ATC121130: Report of the Select Committee on Appropriations on the Hearing on the Fourth Quarter Expenditure on the Social Sector Expanded Public Works Programme Incentive Grant For Provinces, dated 27 November 2012

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE HEARING ON THE FOURTH QUARTER EXPENDITURE ON THE SOCIAL SECTOR EXPANDED PUBLIC WORKS PROGRAMME INCENTIVE GRANT FOR PROVINCES, DATED 27 NOVEMBER 2012

1. Introduction

The Social Sector Expanded Public Works Programme (EPWP) Incentive Grant for provinces was first introduced in the 2010 Division of Revenue Act as the Expanded Public Works Programme Grant for the Social Sector. The Grant was aimed at subsidising non-profit organisations working in the home– and community-based care sector and the purpose was to fund the remuneration of previously unpaid volunteers in order to maximise job creation and skills development. The Grant framework allowed for a subsidy to non-profit organisations ( NPOs ) to be transferred via the provincial departments of Health and Social Development. In 2011, the Grant was restructured into an incentive grant, aimed at incentivising provincial social sector departments to increase employment in NPOs and to improve the reach and quality of NPO services.

1.1 Terms of reference

The Committee invited the Department of Public Works (DPW) and the National Treasury (NT) to a meeting on 22 May 2012 to make presentations on the provincial fourth quarter spending on the Social Sector Expanded Public Works Programme - Incentive Grant for Provinces. This followed an initial meeting on 14 February 2012, during which the DPW and NT made a presentation to the Committee on the purpose and implementation of the Grant.

In addition, the following provincial Members of the Executive Council ( MECs ) were invited to the meeting of 22 May 2012 to make presentations on their fourth quarter spending on the Grant:

· Eastern Cape MEC for Social Development

· Western Cape MEC for Education

· Western Cape MEC for Health

· Free State MEC for Health

During the meeting of 22 May 2012, the Committee noted certain discrepancies between the expenditure information presented by the National Treasury and the Department of Public Works. The two departments were requested to submit an accurate, consolidated expenditure report to the Committee. This report was received by the Committee on 18 September 2012.

2. Briefing by National Treasury

National Treasury reported that, based on past performance data, DPW used an incentive model to identify provincial departments that were eligible for the Grant. These departments then received an allocation from national government through the DPW. The allocation criteria were based on the payment of stipends for volunteers and wages for other community development workers at a minimum of R60 per day. National Treasury further indicated that provinces may use a portion of the funds to expand the programme to different social service benefit areas, like community sport development and community safety awareness. According to National Treasury, provinces were required to sign an incentive agreement with DPW to ensure that conditions were met and targets achieved. Provincial departments were also required to submit quarterly reports on performance.

National Treasury reported that a total of R200 358 million of Grant funds for the 2011/12 financial year had been allocated as follows:

· Eastern Cape Department of Social Development: R5.07 million;

· Free State Department of Health: R15.59 million;

· Gauteng Department of Social Development: R15.07 million and Department of Health: R19.78 million;

· KwaZulu-Natal Department of Social Development: R4.5 million and Department of Health: R25.77 million;

· Limpopo Department of Social Development: R3.38 million and Department of Health: R24.95 million;

· Mpumalanga Department of Health: R3.31 million, Department of Education: R9.9 million and Department of Safety: R0.2 million;

· Northern Cape Department of Social Development: R5.66 million, Department of Health: R2.07 million and Department of Education: R6.16 million;

· North West Department of Social Development: R10.96 million, Department of Health: R17.37 million and Department of Education: R13.89 million; and

· Western Cape Department of Health: R8.66 million and Department of Education: R8.07 million.

National Treasury reported that it had noted the following challenges in provinces:

· According to Treasury’s records, the Eastern Cape ’s spending for 2011/12 was zero per cent. It was also noted that the Eastern Cape Department of Social Development had under-spent its overall budget by R18 million, particularly by under-spending on transfers.

· The Free State Department of Health was paying beneficiaries R55 per day instead of the required R60 per day. National Treasury was awaiting feedback on engagements between the DPW and the province on this matter.

· Gauteng was in the process of addressing payment backlogs to service providers and non-government organisations (NGOs). The provincial Department of Health and Social Development would be reconfigured into separate departments, which Treasury felt would assist with the administrative challenges experienced by the province.

· The Mpumalanga Department of Education was slow in submitting reports to the DPW. National Treasury had met with Mpumalanga Provincial Treasury to address this issue.

· The Western Cape was paying care-givers in an inconsistent manner – from R52 to R65 per day. DPW had been engaging with the Province on this matter and were still waiting on feedback.

National Treasury indicated that it had noted an acceleration of expenditure during the fourth quarter. This pointed to a lack of readiness at the start of the financial year by provinces and DPW. National Treasury was of the opinion that it was critical for DPW to adopt a strict approach to finalising agreements and business plans, in order to avoid the delays experienced in the 2011/12 financial year. Treasury further reported that the first scheduled payment of the Grant for the 2012/13 financial year was 25 May 2012. In terms of the Division of Revenue Act, these transfers could only be made if the business plans and agreements had been signed. Failure to conclude this process would lead to further delays in provincial transfers and expenditure. National Treasury reported that, at the time of the meeting, no business plans had been submitted.

3. Briefing by Department of Public Works

The Department of Public Works (DPW) reported that it had transferred a total amount of R199 684 million (i.e. 99.7 per cent) of the total allocation of R200 358 million by the end of the 2011/12 financial year. The expenditure by provinces was reported as follows:

Province	2011/12 allocation ‘000	Actual payments to provinces in 2011/12 ‘000	Provincial expenditure in 2011/12 ‘000	Expenditure as % of total available	Pre-Audited (over)-/under-spent
Eastern Cape	5 070	5 070	5 606	110.6%	(536)
Free State	15 586	15 586	11 481	73.3%	4 105
Gauteng	34 848	34 848	29 895	85.8%	4 953
KwaZulu-Natal	30 269	29 595	29 822	98.5%	447
Limpopo	28 332	28 332	26 210	91.4%	2 467
Mpumalanga	13 407	13 407	9 066	67.6%	4 341
Northern Cape	13 890	13 890	12 841	92.4%	1 049
North West	42 222	42 222	37 284	88.3%	4 938
Western Cape	16 734	16 734	13 400	60.6%	8 718
Total:	200 358	199 684	175 605	85.2%	30 482

DPW reported that the following challenges had impacted on the Grant performance and expenditure during the 2011/12 financial year:

· Delayed payment of volunteers due to delayed project transfers by provinces or late finalisation of administration processes such as the signing of service level agreements. KwaZulu- Natal’s Department of Social Development and the Health departments of the Western Cape and Free State Provinces had been affected in this respect.

· Delays in the submission of reports to DPW through provincial treasuries remained a problem.

· Non-aligned reports between National Treasury and DPW.

· Under-funding of the programme by provinces resulted in departments seeking to do EPWP only through the incentive grant.

DPW reported that they had put the following measures in place to deal with the above-mentioned challenges:

· The social sector had developed a plan for technical support to provincial treasuries by the Independent Development Trust (IDT) to ensure compliant reporting, in line with section 32 of the Public Finance Management Act.

· IDT would periodically deploy finance managers in sector departments to assist with the reconciliation and submission of grant expenditures of their programmes to their respective chief financial officers, in line with in-year monitoring reporting requirements.

· A clear grant management plan had been developed to ensure efficient monitoring of the grant performance.

· Capacity was available in the EPWP Monitoring and Evaluation Unit to execute the plan in conjunction with other national stakeholders.

· Provincial EPWP social sector coordinators had work plans with clear indicators for managing the grant performance in the 2012/13 financial year.

4. Briefing by Eastern Cape Department of Social Development

The Eastern Cape Department of Social Development reported that they had received a total allocation of R5.07 million for the Social Sector EPWP Incentive Grant and R536 000 as a Social Infrastructure Grant to accelerate the expansion of job creation efforts. The Department indicated that they had managed to spend 100 per cent of the allocated funds. The Grant targeted 285 community caregivers providing services to 17 home community based care projects. In addition, 17 non-profit organisations ( NPOs ) received administrative support. The funds were used for the payment of stipends and administration costs.

The Department reported that it had achieved the objectives of the grant and had created a total of 367 work opportunities.

5. Briefing by Western Cape Department of Education

The Western Cape Education Department (WCED) reported that they had received a total allocation of R8.07 million for the Social Sector EPWP Incentive Grant. By the end of the 2011/12 financial year, they had spent 99.9 per cent, leaving a balance of R4 310. In terms of project achievement, the WCED indicated that they had identified 648 unemployed persons who would benefit from training as early childhood development (ECD) practitioner assistants, and eight unemployed matriculants who needed training and experience to improve their computing skills. The WCED further reported that the 648 ECD practitioner assistants had volunteered at ECD centres for four days a week and had attended a weekly training session at a Further Education and Training (FET) college on the fifth day. They had each received a monthly stipend of R1 200 for the duration of the course. This had been in line with the required R60 per day. The eight technical administrative support staff had each received a monthly stipend of R3 000 for the contract period of 12 months.

With regard to challenges, the WCED indicated that, even though the FET colleges had conducted thorough screening assessments, there had still been a total of 21 learners who had dropped out of the programme. The reasons for the drop-out had included ill health and pregnancy; some learners had found the stipend insufficient to cover all their expenses; some had been offered permanent employment elsewhere and some learners had been unable to cope with the expectations of the skills programme.

6. Briefing by Western Cape Department of Health

The Western Cape Department of Health (WCDH) reported that it had been allocated a total of R8.66 million for this Grant in the 2011/12 financial year. The WCDH further reported that it had split its allocation into two parts – R6.9 million (80 per cent) for stipends for the employment of an additional 438 community care workers ( CCWs ); and R1.7 million (20 per cent) for capacity building through the training of current CCWs in Community Rehabilitation, which had been identified as a need in the home-based care programme.

The WCDH reported that it had under-spent on this Grant by a total of R3.3 million by the end of the 2011/12 financial year. They attributed the R1.6 million under expenditure on the stipends portion to the following factors:

· A higher attrition rate than normal had been experienced - 147 CCWs out of 3000 funded CCWs , thus 5 per cent.

· Delays in appointments and therefore delays in expenditure.

· Meetings with DPW, the Department of Social Development and the Department of Health to address and resolve the issue of non-compliance on the payment of stipends to CCWs had led to delays in implementation.

· Many claims from the districts for the fourth quarter had been received late and could not be processed before the financial year end.

The WCDH further reported that the under-expenditure of R1.7 million on the capacity building portion had been due to delays in the procurement and awarding of a tender for a training service provider. The WCHD indicated that it had requested a roll-over of the R3.3 million from National Treasury, and that administrative processes would be reviewed to address the delay in the processing of claims.

7. Briefing by Free State Department of Health

The Free State Department of Health (FSDH) reported that a total of R15.58 million had been allocated for the 2011/12 financial year, and it had spent a total of R10.54 million or 68 per cent of the total allocation by the end of the financial year. The FSDH explained this under-expenditure as follows: The third tranche that had been due in October 2011 had been withheld by DPW due to non-compliance with the ministerial determination on wages of R60 per person per day. During a meeting between the FSDH and DPW, it had been resolved that this had been as a result of an oversight on the part of DPW. The business plan submitted by the FSDH in March 2011 and the signed memorandum of agreement had reflected the R55 wage per person per day. During this meeting it had also been resolved that the wage would be increased from R55 to R60. The FSDH indicated that they had used internal funds to pay stipends during the suspension to ensure the continuity of services. When the third and fourth tranches had eventually been received, it had been at the close of the financial year and the funds could not be journalised back to internal funding. However, the FSDH reported that it had reached its target of a total of 948 beneficiaries.

8. Findings

During interactions with the Department of Public Works, National Treasury, provincial health departments from the Western Cape and the Free State , the Eastern Cape Department of Social Development and the Western Cape Department of Education, the Committee made the following findings:

8.1 There were discrepancies between the provincial spending figures presented by National Treasury and those presented by the Department of Public Works during the meeting of 22 May 2012. They attributed this to the varying reporting structures in different provincial departments.

8.2 At the time of the meeting, three days before the first transfer of payments for this Grant was due, National Treasury had not received any business plans from provincial departments eligible for the Grant.

8.3 KwaZulu- Natal’s Department of Social Development and the Health departments of the Western Cape and Free State Provinces had experienced delayed payment of volunteers due to delayed project transfers by provinces or late finalisation of administration processes such as the signing of service level agreements.

8.4 The Western Cape and Free State Provinces were paying beneficiaries below the stipulated minimum of R60 per day - Free State was reportedly paying R55 while Western Cape was paying between R52 and R65.

9. Recommendations

After the interaction with the Department of Public Works, National Treasury, provincial health departments of the Western Cape and the Free State , the Eastern Cape Department of Social Development and the Western Cape Department of Education, the Select Committee on Appropriations recommends the following:

9.1 All reports on the Social Sector Extended Public Works Programme Incentive Grant from provincial departments should be signed off by the heads of department, and not the programme manager.

9.2 The Department of Public Works should ensure that all provincial departments managing projects funded by the Social Sector Extended Public Works Programme Incentive Grant are compliant with the grant framework regarding the amount of stipend to be paid, which is a minimum of R60 per day.

9.3 The Department of Public Works and National Treasury should investigate what punitive measures can be taken against the heads of departments that fail to submit business plans on time, as the failure to do so impacts negatively on communities that are reliant on the services provided by the programmes funded by this Grant. Furthermore this Grant funding directly promotes job creation and delays in the programmes that target job creation projects such as these is a major concern due to the growing unemployment rate in the country.

Report to be considered