27 November 2018 PRESENTATION ON THE CONDITIONAL GRANT TO THE SELECT COMMITTEE ON APPROPRIATION 16 MAY 2018 MANCO

PURPOSE Performance during 2017/18; and Brief the Select Committee members on the implementation of ECD Conditional Grant with specific focus on Performance during 2017/18; and Progress made on implementation during 2018/19

Reminder of Background

BACKGROUND In order to enhance the implementation of the ECD policy, Treasury has allocated R812 million as a conditional grant for 2017/18 (R319 828 000) and 2018/19 (R493 065 000). This is to enable National DSD to better control and ring-fence expansion of ECD in the country in line with the approved national Integrated ECD Policy. The allocation will be used to increase coverage of children accessing ECD services through the ECD subsidy to poor children as well as assist to improve the conditionally registered ECD centres to meet basic requirements in order to be fully registered. The grant is divided into two: Subsidy component ECD maintenance component

KEY CONDITIONS OF THE ECD CONDITIONAL GRANT Subsidy Grant The grant will assist registered centres that are not fully funded from the equitable share, fully registered centres that are not funded or conditionally registered partial care facilities not funded offering Early Childhood Development programmes. The subsidy is targeted for qualifying children from birth to 5 years or until they enter Grade R. The value of the subsidy paid is at a rate of R15 per child for a maximum period of 264 days.

KEY CONDITIONS OF THE ECD CONDITIONAL GRANT Maintenance Grant Partial care facilities offering ECD programmes that are registered conditionally will be eligible for the maintenance grant. Minor building and maintenance improvements aimed at ensuring ECD centres comply with the health and safety norms and standards, as identified by the National Department of Social Development will be funded from the grant. The maximum value to be spent per ECD centre for maintenance improvements is R100 000.00 Prior approval for any amount exceeding the R100 000 should be obtained from the HOD and CFO. The exceeding amount should not be more than 30% of the R100 000. Provinces must conduct assessments of conditionally registered centres and cost them in order to qualify for maintenance grant funding in 2018/19. All maintenance projects must be recorded on the National Treasury Infrastructure Reporting Model (IRM).

ECD CONDITIONAL GRANT 2017 MTEF ALLOCATIONS   2017/18 2018/19 2019/20 R' 000 Early Childhood Development Grant 317 612 490 800 518 228 ECD subsidy expansion 248 892 412 055 435 101 ECD centre maintenance 68 720 78 746 83 127

COMPLIANCE TO THE GRANT FRAMEWORK 2017/18

RESPONSIBILITIES OF NATIONAL DEPARTMENT National Responsibility Compliance 1 Appointment and management of service providers; Completed 2 Develop Business Plans and submit after they get signed off by Heads of Department to national DSD; 3 Provinces to implement the Business Plans as approved by national department (national should be notified in writing about deviations before implementation can take place);  Completed 4 Comply with terms and conditions of the receiving officer outlined in the Division of Revenue Act (DoRA); 5 Submit monthly financial reports to National Treasury 15 days after the end of the month; 6 Submit quarterly performance reports to national department within 30 days after the end of each quarter;

SUBMISSION OF BUSINESS PLANS Province Date Signed by HOD Acting DG’s NT Submission EC 04 April 2017 10 April 2017 April 2017 FS 28 February 2017 31 March 2017 GT 28 March 2017 KZN 10 March 2017 LP 07 March 2017 MP NC 13 March 2017 NW 29 March 2017 WC 06 March 2017

RESPONSIBILITIES OF PROVINCIAL DEPARTMENT National Responsibility Compliance 1 Appointment and management of service providers; Completed 2 Develop Business Plans and submit after they get signed off by Heads of Department to national DSD; 3 Provinces to implement the Business Plans as approved by national department (national should be notified in writing about deviations before implementation can take place);  Completed 4 Comply with terms and conditions of the receiving officer outlined in the Division of Revenue Act (DoRA); 5 Submit monthly financial reports to National Treasury 15 days after the end of the month; 6 Submit quarterly performance reports to national department within 30 days after the end of each quarter;

Financial allocations, payments and expenditure 2017/18

TOTAL ALLOCATION TO PROVINCES Column A Allocation 2017/18   R'000 Eastern Cape 56 365 Free State 18 398 Gauteng 38 489 KwaZulu-Natal 71 879 Limpopo 41 085 Mpumalanga 25 799 Northern Cape 13 761 North West 32 686 Western Cape 19 150 Total 317 612

SUMMARY 2017/18 BUDGET VS ACTUAL TRANSFERS AND EXPENDITURE AS AT 31 MARCH 2018 Province Budget Allocation Transferred by National DSD at 31 March 2018 Spent at 31 March 2018 Percentage Spent by Provincial DSD R'000 % Eastern Cape 56 365 27 238 48% Free State 18 398 12 937 70% Gauteng 38 489 35 938 93% KwaZulu-Natal 71 879 100% Limpopo 41 085 36 034 88% Mpumalanga 25 799 23 645 92% Northern Cape 13 761 11 710 85% North West 32 686 20 304 62% Western Cape 19 150 18 770 98% Totals 317 612 258 446 81%

BUDGET VS EXPENDITURE PER PROVINCE PER GRANT COMPONENT AT 31 MARCH 2018 EASTERN CAPE DSD ALLOCATIONS R TOTAL EXPENDITURE % Spent UNSPENT 31 MARCH 2018 % Available Total 56 365 000.00 27 238 475.64 48% 29 126 524.36 52% Subsidy 43 749 750.00 26 943 794.76 62% 16 805 955.24 38% Maintenance 11 148 913.00 0.00 0% 100% Administration 1 466 337.00 294 680.88 20% 1 171 656.12 80% FREE STATE DSD ALLOCATIONS R TOTAL EXPENDITURE % Total Available Total 18 398 000.00 12 936 601.33 70% 5 461 398.67 30% Subsidy 8 259 000.00 8 173 084.00 99% 85 916.00 1% Maintenance 8 039 000.00 2 847 392.48 35% 5 191 607.52 65% Administration 2 100 000.00 1 916 124.85 91% 183 875.15 9%

BUDGET VS EXPENDITURE PER PROVINCE PER GRANT COMPONENT AT 31 MARCH 2018 GAUTENG DSD ALLOCATIONS R TOTAL EXPENDITURE % Total Available Total 38 489 000.00 35 937 691.01 93% 2 551 308.99 7% Subsidy 34 922 000.00 33 519 751.00 96% 1 402 249.00 4% Maintenance 1 467 000.00 1 441 267.00 98% 25 733.00 2% Administration 2 100 000.00 976 673.01 47% 1 123 326.99 53% KWAZULU-NATAL DSD ALLOCATIONS R TOTAL EXPENDITURE % Available/Over Total 71 879 000.00 71 870 450.00 100% 8 550.00 0% Subsidy 57 874 000.00 57 865 450.00 Maintenance 11 905 000.00 0.00 Administration 2 100 000.00

BUDGET VS EXPENDITURE PER PROVINCE PER GRANT COMPONENT AT 31 MARCH 2018 LIMPOPO DSD ALLOCATIONS R TOTAL EXPENDITURE % Total Available Total 41 085 000.00 36 034 299.95 88% 5 050 700.05 12% Subsidy 30 101 000.00 30 550 023.75 101% -449 023.75 -1% Maintenance 10 084 000.00 5 013 040.20 50% 5 070 959.80 Administration 900 000.00 471 236.00 52% 428 764.00 48% MPUMALANGA DSD ALLOCATIONS R TOTAL EXPENDITURE % Total Available Total 25 799 000.00 23 645 298.61 92% 2 153 701.39 8% Subsidy 18 317 000.00 17 835 780.00 97% 481 220.00 3% Maintenance 5 382 000.00 5 197 477.15 184 522.85 Administration 2 100 000.00 612 041.46 29% 1 487 958.54 71%

BUDGET VS EXPENDITURE PER PROVINCE PER GRANT COMPONENT AT 31 MARCH 2018 NORTHERN CAPE DSD ALLOCATIONS R TOTAL EXPENDITURE % Total Available Total 13 761 000.00 11 709 925.90 85% 2 051 074.10 15% Subsidy 3 605 000.00 100% 0.00 0% Maintenance 8 056 000.00 6 385 776.87 79% 1 670 223.13 21% Administration 2 100 000.00 1 719 149.03 82% 380 850.97 18% NORTH WEST DSD ALLOCATIONS R TOTAL EXPENDITURE % Total Available Total 32 686 000.00 20 304 455.19 62% 12 381 544.81 38% Subsidy 26 258 900.00 18 047 919.75 69% 8 210 980.25 31% Maintenance 4 465 940.00 1 059 737.00 24% 3 406 203.00 76% Administration 1 961 160.00 1 196 798.44 61% 764 361.56 39%

BUDGET VS EXPENDITURE PER PROVINCE PER GRANT COMPONENT AT 31 MARCH 2018 WESTERN CAPE DSD ALLOCATIONS R TOTAL EXPENDITURE % Total Available Total 19 150 000.00 18 769 933.00 98% 380 067.00 2% Subsidy 16 478 000.00 16 097 933.00 Maintenance 572 000.00 100% 0.00 0% Administration 2 100 000.00

MAINTENANCE COMPONENT

CATEGORIES FOR MAINTENANCE COMPONENT Health and Safety Minor Building improvement (including disability accessibility) Early Learning Material Equipment

PROVINCIAL PERFORMANCE ON THE MAINTENANCE GRANT PER QUARTER Province Annual Target Q1 Q2 Q3 Q4 Total ECD’s benefiting from the grant (Q1-4) Current % of ECD’S Benefiting against the annual target Western Cape 13 - 100% Mpumalanga 62 44 18 Free State 79 26 53 Limpopo 98 90 8 Northern Cape 65 11 2 52 North West 48 4 6 10 21% Eastern Cape 96 0% Gauteng 15 KwaZulu Natal 117 Total 593 81 180 198 459 77%

METHODS OF ASSESSMENT AND FIXING THE ECD’S IN 2017/18 Province Assessments and Costing Fixing of the ECD’s Gauteng Used a service provider for assessments and costing. Appointed contractors North West Used DSD officials Western Cape Used a service provider for assessments and costing Mpumalanga Transferred to the NPO Northern Cape Free State Limpopo Used Dept of Public Works KwaZulu Natal Appointed contractors and transferred to the NPO Eastern Cape

REASONS FOR UNDER-PERFORMANCE NW The strike action in the NW resulted in the province not being able to perform on the grant particularly in the last quarter which compromised on service delivery. EC Delay in finalising the recruitment of the Construction Project Manager and Project Managers impacted on the performance as technical skills were required. The two Project Managers were recruited in Nov and Dec 2017 respectively. Assessments from the EC DRPW were received in November and December 2017. Bills of Quantities were then complied from the assessments by the two Project Managers in December 2017 and January 2018. Briefing for phase one tender was advertised on 02 February 2018 and closed on 05 March 2018, phase two was advertised on 23 February 2018 and closed on 23 March 2018. The Business Forum in Alfred Nzo District raised issues during the two tender briefing sessions. This resulted in the cancellation of the tender.

STRATEGIES TO BE EMPLOYED TO ADDRESS UNDER-PERFORMANCE NW Complete the application for the rollover of funds and continue with the fixing the ECD’s identified for 2017/18 when operations resume in the province subject to the rollover request being approved. EC The conclusion of the recruitment of the Construction Project Manager by end June 2018. Plan of Action on the 95 ECD’s that did not benefit from the grant in 2017/18 Application for rollover of funds from 2017/2018 was made to Provincial Treasury. Outcome of the rollover of funds is still to be confirmed. National DSD Reduced the allocation on the maintenance grant for 2018/19 from R12 million to R5 million for the EC to enable the province to address their challenges and fine tune their processes. EC is expected to provide weekly progress reports and national DSD (representatives from infrastructure and ECD programme) will be conducting bi-weekly site visits to the province to ensure that all challenges are addressed timeously. The quarterly ECD conditional grant meetings with provinces will continue but the representation from provinces will be elevated to that of a Chief Director and the project manager for the grant.

SUBSIDY COMPONENT

TARGETED VS ACTUAL NUMBER OF CHILDREN THAT BENEFITED FROM THE SUBSIDY PROVINCE TARGETED NUMBER OF CHILDREN NUMBER OF CHILDREN THAT BENEFITED NUMBER OF DAYS Eastern Cape 11 047 8 420 209 Free State 2 085 2 084 264 Gauteng 8 818 9 079 KwaZulu-Natal 14 614 14 615 Limpopo 7 601 9 414 215 Mpumalanga 4 625 Northern Cape 910 1 221 North West 6 631 6 632(Q3) 248 Western Cape 4 151 4 265 TOTALS 60 482 60 355  

HIGH LEVEL CHALLENGES IN IMPLEMENTATION OF THE CONDITIONAL GRANT SUBSIDY COMPONENT Corrective measures Not all provinces provided the subsidy for 264 days. The 264 days was not enforced as a condition in the conditional grant framework. The 2018/19 conditional grant framework has the 264 days and the rate of R15 per day as conditions in the conditional grant frameworks. Progress reports not always submitted in line with the agreed timelines. The Department uses a claiming process. The claim form requires that all compliance documents be submitted before payment can be released. Where documents are not received by the scheduled payment date, the payment schedule is amended for payment at a later stage once all compliance documents are received. Claim certificate not submitted timely to allow for release of funds in line with the approved payment schedule. This results in many in year changes to the payment schedule. Timelines for submission of claim forms have been communicated to provincial CFOs through the Department’s CFO forum. The conditional grant allocations in the ENE includes an amount of R2,1 million made available for administration of the grant by provincial DSDs. The administration portion is not earmarked and can be taken from the subsidy or maintenance allocation. This means that the ENE targets are not final. The Business Plan templates requires that provincial DSDs allocate funds to administration from the subsidy and maintenance portion. Targets for subsidy can be amended depending on the amount remaining after reducing the subsidy amount by the administration budget.

DISABILITY CONSIDERATIONS The department had undertaken to do research on cost of disability. This will enable us to provide an accurate guidance on costing of disability There were delays in the procurement processes that hampered the implementation of the research The service provider that qualified to do the research inflated the cost to double the amount that the Branch could not afford. Within the 2018/19 financial year, the Branch - RPD will be working with the Branch- Welfare Services providing technical support in the costing of services to Children with disabilities

PROGRESS IN IMPLEMENTATION: 2018/19

PROVINCIAL ALLOCATIONS SUBSIDY & MAINTENANCE The below table reflects the subsidy and maintenance allocations per province for the 2018/19 financial year.

IMPLEMENTATION OF THE GRANT FOR 2018/19 The 2018/19 Conditional Grant Framework was developed and consulted with provinces. It was finalised and signed off by the Acting DG and submitted to National Treasury in February 2018. Provinces have submitted their signed off Business Plans to National Department. The Plans were then signed off by the Acting DG and submitted to National Treasury on 12 April 2018. Meeting with provinces to prepare for quarter 1 implementation was held on 1 March 2018. Schedule for transfer of funds has been developed. Funds have been transferred to 5 provinces; funds will be transferred to the remaining provinces during May 2018

RECOMMENDATIONS It is recommended that the committee: Note the presentation in respect of the performance of the grant in 2017/18, the reasons for under-performance and the strategies to be employed to address this; and The progress on the implementation of the grant in 2018/19.

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