Department of Basic Education irregular, fruitless & wasteful expenditure; infrastructure; scholar transport: hearing; with Minister

Meeting report

The Chairperson said the meeting was not intended to point accusing fingers but to review the activities of the Department of Basic Education (DBE) with respect to irregular; wasteful and fruitless expenditure, the infrastructure grant and scholar transport. The Committee wanted to ensure that officials of the DBE did not allow irregular wasteful and fruitless expenditure, that the infrastructure grant was well-managed, and that learners operated under favourable conditions, especially with regard to transport. The Committee was not interested in theoretical figures but rather the practical achievements of the DBE in service delivery to learners. It was the Committee’s view that projects should be handled properly and those involved in planning and execution should be held accountable.

The DBE delegation was led by the Minister of Basic Education, Ms Angie Motshekga.

Discussion issues:

Financial matters

Mr D Ross (DA) led the questioning and commending the DBE on its provision of basic education to learners, which was a fundamental human right. However, he was not clear about the actual budget allocation to the DBE for the 2018/2019 financial year -- was it R246 billion, or R22.722 billion? The role of Parliament was to ensure that money allocated to each Department was correctly spent in line with the Public Finance Management Act (PFMA) and Treasury regulations. He would interrogate the DBE on wasteful and fruitless expenditure in order to clarify aspects that were not clear. He had read a report that stated that the irregular expenditure in the DBE was R1.4 billion, and that the budget allocation to the DBE in the current financial year was lower than for the 2017/2018 financial year. Why had there been a reduction in the budget allocation? What was the position of the Director General (DG) on the irregular expenditure? Had there been any interventions on the part of the DG to prevent or reduce irregular expenditure? He expressed concern about the trend of irregular expenditure, as it clearly resulted from non-compliance with appropriate regulations.

With respect to the National Revenue Fund and accruals, why had R694 million not been spent in the 2016/2017 financial year? Did the DBE have a management plan for the handling of funds? Did it have an internal audit team? What were the reasons for the Auditor General’s (AG’s) allegation? Were there measures to monitor the daily activities within the DBE? Were historical risks linked to implementing agents?

He said irregular expenditure was not peculiar to the DBE, but it was still a cause for concern. Had the culprits been brought to book in a timeous manner? How did the DG handle irregular expenditure? Could unauthorised expenditure be prevented? He preferred prevention of irregular expenditure, rather than just its reduction. Should supply chain management (SCM) not be an independent process? What was the role of the Treasury in SCM? Was the Accelerated School Infrastructural Delivery Initiative (ASIDI) project part of the irregular expenditure? Did the DBE have means to deal with non-performing contractors?

There should be independence in the bidding process, and the Public Finance Management Act (PFMA) had to be complied with.

Mr Ross wanted to know about the practical importance of ASIDI. Was there co-ordination among the DBE and client departments on project implementation? While it was important to collaborate with other departments, the DBE should take ownership of its projects. He cited an example where the Departments of Correctional Services and Public Works were shifting the blame. To avoid this scenario, he advised the DBE to get its direction and organogram right. There must be a yearly comprehensive report of all implementing agents. A forensic breakdown of how money was spent would help the Committee to identify areas where help was needed and make recommendations that could be useful in dealing with irregular expenditure.

He lamented the trend of non-implementation of projects, failure of projects and the trend of corruption. Defaulting implementing agencies should be held responsible to prevent adverse consequences on learners in the affected provinces. He hoped the Minister intervened in this matter. Why were projects not fully implemented? Why were there no viable organograms in place? 

He commended the Minister’s intervention in respect of the equitable share allocation to the Provincial Education Departments in the Eastern Cape and Northern Cape. These two provinces had failed to ask for their equitable share. This might have denied the learners the opportunity to have transport to school. He suggested that there must be a way to monitor if Provincial Education Departments had access to the equitable share.

DG’s response

Mr Hubert Mweli, DG: DBE, said that the figure of R246 billion was the budget for a period of 10 years. The reduction in the budget allocation from 2017/18 to 2018/ was the result of budget cuts. The DBE and client departments had been taking active steps in recent years to reduce the risks of wasteful and fruitless expenditure. He regretted that R694 million had not been spent on projects in the financial year in question. Officials of the DBE sometimes had technical difficulties in making payments, leading to increased accruals. This problem also occurred in other departments, and was not peculiar to the DBE. The DBE had a management plan that sought to manage accruals on a monthly basis. Steps were being taken to ensure that invoices were paid within 30 days.

An internal audit team was functional within the DBE. There were also interventions in project implementation, especially with the implementing agents, as this helped to mitigate risks of irregular expenditure. Most of the risks were attributable to implementing agents. Officials ensured that the implementing agents involved in projects were qualified before contracts were awarded to them. Though this caused delays due to the technicality and time consumption, it was worthwhile because it helped to reduce the risks of irregular expenditure. Officials of the Department also monitored the activities of the implementing agents and ensured compliance with relevant regulations.

ASIDI was part of the irregular expenditure. He agreed that SCM had not been adhered to in the implementation of certain projects.

Accountability

Mr E Kekana (ANC) asked if the PFMA and other relevant regulations were followed in the implementation of projects. He suggested that the DG should take responsibility for what went on in the DBE, instead of shifting the blame on to implementing agents. As the Accounting Officer of the DBE, the buck stopped with the DG. He lamented that the DG had not been specific in respect of the year under review. He wanted the DG to focus on the 2016/2017 financial year.

In response to the DG’s answer on his responsibilities, Mr Kekana cited Chapter 5 of the PFMA, Section 28, Page 6. As the Accounting Officer of the DBE, what had the DG done to deal with transgressors? What specific steps had been taken to ensure accountability within the DBE? He complained that the DG responded as a politician, and not as the Accounting Officer of the DBE. He also stated that the report the DBE had sent to Committee regarding culpable officials, was irrelevant. If there were challenges, what were the remedial actions? The DBE should have the means to check the activities of implementing agents. This would eventually help the DG, as he was accountable and responsible for the deliverables.

Mr Kekana asked the DG what a Certificate of Completion was. He also sought clarity on the previous positions held by the DG within the DBE.

He complained that the figures and details presented by the DG were misleading. Why was a Certificate of Completion delayed even after some of the contractors had received payment for the work done? This was a gross violation of project management rules. Payment must be made only when all components of the project were certified complete.

Mr Kekana said that there should be a mechanism to check the activities of the DG. The DG could not commit crimes and go scot-free just because he was the head of the DBE.

The Chairperson insisted on knowing why Certificates of Completion were not issued. Were the processes incomplete, or was there negligence on the part of the organisations that should issue the certificates? He advised the DBE to handle government business with dignity. Lapses and corruption should not be tolerated from implementing agents, contractors or officials of the DBE.

The Chairperson found it difficult to understand why the DG would allow contractors and implementing agents to hold him to ransom, to the point where the Standing Committee on Public Accounts (SCOPA) made adverse findings.

DG’s response

The DG said he was fully aware of his mandate and was taking appropriate measures. He had made interventions. Steps had been taken to deal with officials who had transgressed in contract management. Implementing agents had also been warned to comply with relevant regulations should they wish to continue to render services to the DBE. 

The DBE had already forwarded a report to the Committee on the steps taken regarding the officials who had transgressed in contract management. In the year under review, certain officials had been issued with final written warnings.

He assumed Mr Kekana was referring to the education infrastructure grant when talking about challenges and remedial actions. He said there was a need to beef up capacity at both the national and provincial levels. While provinces were responsible for the implementation of projects, the national body monitored and supported what happened at the provincial level. The DBE used implementing agents to monitor what went on at the provincial level.

Technical capacity

The Chairperson asked the DG about the technical capacity of the DBE to enforce project implementation at the provincial level. If the DBE did not have the technical capacity, did it mean the DBE accepted whatever was given to it by implementing agents in terms of their expenditure? Why were infrastructural projects rolled out when there was no technical capacity?  What was the impact of the lack of capacity on project implementation in the affected provinces? On the basis of 10 projects, how many projects could the current capacity deliver in the affected regions?

Had the needed capacity been built? How often did monitoring take place at all levels of infrastructure? Did the DBE have the ability to monitor and enforce compliance? What were the risks of not having the capacity to ensure delivery of structures? Was the organogram the only route to intervention? Projects could be rendered wasteful – with walls falling apart and buildings collapsing -- if there were no proper interventions. How did the DBE hope to handle challenges in infrastructure, especially in the marginalised provinces?

The DG said that DBE lack technical capacity to intervene at provincial level. It also lack capacity to monitor the implementing agents. Four provinces including Limpopo, Mpumalanga, Free State and Northern Cape were currently struggling with technical capacity. With a new reviewed organogram structure, the DBE would work with the national Treasury to get the adequate capacity to monitor and intervene at the provincial level. This would address the lack of technical know-how with respect to engineering, architecture and quantity surveying.

DG’s response

The DG said that the risks of a dearth of capacity were huge. The DBE lacked capacity for effective planning and timeous intervention. The technical capacity in the affected provinces was extremely limited. With ASIDI, an implementing agent possessed the technical capacity, on behalf of the DBE, to ensure monitoring and intervention in the interim. There were architects and quantity surveyors who were able to do the work on behalf of the DBE. Lack of capacity definitely slowed down projects, especially when a large number of projects were to be executed within a limited time frame.

Regarding the Educational Infrastructural Grant, projects were awarded to provinces based on their capacity. The inability to monitor implementing agents also posed a risk to the success of projects. The DBE awarded money to provinces to implement projects. However, provinces sometimes may not be able to implement all the projects due to limited capacity.

In response to why the AG had not recognised the completion of most projects, the DG said that the Auditor General did not consider a project had been delivered until the Certificate of Completion was given. He cited the case of getting the chief executive officer (CEO) of Eskom to issue a completion certificate. The projects had long been completed, but completion certificates were not issued. He could get the completion certificates only after the intervention of the Eskom CEO. Some of the project money had been released to contractors before the completion of projects, while the rest was released after the contractor had been issued with a Completion Certificate.

In response to the question about his years of employment in the DBE, Mr Mweli said he came into the Department as a Branch Head of Curriculum in 2012. He also held the position of Head of the Department before he was appointed the DG. He added that Mr Mafoko had been employed in the DBE since 2008.

Achievement of targets

Mr T Brauteseth (DA) sought clarity on the number of projects delivered in relation to the targeted number of projects, and the percentage of budget spent. He said that R12 billion had been budgeted to build 59 schools, provide sanitation to 265 schools, supply water to 280 schools, and to electrify 620 schools. The DBE had managed to build 16 out of 59 schools, provide sanitation to nine schools, give water to 10 schools, and none of the schools was electrified. How could the DBE justify that it had spent 93% of its budget?

He asked about the meaning of ‘replacement schools.’ Was there any difference between ‘replacement schools’ and ‘new schools’? He suggested the term ‘renovated schools’ in place of ‘replacement schools’.

If R2.1 billion had been budgeted for ASIDI, what proportion of the target had been achieved? How much of the R2.1 billion grant had been spent? He expressed dissatisfaction over the non-availability of statistics regarding the target and achievements of the DBE on the ASIDI projects. Did the DBE attempt to make its books clean by spending money on nothing? What was the cumulative figure of projects implemented within a given timeframe with the R2.1billion under ASIDI? He lamented that problems arose when the DBE and other departments failed to monitor the activities of implementing agents.

Mr Brauteseth expressed his dissatisfaction at how the DG had contradicted himself on the number of implemented projects. He did not trust the DG, and was not satisfied with the answers and figures he had given, especially regarding electrification projects. Why were the Certificates of Completion withheld after project implementation?

The Chairperson advised the DG to have up-to-date information that was verifiable, instead of using the unverified figures of Mr Mafoko (Director: Infrastructure, DBE). Were the irregular expenditures a consequence of lapses, or was that the way things were done in the DBE to enhance material benefits?

He asked whether the DG exercised authority over Mr Mafoko? He suspected Mr Mafoko was politically superior to the DG, so the DG might not exercise authority over Mr Mafoko.

He said the Committee saw the DBE from a standpoint of distrust. He expected the DG to have the details of all implemented projects. 93% of the budget could not be spent when less than 50% of the projects had not been implemented. How were the projects monitored? Was there proper budgeting? Were measures taken to avoid inflation, and what were the roles of the officials of the DBE?

DG’s response

In response to the question on the budget specifics, Mr Mweli said R12 billion was the combined budget for ASIDI and the Education Infrastructure Grant. The deliverables presented belonged to ASIDI, for which R2.1 billion had specifically been budgeted. The DBE did not have detailed statistics on the deliverables of ASIDI at the time of the meeting, but these would be supplied to the Committee as soon as possible.

The number of schools provided with electricity was zero because the Certificates of Completion were not issued, though there had been delivery at the time of the AG’s report. The DG gave conflicting figures of the number of electric projects implemented.

The DG said that the underperformance in project implementation was due to the challenges the DBE had faced during the period under review. The projects had been given to the Independent Development Trust (IDT), which could not deliver. The projects had been taken from the IDT and given to the Mvula Trust.

Mr M Hlengwa (IFP) found it disingenuous that the DG could not give the statistics of Department’s achievements. He expressed frustration with the way the DG handled the statistics. How did the DG know the difference between R12 billion and R2 billion, but could not give a breakdown of how the R2 billion was spent? Regarding targets and deliverables, what did the DG take responsibility for? What was the logic behind transferring money to the provinces, knowing that some of them may not have the capacity to implement projects? Were there conditions provinces had to meet before money was transferred?  Transferring money to provinces that lacked the requisite capacity could tempt provinces into financial misappropriation. What were the plans and interventions to build capacity?

He wanted to know which officials were in charge of money transferred within the DBE. What level of management did these people occupy? What was the hierarchy within the DBE? Had money been recovered from people involved in fruitless and wasteful expenditure? What were the names of the officials involved in fruitless and wasteful expenditure? People in top management should not behave in a way to avoid punishment for their wrongdoing. Junior staff should not bear the consequences of the actions of those in top management. Did the DG realise that he was the accounting officer of the DBE? Did he get warnings? Who did he report to?

The Chairperson asked the DG how transfers were made within the DBE. Were they given in lump sums, or as the need arose, or as projects were identified? Who transferred the money?

The DG said he took responsibility for all projects implemented on behalf of the DBE, the Provincial Education Departments and all transfers that emanated from the DBE.

Budgeting was done per project, and transfers were made in five tranches. The province tells the DBE the number of target projects, and the DBE provides money based on the information supplied.

Part of the intervention of the DBE was to build capacity in the provinces. The major challenge was capacity retention. People with technical capacity were leaving the public sector for private sector.

The DBE allocated financial resources to provinces with capacity. In case money was transferred and the DBE found out a province lacked capacity, the money was reallocated to provinces with capacity. However, this practice would further marginalise already disadvantaged provinces.

He stated that the Deputy Director General, Chief Director and Directors were involved in the management of supply chain and have been issued appropriate warnings. He said money had been recovered from fruitless and wasteful expenditure and details sent to the Committee.

The names of the officials involved were the branch head for Infrastructure and Contract Management, who was issued with a warning letter, Mr Mafoko (warning letter), and directors reporting to them. These officials had been warned because of lapses in project implementation and the handling of implementing agents.

The DG said he could not issue a warning or take disciplinary action against himself. He reported to a higher authority.

Implementing agents

Ms T Chiloane (ANC) asked the DG about the number of implementing agencies the DBE had engaged with in the financial year under review. She expressed concern about the relationship between the DBE and their implementing agents. There were issues that bordered on mistakes and improper procedure in the award and implementation of projects. She was dissatisfied with the nature of disciplinary actions within the DBE. Apart from written and final warnings, were there other steps taken to hold defaulting implementing agencies accountable? Who was responsible for the mis-management? Was a written or final warning appropriate in all cases? She said a final or written warning was not satisfactory, especially where transgressions were repeated. How much of the R11 billion in irregular expenditure had been recovered? Had money been recovered from contractors, implementing agencies or officials of the DBE?

Most of the money lost was from wasteful and fruitless projects. How did the DBE recover money from the defaulting contractors? There appeared to be flaws in supply chain management. The DG appeared not to respect the PFMA. When was Mr Mweli appointed as DG? She was not comfortable with the answers the DG had given. The DG had failed in his responsibility, based on the PFMA.

DG’s response

Mr Mweli said that there had been eight implementing agents for ASIDI. In terms of value chain management, the DDG and Chief Director were responsible. Appropriate action had been taken against them for lapses in contract management, and in respect of a Memorandum of Understanding (MoU). A final written warning was serious, because a further offence by the affected party may lead to dismissal.

The DG said that R7.2 billion had been recovered from the R11 billion of irregular expenditure in the 2017/18 financial year. The irregular expenditure for the 2016/17 financial year had been R44 billion. Law enforcement agencies had been involved in recovering more of the money. Money had been recovered from volunteers who were involved in unlawful practices.

He said he was appointed as DG in 2015.

Other issues

Ms N Gina (ANC), Chairperson of the Portfolio Committee on Basic Education, asked the DG to give a practical report on the targets and deliverables of the projects being managed by the DBE. A proper answer to this matter would help to correlate the activities of SCOPA and the Portfolio Committee on Basic Education. She expected the DBE to update the Committee on the stages of projects. What could be responsible for the non-implementation or non-completion of projects? How many tranches had been transferred so far?

Ms N Mente (EFF) requested the DG to specify the offences committed by officials who had been issued final warnings. This would help the Committee to evaluate if final warnings given to those officials were sufficient for their transgressions. What was the level of the transgressions? What were the penalties? Were there cases of repeated transgressions? She cited the involvement of the Mvula Trust and other implementing agents in the Eastern Cape (EC). Why were offenders continually given written warnings? For instance, the same set of people involved in irregular expenditure had been issued written warnings from 2012 up till now. Had contracts been inflated? Had there been kickbacks? Was there value for money in the implementation of the projects?

Ms Mente wanted a comprehensive breakdown of the targets and deliverables on a school-by-school basis. Where were those schools located? She was concerned about the existence of inappropriate schools in places like Limpopo and the Eastern Cape (EC). Where did the allocation of funds for projects start?

Why had R500 million been retracted from the EC? Had the DBE been aware of the lack of capacity before transferring money to the EC?

Aside from the risk of fiscal dumping, the reallocation of money could also impact adversely on skills development. The skills required for implementing projects were widely available in South Africa. The questions had to deal with management. Did the DBE have provisions for provinces? Did it evaluate those that were currently working in different provinces in terms of functional organisation and the things needed to make the departments function properly? Was there a framework that provinces had to comply with for the appointment of people, or were people recruited without consideration of skills and capacity? Did the DBE have plans to build capacity in rural and marginalised areas? Capacity building was important so that money could be spent judiciously and service delivery provided to the people.

In terms of accruals due to the non-payment of service providers, how many schools had not received a transport allocation? What was the total allocation of transport that had not been paid? According to the DBE presentation, the Department of Transport and the Department of Education were responsible for learners’ transport. Where did the budget allocation of the Department of Education come from? How did the DBE evaluate the relationship between the school, the service provider, learners and the Education Department? Were there policies or monitoring tools to verify the effectiveness of learners’ transport? Were service providers paid timeously? She asked the DG if there was any difference between policy, guidelines and a monitoring tool. Where did the DG feature in the institutional framework?

If there was no monitoring tool, how had the DBE arrived at the figures it had presented to the Committee on pages 23 to 25 of the presentation?

Ms Mente asked the DG to give a breakdown of the schools with transport needs, and those schools that had received transport services in the third quarter of the 2017/18 financial year. She did not believe the figures presented by the DG. Had the DG based his presentation on abstract figures given by his officials? Was he actively involved in the actual operations? Did he have any means of verifying the figures? What types of vehicles were used for learners’ transport? Why were vans used to transport learners?

Ms Mente said that the number of students should not be the yardstick for building schools. The DBE should rather know the profile of each community and give preference to the educational needs.

The Chairperson said that people did not engage in irregular expenditure because they were fools. What motivated people not to follow due process? Systems had to be put in place to avoid irregular expenditure going forward. He affirmed that the report was comprehensive. However, he advised the DG to work on the details in order to avoid unnecessary generalisation.

The withdrawal of money from provinces that lacked capacity to provinces with capacity could lead to fiscal problems. If money was transferred in tranches, at what point did the DBE realise that a province lacked capacity? In the case of the EC, was the R500 million with the DBE or the EC? In cases where money were retracted and given to provinces with capacity, were there measures to ensure the money was spent judiciously?

The Chairperson asked about the role of the National Department in learners’ transport. Did the DBE have the means to impose itself on the provinces? Was it able to intervene effectively and decisively where there were lapses? What was the level of compliance with policy with respect to learners’ transport? Did the National Department monitor provincial activities after appropriation of the budget? There did not seem to be an effective working relationship between PEDs and the DBE. Did the DBE literally accept figures written on paper from Provincial Education Departments without adequate verification?

DG’s response

In response to the question on the nature of the offences committed, the DG said that the transgression had been non-compliance with SCM and the PFMA on the part of implementing agents. Necessary action had been taken to deal with officials and implementing agents involved in mis-management of projects. The DBE required all implementing agents to submit requisite documents before contracts were awarded. This helped the DBE ensure that projects were handled by qualified contractors.

The DBE had set up an investigating team comprising the directors of internal audit, legal services and infrastructure. The report was available for the consideration of the Committee. He agreed that there were repeated offences, especially by the Mvula Trust.

The allocation of funds for projects was done in compliance with the Education Infrastructure Act. The R500 million had been retracted from the EC due to its lack of capacity.

The DBE ensured that money previously given out was well spent before giving out the next tranche.

The R500 million was with the DBE, and was reallocated to provinces which had projects with value for money service delivery.

The DBE did not handle the budget for learners’ transport. The Provincial Education Departments were responsible for learners’ transport.

The role of the DBE, in learners’ transport, was to develop policy and monitor the implementation of the policy. It had guidelines that regulated policy implementation. The monitoring of invoices did not fall under the ambit of the DBE.

The DG said that the National Inter-Departmental Committee reported to both the Minister of Transport and Minister of Basic Education. He usually discussed the state of learners’ transport in management structures and at Council of Education meetings, which the Minister chaired. The Minister was able to intervene in terms of Section 8 of the National Education Act, where policy had not been complied with. Compliance with policy, in terms of learners’ transport, meant budgets were well spent and students did not walk more than five kilometres to and from schools. Provinces appropriated budgets for learners’ transport.

The DG said the figures came from self-reporting, but were verified by the end of the year monitoring report.

Minister’s comments

Minister Angie Motshekga said the implementation of learners’ transport was the responsibility of the Provincial Education Departments. The figures presented were based on quarterly reports. The Department only acted as a bank for the provinces. However, the DBE aimed to develop a framework to monitor the implementation of projects at the provincial level. She promised to furnish the Committee with the relevant statistics as soon as they were released by the Provincial Education Departments.

The Minister said she was not satisfied with the DG’s responses. Why was there no correlation between expenditure and deliverables? The main problem was the non-issuance of Certificates of Completion. She cited an example of 49 schools that had been completed and occupied by learners for two years. None of the schools had received Certificates of Completion. Therefore, the projects were seen as incomplete. Non-issuance of Certificates of Completion had caused the DBE to withhold the retention fund. Most contractors preferred to have a fresh contract that paid more money, rather than running after the retention money.

The re-allocation of funds to other provinces could be done only with Parliamentary approval. The challenges in the EC included lack of capacity, legal cases and delays. She gave an example where a service provider had taken the DBE to court. The case had been in the courts for six months, and had led to a loss of time.

She maintained that infrastructure could be built only by being compliant with the relevant regulations. She decried the erection of white elephant structures. She also said that limitations were sometimes imposed because of inter-ministerial relationships. Based on this, the DBE preferred external contractors to other client cepartments in the implementation of projects. Weekly meetings were held to provide solutions to some of the challenges.

The main challenge with infrastructural projects was capacity. The DBE disbursed money based on the business plan of each province. It then decided whether to issue the money or not. If a province did not display adequate capacity, the money was retracted and sent back to the Treasury or re-allocated to provinces with needs and capacity. She cited the case of the EC, where money had been withdrawn and re-allocated to Gauteng and the Western Cape provinces.

She promised to address the concerns of Members and give an appropriate report to the Committee.

Conclusion

Mr Mweli apologised for the poor quality of the presentation, and promised to work more effectively with the Committee going forward.

The Chairperson expressed his frustration at how the government was configured. He gave examples of Mpumalanga and KwaZulu-Natal, where service providers complained of non-payment for services rendered. He promised to look into the activities of provinces as soon as business with Section 25 was concluded.

The meeting was adjourned.