Sector Education and Training Authorities Annual Reports: Auditor-General briefings; FASSET Annual Report 2009/10

Meeting report

Finance, Accounting, Management Consulting and Other Financial Services Sector Education and Training Authority (FASSET) Annual Report 2009/10
The Acting Chairperson asked the Finance, Accounting, Management Consulting and Other Financial Services Sector Education and Training Authority (FASSET) to clarify whether the presentation now handed out to Members was the same as the previous document submitted. FASSET confirmed that the previous presentation was in fact its Annual Report and that the presenters would at this meeting present a summary of FASSET achievements over the last decade.

The Acting Chairperson asked the Chairperson of FASSET to give an introduction to the Committee.

Mr Robert Capper, Acting Chairperson of FASSET, said that he had not prepared a presentation, but that he would nevertheless attempt to provide some input from the board. He was proud to inform the Committee that FASSET had received unqualified audit reports for the previous ten years. It had a very good relationship with the Auditor-General South Africa (AGSA) and appreciated its input in ensuring FASSET continued to maintain those unqualified reports. FASSET strongly believed in good corporate governance and constantly reviewed the performance of the board and management operations. It worked hard to ensure that FASSET was aligned to the King III Code of Corporate Governance, and supporting taking the audit process beyond the statutory minimum, in order to secure a clean report.

Ms Cheryl James, Chief Executive Officer, FASSET, noted that it served a sector that was predominantly comprised of accounting and auditing firms, representing 63% of the organisations and 49% of the employees in the sector. There was a strong link between FASSET and South African Revenue Services (SARS), National Treasury and other government departments, with employees representing 14% of FASSET’s constituency. Another important feature was that 96% of the organisations within FASSET’s jurisdiction employed less than 50 people. Therefore FASSET had a strong focus on growing the Small, Medium and Micro Enterprise (SMME) sector, in view of the important role that these enterprises had to play in the South African economy.

Ms James said that more than 80 of FASSET’s employees were situated in the three provinces of Gauteng, KwaZulu Natal (KZN) and the Western Cape. FASSET also had initiatives geared to small practitioners positioned in smaller cities and rural areas. There were major challenges in making the sector more reflective of race and gender demographics, although it had made good progress, from 25% black learners in 2002 to 52% black learners in 2009. This shift had not yet manifested itself in the higher levels of the profession because it took seven to ten years on average to qualify in the sector. Further initiatives aimed to address the gender imbalance at the higher levels of the profession.

FASSET’s expenses exceeded its levy income, and it had a deficit of R30 million. This did not mean that FASSET was spending money it did not have, but it was now spending monies that were unspent in previous years. Most projects lasted three to four years and FASSET would keep the allocated project funding in trust. Ms James stressed that for the SETAs, it was positive to have a deficit, as all unspent money was now allocated and committed to projects. Administrative expenses were kept below the norm of 10%, and were currently at 7.96%. She reiterated that FASSET was strongly focused on aligning with the King III code and had an internal audit to identify further gaps. FASSET had succeeded in reaching its Skills Development (SD) targets, owing to thorough research into the skills shortages in the sector.

Ms James noted that most reports simply outlined statistics, but she would like to highlight one way in which FASSET impacted on the lives of beneficiaries. She related the story of a young man from a very poor background, who was sponsored by FASSET and the South African Institute of Chartered Accountants (SAICA) through an academic programme at University of Johannesburg (UJ), and who completed his articles within the minimum period. He subsequently decided to take up a lecturing post, in order to assist students, and lived with them at a hostel for disadvantaged students, to offer them the same opportunities he had been given. She stressed people were really benefiting from SETA programmes.

Ms Nadine Kater, Chief Operations Officer, FASSET, stressed that FASSET’s interventions were based on its research. The learnership programme at FASSET was very successful in allowing learners to qualify academically and practically. In 2009/10, FASSET took in 4 278 learners, with 3 367 completing their learnerships and being placed. 52% of those learners were black. Over the last ten years 39 000 learners had been trained. FASSET had spent R310 million over ten years on development projects, which focused on unemployed qualified learners who were placed on work-readiness programmes, to prepare them for full employment, and 11 000 learners had been supported in this way. 13 529 learners in the profession had been trained in lifelong learning programmes, to keep practitioners up to date with the latest developments in their industries.

87% of employers in the sector were claiming mandatory grants, which meant that they were actually planning their training interventions, receiving a cash grant of about R27 000 per learner. The strategic cash grants were targeted at employers who accommodated learners needing workplace exposure through internships or vacation work. They were allocated only where black or disabled learners were placed, which encouraged small accounting firms from small cities and rural areas to take on black learners.

Ms Kater said that FASSET’s career guidance campaign focused on educating young people about the many careers within the sector. This campaign reached learners at schools, universities and Further Education and Training (FET) colleges. FASSET also developed a disability toolkit, which employers could use to fast track the inclusion of disabled people within the sector.

Ms Kater stressed that although most learners were from KZN, Gauteng and the Western Cape, FASSET still impacted on all nine provinces, and its programmes did target rural areas, by locating and placing learners in these areas. FASSET encouraged people who had been trained to return to their home areas. Whilst it was sometimes difficult to achieve this, since economic activities would, for example, determine where stockbrokers needed to work, it was possible do so in some cases, such as debt collectors. Lifelong learning programmes made a large impact in rural areas, and FASSET had travelled to Upington, Springbok, Mthatha, King Williams Town and other areas. Together with the professional bodies, it had worked with all 23 of the universities in the country. Employers accredited to take on learners (workplace providers) were spread across the country.

FASSET’s career guidance campaign was publicised in many national publications, and it was exploring mobile technology to broaden this campaign, as well as aiming to appoint FASSET brand ambassadors at tertiary institutions to promote the opportunities in the sector.

Of the 40 000 learners registered over ten years, about 20 000 had completed their learnerships, of whom 56% were female. However, not all were working in the sector. 13 529 learners undertook lifelong learning programmes in 2009/10. Over the past ten years, 55 978 had undertaken lifelong learning training.

Ms Kater noted that FASSET had a number of partnerships to assist delivery. It had recently formed Quality Assurance partnerships (QAPS) with bodies like the Institute of Chartered Accountants, to achieve quality training, and to avoid duplicating the work other bodies were already doing. FASSET had various initiatives with universities, such as retraining matriculants to improve their career prospects. It had a joint initiative with the Eastern Cape Skills Council and the University of Fort Hare. In the public sector, SARS, National Treasury and AGSA had taken on learners and a new initiative had been established with municipalities. 2 000 learners would be placed within local government to learn the financial skills needed to run a municipality, and another 2 000 were placed in learnerships in collaboration with other Sector Education and Training Authorities (SETAs).

Ms James concluded by highlighting some challenges, which included poor matric results and the high drop out rates at tertiary level. Many trained accountants did not end up working in the FASSET sector, and their employers who offered them training were aware of the fact that they were likely to leave after training, so the new Catalytic Grant, which would come into effect with the Third National Skills Development Strategy (NSDSIII), was welcomed. Other challenges included the migration of SETAs to the Department of Higher Education and Training (DHET) and the new Qualifications Council for Training and Occupations (QCTO).

Discussion
Mr A van der Westhuizen (DA) referred to FASSET’s intention to run a “lean and mean” organisation, but said that the increase in administrative expenses did not match the output. He cited the 21% salary increases of the Chief Executive Officer (CEO) and Chief Operations Officer (COO), as well as other increases in expenses, and stated that the increase in grant allocations did not match the 21% salary increases. He also noted that the levy revenue reflected the hard economic times of the recession, and said these increases created the perception of disparity between the sector’s struggle and SETA benefits.

Ms F Gina (ANC) was also concerned about the huge gap in salaries between top management and the rest of the staff.

Mr G Radebe (ANC) asked about the formula FASSET used to calculate the salary increases of its top management.

The Acting Chairperson was very critical of the payment that board members received for each meeting, and said that the Department should investigate the practices, as SETAs showed wide disparity.

Ms Gina asked why a different Chairperson appeared in the Annual Report.

Ms Mpuseng Moloi, Vice Chairperson, FASSET, explained that she had been the Acting Chairperson for 2009/10, and that Mr Capper was the incoming Chairperson. She said that the board members acted voluntarily, but that the board’s audit committee members were paid, because of their professional input. She said that the R5 000 paid per sitting to board members was justified and was very little in comparison to what board members received in the private sector.

The Acting Chairperson of the Committee said that these high payments to board members were a general problem in the private sector in South Africa.

Ms Moloi agreed that this could be problematic, but cautioned that it was not necessarily the standard practice. There were cases of mismanagement, or inappropriate allocations. However, it was necessary to offer adequate rewards attract the professional skills needed. In addition, it must be borne in mind that board members not only had to spend time at meetings, but also time preparing for them.

The Acting Chairperson noted that this was the highest amount paid by any of the SETAs who reported to the Committee.

Ms Moloi asked that it not be discussed further. These payments were a board decision, based on the relevant statutory guidelines. The board consisted of various sub-committees, whose decisions must be ratified by the full board. There was also a finance committee and a remuneration committee, with the latter recommending the salary increases and adjustments of the previous year, after benchmarking against other SETAs and the broader sector. The minutes of their meetings would reflect that concern about the increases and adjustments were raised, but the board remained confident that they were justified.

The Acting Chairperson enquired about the top management’s involvement in the decision about salaries.

Mr Capper explained that the remuneration committee had applied a standard performance review mechanism to arrive at salary increases, including a benchmark calculation. He agreed that some of the salaries of FASSET staff were slightly above the average SETA salaries, but also emphasised that top skills were attracted by good salaries. FASSET managed to perform its work with a staff complement of only 22 people, below that of other SETAs, with high staff retention, and the unqualified audit was merely one example of the outcomes achieved with the best possible staff.

The Acting Chairperson explained that the Members were not questioning the capabilities of the staff, but needed to understand how a 21% increase was approved, given the hardships that the entities paying the levy were experiencing. Other well-performing SETAs had not offered such increases. She felt that the real questions raised by members were not being adequately answered.

Ms Moloi said that the 21% did not necessarily represent a salary increase only, but included a retention bonus awarded to key staff members. The general increase was about 10%, and the 21% was a once-off bonus. Matters would normalise in the following year. She apologised for the initial confusion.

The Acting Chairperson asked whether the 21% was given to all staff members.

Mr Capper responded that all staff members received a bonus, based on matters such as length of service, with the average being about 9%, over and above the annual performance-based increase.

The Acting Chairperson asked if even the office assistant received a bonus.

Mr Capper replied in the affirmative. FASSET’s office assistant had about 9 years service and she received a bonus.

Mr van der Westhuizen asked why the number of mandatory grant applications and approvals dropped from 2008/9 to 2009/10, as reflected on page 15 of the Annual Report. He said that if employers were training more people, this should have shown an increase. He asked whether, in view of the numbers of learners qualifying, there was value for money achieved by this spending. He asked for examples of how FASSET applied cost-effective measures.

Mr Capper said that the reason why the number of grant applications dropped over the two years was simply because of fluctuations within the industry. The majority of the clients were SMMEs and they tended to move above and below the threshold of R500 000 from year to year. That was simply the nature of the SMME sector. Many of the smaller firms also chose not to participate in the mandatory grant programme but rather to enter the lifelong learning programmes.

Ms F Mushwana (ANC) asked why the management team did not reflect the gender demographics prevalent in the sector.

Ms James explained that the full-time management component of FASSET staff were all women. This was done neither by design or policy, but was purely due to the nature of the profession. Most of the staff members of professional bodies were women. As far as the sector was concerned, there was a huge gender imbalance at senior management level. FASSET was trying to address that glass ceiling, but did not have all the answers. The problem was exacerbated by many of the women training in the sector then moving on to other sectors. Some women also changed from being employees in the sector to becoming employers, if they chose to start their own small firms.

Mr Radebe could not understand the race and gender breakdown in the presentation, and said also that FASSET should be more specific about the race breakdown, and not only refer to “blacks”.

Ms Mushwana asked how the number of learners from a province was determined.

Ms Mushwana questioned whether all municipalities were targeted for financial training. She noted that the career guidance campaign seemed to focus mainly on Cape Town.

Ms James said that the main employers were located in the bigger provinces and cities. For example, all the stockbroking firms were based in Johannesburg. FASSET was, however, finding that many of the small accounting practices in the smaller cities and rural areas were beginning to access the grant system to grow their practices by employing additional staff members.

The Acting Chairperson asked whether FASSET had any regional offices.

Ms James said that FASSET only had a head office with 22 full-time staff members. FASSET relied heavily on some of its partners to facilitate or provide certain services. This kept its administrative costs lower.

Ms Mushwana asked for more details on the strategy to engage more young people.

Mr Radebe asked whether FASSET had any partnerships with organised youth bodies, because he felt that their inputs would prove invaluable.

Ms James answered that FASSET tried always to reach as many as possible learners through as many as possible platforms. Several partnerships were created. She used Career Planet as an example and stated that Career Planet was basically a website and therefore had national coverage.

Ms J Klopper-Lourens (DA) asked for further clarity on the learners who had signed up, those who completed learnerships, and those who dropped out.

Ms Gina was pleased to hear the success stories, but cautioned that excellence by black people should not be presented as if it was unusual.

Ms Gina asked that in future the SETA should report only on the financial year covered in the Annual Report, and not on ten years.

Ms James thanked the Members for this comment and agreed this would be done in future.

Ms W Nelson (ANC) said that the high drop out rate from tertiary institutions was well known, and asked if the SETA had a specific strategy in place to address this matter.

Mr Capper said that the apparent high drop out rate from learnerships should be viewed against the fact that learners stayed within a programme for about seven years. The figures quoted in the presentation did not clearly reflect this. FASSET actually had a very low drop out rate, and not 60% as mentioned by the Members. The cost-effectiveness of learnerships were influenced by the fact that FASSET only funded the entry year of a learnership, but that the employer must then fund the learner for the subsequent two years. Effectively, the funds that FASSET granted in year one would have to be spread over three years. The cost of a qualification at a professional level could be very high. Those learners who were only funded for their tuition still had to find the money for accommodation, food and transport. FASSET had in one instance funded a learner who needed a driver’s license, because that learner could not complete articles without transport. The costs were slightly higher, but FASSET got a better return on its investment.

Ms James added that the high drop out rate at tertiary university level was a major concern. It to some extent impacted on delivery. However, the SETA could not focus on the whole pipeline, and there were other role players who focused on different aspects. FASSET had taken a conscious decision, given its limited resources, to focus on the unemployed graduates. The starting point for their target setting process was the NSDS II and FASSET would factor that into the research findings and their available resources.

Ms Nelson asked if the over-achievement on targets did not perhaps suggest that those targets were set too low.

The Acting Chairperson said that there were high demands, but that the targets were set very low, enabling SETAs to over-achieve on targets.

Mr S Makhubele (ANC) asked if FASSET had a specific transformation programme or policy in place, pointing out that its mandate included contributing to transformation in the country. Many young people complained how difficult it was for them to qualify in this sector, even to the extent of citing barriers outside their own academic ability, such as the language or medium of instruction. He asked if the SETA knew about and was investigating non-financial barriers.

Mr Makhubele asked if the SETA or the employer initiated training initiatives.

Ms James said that a combination of various sources was consulted to arrive at a programme. FASSET did use the Workplace Skills Plans (WSP) but combined those with FASSET’s own research and the National Skills Development Strategy (NSDS). The only time when FASSET would not consider the employer’s input or the WSP was when it developed programmes outside the mandatory grant framework.

Mr Makhubele was disappointed that the FASSET Chairperson did not adequately present the board’s views on its strategic objectives, particularly relating to the national transformation agenda.

Mr Makhubele said that quality structures were well known, but wanted clarity on the quality partnerships to which FASSET had referred.

Ms Kater said that most of the employees in their sector were professionals and that they were all registered with at least one of 15 different professional bodies, each with their own quality assurance standards. Realising this, FASSET had entered into formal agreements with these bodies that they would continue to perform the quality assurance function. These bodies had undertaken to align their standards with the national standards as set by the South African Qualifications Authority (SAQA). This ensured that FASSET was able to perform its SAQA and National Qualifications Framework (NQF) functions, whilst the professional bodies were able to ensure that their professionals were trained to the right standards.

Mr Makhubele pointed out that he was surprised to hear of FASSET’s relationships with about 100 FET colleges, since he was not aware there were so many. He asked what FASSET was doing to prevent courses being offered that were not accredited, which meant that people might study but their qualifications would not meet the criteria.

Ms James said that the number of FET colleges quoted in the statistics included both private and public sector institutions, as well as satellite sites of providers such as Boston Campus. She agreed that the question of accreditation was complex, and that different levels of accreditation existed at different universities. In the sector there were bodies, besides SAICA, who also provided accreditation to universities but for different streams of qualifications. Efforts were being made to look at the accreditation of some tertiary institutions, but the funding was not available at that time to make this a focus area.

Mr Makhubele wanted to know whether the board had the necessary skills to deal effectively with the broad transformation agenda of the country, over and above merely providing skills.

Mr Capper explained that it took on average seven years for people to qualify in the sector and that the reason why things appeared to be slow was linked to this process. Transformation was picking up, as people moved through the chain of training, which in itself was only about seven years old. As people exited the training process, as qualified professionals, matters would improve.

Ms James added that all FASSET’s development programmes had a disability target of 4%, and that the SETA had gone out of its way to assist disabled persons to attend the work-readiness programmes. For example, blind learners were assisted with Braille facilities. The professional levels in their sector could only accommodate disabled learners if they had been made available from undergraduate level.

Mr Capper said that the profession needed a degree of mobility and that disabled people simply chose not to enter the profession. This was despite the efforts that SETAs had employed.

Mr van der Westhuizen thought that FASSET was not addressing the issues. The presenters had said that the call centre provided ideal opportunities for disabled workers, but subsequently said that the sector was not an ideal platform for disabled workers. He needed clarity on the matter.

Ms James reiterated that FASSET did not fund all learnerships, as many other SETAs did. FASSET had taken a firm decision to only fund black and disabled learnerships. The majority of learners in learnerships were still white, but they were not funded by FASSET. Employers were free to employ any learners they identified, even if this was contrary to the spirit of transformation. This meant that FASSET only funded about 800 out of the nearly 15 000 learners within a year. This was based on the limited funds available. There was nothing the SETA could do to change the profiles of the learners that it did not sponsor.

Mr G Radebe (ANC) recommended that FASSET should consider using municipalities to market its services, pointing out that the mainstream media did not necessary reach the poorer areas.

Ms James said the local government project was a pilot, based in the rural areas of the Eastern Cape and KZN, but as the programme developed more municipalities were requesting involvement. She was appreciative of the suggestion that municipalities be used to promote the work of the SETA and promised to use this.

The Acting Chairperson reminded members that the targets were set in the NSDS II and that the Department of Higher Education and Training (the Department or DHET) should set more appropriate targets for NSDS III, so that meaningful transformation could be achieved in a shorter period of time.

Ms James noted that the timeframes for various transformation targets were pretty much set in the various charters in the sector and FASSET tried to link its work with those timeframes and targets.

The Acting Chairperson noticed that considerable resources were allocated to lifelong learning, and asked whether the learnerships in lifelong learning were addressing the transformation needs in the sector. She also wanted more detail on the SETA’s transformation strategy.

Ms James noted that lifelong learning was often referred to as “Continuous Professional Development” or “Continuous Professional Education” (CPD or CPE). This involved updating the professionals' skills and knowledge on annual tax changes and the State budgets. FASSET also trained professionals around compliance issues when new legislation was passed.

The Acting Chairperson was concerned about the lack of detail in the Annual Report, saying it amounted to a “summary”. Although the presentation provided some detail, it had not been specific enough, for instance, on achievements and targets for the disabled.

The Acting Chairperson asked for more clarity on the statement that it was positive for a SETA to have a deficit.

Ms James said that the Public Finance Management Act (PFMA) only allowed SETAs to allocate funding from monies they already had. This meant that even where the project was a multi-year project, the SETA had to have funds available in its bank account from year one. In this year, FASSET had spent more than was allocated for the year, hence her reference to a “deficit”. However, this was positive because it meant that previously unspent funds had now been used. She said that the PFMA should perhaps be amended to allow SETAs to allocate funds on a year to year basis, rather than having to save funds in the bank.

The Acting Chairperson said that she was not happy with this explanation and asked a representative from Auditor-General South Africa (AGSA) to comment.

Mr Rienk Grobler, Senior Manager, AGSA, stated that it was normal for SETAs to account in that manner. He explained that FASSET had spent more than it had received in 2009/10. However, the money spent was drawn from funds that were still in the bank account, having been unspent in previous years.

Mr Makhubele said that the manner in which the spending was accounted for implied that the SETA had used money it did not have.

Mr van der Westhuizen agreed that perhaps the problem was created because of the accounting rules. He asked whether there was no accounting solution to clear up the misunderstanding.

Mr Capper responded that “creative” and “accounting” were two words that should never be raised together. The PFMA deviated from the Generally Accepted Accounting Principles in this regard, but nothing could be done until the PFMA was amended.

The Acting Chairperson said it would help if FASSET had shown its previous years’ unspent funds in this year’s reporting.

Ms Asha Lakhoo, Chief Financial Officer, FASSET, referred Members to page 44 of the Annual Report, noting that a reserve of R71 million was reflected at the end of 2008/9, which had now been reduced to R41 million, because FASSET had continued spending on previously approved projects.

The Acting Chairperson said that, although Members had been critical of the outputs, she did wish to commend the clean audit and was pleased that the financial management was good. However, she was at pains to emphasise that the large sums of monies must be translated into meaningful outputs. She challenged FASSET to explore creative ways of translating the large budgets into meaningful outputs, saying that the board must play a major role in facilitating this mind shift.

The Acting Chairperson asked for more detail on the system used to track learners

The Acting Chairperson noted that the report had said nothing about the Recognition of Prior Learning (RPL) and she asked for details about FASSET’s RPL strategy and achievements. The report was also silent on skills lay-offs and new venture creation. It was not clear what the link was with FET colleges beyond the career guidance campaign.

Ms James confirmed that all the FASSET learnerships had a RPL component which addressed and gave recognition for the work and experience to which learners were previously exposed.

Ms James added that no employer within this sector reported any training lay-off schemes. The FASSET’s notion of what “a new venture” comprised was different from other SETAs. FASSET regarded a new venture as a person who had written a licensing exam enabling that person to start his or her own practice. This SETA did not fund the traditional “new venture creation” initiatives.

The Acting Chairperson thanked FASSET team and asked for more details to be submitted in writing on the work on RPL, and the funding dedicated to it. She then said that the Committee would have time to reflect on the issues raised in this year by the SETAs, and would compile a list of issues to be discussed with the Department. She noted that the Committee must also engage with the Department before the NSDSIII was published.

Sector Education and Training Authorities: Financial Performance: Auditor-General of South Africa briefing
The Acting Chairperson introduced the presentation when she said that the reason for the invite to the Auditor-General of South Africa (AGSA) was for them to provide the Committee with a more accurate explanation of what caused certain SETAs to under perform financially. She noticed the long presentation document and hoped the presenters would focus only on the matters they were invited for.

Ms Meisie Nkau, Business Executive, AGSA, noted that although the Auditor-General South Africa (AGSA) had submitted a long presentation document, it would focus on explaining why some SETAs were under-performing. Other slides were included for background information. She noted that most of the problems arose through lack of skills and capacity, and that most poor performance related back to failure to observe fundamental principles.

Mr Rienk Grobler, Senior Manager, AGSA, said that entities could avoid undesirable audit reports if they followed proper internal controls. In future, each SETA would be required to sign off on an Internal Key Control document in which its chairperson accepted accountability for internal controls within his or her entity. If entities had implemented the prescribed internal controls, all the concerns raised by the Committee would have been addressed. AGSA had set itself a target of clean audit reports for all its entities by 2014.

Mr Grobler noted that there had been improvements amongst SETAs from 2008/9 to 2009/10. The main contributory factors to financial problems were lack of adequate plans, coupled with lack of total commitment from management and boards. Staff should have been properly trained, and adequate policies and procedures should have been in place, followed up with proper and effective internal audit controls.

Mr Grobler said that the Auditor-General (AG) would raise an emphasis of matter to draw the user’s attention to a matter that was of such importance that it was fundamental to the user’s understanding of the financial statements. In 2009/10, ten SETAs had material amendments to their financial statements after submission for audit purposes. The main emphases of matter for nine SETAS were thus the restatement of corresponding figures. This meant that they were reporting on corrections to entries of the previous year. Other emphases of matter were that ten SETAs had pending litigation against them (with some facing a possible administration order), that ten SETAs were guilty of irregular expenditure and wasteful or fruitless expenditure, and that three SETAs had material losses due to criminal conduct. One SETA had an emphasis of matter raised about its status as a going concern, which was still in the balance at present.

One good practice, which was beginning to work well, was that SETAs were now compiling monthly statements. One of the greatest concerns, which would no doubt impact on the work in future, was the new landscape for SETAs, which included closures, mergers and establishments of new entities.

He summarised the material findings of AGSA for the year for the SETAs. These included unavailability of adequate supporting documentation, lack of adequate policies and procedures, lack of adequate systems to monitor and report determined objectives and a lack of skills, specifically with regards to predetermined objectives.

He noted that the NSDS III would also impact on future audits. The problem with previous targets was that these were number based and failed to measure impact. It was important that correct targets were set and that those targets complied with the National Treasury Framework for managing performance information, which were on the website, referred to as the “SMART” principles of Simple, Measurable, Accurate, Relevant and Time bound targets. The targets should also be finalised with special consideration to the Medium term Budget Policy Statement. Other areas that may impact future audits would include compliance with laws and regulations, particularly with reference to the future horizontal audits for supply chain management, and irregular and wasteful expenditure.

Discussion
Mr K Dikobo (AZAPO) asked for more details behind the restatement of figures.

Mr van der Westhuizen expressed concerns that SETA staff may begin to take from the purse and the assets of the SETAs as they closed off their books over the next four months, and enquired what measures were in place to prevent this.

Ms Nkau said the final responsibility rested with the management of an entity. AGSA could not audit everything, and only did sample audits for each entity. If the report on the sample of about 20% of transactions suggested irregularities, then AGSA would initiate a complete audit. There were therefore chances that certain misstatements could slip through. Entities would also only correct errors that surfaced from the sample, and not necessary from all their documentation. Some entities would only discover errors of misstatement in the following year and such errors would be restated. There was an onus on the entity’s management and board to ensure that controls and procedures were in place and that its staff were adequately trained and capacitated.

Ms Nkau agreed that the safeguarding of assets of SETAs, in particular those due to close, was important. She said that the Portfolio Committee had every right to interrogate entities and establish what they planned to do with the assets they held. There were guidelines that entities should follow when they were about to close. The Committee and Department could do in-year monitoring. All affected entities must have a transitional plan in place, including an indication of who would assist AGSA during the audits in April to June 2011. For instance, the MAPPP SETA must indicate where the assets would be held and how staff would be redeployed.

Mr Grobler added that although some SETAs would be closed and others would be merged, the commitments and learnerships would not simply stop, and transitional plans must indicate how the plans for the future were to be carried out.

Mr H Hoon, Director, Department of Higher Education and Training, said that the Department had already put in place transitional plans, and the SETAs were instructed to establish steering committees consisting of Department officials and the SETA board and CEO. Terms of reference were handed down to these steering committees. The Department had a similar experience in 2005, with the merger of four SETAs. Clear guidelines were included in Section 9(a) of the legislation that announced the future changes.  AGSA had been part of the process in 2005, and this would happen again. The first steering committee meeting would meet on 26 November 2010.

The Acting Chairperson said that the Committee would formally request a detailed briefing from the Department on the matter just explained and asked Mr Hoon to start with preparations in the meanwhile.

Adoption of Minutes and Reports
The Minutes of meetings held on 25 August 2010, and 8, 14 and 20 September 2010 were tabled and approved.

The Committee’s draft Report on the visit to the SETA in September 2010 was tabled and approved.

The Committee’s draft Report on the amendment to legislation was tabled and approved.

The meeting was adjourned.