SASSA, Central Drug Authority, National Development Agency 2016/17 Annual Report, with Minister

Meeting report

South African Social Security Agency (SASSA): 2016-17 Annual Report

Ms Connie Nxumalo, Deputy Director General (DDG): Welfare Services, Department of Social Development (DSD), said overall performance showed that of the 42 targets set in the annual performance plan (APP), 19 (45%) targets had been fully achieved, 13 (31%) were partially achieved (between 50% and 98% achievement), while 10 (24%) targets were not realised (below 50%). Total expenditure stood at 106%.

Programme 1 (Administration)

Some of the targets not achieved were clearing the backlog of investigations into fraud, theft and corruption; the acquisition, configuration and piloting of biometric access systems for staff and beneficiaries; a network connectivity infrastructure upgrade; and implementation of a back scanning solution. Another indicator with a very low performance was the recovery of debts. A 5% target had been set, while only 2% of social assistance debts to the value of R12.9 million out of a total of R814.4 million had been recovered. High performances had been achieved in targets to achieve an unqualified audit report, implementation of the Enterprise Business Solution for grants data, financial management support systems automation, the auditing of 367 local offices and opening of 150 open pay points, conversion to fixed structures, drafting of contracts within 10 working days, internal audit reviews and fraud and corruption awareness programmes.

Programme Two (Benefit Administration and Support)

Achieved indicators were the processing of new social grant applications, where 1.4 million had been targeted and more than two million applications were processed. There had been an over-achievement in social relief of distress (SRD) applications awarded, and total expenditure on SRD for the financial year was R587 million. The payment administration for regulation 26A backlog mandates had achieved 60% and matching fingerprints of both adults and children had achieved only a 16% performance because of the challenges of tracing beneficiaries by SASSA.

Mr Tsakeriwa Chauke, Chief Financial Officer: SASSA, said SASSA had an allocation of R6.9 billion, and the total expenditure for the year had been R7.2 billion. The over-spending was due to the return of a surplus of R1.2 billion. Approval to spend the returned surplus of R1.2 billion had been received from National Treasury. Over-expenditure was due to spending on the Integrated Community Registration Outreach Programme (ICROP) and the Mikondzo service delivery project, and handling fees of R2.1 billion paid to service providers. There had been under-expenditure of 4% on the compensation of employees due to positions that were not filled.

SASSA had received a qualified audit opinion. Financial statements were presented without material misstatement, with a few exceptions. The Auditor General (AG) was not happy with the percentage of disputed deductions from social grants payments which had been resolved. A 36% achievement had been reported but the AG had found it to be 33% achievement, which had been due to multiple channels of reporting which had been standardised. The AG had also found disclosure of irregular expenditure on local content and the Construction Industry Development Board (CIDB) Act, and its provision. SASSA had reconsolidated the register from the regions, but the AG had not accepted it because there was no means of validating the consolidated register.

Central Drug Authority: 2016-17 Annual Report

Mr David Bayever, Chairperson: Central Drug Authority (CDA), said there had been a late submission by the Department. Only 10 of the departments had submitted their reports, of which only two had been signed off by the Department.

Mr C Hattingh (DA, North West) asked what the Committee could do without the report of the CDA, because the report was the reason for the meeting.

The Chairperson asked if some departments had not submitted their reports, and how Mr Bayever would account for those that had not submitted their reports.

Mr Hattingh said there was no way of having a presentation on what did not exist. He said history showed that a presentation could be selective in showing the positive side of the report. It was a wasteful expenditure – had the CDA put the situation forward before the meeting?

Ms D Ngwenya (EFF, Gauteng) said it was difficult to engage without the report, and observed that the chairperson had said the report was not complete because some departments had not submitted their reports. She asked what the stakeholders had done to ensure that a report was produced.

The Chairperson said she had a copy, and four additional ones. When she had asked about the report, she had been told that it was tabled late. She asked how many departments had submitted and asked if the problem had persisted, or if it was a recent problem.

Ms Nxumalo said the CDA was not a scheduled entity and not a private structure. It was a statutory body without a budget -- a coordinating structure. It was not audited by the AG and had no financial statement. It coordinated the implementation of the National Drug Master Plan and had structures in provincial offices The Department had allocated about R5m for coordination. There were 21 departments which were part of the CDA. Only 10 had submitted and only two of the reports had been signed. The Department had tried to assist CDA. The Minister had written to the Departments, and DGs had also followed up on the request to submit their reports, yet most of the Departments had not submitted a signed report, which had been a challenge. She said the CDA had come for the meeting because it had a statutory obligation to table its report in Parliament annually, and had to come despite not having the complete reports from the Departments.

Ms Ngwenya asked if the CDA had been before a portfolio committee in Parliament, and asked what they had submitted.

Ms Nxumalo said it had been called, and the Portfolio Committee on Social Development was also aware that it was a statutory body and had no allocated budget. The Department was looking at how to change its structure so that it could be allocated and could have the authority to deliver on its mandate.

The Chairperson said there were only two signed off reports. She asked why the CDA was required to submit a report, despite not being allocated a budget. What should the CDA account for when no fund was allocated to it, and what informed the R5m given to the CDA by the Department?

Ms Nxumalo said it was for the coordination of the CDA. The R5m was for funding the meetings and the transportation.

The Chairperson said it was a very important structure, but it was not making impact looking at the extent of the drug problem in the country. She said the CDA would be called again, because the country was losing its youths. The Committee would want to see the finances of the Department in relation to the report of the CDA. The statement of the finances of the entity should be extracted from the Department’s report and added to the report of the CDA when next it appeared before the Committee, which would be in the first quarter of 2018. She welcomed the Minister, Ms Bathabile Dlamini, and encouraged her to look into the structure of the entity and make it more effective than just a coordinating structure because of drug-related problems in the country.

Mr David Bayever said the CDA was aware of the extent of the drug problem and was committed to dealing with the situation. He said the recommendation of the Committee was welcomed.

National Development Agency: 2016-17 Annual Report

The Chairperson commented on the importance of the mandates of the National Development Agency (NDA).

Mr Bongani Magongo, Executive Director: NDA, said 2016/17 had been its transitional year, and the entity was going through a process of restructuring in the 2017/18 financial year. The restructuring was a response to the new NDA organisational model and structure requirement at the national, provincial and district levels. The NDA had adopted a model which decentralised programme and service delivery so that it was also able to increase its footprint. The organisational framework had been reviewed and it had re--organised its organogram in line with the new structure. It had executed four programmes along with the restructuring.

There were 23 key performance indicators (KPIs) in the last financial year, and only two were not achieved, which gave an average performance of 91%. Over-achievement in some of the targets was attributed to the improved ability of the entity due to the restructuring. The NDA could not meet the target for the reduction in regulatory and audit findings, and the implementation of a functional integrated information system was also not achieved. The information communication technology (ICT) strategy had been approved would be implemented in the new financial year.

The NDA had overachieved in civil society organisation (CSO) capacity in Programme 3 because there were lots of partnerships in the area and because targets were set with uncertainty, not knowing if some contracts would scale through or not.

On governance, he said the NDA had a board of 10 members and for the first year the Committee hadmet more frequently than planned because of the review in the operation module. He identified a challenge with the re-structuring of the system and the capacity with which it worked during the process. The NDA had 180 employees in nine provinces. The majority of them were females, and three employees were people living with disabilities.

Ms Ngomusa Cheryl Yeni, Chief Financial Officer: said the NDA had received R237m, which was 3% above the budgeted amount. R 221m had been spent, which was 4% below budget. The NDA operated under stringent financial constraints because the allocation from the NT increased by 5% annually while the consumer price index (CPI) rose by 6.5%. Also, key organisational expenses such as rentals of offices and employees’ salaries had increased by between 7 and 8 percent in the previous year. This meant that the allocation effectively had decreased. Revenue had declined by R18m due to a reduction in the conditional grant received by the NDA. Total assets exceeded the total liabilities, and the entity was in a healthy financial position.

Chairperson asked why there was no report on the audit outcome. The audit opinion must not be left out and the matters of concern should be highlighted.

Mr Magongo said the NDA had received an unqualified audit opinion, with matters of emphasis. He explained the reasons for the matters of concern raised by the AG in the audit outcomes. The restructuring and re-positioning of the NDA had created implementation challenges because it was getting into new areas, and the implementation of the decentralised approach posed initial challenges for which time was required to adjust. However, the NDA was already mastering the situation. It had replaced all the officials in acting positions with permanent staff. There had also been a financial challenge with the expansion because it required a more than 250% increase in the number of staff. The change of approach to the intervention required tools, and though the tools had been designed, institutionalising them would take time. A part of the remedial measures was the establishment of programme implementation at the district level and the introduction of an audit turn-around strategy. A senior manager had been hired to manage the strategy. Performance information was good for the year under review.

The Chairperson invited Ms Judy Hermans, Chairperson of the NDA to make additional comments.

Ms Hermans said she would allow the Committee to ask questions, so as to save time.

The Chairperson invited Minister Dlamini to make an input to the presentation.

Ms Dlamini said she would prefer to respond to questions, because she had not been available at the beginning of the presentation.

Discussion

Ms M Moshodi (ANC, Free State) observed that the NDA had said its vacancy rate was at 22%, with a turnover rate of 27% because of the departure of 12 employees. She asked why they had left. She asked the NDA to explain what had happened to the four employees that faced disciplinary hearings, as reported in the presentation. She stated that there were two types of grant cards, and one of them was not accepted by SASSA officials, and she wanted an explanation. She asked NDA to explain the reason for irregular expenditure of over R326m.

Mr M Khawula (IFP, KwaZulu-Natal) said that he had received a report of a challenge at Cash Payment Services (CPS), where employees were compelling beneficiaries of SASSA to register for a funeral scheme, and were being held liable if they were not able to meet targets set CPS. The case should be monitored to avoid this anomaly. The SASSA presentation had talked about institutionalizing payment of SASSA, and he wanted to know how this would be done. SASSA had said it had a responsibility to uphold good governance, and hr asked if the way the former SASSA CEO had left the entity was in accordance with good governance. He observed that SASSA had referred to the conversion of the open pay points to fixed structures, and said he was not aware that it was SASSA's responsibility to build structures. He asked how this was being done, because there were still many open pay points. Also, he asked how big the challenge of refugees not being able to produce identity documents was. He asked if the problems of fingerprinting would not expose SASSA to fraud. The NDA mandate of contributing towards to the eradication of poverty was big. It should explain why it had under-spent its funds, yet complained of working under stringent financial conditions.

Ms T Mampuru (ANC, Limpopo) said the presentation had been silent about the consequences of the fraudulent occurrences. She asked about the interrogations, if arrests had been made, and if the people involved were still in the system. It had been cleared that the green ID document would still be valid, and asked the Department to explain the collaborative effort with Home Affairs in preparation for 2018.

Mr C Hattingh (DA, North West) observed that some misstatements in the previous report submitted for auditing by SASSA had been repeated, while some had been corrected. The reported achievement for the benefit administration had again been misstated -- 36% instead of 33%. He said irregular expenditure and fruitless expenditure was repeated, while performance bonuses were increased. A performance bonus was given to eight to 10 percent of the staff, and asked if it had become a right to earn a performance bonus. The performance bonus policy should be presented to the Committee so that it could have an idea of its guidelines. He would like to get an understanding of why about R26m had been allotted to entertainment. The AG had reported that disciplinary was not taken against some employees in respect of wasteful and fruitless expenditure, and asked why this was a repeat finding by the AG. He said the emphasis in the budget was for performance bonuses, despite provision for a 13th cheque at the NDA. He asked why the R7.9m performance bonus allocation (about 8% of staff costs) was included in the budget.

Ms Ngwenya said the AG had reported that the accounting system of SASSA was not in place. SASSA had continued to shun the financial regulations, and she asked for the consequence management in place to address the situation. With regard to SASSA, were people held responsible for wasteful and fruitless expenditure? What informed the figures in the targets, and what were the baselines of the figures that were selected? There was a need to know the baseline in order to monitor progress. The amount of money recovered from the outstanding debt was too little. The NDA should know that under-expenditure was not a positive mark, and it would not be given money that it could not spend. The vacancy rate of 22% in the NDA was too high while money was available to employ more staff. She appreciated the effort made by the NDA to get an unqualified audit opinion, but it should address the matters identified by the AG, and this should be reported when next it appeared before the Committee. The expectation of the Committee was for all the entities to achieve a clean audit opinion.

The Chairperson said the NDA was allowed to raise funds, but it appeared that all its income was from the government. She asked what the NDA was doing to raise funds, or if it was just waiting for the government. The NDA should go back and reflect on whether it was impacting on poverty as it should. She said the over-achievements were probably due to lower target setting. She recommended that the NDA should retain the size of its organisation and spend more money on implementation, rather than expanding without the ability to fund the expansion. She said there had been so much noise about SASSA. She asked for the reason SASSA continued with irregular expenditure. Was it because of a lack of capacity in financial management? The actions of the officials in the entities impacted negatively on the Minister.

She asked if the CFO had been deployed, because it had been observed that deployed staff lacked competence. She said there were no partially achieved indicators, but rather fully achieved indicators. She would like to know the type of fraud that had been committed. She said 109 contracts had been completed within 10 days, and commented that this could lead to a problem. What kind of contract had it been, and how were they all achieved in 10 days? She said IT systems must be acquired with knowledge, adding that under-achieved targets could be solved if the NDA could find IT systems that could integrate or interface with existing systems. She asked why so much debt would be cancelled. The debt cancellation was not ideal, and the entities should make more efforts to recover more of the debts. SASSA had said it could not achieve its target on finger prints because it could not trace the people involvedbut most of the people collected pensions, so why was it difficult to locate them? She asked why the Department had gone to the Independent Development Trust (IDT) when the IDT had owed money to some service providers for seven years.

Responses

Minister Dlamini said the Constitutional court had ruled against SASSA, saying that no one should be allowed to use the Department’s beneficiaries for other purposes. The Department had therefore decided to cut out the people using a beneficiary for re-registration. The Department had been taken to court again and had been ruled against in the Pretoria high Court. The judgment said the ruling of the constitutional court did not mean that the Department should stop the re-registration process. The Department had appealed the judgment.

She said CPS was an independent company, despite providing services to the Department. However, she said a judgment had earlier clarified that when an organisation had a contract with the government; it became an extension of the government. The Department related with the CPS within the contract but this did not extend to CPS employees. However, she promised to look into the situation.

She said the former CEO's term had come to an end, which was why she had left the Department.

Though there were still pay points in open places, a lot of work had been done by the Department to increase SASSA’s footprint by increasing pay points, towards meeting the 5km radius target.

The issue of refugees was a challenge. SASSA was trying to resolve it, but the challenges in border areas were enormous. There were grant recipients with dual citizenship and it was difficult to get caregivers in some areas, making it difficult to register children. She said Home Affairs and Lesotho government had tried to register children in the area but beneficiaries do not show up during these exercises.

She explained to the Committee that the NDA had tried to carry out its mandate but she realized that its challenge lay in the way it had presented its report. It had done a lot of work in strengthening the CSOs and the NGOs. They monitored the cooperatives so that they did not collapse, and helped with the training of early childhood development (ECD) practitioners through collaboration with service providers and institutions of higher learning. The NDA had been raising funds for building ECD centres, though it was not a responsibility of the Department, but the responsibility had been adopted by the Department. Though she did not agree with over achievement, it was the first time the NDA had come up with a clear target, and this would be the baseline. On the issue of the accounting statement, she said the team was trying very hard and there had been a clear difference. It had also realised areas where it had made mistakes.

She said the CFO had been employed because he was competent, and not because of favoritism. A lot had been done, and there was a difference which would be seen as time went by.

The projected number of people to be registered as grant beneficiaries varied, because it was difficult to foresee the turnout of people for registration, so the number would be exceeded and sometimes performance would fall below target. The target for the number of beneficiaries to be registered was often decided between the NT and the Department.

She said not all the officials got bonuses. There was always a panel that sits to determine the beneficiaries of performance bonuses, and sometimes there was contention over who received one.

She gave a brief summary of the engagement of the Department with Standing Committee on Public Accounts (Scopa). The Department had been to Scopa as an Inter-Ministerial Committee (IMC) twice – firstly, to report on how it would comply with the Constitutional Court ruling, and again to give an update on the implementation protocol which had been signed by SASSA and the SA Post Office (SAPO). She said the update was on what had been done since the IMC had been formed. Information had been provided to a panel of experts. It had also committed to providing sufficient details on the process undertaken by SASSA in the appointment of service providers, including communications by the office of the Chief Public Procurement Officer, by Friday 17 November, and also to combine statistics and all information involved in the payment of social grants in one consolidated document, to be provided to the panel on a monthly basis. A request had been made to the Government Communication and Information System (GCIS) to present a plan to the IMC, and the next report to the constitutional court would be on the 8th of December.

She explained other activities dealt with by the IMC to ensure successful implementation. These included risk mitigation and contingency plans to ensure that on 1 April 2018 there would be a seamless transition, ongoing meetings with the banking association, and engagements with the public sector concerning the hybrid model. There would be four focus areas -- ICT, legal, financial institutions and constitutionality, and legal robustness of the process. A lot had been achieved within the 10 days, and the commitment of the IMC was to ensure that citizens accessed the grants. SAPO would provide SASSA with some accounts and bring on board new beneficiaries. The Banking Council of South Africa had agreed to open affordable accounts for SASSA beneficiaries. The reports would be cleaned and sent to the Committee. She said the IMC should be invited to present before the Committee.

The Chairperson requested that outstanding questions be answered in writing. She thanked the Minister and all the delegates, and said she hoped that SASSA would improve.

The meeting was adjourned.