Members of the Committee were briefed by the Auditor-General of South Africa on Casidra and the Western Cape Department of Agriculture’s Annual Reports for 2018/19 in a closed session. Members raised questions on both Reports in an open session with the MEC in attendance. Members raised concerns on the dispute between the Department and the Auditor-General on certain sensitive matters that had been taken to court. Members felt they could not raise questions as a result of this. Members raised concerns on the Department’s non-compliance with the Broad-Based Black Economic Empowerment Act, investigations of irregular expenditure, exit gratuity for the Minister, the increase in expenditure on transport and catering and non-profit organisations that receive funding from the Department.
On the Casidra report, Members raised concerns on gender equity in the management team, proper internal control systems, supply chain complaints, the increase in audit fees, loss of data due to the server being hacked and the Auditor-General’s findings of the reliability of information provided by the entity.
Members of the Committee were briefed by the Auditor-General of South Africa on Casidra and the Western Cape Department of Agriculture’s Annual Reports for 2018/19 in a closed session prior to engagement with the Department and Casidra.
Discussion on the Western Cape Department of Agriculture Annual Report 2018/19
Ms D Baartman (DA) asked whether valid apologies had been tendered for the meetings between executive members.
Ms Joyene Isaacs, Head of Department, Western Cape Department of Agriculture, replied there are minutes of the formal meetings which account for both present and absent members.
Ms N Nkondlo (ANC) asked whether it is normal practice for the Minister to be part of the Risk Management Committee (RMC). The key areas have been identified as safety, crime, evictions and pollution. Is each key area a risk for the Department? Can the Department provide the Committee with details on the 2 cases of fraud and corruption and when these will be concluded?
Ms Isaacs replied the Department invited the Minister to sit as a member of the RMC so he could observe the proceedings. On risks, the Department has identified a list of key areas that have become a priority in the past year. Each area is included in the Department’s strategic plan.
Mr Floris Huysamer, Chief Financial Officer, Western Cape Department of Agriculture, replied the first case relates to alleged fraud and has been in progress since September of this year. The second case concerns electricity funding theft. The Department is unsure when both cases will be concluded.
The Chairperson asked what electricity funding theft is.
Mr Huysamer replied the Department has an allocated budget for the payment of its electricity bill. The accused employee stole money from this fund.
Mr M Xego (EFF) said the report fails to mention whether conflicts of interest took place and asked for more information on this.
Mr Huysamer replied the Department has a process to deal with conflicts of interest. There were no cases of it in the past financial year.
Ms Baartman noted instances where debts were written off by the Department. What are the details behind these decisions, more specifically, the writing off of the bursary debt?
Mr Huysamer replied it only applied where former employees who were recipients of a bursary during their work tenure resigned before they had completed their studies. There was also an instance of telephone debt that was written off.
Ms Isaacs replied the Department has a policy which requires an individual to work for the Department in order to receive a bursary. There are instances where an individual who is on a scholarship resigns from their post and the Department needs to make a decision to release them from the bursary.
Mr D America (DA) said the Committee is handicapped in asking the Department questions because the 2 issues flagged by the Auditor General (AG) are sensitive and have not been resolved yet.
Mr P Marran (ANC) agreed and said his question can’t be posed to the Department because the matter is currently being dealt with in court.
Ms Baartman said the Committee must deal with other information on the report given that some matters, such as goods and services, are currently being adjudicated in court.
Mr Huysamer replied the issue of goods and services is not in dispute and members may ask a question on it.
The Chairperson said the dispute is a financial accounting issue. Why did the Department have to go to court for this?
Mr Huysamer replied the AG is a chapter 9 institution and the only way the Department could challenge it was by taking the issue to court. If the Department doesn’t win the case it will be forced to change its business model.
Mr Ivan Meyer, Minister: Western Cape Department of Agriculture, replied the Department is not relying upon the court case to evade questions from Members. The Department simply wants legal clarity from the court so that it is able to manage its business model. This court case will set a precedent for the rest of the country.
Mr Nico Boshoff replied there are two aspects that led to the matter going to court. The first is that the Department ran out of options in trying to resolve the difference of opinion with the AG and had to gain legal clarity. The second is that there is a critical legal argument underlying the dispute. It is about the actual standards being applied and not only its interpretation. This court case will have far-reaching consequences in the country and how the AG will approach the auditing process.
Mr Xego said it is well known for provincial departments to resolve disputes with national departments in court. This has created the perception there is a political agenda and clouds whether there has been compliance by the provincial department. Can the Department clarify which of the AG’s recommendations it did not follow?
Mr Boshoff replied this has been a long-standing issue and the Department consulted its legal advisors. The Department’s counsel advised it should seek a declaratory order in court. Both the AG and the National Treasury (NT) have not accepted the Department’s legal interpretation. It is clear there is a difference of interpretation on the accounting standards.
Mr America said the report does not indicate if there is a provision for contingent assets. Does the Department have contingent liability for possible costs it might incur once the court delivers its verdict? The report indicates that R29 million was transferred from the Department to Casidra. Where is the outflow from the Department’s account that captures Casidra received this amount?
Mr Huysamer replied the transfer of money is captured in the report. There are 2 main transfers under Casidra, one is the core funds used to pay things such as salaries and the other is the disaster funds used for the settling of farmers and rain care. The R29 million is high because the Department had to provide funds for drought and disaster.
Mr America noted that a letter of credit was awarded to an international company to provide the delivery of a plant harvest to the Department. Which company is responsible for delivering it?
Mr Huysamer replied the plant harvest arrived this week and was provided for by a company in Germany. The Department chose to arrange a letter of credit for the transaction.
Mr A van der Westhuizen (DA) noted the Department has not received the funds for the MariSet programme. Does this mean the programme has come to a standstill? Why has the Department decided to increase the allocated amount for this programme? The amount allocated for the exit gratuity of the Minister has not been disclosed in the 2017/18 financial year report. How does this gratuity function?
Mr Huysamer replied the Department was doing work on behalf of the National Department of Agriculture. On the housing provision, the Department tries to recover outstanding debt but it has been unsuccessful. The house rent was transferred to the Department of Public Works and the debt still stands. The Department increased the provision based on the feedback from the State Attorney. The gratuity is normal in terms of the Ministerial handbook.
Ms Nkondlo asked if the Department could confirm the court date.
Mr Huysamer replied it is on 6 February 2020.
Ms Nkondlo asked what the reason is for the increase in the transfer of funds to Casidra in the 2017/18 financial year. Can the Department define the relationship that exists between itself and private enterprises, such as WardCro? Does it act as a sponsor or a donor? Can it be clarified whether Casidra is an entity under the Department? Can members be provided with information on the incidents of irregular expenditure that took place this past financial year? What investigative processes have been conducted and how far are the cases? The report makes mention of returning debt. Does this refer to the saving of money? Is the theft of computers reported as a loss? What are the costs for the social facilitation of the Compensation of Employees (CoE)? What are the new employee jobs that fall under this? What resulted in the increase in expenditure on catering and transport?
Mr Huysamer replied the increase in expenditure on catering is part of the female entrepreneur and farm worker competition that was conducted by the Department. In previous years this competition was hosted by Casidra. The returning of debt refers to expenditure and not savings. It refers to cases where individuals have taken leave and earned their salary but resigned before their leave ended. If an individual does this, they have to pay back their earnings to the Department. The irregular expenditure cases are taken into consideration individually. There is a prescript that the Department follows but it has been changed twice this year. As a result, there has been a delay in concluding the investigations. During this financial year, the Department received additional funding for drought management.
Mr Darryl Jacobs, Deputy Director-General: Agricultural Development & Support Services, Western Cape Department of Agriculture, replied the increase in CoE funding is due to the recent employment of a middle manager. The report outlines what the social facilitation programme covers.
Ms Nkondlo asked for clarity on the functions of a middle manager.
Mr Jacobs replied the increase in expenditure is due to the appointment of the middle manager.
Ms Nkondlo said the Department’s response to cases of irregular expenditure casts doubt on the capacity of internal controls. Internal controls are put in place to decrease the occurrence of these cases.
Mr Marran noted the amount spent on students. Can the Department provide information on the number of trips conducted by students to the farms and the types of programmes done? What is the benefit for the Department? When does the Department decide that it can recover money that has been lost due to cases of irregular expenditure? How many people have committed fraud?
Ms Isaacs replied the travel report will be provided to the Committee. The Department takes its masters students to the United States to attend conferences that speak on new farming methods. Staff members also form part of delegations that travel to different countries. The Department will provide the report including the processes and the benefit of the programmes.
Mr Huysamer replied the Department does not write-off debt until the State Attorney makes the decision.
Mr Marran asked if the Department has information on what these students do after their studies. Does the State Attorney cost the Department money?
Mr Huysamer replied it does.
Mr Marran asked if the Department chases money owed to it.
Mr Huysamer replied the Department assesses the amount to see whether it is worthwhile to follow up on.
Mr America asked for details on the number of non-profit organisations (NPO’s) that receive funding from the Department. Do the organisations apply for funding? Do they align with the policies of the Department?
Mr Huysamer replied the City trust conducts the projects of the Department. It falls under the category of NPOs so the Department has to list it as such.
Mr America said the investment of R25 million to Casidra is not reflected in Casidra’s balance sheet.
Mr Huysamer replied the Department had to take out shares to get money into Casidra.
The Chairperson noted the AG’s finding of a compliance issue with the Broad-Based Black Economic Empowerment Act (B-BBEE Act). Does the Department comply with the Act?
Mr Huysamer replied the Department is non-compliant and is currently working on this issue.
The Chairperson asked why the Department did not comply.
Mr Huysamer replied the Department planned to comply with the Act but it has not yet done so.
Mr America said this is a generic finding across all state departments.
Ms Baartman asked if non-compliance was due to the fact the Department did not provide a certificate for the auditing process. How much would it cost to provide it?
Mr Huysamer replied the cost might be significant but the Department needs to understand the certificate better.
Ms Nkondlo asked about the relationship between the Agricultural Trust and the Department. Is the trust a governmental entity? How long is the agreement and how long has the arrangement been in place for? There is underspending recorded in the report. What challenges does the Department face as a result of its underspending?
Mr Huysamer replied the trust is not a governmental entity. The trustees are the farmers of the Western Cape. The under-expenditure is a rational calculation made by the Department. There are still outstanding accounts that need to be paid.
Mr Xego asked if the plant harvester had been imported from Germany. On non-compliance with the B-BBEE Act, the Department should not continue in this way as it may be taken to court.
The Chairperson said the B-BBEE Act was signed into law to bring about redress within the country. The Committee will continue to refer to this issue for as long as the Department fails to comply with the policy. She asked members to raise questions on the Casidra report.
Discussion on the Casidra Annual Report 2018/19
Ms Nkondlo noted the performance assessment evaluation of the Board. What role does a shareholder play in this assessment? The report contradicts itself in that it states management is in the process of addressing its internal control issues but states that proper internal control systems are in place and maintained. It is clear the management team faces a serious gender equity challenge. Are there plans to address this?
Mr Ainsley Moos, Chairperson, Casidra, replied the Vice Chairperson of the Board leads the self-evaluation assessment. Casidra does not make the assessment external to ensure that management is able to have private discussions.
Mr Ashley Seymour, Chief Executive Officer, Casidra, replied there are proper internal controls. The entity has begun a process of addressing the concerns of the AG.
Mr Moos replied the Board takes gender equity seriously. The former Chairperson was a female. Discussions have taken place within the Board to address the issue.
Ms Nkondlo asked what role the Department plays in the entity’s self-evaluation assessment.
Mr Freek van Zyl, Chief Financial Officer, Casidra, replied the questionnaire for the assessment was compiled by the Board and sent to the Minister who then approved it. This was done to ensure that he is a part of the assessment process.
Mr Xego said the entity has regressed in terms of gender representation. It has replaced former female members of the Board with male members.
Mr Moos replied the former Chairperson of the Board resigned because of ill health. Gender equity is a serious concern of the Board and the entity will provide the Committee with a plan in the next meeting.
Mr Xego said this plan must include why women cannot hold their positions within posts.
Ms Nkondlo said most of the Board members studied at Stellenbosch University. Is there a reason for this? Which instances of non-compliance have been flagged by the AG? How can the entity have proper internal controls yet have instances of non-compliance? Can members be provided with a report on the supply chain complaints that are with the Public Protector and the Minister?
Mr Moos replied there is no deliberate intent to draw individuals from Stellenbosch University. This is purely coincidental. The Board has a process where recommendations for suitable candidates are supplied by the Minister. Each individual is interviewed and a decision is made.
Mr Seymour replied the non-compliance was part of the supply chain regulations. The Department is working to address this issue. There was a case which was quite public and related to a tender allocation which was referred by the Minister to the Board who then referred it to the Audit Committee. An investigation was conducted by an independent service provider who found there was non-compliance with supply chain regulations.
Mr van der Westhuizen asked if the loss of data was as a result of the hacking that took place. What were Casidra’s audit fees for this financial year? How much of the audit fees can be ascribed to the fact that additional auditing work had to be done? Are the assets of the Department currently performing? Casidra hasn’t sold any shares so will the Department keep them?
Mr Seymour replied the server of Casidra had been hacked and was held for ransom. The Department enacted a disaster recovery plan to retrieve the data but some of the data was lost. Casidra is confident there has not been any loss in confidential information. The audit fee budget has increased drastically because 2019 was the first year the entity was audited by the AG. The specific projects on the farms can be found in the annexure of the report and not on Casidra’s balance sheet.
Mr van Zyl replied the AG’s reports differ from private auditors which is a point the entity has taken into consideration. Casidra received shares in Sanlam and Old Mutual and have not sold their shares. The purchasing of shares was a business decision.
Mr America asked for clarity on the R25 million in the balance sheet. Was this an investment by a partner of the Department? Does the entity own the company and if so why would it list it as part of its total liabilities? If it is listed as an investment there should be income that emerges from it. On training, skills levy and bursaries, there is no explanatory note in the report that would disaggregate this amount. Was any amount paid to AgriSeta? Was the training sub-accredited? The report states the number of queries stands at 34 but the audited number is 15 which is less than what had been expected to be resolved. This shows there is a lack of internal controls.
Mr Seymour replied the entity could have applied better principles for its audit performance objectives and there is a plan in addressing those queries with the AG.
Mr van Zyl replied the entity is the creditor and the Department is the debtor of the investment. This is why the R25 million is listed on both the Department and the entity’s financial books. For the past 7 years, Casidra has only been able to breakeven and has not achieved an accumulation surplus. The R7 million reported is due to the fact that all unused money must be recorded as a surplus. There are 3 different components to the training which were grouped together. The entity has fully functioning internal controls. It has its faults but the entity tries to ensure adherence to the policies and legislation that govern it.
Mr Marran asked why there is no information on the number of queries resolved by the entity. Is it because of the hacking? The entity has not stated who has benefitted from the food programme. The Committee needs to be provided with this information.
Mr Seymour replied the data breach related to soft information. In compiling its reports, Casidra relies upon physical documentation. This is the first year that Casidra is being audited by the AG and will make sure to compile its financial reports.
Mr Masibonge Silevu, Chief Officer Technical: Casidra, replied there is information on the programmes which can be provided to members.
Mr Marran said there have been 2 contrary responses. The entity has said there is an issue with the recording of information yet it says it has recorded its information. The entity needs to improve its recording system.
The Chairperson asked if it is the first time that Casidra has been audited.
Mr van Zyl replied Casidra was audited annually by private firms. It received a letter from the AG indicating it would audit the entity instead.
Mr Marran said it is clear the AG believes the information provided by Casidra is unreliable because of the inaccurate capturing of its achievements.
Mr Seymour replied the entity has provided the AG with information that validates its achievements whereas the AG disagrees with this. Casidra must align itself with the prescribed recommendations of the AG.
Ms Baartman said there was contestation on the word ‘accredited’ and how this is assessed. It was confusing when the AG said it could not find information on whether the accredited course was achieved or not. Can clarity be provided on this, given that legislation makes a distinction between credited and non-credited?
Mr Seymour replied the entity will provide this to the Committee.
Ms Nkondlo said there must be continuous engagement between the Department, the entity and the AG to put an end to the contestations that occur. Which operations provide dividends to the entity? How does the entity’s remuneration framework function? Some members of the Board received bonuses while others didn’t.
Mr van Zyl replied what is shown on the report is the total of the dividend. The entity only pays bonuses for work performed over the course of a year.
The Chairperson asked whether the AG is auditing Casidra on B-BBEE compliance.
An official from the Auditor General of South Africa replied this will be provided to members at a later stage.
Mr van Zyl replied Casidra is not exempt from being audited on B-BBEE compliance. It has been audited for a number of years and has reported on this.
The Chairperson asked for clarification on who is at fault for the B-BBEE non-compliance.
Mr Huysamer replied the AG did comply but the Department did not.
Ms Baartman asked how much it costs to obtain a B-BBEE certificate.
Mr van Zyl replied it is R8000 but this could increase. Under the old scorecard, Casidra was rated as level 2 and with the new scorecard it is currently on level 6.
The Chairperson said the Committee is concerned about the transformation of the country and wants state departments to comply with the B-BBEE Act.
The meeting was adjourned.
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