The joint meeting of the Portfolio and Select Committees on Women, Children, Youth and People with Disabilities were briefed by the Office of the Auditor-General on the audit report of the Commission of Gender Equality for the financial year 2009/10. The CGE had received a qualified audit opinion and the basis for the qualification related to irregular expenditure, contingent liabilities, trade and other payables from exchange transactions and staff costs. Attendant on the qualified opinion were items listed under 'emphasis of matter' which included material losses, fruitless and wasteful expenditure and there was a 'going concern' risk. The CGE had progressed from receiving a disclaimer in 2008/09 but still had serious challenges to address in terms of supply chain management, the lack of an internal audit unit and a history of financial mismanagement and non-compliance, forensic investigations and litigation. Several areas of non-compliance were also identified in their pre-determined performance objectives as the reported information was not consistent with the planned objectives, indicators and targets. Overall the performance management was insufficient for the Auditor-General to express an opinion.
The meeting was then briefed by the CEO of the CGE on their Annual Report and it was confirmed that the CGE had faced major challenges in 2009/10 such as a lack in continuity in leadership, capacity and internal control mechanisms. A two phased turnaround strategy had been adopted prioritising improving the Commission's poor financial performance and conducting a strategic review. The Service Delivery Programme was rendered through its three key operational departments: Public Education and Information, Legal Services and Research to achieve the objectives of their Strategic Plan of 2008-2013. In line with this strategic plan, programmes were conducted in the CGE's five key themes: Gender-based Violence; Gender and Poverty; Gender: Democracy and Good Governance; Gender: Culture, Religion and Traditional Practices and Gender: HIV/AIDS.
The Acting CFO explained the 2009/10 annual financial statements: The CGE had received an allocation of R49,112 million . Expenditure was R51,6 million and this resulted in a deficit of R2,5 million. Key cost drivers were staff costs and depreciation. Irregular expenditure of R5,949,154 had been incurred in 2009/10 and R8,891,563 in 2008/09. Thus the total amount awaiting condonement was R14,840,718. However the continued existence of the GCE was entrenched in the Constitution and funding from the National Treasury was guaranteed.
Members were unanimous in their condemnation of the mismanagement that had resulted in the acute financial predicament of the CGE. The majority of the questions were about the irregular expenditure and the tacit expectation that it should be condoned and not accounted for. Members felt that an investigation should be undertaken and the existence of fraudulent activity should not be ruled out. Members wanted to know which measures had been implemented to remedy the problems. Members were concerned that tax-payer's money was being wasted and that the guarantee of funding from Treasury had led to complacency by management. They also queried expenditure of R40,000 on Bafana Bafana jerseys for the FIFA World Cup.
A concern of the meeting was there appeared to be little correlation between the Annual Report and the Strategic Plan of 2008-2013 and the GCE had reported according to its operational departments and not in terms of the thematic areas which were the basis of their pre-determined objectives. There was an admission made by the both the CGE chairperson and CEO that the Strategic Plan document was flawed and that it was under review. Members felt that this should have been communicated to the National Treasury as stipulated in the regulations. Many of the questions posed by members were left unanswered and a follow up session was planned.
Briefing by the Office of the Auditor-General of South Africa (AGSA)
Mr Lourens van Vuuren, AGSA Acting Business Executive, referred to the Auditor-General's report contained in the Annual Report of the CGE. He explained the three part structure of the audit report. Firstly, it expressed the AG's opinion on the financial statements of the entity which in this instance was a qualified opinion with the basis of the qualified opinion being irregular expenditure, contingent liabilities, trade and other payables and staff costs. Secondly, it dealt with legal and regulatory requirements including the findings on the audit of the pre-determined objectives and any other non-compliance with key legislation such as the Public Finance Management Act (PFMA), Treasury Regulations and the entities own enabling legislation. Finally, it dealt with internal control. He noted that the negative reporting in the audit could be linked to three areas of internal control i.e. leadership, governance and financial management issues. Under internal control, the AG highlighted leadership and governance issues which had to be addressed by the CGE.
Mr van Vuuren elaborated on what determined the 'emphasis of matter' attendant on the AG's qualified opinion which cited material losses, a restatement of corresponding figures, fruitless and wasteful expenditure and that there was a 'going concern' risk. Full disclosure was imperative and thus if the material losses had not been fairly stated and fully disclosed it would have been included as a part of the qualified opinion. In contrast, the irregular expenditure incurred by the GCE had not been disclosed or been accurately recorded and therefore it was not included under 'emphasis of matter' and was instrumental in the qualified opinion.
Referring to the summary he had provided on the comparison of the CGE's audit outcomes of 2008/09 to that of 2009/10 (see document), it indicated some improvement in the reporting year. In 2008/09 the CGE had received a disclaimer and had progressed to a qualified opinion for the 2009/10 financial year. He noted that a disclaimer was one of the worst opinions that an auditor could express and the basis for this would be that the auditor could not obtain adequate and substantive evidence to be able to express an opinion. Historically the problem at the CGE was that the AGSA could not obtain the documentation required to conduct an audit and the list disclaimed was extensive. The qualified report it had received for 2009/10 related to four items and reflected an improvement in the audit outcomes of the CGE.
In respect of the pre-determined objectives, the comparison revealed that there was no strategic plan or quarterly reporting for 2008/09 and that the performance information was not received in time. In 2009/10 the information was received and it was possible to take the audit one step further by evaluating how accurate, complete and well presented the information was. However, several areas of non-compliance were identified such as a lack of an effective, efficient and transparent system of internal control. There was also inadequate quarterly reporting and reasons for variances between actual achievements and planned targets were not documented. Further findings were that the reported information was not consistent with planned objectives, indicators and targets and the reliability of reported performance information could not be determined. Overall the Performance management information was insufficient for the AG to express an opinion.
Mr van Vuuren expanded on the basis for the qualifications as listed by the AG. The first item that was qualified was under 'Trade and other payables from exchange transactions' which related to leave pay accrual which was in excess of the number of days that staff were allowed to carry forward at year end. This should have been converted into Rand value according to the different salary scales of the respective staff members and accurately recorded. Provision was made for more than the maximum number of leave days allowed and the AG could not obtain reasonable assurance that the remaining balance of the leave pay provision was fairly stated. This had to do with record keeping and ensuring that individual staff members leave was accurately accounted for. He noted that the CGE should be able to rectify this in the current financial year.
The next item qualified was staff costs and here there was a difference between the payroll system and the staff costs reflected in the financial statements. The monthly payroll did not correspond with what was recorded in the general ledger on which the annual financial statements were based and there was a difference of R3,133,685 at year end. A reconciliation should be done on a monthly basis and this was part of the key controls which the AG had communicated to the CGE. The implementation of these key controls would ensure that the financial statements were fairly stated by financial year end.
The Chairperson asked what happened if the figures did not reconcile at the end of the month.
Mr van Vuuren said that it could be indicative of salary payments that were not made through the payroll system and it had to be investigated to see if payment had been made to a valid employee. He noted that salary payments had a tax implication and all salary payments should go through the payroll system which was linked to the tax system and this ensured that IRP5 forms issued were accurate. It was possible that someone was paid who was not on the payroll. This which could happen in the case of new employees when information was incomplete but this had to be put through the payroll at some stage.
Mr van Vuuren stated that the next item qualified was irregular expenditure that was not disclosed in the financial statements. A further dimension, of relevance to the committee, was why the irregular expenditure had occurred. The CGE had not had a supply chain unit and although the CGE was a small concern the supply chain management regulations required that it existed even if it was only one or two person responsible for the function. There were rules and regulations that the supply chain management had to comply with in procuring goods and services and whenever these regulations were not followed it resulted in irregular expenditure. The GCE did not review all its expenditure to identify and quantify and disclose all irregular expenditure incurred. Thus the AG could not obtain sufficient appropriate audit evidence on the completeness of irregular expenditure to express an opinion on whether it was fairly stated. If there was irregular expenditure that was not condoned by National Treasury, it was carried forward to the next year. In the case of the CGE there was an amount of R14,840,718 awaiting condonement. This reflected an opening balance of R8,891,563 and an amount of R5,949,154 incurred during 2009/10. He explained that condonement was not axiomatic but only done in very specific instances and going forward this irregular expenditure had to be properly investigated in terms of the PFMA. It had to be determined whether someone had to be held responsible for it and if the entity had received value. In some instances they did receive value but the correct processes had not been followed.
The Co-chairperson asked for further clarity on the AG's interpretation of condonement and the waiving of so much money.
Mr van Vuuren replied that in terms of the PFMA all irregular expenditure had to be investigated. This did not imply that the entity had not received value in all cases and this was a determination that was made at the end of the investigation and judgement had to be reserved till then.
The Co-chairperson stated that investigations cost money and asked if there was any possibility that losses could be recovered.
Mr van Vuuren replied that not all instances would warrant an independent investigation but the individual circumstances had to be looked at. For example, where the stipulated three quotes were not obtained or if it was obtained from the same company. It should be established why this had happened and if there were any underhand implications.
The Co-chairperson asked whether it would be worthwhile to conduct an investigation.
Mr van Vuuren replied it was difficult to comment but the first thing that should happen was that management should investigate the exact circumstances leading to the irregular expenditure. The problem at the GCE was that they did not have a supply chain management unit and many of the irregularities had to do with not following the right process. If there were more serious infringements, then they should be investigated.
The Chairperson stated that it should be determined what actually took place first and then a decision should be made on whether to investigate.
The Co-chairperson said that it was necessary to know what the process entailed as it was a lot of money to be condoned. An investigation might take time and it would involve money and the Committee should meet to discuss the matter.
Mr van Vuuren informed the meeting that part of the R14 million was subject to two special investigations, one by the Public Protector and one by the Auditor-General and there were two reports on that. With regard to condonement, National Treasury regulations determined that they had the initial authority to do so and in limited cases, condonement could be done by the accounting authority itself.
The fourth item qualified was contingent liabilities and the problem here was that the entity should disclose all contingent liabilities. Contingent cases normally arose out of legal cases and part of the audit process was to obtain confirmation from the attorneys that the entities had in fact used them. In the case of the CGE, the AG was not able to obtain confirmation from two of the legal advisors they had used. Thus the AG could not obtain the appropriate audit evidence to ascertain the completeness of the contingent liabilities disclosed by the CGE.
Under emphasis of matter, Mr van Vuuren drew attention to the CGE's precarious position as a 'going concern'. Looking at the financial statements of the CGE in the Annual Report, he noted that the entity had made a loss of more than R10 million in 2009 and a loss of more than R2 million in 2010. If an entity continued to make losses it would end up in a situation where there was not enough cash to pay their future commitments when they were due. The ability to pay was what was meant by the 'going concern' concept. Even though the CGE was established in terms of the Constitution and as such would always be there, unless there were amendments to the Constitution, it did not mean that it would be able to pay its creditors when payment was due. Therefore the AG had highlighted this in the audit report so that entities who did business with the CGE were aware of the possibility that they would wait for their bills to be paid. It was important for the CGE to turn this situation around and get into a positive cash flow situation and to curb over expenditure as the National Treasury would not give them additional funds to make up for their losses.
Mr van Vuuren then elaborated on the AG's audit report on other legal and regulatory requirements which considered the predetermined objectives and performance management of the CGE. He stated that the findings of non-compliance was because they did not have a proper system of monitoring the performance achievements against the pre-determined objectives. Documentation and record keeping should be accurate and complete and everybody should understand how the system worked and what role they played in collating the information. A properly documented system was a requirement of the PFMA.
The role of the internal audit section was important in assisting management in ensuring that information was accurate and complete and could be substantiated by proper documentation. He reiterated the importance of ongoing monitoring by the internal audit section which would ensure that problems were picked up before the AG did the external audit.
Ms Ramodibe asked if irregular expenditure was investigated in order to determine whether it should be condoned and whether Mr van Vuuren could give an example where it had been condoned.
Mr D Worth (Free State, DA) stated that the AG's findings on the CGE of the previous year had been shocking and the present findings were not much better. The negative findings on internal control, problems with the internal audit system and supply chain management and the lack of leadership made him doubt whether it should be a going concern and that taxpayers’ money should be used to salvage it. There had been a response from the CGE on remedial action but he wanted to know whether there was a way to check if these things were in place during the current financial year. He noted that the litigation involving the CGE and a court case set to commence in September and he asked if it was in process. There was also a forensic investigation on unauthorised expenditure particularly on procurement procedures. He wanted to know if there was any other body that could check if systems were in place to ensure that the same cycle was not repeated.
Mrs Malgas referred to Mr van Vuuren's audit comparison of 2008/09 to 2009/10 and asked how he had measured the improvement made by the GCE. The CGE Act was outdated and needed to be amended as it was not in line with the Constitution and the PFMA as it was an Act of 1996. She also wanted to confirm that one third of the CGE's budget was spent on irregular expenditure.
The Co-chairperson picked up on the point raised by the previous speaker about the CGE Act being outdated and speculated that the irregular expenditure could be condoned due to the fact there was no legislation guiding them.
Mr van Vuuren said an example of irregular expenditure was emergency expenditure where the normal processes could not be followed and in these instances the accounting officer was allowed to condone it. All other cases had to be condoned by the National Treasury.
In reply to Mr Worth's question on what should be happening at the GCE before the next audit, Mr van Vuuren said that the key controls document he had referred to, had been brought to the attention of the Chairperson, the CFO and the CEO. The AG was advising them to use these controls and to do reconciliations every month. On a quarterly basis the AG gave them a high level of feedback. Other than that, they relied on the integrity of officials and the role of the internal audit.
Mr van Vuuren said that the improvement noted by the AG was based on the opinion expressed and the change from a disclaimer to a qualified opinion. A disclaimer was the worst opinion that the AG could express and the long list of problems identified in the 2008/09 audit report proved this. The four items qualified in 2009/10 could be remedied if management and the internal audit section performed their duties as he had indicated.
Mr van Vuuren was cautious in answering the questions on the CGE Act and whether it should be amended as the AGSA did not involve itself at that level. The PFMA had a provision whereby it overrode other legislation when it came to financial matters. He conceded that legislative review became necessary from time to time.
On the irregular expenditure, he agreed that it was very high and therefore it was important that the supply chain management unit was fully enabled and that the recommendations of the AG were implemented as a matter of urgency.
On the special investigation, he said that it had been completed and had been tabled recently.
Mr Worth commented that the GCE needed ongoing monitoring on their performance and their outcomes. He queried why there was nothing in the Annual Report about the provinces or from provincial offices.
A member asked if the AG had an arrangement whereby an administrator could be appointed to an institution like the CGE that had problems with their finances as had happened in the case of struggling municipalities.
Mr van Vuuren said that the CGE should report according to its strategic plan and objectives. The AG did audits at the nine provincial offices but the CGE did not report per province and they needed a good system to collate the information and give feedback to the national office.
With regard to assistance, Mr van Vuuren said the AGSA had to be independent and they could not render assistance to entities. National Treasury focussed on some entities but the Committee could adopt an action plan and monitor it. It was also imperative that the key posts such as CFO were filled with the right people.
The Co-chairperson asked what the total budget was and what the total irregular expenditure amounted to. She also wanted clarification on deviations and emergency expenditure.
Mr van Vuuren said that the only deviations allowed were in emergencies or when impractical. Circumstances had to be clearly evaluated and the AG looked specifically to see if it was abused and if it was a matter of bad planning.
The Chairperson said that even if that did happen, the law was very clear that it had to be reported which the CGE did not do.
Mr van Vuuren clarified that the CGE's budget for 2009/10 had been R50 million and the irregular expenditure amounted to 12% of the budget.
The Co-chairperson thanked Mr van Vuuren for his presentation and called on the parliamentary researchers for their input.
Mr Gary Rhoda, parliamentary researcher, explained that the strategic plan of the GCE for 2008 - 2013 and the Annual Report did not correlate. The strategic plan identified six thematic areas: Gender and Poverty; Gender-Based Violence; Gender, Democracy and Good Governance; Gender: Culture, Religion, and Traditional Practices; Gender: HIV/AIDS; and the National Gender Machinery. There were specific goals and targets for each thematic area. In the Annual Report the GCE had reported according to specific departments and not on the thematic areas which made it very difficult to process the information. In terms of the overall quality of the report, the numbering was out, reference was made to specific schedules and sections which did not exist and the pages did not correspond to the numbering given in the contents page. The information on specific departments did not speak to the strategic plan which made it difficult to measure performance and efficacy. The strategic plan had to be aligned to the budget but because of the conceptual dissonance there was no evidence of this in the Annual Report.
Briefing by the Commission for Gender Equality
The Acting Chairperson, Mr Mfanozelwe Shozi, introduced the CEO, Ms Keketso Maema who presented a summary of the service delivery performance information of the reporting year. During this period she had been the Acting CEO. In her introductory remarks, Ms Maema alluded to the major challenges which the CGE had faced in its recent history in terms of lack of continuity in leadership, the numerous vacancies and lack of capacity and its impact on internal controls and the limited budget and resources which negated against the entity implementing its mandate fully. She also referred to the turnaround strategy the CGE had embarked upon to address its considerable financial and internal problems. The organisational structure as depicted in the Annual Report was problematic and cumbersome and addressing this was part of the strategic review process.
Responding to the chairperson's request to move ahead to the programmes identified in the CGE's Strategic Plan for 2008 - 2013, she identified the three key operational departments of the GCE which were Public Education and Information, Legal Services and Research and linked them to the first five thematic areas identified in terms of its pre-determined objectives. She explained that the Public Education and Information Department dealt with outreach and sensitising people to the CGE's mandate. She illustrated the Service Delivery Performance in the nine provinces for the following strategic plan themes i.e. Gender- based Violence; Gender and Poverty; Gender: Democracy and Good Governance; Gender: Culture, Religion and Tradition and Gender: HIV/AIDS. Targets had not been met in some instances and the variances could be attributed to specific challenges experienced in the various provinces.
Notable achievements undertaken by the National office was the initiation of a Women and Media Dialogue in October 2009. The country's compliance with the international instruments, the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) and the Beijing Declaration and Platform for Action was researched by staff and their reports will be available in the 2010/2011 financial year. Interventions were conducted on issues such as Ukhutwala (most notably in the Eastern Cape and KZN) and other harmful cultural practices such as virginity testing and male initiation. The 16 days of activism campaign focused on Gender based violence (GBV) and its link to the increase in HIV infection and other interventions focussed on men. There were two consultative workshops on maternity benefits for unemployed women.
There were 40 media based interventions which focused on the CGE's mandate, forced marriages, sex work, human trafficking, maternity benefits, Gender and Elections and GBV. The Legal department dealt with issues such as chieftaincy, the recognition of customary marriages and interstate succession and a complaint on funding from the South African Women Football Association (SAWFA).
12 submissions were made to Parliament on issues such as human trafficking, customary marriages, domestic violence, adult prostitution, protection against harassment and the expansion of the CGE mandate to assist citizens in foreign jurisdictions.
Mr Moshabi Putu, Acting CFO presented a summary of the Annual Financial Statements of the CGE and referred the committee to the Annual Report for more detail. In terms of the CGE's financial performance in the reporting year, the CGE had received an allocation of R49,112 million from the National Treasury which reflected a 6% growth. This was basically equivalent to the inflation rate and indicated that the CGE had not received any increase in funding. Expenditure was realized at R51,6 million compared to the restated 2008-09 figure of R57 million. This resulted in a reported deficit of R2,5 million. Depreciation amounted to R3,7 million and was a major contributor to the reported deficit but this had been off-set by savings on CAPEX of R1 million. Key costs drivers were staff costs which amounted to R31 million and depreciation. He noted that management had made great efforts to curb expenditure in 2009/10 in contrast to the preceding financial year.
Drawing attention to the Statement of Financial Position, he emphasised that the commission had more liabilities than assets. Technically speaking, the implication was that if the Commission stopped operating it would run short of R2 million to pay its creditors. He referred the members to the notes to the financial statements in the Annual Report which spoke to the CGE's position as a 'going concern'. Here it was noted that the CGE's current liabilities exceeded its total assets by more than R2 million. It also noted that notwithstanding these matters, the Commission's ability to continue as a going concern was supported by guaranteed cash flows from the National Treasury as well as the entrenchment of the existence of the Commission under Section 181 of the Constitution. He reiterated that this reflected the perspective of management which was based on the recognition of the Constitution as the supreme law and thereby the existence of the CGE was guaranteed and funding was guaranteed. management was in a position going forward to improve on the balance sheet by avoiding future deficits and working towards registering surpluses or alternatively by getting increased funding.
He acknowledged the challenges which the CGE faced as revealed by the audit report. management would endeavour to achieve an unqualified opinion by the next audit by implementing the measures communicated to them by the AGSA and those identified in the turnaround strategy.
The Chairperson asked what percentage of the total budget of R50 million had been spent on irregular expenditure and how the CGE measured their performance.
Mr Putu referred to the reconciliation of irregular expenditure reflected under the financial statements in the Annual Report and stated that irregular expenditure had amounted to R5,949,154. This amounted to 12% of the total budget of R50 million.
In answer to how the CGE measured performance, Mr Shozi acknowledged that the CGE did not have clear targets and that was why they were reviewing their strategic plan and they were inviting the two parliamentary committees to participate in the process. There were different committees responsible for measuring performance. There were plenaries of Commissioners which interrogated management in terms of performance, and thematic committees that exercised oversight over the work of the Commission. They were also finalising the tool that would assist them in measuring performance. On a quarterly basis there were reports that managers submitted to the Commissioners and this was escalated into a quarterly performance system. They were also considering the Annual Report and the report of the AG. They were going to meet with the AG to finalise the action plan that he had referred to.
Mr Mokgoro wished to know what PEPUDA was as it was a new term to him.
Adv. Boogie Khutsoane explained that PEPUDA was an acronym that stood for the Promotion of Equality and Prevention of Unfair Discrimination Act which was passed by Parliament in 2000. She added that the CGE had to implement part of it.
Mr Mokgoro asked if Ukhutwala was a cultural issue or a matter of misbehaviour. If it was a cultural issue, was there any way in which it could be modified.
Mr Shozi said that some communities saw it as a cultural issue but the CGE regarded it as a criminal matter.
The Chairperson added that the committee shared that view.
Mr Mokgoro noted that Mr van Vuuren had informed the meeting of an amount of R14 million that still had to be condoned and he wanted to know how this had happened.
Mr Putu said that the amount of R14 million for irregular expenditure was an accumulative balance and reflected an amount of R8,891,563 which had been carried over from 2008/09 and an amount of R5,949,154 for 2009/10. The procedure to have this regularised had to be done in writing to the National Treasury giving explanations and also indicating actions that had been taken. Specific instances of irregular expenditure were contained in the notes to the financial statements in the Annual Report. The causes of the irregular expenditure were mostly administrative in nature and the CGE had acknowledged that this should be addressed. Staff had to be upskilled in terms of supply chain and contract management as there may have been contracts but document management was weak. The appointment of competent people was on course and they were at the tailend of the recruitment of staff. There had been a high rate of staff turnover and the institutional memory had been lost. He stated that there were no instances of criminality in terms of money spent irregularly or fraudulent procurement in this amount of R14,000,000. They were matters of an administrative nature, such as lack of contracts and the CGE was addressing this as an institution.
Dr Yvette Abrahams, Commissioner, referred to the financial statements and said that the vast majority of incidents of irregular expenditure had taken place in 2008/09 and this had been subjected to a forensic audit. The problem was of a technical nature as the AG carried irregular expenditure over at financial year end. It would recur every year until it was condoned by Treasury and in that sense it was completely beyond the Commission's control. With respect to the R5 million incurred in 2009/10, R1,248,369 was incurred on unforeseen legal expenditure which by definition was irregular expenditure as it was not budgeted for. These again were matters that were incurred under the previous chairperson and there was nothing that could be done about it. The remaining R4 million referred to things such as travel agencies and shuttle services which were incurred on a case by case basis. The AG had said that those things had to be put through supply chain management procedures and that they required one supplier and it has to go out to tender. The difficulty was that the CGE did not know what services would be required for a particular month and despite that, those services had to be contracted. While the amount of R4 million looked bad there was absolutely no fraud, it had not benefited any particular person but related to the technical processes. This explained why it was not possible to move from a disclaimer to a clean audit in one year because of the technical nature of the AG's approach.
Mr Worth asked a follow up question about contingencies referred to in the notes to the financial statements in the Annual Report. He noted there was a claim of R814,192-56 against the CGE by a service provider for a cancelled contract for IT services which had been set down for August 2010.
Ms Maema said the matter pertained to a contract that had been entered into without following procedures. The amount was for the remaining period of the contract and the matter had been postponed and the CGE was still engaged in litigation on the matter.
Mr Worth said that the representative from the AG had indicated that the CGE should have an action plan to address the issues raised in the audit report and he asked whether this was in place and if the shortage of skills was being remedied. He observed that the actual plan and outcomes and the strategic plan did not agree, that there was no feedback from the provinces, there was little information on court cases and that members wanted to see more specific outcomes on the CGE's strategies.
The chairperson commented that the members wanted to see know how many court cases were undertaken and how many were successful.
Ms D Robinson (DA) referred to Mr Putu's presentation and the figures given to fund operating activities for staff and suppliers which she stated amounted to 96 % of the CGE's budget. She observed that this happened while they were short staffed and she asked how the CGE was going to move forward when they were spending more than they received currently. What amount had been spent on programmes? She commented that she did not want blustering but wanted to know what had been done to affect the lives of ordinary people.
Mrs Robinson referred to Mr Putu's comments on the CGE as a 'going concern' which was guaranteed by virtue of funding from the Treasury and its entrenchment in the Constitution. She said that was the wrong attitude and what made them a going concern was how they managed their money and they were clearly not managing their money. The fact that the entity existed did not allow them to continue to exist if there was no proper management as seen in the irregular expenditure by the GCE.
She noted that R40,000 had been spent on Bafana Bafana jerseys. How had that assisted with gender issues? She commented that persons who earned salaries could buy their own jerseys and how money was spent had to be looked at.
Ms Malgas asked if the deficit could be explained again as in her understanding it could be regarded as over expenditure or an overdraft. She noted that there were two amounts under the deficit i.e. R10 million and R2 million. How was the CGE was servicing this overdraft?
She referred to the AG's report which reflected 'material losses due to criminal conduct and impairment' which amounted R406,746,00. She said more should be explained about what happened in the cases of criminal conduct referred to.
Ms Ramodibe raised the issue of the strategic plan and the budget and asked if the CGE were aware that they were not linking there activities to the strategic plan. Were they aware of the implications and that it made it difficult for the AG to conduct an audit?
The chairperson commented that in a situation where there was irregular expenditure, the law was very clear on what should be done. It should be reported to the National Treasury. She asked if it had been reported.
Ms Malgas stated that it should not be explained verbally but that normally a letter had to be written to Treasury and the CGE should have a record of these transactions which should be made available to the members.
The Co-chairperson asked if she had understood Mr Putu correctly when he had stated that if the CGE had to close shop, they would need R2 million to pay off their outstanding debt.
The chairperson said she had also understood that and commented that it meant that the CGE was living from hand to mouth.
Mr Putu stated that technically when there were more liabilities than assets it meant that if you were required to pay your liabilities the only source to service that debt was from your assets. In the case of the CGE , if the assets were sold at fair value, the amount of R2 million would be required to pay its creditors.
Mrs Malgas reiterated her point that the deficit equated to over expenditure and that implied there was an overdraft at the bank. She asked Mr Putu how the GCE was servicing an overdraft.
A member noted that the Chairperson had resigned in March 2010 and asked who was responsible for the appointment of the chairperson, if it was done by the commissioners themselves or by the President. She also wanted clarity on the R40,000 spent on the purchase of Bafana Bafana jerseys given the CGE's limited budget.
Ms A Qikane (Eastern Cape, ANC) asked if the CGE had reached their targets on service delivery performance or if they had under performed as it was not clear in relation to the Eastern Cape.
Mr Shozi responded to the question of court cases raised by several members. he was putting his head on the block that he would send the information to the committee and they would give a brief on every case for each Province.
Mr Shozi answered the questions raised about staff costs and how much was spent on the Commission's Programmes. staff were paid salaries and were currently performing all the work of the CGE and they were actually acting as the entities service providers. When people came into the CGE offices, the CGE dealt with the clients, they conducted the research, the educational workshops, even the Annual Report was done by the delegation and it was not commissioned out.
The chairperson cautioned about time constraints and stated that she wished to use the remaining time to ask each member of the CGE present to respond briefly on how close they were to an unqualified audit opinion.
Mr Putu returned to the question of how much money was spent on the Commission's programmes but could not proceed as Ms Duncan intercepted on a point of order
Ms Duncan said that with respect to the chair, she felt offended as a member of the Portfolio Committee as she had been attempting in vain to get the attention of the chair. She wanted to know (before the CGE delegation expressed themselves as requested by the Chairperson) if the members' question time was over. She felt that the delegation should not be given the opportunity to speak till the members had asked their questions.
The Chairperson said that she was thinking of the time and asked if Ms Duncan had a question.
Ms Duncan referred to the AG's report and said that there were investigations and other matters that members might want clarified and the time should be used optimally. The delegation could be questioned at another session.
The Chairperson said that there were ongoing processes with the CGE so it was necessary to understand how close they were in obtaining a clean audit so that a contribution could be made. She acceded to the point made by Ms Duncan and allowed her to proceed.
Ms Duncan asked the CGE to confirm whether the Annual Report related to the strategic plan of the Commission and also how the presentation that was delivered spoke to both. In the presentation the CEO had referred to the organogram which the management was not satisfied with. She said she was puzzled as they had started with something and it had changed into something else and it was difficult to keep track. She reiterated her question which was directed at the CEO, which was whether the Annual Report reflected the strategic plan and if the presentation corresponded to the two documents mentioned. She noted the financial report corresponded to the AG's report.
The CEO responded that the Strategic Plan had been developed in 2008 and had a number of flaws and that the Chairperson, Mr Shozi, had mentioned that they were reviewing the document. At the beginning of each financial the year, the year plan was taken out of the Strategic Plan for all departments and thematic areas. She referred to the performance information in the Annual Report to confirm this. The limitations emanated from Strategic Plan document and she reiterated that it was a document which had flaws and which they were reviewing. The Annual Report was based on the strategic plan of 2008 - 2013.
Ms Duncan said that if the document was flawed then how was it possible to evaluate the CGE when the documentation was problematic and there was also a turnaround strategy. She said that the CGE should make it a priority to see that the strategic plan was in place as it was part of the legislative structure that had to be adhered to. She said that an Annual Report could not be based on a flawed strategic plan.
Mrs Robinson asked if she could have an answer to the question she had raised on the Bafana Bafana jerseys as she had to leave for another meeting and she wanted to hear, personally, how the GCE justified that expenditure.
Mr Shozi said it had been bought to encourage staff to support the national team and the FIFA World Cup and it was linked to a GCE programme looking at Human trafficking and sex work during the World Cup period. A report was being sent to the committee about the issue in three weeks time.
Ms Robinson responded that with respect to the chair, the explanation was a long shot and that one needed one's brain and not a jersey to work on human trafficking.
The chairperson commented that deviations from a strategic plan happened but the issue was that there were systems in place that should be followed if ever a situation occurred when such a step was called for. She said the CGE did not follow the correct procedures which was reporting the matter to the National Treasury and the committee could also have been briefed.
Dr Abrahams said she wanted to respond to Ms Duncan on the concern around the strategic plan, the Annual Report and the presentation. She said she was the Chair of the Finance Committee and their job was to ensure that the CGE spent according to their budget. She said in that capacity she was entering into a debate with the AG. While there were concerns that the strategic plan was flawed and they sincerely took responsibility for it and were working on revamping it, they were also expressing to the AG that the performance management systems that were appropriate to a government department might not be appropriate to a Chapter Nine institution, particularly in respect to the AG's insistence on quantifiable outcomes. Although the CGE tried to meet them half way, the commission might not ever have a strategic plan where the outcomes were measurable and this was in line with international best practice. In the gender based violence programme, they had looked at the United Nations Development Fund for Women (UNIFEM) standards and United Nation (UN) standards on how they monitored gender based violence and the CGE was doing exactly what they were doing which was processing indicators. She referred to the programme on poverty in the strategic plan which set out exactly what had to be done during the course of the year. This was reported on for every department in the Annual Report and summarised in the presentation. They had reported to the committee that they had rolled it over for the year because the programme budget for 2008 had been spent but other than that there had been no deviation and the GCE had achieved 85% of its objectives under poverty. it might be that they were not presenting the information in a format that makes it clear but there certainly was a very deep link between the three documents.
The Chairperson stated that she did not like to become confused at the end of the meeting and that she had thought that there had been some consensus that the strategic plan had flaws and now Dr Abrahams was stating that there had been no deviation. She asked the CGE if her understanding had been correct.
Ms Duncan said on a point of order that the CEO had pointed out that the strategic plan document was flawed and it needed to be reviewed and she understood why that was stated. She also understood that some of it related to the Annual Report but it was not necessary to unravel it at that stage. The strategic plan had to be reviewed and put in place so that the committee could use it as a tool to see if the Commission delivered on their strategic objectives. It was important for the committee as it was the one document which the committee could interrogate to see if they were delivering on their objectives. She said there could be another session with the CGE or members could take the matter up individually, which was what she would be doing.
The CEO said she wished to affirm what Ms Duncan had said. She said that the turnaround strategy which had been presented to the Portfolio Committee had been divided into phases and they had prioritised ensuring that they receive a clean audit and the second phase was on the strategic review of the strategic plan document.
Ms Malgas stated that there was no need for an explanation and she questioned why this had emerged at this late stage and she wondered how this would effect the next Annual Report. what the CGE was doing was problematic and it was illegal. The strategic plan had been accepted in a meeting and she said they should write a letter to the Chairperson on the matter.
The Chairperson agreed with what Ms Malgas had said and she informed the CEO that the strategic plan had been agreed upon in Parliament and to find out that it was flawed placed the meeting in a difficult situation as they had been evaluating the Annual Report on it. She said they would find another time to address the matter.
She said she still wanted to know how close they were to moving towards an unqualified audit opinion. The AG had noted the improvement from a disclaimer to a qualified opinion but was not specific.
The CEO said they would have to return to the turnaround strategy document but they had made an undertaking to receiving a qualified opinion for the financial year under review and to move to an unqualified audit opinion in the following financial year.
Mr Shozi referred to the two previous disclaimers that the CGE had received in the 2008/09 financial year and noted the extensive list of problems identified by the AG. He noted the improvement to receiving a qualified audit report and although they still faced serious challenges they could move to an unqualified opinion.
Ms Malgas said they could move to an unqualified report with emphasis of matter.
The chairperson enquired how far the CGE had got with the international instruments. She said that as the meeting had run out of time they would put the outstanding matters together and send it to the CGE and they could respond in writing. She called on the Co-chairperson for her final comments.
The Co-chairperson said the intentions for the establishment of the CGE were good but along the way people saw it as an opportunity to make money and there was no accountability. She was not convinced that the money that could not be accounted for could not be classified as fraud. For her, any expenditure that was not in line with the PFMA was fraud. Most of the people in the CGE were graduates from the university so they understood clearly what the law required in terms of spending money. What was at stake was the amount of R14 million that was awaiting condonement . The only authority who could condone that was the National Treasury and a recommendation from the committee. She asked the CGE if they could give a commitment to recovering some of the money back or to give proper account for it so that it could not be translated as fraud.
The Chairperson stated that there was a need for an internal investigation as could be determined from the AG's report. At this stage it would not be correct to directly declare that it was fraud and it would also not be correct to say that irregular expenditure amounted to fraud. She said they would send on the questions that had been left answered and she hoped that the CGE would commit themselves to their turnaround strategy.
The meeting was adjourned.
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