1. 1 Conditional Grants Presenters: Mongana Tau and Yolanda Brown 17 February 2015

2. Outline Conditional Grant categorisation and purpose Conditional Grant expenditure trends Provincial breakdown of grant expenditure Grant system challenges Provisions within the Division of Revenue Act on administration of grants Proposed oversight focus 2

3. Schedule 4 Grants 3 These are allocations to provinces to supplement the funding of programmes or functions funded from provincial budgets. Expenditure of schedule 4 grants do not form part of National Treasury’s in-year monitoring reports.

4. Schedule 4 Grants cont. GrantPurpose Comprehensive Agriculture Support Programme Grant Provide support services, promote and facilitate agricultural development by targeting beneficiaries of land restitution and redistribution. Education Infrastructure GrantTo accelerate the construction, maintenance, upgrading and rehabilitation of new and existing infrastructure in education. Occupational Specific Dispensation for Education Sector Therapists Grant To augment the baseline compensation budget of provincial education departments. Health Professions Training and Development Grant To fund service costs associated with training health science trainees on the public service platform. National Tertiary Services GrantTo compensate tertiary facilities for the additional costs associated with the provision of tertiary health services. 4

5. Schedule 4 Grants cont. 5 GrantPurpose Further Education and Training Colleges Grant Ensure the transfer of the function to the Department of Higher Education and Training. Provincial Roads Maintenance Grant Supplementary funding for preventative, maintenance and rehabilitation of provincial road networks. Public Transport Operations GrantSupplementary funding for transport services provided by provincial departments of transport.

6. Schedule 5 Grants This is funding provided for a specific purpose. National Treasury publishes expenditure reports with regard to schedule 5 grants on a quarterly basis. 6

7. Schedule 5 Grants cont. 7 GrantPurpose Ilima/Letsema Project GrantAimed at assisting vulnerable South African farming communities to increase agricultural production and improving farming skills. Land Care Programme Grant: Poverty Relief and Infrastructure Grant. Aimed at promoting sustainable use and management of natural resources by engaging in initiatives that support sustainability and lead to greater productivity, food security and job creation. Community Library Services GrantAimed at transforming urban and rural community library infrastructure, facilities and services (primarily targeting previously disadvantaged communities) through a recapitalised programme at the provincial level in support of local government and national initiatives. Dinaledi Schools GrantAims to improve learner performance in mathematics and physical science.

8. Schedule 5 Grants cont. GrantPurpose HIV and Aids (Life Skills Education) GrantSupports South Africa’s HIV prevention strategy by promoting life skills training, sexual and reproductive knowledge and encouraging appropriate decision making among learners and educators to mitigate the impact of HIV. National School Nutrition Programme GrantAims to improve the nutrition of poor school children, enhance learning capacity and improve attendance in schools. Technical Secondary Schools Recapitalisation Grant Aimed at recapitalising technical schools to improve their capacity to contribute to skills development and training in the country. Technical Schools are secondary schools that offer vocational training with respect to specific technical subjects, which include: Civil Technology; Electrical Technology; mechanical Technology; and Engineering Graphics and Design. 8

9. Schedule 5 Grants cont. 9 GrantPurpose Comprehensive HIV and Aids GrantAimed at developing an effective response to HIV and Aids including universal access to HIV counselling and testing; and to support the implementation of the National Operational Plan for comprehensive HIV and Aids treatment and care; as well as subsidise in- part funding for the antiretroviral treatment programme. Health Facility Revitalisation Grant has 3 components:  Health Infrastructure  Hospital Revitalisation  Nursing Colleges and Schools  Aimed at funding general maintenance and infrastructure needs of smaller hospitals and clinics;  Aimed at providing funding supporting large projects that modernise hospital infrastructure and equipment ;  Aimed at funding the refurbishment and upgrading of nursing colleges and schools.

10. Schedule 5 Grants cont. GrantPurpose National Health Insurance GrantAimed at testing innovations in health service delivery to assess readiness for the implementation of National Health Insurance (NHI), and undertake health system strengthening activities in identified focus areas. Human Settlements Development GrantAimed at providing funding for the creation of sustainable human settlements. Expanded Public Works Programme (EPWP) Integrated Grant for Provinces Aimed at incentivising provincial departments to expand work creation efforts through the use of labour- intensive service and infrastructure delivery methods. 10

11. Schedule 5 Grants cont. 11 GrantPurpose Social Sector Expanded Public Works Programme (EPWP) Incentive Grant for Provinces Aimed at incentivising provincial social sector departments identified in the Social Sector EPWP Log- frame to increase job creation by focusing on the strengthening and expansion of social service programmes that have employment potential. Mass Sport Recreation Participation Programme Grant Aimed at facilitating mass participation within communities and schools through selected activities, empowerment of communities and schools in conjunction with relevant stakeholders.

12. Schedule 6 and 7 Grants Schedule 6 grants are allocations-in-kind to provinces for designated special programmes. Expenditure of schedule 6 grants do not form part of National Treasury’s in-year monitoring reports. Schedule 7 grants are unallocated funds for provinces for disaster response. 12 Schedule 6 GrantsPurpose School Infrastructure Backlogs GrantTo eradicate inappropriate school infrastructure and provide water, sanitation and electricity to schools. National Health GrantFund the improvement of NHI pilots and infrastructure projects and the implementation of the Human Papillomavirus vaccination programme. Human Settlements Development GrantFunding for the creation of sustainable human settlements.

13. Agriculture, Forestry and Fisheries The Agricultural grants registered expenditure of 90 per cent and above on average for the five year period under review. 13

14. Arts and Culture Grant expenditure average of 85 per cent and above for the five year period under review. 14

15. Basic Education The National School Nutrition Grant and the HIV and Aids Grant registered expenditure of 90 per cent and above on average for the five year period under review; while The spending performance of the Dinaledi Schools Grant and Technical Secondary Schools Recapitalisation Grant lags behind at an average of 84 per cent and 69 per cent, respectively. 15

16. Health The Comprehensive HIV and Aids Grant registered expenditure of 95 per cent on average for the five year period under review; The newly merged Health Facility Revitalisation Grant registered 83.3 per cent expenditure in its first year of implementation; and Spending of the Health Insurance Grant started off slowly at 52 per cent in the first year of implementation (2012/13) and increased to 78.9 per cent in the following year. 16

17. Human Settlements Average grant expenditure of 95 per cent and above, since implementation in 2010/11. 17

18. Public Works The EPWP Integrated Grant registered high expenditure, since its implementation in 2012/13; while The Social Sector EPWP Grant has registered expenditure of between 70 and 90 per cent for the period 2010/11 to 2013/14. 18

19. Sport and Recreation South Africa Average grant expenditure of 90 per cent and above for the five year period under review. 19

20. Ilima/Letsema Project Grant 20 Provincial grant expenditure was well below the 50 per cent quarterly expenditure benchmark for the second quarter of 2014/15.

21. Land Care Programme Grant 21 This grant registered the most improved spending of all the schedule 5 grants by the end of the second quarter. Expenditure increased considerably from 5.4 per cent in the first quarter to 47.9 per cent in the second quarter of 2014/15.

22. Community Library Services Grant 22 Provincial spending continued at a slow pace in the second quarter of 2014/15 at 33 per cent, well below the quarterly expenditure benchmark of 50 per cent.

23. Dinaledi Schools Grant 23 The Eastern Cape and Western Cape provinces are the only provinces spending within reach of the quarterly expenditure benchmark of 50 per cent. The rest of the provinces will need to review their spending plans if they are to expend this grant funding in full by financial year-end.

24. HIV and Aids (Life Skills Education) Grant 24 This grant expenditure was off to a slow start at 10.6 per cent in the first quarter but improved considerably to 42.4 per cent by the end of the second quarter.

25. National School Nutrition Programme Grant 25 Grant spending by the provinces was on track at the end of the second quarter of 2014/15, except for Limpopo Province that was lagging behind at 42.2 per cent.

26. Technical Secondary Schools Recapitalisation Grant 26 This grant registered the least expenditure of all the schedule 5 grants by the end of the second quarter of 2014/15 at 20.7 per cent. However, the Western Cape Province registered expenditure of 53.8 per cent in line with the 50 per cent benchmark.

27. Comprehensive HIV and Aids Grant 27 Grant spending was on track in the majority of the provinces by the end of the second quarter of 2014/15, except for the Free State Province and Limpopo Province.

28. Health Facility Revitalisation Grant 28 Spending by the provinces started off at a slow pace in the first quarter and continued into the second quarter at an average of 36.7 per cent, well below the 50 per cent benchmark.

29. National Health Insurance Grant 29 Provincial grant expenditure was well below the 50 per cent quarterly expenditure benchmark for the second quarter of 2014/15, except for Gauteng province that registered expenditure of 53.6 per cent.

30. Human Settlements Development Grant 30 Grant spending was on track in the majority of the provinces by the end of the second quarter of 2014/15, except for the provinces of Free State, Gauteng and Limpopo.

31. EPWP Integrated Grant for Provinces 31 Grant spending at the end of second quarter was in line with the 50 per cent benchmark. However, grant spending differs significantly across the provinces. For example, the Eastern Cape registered the highest expenditure at 76 per cent and Gauteng the least at 11.9 per cent.

32. Social Sector EPWP Incentive Grant for Provinces 32 Grant expenditure by the provinces would appear to be on track for 2014/15, except for Free State Province that was lagging behind at 23.8 per cent by the end of the second quarter.

33. Mass Sport and Recreation Participation Programme Grant 33 Provincial grant expenditure was well below the 50 per cent quarterly expenditure benchmark for the second quarter of 2014/15.

34. Grant under-expenditure These seven grants registered the least expenditure at the end of the second quarter of 20141/5: –Health Facility Revitalisation Grant – 36.7 per cent; –Ilima/Letsema Project Grant – 33.2 per cent; –Community Library Services Grant – 33.0 per cent; –Mass Sport and Recreation Participation Grant – 32.4 per cent; –Dinaledi Schools Grant – 24.7 per cent; –National Health Insurance Grant – 24.4 per cent; and –Technical Secondary Schools Recapitalisation Grant – 20.7 per cent. 34

35. Grant System Challenges 35 Shifting grants from direct to indirect and from one department to another Poor planning characterised by slow procurement processes, submission of unsound plans that lack risk management or show unrealistic targets or do not show long term plans. None compliance with reporting on spending, outputs and outcomes Monitoring capacity constraints within national departments Implementation capacity constraints – lack of technical skills Poor project management that compromises quality of the work done Under spending - some of the under spending are due to delays within supply chain processes, capacity constraints and service providers who fail to deliver Questionable spending such as huge expenditure spikes and transfers to implementing agencies. Disjuncture between allocation and impimentation

36. Provisions within the Division of Revenue Act on administration of grants 36 Duties of national transferring officers and duties of provincial receiving officers. The role of National Treasury with regard to payment schedules and their amendment. Spending purpose and conditions Conditions for withholding and stopping or re-allocation of grants Reporting requirements (financial and non-financial) Conversion of allocations Unspent allocations and request for roll-overs Duties and powers of municipalities, provincial treasuries and National Treasury

37. Proposed oversight focus 37 National Departments that should be called before the Committee for: Reporting on financial and non-financial outcomes of grants administered by them – especially Schedule 4 and 6 grants. Provinces that should be called before the Committee regarding overall conditional grant expenditure performance, especially Schedule 5 grants, should include: –Provincial Departments that fail to report appropriately. –Provincial Departments that underspent. Oversight visit to certain projects of provinces that seem to be spending well to ascertain value for money spent. Strengthening the provisions for grants during the Division of Revenue Bill 2015 processes.