Here is the problem. The current planning and budgeting system for elementary education is designed to centralise rather than decentralise school functioning. And, in so doing, serves to dis-empower SMCs. When it comes to crucial activities related to school managementhiring/ firing teachers, building infrastructure, determining the nature and quantum of teaching material neededit is the state bureaucracy and not the SMC that controls the purse strings and decision-making powers. Break down the elementary education budget and youll find that SMCs have expenditure authority over a tiny set of school grants that account for somewhere between 5-6% of the annual education budget. Consequently, even if an SMC were to take decisions for the school, it is left to the state bureaucracy to approve and implement these decisions.
Last year, I discovered how this works when I was part of an exercise aimed at mobilising SMCs to make plans for government schools in Hyderabad. In one instance, the SMC wanted, amongst other things, to purchase desks and chairs, repair a roof, and install a water tank for its school. But with the exception of the water tank, all other decisions had to go through the labyrinthine bureaucratic approval process and we know how long that can take.
This desire to centralise is so deeply ingrained in our administrative culture that even for the small amounts of money transferred to decentralised bodies like the SMC, the bureaucracy manages to impose rules that enable it to retain control over decision making. To explain, although SMCs have expenditure control over 5-6% of the education budget, the financial rules are designed such that these monies arrive in school bank accounts tied to very specific expenditure norms. So, if an SMC wants to spend more than the norm on, say, purchasing teacher material, or if a school wants to invest more in improving childrens reading capabilities by dipping in to its infrastructure maintenance fund, it cant.
Added to this, in the interest of streamlining local accounting, the bureaucracy often issues rules specifying the minutest of details on how monies ought to be spent. In some states, the rulebook for spending money by the SMC even specifies the amount of money that should be paid to the local sweeper!
This tendency to centralise can seriously affect the quality of expenditures. Schools, in the expectation of orders from the administration, tend to hold off on expenditures till they receive instructions. And when these instructions do arrive, they often require schools to spend money on things they dont need. This problem is best illustrated through the story of school expenditure in Purnea, Bihar. Purnea is an extremely backward district in eastern Bihar, with many schools that operate, quite literally, under a tree. In fact, the local administration has a special term for thembuilding-less schools. Despite the existence of many building-less schools in the district, about a year ago, the local administration issued an order requiring all schools to use their school grants to purchase fire extinguishers. While surveying school funds in the district, my colleagues actually came across a building-less school that had to buy a fire extinguisher. In this instance, the headmaster claimed to have requested the shopkeeper to hold on to the fire extinguisher, after he bought it, till he received money to construct the school building!
Governance inefficiencies serve to exacerbate these problems. For the last few years we have been running a surveyPAISAthat tracks fund flows and expenditure in elementary education. One of our main findings is that funds take an incredibly long time to travel through the system and most often arrive in schools more than half way through the financial year. This results in serious pressure to spend quickly in order to be eligible for the next round of funding.
So, where do solutions lie Breaking down this centralised system is not going to be an easy task. But here are three things that the ministry can do to create an environment that favours greater SMC participation.
First, and foremost, the ministry must undertake a systematic activity mapping to determine which activities and decision-making powers ought to be transferred to the SMCs. If one were to follow first principles of decentralisation, this mapping ought to be based on the principle of subsidiaritythat which can be done at the local level, ought to be done at the local level.
Second, redesign the transfer system away from line-item based devolution that enables bureaucrats to impose rules on expenditure, to an untied block grant system so that SMCs can spend based on decisions taken by them and not on rules made by the administration. To deal with accounting concerns, the district can identify broad areas of expenditure (for example, infrastructure, maintenance) but schools must have the flexibility to spend on activities prioritised by them. The quantum of the grant could be determined on the basis of per-child enrolment in schools, thus linking grant amounts with school-specific characteristics.
Third, to ensure financial transparency and deal with problems of leakagean oft repeated reason for centralising finances and decision makingbuild a real-time management information system to track expenditures. Efforts to do this are already under way for some programmes like the MGNREGA, and the ministry could well leverage these efforts to build tracking systems for its programmes.
Fourth, build in incentives to speed up fund flows to schools. For instance, a reward and sanction based incentive structure can be built where sub-national governments that delay transfers are made to pay schools an interest on delays.
The author is director, Accountability Initiative, and senior research fellow, Centre for Policy Research