COGTA Portfolio Audit Outcomes; with Minister and Deputy Ministers
Cooperative Governance and Traditional Affairs
10 October 2023
Chairperson: Mr F Xaza (ANC)
Meeting Summary
The Office of the Auditor-General briefed the Committee in a virtual meeting on the audit outcomes of the Department of Cooperative Governance and Traditional Affairs and the entities reporting to them.
It said that while a few entities had received clean audit outcomes, there had been underspending which had raised concerns. A big factor contributing to the failure of departments was inadequate leadership and a lack of good decision-making. It assured the Committee that the necessary consequence management was taking place.
Members of the Committee raised questions about what was being done at departments and municipalities that were found to be overspending. They asked why the Auditor-General was not stricter on them, as they were empowered to do so. They also asked to be given a timeline for when the uncompleted projects would be implemented.
Meeting report
The Chairperson welcomed everyone from the Office of the Auditor-General, and acknowledged the presence of Minister Thembi Nkadimeng and Deputy Minister Parks Tau.
The Office of the Auditor-General had come to brief the Committee on the audit outcomes of the Department of Cooperative Governance and Traditional Affairs (COGTA) and the entities reporting to them.
An apology was noted for Mr I Groenewald (FF+).
AG's Budgetary Review and Recommendations Report (BRRR)
Mr Nicholas Mokwena, Deputy Business Unit Leader, Auditor-General of South Africa (AGSA), said it was part of the AG's goal to ensure adequate oversight in all departments, and that it recognised the importance of the Department of Cooperative Governance and Traditional Affairs as a leader for other departments. He said that the AGSA would share insights on the measures of intervention implemented by COGTA to help local governments. It was important for COGTA to have a clear and efficient administration, because this would lead other departments to do the same.
Mr Mdumiseni Dazela, Senior Audit Manager, AGSA, said that the mission of the AG was to strengthen the democracy of South Africa through oversight, accountability and governance in the public sector. He said that influence, insight and enforcement were central to the accountability ecosystem.
2021/22 Recommendations
- Monitor the implementation and progress of the action plans to address poor audit outcomes during quarterly reporting.
- Consequence management should be prioritised for the employees responsible for unauthorised, irregular, fruitless and wasteful (UIFW) expenditure to be held accountable.
- Request management to provide quarterly feedback on the status of key controls.
- Performance indicators and targets must be developed to achieve service delivery/impact against the mandate of the Department and the portfolio.
- Conclusion of material irregularities (MIs) close-out and disciplinary processes.
Implementation of some recommendations was still in progress, and there were others which had not started.
Departments such as the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic (CRL) Communities, the Department of Trade, Industry and Competition (DTIC), the Municipal Demarcation Board (MDB), the Municipal Infrastructure Support Agent (MISA) and the South African Local Government Association (SALGA), had received a clean audit opinion. However, they should aim to maintain the best practice to retain this clean audit status.
COGTA had remained stagnant, with a qualified audit opinion with findings for several years on moveable tangible capital assets and goods and services relating to the community work programme.
The Department was still struggling with the preparation of quality financial statements. Those submitted had contained material misstatements relating to tangible capital assets, where some assets could not be verified.
Instability was evident due to the high rate of resignation in key positions, resulting in a lack of continuity which also impacted the commitments and implementation of action plans by management to address the challenges the Department faced.
The Office of the Auditor General had identified non-compliance with legislation, resulting in irregular expenditure of R4 526 313 for the current year. The Office had not identified any material irregularities, and had noted the improvement by the Department to address previous irregularities.
Activating the accountability ecosystem
Mr Dazela said the AGSA was calling for action to implement the following recommendations:
- Continue to oversee progress on developing and implementing a root cause-focused audit action plan, including measures to resolve the material irregularities that had been reported.
- Monitor implementation of the legislative framework to address instability at the local government level.
- Intergovernmental relationships must be strengthened to ensure appropriate, swift and impactful interventions and support. Monitor implementation of the interventions put in place by coordination institutions to support local government.
- Continue to oversee and monitor the filling of the remaining vacancies to ensure the stability of leadership.
Reporting on COGTA's performance, and the impact of targets not achieved, he said that over the medium term strategic framework (MTSF) period, the government may not achieve its service delivery objectives by the end of its administration term. There was a fragmented approach to service delivery when the plans were not achieved according to the targets. The non-achievement of targets linked to infrastructure would negatively affect access to services by the citizens.
As part of AGSA's service delivery theme for the 2022/23 financial year, it had selected initiatives that focused on the support provided. These focus areas assisted in obtaining insights into understanding the implementation and monitoring the effectiveness of the support, the challenges phased during implementation, and the impact on the livelihood of citizens. The presentation provided insights into dysfunctional municipalities' support and the capacitation of local government.
Findings on Flood Relief Measures
The National Disaster Management Centre's preparation for responding to disasters included conducting disaster risk assessment, and identifying and mapping risks in areas, ecosystems, communities and households that were exposed, or were vulnerable, to physical and human-induced threats. It provided measures and indicated how organs of state should invest in disaster risk reduction and climate change adaptation, including ecosystem and community-based adaptation approaches. COGTA aimed to achieve a substantial reduction in disaster risks and loss of lives, livelihoods and health, and the economic, physical, social, cultural and environmental assets of persons, businesses and communities.
Material irregularities
The recommendations to the Minister were to monitor the long outstanding material irregularities (MIs) with determined turnaround times on the recovery process, and how dependencies were managed.
AGSA conclusions and recommendations
- Monitor the implementation of the audit action plans put in place by the Department and entities to improve audit outcomes.
- Monitor the filling of vacancies to ensure stability of leadership within the portfolio.
- Monitor the implementation of the interventions put in place by coordination institutions to support local government.
- Monitor measures put in place by the Department to resolve material irregularities.
(See attached presentation document for full details).
Discussion
Ms H Mkhaliphi (EFF) asked about the Department's progress in addressing irregular spending. She mentioned the Community Works Programme (CWP). She said there was instability within the Department, and she wanted to know what timeframe the AGSA had given COGTA to address these issues. She asked why the AGSA was not stricter on the Department, as they were empowered to do, instead of just complaining to the Committee.
Mr K Ceza (EFF) said that he had looked at the mandate of the Department when he considered the current report. He had also looked at where the country stood regarding transparency and democracy. He questioned if South Africa was progressing in terms of democracy, or if it was just maintaining the status quo. He was concerned about the closing balance presented on slide 34. He said that the AGSA was required to take the steps necessary to ensure that there was compliance by departments. He was concerned about the instability that was being caused by resignations.
No applications were received for the Khoisan recognition process -- what were the contributing factors to this low percentage? Irregular expenditure at COGTA was very concerning. Did AGSA not think that the current procurement model prompted the irregular expenditure that was happening? He asserted that there were contracts awarded to bidders who did not submit declarations of not being involved with the state, and that this was concerning because there could be a lot of legislation bypassed in this process. What did the AGSA recommend for companies that did not submit these declarations? What was being done for municipalities which were in financial distress?
Ms E Spies (DA) referred to the Community Work Programme, and acknowledged that consequence management had been implemented to recover what had been lost by the Department. She asked if the AGSA had included the audit of actual CWP sites. She questioned why there had been no progress with the district development model (DDM) and if the Department was willing to implement the suggestions the AGSA gave them, because the Committee should not be sitting with the same problems again next year. Were the departments listening to the AGSA, because it seemed that the recommendations given were not being listened to, and there was no proper intergovernmental engagement?
Mr J Smalle (DA) asked if the people acting in positions were not able to do their jobs, or if there was a skills vacuum within the Department. Was the over-expenditure of R3.4 billion currently being investigated, and how was this investigation being verified?
AGSA's response
Mr Mokwena addressed the slow progress of the Community Work Programme, and acknowledged that the timelines that it took for COGTA to get work done concerned the Auditor General. There was engagement with management to ensure that processes were quicker.
It was difficult to know if the current procurement process was what was leading to irregular expenditure. The AGSA was investigating the contracts awarded without the submission of declarations. There was a general issue with distressed municipalities, and the biggest problem was leadership instability, because it made implementation of AGSA's recommendations harder. Instability contributed greatly to distressing municipalities financially.
The AGSA visited the departments when they did reports to verify the number of employees and assets. He acknowledged that there was work that needed to be done in getting departments to implement the recommendations given to them.
Because of dependency, Mr Dazela said that the Department of Traditional Affairs was not achieving its goals for Khoisan recognition applications. The Department's target was to process every application that they received, but some of these applications were incomplete and the Department was unable to take them further.
There was a lack of specialists to manage money, and this was a key reason for irregular expenditure. 66 municipalities had sat with the AGSA in the finance portfolio.
Having acting positions disadvantaged the departments because of the lack of follow-through.
Further discussion
Mr G Mpumza (ANC) asked if the AGSA report had raised the role of decision-makers in the accountability ecosystem as being paramount. Only if this happened would work be done. He said that one of the root causes of the outcomes was instability within municipalities, which impacted the audit outcomes negatively. He asked if there was another form of remedial action to make sure that the right people made decisions. Had the AGSA gone to the extent of looking at poorly planned predetermined objectives and assessed what had led to them? What was contributing to the recommendations given by the AGSA not being followed? Was there resistance? What could be done to ensure that there was compliance in the future?
AGSA's response
Mr Mokwena agreed that the instability did impact the management of departments. He said that this was looked at from a service delivery lens. The AGSA had indeed taken remedial actions to address non-compliance. Financial management discipline needed to be implemented. He acknowledged that planning was a big issue. There was a delay when municipalities did not have decision-makers who could implement the recommendations. The AGSA suggested that there be intergovernmental consultations to ensure that this implementation took place.
The Chairperson highlighted the importance of the AGSA in achieving transparency and good governance in South Africa.
The meeting was adjourned.
Documents
Present
-
Xasa, Mr FD Chairperson
ANC -
Burns-Ncamashe, Prince Z
ANC -
Buthelezi, Ms SA
IFP -
Ceza, Mr K
EFF -
Direko, Ms DR
ANC -
Hadebe, Mr BM
ANC -
Mkhaliphi, Ms HO
EFF -
Mpumza, Mr GG
ANC -
Msimango, Mr X N
ANC -
Simelane, Ms T
ANC -
Smalle, Mr JF
DA -
Spies, Ms ERJ
DA -
Tau, Mr P
ANC -
Xaba-Ntshaba, Ms PP
ANC
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