Freedom Park received a qualified audit as there were concerns with the annual financial statements, asset register and the performance information. There was a dispute on the audit outcomes but this was subsequently resolved. Key infrastructure investments include the gallery of leaders, re-graveling of perimeter road, standby generator and electricity infrastructure upgrade, light fitting replacements, repair of heat ventilation and air conditioning systems and name inscription.
Committee members asked about the impact of Treasury Instruction Note 4 2022/23; once-off staff bonuses; audit dispute and audit action plan; procurement from designated groups, asset register; strategies to improve financial reporting; irregular expenditure and consequence management.
The PanSALB Ad Hoc Committee Panel was finalised as follows: Dr Bheki Langa, Mr Edgar Neluvhalani, Prof Saths Cooper, Ms SibongileTsoleli, and Dr Phateka Ntsuntshe.
The Chairperson said that the Committee hopes the two South African National Rugby and Cricket teams can bring the Cup back home and we should show passion for the sports.
Overview of Freedom Park: Department of Sports, Arts, and Culture briefing
Dr Cynthia Khumalo, DSAC Acting Director General, delivered the presentation noting the mandate of Freedom Park to honour the heroes and heroines of the struggles for freedom and humanity by memorialisation and storytelling that narrates a story spanning a period of 3.6 billion years through the following seven epochs: Earth, Ancestors, Peopling, Resistance & Colonisation, Industrialisation & Urbanisation, Nationalism & Struggle, and Nation Building & Continent Building.
Freedom Park achieved 86% of set targets for 2022/23. The total allocation for the year under review is R99.522 million. The organisation received a qualified audit; however a dispute on the audit outcomes has been lodged against AGSA by Freedom Park which is pending finalization. The staff gender representation is stronger on the side of females. Racial representation has also improved.
Dr Khumalo also reported on the number of current board members, meetings held, attendance rate of council meetings, and amount spent on remuneration for council meetings. Challenges included no salary increments to employees for four years, 99-year lease agreement of Freedom Park, the lease liability being over R5 billion compared to its assets of R5 million.
Its Medium-Term Strategic Framework objectives include sustainable diversified revenue streams, improved governance, redress, inclusivity and access, and increased demand for its products and services. Key infrastructure investments include the Gallery of Leaders, re-graveling of perimeter road, standby generator and electricity infrastructure upgrade, light fitting replacements, repair of heat ventilation and air conditioning systems and name inscription.
Freedom Park presentation
Ms Jane Mufamadi, Freedom Park CEO, spoke to the annual performance plan and "estimated" performance for 2022/23; budget expenditure; risk mitigation. She identified the following challenges:
- Lack of salary increase versus increasing cost of living expenses
- Budget cuts/cost containment measures
- Poor revenue generation
- Low employee morale
- High staff turn-over at executive Level
- Council challenges were the low remuneration for expertise and time required for the responsibility; lack of audit skills; short-term assignment for oversight over long-term strategy implementation.
Ms R Adams [ANC] ask the following:
- What are the implications of the new National Treasury Instruction Note 4 on irregular, fruitless and wasteful expenditure for the entity?
- The intended outcome of programmes 2 and 3 is social cohesion, what instruments do they use to measure the impact on social cohesion?
- The challenge about salary increases for employees has the potential to affect staff retention negatively. Therefore the Department should assist in finding ways in its budget to assist with salary increments. The intervention of bonuses is temporary and not long-term.
- The Auditor General South Africa (AGSA) recommendations should include monitoring the implementation of audit action plans to address the audit findings and root causes when it comes to the slow implementation of adequate preventative control measures.
Mr M Zondi (ANC) stated that he likes the strategic alignment with social cohesion and nation building priorities and that gender and race in the staff complement is well balanced. He noted it measures public engagement in terms of revenue. Its performance is positive and is a work in progress. He encouraged it to keep on working especially its financial performance. He asked the about the assets of the park.
He noted that 42% on procurement was awarded to women and people with disabilities which was a 2% decrease from 2021/22. The target for 2023/24 is 60% so what strategies have been put in place to ensure this 18% increase?
Mr T Mhlongo (DA) welcomed the presentation and posed the following questions:
- What is the current valuation of the asset register.
- When was the last valuation of each and every item on the asset register?
- The 2020 check of the asset register was valued at R10 million, can they provide details of the asset register?
- How far is it in addressing its poor internal control measures and when is it going to improve the gaps identified?
- What relationship does it have with the lease farm? In the past the lease farm was given R8.1 million which was never accounted for.
- In 2019 there were allegations that the staff did not get money. In other words, the staff are not motivated. However, once-off salaries were mentioned. What are these and do these address the salary increment issue?
- On consequence management, what have they done to resolve the irregular, fruitless, and wasteful expenditure from the past to date? This required by law. How far are they and what steps have they taken to rectify this?
- What was the expenditure in the previous year? What is the average age of the council members? Due to the important issues raised by AGSA, what are its implications for it to achieve the mandate and outcomes of Freedom Park?
- Freedom Park put a number of infrastructure projects on hold due to COVID-19. What are the impacts and the results of deferring this?
- There is a relationship between the entity and the Department of Public Works and Infrastructure (DPWI) where the proposal is selling and not donating the land to Freedom Park. What mechanisms will it use to solve the land issue?
Mr R Mamabolo (ANC) noted that Freedom Park had regressed to a qualified audit opinion. The Department indicated that they resolved the dispute. Does this mean that the findings do not reflect what has since transpired? What is the way forward on this?
Ms V van Dyk (DA) posed the following questions:
- On infrastructure projects, she requested a breakdown of the light fitting replacement project of R450 000, the standby generator and electricity infrastructure upgrade of R5 450 000, and the repair of the heat ventilation and air conditioning systems of R11 22 983? Who are the contractors that benefitted from these large contracts?
- The audit noted that the financial statements were not prepared according to the financial reporting framework. Does this mean that the people appointed to do this do not have the necessary skills to do this, and if so, why were they appointed?
- How is it justified paying bonuses to staff from a business perspective, as there was poor revenue and R6 million in irregular, fruitless and wasteful expenditure for no reason?
Ms D Sibiya (ANC) asked the following:
- The Auditor General reported that there were errors in the cash flow statement and that it was not prepared according to acceptable standards. Can they elaborate? Were there misstated figures?
- On irregular, fruitless and wasteful expenditure, were there disclosure notes in the annual financial statements?
- On staff composition, do they employ persons with disabilities?
Mr D Joseph (DA) asked the following:
- When did the board adopt that medium term strategic framework given the fact that there are issues relating to the outcomes?
- A lot was said about Priority 6: Social Cohesion and Safe Communities without showing the an outline, especially about redress, special libraries, history, resistance and liberation heritage. Can this valuable information be shared with the Committee via presentation or another type of shared media?
- Is there a contact person for storytelling of liberation, history, experiences and future dreams of the nation? Do communities know of this opportunity to tell their stories?
- Were any costs involved in the dispute with AGSA such as an external legal team?
- Was an intervention made by the Department or the board to resolve the matter and avoid a dispute with AGSA. Just looking at their names, the board has a lot of experience.
- He agreed with his colleagues on the once-off payment to staff. Will it be on a sliding scale based on years of experience or service? Even if in principle we think it is good as people cannot work four years without an increase, is there money for that. How are they justifying it financially?
- What are the required standards that must be followed for the cash flow statement.
- What system is in place for income received from visitors? Is there a cash system, an electronic card system, or both? How will they improve the revenue rate and protect it as there has been experiences of money collected not getting to the bank?
- He has not visited Freedom Park but it is a place that he has to go to before the Sixth Term ends and he acknowledged the work that people are putting into it.
The Chairperson stated that her question about the audit dispute had been answered by the presentation stating that it had been resolved. The credibility of Freedom Park must be upheld not only for future decisions but also for the past it embodies. The management of Freedom Park is vital and the leadership present in the meeting is capable of doing so. She requested that the Department reflect on the budget increase asked for by Freedom Park.
Freedom Park response
Mr Bheki Langa, Freedom Park Board Chairperson, noted several Members had raised social cohesion and this is Freedom Park's key objective and mandate. Freedom Park was established on the key principles of truth and reconciliation as a means to promote oneness and social cohesion amongst our people. Therefore, the programmes are geared towards achieving the vision articulated by the founders of our democracy. Given the Chairperson's introductory remark about the Springboks, South Africans should share that passion for other programmes not just sports.
- Treasury Instruction Note 4 2022/23
Mr Radichaba Malapane, Freedom Park CFO, explained that Treasury Instruction Note 4 2022/23 guides how departments and entities should process irregular, fruitless, and wasteful expenditure. The Instruction Note now confers more power on the accounting authority which is the board allowing it to be able to consider and approve irregular expenditure.
- In the past the approval of irregular expenditure was a power given only to National Treasury. With Instruction Note 4 2022/23, accounting authorities of state owned entities can condone writing off historic irregular expenditure. National Treasury provides the requirements on how an entity must first do an investigation to determine if there is fraudulent or corrupt activity.
- National Treasury still provides guidance on what process the accounting authorities will need to follow to write off or remove irregular expenditure from the financial statements.
- Once-off staff bonus
Mr Malapane replied that the once-off staff bonus is a kind of temporary relief to staff. They agree that the once-off bonus is a temporary solution. The instruction received from the executive authority was that Freedom Park could only effect a baseline percentage increase if they are able to afford this from their grant allocation. However, because the grant allocation is not increasing it was not possible to implement a baseline adjustment to the compensation of employees. As a result, from time to time they have a surplus and they write to the executive and National Treasury requesting to make use of the surplus funds to pay those once-off bonus salaries as an attempt to boost employee morale. In simple terms, the money for a staff bonus is not budgeted for but was a surplus at the end of the financial year.
- Audit action plan:
Mr Malapane agreed that they do indeed need a tighter audit action plan. This will become a standing item in the audit and risk board committee where management will report on the progress in the implementation of the audit action plan.
On strategies to ensure increased procurement from designated groups, the new supply chain regulations state that entities are allowed to use their own specific goals on procurement and they have updated their supply chain policy to align it with this goal of targeted procurement.
Previously service providers would come with a BEE certificate and entities would allocate points based on their BEE level but under the current dispensation set by National Treasury, entities are allowed to use their own specific goals.
With the supply chain policy approved by council, they are now able to say points will be allocated for people with disabilities, for youth or women. This then puts designated groups at an advantage as compared to the normal regulations. This is the strategy that they have now employed.
- Asset register:
Mr Malapane replied that one of the challenges was the asset register and the calculation of depreciation. They have started recompiling the entire asset register because an AGSA finding was that the asset register they had inherited had numerous misstatements and misallocations of assets. They want to address the root cause as it is a pervasive audit finding that affects the balance sheet, the income statement, and the cash flow statement. Once the asset register has been recompiled, they will be able to share it with the Committee as requested.
- Financial reporting:
On the overall financial reporting and if the specialists are qualified, previously Freedom Park was relying on consultants to prepare financial statements for them. They decided to do them internally after they appointed the financial manager. However, they did pick up that one financial manager alone is not sufficient to be able to produce an accurate set of financials. This is why they have now decided to build a team around their financial manager, a team of qualified specialists so they can have the internal capacity to produce the financial statements. In the long term they will save on the cost of consultants. The process has already been concluded and they will be joining us from 1 December after serving notice in November.
- Interim Audit:
The other intervention to address the audit outcomes regression is to prepare interim financial statements. The AGSA team will come and audit in January as if auditing the year-end but that audit is focused on only the nine months since April and it is able to show them three months before the year-end the areas of potential risk that need to be corrected in the last three months.
- Irregular expenditure and steps taken for consequence management:
Where officials were found guilty of negligence and failure to comply with policies and written warnings have been issued, disciplinary measures were implemented.
- Deferred income for infrastructure:
Infrastructure projects are always granted on the notion that you can retain them for multiple financial years. In accounting terms, it is called a deferred income account. Funds are allocated on the understanding that an infrastructure project can take multiple financial years. This is why it is classified as deferred income which is an accounting treatment of funds received that you have not been able to spend at the end of the financial year.
- Audit dispute:
The Department presentation noted a dispute with AGSA but the matter has since been withdrawn by Freedom Park after having engagements with the Auditor General where we both acknowledged that communication was the main challenge during the 2022/23 audit and that this will be improved in next year's audit.
- Ms van Dyk questions:
- On the light fitting replacement project of R450 000, this was done just to have a service provider in place as they need light repairs and the same response applies to the generator.
- The process for acquiring the generator service provider was done through an open bid. The same process was followed for heat ventilation and air conditioning.
- All these bids were subject to internal and external auditing. All files and findings can be shared with the Committee.
- All staff members received the same bonus amount regardless of their position as long as they had worked at Freedom Park for a minimum of one year.
- Ms Sibiya questions:
These had been previously addressed.
- Mr Joseph questions:
- On the staff bonus, some board members were not comfortable with this decision and some are still not comfortable with it but it was brought to the board and it was adopted by them.
- On the dispute lodged with AGSA, there was no cost attached to it and it was merely internal. Meetings were held the concerns ventilated and discussed and an agreement was reached. The process was internal with no costs incurred.
- Income collected from visitors is done through cash, card payments and EFT.
Ad Hoc Committee Panel
The Committee agreed to the following names for the panel:
- Dr Bheki Langa
- Mr Edgar Neluvhalani
- Prof Saths Cooper
- Ms SibongileTsoleli
- Dr Phateka Ntsuntshe.
The meeting was adjourned.
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