SRSA, SAIDS & Boxing SA 2016/17 Annual Report: Auditor General Input, with Minister

Sports, Arts and Culture

10 October 2017
Chairperson: Ms B Dlulane (ANC)
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Meeting Summary

Annual Reports 2016/17 

The Office of the Auditor General South Africa briefed the Committee on the Department of Sport and Recreation on audit outcomes for the 2016/17 financial year.

Inadequate monitoring of Supply Chain Management legislation at Boxing South Africa resulted in non-compliance with supply chain management legislation for transactions procured below R500 000 where price quotations were not obtained. As a result, effective steps were not taken to collect all money due at Boxing SA and the South African Institution for Drug Free Sport. Lack of daily controls over expenditure resulted in the SA Institution for Drug Free Sport having exceeded their approved budgeted allocation. Lack of adequate review of the financial statements at Boxing SA resulted in material misstatements identified and corrected.

SA Institution for Drug Free Sport obtained an unqualified audit outcome with adjustments but no material findings for 2016/17. Education targets were exceeded as a result of increased networking and outreach efforts by the education unit and increased demand by national sports federations. Education is largely funded by the Lottery grants.

Boxing SA achieved an unqualified audit opinion in 2016/17 and will double its efforts to achieve a clean audit. In terms of its Annual Performance Plan, Boxing SA has 22 performance indicators located across its three programme areas. During the period under review the organisation’s non-financial performance against pre-determined objectives can therefore be said to be at 55%, i.e. the organisation was able to meet 12 out of 22 indicators.  Most of the challenges facing the organisation with regard to non-financial performance have now been addressed but were mainly with regard to:  The absence of a proper technical indicator description document, standard operating procedure systems as well as the performance monitoring & evaluation framework. The internal audit capacity could only be brought on board in the last quarter due to challenges with resources, followed by a protracted procurement process. The Chief Operations Officer was only recruited in the third quarter of the previous year and commenced duty in the last quarter.

Members asked why the Auditor General thought an entity had no audit report impact when it spends more than what it has. Other Members thought that the slides were misleading, some were correct, some not. Every year AGSA issues the Department of Sports and Recreation South Africa a clean audit but they always come short in their Monitoring and Evaluation compliance.

Members opined that that it was clear that if the SA Institute for Drug Free Sport is to function according to their mandate they will have to continue to overspend but the question is how can this be mitigated legally? Others asked how much it costs to send test samples overseas and pay in Euros.  What measures did the Institute adopt to save funds?

 Members asked how BSA could operate without a provincial management.  The auditor’s report says effective steps were not taken to prevent irregular expenditure to the tune of R709, 358. Others contented that resolving one out of five disputes can hardly be termed a reduction and wanted to know if these disputes happen during boxing tournaments?
 

Meeting report

AGSA budgetary review and recommendation briefing

Ms Michelle Magerman, Senior Manager, Auditor General South Africa (AGSA) briefed the Committee on the Department of Sport and Recreation (SRSA) portfolio audit outcomes for the 2016-17 financial year. SRSA maintained its clean audit opinion, as a result of a culture of accountability instilled in senior management due to an effective performance management system, that resulted in the consistent implementation of daily and monthly monitoring of financial reporting disciplines within the Department. There is stagnation in audit outcomes for Boxing SA (BSA) and the SA Institute for Drug Free Sport (SAIDS) because of inadequate monitoring disciplines around compliance with laws and regulations by management, which resulted in repeat findings.

Inadequate monitoring of Supply Chain Management (SCM) legislation at BSA resulted in non-compliance with SCM legislation for transactions procured below R500 000 where price quotation was not obtained. As a result, effective steps were not taken to collect all money due at BSA and SAIDS. A lack of daily controls over expenditure resulted in SAIDS exceeding their approved budgeted allocation. Lack of adequate review of the financial statements at BSA resulted in material misstatements identified and corrected.

Management implemented recommendations made by the Department of Planning, Monitoring and Evaluation (DPME) and the AGSA interim audits on the Annual Performance Plans (APPs) by crafting clearer and unambiguous indicators and targets that conform to the smart principles. Material misstatements identified were due to an inadequate system to collate evidence from provincial departments to support sector indicators reported by the Department, controls around the collation of supporting documentation from the provinces must be strengthened. Inadequate review of the reported targets against supporting documents by SAIDS and BSA resulted in material adjustments to the APR.

An adequate system to record provincial indicators that are supported by reliable evidence must be developed and implemented by the Department.  Effective monitoring of action plans must be implemented by both BSA and SAIDS.  Rigorous review of financial and performance management policies against legislation is required at BSA.  A culture of adequate daily and monthly reviews for performance information must be instilled at BSA and SAIDS. Timely record keeping should be strengthened to ensure complete, relevant and accurate information is provided to support financial information reported at BSA. Daily and monthly controls at SAIDS on expenditure management must be performed.

Key concerns identified

- SAIDS and BSA incurred a deficit.
- Both entities were unable collect monies owed to them in less than 90 days, more than 10% of their debts is deemed to be unrecoverable.
- The net current liabilities of SAIDS exceed its net current assets.
- The total liabilities of SAIDS exceed total assets.
- SAIDS is unable to pay off creditors using current cash and cash equivalents balance.
- SAID’s ability to continue as a going concern is in doubt

Discussion

Mr T Mhlongo (DA) welcomed the presentation but with some concerns. The presentation was so fast and on the status of key controls, there is the issue of repeated findings mentioned. What is the limit for a department to implement repeated findings?   

Mr M Mabika (NFP) welcomed the presentation and asked why AGSA thinks that an entity has no audit report impact when it spends more than what it has? As a layman, this is interpreted to mean it is fine and is of no consequence to overspend.  The same happened to SAIDS because it was stated that interest was charged on its diner card due to late payment and yet AGSA says it has no impact on entity’s audit report? This should be clarified. Why had Boxing South Africa failed to align itself with established government policy by paying suppliers without getting three quotations?

Ms D Manana (ANC) thought the presenter was too fast and noted that a cursory look at the presentation will make one compare it with that produced by KPMG. Some of the slides were misleading, some correct while others not. Every year AGSA certifies that the Department has a clean audit but they always come short in their M&E compliance. SRSA were allocated R6m to provide oversight and support for the delivery of sports infrastructure projects by the municipalities. The Department was unable to utilise all the funds so allocated in 2016/17, in fact under spent by R1.8m. It is fair to assume then that some of the slides were misleading the committee.  It was repeatedly mentioned that SCM legislation resulted in non-compliance to SCM prescripts. When will the correct procedures be followed? There is a mention of R500 000 where the prescribed price quotations were not obtained. SAIDS and BSA also failed to collect monies owed to them. What criteria or measurement are they using to collect those monies owed, especially as it relates to the 10% that is deemed unrecoverable?

Mr S Ralegoma (ANC) asked why SAIDS keep getting unqualified audits. Could AGSA throw some light on this issue?  There seems to be visible improvement because they have all the key personnel in place now.  With regard to SRSA, the provinces remain a major challenge and this was discovered in the Committee’s oversight duties. It would be nice to hear from AGSA what reasons were given by the department in their interactions with the provinces. This is an area that needs the Committee’s focus with other stakeholders such as NCOP and other legislators.

The Chairperson asked, when it is stated that there is disclaimer opinion which entity did that refer to?

Responses

Mr Lourens van Vuuren, Business Executive: AGSA, said with regard to internal controls, and difficulty in interpretation of different colours in the slide, yellow means in between or in progress, which means some work still needs to be done; red means serious intervention is required. Currently there is a challenge because of the customised indicators; the information must be collected at the various provinces. That information will then be rolled to the National Department who then utilise those indicators to actually report in the Department. It is imperative that the Department get accurate information from the provinces. The challenge then is that each provincial department has its own control environment. The ideal situation is for the National Department to give specific requirements and guidance to the provinces on how to collect performance information. Everyone in the circle should also be made to understand what constitutes reliable evidence and the same harmonised methodology should be utilised by all. One problem discovered by AGSA is the lack of combined action in the provincial department. These concerns were discussed with the Minister. As this risk is highlighted, it should now be taken up by the accounting officers, executives and even this oversight committee. They should be engaged in various levels to reach an amicable solution so that the report is accurate. BSA and SAIDS also need to effectively monitor action plans after this audit circle so as to develop an audit action plan that could be monitored on a continuous basis.  It could help to prevent the recurrence of these negative audit findings. There are recommendations in the presentation made to the portfolio committee to monitor action plans as well. The Committee should therefore request the entities to present their audit action plans as well and force them to present their progress report on a quarterly basis. If the plans are implemented successfully, it should change the audit outcomes.

Again, rigorous review of financial, performance and management policies against legislation is required for BSA. They must instil the culture of daily and monthly reviews.  These controls are necessary because a non-compliance cannot be fixed. So, these controls are required to prevent it. For instance, if the focus area is in SCM, the control should also be in SCM as well. This can be done by ensuring that before a procurement transaction is approved, ensure that someone else checks the procurement process and stops it if there is breach of the procurement process before it happens. Day to day controls should be implemented. Timely record keeping should also be strengthened to ensure that there is regular and accurate information provided to support financial information by BSA. No financial adjustments are made to financial statements once it has been presented.

AGSA has moved away from the assessment of key controls to a new method which is the status of records review. This is a proactive approach. For example, when planning the audit, it is already dealing with the planning phase of the audit focused on various areas in the environment. A report will be written to the accounting officer highlighting certain areas which AGSA believes there might be challenges that might result in findings. If there are some controls not in place and is a high-risk area with regard to the financial statements, this process will be highlighted. If the accounting officer acts on it, it should aid him/her to address the issue and to prevent any negative outcomes.

On non-compliance, irregular and wasteful expenditure issues, on SAIDS; the fact that it exceeded its budget was disclosed in the financial statement and is irregular because SAIDS exceeded their budget and it is a non-compliance with PFMA because entities must stay within their budget. Their non-compliance has been reported in the audit report. The fruitless and wasteful expenditure does not warrant AGSA to report in the audit report because it was adequately disclosed. The PFMA has four requirements with regard to irregular expenditure which are; the entities must prevent it, detect it, disclose it and take appropriate action to deal with it in terms of consequence management.

SAIDS irregular expenditure was adequately reported and included in the financial statement.

On the achievement of targets in SRSA, AGSA focused on two specific areas which is the usefulness of information which was reported that AGSA belies that for the three entities, the performance information was useful. Another focus was on the reliability of performance information in which AGSA reports that it might be possible that there might be unspent funds or even under-achievement in a specific area. The main focal point was to ensure that an entity reports accurately which is then made available in the appropriations statement. Appropriations statement gives details of over/under spending on programme level and various other levels in the Department. That information is available on audited programmes, should there be no specific issues raised on the reliability of information on any programme so audited, it means that it accurately reported on it. However, if there is an underperformance, the oversight has a role by focusing on such because the targets are there and achievements are there as well. The reasons for the underperformance should also be disclosed in the annual report where the performance information is reporting.  No entity had an adverse opinion in their audit outcome this year. SRSA had a clean audit while BSA and SAIDS are financially unqualified financially.

The Minister for sports and recreation asked Parliament to think seriously about different spheres of government having its own accounting officers. For instance, sports and recreation have a DG nationally and another DG at the provincial levels that reports to another political leader and even to the Premier.  The national DG can neither instruct nor punish the provincial DG if not satisfied with the quality of information provided by the provincial DG because they do not account to them. Some provincial DGs will say it openly that they do not account to the national DG but to their political heads. There seems to be a constitutional issue or in its interpretation thereof.   Politicians must deal with this issue and not the Auditor-General.

Follow up questions

Mr Mhlongo asked what the punishment was if there is repeated findings/recommendation and the issue is not resolved.  How can AGSA give a department a clean audit when they have R3 000 irregular expenditure?

Mr D Bergman (DA) said the same question that continuously arises in sports is sponsorship.  How do we get at the layers of sponsorship? This is because nothing is ever mentioned in the reports about that. How do we start working on a system that gives strong internal controls on what goes on in sports taken into account all the layers of sponsorship? 

Ms Manana asked about the disclaimer audit opinion where it was stated that auditee had the same challenges as those with qualified opinion, who was being referred to?

Responses

Mr van Vuuren responded on repeat findings. When there is an audit action plan and repeat findings it means either the audit action plan is not successfully implemented or the other levels of assurance in the entities have not performed to the required level. The day to day controls were not supervised the way they should be and if it continues to happen then it is important to focus on consequence management. The question should now be why the day to day controls are not being supervised? That means individuals at the lower or top level are not performing their functions the way they should and consequence management has to be exercised. The wasteful and fruitless expenditure for the current year is R3 000 and should not be put in the audit report as it was duly reported in the financial statement as required by the PFMA, which still allows oversight to be exercised on it. Irregular expenditure of R1.9m was reported in the audit report.  AGSA’s current mandate is to audit the financial statements of the various entities but not to go beyond that. The fruitless and wasteful expenditure does not relate to SRSA but with SAIDS.

The Chairperson commended Committee Members for their proactive engagements in carrying out their oversight responsibilities. This debunks the thinking of many persons coming to present to the Committee from the thinking that Members can neither read nor write and therefore they will have an easy passage. 

South African Institute for Drug Free Sports (SAIDS):  Annual Report

SAIDS presentation was delayed because the presentation copy was not available and ready because they were only emailed to the office the prior night, for which SAIDS apologised. Members were livid and reminded SAIDS that they were supposed to engage with the documents before now.

Mr Alec Moemi, Director General: SRSA, said the constitutional and legal requirement was that a fully-fledged report be tabled and this constitutional requirement has been met. The report was tabled on time by the Minister for SRSA.  The duty of the Committee was to go through the report and even if the briefing document is not available, based on the report initially tabled, engagements could still take place and was perfectly allowed. The issues in the presentation were simply to highlight what was in the initial report. Receiving the documents earlier was the Committee’s practice but was not a stipulated legal requirement.

[Committee support staff hurriedly printed the document and distributed copies to the Members]

The Chairperson reprimanded SAIDS for this laxity and cautioned that this should never be repeated.

Adv Dave Mitchell, Chairperson of Audit Committee of SAIDS, said he and SAIDS had met with AGSA to rescind some of its decisions.  Few issues had to be brought to the table, which was important for Sports and Recreation SA and SAIDS.  SAIDS and the audit committee shared Parliament’s concerns on irregular expenditure and non-compliance with NT prescripts and PFMA. SAIDS was close to a clean audit and management had striven over years to make this happen.  
The appointment of Mr Onke Ngwane as CFO was very pleasing and positive.
SAIDS has made unexpected expenditure that was not forecasted and this is in the discharge of its mandate of promoting Drug Free Sports in SA. In the discharge of this mandate, tests need to go the laboratory and have to be World Anti-Doping Agency (WADA) accredited. Bloemfontein laboratory accreditation was withdrawn and alternatively test results were sent to Doha which also saw its WADA accreditation withdrawn.  There were serious problems in laboratory testing space both in this country and abroad that is hampering SAIDS ability and that of WADA to combat doping in sports.  This Committee would be asked for assistance towards making needed interventions if SAIDS could continue its role as mandated by government.

The assessment of irregular expenditure was appreciated but it should be seen in context. A cell phone was lost or stolen; it was covered by insurance and replaced by the insurer.  Management of SAIDS went to an Apple store and collected one after being paid by the insurance company as per quote and pay-out, with no declaration of interest obtained from the Apple store.  No big deal and irregular to see that this phone was covered by insurance.  SAIDS software (Pastel & Cloud based) was used for licence renewal. This licence renewal did not have a conflict of interest declaration. It was clean and regular and beyond reproach in every respect. There is R3 000 fruitless and wasteful expenditure in the financial report against SAIDS. This was finance charges; management deliberately took a decision when they had the option of paying the minimum amount to incur some charges or paying the full amount. The choice they had was to pay the minimum amount and incurred the finance charges because to pay the full amount would have amounted to unauthorised overdraft. This has to do with SRSA second cache of grants not yet received by November/December. These decisions were good deals that were classified as an irregular expenditure.  SAIDS needs assistance and understanding to make a clean audit.

Mr Khalil Galant, CEO of SAIDS opined that SAIDS obtained an unqualified audit outcome with adjustments but no material findings for 2016/17.
Education targets were exceeded as a result of increased networking and outreach efforts by the education unit and increased demand by national sports federations. Education is largely funded by the Lottery grants. Financial targets achieved: ENE process completed and database submitted were within deadlines quarterly reports submitted to Lottery, SRSA and National Treasury within the prescribed deadlines. Austerity measures and budgetary controls are in place to prevent deficit. Irregular expenditure was presented to board for condonation and board resolved to condone irregular expenditure. Procurement practices have been improved with stricter compliance i.e. tax clearance certificates, declaration of interest have been made mandatory regardless of value of transactions and all quotations are written (no verbal quotes).

Analysis of Sustainability

- To comply with World Anti-Doping Code and the testing targets for priority sports codes
- International and national compliance
- Actively follow up and prosecute on steroid manufacturing and trafficking
- Implement comprehensive schools testing program
- Implement comprehensive anti-doping curriculum (life orientation) in high schools

SAIDS underfunded by 25%, year on year over the medium term (R5.7m) per year.

Mr Moemi said that the Committee needed to be brought up to speed with some of their concerns with SAIDS as a growing concern. Presently SAIDS liabilities exceed their assets and questions to be asked of SAIDS viability to carry out its functions over time. This issue was addressed with NT and it was agreed that it was not a wise choice to invest in SAIDS now but to correct the underlying challenges SAIDS is facing, which is having to conduct testing overseas.  It should be ensured that samples are tested here in SA and the re-accreditation of the lab in Bloemfontein is the answer.  This will save a lot of money compared to testing abroad. SRSA is restricted by the WADA code that was adopted in Johannesburg and SAIDS itself cannot fund the lab because of conflict of interest issues and WADA prohibits it. WADA wanted the lab to be independent free from government interference.  The Bloemfontein lab is the only surviving lab on the continent of Africa as the Tunis and Cairo labs were all closed down. Government has pleaded with WADA to support government by allowing the University of the Free State to have the lab re-accredited. There has been a new dispensation that government has being allowed to intervene, leading to the lab being given the first tranche of R2m. This led to the lab signing a pact with that in Cologne to train our people there. Our practitioners have been sent there already and they have come back with new skills set that has led to the lab re-accredited for blood testing.  This is positive development but the bulk of the tests to be done are urine tests. The challenges is now two fold; after the WADA conference in Johannesburg, protocols were introduced that required new machines that even led to the Russians being caught and expelled from world sports.  One of these machines that can handle an average test of ten samples a day cost about R14m. This is a lot money but our practitioners are already being trained in Cologne to operate these machines and hopefully before year end government might purchase one machine. The yoke remains the number of tests prescribed to be done here in a year. If the tests are not much, then SAIDS could be able to live within available resources. But as a national anti-doping agency, it is required to meet the national threshold within any given year.  This led to SAIDS sending some sample overseas with attendant costs. Qatar was cheaper relative other parts of the world but with Qatar also suspended SAIDS had to test in Europe in Euros. The quicker Bloemfontein lab is re-accredited for urine testing the better and less drain on SAIDS resources. SAIDS for now need to tighten its belts as NT has indicated that no new money will be allocated to SAIDS during this period.

Discussion

Mr Ralegoma said that it was clear that for SAIDS to function according to their mandate they will have to continue with overspending. The question was how can this be mitigated legally? Another issue was around revenue collection; what was the percentage owed to SAIDS by other African countries and was it significant? What innovations were there for SAIDS to generate extra income so as to become self-sustaining?

Ms Manana said hopefully SAIDS will have a clean audit in the next auditing circle. SAIDS had a lot of their test targets reduced, was this due to the suspended lab?  Was SAIDS budget enough for its testing target? The entity was standing at 43% and since SRSA was giving R22.991m in tranches was SAIDS accounting for the first tranche so the second tranche can be transferred?  It could be that the second tranche is not transferred because the first was not accounted for.  Clarity is demanded if it accounted for the first tranche received because SAIDS cannot say it has no money because its payments are delayed.

Mr Mmusi asked how much it cost to send test samples overseas and pay in Euros.  What measures were adopted by SAIDS to save funds?  SAIDS must be happy to have an accountant who is also an advocate in its ranks.  There is this canny feeling that there is something not fully said when it was mentioned that there will always be unbudgeted expenses to be made by SAIDS.

Mr Sithole was concerned on compliance. How is that services were dispensed without the mandatory three quotations obtained? How many schools were drug tested by SAIDS?  Spending is a worry too because you should not spend what you do not have.  If there is constant overspending then something was wrong in the planning.  Despite professed good relationship with AGSA, the same issues raised by the audit last year still subsist; what are the mechanisms put in place to remedy the situation?

Mr Mhlongo said the audit outcomes for SAIDS cannot suddenly change without working for it. There is no detailed action plan from SAIDS to monitor and evaluate the entity.  The proposition is for the Committee to have SAIDS monthly and not quarterly reports as this will give a clearer picture in the trends and ability of SAIDS to achieve its plans and this is allowed by PFMA.  If the lab exists, the Committee must go and see it for an oversight visit.   Why are the SAIDS clients not able to pay in cash? More details should be provided on the R1m over-expenditure.

Responses

Mr Moemi said the issue of overspending cannot be avoided but wasteful expenditure should however not reach the level of materiality to warrant a negative funding in the current circumstances. SAIDS has to brace the storm which is dependent on the volatility of the Rand, which cannot be planned for but just projected for.  There might be gains if the Rand strengthens but what is projected for is the opposite. There are two costs to bear in mind, the actual costs for testing and that for the chain of custody such as getting a courier company uninterrupted. If the Rand strengthens significantly, then SAIDS may be within budget but given the global outlook and our growth rate, we anticipate the opposite so the same audit outcomes should be expected.  SRSA is not allowed to take money from its budget and give to SAIDS.  The Minister and other stakeholders insist that new revenue streams and innovation should be the order of the day. SAIDS is no longer doing random testing rather targeted and intelligent testing whereby people who are likely prone to dope are identified so that the outcome and impact is much higher. Performances of athletes is studied, like how have their times improved and if there is a rapid increase within a short period of time in the last three races or so and this is not a typical human performance, such persons are prime candidates for testing. Intelligent led testing is a new innovation that saves money. There is also the issue of biological passport that is kept.  SAIDS is also targeting African countries to increase its revenue.  There is room for improvement but the management of SAIDS is very responsive to government’s call for prudence and innovation.

Mr Galant, in his response said that the entity is very conscious of the deficit and consciously managing it however do not foresee that it will be erased completely within the year. It has been reduced and hope to continue to. The plan to reduce the said deficit is to reduce the number of tests and become more strategic by focusing on priority sports. The leading sports such as Rugby, Cricket and Football are being approached to help out with ex-gratia donations to supplement testing costs. Administratively, domestic and international travel is being reduced, reliance more on Skype and teleconferencing to conduct meetings and trainings. SAIDS have a national training conference for doping control officers and was postponed to make it now every other year and two regional conferences instead to satisfy the training needs. From an expenditure of R820 000 from these conferences, it has been reduced by R60 000. SAIDS have partnered with SRSA with a capacity building anti-doping seminar with the independent tribunal members. Such conference every two years would have cost SAIDS R400 000 but with this partnership with SRSA all SAIDS did was to pay for the tribunal members to get to Potchefstroom and this cost not more than R40 000. They seem small but add up in the long run. There is also another partnership with PSL where they funded anti-doping education in the PSL and NSD and the same for extreme fighting. This resulted to huge savings for SAIDS. International travel is severely restricted except those that have to do with compliance.

On innovation to generate income, there are successes whereby private sponsors in addition to lottery grants have assisted SAIDS. There is also an income stream from trainings for our African colleagues. Marketing quotes has been sent out on how to make SAIDS more attractive in marketing for companies involved in funding corporate social responsibility.  On the question regarding tranche reports, quarterly reports are submitted to SRSA, treasury and lottery to account for how monies are spent and cash flow projections. On the question of the Rand amount of international debtors, the amount is R279 000 and 30% of international debt. A monthly report is prepared and reviewed by the CFO and if required, it could be sent to the Committee.  A breakdown of over-expenditure, lab analysis which is testing overseas was R1.2m, courier costs R1m.

The chairperson thanked SAIDS and hoped that their plans and goals be achieved.

Boxing South Africa (BSA): Annual Report

Ms Ntambi Ravele, Chairperson of BSA board, stated that BSA has achieved an unqualified audit opinion for 2016/17 but has to double its efforts if it is to achieve a clean audit outcome.

On its Annual Performance Plan, Boxing SA has 22 performance indicators located across its three programme areas. During the period under review the organisation’s non-financial performance against pre-determined objectives can therefore be said to be at 55%, i.e. the organisation was able to meet 12 out of 22 indicators.  Most of the challenges facing the organisation with regard to non-financial performance have now been addressed but were mainly with regard to:  The absence of a proper technical indicator description document, standard operating procedure systems as well as the performance monitoring & evaluation framework. The internal audit capacity could only be brought on board in the last quarter due to challenges with resources, followed by a protracted procurement process. The Chief Operations Officer (COO) was only recruited in the third quarter of the previous quarter and commenced duty in the last quarter.

In terms of revenue collection, the total sanctioning fees were under collected; this was due to long outstanding debtors in the books of BSA to the extent that debtors have been impaired to reflect the challenges of collection of sanctioning fees.  The legal entanglement resulting from disputes by association of promoters in the Eastern Cape also affected collectability of outstanding amounts. Licensees fees received were over the expected number of applications. There was also over collection of money collected from penalties and fines levied on offences committed by licensees on behalf of BSA have to be recognised as actual revenue from non-exchange and is disclosed as part the total additional amount of Additional financial support from the SRSA for payment of legal expenses paid of related parties notes in the Annual Financial Statements Other income: Sponsorship -Receipts relates to the Lottery grant and SABC for Boxing Awards which was signed after the budget was approved.

Past outstanding labour relations cases remain a challenge for the entity, however one case has been successfully concluded and there are still five more cases underway. Constant and close monitoring by BSA management is kept on the remaining cases to ensure that the legal team is fully supported and resourced to successfully defend BSA in the remaining cases. BSA is finalising the mitigation process involving legal disputes by the Eastern Cape Promoters Association over the interpretation of the Boxing Regulations. This matter to a large extent, affected the systematic approach to recovering debts of promoters. Upon conclusion of the impasse the entity shall levy interest on long outstanding debtors and improve on the turnaround times for recovering such debts. BSA has developed SCM internal control systems to prevent occurrence of irregular expenditure. Inefficiencies in contract management resulted in the continuation of an old contract/ account for courier services, the entity has already terminated the said contract and opted to participate in a transversal contract arranged by the National Treasury.

Discussion

Mr Bergman said the SABC was an unreliable partner in boxing in his opinion. If growth was expected the issue of controls in the relationship should be looked into. BSA is saying that there are sanctioned bouts without purse money being paid, should it be assumed that is within the prescribed period of time and without exception? Should we say no promoter has executed a fight without putting the cash money down?  Yet we see fights cancelled at the last minute because of purse money. How does that happen when there is requirement of a two-week lapse before fights could be cancelled yet we see last minute cancelations?  Looking at the boxing licences and the bouts that have taken place there is a skewed picture. Eastern Cape and Gauteng leads the way in boxing. Looking at the bouts one cannot fail to notice foreign names and struggle to find SA boxers in the tournaments in proportion to the sanctioned fights. Not that there is anything against foreign boxers but SA boxers should be promoted when fights take place on our shores. We thank the board for bringing stability to BSA as the number of disciplinary actions has come down. And moving forward we should now focus on who is boxing and which promoters have franchise and who controls the bouts on SABC.  The promotion of our amateurs and protection of our boxers from abuse maybe from SABC should now take centre stage.

Mr Sithole asked how BSA could operate without a provincial management.  If we look at the auditor’s report, it says effective steps were not taken to prevent irregular expenditure to the tune of R709, 358. Another says effective steps were not taken to collect all monies due as required by PFMA regulations. Also, goods worth R500 000 were procured without the required price quotations. Why is all this happening?  On leadership, audit report said that the accounting authority did not exercise sufficient oversight responsibilities. Yet accounting authority again did not communicate all policies and procedures to enable and support the outstanding internal controls mechanisms. Why was all this happening in BSA? What was the nature of the relationship between BSA and SABC? It was a challenge before because SABC hardly broadcast our boxing especially amateur boxing. What about transformation in boxing?  Amateur boxers still have no resources and they need help. The Committee will be willing to meet them to find out the difficulties they are facing.

Mr Mmusi said where one was to make a distinction between rural and urban boxers, the rural boxers are better yet they do not have resources. It was unfortunate that rural dwellers lack opportunities and therefore are behind their urban counterparts. It was stated that some of the disputes have been reduced and the CFO spoke of ghost litigations still continuing.  And putting that in context, resolving one out of five disputes can hardly be termed a reduction. Do these disputes happen during boxing tournaments?  Do disputes of victimisation of boxers from a different province reach BSA? Was the 5% and 10% from promoters the only income stream BSA has?

Ms Manana appreciated the presentation but told BSA to ensure when they go back to look at their policies and procedures because in their audit outcomes these are highlighted issues. BSA needs to sit up on the legislative mandate. On the organisational structure, it was comforting that they are sitting on 80%.  On transformation as regards to amateur boxing, there was much to be desired. They need to be assisted especially in the rural areas. BSA needs to assist armature boxing because they are standing as a separate structure.  Boxing promoters in the rural areas do need assistance.

Mr Ralegoma appreciated the presentation and thanked the board for a job well done and hoped that the Minister will also choose competent persons when the time comes to replace the present board. On tender with SABC, we hope to see more fights that will benefit BSA. On the action plans and AG’s concerns thereof, it is hoped that Eastern Cape should pay what they are able to pay rather not paying anything at all same as we are experiencing with ESKOM. With regards to arbitration, what are the chances of getting anything from them because that is the reason they are declaring a dispute.

Mr Mhlongo wanted to know the relationship between BSA and SAIDS and if they are now working together. Regarding the investigation on fruitless and wasteful expenditure, how far are we?

Response

The DG said it is important to make a distinction between the mandates of BSA and what the national federation SA National Boxing Amateur Organisation (SANABO) must do.  BSA is a regulator and not responsible for the development of boxing. BSA is supposed to sanction fights, ensure people do not die in the ring and do other things required of them. They should not have been made a 3B entity or a 3C. They are not a bottomless pit because they are expected to generate revenue for their sustenance.  This mandate might work well in a developed market but we are a developing country. The promoters we have here if thoroughly analysed, the real entrepreneurs amongst them might only be five.  People who can really package a product and sell it and make a profit and very few them are less dependent on government grant. Those who can raise their own money and generate revenue are very few. The rest of the promoters have licences to promote but would not be able to package a product and sell to SABC or Supersport and the like. The model of them asking government to fund them is flawed because it pre-suggests that government must subsidise people’s private businesses. There comes our dilemma in development of boxing in SA. There is SANABO whose duties are twofold; to promote boxing development in the amateur level not to deal with professional boxers and to deliver team SA into international amateur boxing tournaments. SRSA have being consistently criticised that professional boxing is dead and no more on TV and amateur boxing is in shambles and no development in boxing. But Rio Olympics was a great eye opener.  Since 1932 Olympics, boxing have been delivering medals to team SA.   With regards to amateur boxing, an open boxing league was recently launched the first for SA and all nine provinces are represented with fully fledged teams and with girls included and subsidised on an equal footing.   This will benefit the youngsters from the rural provinces. The first-time amateur boxing will be on TV and it is heading to the finals and going well. Supersport has come to the party as well. SANABO has been paid R500 000 for the rights to the tournament a good revenue stream for them because no one wants to see amateur boxing on TV.  SANABO should also be invited by the Committee to explain what SRSA has done so far for them.

SAIDS has highlighted that on the number tests they had done; boxers were caught in the red using prohibited substances. SAIDS were saying because BSA has a higher positive test rates, they must be compelled to contribute towards the cleaning of the sport and testing programmes.

Ms Ravele in answering the question on the reliability of SABC as a partner, said BSA and SABC relationship has subsisted for three years now.  Both entities have been moving through baby steps and there is some degree of comfort that it is heading somewhere. A workshop was recently held with promoters and an agreement was reached on advertising for the tournaments for this financial year. Road shows were held in all nine provinces and beginning from this month, two tournaments per month might be in the offing. The month of August saw two female tournaments held. It’s an ongoing relationship that still needs to be strengthened.
On dispute resolution, it was not categorised in the report.  The reference was on staff matters only and not with promoters not paying 5% or any other for that matter. Before now, going to court was a growing concern but not anymore as we have not been to court for two years which is a big achievement. There is also no negative publicity in the media with regard to BSA. The dispute with Eastern Cape is a winnable case. The suggestion BSA will take home today is for them to pay the amount they are not disputing instead of waiting for all the cases to be resolved. There was no problem between SAIDS and BSA before; it was just that BSA could not afford to pay for their services.
The Committee was thanked for the cooperation they accorded the board for the last three years. As this was the last term for the board, it was a joy working with the portfolio committee.

Mr Tsholofelo Lejaka, CEO of BSA, on the issue of promoters’ payments, the 10% is before expenses. On the issue of purse money, the law says that if there is an agreement for purse money, that must be paid on or before the tournament date or a date that is agreed upon. The regulation on the other hand says it must be paid thirty days before or BSA shall determine. This gives BSA the power of determination.  It also enjoins BSA to put into account the financial viability.                                                              

The Chairperson thanked all present and the meeting was adjourned.

 

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