Conditional Grant Spending: Provincial Education Departments briefings

NCOP Finance

13 November 2007
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Meeting Summary

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Meeting report

FINANCE SELECT COMMITTEE
14 November 2007
CONDITIONAL GRANT SPENDING: PROVINCIAL EDUCATION DEPARTMENTS BRIEFINGS

Chairperson:
Mr T Ralane (ANC, Free State)

Documents handed out:
Western Cape Department of Education Presentation [Part 1][Part 2]
Free State Department of Education
Limpopo Department of Education 2007/08 Conditional Grant and Infrastructure Expenditure
Department of Education Second Quarter Outcomes in respect of 2007/08 Conditional Grants
Department of Education Mpumalanga Conditional Grants and Capital Expenditure Report
Department of Education North West 2nd Quarter Provincial Expenditure Report
Northern Cape Education Department Conditional Grants and Capital Expenditure

Audio recording of meeting [Part 1][Part 2]

SUMMARY
The Committee was briefed by National Treasury and Provincial Departments of Education on the Conditional Grant spending in the first and second quarters. In most of the provinces the FET College grant showed a steady increase in expenditure which National Treasury said was healthy. Most of the over expenditure in provinces related to personnel. The Western Cape raised concern about the increase in benefits for teachers that the Department was now expected to pay and requested suggestions from the Committee how to overcome this challenge. The Western Cape was also commended for their expenditure trend improvement.

A matter of concern in the North West province was that the department had decided to reduce the number of feeding days in schools, as that was proving to be quite expensive, and that a number of projects on infrastructure had been severely delayed. Members suggested that National Treasury assist the province in this regard and progress be given regularly on those engagements.

The Free State was commended for their achievement in the NSNP grant and this raised question about why and how they had managed to perform so well with less money than the North West. This matter would be investigated further by the Department.

In
Gauteng, over expenditure was estimated at R 25 million for the current financial year although delays in the building of schools were also expected. Other problems identified were expensive land and poor planning by local municipalities. The budget had been reprioritised to convert some portion of it for infrastructure in order to built schools in a hurry.

The Mpumalanga Education Department indicated that a range of strategies was implemented to address backlogs. There had been significant under-spending for infrastructure, and a turnaround plan was being implemented to fast-track implementation.

The Northern Cape Department representative said that its Department had managed its spending patterns quite well. The challenge for the Department was value for money.

Questions from the Committee focused on the reasons for over expenditure and under expenditure and what departments planned to remedy their problems. The Committee focused on figures and asked for explanations and clarifications regarding figures that were reported.

It was agreed that the Committee would identify relevant provincial departments to appear before the Committee and report on issues identified in the National Treasury report.

MINUTES
National Treasury
Mr Spencer Janari, Director: Public Finance (Education), National Treasury, briefed the Committee on the spending patterns in provinces as at 30 September 2007. Spending was at R42.5 billion or 47.9% against R88.7 billion budget, with projected overspending at R1.8 billion mostly relating to personnel.

The North West province was looking to overspend by over R1 billion which was the result of under calculations due to changes in demarcation. Mr Janari said that over expenditure at 30 September 2007 excluded roll-overs and some other adjustments that usually levelled out projections going forward. Capital expenditure in the Eastern Cape and North West province was slow, at 18% and 22% respectively.

The Further Education and Training (FET) College Grants showed very healthy expenditure because the FET Colleges spent 62% of what they received from provinces. In the HIV/AIDS grant life skills programme, Kwa-Zulu Natal reflected the lowest spending.

Western Cape Department of Education
Mr Cameron Dugmore, MEC: Education, Western Cape, opened his presentation by noting that contract teachers who were not getting benefits would now be receiving them and apparently this was not planned by National Treasury because Treasury expected the Department to fund this benefit from the Department’s equitable share. He added that Western Cape Education had no guarantee that the full 7.5% benefit agreed upon nationally would be settled.

The National School Nutrition Programme (NSNP) spent 100% of its budget in 2005/6 and 95.1% of its budget in 2006/7. 203 535 learners were fed at 988 targeted schools and 18 additional mobile units had been donated to needy schools. These units served as food preparation areas and were fully equipped and secured.

The expenditure was at 40.9% at mid-term for the HIV/AIDS Life Skills Conditional Grant. Annual ante-natal survey over the past 3 years showed a reduction in teenage HIV infection rates down to 7.2% in 2006.

The Infrastructure Grant was overspent by R451 000 at the end of the 2006/07 financial year. Mr Dugmore said that the erratic budget allocation jeopardized proper planning and the inviting of tenders. He said that this was a stop-start situation. Current infrastructure backlog was R4.5 billion. Budget allocations needed to be increased and more serious attention given to the critical effect of construction escalation so as to ensure adequate allocations. Seven primary schools and four secondary schools were still under construction at the end of September 2007. This represented space for 12 320 learners.

Discussion
The Chairperson said that nationally budgets were growing but in the provinces, the education share was declining. He said that the Committee’s concern was where this money was going, and what it was used for.

Mr Dugmore responded that the Department would provide the Committee with presentations made to National Treasury on the equitable share.

Mr E Sogoni (ANC) (Gauteng) commented that if moneys ere rolled over that meant that there was money kept somewhere, so the province did have a certain amount of money. He also said that there was a need to shift focus from feeding primary school children only because otherwise they might not want to attend secondary schools.

The Chairperson emphasized that the education budget should not be tampered with.

Mr Z Kolweni (ANC) (North West) commented that the Department had mentioned in their report that the Department had capacity to monitor expenditure, but commented that the Committee would only be convinced of this once the Department had an audit committee running. He then asked what was meant by a school garden.

Mr Dugmore responded that this was a garden that added nutrition to the food programme.

Ms D Robinson (DA) (Western Cape) said that she was delighted to see improvements in the Department’s performance and she was particularly pleased to hear of the increasing staffing. She added that she hoped it would help with communication and administration between departments and schools.

The Chairperson encouraged people not to be pessimistic because the review of the equitable share was currently taking place as an on-going process.

Mr Dugmore appealed to members to contact him if a member of their constituency was having trouble reaching any staff members in the Department. He thanked the Committee members for their positive feedback, noting that in a recent media briefing the Western Cape DoE was accused of being “in shambles”, which was not true.

North West Department of Education
Mr Matanzima Mweli, Head of Department, North West Education, said that the FET Recapitalisation Grant was under spent by 0.1%, which was on track and in line with approved business plans. Colleges were advised by the National Department of Education not to engage Telkom service for connectivity, due to pricing uncertainties until it had given approval. In terms of the building of new college facilities, the project commenced in August 2007 and therefore expenditure was expected to improve in the third quarter as certificates from service providers were submitted for payment.

There was 21.97% under expenditure on the HIV/AIDS grant with the greater part of the allocation earmarked for training of teachers during the winter schools holidays, but this could not take place due to the public sector strike action. The affected training sessions had been re-scheduled to take place during October and the rest in January 2008. As at the end of October, expenditure had improved to R5.3 million which represented performance of 46%.

The Infrastructure grant reported a variance of 25.62% under spending. The allocated budget had been ring-fenced for completion of outstanding Department of Public Works (DPW) Capital projects, which started in 2001 and remained incomplete to date. Claims from DPW were submitted at a slow pace, thus reflecting poor performance on expenditure. The National School Nutrition Programme (NSNP) showed an over expenditure of 6.03%. Feeding days were reduced from 5 days to 3 days a week in an attempt to reduce the over-expenditure. Several appeals had been made for additional funding but this was unsuccessful.

Discussion
Mr M Robertson (ANC) (Eastern Cape) sought clarity on Early Childhood Development under spending of 17.2%. He then commented that the issue of cutting the NSNP grant was a serious problem.

Rev Johannes Tselapedi, MEC for Education, North West, responded that there were unforeseen consequences with respect to NSNP. Children who were not otherwise attending that school came to eat at the school. He said that government departments very rarely got what they asked for in their business plans, hence the over expenditure. He said that this was a problem that the Department had been having for a while and it was a very sensitive issue. National Treasury suggested that the Department must talk to Provincial Treasury.

Mr Z Kolweni (ANC) (North West) said that the department had targeted 220 mobile classrooms but had 125. He asked what would happen with the outstanding number.

Mr Mweli responded that while the Department was waiting for these classrooms to be delivered, there was overcrowding in the classrooms. He emphasised that the Department had no record of learners being taught under trees.

Mr Kolweni asked with respect to outstanding projects on infrastructure why there was no target with respect to ring-fencing. It seemed as though the Department was not prepared to move in.

Mr Mweli responded that consultants had been appointed by DPW to expedite these projects dating back to 2001, and said that this should be concluded soon.

Mr Sogoni commented that the Department had said that the reason for under spending on HIV/AIDS was that there were no teachers, but on the NSNP there was over spending. He said that there was a contradiction. He then asked if the problem was lack of planning for those projects that showed over spending. Lastly, he sought clarity on where the money for sanitation came from and whether it was from the Infrastructure Development Grant.

Mr Mweli responded that under spending on the HIV/AIDS grant had to do with training of educators during school holidays, and commented that he saw no contradiction.

Rev Tselapedi added that sanitation was provided from provincial earmarked funds. He said that the Department worked on figures they had from last year and that was what appeared in the business plan.

Mr D Botha (ANC) (Limpopo) commented that the Department had planned to feed children for 5 days per week and said that it could not be running short at the moment. He asked what the problem was in the beginning of the year.

Mr Sogoni asked for clarity on the miscalculations.

Mr Botha asked for clarity on cross-boundary educators from one province to another.

Mr Sogoni asked for the number of projects that had not been completed in 2001 and also sought an update on progress so that the Committee could take it up. He also asked if the Department had received any adjustments on the NSNP funds.

Mr Spencer Janari (National Treasury) said that Treasury had not received a letter regarding funds for NSNP. He said that it has been working with both North West Provincial Treasury and the Education Department. He added that he did not have any detail regarding the infrastructure but in his experience if something was dragging on for so long, it could be an administrative issue.

The Chairperson commented that the MEC had said that the Department received R80 million for NSNP, but the Division of Revenue Act allocations stated that they received R84 million. He asked what the basis of the allocations presented here was. He suggested that the Committee should allow interaction between the National Department and the North West province on the issue of allocation, overcrowding and projects outstanding. He requested that they also investigate downscaling on the feeding scheme. The Chairperson appointed Mr Kolweni and Mr Sogoni as the oversight officers to see to progress with the issues raised. He requested that this Department must report to the Committee on a regular basis as well.

Free State Department of Education
Mr M Rakometsi, HOD, Department of Education, Free State, said that the HIV/AIDS Conditional Grant showed spending of 40,79%. The department targeted 30 schools for orientation meetings for parents and reached 39 schools. The target of training 40 officials in a teenage pregnancy programme had been exceeded, with training of 67 officials. The department managed to reach 136 schools in cross curricular integration and reached 95 schools in the substance abuse and/or victims abuse programme.

The challenges faced by the department included workshops being postponed due to industrial action. Furthermore, most available holiday time was usually reserved for National Curriculum Statement (NCS) training, so most training was restricted to afternoons, weekends or postponed to September/December holidays.

In the NSNP programme, schools were given R300 per month for gas or fuel. There were now 637 schools with existing vegetable gardens and the department was providing meals for all school days. Voluntary food handlers are given stipends of R500 each per month. The NSNP had spent 56.6% of its budget. The department had plans to improve the quality of meals within the limitations of the budget allocation. There had been appointments for monitoring of Services providers in the NSNP, but the vast and rural nature of the provinces remained a challenge.

Infrastructure expenditure was at 47.79% at the end of the 2nd quarter. Expenditure was below the 50% target due to the relatively late appointment of contactors. This challenge was addressed by providing project lists to the Implementing Agency (Public Works) earlier for future years. The Capital Infrastructure Programme consisted of major capital implemented by Public Works with a focus on elimination of platooning and overcrowding.

Spending by FET Colleges on the Recapitalisation Grant had improved by the end of October to 83.04%. The National and Provincial Departments visited FET colleges on a regular basis to assist and ensure implementation of management systems. Infrastructure developments were taking place at Colleges. Challenges included inadequate student services due to shortage of human resources at FET Colleges and inadequate staffing of FET Colleges at Central Offices, resulting in difficulties in implementing the new FET Act. There was a need to improve the skills of educators. Problems with contractors included failure to comply with specifications and falling behind schedule. Monitoring continued through monthly finance committee meetings and quarterly review sessions. Letters would be written to those managers who were underspending.

Discussion
Mr Z Kolweni commented that the achievement of NSNP food handlers was impressive because it addressed poverty alleviation.

Mr Robertson asked what the 20.34% household expenditure was. In relation to ICT equipment he asked when that project would be finished, because procurement had started and roll-out had commenced in November 2007. Mr Robertson asked how far the under expenditure by 7% related to the Department of Public Works.

Mr Rasmeni responded that he was unable to provide answers about under spending relating to households. In response to the questions on the ICT equipment, he said that R10 million of the money was being spent on burglar proofing and tables for computers. He said that the Department was dealing with companies that had contracts with the Sector Education and Training Authorities. With respect to infrastructure grants, school governing bodies received workshops and had to invite tenders.

Mr Botha said that the budget for NSNP was R68 million was and the department fed 413 546 children for 184 days, which was commendable for the province. He then added that North West had more money yet fed fewer children and suggested that maybe provinces should work together in making feeding plans.

Mr Mweli (North West DoE) responded that this observation was incorrect, because North West said that they were feeding school children for 5 days, but wished to reduce it to 3 days.

Mr Sogoni commented that the number of days was irrelevant and what the Committee was asking was why there was such a disparity in the numbers of children being fed in relation to the budget.

Mr Botha added that he did not believe that he was wrong about the statistics because he was basing his question on the facts given in the report.

Mr Robertson requested that the North West province and Free State provide information to the Committee on how much it cost to feed a child per day, and what they were feeding them, so that the Committee could make proper comparisons.

The Chairperson requested the National Department must look at these comparisons because this matter was serious and raised questions around efficiency.

Gauteng Department of Education
Ms Angie Motshekga, MEC for Education, Gauteng, briefed the Committee on the Second Quarter Outcomes in respect of 2007/08 Conditional Grants.

She noted that there had been under-expenditure due to staff who terminated their medical schemes and did not use their housing allowances. That portion of money budgeted by the State would therefore not be used for its intended purposes.

Challenges faced by the Department in the previous quarter involved industrial action taken by educators, which disrupted almost all activities that were planned to take place in the school holidays. Industrial action resulted on a focus on the curriculum and therefore an u
nderspending on HIV/ Aids. District officials and head office staff reworked their operational plans to make up for the lost time. The school nutrition programme was doing well despite capacity problems. Recapitalisation also presented challenges, where money was sent by National Government to Further Education and Training (FET) colleges without giving provinces an administrative fee to monitor implementation.

There was a huge backlog of infrastructure in Gauteng with a major under utilisation of infrastructure in older townships. A new approach in the delivery of infrastructure was being adopted. Lack of space in new areas for schools was identified as a problem.

Over expenditure was estimated at R25 million for the current financial year although delays in the building of schools were also expected. Other problems identified were expensive land and poor planning by local municipalities. The budget had been reprioritised to convert some portion of it for infrastructure in prioritise urgent building of schools.

The Department had been funding Adult Basic Education and Training (ABET) learners. There were about 45 000 learners in ABET centres who were trying to complete school. Meetings with ABET principals took place in order to restructure financial arrangements for these schools.

Mpumalanga Department of Education
Mr Mokgosi, representative of the Mpumalanga Education Department, said that conditional grants were allocated by National Treasury and the National Department of Education (NDoE). The Department had spent 99.2% of its total allocation of R6.3 billion in the last year. In terms of Conditional grants in the current year it was indicated that 33% was spent on the HIV/ AIDS grants. 44% of the budget had been spent for the National School Nutrition Programme (NSNP). 50% of the budget for FET was spent. A rollover of R6.7 million was reported, which would be transferred back to the FET colleges in 2007. There had been spending of only 8% on infrastructure, but a turnaround plan was being implemented to fast-track proceedings. With regards to infrastructure it was reported that planning, implementation and monitoring was disconnected. Technical capacity limitations were reported in strategic functions. Proposed remedial action to improve planning procedures included the adoption of circuit based planning in the context of regional Integrated Development Plans (IDP’s). Treasury was assisting the Department with skills transfer. A range of strategies was implemented to address backlogs. Improved financial management procedures were embarked upon to improve cash flow.

The Department had improved their institutional capacity through a focus on internal audit, and the audit committee, and they were supported by the Provincial Treasury and the National Departments. Monitoring instruments included early warning systems on finances and quarterly performance reports and annual reports.

Northern Cape Department of Education
Mr Matebe, representative of the Northern Cape Department, said that this Department had managed its spending patterns. The challenge for the Department was giving and receiving value for money. The expenditure on the NSNP was reported as 56%. The adjustment to the grant was a problem, given that Kgalagadi learners were not incorporated. In Kgalagadi, there were also not enough places for the preparation of food.

The 40 % spending on HIV/AIDS was on track. The Department also used the NSNP money to feed learners that attended the spring school and therefore did not experience problems resulting from industrial action. Expenditure on the FET was as expected. Challenges were experienced in rural FETs where there were problems with connectivity, given that no ADSL line was provided by Telkom. Spending on infrastructure was reported as being 66 %. The challenge was that some contractors were not able to complete projects. The Department built a good relationship with Public Works. Monitoring and capacity building plans were being followed. With regard to life skills it was reported that bi-monthly meetings, quarterly report and quarterly sampling of schools were done. The impact for life skills programme was not monitored on a yearly basis. In terms of FET monitoring site visits were conducted on a random basis. With regards to the monitoring of infrastructure it was reported that the Department did their own verification before payments were done. The Northern Cape Department’s expenditure was on track with all four conditional grants, and capital expenditure was relatively healthy. No transfers were made to other departments or municipalities, whilst food nutrition made transfers to schools and FET recapitalisation. There were limited problems due to the tight monitoring.

Discussion on Gauteng Department
Mr E Sogoni (ANC, Gauteng) asked how much money the Gauteng Department of Education allocated for infrastructure.

Ms Motshekga said that there were empty schools in older areas. In new areas there were also no schools. Some schools were being used as computer academies. There were private schools in townships. The problem was that people invaded schools and used them for residential areas.

Ms Motshekga said that electricity was not provided in some schools because there were no bulk services, especially in new areas.

Mr Sogoni referred to Early Childhood Development (ECD) and Grade R. He wanted to know what was being done to register learners. Mr Sogoni also wanted to know if the Department was able to address challenges being experienced in schools.

The Chairperson referred to the 35 % of the budget, which was spent on the Further Education and Training (FET) recapitalisation grant. He wanted to know what the likely position would be at the end of the financial year.

The Chairperson referred also to R 25 million that was spent in July and R 50 million that was spent in September. He wanted to know what the likely outcome would be given these figures. He asked the Department whether overspending or under spending was expected, and what the Department would be doing about that.

The Chairperson questioned what the likely risks would be with regard to the 46 % spending on Goods and Services under Expenditure by Economic Classification indicated by the Department.

Ms Motshekga said that with regard to budget trends that there was a provincial grant of R 162 million. The Department was implementing mostly rehabilitation projects under the line item of national grants.

The Chairperson referred to the total transfers and subsidies for provinces and municipalities, Departmental agencies and accounts, non-profit institutions and households. He wanted to know if there would be overspending or under spending with regards to the transfers.

Ms Motshekga said that the recapitalisation grants within conditional grant spending were not fully within the Department’s control. The Department had set up measures to follow up on a monthly basis to reconcile operational plans and delivery.

The Chairperson asked what the Department would do about the situation of empty schools. He referred to the Neighbourhood Programmes of National Treasury and asked what the Gauteng Education Department would do to address this issue.

The Chairperson also wanted to know what the Department would be doing to electrify schools. He said that this problem should be raised with Eskom.

Ms Motshekga said that in the inner city of Johannesburg there was a shortage of schools. School buildings were owned by Telkom, the military and theological colleges, and no land was available for public schooling. Modelling and planning was required to determine what percentage of schools could be leased for short-term use.

She indicated that pre Grade and Early Childhood Development programmes were not the responsibility of the Department of Education but fell under Department of Social Development, Local Government and the Department of Health. The Education Department focussed on quality assurance and supporting the practitioner development and learning programmes. The Gauteng Education Department had established a directorate to develop a co-ordinated delivery strategy. The Directorate was operational and a single regulatory framework, once developed, would allow private provisioning to be registered and also to determine the demand for it.

Ms Motshekga said that with regards to HIV/ AIDS the Department had developed an accelerated programme for February and March. It was expected that 90 to 95 % of the budget would be spend.

Ms Motshekga said that nutrition spending was on track despite industrial action having taken place. Alternative arrangements were made with hospices to ensure that food reached schools. There was R 25 million expenditure per quarter.

In terms of overall expenditure, Ms Motshekga said that there was a projected under expenditure for personnel. The Department had discussions with Treasury and would surrender the money before the end of the adjustment period.
Discussions in relation to Mpumalanga and Northern Cape / Kgaladi
Mr Sogoni said that there was a range of challenges being experienced by the Mpumulanga Education Department.

The Chairperson said that the biggest challenge for the Mpumulanga Education Department was infrastructure. He indicated that the National Department had to provide assistance to Mpumulanga. The focus of assistance should be on the turnaround strategy.

Mr M Robertson (ANC, Eastern Cape) referred to backlogs of projects from 2001 as reported by the Mpumulanga Education Department.

Mr B Mkhaliphi (ANC, Mpumalanga) said that a dedicated team was necessary to work on the challenges experienced by the Mpumulanga province.

Mr Robertson asked why money was not budgeted for the Kgalagadi education.

Mr Sogoni asked if the figures that the Northern Cape Department gave were up to date.

Mr Matebe said that the Department’s reported figures ran up to September.

Mr D Botha (ANC, Limpopo) asked if the Kgalagadi school children were included or excluded by the Northern Cape. He asked if the two provinces had sat down and attempted to resolve the Kgalagadi issue.

Mr Matebe said that the Kgalagadi learners were included in the Northern Cape’s figures.

A National Treasury representative said the Kgalagadi issue was a problem of demarcation. He indicated that he would revisit the Kgalagadi issue with the Northern Cape and the North West Province. Demarcation was based on the equitable share formula and it did not take poverty into account. It was important also to take poverty into account.

The Chairperson said that the issues raised should be discussed in the Division of Revenue Bill. He indicated that a mini-audit should be done. He commented that there had been a lowering of standards with Kgalagadi. He was worried about provinces who outsourced audit functions.

The Chairperson also noted that there were critical departments who did not appear before the Committee. He noted that there seemed to be problems with the Eastern Cape Housing Department and the Agriculture Department.

The Chairperson said that a smaller team consisting of the Committee and the Local Government were required to look at problems identified within municipalities. A range of problems was experienced, which needed to be addressed. Capacity building seemed to be a major problem. The Department of Public Works must be engaged to determine how to address problems that were being experienced.

It was agreed that the Committee would identify relevant provincial departments to appear before the Committee and report on issues identified in the National Treasury report.

The meeting was adjourned.

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