Department of Women, Children & People with Disabilities; Commission on Gender Equality 2013 performance: Auditor General, Financial & Fiscal Commission, Committee Researchers inputs

Meeting report

Mr Lourens Van Vuuren, AGSA Business Executive, presented the 2012/13 audit outcomes of the Department of Women, Children and People with Disabilities (DWCPD) and the Commission for Gender Equality. There was no movement from the audit outcomes when compared to the prior year. Although the DWCP received an unqualified audit opinion with findings, the number of non-compliance matters with laws and regulations coupled with significant deficiencies in Internal Controls had been flagged as qualification issues. The key focus areas were:

Supply Chain Management
The DWCPD had the following findings. Goods and services with a transaction value below R500 000 were procured without obtaining the required price quotations, as required by the Treasury Regulation. Contracts were awarded to certain suppliers whose tax matters had not been declared by the South Africa Revenue Service to be in order as required by the Treasury Regulation. The accounting authority did not take effective steps to prevent irregular expenditure as per the requirements of section 38(1)(c)(ii) of the Public Finance Management Act (PFMA). The root causes identified by the AGSA found that there were inadequate procedures and processes in place to ensure that the documents required in terms of the applicable legislation had been obtained before contracts were awarded to prospective suppliers and the lacks of adequate oversight to ensure that personnel comply with the Treasury Regulations and PFMA. AGSA recommended that management within the Department ensure that procedure and processes in place were adequate to ensure expenditure compliance with relevant legislation, and appropriate action needed to be taken against the appropriate officials.

The Commission for Gender Equality had similar findings. Contracts were awarded to certain suppliers whose tax matters had not been declared by the South African Revenue Service as required by the Treasury Regulation. The preference point system was not applied in the procurement of goods and services above R30 000 as required. The root cause in this case was that leadership did not adequately establish and communicate policies and procedures to enable execution of internal control responsibilities. AGSA recommendations were that appropriate disciplinary steps should be taken against officials who made or permitted irregular expenditure. On a monthly basis the procurement officer should prepare a list of expenses which may constitute irregular expenditure, and the Chief Financial Officer (CFO) and accounting officer should review the report and take immediate corrective actions, to create a culture of compliance. The performance of the procurement management unit needed to be assessed under the supervision of the accounting officer and the CFO on a monthly basis to determine if there was any non-compliance with Supply Chain Management (SCM) legislation and SCM internal policy and corrective actions should be immediately taken.

Predetermined Objectives
The DWCPD had the following findings: Of the 119 planned targets, 36 targets were not achieved during the year under review. This represented 30% of the total planned targets that were not achieved. The root cause was found to be that indicators and targets were not suitably developed during the strategic planning process. AGSA recommended that progress needed to be continuously monitored and actions needed to be taken where indicators of non-achievement were present.

The Commission for Gender Equality had similar outcomes with its predetermined objectives: Of the 43 planned targets, 11 targets were not achieved during the year under review. This represented 26% of the total planned targets that were not achieved. The root cause was found to be that the constitutional entity did not adequately monitor performance against predetermined targets on an ongoing basis to take appropriate steps timeously in ensuring achievement of targets. The AGSA recommended that CGE needed to adequately monitor performance against predetermined targets.

Human Resources Management
The DWCPD had the following findings: The accounting officer did not ensure that all leave taken by employees were recorded accurately and in full as required by Public Service Regulation. The root cause was the lack of monitoring controls in place to ensure adherence to this requirement. AGSA recommended monthly reconciliation between approved manual leave forms and Persal and frequent checks.

Information Technology Controls
The DWCPD had the following findings: Information and Technology (IT) management had not formally designed IT governance controls to mitigate the risk of misalignment with business strategic controls. IT management had not formally designed security management controls to mitigate the risk of unauthorised access to the network and information systems. Informal controls were in place, but were inadequate. IT management had designed user access controls, which had been documented and approved, but the controls were not adequate as they did not fully address/mitigate key risks and IT management had not formally designed IT service continuity controls as the Disaster Recovery Plan (DRP) which was still in draft and awaiting approval.

The root causes identified were the inadequate IT personnel and personnel operating in positions where they lacked the required competency levels due to vacant positions on the IT department structure. Failure by management to document policies and procedures to guide and monitor the activities of users, and the lack of oversight responsibility on IT matter due to unclear definition of IT governance roles and responsibilities.

The AGSA recommended that the Department Government of Information Technology Officer (GITO) needed to review and approve the draft IT Strategy Plan and provide guidelines on how the IT function would monitor the business impact of the IT infrastructure and the deployment and use of it. An IT steering committee needed to be appointed by the Chief Financial Officer, once appointed, the IT manager needed to exercise oversight over the IT Steering Committee and schedule and convene meetings to discuss IT related issues. The Director General should, together with senior management, ensure that the DRP was up to date and relevant to the current I environment that it operated in. The plan needed to be approved and implemented. These controls needed to be implemented by 31 December 2013.

The Commission for Gender Equality had similar findings. The lack of an IT governance framework was due to the Commission not prioritising the establishment of a designed IT governance framework, inadequately designed strategic plan, inadequate implementation of service level management, and lack of user account management. ICT management had not formally designed IT service continuity controls such as the Disaster Recovery Plan (DRP) and Backup procedures. Informal controls were in place, but were inadequate as regular backups were not verified for successful completion and tested for restorability. The root causes noted were the lack of IT governance framework due to the Committee not prioritising the establishment of a formal IT governance framework and actions plans were inadequate to address PY matters reported. ASGA recommended that compliance with processors should be monitored and IT should be seen as a priority by leadership of CGE.

Material errors/omissions submitted in (Annual Financial Statements) AFS
The DWCPD had the following findings The financial statements submitted for auditing were not fully prepared in all material respects in accordance with the prescribed financial framework as required by the PFMA. Material misstatements identified by the auditors in the submitted financial statements were corrected, resulting in the financial statements receiving an unqualified audit opinion. The root cause found that the Department had not established the daily and monthly controls to ensure complete and accurate financial statements. The AGSA recommended that management needed to ensure that AFSs were prepared regularly. AFSs needed to be reviewed by the governance structures and prepared adequately and supported by substantiating evidence to corroborate validity, accuracy and completeness. Submitted AFS needed to be the final set approved by the leadership and supported.

Financial Health Status
The AGSA noted that there were no matters to report on the financial health status

The AGSA noted that the DWCPD in 2012 had an unauthorised expenditure of R25 153 000 and 0 in 2013, the Commission for Gender Equality had an amount of R37 040 of fruitless and wasteful expenditure but 0 in 2013 and both Departments had amounts of irregular expenditure. The DWCPD had an irregular expenditure of R6 120 000 and the CGE had an irregular expenditure of R1 902 088.

It noted that the Portfolio Committee would monitor progress against the annual performance plan on a quarterly basis, track implementation of action plans to address previously identified issues by the AGSA on a quarterly basis and track the progress that internal audit was fully established and capacitated so that it could deliver against the internal audit plan.

Discussion
The Chairperson thanked the AGSA for its presentation. She said the Department was coming from the worst times in terms of it performance. Its lack of qualification was an indication that it was gradually moving away from compliance. If the Internal Audit function of the Department was not functioning properly, it meant its audit committee was out of work, which the Department needed to take note of. She said it was important for the Department to provide the Committee with monthly statements which would not only benefit the Committee in being able to track errors and employ corrective measures, but it would also benefit the Department in enabling it to work on its issues.

Ms L Van de Merwe (IFP) said it was right to note that there had been improvements within the Department. On the issue of Supply Chain Management, she said the Department had launched a Turnaround Strategy to address said challenges, but it was safe to say that the Turnaround Strategy had not achieved its desired outcome. She asked why the issues of unfilled vacancies were not flagged by the AGSA.

Ms H Lamoela (DA) said the vacancy rates had an impact on the workings of the Department. She said the unviability of the Departments Internal Audit group was its lack of capacity which the Committee had continuously asked the Department to seek solutions for and rectify, the same recommendations kept resurfacing and the Department continuously failed to comply. She asked about a Departmental donor funding audit since the CFO had said there were no records indicating the list of donors supporting the Department. Also, last year there was an amount of R25 m being paid to four officials and 14 performance bonuses, when the Minister was asked to comment on the matter, the Committee was told it was a printing error but the correct figures were never received.

Mr Van Vuuren responded that overall there was improvement in the Department. Non-compliance had improved and the current outstanding issues had to deal with Internal Audit and Supply Chain Management. The unfilled vacancy rates had a direct impact on service delivery and day to day control mechanisms. He said the lack of donor records was more of a records management issue, it was important that proper record keeping became prioritised as part of management policy, for the 2012/13 the Department did not receive significant donor funding but they did receive some donations. He said the question of irregular expenditure would be better answered by the Department, it was a requirement by the PFMA for Departments to disclose any financial information even if the funds were under investigation. He said printing errors did sometimes occur but he was not aware of the particular incident mentioned by Ms Lamoela but he would follow up on it and get back to the committee.

Financial and Fiscal Commission (FFC) on DWCPD spending patterns and its recommendations
Mr David Savage, FFC Commissioner, introduced the briefing. The FFC had received a request to present on some of the spending patterns of the Department. The key question to ask were what, why and when, when assessing the Department and recommending solutions on what it should look towards achieving. He apologised on behalf of the FFCs other Commissioners who were unable to make it.

Mr Ghalieb Dawood, Program Manager of the Financial and Fiscal Commission presented the financial and non-financial performance and spending trends of the DWCPD. Mr Dawood gave an overview of the Progression of Programme spending and MTEF budget and noted that average Departmental spending had increased by 31% in real terms in 2012/13, compared to 1.78% over the Medium Term Expenditure Framework (MTEF) period. The major cost drivers for the Department for the period of 2009/10 – 2012/13 was administration. Administration was also the major cost driver over the MTEF period with funds allocated to improve efficiency in supply chain and finance functions.

Mr Dawood gave a brief overview of the prioritisation of spending and MTEF budget and noted that Administration and Women Empowerment were prioritised over the MTEF period, while Children’s Rights and People with Disabilities declined marginally over the same period. Despite relative fall in share, Women Empowerment was the largest service delivery program at 42%, over the MTEF period, mainly from transfer payments to the Commission on Gender Equality which comprised 78% of the program expenditure in 2012/13. The FFC noted that the Department should look into re-examining the merits for keeping the Children’s Rights and Disabilities as two separate programmes on its budget, since the staff complement for each programme was relatively small and the functional assignment within each programme was also the same.

In regards to the progression of line item spending and MTEF estimates, the FFC noted that the Cost of Equity (CoE) increased by 34% in 2012/13 and would increase by 5.8% per annum (p.a.) in real terms over the MTEF period. The increases were to build capacity in finance and supply chain, improve conditions of services and fill critical posts in line function programmes. Goods and services increased by 47.8% p.a in real terms between 2009/10 – 2012/13, but declined over the MTEF by –1.1% p.a. The major cost drivers were travel especially foreign travel expenses and subsistence, property payments, venues and facilities. Transfer to the Commission for Gender Equality increased in real terms by 1% over the MTEF period for improved conditions of service. Some of the Department’s expenditure figures in the Estimates of National Expenditure (ENE) did not reconcile with recorded amounts in the AFS.

Mr Dawood gave a brief overview of the line item share of total expenditure and MTEF budget and noted that the decline in the share of transfers and subsidies between 2009/10 – 2012/13 was offset by an increase in share of CoE goods and services as the department moved from being a unit within the Presidency to becoming a stand-alone department. Over the MTEF period, this trend evened out with transfers and subsidies the second largest line item at 31% over the MTEF period. Over the MTEF, the share of goods and services declined whilst the share of CoE increased as the department relocated resources away from non-core spending items to building capacity within the department.

The FFC noted that the in-year pattern for the department had improved considerably in 2012/13 compared to 2011/12 and 2010/11 where erratic spending disbursements most likely compromised the department’s cash management process. The more consistent pattern observed in 2012/13 could be a result of better cash flow planning; although a small spike in spending was still observed in March 2012/13.

In 2012/13, the DWCPD was able to achieve 69.2% of its targets based on its four main programmes. DWCPD spent 93.3% of its total budget (R192.9 m) in 2012/13 which included a transfer amount of R59.1 for Gender Commission. Underexpenditure was mainly due to additional earmarked funding that was allocated to fill critical posts and rental payment for additional office space. DWCPD underspent on all its programmes, especially on the Children's Rights and Responsibilities (CRR) programme (70.7%) with no reasons cited for the programmes large under expenditure.

Unauthorised expenditure in 2011/12 amounted to R25.1 m which was not yet condoned but in 2012/13 the DWCPD did not incur any unauthorised expenditure. An amount of R35.5 m of irregular expenditure had been recorded in 2011/12 with no reasons cited by the DWCPD, currently investigations were underway regarding the R6.1 m irregular expenditure incurred in the 2012/13 financial year.

Mr Savage briefed the Committee on the FFC recommendations. It noted that the funding for non-governmental agencies providing child welfare services had declined markedly because the donor community was less inclined to fund statutory services and lower private donations because of the economic slowdown. With limited funding for children services available, funding for non-statutory services like Early Childhood Development (ECD) may be delivered to fund statutory services which were justifiable. Provinces had not been able to implement a needs analysis for children services as required by the Children’s Act. This has led to a lack of information on backlogs and to a lesser extent, existing service provision needs, resulting in some children services not being adequately provided for. Key programmatic child welfare indicators and targets were not reported by provinces in a consistent way. Some indicators were also of poor quality and were not specific, it was therefore difficult to monitor the implementation of child welfare services and to hold departments and Non-Profit Organisations (NOPs) accountable.

Therefore National and Provincial spheres of government and NPOs should:
▪ reach an agreement on the funding principles to improve transparency in the grant system
▪ other sources of funding for child welfare services should be identified to ease existing funding pressures
▪ funding allocated to statutory and non▪ statutory services such as ECD should be carefully balanced, through it prioritisation framework that recognises the importance of both services to children’s well being
▪ provinces needed to conduct an updated needs analysis of child welfare services to inform short and long term service planning, budgeting and monitoring and evaluation
▪ the national sphere should standardise a limited number of indicators that the sector departments and NPOs must report on. It should build a capacity within provincial departments to monitor, support and enhance the delivery capacity of NPOs, especially emerging ones.
▪ One system for reporting and monitoring indicators should be introduced, a simple to use system which could be applied in all the provinces.

Discussion
The Chairperson thanked the FFC for its presentation and stated that the R25 million addressed by Ms Lamoela needed to be addressed by the Department. She asked the FFC what it would suggest about the non-compliance of government departments on hiring 2% of its workforce as persons with disabilities. She asked who was responsible for Scholar Transport.

Ms Van der Merwe thanked the Department for its presentation and said the state seemed to be expecting Non-Governmental Organisations and Non-Profit Organisations to work on their behalf. It was important to bring all stakeholders together and fight for adequate funding. She noted that the travel expense budget for the Department was quite excessive for a Department with a small budget.

Ms Lamoela asked if the Department was expected to pay property rates.

Mr Savage said it was important to differentiate strategy services and non-strategy services. Strategy services create an obligation on the state to provide and intervene, and when it cannot provide those services NGO’s and NPO’s provide on behalf of the state. Non-strategy services was where the contestation needed to be resolved. There was a need to find ways to determine what non-strategy services government needed to invest in, and how such would provide returns for public sector especially for women and children. Many institutions did not have the public good at heart therefore he would be cautious but optimistic on what constituted a non-strategy service. On the issue of property rates he said the Department would be better equipped to answer that particular inquiry, and on the issue of increased spending on administration due to travelling it was important to note whether Departmental oversea trips had any returns for the citizens in the country.

If the Committee wanted hard data it would be conceivable to ask the HR and Gender commission to provide such information. Reaching the 2% target was a problem, a paradigm change was required on how Departments accounted for delivering against the 2% or not. It would be beneficial to ask Departments to sit and think about implementing hard targets over the next 1-2 years in order to reach the 2% target. On the issue of the Scholar Transport he said the FFC did a project and it would be able to make the recommendation it made on behalf of the scholar transport available to the Committee

Analysis of Annual Report of Department of Women, Children and People with Disabilities 2012/13
Ms Crystal Levendale, Committee Researcher, presented a brief overview of the analysis of the Annual Report for DWCPD and noted that there was a difference in the strategic goals/objectives presented in the strategic plan and those reflected in the Annual Report. The operating environment of the Department had been identified as one of the overarching issues impacting its ability to meet its targets. Among these were human resources constraints and a lack of effective governance systems. DWCPD had a total of 188 approved posts of which 102 were filled during the period under review. The 2012/13 Annual Report indicated that the Department had an average vacancy rate of 15.8% of funded posts and that 29% of the establishment remained unfunded due to budgetary constraints. There was a ratio of 2.6:1 between support and core functions, for every 1 person in the core programmes, there were 2.6 persons in the administrative programme. In terms of staff turnover, a total of 19 persons had left the department in 2012/13 through either resignations or transfers to other departments. Under governance the department reported that it was able to improve corporate governance by reducing non-compliance with the PFMA, and an internal audit unit was established in July 2012. However, this unit experienced capacity constraints which in turn had impacted on the information and assurance reports submitted to the Audit Committee.

Mr Lorenzo Wakefield, Committee Researcher, presented the financial performance and noted that the Department’s final appropriation for the 2012/13 financial year was R192 849 m, of which it spent R179 889 as of 31 March 2013, leaving the Department with R12 960 million in under expenditure. The overall financial reporting system of the Department had improved based on previous years’ Annual Reports, however it was critical for DWCPD to spend the entire allocation of its budget as much as possible. The total amount of donor funding received by the Department was R3 541 m. It was important for the Department to provide an accurate breakdown of the donor funding received for each programme and justify its reasons for receiving donor funding when it failed to spend all of the money allocated to it by Treasury.

DWCPD incurred irregular expenditure to the value of R6 120m, and inherited an overall debt of R3 m. Overall the AGSA gave the Department an unqualified audit for the financial year which was progress in relation to previous audits.

Ms Levendale briefed the Committee on the Departments Programme Performance and noted that its Administrative Programme had not achieved three of its targets:
- it failed to implement in year monitoring mechanisms
- it failed to achieve compliance on policies and prescripts and financial internal control mechanisms and failed to develop a functioning M&E system
- no employee assistance programme had been developed
- the implementation of the ICT governance framework had not yet been achieved.

Programme 2: Women’s Empowerment and Gender Equality
The Department failed to achieve three of its targets:
- a net growth path engendered which advocated for 50% allocation of Job Fund for women was not achieved during this fiscal year.
- it failed to develop 12 gender audit reports
- failed to develop 5 reports on compliance to National Commitments.

Mr Wakefield gave a briefing on Programme 3:

Programme 3: Children’s Rights and Responsibilities
The Department was unable to achieve one of its targets:
- It failed to develop a child friendly cities/communities model and develop an institutional framework for children.

Programme 4: The Rights of People with Disabilities
The Department was unable to achieve two of its targets. In order to achieve Programme 4, three sub programmes were implemented.

- Objective 1: Advocacy and Mainstreaming, where the Department was unable to achieve three of the targets it set out for itself under said sub programme.
- Objective 2: Institutional Support and Capacity building, four targets weres unable to be met
- Objective 3: Monitoring and Evaluation, where DWCPD had three targets which it was unable to meet.

In conclusion it was noted that the Annual Report for 2012/13 was generally an improved document in relation to previous Annual Reports. However the challenges in the performance of the Department, should be given attention, especially in relation to Programmes 1 and 4 of the Department.

Discussion
Ms Van der Merwe said it was disconcerting that the Department was looking after people with disabilities yet the Department employed insufficient people with a disability.

Ms Lamoela said employment equity in the Department was not right, non- racialism was important. She noticed that there were no performance bonuses but there were huge salary increases. She wanted clarification on the packages of the people that were dismissed.

The Chairperson said Members should ask all remaining questions to the Department the following day.

The meeting was adjourned.