Conditional Grants & Capital Expenditure of Eastern Cape, Limpopo, Free State & Kwa-Zulu Natal Education Departments: briefings

NCOP Finance

13 October 2005
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Meeting report

FINANCE SELECT COMMITTEE

FINANCE SELECT COMMITTEE
14 October 2005
CONDITIONAL GRANTS AND CAPITAL EXPENDITURE OF EASTERN CAPE, LIMPOPO, FREE STATE AND KWA-ZULU NATAL EDUCATION DEPARTMENTS: BRIEFINGS

Chairperson:
Mr T Ralane (ANC)

Documents handed out:
National Treasury: Outcome of Conditional Grants and Capital Expenditure at 30 June 2005
Eastern Cape briefing
Limpopo Infrastructure Plans for Medium-term Expenditure Framework (MTEF)
Free State briefing
KwaZulu-Natal briefing
Limpompo briefing
[please email
docs@pmg.org.za]

SUMMARY
The National Treasury presented the Committee with the first quarter provincial spending trends for Education Conditional Grant expenditures, capital spending and infrastructure. The overall situation, including Conditional Grants, reflected the Education Departments’ apparent intention to overspend their budgets by almost R900 million, which was concerning.

The Eastern Cape, Limpopo and Free State provincial education departments then presented their reports. The provinces outlined the challenges encountered with the School Nutrition Programme, HIV/AIDS education programmes, and infrastructure development.

The Committee raised concerns about the Eastern Cape feeding learners only three out of five days per week. The Limpopo Education Department had planned extensive overspending on infrastructure to eradicate ‘schools under trees and in shacks’, but the Committee was concerned about their intention to overspend. Concern was also expressed about the infrastructure grant outlined in the Free State report. The province was instructed to report to the Committee with more details. HIV/AIDS education spending had been inadequately low.

The Committee refused to hear the Kwa-Zulu Natal submission, as the Member of the Executive Committee (MEC) had not attended the meeting.

MINUTES
National Treasury briefing
Mr D Mogajane, Treasury Director: Intergovernmental Relations, presented the overall trends for the first quarter of the financial year as it related to the Education Conditional Grant expenditure and capital expenditure (including infrastructure). Over- or underspending was viewed as a serious transgression and the figures were disturbing. The overall situation, including conditional grants, reflected departments’ intention to overspend their budgets by almost R900 million. All provinces planned to overspend except Gauteng. Total provincial education expenditure was at 24 %. Provincial Public Ordinary School Education) expenditure totalled overspending of over R800 million. The Provincial Non-Personnel, and the Non-Capital Education expenditure projects projected overspending of R200 million.

Broad capital trends also suggested the same pattern of overspending for other provinces. The Eastern Cape had shown low spending in the first quarter of 2.3 %, but projected annual overspending, and needed to explain the situation. Education projected an overspending total of R313 million out of the total provincial overspend of R765 million. The Conditional Grant Budget for the first quarter was about R1 billion and spending was 17.8 %. Spending on HIV/AIDS (Life Skills Education Grant) was 13.6 % and was 18.5 % on the National School Nutrition Programme Grant. The Treasury was aware of problems identified around those grants and looked forward to hearing more from the departments concerning performance.

Mr Mogajane then outlined the Conditional Grant differing spending rates of the various provinces on the National School Nutrition Programme and HIV/AIDS education. He outlined the dates for the pilot programme, which would enable the Treasury to have non-financial as well as financial information from the provinces in Quarterly Provincial Reports. This would enable them to know exactly what the money was being spent on.

Mr I Lesang (Treasury Deputy Director: Intergovernmental Relations) noted that the total Infrastructure Budget as a percentage of Capital Expenditure (buildings and other fixed structures) was a 73.9% average for all provinces. Three provinces (Free State, Gauteng and Mpumalanga) had not reported their spending breakdowns, despite having being requested to do so.

Eastern Cape briefing
Dr D Edley (Head of Education Department) tendered the MEC’s apologies as he had been in a meeting with the Deputy Minister around serious education issues in the province. Dr Edley confirmed that the Treasury’s projection of R106 million over-expenditure was correct. Educator backlog payments for which funds had been transferred to the provincial departments in the previous financial year, had created that situation. A delay in the signing of a national agreement had meant the province had been unable to pay, and therefore that payment had only been made out of funds allocated for this financial year. An application for a roll-over had been accepted despite unusual circumstances. The Department would therefore not be projecting over-expenditure. Over-expenditure in the other programmes was also due to the educator backlog payments, which would be resolved in due course.

The Eastern Cape had had a very good record of capital expenditure, as it had spent all of its budget allocation in the past two years. In the last financial year, the Provincial Treasury had had to deal with provincial overdrafts and other problems. Due to those pressures, the infrastructure budget of the Department had been reduced. All planned projects that had not been started, had had to be put on hold. Delays in spending of infrastructure funds in the first quarter were a result of having to restart those projects as well as delays encountered by having to sign service agreements. Dr Edley predicted the expenditure would be much ‘healthier’ by the end of the next quarter. The Treasury figure of 2.3 % for the first quarter was correct.

The Treasury’s statistics for the Conditional Grant for HIV/AIDS education spending was also right. The roll-out of the programme had been subject to the vagaries of tenders with a commitment of all funds in this programme. The projected first quarter figures were correct.

There had been various problems with the School Nutrition Programme in the previous year when taking over the project from the Health Department, but great progress had been made regarding backlogs. The National Treasury figures were correct and the Department had made progress in spending the grant. Additional funds had been requested for extending the programme as they were currently feeding only Grade R to Grade Four students in Public Ordinary Schools, and Grade R to Grade Seven in so-called ‘farm schools’.

Discussion
Mr M Robertson (ANC) noted that children in the Eastern Cape only received food three out of five days. He suggested that a gross miscalculation of the number of children in the province had been made.

The Chairperson wondered if there had been a problem with the Business Plan submitted. Dr Edley responded that, given the current funds allocated, the province was unable to feed all children using the present feeding model. The long cycle of payments with suppliers had exacerbated the problem. Some children in the same households were not being fed because they had moved into a higher grade.

The Chairperson asked the National Education Department if it could confirm the agreement for three feeding days and the reasons for the decision. Mr P Benade (Chief Financial Officer: National Department of Education) said that the MEC had accepted the proposal with concern, but felt that it was preferable to feeding being withheld. There was a need to move away from service providers towards communities providing food at a more reasonable cost. The allocation of funds had been based on old statistics. The formula was only now being revisited and would effect the 2008/09 Medium-term Expenditure Framework (MTEF) allocation, but not the funds for the next few years. A service provider had been contracted to compile a comprehensive Register of Needs and their technical team would be visiting every school. The first part of the Register would be available in this financial year and the complete project within a 12 to 18 month period.

Mr Robertson argued that, while the Department spoke of feeding to farm schools, to his knowledge very few such schools remained in existence. He requested exact figures in that regard. Only one of the five farm schools in his area was still operating. The cost of taxi fares and learners’ town accommodation was very onerous for cash-strapped parents.

Dr Edley acknowledged that farm schools were under review, but the migration of the population away from rural areas was a factor in the depletion of those schools. Parents made choices on where their children would be better educated. The Department had a duty to provide scholars’ transport and create viable routes. Bad roads and illegal ‘bakkie’ transport were major problems. The Department could not subsidise illegal modes of transport and needed to find alternatives. The problem with buses was in being able to attract service providers to the rural areas, when only R50 was allocated per scholar per month.

Mr Robertson pointed out that, despite the serious infrastructure shortage, with cases of 70 children in one classroom, the Department had only spent 2.3% of the infrastructure grant. The Chairperson noted that during a recent Eastern Cape visit, poor infrastructure had been seen all over the province, including schools and bad roads. In the midst of that massive poverty, the Department had only spent 2.3 % of that grant and yet had reported "a good record of spending". The report indicated the Provincial Treasury had reduced infrastructure investment and the reasons for that needed to be explained.

Dr Edley noted that the Eastern Cape and Limpopo provinces had been most neglected during the apartheid era and infrastructure backlogs were enormous. The highly mobile population had also made planning and balancing urban and rural needs difficult. He felt that it was preferable to increase the size of existing schools rather than build new ones. In response to the Chairperson’s question regarding the quality and value of the spend, Dr Edley responded that quality building was being delivered in partnership with the Public Works Department. However, the allocated funds were ‘a drop in the ocean’ and R2.3 billion was needed to rectify problems.

Mr Robertson noted that letters had been written since 1997regarding the issue of sewage leaks at Frans Wilger School in Lady Grey, and the pipes had not yet been repaired. Dr Edley responded that such problems were the responsibility of the school and funds were allocated for maintenance. If the school was unable to conduct the repairs, they were supposed to report to the relevant District. He would however follow up that complaint personally, and was disturbed at the long time that had passed.

Mr Robertson noted that schools such as Rhodes Primary School and Frans Wilger School had been categorised as Quintile 5 schools. This has been done despite the very high levels of unemployment in those areas, where less than 5% of pupils were able to pay school fees. The Quintile 5 categorisation placed them on a par with Selbourne, Dale College and Queens College, which made no sense.

Dr Edley agreed that the quality of infrastructure of the school should not determine the quintile. There should be a classification of national quintiles with the same criteria for all schools in the country. Poverty in the area surrounding schools should be the only criteria. Once fee exemptions were granted, ‘no fee’ schools would be introduced into the poorest quintiles.

Mr Robertson argued that despite the Department reporting overspending on a backlog payment to teachers of R106 million, teachers in his area have been waiting for pension payouts and increases for the past four or five years.

The Chairperson asked for elaboration on the funds committed for HIV/AIDS education. Dr Edley noted that the programme had been ‘patchy’ with some areas highly informed and others ‘untouched’. The Department had secured a service provider to conduct an evaluation study to assess the impact of the programme.

Ms D Robinson (DA) said that even with the historical backlogs, 2% expenditure on infrastructure was very low and delivery needed to increase. She illustrated the example of Methodist and Catholic Schools that used to be run very successfully in the previous Transkei. These had been closed due to a political agenda and she suggested that these partnerships be reintroduced. Some excellent farm schools existed in the country that parents supported. Such quality schools should be maintained and not closed in favour of large comprehensive schools.

The Chairperson expressed the infrastructure concerns to the Eastern Cape Public Works Department representatives present, and encouraged them to find ways of assisting the Education Department in delivery of classrooms, sanitation and water at schools. He concluded by emphasising the need for community gardens to be developed, which could provide cheap vegetables for soups so they could feed children for more than five days. He suggested the Department investigate those options and return with better news.

Limpopo Education Department presentation
Dr P Motsoaledi, the Provincial Education MEC, agreed that the National Treasury figure of 6.8 % expenditure for Limpopo was correct. He explained that funds had been committed with the tendering process underway, but those projects were not yet on the books. There had been a misuse of the Primary School Nutrition Programme, where rich unscrupulous people had acquired the tenders. The tenders were now being awarded to empower the local communities. However, the Programme had to be cleaned up before it could continue, and feeding had begun late. He predicted the Department would overspend by R208 million on the Programme. They had debated cutting the feeding days, but felt this was not viable.

The MEC noted that quintiles 1 and 2 school children should be fed, but due to prevailing circumstances in communities, the programme was covering even quintile 3 schools. Children from the same families were being fed while others in the family were not, due to children moving to secondary school.

The Treasury was correct that little of the HIV/AIDS education grant had been spent. The MEC himself had disagreed with the Business Plan that had been submitted. The programme activities had been conducted during school holidays. Teachers were dying in large numbers, yet the message in schools was that HIV/AIDS was not affecting them. The programme aimed at teachers had to be different. People were becoming used to the existing pamphlets and a drastic new approach was needed. The MEC felt strongly that a Director was needed at that level, as only junior staff had been involved thus far. The Employee Assistance Programme was not working because teachers did not feel comfortable disclosing their status to a colleague. Outside counselling was needed.

The Treasury’s capital expenditure figures were correct. The MEC had disagreed with the Business Plan and spending had begun late. A plan was essential to avoid a ‘demand-driven approach’.

The information on the Education Management Information System (EMIS) needed to be more reliable as departments often provided false and inflated information regarding issues such as the number of ‘schools under trees’. The Independent Electoral Commission (IEC) had more information on schools used as voting stations than the Education Department.

The Province had identified seven categories of infrastructure provision for the MTEF. R473 million was committed to providing 2 000 classrooms so that no child would have to study under a tree or in a shack. The projected overspending was necessary to achieve that goal. Some 40 new schools had been completed with a hall. Extra library, laboratories and sports facilities were being planned. Condemned schools would be renovated or demolished and rebuilt as storms destroyed them. There were 24 Early Learning Special Educational Needs (ELSEN) schools for the disabled with varying degrees of need. Overcrowding in schools was being addressed as the given ratios applied in very few schools. Circuit offices were being built. One comprehensive school would be erected in each of the six districts of Limpopo. Historically, the schools backlog had been addressed by adding classrooms in a fashion the MEC called ‘4x4s’. He wanted to see proper schools of the best quality with all facilities in Limpopo. Additional funds were needed for the Nutrition Programme and the extensive infrastructure plans. The Department had been told they would receive less in the following year, and the MEC was pleading with the Treasury for an increase rather than a decrease.

Discussion
The Committee felt that the report had been extremely worthwhile and well presented. Mr Robertson commented that running activities on HIV/AIDS during the school holidays was a problem as pupils were spread out, and that would dilute the impact. The MEC agreed and said they were in the process of changing that strategy. Mr Z Kolweni (ANC) asked if the HIV/AIDS programme was being addressed to parents as well. Dr Motsoaledi said that they were not, and they were not even reaching teachers successfully at this stage.

The Chairperson suggested that the Provincial Treasury assist the Department with financial management regarding overspending, and asked if the projected targets of building infrastructure, such as classrooms, had been met. Dr Motsoaledi responded that the province had been very helpful. He felt confident that the targets would be met as all tenders had been allocated and many projects were well underway.

Dr Motsoaledi reiterated the need to involve local suppliers, support community garden initiatives in the Primary Nutrition Programme, and link that Programme to the Poverty Relief Programme. The Department’s concern had been about communities being able to provide consistent supplies. A balance between empowerment and service delivery needed to be found. The Northern Cape should be looked at for best practice in the area of community gardens, and in partnerships with the Agriculture Department.

Mr B Mkhaliphi (ANC) wondered if the province received any guidance regarding the norms and standards to help with the planning. The Chairperson added that the Infrastructure Delivery Improvement Programme (IDIP) should be of assistance to the Department. Dr Motsoaledi responded that the standard ratios were not being applied in practical situations, as overcrowding was a serious problem. Infrastructure planning had been left to junior staff unable to deal with the complex situations. IDIP were now assisting and a Directorate would be established. Posts had already been advertised.

Mr Mogajane noted that overspending was against the law and asked how the Provincial Treasury was assisting the Department in addressing the situation. Mr Lesang added that IDIP was a generic tool that could be most effectively used. It provided technical assistance and could be used in a flexible way to address capacity gaps. He gave positive acknowledgement that the MEC had himself gone out, investigated the situation, and gathered important information. He also raised the issue of foreign funding and questioned how well that had been used.

Dr Motsoaledi made it clear that his Department had not deliberately gone against the law. He had hoped that he could ask for more funds at this meeting. In order to eradicate schooling under trees and in shacks, a larger conditional grant would be needed. The Department was attempting to re-organise itself and the National Education Department had been extremely helpful. The Education and Management Information System (EMIS) information had not proved reliable and updated data was needed. Best practices were being studied in other provinces. Foreign donors needed to be ‘controlled’ as they tended to want to spread their influence over many schools, rather than provide to fewer, fully resourced schools. The MEC felt very strongly that ‘total schools’ needed to be built and not clusters of classrooms (he termed them ‘4X4s’), where toilets might be added later.

The Chairperson concluded that the issue of rural municipalities not having loan capacity would be raised with the Development Bank of South Africa (DBSA) at a meeting next month. There were 101 Development Finance Institutions (DFIs), and they need to be challenged on their inflexible mandates.

Free State Education Department presentation
Mr M Rakometsi, Head of Department, understood that the meeting was only looking at the first quarter expenditure, but noted that the second quarter figures showed a vast improvement as posts in the Department had been filled and capacity had been improved. The Department had implemented several measures to improve the monitoring and expenditure of the conditional grants. The Department administered the National School Nutrition Programme, HIV/AIDS Life Skills Education, Early Childhood Development and the Infrastructure Grant.

The fortified biscuits for the School Nutrition Programme inherited from the Health Department, would be replaced by hot meals. It would provide a more nutritious and dignified option to the biscuits, which were nicknamed ‘Dogmore. A hot meal pilot project was being conducted. The Department had collaborated with the Department of Agriculture with the provision of food gardens and cows. Capital assets such as stoves, pots and refrigerators were needed to store and cook the food before the hot meal alternative could be launched. Monitors had been employed to ensure service providers fulfilled their contracts properly.

HIV/AIDS education had progressed in accordance with the approved business plan and a monitoring system had been introduced.

The Department provided a schedule outlining the status of all projects currently underway. The drastic increase in spending in the second quarter was due to a transfer payment made to the Public Works, Roads and Transport Department.

A process of schools rationalisation needed to be embarked upon. Former white schools were under-utilised, with examples of 30 learners in 15 classrooms. Four kilometres away there were overcrowded township schools. Challenges had also arisen when the Department of Provincial and Local Goverment had not informed the Education Department about the sudden growth of new informal settlements. These settlements could mushroom and, with no forward planning, learners would be forced to cross over busy roads to attend school. The MEC was addressing the issue.

Projects were often taking too long to complete - sometimes up to three years. There had been problems with the capacity of emerging contractors, and they would be served better by taking on smaller contracts. Ideally, building projects should be completed within 18 months.

Discussion
The Chairperson pointed out that the HIV/AIDS Conditional Grant expenditure was under 10%. He raised questions about targets being met and whether the province projected over- or underspending.

Mr Rakometsi said that fortnightly Bid Committee meetings had helped speed up the tendering process. Complaints were dealt with quickly and efficiently. A school identified its needs, such as a ceiling or windowpane repairs, and obtained a quotation from local contractors. The Department then transferred funds to the school to correct the situation. This approach not only empowered the local community, but also was quicker than using the large contracting firms.

The Chairperson raised the importance of hygiene issues once kitchens were provided and communities did the cooking. Mr Rakometsi agreed that the provision of hot meals required the correct infrastructure and training. The fortified biscuits and soup were kept in storage rooms and the only consideration was the expiry date. Statistics had revealed that even when sick in bed, learners would go to school for food before returning home, or even hide their illness. Five days of feeding was currently being provided to learners.

Ms Mgijima (Director, National Education Department) outlined the challenges when provinces moved from uncooked to cooked meals, which included storage and hygiene. There were great weaknesses in the monitoring mechanism and 7% of the budget would be retained at a national level for the monitoring programme. An Assistant Director would be appointed for that task. It would be important to train food handlers and volunteers from the community in preparation for the hot meal programme.

Mr Mkhaliphi stressed the importance of interdepartmental initiatives having a vision and co-ordinating to provide water, energy, land and schools in the built environment.

Mr Lesang expressed concern about the infrastructure grant, as the National Treasury required a clearer picture on total infrastructure spending. Mr Mogajane added that once a transfer was made to a particular division, accountability for the funds remained with the Education Department. The Chairperson noted that a large amount had been spent on National Infrastructure and queried where that had come from.

Mr Rakometsi admitted that he was new to the position, but stated that the National Infrastructure Grant had derived from the Business Plan. Money transferred was closely monitored. He would provide the Committee and Treasury with clearer answers upon his return to the office.

Mr Benade noted that there were only two conditional grants. Those were for school nutrition and HIV/AIDS education, and were the only funds floated from their Department. He wondered if the money came from National Treasury to the province for the purposes of infrastructure development. They would follow up the matter. Mr Mogajane added that the funds seemed to have been classified incorrectly and the situation was confusing.

The Chairperson instructed Mr Rakometsi to rectify the funding confusion with haste. The Treasury and Free State Education Department should report the results to the Committee, explaining the desired allocation for the R62 million. Much of the money had already been spent and this needed to be clarified.

Kwa-Zulu Natal Education Department presentation
The Chairperson thanked the representative, Mr Ndlovu (Deputy Director-General, KZN Department of Education), for his hard work. The Committee would not however hear the submission as the MEC had failed to attend the meeting. The Chairperson noted that he had some hard questions for her on the lack of expenditure planning.

The meeting was adjourned.

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