GCIS and MDDA Annual Reports 2011/12 and 1st Quarter Expenditure Report

Meeting report

The Chairperson noted the apologies of the Minister and Deputy Minister of Communications.  He welcomed the delegation from the Audit Bureau of Jordan.

Briefing by the Auditor-General South Africa (AGSA) on the audit outcomes of the Government Communication Information System (GCIS) and the Media Development and Diversity Agency (MDDA)
Mr Lourens van Vuuren, Business Executive: AGSA presented the briefing on the audit outcomes of the GCIS and MDDA for the 2011/12 fiscal year (see attached document).

The combined assurance on risk management in the public sector framework was the approach followed by AGSA to facilitate clean audit outcomes.  Three levels of assurance were identified, i.e. management assurance, oversight assurance and independent assurance.  The oversight role of the Committee was limited as there was no day-to-day involvement in the relevant Government entity.  The Committee interacted with AGSA and the entities and obtained assurances to achieve positive audit outcomes.  A high level of assurance was required from the senior management of entities but a moderate level of assurance was provided by the executive authority.  A moderate level of involvement was required from internal audit committees and legal and risk committees.  Extensive involvement was required from external service providers, for example external audit committees and external auditors.  The internal audit committee played a crucial role and had to have adequate capacity and independence.  The internal audit committee had to submit regular reports to the management of the entity.

The GCIS had received financially unqualified audit outcomes with findings for three consecutive years.  The audit outcome of MDDA had regressed from financially unqualified with no findings to financially unqualified with findings for the 2011/12 fiscal year.  The overall assessment of leadership and governance for both entities was positive.  There were some concerns over financial and performance management.  The control environment was satisfactory but certain risk assessment issues needed to be addressed.

There were no findings concerning the quality of service delivery reporting, human resource management and financial health of the entities.  There were material errors and omissions in the annual financial statements (AFS) of GCIS, which were corrected during the audit process.  The main areas of concern were supply chain management (SCM) contraventions and information technology (IT) exposures.

There were no findings concerning pre-determined objectives.  However, a new framework for strategic planning came into effect in the 2012/13 fiscal year and AGSA suggested that the Committee ensured that the new framework was understood and properly implemented.  Both entities received findings on compliance with laws and regulations.  The findings concerned violations of SCM requirements.  There were no findings concerning unauthorised expenditure and fruitless and wasteful expenditure.  The MDDA disclosed irregular expenditure of R15,000 and GCIS had irregular expenditure of R14,000.  AGSA considered the amounts involved as negligible.

The root causes of the adverse findings were identified as insufficient attention to key controls and the ineffectiveness of assurance providers.  GCIS should pay more attention to daily controls (particularly related to SCM) and the preparation of monthly and quarterly financial statements.  The MDDA should improve daily control over the SCM processes.

Discussion
Ms R Morutoa (ANC) asked why GCIS and MDDA were grouped together in the report by AGSA as the entities had different mandates.  The two organisations submitted individual reports to the Committee.  She found the briefing document provided by AGSA to be lacking in detail.

Mr Van Vuuren explained that GCIS was a national department whilst the MDDA was a subordinate entity.  GCIS transferred funding to the MDDA.  There were slight differences in the requirements for the different types of organisations in the Public Finance Management Act (PFMA).

Ms J Killian (COPE) observed that the format of the report submitted by AGSA differed from previous briefing documents.  In previous years, the Committee received separate reports on the Department of Communications (DOC) and its subordinate entities.  She asked for clarity on the percentage references in the briefing document.

Mr G Schneemann (ANC) asked for an explanation of the different coloured arrows used in the diagrams included in the briefing document.

Mr Van Vuuren explained that a red arrow indicated that there had been regression, a yellow arrow indicated that the situation was unchanged and a green arrow indicated that there had been an improvement.  Both entities had received financially unqualified audit outcomes.  GCIS had to make material adjustments before the unqualified opinion was issued.  The quality of the submitted financial statements was the major consideration.  The report related to two entities.  If the finding referred to both entities, the finding applied to 100% of the entities concerned.  A finding applicable to 50% of the entities applied to only one of the entities.  Both entities had adverse findings on SCM and IT exposures.  The MDDA did not have adverse findings concerning SCM contraventions in prior years.

Ms W Newhoudt-Druchen (ANC) asked why the word “poor” was used to describe the focus areas concerning the quality of service delivery reporting and human resource management.  She asked for more detail on the movement indicators (red and green arrows) concerning irregular expenditure.

Mr A Steyn (DA) found the presentation document difficult to follow.  The document was not made available to Members prior to the meeting.  He asked for more information on the level of assurance required from management.  He asked for an explanation of an unqualified audit opinion, with findings.  The assessment of the financial health of the MDDA was positive but the Agency had a deficit and had utilised the surplus declared in prior years.  He asked for more information on the new framework coming into effect.

Ms Killian noted that there were contradictions in the AGSA presentations and the report of the Auditor-General in the GCIS annual report.  For example, the assessment was that no intervention was required in the leadership of GCIS but there was a statement in the annual report that management did not exercise sufficient control over compliance with SCM regulations.  The Auditor-General had commented on the lack of management control in the prior year as well.  She asked for more detail on the request that the Committee conducted oversight over the implementation of the new framework.  She asked for more information on the material errors in the financial statements submitted by GCIS.  The annexure in the GCIS annual report on inter-governmental relations was not clear and the Auditor-General should point out any issues that would have a negative impact on the department’s ability to meet its mandate.

The Chairperson asked Members to limit their questions to the AGSA briefing.  Questions concerning the annual reports would be dealt with when the relevant entities presented their briefings to the Committee.

Mr Schneemann asked for more clarity on the roles of the internal audit function and the involvement of the audit committee.  He noted that there had been changes in the composition of the GCIS audit committee during the year and asked if this had an impact on the findings.  There was no reference to an audit committee in the MDDA annual report.  He asked for more information on what attention was necessary to improve risk control.

Mr Van Vuuren advised that the report of the audit committee was on page 135 of the MDDA annual report.  The establishment of an audit committee was a legal requirement.  The audit committee controlled the internal audit function and played a very important role in the audit process.  The audit committee based its assessment of the environment on the internal audit reports.  A moderate level of assurance was required from the audit committee.  A good control environment existed where there was a properly functional internal audit function and audit committee.  The control environment for GCIS and MDDA was considered to be good and not much work needed to be done to achieve clean audit outcomes.  There were few instances of irregular expenditure and the Rand value involved was low.  There were no concerns that the control environment was failing and required attention.  Irregular expenditure of R14,000 at GCIS was considered to be an insignificant amount.  The amount concerned was less than the amount declared in the prior year.  It was necessary to keep manual records for the disclosure notes in the financial statements concerning adjustments.  Queries concerning debtors and creditors should be referred to GCIS.  GCIS worked on the basis of advance payments to creditors, which were offset against services rendered.  Any surplus amounts were recovered.  The instances of non-compliance to the SCM legislative requirements related to the failure to obtain the necessary information from prospective service providers with regard to declarations of interest and declarations that the supplier had not indulged in any fraudulent practices. 

Mr Van Vuuren explained that the briefing document focused on the model used by AGSA and was not intended as a detailed report on the audit outcomes of the entities concerned.  He agreed that the MDDA had utilised accumulated reserves for 2011/12.  AGSA had not previously considered the financial health of entities and took a relatively cautious approach.  The intention was to assess the financial sustainability of the entity.  If an organisation was found not to be a going concern, this would be highlighted in the report of the Auditor-General.  The MDDA was considered to be a going concern and the nature of the funding provided allowed the Agency to operate within its budget and avoid the need to utilise accumulated funds in future years.  The Committee needed to ensure that the budget provision for the MDDA was adequate to ensure future sustainability.

The National Treasury had issued a new framework for the development of strategic objectives two years earlier.  The new framework had to be implemented from 1 April 2012.  The new framework included more detailed guidelines.  All Government entities had been briefed on the framework and should be familiar with the requirements.  The Committee’s role was to ensure that the guidelines were applied.

The internal audit function was required to conduct risk assessments and to ensure that effective control measures were in place.  The oversight role of the Committee involved engagement with the entities on risk assessments and the relevant control measures.  The most significant area requiring attention from the Committee was SCM.

The Chairperson agreed that instances of fraud and corruption were most likely to occur in the area of SCM.  The Committee did not consider any amount of irregular expenditure to be immaterial.  GCIS and MDDA had been requested to brief the Committee on the measures put in place to prevent irregular expenditure.  He asked that the Committee was provided with a more detailed briefing on the new framework at a later date.

Ms Newhoudt-Druchen requested that a more detailed briefing document was e-mailed to members.

Mr Schneemann asked if the MDDA and GCIS were aware of the new framework.

Mr Van Vuuren confirmed that both entities were aware of the framework.  AGSA provided briefings to all Government entities on all the matters that had to be attended to on an annual basis.  The presentation could be made to the Committee if required.

Mr Van Vuuren explained that there were no findings concerning the financial statements of the MDDA and GCIS.  Both organisations therefore received a financially unqualified audit opinion.  However, there were findings concerning procurement and SCM practices for both entities.  Management was responsible for ensuring that effective control measures were in place.  The Committee conducted oversight and should query what controls were in place, what corrective action had been taken to address the findings and the content of internal audit reports.

Briefing by the Auditor-General South Africa on the audit outcomes of the Department of Communication (DOC) and its subordinate public entities
Ms Alice Muller, Corporate Executive: AGSA presented the briefing on the 2011/12 audit outcomes of the Communications portfolio to the Committee (see attached document).

The Communication portfolio comprised the Department of Communication; the Universal Service and Access Agency of South Africa (USAASA) and the Universal Service and Access Fund (USAF); the National Electronic Media Institute of South Africa (NEMISA); the South African Post Office (SAPO); the South African Broadcasting Corporation (SABC); the Independent Communications Authority of South Africa (ICASA); Telkom and Sentech Limited.

Only Telkom had achieved a clean audit outcome for the 2011/12 fiscal year, i.e. an unqualified opinion with no findings.  ICASA and the SABC received qualified audit outcomes.  The remaining entities received financially unqualified opinions, with findings.  The outcomes for 2011/12 were similar to the outcomes for the prior year but there had been regression in the areas of leadership and financial and performance management.

The main cause for the adverse leadership and management outcomes was the high number of long-standing vacant senior management positions in the entities concerned.  AGSA expressed serious concern over the extent of the vacancies and urged the Committee to give more attention to the matter when conducting oversight.  For example, the regression in the outcomes for the SABC was related to the manner in which compliance to laws and regulations was managed at the public broadcaster.

There had been an improvement in the outcomes related to governance.  The DOC had resolved the previous issues concerning the internal audit and audit committee functions and there were no new findings.  The previous issues concerning governance at USAASA had been addressed.

The audit outcomes indicated regression in all the focus areas of SCM contraventions, quality of service delivery reporting, human resource management, material errors and omissions in financial statements and IT exposures.  With the exception of Telkom, all entities received findings concerning SCM.  In the area of material errors and omissions in financial statements, the DOC had a new finding concerning undisclosed irregular expenditure; there were new findings for Sentech and ICASA and repeated findings for the SABC.  USAASA and the SABC had partially corrected material errors and omissions in the financial statements submitted.  IT exposures concerned control over user access and putting an IT framework in place.  For example, the Postbank system was hacked and a material financial loss was suffered.  The SABC had made an effort to clear the previous findings concerning the quality of service delivery reporting but had failed to achieve 70% of the targets for the 2011/12 year.  USAASA, USAF, NEMISA, ICASA and SAPO also received adverse findings on the quality of service delivery reporting.

ICASA had addressed previous findings concerning non-current assets but the finding for the SABC had been repeated.  There had been no improvement in the finding concerning the ICASA license fee liability (which was paid over to Government).  There was a new finding concerning SCM irregular expenditure by the SABC and the amount indicated in the financial statements was qualified.

USAASA and USAF did not comply with the requirements for pre-determined objectives.  The objectives set by ICASA were not clearly explained.

The DOC had dealt with previous findings on compliance with laws and regulations.  There was a new finding concerning the utilisation of USAF fund money by USAASA.  There were adverse findings concerning procurement for the DOC, USAASA, NEMISA and Sentech.

A forensic investigation found irregular expenditure of R95 million was incurred by the DOC during prior years.  The item was disclosed in the 2011/12 AFS.  In addition, irregular expenditure of R20 million was incurred in the 2011/12 fiscal year but was only identified during the audit process.  Other findings on irregular expenditure and fruitless and wasteful expenditure were made for USAASA, the SABC and SAPO.  The matter concerning the irregular expenditure related to the move of SAPO to new premises (Eco Park) was still under investigation.

Material errors and omissions in financial statements were regarded as non-compliance with the PFMA.  The DOC had established effective internal audit and audit committee functions.  The findings concerning poor human resource management related to the failure of senior management officials at the DOC to sign performance contracts.  The finding concerning asset management related to the poor performance of the SABC in this area.

The root causes for the poor audit outcomes were the high rate of senior management vacancies and instability in key leadership positions; a lack of consequences for transgressions and poor performance; senior managers not accepting accountability for their actions and poor audit outcomes and inadequate monitoring to ensure compliance with laws and regulations.

AGSA had summarised the significant findings from the audit outcomes that required monitoring.  The document had been presented to the Minister.  AGSA suggested that the management of the DOC and the subordinate entities presented briefings to the Committee on a quarterly basis.  AGSA would conduct workshops with individual entities on what checks and balances should be in place to ensure that no irregular transactions occurred.

Discussion
Ms Morutoa asked if the Committee had to approve any IT framework implemented by the entities.

Mr Steyn asked if the amount of irregular expenditure reflected in the presentation document was the full extent of it.  For example, if the irregular expenditure during prior years that was uncovered by the forensic investigation into the finances of the DOC was limited to R95 million.  He asked AGSA to provide Members with a more detailed briefing document.

Ms M Shinn (DA) observed that the current state of affairs at the DOC was the result of regression of a period of several years.  She asked why the downward trend had not been addressed earlier and what action had been taken by the Minister to reverse the trend.  In a report submitted to the Appropriations Committee, the DOC was listed as one of the departments that had significantly failed to spend its allocation.  She wondered how committed the Department was to improve its ICT structure.  She asked what the legal implications were of USAASA transferring funds from the USAF to pay for its UIF obligations.  (She understood “UIF” to be the acronym for the Unemployment Insurance Fund).

Ms Killian asked if AGSA monitored and assessed the action taken against personnel committing fraud and other financial transgressions.  She asked if there was a system in the public sector that allowed for non-performing officials and officials found guilty of transgressions to be ‘blacklisted’ in order to prevent them from moving on to another department and continuing to ‘spread the rot’.  The report by AGSA on the DOC and its entities was not positive.  The Committee would have to increase oversight over the portfolio and should consider linking with the Standing Committee on Public Accounts (SCOPA).  The Committee found the summary of matters requiring oversight in the 2011/12 PFMA Outcomes document provided by AGSA to be useful.

Mr C Kekana (ANC) observed that the report by AGSA had highlighted the problem areas requiring further attention.  He asked why the DOC was regarded as a ‘difficult’ department to report on.  He asked if consideration should be given to splitting the Department.  He asked what the reasons were for the failure to fill the vacant positions.  He asked what AGSA’s opinion was of the overall trend in the Communication portfolio.

Ms M Lesoma (ANC) remarked that the current Minister of Communications was committed to improving the performance of the DOC.  Each entity would be briefing the Committee on their annual reports for 2011/12 and would confirm the exact amount of irregular expenditure incurred.  She asked if the senior managers had employment contracts outlining what their duties and responsibilities were and if it was necessary to sign additional employment contracts.  She asked what the reasons were for the lack of performance of the State-owned entities (SOE’s) reporting to the DOC.

Mr Schneemann observed that the PFMA was clear on what was required of Government entities.  The roles and responsibilities of officials were clearly defined.  The Director-General of the Department was the accounting officer and the roles and responsibilities of the Chief Financial Officer (CFO), Chief Executive Officer (CEO) and Chairperson of the Board was clearly set out in the legislation.  The PFMA was enacted in 1999 and subsequently amended to refine the legislation.  He wondered why the same problems recurred over the previous twelve years.  He asked if AGSA was of the opinion that the responsible officials understood the requirements of the PFMA or if there were other reasons why the same problems occurred year after year.  He asked if the CFO’s that had been appointed were suitable.

Ms Shinn remarked that a major problem was the failure of officials to take responsibility for their actions.  She felt that officials should be criminally prosecuted for repeated misdemeanors.

Ms Killian asked if any official had been prosecuted in terms of the PFMA.  If not, the legislation was meaningless and should be repealed.

Ms Morutoa asked for clarity on the finding that 57% of pre-determined objectives did not satisfy the SMART criteria.  She asked for more information on the new audit findings concerning the SABC.  She asked what was meant by the statement that the financial statements had been partially corrected.  There appeared to have been a regression in the performance of entities in all the focus areas and she wondered what the reason was for the poor performance.

The Chairperson asked for more information on the failure of officials to sign performance agreements.  He asked for further comment on the unwillingness of responsible officials to take action against transgressors, the quality of appointees and their ability to make sound decisions.  The same questions would be asked of the entities during the subsequent briefings to the Committee.

Ms Muller advised that the DOC did not have an IT framework in place.  It was necessary to compile a framework, obtain approval and implement it.  She explained that pre-determined objectives had to be specific, measurable, attainable, realistic and time-bound (SMART).  In general, Government entities had improved the quality of pre-determined objectives by applying the SMART criteria.

Ms Muller advised that the SABC had disclosed irregular expenditure of R136 million but AGSA was not satisfied that the amount disclosed was the full extent of the irregular expenditure incurred during the year.  The acronym UIF used in the context of the transfer from USAF to USAASA meant “unauthorised, irregular and fruitless” expenditure and not “unemployment insurance fund”.  Entities were allowed a period to correct errors and omissions in financial statements.  The corrections had to be made before the deadline of 15 July 2012.  ICASA and the SABC had not managed to make all the necessary corrections before the deadline.  The request for a more detailed briefing document had been noted.

Ms Muller advised that the Minister had actively encouraged her portfolio to participate in the clean audit workshops offered by AGSA and was committed to achieve clean administration.  The failure of the entities to improve their performance was not because of a lack of effort from the Minister and the Director-General of the DOC.  AGSA would pursue the legal implications of the transfer of funds from USAF to USAASA.  The PFMA and Treasury guidelines included requirements for financial reporting.  AGSA investigated instances of non-compliance and recommended that the responsible official was held accountable.  However, AGSA had found that the action taken against officials was limited.  AGSA would like to see that action was taken against all personnel implicated in financial wrongdoing irrespective of the amount involved.  She was not aware that there was a system of ‘blacklisting’ non-performing officials within the public sector.  AGSA recommended that the Committee developed a closer relationship with SCOPA.

Ms Muller explained that the Communication portfolio was complex and diverse and a variety of issues required attention.  The number of vacant senior positions was a serious problem and required immediate attention.  The vacancy situation had an adverse impact on the standard of leadership within the portfolio.  The level of commitment from a person appointed in an acting capacity was less than that of a person that was appointed on a permanent basis.

The overall impression of AGSA was that the audit outcomes for the Communication portfolio had stagnated.  If the areas of concern were not addressed, the sustainability risk would increase and there was a danger of rapid deterioration.  The level of skills of CFO’s and other officials in finance units varied.  The lack of suitable financial management skills had a significant impact on the performance of an entity, for example, an SABC internal audit report cited a lack of capacity in the finance department as the reason for the lack of financial control and management in the organisation.

Ms Muller agreed that the provisions of the PFMA were clear and that every public service official should be aware of the requirements.  She was not aware than any individual had ever been prosecuted for the failure to comply with the PFMA.  AGSA would like to see much more action being taken against transgressing officials so that the message around incurring irregular expenditure was driven home.

Mr Phuti Phukubi, Senior Manager, AGSA advised that the PFMA required that a performance agreement was in place.  The finding was made because the Auditor-General was not provided with copies of any agreement documents.  The amount of under-spending by the DOC had reduced from R700 million in the prior year to R200 million in 2011/12.  There was a high turnover of CEO’s and CFO’s at the DOC and the SOE’s, which had resulted in leadership instability and problems with commitment and attitudes.

Ms Lesoma found it difficult to believe that individual performance contracts did not exist.

Mr Phukubi replied that the Auditor-General had requested copies of the performance agreements and had reached the conclusion that there were no agreements in place when no documents were provided.

Mr Schneemann said that a person in an acting capacity should have the same level of commitment as a permanent appointee.  If the acting official concerned was unwilling to provide the required level of commitment, the appointment should not be made.  If officials understood the requirements of the PFMA there should be no problem with compliance.  He wondered if the problem was in fact a ‘don’t care’ attitude towards compliance.

Ms Muller replied that the underlying problem was the vacant senior management positions.  There was a leadership vacuum and no-one to set the tone and ensure that officials were held accountable.  The vacancies were numerous and the high vacancy rate had been identified as a high risk for the DOC.  The issue should be addressed as an urgent priority.  Once the senior positions had been filled, the other areas of concern could be resolved.

Ms Morutoa observed that the Committee had failed to properly address the vacancy issue during the previous five years.  She urged the Chairperson to arrange a meeting so that the Members could discuss the matter.

Mr Kekana asked if any officials had received bonuses.

Mr Phukubi advised that any bonus payments to officials who had failed to sign performance agreements would be regarded as irregular expenditure.

Ms Killian wanted to know on what basis bonuses were paid if the entity had not performed adequately.

Ms Muller suggested that questions concerning bonus payments were directed to the DOC and the entities.

The Chairperson thanked AGSA for the comprehensive briefing.  The issues raised by Members were an indication that the entities were not operating in normal environments.  The fact that the Minister was engaging with the Auditor-General was an indication of the Minister’s concern.  The oversight role of the Committee was limited.  Currently, the interaction with the Committee was limited to briefings on strategic plans, budgets, annual reports and the reports on the first quarter of the new financial year.  In future, the Committee would have quarterly engagements with the DOC and its subordinate entities.  The report submitted by AGSA made depressing reading and indicated a regression in the performance of the entities and disappointing performance by the officials appointed to senior positions.  It was clear that drastic action was required but the action that could be taken by the Committee was limited.  The Committee had to obtain answers to all the issues that were raised by AGSA.  The entities had been informed that the Committee required information on any irregular activities, the amounts involved and what action had been taken against the implicated officials.  The amount of irregular expenditure was substantial and the money wasted should have been used to improve access to communications infrastructure.  The Committee would engage with SCOPA and with the Appropriations Committee.  The DOC would be requested to provide an explanation for the failure to attend a meeting with the Appropriations Committee.

The meeting was paused for lunch.

Ms Pumla Williams, Acting Chief Executive Officer: GCIS, introduced the delegation and highlighted some of GCIS’s key achievements in the 2011/12 financial year.

The National Communication Strategy (NCS) had been approved by Cabinet in 2011 and communicated to all spheres of government, to ensure coherence across Government messaging. Broadcasting of the State of the Nation address had this year been focused on middle Living Standard Measure (LSM) communities, through the setting up of town halls. GCIS had tapped into the previously neglected five-to-seven LSM group and had raised the number of Public Participation Programme (PPP) events to 1760, allowing Government to reach roughly 21 million citizens this year, versus only 17 million last year. In terms of training government communicators, GCIS was “finally getting it right” and had trained 314 officials last year.

GCIS had spent 95% of its total 2011/12 budget. The unspent funds were related to their new Head Office building, which was meant to be completed in 2012. Completion had been delayed so that certain matters could be smoothed out. GCIS had established a senior-management competency test to ascertain in which areas to develop its leaders. It used the Audit Report as a tool to help it zoom in on its weaknesses. This year it had received an “unqualified” audit result with matters of emphasis, and these matters singled out by the Auditor General (AG) were different to last year, reflecting GCIS’s commitment to working on audit issues. The AG had singled out certain aspects of GCIS’s reporting style and supply chain as problematic. GCIS had tasked a new person with completing the financial reports this year, in order to ensure that more than one person on the team was adept at this skill. This explained some of the stylistic hiccups. There were more departments depending on GCIS’s services now than ever before, because these services were free and had proven useful. The two staff members responsible for order-processing were now inundated. National Treasury needed to help CGIS address supply-chain issues.

Mr Keitumetse Semakane, Acting Deputy Chief Executive Officer: GCIS, told the Committee that almost all targets set for Programme 1: Administration and Programme 2: Communication and Content Management had been achieved in 2011/12. He went on to discuss the areas of underachievement.

GCIS had targeted an 85% success rate for order-and-payment processing but had only achieved 77%. The 8% variance was owing to system disruptions and staff turnover, as well as to the fact that the processing team had only two members.

The development of a curriculum for training government communicators had been delayed, because further research and consultation with academics had been necessary. The first seminar had been held in September, however, and the programme was back on course.

GCIS had exceeded its target of four dashboard presentations to Government clusters, holding nine last year. It had aimed to publish 12 20-page editions of its Government newspaper but no editions were published in May or June owing to delays in NCS approval. GCIS had since caught up by publishing its later editions with more than 20 pages. For the same reason, it had not met its target of publishing 12 “employment news” supplements inside its Government newspapers.

GCIS had only managed to release ten editions of its monthly magazine for senior-management members of Government. It typically sourced funds for this from advertising, and these had not been available last December. It had also realised that its target of directly reaching 300 000 constituents through a monthly electronic newsletter had been misguided, and that it needed instead to reach 81 internal government members who would in turn distribute the newsletter to 300 000 constituents.

GCIS had not met its target of developing a print edition with a print run of 10 000. It was still trying to source funds through advertising, though in the meantime it had developed a full directory aimed at making senior public officials accessible to the public.

There had been no funds available to implement 25% of its weekly radio show, as targeted. Similarly, a plan for an annual exhibition with 50% participation of state-owned entities and department had failed for lack of funding.

Ms Nebo Legoabe, Deputy Chief Executive Officer: GCIS, briefly highlighted the Programme 3: Government and Stakeholder Engagement targets that had been achieved. In terms of underachievement, GCIS had fallen short on its targets for use of the Thusong Service Centres, but this was mainly because construction had been slow. GCIS was only responsibie for marketing and communication of these centres, which were constructed by the municipalities.

GCIS had aimed to have 50% of all departments develop a communications strategy in 2011/12 but only 41% had successfully done so, largely owing to delays in strategy approvals.

Ms Williams told the Committee that R20 294 000 had been rolled over to the current financial year and explained the two main areas of under-spending.

Mr Donald Liphoko, Chief Director: GCIS, explained GCIS’s media bulk-buying initiative. GCIS had purchased R122 153 535 worth of advertising space and had negotiated discounts to bring the price down to R114 535 730. The difference had become a cash benefit to the Government, an added value of about R9.7 million to be used where needed.

1^st quarter report 2012/13
Ms Williams explained how GCIS had invested in an intern scheme, to address challenges of capacity and expand the pool of personnel who understood the system. As a result of its audit report, GCIS had reflected on and revised its procurement policy.

Mr Semakane reported that CGIS had achieved all its first-quarter targets. Through its interactions with the Committee, CGIS had become aware of the need for impact-assessment reports, which were being implemented.

The first edition of GovComms had not come out in the 1st quarter, as targeted, owing to missed deadlines and printing slots. This matter had been taken up seriously by management.

GCIS had aimed to submit 170 reports on the Thusong Service Centres but had only delivered 89. At the local-government level, municipalities had started to hire their own communicators, so GCIS had decided to have communication officers servicing whole districts instead.

Ms Williams concluded by explaining some areas of over- and under-spending in the 1st quarter.

Discussion
Mr Kekana said that the Committee’s oversight visit had revealed some of the Thusong Service Centres to be in a “pitiful” state. What was GCIS’s final assessment of this project? Was it a success or a failure?

Mr Steyn said that the newly implemented impact-assessment reports should be used to evaluate the Thusong Service Centres. He requested such a report from GCIS and a follow-up presentation to the Committee on findings. Ms Williams had said of supply-chain management that GCIS was “finally getting it right”, but this was in fact an area of regression on the audit report. How could this be explained?

Ms Williams replied that major problems with GCIS’s record-keeping, procurement policies and other supply-chain processes had been eradicated in the time since her joining. The systems in place were now much smoother, even if there was still definite room for improvement. In the audit report, the AG had red-flagged a R14 000 cost, arguing that anything above R10 000 needed to be quoted. The official concerned had genuinely believed that the venue being paid for was less than R10 000 so had not requested a quote and, when the invoice arrived, it was too late to do so. The incident was not a fundamental, systems-based one but rather a result of human error.

Mr Steyn asked about GCIS’s IT system and about the variances in delivery due to “system disruptions”.

Ms Williams replied that GCIS did not have control over the systems it used and that these systems tended to crash at the most critical moments. For urgent business matters, employees had sometimes been asked to work after-hours, when the systems worked faster.

Mr Steyn asked about GCIS’s printing of its “pocket guide”. Why had it not looked at DVD distribution as an alternative to paper printing? If funds for the monthly magazine for senior management were sourced from advertising, why were advertising receipts and production costs not included in the financial report? Wherever the GCIS had underachieved, it had attributed this variance to budgetary constraints. Conversely, its overachievements in other area were bound to cause budgeting problems further down the line. What was the GCIS’s budgeting technique and was it working?

Ms Shinn asked what had been done to correct and monitor the problem of employees doing outside work without permission, on the government tab.

Ms Williams replied that disciplinary action had indeed been taken. The GCIS had received a court judgement in its favour on 10 September.

Ms Shinn added that the AG had reported that GCIS’s report had not been prepared “in accordance with the reporting framework” and that contracts had been awarded to bidders who had not submitted a declaration. What had been done to avoid these issues recurring? There had been a drastic increase in laptop thefts from 13 last year to 33 this year. Were staff members being careless with their laptops? What was being done to avoid this and to reclaim the stolen goods?

Ms Williams replied that the theft situation was unfortunate but that GCIS had to provide resources for its employees in rural areas. The question had quickly become whether to stifle the progress of work with fears of further theft or to forge on with the programme. That being said, if workers were found to have been negligent, they had to pay for the lost laptop.

Ms Shinn asked about staff making private telephone calls. What disciplinary and monitoring process had been put in place here?

Ms Williams responded that staff members were allowed 150 private calls per month, after which they had to pay out of their salaries. Call counts were monitored using a pin-code system.

Ms Kilian asked about inter-government payables. To what did this refer? Was it money paid over in advance with service delivery outstanding?

Ms Newhoudt-Druchen asked what media bulk-buying was and how it worked. The Committee had heard about media brokers during its oversight visit. Was GCIS using them? Were the GCIS’s advertisements accessible to the deaf? Speeches like the Minister’s on World Heritage Day or the President’s on New Year’s Day remained inaccessible to the deaf community.

Ms Williams replied that GCIS used to do its media bulk-buying through outsourced agencies that would charge fees of 16%, cancelling out any benefits of a discount. The process was now being down internally.

Ms Lesoma asked how service was provided to departments. Had departments not allocated some of their own budgets to communications? Did GCIS enter into a Memorandum of Understanding (MOU) agreement with a department it serviced? What legally bound a department to make payments? For communicators at the local and provincial levels, what support was GCIS providing?

Owing to time constraints, the Acting Chairperson asked the delegation to submit a written response to the Committee by 12 October, addressing the unanswered questions. In its response, GCIS was to also please flesh out the concept of media bulk-buying a little more. He added a query about impact-assessment reports, asking why they had not been done until now, and about the effective distribution of GCIS documents. During an oversight visit to the Nelspruit office, he had found a box of unused documents in Braille, along with many other boxes of discarded documents.

Media Development and Diversity Agency (MDDA) Annual Report 2011/12
Mr Lumko Mtimde, Chief Executive Officer: MDDA, highlighted some of the milestones of the 2011/12 financial year, which had been the ninth year of unqualified audits for MDDA. MDDA had supported 413 programmes with R210 million and had trained 1 764 people. It had seen a steady growth in community radio audiences, despite commercial and market challenges.
 
Mr Nkopane Maphiri, Project Officer: MDDA, reported that all key deliverables have been met in the last financial year, and walked the Committee through them. There had been a move away from allocations to urban areas towards a renewed focus on rural development.

Mr Mshiyeni Gungqisa, Chief Financial Officer: MDDA, reported that there were 23 filled vacancies and seven unfunded posts. Total expenditure for 2011/12 had been R89.8 million. The entity had accumulated a R36 milllion deficit, but this had been cancelled out by the rolled-over surplus from the year before. The net surplus was R829 000.

The AG had reported that an additional cost of approximately R150 000 had been irregularly incurred by MDDA during production of its annual report. This was caused by human error. An employee had processed the procurement documents as one page instead of two pages. Once the error had been picked up by the service provider, reversing it would have caused delays in publishing the report. Disciplinary action was taken, because the error could have been extremely costly to MDDA’s reputation. The two employees involved received warnings, and one resigned. As a corrective measure, MDDA now has a supply-chain-management specialist.

1^st quarter report 2012/13
Mr Maphiri delivered the first-quarter report, noting that all targets had been met. The budget remained small but MDDA was continuing to optimise its limited resources. Print-media targets were very challenging to meet, which was not helped by escalating print-house costs. MDDA was finalising the terms of reference for an impact assessment on the last nine years of its operation. Similar analyses had been done by independent stakeholders but MDDA wanted an internal study done too.

Mr Gungqisa explained that MDDA would be able to spend the variance in administration costs in the following quarter. The unspent employee costs had been caused by three unfilled vacancies, which MDDA was in the short-listing phase of filling. The unspent Board costs had been caused by Board members not attending meetings, when their attendance had been budgeted for.

Discussion
Ms Lesoma thanked the delegation for the work done. She pointed out, however, that this entity had refused to be in compliance with equity and was in the grey in terms of gender. The CEO and management needed to address this matter. Why were the 23 filled vacancies and seven unfunded posts not shown in the organisational chart? What were the criteria, if any, for acceptance of a project application to the MDDA?

Mr Mtimde replied that equity was a challenge that the Board and management were fully aware of. They were prioritising it in recruitment, including recruitment for current vacancies. The unfunded positions had only been unfunded in the completed financial year. For the current year, many of them were funded. MDDA had 50% new Board-membership this year and had drawn up a new organisational chart to help the Board confer over and confirm human-resources requirements. Not all applicants were awarded grants and applications were in fact only reviewed once certain baseline criteria had been met. MDDA followed a strict grant-allocation process.

Addressing the irregular expenditure in the AG report, Mr Steyn observed that the vendor had been given the tender based on the assumption that its quote was R150 000 cheaper than what it actually was. Was there not an original bid that was smaller than this high amount? The lack of high-level supervision of this process was a serious problem. How were funded projects being monitored? Almost without exception, the projects encountered during oversight visits had not been sustainable. MDDA was funding three small commercial prints, but the costs of printing community newspapers were prohibiting these newspapers’ sustainability.

Mr Mtimde replied that MDDA had dealt with the irregular expenditure issue very seriously. They had investigated why it had passed the CFO unnoticed and measures had been taken against the CFO. MDDA had picked up the error itself and reported it to its audit committee, which had in turn reported to the AG. The AG had then confirmed the error in his report, which is why he had not qualified his statement. The cost of printing was a big problem that MDDA was working on. It was looking into how it might tap into the Department of Trade and Industry’s resources.

Ms Shinn asked who conducted MDDA’s research and who would be conducting it for the coming year? If it was outsourced, to whom was it outsourced? What was the purpose of the “international trips” listed in the report? Why had MDDA gone to lengths to develop a religious policy?

Mr Mtimde replied that MDDA procured its researching service and that vendors were able to apply to specialist research areas. The purpose of the international trips had been to interact and consolidate partnerships with international donors, such as UNESCO. The religious policy had been developed to assess applications from religious groups, specifically how broad or narrow the communities were that these religious groups proposed to reach.

Mr S Kolwane (ANC) pointed out that the Chairperson of MDDA had only attended two Board meetings in the last financial year. She was also absent from the current meeting in Parliament. Mr Kolwane felt strongly that she must write directly to the Committee explaining why she was not honouring her accepted responsibility or, if she felt the duties to be beyond her capabilities, she must resign. Who else on the Board was not attending meetings? MDDA had to provide the Committee with names. Further, how did the Board operate without a company secretary?

Mr Mtimde replied that Board members not in attendance were listed in the annual report. A list of those included under “other” would be provided in writing.

The Acting Chairperson added that two people did not attend a single meeting of the audit committee, which was of concern. He also asked if MDDA monitored whether any of the radio stations and community newspapers it funded had closed down. If it did monitor this, these figures should be reflected in the report. The Committee wanted to know whether the money being spent was contributing towards sustainable and viable community projects in the long-term, because the general trend seemed to be that many projects would be in trouble without funding.

Mr Mtimde noted the Acting Chairperson’s questions and recommendations on sustainability. MDDA’s imminent social-impact report would also give it a better sense of these matters. He agreed that sustainability was a problem, complicated by the MDDA’s commitment to target rural, poorer area that often lacked the resources to keep projects going. This was why it was funding certain projects within GCIS that worked on professionalising systems in these communities. The two people who had been absent from audit meetings had since resigned. The audit charter stated that three externals were necessary, and MDDA’s compliance with this composition was still in order.

Owing to time constraints, the Acting Chairperson requested that outstanding questions be responded to in writing by 12 October.

The meeting was adjourned.