2010/11 Annual Reports of the Government Communication and Information System; the Independent Communications Authority of South Africa and the South African Broadcasting Corporation

Meeting report

2010/11 Annual Report of the Government Communication and Information System (GCIS)
Mr Jimmy Manyi, Chief Executive Officer, GCIS introduced the delegates and gave an outline of the presentation, the seven strategic objectives and the eight programmes of the GCIS (see attached documents).

The programme performance report included the strategic objectives for each programme, the targets that had been set and the actual performance.  Reasons were provided where objectives were not met.

Ms Phumla Williams, Deputy CEO: Corporate Services, GCIS presented the performance report on programme 1: Administration.  The strategic objectives to ensure efficient and effective financial management, administration and procurement procedures; to implement a human resource strategy to realise the mandate of the GCIS and the effective use of information and communication technology were achieved.  The target set for the implementation of a focused project management discipline and adhere to best practices for campaigns and projects was partially achieved as most resources were seconded to the 2010 FIFA Soccer World Cup project.

Mr Vusi Mona, Deputy CEO: Communication and Content Management, GCIS presented the performance reports on programme 2: Policy and Research and programme 3: Government and Media Liaison.  The strategic objectives that were achieved included conducting research on communication needs and the communication landscape; assisting national and provincial government authorities to develop communication strategies that were aligned to the National Communication Strategic Framework and the Programme of Action and strengthening relations with the media.  The target set to recognise exceptional performance in the field of government communication was not achieved because the Government Communications Awards (GCA) programme was suspended pending review.

Ms Nebo Legoabe, Deputy CEO: Government and Stakeholder Engagement, GCIS presented the performance report on programme 4: Provincial Coordination and Programme Support.  The strategic objectives to develop communication systems in all spheres of government and ensure that policy guidelines were adhered to and the encouragement of public participation in the government’s developmental agenda were achieved.  The objective to support the implementation of government-wide access to information was partially achieved.  Challenges included the failure of certain local government authorities to submit communication strategies and appoint communicators.  Fifteen of the planned twenty Thusong Service Centres were established.  Construction of the centres was the responsibility of the provincial authority.

Mr Mona presented the performance reports on programme 5: Communication Service Agency, programme 7: Government Publication and programme 8: Communication Resource Centre.  The strategic objective to develop and effectively use government communication products and services was partially achieved.  The target to produce radio dramas was not achieved due to the high cost of production.  The objectives to assess the impact of products and services and to enhance communication methods and practices were achieved.

Programme 6 comprised the International Marketing Council (IMC) and the Media Development and Diversity Agency (MDDA).  These entities presented separate briefings on their performance to the Committee.

Ms Williams presented the report on the financial performance of the GCIS for the 2010/11 fiscal year.  The report included details of the budget and actual expenditure for each programme.  The full budgeted amounts for the IMC and the MDDA were transferred.  R522 million of the total budget of R550 million was spent.  The total under-spent amount was R27.8 million (i.e. 5%).  The reasons for the under-spending in each programme were provided.

Mr Manyi was satisfied with the unqualified report of the Auditor-General on the financial statements.  He took the Committee through the findings of the Auditor-General and the corrective action that had been taken.  The findings concerned irregular expenditure of R518,000 when an official failed to follow procedure; incidents of non-compliance to section 30 of the Public Finance Management Act (PFMA) when junior officials did not declare other remunerative work; tariffs for products and services that were not approved by the National Treasury and ineffective control measures to prevent irregular and fruitless and wasteful expenditure.  The matter involving Statistics SA was sub-judice and details could not yet be made public.

The briefing was concluded with a summary of the key achievements concerning the National Communication Framework; the 2010 FIFA World Cup; increased engagement with the media; training of government communicators; publications; Thusong Centres and governance.  Challenges included changes in the organisational structure resulting from the review of the communication strategy, changes to the budget structure and re-alignment to the new organisational structure and pressure on the capacity of GCIS to satisfy the demand for assistance with communication campaigns by government entities.

Discussion
Ms J Killian (COPE) thanked the GCIS for the well-prepared briefing.  She asked for details of where the under-spending was attributed to real savings.  The Committee and the Auditor-General applied pressure on government entities to improve their performance.  She felt that officials found guilty of transgressions should be punished.  Employees had to respect and adhere to procedures, internal control measures and the PFMA without exception and understand that there would be consequences to any non-compliance.  She referred to Annexure 4 on page 174 of the annual report that listed the amounts payable to GCIS by various government departments and entities and asked for more information.  The largest confirmed balance outstanding as at March 2011 (R1.6 million) was owed by the Department of Public Service and Administration (DPSA).  The report of the audit committee on page 105 of the annual report indicated that the chairperson of the audit committee had attended only two of the four meetings held.  She asked for comment on the attendance record of the chairperson.

Mr N van den Berg (DA) referred to the cancellation of the planned radio dramas due to the cost of production.  He asked which organisations had submitted quotations and what the amounts were.  He asked if the GCIS had investigated any alternatives.

Mr K Zondi (IFP) appreciated the good work that was done by the GCIS.  He referred to the performance report of programme 4 and asked what the total value of government spending on advertising was.  He asked how much of government advertising spend went to community radio stations.

Ms F Muthambi (ANC) referred to note 23.1 on page 162 of the annual report that provided details of the irregular expenditure of R518,000.  There appeared to be a discrepancy in the action taken reported in the annual report and in the briefing document.  She asked how many officials had contravened section 30 of the PFMA.  She asked how many cases involving disciplinary action had been taken against personnel during the year.  She understood that responsibility for the Thusong centres was transferred to the Department of Cooperative Government and Traditional Affairs (COGTA) during 2010 and wondered why GCIS continued to include these centres in its strategic plans.  She noted that GCIS had not been invited to assist certain local government authorities and asked what action had been taken by GCIS to correct the situation.  She asked if GCIS played a role in the Presidential Hotline service.

Ms Killian asked if GCIS verified the content of all government communiqués.  There had been incidences where communiqués contained incorrect information and conflicting messages.  She asked if the South Africa yearbook published by GCIS was distributed to all schools and libraries.

Ms N Michael (DA) said that she recently did research on the internet and came across a website with interesting facts on South Africa.  There was no indication of who was responsible for the website.  She asked if GCIS included information on the internet and website content in its strategy.  She asked for more information on the suspension of the GCA programme and what the cost was of canceling the awards.  She was pleased to note that 940 events were held under the provincial outreach programme.  She asked where these events were held as she had been unaware of them.  She asked for more details of the engagement with communities and would like to have been present.  She asked if the official responsible for the irregular expenditure remained in his position.  She felt that an employee found guilty of such misconduct should have been terminated.

The Chairperson asked if the type of disciplinary action taken against an employee depended on the level of the position.  More was expected of a Chief Financial Officer than for an administrative clerk.  He asked for the context of the incident to be clarified.  He asked if the eight programmes of GCIS had been consolidated.

Mr Manyi confirmed that the previous eight programmes had been consolidated into three.  The irregular expenditure item occurred when the official concerned failed to adhere to procedure.  There was no fraud or misappropriation of funds involved.  GCIS wanted a particular person from the United Kingdom as the keynote speaker at an event.  The process followed did not comply with the normal procurement procedure that required that three quotations had to be obtained.  Value was provided and the expense was not wasteful.  The official concerned made an honest mistake and was appropriately sanctioned.

Mr Mona explained that the major cost item in producing a radio drama was the payment of the actors.  GCIS was considering using less well-known and cheaper actors.  Government expenditure on advertising was valued at R1 billion per annum.  The objective was that 30% was awarded to community media entities.  Departments were responsible for the content of communications.  GCIS provided advice and guidance and reacted when conflicting or inaccurate statements were made.  45,000 copies of the South Africa yearbook was printed and distributed to embassies and 27,000 schools.  The issue of the websites would be investigated as there were currently no public/private partnerships involving websites.  The reason for suspending the GCA award programme was the timing of the event.  The award was given in December but the fiscal year end was March.  It would be very embarrassing if the person being rewarded for excellence in December managed to fail in the subsequent three months.  There were no cost implications as the award and the ceremony was sponsored by the private sector.

Ms Legoabe advised that research was done on the Thusong centres and the matter had been discussed with the National Treasury.  GCIS was not responsible for constructing the centres.  The premises could be funded by the Municipal Infrastructure Grant (MIG).  The local government authority had to provide funding for the cost of supervision and the provision of technical support.  GCIS had recommended that the responsibility for the Thusong centres was transferred to COGTA.  The Cabinet had turned down the recommendation.  The matter was currently under discussion by GCIS, the National Treasury, GOCTA and the DPSA.  GCIS had found that invitations were not issued by local government authorities that did not have a dedicated communications officer.  Municipalities often had challenges with communications and GCIS provided advice and guidance on the establishment of effective communication structures.  GCIS took the initiative to approach municipalities that did not have the necessary structures in place.  In general, municipal authorities recognised the contribution made by GCIS.  GCIS provided assistance to the Presidential Hotline.  The public participation programmes were driven by Ministries, national and provincial departments and the mayors of local government authorities.  GCIS identified priority areas requiring additional communication initiatives, for example communicating development plans in service delivery hotspots and the war on poverty initiatives.  Communications officers visited communities to determine the needs before mobilising the available support services, for example the mobile units operated by the Department of Home Affairs to process applications for identity documents.  The publications of the GCIS were distributed to Thusong centres, schools, non-governmental organisations and non-profit organisations.  Workshops on the State of the Nation Address were held at universities, technicons and schools for the deaf.  GCIS distributed the publications of other government departments at events.  The aim was to reach as large an audience as possible.

Ms W Newhoudt-Druchen (ANC) objected to the use of the phrase ‘deaf and dumb’ in the response.  Mr Manyi apologised.

Ms Williams explained that the Auditor-General required the outstanding balances owed by government entities to be confirmed at the end of March each year.  Finalised projects were reconciled.  Three officials had failed to declare their interests and received written warnings.  The declaration of interest should apply to junior officials as well.  Two officials had subsequently resigned.

Mr Manyi was satisfied that the chairperson of the audit committee had good reason for his non-attendance of committee meetings.  The Presidential Hotline was used to monitor government performance and responsibility for the service was transferred to the Monitoring and Evaluation function in the Office of the Presidency.  GCIS had a total staff complement of 600.  No more than 10 incidents requiring disciplinary action occurred during the year.

Ms Newhoudt-Druchen referred to the Auditor-General’s opinion concerning claims from third parties.  She understood that Statistics SA had lodged a claim of R20 million.  She understood that the matter was sub-judice but GCIS had made no provision for any liability that might result from the claim.  On page 118 of the annual report, it was stated that GCIS was allocated amounts of R1,044 million for 2011/12 and R1,108 million for 2012/13 for a project to develop a government communication training programme.  She asked for more details of this project and what the money would be used for.  She asked who developed the curriculum for the communications courses offered by universities and how these courses were funded.

Mr Mona explained that the item in the annual report referred to future projects.  Funds were not provided by the GCIS to universities to develop the curricula of courses.  A new Chief Directorate for training had been established as it was not practical for the human resources division of GCIS to train officials in other government entities.

Ms Killian referred to the analysis of the fruitless and wasteful expenditure on page 163 of the annual report.  The most significant item (R150,000) referred to the loss of documents concerning the storage cost of a government-owned vehicle.  She disagreed with the decision to take no disciplinary steps as an employee in the provincial office had the responsibility for keeping supporting documents on record.  She asked for an explanation of the disparities in the communications from various government officials concerning the Dalai Lama visa application issue.

Mr Manyi responded that GCIS had no comment on the Dalai Lama visa application issue.  The third party matter concerned a claim of R20 million by a service provider.  The matter had been taken to court and details would be made available to the Committee once the legal process was finalised.  He conceded that the fruitless and wasteful expenditure had resulted from a failure to adhere to procedure.

Ms Muthambi questioned the validity of the objectives concerning the GCA programme and the radio dramas.  If the desired outputs were to review the awards programme and to investigate the feasibility of producing radio dramas, the objectives would have been achieved.

The Chairperson noted that three recommendations made by the Auditor-General had been implemented.  He wanted to know how the recommendation concerning the training of staff on ethics and values would be dealt with.  He asked if internal controls were in place to identify employees who did other remunerative work.  Strategic plans should be aligned with government decisions, for example the transfer of responsibility for the Thusong centres to COGTA should have included the proviso that the recommendation was subject to the approval of the Cabinet.  The Committee wanted a more detailed report on how government’s advertising spend was disbursed.  He suggested that GCIS investigated the content of websites on South Africa as the impact of information on the internet was significant.  The Committee required the GCIS to monitor and evaluate the utilisation of the funds that were transferred to the IMC and MDDA.

Mr Manyi assured the Committee that Members’ comments had been noted by the GCIS.  A more detailed report on the corrective action taken to address the Auditor-General’s findings would be provided.

2010/11 Annual Report of the Independent Communications Authority (ICASA)
Mr Fungai Sibanda, Acting Chairperson of the Board of ICASA extended the apologies of Dr Stephen Mngcube, Chairperson of the Board, who was unable to present the briefing.  Two presentation documents had been prepared.  The first document covered the briefing on the annual report.  The second document detailed the two-year turnaround strategy that was developed to address the issues raised by the Auditor-General (see attached documents).

Mr Sibanda presented the overview of the seven strategic objectives and the overall performance of ICASA on competition matters; the licensing of the radio frequency spectrum; the amended licenses to allow digital migration; the monitoring of compliance to broadcasting, electronic communications regulations, procedure manual and postal services regulations; complaints and public awareness; consumer matters and the 2010 FIFA World Cup. 

The performance report summarised the achievements in the core business functions of licensing and compliance; markets and competition; engineering and technology and consumer affairs.  Details of the litigation that ICASA was involved in were provided on pages 35 to 42 of the annual report.

Mr Themba Dlamini, CEO, ICASA presented the briefing on the non-core business functions of human resources, communications and international relations and information technology.

The Auditor-General had issued a qualified audit opinion.  The report on the findings of the Auditor-General summarised the issue, the corrective action that had been taken and the current status.  Additional information on the turnaround strategy was included in the second briefing document.  The matters raised by the Auditor-General concerned the National Revenue Fund (NRF) debtors and creditors; inaccurate depreciation and amortisation of assets; unspecific and unclear predetermined objectives that lacked performance measurement criteria; the lack of procedures for quarterly performance reports; the failure of the internal audit function to evaluate the effectiveness of control mechanisms; non-compliance with supply-chain management regulations and legislation; inadequate expenditure and revenue management and the failure to conduct regular risk assessments.  Irregular and fruitless and wasteful expenditure of R5 million was reported and details were provided on pages 143 – 147 of the annual report.

Mr T Ndadana, Acting CFO, ICASA presented the financial statements for the 2010/11 fiscal year.  Total revenue amounted to R296.8 million.  Total expenditure was R307.7 million and a deficit of R10.9 million was declared.  Total asset value was R1.047 billion and total liabilities amounted to R936.4 million.  The consolidated cash flow statement and the comparison of budget and actual revenue and expenditure were included.

Discussion
Mr Zondi referred to page 139 of the annual report.  He wanted to know why general managers were paid more than the CEO.

Mr Dlamini explained that his appointment was effective from 1 November 2010.  The amount reported reflected his remuneration for five months of the year.

Ms Michael expressed extreme dissatisfaction over the dismal performance of ICASA.  The Authority had received qualified audit reports for the second consecutive year.  ICASA had assured the Committee that all was in order but it was clear that there were major problems.  The various stakeholders involved in the digital migration programme had informed the Committee that ICASA was the reason for the delays.  She wanted to know what the problem was.  The Auditor-General had issued a damning report and a two-year turnaround strategy was far too long.  An emergency six-month corrective action plan was required as the problems and wasted expenditure was likely to escalate over a two-year period.  The findings concerning the National Revenue Fund were totally unacceptable.  Substantial amounts were involved and the responsible person must be held accountable.  She wanted to know if disciplinary action had been taken against the officials who had contravened the PFMA and Treasury Regulations.  The findings on financial management indicated that the Accounting Officer had failed to carry out his responsibilities yet no action had been taken against the responsible official.  More stringent disciplinary action than warning letters was required.  The failure of ICASA to transfer accrued interest amounting to R3.5 million to the NRF was an extremely serious matter.  The excuse that it was a once-off transgression and that no further action would be taken was not acceptable.

Ms Killian supported the comments made by Ms Michael.  The two-year turnaround strategy was not acceptable and urgent action was required.  The report of the Auditor-General was dated 30 July 2011.  The findings were no surprise yet little had been done in the preceding three months.  ICASA had not transferred the fee revenue to the NRF within the required 30 days.  It was not acceptable to regard this transgression as a once-off and not to take any action.  The findings indicated financial mismanagement and were an indictment of the entire management of the organisation.  The CEO had passed off the R5 million of fruitless and wasteful expenditure as a matter of no concern.  The problems in the financial management of ICASA were extremely serious and would compromise the achievement of the strategic objectives of the organisation.  The annual report included a long list of litigation against ICASA.  The extent of the legal action taken against ICASA was a clear indication that the Authority’s house was not in order.  ICASA lacked credibility in the communications industry.

Ms Morutoa had not observed any improvement in the operations of ICASA.  No mention had been made of the local loop unbundling (LLU) programme and she asked what the targets and current status were.  She requested a detailed breakdown of the services rendered by external consultants and the costs involved.  She wanted to know why ICASA continued to receive qualified audit reports.  She requested that an explanation of the acronyms used in the briefing documents was provided.

Ms Muthambi noted that the public participation process for the LLU project had not been completed (see page 20 of the annual report).  The Committee had made it clear that this project needed to be finalised as a matter of urgency during earlier meetings with ICASA.  According to reports in the media, ICASA had held public hearings on 12 October 2011 but the Committee had not been briefed.  She felt that the Committee was being undermined by ICASA and requested an explanation.  She asked for a detailed report on all the legal cases that ICASA was involved in and what the current status of each case was.  She noted that the items of irregular and fruitless and wasteful expenditure had been condoned, that no preventative action had been taken and that no disciplinary action had been taken against the responsible officials.

Ms Newhoudt-Druchen referred to the achievements of the 2010 FIFA World Cup project.  She asked for details of the monitoring of compliance and the issuing of six written warnings.  She asked why DSTV subscribers could not access Cape Town TV (CTV) broadcasts.  She asked for an explanation of the acronyms IPTV and VOD used in the briefing documents.  She asked if the research on the access of the disabled community to broadcasts had been completed and what the outcomes were.  She asked if regulations had been issued for the sub-titling capacity of decoders.  The report on consumer affairs made no reference to the disabled community.  She wanted to know what the strategy was to provide services to the disabled community.

Ms Tsebe expressed disappointment with the performance of ICASA.  The Committee had been informed that Councilors had been allocated responsibility for certain projects.  Councilors were generously remunerated but appeared to be doing very little.  The briefing did not include a report on the projects that were overseen by the Councilors.  The Committee wanted to see that effective action was being taken to address the findings of the Auditor-General.  The two-year turnaround strategy was not acceptable.  ICASA had consistently claimed a lack of capacity during previous interaction with the Committee.  She wanted to know if a lack of capacity was still a problem.  She asked if the postponement of the implementation of the Carrier Pre-Selection (CPS) regulations to the following year was as a result of inadequate provision in the budget.  She asked if the 4,555 complaints received during the year included complaints from members of the public.  She noted that only three female managers were employed and she wanted to know what the strategy was to ensure that the gender, disabled and previously disadvantaged employment targets were met.

Mr Van den Berg observed that there had been much criticism of ICASA for a number of years.  It would appear that the criticism was being ignored and that the concerns that had been raised were not being addressed.  In the report on human resources on page 43 of the Annual report it was stated that ICASA had introduced psychometric and technical skill assessment methods at executive and operational levels to confirm candidate suitability.  He asked if this process had been implemented.

The Chairperson observed that the same issues had been raised during the previous year.  The Committee wanted to know exactly what was wrong in ICASA and why the problems were not resolved.  He noted that the annual report included achievements beyond the end of March 2011.

Mr Sibanda responded that generalised accusations were made against ICASA for delaying the digital migration programme but no specific details were given on how the Authority had delayed the process.  The role of ICASA was regulatory and the regulations for digital migration were published in 2010.  No objections were received to the published regulations.  The Minister had announced a change in policy, which required a review of the regulations and a renewed public consultation process.  ICASA accepted criticism where due but felt that the Authority was unfairly accused of causing delays in the digital migration policy.

Mr William Currie, ICASA Councilor recalled that the role of ICASA was explained during the previous engagement initiated by the Committee on the status of the Digital Terrestrial Television (DTT) project.  The change to a different standard required material changes to the regulations.  The standard adopted allowed for an increase in the number of broadcasting channels.  10% of the available multiplex channels were reserved for community television stations.  The target for the implementation of the digital migration programme was April 2012.  The new DTT regulations would be issued by December 2011 and the targets could be reached.  It was not clear why ICASA was accused of causing the delays as there were a number of stakeholders involved.

Mr Dlamini acknowledged that ICASA had received three successive adverse audit reports from the Auditor-General.  The Auditor-General had found that there was inadequate leadership in the financial management of ICASA.  The audit and risk committee had made several recommendations, which were ignored by the CFO.  An amicable meeting was held with the CFO during August 2011 and it was decided not to renew the contract of the CFO when it expired at the end of November 2011.  The CFO was relieved of his duties but would return to provide assistance when required.  A new CFO had to be appointed and a review of the financial systems was necessary.

The Chairperson clarified that the CFO was merely released from duty and that no disciplinary action had been taken against him despite the fact that he had ignored the recommendations of the audit and risk committee.

Mr Dlamini confirmed that was the case.  Disciplinary action had been considered but it was decided to avoid a long-drawn out disciplinary process because the CFO’s employment contract would end within a short period of time.  He blamed the CFO and the finance department for the adverse audit findings.  The two-year turn-around strategy was developed to address all the findings.  The short-term solutions would be implemented first, followed by the medium- and long-term solutions.  The spectrum management system was outdated.  The details of 70,000 licensees had to be verified and managed.  Alternative systems were being considered.  The most suitable system was developed in Germany but there were currently no skills available in South Africa to implement the system in this country.  More time was needed to address the findings concerning the NRF processes.

Mr Sibanda explained that certain license fees were calculated according to the profit generated from licensed activities.  The financial reports received from licensees did not separate the profit from licensed activities from other activities and it was impossible for ICASA to calculate the expected license fee amounts.  ICASA intended to amend the regulations so that accurate profit information could be obtained.

Mr Dlamini said that disciplinary action was taken against employees only when there was clear evidence of transgressions.  A detailed report on the disciplinary action taken could be made available to the Committee.  An employee was appointed to reconcile the accounts and to provide the supporting documents to the DOC.  The late transfer of funds and the interest earned to the National Treasury occurred once only.  A detailed report on the incidents would be provided to the Committee.  He hoped that the implementation of the corrective action plan would address the Auditor-General’s finding concerning the lack of leadership in the financial management of ICASA.

Mr William Stucke, ICASA Councilor advised that public hearings on LLU were held on 11 to 13 October 2011.  The submissions were available on the internet.  The report on the public hearings would be made available by the end of November 2011.  The Committee would need to be briefed by the Minister and the DOC on the status of the LLU programme.

Mr Sibanda undertook to provide a detailed written report on the litigation that ICASA was involved in.  The licenses issued for the 2010 FIFA World Cup included certain conditions and the monitoring undertaken by ICASA was to ensure that the license conditions were abided by.

Dr Marcia Socikwa, ICASA Councilor explained that nine community TV stations were supported by Sentech, rather than DSTV.

The Chairperson pointed out that Soweto TV was available on DSTV.

Mr Currie explained the acronyms for Internet Protocol Television (IPTV) and Video on Demand (VOD) services.  ICASA welcomed the input of the disabled community on the regulations for subtitling.

Mr Sibanda reported that the results of the research studies on the access of disabled communities had been anticipated.  In general, there was not enough access to electronic communications, broadcasting and postal services.  The results of the studies were available to the Committee.  The regulations on the spectrum fees had been reviewed.  New regulations were drafted for implementation in 2011.  However, a new spectrum management system needed to be in place and would be budgeted for in the following financial year.  All the complaints received were from members of the public.  A breakdown of the complaints per province could be provided.

Mr Dlamini conceded that only four out of 371 members of staff were disabled.  ICASA remained challenged by a lack of capacity, in particular in the areas of finance and technology.  There was a shortage of engineering skills and modern monitoring equipment.  A detailed report on the monitoring and evaluation function could be provided.  The psychometric testing of applicants was one of the tools used in the appointment process.  The regulations for the local government elections in May 2011 were issued on 8 March 2011, which was before the financial yearend date of 31 March.  He had no comment on what was wrong with ICASA.

Mr Sibanda advised that the performance contracts of the ICASA Councilors were currently being finalised with the DOC.  The implementation of the contracts would assist with obtaining an objective performance assessment of each Councilor.

The Chairperson pointed out that the decision to release the CFO from his duties was taken by the Council.  The Committee disagreed with the failure of the Council to take disciplinary action against the CFO.  He wanted to know what the responsibility of the Councilors was to ensure that the matters raised by the Auditor-General for the prior three years were resolved.

Dr Socikwa responded that the Council had received misleading reports from the previous CFO.  He was allowed the opportunity to improve his skills but had received all offers of assistance from the audit and risk committee.  The Council was loath to interfere in operational matters as it had been previously criticised by the Committee for doing so.  The responsibilities of the Council were defined in the applicable legislation and any interference caused tension between the Council and management.  The Council had received reports and had been aware of what was happening.  Senior executive management structures were in place and the necessary authority had been delegated.

The Chairperson wanted clarity on why the decision to release the CFO had been taken by the Council rather than the executive authority.

Ms T Ndabeni (ANC) commented that there appeared to be an increasing trend of tension between the boards and executive management of State entities.  The ICASA Council provided leadership and guidance and conducted oversight to ensure that taxpayers’ money was spent wisely.  She noted that representatives from the DOC were not present at the proceedings and had failed to attend the meeting of the Committee with the Universal Service and Access Agency of South Africa (USAASA) on 14 October 2011.  The DOC was responsible for providing guidance to ICASA and USAASA and approved the reports of these entities.  She questioned the effectiveness of the DOC in this regard.  It might be necessary for the Committee to review the structure of ICASA.  Councilors received the same remuneration as Deputy Directors-General and she wondered if any value was being added to the organisation.  In her experience, management problems were an indication of problems at the Board level as well.  The Committee was reluctant to approve an increased budget for an organisation that was unable to operate efficiently and effectively.

Ms Tsebe did not accept the reasons provided by the Council for its failure to intervene.  There was a difference between interference and intervention.  In the case of ICASA, intervention was clearly required and it did not help to pass the blame to others.  She asked what key actions needed to be taken to ensure that the performance of ICASA was improved.  The Committee had to be informed of what problems were being experienced by the organisation.

Ms Killian quoted the entire section 14 of the ICASA Act, which clearly set out the responsibilities of the Council.  The CFO was guilty of gross misconduct and had violated the PFMA yet the only action taken was to release him from his contract a few months before it expired.  She was extremely concerned by the lack of action taken by the Council and its failure to intervene.  The Accounting Officer was similarly guilty of violating the PFMA.  The lengthy turn-around plan allowed the mismanagement of taxpayer’s money to continue for another two years, which was not acceptable.

Mr Sibanda replied that the financial management and the regulatory functions of ICASA had to be viewed separately.  The Auditor-General had raised a number of issues concerning the financial management of ICASA.  A corrective action plan had been devised and timeframes for implementation were set.  Most of the action would be completed by June 2012.  Actions requiring additional skill would take longer to achieve.  He agreed that the Council was responsible for ensuring that the action plan was implemented.  The necessary systems needed to be in place but would not be achieved if the funding was not made available.  ICASA lacked the capacity to fully monitor compliance to the regulations.  The equipment used to monitor and evaluate broadcasts was old and ineffective.  Funding was required to purchase modern monitoring equipment.

Mr Sibanda said that the Council had acted on the matter concerning the CFO on the advice of the audit and risk committee.  There were no accusations of fraud or transgressions requiring criminal prosecution.  It was only a matter of non-performance.  The Council had decided that the best option was a parting of the ways as criminal charges would not be laid.

The Chairperson asked if the CFO was paid his full salary until the end of his contract.  The CFO had clearly failed to meet the terms of his contract and the disregard for the recommendation of the audit and risk committee constituted insubordination.  He disagreed that the issue was merely incompetence as the CFO had consistently refused to carry out instructions and took no action.  He asked if the Council had examined the recommendations of the audit and risk committee.

Mr Sibanda confirmed that the Council had received the reports of the audit and risk committee and was aware of the two previous qualified reports of the Auditor-General.  The decision to terminate the contract of the CFO was made when the recommendations of the audit and risk committee was ignored.

Mr Dlamini confirmed that the CFO was paid to the end of his contract.

The Chairperson said that the CFO was effectively rewarded for ignoring instructions when no action was taken against him.  There were no consequences for the failure to carry out his duties and responsibilities.  He wanted to know what legal advice was given to the Council.

Mr Dlamini said that the CFO had displayed no leadership and had lacked competence.  The Audit and risk committee had appointed a special technical sub-committee to provide support to the CFO.  The Council had obtained legal advice and decided on the best course of action.

The Chairperson disagreed that the Council had made the correct decision.

Dr Socikwa advised that Councilors were not satisfied with the performance of the CFO and felt that his continued presence on the premises would hamper any attempts to address the problems.  However, there was division in the Council on the matter.  The CFO was requested to submit a report to the Council on the implementation of the recommendations of the audit and risk committee but the report was not received.

Ms Morutoa asked who the ultimate responsible authority was and why the DOC had not taken any action.  She anticipated that the situation would become worse.  She criticised the reticence of the ICASA delegates to provide detailed responses to the questions from the Committee.

Ms Ndabeni suggested that the Committee met separately with the senior management of ICASA and Councilors to resolve the issues in a closed session.

Ms Killian said that all Members agreed that the Committee was dissatisfied with the standard of financial management at ICASA and the failure of the Council to intervene.  She suggested that ICASA provided the Committee with a more detailed corrective action plan that reflected a more interventionist approach.  Little time remained before the end of the current financial year to take effective action.  The regulator played a key role and could not be allowed to become dysfunctional.  She asked for full disclosure of the salary package of the CFO.  The Committee could not be expected to approve additional funding for ICASA unless it was satisfied that the money would be well-spent.

The Chairperson was not convinced that the corrective action plan presented to the Committee would address the problems.  ICASA had failed to resolve the issues that were raised in two previous audit reports.  He asked if the turn-around strategy had been costed and if it had been approved by the DOC.  There need to be a clear delegation of authority from the Council to the executive management.  The duties and responsibilities of the CEO were prescribed in the applicable legislation as well.  He requested a written, detailed report on the legal cases ICASA was involved in and what had caused the litigation.  If the cases had resulted from a failure to follow proper procedure, he expected that appropriate action was taken against the responsible official.  The Committee awaited the report on the public hearings on LLU.  The Chairperson of ICASA was expected to provide leadership to the organisation.

2010/11 Annual Report of the South African Broadcasting Corporation (SABC)
Dr Ben Ngubane, Chairperson of the SABC Board introduced the delegates to the Committee.

Mr Phil Molefe, Acting Group CEO, SABC presented an overview of the operating environment, executive summary and the performance highlights (see attached document).  The presentation included a summary of the achievements in radio, television, news and current affairs and sport broadcasts.  Reports on technology, the DTT programme, human capital, occupational health and safety, stakeholder management and the provincial activities of the SABC were included.

Mr Lerato Nage, Acting CFO, SABC presented the report on the financial performance of the SABC for the 2010/11 financial year (see second attached document).  Total revenue amounted to R5.293 billion and total expenditure was R4.967 billion.  A total comprehensive loss of R214 million was declared for the year.  The SABC reported positive net cash inflows from operating and financing activities.

The SABC continued to implement its turn-around strategy and the financial statements reflected an improvement on the previous year’s performance.  The briefing included the report on the performance of the Corporation versus the government guarantee targets that had been set and the remaining financial challenges.

Mr Desmond Golding, Director, SABC and chairperson of the audit committee referred Members to the report of the independent auditors on page 103 of the 2010/11 annual report.  The SABC had received a qualified audit report from the independent auditors.  Details were provided of the corrective action plan (project plan) that was developed to address the auditor’s findings.  The SABC continued to be challenged by problems with procurement, a lack of internal controls, deficient financial management, a culture of non-compliance and a lack of skills.

Mr Golding took the Committee through the audit findings, the root causes, the remedial action and the target dates that were set.  The findings concerned the performance to pre-determined objectives; usefulness of information; the internal audit function; the functioning of the audit committee; procurement and contract management; declarations of interest; expenditure management; revenue management; asset management; annual financial statements and internal control.  He assured the Committee that the SABC was committed to resolving the issues.  Disciplinary action had been taken against the responsible employees and the Special Investigations Unit (SIU) was brought in to investigate criminal transgressions.  Management submitted regular reports to the Board on the action that had been taken and the progress that was being made.

Dr Ngubane was confident that the SABC would receive a clean audit report for the following year.  He acknowledged that challenges remained but assured the Committee that progress was being made.

Discussion
Ms Michael commended the SABC for what had already been achieved.  However, the audit report indicated that the Corporation remained in a precarious financial position with numerous items of irregular and fruitless and wasteful expenditure.  Members of the Committee had held talks with SABC employees and were aware that the basic needs of staff were not being satisfied.  The SIU had found that fraud and corruption had occurred at the highest levels and she wanted to know which officials were implicated.  She referred to recent reports in the media concerning the exorbitant cost of leasing luxury vehicles, which amounted to R20 million.  She had requested the Auditor-General to investigate the matter.  She understood that the initial tender had been awarded to Wesbank but the SABC Board had rejected the tender and wanted to have it awarded to another applicant.  She asked for an explanation of the matter.  The Auditor-General and the National Treasury had reported that the SABC had reneged on the terms of the government guarantee.  The SABC had requested additional funding but there was doubt over the financial management of the entity.  The Committee understood that the SABC was experiencing difficulty and Members were willing to provide assistance.

Ms Michael was of the opinion that warning letters as disciplinary action was ineffective.  There had to be serious consequences for the incidents of theft, corruption and irregular expenditure and those involved should be immediately suspended.  She questioned the extent and substantial cost of external consultants as the SABC had many highly-skilled employees.  She asked for an explanation of the payment of R20 million to Deloittes for the development of the turn-around strategy.  She asked what procurement process was followed.  It was not clear which Board members were invited to which meetings of the SABC Board.  She asked what the cost of Board meetings was and what emoluments were paid to Board members.  In terms of the government gurantee, the SABC had undertaken to reduce the number of senior management employees yet the contracts of two senior managers were recently renewed.  She wanted to know what criteria were applied when deciding which contracts would be renewed.

Ms Killian said that the Committee could provide guidance and assistance, not only criticism.  The annual report was an attractive document but should not include reference to items that occurred beyond the year-end.  She acknowledged the progress that had been made to date but insisted that the Committee was made aware of all remaining weaknesses.  She disagreed that the audit committee had performed satisfactorily as there had been a number of internal audit failures during the year.  She asked why it had taken the audit committee so long to identify that the internal audit function was not working as required.  She had expected that more action would have been taken by the audit and risk committee since the 2009/10 audit report.

Ms Killian wanted to see that effective action was taken against personnel involved in fraudulent and corrupt practices.  She asked for the report of the SIU and whether any senior officials had been prosecuted.  It was clear that the SABC continued to suffer from a lack of capacity but this issue should have been addressed by now.  A significant proportion of the amount owed to the SABC was from government departments and she felt that these departments should be named and shamed for not paying their accounts.  Reporters should have the means to travel to gather stories but the leasing of luxury vehicles for this purpose was not appropriate.  Allegations of favouritism and nepotism continued to be levied against the human resources management.  She asked what the status was of the Acting Head of the Human Capital department.  She understood that the person concerned was in fact an external consultant and not an employee of the SABC.  She asked for a full explanation of the matter.

Ms Killian asked who was liable for the cost of attending international business courses, which members of staff had attended the courses and if the persons concerned would remain in the employ of the SABC.  She wanted to give the SABC the benefit of the doubt that the public broadcaster was unbiased.  However the ANC affiliations of Board member Mr Nkomotana Clifford Motsepe were listed on page 82 of the annual report.  The reporting of news was not always unbiased and there were clear indications that there had been political interference on occasion.  She noted that there had been twelve Board meetings during the year but wanted an explanation of the numerous special Board meetings that were convened.

Ms Muthambi queried the inaction of the audit and risk committee.  The report by the Auditor-General had not been addressed and reliance had been placed on a dysfunctional internal audit function.  She asked if the problems that were being experienced had been reported to the Board, the Auditor-General and the National Treasury.  She asked why an Acting Head of Internal Audit had remained in place for two years.  The Head of Internal Audit had left in December 2010 and was only replaced in March 2011.  The issue of the declarations of interest had been outstanding since 2009 and had still not been resolved.  She asked if the officials who had failed to submit the declarations had been identified and if any action had been taken against the persons concerned.

Ms Tsebe conceded that the SABC had accepted the challenges and had been seen to take action.  She asked if the training of 3,218 employees included personnel based at the provincial offices and what the impact of the training had been.  She queried the amounts paid to external consultants.  She complained that Mr Motsepe had been rude to the Committee, had arrived late for meetings and had not stayed for the duration of the meetings with the Committee.  She asked for clarity on the audit tracking system that was being contemplated.  The same audit findings had been reported since 2009 and she would like to know how the tracking system would help.  She asked if there was a policy for granting bursaries only to employees and their children.  During oversight visits, the Committee became aware that SABC employees were retrenched and received settlement packages but had returned to work for the Corporation again.  She asked for comment on this issue.

Ms Ndabeni asked for an explanation of the appointment of the Acting Head of Human Capital Services.  She asked what the costs and the current status of the appointment were.

The Chairperson asked what action was being taken by the Board on the vehicle lease matter.  The issues concerning the vehicle leases and the Acting Head of Human Capital Services were urgent and needed to be addressed without delay.  He requested written reports on both matters to be submitted to the Committee.

Dr Ngubane agreed to provide the reports to the Committee.  The Acting Head of Human Capital had been an external consultant.  The SABC lacked capacity to review and it was decided to appoint Mr Ndababana to compile the necessary documentation.  His performance had been satisfactory and he was considered to be the best candidate for the vacant Head of Human Capital Services position.  It was subsequently found that Mr Ndababana had an unsatisfactory credit record and he was dropped form the list of candidates.  He continued as a consultant and was not employed by the SABC.  Mr Nage and Mr Ndababana attended the training course in London.  He was not satisfied with the performance of the SABC and felt that a great deal of work still needed to be done.

The Chairperson wanted to know how the SABC had approved the funding for sending a consultant on an overseas course.  He asked how a consultant could be given the authority to issue instructions to the SABC’s head office and regional offices on what should be done.  The SABC had to get his house in order.  The written reports to the Committee were awaited and the matter would be discussed further.

Ms Muthambi asked that the report included the terms of reference of the appointment and the name of the person who had authorised it.

Mr Molefe said that the Chairperson of the SABC Board had requested a full investigation on the vehicle leasing matter.  He was currently not in a position to provide any details but undertook to submit a full report to the Committee once the forensic investigation was completed.  He said that the media reports on the issue had contained many errors and had misrepresented the facts.  In certain cases, the annual report included reference to matters that extended beyond the year-end date, for example the SABC’s involvement in local government elections had commenced long before the actual elections.  The SABC was owed a total of R60 million by government departments and entities.  R9 million was owed for television license fees and R50 million was owed for advertisements.  Entities from all three tiers of government were involved.  He denied that the SABC reported in a biased manner and strived to cover news items from all areas in the country.

Mr Molefe reported that more employees were undergoing training to upgrade their skills.  62 junior and senior managers from provincial offices had undergone training.  A small number of retrenched employees had returned in a consulting capacity.  The employment contracts of few managers were renewed.  One person had specialised legal skills in music rights and were involved in pending litigation.  Another was an organisational design specialist and was essential during the reorganisation of the Corporation.  The third person had expertise in finance and payroll management.

Mr Golding appreciated the positive remarks of Members and gave the assurance that the SABC would continue to improve.  He agreed that much still had to be done to ensure that all the issues had been addressed.  The reports from the SIU could not be made public as the investigations were sub-judice.  The smaller deficit in 2010/11 was an indication of the improvement in the financial performance of the SABC.  The audit and risk committee was required to meet on a quarterly basis but six meetings were held during the year.  Certain members of the Board were experts in their field and attended special Board meetings for which no emoluments were paid.  He explained the key responsibilities of the audit and risk committee and agreed that the performance of the internal audit function had not been satisfactory.  The audit finding tracking system was a valuable tool for tracking the progress made in addressing the audit findings.  Progress reports were submitted to the Board.

Mr Golding advised that the Head of Internal Audit was removed in December 2010.  He conceded that disciplinary action for non-performance should have been taken.  The person concerned was suspended when he was implicated in another matter.  An Acting Head of Internal Audit was appointed until the permanent Head was appointed in March 2011.

Dr Ngubane said that the Board had hoped for a better audit report.  The Board was only able to exercise supervision over the management of the organisation on a part-time basis.

The Chairperson urged the delegates to inform the Committee of what the problems were.  It was not desirable to wait for the next audit report to indicate where the problem areas were.  The Committee had past experience of promises that had failed to materialise.  He asked for a detailed report on all the disciplinary action that had been taken against SABC employees.  It was essential that the SABC recovered its credibility.  The Committee held the Board accountable and expected reports from the Board at future briefings.  The questions from Members concerning the declarations of interest were not responded to.  There appeared to be a culture of non-compliance within the SABC, which needed to be addressed.  He awaited a report from the SABC on the issues that were raised during the Committee’s oversight visit to the Eastern Cape office of the SABC.  Employees did not have equal access to training programmes and certain members of staff were denied the opportunity to attend courses.  He wanted to know who was responsible for selecting candidates for training and asked for a report on the application of Sector Education and Training Authority (SETA) funding.  He agreed that encouraging progress had been made.  The SABC had applied for additional funding but there was a school of thought that the Corporation should be placed under administration.  The Committee needed the assurance that taxpayers’ money would not be wasted.

Ms Ndabeni remarked that the public lacked confidence in the SABC.  She felt that the excuses put forward had been weak and that the Board had placed all the blame for the lack of performance on the management of the entity.

Dr Ngubane responded that the Board must be able to trust the executive management.  However, the reports submitted to the Board painted a rosy picture.  The DOC and the National Treasury was making a technical team available to provide assistance.

Ms Morutoa asked what the terms of reference of the technical team were.

Mr Zondi said that the Committee expected the Board to act in a unified manner and that all the members of the Board were kept fully informed.

Ms Killian had not received a response to her question about the appointment of Deloittes.

The Chairperson requested a detailed report on the external consultants that provided services to the SABC.  The Board had to take into account that there would be financial implications for making use of the services of a technical team.

The meeting was adjourned.