The National Department of Tourism (NDT) obtained an unqualified audit with findings for the financial year 2020/21. The Director General commented on the outcomes of the Auditor General report noting there were a few matters which NDT needed to address. It was ensuring that all the AG recommendations were taken seriously and work is being done to prevent a recurrence of findings. Legal efforts are under way to ensure that lost money is recovered. Although some were internal cases, he was unable to divulge information such as the names of these people and companies. The audit action plan was presented to close the gaps identified in the AG report.
The Director General went through the department programmes highlighting achievements and shortcomings. The common themes that restricted the programmes from achieving their targets were the Covid-19 pandemic and budget cuts. NDT had a recurring challenge with its vacancy rate. Most vacancies were not filled due to the budget cuts. NDT had a R48 million budget cut and despite requests to get more budget from National Treasury, it failed in these attempts. NDT however is working at improving the vacancy rate with a working strategy plan.
The Auditor General identified quite a lot of fruitless and wasteful spending. The bulk of this was due to funds that went into channels illegally from the Tourist Guide Relief Fund. The Director General explained how the Tourist Guide Fund came about and why it was important for NDT to embark on this journey.
NDT gave a breakdown of the expenditure, noting areas that needed to be improved and explaining certain financial variances. The budget for compensation of employees was R336 443 million and R330 703 million was used. The unspent funds were due to the Expanded Public Works Programme (EPWP) incentive budget which was not approved for spending by the Department of Public Works and Infrastructure (DPWI) and therefore the funds were sent back to National Treasury.
Committee members raised concerns about the internal controls which NDT has put in place to ensure consequence management. They noted some challenges were not raised in the presentation. They were concerned if NDT has considered prior audit recommendations as there were several recurring findings such as the large sum of missing funds. They wanted NDT to take accountability for the mismanagement and bring those who are wrong to book.
The Chairperson welcomed the Deputy Minister. She highlighted that the Department of Tourism received a damning report from the Auditor General (AG). She hopes that changes will be implemented, and those who are responsible for the thieving of money will be brought to book.
The Deputy Minister noted that the Minister was having a connectivity problem and was unable to join the digital meeting.
Mr Victor Tharage, NDT Director General, proposed that since the AG has already presented on the audit report, the Department focuses on what has not yet been presented to committee members. The first part will deal with the finances, highlighting how the money was spent. The second part would deal with programme performance, and all the Deputy Directors General are in attendance. The audit outcome for 2020/21 was unqualified with a few matters. One of the matters was within the pre-determined objectives. There was an error and this was later corrected leading to an unqualified audit. Performance information is an area in which NDT was receiving clean audits and this was the first error they had made. They are keeping a close eye on the matter. The financial statements were in accordance with the modified cash system NDT uses. There were two matters to do with procurement. The AG questioned its preferred bidder decision in an instance where the advertisement was specific about the need to break down the price, to be able to assess whether the necessary work would occur within the budgeted costs from the supplier. Unfortunately, the lowest bidder did not breakdown these details, this was however contested between NDT management and the AG. In a second procurement in 2020, the requirement for local content was not specifically stated. NDT had actually paid a lot of attention in this area. Some implementing agents in different provinces were taken through detailed local content training on how they should do that when engaging with third parties. NDT brought in people from the Department of Trade and Industry and Competition (DTIC) to impart skills. This is an area that NDT is keeping an eye on.
Due to the previous audit findings on the Extended Public Works Programme (EPWP) infrastructure projects, NDT conducted investigations. Thereafter, it began the process of recovery and took the results of the fruitless and wasteful spending to the state attorney who was then responsible for taking each case to the provincial level depending on location of the business concern. The state attorney has since left the employ of the state and the cases had to be handed over to another person. Matters that were deemed to be of a criminal nature were reported to the Directorate for Priority Crime Investigation (DPCI). There are updates, and they are trying to go for a prosecution-led investigation to ensure that consequence management is applied. One of the NDT employees has left but is still within the government system. That head of department is aware of the matter, and it will be dealt with internally. A presiding officer was assigned to the case, however they decided that the matter was too old for him to preside over. NDT has since taken the matter to the high court for review.
The Acting CFO took the committee through the financial report for 2020/21. In the four programmes, Administration had a R289 822 million budget and 100% was spent; Tourism Research, Policy and International Relations had a R482 245 million budget. The Destination Development budget was R442 709 million and 97% was spent. Tourism Sector Support Services with a R212 184 million budget had an overall spending of 92%. The bulk of unspent funds was due to funds allocated to the EPWP incentive which was not approved.
The overall target performance of NDT was 84%.
Programme 1: Corporate Management
Ms Rhulani Ngwenya, Deputy Director General, said that the programme had 15 targets and only two targets were not achieved. The vacancy rate target was not met as NDT closed the financial year with a vacancy rate of 11.2%. In the first quarter of 2020/21 there was a hard lockdown and the second quarter allowed for a recovery. NDT filled vacancies with an online application system. NDT has commenced with a programme to close off 2021/22 with fewer vacancies. There was a challenge with budget cuts.
Programme 2: Tourism Research, Policy, and International Relations
Ms Aneme Malan, Deputy Director General, stated that this programme had 14 annual targets and 13 were implemented. The team set up the Tourism Sector Recovery Plan in response to the pandemic. They produced nine monitoring and evaluation reports. Some of these assisted NDT to identify the effects of the Covid pandemic on the tourism sector. This was also used as an opportunity to improve the tourism sector with the use of these strategies. The team also managed the Covid-19 Tourism Relief Fund.
Programme 3: Destination Development
Ms Shamilla Chettiar, Deputy Director General, said that they had nine targets and only eight were achieved. This programme deals with tourism spaces, infrastructure and experiences and with the pandemic there was a restriction in movement.
Programme 4: Tourism Sector Support Services
Ms Mmaditonki Setwaba, Deputy Director General, said that the branch exists to enhance transformation within the sector, to increase skills levels, and ensure that South Africa remains competitive as a destination. The branch had 20 targets and four were not achieved although significant work was done on them.
Ms H Winkler (DA) asked what NDT has done to strengthen internal controls to prevent recurring audit findings. There was a 33% recurrence for NDT and 45% for South African Tourism (SAT). What does NDT intend to do about internalizing the audit outcomes and recommendations to ensure that in the next financial year there has been consequence management. She also mentioned EPWP and asked NDT to explain the exact nature of the wasteful expenditure. She asked for NDT plans for filling senior technical posts, especially senior management service (SMS) level.
Ms M Gomba (ANC) stated that there were areas which the DG did not cover. She raised a concern that perhaps his report was incomplete, as it failed to mention some concerns in the AG report. He did not mention the repeat payment of R50 000, which was later recovered. She asked about the 26 beneficiaries who illegally benefitted from the Tourism Relief Fund, and the double dipping of 100 people. She raised the invalid ID numbers that qualified for the fund, together with the UIF beneficiaries who benefitted from the fund. Who exactly was responsible for making these payouts?
Ms Gomba asked about the reporting line of the companies that work together with NDT. “Who is reporting to whom? Who oversees the companies?”. it is important to understand why things fall apart when there is a clear line of accountability and monitoring. Based on a previous NDT presentation that it would be reducing the number of staff, the Committee was concerned if NDT would be able to carry out its duties. She asked how many resignations were received in 2020/21? How many people were let go due to COVID-19? Did NDT reduce their numbers? She asked about the number of dismissals and the reasons justifying these dismissals. She noted the Committee was only told about filling positions and not about resignations and dismissals.
Mr P Moteka (EFF) raised concern about the relief fund payment of 17 deceased people which the DG failed to mention in his presentation. This is a very serious matter as the relief fund was meant for people who are suffering. Mr Moteka asked about the 1172 individuals without IDs who benefited from the fund, re-iterating that it was complete theft. He was adamant that the DG should come forward and explain how these cases happened under his control.
Mr K Sithole (IFP) asked for clarity between a unqualified and qualified audit. He expressed concern with the targets set by NDT. Why are they not targeting something that will be achieved? NDT was not clear on the vacancy rate; why were the vacancies not filled? He also mentioned the double payment of R50 000 and requested clarity.
Ms P Mpushe (ANC) asked why NDT chose to present the glossy areas of what is happening in NDT. She pleaded that they should refrain from doing that, so that they may be able to work together and assist in finding solutions within NDT.
She asked what NDT has done to strengthen internal controls to prevent recurring audit findings. Ms Malan had said they were monitoring the relief fund on tourist enterprises but she did not share the details of the people who benefited from the fund but did not qualify as per the criteria.
Ms Mpushe asked if there were systemic control deficiencies in supply chain management (SCM) that resulted in the irregular awarding of tenders as noted in the AG report. Why did DPWI not approve the EPWP funds? How is NDT planning to prevent underspending, specifically on programmes geared to improving the sector?
DDG Ngwenya replied that NDT had already commenced with the strengthening of internal controls in their programme. NDT was looking at reviewing policies and procedure guidelines. They are reviewing delegations to ensure they can address areas where there have been challenges. NDT is looking at strengthening the segregation of duties in critical areas. It will also strengthen monitoring and evaluation to ensure that work is monitored efficiently. Should there be a need for a service delivery improvement plan, this will be implemented.
On internalizing the audit outcomes, Ms Ngwenya replied that they already have a plan to keep track of the AG findings. Regular reports are being provided, with hopes that when they reach a satisfactory level, they may be able to request internal audits.
Ms Ngwenya addressed vacancies and highlighted that work is being done. There were delays in the filling of positions in 2020/21 due to the impact of COVID-19. The number of positions that were filled in the first and second quarter of 2021/22 are a result of processes that began in the previous financial year. There was a particular focus on women, with two appointments at chief director level, one Director and a DDG.
Ms Ngwenya highlighted that NDT found itself in a unique situation as 2020/21 was the first year of budget cuts from Treasury for the compensation of employees budget with a R48 million cut. There had already been a process of fast tracking the filling of positions. NDT had 57 positions available and 34 were prioritized, but with the budget cuts some of these positions would no longer have funding. NDT submitted a motivation to Treasury for a budget readjustment in September with hopes that it would be granted additional funding. Unfortunately no funding was granted to NDT. NDT has commenced with the costing of the current commitment for compensation. They are reprioritizing positions for women.
Looking at the current CoE allocation for occupied positions, NDT is anticipating between five to ten funded positions. Consultations are currently underway with DPSA on the process of managing this and implementation of this strategy has already begun. As soon as the process has been concluded, NDT will be able to recommence the filling of reprioritized positions, with the approved recruitment plan. The reduction in employees is a direct result of the failure to attract further funding from Treasury. No dismissals have been recorded. NDT had three employees who were deceased in 2020/21. Eight employees resigned and the reasons have been recorded in the exit management interview. She would be willing to provide this document at the next meeting. One employee was discharged due to ill-health. Three employees have retired.
Ms Ngwenya said that the vacancy rate is a moving target. In August there was a change in leadership, this meant terminations in the Office of the Minister and NDT had new appointments. The vacancy rate has therefore been fluctuating. Once the reprioritization strategy has been implemented, NDT will have a fixed vacancy rate based on funded positions.
Mr M Maharaj, NDT Acting CFO, replied that NDT has looked at improving Human Resources capacity, especially in SCM. They are training existing staff. NDT is reviewing some of the SCM processes, identifying the weaknesses that led to the audit findings and closing the gaps.
There was no irregular expenditure for EPWP in 2020/21. The wasteful expenditure was based on ‘no shows' and cancellation of bookings for travelling. Irregular expenditure was more due to SCM, referring to tenders that were not awarded appropriately and bids where local content and production was not specified.
NDT is busy with the recovery of the erroneous payments, where beneficiaries received funds they were not supposed to. NDT is looking at the current budget and spending. They had budgeted for travelling expenditure but due to COVID-19 there has been a lag in expenditure. There are measures in place to ensure that EPWP spending will pick up as the year progresses.
DDG Malan replied that NDT can make the monitoring report on the Tourism Relief Fund available to highlight that she monitored the Tourism Relief Fund and not the relief fund for the tour guides specifically.
DDG Chettiar explained that there are two components to the EPWP budget. There is a baseline budget which NDT can use and an incentive budget which can only be utilized when targets are met as signed off by both NDT and DPWI. In 2020/21, it was the incentive budget that was not allocated by DPWI.
DDG Setwaba replied about the tourist guides relief fund. During their consultations with the tourist guides to find out the impact of the Covid 19 restrictions, there was a genuine outcry for help as they had no income. This is the reason that the fund was started. The process put in place meant no application procedure was required. NDT would rely solely on the provincial registers for information on tourist guides. They had confidence that the information would be accurate as the provincial registers are the ones with all the information on ID numbers, names and passports or work permits. This takes into consideration those from other countries who have been verified by Home Affairs to be able to take up tourist guide permits. NDT really wanted this fund to benefit those who are in real need to meet their basic needs. The amount determined was R1500 to be paid out in three installments. To determine the criteria, NDT relied on the Department of Labour to verify if the tourist guides are in employment and if they were receiving a Temporary Employment- Employee Relief Scheme (TERS) payment. The payment process began as soon as the candidates met the criteria set out by NDT.
After the Covid-19 special audit findings, NDT has established an action plan to verify information and recover money. Working together with the national register, NDT will determine if the information given is accurate. In instances of death, did the death happen after they received the details of the tourist guide or before.
Those that have benefitted in double dipping from SASSA and the tourist guide relief fund, NDT will be approaching SASSA to intervene and assist to recover the money.
Tourist guides employed by government who benefitted from the fund, NDT will alert their government employer and ensure that internal processes are adhered to. She is confident that it will be easier to start recovering these funds from government employees. The entire process will also assist the provincial registers to figure out the real number of tourists guides in South Africa.
Mr Victor Tharage, NDT Director General, explained that there is a system-wide problem across government, where there is a limit in the capacity to be able to detect government employees who are not under the Public Service Act. The system used by the AG can identify all categories of government employees. National government may want to consider employing the transversal system used by the AG. This will help to avoid dealing with negative after effects in not being able to identify all the relevant information which later requires NDT to follow through with consequence management.
Mr Tharage highlighted another limitation NDT faced while going through this process was with SARS which is bound by client confidentiality. SARS cannot share taxpayer information with a third party and therefore could not verify any information for NDT. SARS was not willing to breach this clause and it became a restriction at NDT 's end. To correct the lack of information would require a system-wide approach.
Mr Tharage pointed out that fruitless and wasteful expenditure associated with the EPWP was not recurring. However, there is a requirement that if it is not yet written off, it should be stated. NDT therefore stated that it comes from 2018/19. It will continue to be there until such time that the funds are recovered. This requires the law enforcement agencies to conclude their work.
On the exact nature of the 2018/19 fruitless and wasteful expenditure of the EPWP projects, Mr Tharage said that the projects were not completed but the budgets were depleted. The AG conducted a performance audit on these projects to see if there was any value for money. Quantity surveyors were brought on board to survey the quantities on the ground. These were dated back to the dates that allowed them to assess them fairly and they took the difference between the spent budget and what was accrued in value. They found that the difference in most instances was negative, which was then determined as fruitless and wasteful expenditure.
He addressed the double payment of R50 000 saying they believe it was a human error. Their system meant that the processing, evaluation and approvals take place in NDT but the payments strictly take place at South African Tourism. The system worked without any glitches until there was a query on a specific business from SAT which went back to the approving authority which was the NDT CFO to verify the banking details. The person who was processing payments had already processed the payment because they had found out it was correct. When it came back from NDT , it was not recognized as a returning query and the payment was processed again. He highlighted that this error was picked up by NDT and not the AG, and they began the money recovery process. The AG also flagged it in its audit report, confirming that there was a double payment. NDT had targeted to support 4000 businesses and they were supported. The R50 000 came from accrued interest from the R200 million accumulated in the short space of time, which is why he said it is human error.
Mr Tharage addressed the line of accountability, highlighting that NDT has only one entity which is South African Tourism. SAT has a board which serves as its accounting authority. The board play the role of accounting for SAT systems, processes, and controls as well as policy environments. NDT receives reports that come on a quarterly basis and assesses these reports and advises the Minister if there is any need to do so. On what led to SAT receiving a qualified audit, he stated that there were certain processes that the board was busy with and had not yet concluded. These processes were then subject to the audit in the period in between and a qualified audit opinion was given. He explained the distinction between a qualified and unqualified audit in that an unqualified audit is the positive of the two, and a qualified audit is a negative audit received by a department.
He noted Ms Mpushe’s comment about always maintaining transparency with the Committee. NDT 's presentation had focused more on the work which they had done than the audit outcomes.
He addressed the comment on whether the transformative programmes would be affected by underspending and said that NDT would still come back to the Committee about current performance. There is currently a court interdict on the Tourism Equity Fund which means that there is no distribution of money to any third party. This does not stop NDT from building capital for the Fund. The stop and go does indeed affect its progress as a department.
The Chairperson said that only an investigation will determine if the double payment was a human error. The AG report said the transaction was done from different provinces and there were different IDs for the recipient. The DG should await results from the investigation and not speak with authority. She asked if the point on slide 5: “Leadership did not ensure that NDT comply with applicable laws and legislation relating to supply chain management” was an admission of guilt or if NDT was conceding that there was flouting of laws? What measures did you put in place when you realized the applicable laws were not followed by supply chain management?
The process of recovery of money requires a thorough investigation; the individuals who processed the money incorrectly should be brought to book. There should be consequence management to that effect. The money that was paid out to 17 deceased people was a fraudulent act and Ms Setwaba was trying to justify the unjustifiable. The investigation should not be conducted by the officials involved, considering that the AG report picked up that a senior official had a conflict of interest with a supplier. The Minister and Deputy Minister need to look at this and come up with a process that needs to be followed to ensure the matter is dealt with. We are dealing with taxpayers’ money and there needs to be accountability. Those who approved squandering of money must be subject to consequence management, and those who have left NDT need to be brought to book. It is not enough to say the tourist guides could not be verified. Does NDT not have its own tourist guide database? It could be that what happened could be due to negligence or perhaps lack of appropriate systems in place. She referred to the sum of R20.4 million which indicated that adequate processes were not followed and that requires a thorough investigation. That investigation report should be tabled to the Portfolio Committee in due time.
Ms Winkler raised concern about the numerous instances of irregular expenditure and conflict of interest. She asked for the current status of the investigation of the SAT member.
Ms M Gomba (ANC) referred to the management letter given by the AG to NDT with warnings of what NDT needs to correct before the audit can be made public. There was a certain percentage of items that was done and a portion that was incomplete. This makes her believe that NDT does not take the AG seriously if there is a constant reoccurrence of findings. There should be an oversight visit to the areas where money was spent on destination development which was not accepted in the AG report. NDT has disregarded this. There should be a further discussion on this.
Mr Tharage accepted the recommendations and guidance on the R50 000, he highlighted that they would look further into that. The issues that were highlighted from the AG’s report were stated as they were, and the AG’s overall comments on leadership were that NDT has not exhausted the implementation of the issues that the AG raised. NDT accepts that they have not concluded all the issues, in some instances implementation was still underway. Working on the issues in details to ensure everyone is onboard. The outcomes of the audit are everyone’s business.
An issue that has constantly been raised is having local content explicitly stated in the advertisements upfront. This has led to the recurring irregular expenditure. NDT gave directives to the relevant people on the areas they need to ensure on.
On the senior official who has been identified as having a conflict of interest, the DG indicated that perhaps Ms Winkler may be referring to South African Tourism. NDT was able to identify the case when a deal came in for approval and the DG flagged it as a conflict of interest matter. There was no flow of money, and the project did not occur. The matter would perhaps have to wait for a report from SAT.
In response to the Chairperson asking if the DG is saying SAT is not NDT 's responsibility, Mr Tharage said that is not the case. However he does not have enough information to discuss the matter within SAT. The entity has processes that are underway, and SAT would be reporting to the Committee.
The DG replied that NDT would be willing to come back and present on the progress of the Destination Development projects.
DDG Setwaba expand further on the Tourist Guides database. The provincial registers are the facilities that go through the process of registering the information on each tourist guide. When a person qualifies as a tourist guide, the province will process the tourist guide's application through the provincial register, and will either approve the application or not. National NDT therefore had to request the information from the provincial register. NDT is working on improving this system through its audit action plan, implement consequence management and money recovery.
Deputy Minister of Tourism, Fish Mahlalela, acknowledged the recommendations made by the Committee. As stated by the DG, NDT is prepared to come back to the Committee and reflect on the projects which NDT is currently implementing. It will then be up to the Committee to decided on oversight visits, to verify that what is written on paper is practically happening on ground. NDT will take up the concerns that have been raised, especially the tourist guide database.
Section 48 of the Tourism Act of 2014 requires that the Minister appoints a qualified officer as a registrar with the intention of having a centralized database for tourist guides. The centralized database is informed by the provincial database as in terms of section 15, provinces are expected to register their own tourist guides. The Deputy Minister highlighted that there seemed to be a problem when this information was being acquired which led to some of the delays. These are matters that need to be dealt with and a concerted effort needs to be made with all nine provinces.
He noted the weaknesses identified in the AG report in that NDT has not done enough to remedy recurring findings. They are consistently working at improving. In 2019/20 NDT had a qualified audit opinion and the improvement should be noted. Everyone should take responsibility and it should not rest on the shoulders of one individual. He concluded that NDT is prepared to work collaboratively with the Committee to improve Department functioning.
Ms Gomba asked about the report on consequence management which involved the people who conducted projects that were not fulfilled but yet they were fully paid. The report has not yet come to the Committee. The DDG said that it is still under investigation and they are unable to divulge any information. She pleaded with NDT to relay all the information to the Committee.
The DG said he would take guidance from the Committee about the forensic report. The forensic report specifies names of people and companies and the transgressions. The state attorney is using the forensic report to continue the process of civil litigation for recovery. The Directorate for Priority Crime Investigation is also working with the same report to close out the matter.
The Chairperson stated that they will get back in writing to the DG on the forensic report as the DG is only able to present a high-level report.
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