Provincial Departments of Education Conditional Grants Expenditure 1st Quarter 2008/2009

NCOP Finance

01 September 2008
Chairperson: Mr T Ralane (ANC)
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Meeting Summary

Provincial Departments of Education, from Limpopo, Eastern Cape, Mpumalanga and the Free State from the various provinces gave presentations on their conditional grant expenditure for the 1st quarter of 2008. Most indicated that there were ongoing problems with the implementation of the National School Nutrition Programme, as there was insufficient money to meet the obligations, and most had done a once-off transfer of funds from other programmes; some from the learner support materials, and some from the infrastructure programme. The Special Projects and HIV Aids was of varying success, with Limpopo reporting large under spending but the Eastern Cape saying that the learning around this area was having a positive impact on pupils’ lives. Infrastructure was proving problematic in all provinces because of delays in the tender process, outstanding payments to service providers, and difficulties with the Department of Public Works, and some provinces had decided to take matters into their own hands and use their own support and learners to assist in building Further Education and Training Colleges or effect repairs.

Members were concerned that all presentations indicated that there were problems around budgeting and the credibility of the business plan. The fact that three provinces had requested extra funding meant that there had been lack of proper planning, and this was indicative of problems in itself. The Chairperson noted that there was a need for all the provinces to assess where they currently stood and where they needed to go, and he requested that the Chief Financial Officer of the National Department must offer support to put the plans in order, and to ensure that the moving of funds was not compromising programmes.

Meeting report

Conditional Grant Expenditure for the first quarter 2008: Provincial Departments of Education (DoE)
Limpopo Province Department of Education
Rev Nevotandalo, CFO, Limpopo Provincial DoE, provided a brief summary of the expenditure pattern of conditional grants for the first quarter. He said that for the National School Nutrition Programme (NSNP), Provincial Infrastructure Grant (IGP) and Special Projects (HIV and AIDS) the department had under spent, and that for the Further Education and Training (FET) Conditional Grant they had overspent by 25%. The reason why the province did not spend actual amounts in the first quarter was as a result of delayed payments in the province. They were feeding learners, but not paying providers. There were minor difficulties with some service providers who had declined the extension of their contracts because the amounts they were receiving were too small, as costs had increased.
 
In the rural schools, there were no facilities for preparing food. The department was currently piloting a new programme by putting up two kitchenettes per district. If the resources were acceptable then they would have a rollout.

Rev Nevotandalo had indicated to Treasury that they would be experiencing problems and that there would be an anticipated over spend of R380 million on budget. The department was still awaiting Treasury’s response. If they were not assisted, then many projects would be delayed.

With reference to the FET colleges everything was on track. There was only one college that received little money. The HIV and Aids programme should be implemented, but there was no staff. The Department had appointed three project managers but they were only appointed in May. The business plan was submitted to the National Department of Education for approval but because of the new format, it had to be resubmitted. That had delayed the programme. Mr Nevotandalo said that the department was confident that expenditure on HIV / AIDS would pick up in the second quarter.

Discussion
The Chairperson said that an interesting assumption was made on infrastructure and commented on the additional funds that were given.

Ms D Robinson (DA, Western Cape) noted that two kitchenettes would be built per district. She questioned the distance they would be from the schools. She added that this distance could have cost implications for transport. She wanted to know whether it would be feasible for local people to cook, and whether local people could not also produce vegetables.

The Chairperson said that perhaps the Chief Financial Officer of the National Department of Education could inform members as to what the plans were with regard to school nutrition, and added that school nutrition might be compromised because of food and fuel prices. He noted that the Limpopo DoE had to abandon some of the old service providers and get new ones because businesses were not making sufficient profits. He added that school nutrition seemed to be a business venture. The Chairperson said that at Early Childhood Development (ECD) level there was no nutrition-dedicated funding. He said that each province needed to go back and redo figures in the business plan to ensure money was available for school nutrition. He added that there was a need to sustain but at the same time increase per capita spending. However, per capita spending was not the same across provinces and he questioned how to deal with that for each province.

Mr Philip Benade, CFO, National DoE, said that there were certain procedures within government that needed to be followed. He agreed with what the Chairperson had said. On the ECD level, which was age 0-4, he stipulated that that such children were mainly the Department of Social Development’s  (DSD) responsibility and that coordination was needed. He added that grade R needed to be incorporated into the feeding system. Another issue was extending the feeding system to secondary schools. He added that the Minister was looking at improving feeding schemes. The variations between provinces had to be taken into account. There was a need also to consider the price increases. The Department had been in serious negotiations with National Treasury and money was forthcoming to cover inflation. The challenges the Department faced were that quintile four and five learners needed to be fed.

The Chairperson said that it was undesirable that the programme stop because of food and fuel prices. He added that it was also not desirable that new tenders be issued and that learners go without food.

Ms Robinson wanted an answer regarding the practical situation of the kitchens.

Rev Nevotandalo said many schools in the rural areas did not have proper facilities in which to prepare food. Providing two kitchens per district was an innovative idea, and the kitchens would be situated in certain schools, and would not be servicing the whole district. Food handlers were organised into a cooperative and were local people. 134 monitors were employed to monitor the feeding system.

Mr B Mkhaliphi (ANC, Mpumalanga) said that he was pleased with the report, but queried item number five on page 13 of the report, which related to buying or building new buildings.

Rev Nevotandalo said that all items listed on page 13 were part of the business plan.

Mr Mkhaliphi asked, with reference to page 14 of the report, if there were any initiatives to address the shortcomings.

Rev Nevotandalo said that in Limpopo there was a serious problem relating to a shortage of educators and added that the National programme was trying to recruit. The private sectors were also assisting in some colleges. The problem was also related to a shortage of skills.

Ms Robinson made a comment that there were some people that wanted to come back to the country, but that the Department of Home Affairs was making it difficult for them to do so.

Mr E Sogoni (ANC, Gating) commented that Ms Robinson was suggesting that South Africans were not being allowed to come back because of their particular color, and said that comments must be factual.

Ms Robinson said that she was referring to all South Africans who were married to foreigners.

The Chairperson said that the province would run into trouble in terms of personnel spending, and that needed to be looked at carefully. He added that he was happy that the DoE had managed to appoint people for HIV / AIDS development.

Mr Benade said that the Occupation Specific Dispensation (OSD) payments that were made at the end of June were backdated from January, and that would have had some bearing on the expenditure on the first quarter. All OSD money was supposed to be in provinces with the respective education department. Some provinces were in negotiations with Treasury.

The Chairperson asked Mr Nevotandalo whether Limpopo Province had received its OSD payments.

Rev Nevotandalo said that DoE had received R147 million but was still waiting for the balance. That issue was impacting negatively on the Department, especially on personnel payments.

The Chairperson referred to the document on the Provincial Infrastructure Budgets and Expenditure trends and commented on the numbers of projects, the status of those projects and the number of projects cancelled.  He conveyed his concerns about the additional funds granted and asked whether the provinces were able to absorb those funds.

Eastern Cape Department of Education
Mr Mahlubandile Qwase, MEC for Education, Eastern Cape, said that only 9% of the allocated budget was spent. There was a problem awarding tenders, which led to slow expenditure. For the first quarter, Eastern Cape DoE had not done well in terms of expenditure. With regard to the FET colleges, only R8,4  million was spent in the first quarter, which was split amongst eight colleges. Challenges in the first quarter related to tender processes being slow, the lack of qualified staff and the shortage of staff. In terms of monitoring, once-a-month sessions would be held with project managers. For nutrition, a top up of R54 million was requested.

Discussion
The Chairperson asked why the Province needed a top up for nutrition, and questioned whether the business plan was credible. He wanted to know which areas were compromised by the request for the R54 million. He wanted to know if there was something wrong with the budget.

Mr Sogoni said that he had sympathy with the Mr Qwase. He knew that there were problems and that corrective measures needed to be adopted. Feeding was supposed to run from grade R to grade 4, but not all children received feeding. He wanted to know how the problem was being dealt with.

Mr Qwase said that in 2006/2007, the focus was on children from grade R up to grade 4. In 2007/2008, the focus was from grade R to grade 7, but the number of feeding days was also reduced. In 2008/2009 the amount allocated per learner for the other provinces was R1,40. The Eastern Cape received R1,17 per learner, but had now managed to increase this to R1,69 per learner. The top-up increased the number of learners to be fed by 74 000.

The Chairperson wanted to know from which programme the top up funds had been diverted. He reiterated that this showed that the business plan was not credible.     

Ms Mdikane, Acting CFO, Eastern Cape DoE, said that the amount of R54 million came from programme 2. There were a number of challenges with programme 2. In terms of the business plan, only R1,50 was allocated per learner. When tenders were awarded, the average feeding per learner was costing R1,69.

The Chairperson said that programme 2 was therefore compromised by the diversion of funds intended for it. He questioned what would happen should programme 2 be addressed properly, and whether the top up would be sustained.

Ms Mdikane said that the Department would not be able to sustain that amount. She added that there were also problems regarding scholar transport. She explained that programme 2 referred to public ordinary schools.

Mr Qwase said that with the top up the Department had been able to cater for the needy. He added that when submitting the business plan, the amount should not be less than R394 million. He admitted that the business plan was not done well, and that it needed to be refined. He said that in some schools the Department was forced to feed up to grade 9. In terms of expenditure, the Department had overspent by R29 million with respect to school nutrition. With regards to infrastructure, R1 billion was earmarked for infrastructure, and one of the targets under that  was to eradicate 50 schools with mud structures. He said that expenditure was slow in the first quarter, due to the slowness of the tendering process and the submission of invoices.

The Chairperson said that the Eastern Cape would be given some time to get the matter in order. He suggested that the National CFO should have a look at the business plan and also must look at programme 2, to see what the problems were. He questioned what the risks would be if this Department continued to dip into funds that were intended for programme 2. He also wanted to know what the risks would be going into the second quarter.

Mr Sogoni said that there were problems relating to human capacity and asked how realistic were the issues to resolve. He wanted to know how to ensure that the budgets were credible. He added that there should not be a situation where other provinces were progressing, and the Eastern Cape was not. He added that the National Department needed to deploy people to assist the Eastern Cape.

The Chairperson said that the funding for infrastructure was not a problem, but rather whether there was capacity to roll out. He added that there was still more money allocated for infrastructure, amounting to R1,6 billion. An appropriate plan had to be made for the utilisation of the funds. There were bigger problems in the Eastern Cape,  and part of that was related to the fact that the Department of Public Works was not up to scratch. 

Mr Qwase agreed that the business plan needed to be polished and welcomed any assistance. He said that a FET college had built two five-roomed schools, using students. He added that there were many FET colleges that were under utilised.

The Chairperson welcomed the innovation. He added that with regards to the FET colleges, it was capacity that was already in the system. This would help to increase learners’ experience. He said that it was necessary to engage all the necessary stakeholders.

Mr Benade agreed that the FET colleges should be utilised. Millions of rands could be saved in construction costs, as well as providing practical experience for learners. He said that the Auditor General should be informed and become involved. He would also be visiting the Eastern Cape within the next two weeks. He commented that the funds for nutrition would unfortunately be reduced by the large number of old invoices that still needed to be paid from money from the current budget..

The Chairperson added that Mr Benade should meet and motivate learners for the project during his visit to the Eastern Cape.

Mpumulanga Department of Education
Ms Mmathulare Coleman, MEC for Education, Mpumalanga, said that the department had spent 36% of all the conditional grants for the first quarter. With reference to the life skills conditional grant, the expenditure was only R3.462 million. She added that what was critical was the level at which the Department had informed the learners and educators around issues related to HIV / AIDS, and that had direct impact on their daily lives. In regard to nutrition, she said that the schools that were being fed ranked within quintiles 1 to 4. The expenditure on nutrition was R34.152 million. Food handlers received R20 per day and they were feeding learners five days per week. They would also be extending this programme to the secondary schools. With regards to infrastructure, there were challenges with the implementing agents, who were the Department of Public Works and the Industrial Development Corporation (IDC). During the year there was disaster at Bushbuckridge, but the Department of Public Works was not used to fix the schools; instead these schools were fixed internally. She added there were plenty of projects that were still running from 2007. There were still 238 projects to be closed from 2004. The Department would only be building the two schools by the stadium. She wanted to recommend to Cabinet to use other methods of building. On page 29 of the presentation, she had spoken of the cost drivers, which included curriculum development and support, infrastructure, and the like. She also wanted to point to the achievements, which were fully set out on page 31 of the presentation (see attached document).

Discussion
The Chairperson commended the MEC on her leadership.

Mr Sogoni agreed with the progress that had been made. One area of concern was infrastructure, where the spending was at 33%, and felt that this was quite high. He added that there were some worrying indicators that there might be over expenditure. He noted that projects were narrowing down, and wanted to know what happened to projects that had not been completed. He added that there was a backlog in buildings and schools, and was not sure of the building capacity in that area. He added that there should be an extension on what the grants were doing.

The Chairperson said that he was seeing a comprehensive picture of Mpumalanga.  He added that the bigger challenges were retention of funding. He wanted to know how best to address uniformity across the provinces, in terms of per capita spending. The Chairperson commented that there was a need to benchmark best practices.

Ms Coleman said that R10 million had been set aside for administration costs. She added that it was easy to redirect certain funds. The Department had looked at programmes and checked allocation trends. The issue of budget structure was also not taken care of. She said there was a major problem around quintiling, and certain schools would have to be left out. She said that in terms of projects it was necessary to recognise where the Department currently stood, and where it needed to go. There were still backlogs and with the current capacity the Department would not be able to complete all projects. With regard to the monitoring of transferred funds, Ms Coleman said that money was only transferred after issue of invoices.

The Chairperson wanted to know which areas were being compromised by utilising the R10 million.

Ms L Moyane, Deputy Director General, Mpumalanga DoE, said that R10 million was taken from programme 2, which was the programme for goods and services.

Mr Benade said that the MEC was doing the right thing by paying for those retention fees. He added that retention fees were necessary for capital projects. He stated that it could be difficult to plan for infrastructure. Furthermore, he stipulated that retention fees were part of the original costs of the contract and had to be paid at the end of the retention period, and were therefore part of the future financial year.

The Chairperson said that the MEC of Mpumalanga had said that the Department had no funding. He stated that perhaps this was an opportune time to do an audit. He suggested that it might be possible to  look at a once off injection to pay for the retention fees, or provinces could provide counter funding from equitable shares. There had to be a way to resolve the issue.

Mr Benade said that the retention fees were always part of the infrastructure budget and doubted whether additional funding would be allocated towards it. He added that it could be part of savings or unused funds for infrastructure from previous years.

The Chairperson suggested that it would be necessary to go back to look in the infrastructure fund to try to resolve the issue regarding the retention fees. 

Mr Benade responded that he and the Chairperson were basically saying the same thing. He added that the Minister had taken the position that R1,50 be allocated per learner in quintiles one to four, for all school days. With regards to the quintile numbers, he said that the final allocation rested with the MEC, to decide what quintile the school would become.

Mr Sogoni said that from the committee’s point of view, people could start immediately to plan for the following financial year. If budgets were credible then there would be no problems. He stated that the whole area around financial planning needed to be tightened.

The Chairperson commented that spending in the fourth quarter was always the highest. He questioned whether people were being complacent.

Ms Coleman said that the Department was able to finance the R10 million for the current year. There was also the maintenance issue that was not being addressed. She reiterated  that quintiling was a problem and a challenge.

The Chairperson said that Mr Benade should go to Mpumalanga, after he had been to the Eastern Cape, to assist with regard to quintiling. He hoped that by the second quarter, the issue around quintiling would be resolved.

Mr Sogoni wanted to know about the payment of the service providers, and asked specifically when this would be paid in the Eastern Cape.

The Chairperson said that the ANC had prioritised education and health and would be judged according to its performance. He said that the Committee  should allow the Eastern Cape to continue with their work.  He stated that departments needed to cost anything that was still outstanding, so as to resolve funding issues.

He added that one of the issues that needed to be dealt with was scholar transport funding. He added that accessibility should not be compromised. Learners should not be denied education because of transport problems.

Free State Department of Education
Mr Daddy Phukuntsi, Acting Superintendant-General, Free State DoE, said that spending on nutrition for the first quarter was at 44,12%. With regard to infrastructure the Department had spent 22,19%. With regard to FET colleges the department had spent 50%. The Free State DoE had taken a decision to feed all quintiles, except model C schools. He added that the Department was settling expenses from the previous financial year with the current financial year’s budget. It also had problems with learner transport. The national nutritional grant was topped up by R12 million because of an insufficient administration budget for operational resources. Those funds came from programme 2. He added that he did not think that the R12 million was really assisting to ensure that the Department could stay within budget.

Discussion
The Chairperson wanted to know what the implications were of using R12 million from programme 2.

Mr Phukuntsi said that there would be implications on other important services. He added that the MEC had mentioned earlier that the main purpose of DoE was learning and teaching. 

The Chairperson again questioned the credibility of the business plan. He commented that if the administration fees were part of the budget there would be no problem. Everything needed to be included in the budget, and nothing should be left out.

Mr Phukuntsi said that there was a ministerial mandate that only schools in quintiles 1 to 3 had to be fed. However, the Department had exceeded that mandate. In regard to infrastructure, 15 schools were being built over the next two financial years, and would be completed by November 2009. A total of R230 million would be spent. The building of the schools was broken into three clusters. Each cluster had to provide a cash flow projection. He added that the Department was monitoring capacity. Monthly finance committee meetings were held to discuss under spending and remedial actions to be taken. With regard to FET colleges, actual spending was monitored on a monthly basis by officials at the Head Office. Reasons for under or over spending had to be submitted on a monthly basis by the respective colleges. The Department had also recently handed out awards at an FET college.

The Chairperson wanted to know where the funding came from for the awards.

Mr Phukuntsi said that it was budgeted for.

Mr D Botha (ANC, Limpopo) wanted to know how the schools would look in terms of structure.

Mr Sogoni wanted to know what was the issue regarding programme 2, knowing that it referred to public ordinary schools. He also wanted to know why those funds were not being utilised for that specific purpose.

Mr Phukuntsi said that the schools that were being built had typical school facilities such as classrooms, an administration block, toilet blocks, a hall, a media centre which included a library and a computer room, and a laboratory. These were primarily for secondary schools.

Mr Tebogo Lioma, Deputy Director General, Free State DoE, added that these would have all the facilities of a model school.

The Chairperson said that the schools should first be built, thereafter the Committee would be able to visit and see if the standards have been met.

Mr Phukuntsi said that the reason money was being taken from public ordinary schools was because programme 2 was under pressure. He added that it was important to look at learner teacher support materials. In that instance, they were being compromised.  He added that there was a need to ensure that teaching and learning took place.

Mr Sogoni said that the majority of the schools belonged in programme 2 and that money was being taken away from the most needy schools. He questioned why money could not be taken away from somewhere else.

The Chairperson read a statement from an article on the spending on goods and services, which referred to learner support material. He questioned why there was under spending in that particular area (programme 2). He reiterated that budgets were not credible. He commented that everybody projected overspending but then actually under spent. He added that the National department had to look into that matter. He asked what was wrong with programme 2, if the money was being under-spent and answered his own question by saying that there were no learner support materials being purchased. This indicated that learners did not have textbooks. He also added that there was money for electrifying schools and there was funding for water provision. There was a need to check whether those things were being implemented. He commented that all nine provinces had under spent on library grants, which was a direct link to learner support materials. 

Mr Phukuntsi said that all issues that were raised had been brought up in the department. There had been a discussion regarding section 21 schools to see if they were actually buying books in accordance with their responsibility.

Mr Benade said that programme 2 had bigger funds allocated to it, therefore it made it easier to dip into this programme. He said that the quarterly report could be improved on as it did not take into account cyclical expenditure.  He stated that if expenditure was running well, there should be no learner teacher support material expenditure in the first or even the second quarter, and that it was really only salaries that ran monthly. He said that perhaps one should speak to Treasury and suggest financial cash flow planning in quarterly transfers, as that would provide a true reflection on expenditure. He added that perhaps the budget should be broken up into the four quarters.

The Chairperson said that that was something that needed to be discussed with National Treasury.

Mr Sogoni said that the Committee was not responsible for the drawing up of the budget. He said that it was a matter of assessing the credibility of that budget.

The Chairperson questioned why the members of the Western Cape DoE had come in late.

Mr Archie Lewis, Head of Support Services, Western Cape DoE, said that there had been miscommunication in the department. He added that the HOD and the MEC were involved with disaster management at various schools.

The Chairperson said that Western Cape DoE needed to submit hard copies and that the MEC needed to address the Committee.

Mr Qwase said that there were indeed some serious cost issues that needed to be addressed and he agreed with the Chairperson regarding the issue of budget credibility. He added that clear direction needed to be given so that information could be corrected.

The Chairperson agreed. He said that the issue of planning first needed to be resolved, then the issue around spending needed to be resolved. He added that the Department had not yet looked at the quality of spending, value for money, the sustainability of the budgets and the development impact on communities. He said that maybe the ECD funding should be a conditional grant.

The Chairperson adjourned the meeting.

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