ATC170606: Report of the Select Committee on Appropriations on the Early Childhood Development Grant (Business plan and financial allocation for 2017/18 and 2018/19 financial years), dated 6 June 2017
NCOP Appropriations
Report of the Select Committee on Appropriations on the Early Childhood Development Grant (Business plan and financial allocation for 2017/18 and 2018/19 financial years), dated 6 June 2017.
1. Introduction
The Select Committee on Appropriations (the Committee) invited the Department of Social Development to make a presentation on the new Early Childhood Development Grant’s business plan and financial allocation for the 2017/18 and 2018/19 financial years. The Committee meeting took place on 23 May 2017.
2. Terms of reference
The hearing formed part of the Committee’s ongoing interaction with departments to monitor their spending patterns on conditional grants allocated to them. A framework for the grant sets out the purpose of the grant, measurable objectives, conditions, allocation criteria, and past performance among other things.
The Department was requested to make an oral presentation on the Early Childhood Development Grant and to take into consideration the following:
- 2017/18 business plan;
- Financial allocations and transfers to provinces; and
- Progress on grant implementation.
3. Presentation by Department of Social Development
The Department of Social Development (the Department) reported that in order to enhance the implementation of the Early Childhood Development policy, the Treasury has allocated R812 million for the Early Childhood Development Grant for the 2017/18 and 2018/19 financial years. The allocation for the 2017/18 financial year is R319 million and, for the 2018/19 financial year, R493 million. The Department emphasised that the allocation was to be used to increase coverage of children accessing ECD services through an ECD subsidy to poor children. Moreover, the ECD Grant would also assist to improve the conditionally registered ECD centres to meet the basic requirements in order to be fully registered.
The Grant is divided into two components. Firstly, the subsidy component (R250 million and R413 million for the 2017/18 and 2018/19 financial years, respectively) to cover 104 000 children by the 2018/19 financial year. The subsidy component of the Grant will assist registered centres that are not fully funded from the equitable share. The fully registered centres that are funded or registered partial care facilities will not be funded from the Early Childhood Development programme. The ECD Grant subsidy is targeted for qualifying children from birth to 5 years or until they enter Grade R. The rate per child per day was reported to be R15 per day, with coverage of 264 days.
The second portion of the ECD Grant is the maintenance component (R69.8 million and R79.8 million for the 2017/18 and 2018/19 financial years, respectively) to upgrade 4000 sites by the 2018/19 financial year. The partial care facilities offering ECD programmes that are registered conditionally will be eligible for the maintenance grant. The Department further emphasised that, for the centres to be eligible for maintenance, they must be conditionally registered. The objective of the maintenance component was reported to be for buying equipment and learning materials, and construction of minor building and maintenance improvements aimed at ensuring ECD centres comply with the health and safety norms and standards, as identified by the Department. The maximum value to be spent per ECD centre for maintenance improvements was reported to be R100 000.00. The Department informed the Committee that prior approval for any amount exceeding the R100 000.00 would be obtained from the Head of the Department and the Chief Financial Officer. The exceeding amount should not be more than 30 percent of the R100 000.00.
The Department also indicated that provinces would have the responsibility to conduct assessments of conditionally registered centres and cost them in order to qualify for the maintenance grant funding in the 2018/19 financial year. Moreover, all maintenance projects will be recorded on the National Treasury Infrastructure Reporting Model (IRM). In preparation for the implementation of the Grant, the Department reported that five national workshops had been held with the provinces.
The ECD Grant processing timelines were separated into four quarters, each with unique tasks: (i) 01 March 2016 to 31 July 2016 was meant for identification of ECD centres, assessment of issues and costing of issues that needed to be improved, and categorisation of ECD centres. (ii) From 01 August 2016 to 30 September 2016 the Department conducted an analysis and approval of final ECD centres lists received from the provinces. (iii) From 01 October 2016 to 31 October 2016 the Department finalised the conditional grant framework and financial allocations. (iv) Lastly, from 01 April 2017 to 31 March 2019, the Department will be implementing and resolving issues; managing invoices, payment approvals, database management and reporting as per the conditional grant framework.
With respect to its responsibilities, the Department reported that it was responsible for the implementation, tracking progress and compliance to the conditional grant framework, as approved by the National Treasury. The Department added that it would provide the guidelines and criteria for the development and approval of the business plans as submitted by provinces. The Department explained that it would thereafter monitor implementation through project site visits and provide support on a monthly and/or quarterly basis and further ensure compliance with prescribed terms and conditions of the national transferring officer as outlined in the Division of Revenue Act. Moreover, the Department reported that it would submit monthly financial reports to National Treasury, 15 days after the end of the month. The Department also submitted that it would consolidate and submit quarterly performance reports to the National Treasury, within 45 days after the end of each quarter. The Department reported that it would monitor the utilisation of the Grant against the set outcomes and take appropriate action in cases of non-compliance. Lastly, the Department reported that it would submit an annual evaluation report after the end of the 2017/18 financial year.
With respect to the responsibilities of provinces, the Department reported that they would be responsible for the appointment and management of service providers. The provinces would further develop business plans and submit them after they have been signed off by the heads of provincial departments. The provincial departments would implement the business plans as approved by the national Department and any deviations formally communicated before implementation. The provincial departments would ensure compliance with the terms and conditions of the receiving officer as outlined in the Division of Revenue Act. The Department reported that provinces would submit monthly financial reports to National Treasury 15 days after the end of the month and submit quarterly performance reports to the national Department within 30 days after the end of each quarter.
Table 1: Medium Term Expenditure Framework allocations to provinces
Provinces |
Number of ECD Centres to benefit |
Column A |
Column B |
|
Allocation R’000 |
MTEF Estimates |
|||
2017/18 |
2018/19 |
2019/20 |
||
Eastern Cape |
180 |
R56 365 |
R86 968 |
R91 830 |
Free State |
79 |
R18 393 |
R25 903 |
R27 346 |
Gauteng |
15 |
R38 489 |
R61 883 |
R65 344 |
KwaZulu-Natal |
117 |
R71 879 |
R112 347 |
R118 629 |
Limpopo |
98 |
R41 085 |
R62 414 |
R65 901 |
Mpumalanga |
62 |
R25 799 |
R39 989 |
R42 223 |
Northern Cape |
66 |
R13 761 |
R18 127 |
R19 139 |
North West |
48 |
R32 686 |
R51 692 |
R54 581 |
Western Cape |
53 |
R19 150 |
R31 477 |
R33 235 |
Total |
718 |
R317 612 |
R490 800 |
R518 228 |
The above table shows the 2017 MTEF allocation to provinces and the number of centres that will benefit in each province. The Department reported that consultations with provinces had been conducted where the criteria of qualifying ECD centres, as agreed with the National Treasury, were clearly stipulated. Also reported to be in place and sent to the provinces, were the standard operating procedures and the business plan. The standard operating procedures also have terms of reference for the appointment of service providers, which had been developed with provinces.
The Department added that all invoices that had been submitted were processed and paid on time. Moreover, levels of registration framework for ECD centres had been developed and were being finalised through consultation with the provinces and environmental health professionals. The Department also reported that guidelines for implementation of the ECD Grant have been developed and finalized (especially those that relate to the maintenance grant component). Moreover, the Department reported that service level agreements for maintenance and subsidies have been developed, and most provinces have signed them.
Lastly, on administration for the implementation of the Grant, the Department reported that the administration of the Grant at national level has been allocated R2.3 million. Provinces, on the other hand, will utilise R2.1 million from their conditional grant allocation for administrative management of the Grant. This would include capacity to manage the Grant and funding for maintenance improvement assessments of ECD centres. The Department would employ 1 Project Manager, 3 ECD Project Coordinators (subsidy), 3 Infrastructure Coordinators, 3 State Accountants, and 2 Administrative Officers. Administrative support in all provinces is proposed to include, 1 Programme Coordinator, 1 Project Coordinator, 1 Administrative Officer and 1 Chief Quantity Surveyor.
Table 2: Budget breakdown per province
Province |
No. of ECD centres |
2017/18 allocations (R’000) |
Subsidies
(R’000) |
Maintenance
(R’000) |
Admin
(R’000) |
Eastern Cape |
180 |
56 365 |
43 750 |
10 515 |
2 100 |
Free State |
79 |
18 393 |
8 259 |
8 039 |
2 100 |
Gauteng |
15 |
38 489 |
34 922 |
1 467 |
2 100 |
KwaZulu-Natal |
117 |
71 879 |
57 874 |
11 905 |
2 100 |
Limpopo |
98 |
41 085 |
30 550 |
8 435 |
2 100 |
Mpumalanga |
62 |
25 799 |
18 317 |
5 382 |
2 100 |
Northern Cape |
66 |
13 761 |
3 605 |
8 056 |
2 100 |
North West |
48 |
32 686 |
26 259 |
4 466 |
1 961 |
Western Cape |
53 |
19 150 |
16 478 |
572 |
2 100 |
Total |
718 |
317 612 |
240 014 |
58 837 |
18 761 |
The Department showed that the subsidy component of the Grant will cover about 104 000 children by the 2018/19 financial year. At R15 per child for 264 days and the current R240 012 million subsidy allocations, the Grant is likely to cover about 60 609 children in the 2017/18 financial year. The provincial breakdown of beneficiaries is 14 614 beneficiaries in KwaZulu-Natal, followed by the Eastern Cape with 11047, and with the Northern Cape having the lowest number of 910 beneficiaries. Gauteng has the lowest number of centres at 15 but has about 8818 beneficiaries and this might require centres with huge capacity.
The total budget for maintenance and repairs for the 2017/18 financial year is about R58 836 million which is fairly reasonable considering that it covers a total of 718 ECD centres for a maximum of R100 000. There are, however, two provinces that seem to be projecting to spend beyond the R100 000 in some if not all the ECD centres within the provinces. Free State is projecting to spend R8 039 million for the 79 ECD centres within the province and the Northern Cape is projected to spend R8 056 million for the 66 ECD centres within the province.
4. Observations
During its deliberations, the Committee made the following observations/findings:
4.1 The value of the subsidy to be paid is R15 per child for 264 days, which means about R3 960 will be the total subsidy per child. However, the Department does not have a different rate which would cater for children who have special needs or a disability. The Department reported that the financing strategy to cover children with disabilities would only be finalised by the end of March 2018.
- The Department indicated that costing of the Grant by National Treasury is inadequate and therefore the Department will not be able to meet the targets of 100 004 poor child beneficiaries (based on R15 subsidy per child) and 4 000 ECD centres (based on R32 000 for upgrades per ECD facility).
- The Department indicated, given that the funding is inadequate, the target regarding the number of children has been revised downwards to 76 percent (i.e. 76 003 children) from the original target of 100 004 by 2018/19. The target for ECD centre upgrades have also been revised downwards to 718 by 2018/19 based on their costing exercise that determined that the cost of upgrading an ECD facility would cost a minimum of R100 000.00.
- While the Department had presented clearly stated steps and timelines for the implementation of the Grant, it was, however indicated that provinces are still to sign and submit service level agreements (SLAs) by May and June 2017. Any delay in the signing and submission the SLAs has potential to delay transfers to the provinces since payments are to be made in line with the payment schedule as per the SLAs with ECD centres.
- The total budget for maintenance and repairs for the 2017/18 financial year is about R58 836 million, which on average (at R81 944) is fairly reasonable considering that it covers a total of 718 ECD centres for a maximum of R100 000 maintenance and repairs per centre. With this, maximum total cost would be about R71.8 million. Only the Free State and the Northern Cape provinces are projected to spend beyond the R100 000 on average per centre.
- The Department provided the number of centres but did not include the number of learners in each centre. Provincial breakdown of beneficiaries is 14 614 beneficiaries in KwaZulu-Natal, followed by the Eastern Cape with 11 047; and the Northern Cape has the lowest number of 910 beneficiaries. Gauteng has the lowest number of centres at 15 but has about 8 818 beneficiaries and this might require centres with huge capacity.
- Although only 6 percent of the budget will be used for administration of the Grant, administrative support in all provinces is proposed to include 1 Programme Coordinator, 1 Project Coordinator, 1 Administrative Officer and 1 Chief Quantity Surveyor. The employment of Chief Quantity Surveyors has the potential to compromise the amount of subsidies available to reach as many qualifying children as possible or to also acquire the services of ECD-related professionals such as dieticians, social workers and educators/helpers.
5. Recommendations
5.1 The Department of Social Development should, as a matter of urgency, develop a funding model which includes a subsidy proposal for children with special needs or disabilities. Further, the Department should provide a progress report within thirty days after the adoption of this Report by the House.
5.2 National Treasury should provide the Committee with an explanation of the methodology used for costing of the Grant. Moreover, how the subsidies of R15 per child and R32 000 per ECD centre upgrade, were determined.
5.3 The Department of Social Development should monitor the signing and submission of the SLAs by provinces as scheduled and report any deviations to Parliament within 30 days after the adoption of this Report by the House and also indicate any corrective measures put in place.
5.4 The Department of Social Development should, within thirty days after the adoption of this Report by the House, report to Parliament on the ECD centres in both the Free State and the Northern Cape that require maintenance upgrades and also indicate the type of upgrades required and the cost thereof.
5.5 The Department of Social Development should, within thirty days after the adoption of this Report by the House, provide the number of learners per centre, also indicating the number of learners with disabilities in each centre.
5.6 The Department of Social Development should reconsider its decision to employ professionals such as quantity surveyors and explore the use of the professional services from other organs of state where such professionals are already employed. The Department should, within thirty days after the adoption of this Report by the House, report on any developments in this regard.
Report to be considered.
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