In a virtual meeting, the Committee received briefings on the findings of the audits done in the 2021/2022 financial year from the Department of Social Development (DSD), the South African Social Security Agency (SASSA), and the National Development Agency (NDA). The presentations were meant to guide Members on the progress of the resolution of any inconsistencies in the audits and the measures that would be put in place to ensure that these issues would not arise again in the Department and the two agencies. The Minister and Deputy Minister were in attendance.
Social Development reported a regression in the audit outcome for the 2021/2022 financial year, with the audit outcome being an unqualified audit opinion with findings. The audit noted 51 inconsistent audit findings, of which 43 of these findings have been resolved and closed. One of the most notable findings that was yet to be resolved was the problem of Social Relief Distress (SRD) grant-holders having been using both old and new identity documents in order to register for two grant payments, which is being discussed between Home Affairs and Social Development.
Members inquired about the screening process in the case of the Social Relief Distress grant, which ensures that those receiving social grants are in need indeed, and how these candidates are monitored. They asked if the suppliers identified in the audit as being involved with the fraudulent activity and greatly inflated prices were being flagged so that they were not allowed to continue involvement with the Department. What is the Department doing about repeat offenders who continuously make mistakes in supply chain management (SCM)? Are other departments being informed of these fraudulent suppliers? They also asked about the efficiency of the internal audit. Is this audit being strengthened by the Department to ensure its accuracy and ensure fruitful outcomes? How long was the retraining process for internal auditors?
The National Development Agency said it received an unqualified audit opinion with findings. The audit only picked up 13 findings in 2020/2021. Of these findings, 12 were found to be material, and one was listed as an administrative issue. Measures put in place to address the findings included correcting errors found, improving control variables and management review processes.
A Member asked for an update on the Agency’s turnaround strategy, and how far the Agency was with the implementation process.
The South African Social Security Agency reported that its audit outcome had 83 findings for the 2021/2022 financial year. A total of 73 of these findings have received corrective action. SASSA has also been tackling issues of backlogged cases of finance branch matters, where there were 173 cases of irregular expenditure totalling about R403.62 million. Matters of fruitless and wasteful expenditures are being dealt with through legal processes, which have been heavily delayed due to court delays and appeal processes. Also, disciplinary corrective measures have been delayed due to unforeseen extended labour relations processes and other external investigations. Where ICT problems have been flagged, SASSA has been granted approval to appoint a service provider to procure an active directory monitoring solution. This has since been successfully deployed.
SASSA also presented an update on the current urgent issue that had occurred in the past week, where a system glitch prevented pension grants from being timeously available to grant-holders. The glitch occurred for members with Postbank accounts. The Agency acknowledged its poor communication towards grant holders, and also recognised the Postbank toll-free number as being overwhelmed and grant holders being unable to reach anyone. As a result, there was an increase in numbers visiting local offices requiring assistance.
Concerns were expressed over the recent glitches related to grant distribution by Postbank, and Members questioned SASSA extensively on the causes of these glitches. SASSA was requested to answer questions on why this occurred, the lack of communication during this crisis, how the cases are being resolved, and how many cases still require investigation and reversals. Members of the Committee expressed outrage that grant-holders still have not received their grants a week after this glitch occurred.
The Chairperson opened the meeting and welcomed the Committee Members and all guest delegates. The Chairperson noted the presence of the Minister of Social Development, Ms Lindiwe Zulu and the Deputy Minister, Ms Hendrietta Bogopane-Zulu. She handed over to the Minister.
Minister Zulu apologised for having to leave the meeting early but wished to express the importance of the engagement in the midst of an ongoing crisis where clients of the South African Social Security Agency (SASSA) have not timeously been receiving grants. Minister Zulu expressed a personal apology to South Africans for these occurrences, and stated her hopes that this session would help Committee Members better understand what had occurred. She also expressed that the Department at large had been busy over the week to ensure all grant-holders received their grants within the week.
Briefing by the Department of Social Development (DSD): Progress on the 2021/2022 Financial Year Audit Findings
Mr Linton Mchunu, DSD Acting Director-General, greeted all Members and wished for the proceedings to go through the presentations in the order of DSD, NDA (National Development Agency) and then SASSA last and that questions occurred between each presentation.
Mr Mchunu outlined the following findings of the audit:
- There was a regression in the audit outcome for the 2021/2022 financial year.
- The official status of the audit outcome was labelled as Unqualified Audit Opinion with Findings.
- The audit noted 51 inconsistent audit findings, of which 43 of these findings have been resolved and closed.
- A total of eight audit findings are currently in the process of being resolved.
Mr Fanie Esterhuizen, DSD CFO, outlined the 43 noted and resolved cases:
- Non-compliance issues
- Lack of sufficient training for SCM officials
- Payments exceeding approved quotation
- Payments to NPOs not concluding within the required 30-day period
- Late submission of quarterly SCM report to National Treasury
- Incomplete contract registers.
Findings that have yet to be resolved included issues of Social Relief Distress (SRD) grant-holders having been using both old and new IDs in order to register for two grant payments, which is being discussed between Home Affairs and the DSD. Members had also been found to have incomplete SASSA profiles, and dates were set for these Members to come forward and correct their updated information by February of 2023. A newly implemented system (“Know your Client”) has been approved for implementation. This will resolve challenges of old and new IDs and updated profiles of all SASSA grant-holders.
Mr Esterhuizen noted the unresolved issue of the misstatement of debtors' limitation where files had been lost in a fire during the 2021 unrest in KZN. A total of 39 680 files required reconstruction. Since then, a total of 14 673 files have been written off, and 6 997 have been recreated. The remainder of 18 010 files require reconstruction, and this would be due to conclude by March of 2024.
See attached for full presentation
Ms L Arries (EFF) questioned the Chairperson’s intentions in consulting Mr D Stock (ANC) on whether he wished to proceed with questions or complete all the presentations first. She expressed that, as the Chairperson, she could proceed without consulting Mr Stock.
The Chairperson clarified that Mr Stock had briefly taken over the position of chairing the meeting while she had internet connectivity issues, and she wished to know whether he had declared a mandate in her absence.
Mr Stock confirmed that questions on this presentation should be taken first.
Ms Arries requested a more detailed report on how these issues have truly been resolved and that these resolutions satisfy the recommendations in the audit findings.
She inquired about the screening process in the case of the SRD grant, which ensures that those who are receiving social grants are in need indeed, and how these candidates are monitored.
Concern was expressed about claims that files had been stolen and not lost in the fires in KZN. How can the Department ensure these files were lost in the fire and not stolen?
The Chairperson clarified that questions specific to SASSA would be answered at a later point, after the SASSA presentation.
Ms A Abrahams (DA) asked if the suppliers identified in the audit as being involved with fraudulent activity and greatly inflated prices were being flagged so that they were not allowed to continue involvement with the Department. What is the Department doing about repeat offenders who continuously make mistakes in supply chain management (SCM)? Are other departments being informed of these fraudulent suppliers?
Where officials of SCM are not sufficiently trained or are making mistakes, Ms Abrahams asked what the Department is doing to ensure proper qualifications and that these officials do not make these types of mistakes again.
Ms Abrahams requested clarification on whether persons who are married and applying for social grants are not being validated as married across all grant types, or whether this is limited to a specific grant.
Lastly, in the process of writing off debtors in the case of the KZN fires, what are the criteria, and how are these debtors being written off?
Ms B Masango (DA) asked whether the items in progress are required to be concluded within a specific timeframe, or whether deadlines had been set, so as not to ensure the Committee would have to deal with the same issues in a year's time.
She questioned the issue flagged by the audit regarding the overpayment to a beneficiary without approval. The memo included as a solution to this issue in the presentation reminding regions of compliance when paying beneficiaries is unclear. She requested clarification on this memo.
Ms P Marais (EFF) asked: in the case of verifying married beneficiaries, can pensions be given to all pensioners, whether in marriages or not? What grants are specific in only allowing one spouse to apply for grant relief?
Amongst the unresolved issues was exorbitant expenditure in the Department's decision to buy tablets, couches, chairs and tables. Was this decision made to ensure spending of the Department’s budget surplus?
Where post offices are not up to date with machinery and issues in monetary dispensation, how is this being managed in the Department, considering that the Department has signed a contract with the Post Office despite these concerns?
The Chairperson reminded Members that SASSA will not answer these issues in this section.
Ms J Manganye (ANC) asked about the efficiency of the internal audit. Is this audit being strengthened by the Department to ensure its accuracy and ensure fruitful outcomes? How long was the retraining process of internal auditors?
Concern was expressed over payments not being correctly recorded. How was there an incorrect recording amount in payments? Have these Members been held accountable?
Ms Manganye responded to the issues of debt management processes not being compliant with the legislation and policy. She asked the Department to clarify whether this is a lapse in understanding of the legislation and policies. How can the Department prevent this from occurring in the future?
Ms Manganye expressed her general frustration with the Department after admittedly seeing conditions affecting grant-holders on the ground.
Mr Stock claimed that audit outcomes have suggested to Members that the Department would benefit from strengthening oversight within the Department. Many issues are recurring, and the Portfolio Committee should be informed about how to ensure that these issues do not occur in the future.
The Chairperson agreed that repetitive findings and issues that are continuously in progress are concerning to Members of the Committee. She also acknowledged the importance of having a strong internal auditor. The floor was given to the Department to answer the questions posed to them.
Mr Esterhuizen answered Ms Abrahams’ concerns about suppliers charging higher than market prices. He confirmed that an investigation was done to understand market-related pricing to benchmark all future commodity expenses. He assured Members that these suppliers would be flagged upon the conclusion of the forensic investigation. Service providers will be flagged at the level of the National Treasury to ensure all departments are made aware of these suppliers. Disciplinary processes can proceed from that point on, if Members within the Department are implicated.
Mr Esterhuizen assured Members that all officials within the SCM have received all the necessary qualifications and credentials required to perform their duties. Where new developments arise, specific training is lacking. This case has been flagged to ensure it does not occur again.
Where payments to NPOs were delayed, this only occurred in a few cases and has since been resolved. Contracts between the NPO and the Department have been reviewed by legal services to ensure compliance.
Mr Esterhuizen, responding to Ms Arries, clarified that the AGs form part of the Audit Steering Committees who meet regularly. All updates on resolved and unresolved cases are brought to the Steering Committee. The AG has expressed that all resolutions thus far have been satisfactory.
In response to the question posed by Ms Masango, on the timelines set for resolving all issues, Mr Esterhuizen confirmed that the Department has set a due date – all unresolved cases should be resolved by March 2024.
Mr Mchunu confirmed that the AG is satisfied with the manner in which the Department has handled unresolved issues and is engaged in the steering committee. Non-payment and late payments of NPOs (non-profit organisations) are not one-sided. Where NPOs are found as non-compliant, the Department works with these NPOs to ensure compliance. These issues take time to resolve themselves. As by-laws regularly change, NPOs can find themselves non-compliant. The Department wishes to prioritise the relationship with these NPOs and ensure that payments can eventually be made to them.
Ms Brenda Sibeko, Deputy Director-General: Comprehensive Social Security, DSD, answered questions posed by Members referring to marriage validation in grant applications. She clarified that all grant applicants undergo a means test, where the criteria are specific to the grant they are applying for. Where pension applications are made, the means test requires that both incomes in a marital relationship go under review. This ensures that the grant targets the poorest citizens. The Department has made proposals to assess based on each spouse's income independently, but this has been unsuccessful due to the financial implications that the Department budget would face.
Mr Mchunu assured Members, once again, that red-flagged suppliers are published and also brought to the National Treasury.
In response to questions posed by Ms Arries, Mr Mchunu clarified that SASSA has an existing contract with Postbank and not with the Post Office. All system upgrades and maintenance are communicated to grant holders. Consistent engagement between Postbank and the Department has taken place over the past week to ensure that the problems of grant holders not receiving their money are resolved quickly.
Ms Manganye brought about the issue that all procedures put in place by the Department must be published and made clearer to the Committee.
Briefing by the National Development Agency (NDA): 2021-22 Audit Findings Action Plan
Ms Reekeletseng Hlapolosa, NDA Acting CEO, appreciated the opportunity and greeted the Members. She said that the presentation would outline all findings of the audit for the National Development Agency (NDA) for the 2021/2022 financial year, and all the measures that were put in place. She then handed over to Ms Hajra Mansour, Chief Audit Executive of the NDA, to deliver the presentation.
The presentation outlined the overall outcomes:
- The audit was labelled as “Unqualified Audit Opinion with Findings.”
- As opposed to the audit finding 38 findings in 2019/2020, the audit only picked up 13 findings in 2020/2021.
- Of these findings, 12 were found to be material, and one was listed as an administrative issue.
This detailed presentation listed each issue identified in the audit including all measures put in place to resolve them. Issues identified included: non-submission of documents, members serving on two committees in contravention of policy, and Covid-19 transactions not being reported to National Treasury. Also, disclosure of trade and payables under the risk management note was understated, and an issue with a stock count sheet was noted.
Measures put in place in each case included correcting errors found, improving control variables and management review processes. SCM policies were revised to indicate clearly where a member cannot sit on two committees, and resubmitting misleading documents to the relevant bodies.
See attached for full presentation
Ms Abrahams recognised that her question was not directly related to the presentation given, but asked for an update on the NDA turnaround strategy and how far the NDA was with the implementation process.
Ms Hlapolosa confirmed that the new board only approved this strategy plan in July of this year, and a five-year plan is in the process of being taken on a roadshow to get approval from various committees. It is intended to be implemented in the new financial year.
Briefing by SASSA: Audit Action Plan for 2021/2022
Mr Tsakeriwa Chauke, SASSA CFO, presented the findings made in the 2021/2022 audit:
- The audit reported 83 findings for SASSA in 2021/2022.
- A total of 73 of these findings have received corrective action.
Issues summarised in the presentation included a large amount of wasteful expenditure, contractual penalties, debtors’ files missing (in the case of the KZN fires); insecure configurations on internal network systems, and a lack of documentation submitted to BBBEE in this financial year.
SASSA has also been tackling issues of backlogged cases of finance branch matters, where there were 173 cases of irregular expenditure totalling about R403.62 million. Most of these cases are in the final stages of being processed, and they are either with Treasury, waiting submission to Treasury, or going to be resubmitted to Treasury. There are 37 cases that still need to go through disciplinary processes, totalling R 310 278 889.40.
Problems that have not yet been resolved include:
- Consequence management: fruitless and wasteful expenditure
- Contractual penalties: inconsistencies with penalty charges to rendering of social assistance services
- Debtors: limitation misstatement (burnt files)
- Limitation of system generated on Active Directory
- Insecure configurations on internal networks systems
- The Agency did not submit relevant BBEEE paperwork.
Issues of fruitless and wasteful expenditures are being dealt with through legal processes, which have been heavily delayed due to court delays and appeal processes. Furthermore, disciplinary corrective measures have been delayed due to unforeseen extended labour relations processes and other external investigations.
Where ICT problems have been flagged, SASSA has been granted approval to appoint a service provider to procure an active directory monitoring solution. This has since been successfully deployed. Issues of weak passwords and weak cyber-security on files were flagged. This has been communicated, and systems have been updated. The relevant cyber-security members of staff have received extra training.
Delays with accordance to the burnt debtors’ files have been due to having to track individual debtors to sign documents acknowledging debt, and this burden has now been shared with a third-party service provider to ensure speedy outcomes.
See attached for full presentation
Update on non-payment of SASSA grants
Mr Brenton Van Vrede, SASSA Executive Manager: Grants Administration, presented an update on the current urgent issue that had occurred in the past week where a system glitch prevented pension grants from being timeously available to grant-holders. These were much of the findings:
- The glitch occurred for members with Postbank accounts.
- 40% of SASSA grant-holders receive their grants through Postbank.
- When grant-holders attempted to transact using their Postbank account, money was taken out of the account but not reflected on the vendor's side or ATM.
- This has meant that Postbank has had to manually refund all grant-holders due to this glitch, and this has taken time and has had to occur on a case-by-case basis.
- Postbank has a toll-free number for those who have yet to receive their grant.
- Postbank has also set up an email address where grant-holders can email their ID numbers and card numbers, and have their cases investigated within 24 hours.
- Members were assured that SASSA and the DSD have engaged continuously with Postbank to ensure this does not occur again, and to troubleshoot all arising issues.
Mr Van Vrede acknowledged the problems that have occurred as a result of the Department, and has listed these as:
- Poor communication from SASSA towards grant holders
- The Postbank toll-free number being overwhelmed and grant holders being unable to reach anyone.
- Increase in numbers visiting local offices requiring assistance.
The Chairperson confirmed that after trying to call the toll-free number, she could not get through. Her concerns were expressed considering that this was the official route through which people should be able to access their money.
Ms Abrahams expressed concern that there are still grant-holders as of the time of the meeting who have not received their grant since the glitch occurred at Postbank last Tuesday (05 September 2023). She expressed her wish that SASSA recognise their responsibility in this matter, and not simply lay blame on Postbank. Communication between SASSA and their clients should be better to avoid retailers having to explain what is happening to upset clients. Ms Abrahams requested that the banking committee be invited to this Portfolio Committee to answer other questions and clear up further clarifications.
Ms Masango questioned a previously reported irregular expenditure of R 12 000 000. Can the CFO please explain the outcome of this finding, as this could not be deduced from the presentation? The case of irregular expenditure totalling R74 million in the presentation does not clarify whether the individual responsible for this was investigated and held accountable. Ms Masango requested further clarification on this point.
Lastly, Ms Masango thanked those who were available to help, despite protocols, during the crisis that occurred over this past week. She clarified that SASSA grant-holders apply to SASSA for their grants, not to Postbank. Thus, grant-holders will look towards SASSA for answers when a crisis occurs. SASSA needs to better communicate with their clients. Ms Masango requested a realistic assessment of the turnaround time for the emergency email address set up by Postbank.
Ms Arries expressed her own concern about the issues occurring with SASSA and the crisis that has occurred. She expressed deep sadness for those who had gone the past week without receiving their grants.
She also requested that SASSA provide a written progress report and breakdown of all the unresolved cases thus far to be available to Members of the Committee.
Ms Arries referred to the issue of fruitless and excessive expenditure. Can SASSA provide the Portfolio Committee with a more detailed account of where this excessive expenditure occurred within SASSA? Where in the process of investigation does SASSA find itself at?
Lastly, Ms Arries referred to the reconstruction of burnt files. She questioned the Department on the number of cases of debtors that the newly appointed service provider has been able to track down, and who this service provider is. How many burnt files must still be recreated?
Ms Manganye expressed gratitude to the executive members for being available and accounting to the Portfolio Committee in the midst of the system glitch at Postbank. She echoed the views expressed by Ms Masango that SASSA grant-holders look to SASSA for an explanation when errors occur. She recommended that executive members continue to engage with grant-holders during this time.
Ms Manganye asked the Department what procedures they have in place in the rural areas, where not all grant-holders would have access to a cell phone or to connectivity to send an email.
Mr Stock thanked the SASSA Members for their presentation, and recognised concerns raised by his colleagues before him.
He brought to the attention of the Portfolio Committee the presented outcome of the annual report of 2021 after the issue of files being lost in the fire, where SASSA had committed to embarking on a process of digitising files. Can the Department please clarify how far they are in this process of digitising files and when this is due to be completed?
Mr Stock also requested clarification on the timeline in which SASSA aimed to conclude its review of the negotiations between SASSA and Postbank.
Lastly, Mr Stock proposed the Committee have a meeting, should time allow, with the Postbank and SASSA to hear the problems on both sides of communication.
Ms Marais agreed with Mr Stock’s proposal to have a joint meeting with Postbank and SASSA.
She referenced the point brought up by Ms Manganye on the lack of access people in rural areas have to resolve this issue quickly. Many grant-holders would not have access to data to email the emergency email address to get their cases investigated. Further, she was concerned about the toll-free number being currently unavailable, as was confirmed by the Chairperson.
Lastly, Ms Marias requested a more detailed outline of the resolution of cases under irregular expenditure. She asked the Chairperson if there could be an additional sitting to hear how far SASSA is with resolving these cases. She expressed concern about the exorbitant amount of money in the audit under irregular expenditure.
The Chairperson wished that the Committee had the opportunity to further engage on this issue before SASSA appears at the media briefing confirmed to occur the day following this meeting. The Chairperson acknowledged the concerns brought up by Members of the Portfolio Committee.
Ms Busisiwe Memela-Khambula, SASSA CEO, expressed that SASSA understands their accountability in this issue of non-payment of grants and did not wish to lay blame upon Postbank. The glitch had not been previously communicated with SASSA from Postbank. Over 500 000 grant-holders required manual reversals as of Tuesday, 05 September 2023. And it is confirmed that the number as of this meeting was sitting at 2 000 remaining reversals that still had to be processed. She confirmed that SASSA should have these remaining 2 000 cases reversed within two hours of concluding this meeting.
Ms Memela-Khambula confirmed that SMS notifications confirming the crisis could not be sent out considering the fact that many grant-holders often change SIM cards and do not update the SASSA database. SASSA has used this opportunity to update its databases throughout this week as accurately as possible.
She went on to confirm that the cases of irregular expenditure are all in various stages of investigation. No outcome can be given to the Portfolio Committee until these investigations are concluded. Various disciplinary processes will take place when investigations have also concluded.
Mr Van Vrede agreed with Members of the Portfolio Committee’s suggestion to meet with the banking Committee. He said that the questions that could not be answered in this meeting could be brought up in that context.
The call centre at Postbank is not big and is not prepared for the volume of calls they receive during a crisis such as this. When the line is full, the calls do not go through. This has been communicated with Postbank so that alternative solutions could be explored. Postbank has promised SASSA that email has a four-hour turnaround, but this has been tested and found to not always be consistent. Where rural areas are concerned, some retailers and community leaders are taking lists of grant holders unable to access their money, and forwarding these lists to Postbank and SASSA. Mr Van Vrede expressed that a communication should go out to allow these Members to assist in identifying those falling through the cracks, or who have not yet received their grants.
Mr Abraham Mahlangu, SASSA CIO, responded to the question about the SRD grant system not picking up marriage validation, and other means test calculation issues. He assured Members that the system has been stabilised and audited by the auditor-general and through the internal audit.
Mr Mahlangu expressed the concerns that the Department faces wherein grant-holders are not receiving their grants due to identity theft. SASSA has requested that retailers and phone companies work together with SASSA to ensure that all information is valid when approving a transaction.
He also assured Members of the Committee that the two remaining flagged issues within the IT department of SASSA found in the audit are due to be resolved by the end of September 2023.
Mr Chauke requested to speak on the questions raised by Ms Arries, on excessive expenditure. He said that SASSA does confirm that the detailed list of cases remaining can be provided to the Portfolio Committee. Updates on these cases are reported weekly to the executive and audit steering committees.
To respond to Ms Masango’s question about the case of wasteful expenditure totalling R74 million, Mr Chauke confirmed that the matter is currently within the courts. There are three other matters within the courts, and only one matter that has not yet been brought before the court. This case is currently with the laws control committee which must conclude before the matter is referred to the court.
Lastly, Mr Chauke confirmed that just below 12 000 records must be recreated at this point. The service provider taken on board in this process will allow for greater capacity. Files are being recreated according to priority, starting with those working within the government. He assured the Committee that these remaining files should be concluded by the end of the 2023/2024 financial year.
Ms Masango formally requested that a written account for the cases that have been investigated be provided to the Committee, as well as those in the process of being investigated.
Finally, Ms Masango expressed her concern about panic spreading over the expiring of SASSA cards, while rumours on Postbank not having physical cards available for grant-holders have been spreading. She indicated that the extension for these expired cards was granted, and those members have until December to continue using these cards. What is the status of the availability of these physical cards, and what efforts are being made to try to salvage the situation and avoid panic amongst grant-holders?
Mr Mchunu replied that this matter could be added to the meeting agenda with the banking committees, SASSA and the Portfolio Committee to provide a more detailed response, in the interest of time.
The Chairperson noted concerns that the Portfolio Committee could not confirm when this meeting would be able to occur and if it would be able to fit into the Committee’s schedule for the remainder of this year.
In closing, the Chairperson emphasised the importance of the toll-free number and email address, and that it be contactable during this time. She thanked all the Members of the meeting for availing themselves.
The meeting was adjourned.
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