Department of Sport, Arts and Culture 2020/21 Annual Report

Meeting report

The Chairperson welcomed Members of the Select Committee and the team from the Department to the meeting. Apologies were received from the Minister and Deputy Minister of Sport, Arts and Culture.

Department of Sport, Arts and Culture 2020/21 Annual Report

The Department of Sport, Arts and Culture (DSAC) briefed the Committee on its 2020/21 Annual Report, its performance results and its budget and expenditure.

Mr Vusumusi Mkhize, Director-General, DSAC, said the budget of the Department was revised downwards by R956 million. This led to the revision of the annual performance plan (APP) and the overall scaling down of the Department’s service delivery mandate. The economic hardship and loss of income for professional athletes and artists had led to an increased need for relief, which meant funds being taken from the budget which had been allocated to the normal activities of the Department.

Overall, the Department had achieved 74 percent of its revised targets:

Programme 1: Administration -- 60 percent of targets were achieved.

Programme 2: Recreation Development and Sport Promotion -- 83 percent.

Programme 3: Arts and Culture Promotion and Development -- 62.5 percent.

Programme 4: Heritage Promotion and Preservation -- 100 percent.

Ms Sibongile Mondile, Acting Chief Financial Officer, DSAC, said the Department’s budget was R5.3 billion, of which R5.18 billion (97.5 percent) was spent. The budget was split amongst programmes as follows:

Administration - R493.6 million;

Recreation Development and Sport Promotion - R1 billion;

Arts and Culture Promotion and Development - R1.6 billion; and

Heritage Promotion and Preservation - R2.2 billion

Some of the reasons for under-spending were the moratorium on filling vacant posts; the cancellation of Departmental events as a result of the declaration of the Covid-19 lockdown, which had an impact on travel costs; delays in implementation of the Public Arts Presidential Employment Stimulus Programmes; and delays in the Iziko Museum Courtyard project due to Covid-19 restrictions.

See presentation attached for further details

Discussion

The Chairperson asked about progress on Robben Island Museum. It gave a lot of people sleepless nights, and he was one of those people who were worried about one of the country’s flagship heritage sites.

Going through the reports, there were instances of financial mismanagement by Departmental staff. Some cases had been identified by internal controls and some by the Auditor-General (AG). How far were investigations into some of these cases?

He also asked if there was any progress on the legacy projects. Specifically, when would the investigations come to an end, as there were general concerns about statements not being prepared in accordance with Treasury Regulations and the Public Finance Management Act (PFMA). There needed to be some improvement on this front.

Ms D Christians (DA, Northern Cape), referred to the financial statements, it observed that there was an opening balance for the irregular expenditure at the beginning of 2020/21 of R442.1 million, and a further R3.8 million had been incurred during the period under review. What was the irregular expenditure spent on, and had the investigations produced any results? Had consequence management measures been implemented, and what progress had resulted?

At the beginning of the year, fruitless and wasteful expenditure was stated to be at R89.6 million. She took note of the fact there was no further fruitless and wasteful expenditure for this financial year, but questioned what had happened to the R89. 6 million of the previous year -- had there been any progress on the outcome of investigations into it?

Regarding the Auditor-General’s (AG's) findings and consequence management, the AG had noted that there were no investigations conducted for the majority of the allegations of financial misconduct by Departmental officials, as required by Treasury regulations. Why was this the case? Why were internal controls still deficient? Were such investigations into this still in the process of being conducted?

The AG had mentioned that the internal audit unit had referred some matters relating to legacy projects to the Hawks for further investigation. Had the report been concluded? What was the outcome of the investigation, or had there been any feedback from the Hawks?

She commented that sadly, several Programme 2 projects were not completed, one of which was the Sarah Baartman Centre of Remembrance project. That had started in 2014 and was supposed to be completed in 2019, which was before the outbreak of the Covid-19 pandemic. Why were these projects not being completed? What were the financial implications of this delay? Were they over budget, or were the projects still within budget? How far were they from actual completion?  

There were five Moral Regeneration Movement projects, but only two had been completed. Among those projects were ones which focused on gender-based violence (GBV), including some which were linked to young male children. Why were only two of these projects completed? When would the rest of these projects be completed? She believed that these Moral Regeneration Movement projects were some of the most important projects in the country, but there had been a battle to get them up and running. Was there more information on this -- especially on the GBV projects in Programme 3?

DSAC's responses

Mr Mkhize responded on the Robben Island Museum, and said the Department believed that Robben Island was ‘around the corner’ for a number of reasons. When there was an outcry around the risks related to Robben Island shutting down, such as the employees having salary cuts or being retrenched, the Department had intervened to save the Island through a reprioritization of the budget, and had been provided with more funding.

On the allegations of financial mismanagement against the Department, there had not been allegations against the Department itself except on the issues of fruitless and wasteful expenditure, on which the CFO would give a direct response.

Ms Mandisa Tshikwatamba, DDG: Corporate Services, DSAC, said the Robben Island Museum had received an unqualified audit report. The forensic audit had been completed, and they were still looking at some of the issues which it had raised, and they were working on a plan to address them. Some of the officials named in the forensic audit were the CFO, and the CEO whose contract had just ended. The Council had brought their last decision not to pursue further the issues which had been raised against their officials to the Minister for his consideration.

They had experienced severe pressure on their Robben Island budget due to Covid-19. As the DG had said, in terms of salvaging the situation, they could delay the implementation of s189 which regard to the retrenchment of employees. The funding provided by the Department had provided them with a cushion and assisted them, but they were still riding the wave of Covid-19. They were still in a delicate space, but they were currently working on a plan to review their business model to look at whether there were commercial activities which could assist them in augmenting their revenue through these other activities.

The report did refer to consequence management which was not implemented, but to provide some context, the year under audit had a number of cases which had to be looked into. In that year, the Department had handled 62 cases, and only four were not finalised. Close to the end of the audit, six more cases were added. The Department, therefore, started the year with 68 cases and only ten were not allocated in the entire year. 68 cases was a large number, as it was a legacy number -- it came from the two departments which predated the Department as it was now, and they had had to reconstruct evidence after the merger of the two departments, which had resulted in some delays. Currently, the ten cases which were not allocated were being attended to, and some of them had even been closed.

Some of the Moral Regeneration Movement activities in the year under audit had been affected by the Covid-19 restrictions, because most of the activities were engagement activities. There had been some issues which the Department had been grappling with which they were looking into and monitoring closely.

Ms Sibongile Mondile, Acting Chief Financial Officer (CFO), DSAC, responded on the annual financial statements (AFS) not being prepared in accordance with the prescripts - unfortunately, the AFS which were submitted to the AG had some misstatements which were corrected at the end of the audit. The errors were mainly because they had not yet finalised the transfer of data from the former Sports and Recreation database to the general ledger (GL) which they were using from the former Department of Arts and Culture, so they had used an Excel spreadsheet to combine the balances from the Departments. This error had been picked up by the AG. They were using a manual system, where they had to create the spreadsheet themselves for the purposes of reporting. It was safe to say that by the end of October 2021, the merging of the databases was complete and done correctly. In the current year going forward, the risk of the error recurring had been eliminated completely, as there would be no more manual additions -- trial balances would just be downloaded from the system when preparing financial statements.

Another misstatement had been a contingent liability which was overstated. The process of getting confirmation of the balances took longer than expected. To try and avert this, in the coming year legal services would be instructed to start the process of getting confirmation at the beginning of January.  This was to ensure that when possible contingent liabilities or assets were disclosed, there was confirmation of this status because the AG did not just accept figures -- supporting documentation was needed as well.

The Department would also have a project plan which it would follow for the preparation of the AFS. It would also include ample time for internal audit to assist in reviewing the AFS before it was submitted to the AGSA. In the year under the review, time had been very limited due to the effects of Covid-19, and the AFS could not be given to internal audits in time for them to review it. Internal audit would be given two weeks to review the AFS before it was submitted to the audit committee, and before it was submitted to the AGSA.

There were no new fruitless and wasteful expenditure matters in the year under review. Some of the existing R89.6 million matters were part of the investigations which were finalised during the year, and for some of them, the Department would be requesting condonement. However, those which were referred for criminal investigations must be followed up so that they could ask for condonement for the cases which had already been investigated.

When the former Departments closed, they had irregular expenditure for contracts which were already disclosed as irregular in 2019/20. In 2020/21, as they continued those contracts, the DSAC had to disclose those amounts as irregular, and this was part of the R3.1 million. The new matters which the AG had picked up, but which the Department did not pick up, were small amounts where a payment or acting letter was not signed by a newly appointed person. The Department was working with Human Resources to ensure that the information was put into a project plan, so that supply chain management (SCM) could crosscheck the payments.

The Department had not yet finalised the investigations of the new matters, as the audit had ended late this year. However, a task team had been established to investigate these matters. In 2020/21, seven matters were added to the old balance of the irregular expenditure. The committee had reviewed them and made recommendations to the DG on how to handle letters to the parties liable for this as part of consequence management, and also to assist with the requests to National Treasury for condonement in cases where a loss was suffered. There had been investigations on the old balances, where people had been disciplined and their disciplinary actions finalised, and letters would be written to request condonement in these cases.

Only one payment was not made within the 30-day requirement. The invoice had been paid on the 33rd day. The invoice had been sent back to the end user because the supply chain had questions about it. Unfortunately, that service provider could not give a new invoice, because their system could not reissue new invoices. When invoices were received, they get stamped and their receipt dates are recorded within the Department. Those matters which were resolved were resolved late -- payment was authorised on 19f September, which was outside the 30 days because it was received in August. The correct way was to get a new invoice and stamp it, because the reissued invoice would be considered to be incorrect for processing. The Department was instructing its officials who process payments to be careful, and they were checking that payments were being authorised within 30 days.

Mr Irwin Langeveld, Director: Institutional Development, DSAC, responded on the legacy projects and the matters which had been referred to the Hawks. There was a long list, but only three were related to the legacy projects: the Enyokeni Cultural Precinct, the JL Dube Project and the Nwamitwa Cultural Precinct. The Department had asked the Hawks to prioritise those projects, given the repeat AGSA findings on those projects and their desire to have the projects and their consequences finalised. The Hawks had requested a sworn affidavit from the Department through internal audit, confirming the details of the report and the recommendations on those three projects. The sworn affidavit was provided for the Hawks to continue the prioritisation of the investigation of those projects. The Department was still awaiting a response through the internal audit, as they were the liaison interacting with the Hawks and providing the feedback from the investigations.

The latest information from the Department of Public Works and Infrastructure (DPWI) on the Sarah Baartman project was that progress on site had been over 80% before the contractor had disestablished the site and the contract with the contractor was terminated. There had been various escalations in the project’s budget, these had been approved by Public Works, the DSAC, as well as Treasury. The original budget was R164 million, and the latest cost of the project was R210 million, but this did not include the items which were in dispute with the contractor, but DDG Khan may provide even later figures.

Ms Sumayya Khan, DDG: Recreation Development and Sport Promotion, DSAC, referred to the details of the Sarah Baartman project, and said the Minister of the Department of Sport, Arts and Culture had raised the issue of the performance of these infrastructure projects with the Minister of Public Works and Infrastructure. Letters had been written to her, and a meeting was had with her where it was conveyed that DSAC wanted to take over the management of the Sarah Baartman project, the Heritage Western Cape (HWC) archives project and the Robben Island Museum.

Regarding the Robben Island Museum (RIM), in 2018 several meetings took place with the Directors-General, as Robben Island wanted to take over as the implementing agent for the capital works and maintenance projects. In 2020, the DPWI had looked at a shared implementation approach between the RIM and the DPWI for a water desalination plant project, a sewage treatment plant project, a special heritage solution project, and projects below R500 000. The Department had no jurisdiction to grant RIM approval to take over these functions.

There were still some unresolved issues via the DPWI such as the appointment of a service provider for facilities management, which had been due in February 2021 and there was no indication of an appointment or a new contract. Some progress had been noted in that area as, after a meeting with the Ministers, the DPWI had a new team deployed by the head office which was led by one of the DDG’s, to fast track the implementation of the projects at Robben Island and especially the total facilities management. The DPWI had also approved their budget of R113 million for that project, after which they had started the procurement process, and had provided an execution plan which started with the advertisement process in September. They had been hoping to finalise the award to the winning company at the end of October. At the time when they took over the some of the projects, the steering committee had been dysfunctional, but it was up and running now. Last week there was a steering committee meeting at which it was decided that they could not award the winning company at the end of October due to technical issues which had to be looked at by National Treasury. The process was through a closed bid, as there was a bouquet of services, so it did not go out through an open tender, giving them time to rectify some of the problems they came across. In the meantime, they still had an interim arrangement of different service providers providing maintenance at the facility on the island, but they were hoping to finalise the tender process in the next few weeks.

On the Sarah Baartman project, the Department had indicated that DSAC would take over the project. The DGs had met with other executives to look at how the project would be implemented. Firstly, a handover report from DPWI was needed to assess the scope of work that needed to be done going forward. In a meeting two weeks ago, the DPWI had given the DSAC options for how the handover would take place, and one option that was proposed was co-management. The meeting was concerned as to how the co-management would work, and the details were still being finalised regarding the rules, responsibilities and how service providers would be appointed. The indication was that there were already contracts in place with some organisations which could take over the management of the project, but there were still some grey areas. There were still concerns over what was happening on the ground, and the Department was assured that there was 24-hour security in place to safeguard the project as is, so that there was no vandalism and theft around what was existing. Once all the other issues were finalised, there would be a seamless process of continuing with the project. At this stage, it was hard to tell whether there would be any additional funding until the other details were finalised.

Committee minutes

The Committee considered and adopted the minutes from its meeting on 24 November 2021. 

The meeting was adjourned.