The Lotteries and NonProfits

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Wednesday, 11 April, 2007 - 09:03

Setting an Agenda for Engagement

Since the last article on finding win-win alternatives for dealing with the NLDTF, we have received feedback from various sectors of civil society about how to proceed with the matter and while most of the responses have been positive, they have also highlighted the fact that there is a lack of understanding about how the various parts of the lottery puzzle actually fit together and the impact this has on civil society.

In this article, we aim to firstly set out the key points about how the lottery actually works and secondly start to set the agenda for engagement and dialogue between civil society and the state as well as amongst civil society itself.

This document is an attempt to crystallise the inter-relationship between the different role players involved with the distribution of money available for good causes under the Lotteries Act, No. 57 of 1997. It is not aimed at being a comprehensive resource document, but merely highlights the key functions of the important role players.

The National Lotteries Board (the Board) is often perceived as the key player with the allocation and distribution process of money for good causes. Blame for delays with the appointment of distribution agencies, consideration of applications and transfer of payments to recipients of grants have at times been laid before the door of the Board. Can the Board legitimately be blamed for this?

What are the functions of the National Lotteries Board?

The Board is established in terms of the Lotteries Act and its members are appointed by the Minister of Trade & Industry. Section 10 of the Act sets out the functions of the Board in addition to the other functions prescribed in the Act. The Board’s efficiency and effectiveness must be measured against the obligations imposed upon it in terms of the Lotteries Act. The functions of the Board include, amongst other:

  • Advising the Minister of Trade and Industry on the issuing of the licence to conduct the National Lottery;
  • Ensuring that the interests of every participant in the National Lottery are adequately and the net proceeds of the National Lottery are as large as possible,
  • Administering the National Lottery Distribution Trust Fund;
  • Advising the Minister on percentages of money to be allocated in terms of section 26(3);
  • Advising the Minister on the efficacy of legislation pertaining to lotteries and ancillary matters;
  • Advising the Minister on any matter relating to the National Lottery and other lotteries or any other matter on which the Minister requires the advice of the Board; and
  • Performing such additional duties in respect of lotteries as the Minister may assign to the Board.

The Board is given the responsibility of administering the National Lotteries Distribution Trust Fund which is established in terms of Section 21 of the Act and held in trust by the Board. The monies paid to the Fund will be used to cover certain specified expenditure and for various good causes identified in terms of section 26 (3) of the Act. There are five different categories of good causes that have been identified, namely:

  • Reconstruction and Development Programme
  • Charities
  • Arts, Culture & National Heritage
  • Sport & Recreation
  • Miscellaneous

The money allocated (by the Minister) to the different categories is held in the fund for distribution by the distribution agencies.

Who is responsible for distribution of funds for good causes?

The distribution agencies are responsible “to distribute money” allocated for good causes, not the Board. The Board only has distribution powers in respect of the “Miscellaneous” category. Distribution agencies have been appointed by the Minister for the other categories, except the RDP. The Act clearly stipulates that juristic persons may “apply to the distributing agency for a grant”. If one considers section 32 of the Act it is clear that the Board is supposed to pay over money awarded for good causes to the distribution agencies for distribution.

What are the functions of the Distribution Agencies?

The main function of the distribution agencies is to “distribute the allocated sum(s) fairly and equitably amongst all persons who meet the prescribed requirements”. In doing this, the distribution agencies must:

  • Consider applications,
  • Ensure that conditions imposed by the Minister are adhered to, and 
  • Pay grants to appropriate recipients

In terms of regulations promulgated by the Minister the work incidental to the performance of the functions of the distribution agencies shall be performed by such officers and employees of the Board as the Board may designate for that purpose.

Who is responsible for the appointment of distribution agencies?

The Minister of Trade & Industry is responsible for the appointment of three distribution agencies, namely (i) arts, culture and national heritage, (ii) sport & recreation and (iii) charities. The Board is not responsible for the appointment of the distribution agencies.  The delay in appointing the distribution agencies cannot be laid before the Board.

How applications for funding are considered and distributed:
The adjudication process is clearly a function of the distribution agencies, not a function of the Board. The Board has been given “the mandate by the Minister to set up the infrastructure to offer administrative support for the distributing agencies” – NLB website. All applications for funding go through the Central Applications Office that has been set up by the Board. Details of applications meeting the deadlines are captured and presented to the relevant distribution agencies for adjudication – NLB website.

The adjudication process involves the consideration of applications, the allocation of funds, verification of projects, signing of funding agreements and transfer of funding. The Board’s role with regard to the distribution process is to provide “administrative support” to the distribution agencies.

Important questions to consider:

A. Who is responsible for the delay with appointment of the distribution agencies?

  • The Board does not have the power to appoint the distribution agencies, the Minister of Trade & Industry is empowered to do so.

B. Who should take responsibility for the delay with the consideration of funding applications?

  • The responsibility for considering applications for funding vests with the distribution agencies, not the Board. The Board is responsible for providing administrative support. 
  • It seems that the delay in considering funding applications during 2006 occurred as a direct result of the delay with the appointment of the distribution agencies which is the prerogative of the Minister.

C. Who is responsible for the transfer of payments to successful applicants?

  • The Act requires the Board to make a transfer to the distribution agencies, but it seems in practice monies are directly transferred from the Fund to the beneficiaries.
  • The distribution agencies are given the power to consider applications and distribute the allocated sum(s) fairly and equitably amongst all persons who meet the prescribed requirements – the Board provides administrative support in this regard. 

D. Who do the distributing agencies report to?

  • In terms of regulations issued by the Minister the distribution agencies have to submit a written report to the Board containing certain prescribed information.

E. Who does the Board report to?

  • The Board must submit reports to Parliament and the Minister. 

F. Should there be a clear line of distinction between the regulator and distributor in terms of the Act?

  • The confusion that exists between the function of the different role players can to a large extent be attributed towards the fact that the staff of the regulator (the Board) also serve as the staff of the distributor (distributing agencies). These functions are different and should be clearly distinguished.

In the 2006 Annual Report of the Board, the Auditor-General made the following important remarks:

"The Act established the National Lotteries Board (NLB) and the NLDTF. The accounting authority is ultimately accountable for the funds received and disbursed under its management. Although payments are processed by the NLDTF, such payments are made in accordance with decisions made by distributing agencies (DA's). DA members are appointed by the Minister of Trade and Industry in consultation with the Minister responsible for the relevant sector in which decisions are made. This approval mechanism does not appear to be effective as although the NLDTF administers and assists in the payment of grants made, the accounting authority has no control over the DA's. There are no prescribed governance structures and processes, and oversight mechanisms for the DA's. The appointment of distributing agencies is the responsibility of the department, not the NLB."

It is clear from the above that there is more to merely asking the Minister to start the process of creating regulations for the proper functioning of the respective processes.  Civil society leaders need to look at the strategic goals that they wish to achieve, set clear operational targets, draw-down the relevant process to be followed and then begin the process of engagement to achieve the stated strategic goals.

There are several ways to achieve this and some sectors of civil society such as arts and disability are already in the process of trying to obtain an audience with the Minister. While this may appear to be a positive approach, it does create risks for other sectors of civil society by creating special interest that may create the impression of preferential treatment.

In order to achieve real long-term solutions that will:

  • serve the interests of the people civil society represents,
  • ensure financial sustainability of the sector, and
  • engender a positive collaborative working relationship with the state,

we must look to a new approach that brings together the several fragmented parts of civil society in a unified movement that will be able to claim a legitimate voice and mandate of civil society in South Africa.

The National Lottery is an incredible funding pool for civil society organisations and we should look for ways to ensure that the funding for social services, welfare and development work is integrated into a comprehensive financing system for the sector.

It is not sufficient for civil society to remain on the side-lines of this issue. If we are to achieve a positive long term solution, we need to take centre-stage, lead the process and set the agenda - collaboratively.

- Rajesh Latchman, National Welfare Social Services and Development Fund and Ricardo Wyngaard, Non-Profit Consortium.

Picture courtesy of Local Newspaper.

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