National Youth Development Agency & Department of Performance Monitoring & Evaluation 3rd quarter 2012/13 performance; Auditor General on audit of predetermined objectives

Standing Committee on Appropriations

25 March 2013
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The National Youth Development Agency (NYDA) Third Quarter Report highlighted its Key Performance Areas (KPA) and gave a financial analysis of its budget and expenditure. The key performance areas were: Economic Participation - which gave a breakdown of numbers of young entrepreneurs and job created per province and equity distribution by gender and race; Education and Skills Development which indicated number of youths attending job programmes, and equity distribution; Policy and Research which highlighted strategic objectives, key indicators and third quarter targets, Partnership and Stakeholders Management, Communication and Youth Advisory Services. Other Key Performance Areas included National Youth Service and Social Cohesion which gave the number of youth participating in the Youth Month Proud To Serve campaign, Sport and Arts, Health and Well-being, Governance and Administration, and lastly, National Youth Fund which had to do with raising funds for South African youth. The NYDA Third Quarter financial report was summarised, providing management account expenditure and analysis, operational expenditure and overhead costs. The management expenditure analysis explained the services and programmes on which budget was spent. The project disbursements analysis was explained. The NYDA financial statements, which included equipment and intangible assets, receivable loan, cash and cash equivalents, were presented.

The Auditor General of South Africa (AGSA) presentation focused on what was an audit of predetermined objectives, which included annual mandatory audits and discretionary audits. Annual mandatory audits included a look at financial statements, a report on predetermined objectives and its compliance with laws and regulations. Discretionary audits included performance audits, for example on infrastructure. A comparison was made of the audit of predetermined objectives versus a performance audit. The AGSA combined model was described, which focused on management assurance, oversight assurance and independent assurance. The aim of AGSA was to achieve clean administration. A clean administration meant unqualified financial statements, no findings on predetermined objectives, and no findings about compliance with laws and regulations.  The AGSA's definition of audit of predetermined objectives was clearly defined, and the legislative framework regulating auditing was outlined. The audit of predetermined objectives focused on the alignment of performance to strategic plans which aimed at achieving accountability, achievement of set targets, and improvement in service delivery. The AGSA's strategy on the audit of predetermined objectives for 2004/5 to 2008/9, and 2009/10 to 2012/13 was summarised. Audit criteria, process and reporting were described.

The Department of Performance Monitoring and Evaluation (DPME) audit on predetermined objectives, particularly audit outcomes, were summarised. According to AGSA, the DPME did not meet its targets, and the root causes of that were explained. The National Youth Development Agency's audit outcomes were reported. The AGSA provided some recommendations and the way forward on these.

The Department of Performance Monitoring and Evaluation (DPME) focused on its expenditure for 2012/13, providing a breakdown of the adjusted budget for 2012/13.  Reasons for budget shifts and virements were explained, as well as under expenditure. A graph was provided explaining the number of posts filled. Expenditure for Goods and Services plus Capital Expenditure and reasons for delays in ICT infrastructure spending and evaluations spending. DPME was a new department, and as such, new units had no history and tended to over-estimate when budgeting. The DPME had settled and spending would thus occur more evenly throughout the year. Corrective measures had been introduced to address under-expenditure. DPME had introduced monthly budget and expenditure review meetings to ensure accurate budgeting and expenditure. From 2013/14, DPME expenditure should be within 2% of budget. The third quarter performance report for the four programmes presented statistics for those targets that were fully achieved, partially achieved and not achieved. Administration had 63.63% fully achieved; OME programme had 60%; M & E systems had 60% and PSO had 79%. Detail was provided about what targets had been only partially achieved or not achieved in each programme.

A DA member submitted a list of questions about the NYDA  youth conference that was held last year, but noted that the responses must all be submitted in writing, due to shortage of time and that those questions were not part of today’s agenda. Members asked a number of questions on the NYDA’s Key Performance Areas (KPA), particularly on economic participation of young people, job creation, rewriting of matric examinations, management of accounts, expenditure on seminar and training, travel and entertainment, international travels and other expenditures. Questions posed to the Auditor General South Africa included the internal audit, performance measures and agreements, job creation, and the budget process. The PDME was asked questions on vacant posts, specialist skills, the bargaining council resolution, number of targets met, shifting of funds, Management and Performance Assessment Tool (MPAT) enhancement and maintenance, and on norms and standards.
 

Meeting report

National youth Development Agency Third Quarter performance & financial analysis 2012/13 Mr Ramukumba Khathu, Chief Financial Officer, NYDA, apologised on behalf of NYDA CEO who was running late, and apologised for not sending the report on time. He said that the NYDA presentation was divided into two parts: the NYDA third quarter report which highlighted Key Performance Areas (KPA), and a financial analysis which highlighted budget and expenditure of the NYDA.

The key performance areas were:
▪ Economic Participation - which gave a breakdown of numbers of young entrepreneurs supported, number of new businesses created, value of business opportunities accessed, number of projects supported through the green economy, and jobs created per each province, with equity distribution by gender and race.
▪ Education and Skills Development which highlighted number of youth attended job programmes, number of young people enrolled in the NYDA matric (grade 12) rewrite programme, number of youth who received bursaries, number of youth attended technical skills training programme, number of youth attended life skill training programme,  and equity distribution.
▪ Policy and Research: number of youth development information and knowledge pieces generated by the NYDA resources, and number of youth development information and knowledge packed by NYDA and made available on different platforms for different stakeholders.
▪  Partnership and stakeholder management
▪ Communication and Youth Advisory Services provided number of youth received one on one career guidance sessions, number of NYDA beneficiary stories published and number of portal visits to the NYDA website.
▪ National Youth Service and Social Cohesion which highlighted number of young people enrolled in NYS NYDA projects, number of institutions registered, number of young people who participated in the Youth month commemoration event(s), and number of youth participation in the youth month proud to serve campaign.
▪ Sport and Arts highlighted the number of young people who participated in sports, arts and cultural NYDA activities.
▪ Health and Well-being highlighted the number of young people targeted to participate in healthy lifestyle programmes.
▪ Governance and Administration highlighted the number of NYDA local youth information dissemination and access points.
▪ National Youth Fund - raising funds for South African youth.

Mr Khathu discussed Third Quarter management account expenditure and analysis, indicating total expenditure year to date of R325 529 094. This included total project disbursements of R189 271 479 (58%), total operating costs R118 114 323 (37%), impairment: loans R15 840 307 (5%), impairment: debtors of 374 000 (0%), penalties and interest R613 764 (0%) and write-off of loans R424 742 (0%). An analysis of the operational expenditure and overhead costs to date indicated expenditure on telephones R784 941 (8%), security R803 927 (8%), office utilities and cleaning R2 818 791 (31%) and office rental R2 231 742 (25%) amongst others. The operating expenditure for administration costs indicated expenditure on travel and entertainment R9 943 065 (18%), administration R3 614 801 (6%), communication and PR 19 843 144 (35%), seminars and training R2 668 680 (5%) amongst other expenditure. A narrative was provided about operating expenditure for some items. The same analysis and narrative was provided for project disbursements. The NYDA presented the financial statements with a narrative included (see document for details).

Discussion
Mr M Swart (DA) handed a list of questions to NYDA about the conference held last year, and he requested the NYDA to respond in writing.

All Members agreed that they would like to have those answers in writing.

Mr Swart asked for clarity on the youth scholarship programme.

Ms R Mashigo (ANC) noted that she had problems with the document wording, and asked for clarity on KPA1 Economic Participation, particularly on job creation, and KPA 2 on rewriting of matric examinations.

Ms A Mfulo (ANC) wanted clarity on KPA1 providing financial support to young entrepreneurs, management accounts, operation expenditure analysis, over estimated budget, seminar and training, travel and entertainment, international travel, penalties and interest paid.

Mr G Snell (ANC) asked if the successful entrepreneur strategy had been implemented.
 
Mr J Gelderblom (ANC) asked if there was coordination between NYDA and National Treasury.

Mr Steven Ngubeni, CEO: NYDA, apologised for being late. He replied that Key Performance Area 1 on Economic Participation indicated strictly the number of young people who got help through various programmes, such as youth entrepreneurs, business consultancy services, non financial support interventions, as well as number of outreach activities which mostly targeted women, person with disabilities and youth in rural areas. NYDA had tried to reach out to all young people across nine provinces, both male and female. Some jobs had been created through economic development. Skills development and career guidance had taken place. The partnership between NYDA and other stakeholders had a positive impact as most young people had gained access to necessary resources and support.

Mr Khathu replied that an internal audit was undertaken, and challenges had been identified. The NYDA would address the challenges identified, and it would continue to support the youth.  The June 16 event formed part of the youth programme, and it had been celebrated every year. Risk management had been addressed, and the NYDA had taken serious measures to manage its activities, and the NYDA board had been established.

In concluding, the Chairperson noted that issues such as internal audit, the use of consultants, the templates for the budget needed to be given attention. He congratulated NYDA for establishing a board.
 
Auditor General on the audit of predetermined objectives
Mr Lourens van Vuuren, Business Executive, Auditor General South Africa (AGSA) started by comparing the differences between the mandatory audit of predetermined objectives which looks at performance information versus the discretionary performance audit. The audit of predetermined objectives reviewed and confirmed the validity and completeness of information. It gave annual assurance of the credibility of an auditee's reporting on their performance. On the other hand, a performance audit was a factual report on whether goods and services were acquired economically, applied efficiently and managed effectively towards achieving the desired goals. The performance audit included compliance with laws and regulations, reporting was factual and did not include an audit opinion, evaluation was done on the 3 Es (economy, efficiency and effectiveness).

 An annual mandatory clean audit means unqualified financial statements, no findings on predetermined objectives and no findings about compliance with laws and regulations. AGSA provided combined assurance: management assurance (senior management, accounting officers/authority and Executive authority), oversight assurance (coordinating/monitoring institutions, internal audit and audit committee)  and independent assurance which focused on oversight portfolio committees/council, public accounts committee and external audit. The aim of AGSA was to achieve clean administration.

AGSA's definition of an audit of predetermined objectives was defined as:
"An annual audit of reported actual performance against predetermined objectives, indicators and targets as contained in the annual performance report. An integral part of the annual regularity audit process, confirming the compliance with laws and regulations, usefulness of performance reporting and reliability of performance reporting".

Mr van Vuuren explained the legislative framework regulating auditing which included the Public Audit Act.  The audit of predetermined objectives focused on the alignment of performance to strategic plans to achieve accountability, the set targets and improved service delivery. AGSA explained why the audit of predetermined objectives was necessary.

Mr van Vuuren summarised the AGSA's strategy for the audit of predetermined objectives for 2004/5 to 2008/9, plus 2009/10 to 2012/13 was summarised. From 204/05 to 2008/09, AGSA adopted a phased-in approach to audit findings reported in the Management Letter and Audit Report. There was regular interaction with stakeholders to test their approach, and provided inputs to drafting of NT frameworks. From 2009/10 to 2012/13, the AGSA completed the phased-in audit approach.

The Department of Performance Monitoring and Evaluation (DPME) audit of predetermined objectives, particularly its audit outcomes, were summarised. The DPME did not meet its targets, and the root causes (which included lack of monitoring and oversight over PSO processes, lack of understanding of the principles of the Framework for Managing Programme Performance Information: FMPPI) were explained. The National Youth Development Agency's audit outcomes were reported. AGSA provided some recommendations and the way forward, which included exercising oversight responsibility, development of an action plan, training and development, clearly defined roles and responsibilities, and continuous monitoring and reporting of performance.

Discussion
Mr J Gelderblom (ANC) noted that an unqualified report did not necessarily mean a clean report. He asked if there was any progress in training and management of staff.

Mr G Snell (ANC) wanted clarity on performance measures and agreement. He noted that he was not sure about norms and standards. He then asked how it was going to be applied, and how much budget DPME would request.

Ms A Mfulo (ANC) noted that some people had been saying jobs were not created, and she asked if AGSA had helped in job creation. She wanted some clarity on the internal audit.

Mr van Vuuren replied that more detailed findings were in the Audit Report, and AGSA wrote a Management Report to the management of departments. There had been progress in training and management of staff. Different entities would have different job creation systems. AGSA had a good IT system in place that helped in performing its auditing and reporting duties. AGSA audit findings focused on the validity, accuracy and completeness of reported performance information. There had to be compliance with regulatory requirements. Continued monitoring and reporting of departments would always be important, and there had to be standard operating procedures.

Department of Performance Monitoring & Evaluation (DPME) 3rd quarter 2012/13 expenditure
Mr Sean Philips, Director General, Department of Performance Monitoring & Evaluation (DPME), noted that the third quarter expenditure report highlighted how expenditure was going to look like for the whole of the 2012/13 financial year. The overall budget was described, according to economic classifications such as compensation, goods and services and capital assets for each of DPME’s four programmes: Administration, Outcomes Monitoring and Evaluation (OME), M&E Systems, and Public Sector Oversight (PSO). Reasons for budget shifts and virements were described, noting that all virements were done within the 8% limit for virement in terms of section 43(2) of the PFMA. There was saving on compensation due to, amongst other reasons, delay in implementation of the Bargaining Council resolution regarding salary levels 9/10 and 11/12, difficulties in finding suitable candidates for some specialist positions leading to recruitment processes taking longer than planned, and delay in implementation of HoD assessment programmes. Savings from compensation moved to Goods and Services, largely to fund evaluations in terms of the National Evaluation Plan under the OME branch. Savings from Presidential Hotline moved to Goods and Services.

Mr Philips explained the graph indicating monthly expenditure for 2012/13. The expenditure was from 5 000 to 35 000. A second graph showed overall expenditure for the year according to under-expenditure (2%), savings (2%), committed but delayed funds (6%), March 2013 projects (17%), January and February 2013 expenditure (18%), and expenditure of Quarter 1 to 3 (55%). There would be an increase in expenditure towards the end of financial year mainly due to late expenditure on IT equipment (as DPME was required to engage with the South African State Information Technology Agency, SITA, to plan its IT infrastructure), research projects and evaluations (as the 2012/13 national evaluation plan was approved only in June 2012. However, the 2013/14 national evaluation plan was already approved in November 2012 so expenditure on evaluations would be more evenly spread in 2013/14.

Mr Philips said that DPME projected that it would spend 90.7% of its overall budget for 2012/13. The 9.3% shortfall was broken as follows: 5.8%, R10.1 million contractually committed – orders had been issued but goods and services not yet received, 1.8%, R3.1 million – savings due to projects costing less than expected, and 1,6%, R2.8 million in under expenditure mainly due to under expenditure on compensation.

The DPME reported the number of filled funded posts for 2012/13: 137 posts were filled by 31 March 2012, new posts were created in July 2012, 24 vacancies remained and 5 new employees would start in April 2013. All remaining vacant posts had been advertised and were in the process of being filled.

Mr Philips described the expenditure on goods and services, noting that the Hotline was transferred to DPME from the Office of the Presidency on 1 October 2011. For 2012/13, DPME had requested additional funds for the Hotline for additional call centre capacity and increased services from SITA. The Department reported that actual SITA costs for increased call centre operators and increased services, and actual toll-free numbers costs had turned out lower than estimated, resulting in a saving of R2.9 million against budget. On Capital Expenditure, the DPME ICT infrastructure plan was agreed on with SITA in June 2012, procurement of hardware only started in July 2012, implementation of the ICT plan was on track for completion by March 2013. R4.3 million was unspent on ICT projects (R3.6 million of this was for orders that had been placed, but there were delays in delivery of the equipment; R0.7 million of this was due to delays in finalisation of PoA, MPAT and FSD systems. There was R1.3 million in savings on ICT projects due to equipment costing less than expected (see attached document for details).

Mr Phillips concluded that DPME was a new department, and as such, new units had no history and tended to over-estimate when budgeting. The DPME had settled into multi-year budgeting and expenditure planning, and it was now possible to start evaluation and research projects earlier in the year and spend more evenly throughout the year. Corrective measures had been introduced to address under-expenditure: DPME had introduced monthly budget and expenditure review meetings to ensure accurate budgeting and expenditure. From 2013/14, DPME expenditure would spread evenly over the year, and expenditure should be within 2% of budget.

DPME 3rd quarter 2012/13 target performance
Mr Sean Philips, DPME Director General, noted for each of the four programmes those targets that were fully achieved, partially achieved and not achieved. Administration had 63.63% fully achieved; OME programme had 60%; M & E systems had 60% and PSO had 79%. He went into detail about what targets had been only partially achieved or not achieved for each programme (see document).

Discussion
Mr S van Dyk (DA) wanted clarity on savings on compensation.

Mr N Singh (IFP) wanted clarity on specialist skills that the Department had just presented.

The Chairperson referred to the vacancies and asked where within the Department there was a lack of skills. He wanted some clarity on the bargaining council resolution, MPAT enhancement and maintenance, assessment of HoDs, on new policies, and on norms and standards on concurrent functions. He asked why the achievement rate for all targets was 60%.

Ms R Mashigo (ANC) asked about ambiguous targets and their impact. She suggested that there had to be uniform responsibility and accountability had to be in place.

Ms A Mfulo (ANC) asked if there would be no impact due to funds being shifted, and she asked if there would be any fruitless expenditure.

Mr Philip replied that DPME had hoped to fill the vacant posts soon. Some posts had been filled but it had taken longer than expected. The reason for that was that employees who terminated their employment left huge gaps within the Department. Added to that, the Department did not have a deliberate budget expenditure. The DPME was not involved in HoD assessment processes. HoD processes were done by the Public Service Commission. There had been a debate around norms and standards, and the agreement was that more work still needed to be done. There had been some financial implications. He replied that targets were set up ambiguously and the DPME had been strict on that. The DPME was generally on track. There had been clear positive and negative implications as a result of shifting of funds.

The Chairperson stressed that the presentations had to be sent to Members three days before the actual date of presentation. The issue of the use of private consultants had to be addressed as a matter of urgency. In concluding, the Committee would continuously engage the department in all matters and concerns raised in the meeting.

The meeting adjourned.

Appendix

NYDA admits to massive sponsorship
by Siyabonga Mkhwanazi : The New Age : Mar 26 2013


The National Youth Development Agency (NYDA) has confirmed in Parliament it sponsored a conference of the South African Youth Council (SAYC).

While NYDA CEO Steven Ngubeni would not say how much they had spent, reports have suggested the agency forked out R2.4m.

DA MP Marius Swart asked Ngubeni about the expenditure for the youth council conference when the NYDA appeared before Parliament’s standing committee on appropriations on Tuesday to report on their financial performance for the third quarter.

Ngubeni told MPs he was prepared to respond to questions, however Swart said he must respond in writing.

Opposition parties have slammed the NYDA for spending the said R2.4m on the conference.

Ngubeni said the SAYC was a body for all political youth formations in the country. He confirmed to MPs they had funded the council’s conference.

“The conference was a triennial of the general assembly of the South African Youth Council. The SAYC is a non-governmental organisation made up of youth formations including the DA youth, the ANC Youth League and the South African Students Congress. We sponsored the conference,” Ngubeni said.

Before he could give details Swart said he would prefer that he respond in writing at a later stage.

However, the chairperson of the standing committee, Mshiyeni Sogoni, said he would prefer Ngubeni to provide answers at the meeting because he was prepared to do so.

But Swart said he had detailed questions and it would be better to get the answers in writing.

Following deliberations it was agreed that the NYDA would respond to the questions during a workshop with the committee in the next few weeks.

Sogoni said this would make sense because there would be a new board at the workshop. President Jacob Zuma approved the appointment of the new board last week Friday and named Young Communist League national chairperson Yershen Pillay as the new NYDA chairperson.

ANC North West provincial spokesperson Kenny Morolong is Pillay’s deputy.

The other board members include IFP Youth Brigade deputy leader Zandile Majozi, ANCYL national executive committee member Maropene Ntuli, former Sasco leader Xoliswa Bambiso, ANC member Mothupi Modiba and Nyalleng Potloane.
 

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