Department of Higher Education and Training Quarter 1 performance

Meeting report

Department of Higher Education and Training: First Quarter Expenditure Report

Introduction

Dr Dianne Parker, Acting Deputy Director General (Universities): DHET, described the substantial landscape changes in the Department over the years, since its establishment on 1 April 2010. She gave details of the financial management, explaining the areas of under/over expenditure, including challenges and remedial measures.

Elaborating on the service delivery implications of the expenditure status, she said the spending performance did not have any impact on service delivery and on the attainment of targets. For normal Departmental operations, all payments were on track. The Department was projecting an overspending on examination services, and it would be addressed through reprioritisation in the adjusted estimates. With regard to transfer payments, all block grant subsidy payments to institutions and public entities were on schedule in terms of the approved payment schedule. Total transfers as at 30 June 2018 were reflected in the table.

After Dr Parker had clarified the DHET’s commitment to ensure that services were rendered in the most cost-effective and efficient manner, she proceeded to the first quarter performance report for the 2018/19 financial year.

The 2018/19 annual performance plan (APP) had a total of 110 targets, of which 75 pertained to the direct outputs by the Department, while 35 related to the performance of the Post-School Education and Training (PSET) system. The Department had 21 milestones in the first quarter, and these had been met. The focus was mainly on oversight and reporting in the areas of: Institutional governance – Technical and Vocational Education and Training (TVET) and Community Education and Training (CET) colleges, and Sector Education and Training Authorities (SETAs); infrastructure development and maintenance at TVET colleges; certification backlog eradication; and the academic performance of students; and the conduct of TVET college examination centres during national examinations and assessments

Dr Parker gave a brief breakdown of the performance of the DHET’s six programmes -- Programme 1 (Administration), Programme 2 (Planning, Policy and Strategy), Programme 3 (University Education), Programme 4 (TVET), Programme 5 (Skills Development), and Programme 6 (CET).

The Department had a post establishment of 29 026 employees, the majority of whom were in the TVET and CET colleges. As at March 2018, the vacancy rate was 6.5%. By June, 94.8% of the approved funded positions had been filled, which was 4.8% above the 10% target. College principals had delegations to fill vacancies at salary levels 2-8 and post levels 1-3. The Deputy Director-General: Corporate Services, was delegated to approve appointments at salary levels 2 - 12 at Head Office and salary levels 9 to 12 at colleges.

Dr Parker delineated the 2018 vacancies in the recruitment plan, and explained the reasons for under-expenditure on the compensation of employees.

She concluded by referring to the first quarter spending performance of the National Student Financial Aid Scheme (NSFAS). Upfront payments had been made to universities and TVET colleges from NSFAS, including a fourth tranche paid in early June amounting to approximately 50% of the allocation for each institution for 2018. However, major data integration issues remained, as well as funding decisions not made, bursary forms not signed, and risk displaced to institutions.    

Discussion

Mr B Martins (ANC) said that there had been great concern about the late transfer of bursaries to students. How was the Department coping with that?

Mr N Gcwabaza (ANC) asked for an explanation of the number of vacancies, as it did not seem to have been accounted for. How much was being budgeted for all of the vacancies? Could the Department explain what it meant when it says that the spending performance does not have an impact on service delivery? What informed the Department’s projection that there would be an overspending on examination services, and how much was the Department likely to overspend by? How much had it saved through its cost containment measures? What were the costs attached to all the litigation?

Lastly, concerning infrastructure in universities and TVET colleges, could the Department specify what infrastructure it was talking about? There were challenges in terms of student accommodation. What were the costs and budget for this? The presentation also spoke about maintenance. How had this been budgeted for? Could the Department clarify what was being done to supply equipment, especially to TVET colleges? In the past two to three years, there had been an emphasis that students should come out of TVET colleges ready to enter the labour force as fully skilled persons. If equipment was lacking, we may have the most beautiful of buildings, but it would not help the students.

Ms D Senokoayane (ANC) asked what the challenges around TVET colleges were. Concerning financial management, what did it mean that the travel account had been processed later than projected? Did the fact that spending performance did not have an impact on service delivery apply across to board, including for TVET colleges?

Mr Martins said that the government had stressed the importance of settling invoices within 30 days. What were the challenges that the Department faced in this regard? What were the measures taken to ensure that invoices were settled in 30 days? Quite a number of service providers depend on being paid within 30 days, particularly small, medium and micro enterprises (SMMEs).

The Chairperson asked for clarity on the under-expenditure of the infrastructure grant. Based on the infrastructure plan that had been approved in July 2018, did the Department have capacity? The Committee would like to follow the transfer of grants. The delayed transfers also impacted negatively. This Department would have to display serious professionalism so that, among other factors, the Committee could trust it. Could the Department share with the Committee its cash projections on the transfers so that the Committee could use that to measure its performance? The certification backlog was something that was impacting negatively on employment levels. What progress had been made with regard to issuing certificates? How was the Department acting on unemployment? The vacancy rate was abnormally high.

This country had identified a skills gap, so colleges needed to ensure that they produced the skills needed. The government could not claim there was a skills gap in a context where there was a skills gap and a lack of personnel in the very institutions that were supposed to produce those skills. Could the Department give the Committee a plan for a turn-around? This was an area that needed to be prioritised. In the Committee’s interaction with National Treasury (NT), it had become clear why there was under-expenditure in this Department. The Department was responsible for high volumes of applications. What was the Department doing to make sure people were employed? Leadership was about finding solutions. The Department had stated that there were high volumes of applications sitting on its desks, yet there was a recruitment plan in place to fill 2 330 vacant positions. This was adding to the problem. There was a plan to employ more people, yet the Department had not dealt with the high volumes of applications sitting on its desks. What was the balancing act here? Moreover, the report stated that there were a large number of students who had not been paid their allowances. The term ‘large’ did not give a clear picture of the situation. Could the Department give clear figures? 

DHET’s response

Ms Parker referred to NSFAS and the concern around the late payments of bursaries, and said one of the reasons the Minister had made the decision to put an administrator in place at NSFAS was that the DHET had been unable to get credible numbers out of NSFAS in terms of exactly how many students had signed up, and to how many students accounts had been dispersed. It knew numbers were large, because of the amount of funds that had gone to institutions which were managing it on the basis that it would meet the requirements of the number of student beneficiaries. That was the critical work that the administrator was doing at the moment. The Department was expecting a formal report from the administrator in terms of an update in relation to how far he had gone. Two days ago, they had indicated that they had managed to get on top of a large amount of data integration issues. The administrator had sent managers to almost every institution to work hand in hand with the people at the institutions to deal with these matters. They had started ensuring that the disbursements were going to the students at the so-called S-Bux institutions -- those who were managed directly by NSFAS. The Department could not give the Committee the exact numbers of students that had received disbursements or who had signed their forms. Within the next week, the Department should be able to give the Committee an updated report in terms of where it actually was. This would be forwarded to the Committee as soon as it had been received.

Furthermore, the Department had a relatively small human resources (HR) department. Large numbers of new staff became the responsibility of that relatively small HR department. This was why the DHET was faced with huge challenges. Some of the indicators around how the Department was intending to deal with this problem included the E-recruitment programme, which would really assist with this. It was not fair to say that applications were sitting on peoples’ desks. They were being processed as soon as they were received. It was just that the volumes were endless. Applications in paper-based form had to be captured. There was a large number of staff, with 2 000 TVET college staff vacancies spread across 50 colleges. The total number of staff was approximately 28 000.

In relation to infrastructure, R1.2 billion of the total amount of under-spending was linked to earmarked grants and to infrastructure for the university and TVET sector. Why this did not affect service delivery was the process that had already taken place. For example, in terms of earmarked grants, the infrastructure programme was being planned for the next three years. All the institutions had to put in their plans. These plans had been analysed. The Department had capacity to do this through its infrastructure programme, and work was done. The delay was just in the signing off of approval. It was within a few days of the end of the quarter. It had not affected the service delivery, however, because all of the institutions already had their infrastructure programmes in place. These programmes were across all institutions and types of institutions. In terms of equipment, the infrastructure grant included all the furnishings and all of the equipment that go in a building. The building was only operational once it had all the equipment. In terms of student housing, the money going towards student housing programmes went towards the building itself, the beds, stoves, the seminars, the entertainment etc.

Dr Parker described the way that this was managed in the university sector, saying there was approval for specific projects that were managed at the institutional level. The transfers went to the universities for the approved projects. The funds could not be transferred unless there was actually value for money in the spending at the institutional level. The monitoring of what went on became absolutely important. A teaching development grant, for example, was given against a specific plan. The institution had to provide a report on what they had done in relation to the plan which was approved, and included in this report were audit certificates to show that the funding had been effectively utilised. There also had to be a guarantee that any interest on the funds that were not spent were earmarked so that they could be reallocated for that purpose. If the institution was late in submitting its report, that had a knock-on effect.

Secondly, based on the report, there were at times questions that needed to be asked, because the institution had to be held accountable. If they had not utilised the funds according to the plan that had been approved, the Department would request that they use other funds to cover that amount, and the funds would be withdrawn and reallocated to something else. In this way, institutions could be held accountable for the funds that were made available.

It was quite difficult to get the timing of the transfer of grants exactly right because of the backwards and forwards between them. It was the Department’s job, however, to ensure that institutions were held accountable for the funds that it made available. What was meant by saying that it did not have a service delivery implication was that the funds may be transferred by the end of the year. They may be reallocated for other areas. They all had funds available to do projects that were approved.  

Mr Theuns Tredoux, Chief Financial Office (CFO)r: DHET, responded that with the cost containment measures, it was important to indicate that the Department’s actual operational costs were extremely limited. If all the transfers and the compensation of employees were taken off, earmarked amounts included aspects such as the rental of the building. The Department for this financial year had operational costs of only R379 million in total for everything that had to be done within the Department. In comparison, in 2017-18 the amount was R366 million. There was a very limited increase. Despite the fact that the Department had received numerous additional allocations (student funding, institutional funding, and operations), it had actually received a budget cut.

Although the Department could not specifically quantify, it had quite a number of measures in place to absorb the fact that it was faced with budget cuts on operational costs. This in itself required management to ensure that the Department’s operations could proceed. One of the Department’s areas of concern was that these operational costs included, for example, the examination system. If this was taken into account, these two components absorbed 20% of those costs within the Department. The costs included the development, printing and delivery of exam papers to the various institutions, as well as the costs of examiners and moderators, who received salary increases or increases in their fees on an annual basis. This mostly had to be absorbed within the costs of the Department.

For the past few years, the Department had been applying to National Treasury for increased funding, especially for examination services, because it was so costly. Last year, National Treasury had indicated that with effect from 1 April 2019, the Department would receive a baseline adjustment for examination services. The Department hoped that this would be the last year in which the Department would experience the projected overspending on exams, as the baseline for exams would substantially increase from the next financial year. The Department was currently projecting, taking into account actual expenditure to date, that the Department may overspend by R150 million on examination services for the November and the February examinations. The Department, together with National Treasury, was planning to deal with this within its baseline budget to ensure that it does not need to request additional funding. This exercise was in process and it would be finalised before the adjusted estimates matters were tabled.

Concerning why the travel accounts were not clarified on time, these were very difficult to manage not only on the side of the Department, but also on the side of the travel agent. The Department books its services through a travel agent, which is then responsible for finalising the bookings, but also to make the payments and receive the invoices from the various service providers. The travel agent submits its invoices to the Department only as soon as they have received everything from the various service providers. The arrangement with the travel agent is that they, on a monthly basis, issue to the Department their invoices on what they could have received by that date, what they could have paid, including their agency fee. This was a very slow process. They sometimes receive final invoices and documentation from their service providers after several months.

Mr Tredoux said the Department had those expenses as a commitment in its books so that it made provision for the invoices when they arrived. It was also trying to systemise this entire process. One of the problems which it did experience was that when an invoice was received from the travel agent, the Department still had to verify and check all the documentation. The invoice from the travel agent could not just be paid. This was a mammoth task. The Department sat with boxes of documentation that it worked through on a month to month basis before it made the payment. The matter was dealt with very carefully because the Department’s financial costs for travel and accommodation were relatively high compared to other departments. Within government, this was one of the Departments that had the largest number of institutions, all of which required monitoring and evaluation. This was a huge cost on the side of the Department.

Although the Department was not at 100% in respect of 30-day payment of invoices, if one looked at the average in relation to the large number of payments that it makes, it was way below 30 days on average. Over the past few months, the Department had substantially improved, and had even received a compliment from NT as well as the Presidency. in that regard. There were specific reasons for this. On a monthly basis, the Department looked at each and every payment that was above 30 days to determine why, and to look into possible measures to put in place to improve even further.

Within regard to the costs associated with human resource (HR) litigations, it was not possible to give a direct cost or amount linked to that.  

Mr Lucian Kearns, Chief Director: Supply Chain and Asset Management, added that from a technical perspective it was very difficult to clear amendments through the Central Supplier Database (CSD) of NT. A Treasury committee was dealing with the CSD to see how they could beef up the system, especially from a supply perspective, so that when the information was either outdated or expired, it was much easier for them to update it. The Department had just this week released its computerised invoice tracking system, which would considerably improve the processing time. With regard to the concerns around travel, the system was not as advanced as with the invoice tracking. The Department had commenced a process where bookings could be made electronically, however. It would not only ensure a much more efficient process, but would immensely improve the turnaround time for payments.

Ms Gladys Mapheto, Chief Director: DHET, said the vacancy rate had been reduced from 6.5% to 5.2% year on year. The Department had managed to consolidate all the vacancies, and in its future planning it would distinguish the actual vacancies from the projected vacancies. Its strategy was to ensure it reduced the level of vacancies, especially at the TVET colleges. When the Department advertised posts at salary levels up to 9, it did not get fewer than 56 000 applications. Because of capacity challenges, an external service provider was being used to capture these applications. This had yielded a positive outcome.

The Department was at an advanced stage of engaging the Sector Education and Training Authority (SETA) to develop a recruitment system, and was hoping that by the end of this financial year it would be launched. It would reduce the time in which data was captured, so that the Department could embark sooner with the process of recruitment.

With regard to litigations, the Department was really challenged with resolving 100% of the labour relations cases within 90 days. This had improved because the government had increased the capacity in its regional offices where the Department did not have any representatives. All the cases had previously been resolved or dealt with by head office. The turnaround time had reduced drastically.

Mr Zirk Joubert, Chief Director: Financial Planning: DHET, referred to the TVET capital infrastructure and efficiency grant, and said that the 10.2% expenses applied to delays in the grant payments as scheduled. It was brand new funding which the Department had received. At the time, the Department had no plans in place, so it had to design an expenditure and maintenance plan for every TVET college. There was now a costed maintenance framework for covered infrastructure at every TVET college. This had taken long time to develop. These funds were going to be used for repairs and maintenance only for current infrastructure, not yet for student residences. This may be considered only in year two or three, when the backlog for the current repairs and maintenance had been taken care of. Due to the fact that the Department had not had funds, there was a massive backlog. What the Department was actually doing was to create a maintenance framework before it allocated funds for the colleges to spend. There were conditions attached to the funding. The TVET colleges could not spend the funds without the approval of the Department. A college would approach the Department to request funds for a particular purpose. The Department would send an expert to determine whether it could give approval. If it agreed, it would approve the work package. The college would then spend according to that approval. The Department had these processes in place to ensure that the funds were appropriately spent. 

Further discussion

Mr Martins commented on the great load of applications for specific jobs, and said this happened regularly because of the very high levels of unemployment in the country. Most of the applications were from people who were looking for some kind of job, even if they knew that they did not qualify for the specific job in question. HR had to go through thousands of applications that were completely irrelevant to the job at hand.  

The Chairperson highlighted that the issue was how the Department should fast track this process, because these volumes were sitting somewhere. It was important, however, to recognise that the bulk of the applicants did not meet the requirements.

Ms Senokoayane asked whether the concerns about capacity applied to personnel numbers or skill levels? How long would it take for the problem to be remedied? Regarding the spending performance, there were real challenges around the National Skills Fund.

Mr Gcwabaza said he had seen the delegates agreeing when Mr Martins cited unemployment as a key driver behind the great load of applications for specific jobs. The other side of the coin was the extent to which the universities were giving its students the relevant skills required in the economy and in society. Many graduates were part of the unemployment statistics. Did this not say to the Department that it had to relook at the curriculum and the socioeconomic needs of the country so that it educated and trained people who were matched to the available vacancies requiring specific skills?

The Department had underspent by R31.1 million at the Community Education and Training (CET) colleges, which was attributed to the non-filling of vacant posts. Could not the SETAs be used to retrain the unemployed youths so that they were employable by these colleges? There were also a number of unemployed qualified teachers. Was it not possible for the Department to tap into the budget of the SETAs and ask them to sharpen their skills so that they could become relevant to community colleges, and the problem of vacant posts could be solved, as well as unemployment?

Apart from higher education institutions, a range of other institutions had vacancies. South Africa was not short of jobs -- it was running short of relevant skills. How far was the Department with the recruitment plan in place to fill 2 330 positions by the end of the third quarter? What had it budgeted for the appointment of the external service provider for processing applications? If it needed an external service provider, it raised the question of the Department’s own HR capacity to deal with matters related to the filling of posts. Did it have that capacity? This would need its own budget. How did the Department manage the fact that it had internal resources to process applications which, though limited, were being replaced by an external service provider?

Lastly, did the Department have accruals? If so, what did they amount to and what impact did they have on the 2018/19 budget? It had been highlighted that millions of rands remained in the Department after the transfers and subsidies. Adding the accruals to transfers and subsidies, how much remained within the Department? How much of that remaining amount of money had been spent in the first quarter?  

Mr Martins said that he had two children who were at university at present. He did not have any influence upon what they were studying. One was studying architecture, the other was completing a Masters in economics. He was a lawyer by profession. They were fortunate in that, at the schools to which they had gone, there had been career guidance. They had been able to find interest in one path or the other. The challenge that he saw in the education system today was that there was a general perception that to be so-called educated, one needed a university degree. Technical colleges provided quite a number of life skills and well-paid jobs, such as electricians, plumbers, and welders, but these were not regarding as serious status professions. Quite a number of people who could do very well in the technical field, ended up where they were could not do well. Societal or peer pressures result in people going to university to get any degree in order to be regarded as one of those people who were educated. One had to speak to what skills South Africa needed, and what directions were people studying towards. By the time they get to university, they had decided what they wanted to study. It was not a function of tutors or lecturers at university. It was very difficult for lecturers to force a person into particular stream of education. It was a choice that the students made. This was a function of career guidance at schools and also at universities.

The Chairperson asked the internal auditor’s opinion on the R2 billion in under-expenditure. What was he going to do to ensure that there was no under-expenditure? This was a compliance matter. The Department must remember that, as per the amendment to the National Public Audit Act, people were going to change gears. There was new legislation in place that said that one had to tighten one’s belts and make adjustments. The main aim here was to ensure that the people carried out their duties, but within the parameters of the budget. The Auditor-General’s powers had been made to be binding in terms of recommendations, but also remedial actions. In light of the projected R150 million over-expenditure, unless the AG advised the Department on this matter, any over or under expenditure was an offence in terms of the Public Finance Management Act (PFMA). It was important to discuss this matter with the AG so that he could understand what was happening before there was remedial action.

To the Committee, this was a deviation. Unfortunately, the Department could not do otherwise. These deviations were not good, and the Committee did whatever it could to ensure there was trust between itself and the community it was representing. The Committee and Department should lead by example in observing the law. How much of the first quarter expenditure was money that had gone into the accruals? Accruals could not be accepted, because they rob the next financial year’s operational budget. Furthermore, the budget cuts had reflected negatively on the Department’s baseline. It was under-expenditure that informed budget cuts. The Department must find a way of spending because if it did not spend, there was a budget principle which ensured that there would be budget cuts for other key programmes. How would the Department catch up if it did not make it in the first quarter? If infrastructure grants were not used by the end of the financial year, they would be taken somewhere else. It was important to apply fiscal discipline.

The Committee had found that there had been delays here in implementation. Procurement plans had to be submitted to NT, which had requested the Department to submit them to ensure that there were no delays in procurement. These delays were responsible for under expenditure or over expenditure. Moreover, it was essential to ensure that procurement and infrastructure plans were inclusive of maintenance plans. If those plans were delayed, at the end of the financial year the Department would lose that money. The Department had to hit the ground running, because there was money which, if not used, would be lost.

What was the audit committee’s view of the operational budget that it had, and how it was being monitored to ensure that, come end of the financial year, there was also value for money? Could the Department furnish the cash flow projections and the payments scheduled for transfers, so that the Committee could monitor its financial performance? How was the Department going to ensure that it followed up on the 2019 baseline adjustment? Someone had to ensure that this happened. In the end, there were so many demands. There should not be any budget cuts in education, especially in light of the new demands for fee-free higher education.

DHET’s reponse

Ms Parker responded to comments and questions about employment and the skills that were developed by the post-school system, and said it was very important to recognise that the majority of individuals who were unemployed were those who were uneducated. When one looked at the latest statistics from Stats South Africa, between 4.5 – 6.5% of university graduates were unemployed. University graduates were the most highly employed sector within the system.

The government tried to ensure that there were a whole range of programmes within its institutions that would be responsive to South Africa’s needs and to individual students’ talents. Individuals came with different talents. Those who wanted to do drama and art needed to have programmes to support them, even though they would not be necessarily employed in the way as someone who came in to be an engineer. In the university and TVET context, there was a negotiated enrolment plan against particular kinds of programmes. The needs of the country were determined in light of the occupations in high demand, the National Development Plan, the Industrial Plan for South Africa, and the skills that had been identified in terms of the various Operation Phakisas, etc. When universities were negotiated with, they were asked to identify what their particular capabilities were, and then to start putting in place enrolments for the future that were linked to these kinds of areas. This created the spaces for young people who may want to come in. The DHET tried to ensure that the university system as a whole covered all the skills that it believed apply to South Africa. It was not an exact science. It had been working since the early 2000s to steer the system towards the development of the relevant skills. The issue of developing a relevant and responsive curriculum was an important one. The Department had processes to ensure that universities had updated their curricula.

The issue around career development was vital for the system as a whole. Young people needed to receive the right advice. The data often showed that young people who dropped out of the university system did not get the right advice early on. The Department had a whole system that focused on career development services. It had done major research through the Human Sciences Research Council (HSRC) which was all about trying to understand what the signals were from the supply and demand side within the system, to help South Africa in terms of determining its enrolment planning and processes. What the data had shown from the last quarter was that 6.9% of university graduates were unemployed. This figure was variable between 4.5% and 6.9%. There was a much higher unemployment rate for graduates from TVET colleges. It was about a 17% unemployment rate. It was important to change the curriculum at TVET colleges to be far more occupationally focused. This was something that was being worked on.

The Department had started programmes geared towards developing centres of specialisation, where there was a focus on specific skills. It was working closely with industry to create durable programmes, moving away from general qualifications towards occupationally directed programmes.

Concerning the infrastructure, the Department could not procure infrastructure. The procurement happened at the level of the institutions in terms of their policies. What the Department had was the macro infrastructure fFramework -- a web-based system -- in which there were certain benchmarks which institutions had to adhere to in terms of policy development and implementation of procurement. Institutions were expected to report back to the Department on a quarterly basis in regard to the roll out of the infrastructure plans that had been approved by the Minister and for which the Department provided the funds. The funding was transferred to institutions, and the Department’s payment schedule was around the transfer of funds to institutions. For this reason, as long as the Department monitored what happened at an institutional level, the transfers would be made. Those plans were all in place, and funds were committed in terms of their procurement processes.

It was important to recognise the difference between being a department that directly managed those kinds of matters, to being a department whose main process was around the policy focus and putting in place regulatory processes and monitoring what was happening on the ground. The DHET did have a team that visited every institution twice a year. Quarterly reports were being received from them. The Department also had development support programmes that the team was putting in place for institutions that had difficulties with some aspects of procurement.       

Mr Joubert referred to the R1.3 billion allocated as a TVET infrastructure subsidy, and said the Department was working on a maintenance framework. In this regard, colleges submitted a fully-costed maintenance plan, which was due in October. These plans would explain what repairs and maintenance the infrastructure required, as opposed to capital infrastructure, for a particular college for the year. The R1.3 billion amounted to R27 million per college. A costed maintenance plan may be R50 million, and would inform where the transfer would be allocated. Those funds were conditional allocations, or ring-fenced allocations. The transfers would be made for the end of the year for any college based on these maintenance plans. It would be allocated to a dedicated bank account which the Department would monitor. The funds would not necessarily be spent by the year’s end, but they would have been transferred to those accounts, ring-fenced and earmarked. Therefore, the Department would not have under-expenses in its account -- the funds would be in dedicated accounts. They would spent according to the packages that the Department approved. It was not possible for the R1.3 billion to be expended by all the colleges by March. The Department had to ensure that there was value for money and that the funds were utilised as intended. When the backlog had been addressed, all the roofs had been painted and the ablution facilities had been upgraded, the Department could then consider the utilisation of funds for student residences. As it stood, the Department had to attend to repairs and maintenance. Thereafter, the Department could look at further expansion in terms of capital. 

The Chairperson fully agreed. It was true that TVET colleges were seriously dilapidated. Those environments were not conducive for training.

Mr Zukile Mvalo, Deputy Director General: Skills Development, DHET, echoing Dr Parker, explained that unemployment was quite low among university graduates from the first quarter of 2018 to the second quarter, dropping from 7.9% to 6.9%. Most university graduates were absorbed by industry. The other tertiary qualifications, including TVET colleges, were at 16.6% unemployment. Those who only had matric faced 28% unemployment. Those with no matric, reflected more than 31% unemployment.

The work of universities had a greater contribution to the economy of the country. In 2015, the Department had discovered that in its work on the Labour Market Intelligence Partnership (LMIP), that about 40% of science graduates and 31% of engineering graduates would enter the financial services sector. In terms of gross domestic product (GDP), the financial services sector was one of the areas of the economy that had been doing well, even though the economy was in a technical recession. Among those who studied business and commerce, 41% got into the financial services sector. When one looked at university and TVET graduates in 2015, 72 000 were in the financial services sector and 70 000 were in the manufacturing sector. Of the university graduates, 37 000 were in the financial services sector and 27 000 were in the manufacturing sector.

In the artisanal environment, in the past three years, including the current financial year, the targets that had been set were being met. The target was 21 110. What had been achieved was 21 188. These were the trades that were required by the economy, whether in terms of the New Growth Path (NGP), or the National Development Plan (NDP). In 2016/17, for workplace-based opportunities, the Department had a target of 120 000. This target had been over-achieved, with 148 517. This included the learnerships and internships, etc. Studies indicated that of those who participated in learnerships, 80% were absorbed by industry. It was, therefore, important to scale up learnerships and artisanal programmes. While these statistics were positive, it was important to bear in mind that the economy was in contraction itself.      

Mr Tredoux explained the accruals for 2017/18 applied mainly to travel accounts, specifically examiner and moderator claims for travel and remuneration claims, as well as a portion for community education and training, where educators claimed their fees. The total was as little as R53 million, which was less than a 0.1% of the total spending.

Regarding cost containment and the matters raised by the Committee, the budget cuts implemented by the DHET was not as a result of under-spending. The budget cuts that were absorbed were part of the normal cost reduction cuts across the whole of government by NT. If one looked at the under-spending during the 2017/18 financial year, it was only R12 million out of the R64 billion for that year. The Department did not have a history of poor spending. The measures implemented by the Department were not only to absorb the severe cuts across government, and even within the Department, but also to ensure that it had more efficient and economical expenditure of its resources. It did not have a lot of money, so it could not be wasted. There were a lot of services that had to be delivered within its service delivery branches. It needed to be strict and ensure that everybody performed the activities that they needed to in order to meet their targets for the year.

The Department had a serious level of expenditure monitoring. It did not rely only on its monthly reports in terms of the PFMA to the Director General, as the accounting officer, and to the Minister, as the executive officer. The Department also had more regular reports that it looked at to ensure that its expenditure was on track and to ensure that it did not over-spend. It also ensured that the branch heads received, at least for the first nine to 10 months, monthly reports so that they could also plan thoroughly. In the last two to three months of the financial year, the monitoring was changed, depending on the status of the expenditure, to approximately weekly and, if required, daily.

During the last financial year, around the second week of February, the Department had done the reports that it had monitored to ensure that the Department remained within its allocation, and to apply certain measures to ensure that the Department did not overspend. This was one of the reasons -- because of the additional cost containment and monitoring -- that the Department had under-spent by R12 million by the end of that year. Otherwise, it may have overspent.

There were solid reasons for why the Department underspends. It prevented a situation of fiscal dumping by simply transferring funds to institutions that could have some reasons and motivations for those transfers before they were made. Most of those transfers were made subject to conditions being met during July and August. In light of the shortfall that the Department estimated, it had to adhere to the restrictions in the PFMA and NT regulations.

In respect of the R150 million that the Department estimates that its examination services may over-spend for the financial year, it was already in discussions with NT. The purpose of this was to ensure that the Department shifted its funds within the available resources to accommodate the possible under-spending in examinations services, and to manage that accordingly. It was not to get additional resources, and the Department would not allow a situation where it over-spent, which was not allowed in terms of the PFMA.

The procurement plans were in place. They had been submitted to NT as required. This was monitored on a quarterly basis, and where there were deviations, they were reported to NT as required. Alternative measures were put in place to ensure that the DHET remained within what it planned, and that everything was spent at the end of the day. The Department also included a table within the narrative report on the supply chain management (SCM) process regarding the procurement plans and the monitoring thereof.

Lastly, as part of all this monitoring process, the Department had implemented a compliance unit under the office of the CFO. This unit was also assisting in ensuring that the Department complied and that all the required processes were being met, especially in terms of the PFMA and the NT regulations, so that not only the Department was monitored, but also the CFO and the accounting officer to ensure that everything was in compliance, that there was no overspending, and that the DHET utilised its resources as they were planned.   

Professor D van der Nest, Chairperson: Audit Committee: DHET, said that the DHET needed to obtain assurance on financial management, which included the oversight of the committee in terms of the effectiveness of its expenditure. It was important for the audit committee to get reliable information to base its decisions on. At this stage, the committee was happy that there had been good progress in terms of reporting. It could rely on the financial information it received. It had been monitoring this on a quarterly basis. To assess the effectiveness and the value for money of the operational budget, it received its figures on a quarterly basis and looked at the line by line item to see where there was over and under expenditure. On a quarterly basis, it received the inputs for that not only from the CFO’s office, but also from the operational areas.

Concerning the under expenditure on the TVET transfers, the audit committee also needed assurance that the controls were in place in terms of where the money was transferred to. This was critically important. The PFMA states that money could not be transferred to an area where there was no control, even with university grants. On a quarterly basis, the audit committee compares the performance information against the expenditure of the budget. It could pick up a trend if the DHET was not performing in terms of its objectives. As an additional assurance, the internal audit committee also requests internal auditing to review the quality of performance information so that the Department could get the assurance that it could rely on it.

Mr Paul du Toit, Director: Internal Audit, DHET, said one of the main focuses of the internal audit unit was when it came to the payment for goods and services. It searched for value for money, looking into procurement plans and the staff budget to ensure there was no over-expenditure. It was important to go into some depth into the audited financial statements. There were managed monthly cash flow statements that went to all the programmes, and quarterly reports on those cash flows. Trends were worked out based on those reports.  

Ms Mapheto responded as to whether the Department was lacked capacity according to skills or to the number, and said that there were 16 practitioners that were in 59 colleges, including the regional offices, because currently the regional offices had to provide support through taking over certain responsibilities. When the Department received applications, the 16 practitioners were the very same people who handled the responses. In terms of, if the Department was to capture those 56 000-plus applications internally, these would be the people who would be capturing, processing or facilitating interviews. Secondly, the majority of posts that the Department was dealing with at head office involved colleges. When one appointed a person in a certain position, one was creating another vacancy. Another strategy was that the public service regulations allowed the Department, in terms of the lower level applications, to use previously advertised applications. This was only for generic posts, such as cleaners, but not for specialised posts. As to whether there was a budget to employ a service provider, the Department had budgeted R800 000 to pay the service provider.  

The Chairperson added that there were two questions that came to mind. She asked for clarity on the delayed release of certificates. Secondly, why was there a delay in the issuing of bursaries? Concerning the decision-making process, there was the addressing of all the urgent matters and the delegation of duties to others. This was part of the administration. What was the turnaround strategy in taking decisions for TVET colleges, if there was a delay in decision-making? Did the TVET colleges have the capacity to come up with credible plans to increase their capacity? If not, how was the Department supporting them? In terms of the employment of graduates in various sectors, could the Department give the Committee a breakdown of the employment rate in the various sectors? Was the skills gap being closed? What was the situation with the SETAs? Were funds surrendered when they were not being used for the purpose for which they had been budgeted? There was room for corruption if it was not controlled. Government was doing all it could to close the skills gap, but the stakeholders were not delivering on their goals. 

Mr Feizal Toefy, Chief Director: DHET, said that there were two certification backlogs. One was the National Certificate Vocational (NCV) backlog going back to 2007. That backlog had been addressed. There was also an inherited certification backlog which stemmed from 1991. Preliminary indications were that this backlog should be resolved within the next month. Currently, all certificates were issued within a three-month period of writing.

The Chairperson commended the DHET for the improvement.

Dr Parker commented that the problems at the National Student Financial Aid Scheme (NSFAS) around the delay of bursaries were multiple. On one hand, there were individuals signing the agreement forms and, on the other hand, there was this problem of the data integration between the NSFAS applications and the institutions’ registrations. The funds were available for all the students. Institutions were supporting students, but these agreements had to be dealt with and linked up. This was the work that was currently being done as a matter of urgency under the administrator.

Concerning the infrastructure plan, the delays were not caused by anything other than the Department being absolutely sure that these infrastructure programmes that came from all the different institutions, were credible programmes. The infrastructure support team had to analyse all of them and ensure they were correct, go through the whole process and make recommendations to the DG and the Minister. The Minister had to approve them. It was the delay in the whole chain of events that resulted in this not happening in June as expected, but in early July. It was exactly the same challenge in the TVET sector in terms of finalising the programmes.

Regarding infrastructure support programmes, the Department had a team linked to the macro infrastructure framework that was assisting the TVET branch in analysing the maintenance plans and ensuring that those maintenance plans were credible so that once they were in place, the Department could ensure that they were monitored effectively. That whole issue was about ensuring that there was a plan in place, that the plan was implemented, that the funds were earmarked and could not be used for anything else, and that this process was monitored. The Department could assure the Committee that very strong monitoring processes were put in place, because those funds need to provide value for money and the Department wanted to ensure that effective procurement processes were in place.  

Mr Joubert said that the Department had been running training for the last three months at TVET colleges. All staff specialising in infrastructure had been trained on standards, and how to maintain infrastructure. There had also been training linked to the Construction Industry Development Board (CIDB) in terms of standards and building maintenance.

Regarding the turnaround plans that had been asked for, the Department had a deadline for the end of October for fully costed maintenance plans for all the colleges. It had received 23 of them already and was working on them in order to allocate work packages. Regarding the adjusted Estimates of National Expenditure (ENE) process, the cash flow allowed for the payments still to be made in December and in March next year. These funds would be transferred to their accounts and they could not be spent without the Department’s approval.

Mr Mvalo said a copy of the labour report produced in 2016 would be forwarded to the Committee. It was based on work by the Department, the HSRC, and various universities.

The Chairperson confirmed that the report could be sent to the Committee.

Mr Mvalo confirmed that the Department monitored very closely any surplus arising from a SETA. In 2012, the Department had regulations 3(12) and regulations 4(4) and 3(12) which stated that if a SETA had funds that were uncommitted, those funds would be surrendered to NSFAS. The Department had been doing that for about three years. This regulation had been an incentive, but the Department lost out in court, and it could no longer surrender extra money from the SETAs to the NSFAS. The surpluses were strictly regulated. SETAs were being monitored very closely.

The Chairperson thanked the participants for the constructive engagement, and congratulated the Department on its leadership. The Committee had to meet the Department, given the R2 billion under-spent and the various challenges highlighted in the discussions. This Department dealt with a very crucial mandate. The prosperity of any nation lay in its ability to improve the education of its citizens. The Committee takes note of all the areas where this Department was performing well, including payments within 30 days, the resolving of certificate backlogs, the processing of invoices and the implementation of cost containment measures, as per the instructions of NT.

Hhowever, the Department had to do more with less. The country was currently undergoing a technical recession. This could not be used as an excuse. It had to use the budget that it had in a manner that it would still deliver. The Committee encouraged the Department to improve in the area of under-spending, particularly as there was much-needed infrastructure maintenance and development. Children were failing because of the environment that was not conducive for them to sleep and to study in TVET colleges. The late transfer of infrastructure grants of R1.2 billion to universities was a huge concern for the Committee. The Department had to find measures to put pressure on universities so that the Department could transfer funds. The Department must apply consequence management. The delay of R637 million in capital grants to TVET colleges was another concern. The increased access to higher education and training demanded that government speed up on payments for infrastructure facilities such as lecture halls and student accommodation. Concerning the filling of vacancies, 1 889 vacancies at TVET colleges spoke to the Department’s strategy. The introduction of fee-free education warrants the Department speeding up the capacity to meet the increased demand. Without this capacity, there was no development. The TVET colleges required the necessary attention.

Currently, there were many challenges -- the high vacancy rate, delays in capital grants for infrastructure, delays in issuing graduation certificates. The Committee would closely monitor the Department’s spending performance. It expected improvements and it would not hesitate to call back the Department if there was no improvement.

The meeting was adjourned.