The office of the Auditor General South Africa (AGSA) briefed the Committee on the audit outcomes for the Department of Sport and Recreation (SRSA) and its entities, Boxing South Africa (BSA) and the South African Institute for Drug-Free Sport (SAIDS) for the 2017/18 financial year.
SRSA had maintained a clean audit for the second consecutive year. It had no non-compliance issues, but had challenges in the area of financial control. There was still work to be done regarding internal auditing, as the internal audit post was still vacant. Leadership had regressed slightly, and policies and procedures still needed improvement.
AGSA said the performance of the Portfolio Committee had been satisfactory in providing oversight over all three entities. However, it had regressed in accountability with regard to the planning component in checking accountability. Consequence management showed that there had been a slight improvement.
For Boxing SA and SAIDS, the financial reports were unqualified, although there were no material adjustments which had to be made on their financial statements. The BSA budget had been exceeded and this had resulted in irregular expenditure. BSA said its income was adversely affected by promoters not paying their sanctioning fees, and it was taking steps to exercise greater control.
SAIDS reported that 46 athletes had tested positive in doping tests. Body building alone had 15 positive tests, of which 11 were at one event. South Africa remained a country with one of the highest numbers for doping in sports. This was something SAIDS had to continuously address, and it went beyond having an anti-doping education and research programme. Travel costs were high because drug testing had to be conducted overseas, as there was no qualified local laboratory.
Members expressed concern about vacancies in key positions, particularly those affecting internal auditing. They drew attention to the persistent absence of the BSA chairperson from Portfolio Committee meetings, and wanted to know more about the qualifications of the entity’s chief financial officer (CFO) and his capacity to carry out an internal audit. They commented that legislative requirements were being flouted, contracts were being extended without approval, and despite guidance from SRSA, the same challenges were being repeated. SAIDS was congratulated on its good performance.
SRSA was questioned about the lack of compliance by North West Province, which had created funding problems. Members asked what measures the Department had in place to communicate with ward councillors and communities if provinces were not doing what they were supposed to be doing. They also wanted to know what progress had been made in introducing legislation involving sport and recreation.
Department of Sport and Recreation: AGSA briefing
The Auditor General of South Africa (AGSA) briefed the Committee on the Department of Sport and Recreation (SRSA) portfolio audit outcomes for the 2017/18financial year.
SRSA maintained a clean audit, as in the previous financial year of 2016/17. However, for Boxing SA and the South African Institute for Drug-Free Sport (SAIDS), the financial reports were unqualified. There were no material adjustments which had to be made to the financial statements for SRSA and SAIDS -- it was only for Boxing SA through the audit process. The quality of performance information reporting did not have to be adjusted for SAIDS. The SRSA had to make adjustments regarding quality performance information reporting. The AG expressed satisfaction with the results of the adjustments. For Boxing SA, the financial performance information had already been included in the report.
The SRSA had no non-compliance issues with legislation issues. However, there were non-compliance findings with Boxing SA and SAIDS. The portfolio had experienced a slight reduction in irregular spending, from R1.9 million to R1.8 million. SAIDS had one non-compliance matter which was being resolved. The performance for the past three years had remained unchanged. Boxing SA had moved from qualified to unqualified.
The status of internal control within SRSA revealed that the Department still had issues with financial control. This was regarding performance information, where material adjustments had to be made to avoid any negative reporting in the audit reports. There was more focus needed in the in-year monitoring on performance information.
With governance, the main focus was on risk assessment, the audit committee and internal audit. The Department still had some work to be done regarding internal auditing. At the time of the internal audit, the post was still vacant.
The last category was leadership. Leadership had regressed slightly, and the reason for this was that there were policies and procedures which still needed improvement. The lack of improvement in these procedures and policies could create a potential risk for the Department. The AG expressed further concern at the lack of key vacancies being filled, as they could place the entity at risk, specifically at the senior level.
AGSA said the performance of the Portfolio Committee was satisfactory in providing assurance. There had been discussions and meetings with the Committee and with the Chairperson. The Committee had been evaluated on key focus areas, and had been satisfactory in providing oversight and satisfactory performance with all three entities. It was only the implementation internal auditing in the Department which needed focus, with specific attention to filling the vacancy of the head of internal audit. The AG expressed satisfaction with the executive abilities and accounting officers. Regarding senior managers in SRSA, there needed to be a focus on performance information and adequate assurance on performance information throughout the year so that when it was presented there was no need to make any material adjustments.
The Portfolio Committee had had a regression in terms of accountability with regard to the planning component in checking accountability. Boxing SA had had a regression in terms of performance information recorded, and the usefulness of indicators and targets. A focus was required on the ‘do’ part of accountability, as there had been no change. Following the ‘check’ part, there had been no change for the department. Consequence management had shown a slight improvement.
The financial health and financial management of SRSA revealed no concern. SAIDS and Boxing SA did reveal a concern for financial health. These were entities with small budgets and it was important that there was tight budget control, and a continuous focus on an improvement in their financial health. The ideal situation would be to avoid losses. In the case of Boxing SA, the budget had been exceeded and resulted in irregular expenditure.
The AG confirmed that there had been no unauthorised expenditure in the portfolio for the financial year. Therefore the focus was on fruitless, wasteful and irregular expenditure. Irregular expenditure was a matter of the correct process being followed in terms of the supply chain management (SCM). Looking at fruitless and wasteful expenditure, there had been a slight increase from the previous year at Boxing SA. Irregular expenditure had had a slight reduction, from R1.9 million to R1.8 million. 84% of the irregular spending was as a result of the overspending of the budget by Boxing SA. The rest of the irregular expenditure was in supply chain management. The irregular expenditure for SAIDS was R93 000. Of the total irregular expenditure of R1.8 million, R283 000 represented non-compliance with supply chain management.
With regards to consequence management, there was lack of sufficient evidence on consequence management at Boxing SA to deal with non-compliance. SCM findings reported for investigation in the 2017/18 audit process were related to suppliers that submitted false declarations of interest. This was an item of significance which needed further investigation. The other finding came from the previous year, where employers had failed to confirm their interest in suppliers, which had been followed up in 2017/18 by SRSA.
A summary of the root causes for the whole portfolio which still needed to be addressed was that there were still inadequate consequences for poor performance. It was very important that whenever there was non-compliance with SCM and consequence management, and specific areas where controls were not functioning, there had to be adequate measures undertaken to ensure that those controls were actually functioning in terms of performance management.
AGSA recommended that the entities had to take steps to implement their action plans in addressing the identified audit findings. The Committee should exercise oversight on the compliance of Boxing SA and SAIDS, with particular attention on the performance reporting for Boxing SA. It needed to assist the accounting officers and accounting authorities to make commitments to deal specifically with audit outcomes, and engage with them to ensure that the commitments made by the entities were actually implemented.
The status of records review was a new process introduced to assist entities to achieve better audit outcomes. It was a more comprehensive exercise. It had been applied in the 2017/18 financial year by SRSA, and was used to indicate areas needing intervention within the entities. The review’s different colour coding indicates the particular status in each focus area, showing whether it requires intervention or not. It had been highlighted throughout the year that the internal audit had not been fully capacitated, that some focus was needed in the information technology (IT) environment, and some vacancies in key positions which had not been filled. Another focus in the discussions was on performance information, to ensure that the information was submitted at the year end.
Ms Thokozile Xasa, Minister of Sport and Recreation, said she had engaged with the AG about the matters raised in the presentation. SRSA had made some progress in the focus areas. It had even made some reprioritisation of the vacant posts to ensure that the issues associated with them were avoided. This was also an effort at ensuring that the Department was able to comply, as these vacancies were linked with the capacity to comply fully. One had already been filled, while the other one was in the process of interviews. Funding had been shifted to fulfill this purpose.
The issue of information which related to reporting by provinces had been reported to Ministers and Members of Executive Council (MINMEC) and Cabinet. There had been an agreement that should accounting officers in provinces fail to submit such information, the Director General should take it to the political level so that the MEC could ensure that their head of department (HOD) was able to send the information as required.
When it came to the two entities, there had been interaction. SRSA recognised the Boxing SA unqualified audit and the focus areas raised by the AG. She hoped that the entities would reflect on the matters raised.
She was worried about Boxing SA as a going concern, as it failed to generate revenue. This was a critical issue which the Department was paying close attention to.
She highlighted the status of cash flow being under pressure, and referred to the issue of accreditation of the Bloemfontein laboratory for the anti-doping agency, which had forced SAIDS to test in the Middle East and Europe. The costs of travelling had strained the budget. She expressed SRSA’s intention and commitment to build a domestic laboratory. Lastly, she committed the Department to report back to the Committee on procurement.
Mr T Mhlongo (DA) asked whether the account on the Department’s lack of internal audit capacity due to budget constraints had been communicated. His concern was that the internal audit vacancy had not been filled. If the Department had a qualified person in the post, they would not need capacitation. What recommendations had the AG made with regard to the vacancies in IT and Internal Audit, which they had reported to be still vacant? He asked this in relation to consequence management, as the issue of vacancies not being filled had been happening consistently. He asked the AG about the leadership response to the persistent lack of vacancies being filled. The AG had not gone into detail to explain what caused the challenges. Where there were efforts or methods used differently with the Department to respond to these challenges which may be different from the entities?
The AG responded that the concern about budget constraints was a matter which the Director General could address. Regarding the lack of vacancies being filled, this was a matter involving the moratorium phase on the filling of vacancies by the former Minister. This could lead to budget constraints, in the sense that there needed to be a reprioritisation of vacancies before they were all filled again. However, he did recognise that the internal audit position was a requirement that had to be filled in terms of law.
With regard to consequence management, this was also linked to the moratorium phase in the filling of vacancies, which was why it kept on coming up. In respect of IT, there needed to be a focus on what the cause was so that it could be responded to. The smaller entities had been given with limited budgets, and as a result there needed to be a specific audit approach to them. This was why there were different data statistics kept on the entities. It was a matter of cost saving with the smaller entities.
AGSA committed to giving the Committee feedback of the status review and progress of the entities whenever there was engagement with them.
Boxing South Africa (BSA): Annual Report
Mr Gilberto Martins, Board member: BSA, said the entity had gone through difficult times. He recognised its achievements, such as successfully relocating to a new office, demonstrating good governance, showing pride in its mandates, and had not compromised governance even when faced with budget constraints.
Business operations had focused on the different stakeholders involved to ensure that business happened efficiently. In attempts to promote boxing as a culture in South Africa, BSA had worked closely with promoters. There had been seminars. There had therefore been improved enforcement of compliance requirements in licensing, tournament application and sanction fees.
Consequence management had had improvements. Some problems were inherited. In some instances there were attitude problems, in the sense that if it had not been done before there was lack of initiative to change it. This was in the process of being changed within the entity. Internal controls were being strengthened and gaps inherited from previous years were being addressed.
Training capacity had improved. There had been a roll out of training and capacity building programmes for licensees. There had been strengthening of internal capacity to improve audit outcomes across all areas of the organisation. The entity had experienced litigation issues, but this had been delayed for a while. With the help of the Department, they had been working towards improving. Communication with other professional boxing control boards internationally had improved.
Mr Martins explained that the entity had two sources of funding. One was the Department, and the other was the sanction fee which was collected from promoters. This was a fee paid before the fights. Unfortunately, the trend with the fee was that when it does not materialize, it affects the programmes to which the entity is committed. It creates an issue with the budget. The entity had made estimations of how much it would be receiving from this source of funding, which had not materialized, and this had then created over-expenditure. Boxing SA had taken an aggressive step with a new strategy. They would recover the funds owed to them. As of 1 September, no tournament would take place without the fee being paid. They would implement stricter measures of payment.
Boxing SA had got to get to where it was before. Firstly, the relationship with the SA National Boxing Organisation (SANABO) had to be addressed. It was an amateur body which produced great boxers. This was to assist in producing well performing boxers who could compete internationally. There would be an initiative to create a cost cutting and collaborative approach with others actors in professional boxing regarding the recognition of excellent boxers.
The status of women in boxing was valued by the entity, but sometimes there were financial constraints. This had hampered Boxing SA from getting to where they wanted to be, but it was committed to efforts to keep on trying.
Mr Martins said that a focus on the legal regulations in boxing could assist enhance the sport and efforts by the entity.
Lastly, he referred to the effectiveness of boxing as a nation. It was often mention that there were more boxing tournaments hosted in the Eastern Cape than in other provinces. The board was interested in ensuring that boxing was at a national level. It should be promoted equally in all nine provinces. The youth should have the opportunity to grow in the sport, as boxing in many parts of the world was a lucrative business and career for them.
Mr Tsholofelo Lejaka, Chief Executive Officer (CEO): Boxing SA, said a general financial review of the public entity showed that R2.63 million of its budget of R14.66 million had had to be raised through licensing, sanctioning levies and grant funding, as well as sponsorship as per the Act. The licensing fee rate had not been increased since 2008, and the board was currently considering adjusting it. R1.93 million had been raised through sanction levies, and emphasised the challenges raised by Mr Martins in this regard. The entity had previously reported on the non-compliance by some promoters in paying the sanction levies. They had boycotted the levy based on their opportunistic interpretation of the law, which they misunderstood. The 5% and the 10% which they were supposed to be paying were levied by BSA on “gross,” while according to them it was on “net.”
An achievement by the entity was that on 26 May, the entity had appeared for the first time before the Portfolio Committee with the non-compliance on sanction levies resolved. The R1.5 million in irregular expenditure highlighted by the AG had been linked to the amounts forecasted to be received, but which were not received due to the non-compliance on sanction levies. The entity had ended up collecting R400 000 instead of R1.9 million. This had been the single biggest priority of the board. The entity had engaged with the promoters. The process was now at a point where all promoters had paid their sanction levies and were in the process of making pre-payment plans.
The entity had challenges with its grant funding. It had expected funds from the national lottery to the amount of R3 million. The entity had requested the lottery fund to increase the grant fund to R5 million. A requirement was that the entity needed to make a new application to the lottery. The application had been declined. This had impacted on cash flow as expectations of funding had been forecasted and budgeted.
The litigation costs were as a result of labour disputes in 2015. The CEO, chief financial officer (CFO), chief operating officer (COO), the human resources (HR) manager and information technology (IT) manager had been dismissed and had filed court cases against the entity. Only one of the legal costs had had to do with a tournament in 2015, where purse money was not paid. BSA had covered these costs for the boxers. The costs of these legal court cases had been taken away from funds which were meant for programme implementation. The entity would try and avoid this by ensuring compliance from its side.
Capacity constraints and challenges came from costs of the new office space. BSA had moved to its own new office premises from the beginning of this financial year. This had brought new costs such rental and security, software licences, telephones and internet expenses, as well as the internal audit function.
BSA’s SCM unit was fully functional and operated within a clearly defined and regulated environment, guided by a proper system of internal controls.
The total number of audit findings raised for the 2016/17 financial period was 40. The entity had three remaining unresolved targets, which involved third parties. Action plans had been developed. The most critical matter arising from the previous year’s audit was the debt collection strategy as well as enforcement of a culture of payment.
New or proposed activities in the next financial year included three strategic objectives. The strategies were in line with the current maturity level of the organization, as well as modern day challenges facing boxing nationally and globally. The new strategic objectives that had been included were a legislative review, health and safety, and a funding model for boxing. These matters were not in the annual performance plan. Towards the end of the electoral term, in terms of the medium term strategic framework, these matters needed to be highlighted and included in the annual performance plan. This was part of the duties of ensuring that the boxing indaba resolutions were not lost.
The matter of legislative review was a critical focus area. The entity’s operations were based on the Act of 2001. The regulations themselves were from 2004. To a large extent, in some instances they have been overtaken by events. There was a focus on where the boxing community was worldwide, and what was contained in the regulations. There were still were still areas of contribution needing to be addressed. Part of those areas involves the model the entity uses to collect sanction fees. The model was passive. When there was a WBC and WBA tournament on the line, sanction fees had to be paid before the tournament. The regulations require the promoter to estimate before the tournament. The tournament would then be hosted, and only then would they know the full amount of the sanction fee to be paid. This had to be made seven days after the tournament to confirm the amount with an affidavit. The amount in full could be paid after 30 days. This created an impairment, as the entity did not have an assurance of how much was owed to it. Promoters could cheat. Some promoters could allege to have been paid in donations of kind and not in cash. The regulations needed to cater for this gap so that it created a proactive role for the BSA.
The economic viability of the entity showed a disproportionate disjunction between the mandate and the required budget to effectively deliver on such mandate, which was still a challenge. BSA had an urgent mandate to embark on drastic cost saving measures, complemented by aggressive revenue generation measures in order to turn its fortunes around. Central to this was to ensure maximum compliance measures by licensees, as per the organisation’s debt collection policy.
BSA had sanctioned 78 tournaments in 2017/18, which was three fewer than the previous year. This was a matter which not under the direct control of the entity -- it depended on the initiative of promoters to apply to the BSA to sanction tournaments.
The entity had implemented two programmes -- the SA boxing awards, and women in boxing.
The presentation on the overview of performance was in addition to the AG’s presentation. The BSA had 29 performance indicators, and had successfully achieved 26 indicators. In Programme 1 (governance and management), it had achieved 11 out of 12 targets. This performance equated to a 92% achievement compared to 67% from the previous year. The under-performance area was on training. There were financial constraints experienced, where there was supposed to be 300 licensees trained. This was also due to the training model used. Currently the entity was in partnership with SAIDS in providing an affordable model.
Programme 2 achieved seven out of nine targets. The performance equated to a 78% achievement -- an improvement of 44% from the previous year. There had been under achievement with the training of licensees.
Programme 3 had achieved all seven performance targets -- a great improvement compared to the 50% achievement from the previous year. There was no program under achievement in targets for this program.
Mr Thabang Moses, CFO: BSA, delivered the presentation on the financial audit outcomes. The entity had a slight improvement from the previous year. It had achieved an unqualified audit, but AGSA had said that there were two major concerns with the entity. This included its status as a going concern. This was related to the BSA’s capacity to execute and achieve strategic objectives. The challenges with the going concern highlighted the net loss which had been inherited from the annual losses and past outstanding legal cases. The debtors’ account had had to be impaired with a substantial amount of money. This had caused a loss since last year. The loss had been reduced this year, with a strategy to increase revenue inflow. The more the entity increased its recovery of the outstanding amount, there was a likelihood that a loss could be avoided going forward.
The root causes to irregular expenditure were contract management, contract administration and supplier performance. Going into the new financial year, the focus would be on these three areas.
Mr Mhlongo was concerned at the persisting absence of the BSA chairperson. It was wrong for the chairperson to be absent. He had not seen him in ten months. This was a new board, and his absence indicated something in his opinion.
He asked about the financial qualifications of the CFO in finance. Did he have an approved Institute of Internal Auditors (IIA) certificate, as he was concerned about his capacity to carry out an internal audit? He was not undermining the CFO, but his observations were mainly based on the poor quality of the presentation in terms of what had been done.
Under leadership, he asked about the HR management qualifications and the consequence management system within the BSA. The audit outcomes had shown a lack of financial controls in the entity. Although the BSA had received guidance from the Department, the outcomes were showing repeats of the same challenges. Something might be wrong with the system and the entity was not responsive to the guidance. He did not see any progress. BSA had exceeded its budget. It had not gone through the financial statements for the Committee to understand. The R1.5 million plus over-expenditure had not been explained in detail. He asked the CEO what the amount entailed.
He also raised a point on the contracts extended without approval. There had to be a specific enquiry, as contracts being extended without delegation of authority was a serious matter. He expressed disappointment over the BSA performance. BSA had leadership problems in his view. BSA had previously said they had policies to improve performance outcomes, but they were not implementing their own policies.
Ms B Abrahams (ANC) commented on the competency level of the BSA. She asked whether BSA understood all the Public Service Act (PSA) legislative requirements from them. They had not followed the Public Finance Management Act (PFMA) at all. It continues to break rules purposefully year after year. Over-expenditure and irregular expenditure had been persistent since the last year. She raised the BSA challenge with consequence management. There had been misconduct and an action plan which the BSA had devised to deal with previous misconduct. She asked what had been done until this point about those individuals who were involved in misconduct. Regarding the AGSA’s emphasis on matters, if BSA carried out checks and balances every month, why was it that there were losses at end of the year? If balances were made monthly and there were shortages of funds, why did expenditure continue to happen when they could see funds were not available?
Ms B Ndlovu (ANC) said that the CFO had made a note regarding an amount where he had not clarified what it was for. She raised this as a concern with regard to BSA’s accounting, and whether they were using funds as profitably as they should be.
Mr S Ralegoma (ANC) said the entity had to have the expertise to forecast its own costs and income. The lack of revenue received and over-expenditure should not be excusable. They would always justify their challenges and they would continue to persist. This lack of initiative and accountability would affect the willingness of the BSA to be independent of the Department. They should have forecasted the costs when they were moving to new offices, but for the BSA these issues were not obvious, as they were under SRSA. Now these costs were becoming clear, as they were on their own. He proposed that going forward the Committee should become more thorough and specific with the BSA.
The Chairperson also expressed concern about the performance of BSA. They had the support from the Department, but were going back to the same challenges. The Department would need to focus more emphasis on the BSA.
Mr Martins said BSA was committed to producing a written response to the Committee and the Department should there be a lack of capacity to answer some of the questions.
Mr Moses responded that the entity did not have IIA qualifications, but had internal controls provided by a service provider. The CFO had a degree in finance, and most of the finance staff had a combination of Bachelor degrees and diplomas in business administration. Regarding the net loss, there had been debts not collected under accounts receivable. The amount of provisional debt had been R4.5 million in 2007, and the non-cash items had had to go through the financial statements to show that the amount had not been collected over the years. That was the big amount that had gone through its financial statements. The difference this year was that there was a strategy to collect the outstanding amounts. This would not be a problem going forward.
The challenge regarding contracts being extended was linked to the term of “evergreen” contracts. These were contracts which the entity had had with courier services for a number of years. The entity had now started to change some of these contracts. For example, with courier services there had been a change to transversal accounts. Another one was with a company that hosted emails in 2012.
Mr Luthando Jack, Board member: BSA, responded on the over-expenditure on the budget. He explained that the entity was experiencing budget constraints, and had developed a revenue generation strategy to respond to this challenge. This was based on two pillars. Firstly, the entity would have to ensure the collection of revenue. This would involve overcoming the boycotting of sanction fees. Furthermore, it had to ensure it stepped up the pressure on licensees that were supposed to pay. Secondly, the entity would devise various ways in which it could gain access to the fourth and fifth grant sponsorships according to the provisions of the law to generate revenue. He recognised the under-performance of the entity and was committed to making improvements.
Systematic consequence management had been implemented, but it had not been reflected on how it was taking place, as it had been flagged during the audit process. This had been implemented in contract management. Staff members have had to be trained as well, to ensure they complied with performance planning and the management requirements framework. These initiatives would be reflected in the following financial year. BSA was committed to making improvements with its checks and balances on a regular basis.
Follow up questions
Mr Mhlongo asked for further clarity on the issues he had raised, such as the extension of contracts, how much was paid to the consultants, progress on collections, and questions of leadership capacity. He asked for details of the R68 670 in irregular, fruitless and wasteful expenditure. He further questioned the absence of the chairperson and the name of the CFO’s degree in finance. He asked about the CFO’s capacity, based on the quality of the report, and said the CFO was misleading the Committee. The contract had been extended, which was something different when it had expired, and this was something he should clarify on the report.
Mr S Mmusi (ANC) expressed concern about the strategy to recover debts. He asked whether there were stricter measures or agreements with the promoters to ensure the payment of levies. He said he foresaw another loss.
Mr Moses said he was unable to provide exact figures at the moment in response to Mr Mhlongo.
Mr Lejaka responded to the concern over payments, and said that the promoters’ levy model required payment on estimations. Although the promoters were fighting against the payments, these were being recovered. He explained the absence of the BSA chairperson, and submitted an apology for it.
Ms Lethogonolo Noge-Tungamirai, Board member: BSA, said there was a need for an increase in the budget, as the current one was not enabling.
Mr Alec Moemi, Director General, SRSA, emphasised the point about the lack of an enabling budget. He reflected on how in 2012 the boxing indaba had highlighted the lackof funds to cater for the various needs of boxing, such as medical staff. In the engagement with the Treasury back then, they had challenges in acquiring more funds. If there was going to be an increase in the BSA budget, it should be away from the SRSA budget -- a plan had to be made on where the funds would come from. They had engaged with the Minister and Deputy Minister to provide the BSA with an additional R5 million. They were sending an application to Treasury to ask for these funds. They also recognised the under-performance, but there had been improvements.
He referred to the inconsistencies in the regulatory requirements and what the Act stated. Promoters were exploiting this gap. The Act was disabling the work of BSA, as payments had to be done ahead in preparation of a fight or tournament. The regulations required payments to be made 14 days before a fight, as preparations could not be done in a short space of time. This was where there were budget constraints, as the BSA budgeted on amounts to be received for fights which sometimes did not materialise. This further exposed the BSA to litigation issues. Boxers had the right to be paid by the BSA even when promoters did not comply with the levy requirements. The BSA had to pay costs even when it had not received revenue. The Minister had made efforts for the readjustment of the sport and recreation amendments as a response to the regulatory challenges experienced in levy collection.
Mr Moemi made it clear that SRSA would not tolerate non-compliance. They would engage and oversee the BSA in ensuring compliance going forward.
Mr Mhlongo asked when the Committee could expect the written report from the BSA.
The Chairperson asked whether the BSA wanted to officially commit to producing a written report on the missing responses to Mr Mhlongo’s questions.
The Director General responded that the written response would be available within the official 30 days, as per the rules of Parliament, which had to go through the minister.
Mr Mhlongo responded that he knew the process, but he had been directly promised a written response by the presenter.
The Chairperson said that the written response had to follow a formal procedure and be presented collectively by BSA through the Minister. The report would then be made available to the Committee.
South African Institute for Drug Free Sports (SAIDS): Annual Report
Mr Khalid Galant, CEO: SAIDS, said a new board had been appointed in December 2017, and a new Minister had also been appointed in 2018. An introductory meeting had been held between the new Minister and the Board.
2017/18 had been a year of compliance for SAIDS. It had received the ISO 9001 international quality assurance certification. It had successfully completed the World Anti-Doping Agency (WADA) compliance questionnaire and a low level corrective action plan it was required to implement. It was currently involved with three major mentor-mentee agreements with continental anti-doping agencies. These agreements were normally perused by the Department, or by WADA. The agreements currently taken up by SAIDS as a mentor were to assist in developing anti-doping capacity. The countries involved were Egypt, Ethiopia and Nigeria.
Doping controls had achieved high level numbers. 46 athletes had tested positive in the doping tests. South Africa remained a country with one of the highest numbers for doping in sport. This was something that SAIDS had to continuously improve. It went beyond having an anti-doping education and research programme. Body building alone had 15 positive tests. 11 of these 15 positive tests were at one event. The world anti-doping code and SA’s anti-doping rules require SAIDS to inform SRSA to consider action to investigate why a sport like body building had so many positive doping tests. That had to happen within the SA Sports Confederation and Olympic Committee (SACOC) as body building was a member of SASCOC. This had been brought to the attention of SRSA, and they were taking action on the matter.
Anti-doping education had various statistical reviews in the annual report. There had been 126 anti-doping education events hosted across different provinces. The key activities for 2018 involved a partnership with four schools in the Northern Cape around an edu-drama project on fair play and drugs in sport. Unfortunately, the non-governmental organization (NGO) had been closed down two months ago. SAIDS had to seek new partners. There were collaborative efforts with the SA Sports Medicine Association, the SA Pharmacy Council and the SA Coaches Commission.
The Minister had confirmed the appointment of an Appeals Board in compliance with requirements of the Drug-Free Sport Act. There were 61 Tribunal panel members drawn from the sport, legal and medical professions. Training had been conducted in 2018. All the members had signed a contract of confidentiality and a conflict of interest declaration to serve in the Tribunal independently.
SAIDS placed a high level priority on compliance in 2017/18, and had been able to reap the benefits of that. There had been compliance with the Department of Labour, the Employment Equity Public Register (specifically with recruiting disabled persons in the entity), ISO 9001 Quality Assurance certification (showing capacity to account for operational processes), submission of the WADA Code Compliance Questionnaire and Corrective Active Plan, and completion of the United Nations Educational, Scientific and Cultural Organisation (UNESCO) Convention Against Doping in Sport compliance questionnaire. For 2019, a focus would continue on compliance with the protection of public information.
Mr Onke Ngwane, CFO: SAIDS, said the entity had generated a surplus of approximately R2.3 million compared to a deficit in the previous year of R700 000. SAIDS remained in a net liability position, with total liabilities exceeding total assets by approximately R2.6 million, while the previous year it had been R4.9 million. The net liability position came from the previous year’s over-expenditure, which had been carried over to current year. The over-spending had come from the entity not having its own laboratory to carry out tests, which had had to be done out of the country. The surplus had managed to reduce the accumulated deficit by 47%, showing improvement in the entity’s financial position.
The entity had achieved an unqualified audit report, with findings on compliance. The main findings on compliance were related to revenue collection from outstanding debtors. The emphasis on matters paragraph relating to the financial position of the entity, with total liabilities exceeding total assets by R2.8 million, showed that the material uncertainty which existed may cast significant doubt on the entity to continue as a going concern. The AG’s opinion had not been modified in this respect.
Performance information had received an unqualified opinion with no findings. All objectives and indicators were clearly defined. All targets and actual results were accurately disclosed.
Irregular expenditure as disclosed in the annual financial statements had been R93 000, compared to R1 227 000 in the previous year. The main reason for the irregular expenditure referred to local production and content. The entity did not specify the requirements for local production and content when requesting quotations, and suppliers did not furnish the entity with a declaration of local production and content.
The audit remedial action plan in place involved practising austerity measures and budgetary control in order to prevent incurring a deficit. The entity planned to follow up continuously with debtors in order to recover amounts owed to them. It would engage further with the legal manager to draw up legal letters demanding amounts owed to them by long outstanding debtors who had shown no movement or payment patterns during the year or in previous years. Lastly, it would update its SCM and procurement policy to include the requirements for local production and content, and continue with the strict compliance practices currently in place.
The current status for 2018/19 was that SAIDS had an SRSA/national grant budget allocation of R24 324 000. The amount received to date was R12 162 000. The grant was to be paid in two tranches. The first tranche was received on 25 May 2018. The second tranche was due in October, and SAIDS would engage with SRSA as a reminder. The Lottery Grant budget amount carried forward from the previous year was R4 960 000. The actual expenditure incurred to date was R521 000. The Lottery Grant fund was for education related to anti-doping operations, including a collaboration with the Department of Basic Education, and R1 175 000 of the grant had been allocated to this.
The Chairperson congratulated SAIDS on its good performance and its presentation.
Mr Mhlongo asked when exactly in October SAIDS would be receiving the second tranche of the fund.
Mr Moemi responded that the Department usually gave SAIDS the funds in two tranches. This was to ensure that they spent the funds as required. When the first tranche had been spent well, the second one was then released.
Department of Sport and Recreation South Africa: Annual Report
The Department said that during the period under review, it had achieved 32 of its 35 targets. of which 32 were achieved. It had obtained a clean audit opinion on performance and financial information. The achievement was reached through 152 staff members working as functional units and in task teams. R1.060 billion of the allocated R1.066 billion had been spent. This translated to expenditure of 99.4%.
The Department had achieved 75% of its targets in program 1. Targets not achieved included the creditor payment age, which overall was greater than 30 days. The reason could be attributed, among other things, to system failures. For example, the fourth quarter transaction volumes put pressure on the Basic Accounting System (BAS) payment system, with some payments not being captured. In addition, delays in payments were caused by disputed invoices that retained the original submission date even after resolution of the dispute. Corrective action planned involved the Department working on a system of isolating disputed invoices to ensure that such invoices do not affect the overall invoice payment age until such time that they were corrected by the service provider.
Program 2 of the Department achieved 90.9% against the set targets. Targets not achieved included the number of people actively participating in organised sport and recreation events. Reasons included the conservative planning by provinces, despite the financial allocations they received from SRSA to contribute to the national targets. There were failures by provinces to report in line with the technical indicator description, thus resulting in some of the reported claims being disregarded, and reporting challenges where some claimed performance was not supported with evidence, thus being disregarded. Corrective actions included analysis of the provincial 2018/19 business plan targets by SRSA, which had led to the adjustment of all their conservative targets. Following development of indicator verification guides to help in verifying the reported information, the need to workshop the provinces had arisen. Engagement of the provinces in this regard at various SRSA-provincial forums would also continue to take place at different levels. Work-shopping of provinces on the management of performance information had been undertaken in August and September 2018.
Program 3 had achieved all its set targets. 60 talented athletes had benefited from the Ministerial Sport Bursary Programme. These athletes were placed in accredited sport focus schools, and where there was no sport focus school close to their homes, in a non-accredited school that was good at sport and academically. The number excluded those learners identified at the 2017 championships. Those learners had not been placed immediately, as they had to be taken through sport science testing first to confirm if their talent was backed up by the necessary requirements, such as endurance and related elements, before being admitted to the programme. The number of athletes supported through the scientific support programme was exceeded by 199 because of the increased need for support for the then potential Commonwealth Games athletes.
Five recognition events for athletes and teams were held during the period under review. This was because of good performances displayed at various international events, such as the Commonwealth Games, as well as the hosting of the national sports awards and the regional sports awards. Four drug-free support agencies – SAIDS, WADA, the Central Drug Authority (CDA) and the Regional Anti-Doping Organisation (RADO) -- were supported during the period under review. The support of these agencies enhances the fight against doping in sport.
Seven major events -- three more than planned -- received either Ministerial or Cabinet approval or related support for the Bidding and Hosting Regulations. The target was exceeded because some of the events were unknown, or not yet officially communicated at the time of planning. They were, however, eventually processed to the Department through SASCOC.
Program 4 had achieved 80% of its set targets. Targets not achieved were in sport support. built: Not all multi-purpose sports courts could be built because of a slow consultation process -- which became longer where the community was not united -- and municipalities’ lengthy decision-making processes. The reason behind this was that while plans were made post-consultation, various construction prerequisites sometimes delayed commencement of construction projects. This included changed community priorities, changes in leadership, and lengthy formal approval by municipalities. Corrective action was being taken with regard to sports courts, and engagements with relevant parties were continuing. Where the community’s support was lacking, other communities were being considered. Appeals to municipalities had also beenmade through the Department of Cooperative Governance and Traditional Affairs (COGTA) and the South African Local Government Association (SALGA).
Program 5 had achieved 100% against its set targets. Ten community gyms had been constructed throughout the country. Following the facilities count of 2015/16 and 2016/17, KwaZulu-Natal had concluded a facility audit. Facilities in all the targeted municipalities had been provided with technical assistance towards construction of their sport facilities, in line with the set norms and standards.
The Department had specifically faced challenges with inadequate legislation, financial constraints and uneven distribution of resources. Legislation did not fully support their strategy. Efforts to amend the legislation, such as the National Sport and Recreation Act (NSRA), the Combat Sport Act and the SAIDS Act, as well as the related regulations, were moving at a slow pace because of other national priorities. Sport support experienced financial constraints, and the uneven distribution of resources across the sporting codes remained a major challenge. A significant number of federations still did not have proper administration resources. These included human resources and other office infrastructure resources. This affected the effective governance of sport in general.
The sport delivery system continued to be impacted by budget constraints and the absence of an adequate equitable share to implement the National Sport and Recreation Plan (NSRP) adopted by the sports movement and approved by Cabinet. SRSA continued to explore alternative funding models to ensure that strategic goals were not compromised. That involved optimising citizens’ access to sport and recreation, transformation of the sector, and supporting athletes to achieve international success. Mechanisms included partnerships with provincial and local spheres of government departments. Following baseline reductions in December 2017, the Department had been compelled to review targets planned over the medium term expenditure framework (MTEF), as well as to reconsider the project delivery modalities envisioned. The one million people actively participating in organised sport and active recreation events had been reduced to 600 000 people in 2018/19. The work to strengthen the organisational environment of the Department and make it optimally responsive to the challenges played out by the NSRP was ongoing and being intensified.
The Department’s risk management had adopted a formal approach to identifying and managing risks. This was detailed in the Department’s risk identification and assessment methodology, approved though the normal processes. To this end, risks at the strategic level were linked to the goals, objectives, and key performance indicators for each programme, while the operational risks were linked to the operational objectives of the directorates. With regard to the management of risks, the Department had adopted a combined assurance model. It had also developed a fraud prevention plan and conducted a fraud risk assessment. Included in the fraud prevention plan were various activities that the Department could initiate to actively prevent fraud, create a fraud-free environment, and empower its employees to assist in the active fight against fraud and corruption.
The Audit Committee had reviewed audit issues raised in the prior year, and was satisfied that the Department had put more effort into improving the internal control environment. A recurrence of a few similar audit findings had been identified by AGSA during the year under review. The Audit Committee had reviewed and accepts the opinion of the AGSA, and concurred and accepted the conclusions of the AGSA on the annual financial statements and annual report.
The Audit Opinion from the Auditor-General on the audit of the financial statement reflected that the Department’s financial statements presented fairly, in all material respects, its financial position as at 31 March 2018, and that its financial performance and cash flows for the year were in accordance with the Modified Cash Standards (MCS) and the requirements of the PFMA and the Division of Revenue Act (DORA).
The Auditor General had assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. No material findings had been raised on the usefulness and reliability of the reported performance information for Programmes 2 (active nation) and 4 (sport support). No material findings were raised on compliance with the specific matters in key legislation set out in the general notice issued in terms of the Public Audit Act (PAA). There had been no significant deficiency in internal control.
Mr Mhlongo (DA) recognised the good performance by the Department. He seconded the proposal by the Director General to build an information technology (IT) hub. The unspent R6.1 million surplus could be used for this purpose. He asked how far the Department was on the payment of invoices and on the filling of vacancies, which had been outstanding for some time. He referred to the recommendations from the AG regarding the capacity in the internal audit position, and sought clarity on the financial constraints regarding this vacancy.
Mr Mmusi raised the issue of lack of compliance in North West Province. Another point of concern was the matter of vacancies. He commented that every audit report from the Department had had challenges over vacancies being filled.
Ms Abrahams asked why there had been no skills development for the year, as it was surprising to note that the staff did not need skills development. She recognized the efforts to involve individuals from the disabled community in the Department. Correction action was needed where community support was lacking. What measures did the Department have in place to communicate with ward councillors and communities if provinces were not doing what they were supposed to be doing? She also asked about the consequence management measures in place for repeat findings, where non-compliance kept occurring from year to year.
Mr S Ralegoma (ANC) asked about progress with legislation involving sport and recreation. He also raised the point about the Western Cape’s refusal to allow the use of infrastructure by the Department. This had been based on the assumption that facilities for cricket were being neglected. The concern was for intervention for the building of facilities for cricket.
The Chairperson confirmed that as a Committee, they did not have any legislation. She had hoped that by this time it would have been in the process of producing legislation for sport and recreation. This was an area which needed improvement.
Mr Mhlongo (DA) asked asked about the matter of vacancies, and whether the Department had the capacity to do the work that it was supposed to do, as there were too many contractors. Lastly, sought clarification on the amount R705 000 in unauthorised expenditure -- what had it been for?
Mr Moemi said that the remaining funds could not be entirely depended on for further activities by the Department. Even on the last day of business, the Treasury could make evaluations which changed the financial outcomes, and the Department might have to factor in the remaining amount from the financial year. The Department would rather have funds remaining than to use them all, as business continued even on the last day of operations.
Regarding vacancies, the Department had had a moratorium phase for a while. The system had been working on the basis of filling vacancies which were needed, and not because the Department was trying to avoid having vacant positions. The Department should not have vacancies of more than 5%, because this would compromise its work. However, critical posts had to be filled.
On the matter in the Northern Cape, the Director General said that a province was allowed to structure in any way it saw fit, as long as it was within regulations. However, the model in the North West had shown that it could not work and should be avoided.
The Department had submitted legislation in terms of the rules of Parliament, which was published in the Gazette by 21 September. Comments had been invited, and it had been sent to the Bills office following this. It had been signed at the Bills office. The Bills office now had to edit the bill and give feedback to the Department, However, it was not clear how long the Bills office would sit with the bill. The Department had done its executive processes, and was waiting for Parliament.
Minister emphasized the submission of legislation to parliament. That the Department was waiting for parliamentary processes to take place. In terms of the processes which were followed in submitting the SAGA report, it was received at the end of September. Stakeholders were given an opportunity to review the report and given a deadline to respond to the Department by latest 19th October. The report could then be released by mid-October to end of November.
Follow up discussion
The Chairperson cautioned about the cycles of passing a bill. The NCOP had expressed their struggle with the cycle of the bill. This was according to section 76 where signatures need to be collected from provinces. Some provinces could delay the process and not sign.
Mr Mhlongo required specific a date from the Minister regarding the release of the SASCOC report. He added the lack of clear deadlines not only damaged the Department but also impacted on the Committee as well, as the Department was withholding information.
Mr D Bergman (DA) raised a concern about sponsors and players regarding the release of the report. The information in the report was critical to sponsors and players. Investors needed the report to determine investments. It was about time the committee was tasked with more responsibility than what it was doing. He expressed that he would appreciate when the Department appears before the committee it provides clear and constructive answers.
Minister Xasa said processes had to be followed before the report could be released. The report could not be released immediately it was received. There would have to be engagement with the report by the Department before it was released.
Mr Gert Oosthuizen, Deputy Minister of Sport, said it would be irresponsible to rely on social media for answers. SRSA should be given the opportunity to engage with the report before releasing it without being accused. This would be the responsible way of doing things. Secondly, there was the consideration of the difference in procedures following the judicial commission of enquiry and commission of enquiry. There were different outcomes and implications from each. Any implicated stakeholders and individuals had to be given the opportunity to respond and account. Following this, the ministry could apply their minds and thereafter release the report.
Mr Moemi further emphasized the legal regulations holding the Minister accountable to certain processes regarding the report. The Minister had to follow the Promotion of Administrative Justice Act (PAJA), which compelled her to take administrative actions which were compliant with these requirements. Consultation with individuals implicated in the report had to be taken into consideration by the Minister as well. The dangers of not complying with these processes would reflect negatively on the Department.
Follow up discussion
Mr Ralegoma recognised that the Minister should be satisfied with the procedures taken in handling the report. Until this was done, the Committee must respect these processes and expect the report when it was released.
Mr Mhlongo expressed his frustration as a Member of the Committee. He had written to the Minister, and 30 days had passed with no response. The Minister had an obligation to be accountable to the Committee. He was not suggesting the Minister should deviate from legal requirements. He emphasised that he had asked for specific dates from the Minister on the release of the report.
Mr D Bergman (DA) said he was also not proposing the Minister should dodge legal processes. He expressed a concern, based on how this matter was reflecting on the reputation of the Committee. He added that the Committee should not be the last to receive it when it was released. This was a concern with regard to unity and securing sponsors.
Mr Ralegoma commented that they also needed the report, but it had been explained that there were processes to be followed. This had to be respected.
The Chairperson said Members must trust and be patient with one another regarding the responsibilities each individual had been given. All the Members wanted the report, but would show the patience to honour the processes involved until its final release. The closing date for the Committee was 27 November, and they should expect the report by that date.
The meeting was adjourned.
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