DRDLR Audit: Auditor-General input; Ingonyama Trust Annual Report, with Minister & Deputy Ministers

Meeting report

The Acting Chairperson was elected and he welcomed the Minister, Deputy Ministers and delegations.

Auditor General of South Africa (AGSA) briefing on audit
Mr Rienk Grobler, AGSA Senior Manager, said AGSA checked the strategic objectives were in line with National Development Plan and the Medium Term Strategic Framework. He noted the revised audit methodology where audit opinions were more focused and integrated and more specific about problematic indicators. He provide a four year performance analysis of the audit outcomes of DRDLR and its entities.

DRDLR
DRDLR received an unqualified audit opinion with findings on compliance. There were no material issues on performance information after adjustments, however, AGSA noted that DRDLR had not met some of its targets.

Agricultural Land Holding Account (ALHA)
ALHA received a clean audit (unqualified audit opinion without any findings) in 2016/17 and its performance was unchanged over the three previous financial years.

DEEDS
The Deeds Offices received clean audit in 2016/17 with was an improvement over the three previous years.

Ingonyama Trust Board (ITB)
ITB received a qualified audit opinion with findings but it had improved from an adverse audit opinion with findings from the previous year. There were no material issues on performance information after adjustments. ITB had not met a few of its targets.

Ms Amanda Zuma, AGSA Senior Manager, added that ITB and Ingonyama Trust were two separate entities. and while ITB received a clean audit, Ingonyama Trust received a qualified audit.

See AGSA document for full details.

Discussion
The Acting Chairperson, Mr P Mnguni (ANC), asked for recommendations to address the qualified audit challenge at Ingonyama Trust.

Ms Amanda Zuma, AGSA Senior Manager, replied that Ingonyama Trust challenges could be addressed if revenue collection and land valuations were examined.

Mr Mnguni mandated AGSA to send a written recommendation to the Committee to ensure that it engages Ingonyama Trust on its challenges.

Ms Zuma replied that AGSA had initially sent the report to the Ingonyama Trust but could send it to the Committee as well.

Mr Mnguni asked for time frames for receiving the ITB recommendation report.

Ms Zuma replied that the protocol was for AGSA to send it to the entity.

Mr Grobler confirmed the protocol and made a commitment to forwarding the ITB recommendation report when it was completed.

Mr Mnguni mandated AGSA to send the report to the Committee after ITB had received it. He observed that the Committee had not received the presentation document on time and it was not good enough.

Ms S Mbabama (DA) said that she received the document the previous night and agreed that the late receipt of the reports was not good. She asked AGSA for clarity on the recommendations on the recapitalisation and development indicators as it did not address the findings listed. She asked for the meaning of "the department had a substantial commitments balance" and what it meant that DRDLR did not have enough budget resources to deal with these commitments. She asked AGSA to state the process to address concerns on DRDLR not being able to monitor spending on grants and lease incomes. What were the challenges of DEEDS on irregular expenditure? She asked for the results of the fraud investigations at DRDLR and its entities. She asked for clarity on assurance and key controls for leadership, governance and financial performance management. She asked AGSA to make recommendations to urgently address the root cause: “Slow response by management to improving key controls and addressing risk areas” that led to poor internal controls at DRDLR and ITB. She asked why AGSA wanted to wait for the next financial year to implement the new accountability measure of engaging accounting officers in conversations that were insightful, relevant and impactful. She asked for clarity on the slide that addressed the correlation between low accountability, corruption and impact on service delivery

Ms N Magadla (ANC) asked if AGSA could hold DRDLR accountable if it did not comply with the Public Finance Management Amendment Act (PFMA) provisions.

Mr A Madella (ANC) asked why AGSA had not given any recommendations to the findings observed on ITB Programme 4. He commended AGSA for its recommendation for developing an average pricing list for goods and services. However, he asked why there was no indication of implementation of the preferential procurement policy for small and medium business in DRDLR and ITB. He asked AGSA to confirm if there was irregular expenditure at DEEDS and in which year.

Mr E Nchabeleng (ANC) complained about the lateness of the submission of documents by DRDLR and its entities. He asked AGSA to state the consequence of auditees not adhering to its recommendations.

The Acting Chairperson stated that the late documents were unacceptable but he requested patience from the Members. He observed that Mr Grobler had made some slips during his brief because Members could not reconcile his statements with the slides. He advised AGSA to channel recommendations through National Treasury on using average pricing lists for goods and services acquired. There were four findings on recapitalisation and development indicators but only three recommendations. Mr Grobler had not mentioned cabinet resolutions in the recommendations on recapitalisation and development indicators. The auditors had said that Ingonyama Trust and ITB were separate entities and he asked for clarity on how finances worked between Ingonyama Trust and ITB.

Mr Grobler replied that consequence management in holding auditees accountable was currently not part of the AGSA mandate but this was being reviewed. AGSA would send the ITB recommendations to the Committee. The recapitalisation targets will move to the DAFF from 2018/19 and were not part of the last financial year APP, however, AGSA had written a letter on the recapitalisation targets to the Chairperson. He stated that the findings on lack of monitoring should not be read in isolation.

Ms Mbabama interjected and stated that the findings and recommendations on the recapitalisation and development indicators did not correlate. The recommendation for an average pricing list for goods and services acquired did not align to any finding.

Mr Grobler apologised for the misalignments and noted the point.

The Acting Chairperson remarked that the slide on quality assurance on internal control had some misalignments. He advised Mr Grobler to prepare his documents thoroughly since findings and recommendations were the main tools used by Members to address challenges.

Mr Grobler explained the meaning of the phrase ‘commitments balance’. He stated that AGSA had not looked at the implementation of preferential procurement policies for small and medium business in DRDLR and ITB but the DRDLR could give more information on that. He could not comment on the irregular expenditure of DEEDS because the matter was already in court. However DRDLR had cases of irregular expenditure.

Ms Zuma clarified between the finances of Ingonyama Trust and ITB.

The Acting Chairperson asked for more clarity on the separate budgets of Ingonyama Trust and ITB.

Ms Zuma indicated that ITB had a budget but the Ingonyama Trust did not receive any appropriation funds.

The Acting Chairperson asked for more information on what led to the poor audit opinion for Ingonyama Trust.

Ms Zuma replied that the audit qualification was due to land and royalty revenue. The challenge arose because the royalty revenue needed to be transferred to the National Revenue Fund hence the negative audit opinion.

The Acting Chairperson remarked that the response was not sufficient but they would address the matter later. He asked if ITB conducted oversight on Ingonyama Trust.

Adv Jerome Ngwenya, Ingonyama Trust Board chairperson, replied that ITB administers Ingonyama Trust but did not carry out oversight on Ingonyama Trust.

Ms Mbabama asked DRDLR to clarify its substantial commitments.

The Acting Chairperson remarked that the Committee would ask DRDLR questions when it engaged with it. He mandated AGSA to make clarify in writing the recommendation made on the recapitalisation and development indicators. He asked for clarification on the legal aspects of Ingonyama Trust and if its revenue should be paid to the National Revenue Fund.

The Acting Chairperson asked Members to reflect on the meeting agenda.

Mr K Robertson (DA) expressed disappointments that some of the documents were received just before the meeting started. Hence it had affected the tone of the deliberations.

Ms Mbabama suggested that the Committee could hear the Commission on Restitution of Land Rights brief but hear ITB’s brief on 4 October 2017.

The Acting Chairperson asked ITB about its travel logistics to take in an extra day.

Adv Ngwenya indicated that the logistics were not suitable for an extra day.

Dr Fikisiwe Madlopha, ITB CEO, stated that ITB had sent the documents on Thursday 28 September 2017 and was surprised that Members had not received it earlier. She added that ITB had other scheduled meetings for 4 October 2017.

Mr Robertson remarked that it was unfortunate that this was happening for the second time and asked for the meeting to be deferred to another date beyond 4 October 2017.

Ms Magadla agreed that although the idea was good but the expenses would be high.

The Acting Chairperson clarified the process of circulating documents to Members and he agreed that there were challenges from the desk of the Committee Assistants who were not available at the meeting. He apologised to ITB for the mix-up and pleaded with Members to engage ITB.

Ingonyama Trust Board 2016/17 Annual Report
Adv Jerome Ngwenya, Ingonyama Trust Board chairperson, introduced Ms Jabulile Bhengu, ITB vice-chairperson, Dr Fikisiwe Madlopha, CEO and Mr Amin Mia, CFO. He addressed the arrangement of finances between Ingonyama Trust and ITB, stating that over R18 million was appropriated in 2016/17 but the rest of the budget accrued from the land occupied by people. The funds appropriated from transfer payments from DRDLR had been accounted for. The qualified audit opinion on Ingonyama Trust was due to the non-determination of land values and their non-disclosure in the annual financial statements. Also AGSA had questioned entitlement of Ingonyama Trust to receive contractual royalty income. He stated the strategies used to tackle the audit issues raised by AGSA.

Dr Fikisiwe Madlopha, ITB CEO, stated that although ITB had received an adverse audit opinion in 2015/16 it had made improvements in 2016/17. She highlighted the programme indicators where ITB had experienced underperformance in 2016/17 and gave the reasons for each of these.

Mr Amin Mia, ITB CFO, spoke to the consolidated financial performance, revenue streams, employee equity, operating expenditure trends and expenditure per programme. He stated why under expenditure occurred in the Administration and Rural Development programmes. He stated that new land projects did not commence due to staff capacity. Based on the relevance of determining land values, the valuation of the land project was considered. AGSA expressed an unqualified opinion on the ITB annual financial statements but the Ingonyama Trust received a qualified opinion.

Discussion
Mr Robertson asked for clarity on capacity constraints that were identified as challenges that did not allow ITB to meet its targets in the Administration and Land Management programmes during 2016/17. He asked ITB to state strategies it used to handle illegal land occupation. He asked ITB to give an update on its agricultural projects and confirm if the size of the land allocated for agricultural projects had increased over the years. He asked if the ITB land audit report would be incorporated in the National Land Audit. He asked ITB to give a breakdown on its salaries per grade level. He asked for clarity on the salaries for unskilled labour in the agricultural projects.

Mr Madella expressed concern why the targets had not been met and why under expenditure on programmes was high. He was concerned about ownership of land. He asked ITB to clarify if a party still had to pay rent even if his family had been granted permission to occupy (PTO) land in previous years.

Mr Nchabeleng was concerned about people paying rent on land that their family had lived on for years. He asked for the benefit that would accrue to people that had been granted PTO previously apart from bursaries and training for grandchildren. He asked ITB to confirm if the land was registered in the name of ITB or Ingonyama Trust.

Ms Mbabama asked ITB to explain what it meant by underperformance in communication. She observed that most of the challenges were due to capacity constraints but the report showed only two vacancies, the Real Estate Manager and Deputy Manager Administration positions. There were capable South Africans that had such skills so they should not be still vacant. She asked for more information on the six officials that were undergoing disciplinary procedures. She commended ITB on attaining payment of invoices to contractors within 30 days. She asked if the revenue from commercial enterprise benefited the people. She asked ITB to state why the rural development land audits had not been achieved. She asked ITB to explain royalty revenue.

The Acting Chairperson remarked that he would send his questions in writing but asked the ITB team to respond to questions asked.

Dr Madlopha, ITB CEO, replied that in the approved organogram there were two vacancies, but 38 vacant posts needed to be filled to ensure the smooth running of the entity. Hence, the organogram was being reviewed. People occupy land illegally for different reasons. The response on agricultural projects and strategies used to handle illegal land occupation would be forwarded to the Committee in writing. The land audit started but because of illegal occupation of land, it did not allow a larger number of people to benefit. The presentation grouped the salary bands but the information on specific levels can be forwarded. The work streams in ITB are clearly outlined and security personnel are outsourced. The old dispensation serviced the use of PTOs. However, a combination of lease and PTO is now used. A meeting was organized with the king about security of tenure and the report would be presented when it is finalised. Ingonyama Trust land is communally owned hence no one can say the land belongs to a person or his family. All parties moved out based on their consent and ITB intervened on behalf of parties that did not initially consent to the movement. ITB made relocation plans for parties and funded such relocations. Communication reports were used previously as performance indicators, however, the Board wanted detailed reports as years progressed.

Ms Mbabama interjected and asked Dr Madlopha to state the kind of reports.

Dr Madlopha indicated that the reports were media communications.

Ms Mbabama asked Dr Madlopha to confirm if ITB had not given any media communications during the year

Dr Madlopha replied that there were media communications but they were not accepted by the Board. Adverts for posts were made but did not attract the right officers. The target for land parcels was not met because valuation was not completed. The Agribusiness Development Agency has been identified for beneficiation and marketing. In 2016/17 ITB had limited itself to only one agency but has increased the number of agencies for 2017/18. Underperformance in the indicator for training occurred because the training officer died.

Mr Amin Mia, ITB CFO, replied that the deficits recorded in the finances of ITB were not from the transfer payments but on the Trust funds. Similarly, under expenditure occurred in the Trust funds.

The Acting Chairperson asked for information on the disciplinary cases.

Judge Ngwenya replied that no costs were involved in the disciplinary cases but the employees involved were on suspension with full pay pending the outcome of the cases. He gave the time frame to commence disciplinary measures.

The Acting Chairperson suggested that follow-up questions could be forwarded in writing to ITB.

Mr Robertson said that he had follow-up questions on the land claim but would forward it to ITB.

Mr Nchabeleng asked if the ITB owned land.

Judge Ngwenya replied that only the Ingonyama Trust owned land.

The Acting Chairperson thanked the Minister and Deputy Ministers for their presence and outlined the programme for 4 and 5 October 2017.

Mr Robertson asked if Member would receive the documents on the Restitution of Land Rights Amendment Bill before the meeting date.

Mr Nchabeleng remarked that the Committee needed to engage ITB on documents that were issued in its name.

The Acting Chairperson remarked that the Committee could resort to stringent measures to get information from ITB on the specific issues referred to by Mr Nchabeleng. He explained the process on the Restitution of Land Rights Amendment Bill and asked the Committee support team to circulate the Bill to Members before the meeting date. He invited the Minister to give his remarks on the meeting.

Minister Gugile Nkwinti thanked the Committee for allowing his team to listen to the deliberations. He stated that the grey areas between ITB and Ingonyama Trust were the administrative role of the Board and oversight. He made commitments on his availability for the meeting of 4 October 20017.

The Acting Chairperson asked the Committee Secretary to confirm the availability of the Chairperson for the meetings of 4 and 5 October 2017.

The Committee Secretary appealed to Members to allow the Acting Chairperson to continue in his acting position until 5 October 2017.

The meeting was adjourned.