Deputy Director-General: Public Finance, Dondo Mogajane Select Committee on Appropriations: Social Grants 2007/08

Issue Brief In 2007/08 DSD under-spent by R 37.7 m. However, there was over-spending against the Comprehensive Social Security Programme of R24.1m This was driven by over spending on social grants. DSD over-spent their social assistance budget (R62.45 billion) by R26 million in 2007/08. This amounts to 0.04%. 2 Expenditure (R'000) Final Appropriation Actual ExpenditureVariance 1.Administration Current payment Transfers and subsidies Payment for capital assets Comprehensive Social Security (24 117) Current payment Transfers and subsidies (25 534) Payment for capital assets Policy Development, Review and Implementation Support for Welfare Services Current payment Transfers and subsidies Payment for capital assets Community Development Current payment Transfers and subsidies Payment for capital assets Strategy and Governance Current payment Transfers and subsidies1 587 Payment for capital assets Total Table 1: APPROPRIATION PER PROGRAMME for the year ended 31 March 2008

3 Expenditure (R'000) Final Appropriation Actual ExpenditureVariance 2.1 Social Assistance Current payment Transfers and subsidies Payment for capital assets Social Insurance Current payment Transfers and subsidies Payment for capital assets (14) 2.3 Policy Implementation Support Current payment Transfers and subsidies Payment for capital assets Social Assistance Transfers Transfers and subsidies (26 168) 2.5 SASSA Transfers and subsidies SASSA MIS Transfers and subsidies Contributions and Affiliations Transfers and subsidies Administration Current payment Transfers and subsidies Payment for capital assets (30) Total (24 117) Due to under-spending in other sub- programmes in Programme 2, the total under-spending amounts to R24.1m In 2007/08, the Social Assistance Transfers allocation was specifically and exclusively appropriated through the Appropriation Act 2007/08. Due to this classification, virement rules could not be applied to reduce the social grant overspending. Therefore, even though there was a overall under-spending against the vote budget, and an over-spending of R24.12mn against the Programme 2 budget, the amount classified as unauthorised expenditure for 2007/08 is R26.17mn. DETAIL PER PROGRAMME 2: COMPREHENSIVE SECURITY for the year ended 31 March 2008 Issue Brief Contd.

Overspending in the social assistance budget was under the Old Age, Foster Care, Care Dependency and the Child Support Grant. Of these, the main driver of over-spending was the Child Support Grant (CSG). This can be attributed to CSG’s age extension policy. In 2005/06, the CSG age-eligibility was extended from 11 year olds up until 14 years old. Hence, between 2004/05 and 2005/06, the CSG eligible population grew by 2.9 million. This led to large fluctuations and unpredictability in CSG beneficiary numbers. 2.2 mn additional CSG beneficiaries came onto the system over the course of 2005/06 and 2006/07. 4 Issue Brief Contd. (Social Assistance Budget) Year CSG Age- eligibility criteria 2002< 7 years 2003< 9 years 2004< 11 years 2005< 14 years

In 2007/08, an additional 360 thousand CSG beneficiaries came onto the system. The CSG take-up rate in 2007/08 was 82%; highest since 2004/05 till 2012/13. The CSG take-up rate in the previous year, 2006/07, was 78.6% and in the subsequent year, 2008/09, declined to 80.1%. Thus, in terms of CSG take-up, 2007/08 was an anomaly of a year. Further, there were large fluctuations in reported CSG beneficiaries (Source Feb 2008 IYM), leading to uncertainty on year-end CSG numbers. Additionally, R166million was back-paid to Eastern Cape and Free State in April Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08 Child Support Grant Beneficiaries Issue Brief Contd. (Social Assistance Budget)

6 The social grants programme is demand driven. Behavioural aspect of the programme makes it unpredictable. Apart from behaviour related to take up of social grants, accumulation of back pay, application complexities and external risks all need to be factored into projections. Variation of 1% in such a model is generally acceptable. Over-spending of R26 million against a budget of R63 billion in 2007/08 is a 0.04% variation. Issue Brief Contd.

Recommendation: This overspend cannot directly be related to any negligence or lack of oversight and thus cannot be recovered from any person. Approval be granted in terms of section 34 (1) of the PFMA to authorise the over expenditure as a direct charge against the National Revenue Fund (NRF). This be approved with funding Additional systems now in place: The three main stakeholders; SASSA, DSD and NT, each run their own independent projections to monitor social grants expenditure. Quarterly projection meetings held between SASSA, DSD and NT. Monthly model updates Quarterly Expenditure Reports Adjustment factor incorporated into model, to try and accommodate non- demographic driven factors such as back pay and other administrative complexities. 7

Thank You 8