Western Cape Education Department Audit Outcome & 2020/21 Annual Report

Public Accounts (SCOPA) (WCPP)

15 November 2021
Chairperson: Mr L Mvimbi (ANC)
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Meeting Summary

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Western Cape Annual Reports 2020/21

In a virtual meeting, the Public Accounts Committee (WCPP) was briefed by and deliberated on the Western Cape Education Department on its Annual Report for the 2020/21 financial year.

The Western Cape Education Department expressed that, as a result of COVID-19, it had to step into action very quickly to ensure that it procured the necessary items such as masks and sanitisers in order to try and get learners as quickly back to school as possible – with the Department being responsible for over 1.1 million learners.

The Department stated that the volume of its systems remained underestimated by the public. It was a very large system, which catered to over 1.1 million students and over 43 000 staff members. Education was everyone’s business with the school governing bodies, parents and public all playing an active role, whilst intensely scrutinising the Department at the same time. Despite the confusing directions, regulations and lockdowns, the Department managed to achieve just under 70% of its performance indicators, and spent 99.7% of its budget.

The Chairperson tabled both Sections C and E of the Annual Report of the Western Cape Education Department for the Committee to engage them.

Members sought information regarding the criminal cases that were mentioned on page 151, including the number of cases which had been closed, the sanctions around those cases and the actual content of the cases.

With reference to page 165, the Department had indicated the implementation of a preferential procurement policy. Being aware of the Auditor-General’s Report regarding the observations around local content deviation or non-compliance, a Member wanted to know as to how the Department reconciled the two in its report to state that it was fully compliant.

A Member sought more information regarding the findings by the Auditor-General’s Report that the Department had failed to exercise leadership oversight responsibility with regards to the financial, performance and compliance reporting. Further explanation was sought as to why the Department has not had a clean audit since 2017/18, including what was being done to move towards obtaining a clean audit. The Chairperson remained concerned by the fact that the Department expressed its satisfaction with merely obtaining an unqualified audit, and not a clean audit.

A cost analysis ought to be done on the Auditor-General spending eight months with the Department in order to establish their compliance, including as to whether it hindered the work of the Department in any such way.

The Committee noted this was the first Annual Report it had dealt with where the Department obtained an unqualified audit opinion.

Meeting report

[the beginning of the meeting was a closed session between the Committee and the Auditor-General of SA]

The Chairperson opened the virtual meeting, welcoming the Committee and delegation to the meeting. The agenda and apologies were tabled. Introduction by both Members, and delegation Members were concluded. Section C and Section E of the Annual Report of the Western Cape Department of Education would be dealt with in the current meeting.

Briefing by the Western Cape Education Department (WCED)

Ms Debbie Schäfer, Western Cape Provincial Minister for Education, stated that, as a result of Covid-19, the WCED had to step into action very quickly to ensure that it procured the necessary items, such as masks and sanitisers in order to try and get learners as quickly back to school as possible – with the WCED being responsible for over 1.1 million learners. She was proud of the fact that the WCED managed to maintain an unqualified audit.

Mr Brent Walters, Head of the WCED, stated that the volume of the WCED system remained underestimated by the public. It was a very large system, which catered to over 1.1 million students and over 43 000 staff members. According to the HOD, education was everyone’s business with the SGB, parents and public all playing an active role, whilst intensely scrutinising the WCED at the same time. Despite the confusing directions, regulations and lockdowns the WCED managed to achieve just under 70% of its performance indicators, and spent 99.7% of its budget.

The Chairperson officially tabled Section C of the Annual Report of the WCED.

Discussion

Ms L Botha (DA) sought information regarding the criminal cases, which were mentioned on page 151, including the number of cases which had been closed, the sanctions around those cases and the actual content of the cases.

Ms N Nkondlo (ANC) sought information regarding ‘Governance’ under point 7.2 on page 152, with the details of what exactly the issues were and what needed to be monitored being asked. Referring to page 157, she wanted to know if the WCED had a health and safety unit, and if so, how it was composed. With reference to page 165, the WCED had indicated the implementation of a preferential procurement policy - being aware of the Auditor-General’s Report regarding the observations around local content deviation or non-compliance. She wanted to know, as to how the WCED reconciled the two in its report to state that it was fully compliant.

Mr K Sayed (ANC), referring to page 150, wanted to know as to which strategic risks of the WCED were reviewed and which ones were mitigated, including as to why it had not been completed. He stated that, the finding on the internal control deficiencies, which was made by the Auditor-General, on the WCED, that appropriate management processes were not in place, was something that occurred every year. He asked as to what the challenge was in getting that particular issue addressed, as it could not be something that pops up every year, yet nothing was being done to address it. More information was requested regarding the fact that one supplier received more than 90% of the WCED’s tenders.

Mr Salie Abrahams, Deputy Director-General: Education and Planning, WCED, responded that, besides the guidelines that had been committed to in their Basic Financial Manual, there were also other internal control deficiencies; those included, but were not limited to, where schools lacked appropriate internal policies and controls in place in terms of not keeping adequate records of things. The school governing bodies (SGB’s) were largely responsible for the financial functioning of schools and consisted of a Finance Committee, with principles playing a key role as well.

Criminal cases were largely a result of where forensic services found that money was being stolen. The procedure is then followed, where investigations are then done through the usage of the South African Police Services (SAPS), and follow-ups are then done too. They are also other procedures such as disciplinary hearings, which are done when necessary. Reports could be provided to the Committee regarding those specifically, if necessary. The WCED itself was in the processes of working on its own internal control processes in order to strengthen its own internal environment, particularly in areas that had been identified.

The WCED itself did not have a health and safety unit, but schools were supposed to have safety committees, especially with regard to taking care of things throughout the pandemic, and issues relating to that. All schools were supplied with PPE’s, including hand sanitisers, masks and disinfectants. Schools were requested to inform the WCED as to whether they required further assistance, with their supplier having already delivered some of the requests. Despite requests, or failure to requests, the WCED would continue to ‘top-up’ schools regularly with the necessary PPEs. He reiterated that the safety of learners and staff were their first priority.

He stated that they had an external service provider who conducted assessments to ensure that the WCED complied with all their particulars. Risks were mainly related to the budget and finances, as the WCED was not a revenue-generating department. The WCED was mainly dependent on equitable shares, which meant that they were dependent on the economy of the province as well as on conditional grants. Regarding the supplier, he stated that the Department had already had a contract in place with a service provider that dealt with the supply of disinfectants, amongst other things, to schools. The supplier was a reliable one, and, as such, remained with the same service provider to continue doing that which they had already been doing.

The Chairperson officially tabled Section E of the Annual Report of the WCED.

Ms Nkondlo sought more information regarding the findings by the Auditor-Generals Report, that the WCED had failed to exercise leadership oversight responsibility with regards to the financial, performance and compliance reporting. An opinion from the Minister and Auditor-General was sought on the issues raised in the Auditor-Generals report – with an explanation being sought as to what exactly seemed to be the problem of the Department in fixing its internal controls to ensure information was both reliable and verifiable. An explanation was sought as to why the Department has not had a clean audit since 2017/18, including what was being done to move towards obtaining a clean audit.

What are the payments that go to the non-profit institutions as it relates to the different programmes? Explanation was sought as to the 100% increase in payments and transfers that was made to the non-profit institutions and why such a rapid spike occurred.

The issue regarding salaries was a contentious one as it related to page 242. The Member sought to know as to whether the matter had been resolved or whether it would be resolved for the new financial year.

Mr Walters responded that they would be looking at their standing operating procedures and adjusting it accordingly. Regarding the textbook situation, he said that parents needed to indicate that they received certain textbooks, and those which had not received would be sent the necessary textbooks as required. He emphasised that the issue of the PPEs was a realistic understanding of standard operating procedures, which they were engaging with. He stated that when referring to non-profits, it did not mean that those schools were not funded, but in accounting measures some schools structures were successfully changed to allow funding.

Regarding the increases in expenditure, he explained that towards the end of last year, the WCED had to engage in the Presidential Employment Initiative Programme. The WCED, therefore, had to look at whether it could create employment opportunities – with it to apparently create approximately 19 thousand opportunities by the end of the financial year, if he was not mistaken.

Ms Nkondlo stated that her questions on the future clean audit and the leadership finding of the WCED by the Auditor-General had not been answered.

Mr D America (DA) stated that a cost analysis ought to be done on the Auditor-General spending eight months with the WCED in order to establish their compliance, including as to whether it hindered the work of the WCED in any such way. Regarding irregular expenditure on page 271, he stated that there was no clarity as to whether the previous irregular expenditure amounts had been condoned.

Mr Walters stated that the only comment he could make with regards to the audit outcomes was that the WCED would strive to obtain a clean audit. He stated that, given the reports, they have established within the Department, a culture which strived to follow through with the findings of the Auditor-General. It needed to be remembered that the volume of the system of the WCED and its Operational Department was massive, yet they were striving to execute business in a way that complied with all necessary rules.

The WCED also went through the audits each year. There were always new methods that had not been there in the previous year and was not something the Department could foresee. The Department then tried its best to deal with those new methods, but the same thing would occur the following year, which made it difficult to obtain a clean audit.

Mr Salie responded that, in all of 18 years of him working within the WCED, it was the first time their financial statements were submitted late, and he apologised profusely for that happening. He explained that the WCED had now committed itself to a proper timetable, which would see them submit their financial statements to their Accounting Officer within the projected dates. The Accounting Officer would also be given regular progress reports around that to make sure that they met the reporting requirements. The dates have remained unchanged for several years.

Minister Schäfer proudly stated that they could not state for sure that they would be getting a clean audit, as that was not within their sole control. The Auditor-General often came with additional requirements and it seemed that, more often than not, when a Department is doing well then the Auditor-General tries to move them up another level by imposing additional requirements. She was happy with an unqualified audit because it meant that the WCED had not wasted or stolen money, which, according to her, was the most important thing.

She stated that she believed a broader discussion around the objectives of audits was required. It appeared to her that an inordinate amount of time and money was being spent every year on compliance issues rather than on service delivery issues. At some point, the influence of the Auditor-General impacts negatively on the WCEDs service delivery.

She stated that, while leadership oversight is important, she was more than happy with her teams response to the findings by the Auditor-General, and believed that more measures were being put in place to deal with that and ensure that it does not happen again.

The Chairperson was concerned with the fact that Minister Schäfer commented several times at being more than happy with an unqualified audit – deeming a clean audit as an over-achievement.

Ms Schäfer responded that it was not an over-achievement, and that the WCED would like a clean audit, but South Africa was the only country in the world that had a clean audit as a qualification of audit categories. She stated that she was happy with the unqualified audit, as it meant that the Department had not misused money or stolen money, whilst still managing to deliver quality service delivery.

Minister Nkondlo stated that she found the response by Minister Schäfer interesting and indeed there has been discussion in the public domain of striking the balance between financial performance and the impact of results. Hopefully, through the Standing Committee on Public Accounts, the new financial year would invite more rigorous debate around those issues.

Ms M Maseko (DA) stated that, as SCOPA, the Committee ought to engage with the Auditor-General in depth, to look at the audit outcomes. She suggested that what ought to be done is that on a yearly basis before audit began, that the Committee sat down with the Auditor-General to check whether status quos remained the same for the previous financial year or whether they had been changed, or implemented differently for different departments. She stated that it would help the Committee when interpreting the audit outcomes and reports, as comments had been made that the Auditor-General tries to level up some departments who were doing well and that their status quo kept changing. It would help the Committee from being misled also she emphasised.

An official of the Auditor-General’s Office stated that a clean audit versus an unqualified audit outcome, in as far as financial statements were concerned, meant the same thing. It meant that there were no material misstatements found in a departments financial statements, which have been presented to the auditors for auditing in which they were signing off on. However, the difference between the audit outcomes was in two other areas, which the auditors also interrogate in their audit process. These were the audit of predetermined objectives as well as the audit of compliance with laws and regulations. When it concerned the WCED, instanced were found were there was material non-compliance or material findings, which were raised in the audit reports.

Mr America expressed that it would be remiss of the Committee to not applaud the WCED on navigating through an extremely difficult period whilst still managing to maintain service delivery and reach appropriate performance targets. The magnitude of the WCEDs footprint in the Western Cape was not to be taken lightly or underestimated and for that they deserved to applaud.

Minister Schäfer thanked Mr America for his kind words. She proudly stated that it was a huge achievement and obviously under her leadership, the Department would strive to obtain a clean audit. She stated that Members ought to be made aware of the fact that the WCED was the only education department in the country that has managed to ever obtain a clean audit in South Africa, since the dawn of democracy and that was something to be proud of.

The chairperson of the Audit Committee stated that they would continue to assist the Department in striving to obtain a clean audit outcome.

An official of the Auditor-General’s Office responded that they welcomed the engagement between SCOPA and the AG, on the audit outcomes and objectives.

The Chairperson thanked the Committee for their attendance. Members were to remain behind to deal with Committee business.

Committee resolutions

Ms Nkondlo requested that monthly reports be submitted to the Committee to monitor improvement

The meeting was adjourned.

 

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