Financial Outlook for Social Assistance: National Treasury briefing

SOCIAL DEVELOPMENT PORTFOLIO COMMITTEE
16 August 2006
FINANCIAL OUTLOOK FOR SOCIAL ASSISTANCE: NATIONAL TREASURY BRIEFING

Chairperson: Ms T Tshivhase (ANC)

Documents handed out:
Roles and responsibilities in the system for the delivery of social grants

SUMMARY
National Treasury briefed the Committee on the roles and responsibilities of the various actors in the social grant delivery system. They explained why the establishment of SASSA was delayed. They pointed out that issues such as the transfer of funds and the accounting system were some of the problems being experienced. Members were also concerned about issues such as accountability, conditions of service and management of the grant funds.

MINUTES

National Treasury briefing

Ms J de Bruyn, Chief Director: Social Services, made the presentation. She explained that the visit by the Treasury had been planned for the start of the financial year. Members therefore might know some of the material covered already since it was almost halfway into the financial year. She added that the shifting of the function of grant payments to the South African Social Security Agency (SASSA) was a very complex and intricate one. She stressed that SASSA did not report to the National Department of Social Development (NDoSD) but rather directly to the Minister of Social Development.

Mr H Swanepoel, Chief Director: Public Finance Statistics, addressed the Committee on the flow of funds. The flow of funds has serious implications for the management of cash in government and has serious implications on the debt service cost. The aim was to structure the flow of funds so that the cost to government was minimised. In the present financial year, funds for grants were being paid directly by the NDoSD and not by SASSA. If it had to go to SASSA first, it would mean that the money was leaving the national account and the entity would then have to keep it in separate bank accounts. This would have serious implications for cash management. The various provincial bank accounts were being used at present for these funds. The whole process was managed by SASSA. The key issue at present was the various options for the future.

Ms de Bruyn continued and said that there were different options for the future. There were various benefits and downsides to each option. Treasury was still trying to decide which was the best option. The payment of grants was not just about money, but also about improving service delivery to the poor. It was hoped that SASSA would deal with this. The ideal, and cheapest way was to transfer funds directly to the beneficiary's account. The rural areas however were a challenge in this respect. Banks also charged beneficiaries for doing transactions so negotiations were in process with banks around this. The handover from provinces had certain problems which still had to be sorted out. One of these problems was the ring-fencing of funds. The handover to SASSA from provinces was also causing a problem. In the North West a different accounting system was being used which was also delaying the process. She said that the Committee would probably encounter these problems when they did their provincial visits. She inquired which provinces would be visited. 

Discussion

The Chair said that they would be visiting the Eastern Cape, Gauteng and the Northern Cape. She also pointed out that in 1998, R2 billion had been allocated for arrears pensions to be refunded. Some of these arrears however had still not been received by beneficiaries. Some officials had even told pensioners that they would not be receiving the funds. She wanted to know how SASSA would be addressing this.

Ms de Bruyn said that she had not been at the Treasury in 1998 and would therefore have to find out about the money that had been set aside for the arrears. It would have been a provincial function at the time. She promised to send a written response to the Committee.  

Ms H Weber (DA) thanked Treasury for pointing out that the approval time for a grant was three months.  Some offices had given the time as three weeks. She wanted to know if the different departments were talking to each other, for example Home Affairs as far as documents were concerned and the SA Revenue Services (SARS). There were people who had been waiting for their pensions because SARS had not issued tax clearance certificates. She wanted to know how many rural contractors there were to pay out the grants. She wanted to know who would choose the Inspectorate, from which sector they would be chosen and who they would be responsible to.

Ms de Bruyn said that the three-month period was just given as an example. The Department should have the process time in its regulations. These need to be publicised. The documents needed for applications also need to be publicised. She could not comment on the issue regarding SARS. She asked Mr Cassim to explain about the contractors. The Inspectorate would report to the Minister and he would be responsible for dealing with the appointment of the CEO. The roles and functions of the Inspectorate were dealt with in the Inspectorate for Social Assistance Act. 

Mr M Cassim, Manager: Public Finance Statistics, explained that there were two main contractors that administered the payment of grants, namely Allpay and CPS. Allpay is owned by a consortium, which included ABSA Bank. CPS is owned by an overseas company. He could not give more details about its ownership. It had most of the contracts for the rural areas since it had the technology to provide a mobile service in the rural areas.  

Mr K Morwamoche (ANC) said that he supported the Department in its efforts to centralise the grant system. The procedure for the termination of disability grants, especially in rural areas, was problematic. The proper procedures are normally not followed. People were normally sent to see doctors, but there was normally not a qualified doctor present to examine the person. Disability grants were then terminated while the beneficiary was waiting for the letter from the doctor.  It was important that the regulations were the same for all the provinces. The monitoring of the payment of grants was not happening in the rural areas. He encouraged the Department to do inspections in the provinces regarding this.  

Ms de Bruyn said that she understood the Member's frustration. It was unacceptable that people should be treated in the manner described by the Member. The strategic intent of SASSA was to improve the level of service to the public. A disability management initiative existed that looked at issues involving disability. These issues included who would decide when someone was disabled and how the appeal procedures worked. This was a joint task team between the Departments of Health, Social Development and Treasury. The Committee would have to ask SASSA however how it would be dealing with the issues raised by the Member. On the issue of monitoring she said that this would have to be included in the service level agreement between SASSA and the service providers. Treasury's function would be to monitor the amount of people expected to receive grants and how many actually collected it.

Ms H Bogopane-Zulu (ANC) asked when Treasury would finalise the outstanding monetary issues. This was important since the whole establishment of SASSA was behind schedule already. She was concerned about the link between SASSA and the NDoSD since they both reported to the Minister. The compliance with the Public Finance Management Act (PFMA) was therefore a point of concern. She wanted to know whether Treasury was involved in the drafting of regulations or whether they would only be involved once it was drafted already. This was important as it would speed up the implementation if it was involved from the beginning. She also expressed concern about the transfer of funds to SASSA. It was possible that this would not be a priority for the Department which could delay things further.

Ms de Bruyn said that Treasury has been working with the Department on regulations. They were hoping for a quick process. The aim was to get the norms and standards clear in the regulations.

Mr Swanepoel said they wanted the transfer of funds to be completed as soon as possible, but that this was dependent on other factors. The flow of funds at present was intact and was working at the moment. It needed to be refined however. The final establishment of SASSA was important, which included the ring-fencing of funds and the transfer of staff from the NDoSD. 1 April 2007 would be a good deadline for this transfer to be complete. The year-end reporting formats were finalised around financial reporting. This was part of the normal end of year reporting process. There was a process underway in which non-financial issues would also be reported as well. Collecting this kind of information however was a complex issue. Referring to the clearing of the suspense accounts, he said that in the year 2004/05 there had been over-expenditure in the social grant transfers. This has been declared as unauthorised expenditure which now had to be cleared.  This could not however be cleared against the conditional grant. This happened in a number of provinces. This had to be dealt with outside the conditional grant process. The financial statements for the different departments had been completed and now had to be processed. As the financial statements were processed, these issues mentioned would be picked up and dealt with. The financial issues would be an ongoing process.  There was a bigger move towards accrual accounting that would impact on all departments. SASSA was presently running on the Basic Accounting System and would be changing soon to accrual accounting. This is a complex matter and would take some time. He assured Members however that most of the financial management issues were under control. 

Mr L Nzimande (ANC) wanted to know which stream of funds, of the two going to SASSA, would be responsible to ensure standards and conditions of payment. He also wanted to know what capacity SASSA had to ensure that the transfer of funds took place and how the transfer was actually done.

Ms Ms de Bruyn said that the administration money given to SASSA would deal with the conditions of service at the pay points.

Mr Swanepoel said that Treasury was also concerned that the flow of funds might take away the accountability from the Department. There were technical problems around this accountability. This was high on the agenda at the moment. The transfer goes from the national Department directly to the beneficiary. The administrative burden would be dealt with in the SASSA – SOCPEN system.

Adv T M Masutha (ANC) questioned the accountability of SASSA at administrative level. The NDoSD set the norms standards for SASSA yet it does not report to it but to the Minister. He pointed out that on their visit to Australia, the agency had a service level agreement with the Department. This made them directly accountable to the Department.

Ms de Bruyn said that SASSA and the NDoSD would have to work out an arrangement on how they relate to the Minister. In working this out, the question had been raised whether SASSA should not perhaps have a board. This however would mean that there would have to be a change in the legislation. These were issues that they were all struggling with. She suggested that the three parties concerned (SASSA, NDsOD and Treasury) address the Committee when the regulations were discussed.  

Ms M Gumede (ANC) asked what the term “disability” meant as people had different interpretations when it came to giving disability grants.

The Chair said that the Department should probably answer that.

Ms de Bruyn agreed and felt that the current definition complicated matters. They were pressurising the Department to clarify this in the regulations so that everyone was clear about it.. She said that the Committee should raise the question with the Department and with SASSA.

Ms Gumede said that she felt that since Treasury was the one providing the money, they should know what they were giving the money for. It was therefore important that Treasury spelt out the definition.

The Chair said that it was policy matter which needed to be clarified.

Mr Nzimande wanted clarity about the means test.

Ms de Bruyn said that Treasury participated in the finalising of the means test. The means test involved a cost, but also needed to be simple enough to execute and implement.

Ms Bogopane-Zulu pointed out that people in the rural areas go to town once they received their grants to do all their payments. It was therefore possible for people in rural areas to get their money in their bank accounts. This needed to be explored further.

The Chair thanked the delegation from the Treasury for their presentation.

The meeting was adjourned.