SUBBMISSION BY DEBBIE BUDLENDER

10 August 2010

Court case summary

Free State NPOs challenge government on problems in its NPO funding policy

A recent judgment of the Free State High Court instructs the Free State government to come up with a better policy in respect of funding of non-profit organisations (NPOs). This judgment is relevant for NPOs and provincial departments of social development in other provinces as well because the Free State policy on funding of NPOs is almost identical to the national policy which covers all provinces.

The judgment relates to a court application brought by the National Association of Welfare Organisations and Non-Governmental Organisations (NAWONGO), NG Social Services Free State and Free State Care in Action against the MEC for Social Development in Free State, the Head of the Free State Department of Social Development, and the National Minister of Social Development. The three NPOs brought this court application after several years of serious frustration about the way in which the Department dealt with transfers (or subsidies) to NPOs. The frustration arose, among others, from delays in payment and failure of the Department to consult with and inform them as to how much it would pay them for the services they delivered. Equally importantly, the frustration arose from the fact that the transfers are too small. The NPOs are thus unable to deliver the services which they are willing and able to deliver, and which they know are badly needed by poor and vulnerable people in the province, because they have too little money.

The first part of the NPOs' application was that government should immediately pay them the transfers that had already been allocated to them but not yet transferred. The second part of the NPOs' application was that government should review its policies in respect of NPO funding.

The judgment notes that 1 400 NPOs are currently funded by the Free State Department of Social Development, and that the Department openly acknowledges that these organisations play a major role in delivering social services to children, older people, people with disabilities and others. In fact, the Department is dependent on the NPOs for delivering services which the Department is responsible for providing in terms of various laws, in particular the Children's Act, and the Older Persons Act. The Department also acknowledges that the transfers it provides to NPOs do not cover the full costs of delivering the services. Yet its allocations to NPOs and the way in which it makes (or does not make) payment do not reflect these acknowledged facts.

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 I 085 currently available beds, only about 320 are provided in government-run CYCCs, while the rest are provided by NPOs and were established at a cost (to the NPOs) of "millions of rands" so that they are now able to provide for children in all parts of the province. In terms of running costs, the costing of the Children's Act commissioned by the national Department of Social Development estimated that R6 000 per child per month would be needed to provide adequate care. Meanwhile the Department allocates R5 000 per month per child for one of the homes

that it runs itself, and R6 750 per month per child for the other home that it runs. 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. The judgment gives similarly worrying estimates in respect of shelters for children living and working on the streets. Here the Department pays the NPOs a subsidy of between R400 to R500 per child per month yet acknowledges that at least R2000 per child per month is needed.

The judgment notes that this situation violates the rights of children and other vulnerable groups that are laid down in the Constitution and in other legislation such as the Children's Act and Older Persons Act. The judge therefore ordered the Free State Department of Social Development to revise its policy on financial awards to NPOs. Because the Department had failed even to pay the already allocated subsidies, and because there were other indications that the "department lacks leadership and/or capacity" the judge decided to impose a structural interdict which means that the Court will supervise to ensure that the court order is implemented by the Department. He said that within four months of the judgment the Department must report to the court what steps it has taken to revise the policy. The NPOs that made the court application will then have one month to comment on the Department's report, and the Department will have a further month to respond to the NPOs' comments. In the meantime, the Department must pay all the transfers that are due to NPOs timeously. Finally, the Department must pay most of the legal costs incurred by the NPOs.

The judgement provides guidance to the Department on how it should revise its policy in order for the policy to be reasonable. Firstly - the policy must recognise that the NPOs are providing services that the Department itself is obliged to provide in terms of the Constitution and various laws. Secondly - the policy must have. a fair, equitable and transparent method of determining how much the department should pay and how much the NPOs should contribute from other sources of income such as donations from funders.

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.

Reference: 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.

By Debbie Budlender 10 August 2010