Education Provincial Conditional Grants & CapEx: 3rd Quarter 2006/07 spending

FINANCE SELECT COMMITTEE
13 February 2007
EDUCATION CONDITIONAL GRANTS AND CAPITAL EXPENDITURE: THIRD QUARTER SPENDING: PROVINCIAL DEPARTMENT BRIEFINGS

Chairperson: Mr T Ralane (ANC, Free State)

Documents handed out:
Outcome of Conditional Grants & capital Expenditure as at 31 December 2006
Provincial Infrastructure Budgets and Expenditure Trends: Education
North West Presentation
Eastern Cape presentation
Free State presentation
Limpopo presentation: Part1 & Part2
Gauteng presentation
Northern Cape Presentation
Kwa-Zulu Natal presentation

Audio Recording of the meeting

SUMMARY
National Treasury briefed the Committee on the outcome of the education conditional grants and capital expenditure. The main grant related to further education and training, and R456 million had been transferred, of which only R187.4 million was spent. The key priorities for education were outlined. There had been low spending on the HIV/AIDS Education grant in four provinces. Eastern Cape had a low spending rate on the school nutrition programme. Capital asset spending for education and health had risen by 54.9% from the previous year.

The North West Department of Education stated that computerisation was well on course, that funding had been set aside and would be spent on furniture and equipment, and all committed projects for buildings would be completed as planned in the current year. The Further Education and Training recapitalisation programme had underspent. Many HIV activities were postponed to the fourth quarter. Accountability measures were introduced and cost saving had been introduced.

The Eastern Cape Department of Education focused on the school nutrition programme. The findings of the forensic investigation were detailed. The investigation led to immediate cancellation of all provider contracts. A new tender was awarded on 28 January 2007 and feeding commenced on 1 February 2007. The monitoring programmes were outlined.

The Free State Department of Education focused on the strategies to improve expenditure on further education and training recapitalisation, and detailed the steps already being taken.  The school feeding expenditure amounted to 69.43% of the initial allocation and the steps to overcome low spending were outlined. Infrastructure expenditure was below target but more frequent monitoring visits to projects were being made. 

The Limpopo Department of Education focused on infrastructure challenges. Storm damage led to mobile classes being used. HIV and Aids education represented only 46.86% of the allocated funds. The spending on other programmes was detailed. Expenditure on the school nutrition programme was at 79.12%, with some expenditure relating back to the previous year’s unpaid amounts. 

The Northern Cape Education Department stated that by the end of the 3^rd quarter spending on HIV/AIDS programmes, and infrastructure were at 58% and 70% respectively. Achievements included the establishment of school gardens, and the completion of the food handler training programme. Monitoring mechanisms were outlined. Explanations were given on the achievements and challenges of the Further Education and Training colleges.

Members raised concerns that none of the provinces gave reports on safety in the schools, and commented on the spending on nutrition. Infrastructure needed to be developed and improved. Members sought clarity on outsourcing and use of rented motor vehicles, and the progress on the Further Education and Training colleges. Members also asked why the HIV Aids programme had been added into the school curriculum. Members commended the department for initiating a school gardening system and stated that it was an initiative that had not been picked up by most provinces.

MINUTES
Presentation on Intergovernmental Relations and Public Finance by National Treasury
Dr Mark Blecher (Director: Health Public Finance) made a presentation about the outcome of the education conditional grants and capital expenditure. He stated that the main category of the grants was the Further Education and Training (FET) grant, which reflected an amount of R456 million that had been transferred into the grant. However only R187.4 million had been spent. Dr Blecher stated that the key priorities for education were to reduce backlogs in school equipment, assist in teacher development programs, implement a uniform system for school funding and to filter through the new education curriculum to grades 10 to 12. With regards to the HIV/AIDS Education grant Gauteng, KwaZulu-Natal, Limpopo and the Northern Cape reflected a low spending rate of approximately 65% on average. The Eastern Cape also reflected a low spending rate with respect to school nutrition due to its feeding program commencing from grade 2 and not lower primary. Payments for Capital assets for education and health reflected an increase of R834.7million or 54.9% compared to spending last year. 

North West Department of Education presentation
Rev J Tselapedi (Education Member of Executive Council (MEC)) made a presentation about the strategies for capital expenditure and gave a progress report about the Division of Revenue Act (DORA) activities. The computerisation of schools is well on course with 700 schools that received computers and connectivity. Provision for additional cars, school furniture and equipment was made in December 2006 and funds set aside for this purpose will be spent by 31^st March 2007. All committed projects for buildings and other fixed structures will be completed as planned in the current year. FET recapitalisation in the North West was underspent by 25% due to the procurement process taking longer than expected. With regard to the conditional grant on HIV/AIDS, most activities could not be properly executed due to exams. The activities were postponed to the 4^th quarter, however at the end of the financial year all activities will be successfully completed.  The province conducts accountability sessions on a quarterly basis where managers are held responsible for the management of funds allocated to them. Cost-saving measures have been introduced to ensure that expenditure on the key areas of the departmental plan is monitored on a monthly basis.

Eastern Cape Department of Education presentation
Ms Tracy Cummings (Chief Financial Officer) mentioned that the Eastern Cape’s presentation would focus mainly on the school nutrition program (SNP) that was under much scrutiny by the Department of Education and the media. A forensic investigation initiated by the Office of the Premier commenced in August 2006. The outcome of the investigation revealed that there were flaws in the procurement processes. One of the major findings was that it was alleged that payments were effected to service providers without necessarily rendering/providing the services to the schools. Services were also paid to invalid suppliers and as such an estimated R100 million could not be properly accounted for. Internal control weaknesses within the administrative processes of the Department; more especially within the SNP were identified. The investigation lead to immediate cancellation of all SMME contracts and secondary cooperatives and suspension of all management and officials involved in the SNP programme as per the recommendations from the investigation. This resulted in delays due to contracts of service providers being terminated. A new tender was awarded on 28 January 2007 and feeding commenced on 1 February 2007. The Financial Committee of the Department and Executing Authority now monitored the programme on a weekly and monthly basis.

Free State Department of Education (FSDoE) presentation
Ms M Tsopo’s (Education MEC) presentation focused on the intervention strategies to improve expenditure on FET Recapitalisation and the National School Nutrition Programme (NSNP) intervention strategies. With respect to the FET Recapitalisation program, Management Accountants and Project Coordinators monitored progress through monthly site visits to all colleges. It was agreed that service providers would bill colleges for partial deliveries and not for full delivery. All colleges are required to submit weekly progress reports on expenditure and are also required to pay invoices within 5 working days from receipt of invoices. Actual feeding expenditure amounted to R36 million which is 69.43% of what was initially allocated. To overcome the problem of low spending, transfer payments to all NSNP schools for honoraria and fuel would be implemented. Also, the department would ensure that all outstanding payments of all service providers are processed by 10 March 2007. The challenge faced by the FSDoE was that infrastructure expenditure to date was below target. However Ms Tsopo said that they were improving since the majority of the sites were handed over and that there were more frequent site visits by inspectors, which meant more regular payments.

Limpopo Department of Education presentation
Dr P Motsoaledi’s (Education MEC) presentation focused on giving feedback about infrastructure challenges faced by the province. He said that the number of storm-damaged schools had increased over the past couple of months. This resulted in a significant number of mobile classes being used. On the issue of HIV/AIDS, education expenditure in the province reflected a percentage of 46.86% of the allocated funds. For the training of Peer Educators and Peer supporters, an amount of R2.8 million is to be spent by the end of February 2007. Training of 1000 educators on Level 1 First Aid is expected by March 2007 and will cost R1.1 million. The national department approved the Ethina proposal and amendment of the business plan and the total cost of the kit for 300 schools is estimated at R7.9 million. The kit is a touch screen computer operated by battery or electricity and contains HIV/AIDS information. Expenditure to date on the National School Nutrition Programme is at 79.12%. The over expenditure was due to the payment of outstanding 2005/06 feeding costs which was done earlier this financial year. Dr Motsoaledi highlighted that the amount paid does not always correspond to actual feeding, as service providers do not always submit invoices in time.

Discussion
Mr D Botha (ANC, Limpopo) commended the Eastern Cape for being on track with its spending. He said that that province had come a long way in terms of its reporting quality and encouraged them to keep up the standard. He stated that Free State had produced a top quality report, which reflected the province’s hard work and effort. Mr Botha raised concern about none of the provinces giving reports on safety in the schools.

The Chair said that the issue of safety in schools needed to be discussed at length by the various provinces and the Committee. He said a separate meeting would be scheduled to discuss it at length. 

Mr E Sogoni (ANC, Gauteng) mentioned that the North West province should be careful with regard to its nutrition spending as they had already spent 87% and this might be quite a task to maintain and still be within budget. He said that the Eastern Cape had to focus more on their infrastructure and develop strategies as to how they were going to improve it. Mr Sogoni also commended the Free State for their good work.

Northern Cape Presentation
Mr Edcent Williams (HOD: Northern Cape Education Department) stated that by the end of the 3^rd quarter spending on HIV/AIDS programmes, and infrastructure were at 58% and 70% respectively. He stated that some of the achievements of the grant included the establishment of 142 school gardens, and the completion of the food handler training programme. Mr Williams also focused on the monitoring mechanisms for the grant, and provided a detailed explanation of the achievements and challenges of the FET colleges, infrastructure development and HIV/AIDS awareness programmes. These included the completion of 49 classrooms, newly trained staff members, a lack of monitoring capacity, challenges in the appointment of second layer management at the colleges and the lack of a functional health advisory committee in terms of promoting Aids awareness.

Discussion
Mr M Mkhalipi (ANC) [Mpumalanga] said the issue surrounding the outsourcing of government transport to rental companies concerned him. He asked the department whether or not they could provide the motivations, risks and benefits that would arise from the outsourcing. Mr Mkhalipi also stated that the Northern Cape was one of the provinces in the country that had no institutions of higher learning, and asked the department to elaborate on the progress the province is making in the absence of higher learning through the FET colleges.

Mr Williams stated that it was part of the provincial policy to outsource. Therefore all departments have a common tender in terms of transport, and the tender is placed by the Department of Roads and Transport. He stated that in terms of higher learning the department had established a national institute for higher learning.  The institute is now in partnership with other Universities from across the country, in order to provide courses that will empower learners from the Northern Cape to acquire certain skills without leaving the province.

Mr Kolweni (ANC) [North West] asked the department to provide further information regarding 142 school gardens created in the school nutrition programme. He also said that it was interesting to see that the training of food handlers created so much interest, in that the training was an initiative that did not take place in other provinces.  He also commented on the fact that the department had initiated an HIV/AIDS programme into the curriculum, and said that it was also another initiative that did not take place in most provinces.

The Chair added that it was good to see the Northern Cape feeding both primary and secondary learners, and as a result of the feeding scheme school attendance has increased.

Mr Williams stated that the initiation of the HIV/AIDS programme into the curriculum was in the original formulation of the grant, and still remains the key objective of the grant. Mr Williams also stated that the school garden programme was a way of making the schools more self-sufficient. He stated that the department made it a prerequisite that schools must have a garden.

Mr M Qwase (Eastern Cape Provincial Legislature Chair: Portfolio Committee Education) stated that he was happy with initiatives that were set up around the school nutrition programme. However it is important to note that a number of students from grade 4 to 7 still needed to be fed. He stated that the programme had not yet been implemented at secondary school level; however the department hopes that three years down the line they will be able to feed the secondary schools. He added that the nutrition programme would need funds from the conditional grant, in order for it to survive.

Mr Botha said that yesterday when the Provincial Treasury appeared before the Committee, they pointed out that most departments had no functioning relationship with the Department of Public Works; therefore he asked the department to give clarity on their relationship with Public Works.

Mr Williams stated the relationship with Public Works has not been a healthy one. However since the department started collaborating with Public Works on the Integrated Development Action Plan (IDAP) programme, the relationship has improved.

Mr T Sogoni (ANC) [Gauteng] argued that there was an unfortunate statement in the report by the Northern Cape on the issue of moral regeneration and HIV. He stated that the country had a problem with people not disclosing their status, and that the statement should have been put in a different way.

Mr Williams stated that the use of moral regeneration as a descriptor of the level of awareness and behaviour change was an unfortunate statement and that the department will not make that mistake again.

The Chair stated that according to Provincial Treasury, the department projects to under spend by R4.1 million as a result of problems with Public Works. He asked the department to elaborate on what is being done to solve the matter. The Chair also stated that spending on HIV is below 60%, and asked the department to give clarity on the reason for this.

Mr Williams stated that there would be no underspending as the R4.1m was used due to the increase in the demand for mobile classrooms, and that the class rooms were built to alleviate overcrowding at schools. He also said that with regards to the spending below 60% on HIV, the department brought the matter to Treasury’s attention, and that the department is constantly in talks with Treasury in explaining the rationale of taking a non-linear approach to spending. Treasury is beginning to accept the department’s explanations.

Ms A Mchunu (IFP) [Kwazulu-Natal] again raised the issue of the rental vehicles, and asked the department to elaborate on the use of the vehicles. 

Mr Williams stated that the cars were used for a team of dedicated office-based HIV/Aids specialists. He stated that the specialists needed the vehicles to provide support to the various schools, and also pointed out the fact that the distance between schools in the Northern Cape was between 200 and 300 kilometres.

Mr Qwase raised the issue of the child support grant and commented that the child support grant still remained an issue for the department. He stated that although the child support grant has a very positive incentive, it has unintended consequences in that the grant has been a factor in the increase of teenage pregnancies. He said that during the day when the grants were issued learners are not at school, and that the department need to view the form in which the conditional grant is provided.

Mr T Tredoux (Chief Director: Financial Support Services) stated that in terms of the monitoring of the grants, there has been extensive progress in both spending and delivery of the grants since September 2006. He also stated that with regards to HIV/AIDS programmes, the department can not work with straight line projection, and that the department is looking at approaching Treasury in an attempt to phase out the specific conditional grant as a conditional grant and make it part of the equitable share with effect from 2010. In terms of the FET colleges the department is looking the capacity of the colleges, and possible interim measures to address the capacity issues.

The Chair stated the department should be careful with the HIV/AIDS issue in that many people argue for conditional grants to be phased into the equitable share; however the Committee feels that if and when a conditional grant has achieved its goals then one might consider phasing it into the equitable share. If these grants are phased in too quickly then one lost the opportunity of ensuring that the conditional grants maximise their objectives.

Ms S Sooklal, (Treasury Chief Director: Provincial Budget) said that what one sees generally with financial management is that that strong leadership is needed from a political and administrative level. She also commended the Northern Cape on their performance, and stated that other departments should use the Northern Cape style of leadership as a model to ensuring transformation.

Another representative from National Treasury referred to the Section 32 reports that were published on the 30^th of January, and stated that from Treasury’s point of view, there will be a halt in the transfers of grants to all areas where there has been low spending. This was due to the fact that there had been transfers made to provinces who had under spent, and the correct procedures were not followed when it came to the rollover of funds.

Mr B Khumalo (Financial and Fiscal Commission (FFC) Project Manager: Fiscal Policy Analysis), stated that from the FFC point of view it is important to note that one of the former FFC commissioners is the MEC for finance in the North West. He stated that one of the things he would have to look at is ensuring transport and security for learners in the schools. Mr Khumalo also said that there would be a process that will review the provincial equitable share formula. Therefore some of the non-performing conditional grants will be reviewed again in that context.

The Chair stated that one could not just throw away the idea of conditional grants; however he stated that many provinces plead poverty, yet they have money sitting in their bank accounts. He criticized departments that tried to make a profit from public funds by incorrectly projecting the amount needed for planning, and the lack of cooperation between the departments.

The meeting was adjourned.