Representatives from the Auditor-General South Africa (AGSA) presented the 2014/15 audit outcomes of the Department of Social Development (DSD) and its entities. The Department had received a clean audit, while the South African Social Security Agency (SASSA) and the National Development Agency (NDA) had received unqualified opinions, with findings on predetermined objectives and compliance. There were concerns about flawed supply chain and consequence management at SASSA in particular, as well as the levels of irregular and wasteful expenditure.
The Minister was present for the Department’s presentation of its report. The Committee members were generally complimentary of the Department’s performance, but concerns were expressed about the number of vacant critical posts. The Minister reassured the Committee that these were in the process of being filled. Members questioned the capacity of NPOs to comply with relevant legislation and the funding of LoveLife by the Department. Compliance with employment equity requirements was also examined. The integration of the Department and its entities in order to enhance monitoring and evaluation was discussed.
The Committee asserted that the fact that the NDA was operating without a board had a negative impact on its governance and accountability. The delegation from the NDA reassured the Committee that the process of appointing a new board was underway.
AGSA briefing on Department of Social Development audit outcomes for 2014/15
Mr Theunis Eloff, Senior Manager: AGSA, said that the Department of Social Development (DSD) and the four funds under it -- the Disaster Relief Fund, the Social Relief Fund, the Refugee Relief Fund and the State President’s Fund -- had received clean audit opinions. The South African Social Security Agency (SASSA) and the National Development Agency (NDA) had received unqualified audit opinions with findings on predetermined objectives and material non-compliance with legislation.
Some of the areas he highlighted were the quality of reports submitted by SASSA and the NDA, shortcomings in supply chain management, as well as unfilled vacancies in key posts especially at the NDA. While irregular expenses had decreased, they remained substantial and stronger controls had to be implemented. There were also issues of consequence management at SASSA, as recommendations made that had addressed this problem in the last financial year had not been complied with. The implementation of the Minister’s commitments for the previous year and the current one was under way.
Ms E Wilson (DA) asked how R5 million of wasteful expenditure could result in an unqualified audit report. She noted a discrepancy in the AGSA’s report pertaining to SASSA on the credit risk involving receivables.
Mr Eloff answered that the audit report was unqualified because there had been disagreement about the existence of the wasteful expenses; hence the AGSA’s mandate was only to disclose the possible existence of these expenses, although they were contested, and the responsibility to investigate further and take any action was on the oversight bodies. In response to the credit risk issue, he said that the receivables were a potential risk and as such had had to be disclosed in the audit report.
Ms V Mogotsi (ANC) asked whether there had been progress with the management point letters of last year, and what the AGSA had recommended to the Department in this regard.
Mr Eloff replied that the AGSA had the responsibility of reporting all key control deficiencies to management. After reporting findings, the Department came up with action plans which may take more than one financial year to implement.
Ms H Malgas (ANC) raised a concern about dormant accounts and what recommendations the AGSA had made to the Department about this matter, as it occurred every year. How did the Department intend to deal with wasteful expenditure? She asked the AGSA’s opinion on the faulty risk management policies in place at SASSA. What measures were being taken to fill the position of head of internal audit at SASSA which was vacant?
Mr Eloff replied that the AGSA’s understanding of dormant funds were that these were not raised from current budgets, but had been raised in terms of old legislation. The AGSA had ensured that the Department had a statement of these funds as going concerns so that their existence could be known. SASSA had committed to filling the head of internal audit vacancy as soon as possible. The Department and the different entities under it kept a register of the irregular expenses and the actions taken, or which had to be taken.
Mr S Mabilo (ANC) asked what reason had been given by the NDA and SASSA for the quality of their reports submitted to the AGSA. What was the explanation given for the information technology management issues at SASSA, raised in the AGSA report? He asked about the reason for the NDA not having a board of directors to oversee its operations and the impact of this on good governance.
Mr Eloff responded that although the report submitted by SASSA required material adjustments, the adjustments had been for different issues than those picked up on in the previous year. The information technology issues had been raised with SASSA’s management, which had diligently implemented an action plan. Many board functions were being carried out, despite the lack of a board in place at the NDA. The NDA had committed to constituting a board in the near future. The Minister had also appointed the Director General of the Department as the accounting authority for the NDA as an interim measure until a board was constituted.
The Chairperson commented that it was concerning that it appeared as if SASSA made changes or implemented recommendations when it was in the process of being audited, and this was a serious weakness.
Ms P Sonti (EFF) asked whether SASSA had informed the AGSA how they intended to address the supply chain management issues raised in the audit report. She also asked about the steps taken to fill the internal audit vacancy at SASSA.
Mr Eloff replied that the AGSA had been given an action plan to address the supply chain management issues and also that the Department intended to investigate the problem. In its action plan, SASSA aimed to focus on the accountability and compliance of lower level staff with correct supply management procedures.
Ms Wilson asked what measures would be taken to deal with senior management personnel who did not comply with lawful procurement procedures, since the action plan seemed to focus on lower level employees.
Mr Eloff responded that accountability for non-compliance by senior management would be escalated to the National Treasury to handle.
The Chairperson stated that such cases would also come before the Portfolio Committee for oversight by means of the AGSA’s report.
Department of Social Development Annual Report 2014/15 presentation
The delegation was headed by the Minister, Ms Bathabile Dlamini. Mr Thokozani Magwaza, Acting Director-General, discussed the Department’s objectives and achievements in the year under review.
Mr Thabani Buthelezi, Acting Deputy Director-General,outlined the targets set for each programme and then the progress made towards achievement of these targets. These were: Programme 1 – Administration; Programme 2 – Social Assistance; Programme 3 – Social Security Policy Administration; Programme 4 – Welfare Services; Programme 5 – Social Policy and Integrated Service Delivery. He said that there had been a 2% decrease in the achievement of targets in the period 2014/15.
Mr Clifford Appel, Chief Financial Officer, presented on the Department’s finances. He said that overall it had spent 99.3% of its budget, which was in accordance with its target of achieving a spending rate of between 95 – 100%.
Mr Mabilo said that the report showed that 33% of the Department’s targets had not been met and asked how the Department would ensure that its targets would be met in the upcoming year. A special housing programme for the disabled had been mentioned in the presentation, and he asked for examples of where this had been done. Referring to page 173 of the report, he asked about the Department’s compliance with employment equity laws, as the report showed that the Department had low numbers of disabled and coloured employees.
The Minister stated that Mr Buthelezi would respond to the questions on targets. The Department was doing well in terms of employing disabled people compared to other Departments, but she acknowledged that improvements could be made with regard to the racial diversity of employees.
Ms Connie Nxumalo, Deputy Director-General: Welfare Services, DSD replied that the special housing programme referred to a pending joint initiative by the DSD and the Department of Human Settlements to ensure that disabled people had access to housing.
Ms B Abrahams (ANC) asked about the promotions taking place in the Department, as the report showed that the necessary assessments had not been completed beforehand. She asked when a human resources plan for this financial year would be developed. She also asked what the reason was for not filling critical posts in the Department and the entities that fell under it. Referring to page 165 of the report, she asked why it would be necessary to appoint more than one person to fill a particular post. Referring to page 167, she asked why selection committees were not available to attend interviews to fill vacant positions. Did the Department do exit interviews for people who resigned or were transferred?
The Minister answered that she did not recall any instances where there had been promotions without assessments being done, but in any case it was permissible in some instances for this to be done. The Department was aware of the vacant positions that existed, and was trying to fast track the resolution of the matter. She confirmed that the Department did carry out exit interviews.
Ms K De Kock (DA) commented that an increasing number of non profit organisations (NPOs) were being registered, yet only a small proportion were complying with the relevant legislation. She suggested as a solution, that NPOs should be adequately funded to enhance their capacity to comply with the law. Referring to page 261 of the Department’s report, she asked whether LoveLife’s financial statements were above board, as they had received R50 million in funding from the Department. Under programme 4 of the report, R12 million had been transferred -- where had it been transferred to?
The Minister replied that the Department had the duty of registering all NPOs, but not all NPOs’ work involved the Department, as some NPOs’ missions involved other government departments. Most NPOs were supported at the provincial level of government, while the national government supported a small number of NPOs. The Department lacked the necessary funds to capacitate NPOs to the required level, but the Department did assist some NPOs with funding for employing social workers. NPOs had the ultimate responsibility of ensuring they had enough funding, even from outside of government coffers. On the funding of LoveLife, the Minister said that the Department recognised that it was important for LoveLife to account properly for funds if they were to continue obtaining funding from the Department. To this end, discussions with LoveLife about this matter were ongoing.
Mr Appel replied on the issue of the money transferred by saying that some of the money had been transferred to the Department’s communications section. Another portion had been used to refurbish the Deputy Minister’s office, as she had required special facilities. With regard to the LoveLife issue, LoveLife had not received an adverse audit opinion for the last two years. Before disbursing money to any organisation, the Department scrutinised its financial records and also closely monitored how the money it disbursed was spent.
Ms Wilson congratulated the Department on performing well. She asked whether the Department and the NDA were not duplicating functions, since both were involved in funding early childhood development (ECD) programmes. She also asked about the amounts of money spent on travel and catering, especially in the light of capacity constraints that impacted negatively on service delivery.
The Minster replied that travel was essential for the functioning and effectiveness of the Department. The nature of the Department’s mandate required outreach activities in communities. Travel was also important in order to liaise with international organisations, such as the United Nations. There was no duplication of functions, because the Department was responsible for registering ECD centres, whereas the NDA helped ECD centres to comply with the requirements for registration.
Mr Appel said that the expenditure on travel and catering also related to stakeholders who worked closely with the Department in the implementation of its mandate.
Ms Malgas asked why the international agreements signed by the Department had not yet been brought before Parliament for ratification, as mandated by the Constitution. She asked why only 66% of the budget allocated towards substance abuse had been spent, considering the magnitude of the problem in South Africa. A large number of social workers had not obtained placements after finishing their education. She asked how the Department intended to resolve this issue.
Ms Wilson stated that the problem of irregular expenditure arising from poor supply chain management was concerning. Was the Department concerned about the R9 billion overdraft on page 229 of the report? She also asked about the claims recoverable of R15 million from the provincial departments. In reference to page 253, would offenders who resulted in the Department incurring fruitless and wasteful expenses be sanctioned? Page 267 of the report, under statement of contingent liabilities, showed that R2.5 million claims were related to labour disputes -- were these paid out or written off and additionally, why was the sum so high?
Mr Appel replied that the Department’s loss committee was investigating the issue of wasteful expenses and would make recommendations for the appropriate action to be taken against offenders. The R9 billion overdraft was not an actual overdraft but due to the timing of the financial statements, had had to be recorded as one. The Department was in the process of recovering the money owed for the claims receivable.
Ms Wilson said that LoveLife had presented to the Committee earlier this year, and the Committee had been appalled by LoveLife’s accounting. She suggested that LoveLife should return to Parliament for further clarification on how it was spending the money given to it by the Department.
Mr Peter Netshipale, Deputy Director-General: Community Services, replied that the Department had reviewed its relationship with LoveLife in accordance with the Committee’s recommendations and that the outcome of the review would be recorded in the report for the next financial year.
The Chairperson commended the Department for being able to account well for its budget. However, the agencies under the Department were not integrating with each other or with the Department itself, and this was a cause of concern. She made the example of the supply chain management flaws raised in the AGSA’s presentation, and said that this showed a lack of integration with the Department which had resulted in insufficient monitoring and evaluation by the Department. She also raised the issue of increasing incident of violent crime directed at elderly women, and asked the Department to tackle such issues in their future plans.
The Minister responded that the Department was working on resolving the integration problems in order to enhance the monitoring and evaluation of the agencies under it. She acknowledged that cases of the abuse of women were increasing and called on women in particular to contribute to ending this problem, since they were its victims.
NDA 2014/15 Annual Report presentation
The presentation was made by Ms Nelisiwe Vilakazi, Acting Chief Executive Officer: NDA, Mr Solomon Shinyaye, Finance Manager, and Mr Bongani Magongo,Head of Research.
The capacity building and research and development programmes had met most of their targets for the year under review. The resource mobilisation programme had exceeded its targets. Another success was the unqualified audit opinion from the AGSA.
The NDA had performed well financially because its revenue had grown as a result of the success of its resource mobilisation strategy, although a deficit of R12.4 million had been reported. This had been an accounting deficit, and not a cash deficit.
Ms Mogotsi asked about the reasons for the NDA operating without a board. She also said that the Acting Director General of the Department, Mr Thokozani Magwaza, ought to have attended the meeting in his capacity as the interim accounting authority for the NDA.
The Chairperson agreed with Ms Mogotsi. and said that the governance and strategic issues being raised ought to have been answered by Mr Magwaza.
Mr Buthelezi’s absence was excused by the explanation that he had had to attend urgently to a delegation of people from the Eastern Cape.
Ms Vilakazi answered that potential board members had been interviewed and were awaiting selection. The chief executive officer post had been advertised.
Ms Abrahams referred to page 103 of the report, which discussed non-compliance with the procurement framework that had led to irregular expenditure, and asked what the reason was for this. Page 60 of the report showed that a small number of coloured people were employed by the Department, and said that it was important to promote diversity in the workplace.
Mr Shinyaye replied that the amount of irregular expenditure in the 2014/15 year had decreased from the 2013/14 year. The NDA had created a committee to investigate cases of irregular expenditure and to recommend the action to be taken by management.
The Chairperson said that as there was no board, it was unclear where the members of this committee would be drawn from, and that this oversight structure was not envisaged by the Public Finance Management Act (PFMA).
Ms De Kock commented that R37 million had been spent on capacity building for NPOs, yet a significant number did not comply with laws. The NDA had to assess whether it was being effective in this regard.
Ms Vilakazi replied that the NDA would carry out measures to assist non-compliant NPOs to become compliant.
Ms De Kock asked whether the fact that the NDA had programmes which were similar to the Department’s was not an unnecessary duplication of functions.
Ms Vilakazi stated that there was no duplication of functions with respect to ECD centres, because the Department was responsible for the registration of such centres whereas the NDA’s role was to support ECD centres to comply with the rules for registration
The Chairperson said that it still appeared that there was a duplication of functions in this area, and the NDA should use available resources to lessen inequality by, among others measures, facilitating improved access to ECD centres.
Ms Vilakazi proposed a joint meeting with the Department before the Committee, so that the different mandates in this respect could be explained.
Ms Wilson expressed concern about the NDA’s faulty compliance with supply chain management laws. She also asked about the point made in the AGSA’s presentation about the low quality of the financial reporting submitted by the NDA. She said that despite the R12 million deficit being explained as merely an accounting device, it was worrying because it showed that the NDA was spending more than its income.
Mr Shinyaye replied that the reason for the low quality of the statements submitted to the AGSA was that there had been resignations from key positions in the office responsible for preparing the statements. The NDA was in the process of filling the vacancies.
Ms Malgas pointed out some discrepancies in the report, and said that the report showed the NDA had failed to meet most of its targets.
Mr Mabilo asked whether the income generation ventures undertaken by the NDA were viable, and asked what the ‘resources in kind’ portion of the income raised consisted of.
Mr Shinyaye answered that the resources in kind consisted of free media coverage by the SABC.
The Chairperson adjourned the meeting.
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