1. TVET COLLEGES 2015 STRATEGIC AND OPERATIONAL PLANNING 1

2.  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

3.  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

4.  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

5.  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

6.  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. 7 2014/152015/16% share Eastern Cape838 630 000879 951 00014% Free State389 424 000410 955 0007% Gauteng1 364 872 0001 447 975 00023% KwaZulu-Natal1 033 932 0001 099 995 00018% Limpopo657 723 000700 604 00011% Mpumalanga413 864 000439 830 0007% Northern Cape94 427 000101 368 0002% North West314 409 000334 768 0005% Western Cape719 892 000764 128 00012% TOTAL5 827 173 0006 179 574 000100% Avg Baseline Growth Rate from 2014 to 20156.0% TVET COLLEGE BUDGET ALLOCATION

8. 8

9.  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. 10 2014/152015/16% share Eastern Cape227 212 000237 981 00011% Free State148 253 000154 665 0007% Gauteng467 933 000488 707 00022% KwaZulu-Natal447 349 000467 891 00021% Limpopo281 502 000294 618 00013% Mpumalanga129 184 000135 107 0006% Northern Cape43 215 00045 182 0002% North West135 579 000141 667 0006% Western Cape227 510 000238 182 00011% TOTAL2 107 737 0002 204 000 000100% Avg Baseline Growth Rate from 2014 to 20156% TVET COLLEGES BURSARY ALLOCATION

11. 11 TVET COLLEGES BURSARY ALLOCATION

12. 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

13. 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

14. 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

15. 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. 16 Thank you