolo sought an explanation as to why NGOs were only being trained now, after ten years had already elapsed.

The Chairperson asked whether the NGOs which required training had been newly established.

Mr B Mkaliphi (ANC) [Mpumalanga] noted that the Gauteng department had spent 100% of its budget. For the next four months home based care would experience a lull because there were no funds, and asked whether NGOs should be enlisted to assist.

Ms Robinson (DA) [Western Cape] was concerned by the lack of service delivery, and proposed the imposition of deadlines by which time service delivery must take place.

The Chairperson asked the Gauteng MEC to explain the reduction in the number of beneficiaries between May and June 2005.

Mr Wilton Magwaza, Kwazulu Natal Social Development HOD, responded that some funding was received from the national Social Development Department. The department had put systems in place to measure expenditure. It was only in the third quarter of the 2005 financial year that the department had expended 188% of its HIV/AIDS grant allocation. The Grant in Aid fell under the Old Age grants and the Disability grants, and the number of Grant in Aid beneficiaries was growing steadily. He informed Members that the NGOs which were being trained could have new projects in operation, which would in turn require training.

The Free State MEC replied that she has expressed concern in her department with the lack of service delivery by the provincial Department of Public Works. Her department had met with the Free State MEC for Public Works. There was a need to ensure that the HODs worked together to address the problem, and the matter would be taken to Cabinet. The two provincial departments had devised a plan and have clustered certain programmes to ensure that all work was completed on time in the province.

Significant funds had been invested in SASSA, and the anti-corruption campaign also received significant funding. A group of doctors had received training on the system.. Persons with high blood pressure and diabetes have been eliminated from applying for the grant, as they do not qualify.

Most of the NGOs involved were not in located in the rural areas, where they were most needed. Consequently they were not doing there jobs and the department ended up doing the work. The department would be monitoring funds through ABSA and the NGOs would have to receive training, so that they in turn could train the CBOs. The department did have a poverty alleviation strategy in place, as well as soup kitchens and drop in centres. Fortified food supplements would be distributed to HIV/AIDS patients. She assured Members that a list of NGOs could be sent to the Committee.

The MEC for Gauteng replied that the challenges around public works was faced by all provinces. South Africa was still a developing country and needed to be empowered, and a strong link with training institutions needed to be put in place.

The department was not providing the foster care grant as effectively as it would like to, and bottlenecks were still being experienced. There was a shortage of social workers in both the department and NGOs. The NGOs accused the department of poaching staff because they offered a better salary and better facilities. Some NGOs were progressive whereas other NGOs saw themselves as very independent. The NGOs needed to allow themselves to be influenced by the provincial department.

Mr H Sibeko, Gauteng Social Development HOD, responded that seven thousand people have been taken off the grant system which could account for the drop in numbers during May and June 2005. There were two sources of grants for HIV/AIDS. He informed the Committee that his department received monthly reports from the Gauteng Public Works Deaprtment.

The MEC for Kwazulu-Natal agreed that the Department of Public Works should be present. He stated that the gender breakdown in his department was consistent with government requirements. The department was not able to invite grant tenders before the grant itself was approved, and the reality was that all the planning could not be done beforehand. All the Kwazulu-Natal provincial departments enjoyed good working relationships.

The MEC for Free State commented that training at times needed to be provided on an ongoing basis. Treasury was reluctant to pump money into social workers who worked for NGOs.

North West Province presentation
The MEC for the North West Province said that her department had improved but there was still room for improvement. NGOs historically had been started by families and there was no formal ownership. The department need to ensure that the NGOS were committed. The department was more commonly seen as a social grant service.

She stated that there was a shortage of identity documents in her province. Her department reported a saving on social grants, and an over expenditure on the foster care grant. There was a sudden change in the ISDSG and it was now part of the provincial equitable share, but it was a good programme. The department had commissioned a study on the programmes initiated by government.

The full HIV/AIDS grant allocation will spent, and the department will ensure the funds were properly spent. The ward committees and councilors will assist with the registering of people for grant aid.

The Deputy Director General of the department said that the department was not where it should be with regard to the HIV/AIDS conditional grant expenditure. The business plans were analysed and 37% of the expenditure has been committed. There would be full expenditure on the Food Emergency Scheme. Capital projects were ongoing and expenditure was approximately 60%, with the remainder of the funds being fully committed

Mpumalanga Province presentation
Mr Hussein Verachia, Mpumalanga Social Service HOD, said that the role over for HIV and AIDS Community Based Care had been fully spent, as well as the roll over for the ISDG. A total of 74% the total HIV/AIDS grant allocation had been expended. Expenditure on the Community Based Care grant was in line with the acceptable target. Regular monitoring sessions were conducted weekly and both quarterly and monthly reports were reviewed to ensure compliance with the business plan.

The ISDG expenditure stood at 80%, which was 5% more than the expected target of 75%. The Social Assistance Grant expenditure stood at 72%, which was in line with the acceptable target. The Administration grant has spent 50% of its budget and the under spending was attributed to the non-appointment of staff, and the delays in the acquisition of office space and the procurement of office equipment. This was also dependant on the processes of SASSA nationally.

All business plans have been certified and submitted to the National Treasury for the current financial year 2005/06. Monthly performance reports were certified and sent to the Provincial Treasury and the transferring national department..

Discussion
Ms Masilo wanted to know whether the department assisted the community in drawing up business plans. Secondly, she sought clarity on the remaining 40% of the capital projects.

The MEC for the North West responded that the 40% would be spent by the end of the next financial year. Her department wanted three buildings but could only afford two. The department received business plans that were in a very poor state, and it was sourcing people who could assist the community in drawing up business plans. The department plans to monitor the businesses closely so that they know where the money was going to.

The Chairperson asked the North West department to explain the nature of the relationship it enjoyed with the Department of Public Works.

The MEC replied that a committee representing both departments was established, and a plan of action was drawn up. There may be areas where the department did falter.

Limpopo Social Development Department presentation
Ms Ivy Sikwane, Acting Head of Department, outlined the province’s conditional grant expenditure as well as its capital infrastructure expenditure trends between 2000-2005, its capital infrastructure budget and conditional grant allocation over the 2005-2008 Medium Term Expenditure Framework (MTEF) period and the capital infrastructure expenditure and conditional grant expenditure in 2005. She conceded that her Department had overspent on certain grants, but appealed that National Treasury allocate the overall saving made country-wide on grant payments to provincial departments that were overspending. If that were not done, those provincial departments’ financial statements would report overdrafts for a very long time.

Western Cape Social Services and Poverty Alleviation Department presentation
Ms Virginia Petersen, Head of Department, outlined the budget and actual expenditure for 2005 for the South African Social Security Agency (SASSA) grant, Integrated Social Development Grant (ISDG), HIV/AIDS grant and the food relief grant, as well as the factors influencing those spending trends. She also provided a breakdown of the department’s capital infrastructure budget and expenditure for 2005, and the factors that influenced the expenditure trends.

Discussion
The Chair expressed his disbelief at the request from the Limpopo Department that it be allocated more funds when it was already under-spending. He stated that the Limpopo provincial department faced a major challenge, and asked it to explain the steps it was taking with its provincial treasury to address the underspending problem and the projected over-expenditure. The primary concern in these hearings is the consequences of underspending on service delivery in the communities.

Mr Anton Van Geffen, Limpopo Social Development CFO, explained that the two SASSA grants related to administration costs and the second dealt with the actual service delivery. The provincial department was expecting an under-expenditure on its administration costs, but would over-expend on the provision of the actual grant. The provincial department could not be faulted for the latter, because if the grant applicant was legitimate and presented a bona fide application form, the provincial department had no choice but to provide the grant. The problem was that it resulted in the provincial department then going into overdraft for over-expending.

He stated that his provincial department was currently engaged in negotiations with National Treasury to increase its administration cost allocation and to increase its actual grant provision allocation. National Treasury had just completed the adjustments estimates and those provincial departments that have reported over-expenditure have not been funded, whereas those provincial departments that have reported savings would retain those funds and revert them back to National Treasury and eventually back to SASSA. His provincial department now sat with a major problem because National Treasury cannot bail it out, because the funds never went through their books as it never formed part of the equitable share. Thus technically if his provincial department overspent on the administration grant it would go into overdraft, yet if it saved on the actual provision of the grant the surplus funds would be reverted to National Treasury.

Ms D Robinson (DA) [Western Cape] stated that the problem with business plans being delayed and the lengthy approval process was a constant concern, and sought clarity on the steps being taken to remedy it. This needed to be resolved in order to ensure improved spending patterns.

The Chair assured Ms Robinson that the departments would be held to account for all their promises at the end of the fourth quarter.

Ms Petersen responded that agreement was reached that the matter be resolved at national level, and it will be fast-tracked. The reason was that the ISDG was a new grant and no proper protocols were in place for how exactly the grant funds should be used. The protocol has since been improved, and the agreements were only finalised late in the year. The lesson learnt from the HIV/AIDS grant was that if they were signed off on in April, they could be expended in time.

Mr Z Kolweni (ANC) [North-West] sought clarity from the Western Cape Department on the 31 organisations that received allocations for the HIV/AIDS grant, as well as to whom they were accountable. He noted that the National Treasury presentation indicated that the Western Cape provincial department had spent less than 50% of its HIV/AIDS grant.

Ms Petersen replied that they referred to Non-Governmental Organisations (NGOs). Her provincial department very recently completed its in-year monitoring report, which figures were not reflected in National Treasury’s November 2005 report. The in-year report reflected an increase in expenditure in the third quarter which brought the total to R6,1 million, as was reflected in the presentation.

Mr Kolweni noted that the Western Cape provincial department presentation made no mention of the Public Works Department, and he assumed everything was in order.

Ms Petersen responded that the Western Cape had a slightly different arrangement as funds were immediately voted to the Public Works provincial department for the various provincial department needs. The allocation was then divided into the various projects. Committees sat every month on a five year accommodation plan to track progress. She stated that her provincial department enjoyed a good working relationship with the Western Cape Public Works Department.

The Chair assured both the provincial departments and the Members that the Committee would definitely be revisiting the commitments at the end of the Fourth Quarter to assess the extent to which the provincial departments have honoured their promises.

Mr Kolweni noted that the Western Cape provincial department spent only 47% of its total food relief grant allocation for 2005, and asked whether it invisaged another roll-over.

The Chair asked the Western Cape to indicate the likelihood of it underspending in the financial year, and the steps it was taking with its provincial treasury to address the problem. He stated that it was clear that the province would underspend "big time" on the ISDG.

Ms Petersen replied to the two questions by stating that because it was a tranch arrangement, which meant that the food was distributed as tranches against payment. It was for that reason that she was able to commit and assure the Committee that the provincial department will spend the full grant allocation because the commitment has been made for the entire amount, and for the food parcels to be delivered against it. She informed Members that the last two tranches have already kicked in for delivery, and the final delivery will take place in March 2006..

Ms J Masilo (ANC) [North West] drew attention to the late advertisement of posts for SASSA by the Limpopo presentation, and expressed her hope that those positions were not currently acting filled by acting posts.

Mr Van Geffen responded that the initial agreement reached with SASSA was that his provincial department would identify members of its own personnel that would move across to SASSA. SASSA then changed its mind and informed the department that it planned to employ its senior management itself, which took quite a bit of time. The adverts were placed in October or November 2005 and applications have been received. The administration costs were not being spent by SASSA because it had not yet employed the personnel.

With regard to capital expenditure, he explained that the buildings were being constructed, but not furniture, equipment and other such office items can be bought until the construction was completed. The contracts were in place and the funds would be spent, but not within a twelve month period. He stated that the Limpopo Treasury has never hesitated to approve such roll-overs as long as the provincial department in question was able to prove the commitments.

The Chair sought clarity from the Western Cape on the elements of the administrative costs reflected in the presentation.

Ms Petersen replied that the provincial department had contract staff that assisted in the delivery of the service. The costs involved included the provision of furniture to those staff members, computers etc. The approval of the SASSA accommodation plan has been a very slow process, and only the SASSA regional head office was approved by the end of 2005. She stated that staff took occupation of those offices on 3 January 2006. The orders and commitment had thus been made, and the department merely awaited delivery. Administrative costs could have been better spent if the district offices had already begun to make progress.

She informed the Committee that both the provincial department of Social Services was still supporting SASSA through its administrative staff and, in order to be realistic, a reconciliation needed to be done of the full extent to which SASSA was leaning on the provincial department, financially. An accurate picture of SASSA’s administrative costs would be sketched when that agency functioned independently.

The Chair questioned whether the failure to appoint staff was termed a saving or an under-expenditure. He doubted whether the failure to appoint key personnel could be considered a saving, and suggested that it should surely be regarded as under-expenditure. He stated that this was important because a greater critical analysis of outcomes was needed, in order to guard against government departments simply reporting savings, which might in fact be under-expenditure..

Concluding remarks
The Chair noted that neither provincial department echoed the concern raised by the Western Cape Provincial Treasury regarding Section 33(2) of the Division of Revenue Act (DORA), which did not require provincial treasuries to be informed that certain funds would be withheld. The Chair thanked all the presenters for their input.

The meeting was adjourned.

APPENDIX

OPENING REMARKS BY THE HON MEC FOR KZN SOCIAL WELFARE AND POPULATION DEVELOPMENT IN THE NATIONAL FINANCE PORTFOLIO COMMITTEE HEARINGS ON CONDITIONAL GRANTS

2006/01/18

Chairperson and Members of the Finance Portfolio Committee may I thank you for allowing me to remark on the status of conditional grants as at the end of the third quarter of the current financial year. One cannot overemphasize the importance of the oversight role played by this particular Committee in the area of Public Finance Management.

It is important, Chairperson and Members of the Finance Committee, that I mention that despite the challenges that impede performance of my department, performance in the area of conditional grants has improved steadily during the current financial year, especially the conditional grant which consumes nearly 93% of my department’s budget – Social Assistance Grants.

If the shortfall of R670m was not carried through to the current financial, my department would be registering, for the first time in nearly four financial years, a saving of nearly 2.3%. This is due to the strides made in improving systems to ensure that only qualifying beneficiaries are allowed into the grants system.

Chairperson and Honourable Members of this Committee, it is important that I mention that, despite the achievement I mentioned above, there are still challenges in the area of other grants which are smaller in terms of the size of their budgets but which are equally important in terms of the difference they intend to make in the lives of our vulnerable groups, especially those infected and affected by HIV and Aids as well as those who are poverty striken.

In this area, the HOD assisted by the Chief Financial Officer of my department will attempt to address those during this session.

I thank you

 

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