1. FFC COMMENTS ON THE DIVISION OF REVENUE BILL 2006/07
Presentation to:
Select Committee of Finance,
Joint Budget Committee,
Portfolio Committee of Finance
16 February 2006
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2. INTRODUCTION Section 214 (1) & the IGFR Act.
Consultations with the MOF in 2005/06
General and specific comments on the Bill
Assessment of the allocations for 2006/07
National and Provincial Priorities
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3. GENERAL COMMENTS on D.o.R.B. 2006
Consistent approach needed for ceilings on the portion of the grant that may be used for capacity, acquiring capacity & set-up costs.
Minimum set of criteria required for doing evaluations.
Flexibility needed in the procurement of services for construction and maintenance.
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4. SPECIFIC COMMENTS on D.o.R.B. 2006
Section 9 (2) (b): Greater flexibility for provincial departments to use the services of private providers for infrastructure maintenance and construction.
Section 9 (3) (c): Establish ceilings of the portion of the grants that can be used for capacity, admin and set-up costs.
Section 19: Re-allocation after stopping of allocations. Consider re-allocation of funds within provincial departments or within provincial programmes.
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5. SPECIFIC COMMENTS on D.o.R.B. 2006
Section 22: Allocations to public entities for the provision of municipal service or function – cost of the National Electification Programme.
Section 24 (6): Evaluations should be published to promote transparency.
Section 25 (5): Evaluations should be based on a minimum set of factors to monitor performance at a national level.
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6. SPECIFIC COMMENTS on D.o.R.B. 2006
Section 40: Consideration should be given to the inclusion of bodies such as the DBSA.
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7. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Part A: Recommendations for the DoR 2006
Proposals on health conditional grants (NTSG and HPT&DG)
Proposals on welfare services financing
Assignment of powers and functions framework
Funding framework for housing
Funding and institutional framework for transport
Supplementary submissions
Financing municipal health services
The development component of the L.E.S. formula
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8. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
NTSG
Government generally supports the FFC’s recommendations
Government further stresses the need to review this grant in light of the proposals on the modernisation of tertiary services program (MTSP)
FFC has already conducted such a review and will be tabling its recommendation shortly
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9. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Government has clarified that the grant is meant to fund strictly level 3 services.
Any spillovers with respect to level 2 services can can be dealt with through inter-provincial billing.
While agreeing with the principle the Commission is of the view that the billing systems in the health sector should be improved in order that this principle can be upheld.
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10. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
HPT & DG
There is general agreement that the grant be maintained as conditional grant and that a review be conducted to ensure that the allocation and utilization of the grant is efficient and ensures the training for accredited qualifications
Government further indicates that it is currently reviewing the grant and final results are expected during the course of The FFC supports this effort that it views as complimentary to the work that it has conducted thus far on the matter
The results of the FFC’s work and relevant recommendations will be submitted shortly
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11. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Welfare services
Government agrees with the FFC’s recommendations
Furthermore Government has taken the Commission’s recommendations into account in deciding allocations in the 2006 Budget and over the MTEF by allocating more resources through the PES
The Commission welcomes this development but would be making recommendations on a long-term financing arrangement for Welfare services
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12. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Assignment of powers and functions
Government agrees with the FFC’s recommendations and notes that the Framework Document of the assignment of powers and functions to local government has been developed and published into regulations
The FFC welcomes the development but however, it does not believe the recommendation has been fully addressed
The commission recommended that the policy framework for the assignment of powers and functions should go beyond such assignment to the local sphere alone
Should cover all three spheres of government
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13. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Institutional and funding framework for housing
Government generally agrees with the FFC
Government does not agree with the FFC on the issue that when a function is assigned to Local government the administration costs should be borne by national government
Government is of the view that administrative costs should be shared with local government from own revenue sources
While the FFC agrees with the principle alluded to by government, it also is of the view that the way in which the principle is implemented should not negatively affect poorer municipalities even though it is unlikely that such municipalities will be accredited.
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14. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Does not agree with the recommendation that the formula for the LES be linked with the approval of housing subsidies and the MIG
FFC agrees that the implementation of such a link will be complicated technically due to the time lags between the approval of subsidies and the actual construction.
Further the MIG also funds infrastructure outside of housing
FFC agrees with government but still maintains that there be a link with the equitable share in order to cushion poor municipalities
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15. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
With respect to Transport Funding and institutional Framework
Government agrees with all the FFC recommendations and emphasises the need for efficiency improvements in inter-modal transport planning
The FFC supports the government’s view that there is a need to draw lessons from the problems highlighted through the Gauteng Rapid Rail Link project (Gautrain)
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16. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Supplementary Submissions
Decentralisation of health services
Government agrees with the FFC recommendation that environmental healthcare services be incorporated into the LES and has already implemented the recommendation for the 2006 budget and MTEF. This will be revised as more accurate cost estimates are arrived at.
Government is of the view that there is no need to develop a comprehensive environmental healthcare package since the ACT provides the elements.
The Commission is of the view that the package is necessary for implementation and the for ensuring more accurate cost estimates.
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17. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
The Developmental Component of the LES
Government agrees with the FFC’s recommendation that this component should not be incorporated into the LES
Government awaits the Commission’s recommendations on what municipal expenditure needs are in order to refine the formula to take them into account
FFC has an on-going project that was suspended in the past year due to capacity constraints. The project will form part of the work plan for 2006.
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18. F.F.C. COMMENTS ON GOVERNMENT’S RESPONSE TO RECOMMENDATIONS
Conclusion
FFC welcomes the government’s listing of challenges for the short to medium term in Annexure E
The challenges will be incorporated into the work plan of the Commission
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19. SPENDING PERFORMANCE ISSUES IN BALANCING INTERGOVERNMENTAL ALLOCATIONS
F.F.C. welcomes clauses in DoRB 2006 that deal with spending and delivery performance.
Conditional Grants
National policy priorities can be most directly expressed through conditional grants.
Conditional grants more frequently under-spent than Equitable Share funding (or) spent on matters other than intended.
Reasons include institutional and skills capacity to disburse, spend and monitor (and) conditions that are too onerous, loose or ill-defined
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20. SPENDING PERFORMANCE ISSUES IN BALANCING INTERGOVERNMENTAL ALLOCATIONS
With respect to the debate over whether national or provincial spheres should be entitled to re-allocate unspent conditional grants, the F.F.C. has noted that conditional grants are part of the N.E.S. and that national government has the right to re-allocate unspent conditional grant funds but that it should do so after consideration of provincial government recommendations.
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21. SPENDING PERFORMANCE ISSUES IN BALANCING INTERGOVERNMENTAL ALLOCATIONS
Equitable Shares
Provincial policy priorities can be more directly expressed through re-allocations of Equitable Share funding.These may be expressed through the PGDS. In giving expression to the PGDS, some Premiers’ Offices have established economic development and/or poverty alleviation funds.
Underspending lower on budgets derived from E.S. funding and generally limited to new or small programs.
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22. SPENDING PERFORMANCE ISSUES IN BALANCING INTERGOVERNMENTAL ALLOCATIONS
Performance Budgeting
FFC believes concerns about under-delivery best addressed through performance budgeting systems (linking strategic plans and budgets) which enable constant monitoring.
Important indicators to measure progressive realization include per-beneficiary spending, coverage rates, levels of service, cost-efficiency and cost-effectiveness.
Within limits of ensuring real growth in per-beneficiary spending and improvements in coverage for CMBS, spending on economic development and empowerment should be permitted but accounted for.
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23. CONCLUSION
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