Department of Agriculture and CASIDRA Audit Outcomes & Annual Report 2020/21

Meeting report

Western Cape Department of Agriculture & CASIDRA Annual Report 2020/21
Ms D Baartman (DA) asked for the costs incurred in the court cases and who would be responsible for settling the legal costs now that the SCA had made a ruling on the correctness of the Department’s accounting. She asked if the Department would consider releasing a media statement on the matter because the media reported that the Department did not get a clean audit. She asked how this mistake is going to be corrected in the public domain to remedy the image of the Department.

Agriculture MEC Ivan Meyer stated when the Supreme Court of Appeal judgement came out, he called the Standing Committee chairperson and the Head of Department. The case was about the modified cash basis of accounting and this matter affected the status of CASIDRA. As a result, an opportunity was lost to raise money for CASIDRA. Now the process has started to recover lost money. The court ruling provides predictability in the system. The Department was attacked in the media, but it remained focused and mature. The court ruling has presented an opportunity for the Audit Committee, AGSA, Department, Standing Committee, and Western Cape legislature to celebrate certainty of governance. There is a need to chart a clear path going forward. The problem has not been unique to the Western Cape only because other provinces have been enquiring about the outcome of the case. The modified cash basis of accounting is proving to be a challenge for them as well. The strategy now going forward is to govern with humility. The 30-year track record of CASIDRA is well known.

Mr Floris Huysamer, Chief Financial Officer: Western Cape DoA, replied that the costs of the two court cases would be determined by the Legal Services division of the Department.

Mr D America (DA) asked what the gaps were in the internal controls of CASIDRA because for the past three years there have been certain control deficiencies brought to the attention of the entity. Some of these have been addressed, while others have not. Is there assurance that screws would be tightened? CASIDRA has approved internal audit plans yet gaps were identified by AGSA over the last three years about uncorrected misstatements, lack of evidence provided, and transfer of payments for service delivery.

The CASIDRA Audit Committee chairperson stated that the Audit Committee agreed to have the internal audit team focus on strengthening internal controls, providing reliable information that is valid and complete, and to provide assurance on project management in terms of value for money.

Mr M Xego (EFF) asked for clarity on the three new court cases during 2020/21 because there was no description of what the cases are about and the financial implications. He asked for clarity on Broad-Based Black Economic Empowerment (BBBEE) Compliance Performance as there had been no response to the SCOPA Resolution on not entering into agreements with the private sector and not meeting the requirements of the B-BBEE Act in determining qualification criteria for the issuing of licences for export certificates for animal products and abattoir certificates.

Ms M Maseko (DA) suggested the Department engage with the Committee regularly to avoid what happened in past years and to iron out gaps on policies before Annual Reports are presented.

Mr Huysamer reported that the three court cases were about fraud which involved unauthorised deductions from the Department bank account for personal debit orders. However, it was found this was done by the financial institution, not by Department personnel.

On BBBEE, Mr Huysamer stated it must be noted that state veterinarians have to check all the products moving beyond our borders. The Department would welcome an engagement with the Committee on this matter.

Mr America asked for clarity on Contingent Liabilities because during the AGSA briefing it emerged there is litigation by a farmer against the Department. If it is pending, it should be a potential liability, but nothing is recorded under Contingent Liabilities. He asked for clarity on R100 000 paid to the University of the Western Cape; and asked about assurances from Eskom.

Mr Huysamer replied that the Department's Legal Services spoke to the farmer and reported that it was not sure if the farmer wants to go ahead with the matter. The Eskom guarantees came five years ago on how costs would be determined. Eskom asked for deposits. The money paid to the University of the Western Cape was for research conducted by the institution for the Department.

Ms Baartman asked for clarity on the payment of R270 000 by CASIDRA to SARS and why there has been a jump in back payments.

Mr Freek van Zyl, Chief Financial Officer: CASIDRA, replied that the amount was for VAT payments. Payments were done in 2019. However, 2020 was an unfortunate year with not much activity. For 2021, payments were done before the end of the financial year in April.

Mr Xego asked for clarity on the R213 000 irregular expenditure as payments were made without following Provincial Treasury regulations. He wanted to understand why the Department did not follow Treasury regulations.

Mr Huysamer replied that Mr Xego was referring to the old audit report, not to the new one. The irregular expenditure cited formed part of the court case. The old audit report reflected a qualified audit opinion. When the Supreme Court of Appeal judgment came out, the Auditor-General changed the audit report. The old audit report was withdrawn.

Mr America asked if the deposits paid to Eskom were going to be paid back and if that guarantee is a contingent liability.

Mr Huysamer replied that the guarantee is a liability because there would be problems if the Department does not pay the money.

Ms Maseko asked if the unspent balances that reverted to the Provincial Treasury were not going to have an impact on the work of the Department.

Mr Huysamer replied that the balances were part of an annual occurrence.

The Chairperson wanted to understand if the Department has an unqualified audit with findings or a clean audit seeing that the qualified opinions of the last three years have been retracted. He asked for clarity on the 52 CASIDRA items for which AGSA could not find accurate information or complete records.

The AGSA representative stated that the Department has an unqualified opinion with no findings. The old audit reports were replaced by new ones in November 2021. Hence the clean audit.

Mr van Zyl stated there has been a difference of opinion between AGSA and CASIDRA on the commencement of projects and the year they started. It was a technical matter that has been resolved. Some projects were started without an MOU but it was using and relying on the Department’s contract.

Ms Maseko stated it is important to understand the legislation that causes misinterpretation and misunderstanding between CASIDRA, the Department and AGSA.

The Chairperson remarked that it was not necessary for the parties to square up in court even though there are lessons learnt from this case. The court matter was not about service delivery but more about technical matters. He commended the maturity of the MEC throughout this matter and he has been consistent in stating the issue needs not to be celebrated. There are preventative measures that are currently implemented. He then thanked the MEC and his department for making themselves available for the Committee engagement.

MEC Meyer, in his closing remarks, stated that South Africa is a young democracy and we will go through these different challenges. Thus it is important to govern with maturity and humility.

The AGSA delegation thanked the Committee for giving it space to clarify matters that arose from the court case.

The Chairperson wished the Department well in servicing the citizens of the Western Cape.

The meeting was adjourned.