Report of the Select Committee on Appropriations on the First Quarter Conditional Grants Spending Patterns on the National School Nutrition Grant for the 2010/11 Financial Year, dated 14 September 2010

The Select Committee on Appropriations, having analysed the spending patterns of the provincial departments of Education on the National School Nutrition Grant, reports as follows:

1. Introduction

The Select Committee on Appropriations (the Committee) invited identified provincial departments of Education, who were either under-spending or over-spending on the National School Nutrition Programme Grant, to come and make a presentation on their first quarter spending for the 2010/11 financial year. The statistics on spending patterns were published by National Treasury in August 2010.

The Committee meetings took place on 11 and 24 August 2010.

2. Terms of reference

The hearings formed part of the Committee’s ongoing interaction with provinces to monitor their spending on conditional grants allocated to them. A framework for each grant sets out the purpose of the grant, measurable objectives, conditions, allocation criteria, and past performance among other things.

Provinces were requested to make an oral presentation on National School Nutrition Programme Grant and to take into consideration the following:

• Data trends in allocations, transfers and actual expenditure of conditional grants of the department;
• Assessment of department’s monitoring capacity for the 2009/10 financial year and indicate under/overspending and what capacity constraints that impacted on these outcomes; and
• Report whether monthly reports are received from receiving departments and or municipalities, and if not, what the departments are doing in order to ensure compliance with monthly reporting.

The provincial departments of Education of Eastern Cape, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape, Gauteng, Free State, and KwaZulu Natal were identified and invited. However, the Provincial Department of Education of Free State did not attend, and there was no notification that the province was not going to attend.

National Treasury was invited to brief the Committee on the first quarter spending of the above-mentioned provincial departments.

3. Presentations

3.1 National Treasury

National Treasury reported that R3.6 billion is the total available amount that is budgeted for National School Nutrition Grant for the 2010/11 financial year. Of this amount, National Treasury said that R1 billion (that is 27.5 percent of the total budget) has already been transferred to provinces, but only R593 million was spent as at the end of the first quarter of the 2010/11 financial year.

National Treasury reported that some of the reasons given for under-/over-spending by provinces are as follows:

• The Province of Eastern Cape spent R110, 288 000 out of R190, 353 000 that was received due to the late approval of a tender for April to June feeding. National Treasury emphasized that late approval of a tender has led to reduced spending for the first quarter since many schools were forced to revert to cheaper meals until the new tender was confirmed. Furthermore, the Province of Eastern Cape was projected to under-spend by over R101, 357 000 as at the end of the 2010/11 financial year.

• The Province of Gauteng spent R38, 611 000 out of R109, 116 000 received due to the late submission of invoices by suppliers.

• The Province of KwaZulu-Natal spent R132, 823 000 out of R235, 041 000 that was received due to a large number of claims that had to be sent back to districts to be corrected and resubmitted. 

• The Province of Mpumalanga spent R48, 906 000 out of R97, 031 000 that was received owing to delays in the system which is used to validate claims.

• The Province of North West spent R26, 592 000 out of R67, 940 000 that was received due to the delays caused by the process of converting from the Walker System to the Basic Accounting System (BAS). 

• The Province of Western Cape spent R30, 633 000 out of R48, 698 000 received. This is mainly due to the late submission of invoices by suppliers.

• The Province of Free State spent R49, 804 000 out of R53.594 000.

• The Province of Limpopo spent R135, 452 000 out of R181, 201 000

• The Province of Northern Cape spent R20, 860 000 out of R23, 183 000.

National Treasury reported that there has been an aggregate improvement in the spending rate on the National School Nutrition Programme (NSNP) grant. The spending rate is 12.5 percent higher in comparison to the first quarter of the 2009/10 financial year. This improvement in spending rate is attributable to the provinces of Free State, Northern Cape and Limpopo. National Treasury added that the provinces of Eastern Cape, Gauteng and North West are spending at a lower rate in comparison to the same time in the 2009/10 financial year that is 18.4, 8 and 47 per cent, respectively. A combination of supply chain challenges and invoicing are impending spending on the NSNP grant.

3.2 The Province of Mpumalanga

The Province of Mpumalanga (Education) reported that the total number of primary and secondary school learners that are accessing the National School Nutrition Programme Grant are 751 767 from 1 539 schools. The Province of Mpumalanga further reported that a total number of 3 091 food handlers are contracted at the ratio of 1 food handler per 240 learners for primary schools and 1 food handler per 200 learners for secondary schools. The food handlers are paid a stipend of R600 per month.

The Province of Mpumalanga reported that 26 NSNP monitors supervise the implementation of the NSNP by visiting the schools. After visiting schools, monitors prepare and submit reports to the provincial office for further monitoring and provision of adequate support to all schools. Moreover, the School Governing Bodies further monitor the supply and the quality of food at the school level.

The Province of Mpumalanga reported that it under-spent because the computerized system that was used for the capturing and verification of claims crashed. Consequently, there were delays in the validation of invoices for the months of April and May 2010, and payments thereof. However, the Province of Mpumalanga reported that the programme has been reinstalled and rewritten, and claims are processed faster.

With respect to monitoring, the Province of Mpumalanga informed the Committee that a provincial evaluation team, consisting of officials responsible for the 2 grants (namely NSNP and Life Skills HIV & AIDS Grant), conducts pre-evaluation of 10-20 schools before the final evaluation by the national department is conducted at the end of each financial year. Evaluation reports are compiled by the provincial evaluation team at the end of each financial year.

3.2.1 Committee Observations

• The Special School Learners do not benefit from grant.
• There is a challenge with respect to categorizing schools per quintiles. This has contributed to schools in the same area being classified in different quintiles whereas they are in the same area.
• The Province utilized the grant funds in order to compensate employees.

3.2.2 Committee Recommendations

The Committee recommends that:

• The Province of Mpumalanga should ensure that all needy learners are accessing the NSNP grant.
• The Provincial Departments of Basic Education and Agriculture should fast-track the one-household-one-garden programme. Furthermore, the National Department of Basic Education should coordinate the review/correction of quintiles.
• National Treasury should scrutinize why an unauthorized expenditure, using grant funds to pay salaries, was approved by the Province of Mpumalanga.

3.3 The Province of Limpopo

The Province of Limpopo (Education) reported that due to some constraint with regard to payment of food handlers on monthly basis as schools could not claim for reimbursement on time; the Province of Limpopo decided to transfer grant funds to schools on a quarterly basis as from the 2010/11 financial year. The Province of Limpopo added that the schools are requested to submit invoices as proof of expenses incurred every quarter.

The Province of Limpopo reported that the 2010/11 business plan for the NSNP provides that R3.7 million should be used to procure 24 vehicles for the National School Nutrition Programme Unit. The Committee was informed that the process of procuring these vehicles has started. The Province of Limpopo further reported that, during the 2009/10 financial year, the NSNP received funds from roll-over to erect a cooking area. However, these funds are yet to be utilised. As a result, eight schools erected kitchenettes utilising their own funds.

With respect to monitoring, the Province of Limpopo reported that all 134 circuit offices have an accounting clerk who monitors the NSNP grant. The Province of Limpopo added that the critical constraint that is faced by the monitors is lack of transportation. Furthermore, the Province of Limpopo further reported that the vehicles to be purchased will be stationed at district level and be used per cluster to minimize costs.

3.3.1 Committee Observation

• The most contributing factor to under-spending is that the Province of Limpopo is penalising service providers who supply insufficient quantities of food to schools.

3.3.2 Committee Recommendation

The Committee recommends that:

• In instances wherein few quantities of food are provided, the Province of Limpopo should encourage the service providers to supply additional stuff and invoke the penalty clause as a last resort.

3.4 The Province of Gauteng

The Province of Gauteng (Education) reported that it is currently providing nutrition to a total of 533 644 learners in Quintiles 1-3 primary schools, 85 305 learners in Quintiles 4-5 primary schools and 176 836 learners in Quintiles 1 and 2 secondary schools; and in total 795 785 learners were served with meals. The target number of learners to be fed was 670 000 and the number was exceeded by 125 785(19 percent). The Province of Gauteng explained that the excess was due to the extension of feeding programme to needy learners in Quintiles 4-5 primary school in township areas. The Province of Gauteng added that the NSNP has been successfully implemented in a total of 89 Quintile 2 secondary schools.

With respect to monitoring, the Province of Gauteng reported that, in order to ensure the effectiveness of service delivery as well as the identification of challenges that are facing the programme, two monthly meetings were convened in April 2010 and May 2010 by the district coordinators and provincial staff. The Province of Gauteng further reported that monthly financial reports are compiled.

Some of the challenges that have contributed to under-spending that were mentioned by the Province of Gauteng include delays in payments to service providers in the first quarter of the 2010/11 financial year. The biggest cause in relation to late payment was due to service providers that were sending their invoices late.

The Province of Gauteng reported that corrective measures, that were implemented together with the Provincial Treasury, include ring-fencing funds that were meant for conditional grants and infrastructure budgets; minor enhancements to the financial system have been made to enable the Province of Gauteng to effect this decision; internal measures have been put in place to rectify the matter as per resolution from interacting with the service providers which stated that processing of payments should be done in the second week of every month in order to ensure that all claims are paid on or before the end of each month in which a claim is made.

3.4.1 Committee Observations

• The Province of Gauteng under-spent in comparison to the first quarter of the 2009/10 financial year and the late submission of invoices by service providers is one of the main contributing factors to this under-spending.
• The Province of Gauteng has exceeded the targeted number of learners to be fed by 19 percent.

3.4.2 Committee Recommendations

The Committee recommends that:

• The Province of Gauteng should set stringent timeframes for service providers to abide by when they are submitting its invoices.
• The Province of Gauteng should ensure that the excess number of learners, 19 percent do not result in over–spending at the end of the 2010/11 financial year.

3.5 The Province of KwaZulu-Natal

The Province of KwaZulu-Natal (Education) reported that it was allocated R235, 041 000 for the first quarter of the 2010/11 financial year and it spent on R132, 823 000. With respect to reasons for under-spending, the Province of KwaZulu-Natal reported that June 2010 invoices were not captured due to the following: early closure of schools; late submission of claims by suppliers; an increase in activities for a programme which was not matched by reasonable increase in personnel due to cost-cutting measures; and the long process of reviewing payment process so as to eradicate bottlenecks.

With respect to monitoring capacity, the Province of KwaZulu-Natal informed the Committee that there are personnel at provincial and district levels that monitor operations at schools and deal with claim processing; and that on-site physical inspections is conducted in order to, amongst other things, ensure cleanliness and ensure that cooking processes are compliant with specifications including quality and quantity of food. The Province of KwaZulu-Natal further reported that examination of claims are conducted to ensure compliance with programme specifications and business plan; and that claims are in line with budget allocations are for approved schools per the programme.

The Province of KwaZulu-Natal reported that some of the challenges that the it is faced with include, among other things, increased volume of claims with the because the programme is expanded; high food costs especially on vegetables; inadequate/lack of kitchens and food storage space; cooking on rainy days is problematic because of lack of kitchens; shortage of water supply in rural areas limits food production in schools; and non-/late submission of claims by suppliers.

The Province of KwaZulu-Natal reported that the NSNP is feeding all learners in quintiles 1 and 2 in secondary schools in addition to the quintiles 1 and 3 in primary schools. The Province of KwaZulu-Natal added that learners are scheduled to feed for all school days. The Province of KwaZulu-Natal explained that the procurement method used is the quotation system and it has successfully used a combination of small medium and micro enterprises and local women cooperatives. The Province of KwaZulu-Natal further added on saying that it has employed contract workers in order to increase the capacity of the programme in processing payments to service providers.

3.5. 1 Committee Observation

• It is not only the late submission of invoices that contribute to late or non-payment of service providers. Internal bottlenecks are other contributing factors to late payment of service providers which then leads to under-spending.

3.5. 2 Committee Recommendations

The Committee recommends that:

• The Province of KwaZulu-Natal should ensure that it its internal control measures are fully implemented.
• The Province of KwaZulu-Natal should ensure that it continues to capacitate service providers to such a point that they can be able to bill properly.

3.6 The Province of Western Cape

The Province of Western Cape (Education) reported that it received R173,318 000 for the first quarter of the 2010/11 financial year and spent R30, 633 000. With respect to monitoring, the Province of Western Cape presented that it possesses capacity to monitor spending. The Province of Western Cape reported that additional fieldworkers will be required to increase its capacity to monitor the implementation of the NSNP at schools more effectively. Furthermore, the Province of Western Cape reported that monthly reports are received from districts offices i.e. monthly financial statements and quarterly statistical and narrative reports.

The Province of Western Cape reported that all quintile 3 secondary schools will be prepared for the inclusion of all learners. The Province of Western Cape presented that 361 321 learners are provided with nutritious meals on a daily basis at 1 004 targeted primary and secondary schools. The Province of Western Cape said that the total expenditure is below target as a result of fewer school days in June 2010. The Province of Western Cape further reported that a general increase in the number of learners accessing the grant in July 2010, and that spending, with regard to kitchen equipment and facilities for quintile 3 secondary schools, will cause normalization in the expenditure trends towards December 2010.

3.7 The Province of Northern Cape

The Province of Northern Cape (Education) reported that its spending, for the first quarter of the 2010/11 financial year, amounts to R20, 860 000 (25 percent) of the main grant budget. The Province of Northern Cape further informed the Committee that the NSNP is exceeding its targets (by approximately 1.3%) of the number of learners provided with a meal a day. However, the Province of Northern Cape revealed that 1 483 food handlers were employed instead of the targeted 1 700. With respect to service providers, the Province of Northern Cape reported that only 317 small medium and micro enterprises were utilised against a target of 500. The Province of Northern Cape further reported that there are vegetable gardens at 341 schools but a target was to establish vegetable gardens in 300 schools. But the Province of Northern Cape added that targets for providing garden tools and implementation of nutrition guidelines to schools were not reached.

3.7.1 Committee Observations

• The Committee observed that even though there are food gardens in 341 schools versus the target of 300, irrigation water is scarce.

• The Province of the Northern Cape has not employed garden caretakers as their documentation is was not provided by schools.

3.7.2 Committee Recommendations

The Committee recommends that:

• The Province of Northern Cape should form partnership with the Provincial Department of Agriculture that seeks to provide support to schools that have established vegetable gardens.
• The Province of Northern Cape should priorities the provision of garden equipment and the implementation of nutrition guidelines.
• The Province of Northern Cape should ensure that the number of schools with vegetable gardens are equal to or higher than 75 percent of 341 targeted schools before the end of the third quarter of the 2010/11 financial year in terms of their business plans.

3.8 The Province of North West

The Province of North West (Education) reported that it has under-spent during the first quarter of the 2010/11 financial year. The following were given as reasons for under-spending: migration to the national Basic Accounting System (BAS) delayed the transfer of NSNP funds to schools; and spending on cooking utensils that has not been effected yet.

With respect to monitoring of the programme, the Province of North West reported that day-to-day monitoring of the programme is performed by designated official at Area Project Office (sub-district) level and spending reports are submitted monthly. At school level, schools maintain registers that record expenditure and number of learners fed each day, said the Province of North West. The Province of North West further reported that monthly reconciliation is done against the approved business plan and monthly expenditure reports are submitted timeously to the National Departments of Basic Education and Higher Education, and Provincial Treasury as prescribed in the Division of Revenue Act and/or the Public Finance Management Act.

With regard to remedial steps, the Province of North West reported that schools were advised to use funds allocated to comply with Section 21 of Act No. 1 of 2010 to ensure that learners are not adversely affected and, personnel were deployed to support schools in the implementation of this intervention. The Province of North West further reported the following: that, with effect from July/August 2010, schools shall receive their NSNP funds as scheduled following the resolution of BAS related problems; delivery of cooking utensils for quintile 3 secondary schools is scheduled for third/fourth quarter; and secondary schools in quintile 3 shall receive their transfers in March 2011.

3.8.1 Committee Observation

• The Committee is of the view that the plan to transfer grant funds to secondary schools in quintile 3 at the end of the financial year is equivalent to fiscal ‘dumping’.

3.8.2 Committee Recommendation

The Committee recommends that:

• The Province of North West should ensure that it avoids delaying transfers of grants funds for cooking utensils to quintile 3 schools until the last month of the financial year.

3.9 The Province of Eastern Cape

The Province of Eastern Cape (Education) reported historical problems of the NSNP grant since 2004. These include: the inheritance of quintiles 4 and 5 schools which are not catered for by the conditional grant; payment backlogs because of collapse of SNP in 2006 due to premature incorporation of cooperatives; the approval forensic audit by a company called Ngubane & Associates which led to abrupt stoppage of programme due to investigation, the forensic audit led to additional payment backlogs estimated at R40 million.

The Province of Eastern Cape added on saying that all outstanding invoices since 2006 are being audited and additional funding will be required to eliminate payment backlogs. Furthermore, the Province of Eastern Cape reported that roll-over funds for the 2007/08 financial year to the value of R42.362 million, which was not granted to the Department, may assist to deal with these payment backlogs.

The Province of Eastern Cape reported that a total of 1 126 727 learners from grades R to 7 in quintiles 1 to 3 primary schools benefit from the grant over 186 days per annum. Furthermore, 300 173 learners in grade 8 to 12 in quintiles 1 and 2 secondary schools are benefiting from the grant over 186 days per annum.

The Province of Eastern Cape reported some of the contributing factors to under-spending as follows: delays in the loading of the conditional grant budget in April (due to conditional grant codes) which led to payments to be made only in the last week of April 2010; slow, late and non-submission of 1401’s BAS entity forms by schools which is an additional control measure and prerequisite for transfer of meal servers payments to schools; the non-awarding of NSNP tender resulted in further extension of the contract in April-June 2010 which was approved late in June 2010 with the old price of R1.65 instead of R1.95 for primary schools and R2.00 for secondary schools instead of R2.95 and this translated to delays in payments; the extended tender continued to provide food excluding quintile 2 senior secondary schools from April to June 2010 due to non-awarding of the tender.

With respect to remedial measures, the Province of Eastern Cape reported as follows: capacity issues in the programme are being addressed by assistance from the payment directorate to clear first quarter payment backlogs; an audit team, to deal with payment backlogs dating back to 2004, has been establish; the memorandum of understanding (MOU ), signed by the Eastern Cape’s Provincial Department of Education and King Hintsa Further Education and Training College, will be extended in order to provide quintile 3 schools (primary and secondary) and primary schools with mobile kitchens and feeding utensils in the second quarter of the 2010/11 financial year; and awarding of the new SNP tender and the rollout thereof in October 2010 will assist in addressing under expenditure.

The Province of Eastern Cape reported that monthly in-year monitoring reports were submitted in compliance with the Division of Revenue Act. The Province of Eastern Cape added on saying that compliance to menu and supplier performance have been monitored by districts and head office staff coordinators. The Province of Eastern Cape informed the Committee that actions are taken against non-performing suppliers to avoid fruitless and wasteful expenditure. The Province of Eastern Cape assured the Committee that regular monitoring visit by district staff and submission of reports are done as part of monitoring of spending.

The Committee was told that weaknesses in monitoring result in inaccurate data for budget planning (for example, confirmation of the number of grade R‘s at schools, closed schools, and farm schools will assist the Eastern Cape’s Department of Education in accurate budget planning); staff shortage in the NSNP Directorate and in some districts is exacerbated by the absence of a Director for NSNP and this affects implementation and management of the programme generally; and labour unrest in the department at Head Office has an impact on the timely processing of payments and delays in awarding of tenders.

The Province of the Eastern Cape reported that an application for a rollover and/or appeal for additional funding will be made to the Provincial Treasury to deal with the payment backlogs dating back to 2004. The Province of the Eastern Cape added that SNP Tender has to be awarded by the first week in September 2010 to ensure timeous issuing of award letters and orders to new service providers by Supply Chain Management; monitoring of programme to be improved and learner data to be verified and lastly, the Province said payments to current service providers have been updated and are to be made within 30 days.

3.9.1 Committee Observation

• The committee notes that the continuous extension of the contract that has expired is compromising the service provider because it can only charge the same price whereas food prices have increased. Furthermore, the supply chain unit is failing to discharge its function.

3.9.2 Committee Recommendation

The Committee recommends that:

• The Province of the Eastern Cape should ensure that the NSNP tender process is completed before the end of the second quarter.

4. General Findings

The Committee noted that:

• There is shortage of water in schools has negative effects in vegetable gardens; planted seeds die because they are not provided with sufficient water;
• The Supply Chain Managements challenges are contributing to under-spending; this is the biggest contributing factor to the Eastern Cape’s under-spending and
• There is a new trend that of contract workers forcing provinces to employ them permanently.

5. Further Recommendations

Having analysed the spending patterns on the National School Nutrition Programme Grant by provincial departments of Education, the Select Committee on Appropriations recommends that the National Council of Provinces considers the following:

5.1 That the Provincial Departments of Water should devise other means of preserving water;

5.2 That the Provincial Department of Agriculture should assist schools that have vegetable gardens and encourage other schools to have vegetable gardens; and

5.3 That National and Provincial Treasuries should provide support to the provincial departments that have Supply Chain Management challenges i.e. poor tender management that has lead to under-spending by certain provincial departments.

Report to be considered.