Progress in implementing AGSA recommendations: Audit and Risk Committee briefing; Department 2018/19 Quarter 2 performance

Meeting report

Department of Women, Youth and People with Disabilities: Second Quarter report

Ms Ayanda Mafuleka, Chairperson: Audit Risk Committee, Department of Women, Youth and People with Disabilities (DWYPD), briefed the Committee on the Department’s second quarter performance.

She said the Audit Risk Committee meets every quarter with the DWYPD, and that their previous meeting on quarter two performance was on 28 October. At this meeting, they had processed 13 reports, which included financial information reports for the second quarter, an audit action plan, a risk management report and an internal management report.

While the Audit Risk Committee was happy with the DWYPD’s audit action plan, she was equally concerned about its performance and the progress made thus far. She was particularly concerned about its procurement processes, irregular expenditure, unauthorised expenditure patterns in previous years and risk concerns with information communication technology (ICT) governance, as identified in the Auditor General of South Africa’s (AGSA’s) audit report finding. The Audit Risk Committee would continue to assist the Department to resolve these issues, and had a meeting on 22 November with AGSA and DWYPD’s management to discuss how the audit action plan would be implemented, in order to resolve some of its challenges.

Ms Mafuleka highlighted the findings of the monitoring process which was submitted on 28 October. The DWYPD had resolved some of the issues in its action plan and had provided assurance that it would meet its targets of the audit action plan. However, of the 59 findings raised, 25 findings (42%) had been cleared, while 34 findings remained uncleared. The findings that were cleared, were based on material adjustments to the annual performance report and financial statements, which were resolved at the end of the 2018/19 financial year.

Despite this progress, the DWYPD was behind with meeting its target on the audit action plan. It had not started on five of the targets in its audit action plan, which pertained to human resources (HR) and ICT issues, and 24 of the 34 the uncleared findings had already passed the due dates. The Department had not started on 19 of the targets in the audit action plan which were related to ICT, but once it had resolved these issues, majority of the issues in its audit action plan would have been resolved. Other issues were related to Standing Operational Procedures (SOPs) and submission of portfolios of evidence. 

Ms Mafuleka said AGSA had found that the DWYPD had 14 irregular expenditure transactions that amounted to R979 697 in the second quarter of the 2018/19 financial year, ten of which had been incurred in the previous financial year, but discovered in the 2018/19 financial year, and these amounts had been restated in the second quarter. Subsequent to this finding, the Audit Risk Committee had recommended that the internal auditors of the DWYPD conduct a trend analysis to investigate irregular expenditure, using the previous years’ financial statements. The internal auditor’s trend analysis report had found the following:

• Information relating to the irregular expenditure of previous years could not be provided, and this limited the scope of the investigation;
• The DWYPD had incurred irregular expenditure amounting to R81 021 000 from the 2010/11 financial year to 30 September 2019, which was mainly due to the procurement of goods and services. It had reduced this irregular expenditure over the period to R38 941 000, but the internal auditors were not provided with proof to confirm this decrease. The Audit Risk Committee was investigating this matter.
• The Audit Risk Committee had recommended that the Chief Financial Officer (CFO) must find alternate ways to receive information for internal audit investigations, and that there should be consequence management for irregular expenditure. The Audit Risk Committee also recommended that the DWYPD management should report to the Audit Risk Committee on how it planned to resolve findings from the irregular expenditure trend analysis report.

The Chairperson asked Ms Mafuleka to report on the suspension of the Deputy Director of Supply Chain Management (SCM).

Ms Mafuleka confirmed that the Deputy Director was indeed suspended, which had resulted in capacity issues for the Department. A management consultant had been contracted to work temporarily in the SCM department and investigate irregular expenditure.

She said that unauthorised expenditure amounted to approximately R29 million. The Department would provide reasons for this at the meeting on 22 November.

Although deviations from an allocated budget are allowed by National Treasury, the AGSA audit report findings had suggested that deviations occurred too frequently at the DWYPD, and this was concerning. Although consultant fees were incurred, which deviated from the budget, many of the budget deviations were incurred from catering expenses.

Part of the challenge for the Department was that in the previous administration, it did not have a funded post for the Deputy Minister, and this administration does -- but the budget for the Department had not been adjusted to include her salary. This was a sign of poor financial planning.

Ms Mafuleka took the Committee through the performance information reports, which indicated that there had been no improvement in the second quarter compared to the overall annual report. The DWYPD had recorded a 64% achievement, and would report on this at the next meeting. The Audit Risk Committee had recommended that it should review its policy on performance information and develop standard operating procedures for performance information management.

Discussion

Ms M Khawula (EFF) said she was concerned that the requirement to obtain three quotations through the SCM process was not being followed, and linked this to the rise in unauthorised expenditure. An example was the hiring of a music artist for an event, and whether the money was accounted for. She also asked whether the suspended SCM deputy director was receiving a full salary while serving suspension. She questioned the role of the National Prosecuting Authority (NPA) and whether it was investigating cases of unauthorised expenditure, and if arrests could be made as part of consequence management.

Ms N Sharif (DA) wanted clarity the Deputy Minister’s unfunded post. She also asked for an example of an irregular expenditure contract, and requested to see the report from the DWYPD after they presented it on 22 November.

Ms Desree Legwale, Chief Financial Officer, DWYPD, responded that the matter of the unauthorised expenditure would be submitted to the Standing Committee on Public Accounts (SCOPA) by National Treasury at the end of November. With regard to deviations, she said that the Department had not had any deviations since May 2019.

She confirmed that the DWYPD had an irregular contract, with the appointment of a security company in the 2017/18 financial year. The advertisement for the tender was not published on the government’s E-portal and Tender Bulletin, which went against the SCM regulations, and the Department could not submit the minutes of the tender bid evaluation committee’s meeting. The expenditure would remain as irregular expenditure on a contract until the investigation findings revealed otherwise.

Ms Maluleke said that the DWYPD must report on unauthorised expenditure, unmet targets and budget deviations at its next meeting with the Audit Risk Committee and AGSA on 22 November. She also asked whether the Deputy Minister’s salary was paid by the DWYPD or the Cabinet.

The Chairperson confirmed that the Deputy Chairperson was paid by the DWYPD, through the Programme 1 budget line. She also said that the DWYPD should have communicated the DWYPD’s budget deficit to the National Treasury.

Ms F Masiko (ANC) commended the DWYPD for improving on meeting its targets in the audit action plan. She said there were contradictions with the cleared and uncleared findings, and findings in process, and asked for clarification. She asked why the DPWYD had not started on five of the targets in the audit action plan which pertained to the recommendation on human resources and ICT. It should provide the Committee with timelines on when they would meet these targets. How long would the consultant be investigating the irregular expenditure at the Department?  Why had it failed to submit the required documents for the internal audit?

Ms Mafuleka responded to the discrepancies raised by Ms Masiko, and clarified that she had reported these discrepancies to the departments concerned at DWYPD. She could not reconcile the discrepancies in the information from the HR management. She did, however, confirm that there were 34 findings that were not cleared, with 24 in progress and five that were not started.

The Chairperson also wanted to know how long the consultant would be investigating the irregular expenditure. She requested the DWYPD to respond to the issues being raised by AGSA and the Audit Risk Committee timeously. It was unacceptable that the ICT issues remained unresolved despite the fact that they had been recurring for an extended period. Lastly, she raised concerns about the non-compliance and incurring of irregular expenditure by government departments, despite the availability of frameworks such as the Public Finance Management Act (PFMA).

Ms A Mafuleka suggested that the DWYPD respond to the questions posed, as she felt that majority could best be answered by the Department.

The Chairperson asked the Director-General, Ms Welhemina Tshabalala, whether the person appointed for managing Supply Chain Management was suitably skilled for the position, and whether in general, suitably qualified personnel were identified for positions in SCM.

Ms Legwale responded that the challenge was not that the SCM deputy director was not suitably skilled, but rather that there were not enough personnel for the SCM to operate effectively, and this affected how work was distributed.

Ms Tshabalala said that the DWYPD had submitted a compelling business case to the National Treasury, recommending that the deputy director’s suspension be lifted so that he could assist the Department while the outcomes of his investigation were finalised. However, this suggestion had not been supported. The case had been handed over to the Minister to discuss with National Treasury.

Ms Tshabalala requested that the Chief Director of Corporate Management, Mr Mbhazima Shiviti, respond to the Chairperson’s concerns on the audit report findings on ICT, because he was the only person present at the meeting who was well acquainted with ICT. She added that this was the reason the Department had had to hire a consultant.

Regarding whether the Deputy Minister was paid through the DWYPD or the Cabinet, she said that she preferred not to talk about her salary, but would rather speak to her function as a Minister.

Ms Val Mathobela, Chief Director: Office of the Director-General, responded to the performance information questions. She said that the DWYPD was reviewing its policies and aligning these policies following the findings of the audit report. This had been the first time that the performance information division had had a finding. She attributed this to management lacking a common understanding of the implementation of policies around planning and reporting. The division would conduct consultations with all departments within the DWYPD to ensure that they all have a common understanding of the performance information policy, and how it must be implemented.

She responded to Ms Maluleke’s concern, that if management was responsible for setting up performance information policies, why it struggled to meet its targets. She said that going forward, the DWYPD had developed an operation plan as an outcome from the annual performance plan, to closely monitor operations and activities.

Mr Mbhazima Shiviti took Members through the ICT audit review and its findings. The ICT department would be meeting this month with the Audit Risk Committee to consider its strategy on improving the Department’s ICT performance. He was comfortable with the performance of the ICT system, despite some few challenges with the State Information Technology Agency (SITA).

The Chairperson responded that she was not comfortable with the performance and progress of the ICT department, because it had achieved low targets.

Mr Shiviti read the non-achieved targets to the Chairperson and said some of the audit findings pertained to budgetary constraints and non-compliance due to not having acquired the necessary permission.

The Chairperson said that Mr Shiviti would be accountable for the non-achievement of targets. At the next performance review meeting, there needed to be an improvement in the ICT performance.

Ms Masiko asked Mr Shiviti whether the ICT department had a back-up for its server.

Mr M Shiviti responded and said that it was a difficult question to answer, but added that the server had crashed in the previous year.

The Chairperson said that the ICT department must provide the Committee with an update on its progress on 25 November.

Ms N Sonti (EFF) said there must be further investigations into irregular expenditure. She questioned whether the internal auditors were trustworthy, and whether the Audit Risk Committee would implement the recommendations suggested by AGSA.

Ms Masiko said she was concerned that the server system had crashed in the previous year, and that there had been little progress in getting additional back-up for the server.

The Chairperson agreed, and said that no excuses would be accepted at the meeting on 25 November.

DWYPD Second Quarter Performance.

Ms Tshabalala said she would not present the entire report because many of the issues had already been discussed.  Of 36 targets planned for the overall performance information in quarter two, 23 (64%) were achieved and 13 (36%) were not achieved.

Ms Mathobela said that in programme one (Administration), 11 targets were planned, and six were achieved, while five were not achieved.

In programme two (Social Transformation and Economic Empowerment), out of seven targets planned, five were achieved and two were not achieved.

For programme three (Policy, Stakeholder Coordination and Knowledge Management), 11 targets were planned. Nine were achieved and two were not achieved.

Dr Bernice Hlagala, Acting Chief Director: Youth Development, presented the overall performance for programme four (National Youth Development). Of the four targets planned, three were achieved and one was not achieved. 

Mr B Palime, Director: Rights of Persons with Disabilities, presented the overall performance for programme five (Rights of Persons with Disabilities). Out of three targets set, none was achieved.

Discussion

The Chairperson thanked members for their presentation of the performance of the various programmes. However, given the poor performance reported, she asked whether there was a continuity management or disaster management plan for the next meeting with the Committee on 3 December. 

She asked why there was a decrease in programme two’s budget, and an increase in programmes one and three, when programme two was considered the most important programme at the DWYPD.

Ms T Mgweba (ANC) questioned why the term ‘oversight’ was still used by the Audit Risk Committee and the DWYPD, instead of the term ‘monitoring and evaluation.’ The Committee had resolved on this at previous meetings, stating that the oversight role over government departments was done by Portfolio Committees, and the terms had been changed to avoid a duplication of roles and duties. She also queried the drop in the National Youth Development Agency’s performance, and asked whether the entity still received funding.  

Ms Sharif acknowledged the improvement in achieved targets for programme two. However, she wanted to find out how much was spent on the Deputy Minister’s department. She enquired about the expenses incurred on the Women’s Day event in August 2019 in Vryburg, North West. Was it justifiable for the DWYPD to spend about R600 000 on catering services?

Mr S Ngcobo (DA) asked whether the DWYPD’s website had been updated, because he had noticed that its new mandate -- which includes youth and persons with disabilities -- was not reflected on its website. In addition, he wanted to know how if the youth coordinating programmes were positively impacting on young people.

Ms Maluleke agreed with Ms Sharif’s comment on the improvement of programme two’s targets, but was concerned that there had been no achievements in programme five in respect of persons with disabilities, and asked whether measures had been put in place to rectify this. She also questioned why reports that were meant to be submitted to the relevant investigation bodies took longer than necessary.

The Chairperson explained that reports had to go through the Director General before they could be released to investigators.

Ms Maluleke disagreed with the Chairperson, however, emphasising that it should not have to take three months to gain authorisation from a Director General and submit a document to the auditors. 

Ms Masiko supported Mr Ngobo’s query on the DWYPD’s website. She then directed her questions to HR management issues. Why had seven employees not submitted their performance agreements? Was the post of one person who had resigned a critical post? She commended the DWYPD for improving its programme two targets, but questioned whether these targets met the intended objectives of the department.

Ms Masiko said that although Cabinet had approved the Sanitary Dignity Programme policy, she was concerned that provinces were not implementing this programme using the policy guidelines. She felt that the criteria used to identify beneficiaries were not uniform for all provinces. She was also worried as to whether some of the sanitary towels had gone through quality assurance at the South African Bureau of Standards (SABS). She added that she had attended a lesbian, gay, bisexual, transgender, queer and questioning, intersex, and more (LGBTQI+) intergovernmental dialogue, and asked whether the outcomes of the dialogue were going to be considered by the DWYPD.

Ms Tshabalala responded to Ms Masiko’s comments regarding the allocation of sanitary towels to beneficiaries. She confirmed that there were norms and standards which were used to allocate sanitary towels. The process to get these sanitary towels SABS approved was lengthy, but the Department ensured that all those that were procured had gone through quality assurance.

NYDA board

The Chairperson advised Members that a process to select board members for the National Youth Development Agency (NYDA) was on-going. She had written a letter to Parliament to request publication of advertisements for board member applications. She added that if current board members wanted to apply again, they could do so.

The meeting was adjourned.