In a virtual meeting, the Committee was briefed by the Auditor-General of SA (AGSA) and Department of Sport, Arts and Culture on the Department’s audit outcomes for the 2019/20 financial year.
The AG said overall, the sport portfolio regressed in the audit outcomes in comparison with the 2018/19 financial year: the South African Institute for Drug-Free Sport (SAIDS) regressed from a clean audit due to non-compliance findings on supply chain management (SCM). The Department of Sport and Recreation maintained its clean audit outcome. Boxing South Africa (BSA) received an unqualified audit outcome regarding findings on compliance. The Department of Arts and Culture achieved an unqualified audit opinion.
Members raised concerns on the lack of consequence management especially at Boxing SA, and the other entities, which were not following the recommendations given by the Auditor-General’s office. Members also asked about the irregular expenditure under Arts and Culture and asked if the AG office had suggestions on the steps to take, especially when it comes to wasteful expenditure and also if managers received bonuses from respective departments.
The Department of Sport and Recreation said, in the year under review, (1 April 2019–31 March 2020), the Department achieved 30 of 33 targets (91%). Challenges faced by the Department were financial constraints and uneven distribution of resources across the sporting codes, legislation that does not fully support the strategy, poor adherence to deadlines by external stakeholders, project planning not adequately informed by research, changes in leadership and COVID19.
The Department of Arts and Culture said the 2019/20 financial year saw an improvement in the performance of the Department compared with the 2018/19 financial year. The Department achieved 30 of 38 targets (79%). It spent 95% of its budget.
Members asked the Arts and Culture Department to keep the Committee informed of its programmes, especially the Covid 19 Relief Fund roll-out for artists. Members said Boxing SA is a concern, regarding the issues constantly being raised against the Board, and its failure to meet with the Department or the AG office. Members also asked about the wasteful expenditure and wanted to know the latest updates on the investigations carried out.
The Chairperson highlighted the importance of wearing masks and sanitising, to reduce the spreading of Covid-19. The Chairperson asked Members to observe a moment of silence for all those who passed on from the virus.
Presentation by Auditor-General (AG)
Mr Eugene De Haan, Business Executive, Auditor-General of SA (AG), presented the 2019/20 audit outcomes of the sport, arts and culture portfolio. Overall, the sport portfolio regressed in the audit outcomes in comparison with 2018/19 financial year: the South African Institute for Drug-Free Sport (SAIDS) regressed from a clean audit due to non-compliance findings on supply chain management (SCM). The Department maintained its clean audit outcome. Boxing South Africa (BSA) received an unqualified audit outcome regarding findings on compliance. None of the three auditees received a qualified opinion or had to make material adjustments to the submitted financial statements. All three auditees achieved an unqualified opinion only because they corrected all misstatements identified during the audit. None submitted a performance report without errors.
The presentation by the AG touched on findings around disregard for compliance with legislation, status of internal control and assurance provided.
Regarding financial health and financial management, Sport and Recreation South Africa (SRSA), SAIDS, and BSA, had favourable financial health assessments in 2019/20. Overall, BSA’s financial health has significantly improved from 2018/19 but there was concern around revenue management and cash management.
For the current year there was no fruitless and wasteful expenditure incurred for the portfolio. BSA did not investigate fruitless and wasteful expenditure incurred in prior years. Compliance with legislation on consequence management could not be confirmed. This is because proper and complete records were not maintained as evidence to support investigations into irregular and fruitless expenditure, for the majority of the prior year instances.
This is in contrast to irregular expenditure which had more than doubled compared to the prior financial year.
There was a regression in SCM compliance.
Recommendations to the Department and its entities included: the audit action plans for the Department and its entities should be implemented and monitored, to ensure continued audit outcomes improvement in the portfolio.
SAIDS requires a re-enforcement of regulations through workshops and constant update of policies to align with changes in legislation. Consequence management should be implemented by BSA. Investigations into irregular and fruitless expenditure should be performed and proper records be kept and appropriate actions be taken. The Portfolio Committee should request management to provide feedback on the implementation and progress of the audit action plans to ensure further improvement in the audit outcomes of the portfolio. The Portfolio Committee should monitor implementation of recommendations to the Department and entities above.
Mr B Madlingozi (EFF) wanted to know about a query raised against the National Arts Council and how it was possible for it to have a clean audit after such allegations were raised.
Mr T Mhlongo (DA) welcomed the report by the AG and raised a concern on the procedure or timeline for Departments to submit documentation. He asked if there is any consequence management, and wanted to know what the AG office does once it knows there was misconduct.
Mr Mhlongo said recommendations were repeated and asked what was done to make sure these recommendations are not repeated in future.
Ms V Malomane (ANC) accepted the presentation and asked what the AG office does once a report is submitted to it. She raised the issue of time frames given to the department.
Ms V Van Dyk (DA) asked about the irregular expenditure under Arts and Culture, which amounts to more than R60 million. She wanted to know the indication for the risk of R7 million, and asked if the AG office had suggestions on the steps to take, especially when it comes to wasteful expenditure and also if managers received bonuses from respective departments.
Ms Van Dyk was concerned about the lack of consequence management and asked what is being done. She said there needs to be a closer look at the qualifications of those who are employed because employees are not performing duties well.
The Chairperson thanked Members for asking questions. She asked the AG Office if the departments were following suggestions, especially Boxing SA. She raised a point about not understanding the report because there were certain things not aligning regarding the Boxing SA matter. The Chairperson wanted more clarity on what the Office said to Boxing SA. The Chairperson asked if the AG office experienced problems with departments not following recommendations.
Response by AG office
Mr De Haan said the AG office works in line with the performance agreements when it comes to timelines, but it was impacted by Covid-19 because most departments did not have all employees at the office. Audits were affected by Covid-19 just like any other business and the Office tried to work electronically. Under normal circumstances financial statements are submitted by the end of May but this year Treasury granted an extension, and this resulted in some work completed only at the end of September, because of the number of employees who were working. No one knows how it is going to be this year because of the second wave. Timelines are advised in line with legislation, and departments are to work with the executive structures and meet deadlines and procedures.
On the issue of consequence management, it is dealt within the performance agreements and it determines how one is to be held accountable. The accounting authority handles these issues. Regarding the root causes of not following recommendations, he said the AG office found out there are action plans in place on what must be implemented, but departments do not follow it at all and this is a problem. He suggested the Committee should at least play an oversight role in making sure the plans are followed.
Ms Nelisiwe Maninjwa, Senior Manager, AGSA, replied to the question about wasteful expenditure and said the reason why not all entities were included in the presentation is because the Office highlighted the biggest contributors on expenditure. On the issue of action to be taken against the National Arts Council, Ms Maninjwa said Treasury issued a specific framework which allows departments to deal with these issues. There is a process to be followed. She said the AG office will follow and verify these matters. On the matter raised by Mr Madlingozi, she said there was a clean audit because some of the issues were raised years back and did not have an effect on the current financial year. Ms Maninjwa said there are standards and procedures to be followed by the AG office on how it must conduct its work, and it is guided by legislation.
Ms Mbali Tsotetsi, Business Executive, AGSA, said regarding the qualifications of management posts in supply chain management, the AG office is currently not looking at the qualifications, but looking to make sure the posts are filled adequately. However, when it comes to appointments, this is when the Office looks at qualifications, because once a person is in the post the Office cannot look into qualifications then.
The management must have workshops to equip it with how to deal with certain issues. When it comes to performance reports all the reports submitted had mistakes, but it was rectified. Boxing SA doubled irregular expenditure, and there is no consequence management. These matters were reported to the Board to make sure there is consequence management. The Board has to make sure it implements the recommendations given by the AG office.
The Chairperson thanked the AG Office for the presentation and for replying to questions asked by members. She asked Department of Sport and Recreation South Africa (SRSA) to make its presentation.
2019/20 Annual Report SRSA
The Deputy Minister of Sport and Recreation South Africa, Ms Nocawe Mafu, offered condolences to the Committee on the passing of the Committee’s researcher. She emphasised the importance of wearing masks so as to combat the Covid-19 pandemic.
Deputy Minister Mafu reminded the Committee that the annual performance reports to be presented, are for the 2019/20 financial year, and sports was separate from arts because it was before the departments were merged.
Mr Manase Makwela, Director: Strategic Management, Monitoring and Evaluation, Department of Sport and Recreation (SRSA), said the presentation covered the Annual Report of SRSA, which ceased to exist because of its merger with Arts and Culture to form the new Department of Sport, Arts and Culture (DSAC).
The word ‘Department’ in this presentation refers to SRSA. The main responsibility of SRSA was to develop national policies and guidelines for sport and recreation in the country. Partners assisting with implementation were provinces and municipalities, as well as National Federations, and other agencies such as non government organisations (NGOs).
Despite the delivery of sport and recreation in three different spheres of government, the actions and initiatives within SRSA’s mandate were coordinated to maximise impact. The Department administered two public entities namely, Boxing South Africa (BSA) and the South African Institute for Drug-Free Sport (SAIDS).
In the year under review, (1 April 2019–31 March 2020), the Department planned to achieve 33 targets. The Department maintained its performance in the 90s (91% in relation to 2018/19: 91.4%) despite the COVID 19 pandemic. Challenges faced by the SRSA were financial constraints and uneven distribution of resources across the sporting codes. A significant number of federations still do not have proper administration resources, such as human and other office infrastructure resources, which impede the effective governance of sport in general. SRSA continues to explore alternative funding models to ensure strategic goals are not compromised. It optimises citizens’ access to sport and recreation; transforms the sector; and supports athletes to achieve international success.
SRSA adopted an enterprise risk management approach. This approach is implemented by employees at every level of the organisation and applied in strategic settings. It is also designed to identify potential events which may aﬀect the organisation, and thus ensures risks experienced are within its risk appetite, to provide reasonable assurance regarding achievement of the organisation’s objectives.
The document is reviewed regularly to ensure it remains current and relevant. Management developed an annual risk management implementation plan which was endorsed, noted, and approved, by the Audit and Risk Committee and the Director-General.
The Audit and Risk Committee reviewed the Department’s implementation plan for audit issues raised in the prior year and is satisfied the Department placed greater effort into improving the internal control environment.
The Auditor-General of South Africa during the year under review found a recurrence of a few similar audit findings. The Audit and Risk Committee reviewed and accepted the opinion of the Auditor-General of South Africa. The Committee concurs and accepts the conclusions of the Auditor-General of South Africa on the annual financial statements and annual report.
The Auditor-General found the financial statements presented fairly, in all material respects, the financial position of the department as of 31 March 2020 and its financial performance and cash flows for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.
Department of Arts and Culture 2019/20 Annual Report
Mr Vusithemba Ndima, DAC, said that in May 2019, the President announced the new reconfigured Cabinet of the sixth administration. The configuration came with several changes which saw among others, the former Minister of Arts and Culture having Sport added to his portfolio, to become the Minister of Sport, Arts and Culture (DSAC).
The 2019/20 financial year saw an improvement in the performance of the Department compared with 2018/19 financial year. This is despite COVID-19 pandemic which hit SA shores before the completion of the 2019/20 financial year. Some of the contributing factors to the improved performance include improved understanding and compliance with the Frameworks for Strategic Plans and Annual Performance Plans, thus resulting in improved planning, budgeting, and reporting process. Improved synergy and alignment between the quality assurance providers now exists, for example, Internal Audit, Monitoring and Evaluation, Finance, and Risk Management Unit. More internal controls were implemented as per recommendations from the Internal Audit Unit and Auditor General, thus improving the standard operating procedures and subsequent achievement of the planned targets.
A report on the audit of compliance with legislation found material misstatements of contingent liabilities and leases identified by the auditors in the submitted financial statement were corrected, and the supporting records were subsequently provided. This resulted in the financial statements receiving an unqualified opinion. Effective and appropriate steps were not taken to prevent fruitless and wasteful expenditure, as required by section 38(1)(c)(ii) of the Public Finance Management Act (PFMA), and treasury regulation 9.1.1.
The fruitless and wasteful expenditure was caused by substandard work performed on the legacy infrastructure projects, and overpricing. Payments were not made within 30 days or an agreed period after receipt of an invoice, as required by Treasury Regulation 8.2.3.
On the expenditure variance per economic classification, Mr Ndima said the variance of R55.5 million is due to delays in the appointment of Transaction Advisers for the conduction of feasibility study for the National Archives new purpose building. Due to the Covid-19 pandemic, flagship events were cancelled/postponed, and provinces could therefore not submit claims.
The variance of R9.5 million under-expenditure is mainly due to: (i) Invoices from Department of Public Works and Infrastructure for work performed at public entities done on a recovery basis, and invoices received were therefore for work performed; (ii) The final report from National Youth Development Agency (NYDA,) regarding the Young Patriots programme was delayed, because the Board of the NYDA had to endorse the report; and (iii) As a result of the late close-up reports submission by performing arts institutions, the department paid the first tranche of the 2019/20 financial year, late. This impacted on subsequent transfer of tranches.
The Chairperson opened the floor to discussion.
Mr Madlingozi asked about issuing invoices. He wanted to know why the invoices were not paid on time. He was concerned about the posts which still had to be filled. Mr Madlingozi wanted to know what the progress was with making sure school children are encouraged to learn and speak in their mother tongue. His last question was about the plans for the compilation of local music, because artists were not generating income because of Covid 19. He wanted to know about the progress of the Covid 19 relief fund to artists, and was concerned about why money was given to theatres and arts centres, because there is no one attending those places at the moment.
Mr Mhlongo concurred with Mr Madlingozi on the issue of the relief fund to artists. He asked the Department why it did not achieve the targets set by the committee. Mr Mhlongo asked for the names of members who were under disciplinary processes which led to consequence management. His sentiments were centered around the point made by the AG office regarding a lack of proper management at certain departments. He went on to ask about the Freedom Park report, and asked if the Deputy Minister and the Department did oversight work before the report was released.
Regarding the recommendations, he was concerned why it was repeated, and this showed the Department was not performing well and should seek legal assistance if it cannot act. It was concerning to see management did not have any workshops. Mr Mhlongo was suspicious about the National Arts Council and said the Chairperson was arrogant to the committee last year when it had a meeting.
The Chairperson raised a concern about Boxing SA, regarding the issues constantly being raised against the Board, and its failure to meet with the Department or AG office.
There was a high irregular expenditure rate, and there was a need to get answers from Boxing SA. The Chairperson was of the view the Committee was going to get a report on Boxing SA which was a positive reflection, but it did not look like this.
Ms Van Dyk noted disappointment regarding the failure of the Minister to be present at the meeting. She said she was directly attacked by the Department, without being afforded an opportunity to defend herself, or state her side of the story. It was untrue she was contacted, as she did not receive any communication from the department. She raised her concern on the difference of the tour offered by the department.
Ms Van Dyk asked about the wasteful expenditure and wanted to know the latest updates on the investigations carried out. She asked to be provided with documentation of the jobs created. She wanted to know if it was possible for the committee to be provided with more information on the overseas trips taken, and how it was helpful to the department.
On the issue of the Chief Executive Officer (CEO), she wanted to know if the CEO resigned, and how many posts were to be filled. Ms Van Dyk wanted a progress report on the bursary scheme and the numbers of those who benefited in KwaZulu-Natal (KZN), and others in different rural areas. Her last question was about progress with the Memorandum of Understanding (MoU) between Schools SA and basic education.
The Chairperson thanked Members for asking questions and asked the department to respond.
The Deputy Minister said the report looked at the Department’s work up to March 2020, and some of the information asked for by Members will be provided in the 2020/21 financial year. It was unfortunate the meetings for the next two days were cancelled, because the Department would have provided more detail. The issue of consequence management is very important, and she asked the Department to furnish the Committee with some of the details, since she knows there are names of officials who were involved in irregular expenditure.
The Deputy Minister asked for some time, so she would get a better understanding on the issue of Freedom Park, and provide a written response to the Committee and Ms Van Dyk.
Mr Ndima replied to the issue of invoices which were unpaid. He said the Department would not pay in 30 days because there was information required before the payments were processed. The Department is very careful about making payments, in the case of Sarah Baartman there were issues which involved changing contractors, and the Department did not want its money to be misused.
On the matter of Covid 19 funds, he said it was an emergency and an overwhelming experience. The first phase of funding had its own struggles, but it learnt from its mistakes. The dissatisfaction expressed by the arts sector is because of the requirements which may not be overlooked by the Department when making payments, because it must be done within the parameters of the law.
Consequence management was done, although it was not the best, but action was taken against individuals and there are still processes to be followed to determine which steps must be taken.
Mr Ndima said SRSA was given an opportunity to adjust the performance agreements, but Covid 19 disrupted its work.
Mr Ndima, in response to the question by Ms Van Dyk about trips overseas, said the Department will be happy to share what it learnt on the trip, and the costs of it, with the committee. He provided context on irregular expenditure, and said, in some instances the Department assigns other entities to assist with infrastructure. All projects handled by the IDT were subjected to a forensic audit which resulted in the contract being terminated. Perhaps the Department should have the capacity within the Department, to see and deal with some of the issues, and not to only react after it happened.
Mr Charles Mabaso, Chief Director: Cultural Development, Department of Arts and Culture, said there were engagements with communities and event chapters when it comes to issues of music. Various engagements were used to promote local content. One of the ideas was to have digital content, and royalties must be paid on time so artists can receive due earnings. Stakeholders were approached and this also resulted in artists performing on Channel O and SABC 1.
Dr Cynthia Khumalo, Deputy Director General (DDG) : Arts and Culture Promotion and Development, DAC, there are roles and responsibilities to be played in making sure children use local languages. There are projects currently taking place where young authors writing in indigenous languages are provided with funding.
There was a special focus on authors who use indigenous languages, and there are literacy awards to show the support. There is a Books and Publishing Unit, which focuses on reading and writing. Dr Khumalo said the Department will brief the Committee in due time on how it was working with artists. The Department embarked on a comprehensive funding structure to improve the ways in which funds are disbursed.
Mr Ndima said money budgeted for by the Department is mainly for administrative purposes and awareness campaigns. There was less travel due to Covid 19, hence there was under-spending by the South African Geographical Names Council. On the issue of jobs created, he referred members to the annexure which included the numbers of jobs created by the department.
The Deputy Minister said the Sports and Arts departments are going to be amalgamated as one department, and this resulted in some posts being frozen, because it would result in duplication of posts. The Department decided not to fill the vacancies.
The issue of school sports is critical to the Department, but the bulk of the work is done by the Department of Basic Education. A meeting was held to discuss the MoU, and a task team was set up to make sure sports in schools resume. She reminded the Committee to keep an oversight eye on the process. The Deputy Minister asked the Department to reflect on the point raised by Mr Mhlongo, regarding decisions taken by management without proper consultation.
Ms V Malomane (ANC) asked about the Department’s progress with infrastructure.
Mr Mhlongo said the Deputy Minister was more involved with the work and should be promoted to the position of Minister. He was concerned about the third phase of funding for artists, and about the Minister holding a media briefing without briefing the Committee first.
Mr Mhlongo wanted to know the number of artists assisted by the Department.
The Chairperson reminded Mr Mhlongo only the President can deploy ministers.
Mr Madlingozi thanked the Deputy Minister for the feedback she provided. He directed a question to Mr Mabaso, and asked for a document which supported the information given to the committee.
Mr Madlingozi wanted to know what role the Department had in making sure local music played, and said the Committee must not beg for this move.
The Chairperson reminded Members the question about MoU was dealt with and a task team was formed, although nothing concrete materialised. It was concerning because the Committee did not understand what the current position was.
Ms Sibongile Mondile, Acting Chief Financial Officer (CFO), SRSA, said the vacancies still open in the Department of Sports are because of the amalgamation of the departments, as mentioned by the Deputy Minister. On the issue of unpaid invoices, only two invoices were unpaid, and it was because of a human error where the date was captured incorrectly. The matter was rectified.
Ms Mondile said Boxing SA, as any other entity, has a CEO and a Board, which deals with issues, but it must be assisted by the department. There were improvements on the management of Boxing SA.
Mr Makwela told the Committee the piloting in KZN ended, and the Department is putting a team together to come up with a report which will give directions on club development around the country. More detailed information will be provided to the committee.
Mr Simphiwe Mncube, Director: Sport Support Services, SRSA, said the bursaries programme receives applications on sports related matters. The reason why the expenditure is low is because learners submit supporting documents which do not meet the maximum funds allocated per student, and this results in under-spending.
Mr Lebogang Mogoera, Chief Director: Infrastructure, SRSA, said in the financial year 2019/20, SRSA completed six projects, and the other projects are close to completion. Delays were due to site inspection, and in some municipalities it was registration and procurement processes which resulted in the projects taking longer than expected.
Looking at the history of SRSA, it can be said the infrastructure development was a success at this stage.
He also referred to the projects completed in the 2018/19 financial year. As for the current financial year, there is quite considerable progress. Some of the problems encountered by the Department are, the MoU was not signed with the Department of Cooperative Governance and Traditional Affairs (COGTA), and it is also delaying some of the projects. Sport was identified as a tool for social cohesion, and this means the projects should be taken seriously. The ring fenced model delivered the desired results, but it must also be mentioned, it has its own challenges.
The Chairperson reminded members to discuss the infrastructure development issue, especially after the decision was made for COGTA to be in front. There are problems between South African Local Government Association (SALGA) and municipalities. It would be ideal to have another discussion on the matter during the year.
Dr Khumalo said the wellness programme is for three years, and it commenced this year. It was informed by the needs of the Department and the sector. It will run until 2023. Everything is aligned to fit in with the Covid 19 regulations, and the Department is now working on making sure the programme is enrolling artists. She said the Committee will be provided with information on how many artists will benefit from the programme.
The Deputy Minister appreciated the comments made by the Chairperson on the issue of infrastructure development because it was important to have a discussion on the matter. She emphasised the importance of building internal structures which will assist in dealing with matters.
The Deputy Minister said lockdown affected the National Schools Championships last year, and it could not take place because it was scheduled for the end of March.
She accepted the criticism of the Covid 19 Relief Fund for artists, because the Department had not reported back to the Committee on the progress of the project. There are preparations for the third phase of funding but it is still in the conceptualisation phase. The Committee will be briefed as soon as it commences.
The Chairperson thanked the Deputy Minister for taking her time to respond to the questions asked by Members. She was also grateful for the comments and suggestions given in the meeting.
Mr Mabaso said a detailed document can be submitted to the Committee, containing the names of those who are engaged with the Department.
The Chairperson thanked Committee Members and presenters for attending the meeting.
The meeting was adjourned.
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