The Auditor General of South Africa (AGSA) briefed the Committee on the budget review and recommendations process, which focused on ensuring that strategically, accountability was achieved and service was delivered accordingly. It highlighted that based on the financial statements of the Commission for Gender Equality (CGE), the AG had issued an unqualified opinions with findings. The statutory audit had found that the Department of Women (DoW) had achieved only 14 of the planned 36 targets, and that there was a misalignment between its budget and operational planning. There was a serious lack of planning within the Department. A major issue was the fruitless and wasteful expenditure disclosed in the financial statements of both the DoW and the CGE, and consequence management would have to be taken even more seriously. Although an investigation was under way, AGSA would provide a detailed quarterly update to the Committee on the issue of finances and mismanagement.
The CGE reported on its financial performance and budget management, indicating that total expenditure had exceeded its allocation from the National Treasury (NT) by R5.2 million, although other income of R3 million had reduced the overall deficit to a net R2.2 million. There had been R3 million in savings on the compensation of employees (COE) due a reduction in performance bonus provisions and vacancies that existed during the period, most of which had been subsequently filled. Current liabilities exceeded current assets by close to R1 million as a result of spending pressures on the operating budget. Year on year cash resources were reduced by payment to creditors, and current spending on goods, services and employees. Irregular expenditure of R34.6 million was awaiting condonation by NT, while fruitless expenditure had amounted to R245 000. Four disciplinary measures had been undertaken, and R27 650 had been recovered.
Significant issues highlighted included the CGE’s 20-year review; its analysis of the outcomes of the 2016 municipal elections from a gender perspective; the investigation of the Uthukela Maiden Bursary scheme, where virginity was a central criterion for awarding bursaries; gender transformation reports, which placed the spotlight on challenges of gender transformation in the mining sector, the private sector and institutions of higher learning; and the Africa Gender Development Index report where, in collaboration with the United Nations Economic Commission for Africa, it drew attention to the achievements and challenges that the country was facing in complying with a raft of global, continental and regional instruments.
Members expressed serious concern over the lack of female representation in AGSA’s delegation, and argued that it was not leading by example when auditing government departments and entities on gender equality issues. The asked about AGSA’s interaction with the DoW and the CGE during the audits; what could be done differently by the Committee about exercising oversight over the Department to ensure that the outlined challenges were eliminated; whether AGSA advised the DoW on the time frames for filling key vacancies; whether there were any confirmation checks to verify that service delivery occurred; how the AG verified the reasons provided by the Department for its fruitless and irregular expenditure; the implications of the lack of a Chief Financial Officer (CFO) in the Department; how the CGE would like the Committee to handle the issue of amalgamation; and whether the CGE was aware that the country faced a significant problem of women’s lack of access to higher education institutions.
Auditor General South of Africa (AGSA): Budgetary Review and Recommendations
Mr Amod Muller, Senior Manager: AGSA, said the purpose of the presentation was to assist in looking at the financial performance of the Department . The AG’s responsibility was to perform the audit, investigate whether the annual financial statements were fair and without material misstatements and reliable, and express an audit opinion thereafter. The second aspect which the report examined was at the annual performance (targets, indicators and the Department ’s objectives). The third area was ensuring the financial statements complied with key legislation on financial and performance management.
He explained that AGSA did not audit every single amount that was in the annual financial statements, as the audit was based on a sample. The Commission for Gender Equality (CGE) was in compliance with legislation, although it had received an unqualified audit opinion with findings.
Mr Riaan Allie, Auditor: AGSA, further substantiated the unqualified opinion by stating that the CGE could not produce evidence on a few unsubstantiated expenditures. The representatives of AGSA had drawn up a plan to improve the outcomes of the Commission. He suggested that the CGE had had difficulty in clarifying its targets and setting out a clear plan. Furthermore, there had to be people employed to supervise the implementation of the plan, ensuring that it complied with legislation and regulation. The senior management would then have to check for assurance to ensure that those responsibilities were executed accordingly and hold everyone accountable, and ensure that at any transgression that took place was dealt with accordingly.
The regressions in audit outcomes in the current year included the Department 's inability to appropriately address findings of non-compliance in the supply chain management (SCM) environment which had persisted over the past four years. These material non-compliances had also resulted in irregular and fruitless and wasteful expenditure being incurred. Secondly, the CGE had regressed from a clean audit to an unqualified audit opinion, with findings on performance information. Thirdly, the CGE had incurred a material finding on the usefulness and reliability of one material indicator.
The leadership of the Department of Women (DoW) had to focus on creating a culture of accountability, including implementing efficient consequence management practices for transgressions and poor performance by employees. Audit action plans had been developed by DoW management, but these plans were not effectively implemented and monitored to ensure findings were not repeated. Lastly, a rigorous review of SCM legislation was required at DoW, where deviations resulted in non-compliance with SCM legislation.
Notably, the Department had achieved only 14 of the planned 36 targets. However, the key findings were around Programme Two (social transformation and economic empowerment), which stemmed from misalignment between budgeting and operational planning, resulting in the development and approval of performance targets for which the Department did not have adequate skills and resources to achieve. Secondly, the lack of clarity of the mandate of the Department resulted in the approval of targets that were subsequently removed due to their falling under the mandate of other Department s. The last key finding was on Programme Three.
The Chairperson asked who audited the AGSA, because it did not seem to comply with the gender compliance requirements in terms of women in senior management positions. She had raised the issue of gender at the AGSA before, and while the AGSA was policing other Department s on this issue, it did not comply itself. The AGSA was pointing fingers at other Department s, but it was not setting a good example for Department s to follow. In layman’s terms, the AGSA was corrupt.
Mr Muller responded that it was coincidental that the delegation present was only male.
The Chairperson interjected that the institution was not complying. This was not about the present delegation.
Mr Muller responded that he was willing to share the annual report of the AGSA that outlined the gender balance in the organisation. He took offence to the Chairperson’s remarks that the AGSA was “corrupt,” because a lot had been done at AGSA to foster transformation as far as the gender balance in the institution was concerned.
The AGSA ensured that it corroborated the samples that it worked from, and it also ensured that its findings were confirmed. The team then went back to the Department ’s officials for confirmation and allowed them the opportunity to provide reasons for the root causes of the deviations from internal controls. In essence, the findings were corroborated before they could be included in the audit report.
A Member said that whether the AGSA identified accountability with the material misstatements, there was still a certain lack of transparency and accountability. Therefore, in its dealings with the Department , was it taking responsibility or was trying to be defensive and protect their transgressions? How did the AGSA find its interaction with the Director General (DG)?
Mr Muller responded that it was difficult to answer that question, but he had no issues with the officials in the Department with regard to the information that he requested. Whatever documentation or information he requested, he always received it. In his interactions with the DG, he got the impression that she always wanted to fix things that may have been incorrect. From the senior leadership perspective, there were clients who actually wanted to do things the right way.
A Member asked what could be done differently by the Committee in terms of exercising oversight over the Department to ensure that the outlined challenges were eliminated.
Mr Muller responded that he would do follow ups on the Department to ascertain where there were problems in internal controls, what the Department had done to ensure that those were fixed, and he would come back to report to the Committee. However, he said that he still needed to obtain approval from his senior manager as to whether he could do that.
The Chairperson was happy with this.
A Member asked whether AGSA advised the Department on the time frames for filling key vacancy positions, such as the vacant position of the Chief Financial Officer (CFO).
Mr Muller responded that there were time frames that were suggested by the AG. These ranged from three to six months, depending on the vacant position that needed to be filled. However, this would not be included in the audit report, but was recommended when the auditors had meetings with management or the executives.
The Chairperson asked whether the AG recommended a budget upon perusal of the Department ’s annual performance plan (APP).
Mr Muller said that it was not the responsibility of the AG to do that, but of the executives of the Department . AGSA’s responsibility was to audit the financial statements and the internal controls to ascertain whether they had been fairly reported.
A Member said that during her first interaction with the Minister, she hadasked a very simple question: What had been done? She therefore recommended that the Department goes back to the drawing board and prioritise in focusing its resources and skills into reasonable and achievable goals. The quarterly report by the AG was very helpful, she recommended that the committee should then decide on what to hold the Department accountable for, and state very clearly what it wanted. The Department should not come here and produce the report, but the Committee should instruct it on what it had to report on.
Ms M Chueu (ANC) asked whether the Department had said it had conducted a dialogue in Polokwane. Did the AG conduct its audit on the basis of investigating and looking at the Department’s invoices? Were any confirmation checks done to verify that service delivery occurred? She expressed her frustration with the report, saying that it was the same every year, and asked how the AG could go further to curb corruption by ensuring that the money spent corresponded to the services rendered.
The Chairperson said that AGSA would first hear all the questions, and then respond individually.
Ms T Stander (DA) asked how the AG confirmed the veracity of the reasons provided by the Department for fruitless and irregular expenditure.
Mr Muller responded that it was important to understand the duties of the auditors, especially in government. Auditors did not have the power to hold people or departments accountable. They could only provide an opinion on whether the state’s resources were being utilised according to the prescribed manner in legislation, and how the state’s resources were spent. Basically, the aim was to follow the money. The AG’s powers were very limited. The AG could not go as far as holding officials accountable, as that was Parliament’s responsibility. He understood the Member’s frustrations, but the AG had come forth to provide the Committee with information that it could use to hold the Department accountable.
Mr Allie added that the Department had received an unqualified audit opinion because there had been some financial misstatements which needed to be addressed.
Ms Chueu asked who audited the AG, and checked whether it adhered to compliance issues, because she had raised the issue of gender balance, and of women not being giving frontline opportunities to be auditors. In the past 23 years, the Committee was still sitting with the issue of gender imbalance. She asked how many women had been hired. The AGSA itself was corrupt, based on her observation of the lack of gender balance in the institution.
Mr Muller responded that the presence of male auditors was coincidental.
Mr Allie took offence to Ms Chueu’s accusations, because about 50% of the members of the AG executive were women.
Ms D Robinson (DA) asked about the implications of the lack of a CFO in the Department. She alluded to the appalling treatment of women in the country, and urged the AG’s representatives to speak out if they needed additional assistance from the Portfolio Committee.
Mr Muller committed himself to do a quarterly update to the Committee to track the CGE and the Department on matters raised by Members thus far, particularly regarding fruitless and wasteful expenditure. He would also look at the improvements following the outcome of investigations. However, he would need to obtain approval from his superiors.
Ms Chueu made the suggesting of bringing the “Fourth Industrial Revolution” to the Committee. She said that the working conditions of women had not been spoken about because they were assumed to be a trivial matter, and emphasised the point that it was this Committee that should tell the Department what to do and not the other way around.
Committee Members agreed.
The Chairperson added that when she attended a Departmental meeting, it had been a “nasty and a derogatory meeting,” and encouraged the Committee to take a stand jointly. This was received with some loud cheers of agreement from Members.
The Committee then decided to hold a closed impromptu meeting, after discussions with the CGE, in preparation for the Committee meeting for Wednesday, 11 October 2017.
Commission for Gender Equality: Financial Management Report
A CGE official took the Committee through the financial management presentation and said that the organisation had come to highlight some of the key issues emanating from the adjustments. The revenue for the 2017 financial year had amounted to R69 million, and the deficit of R2.2 million was attributable to depreciation. Additional resources for extra spending were covered by extra-allocation funding (donations in the main).
In terms of financial performance and budget management, the CGE reported:
- Total expenditure exceeded the allocation from National Treasury (NT) by R5.2 million.
- Other income of R3 million counter-effected the overall over-spending, leaving a net R2.2 million deficit at the reporting date.
- There were savings on compensation of employees (CoE) of R3 million due reduction in performance bonus provision (R1 m for each year) and vacancies that existed during the period, most of which had been subsequently filled.
72% of spending was in support of core legislation and the main programmes in the APP. The COE was linked to core work and accounted for 63% of the overall expenditure, of which 79% (R37.6 m) was directly linked to legislation – the CGE Act and the Promotion of Equality and Prevention of Unfair Discrimination Act (PEPUDA). Although the CGE was solvent and the going concern assumption still valid, its financial viability going forward was challenged:
- Current assets were less than current liabilities by close to R1m. There were liquidity weaknesses -- the gradual effect of spending pressures on the operating budget.
- The net asset position was diminishing year after year, and without the capital expenditure (CAPEX) budget, the whole balance sheet strength would be negatively impacted in the medium term.
- Year on year cash resources were being reduced by payments to creditors, and by current spending on goods, services and employees.
- Cash resources had been reduced from R8 million in the previous year to R4.5 million by March 2017. The cash remained less than liabilities/debts owed by the CGE as at 31 March 2017.
In line with the requirements of the Public Finance Management Act (PFMA) section 40(3), the material disclosures were:
- Irregular and fruitless spending accumulated to R34.6 million and R245 000 respectively, and the former was awaiting condonation by the National Treasury (NT).
- Four disciplinary measures had been undertaken, with one involving financial misconduct without any embezzlement, but for non-compliance with the PFMA.
- Recoveries of R27 650 had been received for a claim regarding a loss involving a former Chairperson, Ms Nomboniso Gasa. Litigation had been abandoned by mutual agreement.
- Reports had been made alleging irregularity and impropriety by some members of management. Investigations had been undertaken by the audit committee which had proved the inaccuracy or lack of credibility of the allegations.
Commission for Gender Equality: Annual Report
The overview of the annual report highlighted that in 2016/17, performance information had been audited and the Commission had received unqualified audits for strategic objectives 1 and 3. The target for strategic objective 2 had received a qualified audit opinion for the following reasons:
- The AGSA could not test whether the indictor relating to 900 complaints received and handled in accordance with the complaints manual;
- The technical indicators developed by the Commission were inadequate;
- Complaints were not handled in accordance with the complaints manual.
In order to correct and ensure that an unqualified audit was obtained going into the new financial year, the Commission had embarked on:
- Consequence management with the officers in the legal department;
- Sourcing funding for an online case management system that would provide efficient and effective oversight and management regarding complaints lodged;
- Other targets relating to strategic objective 2 were achieved, with performance information relating to the targets being adequately presented.
Significant issues highlighted included:
- The CGE’s 20-year review;
- The local government elections report, where an analysis of the outcomes of the 2016 municipal elections from a gender perspective was done;
- The Uthukela Maiden Bursary report, where an investigation was conducted on a bursary scheme where virginity was a central criterion for awarding bursaries;
- Gender transformation reports, which placed the spotlight on challenges of gender transformation in the mining sector, private sector and institutions of higher learning.
- The Africa Gender Development Index report, in collaboration with the United Nations Economic Commission for Africa, which highlights achievements and challenges that the country was facing in complying with a raft of global, continental and regional instruments;
- Strategic partnerships through the communications unit, which ensured that messaging and public engagements continued even in areas which the institution was incapable of reaching. The commission derived value to the tune of R2 million out of its partnerships with the National Electronic Media Institute of SA (NEMISA), the South African Broadcasting Corporation (SABC) Foundation, the Government Communication and Information System (GCIS) and the National Community Radio Forum (NCRF). These enabled the radio programmes which focused on educating citizens from disadvantaged communities to be broadcast in vernacular or indigenous languages;
- The CGE had drafted a resources pack on Sustainable Development Goals (SDGs) to mainstream gender issues across Departments
In conclusion, the course of gender equality and transformation continued to face large-scale structural obstacles that needed collective efforts at all times. The Commission had carried out and achieved some of the objectives as set out in the APP. It acknowledges that in some areas, such as legal complaints handling, it had fallen short of its stated goals and performance targets. It acknowledged these shortcomings and had developed plans to overcome them. However, overall it was confident that the Commission through the collective efforts of its staff had done justice to its mandate even under testing circumstances of budgetary constraints.
The Chairperson said that if the Committee sought to put an agenda to the Department, it had to be clear. The Committee had been appealing to the Department to invite the Committee to its strategic planning meetings, but this had not happened. The Committee wanted the Department to bring forward plans related to the “Fourth Industrial Revolution,” and how it would implement them and change society. This was up to the Department, because every time the Department submitted that it would not be able to meet certain goals or implement certain things, the Committee had gone along with the Department and approved its Budgetary Review and Recommendation Report (BRRR). Therefore, she suggested that the Committee needed to be stricter towards the Department and be stern with its proposals.
She indicated that in dealing with gender equality issues, the Committee sought to tackle structural forces that were not very apparent, such as university structures. For instance, when it came to women, this also trickled down to employment opportunities and interviews for employment. Her understanding of the CGE was that the organisation did not have a clue regarding what affected ordinary people, especially the women who were oppressed in the country. Therefore, the organisation needed to understand the daily struggles of women in all their aspects so that it could devise solutions that spoke directly to those issues.
A Member indicated that when the CGE came before the Committee, it spoke in generalities -- it did not speak specifically to the issues that were so common for ordinary women. There was a mandate, but in this case, if the CGE wanted any support, the Committee needed to know exactly what was going on. She did not personally know how the Parliamentary processes unfolded and the right people to write to in order to highlight these issues.
A Member commended the good performance of the CGE in meeting its targets. She asked about the plans regarding the findings by the AG which had led to the qualified audit opinion. She asked the CGE to indicate how it would like the Committee to handle the issue of amalgamation.
A Member asked whether the CGE was aware that the country faced a significant problem of women’s lack of access to higher education and further education and training (FET) colleges. It appeared that most women struggled with access to education. The issue of gender violence should not be treated as an isolated issue – this was an issue that had been inherited from generation to generation. Therefore, it needed to be made a priority in order to change this structural problem.
Dr Nondumiso Maphazi, Acting Chairperson and Commissioner: CGE, responded that the Commission was also very disappointed by the findings of the AG, because it was something that had been overlooked – the procedure was there, and it had been a matter of one person’s ability to discharge the responsibility appropriately. The complaint was acknowledged, and the Commission had investigated the matter. It had agreed with the AG and agreed that consequence management had to be exercised.
There was specific software that the organisation had to acquire in order to deal with the information technology (IT) challenges, and it would try by all means to get possible funding for it. The Commission would also seek to find out where the legal officers were located across the country in order to assist in monitoring and evaluation.
Ms Chueu said that the issue with public service was that there was no clarity. She expressed her disappointment with the report, saying that it was similar every year. She highlighted the different economic struggles that existed between university students, where some were concerned about where they would find their next meal, while others were concerned about where their next International holiday would be. The main differentiating factor between these students was their race.
The problem she had with the CGE was that it wanted help but it was not telling the Committee what it needed help with. Referring to the report and the presentation, she said that when doing a report, the presenters should give detailed information. If this did not happen, she would go to the people who the CGE was supposed to service and ask them directly about the service that had been rendered. She said that it would be women who would take women out of oppression. Men should understand that they formed part of the system that oppressed women, and should first learn about their privilege and use it to fight for the liberation of women.
Dr Maphazi highlighted the condition in which the country found itself currently, providing the example of two women students from Nelson Mandela University who were sexually and physically assaulted in a university laboratory by a male intruder. There was also the recent outcry over the Oscar Pistorius movie, which portrayed Mr Pistorius as a hero despite his conviction for the murder of Reeva Steenkamp. These incidents needed to be addressed because they were ills directed towards women. She shared statistics of how women were in a dreadful position in the country, drawing attention to the fact that they had the highest numbers to be murdered, assaulted and experience violence in society -- even in the workplace.
Ms Keketso Maema, Chief Executive Officer: CGE referred the Members to the document handed out, saying that she did not want to reiterate what it contained, but would like to point out that as a Commission, they had to create a document that was clearly defined so that that the auditors could be clear on their financial statements. It had been discovered that their definitions were not adequate. This was the main issue where they had been found wanting.
Members agreed that the amalgamation was definitely an issue that needed serious attention. The CGE was further congratulated for not taking bonuses, but instead focusing its finances on the important matters. They concluded that the Kadar Asmal Report needed serious revisiting, as it was outdated and was written from a male perspective.
The meeting was adjourned.
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