Audit outcomes of Sport and Recreation SA & Department of Arts and Culture: AGSA briefing; SRSA & DAC 2019/20 Quarter 1 performance; with Minister

Meeting report

Opening remarks by the Chairperson

The Chairperson began by welcoming all Members of the Committee. She asked that all visitors to the Committee introduce themselves and state their affiliation. She mentioned that there would be three briefings during the meeting and the first would be by the Auditor General on Sport and Recreation South Africa

Briefing by the Auditor General on Sport and Recreation: South Africa

AGSA Deputy Business Unit Leader, Ms Mbali Tsotetsi, began by stating the purpose of the Auditor-General of South Africa (AGSA). She stated that AGSA has a constitutional mandate and, as the Supreme Audit Institution of South Africa, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

Ms Tsotetsi mentioned that the role of AGSA is to reflect on the audit work performed and to assist the Portfolio Committee in its oversight role of assessing the performance of the entities – taking into consideration the objective of the Committee to produce a Budgetary Review and Recommendations Report (BRRR).

Ms Tsotetsi proceeded to present the 2018-19 audit outcomes to the Committee. She informed the Members of the Committee that the AG’s annual audits examine 3 areas. The first is fair presentation and absence of significant misstatements in financial statements. The second is reliable and credible performance information for predetermined objectives. The third is that there is compliance with all laws and regulations governing financial matters. Members were informed that AGSA expresses five different audit opinions, which are: unqualified opinion with no findings (clean audit); financially unqualified opinion with findings; qualified opinion; adverse opinion; disclaimed opinion.

Ms Tsotetsi explained each audit opinion in great detail. She first explained that a clean audit is when an auditee:

• Produced credible and reliable financial statements that are free of material misstatements
• Reported in a useful and reliable manner on performance as measured against predetermined objectives in the annual performance plan (APP)
• Complied with key legislation in conducting their day-to-day operations to achieve their mandate

A financially unqualified opinion with findings is when an auditee produced financial statements without material misstatements or could correct the material misstatements, but struggled in one or more area to:

• Align performance reports to the predetermined objectives they committed to in APPs
• Set clear performance indicators and targets to measure their performance against their predetermined objectives
• Report reliably on whether they achieved their performance targets
• Determine the legislation that they should comply with and implement the required policies, procedures and controls to ensure compliance.

A qualified opinion is when an auditee:

• Had the same challenges as those with unqualified opinions with findings but, in addition, they could not produce credible and reliable financial statements
• Had material misstatements on specific areas in their financial statements, which could not be corrected before the financial statements were published.

An adverse opinion is when an auditee:

• Had the same challenges as those with qualified opinions but, in addition, they had so many material misstatements in their financial statements that AGSA disagreed with almost all the amounts and disclosures in the financial statements.

A disclaimed opinion is when an auditee:

• Had the same challenges as those with qualified opinions but, in addition, they could not provide AGSA with evidence for most of the amounts and disclosures reported in the financial statements, and we were unable to conclude or express an opinion on the credibility of their financial statements.

Ms Tsotetsi mentioned that it is important to note that the percentages in this presentation are calculated based on the completed audits of three auditees, unless indicated. She added that audit outcomes are indicated as follows:

• Unqualified with no findings
• Unqualified with findings
• Qualified with findings
• Adverse with findings
• Disclaimed with findings
• Outstanding audits

Ms Tsotetsi outlined the audit outcomes of the Portfolio over five years. She mentioned that overall, the Sports Portfolio has improved its audit outcomes over the past five years. One of its entities, the South African Institute for Drug-free sport (SAIDS) achieved a clean audit outcome for the first time during the 2018-19 financial year. She commended SRSA for retaining its clean audit outcome for the past five years. Whilst she commended SRSA and SAIDS, she noted that Boxing South Africa (BSA) remains with an unqualified opinion with findings on performance information due to issues with the measurability of indicators as well as compliance with some legislation. The audit opinion was unqualified because BSA had corrected all misstatements identified during the audit.

Both SRSA and SAIDS had no material findings identified during the current year audit. BSA could not correct some of the material findings raised.

Ms Tsotetsi concluded by providing the Committee with the recommendations that AGSA has provided to SRSA and its entities.

• The audit action plans for the Department and its entities should be implemented and monitored to ensure continued audit outcomes improvement in the portfolio.
• BSA to ensure that the revised 2019-20 APP is implemented and accurate reporting of targets is timely monitored.
• Consequence management should be implemented by BSA. Investigations into irregular and fruitless expenditure should be performed and proper records be kept and appropriate actions be taken. Also ensure that declarations of interest are requested with bids and that a fair and competitive process of procurement is followed.

AGSA further recommended:

• The Portfolio Committee (PC) should request management to provide feedback on the implementation and progress of the audit action plans to ensure further improvement in the audit outcomes of the portfolio.
• The PC should monitor implementation of consequence management.

Discussion

The Chairperson stated that the Committee is satisfied to hear about the performance of SRSA as well as the improvement of SAIDS, however, there is room for improvement in BSA. She thanked the presenters for a clear and concise presentation. Before she opened the discussion to the Members of the Committee, she asked the Acting DG of Sports and Recreation to give some input to the Committee.

Ms S Khan Acting Director General of Sports and Recreation stated that the Department appreciates the presentation from the AG as well as the support and interaction the Department has with the AG. She commended the Department for its clean audit but reiterated that the Department needs to continue to work hard to achieve clean audits. She added that based on some of the issues highlighted in the report by the AG, the Department is putting together a Management Plan, which will attend to those specified areas.

Ms Khan mentioned that the SRSA report mentioned that employees of the Department are conducting business with other organs of the state, in contravention of supply chain management rules. The Department does not yet have a system which identifies officials who conduct business with other organs of the state. She added that the Department is working with suppliers identified by AGSA and is working with the procurement office of the National Treasury.

The Chairperson asked for clarification on the amount given to BSA this year.

Ms Khan stated that the Department allocated R12.810 million. The Department usually gives BSA the funding in tranches. The Department has just given BSA the first tranche and it will provide BSA with the second tranche in the coming months.

The Chairperson asked why BSA was allowed to be allocated funding, even with the highlighted irregularities. She also asked if BSA is allowed by the law to be given funding in tranches.

Ms Khan stated that in terms of the service level agreement that the Department signed with BSA, BSA is expected to account for any funding and to provide the Department with audited financial statements. She further added that given the reports that the Department has received from BSA, the Department is satisfied with BSA’s compliance, hence the transfer of the funds.

The Chairperson opened the discussion to the Members of the Committee.

Questions from MPs

Mr WF Faber (DA) asked when last did BSA have a clean audit. He mentioned that BSA has been struggling for several years. He asked if the Department could tell the Committee what has been done to rectify the issues in BSA in the past three years.

Mr TW Mhlongo (DA) stated that it is quite clear that situation in BSA has not changed. He asked what the outstanding conference fee in 2007/09 related to and why this fee had not been paid at this very moment. He mentioned that it is shocking to hear that there are certain issues which have not been dealt with since 2007. He added that it seems as if Ms Khan is surprised by the information that she has just reported to the Committee.

The Chairperson interrupted him, and asked that he not speak directly to Ms Khan and that he should rather address the Chairperson directly.

Mr Mhlongo accepted the Chairperson’s input and continued with his questions. He asked the Chairperson if representatives of BSA are present at the meeting. He realised that BSA was in fact not present at the meeting and said that this is disappointing.

The Chairperson interrupted him once more, and informed Mr Mhlongo that the Committee has a procedure of contacting representatives that are not present at a Committee meeting to come and address the Portfolio Committee.

Mr Mhlongo told the Chairperson that it is unfair that she continues to interrupt him whilst he is asking questions.

The Chairperson said that she is not trying to interrupt him, only that she is informing him on the procedure followed by the Committee.

Mr Mhlongo stated that it is clear that the Department has not put regulations in place. He added that there is no clear relationship between the entities and the Department.

Mr Mhlongo said that the Portfolio Committee is performing its oversight mechanism, whereas the Department does not listen to the recommendations given by the Committee.

Mr Mhlongo asked why is it that the Department has a clean audit, but not its entities.

Mr Mhlongo stated that the Department does not listen to the Committee. He added that there is poor communication between the Committee and the Department. He outlined that he is very upset with the conduct of the Department.

Mr Mhlongo mentioned that the Portfolio Committee has asked the Department to provide the hierarchy structure of the Department, yet the Department has not provided it. He emphasised that the Department’s inability to follow recommendations from the Portfolio Committee has made it difficult for the Committee to conduct its oversight mechanism. He stated that the Committee must inform the Minister about this.

Ms V Van Dyk (DA) referred to page 11 of the audit report but she was stopped by The Chairperson.

The Chairperson reminded the Committee is currently dealing with the audit report of Department of Sports.

A representative from Al Jama-ah stated that there is nothing mentioned of the penalty imposed by the SA Revenue Service (SARS) on Boxing SA in the audit report.

Mr BS Madlingozi (EFF) stated that it is clear that Boxing SA is run by individuals who are not interested in the running of the entity. He asked if the AG recommended any remedial actions on what to do in Boxing SA and if not, why.

The Chairperson interrupted Mr Madlingozi and mentioned that the observer from Al Jama-ah cannot ask questions. She stated that the question must fall away.

Mr Mhlongo mentioned that the observer’s question is important and that the officials should answer the question.

Mr A Seabi (ANC) welcomed the fact that there was a clean audit in the Department. He stated that he had four questions. First, he asked if the South African Sports Confederation and Olympic Committee (SASCOC) is a part of the auditees, and if not, why is the Committee interacting with it at this level.

Mr Seabi asked secondly if there were specific bidders who were offered the contracts.

Mr Seabi asked what the liquidity status of BSA is. He added that the audit report mentioned that BSA has investments and sometimes withdraws its investment. In the report it stated that BSA should not withdraw its investments for several reasons. He asked for clarification on the liquidity status of BSA.

Mr Seabi referred to Page 17 which addressed unauthorised expenditure. He asked if the report of unauthorised expenditure was submitted to Parliament to look at this report.

Mr Seabi asked that if the AG has the capabilities to investigate fraud and theft.

Mr Seabi asked if during the audit process the AG’s office looked at the impact of its findings in line with public interest because some of the actions are taken by entities of Departments. When the AG’s office looks at the impact of its findings, does it look at in terms of public impact.

Ms Van Dyk asked if the penalty of R20 000 for BSA was included in the report, and if not, why was it not included.

The Chairperson wanted to know what went wrong with the Department when in three years Boxing South Africa had changed the board several times. She asked the AG if it was aware of the historical financial challenges of BSA.

The Chairperson mentioned that the improvement seen in BSA must attributed to both the AG and the SRSA. She asked if the AG could continue to assist BSA with their turnaround strategy. She added that the Committee has seen an improvement but there are still several challenges within the SRSA.

The Chairperson asked what does a penalty from SARS entail for a Department and why the AG terms fraud as fruitless expenditure.

The Chairperson emphasised to the Department that there is still an issue of vacancies that has been ongoing since the 5th administration of Parliament and the Department has still not briefed the Committee on why these vacancies have not been filled by the Department.

Answers

Ms Tsotetsi first answered the question on the penalty of R20 000. She mentioned that this penalty was for SAIDS and not for BSA. It was imposed on SAIDS because it does not make timely submissions with regards to payment. She explained that it is classified as fruitless and wasteful expenditure because the amount was incurred in vain, if the entity had submitted on time then it would not have paid the R20 000 fine. The amount was then disclosed in the financial statements of SAIDS as fruitless and wasteful expenditure.

Ms Tsotetsi also mentioned that remedial action can only be taken once the AG’s office has identified a material irregularity which has been communicated to the accounting officer who then fails to implement the recommendations. This in line with the expanded mandate. With BSA, the AG’s office has not identified a material irregularity that has passed the stage of recommendations and is currently at the point of remedial action.

Ms Tsotetsi mentioned that the AG’s office does not audit SASCOC. The entity does receive transfers from SRSA, which the AG’s office does audit but it does not audit SASCOC itself.

Ms Tsotetsi mentioned that it is the case that the bidders for procurement contracts from BSA did not receive their contracts and that is why the AG’s office has listed that as non-compliance. The BSA should have made the information available but it was not.

Ms Tsotetsi mentioned that the investments of BSA are ring-fenced in order to cover boxer’s injuries. BSA should not use that money to cover their normal operations, that money is not available for anything else but to cover the boxer’s injuries. If BSA is tapping into this fund they will not have the requisite funds to deal with the boxer’s injuries. She added that BSA is indeed having issues with liquidity.

Ms Tsotetsi stated that she does not have a specific amount with regard to unauthorised expenditure at the present moment but this amount should have been submitted to Parliament and the Portfolio Committee already by the Department. She added that the AG is still awaiting approval from Parliament.

Ms Tsotetsi added that the AG’s audit does not focus on fraud but if it does come across allegations of fraud the AG must report it immediately to those tasked with matters relating to governance, so that they can conduct an investigation. She added that if the AG’s office does come across such instances, it may opt to investigate to confirm if fraud has taken place. She added that the AG’s office does have an investigations unit within the organisation.

Ms Tsotetsi referred back to the accountability cycle and she reminded the Committee that the role of the AG is to ensure that the right internal controls and internal supervisions are in place to make sure that the planned targets aligned to the entity are actually achieved. If management and assurance providers are playing their role in ensuring that those control mechanisms are effective and that those defined targets in the APP’s are being achieved; and if there are gaps, there should be consequences to ensure better delivery to the citizens.

The Chairperson asked that Ms Tsotetsi address Mr Mhlongo’s question on the lack of movement in the financials since the 2007-08 financial year.

Ms Tsotetsi stated that the unauthorised expenditure during this period was submitted for approval by Parliament, however that approval has not yet occurred and the AG’s office will follow up on this issue and will provide the information to the Committee in the next meeting.

The Chairperson asked that the Department address this question.

Mr Makato Matlala, Chief Financial Officer (CFO) SRSA, stated that the unauthorised expenditure was picked up in the 2011-12 financial year audit. He added that the Department with the former DG have written to the Standing Committee on Public Accounts (SCOPA) on this issue. SCOPA stated that this issue does not appear on their records. The Department then followed this up with National Treasury in 2016 and the Department has letters that were sent to SCOPA as far back as 2016 where it was explained by the DG to National Treasury that there was a misclassification that has to be condoned by SCOPA; as the financials have been audited in the year where this was classified as an instance of unauthorised expenditure. In its appearance at SCOPA, the Department was told that the issue was still pending. The Department immediately wrote to SCOPA stating that it is awaiting the condonement but the amount was wrongfully classified as unauthorised, as the expenditure incurred in 2007-08 was during the 2010 FIFA World Cup mass mobilisation that the Department conducted. He mentioned that the letter that the Department addressed to SCOPA illustrates the steps taken by the Department in this regard.

Mr Mhlongo stated that he does not understand the response given by the CFO to the 2007-08 unauthorised expenditure. He mentioned that the issue being raised is on whether the amount was classified or misclassified. He said that it does not make sense that this unauthorised expenditure has been termed as taking place in 2007-08, but now the Department has just mentioned that it falls under the 2010 financial year. He asked that the Department provide the Committee with the correct answer. He asked the Department why it is only raising this unauthorised expenditure now and why it did not do so 5 years ago. He mentioned that this makes it difficult for the Committee to follow up on issues.

Mr Mhlongo added that he is disappointed with the response given by the Department.

The Chairperson welcomed the Minister of Sports, Arts and Culture to the meeting.

Mr Matlala stated that in 2007-08 the Department started the mobilisation campaign, building up to the 2010 FIFA World Cup. The amount takes into account the money spent on this campaign from 2007-10. He added that the Department has tried to conduct a follow up on this amount.

The Chairperson stated that according to the Committee’s reports, the former DG once gave an explanation on this matter. She mentioned that the Committee will monitor SCOPA’s condonement.

Mr Mhlongo first asked what does AFS stand for. He then asked that the AG’s office respond to his question on why this unauthorised expenditure has only been flagged now. He added that he understands the Department’s explanation that this amount is of consecutive years but he wants an answer on the amount spent that was unauthorised.

Ms Tsotetsi corrected Mr Mhlongo and mentioned that this is not the first time that this unauthorised expenditure in 2007-08 has been flagged by the AG’s office. She added that the reason that this issue continues to show up in the audit report is because it is still enclosed in the Department’s financial statements and will only disappear when the process of condonation has been completed.

Questions from MPs

Mr Madlingozi said that he is reminded of the fact that there money that disappeared from the Department of Arts and Culture in 2010.

The Chairperson interrupted him and reminded him that the Committee is currently discussing the audit report on sports.

Mr Madlingozi mentioned that he only used this as an example and that he had previously asked the previous Minister on what action should be taken about the unauthorised expenditure in 2007-08, she mentioned that action will be taken.

Mr Seabi suggested that the correspondence between the Department and SCOPA be made available to the Chairperson, so that the Committee can assist. He added that he will put a proposal that the correspondence must be made available to the Chairperson, so that the Chairperson can follow up on this correspondence.

Mr Seabi also mentioned that if SASCOC reports to the Department of Sports and usually appears before this Committee, why is it not being audited. He asked why the AG’s office has not audited SASCOC.

The Chairperson mentioned that she did notify the Department and the AG that the Committee does require the correspondence from it and SCOPA.

The Chairperson also informed the Members that SASCOC receives funds from the Department when it is preparing for athletics. She asked if the AG’s office does not audit SASCOC, is it the responsibility of the Department to deal with the financial statements of SASCOC.

Answers

Ms Tsotetsi mentioned that BSA, unlike SASCOC is an entity of Sports, that the AG’s office is mandated, according to the Public Audit Act (PAA) to monitor only BSA. SASCOC is a federation and not an entity. The links between SASCOC and the Department occur between the transfers of money, which are detailed in a service level agreement. This governs the transfer. The AG’s office then audits that specific transfer to SASCOC. In terms of the PAA, this falls out of the AG’s office.

Ms Khan addressed the issue on the vacancies within the Department. She stated that the Department has submitted the documents to the Committee and it was an agenda item at the previous meeting. She added that the Department is currently looking at what funding is available for compensation of employees. She reminded the Chairperson that this is an abnormal year because of the introduction of the 6th Parliament. She also added that the Department is currently merging with the Department of Arts and Culture, so there is a directive from the DG to fill in posts from programme 1. Programme 1 will have to have generic posts in both Sports and Arts & Culture, which has prevented the Department from filling in posts at the moment. She mentioned that there are posts that the Department has advertised from the 30th of May, that it is currently looking to fill. She added that the Department will fill critical posts before the end of the financial year.

The Chairperson thanked the Office of the AG, the Department and the Members of the Committee.

Mr Madlingozi mentioned that his question has not been answered. He stated that he wants to know what happened to the money unaccounted for in 2007-08.

The Chairperson mentioned that she does not understand his question and to whom it will be addressed to. She mentioned that the information on the money unaccounted for in 2008-09 and not the 2007-08 financial year will submitted to the Committee by SCOPA.

Briefing by the Auditor General on Department of Department of Arts and Culture, in the presence of the Minister of Sports, Arts and Culture

The Chairperson once more welcomed the Minister and asked that the AG begin its briefing on the audit report of the Department of Arts and Culture.

Ms Ziphezinhle Biyela Audit Manager of the office of the Auditor General of South Africa presented information relevant for the budgetary review and recommendations report for the Department of Arts and Culture. As the Committee had been earlier taken through the mandate of the AG and how it expresses its different audit opinions, she immediately addressed the audit outcomes of the portfolio over five years.

Ms Biyela first commended the Department of Arts and Culture for achieving a clean audit for three years in a row. She added that there is an increase in the number of auditees obtaining clean audit within the Department (nine).

Ms Biyela mentioned that the AG is concerned that Artscape has regressed from a clean audit in the prior financial year audit to a qualified opinion. She added that the AG’s office is also concerned that there still remain four audits that received qualified audit opinion in areas of: property plant and equipment, revenue, expenditure and heritage assets. She mentioned that this was due to slow response in implementing recommendations given by the AG and other assurance providers. She also informed the Committee that there is material concern for the Performing Arts Centre of the Free State (PACOFS) which regressed in 2018/19 from a qualified opinion to a disclaimed audit opinion.

Ms Biyela mentioned that there has been improvement in the audit outcomes of six entities in the Department, which are: Nelson Mandela Museum, SA Library of the Blind, the National Film & Video Foundation (NFVF) , Ditsong Museum, Pan South African Language Board (PanSALB) and Freedom Park. She also mentioned that there are 17 entities with unchanged audit comes. She informed the Committee that more importantly, there has been a regression in the audit outcomes of Artscape, Luthuli Museum and PACOFS. She added that the regression highlighted in these entities should be a cause for concern for the Department.

Ms Biyela addressed credible financial reporting. She mentioned that 35% of the Department’s entities achieved unqualified opinions only because they corrected all material misstatements identified during the audit. The top four qualification areas are:

• Heritage assets (National Library and Luthuli Museum)
• Property, infrastructure, plant and equipment (Artscape and PAFOFS)
• Expenditure (Artscape and PACOFS)
• Irregular expenditure (National English Literary)
• Leave accrual, receivables, payables other disclosures (PACOFS)

Ms Biyela then referred to credible performance reporting. She mentioned that 38 % of the Department’s entities had no material findings only because they corrected all material misstatements identified during the audit.

Ms Biyela informed the Committee on the top five non-compliance areas in the Department. These were:

• Quality of submitted financial statements (13)
• Irregular, Unauthorised and fruitless and wasteful expenditure (11)
• Procurements and contract management (10)
• Consequence management (7)
• Expenditure management (4)

Ms Biyela added that overall the internal control within the Department’s entities is of concern but there areas, such as effective leadership and risk management, where the status of internal is rated as good by the AG.

Ms Biyela then addressed the matter of fruitless and wasteful expenditure incurred by entities within the Department. She informed the Committee that 79% (R8.8 million) of the disclosed fruitless and wasteful expenditure for the current year was caused by interest and fines due to the non-payment of creditors incurred by DAC.

Ms Biyela told the Committee that there are five entities which have incurred high irregular expenditure in the past financial year. These were:

• DAC (R17,5 million) (18%)
• Ditsong (R12,5 million) (13%)
• PanSALB (R17.9 million) (18%)
• Luthuli Museum (R9,7 million) (10%)
• Artscape (R28,7 million) (29%)

She added that the irregular expenditure amount of R28.7 million incurred by Artscape should be of concern for the Department.

Ms Biyela addressed supply chain management. She said that the most common findings on supply chain management were:

• Local content requirements
• Uncompetitive and unfair procurement process.
• Awards to employees amounting to R 3 793 066 and awards to close family members amounting to R 3 244 022.
• Inadequate contract management.

The AG also identified 10 Auditees with material non-compliance:

• DAC
• Ditsong
• Freedom Park
• Robben Island
• National Literary Museum
•  Artscape
•  Die Afrikaans taalmuseum
• Luthuli Museum
• Msunduzi Museum
• Pacofs

 

Ms Biyela concluded the presentation.

Overview from the DAC

The Chairperson asked the Minister to provide a brief overview.

Minister N Mthethwa asked that that DG of the Department should fill out the gaps first and he would speak later.

Mr V Mkhize Director-General of Arts and Culture stated that the Department has faced challenges with grant management and it has put into place systems to automate the grant management system. The Department is also working towards revising several policies that it has identified have gaps.

Mr Mkhize indicated that the Department did have a court order that had arisen from a beneficiary called Opticon. The Department had decided that would not pay the company until it submitted its report and supportive documents. The matter was taken for arbitration and the court found that the Department must pay, including the interest which amounted to a total of R8.8 million.

Mr Mkhize stated that there was a difference of opinion between the Department and the AG on the basis that this expenditure was directed to the South African Cultural Observatory which the Department had appointed as a research arm of the Department. He mentioned that there were three areas that needed to be researched, arts in school programme and the impact of the White Paper. The AG told the Department that this should have been a transparent process.

Mr Mkhize stated that this has proved to be an issue which caused instability within the Department, to the point where the Minister had to intervene in this matter. This intervention led to the Chairperson of the Board being relieved of their duties and a new board Chairperson was appointed. Several investigations were conducted in PACOFS. A new CEO has been appointed to PACOFS, he was the former CEO of Artscape.

Mr Mkhize added that the Department notes the regression in the audit opinion of Artscape. He mentioned that the entity has not been able to keep records of its financial statements, and it has recently lost a CFO. Once the CFO left, the entity was plagued with more issues. He added that the Department has mechanisms to monitor the Department’s entities, and will continue to monitor the record keeping of the entities.

Mr Mkhize mentioned that the Department has engaged with Luthuli Museum on the registering of their assets and the valuing of the assets. The Department has asked Luthuli Museum to conduct a report on this and submit it to the Department.

Mr Mkhize said that unauthorised expenditure is a cause of concern for the Department, and it still has a difference of opinion in relation to the Mzansi Broadcasting Academy that it has funded. The AG stated that the Department is funding outside of its mandate whereas the Department believes that the Mzansi Broadcasting Academy is funding within its mandate.

Mr Mkhize added that the Department has issued final warnings to seven officials who did not follow the recommendations of the AG. He emphasised that the Department is applying consequence management. After receiving the final warnings, some of the senior managers have left the organisation.

Mr Matlala mentioned that the DG has covered the issue on the recommendations of the AG.

The Chairperson opened up discussion for the Committee.

Questions from MPs

Ms Van Dyk referred to slide 9 and 11. She questioned a complaint received in November 2018 which was lodged by South Africa Heritage Resources Agency (SAHRA). This concerned a fake proposal made in the entity’s name by the National Arts Council (NAC) and processed in accordance with the NAC grant and surplus policy. She stated that the NAC awarded funds to itself to be dispersed. Her question to the AG was how the NAC received a clean audit when it is clear that it has breached prescripts of the Public Finance Management Act (PFMA) and the Public Audit Act (PAA). It has a surplus and grant policy is unlawful. She asked what were the recommendations of the AG to the Department, and what has been done one year later. She asked if this matter was lodged to the Public Protector.

Ms Van Dyk referred to the incident register in 2018 of Freedom Park and said that this indicates that there was a fraudulent payment of R555 898 that was paid to a bogus account. She added that there was a complaint written to the SA Police Service (SAPS), but when she looked into the investigation procedure on the incident register it reflected that there was no action taken against the person who made that payment. She asked the AG if this is reflected in the documentation submitted to the AG and if it was, will it be possible for the Committee to receive feedback on the proceedings of this particular case. And type of action should be taken against the employee.

Mr Madlingozi stated that he is satisfied that the DG presented to the Committee and mentioned that he will make changes within the Department. He further mentioned that it is important that the DG has taken action. He asked that the Committee receive clarity on the irregular expenditure within the Department.

Mr Seabi welcomed the presentation from the AG’s office. He asked what other entities that the AG’s office has audited besides that one’s shown on the presentation slides.

Mr Seabi mentioned that since there is a difference of opinion between the Department and the AG’s office, what is the recourse between the two Departments.

Mr Seabi asked why the AG would qualify the Department when it was directed by the Constitutional Court to pay the R8.8 million.

Mr Seabi asked if there has been improvement in PACOFS after the Department’s intervention.

Mr Mhlongo welcomed the presentation but added that the situation is bad in the Department. He stated that he does not understand why the Department does not make submissions on time. He asked the Department why it is not performing, even when it is guided by the AG’s recommendations.

Mr Mhlongo mentioned that he does not even want to address the issue of the Mzansi Golden Economy as this would upset him further.

Mr Mhlongo stated that with the Department’s litigation loss, the Department knew that it was wrong but still continued to pursue the case, which was wrong. He added that he has a legal background, and before a legal team continues with litigation, it consults with its clients on the matter. And so the Department must have known then that it was wrong.

Mr Mhlongo emphasised that it is disappointing that the Department cannot even get the basis right. He asked for Mr Mkhize and AG to elaborate on the issue of schools.

Mr Mhlongo asked that in the future the AG should provide figures, and not just percentages as it had done in the presentation.

Mr Mhlongo stated that it is disappointing that the Department cannot even manage its own record keeping. He asked the Department on what it does when its entities do not account for quarterly spending.

Mr Mhlongo added that the senior leadership in the Department is in a poor state.

Mr Mhlongo also mentioned that there has been no improvement in terms of irregular and wasteful expenditure. He asked what caused this and whether or not the Department implemented the recommendations from the AG. If not, he asked the Department to explain why irregular and wasteful expenditure has increased.

Mr Mhlongo said it seems that all the entities of the Department have issues with supply chain management. He asked why the Department is struggling with supply chain management.

Mr Mhlongo also asked why the Department does not place tenders for external parties to provide services to it.

Mr Mhlongo asked the officials of the AG to explain the total costs spent by the different entities.

Mr Mhlongo mentioned that the issue of vacancies within the Department is troubling. He asked why the Department has not been able to fill the vacancies.

The Chairperson mentioned that she agreed with the recommendations by the AG. She added that the Committee will enact an action plan that will deal specifically with the issue of vacancies within the Department. She added that the Committee will try and fast-track the White Paper of the 26 entities. She mentioned that it could be the case that because the Department is dealing with 26 entities, it is possible that it is struggling to monitor the activities of all of them. She informed the Members that she has received the APP’s from the Department which highlight the problems that the Department is facing. She stated that the Committee will use the AG’s recommendations as tools to ensure that the Department gets its house in order.

The Chairperson stated that the Department still has the opportunity to improve its institutional systems and it should work with the Portfolio Committee. She asked if the AG could respond to the questions of the Members.

Mr A Sekgetho, Business Executive for Auditor-General of South Africa, said that many of the questions are directed towards the Department and that the Department should respond to those questions from the Members of the Committee.

Mr Sekgetho stated there are 26 bodies within the Department and these bodies consist of various types of entities that the Department uses interchangeably. He mentioned that he hoped that he has been able to clarify that misunderstanding.

Mr Sekgetho stated that it is true that the Department did receive the complaint from Mr Freddie Nyatela, and further engaged with him to understand what was his source of concern during September 2018. This information was handed over to the investigations unit within the office of the AG which assessed the complaint and the evidence. Once that process is finalised, the office of the AG will decide whether or not it should take action. He added that based on the audit report, there were no transgressions identified. That correspondence was provided to Mr Nyatela as well. He added that the audit process is a process where the AG provides assurance based on a sample basis, and it does not necessarily select each and every transaction and provide assurance on each transaction of an entity. He added that the purpose of an audit is not to conduct an investigation. He admitted that the audit process has limitations.

Mr Sekgetho said that when the AG engages on the risk registers, in fact when it conducts the audit, it asks management to complete a questionnaire about whether they know about any fraud within the Department. If management has identified a case of irregularity or fraud, then the audit process ends and it is then up to management on whether it would like to pursue the process further or not. The AG cannot at that point do anything once the management has taken a decision. The AG can only act on the prescripts of the PFMA, which state that the AG must follow up on any official who incurs fruitless and irregular expenditure. He added that work of the AG’s office is geared in that respect. If management has not followed up on an issue after recommendations from the AG, then the AG can implement consequence management.

Mr Sekgetho addressed the question on small auditees. He added that the Department has a differentiated audit approach to increase efficiency in the audit process. He mentioned that there are different categories that the AG’s office uses to class different entities. He added that the audits were conducted and that the they were given the audits as required. The main focus was on the eight auditees that have been detailed in the presentation. These are those that are not classified as small auditees per AGSA’s methodology.

Mr Sekgetho mentioned that the audit process does allow for disagreements to take place between the AG and auditees. He added that if there is a disagreement within management, an audit opinion can be given to conclude the issue. The basis for an adverse outcome is when the AG has found evidence during the audit process and addressed it to management who disagrees but cannot provide evidence that supports their view. Once the audit process concludes the AG can issue an adverse opinion. This is at the principle level. He mentioned that the process must be fair and just; and this process includes allowing management the opportunity to argue their case and place evidence to the contrary. He mentioned that if there is still dispute at the end of this process, management is allowed to make use of the dispute resolution process within the office of the AG which has an independent quality assurer stationed in its offices. The independent quality assurer will provide an independent analysis of the audit of the AG, to determine whether the audit has reached the proper conclusions or not.

Mr Sekgetho informed the Committee that sometimes when the Department conducts their audits, the AG often finds that there was no wilful or negligent intention on behalf of an official, but this does not negate the process of investigation by the AG. He added that the AG often experiences challenges because it often has to provide negative reports. The office of the AG has accepted that this is the environment in which it has to work in. He also added that even if a Department or entity improves their financial statements with the recommendations provided by the AG, the office of the AG will continue to provide recommendations to further strengthen the institutional capacity of the Department.

Mr Sekgetho added that the litigation that the Department has undergone could have been avoided if the Department had followed the correct procedures. He emphasised that the office of the AG is not disputing the court order but only the basis of why the Department did not pay.

Mr Sekgetho addressed the question on the intervention in PACOFS. He stated that this is a difficult question to answer, as how does one assess whether an intervention has succeeded or not. He mentioned that the feedback the AG gives oversight structures, like the Committee, to hold the Department to account based on the audit outcomes. Based on the audit outcomes it is clear that the interventions have not been successful.

Mr Sekgetho said that the AG will provide the actual amount of money misappropriated, rather than just the percentages at a later stage, as there are a number of entities.

Mr Sekgetho added that the audit is a retrospective process as the AG involves itself after the fact and retraces management’s footsteps. The AG does not question the business decision taken by management, rather it asses the procurement compliance processes in terms of section 217 of the Constitution. The only evidence the AG has is the documentation of when a decision has been taken. If the audit flags any irregularities, then the AG must raise that issue to the executive authorities.

Mr Sekgetho added that there has been improvements within the audit outcomes of the Department but it is still the duty of the office of the AG to highlight the internal controls and financial management. If the office does not do that, this could result in the Department regressing in its audit outcome. He notified the Chairperson that there have been instances where entities have moved from a clean audit to an unqualified finding. He asked the Chairperson to remind him on any question that he did not cover.

The Chairperson asked the Department to respond to the questions before she allows for follow-ups.

Mr Matlala addressed the issue on the interest paid on fruitless and wasteful expenditure. He mentioned that this in relation to one of the beneficiaries of the Department. In terms of the Department’s policy, before payments are made, beneficiaries need to submit audited financial statements. With this particular beneficiary, it had submitted financial statements which were qualified and as a result the Department refused to make the payment. The beneficiary then appointed other auditors who issued another audit report which was unqualified. But the Department was not satisfied with the information on the new audit report. It then sought legal advice on what it can do in this circumstance. The state’s legal advisors agreed with the Department that payment should not be made and unfortunately the beneficiary took the Department to court. Although the Department lost the case, it still feels that it should not have made payments to the beneficiary.

Mr Matlala informed the Committee that in terms of its constitution, Mzansi Broadcasting Company is offering: value production, content production, editing; personnel branding, public speaking, vocal control and social and media management, amongst other things. In terms of the list mentioned, this training is relevant within the field of arts and culture. It is in the Department’s view that the funding of this company is within the Department’s mandate.

Mr Matlala stated that the Department does implement consequence management and in this financial year, seven officials have been issued with either written final warnings or written warnings. He added that the point of consequence management is to indicate that the Department has taken action against officials implicated in transactions that are non-compliant. He disagreed with the AG’s findings that the Department is not implementing consequence management.

The Chairperson asked if Mr Mkhize had more input.

Mr Mkhize stated there were problems with record keeping in the Department. There are individuals within the Department that do not have the requisite qualifications to deal with record keeping and as a result, struggle to keep sufficient records. He added that the Department is working on improving record keeping within the Department through the training of record officials.

Mr Mkhize stated that there is an improvement within the entities. The entities analyse the reports from the AG and coordinate with the officials of the AG. Compared to the past, it is clear that the interventions have improved the financial statements of the entities.

Mr Mkhize added that interventions relating to forensic audits were conducted by the Department, to deal with issues of allegations financial mismanagement of funds and failure to perform their functions. All of the findings were given to the boards of the entities to implement the findings of the forensic audits. He listed the example of the Department’s intervention of its entity, NAVF, which subsequently led to the departure of the CEO. The Department then monitored the board to ensure that they were able to turn around the issues within that entity. He mentioned that this has improved NFVF’s institutional capacity and performance. Such actions by the Department are to improve governance and management within its entities.

Questions from MPs

Ms Van Dyk stated that she is not satisfied with the answer on the surplus policy of the National Arts Council.  The fact an official of the office of AG released a response to Mr Mahlongo that mentioned that the AG has noted the process and will add the complaint to the audit report means that this should have been included in the audit. She asked why the audit report did not include the change in policy that is not in line with the PFMA. She asked what action was taken against the official/s who participated in fraudulent activities within the NAC.

Mr Mhlongo stated that the Department did not respond to most of his questions. He mentioned that he will remind the Department on each question he posed to them.

Mr Mhlongo asked the Department why it is funding Rhodes Association, how much funding is the association receiving and what relationship does the Department have with it. He asked the Department to share information on its different research initiatives. He asked Mr Sekgetho why the AG does not provide in-depth accounts of its activities and its findings.

Mr Mhlongo asked why the Museum and National Library is struggling with compliance with accounting principles. He asked if the Department will give the Committee assurances that it will address this issue before the end of the financial year. He said that Luthuli Museum is struggling. He emphasised that the Committee needs to have more information on its financial statements. He asked for the Department to provide the names of the vacancies within the top structure of the Department.

The Chairperson asked Mr Mhlongo to not make statements when this session is for follow up question only.

Mr Mhlongo apologised to the Chairperson for the number of statements he has made. He asked if the Department struggles with bookkeeping. He asked why the leadership within the Department does not provide assurances to the AG.

Mr Seabi asked if the AG referred to specific service providers that applied for the tender or all the service providers who applied for the tender. He asked for the AG to clarify why it qualified the Department because it had provided tenders to individuals close to officials within the Department.

Mr Seabi asked if the AG has found that the Department is not filling vacancies with competent officials.

Answers

Mr Sekgetho mentioned that the AG did note the complaint made by Mr Nyatela. He added that there instances where there is a transgression of a policy which does not have a financial impact or result in fraud. As the AG noted earlier, it does not investigate fraud. It only provides a high level audit based on materiality and risk assessment. The AG did the audit and did not find any significant irregularities. He mentioned that it is important to state that the AG did work on this issue.

Mr Sekgetho stated that the audit is not meant to test each transaction that has gone through in the environment. It draws samples. If the AG tests 30 samples and notes that there is no clear irregularities it concludes that the internal audit system is fine. It is all sample based, even within the private sector.

Mr Sekgetho mentioned that certain investigations conducted by the AG’s office can take longer due to the nature of the audit process.

Mr Sekgetho noted that certain officials in PACOFS have awarded contracts for service providers that were not disclosed within the financial statements of the entity.

Mr Sekgetho added that the AG is not providing feedback on the competency of management within the Department rather it is telling the Department to consider its own competency framework when it is filling vacant posts within the Department. The AG’s office does not assess incompetency within Departments.

Mr Sekgetho asked Ms Mhlongo to answer the rest of the questions.

Ms N Mhlongo Senior Manager of Auditor-General of South Africa stated that the National Library is the only entity that has consistently not been able to deal with its collections. She added that the office of the AG has followed up with them and the entity has assured the AG that it will improve its ability to tabulate its collections.

Ms Mhlongo stated that because Luthuli Museum has an audit process that allows them to correct their audits, the entity is able to resolve its qualification. When the AG returned in the following year, the entity had still not resolved the its internal audit matters and that is why it has regressed.

Mr Matlala addressed the issue of Mzansi Broadcasting Academy. He mentioned that the Mzansi online academy is part of the work of the Department of Arts and Culture. He stated that it is integral to the Department’s functions.

Mr Matlala added that the Department supports SAHRA and its functions.

Mr Mkhize stated that there has to be a compromise with the functions of Mzansi online Academy as its curriculum has addressed skills deficits within the country. He added that skills development growth in this sector is important and the Academy has assisted greatly in this regard. He mentioned that the appointment of the board within the Academy was approved by the National Treasury. He informed the Committee that it will return to National Treasury to gain clarity on the decision it took to fund the Academy.

Mr Mkhize mentioned that the Department has done what it can to fill in vacant posts. Last year the Department filled in 69 posts and where it encountered difficulties, it engaged with EOH which gave the Department 70 interns that assisted the Department with its functions. He added that most of the 69 posts that were filled were within management. He mentioned that previously there was a ceiling on the compensation of employees which made the filling of vacancies difficult. He informed the Committee that the post of the DG was filled and the post of the Deputy DG was not filled as the Department was not satisfied with the candidates. He added that the Department is looking to fill this post soon.

Mr Mkhize stated that the research of the Department must be done by an already appointed service provider and that service provider is the South African Culture Observatory (SACO). The area of research that it was tasked at looking at was the White Paper, as the Department needed to submit a report on the socio-economic impact of the White Paper with its provisions.

Mr Mkhize added that the Department has a good relationship with the Rhodes Association and in fact the Department is supporting them with three programmes. He added that the issue that the Association had with the Department was taken to the Public Protector but this has been resolved. The Department has invested in the renovation of the premises of Rhodes Association. He explained that the Association has provided valuable technical skills for backstage hands and the Department has assured them that it will continue to support its initiatives. He mentioned that the Association has produced 200 technicians, most of which are African.

Mr Mkhize indicated that issues raised by management to the executive will be addressed. Especially the issue of record keeping, as well as the process of automation of the online application to the Mzansi Golden Economy (MGE) project of the Department. He stated that applicants struggle with the application process at the current moment. He stated that the Department is ensuring that the project managers understand their roles and responsibilities. The Department is also re-engineering the process so that record keeping is done. He accepted Mr Mhlongo’s criticism on record keeping.

Mr Mkhize added that if the Department received two reports with separate outcomes, the Department was justified in not paying the fee to the beneficiary. He added that the R8.8 million was the interest on the payment.

Te Chairperson mentioned that the Minister would like to be released from the meeting and she asked that he make a few remarks to the Committee. She mentioned that the information on the money unaccounted for in the Department must be explained to the Committee.

The Chairperson asked that the Minister give his remarks to the Committee.

Minister Mthethwa thanked the Committee for their valuable input. The Minister stated that he had shared the same criticism of lack of consequence management within the Department and he raised this issue with the DG and Department officials. He added that he was unsure about the issue of consequence management of senior management within the Department. He stated that there has to be consequence management within the Department.

The Minister said that he has agreed with the DG that certain things need to be clarified and there will be more meetings with the office of the AG.

He stated that Mr Mhlongo’s point on duplication of work done by SAHRA that was meant to be done by Mzansi Broadcasting Academy is correct. He added the work of the two is quite similar. He added that whilst Mr Mhlongo raised concerns on the duplications, the fact of the matter is that the service is needed but the entities do not need to duplicate the same service. He added that in the future there will be greater communication of the mandate of the Department of Sports, Arts and Culture.

The Minister mentioned that the issues within PACOFS have been well documented. He said when the Department engaged with PACOFS last year, it recognised that the rot was too deep. He added that the issues within that entity are multi-faceted. He said that there was no work being done in the entity. He further mentioned that as the Department looked into the issues plaguing the entity.

SACO was created to observe global creative industries. He stated that one of the achievements of SACO, is that it is a reference point for the United Nations. It is part of the arsenal of Arts and Culture.

He said that there are newfound difficulties with the addition of Sports to the Ministry.

The Minister stated that the Department would like the Portfolio Committee to fast-track the White Paper. He added that the Department must take the recommendations into consideration, as they are useful for the Department. He concluded by stating that it has been a useful engagement and that certain things need to be clarified in the future and the Department must take the recommendations.

The Chairperson adjourned the meeting until 2.

The Chairperson stated that the Committee appreciated he presentation from the AG. She further mentioned that several individuals have sent her written questions on the Committee’s role with the issues within the SA Broadcasting Corporation (SABC).

The Chairperson noted that both the Department and the Portfolio Committee should work closely with one another so that there can be an improvement within the Department. She suggested that the Committee should meet twice a week, as this is a large Department which deals with various matters.

The Chairperson also stated that it is great that the Committee has young and talented individuals who have contributed to the discussion and in holding the Department to account.

The Chairperson asked the Department of Sports and Recreation to present.

Briefing by Sports and Recreation SA, on the 2019/20 first quarter performance

Ms Khan stated that the purpose of the presentation is to provide a report on quarter one performance of the financial year (2019/20). She mentioned that this report reflects progress made to date against key strategic objectives and annual performance indicators as reflected in the Department’s APP. Overall achievement is 82% (18 targets out of 22 were achieved). She also added that this report is submitted to the Audit Committee; National Treasury; the Department of Performance Monitoring and Evaluation (DPME); and the Sport, Arts and Culture Portfolio Committee for performance monitoring/oversight purposes as prescribed.

Ms Khan then addressed the performance in the first quarter of the Department’s 5 programmes: administration, active recreation, scientific support, sport support and sport infrastructure support. She mentioned that overall the Department was able to meet its targets for its programmes but there were still targets that the Department had failed to meet but it has placed the mechanisms to correct this.

Ms Khan told the Committee that the Departmental financial performance as at 30 June 2019 is as follows:

• The overall spending is at R220,9 million which represents 19.2% of the total budget allocation out of a total budget of R1,2 billion. The overall spending is 12.4% higher than the 6.8% spend this time last year. The first tranche of transfer payments to entities and provinces were delayed in the previous year but made on time in the current year hence there was an increase in the spending.
• Spending on compensation of employees was at 20.2% totalling R25 million out of a budget of R123,9 million. The expenditure pattern is in line with that of the previous financial year with a decline of just over 1%. The Department is in the process of filling other vacant posts.
• Expenditure on goods and services was at 17.0% totalling R29.3 million out of a budget of R172,5 million. Expenditure is expected to increase in the third and fourth quarter when most of the Departmental projects will be rolled out.

Ms Khan then provided the Committee with the budget, expenditure, available budget and the expenditure in percentage terms within five programmes.

Questions from MPs

Mr Seabi told the Committee that he would assume the responsibility of Chairperson, as the Chairperson had excused herself. He opened the discussion for the meeting.

Mr Faber asked if the Department had reached its target of 2 400 number of individuals participating in Sports campaigns per year, which in the first quarter stood at 395. He asked if the SASCOC report mentioned whether there was a specific reason why this report was not submitted on time. He asked if the delay is it due to the investigation report that had been conducted concurrently during the process of completing the SASCOC report. He also asked if the SASCOC report has been finalised and whether or not the Department has yet to receive the report. He asked if there has been  bilateral relation strengthening with the BRICS countries in the hosting of international games.

Mr Faber added that in the Departmental agency accounts, in the first quarter, most of them are in between 49% and 50% spent in the first quarter. He asked if there is a specific reason, as the rest are between 15% and 25% if you look at the average.

Ms Van Dyk raised the concern of SASCOC’s late reporting and the fact that it was mentioned by the AG earlier that it was not audited. She mentioned that SASCOC must be audited so that the entity can be held accountable. What are the criteria for the number of athletes that are supported through scientific support programmes per year and could  the Committee get a breakdown per province in the next meeting with the Department. She also asked for the Committee to receive a breakdown of the different provinces that are provided with technical management support. She asked that if this is calculated per municipality, can the Department provide the Committee with the breakdown per municipality. She asked if the infrastructure support that has been given by the Department (referred to on programme 5) is still under the Municipal Infrastructure Grant (MIG) funds and what exactly is the process.

Mr Madlingozi stated that he does not understand why it takes the government so long to pay invoices. He asked if the Department cannot pay its clients a fee before the begin their work for the Department. He mentioned that he has heard through the grapevine that there are two or Members of the Committee that will be travelling to Japan. He asked what is the criteria for choosing members to go on overseas trips.

Ms N Nkabane (ANC) first commended the work that the Department has done in the past financial year. She stated that invoices are a concern for private and public institutions and that matter always emerges in the AG’s audit reports. She asked what measures are being taken to rectify the issue of invoices within the Department, as it is of concern for the Portfolio Committee. She added that non-compliance is an important area that the Department must address.

Ms Nkabane mentioned that it is clear that there are several recreational activity campaigns currently taking place. She asked if rural areas are targeted in these programmes, so that people within the rural communities are made aware of these recreational activities as well.

Mr Mhlongo welcomed the presentation. He asked how the Department promoted the Move for Health Day and which media houses did it use to promote this activity. He also asked how many participants the Department targeted to involve in the Health Day. He asked why the Committee was not invited to the event, as it is required to perform its oversight work over such events held by the Department. He mentioned that he has also sent the Chairperson a letter to ask that the Committee Members participate in the Department’s activities.

Mr Mhlongo agreed with Mr Madlingozi that it is strange that the Department has invited two members to travel with its officials to the Rugby World Cup in Japan. He asked if the Department was aware of this and whether it had checked if there is a conflict of interest. He also asked what criteria the Department used to select the Members of this Committee to attend the World Cup.

Mr Mhlongo asked what the reasons were for the Department to underspend 6% of its budget during this quarter.

The Acting Chairperson stated that he is not sure that if this is the prescribed format of reporting. He mentioned that his preference would have been that if the Department has set a target, it must juxtapose it with the budget for that quarter so that the Committee can see what the Department budgeted and how much it actually spent. He said it is important for the Department to be more clear on the outcomes of their initiatives. The Department must brief the Committee on when it intends to fill the vacancies, as the merging of the two Departments has had an impact on this. He did not understand why the Department needs to allocate a budget for leave gratuity as leave has a negative impact on the organisation and its employees.

Answers

Ms Khan stated that the SASCOC report has not come to the Department in time. It had been expected that week but the Department had still not received it. She added that several members of management within SASCOC have vacated their posts and as a result there was no proper handover of the report to the Department.

Ms Khan stated that the AG was clear on why SASCOC cannot be audited. She informed the Members that SASCOC is a confederation and is not a public entity like BSA. SASCOC receives funding from Sports and Recreation South Africa and funding from the International Olympic Committee. SASCOC also has sponsors. She added that the Department has to look at the audit sample by the AG on the funds that the Department provides to SASCOC. If there is an audit of the entire SASCOC organisation, then it is an issue which is outside the mandate of the Department.

Ms Khan added that the Department of Sports and Recreation has fought very hard for the MIG programme. Ideally the Department would have preferred that it held 15% of the MIG component allocated for public amenities and sports. She added that currently the Department has a compromise situation where initially SRSA was allocated R300 million. She added that this money does not come to SRSA directly, but rather to the Department of Cooperative Government and Traditional Authorities (COGTA). SRSA must identify the facilities which must be built and COGTA must then transfer the funds to the municipalities working on the facilities. She also mentioned that in every province there are facilities being built based on the MIG conditions. She informed the Committee that SRSA monitors and gives the municipalities technical support.

Ms Khan referred to the scientific support given to athletes. She mentioned that the Department works closely with the sports’ federations on scientific support given to athletes. The Department has an operations excellence programme with SASCOC where the elite athletes are housed. She added that this athletes’ support is for the athletes within each federation. She mentioned that recently the athletes who took part in the University games in Italy won 35 medals and this can also be attributed to the support given to the athletes.

Ms Khan informed the Committee that 99% of the Department’s invoices are in fact paid within the 30 day target. She added that there may have been certain delays in payment by the Department because of human error. She mentioned that 83% of the time in the previous financial year, the Department was able to pay its invoices in 30 days. She said that the Department does make arrangements with service providers if there are certain process that may delay the payment beyond 30 days.

Ms Khan made it clear that the Department is not aware of any support being provided for Committee Members to attend the Rugby World Cup.

Move for Health is an event that takes place in other parts of the world. It has been earmarked by the World Health Organisation. She added that SRSA works in partnership with the Department of Health and the provinces. She also mentioned that the SRSA does publicise the event on its platforms and does send out media releases, as well as inviting the media to cover the event. Communities are also mobilised to take part in this recreational event. She informed the Committee that the Department targets areas where there is high incidence of crime and health issues to campaign in. The Department went to Reicher Park in Gauteng with the Department of Health and with the Ekhuruleni municipality to campaign for the community to take part in the event.

Ms Khan noted that the Department must inform the Committee on the filling of vacancies in the next meeting. The Strategy Manager would answer the question on the prescribed format of reporting.

The CFO of the Department stated that the agreement that the Department has with SAIDS and BSA is that the Department will pay the entities 50% of their allocated budget in the first quarter.

She told the Committee that the Department does not budget for leave gratuity. She added that if an official has retired from their post or is deceased, the Department is obliged to pay gratuity to the official or the officials family members. She added that during the Department’s budget adjustment, the Department applies to National Treasury for a virement. This will be displayed in the 4th quarter of the Department’s financial statements.

She mentioned that at the end of the 1st quarter, the Department received over 2 000 invoices that it has processed and only 0.1% of the payment of the invoices were late. She added that during the process for evaluating invoices, the Department sometimes finds that there mistakes on the invoice and has to send it back to the service provider to correct the issue. She also mentioned that there is a dedicated central section within the Department that deals with the processing and stamping of the invoices, which helps with the tracking of invoices to ensure that the Department can pay the invoice as soon as possible.

She said that the Department would prefer to be at 25% for compensation of employees but the actual operations of the Department do not allow for this. She added that the Department’s programmes take place in the 3rd quarter and in the 1st quarter the Department will not be able to make pre-payments. She added that the spending pattern runs with the Department’s ability to spend at that moment. She mentioned that in the 1st quarter, the Department agreed that it would dispense with 20% of the provinces that comply and in the 2nd quarter, this will increase to 30%. Different operations occur at different times.

She addressed the question on the MIG budget in programme 5. She said that the earmarked funds for the Department to support the MIG functions is only R10.5 million. She added that if the Members look at the total budget of that programme, it is currently sitting at R15.2 million. This additional amount is from the Department’s voted funds.

Questions from the MPs

Mr Faber asked if there was any rollover from the previous financial year to this year’s financial budget.

Mr Mhlongo asked the Department to respond to his question on why it has not invited the Members of the Committee to the Move for Health Day. He stated that it is important that the Members are present at the event to see if the 1 300 people that the Department is estimating to take part will be present. He suggested that councillors within the rural areas must announce such events in their public meetings because many of the rural people do not have access to internet to find out about the events. He asked if the media covers the events that the Department organises.

Mr Seabi asked that the Committee discuss the issue of leave gratuity further because according to the law, the Department is not obliged to pay a gratuity to employees on leave. He added that he raised this question of leave because of the financial constraints that the Department is currently under and if these finances could be redirected to programmes that could benefit the community.

Answers

Ms Khan apologised to the Committee that the Department has not invited Members to the Department’s organised events. She added that there is usually standard guest list for the Departments events which includes Members of the Committee but she will follow up on why the Members have not received invitations to the events.

Ms Khan said that there is a rural development programme and one of the conditions for support of rural support programmes in provinces is that their club activities must benefit communities within rural areas. She added that the Department conducts oversight on this. She added that the rural development programme has been functioning for four years now and during this period the Department has worked with traditional councils. More traditional councils have been added to the rural development programme.

The Programme Manager of Sports and Recreation said that the Department did reach the target of R2.4 million. He added that this relates to an outreach programme funded by the Department. There is still other activities that the Department is yet to report within the rural areas, as they have not yet taken place.

He said that the Department will report on the BRICS games. He added that the BRICS countries are included in the planning of sports and recreational events.

He said that the Department has a specific template that it uses to communicate with the DPME and it is the template used to correspond with the Portfolio Committee as well. In engaging the audit and risk committee, the issue of performance and expenditure within the Department has been raised and will be included in the 2nd quarter report.

He said that the Department does have a record of the outcome of its policies but the indicators it uses provide different evaluations on the outcomes. He added that the Department will provide this in the next meeting.

The Chairperson mentioned that the Committee has exhausted its time. She added that she has received Mr Mhlongo’s letter and he is correct that it is disappointing that the Department has not invited Members to the Department’s organised events. She said that the Department must in future invite the Members of this Committee to its organised events.

The Chairperson asked for the officials of the Department of Arts and Culture to present their presentation.

Briefing by the Department of Arts and Culture on the Department’s audited first quarter performance report

Mr V Mkhize, Director-General of the Department of Arts and Culture, presented the audited first quarter performance report.

Mr Mkhize first outlined to the Committee that as per the DPME reporting guidelines, preliminary quarterly reports are generated 30 days after the end of the quarter. The preliminary first quarter reports are then submitted to internal audit for validation before being presented to the Audit Committee for final assurance. He added that the final validated quarterly performance reports are submitted to DPME and National Treasury 120 days after the end of each quarter. He then requested that the Portfolio Committee note that the presentation is based on results provided by Internal Audit.

The Department had planned to implement and achieve 21 performance targets during the first quarter reporting period. However, 71% (15/21) of the aforesaid targets were achieved and 29% (6/21) were not achieved. He listed the non achieved targets as:

• Implementation of two governance tools for DAC public entities;
• Conducting of social advocacy platforms;
• Provision of support to Arts and Youth Development Programmes;
• Provision of support to multi–year Human Language Technology (HLT) projects;
• Digitisation of archival collections;
• Finalization of provincial consultations relating to the development of the heritage policy on repatriation and restitution of human remains and heritage objects.

He then provided the detailed reasons for deviation as well as the proposed correction actions for targets that were not achieved.

This first quarter audited report showed that the first quarter performance of 2019/20 financial year had decreased by 14% compared to 2018/19 first quarter performance.

The highlights of the first quarter included:

• The Annual Celebration of Africa Indigenous Cuisine, Craft, Music and Dance that took place on 31 May 2019 at the Letlhakeng Stadium, North West.
• The 15th Gcwala Ngamasiko Cultural Festival that took place on Sunday 02 June 2019 at the Walter Sisulu Freedom Square in Kliptown, Soweto, under the theme “Celebrating 25 Years of Democracy- Building a better Africa and a Better World”.
• The Golden Rhino Cultural Festival that took place on Saturday, 08 June 2019 at the Musina Showgrounds in Limpopo Province.
• The Social Cohesion Youth Dialogue that took place at the University of Limpopo on 13 June 2019.
• On June 16 2019, President Ramaphosa delivered a keynote address during the Youth Day Commemoration at the Polokwane Cricket Club in Limpopo Province. This year’s event took place under the theme, “25 Years of democracy: A celebration of youth activism”.

Mr Mkhize told the Committee that the Department had overachieved in two targets this year. The first was the number of Imbizo’s that were held in the first quarter, which were 6% more than planned. The second was 70.47% of total value of procurement was awarded to BBBEE compliant service providers, which the Department overachieved by 0.47%. He added that the Department reached its target of implementing three communication and marketing campaigns that were intended to profile the Department. These were: Freedom month, Youth month and Africa month.

The Department had reached its targets of institutional governance. Three examples were: the five Cultural Diplomacy engagements that were coordinated by the Department; consultations with CEOs of the entities as well as other relevant stakeholders; and the approval of three Departmental and one entity performance information reports/ documents.

Several other examples of targets that the Department had either achieved or overachieved were given in the presentation.

Mr Mkhize said that whilst the Department has been successful in reaching some of its targets, there are targets that the Department did not achieve. These were mostly in the areas of Institutional governance, Arts and Culture Promotion and Development, as well as Heritage Preservation and Promotion. He added that in each case, the Department has identified a reason for deviation as well as the corrective action that it plans to implement.

Mr Mkhize provided the Committee with a Summary of Annual Appropriation and Quarterly Projected Budget versus Expenditure in each programme of the Department.

Mr Mkhize told the Committee that the Department incurred actual expenditure of R943.5 million (85%) versus a quarterly projected budget of R1.1 billion in the 1st quarter. 20% of the annual budget of R4.6 billion was spent in the 1st quarter.

The Chairperson thanked the DG for the presentation and opened the meeting for discussion.

Questions from MPs

Mr Madlingozi first asked what the returns were for the Department from performances staged by international acts. He asked if the Committee could get information prior to the presentation on what the condition is within the music industry. He also asked if the Department could explain the jargon that it has used in the presentation.

Mr Mhlongo asked when the Winnie Madikizela Museum would be completed and how much was used for the cradle Motho museum.

Ms Van Dyk asked that officials to respond to the questions that the Members pose to them. She said that the amount spent to erect the building in Freedom Park amounted to R1 billion and the project has fallen apart. She called the status of the project “disgusting”. She asked if the Department could provide greater maintenance for its museums.

Ms Van Dyk asked for the figures on the amount spent for renovations and building of structures such as Freedom Park. She also asked the officials of the Department to provide the statistics on the number of foreign and local visitors to the museums. These statistics are important to note when the Department decides to build another museum. She asked if it was necessary to keep building new museums, when it is a great cost to the Department.

Ms Van Dyk asked why the amount illustrated in slide 39 next to Western Cape is so little in comparison to other amounts. Slide 46 showed that R470 000 was spent on laptops and bags, she mentioned that this a significant amount of money and asked who in the Department was it spent on.

The Chairperson agreed with Mr Mhlongo and Ms Van Dyk that the nature of responses has been poor. She added that the Department staff must acknowledge the letters that the Committee has sent to the Department. She asked that the Department improve in its communication with the Committee.

Answers

Mr Mkhize answered Mr Madlingozi’s question. He said that Members must be aware that South African citizens have different tastes in music. And when these festivals are staged, the Department looks at who has the potential to attract the audiences that it has targeted and if there will be a return on the investment to the Department. He stated that festivals, such as the Arts festival, are full.

Mr Mkhize stated that the SACO assessment of the National Arts Festival shows that there is both socio-economic impact and job opportunities created through the National Festival. There is no policy which restricts the type of music which is played.

In future, the Department will add a list of acronyms in their documents, so that there is a glossary for members to understand the Department’s jargon

Mr Mkhize mentioned that Mr Ndima will be able to answer the question on the Winnie Madikizela-Mandela museum as he is involved in the project as well as the feasibility studies on new projects.

Mr Mkhize said that the Department will look to improve communication with the Committee.

Mr V Ndima Deputy Director General DAC clarified that the cradle Motho museum was done by the province, with the support of the national Department. He added that the Department will provide the Committee with the details on that museum. The Winnie Madikizela-Mandela museum is at 95% completion and might be finished earlier than planned.

Mr Ndima said that when the feasibility study was introduced, it was part of the Resistance Liberation Heritage. The Inter-Ministerial Committee (IMC) asked an important question which was if there could be a museum that would expose the history of the horrors of colonialism and apartheid. He added that the current museums do not show this. He stated that feasibility study asked if it is possible to create such a museum, in the point of view of money and location as well as the content of that museum. He added that it is important that it reaches international benchmarks, and once the report is complete it will share it with the Committee.The report showed that there was contestation between the provinces on the location of such a museum. He added that the feasibility study was important to establish an objective study for where this museum should be located. South Africans have a low level of interest in culture events and museums in comparison to other parts of the world.

Mr Matala mentioned that in terms of their business plan the Western Cape chose to receive R4 million for its first quarter and total budget allocation of R147 million will be transferred to the Western Cape Department in due course.

In terms of the Departmental fixed asset policy, there is a period when laptops must be replaced as some are either damaged or others have reached the end of their utility. The Department then buys new laptops and bags in bulk for their officials. He added that the Department purchases the laptop bags because the officials often have to be mobile, so it provides greater security for the laptops.

The Chairperson mentioned that she wished that she could allocate only 3 minutes to each speaker, as the questions are quite long.

Questions from MPs

Mr Seabi suggested that the departments should start working together in the future. He used the example of the two departments presenting one briefing in the next meeting.

Mr Madlingozi stated that the people do not need to be fed music chosen by the organisers of the festivals. He added that the content is mostly catered towards the elite and middle class. He also mentioned that there needs to be investment in black musicians.

Mr Mhlongo mentioned that the Department assured the Committee that the Winnie Madikizela-Mandela museum would be completed in August. He asked why the Department did not meet it its own deadline. The inter-governmental relationships between the provinces and the national Department are poor.

Mr Mhlongo asked if the Department could share its policy on assets, especially the policy with laptops with the Committee.

The Chairperson agreed with Mr Mhlongo’s question and recommended that the Department look to providing the rural communities with the old laptops. She added that Parliament has a policy that the old equipment given by Parliament to Members should be taken home for Members own use and the Members will then be supplied with new equipment.

Ms Van Dyk asked if the Committee could make this type of proposal for the Department.

The Chairperson answered said it is not possible.

Answers

Mr Ndima stated that he does not recall the Department setting a target of August and that it has always stated that it will be complete in November.

Mr Ndima agreed with Mr Mhlongo that the National Department must have greater oversight on the functions of the provinces.

Mr Mkhize added that the Department did respond on the 4th of October on the status of the different projects of the Museum.

Mr Mhlongo asked him for a clear answer.

The Chairperson stated that the DG has responded and Mr Mhlongo should follow up with the Department on this issue.

The Chairperson added that this Committee has proved to be lively.

The Chairperson agreed with Mr Seabi that the amalgamation of the two department’s must be finalised by next year. She asked that SRSA and DAC sit down and assist one another to ensure that the presentations are not separate. The separate presentations had confused the Members of the Committee.

The meeting was adjourned.