Department of Sport & Recreation, Boxing SA: Interrogation of Annual Reports 2010/11 in presence of Deputy Minister

Public Accounts (SCOPA)

25 April 2012
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Department of Sport and Recreation (SRSA) and its entity Boxing South Africa (BSA) were interrogated on their financial statements for the 2010/11 financial year, in the presence of the Deputy Minister, who participated in the discussions and noted his concerns at the poor relationship of this Department with the Committee in the past. Although SRSA had an improved audit, there were still matters of concern, and the Committee took note of the changes of leadership once again, whilst it became apparent during the meeting that several of the historic questions simply could not be answered because there was no information available. SRSA now had its fourth Director General in five years, and a new Board and Chief Financial Officer had been appointed from mid-2011 at Boxing SA, but there was no final Audit Committee in place, nor Chief Financial Officer. Several of the problems at both organisations arose from lack of proper leadership, management and monitoring.

SCOPA asked SRSA to explain the various instances of non-compliance with Public Finance Management Act, noted that some of the instances of fruitless expenditure resulted from the past structure, in which two units were authorised to contract and procure, leading to wasteful expenditure of R2.2 million, but this had now been corrected. Members were pleased to note that the staff involved in mismanagement, corruption and fraud had been disciplined and, where necessary, criminal charges were laid, although it remained concerned about the anomalous position of a former Director General who had challenged the action taken on a legal technicality, and had eventually left the public service without being disciplined. They also noted their concern that failures on the part of other government structures led to the situation where wasteful and fruitless expenditure of R5 million could not be recouped, since claims prescribed. SCOPA also questioned the non-approval of policies and procedures, the systems to obtain approvals from the Minister, the fact that some issues were identified only by the Auditor-General at the time of audit, and whether it would not have been preferable for the incoming Director-General to discipline all staff who needed to be disciplined immediately. Details of the disciplinary steps taken were given. The Committee also questioned the conditional grants and monitoring procedures, and noted that SCOPA would need to look at the question of grants generally in more depth. Another question that was of continuing concern to SCOPA related to disciplinary procedures against defaulting employees. This led to a discussion on the effectiveness of controls, including the effectiveness of the Internal Audit, and its relationship with management. The involvement of an employee in other business interests was also questioned. Finally, SRSA asked SCOPA to condone unauthorised expenditure incurred two years previously.

The Auditor-General had questioned the status of BSA as a going concern, given its deficit of R2.7 million, and the fact that it owed R8 million to the Receiver of Revenue and R1.8 million to the Auditor General. It was explained that SRSA had effectively “bailed out” BSA by providing funding for the specific purpose of covering its debts, that there had been offsetting of amounts due to and owing by promoters and BSA was in a healthier financial state.  Members questioned the ongoing law suits, which arose during the term of a previous Chief Executive Officer, and noted that they were due for discussion shortly by the current Board. When it became clear that many of the questions on specific financial problems could not be verified by those now appointed, the Chairperson suggested that a different approach be followed. SRSA had previously been asked to assist BSA, and it was clear that it had done so in various ways, and was now trying to boost its revenue through proactive measures, which were outlined by SRSA.  BSA and SRSA should perhaps be called in to give another report, in six months, to ensure that matters were on the right track. The Auditor-General South Africa, in commenting, added that attention needed to be paid to financial management issues.

Meeting report

Department of Sport & Recreation Annual Report 2010/11 interrogation
The Chairperson welcomed the Deputy Minister and delegation, and noted that this interrogation was aimed at obtaining forthright and pointed responses to the queries raised. There had not been particularly good interaction with the Department of Sport and Recreation (SRSA) in the past, and he hoped that the engagement today would take matters forward. However, he stressed that the Committee was not oblivious to the good work that had been done, had noted the unqualified audits over the last two years, but still thought there was room for improvement.

Mr Gert Oosthuizen, Deputy Minister of Sport and Recreation, noted the apologies of the Minister, who was attending a Cabinet meeting.

Mr S Thobejane (ANC) called for an explanation of non-compliance, particularly non-compliance with supply chain management procedures, which led to irregular expenditure. He asked why section 44 of the Public Finance Management Act (PFMA) was not fully observed.

Mr Alec Moemi, Director General, SRSA, responded that the Auditor-General’s (AG) reports on non-compliance and losses had been noted. SRSA had instituted an action plan to deal with them, had also taken remedial action, and had dealt with the personnel involved in the shortcomings.

SRSA had several systemic challenges. Its previous structure allowed for financial delegations to contract and procure by both the Auxiliary Services Unit, and the Supply Chain Unit. This led to the situation where instructions might be misinterpreted, or it might not be appreciated who was to deal with what. Sometimes both sections had dealt with the same matter. When he took office, he had transferred the functions of Auxiliary Services to Supply Chain, and SRSA was now restructuring with a view to closing down Auxiliary Services.

Mr Thobejane asked what had been done about staff who had contravened the law.

Mr Moemi answered that the SRSA had charged those involved; some cases had been finalised, and some staff were suspended, with others still subject to investigations. There were a few cases still outstanding. In answer to the Chairperson’s call to explain what “some cases” meant, he noted that there had been six dismissals, and the SRSA had taken further steps to combat corruption. Cases where fraud were discovered were reported to the South African Police Serve (SAPS).

Mr Thobejane was pleased to hear this, noting that other departments did not follow through on these matters.

Mr Thobejane then asked how it was possible to achieve doubling up on staff.

Mr Moemi explained that it was not a doubling of staff, but a double-booking, which related to the Beijing Olympics. The then Director-General gave the instruction that a venue had to be obtained and booked, with sufficient accommodation for the entire government delegation, so as to obtain favourable group rates. There was an expectation that the other departments would then make internal transfers of funds to SRSA to cover their own costs. However, at a very late stage, the USA delegation had booked into the same hotel, and had insisted upon every other guest being subjected to stringent security checks, which essentially ran completely contrary to the whole plans for the South African delegation to be accessible. On hearing of this, other Ministers and departments moved to another hotel. SRSA, having made the bookings, was obliged still to pay, and there had been no written agreements around the inter-departmental transfers.

The Chairperson commented that he had wondered about this point.

Mr Moemi continued that the then- Director General, Ms Xoliswa Sibeko, faced disciplinary charges as a result of this matter, and it was decided to bring in Mr Vernon Petersen, at that stage Director General of the Department of Correctional Services (DCS), whilst she was moved to DCS.

Mr Thobejane asked what arrangements were made between departments, in such a case, and whether the DCS could pursue disciplinary steps against a former employee of SRSA.

Mr Moemi said that at this stage Directors General were still appointed by the President. Ms Sibeko challenged her charge and dismissal by the then-Minister of Sport and Recreation, Mr Stofile, on the basis that since she had been appointed by the President, only the President could fire her. At the time of her transfer to DCS, the President was advised of the problems, but she did not stay with DCS, left the public service, and was in fact not charged, with the President having indicated an unwillingness to act in the matter.

The Chairperson questioned how this situation had developed and why Legal Services had not become involved.

Mr Moemi said that the position was untenable, but and the reporting and employment lines were unclear. Although there were indeed Legal Services in the Department, there were apparently some technical legal points of difficulty.

Mr Thobejane interjected to say that Cabinet, individually and collectively, were accountable, and despite the fact that the Minister did not appoint, he believed that the Minister had been correct at that point. He suggested that an update was needed from the Office of the President as to how the matter was concluded.

The Chairperson said he would think about that point; he was not sure of the position off the cuff.

Mr Thobejane moved on to the issue of compliance. Certain procedures were set out for the strategic plans, and those plans should be approved, yet it appeared that the necessary approvals were lacking.

Mr Moemi responded that the strategic plans were in fact approved, but the key issue was the late submission of the provincial strategic plans, which delayed the 50% portion of the budget that related to grants.

Mr Thobejane drew his attention to page 111 of the Annual Report, which noted that “several policies and procedures were not approved”.

Mr Moemi said that this referred not to the strategic plan, but to internal policies and procedures of the SRSA. Some were approved, but others not. Policies were supposed to go to the Ministry for approval, but by the time the audit was conducted, some of the policies remained unsigned. There was an issue whether Departmental policies that did not affect the Constitutional powers of the SRSA, but which merely related to the running of the Department, had to be approved by the Minister or Director General, and now, in practice, those were approved by the Director General, so the situation had since been remedied and all policies had now been signed.

Mr Thobejane said that there may have been improvements now, but wanted to know what happened in the 2010/11 financial year.

Mr Moemi said that he could not answer fully why it had taken longer for the Minister to sign the documents at that stage, but once the management letter was reviewed, the situation had been rectified.

The Chairperson asked what turnaround time was anticipated in the Minister’s Office, and if there had been delays.
The Deputy Minister responded that the turnaround times could be affected by various factors. Normally, matters were attended to within two to three working days. He could only assume that the Minister at the time would have been applying his mind to the policies. He noted that there was a period where only an Acting Director General was in place, then two other Director Generals in quick succession, and the Task Team Report was being implemented in this financial year, as well as World Cup 2010 matters. He could only conjecture that this may have led to delay.

The Chairperson asked if the Department, having sent something through to the Minister, would be allowed to make enquiries and follow up what had been done. It seemed that the AG had asked for the documents, but was not given any indication of when the documents would be finalised, or why the matter was delayed.

The Deputy Minister said that this had to do with delegations.

The Chairperson asked again if the Director General could phone the Minister and ask what had happened to a document.

The Deputy Minister confirmed that he could, and in practice did do this in order to meet deadlines. He reiterated that it might also be that policies were queried. There was certainly no malice, but he could not give a specific answer.

The Chairperson said that he wanted to ensure that there were working linkages between Department and Ministry. He understood that the parties were only speculating on what might have happened.

Mr Moemi stressed that this only referred to two policies.

The Chairperson said that the number was not really relevant; it was the process that was important.

Mr Moemi said that some policies could be finalised by the SRSA, but there were others that had to be endorsed by the Department of Public Service and Administration, such as the human resources plan. The latter department had failed, despite eight months having lapsed, to endorse this plan yet. Feedback on Ministerial handbooks was also not given as quickly as required. Even the current audit would reflect that there was no HR plan in place, although this was not entirely correct as it had been drafted, but not approved.

The Chairperson accepted this explanation.

Mr Thobejane noted that many of the instances relating to non-compliance might need to be taken up with other departments, and SCOPA may need to look at how it could assist in ensuring that processes were not frustrated.

Mr Thobejane asked whether, at that time, there were systems and people in place who were responsible for doing the work. Issues of assets and expenditure were not properly handled until identified by the Auditor-General. It seemed that staff were being paid, but were not doing their work properly. This begged the question whether salaries were justified, in view of non-performance.

Mr Moemi said that the mis-statements had to be considered, and it was recognised that some of the policies were not fully compliant. There was an internal audit unit, and internal audit committee.

Mr Thobejane asked whether this was the current position.

Mr Moemi agreed that it was. He had been in a difficult position when appointed. He had a choice of either looking backwards and spending most of his energies on disciplining, or accepting that there were difficulties, and looking to improve those systems to move forward. He had chosen the latter route, rather than putting the entire department into limbo, and investigating absolutely everything.

Mr Thobejane asked whether both issues should not have been addressed. He thought that ignoring the past issues might be negligent. He suggested that if staff had not been acting correctly in the past, they should be disciplined, and if it seemed that all staff must be fired, then so be it. SRSA had to implement the law, not rewrite it. The reason for talking to the Annual Reports was to correct matters.

The Chairperson noted that this Committee effectively dealt with “post-mortems” to decide what had happened, and then tried to ensure that the situation was corrected and that staff were now dealing with matters correctly. It was difficult for Mr Moemi to justify contraventions of the law for which he had not been responsible. SRSA had had four Directors General in five years. Since January, every department appearing before SCOPA noted changes in leadership, meaning it had been very difficult for SCOPA to ascertain exactly why things had happened.

Mr Thobejane asked when Mr Moemi had been employed, to which he responded that he had started on 1 November 2011.

Mr Thobejane noted that he had, in that case, inherited many matters. He then went on to ask about procurement failures, when proper procedures were not followed to obtain the necessary quotations, or advertise for the correct period of time. He asked whether this also fell into the investigations for corruption.

Mr Moemi confirmed that this was so, and that these matters were being investigated.

Ms T Chiloane (ANC) followed up on questions of fruitless and wasteful expenditure related to the hotel bookings. Ms Sibeko was no longer in the employ of the public service, but she wondered if SRSA was trying to recoup the money, whether any other officials in addition to Ms Sibeko had played a part in incurring this fruitless and wasteful expenditure, and whether the entire South African contingent had changed their bookings.

Moemi noted that the R7.2 million of wasteful expenditure in this financial year was made up of R5 million for the Beijing hotel, and R2.2 million in relation to an athletics programme. In Beijing, not everyone had moved away from that hotel, and SRSA officials did stay at the hotel, but many other rooms were left empty. Ms Sibeko, as Accounting Officer, was ultimately responsible. SRSA had to settle the debt, no mater what the internal processes with other departments. When she had moved across to DCS, DCS should also have followed up on the recovery of the debt. The problem was now that the debt had prescribed, and no active steps were taken to recover before prescription occurred.

The R2.2 million related to a tournament that was supposed to be held at Ekurhuleni. Both the Auxiliary Services and Supply Chain units booked avenue and made a commitment, both believing they had the necessary delegation to act in the matter. By the time the double-bookings were discovered, there were contractual liabilities. Mr Moemi reiterated that on discovering this, he had immediately taken steps to prevent recurrence in the future.

Ms M Mangena (ANC) asked why SRSA had not taken steps to cancel the bookings at the hotel in Beijing.

Mr Moemi said that the details of the USA bookings were not disclosed until shortly before the tournament, and by this stage the full cost was still required, even if SRSA had cancelled. 

Ms Mangena asked for more details as to why the Ms Sibeko could not be charged, as well as further details on the people who were charged and dismissed, and the reasons.

Mr Moemi noted, in regard to other employees, that after a compliant to the Presidential Hotline, SRSA conducted an investigation, then a forensic investigation by Ernst and Young, involving imaging of hardware and databases, including deleted documents, which revealed that some employees were colluding in quotations and manipulating procurement processes. Fraud and corruption were isolated. Charges were laid against six employees. Others implicated had immediately resigned when the charges were laid, and one person had even resigned when the investigations commenced. One employee found a job elsewhere, but SRSA did inform the new employee, the Department of Cooperative Governance and Traditional affairs, that the employee had left under a cloud, so that new employer must now consider the employee’s position. One of those charged challenged the charge, and it was ongoing. Criminal dockets had been opened at South African Police Service (SAPS) so the matters were sub judice and no further details could be given at this point. The founding affidavits could be made available to the Committee, in confidence.

Ms Chiloane asked about the transfer of funds for conditional grants, as set out on page 112 of the Annual Report, under items 31 and 32. She noted that provinces were required to submit business plans, to be approved by the Had of Department in the province. SCOPA had raised the same matter in 2009, and was promised that staff would be appointed to check whether matters in the provinces were being handled properly. It was apparent that, despite the fact that these were conditional grants to be used for a specific purpose, they were often used for other purposes, and there appeared to be no improvement from the past years.

Mr Moemi acknowledged that the conditional grants had been a major challenge, and remained so to date. SRSA had decided to overhaul the conditional grant system. Firstly, it noted that this was not achieving the desired objective and was too open-ended, since the Heads of provincial departments had too much leeway. Whilst SRSA could have rushed to meet the deadline of 15 March, it had instead requested Provincial Treasuries to grant extensions to finalise provincial plans properly. Some provinces had problems with the new framework. However, SRSA had locked up the funds for specific purposes, and had developed reporting templates for all provinces to report back. The key issues were around procurement, and he pointed out that when provinces procured, it was often far more costly in the long run, because economies of scale did not apply, and ultimately, provincial treasuries had now accepted the SRSA’s arguments and broken the deadlock on procurement. Eight provinces had submitted provincial plans; Free State was refusing to o so, although SRSA was steadfast in its demands, was convinced of the appropriateness of the decisions now taken, and would not transfer if Free State did not submit.

The Chairperson said that conditional grants were supposed to be quite simple to understand. However, incorrect practices had been followed on these grants over many years. SRSA transferred about R500 million, and the question was whether the quarterly and monthly reports were viable, and whether the grants were making a difference. There had to be accountability. That was a very sore point for SCOPA. Almost all departments transferring money were not managing to achieve full accountability. SCOPA would need to look at these issues in more detail, and in a broader way.

The Chairperson remarked that procurement and supply chain management problems arose as a result of inadequate processes and procedures to identify irregular expenditure. The bulk of these seemed to have been identified only during the audit, by the Auditor-General, and SRSA’s internal audit unit had not done so. He asked about the effectiveness of controls, and the responsiveness of management to issues raised by audit committees.

Ms Nozi Lupanga, Director: Internal Audit, SRSA, referred to the R2.2 million, saying that this amount had arisen after the Internal Audit unit was put in place. This amount was in fact identified by the Internal Audit Unit, was included in the Register, and was then brought to the attention of the AG. She noted that internal controls had improved since 2009, as evidenced by the decreasing number of qualifications, down to an unqualified audit. The Internal Audit unit was assisting the SRSA to achieve a completely clean audit. However, this could not be done overnight. Whilst not every internal control was fully functioning, the changes that Mr Moemi had put in place were making a difference.

Mr Humphrey Molemang, Chairperson, Audit Committee, SRSA, noted that management had assured the Committee that there would be improvements, and some were already apparent. There had been some loss of focus during the 2010 World Cup events, and some matters had not received proper oversight. The issues raised here were not insurmountable and it was clear that leadership was key to the issues. Mr Moemi had been advised of actions that had to be taken. The Audit Committee did interact with the Executive Authority, although the one meeting scheduled with the Minister had had to be postponed. There were reports made to the Minister on matters of concern. He was confident, following his meetings with the Director-General, that matters would be rectified and he believed that there was no reason why this Department could not achieve a clean audit, as the Department was not too complex.

The Deputy Minister interjected to remark that the administrative and financial side of the portfolio of sport may not be complicated, but other aspects certainly were.

The Chairperson raised the issue of an SRSA employee who had a business supplying to other state institutions, and noted that permission was needed to do this.

Mr Moemi reported that this person was an Advisor to the Minister, and should disclose other interests to the Minister. This person was also a board member of the SABC. Although a financial disclosure form was given to the Minister, it was not lodged with Human Resources division. The employee was summarily relieved of his duties by the Minster and was no longer in the employment of the SRSA.

The Chairperson asked which investigations were ongoing, what they concerned, and how soon they were likely to be concluded. He expressed SCOPA’s frustration that employees should be allowed to resign, and nothing be done to pursue the matters thereafter. Currently, he noted that the civil service was fragmented, and it was of particular concern that an employee disciplined could merely move to another department. This was a policy issue that government needed to look into.

Mr Moemi said that although SRSA could not dismiss the two employees mentioned earlier, who had resigned, SRSA had laid criminal charges, and it was now up to SAPS to decide how those should be taken forward. There were currently three investigations in the pipeline. In one, the employee had challenged the matter. The other two involved people who had been on suspension for a long time, of over a year. When Mr Moemi took office, about seven or eight case were in the pipeline, and most had been fast-tracked. One of the matters was on appeal to the Minister, who had 31 days to take a decision and inform the parties. The other was about to go to the Labour Court. One had recently been finalised, and the employee's application to the Labour Court was dismissed.

Mr Moemi added that SRSA was a small department, and it was unfortunate that so many cases were pending. It was trying to improve its labour relations and reduce the number of disciplinary cases, as they were costly to pursue. If management was more effective, there should be less cases.

The Chairperson noted that SCOPA simply wanted departments to implement the law. The Committee looked forward to SRSA achieving a clean audit.

Boxing South Africa (BSA) Annual Report
The Chairperson noted that SCOPA had interacted with Boxing South Africa (BSA) on a few occasions in the past, and had received a commitment to achieve a turnaround. However, the turnaround effectively amounted merely to BSA moving in circles, with its administration was in a poor state. SCOPA and the country needed to find lasting solutions to the challenge.

Dr P Rabie (DA) said that BSA had a unique relationships with SRSA, its parent body, and received funding from it. He noted that page 28 of the AG’s report on BSA said that BSA had incurred a deficit of R2.7 million and its liabilities exceeded its assets by over R6 million. These conditions, with other matters, indicated a material uncertainty about BSA’s ability to continue as a going concern. He asked what had been done to stop this state of affairs, whether there were proactive plans to address it, and what its current status was. He reminded the Committee that BSA was a public body.

The Chairperson added that the question of continuing viability of BSA had been expressed several times in the past, and wondered if this state of affairs would ever be corrected. He added that he would like also to hear from the SRSA what it planned to change the situation.

Mr Ngconde Balfour, Chairperson, BSA, said that the amount of work done, from the time that the new Board of BSA had been appointed, until now, was quite significant. He noted apologies from the past Chairperson of BSA, as well as from the past Chairperson of the BSA Audit Committee. BSA had been in discussions with the office of the AG. He noted the comments about poor interaction in the past, and said there would be attempts to improve upon this, in recognition of the critical oversight done by SCOPA. He noted the mandate given by the Minister of Sport and Recreation to the new Board to rejuvenate boxing as a sport. BSA had started doing so, and the declining popularity of the sport in the past was now seemingly turning around. Mr Balfour acknowledged that the Annual Report was not good, nor had it been so for several years, but he hoped that BSA and SRSA and other institutions would be able to change that over the next three years. The new Board had inherited the situation and was not shirking its responsibilities, and was looking forward to correcting the issues.

The Chairperson asked why the Audit Committee present and past Chairpersons were not present.

Mr Moffat Qithi, Chief Executive Officer, BSA, said that the past Chairperson of the Audit Committee had another commitment in Kimberley on this day. The previous Chairperson of BSA was apparently overseas on work commitments. At the moment, there was no Chairperson of the Audit Committee.

The Chairperson asked when the present Board had taken over, and its term of office..

Mr Balfour confirmed it had been in operation since 1 September 2011, and it had a three year term.

The Chairperson noted that it would not be desirable to wait for three years to sort matters out. He asked what had been done to address the issues around whether BSA was a going concern.

Mr Qithi said that BSA had owed a debt to South African Revenue Service (SARS) of about R8 million, at the time that the new Board and he had assumed office. It also owed the Auditor General, and there were other smaller debts relating to promoters who were licensees of BSA. When he took office, he started negotiating with SARS around the debt. He pointed out that the capital sum was R4.5 million, but interest and penalties brought it up to R8 million. He reached agreement with SARS that SARS would waive interest and penalties, if BSA could raise the capital sum. The Minister advanced R4.5 million to pay the SARS debt, and SARS and BSA entered into a written agreement to record that this payment was in full and final settlement of the debt. He recorded appreciation of BSA to SRSA for this assistance. SARS was presently completing its own internal journal entries and would provide the final confirmatory letter shortly.

BSA’s debt to AGSA, of R1.8 million, was similarly now paid, with assistance from SRSA, through the additional allocation of R3.3 million. In total, therefore, R9.5 million of liabilities were now cleared. He pointed out that concerns around the status as a going concern were based on the fact that the asset base was small and debts were high.

BSA had both debts and credits in relation to promoters. The amounts would have to be offset. Reconciliations had not been done, in the past, on a monthly basis, to assess what was owed, but this had now been attended to, and BSA was in fact owed about R60 000 by promoters. With assistance from SRSA, BSA had therefore now moved to a positive financial state, which would be indicated in the next audit.

Dr Rabie said that because BSA was a public body, a detailed report on creditors and debtors was needed.

Dr Rabie noted that page 28 of the AG's report said that a number of law suits were ongoing – including those for premises, a marketing agent and legal fees. He asked that the Committee could be furnished with a report and cost estimate, pointing out that legal fees could also place severe constraints on BSA.

Mr Qithi said that this was another historic matter. The premises lawsuit related to a previous Chief Executive Officer’s agreement with a property owner for lease of premises to BSA. Section 4 of the Boxing Act (the Act ) said that the Board of BSA, in consultation with the Minister, should determine the location Head Office. There was no evidence that this former Chief Executive Officer, Mr Khumalo (who had resigned in 2007) followed the correct procedure. This case had been dragging on, but had not prescribed because claims were still notified to BSA. The property owner had now been asked to provide full details of the claim, and what had been billed since 2007. The previous Chairperson had said that Mr Khumalo had not sought permission from the board to enter this agreement, so it was possible that it was ultra vires and BSA might not be legally liable.

Mr Qithi said that the law suit related to an agreement made by Mr Khumalo with a third party for sponsorship of BSA and the exact details were being followed up, although it appeared that the third party, despite having failed to bring in any sponsorship, was still demanding payment. This matter would be considered by the Board on 18 May. The case would probably be defended, but the Board must take the final decision.

Dr Rabie asked Mr Qithi when he was appointed, and Mr Qithi responded that he took office on 1 June 2011.

Dr Rabie noted that the AG had noted insufficient or inappropriate evidence to support an amount under trade and other payables. It was a pity that the Chief Financial Officer of BSA was not present to answer to this, amounting to R324 326.

The Chairperson interjected at this point that perhaps SCOPA should, instead of interrogating figures that could not be verified, rather follow a different approach. BSA seemed to have had no structure or organisation in place. Currently, there was no Audit Committee, although this was a requirement of the law, and he presumed that the internal audit function was outsourced. All the matters were historical, and there was still no sense of what exactly had been happening, despite the right questions being asked. When BSA was last called before SCOPA, SCOPA had emphasised that the SRSA should step in to assist BSA. The current responses suggested the situation had not improved.

Mr Moemi responded that SRSA shared the concerns of SCOPA. SRSA wanted to clarify the issue around the going concern. In the agreement relating to the “bail out”, SRSA had specified that the money provided was to be used only to clear the debt and to reverse the negative footing around the debt. Many internal promoters would otherwise not have confidence in BSA. Those issues had been dealt with. The second issue had to do with functionality. The Minister had met with the Board and clarified what had to be done, and he was confident that the Board was now on a good footing and was doing some good work. Mr Moemi emphasised that BSA, similar to other entities under SRSA, was small, and did not have capacity. SRSA’s internal audit function would be extended to BSA. That scope had been expanded, after consultation with the Head of Internal Audit, and approval was sought from the Minister. SRSA had also issued an advertisement calling for applications to the audit committee of BSA, about two weeks ago, and a BSA audit committee would soon be appointed. Meantime, a member of the Internal Audit Committee of SRSA had been seconded to the Audit Committee of BSA. In addition, five interns had been appointed, including finance interns, who had already started at BSA in order to increase BSA’s internal capacity, although there were paid by SRSA.

Mr Moemi noted that these interventions still may not address the future, and so it was deemed necessary also to ensure that BSA’s revenue streams improved, to address core issues. Firstly, this would involve licensing. The
new Combat Sport Bill would be introduced, which would empower BSA to insist on all boxers registering, and paying a registration fee to BSA. Secondly, the Minister had actively engaged with the South African Broadcasting Corporation (SABC) to try to boost broadcasting of boxing, and therefore of licensing rights for flighting the sport on TV. Finally, a senior manager, who was legally trained, had been seconded from SRSA to BSA, to work with BSA for three months, and put regulations and policies in place. All of this hopefully would put BSA well on the path to sustainability.

Mr Balfour appreciated the assistance from SRSA, through the Minister. The Board had inherited a poor state of affairs, with significant uncertainty, but had, with assistance, now set up structures to improve administration. This was not an easy entity, but the Board intended to make sure it met its obligations.

Dr Rabie shared the Chairperson’s views on the difficulty in pinpointing the reasons behind BSA’s disarray, but , noted that it was an important entity, given that millions of South Africans regarded boxing as a prime sport. He noted that SCOPA still had a duty and suggested that perhaps it should be required to give a report to SCOPA, in the next six months, on what had been achieved.

Ms Chiloane queried the fruitless and wasteful expenditure of R37 000 on HR consultants, noted on page 77, noting that this was not a past matter, but was more recent, and asked for a report.

Mr Qithi explained that this related to training of BSA staff on a new system that it was intended to install. They had attended the training session, but when they returned to BSA, the new system was not yet in place at BSA, although it was to be set up by the same company who had provided the training. Instead, it was decided to hire an HR consultant, once a month, to do payroll, for R2 500 a month.

The Chairperson asked if she was still coming in each month to do payroll, and what this entailed.

Mr Qithi said that the Board had now decided to purchase the system, but one of those two people receiving training had since resigned. The consultant would hand over to the person working on the new system. Payroll essentially involved confirming all details of each employee, ensuring payment and making entries on the system.

Ms Mangena asked why the people were trained when the systems were not in place, and why consultants were used.

The Chairperson asked why the company had not provided the system, as that was surely agreed.

Mr Qithi said that he could not answer this; it had happened before he took office.

Ms Chiloane asked about  expenditure listed on page 78, and contraventions of supply chain management involving R582 000 in 2011.
Mr Thobejane commented that these questions again could not be answered by the present staff. He wondered how the public could be convinced of the need to sustain BSA. Sustainability had been an ongoing issue, he was not sure that there were real improvements, and he asked if, apart from the report-back suggested by Dr Rabie, the Deputy Minister could give any guarantees on its futures, failing which alternative structures may need to be considered.

The Chairperson said that commitments had been made on the turn around. Perhaps the missing link was sustained interaction with BSA, and he suggested that Members of the Committee may need to visit BSA again. A long list of matters had arisen, but he agreed that the same difficulties arose in giving answers each time. SCOPA, in its resolution, would indicate how feedback could be given.

Mr Qithi asked if Members had the “Acting Plan” and they confirmed that they had received it.

The Chairperson added that, in addition to what was put down on paper, there must be sustained interaction.

Mr Moemi said that this was very helpful. BSA did need to be put under tutelage and engagement would happen on a regular basis. The SRSA had increased the frequency of its monitoring and most of the work to assist with the turnaround was already done. Although it was yet to be seen how appropriate the policies were, and the level of compliance, he assured Members that there would be a huge shift and key areas would improve.

Mr Thobejane asked if the proposed new legislation would repeal, or augment, the existing legislation.

The Deputy Minister answered that the Combat Sports Bill would not regulate not only to boxing but all other combat sporting activities.

Mr Moemi then asked if he could raise a matter on which SRSA needed assistance from SCOPA. This related to unauthorised expenditure from two years previously, that SCOPA needed to condone, in order to remove it from the financial statements. He explained that he, personally, was of the view that the expenditure probably had not been unauthorised. The then-Director General, Mr Vernon Petersen, had delegated tasks to other officials, including the implementation of a tournament, but had later refused authorisation, despite the fact that this tournament was mentioned in the strategic and approved work plan. The service provider had already been contracted and costs were incurred. This amount had to be carried over into each financial statement until SCOPA condoned the expenditure.

The Chairperson confirmed that he had received correspondence and the Committee would be meeting to discuss the matter.

The Deputy Minister noted his appreciation for the work of this Committee, and noted that the interrogation assisted the Ministry and Department to focus on issues. SRSA hoped to regain its status of excellent audits. This was the first time that steps had been taken to ensure accountability and sustainability of the public entities, and hopefully their re-capitalisation would not be necessary. He looked forward to reporting progress in six months time. He thanked the Committee for the spirit in which this meeting was conducted

The Chairperson asked the representatives of the Auditor-General for their observations.

Mr Musa Hlongwa, Business Executive responsible for Sport, Auditor-General South Africa, said he was encouraged by the improvements and the assistance of the SRSA to BSA. There were, however, continuing concerns about the lack of proper accounting systems. Nothing had been reported on the appointment of a Chief Financial Officer, and he urged SRSA and BSA to deal with this.

The Chairperson concluded that SCOPA would be hoping for sustained interaction in future.

The meeting was adjourned.


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