1st Quarter Conditional Grant & Capital Expenditure for Provincial Departments of Education: hearings

NCOP Finance

21 September 2006
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Meeting report

FINANCE SELECT COMMITTEE

FINANCE SELECT COMMITTEE
22 September 2006
CONDITIONAL GRANTS SPENDING BY PROVINCIAL DEPARTMENTS OF EDUCATION FIRST QUARTER 2006/07

Chairperson: Mr T S Ralane (ANC, Free State)

Documents handed out:
Gauteng Department of Education Presentation
North West Department of Education Presentation
Limpopo Department of Education Presentation
Free State Department of Education Presentation
Provincial expenditure on education conditional grants – First quarter 2006/7
Learners Under Trees and Shacks

SUMMARY
Four provincial Departments of Education gave briefings to the Committee on their conditional grant spending for the first quarter of the 2006/7 financial year.

The Gauteng Department advised that the nutrition programme was on track, but further education and training fell short of projection, resulting in the employment of a contractor. The Committee raised questions on the capex, the low expenditure on HIV and AIDS, monitoring of funds to further eudation and training, and overspending on bussing. Language issues of immigrants and the number of abandoned school buildings, as well as performance based bonuses being awarded where there was underperformance, caused concern.

The Northwest Province Department reported great under expenditure in HIV/AIDS, and nutrition. The Department had only utilized about R400 thousand out of the R14 million transferred. Proper sanitation had not been set up and capital expenditure was way below 50%. Questions were raised on the sanitation, the clear lack of budgeting, the lack of planning in the presentation, and why the funding had not been utilized. Members made suggestions for improvement on school nutrition and deliveries to farm schools. The internal audits were questioned.

The Limpopo Department commented that it was plagued by poor buildings and the collapse of school buildings. The expediture was below target by 10% but this did not take into account buildings erected but not yet paid for. The Department was trying to improve its HIV/AIDS programme but had achieved much in the nutrition programme. It had improved its relationship with the Department of Public Works. There had been gross underbudgeting due to a mistake. Questions were raised by members on monitoring of buildings, the appointment of an internal engineer, the lack of agreement between National and Provincial figures, and how the spending was reflected.
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The Free State Department of Education reported challenges in the FET recapitalisation, and noted discrepancies in funding due to certain funds being received later. Members raised queries on commitment to the HIV/AIDS schemes, school feeding programmes, internal controls, the figures for spending on schools, and discrepancies in the figures.

The National Department of Education commented that there was indeed under funding, and concerns on the conditional grants had been reported to National Treasury. The Provinces’ role was to monitor the funds for FET. National Treasury commented that outputs should be measured, and that planning should also include implementation issues. There was a need to investigate whether the objectives of the HIV/AIDS grants were being fulfilled. Problems with the Departments fast-tracking of expenditure were highlighted. The Chairperson commented that there was a need to reconcile the discrepancies in figures, and suggested that there be a meeting to discuss ways to alleviate problems of accommodation.

MINUTES
Briefing by the Gauteng Department of Education
Ms Angelina Motshekga, MEC for Education, Gauteng reported upon the conditional grants for the first quarter of the year. She noted the difficulties the Department had faced. She tabled and explained the expenditure of the conditional grants in her trends analysis. She was happy to inform the committee that the nutrition programme was on track. In respect of Further Education and Training (FET) grants the department was 2% short of the projected 15% and had decided to adopt the model used by other provinces to hire a contractor who would manage the FET for 3 years. She tabled and noted the assessment of monitoring capacity and information in regards to service legal agreements.

Discussion
The Chairperson told the MEC that he was worried about capital expenditure (CAPEX) especially if the Department had capacity. He was worried that they had to source more money when according to Section 9 of the Division of Revenue Act (DORA) the Department could have signed service agreements with the provincial Public Works Department.

Ms Motshekga replied that in terms of infrastructure the Department had a serviceable agreement with the Department of Public Works (DPW) in accordance with the law to service schools that would be operational in 2006-07. However, DPW had already done some major repairs. The Department was in need of 170 schools and they called in the IDT because they lacked the capacity. The Department had agreed with Treasury to contract outside management to deal with the serious problem of space and overcrowding.

The Chairperson asked whether the declining rates of HIV/AIDS in Gauteng were responsible for the low expenditure on HIV/AIDS, which was at 9%

Ms A Motshekga agreed that there was no reason to scale down on HIV/AIDS, which clearly still needed intervention. She stated that the management of HIV/AIDS would step up.

The Chairperson asked what the funds being channeled to FET were actually being used for, since 50% had already been rolled out to FET in the first quarter. He asked whether there was monitoring on the funds.

Ms Motshekga replied that the colleges were supposed to make plans and the money they received from the National Department of Education (NDOE) for FET was based on the plans. The provincial Department’s role was to monitor the implementation of the funds and the procurement of services. Since the spending was at 13%, which suggested that they lacked capacity to spend the funds, they had decided to contract outside personnel to manage the FET grants.

The Chairperson asked whether the reason the Department were planning to employ outside expertise was that they did not have the internal capacity to monitor the FET. He commented that in terms of section 9(3)(b) of DORA the provincial treasury could designate not more than 1% of its allocation to acquire the necessary internal capacity.

Mr E Sogoni (ANC, Gauteng) asked for clarity on the transfer of about R6million to the municipalities and province. He commented that there was no budget for it. He also wanted to know what the money was being used for.

The Chairperson confirmed that the committee wanted information on why the R6 million was already in the Gauteng province.

Ms Motshekga replied that the mention of municipalities and province was meant to refer to Section 21 schools, where the Department would pay provincial departments and municipalities for schools that did not have the power to run their own finances.

Mr Sogoni asked whether the Department was going to be able to utilize all the funds concerning CAPEX by March, as it seemed it had started the expenditure a little too late.

Ms Motshekga replied that the Department was confident that it could going to spend the money allocated as it had already embarked on the building of 16 schools which would cost around R320million, and Independent Development Trust (IDT) had already built about 8 schools. Although the Department was still to pay IDT all of this meant money already committed.

The Chairperson noted that the Department received the infrastructure grant, and this was in violation of section 9(3)(a) of DORA, which stated that before any province could be given the grant it should take into account its capacity to spend the grant based on approved roll-overs and any project roll-overs of 2006-07.

Ms Motshekga responded that the province had requested adjustments for bussing only, as they were expecting to overspend with the scholar transport which was caused by the spacing crisis in Gauteng.

The Chairperson asked whether they had encountered any problems whilst working with the Government Communication Service (GCS).

Ms Motshekga replied that the GCS was very efficient and had a good turnaround time and whatever problems they had they emanated from within the department

The Chairperson suggested that Ms Motshekga should have a meeting with the other provinces to discuss trade-offs and the migration that was affecting her province and which was creating backlogs, so that there could be an accurate assessment of the number of people migrating, to make it easier to plan for the schools to be built. He thanked Ms Motshekga for enlightening the committee on the FET grants, which would form the subject of questions to National Departments.

Ms Motshekga replied that the Department would look into discussion with the neighboring provinces but she said the migration issue was worsened by foreigners who were settling in areas that were not designated to be residential areas and were speaking languages such as French that would not be offered in schools.

Ms Mchunu (IFP; KwaZulu Natal) asked what the Department was doing to develop languages in preparation for 2010 so that the children would not be left out.

Ms Motshekga replied that the Department was battling enough with the new OPE curriculum, and therefore did not see the need to burden the children with new languages as well. She was aware that the French and Portuguese Consulates were offering special programmes to teach the languages. She said that if the 2010 initiative required interpreters then it was the job of the coordinating committee to look for them.

Ms Mchunu congratulated the expenditure by independent schools, which was at 49.7%, and she remarked that if they could improve on services the children might stop flocking to private schools.

Mr Sogoni disagreed, stating that he believed the money channeled to private schools should be re-routed to public schools where it might benefit more children.

Mr Sogoni said that bussing was a problem because there was no integration and he suggested that integration be looked into.

Ms Motshekga replied that indeed there was poor integration, which led to the bussing crisis, and which in turn meant that there were a lot of schools that were not being utilized. Moreover, the problem was compounded by illegal settlements because the Department, in terms of the Constitution, still had to provide education for the children despite the fact that there were staying in illegal settlements.

Mr Sogoni asked why Gauteng Online had only utilized 7%, and why it was being treated like a problem when it was an existing program being rolled out. He further noted that when the Committee had visited schools the major complaint was that the computers were being stolen even before they were utilised.

Ms Motshekga replied that the expenditure was low because the Department and schools were experiencing security problems in that Gauteng Online was a target for thieves, so that schools were scared of opening their labs. In addition, teachers were not confident enough to use the system. Therefore the Department had decided to rollout next year, when it was confident that security issues and adequate training would be in place.

Mr Sogoni asked to what extent the Department had improved on its financial statements since the Auditor General’s disclaimer in 2004-05.

Ms Motshekga replied that the Department now had a clean audit. However, she noted that the system was not sustainable because they were constantly losing senior accountants to the private sector.

The Chairperson suggested that there should be a discussion on the issues raised before the Finance and Fiscal Commission closed its submissions for the 2006-07 financial year. He remarked that the Committee had to look into how performance based bonuses were being given despite underperformance.

Briefing by The North West Department Of Education
The Chairperson expressed disapproval on the MEC’s decision to go to Europe and not appear before the committee as requested.

Mr Mathanzima Mweli, Acting Superintendant General, Department of Education, North West apologised for the absence of the MEC and implored the committee to remember that she had been consistent with her attendance thus far. He began with the financial breakdown of the conditional grants. He acknowledged that the Department was under performing on HIV/AIDS but this was due to the late approval of their business plan. Concerning nutrition he informed the committee that the problem lay with farm schools that had not only few children attending, but also experienced problems in that businesses were not keen to service them. He then tabled and explained the statistics on grants. He reported that of the R28 million budgeted, R14 million had been transferred, but very little had been spent. The capital expenditure was way below 50%. The Department’s infrastructure was making use of mobile units because it had not contracted any sanitation company. The presentation ended with the statistics on infrastructure projects for the first quarter.

Discussion
The Chairperson enquired what facilities the staff and children at schools were using since the Department had not contracted any sanitation company, and whether the Department was aware that not only was this a health hazard but unconstitutional as well.

Mr Mweli replied that the schools were using mobile units.

The Chairperson noted that he was worried by the state of affairs of North West, which reflected a lack of budgeting. He stated that the conditional grants were supposed to be supplementary to the national apportionment, but it seemed that the North West was relying on the grant only.

Mr Mweli replied that he was glad that the Chairperson had raised this point, because North West was just surviving on grants, especially the infrastructure grant.

Mr Sogoni said that the presentation showed a lack of planning and he did not understand what the training for teachers on HIV/AIDS allocation was for, since the Department did not appear to be following any programme after the training.

Mr Mweli replied that it was not the Department’s fault that the business plans were approved only in May, so that even though the Department knew the allocation of their money they could not start planning on it because other issues like reduction might crop up. He added that they were working to improve planning so that they would not work with speculative figures but would be running closer to the situation on the ground. He emphasised that from last year there was an improvement,which he vowed they would maintain.

The Chairperson corrected Mr Mweli and told him that the conditional grants did not change the national apportionment. The problem lay with the Department’s constant changes of plans. There was no question that the funding, once approved, would be withdrawn unless the Department was actually doing something wrongly.

Mr Sogoni asked whether there were any linkages with other departments such as social development.

Mr Mweli replied that there were linkages with other departments. There were joint programmes, such as AIDS, that involved the Department of Health, and an integrated plan on HIV with the Department of Social Development.

Mr Sogoni commented that he was worried with departments that under utilized nutrition funds as these were intended for the alleviation for poverty in the provinces. The Committee had recently visited certain areas where they were shocked by the level of poverty.

Mr Sogoni asked whether they were interim measures for schools that did not have water.

Mr Mweli replied that schools with no water were provided with reservoir tanks until they could be linked to a more permanent source of water.

Mr Sogoni asked why it took up to 12 months for the department to reply to a request for maintenance, as this was one of the complaints that the Committee, when conducting oversight visits, had received.

Mr Mweli replied that this took so long because the maintenance allocation was so small that sometimes they had to wait for the following year’s allocation to reply to the requests.

Ms Mchuni asked what the Department was doing to make school nutrition sustainable, such as encouraging children to start food gardens at their homes.

Mr Mweli responded that the Department had not considered it but they would try the suggestion.

The Chairperson remarked that he could not understand why farming schools were facing problems considering that since they were in a farming area they should simply partner with the farmers for supplies.

Mr Mweli replied that the Department had not thought of this and he promised to try it.

Mr Sogoni asked why there had been such inadequate spending, of around R400 000 out of a budgeted R14 million, and enquired whether there were structures in place for a turnaround.

The Chairperson asked what was being done with the money on infrastructure, since it seemed that little was being done on water and nothing on sanitation.

Mr Mweli said that the 39.9% mentioned for infrastructure was used to build up classrooms. He informed the committee that IDEC only started two years ago and this was the spin-off but he emphasized the fact that by December all schools should be linked in with the schemes.

The Chairperson said that the HIV schemes had objectives that had to be fulfilled such as peer education. He hoped that in the following presentations this was going to be broken down so that the Committee would have clarity on the objectives that were being met and those that were under performing.

Mr Mweli replied that he had not brought the statistics but the objectives were being covered. He noted that in his presentation, for example, he had highlighted peer education.

Mr Sogoni asked whether the Department had moved from the disclaimer they were given by the Auditor General.

Mr Mweli replied that they had moved from the disclaimer to a qualified report. They also had an audit committee and an internal audit directorate and they were looking forward to spending as much as they were given. He also commented that the Department’s understanding of the role in FET was to monitor the funds and put in place relevant procurement procedures.

Briefing by the Limpopo Department Of Education
Dr P Aaron Motsoaledi, MEC for Education, Limpopo commented that Limpopo, like KwaZulu Natal, suffered form weak buildings, with over 50% of the buildings being weak and only 12% being very good. Moreover, there were a further 130 buildings that had collapsed in addition to the 230 collapses that were reported in February. Mr Motsoaledi then gave a breakdown of the expenditure in infrastructure, which he admitted was below target by 10%. However he said that this was because the contractors had not been paid as yet. The work on the ground showed that infrastructure was way above 60%. He acknowledged that the Department was not doing so well in HIV/AIDS and they had proposed a new programme called ETHENA to try to improve the situation. The nutrition programme was well under way, feeding more than 1.4 million students. The Department’s working relationship with the Department of Public Works had vastly improved.

Discussion
The Chairperson proposed that there should be a major meeting between the Departments to work out tradeoffs, as some provinces, like Gauteng, had the problem of abandoned schools whilst others like Limpopo had to deal with collapsing schools and shortage of space.

The Chairperson asked if this Department was also facing problems due to immigration.

Mr Motsoaledi replied that the trend was encroaching in the rural areas. He gave the example of Polokwane, where people were migrating to such an extent that they had to build six new schools.

Ms Mchunu asked whether there was monitoring when the schools were being built, as this would ensure that a weakness in the structure was picked up early and worked on, instead of the schools being finished without any supervision and then starting to collapse.

Mr Sogoni, on the same point, remarked that there had not been much improvement on the question of the Department employing its own internal engineer. He noted that both in the last and in the current report this position was still noted as vacant.

Mr Motsoaledi replied that the reason the Department had wanted the engineer was to monitor the buildings, and the post had been filled. However, due to some domestic problems the engineer had been delayed from taking up the appointment for three months and the Department was now working on this.

Mr Sogoni asked why the National figures did not corresponding to the Provincial figures. For instance, on HIV/AIDS the national report suggested that the Department had utilized only 9% but the provincial report said that the figure was 13%.

Mr Motsoaledi responded that he was puzzled by the discrepancies since they had cluster meetings with the Treasury and National Department, where issues are discussed and the figures presented.

Ms P Zulu, Chief Finance Officer (CFO): KwaZulu Natal, DOE, said the discrepancies lay with the system in use that separated capital and the current figures. The figures presented represented the the capital, whilst maintenance was included in the current, so one had to do a physical reconciliation. Unfortunately, while the current system was in place discrepancies were still going to be the norm.

Mr Sogoni asked whether the 50% on FET grants to colleges was expenditure or money transferred.

Mr Motsoaledi replied that this was the money transferred and everything seemed to be moving smoothly although the Department had never gone to monitor the actual expenditure.

Mr Sogoni remarked that the Department had abandoned the first HIV/AIDS programme. He asked whether the current one was approved and what were its main challenges.

Mr Motsoaledi replied that the current programme was a more electronic, monitored and highly individualized programme that gave more than counseling and medical information in the language of one’s choice and also ensured privacy.

Mr Sogoni asked whether the money for infrastructure came from both the national equitable share and the conditional grants.

Mr Motsoaledi replied that the money for infrastructure was a mixture of the equitable share and the infrastructure grant.

The Chairperson asked why it seemed that the Department would be going to overspend again this year when last year they reported that they were hoping for some savings.

Mr Motsoaledi replied that indeed the Department was going to overspend because there was a mishap, which was the fault of the Department, which resulted in a gross under-budgeting.

Mr Sogoni wanted to know why the Department’s non-personnel and non-capital expenditure was at 8.1% and whether this would provide adequate stationery per child.

Mr Motsoaledi replied that the problem did not lie with the Department, but with the Treasury as spending after a certain point was not reflected in the accounts, and did not take into account the beginnings and ends of the financial years. He added that Treasury must understand the spending, as there were sometimes peak and quiet times.

The Chairperson asked for the input of the National Department and the Treasury on the information they had digested so far.

Mr T Tredoux, Chief Director: Financial Support Services, DOE spoke on behalf of the National Department of Education. He said there was truth to the complaint that there might be under funding, and on the issue of the conditional grants there were some concerns that came up and were duly incorporated in the report to the National Treasury. In so far as FET was concerned, the provinces had correctly pointed out that their role was to monitor the funds, and the process was driven by the specific needs in colleges and certain national issues. He was confident that the money channeled to the FET was going to be utilised.

Dr Sandra Sooklal, Intergovernmental Relations Division, National Treasury, commented that there was too much talk on expenditure and transfers, whilst the measurable output was not clear. It was not certain whether the money was doing what it was intended to do, and she hoped that next time this would be clear. She was also concerned that Treasury was not sure how the money that the Departments had been given last year for planning had been used, since to her way of thinking "planning" should also involve a number of other matters such as implementation. Lastly she said that there was a need to look more carefully at the objectives of the HIV/AIDS grant and whether these objectives were being fulfilled because she could not understand why the programme still had problems, having been in the system for a very long time.

Briefing by The Free State Department Of Education
Mr M Rakometsi, Superintendant General, Department of Education, Free State, gave the briefing, but due to time constraints he began the presentation on page 11. He detailed the conditional grants spending, and reported that the Department was facing challenges in the FET recapitalisation. He broke down the expenditure of HIV/AIDS according to the provisions that had to be fulfilled. He projected the National School Nutrition Programme expenditure and explained that the discrepancy in the figures was due to the extra funding the Department had received later. He outlined the FET recapitalisation expenditure and challenges. He explained the intervention strategy to improve expenditure on recap, capital expenditure, and infrastructure. He highlighted the projects for 2006/07, the public/private partnership (PPP) projects for 2006/07, challenges on infrastructure, and conditional grants planning for 2007/08.

Discussion
The Chairperson said that the National Department had unlocked funding in the FET sector and the majority of provinces were far behind in expenditure. The money was therefore sitting in banks when it could have been used elsewhere.

Dr S Sooklal remarked that the problem now related to the Department’s bid to fast track expenditure. The concern was, firstly, whether this was appropriate, and secondly any attempts to fast track should take into consideration that if the money would be used to start addressing spending, there would have to be a proper investigation whether there were adequately trained personnel to look after the equipment, and proper housing facilities. That was precisely why she had suggested earlier the need to set targets and to make sure that they were achieved.

The Chairperson commented that it was essential to set targets as this would ensure proper performance. He commented that he was also worried that the Department’s service to its clientele was not matched by its service in its own offices, which could be described as poor.

He added that the government was being wrongly accused by the public of not being committed to the HIV/AIDS schemes, but clearly the problem lay with the provinces that were not doing the spending.

Mr Rakometsi replied, in relation to the low expenditure on HIV/AIDS, that a lot of money had been committed, as shown in the presentation, but there were problems in rolling out certain issues at certain times of the year.

Mr Sogoni asked about the 44 days referred to in the presentation for the feeding schemes, and enquired whether this meant the Department was feeding the learners on a weekly basis.

Mr Rakometsi replied that the feeding of learners covered the first quarter and the Department was seeing to the feeding on five days a week.

Mr Sogoni asked whether the 91% spent on infrastructure was the overall actual percentage spent on infrastructure. He asked what the Department intended to do about the over expenditure which was most likely to happen. He further asked whether the Department had improved on its financial controls and whether the internal audits being mentioned by everyone were functional.

Mr Rakometsi replied that the Department did have an internal control, which was a very functional internal committee. There was no duplication. It was deputized by the CFO and its job was to consider financial reports.

Mr Sogoni remarked upon the figures given in the report. He noted that spending of R7.1 million had been mentioned on 10 schools. He commented that this seemed too low, and asked if the R7.1 million also covered sporting amenities. The Committee had noticed during one of their visits to the province that some schools did not have soccer fields.

Mr Rakometsi said that the R7.1 million was for the takeoff of the public private partnership (PPP) project and not for the actual building of 10 schools. He added that it was impossible to build 10 schools with R7.1million. The Department did intend to build schools with halls and sporting facilities.

The Chairperson asked what was the province’s own infrastructure grant, where had it been transferred from, and requested its purpose.

Mr Rakometsi replied that money for own infrastructure came from the provincial government. This was in place for provinces with an under budget for education from the top slice of the national share. The provincial departments would create their own infrastructure.

The Chairperson asked why there was not an integrated approach and why it had to wait for June.

Mr Rakometsi replied that the Department could not train educators during school days. Although the picture looked bad in August there had been some improvements as some money was committed in June. The actual payments were made in July and August.

Mr Sogoni noted that there were discrepancies in the figures between the National and Provincial reports. .

Mr Rakometsi said he could not account for the discrepancies, but could only give the Committee the figures he had.

The Chairperson suggested that the Department must reconcile the figures with those from the National Department and he asked what the figure of R1 billion, extracted from R4 billion, had been spent on.

Mr Rakometsi replied that R29million was spent on infrastructure and the conditional grants had supplemented the equitable share.

The Chairperson asked whether the Department budgeted for infrastructure in their main budget.

Mr Rakometsi replied that in their equitable share it did budget for infrastructure.

The meeting was adjourned.

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