Departments of Cooperative Governance and Traditional Affairs 2014/15 audit outcomes by Auditor-General

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Cooperative Governance and Traditional Affairs

13 October 2015
Chairperson: Mr M Mdakane (ANC)
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Meeting Summary

The Portfolio Committee on Cooperative Governance and Traditional Affairs was briefed by the Office of the Auditor-General of South Africa (AGSA) on the audit outcomes of the Department and the entities reporting to it.

AGSA said that there had been overall stagnation in audit outcomes in the past three years. The SA Local Government Association (SALGA) had been unqualified with no findings, while the audits for the other entities – the Department of Cooperative Governance (DCoG), the Department of Traditional Affairs (DTA), the Municipal Infrastructure Support Agent (MISA), the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities (CRL) and the Municipal Demarcation Board (MDB) – had been unqualified with findings. Areas of concern, and where intervention was required, were highlighted. Root causes of challenges were the slow response by management (accounting officer and senior management), instability or vacancies in key positions, and a lack of consequences for poor performance and transgressions.

Referring to the quality of submitted financial statements, AGSA said that five auditees had avoided qualifications by correcting material misstatements during the audit process in the 2014/15 year, compared to only three the previous year. 67% of reports had been reliable and useful, compared with 40% in previous year. All the auditees had submitted information in time for audit. Most of the auditees had not complied with legislation in the quality of the annual financial statements submitted, the prevention of unauthorised, irregular and/or fruitless and wasteful expenditure, and the management of procurement and or contracts. Unauthorised expenditure had amounted to R8.9 million, the irregular expenditure total had been R238 million, and fruitless and wasteful expenditure by MISA had amounted to R512 303.

To address the slow response by management (accounting officer and senior management), the recommendation was regular monitoring of the action plans to ensure that the identified deficiencies were addressed to avoid repeat findings and continued non-compliance. The recommendation for instability or vacancies in key positions was that the accounting officers of DCoG and MISA should provide feedback to the executive authority on the progress made in the filling of key vacancies on a quarterly basis. For the lack of consequences for poor performance and transgressions, it was recommended that the accounting officers should intensify their focus on ensuring that transgressors were held accountable and action taken as required by the Public Finance Management Act (PFMA).

Members raised questions about MISA, saying it was relatively new, and problems abounded. There was a challenge with regard to spending. Could improvements be made on the kind of intervention required?

There was concern that the audit outcomes of the portfolio for the 2014-15 financial year had been a mere repetition of the previous financial year. Departments were not compliant. The issue of a lack of consequences for poor performance and transgressions had always been there, and it was questioned who was to administer the consequences and ensure that transgressors were held accountable. Members said a lot of progress had been made, but asked why people had not been appointed into the vacant positions.

Meeting report

Chairperson’s Opening Remarks

The Chairperson said the financial year was coming to an end and the issue of traditional leadership was still pending and should be resolved. There was a demand on all the Members to set aside time to engage the traditional leaders, as the Committee had developed a programme to be followed for the issue to be dealt with.

Apologies were read from Mr A Mudau (ANC), who was ill, Mr B Bhanga (DA) and Mr M Hlengwa (IFP).

Auditor-General on audit outcomes of Department of Cooperative Governance and Traditional Affairs and its entities

Ms Connie Myburgh, Business Executive: Auditor General of South Africa (AGSA), said she was standing in for the Director General, who was on leave

Ms Stefani Wademan, Manager: AGSA, briefed the Committee on the audit outcomes of the Department of Cooperative Governance and Traditional Affairs (COGTA) and the entities reporting to it.

She said that there had been overall stagnation in audit outcomes in the past three years. The SA Local Government Association (SALGA) had been unqualified with no findings, while the other entities – the Department of Cooperative Governance (DCoG), the Department of Traditional Affairs (DTA), the Municipal Infrastructure Support Agent (MISA), the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities (CRL) and the Municipal Demarcation Board (MDB) – had been unqualified with findings. Areas of concern, and where intervention was required, were highlighted. Root causes of challenges were the slow response by management (accounting officer and senior management), instability or vacancies in key positions, and a lack of consequences for poor performance and transgressions. (See document)

Referring to the quality of submitted financial statements, she said that five auditees had avoided qualifications by correcting material misstatements during the audit process in the 2014/15 year, compared to only three the previous year. 67% of reports had been reliable and useful, compared with 40% in previous year. All the auditees had submitted information in time for audit. Most of the auditees had not complied with legislation in the quality of the annual financial statements submitted, the prevention of unauthorised, irregular and/or fruitless and wasteful expenditure, and the management of procurement and or contracts. Unauthorised expenditure had amounted to R8 925 085 (DTA: R2 252 000; MISA: R6 673 085). The irregular expenditure total had been R238 173 665 (DCoG: R155 375 000; DTA: R6 518 000; MISA: R73 228 840; MDB: R3 051 825). Fruitless and wasteful expenditure by MISA had amounted to R512 303.

To address the slow response by management (accounting officer and senior management), the recommendation was regular monitoring of the action plans to ensure that the identified deficiencies were addressed to avoid repeat findings and continued non-compliance. The recommendation for instability or vacancies in key positions was that the accounting officers of DCoG and MISA should provide feedback to the executive authority on the progress made in filling of key vacancies on a quarterly basis. For the lack of consequences for poor performance and transgressions, it was recommended that the accounting officers should intensify their focus on ensuring that transgressors were held accountable and action taken as required by the Public Finance Management Act (PFMA).

Discussion

Mr K Mileham (DA) said the contract with MISA had been cancelled, and asked why this information had not been included in the presentation.

Mr E Mthetwa (ANC) asked what AGSA was doing to assist MISA.

Mr M Mapulane (ANC) asked for the details of the community works programme (CWP) that had been raised.

Mr N Masondo (ANC) said MISA was relatively new, and problems abounded. There was a challenge with regards to spending. Could improvements be made on the kind of intervention required?

Mr A M Matlhoko (EFF) said he was concerned that the audit outcomes of the portfolio for the 2014-15 financial year had been a mere repetition of the previous financial year. Departments were not compliant. He questioned what would then be expected from the lower structures, adding that the Department was non-functional and should be disbanded.

Mr C Matsepe (DA) said the issue of a lack of consequences for poor performance and transgressions had always been there. He questioned who was to administer the consequences and ensure that transgressors were held accountable.

Ms Mybugh replied that the Chief Executive Officer (CEO) was responsible for administering and holding people accountable. She said there was a need to start with the lower level staff, and added that there should be discipline and effective control. There should be a review and follow up.

Ms B Maluleke (ANC) said she was concerned that the AGSA had said its scope did not provide for commentary on service delivery. She asked if the Department cooperated when audits were carried out on them, and said that the main problem was documentation, as there were no documents and records.

Mr Mileham asked if the matter of irregular and wasteful spending had been reported to the office of the AG. It covered the whole period under review.

Ms Mybugh replied that the AGSA did not have that particular information at the meeting, and would come back to the Committee on that particular issue.

Mr Mthethwa remarked that it was a good report and a lot of progress had been made. He questioned why people were not being appointed into the vacant positions.

The Chairperson said the AGSA had done very well, as it had produced a very short and succinct report. He said Members were happy with the report, adding that the AG was invited to prepare the Members for the upcoming meetings.

The Chairperson said recommendations must reflect the views of the entire membership of the Committee, as this would make it easy to finalise the meeting on Friday. There was no need for a delay in finalising the reports, as the issues had been raised earlier. There was a need to look at the oversight reports and adopt them. All the outstanding reports were to be presented to the Committee for approval. The Committee could not afford to go into the festive season without approving all the reports and adopting the minutes. The Committee was pleased with its oversight function.

He said there had been a proposal for the Committee to split into two groups to address the traditional leadership problems in the different regions, but pointed out that if the Committee went as one team, the work would not be concluded before December. By 4 December, the Bill should have been passed and presented to the Chambers for approval. It was a very expensive exercise, as it involved real engagement, so the months of October and November would be very busy periods for the Members. He advised the Members to read about the traditional leadership system.

The meeting was adjourned.

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