Enyokeni Cultural Precinct Project Forensic Investigation: Department Arts & Culture further report, in presence of Minister

Meeting report

Opening and welcoming remarks
The Chairperson reminded Members of the need for confidentiality. The Committee had oversight functions to perform and in that capacity was concerned to interrogate some further issues arising out of the forensic investigation report into the Enyokeni Cultural Precinct Project (ECPP). These included abuse of deviation clauses, where contractors used sub-contractors appointed by itself instead of using selected contractors, over-billing and extension of the scope of the ECPP, not following due process and not having a terms of reference or memorandum of agreement with the service providers. The Committee wanted an update on remedial actions taken by the DAC against the people involved in awarding the ECPP project and the consultants. The Committee would confine itself to these issues in the current meeting.

In addition the Chairperson stated that the DAC had requested that the Committee members should sign an oath of non-disclosure of the Forensic Investigation report on the ECPP. She further asked the DAC if they had any other submissions

Enyokeni Cultural Precinct Project Forensic Investigation: Department Arts & Culture report and update

Mr Vusithemba Ndima, Acting Director General, Department of Arts and Culture, said that the Department (or DAC) did not wish to make any further submissions to what it had described already in a previous meeting. An executive summary of the outcomes was contained in the document that had been handed out.

Discussion
The Chairperson invited Committee members to comment.

Mr J Mahlangu (ANC) stated that the Committee did not need to sign another oath of non-disclosure as Committee members had already taken an oath previously and were committed to it. He also observed that the Committee had dealt with more sensitive matters previously, and understood that they had a responsibility of not exposing any matter.

Dr P Mulder (FF+) supported Mr Mahlangu that the Committee Members should not take a new oath.

Mr Ndima appreciated the guidance given by the Committee on the matters that concerned the DAC. He reported that because of the people and the service providers involved, a non-disclosure clause was signed by the dignitaries from DAC, which is why the Committee had been asked to do the same.

Mr D Makondo (ANC) expressed the Committee's concerns on the forensic report received during the meeting with DAC during the previous week. He observed that the Enyokeni Project had not been budgeted for and the consultants received payment before the Independent Development Trust (IDT) was appointed to manage the ECPP project as stated in the document. He asked what processes the DAC followed when a project such as the ECPP was implemented, particularly because it had not been captured in the Annual Performance Plan (APP). He asked what were the consequences of spending government funds on projects not included in the budget. He further asked whether the DAC or the Minister had the power to authorise such projects, and the consequences of undertaking such projects. He wanted to know if this was the only un-budgeted project undertaken, asked it to explain why such projects were undertaken, and also to explain why the consultants received payment in August 2013 while the IDT was only appointed to manage the project on 8 November 2013.

Ms S Tsoleli (ANC) noted that the project did not have a business plan, was not classified as a capital project and was not included in the budget. She summarised some points from the report and asked the DAC to explain: 
- what processes were used to initiate the Enyokeni project, since the report noted that it had not followed any of the required standards or due processes
- why consultants received payment through Pay Sal (used for salaries) and not Bus Sal (used for business payment)
- why there had been little or no input from the office of the Deputy Director General: Heritage Promotion and Presentation
- why the DAC initiated the Enyokeni project in March when the financial year was about to end
- the business plan and how much funding was involved in the under-spend before funding had been allocated to Enyokeni project
- why payments were transferred to the Enyokeni project that was not initially classified as a capital project.

Ms N Bilankulu (ANC) expressed concerns on the consultant recruitment policies used to award the contract to the consultant. Additionally she observed that the report stated that the former Director General had approved the project, and the first payment came before the contract started. The DAC carried out physical dumping of underspent funds to this project. She wondered if the DAC had policies in place to award contracts and whether these policies were followed to award the contract to the consultant. She asked if the first phase of the contract had been completed, why the project was included in the financial year when it was not even part of the APP and whether this ECPP had given value for money. She also asked the DAC to clarify whether the former Director -General personally, or his office, had approved the contract. She wanted details of the final amount paid to the consultant and whether contractors were supposed to be paid from Bus Sal or Pay Sal.

Mr Mahlangu commended the Minister for setting up the forensic investigation and making the reports available to the Committee. He encouraged government entities to take similar steps when irregularities occurred in their day to day activities. The report noted that DAC had failed to adhere to the Public Finance Management Act (PFMA) and therefore needed to explain the reason. He also observed contradictions between the South African Roadies Association (SARA) settlement agreement projects implemented by DAC and the Enyokeni CPP. This document stated that DAC received a request to list the ECPP as a capital project but this was not captured by the forensic investigation report. The DAC did not have a specific policy that governs projects and did not follow criteria for implementing projects. In addition, DAC dispatched funds to the consultant without carrying out feasibility studies on the ECPP. He asked what the DAC was doing to manage the consequences of the failure of the ECPP, who owned it and who was responsible for it.

He noted that the former Director General, instead of the Chief Financial Officer (CFO), had handled the financial matters, and he asked for clarification of the role of the CFO in the ECPP, and whether the current CFO had confirmed what actually happened to the funds disbursed. He also asked what DAC would have done to remedy the initial observation of the Committee on underspent allocated funds if there had been no physical dumping to the Enyokeni project.

He asked why the name of a particular festival was included in the confidential report and how this festival related to the ECPP. He also wanted to know which capital project was put on hold for the Enyokeni project, and what was the state of that project.

Ms Tsoleli asked for an update on the ECPP with a note of exactly how much had been spent and how far it had been completed.

Mr P Moteka (EFF) expressed concerns on what happened to projects captured in the APP but that were put on hold during the financial year. He too wanted to know which particular project had been put on hold so that DAC could undertake the ECPP.

Dr C Mulder (FF+) asked whether DAC had considered the IDT inputs before paying the consultants.

The Chairperson observed that the DAC clearly erred by deciding to undertake the Enyokeni project without any criteria having been met. Even without seeing the forensic report, the Committee had already expressed its concerns on underspending of allocated funds, cautioning that this might result in physical dumping, which had now been confirmed by the forensic report. She repeated questions on the project put on hold. She wanted updates on the funding model, and the time frame for the investigation of the former Director General.

Mr Ndima confirmed that due process was not followed on the ECPP. The due process demanded a proposal to do a cultural precinct, with well laid out business plans. DAC was involved in the implementation and did not give ownership to any stakeholder.

The Chairperson stated that the Committee insisted upon detailed information on the ECPP.

Mr Ndima reported that the Heritage Promotion and Presentation (HPP) team had initially met with the King to gain support for DAC programmes in the Kingdom, and to ensure that correct protocols were followed in implementing this projects. During the visit, the King informed the HPP team that the young girls who came for festivals had challenges with the accommodation. The HPP team explained that before any projects could be initiated, a proposal with a full business plan would have to be submitted to the DAC. This was also included in the back-to-office report. However, the HPP unit had only been told of this on 31 March 2014. The mandate for management of the ECPP was granted when payment of R54 million was received by the consultant.

The Chairperson interjected to ask whether ECPP had a budget.

Mr Ndima reported that the ECPP did not have a budget. In addition, when the HPP unit asked for a clear hand over process with concept documents, it had observed that the procurement process was unclear, as the funds allocated were transferred by the accounting officer. He emphasised that the ECPP was initiated without the involvement of the HPP unit. That unit had been called in to manage the Enyokeni project when the funds were transferred by the accounting officer to the consultant.

Mr Mahlangu and Mr Moteka asked for detailed information on the how the funds were transferred to the consultant of the Enyokeni project.

Mr Makoto Matlala, Chief Financial Officer, DAC, reported that the Office of the Director General had appointed IDT as project manager of ECPP and had transferred the funds to IDT, which was  a public entity falling under the Department of Public Works (DPW). This was done using the correct documentation. The accounting officer of DAC had transferred funds from an uncompleted infrastructural project to the ECPP,  but had taken the decision to do so personally, without the knowledge of the HPP unit.

Mr Moteka (EFF) sought confirmation that ECPP was therefore approved without a proposal or a business plan.

Ms Bilankulu asked if the funding disbursed, totalling R54 million and R77 million, had been disbursed in a one-off payment or in tranches.

Ms Tsoleli asked DAC to confirm which office had prepared the documentation appointing the consultants, and asked what was the correct accounting process to use for such appointments.

Mr Matlala reported that the accounting process required these payments to be initiated by the unit purchasing the items.

The Director: Internal Audit, DAC, responded that the DAC entered into an agreement with IDT supposedly for the purposes of upgrading library infrastructure. The Royal House then submitted a letter to the DAC. However, that request in the Royal House's letter was implemented as the ECPP, and was managed as an infrastructure project by the DAC. That letter did not contain a business plan. The letter was then amended. DPW was supposed to assist DAC with the ECPP, but it did not. IDC was then appointed on 8 November 2013 without proper planning, as set out in the documentation handed out.

Ms Bilankulu asked if DAC was managing other projects apart from Enyokeni project, whether these other projects had followed due process, and an explanation if they had not.

Mr Ndima reported that the DAC did manage other projects - for instance the Bombata Sculpture project, all of which had followed due process; the ECPP was the only one that did not. The HPP unit initially raised questions on the Memorandum of Agreement, and had also discovered that the accounting authority did not vet documents before the funds were transferred on the ECPP. The ECPP project, however, was not the first or only project to have been funded without being on the APP, because from time to time DAC supported projects that would be beneficial to the community even though these projects were not in the APP. The difference with this one was that the project had been flawed.

The Chairperson interjected to ask why DAC initiated and implemented projects that were not originally in its APP.

Mr Ndima reported that supporting projects that were not originally on the APP was a weakness on the part of the DAC. DAC was now looking for ways to stop this negative trend. Funds were released to the consultant before the Enyokeni project started because the pace of capital projects was slow. He agreed that the Office of the Director General had enlisted the consultants on 22 August 2013, before the project started. He said that due process indicated that funds should be transferred to consultants using the Bus Sal system.

Mr Makondo said that, according to the forensic report, the consultant was paid before the ECPP was started. The HPP Unit had not been involved initially because this ECPP project had started as a library project initially, only later being changed to a cultural precinct project. The HPP unit could not claim that the Enyokeni project occurred without its involvement, because the DAC could not perform its heritage and culture functions without the assistance of the HPP unit.

Mr Ndima emphasised that he was the head of the HPP unit, and he repeated that this unit only got to know about the ECPP when R54 million funds were transferred.

Mr Matlala reported that an exemption was used in paying the consultants because they were recruited as individuals. This was how they could be paid on Pay Sal rather than Bus Sal. Bus Sal could not calculate wages with PAYE.

He added that the payment was also an IDT transfer and not a capital transfer, because payments were not made internally but through agents. The agents kept the transferred funds in an expense account until the invoices and supporting documents were received. As a result the DAC received an exemption for the transferred funds in the 2013/14 financial year but the DAC reported this as work in progress when the invoices and supporting documents were received from the IDT after the 2013/14 financial year so there were no audit findings.

Mr Makondo interjected and asked the DAC to confirm that there were no other adverse audit findings, since the forensic report stated that the processes that IDT took were not fair.

Mr Matlala reported that irregular expenditure was treated in two way. If the DAC was part of the bid it would be treated as non- compliance. An agency involvement would be treated differently. In the ECPP, the DAC had not been part of the bid, so there were no audit findings on DAC.

The Director: Internal Audit reported that as a result of the findings of the forensic report, criminal charges had been laid against the former Director General. In addition the IDT was being held responsible for paying the consultants 4% of the funds released, instead of 1%.

The Chairperson asked whether the excess funds paid to the consultants had been recovered, and she reported that they had not been recovered.

The Chairperson asked whether the consultant had given value for funds paid on the ECPP.

Mr Ndima said that ECPP had not added value for funding, as evidenced in the forensic investigation outcome document handed out.

The Chairperson asked what DAC was doing to recover the funds, since the consultants did not sign any agreements with DAC.

Mr Ndima replied that the DAC was still trying to establish the terms of reference and would, after that, seek advice from its lawyers.

The Chairperson observed that the DAC had not responded urgently to the forensic report and had not yet dealt with the people involved.

Ms Tsoleli asked the DAC to confirm how far the ECPP had gone.

Mr Ndima reported that the Enyokeni project was far from being complete. The initial verbal request was to provide accommodation for the young girls who came for festivals, and this had not being done. Furthermore, construction of the royal square was not complete, the amphitheatre was still exposed to weather, and the ablution and kitchen facilities in the amphitheatre had not been constructed.

Ms Bilankulu followed up on the issue of consultants, asking if they were indeed professionals, whether the DAC had a ministerial monitoring and evaluation unit, and, if so, if it had monitored this project. She asked if IDT accounted at all to the DAC. She wanted to know of any charges laid.

 and if the unit had monitored the Enyokeni project and given a report. In addition she asked if IDT was a unit that accounted to DAC and asked for an update on the charges laid against IDT,

Mr Moteka recognised that the irregularities with the ECPP had occurred during the tenure of the former Director General. However, he wanted to know what the new administration was doing to hold the people involved accountable, how much funding had been spent on the Project and how much in total was likely to be spent on it.

Dr Mulder agreed with the Chairperson that the DAC had shown little sense of urgency in responding to the forensic report, and had not yet dealt with the people involved, and it was obliged to do so even though this incident occurred under the tenureship of the former Director General. He asked Mr Ndima therefore to give an update on the money that has been spent and how much the DAC intends will be spent on the Enyokeni project ultimately.

Mr Ndima reported that DAC was presently liaising with the legal team in order to recover the excess funds paid to the consultants, as a result of misrepresentation of charges by IDT. Under his own leadership as Acting Director General, no further funds had been spent on the ECPP itself, although some funding had been put into monitoring the Project. The ECPP was now captured in the APP because it had been initially implemented, and because funds had been spent on law enforcement. The new administration did not want this Project to create a bad record for the DAC.

DAC had discussed the reasons for the delay with the royal house, and had committed itself to engaging in discussions on ownership of the Project, despite the challenges to date, so that it could take corrective measures.
 

The Chairperson interjected, asking the DAC to remind the Committee of the plans as set out in the APP.

Mr Ndima reported that completion of the amphitheatre construction was the major objective of DAC in regard to this project. DAC was considering whether to continue working with the IDT, because IDT had initially contributed to possible fruitless and wasteful expenditure. DAC would therefore undertake to finance the ECPP on its own.

Mr Moteka reminded Mr Ndima that he had not yet stated how much was spent on the Project so far. DAC could not move on with this project without knowing how much had already been spent as this implied that other projects would remain on hold or not be allowed to continue.

Other Members said that the ECPP had now been captured on to the APP because the forensic report had suggested that it must be treated as a legacy project, but that the Committee must get updates both on the status and the amounts spent.

The Chairperson advised the DAC to rectify all the areas of concern before continuing with the Project. Even though further funding may be required, she still wanted an estimate of what had been spent so far.

Mr Ndima reported that the ECPP quarterly targets would be met without additional funding. He repeated that the DAC had consulted with the royal house and a draft Memorandum had been prepared. Because of the criminal charges laid against IDT, it was not considered advisable to keep working with it on this project. DAC was now working with the Department of Sports and Recreation because of the criminal charges laid against IDT.

Dr Mulder observed that although ownership of the ECPP was complicated, DAC must settle this issue before spending any further funds.

Mr Makondo wondered if the DAC had the capacity to complete the ECPP, seeing that the Department of Sports had not generally dealt with cultural precincts, and feared that the project might end up back with the IDT. DAC did not appear to have done due diligence on the Project before it was taken over and incorporated into the APP. The Committee wanted to know the full brief to avoid any further waste.

Mr Ndima noted the observations and concerns of the Committee and promised to give feedback on their recommendations. DAC had learned hard lessons from the implementation of the ECPP, and had therefore taken corrective measures with the SARA project. The White Paper would contain progress on the funding model. The funding model had set criteria, and the DAC had a panel that looked into the merit and transparency of the funding model processes.

Mr Mahlangu (ANC) advised the DAC to seek legal advice on the issue so that DAC would be justified in rejecting other similar requests, if made by other traditional rulers.

Mr Ndima reported that the case on misappropriation of funds had been transferred to the former accounting officer's new employer, according to the Public Service Act. There are ongoing meetings being held on the issues.

The Chairperson asked Mr Ndima if the new employer was showing interest in pursuing the case.

Mr Ndima responded that the new employer had requested the file.

The Chairperson asked Mr Ndima to give a time frame on how long this case would take.

Mr Ndima replied that the DAC had communicated the urgency of the matter to the new employers during a meeting but could not give any time frame.

The Chairperson gave a summary of observations. Under-spent funds meant for budgeted projects were used for the ECPP, and the Committee still wanted the DAC to give feedback on the projects put on hold for the ECPP.

Furthermore, the Committee expressed its deep concerns on the way the DAC had handled the case of the accounting officer and urged the DAC to urgently follow-up with the new employers so that he would be held accountable.

The Committee mandated the DAC to identify and furnish the Committee with a figure on how much the remaining phases of the ECPP would cost. The Committee advised DAC to work within Government prescripts and give a report on the recurring issues of physical dumping, under-spent funds in Government spending and progress on the White paper.

Minister's comments

Mr Nathi Mthethwa, Minister of Arts and Culture, said that the DAC would appreciate continuous engagement with the Committee. The forensic investigation was initiated by his office to get clear information on the matter. He reported that the progress on the White Paper had been slow, in order to allow stakeholders to contribute to the process, and it should be completed in the next financial year. He explained further that the ECPP had been part of the physical dumping, because the DAC had under spent on its budget allocation.

The Chairperson asked that the DAC should give further feedback on these issues.

The Chairperson requested Mr Ndima to give an update on the matters set out in the agenda - namely SARA, feasibility report on the funding of events and the draft White paper.

Mr Ndima reported that, a proposal on the life event/technical and production service of 2016/17 had been completed. Payments had been made for 2016/17 phase, however payment for the next phase would be in 2017/18. In addition sector practitioners had called for a skills audit. A feasibility study had been conducted on the training of the response department and tenders had been opened in August and closed in September. This would be finalised before end March.

He noted that the investigation into the National Arts Council was completed and the information, which was confidential, would be shared with the Committee. The DAC would be coming up with further accounting policies in line with the PFMA.

Mr Ndima reported that in relation to SARA, the legal team would assist with the agreement settlements and would recommend whether the DAC should carry on with the renovations, as the monument is a South African heritage site. However, technical expertise is needed for the tender documents and the actual bidding. The DAC is also working with SARA to resolve the deadlock between them.

In relation to the Backstage Academy Project a feasibility study is being carried out, to identify whether the project can be customised, because the legal team is not in favour of the project.

He then reported on the progress of the White Paper. The DAC would be having an indaba on 17 and 18 November although the White Paper would be submitted next year. A list of all the events that the DAC would fund would be given in the next briefing.

The Chairperson mandated the DAC to draw up a list of events the DAC would fund, and give feedback on all questions asked and concerns expressed by the Committee.

Discussion
Mr Moteka stated that the DAC should resolve issues with SARA as a matter of urgency. He asked for an update on the R5 million allocated to SARA, which it claimed not to have received.
 

The Chairperson noted that SARA had different areas of funding.

Mr Ndima reported that in this financial year, R5 million had been allocated to SARA but it was not transferred because SARA and DAC had not agreed on the terms of reference. He also committed to giving a feedback on issues that concerned SARA during the next meeting.

Closing remarks

The Chairperson stated that the consideration and adoption of Committee minutes would be postponed.

She thanked Members and said that officials should not take it personally when a number of questions were raised.

The meeting was adjourned.