Audit outcomes of Department of International Relations and Cooperation (DIRCO) & African Renaissance and International Cooperation Fund; Deputy Minister & DIRCO on its Annual Report for 2012/13

Meeting report

Introduction by the Chairperson
The Chairperson pointed out that international relations was an area where narrow party political interests had to be set aside. Party political divisions had to be transcended. Issues had to be raised without fear or favour. The relationship of the Portfolio Committee to the Department of International Relations and Cooperation (DIRCO) was not acrimonious. There had to be communication to engage for solutions, even if there were critical differences on some issues.

Auditor-General South Africa: audit outcomes for the Department of International Relations and Cooperation (DIRCO) for 2012/13
Ms Kumari Naicker, Senior Manager, stated that the International Relations Portfolio had received unqualified reports for the preceding three years, but there had been little movement towards a clean audit, and responses were slow. The African Renaissance and International Cooperation Fund (ARF), an entity of the Department, lacked a proper governance framework. There were material findings for DIRCO and the ARF related to material misstatement; creditors not settled with in 30 days; the asset register and ineffective asset management. There was ineffective monitoring of the ARF, which lacked an organogram.

Predetermined targets were not specific. The ARF had no Strategic Plan or Annual Performance Plan, and had failed to submit an Annual Performance Report. There had been a regression of supply chain management, which DIRCO tried to address. There was non-compliance on the part of the ARF. The ARF lacked delegation of authority.

The Department had committed itself, inter alia, to enhanced performance and consequence management, and to increased attention to a root cause action plan. AGSA had requested commitments from the Minister, including an investigation into the root cause of non compliance matters reported on the ARF; a proper governance framework for the ARF and SADPA, and implementation of proper oversight mechanisms over the ARF and SADPA.

Commitments required from the Portfolio Committee Chair included assistance in monitoring and assessing the investigation into the ARF; providing guidance on appropriate government frameworks for the ARF and SADPA, and meeting with the Audit Committee Chair at least once a year, so that all assurance levels could speak with one voice.

Discussion
The Chairperson said that he had a briefing with the Auditor General some weeks before. He had made a commitment as Chairperson that there would be follow up.

Mr M Booi (ANC) commended the work of the Audit Committee. He supported the work done.

Mr I Davidson (DA) remarked that the was concerned. The overall performance showed regression in almost every aspect. Asset monitoring caused concern. Drivers of key controls had to be improved. There was backward movement. The Portfolio Committee had to find out why.

Mr Davidson said that he would like to see findings for DIRCO and the ARF disaggregated. The ARF findings distorted the total picture. DIRCO could come out much better on its own. Findings for the ARF were damning in the extreme.

Mr Booi emphasised that an unqualified audit had been achieved, nevertheless.

Mr Davidson said that he was only repeating what was in the report. The Auditor-General (AG) had stated that the ARF was a mess. The combination of findings caused distortion. DIRCO came out negatively, and it could have come out better. Leadership as a whole had gone backwards because of the ARF.

Mr Davidson asked why there was no exercise of control in the governance of the ARF. He asked why the Ministers responsible for the ARF had not made enquiries to see why regulations were not being followed. The person who had made the decisions had acted on his own. He asked how that had been allowed to happen. It was a blemish on the DIRCO. The ARF’s accounting officer had not been assisted.

The Chairperson noted Mr Davison’s questions, but reminded him that although the Department and the ARF almost presented two different pictures, the ARF was still an entity of DIRCO.

Mr E Sulliman (ANC) said that the AG had requested a commitment from the Minister. Root causes had to be investigated. The Minister had to respond.

Mr Booi remarked that the AGSA information pointed to difficulties with leadership. It had to be known what was fought about in the ARF. Leadership and governance were the important issues for DIRCO. The Committee had not been sufficiently informed. It was necessary to get down to the details of ARF challenges. He called on all to work together as a Portfolio Committee.

The Chairperson remarked that the AGSA had to unpack leadership and governance. Finance and performance management were in order.

Mr Thami Dibishi, AGSA Business Executive, replied that when governance was assessed, it was asked what internal audit had to do. A risk audit had to be done. A report should have been tabled to the Audit Committee. The Audit Committee had to sit and ask if risks had been covered. That process was not there. DIRCO had been covered, but the ARF not. The question about leadership was who was responsible for policy. Compliance with the Act had to be checked to regularise matters.

Mr Booi remarked that issues of leadership and internal audit were a void that no one touched. He asked about the role of internal audit, and when the Committee could meet with them. There had to be an Audit Committee.

Mr Davidson said that the Portfolio Committee were supposed to process a SADPA bill. Information had not been processed.

Mr Davidson asked about the role of the Audit Committee within the context. If no report was received in the first quarter, the Audit Committee had to start asking questions. The alarm bell had to be pressed, if not by the Audit Committee, then by management. The question was why regulations had not been followed. The AGSA only came in at the end of the process.

Mr Dibishi replied that the responsibilities of the Audit Committee were clear. It was clear who were entrusted with what responsibilities. The Audit Committee had to look at Treasury regulations around risk. Issues should have been picked up earlier in the process.

The Chairperson said that the Portfolio Committee had met with the Audit Committee in January, at which stage they had stated that things were in order. The Auditor-General was saying that it was the breakdown of governance that had created conditions for things to happen. The Department could shed light on issues. The Committee would intensify oversight on areas pointed out. He had met with the Chairperson of the new Audit Committee.

Mr Davidson asked if it was possible to disaggregate findings for DIRCO and the ARF.

Mr Dibishi responded that it would only serve to see how the DIRCO looked on its own.

Mr Davidson asked if it could be formally requested. He reiterated that the DIRCO had been tarnished.

Mr Dibishi replied that it could be done. Findings would be sent directly to the Portfolio Committee.

Briefing by the Deputy Minister on the Department of International Relations and Cooperation performance for 2012/13
Mr Marius Fransman, Deputy Minister, said that serious questions had been raised. But it had to be granted that the Department had spent 98% of the budget, and had received an unqualified audit opinion. No disclaimer had been received. Technicalities would be dealt with. There had to be preventative measures, it had to be ensured that issues were dealt with. DIRCO had to implement corrective measures.

The Deputy Minister said that DIRCO had scored considerable successes. It had hosted the African Diaspora summit. There were areas of intervention in peace missions. There were mediation efforts in Zimbabwe and the Madagascar elections. He thanked the Portfolio Committee for participation in the Zimbabwe process. There had been a successful BRICS summit. A BRICS development bank would be created. 19 heads of state had gathered in South Africa. South Africa had tenure in the UN Security Council. The question was how to strengthen integration in the UN security processes. Funded posts were designed to train 2000 officials against racialism and discrimination. Officials were being sent to every province to demystify foreign relations. Public diplomacy was encouraged.

The Deputy Minister urged that the poor audit performance of the ARF not crowd out what the Department was doing. Compliance issues had been dealt with, and recommendations from the Minister requested. The emphasis had to fall on precautionary measures, to deal timeously with issues that could develop into serious challenges if unchecked. There was concern over allegations against the ARF. An investigation had been commissioned. The Minister had asked for an independent investigation. A comprehensive investigation into irregular expenditure was called for. Evidence of fraud and corruption would be looked for. It had to be found if there was substance to allegations of intimidation of auditors. Action had already been taken on some recommendations. Cabinet would appoint the Chief Accounting Officer. There had to be a proper governmental framework for the ARF and SADPA. There were judiciary recommendations on the SADPA process. There had been systemic failures. The Minister had decided to appoint a Ministerial Task Team to assist Departmental managers. There was not a crisis, but one had to be alert to fundamental contradictions. The National Treasury and the Department had concurrent responsibilities regarding the disbursement of ARF funds.

The ARF had to act with speed at times, as with the disaster in Somalia. There were checks and balances, but there was a tension between rapid response and compliance. The ARF was rather a dispersement agency that moved funds to entities like the Red Cross. It was part of the development agenda to make sure that objectives had been reached when amounts like R200 million was put out to agencies. If money was provided for black farmers, it had to be possible to make sure they received it. Compliance remained a responsibility. Disaster interventions often happened after the fact. The law made provision for the ARF to advertise upfront. There was a roster of organisations that could give quotations. Local procurement at the ARF level was a challenge.

Briefing by DIRCO on its Annual Report, 2012/13 financial year
Mr Clayson Monyela, Acting Director General, stated that there were challenges faced. DIRCO had regressed in some areas, but corrective measures were in place. The Ministerial Task Team (MTT) could get the Department back on track. An unqualified audit had been received, but the Department wanted a clean audit without matters of emphasis. The African Renaissance and International CooperationFund (ARF) had to be investigated, and the SADPA bill had to be promulgated. Lessons had to be learnt from ARF mistakes. There was a disjuncture between successes and administrative failures. Yet the Department had achieved its strategic objective of pursuing the African agenda.

Mr Ramashao took the Committee through expenditure per programme. There was a challenge in the lack of a central finance management system. Under expenditure per economic classification, compensation of employees was the chief cost driver, with 42% of the budget spent on it. 98.4% of the budget was spent. There was underspending on payments for capital assets. The oversight process for finance reporting, had to be reviewed. There had to be a review of monthly reconciliation.

The ARF did not have an organogram, and there was a lack of delegation of authority. The ARF received an unqualified audit. But expenditure had grown during recent years to provide assistance on the continent. The ARF had to develop a service provider database. There had to be a system to detect prevention of policy guidelines being followed. The ARF had to have the organogram of a government component. The Advisory Committee and the Secretariat of the Fund did not have documented terms of reference.

Discussion
Mr Davidson thanked the Deputy Minister and Department for the explanation of the ARF dilemma. Speed and regulatory controls were required, but it had to keep to the law. He asked about the status of the Director General. If he was suspended, the terms had to be known. He asked if there was a disciplinary enquiry.

Mr Monyela replied that the Director General was on leave, and would remain so during the investigation, so that the process could not be contaminated. The investigation would last 30 days.

Mr Davidson noted that the acting DG had said that the ARF had always worked in the same way. He asked why government and leadership were only currently picking up on the challenges. The Treasury was the hard end of the PFMA, and had to check that regulations were adhered to. The position of the Treasury as concurrent authority had to be examined.

Mr Ramashao replied that the Treasury approved projects but not their implementation.

Mr Davidson referred to key arguments by the DG for a separate Act. The ARF had been determined two years before by the Act. SADPA and Foreign Services bills were contemplated. He asked why thinking about the SADPA bill had changed.

Mr Davidson referred to the statement that less had to be done with more, regarding ARF missions abroad. The Rand/Dollar exchange rate had depreciated by 20% that year. The key mission was to promote trade. There was a new era of economic diplomacy. There was a lack of funding for diplomatic missions. Not all ambassadors had the ability to raise money. He asked how diplomatic missions abroad were managed.

Mr Monyela replied that missions had to be funded more. There was an ever-expanding mandate, and yet funding was decreasing. Assistance was needed. The budget was being cut every year.

Mr Davidson said that there had been a paragraph about DIRCO in the National Development Plan. That chapter had been withdrawn and replaced. There was no reference to the NDP in the document.

Mr Monyela replied that the current chapter 7 did not take the input of DIRCO into account. Consultants had done it. The Executive had asked that the chapter be revised. There had to be an addendum to the NDP on chapter 7.

Mr Elof asked about time frames for the Ministerial Task Team investigation. He asked if they had been established. DIRCO had spent 98% of its budget. He asked if the Department had run out of money.  There were challenges of asset management. Millions of Rands were without control.

Mr Elof asked about oversight over missions abroad. DIRCO had claimed that there was good oversight. But there had to be information about how money was spent at the missions.

The Chairperson reminded Mr Elof that information was for the period ended on 31 March 2013.

Mr Monyela replied that missions abroad were monitored through monthly reports.

Mr Ramashao added that there was a credible asset register, but a lack of monitoring of the missions. Assets had to be picked up on.

Ms M Kubayi (ANC) said that she was comforted by actions taken to rectify what the AGSA opinion had pointed out. Processes had been put in place. She asked about non-expenditure and areas of surplus. Advocacy and international relations had to become more visible.

Ms Kubayi remarked that there was a lack of a South African perspective on the UN Security Council issue. Commentators were not from South Africa. Media houses had to engage. There had to be more Departmental advocacy. There had to be a focus on what Zambia wanted to achieve at the African Union. She asked what the President was saying on behalf of South Africa.

Mr Monyela replied that the question was how to communicate foreign policy to foreign policy correspondents. There was a lack of appetite among the media houses. There were Public/Private Partnership (PPP) projects to directly engage communities. Content had to be given through electronic print media. The Department held weekly briefings on its own platform. A station would be launched on the following day. External people were brought in to anchor debates. Foreign policy had to be made topical.

Ms Kubayi referred to unauthorised expenditure. It was worrying when the AGSA said that there were no systems. There had to be lessons learnt from the process. The question was how it got to an organisation without structure. She asked how regression could be prevented.

Mr B Skosana (IFP) said that new things were happening. There was an African agenda. The French president had said that impunity would not be supported. The African continent had become a tribunal. A strong legal process was needed for self determination.

Mr Monyela replied that there was a geo-legal entity on the continent to deal with crime. The relation between the African Union and the International Criminal Court caused concern. People had claimed that Africa would pull out because of bias against Africans. There was a court but it had to be capacitated.

Mr Skosana said that AGSA had pointed to repeated failure. The Strategic Plan was only assessed on a quarterly basis. A qualitative process of transformation could not become visible. Foreign policy progress had not been dealt with. South Africa was committed to reform of UN structures, but there were no tangible indicators to show reform. There was currently an Ubuntu radio dedicated to public diplomacy.

The Chairperson advised that the acting DG tap into Ministerial knowledge about issues. DIRCO had to come back about SADPA. The DIRCO had to have an initial conception of the SADPA relation to the ARF. DIRCO had to brief about the matter. Parliament had to know what was going on, to approve the budget. There was as yet no SADPA bill. He asked about time frames for investigating irregular expenditure.

Mr Monyela responded that there would be a briefing about SADPA.

The Chairperson said that a clean audit was a minimum requirement, and that the Portfolio Committee would not settle for less. DIRCO had been unqualified for the preceding four to five years, but that was not good enough. DIRCO was saying that there were systems in place, and that it was deliberate and dedicated. The Portfolio Committee would sharpen oversight in a way that would help DIRCO. The ARF caused concern. The Portfolio Committee would assist the DIRCO. A helping hand was needed. The role of Parliament did not have to be antagonistic. The government departments and Parliament were part of a bigger system that had to provide a better life for all. The goal was to create a non-racial and non-sexist prosperous South Africa. Successes belonged to all. The Committee had to be briefed on chapter 7 of the NDP. The prompt action of the Minister on the ARF had to be acknowledged. Leadership was being provided. There had to be consequences. There were officials who acted with impunity or failed to do their work. There had been a collapse of systems. If measures were not implemented, people had to be held accountable.

The Chairperson asked how many people had been dismissed over the preceding three to five years. The public service was paying undeserved performance bonuses. Departments were receiving disclaimers, yet performance bonuses were paid. The culture of impunity had to be stopped. People had to be taken to court.

The Chairperson noted that the BRRR would be compiled. There would be a report on recommendations as well. Issues and successes had to be balanced.

The Chairperson adjourned the meeting.