ICASA + FPB 2016/17 Annual Report

Meeting report

Opening remarks

The Chairperson referred to the delay in the South African Broadcasting Corporation (SABC) board appointments, and said the Minister of Communications had given the Committee an update on how the process was enfolding with the Department and the Presidency. The process needed to be allowed to continue and to be finalised. Everyone hoped the process would not be delayed any longer.

Independent Communications Authority of South Africa (ICASA)

Overview  

Ms Qinisile Delwa, Acting Director-General (ADG), Department of Communications (DoC), said ICASA had achieved 64% of its targets, which was better than their performance in 2015/16. It had not achieved 16 key targets relating to backlogs from July 2016. It had generated a total revenue of R455 million. However, it had received an unqualified audit opinion for 2016/17 and there were areas identified by the Auditor-General of South Africa (AGSA) that needed strengthening. A bilateral meeting had been held between the DoC and ICASA in which they had committed to adopting a monitoring plan to address issues.

ICASA currently had 36 vacancies ranging from senior to junior management. The key vacancy was that of a Chief Director, which was expected to be finalised by November 2017.

Mr Paris Mashile, Acting Chairperson, ICASA said that councillors had skills ranging from engineering and public policy, to accounting, etc, in order to ensure that that the regulator (ICASA) was operational.

Issues regarding former CEO

Mr Mashile said the Authority was taking disciplinary action against Mr Pakamile Pongwana, former CEO, after allegations had been made. It had suspended him in order to avoid any constraints on his duty as CEO while trying to deal with the allegations against him. He had informed ICASA that he wanted to terminate his services. ICASA would have preferred to continue with the disciplinary process. Mr Pongwana initially wanted a 12 month pay-out, but ICASA had counter offered to say they would be willing to pay for one month. Mr Pongwana had then counter offered, saying that he wanted a 10-month pay out. ICASA had considered it, and eventually a pay-out was made.

Mr M Gungubele (ANC) said that the request by the Committee was to receive a briefing by ICASA, and dealing with the former CEO was an issue that the Committee would deal with separately.

The Chairperson said that it was important to proceed with the issue of the former CEO and then discuss the briefing after the Committee had concluded the discussion.

Mr Tom Tseane, Acting Corporate Secretary, ICASA said that allegations against Mr Pongwana had been made by a ‘whistle-blower,’ and not the actual victim. ICASA had then sought to investigate the allegations and had suspended Mr Pongwana pending the investigation. An offer was then made to Mr Pongwana to settle. There were three areas of non-disclosure in the agreement signed between ICASA and the parties involved. Mr Tseane was therefore not at liberty to say what these were..

The Chairperson asked if he had heard correctly that there was an allegation that was laid through a whistleblower and not the alleged victim.

Mr Tseane confirmed that the Chairperson had heard correctly.

The Chairperson asked if the alleged victim had contacted management herself about the incident.

Mr Tseane said that the alleged victim had not contacted management.

Mr M Kalako (ANC) asked what the three areas of non-disclosure were. Which party had offered to settle? Was it Mr Pongwana who had offered to resign, or had ICASA requested it? Was the Minister informed of the decision to suspend Mr Pongwana before he was suspended, and also before ICASA proceeded with the process to settle? Had ICASA informed Parliament or any other state authority?

Had they had interviewed the victim herself before suspending Mr Pongwana, and if they had not, then why not?.

Mr Gungubele said that ICASA had material findings in AGSA’s report with regard to compliance with legislation, and he had picked up some contradictions because Mr Mashile had said that Mr Pongwana was the initiator of the settlement, whereas Mr Tseane had said that ICASA was the initiator. He was worried that the process to suspend Mr Pongwana took place immediately after the ‘whistle-blower’ informed ICASA of the sexual harassment without investigating the mattter.

Ms V van Dyk (DA) asked what the specific allegations in question were and why an aggrieved party like Mr Pongwana would not want to clear his name. She wanted to know if the victim had been contacted and what the feedback was.

Ms W Newhoudt-Druchem (ANC) asked if a legal advisor had been present from the beginning when the whistleblower informed ICASA, and if permission was needed from the ‘whistle-blower’ or the victim before disclosing. Had the alleged victim been contacted, and had she wanted to press any criminal charges against the accused before ICASA made the decision.

The Chairperson said that after listening to the Minister on 3 October 2017, he had written a letter to ICASA on the issue and requested a written report on the issues raised by the Minister. His office had not yet received a report but after receiving a verbal report from ICASA, the Committee would need to call ICASA again and deal with questions raised by Members.

Mr Kalako agreed with the Chairperson and said that in the absence of a written report, this would lead the Committee to breaking the law by asking what the settlement was, and this was not their area.

Mr Gungubele said that the information given to the Committee needed to be in writing so as to avoid any misunderstanding. The Committee needed legal advice as to what could be constituted as confidence clauses, because it needed to act in the public interest.

Mr Kalako said that there were rules of Parliament which sometimes override what is said.

Ms Van Dyk said that the Committee should not stick to the conservative notion of sticking to written reports. Verbal reports were also legally binding. In this instance, however, a written report was necessary, especially since a victim was involved.

The Chairperson asked to close the matter at this point until a report was submitted to the Committee, and then they would invite ICASA back to the Committee. A similar report had been requested from the Film and Publication Board (FPB), since the issue there was very similar.

Ms Van Dyk requested that the entire ICASA and FPB Councils be present at Parliament when they were asked to attend.

The Chairperson agreed and said that ICASA would be informed of the time and date when the Committee would be dealing specifically with the issue of the CEO.

Ms Newhoudt-Druchem asked if the FPB situation was the same as ICASA’s, and whether it had been a ‘whistle-blower’ who had relayed information to the board.

The Chairperson said that the issues were the same. The former CEO, Mr Themba Wakashe, was offered a settlement to terminate his contract without proper processes being followed.

Ms Thoko Mpumlwana, Chairperson, FPB, requested that a limited number of the councillors come to Parliament because it would be too costly, considering they had nine councillors who would each need flight tickets, accommodation and food allowances.

Ms Van Dyk said that the entire Council needed to be present, because there could have been some councillors who had disagreed with the decision to suspend Mr Wakashe, and therefore they all needed to account to Parliament.

The Chairperson said that there would be arrangements made by Parliament to assist with the expenses, and that it was necessary for the entire Council to attend.

ICASA: Annual Report 2016-17

ICASA was committed to the National Development Plan (NDP), and focused on Outcomes 6, 12 and 14. Outcome six was aimed at promoting competition and network deployment for universal broadband provision. Outcome 12 was aimed at ensuring that the regulatory framework facilitated the use of Information Communication Technology (ICT) as a platform to provide increased access to government services. Outcome 14 was aimed at facilitating the three tiers of broadcasting and was specifically focused on a regulatory agenda that promoted local content, dissemination of information in the public interest, and public broadcasting content across all platforms.

There were four strategic goals set for a four year period that started in 2015/16 and ended in 2019/20:

• achieve universal access to broadband;
• access to communication services at affordable prices;
• improve organisation service delivery;
• common national identity and social cohesion.

ICASA provided the following services to licensees: type approval and allocation of numbers; interconnection/facilities leasing; spectrum assignment; licences and channel authorisations; and issued registration certificates. The end users and audiences in turn had universal service obligations: diversity of local content; quality services; speedy resolutions of complaints; and were offered competitive pricing.

Mr Willington Ngwepe, COO and Acting CEO, ICASA, said that ICASA had received an unqualified audit opinion from AGSA. The regulator had achieved 74.5% of its 59 planned targets. Key areas of concern which were not achieved were in licensing; policy research and analysis; internal audit; human resources (HR); and compliance and consumer affairs.

ICASA had a total budget of R428.29 million which was then adjusted to R429.32 million. Reasons for over expenditure were that the operational expenditure was R406.1 million which was 2.4% less compared to the budgeted operational budget of R416.24 million. Normal project spending of R20.56 million was R8.55 million (70.7%) more than the budget of R12.04 million. Causes of over spending were due to local elections monitoring; quality of services (QoS) monitored and the frequency migration strategy/plan, while the updated national band plan and reviewed broadcasting plan were both under budgeted for. Over expenditure on repairs and maintenance was mainly due to additional expenditure of R221 782 incurred for repairs on old motor vehicles; and additional expenditure of R901 256 incurred for the maintenance of monitoring equipment.

Programme one: Administration.

In corporate services, there was a systems and processes integration, from 3% to 50%; an increased ICASA reach, from 10% to 40% on available communication platforms; increased safety and occupational health and safety, from 50% to 60%. R984.92 million (99%) or was collected on all invoices. Programme support increased from 88% to 95%. There was an increase in talent sourcing, from 20% to 50%, and an increase in employee interventions from 20% to 50%. Audit plans completed increased from 84% to 85%, 12 issue-tracking reports were produced and assurance reports increased from one to four. Service level agreement (SLA) completion increased from 20% to 50%.

Only 87% of the targeted 95% of suppliers were paid within 30 days from the 1 646 invoices received. 197 out of 277 small, medium and micro enterprises (SMMEs) were paid out within 15 days. Only 33% of the HR initiatives were implemented against the targeted 50%. Compliance monitoring was not completed in the internal audit committee, and data analytics took longer than expected to fill due to the poor level of candidates interviewed.

Programme two: Licensing.

With regard to universal access to broadband, the International Mobile Telecommunications (IMT) spectrum Invitation to Apply (ITA) was published. Regulation on exempted devices was completed, as well as regulation on premium rated services completed. With regard to affordable communication prices, licensing processes for commercial sound broadcasting in the Northern Cape were completed; there was an increase in the approval of applications within 30 days, from 18% to 65%; there was an increase in the number of applications, from 94% to 96%; an increase in individual service licences amendments, transfers and controls processed, from 88.9% to 100%; an increase in new, amendments, transfers and control of spectrum licensing applications, from 81% to 97.7%; and an ITA for free to air commercial broadcasting was published.

Licensing of 45% of multiplexer (MUX) devices was not completed. ICASA had decided to extend the submission deadline at the request of the qualifying applicant.

Programme three: Policy Research and Analysis.

A draft community broadcasting regulatory framework was published in respect of making communication services available at affordable prices.

This was the least achieved programme. Access to broadband spectrum was not achieved during 2016/17. There was a delay in procurement of the service provider. The project towards making communication services available at affordable prices experienced unexpected delays at the information gathering stage.

Programme four: Engineering and technology.

The updated National Radio Frequency Plan was approved; final regulations on E-band and V-band were published on 22 November 2016; and 100% of spill-over cases were resolved within 60 days.

On September 6 2016, Council had approved the 5G forum. Only 25% had responded to invitation letters to participate. There was a decrease in turnaround time on type approval and spectrum licensing. The project proved to be unrealistic in terms of the project plan.

Programme five: Regions.

An additional ICASA reginal office was opened in Limpopo with the aim of improving organisational service delivery. Additional ECS/ECNS class licenses were processed in regional offices. There were increases in the resolution of interference cases, from 90% to 92.5%. There was an increase in consumer awareness, from 0% to 5%, and all National Joint Operations and Intelligence Structure (NATJOINTS) instructions were received and executed.

Programme six: Compliance and Consumer Affairs.

RIA were implemented; consumer advisory panel was established; three ECS/ECNS compliance reports were published; the consumer protection strategy and implementation plan was completed; and there was an increase in consumer complaints resolutions, from 75% to 80%.

Obligations were imposed for broadcasting ECS/ECNS and postal services, from four licenses to seven. A decision to publish a further draft code for persons with disabilities for public comments had extended the project beyond the 2016/17 financial year.

Total number of employees at ICASA was 357, with 30 vacancies. There were 281 Africans, 27 Coloureds, 16 Indians, and 33 Whites.

Mr Tebogo Matabane, CFO, ICASA said revenue collected from non-exchange transactions in 2016/17 was R431.81 million, as opposed to R418.83 million in 201/16, and revenues collected from exchange transactions in 2016/17 was R23.94 million compared to R22.06 million in 2015/16. While revenue increased, overall expenditure also increased from R384.86 million in 2015/16 to R429.32 million in 2016/17. The surplus for 2016/17 was R26.43 million.

ICASA had been rated unqualified with findings by AGSA for the past three consecutive years. Interventions were required in respect of the quality of submitted financial statements, and in supply chain management. Concerns were noted over the quality of submitted performance information, human resource management and information technology (IT). The overall financial health of the regulator was good.

Fruitless and wasteful expenditure had increased from R2.87 million in 2015/16, to R12.14 million in 2016/17. An amount of R3 million had been condoned by Council during the financial year. The fruitless and wasteful expenditure was under investigation in terms of the Public Finance Management Act (PFMA), and disciplinary steps against relevant officials would be taken where it was proven they had committed fruitless and wasteful expenditure as disclosed.

Irregular expenditure increased from R1.17 million in 2015/16 to R27.28 million in 2016/17. An amount of R1.37 million had been condoned by Council during the financial year. Irregular expenditure was under investigation in terms of the PFMA and disciplinary steps against relevant officials would be taken where it was proven they had committed irregular expenditure as disclosed.

Issues needing to be addressed with regard to the audit report were:

• financial statements not been prepared in accordance with the prescribed financial reporting framework as required by the PFMA;
• contractual obligations had not been settled within 30 days;
• effective steps had not been taken to prevent irregular expenditure amounting to R27.48 million as disclosed in the annual financial statements;
• effective steps were not taken to prevent fruitless and wasteful expenditure amounting to R12.26 million as disclosed in the annual financial statements;
• quotations had been accepted from suppliers who had not submitted a declaration on whether they were employed by the state or connected to persons employed by the state, which was prescribed in order to comply with National Treasury regulations;
• contracts and quotations were awarded to suppliers who had no tax clearance certificates; and
• goods and services above R500 000 were procured without inviting competitive bids.

Mr Mashile said that some staff members had been poached by operators and were offered higher salaries than what ICASA could afford. This issue needed to be addressed by matching the salary structure with that of the operators. Without the training of officials ICASA would never be able to match private operators. It would be doing its level best where it fell short.

Discussion

The Chairperson asked if ICASA was keeping in touch with AGSA at all times, because AGSA’s work was to assist government departments and entities to have clean audits.

The Chairperson wanted clarity on the issue of performance management, since he had not gained a clear understanding from the presentation.

Ms Van Dyk asked if 53% of personnel costs was for salaries, bonuses, etc. Who were the local service providers, and what services were procured from them? Why were criminal proceedings not instituted against the employees implicated in the “sound track management processes”? Had members of the ICASA Council been found to have conflicts of interest and could not therefore work for state entities?

What steps had been taken with regard to equipment? Which individuals were the beneficiaries of ICASA opening up the airwaves in the Northern Cape? Had ICASA scrutinised the licence agreements to ensure that licences were indeed issued to the community and not managed by someone connected to the management authority?

Ms Newhoudt-Druchem asked when the code related to people with disability and what blind and deaf people wanted, which ICASA was still working on, would be completed. She asked how many women and people with disabilities were employed by ICASA.

Ms M Matshoba (ANC) asked on why people were resigning from the regulator after they had been trained, which meant new people had to be trained all over again. She said that “acting” positions needed to end and there needed to be permanent people in positions. She asked how would they assist poor communities like Gugulethu to have their own radio stations instead of relying on other community stations. If there was no more spectrum available, then ICASA needed to conduct imbizos to inform the people that this was the situation.

Mr Gungubele said that it was torture to the brain trying to understand the plans and performance of ICASA. Although it remained unqualified, they continued with material issues on performance information, compliance and registration, and financial statements. All the performance outputs emerged as underachieved or not achieved. He wanted ICASA to show him a section which said what their planned outputs were. The reported achievements did not match up to ICASA’s non-achievements. Looking at the non-achievements, a lot of the information was not aligned. It was reported under human resources that 33% of HR development initiatives had been implemented against a target of 50%, but he did not know which area the 33% constituted since HR was a broad field with many aspects. He asked what amount was involved with suppliers who did not declare their interests or submit their tax clearance certificates.

Mr Kalako asked what ICASA was doing about all the issues raised by AGSA on expenditures incurred in vain that could have been avoided, and were therefore classified as fruitless and wasteful, as well as the expenditure incurred in contravention of key legislation where prescribed processes not followed.

Ms Matshoba asked for clarity on what SMMEs were doing for ICASA, since there was no indication in the presentation.

Mr Gungubele said that ICASA was under-performing in almost all areas highlighted by AGSA, such as internal audit committees, internal controls, etc. He asked what date was set for the internal audit committee.

Responses

Mr Delwa said that the DoC was currently working on revising the governance agreement because in the current agreement, entities were submitting their reports themselves and the report given would be that everything was fine, when in most cases they were not. The governance agreement would be trying to create better governance over the “real things happening at the entities”.

With ICASA, one of the targets not achieved was related to performance outputs with regard to its councillors, and the DoC had held engagements with them in order to improve their work and achieve aspects they had not achieved in the 2016/17 financial year.

ICASA’s outputs and goals were linked to the Medium-Term Strategic Framework (MTSF) goals. One would be better able to judge the extent to which a goal was achieved at the end of the MTSF period.

It was the Minister’s intention to finalise the process of ICASA councillors by January 2018.

Mr Mashile said that inasmuch as they had day to day employees responsible for the work of ICASA, the Council was ultimately responsible for reporting to the public, the DoC and Parliament.

Mr Ngwepe said that the presentation had been structured to highlight the key achievements and key non-achievements. The key point to note with regard to performance information was that ICASA was constrained in fixing the strategic plan in the medium term. The findings of AGSA were not consistent in some cases and may have related to different areas in different financial years after resolving one area. ICASA would look at resolving all the issues in 2018/18 so that they could start with a clean slate in 2018/19.

Mr Ngwepe said that the outcome in respect of the licensing issue in the Northern Cape was that none of the applicants had met the requirements and could therefore not receive licences.

He said that on the system, there was an accounting system that billed and reminded licencees when their fees were due. Monies collected were transferred directly to the National Revenue Fund.

There were challenges with capacity in community radio to monitor the environment of licensing, and this entailed ICASA monitoring and bringing community radio stations up to speed with all the compliance requirements. He said ownership of community radio stations ought to be in the hands of the community since it was intended to service the community.

There was currently a code which had been in place from 2010/2011. Because of the inadequacies with that code, ICASA was updating it. The process had taken longer than was intended. A revised code, taking into account all the needs of people with disabilities would be completed by the end of the current financial year, 2017/18.

Mr Ngwepe said that the cost of data would be parallelled with the process by the Competition Commission to reduce the costs of data so that it was affordable for all individuals.

There were 47% female and 53% male employees at ICASA, but currently no individuals with disabilities.

ICASA needed to go to the communities and explain why the moratorium was in place and why it needed to be lifted, so that communities knew why some did not have their own radio stations.

Mr Ngwepe said that the serious spectrum constraints were mostly in the metros. Conversations were currently being held at council level to determine whether to wait for the moratorium to be lifted, or to look at other alternatives.

Mr Mashile said that digital broadcasting would produce many benefits by providing more channels using smaller frequencies.

Mr Matabane said that it was very important to manage a working relationship with AGSA, and ICASA would implement controls with immediate effect. The “projected” table in the presentation had not been updated, and he realised that some of the figures did not add up. He would ensure that the Committee was provided with an updated copy if they did not already have it. Expenditure had increased with the increase in the number of Council members, relating to their salaries as well as operational costs.

Film and Publication Board: Annual Report 2016-17

Ms Delwa said that there were no vacancies in the FPB Council, but there were vacancies in top management at the level of CEO, CFO and COO. The process of appointments of top management was set to commence by December 2017. In total, the FPB had 12 vacancies and the most crucial were the top three. If the current Acting CEO was empowered to fill the top three positions, then she was encouraged to do so.

The FPB had 76 targets and had achieved 66 of them. It had received an unqualified audit with findings from AGSA. The DoC would be monitoring and ensuring that they were going through their action plan to monitor how FPB would be addressing the issues raised by AGSA.

Ms Thoko Mpumlwana, Chairperson: FPB said that the organisation was functioning and stable, and vacant positions would be filled, as Ms Delwa had pointed out. The Board received limited funding and was doing its best to maintain their cost saving initiatives. It had remained static on an unqualified audit. It had been hoping for a better opinion, but had not achieved that in the 2016/17 financial year.

She said that a written report on the issue of the former CEO, Mr Themba Wakashe, would be submitted to the Committee as requested.

Ms Abongile Mashele, Acting COO: FPB, said that the FPB was the institution that ensured that there was no harmful content in cinemas for young children. It ensured regulation of media entertainment by empowering the public, contributing to child protection and promoting the growth of the industry.

It had received an unqualified audit report in respect of its performance audits. The number of findings had reduced from 14 in 2015/16 to eight in 2016/17. 86% of its annual performance targets had been achieved, and the Film and Publications Amendment Bill was at the deliberation stage with the Portfolio Committee on Communications. The online content regulation system was implemented, as well as a pilot project to decentralise the administration function and classification of content in the Durban office. The FPB had also launched the University of South Africa (UNISA) programme on Classification of Media Content in South Africa.

The FPB had generated regulation income amounting to R6.71 million in 2016/17. 1 279 online content inspections had been conducted; 22 cases had been lodged, with 450 000 items (videos/images) being reviewed; there were 12 cases confirmed to have contained child pornography content.

The Board had 95 employees, of whom 58 were female, and 37 were male. 78 were African, four were Coloured, seven were Indian, and six were White.

Industrial relations issues had been reported. The first involved a labour court hearing which convened on 12 May 2016. The labour court had directed the matter to arbitration. The arbitration finding was issued on 25 September 2016 in favour of the employer. The dismissal was deemed substantively fair.

In the second issue, the FPB had referred the matter to the labour court and the process was under way. An appeal was lodged by the employee with the Minister of Communications, the Public Protector, and Council Chair. The hearing of the case was still pending, awaiting a set-down date.

In the third issue, an anonymous complaint was issued that an alleged FPB employee had not disclosed misconduct at another government department, and that the FPB had not screened properly. The matter had escalated from risk/HR to Council Chair/EXCO. A disciplinary hearing was held on 21 July 2016 and the accused was found not guilty of gross dishonesty/misrepresentation. The whistle-blower was then notified and the Minister informed of the outcome.

The fourth issue was a Commission for Conciliation, Mediation and Arbitration (CCMA) constructive dismissal claim. The final arbitration session was held on 6 March 2017. A proposal for monetary settlement was tabled by the applicant, with a reduction from 24 to 12 months settlement. The parties had later agreed on a 3½ months’ salary as monetary settlement.

In Strategic Outcome One, some objectives were not achieved, such as the implementation of automated processes. Errors and gaps were identified in the Electronic Report Management System (ERMS), and escalated to the IT unit. Game classification was also removed to be part of the Online Content Regulation (OCR) project. The partnership with at least two universities to leverage research capacity and assist FPB knowledge creation was deferred to the 2017/18 financial year. This was because the requirement to call for proposals on FPB and National Treasury (NT) databases received poor responses from universities.

In Strategic Outcome Two, all the objectives were achieved with regard to consumers, general members of the public and industry being informed about the mandate of the FPB. Eight newsletters were issued; three opinion pieces were written; four media dialogues were hosted; 44 television and 70 radio interviews were conducted, along with 884 print and online articles; 32 outreach programmes were conducted; social media numbers were increased by 16.5%; and internal staff workshops were held.

In Strategic Outcome Three: effective and efficient management of FPB operations, the implementation of a remuneration strategy was not achieved because there was no agreement on the multi-year level for salary increases. An agreement was reached during the 2017/18 financial year, however. A call centre system was implemented, but a sub-component that was intended to assess the effectiveness of the call centre system by checking the turnaround time of responses to queries, was not achieved. The target of an annual update and implementation of a business continuity management plan and disaster recovery plans was not achieved due to the fact that there was no disaster recovery site for a large portion of the year. The FPB was in the process of procuring the site, but the appointment had not yet been finalised.

In Strategic Outcome four: ensuring effective and innovative regulation of content distributed online on mobile and related platforms to protect children and inform the general public, only one target was not achieved -- implementing an online content regulation system and compliance monitoring tools. This was due to the system not being reviewed, as it was in a pilot phase.

Mr Vuledzani Matidza, Acting CFO, FPB, said that R720 000 was spent on engaging with consultants. Issues ranged from risk management, fraud hotline, Pastel and caseware, FPB Council legal consultations, labour matters, the Bill Amendment, and legal services on the online policy and other services.

Several cost saving initiatives were implemented during the financial year, resulting in an overall saving of R4.46 million that had been allocated to flagship projects. R6.7 million was generated from regulation fees, as compared to R5.8 million in the previous financial year, and was due to the increase in online distribution fees. Other income of R1.1 million consisted mainly of investment income and tender fees. Overall income received for the year was R94.3 million, compared to R89 million in 2015/16. This was an overall increase of 6%. The surplus for the year was retained and used to pay outstanding balances and for the OCR project.

Staff costs of R49.9 million were incurred, which included classifiers’ fees of R4.5 million paid during the financial year.  Operational expenditure of R37.4 million was below the R37.9 million in 2015/16 due to cost saving measures implemented, such as a reduction of international travel fees by 5%, a 38% reduction of telephone and fax expenditure, and a 98% reduction in advertising.

Emphasis of matter in the audit report referred to a restatement of corresponding figures, and there was material non-compliance on measurability and reliability of performance information. The FPB had no adjustments to the initial annual financial statement (AFS) submitted for audit. It had identified, disclosed and implemented consequence management for all irregular, fruitless and wasteful expenditure disclosed in the AFS note. Although AGSA had not identified any misstatement in the financial statements, they had found material issues on performance information. Based on the methodology that they used, they concluded that FPB’s target was not measurable and SMART. This had resulted in AGSA issuing a modified audit report.

Audit progress was made in the categories of expenditure and payables, property, plant and equipment, disclosures, compliance and controls, and ICT. Regressions were found in human resources (from no findings to one finding related to administrative matters), performance information increased from one to two findings, and supply chain management increased findings from one to two findings relating to admin matters.

93% of previously unresolved findings were successfully cleared during 2016/17. AGSA reported an improvement in the quality of the financial statements and internal controls as per the management report. The quality of performance information reported was flagged as an area where intervention was required. Management was satisfied with the controls implemented over SCM processes and procedures.

Issues raised by AGSA had been addressed and a revised annual performance plan (APP) was resubmitted to the executive authority. All existing vacancies had been advertised and the recruitment process was under way. Requests from the Committee had been noted and tabled by the DoC on 19 September 2017.

Discussion

Ms Van Dyk commented that the FPB had made profit in 2016/17 and that fruitless and wasteful expenditure had reduced. She asked in what way FPB’s targets complied with the SMART requirements of NT. Had the case with Mr Wakashe involving a car hire amounting to R176 000 been settled by him or the FPB? How much of the money went to community media and how much went to main stream media? She said that there had been no mention of payouts, except where an employee was taken to the CCMA. She asked how much had been spent by the FPB on legal settlements, and requested a written report on the legal council matters, to see where the monies went. What were the reasons for international travel, because R5 million was a huge amount to spend on travel? What was the ratio of personnel salaries to the entity’s operational costs?

The Chairperson said that Ms Mashele had described FPB’s unqualified audit status as an improvement, and he wanted an explanation why they viewed it as an improvement. He was not sure where the improvement was, since the FPB had been found with unqualified findings for three consecutive years. In the presentation, under audit progress made in 2016/17, there had been a regression in HR from 0 to 1. He requested that when communicating with the Committee it was important to report progress.

Ms Newhoudt-Druchem said that she was impressed with the work of the FPB, and saw that it had a mandate of informing the public. For six years, the deaf and disabled community had been asking to meet with the CEO, but no response had been given. She wanted to know why no meeting had been scheduled with her constituency. DVDs in the shops were approved by the FPB, but deaf communities’ concerns were that a lot of DVDs were imported into the country without any subtitles, and they could therefore not access such information or entertainment. DeafSA would like to raise awareness that subtitles were not always available on some DVDs and she would like the FPB to address that. She commended the FPB for their role in fighting cyber crime, and asked if training and information was also provided to deaf children, since the FPB was training teachers to educate children on cyber crime.

Ms Matshoba said that the FPB had mentioned awareness campaigns, but their outreach did not reflect how many learners came from each province. She asked who the beneficiaries would be from the courses offered by UNISA, and if the courses would be offered to FPB staff or learners.

Mr Gungubele said one got a positive feeling when interacting with the presentation. There was commitment and an attempt not to misrepresent information. He asked why there had been stagnation in the FPB over four years, and why they were so comfortable with that. How were the material findings contributing toward their stagnation? The FPB should not be happy with its performance information when there were material findings in the four areas that were selected by AGSA to audit. The report presented to the Committee was not a performance audit, but performance information.

The Chairperson said that a lot of money was spent on paying consultants, and he asked if there was a way of avoiding using too many consultants and dealing with certain areas themselves.

Mr W Madisha (COPE) said that he was happy looking at the report, because there was a clear way forward. He asked if UNISA wanted profit from the FPB in order to offer the qualification. Had the Board tried to negotiate with UNISA or engage with other institutions to get them on board and alleviate the burden on taxpayers’ money? He asked for clarification on the movie “Inxeba,” and why the FPB had allowed it to proceed.

The Chairperson said that he had looked at 2015/16 and observed that the FPB was spending more or less what they were spending in 2016/17. He said that leadership in an organisation had an impact on audit findings.

FPB Response

Ms Mpumlwana said that the FPB had an internal audit function that was previously outsourced, and then they had decided to insource a person who would monitor and advise audits. AGSA had recommended a hybrid model of having an internal audit function as well as outside assistance which they needed to make use of. She said that the internal audit function worked well and looked at risks as well as accounting. The internal audit committee looked at all of AGSA’s findings from previous financial years to ensure that they addressed them.

 

FPB had had a meeting with traditional leaders on “Inxeba” and unfortunately, in the constitutional dispensation, told them that they understood, appreciated and knew exactly how they felt. The FPB staff had made her watch the film before engaging with the traditional leaders. She noticed that there were issues with regard to the movie, that there were unfair classifications. The FPB simply classified movies, they did not censor. What they would do was to ensure that there was engagement between the movie directors and traditional leaders on censorship in the making of such movies and perhaps having a classifiable element that would alert viewers that if they were sensitive to cultural movies, then they should not view such content.

Ms Mpumlwana said that FPB had one lawyer and an assistant. The organisation was not big enough. Where they could do the work themselves they did so, but if they could not then they had to make use of consultants.

They had tried to limit instances of travel so as to work within the budget, but the only way they could learn and be better was by learning from other countries. There would definitely be a need to travel.

Mr Matidza said that in some instances, they had indicators that referred to targets but did not specify a number, and in other cases it was the other way around.

The R186 000 for car hire was indeed paid personally by Mr Wakashe.

Mr Matidza said that based on the cases where the FPB knew they would have to settle with an employee, they had to disclose it in their financial statements, hence the R2.8 million reported in the financial statements.

Travel would always be part of the expenditure they incurred because the FPB was a national entity that travelled across all the provinces and informed people of the work they did. They had, however, cut down their expense from previous years.

He said that while the audit finding was unqualified, they had been reducing the number of findings from previous years from 14 to eight, with only one material finding reported for 2016/17.

The Chairperson asked Mr Matidza if he perhaps wanted to pass on that question, because he was not convinced of the answer. The Committee’s role of oversight was to ensure that the Department and its entities were producing clean audits. Unqualified audits did not represent progress. She questioned what FPB officials were doing if unqualified audits were seen as a success.

Mr Matidza said that since he could not convince the Committee, he would just accept the recommendation and promise the Committee that the FPB would work harder to ensure they got clean audits. He agreed the performance report was not an audit report.

The Chairperson said that the issue of consultants needed to be explained further, because the FPB fell under the DoC and they could therefore use legal services from the DoC and save costs on consulting. He also asked what was meant by ‘Pastel and Caseware consulting,’ and what it entailed.

Mr Matidza said that FPB used to capture the reports manually, and they used to make use of a consultant who would draw up the reports. Caseware was the ledger used.

The Chairperson said that he still had a problem with Pastel and Caseware consulting because it was present in previous financial years’ annual performance reports. Consultants were meant to be once off services and not recurring. FPB could utilise people within its organisation and train them to work on Pastel and Caseware.

Mr Matidza said that they had a two-year contract with the consultant and they had started in 2015/16. 2016/17 was the final year of the contract, and the consultant would therefore be finalising the report.

The Chairperson asked why services were not only requested for one year instead of two.

Mr Matidza said that the second year was for maintenance so that the FPB would not be left stranded. However, there had been ongoing skills transfer and therefore the FPB had been able to compile their performance report in-house for the year under review, 2016/17.

Ms Mpumlwana said that with regard to Bill amendments, the FPB needed external legal services since they had only one in-house councillor in their organisation. Bill amendments were not their speciality, hence the need to outsource.

The Chairperson asked for an explanation on the FPB Council’s legal consultation.

Ms Mpumlwana said that when the whistleblower issue arose, it became a difficult matter for Council, and they needed outside counsel that would be objective and conduct a thorough process of the issue.

Ms Mashele said that the unqualified audit was not an improvement, but what they were trying to point to was that there had been a reduction in the number of findings.

The information from DeafSA was part of the findings that had been submitted by FPB.

FPB had gone to all the schools they had identified. It had not focused a lot on deaf schools during its outreach campaigns, but it would definitely reach out more. It had gone to all nine provinces in the last financial year.

Ms Mashele said that the FPB was the beneficiary of learners who would have the qualification from UNISA, since they would be requiring people who had this specific qualification in future years. UNISA had nothing to gain. It was a mutual relationship and UNISA was providing their lecturers to teach learners

FPB went to every part of the country and if they saw a case of child pornography in a certain area, they went and conducted outreach programmes. But most of their outreach programmes were as a result of requests by stakeholders.

.Ms Newhoudt-Druchem said that if DeafSA requested a meeting, she would like it if FPB accepted the request. She also asked FPB to work with DeafSA to assist the deaf community in educating them about pornography.

Mr Madisha said that it would be proper for the FPB to go around the country and reach learners across the entire country.

Ms Mashele said that perhaps Mr Madisha did not hear her properly, but the 24 000 learners were from across South Africa. Personally, she was present in Limpopo, Bushbuckridge and Kwadukuza. They were definitely reaching everyone around the country, and not just people in the vicinity of Johannesburg.

The Chairperson thanked the FPB and ICASA for their briefings.

The meeting was adjourned.