South African Social Security Agency 2010/11 Annual Report

Social Development

11 October 2011
Chairperson: Ms Y Botha (ANC)
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Meeting Summary

The South African Social Security Agency (SASSA) briefed the Committee on its 2010/11 Annual Report. The setting up, purpose and mandate of SASSA were explained. It was noted that its key strategic priorities were to have a customer care-centred benefits administration and management system, to make improvements to the integrity of the system and to provide increased access to social security services. The social assistance benefits provided in 2010/11 totalled R14 million, and the breakdown of the numbers, by type of benefit, and province, as well as a five-year percentage growth analysis, was presented. The presentation also noted that SASSA was trying to change its system of payments, and now was doing more than 47% of payments through automated banking, which was cutting down the commission paid to other agents. SASSA explained its Improved Grant Application Process (IGAP), and the Disability Management Model, and an outline was also given of the improved systems integrity. SASSA had implemented a number of changes, which it hoped to introduce throughout the staff organisation, and had also revised its legal services model, in an attempt to reduce litigation costs. An integrity model was implemented by SASSA to respond to fraud and corruption, focusing on verification of beneficiaries. 132 603 beneficiaries were verified for eligibility and existence, and there were found to be 7 133 fraudulent records. The Special Investigating Unit (SIU) was paid R3 million to investigate and prosecute persons found to have defrauded the system, and it had succeeded in prosecuting 2 828 people in the year, bringing the total number of convictions for fraud to 17 477, since 2005. Over 6 000 had signed admissions of debt and were repaying the amounts defrauded. An Integrated Community Registration Outreach Programme was implemented in order to increase access and ensure equity to social assistance services, especially in rural and semi-rural areas, which had resulted in 72 425 new beneficiaries being registered. Eleven new satellite offices were opened in North West. There was also increased Social Relief of Distress assistance to poor households, and there were increasingly effective partnerships with other departments. The Social Assistance Amendment Act now allowed beneficiaries to call for internal reviews.

Although the 2009/10 audit report had isolated several weaknesses in leadership at SASSA, and a disclaimer was issued in that year, SASSA had now managed to achieve an unqualified audit report, although there were matters of emphasis. Total revenue of SASSA was R5.6 billion, most of which was paid through transfers from the Department of Social Development (DSD). SASSA spent R5.2 billion and had achieved some budget savings in relation to contractors’ fees and cost reduction exercises. It had managed to recover R106 896 from dormant accounts and had isolated a further 2 000 deceased beneficiaries from whose dormant accounts money would be recovered. The matters of emphasis related to restatements of financial items, due to correction of prior errors, and changes in material impairments of debt as a result of write-offs. There were no findings on material non-compliance. In some cases proper record-keeping was not maintained, and complete information was not always available to support financial and performance reporting.

Members congratulated SASSA on the improvement in its audit status. They asked whether value for money was obtained from its contractors, and asked how they were monitored and whether there was transfer of skills, especially in relation to Ernst and Young. They noted that the Black Sash was also assisting with the monitoring function and asked for more details on this. Members asked about the filling of posts, and were assured that this should be finalised by December 2011, but that SASSA intended to appoint more people at the lower levels. Members asked if the overdraft would be repaid, and questions what was being done about the irregular expenditure. They questioned whether it was worth SASSA’s while to continue paying the Special Investigating Unit, or whether it would not be preferable to set up its own Inspectorate, but the Department of Social Development gave some further details on this function, which would fall within the Department. Members asked why some of the targets had not been met, questioned the rollout of the IGAP project, asked when the reports on disability grants of foreigners would be received, and what were the reasons for the delay. They asked about the files that could not be made available for audit purposes, and how this problem was being addressed, asked what was being done to remedy the points raised by the auditors, asked about irrecoverable debts and wondered if a different system could be found to stagger reviews, pointing out that substantial resources would be needed to deal with all matters if they arose simultaneously. They commented that it would be useful to introduce more online systems, including on-line training, suggested that the tenders needed to be evaluated carefully, and were briefed on the new payments strategy process, which would be outlined in more detail at a later meeting, together with the Service Delivery Models. The Committee also noted that SASSA and the DSD would be asked to implement some recommendations that would arise out of the oversight conducted by the Committee in Eastern Cape.  


Meeting report

South African Social Security Agency 2010/11 Annual Report
Ms Virginia Petersen, Chief Executive Officer, South African Social Security Agency, said that SASSA (SASSA) had been established as a Schedule 3A public entity. Since its establishment in 2006 the number of benefits increased from 10 million to its current level of 15 million. The increase in demand for services was of particular importance to the way SASSA had to increase accessibility. She briefly outlined the vision to provide a comprehensive social service that would over time assist people to become self-sufficient. The key strategic priorities in the 2010/11 financial year related to  a customer care-centred benefits administration and management system, making improvements to the integrity of the system and providing increased access to social security services.

In 2010/11, 14.9 million social assistance benefits were paid. A full breakdown of the comparison of the types of grants that were paid, year on year since 2005/06, was tabled 9see attached presentation for details). In 2010/11, 2.6 million old age grants were paid, 958 war veterans grants, and 1.2 disability grants. Grant in aid currently stood at 58 000 benefits. Foster care grants grew to 512 000, while the care dependency grants totalled 112 000. The Child Support Grants totalled 10 million. A provincial breakdown was also given, showing that KwaZulu Natal received the largest numbers of grants, at 3.7 million, followed by Eastern Cape at 2.5 million.

SASSA had made significant progress in migrating the numbers of beneficiaries being paid by cash, to those paid through Automated Clearing Bureaus (ACBs), with the latter payments now totalling 47.33% of all payments. The cost of administering social assistance grants through contractors was reduced, resulting in savings of about 9%. It was intended to review the current system and to develop a new payment strategy, but SASSA stressed that it would avoid destabilising beneficiaries when doing so.

The Improved Grant Application Process (IGAP), which was intended to reduce the turnaround time for social grant applications, was implemented in one of the districts in the Free State. Because of the automation SASSA had achieved a turnaround time of nine days, a substantial improvement on the previous 21 days for processing of new grants. KwaZulu Natal (KZN) and Gauteng recorded the highest number of social grants applications processed within 30 days, whilst the Northern Cape recorded the lowest number.

Ms Petersen that the Disability Management Model (DMM) had so far only been adopted in Eastern Cape. It was intended to standardise the medical assessment process, and all doctors contracted to SASSA were trained and accredited to conduct disability medical assessment. So far, doctors had managed to undertake 112 363 medical review assessments, against the target of 298 752 over the Medium Term Expenditure Framework (MTEF) period. SASSA would continue to monitor and evaluate the effectiveness of prioritised elements of the DMM. It had also entered into a Memorandum of Understanding (MOU) with some Provincial Health Departments for assistance in conducting disability assessments.

SASSA had investigated organisational power timing, where change management initiatives were undertaken to improve skills, competencies and professional conduct. SASSA had conducted ethics audits, which revealed a significant decrease in the number of grievances relating to job description and performance management, including staff development. SASSA had made progress in inculcating the understanding between performance expectation and actual performance. Ethics training was provided to 3 165 staff members across the regions.

An integrity model was implemented by SASSA to respond to fraud and corruption, focusing on verification of beneficiaries. 132 603 beneficiaries were verified for eligibility and existence, and there were found to be 7 133 fraudulent records. The Special Investigating Unit (SIU) was paid R3 million to investigate and prosecute persons found to have defrauded the system, and it succeeded in bringing 2 828 persons before the courts in this year, bringing the number of total convictions to 17 477 since the inception of the project in June 2005. 6 368 people had signed admissions of debt (AODs) and were repaying the amounts defrauded.

SASSA had, through the implementation of the legal services model, drafted and vetted 101 contracts and service level agreements (SLAs) in accordance with processes contained in the Framework for Contract Management. The number of litigation cases had been reduced from 2 744 to 1 944 during the 2010/11 financial year, and the liability costs were dropped from R43 million to R12 million in this year. KZN showed the largest number of claims, as it had the largest numbers of beneficiaries, followed by Eastern Cape. SASSA was interrogating the litigation and its drivers, to try to reduce costs.

Ms Petersen emphasised that the Integrated Community Registration Outreach Programme (ICROP) was implemented in order to increase access and ensure equity to social assistance services, especially in rural and semi-rural areas. To date, 675 outreach programmes had been conducted in 121 municipalities across the country, and 72 425 new beneficiaries were registered through the ICROP. This had not only increased the accessibility of social grants but also led to the significant increase in Social Relief of Distress (SRD) assistance to poor households, as 3 766 households that experienced hardships were issued with vouchers, food parcels, and assisted with other material needs. The success of this programme could be attributed to an effective partnership between SASSA and the Departments of Social Development (DSD), Home Affairs (DHA), Health (DOH), and the South African Police Service (SAPS) for integrated service delivery.

Eleven satellite offices were also instituted in North West to improve access to services.

Ms Petersen noted that the audit report for 2009/10 had isolated weaknesses in leadership in SASSA, which contributed to the audit disclaimer in that year. SASSA had since focused on providing targeted skills development initiatives to enhance leadership skills. She outlined the various programmes offered (see attached presentation) and said that staffing analyses had been conducted on 70% of all staff.

Ms Petersen then outlined some key policy developments and legislative changes. The Social Assistance Amendment Act came into effect on the 16 September 2010, and this provided an avenue for applicants to contest decisions and call for a review by SASSA. Another amendment, which applied from 1 December 2010, dealt with the eligibility of persons to Social Relief of Distress, where they had been affected by disasters. The Bargaining Forum Resolution 1 applied to staff.

Ms Petersen outlined the financial figures. The total revenue was R5.6 billion, which was mainly received through transfers from the Department of Social Development (DSD). The total expenditure amounted to R5.2 billion, leaving budget savings of R462 million. SASSA had realised reduction of expenditure on contractor fees, because of negotiations it had conducted. At the beginning of the year SASSA had an accumulated budget deficit of R884 million, arising since 2007/08, but cost savings exercises had been implemented. The gains through this were, however, negatively impacted upon by budget adjustments or funds shifted to items that incurred lesser expenditure, such as communication and travel.

As mentioned earlier, SASSA had initiated the migration of beneficiary payments through banks to try to reduce the exorbitant disbursement fees charged by cash payment contractors. 47.33% of payments, or an increase of 16.8%, were now being made through banks. Where monies had been paid to dormant beneficiary accounts, SASSA had collaborated with law enforcement agencies to get authority to recover those funds, and so far had succeeded in recovering R106 896 from dormant beneficiaries, whilst it had initiated processes to recover overpayments from a further 2 000 deceased beneficiaries with dormant accounts.

SASSA had achieved an unqualified audit opinion in this year. Its financial performance and cash flows for the year were in accordance with Generally Recognised Accounting Principles (GRAP) and complied with the Public Finance Management Act (PFMA) and the South African Social Security Agency Act. SASSA had restated various financial statement items, due to correction of prior errors. As disclosed in note 20, material impairment of debtors were incurred as a result of a write off of irrecoverable departmental debts.

Ms Petersen outlined the findings on the Annual Performance Report, set out between pages 39 and 61 of the Annual Report, and noted that there were no findings on material non-compliance with laws and regulations. The internal controls were considered relevant to the audit, but no opinion had been expressed on the effectiveness of internal control. There was a comment that management did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information was accessible and available to support financial and performance reporting.

Ms Petersen outlined some of the strategic challenges, noting that the Budget Performance Review would be important for designing the most appropriate structure for SASSA. SASSA had implemented various steps to improve service delivery. It had optimised business processes, and had standardised the Grant Payment System. It had developed a new payment model to improve its costs efficiencies, whilst the implementation of austerity measures also had a bearing on the new envisaged innovations and projects. The moratorium on the filling of posts remained a major challenge in respect of its human resource (HR) capacity, and that had an effect on overall performance of SASSA.

Discussion
The Chairperson congratulated SASSA on achieving an unqualified report.

Ms P Tswete (ANC) also congratulated SASSA on its unqualified report.

Ms Tswete asked whether there were timeframes for the delivery, or how the progress of work was tracked, to ensure that contractors were giving value for the money SASSA paid for their services. She also asked why it was difficult for SASSA to do this work itself.

Ms Tswete asked why there were still so many acting posts, saying that if SASSA did not have the authority to hire extra staff, it was likely that the posts would still be unfilled by 1 December 2011, although SASSA had promised that this would be the deadline for final hiring. She asked if by this date the acting positions would have been permanently filled.

Ms Petersen noted that the position of the Chief Financial Officer and the Executive Manager for Strategy had already been advertised and interviews would be conducted soon. SASSA had also managed to secure release of 1 100 level 5 and 7 positions, and was growing its capacity at operational level. However, she conceded that in certain areas SASSA did not have managers in some areas of production. The nature of the work required “more hands in small offices” than having managers at head and regional office. SASSA’s work was concentrated at ground level where the grant applications were received. That was why SASSA wanted more people at the lower production levels. She also confirmed that the new batch of staff would come in by the 1 December 2011.

Ms S Kopane (DA) congratulated SASSA on its report, and noted that SASSA had achieved a saving of R4 million in respect of its overdraft. She asked if SASSA had paid the R74.5 million which was stated as being in issue during the previous year.

Mr Thulaganyo Mothusi, Acting Chief Financial Officer, SASSA, responded that SASSA would be paying the R74.5 million, but had first to write to National Treasury for permission to pay over this amount. The relevant letter had already been sent and SASSA was awaiting Treasury’s response. He would report further to the Committee during the next meeting.

Ms Kopane was pleased to hear that SASSA was doing something to reduce its irregular expenditure. She asked about the outcomes on the 140 cases of irregular expenditure that had been reported in the previous year.

Mr Mothusi said that in the 140 cases of irregular expenditure, the accrual was regarded as expenditure, although the question of irregularity was found only after the payment had been made. This had to be disclosed, and an investigation done. SASSA had a Financial Misconduct Board who would consider and decide on those issues. He said that although the process had started, he would need to provide progress reports on all the cases. SASSA would try to ensure that amounts were recovered, where this was recommended. This went hand-in-hand with the report on fruitless expenditure, (raised by Mr Bhoola later)

Ms Kopane asked if there was any contract with the consultants hired by SASSA to ensure that there was a transfer of skills to employees of SASSA. She also asked if there was a monitoring tool to ensure that the consultants or contractors reported on progress, on a monthly basis, and in this regard asked particularly about the agreements with Ernst and Young.

Mr Mothusi said that the consultants, particularly Ernst and Young, were treated on a project basis, and that certain deliverables were agreed upon between SASSA and the consultancy. Progress was monitoring in weekly and monthly meetings, and feedback was provided to the Project Managers on the achievement of deliverables.

Specifically in relation to skills transfer, Mr Mothusi assured her that skills transfer had already started. His financial colleagues were moving from province to province to train staff in all offices. All financial officers had been trained on the basic accrual principles, and on application of these principles, and training was provided by those who were knowledgeable on the Oracle systems. In time, every employee at SASSA should be competent in the theory and application of the systems, and applied the necessary financial standards.

Ms Kopane noted that the Social Assistance Act provided for the establishment of an Inspectorate and therefore could see no reason why SASSA was still utilising the services of the SIU. She said that there would be substantial savings if SASSA established the Inspectorate to handle investigations within the Agency.

Ms Petersen responded that SASSA would have paid about R18 million to the SIU over an 18 month period, but the saving was R6.9 million. In regard to the establishment of the Inspectorate, she responded that this was contained in the Social Assistance Act and would in fact be set up by the DSD. The DSD had already appointed someone who had already started to establish the SASSA links, and to do some bridging work, until the Inspectorate was finally established. SASSA and DSD would be working jointly on this. The SIU would gradually reduce its input, as it would be working more closely with other Government agencies on matters of common interest. The point was to have sufficient good evidence, so that when the cases were handed to SAPS, the investigations could continue to prosecution.

Mr Selwyn Jehoma, Deputy Director-General, Department of Social Development, added that it was not correct to assume that the establishment of the Inspectorate would necessarily be less than the costs that were being charged by the SIU. The DSD had set up a Tribunal, but the setting up of the Inspectorate would involve a shift in direction. There were not necessarily large gaps and losses to be expected in future. The amount of compliance that SASSA had by now achieved was superb.

Ms Kopane noted that some of the targets were not met, including the IGAP that was not rolled out to other regions, some internal mechanisms that were not implemented in all areas, and the non-finalisation of the new premium strategy. She asked why these targets were not met.

Ms Dianne Dunkerley, Executive Manager: Grants Administration, SASSA responded that SASSA needed a critical review of the IGAP but did not want to invest a lot of money in it if it would not provide the platform that would take SASSA forward. The Service Delivery model would be shared with the Committee shortly. SASSA wanted to ensure that its current work would help, and for this reason it intended to pilot IGAP fully in Free State, which would be done before the end of the current financial year. SASSA wanted to try to ensure that there was standardisation before rolling it out to the other provinces. She confirmed that automation would help SASSA and would ensure the speeding up of the process, but the most important aspect was to look at the quality of the grants applications so that SASSA had a system that ensured quality and compliance issues.

Ms Dunkerley also agreed that the internal review mechanism target was not achieved, as it should have been rolled out to all provinces. This was legislated for in September 2010, but the regulations had only now been finalised. SASSA had implemented various versions, and it was now trying to ensure standardisation in line with the clear new regulations. This must be coupled with an extensive communication campaign, so that people knew what their rights were, and also knew that they could ask SASSA to conduct internal reviews. SASSA wanted to ensure that the processes were correct, and it was committed to implementing this in the current financial year.

Ms Kopane also asked what the timeframe was for the delivery of the draft report on disability of foreigners in accessing grants, and why this had not been achieved.

Ms Raphaahle Ramokgopa, Acting Executive Manager, SASSA, said that SASSA had done a preliminary report on the eligibility of foreigners to receive grants. Some gaps were identified with regard to the method being applied. Currently, in conjunction with the internal audit unit, SASSA was auditing some of those entering the cross-border areas, to try to strengthen the report. By the next meeting a final report should be compiled, and she said that SASSA would send the findings to the Committee, which would reveal the outcomes. The first report, which was merely a desktop analysis, did not contain sufficient facts. It was now decided that further work must be done in that area.

Ms H Makhuba (ANC) congratulated SASSA on its unqualified audit report. However, she was surprised to note that DSD also received an unqualified audit, because she noted that SASSA had been requested to provide 2 762 beneficiary files for audit purposes, yet it could only produce 42 files, and even some of those were found to be incorrect in that they did not contain the necessary information that entitled beneficiaries to receive grants. That was something that worked against the Department. She asked why those remaining beneficiary files were not presented for auditing purposes.

Ms Dunkerley responded that in this financial year, it was only 42 files that could not be supplied. However, for audit purposes, the Auditor-General took the percentage as a percentage of the selected sample. It was unfortunate, but was an improvement on the previous year, when over R10 billion could not be accounted for. SASSA was trying to ensure, in this financial year, that it was tidying up its systems to ensure that it would be able to produce correspondence and documents related to reviews when they were called for.

Mr Bandile Maqethuka, Executive Manager: Grants Administration, SASSA, added that SASSA had a plan to try to remedy all the matters of emphasis raised by the Auditor-General. The targets for this year were mostly achieved by SASSA, and he noted that there had been a substantial improvement in the audit reports of SASSA, despite the matters raised.

Ms Makhuba asked if SASSA could give an example of irrecoverable departmental debtors as highlighted in slide 45 of the report.

Mr Mothusi said that the irrecoverable debts were not related to grant debtors but to SASSA’s own staff debtors, and interdepartmental debtors. There were about 15 interdepartmental debtors, and this challenge arose out of the fact that in KZN and Eastern Cape, offices were shared with Department of Public Works, but invoices were not provided on time. Some of the problems and delays had been picked up only after about two years. These were being addressed to see what could be done.

Mr R Bhoola (MF) also congratulated SASSA on its audit report and hoped that its achievements would truly and satisfactorily translate to service delivery on the ground. He also congratulated Ms Petersen for her efforts to clean up the system. However, he noted that there were a large number of reviews, and was worried that there might be inadequate resources to cope with them. He wondered whether it would not be preferable, rather than stopping grants at the same time, to stagger this so that the social development offices could cope with the flow of requests.

Mr Bhoola thought that the numbers of grants and benefits per percentage growth were interesting. He noted the target of one million new grants, but said that in order for SASSA to deal with this, it would have to address its resources and capacity building. He asked if SASSA was satisfied both with the current system and the resources to address service delivery. He thought that there were particular challenges with the growth rate of grants, the disability system, and the fact that children might not be taken into account. He asked if any precautionary measures were being put in place. He also added that clients whose disability grants had been rejected might tend to “shop around” for medical reports, which meant fruitless expenditure, and asked if SASSA had suggestions to curb this tendency.

Mr Selwyn Jehoma responded that, regrettably, there was nothing much Government could do about this. There were two issues at play; one was the high level of unemployment and the other was poverty. People would try whatever they could in order to try to sustain themselves, including visiting various doctors to try to get an assessment that they were disabled and entitled to access the grants.

Mr Bhoola noted that SASSA had no control monitoring over stores, but people were compelled to purchase a certain amount of goods before they would be paid.

Mr Bhoola commended SASSA on its one-day turnaround, which he described as “remarkable”. However, he remained concerned about the high rejection rate on disability claims. He suggested that SASSA needed to have an online system for applications, monitoring and controlling.

Mr Bhoola said that the changed management systems were interesting, but pointed out that some offices, particularly in KZN, had not begun to improve substantially as yet. He wondered if SASSA had ever considered setting up an “Academy”, to ensure that quality of services was delivered throughout.

Ms Petersen said that she believed that a virtual training centre would give SASSA the capability to interact with all its workers through laptops or computers, which would enable it also to pick up any trends of workers perhaps taking on grants or making mistakes. The faster that a “virtual training centre” could be implemented, the better this would be for SASSA.

Mr Bhoola asked if SASSA was satisfied that its strategic plan and the operational plans were translating to the services on the ground. He asked if any gaps had been identified, and, if so, asked what solutions were put in place.

Mr Bhoola also welcomed the introduction of the legal services implementation model to curb corruption. He suggested that in future SASSA needed to focus on, and evaluate the tender service agreements to check that it was receiving value for money. The reduction in litigation was also welcomed, but SASSA must continue to do compliance monitoring. He suggested that the Public Protector and Black Sash could be asked also to assist with monitoring of the systems.

Ms Petersen responded that SASSA was an agency that did utilise other agencies as part of its monitoring. It had entered into an agreement with the Black Sash, a civil society organisation engaging with peoples’ rights on the ground, was monitoring service delivery and would report inconsistencies in this to SASSA. SASSA and Black Sash held lengthy meetings to engage on the service delivery issues identified, because it wished to be open and transparent. It welcomed engagement with community structures. The Deputy Minister of Social Development was leading a community programme.

Mr Bhoola asked if SASSA was satisfied that it was complying with National Treasury and PFMA requirements, and asked if there was any fruitless or irregular expenditure.

(This question was answered earlier)

Ms Ramokgopa commented that the new payment strategy was a long term process, which SASSA thought would only be completed in about five years. This had, however, been coupled with an interim phase, as advertised in the tender, during the next five year period. The evaluation on the tender was currently being completed, and the tender should be awarded before the end of the current financial year. Another element of this related to the investigations as to where SASSA wanted to place itself in the next few years, what its responsibilities were, and what it could handle, as well as the requirements with which it would have to comply in order for SASSA to be a paymaster on its own. Further research was needed. The actual development and implementation of the model would be piloted in the third year of the five-year project.

The Chairperson informed the Committee that on 25 October, SASSA would be briefing the Committee on its Service Delivery Models, and suggested that Members’ questions in relation to service delivery should be answered at that meeting. Most of the questions in fact would probably be answered by the new models.

The Chairperson agreed that Ms Kopane had raised an important issue pertaining to monitoring and evaluation of contractors, especially Ernst and Young. She agreed that effective monitoring and evaluation of contractors would ensure value for money. The first fruits of the improved monitoring were seen in the unqualified audit report from the Auditor-General (AG). She also requested that in the next meeting, SASSA provide more details on the end results of the interaction.

The AG had raised some issues. She also noted that once the Committee’s Report on the Oversight Visit to Eastern Cape had been finalised, recommendations would be presented, and the Department and SASSA would be given the opportunity to discuss how to implement some of those. In particular, that Report would highlight some areas that needed improved service delivery, in Eastern Cape and in Free State, where the Committee had visited a paypoint, and a report had been presented at the People’s Assembly. It was important that SASSA and the Committee maintain interaction and good communication, to assist service delivery by SASSA and oversight by the Committee.

The meeting was adjourned.


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