SUBMISSION TO PARLIAMENT on the DIVISION OF REVENUE BILL for 2002 / 20003

----------------------------FINANCIAL AND FISCAL COMMISSION

For Select Committee6 March 2002

6. The Size of Provincial Conditional Grants

• Conditional Grants fund 12% of Provincial Government spending.

• Conditional Grants fund small proportions of provincial Education and Welfare spending, over 20% of Health spending and nearly all expenditure on Housing.

7. Composition of Provincial Conditional Grants

• 43% of the total value of Provincial Conditional Grants attaches to the Health sector in 2000 / 01.

• 24% to the Housing Subsidy

• 18% to Supplementary Allocations

• All 3 HIV-AIDs grants constitute 0.9% of total value of P.C.G. in 2001 / 02 (up from 0.4%)

8. Variations and Fluctuations in the Value of Conditional Grants

• Factors influencing changes in the value of individual grants include:

a) Entry and exit of new grantsb) Performance with respect to under-spending and

rollovers.

9. Under- and Over-spending on Provincial Conditional Grants

• Compliance with PFMA reporting requirements increased from 63% to 98% of the total value of P.C.G. between 1999 / 00 and 2001 / 02.

• Reported under-spending on P.C.G. increased from 5% to 16% during the same period.

• Rate of under-spending declines for Social Sector grants and EWS predicts slight over-spending for all Health and Welfare grants (except HIV-AIDs).

• Under-spending rates remain high for infrastructure grants (except Housing).

• Under-spending high for Transitional and Special Allocation grants – lack of confidence to make new spending commitments?

10. Provincial Conditional Grant Flows & Timing

• Quarterly disbursements the norm.• There may be disjuncture against monthly personnel

requirements.• Late (and infrequent?) disbursements contribute to

under-spending over the short- to medium-term.• Initial allocations for Poverty Relief and HIV-AIDs grants

made outside the Budget Process.

• Quarterly reporting is the stated norm in the Conditional Grant Framework. However, full compliance with PFMA requirements is not obvious.

• Inadequate or incomplete reporting may result in lower than average growth of disbursements and allocations.

11. Organizational Capacity Issues and Under-Spending 

• The more well-established grants appear to exhibit more frequent and regular disbursements and reporting and hence, lower rates of under-spending.

• The growth rate of disbursements appears to exceed provincial capacity to spend especially during the start-up phase. This is important where new policy initiatives are being operationalized.

• Nearly 40% of total P.C.G. value is constituted by grants aimed at capacity building and institutional restructuring. However, these initiatives are fragmented.

12. Output Performance Issues

• Most Provincial conditional grants indicate measurable outputs. A few indicate quantified output targets.

• Some grant descriptions exhibit a wide range of measurable objectives. This makes reporting onerous.

• Output measures expected of forthcoming Strategic Plans.

• The generation of such data is essential to enable planning for progressive realization towards equal access to basic services.

• Increasing rates of spending may hide inefficiencies. Declining rates of spending do not prevent efficiency gains.

• Measures of the “outcome” or impact of policy initiatives not provided.