PCSocDev18

1. The Budgetary Review and Recommendation Report (BRRR) of the Portfolio Committee on Social Development, on the performance of the Department of Social Development and its entities for the 2017/18 financial year, dated 31 October 2018

The Portfolio Committee on Social Development, having considered the performance and the submission to the National Treasury for the medium term period of the Department of Social Development, the South African Social Security Agency (hereafter SASSA or the Agency), and the National Development Agency (hereafter the NDA or Agency) reports as follows:

1. Introduction   

The Portfolio Committee on Social Development as an extension of the National Assembly of Parliament is tasked with a mandate to conduct oversight over the Department of Social Development and its entities the South African Social Security Agency (SASSA) and the National Development Agency (NDA).

The Committee’s mandate as prescribed by the Constitution of South Africa and the Rules of Parliament is to build an oversight process that ensures a quality process of scrutinising and overseeing the department’s action, that is driven by the ideal of realising a better quality of life for all people of South Africa.  It is also required to facilitate public participation, monitoring and oversight over the legislative processes relating to social development and also to confer with relevant governmental and civil society organs on social development matters.

The Committee also enhances and develops the capacity of its members to exercise effective oversight over the Executive Authority in social development.  It monitors whether the Department of Social Development fulfils its mandate according to priorities. 

The Committee also has a mandate to perform the following:

• Considers legislation referred to it;
• Conducts oversight of any organ (s) of the state and constitutional institution(s) falling within its portfolio;
• Facilitates appointment of candidates to entities;
• Considers international agreements; and
• Considers budget of department and entities falling within its portfolio.

For the current medium term (2014 – 2019), the Committee’s oversight focuses on the department and its entities performance with regard to the implementation of the priorities set in the National Development Plan and in the Medium Term Strategic Framework. The Committee also conducts oversight over the department’s performance in implementing the priorities of the State of the Nation Address (SONA).

NATIONAL DEVELOPMENT PLAN (NDP)

These are the priorities of the NDP that the Committee focuses on:

• establishment of a social floor which outlines an acceptable or decent standard of living,
• bringing the informal sector into the mandatory contributory scheme,
• expanding social welfare system,
• reviewing funding to not-for-profit organisations,
• training more welfare professionals and community workers,
• expanding public employment programmes,
• promoting opportunities for youth employment.
• use of social audits to enhance accountability in the welfare system, and
• the integration of all databases of people who receive different forms of social security services.

THE MEDIUM TERM STRATEGIC FRAMEWORK (MTEF)

These are the priorities of the MTEF that the Committee focuses on:

• provision of quality and universal early childhood development (ECD) accessible to all young children and their caregivers,
• universal access to social assistance benefits, at least to 95% of eligible people;
• strengthening of community development emphasizing the roles of community-based planning and
• profiling of communities, in the process identifying vulnerable households.  

2017 STATE OF THE NATION ADDRESS

The 2017 SONA outlined the following policy objectives in the area of Social Development:

• Working towards universalization of child support grants, developing policy proposals for mandatory retirement, disability and survivor benefits cover, and improving the administration process in order to make access to social assistance easier.
• A number of amendments to the Social Assistance Act will be made which will, among others, empower the Minister to make additional payments for certain social grants, such as Child Support Grant to orphaned and vulnerable children living in child headed households.

1.2       PURPOSE OF THE BRRR

As part of exercising its oversight work, the Committee considered the 2017/2018 annual reports of the department and its entities. This BRRR reports on the financial and non-financial performance of the department and its entities.

In terms of Section 5 of the Money Bills Amendment Procedures and Related Matters Act, No. of 2009, the National Assembly (NA) through its committees must annually assess the performance of each national department. Portfolio Committees must thus annually submit Budget Reviews and Recommendation Reports (BRRRs) for tabling in the NA in order for Parliament to compile a report for the Medium Term Budget Policy Statement.

The Money Bills Amendment Procedure and Related Matters Act therefore make it obligatory for Parliament to assess the department’s budgetary needs and shortfalls vis-à-vis the department’s operational efficiency and performance.

Most importantly, the budget review process enables the Committee to amend the budget allocation of the department through the recommendations it makes. Its recommendations are considered during the consideration of the Medium Term Budget Policy Statement (MTBPS).

The budget review process also enables the Committee to make recommendations to the Minister of Social Development on issues pertaining to service delivery. This therefore means that the analysis contained in the BRRR is both backward and forward looking.

2.         METHODOLOGY

The BRRR culminated from a very intense and thorough analysis and interaction with the Department and its entities. These included a briefing from the Department of Social Development on its quarterly reports, briefings on the annual reports of the department and its entities and a briefing from the Office of the Auditor-General on the audit outcomes of the department’s financial and non-financial performance in the year under review (2017/2018).

3.         MANDATE OF THE DEPARTMENT OF SOCIAL DEVELOPMENT

The Department derives its mandate from several pieces of legislation and policies, including the White Paper for Social Welfare (1997) and the Population Policy (1998). The constitutional mandate of the department is to provide sector-wide national leadership in social development by developing and implementing programmes for the eradication of poverty and social protection and development amongst the poorest of the poor and most vulnerable and marginalized.

The Department’s mission is “to ensure the provision of comprehensive social protection services against vulnerability and poverty within the constitutional and legislative framework, and to create an enabling environment for sustainable development’’. The Department further aims to deliver integrated, sustainable and quality services, in partnership with all those committed to building a caring society.

The vision of the Department is to create a caring and integrated system of social development services that facilitates human development and improves the quality of life.

4. Overview and assessment of performance OF THE DEPARTMENT OF SOCIAL DEVELOPMENT

4.1 Overview of the key relevant policy focus areas

The social development sector derives its overarching mandate from Section 27 of the South African Constitution (Act 108 of 1996). Section 27 makes it a right for South African citizens to have access to social security and food security. In line with this constitutional mandate and the international and regional obligations, the government adopted the 2009 – 2014 Medium Term Strategic Framework (MTSF) in which 12 Government Priority Outcomes were identified. Due to the cross cutting nature of the social development sector, the Department of Social Development had to implement a number of these priority outcomes. Additionally, Government adopted a National Development Plan in 2012, which provided a strategic framework for the 2014 – 2019 MTSF. This MTSF increased the Government Outcomes to 14. The priorities and targets that have relevance to the social development sector are as follows:

• provision of a comprehensive, responsive and sustainable social protection system;
• creation of decent employment through inclusive growth;
• ensuring that all people in South Africa are and feel safe;
• creating a vibrant, equitable, sustainable rural communities contributing towards food security for all;
• developing an efficient, effective and development-oriented public service; and
• creating a diverse, socially cohesive society with a common national identity.

4.1.1 DEPARTMENT STRATEGIC PRIORITIES (2017/18)

The Department will focus on the following key priorities for the 2017/18 financial year; namely:

• Increasing access to social assistance.
• Investing in and increasing access to effective early childhood development services.
• Reforming and standardising the social welfare system.
• Expanding social development services.
• Improving household access to food and nutrition.
• Strengthening community participation in service delivery.

5.         FIRST QUARTER PERFORMANCE OF THE DEPARTMENT 2018/19

5.1 PROGRAMME PERFORMANCE

5.1.1 Programme 1: Administration

The purpose of the programme is to provide leadership, management and support services to the Department and the Social Development Sector.

Under this programme, the Department had set to achieve eight (8) targets, and it reports that it managed to achieve 5. Two of the targets were partially achieved, and only one (1) target was not achieved. The alignment and approval of the provincial generic structure within the national structure target in quarter 1 was not be achieved as result of the delays to confirm the review of the new DSD strategy. However, it has managed to achieve the facilitation of the DSD’s participation international engagements. The DSD initiated a review of its oversight function over entities in line with relevant legislation. 

This programme spent R76.2 million or (19.8 %) of the budget allocation of R383.2 million, which was lower that the projected expenditure of R85.8 million (R9.6 million lower). The slow expenditure was mainly within computer services due to delays with the receipt of the monthly invoices for the departmental computer services related to the Turn Key solution. The Department indicated that these payments would commence during the second and third quarter of the 2018/19 financial year.

The bulk of the expenditure of R23.8 million (15.7%) was spent in the Corporate Services sub-programme, followed by R16.4 million (23.2%) in the Departmental Management sub-programme.

5.1.2    Programme 2: Social Assistance

The purpose of this programme is to provide social assistance to eligible beneficiaries in terms of Social Assistance Act, 2004 (Act No.13 of 2004) and its regulations.

South African Social Security Agency (SASSA) administers programme 2 of the Department in providing quality customer-centric social security services to eligible and potential beneficiaries.

Under this programme, the Department had planned to achieve eight (8) targets, of which all were achieved. This programme was allocated a budget of R162.9 billion, which is R11.6 billion more than the R151.6 billion for 2017/218 financial year. By June 2018, the programme spent R39.9 billion or (24.5%) of its allocation for the year, which is lower than R283.0 million of the projected expenditure of R40.2 billion. The reasons cited for the lower expenditure was due to the lower than anticipated number of beneficiaries for the Disability and Child Support grants. Lower expenditure was reflected on the Social Relief of Distress (SRD) grant due to the lower than expected claims submitted by beneficiaries by the end of June 2018.

In the quarter under review, the department reported the following achievements:

• 3 451 366 older persons benefitted from Old Age Grants,
• 124 war veterans benefited from War Veterans Grants,
• 12 288 693 children benefitted from the Child Support Grant (CSG)
• 1 052 374 people benefitted from the Disability Grant,
• 14 8 155 people benefitted from Care Dependency Grant,
• 434 389 children benefitted from the Foster Care Grant
• 198 381   people benefitted from Grant-in-aid
• 86 471 SRD applications processed/awarded

5.1.3    Programme 3: Social Security Policy and Administration

The purpose of this programme is to provide for social security policy development, administrative justice of social grants, and the reduction of incorrect benefits payments.

The Department reports that it had set to achieve one (1) target for the 2018/19 financial year, and this was not achieved.  The target of submitting the policy (under the annual target of Draft Social Assistance Amendment Bill) to the Cabinet was not achieved. The Department indicated that, the target had to be considered for an errata given the reconsiderations on all the relevant legislation in line with the Comprehensive Social Security Policy.

This programme was allocated a budget of R7.880 billion in (2018/19) as compared to R7.3 billion previously, of which it spent R1.782 billion (or 22.6%) by the end of the 1st quarter. This means it spent R8.9 million lower than the projected expenditure of R1.792 billion. Reasons cited are that salaries and wages for the ministerial directive was suspended for all processes in the filling of all vacant posts was the cause of the under expenditure on this programme. Most of the vacant posts relate to the establishment of the inspectorate tasked with providing oversight on the social assistance function to curb fraud.

5.1.4    Programme 4: Welfare Services Policy Development and Implementation Support

The purpose of this programme is to create an enabling environment for the delivery of equitable developmental welfare services through the formulation of policies, norms and standards and best practices and the provision of support to the implementation agencies.

A total of 22 targets was set for the 1st quarter (2018/19) in this programme. Furthermore, the Department has managed to achieve 13 targets, four (4) were partially achieved and 5 not achieved. The Department has achieved the target to develop the costing report of the Supply and Demand Model for Social Service Practitioners, as planned. A service provider has been appointed to review the South African Integrated Programme of Action Addressing Gender Based Violence 2013-2018.

This programme was allocated a budget of R1.284 billion for 2018/19 financial year. During the 1st quarter, it spent R224.3 million (or 17.5 %). This means it spent R19.6 million lower than the projected expenditure of R243.9 million at the end of June 2018. This programme had very low expenditure for the following reasons:

Lower than expected expenditure is mainly on transfers to provinces, specifically for the Substance Abuse Grant due to delays in the construction process in the Northern Cape, which was initially delayed by a Court challenge and has still not been finalised. Construction is expected to be completed during the 2nd Quarter and operations will commence in the 3rd Quarter. Furthermore, spending on the Early Childhood Development (ECD) Grant is in line with the payment schedule, but reflects slow spending when compared to original drawings. The original drawings process is finalised very early in the financial year and is concluded before the conditional grant payment schedules are finalised and submitted to National Treasury.

5.1.5    Programme 5: Social Policy and Integrated Service Delivery

The purpose of this programme is to support community development and promote evidence-based policy making in the Department and the Social Development Sector.

This programme is reported to achieve 16 targets. It achieved 12 targets, partially achieved two (2) targets, and did not achieve five (4). A Draft Implementation Plan for both the DSD Sector Funding Policy and the DSD-NPO Partnership Model was developed as planned.

For the period under review (2018/19), the Department under this programme had a budget expenditure of R177.4 million (or 45.2 %) of the budget allocation of R392.3 million.  The programme expenditure is R3.2million lower than the approved drawings of R180.7 million at the end of 1st quarter 2018/19 financial year.

Subscription fees to the United Nations Populations Fund (UNFPA) and Partners in Population and Development was one of the reasons for underspending in this programme. The Department reported that, invoices were received during the month of June; however, there were discrepancies with the exchange rate. Invoices will be resubmitted and payment is expected to be made during the month of August.

5.2 Budget allocation

Table 1. Budget Allocation per Programme for 2018/19 First Quarter Expenditure

5.3 Committee deliberations and observations

• The Committee commended the Department for the set target to develop a framework to monitor the implementation of the Children’s Act in three provinces.  The Department was advised to ensure that proper mechanisms to monitor and evaluate effective implementation of this Act should also be developed.  In addition, this framework should also be expanded to the other six remaining provinces.
• The Committee expressed concern over the low spending on certain sub-programmes under programme 4 such as HIV and Aids, Youth and Social Work.  It pointed the importance of these programmes and advised the department to consider increasing spending on these programme for the benefits of those in need of their services. It pointed out that the department’s slow spending is a worrying factor because the impact caused by the low spending is high. 
• The Committee expressed satisfaction with a report to review the organisational structure of the department.  It pointed out that this would enable the department to have enough personnel to implement the targets set in the department’s Annual Performance Plans.
• The Committee was interested to know whether the department had specific reasons for not having timeframes on targets relating to, amongst others, the Project Mikondzo.  Lack of setting clear timeframes as a baseline to achieve certain targets makes it difficult for the Committee to exercise its oversight function.  The Committee recommended that all set targets in the department’s quarterly report must indicate timeframes to achieve them.
• The Committee expressed concerns regarding delays by the department to finalise the White Paper on Social Welfare.  The Committee wanted to know reasons for delays to achieve the target to complete this Paper.  It highlighted that almost all the programmes of the Department are linked to this Paper. 

In response, the department indicated that a Committee led by Prof. Taylor to deal with this paper was established by the former Minister, Ms Dlamini during her tenure, however, changes in government impacted on the completion of this document. The Cabinet was also keen to complete this document. 

• The Committee was satisfied with a report on achievements of certain targets but was interested to know how sustainable these achievements were.  The department must always ensure its achieved targets are sustainable.
• The Chairperson explained to the Committee that Parliament had taken a decision not to consider any Bills due to time constraints.  She also reported during a meeting held with Whips and Chairpersons this decision was reemphasized. 
• The Committee appreciated the department’s new initiative to provide explanatory notes on its financial report.  This would enable the Committee to gain insight on reasons why certain targets were not achieved.

5.4 COMMITTEE RECOMMENDATIONS

The Portfolio Committee on Social Development, having considered the 2018/19 First Quarterly financial and non-financial performance reports of the Department of Social Development, makes the following overall recommendations:

The Minister of Social Development must ensure that:

• The department fast-tracks the process to finalise the White Paper on Social Welfare as most of its programmes are linked to this paper.
• The department’s set targets on its quarterly report reflects on timeframes to achieve certain targets.
• The department develops a cost saving business plan to use it as a tool to save costs on certain programmes. It cautioned that a lot of money was spent on accommodation and S&T for officials.  The department should consider making use of local fieldworkers to carry out certain projects instead of utilising national officials.
• The department expands its target to present the National Plan of Action for Children in the National Children’s Rights Interpectoral Coordinating Committee to other five remaining provinces, namely, Gauteng, Limpopo, North West, Western Cape and Free State.

6. KEY FINDINGS OF THE AUDITOR GENERAL ON THE FINANCIAL AND NON FINANCIAL PERFORMANCE OF DSD, SASSA AND THE NDA

The Department retained its clean audit report. However, irregular expenditure of R82 million in relation to non-compliance with supply chain management legislation in administering the social relief for distress was noted. There were also inadequacies in the Bid documentation for the procurement of commodities designated for local content and production, as well as regression in the internal controls of the Department and its entities

The NDA received an unqualified audit opinion with findings, as the AG could not obtain audit evidence that was sufficient and appropriate to be able to present an Audit Opinion. Further, effective and appropriate steps were not taken to prevent irregular expenditure amounting to R16 506 194. Other issues highlighted by the AG included: regression in the oversight provided over the financial statement preparation; and material adjustments were made to their financial statements that resulted in a regression in financial management.

SASSA received a qualified audit opinion as the entity did not have an adequate system for identifying all irregular expenditure resulting from procurement and contract management. The entity also experienced challenged in preparing financial statements free from major misstatements.

No improvement was made in procurement and contract management, with material findings reported at both SASSA and the NDA.

Compliance regressed in the portfolio with the DSD, SASSA and NDDA having material non-compliance. Further, vacancies in key positions remained an issue in the portfolio.

7. SUMMARY OF EXPENDITURE OF THE DEPARTMENT OF SOCIAL DEVELOPMENT PER PROGRAMME FOR 2017/2018 FINANCIAL YEAR

In line with its mission and strategic objectives, the Department has been instrumental in providing a safety net for the poor, marginalised and vulnerable members of our society. To this end, it has formulated a range of policies in areas such as social assistance and integrated developmental social welfare services. These efforts seek to expand and improve the services available to poor South Africans, thereby enabling them to support themselves and participate productively in the economy.

The following can be observed from the financial statements:

Table 2: Expenditure per programme, 2017/18

Virements

At the close of the 2017/18 financial year, the following virements were effected:

Table 3: Per Main Division

Source: Department of Social Development (2018)

Unauthorised, fruitless and wasteful expenditure

• The Department incurred irregular expenditure to the value of R904 000 in 2017/18 as compared to R42 745 for 2016/17. The reason for this was non-compliance with the Public Financial Management Act, 1999 (Act No. 1 of 1999) and National Treasury Practice Notes: SCM processes were not followed. The Department indicated that there was an unforeseen and unavoidable need for additional goods or services during departmental activities.
• Fruitless and wasteful expenditure amounted to R528 000 (compared to R270 000 the previous year). The increase in the current year relates to hotel ‘no-shows’, transport ‘no-shows’ and damage to hired vehicles.

7.1       Steps taken to address and prevent recurrence

The Department had taken the following steps to address the unauthorized, fruitless and wasteful expenditure:

• Reviewed financial policies and delegations in line with National Treasury Practice Notes and Circulars.
• Issued circulars to sensitise officials in the Department on the implications of financial misconduct.
• Reviewed and strengthened controls where they were found to be weak.
• Facilitated, coordinated and provided guidance and advisory services in terms of audit queries through the implementation and monitoring of audit action plans. Tested the environment to ensure compliance and implementations of actions.
• Instituted disciplinary actions against officials found liable for irregular, fruitless and wasteful expenditure.
• Recovered expenditure from officials who were found liable for financial misconduct.

7.2     General Concerns Arising From the Analysis

• In line with the Strategic Plan priorities, there was a disjuncture between the financial expenditure and service delivery performance, with an average expenditure of 99.40% while only (71) 78% of targets were achieved and (21) 22 % was not achieved.
• As compared to the previous year, there is a decrease in the achieved targets by 8%. Furthermore, when looking at the overall non-achievement of targets, there were no thematic reasons in all programmes. Instead, the common reasons for non-achievement in Programme 4 was the change in Cabinet (February 2018).
• The AG drew attention in note 24 to the financial statements, where the Department incurred irregular expenditure of R82 million, which relates to the non-compliance with supply chain management legislation by SASSA in administering the social relief for distress (SRD) on behalf of the Department.
• Furthermore, under procurement and contract management, the AG found that Bid documentation for procurement of commodities designated for local content and production did not meet the stipulated minimum threshold for local production and content as required by the 2017 preferential procurement regulation 8(2) and, consequently, goods to the value of R2 million were procured from suppliers who did not meet the prescribed minimum threshold for local production and content.

8. OVERVIEW AND ASSESSMENT OF SERVICE DELIVERY PERFORMANCE

8.1 PROGRAMME PERFORMANCE

The Annual Report of the Department of Social Development, analysed in conjunction with the Strategic Plan, provides valuable information on its annual plans and achievements. The report also provides information on the operational successes of the Department in relation to its programmes and sub-programmes.

8.1.1    Programme 1: Administration

Objective: To provide leadership, management and support services to the Department and the Social Development Sector.

Table 4: Programme 1: Administration

(Source: Adapted from Department of Social Development, 2018)

Summary

• Out of a total of 14 performance targets set for Programme 1, a total of 11 targets were achieved, reflecting a 79% achievement rate.
• Some of the reasons for non-achievement included: the under-expenditure relating to the delays in the delivering of goods and services, as well as capital requirements before closure of the financial year.
• For the year under review, expenditure for this programme totalled (R3 386 438) 99.4% as opposed to (349 746) 99.89% in 2016/17.
• The risk-based auditing project target was not met in 2017/18.

The following sections discuss the performance of the sub-programmes of the Department:

• The Department planned to participate in eight international engagements in 2017, but managed to exceed the target by participating in 13 international engagements. In addition to the statutory engagements of the United Nations (UN), there were crucial multilateral engagements and bilateral interactions that occurred during the course of the year, which were not on the initial plan.
• Data collection tools for Social Protection / Outcome 13 were developed as planned.

• Internal auditing acts as a catalyst for a strong risk and compliance culture within an organisation. A target of auditing 26 risk-based projects were conducted as planned in 2017/18.
• Human Capital Management (HCM) is critical in any organisation, since it emphasizes that people play a strategic role in the organisation’s’ success. To this end, Phase 1 of the Social Sector Academy was established.
• Under this sub-programme the Department has reported that a total of 3 228 210 people were reached via social media platforms during the period under review. The Department's campaigns have been particularly successful on Facebook and Twitter, reaching 1 352 926 timelines on Facebook and 1 835 200 timelines on Twitter.

8.1.2 Programme 2: Social Assistance

Objective: To provide social assistance to eligible beneficiaries in terms of the Social Assistance Act 13 of 2004, and its regulations.

Table 5: Programme 2: Social Assistance

Source: Adapted from Department of Social Development (2018)

Summary

• This sub-programme has only eight performance targets, and the Department succeeded in meeting all 8 targets set, thus reflecting a 100 % achievement for 2017/18, compared to a 50% achievement in the previous financial year (2016/17).
• Expenditure for this programme is (R151 230 232) 98.41% in 2017/18, as opposed to (R138 915 638) 99.58% in the previous year.
• The under-expenditure mainly relates to slow spending on foster care and old age grants as a result of less-than-anticipated projected beneficiaries.

The South African Social Security Agency (SASSA) is responsible for the administration of social assistance grants. In the year under review, social grants increased from 17 million in the previous financial year to “more than 17.5 million”. Out of the 17.5 million beneficiaries receiving social grants, 12 million are children benefiting from the Child Support Grant and 3.4 million are older persons. Furthermore, the benefit amounts were adjusted during the Medium-Term Budget Policy Statement (MTBPS) to counter inflation, with an average increase of 6% for most grants, which was above inflation. The Financial and Fiscal Commission (FFC) indicated that research show little evidence that an alternative use of resources invested in social grants will lower the poverty head count, poverty gap and poverty severity. This means that while social grants in South Africa contribute to poverty alleviation, injecting these resources into the economy as other forms of capital can achieve a similar level of poverty reduction. Social grants are more likely to reduce economic inequality.  Studies on the impact of the social grant show that it plays a role in lowering the cost of health services and agriculture and food products.

8.1.3    Programme 3: Social Security Policy and Administration

Objective: To provide for social security policy development, administrative justice of social grants, and the reduction of incorrect benefits payments.

Table 6: Programme 3: Social Security Policy and Administration

Source: Department of Social Development (2018)

Summary

• Out of 10 targets set for 2017/18, the Department met 9 targets (90%).
• The total expenditure for this programme was R7 296 237 (99.7%) in 2017/18, compared to R6 980 942 (100%) in the 2016/17 financial year.
• The under-expenditure mainly related to slow spending in the establishment of the Inspectorate for Social Assistance.

Achievements

• The Department managed to develop the draft policy on mandatory cover for retirement, disability and survivor benefits as planned. However, the technical report on voluntary inclusions of informal sector workers in social security was not completed due to gaps. The reason cited was that it could not find a suitable service provider to assist in the development of the technical report. The Bid has since been re-advertised.
• In terms of the percentage of appeals adjudicated within 90 days, a total of 1 321 appeals were adjudicated, of which 96.6% (1 276 of 1 321) were adjudicated within 90 days of receipt. The collaboration with SASSA via its Electronic Internal Reconsideration Management System is said to be the main contributor for this sub-programme to reach its target.
• The Department met its target of conducting 40 stakeholder engagements as part of implementing social assistance stakeholder and partnership strategy in 2017/18.

8.1.4 Programme 4: Welfare Services Policy Development and Implementation

Objective: To create an enabling environment for the delivery of equitable developmental welfare services through the formulation of policies, norms and standards and best practices and the provision of support to the implementation agencies.

Table 7: Programme 4: Welfare Services Policy Development and Implementation

Source: Adapted from Department of Social Development (2018)

Summary

• The Department reported on all 33 targets set in the 2017/18 APP.
• Out of a total of 33 stated targets, 22 targets were achieved – resulting in 67% of targets achieved and 33% (11) not achieved. In addition, R1 056 155million or 95.76% of Programme 4’s funding allocated was spent over 2017/18, as opposed to R713 088 million or 99.24% in the previous financial year.
• The Department indicated that the under-expenditure was mainly due to the non-payment of operational costs in terms of the Substance Abuse Conditional grant to the Northern Cape and Free State provinces, and delays experienced in the procurement of “White Doors” in provincial and district areas, as well as delays in the delivering of computer equipment.
• There were different reasons cited in this programme for the 11 targets that were not achieved, including introducing the Older Persons Amendment Bill and submitting to Cabinet the Bill on Victim Empowerment Support Services (VSS Bill). The reasons for not meeting these targets were due to Cabinet changes in February 2018. In practice the Bill is first approved by Cabinet before introduction in Parliament. It is unclear how the Department will be able to deal with this target in the current financial year; as there are no strategies in the 2017/18 annual report to ensure this is done.

Achievements

• A framework for the revised White Paper for Social Development was developed.
• A target to award 500 youth with social services scholarships was overachieved by 10 extra students. These 10 students were identified during the student support programme.
• A target of providing subsidies to 59 111 children through ECD conditional grants were planned for the 2017/18 financial year. The Department over-achieved this target by providing subsidies to 60 307 children.
• There is a challenge with the infrastructure of ECDs in South Africa. Most of the ECD centres operate without basic infrastructure, such as running water, access to electricity or suitable sanitation. The Department had planned to approve the infrastructure plan during this financial year, and this was met as envisaged.
• The Department over-achieved its target of registering 80 (91%) of the adoptions received from the Children’s Courts with complete records. The breakdown is as follows: out of 1 251 adoptions received, 1 149 were registered (1 022 were National adoptions and 127 Inter-country adoptions).
• The Department did not achieve its target of submitting the policy on social development services to persons with disabilities for Cabinet approval to publish for public comment.

Challenges

• It did not achieve its target of making sure that 593 ECDs benefit from the maintenance grant as only 459 benefited.
• Although the national department provided support to the Eastern Cape (EC) province with the implementation of the maintenance grant, no ECD centres benefited from the grant due to challenges within the province.
• In the North West (NW) Province the strike had an adverse impact on the implementation of the grant and national target.
• Only 10 ECD centres benefited from the grant in the year under review. In terms of mechanisms to deal with these unmet targets, it has been indicated that both the EC and the NW will apply for a rollover of funds to enable them to deal with the ECD centres that they did not complete in 2017/18.
• Provinces are expected to provide weekly progress reports and national DSD (representatives from infrastructure and ECD programme) will be conducting bi-weekly site visits to provinces to ensure that all challenges are addressed timeously.
• Approval of the National Plan of Action for the Children in South Africa (2018-2022) was not achieved, due to delays in finalizing the plan.
• Only one National Strategic framework (instead of two) that supports the implementation of the White Paper on the Rights of Person with Disabilities (WPRPD), was developed.

8.1.5 Programme 5: Social Policy and Integrated Service Delivery

Objective: To support community development and promote evidence-based policy making in the Department and the Social Development Sector.

 Table 8: Programme 5: Social Policy and Integrated Service Delivery

Source: Adapted from Department of Social Development (2018)

Summary

• Programme 5 identified a total of 27 performance targets in both the Department’s APP and Annual Report for 2017/18.
• Furthermore, a total of 22 targets was achieved during this yea,r as reflected in the Annual Report 2017/18; and only 5 targets were not achieved.
• A total of R388 706 or 99.46% of Programme 5’s funding allocated was spent over 2017/18, as opposed to R383 214 million or 99.65% in the previous financial year. 

Achievements

• The Department overachieved (by 4057) its target of training of 3000 NPOs on governance and compliance with the NPO Act. 
• A total of 32 104 NPO registration applications were received, of which 98.5% were processed within 2 months as envisaged.
• Through the Mikondzo Programme, the Department extended its footprint to 774 wards.

Challenges

• The Department planned to train 50 officials in social policy and policy analysis. However, it is reported that the training did not take place.

8.2       HUMAN RESOURCE MANAGEMENT

The following table gives a breakdown of Employment Equity under Human Resources as at 31 March 2018, in terms of race, gender and persons with disabilities:

Table 9: Employee breakdown by race and gender

Other HR issues

• During the year under review, the total number of grievances lodged was five (5).
• With respect to misconduct and disciplinary hearings, there was one final written warning issued in the 2017/18 financial year.
• There was no irregular expenditure referred for disciplinary hearings in the year under review. This is an improvement, because in the last financial year there were eight matters for irregular expenditure addressed. Only two cases were withdrawn.

8.3       REPORT OF THE AUDITOR-GENERAL

• The audit outcome of the portfolio remained unchanged (i.e. it retained its clean audit on performance information, in that NO material findings were raised on the usefulness and reliability of the reported performance information for the following programmes: Programme 2: Social assistance and Programme 4: Welfare services policy development and implementation support).
• The AG drew attention in note 24 to the financial statements, that the department incurred irregular expenditure of R82 million, which relates to the non-compliance with supply chain management legislation by SASSA in administering the social relief for distress (SRD) on behalf of the department.
• Furthermore, under procurement and contract management, the AG found that Bid documentation for the procurement of commodities designated for local content and production did not meet the stipulated minimum threshold for local production and content as required by the 2017 preferential procurement regulation 8 (2) and, consequently, goods to the value of R2 million were procured from suppliers who did not meet the prescribed minimum threshold for local production and content.

 9. COMMITTEE Observations 

Having considered the briefing by the Department, the Committee made the following observations:

Service delivery

• The Committee noted that the Department continued to have a disjuncture between achievement of targets and budget expenditure. In the year under review, the department achieved 78% targets but had an expenditure of 99.40%. This was despite the recommendation it made in the 2016/2017 BRRR. It had recommended that the department should align achievement of targets with budget expenditure.
• The Committee also raised concerns relating to the increased percentage of targets not achieved by 3% as compared to the previous year.  This was also identified by the AG as an area where the Committee would need to conduct oversight over.
• The Committee raised a concern relating to over achievement of certain targets by a huge percentage and it was of the view that this was not a good reflection in terms of accounting principles and could be due to poor planning.  It advised the department to improve on its planning processes.

Expenditure

• The Committee raised a concern over the irregular expenditure of R82 million as was reported by AG in note 24 of the financial statement. The incurred irregular expenditure was a result of non-compliance with Supply Chain Management Legislation by SASSA in administering the Social Relief for Distress on behalf of the department.  The Committee reminded the Department that it is its role to monitor and evaluate the Agency’s function to ensure that it complies with the set regulations. 

• The Committee strongly felt that lack of effective leadership has a negative impact on the performance of any organisation. 

• The Committee expressed dissatisfaction that goods to the value of R2 million were procured from suppliers who did not meet the prescribed minimum threshold for local production and content.

• The Committee was worried about the under-expenditure of R44 801 million under Programme 4: Welfare Services Policy Development and Administration due to non-payment of operational costs from the Substance Abuse grant allocated to Northern Cape and Free State. 

• The Committee expressed frustration over the recurring condonation of irregular expenditure and lack of consequence management by the department and its entities.  It sought advice from the AG on how this matter could be dealt with to prevent these recurring patterns because currently there seemed to be no plan in place to address this challenge.

• The Committee also raised a concern regarding the under-expenditure of R893 461 million in Programme 3: Social Assistance due to the slow spending on Foster Care and Old Age Grants, as a result of a lower-than-anticipated projected number of beneficiaries.  The Committee strongly disputed the reasons provided by the Department in relation to the underspending on this programme and felt that the Department is not doing enough to carry out this function.  The Department was advised to relook at variables informing the Foster Care Grant budget projections.

• The Committee reiterated its concern over the manner in which the Department implements virements. Even though it notes that the PFMA allows departments to shift funds within an 8% limit, it was of the view that this provision is recklessly applied by the Department. Funds were shifted from core programmes to fund activities that are not the core function of the Department, such as outreach programmes and travel expenses.

• The Committee expressed a concern over an increase in irregular expenditure in both the Department and its entities. This expenditure increased from R376 million to R517 million (DSD incurred R86 million, NDA R16 million and SASSA R415 million) due to contraventions of key legislation, goods delivered but not prescribed and processes not followed. 

• The Committee also noted with concern that the Department incurred fruitless and wasteful expenditure to the amount of R537 000 as a result of hotel ‘no shows’.  It instructed the Department to hold accountable those implicated. The Department should provide the Committee with a breakdown of the costs incurred by these officials. 

Governance

• The Committee commended the Department on the slight improvement on the implementation of leadership controls and governance-related internal controls.  However, it noted with concern the regression in the status of internal controls in the NDA and SASSA. 

10. Overview and assessment of performance OF SOUTH AFRICAN SOCIAL SECURITY AGENCY (SASSA or Agency)

The South African Social Security Agency was established in April 2006 as a Schedule 3A Public Entity in term of the PFMA. The Agency derives its legislative mandate from the South African Social Security Act, 2004 and the Social Assistance Act, 2004.  The main function of the South African Social Security Act is to make provision for the effective management, administration and payment of social assistance and service through the establishment of the South African Social Security Agency.

The Social Assistance Act provides a national legislative framework for the provision of different types of social grants, social relief of distress, the delivery of social assistance grants and the establishment of an Inspectorate for Social Security.

SASSA’s mandate is guided by the Constitution of South Africa, the National Development Plan and the Medium Term Strategic Framework. Chapter 13 of the NDP is relevant to SASSA as it deals with a comprehensive, responsive and sustainable social protection system. A number of key priority areas are highlighted as a road map to achieve the NDP’s vision. The key priority area relevant to SASSA is that of administering and paying social grants as this contributes to the imperative of poverty alleviation. 

The mission of the Agency is to administer quality customer-centric social security services to eligible and potential beneficiaries. The objectives of SASSA are to act as the sole agent that will ensure the efficient and effective management, administration and payment of social assistance and to eventually serve and institution to manage broader social security benefits.

The Agency has to align its priorities to 14 government outcomes, namely:

• Sub-Outcome 4: ‘Deepening social assistance and expanding access to social security’, and
• Sub-Outcome 5: ‘Optimal systems to strengthen coordination, integration, planning, monitoring and evaluation of social protection services’.

To fulfil the aforementioned government outcomes, SASSA set the following priority areas for 2014 – 2019:

• Reducing income poverty by providing social assistance to eligible individuals;
• Improving service delivery;
• Improving internal efficiency; and
• Institutionalising social grants payment system within SASSA.

During this period (2014 – 2019) SASSA had made policy reforms to its comprehensive social security programme. These reforms were made in the Old Age Pension and Child Support Grant. They entailed universalising these grants to ensure that old people and children who were excluded in the system were included. These changes came at a time when SASSA was preparing to implement its core mandate, viz. that of insourcing the payment of social grants over the medium term, which had been previously outsourced to a private company.

In its Annual Performance Plan for 2017/18, SASSA reported that, during the transition period, the payment system would be implemented through a hybrid model, which involves partnership with the South African Post Office (SAPO), commercial banks (for electronic payments) and corporate financial institutions (CFIs). It is expected that the transition period will take five years and thereafter service providers will transfer resources or assets to SASSA.

10.1 OVERALL PERFORMANCE AND FINANCIAL EXPENDITURE

SASSA’s budget structure for the 2017/18 financial year comprises of two programmes, namely Administration and Benefits Administration and Support.

10.1.1 PERFORMANCE INFORMATION BY PROGRAMME

Programme 1: Administration

The aim of the programme is to provide leadership, management and support services to SASSA. This programme consists of the five (5) sub-programmes mentioned earlier. 

Table 11: Administration target performance      

SASSA annual report (2018)

The programme had 21 targets planned for the financial year - of the total planned targets, 13 (62%) were fully achieved, 8 targets that were not achieved, 4 targets (19%) were partially achieved; and the remaining 4 targets (19%) recorded below 50% performance.

The budget expenditure on this programme was 95%. The budget for this programme was R2 674 604 billion and SASSA spent R2 593 559 billion. This means the programme had a variance of R81 044 million for the year under review.  According to SASSA, the 5% under-expenditure was on Compensation of Employees due to unfilled posts. The following senior management positions were among the posts not filled by 31 March 2018:

• Chief Executive Officer (occupied in an acting capacity),
• Executive Manager Corporate services,
• Chief Operations Officer,
• Regional Executive Managers for Limpopo, Northern Cape, Free State, Mpumalanga and Western Cape regions which are occupied in an acting capacity.

10.1.2 Programme 2: Benefits Administration and Support

This programme provides an efficient and effective grant administration service to implement social protection floors. This programme manages the function of grant administration from application to approval, as well as beneficiary maintenance, benefit payment, customer care, strategic direction and guidance pertaining to grant operations.

 Table 12: Benefits administration and support target performance

The Benefits Administration and Support programme had 21 targets planned for the financial year and achieved 14 (67%) performance targets. According to SASSA, the remaining 7 performance targets (or 33%) were partially achieved. The 7 target performances that were not fully achieved include the following:

• SASSA planned to pay social grants including the grants in aid to more than 17 523 737 million beneficiaries for the year under review. However, SASSA paid social grants including grants-in-aid to more than 17 509 995 million beneficiaries.
• SASSA planned to process 95% of new social grant applications within 10 days. SASSA managed to process 94% of new social grants applications within 10 days.
• SASSA planned to review 232 757 of processed Foster Child Grants for the year under review but managed to review 181 305 of processed Foster Child Grants.
• SASSA planned to conduct 600 beneficiary education programmes. SASSA managed to conduct 544 beneficiary education programmes.
• SASSA planned to monitor 100% of large cash pay points (those paying more than 300 beneficiaries a day). However, SASSA managed to monitor 99.67% (2 393 of 2 401) of large cash pay-points.
• Current payment service provider (CPS) services phased out. Phase-in and Phase-out plan developed and approved. SASSA was successful in taking over certain services from the service provider (CPS) which include direct transfer to banked beneficiaries; Regulation 26A; Biometric enrolment; and Appointment of SAPO.
• Phasing in new service provider/s for social grant payments. Phase-in and Phase-out plan developed and approved by SASSA EXCO. SASSA signed a Government-to- Government Agreement with SAPO for the payment of social grants with effect from 01 April 2018. According to SASSA, in line with the protocol agreement, the new service provider (SAPO), will take over payment of social grants in the 2018/19 financial year.

The budget expenditure for the programme is 102%. The total budget allocation for the programme is R4 531 455 billion and SASSA spent R4 623 433. This shows an over expenditure of R91 977 million.

10.2 Overall Performance of SASSA

Table 13: Appropriation Statement for 2017/18

SASSA annual report (2017/18)

The budget allocation for SASSA for the year under review was R7.206 billion. Of this amount, SASSA spent R7.216 billion at the end of the financial year, indicating an over-expenditure of R10.932 million. SASSA has reduced the over expenditure as compared to the previous financial year (2016/17) to the value of R261 million.

For the year under review, SASSA had 42 planned performance targets and fully achieved 27 (64%). Of the 15 performance targets not achieved, SASSA indicated that 11 targets (26%) were partially achieved (recording between 50% and 98%); and 4 targets (10%) recorded below 50% performance. The overall target performance of SASSA is reflected in the table below:

Table 14: Target performance of SASSA

SASSA Annual Report (2017/18)

As the table above depicts, SASSA has improved in the overall target performance as compared to the previous financial year. SASSA improved from 43% in 2016/17 financial year to 64% in 2017/18. 

The following section focuses on the performance of the two programmes of SASSA.

10.3     SUMMARY AND ANALYSIS OF ANNUAL FINANCIAL STATEMENTS FOR SASSA

10.3.1. Irregular, Fruitless and Wasteful Expenditure

Irregular Expenditure

SASSA incurred R224.5 million of irregular expenditure with a closing balance of R1.711 billion for the 2017/18 financial year. The closing balance for irregular expenditure had increased from the R1.4 billion recorded in the previous financial year.

Fruitless and Wasteful Expenditure

SASSA recorded a total amount of R227, 577 for 2017/18 with a closing balance of R6.007 million. The material amounts in the balance relates to the cancelled Mikondzo event (to the value of R1.3 million) and VIP close protection services (to the value of R3.5 million) that were recorded in the previous years and for which investigations had not yet been concluded.

Other cases of fruitless and wasteful expenditure resulted mainly from hotel bookings made but not honoured, car damages, interest and penalties. According to SASSA, these cases were investigated and all appropriate corrective steps were taken against the third parties and any officials responsible for incurring fruitless and wasteful expenditure. 

10.4      HUMAN RESOURCES MANAGEMENT

SASSA had 8 800 employees at the end of March 2018. These positions included 397 contracts (EPWP - 182), interns (39) and other contracts (176).  While 95% of funded posts had been filled, most of the 10 206 vacant posts were not funded, which meant that the 9 919 unfunded posts could not be filled.  The HR Plan was reviewed and approved.

The review focused on:

• Business process based on steps in the biometrics;
• Time and motion studies; and
• Norms and standard were developed for each activity in biometrics.

10. 5    REPORT OF THE AUDITOR-GENERAL

Findings of the Auditor General (AG)

SASSA received a qualified audit opinion for 2017/18. The AG made the following findings:

Amounts included in the condonation in the irregular expenditure were not condoned by the appropriate authority. In addition, the AG found that not all irregular expenditure identified was disclosed in note 31, as required by section 55(2)(b)(i) of the Public Finance Management Act (PFMA).

For the year under review, the AG found that SASSA did not have an adequate system for identifying all irregular expenditure resulting from procurement and contract management.

The AG further found that there were no satisfactory alternative procedures to obtain reasonable assurance that all irregular expenditures had been properly recorded in note 31 of the financial statements.

11. COMMITTEE OBSERVATIONS

Having considered the briefing by SASSA the Committee made the following observations:

Governance

• The Committee noted with concern the regression of SASSA with regard to the implementation of leadership controls as found by the Auditor General.  It advised the Agency to develop a proper plan to improve this challenge.
• The Committee expressed dissatisfaction over the AG’s finding that SASSA regressed on its oversight responsibility and its lack of effective leadership, policies and procedures.
• It also noted with concern the regression on internal controls for risk management and internal audit at SASSA due to vacancies and non-performance of risk assessments. 

Expenditure

• The Committee expressed concerns over the incurred fruitless and wasteful expenditure to the amount of R419 000 because of hotel ‘no shows’.  The Committee raised serious concerns on this matter and advised the Agency to ensure that there were consequences for the implicated officials.  Furthermore, it requested the Agency to provide it with a breakdown of the costs incurred by these officials.  In addition, the Committee resolved that consequence management be applied to all implicated officials and a progress report on such actions be forwarded to it.
• The Committee noted with concern the findings of the AG on the irregular expenditure incurred by SASSA to the value of R415 million due to a contravention of the Supply Chain Management. 
• The Committee was worried about the AG’s findings, which indicated a deterioration in the status of collection of debtors at SASSA.  This might cause problems in future as the debtors’ balance was growing. 
• The Committee noted with concern the underspending on the compensation of employees and advised the Agency to put more focus on human capital.

12. Overview and assessment of performance OF THE NATIONAL DEVELOPMENT AGENCY (NDA or Agency)

The NDA is a public entity established by the National Development Agency Act, (No. 108 of 1998) as amended, and reports to Parliament through the Minister of Social Development. It is listed under Schedule 3A of the Public Finance Management Act (No. 1 of 1999).

The NDA’s primary mandate is to contribute towards the eradication of poverty and its causes by granting funds to civil society organisations (CSOs) to, among others:

• Implement development projects in poor communities, and
• Strengthen the institutional capacity of CSOs that provide services to poor communities.

The NDA’s secondary mandate is to:

• Promote consultation, dialogue and sharing of development experience between CSOs and relevant organs of state,
• Debate development policy, and
• Undertake research and publication aimed at providing the basis for development policy.

12.1 NATIONAL DEVELOPMENT AGENCY POLICY PRIORITIES

The NDA Board identified four (4) strategic objectives of the NDA for MTSF. They are as follows:

• To develop and strengthen internal systems, processes and human capability to deliver efficiently and effectively on the NDA mandate.
• To conduct CSO engagements, assessments, and needs analysis in the identified prioritised wards.
• To increase accessibility to capacity strengthening interventions to CSOs with the aim of improving the quality of services.
• To conduct, collate and disseminate research and evaluations that inform the national development agenda.

12.2 OVERALL PERFORMANCE AND FINANCIAL EXPENDITURE

During the year under review, the NDA’s actual expenditure was R230 091 278 as compared to R220, 7 million in the previous year (2016/17) of the allocated R260 485 762 in 2017/18.

The NDA executes its mandate through 3 programmes. These are:  Programme 1 - Governance and Administration; Programme 2 – CSO Development; Programme 3 –Research. For the year under review, it is not clear how many targets the NDA achieved as per the APP of 2017/18, as there is no correlation between the information contained in the APP and Annual Report in terms of the targets set. According to the Annual Report, only 3 targets were not met whilst 26 targets were mostly overachieved (which is a sign of poor planning as much as the NDA can be commended for their achievement) and only 3 targets were not achieved.

12.3 SELECTED PERFORMANCE INFORMATION BY PROGRAMME

12.3.1  Programme 1: Governance and Administration

The focus of this programme is on promoting and maintaining organisational excellence and sustainability through effective and efficient administration that includes performance management, employee well-being, as well as cost containment and brand recognition.

Table 15: Performance on planned targets

Source: NDA Annual Report 2017/18

Table 14 above depicts that NDA had set itself a total of 6 targets in the 2017/18 APP, the same as their annual report reflects. The targets that were achieved as per the AR, were 3 and only 3 targets were not achieved.

12.3.2 Programme 2: Civil Society Organisation Development

The programme focuses on Civil Society Organisation (CSO) engagements, assessments and needs analysis for CSOs, interventions required by CSOs, facilitating community and CSO networks, resource identification and mobilisation to support CSOs and the provision of information and referrals of CSOs to other state and private institutions for additional support.

Table 16: Performance on planned targets

Source: NDA Annual Report 2017/18

Table 15 above depicts that programme 2 achieved 18 targets as per the annual report.  As with programme 1, most of the targets were overachieved.

12.3.3 Programme 3: Civil Society Organisation Capacity-building

The focus of this programme is on strengthening institutional capacities of CSOs across all nine provinces.

Table 17: Performance on planned targets

Source: NDA Annual Report 2017/18

Table 16 depicts that Programme 3 achieved 100 per cent of the planned targets (6 out of 6). 

12.4     FINANCIAL STATEMENTS

Fruitless and Wasteful Expenditure

• The fruitless and wasteful expenditure remained the same at R1 042 326 for 2017/18 as compared to 2016/17 financial year.

Irregular Expenditure

• Irregular expenditure increased from R84 351 777 in 2016/17 to R88 650 186 in 2017/18.

12.5     HUMAN RESOURCES

The NDA has five directorates that implement both the primary and secondary mandates. These include Development Management & Research, Finance, Office of the Chief Operating Officer (COO), Office of the Chief Executive Officer (CEO) and Corporate Services.

As at 31 March 2018, the NDA had 192 employees within its total workforce. The table below summarises the audited expenditure and provides an indication of personnel cost per programme and salary band.

Table 18: Personnel cost by programme

Source: NDA Annual Report 2017/18

In terms of personnel cost by programme, the highest expediture is recorded in programme 2 to the value of R128.601 million, which is 31.27% of the allocated budget in programme 2. This is followed by programme 1 to the value of R42.699 million, which is 18.56% of the allocated budget in programme 1. This is because both programmes have the highest number of employees.

For the period under review, the NDA had a vacancy rate of 19% which is very high. As reported by the NDA, this is largely due to the approval of the new positions at national office and at district office levels as result of the restructuring process. The vacancies are recorded in programme 1 (8 vacancies - 13%) , programe 2 (33 vacancies - 22%) and programme 3 (1 vacancy – 14%). When these vacancies are broken down, top management (17%); senior management (5%); professional qualified (19%); skilled (24%); and unskilled (32%).

12.6 REPORT OF THE AUDITOR-GENERAL

12.6.1 Audit Opinion

The NDA received an unqualified audit opinion with findings for the 2017/18 financial year. This means that the AG could not obtain audit evidence that is sufficient and appropriate to be able to present an Audit Opinion. Below find the following matters identified by the AG:

Report on the audit of the annual performance report

The material findings in respect of the usefulness and reliability of the selected programme are as follows:

 Programme 2 – CSO Development

The entity did not have an adequate recordkeeping system to enable reliable reporting on achievement of the indicators. As a result, sufficient appropriate audit evidence was difficult to obtain in some instances, while in other cases the supporting evidence provided did not agree with the reported achievements. Based on the supporting evidence that was provided, the achievement of these indicators was different to the reported achievement in the annual performance report.  It was also not possible to further confirm the reported achievements by alternative means. As a result, it was not possible to determine whether any further adjustments were required to the reported achievements of the indicators.

Report on Audit of Compliance with Legislation

The AG found the material findings on compliance with specific matters in key legislations are as follows:

The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, nor were they supported by full and proper records, as required by section 55(1) (a) and (b) of the Public Finance Management Act (PFMA).

Expenditure management

Effective and appropriate steps were not taken to prevent irregular expenditure amounting to R16 506 194 as disclosed in note 31 to the annual financial statements, as required by section 51(1) (b) (ii) of the PFMA. The majority of the irregular expenditure was caused by the entity not following the bidding processes.

Consequence management

Disciplinary steps were not taken against some of the officials who had permitted fruitless and wasteful expenditure, as required by section 51(1) (e)(iii) of the PFMA.

Procurement and contract management

Some contracts were awarded to bidders that did not score the highest points in the evaluation process, as required by section 2(1)(f) of Preferential Procurement Policy Framework Act and Preferential Procurement Regulations.

13. COMMITTEE OBSERVATIONS

Having considered the briefing by the NDA the Committee made the following observations:

Governance

• The Committee raised a concern over the AG’s findings that the NDA regressed on its oversight responsibility, effective HR management, action plans policies and procedures. 
• The Committee observed the regression on the internal controls related to financial and performance management record-keeping. 

The Committee was dissatisfied by the AGs findings which highlighted regression in leadership controls.

Expenditure

• The Committee raised serious concerns over the irregular expenditure of R16 million incurred by the NDA due to its contravention of key Supply Chain Management legislation.

14. OVERALL OBSERVATIONS

The Committee observed with concern a disjuncture between budget spend and the achievement of targets, in the Department and SASSA, particularly as this was a pattern continued from the previous financial year.

There was a pattern of recurring irregular expenditure, perpetuated by inadequate record-keeping or a lack of systems to identify irregular expenditure at both SASSA and the NDA. This was concerning as it made reliable reporting on the achievement of indicators extremely difficult - this was also a pattern carried over from previous years. These two entities also experienced regression in key controls and oversight responsibility – this poses a risk of misstatements. Even more concerning, was the lack of consequence management at the two entities – disciplinary steps were not taken against officials flouting or ignoring PFMA and SCM regulations. This pattern of laxity is allowing a culture of impunity and lack of accountability to take hold among officials, which has serious implications for the effective functioning of these entities in the future.

There was sometimes no correlation between information contained in the APP and the AR in terms of targets set. This made it difficult to extract accurate information on the achievement of targets.

15. Summary of previous (2016/2017) key financial and performance recommendations of Committee AND PROGRESS MADE

The Portfolio Committee on Social Development, having considered the performance and the submission to the National Treasury for the medium term period of the Department of Social Development, the South African Social Security Agency (hereafter SASSA or the Agency), and the National Development Agency (hereafter the NDA or Agency) reports as follows:

15.1 Department of Social Development

Recommendation 1:

The Minister must ensure that the Department acts on its undertaking to the Committee that it will correct the manner in which it has been implementing virements between its programmes as from 2017/2018 financial year. There should be strict monitoring and evaluation processes in the implementation of virements. The Department should inform the Committee on a regular basis on its intention to shifts funds between programmes.

Progress: 

Programme 1: Administration had been underfunded in history due to the centralisation of “Mandatory Services” for the department: These Mandatory services benefitted the “Support and Core Business” of the Department;

The following “Mandatory Services” are been financed in Programme 1 Administration:

• Audit Fees for Auditor General SA
• Communication charges e.g. Telkom, postage, 3G data lines;
• G Fleet services
• Computer services and ICT Infrastructure;
• Security and Cleaning Services
• Property leases e.g. Office accommodation and Municipal accounts;
• Financial leases e.g. centralized printing solutions;

During the 2017/18 AENE (Adjusted Estimates of National Expenditure), the Department has submitted virements from core business to fund the expected shortfall in Programme 1 Administration in terms of the 2017/18 financial year.

The department has now ensured that this virement has been carried-through over the 2018 MTEF period and that sufficient funding has been allocated for future mandatory services for the Department from 1 April 2018

Recommendation 2:

The Minister must ensure that the Department and the entities must report on the report on the progress made in implementing BRRR recommendations when they present their quarterly reports to the Committee. The report should be a separate report (as addendum).

Progress:

The department has always responded to all invitations by the Portfolio Committee according to the stipulated agenda items. However, the Department should commit itself to present progress on BRRR recommendations in its presentations of the quarterly reports. 

Recommendation 3

The Minister must ensure that between 2016/2017 and 2017/2018 financial years the recommendations made by the erstwhile Committee and the AG regarding the Four Dormant Funds are implemented so that their existence no longer becomes an audit query.

Progress:

The Fund Raising Amendment Bill was presented to Cabinet, and Cabinet granted permission for the Bill to be publicised in the Government Gazette for public comments. Minister granted permission to publicise the Fund Raising Amendment Bill 

Following the approval by the Minister to publicise the Fund Raising Amendment Bill the Bill was gazetted for public comments for the period of 30 days.  It was envisaged that the Bill will be tabled to Parliament during the 2017/18 financial year, to finalise the closing of funds. However, it should be noted that the SANDF has requested to further deliberate on the proposed amendment with their principal to finalise their inputs. 

Recommendation 4

The Minister must ensure that the Department corrects the formulation of targets so that they follow the SMART principle. Similarly, the Minister must ensure that the Department aligns its non-financial performance (achievement of targets) with actual budget expenditure. The Department should improve on its achievement of targets. The targets set by the Department and its entities should be based on realistic baselines.

Progress:

The Department has institutionalised the Planning and Performance Reviews which are held quarterly to ensure that planning is informed by prior performance and that indicators and targets are well defined. DSD has since improved and continues to ensure that APP targets follow the SMART principles and that there is technical compliance on planning framework in terms of ensuring strategic alignment from the strategic objectives to the targets. There are now Technical Indicator Descriptions for all performance indicators in the APP of the Department to ensure that all indicators are clearly defined. In its planning, the Department is also informed by the Medium Term Strategic Framework (MTSF).

As a result, there has been a significant improvement in the achievement of planned targets in the period 2016/17 when compared to 2015/16. In 2015/16, a total of 69% of the planned targets were achieved. This performance improved by 12% in 2016/17 financial year, where 81% of the planned targets were achieved.

Recommendation 5

The Minister must ensure that transfers to the provincial departments for the absorption of social workers is utilised accordingly so as to ensure that the backlog is eliminated. The national department should improve its monitoring and evaluation and reporting by the provincial departments on this matter.

Progress:

During the first quarter 2017/18 eight EC (106), GP (9), KZN (157), LP (164), MP (46) NC (2), NW (21), WC (35) provinces commenced with implementation of the conditional grant in line with the approved Framework. A comprehensive report outlining performance of the programme was developed for submission to the National Treasury (Attached as Annexure A). Funds allocated have been utilised for appointment of social work graduates as stated in the Conditional Grant Framework. Both KZN and EC will continue to fill the remaining posts, which were declined by graduates during the first quarter appointment process. The Free State commenced with implementation in August 2017 and 10 graduates have been appointed. All provinces have to submit reports at the end of October 2017 for quarter 2 performance review.

15.2 South African Social Security Agency (SASSA)

Recommendation 6

The Minister must ensure that the accounting officers of SASSA and the NDA put in place effective and stringent measures to prevent irregular, wasteful and fruitless expenditure as from the 2016/ 2017 financial year onwards. These measures should include improved training of officials on their understanding and implementation of the Public Finance Management Act and National Treasury Regulations relating to procurement procedures. There should also be stringent formal disciplinary processes to ensure that responsible officials are held accountable.

Progress:

SASSA has improved the quality of Annual Financial Statements (AFS) prepared and presented for audit as there were no material misstatements identified and reported in 2016/17 except for note 31: Irregular expenditure disclosed.

Progress in Irregular expenditure

The Agency’s irregular expenditure was R1.1 billion carried from 2015/16.

The irregular expenditure increased to R1.4 billion in 2016/17 as a result of the following key items:

• National Treasury could not finalise requests for condonations in respect of R316 million for CPS, R414 million for physical security, R75m for SAB & T and R358 million for Trifecta lease payments being transactions carried forward from 2015/16;
• National Treasury reviewed Work-stream's contracts and expenditure which was then declared irregular;
• The Agency experienced non-compliance relating to local content (R60m) and CIDB (R24m) which resulted in additional irregular expenditure being incurred.

Measures taken by SASSA to prevent irregular expenditure

The following stringent measures were introduced by SASSA towards prevention of irregular expenditure:

• Training in local content and CIDB prescripts was arranged for SCM officials at Head Office and Regions and was conducted by IDT and CIDB on 5 and 6 September 2017 respectively.  A total of 37 officials attended CIDB training and 24 officials attended Local content;
• Bid Adjudication Committee (BAC) members were trained on the 08th June 2017 by National Treasury on their role and responsibilities. SASSA is in the process of extending the training to both Regional Bid Adjudication Committees and SCM officials.
• SASSA has implemented pre-audit of bids before the award as a validation of SCM compliance, thus ensuring irregular expenditure is avoided;
• Developed and implemented SCM compliance checklist for bids to be awarded;
• Developed and currently implementing Dashboard and Audit Action Plan to respond to the 2016/17 Audit Factual Findings;
• Established Financial Misconduct structures to deal with consequence management for non-compliance, monitoring at executive management level;
• Executive managers in the Regions are tasked with the responsibility to ensure that financial misconduct cases, particularly long outstanding ones, are finalised urgently.

Recommendation 7

The Minister should ensure that the entity aligns the reporting of achievement of targets in the Annual Report with the planned targets in the Annual Performance Plan to avoid discrepancies.

Progress:

The 2016/17 SASSA annual report has been developed in line with the approved Annual Performance Plan.

Recommendation 8

The Minister must ensure that SASSA conducts awareness campaigns or strengthen its communication strategy on how and where social grant beneficiaries can report illegal deductions from their social grants. The communication should also include awareness campaigns on all the services rendered by SASSA.

Progress:

SASSA has implemented the dispute resolution mechanism and trained all staff at local office levels, thus increasing awareness and knowledge to assist beneficiaries who report disputes at local office;

The call centre staff members have standard operating procedures on how to record and deal with disputes.  A total of 14 683 disputes were recorded for the financial year 216/17;

General communication has been intensified at all ICROP and Project Mikondzo events, to inform beneficiaries on how & where to report disputes, and reinforce the fact that SASSA does not offer loans or any financial products;

Over the past year, various channels of communication (radio, newspapers, social media, etc) have been employed to constantly strengthen the message. A total of 828 public awareness sessions were conducted.

Recommendation 9

The Minister must make sure that SASSA strengthens the implementation of the Fraud Prevention Strategy to eliminate fraudulent activities in the grant payment system.

Progress:

The Minister initiated Project Sephooko, a project dedicated to investigations related to illegal loan sharks. It is a joint project between SASSA, law enforcement agencies and the National Credit Regulator.  In the 2016/17 financial year, there were 12 cases that were referred to the Law Enforcement Agencies in this regard;

SASSA received a total of 405 fraud cases which were reported through the National Anti-Corruption Hotline (NACH), and managed to finalise 65% (262). The monetary value of the finalised cases amounted to R73 million implicating 22 SASSA officials.  In addition, 933 backlog cases were finalised bringing the total number of cases concluded in the financial year to 1 195;

On the prevention side, SASSA conducted 72 fraud awareness sessions across the 9 regions reaching more than 2 900 employees.

Recommendation 10

The Minister must ensure that the Department and the entities must report on the report on the progress made in implementing BRRR recommendations when they present their quarterly reports to the Committee. The report should be a separate report (as addendum).

Progress:

In the 2016/17 financial year, SASSA did not appear before the Portfolio Committee to present its quarterly reports, as such the progress was not presented.

15.3 National Development Agency

Recommendation 11

The Minister must ensure that the accounting officers of SASSA and the NDA put in place effective and stringent measures to prevent irregular, wasteful and fruitless expenditure as from the 2016/ 2017 financial year onwards. These measures should include improved training of officials on their understanding and implementation of the Public Finance Management Act and National Treasury Regulations relating to procurement procedures. There should also be stringent formal disciplinary processes to ensure that responsible officials are held accountable.

Progress:

• The NDA implemented the following measures to prevent irregular, fruitless and wasteful expenditure:

• The Supply Chain Management policy and processes were revised and strengthened in the 2016/2017 financial year to address shortcomings identified during audit process 
• A financial misconduct committee that adjudicates reported instances of irregular expenditure and make recommendations to management was operationalised in 2016/2017
• Instances of irregular, fruitless and wasteful expenditure for the 2015/16 financial year were investigated and in some of the instances written warnings were issued to staff.
• The SCM officials attended regular ongoing training on SCM updates. Forthcoming training will take place on 25 -27 October, offering updates on PFMA, PPPFA and National Treasury regulations. All SCM and Finance officials are attending the training.

Recommendation 12

The Minister must ensure that by the end of 2016/2017 financial year the National Development Agency has a fully functioning audit committee and that a permanent Chief Financial Officer is appointed.

Progress:

The NDA has a fully functional Audit and Risk Committee which has, amongst others, evaluated and strengthened the effectiveness of the internal control systems and ensured the reliability and accuracy of financial information. The Audit committee was appointed in March 2016 and was operational for the entire financial year 2016/2017.

The Chief Financial Officer has been appointed and will assume duty in October 2017.  

Recommendation 13

The Minister must ensure that the NDA, in its next annual performance report (2016/2017,) aligns the targets reported on in the annual report with the targets recorded in the annual performance plan to avoid incorrect reporting

Progress:

The 2015/16 annual report was not aligned due to changes that took place during that financial year which resulted in some KPIs being revised outside the timeframes and framework for managing performance information. The Annual Report for 2016/17 is fully aligned to the Annual Performance Plan (2016/17) as the Key Performance Indicators and Targets in both documents are the same. The NDA, at the half year, should review the APP and performance information reports to ensure that both the APP and Reported information are aligned.

16. COMMITTEE Recommendations  

Having deliberated and made observations on the Department and its entities’ annual reports, the Committee recommends the following:

Department of Social Development

Service delivery

• The Minister must ensure that the Department revise its projections on the number of Foster Care and Old Age Grants beneficiaries. It must make sure that the budget allocation for these grants is accurately aligned to these projections so as to prevent under expenditure in Programme 3: Social Assistance. The Department should report to Parliament on how it revised these projections on its progress report on the implementation of this report.
• The Minister must ensure that the Department prioritises the completion of the construction of the Substance Abuse Centre in the Free State. The construction should be completed before the end of the current financial year (2018/2019).  

• The Minister must monitor progress and ensure that the Department, as a temporary measure, explores alternative ways to render the needed substance abuse services to the communities. The Department must make sure that this centre is operational. The Department should partner with Community Based Organisations (CBOs) who render these services. This will ensure that the Department does not underspend on operational costs payments.

• The Minister must ensure that the Department strengthens its oversight over SASSA. Focus should be on ensuring that SASSA complies with Supply Chain Management legislation in its administration of the Social Relief of Distress. This will avoid the Department incurring irregular expenditure under this programme. Steps taken by the Department to strengthen its oversight should be reported in the progress report to Parliament on the implementation of the recommendations contained in this report.

• The Minister must make sure that the Department only procures goods from suppliers who meet prescribed minimum threshold for local production and content.

• The Minister must ensure that the Department improves under-spending in critical programmes such as Programme 2: Social Assistance. Particular focus should be on spending on Foster Care Grant. 

• The Minister must make sure that the Department discontinue the practice of making virements from core programmes to fund non-core activities, such as Subsistence and Travel (S&T) and outreach programmes under Programme 1, sub-programme Ministry.

Governance:

• The Minister must make sure that the Department improves its oversight responsibility over its entities. Oversight should focus on ensuring that SASSA and the NDA address the AG’s audit findings over the regression in the status of internal controls. Steps taken to improve oversight should be reported to Parliament as part of the progress report on the implementation of the recommendations of this report.

• The Minister must ensure that the Department during the 2018/2019 financial year develops and implements consequence management policies to hold those responsible for non-compliance with PFMA and SCM regulations, as found by the AG.

South African Social Security Agency

Governance

• The Minister must ensure that SASSA puts in place mechanisms to improve the status of its internal controls for risk management and leadership controls.

• The Minister must ensure that the Agency strives to meet the requirement to employ at least 2% requirement of people with disabilities within its establishment.

Expenditure

• The Minister must ensure that SASSA puts in place mechanisms that will hold officials accountable for hotel ‘no shows’ which resulted in fruitless and wasteful expenditure of R419 000. Focus should be on ensuring that this kind of expenditure is totally avoided.

• The Minister must also make sure that SASSA’s Supply Chain Management checklist is effectively implemented. It must achieve its desired intention to completely end irregular expenditure due non-compliance to Supply Chain Management policies. Steps taken to ensure that this checklist achieves its purpose should be reported to Parliament as part of progress report over the implementation of the BRRR recommendations.

• The Minister must ensure that the Agency develops mechanisms to improve the collection of debtors as this has the potential to cause problems in the future.

National Development Agency

Governance

• The Minister must ensure that the NDA strengthens the implementation of leadership control as was highlighted as an area of concern by the Auditor General.

• The Minister must ensure that the NDA puts mechanisms in place to address the regression in the internal controls relating to financial and performance management in record keeping, as well as performance reporting and compliance with regulations. These mechanisms should be reported to Parliament as part of the progress report on the implementation of the recommendations of this report.

• The Minister must ensure that the NDA improves on its oversight responsibility over the preparation of financial statements, implementation of Human Resource Management, actions plans and policies and procedures.

Expenditure

• The Minister must ensure that the NDA take steps to prevent irregular expenditure by ensuring that officials follow all the bidding processes. The NDA should develop policies and regulations.

17. Appreciation

The Committee wishes to express its appreciation to the Department of Social Development and its entities for their continuous co-operation and for making available all the information the Committee requested. It also wishes to express its gratitude to the office of the Auditor General for availing itself to brief the Committee on their analysis of the work of the Department and its entities. The analysis was invaluable to the Committee in its consideration and deliberations on the annual reports. It also expressed its appreciation to the support it receives from its support staff.  

Report to be considered