Boxing South Africa response to Auditor-General's Findings on its 2010/11 Annual Report

Sports, Arts and Culture

24 January 2012
Chairperson: Mr M Dikagwi (ANC)
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Meeting Summary

The Chairperson explained that the purpose of the meeting was to get Boxing South Africa (BSA) to explain problems affecting boxing in the country. While there were other issues troubling BSA including administration matters, the Committee was particularly concerned about policy issues in the development and transformation of the sport. BSA said that they were prepared to do everything in their power to bring sanity to the sport but they needed funds to execute their strategy. Currently, BSA projects were running on a R2.5 million budget which fell far below the clean-up exercise needed to revive boxing. The board was holding meetings with broadcasters such as eTV and SABC to broadcast matches. Members were asked to help in raising funds and looking for sponsorship as the entity did not currently have a sponsor.

Even though members were happy about the corrective measures taken by the new board after receiving the 2010/11 Auditor-General findings, there was concern about whether the objectives would be realised, given that BSA was financially handicapped. BSA members that were implicated in the cause its current problems should be investigated and dealt with accordingly.

Meeting report

The Chairperson explained that it was not the purpose of the Committee to embarrass delegates appearing before it. He emphasised that, despite the fact that BSA was battling financial and governance issues, the Committee was particularly interested in issues of development and transformation of boxing and other sporting codes. Most boxers died as paupers and the sport had nosedived in recent years. Even the Eastern Cape Province, once renowned for producing talented boxers had been affected badly.

Mr
Ngconde Balfour, the new BSA chairman, told the Committee that the entity was appearing before the Committee to explain problems related to its 2010/11 Annual Report and to explain the course of action that the new board of directors would be taking in, carrying out the job tasked by the Minister and rectifying irregularities raised by the Office of the Auditor-General.

Mr Balfour had been appointed as BSA’s new Chairman by Minister Fikile Mbalula in August 2011 and had previously served as a Minister of Sport and then as Minister of Correctional Services. He explained that he and Mr Moffat Qithi were appointed by the minister because there was no functioning board of BSA at the time. Only two members of the new board had managed to come to the present meeting due to financial constraints. The other board members were Muditambi Ravele, Thabani Khumalo, Mandla Ntlanganiso, Dumile Mateza and Nontsantsa Lebaka. The board would serve for a period of three years, and the former minister said he had committed to one year but would re-consider this decision only if BSA was still experiencing problems.

The new board was mandated by the Minister of Sport to create an organised and regulated environment for professional boxing and amateur boxing, develop an appropriate structural arrangement and look for sponsorship and the screening of boxing by local broadcasters, in particular, the SABC. Also, BSA would help develop a synergy between amateur boxing and professional boxing. Boxing had been thriving under the 1954 Act, because of the enthusiasm and support given to the sport then but since the passing of the new act in 2001 the sport had nosedived. He admitted that there were weaknesses in the current Boxing Act which must be amended to ensure the smooth running of the sport.

Most boxers died as paupers because they were never skilled to be role models and the previous boards, (including the ministry during Mr Balfour’s time) did not teach boxers about finance management and mandatory fights. The board would work hard to make sure it did not disappoint the people of South Africa and it would be an embarrassment if the former minister failed to revive the glory days of boxing.
Boxing was a big sport in other countries such as the United States, because of sponsors such as UBO.

Referring to the Annual Report, Mr Balfour expressed concern about the poor performance of the entity and apologised for failing to appear before the Committee in the last financial year. The entity could not present their report then, because the Annual Report had not been submitted to the minister as per the norm and the new board had not yet settled down. Despite the poor performance by BSA, he was not distancing himself from the problems and it was up to the new board to tackle the challenges facing the sport, and rectifying the problems highlighted in the Audit Report. All issues raised by the Auditor-General (AG) would be investigated and dealt with including the formation of a BSA audit committee. A strategic plan had been drafted and would be tabled before the board on Friday 27 January before final handover to the Minister on 30 January. Members were encouraged to raise other problems affecting boxing which were not included in the report. As part of corrective measures, the board resolved that going forward, BSA would give Parliament its report a week before appearing to the Committee so that both parties familiarise with the report.

Mr Moffat Qithi, the newly appointed Chief Executive Officer (June 2011), told the Committee that the AG’s report was compiled at a time when BSA had no functioning board. In July last year, soon after receiving the audit findings, the management developed an Action Plan to address concerns noted during the 2010/11 financial year. According to the recommendations by the AG, it was necessary that pressing administrative issues be dealt with urgently hence the formulation of the action plan - without the board which was to begin work only in September. Since the 21 May 2011 BSA had been without a board. The corrective measures were tabled before the board on 9 December 2011.

The AG’s findings were based on four matters: matters affecting audit report, administrative matters, Information System matters and other important matters. The AG found that there were significant uncertainties concerning court cases that the BSA was involved in. These included lawsuits about its premises, a marketing agent and a law firm. All matters were on-going. With regards to the first, the former CEO entered into an agreement with a property owner on the grounds that BSA would rent the premises but he later defaulted. In terms of the Boxing Act 2001, it was the board in consultation with the Minister that should decide on the location of BSA offices. For the second issue a marketer approached BSA and promised to organise a sponsor, despite failing to deliver, she wanted to be paid. The other issue referred to the legal firm which represented BSA. The board resolved that the management working with the CEO should follow up on the matters and the deadline was 27 February.

BSA incurred a net deficit of R2 709 332 for the year ending March 2011 and liabilities exceeded assets by R6 248 040. Responding to the finding, the CEO said promoters would deposit money into BSA account before a tournament. Accordingly the money was to be paid back after tournaments, but BSA was not reconciling the money to sponsors which led to debt accumulation, while in some instances sponsors owed BSA. The board did an offsetting exercise and the debt was now down to R327 000.

The AG found issues of irregular expenditure where BSA failed to comply with Supply Chain Management Regulations. The board resolved that a supplier database would be developed. Some of the problems facing BSA were as a result of lack of a CFO, and the R 2, 5 million budget allocations were too small to cover operational costs. Employees were leaving the entity due to late payments and finance problems facing BSA.

Irregular and Wasteful Expenditure
(a) BSA incurred costs as a result of late payments to the South African Revenue Service (SARS) and the Auditor-General South Africa (AGSA). The board would ensure timeous payments to SARS and AGSA and would correct the anomaly where boxers were depositing their tax money into BSA account instead of paying direct to SARS. BSA would partner with SARS in education programmes on finance handling.

(b) BSA outsourced the human resource function even though the staff had received training for the job. Mr Moffat said two staff members were trained in payroll but BSA did not have the proper software to carry out the function. An external consultant was engaged to perform the function and was paid R 2,200 a month. The management would ensure that individuals who received training in payroll carried out their duties alongside the consultant (to be engaged for two months only) though one of the employees had resigned.

Material Loss
Material losses to the amount of R132 335 were incurred as a result of shortfalls between cash
received for licences and cash banked into the BSA bank account. The scandal involved managers receiving money for licences and withholding some of the money when they made deposits into the BSA account. The board had since resolved that boxers should deposit money directly into the BSA account at their nearest ABSA Bank. Letters would be sent to all provincial mangers that were involved in the scam and action would be taken in terms of the Public Finance Management Act (PFMA) regulations. 

Strategic Planning
The accounting authority did not finalise and submit a strategic plan to the relevant executive authority on or before 1 April as required by treasury regulations 30.1.1 and 30.1.2. The accounting officer did not ensure that the entity had maintained an effective system of internal control regarding performance management as required by the PFMA. He said that management would ensure that the strategic plan was submitted to the relevant authority before 1 April each year. Other findings were about a dysfunctional audit committee which failed to follow PMFA and Treasury regulations. BSA was in the process of constituting an audit committee and advertisements for candidates had been done and the board would select on Friday 27 January members who would do the interviews.

Mr Moffat said BSA had no resources to carry out its work and the audit was done sparingly by a Cape Town-based audit company which accounted for most of the irregularities raised by the AG.

Mr Musa Hlongwa, AGSA Business Executive, said they were happy that the BSA board had attended to matters of performance, compliance and matters of emphasis they had raised. AGSA would continue monitoring the implementation process of the Action Plan. However, BSA did not address in their response, the issues of qualification including insurance received in advance and was not evaluated in accordance with accounting standards. He stressed that the matters be attended to by qualified personnel.

Discussion
Mr G Mackenzie (COPE) said if BSA was a citizen of South Africa, it would be behind bars because they had broken all the rules. He had lost all his passion in boxing due to the problems affecting the sport, adding that boxing clubs were fast disappearing in KwaZulu Natal. He questioned the capacity of BSA in solving issues of transformation and development of the sport since the entity was under financial constraints.

Mr J McGluwa (ID) said the board was faced with a tremendous task but was doubtful if Mr Balfour would be able to make an impact in the eight months remaining since he was keen on serving for a year only. There was no way the entity would be able to employ a CFO because of the financial problems. Issues raised on auditing must be followed and investigated and a new audit committee must be selected and the contract to the Cape Town auditing firm be terminated. The Department of Sport must ask for increased funding. He expressed concern because currently the SABC was screening matches in the middle of the night when people were sleeping already.

Mr J Van Der Linde (DA) was happy with the details of the response to the AG Report but wanted the board to take action against those implicated in maladministration and misappropriating funds. He raised concern about interest on financial costs of between R450 000 and R1, 5 million and the finding that new equipment was bought for R126 000 and R50 000 had been depreciated. Matters involving financial misconduct must be investigated and dealt with accordingly.

Mr Moffat said that although the board would do its best to rectify issues of concern, some of the matters were not easy. He gave an example of a car that was bought without sanctioning by National Treasury which had depreciated and was the only car BSA had. A letter was written to the Director General to assist with the appointment of a financial officer but BSA was told to pay from the R 2, 5 million budget allocation. He asked the Department to help with appointment of a new CFO as, since 2003, BSA had been functioning without a CFO.

There was controversy about the rights of boxing, with some people thinking it rested with sponsors yet it should be with BSA. Another issue was how small sponsors were able to clinch lucrative broadcasting deals.

Mr Balfour acknowledged the observations by Members adding ways should be found to save the institution and reiterated that issues of misconduct would be pursued. The problems facing SABC were a public secret since it also depended on the government for funding. A Memorandum of Understanding had been signed between BSA and SABC for a partnership. Under the arrangement, BSA would be responsible for rights and dealing with sponsors. Other meetings were being held with eTV and Super Sport. Though it was a difficult task, the board would try to build the enthusiasm around the sport and solicit for sponsorship and support from the ministry to buy equipment and revamp small gyms.

Mr Mdakane commented that there were a lot of sporting codes that must be looked at, with the same problems as BSA. Only three sporting codes were well sponsored (soccer, rugby and cricket). The Committee and BSA must meet regularly to attend to issues of governance, administration and sponsorship thus attending to the pertinent issues affecting boxing.

The meeting was adjourned.



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