GCIS, ICASA, MDDA, FPB on their 2014/15 Annual Reports; Communication portfolio audit outcomes: Auditor-General briefing

Meeting report

Auditor-General of South Africa (AGSA)  briefing on 2014/15 audit outcomes
Ms Alice Muller, Corporate Executive: AGSA, focused on the scope of the AGSA audits; overall audit outcomes for the Communications portfolio; unauthorised, irregular or fruitless and wasteful expenditure, root causes and recommendations, assessment of assurance providers, and Minister’s commitments to address root causes. The GCIS received an unqualified opinion with no findings, ICASA, MDDA, FPB, BSA received an unqualified opinion with findings, SABC received a qualified opinion with findings. AGSA highlighted proposed measures that could be taken by entities themselves and Minister for improvement in performance.

The GCIS received an unqualified opinion with no findings; ICASA, MDDA, FPB, BSA received an unqualified opinion with findings; the SABC received a qualified opinion with findings. There was overall stagnation in the Communications portfolio with no improvements except the GCIS who had achieved a clean audit. The MDDA had declined from a unqualified opinion with no findings  to having findings this year.
Unauthorised expenditure is expenditure not spent in accordance with the budget vote or budget overspending. Only GCIS had R710 000 unauthorised expenditure.

Irregular expenditure is expenditure in contravention of key legislation or where prescribed processes are not followed. ICASA had R30 223 950; SABC had R413 793 000; GCIS had R506 496; Brand SA had R79 055 and FPB had R6 473 620 irregular expenditure.

Fruitless and wasteful expenditure is expenditure incurred in vain and could have been avoided if reasonable steps had been taken. The expenditure had no value for money. ICASA had R2 343 311; SABC had R18 840 000; GCIS had R11 000; Brand SA had R168 274; and MDDA had R18 000 fruitless and wasteful expenditure.

Ms Muller noted the root causes of the audit findings as being a lack of consequences for poor performance and transgressions; instability or vacancies in key positions; and slow response by management in addressing the root causes of poor audit outcomes.

Ms Muller explained three levels of assurance that would lead to improved and effective audit outcome. These three levels were referred to as combined assurance (see document).

Ms Muller noted that the Minister, in her commitment to address the root causes, had appointed the CEO and a Chief Financial Officer (CFO) for the SABC which would be finalised by 31 October 2015).
These two commitments were in progress:
- Reassess senior managers’ performance agreements to ensure clearly defined roles and responsibilities.
- Key vacancies in key management personnel will be filled in the third quarter of 2015/16 (MDDA).
This commitment had not been implemented:
- Request department and entities to compile monthly financial statements to assist with proper governance.

Government Communication and Information System (GCIS) briefing
Mr Donald Liphoko, GCIS Acting Director General, reported on the GCIS mandate, vision and strategic. He provided an overview of achievements per programme (see attachment). He noted the cost effectiveness of 272 media bulk-buying campaigns which saved GCIS over R24 million.

Mr Liphoko noted that the GCIS received an unqualified audit without findings. Looking at the performance targets, non-achievements were noted for Programme 1 Administration, Programme 2 Content Processing and Dissemination and 3 Intergovernmental Coordination and Stakeholder Management. Reasons were provided for non-achievement.

After going through financial performance per programme, Mr Liphoko noted that 99.9% of R425 069 000 budget was spent with R438 000 remaining.

Independent Communications Authority of South Africa (ICASA) briefing
Ms Katharina Pillay, Councillor: ICASA introduced the team and Dr Stephen Mncube, ICASA Chairperson, took the Committee through the presentation that included organisational mandate, strategic goals, 2014/15 performance and key achievements, Auditor-General’s assessment and measures to improve audit performance.

Dr Mncube highlighted the organisational key achievements for its four programmes: Licensing & Compliance; Engineering & Technology; Markets & Competition; Consumer Affairs.

Dr Mncube noted the targets that were not achieved in these programmes and provided a prognosis for each. These targets related to free to air television, ITA for spectrum licence, spectrum management system, toll-free framework, findings on local content review, universal access to postal service. There was poor performance across all programmes.

At the end of 2014/15, ICASA had 312 employees compared to 330 employees at the beginning of the financial year. As at 31 March 2015, the organisation had 80 vacancies. These vacancies had a negative impact on service delivery.

Financial performance showed that R29 million was underspent of the R404.2 million budget. Fruitless and wasteful expenditure was R2.5 million whereas irregular expenditure was R13.2 million.

Dr Mncube went through the remedial measures taken with regard to Auditor-General’s findings (see document).

As a way forward, Dr Mncube stated that the organisation need to improve in the areas of organisational governance, project planning and execution, business process re-engineering and stakeholder management and engagement.

Discussion
Ms V Van Dyk (DA) asked for the reasons for the non-achieving of targets, on why certain performance was not finalised, who would be liable for debts, how the organisation would deal with unspent government funds, and why compensation for employees was so high.

Mr R Tseli (ANC) was of the view that ICASA should address the findings raised in the report of Auditor-General first. He sought clarity on under-spending, fruitless and wasteful expenditure, irregular expenditure and on what would be the consequences of poor performance. Was there any disciplinary measures taken against individuals who did not perform? Referring to Izimbizo, he asked to what extent did ICASA ensure that it engaged fully with communities. He expressed his concern about the coordination of Izimbizo. He suggested that management should try to do something differently especially in informing the community about its services. There should be meetings at provincial and local level where people could be addressed on what was discussed in ministerial meetings.

Ms R Van Schalkwyk (ANC) expressed her concern about ICASA’s quarterly poor performance. It seemed that there was no intervention to remedy the situation even though most of budget was spent.

Mr M Kekana (ANC) appreciated the fact that ICASA received an unqualified audit report but warned that it should not generalise its financial matters. Financial matters ought to be detailed otherwise Members would not be able to ascertain how money was spent. ICASA should allude to the fact that there were a higher number of unoccupied posts so certain targets could not be met. On vacancies, he asked if ICASA could not find qualified people from 49 million South African citizens. He viewed this as an insult to the President’s strategic goal of creating jobs. The President promised citizens that creation of jobs is a matter of priority. Finally, he was happy that there was a reduction in consultation services.

On GCIS, Mr Kekana suggested that it should come up with a strategy for reporting which did not generalise important issues.

Mr L Mbinda (PAC) appreciated that ICASA received an unqualified audit but felt that there was still room for improvement. He sought clarity on under-spending and expressed unhappiness about the poor performance. He asked why no timeline for achieving strategic targets was indicated and whether there was a performance management system to deal with internal control, empowerment, training, and discipline, including supply chain management. An absence of a performance management system might imply negligence in management.

Mr Tseli sought clarity on Programme 2: Licencing and Compliance on whether there would be a challenge and how ICASA responded to licencing related problems. Why did ICASA carry on with issuance of licences while it was aware that there would be problems? He sought clarity on the progress of toll-free framework.

Ms N Ndongeni (ANC) expressed her concern about IT which remained a challenge. Why was it difficult for ICASA to secure funds to resolve the IT problem?

Ms O Matshoba (ANC) sought clarity on financial matters, particularly, indicators on how ICASA underspent and on how many licence registration applications ICASA received.

The Chairperson asked about licence registrations per province, cross border coordination in terms of outcome and resolutions of a meeting between Lesotho, Mozambique and South Africa. What factors should be taken into consideration so as to promote fair competition? How long did it take to resolve customer complaints? Did ICASA have capacity to convince its customers that it was going to improve and achieve targets?

Ms Van Dyk asked GCIS whether its communication products were reaching rural areas.

Ms Muller (AGSA) replied that AGSA had engaged with entities throughout the financial year to ensure that they were capable to deal with internal controls. The AGSA engaged with managing bodies and it had met with the Minister to discuss certain matters. AGSA had proposed some commitments to the Minister so as to alleviate root causes of irregular and fruitless and wasteful expenditure and other challenges. Disciplinary actions were not taken by AGSA but by the management of an entity. AGSA however had designed a booklet containing what kind of disciplinary actions could be taken, by whom and when? The booklet would be shared with the Committee.

Ms Pillay (ICASA) explained that ICASA did not pay a bonus to its employees due to poor performance. Paying bonuses would have generated bad behaviour. With regards to budget, Ms Pillay noted there were some projects that needed to be implemented and budget for these projects had to be deviated from somewhere else. On consultants, she said that ICASA did not use consultation services unnecessarily. Consultants were resorted to at some point because ICASA did not have the needed human resource capacity. Some human resources were outsourced because ICASA did not have in-house expertise. She commented that ICASA did not achieve its targets but it almost did.

Dr Mncube replied that ICASA faced a challenge in aligning objectives and targets with its budget. Indeed, the budget was spent because there were activities but were these activities talking to targets? He identified the IT sector as a challenge and stated that ICASA did not have in place a reliable and credible IT mechanism. ICASA relied on consultation in order to create such reliability, effectiveness and credibility. He viewed the resignation of a councillor at the end of January 2015 as a matter that contributed to its challenges. In order to improve ICASA’s performance, Dr Mncube was of the view that an employee who claimed to have performed ought to show proof of performance. He noted that there was moratorium on issuing licences for radio community stations. The ICASA wanted to ensure that they were well-funded in order to operate.

On the toll-free project, Dr Mncube explained that toll-free services were not free in that sense. Someone had to pay. In that context, ICASA was in discussion with Telkom.

On meetings between South Africa and neighbouring countries on cross-border communications, Dr Mncube responded that outcomes of these meetings would be shared with the Committee.

On allocation of frequencies, Dr Mncube responded that frequencies were allocated when available in accordance with ICASA’s plan, but if they were allocated to someone and not in use, they were cancelled. He noted that ICASA was faced with a dilemma on whether its objectives should revised. ICASA management did not know how to go about the revision of its objectives. ICASA was sitting with meaningless objectives and targets.

In terms of supply chain management, Dr Mncube stated that ICASA had capacity to deal with consequences.

He noted that small radio stations were not paying their licences and that was one of the problems. He also noted that compensation of employees was high and had to come down. ICASA had come up with mitigation strategy to ensure that compensation was reduced.

On debt, Dr Mncube explained that the majority of the debt is owed by the Department of Defence and Department of Police. On conditional grants and its allocation to compensation of employees, Dr Mncube explained that it could be a problem if the allocation was beyond 30% of the budget.

Mr Liphoko, on vacancies, responded that GCIS had put a moratorium on filling vacancies because they were trying to create a strategic plan process to be able to determine how many staff were necessary for the two departments. The Department of Communications was divided into two departments. Once the GCIS was clear about the two departments’ structure, it was able to come up with a budget that was presented to National Treasury. In the Annual Report, on pages 72-74, there was a table on human resource statistics, with more detail about placements and vacant posts.

Mr Liphoko noted that there were two levels of training: internal and external training. Internal training focussed on developing existing skills. Details on internal training were provided on pages 96-97. In its quarterly reports, the GCIS had indicated how training was provided. There was training provided at executive level, with particular focus on media training and orientation on government communications. There was also training of managers and professional practitioners.

Touching on IT under-funding, Mr Liphoko said that, if the situation was different and economy was in a different space, he would have concluded that IT was at risk. GCIS was a disciplined organisation and IT was the backbone of GCIS, but it was critical that its IT system was modernised. It was a major problem. Due to delay in IT procurement, the radio studios were put on hold and one radio broadcasting studio was not completed. Well-established IT should be well managed not only from a financial perspective but also from a security perspective. GCIS was looking at what strategy could be adopted to run its IT in well-coordinated manner.

Referring to the clean audit, Mr Liphoko responded that it took GCIS quite some time to get where it is now. However, he agreed that there would be always a room of improvement. Yet, the Committee also had a role to play to ensure that the entities had a clean audit. This could be done through Committee’s oversight visits. An eye should always be on internal control system with regard to supply chain management. The Internal Audit Committee should be in place.

On Izimbizo, Mr Liphoko said that every time there was going to be an Imbizo focus week, the GCIS issued directives and guidelines. In about 2009, the GCIS went out with Department of Cooperative Governance and Traditional Affairs and other stakeholders. This included intergovernmental coordination. Nothing was as frustrating as having three to four ministers that had been to the same area. Guidelines among other things included coordination of Imbizos and talking about intergovernmental matters. In these guidelines, it was emphasized that when leaders go to the public they should start by giving feedback on issues that had been raised. Members of the community know less or nothing about a minister’s portfolio, therefore, a minister should be able to respond to all questions asked by communities. They did not know to differentiate between local and provincial government. The GCIS encourages provincial and local government that there should be periodical reporting to the public. Premier and mayor should always go to the public to give it feedback.

Mr Liphoko explained that My District Today is an electronic newsletter that is meant for intermediaries and was not meant for the public. It was more about political principles and leadership in civil society. It talks about government engagement and testimonies by civil society on how they view government’s service delivery.

On the Vuk’uzenzele Newspapers, Dr Mncube explained that the newspaper was meant to reach people who did not have access to mainstream media. GCIS would continue to print it in all official languages. On media bulk-buying, the figure of 272 was coming from different departments. It did not mean that each advert could be aired by every TV or radio or every newspaper. GCIS was conscious that it ought to support community media. In the previous financial year, R38 million was directed to supporting community media. The sustainability of community media should not be dependent on government, the private sector too should play its role.

Media Development and Diversity Agency (MDDA) briefing
Ms Phelisa Nkomo, MDDA Board Chairperson, provided highlights from the 11 years that MDDA had been in existence, its 2014/15 programme achievements, programme target performance, human resources, governance, audit and ensuing remedial action, and its financial report. She noted that the MDDA had received unqualified audit report, an unbroken record since its inception. MDDA received funding from the government through the Department of Communications as well as from broadcasting service licences.

The programme achievements were noted in terms of community media, small commercial media, research, training and development and monitoring and evaluation. The MDDA however faced certain challenges, including the board’s inability to form a quorum in the last two meetings of the year, high staff turnover, executive leadership positions appointed in an acting capacity and inadequate budget allocation due to cessation of print media funding.

A summary of projects supported in 2014/15 were provided. Funding for these community projects totalled R8.9 million.

At 31 March 2015, vacancies were standing at 15. Vacant senior management positions numbered four. Of the 19 employees, 14 were female.

On the findings of the Auditor-General and the remedial action taken, the key root cause for non-performance was due to vacancies in key positions. However, these vacancies have now been filled.

Film and Publication Board (FPB) briefing
Mr Themba Wakashe, FPB Chief Executive Office, spoke on the 2014/15 organisational achievements and challenges; total number of classified materials; compliance raids; appeals; media coverage; vacancies; finance; cost saving measures and savings; audit report; consultant use and litigation.

Mr Wakashe noted that the FPB governance structure was comprised by the following bodies: Accounting Authority Council; Audit and Risk Committee; Chairperson Committee; Finance Committee; Human Resources and Remuneration Committee; Operation and ICT Committee; Appeal Tribunal and Executive Committee. The governing bodies drew their mandate from legislative frameworks, including but not limited to the Film and Publications Act 65 of 1996, as amended. The FPB’s five year priorities include (i) leading edge in content classification; (ii) informing and educating society to empower adults and protect children against harmful content; (iii) legislative review; (iv) develop and maintain local and international partnership; and (iv) research, compliance and monitoring and evaluation.

Referring to 2014/15 Annual Report, he highlighted the FPB’s key organisational achievements and challenges. The Challenges included online content regulations, delays in legislative amendments, user generated content (law enforcement sex video. Sex video in schools and imitative acts) shifts in content submitted for classification from physical submissions to online submissions and distributor’s access to financial records of balances and delays in the issuing of invoice for classification and legislations; confusing and unclear tariff information; unclear understanding and meaning of ratings; consistent insistence by distributors to get ratings before classification is finalised; and complaints from members of the public about cinemas not allowing admission of underage children to movies.

With regards to achievement of strategic targets, Mr Wakashe noted that 78% of annual targets were fully achieved whereas others were not fully achieved but, overall, significant improvement was noted. Total number of classified materials was 2151 and two cases were on appeal. Identified and reported suspected child sexual abuse materials were 169.

Mr Wakashe noted that the FPB conducted compliance raids. In these raids, 28 714 total material were seized.

With regards to employment, Mr Wakashe noted that 9.8% of posts were vacant.

In terms of financial performance, Mr Wakashe stated that the 2014/15 revenues were generated as follows: R78.9 million was received as grant; R6.3 million was generated from regulation fees; and R1.6 million disclosed as other income. Overall income received for the year end 31 March 2015 was R86.8 million as compared to R87.1 million received in the previous financial year. 99.6% of the grant was spent. The FPB received unqualified audit with matters of restatement of corresponding figures and of taking effective steps to prevent irregular expenditure. According to audit report, there was inadequate review and monitoring to prepare financial and performance information. There was irregular, fruitless and wasteful expenditure. Disciplinary action was taken against employees responsible for previously incurred fruitless and wasteful expenditure.

Mr Wakashe enumerated projects under which consultants were used and R1.3 million were allocated to them.

Discussion
Ms P Van Damme (DA) asked FPB whether or not the public consultation would change the film and publications policy.

Ms Van Wyk asked MDDA about its vacant posts and the budget that was spent on recruitment and its outcome. In respect of the latter, what were the criteria that the MDDA followed? How many projects were monitored in 2014/15? She commented that there was a contradiction in the number of people trained and asked for the correct number. How many people were trained and who trained them? Were they trained by MDDA itself or by other institutions?

Ms Ndongeni asked FPB what strategies were put in place to address the matters raised in Auditor-General Report. She asked MMDA what criteria and procedures were used to select the funded guarantee and what would be done in future to prevent flaws causing certain tenders to be cancelled. What strategies were used to deliver on that project.

Mr Tseli appreciated the work of FPB, more particularly, its latest conference. He asked how important information related to films and publications would reach communities or how communities could be kept informed, on the progress of the policy amendment and on the irregular expenditure of R1 million arising out of the irregular award of an ICT tender to an IT company. He appreciated the fact that there was reduction in use of consultants.

Mr Tseli asked the MDDA how many radio communities and print media were targeted for support; what criteria were followed in the selection of radio communities and print media to be supported; what strategies were in place to determine if MDDA was meeting government priorities? He expressed his concern about the use of consultant services as nothing in the presentation indicated whether use of consultants was increasing or decreasing.

Mr Mbinda appreciated that MDDA had been receiving an unqualified audit report for many years but was unhappy that its annual report was showing a regression on the issue of compliance. He too asked for the criteria and procedure for the support of community radios, why no audit action plan was submitted on remedial actions, whether the interim financial statement was reviewed by the internal audit committee or whether the internal audit was outsourced. On recruitment, he asked why consultants were still being used.

Mr Kekana asked how these entities in question dealt with vacancies and what measures were in place to ensure that individuals were employed in permanent positions. He appreciated FPB's improvement in its work but expressed his concern about vacant positions. The most important thing, in his view, was to ensure that all positions were filled with immediate effect to meet the government priorities. He commented that the FPB did well in its annual performance even though it was facing huge challenges. However, he asked how these challenges would be alleviated. Was FPB contemplating to partner or cooperate with the Department of Social Development especially on matters affecting children?

Ms Matshoba suggested that the 16 Days of Activism Against Gender Violence should be used to address certain challenges that the FPB was facing. To alleviate these challenges, the FPB should work hand in hand with relevant stakeholders.

The Chairperson commented that the Bill of Rights enshrined rights that protected dignity and integrity of children and asked if FPB was ready to act for protection of these rights. She asked if FPB covered local content. If yes, for how long had local content been covered? Was there any strategy on how the FPB would be retaining skills in the future? Why was there no breakdown of gender for employees and trainees?

Ms Matshoba asked MDDA about the criteria and procedure for awarding bursaries. Were bursaries distributed via universities and colleges?

MDDA responses
Ms Nkomo noted that the MDDA work was guided by its vision in that they support community media projects. MDDA had reviewed its strategies and had shifted focus on investment. The MDDA projects ought to be approved by the board in its meetings.

On orientation about guarantees, Ms Nkomo stated that only one board meeting took place in July 2014 that approved projects. The number of the people who were trained were approved in that meeting. In approving the projects, questions of ownership and community participation were determinants.

Targets that were achieved were 56%. This was due to the fact that there was no actual planning with regards to meeting our objectives. The tender in question was cancelled in accordance with professional advice from the internal auditor. The project was said to be at risk if it would have been undertaken.

Referring to training, the MDDA cooperated with its Sector Education and Training Authority (SETA), the Institute of Journalism, the Media Workshop and other accredited institutions.

On equipment, the investment projects were encouraged through the support of establishing a sustainability plan. MDDA looked at how they planned to take the projects forward.

Referring to bursaries, Ms Nkomo responded that the bursaries went directly to institutions and not to individuals. For example, the MDDA worked with Wits Radio Academy. The agreement between them was that the bursaries would be managed by the academy. MDDA would, in turn, identify other institutions that could benefit from the programme.

On the question of retaining staff, Ms Nkomo replied that the MDDA was heavily relying on consultant services. However, it had an in-house research unit which had its own manager. Depending on the nature of research, researchers could be outsourced. Content development research was done by outsourced researchers who had to run all over the country conducting interviews.

On policy change, Mr Wakashe replied that over 600 comments and inputs were received and the FPB was looking at how they could be incorporated in the policy document. The deadline to do so was 31 March 2016.

Mr Wakashe explained that the training was a one year certificate course which was offered by UNISA. UNISA was an accredited institution.

For improvement in services, there was a need to upgrade the IT infrastructure. If the IT infrastructure was not upgraded, it would be difficult to monitor non-compliant online publications. The FPB was concerned about content that was harmful to children.

Referring to fruitless and wasteful expenditure, Mr Wakashe stated that there would be a meeting in November in which such matters would be dealt with to find a solution. The question that would be looked into was whether the FPB could sue for refunds or whether managers should be held accountable.

Meeting was adjourned.

[Apologies: Ms J Moloi_Moropa (ANC), Ms L Van der Merwe (IFP), Mr M Ndlozi (EFF)]