ASIDI & Conditional Grant expenditure; Department of Basic Education, Umalusi, SACE: Auditor-General input

Meeting report

Election of Acting Chairperson

The Portfolio Committee voted for Ms N Mokoto to be Acting Chairperson of the meeting.  Ms N Mokoto welcomed the delegation and invited the FFC delegation to give their presentation.

Briefing by Financial and Fiscal Commission (FFC)

Professor Daniel Plaatjies, Chairperson, FFC, introduced the delegation from the FFC to the Portfolio Committee and took the Committee through the presentation. He stated that the reason for the presentation was to show the Committee what recommendations the FFC was giving to the two houses of Parliament over time and to indicate what responsibilities the FFC had and what advice to give. 

He explained that the Financial and Fiscal Commission (FFC) was an independent, permanent, statutory institution established in terms of Section 220 of Constitution. The Commission’s focus was primarily on the equitable division of nationally collected revenue among the three spheres of government and any other financial and fiscal matters. The FFC made previous recommendations on Basic Education and one of the recommendations given out in 2016/17 was that the FFC recommended that Government provide a full or partial capital subsidy for constructing and or upgrading community and NPO-based ECD facilities, through the municipal infrastructure conditional grant. Government agreed and an ECD grant was introduced in the 2016/17 financial year.  Another recommendation was given out in the 2015/16 financial year and the recommendation was that the allocation framework for education infrastructure conditional grants set out clear expenditure targets for quintile 1 to 3 schools and timelines for addressing priority infrastructure backlogs in each quintile. Government agreed and the School Backlogs Infrastructure grant was cited as a response.

Mr Eddie Radebe, Research Manager, FFC, took over the presentation. He said that the country was at risk of losing out on the youth demographic divide, partly due to education challenges. Education challenges included high spending coexisting with lower than expected performance; shortages of resources such as qualified teachers, classrooms, LTSM, facilities; classroom discipline; parental involvement; accountability; school management; unevenness in distribution of resources between rich and poor-urban and rural divide; inadequate infrastructure-causing poor learning environment.

He stated that going forward in attempts to reap the education dividend, what was important was to:

• Focus on the entire education pipeline and view student progress as a continuum from birth to post-school completion;
• Prioritise Early Childhood Development (ECD);
• Ensure high throughput rate across all grades and to close all leakages across the entire system;
• Invest in the relevant skills, particularly Science, Technology, English and Mathematics and vocational training;
• Support transition to higher education especially for the poor and vulnerable.

Mr Radebe said that the FFC viewed education as a pipeline where there were many children entering the education system at the Early Childhood Development level with almost 1.8 million learners and as the children progressed towards higher grades, one found leakages because of the country’s economic situation, like unemployment and unskilled labour. The country made noticeable strides to improve access to primary and secondary education over time, although there may be concerns of higher than expected Growth Enrolment Ratio (GER), especially in the primary and secondary school sector. He said that the ECD sector and post school enrolment was not in line with meeting NDP goals.

He said that when it came to education performance and attainment, provincial education attainment levels generally mirrored national trends. Regional education attainment rates were inequitable across the district. Socio economic conditions had very serious implications for education attainment levels and there was usually a close positive association between attainment and parental involvement.

Ms Poppy Ntaka, Researcher, FFC, took the Committee through the education performance outcomes and budget analysis done by the FFC. She said that in terms of education strategic goals in the short term to the long term, in respect of the Annual Performance Plan (APP), Medium Term Strategic Framework (MTSF) and National Development Plan (NDP), what was evident was that the goals sought to address some of the key challenges that were alluded to by the FFC in the presentation. The focus area in respect of the APP 2017 in the short term was improving access to education, school infrastructure and the quality of learning that took place in the classroom and ensuring adequate supply of teachers. The focus areas of the MTSF was more about ensuring that a greater proportion of learners progressed through the schooling system.

She stated that the Department of Basic Education (DBE) achieved most of its performance targets, the exception being Planning Information and Assessment Programme, which achieved only 38% of its targets in 2016/17.  The Accelerated School Infrastructure Delivery Initiative (ASIDI) programme was largely responsible for the low achievement. In terms of consolidated education spending, Basic Education spending accounted for highest share (17%) of consolidated spending or 6% of GDP. Over the medium term, the compensation of employees overcrowded allocation of the education inputs. On the non-infrastructure conditional grants apart from the Maths, Science and Technology grants, spending was generally good. She explained that the Maths, Science and Technology grants was a merger between Dinaledi and the Technical School grant. The Commission reiterated a previous recommendation that merely merging grants did not necessarily solve the underlying performance issues.

Ms Ntaka highlighted that what was evident in the provincial education allocations was that provincial discretionary education was in line with Provincial Equitable Share (PES) education weighting. She said that the Western Cape had the lowest share of PES and on the other end of the spectrum Limpopo had much higher than the rest of the provinces with about 51% share of the PES. KwaZulu Natal accounted for bigger share of total education conditional grants allocation and the Northern Cape total education budget had the high proportion of conditional grants allocation. Provincial education budgets prioritised public ordinary schooling (Programme 2) and between 72% and 92% of the Programme 2 budget was allocated to the Compensation of Employees (COE). Gauteng and Western Cape had the lowest COE. She said that there was no visible prioritisation of ECD in provincial spending priorities due to overlapping mandates. The Eastern Cape and Limpopo budget allocations between primary and secondary schools were inconsistent with the education pipeline trend.

Ms Ntaka said that in November 2013, the Minister of Basic Education published the legally binding regulations on minimum norms and standards for school infrastructure. These norms and standards stipulated the basic level of infrastructure that every school had to meet to function properly. In terms of the regulations, the Provincial MEC was responsible for annually reporting to the Minister of Basic Education on plans to address backlogs at district level in the province and report on its implementation. The regulations also specified that these provincial plans should include targets to reduce backlogs and the proper costing thereof. The Commission’s view was that regulations on norms and standards for school infrastructure would go a long way to enhance teaching effectiveness and improve student learner outcomes. The ASIDI programme was introduced by the DBE in 2011 to eradicate school infrastructure backlogs, prioritizing those schools with no infrastructure at all and no access to basic services. The ASIDI programme was initially meant to be complete within three years but due to implementation challenges, the programme continued into its seventh year. Additional infrastructure that was rolled out in the education sector via the ASIDI programme meant that maintenance budgets should show an increasing trend in line with the growth in ASIDI spending. However, maintenance in provincial education budgets was often an area that got cut when there was pressure from other sectors.

She said that implementing maintenance norms were therefore critical and were currently under-addressed.  One of the priorities of the ASIDI programme included replacing mud schools, and schools built from asbestos, metal, wood and prioritise schools with no access to power, water and sanitation. The Commission noted that the first milestone contained in the regulations relating to the replacement of mud schools and targeting schools with no power, water and sanitation was not achieved by the DBE by November 2016 deadline.

Ms Ntaka said that the School Infrastructure Backlogs grant was an indirect grant to provinces introduced the 2011/12 financial year as a short-term, high-impact grant. She explained that DBE used the grant on behalf of provinces to address backlogs through the ASIDI programme. However, since its introduction, the grant consistently underperformed (with exception of 2014/15 financial year) and only 60% of its total allocation was spent in the 2016/17 financial year. She said that the Commission was concerned that a total of R3.68 billion was unspent on this grant for the period 20111/12 to 2016/17. The unspent funds amounted to 30% of the total grant allocation over this period and could have been used to address the prevalent high levels of school infrastructure and maintenance backlogs in poorer areas. This implied that there was enough money available in the system to address the historical backlogs in school infrastructure and the real challenge was limited capacity to spend. The Commission was also concerned that for the 2016/17 financial year, the achievement of performance targets for the ASIDI programme ranged from 27% (for instance, the new schools built) to 0% of the planned targets such as schools provided with electricity. Even more concerning was the imbalance between the targets achieved (0%-27%) and the budget spent (60%). She emphasised that Government was therefore not getting value for money from the resources spent on the ASIDI programme.

She said that the Department reported that poor spending on ASIDI via the School Infrastructure Backlogs grants was a result of:

• Poor contractor performance resulting in the inferior quality of work which had to be redone. Terminating the contracts of these service providers and replacing the created delays
• Some contractors were not liquid and had to be replaced.
• Slow pace of merging and rationalising schools
• Remote locations where site access was hampered by inaccessible physical features of the region and poor road conditions making the delivery of building materials difficult.
• Other reasons provided included the shortage of building materials and construction disruptions due to community unrest.

She said that an amount of R623 billion in irregular expenditure was reported by DBE for 2016/17 financial year. In most cases, irregular expenditure related to Implementing Agents appointed by DBE to carry out the ASIDI programme not following proper procurement processes. 

She stated that the Education Infrastructure Grant (EIG) was a direct grant that provinces received to build new schools, provide basic services, rehabilitate and maintain new and existing schools and other educational facilities. The average spending on the EIG was 96.4% for the period 2011/12 to 2016/17, significantly better than the 60.5% average for the Schools Infrastructure Backlogs Grant over the same period. The Commission reiterated its concerns over the quantum of understanding as these resources could be productively used to meet the schooling norms and standards.

Ms Ntaka said that the revised grant infrastructure process for the Education Infrastructure Grant was currently underway and plans to improve the quality of spending and institutionalize proper infrastructure planning and delivery. National Treasury revised the application process for the education infrastructure grant in 2013/14 financial year.  Provinces were required to submit building plans two years ahead of implementation and would only be given allocations if plans met certain benchmarks. To boost performance, an incentive was introduced so that provinces with a good record of planning and implementation could receive additional funding. She said that provinces needed to obtain a minimum of 60% to qualify for the incentive. Given its poor performance, the Commission previously suggested that the same performance allocation regime should be extended to the school infrastructure backlogs grant. She stated that the Commission was concerned about the inability of certain provinces (Free State, Limpopo, and Mpumalanga) to meet the minimum threshold for receiving the incentive and possibility of having parts of the incentive remain unallocated.

The Commission also noted there was no consistent relationship between provincial assessment results on infrastructure plans and spending performance, suggesting that good planning did not always guarantee good spending performance.  She said that the Commission noted that to address the grant’s poor performance, the School Infrastructure Backlogs Grant would be merged into the Education Infrastructure Grant from 2018/19 financial year. The date of the merger was delayed from 2017/18 to 2018/19 to allow time for projects to be completed and to assess the grant transition process, including adding ASIDI projects to the merged grant. The merger coincided with recommendations previously made by the Commission, discouraging the utilisation of indirect grants as they appeared to be performing poorly. In addition, merging the two grants may not necessarily improve performance in education infrastructure, unless the underlying issues of poor performance were also addressed.

The Chairperson of the Commission ended the presentation by saying that the education policy and budget needed to take a holistic and long-term view of the entire pipeline. Allocations of funding at the aggregate level was evenly distributed but became more unequal as the budget cascaded down schools. He said that there was a need for a delicate balance between compensation of employees’ allocation and other education inputs. Funding was important but it was not the only condition for improving education outcomes; there was a need to address factors in and outside classroom. South Africa may have achieved equal treatment of learners but not necessarily equitable education as funding frameworks disregarded historical disparities and other important constraints which affected disadvantaged schools. He highlighted that the Commission would like to see DBE implement more stringent measures to hold implementing agents accountable for poor performance. Parliament needed to strengthen oversight over implementation of the FFC recommendations.

Discussion

Mr H Khosa (ANC) said that it was the Portfolio Committee’s responsibility to hold the Department accountable for issues that came up and asked how often the FFC recommendations were taken seriously regarding implementation by the Department. What was the progress on implementation once government agreed with the Commission? He asked what advice the FFC gave to the Department regarding relevant qualifications and said that what he observed was that the challenge was increasing where many graduates were qualified but were irrelevant and not being absorbed into the work situation. What could be the reason for the imbalance between the primary schools and secondary school enrolments and was the Commission able to assist? He also wanted to know what informed the Commissions analysis that the National Department allocated insufficient funding to provinces? Did the Commission also consider that some provinces were under-spending?

Mr X Ngwezi (IFP) said that he did not fully agree that there was a shortage of qualified teachers because a few weeks back he submitted a list of more than 700 qualified teachers and the problem might be that these teachers did not meet the demand in the job market because of the qualifications that they had. Which department should prioritise Early Childhood Development plans? He said that according to the FFC’s observations, was the job market informed of the Curriculum being designed in the Basic Education?

Mr M Ollis (DA) asked if it was more expensive to educate a child in the rural areas or did it cost more to educate a child in an urban or metropolitan setting? What could be the reason for the drop-offs in matric registrations this year? She felt that it was difficult to understand the information provided on the drop off in primary and secondary schools because there was no underlying data, just numbers and no comparisons to other countries or benchmarks according to international standards and the problem with that was that the Committee just had to trust the Commissions word. Throughput of rate of blacks and coloureds from Grade 12 to post-secondary was declining and that was a huge problem because the population of the groups were growing and there was no knowledge of what the numbers were previously and again there was no knowledge of the degree of the decline.

She asked why Gauteng and the Western Cape had the lowest COE allocation? How could the provinces with the two fastest growing learner population get such low allocations? At what place in the budget cycle was someone deciding to do that?

Ms N Tarabella-Marchesi (DA) asked for the specific number of unemployed graduates. She said that the issue of norms and standards was a sore to the Committee because what was happening was that the DBE spent over R40 million from the ASIDI programme and most of the ASIDI schools were found in well developed areas and some in the rural areas. Would it not be better to prioritise the mud schools and wood schools so that at least all learners were exposed to basic education instead of increasing the standards of schools that were not battling. She said that the average ratio of one teacher to 33 learners in a classroom was not realistic because the ratio took on the average of learners within a province and that was not a real picture because some schools in the townships had a ratio of one to 60 learners in a class. This was not the actual depiction of what was happening in the ground.

Ms H Boshoff (DA) asked what the stringent measures were that the Commission would like to see the Department implement regarding IA’s, because the IA’s could not be allowed to continue as the sufferers were teachers and learners? What happened to the budget of a province when the learner was transferred to another province?

Mr D Mnguni (ANC) said that it was a pity that the Committee did not have recommendations from the Commission because it was important to discuss an issue with full knowledge instead of the presentation, so that the Committee could engage. What was the Commission’s recommendation on the issue of the usage of conditional grants by provinces and local municipalities? How often did the Commission meet with all the spheres of the Department, because the Constitution stipulated that the Commission should regularly meet with the spheres? He also asked what the Commission’s recommendation was on teacher performance?

What did the Department say around the issue of the merger?

The Acting Chairperson asked to what extent did the recommendation from the FFC influence National Treasury when it decided on budget allocations? What was the likely outcome of future budget allocations given that there was underperformance in some programmes of the Department? In terms of ECD and Post School Enrolment, what were the identified loopholes which continued to hamper the implementation on meeting the NDP goals?

Prof Plaatjies said that the Portfolio Committee on Basic Education was one of the Committees that ought to call the Commission regularly because Education was very important and he did not think that all the questions raised by the Committee would be answered. He said that the budget process was a political and technical process. The technical process was where the provincial treasurers, heads of treasuries in the municipality and the administrators sat and looked at how the whole budget would work, looking at points such as policy issues, costs and performance of the budget. That process then produced social policies and fiscal policies. The budget was a policy statement and a political process at the same time. In that political process was the MEC of Finance in that province with the Minister of Finance and the Deputy of Finance who all then discussed the budget. With that was the education process, whereby the MEC of Education with the Ministers of Education talked together. The Commission was only an observer of the process.  Another parallel political process was taking place which involved the Presidential Coordinating Committee, President, Deputy President and the process then filtered into Parliament. The Commission tabled its responsibilities to government. The Minister of Finance historically and currently was given the responsibility to interact with the Commission’s recommendations. In the budget review, there was an annexure which annually responded to the recommendations of the FFC.

Prof Plaatjies said that the Commission interacted with provinces at least twice a year and it did whatever it could to influence the performance of provinces. The Commission did specific recommendations to each function of Education. He said that the issue around infrastructure was raised year after year and asked the Committee to call the Commission so that it could help them through the process of providing all learners with quality education.

On the issue of learners transferring to other provinces, the Commission gave out a recommendation which stated that ‘the Department of Education must allocate learners with unique identification numbers when they first enter the school system to enable seamless tracking and measurement of movement across provinces and within districts’. This recommendation was given out in the year 2017 and acceptance of the recommendation was not yet known.

He said that mud schools were not dignified places of learning for learners and there was a need for proper infrastructure and this was a problem that the government could not run away from. There was a different thinking that had to be developed. He suggested that since there were prisoners who could build their own prisons, why could those prisoners not be allowed to help in the building and renovations of schools.

The Chairperson of the Commission asked the Committee if they ever thought of asking the SGB of schools that were predominantly white, with mostly white teachers and mostly white learners, schools that people assumed were better, to have 50% of the learners be African for a range of reasons. The reasons included greater access to resources and quality education and to help children and adults to build better social cohesion and the children would have to be fully funded. The schooling systems was in many ways also reproducing racial patterns and racial behaviour of the past, which was evident in the media as well. The Commission would look at school funding and issues around competition.

He added that South Africa’s current problem was not that it had too many graduates, it was that the probability of getting a job was much lower for a graduate than it was for someone without a degree. Some of the problems in the education sector did not come from the Department but were problems that were evident in the entire country.

The Acting Chairperson interjected and said that the discussion with the Commission overlapped its time. Many the questions were not responded to and she said that the Secretariat would have to arrange another meeting to discuss the questions further because now there was nothing that could be done.

Mr Ollis said that he agreed with the Chairperson’s suggestion and that the presentation from the FFC was great. Questions that members asked were relevant and the answers that they received from the Commission were not good, but they were just generalisations and not specifics.

Briefing by the Office of the Auditor General of South Africa (AGSA)

Ms Sibongile Lubambo, Corporate Executive, AGSA, introduced the delegation from the Office of the Auditor General and then handed over to Mr Eugene de Haan, Senior Manager: Auditing, AGSA, to take the Committee through the presentation.

Mr Haan said that the role of the AGSA at the meeting was to inform the Committee of the audit outcomes so that the Portfolio Committee could be strengthened in terms of its oversight role in the Department.  The Department of Basic Education together with its entities received an unqualified audit opinion. He said that there was stagnation within the Department in terms of progress and some material findings needed to be resolved going forward, which related to performance information and compliance.

He said that the AGSA found that there was no compliance to key regulation from the DBE looking at the trends over the last three years and there was material non-compliance identified which called for intervention. The non-compliance mainly related to Implementing Agents (IA’s) and procurement processes of the DBE. In terms of the Annual Performance Plans, all three reports showed that the annual reporting process was not credible and the quality of the Annual Report was subject to material corrections; at the moment, the Annual Report was reliable but subject to material corrections being made. He explained that there were three levels of key control which was important to ensure credible and reliable reports. These levels of control were leadership, financial performance management and governance. All three of the levels required interventions. He said that an issue that was identified under the financial and performance management level included proper record keeping and it took the Department some time to give information that the AGSA requested. This was something that the Department needed to consider going forward.

Mr Haan highlighted three key programmes from the Department, which were the Curriculum Policy Support and Monitoring Programme, Information and Assessment Programme and the Planning and Information Assessment Programme. In terms of the Curriculum Policy Support and Monitoring Programme, the AGSA specifically looked at the Kha Ri Gude programme and R58 million irregular expenditure was identified. He said that the irregular expenditure consisted of R42 million expenditure that was not in accordance with the policy that was approved and the implementing agent, which was an audit firm used to monitor the programme, which could not adhere to the budgeting processes. He said that the Department underwent an investigation regarding the R42 million fruitless and wasteful expenditure and what was identified in the investigation was that only R1.8 million was actual fruitless and wasteful expenditure and the remaining was classified as irregular expenditure, since proper procedures were not followed in awarding that specific grant. The AGSA and the Internal Audit Unit dug a little deeper and came up with a procedure that would allow verification of the learners and how many of the learners had matric certificates. At the moment, the classification was fruitless and wasteful expenditure under investigation in the financial statements because it was not yet confirmed and the Department was embarking on an investigation regarding the issue.

Mr Haan said that the Planning Information and Assessment Programme was the programme that hosted the ASIDI programme and from the programme there was 93% of the budget spent identified and various material misstatements identified as well as R303 million irregular expenditure which related mainly to the IA’s used to construct the schools. He said that none of the four ASIDI targets (new schools, water, electricity and sanitation) were achieved by the Department. Only 3% of the ASIDI budget was spent and there was material under-spending in terms of the actual budget; most of this was the result of the non-performance from the IA’s.

Mr Haan said that School Infrastructure, School Governance and Early Childhood Development (ECD) were the three sectors that the AGSA focused on in the audit. In terms of School Infrastructure, Limpopo was the only province that improved and moved from a disclaimer to a qualified opinion. On the site visits conducted, the AGSA found poor quality workmanship and one of the main reasons for the poor-quality workmanship were production inefficiencies in the project management; the professional service providers were not on the site all the time and it was too late to correct the poor workmanship qualities. Some of the schools that were meant for teaching and learning were found to have security guards living and cooking in the classrooms, which was a major concern. Construction risks were also identified during the visits where in one school, bricks that were not in good condition were reused to construct classrooms.

Ms Chrisna van Rensburg, Senior Manager, AGSA, took the Committee through the other two sectors, namely, ECD and Social Governance. She said that in terms of the ECD sector, since the previous AGSA audit, there was progression in terms how the sector was applying its mind in getting to the goal of 2019 for a compulsory inclusion of Grade R into the education system. However, the progress was too slow at this stage given that 2019 was just one year away. The National Department compiled a policy framework for universal access to Grade R in 2011 which was not approved. In the year 2013/14 a total of 27% of ECD teachers were qualified but in the year 2016/17 the percentage increased to 50% and this needed to grow since there was a move to compulsory Grade R and therefore a need for qualified educators for Grade R. She said that the lack of funding had a big impact because it impacted what the Department could pay the teachers, since the teachers were currently only receiving stipends. It was also important for learners to have facilities that allowed for them to learn through play and that required resources, such as sufficient space, since children in that age group learnt through play. She said that Grade R learners needed space to perform activities that would help them learn and most classrooms were built prior to the ECD grade introduction, resulting in classrooms not specifically built to be a Grade R classroom.

Ms van Rensburg said that in terms of school management and governance, the AGSA had a look at the South African Schools Act, looked at compliance and what was necessary in management and governance to make sure that schools were running the way it should run. Annual management processes were not adhered to and one of the reasons was that the DBE did not provide a clear directive for the annual management processes. She said that in terms of school performance management, what was important was strengthening the school management team such as the principal, head of department and then the school committees because the school committee’s presence was very important in schools.

She said that school reporting systems had to be very strong and monthly reports were reports that would happen in schools and that was the only way that the principal could manage the school properly. In terms of quarterly and annual reports, that sector needed to be strengthened to make sure that the information included in the reports was credible.

Discussion

The Chairperson said she was a bit confused between ECD starting from age two to age four and Grade R from age five to six years.

Ms van Rensburg replied to say the focus was on Grade R which was from age four to six years. Class size was important and the class to learner ratio had to be monitored so that all learners could get equal access to education.

Ms H Boshoff (DA) said throughout the presentation they kept on hearing about IA’s (Implementing Agents) which was very concerning. She asked what the AGSA’s report said to the DBE as to how to deal with these IA’s because it was clear that the DBE’s supply management processes were not working properly. That money that was spent extra on a facility could be allocated to other sections of education to capacitate needs such as learners with special education needs.

Ms J Basson (ANC) asked that from the AGSA’s observations, how was inclusive education schools funded and supported? What would happen with the money that was not used in the ASIDI programme? Given that the money was not used up and it was needed on the ground, how would the money be retrieved and used for something will be fruitful? She asked how School Governing Bodies were empowered to be able to have a voice and report irregularities? How could the issue of poor monitoring be solved because from the start of the presentation, the report was speaking of poor monitoring?

Mr X Ngwezi (IFP) said in the AGSA’s presentation, it was stipulated that 47% of the infrastructure budget was not spent and the reason was that there were problems with the IA’s. How long would this problem with IA’s go on for, because these Implementing Agents did not appoint themselves. Surely the findings of the AGSA had to be implemented and the poor IA’s should be done away with. He said that there would always be a problem with infrastructure since there were a lot of agencies involved and the local people were not employed to build the schools. Were School Governing Bodies part of the recruitment of educators in schools?

The Chairperson asked Members of the Committee not to ask the AGSA questions that were supposed to be directed to the Department because the AGSA provided the Committee with relevant information that would assist the Committee in its oversight duties.

Discussion

Mr D Mnguni (ANC) noted that under demand management, there was no feasibility study done, and under acquisition and project management one would find that some of the things were not done according to the book.

The Chairperson asked what the baseline was in terms of investigations on issues of strengthening support and monitoring. She asked about the issue of concurrent functioning, how did the DBE conclude on it in terms of the school infrastructure because mostly the budget of the Department was composed of capital grants and conditional grants where there was irregular expenditure.

She asked what the Departments’ targets were in terms of monitoring schools per annum. The Department could not equate itself to a municipality in terms of its targets since it was stated that it monitored 20 schools.

The Chairperson asked on the issue of ASIDI, what the Department meant when it referred to a focused response, and how did it deal with consequence management, what corrective measures were there to improve the Department’s planning, and how was the AGSA assisting the Department to move from irregular expenditure.

Ms van Rensburg said that on the question of enrolment of learners between the ages of four and six, the requirement was that the child had to be in Grade R in the year when the child turned 6 and they received preference when their parent applied to a school. In terms of how many learners should be in a class, the norms and standards required 30 learners for one teacher in a class, but as Grades progressed it moved up it changed to one teacher to 40 learners.

Ms van Rensburg said that in terms of the audit, there was an improvement from the previous audit; it was not that there was no progress since the previous audit

On continuous teacher professional development, what the AGSA audited last year was teacher professional development. This year it would do a follow up again as part of its normal set procedures.

Ms van Rensburg said that in terms of the School Governing Bodies (SGBs), part of the audit looked at whether SGBs attended training or not. In most instances, SGB’s attended training.

On providing monitoring support, the advantage of this was that as part of the 2015/16 Education Sector Report, the AGSA audited the education districts that reported in terms of the curriculum. That report could be made available to the Committee and would assist the Committee in its oversight responsibility.

Ms Rensburg said that with regards to the issue of the baseline of investigations, it indicated how the baseline was audited on district level which would include a plan indicating which schools needed support and monitoring. The AGSA would measure that by doing quarterly reporting to the provincial departments. Therefore, that would give them a baseline to go to the provincial department to enquire whether it received the report from the districts, what it did with that report and how it recommended remedial action.

The Chairperson thanked Ms van Rensburg for her responses. She asked the delegation from the Internal Audit Committee of DBE to make its presentation to the Committee.

Briefing by DBE Audit Committee

Mr Daniel Van der Nest, Acting Chairperson: DBE Audit Committee, said that the purpose of the presentation was to brief the Committee on the audit outcomes and financial performance of the Department of Basic Education (DBE). The Audit Committee’s responsibility included oversight over Internal and External Audit; oversight over the implementation of Internal and External Audit recommendations; oversight over Risk Management; oversight over the quality of Financial Statements and; oversight over the system of internal control for the generation, collation and reporting of Performance Information.

Mr Van der Nest said that in terms of its Assurance Model, there were four lines of defence.

• The First line: the way risks were managed and controlled day-to-day. Assurance came directly from those responsible for delivering specific objectives or processes. It might lack independence but its value was that it came from those who knew the business, culture and day-to-day challenges.
• Second line: the way the organisation oversaw the control framework so that it operated effectively.  The assurance provided was separate from those responsible for delivery, but not independent of the management chain, such as risk and compliance functions.
• Third line: objective and independent assurance, e.g. internal audit providing reasonable (not absolute) assurance of the overall effectiveness of governance, risk management and controls. The level and depth of assurance provided would depend on the size and focus of the internal audit function and management’s appetite for internal audit assurance.
• Fourth line: assurance from external independent bodies such as the external auditors and other external bodies. External bodies might not have the existing familiarity with the organisation that an internal audit function has, but they could bring a new and valuable perspective. Additionally, their outsider status was clearly visible to third parties, so that they could not only be independent but be seen to be independent.

Mr Van der Nest said in terms of improvements, it stabilized leadership (Accounting Officer). There was a new Risk Management Committee with an external chairperson. There was also a newly appointed Chief Audit Executive for the improvement of the internal audit. He said that the challenges it was facing were:

• Leadership oversight from DDG level, CD and Directors which was not effective;
• Capacity and leadership in finance and supply chain;
• Prior audit findings not addressed fully;
• Synergy between finance and ASIDI;
• New Audit Committee.

He said that management was commended for addressing the control deficiencies reported during the 2015/16 audit. However, the intervention which took place in the third quarter of the financial year was expected to yield the desired impact within the 2017/18 financial year. Signs of improvement were noted, but controls regarding oversight by Internal Audit were not effective throughout the 2016/17 financial year as reported by AGSA.

Mr Van der Nest said that in terms of the Accelerated Schools Infrastructure Delivery Initiative (ASIDI), the audit outcomes noted that assets were misstated, commitments misstated, accruals wrong, irregular expenditure, and there were contingent assets and liabilities. He said that the root cause of these findings included a silo approach, poor management in the section, project managers not performing and information provided too late to finance. Therefore, it was recommended that investigations and action had to be expedited.

In terms of ASIDI action, Mr Van der Nest said that there had to be a workshop between Finance and ASIDI staff to improve the process. Monitoring and evaluation of a full set of half-year financial statements had to be done. He said that there had to be regular monthly reconciliations to be prepared to prevent misstatements in the financial statements. There should also be more internal audit effort directed and an interim audit conducted by the AGSA. There should also be possible disciplinary action against persons that caused irregular expenditure.

In terms of the Kha Ri Gude project, Mr Van der Nest said that the project was phased out. The Audit Committee’s own investigation and internal audit reports found many irregularities. There was too much irregular, fruitless and wasteful expenditure. He said that the Audit Committee was involved in the review of the annual financial statement prior to submission to the AGSA. Internal Audit presented the report during the Audit Committee which also highlighted other gaps to be corrected by management. Gaps were identified and the major challenge was the completeness of all disclosures. Management confirmed that outstanding information would be cleared before submission date (31 May 2017) and it was not, hence the material adjustments. He said that the Annual Report was reviewed prior to submission to the AGSA. Management worked with Internal Audit to correct other gaps identified during the review meeting prior submission date. Some deficiencies were still identified by the AGSA.

Mr Van der Nest said that in terms of proposed improvements, the Audit Committee recommended an electronic system be obtained to improve control over performance information. There should be more detailed work done by Internal Audit on quarterly performance information reports. The Audit Committee received a management action plan to address the AGSA findings. It would monitor progress and request the Internal Audit to do follow-up reviews. The AGSA would conduct a comprehensive workshop with management in the beginning of October to discuss improvement actions and to determine whether it would address the root cause of findings.

In terms of the other interventions during the audit, Mr Van der Nest said the Internal Audit already worked with management and AGSA on the issues which arose during the audit, which also resulted in material misstatement and significant changes in the finalisation of the Annual Report. Internal investigation on Kha Ri Gude also resulted in the adjustment of the number of learners that were initially registered.

In conclusion Mr van der Nest said that the Audit Committee would continue to address all matters within its mandate and responsibility. The Audit Committee would pay specific attention to the high risk and high impact issues to assist in moving to a clean audit.

Discussion

Mr M Ollis (DA) asked whether the Audit Committee had a dashboard to oversee contract management on a monthly and quarterly basis in terms of contracts signed or payments made and so on. The reason for asking this was because there was a situation where zero schools were connected to electricity out of 620, yet it took 18 months to realise this. Who was monitoring that? Was it only management or did the Audit Committee have some kind of dashboard where it picked up these things.

Mr H Khoza (ANC) said that he was happy with the improvements that were made because there was stability in the Department. But that stability should cascade to the lower management levels of the Department and it should avoid a situation where the Senior Accounting Officer received a performance bonus but the lower management did not, because that did not make sense if the top manager seemed to be performing whilst his juniors were not performing.

Ms J Basson (ANC) noted that the report did not address the findings of 2016/17 financial year. She asked what the recommendations were in addressing those findings.

Mr Mnguni asked what accounting duties the Audit Committee had when the Department was failing and what it did with the findings it received from the Department? What was the plan going forward?

The Chairperson interjected that Members of the Committee should note that they were asking these questions to the newly appointed Audit Committee and it may not have answers Members were looking for. In the report it was indicated that it had a plan on how to deal with those challenges. Therefore, the Audit Committee had to assist the Department to move out of these problems.

The Chairperson said that the Audit Committee had to come back and present the audit action plan to the Committee so that it would be adopted by the Committee; this was a work plan for the Department. The Audit Committee had to be able to reverse all these challenges of the Department, especially ASIDI, which had a lot at stake for skills development and job creation for young people. Therefore, in six months’ time the results of the work done by the Audit Committee had to be visible.

Mr Van der Nest responded that on the issue of the dashboard, in terms of contract management or in terms of performance against projects, it saw a performance report in quarterly meetings and in the internal audit review the evidence was clear. But it did not keep the inauguration contract register as the Audit Committee because the inauguration contract register was in the office of the Chief Financial Officer (CFO).

Mr Van der Nest said that performance was cascading to the lower management levels of the Department and it was already evident. The Accounting Officer was included in all managers’ performance agreements and DDGs downwards.

Ms Sibongile Lubambo, Provincial Auditor General, AGSA, said that it also finalized an exercise with HR which included all the Annual Performance Plans (APPs) indicators to align to the performance of DDGs so that when they were evaluated performance was included in the evaluation.

Mr Van der Nest emphasized that DDGs were monitored because specifically these were problems identified in other areas of the Department. He agreed that the Audit Committee was an early warning system and it met quarterly to review the quarterly reports from internal audit from management. The internal audit gave an early warning and it relied heavily on the work produced from the internal audit. It also looked at capacity in terms of how work could be completed because there was a lot to be done. The Audit Committee approved the annual coverage plan, which was a 3-year plan and an annual plan, which was presented to the Audit Committee to look at some areas. It also discussed those plans with the AGSA so that they could see the Audit Committee had sufficient coverage in the Department. The problem it had was that the internal audit was not effective but it would be given a chance to prove it can do a good work.

On oversight, the Audit Committee was independent and worked outside the Department although employed by the Department. It also received assurance from several assurance providers, assurance from management, assurance from internal audit, and assurance from external audit. The Audit Committee used this position to get early warnings, liaise with the accounting officer, get advice and communicate with the Minister if needed to.

Mr Van der Nest said that in terms of the audit action plan, it would be forwarded soon after workshops were concluded and submitted to the Committee. Because lot of work still needed to be done, it would ensure that the audit action plan had a desired effect in terms of the work of the internal audit and the interim audit would allow the Department some time to address any remaining issues before they do the final audit.

The Chairperson thanked the delegation from Audit Committee of the DBE for the presentation and answers.

The Chairperson informed Members of the Committee that they will deal with the report and minutes in their next meeting.

The meeting was adjourned.