Provincial Treasury Performance: AGSA briefing

Meeting report

The Chairperson said that the Committee would receive two critical briefings. The North West Provincial Treasury would brief the Committee on its quarterly reports, and the Auditor-General of South Africa (AGSA) would give a briefing on the performance of Provincial Treasuries and their entities, with a focus on governance and compliance. The work of Provincial Treasuries was fundamental for sound fiscal governance, effective service delivery and the accountability of the use of public resources. However, persistent challenges, such as irregular expenditure, weak internal controls and delayed financial reporting, continued to undermine public trust and hinder development. The Committee expected constructive engagement. The Committee had to understand whether the North West Provincial Treasury and its entities were executing their mandates, whether systemic failures persisted, and what corrective measures had been implemented to address audit findings. The role of the Committee was to exercise oversight, demand accountability and ensure that recommendations lead to tangible improvement. She asked that this matter be approached with the seriousness that it deserved.

Mr D Ryder (DA, Gauteng) asked if he could be recognised after the apologies.

Ms T Legwase (ANC, North West) indicated that she had network issues.

Ms S Siwisa (EFF, Northern Cape) asked if the same presentation from last week would be presented. If this were the case, she did not understand what the meeting would be about. In the meeting last week, it was made clear that the Member of the Executive Council (MEC) had to come and account on the report. Was the meeting going to be the same as last week? She reflected that the purpose of this meeting was for the MEC to inform the Committee on why the North West was in the situation in which it currently found itself.

The Chairperson asked that the North West Provincial Treasury be allowed to do the presentation, and thereafter, the Members would ask questions.

Ms Siwisa asked whether the presentation would be the same as last week. If it were the same presentation, it would be a fruitless exercise. The Committee should be engaging with the MEC and the Head of Department (HOD).

Mr Ryder said that the presentation by the North West Provincial Treasury had consisted of 65 pages. There were only 50 minutes allocated for the presentation. The length of the presentation indicated that the presentation would run longer and take away some of the time for the deliberations. There was too much information. He suggested that the Committee Secretary reach out to the presenters to trim the presentation if it would not be completed within the allocated time. The Committee wanted to engage properly with all the details, the MEC and the HOD. He felt that the presentation was too long and would not allow the Members a lot of time to interrogate the information. He asked that the presenters keep this in mind.

The Chairperson said the presentation might be the same, but the MEC and the HOD were now present, and the Members could ask questions.

North West Provincial Treasury on its quarterly reports

Ms Kenetswe Mosenogi, MEC for Finance, North West, said that she would not take much time, and asked Mr Ndlela Kunene, HOD, North West Provincial Treasury, to make the presentation.

Mr Kunene said that a letter had been received from the Chairperson of the Committee on 24 March, and the presentation covered the concerns raised in the letter.

The presentation outlined the purpose, provincial economic growth and job creation, provincial fiscal framework, AGSA audit outcomes and concluding remarks.

Provincial economic growth and job creation

The province would intensify its investment mobilisation drive to unlock economic growth and job creation. These investments would take place in various sectors, such as mining, tourism, energy, and communications. The province would invest in various infrastructure projects in the social and economic sectors. These projects would entail the construction of schools, clinics, roads, communications, transport and energy, to facilitate economic growth. The province would also support the development of industrial parks in special economic zones.

As of March 2025, the preliminary expenditure amounted to R53.869 billion or 99.23%, an improvement of 0.10% compared to the 2023/24 financial year.

Overview of spending outcomes

Only one entity had a substantive board. Two of the entities had an interim board. Two of the entities had a substantive chief executive officer (CEO), while the remaining entities were in an acting capacity. None of the entities had chief financial officers (CFOs), which affected the regressed audit outcomes for 2023/24. These were critical executive management positions that were required to drive the mandates of the entities.

As of 28 February 2025, total revenue collection, inclusive of transfers and own revenue, amounted to R907.5 million, or 87.1%, from the adjusted appropriation of R1.042 billion. There was a projection of under-collection of R6.2 million at the end of the financial year, which was a cause for concern. Own revenue collection remained a challenge, with only 78%, or R296.2 million, collected by public entities for the period under review. The provincial adjusted budget for the 2024/25 financial year amounted to R54.286 billion, with preliminary spending of R53.869 billion. The underspending was R416.376 million. The provincial Department of Social Development overspent by R813 000. The preliminary spending was driven by compensation of employees (CoE) at R33.635 billion, followed by goods and services at R10.744 billion and transfer payments at R6.407 billion.

Some of the departments consistently underspent, such as community safety and agriculture, while other departments, such as cooperative governance, periodically exceeded their budgets. Health and education often registered high expenditure, but health fluctuated from 70.34% to 99.12%, while education declined from 99.95% to 82.41%. The inefficient budget execution could result in inconsistent spending, which suggests systematic capacity constraints. There were measures in place to enhance spending. Some measures included resuscitating infrastructure governance structures and collaboration with National Treasury to conduct training on the infrastructure delivery management system to guide departments on infrastructure planning and delivery.

Sources of revenue

The provincial own revenue shows a steady growth of 4.5%. Own revenue collection had to be prioritised, as under-collection results in unfunded budget programmes. The provincial own revenue amounts to R1.398 billion in 2025/26, increases to R1.461 billion in 2026/27, and to R1.527 billion in 2027/28. The major contributor to the revenue budget was the collection of motor vehicle licences. The Department of Public Works and Roads had the potential to collect more revenue should the process of disposing of the non-strategic assets be improved. Some of the strategies for own revenue enhancement included a comprehensive tariff review, strengthening oversight, establishing a provincial revenue forum, and conducting awareness campaigns. The debt management policies were also reviewed regularly to ensure continued relevance, effectiveness, and alignment with the prevailing fiscal conditions. An amount of R214.726 million was reduced proportionally from departments, excluding the Provincial Legislature, to fund the provincial priorities, amounting to R181.815 million, and the remaining amount of R32.911 million was unallocated as a contingency reserve.

The budget reductions had a negative impact on the service delivery targets. The filling of some vacancies had to be delayed. Some of the services of the departments would not be able to expand and would have to be scaled down. The provincial Department of Health viewed their budget as insufficient to support the full implementation of all sectoral policy priorities as well as the equitable delivery of health services.

Audit outcomes

In the previous year, 11 departments and the North West Provincial Legislature had received unqualified audit opinions. The Department of Education received a qualified with three fewer findings compared to the previous year. Public entities' audit outcomes remained unchanged from the previous years. Three public entities received an unqualified opinion with no material findings. Three public entities received unqualified audit opinions, while six were qualified. Two public entities received disclaimers. The North West Transport Investments (NTI) group has not submitted annual financial statements for the past four years. The Provincial Treasury has deployed officials to NTI to assist with the preparation of the annual financial statements.

Some of the remedial actions included developing a post-audit action plan, establishing capacity building initiatives and regular onsite visits.

(Please see the presentation attached for further information)

MEC Mosenogi said that she hoped the presentation was not the same as the one alluded to earlier. Unfortunately, the presentation could not be made last week. The team was ready to engage on the presentation.

Discussion

The Chairperson thanked the North West Provincial Treasury for the presentation. She acknowledged the comments on the adjusted budget and the letter received by National Treasury.

Mr Ryder was impressed that the presentation was done on time. Despite the claims of improved spending, the North West had cumulatively underspent R3.8 billion over three years. He raised concerns about the recurring underspending, particularly in agriculture, roads and human settlements. These were important departments to help people get out of poverty and to have a decent quality of life. Why were the budgets consistently misaligned with the departments’ capacity to spend those budgets? There were cases where money had been returned because it could not be spent. Instead of things getting better, it was getting worse. The spending on education fell from 99.95% in 2021/22 to 82% in the current financial year. There was a declining trend rather than an improving one. The 99.95% was remarkable, but why were things going backwards? There had been big increases for the education infrastructure grant and the health facility revitalisation grant, but the spending was not going up. The underspending on infrastructure remained. Arts was at 58%, agriculture was down at 42%, and community safety was at 12.8%. Why was the absorption rate so low? He felt that this had to be justified.

Only one of the entities had a proper board, while two had interim boards. Most of the CEOs were in acting positions, and there were no CFOs. This indicated a massive failure of governance, and had to be urgently resolved. The Golden Leopard Resort had received a disclaimer audit report. An adjusted budget of R15 million was being transferred to transport, but over R23 million had been transferred. This exceeded the budget, yet there was a failure to support a CFO. How was this approved? Who had approved it? He reflected that tourism was not able to pay salaries. There were real problems. It was evident that the cost of employees made up 81% of the expenditure, and was crowding out service delivery. Despite this, the employees were not able to spend money on infrastructure. The agricultural support programme of R130m was taken back by National Treasury because it could not be spent. This was a core programme that could empower emerging farmers, and it had been lost.

The North West was projecting a 4.5% annual growth, way above the growth levels of the country. He was not sure where this projection came from. The National Council of Provinces should find ways to help the provinces. There were two types of oversight -- one by a police officer, and the other looking at the legislative or regulatory problems that were preventing a province from achieving its outcomes. He said that asking for a more equitable share was highly inappropriate. The money in the province was being spent and mismanaged. If there were ways the Committee could help to improve regulations or laws, then that could be communicated. However, asking for a more equitable share when money was mismanaged was not appropriate.

Ms Legwase said Mr Ryder had summarised her worrying factors of the North West. The improvements and underspending did not translate into value for the money that had been spent. What could the Committee do to assist? The presentation had given the Committee an idea of where oversight should be done. The status of the North West was worrisome, and the province had to be rescued.

Ms Siwisa was worried about the underspending when there was so much that the North West could do. Last week, the AGSA raised some concerns about the housing targets not being met. There was this trend of more money being spent on paying salaries, but there was no value for money -- people were being paid to do work, but there was underspending on service delivery because the work was not done. She wished that there could in the future be a report where there was underspending on salaries and overspending on service delivery. She hoped that there would be a report where more was achieved than the initial targets.

At this time, there could not still be underspending. Many things needed to be done. Agriculture and roads were struggling in the province. The North West did not have maintenance for the roads. She wished the province could put forward a plan to fix these problems. She agreed that the Committee should visit the province face-to-face to hear the challenges and see how it could assist. The NCOP was here to assist the provinces by giving advice and guidance. There could not be so much underspending when a lot still had to be done. The money was there, but it was not being spent, and the performance targets were not being met. More money was spent on salaries than on providing services. Some entities did not have a board, and some entities did not submit financial reports. One entity had not submitted financial reports for the last four years. What guarantee was there that these financial reports would be submitted? These reports were needed.

There was a delay in appointing board members. There could not be entities that did not have a functional board. If no board was appointed, it meant that no work was being done, and that no one could be held accountable. There were human settlements issues -- beneficiaries were waiting for their houses, while other beneficiaries had not yet received their houses. Family members were living under the same roof because there was no indication of when houses would be received.

The hospitals were dysfunctional. The infrastructure for hospitals was not good. Ceilings were falling to the floor. People feared going to a hospital and having a ceiling fall on their heads. There were issues with medical claims. If the North West Department of Health was doing what needed to be done, there should not have been any medical claims.

As much as these concerns were raised and recommendations made, if the money was not spent on service delivery, there would be underspending, and the money would be returned to the National Treasury. The MEC for Finance had to ensure that the money was spent. These departments had to be assisted to ensure a positive report in the future. There had to be no findings of officials not submitting financial statements, non-performance of targets, or irregularities.

The country was 31 years into democracy, so these issues should not still be discussed. A lot of people were protesting because there was no service delivery. There would be protests forever if the tax money was not being used. She recommended that the Committee go to the North West and sit down with the departments to see where the problems were and where the Committee could assist.

Mr B Radebe (ANC, Free State) said that he had not been to the North West in a long time. However, the report indicated the governance issues in the province. He was impressed that its strategic plan was aligned with the medium-term expenditure framework (MTEF) and the National Development Plan (NDP). It aspires to create a developmental state, but it could not fight corruption and critical development at the same time. Some entities were dysfunctional. How could there be an entity that did not have a board? Who was going to be accountable if there was no CEO? The Public Finance Management Act (PFMA) was clear that every quarter, there had to be a financial report. To whom would the CEO and CFO report if there was no board? If there were no facilitation to appoint a CEO or CFO, it would create an environment in which corruption was going to thrive.

He suggested that entities should not get any transfers until the books were done appropriately. The NTI had not submitted financial statements since 2019, so why did it still get allocations? Did the reported economic growth translate to job creation? The rates of unemployment were still high in the North West. Who was going to benefit from the R100m funding? Who were the stakeholders? Were there any catalytic projects that were going to be supported? This would help to grow the economy of the country.

The North West was very rich in platinum. This vast resources of platinum must translate to a better life for the people. What was specifically being done for that special economic zone (SEZ)? If the economy did not grow, there would be no transformation. The vast resource of platinum must be exploited properly so that it would benefit the people on the ground. The areas of health and education were a concern. The Basic Education Laws Amendment (BELA) Act was recently passed to transform education. The National Health Insurance (NHI) Act was also passed. If there was no proper spending in these two departments, it would mean that the work of Parliament would be in vain.

He appreciated the fact that the Provincial Treasury had sent a team to assist the departments. However, there had to be regular feedback. This feedback had to include if there were any improvements, the people who had caused these problems, and the consequence management. The North West was one of the provinces that had a lot of potential. How could the North West attract tourists if it did not have a functional airport? Were there plans to ensure that there would be a functional airport that would be internationally recognised?

Mr J Britz (DA, Eastern Cape) said that the colourful picture that was being portrayed by the province did not add up to the reality depicted in the financial statements and reports. There had been fruitless and unauthorised expenditure for the past three financial years. There had been underspending by the departments, and money was returned to National Treasury. There were huge problems that had to be addressed. It was important to understand what the problems were, but the denial of these problems was not helping the situation. The projected growth was doubtful. It was clear that "ostrich politics" -- putting one’s head in the ground -- was not helping. He agreed with the Members that one had to get to the core of the problems facing the province. This had to be addressed to see progress in the North West.

Ms S Nxumalo (ANC, Mpumalanga) said it was evident from the AGSA’s report last week that the Committee had to go to the North West to quantify what was in the documents. Concerns had been raised about the underspending in the North West -- underspending was a criminal offence. There was a lack of capacity. There were issues with setting targets. The North West was a predominantly rural province that was dominated by mines. The province was very rich in mining. However, if one had to drive through the North West, it would be evident that nothing was happening.

There were a lot of public entities, and some had a disclaimer audit opinion. Public entities were there to assist with job creation. However, the disclaimers showed that nothing was happening. Some entities did not have a CEO. The MEC and the Premier must produce a plan on how to fill the vacancies, like the CEO and the CFO. There should be timelines on when the vacancies should be filled. The Committee could not sit back and watch the province collapse. She agreed that the Committee should do oversight in the North West to see how it could assist the province. There could be a programme of action that may assist in uplifting it. The North West was a very rich province, but the reports said otherwise. She emphasised that the Committee had to go to the North West to assist and uplift the province.

Province's response

Mr Kunene thanked the Committee for the comments and questions raised. He acknowledged that there were some shortcomings, and said remedial actions had been listed in the presentation.

Through the Executive Council and the work that the MEC was doing, there were monthly reports. These were extended reports to the executive which were aimed as part of improving accountability and consequence management. There was a report on the post-audit action plan and the progress around those audit outcomes. There was another report about the spending trends, performance and remedial actions being implemented. There was also a consolidated report on the quarterly performance of entities. All the departments were requested to produce a plan to fill the vacant posts at the level of the CEO and the CFO at the entities. It was through the process of the EXCO that these appointments could be fast-tracked. The speed at which some of these things could be done was dependent on the departments. There was a suggestion to bring in punitive measures for non-compliance. These were measures that would be implemented, but were not limited to withholding funds from the entities.

There had been efforts by the Provincial Treasury to improve the issues around the audit outcome. There had been concerted and comprehensive efforts to ensure that matters relating to the audit outcomes were addressed. These included the entities that had not submitted financial statements. As part of a proactive approach, the Provincial Treasury was assisting the NTI to put together their annual financial statements for the 2019/20 and 2020/21 financial years. There had been a discussion with the AGSA, and the other financial statements would be done after these two financial years had been completed. If there was a view that all the audits should be done, it could be arranged. The Provincial Treasury was also dealing with a difficult challenge in the NTI, which involved the business rescue practitioners. This also continued to compromise its ability to ensure that the annual financial statements were completed. The audit outcomes and efforts were emphasised on slide 63 of the presentation.

There had to be additional efforts to address crime and corruption in the entities due to the lack of capacity. There were efforts to support the growth of the economy. There was a budget of R35 million for capital projects, such as in Bojanala District Municipality. There was a budget for airports in the North West. Two of the airport projects were being finalised by the Department of Community Safety and Transport Management.

The NTI had been under business rescue to deal with its challenges. The concerns about the appointment of boards had been noted. The human settlements' performance in 2024/25 had improved. There had been an additional allocation, which had resulted in huge improvements. There had been an agreement to work on the issue of value for money to ensure that the provincial Department of Human Settlements met its targets. Based on the assessment done during the 2024/25 financial year, there had been a second adjustment budget of R150m. The entire allocation for the 2024/25 financial year has been used by the Department. In the past, there may have been some under expenditure, and there was now the challenge of meeting commitments.

This was the same for the areas of public works and roads. There were challenges in the planning and implementation of road projects. The concerns about the value of money raised by the Members had been noted. This was the reason that the Provincial Treasury had deployed teams as part of technical support to do site visits, to escalate the matter and engage with the departments to assist them in the initial stages. These interventions would be made as required.

Mr Kunene said that by the end of March 2025, human settlements had spent 99% of their budget. Social development also spent its entire budget, while public works, roads, and cooperative governance spent 99% of their budget. Education spent 90% of its budget, and health spent 99.99%. Community safety had spent its entire budget on conditional grants. There had been over-commitments. If one had to look at the 2023/24 to the 2024/25 financial year, the province was on a positive trajectory in terms of improved expenditure performance. The issue of value for money was important. The use of funds to support the targets in the annual performance plans was also relevant. The departments had significantly improved in terms of their performance. In 2021/22, public works and roads had underspent by R546m, but the amount now was R87m. There was a commitment, so it would constitute a rollover. Measures had been put in place, and there had been some improvements. There were remedial actions by the Cabinet and EXCO, which would be followed by National Treasury, and there would be a feedback report on that. This had to do with enhancing accountability and ensuring that there were improvements.

Regarding concerns about agriculture, the Provincial Treasury was working with the Provincial Department of Agriculture on the current financials. In one instance, an issue had been raised that the approval processes had come late in terms of the business plan. Another issue was about how the projects were sequenced. In agriculture, there was talk about things being seasonal. However, the Provincial Treasury had decided to continue to assist the Department of Agriculture.

The issue of Golden Leopard Resorts was unfortunate. The resort used to be a subsidiary of the North West Development Corporation (NWDC). When the entity moved, the same challenges from an audit perspective were impacting their audit outcomes. In the last meeting with the Department of Economic Development, there had been a request to produce a proposal on a permanent solution and strategy to address the Golden Leopard Resorts' challenges.

The Provincial Treasury would remain open to work and assist the entities. A decision had been made to look at the challenges of the audit outcomes, and to institutionalise some of the governance structures that the entities were battling with. The Treasury’s contribution to support the different departments and their entities was to establish risk management committees and audit committees. There has been assistance to various entities to strengthen their oversight structures. This would go a long way in terms of the interim financial statements.

The Provincial Treasury has done a lot of work to reduce under-expenditure. It has been working with all the departments to address the issues involving the Unemployment Insurance Fund (UIF), including the condonement process. There was a need to look at the projected growth and where to implement measures that would turn around the province's economic fortunes. This would also help to address some of the difficult social and economic challenges. Some of the initiatives were related to industrialisation. These could be opportunities presented by government procurement to facilitate industrialisation and the establishment of factories in the province. Measures would be implemented to enhance some of the processes. More should be done about the implementation of consequence management. This was a matter that had to be aggressively dealt with.

MEC Mosenogi said that the province was not in denial about the challenges that it was facing. She acknowledged that the Committee was keen to come to the province to see how it could collectively work together to address some of the weaknesses. However, she also acknowledged that there had been some serious improvements, as shown in the presentation. The underspending had been bad over the past three years. There had been consistent engagement with the Provincial Executive Council. There has been an improvement in infrastructure expenditure and other conditional grants.

There was a concern with the consistent underspending on agriculture. Engagements had taken place, which had indicated that there was poor planning and implementation. There was a need to improve this. There was a commitment to improve in the current financial year, and the Provincial Treasury would continue to provide support.

The presentation showed that the audit outcomes had improved. The North West Gambling Board had received a clean audit. She hoped that there would be more audit improvements in the current financial year. There was agreement on the concerns that were raised about the state of affairs of the public entities. She suggested that all MECs responsible should be invited to address the weaknesses that exist in the governance structures of the public entities, including the vacant positions of CEOs and CFOs. There had been a commitment to speed up the process, which meant that the situation would have improved in the next two months.

Concerns about the R100 million set aside for the development fund had been raised. There had been challenges in the budget to meet the demand for infrastructure in terms of construction and maintenance. As a result, it might take longer to fulfil the infrastructure demands in the province. There would be an infrastructure coordinating council supported by all the Heads of Departments in the province to consolidate an infrastructure pipeline. The Council would be looking at the projects that could be fulfilled in the next MTEF, but also at the projects that would be difficult to fulfil. There was a need to set aside the R100m and to mobilise private sector funding. The province had collectively joined hands with the private sector to ensure that the infrastructure demands in the communities were fulfilled. A report announcing the first project would be announced soon.

Some entities were not supposed to be getting transfers because they were self-funding in terms of their founding legislation or memorandum of incorporation. However, there has been a drastic decline in the performance of the Golden Leopard Resorts. It was no longer performing at the rate it had in the past. The MEC responsible for this had given an assurance that there would be an improvement. There might be some other considerations, but the discussions have not yet been concluded. This establishment was largely responsible for tourism. There were guests in the establishment. What was happening with the revenue? This meant that there were leakages in the system. There was a need to provide support to ensure that those leakages were identified and to improve the performance. There was an understanding that these entities had to generate revenue to cover their own costs. If these entities could break even, they would be in a better position.

The Chairperson thanked the North West Provincial Treasury for the responses. The Committee was willing to assist and intervene in the North West. When it visited the province, it wanted to see value for money. It would not be happy to hear that there was spending, but on the ground, it looked like nothing was happening. There had to be a balance. She appreciated the honesty and commitment shown throughout the presentation.

Mr Michael Rammabi, Director: Provincial Budget Analysis, National Treasury, addressed the amount that the North West would have lost as a result of the update on the equitable share formula. It would be appreciated that when the prioritisations were done, social services had not been made to suffer. For instance, access to health and basic education -- the services that poor people need -- would have to take priority. This included the private sector investing in the province. It would also be important for the maintenance of roads to be prioritised.

AGSA on the performance of provincial treasuries and their entities

Ms Sharonne Adams, Head of Portfolio, Regularity Audit, AGSA, said the presentation would focus on the audit outcomes for the Free State, Northern Cape and the Western Cape.

As a supreme audit institution, the AGSA wanted to ensure that the work that was done was relevant and that it came at the right time. The right insights would illuminate the use of the reports, but also further entrench the work of the AGSA based on the auditing standards. At the centre of the work that the AGSA did, it must have an impact on the lives of the citizens. Section 28 of the Public Order Act stated that the AGSA had a responsibility to audit the financial statements by looking at the credibility of the information and the compliance with the applicable accounting standards. It had to determine whether there had been compliance with rules and regulations. The AGSA had to look at service delivery and at the targets -- whether the targets were measurable, and if the information was reliable. The audit report must indicate the internal control deficiencies that led to the findings. The shareholders in the accountability ecosystem had a critical role to play. The AGSA looked at whether the role players in the accountability ecosystem understood their responsibilities and mandates. This would have an impact on the public sector culture. There were institutional controls to ensure that the officials and leadership behaved ethically, complied with the legislation, put the best interests of the institution first, and avoided conflicts of interest.

In the audit outcomes, there were three different zones -- purple, yellow and red. The auditees in the purple zone had information that was not credible, or the AGSA could not confirm it. This was especially concerning around service delivery. The auditees in the yellow zone had no findings relating to credibility, underachievement of targets, and the information was not verifiable. The other area, the red zone related to compliance with regulations. There was a mirror of non-compliance. In the Free State, there were financial health issues when it came to the areas of unauthorised expenditure.

Free State

Mr Odwa Duda, Business Unit Leader: Free State, AGSA, took the Committee through the presentation.

He said there were two clean audits, eight unqualified with findings, and six qualified with findings. There had been an overall improvement over the administrative term. Most of the auditees had remained stagnant, which illustrated a lack of prioritisation of the performance information and compliance. Fleet management, roads and transport, and community safety had regressed.

88% of the auditees had material non-compliance findings. The areas included consequence management, quality of financial statements, strategic planning and performance management, procurement and contract management, prevention of unauthorised, irregular, fruitless and wasteful expenditure, and revenue management.

Weaknesses in performance planning and reporting

The indicators were not well-defined, verifiable, specific or measurable. The political mandate indicators for prioritised core functions were not in the planning documents for education and human settlements. Some auditees' reported achievements were not valid, accurate or complete. As a result, there was a delay in service delivery to communities, which impeded the ability to fulfil mandates. The information that was not credible hampered decision-making on important matters.

Achievement of targets in key sectors

Human settlements had not achieved 84% of its targets. This was due to an inadequate performance management system, delays in the appointment of contractors, poor project management, and poor quality of work. As a result, poorer communities may continue to live in deteriorating conditions without access to adequate housing, sanitation facilities, and clean water facilities.

Health did not achieve 43% of its targets. This was due to a lack of consequence management against staff not adequately performing their responsibilities. The targets that were developed were not aligned with the available budget. The vacancies in the key positions negatively impacted services. As a result, improving the National Health Insurance (NHI) standards at psychiatric and regional hospitals was not prioritised. Consequently, the quality of patient health care did not meet patient expectations and fatality rates for children under five years were high.

Education did not achieve 28% of its targets. This was due to a lack of monitoring, poor project management and an inadequate inventory management system. There was a lack of sufficient classroom facilities and learner resources. As a result, teaching had to be provided in overcrowded classrooms, and insufficient or damaged textbooks had to be used.

Pressure on government finances

There was an estimated R426.1 million financial loss from 24 non-compliance material irregularities (MIs) issued since 2019. There was also unauthorised, irregular, fruitless and wasteful expenditure. The financial losses were due to poor payment practices, unfair/uncompetitive procurement processes, inadequate needs analyses and project management, and revenue management.

So far, 13 of the 24 MIs on non-compliance have been resolved.

Infrastructure for service delivery

There was a project for the refurbishment of Mantsopa Hospital in Ladybrand. In 2023, the site had not been commissioned after the project was completed in 2019. There was evidence of theft and vandalism. In 2024, the facility was still not commissioned, and the theft and vandalism had worsened. This had an impact on the patients who received treatment there. Despite numerous engagements with the auditee, no progress had been made in the implementation of recommendations. The AGSA was potentially pursuing a material irregularity on the project.

Call to action

The political and administrative leadership should play an enhanced role to support and enforce auditees in investigating unauthorised, irregular, fruitless and wasteful expenditure and apply consequence management. The Office of the Premier, with the support of the coordinated ministries, should pay special attention to the performance planning and reporting processes to improve the credibility of the performance reports. The political and administrative leadership was urged to address the infrastructure challenges. Oversight and governance committees should enhance their efforts to hold accounting officers accountable for the timely implementation of audit action plans.

(Please see presentation attached for further information)

Northern Cape

Mr Charles Baloyi, Business Unit Leader: Northern Cape, AGSA, took the Committee through the presentation.

The Northern Cape had received two clean audits, two unqualified with findings audit opinions, and one qualified with findings audit opinion. Public works and roads had regressed. There was poor planning and unreliable reporting. Some indicators were not well-defined, not valid, accurate, complete or verifiable. There were no reasons provided for variances in over- and underachievement. All the relevant indicators were not included. The core functions of education and health were not prioritised, which affected the opportunity for ordinary citizens to obtain a quality education and quality medical care in the province.

Infrastructure service delivery

The AGSA had identified poor planning, lack of coordination between role players, delays in project completion, cost increases, and poor quality of work. This had a negative impact. The schools were overcrowded, and health care services were not provided sufficiently. The road conditions were poor. There were 11 projects audited, and 91% had one or more findings based on delays, cost, quality, monitoring and supervision. There was a lack of remedial action against defaulting contractors. Work was not inspected before payments were made. There was also a lack of skills and capacity. As a result, citizens had to travel far for medical services, the quality of teaching was negatively impacted, and road users remained at risk.

Pressure on government finances

21 non-compliance and suspected fraud cases have been identified since 2019. This resulted in a financial loss of R127 million. The financial losses were due to poor payment practices, unfair/uncompetitive procurement processes, inadequate needs analyses and project management, no/limited benefit received from money spent, and ineffective maintenance of infrastructure. Four of the material irregularities had been resolved, two appropriate actions were taken, and six material irregularities were closed. Five recommendations were made in the reports, and one referral and two other referrals were made to investigating bodies. One response was received on the notification.

Call to action

Senior management and accounting officers needed to lead by example and ensure that there was consequence management. The MECs, as well as the provincial oversight bodies, needed to insist on credible financial and performance reports. The Provincial Treasury had to widen the focus of its support to cover service delivery matters.

(Please see presentation attached for further information)

Western Cape

Ms Sangeeta Kallen, Business Unit Leader: Western Cape, took the Committee through the presentation.

There were 18 clean audits and two unqualified with findings audit opinions for the 2023/24 financial year. There were no regressions.

Weaknesses

Education did not include key medium-term strategic framework (MTSF) performance indicators relating to programmes two and five in the annual performance plans. This resulted in a material finding on the completeness of indicators in the annual performance plans. The Western Cape Education Department (WCED) did not develop adequate standard operating procedures to ensure processes were embedded to produce reliable performance information. This included the lack of providing adequate confirmation of evidence to support the reported performance achievements. Excluding key performance indicators from the performance plans of the WCED could result in a significant setback in achieving educational equity and future workforce preparedness. It would hinder the overall development and progression of the education system in the province.

Some of the housing targets were not achieved. This was due to poor project management and quality of work. There were challenges with municipalities not delivering infrastructure, and community unrest within informal settlements. There had been visits to various projects. The AGSA had found that there was good quality of work and the prior year defects had been addressed. There were delays in the planned project timelines and additional costs. There was poor performance by contractors, and the contracts with the defaulting contractors were not terminated. As a result, the improvement of service delivery had been delayed. There had been changes in the scope during the construction phase, which resulted in significant delays and cost increases. The poor-performing contractors were kept in the system, and could potentially be reused.

Some of the root causes for the weaknesses in infrastructure project delivery were inadequate planning and design, lack of accountability for non-performance by contractors, and inadequate cooperation and delayed provision of utility services by local government. It was recommended that there should be an effective planning mechanism in place and that comprehensive management processes, contract management processes, and consequence management processes should be in place. There was one material irregularity in non-compliance and suspected fraud identified. There were internal control improvements in place to prevent a recurrence. The material irregularity had been resolved.

Call to action

The accountability ecosystem must be activated to address the current realities. Provincial leadership had to intensify the reviews of the annual performance reports in line with the requirements of the performance management and reporting framework to ensure that information gathered for predetermined objectives sufficiently supports the reported performance and is complete, thus improving the audit outcomes of education and mobility. The Portfolio Committees must review annual performance plans in a timely manner. Provincial leadership must find a mechanism to adequately manage their tactics to optimise the future planning on project delivery and effectively utilise dedicated capabilities to improve service delivery in the province.

(Please see presentation attached for further information)

Discussion

Ms Siwisa said that she had only one question about the Northern Cape -- how did one identify when a project was complete? During the oversight week focused on infrastructure, some projects were not included in the report. There was a school in Petrusville that learners attended, but the construction was ongoing. If a project was handed over, it meant that the project was complete. One had to consider the raping of children that had been happening. These were primary school learners who were attending school, but the contractors were still on the premises. If the construction was still going on, was the project complete or in progress? This was something that the MEC for Public Works and Infrastructure needed to answer. The service delivery departments were not doing what needed to be done. This was seen in the North West, the Eastern Cape, the Northern Cape and the Free State.

She found the Free State to be scary, because the Office of the Premier was not performing. The report indicated that the Office of the Premier had experienced increased irregular and wasteful expenditure, from R53m to R75m. This was a concern that had to be addressed with the Premier, as the Premier was the individual who was supposed to ensure that things like irregular and wasteful expenditure did not happen. The Mantsopa Hospital had been classified as being in good condition in 2023, but the province had done nothing to ensure that the facilities were utilised. The facilities had been vandalised. Where was the money going to come from to do repairs or redo the whole project? The damage done was going to cost a lot of money.

In the Northern Cape, the classes were overcrowded. The Provincial Department of Education was not utilising the money for what was supposed to be done. If classes were overcrowded, it meant that the learners would not be able to pay attention. As a result, more money would have to be spent on infrastructure. If public works, infrastructure, roads, and transport did not do what they were supposed to, there would not be a proper handover of a project. If the AGSA recommendations were not implemented, money would be spent, but there would be no change.

She expressed concern about targets versus budgets. There were situations of targets not being met, and overspending and not being able to account for where the money was. There were human settlements problems in almost all the provinces. She emphasised that the Committee was asking the questions to the wrong people. The people who were supposed to answer must come to the Committee and explain why the provinces and the different departments were not performing. In the Northern Cape, there was a human settlements crisis. People were looking for places to stay. There was still a discussion about giving money, but the money ended up being returned. This money could have been used elsewhere in areas like service delivery. She stressed that the people who needed to respond should come to the Committee to explain why the provinces were not performing.

Mr P Swart (DA, Western Cape) agreed with Ms Siwisa. He said these problems had been going on for a while. As Members of Parliament, they had to make a difference to change the lives of people and the conditions in which they lived. After 31 years, there was a struggle to do the right thing. There were capacity concerns. He agreed that oversight had to be taken more seriously. From the AGSA’s reports, the Committee could see all the mismanagement and corruption. The Committee had to do oversight, because there needed to be accountability and consequences.

The lack of accountability and material irregularities stood out to him. There were significant MIs of R426m in the Free State and R127m in the Northern Cape. In the North West, there were questions about the status of MIs, which meant that further investigation had to be done. Why was there a delay in recovering the losses or applying consequences? Everybody had been talking about consequence management. He was worried about the audit regression in the key departments. He thanked the AGSA for the important work that it did in reporting what had happened. He raised concern about departments like education and health in some provinces having received findings related to unreliable performance reporting. What measures could the legislatures implement to support the AGSA’s recommendations and ensure that the departments implemented proper technical indicator descriptions and standard operating procedures?

What happened to the recommendations made by the AGSA? He agreed that the people who were supposed to answer these questions were not present. The AGSA had flagged performance indicators not being specific, measurable, or verifiable for several provinces. What role could it play in training or capacity building of officials in strategic planning, to address the recurring issues in the provinces? There were infrastructure failures due to poor project planning, inadequate inspections, and unqualified contractors. Could it be recommended that National Treasury revise the protocols, or introduce a stricter early-phase project assessment, before funds were dispersed? The AGSA recommendations were based on the realities on the ground. What recourse did it have when the recommendations were ignored year after year?

He congratulated the Western Cape on its audit outcome. Everyone was part of South Africa and had to come together to learn from one another, because they were serving the people of South Africa as a whole.

Mr Ryder appreciated the work that the AGSA had been doing, because it enhanced the Committee’s work and helped to ask the correct questions. Ms Siwisa and Mr Swart had indicated that the questions should be asked of the right people. He felt that the AGSA’s report should have been titled "the good, the bad and the ugly." However, he acknowledged that the AGSA had categorised the report according to its own perceptions. Audits were coming out each year, which was important for oversight work. What were the auditees doing about the audit outcomes?

It was refreshing to see the good responses from the Western Cape. It showed that if there was irregular expenditure, the Western Cape would show progress in dealing with the matter. Similarly, the Northern Cape was also improving. The Premier had made a genuine attempt to improve governance in the Northern Cape. Anyone could drop the ball at any time. An audit was a snapshot in a specific space of time, and things could go wrong. If the AGSA pointed something out, what were the auditees doing about it? How were the auditees responding to the problems? Further steps needed to be taken when there were repeated findings, with no improvement, and regressions. Otherwise, the audit report would just be a piece of paper that got shredded as soon as a Member of Parliament left office.

One of the first steps that could be considered was to visit these provinces for oversight. A request could be made to the Select Committee on Cooperative Governance and Traditional Affairs (COGTA) to investigate the matter further. A letter could also be sent to the Minister of COGTA to implore the Minister to take these matters seriously. The Committee could not give the Minister orders but asked for the matters to be taken seriously. There could be section 100, 139 or 154 interventions, depending on the sphere of government. Having these discussions around the audit outcomes was all good and well, but where there was no attempt to improve governance, there should be a follow-up. The Committee should encourage the Select Committee on COGTA and the Minister of COGTA to conduct further investigations. The Committee could not allow the AGSA’s work, as good as it was, to just die a miserable death.

Mr Britz said he was listening to the AGSA for a fair amount of time, and there were recurring things being mentioned which involved consequence management. The phrase consequence management had become a popular buzzword, with little substance. Perhaps it was time to look at legislation and criminal investigations where there had been adverse findings for individuals and contracted companies. There must be natural consequences for adverse findings or irregularities. It was time to criminalise irregular outcomes. He emphasised that this was just an idea that he had.

Mr Radebe felt that some things should be referred to the law enforcement agencies. In his constituency, in the human settlements department, there was a problem where in one house, there were three different beneficiaries. When dealing with the issues of the small, micro, and medium enterprises (SMMEs) that were supposed to benefit from these projects, there were foreign nationals who were building these houses. What could the AGSA do about that?

AGSA's responses

Ms Adams said that the AGSA looked at where projects were commissioned, and whether the projects could be utilised, to determine their completeness. There were instances where it was indicated that a project was completed, but when visiting the site, this was not the case. This was something that the Committee could take up with the provinces. A project could be practically complete, but there may be a risk, or small things that still had to be done. There was a trend analysis where key services in the Free State and the Northern Cape were having performance problems. It was especially in those areas that had the biggest budgets. The slides also indicated the underachievement of targets and indicators.

There were a lot of challenges when it came to material irregularities. She saw things become stuck in this system as the process unfolded. The MI would cause either harm or financial loss. This issue would be reported to the accounting officer. The information would be included in the audit report, but there would be no corrective action by the entity, department, or municipality. From an oversight perspective, proper oversight should happen, to ask questions. A lot of the recommendations were not responsive, and would lead to the next step of remedial action. A number of the material irregularities were referred to law enforcement agencies. There was also communication to say that matters had to undergo further investigation in the Northern Cape, which was currently being addressed.

Every role player in the accountability ecosystem had to play their part so that matters could be dealt with swiftly. The AGSA had seen consequence management in the space of the PFMA and the local government. This was a big challenge when it came to repeated irregular expenditure, fruitless and wasteful expenditure, and unauthorised expenditure. There had to be compliance with those laws and regulations because they were there for a reason in the first place. Training could be provided by the National School of Government (NSG). The NSG assisted departments when putting performance plans together. The Department of Planning, Monitoring and Evaluation (DPME) also had a role to play in this regard from an oversight perspective.

Mr Duda said that if one looked at the audit outcomes of the Free State from 2018/19 until today, there had been some level of improvement -- there had been eight improvements and one regression. It was the undesired picture that had to be dealt with. One had to make sure that the outcome was translated to the impact, the lived experience of citizens. When there was no progress, the AGSA challenged itself to link those areas that management was not paying attention to, with the AGSA’s extended powers.

There was a lack of attention to dealing with the issues of service delivery. Some material irregularities had been identified in those areas. In some instances, the leadership had started to respond positively. Some processes had been developed to guide the officials. This would help with designing the key performance indicators. There was also a discipline to ensure that the supporting documentation was not an afterthought process, but was something that was developed through the indicators. In this instance, the officials would already be thinking about how to collect the information. There had been some level of attention when the AGSA issued material irregularities.

The challenge of compliance with regulations was one of the hindrances to the improvements in the Free State. The AGSA continued to look at whether those non-compliance issues could be linked to the definition of material irregularities. A number of MIs were issued in the province. This was particularly around the poor payment practices, where money was paid to a party, but there was no service in return. The AGSA went as far as looking at the contracts that were drafted on behalf of the institution, and whether they were done in a manner that would benefit the institution. In some instances, this could be triggered and raised as a material irregularity.

He acknowledged that Members felt that the Premier should be leading by example. There could not be a situation where the Premier was supposed to be monitoring the performance of the province but could not get it right in his own office. The AGSA had been engaging a lot with the Premier to ensure that people were able to fulfil their roles. For several years, it had been focusing on the Free State, the Premier, and the irregular expenditure. A number of issues were referred to the Special Investigating Unit (SIU).

The international bursaries had stopped. The last students were being finalised. There would now be a focus on domestic bursaries. There must be a process to identify these students. There must be a process to ensure that the progress of the students was monitored. There must be a process to ensure that the money was not just thrown away, but was spent to make an impact.

He addressed the concerns about the Mantsopa Hospital project. In the past, the AGSA could only make recommendations to the auditees to ensure that the processes were correct. However, with its extended powers, it was able to drill down to identify the failures of the Mantsopa Hospital. R29m had been spent, but the amount had been wiped out because of a lack of safeguarding. The AGSA had been able to identify what went wrong and bring those elements to the forefront. This would help government implement consequence management against those involved and would assist with instilling the practice of accountability in general by shifting the culture. The focus had to be that if something was done wrongly, there would be consequence management.

Mr Baloyi said that there was a stage called the practical completion of a project. There was retention money involved, which was kept by the departments in case there were small defects that had to be corrected. However, there were instances where projects were in the practical completion stage, and children moved to the schools. The contractors would still be on site if there were minor repairs at the school. This was due to the retention money that had been agreed upon. This was one of the projects that he had seen in Kimberley. There were also issues of overcrowded classes. This was due to the lack of proper project management. If a project was delayed, it would cause overcrowding in other schools which had to accommodate those students. This would result in overcrowded classes.

There had been educational indicators that were not included. There was a programme that referred to the infrastructure development of additional Grade R classrooms and the construction of schools. These were some of the things that would alleviate this overcrowding. The AGSA had urged that these matters must be prioritised by the Department of Education.

There had been challenges with human settlements. R1 billion had been received to deal with the housing issues. In the audit process, the AGSA would look at the list of people who were supposed to get houses. Sometimes, there was an indication that the people on the list were not receiving those houses. This was one of the things that the AGSA would focus on.

The AGSA did refer material irregularities for further investigation. For the provincial Department of Health, there were issues where waste management had not followed the proper supply chain processes. At the time, the matter had been referred to the relevant stakeholder, which was the National Treasury. In the end, the matter had been referred to the Directorate for Priority Crime Investigation (Hawks). Other matters not in the presentation had been referred to the SIU.

There was another matter regarding a public works and roads project, where almost R160m had been spent on a road, but on the ground, there was nothing to show for it. When the AGSA engaged with the Premier, the Premier had indicated that the route had been much better before the construction. The matter had been referred to the SIU. There were instances where the AGSA looked at the relevant bodies to refer the matters.

Six departments in the Northern Cape were doing well. To receive a clean audit or an unqualified audit with no findings on compliance or predetermined objectives, one had to ensure that there were no material findings. There were issues with the service delivery departments, especially education and health. These departments had to be capacitated so that there could be an improvement. For education, some of the indicators would not be measures that would improve the realities of the students or the communities. Most departments called the AGSA if they did not understand the annual operating plan. There would be a strategic session to explain and capacitate the departments. The provincial Department of Health has been receiving a disclaimer audit opinion for many years, but they have improved in the current year. The AGSA also attended the quarterly engagements to indicate where the departments went wrong so that the same mistakes would not be made in the future.

When recommendations were not adhered to, the AGSA would identify the people in the accountability ecosystem for engagement to assist. It also looked at whether a material irregularity could be enforced. In most instances, there was no consequence management, and the AGSA could then issue a material irregularity. In some instances, there were weak internal controls, but as soon as a material irregularity was issued, there would be progress. There had been a lot of success with the sports department, because there had been regular engagement. It now had an unqualified audit.

Ms Adams said there were enough processes, procedures, and legislation in place. The key challenges were their implementation. This also came down to institutional integrity, which was one of the key root causes for a lot of the institutions, as the controls were not institutionalised and maintained. The behaviour of key officials was not ethical, and the officials did not always put their own institution first. If the ethical behaviour part could be addressed, there were a lot of issues that could be addressed within the system of the public sector.

Chairperson's concluding comments

The Chairperson thanked the North West Provincial Treasury and the AGSA for the detailed presentations. The discussions had been insightful, yet concerning. The Members and the AGSA had raised a lot of issues. The need for an oversight visit to the North West had been raised. The Committee would go to all the provinces. The Committee wanted to see that the audit outcomes addressed what was happening on the ground. Consequence management must be prioritised. The officials responsible for mismanagement or non-compliance must be held accountable. The turnaround plan for struggling entities must be implemented without delay. There must be clear timelines with measurable targets.

The presentation had been for only three provinces. The Committee hoped to get a briefing from two more provinces at the next meeting. The Committee Secretary would communicate with these provinces.

She asked that the adoption of the minutes be referred to the next meeting.

The meeting was adjourned.