ATC180912: Report of the Select Committee on Appropriations on the Eastern Cape Province’s Early Childhood Development Grant Expenditure For 2017/18 and First Quarter Of 2018/19 Financial Year, dated 12 September 2018

NCOP Cooperative Governance & Traditional Affairs, Water and Sanitation and Human Settlements

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE EASTERN CAPE PROVINCE’S EARLY CHILDHOOD DEVELOPMENT GRANT EXPENDITURE FOR 2017/18 AND FIRST QUARTER OF 2018/19 FINANCIAL YEAR, DATED 12 SEPTEMBER 2018
 

  1. Background

 

On 16 May 2018, the Committee conducted a hearing on the Early Childhood Development (ECD) Grant expenditure as at the fourth quarter of the 2017/18 financial year with the national Department of Social Development, National Treasury and three provincial departments, selected on the basis of their performance in the first three quarters of the financial year. (The Committee Report on this hearing was adopted on 22 August 2018.) The Eastern Cape Member of the Executive Council (MEC) for Social Development could not attend this meeting, and the Committee therefore resolved that another meeting would be scheduled with the Eastern Cape MEC for Social Development, National Treasury and the national Department of Social Development. In addition to reporting on the Eastern Cape’s ECD Grant performance for 2017/18, the departments were requested to report on the expenditure for the first quarter of the 2018/19 financial year.

This meeting took place on 15 August 2018.     

 

2. Submissions by National Treasury and Department of Social Development

 

National Treasury confirmed that the Eastern Cape, at 48.6 percent, had been the lowest spending province on the ECD Grant in the 2017/18 financial year. With regard to the subsidy component, 8 420 children had benefitted for 209 days instead of 264 days, against a target of 11 047; and with regard to the maintenance component, none of the 96 targeted ECD centres had been upgraded or maintained. National Treasury further reported that R22.6 million in ECD Grant funds would be surrendered by the Province after a pre-audited roll-over of R6.3 million had been approved for 2017/18.

 

With regard to the 2018/19 financial year, Treasury reported that by the end of the first quarter, the Eastern Cape had spent 1.2 percent, or R247 000 of the R18.2 million transferred to it. This spending had been on administration, with no expenditure on the subsidy and maintenance components. The challenges that had led to the poor spending were the same as those reported during the meeting of 16 May, including the late conclusion of service level agreements (SLAs) with ECD centres; delays in recruitment processes leading to the late appointment of staff and lack of capacity in infrastructure units; and delays in supply chain management processes regarding the appointment of contractors. National Treasury was of the opinion that the Eastern Cape’s performance was likely to improve in the following months, given the appointments that had been made and the signing of the SLA.

 

The Department of Social Development (DSD) reported the reasons for the under-performance of the Eastern Cape on the ECD Grant as follows:

  • The delay in finalising the recruitment of the Construction Project Manager and Project Manager had impacted performance, as technical skills were required.
  • The two Project Managers were recruited in November and December 2017, respectively.
  • The assessments from the provincial Department of Roads and Public Works were received in November and December 2017.
  • Bills of quantities were then compiled by the two Project Managers from the assessments in December 2017 and January 2018.
  • The briefing for the Phase 1 tender was advertised on 2 February and closed on 5 March 2018; while Phase 2 was advertised on 23 February and closed on 23 March 2018.
  • Issues raised by the Business Forum in the Alfred Nzo District during the two tender briefing sessions, resulted in the cancellation of the tender.

 

The DSD further reported the following interventions to address the poor ECD Grant performance of the Eastern Cape:

  • The allocation for the maintenance component had been reduced from R12 million to R5 million in the in 2018/19 financial year, to enable the Province to address its challenges and fine tune its processes.
  • Since the previous meeting with the Committee, a task team, chaired by the Head of Department (HOD), had been established to manage the Grant.
  • A workshop had been held on 29 May 2018 to develop a project plan, which was approved by the HOD.
  • The task team met on 13 July 2018 to review progress and address challenges with the project plan. The following meeting was scheduled for the end of August 2018.

 

 

3. Submission by Eastern Cape Department of Social Development

The Eastern Cape Department of Social Development (ECDSD) submitted that the total allocation of the Early Childhood Development Grant subsidy component had been R43.8 million in the 2017/18 financial year, of which R26.4 million was spent. The funds were distributed among the eight district offices and benefited 8 420 children who accessed 833 ECD centres. Table 1 below shows the breakdown of the financial allocations and actual expenditure per district office, including the number of ECD centres and the actual number of beneficiaries per district.  

 

Table 1: 2017/18 Financial Allocation per District Offices

District

Amount allocated

Number of children accessing ECD centres

Number of ECD centres per District Office

Actual expenditure

Alfred Nzo

R6 505 million

1842

77

R3 615 million

Amathole

R3 050 million

845

65

R1 873 million

Buffalo City Metropolitan

R3 238 million

970

38

R2 129 million

Chris Hani

R2 109 million

1301

230

R1 897 million

Joe Gqabi

R8 075 million

646

38

R4 115 million

Nelson Mandela Metropolitan

R5 671 million

823

131

R3 593 million

O.R. Tambo

R12 903 million

1415

188

R8 157 million

Sarah Baartman

R2 247 million

578

66

R1 014 million

Total

R43 802 million

8420

833

R26 397 million

 

With respect to the maintenance component of the ECD Grant, the Eastern Cape reported that an annual target of 96 ECD centres had been set for the 2017/18 financial year, but the target was not met. According to the Province, failure to attain the 2017/18 maintenance targets was due to a number of challenges. The ECDSD submitted that remedial actions to address these challenges had been formulated. The first challenge faced by the ECDSD, related to demands of the Alfred Nzo District Business Forum, who wanted first preference for all ECD Grant maintenance projects in the district. Political intervention had been sought from the MEC for Social Development, and a meeting with the Forum had been arranged for 16 August 2018, to resolve the stalemate. The second challenge was the delayed payments to non-profit organisations (NPOs) as a result of technical challenges emanating from the migration to a new, enhanced version of the NPO electronic payment system. This challenge was mitigated by processing payments to NPOs for the first and second quarter of the 2017/18 financial year through the Procure to Pay system, while the module for the payment of NPOs was being tested.

 

The third challenge reported, was centralisation of the NPO payment system at the provincial office. The ECDSD reported that this had since been reviewed. The NPO payment system was now decentralised to the district offices, where NPO Units had been established and capacitated. The final challenge identified, was that the need to change the existing service level agreements (SLAs) for the ECD Expansion Grant was determined only in June 2018, contributing further to delaying payments to ECD centres. In this regard, two remedial actions had been put in place. Firstly, an addendum increasing the number of subsidised days from 209 to 237 was drafted and signed by all ECD centres. Secondly, consequent management action was initiated for breach of the signed Financial Management Pledge and failure to ensure timeous payments were made to ECD centres benefitting from the ECD Expansion Grant.

 

Having identified the above challenges and taken the remedial actions, the ECDSD committed that for the 2018/19 financial year things were being done differently. A revised operational strategy for the implementation of the ECD Grant was being followed. The new operational strategy had a revised governance and reporting structure aimed at reducing the backlog of ECD centres; reviewing the implementation of the maintenance component process; increasing access to ECD centres and ensuring compliance with the ECD Grant framework.

 

Regarding the 2017/18 backlog of 96 ECD centres, the ECDSD submitted that R5 million from the 2018/19 financial year equitable share had been added to the ECD Grant budget for the benefit of 38 ECD centres and the rest would be dealt with in the 2019/20 financial year. With respect to the maintenance component of the Grant, the ECDSD reported that the procurement strategy had been revised to follow the route of quotations as opposed to a tender process that resulted in a quicker turnaround time to award. In addition, the ECDSD had engaged with the Eastern Cape Provincial Treasury and the provincial Department of Roads and Public Works to establish a database of pre-qualified contractors in each district to enable a more efficient procurement process.

 

The ECDSD further explained that the process flow for the maintenance component of the Grant involved the following five interrelated responsibilities:

  1. Identification of ECD centres, which has been reviewed to ensure that each centre meets the requirements of the Grant. The local office will identify the centres and compile the required files, then the district office will provide support for the administration and the management of the Grant, while the provincial office will be responsible for monitoring and support.
  2. Assessment of ECD centres in collaboration with the Department of Roads and Public Works in order to address the backlog of 38 and the 2018/19 target of 26 centres.
  3. Procurement processes, advertised through Request for Quotations (RFQs).
  4. Site handover to the contractor, involving a clear completion period of three weeks.
  5. Site monitoring of works and issuing of completion certificate.

 

With regard to the way forward, the ECDSD’s plan involved increasing access to ECD services, which would increase the number of beneficiaries from 8 420 in 2017/18 to a target of 20 429 in the 2018/19 financial year.

 

The ECDSD reported that there had been progress with the implementation of the revised operational strategy and compliance with the Grant framework for the 2018/19 financial year. The following achievements were reported:

  • The ECD Grant business plan had been approved by the Head of the Department and submitted to the national Department of Social Development (DSD).
  • The annual evaluation for the 2017/18 financial year had been approved and submitted to the DSD.
  • The First Quarter Report had been submitted to the DSD.
  • The First Quarter In-Year Monitoring Report had been sent to the Eastern Cape Provincial Treasury.

 

With regard to the 2018/19 financial year allocation of the Grant, the ECDSD reported that R3.36 million had been allocated for the maintenance component of the Grant; R72 million for the subsidy component, and only R663 000 for the administration of the Grant. Only R227 000 of the administration component had been spent in the first quarter of the 2018/19 financial year.

 

With respect to the first quarter implementation progress on the maintenance component, the ECDSD reported that of the planned 26 ECD centre projects; nine in the Alfred Nzo District were not accessible due to the Business Forum preventing RFQs from being sent out; eight in the Joe Gqabi District were being evaluated and the appointment of service providers would be done on 15 August 2018; and of the nine targeted centres in the Sarah Baartman District, only six had been advertised and evaluation was in progress.

 

With regard to the 2017/18 backlog of 38 ECD centres, the ECDSD submitted that 13 centres in the Alfred Nzo District were affected by the stalemate between the Province and the Business Forum. Advertisements of RFQs for the 15 centres in the Amathole District had been issued on 13 August 2018 with a closing date of 20 August 2018. In the Chris Hani and Nelson Mandela Metropolitan District offices there were five centres each; with advertisements of RFQs also issued on 13 August 2018, with a closing date of 20 August 2018.

 

The following step for the maintenance component would be project site handovers of the eight centres from the 2018/19 financial year annual target of 26, which were planned for 16 August 2018. The project site handovers of the 25 centres from the 2017/18 backlog of 38 was planned for 4 September 2018. The project period was set at three weeks and the intention was to complete all work in September 2018. The remainder of the 18 centres for 2018/19 and the 13 from the backlog of 2017/18 is planned for completion by January 2019.  

 

Table 2: 2018/19 ECD Grant First Quarter allocation

District

Number of Special Day-care centres

Number of children

Special day-care centre budget allocation

Number of children benefiting

First Quarter Allocation

First Quarter Expenditure

Alfred Nzo

 

 

 

R3 033m

R2 695m

-

Amathole

 

 

 

R1 422m

R1 263m

-

Buffalo City

2

15

R59 400

R1 517m

R1 363m

-

Chris hani

 

 

 

R2 644m

R2 349m

-

Joe Gqabi

1

10

R39 600

R984

R884

-

Neslon Mandela Metropolitan

 

 

 

R3 765m

R3 346m

-

OR Tambo

 

 

 

R6 016m

R5 346m

-

Sarah Baartman

 

 

 

R1 048m

R931 00

-

Total

3

25

R99 000

R20 429m

18 181m

R0

 

The ECDSD indicated that, even though there had been no spending for the first quarter, as at 13 August 2018, Grant payments had been made to 204 ECD centres, amounting to R3 896 million against an annual allocation of R18 181 million. The breakdown was reported to be as follows:

  • 15 ECD centres in Alfred Nzo District were paid a total of R361 721;
  • 31 ECD centres in Amathole District were paid a total of R582 131;
  • 47 ECD centres in Buffalo City District were paid a total of R978 363;
  • 11 ECD centres in Chris Hani District were paid a total of R174 051;
  • 34 ECD centres in Joe Gqabi District were paid a total of R611 593;
  • 11 ECD centres in Nelson Mandela Metropolitan District were paid R274 880;
  • 41 ECD centres in O.R. Tambo District were paid R623 902; and
  • 14 ECD centres in Sarah Baartman District were paid R279 993.

 

In addition to the above expenditure report, the ECDSD reported that the next steps regarding the subsidy component of the Grant included signing of all SLAs with the respective ECD centres and the outstanding payments for the first quarter to be processed by 30 August 2018. The second quarter payments were to be processed by 30 September 2018. Payment for the remaining two quarters would be made by 01 October 2018 and 30 January 2019, respectively.

 

With respect to governance and reporting, the ECDSD submitted that together with the national DSD they have established a task team chaired by the Eastern Cape HOD. The task team convened meetings on a monthly basis for the purpose of providing support, guidance and monitoring. The provincial HOD reported to the MEC on progress made. Secondly, a Provincial Steering Committee, chaired by the Acting DDG for Operations, had been formed. This Committee was reporting to the Eastern Cape HOD weekly. The third governance layer established was the District Project Team. The District Director chaired this Committee, which consisted of representatives from local offices. The District Project Team met weekly and provided progress reports to the Provincial Steering Committee.

 

 

  4. Observations

Having considered the submissions by the two national departments and the Eastern Cape Department of Social Development, the Committee observed the following:

 

4.1 The ECDSD would surrender back to the National Revenue Fund R22.6 million of ECD Grant funds, this after a pre-audited roll-over of R6.3 million had been approved for the 2017/18 financial year.

4.2 The ECDSD has revised the subsidy allocation days from 209 to 237, with the intention of complying with the national norm of 264 by the 2019/20 financial year.

4.3 After having been criticised by the Committee for under-expenditure on the ECD Grant, the ECDSD, together with the national Department of Social Development, have developed an intervention strategy to address all challenges linked to the implementation of the Grant within the Eastern Cape.

4.4 The intervention strategy appears to be assisting the Eastern Cape HOD to address the shortcomings that existed in the implementation of the Grant.

4.5 The Alfred Nzo Business Forum’s demand to receive first preference for all ECD Grant maintenance projects within the Alfred Nzo District, had led to the stoppage of all projects in that District. The MEC was attending to the matter and hoped that a solution would be reached.

4.6 Even though expenditure was not where it should be, the Committee viewed the intervention strategy positively, and believed it would assist the ECDSD to address the backlogs on the maintenance component and further pay the ECD centres which were entitled to a subsidy, provided that there was capacity within the Province to implement the plan; there were clear time frames for each step in the plan; and regular oversight was done over the implementation of the intervention.

4.7 The vacant technical positions, which were meant to be filled in the 2017/18 financial year have since been filled. This would help the ECDSD to fast-track the appointment of contractors; ensure that prices were not inflated by contractors; monitor project implementation quality; and ensure that projects were implemented within the agreed timeframes.

4.8 The Eastern Cape Department of Social Development, the Eastern Cape Provincial Treasury and the Eastern Cape Department of Roads and Public Works have resolved to establish a database of pre-qualified contractors in each district to enable a more efficient procurement process.

 

5. Conclusion

The Committee resolved that it would invite the Eastern Cape Department of Social Development for a follow-up meeting during the fourth term, or the first term of 2019, to assess progress made on the implementation of the revised operational strategy on the Early Childhood Development Grant implementation and the expenditure thereon.

 

Report to be considered.

 

 

 

 

Documents

No related documents