Department of Social Development audit outcome and performance: FFC & AGSA input

Meeting report

The Chairperson welcomed all the Members of the Committee and Financial and Fiscal Commission (FFC) and the Auditor-General of SA (AG) to the meeting and everyone. He said there would be a discussion on two fundamental issues to pursue the noble cause of a single South Africa which is at peace with itself which prosperous. The FFC and AG would be showing Committee Members how funds are allocated and what the underlying factors would be so that the Committee would make its opinion being aware of what would be possible or not possible and having awareness of challenges. The AG would be talking about its work regarding minimising risks or eliminating risks to ensure all resources that the FFC would be speaking on are safely deployed and directed to its intended cause and realise the original target. He said COVID19 had damaged the country’s economy, thousands of companies have closed, and others are struggling to get back into operation because during the pandemic economic activities were brought to a standstill except the essential ones. Revenue streams stopped for companies. It meant creditors were not receiving money from their debtors. Those who were selling could not sell to receive money from customers. He said the presentations were critical in providing a sound clarity on the environment to indicate that work was being done. He said the Committee would not disappoint.

An apology was received from a Committee Member.

Financial and Fiscal Commission Briefing

The FFC said unemployment and general economic decline contributes to an increase in the demand for services offered by Department of Social Development (DSD).

The FFC provided an overview of the DSD budget looking at each programme. As at 2019/20, the Department overspent its budget – mainly as a result of overspending on the Social Assistance programme. As at 2019/20, spending performance was lowest for the Welfare Services Policy Development and Implementation Support programme. It is clear children are being prioritised in the Department – there is significant growth in Children subprogramme in 2017/18 as a result of introduction of Early Childhood Development (ECD) conditional grant but once responsibility for ECD is shifted to Department of Basic Education (DBE), this grant and funding will also shift to DBE.

Looking at the food and nutrition security programme:

-With respect to performance relating to food security, the Department has achieved 100% of its annual target on facilitating implementation of the national food and nutrition security plan in nine provinces and over-achieved on the number of vulnerable individuals accessing food (target was 415 000 vs. 876 860 individuals accessing food through DSD feeding programmes)

-Lack of disaggregated data on funding food and nutrition security limits assessment of financial performance of the programme

 

ECD conditional grant:

-Aggregate spending performance has improved from 81.3% in 2017/18 to 93.2% in 2018/19 and finally 96% as at 2019/20

-Variation across with provinces with Free State, Mpumalanga and Northern Cape recording lowest levels of spending performance for 2019/20. Reasons for under spending include, amongst other things, late submission of claims by NPOs for payment, underpayment of ECD centres

On the ECD, the FFC recommends:

-The DSD should conduct a nation-wide audit and mapping of ECD services being rendered

- Together with relevant stakeholders, the DSD should lead the finalisation of legislation for ECD together with a fully costed, time-bound implementation plan

-Government should take urgent steps to strengthen funding for ECD in South Africa. Particular priority should be given to funding all non-profit, non-centre based ECD programmes serving quintiles one to three. Related to this, the process and requirements for registration should be simplified and specific and appropriate registration requirements for non-centre-based ECD programmes should be finalised with haste

-Government should ensure further targeted support to non-profit ECD programmes in quintiles one to three focusing on infrastructure upgrades, to enable these centres to register and receive subsidies, and for funding for basic early education equipment, which will enhance the early learning programme and prepare young children for formal schooling from Grade R to Grade 12, and beyond, into tertiary training

-The departments of basic education, social development and higher education and training should prioritise the upskilling of existing ECD practitioners and develop a plan to professionalise the ECD career path, with a comprehensive and harmonised professional development system

 

Social Assistance Programme:

-Social grants are government's biggest poverty alleviation and redistribution intervention – consumes 94.8% of departmental budget

-Total social assistance grants show a steady year on year growth rate, with overall increases in allocations reflective of increased reach

-The Old Age Grant (OAG) shows a steady upward trend over the years with an increase of 9.9% in 2017/18, 10% increase in 2018/19 and 9.1% in 2019/20

-The Grant-in-aid also shows an upward trend over the period, increasing by 25.6% in the 2017/18 year and 21.8% in the 2018/19 year

-The War Veterans grant shows a downward trend, decreasing by 19.8% in 2017/18 and 22.9% in 2018/19

-Decreases are driven by decreases in the number of beneficiaries from 132 in 2017/18 to 62 in 2019/20

-As at end of March 2020, the total number of grants in payment was 18.3 million - this is an increase from 17.8 million in 2018/19

-Largest grants are: Child Support Grant (CSG) with 12.8 million beneficiaries, the Old Age Grant (with 3.7 million beneficiaries) Disability Grant which has just over 1 million beneficiaries

-KZN has a grand total of 4.1 million beneficiaries, followed by EC with 2.9 million and GP with 2.8 million

-The provincial distribution of social assistance grants mirror poverty levels

-An overspending of 8.6% is recorded for 2019/20: the overspending in 2019/20 seems to be driven by the number of social grants in payment which increased from 17 811 745 at the end of March 2019 to 18 290 592 at the end of March 2020, an increase of about 2.7%.

-The old age grant and the child support grant show an overspending of 8.5% and 8.8% respectively for 2019/20.

-The social relief of distress grant is the only grant which experienced underspending of 1.8% in 2019/20  

-The Commission is concerned about both overspending and underspending in social assistances. Social assistance remains one of government’s most effective measure of combating income poverty and inequality among the poor and vulnerable. But keeping public spending under control require spending efficiency

 

Key Challenges in Social Assistance

-Administrative issues: the system is still fragmented and plagued by administrative bottlenecks and implementation inefficiencies and therefore its various elements do not operate seamlessly; lack of integration between cash transfers and social services, and grant application procedures that often remain onerous for beneficiaries

-Implementation issues: corruption, fraud and mismanagement has been pervasive in social assistance payments. The adoption of biometric identification and electronic payment in 2012, resulted in a process of reregistering grant beneficiaries and over 600 000 fraudulent social grant recipients were removed from the system; beneficiaries having unauthorised deductions from grant recipients’ account

-Sustainability issues: social assistance programme has grown, in 1994 there were 2.9 million recipients and now there are 18.3 million. In the context of slow economic growth, such increase may present financial sustainability challenges

 

NDA Expenditure Patterns in Support to Civil Society Organisations (CSOs):

-The NDA is mandated to contribute towards the eradication of poverty through supporting CSOs by funding them to implement development projects in poor communities and strengthening their institutional capacity.

-The 2020 budget increased the NDA’s spending from R215.5 million in 2019/20 to R248.4 million in 2022/23 at an average annual rate of 4.9%, after decreasing from R220.8 million in 2016/17 to R215.5 million in 2018/19 at average annual rate of (-0.8%)

-The spending on research and development programme increased by 24.4%, CSO development programme declined by (-3%), administration programme was stagnant (0%) between 2016/17 and 2019/20. -The spending on research and development will grow by 5.9%, administration programme (5.3%) and CSO development (4.4%) between 2019/20 and 2022/23. There is no available disaggregated job creation funding data for analysis

-The CSO development programme accounted for 51.6% of the NDA total expenditure, administration programme (45.2%) and research and development (3.2%) between 2016/17 and 2019/20. The administration programme will account for 48.8% of the NDA total expenditure, CSO development (46.8%) and research and development (4.4%) between 2019/20 and 2022/23. The administration programme rather than the CSO development will become more important, in expenditure terms, for NDA over the MTEF period

-The underspending of the CSO Development programme, which is a critical in fulfilling the NDA mandate, remains relatively high in comparison with the other programmes even though it decreased from R9.6 million in 2018/19 to R4.3 million in 2019/20. The Research and Development programme underspending marginally decreased from R2.2 million in 2018/19 to R2.1 million in 2019/20. There was a significant decrease in underspending for the Governance and Administration programme from R9 million in 2018/19 to R1.2 million in 2019/20.

-The NDA has met almost all its performance indicators in 2019/20. However, the target on the number of CSOs capacitated in civil society organisational management per year was not met. The planned target was 5500 and the actual achievement was 5263, reflecting an underachievement of 237 resulting from capacity constraints in some provinces.

 

The Commission commends the effectiveness of South Africa’s social security system, in terms of targeting and extending benefits to poor households - as an anti-poverty measure, social assistance has contributed significantly towards mitigation of the impact of poverty. In light of the positive impacts on poverty, the Commission is of the view that government should expand coverage to those currently excluded and integrate social protection systems to respond to the multiple and compounding vulnerabilities faced by communities (e.g. recipients of old age grant being linked to indigent registers). However, the Commission is also wary about the expansion of social assistance grants outstripping economic growth and revenue collection as this may result in a huge fiscal burden. Sustained economic growth is important to expanding the coverage of social assistance grants. Likewise administrative and implementation challenges should be addressed to ensure value for money. The People with Disabilities and Social Crime Prevention and Victim Empowerment subprogrammes focus on some of the most vulnerable groups – as such the Department needs to improve effectiveness and efficiency of spending, which was markedly poor in 2019/20

Discussion

Ms B Masango (DA) thanked the FFC for a detailed and substantive presentation, which provided clarity. In the view of the Committee, efficiency would be proven by the impact of efficient spending by the Department. She appreciated the concluding remarks that had been made by Mr Thando Ngozo, FFC Senior Researcher: Macroeconomics and Public Finance Unit, saying that the Committee need to make ensure that those categories of the programme that had not received attention, received attention going forward in areas such as the NDA, CSOs, and developments that were not being covered to an extent that the Committee could see a difference in terms of projects’ income generation. Where persons with disabilities and victim empowerment were concerned, the Department could not afford for programmes not to receive the attention they deserved.

Ms L Arries (EFF) said there were a number of concerns raised in terms of social development assistance. The social development budget was dominantly allocated for social assistance, and it was worrisome that people were so reliant on assistance from the government. There were no developmental plans or projects on how to get people out of social development assistance. There was no detailed report on the ‘Analysis of Key Programmes: Food and Nutrition Security Programme,’ as well as under-spending.

Referring to the Early Childhood Development (ECD) conditional grant, she asked how the Committee would ensure the teachers had the necessary qualifications. The process of getting ECDs registered involved stringent conditions, so what could be done to ensure that they were properly registered in order for people to get qualified for the grants? What were the reasons for the under-spending on the Social Relief of Distress (SRD) grant? It was concerning that there were 600 000 fraudulent social grant recipients who had been removed from the system. She asked whether the funding would be recovered. Many of the grant recipients had deductions on their social grant funds, and she asked how this could be curbed or a limit set. The ECD in poorer working class areas were at a disadvantage compared to affluent areas, and the Department needed to look at how it could assist the teachers in terms of learning material, infrastructure etc.

She said the NDA had failed the Committee dismally in terms of the unemployment rate in the country and its failure to create jobs for youths or to create developmental programmes. The Department had to come back and explain what its turnaround strategy would be. The biggest part of the budget had gone towards compensation of employees, while there were no developmental programmes in place. She had noted the decline in the support for war veterans and asked for reason, despite the high unemployment rate. She was worried that very little had been done for people with disabilities. How many of the 1 809 social workers were employed?

Mr D Stock (ANC) asked the FFC what the foreseeable implications on the implementation on the key policy directives and strategic goals were, due to the recorded decline in spending for both the people with disabilities and the social crime prevention and victim empowerment sub-programmes. He asked how the implications could be circumvented for future purposes. How did the lack of development of a policy on the provision of counselling affect the spending on welfare services development and implementation support? He asked in what way the lack of disaggregated data on funding food and nutrition had limited the assessment of the financial performance of the programme.

Ms A Abrahams (ANC) appreciated the in-depth content of presentation, which allowed the Committee to engage on it. She requested that the ECD research report be made available to the Committee, and that the status of non-profit organisations’ (NPOs’) funding and budgeting be broken down, as well as the projections. She asked if the NDA was supposed to be in the business of creating jobs, which they had been reported to have failed to do, rather than focusing on the core mandate.

Ms K Bilankulu (ANC) asked what the foreseeable implications of the delays in sourcing the technical support were for the sheltering services provided by the Department. How had the financial and performance management been affected by the late development of programmes, such as the community-based disability development programmes?

Ms J Manganye (ANC) said briefing by the FFC was thought provoking especially regarding people who were reliant on social grants. She asked if the FFC had an analysis that could help the country so that people would not be reliant on social grants. She said the economy was down and people were indebted and asked if the FFC had a plan to assist the country to ensure reduction in the number of people reliant on social grants such as a plan that where others could do something they in order to generate income. She asked how the Commission proposed efficient spending on the social assistant programme. She asked whether there were foreseeable implications on the growing compensation of employee budget which was crowding other spending items of the mandate of the NDA.    
 

Ms A Motaung (ANC) asked about measuring the impact of outputs. What was the impact of providing promotion of the rights of disabled persons and frameworks on disability rights awareness, if the strengthening of the national disability rights machinery was suspended? She asked what the lack of available disaggregated job-creating funding data for analysis meant for the assessment of the impact and financial performance of the NDA on its mandate. What would the impact on the civil society organisations’ (CSOs’) management performance be if the targeted number of CSOs capacitated through the development programme was not met?  

Ms N Mvana (ANC) asked what the overall financial and performance management impact on the entity’s administrative implication and sustainability would be.

FFC’s response

Ms Elzabe Rockman, FFC Commissioner, said there had been a request for an overall ECD report, and they would share what was available at the FFC, including the chapter on the ECD that was part of the annual division of revenue. If there was request for further information, the Committee could just formalise that request and the FFC could look at the breakdown of further information regarding the NPOs.

Dr Mkhululi Ncube, Program Manager: Local Government Unit, FFC, said one of the issues was getting more ECD teachers qualified. There was a need to reprioritise that area because if there was no capacity, there would be very little output from the ECD facilities. ECD was important, and if it failed it would mean children would not succeed when they grew up.

Another area which had been mentioned was the lack of disaggregated data, and this affected the ability of management to manage effectively. It was important to have both disaggregated data and segregated data because of the need to know who the beneficiaries were in terms of gender, disability etc. so that they could manage and spend the resources effectively.

The compensation of employees was a general worry across government departments, as it was growing more rapidly than the economy could accommodate. It was crowding out service delivery, which was not right. There was a need to try and contain the compensation of employees for this reason. Debt servicing costs were also a growing concern for the Commission, because it was beginning to affect social services such as education, health and social development.

Ms Sasha Peters, Program Manager: National Budget Analysis Unit, FFC, said that Ms Arries had raised issues on the poor balance between social assistance and developmental programmes which addressed the level of poverty in the country. The concern of the Commission was that the social development sector had not seemed to really embrace the developmental approach that looked at building the capacity of vulnerable people, and shifting an emphasis from statutory interventions, which were very pricey to implement.  There had been a disjunction between providing state income support and statutory compliance versus a more developmental approach. The Department needed to look at a better integration of assistance such as income support and social security grants, relevant to support providers through social welfare type programmes, in order to give a comprehensive package of social protection.

Regarding the stringent conditions for ECD registration, it was a very big concern because the bulk of facilities that were providing early learning programmes to poor and vulnerable children could not afford to comply and register, so there needs to be a way found to bring them into the fold so that they received funding. The FFC was not saying there should not be any registration compliance requirements, but rather that there should be a different approach, because now both the formal and informal ECD programmes had to meet the same type of registration requirements. This was not a logical approach because the very modality used to provide early learning programmes in a formal setting was different to that in an informal setting. The requirements needed be tailored to the different ways in which early learning could be delivered.

Regarding disaggregated data analysis, what was meant was that where there was a specific type of programme in the budget that addressed a specific intervention, the allocation could be looked at and analysed and the FFC could tell the Committee what the growth rates and spending performance were. She said regarding the food and nutrition programme, it was more difficult to identify which programme or sub-programme it fell into, and therefore they could not tease out the financial allocation and analyse it for the Committee, and had had to stick to the service delivery information available. She said the best way to analyse was to have the financial information against the service delivery in order to judge whether what had been overspent or underspent was consistent with what was recorded as delivered.

Mr Ngozo referred to the NDA and job creation, and said the mandate of the NDA was to contribute towards job creation, but it was not a directly linked or involved with job creation. The mandate spoke to the fact that there had to be support for civil society organisations by funding them so they could implement developmental projects. Those projects should be creating jobs in the context where the majority of the people, specifically the youth, resided in those poor or rural communities.

Prof Aubrey Mokadi, FFC Commissioner, replied to the question on how non-formal ECDs could be supported, and said that unless the national integration policy that was initiated in 2015 was converted into legislation, that problem would continue to persist, and would be complicated by the lack of implementation through lack of funding. He asked the Committee to assist in ensuring that the policy was turned into legislation to ensure that they could respond comprehensively to that critical issue.

Auditor-General of South Africa (AGSA) Briefing

Briefing the Committee on the 2019/20 audit outcomes of the Department and its entities, the AGSA said the overall outcome of the portfolio has improved from the prior year. The DSD had improved from a qualified opinion to an unqualified opinion with no findings in the current year. The NDA and SASSA remained unchanged from an unqualified opinion with findings on compliance. NDA had further material findings on performance information. The audit outcome of the four relief funds has remained unchanged from prior year as unqualified without findings. The relief funds are not subject to the PFMA; therefore reporting on predetermined objectives is not a legal requirement and was therefore not reported on in the funds

There was improved credible financial reporting from 2018/19 to 2019/20 and all entities produced financial statements free from material misstatements and all submitted within the legislated deadlines.

SASSA and DSD produced credible performance reporting. DSD was able to do so only because they had corrected material misstatements identified in the submitted annual performance report during the audit through the audit process. NDA however did not produce credible performance reports because they were unable to provide sufficient appropriate audit evidence for reported achievements resulting in it being reported in the audit report as also reported in the prior financial year

Looking at compliance with legislation, the top five areas of non-compliance were:

-Management of procurement and contracts (SASSA and NDA)

-Prevention of irregular, fruitless and wasteful expenditure (SASSA and NDA)

-Consequence Management (SASSA and NDA)

-Strategic planning and performance management (NDA)

 

In terms of the status of internal control, the NDA did not have a proper record management system to maintain information that supported the reported performance information in the annual performance report. This included information that related to the collection, collation, verification, storing and reporting of actual performance information. Sufficient review and monitoring controls were not implemented by NDA to ensure that quarterly performance reports are accurate and complete. Data integrity and verifications checks were not conducted resulting in material findings identified in reported performance information. Non-compliance with legislation identified in expenditure management especially within procurement and contract management having not been prevented by SASSA and NDA.

In terms of financial health, the NDA and SASSA had favourable assessments of financial health however, the following areas of concern existed at the Department:

-Asset and liability management: current liabilities exceeding current assets indicating liquidity concerns, which means that the department may not be able to pay its creditors as payments become due.  Net liability position - highlights a possible risk that the department may not continue its operations at the desired levels, which may lead to an interruption or breakdown to service delivery.

-Cash management: negative cash balance - possible cash flow constraints may be experienced. The department will continue to have a negative cash balance at year end as a result of making funds available in advance for social assistance payments to occur on the first day of the new financial year. •Negative operating cash flows – can impact on financial viability and the ability to continue operating optimally at its current capacity.

 

Unauthorised expenditure increased from nothing in 2018/19 to R15 134m in 2019/20 - in response to the lockdown measures implemented as a result of the Covid-19 pandemic, the Department attempted to pay registered beneficiaries their April 2020 social grant in March 2020. This payment was made in the 2019/20 financial year and therefore exceeded the available budget that was allocated to DSD for 2019/20. The Department therefore did not pay the April 2020 social grant in the new financial year (April 2020).

There was a marked decreased in fruitless and wasteful expenditure from R79m in 2018/19 to R6m in 2019/20. The fruitless and wasteful expenditure related to:

Interest and penalties by NDA (R144 000) and SASSA (R1 000)

-Late cancellations or no shows for travel and accommodation by SASSA (R197 000) and NDA (R37 000)

-Damages to vehicles by DSD (R903 000)

-Procurement related non-compliance resulting in overpayment by SASSA (R5 mil)

 

There was also a decrease in irregular expenditure from R224m in 2019/20 to R147m in 2019/20. The irregular expenditure related to:

-Procurement without competitive bidding process by DSD (R295 000), SASSA (R14 mil) and NDA (R36 mil)

- Contravention of various procurement processes by DSD (R312 000), SASSA (R5 mil) and NDA (R3 mil)

- Unapproved contract extensions by DSD (R1,8 mil) and SASSA (R84 mil)

-Over expenditure on employee costs by DSD (R1,8 mil)

 

There was a regression in supply chain management compliance from the previous financial year. Most common findings on supply chain management:

-Uncompetitive and unfair procurement processes at SASSA and NDA

-Inadequate contract management at SASSA

- Emergency procurement for Covid-19 was not aligned to Treasury regulations at SASSA

 

The AGSA recommended:

-The leadership should continue implementing and monitoring the necessary oversight and preventative controls.

-Appropriate and timely consequence management should be implemented for transgressors of established internal controls.

-Vacancies in key positions should be filled.

-Action plans must be implemented and should be monitored quarterly to support financial management and governance and address the root cause of findings.

The Portfolio Committee should monitor the implementation and progress of audit action plans to ensure improvement in the audit outcomes of the portfolio.

 

Discussion

The Chairperson said the meeting held on Monday had not been a waste. With regard to fruitless and wasteful expenditure, he had seen a simplification of matters where this was called for in the presentation. There were a lot of narratives, including how the presenters had articulated the root causes. Members of the Committee would be able to focus in when the Department came, because they would know exactly what to ask for in areas like supply chain management (SCM) and irregular expenditure.

He said there had been improvements, even though they were slow. Even fruitless expenditure had a narrative that explained the root cause of every problem, including unauthorised expenditure and all elements under financial health. The assurance provision and status of internal controls was almost similar. Disregard for compliance had also been mentioned, and it simplified the work of the Committee to know exactly what questions to ask the Department. The Committee’s work had not been in vain, because last year it had taken the initiative to ensure that there were action plans on all the findings.

Mr Stock asked what measures could be put in place to assist the NDA to address the annual challenge of not being able to produce credible performance reports. He also asked how they could ensure that the NDA and SASSA improved in their ability to materially comply with legislation.

Ms L van der Merwe (IFP) sent condolences to the family of the former Auditor-General’s family.

She said the Chairperson had been right -- there had been improvements -- but she was concerned that time and again, the NDA and SASSA would promise to improve in terms of the shortcomings identified by the AG, but each year they came back and were flagged for the same things, including shortcomings in consequence management to deal with irregularities, fruitless and wasteful expenditure and supply chain management issues. It called into question how effective the DSD’s entity monitoring system was, because at the last meeting with the Department it had assured the Committee that it had stepped up the monitoring of its entities. She would ask the Minister about this when she came.

She said what was also concerning was the remark made by the AG that Treasury notes had been ignored in the procurement of personal protective equipment (PPE). However, it had informed the Committee that the Department was complying with Treasury notes in that it was paying the right amounts, and to hear now that it had paid much more was concerning. She regarded the issue of the late cancellation of travel as quite baffling, as officials were wasting money when they could cancel travel timeously and not incur losses. She would like to know from the AG whether they knew if there were repeat offenders in the specific Department entities that could possibly be held responsible for these financial losses.

She referred to prolonged vacancies, and said this was concerning in a country that had such a high unemployment rate. She wondered why the Department and SASSA continued to fail to fill these vacancies. She asked what reasons had been furnished to AG’s office. Referring to the more than 30 000 people who paid the R350 social relief of distress (SRD) grants who were not eligible for the grant, she asked what shortcomings had been found, because the Committee had subsequently been informed that people who were recorded as deceased were collecting grants. She said there were procurement of food parcels issues because of quality, and asked if companies were not providing quality for the amount that they were charging the Department. Regarding consequence management, the AG had said it did have the ability to bite and was not toothless and could refer material irregularities and non-compliance with laws to investigative parties --would it be willing to take these matters further?

Ms Abrahams referred to the vacancy question, and said the position of the Director-General of the Department had been vacant for a very long time, asked the AG how this affected the DSD as a whole. In the presentation, when it came to consequence management and the assurance of the status of internal control, it seemed the DSD was improving, yet there was still this massive vacancy that had not been filled.

She said the AGSA had highlighted for SASSA the need to red flag the medical assessment doctors for the disability grant, because it was not in line with the correct tender process. She asked if the Department had deviated purposefully because there was a shortage of doctors. Why was it red flagged by the AG when there was a deviation, because they needed to employ more doctors for the purpose of assessing disability grant beneficiaries?

Ms Mvana said she the regression in supply chain management compliance had serious implications. She asked what the AG recommended to deal with this challenge.

Ms Arries said the failure of SASSA and the NDA to manage procurement because of irregular, fruitless and wasteful expenditure was due to the lack of consequence management and strategic planning, and was a red light for the Department on the need to come up with a turnaround strategy to improve the findings. SASSA and the NDA’s lack in leadership were pivotal to the outcomes and performance of the entities. Record-keeping control management, risk management review and monitoring of compliance needed intervention. This was why so much fraud and corruption happened in this entity in the first place. Measures had to be put in place for drastic changes at these entities.

She said the DSD had damage to vehicles which amounted to R903 000, and asked if vehicles were involved in accidents, and what had caused so much money to be spent. Fruitless and wasteful expenditures within the NDA that were not investigated, was also concerning. Irregular expenditure amounted to fraud, and within SASSA and NDA corruption took place, yet there was no consequence management being instituted. The material non-compliance with legislation by SASSA and the NDA was worrying. Nothing had changed at the NDA from 2015 to 2019, and there had been regression at SASSA.

The Chairperson said the AG had identified the risks the Department was facing, and had also exposed their root causes. This would enable the Committee to put together a programme to make the Department accountable. The presentation had caused Members to ask many relevant questions which the content advisor needed to compile into a report which would be the basis for the Department having to account. The way the AG was reporting the information simplified the Committee’s oversight duties, and would enable it to deal with the culprits.

AGSA’s response

Mr Lourens van Vuuren, Business Executive, AGSA, said he agreed with the Chairperson. There were a number of questions that needed to be asked to the various entities, such as damage to vehicles, fruitless and wasteful expenditure, and if there were repeat offenders etc.

He replied to the question on what the NDA could do to improve the management of performance information, and said it was all about having a system. It need not be a computerised system -- it could also be a manual system. What was important was that there needed to be controls -- preventative controls and even detective controls in those systems.

He said the programme where the AG had key findings was where the information to substantiate the achievements and number of CSOs was not readily available for the audit process, which meant that management had needed to put a process in place monthly, throughout the year, to ensure the information was collated and someone verified it with the performance information, and ensured that it was adequately filed, that internal audit was involved and understood its risk area, and focused on it throughout the year to determine whether the information was there and agreed with performance information. There should be an oversight exercise on a regular basis to ensure that the information was accurate.

He said the AG had a document called a special report which the AG could take the Committee Members through. It would be tabling a second special report.  He suggested that a briefing session to be arranged where the Committee would be briefed on both reports and provided with detail regarding those findings which would assist the Committee in focusing on the key areas.

The important thing to note was that the powers of the AG were firstly for the entities to be scoped, and the NDA was not on that list of entities. Once the NDA or any other entity was scoped, the key focus would then be whether non-compliance had resulted in a loss. In many cases, the non-compliance did not result in a loss. Once the entities had been scoped where non-compliance was found hypothetically in a supply chain environment, then additional procedures would carried out to determine if there was a financial loss. If there was a financial loss, then additional powers would be utilised, and the entity would go through the whole process of material irregularities.

He said training could boost the supply chain management environment. The environment was a difficult one, and proper procedures were also important. Proper planning was needed, and sometimes entities did not plan ahead and ended up in a situation where the lease of a building had expired or was about to expire, for instance.

He said that whenever there was irregular expenditure, there should be investigation to determine whether anyone should be held accountable, and that process had been highlighted in the presentation. There were other entities did not carry out consequence management.   

Mr Faizel Jogee, Senior Manager, AGSA, referred to the procurement findings on the food parcels that had been reported in the SASSA audit report, and said it was specifically related to the appointment of those suppliers which had already been appointed in the previous financial year, and the process of getting them reappointed. Weaknesses had been identified. There had not been enough time to appoint new suppliers because there had been a delay in a number of areas in terms of officials not fulfilling their duties of not getting new suppliers on board. SASSA had asked for an extension, but that was due to poor planning and there was a report that they could have done it in a lesser time and opened a proper tender process to get all suppliers on board.

He said consequence management was an issue and should be dealt with in more detail. On the issue regarding medical doctors, SASSA should have conducted a tender process, but this had not happened in two provinces, but the numbers were above the level at which they should have followed the supply chain management requirements, and that was the reason for medical doctors not being out there. A huge amount had been spent on certain doctors.

He said the damage to the vehicles were accident related. Negligence had played a role, and losses had been incurred in that regard.

The Chairperson said the content advisors should collate a report that was attached to the correspondence to the Department so that the DSD could present its side of the story on the matters raised.

He thought the Portfolio Committee was not sleeping at work, and he was happy to be part of it. There needed to be a lot more work done, particularly with the entities, but the bigger challenge was what Ms Van der Merwe had said was the one thing needed for the DSD to get a clean audit. Through its oversight, monitoring and evaluation the DSD was ultimately responsible for the proper running of the NDA and SASSA, and that matter needed to be clear to them.

Committee minutes

The minutes of the 14, 21 and 28 October 2020 were adopted.

The meeting was adjourned.