Auditor-General briefing on key issues in the Department and Entities' Strategic Plans and Budgets

Meeting report

Chairperson’s opening remarks
The Chairperson said that during the last conference, Members had discussed which conferences they wanted to attend with AGRI South Africa.  Because 46% of land in Mpumalanga had been identified as being of high value, this meant that it was also in danger of mineral exploitation. The Committee had also attended a conference in Sun City where the Animal Feed Manufacturers Association (AFMA) was the organiser. However, a concern had been raised about how the Department of Agriculture, Forestry and Fisheries (DAFF) had not communicated the details of the conference in time to the Members.  Fertilizers, feeds and legislation were matters which had to be aligned nationally. A conference for 24 April 2013, which was to be held by AFMA, was announced. Rural Development and Land Reform had also requested a joint session with the Committee on 18 April, on the reopening of land claims.

Committee Agenda
The Chairperson requested that Members spend a few minutes discussing the Committee agenda and making any changes deemed necessary before adoption.

Ms A Steyn (DA) said that Members would not be able to adopt outstanding minutes, as outlined in the agenda. They had not received any of the relevant documentation.

The Chairperson gave an assurance that the outstanding minutes would be handed out for Members to consider.

The agenda was adopted.

Draft Programme of the Portfolio Committee, second quarter, 2013
The Chairperson suggested that Members discuss the programme and make any relevant changes. He argued that the joint session requested by Rural Development and Land Reform be allocated a spot in the programme as a matter of urgency. The matter had already been handed over to the Speaker’s office. Another urgent matter was that of fertilizers.

Mr L Gaehler (UDM) referred to the 21 May item on the agenda, which dealt with an investigation into the Ncera Farms (Pty) Ltd. An argument was made that stakeholders needed to be present in the meeting.

Ms M Pilusa-Mosoane (ANC) added that the matter of the Ncera Farms was one which needed the Committees’ attention as a matter of priority.

Mr S Abram (ANC) asked why the meeting on the Ncera Farms was a closed meeting. It was public knowledge that Ncera Farms were under discussion within Parliament, so it made no sense to keep it closed from the public. Reference was also made to the game farming industry -- it was an important matter which needed to be discussed. The sector played a central role in tourism and in strengthening the farming and agriculture sector as a whole.

Mr L Van Dalen (DA) said that the draft policy on the allocation of fishing rights had been handed out to the relevant persons, but not to the Committee. Reference was made to the meeting scheduled with the Department on 14 May, and he asked whether the draft policy would be adopted without the Committee’s consent. A suggestion was also made that the Marine Living Resources Amendment Bill, which would influence the allocation of fishing rights, should also be included in the agenda as a matter of urgency. He argued that the National Development Plan and the Department’s Strategic Plan were in contradiction. The Department thus needed to be called in to discuss this contradiction.

Ms Steyn wondered whether the programme would later be amended to include allocations for oversight visits. The joint meeting with the provinces also needed to be allocated a slot for a meeting. The Department was asked to come back and report back to the Committee within six months on disaster funding and management. The matter was an important one, keeping in mind the droughts which were currently threatening the country.

Ms N Phaliso (ANC) suggested that the draft policy should also accommodate the Afrikaans-speaking people of the West Coast, who did not understand any other language. The forestry sector was also not in the programme, and a suggestion was made that the sector be called in to meet with the Committee to discuss issues such as transformation.  The date proposed for the meeting was 18 June, 2013.

Ms Pilusa-Mosoane said that the Ncera farms issue was a serious matter. A suggestion was that it also be included in the programme for 7 May, 2013.

The Chairperson noted all the concerns and suggestions.

Mr Abram said that the ostrich industry had already shed about 10 000 jobs, as about 50% of farmers had quit the industry. The industry was therefore in a crisis. The Committee needed to find some time to engage with the industry as a matter of urgency. The problem with the wool growers’ ramp project was also highlighted, and a suggestion was made that the Committee make contact with the Department in order to find out what the progress had been made.

The Chairperson responded that regarding the small-scale fisheries industry, he had received a call from the Deputy Director-General, indicating that the Department had forwarded a draft to the Committee. However the draft was currently in Parliament, and would be forwarded to the Committee in due course.

Mr Van Dalen added that the policy was not about small-scale fishing, but about a policy which would govern the rights allocations for fishing.

The Chairperson responded that a copy of that policy would have to be requested from the Department as well. He also highlighted the fact that at the conference in Pretoria, the Members had met up with Professor Nik Olivier, who was assigned by the University of Pretoria to work with the Department to review legislation. The aim was to take all legislation which the Department was working on, and review it. This would include the Marine Living Resources Fund. He suggested that the Committee programme be extended to include 19 and 20 June, 2013. These days would be used to include all matters which had not been previously accommodated. It was also noted that after 20 June, the Committee would be in  recess, so the Members might not have the time to conduct oversight visits.

Ms Steyn suggested that a day be set aside by the Committee to receive submissions, if oversight visits were not feasible anymore. This was necessary to extend information to rural areas.

The Chairperson responded that the proposal to extend the programme for two days was not in order to include discussions on the Bill. The process of the Bill would not be changing. On the Ncera farm issue, he said the reason why the meeting on  21 May was closed to the public was because there would be forensic investigations being discussed. These investigations would be discussing names of people, and so it would be premature to have the public present. Members were reminded that the decision had been taken earlier by the Committee Members themselves.

Mr Abram suggested that the starting time for the meeting be moved earlier to 09h00. The matters concerning Ncera farms and National Emergent Red Meat Producers’ Organisation (NERPO) could then be dealt with in one day.

The Chairperson responded that the Ncera farms matter should be given all the time it needed, as it was important.  The matter concerning the Forestry Charter Council also needed to be allocated a slot for a meeting.

Ms Phaliso responded that 19 June 2013 could be allocated for the meeting.

The Chairperson asked when an appropriate time would be to discuss the ostrich industry. He asked whether the natural disaster issues could not also be discussed at the same meeting with the ostrich industry, seeing that they covered similar issues.

Mr Abram responded that the ostrich industry had traditionally been the most important. It contributed to tourism and high levels of employment, especially for women. The fact that more than 10 000 jobs were being lost was a major concern. Government intervention so far had been limited.

Ms Phaliso said that there was an urgent need to address the ostrich industry. A suggestion was made that the 20 May 2013 be used to discuss the matter.

The Chairperson asked whether Fridays or Wednesdays could not be used to also discuss all outstanding issues.

Ms Pilusa-Mosoane responded that it would be very difficult to get Members to Friday meetings.

Ms Steyn proposed that Wednesdays be looked at to discuss all outstanding issues. The secretary was asked to add all the changes made by Members into the programme, and circulate it in due course.

The Chairperson said that on Tuesdays he attended strategic meetings at 08h30.

Mr Abram said that Members served on other Committees as well, which met on Wednesdays. He suggested that the Members start at 09h00 on Wednesdays and that the Chairperson attend when he returned from his meetings.

Briefing by the Auditor-General of South Africa (AGSA) on key issues in the Department’s and Entities’ Strategic Plans and Budgets
Mr Fanie Kok, Senior Manager, AGSA said that the purpose of the meeting was to brief the Portfolio Committee on the progress made by the Department from the previous audit cycle. The previous year’s audit outcomes indicated that the Department was financially unqualified, with findings.

The Department had five focus areas; Supply Chain Management, Predetermined Objectives, Human Resource Management, Information Technology Controls, and Material Errors in annual financial statements (AFS) submitted for audit. Of all the key areas, only Human Resource Management had improved from the previous year, even though there were causes for concern with regard to staff and the filling of vacancies. The National Agricultural Marketing Council (NAMC) had received a clean audit, and there was no need for any interventions. The Ncera Farm had also received a clean audit, the only area needing intervention being predetermined objectives, which had shown no improvement.

Mr Kok said there were a few areas which the Department needed to improve on in order to receive clean audit outcomes by 2014. These were referred to as ‘silver bullets’, and included: the lack of monitoring of compliance with laws and regulations; the lack of discipline for credible comprehensive monthly reporting; an Ineffective internal audit function; and a lack of skills and policies for pre-determined objectives.

The Committee therefore had the responsibility to oversee the Department to make sure that it met the targets set for the silver bullets.

Mr Kok said that the Department had developed action plans to tackle its short-comings.  However, the Auditor-General’s office noted that there were still problems with the monitoring and controlling of the plans. This had resulted in repeated findings.  The results of these repeated findings were: non-review of compliance with laws and regulations (this included HR matters, and supply chain management which resulted in fruitless expenditure); reported disclosure notes were incomplete; action plans were not sufficiently implemented; a lack of understanding of the principles of the Financial Management Performance Plan Information (FMPPI); and oversight responsibility regarding compliance and reporting not exercised.

More than 20% of the targets had not been achieved and material adjustments had been made to the annual performance reports submitted for audit. The usefulness of the 2012/13 Annual Performance Report was that performance information would be presented, using the National Treasury Annual reporting guidelines. The actual performance information in tables and narratives required that the annual report must be consistent. The reason for major variances between planned and actual performance must be explained and should be supported by collaborating evidence. However, a total of 44% of the indicators and targets as per the annual performance plan were not consistent with the indicators and targets as per the approved strategic plans, as required by the National Treasury Framework for strategic plans and annual performance plans.

A comparison was made between the 2012/13 and the 2013/14 budget. Programme 1, Administration increased by over R50 000; Programme 2, Agriculture Production, Health and Food and Safety increased by R174 497; Programme 3, Food Security and Agrarian Reform increased by R189 065; Programme 4, Trade Promotion and Market Access increased by R19 567; and Programme 5, Forestry decreased by R77 275 while Fisheries increased by R22 209.

The key issues in the Department’s budget were that of utilization in relation to service delivery. In 2011-12, DAFF did not achieve 51% of the planned targets per their strategic plan. However, 99% of the vote had been spent during the 2011/12 financial year, which required significant improvement to achieve more efficient service delivery. With regard to the reliability of the AoPO, the validity, accuracy and completeness of reported predetermined objectives could not be verified in 2011-12. With regard to the National Development Plan (NDP), the goal was to “realise a food trade surplus, with one-third produced by small-scale farmers or households.”  The Department’s strategic plan was to increase the number of smallholder producers accessing financial services through the Comprehensive Agriculture Support Programme (CASP) and the Micro Agricultural Financial Institutional Scheme of SA (Mafisa). The Department had a responsibility to ensure household food and nutrition security. This would be done through the Gazetted Paper (National Food Security Policy) and the implementation of the Zero Hunger Campaign.

Mr Kok said that with regard to ‘combined assurance’, the first level of assurance was that of management assurance. One branch of this was human resources capacity and productivity. This included the timeous filling of vacancies with the right skills, effective performance management and the maintenance of leadership stability. Attention to the credibility of management information was also a matter which needed management assurance. This dealt with the effective operations of daily controls, checks and balances, as well as with monthly reporting. The second and the third levels of assurance dealt with ‘oversight and audit’. This branch of combined assurance was about the effectiveness of assurance providers.

The assessment indicated that there was still work to be done to achieve clean administration.  However if focus was placed on the “silver bullets” and the way forward, it could be achieved. The key focus areas were highlighted as follows: Supply Chain Management (SCM); Predetermined Objectives (AoPO); Misstatements in AFS (completeness of disclosure notes); and capacitating internal audit.

A way forward was recommended as follows: adequate preparation of complete monthly audited financial statements, with full disclosure notes; preparation of monthly key controls by auditees; focussed quarterly key control assessments and discussions; action against transgressors (consequence management); and timely implementation of action plans to address root causes.

Discussion
The Chairperson asked about the mechanisms which needed to be in place to achieve targets.

Mr Kok responded that the targets from the previous financial year had not been dealt with or achieved, and 99% of the budget had been spent, while only 51% of the targets had been met. Explanations for such a discrepancy were necessary.

Mr Van Dalen asked about the influence the Minister had in making sure that the Department achieved its audit outcomes.

Ms Steyn asked about the role of the Committee in assisting the Department to achieve its targets.

Mr Gaehler said that the internal audit committees did not function well. He argued that people on the ground did not know about the workings of the Department. A question was asked about where the Department’s funds were being spent, seeing that the desired targets were not being achieved.  A concern was also raised about the fact that the Department had had an Acting Director-General for several years.

Ms Pilusa- Mosoane referred to the silver bullets and asked for an explanation on the internal audit function. She also asked for clarity on the root causes which had resulted in repeated findings when they had not been addressed.

Mr B Bhanga (COPE) referred to the silver bullets, and stated that these challenges were not new to the Department. He argued that it seemed as though the Department had reached a deadlock. Reference was also made to the failed oversight responsibility of the Department. He argued that the Minister had a huge responsibility to play in this regard. The fact that the Department did not have a functioning audit committee was also very disturbing. The Minister therefore needed to be called to appear before the Committee and give an account.  Concern was raised as well about the fact the Department had had an Acting Director-General for the past five years. He argued that the ANC Manifesto was failing the people in the Department.

Mr Abram agreed with Mr Bhanga that the Minister needed to be called in to account to the Committee. The country was experiencing high food shortages, while the Department was using its budget allocations for fruitless expenditure. He asked about the kind of interventions which were needed to curb the silver bullets, and also raised a concern about the non-functional audit committee within the Department.

Ms N Twala (ANC) questioned the Department’s commitment to achieving its targets. She also agreed with the previous Members that the Department needed to be called in to give an account to the Committee. The people on the ground were the ones who suffered the most from the Department’s inadequacies.   She used the phrase, “the stomach knows no politics”.

Ms Phaliso said that the ineffective audit committee needed to appear before the Committee, to account for their lack of concise monthly reports. She questioned whether the current reports presented to the Committee were even a true reflection of the work on the ground. Clarity was asked on the silver bullet: “skills and policies for pre-determined objectives are lacking”. Concern was also raised about how the Department spent its budget when more than half of its targets were not met. She suggested that the political parties which did not have manifestos, such as COPE, should not blame the ANC for the Department’s failure to achieve its targets.

Mr Bhanga called a point of order and said that what meant was that the country was run by the ANC, which had a manifesto to implement nationally. The Minister who was appointed by the ruling party therefore needed to be called in to give an account for the failures of the Department.

The Chairperson said that the majority of the responses from the Members were not addressing the office of the Auditor-General. Most of the concerns were addressed to the Department. However, the Department would be called in to respond to the Members at the appropriate time. It was clear that the Committee was concerned with food security in the country, specifically pertaining to small scale farming. Small scale farmers needed to be supported in order to increase food security, and needed to be assisted in becoming commercial farmers. An analysis of the past three years’ financial cycles was requested.   Fiscal dumping had been on the rise and needed due attention. Another concern was raised about agricultural trusts and their transformation. He asked whether they were being audited regularly. Was the Department was willing to have a department which encompassed fisheries?

Mr Kok responded that the issue of the Acting Director-General had been discussed by the Department and would be dealt with in due course. With regard to irregular and fruitless expenditure, there had been some improvement from the Department. And with regard to the silver bullets, the Department needed to come in and present what their plans were for improving the state of the Department. Vacancies also needed to be filled with the right people who possessed the right skills. The Committee had a responsibility to oversee the work of the Department to make sure that the targets set were met and that the silver bullets were reduced.  The Minister, as well as the Director-General, needed to be held accountable for oversight issues.  Management had shown an interest in improving the functioning of the Department and producing clean audit outcomes. The Department was also committed to empowering small scale farmers in an attempt to improve food security in the country.

Mr Van Dalen referred to the three-year graph presented and said that the Department’s performance over the years had declined, and not improved.

Mr Gaehler referred to the regression and also suggested that the Minister be called in to give an explanation on the matter, as well as to explain when the post of the Director-General would be permanently filled.

Mr Bhanga said that the interim report of the Department indicated that its performance was getting worse and not improving.  He also supported the notion that the Minister be called in to appear in front of the Committee.

Ms Steyn asked what the national plan for the Department was, so that it could be filtered down to the provinces. She also requested that the Department provide a breakdown of the staff which were employed and were fully qualified in the area. The proposal to call in the Minister was supported. Concern was raised about the predetermined objectives which were being moved from one year to the next without being achieved.

Ms Pilusa-Mosoane asked what the Department spent the budget on, seeing that most of its targets had not been achieved.

The Chairperson said that the Department was not outcomes-based and asked for an explanation for that. He also reiterated that most of the questions raised by the Members were directed at the Department and not to the office of the Auditor-General. He agreed that the Minister needed to be called in to appear before the Committee and account for the Department’s shortcomings.

Mr Kok responded that the Department had actually improved over the years in many respects, even though it still struggled to achieve 100% of its targets. He argued that the Committee needed to wait on the final audit report in order to get a better understanding of the status of the Department.

The Chairperson thanked the delegation from the office of the Auditor-General and reiterated that the Minister should be called in to appear before the Committee.

The meeting was adjourned.