Tracking public expenditure and assessing service quality in Early Childhood Development in South Africa

1. Tracking public expenditure and assessing service quality in Early Childhood Development in South Africa George Laryea-Adjei (glaryeaadjei@unicef.org) Chief of Social Policy UNICEF South Africa 7 December 2010

2. Background • Early Childhood Development (ECD) services in South Africa have grown rapidly due to the rapid expansion of subsidies to this sector. • The sector comprises pre-Grade R for children 0 to 4 years old and Grade R for children 5 to 6 years old. • ECD subsidies take two major forms: Subsidies by the Department of Education (DoE) of formal Grade R, mainly in public schools, and subsidies for community based ECD facilities by the Department of Social Development (DSD).

3. Background • The Role of Government in ECD: policy, norms and standards, regulation and monitoring, financing through subsidies to facilities as well partial provision of learning and teaching material • Subsidies flow from the National Treasury/Provincial Treasury to Provincial Departments of Social Development and Education. Provincial Departments usually allocate directly to facilities, though some provinces pass the funding through district offices • ECD facilities for children 0-4 are mostly owned by private operators, including community-based organisations • ECD facilities for children 5-6 are mostly attached to primary schools though in one of the sample provinces private ownership is dominant

4. The Analytical framework for ECD PETS in South Africa • PETS is concerned with tracking public expenditure, often through multiple administrative layers • The ECD PETS in South Africa required a variation of this approach • Given the type of intergovernmental arrangement for the delivery of ECD services in South Africa, where facilities receive funds directly, the really important question for the ECD PETS is who benefits from expenditure: Children, or “owners” of community facilities who receive the subsidies? (Put differently: Are the subsidies really converted into services benefiting children?) • The typical PETS question about whether funds reach the facility without being siphoned off to other purposes by other levels of government is investigated, but is not as important as the question around possible ‘owner profit’

5. Framework for PETS for community facilities Community site B A Province “Owner” Incentives for “owner”: • Maximise flows A, B and F • Minimise flows C, D, E A is maximised by attracting/inflating child numbers B is maximised by minimising C, D, E – by employing fewer workers, providing less or cheap food, reducing LSMs & consumables F is maximised by appearing to offer value for money C Caregivers F D Households, donors Food E LSM, etc.

6. The Framework • “Owner profit” is what remains after payments to non-owner services, minus the salary the owner would have received if employed by someone else. This is a measure of “leakage” (funds diverted from acquiring more care) • Minimising spending on other caregivers reduces availability of caregivers per child hour or quality of care • A measure of care-giving services provided is thus spending on caregivers per child hour, where spending on owner is taken to be only the opportunity cost of the owner’s labour (what he/she could have earned working for someone else). • Parent pressures, especially through SGB bodies, should assist to maintain quality

7. Some questions • Are subsidies converted into services for children? • How much improvement do subsidies bring? • Do benefits extend beyond basic care of children, i.e. do subsidies help to prepare children better for learning in schools? • How much do the poor benefit?

8. Methods • Financial and service data from various levels of government • A survey held in three provinces in some 700 facilities: more than 300 public schools offering Grade R (mostly for children 5-6), more than 300 registered community based ECD facilities (mostly for 0-4), 90 non-registered community based ECD facilities (mostly for 0-4). • Province 1 is a richer province, Province 2 a moderately poor one and Province 3 a large and very poor province, thus the survey reflects the broad spectrum of experiences in ECD in South Africa. • The survey combined modules from a Public Expenditure Tracking Survey (PETS) and Quality of Service Delivery Survey (QSDS), to track whether public expenditure reaches the intended institutions and was applied in a manner that supported ECD

9. Some Findings • Community based ECD Centres provided information on a variety of income sources and expenditures. However, the quality of this data was poor, despite special effort by the survey organisation to collect further financial information from facilities • Financial record keeping was very poor in most facilities • The sector relies on a mixture of government subsidies and fees, but clearly, subsides considerably reduce the outlays poor parents have to make and thereby make ECD much more affordable. Without them, many facilities in the bottom three quintiles may not be able to continue offering these services.

10. Some Findings • The dominant expenditure component was salaries (51%); Food expenditure comprised about 15% ; “other” component of expenditure, more than a third of the total, had a high share in all quintiles and provinces. This item was not specified and potentially allows for expenditure diversion in the absence of detailed and precise bookkeeping. • However no evidence of large scale diversion of funds • Missing information on subsidies received or transferred raises issues about the source of such errors. It may have derived from a combination of diversion of funds away from facilities, poor financial bookkeeping by facilities and deliberately misleading financial statements. This clearly needs prompt attention, even if there had been no large scale diversion of funds.

11. Findings • Incidence analysis show fairly good targeting of subsidies, with the poorest three quintiles benefiting most • Despite no evidence of large scale financial leakage, poor quality of service, an indirect leakage, was observed in many facilities • Overall quality of services appears to be moderate, as reflected in teacher-pupil ratios, training and experience of staff members, planning of classroom activities and programme quality. However, several ECD facilities have limited space and poor infrastructure, they receive inadequate community support, there are issues around adequacy of nutrition, and few facilities put enough effort into development of children. • There is a strong correlation between the quality of learning material and programme quality.

12. Some Findings • Poverty and management quality are the underlying factors that influence both programme quality and the quality of resources available to children. • Registration of a facility is a major indicator of quality

13. Some Recommendations • After the extremely rapid expansion of ECD in recent years, more emphasis is now needed on dealing with the quality of delivery and improving monitoring of services and finances. • Government must continue to complement private community based provision • Government should monitor bookkeeping and disqualify ECD organisations who consistently fail to keep proper financial records from receiving subsidies. • Formal community oversight mechanisms in community based facilities should be encouraged and expanded. • Regular audits must be undertaken to ensure that enrolment numbers used to determine subsidies are not inflated

14. THANK YOU