The Auditor General of South Africa (AGSA) briefed the Committee on the 2020/21 audit outcomes of the National Department of Tourism (NDT) and SA Tourism (SAT). AGSA noted that there has been a regression in the last two years in performance reporting of NDT and SAT.
A major sticking point for Committee members was the lack of department oversight in how the funds from the Covid-19 Tourism Relief Fund (TRF) and the Tour Guide Relief Fund (TGF) were allocated. They said that there was a lamentable misappropriation of funds and a lack of robust measures resulting in money being unaccounted for, allowing state employed persons and others to benefit unduly from these relief funds. Members were also concerned about the lack of thorough investigations into recurring audit findings over several financial years. They reiterated the need for measures to recover misused funds identified in forensic investigation reports and to improve on implementing the Auditor General recommendations.
The Chairperson pointed out that there would be two Portfolio Committee meeting that day as the Annual Reports needed to be considered before Parliament rises in December. She lamented that based on the presentation document on the audit report, the audit outcomes did not look good.
Department of Tourism & SA Tourism 2020/21 Audit: AGSA briefing
Ms Sangeeta Kallen, AGSA Deputy Business Executive, touched on the role of AGSA to assist the Portfolio Committee in its oversight duties. The audit focus was on fair presentation of the annual financial statements, reliable and credible performance information and assessing compliance with laws and regulations governing financial matters. The outcome of the annual performance reports show that NDT and SAT have regressed over the past two years. NDT had inconsistencies which were later corrected by management. With SAT, the efficiency of its programme was not measurable because it was not specific about their intended outcomes and processes. Of the six AGSA recommendations from the special audit on the Tourism Relief Fund (TRF), only one was carried out. It found that with the R30 million relief fund for tour guides (TGF), some beneficiaries did not meet the criteria, had invalid IDs or also benefitted from other grants.
AGSA noted the root causes for this regression. The SAT management disregarded procurement processes for expenditure incurred by it and paid by a third party, Tourism Marketing South Africa (TOMSA). There were inadequate reviews of annual performance plan and annual performance report. The audit action plan was not implemented in time to prevent reoccurrence of compliance challenges. There were no preventative controls for the Tourism Relief Fund and the Tourist Guide Fund to mitigate the risk of giving money to applicants who did not meet the requirements.
AGSA recommendations included:
- SAT needs to develop and implement the audit action plan on time to address audit findings;
- Management needs to enhance the review process on annual performance reports;
- An investigation is needed on relief fund monies and a recovery process needs to take place.
Ms Gomba (ANC) asked AGSA to unpack the conflict of interest that was referred to; to whom were the duplicate payments made and what was meant by the reference to local content in the presentation.
Mr M De Frietas (DA) commented that it seemed an investigation was not going to be carried out by AGSA but it was recommending that an investigation take place. Will this investigation be carried out?
Ms Gomba (ANC) asked about improving Department oversight in resolving the audit findings. How many of the audit findings have been resolved? What percentage of findings from the previous financial year have not been resolved? Were improved procurement systems put in place? Has there been an improvement since the recommendations were made? If there are no improvements, can AGSA say why there were no improvements?
[Due to load shedding part of the discussion on this digital platform was not captured].
Ms Kallen replied that AGSA has two processes for recommendations. Firstly, they have an early follow-up process where they review the audit action plan and monitor progress on the adoption of recommendations. If there is non-compliance, AGSA brings this up and notes it for follow-up in the next financial year. She could not say who the beneficiaries of the duplicate funds were as she did not have their names in this meeting.
In response to Mr De Frietas, Ms Kallen replied that an investigation had already been carried out. It is part of the audit process to ensure a follow-up is done on irregular expenditure, fruitless and wasteful expenditure and non-compliance with legislation. However, these investigations are carried out by the accounting officer or accounting authority. In the case of the 2020/21 audit report, AGSA is recommending an investigation, but that investigation will not be carried out by the Office of the Auditor General unless AGSA specifies that is should be. What AGSA does is review the recommendations to see if the mandate of this investigation should be conducted by AGSA, the Office of the Minister or the entity itself.
Mr P Moteka (EFF) wanted more specificity on the relief funding. How many beneficiaries received money inappropriately, and how much money did they receive? How many municipal officials received money and how much did they receive? Could AGSA speak about those relief funding applicants that received this money with invalid IDs or used the identity of deceased individuals?
Ms Kallen replied that for the Tourism Relief Fund there were 32 beneficiaries that were found not to meet the criteria for receiving these funds. There were 36 beneficiaries who did not comply with the criteria. There were 35 state employees that unduly benefited from this fund. For the Tour Guide Relief Fund, there were 58 beneficiaries who were either state employees at a municipal level or were public entity employees at a departmental level. Breaking this down further, 17 of these beneficiaries were deceased or the benefit was received on deceased people’s identities, and 26 of them received duplicate payments. Beneficiaries who also received money from the SASSA grant were 273. 100 of these beneficiaries were essentially double dipping and receiving money from both the Tour Guide Relief Fund and the Tourism Relief Fund. 1172 recipients did not have valid IDs and 641 of these received payment in the time period that was not part of the criteria, which demonstrated more double dipping tendencies.
Ms Gomba asked if the risk management or audit committees in the Department were functional. Surely the NDT audit committee was not doing an adequate job if these are the figures showing up in the special audit report?
Ms H Winkler (DA) asked about the over-expenditure in the tourism marketing budget. The initial budget was R266 million but actual spending ended up at R405 million, how come? For the TOMSA expenditure, SAT did not have documentation to adequately explain what the money was used for. How much money was used there?
The Chairperson asked AGSA to elaborate on the missing integrated systems, or if this was just negligence on the part of the Department?
Ms Kallen replied that there was an evaluation of the functionality of the audit committee in the Department and its functions do exist. They provided a level of assurance to AGSA throughout the year and did carry out their duties. However, a recommendation to the audit committee was that it need to improve its oversight monitoring of the audit action plan.
On the recommendations AGSA raised in previous years, the audit committee had an audit action plan in place and it was doing the required monitoring. However, the lack of timely implementation of the audit action plan was the reason certain non-compliance findings kept cropping up. The action plan was just not effective. Tying this to the TOMSA expenditure, the amount of money identified in expenditure through invoices and AGSA own testing methods was R33 million. However, because there was no proper system to keep track of these expenses, it cannot be concluded that the amount is complete. The investigation does highlight that there was a level of deliberate system circumvention, from an accounting perspective, for these expenses and the procurement processes.
On the Chairperson’s question about missing systems, for both the Tourism Relief Fund and the Tour Guide Relief Fund, there should have been an automated system to implement the criteria for receiving funds. NDT faced problems with this system and it also faced problems with some of the relief fund applications. A recommendation was made to NDT that the criteria for application needed to be amended. However, these amendment changes were being done manually rather than through the automated system. AGSA did audit the system while it was being evaluated and did identify in a report some of the risks and shortcomings together with a recovery process. Ultimately, the lack of a stable system to manage these relief funds is what will need to be taken into account as a lesson learnt for any other relief fund that will come out of the Department.
Another AGSA official added that it is not that SA Tourism did not achieve its targets. AGSA found that SAT did not have a specific plan in place for how many partnerships it wanted to enter into for the purposes of this programme. In the end SAT settled on two partnerships, one was for R2 million and the other for an amount just below that. The concern is not SAT did not deliver or did not achieve what it should have, but that its plan was not specific. Ultimately, we could not determine if SAT overachieved or underachieved.
The Chairperson stated that this was indeed a damning audit report that demonstrated that money was deliberately stolen. Having 17 deceased persons receive money and having R34 million in irregular expenditure was a lot. As the Portfolio Committee, they have to ensure that they do their job in carrying out the oversight that must be done working hand-in-hand with the Minister of Tourism. In the next meeting, the Minister will detail how she plans to recoup the money. But what is clear is that a lot needs to be done to turn things around.
Ms Winkler asked in what instances can management override procurement and other financial controls in third party matters such as TOMSA.
Ms Kallen replied that in AGSA forensic reports they had picked up a few instances of expenses and the involvement of senior management. What enables this override is that the funds are coming in from a third party such as TOMSA, allowing for this override.
The Chairperson asked about the money recovery process for employees that leave and work elsewhere after such a investigation report.
The AG replied that even if an employee leaves, they are still held liable for whatever may have come up in the investigation. The requirements for the misappropriation of public funds and/or irregular expenditure must be followed up and consequence management can be carried out in many forms. An employee who has departed the department can still be held under personal liability from a criminal case perspective. If the employee is still part of the organisation then disciplinary action should take place.
The Committee read through and adopted the Committee Report on the NDT Fourth Quarter Performance.
The Committee minutes of 7 September 2021 were adopted unamended.
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