SELECT COMMITTEE ON FINANCE
INPUT ON THE DIVISION OF REVENUE TO THE SELECT COMMITTEE ON FINANCE,
DEPARTMENT OF SOCIAL DEVELOPMENT

1. INTRODUCTION
1.1 The National Department of Social Development has been administering a number of conditional grants since 1998/99. The current allocations in the Division of Revenue represent the "tail end" of these conditional grants.

1.2 The two conditional grants reflected in the Division of Revenue are:
(a) Improvement of the social security system; and
(b) Implementation of the National Integrated Plan for Children Affected and Infected by HIV/AIDS.

2. IMPROVEMENT OF THE SOCIAL SECURITY SYSTEM
2.1 In 1996, the Committee on the Restructuring of Social Security submitted a memorandum to Cabinet proposing improvements to several areas of the social security system. A special allocation was made to the then Department of Welfare (totalling R200 million), to effect these improvements. Part of the allocation was to be spent by the National Department and part was to be spent by provincial departments in the form of conditional grants.

Purpose and measurable objectives of conditional grant
2.2 To increase the effectiveness and efficiency of the end-to-end processing of grant applications and thereby, the social security system in all provinces.

2.3 Measurable objectives are:
(a) To provide functional, acceptable infrastructure and office automation tools to facilitate effective service delivery.
(b) An improved communication network and information service on all grant inquiries to enable speedier responses to beneficiaries.

Conditions attached to the grant
2.4 The following conditions apply:
(a) Approved provincial business plans must exist for each province, approved by the National Treasury, and the procurement of technology in line with the quality guidelines provided by the National Department of Social Development,
(b) The individual provinces must submit the required monthly reports by the tenth of each month to the Department of Social Development on the progress made with the individual projects and the state of expenditure up to the end of the previous month.

Criteria for allocation between provinces
2.5 In the preceding years of the conditional grant, the allocations between provinces was based on the beneficiary population in the respective provinces. For the forthcoming financial year (2001/2002), each province was allocated an equal amount of the grant, namely, R642 000. The reason for this is that allocation is intended to update and replace a modest amount of technology (provinces already received substantial support in previous years), to improve services at pay points and to provide for operations centers in each province.

2.6 The Northern Province was identified as one of three provinces, the other two being Eastern Cape and Mpumalanga has having serious lags in the technological infrastructure in comparison with other provinces and were thus prioritized for this project. However whilst the infrastructure roll out was completed fully in the Eastern Cape and Mpumalanga in the period 2000 - 2001, the process was only 50% complete in this year in Northern Province. Thus the Northern Province was prioritized in the 2001/2002 budget for the completion of its infrastructure development. The cost of completing the remaining infrastructure rollout in the Northern Province is R5 million.

Table 1: ACTUAL DIVISIONS PER PROVINCE

PROVINCE

2001/02 R'000

2002/03 R'000

Eastern Cape

642

1 200

Free State

642

1 200

Gauteng

642

1 200

KwaZulu-Natal

642

1 200

Mpumalanga

642

1 200

Northern Cape

642

1 200

Northern Province

5 100

1 200

North West

642

1 200

Western Cape

642

1 200

TOTAL

10 236

10 800


Monitoring mechanisms and auditing arrangements
2.7 In terms of monitoring, the following activities form part of the project:
(a) Monthly progress reports by provinces;
(b) Quarterly evaluation by Departmental staff/provincial facilitators;
(c) Structured site visits on a bi-annual basis by a team consisting of both national and provincial officials.

2.8 The auditing arrangements are that provinces will be accountable for the spending of the money and audited by the provincial officials of the Office of the Auditor-General.

Rationale for funding through a conditional grant
2.9 As was indicated earlier, the Committee on the Restructuring of Social Security recommended several areas of improvement for social security. The provinces, however, did not have any funds from the equitable share to initiate the recommendations of the CRSS report and thus the motivation to Treasury for the allocation of a conditional grant in this respect.

2.10 The rationale for using conditional grants as opposed to the equitable share for the improvement of the social security and financial management system are as follows:
(a) Although social security is delivered through the provinces, it is necessary to have national norms and standards in the delivery of services. The improvement in social security is a national imperative.
(b) All provinces are required to comply with one universally applicable set of conditions and have to follow the same procedures. The uniformity in planning, implementation compliance makes monitoring and evaluation of project development cost effective.
(c) The funds are ringfenced for specific projects, which must be motivated for, through carefully developed business plans, with clear indicators of milestones, definite outputs and outcomes.
(d) The provincial treasuries cannot use the conditional grants for purposes other than for what it is intend, thus forcing provinces to improve their capacity to render an effective service.
(e) The management of the funds by one central departments facilitates the implementation of uniform procedures, systems and development.

Administrative costs
2.11 The administrative costs to the project are minimal and provinces did not request such in their business plans. At the national level, administrative costs for monitoring and evaluation are borne by the transferring department. Regarding future obligations, the receiving provinces will only budget for the recurring and incidental costs of the projects in their MTEF inputs.

Past Performance
2.12 The performance (in terms of transfers and expenditure are shown in the table at Annexure A.

Projected life of the grant
2.13 The final tranches of the grant will be transferred in the 2002/2003 financial year.

Payment schedule for 2001/2002
2.14 The allocations and payment schedule for 2001/2002 are shown in the table below:

Payment Schedule for 2001 - 2002

 

1st Tranche

2nd Tranche

Total

Province

May - 01

Sept - 01

 

Eastern Cape

642 000

nil

642 000

Free State

642 000

nil

642 000

Gauteng

642 000

nil

642 000

Mpumalanga

642 000

nil

642 000

Northern Cape

642 000

nil

642 000

Northern Province

3 060 000

2 040 000

5 100 000

North West

642 000

nil

642 000

Western Cape

642 000

nil

642 000

KwaZulu Natal

642 000

nil

642 000

Total

8 196 000

2 040 000

10 236 000


Capacity and preparedness of the transferring department and assessment of performance
2.15 The national department, despite capacity problems in terms of personnel has since the 1998/99 fiscal year successfully transferred the conditional grant. A number of current initiatives in the department will further strengthen its capacity to deliver on its obligation in terms of the conditional grants. These initiatives include:
(a) Restructuring the department to strengthen core functions, especially social security, financial management and internal audit and the establishment of a monitoring and evaluation unit for social security.
(b) Appointment of financial expertise in the national and provincial departments to improve financial management in general and the management of conditional grants in particular.
(c) Capacity building workshops for officials on the implementation of the Division of Revenue Act.

2.16 The performance of the department should be assessed against the following:
(a) Timeous transfer of funds in accordance with payment schedules and conditions set out in the Division of Revenue Act.
(b) Quality of information, guidance and support provided to the province on the effective and correct utilization of the funds.
(c) Effectiveness of monitoring systems put in place by the national department, for early identification of problems and taking corrective action.
(d) Effective evaluation by the national department on the impact of the conditional grants.

3. HIV/AIDS CONDITIONAL GRANT
Purpose and measurable objectives of the grant
3.1 In 2000, Cabinet approved a R450 million special allocation for HIV/AIDS, over and above the normal allocations in departmental budgets. For 2000/2001, Cabinet approved that R75 million of the grant be utilized for the implementation of the National Integrated Plan for Children Infected and Affected by HIVIAIDS. The plan is a joint initiative of the Departments of Social Development, Health and Education.

3.2 The purpose of the grant is to provide for integrated services to children and youth, in the form of life skills education, voluntary testing and counselling and social services. Furthermore, the purpose is to establish and strengthen local institutional structures and partnerships in combating HIV/AIDS.

3.3 For 2000/2001, an amount of R6.8 million was allocated to the Department of Social Development. Of this, R1.18 million was earmarked to strengthen existing projects, while R5.62 million was to be transferred to the provinces as conditional grants.

3.4 The outputs for the grant are:
(a) An increase in the number of orphans (infected and affected by H V/Aids) identified and monitored.
(b) An increase in the number of orphans receiving appropriate care.
(c) Establishment of effective local institutional structures and partnerships for the management and maintenance of home/community-based care and support programmes.

Conditions attached to the grant
3.5 The following conditions apply:
(a) Business plans should be submitted by the provinces to the Department for approval.
(b) The financial section of the provincial departments must be aware of the funds.
(c) A monthly report on the progress and expenditure of funds to be submitted on the tenth working day after each month in terms of section 7(8) of the Act is necessary.
(d) The quarterly reports must be submitted to this Department before the fifteenth working day after that quarter in terms of section 7(10) to comply with section 40(4) of the PFMA.

Criteria for allocation between provinces
3.6 In the first year of the grant (2000/2001) a decision was made to prioritise provinces on the basis of HIV/AIDS prevalence as revealed by the Ante-Natal Surveys of the Department of Health. The grant was made available to the following provinces:
Eastern Cape
Northern Cape
North West Province
Northern Province
Free State
Mpumalanga
KwaZulu-Natal was not included as the province already had a number of initiatives underway.

3.7 For 2001/2002, the resources available in the provinces were taken into account in making the allocation between the provinces. Western Cape and Gauteng, which had considerable resources allocated an amount slightly lower than the other provinces.

Monitoring mechanisms and auditing arrangements
3.8 For monitoring purposes, monthly progress reports and quarterly progress reports are expected from provinces. The reports are discussed at the respective project team meetings that consist of provincial and national project leaders and at the Heads of Department meetings to verifying outputs and expenditure. Provincial visits to evaluate implementation of the programmes are made.

3.9 The auditing arrangements are that provinces will be accountable for the spending of the money and audited by the provincial officials of the Office of the Auditor-General.

Rationale for conditional grant
3.10 The conditional grant route was preferred for the following reasons:
(a) The National Integrated Plan for Children Infected and Affected by HIV/AIDS is a pilot of three national departments. The conditional grant route provides the opportunity to establish a consistent approach across the provinces in terms of planning and implementation.
(b) The conditional grant route provides for more effective monitoring of the programme by the national departments.
(c) The ringfencing of the funds ensures that the funds are used for the intended purpose.

Administrative costs
3.11 No specific amount was made available for administrative costs. The provinces had to indicate in their business plans if administrative costs were necessary. The administrative costs incurred by the national department are funded through the normal departmental budget.

Past performance
3.12 The payment transfers for 2000/2001 are shown in the table below.
PAYMENT SCHEDULE FOR THE YEAR 2000/2001: HIV/AIDS

PROVINCE

AMOUNT GAZETTED

1ST TRANCHE AMOUNT PAID
1 Nov 2000

2ND TRANCHE AMOUNT PAID
23 Nov 2000

3rd TRANCHE AMOUNT PAID 21 Jan 2001

Eastern Cape

R 950 000

R 380 000

R 475 000

R 95 000

Western Cape

-

-

-

-

Northern Cape

R 1 000 000

R 400 000

R 500 000

R 100 000

North West

R 1 000 000

R 400 000

R 500 000

R 100 000

Northern Province

R 800 000

R 320 000

R 400 000

R 80 000

Free State

R 910 000

R 364 000

R 455 000

R 91 000

KwaZulu Natal

-

-

-

-

Mpumalanga

R 960 000

R 384 000

R 480 000

R 96 000

Gauteng

-

-

-

-

TOTAL

R 5 620 000

R 2 248 000

R 2 810 000

R 562 000


Projected life of the grant
3.13 The final tranches of the grant will be transferred in the 2002/2003 financial year.

Payment schedule for 2001/2002
3.14 The payment schedule for 2001/2002 is shown in the table below.

PAYMENT SCHEDULE FOR THE 2001102 FINANCIAL YEAR: HIVIAIDS

PROVINCE

AMOUNT GAZETTED
R'000

1ST TRANCHE May 2001
R'000

2nd TRANCHE Sept 2001
R'000

3rd TRANCHE
Jan 2001
R'000

Eastern Cape

1 500

500

500

500

Free State

1 500

500

500

500

Gauteng

1 500

500

500

-

KwaZulu-Natal

1 500

500

500

500

Mpumalanga

1 500

500

500

500

Northern Cape

1 500

500

500

500

Northern Province

1 500

500

500

500

North West

1 500

500

500

500

Western Cape

1 000

500

500

-

TOTAL

12 500

4 500

4 500

3 500


Capacity and preparedness of the transferring department and assessment of performance
3.15 The national department has the capacity to manage the conditional grant. In addition to establishing a Directorate to deal exclusively with HIV/AIDS and improving the financial management and auditing capacity of the national department (refer to discussion of social security), the a National Co-ordinator for the programme has been appointed by the Department of Health. Provincial co-ordinators will be appointed during the forthcoming financial year.

3.16 The performance of the department should be assessed against the following:
(a) Timeous transfer of funds in accordance with payment schedules and conditions set out in the Division of Revenue Act.
(b) Quality of information, guidance and support provided to the province on the effective and correct utilization of the funds.
(c) Effectiveness of monitoring systems put in place by the national department, for early identification of problems and taking corrective action.
(d) Effective evaluation by the national department on the impact of the conditional grants

(ANNEXURE A: Improvement of the Social Security System - this table is not included)

ANNEXURE A.2
IMPROVEMENTS TO SOCIAL SECURITY: 2000/2001

PROVINCE

TOTAL ALLOCATION

PROJECTED EXPENDITURE

EASTERN CAPE
* The funds for the operation centre and financial management have not been used. Will be committed by 31/3/2001

R 5 066 700

R 4 538 700

WESTERN CAPE
*The funds for the financial management and the electronic registries are unused. Will be committed by 31/3/2001

R 4 583 200

R 2 833 200

NORTHERN CAPE
*The funds for the operations centre, financial management and part for the re-registration not used. Will be committed by 31/3/2001

R 1 420 600

R 782 033

NORTH WEST
*The funds for the operations centre and the financial management not used. Will be committed by 31/3/2001

R 2 232 800

R 1 704 800

NORTHERN PROVINCE
All funds used.

R 3 083 300

R 3 083 300

FREE STATE
*The funds for the financial management and the electronic registries will be committed by the 31/3/2001

R 3 545 700

R 1 045 700

KWAZULU-NATAL
*The funds for financial management and electronic registries will be committed by the 31/3/2001

R 5 972 600

R 4 222 600

MPUMALANGA
*The funds for the operation centre and financial management are unused. Will be committed by 31/3/2001

R 1 371 900

R 843 900

GAUTENG
* The funds for the operation centre and financial management unused. Will be committed by 31/3/2001.

R 2 725 200

R 2 197 200

TOTAL

R 30 002 000

R 21 251 433

Kindly note that the amount allocated per province for operation centres is R278 000,for financial management R250 000 and for electronic registries R250 000 which was only available to the Western Cape, KwaZulu-Natal and Free State in 2000-2001 where the project was being piloted before being rolled out to other provinces.