South African Social Security Agency on its 2012/13 Annual Report

Social Development

21 October 2013
Chairperson: Ms Y Botha (ANC)
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Meeting Summary

The Committee heard that the year under review was both challenging and exciting for the South African Social Security Agency (SASSA) which continued on its path of improving the lives of the poor and vulnerable. The financial statements were credible and the SASSA had for the first time in a while been able to achieve this without outside assistance. A few outcomes had been achieved as well. At the end of the financial year, a total of 16 106 110 grant payments had been+ made. A decision was taken to slow down on some of the planned targets such as the reviews and to concentrate resources on re-registration. At 4.45%, the Old Age Grant had shown a more than normal growth rate (of 2%) year-on-year and the number of Disability Grants decreased due to improved management and more stringent screening. The re-registration project was the largest data integrity and beneficiary authentication project ever, and it entailed mass re-registration of existing beneficiaries, children receiving grants and procurators. The overall objective was to re-register 22 million beneficiaries. This resulted in voluntary cancelling of over 150 000 social grants, leading to a saving of R150 million. The re-registration project saw 8000 jobs created, of which 3000 were permanent.

SASSA continued to implement its zero tolerance approach to fraud and corruption. During the 2012/13 financial year, a total of 7 734 fraud/corruption cases were registered. Of these, 2 747 cases were finalised with a monetary value of R59 million. Successes included the arrest of 50 individuals in the Mahlabathini area (KZN), who were found to be in possession of 127 unregistered SASSA cards, 3 Cash Paymaster Services (CPS) registration machines and R47 000 in cash. The total amount of litigation costs was just over R10 million. The amount included costs incurred in respect of the matters which were dealt with in the previous financial years.

Members commented they were impressed with some of the programmes particularly, the Integrated Community Registration Outreach Programme (ICROP). They were also impressed with the amount of work SASSA was putting in. Clarity was sought on how the targets were correctly aligned to the Annual Performance Plan and what the issue was regarding ATMs and bank charges. Members asked if the matter of the SASSA card deductions by micro-finance companies could be clarified, and if there was some sort of legislation that would regulate the issue of deductions by the banks. Members wanted to know if there were plans to ensure fully functional regional offices in all provinces.
 

Meeting report

Opening remarks
The Chairperson welcomed the delegation from South African Social Security Agency (SASSA). There were apologies from the DG and the Minister who both attended the Forum for Older Persons Annual General Meeting (AGM.

SASSA presentation
Ms Virginia Petersen, SASSA Chief Executive Officer, said the year was the most challenging for the Agency but also exciting. The financial statements were credible and the Agency had for the first time in a while been able to achieve this without outside assistance. Whilst a company was contracted since 2009 the Agency only managed disclaimers. The purpose of the presentation was to reflect on some key administrative challenges facing the Agency, but also report on the Annual Report.

SASSA in some parts still operated "as a department" and that needed to be looked at. Some adjustments were required in the SASSA Act to address the autonomy in how the Agency conducted its business. The Agency should, for an example, be able to lease directly and not involve the Department of Public Works (DPW). The vision of the entity remained the provision of quality social services.

During the period under review SASSA continued on its path of improving the lives of the poor and vulnerable. At the end of the financial year, a total of 16 106 110 grant payments were made. The Agency embarked on a re-registration project during the financial year. A decision was taken to slow down on some of the planned targets in the Agency such as the reviews and to concentrate the available resources on re-registration and as a result the Agency achieved 69% of its annual targets.

The War Veteran Grants, Disability Grants and Foster Child Grants attrition rates and the effective review of these were discussed. At 4.45%, Old Age Grant had shown a more than normal growth rate of 2% year-on-year. This was due to the increase in the threshold criteria for the means test, which resulted in many beneficiaries coming into the system. The number of Disability Grants decreased due to improved management of temporary disability and more stringent screening and assessment of permanent disability. Grant-in-Aid had increased due to improved awareness campaigns.

Improvement in the turnaround times meant 91% of all new applications were processed within 21 days. The focus was on full implementation of the standardised 4-step process for social grant applications. Full standardisation had been implemented in all local offices, except in three offices, which are still undergoing renovations as part of the Local Office Improvement Project.

The re-registration project was the largest data integrity and beneficiary authentication project ever, and it entailed mass re-registration of existing beneficiaries, children receiving grants and procurators. The overall objective was to re-register 22 million beneficiaries, recipients and procurators. A total of 18.9 million people had since been re-registered onto the new system. This resulted in voluntary cancelling of over 150 000 social grants, leading to a saving of R150 million. The re-registration project saw 8000 jobs created, 3 000 of those resulted in permanent employment.

A SASSA smart payment card underwritten by Grindrod Bank, endorsed by MasterCard was issued to more than 10 million social grants recipients. The card contained both pin and biometric capability and, thus, recipients could use it to access payment anywhere. The current payment system had absorbed the previously unbanked beneficiaries and incorporated them into the banking community. Beneficiaries have also used the increased payment channels to access their social grants within the first seven calendar days of the month.

The Integrated Community Registration Outreach Programme (ICROP) was established to improve access and equity in services to beneficiaries in rural areas. The success of ICROP was attributable to partnerships with government departments, non-governmental organisations, faith-based organisations, traditional leaders and ward councillors. ICROP targeted 40 poverty wards for the provision of social assistance. The target was met and surpassed as 390 poverty wards benefited through special ICROP requests. A total of 61 110 beneficiaries in 430 wards had access to social assistance through ICROP. The target of 60 000 beneficiaries for the period under review was exceeded. The Agency sought to achieve a fully automated system through a fully secured, integrated and automated end-to-end system in order to improve the administration of the social assistance programme by 2016. In line with this, the Agency established a baseline of the Agency’s as-is environment and developed an ICT vision that supported its strategic objectives.

SASSA continued to implement its zero tolerance approach to fraud and corruption, and for the year 78% of fraud cases were investigated, with 98% of suspicious grants verified. The focus shifted from beneficiaries to own staff members who colluded with beneficiaries and crime syndicates to defraud the system. Efforts to clamp down on syndicates in specific regions, resulted in the arrest and conviction of 10 current Agency officials, 3 former Agency officials and 15 agents. Nationally, 52 of the Agency’s officials were suspended from duty, 25 had been dismissed and 7 resigned prior to the completion of their disciplinary cases.

During the 2012/13 financial year, a total of 7 734 fraud/corruption cases were registered; 2 747 cases were finalised with a monetary value of R59 million; 1 272 cases were closed; and 3 715 cases are still in progress. The monetary value related to cases finalised amount to R59 million. Other successes included the arrest of 50 individuals in the Mahlabathini area (KZN), who were found to be in possession of 127 unregistered SASSA cards, 3 CPS registration machines and R47 000 in cash. Five of these suspects remained in custody.

The legal risks that the Agency was exposed to significantly decreased, and the total number of litigation cases decreased from 249 the previous year to 89 in 2012/13. The total amount of litigation costs was just over R10 million. The amount included costs incurred in respect of the matters which were dealt with in the previous financial years.

One of the Agency’s priorities for the year under review was to improve its organisational capacity, particularly at service delivery. A total of 931 positions were filled to augment the capacity, especially in the core business. The Agency continued to implement various programmes as part of its employee wellness programme. About 59 wellness champions were trained to ensure effective implementation of the Programme. Psychological support was provided to employees, particularly those infected HIV and Aids.

The spending focus of SASSA remained the administration and payment of social grants. A significant achievement was turning around the Agency’s financial position from an overdraft of R839 million. Cost containment measures played a key part of the interventions. The majority of the budget (34%) was on compensation of employees, followed by the cash handling fees (32%), while the balance caters for operational expenses such as office accommodation, cleaning, security, travel, and communication. Head office accounted for 50% of the budget due to the cash handling fees budget while the other 50% was spent in provinces. KwaZulu-Natal and the Eastern Cape regions accounted for the larger share. The 2012/13 budget was adjusted downward by an amount of R80.5 million, from R6, 200 billion it received in 2011/12. Some of the vacant funded posts remained unfilled at the regions and head office but they were being filled at year-end.

SASSA received an unqualified audit opinion with a few matters of emphasis. The AG found that SASSA’s financial statements fairly presented the financial position of the Agency, and that financial performance was in accordance with SA Standards of Generally Recognised Accounting Principles (GRAP) and the requirements of the Public Finance Management Act (PFMA). Matters of emphasis included the pending litigation with AllPay Consolidated Investment Holdings [which lost a R15 billion R10-billion social grant five-year tender which was awarded to Cash Paymaster Services]. Subsequent to the Supreme Court of Appeal (SCA) delivering judgement in favour of the Agency, AllPay filed an application for leave to appeal at the Constitutional Court. The AG found that 31% of the targets had not been achieved during the year. This was mainly due to the fact that indicators and targets were not suitably developed. It was also found that the financial statements were not supported by proper records as required in the PFMA. Significant deficiencies with regards to internal controls were identified.

Some challenges that the Agency faced included a pending case on the payment tender; complaints about on-going deductions from the SASSA Card and the implementation of the fraud management strategy. The Agency had to close some offices due to the number of officials that were implicated in fraudulent activities.

Discussion
Ms P Xaba (ANC) said she liked the ICROP because it would be good for communities, and she hoped the programme would be taken to the local wards. This was a good programme. She sought clarity on capacity building at SASSA, and asked about the situation at Maponya Mall (Soweto, Gauteng) where officials serviced the communities "whichever way they wanted" and SASSA officials just shouted at people.

The Chairperson interjected and pleaded with Members to reflect on issues that were in the Annual Report.

A Member asked what SASSA was going to do about the targets that were not achieved. She asked for more clarity on litigations in the Eastern Cape.

Mr R Bhoola (MF) applauded SASSA's progress and the value of work they put it. He sought clarity on how the targets were correctly aligned to the Annual Performance Plan (APP). Could the matter of the SASSA card deductions be clarified but also could there not be some sort of legislation that would regulate deductions. He asked how and whether the vision of skills at the Agency was aligned to the National Development Plan (NDP). Was the training intervention alluded to in the presentation empowering to the junior staff? He sought clarity on the programmes that required cooperation from the Department of Home Affairs (DHA) and the South African Police Service (SAPS). This relationship was particularly important when dealing with fraud. He commented that people from the rural areas generally had a challenge with duplicate documents. He asked how the Agency addressed this and those who had duplicated identity documents, and whether there was an electronic system where such challenges could be speedily resolved.

Mr M Waters (DA) sought clarity on what SASSA had said about ATMs and when do normal bank charges apply. Was this related to ABSA or was it Grindrod or Standard bank charges? He asked by what date the re-registration of the elderly and disabled would take place. SASSA also showed that CPS was abusing their grant distribution privileges. He asked what SASSA was doing about this and if there were penalty clauses in their contracts to prevent them from defrauding the system, or  punish them if they did.

Ms F Khumalo (ANC) welcomed the report and sought clarity on whether there were plans in place to ensure regional offices in provinces were all fully functional.

A Member sought clarity on the upgrading of offices, and wanted to know if it was possible provide a breakdown of those offices by location. SASSA staff ought to be responsible people, and how would the traffic fines that had been accumulated by staff be dealt with?

The Chairperson said asking question that were not on the Annual Report would dilute the issues that the annual report raised. She sought clarity on the targets that were not achieved especially as they related to the APP. She noted that SASSA had adjusted its performance targets. She wanted SASSA to explain to Members the difficulties of managing a system with approximately 16 million beneficiaries. She asked about “cross border beneficiation” where SASSA was working with systems in other countries. SASSA was asked to comment on the Committee recommendations on SASSA's 2011/12 Annual Report.

[Note: about five questions could not be reported as the audio tape was inaudible]

Overall responses

Ms Petersen replied that the Agency appreciated the comments on the ICROP and it would intensify the programme and take it to all the wards. Two million children from certain informal areas had been identified and would be prioritised.

She answered that when she joined SASSA, they had just written a strategic plan for the next three years. One of the mistake the Agency made was that they did not come back to Parliament and show the Committee what they had changed.

Ms Petersen stated that mismanagement of SASSA business and grants was vexing for them. The new plan was that they would biometrically enrol its staff during the first leg of implementation. Firewalls and end to end solutions would be put into place, but the system functioned well. SASSA understood that they had to bring in a system that would prevent the mismanagement of information.

There was only one person that had been dealing with risk and risk matters, and that had been taken up with the AG. The Agency would come up with a better and manageable risk plan that would identify five key steps that would be used to reduce the risk. Some of it was systemic; some of it was human and some of it was due to the lack of training to get compliance. If one failed to write the tender specifications, whoever was appointed might not stick to what was required. This process started late last year but by the end of the year, the Agency would have a risk management plan.

A SASSA official replied that the reason why litigation happened in the EC was because mostly attorneys were not aware of the amendment to the regulations whereby an internal mechanism had been introduced, where you had to wait 90 days to go to court.

Ms Petersen replied in terms of the AG’s concerns on the payables, the issue was how far to clear the books and how far to pay the bill. If a commitment was made to pay within 30 days, one had to look at what caused one to miss that? At the end of the financial year the Agency had introduced a tracking system, but the challenge was that SASSA worked on the system at the time of the audit. The Agency worked a corrective plan for the auditor, where it looked at what the issues were per province, and tried to craft a solution. This had to be fixed; SASSA should gear up for even greater responsibility when it paid out. There was a misconduct clause that was used to fine people for negligence while working.

Ms Petersen said on the regulation of the CPS service provider, the Agency started out by saying deductions could only be up to 10% according to Regulation 26A of Regulations issued under the Social Assistance Act. When SASSA tried to close this micro-loan service, the loan sharks immediately came up with a triple amount that beneficiaries had to pay. They wanted to harm the people, and the Agency explained to them what the conditions were. By 1 June, deductions had been reduced to 10% only; even in that, the Financial Services Board was asked to assist SASSA to conduct a survey on all deductions, even the funeral benefits that were being offered. Amendments were made to the Service Level Agreement (SLA) and SASSA was currently looking at regulatory reform. SASSA was also looking to work with government, because they had to. They also needed to look at other ways of managing themselves.

She stated that the Minister was quite vocal about how poor people should be treated with respect. SASSA was also interested in community education. The reason for having a card that was also a debit card was to liberate the people. Offering loans to poor people who earned R1200, even the banks were doing this, was an attack on poor people. What had to be defined was whether a grant or a pension could be considered an income. The question was how this could be tightened to reduce people using it as collateral in the process. SASSA was in the process of looking at everything at its disposal, and its duty was to protect the pensioner. The Agency was beyond discussions and was now working out a strategy to protect poor people. There was a need to look at the card management process.

[Inaudible]... The Agency was extending its footprint. The Agency now it had data, it had to load and test. This was done with DHA and SARS so that there could be integrity to the data. There was a new project being managed by SASSA. The Agency was just waiting for 2016 when every elderly person would be entitled to a pension. SASSA was also pushing for the Child Support Grant (CSG) to be liberated.

Ms Petersen said the Agency had a list of officials linked to fraud but the list had not been advertised because some of them went through individual core processes and some had already received their sentencing. If this was required, SASSA could add to it.

In terms of the NDP compliance, when SASSA was formed, it was formed on the basis of people who had been in DSD at the time. Now, preparation had to be done for the next phase of SASSA. It was now at the second phase of SASSA that it had to build capacity. Training of staff was important. SASSA had gone to State Security Agency (SSA) and they were determined to get vetting officers. In order to move out and ready themselves to take over payments, this was what they had to do. This was another area of risk deduction that was being taken.

Ms Petersen stated that in terms of birth certificates, SASSA's long term plan was to implement a virtual registry. At the moment there were hardcopy documents. SASSA would have liked a virtual registry, but they also had to be compliant with the AG – that the hardcopy had to be in the file. SASSA had improved its working relationship with all its sister departments to make interoperability better in the future.

A SASSA official spoke to the question about bank charges. He replied that the intercharge fee was a fee that banks agreed to charge in between themselves. The challenge with this system in South Africa was that the government did not regulate this area. The intercharge fees were set by the banks themselves but government could give input as to what fair pricing would be. SASSA had already approached the South African Reserve Bank for an intervention, as well as National Treasury. The Agency was now talking directly with the head of the national planning system who in turn represented the Agency at the banking forum. The intention now was to get the banks to lower the fee not only for beneficiaries but also the pensioners. The standard rates would apply; if one were to draw a R1 000 a person would be charged R3.50. There were other costs associated with bank charges. In other ATMs, the bank that issued the card might be making additional profit over and above the bank charge. With the Grindrod beneficiaries, if they required a statement they could call the Grindrod call centre and be issued with the statement for free; but with other banks, people were charged, and that charge varied from bank to bank, depending on what the charges were. The Agency tried to discourage people from using any of the commercial banks as the normal fee would apply depending on the ATM used.

A SASSA official said home visits had been done in all the provinces except for the Western Cape. Over 24 500 citizens over the age of 75 had not applied for the home visits. This was a moving target and they would be given until end of November to apply. By 1 December, SASSA might be forced to do a forced registration – this meant that the grant would be stopped, thus forcing the citizen to do something about it.

Ms Petersen addressed issues stemming from the SIU report which had been dealing with SASSA fraud cases since 2005. SIU assisted SASSA on issues like Supply Chain Management (SCM) and conflict of interest regarding staff. It took them more than five years to give SASSA a report on the many investigations that were done, as investigations took time. SASSA would continue to work with the SIU, but the AG should assist as SASSA did not have the ability to go directly to the South African Revenue Service (SARS). SASSA would follow up all the issues raised by the AG.

In terms of management strategy, SASSA actually had one. They were going to have a conference the following month regarding this matter. They were also implementing a debt management strategy.
Ms Petersen thanked the Committee for its 2012 Budgetary Review & Recommendations Report showing SASSA where they were vulnerable. Management was one of the areas that was mentioned very strongly. They had tried to attend to the areas raised by the Committee. SASSA reported to the Committee after each Committee oversight visit reports and the problems they raised about SASSA. The Agency was also looking at issues of fraud management and internal controls. SASSA needed additional support during this time when they were calling on external service providers because the amount of work that had to be done. There were masses of files to go through.

A SASSA official addressed cross-border relationships. As the SASSA card was an interoperable card, from time to time it could be found that a person would use their card overseas. What SASSA noted recently was that there were 60 beneficiaries who constantly drew their money at specific ATMs over the past six to twelve months in Lesotho, Swaziland and Mozambique. This would be reviewed during the review process. The Agency would review the systems to ascertain whether those were South African citizens or citizens who possessed dual citizenship. This would form part of the cross border re-registration. Those cross border applications would still be done by those provinces that border those countries.

Ms Petersen said that if there was anything outstanding, she would answer them.

The Chairperson said that all the questions were answered. She emphasised the importance of the work SASSA was doing, and said this was crucial information that Members needed when conducting oversight. The beneficiaries were at Members’ constituencies. The Agency should at all times ensure the service improved. The Committee would wait to receive the information it was promised.

The meeting was adjourned.

Appendix 1:
Business Day Live article: Legal challenge to grant distributor over deductions

Jun 10, 2013 | Linda Ensor

Cash Paymaster Services is in dispute with the Legal Resources Centre (LRC) over the repayment of the loans it has granted to beneficiaries which the LRC says leaves many of them with little left to live on

CASH Paymaster Services (CPS), which is responsible for distributing social grants and pensions to more than 12-million beneficiaries on behalf of the South African Social Security Agency (Sassa), is in dispute with the Legal Resources Centre (LRC) over the repayment of the loans it has granted to beneficiaries which the LRC says leaves many of them with little left to live on.

The LRC believes that thousands of beneficiaries in the Eastern Cape and elsewhere have had deductions made from their grants even before the payments have reached their bank accounts but CPS insists it has the right to enforce debit orders signed in its favour. Public Protector Thuli Madonsela is undertaking a preliminary investigation into claims that CPS is operating an illegal loan scheme.

This followed complaints by Democratic Alliance (DA) MP Mike Waters who received reports that CPS officials were offering and providing beneficiaries "interest-free" microloans, with repayments being automatically deducted from their social grants.

Last week, the LRC wrote to Sassa CEO Virginia Pietersen complaining that its clients had various amounts of money unlawfully deducted this month from their social grants prior to them receiving their payments.

A copy of the letter was also sent to CPS. "The amounts deducted in respect of our clients is way in excess of the allowed deductions in terms of regulation 26A to the Social Assistance Act, which only authorises one deduction for funeral insurance not exceeding 10% of the person’s grant," the LRC said.

It said the deductions were also contrary to the many adverts Sassa placed in newspapers and bulletins across the country in which it said that no further deductions would be made.

The LRC asked Sassa to reverse all unlawful deductions made this month, and previous ones, failing which it would launch an urgent application in the high court to declare the conduct of Sassa or CPS unlawful, with an order that all unlawful deductions be immediately reversed.

However, a replying letter by CPS lawyers Smit Sewgoolam Inc on Friday disputed the claim that it was acting unlawfully by making "deductions" as defined in the Social Assistance Act for loan repayments. It said the repayments were made when the grant was transferred electronically to the beneficiary’s bank account, and not prior to the transfer, as prohibited. The letter emphasised the right of beneficiaries to use their social grants as they deemed fit. The act did not preclude third parties from enforcing the rights established by a debit order signed in their favour by making deductions from grants, it said.

The lawyers said the transactions reported by the LRC had been reversed by Grindrod Bank because they were disputed and not because they constituted unlawful deductions. It warned the LRC against further claims that it was making unlawful deductions, saying they were defamatory. CPS won the R10bn grant distribution contract from Sassa despite an unsuccessful bid by Absa subsidiary AllPay to contest it in the courts. CEO Serge Belamant has said the loans granted by CPS were "interest free" and that CPS as the facilitator of purchases made by beneficiaries got its return from the companies selling services and goods to them.


 

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