HSRC 2020/21 Annual Report, with Deputy Minister

Meeting report

Human Sciences Research Council
Dr Cassius Lubisi, Board Chairperson, HSRC, said the new board took office on 1 November 2021. None of the previous members of the board were on the new board. The new members would know very little about what had transpired in the HSRC during the year under review as they were recently appointed. However, the previous chairperson of the Board had availed himself to account to the Committee and respond to any issues that Members may have in relation to what had transpired during the tenure of the previous Board.

Prof Mvuyo Tom, the previous Board Chairperson, said he would deal with only the introductory part of the report, as the Board was in existence for most of the financial year. The rest of the report would be presented by the management team. The report showed the performance of the organisation in the first year of the strategic plan, and it had seen a terrific performance. The main issue for the old board was to ensure that the new board had a smooth transition into the organisation.

The HSRC was a research council, which was part of the Department of Science and Innovation (DSI), and the Board was pleased to say that it had achieved clean audits for consecutive years. It was unfortunate why in the final year of the previous board, there had been a regression. The correction of this audit outcome was a continuous process, and all the evidence and supporting documentation, as well as correspondence with the National Treasury, would be provided to the Committee and explained further during the presentation.

The HSRC was functioning under the cloud of the pandemic, which had started in March 2020. When the financial year started, it was facing a new normal, so the Council had to adapt to that new normal. The previous audits had not looked at the collaborations, supply chain management (SCM) and procurement in the manner that the new audit had. Hence, there had been a regression in the audit outcome. However, this would be explained further during the presentation.

HSRC's 2020/21 Annual Report
Prof Leickness Simbayi, Acting Chief Executive Officer, HSRC, said that in response to the pandemic, many research projects had had to be adjusted as the various levels of lockdown came into effect, with research protocols revised and re-submitted for ethics review to account for new risks and different forms of engagement with research participants. Through adaptation and implementation of new research methods, the HSRC had been able to ensure that ongoing research studies proceeded and structures were set in place to respond to new opportunities necessitated by the need for evidence-based responses to the impacts of COVID-19. 

The information technology (IT) department’s strategic plan was tested during the pandemic. In its third year of existence, the IT strategic plan enabled ‘working from home’ via the mobility strategy, with servers having been moved to the cloud. Thus, during the pandemic, the architecture was already in place, allowing a seamless ‘work from home’ ability. Security was enhanced and tweaked synchronously with unfolding risks. User awareness education increased to ensure minimum exposure to cybercrime. Policies were created or modified to improve the IT user experience when working from home, and additional cloud security technologies were being deployed.

Prof Heidi van Rooyen, Acting Deputy Chief Executive Officer, HSRC, said the entity had achieved 90% of its performance targets, which was something new for the organisation. However, this was indicative of the new normal in which the Council had to adapt. In line with the COVID-19 regulations, the HSRC was faced with severe restrictions, but complied with lockdown regulations to prevent loss of life and maintain the well-being of staff, while at the same time maintaining business continuity in critical organisational areas.

The HSRC had developed a COVID-19 response plan that covered risk exposure, an impact on operations, safety measures, action plans and the potential impact on revenue. This document was also informed by directives from the Presidency and the DSI.

Effective from 1 April 2020, the HSRC had implemented an organisational realignment with a more streamlined structure of research divisions, better reflecting the areas of the ongoing and future focus of the HSRC. This was part of the implementation plan envisioned in the 2020/25 strategic plan. The new five-year strategy necessitated a realignment of the organisational structure to ensure that resources were allocated optimally to achieve the outcomes envisaged in the strategy.

As for its achievements in the context of Covid-19, some of the steps taken to adapt to the new environment included a shift the workforce to work remotely; research events that were planned could not be materialised due to the pandemic, and which affected the performance or achievement of those targets and seminars, had to be hosted on digital platforms. The HSRC continued to host its thought-provoking seminars, albeit on digital platforms. In the year under review, 48 seminars were held.

Considering the performance of the Council, one must recognise that it came at some cost, where staff members were working from home, blurring the lines between work and home, and that had placed a mental strain on many employees who had had to work from home.

Prof Narnia Bohler-Muller, Executive Director, HSRC, presented on the important work of the Council, and also outlined different areas in which the entity did work, as well as human resources management in relation to employment and vacancies. Programme one had grown substantially because management had moved the work of the deputy chief executive officer (CEO) into programme one from programme two, hence the performance on programme two had also declined.

There had been 21 resignations and 29 contracts had come to an end. Employment by race and gender showed that the entity had far more Africans working in the entity (68%) and more women (59%). It also employed four disabled staff members -- two males and two females -- during the year.

Ms Jacomien Rousseau, Chief Financial Officer (CFO), HSRC, said that the Council had achieved an unqualified audit opinion, with findings on compliance with legislation. No material misstatements were identified on the annual financial statements. There were also no material findings identified in the annual performance information.

The Council had some irregular expenditure that had occurred in the current and prior years, which was due to non-compliance. It originated from the incorrect interpretation of "sole supplier" versus “single source supplier". Sole supplier deviations were approved in terms of the entity’s delegation of authority, but all single source suppliers had to be pre-approved by National Treasury. Further determination of irregular expenditure still needed to be determined on 2016/17 to 2018/19, which would soon be concluded by management and reported. The improvement plan had already been implemented, which included engaging with the National Treasury and AGSA; updating SCM policies; and re-looking at the procurement framework and training. The new changes in procurement would now require a retrospective determination from the years 2016/17 to 2018/19, and any changes would be reported. It amounted to R17.2 million in the year under review.

Prof Simbayi stated that the pandemic had shown that the Council could do credible, authoritative work that could inform policy makers and society at large.  As it went forward, it would bring some of these lessons to the work it did, to ensure it could make timely interventions that could support the country’s political and socio-economic agenda. Management was committed to resolving the issue identified during the audit regarding compliance with laws and regulations.

(See Presentation)

Discussion

The Chairperson asked for the exact date when the new board was appointed.

Mr Lubisi responded that it was 1 November 2021.

The Chairperson also sought clarity whether the Department sent correspondence to Parliament about the new Board. The time frame was about 30 days. They were still within that timeframe, but Members would like clarification on this. Thirdly, why were there acting positions within the executive for the CEO and deputy CEO, and one other position?

Prof Tom said that there was a substantive vacancy in the CEO position and a substantive vacancy in the group executive shared services. Therefore, the current Deputy CEO was acting as the CEO, which left a gap in his position; hence Prof Van Rooyen was here in an acting position. She had a substantive position in the Council, and was now acting as the Deputy CEO. In the shared service group executive position, Prof Bohler-Muller was acting. There were two substantive vacancies in which there were acting people. The previous Board tried to recruit a CEO at the beginning of the year and had not been successful. This had been shared with the Minister, and it was agreed that the recruitment of the new CEO would be left to the new Board.

Ms Gugu Zwane, Acting Director General, DSI, said that the document to inform Parliament about the appointment of the new Board was en route to Parliament, which would be within 30 days. The document was still in the office of the Minister, but it was definitely on its way to Parliament.

Ms C King (DA) noted that a moratorium had been placed on baseline funded appointments. Had that moratorium been lifted for the current financial year?

The AG had concerns with internal controls, and how they could be addressed;, such as the culture of consequence management and best practices implemented by management in key risk areas. This was also highlighted by the internal audit and risk committee. How was the action plan addressing these concerns, specifically the SCM issues from the previous years? These were related mainly to the 2016 to 2019 period which had popped up in the financial year under review, and that there had been a misinterpretation. When was the investigation and the review plan going to be implemented to ensure that the 2016 up to 2019 SCM challenges were adequately addressed?

No infrastructure projects were identified for the current financial year. Was the HSRC considering collaborating with the National Research Foundation (NRF) on its conceptualisation of research infrastructure platforms for the social sciences and humanities domain?

Most of the properties that the HSRC was operating from were being leased. The Cape Town lease was R771 211 per month, excluding VAT. The office in Durban was leased at R123 795 per month, excluding VAT, and the Sweet Waters lease was R14 782 including VAT. Was the HSRC considering purchasing its own properties in the long run to cut the rental costs?

The current ratio of parliamentary to external funding was sitting at 52:48 -- what ratio was preferred by the HSRC when it came to the government funding ratio method?  

Ms N Marchesi (DA) asked how the Council would make sure it attracted talent, specifically those from the disadvantaged groups and women in need of funding from the entity. Secondly, what were the requirements for being able to get opportunities to work for the entity? There were students graduating yearly who were unable to find work in these kinds of entities because they were not specialised – they did not have honours or masters degrees. Was there scope within the entity to consider those graduates who had just graduated, and had a generalised understanding of science?

Thirdly, although about 32% of the budget had not yet been spent, 90% of the targets had been achieved, so surely there must be scope for the entity to grow and the budget should be increased. Looking at the financials, was there a way to look into research to get young people into employment? Was there an intention or a proposal to do this?

Mr T Letsie (ANC) asked about what the management of the HSRC believed had led to the regression of the audit opinion. Secondly, there would have been an institutional review undertaken -- what were the key findings, and how would they be addressed? What progress could be reported in relation to the strategies to enable the organisation to evolve from research generation only, to user-research impact assessments? How would the review recommendation for the entity to have much more focus on a consolidated programme of work be realised? Based on the Presidential youth employment initiative, what progress could be reported on the DSI internship programme which had been transferred from the NRF to the HSRC?

As for the audit outcome and findings, what progress could be reported on consequence management and the actions that were being implemented to address the identified weaknesses? Would these ensure that the entity received a clean audit in the next financial year? Finally, had the full amount of fruitless and wasteful expenditure been recovered from the staff responsible, and what consequence management steps had been taken on this?

Ms J Mananiso (ANC) said it was important that the Board submit its action plan to the Committee on addressing the audit findings. One hoped that the action plan would adhere to "SMART" principles.

The work of the entity was quite visible but when one referred to issues of research or innovation, one often left the disadvantaged behind. She hoped that the Council would take this into consideration and do more to ensure that all groups of people in this diversified country were part of the work done by the Council.

It had been worrisome to read an audit report full of issues of non-compliance. Were these due to the personnel entrusted to do the work, or to the systems in place? She suggested that the work done by the entity needed programmes that were created or geared towards youth employment challenges. Members would appreciate a full report on how the entity planned on bringing on board young people in its development programmes.

The Chairperson asked when the new board intended to conclude the process of appointing a new CEO. Secondly, the Committee needed to have an outline of the audit action plan to address the findings picked up by the AG. What exactly would have contributed to the challenges that the Council had encountered, and what was it planning to do about it?

The Committee was concerned about the non-compliance involving the issues around supply chain management.

Prof Simbayi assured the Committee that the entity was taking the audit outcome seriously. There was an action plan and it was being implemented already. The AG was still looking back at the previous financial years, and the Council was uncertain what the outcome would be for now.

The SCM matters were ongoing issues, particularly with funding coming from donors. The funding framework required the entity to depend on the parliamentary grant and external funding. The HSRC was successful in securing external funding, but it fluctuated within the period of four years because of the HIV/AIDs survey undertaken every four years. The entity currently had funding from the President’s Emergency Plan for AIDS Relief (PEPFAR) through the Centre for Disease Control (CDC) amounting to US$20 million to undertaken the next survey.

A letter had been written in 2017 by the former CEO on SCM, governance, monitoring and compliance, the last paragraph of which stated that if competitive bidding was not followed, the deviation should be reported unless the donor directed the entity to use a different procurement approach. What often happened was that the work done by the entity involved collaborating with people who were experts in the subject matter. Essentially, this was competition for funds, and funding was given to a winning proposal. It therefore happens that often the HSRC knows who the people or institutions are to work with, and the proposals are formulated with them to increase the chances of getting funding. When that is done and they are successful, they get a contract from the funder. The partners are then listed in the contract, which specifies the percentage each partner will receive, which in turn is an approval from the funder that the entity would be working with those institutions or persons. The entity was now required, once it had received an indication from the funder that it would most likely receive the funding, to submit that contract to Treasury within a period of five days, to look at. Normally, the procedure should be that before the HRSC prepares the proposal, it engages in finding out who would be collaborating with it and seek approval before the proposal was submitted. Unfortunately, timeframes when international funders are involved are very short. Hence, the entity had come to a compromise with Treasury and the AG. Going forward, it would follow the agreement reached with Treasury in terms of how the approval process would be done.

Regarding the provision of adequate funding for the HSRC, in the last institutional review it had proposed an 80:20 split between parliamentary and donor funding. It believed that this would be adequate, and the Council would be able to do more extensive research instead of utilising resources to source funding. This would be preferable. In fact, compared to other research councils, the HSRC was more favourably funded, as others under the DSI receive much less.

Referring to the relationship with the NRF, during the development of the strategic plans of the two institutions, they had been working with each other fairly closely, and there was a lot of synergy between the two organisations.

Ms Rousseau responded to the questions on the internal audit findings, the risks and the best practices. The HRSC had needed to go back to basics to see if the internal audit was up to scratch, and it was doing a complete revision of all the policies in relation to finance, SCM and risk management. This was necessary to ensure that everything was up to date with legislation. The entity had been working towards finishing a couple of policies, and these would be presented to the new Board soon.

Management was in the process of reviewing the transactions from the 2016/17 to 2018/19 financial years. The auditors had sought all the required information before the audit was closed, but due to time constraints had asked management to look into the transactions and report within the next audit. Management was now busy looking at the purchase orders issued and documentation to see if it had involved a sole supplier or a preferred supplier, and it would then go on the list of irregular expenditure. Once the investigation was concluded, it would be presented to the Board and the National Treasury. The time schedule for that was the fourth quarter of the current financial year.

The entity did have an accounting surplus at year end, but there was a specific formula that Treasury applied to requests to retain funds. The request had been made and granted by National Treasury.  The entity was now in the process of implementing and spending the surpluses on research projects and internal infrastructure in the form of IT equipment bought for the organisation.

The entity had regressed from a clean audit to an unqualified audit due to non-compliance with laws and regulations. These were large numbers or transactions. If the values had been smaller, they would not have been raised in the audit report.

The entity kept all internal and external audit findings in a register, which was available if the Committee would like to see it. The report on consequence management, which was done for irregular, wasteful and fruitless expenditure, would be provided to the Committee, as would a report on the SCM challenges. The previous auditors had accepted the Council's explanations regarding deviations on SCM policies, but the current auditors had not. The report on this could be provided to the Committee.  

Prof. Van Rooyen said that the entity had recently launched a new unit that would allow it to put in place capacity development and learning initiatives that look at youth internships and placements, and address the issue of unemployment. Through the Presidential youth employment (PYE) programme, the entity had an employment initiative for interns who come in for six months, as well as the larger DSI/HSRC internship programme, which had transitioned to the HSRC.

The PYE programme was a short-term programme for about six months, which equipped and built the skills and capacity for 500 young people spread across the HSRC in a range of locations across the country. They were trained from soft skills, to providing a range of services in those communities. That programme had come to an end, and the majority of those interns would transition out of their placements at the end of November. The HSRC had been in conversation with the DSI to see how the R10 million surplus could be used to retain some of those young people. The only thing it was not able to complete was community surveys, where it used young people to conduct surveys in their communities in connection with various diseases, including substance abuse and mental health. It was not able to complete this because of Covid, and instead, it was done online. It had reached an agreement with the DSI, and was in a process of negotiating a no-cost extension for six months, from 1 January to July next year. This would allow it to being back a small cohort of that 500.

Through the DSI/HSRC internship, 420 young people had been recruited and placed, and those internships would start soon. A unit was needed in the Office of the Deputy Chief Executive Officer (DCEO) that would allow it to conceptually address the issue of youth unemployment and create opportunities through these internships, and address placement problems. Any additional funding to assist in making this happen would go a long way.

Ms Bohler-Muller said the staff moratorium was still in place at the Council, and it was dependent on the Treasury’s regulations on salary caps. There was a need to reconsider the moratorium on the baseline funding, but this was something that the Board would look into to ensure that it had the capacity to do what it had to do.

Referring to the building leases, she said the Pretoria building was owned by the HSRC and was shared with the Department of Social Development, which was leasing from the HSRC, and that money was utilised to cover the rent at the other offices of the HSRC. There was a need to take into account moving towards a hybrid approach and remote working, which would require less space and fewer offices. It was reconsidering how to deal with the office situation and looking at possibilities of renewing leases or moving into smaller facilities, especially in Cape Town.

With regard to legislative compliance, the legal services division needed to be strengthened, with a more senior appointment made of someone who could be a compliance manager within the HSRC, so that there was a legal mind that was "business savvy" to ensure that the entity complies with regulations and legislations all the time.

On the employment equity issue, the Council recognises that there is work to be done in this area, but there had been progress in the last few months. In all its advertisements, it makes it clear that priority would be given to designated groups, and in the recruitment and appointment process, the equity profile of HSRC had been improved substantially. There was data available to be shared with the Committee on this.

Mr Lubisi said that since the board was appointed two weeks ago, it had not yet met or been inducted, so all the issues that had been raised in this meeting would be addressed at the first board meeting once it had been inducted -- and this included the recruitment or appointment of the new CEO.

The Chairperson said that the Committee was waiting for the communiqué about the appointment of the new board at the HSRC. It would appreciate being kept updated on the audit action plan. Over the year, the Committee would monitor and evaluate the progress of the HSRC to get back to a clean audit.
Committee business
Members considered the Committee two committee reports:

ATC211119: Report of the Portfolio Committee on Higher Education, Science and Technology on the consideration of the 2020/21 Fourth Quarter and 2021/22 First Quarter Financial and Non-Financial Performance of the Department of Science and Innovation, dated 19 November 2021

ATC211119: Report of the Portfolio Committee on Higher Education, Science and Technology on the Consideration of the 2020/21 Fourth-Quarter and 2021/22 First-Quarter Performance Reports of the Department of Higher Education and Training, Dated 19 November 2021

The reports were adopted without any amendments.

Members also considered draft minutes dated 10 and 12 November 202, which were adopted without any amendments.

The meeting was adjourned.