Audit Outcomes: AGSA briefing; DHET 2018/19 Annual Report 2018/19 & Quarter 1 performance

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Meeting Summary

Annual Reports 2018/2019

AGSA reported that 74 auditees out of a total of 78 (95%) were within the Department of Higher Education and Training (DHET) portfolio. Financial statement preparation remained a concern as material adjustments were effected to the annual financial statement (AFS) submitted for audit by 15 auditees.  A total of 52 auditees achieved unqualified opinions only because they corrected all AFS misstatements which were identified during the audits; 29% had no material findings only because they corrected all misstatements identified during audit on the performance reports.

For DHET and its entities, fruitless and wasteful expenditure has decreased over a two-year period – from R45 million down to R25.4 million in 2017/18 and 2018/19, respectively. Much of the disclosed fruitless and wasteful expenditure for the current year was caused by fraudulent payments at the DHET, resulting in fruitless and wasteful expenditure of R24 million. This matter was identified by the Department. Irregular expenditure increased over the same two-year period, from R353 million to R1.2 billion. The nature of the irregular expenditure was due to overspending of the budget without approval from the executive authority, specifically regarding expenditure on discretionary grants. About R1.1 billion of the R1.2 billion irregular expenditure was incurred by four of DHET’s entities due to the overspending of the budget. Deviations were approved without justifiable reasons and the awarding of bids was not in line with approved specification.

For Technical and Vocational Education and Training (TVET) colleges, fruitless and wasteful expenditure increased from R298 743 to about R1 million in 2017/18 and 2018/19, respectively. The fruitless and wasteful expenditure incurred in the current year was incurred by Coastal TVET College, Nkangala TVET College and South Cape TVET College as a result of interest on overdue accounts and other expenses that could have been avoided. The irregular expenditure sat at R3 million for FY2018/19 because Coastal TVET did not adhere to the supply chain management policy. Both prior years’ irregular, fruitless and wasteful expenditure were reported for investigation and was investigated. Financial statement preparation remained a concern as material adjustments were effected to the AFS submitted for audit by 41 TVETs; 22 TVETs received qualified opinions on repeat areas from the previous year’s findings which were not addressed. The number of outstanding audits also remained a concern.

The Auditor-General (AG) made the following recommendations:

• There was a need for a concentrated effort in the management of projects in the SETA environment because it was the root cause for the regression in that space.

• The TVETs would benefit greatly if there was an invested effort in developing responsive action plans that would address the root causes of the deficiencies identified, capacitating their finance departments and improved oversight processes.

• Action plans to improve the internal control environment should be implemented. Monitoring of progress against action plans should be enhanced to determine the effectiveness of the implemented actions in addressing reported internal control deficiencies.

The Members asked if the AG ran any capacity building programmes for the Department and its entities’ audit functions. What steps were taken by the AG where there was no response to its recommendations? For the investigations conducted for repeat offenders, was there consequence management implemented in those institutions?

The Members also asked if the AG would be able to audit NSFAS, considering that its audit was still pending and whether the AG was able to obtain reasons for the lack of investigations in the 3 SETAs that were not investigated.

On its 2018/19 annual and FY2019/20 quarter one performance report, the Department reported that there were 110 targets in the 2018/19 financial year:

- 75 were the direct outputs of the Department, of which 95% (71) were achieved.

- Three of the four targets that were not achieved were in programme one and three.

- 35 were system outputs relating to access, success, transformation and other systemic areas of strategic interest to the Department. Only 46% (16) of the system targets were achieved.

- Overall, 79% (87) of the 110 targets were achieved.

The Department had total drawings amounting to R46.237bn; of this available amount, about R45.4bn was spent, resulting in an underspending of R793 million during the first quarter. The underspending was well within the allowable National Treasury limit of 8% and it was mainly due to:

- Delayed earmarked grant transfers to universities due to delayed cash flow projections as well as new reporting requirements introduced for the first time this financial year (R475 million)

- Projections of skills levies exceeded the actual payments (R230 million)

- Compensation of employees due to unfilled vacancies (R30 million)

- Goods and services as well as equipment due to outstanding invoices (R58 million)

University education remained the biggest spending programme, costing R37.385bn, followed by TVETs at R2.829bn and CETs at R600 million. Transfer payments of R43.189bn and compensation of employees (R2.153bn) were the biggest spending items on the budget.

The Members welcomed the report and appreciated its full account on the important detail. On the strategic overview, the Department indicated that it did not achieve some of its targets; what plans are in place to ensure that those targets will be achieved? They asked about the lack of good governance and whether any plans have been put in place to strengthen at universities level as well.

The Members asked who was responsible for students not receiving NSFAS funding. What are the causes of the backlog and how is the Department’s planning to address it? What are the challenges regarding the submission of the report to the AG? What are the Department’s specific plans to ensure that CETs received adequate attention like TVETs?

The Members noted that there was an issue of R138 million incurred on irregular expenditure but it was not included in the AG’s report. When will this issue would be resolved? The DHET received an unqualified opinion with findings; are the findings related to the CETs’ R24 million that was defrauded and the issue of record keeping raised by the AG?

After reading the DHET’s report, the Members felt that the state of the Department was concerning. Funds were not being used effectively and adequately and this was evident through the high output of graduate that leave university and stay unemployed. There was no doubt that the Department received quite a hefty allocation, although it may not be enough; having repeat offenders on irregular expenditure, all year round, was regression. Targets were not being met due to the lack of consequence management.

Not happy with student accommodation and infrastructure development in TVETs and universities, one of the Members lamented and said:

“The current status quo sustains a societal anomaly which impacts mainly the female gender. There are universities which do not have adequate beds for students which, in turn, causes a situation where students are forced to look for alternative accommodation in the neighbouring, historically disadvantaged communities. The female students then become exposed to social dangers because of lack of adequate infrastructure to accommodate them and be in a space to sustain a life with minimal needs, such as requiring money for transport to attend classes. This creates a need which a student is unable to fund herself and the money given by NSFAS is not adequate for those needs. It ultimately creates the “blesser/blessee” situation where young women are forced expose themselves to older men for subsistence and support because they come from poor backgrounds. It is a sad situation of what it breeds to society. Responses that create a society that we must all be proud off to live in are long overdue.”

Meeting report

Committee Programme/Announcements and Other Business
The colloquium that was planned for Thursday was postponed to the 6th of November. The colloquium would focus on student funding in Technical and Vocational Education and Training (TVET) colleges, universities and Community Education and Training (CET) colleges. It was postponed because the programme of Parliament had changed accommodate the session for questions to the Deputy President.

The Committee wrote to National Treasury asking it to come and brief the committee on the fiscus available to fund post-school university as well as the projections over the Medium-Term Expenditure Framework (MTEF) period. Treasury said that it was not able to do so and it should be done by the Department.

Briefing by the Auditor-General of South Africa on the 2018/19 audit outcomes
Ms Zamahlangu Mditshwa, Senior Manager at AGSA, reported that 74 auditees out of a total of 78 (95%) were within the DHET portfolio. The audit outcomes outlined that the AG commended the FOODBEV SETA, INSETA, QCTO, CETA, NIHSS and CHE for retaining the clean audit status. The National Skills Fund (NSF) received a qualified audit opinion on accruals and receivables as the AG was unable to obtain sufficient audit evidence that the transactions were appropriately accounted for. Services SETA and W&R SETA were qualified on commitments due to not having adequate systems in place to process records related to projects. Financial statement preparation remained a concern as material adjustments were effected to the annual financial statement (AFS) submitted for audit by 15 auditees.  A total of 52 auditees achieved unqualified opinions only because they corrected all AFS misstatements which were identified during the audits; 29% had no material findings only because they corrected all misstatements identified during audit on the performance reports.

Audit outcomes for DHET and its entities
There was improvement in the supply chain management (SCM) function, 59% with no findings. However, all SCM findings should be investigated. Nine of the auditees were found to have uncompetitive and unfair procurement processes while four had inadequate contract management, along with R11 million that was not audited due to incomplete procurement information.

Fruitless and wasteful expenditure has decreased over a two-year period – from R45 million down to R25.4 million in 2017/18 and 2018/19, respectively. Much of the disclosed fruitless and wasteful expenditure for the current year was caused by fraudulent payments at the DHET, resulting in fruitless and wasteful expenditure of R24 million. This matter was identified by the Department.

Irregular expenditure increased over the two-year period from R353 million to R1.2 billion in 2017/18 and 2018/19, respectively. The nature of the irregular expenditure was due to overspending of the budget without approval from the executive authority, specifically regarding expenditure on discretionary grants. About R1.1 billion of the R1.2 billion irregular expenditure was incurred by four entities (CETA, EWSETA, MICT and Services SETA) due to the overspending of the budget. Deviations were approved without justifiable reasons and the awarding of bids was not in line with approved specification.

Audit outcomes for TVET colleges
The AG commended False Bay and South Cape for retaining their clean audit status. Financial statement preparation remained a concern as material adjustments were effected to the AFS submitted for audit by 41 TVETs; 22 TVETs received qualified opinions on repeat areas from the previous year’s findings which were not addressed. The number of outstanding audits also remained a concern.

Fruitless and wasteful expenditure increased from R298 743 to about R1 million in 2017/18 and 2018/19, respectively. The fruitless and wasteful expenditure incurred in the current year was incurred by Coastal TVET College, Nkangala TVET College and South Cape TVET College as a result of interest on overdue accounts and other expenses that could have been avoided. Irregular expenditure sat at R3 million for FY2018/19 because Coastal TVET did not adhere to the SCM policy. Both prior years’ irregular, fruitless and wasteful expenditure were reported for investigation and was investigated.

On the portfolio snapshot for 2018/19, clean audits declined from 33% to 21% and financially unqualified statements declined from 42% to 40%, while no findings on performance reports remained the same.

The AG made the following recommendations:
• There was a need for a concentrated effort in the management of projects in the SETA environment because it was the root cause for the regression in that space.
• The TVETs would benefit greatly if there was an invested effort in developing responsive action plans that would address the root causes of the deficiencies identified, capacitating their finance departments and improved oversight processes.
• Action plans to improve the internal control environment should be implemented. Monitoring of progress against action plans should be enhanced to determine the effectiveness of the implemented actions in addressing reported internal control deficiencies.

It was worrisome that there was an expectation that auditors were meant to come and point out errors in financial statements and only then would the corrective measures be put in place. Auditors are meant to come at the end of the process. The AFS needs to be consistently reliable and that is a deliverable of internal audit.

Discussion
Ms J Mananiso (ANC) indicated that Members were equipped to engage the Department’s Annual Report. It appeared that the leadership was performing well as per the presentation but when it came to executing the tasks, the performance was poor. She asked whether the AG capacitated the internal audit function of the entities and the Department.

Ms D Sibiya (ANC) wanted to know steps taken by the AG if there was no response to the recommendations made by the auditors.

Mr B Nodada (DA) noted that the AG mentioned that it monitored the investigations done on the wrongdoing of the entities. It was also mentioned that 22 of the TVETs were repeat offenders and the AG was able to ascertain whether any investigations were done in the repeat offenders and whether any consequence management would be measured.

The briefing document outlined that there was a challenge in describing the indicators which NSFAS was supposed to produce; is there a process where the AG would be able to audit NSFAS? It remains an elephant in the room, particularly the lack of the timeframes in concluding that audit.

There were three SETAs which were not investigated; was the AG able to ascertain the reasons why those SETAs were not investigated?

The office of the AGSA responded on the mismatch of leadership and said that the AG broke down the control environment into three aspects so that when there was an element that was not working, it would be picked up. The assessment of effective leadership involved the ability to allow controls to run; these included filling vacancies in key positions, development of policies and procedures to drive critical elements of the environment (if these were developed, the AG would give a green light) and financial management where implementation ought to take place. Many of the entities under the DHET could not say that there was no policy but the issue was the implementation of those policies to enable reliable reporting. The second part was that the AG availed itself for all the critical elements of the entity but it did not roll out a programme for capacitating the internal audit. However, there was constant engagement and communication with that function. In addition, the AG would run a programme when an entity required a capacity building programme.

When there was no movement, AG would come to Parliament and ask for intervention. The amended mandate will now give the AG teeth to take more action on issues regarding material irregular and issue remedial actions to auditees.

The NSFAS was a critical entity; the AG was hoping to conclude the audit by 31 October 2019. The AG would come back to the Committee to report on the outcome of that audit process.

The Chairperson indicated that there was a letter issued by the Minister explaining the reasons for the late submission of the financial statements. He asked for the reasons. The DHET could provide these details.

The critical issue with NSFAS was the lack of providing information to the AG when required. There were many other developments between the two parties and the AG provided a draft audit and management report; there were, however, portions of those reports that the NSFAS needed to provide to the AG and it struggled to do so.

Ms Mditshwa said that the investigations on the TVETs, which were outlined in the presentation, spoke to AG’s investigation and they were 100% investigated. Those investigations related to fruitless and wasteful expenditure. At this point, the AG could not detect repeat offenders and whether consequence management was implemented on them. The AG also could comment on whether investigations were done by the TVETs themselves or whether consequence management was implemented where wrongdoing was identified.

It was emphasised that there was a serious lack of consequence management in TVETs. The quality of the financial statements provided by the TVETs was very poor.

The Chairperson said that the Committee would engage with the NSFAS audit report which would have been after the Budget Review and Recommendations Reports (BRRRs) as well as the Finance Minister’s Medium-Term Budget Policy Statement (MTBPS). The Committee could still interrogate that report but would not submit its recommendations as part of the review process. This would be disadvantageous and worrisome because NSFAS received about R30bn budget allocation from the Department.

The Deputy Minister, Mr Buti Manamela, concurred with the Chairperson. However, there was a material issue that had to do with the evaluation of the student loan book. The AG informed NSFAS that it would investigate this back in 2014. The delay largely stemmed from this but the Department was now preparing to get the audit report and the process was being finalised.

The Chairperson said that the Committee would not comment on the reasons for the delay but would certainly interrogate the report as soon as it was available. In the previous week, the Committee issued a statement in response to employees that were arrested relating to charges on the monies that were sent to their personal bank accounts. It seemed like there was a sting operation, even though it was under new administration and administrator.

Mr B Nodada (DA) heard the sentiments on allowing the process to unfold. He noted that the Members were not comfortable with the fact that they would not be able to make recommendations based on the report that they were supposed to comment on. Parliament was solely tasked with exercising effective oversight over the entities and it would be failing in executing that if Members could not make those recommendations. It was a serious concern that the Committee could not make recommendations. He agreed to allow the process to unfold but he remained stern on his disappointment of the entity.

Deputy Minister Remarks
The Deputy Minister reported that the Department received an unqualified audit opinion since the establishment of the DHET. The team also saw improvement in the higher education system and the fee-free higher education. The start of 2018 came with challenges but those challenges would be fixed to realise the vision.

Deputy Minister Manamela indicated that more funding was made available for TVETs for infrastructure. One of the major highlights was the establishment of the centres of specialisation as well as 5% increase in the number of graduates as well as the research output. There were still challenges in the CET Colleges but they were being addressed accordingly.

Briefing by the DHET: 2018/19 Annual Report and 2019/20 Quarter One Performance and Expenditure
Mr Gwebinkundla Qonde, Director-General of DHET, indicated that there were 110 targets in the 2018/19 financial year:
- 75 were the direct outputs of the Department, of which 95% (71) were achieved.
- Three of the four targets that were not achieved were in programme one and three.
- 35 were system outputs relating to access, success, transformation and other systemic areas of strategic interest to the Department. Only 46% (16) of the system targets were achieved.
- Overall, 79% (87) of the 110 targets were achieved.

Under programme three (University Education), there were 15 planned outputs for the financial year ending on 31 March 2019, of which 14 (93%) were achieved; these were mainly oversight reports on various programmes. The Branch did not have specific APP targets to achieve for the quarter of FY2019/20, ending on June 2019.

For programme four (on TVETs), the branch achieved all of its 25 planned outputs. As for performance on infrastructure development, the challenges included poor condition of TVET facilities related to repair and maintenance as well as increased access required for students. R1.3 billion was allocated during the year under review; the first tranche (April 2018) to colleges consisted of a conditional allocation of a 35% advance (dedicated bank accounts) amounting to R9.1 million per TVET college. The allocation of the balance of the 2018 tranches was made based on condition assessments to priority areas: bulk services; statutory compliance; sanitation; building repairs; and student accommodation repairs. The allocation for the next two years of the MTEF was to be based on the condition assessment which was about to commence at TVETs.
The Department had total drawings amounting to R46.237bn; of this available amount, about R45.4bn was spent, resulting in an underspending of R793 million during the first quarter. The underspending was well within the allowable National Treasury limit of 8% and it was mainly due to:
- Delayed earmarked grant transfers to universities due to delayed cash flow projections as well as new reporting requirements introduced for the first time this financial year (R475 million)
- Projections of skills levies exceeded the actual payments (R230 million)
- Compensation of employees due to unfilled vacancies (R30 million)
- Goods and services as well as equipment due to outstanding invoices (R58 million)

University education remained the biggest spending programme, costing R37.385bn, followed by TVETs at R2.829bn and CETs at R600 million. Transfer payments of R43.189bn and compensation of employees (R2.153bn) were the biggest spending items on the budget.

Discussion
Ms Mananiso welcomed the report and appreciated its full account on the important detail. On the strategic overview, the Department indicated that it did not achieve some of its targets; what plans are in place to ensure that those targets will be achieved? She asked about the lack of good governance and whether any plans have been put in place to strengthen at universities level as well.

On slide 19, the DHET indicated its beneficiaries for local labour according to gender but the Committee made it clear that it would appreciate a full account of the demographics of the beneficiaries and whether young people were included.

Ms Mananiso asked who was responsible for students not receiving NSFAS funding. What are the causes of the backlog and how is the Department’s planning to address it? What are the challenges regarding the submission of the report to the AG? What are the Department’s specific plans to ensure that CETs received adequate attention like TVETs?

Are there any matters that were picked up by the Standing Committee on Public Accounts (SCOPA) in getting sense of what is happening in the Department?

On SCM, Members were often told about irregularities on the annual reports and she believed that this was attributed to the lack of competent personnel to execute their duties effectively in SCM. The DHET must ensure that where there is a lack of competent people to execute their duties, those individuals ought to be dealt with.  

The Chairperson announced that the Committee was expecting a detailed and specific briefing on the certification backlog of TVETs from the Department, UMalusi and SITA.  

Dr W Boshoff (FF+) referred to programme four, slide 38, he sought more details on the percentage approved for infrastructure and maintenance plans in TVETs. He was not convinced that the percentage outlined in the presentation was accurate and wondered what the target was based on.

On slide 23, there were reasons given for lower enrolments for CET colleges; he asked what the targets were based on. Perhaps, the Department could elaborate on this.

He wondered whether that skills and artisanal training was sitting comfortably within the Department at the CET level.

Mr Nodada said that after reading the DHET’s report he felt that the state of the Department was concerning. Funds were not being used effectively and adequately and this was evident through the high output of graduate that leave university and stay unemployed. There was no doubt that the Department received quite a hefty allocation, although it may not be enough; having repeat offenders on irregular expenditure, all year round, was regression. Targets were not being met due to the lack of consequence management.

The R78 billion was mostly transfers from the DHET to universities and the different entities; does the Department receive any report from universities based on the audits done internally, since they are autonomous to see where that money was used for and whether it was properly accounted for? Are there any accountability measures for institutions the DHET transfers money to?

There was a comment that indicated that when the targets for good governance were being set, there was no baseline to inform the target-setting. What informed the target-setting? Which institutions failed to meet the good governance targets? 

There were a few students that were funded through NSFAS based on the projections but at the same time the data received from scheme was not accurate. He asked how the Department ascertained the number of the students that were funded and whether an audited report was received to ensure that the numbers were correct, for both the universities and the TVETs.

In terms of the NSFAS funding that is transferred versus the targets set; were the targets set based on the money transferred to NSFAS or in terms of the students that the Department planned to fund? He felt that there was no justice in the students not receiving the funding from NSFAS.  

There were 22 TVETs that were repeat offenders on irregular expenditure and financial mismanagement. He asked the DHET to detail its plans on consequence management relating to those colleges. Out of the 50 TVETs, how many of those colleges or campuses are owned by the State or the municipality? The Members wanted to ascertain whether the maintenance of those campuses lied with the State or the municipality or whoever owned them. This would ensure that whoever needed to maintain the buildings and infrastructure is called to account.

The skills development department on SETAs was appalling. The Deputy Minister spoke about a lot of throughput – people that were graduating. However, there was a structural problem in South Africa of 10 million people that were unemployed. Those graduates were also not skilled for the market.

There was a skills department that dealt with the National Skills Fund and the SETAs but there was a lot of unaccountability on where and how the money was used to develop skills. Given the way the SETAs were being operated, is it beneficial to the skills output that the country requires or are we just pumping money to people that do not use it for what it is intended for?  What consequences are there for people that do not use the money rightfully?

He wanted to know where the CETs were based and about the plans to bridge the shortfall on the outreach programmes for CETs. Was the Department was satisfied with curriculum taught at CETs?

The Department of Science and Innovation (DSI) did a presentation and informed Members it was able to track students that it had funded. Can the Department track students that graduated from CETs and ascertain whether they were employed or not?

The Chairperson said the AG raised an issue on record management in the DHET and how it must improve its recordkeeping, ensuring that its performance management was tracked and monitored. The portfolio of evidence kept was not adequate. He appealed to the DHET to improve on that.

He sought clarity on the fruitless and wasteful expenditure of R24 million incurred in CETs. The payment was referred to as an erroneous payment. He reckoned that this was a fraudulent payment and it ought to be described as such. It was a deliberate action to defraud the State. It was reported that it was reported to the Police and the matter was being investigated. Surely there must be proof obtained about the people responsible for this. He wanted to know whether any arrests had been made. Part of the reason why people continue defrauding the State was due to the lack of immediate action or consequence. This transaction should have been detected early. Even though R12 million has been recovered the perpetrators must be arrested and the full amount be repatriated to the State.

There was an issue of R138 million incurred on irregular expenditure but it was not included in the AG’s report. When will this issue would be resolved? The DHET received an unqualified opinion with findings; are the findings related to the CETs’ R24 million that was defrauded and the issue of record keeping raised by the AG?

Mr T Letsie (ANC) said the AG’s report seemed to suggest that the DHET had a good audit in overall. This was encouraging; hopefully, the next one would be unqualified with no findings. Entities under the DHET pointed to serious issues of capacity and so he wanted to know about measures that were put in place to ensure that the entities improved on the internal controls. Surely the Department could have a serious discussion with the internal audit function on its expectations.

The DHET has divided itself into branches and the audit report indicated that there was a serious problem in the skills branch, particularly with SETAs. However, it did seem like there were challenges in all these branches. Is there anything that the DHET could have done to turn things around? Some of these entities and TVETs were repeat offenders on the same issues.

Ms Sibiya said that it was mentioned that the Chairperson chairing the disciplinary committee in the Department was not capacitated. Could the department please explain on this?

Mr B Yabo (ANC) noted that on slide 19 and 20 on the construction of new TVETs, specifically the one in Ngqungqushe, the DG mentioned that it was meant to be completed by the 3rd of October but it was still at 36% completion as at 15 October 2019. The picture on the presentation showed that it was still a structure but what was worrisome was that the Department said that there were no challenges. He was failing to understand the 36% progress, that after two weeks it was still a structure but there were no challenges. The DG also mentioned that these campuses were funded from the National Skills Fund. Is that not public funding?

On the oversight of the construction of campuses, is there a framework on how it performs as the Department and how are the tender infrastructural projects issued? Who manages that process? Because today it might be Ngqungqushe and tomorrow it may be two or three other campuses. There must be a method of managing the challenges. The progress of the Ngqungqushe Campus showed that the contractors were not being penalised for running over the period of scheduled completion. He sought details on this delay, particularly on the part of the contractor.

He did not believe that it was proper for TVETs to be allowed to submit statements that were not compliant. Even though the AG said that there was improvement, the people that use public funds need to start understanding that taxpayers’ money was being used and proper accounting needed to be applied. Thus, it brought to question whether people in these institutions possess the necessary capacity to manage public institutions.  If this was a matter of incapacity, Members need to be brought into confidence about what the Department was doing about it. There was irregular expenditure sitting at R1.2bn which could have been prevented had the right people been employed. If this is a question of delinquency, what is it being done about it? Is there a process instituted to determine whether personnel were delinquent or incapacitated? Where there is an issue of capacity, what policy measures were used to hire these people because after a period of time these people could have received the necessary training to be able to execute their duties?

Accountability had to be enforced. Consequence management was raised quite often but the problem was that the people put in place did not understand that this was a developmental project and that they needed to do the right thing simply because it was the right thing to do. How many people must be fired for changes to happen? There cannot be professionals that are qualified but come to public institutions to destroy them. The trajectory of complaining needed to be changed and wrongdoing needed to be addressed.

Acting Chairperson, Ms Mkhatshwa, asked about the commitments to address the challenges outlined on slide 35. She also sought clarity on the disciplinary actions on the people who defrauded the CETs. From slide 63 to 65, there was no clarification on the matters under investigation and their timeframes.

Responses
Mr Qonde spoke on performance and said that the DHET was tasked with supporting the institutions, primarily on prudent financial management. Hence, in the presentation it was made clear that one of the things monitored was the financial health of the institutions in respect of the funds transferred by the Department, for teaching, training, learning, etc. It was not accurate to say that the efficiency and the effectiveness of the system were questionable and the outcome thereof. Stats SA said that 92% of the university graduates were employed. This was not a fluke in terms of the quality of learning and teaching taking place in that space.

On slide 13 the Department provided a detailed account on the statistics on specific areas. If there was a questionable area, it would help the delegation to understand that so that more details could be provided.

Dr Diane Parker, DHET DDG: University Education, said that the lack of accountability was taken seriously by the Department. The DHET had very targeted, ear-marked plans around areas of capacity development and infrastructure and in those grounds. It would manage these plans and monitor their implementation in each institution. If an institution failed to carry out that work and to spend the allocated funding, the funds would be diverted to other areas that needed it, such as capacity development. Where institutions do not meet their targets (2% target on enrolment plans), the Department would negotiate with universities but it was difficult to get the exact numbers during the planning stages. If a university under-enrolled, it was penalised by the DHET. These, and other measures, have produced improvements since 2013.

On planning for the good governance target (70%) and the improving the baseline, at the beginning of the last Medium-Term Strategic Framework (MTSF) period, there was no measurement to understand good governance in the system. DHET had since developed a guide for universities and it was publicly available. It reflected on some of the governance failures of the past as well as good practises. In that guide there was a set of indicators that universities could measure themselves against. DHET would also get reports from the institutions on an annual basis. In the previous year, the Department had to set up indicators in order to measure good governance. Therefore, the 70% was more like a raw measure. Now that there was something that the AG had approved as indicators, the target was now at 80% and it was quite an interesting combination of aspects that brought about the 80%. Currently, there were only two institutions that were placed under administration.

On student demographics, there was data available and there was also a cohort report that came out every year and it reported how the system was performing. Another issue was the tracking the graduates; institutions had embarked on graduate destination studies in order to reflect on what the institutions had been producing and perhaps feed back into the development of their curriculum. The DHET did not track students out of the system but inside the system. The graduate destination studies undertaking was a good initiative.

Mr Zirk Joubert, Chief Director: TVETs, DHET, said, on the employment of local labour, that the details could be provided on the statistics on male and female but the majority of the people that worked on the construction sites were young people; generally under the age of 30, within those communities.  However, details on the demographics can later be provided to the Committee.

The actual expenditure on the first quarter sat at 3% versus the 40% target. The reason was that the funds were quite new and were received in FY2018/19 and not in the current FY2019/20. Since recapitalisation, the TVETs did not create capacity to deal with infrastructure maintenance, repairs and infrastructure management due to the lack of funding. It was also not prioritised but the DHET had invested comprehensively into training and initiated infrastructure and asset management standards. According to the standards, it would take time to regulate and implement but if the Department did not initiate immediately, the money would be spent inappropriately. For instance, in quarter two, the spending was sitting at 18% and it would increase as the standards were being implemented. The spending had been slow because it took a long time to initiate the standards.

On the linkages between skills and artisan programmes and TVETs making that link, centres of specialisations were established in 20 colleges rendering occupational programmes. The 2020 plans for the programme envisaged 2050 intakes; it was slow but that was currently the vision and it would grow gradually.

On NSFAS targets on the TVET side, if one looked at the 2018/19 and 2019/20 Annual Performance Plans (APPs), the former was based on what the funding could provide. The latter was revised to fit in rather than to follow NSFAS trends. The DHET was aware that the NSFAS data was not accurate; this linked to the qualification received but it was an issue that was going to be attended to. However, the trend analysis for qualifying students would inform the new targets in the 2019/20 targets.

Mr Nodada said that 200 000 students were provided with funding and the left-over students were eligible but did not receive the funding. He sought clarity on this. 

Mr Qonde said that the funding by NSFAS was based on two things; one, the determination of the R350 000 cap of combined family income per annum and on meeting academic standards going forward. But because of the challenges in respect to TVETs, the overall pass rate – the amount of students who progressed, relative to the high volumes at the entrance level – had decreased. Hence, the foundation phase learning programmes were introduced so that as students came into institutions they were assisted to get acclimated and to build the necessary capacity that would enable them to progress once they got into fully-fledged programmes.

There was an anomaly on the accuracy of the NSFAS data because the integration of data between colleges and NSFAS was disruptive to an extent that even qualifying students were not uploaded and captured in the NSFAS database. In 2018, there was improvement when the new administrator came in with the mandate to address and close the funding cycle of 2017 and 2018 and prepare for applications for 2019. In 2019, by all accounts, the system was hugely successful amongst the institutions. Credible data was now emerging.

On audit outcomes for TVETs, Mr Joubert indicated that there were 23 unqualified, 21 qualified, three disclaimers and three that were still outstanding. There were eight improvements, two regressions, and the rest were unchanged. There was still a small improvement of about 7% in the system. The system moved from disclaimers to qualified opinions and this was due to the initiatives implemented by the DHET. Even though there were still negative audit outcomes, most of them were now sitting at qualified status – the system moved from a disclaimer to a qualified opinion. The DHET started focusing on the colleges that still had disclaimers by guiding them through the process of planning audit actions and working with audit committees through the Section 31J process.

Many college campuses were owned by the colleges; there were approximately 200 sites and 90% of them were owned by colleges. When money was spent on infrastructure and maintenance, it was spent on campuses owned by the colleges or the Department of Public Works and Infrastructure (DPWI). However, the DHET also spent money on sites that were not owned by the colleges or the DPWI solely because failure to do so affected the students. Although there was no extensive spending on those sites, the monies spent ensured that the health and safety standards were maintained and that the quality was brought to the required level.

The site that was sitting at 36% progress had faced social challenges within the community. The DHET was now waiting for the extension of time from the principal agent to assess the implications, whether they were financial or not. If the matter were found to be a social issue, it would be extended without additional costs. The challenges were resolved but the DHET was now waiting for the approval of the timeframe extension.

Ms Esther Kodisang, Director: CET Governance and Management, DHET, explained that what informed the targets was the baseline; for the 320 000 that was not achieved, the baseline was 300 000. The team also looked at previous baselines prior to the migration of the branch into the DHET and the enrolments would be around those figures.

The failure to achieve the target was largely due to the limitation of infrastructure. There were nine CETs in the country, one in each province, and there were community learning centres operating from schools across in the communities. The disadvantage was that these centres operated within schools and meant that the learning could only take place after school hours. This affected the people that DHET sought to attract due to safety reasons and this left the CETs unable to improve its programmes.

The CETs did try to create awareness in the communities; this was done through media via community radio stations and there was an improvement. People started calling in to ask more about the CETs. More still needed to be done, hence a national community strategy was currently being developed to raise even more awareness about the colleges.

The curriculum was relevant; for instance, the qualification was a general education and training certificate at NQF level one and most of the people that come into that space were those who learned up to secondary school level. The DHET would soon introduce a National Certificate for Adults which would be equivalent to a matric certificate.

The Official responsible for SETAs function said the National Skills Authority would soon share a report on a study that was done from 1 April 2011 to 31 March 2016. The report would reveal that the beneficiaries of the SETA programmes for that five-year period were more than one million. The completion and throughput rates stood at 77%, which was quite high compared to other related area. A survey with employers was also conducted and the employers said that the output of beneficiaries improved by 80% and there was products had better quality. There was a 74% work readiness amongst beneficiaries and a 73.3% decrease in work errors of those who participated in those programmes.

In 2017/18 there were 21 151 artisans found competent in the country and the absorption rate was 77% higher than the previous year. This revealed that the impact was prevalent but the DHET should continue with the artisan development and learnership programmes. The HSRC also conducted its own study and revealed that 86% of those who participated in learnerships, and 70% of those who participated in apprenticeship programmes, were easily absorbed.

Mr Theuns Tredoux, Chief Executive Officer of DHET, welcomed the comments made by Members and said that Section 38(1)(j) reports were currently being looked at as a first step. Annually, each institution that received transfers from the Department were obliged to issue, in terms of the PFMA, Section 38 certificates. In 2019/20, the DHET set conditions for the transfers; the institutions must report and the DHET would monitor on a quarterly basis.

Mr Qonde indicated, in respect to the R24 million in the CET, that a forensic investigation was instituted and that the matter was reported to the Hawks and the South African Police Services (SAPS). Progress was made but no arrests had been made. Some of these staff members had jumped ship, especially the main culprits. But the DHET managed to withhold pensions and other monies which were due to these culprits. Those who benefited out of this had signed agreements to pay back the money; hence, R11 million had since been recovered and the DHET was still recovering more funds. The culprits took the DHET to the Public Protector for not paying their pension funds. The DHET was dealing with the matter.

He concurred with taking a robust approach on accountability in the system even though the Accounting Officers suffered vicious attacks in the process. Before the University of Fort Hare was placed under administration, the institution was a tug of war to the extent that people who were messing up the institution managed to drive out its Vice Chancellor. The Minister would send the DG to the institution twice a week to intervene. Although this was an academic institution, some senior managers had to be provided with security for 24 hours. There was a report by the investigators and the three things that it pointed out were the question of core governance imposed, core management and the environment – which had gone to the extent that those who stood for the truth did not want to be identified. Those who were encouraged to stand up and voice their views were the ones who brought the institution down. The Department was certainly dealing with the matter.

The Chairperson said that he thought Mr Joubert would elaborate on the issue of audit outcomes in that space because the picture was quite bad. One of the things raised by the AG was that there were CFOs who were seconded by the South African Institute of Charted Accountants (SAICA) but the contract with the institute had come to an end. As a result, there was no sustainability of the systems that were introduced by the CFOs that were there. He had hoped that Members would be appraised on what would happen in the absence of such. The picture remained very blurry, with three colleges having not yet submitted their AFS nor indicated when those AFS would be submitted for audit. This required serious intervention.

The Chairperson said that he was aware that the system was quite vast, with these universities operating autonomously while receiving funding from the DHET. Out of the 26, the worst performers must be selected to come and account to Parliament. The University of Fort Hare received a bad audit outcome and some institutions regressed. There was no picture of the full status of their finances.

He noted that he had just received correspondence from TUT that things were quite bad in terms of governance and this affected management. At an appropriate time it should be dealt with.

He was not happy with the fact that the culprits at CETs were not being arrested. The matter must be followed up very speedily with the SAPS.

Mr Letsie was not satisfied with the response from the DHET regarding rendering assistance to TVETs on the issues raised by the AG about TVETs. The Department said it was concentrating on assisting those with disclaimers but that was not satisfactory. What about those that were previously doing fairly well but have now gone bad? There must be consensus on establishing a stable and steady system that would resuscitate the TVETs.

Mr Yabo said he was quite perplexed and confused about how slide 69 was put together. The amounts written all have millions after the figures. He sought for clarity on the actual numbers.

Not happy with student accommodation and infrastructure development in TVETs and universities, he lamented and said:

“The current status quo sustains a societal anomaly which impacts mainly on the female gender. There are universities which do not have adequate beds for students which, in turn, creates a situation where students are forced to look for alternative accommodation in the neighbouring, historically disadvantaged communities. The female students in turn become exposed to social dangers because of lack of adequate infrastructure to accommodate them and be in a space to sustain a life with minimal needs such as requiring money for transport to attend classes. This creates a need which a student is unable to fund herself and the money given by NSFAS is not adequate for those needs. It ultimately creates the “blesser/blessee” situation where young women are forced expose themselves to older men for subsistence and support because they come from poor backgrounds. It is a sad situation of what it breeds to society. Responses that create a society that we must all be proud off to live in are long overdue.”

“We speak of gender-based violence but we create spaces where young women who are financially vulnerable are forced to depend on abusive men who are financially viable. If we seek to eradicate the issue of gender-based violence in the higher education space, we need to address it with a cause and effect approach. It may look minimal but it because a big problem if it affects your own child and sometimes, we live because maybe we can afford to take our children through higher education without them needing a “blesser”. This is an effect that is caused by one; the lack of beds, adequate facilities that speak to a holistic development of infrastructure and catering to the needs of students without just the ability to study but enter and be adequately qualified without having to deal with adulting issues to get through higher education. I saw a picture recently of kids staying in one room, 6 or 7 of them at a time, this is untenable. It cannot be that the higher education system replicates the mining system of holds, of hostels because children 6 or 7 children are forced to sleep in one room.”


Mr Qonde replied that the study conducted on student accommodation in 2012 came out with a report that only 20% of the student population was housed in the university residences. Those institutions in rural areas were more adversely affected in terms of the quality of the accommodation the students could get, even in the private space. The DHET looked at the budget to respond to the challenge; National Treasury came into the party and injected some funds but the money would only allow to roll out 30 000 extra beds over ten years. The DHET then worked out a number of interventions by engaging with fund managers and development finance institutions as well as banks at which a committee was established. This committee was to look at this matter to determine what could be an appropriate policy framework where the private sector could come on board to invest in student accommodation. That process led to the Housing Student Accommodation Symposium held at UNISA in 2016, with all the stakeholders. Out of that process, processes and engagements were streamlined and the DHET received substantial funding from the Development Bank of Southern Africa (DBSA) because calculations pointed to the fact that in order to make a dent, the DHET needed to roll out up to 300 000 beds over ten years. A structure was then established between the DBSA, National Treasury and DHET to look into soliciting private funding into student accommodation. Institutions that were in serious desperation were then identified and about eight institutions were benefiting because the roll out had started.

He encouraged Members to visit the University of Fort Hare to see the first phase of the roll out in that institution. The DHET availed R122 million, DBSA provided R278 million and IPSA (Infrastructure investment Project of Southern Africa), through Treasury, provided R28 million. The planning and execution was meticulous; it started at the feasibility study to architectural design and procurement with high level engineers, surveyors and architectures. At that institution, they had started handing out keys in the first phase. The Department would roll out over 200 000 beds for universities and 100 000 for TVETs over the ten-year period. It was a matter that was receiving high level attention and the committee was chaired by the DG. The success initiatives were giving government more prospects for investments.

TVETs were not a matter of the PFMA, they were the subject of the CET Act of 2006 as amended, which stipulated that the practices that these colleges put in place should not be inferior to that of the MPFA. The DHET then engaged with AG because colleges were not audited up to 2015. In 2016, the DHET requested AG to come on board and start with a pilot project for the DHET to establish the nature of the financial control management in that space. The report that came out of that initiative was quite scary but out of the report a control scheduler was developed and it identified all control lapses and controls which were required for functions within an institution. Working with SAICA, with the assistance of the AG, a package of policy environment was developed that TVETs should consider in terms of financial management and were each assigned with a SAICA CFO. This had come to an end but as an exit strategy, the DHET created posts of financial managers at a Deputy Principal level but that could not be done as advised by DBSA. This suggested the need to put the posts at the Deputy Director level. Posts were advertised and 42 colleges were assisted with the appointments of CFOs. Processes are in place for the remaining colleges.

The first audit outcome was concerning. Since then, the DHET had managed to roll out auditing to all colleges. The way the AG reported provided a clear picture. The report was saying that ten colleges had improved and this needed to be appreciated. Three colleges regressed with one regressing from a clean audit to unqualified audit. Six colleges received clean audits and 17 received unqualified audit opinions, leaving 21 with qualified audit opinions. Systems, processes and procedures exist and the AG could look at how they were performing against what existed. That needed to be encouraged and elevated to the next level. The disclaimers were indeed worrisome and efforts were put in place to ensure that was established.

He asked for the Committee to support the DHET with governance issues to ensure that interest groups within these institutions would not be elevated above governance and management structures.

The meeting was adjourned.
 

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