1. This circular repeals and replaces Circular 0045/2014 in its entirety.

2. In terms of the National Norms and Standards for School Funding (NNSSF), 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 manage and administer these funds.

3. The following sections in the South African Schools Act (SASA), 1996 (Act 84 of 1996) govern the establishment, management and administration of school funds—
3.1 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).
3.2 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.
3.3 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.
3.4 Section 37(4) - Money or other goods donated or bequeathed to or received in trust by a public school must be applied in accordance with the conditions of such donation, bequest or trust.
3.5 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.
3.6 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.
3.7 Section 43(5) – A governing body must submit to the Head of Department, within six months after the end of each financial year, a copy of the annual financial statements, audited or examined in terms of this section.

4. Should it be necessary for a school to deposit money donated, bequeathed to or received in trust by the school in a separate bank account, the school must apply to the MEC for approval to open and maintain a bank account specifically for this purpose.

5. 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.
6. If a principal fails to perform his/her functions in terms of Section 16A(2)(h-k) of SASA the employer will assess the capacity of the principal and may take action against the principal in accordance with the incapacity code and procedures for poor work performance. Principals are requested to ensure that this circular is communicated to SGB chairpersons.

7. 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.

8. 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.
9. In accordance with National Treasury Regulation (NTR) 8.4 issued in terms of the PFMA, 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.
10. In terms of NTR 8.5 an accounting officer may withhold transfers and subsidies to an entity if he or she is satisfied that-

  1. conditions attached to the transfer and subsidy have not been complied with;
  2. financial assistance is no longer required;
  3. the agreed objectives have not been attained; and
  4. the transfer and subsidy does not provide value for money in relation to its purpose or objectives.
11. In terms of paragraph 121A(b) of the amended NNSSF transfer payments to schools may be effected only if the WCED is satisfied that the public school has utilised its school funds in accordance with its functions and responsibilities as prescribed by SASA.

12. In terms of paragraphs 5 to 11 above the HOD, as Accounting Officer for the WCED, is therefore responsible—
12.1 to ensure that SGBs establish and administer the school funds as per the directions issued in the financial manual; and
12.2 to put 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.

13. In further support to SGBs, the WCED has developed an electronic Cash Book System to record all income and expenses of school funds. This System also links to the budget of the school. This System generates a WCED 043 report on all income and expenses and is available for all schools. District staff will support schools in the implementation thereof. The WCED 043 report serves as a valuable report that will assist SGBs in the monitoring of the funds of the school. This report must be submitted to the WCED as per the instructions of paragraph 14.1(b) below. Schools that make use of administration systems like PASTEL must also complete the WCED 043 report as per paragraph 14.1(b).

14. 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 directives to all SGBs. :
14.1 Reporting on the receipting and spending of all school funds

  1. In terms of the requirements, as stipulated in paragraphs 8 - 11, all SGBs must maintain and keep up to date records of all income and expenditure of school funds.
  2. In terms of NTR 8.4(a) all schools are requested to maintain reports of transfer payments made to the school by the WCED. In this regard schools are requested to submit a signed WCED 043 report reflecting all transfer payments 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). However, schools that use the Cash Book System, referred to in paragraph 13, can submit the WCED 043 report of all income and expenditure that the system generates. The following attachments must also be submitted -
    1. A copy of the bank statement for the last month of the period of reporting;
    2. A copy of the bank statement of investment accounts that the school has as per the last month of the period 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 if these two satisfactory WCED 043 reports as well as the audited or examined annual financial statements of the previous financial year have been received.
14.2 Monitoring of the receipting and spending of all school funds

  1. In accordance with Section 43(6) of SASA, the SGB must make the financial records and statements of the school available for inspection at the request of an interested person. The Compliance Component at the district office will diarise and monitor the receipt of the reports mentioned in paragraphs 3.7 and 14.1(b). They will then evaluate these reports for correctness, monitor compliance with the prescripts and provide feedback to SGBs. However, if the evaluations reveal any indication of maladministration or mismanagement of transfer payments, the HOD will request district officials, by delegation through the district director, or officials from Head Office to monitor and visit such schools in terms of NTR 8.4(c) and (d) and paragraph 121A(b) of the NNSSF. This will include, amongst other things, the assessment of the effectiveness and efficiency of the accounting and internal control systems within the school 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.
15. 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. Details of this will be communicated to the schools and SGBs concerned.

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

17. The content of this circular must be brought to the attention of district office officials, principals, members of governing bodies and school management teams.


SIGNED: PA VINJEVOLD
HEAD: EDUCATION
DATE: 2014:12:17

South African Schools Act (SASA), 1996  (size: 255 KB)
Public Finance Management Act (PFMA), 1999  (size: 487 KB)

WCED 043 report  (size: 206 KB xlsx)