1. In terms of the Norms and Standards for the Funding of Schools, the Western Cape Education Department (WCED) transfers large amounts of state funds to schools in the Western Cape. Further transfers are made to certain schools for special projects e.g. maintenance, feeding scheme, etc. Schools also receive funding in the form of school fees (school fee paying schools), monetary donations, fundraising activities, etc. All these funds are defined as school funds and it is the responsibility of School Governing Bodies (SGBs) to ensure that all these funds are kept and managed in one bank account.

2. The following sections in the South African Schools Act (SASA), 1996 (Act 84 of 1996) govern the establishment, management and administration of school funds—
2.1 Section 37(1) - The governing body of a public school must establish a school fund and administer it in accordance with directions issued by the Head of Department (HOD).
2.2 Section 37(2) - Subject to subsection (3), all money received by a public school including school fees and voluntary contributions must be paid into the school fund.
2.3 Section 37(3) - The governing body of a public school must open and maintain one banking account, but a governing body of a public school may, with the approval of the Member of the Executive Council, invest surplus money in another account.
2.4 Section 37(6) - The school fund, all proceeds thereof and any other assets of the public school must be used only for—

  1. educational purposes, at or in connection with such school;
  2. educational purposes, at or in connection with another public school, by agreement with such other public school and with the consent of the Head of Department;
  3. the performance of the functions of the governing body; or
  4. another educational purpose agreed between the governing body and the Head of Department.
2.5 Section 42 - The governing body of a public school must—

  1. keep records of funds received and spent by the public school and of its assets, liabilities and financial transactions; and
  2. as soon as practicable, but not later than three months after the end of each financial year, draw up annual financial statements in accordance with the guidelines determined by the Member of the Executive Council.
3. In accordance with Section 16A(2) of SASA the principal must—

  1. Assist the governing body with the management of the school’s funds, which assistance must include—
    1. the provision of information relating to any conditions imposed or directions issued by the Minister, the Member of the Executive Council or the Head of Department in respect of all financial matters of the school contemplated in Chapter 4; and
    2. the giving of advice to the governing body on the financial implications of decisions relating to the financial matters of the school;
  2. take all reasonable steps to prevent any financial maladministration or mismanagement by any staff member or by the governing body of the school;
  3. be a member of a finance committee or delegation of the governing body in order to manage any matter that has financial implications for the school; and
  4. report any maladministration or mismanagement of financial matters to the governing body of the school and to the Head of Department.
4. Principals are therefore instructed to ensure that the instructions in this circular are strictly adhered to.

5. In terms of Section 37(1) of SASA the HOD has already issued directions in the form of a financial manual, Basic Financial Manual for Schools, to all SGBs. The financial manual provides directions on how to establish and administer school funds and it is expected of SGBs to diligently implement these directives. In this regard specific reference is made to the submission of reports in terms of Chapter A8 of the financial manual.

6. In terms of Section 38(1)(j) of the Public Finance Management Act (PFMA), 1999 (Act 1 of 1999 as amended by Act 29 of 1999) the accounting officer for a department, trading entity or constitutional institution—

  1. before transferring any funds (other than grants in terms of the annual Division of Revenue Act or to a constitutional institution) to an entity within or outside government, must obtain a written assurance from the entity that it implements effective, efficient and transparent financial management and internal control systems, or, if such written assurance is not or cannot be given, render the transfer of the funds subject to conditions and remedial measures requiring the entity to establish and implement effective, efficient and transparent financial management and internal control systems.
7. In terms of Regulation 8.4 of the PFMA: Treasury Regulations, an accounting officer must maintain appropriate measures to ensure that grants and other transfer payments are applied for their intended purposes. Such measures may include—

  1. regular reporting procedures;
  2. internal and external audit requirements and, where appropriate, submission of audited statements;
  3. regular monitoring procedures;
  4. scheduled or unscheduled inspection visits or reviews of performance; and
  5. any other control measures deemed necessary.
8. In terms of paragraphs 5 to 7 above the HOD, as Accounting Officer for the WCED, is therefore responsible—
8.1 to ensure that SGBs establish and administer the school funds as per the directions issued in the financial manual; and
8.2 to have control measures in place to ensure that all state funds paid to public schools are used for the purposes for which they were allocated and that these funds are properly accounted for. Such measures may include the submission of reports and monitoring and inspection visits to schools.

9. Despite the issuing of the financial manual and support provided by district staff to schools regarding financial management, the WCED continues to experience, on a regular basis, cases of minor to serious basic financial management deficiencies which often result in financial mismanagement, fraud and other serious transgressions. The WCED is expected to ensure that adequate control measures are in place at institutional level to reduce or eliminate the possibility of fraud and corruption. In order to ensure that all schools manage all school funds efficiently, effectively and in a transparent manner, the HOD herewith issues the following additional instructions to all SGBs that must be adhered to:
9.1 Reporting on the receipting and spending of all school funds

  1. In terms of the requirements, as stipulated in paragraphs 5 – 7, all SGBs must maintain and keep up to date quarterly records of all income and expenditure of school funds and report on such. For this purpose the attached WCED 043 quarterly report is to be used.
  2. In terms of Treasury Regulation 8.4(a) all schools are requested to submit a signed WCED 043 quarterly report and the following attachments for the 2nd and 4th quarters only to the relevant district office within 30 days of the end of the two quarters (expenditure to 30 June and 31 December):
    1. A copy of the bank statement for the last month of the quarter of reporting;
    2. A copy of the bank statement of investment accounts that the school has as per the last month of the quarter of reporting; and
    3. A copy of the latest municipal account and proof of payment.
  3. Funds will be paid over to schools in April/May and November only if these two satisfactory WCED 043 reports on the financial activities have been received.
  4. Furthermore, Section 43(5) of the SASA requires schools to submit (for the attention of the relevant education district director) a copy of their audited set of financial statements for the previous financial year by 30 June of each year.
9.2 Monitoring of the receipting and spending of all school funds

  1. The accounting and internal control systems at many institutions do not provide management with conclusive evidence that the objectives in paragraphs 5 - 7 above are sufficiently reached. For this reason the HOD, in terms of Section 9 of the Western Cape School Education Act, the Regulations Relating to Visitation and Assessment of Public and Subsidised Independent Schools and Treasury Regulation 8.4(c) and (d) herewith authorise officials from districts to visit schools at least once per semester to evaluate performance and monitor compliance with national and provincial norms and standards for school funding. This will include, amongst other things, the assessment of the effectiveness and efficiency of the accounting and internal control systems within all institutions of the WCED and to provide support and training to relevant school staff and SGB members in financial management.
  2. This is especially necessary in circumstances where segregation of duties is limited and audit evidence of supervisory controls is lacking.
  3. As a result of obtaining an understanding of the accounting and internal control systems and tests of control, these officials may become aware of weaknesses in the systems of institutions.
  4. These officials are required to make management aware, as soon as is practically possible and at an appropriate level of responsibility, of material weaknesses in the design or operation of the accounting and internal control systems that have been detected.
10. In spite of the fact that departmental officials will visit schools to monitor the receipting and spending of school funds, the Member of the Executive Council (MEC) may, in terms of Section 43(4) of SASA, if he or she deems it necessary, request the Auditor-General to undertake an audit of the records and financial statements of a public school. The WCED is considering invoking this provision as a further measure of strengthening financial management in schools. Once a decision has been made in this regard, the WCED will inform all role players. Meanwhile, principals are instructed to play their role diligently as outlined in paragraph 3 above.

11. Furthermore, where improvement in financial management is not realised, the WCED will apply the lawful remedies contained in Sections 22 – 25 of SASA.

12. In further support to SGBs, the WCED has developed an electronic Cash Book system to record all income and expenses of school funds and which also links to the budget of the school.

This system also generates the WCED 043 quarterly report that must be submitted. This system is available for all schools and district staff will support schools in the implementation thereof. Schools that make use of administration systems like PASTEL must also complete the WCED 043 quarterly report.

13. Kindly bring the content of this circular to the attention of district office officials, principals, members of governing bodies and school management teams.


SIGNED: JH LYNERS
ACTING HEAD: EDUCATION
DATE: 2014:09:10

South African Schools Act (SASA), 1996 (Act 84 of 1996)  (size: 255 KB)
Public Finance Management Act (PFMA), 1999 (Act 1 of 1999)  (size: 487 KB)
WCED 043 quarterly report  (size: 52 KB)