Western Cape Gambling & Racing Board; Provincial Treasury: Quarter 2 & 3 & 4 performance

Meeting report

Provincial Treasury Quarterly Performance Report: July 2017 – March 2018

Mr Zakariya Hoosain, Head Official: Provincial Treasury, asked whether he should take the Committee through the presentation quarter by quarter, or whether only the last quarter should be addressed in the presentation?

After some discussion, the Chairperson concluded that the fourth quarter could be addressed while the Committee remained cognisant of the other information that the quarters provided.

Ms Beerwinkel referred the Committee to a document which was not legible, which was another waste of time and paper. This was disregard for the Committee, which was unable to play an oversight role when it was given documents that were illegible.

Vote 3 – Provincial Treasury: Expenditure as at 31 March 2018

Ms Annamarie Smit, Chief Financial Officer: Provincial Treasury (PT), gave a brief breakdown of the expenditure as at 31 March 2018, specifically for administration, sustainable resource management, asset management and financial governance.

Ms Beerwinkel referred the gathering to the ‘virement’ column, and asked whether the virements include movements for the whole year. The Committee had asked the PT at another meeting was to explain to the Committee when exactly those changes were made to virements and why. To just refer to ‘virements,’ does not provide a reason -- when the virement was done, and whether it was done at, before or after the adjustment budget. Could the Committee get an explanation going forward?

The representative from the PT said that virements were done after the expenditure had already taken place. It was basically a realignment to ensure that there was no over-expenditure in the programmes. This was why, in terms of the total, there was a zero effect.

Ms Beerwinkel responded that she did not accept the answer, simply because the Committee knew and had been told how, when and why virements happened. PT would obviously not have this information with them right now, and that explanation must be given at the next meeting.

The Chairperson responded that this information would be requested. Why did the total under virements reflect zero? The point was that if there were amounts that were shifted, it brought one to the question as to how, when and why virements happenned.

Mr P Uys (ANC) asked that when the PT went through the programmes, it was important for it to reflect on the virements.

Ms Smit continued with the presentation, giving a breakdown of expenditure as at 31 March for the four programmes: administration, sustainable resource management, asset management and financial governance.

Discussion

Ms Beerwinkel asked, if the Programme Heads were present, that they give an explanation about the virements, particularly about when, why and how they happened.

Mr Uys referred to slide 16, and highlighted that the budget was R308.1 million, and had been adjusted to R288.6 million, while the actual expenditure had been R278.1 million. R30 million had not been spent. Why had there been over-budgeting to the extent of R30 million? A proper explanation was required. Apart from the virements, there had been some shifting which had taken place within programmes. Virements were within different programmes that had taken place.

For the Office of the Minister, there was an outcome of 93.3%. Why was R433 000 not spent and how would this be rectified? Furthermore, for management services, there was an outcome of 93.3%. Why was R 1.7 million not spent? For Programme 2, sustainable resource management, what was happening in terms of programme support, where expenditure was 90.6% of the final appropriation? Moreover, for Programme 3, in terms of programme support, the expenditure was also 90.6% of the final appropriation. Could these figures be unpacked? There was under-spending of R8.8 million regarding the total sustainable resource management. It was important to understand why, in this particular area, there was under-spending. In Programme 3, under Supporting and Interlinked Financial Systems, there was spending of 94.3%. What was the reason for the variance of R1.5 million? In Programme 4, could the PT explain the accounting services and the reason for the increase in Provincial Government Accounting and Compliance? An overall assessment was needed, which would be available in the annual report. It was important, however, that the Committee also gets an understanding now as to what went wrong.  

The Chairperson highlighted that was up to the Head of Department (HOD) of PT as to how he would like to manage the questions.

Mr R Mackenzie (DA) said that, as all the Programme Heads were present, they could take the Committee through a brief explanation and cover the Committee’s questions concerning the under-spending.

Ms Beerwinkel (ANC) referred to the question about the fact that the budget in its totality was decreased, and asked if the Programme Heads could explain why each programme had its budget decreased, yet at the end they had not spent the budget.

Treasury’s response

Mr Hoosain asked if the PT could furnish a formal response on the virements, the reasons for them and when they were effected. In terms of the PT’s budget a year ago, there was a lot of pressure to get the provincial budget into a sustainable process. What PT was challenged with was making decisions around which posts to fill. About a year ago, it had explained to the Committee how it planned to go through that process. The management team had sat together to identify the posts within the Department. What the Department did not want was to identify posts that were not a priority, to fill those posts, but then could not sustain the funding. PT had to rework its budget as a provincial department as well. It was also faced with the same dilemma that other departments had to go through, namely, to get the compensation budget under control. PT’s first priority, given that the compensation budget had a pull-through effect, had been to get the approved-post list finalised. It was finalised. Parallel to this, PT also had a massive problem with regard to the stability of the compensation funding. It had a number of commitments with interns as a result of bursary obligations, and needed to get the commitments finalised.

Another issue was that PT had in excess of about 40 people that it needed to place, but did not have funding for all of them over the medium term expenditure Framework (MTF). There may be funding in the initial part of the year, but not necessarily over the full year, which presented PT with a sustainability challenge. At least about one-third of the applicants who originally planned to get into the system had not taken up the bursary or the placement within the PT. PT planned to deal with this in the adjustment budget, as it felt that this was the most responsible approach. One thing the PT did not want was to commit to a compensation budget which it could not afford in the inner and outer years. This was the PT’s first main priority. It explained the concern around what happened between the main budget and the adjustment budget.

The part that the PT did not have under control yet was that it had implemented austerity measures, cross-containment etc. with a view to trying to get the its goods and services budget under more efficient budgetary control. Unfortunately, what the Committee saw now was the R10.4 million, which was the net effect of that. There was also under-spending in what was largely the residual compensation of the employees. This was basically the normal attrition of R1.1 to R1.2 million for compensation. Then there was a portion for training and development, which the PT had budgeted for, and had contributed about R1 million to the under-spending. There were also bursaries that had not been taken up. The proportion of bursaries that contributed to that under-spending was about R500 000. The other portion of that under-spending was spread over things like the consumables, printing etc. This made up the bulk of the under-spending on the high level, based on the R10.4 million.     

Mr Mackenzie asked for clarification on how the main budget of R308.2 had been adjusted to R288.6 million.

Mr Hoosain explained that this was in view of getting the compensation budget under control, and a big portion of that was to get the posts realigned with the budget. The PT was comfortable that the figure for compensation was what the PT could afford over the MTEF. This also included the interns’ money.

Adv Estienne Pretorius, Head of Ministry: Finance and International Relations, PT, referred to the under-expenditure in the Ministry, and explained that one of PT’s staff members, a registry clerk, had been promoted to a different component in the Department. She had departed on 1 October, and the PT had managed to fill that position only towards March of this year. The position was filled now, but it accounted for more than R100 000 of the under-expenditure on the personnel side. On the goods and services side, the PT had benefited to a large degree from its collaboration with the communications component in the Department of the Premier (DotP). Much of the marketing and advertising issues were picked up by the DotP. The PT was grateful for that, but it had caused under-expenditure in that regard. Because the Minister was responsible for international relations, the PT as a rule predicted a budget for at least two visits from the Ministry per annum. This year, there had been only one.

Ms Smit explained the variance in management services, of which R627 000 had been for the compensation of employees. Goods and services were R615 000, the biggest portion of which was R48 000 for training and development. The reason why the PT had not spent its money on training was because according to legislation, the PT had to budget for 1% of its compensation for training and development. The training that Programme 1 required was provided by internal service providers or internal departments, like the DPME or National Treasury. The PT did not need to pay because they saw to the bill for training even when they got outside presenters. That was the main reason for the under-spending on training and development. There were other small amounts, like the bursaries for employees, which were under this sub-programme. Sometimes the PT only awarded the bursaries during the year, so it could not anticipate in advance the number of bursaries that would be awarded. That was why there was under-spending on bursaries.

The transfers and subsidies was at R484 000. These were the bursaries for the external training which were was also allocated within this sub-programme, some of them as back up to bursaries the PT budgeted for the current bursary holders. If they failed some of their subjects, the PT did not pay for the failed subjects. This was also very difficult to anticipate earlier in the year, and the backup bursaries catered for the deferment for people who did not make the grades and then had to redo the subjects.  

Ms Beerwinkel asked whether there was knowledge beforehand as to which training the DotP would pay for, and if the PT did, why was it budgeting for it?

Ms Smit responded that sometimes the PT did not know, because it was also training that they offered. For example, if it saw within the Province that there was an issue with one general evaluation, the PT would get somebody to represent the framing of that general evaluation. While it was difficult to anticipate, the PT would need to see how it would go about this because, in terms of the legislation, training had to be budgeted for.

Ms Beerwinkel responded that, while understood, this scenario reflected badly on the budget, even if the PT may have thought that was what it was going to spend. One was not unappreciative of what DotP was doing in terms of training, but it did not look good in the PT’s figures and budget.

Mr Hoosain responded that the PT accepted that this was something that it struggled with, but it was legislated that it must be budgeted for. It did not look good on paper.

Ms Julinda Gantana, Provincial Government Public Finance Head: Provincial Treasury, clarified that under Programme 2, the 90.6% spent in terms of programme support could be explained by the registry clerk that had moved over in October. The PT had had a number of vacancies, and it had poached some positions from the Ministry to fill on the side of Programme 2, and that had happened late in the year. Programme 2 also had a number of personal assistant positions that were vacant which PT had managed to fill later in the year. This had largely contributed to the under-spending on programme support.

Concerning the R156 000 for virement, it was specifically for consultants. The request had come through for additional funding. The PT had training for local government finance group 1. The PT had requested additional funding, which had then been shifted from somewhere else to Programme 2. This had happened after the adjusted budget.  

Mr I Smith, Deputy Director General: General Governance and Asset Management, PT, clarified the supporting and interlinked financial systems. He said that that unit was running three transversal systems -- Basic Accounting System (BAS), Logical Information System (Logis) and the Personnel Administration System (Persal) -- and for each of these systems the PT had a contract. What the PT had instituted was particularly more efficient contract management. There had been some saving on those particular contracts. In addition, the PT had budgeted for buying an additional server.

Regarding the efficiencies which the HOD had referred to, it had been communicated at a previous meeting that in so far as local government supply chain management was concerned, PT had adopted a district approach, which meant that the PT’s staff were travelling much less than in the past. In total, there had been about a R300 000 saving for both the provincial and local government supply chain.

Regarding training and development, which was in each and every programme, the PT had a contract where it trained the officials in municipalities. It sometimes happened that the PT included its own officials in that training as well, which was already budgeted for under that particular contract. There was also quite a bit of saving through efficiencies on venues and facilities. The PT sometimes provided training to the Provincial departments and, at times, even the National departments under transversal systems. The bulk of the under-spending was as a result of efficiencies for better management of not only the PT’s service delivery requirements, but also as far as venues and facilities were concerned.    

Mr Uys asked when a decision had been taken to make use of the “cloud” platform? Was this a decision that had been taken across provincial government? By way of a technical comment, was that the best way to go in terms of managing local and provincial government? This was a decision that had probably been taken by the previous Department. The impression had been that they were going to pay for it as well. What was discernable was that there was gradual fiscal dumping from the side of the Premier on to the PT so that their books would look good. The PT would eventually need to look at their books. They had already paid for communication, and they had started to pay for training. The impression was that they were causing some of the PT’s problems.

In regard to the technical part of the PT’s server, what was the reason for giving that server and who was the PT contracting with? Normally it was the PT in control of these kinds of issues, because it was keeping tight control over what was happening there. It was worrying that a department that was supposed to account to the PT started doing things like this. It was always as if the tail was wagging the dog. The PT was losing its status and role.  

The Chairperson reiterated that it came back to the initial statement made by the HOD about austerity measures, among other factors.

Mr Smith said it was not only the Department of the Premier that was making the decisions. The decision to move to a cloud-based platform had been based on the research that had been done, but it was also discussed with all the IT heads within the various departments. Most of the corporates and the departments used this system. Therefore, it was a decision taken from a provincial perspective.

As far as the server was concerned and the request as to whether they were paying for the service, they were paying up to a certain amount. This server was for the additional space the PT needed.  After the decision had been taken to go the “Cloud” route, they had decided they would also not service all the maintenance because of the cost implications. What also had to be taken into account was that although PT was responsible for the transversal systems, in terms of the maintenance and the technical aspects, PT had an arrangement with Computer Enterprises Inc (CEI), who did it it on behalf of the PT. As far as the transversal systems were concerned, it was a partnership among the PT, CEI and the Department.

Mr Hoosain added that the PT had been consulted when the Cloud-computing policy was put on the table. PT had been encouraged because it allowed it to work across platforms between its own virtual space and that of municipalities. It was still a work in progress, because system changes had to take place across sites. It was, however, a step in the right direction.  

Mr Aziz Hardien, Financial Governance Programme Manager: Provincial Treasury, explained that the total under-spend had been about R1.643 million from the original budget. For most of the year, there had been three key posts vacant -- a chief director (CD) post, which had been vacant for about six months; a director post, which had been vacant for about one year; and a deputy-director post, which had been vacant for about six months. All of these posts had been filled in acting capacities.

Most of the savings were around catering, travelling, subsistence and venues. When the PT engaged with municipalities, it tried to get free venues. It would have arrangements with municipalities to co-sponsor some of the catering. Because the PT had fewer engagements in the year, it had also travelled less during the year. The PT had had a further saving of about R200 000 in audit fees. For the training that PT had arranged, it had received much cheaper quotes this year than in prior years. Therefore, the PT’s training costs were lower. 

Ms Beerwinkel stressed that one was always appreciative of forward thinking to save money on various things. The question was, when had PT realised that it would save money if it spoke to municipalities and asked them to supply free venues and contribute to the catering? Again, while the PT was trying to do something good, it did not look good in its figures. Did this realisation come after the PT had budgeted? 

Mr Hardien explained that cost-containment had consistently been raised. As soon as cost-containment statements had been issued, it took time for them to be implemented. PT’s major engagement with municipalities happened in the second and the last quarters of the financial year, but it still had to budget because it did not know what the municipalities were coming to the party for. Many of the PT’s engagements with outside people when it got venues were negotiated around the time of getting those venues, and could not be determined at the beginning of the year already.

The flipside to this was that if the PT anticipates that a certain number of municipalities would provide free venues and they did not, the PT sat with the opposite challenge of over-expenditure. In a way, it was a good problem to have, where the PT was able to save money.

Mr Uys asked what informed the virements, because only in one case had it been over 100%. Were the virements worked out by balancing out the programmes which were all approximately 95% spending? It was not clear as to what informed the virements, and one could not see it really going over 100%. As such, the programme had to do something critical. Was it to make it look good?

Ms Beerwinkel reiterated the importance of knowing when the virements happened. Did they happen before or after the adjustment budget? The Committee would not have known if that column had not been there.

Mr Hoosain said that the PT would rather just check all its facts and provide an adequate response. He asked if it could move to clarifying the fourth quarter financial outcomes, as shown on side 39.

Mr Uys said that it would be better to refer to slide 47, where there was a summary of the fourth quarter performance.

Mr Hoosain asked, nevertheless, to proceed with slide 39.

The Committee was referred to the slide with the key indicators for Programme 1 (Administration) performance – achievements, partial achievements, non-achievements and budget expenditure.

The Chairperson said that unless certain issues would be raised in relation to this and the following slides, the PT could proceed to slide 47.

The PT representative asked whether she could go through the slides, item by item.

Mr Uys reiterated that the PT should look at those areas which had deviated from the targets that had been set.

The PT representative responded that the only deviation for Programme 1 was the number of prescribed performance plans and reports submitted.

Mr Uys asked for the reason for the deviation.

Ms Smit explained that the evaluation was to evaluate the CAA. Previously, it had indicated that it was a new initiative. The PT had wanted to evaluate the success of its implementation, but had underestimated the process and the time it would take to get a service provider.  

The PT representative referred the Committee to the next deviation under Programme 4, concerning the number of reports submitted for Municipal Governance Review and Outlook (MGRO) engagements, including progress on Municipal Standard Chart of Accounts (mSCOA). Although it looked like the PT had not under performed, during the validation period between the end of April and May, the it discovered that there was one record that had not been achieved. This indicator was partially achieved. Instead of doing 30, the PT had achieved 29.  

Mr Uys asked if the report was incorrect then.

The PT representative said it was not really wrong. The PT was reporting the partial performance. In terms of the annual presentation, which had not been given to the Secretariat, there was a printout in which it appeared. In that particular one, only 29 had been achieved. The reason for that was that local government accounting (LGA) was regionally planned to submit 30 reports for all Western Cape municipalities. However, when the project was rolled out, no report was required for the City of Cape Town, as this municipality was non-delegated and the mid-year engagement had been driven by National Treasury. 

Mr Hoosain clarified that there were two aspects to that report, one having to do with all the MGRO assessments that had been issued. The first part of the report dealt with a technical indicator. However, the only part that had been concluded was the mSCOA part. The Committee may be aware that the City of Cape Town’s audit report had been issued late. The PT would engage the Metro on a bespoke basis, and what would inform the discussion were the audit action plans. There were 30 submissions. In the thirtieth submission, there were supposed to be two parts to the report. Only one part had been concluded. Therefore, it was not achieved. That engagement with the City of Cape Town had happened about two weeks ago. In the final annual report, it would read 29 reports completed. These were the two big variances in terms of partial achievements. The rest of the targets were all achieved. There were various over achievements as well.

Mr Hoosain said that the DPME Quarterly Performance Report (QPR) printout had inadvertently been submitted. The PT would try to get it to the Committee in a more legible form.  

 

Western Cape Gambling and Racing Board: Quarterly Performance, July 2017 –March 2018

The Chairperson welcomed the representatives from the Western Cape Gambling and Racing Board.

Mr Uys recommended that they start with the financials as of 31 March. They were supposed to give the Committee the fourth quarter on its own. Then the Committee could assess the 4th quarter, which would be followed by the total for the year. 

Ms Beerwinkel asked for the adjustments in terms of the virement shifts to be reported, especially when, how and why. Going forward, could the Committee have the adjustment column explained.

WCGRB expenditure outcome as at 31 March 2018

Ms Zoé Siwa, Chief Financial Officer: Western Cape Gambling and Racing Board (WCGRB), gave a breakdown of, and clarified, the WCGRB expenditure outcomes as at 31 March 2018, after which, she presented a year-to-date comparison.

Mr Mackenzie asked for clarification on the total variance (see slide 5).

Ms Siwa responded that it was in line with the budget. It was mostly related to travel and subsistence. There was also only one vacancy for a law enforcement officer.

Mr Uys asked whether there was any different breakdown from what was found in the presentation.

Ms Siwa stated that these were the financials.

Mr Uys asked for clarity concerning the over-spending of the Board of R240 000? Furthermore, who actually approved this? Was it the board, knowing very well that they had a budget, and had approved their own budget, and now they had exceeded it by more the 10%? Were the additional board meetings really necessary? Could the fact that the board attended all of industry’s meetings be explained? Why were there no board members at the Committee meeting? Under executive expenses, there was already an adjustment R300 000, yet there had been a further adjustment for the fourth quarter budget. The approved budget of R58 104 000, with the adjusted budget of R54 271 000 and a variance R1 989 000, would need to be explained. Further clarification was also needed concerning administration and finance and licensing. Under licensing, could the over-spending of R181 000 be explained? Although there were no adjustments made at the time, was it not foreseen that there was going to be over-spending? Moreover, clarity was needed concerning the approved budget for the 2017/18, adjustments, the adjusted budget and variance under Information technology.    

Ms Beerwinkel asked what was meant, in the variance explanation, by the comment that it was in line with the budget.

Mr P Abrahams, Chief Executive Officer: WCGRB, said that the chairperson and other members of the board could not make it to the Committee meeting.

Mr Uys asked whether the board was busy with a conference somewhere.

Mr Abrahams explained that there were currently only five board members who had been appointed, highlighting the reasons for their absence. There were two vacancies. However, the board had had six board members since yesterday, so there was one vacancy left.

Mr Uys asked, since some members had not come, whether there was gate-keeping happening on the side of the board, preventing some members from coming.

The Chairperson highlighted the opportunities of empowerment and capacity building that resided in members attending meetings.

Mr Abrahams said that those members were present at meetings where they were meant to be. They were not all present, because a travel fee had to be paid. The chairperson and vice-chairperson were usually in attendance. All members attended the year-end presentation of the annual report.

The chairperson commented that this was a standard arrangement.

Mr Uys said he understood that the chairperson could not come and that if there was another member, they had to be flown in. It was not the deputy. There was another member who had not been asked at all. Why had somebody from the board not attended this meeting?

Mr Abraham clarified that the normal process was to bring in the chairperson and the vice-chairperson. The board did not have a vice-chairperson at the moment. The two remaining members could not come.

The Chairperson commented that the board must consider, in the event that one of the two of them were not available, that some board member should be sent in their place. 

Ms Beerwinkel and Mr Uys agreed with the Chairperson’s recommendation.

The Chairperson added that the board needed to improve on the situation.

Mr Abrahams said there was R7 million in revenue which the board would not get to this financial year. The board had adjusted the budget and asked for an additional grant from Treasury. That grant had been received only after the adjustment budget, and had been factored into the last quarter. Therefore, most of the under-spending was based on the fact that the board did not believe it would have funds. The money had been received in the last quarter and that was the only time that there was a guarantee that there would be money to spend. Most of the savings were based on the fact that the board had lost revenue.  

Ms Beerwinkel said that it was not enough to say that R7 million would not be received. It was important to explain why -- where was it going to come from and what the reason that the board was not going to get it was, so that the Committee understood. Just to hang the statement out there did not mean anything.

Mr Abrahams explained that the regulatory fee was a fee that was received every year. For this financial year, it was R7 million. This fee was due only for a limited period. In this financial year, it had expired. The board had gone to Treasury and to legal services, and it may even get the money back.  

Mr Mackenzie asked for some background on why the fee had an expiry period. Was it part of legislation?

Mr Uys asked when all this had happened. When the Committee looked at the budget, the APP was still R58 million. The Committee was under the impression that it was going to be R58 million. When did this all happen in the process? This budget had been signed off by the Minister or the Member of the Executive Committee (MEC). Could timelines be provided, and what had happened?

Ms Beerwinkel asked whether the R7 million, which Ms Siwa discovered had expired, was included in the R58 million? This would answer Mr Uys’s question as to when it had been discovered.

Mr Abrahams explained that it was a statutory income set by the Act, and increased every year. In this year, it would be R7 million. This year, when the board was expecting it to come in, it was found that this fee had actually expired. Right up until the budget into the financial year, the board had expected that this money would still be due to it. The R58 million was still in there. It was only afterwards that it was discovered that the fee had a limited time period.

Mr Mackenzie posed whether the R7 million had been acquired in terms of the Regulation 5, 1998, and was expected to expire after 15 years on 21 January 2018. Could the board point the Committee to the guidelines which would explain when, why and how it happened? It had not been picked up by the companies, but internally by the staff.

Ms Beerwinkel commented that it had been said that it was part of a statutory arrangement or an Act. However, if it was a statutory arrangement or part of an Act, then the board should have received it. But the board had not. So when did this all happen?

Ms Yvonne Skepu, Legal Services Manager: WCGRB, explained that in Schedule 2 of the Act, both the casino operating fees, as well as the route operator fees, were listed as being limited to a period of 10 years. That period, post the investigation, would have expired in 2014. It was dependent on the date that the first licence was issued. The board would count consecutively for 10 years as and when these fees were paid. When the board discovered this, it obtained legal advice on an urgent basis and also wrote to Provincial Treasury within the same month to get the process going in terms of having the legislation amended. These were intended to be operating fees that ought to be payable for as long as the operator’s licence subsisted. That process had commenced. The legislation had now been published for public comment and was still in progress. Provincial Treasury had published it for public comment. Those operators would have an opportunity to comment on that and then it would be seen what the net result was. The proposal was also intended to delete the 10-year period retrospectively so that those fees would have remained payable in the intermediate period until the amendment was published, because it was a levy imposed as a statutory fee.     

The Chairperson asked whether the amendment would not have a timeframe now. Was it on-going or permanent?

Ms Beerwinkel thanked Ms Siwa for picking this up. Furthermore, with the exclusivity fee, things stopped with casinos. The process started to increase their tax so that that money was not lost to Treasury. What was the board intending? Did it want to amend legislation to put the levy in place? Or, was it going to impose an increase in tax? R7 million was a lot of money that had gone down the drain because somebody had been sleeping on the job and did not pick it up.

Mr Uys asked why PT and the executive had missed this one. For the executive, it seemed that the legislation had lapsed and it had not been picked up. It was picked up only when it did not get the money in. Moreover, what legislation was being talked about? Was it the regulation that was going to be amended, or was it an Act? The Committee would have to go through the whole public hearing process. Was the Chairperson aware of this? The Committee would have to take responsibility for taking that piece of legislation through. Finally, was the board allowed to make it retrospectively applicable in terms of this legislation? It seemed that the Committee would need to sit down with the board to get the answers. Would the board get the support of the Committee and the community to do it that way?

Ms Beerwinkel reiterated that the Committee needed to sit down with the board in an informal situation and ask the kind of questions that it needed to ask. More answers were needed compared to what was on paper here.

The Chairperson said that a side meeting was not necessary. Parliament was the appropriate forum. Good questions were being asked and the Committee was getting information. There was an outstanding question about the Act and whether it would go through public hearings, and Treasury’s role in picking it up or not picking it up.

Mr Mackenzie asked for the Committee to be referred to the legislation, as it had not received anything yet.

The Chairperson clarified that the Committee had received a stack of government Gazettes yesterday, but did not know what was in the pipeline yet.

Mr Theophilus Mahlaba, Manager: Management Accounting, Provincial Treasury, explained that the board, as Ms Siwa had indicated, had identified the discrepancy and the industry was still paying up to now. The mere fact that there had been an expiry meant that those monies needed to be paid back at some point in terms of the legislation. What Treasury and the Board had subsequently done, as the board had indicated, was to actually go to the legislation to amend it. Legal opinion had been sought on the retrospectivity of the licensing. It may actually be possible to amend retrospectively. This was being tested in terms of the opinions the PT had sought. The expiry date for the submission of comments was 31 July. It was still in the public domain for the different stakeholders, the public and the industry to comment on this matter.  

Ms Beerwinkel asked if the motivation for wanting to make the legislation retrospective was to avoid having to pay back the money that the LTM operators had paid that the board should not have been receiving?

Mr Mahlaba explained that the idea of retrospectivity was actually to cover those monies that had been received but were not due in terms of the licensing conditions.

Ms Beerwinkel asked whether the industry knew that they had paid the board money that they should not have.

Mr Uys asked when it had actually lapsed. Had it been 2014, because it was only picked up three to four years down the line? Could the Committee get an understanding of what actually happened in each of the financial years, and what the amount in each of the years was? Were they still paying now? In the previous years when the board received the money, had it receive the money in the financial year? Could the board put it in full perspective?

Ms Skepu responded on the question of retrospectivity, and said the board had had to sit with counsel and make sense in terms of the constitutional principles and the issues of enrichment. She asked if the board could submit a formal report on this issue. There was also sensitivity around the fact that there may be litigation on this. One statement could be taken out of context if it was put in the public domain. Just in terms of the vested interests and the financial implications, there was a real possibility that there may be litigation arising from this. The board, however, did take comfort in the legal counsel that had been obtained. An explanation had to be given to the Committee and it must make sense in terms of what had happened factually, and the fact that the board had acted in all earnestness in rectifying the situation. It would include the correspondence that was sent to the two operators in terms of the board’s good faith.

The Chairperson asked whether it had been two to three financial years before, and the amounts involved.

Ms Siwa explained that the fee had expired in 2014. They had been paying it for a period of three years. The amount involved was R17.6 million. In the current year, the board had not invoiced that because when it discovered it, it could not go and tell the LPM operators to pay whilst the board knews that it had expired in 2014. The intention was never there for the 10-year limitation.

The Chairperson said that, going forward, the Committee would like to be updated.

Mr Uys asked about the amendment to the Act. What was the Act, and was it an Act that was governing the board? It had been said that it was out in the public domain and for public consumption. Prior to the Committee getting the legislation on the table, it had to understand what the draft looked like. There was normally a memorandum attached. There was a need for timelines. The term of this Parliament was running out. Committee were getting very busy. The board was facing a major problem. Somehow, when this Committee got to the point when it went into public hearings, it would ask the same questions, but it would also need legal opinions. What was worrying was that the timelines and the path were not being set to remedy this situation. It had been a big shock to hear about it today. If the board was really honest with the Committee, it should have told it when it realised this, but it had not. The Board had not taken the Committee into its confidence. Now it was going to ask the Committee to rush the legislation through. There was no trust between the Board and the Committee. The Committee had to pull the information out of the Board. It was really unfair.

The Chairperson asked what PT’s expectations were in terms of timeframes.

Mr Mahlaba explained that the original advertisement was for hearings to expire on 31 May. The industry role players and the public, however, had asked for the comment period to be extended so that they could give considered representations in terms of the Act. Once the comments were received from the public, they would be considered, collated and included into the draft. Then the legislative process would commence.  

The Chairperson said that the Committee would wait to be informed of the process and when it would officially start 

Ms Beerwinkel asked what was being contained in schedule 2 of the Act. Was it just the clause that had been referred to?

The Chairperson asked whether it said 10 years.

Ms Skepu confirmed that it expressly referred to 10 years. It was the clause that referred to the amount of the fees and that that would increase annually at the rate of debts due to the state. The board would outline in the report exactly what the stipulation was. It was to Schedule 2 to the Act.

Ms Siwa explained that the executive under-spending by R728 000 applied to legal fees. The board did budget for legal fees, but it did not know the exact amount it was going to incur. In terms of board awareness programmes, when the officials of the board went out, the board did not incur that many costs because they were employee-related costs.

Mr Uys asked whether this related to creating awareness.

Ms Siwa said that the board budgeted for board awareness programmes. The board officials went out, which was a time cost in terms of the salaries of the staff. For administration and finance there had been an under-spending of R182 000. The biggest amount was the audit fees. The board had a saving on the audit fees (internal and external) for the current year of R162 000. For gambling and compliance, the saving had been R199 000, which was for travel and subsistence. When auditors went out on audit, they go in one car as a part of cost-containment issues. 

Mr Alwin Matthews, Head of Department: Information Communication Technology (ICT), WCGRB, explained that IT had basically saved money due to under-spending, but this had been due to the cuts, specifically for the automation system, and the development and the software thereof. The other under-spending related to hardware which had been budgeted for as a separate line item. Most of the R1 650 000 was for the hardware and the network components, because the board would have expanded the band width which would have been required for the automation system, but this was not done.

Mr Uys asked why it had been under-spent. Was the board worried that it would go over budget? What services had not been rendered because the board had had to take these serious steps? Clarity was still needed on the licensing.

Mr Matthews explained that it was also to assist with the same […] that was required within the environment, but also in terms of all the other stuff that was required was mostly done for the automation component that had other ancillary components that could not be included.

Mr Uys asked what the process of remunerating managers was. Why did the board have to go the Minister for amendments to it? Were they not being assessed externally?

Mr Abrahams explained that if one increased the amounts of the salary, approval was needed by the Minister. This would have been an increase in salary from a level 13 notch 10, to a level 13 notch 12. Those notches required the Minister’s approval.

Ms Beerwinkel asked when Ms Siwa had started as the CFO, and who the previous CFO before her was.

Mr Abrahams said that he was the last CFO. Ms Siwa had started in February.  

Ms Beerwinkel asked the CEO how he could say that the fee was not meant to expire, yet it was in an Act.

Mr Abrahams responded that the board had a detailed audit report which explained these outcomes.

The Chairperson said that there would be another opportunity to address these matters in the annual report.

Ms Siwa summarised the Board’s annual performance targets for 2017/18, where 16 out of 17 targets had been achieved, with one target partially achieved.

Mr William Bowers, Human Resources Manager: WCGRB, explained that the reason for the non-achievement was that the online performance reviews had been done during April 2018, but the year-end had been 31 March 2018. This was to align the WCGRB performance review period with that of Western Cape Provincial Government and its financial year period.

The Chairperson thanked the Board for the presentation, concluding with the hope that it would find a legal way to address the situation it found itself in.

Resolutions / Actions

The Secretary of Committee said that the resolutions were:

• that PT provides the Committee with a comprehensive response on the virements;
• the board report on the adjustment budget;
• that the board brief the Committee on the expired fees, the R17.6 million, which appears in the Act under schedule 2; and
• the board should provide the Committee with a full memorandum.

Ms Beerwinkel asked that the recommendations be forwarded to the Committee so that they could be amended if necessary.

The Chairperson agreed to the request.

Adoption of Minutes

The minutes of 6 June 2018 were considered and adopted.

The meeting was adjourned.