Leakage, as defined in Chapter 5, is the allocated spending that does not reach intended beneficiaries and is either used by local government officials for purposes unrelated to education or captured for private gain. The study relied on data from the schools by asking the principals how much they expected to receive from government and how much they actually received. In an effort to triangulate data collection, district officials were also asked to provide information on the amount that schools were supposed to receive. These two sources of information were consolidated to derive the amount schools were meant to receive (intended amount). Actual receipts obtained from school records were captured as amounts actually received. To derive leakage, the original amount earmarked by the central government is compared with the amounts actually reaching the schools. The formula below is used to derive the extent of leakage (modified from Reinikka and Svennson, 2001). 100 * } { 1 schools for earmarked amount actual schools by received amount Leakage
Of the 164 schools for which financial data was obtained, there were cases of leakage in 21 schools. Of the 21 leakage schools, 13 were located in Gauteng and the remaining 8 were located in the North West province. The mean poverty quintile of these schools was 3.6 but, the modal value was 5. The emergence of a large proportion of wealthy schools experiencing leakage is a surprising finding with important implications and will be discussed later in the chapter and in Chapter 8. The descriptive data is shown below.
160 | Table 6.13: Descriptive Data of Leaked Funds
Descriptive data of Leaked funds Leaked funds (Rands)
Minimum 1,000
Maximum 197,845
Mean 38,920
Total amount – Gauteng (Average per school)
612,446 (47,111) Total amount - North West
(Average per school)
204,833 (25,604)
Grand Total (GP and NW) 817,329
On the whole, a cumulative amount of over R 800,000 or nearly R 40,000 per school was leaked or unaccounted for in 21 schools. The extent of leakage per school in Gauteng was nearly twice the levels in the North West province. One may argue that this occurrence may be due to higher resource allocation in Gauteng schools. On the contrary, the North West has a higher allocation per school as shown in Table 6.11. The high levels of leakage in Gauteng are related to the earlier finding of high incidences of leakage among relatively wealthy schools. These schools rely mainly on tuition fees and other non-state funding and therefore are less likely to pay attention to their subsidy allocations and ensuring that they receive the amounts that they are entitled to. Corrupt officials within sub-national levels may target these schools for this purpose. One would expect that the poorer schools that do not charge fees and rely solely on subsidies would monitor government subsidies more closely.
Leaked funds (according to Reinikka and Svennson‟s 2001 definition) may be the result of misappropriation. It could also be that these funds cannot be accounted for simply due to poor accounting (by schools or government). Both of these are governance concerns. It is important to recall the provisions made by government for underprivileged schools (no fee and non-section 21 schools) as discussed in Chapter 3. For these schools, the
161 | Department of Education manages their finances and as indicated by District officials during the interviews, the department at times makes payments for certain categories of spending such as utilities and maintenance on behalf of the school. One may argue that this explains the discrepancies in funding. Therefore, one would have to examine whether the district offices made some payments on utilities and maintenance for these schools that would be equivalent to the leaked amount. In examining the expenditure statements of the 21 schools, it was observed that only five of these schools did not make utility payments in 2007 and one could infer that payments were made on their behalf by the district authorities. In the end, questions remain about the funding gap for the remaining 11 school funds that made utility and maintenance payments.
For Gauteng Province, 13 percent of funds earmarked for public schools in Gauteng province were leaked as shown below. Therefore, only 87 percent of the allocated funds reached the schools.
% 13 100 * } 222 , 257 , 2 976 , 971 , 1 { 1 _LeakageI GP
In the North West Province, a considerably higher proportion, 28 percent of funds were leaked meaning that only 68 percent of funds reached the schools.
% 28 100 * } 520 , 735 637 , 530 { 1 _LeakageI NW
Even though in terms of a Rand amount, the leakage problem is more endemic in Gauteng, the pervasiveness of leakage in the North West cannot be overlooked. The fact that over a quarter of education funds are leaked in that province warrants a serious
162 | concern, especially if public funds are found to be highly correlated with outcomes. This is examined in Chapter 8.
In comparison with Table 1.1, where leakages in other African countries were as high as 78 percent in one country, leakage in the South African school system is relatively modest. It is also important to recall that personnel funds are excluded since teacher salaries are paid directly to the teachers by the Department of Education. These funds, as mentioned in Chapter 3, constitute the largest share of education funding. Therefore, the leakage calculations are relatively minimal. When examined from the perspective that any given school could be losing nearly R40,000 a year of funds that could upgrade facilities and supplement learning materials,, the leakage amount warrants some concern.