Revision of the National School of Government
Description: Revision of the National School of Government Funding Model: A presentation to the Portfolio Committee on Public Service and Administration Prof. Richard M Levin Principal: National School of Government 14 June 2017 Purpose The purpose of
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slide1. Revision of the National School of Government Funding Model: A presentation to the Portfolio Committee on Public Service and Administration Prof. Richard M Levin
Principal: National School of Government
14 June 2017<br>
slide2. Purpose The purpose of this presentation to the Portfolio Committee is to:
Provide a background to the current funding and business model of the National School of Government
Reflect on the challenges that the National School of Government is facing with regard to the current funding model
Propose and seek the support of this Portfolio Committee for a revised funding model 2<br>
slide3. Key Message The National School of Government is legislatively mandated to provide training or facilitate the provision of training in the public service (Public Service Act). In fulfilling this mandate, it recovers costs for revenue generation to augment the Training Trading Account (TTA - Public Finance Management Act) for financial viability and institutional sustainability
The current funding model is made up of partial funding appropriated by Parliament and income derived from cost recovery through training course fees, which is managed in the TTA. All costs associated with the design and development of learning material and implementation of training courses from the training fees are recovered
The revision of the current funding model comes at a time of an array of influencing factors, such as government’s austerity measures, budget cuts imposed on the NSG and its impact on the funding model, and NSG’s ability to remain competitive within the training and development landscape
International reports and benchmarked studies of funding models of schools of government indicate that the models vary from country to country. There is, therefore, no single model within national schools of government for funding allocation 3<br>
slide4. BACKGROUND 4<br>
slide5. Background “In the past, public sector training institutions did not compete with private sector training institutions….nowadays public service training institutions are managed more and more like private enterprises. They have to face market competition and compete on a more or less equal footing with private sector training providers.” (OECD report, 1997)
”Schools of government are uniquely positioned to play a central role in developing the necessary skills and competencies to meet government needs and priorities.” (OECD Survey Report, 2017)
The NSG (then PALAMA) was “set up as a training institute equipped to run short-term courses” and “is constrained by its demand-led funding model” with its “reliance on buying in training capacity” (National Development Plan – 2030)
The NDP recommends that the institution’s work be better aligned with the wider objectives of professionalising the public service, and redesigning the funding and training model so that it receives core funding for training provided by in-house staff 5<br>
slide6. Background 6 The competitive nature of public service training delivery was underscored in the 1998 White Paper on Public Service Training and Education, which indicated the policy option of “centralised setting of norms and standards, together with decentralised provision by state and non-state providers in a competitive framework”.
The option was selected since it assumed that it “combines maximum creativity and flexibility at the delivery end, but without undermining the need to build a unified public service with a common culture and value system”.
“Government will encourage the development of a multiplicity of education and training providers operating as equals in a market environment. These will include internal (e.g. SAMDI and provincial training bodies) and external providers such as universities, universities of technology, NGOs and private training organisations” – White Paper
The Minister of Finance established and opened the Training Trading Account (TTA) in April 2001 in terms of Treasury Regulation 19 for the purpose of revenue generation. Currently, the School is required to recover all costs associated with the training. This includes costs associated with developing materials, marketing, logistics, and infrastructure for the School
There are real challenges with implementing the model.<br>
slide7. Background 7 The table below is a five-year indication of the NSG funding from National Treasury (Vote), revenue generated (Trade) as well as the number of public servants trained
* This figure includes open online learning
The Trading Account accumulated reserves to the amount of R91.2m, which were used to offset against the budget cut imposed by the National Treasury in the 2016/17 budget.<br>
slide8. CURRENT FUNDING MODEL 8<br>
slide9. Current Funding Model The funding allocation to the NSG Vote was significantly reduced in the 2016/17 financial year and is insufficient to cover overheads such as the staff establishment and infrastructure costs, and has to be augmented by revenue generated
The current funding model does not generate sufficient resources to invest in physical and ICT infrastructure. As a result, the NSG has not been able to keep up with technological advancements in the training environment that would have rendered it more efficient and cost effective
The NSG does remain fairly competitive through the procurement processes as the pricing for most of the courses and programmes are lower in pricing as compared to other service providers.Nevertheless, it is not the preferred training provider for government, thus placing it in competition with other service providers. This requires government departments to follow the procurement process of obtaining three quotations from service providers
Many departments do not honour the prescribed 30-day payment of invoices for services rendered. This increased the debtors book significantly, to a point where there is a potential bad debt of R17.5m to write off in the current year. In response, the NSG introduced a pre-payment method when booking for training 9<br>
slide10. Course Tariff Structure In December 2007, the then PALAMA submitted a tariff structure to National Treasury that was provisionally approved. The structure was based on the model of being a facilitator of training not a provider of training
The NSG undertook a review and analysis of the current tariff structure over the past 5 financial years. The number of persons trained, the escalating costs of direct and indirect cost due to inflation and other increases have a direct influence on the daily cost
The approved new tariff structure (approved in April 2017) incorporates the different modes of training delivery, partnerships and charges associated with delivering training activities
The new tariff structure model has the following components: university/other partner-developed courses; NSG courses/workshops; e-Learning courses; professional advisory/consulting; conferences and seminars; and international training 10<br>
slide11. REVISION OF THE NSG FUNDING MODEL 11<br>
slide12. Benchmarking of Funding Models The funding models of three African institutions (Liberia Institute of Public Administration, Rwanda Management Institute, and Civil Service College Uganda) were comparatively analysed and it was found that cost recovery and revenue generation remain a challenge, and have not yielded the desired effect (source: World Bank report April 2016: Strengthening Public Service in the Context of Fragility)
In Liberia, for example, the institute receives partially funding of US $1 million to cover a share of operating expenses, but cost recovery remains a challenge in the collection of fees from ministries and departments with up to 50-65% fees not being paid. Rwanda can only generate 2% of own revenue
According to the OECD, there is no single model within national schools of government for funding allocation 12 Source: National Schools of Government: Building Civil Service Capacity, January 2017 OECD Report Preliminary Version<br>
slide13. Benchmarking of Funding Models According to the OECD Report (2017):
Many schools of government rely on a fee-for-service model to fund training activities, which are paid for by a governmental institution. In countries where reductions in the training budgets for governmental institutions are prevalent, this may influence the resource base of schools
In some countries, “training activities do not entail a service fee,” which could be interpreted to mean that the national school of government receives a form of base funding for its activities as part of the public administration budget, or benefits were derived from an institutionalised levy on departmental or agency budgets to fund their activities
Some institutions, for example Canada’s School of Public Service, have begun to consider alternatives to fee-for-service and cost-recovery models and are instead opting for a capitation model. The benefit of this approach, is that schools gain predictability in their budgeting and resource plans and can focus on developing and providing training specifically tailored for government, rather than compete with other providers in terms of price for similar course offerings 13<br>
slide14. Revising the current funding model: Value Proposition 14 Centre of Excellence for applied workplace skills development<br>
slide15. Revising the current funding model In analysing the training budgets of national government departments for the 2017/18 financial year as contained in the Expenditure of National Estimates (ENE), national government alone has a projected training expenditure of R2,7 billion. This, however, does include occupational specific personnel (e.g. nurses, police, defence, etc.)
The NSG will focus on training in generic administration, management and leadership for public servants. Additionally, it will focus on compulsory courses as directed by the Minister. The compulsory courses will be implemented through a phased-in incremental approach over a 5 year period and taking into account each departments needs or challenges
Over time the NSG will build capacity to assess the professional development requirements of the entire public sector and whether these are being met
The complexities of the division of revenue currently exclude the provincial governments from the proposed funding model. We remain cognisant that once compulsory courses are effected, that provinces will also require training in these. The NSG will continue servicing its relationship with the provincial governments and local governments through memorandum of agreements 15<br>
slide16. Revising the current funding model The NSG’s current allocation can be augmented by reducing the 1% training budget allocations to national departments by 7.5% (3% for Departments with established Academies and sectoral colleges) estimated at R103,9m in 2017/18. We are currently engaging with the DPSA to verify ENE personnel information on training figures with the PERSAL system
National Treasury would have to redirect these budget cuts as a vote allocation to resource the NSG
The NSG in exchange for the additional funding will provide an indicative list of mandatory programmes to address key departmental capacity development requirements
The Departments will be allocated a set number of persons training days (69,264 training days national government in 2017/18) to be trained at no cost for contact sessions and unlimited open online training sessions 16<br>
slide17. Revising the current funding model The three-year breakdown of the revised funding model is as follows: 17 INDICATIVE<br>
slide18. Implementing the revised funding model The National Treasury plays a crucial role in the implementation of the proposed funding model, such as defining the legal instrument for the top slicing of the training budgets
The NSG, together with the DPSA, National Treasury and DPME should identify and agree on a list of compulsory courses for national departments – which only the NSG would be offering. This would narrow down the niche areas and targeted focus by the NSG
The MPSA will introduce a directive on compusory courses
The NSG needs to identify (and increase internal and on-board) dedicated capacity to focus on the delivery of these compulsory courses to national departments. The establishment of the Sales Unit will market and sell NSG course offerings, which must contribute towards cost recovery and revenue generation through cost-of-training sales
The NSG should also be recognised as the preferred service provider for public service training, and departments should be exempted from following competitive procurement processes (three quotations) when acquiring services from the School 18<br>
slide19. Recommendations It is recommended that the Portfolio Committee:
Notes the background to the current funding model and its implementation challenges
Notes the need for further engagements with National Treasury on defining the legal instrument for the revised funding model
Notes the need for engagements with the DPSA, National Treasury and DPME to identify the compulsory programmes and issuing of ministerial directives
Notes the proposal to recognise the NSG as the preferred service provider for public service training, and departments should be exempted from following competitive procurement processes (three quotations) when acquiring services from the School
Deliberates and provide inputs towards the proposed funding model
Supports the tabling of the revised funding model before Cabinet for approval, once other consultative processes have been concluded 19<br>
slide20. Thank you 20<br>
Principal: National School of Government
14 June 2017<br>
slide2. Purpose The purpose of this presentation to the Portfolio Committee is to:
Provide a background to the current funding and business model of the National School of Government
Reflect on the challenges that the National School of Government is facing with regard to the current funding model
Propose and seek the support of this Portfolio Committee for a revised funding model 2<br>
slide3. Key Message The National School of Government is legislatively mandated to provide training or facilitate the provision of training in the public service (Public Service Act). In fulfilling this mandate, it recovers costs for revenue generation to augment the Training Trading Account (TTA - Public Finance Management Act) for financial viability and institutional sustainability
The current funding model is made up of partial funding appropriated by Parliament and income derived from cost recovery through training course fees, which is managed in the TTA. All costs associated with the design and development of learning material and implementation of training courses from the training fees are recovered
The revision of the current funding model comes at a time of an array of influencing factors, such as government’s austerity measures, budget cuts imposed on the NSG and its impact on the funding model, and NSG’s ability to remain competitive within the training and development landscape
International reports and benchmarked studies of funding models of schools of government indicate that the models vary from country to country. There is, therefore, no single model within national schools of government for funding allocation 3<br>
slide4. BACKGROUND 4<br>
slide5. Background “In the past, public sector training institutions did not compete with private sector training institutions….nowadays public service training institutions are managed more and more like private enterprises. They have to face market competition and compete on a more or less equal footing with private sector training providers.” (OECD report, 1997)
”Schools of government are uniquely positioned to play a central role in developing the necessary skills and competencies to meet government needs and priorities.” (OECD Survey Report, 2017)
The NSG (then PALAMA) was “set up as a training institute equipped to run short-term courses” and “is constrained by its demand-led funding model” with its “reliance on buying in training capacity” (National Development Plan – 2030)
The NDP recommends that the institution’s work be better aligned with the wider objectives of professionalising the public service, and redesigning the funding and training model so that it receives core funding for training provided by in-house staff 5<br>
slide6. Background 6 The competitive nature of public service training delivery was underscored in the 1998 White Paper on Public Service Training and Education, which indicated the policy option of “centralised setting of norms and standards, together with decentralised provision by state and non-state providers in a competitive framework”.
The option was selected since it assumed that it “combines maximum creativity and flexibility at the delivery end, but without undermining the need to build a unified public service with a common culture and value system”.
“Government will encourage the development of a multiplicity of education and training providers operating as equals in a market environment. These will include internal (e.g. SAMDI and provincial training bodies) and external providers such as universities, universities of technology, NGOs and private training organisations” – White Paper
The Minister of Finance established and opened the Training Trading Account (TTA) in April 2001 in terms of Treasury Regulation 19 for the purpose of revenue generation. Currently, the School is required to recover all costs associated with the training. This includes costs associated with developing materials, marketing, logistics, and infrastructure for the School
There are real challenges with implementing the model.<br>
slide7. Background 7 The table below is a five-year indication of the NSG funding from National Treasury (Vote), revenue generated (Trade) as well as the number of public servants trained
* This figure includes open online learning
The Trading Account accumulated reserves to the amount of R91.2m, which were used to offset against the budget cut imposed by the National Treasury in the 2016/17 budget.<br>
slide8. CURRENT FUNDING MODEL 8<br>
slide9. Current Funding Model The funding allocation to the NSG Vote was significantly reduced in the 2016/17 financial year and is insufficient to cover overheads such as the staff establishment and infrastructure costs, and has to be augmented by revenue generated
The current funding model does not generate sufficient resources to invest in physical and ICT infrastructure. As a result, the NSG has not been able to keep up with technological advancements in the training environment that would have rendered it more efficient and cost effective
The NSG does remain fairly competitive through the procurement processes as the pricing for most of the courses and programmes are lower in pricing as compared to other service providers.Nevertheless, it is not the preferred training provider for government, thus placing it in competition with other service providers. This requires government departments to follow the procurement process of obtaining three quotations from service providers
Many departments do not honour the prescribed 30-day payment of invoices for services rendered. This increased the debtors book significantly, to a point where there is a potential bad debt of R17.5m to write off in the current year. In response, the NSG introduced a pre-payment method when booking for training 9<br>
slide10. Course Tariff Structure In December 2007, the then PALAMA submitted a tariff structure to National Treasury that was provisionally approved. The structure was based on the model of being a facilitator of training not a provider of training
The NSG undertook a review and analysis of the current tariff structure over the past 5 financial years. The number of persons trained, the escalating costs of direct and indirect cost due to inflation and other increases have a direct influence on the daily cost
The approved new tariff structure (approved in April 2017) incorporates the different modes of training delivery, partnerships and charges associated with delivering training activities
The new tariff structure model has the following components: university/other partner-developed courses; NSG courses/workshops; e-Learning courses; professional advisory/consulting; conferences and seminars; and international training 10<br>
slide11. REVISION OF THE NSG FUNDING MODEL 11<br>
slide12. Benchmarking of Funding Models The funding models of three African institutions (Liberia Institute of Public Administration, Rwanda Management Institute, and Civil Service College Uganda) were comparatively analysed and it was found that cost recovery and revenue generation remain a challenge, and have not yielded the desired effect (source: World Bank report April 2016: Strengthening Public Service in the Context of Fragility)
In Liberia, for example, the institute receives partially funding of US $1 million to cover a share of operating expenses, but cost recovery remains a challenge in the collection of fees from ministries and departments with up to 50-65% fees not being paid. Rwanda can only generate 2% of own revenue
According to the OECD, there is no single model within national schools of government for funding allocation 12 Source: National Schools of Government: Building Civil Service Capacity, January 2017 OECD Report Preliminary Version<br>
slide13. Benchmarking of Funding Models According to the OECD Report (2017):
Many schools of government rely on a fee-for-service model to fund training activities, which are paid for by a governmental institution. In countries where reductions in the training budgets for governmental institutions are prevalent, this may influence the resource base of schools
In some countries, “training activities do not entail a service fee,” which could be interpreted to mean that the national school of government receives a form of base funding for its activities as part of the public administration budget, or benefits were derived from an institutionalised levy on departmental or agency budgets to fund their activities
Some institutions, for example Canada’s School of Public Service, have begun to consider alternatives to fee-for-service and cost-recovery models and are instead opting for a capitation model. The benefit of this approach, is that schools gain predictability in their budgeting and resource plans and can focus on developing and providing training specifically tailored for government, rather than compete with other providers in terms of price for similar course offerings 13<br>
slide14. Revising the current funding model: Value Proposition 14 Centre of Excellence for applied workplace skills development<br>
slide15. Revising the current funding model In analysing the training budgets of national government departments for the 2017/18 financial year as contained in the Expenditure of National Estimates (ENE), national government alone has a projected training expenditure of R2,7 billion. This, however, does include occupational specific personnel (e.g. nurses, police, defence, etc.)
The NSG will focus on training in generic administration, management and leadership for public servants. Additionally, it will focus on compulsory courses as directed by the Minister. The compulsory courses will be implemented through a phased-in incremental approach over a 5 year period and taking into account each departments needs or challenges
Over time the NSG will build capacity to assess the professional development requirements of the entire public sector and whether these are being met
The complexities of the division of revenue currently exclude the provincial governments from the proposed funding model. We remain cognisant that once compulsory courses are effected, that provinces will also require training in these. The NSG will continue servicing its relationship with the provincial governments and local governments through memorandum of agreements 15<br>
slide16. Revising the current funding model The NSG’s current allocation can be augmented by reducing the 1% training budget allocations to national departments by 7.5% (3% for Departments with established Academies and sectoral colleges) estimated at R103,9m in 2017/18. We are currently engaging with the DPSA to verify ENE personnel information on training figures with the PERSAL system
National Treasury would have to redirect these budget cuts as a vote allocation to resource the NSG
The NSG in exchange for the additional funding will provide an indicative list of mandatory programmes to address key departmental capacity development requirements
The Departments will be allocated a set number of persons training days (69,264 training days national government in 2017/18) to be trained at no cost for contact sessions and unlimited open online training sessions 16<br>
slide17. Revising the current funding model The three-year breakdown of the revised funding model is as follows: 17 INDICATIVE<br>
slide18. Implementing the revised funding model The National Treasury plays a crucial role in the implementation of the proposed funding model, such as defining the legal instrument for the top slicing of the training budgets
The NSG, together with the DPSA, National Treasury and DPME should identify and agree on a list of compulsory courses for national departments – which only the NSG would be offering. This would narrow down the niche areas and targeted focus by the NSG
The MPSA will introduce a directive on compusory courses
The NSG needs to identify (and increase internal and on-board) dedicated capacity to focus on the delivery of these compulsory courses to national departments. The establishment of the Sales Unit will market and sell NSG course offerings, which must contribute towards cost recovery and revenue generation through cost-of-training sales
The NSG should also be recognised as the preferred service provider for public service training, and departments should be exempted from following competitive procurement processes (three quotations) when acquiring services from the School 18<br>
slide19. Recommendations It is recommended that the Portfolio Committee:
Notes the background to the current funding model and its implementation challenges
Notes the need for further engagements with National Treasury on defining the legal instrument for the revised funding model
Notes the need for engagements with the DPSA, National Treasury and DPME to identify the compulsory programmes and issuing of ministerial directives
Notes the proposal to recognise the NSG as the preferred service provider for public service training, and departments should be exempted from following competitive procurement processes (three quotations) when acquiring services from the School
Deliberates and provide inputs towards the proposed funding model
Supports the tabling of the revised funding model before Cabinet for approval, once other consultative processes have been concluded 19<br>
slide20. Thank you 20<br>