1

TVET COLLEGES 2015 STRATEGIC AND OPERATIONAL

PLANNING

Effective planning is underpinned by the financial capability of College.

Cash-flow forecast is pivotal for financial planning. Total monthly income (DHET subsidies, student fees, NSFAS,

Occupational / skills income) including PERSAL budget at DHET) Less: Total monthly expenditure (Operational expenditure,

College payroll and DHET payroll expenditure)

= Available cash-flow

Planning should be executed within the financial capability of the College taking into account available cash-flow and potential reserves.

2

Financial planning

Only plan for a budget deficit when reserves are available for utilization. Reserves should primarily be applied for capital expansion and not for operational costs.

Critical to monitor DHET PERSAL spent monthly in order to predict potential savings. Savings to be released by DHET based on National Treasury approval.

Segment reporting will be requirement for TVET Colleges going forward. New standard chart of accounts (SCOA) to be developed to split

segments between ministerial and occupational programmes. Ministerial programme funds may not subsidize occupational

programmes. This will be monitored by DHET going forward.

3

Financial planning

Occupational programmes must be costed (all inclusive cost) by the TVET Colleges and must indicate financial viability to render the programme.

Capital infrastructure expansion must only be budgeted for based on available reserves and sound cash-flow forecasts.

Frequent reporting on cash-flow position and cash-flow forecast to Accounting Officer and Council via the Finance and Executive Committee.

Student debt (excluding students qualifying for financial assistance) should be recovered.

Debt write-off only when all avenues have been exhausted – Council approval required.

4

Financial planning

Sound corporate governance has to be embedded in all College processes.

This must be enforced through the adherence to policies and procedures.

DHET will issue standardized financial policies for adoption by College Councils during July 2015.

Although Colleges not regulated via the PFMA, DHET has adopted the approach to recommend PFMA and National Treasury Regulations as best practice to the Colleges.

Supply Chain Policy approved by Director-General for immediate adoption and implementation by all TVET Councils.

5

Financial planning

PFMA requirement strengthened through DHET requirement: Section 38(1)(J) confirmations required before funds may be transferred – Accounting Officer confirms effective and transparent financial systems and controls at TVET College.

Auditor-General will be auditing all 50 TVET’s by 2017. Currently auditing 16 in 2015. 30 TVET’s by 2016 50 TVET’s by 2017

DHET Monthly reporting – TVET Colleges required to comply with monthly reporting deadlines.

6

Financial planning

7

2014/15 2015/16 % share

Eastern Cape 838 630 000 879 951 000 14%

Free State 389 424 000 410 955 000 7%

Gauteng 1 364 872 000 1 447 975 000 23%

KwaZulu-Natal 1 033 932 000 1 099 995 000 18%

Limpopo 657 723 000 700 604 000 11%

Mpumalanga 413 864 000 439 830 000 7%

Northern Cape 94 427 000 101 368 000 2%

North West 314 409 000 334 768 000 5%

Western Cape 719 892 000 764 128 000 12%

TOTAL 5 827 173 000 6 179 574 000 100%Avg Baseline Growth Rate from 2014 to 2015 6.0%

TVET COLLEGE BUDGET ALLOCATION

8

TVET COLLEGE BUDGET ALLOCATION

23%

18%

14%12%

11%

7%

7%

5% 2%

TVET Budget Allocations

Gauteng KwaZulu-Natal Eastern Cape Western Cape Limpopo Mpumalanga Free State North West Northern Cape

The Budget Allocation is determined in terms of the Norms and Standards for funding TVET Colleges

It consists of the following: Compensation of Employees for all TVET Colleges appointed

to offer Ministerial approved programmes (NCV and Report 191)

Operational costs for the TVET Colleges Goods and Services costs for Regional TVET Units From 2015/16, the Compensation of Employees budget

allocation has been retained by the Department to enable payment off salaries relating to staff rendering functions in ministerial approved programmes. This is attributable to the function that has moved to the Department starting 01 April 2015.

9

Budget Allocation TVET Colleges

10

2014/15 2015/16 % share

Eastern Cape 227 212 000 237 981 000 11%

Free State 148 253 000 154 665 000 7%

Gauteng 467 933 000 488 707 000 22%

KwaZulu-Natal 447 349 000 467 891 000 21%

Limpopo 281 502 000 294 618 000 13%

Mpumalanga 129 184 000 135 107 000 6%

Northern Cape 43 215 000 45 182 000 2%

North West 135 579 000 141 667 000 6%

Western Cape 227 510 000 238 182 000 11%

TOTAL 2 107 737 000 2 204 000 000 100%Avg Baseline Growth Rate from 2014 to 2015 6%

TVET COLLEGES BURSARY ALLOCATION

11

TVET COLLEGES BURSARY ALLOCATION

22%

21%

13%11%

11%

7%

6%

6%2%

TVET Bursary Allocations

Gauteng KwaZulu-Natal Limpopo Western Cape Eastern Cape Free State North West Mpumalanga Northern Cape

The Bursary Allocation for TVET Colleges consists of the following:

Tuition Fees ; and Allowances (Transport and Accommodation)

This form of funding is channeled through NSFAS NSFAS pay TVET Colleges on a claim basis

12

Bursary Allocation for TVET Colleges

• In terms of the Norms for Funding TVET Colleges:

63% is earmarked for COE, also approved by the Minister. 63% COE will be based on 100% programme costs (Thus

DHET 80% programme costs as well as 20% student fees).

DHET therefore retain 63% of the TVET Budget as follows:

63% of DHET TVET Budget; and 63% of 80% of TVET NSFAS Allocation (Retained from DHET

TVET Budget)

Total budget retained by DHET: 81% of DHET TVET Budget

13

Calculation of 63% by DHET

Direct implication of 81% Budget retention by DHET:

DHET Subsidies has decrease by 36% from 2014 allocations.

Colleges will be highly dependent on NSFAS Claims for operational cash-flow purposes.

It will be critical to submit quality claims to NSFAS in order to receive timeous payment – lack of quality claims will lead to rejections by NSFAS and implicate cash-flow for the Colleges.

14

Implication of budget retention by DHET

TVET College subsidies will be paid in 3 tranches as follows:

50% paid in April 2015;

25% in September 2015; and

25% in January 2016.

15

DHET subsidy payments

16

Thank you