Department of Arts and Culture, Market Theatre & Msunduzi/Ncome Museum on their 2015/16 Annual Report

Arts and Culture

13 October 2016
Chairperson: Ms X Tom (ANC)
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Meeting Summary

Annual Reports 2015/16 

Msunduzi/ Ncome Museum
The Msunduzi/ Ncome Museum is a Schedule 3A public entity established in terms of the Cultural Institutions Act of 1998. The Museum receives institutional transfers from the Department to finance its operations and address its infrastructural needs. The museum has had very exciting programmes that contribute to nation building and social cohesion and is currently planning to have a mobile museum.

Msunduzi Museum received a qualified audit outcome for three consecutive years. The Committee was dissatisfied that the museum continuously had a qualified audit and said the museum should aim for zero irregularities. The museum made a decision not to employ a Chief Financial Officer and Members wanted to know why the museum did not fill this position. Members also raised concerns regarding the 65% attendance at Council meetings; and suggested that the museum requests for free Wi-Fi in order for members of the
community to be able to use the internet.

Market Theatre Foundation
The Market Theatre Foundation is also a Schedule 3A public entity established in terms of the Cultural Institutions Act of 1998. The Foundation receives institutional transfers from the Department to finance its operations and address infrastructural needs. The Council of the Market Theatre Foundation is fully constituted as at 13 October 2016. The Management of the Foundation has a Chief Executive Officer and a Chief Financial Officer in place. A consolidation between the Market Theatre and the Windybrow Theatre has taken place. The Windybrow Theatre is also a Schedule 3A public entity.

The Market Theatre has received unqualified audit outcomes since 2005. The Windybrow Theatre also received an unqualified audit outcome in the 2015/16 year and that can be accredited to its amalgamation with the Market Theatre. Concerns raised were that the Market Theatre operates in an unsafe environment, and that the new Lottery regulation preventing the Lottery from funding state subsidised industries has crippled the industry. The Committee was very pleased with the work that the Market Theatre has achieved so far.

Department of Arts and Culture
The Committee had already been briefed on various issues faced by the Department following the Auditor General’s report which they had received last week.

The Committee had identified various areas of concern which the Office of the Auditor General agreed with and both the Committee and the Auditor General agreed that the issues identified were of a recurring nature. It was stressed that it was unacceptable that the Department was not setting the example for its various entities that the issues identified were of a recurring nature and that there appeared to be a lack of commitment on the part of the Department to ensure that those issues were dealt with as well as ensuring that the officials responsible were held accountable.

The Department set 93 performance targets and achieved 61 which resulted in a total percentage of 66% of targets achieved. 

The main areas of concern, in terms of non-achieved targets, were primarily in the areas of infrastructure and policy. In terms of infrastructure there were a number of projects which were not completed such as the establishment of community art centres and providing books to libraries. There were also a number of projects which had a moratorium placed on them pending a financial forensic investigation. A number of policies had not been approved, primarily due to a recent rule inserted in the White Paper which required the Department to assess the socio-economic impact of their projects, but this was currently being conducted. The museum policy had been temporarily suspended from implementation as the Department did not formulate a policy that would later be at odds with the White Paper.

The Department had also faced issues relating to events that arose last year regarding the Rhodes Must Fall protests which required the Department to reprioritise certain goals in order to deal with issues which also affected its targets achieved. Much progress had been made in changing colonial names, however particular areas of concern were present in the Eastern Cape which still had a number of colonial names of towns and cities such as Port Elizabeth and Grahamstown, but the provincial heads of Department had been engaged on that issue.

On the Auditor General’s audit findings and the Department financials, the Department had unqualified audits in the years 2010-2013. However, they received a qualified audit in the 2013/14 year but had an unqualified audit in the 2014/15 year. The Auditor General raised particular concerns regarding the fact that the financial statements submitted differed materially from the statements submitted in the Department’s final financial report. In terms of the Legacy Project the Department was using an independent development class to roll that project out and was treated as part of the modified cash standards, a deviation which was submitted to and approved by National Treasury. The Auditor General refused to accept the deviation from the accounting standards and thus gave the Department a qualification. The qualification had been accepted and the Department accepted the Auditor General’s directives, it would not pursue court action, unlike other Departments and entities which had, on the basis that they had an issue with the qualifications as the Public Finance Management Act allows the Minister of Finance to approve such exemptions from the prescribed accounting standards.

The Auditor General made a finding of concern regarding irregular expenditure, procurement and contractual issues at the Department. The Management had adopted a management action plan to deal with those issues and the Chairperson agreed to the suggestion that that plan be circulated amongst the Members at a later date. The Department had amended its management supply chain policies following the Auditor General’s findings and which related largely to the time period that the Department had adopted to advertise tenders, however that issue had subsequently been addressed. The Auditor General had also found that a number of contracts awarded did not comply with the regulations of the Preferential Policy Framework Act but management had made a strong commitment that any issues in that area would be rectified through educating all relevant officials further about the provisions of the Act and the requirements that it imposes.

The Department had under-expenditure of approximately R63 million of the total R3.8 billion granted for its budget. The primary reason for the under-expenditure was that various projects could not be rolled out due to the forensic investigations which were taking place. There was also a number of payments to beneficiary which had been claimed by the end of the financial year and which resulted in further under-expenditure in terms of the official statements, alongside various positions which had not been filled, which also contributed to the overall under-expenditure.

The Chairperson expressed her dissatisfaction with the fact that the Department still faced the same recurring issues, that the Auditor General had concerns regarding irregular expenditure, that there was such a high amount of under-expenditure and that the Department was not taking the lead in setting an example of good governance and accounting standards for its entities. She raised concerns as to whether the Department was taking the Committee’s concerns seriously and whether there was an efficient consequences management system in place to hold officials accountable for poor performance.

Members wanted clarity on how the Department could reconcile the discrepancy between its actual expenditure and its budgets which were different. Members wanted to know why the Department was taking so long to fill the vacant positions in Programme 1; how the Department could be responsible for only 20% of the total Department budgets, the remainder going to the Department entities, yet be responsible for the majority of the entire Departments’ irregular expenditure. Financial disclosure was a key component of good corporate leadership and accountability which would also improve the Department’s relationship with the office of the Auditor General.

The Acting Director General said there was a number of areas of concern, it could be that the focus of the Department of infrastructure rollout and not policy development and implementation was a possible issue in terms of the structure of the Department. The Department did take consequence management seriously and 17 officials were currently undergoing disciplinary processes and that once those processes had been finalised further details would be circulated to the Committee. When the Department created targets it structured them in such a way as to plan for contingencies and changing situations such as the Rhodes Must Fall protests. Those protests took the Department by surprise and affected the achievement of its other targets.

There were currently 38 vacancies but due to budget cuts from National Treasury only 11 positions could be filled at the present time.

Meeting report

Msunduzi/Ncome Museum on its 2015/16 annual report and audit findings
Mr Vusithemba Ndima, Acting Director-General for the Department of Arts and Culture gave an overview of the Msunduzi/ Ncome Museum. The Msunduzi/ Ncome Museum is a Schedule 3A public entity established in terms of the Cultural Institutions Act of 1998. The Museum receives institutional transfers from the Department to finance its operations and address its infrastructural needs.

Mr Ndima then proceeded to discuss the different programmes that the Museum has hosted as a response to the Ministers key priorities, more particularly when it comes to the issues of nation building and social cohesion. The Department hosted a two-day programme themed “Unity in Diversity” which was held in Ncome museum on 5 and the 6November 2015. The Museum also provided library services to 736 users in Msunduzi and 153 in Ncome museum, including library events in 2015 and 2016.

On challenges relating to the annual report, Mr Ndima mentioned that the entity received a qualified audit opinion based on the valuation or measurement of its heritage assets. The Auditor General could not accept the exemption that was granted to all Department of Arts and Culture entities due to the fact that it overlooked the Fair presentation assertion that is the foundation of the presentation of annual financial statements as per GRAP 103. The Department of Arts and Culture will follow up on the resolution of the audit findings during the quarterly visits to ensure that there is no recurrence of these.

Mr Ndima moved on to discuss the annual performance of the Msunduzi/ Ncome museum in terms of its key performance areas. The entity had 36 planned key performance indicators and has achieved 35 of these, which is the equivalent of 97%. One key performance indicator which is an equivalent to 3% was partially achieved and this is due to technical and design issues.

Mr Ndima discussed the three-year performance overview of the entity. In 2013/14 the entity achieved 72%, in 2014/15 the entity achieved 87% and lastly in 2015/16 88% was achieved by the entity.

On the income and expenditure trends over three years of the museum, the income represents what the entity receives from the Department. In 2013/14, the entity received R11.2 million, in 2014/15 the entity received R11.9 million, in 2015/16 it received R13.3 million and in the first quarter of 2016/17 the entity has received R33 million so far from the Department.

It was important to note that the institution also generates its own income through donations, shop sales, entrance fees, insurance claims, internet income and income from investments.

On the audit outcome, the entity received qualified audits in 2013/14, 2014/15, 2015/16. Mr Ndima also discussed governance matters in relation to the number of council members and particularly focused on 2015/16 said there are 8 Council members. The Council members had 4 meetings and the attendance rate of Council meetings was 65%. The number of Audit committee meetings are 4, the number of Management meetings is 7 and the number of staff meetings is 10.

Mr Ndima concluded by discussing the challenges facing the museum as well as the interventions that have been undertaken to deal with the challenges. One of the challenges is with the construction of Ncome, the Museum is faced with extra operational responsibilities which are not funded separately. The Department intervened by forwarding the request to National Treasury to consider increasing the current subsidy. The second challenge was that the cost of maintaining the Reconciliation Bridge between Ncome and Blood River Monument is not budgeted for by both institutions. The Department intervened by allocating funding for the maintenance of the bridge between the two entities.

Mr Thami Kubheka, Council member for Msunduzi museum, said as Council members, they want to achieve an unqualified audit and the numbers already show progress that has taken place to date.  He wanted to bring to the attention of the Committee the challenges and constraints faced by the museum. From their side as Council, they would like to have funding for the position of a Chief Financial Officer (CFO). Some of the reasons that the audits have being unqualified was due to finance related compliance.

Mr Mlungisi Ngubane, Director of Msunduzi museum, further discussed that members of the Committee visited Msunduzi museum late last year and they had an issue with the bridge. He thanked the Department for their intervention to ensure that the bridge opens. The bridge should be re-opened by November.

Mr Rob Luyt, Deputy Director of Msunduzi museum, reiterated that there is no funding for the position of CFO at the moment. In the museum they have a department for administration and a department for education. The different events that Msunduzi has hosted included an event for Mandela Day and a heritage concert. He briefly discussed some of the problems that affected the qualified audit such as assets sharing the same code, incorrect medical aid deductions and unauthorised use of journals, and said that all of that has now been attended to.

Mr Luyt discussed the success of Msunduzi as an institution. They are moving forward, they have a well preserved collection and a well preserved building. The staff is also really committed. The issue around the reconciliation bridge has now been addressed and funding for a mobile museum has been approved. The main challenge of the museum is getting a good audit. The museum has been marketed through Facebook and the newsletter, which is published quarterly.

Ms Thenjiwe Khumalo, Head of Department of the Msunduzi museum, presented the financial report. For the last financial year, 2015/16, for administration there was a deficit for R1.6 million and the major contribution to that was the evaluation of its assets. The museum also never budgeted for municipal expenditures and this contributed to the R1.6 million deficit. The museum generates most of its funding from the Department.

The museum has been trying for many years for the budget to break even by taking from reserves. Expenditure and depreciation amounted to a total of R900 000 in the last financial year. The museum would like to achieve an unqualified audit for the next financial year.

Mr T Makondo (ANC) complained that what Msunduzi presented was not an annual report, it did not outline what was achieved and what was not achieved. The presentation was poor and sounded more like a story. The audit results had been qualified for the last three years; he asked whether the findings were recurring or was it different findings every year. He also took issue with the 60% attendance at Council meetings. He did not understand why there was no Chief Financial Officer at Msunduzi museum when that was the main person needed to deal with financial matters.

The Chairperson shared the same sentiment that the presentation by Msunduzi did not provide a guideline about the museum’s action plans or state how the Committee could help. The presentation sounded like a story. Some pages of the report did not have page numbers. She also complained that Msunduzi did not mention that they had changed some of the documents because now the Committee was unable to follow the presentation without the new pages that were subsequently added. Msunduzi had a duty to tell the Committee from the onset or at least send the new document 10 days prior to the meeting. She emphasised that the Portfolio Committee did not want a story or an essay as a presentation. The information that the museum offered the Committee should be information that enabled the Committee to do their oversight function and be able to monitor the museum. She was wary of the fact that the museum had not set any exact time frames so that the Department could be able to track the work that the museum set out to do.

Mr G Grootboom (DA) said the financial report was confusing at the beginning and he was also not very pleased with the report.

Mr P Moteka (EFF) said the issue of recurring findings by the Auditor General (AG) had to do with the council and not necessarily with the administration. It was unfortunate that only one member of council was present. He emphasised that the findings by the AG dealt with issues of oversight and that had to do with the board. If the board was missing, then audit issues would recur. The Council should have discovered why there was a recurrence and why had the Council not stopped it. He also did not understand why the position of CFO was vacant but there was a budget for it.

The Chairperson said the display area of the museum is small. On visiting the museum, she noticed that one cannot go as a group because there is insufficient space. The museum is carrying very important history and that museum is very important. She insisted that Msunduzi museum should not get a qualified audit in the next financial year because the public would automatically assume that there is corruption.

Miss N Bilankulu (ANC) asked whether the posts for the education department were more important than appointing a CFO. She had an issue with the audit outcome; it is not good to have qualified audit outcome for three consecutive years. She asked whether the museum had an internal auditor because the internal auditor would assist them to avoid some of the audit findings.

The Chairperson emphasised that the museum repeatedly had a qualified audit and this was a major concern. The Committee had no guarantee that the museum would get an unqualified audit for the next financial period. She also wanted to know why the museum does not have a Chief Financial Officer because this is a priority post.

Mr Ngubane said that the museum does have an internal auditor and that Msunduzi had aimed to have zero irregularity. He said that there is a hope that in the next audit cycle there is zero irregularity.

Mr Kubheka shared the sentiment of the Committee and said as a council member with a finance background, he was also uncomfortable that there was no CFO. He commended the team for going an extra mile in the absence of a CFO but mentioned that they were working with the Department to improve the situation. Mr Kubheka wanted the committee to know that Msunduzi paid council members a very low income.

Mr J Mahlangu (ANC) said whilst the Committee was very critical of the museum’s underperformance he acknowledged that there were marked improvements. An example was the decrease in irregular expenditure. Issues of policy and action plans needed to be improved. He had no problem with issues of governance. In terms of reporting and compliance, the museum must do audits on a quarterly basis. If there were discrepancies with the audits, the museum must disclose them before the auditors discovered them.

He also noted the absence of action by the board and did not understand why there was no budget for municipal services. He asked why, and who was supposed to do that. In the report Msunduzi did not state why there was no budget for municipal services.

He requested that Msunduzi submit reports to the Committee of the past three financial years.  Msunduzi should get free Wi-Fi and should make a request to the relevant entity. It would be a total disservice if people from around the area do not get free Wi-Fi, more especially as school children visit the museum.

Mr Makondo agreed that the internet should be available for members of the community.

The Chairperson suggested Msunduzi should speak to the provincial government regarding the issue of providing internet to the community. The library must be used by the community so that the lives of the community can improve.

Mr Mahlangu also raised a concern regarding the Basotho people in the area and said that in the tone of social cohesion, Msunduzi should involve people in that community.

Mr Kubheka said that as council they are trying to get the community involved, more especially on the activities of the museum. He mentioned events where the women of the community were involved and he promised that the museum will involve members of the community with mobile facilities.

The Chairperson asked the museum to please be specific with the time frame so that the museum could be held accountable. She emphasised that it is important to always remember that there is a service that needs to be provided. There are areas of improvement but the museum should focus on the areas that they had not improved on, and they should also maintain improvement where they have done well. A qualified audit makes the public lose faith in them. She thanked Msunduzi museum for the work they are doing for the good of the people and for the transformation of society.

Market Theatre (including Windybrow) on its 2015/16 annual report and audit findings
Mr Ndima, Acting Director-General of the Department of Arts and Culture, gave an overview of the Market Theatre Foundation. The Market Theatre Foundation is a Schedule 3A public entity established in terms of the Cultural Institutions Act of 1998. The Foundation receives institutional transfers from the Department to finance its operations and address infrastructural needs. On the the three-year performance of the Foundation, the Market Theatre achieved 75% of what it set out to achieve in 2013/14, in 2014/15 it achieved 80% and in 2015/16 it achieved 68%.

Mr Ndima discussed the income and expenditure report. The Foundation received R43.2 million from the Department in 2013/14, R69.7 million in 2014/15 and R73.4 million in 2015/16. The Foundation received unqualified audit outcomes since 2012 until now, however it has been unqualified with findings. The selected audit findings included irregular expenditure incurred by the Market Theatre Foundation. The Market Theatre Foundation also did not maintain regular, accurate and complete performance reports that were supported by reliable verification sources.

On the Governance structure of the Foundation, the Council of the Market Theatre Foundation is fully constituted as at 13 October 2016. The Management of the Foundation has a Chief Executive Officer and the Chief Financial Officer in place. In terms of the meeting frequency and attendance there had been four council meetings and 6 Council committee meetings with 84% attendance. There were also four Audit Committee meetings, eight Management meetings and ten Staff meetings.

Mr Ndima reminded the Committee that there had to be a consolidation between the Market Theatre and the Windybrow theatre. Windybrow is also a Schedule 3A public entity and it receives institutional transfers from the Department to finance its operations and address its infrastructural requirements. The Windybrow Theatre was consolidated into the Market Theatre Foundation om 1 April 2016. The Council and the Management of the Market Theatre were appointed as the acting Accounting Authority and Executive Management of the Windybrow Theatre, respectively. Operations at the Windybrow were suspended in March 2014 and staff of the Windybrow Theatre is currently operating from the premises of the Market Theatre Foundation.

Mr Ndima discussed the income and expenditure of the Windybrow theatre and stated that Windybrow received R15.9 million from government in 2013/14, R11.5 million in 2014/15 and R17.4 million in 2015/16. The Windybrow theatre also generates its own income. The Windybrow Theatre received an unqualified audit opinion in 2015/16 and that it is due to the integration with the Market Theatre. Windybrow Theatre has received improvement from the qualified opinions by the entity since 2005. The entity received audit findings due to lack of Internal Audit function and there have been misstatements of financial statements. Prior to the integration with the Market Theatre, Windybrow Theatre was receiving qualified audit findings.

Mr Kwanele Gumbi, Chairperson of the Market Theatre Foundation, gave an overview of the history of the Market Theatre Foundation and mentioned that the Market Theatre celebrated its 40th birthday in June 2016. The Market Theatre was declared a Cultural Institution in 2005. The Market Theatre has received unqualified audit opinions from 2005 to 2016.

Mr Ismael Mahomed, CEO, Market Theatre Foundation, stated that the vision of the Market Theatre is to create an authentic South African arts and cultural experience which is committed to providing the highest level of artistic excellence. The Market Theatre had 48 staged productions in 2015 and 2016 despite the fact that construction was taking place. There had also been an increase in patrons and audience base even though there was a time that the Theatre could not be used to its full capacity. Production costs had increased and there was a slight drop in the staff employed but it is a drop by only one person.

The Market Theatre has a legacy of a Human Rights culture and received recognition and awards acknowledging that. The Market Theatre hosted a Public Talk in their gallery with photographer Omar Badsha. In terms of capacity constraints, there is a lack of funding for overheads, programme and capital works. There are also no tax incentives for funders and there is a staff shortage more especially now that the Market Theatre has consolidated with the Windybrow Theatre. He also stressed that the new Lottery Regulations prevents organs of state from benefitting from funding.

Mr Mahomed mentioned that the Market Theatre has a track record of artistic excellence and it also has a strong brand and legacy that continues to grow nationally and internationally. There is also an accountable institutional governance and management with regard paid to the Council and Management of the Market Theatre. The Market Theatre also has a long list of donors and in addition the DLA Cliffe Dekker Hofmeyr Inc provides legal advice to the Foundation on a pro bono basis. The top 5 risks of the Market Theatre included that the Market Theatre operates in an unsafe environment. The Lottery regulation changes also affected the Foundation and the amalgamation with the Windybrow Theatre is also a significant risk but they were confident that the amalgamation will work.

Miss Christine McDonald, Chief Financial Officer, Market Theatre, said the Windybrow does not have much funding from donors but they are currently engaging with stakeholders. There is day and night security at Windybrow and there is electrical fencing. They will work very hard on the audit findings, more especially with irregular expenditure. She said it is difficult to obtain IT equipment from SITA as prescribed by the Department because they normally do not require much equipment because they are a small entity and SITA cannot cater to small-scale needs such as the purchase of two computers.

Mr Gumbi said the decision that the National Lottery should not give funding to state subsidised industries has crippled the industry. There is a need to look at tax incentives for the Arts and Culture in order to sustain the Arts and Culture of our country. He also raised the issue of council remuneration. Council members are not being paid fairly for the work that they do. The Council is demotivated because there is no incentive. Council remuneration is disconnected from the work that they do because there is no fair compensation for the skills and the work that they do. Mr Gumbi had raised this with the Minister. Lastly, he said that the Department should also give attention to institutions that are performing well and not just focus on entities that did badly. He asked for full support of the Department stating that the Market Theatre is a special entity.

The Chairperson was impressed by the amalgamation of the Windybrow and Market Theatre. She spoke about the issue of fruitless and wasteful expenditure but noted that the Market Theatre had explained. She noted the input of inviting entities that are doing well and entities that are performing so that they learn from each other. She questioned whether funds followed the function.

Miss Christine said that the Windybrow funds did follow the function.

Mr P Moteka noted that the Market Theatre is doing very well. He referred to the issue of non-compliance, deviating from policy is opening a room for thieves to steal. In terms of the IT equipment, he did not understand why they did not use SITA as required. Overall, he is very happy with how they are doing.

Mr G Grootboom clarified that Councils do not receive a salary but rather honorariums. In terms of the fact that funders do not get tax incentives, he wanted to know whether the employers apply to SARS for exemption. He was pleased to see Windybrow restored to its former glory. The environment is not very safe where Windybrow is located and there should be an increase in security.

Mr Mahlangu said the Department noted the concerns raised. He appreciates the input of this entity into our landscape. He also mentioned that packaging the Market Theatre with Msunduzi was intentional so that Msunduzi could learn from the Market Theatre.

The Chairperson concluded by saying that the Market Theatre should keep doing the good work and that the portfolio Committee is assured that the Market Theatre is in good hands and hopes that they get a clean audit with no findings.

The meeting was adjourned for lunch.

Opening Remarks
The Chairperson opened the afternoon meeting. She requested the Department to focus more on the areas where they felt they were underperforming in order for those issues to be focused on more by the Committee, and secondly what measures the Department had put in place to address those issues of underperformance.

The Chairperson noted that the Committee had already identified various issues after the Committee received the Auditor General’s (AG) Report on Tuesday 11 September 2016. The report identified that the AG had made various negative findings against the Department which were of a recurring nature and which had been identified by the Committee before in previous meetings. She expressed concern and disappointment that the Department continued to make the same errors and underperform in the same areas despite those same concerns being raised every year. The Department was expected to take the lead in ensuring good governance and that its mandate was fulfilled and was supposed to set the example for the other entities which fell under it, as to how it should perform its functions. The Committee had identified certain areas of concern and underperformance which in its view was unacceptable from the Department. She wanted the Department to focus specifically on those areas of concern and to explain to the Committee why those recurring issues had not been properly addressed despite being brought to the Department’s attention.

Mr J Mahlangu (ANC) recommended that the chairperson restrict the departments presentation to a particular time period for completion.  He agreed with the comments made by the Chairperson but noted that many of the issues which the Department wanted to address in their presentation, had already been brought to the Committee’s attention during the quarterly briefings. He requested that it would be preferable if they gave the Department a timeline in which to complete their presentation, given time constraints, and that that they focused on the areas of concern which were not focused on as much during the quarterly presentations in order to allow the Committee to engage more with the Department on its areas of concern.

The Chairperson agreed with the suggestions made by Mr Moteka and agreed to give the Department 15 minutes in order to complete their presentation.

Department of Arts and Culture on their Annual Report 2015/16

Mr Vusithemba Ndima, Acting Director General, Department of Arts and Culture briefed the Committee.

The Department had achieved 61 out of 93 set performance targets for the 2015/16 year, which resulted in a 66% total performance targets achieved. 32 targets had not been achieved with a percentage total of 34% of targets not achieved. The areas in which the Department had primarily been found wanting was in the area of infrastructure primarily in terms of Heritage regarding the establishment of community art centres and in terms of the establishment of libraries and community art projects. Those were areas which the acting DG wanted to highlight as particular areas of concern which had been raised by the Committee in previous meetings. There was a moratorium on certain projects which were currently been assessed in terms of value for money for the current financial year as the Department did not want to proceed on those projects whilst the forensic investigation conducted had already identified points of concern in those areas. A number of the investigations had already been completed whilst the rest of the investigations were estimated to be completed by the end of October. Once the investigations had been completed further decisions would then be made regarding the further implementation of those projects.

A second area of concern was policy. A number of the policies which the Department thought would be approved such as the Heritage policy, museums and the current Bill for Public Libraries had not yet been approved. In terms of the Bill for Public libraries a new rule had been implemented which required the Department to examine the socio-economic impact of the implementation of those projects, but the Department had already begun to examine that factor as required in terms of the Bill. The Museum policy implementation also had to be temporarily suspended due to the White Paper which was in the process of being drafted. The concern of the Department was that it did not want to formulate a museum policy which would later be at odds with the White Paper which was the reason for suspending the implementation of that policy.

A number of areas of concern had been identified in terms of Department administration. In terms of the employment of women in the Department the target was set at 50% employment but the target actually achieved was approximately 46%. There had been a regression in terms of this target compared to previous year but the Department was taking this issue very seriously. The reasons for the underperformance in this area had been communicated to the Committee in previous meetings.

The Department would not address the issue of the White Paper review process as the Council had visited the Committee a few weeks ago and given its presentation on that issue. The Council had previously indicated to the Committee that work on that issue was currently being conducted and that a first draft of that policy had been completed.

The Acting DG addressed the issue of Nation Building and Social Cohesion which had been raised in previous meetings with the Committee. The Committee had informed the Department that it was important that this policy have a real impact and that it was not enough to engage on cosmetic projects which did not have any real impact in that area.

The Committee had been informed of the Living Legends Programme which was a new programme currently being implemented. The Programme was still in its initial phases of implementation and concerns had been raised with the Department at the criteria used for the programme given the diversity across the country. The Department was aware of those concerns which would be addressed and as further implementation of the Programme continued into the future. It was stressed that as the Programme was implemented in the future further adjustments would be made to ensure that a broad and diverse range of people across the country benefited from the Programme. 

On issues faced last year, regarding the Rhodes Must Fall protests and what the Department had done in terms of that issue, much progress still had to be made. Substantial improvements had been made in terms of name changes. The Rhodes Must Fall protests extended further than just the actual statue itself but extended to other areas regarding name changes and the transformation of colonial and Apartheid names. In the Eastern Cape a number of improvements in this regard had been made but a number of colonial names still remained such as East London and Port Elizabeth. There was however a general reluctance to change those names in particular but the Department was looking into the possible name changes of those metros and was engaging all of the relevant stakeholders. The Department was working very closely with Heads of Department of the provincial departments to ensure that they took responsibility for driving transformation on that issue at provincial level. It had been stressed to the HOD’s that they take full responsibility for contracting work out of the Department as what often occurred when work was contracted out, was that it was not adequately or fully completed by the contractors, which then resulted in wasted expenditure. It was stressed that the Department had informed the HOD’s that they take full responsibility for that issue and that they remain accountable for the expenditure of public funds.

Financial Report and Audit Findings

An official from the Department dealt with the audit findings from the AG’s office.

In terms of slide 45 of the Presentation the audit outcomes for the years 2010 to the present were dealt with. In 2010 to 2013 the Department had received an unqualified audit report, however in the 2013/14 year the Department received a qualified audit. In the years 2014/15 and 2015/16 however the Department had received an unqualified audit. In terms of the 2014/15 and 2015/16 financial year however the AG had indicated that there was a material adjustment to the financial statements for that year. The AG emphasised that there was material difference between the financial statements submitted on 31 May 2015 and the financial statements which appeared in the Departments’ annual report.

In the 2014/15 year it was noted that the Department was using an independent development class to roll out their infrastructure in terms of the Legacy Project. The Department treated this aspect in the 2014/15 year in terms of the modified cash standard and requested National Treasury (NT or Treasury) to approve that transaction being treated as a transfer to Independent Development Trust (IDT) which was approved by NT resulted in an authorised departure from the usual accounting standards. In that same year other departments such as IDT and the Department of Public Works (DPW) had also requested departures from the modified cash standards from NT. There was an issue in terms of GRAP 103 which had been raised with the Committee in previous meetings. This however was not an issue for the Department at the moment however the primary challenges faced related to the issue of the exemption. It was emphasised that Departments should not depart from the approved accounting standards even if it had been approved. The audit thus was based on its actual compliance with the applicable accounting standards regardless of whether approval had been granted for a departure from those standards or not. This created a challenge between the Department and the AG’s office, as during the Department’s consultation with NT they were informed that the Minister had approved the departure from the modified cash standard guidelines and were informed at that time that the AG should have accepted the exemption.

During the first few weeks of June and July the Department had not received any audit finding however during the last few weeks of the auditing process during July the advice Committee of the AG’s office had informed the Department that the exemptions granted by Treasury would be disregarded. This had created issues for the Department who accepted the qualification and agreed not to adjust its financial statements. Other Departments had threatened the AG’s office with court action due his disregarding the exemptions in the auditing process which was motivated on the basis that in terms of the Public Finance Management Act (PFMA) the Minister of Finance could approve departures from the applicable accounting standards if requested. One of the entities of the Department had engaged in litigation against the AG on that issue, challenging the AG’s disregard of the exemptions. The Department had decided however not to pursue court action and had informed the AG that they would modify their standards in order to ensure compliance with the applicable accounting standards.

Engagements had begun with IDT in the past year to allow IDT to give the Department vouchers for the verification office for the reports in terms of the Legacy Project which was currently being rolled out. During the week that the Department was being audited on this issue the AG had informed the Department that he would not accept a departure from the accounting standards of the exemption which was granted. Those transactions had affected a number of transactions of the Department as a whole in terms of their annual finances, such as the Department’s annual accruals and financial commitments. The AG’s report had identified commitments as an issue which related to the IDT’s appointment of contractors and service providers to do work on behalf of the Department. The Department had informed the AG that they had not contracted those service providers which were in fact contracted by IDT. The AG informed the Department that as the Department would pay the expenditure of the IDT at the end of the day, that commitment then fell under the Department’s financials.

The AG had made a finding of concern regarding irregular expenditure and contract procurement and management at the Department. Management had already drafted management action plans in that regard, however apologies were advanced that those plans had not been circulated amongst the Committee. The Chairperson agreed that those reports could be circulated at a future date, which the Chairperson requested be sent to the Committee Secretary. Following the AG’s findings, the Department had amended its management supply chain policy as the majority of the AG’s concerns related to the period of time taken to advertise a Department tender. In terms of the tender issue provided that tenders were advertised within 21 days no issues would arise, however if a tender was to be advertised within a shorter period that deviation would have to be granted by the accounting officer in order to remain in compliance with the applicable accounting standards. The AG had however found that that practice was not acceptable and that tenders would have to be advertised for the required 21-day period. The supply chain policies had then been amended to provide that tenders should not be advertised within a shorter period then the 21 day minimum unless it properly fell within the exemptions in terms of the Treasury regulations.

A further issue related to contracts awarded to builders which did not comply with the preference provisions in terms of the Preferential Policy Framework Act. The AG had advised the Department that under no circumstances should supply points be awarded to suppliers who had not submitted original BEE compliance certificates. Management made a commitment that all of relevant officials would be made aware of all the applicable preferential procurement regulations in terms of the Act. An official had been identified within the office of the CFO whose responsibilities would include checking all documents to verify compliance and that such an individual would be someone who had expertise in internal control processes.

In terms of the summary financial report the budget of the Department was R3.8 billion for the year and R3.7 billion had been spent. There was however under-expenditure of R63.3 million for the previous financial year. The under-expenditure was primarily due to the infrastructure development projects which had not been rolled out due to the financial forensic investigations which were occurring, resulting in many of those projects being halted in order to allow those investigations to properly proceed.

Under the summary of appropriation per economic classification the Department had underspent by approximately R5 million in terms of employee compensation, goods and services by R26 million, non-profit organisations by R15 million which cumulatively resulted in a total of R63 million under-expenditure, taking into account other areas where there was also further under-expenditure by the Department.

The presentation then dealt with the difference between the budget and the spending where the under-expenditure was due primarily to vacant positions that existed within the Department. Under goods and services there was under-expenditure of R27 million, however in terms of institutional governance there was over-expenditure of R9.9 million. This variance was due to the management fees charged by IDT and therefore was not necessarily a cash transaction but was due to the adjustments in the financial statements which created that over-expenditure. The Department had achieved 100% of its targets in terms of financial transfers to provincial departments.

There was R15 million under-expenditure under public co-operation and private enterprises, where transfers to beneficiaries were not all claimed by the end of the financial year.


The Chairperson stressed that the Committee could not continue to stress the same areas of under-performance in the Department without the Department taking measures to address those issues which kept on reoccurring every year. It was not acceptable that the Department continued to have issues regarding the submission of financial statements which had material errors and they continued to have such high levels of irregular expenditure and there was not proper control over issues such as procurement and contracts. These were issues that arose in respect of entities and the Department should be taking the lead in providing an example to their entities on good governance and financial management. It was stressed that the fact those issues are reoccurring was particularly worrying.

Worryingly if the department was so brazen in underperformance and reported such to the committee repeatedly, it was no wonder therefore its entities continued doing the same; as they learnt from the mother body. Particular issue was also taken with the under-expenditure of R101 million which was viewed as unacceptable. She wanted to know whether there was an efficient consequence management system in place where those who were responsible for the under-expenditure are hold properly accountable either through being held personally liable or otherwise.

Mr T Makondo (ANC) congratulated the Department on its unqualified audit. However, he, and the Committee as a whole, was disappointed with the other areas of recurring under-performance as noted by the Chairperson. He shared the concerns of the Chairperson in terms of concerns raised about proper accountability and consequences management and that it was important that the Department hold its officials accountable for persistent and recurring issues. It was not acceptable that the same issues continued to arise every year whenever the Department was called to account before the Committee. He wanted the Department to specifically account as to what steps had been taken to discipline officials who were responsible for the Department’s continuous underperformance and it was imperative that these issues were decisively dealt with as the public perception that public entities are not properly managed had to be brought to an end.

Mr G Grootboom (DA) had four questions. He noted that the Department had not achieved 34% of its objectives but its expenditure was at 98% and he wanted to know how those two figures could be reconciled with one another. The second question related to the persistent problem of supplying books and materials to libraries, where there was only 30% spending on library materials and he wanted further clarity on that issue. The third question was a point of clarity on the Heritage assets which had a 48% expenditure and wanted further clarity on those figures. The fourth question related to the Artists in Schools employment project which was a good initiative, however, he noticed that the majority of the artists employed in the project were young artists. The majority of the young artists had not yet mastered their trade whilst there was a high amount of older and more experienced artists who had established themselves in that field, yet those older artists experience and expertise was not being utilised. His question was essentially whether it would not make the project more effective if older and more experienced artists were also employed in the programme.

Mr Moteka agreed with the concerns raised by Mr Grootboom in terms of how the discrepancy between the Department’s expenditure and budget could be reconciled. There was initially a shifting of funds from programme 2 and then there was over-expenditure in terms of that very same programme. He questioned why there was shifting of funds from that programme and then that exact same programme reflected over-expenditure. There was also an under-expenditure in terms of programme 1 and he wanted to know how that could then be reconciled? A further question was raised regarding the filling of vacant positions in programme 1 which was very slow and he wanted to know why the Department was so slow in filling those vacancies. He shared the concerns of the Chairperson regarding consequences management and whether disciplinary or other measures had been taken against officials who were responsible for irregular expenditure.

Mr J Mahlangu (ANC) stated that the Committee wanted the Department in future presentations to focus on areas of underperformance in order to allow the Committee to perform its oversight function more effectively, and that the Department had to take the lead in setting the example for its different entities. In terms of irregularities he noted that the Department was responsible for around 20% of its total budget with the entities being responsible for the remaining 80%. The Department’s irregularities in terms of that same figure showed R111 million irregular expenditure, whilst the entities who controlled the rest of the budget had a total of R60 million. It was not acceptable that the Department had such a high level of irregular expenditure despite being responsible for less of the budget, which was very concerning. In his personal experience it was important for entities to fully disclose all of their expenditure and that if there was any uncertainty there should be a pro-active attitude of informing the AG in order to remedy any problems before they arose. This would create a good working relationship with the AG’s office which was a key component of good leadership in terms of financial and legislative compliance. It would improve the working relationship with the Committee if areas of concern were disclosed in advance and not discovered later by the Committee. He stressed that it was not the role of the Committee to find fault with the operations of the Department but it could only effectively perform its role if those issues were properly disclosed to the Committee.

The Chairperson said that under-expenditure was a serious issue which the Committee took very seriously. This created a negative public perception where the programmes and policies of the Department could not be properly implemented due to under expenditure which would then simply be transferred back to Treasury.  Citizens would ask what the portfolio committee’s job was, if under-expenditure continued with the attendant lack of service delivery. The issue of not achieving their targets was unacceptable and it was important for the Department to apply their mind to the targets which they set in order to ensure that they could be properly achieved.

The Acting DG responded that it was problematic that the Department simply analysed issues without implementing solutions which would be addressed. As the Department was only responsible for 20% of the budget, the remainder being the responsibility of the various Department entities, this was a flaw in the system and it would be preferable if the work done by the Department focused more on policy work and monitoring. This could however be rectified through the policy process where the Department could redesign its operations to better achieve its mandate. The Department was also responsible for implementing its own projects where much of its irregular expenditure arose, especially with regard to the procurement process for those projects. He accepted the criticisms of the Committee and noted that a proper overhauling of the Department’s operations should be done in order to address the concerns at the Department and to improve its functioning.

The Acting DG then dealt with the concerns of the Committee relating to consequence management. Around 17 officials were currently undergoing disciplinary process and he stressed that the Department did take issues relating to financial mismanagement and poor performance seriously.

The Department did set its own targets, however, in certain cases various events arose which resulted in the Department being unable to properly achieve them. He gave the example of Rhodes Must Fall in 2015 which was something that the Department had not planned for but which required a response from the Department thus resulting in certain targets having to be re-prioritised in order to address pressing concerns when they arose. When the Department set its targets it did make provisions for unplanned contingencies which required targets to be re-prioritised, however, he admitted that the Department was not properly prepared for the issues which arose in respect of the Rhodes Must Fall movement. A second issue was the public defacing of statues which required the Department to embark on road shows to encourage discussions regarding those matters and discourage the defacing and vandalism of those statues.

The Chairpersons noted that the acting DG’s responses. She wanted further details regarding progress and outcomes of the various disciplinary hearings against the officials mentioned by the acting DG. The Committee needed those further details in order to properly exercise oversight and monitor its performance. She reiterated that the Committee would not be satisfied if the Department returned the following year and the same issues were raised again. She requested that further written details be provided regarding the disciplinary procedures and circulated amongst the Committee so that it could perform effective oversight and monitor the implementation of progress.

Mr Makondo said he differed slightly with the comments of the Chairperson. He wanted total disclosure regarding all the processes of the Department in order for its issues to be properly addressed. He was concerned at the slow process of recruitment and was not satisfied with the acting DG’s responses regarding those issues and wanted to know who was responsible for the recruitment processes within the Department. He also requested further clarity regarding who was responsible for monitoring the 80% of the budget which was sent to the Department’s entities.

Mr Moteka made a proposal that the Department forward the progress and outcomes of the disciplinary processes currently underway to the Chairperson’s office within the next two weeks.

The Chairperson agreed with the comments made by Mr Makondo regarding the issues around the Department’s budget. She raised further concerns regarding the fact that many vacancies had not been permanently filled with many appointments being on a temporary basis. A complete plan should be formulated to address that issue and where vacancies were not filled serious implications arose such as work not being completed. The Nelson Mandela museum was specifically mentioned where employees had done work with no remuneration, which was unacceptable. She stressed that the Committee needed to be informed of these issues in a proper manner so that it could provide proper assistance to the Department in addressing issues they had where the Committee was in a position to do so.

An official from the Department addressed some of the concerns relating to the filling of vacancies raised by the Chairperson. In the Governance unit responsible for managing the Department’s entities five Deputy Directors and one Director under the leadership of Dr Sakiwo Tyiso, Chief Director: Coordination of Monitoring and Evaluation and Governance and herself. There had been an improvement in the management of entities and the former CEO of Market Theatre had been deployed to Parkhof due to his good work at other entities in the Department as an interim CEO. Dr Tyiso had been deployed to the Nelson Mandela museum, which required proper executive management and leadership to improve its performance. The State Theatre’s CEO position had been filled and it was hoped that its performance would then subsequently improve. Detailed reports were produced on a monthly basis for the various entities and proper monitoring was done in respect of entities which did not fulfil their set targets. The first quarter had recently been received which could be made available to the Committee if they wanted to examine it.

Ms S Tsoleli (ANC) made the suggestion that the Department provide the Committee with detailed reports of any interventions that it made in the various entities. She disagreed with the comments made by the delegate that the situation at Parkhof was improving as, in her view, the standards at that entity had gradually been deteriorating. The Committee had received a number of complaints regarding Parkhof which was contrary to what was presented to the Committee. The policies may be in place but it was important that stakeholders were properly involved in policy formulation and implementation which, in her view, the Department was not properly adhering to. The committee would really need to see intervention taking place because it would be followed by progress. It was not enough to simply do implementations in problem areas without actual meaningful progress occurring.

The Chairperson agreed with the comments and concerns raised by the Member and specifically mentioned the Nelson Mandela museum again which, in her view, was suffering from serious issues and deficiencies in its management. It was not the responsibility of the Committee to intervene unnecessarily in issues of poor management of entities in that capacity, which fell to the Department and intervention by the Committee directly would raise serious separation of powers concerns. The Committee had been bombarded with emails from entities of the DAC especially from the Sarah Bartmann Centre of Remembrance until the Nelson Mandela Museum, including Parkhof staff for intervention. She stressed that the appointment of board members to the institutions of the Department should be properly qualified and that the Department must exercise continuous oversight over those entities to ensure good governance and the proper expenditure of public finances. It was stressed that it was very important that proper management and oversight of the entities expenditure and governance was undertaken by the Department given the fact that 80% of the Department’s budget was allocated to those entities.

A delegate from the Department spoke to the issues regarding heritage assets and the discrepancy between its expenditure and its official budget figures. The reason for the discrepancy was that the conceptualisation of heritage assets took longer than expected, which resulted in the spending been delayed. In terms of the other discrepancies in the budget and expenditure in general, the auditing processes of all the Departments’ targets must be 100% achieved even if all of the finances had not been spent despite that target not actually been achieved which resulted in the discrepancy.

Mr Grootboom requested clarity on what the delegate meant by the conceptualisation of heritage assets.

The delegate replied that conceptualisation in terms of the Heritage assets related the statues of Chief Fuba Zibi of the Amahlubi which had been commissioned, which required consultation with various stakeholders to ensure that the actual statue reflected the likeness of the Chiefs which the statues were intended to depict.

Another delegate from the Department replied further regarding the discrepancy between the budget and the actual expenditure. In terms of one programme there was a particularly large transaction which could not be transferred due to that matter being subject to an investigation, with the result that those funds could not be transferred until that investigation was completed, which was the reason for the under-expenditure in terms of public corporations and private enterprises. In the Community Arts space the process had unfortunately begun late on the Department’s side, which resulted in a contract being concluded but implementation actually not occurring as a result.

She replied to the issues raised by Mr Grootboom on his concerns over the Artists in Schools issue. Whilst the Committee viewed the programme as a worthwhile enterprise various issues had arisen with regard to its implementation. A real challenge in terms of the programme was the fairly low remuneration levels which resulted in more experienced artists being less willing to participate in the programme given the low levels of compensation. The programme required some level of teaching experience, and whilst the Programme was not perfect the Department was continuously working on improving its implementation. Further details would be gathered regarding the age breakdown of participants in the Programme and those details would be circulated amongst the Committee when had been collected.

Another delegate commented on the issue regarding the filling of vacancies and noted that there were still 38 vacancies left at the end of the financial year. The compensation budget cuts imposed by Treasury resulted in the Department identifying only 11 vacancies that they would be able to permanently fill which was a consideration to keep in mind, as any additional appointments would place the Department over the ceiling imposed by Treasury due to those budget cuts. The Department had done a skills audit and the second step would be to examine the work study in order to more effectively make use of the current persons employed by the Department and to ensure that the Department fulfilled its mandate without having to fill those vacancies over and above what the current compensation budget cuts allowed.  

The Chairperson noted that it was the responsibility of the Department to inform the Committee of any issues they had regarding the filling of vacant posts. She noted particularly the restructuring that had occurred at the Nelson Mandela museum which formed the basis of many complaints received by the Committee. The complaints primarily related to the fact that employees had to do work for two different units yet they received the same package as if they worked for only one entity, which was a cause for concern. It was important for the Committee to be properly informed of these issues so that it could properly track the Department and its entities progress.

Mr Makondo noted that the same issue regarding the fulfilment of unfunded positions had been raised with the two previous entities that had appeared before the Committee that day. The budget only allowed 11 positions out of 38 to be filled, but he wanted to know when those positions would actually be filled. As the demands of the Department mounted, it would not be acceptable for the Department to leave those 11 positions unfilled which required appointment as a matter of urgency. He wanted a commitment as to when those positions when actually be filled even in terms of the current budget cuts and that it was important to prioritise the posts that were most critical.  

The Chairperson agreed with the comments of Mr Makondo and noted that the position of the Director General was taking a very long time to find a permanent appointment. Acting appointments created particular issues as persons who occupied those positions were often hesitant to take important decisions for fear of those decisions later having negative consequences given the fact that they were only temporarily employed in those positions.

A delegate responded that of the eleven vacancies a number had been filled but further information could be provided at a later date as to when those vacancies were filled and which positions still required a permanent appointment.

The Chairperson then adjourned the meeting.


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