Department of Department of Higher Education and Higher Education and

Training Training REGULATIONS FOR REPORTING by COUNCILS of

PUBLIC HIGHER EDUCATION INSTITUTIONS

Regional Councils training workshopAugust 2014

Dr EL van Staden: Chief DirectorAcademic Planning and Management Support

OUTLINE OF PRESENTATION Revision of Reporting Regulations of

2007

Process Followed and context of Revision

Reporting Regulations 2014

Conclusion

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Why Why REPORTING REGULATIONSREPORTING REGULATIONS??

Section 20 (4) of the Higher Education Act 101 of 1997:

every public higher education institution established is a juristic person.

For this reason the Regulations for Reporting by Higher Education Institutions requires from a councilcouncil and management of a public higher education institution to:• exercise their fiduciary exercise their fiduciary and managerial responsibilities in a transparent manner, • implement systems implement systems that will ensure good corporate governance and • give regular account give regular account of the results of exercising their delegated powers.

HEI’s must in terms of the 2007 Regulations report on, among other things:• Achievements of strategic objectives• Financial statements • Senate and councils achievements• Report of IF • budgets planning.

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Status of reporting Status of reporting

2007 - 2014

Reporting by Public HEI were regulated by the Regulations for Reporting by Higher Regulations for Reporting by Higher Education InstitutionsEducation Institutions which were drafted in terms of the Higher Education Act 101 of 1997.

These Regulations (published in Government Notice No. 691, Government Gazette No 30132 of 1 August 2007) was underpinned by governance and management principles as outlined in the King II Report on Corporate Governance

Since then the guidelines on Corporate Governance were updated with the release of the King III Report

Continue to apply to reporting in 2014 in respect of the 2013 financial year.

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Revision of 2007 Revision of 2007 Regulations.Regulations.

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Purpose of revision of Regulations of 2007:

Assessment of annual reports revealed concerns relating:

InconsistentInconsistent reporting, incomprehensiveincomprehensive reporting and lack of quality and coverage particularly with regard to predetermined objectives, performance evaluation, budget control and risk management makes it difficult to assess university performance.

The assessment of achievement of predetermined objectives was not possible and is a focus of audit by the AG focus of audit by the AG but the current reporting on this area is incomprehensive, inconsistent and properly not structured and making auditing difficult thereof

Current Regulation has no monitoring mechanism no monitoring mechanism and thus making it difficult to monitor HEI’s performance during the year and at year end (which is a prerequisite for entities receiving public funds.)

Purpose of RevisionPurpose of Revision The section 4(3)(b) of the Public Audit Act 25 of 2004 (PAA) prescribes that the AG

may audit and report on accounts, financial statements and financial management of any other entity funded from the National Revenue Fund and which is authorized in terms of any legislation to receive money for a public purpose.

THUS: The Auditor General is required to express an audit opinion, in terms of the Public Audit Act on the achievements by institutions in realizing their predetermined objectives.

The AG has opted not to audit not to audit the performance of HEI

but the Public Audit Act requires that the Auditors of the HEI to include in their audit report an opinion / conclusion on Performance information with regard to achievement of predetermined objectives by Universities as required by Public Audit Act.

The PAA and the AGSA directive set out certain requirements PAA and the AGSA directive set out certain requirements that the public higher education institutions should comply with. These requirements include matters relating to the appointment of the auditors and the content of the auditor’s report.

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Purpose of Revision…..Purpose of Revision…..

Incorporate the framework for setting predetermined and strategic objectivessetting predetermined and strategic objectives, performance monitoring and evaluation, risk management and budget planningrisk management and budget planning;

The King Report on Governance (King III) which has been adopted in revising the Reporting Regulations by Higher Education Institutions stresses the need for good good corporate governance and accountability by HEIs corporate governance and accountability by HEIs - Updated the Regulations in line with King III;

Therefore: new Regulations underpins governance and management principles as guided by King III

Update the Regulations with the changes in the International Financial Reporting Standards (IFRS);

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PROCESSPROCESS

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Stakeholder engagements: STARTED IN 2011 – ENDED IN 2014

the reporting of “predetermined” objectives was a process of consultation through a discussion on a reporting frameworkreporting framework.

institutional visit to all HEI in collaboration with the AGSA

various meetings with Auditor-General of South Africa (01 March 2012;)

consultation MEETINGS were held with:

Finance Strategy Group (FSG), EXCO of the Finance Executive Forum (FEF) and FEFReference Group of the FEF, Task team of the Council Chairs and UCCF; new ministerial appointees to Councils ; Minister and HESA led by its Chairperson of the Board

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Concerns raised Concerns raised

Reference to “prescribed formatprescribed format” removed and content clearly listed; Best practice Governance principles, as advocated in King III including the principle of “apply apply

or explain”or explain” ““Specifically fundedSpecifically funded” replaced with “restricted and designated” as defined; disclosure of remuneration of Executive management disclosure of remuneration of Executive management more clear (per individual, as a note to

financial statements, etc.). Definition of Executive management (previous Senior management) inserted (focus on “executive” that mostly would exclude “Deans” unless they have “executive powers”);

Not specifically mentioned but cleared that Annual report plus Annual Financial statements can be in the “form” of an integrated reportintegrated report.

ManualManual published as the Schedule is considered more as guidelineguideline; Matters in the current “Implementation Manual” that the DHET wishes to have as

specific compliance/reporting matters to be moved into the Regulations itself; DHET and FEF Benchmarking to consider the “supplementary data” “supplementary data” which should

focus on a “methodology” of evaluating financial well-being of an HEI. Difference between must / should / will

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Process / comments…. Process / comments…. The draft Regulation document was publishedpublished for public comment on 29 November

2012 (Gazette nr. 35923

CommentsComments were submitted to the Department of Higher Education and Training (DHET) not later than 31 January 2013.

Comments received from twelve public higher education institutionstwelve public higher education institutions, the Office of the Auditor-General, the DG of the Western Cape Provincial Government, the Finance Executive Forum, and Ernst & Young.

Universities which submitted comments to the Department were Rhodes, UNISA, VUT, UJ, UFS, NWU, UCT,CUT,SU,CPUT, WITS NMMU and UP

The Department embarked on process to revise the Regulations for Reporting by Public Higher Education Institutions which entails intensive engagements with the sector

Amendments were proposed by various stakeholders which were considered. Comments were accordingly analysed, consolidated and engaged with the HE sector

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CONTEXT OF NEW REPORTING CONTEXT OF NEW REPORTING

REGULATIONSREGULATIONS::

REPORTING FRAMEWORKREPORTING FRAMEWORK A reporting framework is proposed to:

~ close gaps in Regulations~ this includes now a framework for planning, monitoring

evaluation

A framework seeks to give effect to some aspects in the Regulation where ambiguityambiguity existed which resulted in poor reporting.

The framework will not necessarily change university processes.

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Amendments Each public higher institution

must-  produce a Strategic PlanStrategic Plan and update it at least every five years;

 submit an Annual Performance Plan Annual Performance Plan to the Department annually • must be consistent with the Medium-Term Expenditure Framework

(MTEF) period; • must contain performance targets, and • should be aligned to the Strategic Plan.

 identify core set of indicators set of indicators it will use to monitor institutional performance.

 adopt a mid-year reporting systemmid-year reporting system, and submit a Mid-Year Performance Report as further provided for in these regulations; and

 ensure alignmentalignment between the Strategic Plan, Annual Performance Plan, Annual Report, budget documents and Mid-Year Performance report.

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1. 1. Annual Performance Plan Annual Performance Plan   

A public higher education institution must prepare an Annual Performance Plan setting out its intention for the upcoming financial year (n+1) as outlined below.

Submit by 15 December of each year for year n+1linked to the strategic goals and objectives as stated in the public higher education institution’s Strategic Plan;include commitments and/or agreements that the Council commitments and/or agreements that the Council has made to / with the Minister (such as enrolment targets, funding envelopes and infrastructure projects);include plansplans for meeting the strategic success factors identified by the institution;have SMART key performance indicators and performance targets SMART key performance indicators and performance targets including but not limited to-

• the headcount enrolment; • first time entering enrolment, • success rates inclusive of graduate output and throughput rates; and • research output inclusive of research output per instructional/research professional

staff.

 

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Annual Performance Plan…..Annual Performance Plan…..

include appropriate mid-year performance indicators;

include cash flow projections of revenue and expenditure for year n+1 and for years n+2 and n+3;

include the annual budget for the current financial year n and forward projections for the following three financial years (n+1, n+2 and n+3);

show separately income and budgeted expenditure for- primary activities, that is, teaching / learning and research; student housing; and other activities  

include a separate budget/financial plan for items of long-term capital expenditure and the financing of such, with disclosure of any proposed borrowings;

include an institutional risk register - critical identified risks (typically the top 10 to 20 risks);

  

Annual Performance Plan….Annual Performance Plan….

form the basis for the annual report of a public higher education institution;

be updated annually; and be approved by the Council.

Council may not approve a deficit budget, where projected expenditure is Council may not approve a deficit budget, where projected expenditure is above three percent of total income. above three percent of total income.

Where the approved budget for year n+1 or the forecast for either years n+2 and/or n+3 shows a deficit the Annual Performance Plan must show how Council plans to fund the budgeted deficit.

the first Annual Performance Plan to be submitted by 15 January 2015.

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2. Mid-year Performance Report

The Mid-Year Performance Report provides a progress update on the enrolment (size and shape) andand on financial performance of the institution against the Annual Performance Plan.

submit to the Department by 30 November of each year  include information up to 30 June of that year

• financial performance of the institution for the six month period • a comparison between the actual and budgeted revenue and

expenditure for the period; include progress and expenditure with regard to any earmarked funding allocations;include enrolment against ministerial approved targets; and be approved by Council;

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3. 3. Annual Report Annual Report

The annual report provides information on the performance of a public higher

education institution for the preceding calendar and financial year and must be signed by

the Chairperson of Council and the Vice-Chancellor.

must include a performance reportsubmit by 30 June of each year

report on the work of the institution and the extent to which the objectivesobjectives as set out in the Annual Performance Plan Annual Performance Plan have been met, and the extent to which the institution believes that it has met the objectives and goals of its Strategic Plan; include report of the Chairperson of Council’s assessment of the performanceassessment of the performance, degree of progress towards achieving the objectives set for the period under review in relation to the targets set for that period in the Annual Performance Plan;the Council's statement on governance; sustainability; transformationgovernance; sustainability; transformation; risk assessment and management of risk;Vice-ChancelloVice-Chancellor on management and administration;senate'ssenate's report to the council;institutional forum's (IF(IF) report to the council;

 

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Annual Report …..Annual Report …..

statement of the Finance Executive Finance Executive and the Chairperson of the Finance Committee on the financial results;

statement of the Audit Committee Audit Committee on how it has fulfilled its duties; the audited annual financial statementsaudited annual financial statements, which must comply with the International

Financial Reporting Standards (IFRS) where-

the consolidated Statement of Comprehensive consolidated Statement of Comprehensive Income should differentiate in separate columns between (1) Council Controlled unrestricted and designated, (2) restricted, and (3) student and staff accommodation restricted;

the annualised gross remuneration for Executive Management annualised gross remuneration for Executive Management is disclosed in a note showing the gross remuneration paid to each individual in their executive capacity and separated gross remuneration paid to him or her by the institution for other services;

the gross remuneration of each Council members gross remuneration of each Council members paid to him or her for his or her work as a Council member disclosed in a note to the annual financial statements;  

the report of the independent auditor independent auditor on the Annual Report.

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CONCLUSIONCONCLUSION

SHORT TITLE AND DATE OF COMMENCEMENT

 

These Regulations are called the Regulations for Reporting by Public Higher Education Institutions and shall come into effect on 1 January 2015.

WAY FORWARD:

DHET and FEF Benchmarking to consider the “supplementary data” which should focus on a “methodology” of evaluating financial well-being of an HEI.

Analysis of the Financial Health of the system using performance indicators

THANK YOUTHANK YOU

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