What are the funding channels for a public ordinary school?

The Principals Fund is about building strong schools. Schools, and later universities, are the fundamental building blocks of an economy. Principals, school management teams, teachers, admin and support staff build strong schools. Our purpose at the Principals Fund is to build strong schools by helping low-resourced schools in South Africa generate long term incremental income.

This article is intended to give an overview of the financial status of a school and the areas where we can impact the school’s income streams. And if we understand what resources, or income streams, are at our disposal, or “what budget we have”, we can infer what is possible for a school to do.

It is intended to give some insight into the funding channels and income streams of a general low-resource government school (Public Ordinary School, or POS) in South Africa. This does not cover the previous “model-C” schools, or private schools. That said, we will use an example of a single school that we partner with, in order that the reality is not lost in the average.

The Funding Channels of a School

Here is an overview of the funding channels for a typical public ordinary school that we work with: 

Norms and Standards are funds allocated from the Provincial Education Department (PED) to each school in order to cover the operating and educational costs of the school. Norms and Standards are allocated on a per learner basis according to a rate defined by the PED. The rate is calculated based on the PED’s annual allocation from the National Treasury. 

LTSM stands for Learning and Teaching Support Materials. These materials are specified by the PED. The PED also specifies the proportion of Norms and Standards to be spent on each category of expense. LTSM is one category of expense (this also includes library materials), the other categories being day to day maintenance, local purchases (stationery, etc) and municipal services.

Public Ordinary Schools are split for financial management purposes into 2 types of schools in terms of the South African Schools Act (SASA). Section 20 schools are schools which have poor financial controls. In these schools, the PED retains control over the delivery of the learning materials and maintenance of the schools, and so retains the majority of the Norms and Standards allocation in order to deliver these goods and services itself. A Section 21 school has good financial controls, and therefore the department distributes the Norms and Standards funds directly to the school to allow the Principal to source and manage the delivery of LTSM, maintenance and other services.

The Department of Education specifies certain standards that should be met for a school to function. For example, classroom size, number of textbooks per learner, access to chemistry labs and libraries, are all defined in terms of standards for a school. However, the Department of Education, and the PED, are also cognisant of the financial limits applicable to it from the National Treasury. As a result, the SASA prescribes that, where additional expense, in excess of the prescribed Norms and Standards, is required in order to meet the minimum prescribed levels for education, the SGB and the school are required to source the additional funds themselves from outside sources through channels available to them.

Here is some further detail on the nature of the expenses:

Standard Teaching and Management Staff

This is paid for by the Provincial Education Department. 

This includes teachers, principals, deputy staff and support staff. The ratio of principals and teachers to students is governed by PED standards, and posts are allocated/removed according to where staff need to be placed and what budget is available to the PED, amongst other criteria. The salaries are defined in terms of government standards and negotiated packages at a union, provincial or national level.

Norms and Standards Expenses, including basic LTSM

This is paid for by the Provincial Education Department. 

Norms and Standards are funds allocated from the provincial government to each school in order to cover the operating and educational costs of the school. Norms and standards are allocated on a per learner basis, according to a rate schedule. The rates are determined by the PED, based on the allocations of the budget received from the National treasury. 

For a s21 school, the funds are paid into the bank account of the school directly. The school is then able to procure and pay for the learning materials as required. This can either be from the department, or through a third party provider. Below is a breakdown of the allocation of funds from the PED to a school, based on the quintile and fee nature of the school (in ZAR per learner per year. Provincial refers to the WCED) (Reference: https://pmg.org.za/committee-meeting/30313/)

The recommended allocation of spend for Norms and Standards is as follows:

LTSM - 30%

Local purchases - 20% (stationery, day to day running costs)

Municipal Services - 25%

Maintenance - 25%

Therefore, to put this into numbers for our example school:

In 2020/21, if our school had 500 learners, is quintile 4 and is Fee-Charging, it would have expected to receive (500*R822) = R411,000 from the department to assist in running ongoing expenses during that financial year. This is R34,250 per month. If they spent 30% on textbooks according to the PED recommendation, this would be R123,300. And at R125 per textbook, this would equate to 986 new textbooks each year, for a school of 500 pupils.

 

Additional SGB Teaching and Administrative Staff Costs

Additional Operating and Infrastructure costs

Additional Educational Costs

Where a school wishes to hire additional staff, incur additional operating or maintenance expenditure, or invest in additional educational assets in excess of the Norms and Standards expenditure, it must then raise the funds itself.

If it is a fee-paying school, it can levy school fees as well as run fundraisers or sell products and services (uniforms, etc). If it is non-fee paying, it is only able to run fundraisers and sell products and services.

The funds a school raises can be used for any of the expenditure line items identified above, at the discretion of the school Governing Body (SGB), School Management Team (SMT) and Principal. The spend is approved in terms of the annual budgeting process by the SGB. 

In law, a Public Ordinary School is a juristic entity under the South African Schools Act, and therefore may contract directly. Any SGB posts are direct employees of the school, while ongoing contracts are signed directly by the principal on behalf of the school. 

Provincial Oversight and Management Costs

These are costs related to the ongoing oversight of the PED, and management of the schools. We do not have any insight into these costs, but we will make an assumption below.

A Financial View of a School

Before we proceed, it is worth noting that this assumption applies specifically to fee-paying low income schools, since fees will usually constitute a material proportion of the school’s income. However, as of 2020, 79% of learners in South Africa attended non-fee paying schools ( https://pmg.org.za/committee-meeting/30934/ ). From our experience (though based on a very small sample), the total budget for a no-fee school is not materially different from that described below, for the same learner numbers, and may be slightly higher.

Then, aggregating this information and making some assumptions regarding teacher salaries, we can come up with a picture of this school through a financial lens. Our example school is a fee paying school, with 500 learners, and annual average fees of R700 per year.

This is what a full income statement of the school might look like: 

To benchmark this number, here are some comparative fees from low fee private primary schools:

 

The following could be takeouts (taking into account the uncertainty and sample size of the information):

1. Total income per learner, including an assessment of teacher and staff salaries, seems to be materially lower than the comparative for a low-fee private school.
2. Once the impact of teacher performance is removed (ie. the ability to leverage better a large component of the cost base), there is little room for other interventions to assist with learning, such as changes to facilities, ICT investment, external service providers and learning organisations. 

The point of this article is not to laud or criticise. It is an attempt to see reality for what it is, and understand the reasonable expectations that can be made of schools and principals with a view to understanding what interventions can be implemented with the resources available to them. Finances are only one component of the picture, but an important component nevertheless. This was an attempt to show the school through this lens.