Film & Publication Board Annual Report and Financial Statements

Meeting report

HOME AFFAIRS PORTFOLIO COMMITTEE
24 March 2006
FILM & PUBLICATIONS BOARD ANNUAL REPORTS AND FINANCIAL STATEMENTS

Chairperson: Mr H Chauke (ANC)

Documents handed out:
Film and Publications Board Presentation to the Committee
Film and Publications Board Annual Report 2003/2004
Film and Publications Board Annual Report 2004/2005
[please email [email protected] for the documents]

SUMMARY
The Film and Publications Board presented their Annual Reports for 2003/04 and 2004/05. The 2003/04 report had been qualified by the Auditor-General due to non-compliance with accepted financial practices, problems with regard to a lease agreement and non-compliance with the Public Finance Management Act and Treasury Regulations. The Committee questioned what the Board had done to deal with these problems, and what had happened to the responsible persons. The Board indicated that two senior executives had been suspended and that a forensic audit had been launched. The Committee decided to note the 2003/04 Annual Report with concern.

The Board reported improvements that had been made for the 2004/05 reporting period. The Committee commended the Board on these improvements and noted the 2004/05 Annual Report.

MINUTES
The Chairperson noted that the Film and Publications Board (FPB) 2003/04 Annual Report had not been presented to the Committee as yet because of problems within the FPB, and confusion between the Board and the Committee. He introduced the FPB’s Ms S Bopape-Dlomo (Chief Executive Officer) and Mr Z Ngququ (Chief Financial Officer). Mr Chauke said that before the FPB presentation began it was important to note that the Committee was still waiting for the Department of Home Affairs Annual Report 2005/06, and had been informed that it would be available on that day (24 March). There was thus a need to schedule a meeting with the Department to present the report to the Committee.

FPB presentation on 2003/04 Annual Report
Ms Bopape-Dlomo began her presentation by stating that the 2003/2004 Annual Report was qualified by the Auditor-General for a number of reasons. One of these was that moving the FPB office from Cape Town to Johannesburg had been budgeted at R400 000, but the FPB had spent over R1 million on the move.

Ms Bopape-Dlomo noted, however, that some achievements had occurred in this financial year. There was an increase in submissions to the Board due to the move to Johannesburg, and because of this revenue went up slightly. In addition, the Deputy Minister’s Advisory Panel and new examiners were appointed. Performance Development was introduced, although Ms Bopape-Dlomo noted this did not work as well as it should have. The Board also had some success with Media Education, even though at the time no Public Relations Officer had been employed.

Ms Bopape-Dlomo said that the challenges facing the Board in 2003/04 had been that no permanent CEO or CFO had been employed, and that at one point the same individual was acting as CEO and CFO. The Board also had an unclear strategy, and problems with financial management and management in general. In addition, legislation against child pornography had not at that point been introduced in South Africa.

Mr Ngququ commented on the Auditor-General’s audit qualifications. He said that the Auditor-General highlighted issues with regard to non-compliance with accepted financial practice. In addition, issues around the FPB lease agreement were highlighted, as the details had not been submitted and so the Auditor-General could not be satisfied that the rent was valid and accurate. The Auditor-General also commented on non-compliance with the Public Finance Management Act (PFMA) and Treasury Regulations, noting a lack of appropriate procurement policy and irregular expenditure in the move to Johannesburg.

Mr Ngququ said that the assets of the FPB had increased due to the move to Johannesburg as revenue had increased. The decrease in surpluses from 2002 to 2004 was due to the cost of the move. He noted in terms of cash flow management, however, that the cash position of the Board had always been healthy, and that the Auditor-General’s problems with the report were due mainly to legalities.

Discussion

Mr F Beukman (ANC) queried increased spending on professional fees.

Mr Ngququ replied that professional fees increased from R99 000 to over R300 000 due to programs undertaken after the move to Johannesburg, such as the introduction of the Performance Development Management System, and the need to call in Information Technology (IT) consultants to ensure no data was lost in the move.

The Chairperson commented that the Committee would like a breakdown of how this money was spent. The Board representatives may not have the figures with them at present, but should submit them when they presented to the Committee again in September 2006. Mr Ngququ agreed to this.

The Chairperson asked what the Board had done to deal with the problems of the qualified audit report, and what had happened to the responsible persons.

Ms Bopape-Dlomo responded about the issue of irregularities around the move. She stated that when she had joined the Board, she had been uncomfortable with the situation and as such had asked for a forensic audit to be conducted. Although this audit was expensive, and was not budgeted for, it was thorough and provided recommendations. Some of these recommendations had been implemented and others had not due to lack of resources.

The Chairperson noted that a forensic audit seemed like the right move.

Ms Bopape-Dlomo said that two senior executives had been suspended, and that there had been a disciplinary hearing. The technical and legal issues were a challenge as the FPB did not at the time have a procurement policy. She said that the Board engaged the Department of Home Affairs to see how they could assist with human resources. The forensic audit report had been referred to the Public Prosecutor, but the Board had not yet received a response.

The Chair asked what programmes were in place when the present CEO and CFO had arrived at the Board. He wished to know what plans were in place and how the money had been spent.

Ms Bopape-Dlomo said that the programmes were listed in the Report. These included amendments to legislation on child pornography, and programmes around national media education. She further noted that written documents were scarce and most information was "stored in people’s heads".

The Chair noted that it seemed that there was only one inspector for the Western Cape and that this was inadequate. He commented that it seemed films went unmonitored all over the country. The fact that information was not documented meant that there was no way of proving what money was spent on. He queried whether Board members from that time were still on the Board, as they needed to be called before the Committee and held accountable.

Ms Bopape-Dlomo said that some members of the previous Board served on the current one. She added that getting documented information about past events had been a major problem and that it was a priority to get it done.

Mr P Swart (DA) asked that these documents be placed before the Committee when they became available.

Mr Skhosana (ANC) asked what the situation was with regard to the senior managers who had been suspended. Was the case still open and what percentage of Board members from that time were on the current Board?

Mr Swart queried whether any prosecutions had resulted from the forensic audit.

Ms Bopape-Dlomo replied that at the time one option had been to bring in consultants to conduct disciplinary hearings, but this was expensive. In the FPB, Chief Directors had to charge senior executives but this was not always possible. The final option was to approach the Department of Home Affairs. This had been done, but the section of Home Affairs that dealt with these matters was very busy and as such nothing had yet happened. She added that the longer the issue was dragged out, the greater the legal complications became, as were a senior executive to take them to court, he/she could win due to the length of the process. Ms Bopape-Dlomo said that because of this it was cheaper to negotiate the exits of these senior executives.

On the percentage of "old" Board members, Ms Bopape-Dlomo replied that there was a need to engage with the Film and Publications Act as currently it stated that the Minister of Home Affairs had to appoint Board members. At one point in the Act, examiners are referred to as Board members and at times the examiners misused this provision. In addition, the Act refers to a Chairperson and a Deputy Chairperson of the Board, which still had not been appointed. There were thus technically 75 Board members at the time of the report. Currently there were 68 members.

The Chair asked how often the Board met.

Ms Bopape-Dlomo replied that she had arranged four meetings for 2006. It was difficult as some members were not interested in the affairs of the Board and it was also expensive as members came from all over the country.

Mr Swart commented that if members were not interested in attending meetings, they should be removed.

The Chair noted that that would happen, but at this point it was more important to clarify the Act.

A Member of the Committee questioned what had become of the person who had served both as CEO and CFO.

Ms Bopape-Dlomo replied that he was still an executive manager of the FPB.

The Chair noted that some weaknesses were apparent in the Annual Report for the 2003/04 financial year. He asked that when presenting the 2004/05 report, the FPB should highlight what had changed. He also emphasised the lack of written records for the three programmes that had been implemented. If written records were not available, the responsible persons must account to Parliament and the country about what had been done with the money. If these people could not account for it, the Committee would ask for the money to be returned. The Chair further indicated that the Committee had to be informed of the status of the forensic audit report.

The Chair requested the Committee’s decision on the FPB’s 2003/04 Annual Report.

Mr Swart (DA) proposed that the Committee note the report with concern. The Committee unanimously agreed to this.

Presentation of the 2004/05 FPB Annual Report
Ms Bopape-Dlomo noted that this report showed an improvement on the previous reporting period. She outlined the key achievements for 2004/05. These were the appointments of the CEO and CFO which put the FPB on a new footing; the extension of compliance monitoring to the Eastern Cape (previous to this only the Western Cape, Gauteng and KwaZulu-Natal had monitors); and an unqualified audit report from the Auditor-General.

Ms Bopape-Dlomo added that, although the audit report was unqualified, attention had been drawn to the issue of overtime, as some employees’ overtime went against regulations as it was above 30% of their salary. Attention was also drawn to the issue of surplus funds because the FPB did not get written approval from the National Treasury.

Further achievements were made in regard to child pornography through the recruitment of a full-time call centre operator. A major challenge, however, was to publicise the number. Eighty percent of the calls received by the call centre were related to children’s issues that should be dealt with by the Department of Social Development. The call centre was thus not yet functioning as intended.

Ms Bopape-Dlomo said that there had been increased submissions of films for classification and that it was hoped that the public relations exercises were beginning to pay off and that people were beginning to comply with the law. In addition, there had been increased cooperation with law enforcement authorities and other stakeholders.

Ms Bopape-Dlomo said that the public debate around child pornography was positive, as was the fact that the FPB had a fully functional Audit Committee and an effective management team.

Ms Bopape-Dlomo also outlined some of the problems facing the FPB. She said that monitors spend a large amount of their time (up to 93% in one case) travelling. This was both expensive and dangerous for the monitors as it was exhausting.

The fact that a Chairperson and Deputy Chairperson had not yet been appointed to the Board was a problem.

Ms Bopape-Dlomo said that there had been increased complaints from the public about television. This was problematic as the Act excluded television. These complaints must be forwarded to the relevant authorities.

A further challenge was non-compliance with corporate governance and the need for more monitors.

The FPB was currently undergoing restructuring by looking at processes and efficiency. She referred to this as a basic overhaul.

Ms Bopape-Dlomo said that she wanted to emphasise the necessity of finding a way to streamline the FPB with other media organisations. There had to be an initiative to look at where government organisations in this area overlapped.

Discussion

Mr Skhosana asked when a Chairperson and Deputy Chairperson of the Board would be appointed.

Ms Bopape-Dlomo said that if it were within her powers it would have already been resolved, but unfortunately the appointments could only be made by the Minister of Home Affairs. The Board had forwarded recommendations for these positions in an attempt to speed up the process.

The Chair commented that this problem was beyond the CEO’s control and that before the next round of meetings, the Committee should write to the Minister about the issues raised in this meeting. He then asked if a turnaround strategy had been adopted.

Ms Bopape-Dlomo replied that it had, and had been approved by the Minister. She commented that progress had been made and estimated that the FPB would be stable within two years.

Presentation on FPB financial affairs

Mr Ngququ presented the financial aspects of the report. He commented that the Board was trying to move on from the last audit report of the Auditor-General. He added, however, that the problems from financial year 2003/04 had ramifications for the 2004/05 financial year.

The issues raised in the 2003/04 report of not complying with general accounting practice and the PFMA had been dealt with, and so the 2004/05 report was unqualified by the Auditor-General.

Discussion

Mr Skhosana (ANC) asked why the report showed remuneration for some members and not others.

Mr Ngququ replied that the appointment of new members happened during the financial year, and so people were partly functional in one year, and not functional at all in the next. The remuneration figures reflected payment for one year, but not the next.

The Chair asked how bonuses were determined.

Mr Ngququ said that a Performance Management System was in place, with set formulas for working out bonuses.

Mr Swart asked why the examiners and senior management had not received bonuses. He queried whether their performance had been poor.

Ms Bopape-Dlomo replied that consultants had developed the system, but they had not trained the Board to implement it. In terms of senior management, no original performance agreements existed and so it was hard to establish criteria for bonuses. She said that as the examiners worked part-time they did not fit into the system. These problems were being addressed.

Mr Swart commended the CEO and CFO for addressing the identified problems. Although some problems were still apparent at least turnaround had been achieved. He added that the fact that some staff received more than the 30% overtime limit showed that the Board was probably understaffed, and the Committee should assist in changing this.

Mr Beukman queried the increase in audit fees. He asked whether this was due to a specific audit.

Mr Ngququ said that it was due to specific assignments in addition to those agreed upon with the internal auditors as a result of the previous report.

Ms Bopape-Dlomo added that the costs associated with the internal Audit Committee were included in the fees. This Committee met four times per year. Next year’s fees would be higher as a result of the Forensic Audit.

Mr Swart asked whether the Committee could, through the Chairman, get the Minister to investigate the possibility of streamlining the different media boards.

The Chair asked about television viewing research carried out by the Human Sciences Research Council (HSRC). He asked for the findings and how these findings had influenced the functioning of the Board.

Ms Bopape-Dlomo said the research had looked at the viewing patterns of children, and the attitudes of parents to what children watched in order to establish a basis from which further work could be done. She said there was a need to do further research on the impact of viewing certain programmes on children.

The Chair asked what the impact of this project had been, and had it resulted in a change of policy? He emphasised that in the next meeting, the Board should have this type of information ready so that the Committee could measure progress. It was clear that there had been improvements since 2003/04, but there was a need to end comparisons with that point in time and arrive at a point where it was possible to say the Board was making an impact.

Ms Bopape-Dlomo said that the research was done in order to establish a television viewing basis. There was a problem with funding, but the Board hoped to appoint a full time in-house researcher to do South African-based research on the impact of viewing.

Mr Skhosana asked if the CFO could give a clear indication of the relationship between the Internal Audit section and the Audit Committee. He also asked for clarification of the difference between the auditors’ remuneration and the audit fee.

Mr Ngququ replied that the Audit Committee had an overview function, and the Internal Audit section regularly reported to the Audit Committee. Remuneration was broken up into two parts - the auditor’s fee and expenses - and so the auditor’s fee was part of remuneration, not different from it.

Ms N Mathibela (ANC) commented that she agreed with the necessity of considering streamlining media boards. In last week’s newspaper there had been a report about children being sexually active due to television. She thought that if groups worked together they would be more effective in censoring television. She added that in terms of the research, parents often did not know what their children were watching and this had to be taken into account.

The Chair asked if the Board had a strategy to publicise the call centre number, and what resources would be needed.

Ms Bopape-Dlomo said that it had been agreed with the Communications Officer that her performance bonus would depend on success in publicising the number and other outreach programmes. Resources were scarce, but hopefully a sponsorship could be secured.

The Chair said that the Committee would discuss the issue of the Chairperson and Deputy Chairperson of the Board with the Minister. The Committee noted the progress and hoped the FPB 2005/06 report would indicate further progress.

The FPB 2004/05 Annual Report was noted and the meeting adjourned.