South African Social Security Agency & National Development Agency 2006/7 Annual Reports

SOCIAL DEVELOPMENT PORTFOLIO COMMITTEE
21 November 2007
SOUTH AFRICAN SOCIAL SECURITY AGENCY & NATIONAL DEVELOPMENT AGENCY 2006/7 ANNUAL REPORTS

Chairperson: Advocate T Masuto (ANC)

Documents handed out:
South African Social Security Agency 2006/07 Annual Report presentation
Presentation: National Development Agency 2006/07 Annual Report
National Development Agency 2006/07 Annual Report

Audio recording of meeting

SUMMARY
The two agencies presented their 2006/07 Annual Reports. Regarding the South African Social Security Agency’s (SASSA) report, the Portfolio Committee raised the problem of dual responsibility between the Department of Social Development and SASSA while the progressive hand-over took place. The Chairperson pointed out that regulations had not been implemented and a functional inspectorate was not in place. He emphasized that where institutional arrangements were not compatible with legislation, instead of disregarding legislation, the agency and department had to immediately request for the legislation to be amended. Also discussed was the outcome of fraud cases.

The National Development Agency’s (NDA) report was well received by the Committee, as the Auditor General’s report was unqualified. It had disbursed R49,5 million to 95 projects which was R13 million than the previous year but NDA provided reasons for this. The means for communities to obtain project funding was discussed. NDA noted that it was already inundated with project proposals, and that the agency did not have enough funds to grant all communities financial support. NDA saw its limited funding sources as a major hurdle to overcome.

MINUTES
The Chairperson opened the meeting by explaining the absence of many of the Portfolio Committee members, as there were different processes occurring that morning that demanded the presence of committee members. A large portion of the Committee was required to attend the Mediation Committee’s finalisation of the Children’s Amendment Bill, a crucial and complex matter that needed to be concluded – no matter what extraordinary measures needed to be taken – before the week ended. He apologised to the visiting delegations, as he would have to leave the briefing early to attend a Joint Rules Committee meeting where he would be presenting rule amendments. He had assigned a substitute to fill the position of Chairperson at that point.

He explained that he had invited a Senior Manager, Mr A Adendorff, from the Office of the Auditor General (OAG), to the meeting as the Committee had had a closed meeting with the OAG the previous week, where the problems with the audit reports of both agencies were discussed. He hoped that the OAG would provide insightful commentary to the agencies. In addition, he welcomed officials from the Department of Social Development (DSD), and urged them to offer their views on the progress of the agencies. He said that he looked forward to the National Development Agency’s report, as he knew that there had been a radical improvement in its management in the past year.

South African Social Security Agency’s 2006/07 Annual Report
Mr Fezile Makiwane (SASSA CEO) began his presentation by noting that SASSA had only been officially functioning since the beginning of the 2006/07 financial year, which meant that the agency was still in its infant stages of development. In 2005/06, the Social Grants Administration and Payment Services were managed by the Department (DSD). In 2006/07 the DSD had been gradually ceding these responsibilities to SASSA. Only Social Grants Administration had been transferred to SASSA control in 2006/07. The task of Social Grants Transfer Payments still remained with the DSD. As many of SASSA’s expected functions still remained in the hands of the DSD, this resulted in a situation of dual accountability between the department and agency. He reported that the department had agreed that it would provide support to SASSA, yet the only personnel transferred from the DSD to SASSA had been staff from Social Grant Administration, and that all Corporate Officers remained at the DSD, meaning that Corporate Services had been compromised. There were many procedures required throughout the year to ensure that SASSA became operational. These included: the standardization of systems, processes and procedures on finances, corporate services and grant administration; establishment of offices and the recruitment of staff.

He explained that the task of establishing a fully functional agency is a complex and lengthy undertaking, and used the example of SARS taking nearly five years before it reached its full capacity, to illustrate his point.

In fulfilling SASSA’s key objectives of ensuring high performance, good governance and improved service delivery, Mr Makiwane noted that SASSA had achieved good progress. The agency had utilized 80% of resources on establishing and integrating the social assistance administration and payment services, and on the creation of national and regional offices. SASSA had commenced its separation from the DSD at district and local levels, and it had assumed 6 246 grant administration personnel from DSD. A further 300 staff were recruited and appointed to fulfill support functions

Mr Makiwane reported that the plan to purchase 40 mobile units had been finalized, meaning that increased grant access would be possible in rural areas. The agency had improved the grant application administration process. This meant that applicants for social security would be able to find out if they have been approved within a waiting period of one day, instead of months. SASSA had increased the scope of social grants by 1 040 983 (9.49%), where the provinces that had benefited the most were KwaZulu Natal and the Eastern Cape. The Improved Grant Administration Process (IGAP) was implemented in a number of provinces throughout the year, and grant application forms were standardized throughout SASSA. A SASSA National Call Centre tender had been finalized and a media launch was hosted to promote awareness of the agency.

Mr Makiwane explained that a risk and fraud strategy was developed and implemented by SASSA, and 2 300 public servants had been prosecuted for fraud. In addition, there were 1 150 admitted signed cases of debt, which came to the sum of R6 132 382, of which almost R 5 million had been recovered at that point. The main areas of SASSA budget under-expenditure were the compensation of employees and payment for capital assets, both of which were attributed to the slow staff recruitment process. A further area of under-spending was payments for goods and services, where there was 30% noted under-expenditure. This was a result of invoices that were either handed in after the end of the financial year, or invoices not being paid by the year’s end.

Mr Makiwane noted that in the Auditor General’s Report there were two main qualifications regarding SASSA. The first was the limitations on the scope of the audit, as some of the documents required for the audit were unavailable. This was because the documents were either at a provincial department or at the national department. He explained that this was a transitional issue, where documents still needed to be handed over to SASSA. The second qualification was due to a fraud investigation. Although SASSA had reported the matter to the Auditor General and investigators, the information about the fraud was still unavailable by the time the audit was executed. He noted that SASSA was addressing these concerns through the implementation of a financial management plan.

Mr Makiwane said that the main challenges the agency faced were:
- the completion of infrastructure, recruitment of personnel and the finalisation of policies and procedures;
- the elimination of fraud and corruption;
- improving rural accessibility of services;
- creating enabling conditions for potential social grant beneficiaries
- reducing the number of grant application appeals.

Discussion
The Chair asked the DSD to comment on the institutional arrangements that had been made in the SASSA Act and the Social Assistance Act. He noted with displeasure that since 2005 no new regulations had been implemented and a functional inspectorate was not in place. He asked the DSD to explain what had been accomplished regarding the Social Grant Appeals

Mr Selwyn Jehoma (DSD Deputy Director-General: Social Security) replied that it was difficult to maintain an oversight role without becoming operationally involved in SASSA. He added that although the DSD was present during the formulation of the two Acts, the mandate of the Inspectorate overlaps the role for the Auditor General and the Special Investigating Unit (SIU) in many areas.

The Chair responded that both the Social Security Act and the SASSA Act were in force, which meant that it was the duty of the DSD and SASSA to ensure that the legislation was implemented. If there were fundamental difficulties in translating the legislation into action, then it was the DSD’s duty to organize an urgent meeting with Parliament to ensure that the legislation was revised, and possibly amended. He noted that it was no use in waiting to approach Parliament about these problems two years down the line - there should have been immediate action taken where institutional arrangements were not compatible with legislation.

Ms Patricia Maloka, Executive Programme Manager: DSD, pointed out that with regard to the Social Assistance Act, Chapter Four was not in force, and that the DSD had not neglected the issue of appeals, as they were already in force in provinces, but still needed to be revised and homogenized. She added that the department was in the process of establishing the Appeals Tribunal model, which would be piloted in KwaZulu Natal on 15 December 2007. Furthermore, if the pilot was successful, it would be extended to all provinces.

The Chair asked whether any action plan had been initiated by the DSD concerning the inspectorate

Ms Maloka asserted that the Director Manager had appointed a programme manager to forecast on the reviewing of legislation, which in addition, was not only focused on the inspectorate, but also included a regulatory body for social security discussions and reform. She noted that the DSD intended on tabling the Social Security Act for review and aimed to propose amendments in the next year.

The Chair noted that once Parliament reopened in 2008, the Committee planned to call the DSD for a meeting to discuss why certain regulations were still not in place after the finalization of legislation. He added that this meeting was not designed for an interrogation of the DSD, and opened the floor to the committee members to pose questions to the SASSA delegation.

Ms H Weber (DA) congratulated SASSA delegates on their well-prepared presentation, and complimented SASSA on the establishment of their national call line, which she had tried and tested. She further noted that the Mpumalanga mobile unit had been very successful. She asked for further information about the R40 million that was unaccounted for. She added that SASSA officials were not trained to handle the elderly, and urged the agency to provide skills training to its personnel.

Mr Daniel Plaatjies (SASSA Executive Manager: Business & Strategy Development) explained that the R40 million did not relate to fraud, it was a case of supporting documents being unavailable at the time of the audit to prove that valid transactions had taken place. The discrepancies were in the process of being accounted for as they had been utilized for SASSA business. He agreed that there was a poor report back on the service delivery of officials, and noted that SASSA planned to retrain its staff to be more service orientated.

The Chair reported that he was planning to meet with the Minister later that afternoon to discuss corruption, and wanted to know more details from SASSA on the reported cases of fraud.

Ms W Direko (ANC) asked how SASSA planned to monitor staff who remained in the system after being accused of fraud. Merely repaying the money was not enough, a mechanism needed to provide stronger oversight of the people concerned.

Mr Makiwane responded that 5 600 officials were to taken to court for fraud charges and that 4 000 of these had been convicted. On the matter of unauthorized and irregular expenditure, he noted that a pre-audit and post-audit function was in the process of being implemented. It was reported that monthly audits of all expenditure were to be implemented in the following year, so that SASSA might pick up suspicious transactions.

The Chair noted that in the following year the Committee intended to have a joint meeting with the Department of Home Affairs where the slow delivery of Identification Documents (IDs) and the proliferation of fraudulent Ids. He then excused himself from the meeting, and assigned Ms Direko as substitute Chairperson for the remainder of the meeting.

Ms Direko commented that it was important for the DSD and its agencies to receive a clean report from the Auditor General. Although it was expected that SASSA endure some hiccups in its first years, it should nevertheless aim for an unqualified audit in the following year.

National Development Agency’s Annual Report
Mr Godfrey Mokate (NDA CEO) provided a summary of the agency’s functions and processes. He noted that the main aim of the NDA was to position itself as a relevant contributor to poverty alleviation through the strengthening of the secondary economy by attributing funds for projects and programmes developed by civil society. He noted that the agency had taken enormous leaps in the past year in improving NDA management, processes and operations, which had been achieved through:
- the implementation of a five year strategic plan;
- expanding its grant funding system to include programme formulation, where communities without an official Community Based Organization (CBO) may receive assistance from the NDA;
- the initiation of a two year capacity building programme;
- the election of a new Board Committee.

Mr Mokate noted that the key objective for the year had been organizational transformation, which ensured greater skills development and good corporate governance. Other important aims were forming collaborations with strategic stakeholders, the mobilization of resources for project funding; and increasing communication and research capacities.

In attaining these goals, Mr Mokate noted that there had been wide-ranging success. The agency’s organization was restructured and a performance management system developed and implemented, where a Workplace Skills Programme was installed. The Enterprise Resource Planning system (ERP) was in its second phase of integration into the NDA structure. The agency furthermore established partnerships with a large portion of the Development Finance Institutions (DFIs) and signed a partnership with the Department of Trade and Industry (DTI) to help establish poverty alleviation and development projects. The NDA funded and organized multiple conferences and workshops concerning poverty and development.

The NDA Funding Board had committed itself to funding 95 projects (R110, 97 million) and R49,5 million had been disbursed during the year. This was given to provinces suffering from higher levels of poverty, such as the Eastern Cape, KwaZulu Natal and the Limpopo. Mr Mokate noted that the NDA was represented in all provinces, where provincial managers report to the Development Management directorate.

The disbursements in 2006/07 was R49,5 million, which was R13 million less than the previous year. This decrease was a result of:
- ongoing investigations following the exposure of fraud in the NDA, which meant that project files were withheld for lengthy time frames;
- late submissions of project proposals to the NDA Funding Board;
- increased risk management procedures;
and lastly, the fact that there were delays in CBOs meeting the Board’s project conditions

On the financial front, the NDA lowered its budget under-expenditure from R48 650 717 in 2005/06, to R12 506 462 in 2007. The NDA received an unqualified report from the Auditor General with no emphasis of matter, with only attention drawn to a few matters such as the NDA’s non-compliance with applicable legislation for its audit committee and some material corrections that had to be made to the financial statements submitted for audit.

Of the nine challenges to the NDA in 2007/08, limited funding sources was highlighted as the main hurdle to overcome. Mr Mokate noted that it was a primary objective of the NDA to increase its benefactors. Other challenges that were ongoing were institutional capacity, organizational and individual performance targets, an updated database of civil society organisations and a reviewed NDA Act and delegations of authority.

Discussion
Ms I Mars noted that there seemed to be a vast improvement, where the NDA’s turnaround strategy appeared to have had effective results. She asked the NDA why KwaZulu Natal, the most densely populated region of South Africa, had only three personnel working in the provincial office.

Mr Moitswadi Mofokeng (NDA CFO) noted that the report only indicated the staff that were directly working on projects. There were actually six people working at the KwaZulu Natal office. He added that there was a further three people working in the office, as an administrator and casual staff.

Ms Weber asked the NDA delegation to elaborate on the funding received from the European Union (EU), and whether the remaining unspent funds were returned to the regional bloc.

Mr Mokate reported that once the NDA’s agreement with the EU had come to an end, the contract stated that all residual money needed to be returned, a matter that was in the process of being completed by the NDA.

Ms M Gumede asked the NDA how communities come to know about the NDA and how to obtain funding from the agency, as it was usually those who were the most needy who were unaware of development opportunities.

Mr Mokate explained that the NDA was already inundated with project proposals, and that the agency did not have enough funds to grant all communities financial support. He added that through the formulation programme, the NDA approaches extremely needy communities that do not have any CBO or civil society organizations to assist in completing project plans and establishing CBOs. Public forums were also held to ensure that the public were aware of the potential project assistance.

Ms Gumede replied that those who cannot write good project proposals would be less likely to obtain project approval.

Ms Weber asked for further information regarding the fraud charges.

Mr Mokate said that the woman accused of fraud had been sentenced to 15 years in prison.

Ms Direko closed the meeting by noting that she had previously hated the name NDA, but the 2006/07 Annual Report had restored her faith in the agency.

Meeting adjourned.