Issued by Ministry for Welfare, Population and Development
10 March 2000
R203 Million Financial Year 1998/99
In the report of the Auditor-General concerns were raised about the increasing proportion of under-expenditure by the Department of Welfare since 1996/7. The reported under expenditure is as follows:
The bulk of the under-expenditure in 1998/99 was attributed to the Poverty Relief Fund. The Department of Welfare (DoW) received R203 million in 1998/99 from the Infrastructure and Investment Fund for its Poverty Relief Programme.
Prior to the end of the 1998/99 financial year, the DoW transferred R81 million to the Independent Development Trust (IDT) appointed as its disbursement agency. The transfer of funds was paid from the suspense account for control purposes as a number of administrative and legal procedures with regard to the individual projects still had to be finalised. The amount transferred to the IDT was therefore not reflected as expenditure.
The DoW obtained approval from the Department of State Expenditure to roll-over R202 950 000 of the Poverty Relief Allocation to the 1999/2000 financial year. The original allocation of R50 million for 1999/2000 was reduced to R40 million. The total amount of funds for Poverty Relief in 1999/2000 was therefore R242 950 000.
The DoW received an allocation of R50 million on 1997/98. All funds were spent by the end of that financial year. These funds were disbursed directly by the DoW. A rapid appraisal was conducted on the programme to identify lessons learned, so as to improve the management of the programme. The IDT was appointed as a disbursement agency in order to address some of the shortcomings of the original programme.
The rapid appraisal also pointed to the need to conduct an audit of programme. A tender was advertised for the audit. The DoW has been informed that the State Tender Board will finalise the appointment of an audit company this week. The DoW will meet with the consultants this week to agree on the audit pIan.
The State Tender Board On 2 March 2000 approved that the DoW oould use a restricted tender for the auditing of current poverty relief funds. While the audit is expected to focus on the national projects, it will include a sample of provincial projects. As the cost of the audit is expected to exceed the DoW's delegation, the final decision vests with the State Tender Board.
An official from the DoW was arrested and charged in December 1999 with fraud and theft R200 000 from the Poverty Relief Funds. The matter has been investigated by the Scorpions and the official is in custody awaiting trial. The DoW has received a draft report on the forensic audit conducted as part of the investigation, which confirms the fraud and theft.
There are serious shortcomings in the financial management of the Poverty Relief Programme by the DoW. Although the Department has taken steps to improve the programme, for example, designing a monitoring and evaluation system, fundamental problems of poor management will continue to frustrate progress.
The financial audits, white necessary, will only provide a partial picture of the; programme. A comprehensive evaluation of the programme will be undertaken to assess the impact of the programme on the poor and to assess the effectiveness of the institutional arrangements. This will contribute to the development of an integrated poverty eradication strategy. Since late last year the Department has been exploring donor support and technical advice for the evaluation.