ATC130415: Report of the Portfolio Committee on Social Development on the National Development Agency 2011/12 Annual Report, dated 26 February 2013

REPORT OF THE PORTFOLIO COMMITTEE ON SOCIAL DEVELOPMENT ON THE NATIONAL DEVELOPMENT AGENCY 2011/12 ANNUAL REPORT, DATED 26 FEBRUARY 2013

The Portfolio Committee on Social Development having considered and deliberated on the 2011/12 Annual Report of the National Development Agency (hereafter referred to as NDA or agency) on 06 November 2012, wishes to report as follows:

1. Introduction

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 Government’s action and that is driven by the ideal of realising a better quality of life for all people of South Africa.

The Committee, as part of exercising its oversight function received a briefing from the NDA on its 2011/12 Annual Report. This report presents some of the key achievements and challenges encountered by the entity in meeting its set strategic objectives. It will also highlight the observations made by the Committee.

2. Presentation by the NDA

2.1 Strategic Goals of the NDA

The NDA is a Schedule 3 (A) Public Entity established in terms of Section 2 of the National Development Agency Act [No.108 of 1998]. The NDA’s primary mandate is to contribute towards the eradication of poverty and its causes by granting funds to civil society organizations( CSOs ) for the purposes of carrying out projects or programmes aimed at meeting development of poor communities, and strengthening the institutional capacity of other civil society organizations involved in direct service provision to poor communities.

The NDA strategic goal is to leverage strategic partnerships to eradicate poverty to enable poor communities to achieve sustainable livelihoods. For 2011/12, the NDA operated under six strategic goals, namely:

2.2 Strategic objective 1: To build and enhance the capacity of Civil Society Organisations ( CSOs ) to enable them to carry out development work effectively

The NDA achieved the following to achieve this objective:

· Capacity needs of 146 funded projects were assessed.

· Capacity programmes were designed and implemented as per the recommendations of capacity assessment reports in line with the target.

· 237 ECD sites were supported through eight ECD networks approved for funding against an annual target of 100.

· 400 volunteers were capacitated to support the identified ECD projects against an annual target of 200.

· 199 CSOs were capacitated against an annual target of 40

Deviation

· 150 members of CSOs supporting vulnerable groups were not trained as planned due to late approval of projects.

2.3 Strategic objective 2: To grant funds, facilitate and manage poverty eradication programmes

The NDA achieved the following to achieve this objective:

· 28 food security projects in ECD sites were funded to an amount of R9 785 816 against a target of 20.

· 65 volunteer opportunities were created in the rural development sector against a target of 60.

· 47 volunteer opportunities were created in CSOs supporting vulnerable groups against a target of 10.

· 2 079 employment opportunities were created against a target of 800.

· 2 research think-tank CSOs were supported. These were the Cooperative for Research and Education (CORE) and the Centre for Early Childhood Development, meeting the annual target.

· 25 partnership linkages were created with government departments, private sector CSOs and the local government against a target of 10.

Deviations

· 4 CSOs supporting vulnerable groups were funded against a target of 5. The management approved larger grants for CSOs supporting vulnerable groups resulting in one CSO not being funded.

· 3 CSO networks were supported against a target of 5. networks planned for support did not complete the current funding activities.

· 37 CSOs in rural development were funded to an amount of R50 965 630 against a target of 40 due to a larger grant allocated to rural development projects.

2.4 Strategic objective 3: To influence policies, practices and strategies through comprehensive research and knowledge management

The NDA achieved the following to achieve this objective:

· A research agenda was developed and approved by EXCO and presented to Parliament as planned.

· Planned policy paper was presented on the role of NGOs and CSOs in policy formulation.

· Planned study reports on ECD and CSO fundraising challenges were commissioned and submitted.

· Partnerships and linkages were built with the Journal Storage ( JStor ), the Development Bank of South Africa (DBSA) and the South African Local Government Association (SALGA).

· CSOs in the Northern Cape were supported through the sponsorship of their annual general meetings.

Deviations

• The agenda on lobbying and advocacy was not developed

2.5 Strategic objective 4: To mobilise and leverage resources

The resource strategy was approved and implemented.

Deviations

· R11,7 million was raised in cash against an annual target of R200 million

· 8 partnership agreements were signed and implemented against a target of 10 due to delays in the finalisation of agreements with the University of Johannesburg and the National Economic Development and Labour Council (Nedlac)

2.6 Strategic objective 5: to position the NDA as a premier development agency

The NDA achieved the following to achieve this objective:

• A stakeholder management / communications strategy was approved and implemented as planned.

• 14 engagements between CSOs and government on poverty eradication and development were facilitated against a target of 4.

2.7 Strategic objective 6: to promote and maintain organisational excellence and sustainability

The NDA achieved the following to achieve this objective:

· A human resources strategy was approved and implemented

· A performance management system (PMS) was implemented as follows:

o Executive scorecard was replaced by the directorate scorecards, and

o Critical leadership competencies were introduced and implemented.

· The following key internal controls were managed and successfully implemented:

o Monthly and quarterly management accounts for Exco , Board sub-committees and the Board

o Weekly and monthly bank and general ledger were reconciled

• Finance and procurement policies were reviewed.
• Half-yearly and annual fixed assets counts were performed.
• Effective risk management was implemented.
• Key audit findings from prior year audits were addressed.
• Audit findings were tracked and addressed through quarterly progress report at quarterly review meetings.

Deviations

• A high-level organisational structure was aligned with the strategic plan developed and approved by the Board but was not fully implemented.
• 10% half-yearly performance management reviews were not conducted for staff who joined the NDA in the middle of the performance cycle, including those on maternity and sick leave.
• 35% year-end appraisal reviews were not conducted for EXCO and employees who joined the NDA in the middle of the performance cycle, including those on maternity and sick leave.

· The following HR policies and procedures were developed but not approved by Board:

o Code of conduct

o Long service and excellence awards

o Integrated Employee wellness

o Conflict of interest

· Enterprise-wide risk assessments were conducted and the 2011/12 risk registers were updated but not approved during the year under review.

· A draft audit report were issued on portfolio analysis of Development Management Directorate but not finalised.

· Project write-backs and reviews of projects closeout audits were not finalised due to resource constraints.

· Review of the integration between communication, research and development management were not achieved.

· A review of the NDA funding process was not achieved.

· The Board performance assessments were not achieved.

3. Financial overview

The agency achieved the following with regard to its financial performance:

• The transfer from the Department of Social Development was restored to the previous levels after a significant reduction in 2011 (R83. 4 million, R144. 7 million in 2010) to R163. 4 million in the 2012 financial year.

• The agency raised a total of R11.7 million in 2011/12 financial year as part of the resource mobilisation strategy to expand the revenue streams for the NDA.

• Funds worth R77.5 million were committed to projects in the 2011/12 financial year compared to the R49.5 million in 2010/2011 representing a 57% increase in the direct project funding year on year.

• A total cash of R83, 1 million was disbursed to funded projects including those approved in the previous years, resulting in the reduction in projects liability of 13% from R95.5 million in 2011 to R83.1 million in 2012.

Challenges

The NDA reported it under achieved in the following areas:

• The desired mandate versus administration expenses ratio of 60: 40 was not achieved in 2010/2011. A ratio of 50: 50 was achieved in the year under review. This split was as a result of the escalating fixed costs that will be remedied in the following financial years through an increased resource mobilisation.

• Interest income was down by 45% compared to the previous year. The reduction implied that a significant source of funding to the organisation was no longer available. The decrease in the interest income could be partly attributed to the delays in the transfers of tranches by the Department of Social Development and the decrease in the prime rate.

• The agency’s funding remained a concern due to the historical below inflationary increase in the funding from the National Treasury. This impacted negatively on the agency’s ability to perform at the expected level of its legislative mandate.

4. Audit turnaround strategy

Process for implementing and verifying audit turnaround strategy

The agency reported that an audit turnaround strategy had been developed and approved by the Audit Committee and the Board to address all identified weaknesses from the regulatory audit. The corrective action was being implemented by the management, assessed by the internal audit and monitored by the audit committee on a quarterly basis.

The progress implementation report on the turnaround strategy was going to be submitted to the Auditor-General and the Department of Social Development as part of the quarterly audit dashboard. The management will implement corrective actions on non implementation of the turnaround strategy.

5. Committee Observations

The Committee expressed a concern over the non achievement of the target to raise R200 million. The committee was interested to know on what basis this target had been based on.

The Committee further raised concerns over the non alignment of the agency’s work with the National Treasury Regulations. This was viewed as an area that needs urgent attention.

It agreed that the agency should strengthen and improve its core business and put more focus on achieving its target of reducing administrative costs. A large amount of the budget was still allocated to salaries.

The Committee observed that a number of Human Resource policies were not approved by the Board. It emphasized that the lack of implementation of such polices was going to impact on the running of the agency.

6. Recommendations

The Committee made the following recommendations:

• The Minister of Social Development should ensure that the agency’s work is aligned with the National Treasury Regulations.

• In terms of the agency’s fundraising strategy, the Committee suggested that it should develop annual targets that are realistic and achievable.

· With regard to the delays in the approval of policies by the Board, the Committee recommended that the Minister should ensure that these policies are approved before the next reporting period (2013/2014).

Report to be considered