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

Ministerof Social

Development

SASSANational Department

of Social Development

Inspectorate for

Social Asistance

8

Transition: Social Assistance and Grants Administration

2004/05 2005/06 2006/07 2007/08

Function Provincial National National National

Delivery of social grants (Execution)

ProvincesProvinces 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)

National Budget (Transfers to SASSA)

CG Social Assistance

National Budget (Transfers to Households)

National Budget (Transfers to Households)

9

Relative roles in the system for the delivery of social assistance

Functions SASSA National

DoSD

Auditor-

General Inspectorate

Internal Audit

External Audit

Service Delivery Monitoring and

Evaluation

Service Delivery Monitoring and

Evaluation Oversight

Financial control

Financial control oversight

Regulatory Compliance Monitoring

Oversight of policy implementation and

policy review

10

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

Fraud Investigations SASSA National

DoSD

Auditor-

General Inspectorate

In the social grants delivery system, i.e.

NDoSD, Agency, payment contractors

(investigation of internal matters)

External to the Agency, i.e. by

applicants and other external parties

Flagging evidence of fraud in the

delivery of social grants

Financial management, monitoring and

control

Oversight of the integrated Social

Security process

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

National Revenue

Fund

• Division of Revenue Act

Equitable share Provincial Treasuries

Provincial Departments of Social

DevelopmentBeneficiaries

Payment Contractors

Transfers to Households

13

Flow of funds:2005/06

National Revenue

Fund

• Division of Revenue Act

Conditional Grants Provincial Treasuries

• Social Assistance Administration

• Social Grants

Provincial Departments of Social

DevelopmentBeneficiaries

Payment Contractors

Transfers to Households

14

Interim flow of funds:2006/07

National Revenue

Fund

Appropriation Act

National budget process

National Department

of Social Development

South AfricanSocial Security Agency

Transfers to SASSA

(SASSA)

Social Assistance Administration

Beneficiaries

Social Assistance Payments

Paym

ent

Co

ntracto

rs

Direct b

ankin

g

transfers (E

FT

’s)

SOCPEN

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