Education Provincial Conditional Grants & CapEx: 2nd Quarter 2006/07 spending

FINANCE SELECT COMMITTEE
21 November 2006
EDUCATION CONDITIONAL GRANTS: SECOND QUARTER SPENDING BY PROVINCES

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

Documents handed out:
Western Cape PowerPoint Presentation
Eastern Cape PowerPoint Presentation
Northern Cape PowerPoint Presentation: Part1, Part2, Part3
Free State PowerPoint Presentation
Gauteng PowerPoint Presentation
Limpopo PowerPoint Presentation
Northwest PowerPoint Presentation
Kwazulu Natal PowerPoint Presentation: Part1, Part2 & Part3

SUMMARY
The provincial departments of education briefed the Committee on their second quarter expenditure, April to September 2006, with emphasis on conditional grants for Further Education and Training, recapitalisation, infrastructure development, HIV and Aids as well as the National School Nutrition Programme.

Provinces highlighted common challenges. These included delayed procurement processes, under expenditure on the Nutrition Programme, as well as difficulties experienced in the monitoring of the spending of funds transferred to Further Education and Training colleges. Challenges with the progress of infrastructure projects were also reported. The Kwazulu Natal Education Department highlighted the need to strengthen the capacity of implementing agents responsible for new facility construction as well as upgrading existing structures. The need for improved cooperation between the provincial education departments and DPW was noted.

Members expressed their concerns over the inefficiencies of the planning systems of provincial departments. This impacted on the quality of expenditure and outcomes of projects. Delays experienced in the procurement process due to the late submissions of invoices needed further investigation to ensure that the integrity of the process was not being compromised. The high vacancy rates in education departments challenged the efficient delivery of services.

The Chairperson was dissatisfied with the contradictory information presented by certain provinces when compared with the information found in National Treasury’s 2002/03-2008/09 Provincial Budget and Expenditure Review. The contradictory information cast doubts over the reliability of information provided by provincial departments.

MINUTES
The Chairperson welcomed the delegates from the provincial education departments. He also extended a welcome to visitors of the Southern Sudan Legislative Assembly. He explained that the Select Committee on Finance met with provincial departments on a quarterly basis to evaluate quarterly expenditure.

The Chairperson said that the Minister of Education, Ms Naledi Pandor, had informed him of an important colloquium held with all MECs of Education that day. She had apologised, in advance for the possible absence of some MECs. He said that in such instances, where a Chief Financial Officer delivered a presentation, questions raised by the Committee would be forwarded to the MEC and Heads of Departments. Written answers needed to be provided within two working days.

Observations by National Treasury
Mr Anthony Phillips, Director: Financial Management, National Treasury, commented on provincial expenditure for the 2005/2006 financial year. This spending was published in the Government Gazette on 30 October 2006.

Although it was projected that provinces would overspend by R4.3 billion, unspent funds reflected in the provincial adjustments budgets may reduce this figure. The National Treasury urged provincial departments additional information on spending performance to submit to the National Council of Provinces.

The provincial finances were satisfactory, however some persistent challenges such as insufficient personnel, and capital expenditure were detected. This needed closer monitoring. Provinces were thus expected to spend R187 billion of the allocated total budgets of R182, 979 billion. Provinces more likely to overspend at the end of the current financial year were Gauteng (R1.065 billion) and the North West Province (R856 million).

Comparatively, provincial spending in the second quarter of the financial year had improved by 11.4 percent. The highest increased spending was in Gauteng, while Mpumalanga’s spending lagged behind the others.

Provincial Education Departments were projected to overspend their budgets by R1.5 billion. This sector accounted for the highest overspending across provincial departments. Provincial Education Department would thus spend R80.585 billion, compared to the R79.05 billion allocated. Over expenditure increased to 6.8 percent as compared to the same period in the last financial year. Over expenditure per provincial education department were as follows: Kwazulu Natal DoE (R353 million), Limpopo DoE by (R330 million), Mpumalanga DoE (R175 million) and North West DoE (R439 million), Western Cape DoE by R59 million. This was cause for concern.

Total spending on Conditional Grants were as follows: 48.1 percent spent on education grants; 52.5 percent on the Further Education and Training recapitalisation project, HIV Aids, 34.9 percent and school nutrition by 37.9 percent. The Following provinces spent less than 45 percent of their HIV/Aids grants: Gauteng, Limpopo, Northern Cape, North West and Kwazulu-Natal.

The National Treasury recommended that the NCOP note these finances and should note that provinces should complement their submissions with performance information on quarterly expenditure. Year on year growth of education expenditure was relatively low.

North West Education Department (NWED): presentation
Mr H M Mweli (Acting Superintendent General) outlined the provincial department’s expenditure for the second quarter of the current financial year, with particular emphasis on expenditure on Infrastructure, Further Education and Training (FET) recapitalisation, HIV/Aids and National School Nutrition Programme (NSNP) grants.

The Chairperson requested the presenter to pay particular attention to spending per programme, per standard item as well as expenditure on conditional grants. He noted that the recorded 99.7 percent expenditure of the infrastructure grant was cause for concern. He requested Mr Letsang of National Treasury (NT) to provide the Committee with further information during the course of the proceedings.

Mr Mveli explained that total spending on conditional grants was 55.9 percent. These included 99.7 percent on infrastructure; 46.9 percent on the NSNP; 11.8 percent of the HIV/AIDS grant as well as 50 percent of the total funds available for FET recapitalisation. The reasons for the under expenditure on the HIV/Aids grant was due to delays experienced in the procurement and payment aspects of the programme. Due to the subsequent implementation of remedial methods, the department expected expenditure would rise to 69 percent. The Infrastructure Improvement Programme, implemented over the past three years, had increased infrastructure expenditure to 99.7 percent. This had sharpened the Department’s capacity to plan ahead.

The delays in further spending on NSNP was due to delays in registration of school nutrition service providers that had been contracted since July 2006. Expenditure on this programme had improved, compared to the spending in the first quarter.

Problems related to supply chain management of the FET recapitalisation project had been dealt with and improved expenditure should be reflected in the third quarter. The Department had spent 15.1 percent of the total expenditure on machinery and equipment for these colleges. The Department’s computerisation programme was on course and this expenditure would show in the third quarter expenditure report.

The funds allocated by the national and provincial treasuries could be used to supply schools with mobile classrooms as well as the reconstruction of schools affected by the Taung flood disaster of March 2006. The adjusted estimates would factor in the R43 million received for this disaster and would alleviate the anticipated over expenditure.

The second quarter infrastructure spending was summarised as follows: 99.7 percent spending of the infrastructure grant; 97 percent expenditure on the school building project, 78.5 percent on the provision of sanitation as well as 68.6 percent on the maintenance of facilities. The Department had thus spent 86.6 percent of its total available infrastructure budget.

The improvement of the monitoring capacity of expenditure in the department was a priority. Monthly budget committee and senior management team meeting ensured that monthly expenditure was closely monitored. Accountability sessions, held at the end of each quarter further strengthened its capacity to monitor. Programme, sub programme as well as responsibility managers would then account for expenditure of each particular unit. This assisted in the identification of both reasons and remedial methods for under and over expenditure. Service delivery was expected to improve.

The Chairperson said that the information presented conflicted with that contained in the 2002/03-2008/09 Provincial Budgets and Expenditure Review of the National Treasury. An additional document served as a record of the status of all infrastructure projects in South Africa. Mr Letsang was instructed to investigate all projects in the North West and inform the Committee during the course of the proceedings.

Discussion
Mr E Sogoni (ANC, Gauteng) raised concerns about the 11 percent expenditure of the HIV/Aids conditional grant. Could the Committee be supplied with reasons for this low level of expenditure? Given the scourge of HIV/Aids in all provinces, this lack of expenditure was problematic.

Mr Mweli responded that the under expenditure was due to the blockages in procurement and payment section and the Department had taken note of the remarks made by members.

The Chairperson commented that the HOD had to commit to resolve the under expenditure in the third quarter and should not merely take note of the concerns raised by the Committee.

Mr Mweli replied that the Department was committed to improve the systems of procurement and invoices. It would report, in the next reporting periods, an improvement in this regard.

Mr Sogoni asked for clarification about the NSNP problems experienced by NWED. Was this programme working effectively? Was the Department providing meal to learners of all schools?

Mr Mweli replied that the spending on the nutrition programme was currently at 46 percent. This was not satisfactory and should be 50 percent expenditure. The Department had taken measures to address this challenge. Expenditure in the first quarter of this financial year was 15.8 percent. This expenditure needed to be at 75 percent in the third quarter. Such levels of expenditure would be satisfactory.

Regarding the numbers of children benefiting from NSNP, Mr Mweli explained that 483 894 learners in 1393 schools were fed, every school day.

The Chairperson said this was incorrect. The NWED should reinvestigate the information supplied in its presentation. The NT Provincial Budget and Expenditure Review 2002/03-2008/09 reflected a targeted 335 464 learners in the last financial year of which 378 312 learners were actually reached. Its latest target number was 406 000. The NWED needed to provide a thorough break down of the targets set. It also needed to study the National Treasury’s 2002/03-2008/09 Provincial Budgets and Expenditure Review.

Mr Sogoni asked for clarification about service providers, especially contractors. What were the problems associated with these service providers?

Mr Mweli said that the NWED was not facing any challenges about the contractors involved in the construction of infrastructure. The service providers referred to were those providing services for the NSNP. These were newly contracted providers, that had to be trained in how such business was conducted. Some did not have a bank account into which money could be transferred. Workshops had been organised although challenges were still experienced. However there was a tremendous improvement in the manner in which services had been conducted.

Mr Z Kolweni (ANC, North West) commented that the National Treasury figures reflect a low expenditure (less than 35 percent of available budget) on HIV/Aids by both the North West and Northern Cape provincial departments. This was unsatisfactory and the same reasons for such low expenditure were advanced every time. The Committee needed the correct information on what the problems were in the spending of grants as well as the implementation of these projects.

Ms Xunu wanted to know what kind of sanitation was provided by means of the infrastructure grant.

Mr Mweli replied that sanitation involved the provision of boreholes and ventilated toilets.

Ms Xunu asked how communities benefited from NSNP.

Mr Mweli replied that the NSNP had community benefit. Unemployed women and youth were providing such services and this was how the community was involved. The school gardens had grown from 230 to 375.

Mr Letsang (NT) noted that the alleged 99 percent infrastructure expenditure by NWED was cause for concern. The figures presented by NWED probably included spent as well as committed funds. Additional information suggested that the NWED had actually spent 52 percent of the infrastructure grant. Clarity about both the method of calculation as well as the reasons for the contradictory information needed to be provided. A meeting between the National Treasury and the NWED was scheduled for 27 November 2006.

He continued that the infrastructure reporting model provided in the grant framework required the reporting of financial expenditure as well as physical progress in the implementation of projects. Provincial officials were then trained on the improved reporting model. A key concern was the lack of reporting on the expenditure on FET grants as well as the monitoring of such spending. This was a big concern due to the lack of adequate capturing of expenditure in provincial expenditure reports. The NWED needed to monitor officials, ranging from data capturers to analysts in directorates responsible for infrastructure reporting. Additional allocation to the Northwest had been made, to assist in the reconstruction of infrastructure subsequent to the floods. This allocation would be reflected in either the rehabilitation of schools or replacement of existing structures categories, but was not reflected in the movement of the project. Treasury could consider redirecting those funds to other provinces.

The Chairperson commented that during a study tour of Taung, the inadequacies of existing school infrastructure were apparent. A contradiction existed between the information presented by Mr Mweli and the information contained in the National Treasury’s Provincial Budgets and Expenditure Review. The Committee needed immediate feedback after 27 November as it needed clarity on expenditure as well as where additional schools were located.
 
The Chairperson stressed that departments should not glamorise reports. The Committee needed to know the challenges and obstacles faced by provincial education departments.

The Chairperson implored provinces to manage the infrastructure grant more effectively. Legislatively, this grant was not treated separately and did not have different objectives than any other grant. The Division of Revenue Act (DORA) and the grants framework necessitated reporting on the total capital allocation and not only the grants. The tendency was to present on the municipal infrastructure grant.

Northern Cape Education Department (NCED): presentation
Mr Williams (Head of Department) provided an overview of the Northern Cape expenditure for the second quarter of the current financial year. The total allocations for the four conditional grants were R68 995 million. The Department had spent 75 percent of its available NSNP grant; 19.7 percent of its HIV/Aids grant; 46.7 percent on its infrastructure grant as well as 38 percent of its FET grant.

The Department had taken a decision to extend the NSNP to secondary schools and this would be financed through its voted funds. The extension of this project was linked to efforts to alleviate poverty and the  extended public works programme and therefore assisted with the creation of employment opportunities.

FET spending was due to the purchase of specialised equipment for three labs, training of staff members, as well as the building of 8 classrooms. One FET college, based on a Cabinet decision, had been relocated and plans therefore needed to be readjusted. This had caused a delay in the spending of FET grant.

The Department had received a list of infrastructure projects that would not be completed during this financial year by the implementing agency. It therefore had to revise its infrastructure and budget plans.

The monitoring systems required visits to schools in 40 districts to ensure the implementation of the NSNP. Mandatory quarterly meetings were held to track and scrutinise progress. Concerns were raised about the lack of sufficient personnel to monitor spending and progress on infrastructure projects. This section would be upgraded to a full directorate to ensure the necessary skills were attracted. The province was part of the Infrastructure Delivery Improvement Programme and foresaw greater strides in the delivery of infrastructure.

The monitoring of HIV /Aids expenditure was continuous and was monitored in terms of life skills, curriculum integration, as well as care and support programmes. Regular visits to schools were conducted and functional and health advisory committees were formed.

The monitoring of FET colleges was done against operational plans. Colleges needed to submit monthly and quarterly reports. Site visits were also conducted on a monthly and quarterly basis. The Department also met with college project managers on a quarterly basis and planned to conduct internal audits to strengthen this monitoring capacity.

Certified business plans for the 2006/2007 financial year had been submitted to the National Treasury as per the Division of Revenue Act for Food Nutrition, Infrastructure, Life Skills and FET. Business plans, cash flow projections and expenditure plans were also forwarded to the Select Committee on Finance.

Service level agreements in respect of the NSNP and Infrastructure programmes had already been signed.

Discussion
Mr Kolweni commented that the National Treasury figures reflect a low expenditure (less than 35 percent of available budget) on HIV/Aids by both the North West and Northern Cape provincial departments. This was unsatisfactory and the same reasons for such low expenditure were advanced every time. The Committee needed the correct information on what the problems were in the spending of grants as well as the implementation of these projects.

Mr Williams responded that the NCED would report on this during the next reporting session, as the expenditure would then be reflected.

Mr Sogoni wanted to know how the NCED would manage the over expenditure on the NSNP programme, since this programme had been extended to secondary school learners. How did the department intend raising the funds for such purposes? This was a good initiative.

Mr Williams responded that the NSNP was viewed as a means to alleviate poverty and the development of skills. Learner achievement was linked to good and balanced nutritional intake. Treasury had allocated additional funds to increase the number of feeding days. The NCED would make the development gardens at schools compulsory and this would ensure that schools could utilise their own produce. As this capacity to self-supply increased, schools and communities would be able to sustain the NSNP. The NCED would also finance the extension of the programme through it baseline budget.

Mr Williams explained that NSNP spending was not linear. There were more feeding days in the first half of the year and the school holidays in the second half of the academic year altered the growth of the project.


Mr D Botha (ANC, Mpumalanga) noted that all provinces had shown an improvement in the managing and spending of finances. NCED’s NSNP indicated that it spent R1 on every daily meal per learner. He wondered what could be bought for this amount and how much nutritious value these meals could have.

Eastern Cape Education Department (ECED): presentation
Ms Mahanjama (newly appointed HOD) informed the Committee that the ECED had spent 31.3 percent of the allocated R25.8 million of its HIV/Aids grant. Although the Department had spent on this grant, it needed to assess the impact of such programmes. Ongoing discussion continued to identify which programmes needed improvement in spending, were effective and efficient.

The school nutrition programme pilot projects in the six districts faced many challenges. Service providers had performed poorly and effective monitoring of the implementation of these projects was needed at a district level. The high level of vacancies at a district level impacted on the efficiency of such a monitoring system. The Department needed to receive vouchers from schools in time and meal servers did not submit the register to the district offices on time. There were therefore delays in the payment processes and this had caused a lot of problem in terms of the actual monitoring of expenditure.

The following remedial methods had been developed. The cluster chief directors had been mandated to monitor what was taking place at a district level; regular meetings were conducted with service providers to ensure that everybody understood certain processes. Poorly performing suppliers would be substituted with other suppliers. District directors had been requested to monitor the payment of meal servers on a monthly basis. Defaulting districts would be identified and directors and deputy directors-general should monitor this very closely.

An intervention plan for this project had been presented to the Provincial Executive Committee that would ensure the development of early warning systems. The appointment of a project manager was currently being finalised and this person would be responsible for remedying matters.

She stressed that the decentralisation of the program was a key priority. An evaluation and advisory committee would be established to ensure that the project was streamlined. Grade R -7 students would also be included in the NSNP from 2 October. Therefore, the department had increased the provision of meals to 1.3 million learners.

Spending on the recapitalisation programme of FET colleges had not been adequate. The ECED had already committed to the spending of R30 million of the R61 million allocated. Urgent steps needed to be taken to increase the spending on this process and to ensure that the colleges had the requisite capacity to start spending the money allocated to them.

Challenges related to the insufficient running of the supply-chain management and compliance by FET colleges impacted on these institutions’ ability to spend funds. Delays in the expenditure were rooted in the tendering process. The completion of both operational and procurement plans was necessary to ensure that the procurement process was finalised in advance. These issues were currently being discussed with officials of these FET colleges.

Discussion
Mr Sogoni said that the Committee had indicated that it would like provinces to provide shorter, more concise presentations on its quarterly spending of conditional grants. He expressed his hope that the Eastern Cape Department of Education would provide this at the next meeting.

Mr Sogoni commented that the ECED’s 38.5 percent spending on the NSNP grant was not satisfactory, especially given the existing need for nutrition provision at schools. He was not convinced that the ECED was able to manage these problems effectively. Could it explain how often it provided meals to learners?

Ms Mahanjama responded that the food kitchens provided learners with food five days per week.  Although many challenges existed, the monitoring team managed to alert the department as soon as possible. The more serious challenges faced by this entire programme was seen as a provincial priority at this stage. Both provincial Treasury as well as the whole provincial committee were participating in seeking remedial measures. These were permission to appoint the project manager and the interdepartmental committee would oversee the overall running of the project and would report directly to the provincial director-general. This would be inclusive of the departments of Agriculture, Economic Affairs and Health. The advisory committee consisting of relevant specialisations would assist in streamlining the initiative. This project was cross-functional. The overall pilot project needed restructuring because it was to be rolled over to other districts outside of the current six.

Mr Songoni was dissatisfied with the mere commitment of R30 million to the FET recapitalisation programme. The Committee was weary of commitments made to spend funds as this did not guarantee delivery. All provinces experienced problems related to the funding of FET colleges because this funding was directly transferred to colleges. How was spending by these institutions monitored?

Mr Sogoni also expressed concern over the high vacancy rate. The ECED had pledged that it would fill all these vacancies by the 30 November. How would it achieve this? Was this a realistic plan since not all posts were funded? Mr Mkhaliphi also expressed concern over the 90 percent vacancy rate in HIV/AIDS unit in the Department. What service delivery could be achieved in this context?  He added that the ECED had not mentioned this challenge in past interactions with the committee.

Ms Mahanjama replied that the high vacancy rate merely pertained to funded vacancies, and not the total of all vacancies in the Eastern Cape. The filling of 285 positions was a short-term measure. These were already advertised and the selection process had already commenced. Appointments would be finalised by the end of November. The capacity levels of districts as well as at provincial level needed to be improved. Thirteen administrative clerks had been appointed in the NSNP unit, five administrative officers, a director but a deputy director would be appointed in due course. The ECED needed to reduce the unit's 95 percent vacancy rate.

The Chairperson said that the provincial departments of sports always cited the difficulty to employ research coordinators. Why were such difficulties experienced in filling vacancies when there was a high level of unemployment amongst graduates. He was recently told that people were employing friends or acquaintances and therefore did not go into the labour market.  The Committee wished to see that provincial departments were also addressing the problem of unemployment amongst graduates.

Ms Mahanjama assured the Committee that the integrity of the selection process was monitored very closely. Panellists from outside of the Department had been appointed and would also scrutinise the problem.

Mr Mkhaliphi commented that that the delays experienced by the ECED was not related to under expenditure, but related to inadequate planning systems. The issues raised in the presentation related to inadequacies of these systems.

Ms Mahanjama said that the planning systems were closely monitored and a new planning unit had recently been established. However, the efficiency of these systems was affected by the high vacancy rate. A chief director had already been appointed. Various projects would be streamlined and implemented.

Mr Kolweni asked how the community had benefited from the NSNP. He expressed concern that some service providers could easily not be part of that particular community. Could both the ECED and KZNED provide an explanation?

Ms Mahanjama confirmed that the initiatives were of benefit to communities. Community members were involved in all the initiatives. Six thousand meal servers were members of the communities and R300 was the stipend. 690 food gardens produce the produce for the food kitchens. Local cooperatives in six districts were utilised although faced by many challenges.

Ms Mahanjama added that the ECED would intensify community involvement through replicating cooperatives in new districts. Mentorship programmes would be held for local committees to be able to run the small start-up businesses that should be more efficiently run.

Kwazulu Natal Education Department (KZNED): presentation
Ms Cronje (MEC: Education, KwaZulu/Natal) and Dr Lubisi (Acting Superintendent-general) provided an expenditure overview.

Dr Lubisi said that figures on spending on infrastructure development had been misrepresented but have subsequently been rectified. The original figures had shown infrastructure spending at 17.1 percent due to confusion about capital expenditure. The correct figure, as the National Treasury document indicated, was 29.6 percent at the end of the second quarter. There was a clear problem associated with infrastructure delivery compared to the previous financial year and the projected infrastructure targets. KZNED had predicted expenditure on infrastructure to be 36 percent at the end of the second quarter. The October report, despite the 6 percent difference, reflected an improvement in this spending.

Two key issues were highlighted as important for understanding the backlogs. An infrastructure plan had been submitted to the Department of Public Works (DPW) in December 2005.  However, by April 2006, there had not been any progress made to the allocation of projects. This necessitated KZNED to change plans. It therefore took some of the projects and thus a re-budget allocation from DPW to three alternative implementing agents. These were IDT, Itala and Umgeni Water.  These three agents were experiencing serious capacity problems and therefore could not implement fully the projects designed by KZNED. However, KZNED had recovered from these challenges and therefore expected to spend its infrastructure budget optimally by the end of the financial year. KZNED had originally predicted a R43 million under expenditure for the financial year. It had therefore implemented a remedial plan of action to ensure that the necessary funds were spent by the end of the financial year. This remedial plan of action involved the fencing of schools in the province due to the need for security at schools.

The KZNED had devised the following measures to ensure that monthly performance monitoring of infrastructure expenditure and delivery was carried out. These were: the Joint Public Works and Education Provincial Task Team; Education and Provincial Treasury Joint Task Team; monthly and quarterly reporting to National Education Department and Treasury; an internal infrastructure delivery committee that met on a weekly basis as well as internal finance and infrastructure liaison.

The total expenditure on the FET recapitalisation programme was 57 percent of the allocated R90 million.  Expenditure on Human Resource development was at 42 percent. Training committees had been established and a skills audit completed and Workplace Skills Plans (WSPs) compiled. The training of staff had also been kick-started and lecturers had been trained as assessors and moderators.

Expenditure on upgrading of administrative systems was at 41 percent while 69 percent had been spent on the upgrading of infrastructure. The upgrade of student administrative systems should be completed by November 2006. Furniture and equipment had been purchased for the implementation of the curriculum.

Expenditure on the upgrade of skill centres was at 31 percent while 23 percent of funds had been spent on the development of the curriculum and programmes. The KZNED had not spent on the upgrade and refurbishment of existing and new buildings, but contractors had been appointed and plans had been approved.

Total expenditure based on the R45 million already paid to colleges was 114 percent. The following mechanisms were utilised to monitor capacity for the 2006 year for FET recapitalisation.  An acting Director had been appointed at Head Office in May 2006 to manage the recapitalisation process.  Head Office officials had visited all colleges in May/June 2006, to monitor the progress made in the recapitalisation. Another round of visits took place in October 2006 to assess the state of readiness to implement the national certificate. There were monthly meetings with rectors of the nine FET colleges. Monthly and quarterly reports from these colleges were also submitted to KZNED. It was working closely with the Department of Public Works and a technical project manager had been appointed to quality assure all construction and to advise KZNED accordingly.

The total allocation of R90 million had already been transferred to the nine FET colleges. These colleges were obliged to provide cash flow reports on a monthly basis indicating the extent of expenditure on each line item. On a quarterly basis, they provide a full progress report.

The KZNED had spent 31 percent of the amount allocated and had spent 61 percent of the total HIV/Aids grant. Problems related to procurement had been delaying greater expenditure of the grant. Two critical tenders relating to peer education and learning and teaching support materials had subsequently been awarded. Training for these programmes would be run in December during the school holidays as the schools system should not be disrupted. The expenditure on these two projects was expected to increase early in the following financial year.

The following mechanisms had been established to monitor the spending of the conditional grant. These were: monthly reporting in accordance with Schedule 3A and 3C of DORA. Approved business plans were used as a management and monitoring tool; monthly meetings were held with all districts to manage the bulk of the spending on conditional grants. The Head Office-District connection had been strengthened in regard to monitoring that was, in the past, extremely weak. Directorates had to table financial reports for monitoring spending according to the conditions of the grant.

The second quarter expenditure analysis of the NSNP revealed that 57.78 percent of the total allocation had been spent. 115.55 percent of the total amount transferred had been spent. The reasons for the over expenditure was due to the payment of funds committed the previous year and this had affected spending for the current financial year. The provincial education department had roll over funding of R76 million from the 2005/06 financial year to assist with the expenditure that was paid for this period. This request had been refused and the R76 million was to be funded from the baseline budget. This amount was divided into the R43 million for the acquisition of school nutrition utensils and the payment of invoices from schools, the flow of which was currently unacceptable. New mechanisms were investigated to ensure that this submission was increased.

In terms of monitoring measures, the KZNED had both field and administrative personnel at district and provincial levels to ensure the financial monitoring of project expenses and for conducting of site visits at schools. The submissions of expenditure claims on a monthly basis by school governing bodies had to be scrutinised.  The KZNED had signed service level agreements with 43 local women cooperatives to render services to schools for the purposes of feeding learners. All other SMMEs that supplied the schools had signed a memorandum of agreement with relevant schools and not with the provincial departments. These were managed at a district level.  The 2006/07 Business Plan had been approved and submitted to the National Department of Eduction for forwarding to National Treasury. Monthly reports were also submitted in terms of the requirements of DORA.

Discussion
Mr Sogoni asked why KZNED had 36 percent expenditure on its infrastructure grant by the end of the second quarter as this was well below the 50 percent expenditure expectation. Since KZNED had, on previous occasions, expressed confidence about progress made by infrastructure service providers, the Committee was not made aware of any challenges. Why were these problems only revealed at this stage?

Mr Kolweni requested more information on the under expenditure of the infrastructure grant. Could it elaborate on its relationship with DPW, as the late start of projects was cited as the reason for under expenditure

Ms Cronje replied that the level of spending on infrastructure was adequate. In terms of KZNED’s own projections, it indicated that the 25 percent per quarter spending would not be met. There was generally a mistaken belief, that infrastructure spending could be compared to that of salaries. With personnel expenditure, one could expect an exact break-down of spending. Infrastructure spending was different as there could be sudden increases in expenditure.

The KZNED had developed systems to deal with its six percent underperformance on projected expenditure. At the end of the second quarter, it had been concerned about this under expenditure.

She explained that the Department had allocated R503 million to DPW for intended projects. Plans for these projects, to be launched in the 2006/07 financial year were also handed over in December 2005. By April 2006, DPW had not yet made progress on these projects.

The Department had then redirected some of these funds to alternative implementing agents to manage the construction of the new projects. These new implementing agents were also experiencing capacity problems, and thus caused a delay in the spending on projects. DPW was also left with R360 million since it was confident in its capacity to spend this amount.

Mr Sogoni asked KZNED to explain how it would manage to spend the entire infrastructure budget by the end of November. Mr Botha expressed similar concerns and wondered whether this target was realistic.

Ms Cronje answered that 40 percent of these funds had been spent by the end of October. This was a very quick increase. KZNED was convinced that it could spend the rest of the budget through the corrective measures taken. It had also spent money on the fencing of schools. This was a quick and essential deliverable. 1750 classrooms and 2500 toilets had been built. She pleaded with the Committee to accept these set targets.

Mr Mkhaliphi wanted clarity on the declined roll over of R6 million. Could the Department elaborate?

Dr Lubisi answered that KZNED needed to fund the requested roll-over funds from the baseline funds. These included the money used for utensils for the end of the academic year. KZNED realised that many did not have the appliance and therefore, it decided to address the matter in such a manner.

Mr Mkhaliphi commented that as the NSNP had a positive impact on the rate of enrolment, KZNED needed to focus on improving this programme. How did it expect to make a lasting impact on this?

Mr Kolweni again requested an explanation of how the community had benefited from the NSNP. He expressed concern that some service providers could easily not be part of that particular community. Could both the ECED and KZNED provide an explanation?

Ms Cronje responded that the community were involved mainly through cooperative schemes. The KZNED was encouraging the cultivation of vegetable gardens at schools and had employed people with agricultural experience to visits these schools. The Department of Agriculture was working with the Department of Education on this.

Western Cape Education Department (WCED): presentation
Mr Cameron Dugmore, MEC for Education, remarked that the presentation provided a sense of overall spending patterns by WCED, although the focus was on the spending of the conditional grants.

About the primary school nutrition programme, WCED intended to introduce “breakfast clubs” for primary school children. This would start at seven o’clock every school day. Currently, learners receive their meals only at ten o’clock.  Expenditure for this programme was similar to the previous financial year. A delegation was currently on a study tour of the Northern Cape to gain understanding of how school-governing bodies could be better utilised in the running of the NSNP. Three service providers were contracted to provide nutrition to children. He stressed that expenditure was on track and was currently at 42.4 percent.
He added that new menus had been introduced, kitchen facilities had been provided at schools as well as additional necessary equipment for the hot meal programme.  

Fifty percent of the FET recapitalisation programme had been spent. In certain instances, procurement issues had an impact on the progression of this process. The fifty percent expenditure figure represented a full transfer of funds available to the provincial department.

The Department had spent 59.6 percent of the conditional grant for HIV/Aids and had compiled information on the impact of that spending. The ante-natal survey reflected a reduction in the infection rate amongst youth. These details could be provided to the Committee. The WCED was making an impact through its peer education programme, the learners support material and teacher development.

Spending on infrastructure was currently at 35 percent. This spending was as a result of decisions that had to be taken about four new schools in Khayelitsha. As part of the adjustment appropriation, extra funds had been secured to add to the infrastructure programme. WCED was confident that as the tenders had been secured and contractors were now on site, the allocated budget as well as additional funding would be spent.

Discussion:
[The Committee did not raise any questions]

Limpopo Province Education Department (LED): presentation
Mr I van der Merwe (Chief Financial Officer) delivered the LED’s presentation.

The LED had spent 37.03 percent of the total infrastructure grant. R89.3 million had been spent on the improvement of infrastructure to schools classified within the “Learners Under Trees” category. DPW served as the implementing agent. 374 schools had been completed since the inception of the project.

The budget allocated to the rebuilding of storm ravaged schools was estimated at R272 million. Spending on this at the end of second quarter was estimated at R31.1 million. It intended to repair 293 schools with the assistance of DPW as implementing agent. It had spent R36.9 million on the provision of mobile classrooms. These were bought as an interim measure for storm damaged schools as well as for schools with learners under trees, while the completion of schools was still pending.

Planning for FET colleges had been competed and tenders had been awarded in staggered phases. Transfers had been made in terms of DORA and had already been effected since October 2006. This was a three-year programme that intended to upgrade and build new infrastructure and the first programme should be completed at the end of the financial year.

The LED had spent 26.8 percent of its HIV/Aids grant. Training of educators would be conducted during school holidays. Training for peer educators and peer supporters was scheduled for December 2006. By the end of February 2007, the Department hoped to have spent R2.8 million on this.

The Ethina proposal and an amendment to the business plan had been approved by the National Department and the total cost of the kit for 300 schools was estimated at R7.9 million.

The School Nutrition Programme expenditure was 44.3 percent. There were no payments in April due to budget and funding allocations that had not yet been completed. The amount paid did not always correspond to the actual feeding, as service providers did not always submit invoices on time. Many service providers had agreements with suppliers and invoices were delayed to ensure that beneficiary details were updated.

Discussion
The Chairperson requested clarification about the Road Agency Limpopo (RAL).

Mr Letsang said that the Committee should have received the necessary documentation on the RAL. The status of RAL was a cause of concern for, particularly, Mr J Hattingh, Chief Director of the Budget Unit of NT.

The Chairperson raised concerns about the use of conditional grants by provinces. These grants were merely supplementary funds. Provinces needed to spend their budgets well, and should therefore not rely on these grants. If these grants were to be withheld, service delivery could be compromised. This was unsatisfactory.

Gauteng Education Department (GED): presentation
Ms Manjiwa (Chief Financial Officer) presented to the Committee.

She stated that GED faced many challenges in the current financial year because of continued growth of the education sector due to increased learner enrolments arising from migration. Gross enrolment ratio in primary schools had reached universal access levels and in secondary schools was nearing universal access levels. These developments strained the education system which could not respond fast enough to provide a sustainable school nutrition programme as well as the provision of adequate infrastructure.
 
The Department had spent 50 percent of its budget on the recapitalisation of FET colleges. 21.1 percent of the HIV/Aids grant had been spent, while 35.9 percent had been spent on NSNP. A total spending of 41.1 percent of the grants had been spent at the end of September 2006.

The low expenditure of the HIV/AIDS Grant was due to the training of teachers scheduled for the third and fourth quarters of the financial year. The Recapitalisation Grant expenditure would increase as a result of the second tranche of 50% of the allocation to a college that would be transferred to other colleges in the third quarter. The utilisation of the funds by colleges was at a lower level due to slow start-up and had increased rapidly as the projects went into full delivery mode. Spending analyses indicated that expenditure increased from 9% in the first quarter to over 22% in the second quarter. A number of delivery obstacles have been addressed allowing for smoother expenditure over the balance of the year

The following challenges were highlighted. Delays had been experienced in the finalisation of requisitions at the Gauteng Shared Service Centre. The Basic Accounting System posed serious problems as expenditure reports did not present the true reflection of actual expenditure. Interventions were designed and requisitions had been prepared to ensure the filling of vacant posts. The evaluation and monitoring tool to track expenditure had been strengthened. For example, meetings are held to ensure a common approach in the  implementation of the programmes for the year as well as budget utilisation.
Schools in the province did not submit applications timeously and this caused delays in the dispensation process. The procurement process was long and protracted resulting in hindrances in sourcing goods and services required.  The Basic Accounting System presented some problems particularly as it seldom mirrored the accurate expenditure due to accumulations. The GED had arranged some corrective measures for these challenges impeding delivery.  District coordinators developed management plans for the submission of applications by schools to speed up the process. Additional interns would be recruited to alleviate capacity problems.

The GED had designed the following interventions to keep spending on this project on track. It would provide infrastructure and food production programmes at schools through competitions and incentives in the next quarter.  This would ensure that the budget was efficiently spent. Promotional materials supporting healthy lifestyles would also be developed.

The allocation for the FET Recapitalisation Grant in the 2006/07 financial year for the GED amounted to R106 million. R53 million had already been transferred to the eight colleges.
During the second quarter of the financial year the colleges had spent R18 094 million of the R53 million to implement the recapitalisation plans. This represented 34,1 percent of the amount actually transferred to colleges.

The following challenges experienced in the recapitalisation process were highlighted. The Department had experienced difficulties in accelerating the procurement processes, meeting skills demands of projects with existing staff and skills levels as well as developing Learning and Teaching Support Material to meet demands of new programmes. It had also experienced challenges with the readjustments of operational plans and budget allocations in order to meet objectives, as well as to submit these deviations promptly for GED HOD and DoE approval.

However, the FET colleges were provided with assistance to manage these difficulties, especially those related to budgets Thorough analysis of college monthly reports had been done to ensure maximum production. Follow up visits to verify progress as indicated in the monthly reports, were also conducted. Meetings had been held with the National Department of Education, Provincial Education Department and Colleges on preparation for the Procurement of learning and teacher support materials (LTSM) as well as on Programme costing. All personnel involved in bidding /tenders were trained in Supply Chain Management. 37 college staff members (from 8 FET Colleges) and 8 Departmental officials had been trained by the Gauteng Shares Services Centre in August 2006. Compliance with legislature and GPG processes was inculcated into the training. 

The Department stressed the substantial progress in getting its infrastructure programme back on track. Expenditure had increased from first quarter’s R54 871 million to R167 522 million in the second quarter.

Discussion
The Chairperson ruled that the Committee receive the Heads of Department as well as MECs written responses to the following questions within two working days:
- Mr Mkhaliphi asked why the payment of service providers had been delayed.
- Mr M C Goeieman (ANC, Northern Cape) requested information on the GED HIV/Aids programmes. Did the Department collaborate with the Department of Health?

The Chairperson commented that the spending on HIV/Aids was problematic. Money could be allocated to those provinces that were running effective programmes.

Mr Songoni commented that, although there was improvement in the spending on the infrastructure grant, improvement of departmental planning systems was necessary. This was critical in the light of high levels of poverty and thus the need for greater spending on HIV/Aids as well as on the NSNP.

The Chairperson thanked the provincial departments for their attendance. The meeting was adjourned.