ATC140303: Report of the Portfolio Committee on Social Development on the 2012/13 Annual Report of the South African Social Security Agency (SASSA), dated 18 February 2014

REPORT OF THE PORTFOLIO COMMITTEE ON SOCIAL DEVELOPMENT ON THE 2012/13 ANNUAL REPORT OF THE SOUTH AFRICAN SOCIAL SECURITY AGENCY (SASSA), dated 18 February 2014

The Portfolio Committee on Social Development deliberated on the 2012/13 Annual Report of the South African Social Security Agency (hereafter referred to as SASSA or the Agency) on 22 October 2013. This report presents some of the key achievements as well as challenges encountered by SASSA. The report will also highlight matters of concern raised by the Committee and recommendations made.

1. Presentation by SASSA on its 2012/13 Annual Report

1.1 Background

Ms V Peterson, the Chief Executive Officer of SASSA, explained to the Committee that the aim of the presentation was to provide an overview of the performance of the Agency for 2012/13 financial year and also to highlight some of the financial and service delivery challenges. For 2012/13 financial year, SASSA set to achieve the following key priorities: Customer Care-centred Benefits Administration and Management System; systems integrity and increased access to social security services. To address the challenges it had encountered in the past, the Agency had identified key strategic objectives, which are:

· to ensure that eligible beneficiaries receive benefits due to them;

· to improve the quality of service delivery to SASSA customers;

· to achieve a fully integrated and automated social assistance service; and

· to ensure that the Agency is optimally capacitated for optimal service delivery.

During the period under review SASSA had continued on its path of improving the lives of the poor and vulnerable. At the end of the financial year, a total of 16 106 110 grants were in payment. The re-registration project was the flagship and largest project that the Agency embarked on during this financial year.

The presenter also reported that a decision was taken to slow down on some of the planned targets, such as the reviews and to concentrate on the available resources on re-registration. As a result the Agency achieved only 69% of its annual targets

2. Programme Performance Information

2.1 Implementation of the Social Assistant Programme

The objective of this programme is to improve the Agency’s outreach services to qualifying/eligible social assistant beneficiaries. For the year under review the Agency set a target to reach at least 1.2 million new beneficiaries and increase the number of grants in payment from 15 595 to 16 069 007. It was reported that a total number of 1 280 818 new applications were processed.

A total number of 16 106 110 social assistance benefits were in payment as follows:

• 11 994 415 were children’s grants;
• 2 873 197 were older person’s grants;
• 1 164 192 were people with disabilities grants;
• 587 were war veteran grants; and
• 73 719 were grant-in aid recipients

More than 863 689 grants lapsed due to death, voluntary cancellations and reviews. The table below shows the increase in grant payments between 2011 and 2013:

Table 1: Social Grants Trends: growth rates (2011/12 vs. 2012/13)

Grant type	2011/12	2012/13	Difference	% growth
Old Age	2 750 857	2 873 197	122 340	4.45%
War veterans	753	587	-166	-22.05%
Disability Grant	1 198 131	1 164 192	-33 939	-2.83%
Grant in Aid	66 493	73 719	7 226	10.87%
Foster Child	536 747	532 159	-4 588	-0.85%
Care Dependency	114 993	120 268	5 275	4.59%
Child Support	10 927 731	11 341 988	414 257	3.79%
TOTAL	15 595 705	16 106 110	510 405	3.27%

Social Grants Trends analysis

The following was reported:

· Overall, grant benefits uptake increased by 3.27% between 2011/12 and 2012/2013. There was an increase in all but three grant types, i.e. War Veteran Grants, Disability Grants and Foster Child Grants due to attrition rates and effective reviews .

• At 4.45%, Old Age Grant had shown a more than normal growth rate of 2% year-on-year. This was due to the increase in the threshold criteria for the means test, which resulted in many beneficiaries coming into the system.
• The number of Disability Grants decreased due to the improved management of temporary disability and more stringent screening and assessment of permanent disability.
• Grant-in-Aid had increased due to the improved awareness campaigns.

2.2 Improvements in the Grants application process

The Agency had embarked on a process of ensuring standardisation of business processes at all local offices and service points. The target for the processing of new social grant applications was to have 90% applications processed within 21 days. It managed to achieve 91% (1.167 million) of all new applications processed within 21 days.

The Agency also embarked on a process of implementing the standardised 4-step process for social grant applications. Complete standardisation processes were implemented in all local offices, with the exception of three offices, which were still undergoing renovations as part of the Local Office Improvement Project.

2.3 Local Office and Service Points Improvement

SASSA set a strategic objective to improve the conditions under which it serves the beneficiaries and to ensure that all customers experience the same business processes. It set target to have 72 local offices and 400 pay points upgraded to suit the new standardised application processes. A total of 95 local offices were improved, which was 23 more than the annual target. This brought the number of upgraded offices to 259 since 2011. Six hundred and ninety-two (692) pay points were upgraded at a cost of R18 776 416. The Agency surpassed its target by 292. The improvements implemented included procurement of shelters such as tents, ablution facilities, upgrading and/or repairs of existing structures, provision of chairs as well as construction of facilities for the disabled and frail, such as ramps and toilets.

2. 4 Improvements in the Payment Process

Re-registration

The re-registration project was the largest data integrity and beneficiary authentication project ever to be embarked upon. It entailed the mass re-registration of existing beneficiaries, children receiving grants and procurators. The overall objective was to re-register 22 million beneficiaries, recipients and procurators. A total of 18.9 million people were successfully re-registered onto the new system. This resulted in over 150 000 social grants being cancelled voluntarily, leading to a saving of R150 million per annum. During the implementation of the project 8 000 jobs were created for unemployed youth, 3 000 of whom were placed in permanent positions.

SASSA CARD

A SASSA smart payment card underwritten by Grindrod Bank, endorsed by MasterCard was issued to more than 10 million social grants recipients. The card contains both the pin and the biometric capability and thus recipients can use it to access payment anywhere, anytime, using multiple payment channels.

The introduction of the Benefits of the Current Payment System yielded broad positive benefits to both SASSA and beneficiaries, and to a large extent to the South African Economy. This new payment system absorbed the previously unbanked beneficiaries and incorporated them into the banking community. Almost 60% of cash beneficiaries had migrated from pay points and they had a preference to receive their social grants either at their convenient payment vendor or at the ATM’s (at ATM’s normal bank charges apply). Beneficiaries also had an opportunity to use the increased payment channels to access their social grants within the first seven calendar days of the month. Another benefit of the new system was that it significantly reduced the costs for transacting from the average of R30 to R16.44 per transaction.

2.5 Integrated Community Registration Outreach Programme (ICROP)

ICROP was established to improve access to and equity in services to beneficiaries in rural and semi-rural areas. The success of ICROP could be attributed to the partnerships with the key stakeholders, such as government departments, non-governmental organisations, faith-based organisations, traditional leaders and ward councillors. In the year under review the ICROP targeted 40 poverty wards for the provision of social assistance. The target was met and surpassed as 390 poverty wards benefitted through the special ICROP requests. A total of 61 110 beneficiaries in 430 wards had access to social assistance through the ICROP. The target of 60 000 beneficiaries for the period under review was therefore exceeded.

Automation

The Agency embarked in a process of seeking to achieve a fully automated system through a fully secured, integrated and automated end-to-end system in order to improve the administration of the social assistance programme by 2016. In line with this, the Agency established a baseline of its environment and developed an ICT vision for the future that supports its strategic objectives through the Enterprise Architecture project. The strategic architecture, known as the Digital Beneficiary Services Platform (DBSP), was developed.

Fraud Management

SASSA continued to implement its zero tolerance approach to fraud and corruption. The target was to investigate 50% of fraud cases identified: Seventy eight percent (78%) of fraud cases were investigated (i.e., 4 000 out of 5 134). Ninety eight percent (98%) of suspicious grants were verified for validity (i.e. 29 780 suspicious social grants were verified for validity). The focus of the Agency’s fraud management had shifted from only focusing on beneficiaries to focus on its own staff members who had colluded with beneficiaries and other organs of State, including the crime syndicates. Efforts to clamp down on syndicates in specific regions resulted in the arrest and conviction of ten Agency officials, three former Agency officials and 15 agents/touts.

Nationally, 52 of the Agency’s officials were suspended from duty, 25 were dismissed and seven resigned prior to the completion of their disciplinary. A total of 7 734 fraud/corruption cases were registered; 2 747 cases were finalised; 1 272 cases were closed; and 3 715 cases were still in progress at the time of reporting. The monetary value related to the cases finalised amounted to R59.4 million. Other successes included the arrest of 50 individuals in the Mahlabathini area within the Ulundi District, who were found to be in possession of 127 unregistered SASSA cards, 3 CPS registration machines and R47 000 in cash. Five of these suspects remain in custody.

Money lending also became a focus of the multi-disciplinary approach of the Agency. Successful operations included a total of 29 individuals arrested and 1 008 Agency cards and R 82 156.00 cash confiscated.

Implementation of the Legal Services Model

The legal risks that the Agency was exposed to in its day-to-day operations were mitigated to a great extent. A total number of litigation cases decreased from 249 in 2011/12 to 89 in 2012/13. The total amount of litigation costs (liability) as at the 2012/13 financial year was R10 683 420.74. This amount included the amount for the costs incurred in respect of the matters which were dealt with in the previous financial years; however, the bills for the costs were only submitted during the current financial year.

Organisational Capacity

One of the Agency’s priorities for the year under review was to improve its organisational capacity, particularly at service delivery. To this end, a total of 931 positions were filled to augment the capacity, especially in the core business. This increased the staff complement to 8 496 permanent staff members and 530 contract staff.

To ensure the welfare of its workforce, the Agency continued to implement various programmes as part of its Employee Wellness Programme. Fifty nine (59) Wellness Champions were trained to ensure effective implementation of the programme. Psychological support was provided to employees, including those affected and infected by human immunodeficiency virus (HIV) and acquired immune deficiency syndrome (AIDS).

3. Budget and Expenditure for 2012/13 (Financials)

3.1 Overview of the budget

It was reported that the spending and the strategic focus of the Agency remained on the administration and payment of social grants. A significant achievement was achieved in turning around the Agency’s financial position whereby an accumulated overdraft of R839.4 million was dealt with. Cost containment measures played a key part of the intervention. The majority of the budget (34%) was spent on the compensation of employees, followed by the cash handling fees (32%), while the balance was spent on operational expenses such as office accommodation, cleaning, security, travel and communication. The Head Office accounted for the 50% of the budget due to the cash handling fees budget while the other 50% was spent at the nine regional offices. The KwaZulu-Natal and the Eastern Cape regions accounted for the majority of the regional share of the budget respectively. The 2012/13 budget was adjusted (reduced) from R6, 200,270 billion to R6, 119,770 billion by an amount of R80, 500 million during the adjustment budget process.

3.1.1 Commentary on spending trends

The following were reported as spending trends of the Agency:

· Compensation of employees: Some of the vacant funded posts remained unfilled at the regions and head office while some were in the process of being filled at financial year-end, contributing to an under spending on this item.

· Goods and Services: The expenditure trend on this item was influenced by the following key items:

• Communication: Expenditure reached 101% of the budget allocation due to the communication drive related to the mass beneficiary re-registration project. The project had a significant impact on the budget.
• Computer Services: Spending reached 76%. The under spending was due to the delayed biometrics system project and the less than anticipated expenditure on Grants Business Automation project.

Cash Handling Fees: The majority of the overall saving was realised on this item as a result of the reduced tariff on cash handling fees and reduced transactions in the disbursement of grant monies. This was as a result of the implementation of the new payment contract. However an amount of R140 million was shifted to CAPEX for the purchase of motor vehicles.

Lease payments: Expenditure reached 108%, however there were regions that had realised a saving due to the buildings that were budgeted for and were not occupied by the financial year-end due to the lengthy Department of Public Works processes.

Property payments: Spending reached 100% and was in line with the projected spending for the period.

CAPEX – Funds : R140 million was shifted to this item for the purpose of purchasing motor vehicles. However due to issues with the contract the purchase delayed until the financial year-end, leading to under spending on this item.

4. Findings of the Auditor General South Africa (AGSA)

The AGSA found that SASSA’s financial statements presented fairly the financial position of the Agency as at 31 March 2013. SASSA’s financial performance and cash flows for the year were in accordance with the South African Standards of GRAP and the requirements of the Public Finance Management Act (PFMA) and the South African Social Security Agency Act, 2004.

Emphasis of matter: Pending Litigation Case

The Agency was involved in a pending litigation with the ALLPAY Consolidated Investment Holdings (Pty) regarding the awarding of the Social Grant Payment Tender to Cash Paymaster Services. Subsequent to the Supreme Court of Appeal delivering judgment in the ALLPAY/SASSA and CPS matter (applicant for the review and setting aside of the award pursuant to the payment tender) in favour of SASSA, ALLPAY had filed an application for leave to appeal at the Constitutional Court .

4.1 Report on other Legal and Regulatory Requirements

The AGSA made the following findings relevant to the performance against the predetermined objectives, compliance with laws and regulations and internal control:

Predetermined objectives: Reliability of information: There were no material findings on the report on predetermined objectives concerning the usefulness and reliability of the information.

Achievement of planned targets: The Agency had a total of 80 planned targets. Out of that number 25 targets (31%) were not achieved during the year under review. This was mainly due to the fact that indicators and targets were not suitably developed during the strategic planning process and the Agency did not consider relevant systems and evidential requirements during the annual strategic planning process.

4.2 Compliance with laws and regulations

The AGSA did not identify any instances of material non compliance with specific matters in key applicable laws and regulations as set out in the General Notice issued in terms of the PAA .

4.2.1 Annual Financial Statements

The financial statements submitted for auditing were not supported by full and proper records as required by section 55(1) (a )( b) of the PFMA, for example, leases and commitments. The material misstatements of commitments and disclosure items identified by the auditors in the submitted financial statements were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.

4.2.2 Internal control: Significant deficiencies with regards to the following were found:

• Leadership: Lack of review and oversight regarding approved and communicated policies and procedures to enable and support understanding of internal control activities to ensure complete and accurate financial reporting of commitments, disclosure items and performance reporting.

• Financial and performance management : Proper record keeping and review processes were not implemented in a timely manner to ensure that there was complete, relevant and accurate financial reporting on commitments, disclosure items and performance reporting.

• Governance: Procedures to ensure compliance with Treasury Regulations 27.2.7(a) were not in place .

4.2.3 Investigations

It was reported that investigations with regard to non-compliance to the supply chain management policy and procedures were in progress, which could result in possible fraudulent actions and possible irregular expenditure.

5. Challenges

It was reported that the Agency encountered the following challenges when delivering its services:

· Payment Tender pending court case;

· Complaints regarding on-going deductions on the SASSA Card;

· In the implementation of fraud Management strategy, the Agency had to close-out some offices due to the number of officials that were implicated in fraudulent activities.

6. Committee’s Observations

The Committee expressed a concern over the high number and costs of litigation cases especially in the Eastern Cape. It advised the Agency to develop a strategy to reduce these cases.

It also expressed serious concerns over the fact that SASSA managed to achieve only 69% of its planned targets, meaning 31% targets were not achieved. It requested SASSA to provide it with a plan to improve achievement of its targets.

The Committee commended the work done by SASSA through the ICROP and its commitment to continue expanding its roll out to especially reach the 2 million children who were not in the social assistance system. It also welcomed the Agency’s future planning and for organising its business processes accordingly.

7. Recommendations

Having considered and deliberated on the annual report and performance of SASSA, the Committee made the following recommendations:

• The Agency should present to the Committee the plan it had submitted to the office of the Auditor General detailing how it would address the matters of emphasis raised by the AG office. The plan should include corrective measures that will be implemented in all the regions.

• The Minister of Social Development should ensure that SASSA has a balanced gender representation in regional manager level, as currently there are only three (3) females and six (6) males.

• The Agency should provide the Committee with a list of all SASSA offices and pay-points that had been upgraded.

• The Agency should present its risk plan to the Committee in the next financial year.

• The Minister should ensure that that the Agency develops a strategy that will address the issue of traffic fines incurred by its officials.

Report to be considered.