ATC150623 : Report of the Portfolio Committee on Higher Education and Training on the Annual Report 2013/14 of the safety and Security Sector Education and Training Authority (Sasseta) and Public Service Education and Training Authority (Pseta),dated 17 June 2015

Higher Education, Science and Innovation

REPORT OF THE PORTFOLIO COMMITTEE ON HIGHER EDUCATION AND TRAINING ON THE ANNUAL REPORT 2013/14 OF THESAFETY AND SECURITY SECTOR EDUCATION AND TRAINING AUTHORITY (SASSETA) AND PUBLIC SERVICE EDUCATION AND TRAINING AUTHORITY (PSETA),DATED 17 JUNE 2015

The Portfolio Committee on Higher Education on Training, having met with the SASSETA and PSETA, reports as follows:

1. Introduction

The Portfolio Committee convened a meeting with theSASSETA and PSETA on 19 November 2014 to consider their Annual Report 2013/14. This report accounts for work done by the Portfolio Committee during assessment of the annual performance of the SASSETA and PSETA. The report further makes financial and non-financial recommendations for consideration by the Minister of Higher Education and Training.

2. Background

The SASSETA and PSETA were established in terms of the Skills Development Act No. 97 of 1998 (as amended) with the mandate to promote skills development for the safety and security and public sector respectively. The Minister of Higher Education and Training relicensed the SETAs for the five year period from1 April 2011 to 31 March 2016, to operate within the skills development framework articulated in the National Skills Development Strategy (NSDS) III framework and other policies and strategies. The SETAs are public entitiesthat fall under Schedule 3A of the Public Finance Management Act, No 1 of 1999 and they are funded through the 1 percentskills levy paid by employers to the South African Revenue Service (SARS). However, the PSETA was not funded through the 1 percent skills levy since the Skills Development Levies Act exempts any public service employer in the national or provincial sphere of government; or any national or provincial public entity, if 80 percent or more of its expenditure is defrayed directly or indirectly from funds voted by Parliament from paying the levy.

The SETAs are part of the post-school education and training system, whose mandate is to fund the production of a skilled and capable workforce for an inclusivegrowth path. The White Paper for Post-School Education and Training articulates a vision for an integrated system of post-school education and training, with all institutions playing their role as parts of a coherent but differentiated system. SETAs have a pivotal role to play in addressing structural unemployment, improving productivity and ultimately facilitating economic growth and poverty reduction. Given this important role of delivering services to the people, it is of critical importance for SETAs to be well capacitated and efficient to deliver on their mandates.

The SASSETA operates within the safety and security sector and its key role is improving the skills and capacity of the sector to carry out its mandate. During the year under review, SASSETA was able to increase its national footprint through establishment of regional offices in various provinces and, the bursary scheme in partnership with the National Student Financial Aid Scheme (NSFAS) supported students in six universities. However, the entity experienced numerous challenges in the period under review. The posts of the Chief Financial Officer (CFO) and Senior Manager for Corporate Services were vacant. The post of the Chief Executive Officer (CEO) was filled and became vacant in the third quarter. Officials in senior management posts were appointed on acting capacity. The entity experienced challenges in the supply chain management unit which led to suspension of certain officials.

The PSETA is responsible for the delivery and facilitation of skills development in the public sector. Unlike other SETAs which receive the 1 percent skills levy paid by employers to the South African Revenue Service (SARS), PSETA relies heavily on the National Skills Fund (NSF) funds and ring-fenced funding from National Treasury to deliver its mandate. However, the budgetary resources allocated to PSETA had not grown beyond administrative obligations and, the entity did not have sufficient funds to fund its skills projects. During the year under review, the entity experienced capacity related challenges in the supply chain management unit. The entity received a qualified audit opinion on deferred audit income liability which is a historical matter arising from expenditure by the entity during the 2005 – 2009 period.

3. Relevant key policy focus areas

During the year under review, the work of the two SETAs was informed by the NSDS III which is the overarching strategic guide for skills development and provides direction to sector skills planning and implementation in the SETAs. It provides a framework for the skills development levy resource utilisation of these institutions as well as the National Skills Fund and sets out linkages with, and responsibilities of, other education and training stakeholders. The NSDS III has eight goals for implementation by the SETAs which are:

• Establishing a credible institutional mechanism for skills planning;
• Increasing access to occupationally-directed programmes;
• Promoting the growth of a public  Technical and Vocational Education and Training (TVET) college system that is responsive to sector, local, regional and national skills needs and priorities;
• Addressing the low-level of youth and adult language and numeracy skills to enable additional training;
• Encouraging better use of workplace-based skills development;
• Encouraging and supporting cooperatives, small enterprises, worker-initiated, non-governmental organisations (NGOs) and community training initiatives;
• Increasing public sector capacity for improved service delivery and supporting the building of a developmental state; and
• Building career and vocational guidance.

Attached to these goals are outcomes and outputs that are the basis for monitoring and evaluation of the NSDS III implementation and impact. SETAs are expected to play a prominent role in contributing towards these goals, especially through its discretionary and mandatory grants. Through these goals, the SETAs contribute to the achievement of the Ministerial Delivery Outcome 5: A skilled and capable workforce to support an inclusive growth path and the Human Resource Development Strategy of South Africa (HRDSSA), the goals of the National Development Plan (NDP), the New Growth Path (NGP) and the Industrial Policy Action Plan (IPAP).

4. List of participants

4.1 Portfolio Committee on Higher Education and Training

Mr D Kekana (ANC) Whip, Ms J Kilian (ANC), Ms S Mchunu (ANC), Ms M Nkadimeng (ANC), Ms Y Phosa (ANC) Chairperson, Mr E Siwela (ANC), Prof B Bozzoli (DA), Mr Y Cassim (DA), Mr S Mbatha (EFF).

4.2 Safety and Security SETA

Mr A Witbooi: Chairperson, Mr M Masekela: Board Member, Mr N Maziya: Board Member, Mr B Delport: Board Member, Mr M Sekhonyane: Senior Manager, Ms M Sechoaro: Senior Manager, Mr T Mangena: Senior Manager, Mr M Ntanga: Acting Board Secretary, Ms M Moroka: Chief Executive Officer (CEO), Ms P Tembe: Chief Operations Officer (COO) and Mr P Tsotetsi: Chief Financial Officer (CFO).

4.3 Public Service SETA

Mr K Mashigo: Chairperson, Ms S Huluman: Chief Executive Officer, Ms M Ntsowe: Chief Financial Officer and Ms L Ximiya: Chief Operations Officer.

4.4 Ministry

Mr M Manana, MP: Deputy Minister.

4.5 Department of Higher Education and Training

Mr T Tredoux: CFO, Mr M Lumka: Chief Director SETA Coordination, Ms P Sekgobela: Parliamentary Liaison Officer Office (PLO) of the Director-General, Ms N Rasmeni: PLO Office of the Minister and Mr S Mlangeni: PLO Office of the Deputy Minister.

 

5. Summary of the presentations

5.1 Safety and Security SETA

Mr M Sekhonyane: Senior Manager noted that the period under review had mixed results for SASSETA in its overall performance. The year started with two prior qualifications specifically on; discretionary grants, payables, commitments and administration expenditure. Concerning supply chain management; orders were procured without sourcing the required number of quotes, procurement was awarded to suppliers who did not possess valid tax clearance certificates and tenders were not advertised for a period of 21 days as required by law. In relation to the organisational environment,several key posts at management level were vacant, there were number of resignations and dismissals and a number of investigations were undertaken resulting in disciplinary processes. Despite the challenges of the entity in the period under review, a number of measures were undertaken to stabilise the environment which included; filling of vacant posts, development of a turn-around strategy and an action plan to address the audit findings raised by the AG. The entity received an unqualified audit opinion with matters of emphasis for the period under review.

 

With respect to the annual financial statements for the year ended 31 March 2014, the CFO, Mr P Tsotetsi noted that the total revenue was R299.5 million, total expenses amounted to R248 million, discretionary reserves R255 million, total assets R287 million and total liabilities R27 million. In the current financial year, SASSETA plans to open offices in TVET colleges across the country, improve Workplace Integrated Learning (WIL), and commit to artisan development and conducting impact assessments to measure impact.

 

5.2 Public Service SETA

The Chairperson, Ms K Mashigo noted that PSETA welcomed the year under review with great anticipation that the circular issued by the Department of Public Service and Administration (DPSA) on utilisation of the 1 percent training budgets by government departments to facilitate the achievement of its mandate will be implemented. However, owing to administrative and legal challenges, a moratorium was placed by National Treasury urging government departments to withhold payment of levies to PSETA.

 

 

With regard to the performance against predetermined objectives for the period under review, the CEO, Ms S Huluman noted that PSETA achieved 65 percent of its targets and 35 percent of targets were not achieved. The successes for the period under review include; PSETA / DPSA and NSF Rural Youth Skills Development partnership which yielded positive results, participation by Technical and Vocational Education and Training (TVET) colleges  to public service workplaces by lecturers, Education, Training and Development Practices (ETDP) SETA partnership that enabled PSETA to have a presence in 50 TVET colleges, doubled number of learner certificates (2220) issued for Public Administration and in-house internal audit function was fully established.

 

With regard to the challenges experienced in the period under review, the Annual Performance Plan (APP) was reviewed mid-term due to non-payment of levies by the employers, capacity challenges within the finance division, lack of uniform reporting templates in the sector and slow pace of finalisation of the Memorandum of Understanding (MoU).

 

In relation to financial performance for the period under review, PSETA received a qualified audit opinion based on deferred income liability and, failure to present financial evidence supporting the utilisation of R4.6 million (historical from 2005/06 NSF project) from the NSF grant. The matters were submitted to the Special Investigation Unit (SIU) for investigation and 80 percent of supporting documentation was supplied in June 2014. In responding to the AG’s finding, PSETA procured the services of Government Technical Advisory Centre (GTEC) which assists the entity to refine its performance indicators and targets to be well defined and measurable.

 

6. Observations

The following formed part of the key observations:

6.1 Safety and Security SETA

• The Portfolio Committee was seriously concerned with the under-achievement of targets especially on key delivery programmes of the SETA in the period under review.
• It was noted with concern that the Annual Report 2013/14 of the SETA was not articulate on the overall performance for the period under review. An example was given of unreported cases, learnership programmes which did not have sufficient information on the cost per learner, number of learners completed and those who were placed in the workplace.
• It emerged that a Board member of the SETA was appointed as a Chief Operations Officer (COO) in the period under review. The Portfolio Committee was seriously concerned with conflict of interest and possible transgression of Public Finance Management Act by the SETA. The SETA cited that there was no policy in place which prohibited members of the Accounting Authority (AA) from applying for advertised posts within the SETA and, the Board member resigned from the Board after she was shortlisted for the post. Furthermore, it was noted with concern that a lower ranked employee related to the Chairperson of the SETA was promoted to the position of Head of Department (HOD) within the SETA since he resumed office.
• The Portfolio Committee was seriously concerned with the high staff turn-over especially at senior management level. An example was given of two senior managers who resigned and two CEOs that were suspended owing to alleged poor performance. However, it emerged that the former CEOs won their legal cases at the Commission for Conciliation Mediation and Arbitration (CCMA) and SASSETA was liable for their legal and other related costs and reinstatement.
• It was noted with concern that TVET colleges could not offer learning programmes related to the safety and security sector although the SETA partnered with some of these institutions. The SETA noted that inadequate capacity of TVET colleges, uniqueness and high costs related to the safety and security related programmes was a majorconcern for the colleges.
• It was noted with concern that the artisan training and development target could not be achieved owing to a legal dispute between the service provider and Manufacturing Engineering and Other Related Services SETA (MERSETA).
• The Portfolio Committee was seriously concerned with the internal control deficiencies such as non-compliance to supply chain management policies and, the irregular expenditure (R2.1 million) incurred by the SETA in the period under review.
• It emerged that there was an investigation into the alleged payment of funds to non-existing projects and some employees were suspended, and others would undergo disciplinary hearing process.It was noted that the total amount under investigation is R3 million.
• The Portfolio Committee appealed to the SETA to eradicate conflict of interest.
• The Portfolio Committee noted the commitment by the SETA for staff not to receive performance bonuses when it does not meet its targets.
• The Chairperson of SASSETA informed the Portfolio Committee that he did not have a dedicated office at SASSETA’s Head Office.

 

6.2 Public Service SETA

• It was noted with concern that the majority of the budget of PSETA was spent on administration and compensation of employees as compared to the key learning programmes that are meant for skills development and eradication of unemployment and poverty among the youth.
• The Portfolio Committee was seriously concerned with non-compliance to supply chain management policies by certain employees of the SETA as indicated by the AG.
• The Portfolio Committee was seriously concerned with the overall performance, relevance and impact of the PSETA particularly in the public sector.
• The poor attendance of Board meetings by certain members of the Accounting Authority was noted as serious concern that the Minister needs to address going forward.
• The Portfolio Committee acknowledged that the PSETA unlike other SETAs did not get the 1 percent levy income owing to a clause in Section 30 subsection (b) of the Skills Development Act No 97 of 1998, which states that “employers may contribute the 1 percent levy”. As a result of this clause, government departments do not contribute the 1 skills percent levy and the budget of the PSETA is depended on the NSF and Treasury funds which are very limited.
• It was noted with concern that senior managers were paid performance bonuses while the PSETA achieved only 65 percent of its overall targets.
• The Portfolio Committee was concerned that only 79 learners were awarded bursaries in the period under review and only 28 were placed in government departments.

7. Conclusion

The Portfolio Committee was seriously concerned with the under-achievement of targets by both SETAs in the period under review. The continual non-compliance to supply chain management policies was highlighted as a major concern which affect the SETAs ability to exercise their mandates effectively. The Department was requested to closely monitor the governance and administration challenges in the SETAs so that these institutions can improve their performance and have a positive impact on society as mandated by the White Paper on Post-School Education and Training and the NSDS III.

Concerning SASSETA specifically, there was a possible conflict of interest in the SETA as demonstrated by the appointment of a Board member to the COO position and the promotion of an employee related to the Chairperson of the Board. Despite the improvement from a qualified audit opinion in 2012/13 to unqualified audit in 2013/14, the SETA was still experiencing serious challenges of internal control deficiencies. The allegation of funds paid to non-existing projects indicates serious loopholes in the internal controls of the SETA.

With regard to PSETA, the Portfolio Committee was concerned that more than half of the budget of the SETA was spent on administration and compensation of employees. The PSETA was unable todeliver its mandate effectively owing to inadequate budget since it did not receive the 1 percent levy income paid by employers to SARS.

The Portfolio Committee welcomed the commitment from the Department to look into the recommendations made by the Inter-Ministerial Task Team on the financial and operational viability of the PSETA, which will include a recommendation to amend the Skills Development Act so as to compel government departments to pay the 1 percent levy. The Portfolio Committee also welcomed the envisaged briefing by the Department onrelicensing of SETAs and development of a new SETA landscape for 2016 onwards.

8. Recommendations

The Portfolio Committee on Higher Education and Training recommends to the Minister to consider the following:

• The Department should investigate the possible transgression of fiduciary duties and conflict of interest at SASSETA;
• The Department should develop measures to ensure that employees of SETAs do not get performance bonuses when the SETAs have not performed adequately;
• The Department’s SETA Coordination Unit should enhance its monitoring and evaluation function particularly on SETA’s governance and administration and,  report back to the Portfolio Committee on the role of SETAs and their impact on sector wide skills development;
• The Department should ensure that all targets of SETAs are linked to their well-researched Sector Skills Plans (SSPs) and Service Level Agreements (SLAs) signed with the Director-General;
• For the PSETA, given its current funding and operational challenges  and little impact the SETA is making in the skills development environment,the Minister should consider the provisions of the Skills Development Act to either dissolve the SETA in terms of section 9A (5) or amalgamate the SETA, or amendment of the Skills Development Levies Act 9 of 1999to get the public sector (government departments and entities, Parliament and provincial legislatures) to pay the 1 percent skills levy to enable the SETA to increase its capacity to make a significant contribution in the skills sector; and
• The Department should review the compilation of SETA’s Annual Reports so that they provide more relevant information and articulate on the overall performance in terms of the provisions of the PFMA.

Report to be considered.