The meeting was convened to discuss Part C (Governance) and Part E (Financial Information) of Department of Social Development’s Annual Report 2018/19. The Provincial Minister was present.
For Part C (Governance), Members asked about the Department’s plan to address capacity constraints, the cost of compliance with the recommendations in the Auditor-General’s report, cases related to fraud and corruption, the delivery of the Specific Social Relief Grant, declarations of conflict of interest for Department employees, adherence to the 30-day payment requirement, the disaster and emergency management forum, and the impact of the baseline budget reduction on the provision of quality services.
On Part E (Financial Information), the Department was questioned on the causes of underspending the conditional budget, the amount of irregular expenditure that had not yet been condoned, the increase in expenditure on machinery and equipment, incorrect services utilised, and the disposal of old computers and furniture. A focus was placed on the Department’s struggle to find suitable candidates, and its high vacancy and staff turnover rates. Other areas probed by Members were the Department’s social welfare programmes, capital asset verification, the relationship between spending and targets, and litigation cases. The adoption of a work flow process was suggested in order for the Department to do its own cost estimates.
The Chairperson Mr L Mvimbi welcomed the Department and members of the public. He invited the Members to ask questions on Parts C and E of the 2018/19 annual report.
Annual Report: Part C
Ms Sharna Fernandez, Minister of Social Development, told the Committee she would be staying for the whole meeting.
Ms A Bans (ANC) sought clarity on two key risks identified in the report -- “the inability of the Department to maintain and upgrade Western Cape governmental offices and facilities (Secure Care Centres)”, and “the inability to effectively address the capacity constraints of non-profit organisations (NPOs)”. She wanted to know how the Department was helping to address the capacity constraints. What other plans were in place to address the cost impact of compliance referred to on page 123 of the report.
The Department responded that there was an established unit within Programme 5, which assisted NPOs in areas of governance, as well as other services that the Department outsourced to them. The Department was concerned at the embezzlement of funds and subsequent closing down, which was endemic within the non-governmental organisation (NGO) sector. It severely impaired the Department’s capacity to engage with people on the ground level. Its solution was to take over those battling NGO organisations in order to maintain service levels.
Regarding the Department’s ability to trace new facilities, it was not sure if it would be sufficient because it did not want to add more burden on to current facilities and then face the conundrum of not being able to maintain additional facilities. It was also looking for additional sources to secure funding.
On cost compliance, the Department admitted that it had not looked at an alternative solution yet.
Ms N Makamba-Botya (EFF) wanted to find out the status of the two cases that were not resolved by 2019. She also wanted details on the four cases opened as of 31 March 2019 in the report. On page 111, she wanted to know the nature and details of the fraud and corruption case that had been referred to the South African Police Service (SAPS).
Dr Robert Macdonald, Head of Department (HOD), responded that the cases involved fraud, theft and corruption, and all had been closed.
Ms N Nkondlo (ANC) wanted to know how the South African Social Security Agency’s (SASSA’s) non-service delivery of specific social relief had been managed. She requested a report of cases of those who had not stuck to supply chain management (SCM) legislation. She needed the Department to confirm that its employees had all declared their conflicts of interest. She suggested inserting a section on the disciplinary process for employees indicated in the report who failed to comply with code of conduct. What was the consequence if payments were not done within the 30-day period, and were there many of those cases?
Dr Macdonald pointed out that one of the difficulties of SASSA’s social relief grant was because there had been a shift from Cash Paymaster Services (CPS) to the post office for all social grants. Also, due to budget constraint and low cash flow, SASSA had now shifted to handing out food and hampers, rather than giving cash to beneficiaries. He assured the Committee that the Department did have a memorandum of understanding (MoU) with SASSA in which there were provisions for dealing with emergency cases. The Department also had regular engagement with SASSA.
The Department had flagged particular risks within supply chain management. These risks had been identified in the 2017/18 annual report, and it had done follow up post-auditing as well. The non-compliance usually involved very small amounts, but the quantity was quite a lot. Since implementation of the SCM legislation, non-compliance had been reduced radically.
Dr Macdonald said that the Department had picked up conflict of interest breaching cases that had been submitted to it. It had records how many approved and non-approved cases there were. However, it had picked up one or two instances where the Department had had to apply disciplinary measures to employees. It had implemented measures to ensure the declaration of conflict of interests was compulsory for all senior and middle management, as well as SCM management. What the report indicated were the names of those companies that had not been removed from the Department’s database by the time the report was compiled. He assured the Committee that this gap did not involve a large number of people.
He agreed that the Department could have inserted a detailed section on the disciplinary process for easier understanding by Members.
The Department had records that could show that there were not a lot of cases where payments had not been done within the required 30-day period. National Treasury was very strict that the provincial Department had to do monthly report on this aspect.
Ms M Maseko (DA) remarked that the wording “key risks considered and addressed during the year” was incorrect, because these identified issues still remained challenges and had not been addressed. She asked the HOD to comment on the SASSA issue.
Dr Macdonald said that those were the key risks picked up by the auditor, who had made recommendations which the Department had implemented. Most had been implemented by the close of the financial year.
The issue with SASSA was an ongoing concern. The national disaster policy was problematic. The Department had met with the National Minister on Tuesday to get clarity on how to deal with such issues in future. However, challenges still remained.
Ms Maseko asked if further information could be provided on those aspects.
Mr Macdonald said the Department could provide such information in future.
Ms D Baartman (DA) wanted to know if apologies had been submitted from the Department. She sought more clarity around the key risks addressed on page 109 in the report. She wanted to know how they had been addressed, and how the Department had been impacted by the Treasury’s reduction of the baseline budget.
Dr Macdonald confirmed that apologies had been offered.
He explained that Treasury’s cut had impacted on the Department’s 2019/20 budget by R130 million. Certain items could not be changed or reduced. These included compensation of employees, and existing contracts for service providers. He admitted that it was difficult for the Department. The sector that would feel most of the brunt was the NGO sector. The Department’s normal practice was to increase NGOs’ funding at the country’s national inflation rate. Given the budget cut, it would not have sufficient funding to increase, but would keep funding amounts the same in 2020. He acknowledged thathis would not have a positive impact on the NGO sector. The Department relied on NGOs to provide services to people at ground level, so financial sustenance of the sector was vital. Without the NGO sector, it would put more strain on the Department. It had currently decided that R20 million would get the chop from the Sanitary Dignity Project. The Expanded Public Works Programme (EPWP) funding of R9 million, and the Youth Work Project’s R4 million, would remain the same amount next year. and that there would be no expansion for other projects in 2020.
Mr G Bosman (DA) asked about the disaster management forum. Had it been formalised and an internal disaster management forum established? He asked if it would be viable for the committee to share the responsibilities of the SASSA social relief grant. Had the Department used the Auditor General’s cost of compliance comment as a case study which could be used for future budget planning?
Dr Macdonald said that Social Development Department does sit on the disaster management committee as well. The challenge in the province was the unevenness of municipalities’ different levels of capacity to deal with disasters. A humanitarian relief facility had been set up in each district municipality, and local municipalities would involve the district if there was a disaster. However, the Department was still battling with the functionality of disaster management. Currently, an MOU had been signed so that work arrangements existed, and each government division knew its own responsibilities if disaster struck.
The Department could provide details of the social relief policy to the Committee.
The Department had done a cost-compliance study, but it would be very difficult to develop a universal model that could inform all future cost-compliance matters.
Dr Macdonald pointed out that disaster management was a responsibility of local government. The current challenge was that some municipalities did not have sufficient capacity to do that. In those scenarios, provinces had to step in. In some cases, even provinces were not sufficiently capacitated. The City of Cape Town had quite a well-established team. The crucial part in disaster management was defining what the roles and responsibilities of each governmental unit were. However, it was not the Department’s job to be a leader in emergency cases.
Annual Report: Part E
Ms Baartman wanted to know why R1.636 million had been under-spent on conditional grants. She asked for details of the interest, dividends and rent on land indicated on Page 199 of the report. She wanted to know what irregular expenditure on Page 215 had still not been condoned at this stage.
Dr Macdonald said there had been big drop in irregular expenditure. The only amount that had not been condoned was R55 000, which was mentioned in the presentation. All other irregular expenditure had been condoned.
He explained the under-spending by using an example. If 15 social work graduates applied for permanent positions in the Department and their applications were successful, their appointments would result in filling vacancies which in turn would result in a decrease in grant spending. The Department could not use the money to employ more people, because it would result in overspending in the following financial year.
Regarding interest received, he said the Department did not have much revenue. The interest was accrued from the Department’s debtors.
Ms Makamba-Botya commented that the increase in machinery and equipment expenditure from 2017/18 to the current financial year had been due to purchases of audio-visual equipment, radio equipment and office furniture, and asked for a breakdown of those purchases. On the irregular expenditure related to the current year, she wanted to know why the incorrect service was utilised.
Dr Macdonald said the breakdown could be provided to the Committee. One of the key areas in the increase had been items such as computers that were more than five years old, and which needed to be replaced. These items cost less than R5 000 each.
On brand names, he explained that the Department realised it had already paid a service provider and that it had to advertise with a specific clause in the advert regarding local content. As soon as the Department used a brand name, it automatically excluded others, which resulted in its irregular expenditure. These cases were related to the R55 000 which was under investigation.
Ms Maseko asked what the Department were doing with items replaced after the five-year period.
Dr Macdonald said the first step was cleaning all data stored on the old computers. They were then refurbished and donated to the Department’s designated NGO organisations. It donates all its broken furniture to an organisation in Mitchell’s Plein. There was a programme in the organisation to train young people to restore this furniture and sell it.
Mr M Xego (EFF) referred to Page 184, Section 4.1, and said the reason given for the under-spending had been the inability to find suitable candidates. He asked what was at stake to find suitable candidates, considering the unemployment rate. Under social welfare services, he wanted to know what measures were in place during the waiting period for modification on service delivery. What action had the Department taken to ensure the NPOs comply with rules and regulations? He asked how bid commitments under one year on page 210 worked. On movable and tangible assets under investigation on page 218, he wanted to find out how far the investigation was, and if any verification could be done.
Ms Maseko commented on the Department’s struggle to find suitable candidates. She asked what proactive action had been taken on the Department’s side. She also asked for a report on the allocation of bursaries to non-employees.
Dr Macdonald responded on the Department’s inability to find suitable candidates. Its budget was always based on the projected staff costs for the year. During the course of the year, the number of employees would decreases due to resignations, early retirement, cashing out the pension fund, etc. It was therefore hard to predict the compensation budget. Provincial treasury had a rule that the compensation budget could not be allocated to anything else, and any balance must be reimbursed back to them. The average period of time to fill a vacancy took up to six months, while it took only one month to have a vacancy. The Department itself could not predict whether suitable candidates could be found. He further reminded Committee that not being able to fill vacancies negatively overstretched the Department’s employees, putting extra pressure on staff.
For social welfare services, the Department had engaged in late procurement for the vehicles for disabled persons. It was a first-time initiative, and the fund that was used to purchase those vehicles had been provided by provincial treasury. This had been done in light of the court case to increase attention to children with disabilities. The Department had decided to give the money to Public Works, because it was cheaper to ask them to purchase them, and then they could be donated to charity.
The Department also assisted with Early Childhood Development (ECD) facilities that were not registered. The registration was valid for five years. After the five-year period lapsed, the Department had organisations to help them re-register. It was also aiming to ensure the requirements were standardised. In some areas where ECD was not needed, there was a children’s play group. A successful example would be the one in Ocean View.
Bid commitments of less than one year were listed because contracts between the Department and service providers usually ranged between three and five years in duration.
Regarding bursaries for non-employees, the Department did have an internal bursary scheme to get staff into specialisation training. This was also done to create the necessary capacity in struggling areas. The Department used to have a programme that specialised in this, but it was stopped by national government.
Ms Nkondlo asked the Department to explain how it budgeted for its spending in relation to its targets. Under-spending would mean that either the resource had not been fully utilised or the set targets were too optimistic. She would not want the Department to come to the Committee to demand more funds, using this as an excuse. On page 232 of the report, which referred to contingent liabilities, she wanted to know the actual details of the injury and damage cases. On Page 230, the report said that the Department had spent R10 000 on jazz tickets -- for whom had it spent R10 000? Under ‘Commitments’ on Page 209, what had been approved and contracted, and what had been approved but not yet contracted? What did staff debt and other debtors mean on Page 206?
Dr Macdonald responded that the under-spending the Member had mentioned was not material. The bulk of the set targets were determined either by the funding given to NGOs or by services provided by social workers within the region. The bulk of the underspent amount was related to the administrative support unit under which a few vacancies could not be filled. These vacancies could not be filled because the Department had struggled to find suitable candidates, and this had directly affected service quality. He cautioned that targets did not translate into spending, but into service standard quality. The Department’s inability to fill vacancies compromised this quality.
With the underspending on compensation of employees (COE), there was always a possibility that a post like this was vacant. This was impossible to plan.
On contingent liabilities, the Department had been receiving these claims for years. Most of them were dealt with through state attorney processes. As the report indicated, an amount of R172 000 had been reduced because the applicant had withdrawn the case.
The jazz gift had been a donation that the Department had received, not the other way around. It had a strict process that once a gift was received, the accounting officer needed to give approval or non-approval for it. Disclosure of all gifts was a rule in the Department.
On contingent assets, the Department explained that it had claims against certain beneficiaries or organisations.
Regarding ‘commitments,’ the Department explained that commitments between service providers and the Department had to be stated as either approved and contracted, or approved but not yet contracted.
Ms Nkondlo asked whether the Department did work flow processes. In her view, if it did this it would be able to quantify what the cost of the service was for each delivered service.
Dr Macdonald said that the Department did have work flow processes, but it depended on the services rendered. It was impossible to do a universal cost estimate because of the unpredictability of work. For instance, an NGO worker drives to rural areas very far to carry out work, and this could not be compared to the situation in the city, where transport was convenient. However, he assured the Committee that the Department did cost estimates wherever it could.
Mr Bosman commented that the disaster policy should be looked into. The Standing Committee on Social Development could look at the policy as well.
The Chairperson asked if there were any other issues.
Mr Maseko asked the secretary to provide the Committee with a list of documents they had required from the Department during the meeting.
Ms N Bakubaku-Vos (ANC) remarked that the Department was only funding the old NPOs, and those were owned by white people. The Department did not care about NPOs owned by black people and those that were in the rural areas.
Mr Bosman said in social development, certain positions were aligned to certain skills and qualifications, especially those related to children. He pointed out that the Department had worked quite hard to take over some of BOSASA’s work and assisting with NPOs’ profiles. Ms Bakubaku-Vos’s statements may be unfair. He said there was a need to ask for a municipal policy in terms of emergency planning. The Department had to be given a time line on when to set up.
Ms Baartman cautioned the Committee to be careful not to ask for information that was already in the annual report.
Ms Nkondlo pointed out that the cause of underspending had been the vacancies, and the vacancies were due to the Department’s inability source the necessary skills. She wanted information on the particular skills that it was struggling to get.
Ms Maseko said that these issues had been raised with the Department in the 5th term. She suggested promoting people who were already in the system and were on the bursary programmes, to fill those vacant positions. She cautioned the Committee not to debate the matter of scarce skills, as more debates would lead to another annual report. The Department should rather be asked to send them information in writing.
Mr Bosman suggested inviting the Departments of Human Resource and Social Development, as well as the corporate sector, to the Committee so that the Members would be better informed on the procedures for making appointments.
The Committee coordinator suggested a joint meeting, because SCOPA was more financially oriented.
The meeting was adjourned.
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