The Department of Performance Monitoring and Evaluation (DPME) briefed the Committee on the progress made by the Department of International Relations and Cooperation (DIRCO) in meeting its medium term strategic framework (MTSF) targets for the 2014 to 2019 period. While the main emphasis was on Outcome 11 of the National Development Plan – to create a better South Africa, contribute to a better and safer Africa in a better world -- other sub-outcomes that were highlighted included South Africa’s national priorities being advanced in bilateral engagements, an economically integrated Southern Africa, and political cohesion within South Africa to ensure a peaceful, secure and stable Southern African region.
There had been substantial progress with SA’s national priorities being advanced in bilateral engagements. There had been three structured bilateral mechanisms held with Tanzania, the Democratic Republic of Congo and Sri-Lanka to promote national priorities, the African Agenda and the Agenda of the South. The Department had participated in the Southern African Development Community (SADC) observer mission for the Lesotho National Assembly elections that took place on 3 June 2017. The SADC Electoral Observation Mission had declared the election as free, fair and peaceful. The Department had planned disbursements for approved projects for development assistance in support of democracy and good governance, capacity-building and humanitarian assistance. The annual target was R221 million, with about R65 million expected to be spent in the first quarter of 2017/18 on a Guinea Conakry rice and vegetable production project (R1.6 million) and a Cuban economic package (R63 million).
DIRCO was rated according to the Management Performance Assessment Tool (MPAT), and its scores for its key performance areas (KPAs) -- strategic management, governance and accountability, human resource management and financial management -- from 2014 to 2016 were presented. Strategic management and financial management were compliant to prescripts and legislation, but governance and accountability, as well as human resource management, were operating below the compliance level of 3.
The audit of the financial statements for 2016-17 had resulted in an unqualified opinion. Regarding the findings on compliance with key legislation, there were problems in entity managements. Comparing 2016-17 with the previous year, unauthorised expenditure had come down from R167 million to R34 million, fruitless and wasteful expenditure had dropped from R6 million to R3 million, but irregular expenditure had risen slightly, from R344 million to R368 million.
DIRCO’s audit and risk committee said some of the commendable actions that had contributed to positive outcomes were its interactions with the Porfolio Committee (PC), regular attendance of the audit committee meetings by the Director General (DG), and enhanced tracking and monitoring of its resolutions. Some of the current challenges were the non-payment by DIRCO of old African Renaissance Fund (ARF) accounts, administrative deficiencies, and the need for the roles of Heads of Missions (HOMs) to be clarified, including the amendments to performance agreements, to reflect their administrative responsibilities. It was recommended that proper investigations be conducted on the recurring irregular, fruitless and wasteful expenditure.
DIRCO 2014/19 Medium Term Strategic Framework (MTSF): DPME briefing
Mr Joy Rathebe, Outcomes Facilitator: Department of Performance Monitoring and Evaluation (DPME) briefed the Committee on the progress made by the Department of International Relations and Cooperation (DIRCO) in meeting its medium term strategic framework (MTSF) targets for the 2014 to 2019 period.
While the main emphasis was on Outcome 11 of the National Development Plan – to create a better South Africa, contribute to a better and safer Africa in a better world -- other sub-outcomes that were highlighted included South Africa’s national priorities being advanced in bilateral engagements, an economically integrated Southern Africa, and political cohesion within South Africa to ensure a peaceful, secure and stable Southern African region.
Ms H Maxon (EFF) observed that the Committee did not have a copy of the presentation. Mr Rathebe apologised for this. The Chairperson suggested that Mr Rathebe continue his presentation while copies of the documents were being produced.
Referring to sub-outcome 1, he said there had been substantial progress with SA’s national priorities being advanced in bilateral engagements. There had been three structured bilateral mechanisms held with Tanzania, the Democratic Republic of Congo and Sri-Lanka to promote national priorities, the African Agenda and the Agenda of the South. The target of 346 economic diplomacy and image building activities aimed at promoting mutually beneficial cooperation undertaken per year, had been achieved.
Sub-outcome 3 focused on political cohesion within Southern Africa to ensure a peaceful, secure and stable Southern African region. The Department had participated in the Southern African Development Community (SADC) observer mission for the Lesotho National Assembly elections that took place on 3 June 2017. The SADC Electoral Observation Mission declared the election as free, fair and peaceful. 31 trained mediators were added to the trained civilian database, exceeding the target.
The Chairperson asked if the mediators were at the presidency or ministerial level, and said that this could be answered later.
In relation to sub-outcome 4 -- a peaceful, secure and stable Africa -- the indicator was a comprehensive strategic framework for the filling of South African allocated quotas for both SADC and the African Union (AU), where a medium term strategic framework (MTSF) target of 16 posts had been set.
Regarding a sustainable, developed and economically integrated Africa, the Department had planned disbursements for approved projects for development assistance in support of democracy and good governance, capacity-building and humanitarian assistance. The annual target was R221 million, with about R65 million expected to be spent in the first quarter of 2017/18 on a Guinea Conakry rice and vegetable production project (R1.6 million) and a Cuban economic package (R63 million).
As part of the contribution to a just system of global governance, DIRCO’s aim was to ensure resolutions, decisions and outcomes reflecting South Africa’s national interest. The target was achieved, with South Africa’s national interests reflected in 80% of resolutions, decisions and outcomes. There were a number of positions on identified influential multilateral bodies where South Africa was represented, such as the United Nations (UN), and the country was currently represented at 69 international organisations. Among the strategies for South Africa’s engagements for formations and groupings of the South developed, implemented and monitored, an Indian Ocean Rim Association (IORA) Strategy had been developed and finalised.
Substantial progress had been made in developing strong and mutually beneficial south-south cooperation. National BRICS structures had been utilised to implement agreed BRICS outcomes.
Mr Radebe said it was worth noting that the strategic nature of the MTSF rendered it impossible to monitor and report on other critical work that DIRCO was engaged in, such as regional integration and peace missions. The nature of the work was difficult to measure, as it was more qualitative than quantitative, and the achievement of goals was dependent on cooperation with other states, or the lack thereof.
Management Performance Assessment Tool (MPAT): DIRCO ratings
Mr Henk Serfontein, Public Service Monitoring: DPME presented on the Management Performance Assessment Tool (MPAT), and said the whole report was based on the assessment that was carried out in September 2016. The results were 2016 results.
The MPAT had been implemented to facilitate reforms in management practices in government departments. In addition, it was designed to complement the systems approach by ensuring a capable public service, as envisaged by the NDP. The NDP identified the need to have focused initiatives in building a capable state and acknowledged that although the government had interventions in this regard, they were not integrated and neither did they have a long-term focus. In the seven years of the MPAT assessments, it had essentially been about a holistic approach for dealing with managerial and leadership practices in the public service, to enable it to improve performance in service delivery. MPAT assessed key management practices which enabled government institutions to deliver on their mandate -- people, processes, policies, and systems --across four Key Performance Areas (KPAs), which were strategic management, governance and accountability, human resource management and financial management.
The MPAT theory of good management practices should start with self-assessment by each Department against management standards, followed by an accurate assessment and diagnostic of management practices. This would lead to an improved management plan leading to an improved management practice. This would further lead to improved management performance and the performance would lead to improved Departmental performance. This would finally lead to improved sectoral and government performance, and a better life for all.
DIRCO’s score for the KPAs from 2014 to 2016 was presented. The score rating was from 1 to 4. A score of 1 meant not doing anything, level 2 meant one understood what to do, and level 2.5 meant one knew what to do but perhaps miss compliance. At level 3, there was a check on compliance, while level 4 was an active management. Overall, the Department was operating slightly below the compliance level at an average score of 2.9
Strategic management and financial management were compliant to prescripts and legislation, whilst governance and accountability, as well as human resource management KPAs were operating below the compliance level of 3.
On the average scores for the strategic management KPA, the management practices rated an average of 3 overall, which indicated compliance with frameworks and policies that governed strategic management. However, the average score for the strategic management KPA had declined from 2014 to 2016.
DIRCO’s average for adherence to basic policies/frameworks on governance and accountability was 2.8. This was slightly below the compliance level, which was 3. The Department must be commended, however, as the average score for KPA 2 had improved incrementally from 2014 to 2016.
The average score for DIRCO for the human resources management KPA was 2.3, which had decreased slightly from 2.5 in 2015.
The Department had an acting Head of Department (HOD) during the MPAT 2016 self-assessment, so the standard 3.3.3 was not moderated and reflected a score of 1. In most of the HR standards, the self- assessment score was confirmed by the moderator, which meant that the Department realised its areas of weaknesses and needed to put improvement plans in place and monitor them regularly.
The average score for the financial management KPA in DIRCO was 3.7. The Department had been operating above the compliance level from 2014, and must be highly commended. However, the standard on the payment of suppliers required intervention and must be addressed going forward.
Budgetary Review and Recommendations Report (BRRR): AGSA
Ms Portia Mpete, Senior Manager: Auditor General South Africa (AGSA), said the theme of AGSA for the current year was to improve outcomes through being accountable by planning, doing, checking and acting, while complying with the requirements of the International Organisation for Standardisation (ISO). Further defining accountability, she said AGSA looks at the internal controls and supervision, making sure they implemented the basics and monitored all assurance providers, and the outcome of these consequences would result in a better life.
The audit outcomes of the DIRCO portfolio over four years were presented. The first three years had some compliance issues. The current year had seen an improvement in both entities, and an unqualified audit with findings.
With regards to the management and delivery on key programmes (spending performance and reporting), three programmes were audited: Programme 2 (International Relations), Programme 3 (International Cooperation) and Program 4 (Public Diplomacy and Protocol Services).
On Programme 2, 100% of the budget was spent. About R2 million was unauthorised, irregular and fruitless and wasteful spending. Eight out of 12 targets were achieved.
On Programme 3, 96% of the budget was spent, there was no wasteful spending and five out of 11 targets were achieved.
On Programme 4, management reported that 99% of the budget was spent and there was no wasteful spending. However, findings could not be confirmed on two indicators – the percentage of requests for protocol service responded to according to the service delivery charter, and the percentage of requests for consular assistance responded to, as per the service delivery charter. All targets were achieved.
The financial health of the portfolio was assessed as good.
The audit of the financial statement for 2016-17 had resulted in an unqualified opinion. Regarding the findings on compliance with key legislation, there were problems in entity managements. Areas of qualification before extension of the audit were in irregular expenditure, movable tangible assets and heritage assets moved down to 100% percent unqualified. Comparing 2016-17 with the previous year, unauthorised expenditure had come down from R167 million to R34 million, fruitless and wasteful expenditure had dropped from R6 million to R3 million, but irregular expenditure had risen slightly, from R344 million to R368 million.
Focusing on fraud and consequence management, 30% of the 412 allegations of fraud or SCM misconduct were investigated. On the status of internal controls, which speaks to the culture in management, the leadership of both DIRCO and the African Renaissance Fund (ARF) was considered to be of concern, while DIRCO’s financial and performance management and governance was also of concern, but the ARF’s was rated good. AGSA said the accounting officer had shown some progress in addressing the significant deficiencies noted over his oversight regarding financial and performance reporting, compliance and related internal controls. It warned, however, that if officials who deliberately or negligently ignored their duties and contravened legislation were not held accountable for their actions, such behaviour could be seen as acceptable and tolerated.
Key focus areas for the Committee to probe in its review of annual reports prior to final approval of the budget of the portfolio include procurement and contract management, asset management, financial statements and the African Renaissance and International Cooperation fund. An important question under the African Renaissance and International Cooperation fund was why DIRCO was not paying back money not used for the ARF project and not reinvesting it.
The engagement of accounting officers in conversations that were insightful and relevant was also important. This should be done by identifying the key areas of concern that may derail progress in the preparation of financial and performance reports and compliance with relevant legislation, with consequential regression in audit outcomes; providing AGSA’s assessment of the status of key focus areas that it had reviewed; assessing progress made in implementing action plans / follow through with commitments made in previous engagements; and Identifying those matters that add value when measures and action plans have been put in place well in advance to mitigate risks.
Mr L Mpumlwana (ANC) asked what exactly the AGSA had been looking at.
Ms Mpete replied that they were focusing on things that mattered, such as the NDP and the MTSF-linked outcomes. This would also extend to bilateral agreements.
Mr Mpumlwana asked for more detail about the fruitless and irregular expenditure. The information given had been general. What law would be applicable for officials who deliberately or negligently ignored their duties and contravened legislation? He wanted an explanation on the Neo/Thando contract. Regarding the money not spent and not invested, had AGSA asked why the money was not invested? If so, why did DIRCO not invest the money?
Mr Rathebe said the irregular expenditure was going up, which was not a good promise for the future. With supply chain management, what was the reason for not inviting competitive bidding for a particular contract for a particular material? Also, how could DIRCO select a supplier whose tax affairs were not in order? Where there were SCM issues, why had only 102 cases been investigated, and 237 not investigated? On the non-preparation of the monthly financial statements and reconciliation including disclosure note, he asked how one expected to track progress in the future. If DIRCO had terminated the contract with the Laser group, why did they continue paying, as that was also a ground for irregular expenditure? Did the AGSA use KPMG to improve the auditing? What impact would it have if they used KPMG.
Ms D Raputhi (ANC) said she liked the anti-corruption aspect of the report. It was known there were many unethical employees in the Department, and the corrupt and unethical people must go. On the ARF project, it could be seen that DIRCO was sitting with money -- what was it doing to assist these countries?
Ms Kenye also commented about the increased expenditure and problems associated with the SCM, and said recommendations had not being made to inform the way forward, and On Slide 23, no disciplinary measures had been highlighted.
Mr M Maila (ANC) requested an explanation for the irregular expenditure, saying that the money which was spent could not be condoned. It also looked like it was keeping on increasing. He asked how AGSA rated the Portfolio Committee as an assurance provider.
Ms C Dudley (ACDP) said the exchange rate was often blamed for a lot of issues. How had the exchange rate impacted on the DIRCO audit?
Ms Maxon said that 288 allegations of unauthorised, irregular, fruitless and wasteful expenditure had not been investigated, compared to 124 which had. What were the specifics of these cases, and how long had this been going on without the Department being questioned? How did the AGSA check on how well DIRCO’s assets were doing.
Mr S Mokgalapa (DA) commented that the content of the presentation was similar to what had been presented previously, and no notable change could be seen. He insisted that the recommendations should be more specific.
The Chairperson said that majority of the questions asked by the Members were meant for the Department to answer, and they should not be tempted to go beyond this limit. He requested details of the section for the ARF Act that talked about the money not used to be reinvested. The contract had ended in July, and the payment after that. How much had been paid?
Mr Thami Zikode, Business Executive: AGSA, said they never used KPMG, but used their own internal resources. Regarding the investment of money not used, the ARF Act said that it needed to be invested. What was of concern was when there was no immediate request for the funds, and they were not invested. Regarding the contract that ended in July and payment made after then, this had not been audited yet.
The irregular expenditures meant someone was not complying with regulations, and a starting point was needed for this expenditure to be investigated before taking appropriate action.
Challenges causing financial performance concerns at DIRCO and ARF
Mr Mashile Mokono: Deputy Chairperson: DIRCO Audit Committee, gave the report on challenges causing financial performance concerns.
There had been an improvement for DIRCO with the current unqualified audit opinion from the AG for the 2016/17financial year, after three years of successive qualifications. This milestone would not have been achieved, had it not been for the support, dedication and commitment of the PC. The Department has been encouraged to keep the good work and make it a priority to work towards the achievement of a clean audit opinion from now on.
Some of the commendable actions that contributed to the positive outcomes were regular interactions between the audit committee and the PC, regular attendance of the audit committee meetings by the DG, and enhanced tracking and monitoring of the audit committee meetings resolutions. Other contributors were the capacitation and the better utilisation of internal assurance providers, such as internal audit and risk management, and also considering the management’s improved interactions with various oversight stakeholders, such as National Treasury, the audit committee and the AGSA.
Some of the matters raised in the past, as well as their progress, were discussed. For matters that had been completed, there were challenges in the maintenance and the reporting on the asset register, the assessment of heritage assets, and the capacitation of both internal audit and risk management units. For matters with limited progress, there had been adherence to SCM prescripts and compliance with legislation. There was dissatisfaction that most findings from previous financial years were not being addressed, or matters had been only partially completed.
Some of the current challenges were the non-payment by DIRCO of the old ARF accounts receivable. It was recommended that funds should be sourced and budgeted for settlement of these accounts.
Administrative deficiency was another challenge. It was recommended that the role of Heads of Missions (HOMs) be clarified, including the amendments of performance agreements to reflect the administrative responsibilities.
On the recurring irregular, fruitless and wasteful expenditure, it was recommended that proper investigations be conducted.
Management must report regularly on disciplinary matters in relation to the non-implementation of consequence management.
On leadership deficiencies in some parts of the Department, resulting in a culture of impunity and low staff morale, it was recommended that a culture survey be conducted and recommendations be implement timeously.
The information communication technology (ICT) infrastructure was outdated and required upgrading and continuous maintenance. The implementation of the infrastructure refresher plan had taken more than three years. It was recommended that the capacitation of staff involved in the implementation of the ICT be carried out.
Other matters that were of concern were inadequate preparation for audit committee meetings due to meeting documents being submitted late. There was also non-attendance of meetings by some high-level officials. Another concern was the identification of the happening risks, but the response strategy to mitigate the risks was not effective.
Mr Willy Huma, Deputy Chairperson: Risk Committee, DIRCO gave the report of the risk assessment.
He said the committee’s sole responsibility was to assist the accounting officer in discharging his/her role in risk management by reviewing and overseeing the effectiveness of the Department’s risk management systems, practices and procedures, and providing recommendations for improvement
The risk management committee had the authority to request the management to appear before it to account for their delegated responsibilities in respect of risk management.
The chairperson of the risk management committee would report the proceedings of each committee meeting to the accounting officer and make recommendations concerning the adoption of risk management reports and any other matters arising from the risk management process.
The main challenges that were being faced were attendance and slow implementation. Attendance of meetings by some of the high-level officials was sometimes not possible due to the nature of DIRCO’s work. Also, there was slow implementation of some of the risk management committee’s interventions. DIRCO had shown significant improvement in its internal control environment by implementing various risk management interventions. Some of the interventions included DIRCO having a functioning risk management framework, and continuously identifying risks related to related to recurring AGSA findings through risk assessments at all its missions and head office branches, and developing relevant interventions to address the identified risks.
Progress on recommendations since the last appearance at the Committee had been identified. ICT infrastructure was now being addressed by an ICT steering committee, involving a total revamp of the ICT infrastructure. The committee was in the process of developing a costed project plan.
In addition, State-owned properties were now being addressed by the Foreign Service Bill. The Bill created an enabling legislative framework through which the current foreign service would be managed and regulated by DIRCO, and through which international relations would be conducted. The Department was now in the process of conducting professional property assessments at all state-owned properties.
Mr Huma said inadequate asset management was one of the main causes of negative audit outcomes due to the material nature of assets. On irregular expenditure, there was non-compliance with SCM prescripts. There was image/reputational risk at the state-owned properties abroad. Some state-owned properties were not in a good state due to lack of maintenance. Financial constraints had been a key cause in this area.
Risk management interventions that had been put in place included the establishment of a working partnership with a risk management unit, and a functional audit steering committee with representation from all branches. There was also a functional budget committee, as well as a functional ICT steering committee. It was recommended that the planning unit should work closely with finance in order to clearly align plans with available budgets, thereby proactively managing the risk of unauthorised expenditure
Mr Radebe welcomed the presentation by the audit and risk management committee, and said that the quality assurance was working because what was found in the report of the AG was also found in the report of the audit committee. However, the non-attendance of the senior management at the meetings which were called was a concern. He recommended that there must be a chief operating officer (COO) who must be office bound, and asked if such a person was available. Regarding the lack of skills and competencies in some key areas, it had been agreed that the academy must assist the Department in overcoming this.
Ms Raputhi asked why there was no consequence management, when it was known that everyone must be available for committee meetings on Wednesdays, and then were not available. Such acts should not be tolerated. She suggested that more staff be employed for the Department to be able to execute its tasks.
Mr Mokgalapa asked why the recommendations of both the audit the audit and risk management committee were not taken on board by the Department. Why did the accounting officer not attend their meetings? Last year, the Portfolio Committee (PC) had said it must have regular interaction with the risk and audit committee, but he was not sure those interactions had happened. Why did these regular interactions not take place so it could tender its recommendations? The PC was being told what it already knew. Also, the issue of travelling by members being used as excuse, was not acceptable.
Ms Dudley asked who gave the authority to call members to attend, and why was the accounting authority not doing so?
Ms Kenye asked about the model to be developed to check what was being done. Had it been developed?
Mr Maila thanked the risk and audit committee for empowering them to know that the PC should hold the Department accountable, because they were operating under the law and their contribution was showing a sign of improvement.
Ms Maxon commended the risk and audit committed for their presentation. Having heard from AGSA and the risk and audit committee, she asked that the Minister appear before the PC to answer some questions. The PC was not doing its job, and had to stop what was happening before it was too late. She requested more information about the missions outside of the country, and said the PC would need more information from the Department to be able to do its job.
The Chairperson pointed out that the risk and audit committee did their work and operated within their jurisdiction, which was to recommend and not to enforce. It could be that some of the members had done something wrong by being absent or sending junior staff. The PC would look at the observations and recommendations of the risk and audit committee, as well as the recurring issues, and then ask the Minister about what was happening to the issues.
Mr Radebe asked why the COO was not attending meetings
Mr Huma responded that the COO had been sick for a couple of months, but now he was back and they were hoping that he would fully recover.
The meeting was adjourned
- AGSA: Budgetary review and recommendations report International Relations Portfolio
- DIRCO Audit Committee: DIRCO BRRR 2017 Challenges causing financial performance concerns
- Medium Term Strategic Framework (2014-2019) presentation by DPME
- Risk Management: Briefing to the Portfolio Committee presentation
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