SECTION 6

Evaluation of the department’s involvement in the provincial budgetary process.

The MEC for Education is the member of the Cabinet Budget Committee. The department budget hearings are made to the Treasury and the Cabinet Budget Committee. The Department Budget Advisory Committee has been established and consists of head office programme managers, and regional directors. Regions have their own Budget Advisory Committees of which district office managers are a part .

For the 2000/2001 financial year the following items are ring-fenced in the departmental budget:

The conditions attached to section 100 (1)(a) of the Constitution require provincial departments to:

To exercise sound financial control within the province, the Cabinet resolved that financial functions should be centralised at Treasury. The implication of centralisation is that all salary-related payments, over and above the normal salaries which are run programmatically, first have to have Treasury approval prior to payment, and the PERSAL authorisation function is centralised at the Provincial Department of Finance. For the non-personnel expenditure, Treasury certificates first have to be sought prior to placement of orders and when making payments, payment vouchers are processed at the Pre-Audit Section in the Provincial Department of Finance. Budget control systems which would enable the departments to shift funds on FMS is also centralised. This also means that the Department of Finance before has to capture information on virements, after they have been approved by Treasury, before the actual commitment can be made. Bottlenecks are experienced in payments for services rendered for both personnel and non-personnel related expenditure, due to the centralisation process.

The department has on the whole managed to remain within its allocation for 1998/99 due to the Treasury taking over approximately R300m of its pension debt in 1998/99. It is anticipated that in 1999/2000 most of its remaining debts both for suppliers and salary related payments will be paid and whatever amount remains unpaid will be provided for by the provincial department in its 2000/01 Budget.

The enforcement of Treasury legislation and Tender Board Legislation started with the identification of the following areas of focus:

The Eastern Cape Department of Education is fully committed to implementing the Norms and Standards for Funding Schools. To do justice to the aims of the policy, we will be focusing on an intensive capacity building to manage budgeting, payment and procurement systems in district offices and in schools. The following principles guide our implementation strategy.

Most of the schools require extensive training in financial management and procurement. The vast majority of the province’s 6 400 schools have never been responsible for their own finances and for ordering materials, especially in the former homeland areas in the Transkei and Ciskei. Effective implementation of the Norms and Standards For Funding Schools requires that strong financial management and procurement systems should be running in properly managed district offices. Schools need to closely link to budgeting, payment and procurement systems in the local district office, the only effective point from which to build fully functioning systems in the school.

District offices have almost no effective financial management and procurement capacity due to both inherited poor capacity and infrastructure and three years of centralised financial controls and insufficient funding that have almost stopped the operation of district offices. This is again especially the case in districts in former homeland areas in Transkei and Ciskei. The Norms and Standards dictate that financial systems should be overhauled in order to make them compatible with the process, ie. creation of responsibility codes in respect of each school, development of tracking, monitoring and reporting mechanisms in order to avoid over-expenditure. Enormous pressure to stabilise the department has resulted in its lagging behind in developing financial systems that are NSF friendly.

The projected non-personnel budget for the Department for 2000/01 is R612 million. This will be the first year since 1997/98 that effective funds available for non-personnel will be greater than R250 million after allowing for expenditure on debt repayments. The Department therefore is prioritising transformation and capacity building of district offices and schools in 2000/01, as these institutions have felt the brunt of an insufficient budget over the last three years.

As an essential part of its strategy for effective implementation of the Norms and Standards, the department is transferring powers from regions to 24 new districts, from the current structure of 6 regions and 41 districts. The new districts will be the only link between head office and schools, and will have increased powers, capacity and systems. Effective decentralised budgeting, payment and procurement systems will be established in the new district office as a matter of priority.

The increased capacity in the new district offices will be used to implement the Norms and Standards in non-section 21 schools in the academic year 2001. The Department requires the year 2000 and the funding available in the 2000/01 budget to establish strong and effective districts as a necessary condition for effective implementation.

The following implementation steps have been or will be taken in 2000. Community and school indicators have been finalised and agreed with stakeholders. A resource targeting list has been drawn up using the indicators, and will shortly be verified by the schools and district officials. This will indicate to schools and communities the budgets which will accrue to them on full implementation of NSF.

Independent schools will be funded under the Norms and Standards framework from 1 April 2000 when funds become available. This has been negotiated and agreed with their representative bodies. Former model C Schools, by virtue of already performing the necessary functions stipulated by Norms and Standards, will automatically be granted self-managing status (Section 21). They will also be funded under the Norms and Standards framework from 1 April 2000.

A small number of additional selected schools with demonstrated management capacity will be given Section 21 status from 2000/01 to form a pilot project. This pilot project will establish district financial systems that can be piloted and the lessons used to set up systems in the new 24 districts during the year. The pilot will also be used to expand the number of self-governing schools through further districts in 2001.

A sample of schools will be allocated "Paper budgets" according to their ranking on the resource targeting table. This will assist in the process of setting up systems necessary for future implementation in all schools, districts and regional offices. In addition this will assist the ECED to monitor the capacity of the schools to produce development plans linked to the projected budgets.

A training programme in school financial management and procurement systems will be designed and implemented in 2000/01 to prepare schools that are ready for self-governing status to be given budget management in all new districts for the academic year 2001. In addition the implementation of NSF will be part of an ongoing process of building financial, provisioning and management capacity at all levels (particularly district level). This will allow full implementation to be phased in over the medium term as capacity in these areas developed. In that way any possibility of throwing the department into the financial quagmire that it is trying to extricate itself from will be averted.

The policy for fee exemption of school fees was issued to all schools in early January 2000. Additions for clarification were made to the national policy and a pro-forma application form was attached.

A task unit with a project manager has been established to drive the process of implementation of NSF. Management plan covering the period January 2000 to December 2000 has been completed and every effort is being done to adhere as far as possible to the implementation.

Circular 73 of 1999 was issued out to schools to clarify key aspects of the policy as set out in the norms and standards for school funding. An application form has been developed to facilitate uniform implementation of the policy.

Evaluation of the department’s involvement in the provincial budgetary process

The department is involved in the provincial budgetary process. Proper bilateral meetings were held between the department and Provincial Treasury during September and October 1999 which resulted in credible financial allocations the period as indicated in Table 6.1.

There is no significant increase in the amounts between the financial years 20001/02 and 2002/03. The apparent difference of R151 825 00 between the allocation for 20021/02 and 2002/03 will be absorbed by carry through costs for the improvement in condition of service.

Education policy reserve funds to the amount of R12 096 000 were received for the 1999/2000 financial year. The projected expenditure for the period 1 April 1999 to 31 March 2000 is R19.5 million.

An amount of R1.5 million from the department’s budget will not be spent in the current financial year. The Department will request a roll over of the amount. The following funds have been ring-fenced for the MTEF period regarding EPRF:

No mention is made in the provincial report concerning the progress made in the implementation of the norms and standards.

Use of section 100 of the Constitution in the province had an impact on the functioning of the provincial department of education. The amalgamation of the Financial Management system as well as the PERSAL system required new financial codes to be implemented for the whole department and one bank account for the whole province. A moratorium on the purchase of furniture, vehicles, equipment or any other purchase above R15 000.00 without Treasury approval was imposed. This placed the Provincial Administration in control of a lot of functions that were taken away from the Education Department.

Payments are now done on the FMS only once a week with the result that creditors have to wait longer to get paid. The Education Works budget (school building programme) is with the Free State Department of Works, Roads and Transport. As a consequence there are serious delays in the payment of accounts to contractors and suppliers.

Section 21 functions were allocated to 179 schools and training was offered to school governing bodies. A number of schools have been identified that will be allocated the section 21 functions in 2001. The governing bodies of these schools will be trained during the current year. In terms of the South African Schools Act, 1996, new school governing bodies will be elected during the third quarter of 2001. Training of the new school governing bodies will therefore continue after elections at the schools allocated section 21 functions.

School governing bodies are implementing fee exemptions as prescribed. It is also evident that some of the school governing bodies are still not aware of the regulations concerning fee exemptions. Non-attendance of meetings by many parents is still the main reason why many of them are not aware of decisions taken by school governing bodies.

The department is involved twice a year in the budget "lekgotla" / bosberaad. During the first meeting the expenditure in the previous financial year is reviewed and the objectives for the province are set . In the second lekgotla, draft proposals on preliminary allocations are discussed.

The department has been involved in the process of budgeting which include the following:

A resource targeting list was compiled according to the Norms and Standards for Funding Schools and finalised at the end of August 1999. The list was then issued to schools via the District offices. Schools were given a month to contest their allocations and seek clarity. The list was issued with a user’s guide, which detailed the process on how to interpret the allocations, how the latter were arrived at and the framework that informed the whole process. A help desk is being set up to deal queries from schools.

Schools’ budget allocations have changed since the date of release in August 1999 from the initial amounts allocated then. This change was necessary because of discrepancies arising from the buildings’ scoring and the failure of district directors to disclose officially displaced learners. The impact thereof is that because the provincial department cannot change other schools’ allocations for the worse, it has to find some other sources to make up for the increased allocations.

A budget format, in which schools have to compile and present the budgets to the GDE, has been compiled. Schools had been requested to submit details of their banking accounts in order to transfer their allocated funds in the schools’ bank accounts.

FUNCTIONS	%	BUDGET 2000/1	%	BUDGET 2001/2	%	BUDGET 2002/3
LSM + Educational material, equipment and Curriculum needs	60	151 198 544	75	202 025 505	80	226 311 664
Building maintenance and repairs	12	30 239 709	5	13 468 367	5	14 144 479
Payment of services	28	70 559 320	20	53 873 468	15	42 433 437
TOTAL	100	251 997 573	100	269 367 340	100	282 889 580

The poverty indication exercise has not yet been conducted for schools for LSEN. The White Paper on Addressing Barriers to Learning and Development (Inclusion), due for release soon, will map out the funding strategy for schools for LSEN. Currently public special schools are funded in accordance with Chapter 4 of the South African Schools Act. A circular on funding for LSEN Schools for the financial year 2000/2001, Circular 2/2000, was sent out to all LSEN Schools to draw their attention to sections 34, 37 and 44 of the South African Schools Act, 1996.

The preparations for the implementation of the National Norms and Standards of funding independent schools are at the final stages. An assessment according to a checklist has been completed. Subsidy funding levels have been worked out and approved by the Superintendent-General. A Circular on criteria of funding has been sent to schools (Circular no 107 of 1999 dated 01/ 11/ 99). Schools that will not be funded have been notified and the right to appeal was communicated through Circular 107/99.

Data collection forms were sent to schools by 26 January 2000 to obtain information on learner statistics, fee structure audited statements and electronic banking details. The closing date for the information to be supplied to the provincial department of education was 28 February 2000.

The division of provincial Department of Finance. Numerous bi-lateriars are held with the MEC and the Department of Finance at which requests for increased allocation are made. The base problem is the FFC formula for the province.

This is done in terms of specific objectives and expenditure is closely monitored.

This section has been invoked for this province. All conditions of the agreement have been met by this department.

This system has been introduced. Most complaints have emerged from ex-House of Delegates schools that face a substantial reduction in state funding of their activities. A dedicated unit with a customised tracking system is being devised to offer more effective service to schools and a control expenditure.

The system has been introduced. Problems have emerged from people who have applied for exemption but who have refused to make their financial records available.

The department was involved with the budgetary process throughout 1999. Several bi-lateral meetings were held between the national and provincial Departments of Finance and Department of State Expenditure on the MTEF allocations for the next three years. In December 1999 the department of education’s final allocation for the 2000/01 financial year was R2.816 billion which included a conditional grant of R12,5 million. This allocation is 2% less than the first approved allocation in August 1999 and 5% less than the MTEF estimates.

The report does not contain any information in this regard, presumably because funds have not been ring-fenced. Salaries may possibly be ring-fenced in the province even though this is not mentioned.

Section 100 of the Constitution has been applied on the basis of the 1998 Examination results which are under investigation. The Province requested the intervention of the Minister of Education by requesting that an Acting Deputy Director-General should be appointed from his Department. Other officials assisted in the running of the 1999 examinations and monitoring thereof. The appointed Acting Head of Department has since returned to the Department of Education with effect from 24 January 2000.

Paper budgets were released to all schools during February 2000. Guidelines have been prepared for section 21 schools. Some of the schools have applied for section 21 functions and these are being processed. Criteria for section 21 approvals have been prepared. 10 schools have already been granted the allocated functions. Circuit Managers have been trained on resource targeting. A video of section 21 is under production. Independent schools have applied for subsidies and these are being processed.

The implementation of fee exemptions is dealt with in accordance with the South African Schools Act , 1996.

Evaluation of the department’s involvement in the provincial budgetary process

The Public Financial Management Act ensures the political involvement in the budgetary process by giving policy guidelines and government priorities to which budget preparation and inputs have to be aligned.

The department’s preparation and inputs as regards the MTEF allocations is prescribed by the guidelines as set out by the Departments of State Expenditure and Finance. Prior to the finalisation of the budget, the department of education, like all other departments, engages its senior management and responsibility managers in a Strategic Planning exercise. The process is guided by the involvement of the political head of the department.

The strategic planning exercises ensure that the process is in line with the broad policy of the Executive Council. The Department ensures that the budget is aligned in terms of policy objectives and priorities within available resources. The above-mentioned process is subject to the approval of the Accounting officer and the executing authority of the department.

The department budget inputs are submitted to the Department of Finance for analyses and evaluation to assess whether these inputs are in line with the set objectives and priorities as approved by the Executive Council within the approved available resources. The budget inputs are then submitted to the provincial department of finance and are subjected to scrutiny by the provincial MTEF Committee. The budget inputs are finally submitted to the Provincial Executive Council budget committee for evaluation and recommendation.

The allocations as approved by the Provincial Executive Council are then submitted to the departments by the Provincial Department of Finance for the preparation of the budget book which is then tabled in the Legislature by the MEC for Finance for final approval.

In the Northern Cape Department of Education, personnel expenditure, transfer payments are ring-fenced once the Budget Council has approved the final budget allocation for a particular financial year.

The policy applied by the Department of Education to advance 25% of the total amount of the conditional grants impacts negatively on the cash flow of the provincial department. It would be preferable for the Department of Education to allocate the full amount of the conditional grant to the provincial department so that it can implement approved projects.

This section has not been discussed in the report presumably because it has not been applied in the province.

The department completed the resource-targeting list. The list was compiled in accordance with the condition of the school and the poverty of the community. The department used 29 criteria to determine the poverty ranking of a school.

The province used a line instead of the quantiles to determine the allocation for schools. The line used reflects the principles of the Norms and Standards for Funding Schools and ensures that the poorest schools receive 60% of the total allocation while schools in the fifth quantiles receive at least 5% of the allocation. All schools were informed of their position in the list. The list was also published in local newspapers.

The department conducted a series of workshops during the period 8 September 1999 to 13 October 1999 in the six districts in the province:

The department formulated guidelines for the preparation of a budget for public schools in October 1999. The guidelines were then published in the Provincial Government Gazette and also issued to schools in accordance with section 38(1) of the South African Schools Act, 1996. The guidelines give information on:

A team from the department conducted training sessions on 25 and 26 November 1999 for provisioning and finance staff, circuit managers from all regional offices. The aim was to prepare regional staff who would have to scrutinise the school budgets they were to receive.

Regional offices are currently receiving and scrutinising the school budgets. If the budget is prepared in accordance with the guidelines, it is approved and returned to the school.

The department compiled a questionnaire for the allocation of section 21 function as well as the conditions for the acquisition of these functions. Application forms were delivered to schools between 30 August and 3 September 1999. All schools were given the opportunity to apply for the section 21 functions. The decision on which schools receive the allocated functions rests with the Head of the Department. The Head gives additional functions to schools which, in his/her judgement and knowledge of the school, have the capacity to fulfill the functions. Similarly if the Head of Department is of the opinion that a school has no capacity he/she may refuse. In either case schools were granted an opportunity to appeal the decision of the Head of Department.

Some of the schools appealed against the decision of the Head of Department. Meetings between the Head of Department and the appealing schools were held on 17 –18 November 1999 and their concerns were addressed.

At the workshops held between 8 September and 13 October 1999 the department explained the regulations pertaining to the equitable criteria and procedures for the exemption of parents who are unable to pay fees. Schools are familiar with the criteria to be used for granting full exemption, partial exemption, conditional exemption or no exemption. Letters were sent to schools to remind them of the regulations.

The department of education has 20 independent schools of which 7 are fully funded. The department arranged meetings to hold discussions with independent schools. Some attended the meetings while others did not attend.

The department took a decision to fund independent schools for the year 2000 at the same level that they had been funded in 1999. The decision is subject to review for the 2001 allocations. The department is currently developing a management list which will be provided to independent schools to ensure that their subsidies are consistent with the principles contained in the Norms and Standards. Preparation for full implementation of the Norms and Standards is nearing completion.

The Office of the Provincial Treasury decides on the guideline amount for education without the involving the provincial department of education. The department is thereafter requested to manage the funds within the amount allocated.

The department decides on the amount to be ring-fenced. For example no virement can be exercised from money provided for learning support material and capital projects irrespective of the reason for the need of the virement.

Only the office of the Premier and the Director General have the power to use section 100 of the Constitution because this will affect the entire province

The provincial department is in the process of completing a resource targeting table with the assistance of the Education Foundation. The activities in the process include:

Information on the budgets has not yet been sent to schools. The budget for 1999/2000 has already been committed with items such as learning support materials and furniture. The budget for 2000/2001 could not be finalised on time without guidelines. Transfers will only start flowing from the new budget. Schools have been kept informed about the process.

A number of schools to which some of the section 21 functions could be allocated were identified with the assistance from Regional and District offices. On the basis of the identified schools, the MEC for education published a notice in the Provincial Gazette on 31 December 1999.

The policy document on national Norms and Standards for Funding Schools was made available to all principals of schools. A circular to schools on fee exemptions was also distributed to explain the policy further.

The provincial department intends implementing the rates as prescribed in the Norms and Standards for Funding Schools. A management checklist for independent schools has been developed as well as a schedule of consultations with the Association of Independent Schools.

This is done according to the gazetted policy. School governing bodies are compelled to adhere to the exemption policy.

There is a good relationship between this department and the Provincial Treasury in this regard. The trust in this department has increased tremendously due to the openness of this department in respect of its financial matters.

The amounts that are ring-fenced in the education budget are given in Table 6.4.

Programme	Amount ring-fenced
School Building Programme	R10,000 million
Training	R4,400 million
HIV/Aids	R4,793 million
Transformation	R 4,900 million
Conditional Grant (PRF)	R15,360 million
Total	R39,453 million

Section 100 of the Constitution provides for national executive intervention when a province cannot or does not fulfil an executive obligation in terms of legislation or the Constitution. The provincial department of education does not have a problem in fulfilling its obligations.

The ranking of the schools into quintiles was provided to schools for possible contestations/appeals. Various circulars have been distributed to schools to inform them on the process. Workshops have been conducted to cascade the information down. The department produced its resource targeting list and individual budgets for the schools were distributed to the district offices. Applications for section 21 status have been received and are being evaluated according to agreed upon criteria.

A circular together with fee exemption application forms was sent to all schools to inform them on how to deal with the matter.

The provincial department is making plans to deal with subsidies to independent schools. Two officials will attend a workshop conducted by the Department of Education, focusing on how to implement the policy.

The Western Cape Department of Education adheres to the budgeting processes prescribed by the Provincial Treasury. Owing to good planning by the Provincial Treasury, the provincial department of education’s allocation remains substantially constant. In the previous financial year 1998/99, the WCED recorded a small technical over-expenditure, approximately R4 million due to a delay in the promulgation of an Act, which was subsequently rectified during the 1999/2000 financial year.

Apart from the Policy Reserve Fund, the WCDE does not ring-fence any amounts. The WCDE aims to reduce personnel expenditure to 85% and to decrease the non-educator personnel costs to 15% of the total personnel expenditure. The allocations in the MTEF and policy developments have been based on these principles. The achievement of these goals is hampered by the no-viability of a retrenchment tool. The re-deployment process is slow.

Section 100 has not been applied nor does it appear that it will ever be applied in the province.

The Norms and Standards for Funding Schools have been fully implemented and allocations to schools were made on 31 August 1999. The requirement that physical facilities carry 50% of the weight creates problems in the Western Cape where many poor communities have access to good facilities. Why should the allocation of funds for learning support materials, for instance, be based on the condition of the school building? A further problem experienced was that it is very difficult to distinguish the poorest 60% of the population on a socio-economic basis. The result was that allocations to schools were determined to a large extent, by the quality of their facilities, which may be a questionable approach.

All schools have been informed of the regulations and advised on the implementation of the regulations by a circular.

Eight of the nine departments adhere to the normal requirements set by Provincial Treasuries for participating in the provincial budgetary processes. The exception is the Northern Province where it appears that the Provincial Treasury decides on the guideline amount without the participation of the department of education. The reason for this is not explained. It may be that Provincial Treasury has applied section 100 of the Constitution in this province.

Most of the provinces ring-fence part of their respective budgets. The major item, not quoted by most departments, is the expenditure on salaries. The Western Cape ring-fences only the policy reserve fund. All other amounts are not ring-fenced. The other provinces vary in the amounts that are ring-fenced. It appears that they all ring-fence conditional grants, allocation for HIV, transfer payments and funds for training. The list of ring-fenced items however varies in the different provincial departments.

Section 100 of the Constitution has been applied to four provinces, Eastern Cape, Free State, KwaZulu-Natal and Mpumalanga. The reason for the application is associated with over-expenditure. In the case of Mpumalanga though, it appears was implemented after the 1998 Senior Certificate examination debacle. No clear details have been reported by the Northern Province on the application of this section. However, as has been mentioned earlier it appears that this section has been applied from the mere fact that Provincial Treasury does not consult with the department of education on the education budget. Section 100 has never been applied to the remaining four provinces, Gauteng, Northern Cape, North West and Western Cape.

The implementation of the Norms and Standards came into effect in January 2000. Only two provinces, Gauteng and the Western Cape have implemented the Norms and Standards fully. In KwaZulu-Natal and Northern Cape implementation was introduced in the second half of 1999. Implementation is set to continue during the current year. Eastern Cape and Mpumalanga allocate paper budgets to their respective schools at this stage. There are however challenges faced by the Eastern Cape because most of the schools are rural and have never had to manage budgets of such magnitude. Much training of district official and school management teams is required before the Norms and Standards are implemented with a measure of confidence. Both Eastern Cape and Mpumalanga will apply the Norms and Standards in funding section 21 schools. The Free State has not given any details on progress made towards implementation except for section 21 schools.

All provinces have taken steps to notify schools and parents about the regulations and conditions for exemption from fees. This has been achieved through circulars or at workshops. However, there are no details given as to how successful or effective the conditions for exemption are being applied.

A few provincial departments of education have dealt with the funding of independent schools. The procedures adopted are in accordance with the Norms and Standards for Funding Schools. Mpumalanga funds 20 independent schools. Seven of these receive full subsidy. The department is developing a management list for the remaining schools. There are no details given on the criteria used. The remaining provinces did not give details regarding the number of schools nor how these are funded.

Financial Year	Allocation
2000/01	R2 950 518 000
2001/02	R3 125 206 000
2002/03	R3 279 092 000

Financial Year	Allocation
2000/01	R12 096 000
2001/02	R12 789 000
2002/03	R 1 350 200

SECTION 6

FINANCIAL MATTERS