SRSA, SAIDS, Boxing SA on their 2015/16 Annual Reports with Auditor-General input; Committee Report on SRSA 1 Quarter

Sports, Arts and Culture

11 October 2016
Chairperson: Ms B Dlulane (ANC)
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Meeting Summary

The Committee was briefed by the Auditor General’s (AG’s) on the financial statements and performance information of the Department of Sport and Recreation (SRSA), Boxing South Africa (BSA) and the SA Institute for Drug-Free Sport (SAIDS), which also made presentations on their annual reports and financial statements.

SRSA had received a clean audit from the office of the AG for the past three consecutive financial years. BSA had received an unqualified audit report for the 2015-16 financial year, which was an improvement from its qualified audit report with findings in the 2014-15 financial year. BSA’s improvement in its audit report was attributed to the entity finally having a clear sense of leadership now that a Chief Executive Officer (CEO) and a Chief Financial Officer (CFO) had been appointed.

SAIDS had received a qualified report from the AG, with several findings. It had overspent its budget for the 2015-16 financial year due to the fact that 2016 had been the year of the Olympic and Paralympic Games, and the entity had had to continuously conduct random drug tests on all the athletes to screen for banned substances. With the laboratory not functional, blood samples of the athletes had had to be sent overseas for testing, and this had increased the courier costs. The Institute was optimistic that the laboratory would be fully functional by December 2016, although SRSA was not of the same view.

The Committee hoped to see drastic improvements at BSA now that new leadership had been appointed after the dismissal of the previous CEO and CFO. The Committee also acknowledged that BSA had received a small budget from SRSA of only R10 million. SRSA said that if the entity provided an assurance that it could handle a larger budget, then the R10 million could be increased in the future.

Meeting report

Boxing South Africa: briefing by Auditor General of South Africa

Ms Michelle Magerman, Senior Manager, Auditor General South Africa (AGSA) briefed the Committee on the Department of Sport and Recreation (SRSA) portfolio audit outcomes for the 2015-16 financial year.

In the 2014-15 financial year, Boxing South Africa (BSA) had had an unqualified opinion, but in the 2015-16 financial year it had obtained a qualified opinion report. Although the report was an improvement, the office of the AG had wanted to find out what had led to BSA not having a qualified report the previous year, and then improving the following year. The office of the AG had looked at assurance findings in order to rate financial statements, and because BSA had not had the positions of the CEO and CFO filled in the 2014-15 financial year, this had impacted on the assurance of the entity. BSA had had non-compliance with key legislation, and this was under investigation. For the current financial year, 2015-16 BSA had improved and filled the critical senior positions that were needed and there had been a turnaround in their reports.

Discussion

Ms D Manana (ANC) said that there was nothing to ask, and rather appreciated the clean report that BSA had received. She hoped that the new appointments at BSA would turn around the entity.

Ms B Abrahams (ANC) asked what the labour law said about people who were receiving salaries while on suspension.

Mr M Malatsi (DA) asked what the engagements of BSA had been with regard to the findings in the annual performance plan (APP).

Ms Magerman said that there had been no misalignments for SRSA and that it was in an advantageous position, as the Department had looked at the APP and aligned itself according to the findings of the AG.

Mr Alec Moemi, Director General, SRSA, said that there would be consequence management when issues arose. SRSA’s job was to assist entities with issues of compliance. Where there was a need to impose consequences, SRSA had taken charge and dismissed the previous chief executive officer (CEO) and chief financial officer (CFO) of BSA for that particular reason.

Mr Moemi said that according to the law, during suspension an employee was not formally dismissed and was therefore entitled to receive pay.

Mr Moemi said that entities addressed repeat findings in the AG’s report at the beginning of the following financial year.

Mr S Ralegoma (ANC) said that he was not seeing concrete intervention, because this was not the first time that similar issues were recurring.

Mr P Moteka (EFF) asked what had happened when a supplier had been paid, but goods had not been delivered. He asked how it had happened that contracts had been extended without the approval of the SRSA. What were the consequences for contractors who were not providing the services they had been contracted to provide?  Why were the rules with regarded to Broad-Based Black Economic Empowerment (BBBEE) not being followed? Why was BSA awarding contracts to contractors without tax clearance certificates, and what was the entity doing about contractors who were found to be non-compliant?

The Chairperson said that the SRSA should take the issue of non-compliant procurement very seriously and act with caution in the management of the South African Institute for Drug-Free Sport
(SAIDS).

Ms Muditambi Ravele, Chairperson, BSA said that the problems in BSA could be attributed to the same people who had been dismissed from the entity.

Mr Tsholofelo Lejaka, CEO, BSA, said that the faults in BSA in prior years had been attended to under the new leadership. Faults had been created by a lack of diligence in the previous leadership of the BSA, and the job had not been done correctly.

Mr Thabang Moses, CFO, BSA, said that BSA was following a structured programme of identifying all the issues in the past three years and then providing a way forward.

Mr Khalid Galant, CEO, SAIDS, said that the entity had an open and robust channel of communication with SRSA, and they worked hand in hand with the Department.

Mr Onke Ngwane, Financial Manager, SAIDS, said that the budget over-spending had been to cater for expenditure in procurement and the transport of goods. The irregular expenditure had been incurred before he had assumed his current position at SAIDS, and since his employment at SAIDS none of the new findings had been considered irregular.

Mr Malatsi said that it was unfortunate that the new leadership presenting to the Committee was not the guilty party that had incurred all the reported over-expenditure, and it was therefore futile to “preach to the converted.” Those who had committed all the expenditure had been dismissed and could not answer for their errors any more.

Mr Moemi said that SRSA was committed to turning around the financial management in all the entities of SRSA. He would be giving performance reports at all the quarterly meetings with the Portfolio Committee.

South African Institute for Drug-Free Sport (SAIDS): Annual Report

Mr Galant said that SAIDS had not expected to make a presentation, but had prepared a five-page slide show on the tabling of financial expenditure.

SAIDS could not predict why doping levels were so high, but that it was more common at the university level in rugby. SAIDS engaged in random drug testing so that athletes were not aware of upcoming tests.

SAIDS had gone over budget because they had used lottery money in order to conduct tests, and now had to pay back the lottery from their budget. This was because 2016 had been the year of the Olympic and Paralympic games, and therefore they had had to perform a lot of testing so that athletes were not found to be on any drugs.

Mr Ngwane said that the findings in the AG report were related to long-outstanding debtors that had not paid yet and had not been followed up. Because it had been an Olympic year, they had had to conduct rigorous doping tests and their laboratory was not up to standard, so tests had had to be sent abroad. This had increased courier costs and added to the expenditure, because this had been unforeseen. There was a three-stage process before budgets were approved, and procurement processes would go through levels of scrutiny in order to ensure compliance.

Discussion
Mr Ralegoma said that when the Committee was conducting oversight in the Free State, everything had seemed operational. It was important for the Committee to understand what the progress was in terms of having the laboratory operational. He was interested in the action plan to ensure that SAIDS achieved a clean audit report.

Mr Malatsi asked for clarity on the appointment of the previous CFO of SAIDS, and questioned whether Mr Ngwane was saying that there had been irregularities in the appointment of the CFO.
What had been the engagement with school sports?

Ms Abrahams said that she hoped the points system and process of approval would be followed in future, and that the new manager would ensure compliance.

Mr M Mabika (NFP) said that the presentation by Mr Ngwane had been promising, and he hoped that changes would be noticed in the following year. He asked if the issue with a soccer player had been resolved, and if the player had been banned.

Mr Ngwane said that the appointment of the previous CFO had been found to be irregular, not in terms of services and benefits, but rather that the contract had been obtained irregularly.

Mr Galant said that the laboratory was currently 50% operational, and was accredited to perform blood tests up until December. The laboratory had engaged fully with SRSA. SAIDS was engaged in the testing of minors in school level sports, especially rugby, and was partnered by the Department of Basic Education.

He said that the Orlando Pirates player concerned had been issued with a ban from the sport for four years, and the case had been concluded in favour of SAIDS.

Mr Moemi said that SRSA was supporting the laboratory in every respect, but he was not optimistic that the laboratory would be fully functional by the end of the year.

Boxing South Africa: presentation
Mr Lejaka said that based on a previous meeting with the Committee, BSA had indicated that their budget was low because they had not received finances from promoters. They had now determined which promoting associations owed BSA money, and what the amount was. BSA was simply enforcing regulations.

Under the governance and administration programme for the 2014-15 financial year, BSA had had critical positions vacant and senior managers had been placed on suspension due to legal issues. Under the boxing promotion programme, BSA had not done well and they had not achieved their revenue generation strategy.

Mr Moses said that in the 2014-15 financial year, BSA had been qualified in affidavits referring to sanctions, but for the current year (2015-16) they had incurred some unqualified reports. The AG had recommended that BSA ensure that they did not have long-standing debtors on their books. BSA was facing internal control issues, but this required more people to be employed and BSA was not in a position to employ a big staff. However, these issues would be looked at.

Most of the debt incurred by BSA was due to the carrying over or the cancellation of debts by the previous board, and those debts had now increased over the years.

Discussion

Ms Abrahams asked what functions the temporary employees would be serving, since the two positions in senior management would not be filled. Why were they included in the organogram if they were not important? Why was BSA not using a credit controller to collect revenues?

Ms Manana asked what BSA was overseeing if they were concentrating on only promoters and not addressing boxers’ issues.

Mr Mabika said that there was a concern about promoters politicising issues, and he needed clarity on how paying for the services they were receiving from BSA was being made political.

Mr L Ntshayisa (AIC) asked what was happening with regard to boxers who were not being paid by their promoters. Were the fights of boxers from their amateur years considered when rating them?

Mr Malatsi asked what the measures were in place for debt collection. How were those promoters still being allowed to promote fights?

Mr Ralegoma said he had watched the last three fights held in Free State, and they had been quality fights. He wondered why they could not have been screened during prime time.

BSA’s response

Ms Ravele said that majority of the issues were being looked at and would be addressed in the 2016-17 financial year.

Mr Moses said that monies owed by the promoters were from the 2014-15 and 2015-16 financial years. The money owed varied between promoters, depending on the type of tournament arranged.
He said that the traveling fees included the costs of accommodation and transport for meetings with Parliament or any other important stakeholder.

Ms Ravele said that when the previous CEO and CFO had been dismissed, the board of BSA had been more “hands on” in the day-to-day running of the entity, and therefore there had been a lot of traveling and accommodation costs incurred due to board members living in different provinces.

Mr Lejaka said that the two vacancies could not be handled in the current financial year. There was a recruitment process and review of BSA under way to reorganise the structure of BSA, and when the review process was completed, some of the vacancies would be included in the newly formed positions.

With regard to over-achievements, in some cases BSA would have set targets and then ended up achieving more, or slightly under-achieving in some cases, but this was not necessarily affecting performance.

When promoters refused to pay their debts, BSA had the law on their side to withhold the sanctioning of any further fights for that particular promoter. There were boxers who had not been paid from a tournament in April by a promoter, and the promoter had been taken to court. The case was proceeding. BSA had embarked on a process of paying the boxers themselves, because some of the boxers were taking BSA to court, and the legal fees would be more than the actual amount of paying the boxer.

Mr Lejaka said that the ratings committee had autonomy in rating the boxers, and the criteria went beyond just the number of fights fought or lost, but also how the fighter lost.

SRSA performance overview

Mr Moemi said that the Department had received a clean audit report from the office of the AG. The baseline budget for the SRSA had been very low and this had resulted in them not being able to carry out some of their critical functions.

The number of children participating in district sports was 72 000, and there were 52 talented athletes on the Ministerial Sport Bursary (MSB). These were learners in Matric, and the problem that had come up was that the MSB did not cover sports at the tertiary education level.

Mr Moemi said that the South African Rugby Union (SARU) had taken a chance in bidding for hosting the 2019 Rugby World Cup, but it believed that it could make revenue from hosting the competition without the support of state funds. SRSA, however, was of the view that if SARU had not made their transformation targets by February 2017, then there would be dire consequences.

There had been support for sporting codes in multilateral engagements at some of the international forums in which South Africa held memberships. The multilateral engagements included the African Union Sports Council (AUSC) Region 5, the United Nations Educational, Scientific and Cultural Organisation (UNESCO), the Commonwealth Advisory Body on Sport (CABOS), and the 5th session of the conference of parties, at which South Africa would be the Chair.

With regard to risk management, SRSA was ensuring that every employee employed in the supply chain department was not receiving any money that was not allocated to them, and that there were clean audits in the supply chain management departments.

Mr Lesedi Mere, CFO, SRSA, said that the Department had been allocated R980 million and had used R979 million in the 2015-16 financial year, which was 99.9% of the budget. The 0.1% remaining from the budget would be surrendered back to the National Treasury. There had been under-expenditure due to compensations. 75% of the budget allocated had been transferred to provincial sports departments.

In terms of financial management, there had been some challenges in the departmental internal control systems, even though a lot of improvements had been experienced. The Department had received a clean audit for the past three years and had had only had 49 findings, and they intended reducing this number.

Discussion

Mr Moteka said that the attitude of the rugby and cricket associations could not be tolerated any longer, especially with regard to transformation.

Mr Mabika asked how the 52 students in the Ministerial Sport Bursary scheme were spread in terms of provinces. Did SRSA have a clear performance tool to measure the progress of the students receiving the ministerial bursaries? What was the progress with the Durban Commonwealth Games?

Ms Manana asked if SRSA could perhaps recommend sponsors to BSA, because the R10 million allocated to it was not enough and the costs of operation were too expensive. She was also displeased with Cricket South Africa and SARU, who seemed to consider sport as a business and did not prioritise transformation.

Mr Ralegoma said provinces were becoming harder with regard to national championships, and it was important for the Department to be proactive and act now rather than later.

Mr Malatsi asked what the understanding was in terms of the financial responsibilities between the three spheres of government.

Mr Malatsi asked if there was clear discussion about penalties.

Response

Mr Moemi said that the list of learners in the Ministerial Sport Bursary came from all the provinces, and the North West was the only province that did not have representation. There were measures in place to measure the performance of those learners.

Mr Moemi said that the discussions SRSA was having with AfriForum, the Freedom Front Plus (FF+) and Solidarity would probably end up in court, because they were of the view that the Minister of Sports was misusing his powers and in a way institutionalising reverse apartheid, and they saw this  as a political move.

The Durban Commonwealth Games would not be run in the same manner that the FIFA World Cup had been run, where FIFA had made the majority of the profits and the country had received minimal benefits. They were in negotiations for the host city contract.

Mr Moemi agreed that BSA was receiving little money, but as soon as they received an assurance that BSA would perform, then the budget would surely increase.

Mr Mere said that the issue of payment of suppliers referred to the model developed in the last meeting SRSA had had with the Committee, in terms of which suppliers would be paid within 30 days.

The Chairperson thanked SRSA, BSA and SAIDS for their presentations and for informing the Committee on sports issues at all levels.

The meeting was adjourned.
 

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