2012/2013 Anticipated audit outcomes of the Department of Arts & Culture: briefing by AG; Audit Outcomes and Turnaround Strategy: briefing by South African Heritage Resources Agency

Meeting report

Adoption of minutes
Minutes were not adopted as there was not a quorum. Various members had not attended the meeting and had given no apologies.

Presentation by the Auditor-General
Ms Corne Myburgh, Business Executive, Auditor-General’s Office, presented on anticipated outcomes for 2012-2013 and the summary of anticipated audit outcomes.

There were seven entities which were anticipated to receive clean audits ( i.e. financially unqualified opinion with no findings on compliance and predetermined objectives)  these were:

• Freedom Park
• Iziko
• KwaZulu Natal Performing Arts Council
• Luthuli Museum
• Market Theatre
• Msunduzi/Voortrekker
• Natal Museum

She presented on the five entities which were anticipated to receive financially qualified audits. These included:

• National Arts Council (NAC)
• Pan South African Languages Board (PANsalb )
• Performing Arts Centre of the Free State (PACOFS)
• South African Heritage Resources Agency (SAHRA)
• State Theatre

The five entities (NAC, PanSALB, PACOFS, SAHRA and State Theatre) were expected to receive qualified opinions. These entities had experienced leadership challenges especially at board level which were referred to the Minister and Mr Sibusiso Xaba (Director-General of the Department) and they were receiving attention. The Department, together with 14 entities, was stagnating at receiving unqualified audits with findings. More effort was required to move them towards clean opinions.

She also presented on the interim audit of predetermined objectives, the AG’s strategy to the audit of predetermined objectives for 2005/5 till 2008/9 and 2009/10 till 2010/13, audit criteria, and the audit approach.

In terms of SAHRA it was expected that the situation would improve as following the interventions there had already been some progress. The Auditor-General’s Office was excited about the turnaround and interventions even though they anticipated a qualified audit. This was because there was not enough time within the financial year to fully enact the turnaround. The entity promised to hold staff accountable and have clearly defined roles. Regarding the NAC, Down Town Studios had shown improvement following interventions. However the problem was the timing as the end of the financial year was in a week. Within PANSALB there had been no board but there had been a caretaker Chief Executive Officer (CEO) and an interim Chief Financial Officer (CFO). The interventions had not had the desired impact in terms of remedying the situation experienced within the entity. PACOFS’ previous year had had qualifications in terms of assets and nothing had been done about the qualifications. The entity had been undergoing renovations within its buildings which meant that assets were being moved but not accounted for.  This had led to further qualifications. There had also been no internal audit and an external audit had shown irregular expenditure. In terms of the State Theatre the Auditor-General’s Office was concerned about the qualifications of the Chief Financial Officer. There had also been no guidance coming from the CFO. It had been recommended that the CFO attend training. There had also been evidence of fighting within the board as well as inadequate monitoring by the CEO. This had been coupled with the fact that there was no central office that monitored and reviewed performance. However, this was being addressed.

The main reason for other matters was compliance, this included the quality of Annual Financial Statements and noncompliance with procurement processes. The other was performance information. This included usefulness and reliability.

She presented on the predetermined objectives findings, findings on compliance with laws and regulations. The summary of anticipated outcomes continued, outlining that there had been one improvement which was currently anticipated for SAHRA from disclaimer opinion to qualified opinion. However the rest of the entities are anticipated to remain the same.

The focus for the interim audit was measurability and relevance of indicators and measurability of targets. 4 out of a sample of 85 indicators were not well defined (4.71 % error rate), 12 out of a sample of 85 indicators had not been verifiable (14 percent error rate), 7 out of a sample of 85 targets had not been specific (8 %error rate), and 6 out of a sample of 85 targets were not measurable (7 % error rate).

None of the indicators that had been identified were irrelevant or time bound. The Department of Arts and Culture had not had any technical indicator descriptions for the 2012/13 year as well as 2013/14.

The recommendation was that the Department should develop the technical indicator descriptions to ensure consistent understanding of the indicators and process to reach the objectives.

Discussion
Presentation
Mr N Van Den Berg (DA) said he was unable to fully engage with the material as he could not ‘put his finger on what the presenters were talking about’. He said as a politician he needed the bottom line, namely the end result of the approach and not the outlining of the approach itself. He needed information he could use.

Mr S Ntapane (UDM) said the information that was given had been informative and that it was important in the performance of the Committee’s oversight task.

Ms L Moss (ANC) said that it would have been nice to have a more user-friendly version of the presentation as not everyone was an accountant and therefore did not understand all the information conveyed. She was, however, glad to hear there had been progress.

Ms Myburgh replied that the utilisation of the Annual Performance Plan within the presentation was to help the Committee in their task of approving the strategic plan. What the presentation had shown was that the Department was meeting the SMART criteria (objectives that are Specific, Measurable, Attainable, Relevant and Time-sensitive).

Engagement with entities
Mr Ntapane asked if the Auditor-General’s Office had engaged the entities about their shortcomings and made them privy to the information that was being presented.

Ms Myburgh replied there was an approach in the Office that one did not talk about people if they did not talk to them so there had been engagement with the entities (albeit not specifically by herself). Throughout the organisation there were people who engaged with the leadership of the entities. Thus all entities were to be aware of what had been shared today.

Assets
Ms Moss said that the issue of assets had been a problem in the country in general. The main problem was there was no central audit of assets and as long as this was the case this would be a continuing problem.

Ms Myburgh agreed that assets were a general concern and this was usually one of the qualifications that an entity received and one of the last to be resolved. She felt it was often easier for an entity to manage that rather than being managed on a nationwide level as would a national assets register.

Time Frame
Ms Moss asked if the AG’s office had a time frame within which the Department and the entities needed to ensure recommendations and changes were implemented.

Ms Myburgh replied that in the audit guidance had been given and it had been said that things had to be done before the strategic plan had been approved.

Misspent funds
Ms Moss stated that the issue of misspent funds needed to be raised even in the media. She asked what guidelines the AG’s office had given in terms of this. There were many needs that this money needed to meet and thus the issue needed to be addressed.

Ms Myburgh replied that there was not a great deal the AG could do as they could not be ‘referee and player’. They could not go in and correct and report on it. The mandate they were given was to report and highlight issues. This was coupled with engaging in discussions with leadership and people who could make changes. It was up to the leadership of the entity to take charge of issues after they had been highlighted.

Outlined Entities
Mr P Ntshiqela (COPE) asked about the five entities that had been outlined in the presentation highlighting PANSALB and SAHRA. He asked if SAHRA had had a CEO by the time they had been approached by the AG’s office. Had PANSALB staff been forth coming with information despite not having a board in place?

Ms Myburgh replied there had been a discussion document on the entities included. This contained information that may be helpful to the Committee. She said in terms of PanSALB there had not been the impact wanted in terms of the interventions but there had not been resistance amongst the staff. The information that was wanted was forthcoming.

Non Compliance
Mr D Mavunda (ANC) asked what the Auditor-General’s Office did in terms of those entities who continued to not comply. Did they just continue to make recommendations and bring to light findings? He suggested maybe utilising other legislation to outline the steps taken after making recommendations.

Technical Indicators
Ms Myburgh replied that the Committee needed to follow up on the Department’s lack of technical indicators. But the Department was currently busy with that process. These needed to be either included in the strategic plan or included on the website.

Mr Sibusiso Xaba, Director-General, Department of Arts and Culture, replied that the technical indicators were being dealt with and would be finalised. They would also be published.

Closing remarks

The Chairperson said that it would be nice to engage the AG’s Office for longer next time as there were probably questions in terms of the report and how to move forward. She wondered why some issues pertained despite the interventions. She wondered why some entities improved and some did not.

Delay of SAHRA Presentation
The start of the presentation was delayed when it became apparent that no member of the board was present. Members all agreed that this was not acceptable and showed signs of why the entity was in trouble.

The Chairperson stated that there were questions that would be asked by the media and other stakeholders that she was hoping to get the answers to in the meeting. However she did not see how this was possible with all these ‘new faces’ and no board members. The Committee did not even know how the new people had come to be employed.

Ms Moss said that the queries that had been raised in previous meeting had not been answered and she did not see them being answered in the presentation in front of the committee.

The Chairperson stated if a board member was not present in 10 minutes then the delegation would not be allowed to present.

The meeting was postponed whilst members of the board were phoned by the Committee assistant.

SAHRA briefing on Audit Outcomes and Turnaround Strategy
The Chairperson said that there was no such thing as confidential information and all information the Committee requested was to be given to them. They had requested the phone numbers of the board and had been told they could not have them. People who were new within entities needed to be taught how parliament works. Her understanding was that most board members had only learned of the meeting now. It seemed that there had been a problem with communication and wondered if the problem was with the board and the Committee did not know about it.

Dr Somadoda Fikeni, Chairperson, SAHRA Board, apologised for the mix up in terms of the scheduling. He had believed the meeting was on the 22 of March and not today. He further apologised for being late and stated that both he and SAHRA respected the Committee.

The Chairperson warned against victimising people within the entity who had brought information to the Committee or who had exposed failings within the organisation.

Dr Fikeni had said that no one should be victimised for raising matters as SAHRA was dealing with public funds.

The Chairperson said that what made her angry at the entities within the Department was that when the Committee reported on them they were told that they were a lenient committee on their entities. The issue had been raised about the availability of council members. She argued that there were nine members and it seemed it was always Mr Fikeni who came. She wondered what happened to the rest of the members as none had come to any of the committee meetings. She had taken the issue up with the Minister as well.

Dr Fikeni begun by saying that during October 2012 SAHRA had presented a report to the Committee outlining the challenges faced by the entity, which had resulted with a disclaimer audit report for the 2011/12 financial year. The presentation also outlined the intervention strategies which the Council committed to implementing to address the dysfunctional state of the entity. The purpose of this presentation was therefore to report on progress made to date since the commitments were made to the Committee. 

Ms Mmabatho Ramagoshi, Acting CEO and Head of Turnaround Strategy, SAHRA, presented on the progress intervention and turnaround. She said that the setting up of a Turn-Around Task Team involved the Department and sister institutions that had a good record of performance in identified areas.

In terms of the progress to date the team had been duly set up with the Department. They had played a pivotal role in assisting with the drafting of the ENE for 2012/13, the filling of the CFO post and the drafting of the Terms of Reference for the appointment of a team of Accounting Professionals to assist with the turnaround the financial management of the SAHRA.

The progress to date with the appointment of Staff in all key vacancies was:

• Acting Chief Executive Officer and Head of Turnaround strategy – Ms Mmabatho Ramagoshi
• Corporate Affairs Executive – Ms Mamakomareng Nkhasi
• Company Secretary – Ms Lungisa Malgas
• IT Technician – Mr Luvo Mbaru
• Chief Finance Officer – Ms Cathy Motsisi
• Heritage Officer, Objects – Ms Lynn Abrahams
• Heritage Officer, Built Environment – Ms Shaneegh Bruce
• Heritage Officer, APM – Ms Jenna Lavin


The progress with the development of a comprehensive Audit Plan, working closely with the AG, had thus far been:

• The audit was developed and presented to the Council and Auditor-General.
• Progress on clearing the audit findings was presented to the Audit Committee and AG.
• The action plan was monitored internally during the executive meetings

The following bids had been advertised for the appointing of experts to assist the entity:

• Financial Capacity to implement sound financial management
• Organisational Design specialists
• Property Management strategy
• Forensic Audit

The  appointment process had  almost been at the finalisation stages. SAHRA were envisaging having the teams on board before the end of March.

She then presented on the audit findings in terms of the action plan, stating that the actions included: creating capacity within the Finance Section by appointing an Accounting Firm; developing Financial and Supply Chain Management Policies; developing the delegations of Authority for Financial Management; aligning the Standard Chart of Accountants (SCOA) with National Treasury due 28 February 2013; review of Journals; disclosing errors and opening balance corrections; investigating and documenting all differences for deferred revenue; debtors management; developing related party policy and procedure; bank reconciliations; accounts payables; payroll reconciliation; records management and asset movement and records keeping; assets verification; movable assets and supply chain management. All this was outlined in terms of activities completion date and progress.

The current status of the assessment of Provincial Heritage Resource Authorities (PHAs) follows. Following the approval of the Assessment Policy by the SAHRA Council in March 2011, the following PHRAs had been re-assessed. 

Eastern Cape: The ECPHRA were re-assessed in August 2011 and found competent to perform some functions.  For those functions which they were not competent SAHRA had signed an urgency arrangement to perform these functions on their behalf.

Northern Cape: The PHRA were re-assessed on the July 2012 and found competent to perform some functions and SAHRA was to perform some functions on their behalf. Those functions which they were not competent SAHRA has signed an urgency arrangement to perform these functions on their behalf.

Free State: The PHRA were re-assessed on the July 2012 and found competent to perform some functions.  Those functions which they had not been competent SAHRA had signed an urgency arrangement with to perform these functions on their behalf.

North West: The provincial representative who served in the SAHRA Council had resigned and there had been no provincial representation. The province has asked for nominations to serve in the PHRA Council.

Limpopo: A PHRA was established but there had been no representation in SAHRA Council as required by the National Heritage Resources Act of 1999. The PHRA had completed a re-assessment application March 2013 and would not assume any function therefore SAHRA was to perform these on agency basis.

Mpumalanga: The Department of Sports, Recreation, Arts and Culture seconded staff to PHRA. Present term of Council had been extended.

Gauteng: Council had appointed and sent an application for re-assessment March 2013 and was to take over functions except highly specialised areas like archaeology, palaeontology and meteorites.

Western Cape: Heritage Western Cape (HWC), a PHRA, had been re-assessed in October 2011 and authenticated competent to perform all functions except Section 36 on burial grounds and graves.  

KwaZulu Natal: Within the province there was a competent and capacitated PHRA.  SAHRA re-assessed Amafa June 2012 and found them competent but no representation in the SAHRA Council

Mr Fikeni stated that she could not over emphasise the work that had been done. The decision had been made to invite the Committee to view all the work that had been done despite the various challenges the entity faced. The mandate of SAHRA was huge and included underwater and maritime heritage but there was no capacity to tackle such undertakings. SAHRA had thus approached stakeholders to help such as the navy.

Some provinces did not come to the plate, for example they never sent representatives when it came to tackling heritage matters. SAHRA had written to the Department to aid in the matter and they had tried to use the MinMags however this had not been successful. He stated another weakness of SAHRA was that the board did not have any one with financial skills.

Discussion
Oversight on SAHRA
The Chairperson said that the Committee would be watching SAHRA like a hawk. The Committee had agreed to conduct surprise visits because when entities knew the Committee was coming then various steps were taken to ensure the situation looked favourable.

Complaints from the Union
The Chairperson said there had been complainants from the union but they had not been as before. There had been a reduction. It had been an oversight on her part not to invite a union representative and she apologised for that.

PHRAs
The Chairperson said there was continuing issue in terms of the PHRAs. She was not sure whether the provinces did not take it seriously or merely did not understand what it entailed. This had been a problem for years, she would take it up with the Minister, she urged SAHRA to do the same.

Mr Ntapane said that it was important to resolve this issue as SAHRA could not fail to fulfil its mandate because of the PHRAs.

Mr Mavunda said that this did not sound like it was going well. There was possibly a need for legislation and maybe the Committee needed to assist from a political point of view so that the PHRAs begun to function. He was concerned about the fact that nothing was happening, what interventions were being made?

ENE
Mr Ntapane said he had seen a lot of improvement. He however wanted to know what was ‘ENE’?

Contract Workers
Mr Ntapane asked how long the contract workers who had been appointed to assist in supply chain management would be appointed for.

Internal Audit
Mr Ntapane noted that an accounting firm had been hired and asked if there was an internal audit who could work with them? He said if not it would be best to have one.

Mr Mavunda asked how long the firm would be hired for. He needed a little more information on the matter.

The Chairperson said that it was good that something was happening with SAHRA but there were still some concerns she wished to raise. She wanted to know why an accounting firm was being appointed when there was a CFO who seemed competent (despite her track record showing otherwise). She stated she hated consultants and found saw them to be a ‘quick money-making scheme’. Consultants had caused harm in many entities. She asked if there were people within the entity who could do the job.

Dr Fikeni replied that the auditors were looking into all aspects of the accounting. There had been an appeal to the Department but the advice that had been given was that they could not engage in the accounting matters and then also be appealed to for funds.

Bank Accounts
The Chairperson asked how each project could have its own bank account. She was shocked that this had happened. She did not understand how the Department’s monitoring and evaluation structure had missed this as well as the board of SAHRA.

Appointments
The Chairperson asked if there was any room within the organisation for upward mobility as it seemed there were many new faces sitting in the meeting. Had there been room for people who were interested in moving up in the organisation? There were people who loved the organisation. The Committee requested the CVs of the new appointees.

Dr Fikeni replied that he had learned from SAHRA that sometimes when employees applied for a certain position within the entity and did not get through they had a way of writing the report so that they did not appear to have applied for the job. They did not disclose they were not interested parties. He said he would be happy to have independent persons to verify the processes.

Property that was a liability
The Chairperson asked why SAHRA owned property when it was a liability to the organisation. Was there something that could be done with these properties?

Travel Policy
The Chairperson said that one of the issues that had been of a concern were travel costs. She had seen SAHRA members travelling business class. There were some travelling measures that were not understood. There had been instances of people agreeing to work in other cities and travelling home every weekend. This was a matter that was being raised.

Dr Fikeni replied that there was a travel policy in place and it was strict due to various occurrences in the past.

People staying home and being paid
The Chairperson asked what had happened in terms of the people who were staying at home, not going to work but still being paid? Had these issues been resolved?

Dr Fikeni replied that this matter had been resolved in its entirety.

SCOA
Mr Ntapane asked what the SCOA stood for in the presentation.

Interns
Mr Ntapane asked what criteria would be used when appointing interns.

Disposal of property
Mr Ntapane asked how property was disposed of if there was no policy on the disposal of property?

North West
Mr Ntapane asked why people had resigned from being members of SAHRA and what was the issue in the North West?

Performance agreements
The Chairperson asked for clarification on the statement ‘There is a concerted effort to compile and sign off the 2012/13 performance agreements for all staff.’

Action plan
Ms H Van Schalkwyk (DA) said that the action plan had basic steps which one would think were normal. Was the presentation trying to say these steps had not been taken in the past?

Dr Fikeni said that although SAHRA was small it was a very complex entity. There had been various circumstances which he had never been exposed to and was a learning curve for many involved. One expected certain basic minimums but these had not always been there. There had been a number of strange challenges. There had been many things that had been ‘mind boggling’ and AHRA was bogged down by the fact that there was a need to reconstruct a number of things whilst also doing ‘normal business’.

Appointment of the CEO
The Chairperson said that it was important to appoint a CEO as soon as possible.

Dr Fikeni had appointed an acting CEO up until the end of April so that the process of organisational renewal could be started (which was another term for turnaround). SAHRA was in the process of appointing a substantive CEO.

Previous CEO
The Chairperson asked if the matter of the old CEO had been resolved.

Dr Fikeni said the issue of the previous CEO had been finalised and there had been no pending issues or ‘golden handshakes’ as the contract had expired. There had also been no legal challenge.

Appointment of the CFO
Ms Van Schalkwyk asked how the CFO’s position had been filled. She asked to be taken through the ‘steps of appointment’. The CFO had been with the Department of Public Works but her record was not very good. How many applicants had been interviewed? What had done the appointment, had it been the board?

Ms Moss asked what had been the steps followed in terms of appointment. Had there been a contract, had the position been advertised?  What had been the criteria?

Dr Fikeni replied that the contract of the old CFO had needed in March last year and there had been an acting CFO in the interim. The person had had wonderful skills in forensic matters but not necessarily in constructing budgets and the like. He personally had not been involved in the appointing of CFOs it had been an internal process.  The board had merely observed. The position had been advertised. After the CFO had been appointed there had been turnaround. There was no information for the board to engage with before she had come.

The Chairperson said the issue of the CFO was her track record. She had been working in another department and had had a disclaimer. She had later been implicated in some issues and then had chosen to resign. She argued anyone who came into a new environment would be effective in the first six months. It was the integrity that was being questioned. She had a bad track record and then came to SAHRA, which had its own problems.

Dr Fikeni replied that the issue of her track record had been raised to the selection panel as SAHRA did not want to limp from one crisis to another. He wanted this to be on the record.

Provinces
Ms Van Schalkwyk asked that the provinces which did not send representatives to SAHRA be named and shamed.

Ms Moss said that it was important to speak to the provinces. This was a serious matter.

Dr Fikeni answered that the provinces that had not sent members were KwaZulu Natal, Northern Cape, Limpopo and the North West (when PRHAs had started this province had had a member. However, with the change of MEC he had not been seen again, there had been attempts to contact him.) Within the Western Cape there had been a member who had resigned at the end of 2012 and SAHRA had asked for an opportunity to engage with the MEC. The sad thing was that provinces such as the Western Cape and KwaZulu Natal, which were doing well with their PRHAs, had valuable insight to give to others if they had people represented. He asked if the Chairperson and Minister could raise this issue as it was not new. 

Mandate and Vision
Mr Van Den Berg said that the mandate and vision of SAHRA was great and needed to be fulfilled. It needed not to be forgotten and the staff needed to be reminded of it. It concerned him that certain steps had to be taken to look after the entity's own documents. If this was the case then what were they doing with the history of South Africa? There needed to be a total attitude change in SAHRA because of the job SAHRA had. There was a need to build a solid foundation for the future generation who will come and fill the shoes of those within the organisation. If this did not happen there would be nothing left.

Ms Moss said that there was a need to take stock of what was in the country. Those who had been born in 1990 and 1991 would not know the history of the struggle.

Funds
Mr Van Den berg stated that the basic administration of the funds was not being adequately tackled and this was big concern. There had been money left over from projects and it seemed that people could ‘help themselves by saying they were involved in this or that project.’ Corruption and mismanagement of funds begun with a personal change and this needed to be the attitude of everyone within South Africa.

Consultants
Mr Van Den Berg spoke out against the hiring of consultants saying that they were employed for a period of time and spending a great deal of money.

Conclusion of processes
Ms Moss asked when roles would be properly filled and all issues and matters resolved. People who were in acting positions could not stay in those positions for ever. Or else the situation would begin to mirror that of PANSALB.

Skills development
Ms Moss asked that the Committee be given the plan in terms of skills development within SAHRA. It was a pity this had not been done properly at the moment.

Turnaround strategy and structure
Ms Moss wanted to commend SAHRA on their turnaround strategy however she wanted to see how the structure would look once the strategy was fully in place.

Reconstruction and Development Programme
Mr Mavunda said that SAHRA seemed to be in line with the Reconstruction and Development Programme but he did not wish to elaborate on that. He saw a vast improvement within the entity however there was still more to be done.

SAHRA board members absence
The Chairperson said that board members had not been aware of the meeting until today and this signalled a problem to the Committee. This was embarrassing. The situation was such that it could seem like Dr Fikeni was ‘being a dictator’. She felt that these issues needed to highlighted.

Organogram
The Chairperson said that the Committee wanted to see the organogram.

Communication
The Chairperson said that the communication had improved drastically and the Committee received updates which was good.

Answers in writing and follow ups
The Chairperson said that there would be a follow up with SAHRA and requested answers to unanswered questions in writing as the House was starting earlier than normal

Dr Fikeni replied that it would be nice to have a full session with the Committee and take them through a number of issues.

The meeting was adjourned.