The Auditor-General of
Members of opposition parties asked how a suspension period of two years was possible and how much the Auditor-General charged departments for auditing services.
The Department of Rural Development and Land Reform briefed Members on the Department's Annual Report 2010/11 with particular reference to the Department's five programmes - Administration, Geospatial and Cadastral services, Rural Development, Restitution, and Land Reform – and targets and achievements pertaining to each programme, followed by a separate presentation on the annual financial statements. The Department emphasized that there had been a lot of positive movement in the Comprehensive Rural Development Programme. A number of critical posts had been filled. Some key functions had been centralized to consolidate efforts, provide leadership and ensure better accountability. The National Rural Youth Service Corps programme had been launched. This was the first time that a skills development programme of this magnitude had been embarked upon in rural areas. The Department emphasized the need to consolidate the Department at a provincial level – it had been found that the current provincial model had been hampering effective management and expenditure. The Department had acknowledged that its grant funding model had been open to abuse and therefore the recapitalization and development model was the new model that was used to ensure that farms were indeed capable of being farmed.
The Acting Chief Land Claims Commissioner, Department of Rural Development and Land Reform, briefed Members on the Commission on Restitution of Land Rights Annual Report 2010/11. The Commissioner noted that the Commission targeted 60 new claims for settlement during 2010/11. Additional funds were provided and the Commission successfully processed 714 claims; comprising 257 dismissed claims, 127 rural claims and 330 urban claims.
A Democratic Alliance Member was apprehensive about the capacity of the Department and asked why it was taking so long to finalize the immovable asset register. In addition, why were investigations relating to suspensions taken so long? The Member asked about the use of consultants and probed the long list of services outsourced, and asked if the failure to meet the targets set for Deeds Registration was a result of institutional incapacities. An African National Congress Member emphasized that farming was a livelihood and if the State created a welfare system, unemployment would inevitably rise and people would feel alienated. The Chairperson was concerned about the material losses and debts written off and asked why none of the targeted 1 000 rural schools had been given gardens.
The Chairperson opened the meeting with a brief introduction into the matters at hand – namely, the presentation from the Auditor-General of
Ms Meisie Nkau, Business Executive, Auditor-General of South Africa (AGSA), first emphasized a number of governance initiatives that had and continued to be integral to the functioning of both the Office of the Auditor-General and also the entities with which the AGSA consulted.
The chief goal of the AGSA was to have clean administration by 2014 – that is to say, the AGSA continued to work towards obtaining more accurate audit outcomes and also thorough and comprehensive public sector financial statements. The AGSA had been conducting Readiness Assessments within a number of departments – the DRDLR being one of them. Ms Nkau noted that these assessments had been very eye-opening, in that they illustrated that most public entities were not giving regular audit procedures the same attention as their financial statements.
Ms Nkau briefly discussed the mechanisms behind the Internal Control Analysis: these analyses concerned leadership, resources, financial management, and governance. Under the leadership criteria, Ms Nkau explained that the AGSA had been concerned with how leadership was constructed to support entities. Resources were mostly concerned communications issues – namely, the functionality of Information Technology (IT) systems within entities. Furthermore, Ms Nkau discussed the ways in which proper functioning financial management and governance were integral to the success of entities – both public and private.
Ms Nkau underscored the fact that clean and efficient administration was of the utmost priority for the AGSA. This priority consisted of two commitments – namely, that the AGSA would work with entities at every level, and also that the AGSA would commit to submitting comprehensive quarterly reports before bringing an annual report to the Portfolio Committee. Ms Nkau emphasized that these checks would ensure that both the AGSA and the Portfolio Committee would remain on the same page with regards to audit outcomes and performance analysis.
Ms Nkau then noted the importance of legislative requirements for pre-determined objectives. With respect to planning and reporting on pre-determined objectives, Ms Nkau explained that the outcome of a particular entity was often contingent on the performance of individuals. In light of the strong correlation, she suggested that entities ought to enter into performance contracts with their employees to ensure a consistent level of accountability.
Ms Nkau next focused her attention more specifically on the DRDLR. Within this portfolio, she noted that there were four entities under the control of the Department. Of all the opinions within this portfolio, 50% of the entities had received qualified status. With respect to financial outcomes, the AGSA had focused initially on tangible capital assets. Ms Nkau highlighted that the Department had put measures in place to ensure the completion of its asset register. Although the Department put a lot of effort into updating its immovable asset register, the AGSA was still unable to obtain sufficient and appropriate audit evidence to ensure the completeness of the properties recorded in the immovable asset register.
With respect to material losses from criminal conduct, Ms Nkau explained that this category had been emphasized the previous year as such losses had actually occurred; however, this had not been the case for the past year. In addition, she explained that the category of significant uncertainties referred to the possible outflow of funds through law suits (usually land restitution). Furthermore, with regards to irregular expenditure, Ms Nkau noted that the management of the Department’s supply chain had improved remarkably and further efforts were moving in the right direction.
Ms Nkau also aired the AGSA's concern with regard to material adjustments within entities. If entities wished to avoid material adjustments they ought to manage their balances consistently in the case of asset register.
Ms Nkau also noted – with regards to risk management – that the Department did not have an approved fraud prevention plan in place although the accounting officer conducted a risk assessment. The strategy was therefore not communicated to all officials to ensure that the risk management strategy was incorporated into the language and culture of the institution. Ms Nkau emphasized that if systematic fraud plans were not implemented more issues would surely arise and this in itself would have adverse effects on levels of performance.
Furthermore – with respect to human resources management – Ms Nkau noted that the senior management vacancy rate had increased from 18% in the previous year to 25% in the year under review, mainly due to resignations and non-renewal of contracts for senior staff in the land claims commission. Moreover, positions in senior management were vacant for more than 12 months. Ms Nkau explained that the verification process for new appointments (lower levels) did not always take place and did not always cover criminal record checks, citizenship verifications, financial record checks, qualification verifications and reference checks as per the requirements. In addition, Ms Nkau noted that not all senior managers signed performance agreements for the current performance period as per the requirements of part IIIA of the Public Service Regulations. Furthermore, Ms Nkau noted that some employees had been on suspension with pay for more than 60 days – the longest suspension period being 759 days (2.5 years).
Mr S Ntapane (UDM) asked how a suspension period of two years was possible – and furthermore, what implications followed. Mr Ntapane also requested that the AGSA elaborate on the nature of material losses incurred from criminal conduct.
Ms A Steyn (DA) asked how much the AGSA charged departments for auditing services – and whether there were any situations in which payments were delayed.
Ms Nkau explained to that when an incident with an employee came up, there had to be a thorough investigation before a hearing could be conducted. In most scenarios this was a straightforward process but sometimes it could end up being dragged out.
With respect to material losses from criminal conduct, Ms Nkau responded that the information that had already been disclosed was somewhat lacking as investigations were still currently in progress; however, more substantive information would be released at a later date.
With respect to audit fees, Ms Nkau assured Members that the DRDLR was seldom late with its payment for auditing services. She noted that for 2009/10 the fees had been R12.3 million and for 2010/11 they had been R12.4 million. Ms Nkau underscored the fact that the AGSA had increased its rate/hour two years prior, in consultation with the National Treasury and the Oversight Committee on the Auditor-General. That is to say, it was important to acknowledge the increase in pre-determined objectives (service delivery). As the DRDLR continued to expand, it must ensure that the same amount of attention was paid to service delivery as to the management of financial statements.
Department of Rural Development and Land Reform. Annual Report 2010-2011 Presentation
Mr Mduduzi Shabane, Director-General, Department of Rural Development and Land Reform (DRDLR) began with a brief account of the strategic overview. He noted that this had been the first full year of functioning as the new Department of Rural Development and Land Reform. He emphasized that there had been a lot of positive movement in the Comprehensive Rural Development Programme (CRDP). Moreover, he noted that lots of work had been done to develop parts of the new organization (DRDLR) whilst consolidating functions inherited from the former Department of Land Affairs.
Mr Shabane explained that the Department’s activities had been organized into five programmes – namely, Administration, Geospatial & Cadastral services, Rural development, Restitution, and Land Reform. He noted that spending during 2010-11 had translated into 97.7% of the final allocation of R7.293 billion, compared to 91.9% of R6.391 billion allocated during 2009-2010. In addition, Mr Shabane highlighted that the Department had initiated a moratorium on the filling of vacancies, whilst aligning the organizational structure to the new mandate of Rural Development.
With respect to Administration (Programme 1), Mr Shabane noted that the funded vacancy rate had been reduced to 11%. Furthermore, the completeness of the immoveable asset register was still a challenge. The Auditor-General has however acknowledged the improvements made in the 2010/11 financial year towards a complete immovable asset register. Mr Shabane also highlighted that a number of critical posts had been filled – namely a new Director-General had been appointed in November 2010, as well as the Deputy Director-General who was responsible for Corporate Support Services, the Chief Surveyor General and the Chief Registrar of Deeds. He also noted that some key functions (Information and Communications Technology (ICT), and Legal Services) had been centralized to consolidate efforts, provide leadership and ensure better accountability.
With respect to Geospatial & Cadastral Services (Programme 2), Mr Shabane highlighted that 53 projects consisting of research reports, cadastral survey information, and plans from spatial information generated had been addressed within six working days (target of 15 days). He also noted that the Department had examined and approved 29 projects involving rural development within six working days. In addition, approximately 88% of National Spatial Data Set had been completed in the financial year 2010/11. Mr Shabane also noted that the Deeds Registration had progressively introduced the e-Cadastre system and digital scanning of microfilm records had commenced: these decisions proved to be a step forward in the improvement of cadastral survey management and deeds registration. As of 31 March, 2011, a total of 904 928 deeds and documents had been registered in the 10 deeds registries countrywide.
With respect to Rural Development (Programme 3), Mr Shabane noted that the Social, Technical, Rural Livelihoods & Institutional Facilitation (STRIF) initiative had mobilised 28 communities and profiled 13 694 households, capturing them on the National Integrated Social Information System (NISIS). He also noted that 960 youth were trained in participatory rural appraisal and social survey methods. Moreover, Councils of Stakeholders (CoS) had been established in 25 CDRP sites for the 2010-2011 financial year. Mr Shabane also highlighted that the National Rural Youth Service Corps (NARYSEC) programme had been launched by the Department – he emphasized that this was the first time that a skills development programme of this magnitude had been embarked upon in rural areas. He continued, adding that as of 31 March, 2011 there were 7 956 NARYSEC youth and that the DRDLR expected this figure to grow to 20 000 over the next three years.
Mr Shabane also noted that Rural Infrastructural Development (RID) had facilitated the construction and renovation of schools, houses, sanitation systems, water infrastructure, energy infrastructure, fencing and roads in rural areas. In addition, the roll-out of 47 village viewing areas enabled rural peoples to have access to the 2010 Soccer World Cup.
With respect to Restitution (Programme 4), Mr Shabane noted that the Commission on Restitution of Land Rights (CRLR) finalized a total of 714 land claims between 1 April 2010 and 31 March 2011. These included 257 claims that were dismissed because they failed to comply with the Restitution of Land Rights Act,1994 (Act No. 22 of 1994). Mr Shabane also noted that an additional 1 318 backlog claims were finalized, thanks to the additional R 2 billion that was made available to the programme.
With respect to Land Reform (Programme 5), Mr Shabane noted that the DRDLR had transferred a total of 322 844.9931ha, equaling 288 projects and provided land access to a total of 3 089 beneficiaries through either leases or caretaker agreements. Mr Shabane highlighted that 276 396.6893ha of the total land transferred was registered in the name of the State. The remaining 46 448.3038ha had been transferred through Land Redistribution for Agricultural Development (LRAD) in order to finalize the commitments the Department had at the time of the shift from grants-based land reform to Pro Active Land Acquisition Strategy (PLAS).
With respect to organizational challenges, Mr Shabane explained that the DRDLR was still settling into the new mandate for rural development – that is, the three main service delivery components of the Department (rural development, land reform, and deeds & CSG) are at varying levels of maturity and hence require different responses from management. Furthermore, Mr Shabane emphasized the need to consolidate the Department at a provincial level – that is to say, findings had indicated that the current provincial model had been hampering effective management and expenditure.
Department of Rural Development and Land Reform Annual Financial Statements 2010/11
Ms Irene Singo, Acting Chief Financial Officer, DRDLR, first focused on the report of the Auditor General. She noted that there were 236 land parcels which were identified in the Deeds Data but not on the Immovable Asset Register of the Department. Ms Singo assured the Committee that the Department was currently conducting detailed research on those properties and the exercise will be completed by 30 November, 2011. Ms Singo also noted that the project on surveying state land was running in parallel with a comprehensive state land audit which sought to accurately link Deeds Registry records with Surveyor-General Data, as well as providing reliable information on land use.
With respect to the significant uncertainties, Ms Singo explained that these would remain as the decision of the court was independent of the Department – that was to say, case outcomes depended on the rules and processes of the court. Nonetheless, noted Ms Singo, the Department had started an electronic data management project which would ensure that reliable information was stored and kept.
With regards to Risk Management, Ms Singo noted that the Department had since appointed a member of the Audit Committee as the Chairperson of the Risk and Compliance Committee and one other external member. Moreover, the Fraud Prevention Plan was since presented to the above committee and recommended for approval with amendments.
In terms of Expenditure Management, Ms Singo explained that the Department had acknowledged that its grant funding model had been open to abuse and therefore the recapitalization and development model was the new model that was used to ensure that farms were indeed capable of being farmed. She added that the year under review was the final year in which the LRAD model was used.
Commission on Restitution of Land Rights. Annual Report 2010/11. Briefing
Mr Tele Maphoto, Acting Chief Land Claims Commissioner, DRDLR, noted that the Commission targeted 60 new claims for settlement during 2010-2011. He added that additional funds were provided and the Commission successfully processed 714 claims; comprising 257 dismissed claims, 127 rural claims and 330 urban claims.
Mr Maphoto also noted that of the 457 claims settled, 177 were finalized within the available budget. With respect to total expenditure, Mr Maphoto noted that R2 601 414 445 was spent to finalize 1 318 backlog claims and R746 573 977 was spent to finalize 177 of the 457 claims settled in the 2010/11 financial year.
Ms Steyn was apprehensive about the capacity of the DRDLR. She asked why it was taking so long to finalize the immovable asset register. In addition, why were investigations relating to suspensions taken so long?
Mr Shabane replied that the completion of the immovable asset register was a very complex procedure – it was not a question of capacity. He emphasized that his Department was dealing with thousands of parcels of land and that this process required time and patience.
With respect to the suspensions, Mr Shabane accepted that the investigations had been quite lengthy but assured the Committee that this was far from the norm. He explained that the Department tried to handle as many internal issues as quickly and thoroughly as it could; however, the more complex criminal cases required a degree of outsourcing and the Department had less control over these cases.
The Chairperson was concerned about the material losses and debts written off that were mentioned in the annual report. He asked what the ‘No show’ debt referred to and also what the usual procedure entailed for writing off debts was.
Ms Singo explained that, if damages were incurred, an internal audit investigation was completed. If such an investigation indicated that the damages were not due to negligence then damages were written off. Furthermore, it was likely that some of the debt recorded was from damages sustained in previous years and these investigations had only recently been completed.
Ms Steyn asked about the utilization of consultants (see Annual report p154). She probed about the long list of services that had been outsourced.
Ms Singo responded that the Department used a lot of consultants in the Department. She explained that there were a number of situations in which the Department had to hire external professionals (valuers, surveyors, planners, etc.).
Ms Steyn asked if the failure to meet the targets set for Deeds Registration was a result of institutional incapacities.
Mr Shabane explained that during 2009/2010 the Department had embarked on the rationalization process of the then version 2.5 of the organizational structure. This resulted in the issuing of the moratorium on the advertising and filling of vacant positions. He explained that this left a number of newly created components as well as existing components not filling their vacancies, hence the under-performance on set targets.
The Chairperson asked why none of the targeted 1 000 rural schools had been given gardens. He was curious why such a target had been set if it was clearly so insurmountable.
Dr Moshe Swartz, Deputy Director-General, STRIF, explained that the targets had not been met because other departments had not been as enthusiastic as theirs. He emphasized that a number of targets had been joint targets with the Department of Basic Education but it had not been ready with resources or information.
Ms Steyn asked why the targets set for NARYSEC were not met.
Dr Swartz explained that the initial plan was to recruit 9 000 (25% being disabled) but tardiness problems arose within
Ms P Ngwenya-Mabila (ANC) asked why there was a service being provided in Diyatalawa, such that its residents were not aware of the conditions of the land. She emphasized that farming was a livelihood and if the State creates a welfare system, unemployment will inevitably rise and people will feel alienated.
Dr Swartz explained that there was still much progress to be made in Diyatalawa. In a positive light, Dr Swartz noted that 50 plots had been built (of the proposed 37) and that all had now been occupied. He assured the Committee that the appropriate infrastructure of water and solar energy had recently been connected.
The Chairperson thanked Members and delegates and adjourned the meeting.
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