Roles and Responsibilities in the system for the delivery of social grants August 2006 National Treasury

2 Purpose Information session Social grants >R57 bn, representing ~15% of the total annual budget Key poverty alleviation programme, reaching nearly 11 million beneficiaries Function shift involves intricate reconfiguration of grants delivery system

3 Function Shift Between spheres of Government, from the Provincial to the National sphere, as of 1 April 2005 Implications The Minister of Social Development is responsible and accountable for the entire social assistance function, i.e. policy, administration and payments services, monitoring, evaluation and reporting

4 Transition Mechanism – 2005/06 National Department of Social Development (NDoSD) undertook the function using a conditional grant with provinces as implementing agents One national organisation – SASSA – responsible for making social grant payments to all beneficiaries across the country. End State

5 Newly Established Entities SA Social Security Agency (SASSA) Head Office: Pretoria Regional Offices: One in each of the nine provinces Operationally active since 1 April 2006 Inspectorate for Social Assistance In process of being established Expected to be operational 1 April 2007

6 Governing Legislation Social Assistance Act (59 of 1992) Social Assistance Act (13 of 2004) SA Social Security Agency Act (9 of 2004) Outstanding: New Social Assistance Regulations compatible with Social Assistance Act, 2004

7 Lines of Accountability

8 Transition: Social Assistance and Grants Administration 2004/052005/062006/072007/08 FunctionProvincialNational Delivery of social grants (Execution) Provinces Provinces on behalf of NDOSD Provinces on behalf of SASSA SASSA Applicable Legislation Social Assistance Act (1992) SASSA Act Social Assistance Act (1992) SASSA Act Social Assistance Act (2004) SASSA Act Social Assistance Act (2004) Funding arrangement Provincial Budget CG Grants Administration National Budget (Transfers to SASSA) CG Social Assistance National Budget (Transfers to Households)

9 Relative roles in the system for the delivery of social assistance

10 Relative roles in the system for delivery of social grants (contd.)

11 Total funding available in 2006/07 All funds (R61,5 bn) are allocated to the NDoSD Using the CGs in DORA 2005 as the baseline: –Social Assistance Transfers (R57,7 bn) –Social Assistance Administration (R3,6 bn) Funds from the 2005 MTEF –Grant Administration Integrity (R96 m) Funds from the 2006 MTEF –SASSA funds (R135 m) –Inspectorate (R10 m)

12 Flow of funds: prior to 2005/06

13 Flow of funds: 2005/06

14 Interim flow of funds: 2006/07

15 Key Considerations for Future Flow of Funds Service delivery not hampered Optimal cash management of the ~R57bn Practicality of accountability and reporting arrangements on social assistance funds Capacity of SASSA to fully undertake the function –Sufficient financial management capacity –Accounting policies and procedures in place –Completion of ring-fencing exercise –Establishment of in-year cash management and monitoring processes Strategic intent for SASSA establishment in machinery of government (UIF, Compensation Funds, etc.)

16 Options for Flow of Funds: 2007/08 Status quo remains –Social assistance payments flow from NDoSD banking accounts to beneficiaries –Payments process managed by SASSA –DG of NDoSD retains accountability for cash flow to beneficiaries Earmark social assistance funds for transfer to SASSA –Funds transferred to SASSA –Social assistance payments flow from SASSA to beneficiary –CEO: SASSA takes complete accountability for cash flow to beneficiaries

17 Strategic Intent for SASSA Establishment To improve the quality of services provided to beneficiaries To ensure that the minimum standards operate countrywide, for consistent and predictable service delivery Efficiency gains from centralisation –Reducing cost of service delivery –Minimising fraud

18 Reducing Cost of Delivery Function of delivering grants to beneficiaries will be largely undertaken by payment contractors (~85% of transactions), other 15% by direct bank transfer Range of grant transfer fees: ~R30 to ~R15 SASSA to issue new tender to market, and will award a payments contract for each province, as current contracts will expire end 2006 Budget for these services (~R2 bn per annum) are included in the Social Assistance Administration budget of SASSA

19 Role of NDOSD in respect of social grants delivery Research, formulate and revise policy as necessary to maintain a social security system in accordance with the Constitution and relevant Acts; Receive national budgetary allocations as indicated on the previous slide Transfer operational funds (Soc Ass Admin, Grant Admin Integrity and SASSA funds) to SASSA in accordance with the payment schedule Transfer social assistance grants to households using SASSA as the agent for delivery in accordance with good financial management principles (PFMA), oversight and payments schedule Retain accountability to the Minister and Parliament for the national policy interest in social development, including social assistance.

20 Role of SASSA To act, eventually, as the sole agent that will ensure the efficient and effective management, administration and payment of social assistance; Serve as an agent for the prospective administration of social security; and Render services related to such payments Primary Duties Administer social grants payment system Collect, collate, maintain and administer necessary information Establish a compliance and fraud mechanism Retain accountability for integrity of the grant payments system

21 Role of the Inspectorate Conduct investigations to ensure the integrity of the social assistance frameworks and systems; Execute internal financial audits and audits on compliance by the Agency with regulatory and policy measures and instruments; Investigate fraud, corruption and other forms of financial and service mismanagement and criminal activity, within the Agency and in connection with its functions, duties and operations; In general, do everything necessary to combat the abuse of social assistance Primary Duties Conduct investigations within the social grants payments system; Perform internal audits on the Agency; and Provide independent reports to the Minister of Social Development

22 Role of the National Treasury Ensure compliance with PFMA and Treasury Regulations; Review in-year monthly and quarterly reports; Provide support and advice on financial management; Ensure that key risks are managed in the transition, via task team; Concurrency on Social Assistance Regulations

23 Key interim matters: SASSA SASSA to stabilise head office organisational structure and recruit people with requisite skills SASSA to assume full accountability for operation of the SOCPEN System SASSA to recruit requisite skills and people in regional offices, particularly finance staff which do not move over from provincial departments SASSA to complete ring-fencing process in collaboration with provincial departments by March 2007

24 Key interim matters: NDoSD NDoSD to hand over all activities, staff members, contracts and budgets associated with integrity of the payments system to SASSA NDoSD to ensure reconciliation of accounts relating to social grants and repatriation of funds outstanding from conditional grant payments made to provincial accounts during 2005/06, including interest earned on these funds NDoSD to ensure timely transfers made to SASSA for grants and administration NDoSD to drive establishment of the Inspectorate NDoSD to collate financial information and ensure in-year monitoring of funds transferred

25 Key interim matters: National Treasury Conclude flow of funds arrangements Finalise in-year reporting formats for the function Assist with clearing of historical suspense accounts Assist with outstanding financial management matters

26 Key interim matters: Provincial Departments of Social Development Execution partner to SASSA: Perform activities in accordance with Agency Agreements; Perform activities to complete ring-fencing exercise; Complete hand-over of operations to SASSA

27 END THANK YOU