1. 2009/10: Third Quarter Performance of the EPWP Incentive Grant
Select Committee on Appropriations
21 April 2010 1

2. Introduction and General Observation
This submission is made in terms of Section 3(2)(b)(ii) of the Financial and Fiscal Commission Act 99 of 1997 as amended
The Commission welcomes attempts aimed at addressing employment through Government expenditure programmes
The Commission has in the past recommended that government should avoid using conditional grants to fund what can be funded through the equitable share
Conditional grants come with either positive or negative incentives
The negative incentives may discourage provinces and municipalities from funding job creation initiatives in the hope that these will be funded through the conditional grants (substitution effects)
The Commission raised the need for an independent comprehensive review to evaluate the sustainability of jobs created through the EPWP since its inception
The importance of such a review is to ascertain the sustainability of jobs created and realignment of grants to ensure that the stated objectives are actually met
The management of the EPWP Incentive grant requires significant capacity of the DPW to monitor and evaluate the performance of the program
There is a need for constant availability of data disaggregated at municipal level on the performance of this grant

3. Fiscal Incentives to Provinces and Municipalities
Provinces and municipalities spend their budgets on EPWP projects, thereafter the grant is paid by DPW quarterly, after employment has been created
There is no guarantee that provinces and municipalities will be reimbursed what they have spent as the formula to divide the grant is not specific and neither is it transparent
Reference is made to allocation criteria but these are not specified to allow for independent assessment
The Commission has in the past requested information on this matter (see FFC Submission on the 2009 DoR Bill) but this never materialised
Expenditure on this grant has been haphazard across provinces as reported to the Budget Lekgotla of 2009
Expenditure reports on the grant performance at local government level could not be ascertained by the Commission on request
Reports by both the National Treasury and DPW on EPWP achievability do not tally

4. EPWP Incentive Grant to Provinces as at 31 December 2009 (NT PFMA S
EPWP Incentive Grant to Provinces as at 31 December 2009 (NT PFMA S.32 Report)

5. EPWP Milestones as at 31 December 2009 (DPW: EPWP Quarterly Report)

6. Challenges with the administration of the grant
The challenge with this grant has been late disbursement of funds to provinces and municipalities outside the ambits of DoRA
Actual allocations were not finalised when provincial and municipal budgets were appropriated in the legislatures and councils
Planning and implementation of the grant seems not to be done consistently thus the inconsistencies in the data on budgets and outputs between National Treasury and Department of Public Works
More clarity on service level requirements for the grant is required from DPW

7. Conclusion
The grant should be streamlined to labour intensive infrastructure projects because the latter must be planned, costed and scheduled properly. This is necessary to estimate the cost of EPWP
This type of a grant should be linked to service delivery performance by placing conditions on the results to be achieved while providing full flexibility in the design of programmes
Converting this grant into a matching grant should be considered in taking the process forward as this would incentivise provinces and municipalities in a more direct and transparent manner
The Department will be able to be specific on what is required in order to access the grant and hence improve transparency