DALRRD response to the findings and recommendations in COVID-19 Special Audit Reports

Meeting report

Chairperson’s Opening remarks
The Chairperson said the Committee would be considering the Department of Agriculture, Land Reform and Rural Development’s (DALRRD) report to the Auditor -General (AG)’s First and Second Reports on the financial management of government’s Covid-19 funds. The Committee was concerned with the responses to the findings and recommendations of the AG. The Committee was even more concerned with how the Department had implemented the recommendations of the AG.

The briefing by the Department should help the Committee produce a credible report, but having reviewed the presentation initially submitted, he was not satisfied with it because it had failed to respond to the issues that the Committee had requested from the Department.  Of concern was that the presentation was a cut and paste of the AG’s First Special Report without addressing the implementation progress especially in relation to the Second Special Report.  He noted that there was now a revised presentation concerning both AG reports and hoped it included a detailed implementation report and not general statements.  Also, on the theme of accountability, he expressed displeasure at the failure of the Department to honour its commitments to the Committee. On an oversight visit to Gwatyu, the DG, Mr Mooketsa Ramasodi, had made a commitment to submit a report within seven days on interventions to be made at Gwatyu and COGTA had to also submit a report. The reports were due by 15 February 2022, but to date no reports had been received. The DG should inform the Committee on the reason for the delays.

DALRRD response to the findings and recommendations in COVID-19 Special Audit Reports
Mr Rirhandzu Shilote, Chief Director, DALRRD, made the presentation. The presentation addressed both the first and second AGSA reports on COVID-19 relief to small scale farmers. It was stressed that the second AGSA report reflected, in part, a follow-up of the first report. There was therefore, to a significant extent, an interchangeability of findings between the first and second reports. The Department accommodated that in its categorisation of the AGSA findings (both first and second reports) and the relevant responses thereto.  Below is a snapshot of the overarching AGSA findings and the Department’s response.

Approved applicants also employed by an organ of state:
-Investigations substantially completed
-Recovery processes initiated and ongoing
-Debtors accounts, where applicable, created

Approved applicants also receiving support from other government programmes:
-Investigations substantially completed
-Recovery processes initiated and ongoing
-Debtors accounts, where applicable, created
-No material findings in relation to these matters were raised by AGSA in the recently-concluded regularity audit

Approved applicants also receiving support from other departmental programmes:
-Investigations substantially completed
-Recovery processes initiated and ongoing
-Debtors accounts, where applicable, created
-No material findings in relation to these matters were raised by AGSA in the recently-concluded regularity audit

No evidence that applications were received before closing dates:
-The Department disagreed with the finding but noted that AGSA alludes to manual registers in the finding. In this regard, the risks relating to manual registers, in particular, have been addressed through the automation of the processes for all future initiatives as evidenced with the implementation of the Presidential Employment Stimulus Initiative (PESI).

Incorrect applicant scoring:
-All applications received were reviewed and, where necessary, additional verification was done through an electronic system called Survey 123.
-These discrepancies arose from the use of manual processes. All initiatives going forward have been automated as evidenced with the implementation of the PESI.

Inconsistent method or process used to calculate assistance to farmers:
-All applications received were reviewed and, where necessary, additional verification was done through an electronic system called Survey 123.
-These discrepancies arose from the use of manual processes. All initiatives going forward have been automated as evidenced with the implementation of the PESI.

Payments not verified at national office
-All payments have been verified and were supported by evidence.  In addition, all payments have been captured. In this regard, the AGSA has not raised any findings relating to these matters as per the recently completed regularity audit

Paid transactions not recorded in accounting system
-All payments have been verified and were supported by evidence.  In addition, all payments have been captured. In this regard, the AGSA has not raised any findings relating to these matters as per the recently completed regularity audit

Payments made to suppliers without detailed invoices
-All payments have been verified and were supported by evidence.  In addition, all payments have been captured. In this regard, the AGSA has not raised any findings relating to these matters as per the recently completed regularity audit
-It must be noted that payments processed without commodities relate to one province with an insubstantial number of suppliers. 

Inadequate oversight by department officials
-The Department constituted a team with provincial departments of Agriculture and deployed officials to conduct physical verifications as per recommendation by AGSA. All physical verifications have been completed.

Commodities bought unrelated to farming activities approved
-The Department constituted a team with provincial departments of Agriculture and deployed officials to conduct physical verifications as per recommendation by AGSA. All physical verifications have been completed.

Suppliers’ tax compliance status not confirmed
-The Department verified compliance during the bid evaluation and adjudication process and appointed suppliers that were in good standing with the South African Revenue Service. According to the applicable National Treasury instruction, non-compliant suppliers may be given seven working days to correct their taxes before award of the bid. Those who did not comply were disqualified.

Inadequate distribution of cloth face masks and hygiene soaps
-For all initiatives going forward, adequate controls have been implemented through the automation of processes as evidenced by PESI.

Approved applicants with invalid identity numbers
-These discrepancies were subjected to investigation. Based on the outcome of the investigation, recoveries have been initiated or vouchers have been cancelled.

The Department followed a two-pronged approach in addressing the AGSA’s findings:
-Firstly, the Department performed a retrospective analysis on the discrepancies raised and effected corrective measures. This retrospective analysis has yielded positive results as evidenced by the AGSA regularity audit outcome.
-Secondly, from a forward-looking perspective, the Department has adopted automated processes to implement similar initiatives going forward. These automated processes have resulted in a significant improvement in the adequacy of controls and, by implication, the integrity of information and data.

(See presentation)

Mr Mooketsa Ramasodi, DG, apologised for the initial report that was submitted; the  revised report also covered the second AG report. The first critical area he felt was important was to clearly outline how the Department had responded to the AG, specifically on improving systems.

The second matter was the Gwatyu issue. He admitted that the Department had capacity issues and he was dealing with disciplinary issues also. The report that had been sent was just a presentation and there needed to be a full report accompanying it which included the short, medium, and long- term issues the Department had committed to. He had since received the full report on the land rights enquiry and this had been forwarded to the Committee and the Gwatyu report would be sent that day. The issue here had been the quality of the reports and he apologised for the lateness because he had to go through each report. A challenge in the Department was the quality of documents. A DDG was appointed to be responsible for the Gwatyu area from that day going forward.

Discussion
Ms M Tlhape (ANC) expressed concern that the presentation lacked specifics and that it was vague. There were no details of how many people were applicants, where did this happen and who were the applicants. She expected a provincial breakdown of applications. There was no value on the vouchers that were cancelled, on vouchers recovered and on how many vouchers were withdrawn. This was an initiative where there was a lot of public interest in the way Covid -19 funds were spent. The Department did not indicate how many physical verifications were done per province. How many approved applicants with invalid ID numbers were there and what was the total value of these? Were there any cancellations or recoveries and what were these values? On the Department saying PESI was assisting the Department and that automation was being done, she said social media comments reflected people being disgruntled.  

Ms A Steyn (DA) agreed with Ms Tlhape. The presentation contained nothing. She made three proposals. Firstly, to call the Minister to account on the report, secondly to move back to in-person meetings, thirdly to get the AG’s input. Which DDG was responsible for the Covid-19 funds programme? What were the guidelines sent to the provinces when the vouchers were submitted? Were any officials investigated? If yes, then how many; who were they; and what were the findings? How were voucher monies recovered? Was follow- up done with all service providers? Were all suppliers paid? How did provincial departments do physical verification and who from the national department monitored this process?

Mr N Matiase (EFF) agreed with the previous speakers and the Chairperson’s comments. The report should not be debated or accepted. The Department had to go back and compile a report within the guidelines of a proper report within a week. This report should be rejected as a non-report.

Ms B Tshwete (ANC) said there was nothing in the presentation for the Committee to make the Department be accountable. The Committee needed a detailed report. She supported Mr Matiase’s call that the Department go back and create a detailed report that included details like the 100 beneficiaries with invalid ID numbers. How far was the Department’s investigation into this matter and how was it possible for that to happen. If there was corruption then what was being done?

Ms T Mbabama (DA) said the Department should not say that it learnt a lot from the AG’s report,  as it should have been able to do the Covid -19 disbursements as this was not the first time the Department was disbursing disaster vouchers seamlessly. There was a need to crack the whip. The report just gave repetitive answers which did not say much. She agreed that the Department should be sent back to give the report within a specified time period.

Ms T Breedt (FF+) said she was concerned, frustrated, annoyed and disappointed. She did not think the Department had learnt a lot or were doing their best as was claimed by the presenter. The Department was just presenting ‘fluff’. The Department had been asked many times to give details of the Covid – 19 funding. The AG had had identified 861 applicants who did not meet the minimum requirements but were approved and 847 of these applicants had no evidence of farming activity. The Department said it had investigated but did not provide details of the investigations and the outcomes thereof. This was not acceptable and, if necessary, in-person meetings should be held but she suspected this would not resolve the issues.  Steps needed to be taken to call in the Minister to take responsibility. 521 applicants who met the minimum requirements had been rejected. There was no indication of consequence management.  She came from the area of the Survey 123 geo-tagging example that had been shown in the presentation and she could not accept this as an example as it appeared suspect. She said the Department’s systems were a grave concern. The Department never monitored or evaluated the provincial departments. The Department claimed it had a financial control framework, but had it been implemented? What financial recoveries were initiated? Were procurement deviations reported to the Treasury, were there investigations and what were the outcomes of these investigations? There were instances where voucher holders were turned away by suppliers. What happened then in those instances. The Committee wanted the full details.

Ms K Mahlatsi (ANC) said the presentation was not a good one as it did not speak to the issues. She agreed that the Department had to go back and improve its presentation as there was no detail in its responses. She said the term ‘limitation of scope’ used by the AG indicated that there was no trace of the required information and she therefore asked if the Presidential Employment Stimulus Initiative (PESI) had been tested and whether it was reliable. She said there had been two reports, one on the process and one on the financial elements. This report had not spoken about the financial element. It should have contained details on getting value for the money used; fraud issues; and how the money was spent and accounted for. The Department needed to become more professional as the level and generalisation of the current responses were inadequate.

Mr R Cebekhulu (UDM) asked why the Department had done a manual recording process instead of electronic recording of transactions. He said that voucher beneficiaries had to drive past their local cooperatives to suppliers far away who tried to solicit funds from the beneficiaries. He could not believe that people would come with false ID numbers and the officials could be deceived therefore there had to be ghost farmers or people were benefiting twice. He wanted the Department - in its full report - to identify how many people in each province benefited wrongfully.

Ms N Mahlo (ANC) said the presentation was an insult to the Committee and the people of South Africa. She agreed that the Department should be sent back to prepare a report which gave the full information on those who had done wrong and what the Department had done about them to date. The Department should provide the Committee with its monitoring and evaluation tools so the Committee can see how they do their quality management systems work.

Mr N Masipa (DA) agreed that there was no report. The Department had failed to provide data to support their arguments against the AG’s report. He said just throwing money at a problem without assessing its impact on the situation would not solve the problem. The presentation was very subjective. The responses did not talk to the issues the AG had indicated, for example the 113 applicants who had links to the state. 1 832 of those that received support also received support from other government departments. The AG had also noted the inadequate departmental oversight. The old Department of Rural Development cannot do its work parallel to the current Department of Agriculture as it creates problems. He wanted to bring to the attention of the Department, the Public Audit Amendment Act where the AG’s work covered material irregularities which included fraud and theft and breach of fiduciary duties. Some of those elements were emerging in the presentation and the AG could refer matters to the SIU. If the accounting authority failed to implement the remedial action the AG must issue a certificate of debt in the name of the accounting officer. The AG must be invited to present to the Committee.

Ms M Montwedi (EFF) concurred with the other members about the presentation. She said the Department had to be guided as the Minister had announced the suspension of the PESI voucher system because of how badly it was run. Suppliers became reluctant to be part of the programme while others were marking up items by 40%. There were farmers who had not successfully redeemed their vouchers. The Department had to indicate whether all farmers had used their vouchers. How did farmers use the vouchers and how much was spent? Some suppliers were now refusing to give goods because previous vouchers had not been reimbursed to them. To what extent has the voucher program assisted in updating the farmers register?

Mr N Capa (ANC) asked how many applicants there were and what mechanisms were in place that there would not be repeat occurrences. Were the Department’s responses to the issues raised by the AG accepted by the AG? On what basis were deviations asked for from Treasury? How was it that processes continued even though invalid ID documents were supplied? Was there no verification of the documents? Was there a guarantee that there were no material findings? He said the limitation of scope comment in the AG’s report was the key to the negative findings of the AG’s report. He wanted the Department to comment on his opinion that: they should know they have to pay for what they had done; and that one trusted nobody when it came to finances and one needed documents or contracts or receipts to bear witness in transactions.

The Chairperson said that members had voiced their dissatisfaction about the presentation received from the Department and that issues they had highlighted be noted so that a proper presentation could be received by the Committee and in so doing the Committee could hold the Department to account. He asked that a meeting be scheduled within the following two weeks to have a proper presentation and engagement on the issue. A comprehensive report needed to be prepared. 

The meeting was adjourned.