DIVISION OF REVENUE ACT (DoRA):
CONDITIONAL GRANTS
Legislative Framework of Conditional Grants
By definition, conditional grants means an allocation to a province or municipality from the national government’s share of revenue raised nationally for a specific purpose. These funds have conditions attached to them, to which they must not be used for any other purpose other than those initially intended for.
Section 7(1) of the 2015 DoRA notes that conditional allocations for the 2015/16 financial year from the national government’s share of revenue were set out in:
Schedule 4 Part A, specifying allocations to provinces to supplement the funding of programmes or functions funded from provincial budgets.
Schedule 5 Part A, specifying specific-purpose allocations to provinces.
Schedule 6 Part A, specifying allocations-in-kind to provinces for designated special programmes; and
Schedule 7 Part A, specifying funds that are not allocated to specific provinces that may be released to provinces to fund immediate disaster response.
The table below gives an outline of the provincial conditional grants.
Conditional Grant classification
DEPARTMENT SCHEDULE 4 SCHEDULE 5
DRDAR • CASP • Ilima/Letsema
• Land care Programme Education • Education Infrastructure
• Further Education & Training
• OSD for Education Therapists
• Dinaledi
• HIV and AIDS
• School Nutrition
• Technical Secondary Schools Recapitalization
Health • Health Professional Training
• National Tertiary Services
• HIV and AIDS
• Health Facility Revitalization
• National Health Insurance
Public Works • Provincial Roads Maintenance • EPWP Integrated Incentive
• EPWP Social sector
Conditional Grant classification (cont’d)
DEPARTMENT SCHEDULE 4 SCHEDULE 5
Transport • Public Transport Operations
Sport & Culture • Community Libraries
• Mass Participation
Human Settlements • Human Settlement Development
Social Development • Substance Abuse
Conditional Grant Framework (Schedule 4 & 5)
After the publication of the DoRA, National Treasury also issues a Government Gazette in terms of Section 16 of the act relating to Allocations and Frameworks for conditional grants. (No. 37613 for the 2014/15 financial year, and No. 38869 for the 2015/16 financial year).
These gazettes give a detailed framework, outlining conditions of what is required for each conditional grant as follows:
Strategic goal and purpose of the grant
Outcome statements and outputs of the grant
Priority outcome(s) of government that the grant primarily contributes to
Conditions of the grant (additional to what is required in the Bill)
Criteria for allocation between provinces
Rationale for funding through a conditional grant
Process for approval of business plans (Sector timelines vs budget process)
Duties of the receiving department (Schedule 4)
Section 11 of the 2015 DoRA states that the receiving officer of a schedule 4 grant:
Is responsible for the compliance to the framework – per the Government gazette as mentioned above.
Must Submit to Provincial Treasury and transferring National Officer the following:
quarterly non-financial performance report of programmes partially or fully funded by a Schedule 4 allocation within 30 days after the end of each quarter; and
a monthly provincial report on infrastructure programmes partially or fully funded by a Schedule 4 allocation within 15 days after the end of each month, in the format
determined by the National Treasury
The receiving officer must report on programmes partially or fully funded by a Schedule 4 allocation against the relevant framework in its annual financial statements and annual report
Duties of the receiving department (Schedule 4 & 5)
Sections 11 of the 2015 DoRA states the responsibilities of the receiving officer of a Schedule 4 grant:
Section 12 of the 2015 DoRA states the responsibilities of the receiving officer of a Schedule 4 grant:
Section 12 (1) of the 2015 DoRA states among others that the receiving officer of a schedule 5 grant:
Is responsible for the compliance to the framework – per the Government gazette as mentioned above.
submit a quarterly non-financial performance report within 30 days after the end of each quarter to the transferring national officer and the relevant provincial treasury.
Duties of the receiving department (Schedule 5) cont’d
Section 12 (3) notes that the receiving officer must submit a report for a month and for the financial year up to the end of such month, which must set out:
the amount received by the province;
the amount of funds stopped or withheld and the reason for the stopping or withholding;
the actual expenditure by the province in respect of Schedule 5 allocations;
the amount transferred to any national or provincial public entity to implement a
programme funded by a Schedule 5 allocation on behalf of a province or to assist the province in implementing the programme;
the available figures regarding the expenditure by a public entity;
the extent of compliance with DoRA and with the conditions of the allocation provided for in its framework, based on the available information at the time of reporting; and
an explanation of any material difficulties experienced by the province regarding an
allocation which has been received and a summary of the steps taken to deal with such difficulties
Conditional Grant Allocations: 2014/15 Financial Year
The table below sets out the total allocation of conditional grants for the 2014/15 financial year, including both schedule 4 & 5 conditional grants.
A total amount of R10.079 billion was voted for the 2014/15, whilst an amount of R19.073 million was approved for rollovers. This resulted to a total financial year allocation of R10.098 billion.
Of the amount allocated, an amount of R368 thousand (of the R13 million budget) for Substance Abuse grant was not received by the PRF as at year end, due to non – compliance by the
Department of Social Development (invoices not submitted by department).
Clarity of the allocation of the Substance Abuse grant should be sought as the allocation is not made before hand, but rather based on invoices submitted
Gra nt Type - (R'000) Budge t 2014/15
Na tiona l Adjustme nts
Tota l Na tiona l Re ce ipts
Provincia l Rollove rs
Tota l:Budge t
Agriculture: Comprehensive Agricultural Support Programme grant 228,810 228,810 3,315 232,125
Agriculture: Disaster Management - -
Agriculture: Ilima/Letsema Projects grant 46,062 46,062 46,062
Agriculture: Land Care Programme grant: Poverty Relief and Infrastructure
Development 10,853 10,853 10,853
Arts and Culture: Community Library Services grant 109,418 109,418 1,898 111,316
Basic Education: Dinaledi Schools grant 13,342 13,342 13,342
Basic Education: Education Infrastructure grant 1,177,914 1,177,914 1,177,914
Basic Education: HIV and Aids (Life Skills Education) grant 37,023 37,023 37,023 Basic Education: National School Nutrition Programme grant 984,548 984,548 984,548 Basic Education: Technical Secondary Schools Recapitalisation grant 32,928 32,928 32,928
Basic Education: OSD for Therapist 6,571 6,571 6,571
Health: Comprehensive HIV and Aids grant 1,449,237 1,449,237 1,449,237
Nursing Colleges and Schools grant - - -
Health: Health Infrastructure grant - - -
Health: Health Professions Training and Development grant 199,874 199,874 1,386 201,260
Health: Hospital Revitalisation grant 599,231 599,231 599,231
Health: National Tertiary Services grant 786,007 786,007 10,334 796,341
National Health Insurance grant 7,000 7,000 1,049 8,049
Higher Education and Training: Further Education and Training Colleges
grant 319,517 319,517 319,517
Human Settlements: Human Settlements Development grant 2,159,218 233,500 2,392,718 2,392,718
Human Settlements: Housing Disaster Relief - - -
Transport: Infrastructure Grant for Provinces 1,294,279 1,294,279 1,294,279
SOCDEV:Substance Abuse Treatment 13,000 13,000 13,000
Public W orks: EPW P Inte gra te d gra nt for Province s 69,544 69,544 69,544
> Roads and Public W orks 46,791 46,791 46,791
> Health 2,000 2,000 2,000
> Education 3,115 3,115 3,115
> Rural Development 2,681 2,681 2,681
> Human Settlements 2,654 2,654 2,654
> Sport 2,102 2,102 2,102
> Social Development 2,000 2,000 2,000
> Local Government 2,000 2,000 2,000
> Economic Development 2,102 2,102 2,102
> Transport 4,099 4,099 4,099
Public W orks: Socia l Se ctor EPW P Ince ntive gra nt for Province s 41,714 - 41,714 - 41,714
> Education 2,580 2,580 2,580
> Health 31,242 31,242 31,242
> Sport 2,732 2,732 2,732
> Safety 2,580 2,580 2,580
> Social Development 2,580 2,580 2,580
Sport and Recreation SA: Mass Sport and Recreation Participation
Programme grant 64,895 64,895 1,091 65,986
Transport: Public Transport Operations grant 195,282 195,282 195,282
Tota l Conditiona l Gra nts 9,846,267 233,500 10,079,767 19,073 10,098,840
Conditional Grant Allocations: 2014/15 Financial Year (cont’d)
Conditional Grant Allocations: 2015/16 Financial Year
The table below sets out the total allocation of conditional grants for the 2015/16 financial year, including both Schedule 4 & 5 conditional grants.
During the 2015/15 financial year, the total conditional grants allocated amounts R10.060 billion.
As at the end of June 2015, an amount of R2.937 billion was projected to be received, however, an amount of R2.935 billion has been received to date, resulting to a variance of R2 million.
The variance is due to the Substance Abuse grant of Social Development, that was due to be received on 26 June 2015.
Enquiries from the national department revealed that there are no invoices that have been submitted by the provincial department hence the funds were not released to the province.
Summa ry Ce rtifica te of Proje ctions & Actua l Re ce ipts for Conditiona l Gra nts
Gra nt Type - (R'000) Budge t
2015/16
Tota l Proje ctions
Actua l Re ce ive d (Pe r Re ve nue Fund
Re cords)
Va ria nce Agriculture: Comprehensive Agricultural Support Programme grant 261,909 52,382 52,382 - Agriculture: Ilima/Letsema Projects grant 50,131 10,027 10,027 - Agriculture: Land Care Programme grant: Poverty Relief and Infrastructure
Development 10,666 1,067 1,067 -
Arts and Culture: Community Library Services grant 143,694 37,500 37,500 - Basic Education: Education Infrastructure grant 1,703,877 638,954 638,954 - Basic Education: HIV and Aids (Life Skills Education) grant 37,086 3,709 3,709 - Basic Education: National School Nutrition Programme grant 1,020,116 511,588 511,588 -
Basic Education: OSD for Therapist 2,067 689 689 -
Basic Education :Maths Science and Technology 45,059 9,012 9,012 Health: Comprehensive HIV and Aids grant 1,577,065 387,834 387,834 - Health: Health Professions Training and Development grant 204,430 51,108 51,108 - Health: Hospital Revitalisation grant 592,073 152,055 152,055 - Health: National Tertiary Services grant 803,770 200,943 200,943 - National Health Insurance grant 7,204 1,440 1,440 - Human Settlements: Human Settlements Development grant 1,962,372 470,483 470,483 - Provincia Roads and Maintanance Grant 1,289,151 316,350 316,350 - SOCDEV:Substance Abuse Treatment 2,000 2,000 - 2,000 Public Works: EPWP Inte gra te d gra nt for Province s 75,937 30,375 30,375 - > Roads and Public Works 53,607 21,443 21,443 - > Health 2,644 1,058 1,058 - > Education 2,736 1,094 1,094 - > Rural Development 2,188 875 875 -
> Human Settlements 2,607 1,043 1,043 - > Sport 2,013 805 805 -
> Social Development 2,000 800 800 -
> CO-Operating Governance and Traditional Affairs 2,000 800 800 -
> Economic Development 2,000 800 800 -
> Transport 4,142 1,657 1,657 - Public Works: Socia l Se ctor EPWP Ince ntive gra nt for Province s 11,054 4,422 4,422 - > Education 3,000 1,200 1,200 - > Health 5,000 2,000 2,000 - > Sport 1,000 400 400 -
> Safety 1,054 422 422 -
> Social Development 1,000 400 400 - Sport and Recreation SA: Mass Sport and Recreation Participation
Programme grant 61,066 19,752 19,752 -
Transport: Public Transport Operations grant 199,595 36,290 36,290 - Tota l Conditiona l Gra nts 10,060,322 2,937,980 2,935,980 2,000
Conditional Grant Allocations: 2015/16 Financial Year (cont’d)
Conditional Grant Challenges
Section 10(1) requires the transferring national officer of a Schedule 5 allocation to certify to National Treasury not later than 14 days after the enactment of the Act that the business plans have been approved before the start of the financial year in respect of how allocations will be utilised by a province.
A concern relates to the late approval of business plans (after the budget has been tabled) as it allows departments the opportunity to change business plans which may then not be fully aligned to the budget allocations.
The process of approval of conditional grants business plans allows for earlier approval of business plans, with timelines to be determined by the sector
The province may also determine for earlier approval of business plans, with timelines to be determined by the budget process timetable
Challenges experienced with the DORA inputs include the quality of such inputs not meeting the required standards.
Another challenge relates to the slow spending of conditional grants which may result in funds being redirected away from the province
Conditional Grant Challenges (cont’d)
Various challenges are experienced in the province with regard to conditional grants. These result to funds not flowing through from national to the province timeously. Below are some of the reasons for the delay in funding:
Non–submission of business plans to the national department promptly. This results in the first tranche of funds not being received as per payment schedule at the start of a financial year.
Non–submission of financial and non–financial information to the transferring national officers, results in funds being temporarily withheld.
Cross–subsidization of expenditure is also a challenge, due to to non–compliance by departments. As funds are not received as projected in the payment schedule,
departments use equitable share funds to fund conditional grants projects.
Misclassification on requesting of funds in the cash flow requisitions throughout the year.
Funds requested on equitable share whilst expenditure is on grants.
All these result in the delay of funds flowing to the province. These also compromise the liquidity of the PRF as departments spend on these grants whilst conditional grant funds are not received.
Recommendations
All business plans should be submitted to the national departments and provincial treasury as per the required timelines.
All grant managers to be familiar with individual conditional grant frameworks and DoRA to avoid non–compliance.
Possible set up on BAS configurations to ensure that expenditure on grants is able to be identified during the disbursement process.
This will assist departments in funds requisition to the PRF.
