The Policy on Financial Awards to Service Providers (PFASP) replaced the former Financing Policy of 1999. It aims to regulate the co-operation between non-profit organisations (NPOs) and the government in terms of financing arrangements for social service delivery.

When the first draft was released in 2004, the National Welfare Forum (NWF) and the National Coalition for Social Services (NACOSS) released comments on the policy and later issued a common position paper detailing various options for improvement. Since implementation, the policy has been strongly criticised by the NGO sector.

The policy enforces obligations on NPOs while ignoring the responsibilities of the government

The PFASP does not provide a proper base for a functioning partnership as described in the goals of the Department of Social Development (DoSD) (2004: introductory remarks). The policy is built on the perception that NPOs are to blame for the shortcomings in the social services system, which in reality is the responsibility of the government to provide. The policy discusses obligations of the NPOs but very little is mentioned about the obligations of the government in carrying out social services (2004: section 1 & 2; 2008:2.1).

As stated in the 2004 document on the policy published by the NWF: "The responsibility for ensuring that all people are in a position to realise their socio-economic rights as per the Constitution lies in the first place with government" (2004: section 1 & 2).

The NWF thus requests an audit of services and responsibilities in the social service sector. The audit should clearly state which areas of responsibility belong to the government, and which can be outsourced to NPOs. Without a proper audit of this kind, the government will keep asking NPOs to provide more than their share of responsibilities (2004: section 4). Until now there has been a tendency for the DoSD to de-prioritise certain issues and reduce funding for them, yet NPOs are expected to provide these services without any decrease in quality (2004: section 8).

Not only is the government requesting unacceptable obligations of the NPOs but it is also accusing them of poor work

NPOs are accused of not distributing their services equally throughout society both in terms of geography and in terms of social structures. The PFASP demands equity but the funding is not nearly sufficient for the sectors currently served. Without more funding it is impossible to distribute the services more equally without severely weakening the sectors that already have insufficient access to social services (2004: section 1, 2 & 3; 2008: 2.2). The NPO sector agrees that there is a need to distribute the services equally but the policy suggests it should be done through redistributing the funding that is currently available instead of offering more funding (2004: sector 1 & 2).

In the PFASP, the government criticises the NPOs in general for not been transformed according to the guidelines of transformation given in the White Paper for Social Welfare. It is wrong to generalise like this when most NPOs have in fact been adopting the requirements of the charter. If indeed there are organisations who do not conform to the charter then corrective actions should be taken. But the National Welfare Forum finds it unacceptable that the whole sector is unfairly labelled (2004: section 1 & 2; 2008:2.2).

Financing

The financing options presented in the policy are acceptable. NWF supports the long-term contractual financing approach that is suggested in the policy as it would help the organisations conducting projects that can never be self-sustaining in nature. With regards to this approach, the NWF would like to see a model in which the government delegates relevant responsibilities - with full funding for a basic service package - to NPOs, to which they can add additional funding for upgrading of service quality, conducting research, and piloting new services (2004: section 8).

The methods of payment outlined in the policy are satisfactory, but the current system is crippled by delays in payments from provincial departments. There thus needs to be a greater emphasis on timely payments in the PFASP (2004: section 8).

The sector is expected to do sufficient work with insufficient funding

The sector constantly struggles to obtain sufficient funding to do constructive work in its community. The NWF requests the policy to acknowledge the lack of funding, instead limiting the funding even more than before.

The PFASP requires "value for money" which is impossible for the NPOs to deliver when the funding is insufficient in the first place. No other sector is expected to perform sufficiently without sufficient funding (2004: section 4).

The NFW thus wants the PFASP to acknowledge the fact that there is insufficient funds for NPOs and that this is creating a competitive market where NPOs are allocating resources to compete among themselves for funding (2008: 2.1). If the government is unable to provide sufficient funding for a project, it should at least be offering assistance on how to obtain funding from other sources (2004: section 1 & 2). The policy does not mention that the government will provide any form of assistance in this matter. Other funders are implicitly mentioned as being able to provide funding but the reality is that many of the funders are reluctant to fund projects covering basic needs that are the responsibility of the government (2004: section 6 & 7).

The solutions presented in the policy are not the answers

The PFASP suggests that the NPOs should charge fees for their services as a complement to the funding. This is simply not possible since most of the services offered by NPOs target poor and marginalised people who have no ability to pay fees. To implement fees would exclude the weakest groups in the society from the services (2004: section 4). The claims in the PFASP on the ability for NPOs to charge fees are exaggerated and the claims are being made without a proper presentation of what is included in the research it refers to. Furthermore, the same research is referred to out of context when it is claimed that the sector is following pre-1994 patterns, the research does not investigate this issue and it does not come to any conclusion in the matter. NWF suggests that a research be initiated to investigate the current state of the service network (2004: section 4).

NPOs are still encouraged to focus on preventive actions, share their knowledge with new and weaker NPOs, follow best practice models, train staff and keep pace with the latest developments (2004: section 10). When severally underfinanced, however, organisations have no choice but to focus their work on crisis relief and to fight for their own survival. There are no resources available to develop their own methods or share knowledge and help weaker organisation (2004: section 6 & 7).

In conclusion

The NWF welcomes a reviewed version on the financial policy of 1999 and is in principle in agreement on several parts. But in general the situation is misread and the PFASP still contains the same problems as its predecessor. The government is blaming the NPOs for failures that are due to lack of funding, and the PFASP suggests that the NPOs have many obligations but mentions little about the responsibility of the government.

It is important that the concept of "value for money" is not interpreted as numbers served, but the quality of the work delivered (2004: section 10). The PFASP should thus be re-drafted to include the aims of the Integrated Service Delivery Model (ISDM) which examines the responsibilities of the government and its NPO partners (2008: 2.1 & 3).

The NWF urges the government to halt the process of the PFASP and include all stakeholders in a proper consultation process to build a system that works for the state and NPOs. An effective partnership on this level will have a positive impact on poverty in South Africa (2004: Introductory Remarks).

References

2004, The Forum, Comments on the Draft Policy on Financial Awards to Service Providers: The National Welfare Social Service & Development Forum

2008, Position Paper of the Joint Strategic Committee: Join Strategic Committee (JSC)

Policy on Financial Awards to Service Providers: Department of Social Development

Appendix 1

Position Paper by Joint Strategic Committee (2004)

The policy is focussed overwhelmingly on the obligations of NPOs who are being funded or are seeking funding. It fails to address the question of what is to be funded and how the necessary funding is to be obtained.

Where government is unable to meet the costs of services, which are its own legal responsibilities, the policy should address itself to ways in which other funding partners can be drawn in and the gap can be bridged. There is a need to address the fact that there is insufficient donor funding available, and that NPOs are already using an excessive amount of their available resources in competing with each other, and with government, for the limited available resources. Options for correcting this situation should be examined.

Much of the document [PFASP] seems to be founded on the assumption that the basic problem with funding is a lack of transformation amongst social welfare NPOs, who are deemed to be serving mainly the more privileged sections of the population. The conclusion is then drawn that the main task of government is to correct this, e.g. by "tightening" the specified transformation criteria.

While there may well be organisations that have failed to transform, and while both The Forum and NACOSS would fully support corrective action where this is the case, we regard it as unacceptable that the entire sector has been unfairly labelled, and that the PFASP has been largely founded on this assumption rather than on the urgent need to ensure that services are funded adequately.

The amount of money, which NPOs can raise, falls far short of the gap between the services, which government provides directly and the actual social welfare needs of the country. This is especially so at a time when many donors are increasingly funding specific areas such as HIV and AIDS or job creation projects and making very little available for other essential (often statutory) services.

The idea that no matter how inadequate the funding they receive from either the state or the private sector, NPOs can be expected not only to deliver services to unlimited numbers of people, but also to make these services adequate and effective so that they will constitute "value for money".  Government has no such expectation of any partner other than social welfare NPOs. Government can only reasonably expect value for money from NPOs if they have sufficient funds to deliver the required services at an acceptable standard. The current financing dispensation for NPOs is unconnected to the realities of service delivery and this is a recipe for failure by the sector in discharging its responsibilities. The policy should be designed to correct this situation.

It is recommended that the PFASP be amended as follows:

• By the inclusion of a detailed overview of the financing needs of the sector in accordance with its responsibilities as set out in the ISDM.
• By the inclusion of a clear account of government's responsibilities for the funding of the various types of service undertaken by the sector.
• By attention to the issue of how shortfalls can best be addressed, e.g. through approaches to financing which do not excessively divert scarce NPO resources into mutual competition for funds.
• By the removal of unsubstantiated generalisations relating to an alleged lack of transformation in the sector.
• By the removal of statements based on any of the misconceptions mentioned above, or at least by qualifying them to take into account the realities mentioned.

It is also recommended that a national audit be carried out of:

1. The extent of the social needs that need to be addressed by the sector, as set out in the Constitution and relevant laws and policies;
2. The extent of the services required to meet these and
3. The extent to which these services are, or are not, currently in place.

Appendix 2

Comments on the Policy on Financial Awards for Service Providers (2008)

The Forum welcomes the fact that progress is being made towards the development of a revised policy to guide the financing of the social services, given that the policy as formulated in 1999 has not proved adequate for this purpose. However, although the draft policy has some positive components, we are very concerned that in general the present document [PFASP] and the process whereby it has been developed incorporate almost exactly the same problems as those relating to its predecessor.

Neither will there be a proper basis for the type of partnership between government and civil society which is required to achieve the Department's stated mission, and to ensure that services are based on a cooperative approach and are efficient, effective and accountable as emphasised in the Preamble.

SECTIONS 1 AND 2: INTRODUCTION AND SCOPE AND PURPOSE

The statement that realignment of services in line with government policy "has not been the general trend" is made without any evidence being supplied, and we suggest that this is a sweeping and unfair generalisation. If indeed there are organisations which are still living in the past then the Department of Social Development should address itself to them specifically and not stereotype the sector as a whole. 

First misconception: NPOs have sufficient resources to expand their services to areas which have fewer services, and those who will be disadvantaged in such a process are privileged people with a lesser need for the services in question

Most social service NPOs are struggling to cope with the demand for their services within their present localities. They are not able to spread their programmes more thinly without seriously negative consequences for those to whom they are currently accessible, who are in many cases already inadequately served due to the financial constraints within which these organisations are operating. The people using these services are predominantly poor and marginalised persons. To move services away from these in order to serve other poor and marginalised people, or to spread the services so thinly that they are of no value, will solve nothing. Such an approach amounts merely to shifting the service deficits about on the map, and robbing some poor and marginalised people to help others. The only answer is to increase the resource base so that all who need services can have access to them.

The responsibility for ensuring that all people are in a position to realise their socio-economic rights as per the Constitution lies in the first place with government. It is fully appropriate for government to seek partnerships with NPOs in order to carry out this responsibility, but they can only carry out such share of this responsibility as lies within their resources. If there are areas without services it is up to government either to provide these services or to seek the help of and provide support for NPOs in order to fill the gaps. It is completely inappropriate to blame hard-pressed NPOs which are struggling to deliver services under extremely difficult circumstances for these shortfalls.

Third misconception:  "Tightening" the present "transformation mechanisms" will promote the transformation agenda

If by the abovementioned "tightening" is meant an intensification of the practices which emanated from the 1999 financing policy, we would suggest that some of these practices are actually causing the current deficits in services rather than helping to resolve them. Intensifying these approaches is therefore likely to compound rather than resolve the problems.

Fourth misconception: Despite the currently inadequate funding available from either the state or the private sector, NPOs can be expected not only to deliver services to unlimited numbers of people, but also to make these services adequate and effective so that they will constitute "value for money".

No other sector expects the above of non-government partners, because it is obviously impossible for any entity to deliver a service which is far beyond its capacity and yet remain effective.  To speak of quality services in such a context is to make a mockery of the concept.

SECTION 3: PRINCIPLES

The NWSSDF is in agreement with all the principles listed here; however we would differ in our interpretation of the principle of equity. The social service system as a whole is severely underfinanced and it is totally unfair to expect resources to be taken away from those who are currently receiving a service, which is often already inadequate, to serve those who are without services. This amounts to a redistribution of disadvantage rather than of wealth.

We would thus suggest that the need is in general not for a "redirection" of current services, but for an expansion of the resource base so that all, rather than just some, of those in need can be served.

The statistics provided here are useful in terms of providing some broad pointers to the developmental status of the nation, but we suggest that this is a very inadequate analysis for purposes of planning for the financing of the social service system. These are figures which all sectors require for an understanding of their broad context and for a concerted approach to the combating of poverty, HIV, unemployment and other mass problems. Poverty is undeniably the most serious challenge facing the nation - but it has to be faced by every sector.

But it has a host of other responsibilities which, while being closely interrelated with poverty, have to be addressed in their own right.

It has long been pointed out by NPOs that there is a need for a proper audit of the responsibilities of the social service sector. Once such an audit has been conducted, we will be in a better position to begin estimating its financial needs and making systematic plans for these needs to be met. Until government together with the NPOs addresses this task, documents on financing will continue to look like efforts to force the NPOs to take on government responsibilities which are far beyond their capacity.

The Swilling/ Russell figures in relation to fees for service require close analysis to determine what it is that they cover, and what type of "social services" they have included here, as the picture which is presented here is in our view a gross exaggeration of the ability of social service NPOs to generate income through fees. The typical social service NPO affiliated to the NWSSDF is able to garner very little in this manner because most of its clientele are poor. The study, which is five years old, is also quoted out of context to suggest that the sector is still following pre-1994 service patterns, even though the research did not investigate this issue and the researchers do not reach a conclusion, but rather raise a question in this regard. We suggest that specific research be initiated which is properly designed to investigate the current state of the service network.

SECTIONS 6 AND 7:  SERVICE SPECIFICATIONS AND TRANSFORMATION

NPOs must not be expected to expand into rural areas if this will mean removing services from, or seriously weakening services to, high concentrations of people in need in the urban centres. Thus what will be required is additional funding to make the extension of NPO services possible, or alternatively for the state to provide the missing service component itself.

It must be understood that the more funding shrinks, the more an organisation ends up focusing on crisis-oriented tertiary services because these involve life and death issues which cannot be deferred. To date, the Department's calls for a shift towards prevention have unfortunately been accompanied by a reduction of funding in real terms for these services, as well as a continued dependence by government on these organisations for the delivery of statutory services. It is impossible to expand primary and secondary preventive services under such conditions.

As organisations become more and more cash-strapped, their resources increasingly have to be channelled into keeping their own core services going.

Finally, while NPOs are already heavily engaged in fundraising from non-government sources and will continue on this path, it is not acceptable for government to trade on this factor and call for an unrealistic level of independence from social service NPOs. There is strong resistance among foreign and private sector donors to paying for work which is regarded as the direct responsibility of government. Also, for certain types of work, such as statutory social services, government should not be talking about financial independence at all. It should be purchasing such services in full as would any other sector of government when delegating a core responsibility to a private partner. At present it is the NPOs which are subsidising government through the delivery of such services, and this is both an unjust and an unsustainable arrangement.

SECTION 8:  FINANCING

The financing options mentioned in this section are acceptable. The possibility of shared financing offers a way in which organisations can cooperate to overcome the fragmentation of services which is a feature of our system for historical reasons. This is a potentially very useful approach. The long-term contractual financing approach is one which is appropriate to a great many organisations which deliver essential social services that in their very nature can never become self-sustaining. Within this approach we would like to see, clearly outlined, a model whereby the state delegates relevant responsibilities to NPOs on the basis of full funding of a basic service package, according to the actual costs incurred. Such NPOs could then commit to an additional contribution via their own fundraising, for purposes of improving service quality, conducting research, piloting new services and so forth.

While the methods of payment as outlined in the document appear satisfactory, in practice at present there are very serious problems. Many organisations are finding themselves crippled by a pattern of chronic lateness in payments by provincial departments. There needs to be a firm requirement set out in the policy document for timely payment by government of the agreed amounts.

As regards eligibility for financing, the Forum is broadly in agreement with the criteria as stated.  However we would suggest that "the Department's priorities and objectives" (clause 8.4.2) should be arrived at in consultation with its NPO partners and must include statutory social services for which the Department itself carries the primary responsibility. What has happened in the past is that there has been a tendency by the Department to de-prioritise these issues and reduce funding for them, while continuing to expect the NPOs to deliver them at an acceptable standard.

many larger NPOs share of their skills and infrastructure with emerging organisations. But the resources of these organisations are already very thinly spread and the mentoring role is very demanding in terms of staff time and administrative backup. Again, if the Department wishes to extend this capacity there is a need for it to strengthen the infrastructure of the organisations concerned so as to allow them to carry on with their core business while also providing this type of support to smaller bodies. 

SECTION 10:   MONITORING AND EVALUATION

This section is generally acceptable, provided that the Department does not have unrealistic expectations of what is to be delivered relative to the amount of funding it is providing. On the basis of current subsidies, plus the limited amounts which organisations are able to raise from other sources, it is often wishful thinking to expect them to follow best practice models, train their staff properly, continuously evolve their products, keep pace with the latest developments etc. These things tend to fall by the wayside when an organisation has to use too many of its resources simply to survive. Such demands can justly be made if the Department makes a simultaneous commitment to properly playing its own role in the financing of services. In addition it is of vital importance that officials do not interpret "value for money" (p28) in terms purely of numbers served.

Appendix 3

Policy on Financial Awards to Service Providers

1. EXECUTIVE SUMMARY

The policy [PFASP] strives to facilitate the achievement of the mission of the Department, which is "to enable the poor, the vulnerable and the excluded within the South African society to secure a better life for themselves, in partnership with them and with those who are committed to building a caring society".

As is the case all over the world, public and private donors are demanding accountability for the programmes they fund, including measures of efficiency. The Department will therefore enter into contracts with service providers to ensure that expected service outcomes are achieved, that there is customer satisfaction and value for money.

3. SCOPE AND PURPOSE OF THE POLICY

Increasingly the world over, public and private donors are demanding accountability for the programmes they fund, including measures of efficiency. This places pressure on government to evaluate the cost and benefits of its activities and to explain to society as a whole, especially tax payers, how government spending and resource allocation are distributed for the well-being of society. The policy is therefore intended to ensure that there is value for money and that its priorities are being met. This requires accountability from both the government and the nongovernmental sector it provides for.

4.. PRINCIPLES

The following principles underpin the policy on the funding of social development service providers:

Accessibility: Accessibility in terms of physical and geographical conditions, time, language and need.

Accountability: Compliance with all legislative, policy and financial regulations.

Affordability: No one must be excluded on the basis of inability to pay for the service and where fees are charged, a means test should be applied.

Appropriateness: Responsiveness to social, economic, cultural and indigenous and political conditions.

Efficiency and effectiveness: Achievement of objectives in a most cost-effective manner.

Empowerment: To enhance the capacity of emerging organisations to develop so that they can meet the standards set out in this policy.

Equity: Redistribution of resources based on need, priorities and historical discrepancies.

Participation: Active involvement of management, clients, staff, stakeholders and community representatives in organisational programme and policy design.

Partnership: A collective responsibility of government, civil society and the business sector to deliver services.

Social integration: Policies and programmes that promote social justice. 

Transparency: Access to information, openness of administrative and management procedures.

Appendix 4

The Implementation of the White Paper for Social Welfare in the NGO Sector (2009)

Low salaries, the limited nature and volume of services offered, high staff turnover, and sub-standard quality of services, were [for the service providers surveyed] directly attributed to a lack of funding and the restrictive nature of government funding (see figure 14). This is corroborated by other research (Earle, 2008; Hölscher, 2008; Lombard, 2008; Lombard 2005) and resonates with a long-standing tension between government and non-governmental services regarding funding of social work salaries and of welfare services in general (p22).

The most common barrier [for the service providers surveyed] to access to developmental social welfare services was a lack of funds by users to pay for transport (61%), a lack of public transport (30%) which made the agencies inaccessible to many service users, and the charging of fees (30%) (p25)

Insufficient staff (50%) and high turnover were considered a significant barrier [for the service providers surveyed] to access as well as a lack of funds to finance services was cited by 60% of the organisations (p25).

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