2019/20 DSI Audit Outcomes: AGSA briefing; DSI Annual Report, with Deputy Minister

Higher Education, Science and Innovation

03 November 2020
Chairperson: Mr M Mapulane (ANC)
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Meeting Summary

2019/20 Annual Reports

In this virtual meeting, the Office of the Auditor General (AGSA) briefed the Committee on the 2019/20 audit outcomes of the Department of Science and Innovation (DSI) and its portfolio of entities: National Research Foundation (NRF); Human Sciences Research Council (HSRC); Council for Scientific and Industrial Research (CSIR); South African National Space Agency (SANSA); Technology Innovation Agency (TIA) and the Academy of Science of South Africa (ASSAf).

The Committee heard that DSI and CSIR retained clean audit outcomes.  NRF and HSRC audit outcomes improved from unqualified audit opinions with findings on compliance with laws and regulations (material non-compliance on prevention of irregular expenditure) to unqualified with no findings (clean audits). TIA maintained its clean audit status. SANSA’s audit opinion regressed from a clean audit to an unqualified audit opinion with material findings on compliance with legislation because there were material misstatements identified in the financial statements submitted for audit purposes. ASSAf’s enabling legislation no longer require compliance with the PFMA as the new Science Adjustment Act deleted the section requiring that ASSAf need to comply with the PFMA.

Reporting on its 2019/20 Annual Report and audited financial statements, the DSI highlighted that it had received an unqualified audit opinion on both Finance and Predetermined Objectives for the 2019/20 Audit. The Department achieved a total of 40 out of 46 targets (87%) and 6 targets (13%) were not achieved.

Members were informed that there won’t be any financial impact to the Department as a result of underspending under compensation item. However, the delays in the filling of positions will have an impact on the existing personnel due to added responsibilities. The underspending in transfers and subsidies under the Social Impact Bond programme will be impacted over time if delays in the implementation of the programme are not resolved.

The budget of the Department was R8.1b and there was underspending of R119.8m (1.5%). R194 000 of was incurred in the 2019/20 financial year. Irregular expenditure of R194 000 has been incurred in 2019/20 financial year. This is as a result of non-compliance with the Public Service Regulations. No fruitless and wasteful expenditure was incurred in 2019/20.

The Committee commended the Department of the good audit outcome for the portfolio and agreed to issue a press releasing commending the Department on this.

Members asked about job losses, the CSIR prediction model in relation to the US election, a titanium printing facility, delays in filling posts and if persons with disabilities were given opportunities in the supply chain. Members were concerned about the decadal plan as it was an important instrument to implement the White Paper on Science and Innovation and wanted a timeline, in writing, for when the plan would be completed. Members noted the AGSA’s concerns with the IT systems as being inadequate and wanted details on the concerns and how it would be addressed. Members wanted written details on the circumstances around the Irregular Expenditure of R194 000 incurred through the appointment of Ministerial advisors before the Minister of Public Service and Administration had given the go-ahead.

Meeting report

Briefing by the Office of the Auditor-General (AGSA)
Mr Theunis Eloff, Senior Manager, AGSA, gave a briefing on the 2019/20 audit outcomes of the Department of Science and Innovation (DSI) and its portfolio of entities: National Research Foundation (NRF); Human Sciences Research Council (HSRC); Council for Scientific and Industrial Research (CSIR); South African National Space Agency (SANSA); Technology Innovation Agency (TIA) and the Academy of Science of South Africa (ASSAf).

He reported that DSI and CSIR retained clean audit outcomes.  NRF and HSRC audit outcomes improved from unqualified audit opinions with findings on compliance with laws and regulations (material non-compliance on prevention of irregular expenditure) to unqualified with no findings (clean audits).

On the status of internal controls all entities were reported as good except for the CSIR. Proper record keeping was a concern at the HSRC. On the status of assurance provided all provided assurance except the CSIR which only provided some assurance at senior management level.

He said that ASSAf, SANSA and TIA were not audited by the AG. TIA maintained its clean audit status. SANSA’s audit opinion regressed from a clean audit to an unqualified audit opinion with material findings on compliance with legislation because there were material misstatements identified in the financial statements submitted for audit purposes. ASSAf’s enabling legislation no longer require compliance with the PFMA as the new Science Adjustment Act deleted the section requiring that ASSAf need to comply with the PFMA.

The overall financial health in the portfolio is favourable. Even though the MTEF allocation for 2020-21 was revised downwards for the DSI and all the entities within the DSI portfolio, the entities remain financially viable.  The portfolio has assessed its financial viability and it is clear from the assessment that the going concern assumption remains relevant taking into account that the performance plans have been adjusted in line with the available reduced budgets.

In terms of fruitless and wasteful expenditure, DSI and CSIR did not incur any during the year under review.  HSRC incurred R79 000 fruitless and wasteful expenditure resulting from missed flights, interest charged on an invoice and staff members traffic fines. NRF incurred R19 000 which relates to traffic fines and incorrect information provided to a service provider, resulting in a duplication of work performed.

In respect of irregular expenditure, DSI incurred irregular expenditure of R194 000 as a result of non-compliance with Public Service Regulations. The HSRC incurred irregular expenditure to the value of R191 000 of which relates to non-compliance with Supply Chain Management legislation. CSIR incurred irregular expenditure to the value of R3.22 million of which R1, 37 million relates to the current year and the R1, 85 million has been identified in the current year but relates to prior year. All the irregular expenditure is a result of non-compliance with supply chain management regulations. The NRF did not incur any irregular expenditure during the year under review.

The AGSA advised the Accounting officers/authorities and senior management at the DSI and its entities to continue to implement effective and sustainable internal controls that support credible financial and performance reporting and ensure compliance with key legislation.

Further, it recommended that the portfolio committee monitors quarterly reporting to ensure consistent and credible reporting.

Discussion
Mr T Letsie (ANC) said the AG’s report painted a picture that the Department was doing well in being accountable to the AG and he proposed that the Committee issue a press release celebrating this fact.
 
The Chairperson said that it could be considered after the Department’s presentation to the Committee.

Mr B Nodada (DA) agreed with the Chairperson’s comment.

Briefing by the DSI on Annual Report and audited financial statements 2019/20
Mr Buti Manamela, Deputy Minister of Higher Education, Science and Technology, said he was excited by the AG’s report and it was a reflection of the Department’s work. He added that the science and technology skills deficit in the country continued to be a major challenge and the Department had supported over 11 000 students.

Dr Phil Mjwara: Director-General, DSI, said the Department received an unqualified audit opinion on both Finance and Predetermined Objectives for the 2019/20 Audit. The Department achieved a total of 40 out of 46 targets (87%) and 6 targets (13%) were not achieved.

He reported that the Department developed a new White Paper on STI (approved by Parliament in March 2019) in response to rapid global technological advancement and megatrends. This White Paper on STI will be implemented through a series of decadal plans that will be reviewed at least every five years. The first Science, Technology and Innovation Decadal Plan is being developed, and should be finalised by the end of the 2020/21 year. The framework for the Decadal Plan, a Foresighting exercise to identify STI priority areas have been completed.

The Department would be consulting other departments like the Departments of Agriculture, Mining, Health and Trade to align with the masterplans and the document should be ready by the end of January.

He spoke to the publications, research grants and provision of research equipment and infrastructure the Department had contributed and to the bursaries awarded through the NRF and DST programs which had funded 11 992 students. He spoke to some of the knowledge application products that were developed and to the Department’s involvement in the area of international cooperation. He provided performance information on the five Programs of the Department. Programmes 1 and 2 achieved 100% of their targets, while Programmes 3, 4 and 5 achieved 90%, 67%, and 83% of their targets respectively.

Ms Pretty Makukule, Chief Financial Officer, DSI, said that the Auditor-General’s Report indicated that the Department received a clean audit outcome for the third consecutive year with an unqualified audit opinion regarding its financial statements, without any findings. She said the Audit Committee Report expressed satisfaction with the manner in which the Department conducted its affairs and for maintaining an unqualified audit opinion, but expressed concern on the Information Technology environment and requested management to intervene.

There won’t be any financial impact to the department as a result of underspending under compensation item. However, the delays in the filling of positions will have an impact on the existing personnel due to added responsibilities.

The underspending in transfers and subsidies under the Social Impact Bond programme will be impacted over time if delays in the implementation of the programme are not resolved.

The projects that were not finalised in goods and services will be financed through shifting of funds in the subsequent financial year. The projects that were not finalised in capital assets will be financed through shifting of funds in the subsequent financial year

The budget of the Department was R8.1b and there was underspending of R119.8m (1.5%). R194 000 of was incurred in 2019/20 financial year. She said the opening balance on Irregular Expenditure was R35.1m from items in the previous financial years. R2.5m of this was condoned this financial year. Irregular expenditure of R194 000 has been incurred in 2019/20 financial year. This is as a result of non-compliance with the Public Service Regulations. No fruitless and wasteful expenditure was incurred in 2019/20.

Discussion
Ms J Mananiso (ANC) said the Deputy Minister’s comments had included no mention of people with disabilities and it was not being taken seriously by the Department. She added that opportunities should also be provided to these people in the supply chain. She asked if there were any job losses they could have envisaged.

Mr Letsie reiterated his earlier comments that the Committee issue a press release to praise the Department for the work it had done. The underspend on salaries suggested that all posts had not been filled. Could this be expedited? He asked that the Department to expedite the filling of all acting DDG posts so that the Department could be more stable. He said he would be monitoring the CSIR prediction model concerning the US elections.

Dr W Boshoff (FF+) said that a titanium printing facility, which had seemed a success story and which the Committee had visited in February, was suddenly liquidated in March. If this was so then it implied that something was amiss prior to that in the previous year. A forensic investigation by George Fivaz & Associates was instituted and the Committee was not briefed on the matter. Could more information be given?

The Chairperson said he was concerned about the decadal plan as it was an important instrument to implement the White Paper on Science and Innovation and he wanted a timeline, in writing, for when the plan would be completed. He noted the AG’s concerns that while it was satisfied with the internal controls, there was concern with the IT systems as being inadequate. He wanted details on the concerns and how it would be addressed. He said that IE of R194 000 was incurred through the appointment of Ministerial advisors before the Minister of Public Service and Administration had given the go-ahead. He wanted written details on the circumstances around this and could the Department not wait for the approval?       

On vacant posts, Dr Mjwara said there were delays in filling posts because a number of evaluations needed to be done and these processes took longer than anticipated. The first round of positions had been signed off by the Minister and the Department was on track to complete to fill the posts within three months.

He said the one position ‘Acting DDG’ post needed just the concurrence of the Cabinet and would be filled soon. There was one other such position which had to be re-advertised because a suitable candidate had not been found and the recruitment process had to be repeated.

He said they would also follow the US elections closely to monitor the CSIR prediction modelling analysis.

He said the 3D printing was the intellectual property of the CSIR that had discovered problems regarding how its commercial partner traded. They wanted to find out what these challenges were. The IP still belonged to the CSIR. If the trading partner was found to be unsuitable then it would look for another partner.

On the decadal plan, he said the Department already had a draft letter but it was without a roadmap. The term draft -1 was used to indicate when all write ups had been completed. Then there were internal processes to get recommendations accepted by the Minister. This was draft 0, with which other departments were approached, as mentioned before. The engagements with departments should be completed in November and a formal document would then be completed by end December to be put before Cabinet and the Committee.

On the IT systems, he said it was about getting approval for the service provider by Treasury to help the Department with IT challenges. The process was delayed, but approval was granted to use a service provider. This would allow for a full study on how the Department could have value added services and to provide for the Department to connect seamlessly to an off- site server.

He said he would provide the details regarding the Irregular Expenditure of R194 000 on ministerial advisors who had been transferred from another government department. He said that the reconfiguration of government had meant a processing backlog at the Department of Public Service and Administration (DPSA), while the Minister had needed their services for him to be able to do his work. The Department had gone ahead as it was not the appointment of new advisors, they had been transferred from another government department.

He thanked the Committee for the appreciation extended to the Department for the work it did.

Ms Nombuyiselo Mokoena, DDG: Corporate Services, DSI, said there were no job losses. There were posts vacated by people leaving, however posts could not be filled because funding for the posts was a challenge. Vacant posts remained less than the 5% benchmark.
 
On the IT system, she said there was one plan, for IT continuity, which needed to be reviewed and overseen by an external service provider but none of the service providers wanted to accept the liability clause in the contract and hence permission needed to be obtained from the Minister of Finance and this took a long time to get.

Ms Makukule said the Department had an approved procurement strategy, where it had set aside its own targets even when those targets were not yet regulations. The Department had set its own target procurement by women-owned companies at 40% in alignment with the President’s pronouncement in August and it had set aside targets for companies owned by people with disabilities and for cooperatives.

The meeting was adjourned.

 

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