DAC, National Film & Video Foundation, National Library, Msunduzi Museum 2017/18 Annual Reports & AGSA input; DAC Q1 performance

Meeting report

Welcome, Apologies, Adoption of Committee Agenda and Chairperson Opening Comments

The Chairperson welcomed the Members of the Committee, the Auditor General of South Africa (AGSA), the Department of Arts and Culture (DAC) and its entities. The public service work performed by the DAC and its entities was much appreciated. The work of the AGSA was commended for its role in being a mirror for the Department and its entities to view and reflect on aspects of their work, both positive and negative. The AGSA would be the first to present, followed by the Department and the three entities. The Committee encouraged the Department to get to know what was happening in the entities. This explained the decision of the Committee to have the Department present an overview of each entity’s work before the entity presented its report.

Apologies were accepted from Minister Nathi Mthethwa and Deputy Minister Maggie, although there was some reluctance regarding the ministerial absence due to the important insights they gained at these Committee meetings.


AGSA Budgetary Review and Recommendations Report (BRRR): Arts and Culture portfolio

Ms Nelisiwe Mhlongo, Senior manager: Arts and Culture Portfolio, AGSA, said that due to the nature and size of the entities within the portfolio and their geographic location, this required assistance from other colleagues who were not here today. However, she would answer the questions as best she could. The audit report was based on the audits of the Department’s 26 entities.

Accountability of the Department was analysed using the accountability cycle of plan-do-check-act, of which the AGSA found no improvement. The snapshot of the Arts and Culture Portfolio for 2017/18 revealed an overall improvement in clean audits, quality financial statements, and compliance with legislation. However, there was an overall regression in the quality of performance reports and irregular expenditure.

The audit outcomes for the past five years were presented. There was an overall improvement in the audit outcome of the portfolio, with an increase of clean audits from four to seven entities from 2016/17 to 2017/18. There was a reduction in the number of qualified audits, from eight to six entities from 2016/17 to 2017/18. This was due to five out of seven entities previously qualified on Generally Recognised Accounting Principles (GRAP) 103 resolving the qualification. Three entities -- Artscape, Playhouse and the National Arts Council -- were commended for a clean audit for a second year in a row. However, there was concern for six entities receiving qualified audit opinions in various areas due to the lack of implementation of regular reviews and daily controls in the financial balances transaction. Two entities namely -- Ditsong and PACOFS -- who had previously received adverse opinions, now received qualified opinions. There was a total of nine improved audit outcomes, 12 unchanged and four regressed due to findings in performance information in the last year.

The movement in audit outcomes for the past five years was presented. The AGSA pointed out that there was a slight improvement in legal compliance, but financial statement preparation and the monitoring of supply chain management (SCM) legislation was of particular concern. The quality of annual performance reports (APR) showed a slight decline from 2016/17 to 2017/18, while the quality of submitted APRs remained unchanged. This was due to misstatements in the APRs after material adjustments were submitted, as a result of the lack of sufficient evidence for the achieved targets and indicators.

The assessment of the status of internal controls and assurance provided was performed based on eight listed entities, not classified as small auditees, based on AGSA’s methodology. Ditsong and the Pan South African Language Board (PanSALB) were of concern due to issues with governance, financial and performance management, and leadership within the organisations. The senior management provided some assurance, but Ditsong was still of concern. Overall, the consensus for the internal audit for Freedom Park and PanSALB had declined. Furthermore, PanSALB did not have an established audit committee.

AGSA’s review of the status of records of the DAC remained unchanged, as similar findings were raised on supply chain management (SCM) and performance information. Areas of concern included the ineffective controls in place for oversight monitoring and the review of annual financial statements, annual performance reports, and legal compliance.

The management and delivery on four key programmes in terms of spending, performance and reporting was presented. Programmes two (institutional oversight) and three (arts and culture promotional development) were selected for the audit. Programme one, three and four used more than 85% of their budgets, while achieving above 70% of their targets. However, Programme two used only 54% of its budget, while achieving 94% of its targets. Programmes one and four were not audited. However, Programmes two and three required intervention due to material misstatements.

The financial health of the eight auditees showed an overall improvement. Ditsong was of serious concern in the previous year, but had since improved. The key concerns that were identified included that auditees took more than 30 days to pay their creditors, auditees could not collect their debts on time, the realisation of a deficit in the current year, and the total current assets exceeded liabilities. The AGSA recommended that auditees should pay creditors on time to avoid penalties and interest that results in fruitless and wasteful expenditure. In addition to monitoring of approved budgets, there should be investigation of variances between actual and budgeted expenditure, as well as corrective actions.

The trend of fruitless and wasteful expenditure, as well as irregular expenditure, over five years was presented. A drastic increase in fruitless and wasteful expenditure was incurred by the DAC -- from R3 million in 2016/17, to R35 million in 2017/18. 95% -- was incurred in rental payment for accommodation and penalties. This was not qualified for any of the auditees. There was an increase in irregular expenditure from R129 million in 2016/17 to R135 million in 2017/18. Completeness of irregular expenditure was qualified for PanSALB and the National English Literary Museum (NELM). This was due to controls not detecting any legal non-compliance. The top six entities making up 78% of the irregular expenditure were Ditsong, the State Theatre, DAC, PanSALB, Iziko and the Performing Arts Centre of the Free State (PACOFS). There had been overall regression in the number of findings on SCM compared to the previous year. There were five auditees that had not implemented consequence management in the current financial year. Allegations were not investigated by PanSALB, Ditsong, PACOFS and State Theatre. Some investigation was done for the DAC, but this had not been sufficient.

The key project selected for audit was the Saartjie Baartman Centre of Remembrance. The project budget increased from R164 million to R182 million, and 50% of the project had been completed. There were significant delays in completion of the project as the project timeline doubled. The initial contractor had ceded the contract to another, which could result in further delays. The penalties for these delays were not charged to the contractor, thus incurring additional costs. Furthermore, there were potential misstatements coming from this project.

The AGSA said the top three root causes were instability in leadership, inadequate technical indicators, and insufficient oversight control over SCM. The commitment from the portfolio to resolve all GRAP 103 qualifications for seven entities qualified in 2016/17 was in progress. The AGSA recommended that the Committee request the DAC to present the status on all vacant and suspended positions, to ensure technical indicator descriptions were aligned to entities’ operations, to obtain a list of action taken against transgressors, and to request management to provide quarterly feedback on status of key controls.

The AGSA made a final comment explaining that the higher the corruption, the lower the service delivery.

Discussion

The Chairperson commented that the issues of slow or no response from the Department, as mentioned as part of the root causes, meant that the response from the entities was going to be worse. She emphasised that the Department needed to be more responsive to issues that were being raised. The lack of response from the Department resulted in the Committee doing the work of the Department, which was unacceptable. She raised the issue of consequence management and fair dismissal of employees. South Africa was a constitutional country with specific processes to follow regarding dismissal or suspension of employees. The Department needed to follow this process and need to be fair and just.

Mr T Makondo (ANC) agreed with the AGSA that accountability would always lead to less corruption. The Department should move quickly in improving its accountability, starting with the DG to ensure that they could assume their responsibility. He said that the result of the audit outcome of PanSALB was due to the suspension of their CEO. The outcome was to be expected, due to the fact that PanSALB had no board or CEO, and this needed to be resolved. Furthermore, nothing could be expected of PACOFS, as there was also an absence of leadership and accountability. He challenged the DG to assume responsibility and ensure accountability of the Portfolio. He further urged the executive management of the portfolio and its entities to take a break and engage in strategic thinking, and to reflect on the impact of their work. He asked the auditors to explain the situation with the Saartjie Baartman Centre. Had the Department given an explanation as to why the project had been delayed and why there was a change of contractor? All of these issues had resulted in serious time and cost impacts.

The Chairperson referred to the key programmes, and said the Department should explain the figures relating to Programmes three and four. She asksed why 100% of the budget was spent on Programme four, but only 71% of the targets were achieved. She said that when the Department was given a clean audit, it should bring excitement to the Committee. However, she was afraid that underneath the clean audit was corruption, which left the AGSA with a tainted image. The Committee should share the issues that were coming out of the institutions with the AGSA in order to assist them with their work.

She said it was not easy to get the relevant information from the Department according to the AGSA’s recommendations. The Committee requests the information, but either receives it very late or does not receive it at all. But the Department needed to improve this. The recommendation to follow up on the list of actions taken against the people who have transgressed was also a problem. She explained that the Committee gets this information from the Department, but the problem lies with the entities. The Committee had already recommended that the Department should look into the laws governing the entities they were giving money to. Sometimes the boards of these institutions were unlawful, which in turn taints the image of the Department and the entire Government.

AGSA’s response

Ms Mhlongo responded to issues raised regarding the Saartjie Baartman project. She said that the project was being implemented by the Department of Public Works (DPW). The reason for the initial contractor ceding the contract to another was because the initial contractor had been in financial difficulty and could not continue the project. However, not much had been explained about the reasons for the increased project costs. The Department should give further insight. There had been challenges in getting the information because there were two parties involved. It was recommended that the project management of the project needed to be looked into, and the responsibility lay with the Department.

She responded to the Chairperson’s comments regarding clean audits and corruption, saying that the AGSA was a risk-based institution. If there was a risk identified, then it was key that the AGSA follow up on it. The AGSA followed the legal framework, but sometimes there was a misrepresentation that was not picked up. She added that the information they had on the key programmes was what had been disclosed to them by the Department.

The Chairperson reiterated that the AGSA was the mirror to the Department. The Committee would ensure that the issues raised by the AGSA would be taken forward to the DAD so that they were addressed. She expressed concern that the same issues were raised over and over again for the last four and a half years. It was a disheartening process when these issues were not addressed. She thanked the AGSA for the presentation, which enhanced the Committee’s role of oversight.


Department of Arts and Culture: First Quarter Performance Report 

Mr Vusumuzi Mkhize, Director-General, DAC, said the Department had planned to implement and achieve 27 performance targets between April and June 2018, but only 24 (89%) of those were achieved. The contributing factors to the targets not being achieved included issues with the budget and the feasibility of the amalgamation of the DAC’s public entities, delays in the scoping process for the number of flags installed in schools project, and delays in the feasibility report for the Resistance and Liberation Movements Museum caused by dependence on external stakeholders.

The Committee was requested to note that this was a preliminary report as per Treasury guidelines, and the final score or performance may change after the final audit. The performance of the four programmes of the DAC was that 100% was achieved for administration and arts and culture promotion and development, 86% for institutional governance, and only 67% for heritage preservation and promotion.

The highlights of the first quarter included Africa Month celebrations in May, the Youth Day event in Soweto, and Youth Month Dialogue sessions in June. Minister Mthethwa had hosted the USIBA Awards and opened the newly constructed Tshing Community Library in June. Deputy Minister Sotyu, in partnership with the Free State Provincial Archives, and the provincial Department Sport, Arts, Culture and Recreation Member of the Executive Council (MEC), had launched the 2018 Annual Archives Awareness Week.

For the sake of time, the DG skipped over the report on achieved targets. One of the targets for the amalgamation of DAC public entities was not achieved due to the non-appointment of the service provider to conduct the feasibility and due diligence studies. This was a result of the market quotation being higher than the budgeted amount. The process to appoint a service provider had been reinitiated and was envisaged to be achieved by the end of December. The terms of reference for the Resistance and Liberation Movements Museum was submitted to SCM, but had not yet been approved. This was caused by a delay in the nominations and appointment of external experts. It was envisaged that the appointment would be made by 25 September. The flags installed in schools project also experienced delays in the appointment of a service provider due to delays in inputs for scoping of the project. The previous tender was cancelled due to technicalities, but a decision was made to approach the project through the provincial three-quotation process which allows for local economic beneficiation.

Mr Makoto Matlala, Chief Financial Officer (CFO), DAC, presented the expenditure report for the first quarter. The Department was able to spend 21% of the allocated annual budget, or 88% of the projected budget for the first quarter. The under expenditure was attributed to a number of issues and was explained per economic class. For the compensation of the employees, an actual expenditure of R55 million (88%), with an under-spending of R7 million, was incurred. The variance was caused by vacant posts in the process of being filled. For goods and services, R79 million (80%) was spent. The under-expenditure was due to Department of Public Works (DPW) invoices for municipal charges not being paid, as the invoices included the entities’ billings which needed to be paid by the entities themselves, but this was to be processed in August. Furthermore, the Youth Day invoice was to be processed only in July due to unresolved queries. For Departmental agencies and accounts, an actual expenditure of R407.5 million (95%) was transferred to the various entities in the quarter. The variance was as a result of a transfer to the National Library of SA (NLSA) for the community library conditional grant project which was based on a signed memorandum of agreement (MOA). The remaining balance would be transferred in October, in line with the MOA.

The capital expenditure for the Departmental agencies and accounts was R3 million (21%) versus a quarterly projected budget of R14.6 million. Transfers for capital works projects to entities were processed only at the beginning of July due to internal routing processes for authorisation of payments by delegated authorities. Non-profit institutions received a current transfer of R55 million (74%) in the 1st quarter. The under-spending was a result of the acquiring approval process for the introduction and creation of the Mzansi Golden Economy (MGE) beneficiaries on the Standard Chart of Accounts (SCOA), which would spill over into the second quarter. Delays were experienced with the processing of submission for the Artist in Schools project, pending Treasury advice on the Auditor General’s finding relating to the 2017/18 financial year. For capital expenditure for non-profit institutions, an actual transfer of R2.5 million (81%) was achieved. The Department was not in receipt of the progress report relating to the previous contracted allocation from the Steve Biko Foundation, which had an impact on the facilitation of the second tranche payment. For households, an expenditure of R8.5 million (58%) was incurred, and the under-spending was as a result of delays with the vetting of MOAs between the DAC and institutions of higher learning for the Heritage Professionals bursaries. The current expenditure on public corporation was R32 million (71%) and the under-spending was owing to the process of acquiring approval for the introduction and creation of MGE beneficiaries on SCOA. The capital expenditure for public corporations was R8 million (178%). The over-expenditure was as a result of payment made to the Mpumalanga Economic Growth Agency for the upgrading of community arts centre projects which could not be made in the prior financial year due to the late submission of the entity form by the beneficiary for verification of its banking details.

Foreign Government and International Organisations did not incur any expenditure due to the African World Heritage Fund experiencing challenges with acquiring its tax certificate from the South African Revenue Service (SARS). This resulted in the DAC not being able to make a transfer to the beneficiary. Heritage Assets also did not spend any of the R44 million projected budget. Varied challenges were experienced with regard to the implementation of capital works on legacy projects. A reprioritisation exercise of capital works projects was done during the 2019 Adjusted Estimates of National Expenditure (AENE) process for Treasury approval. Higher education institutions also incurred no expenditure, versus a quarterly projected budget of R1.9 million. The under-spending was as a result of delays in signing an MOA between the DAC and institutions of higher learning towards the financially supported Human Language Technology project.

Machinery and equipment incurred an expenditure of R5.9 million versus a quarterly projected budget of R544 000 in the first quarter. The over-expenditure was related to the payment of the invoice for the procured Departmental office furniture ordered in the prior financial year, and desktop computers and laptops for the intake of the interns. Interest and rent on land incurred an actual expenditure of R8.9 million versus a nil quarterly projected budget. This related to interest overdue on withheld payment on receipt of the qualified report from Opiconsivia Investments 314 (Pty) Ltd, a DAC MGE beneficiary. Software and other intangible assets incurred an actual expenditure of R947 300 versus a nil quarterly projected budget. The expenditure related to the procurement of security information and event management solution and Mimecast licences. Payment for financial assets incurred an actual expenditure of R30 545 versus a nil quarterly projected budget. The expenditure related to hired car damages incurred by officials while on duty.

Mr Mkhize assured the Committee that the Department’s efforts would be focused on the matters that needed to be settled and cleared, specifically in relation to outstanding payments from the previous financial year.

Discussion

The Chairperson raised the issue of planning within the Department and expressed concern regarding feasibility studies that needed to be done in the previous financial year that had still not been implemented yet. It was unacceptable to hear that these studies were not done on time.

Ms V Mogotsi (ANC) was concerned that the Department had not been fulfilling their role in assisting the Committee since it started in 2014. She believed the five years had been wasted. She referred to underspending due to vacant positions, and asked where the Department was in terms of its vacancy rate and why the vacancies were not being filled. Unemployment was very high, and the Department had the duty to fill these posts. She questioned whether these positions were advertised internally and externally, how many posts there were and which categories they fell under.

Regarding the 80% non-payment of invoices which fell under SCM, she questioned why the internal auditors did not anticipate this. She requested an explanation for the delays and the causes of the 74% expenditure for non-profit institutions. They needed to be getting funding from the Department. Was there a problem within the Department that was causing these delays? There was something wrong with the 178% overspending of the public corporations’ capital. The information regarding who was supposed to be paid and the progress reports needed to be given to the Committee in the next meeting. The Mpumalanga project had to be followed up due to the over-expenditure.

She asked why the MGE was not being funded. The Department might end up going to court because of this. She expressed concern regarding the flagship projects to support artists. The Department was getting many applications, but some of these artists had not received any feedback. She asked the Department to give the Committee a spreadsheet with all the organisations who were being funded so that they could refer the artists to them. She claimed that it was a human rights issue, because the money was available but was not being given to the people. It was unacceptable.

The Chairperson commented that the Committee had already asked the Department for a list of all the organisations they were funding. However, this had not yet been received. The Committee needed to look at the information about the projects in terms of who the DAC was funding and how much was being given to each organisation. If this information was not given, then the Committee could not do its oversight. The Department was impeding the work of the Committee if they did not respond to these requests.

Mr Makondo emphasised the point made by the Chairperson. He referred to the sketch on accountability in the AGSA presentation, and said that if the Department could not master the accountability cycle, then it would not meet its targets. It had to start with management at the strategic level. He mentioned the issue with institutional governance under-spending of R75 million while achieving 86% of its targets. This did not add up and should be explained. Was the Department achieving more with less money or had the programme been over-budgeted for? This issue was seen in both the annual report and the first quarter report. In the annual report, 94% targets had been achieved, but there was under-expenditure of 54%. This indicated a problem with planning.

He further questioned the MGE and requested a list of projects funded through the MGE. He suggested the Committee should have an oversight of the MGE programme on a quarterly basis. He wanted to know how many people were assisted through this programme and whether they had received funding. The programme had achieved 100% of its targets. He asked for an elaboration of what this meant -- whether it meant all the targets had been fulfilled or if they were simply office targets not related to touching the lives of the people.

Mr G Grootboom (DA) referred to the number of newly built and/or modular libraries supported financially, which was indicated as 29. However, where was this reflected under the expenditure report? The understanding was that money was not given to the libraries, but rather equipment, books and infrastructure. Therefore there needed to be an explanation for this. He asked what the target population of the community dialogues was, and to whom they were directed. His understanding was that these dialogues were self-directed, without a wider audience.

The Chairperson said that some of these issues had been raised before in previous meetings since 2014. This meant that the Committee did not understand the explanations given by the Department. She asked whether the service provider for the flags in schools project was national or provincial.

DAC’s response

Mr Mkhize responded to the question about compensation and explained that the Department had a financial ceiling in 2017/18 and due to austerity measures was instructed not to fill the post once the ceiling had been reached. However, this was possible in 2018/19. There was a list of vacant positions advertised. The post for the Deputy DG for the Arts and Culture portfolio was advertised, and there was money available but there was not a suitable candidate. However, irrespective of the quality, these were still forwarded to the principal and the Minister to determine whether to proceed or not. He then explained that the issue of the DPW was related to the municipal services and invoices.

Ms Mogotsi said that Mr Mkhize had not responded to all of her questions.

Mr Mkhize apologised, and went on to explain that the Department had put a list of projects under the MGE and found that the demand had been higher than the available budget. The Department needed to review the process for applications because it was long and open-ended. It would be introducing a track and trace system. It was an intervention in the application process to give feedback to applicants and an acknowledgement of receipt. Another intervention was a contact centre that applicants could call and get a response and update their application. There would be three dedicated staff members to manage this contact centre to deal with any application queries.

The Chairperson asked when this system would come into place.

Mr Mkhize replied that the status report had been presented to him the week before and the system was intended to be up and running at the end of October. The status report could be forwarded to the Chairperson.

The Chairperson asked whether there was a backlog of applications from the previous financial year that had to be funded in this financial year.

Mr Mkhize confirmed that there was a spill-over of application from the previous year ,and there was a breakdown of all applications that could be forwarded to the Chairperson.

The Chairperson asked when she would be receiving this breakdown.

A representative from the Department said that the DAC had the breakdown from September 2017 and projects allocated in March 2018. It also had a breakdown of projects received from March 2018 to date. This included the project lists, provinces, status, and whether it was a mon-profit organisation (NPO). This could be given it within the next 10 minutes.

Ms Mogotsi said it was best that the Committee received the breakdown. She added that if there was such a high amount of applicants -- more than 800 000 -- then three officials may not be able to manage that. This should be looked into.

The Chairperson said that this information should be given at the next meeting, with the budget and the amounts transferred to each project. It was important for the Committee to understand the number of jobs created by the Department.

Mr Mkhize responded to the final point regarding the under-spending for institutional governance. He explained that this extra amount in the budget should be going to the heritage preservation and promotion programme instead. This needed to be reviewed this financial year. However, the Department could restructure the budget only in the next financial year, as advised by Treasury. He explained that there was a misalignment of targets with budgets, which accounted for the issues with the legacy programmes.

Mr Makondo pointed out that the extra budget in the institutional governance programme would not be enough to fund the heritage programme targets.

Mr Mkhize welcomed this statement, and acknowledged that this was where the challenge lay. These problems with legacy programmes had been around for years, and had to be corrected.

The Chairperson asked what the Department was doing in the meantime to ensure that under-expenditure did not happen again.

Mr Mkhize said that the DAC had formed a partnership with the Department of Human Settlements (DHS), and had found an organisation which would be the implementing agent for these legacy programmes. However, site visits to the areas revealed that the infrastructure had deteriorated and they had found that the costs and work required was much higher than what had been budgeted for. The provincial department and municipality had been looking at these issues. It was now at a stage where MOAs could be signed and the projects could be taken forward.

The Chairperson referred to the issue raised in the report regarding high spending on travelling. The Committee had asked the Department to provide a list of the officials who had gone overseas, including the details of where, for what reason and how much was spent. However, this information had not yet been received. The Committee needed this information in order to determine whether there was value in these overseas visits. She requested that this information be given before the end of business that day. It would be engaged with at the next meeting.

Mr Mkhize assured her that the Department would respond as soon as they left this meeting. There had been a delay because he needed to look at it before it was forwarded to the Committee.

Mr Makondo said there had been a problem in the Department relating to its project management abilities. He asked whether the cooperation between the institutional governance and heritage programmes was just an idea, or whether it would be carried out practically. Even though the Department was not responsible for implementation, it needed to have a team to help in understanding the problems that came up. An example was the Saartjie Baartman project.

The Chairperson said that this was linked to the unit responsible for the entities. There was a Deputy DG responsible for visiting the entities and the DG should not be doing that himself. The Department needed to relook at the directorate -- the unit that deals with entities needed to be beefed up because it dealt with 80% of the budget. This had improved, but it still had to be looked at and evaluated. The DG was at the strategic level.

She referred the meeting to chapter 10 of constitution regarding public administration. She requested that people serving in the entities, and even officials in the Department, should read this chapter.

Overview of Msunduzi Museum

Ms Kelebogile Sethibelo, DDG: Institutional Governance, DAC, presented an overview of the Msunduzi Museum. The Department had reviewed the performance of the museum for the last three years. In 2015/16, 87% of targets were achieved, 97% in 2016/17, and 90% in 2017/18. The reasons for the 10% non-achievement included that the target number of visitors was lower than expected, a delayed stock-take at Ncome Museum due to an injured staff member, and a 90% achievement of exhibitions. However the 10% target for exhibitions had now been achieved. The corrective actions for non-achievement of targets included a review of the marketing strategy to increase the number of visitors, and to plan for any contingencies so that services were not delayed.

Regarding income and expenditure trends over the last three years, in 2015/16 there was an income of R13.9 million and expenditure of R15.7 million. This meant a deficit of R1.8 million. In 2016/17, there was an income of R15.1 million and an expenditure of R17.1 million, which meant a deficit of R2 million. In 2017/18 there was an income of R19 million and an expenditure of R16.8 million. The surplus was R2.3 million, which was of concern. There had been a meeting to address this, and the museum was warned that if they did not use their budget it would be reduced. The Ncome site was of concern, as it was under-funded. There was a bed-and-breakfast (B&B) facility that was not utilised fully. There was a need to engage the Department of Tourism in order to train people in the hospitality sector.

There was an improvement in current assets and liabilities, resulting in a net asset value of R11.8 million in 2017/18. The surplus funds were R2.4 million. The Msunduzi Museum had achieved an unqualified report for the second year in a row, but they could do more. There was not much fruitless and wasteful expenditure, but the irregular expenditure had to be looked at. Irregular expenditure of R10 910 was incurred by the Museum by sourcing legal services without obtaining a price quotation. To avoid a recurrence of this, a legal firm would be appointed through a service level agreement (SLA) to render legal services to the Museum. An amount of R2 265 was attributable to the extension of car hire without obtaining three price quotations. The Council member involved had resigned.

Regarding the composition of staff, there were vacancies that needed to be filled. The Ncome Museum presented a challenge on finalising the operational budget. The entity had been advised to develop a business case for the operationalisation of the Ncome Museum so that the entity could benefit from its hospitality facilities. The entity had also been advised to forge partnerships with the neighbouring heritage sites like the Isandlwana heritage site and the Blood River monument, which could generate income from their accommodation facilities. The entity had also signed an agreement with the neighbouring Blood River Monument to ensure that the reconciliation bridge was opened and maintained at all times.

Overall, the Museum should work towards a clean audit, but attention should go towards the Ncome Museum to get the relevant staff and work towards its operationalisation.

Msunduzi Museum: 2017/18 annual report

Mr Mlungisi Ngubane, Director, Msunduzi Museum, presented the 2017/18 annual report. A qualified audit opinion based on non-compliance with the implementation of GRAP 103 had been expressed by the AGSA in 2015/16. However, an unqualified audit opinion had been expressed for 2016/17 and in 2017/18. With regard to the Reconciliation Bridge, an SLA between the Msunduzi Museum Council and the Voortrekker Monument Council had been signed and the bridge had been in operation since December 2016. Joint Ncome/Blood River management meetings were held quarterly.

In response to the Minister’s priorities, the fifth Courageous Conversations Social Cohesion Conference was held at Ncome Museum, with simultaneous translation provided by the KZN DAC language services. Other events included the 19 Commemorative Day events, the Africa Month being celebrated, the OR Tambo lecture and exhibition being hosted in partnership with KZN Museum, and Library Week and Book Week activities taking place to promote the use of libraries and encourage reading.

The Msunduzi and Ncome Museums delivered a range of programmes and achieved 90% of all targets. Administration targets were 83% achieved, Business development targets were 91% achieved, public engagement through exhibition targets were 75% achieved, and public engagement through education targets were 100% achieved. Other achievements included research projects, publications, educational programmes and craft and herbal workshops.

Human Resources had approved 41 posts with 5% vacancies, which was now reduced to 1%. The total expenses were R16.7 million. Compensation of employees was R10.6 million, and total goods and services was R6.1 million. The total revenue was R19 million, including a grant subsidy of R16 million.

The challenges included depletion of funding, inadequate funding for remuneration causing council members to resign, and high audit fees for internal and AGSA audits. The implementation of GRAP 103 on an ongoing basis would require additional funding in order to undertake a revaluation of the entire collection every five years.

The audit outcome implementation plan included, but was not limited to, the review of technical indicators, developing an SCM checklist, a review of tender procedures, developing a leave policy, and a monthly reconciliation of revenue collected and income received in advance reviewed by an independent person. Irregular expenditure incurred for 2017/18 was R13 175, due to legal fees utilised without three quotations, and a car hire extended without three quotations. This would be corrected by entering into an SLA with one legal firm, and would follow due process.

Discussion

Mr Makondo (ANC) asked how long the director had assumed his role.

Mr Ngubane replied that he had been in his position for five years.

Mr Makondo said he had not expected some of the issues that had been raised. For example, the issue of SCM processes should not arise at such an early stage. The Department should assist. It was unacceptable that lawyers did not want to submit quotations. The other entities had a pool of services that could be used. He did not understand why they had not achieved all of their targets with such a big staff unit that took up 80% of their budget. It was unacceptable to have performance targets that were undefined or not reliable.

Ms S Tsoleli (ANC) asked how many members there were on the board of the Museum. Considering the small size of the entity, there should not be a big board. When the Committee had visited the institution, it was neglected. There should be more attention paid to the Ncome Museum. Some of the issues addressed by the Committee were not being seen to. The facilities were beautiful, but would be worn out if they were not in use. The accommodation facilities could be making the Museum a lot of money. The Department should be implementing, instead of planning and thinking about things. They should be engaging with the Department of Tourism upon these matters.

The Chairperson wanted to know more about the policies that addressed the work the museum was doing. She further questioned what was done about the R13 000 in irregular expenditure and consequence management. She reiterated her point on fairness and justice when it came to consequence management. The Department should also respond on the issue of post-retirement medical aid.

Mr Grootboom (asked when the entity had received the audit outcomes. The questions to follow were relevant to the timeline.

Mr Ngubane responded that they received them between May and June 2018.

Mr Grootboom said that the audit outcomes implementation plan that was presented seemed like it was just prepared for the Committee, or it took a very long time to start the plan. These plans were only going to start happening in November, towards the end of this year. He questioned why the Museum was redeveloping leave policies when other entities already had leave policies. This was a waste of time. The Museum should rather just update and reform existing leave policies.

Museum’s response

Dr Joy Ndlovu, Chairperson of the Board, Msunduzi Museum, said that this was a new board which had been operating for only just under a year. As they had inherited historical issues regarding the Ncume Museum, the Board had sat down with management and found that the issues were the lack of resources. They did not have the capabilities and skills for matters such as hospitality, infrastructure, advertising and marketing. It had been decided that a task team needed to be formed to deal with Ncume Museum. It needed experts to advise them on the hospitality sector.

With respect to the irregular expenditure, the directors would definitely be working on preventing this. With regard to irregular expenditure, due processes were being followed and an application for condonation was to be made to Treasury. She said the historical director had left during her tenure due to irregular expenditure. However, no members had left due to remuneration issues, and the board members did not expect a lot of money from such a small entity. She added that the Museum still needed to have a strategy plan at Ncume Museum, and agreed with the Committee that the board could do better.

Mr Zakhele Gumede, Chairperson of the Finance Committee, Msunduzi Museum, explained that the board struggled to get quorums for meetings, which resulted in postponements. He said that the R2 million surplus was a result of issues between the DAC and DPW. Work needed to be done at the Museum, but this could not be done and the money could not be used until technical input was given by the DPW. The other issue relating to the surplus was the problem with GRAP compliance.

The Chairperson asked why GRAP compliance was budgeted for, and the museum was given money to do it.

Mr Gumede responded that they had been given money previously, and thought it should be evaluated every year at the same level, but found out they only needed to do additions.

Mr Grootboom pointed out that GRAP was not only about the evaluation of assets but also about evaluation of record keeping.

The Chairperson mentioned that record keeping was included in the statement given here.

The Museum’s response was that with regard to post-retirement medical aid obligations, the employees who joined after 1995 were exempted and did not claim this money, so there was no liability. However, there were two or three from that era who were claiming.

The Chairperson asked whether the post-retirement medical aid for the three employees was budgeted for.

He was told that there were originally ten, but two had resigned. The entity did have leave and HR policies. This had been assigned by the AG, and was developed and approved by the board.

Mr Makondo mentioned the issue of language policy that was raised in KZN, and asked whether this had been dealt with. If there were already policies, why had the AG recommended policy development? He further questioned why there was a failure to reconcile the financials. A R16 million budget was too big for a very small entity.

The Chairperson said that when the Committee met with AG, material misstatements were raised. The Department should look into this. It was important that it was done right the first time so that one limited the expense.

Dr Ndlovu said that the issue of language policy had to do with finances. Language policy boiled down to finding money to pay someone to translate into Sesotho. The museum had one of its council members translating into isiZulu without being paid. It was expected that a similar agreement could be made with Sesotho because it was not budgeted for. If there was money for it, then someone could be paid to do it.

Mr Makondo (ANC) said that the Committee had raised this in 2016 already, so the issue of budget should not arise.

Dr Ndlovu said she was not aware that this issue had been raised in 2016. As new members, they were not aware. The leave policy was not at the level it was supposed to be. She added that the newly appointed CFO had been attracted, based on the level that she was being paid. She had started as a junior and had learnt on the job.

The Chairperson said that the Department had to start implementing instead of just planning, and the entities should do the same. There were a number of issues raised, but only some of them were being implemented, while others were still being thought about. The Department needed to explain to the Committee what they had done as far as what was discussed at the meeting with Chairs and deputy chairs of the heritage sectors, the development centres and all the playhouses

Ms Sethibelo said that there had been a report that came from that meeting with chairs and deputy chairs, which had been forwarded to the Committee. The Department had budgeted for the cause of compliance in 2018/19, and had requested the National Treasury to relax the categorisation especially for the cultural institutions. However, despite follow ups and writing letters to the Minister of Finance, the Department had not received any feedback. National Treasury had told the Department that they were positive, but the DAC needed this in writing in order to release the funds to allow for the meeting allowance for council members.

Mr Makondo asked why the Department was not assisting the museum with the language unit.

The Chairperson added that language was the mandate of the Department, and it had to ensure that its entities complied.

Mr Mkhize said that the Department was not aware that the Museum needed support. The Department had translators and would make sure it would deal with this issue upon leaving today.

The Chairperson said it was important for the entities to ask the Department when it needed help. The Department needed to tell the entities how they utilised the DPW. Government should not work in silos.


National Film and Video Foundation (NFVF) Overview 

The Chairperson said that the National Film and Video Foundation (NFVF) was one of those entities that were troubled. The Committee urged them to openly discuss what was happening, so that the Committee could assess and recommend appropriately. She invited the Department to provide a brief overview of the NFVF.

Director-General Mkhize presented the status of governance regarding the number of council, committee, audit and staff meetings for the last three years. The NFVF had achieved 98% of its targets in 2017/18, which was an improvement compared to the two previous years. The reason for the non-achievement of 2% was the delay in approval of three policy manuals. The entity had embarked on an organisation design process and had resolved to complete the process first before approval of the policy manuals. This target would be prioritised in the 2018/19 financial year.

The income and expenditure trends for the last three years were presented. There was an income of R145.9 million and an expenditure of R152.3 million in 2017/18. This had resulted in a R6.3 million deficit. The financial position had declined in 2017/18 compared to the previous two years, with a negative net asset value of R4.4 million. The net working capital funds were R21.4 million for 2017/18. The audit outcomes remained unchanged for the last three years, as unqualified with findings.

The irregular expenditure amount of R9.5 million was made up of the opening balance from the previous financial year amounting to R2.4 million (not condoned), and the expenditure identified during the year amounting to R7.1 million. This was related to renovations; a marketing contract; tax clearance certificates and budget overspending; and non-compliance with SCM prescripts. Disciplinary processes were underway for expenditure incurred relating to the marketing contract.

Challenges involved the NFVF staff raising their concerns with the DAC on numerous allegations of mismanagement, corruption and conflict of interest by Council members. The DAC had instituted a forensic investigation to determine the veracity of allegations submitted by the concerned NFVF staff. The investigation was completed in March 2018 and was presented to Council for the implementation of recommendations. The findings of the report included that the former NFVF CEO, CFO and deputy chairperson had brought family members to the 2017 South African Film and Television Awards (SAFTA) at the expense of the NFVF. Letters of demand had been sent to all three individuals. The NFVF had received R70 140 from the former CFO as payment. A settlement agreement was in the process of being concluded with the former CEO for R75 876. Summons to the value of R39 042 have been issued to the former deputy chairperson.

Another finding was the approval of overspending on office renovations to the value of R726 267 by some former NFVF management, which had resulted in unauthorised expenditure in terms of the Public Finance Management Act (PFMA), and not adhering to process by the former CEO by splitting of work in order to avoid a competitive bidding process. This had resulted in non-compliance to the National Treasury Practice Note 8 and the NFVF’s SCM policy. All the implicated individuals had resigned and/or opted for voluntary retrenchment from the NFVF. The expenditure had been reported as irregular in the 2017 and 2018 annual financial statements. New management was implementing improved measures to ensure that strict adherence to policies was embedded in the organisation, along with controls to detect when such transgressions occurred for early corrective action.

The former CEO was also found to have contravened the NFVF HR Policy in the appointment of her personal assistant (PA). The former CEO had resigned. The PA position had been advertised, interviews were held, and the current PA was appointed. No action had been taken against the PA as there no wrongdoing was found on her part.

Council members were found to have travelled internationally without the Minister’s approval. Furthermore, international travel relating to the Council and other NFVF officials was found to be over budget by R2 299 455. Three specific findings were made regarding Mr Molefe, Mr Masudubele and Ms Mashiane, who were current Council members. The report did not make any recommendations relating to its findings regarding these Council members. International travel by Council members had not been undertaken without the Minister’s approval since these findings came to light. The Chairperson had informed the DAC of the travel of Mr Masudubele, the conflict of interest and double booking at Cannes Film Festival and the London trip, which had nothing to do with the NFVF core business. The Council Member had since resigned, and the Council had to pursue this matter.

Another challenge was the anonymous correspondence from concerned staff of the NFVF, pleading once more for the Minister’s intervention on a number of issues. Formal correspondence had been forwarded to the NFVF Council to inform the Ministry on the allegations raised. The NFVF had committed to respond to the Ministerial correspondence as a matter of urgency.

Lastly, there was correspondence from eight of the 11 Council members, requesting the Minister to invoke Section 6 (6) of the NFVF Act 1997 by removing three of the Council members. The Minister had convened a meeting with the Council on 20 September to resolve the issues between the Council members. The Council had committed to working together to resolve their differences and to focus on the mandate of the NFVF as a strategic national interest. The Minister had tasked the Council to prepare a position paper which would inform the Ministry on how to use the film industry as a major contributor to the economy. This position paper would be presented by the Minister during the BRICS Ministers of Culture meeting, which was scheduled for end of October 2018.

The Chairperson reminded the Department that the Committee required specific details regarding what, when and who would do what needed to be done. She added that specific dates were required so that the Committee could follow up on matters raised. Once the NFVF had presented, then questions for both the Department and the entity would be asked.

National Film and Video Foundation: Annual report

Mr Phil Molefe, Chairperson, NFVF, presented the 2017/18 annual report which included a strategic overview and the goals of the organisation, the implementation and performance plan, and the financial report. An updated presentation had been circulated that morning with additional graphs to assist and provide more detail regarding demographics, race, gender and provincial spread.

The strategic goals of the NFVF were to increase the number of people trained in the industry, develop appropriate policy interventions for the South Africa (SA) film industry, increase the number of South African films produced by previously disadvantaged individuals (PDI), promote the SA Film Industry locally and internationally, and to fulfil statutory and governance obligations as set out in relevant legislation. There were additional goals regarding transformation, infrastructure development and accessibility, policy and research development, social cohesion and nation building as well as developing partnerships and an Africa focus. This included the promotion of SA films in Ghana.

Mr Shadrack Bokaba, Acting CEO, NFVF, presented the performance targets and elaborated on how the NFVF would achieve its strategic goals through its five programmes.

The first was the training and skills development programme, which was comprised of six targets relating to bursaries, internships, funding of training companies, filmmaker programmes, mentorship programmes and schools programme. They had achieved a total of 128 bursaries, which was 62 more than targeted due to the NFVF Media Information and Communications Technologies (MICT) Sector Education and Training Authority (Seta), partnership which had provided additional funding for extra bursaries. The number of bursaries approved every year had continued to grow over the last seven years. Gauteng was where most bursary holders came from, followed by the Western Cape, Eastern Cape and Kwazulu-Natal. The NFVF would continue to do roadshows to get more applications from other provinces. Most bursary students studied film and TV production, cinematography, directing and screenwriting, and digital animation. Most students were in their second and third years of university, with a few at Masters level, while one was a PhD student. The top two institutions where these students were enrolled were private institutions, but the NFVF wanted to increase number of learners who went to public institutions. Three students could go to a public university for every one that went to a private institution due to the difference in tuition fees. The racial and gender profile of bursary students was 88% black and 12% white, and 56% male students to 44% female students.

A total of 120 interns had been placed, which over-achieved by 95, also as a result of the additional funding by the MICT Seta. The number of intern placements had been increasing for the last five years, starting with 20 in 2013/14, to 120 in 2017/18. The provinces where the institutions hosting the largest number of NFVF approved interns were Gauteng, followed by the Western Cape, Eastern Cape and Kwazulu-Natal.

Three training companies were funded, and the Sediba programme hosted 60 filmmakers, and both were on target. A total of 12 students participated in mentorship programmes, which was over-achieved by two students due to an additional mentorship programme in Canada. Two schools programmes were held and 621 learners participated, which was 121 more than targeted.
In the policy and research programme, the NFVF had met targets for two policy workshops conducted, four quarterly policy monitoring reports produced, two policy and legislative submissions contributed, and had achieved compliance with control management systems. The NFVF had also over achieved with an additional research publication, due to a special request from production for a slate project. However, it did not achieve any of the three policy manuals to be approved by Council, as it was awaiting the completion of the organisational design process.

The production and development of content achieved all nine of its targets, with a few over-achievements. The main aim of this programme was to increase the number of films produced by previously disadvantaged individuals (PDIs). This included projects funded in development and production, awards to filmmakers in various categories, 100% certification of applications received, as well as co-production activations. More projects in development and production were funded due to some applicants requesting less than the maximum allocation pre-project. Most of the projects funded were from Gauteng, followed by the Western Cape, Kwazulu-Natal and the Eastern Cape. The racial and gender profile of the projects funded were 77% black, 19% white; 63% male, 35% female.

The marketing and distribution programme also achieved all 13 of its targets, with many over-achievements. These included festivals and activations attended, hosting of the SA Film and TV awards, stakeholder engagement, communication campaigns, implementing a digital platform for the SA film industry, funding marketing and distribution grants, as well as implementing awareness programmes.

The administration and human resources programme achieved all eight of its targets, which included reporting, management accounts, risk assessment, internal audits, staff training and legal compliance. One more internal audit was achieved than targeted, and three more staff were trained due to them requesting courses that cost less than what had been budgeted for.

Ms Zimkhitha Zatu, Deputy Chairperson, NFVF, presented the audit outcomes and governance report. The NFVF achieved an unqualified opinion with findings for the 2017/18 financial year. The three findings included that the NFVF incurred irregular expenditure of R7 million, of which R2 million was carried over from the previous year, most of which related to the renovation project, which was a result of the overspending of the budget and not following the proper tender process. The second issue related to a R1.6 million contract with Live Plus, where some work was out of scope of the contract and resulted in over-expenditure.

Other findings included material misstatements of the current liabilities in the financial statements, and that a person in the service of the entity whose associate had a business interest in a contract awarded by the entity, had participated in the process relating to that contract.

There were two ongoing investigations, the first relating to bursary fraud. The investigation recommended that criminal and civil proceedings to be pursued against the former official concerned. The two processes were independent of each other and were both under way with the National Prosecuting Authority and NFVF attorneys. The NFVF had blocked the pension fund of the individual concerned. The second was the investigation commissioned by the Minister of Arts and Culture after allegations were made by whistle blowers relating to non-compliance, irregular conduct, and wastage or abuse of resources by management of the NFVF. The NFVF was trying to recover some of the funding, and were strengthening the SCM and contract management.

Ms Mbali Buthelezi, CFO, NFVF, presented the financial statements. There was a decrease in the total assets, from R83 million in 2016/17 to R79.9 million in 2017/18. There was an increase in the liabilities, from R81.2 million in 2016/17 to R84.3 million in 2017/18. The total revenue for 2017/18 was R149.7 million, with R129 million from the DAC allocation, and the rest from partnerships, recoupments and investment income. The total expenditure for 2017/18 was R115 million, with R16.9 million going towards training and bursaries, R46 million towards development and production, and R50.4 million towards local and global positioning. This excluded the operational costs of R40 million. The accounts showed a deficit of R6 million. However, according to the cash expenditure, NFVF still sits at a positive amount as it had investments in the bank account. These were solely for film makers, which were disbursed over a period of two years.

Mr Molefe provided the closing remarks, mentioning that even though there had been issues along the way, the NFVF board had put measures in place to address them. It had made sure that it had put a competent management team in place, as demonstrated with appointment of the new CFO, and the NFVF would support the Committee in carrying out its mandate.

Discussion

The Chairperson requested the presenters to be more specific regarding the details of their plans and performance. She urged the NFVF, as well as the Department, to have people in charge of applicants, and to deal with correspondence. She had letters from people who had not received any feedback from the NFVF. It was important to be more responsive. It was a disgrace when there was not even an acknowledgement of the receipt of a proposal.

Mr Makondo commented that an overview of Department was not found in presentation of the NFVF. The Department had mentioned that there was an over-expenditure of R2 million, but this was not mentioned in the NFVF’s presentation. He requested the DG to explain how the Department was dealing with members of the board who had misused NFVF money. There had been a meeting with the Minister, but he questioned what was actually being done. He was happy that the NFVF was collecting the money and some of it was being paid. He commended the NFVF, as they were the only institution that was following the money and bringing it back to the government. He asked for an explanation of the process that was used for funding films, in terms of advertisements and applications. He questioned what the NFVF’s relationship was with the South African Heritage Resources Agency (SAHRA), and whether the reference to private institutions being more expensive than public institutions was related to such an institution.

Mr Grootboom commended the process of recouping the state’s money, and questioned why the Department did not follow a similar process regarding similar misuse of funds. He referred to the NFVF’s expenditure report and questioned why the CFO had reported that the NFVF was in a good financial position, as the overview of Department stated that it had gone from a surplus to a growing deficit. He further questioned the local and global positioning expense and where it emanated from, as it did not feature in the NFVF’s previous financial records. He asked if it included Nollywood and Bollywood too. He wanted explanation of the term ‘black’ used in the race profile of allocated bursaries.

NFVF’s response

Mr Molefe responded by confirming that Bollywood, or India, was included in the NFVF’s work through its efforts with BRICS. Nollywood, or Nigeria, formed part of the African film forum that the NFVF had developed. The NFVF was forming a partnership with Nigeria so that it could harness the synergies and learn from them. The NFVF was also driving Sollywood, which was relevant to the south, as per the Minister’s request.
He explained that term ‘black’ in the race profile referred to Africans, Indians and coloureds (AIC).

He gave an assurance that the bursary and funding application process was very open, and was comprised of different cycles throughout the year, as explained on their website. The NFVF did not take part in the adjudication and appoints an independent panel which was drawn from industry, experts in films. This applied to film funding. There was also a panel for bursary applications, which was comprised of academics, and so on.

The number of students going to the African Film Drama Academy (AFDA) and other private institutions had been reduced so that more students could be funded. However, the students had the final say on where they want to go. The NFVF encouraged them to go to public institutions.

With regard to the misuse of money and its recovery, he said that the NFVF had implemented almost all the recommendations given in the investigation report provided by the Department.

He assured the Chairperson that the NFVF would provide more specific information in future meetings and reports. He would also take up the matter regarding responsiveness with management, and would make sure all applications and proposals were acknowledged and responded to.

Ms Zatu clarified that the financial figures presented by the Department and the NFVF were 100% aligned. The Department had presented R9 million of irregular expenditure, R2 million of which was carried over from the previous year, and R7 million was incurred in the current year.

She explained that there were two positions with regard to the financial health of the NFVF. The one position talked to performance and referred to the income statement, while the other talked to the financial position addressed in the balance sheet. A good position referred to the liquidity, and the ability of the NFVF to service the liabilities when they were due. It meant that the NFVF had sufficient liquidity in terms of cash and investments to be able to meet those obligations as and when they became due. She agreed that the NFVF did not want to be in a deficit, but it was a result of the over-expenditure. She explained the global and local position, which addressed one of the strategic goals relating to marketing and development. She said SA had good content in the film industry, but lacked good marketing. This included the showcasing of films at festivals.

Mr Mkhize responded to the question about the meeting and resolution regarding challenges at the NFVF. The meeting had gone to great lengths to identify the challenges raised by the Council. Before a Council member could travel abroad, they would need to get permission from the Minister. When the chairperson of the NFVF was informed of the travel abroad, it was based on the information given by the CEO. The Chairperson did not mislead the council or the Department. If there was anyone else misusing the money, the Department would make sure that the Council recoups the money. The Council chairperson and deputy chairperson should continue to give updates to the Department regarding the implementation of the report. Internal auditors would also monitor its implementation.

Regarding the conflict and disruptions in the meetings, the resolution was that they must start working as a team. The chairperson and Council members should handle the conflicts internally before involving the Minister. There were some internal processes that they needed to adhere to, such as the right to resign, and the ability to hold each other accountable in the meeting. Should the internal resolution fail, then the Minister would get involved.

The Chairperson asked Mr Makondo whether he was satisfied with the response.

Mr Makondo said that when he looked back at the report, he did not understand. The members of the Council were using NFVF money to travel abroad, and it had been investigated. The investigation had stated that the chairperson had not been aware that he should not travel without it being approved by the Minister. It was an oversight by the Department, who should have informed him beforehand. But what had been said was not clear, and needed to be clarified. People should not be treated differently. He thought the NFVF could do better than receive an unqualified audit opinion. He asked why it had taken so long to replace the CEO.

Mr Molefe clarified that the unqualified audit opinion had preceded the acting CEO, as the financial year ended in March. The acting CEO had taken up this position in June, and now it was four months later. The application and selection process would be completed any time from now. He explained that he did not have any specific information because this matter had taken out of Council to an independent panel. The latest update was that interviews had been completed, and were now in the final selection stages.

He then responded to the issue of travelling abroad, of which he was also a part. He referred Mr Makondo to the report dashboard outlining the allegation, findings, recommendations and status.

Mr Makondo requested the Department to clarify the question, and not Mr Molefe himself.

Ms Sethibelo said that the Minister had issued a letter to all Council members to explain that all travel plans should be approved to Minister.

The Chairperson asked when the letter was written.

Ms Sethibelo replied that the letters were written in February 2017. She explained that the Chairperson of the NFVF had been travelling to China, and the former CEO had told him that the travel had been approved, which was why they had gone ahead with the plans. There was also a Council member who had booked a trip to Cannes with two extra rooms and then travelled to London where he had no business. This matter needed to be dealt with, and the money had to be recovered. Now all Council members had to seek approval from the Minister before travelling.

The Chairperson asked how it had happened that a Council member was able to book travel plans.

Ms Sethibelo replied that the Department was in the process of finding out from the NFVF travel agent.

The Chairperson asked whether it was the NFVF that booked the rooms, and not the Council member himself.

Mr Makondo said he was being denied an answer. He did not want Mr Molefe to explain, as it would involve him defending himself.

Mr Mkhize explained that the Department issued a directive that stated that Council members travelling abroad should get permission from the Minister. This had happened prior to the report and the investigation. Anyone who was given approval for travel by the former CEO had been misled. If this was not the case, then the Department needed to look into it. Double standards were not acceptable in the Department. He assured Mr Makondo that he was not being evasive. This was all the information that he had, and it was what had been explained by the chairperson of the NFVF at the meeting with the Minister.

The Chairperson then asked whether it was only one trip in question, and if so which one it was.

Ms Sethibelo replied that it was only one trip.

Mr Makondo asked how much the trip was.

Mr Mkhize said that he did not have the figure with him at that time, but could request this and forward it to the Committee.

The Chairperson said that the Department should avoid treating people differently, as it set the wrong precedent. It was important to be honest and open about what was happening in the Department and the entities.

She asked where the PA was now in the NFVF.

Mr Bokaba responded that the PA’s contract had ended when he came on board, and she had reapplied and was now a permanent staff member.

The Chairperson said that the Committee promoted fairness and justice, and it was good that she was not punished for something she did not do.


National Library of South Africa (NLSA): Overview 

The Chairperson said that the Committee had received some documents regarding what was happening at the National Library. The Committee advised that it should be sent to the Department. However, the Department had given no acknowledgment of receipt and that was why it was sent back to the Committee. She asked that the Department to make a comment regarding this issue.

Ms Kelebogile Sethibelo, DDG: Institutional Governance, DAC, presented an overview of the National Library of South Africa (NLSA). It had achieved 90% of its targets in 2017/18. The income was R260 million and the expenditure was R257 million. The allocation of the conditional grant had increased from R30 million in the 2016/17 financial year to R42 million in the 2017/18 financial year. The total assets and total liabilities for 2017/18 were R184 million and R156 million respectively. This resulted in a net asset value of R27 million. The audit outcome for the NLSA had been qualified for the last three years. The basis for the qualified opinion for the 2017/18 financial year was related to the heritage assets and gains from legal deposits.

The irregular expenditure of R1.48 million was a result of procurement without competitive quotes, expenditure not approved by the appropriate delegation, and a tender awarded to supplier not on the tender submission register. The official who caused the irregular expenditure amounting to R1.39 million had subsequently been dismissed. Irregular expenditure of R97 325 was dealt with by charging the officials with financial misconduct, and a recoverable debt was raised against them. Irregular expenditure amounting to R2.51 million was still under investigation. Fruitless and wasteful expenditure of R88 129 was a result of unauthorised use of work cell phones and data services for private purposes. Another amount of R15 938 was a result of unauthorised charges which resulted in double charges effected on the same trip. The money had been recovered from the officials concerned.

Ms Sethibelo referred to the governance of the NLSA, and said the oversight activity of concern was that no staff meetings were held in the last three years. One challenge that was raised involved a complaint by a concerned NLSA employee. The Board had decided to appoint an independent company to ascertain the veracity of the allegations. This was also communicated to the Minister in the last two weeks. A report was expected at the end of October 2018.

The Chairperson commented that if staff members reported a problem, why did the NLSA need an external company to listen to them? This was an extra cost to the board. She emphasised the need to ensure effective use of resources for what they had been allocated for. The first move was for the board to listen to the people.

National Library of South Africa: Annual report

Mr Themba Dlamini, Chairperson, NLSA, presented an overview of the governance of NLSA. He explained the various board committees, including audit and risk, research and knowledge management, information communication technology (ICT) strategy, human resources (HR) and remuneration, and finance. He said the NLSA was aligned with the audit report given by the Department. He explained that the audit report had been compiled quite late in the financial year.

The committees had not experienced much instability over the last three years. The NLSA’s compliance with GRAP 103 had seen a permanent qualification for the last three years. There had been one engagement with National Treasury to request an exemption, but this had not been granted. The NLSA had been given money by the Department to overcome the challenge of GRAP 103. He then explained the whistle-blowing issue that had been raised by the Chairperson.

The whistle blowing complaint had been received by a board member and was brought up at the board meeting. The board had decided to get an external company to investigate this issue. The internal auditors were also consulted to conduct an ad hoc investigation, but the cost was way beyond the threshold. The board then sought out three quotations. The cost was about R125 000 to complete the investigation by the end of October. When the Department presented the letter to the board, the decision had already been made to carry out the investigation. The Minister was also updated in this regard.

A different presentation was then opened, regarding the whistle blowing issues and the implementation plan. The first stage of the plan was under way, data had been collected and the information delivered the service provider. Interviews would be conducted in the following week.

The Chairperson asked whether the whistle blowers had received this information.

Mr Dlamini replied that the whistle blowers had not received it. The route of external investigation had been taken in order to protect the whistle blowers.

The Chairperson then asked if there was ever a meeting with the staff of NLSA about the whistle blowing incident.

Mr Dlamini replied that there was not.

Mr Makondo asked why the NLSA was wasting the government’s money.

Mr Dlamini acknowledged that this external investigation was viewed as wastage, but the decision had been made in order to uphold the integrity of the investigation and the protection of the whistle blowers.

Mr Makondo commented that he did not know what was being investigated, but it seemed as though the board was not taking responsibility. He disagreed with the decision to appoint external investigators and the lack of communication with the whistle blowers on the progress of the investigation. The board was expected to explain and communicate to the staff and the whistle blowers about the issue. A report was expected in two weeks, yet there was no evidence that the whistle blowers had been contacted by the investigators. This was unacceptable and was a waste of money.

The Chairperson advised that the Committee should revert back to the presentation.

NLSA annual report presentation resumed

Prof Rocky Ralebipi-Simela, CEO and National Librarian, NLSA, presented the mission, vision, mandate and performance report of the NLSA. The NLSA envisioned itself as a world class African national library and information hub. It aimed to build, record, preserve, conserve and make available a complete South African documentary heritage fostering a reading nation towards an informed citizenry. Its values were based on integrity, excellence, innovation, collaboration, and accountability. It was mandated to contribute to socio-economic, cultural, educational, scientific and innovative development by collecting, recording, preserving and making available the national documentary heritage; promoting an awareness and appreciation thereof; fostering information literacy; and facilitating access to the world’s information resources. It had six strategic-oriented outcome goals to achieve this mandate.

The NLSA had achieved 90% of its targets for 2017/18. The non-achieved targets were related to business development, public engagement and administration. This included the GRAP 103 issues, as well as the amount of money that NLSA had committed to raise for itself.

The highlights for the 2017/18 year included the celebration of 200 years of public libraries, the Library Information Services (LIS) graduate development programme which helps creates jobs, the ICT graduate programme, and the Funda Mzantsi Reading Competition. Others included the LIS National Policy Development Project, the LIS Academic Standard Development Project in partnership with the Council on Higher Education (CHE), the Cape Town Declaration and the Africa We Want, the NLSA chairing the National Libraries Section of the African Library and Information Association (AfLIA), the Preservation of Documentary Heritage (NLSA serves as the Preservation and Conservation Centre), the Committee of Directors of National Libraries (CDNL) of which SA was vice chair, the Online Computer Library Centre (OCLC/EMEA), of which SA was an executive member, and the NLSA serves on the National Libraries section of the International Federation of Library Associations (IFLA).

Mr Nkosini Mashabane, CFO, NLSA, presented the financial performance of the NLSA. The NLSA received an income of R261.6 million for 2017/18. The government grant made up 32% of this income, amounting to R85.9 million. Conditional grants, based on agreed deliverables came from the government allocation, the Bill and Melinda Gates Foundation, and the National Lotteries Commission, and made up 18%, 25%, and 1% respectively. Service in kind income of R56.1 million, making up 21% of the income, was related to the free accommodation costs that the NLSA had received from state-owned properties, and  was just an accounting entry listed under expenditure as well.

The total expenditure for the 2017/18 year amounted to R262.9 million. Personnel costs made up 26% of expenditure, conditional grant spending made up 40%, service in kind made up 21%, and goods and services made up 5%. Less significant expenditure included 3% on contracts and consultants, 2% on subscriptions and licences, 2% on asset utilisation, and less than 1% on audit fees. The government subsidy allowance expenditure was also presented, with the largest portion going to personnel costs.

The audit outcome remained unchanged compared to the previous financial year. The annual financial statements had obtained a qualified audit opinion. The basis for the qualified opinion related to the heritage assets and gains from legal deposits, completeness of the heritage asset register, and valuation of library collections. The NLSA had consulted with the National Treasury, the DAC and the Accounting Standards Board (ASB) on the proposed solution for the implementation of GRAP 103,
and advertised a request for information (RFI) to potential accounting and advisory service providers with a purpose of sourcing expertise on GRAP 103 implementation, and the GRAP 103 implementation project was under way. To date, two Heritage Asset Registers had been produced and were due for valuation.

The compliance with legislation outcome related to irregular expenditure amounting to R1.4 million, and the systems to safeguard and maintain Heritage Assets was not implemented. The NLSA implemented controls to curtail the occurrence of irregular expenditure, consequence management was enforced, and 94% of the irregular expenditure (R1.3 million) was condoned by National Treasury. The WorldShare Management System was implemented to record Heritage Assets, and the physical verification of library collections had been initiated.

The NLSA had identified three key challenges, which included the funding model which noted the growing costs of personnel while not all the position had been filled. The post-retirement obligations and GRAP 103 compliance also remained a challenge.

Discussion

Mr Makondo (ANC) asked the NLSA why they had not met their targets. They had regressed over the last few years.

The Chairperson commended the NLSA for reducing the travel expenses relating to international travel from R2.3 million in 2016/17, to R1.5 million in 2017/18. She noted the increase in professional fees and asked for an explanation. She questioned whether there were any board members being paid for consultation within the institution. She acknowledged the importance of the institution in encouraging people to read -- reading nations were winning nations. The Committee would like to see the integration and collaboration with other libraries within the country. She acknowledged the good work of the NLSA. She asked how much had been spent on litigation in the year under review. The Committee had received information from people who felt they were being victimised, such as a suspension during an investigation. She highlighted the importance of following the laws and regulations regarding the Labour Relations Act, otherwise a crime was being committed. If there was an appeal and the dismissal was overturned, the resolution should be implemented immediately. She asked why this was not happening. She also questioned whether the NLSA conducted exit interviews with staff who had resigned, and what process they followed in this regard.

NLSA’s response
Mr Mashudu Mavhungu, Executive Director: Corporate Services, NLSA, responded to the questions regarding HR. He explained that in the case of suspension of an employee, this could be before or after an investigation, but this needed to be resolved within 30 days.

The Chairperson asked whether it was still lawful to prolong the suspension for five months longer.

Mr Mashudu replied that this would be acting outside of the regulations.

The Chairperson then asked what the employee would have to do if the NLSA was operating outside of regulations.

Mr Mashudu responded that the employee could use other remedies, such as the Commission for Conciliation, Mediation and Arbitration (CCMA), but it should not get to that point. The disciplinary hearing should be within 30 days.

Prof Ralebipi-Simela commented that the reason that the NLSA had not conducted the investigation within the 30 days was due to the official who was responsible for this having since been dismissed. The issue had been brought to the director of HR, and the NLSA had charged and dismissed him on that basis.

Mr Makondo asked for clarification of what had actually happened.

Prof Ralebipi-Simela said the former HR director had been responsible to make sure that the investigation took place within the 30 days. However, the NLSA soon discovered that the HR director had made an agreement with a few employees that they would leave the NLSA to start their own business. However, the reason why he did not do his duty was not established. He was involved in other projects unrelated to this role.

Mr Makondo asked where the employee was now.

Prof Ralebipi-Simela replied that the employee had been dismissed.

Mr Makondo asked whether the employee had challenged the charges.

Prof Ralebipi-Simela replied that the employee had admitted and accepted all the charges.

The Chairperson then asked what was happening with the employee that had appealed the dismissal.

Prof Ralebipi-Simela replied that she had received the appeal report a week ago via email, but had not been in office since, so she could respond only on Monday.

The Chairperson reminded the NLSA that the law states that the NLSA had to respond immediately when the dismissal appeal was received. Excuses for not being available were unacceptable. The government would have to pay if the institution faced litigation. The Committee had warned the entities about unlawful behaviour. The appeal report had been sent to the Deputy Minister’s office. She asked the Department whether the NLSA had a new board.

Ms Sethibelo replied that the NLSA had a new board, but three members had been retained, including the chairperson.

The Chairperson asked when the CEO’s contract was expiring.

Ms Sethibelo replied that the contract expired in 2019.

The Chairperson then asked the NLSA to respond to the rest of the questions.

Mr Mashabane said that some of its targets had not been achieved as a result of the ‘Fees Must Fall’ protest, which gave them less time with the students. Another factor was related to the subscriptions to publications and monographs, and the NLSA needed to reorganise the collection policy. The revenue collection target of R3million was not reached. It had been noted that the NLSA was not effective in utilising properties for rental purposes. There were also ICT-related funding issues that could be resolved only after the conclusion of the financial year. He said that the litigation fees for 2017/18 were around R800 000, but he did not have the exact figure.

The Chairperson asked the NLSA to submit a written response specifying the exact amounts and cases involved in the litigations.

Mr Mashabane said that the professional fees under question included legal fees and external consulting on policy development.

The Chairperson questioned why external consultants were needed for policy development.

Mr Mashabane clarified that there was a project funded by a conditional grant which required consulting on the national policy development.

Prof Ralebipi-Simela added that there was one board member who had been paid for consultation. It was a professor from the University of Cape Town (UCT) who was a member of the technical team for the consultants.

The Chairperson asked the Department whether this was allowed.

Ms Sethibelo said that it was an accounting issue and a conflict of interest that had to be declared. The Department did not encourage it, and was not aware if the board had declared it.

The Chairperson asked the Department to look into it and advise the NLSA. She commented that when the Committee had visited the NLSA, one issue that was raised was the 76% expenditure going to personnel costs. The programmes were being hampered because the bulk of the money went to the personnel. The increased costs were not due to new people being employed, but the adjustment of the remuneration every year. She requested the organisational structure of the NLSA to be presented at the next meeting.

She reminded the Committee about the meeting to take place the following Tuesday, where the Committee would have engagement with the entities.

The meeting was adjourned.