CASIDRA on findings raised by AGSA

Meeting report

Briefing by CASIDRA on the findings that were raised by the AGSA at the end of the 2019/20 financial year, including the measures formulated and implemented by the Entity to avoid future recurrence of the findings.

Mr Stuart Symington, Chief Executive Officer (CEO), Casidra, led the presentation. Speaking on Programme 3: Rural Infrastructure and Poverty Alleviation, Mr Symington said Casidra had a target of 36 projects to be implemented in the annual performance report and achieved 50 projected from the previous year which were reported against the target of 36. However, the AG did not agree with that because the supporting evidence provided did not agree with the reported achievement and indicated an achievement of 43 projects implemented.

Talking to the measures formulated and implemented, Mr Symington said additional layers of control had been put in place to ensure that completed projects were correctly allocated for specific years based on an agreed starting point (the MOA) of the projects with the Auditor-General South Africa (AGSA). Compliance officers and their assigned project managers were required to check and approve performance information on a quarterly basis now.

Mr Symington also gave detail on procurement and contract management. He indicated that some  of  the  quotations  were  awarded  to  bidders  based  on preference  points  that  were  not  allocated  in  accordance  with the  requirements  of  the  Preferential  Procurement  Policy Framework  Act,  2000  (Act  No. 5  of  2000)  (PPPFA)  and  its regulations. Disciplinary  action  was  taken  against  the  employee  involved  that  led to  the  employee’s  dismissal.  The  post  was  advertised  and  filled,  and  the Bid  Kaizen  Team  was  established  to  ensure  the  correctness  of the documents. Some  of  the  quotations  were  awarded  to  bidders  who  did not  score  the  highest  points  in  the evaluation  process  as required  by  Section  2(1)(f)  of  the  PPPFA  and  Preferential Procurement  Regulations. He added that in  some  cases , staff  used  B-BBEE  certificates  that  were  not  originally  certified.  A standard operating procedure was developed to address the matter.  

Discussion

Ms L Maseko (DA) appreciated the presentation. She referred to the reporting systems in the past financial year and asked how it had been done previously.

She asked for clarity on the process of awarding bidders. ‘Did it depend on one person in Casidra or did multiple people to review the paperwork submitted to ensure compliance? She asked if the responsibility for checks and balances fell on a single employee or on a team.

Mr D America (DA) thanked Casidra for having addressed the issues highlighted by the report from the AG. He asked about the adjustment of the starting dates for the Rural Infrastructure and Relief Project.’ Would the change in start dates have a significant impact on the number of projects that had received assistance during a particular financial year’? ‘Would those project outcomes be reduced, or would they remain within the presently defined capabilities of Casidra’?

Ms N Nkondlo (ANC) asked what charge was laid on the employee who had been dismissed. ‘Did it relate to the taking of uncertified B-BBEE certificates’?

Secondly, she noted that it was a procurement function aligned to what Ms Maseko had asked. In that regard she asked what the procurement unit staff compliment was. Who was the final signatory and what roles did Mr Freek van Zyl, Chief Financial Officer (CFO), and Mr Symington play in the final approval of any transaction?

On the number of projects, Ms Nkondlo also asked how one considered the starting dates. She asked if there was a new system of reporting their projects within the current financial year so as to avoid the situation that occurred before.

Mr P Marran (ANC) agreed with questions asked above and referred to the different starting dates of the projects where the AG had pointed out that one of the starting dates were not 50 but 43. He echoed Mr America’s question about the impact of the AG’s finding on the targets and asked whether the seven shortfalls fell within the next financial year. He then asked if Casidra would agree with the AG that only 43 had been achieved if the starting dates had not been affected. If they did agree with this, then how come money was spent on 50 projects but only 43 had been achieved? He pointed out that Casidra thought it had spent money on 50 projects but in reality, the outcome was on 43 according to the AG so Mr Marran asked for clarity on that.

On the dismissed employee, Mr Marran asked why there had been no checks and balances.

Mr Marran also asked about the certificates that had lapsed. He asked how a payment could be made if the B-BBEE certificates had lapsed. During the bidding process it was one thing to allocate a project to a bidder but how could a payment be made when the documents were not in order.

The Chairperson asked about governance issues. He said it was the third time this year the Committee had met with Casidra which had been sent a resolution on what information to report on. The Chairperson referred to the first meeting with Casidra in which the Department of Agriculture, Land Reform and Rural Development (DALRRD) had been present. When the Committee had asked Casidra for its report it indicated that it had not been aware it had to present a report even though it had been sent the resolution requiring a report. In the following meeting Casidra had been present amongst other departments and had submitted half a page as its report which had not spoken to the Resolution that had been sent to Casidra. That led to the present meeting, but the Chairperson indicated that there was a document Casidra had presented previously which it did not present in the present meeting. He asked what had changed within the last week that led to Casidra to submit the present document. ‘What changes had been made’.

Mr Symington responded to the Chairperson’s question about governance. He said Casidra submitted a report on its triple B-BBEE status to the DALRRD which had been requested. On submission of the half paged report, Mr Symington said the Resolution of 23 April requested a financial reconciliation which had been submitted. Thirdly, he said the difference in the reports was that Mr Symington had not clearly understood the request in the letter sent to Casidra. He did not understand that material statements from the AG’s report were required. That was the difference and clarity had been sought.

In response to Ms Maseko on past practices, Mr David Nefdt, Chief Officer: Projects, Casidra, said the general understanding was that a project started when Casidra signed the MOA with the beneficiary. Often there were projects where Casidra needed to deliver not to a direct beneficiary but to the DALRRD which was where discrepancies crept in because there had been no direct beneficiary in which case the starting date would be the date when the funding flowed. Therefore, it would be assumed to have been previously acquired. Casidra had therefore agreed with the AG that if there was no direct beneficiary to sign then the first contract date with a supplier would be used. That was how the 50 was found to be 43 by the AG.

On the impact of the starting date, Mr Nefdt said the reason for the delay of projects did not complete the year the funding closed. It was due to delays in project planning. That was the case with an agricultural seasonal product where the planting season had lapsed. Thus, the deferred starting date did not impact the completion of the projects which would simply be reported as a Previous Year Project.

In response to Ms Nkondlo, Mr Nefdt said Casidra agreed with the AG that Casidra would use (unclear 28:38) agreements with suppliers as evidence if there were no beneficiaries.

On the seven project discrepancy, Mr Nefdt said the money had indeed been spent but was reported under another target. There were two basic targets for projects. One target referred to the date when the MOA had been signed and the other referred to the completion of a project. Thus, the targets referred to were captured under another target head.

The Chairperson reiterated Mr Marran’s clarity seeking question and asked whether the money had been spent on 50 projects or on 43 projects.

Mr Nefdt said the 43 referred to what could be reported under that specific indicator and said the money had been spent on 50 projects.

The Chairperson asked for responses to the other questions.

Mr van Zyl answered the questions on the procurement procedures. He said Casidra had one procurement administrator who was responsible for data collection and filing the documents. Thereafter, there were five to ten Project Managers who had to ensure the correct procedures had been followed on file. A summary was then submitted to a Management Committee for consideration and approval. The final outcome was the management decision where the transaction had been approved. He added there were cases were copies of documents put on file were not always picked up by management. There were two charges against the employee who had first received a final written warning followed by a dismissal one or two months later. In both instances the employee took Casidra to the Commission for Conciliation, Mediation and Arbitration (CCMA) and lost in both instances. Mr van Zyl agreed that there were complete procedures which should have been followed by the dismissed employee who unfortunately had not adhered to the rules. Mr van Zyl echoed Mr Symington in that after the dismissal the post had been advertised and filled accordingly. There was no re-occurrence of those happenings in the present financial year. Mr van Zyl said the problem with electronic B-BBEE certificates was that originals were unobtainable as everything was a copy which had to be certified by a commissioner of oaths. A problem with that is the fact that copies of certified documents were submitted meaning the signature of the Commissioner was not the original. Mr van Zyl said that had been corrected through means of a standard operating procedure for all employees to adhere to.

The total staff complement of Casidra was 50 employees. He said Casidra was too small to be big but too big to be small. That meant it had to adhere to the rules although it did not have the luxury of a team that assisted in every event. In some instances, one individual was responsible.

On whether Casidra agreed with the MOA date defined by the AG, Mr Symington said the business of Agriculture was seasonal which meant missing some cycles. There could be considerable delay between the date funding was received and the date an MOA was signed with a beneficiary. The delays were beyond their control, but they agreed with the date defined by the AG.

Ms Nkondlo asked a follow-up question. She asked Mr van Zyl to educate her on the answer he had provided. First, he said there was one individual responsible for the administration who would report to various project managers. She asked what the reference to ‘various project managers’ meant. How many managers were there? She noted that he indicated there were 50 employees but did not specify how many employees were responsible for the procurement function. She said that as the CFO, Mr van Zyl was the last person in the chain. ‘How many people were in the hierarchy of that function’?

On delegation, she understood Mr van Zyl to have said that the dismissed employee was an administrator and whose role was to ensure that the paperwork before the management committee was in order. However, Ms Nkondlo pointed out that the level of authorisation Mr van Zyl described ended with him. It therefore did not make sense to her how the mistake was not picked up through the various levels of authorisation and least of all how the employee who was responsible for the administrative task took full responsibility. How could the dismissed employee have taken full responsibility when the decision passed through the management committee, ultimately ending with Mr van Zyl as the CFO? As Ms Nkondlo understood it, all people involved in the bidding process had an obligation to ensure that all information was correct which included certified copies which meant that when the dismissed administrator missed the certified copies, those were further missed by the project managers, the management committee and also by Mr van Zyl as the CFO.  She wanted to understand how the mistake could have happened in an organisation with multiple management levels as it seemed the administrator was solely responsible for an irregular contract getting approved. ‘What kind of system was that as Mr van Zyl said a new system had been introduced called the standard operating procedure’? ‘Were those standard operating procedures not in place before’?

Ms Maseko added to what Ms Nkondlo had said. She asked for specific details that led to the sacrifice of the Administrator for the human error. As she had listened, there were ten project managers that had perused the paperwork but the only person who received a disciplinary hearing was the administrator. ‘What was special about the case that caused only the Administrator to be disciplined and not the project managers’?

On the capacity within Casidra, Ms Maseko noted that it had been raised as an issue. She said that perhaps there were not enough employees within Casidra but said if responsibility had been taken within the organisation, then the organogram would work. Ms Maseko said responsibility had not been taken and found it unacceptable for Casidra to cite a lack in employee capacity as an excuse for not following due process.  She asked what had been different from the other financial years because Casidra could not lean on the excuse of not having a big staff complement.

She asked what the relationship was with the AG as the AG usually had ongoing engagement with entities throughout the year. She therefore wanted to know how Casidra missed corrective reporting and why it had not been communicated to them in advance. The AG was not out to catch entities off guard and often communicated flaws that could be fixed. ‘What was the engagement with the AG and why had the internal audit committee not picked up the errors found by the AG’?

Mr Marran said he noted there were different check points and his question referred to the last point where payment was made. He probed why the payment had been made when the document were not up to standard. The last check point was authorisation for payment. He had been listening carefully and Mr Symington said payments were made to companies whose B-BBEE certificates had lapsed so Mr Marran asked why payment had been made when B-BBEE certificates had lapsed.  He said he listened to Mr van Zyl and the chain he described with project managers and the management committee was for the carrying out of checks and balances, so it did not make sense how the payment had been made.

On the 50 versus 43 projects, Mr Marran said he understood the response to mean that 50 projects had been undertaken but seven fell under another target. He asked if that information had been provided to the AG and which specific targets had seven projects which fell under target.

Mr van Zyl said all the records were always made available to the AG irrespective of whether there were internal auditors. He said the AG made selections based on their sampling testing and followed their audit procedures. He did not have a problem with that approach and neither did the AG.

On the procurement process, Mr van Zyl indicated that his response had not relayed that the one procurement officer reported to other managers. There were project managers involved in the whole process and the procurement administrator had to give advice to and assist the project managers. He repeated the procurement process and said that once the documents had been filed it was out of the hands of the project managers to see what had been filed. He said the standard operating procedure had been required because there were different interpretations of what could be considered as audit evidence. The charge against the procurement administrator was negligence which he was found guilty thereof. Management made the final decisions on information and recommendations tabled in front of them. Therefore, they could act on incorrect advice hence why some improvements had been made. Employees were trained to do their job, but measures had been put in place for mistakes. An example given was that despite the person’s training Casidra received the audit finding it received. When the matters were picked up, they were addressed and implemented and those that were not corrected resulted in the audit outcomes given by the AG.

On the targets, Mr Nefdt said that management engaged with the AG on the findings. He said that was limited during the COVID-19 pandemic. There were internal processes after engagement with the AG.

On the 50 versus 43 projects, Mr Nefdt said the date the MOA was signed was reported and was verified by the AG. The others referred to the previous year projects which meant the project was not completed in the year under consideration. The seven projects resulted from the AG classifying them to the year the MOA was signed. Where a project was started and completed within the same financial year, Casidra counted it as a signed MOA. Some projects should have been in the current year because the first procurement happened in the current year, so they did not fall under the previous year as Casidra had erroneously determined.

Mr van Zyl added that when Casidra required work to be completed and an order was written out, a CSD report was compiled to confirm compliance with tax laws and the B-BBEE certificates. When payment was made for services rendered the CSD was consulted to check if the person was still tax compliant for example. Sometimes, if the supplier had not submitted their PAYE, then the South African Revenue Services (SARS) would flag this, and payment would not be made. If there was no compliance the supplier would have to re-submit correct certificates. It was in such instances where the date of payment had not been noted because what was on file could have become outdated by the very next day after it had been filed. That was a challenged Casidra faced.  

Mr Symington said there were no incorrect payments made.

On capacity, he said that when he first arrived at Casidra he consulted with the entire company about the areas that lacked in capacity. According to Mr Symington, a new structure was introduced for better service and the Board had approved the new organogram. He focused on capacitating middle and project management which he hoped would improve service delivery.

Ms Nkondlo said that perhaps the Committee could deal with her concerns through the Committee Resolutions because she was worried about what Mr van Zyl said about being incorrectly advised. It demonstrated a flaw in the processes in the organisation which could easily be manipulated. It was worrisome that the error picked up was from a sample analysed by the AG so she couldn’t imagine what other errors existed in an organisation where the CFO said he was incorrectly advised. She took the matter of finance very seriously stating that the country did not tolerate accounting authorities and officers at levels of government and in all departments who shifted the blame. That was why systems had to be put in place within an organisation that allowed for checks and balances so that an error that was missed by one individual could be picked up by other individuals. She said Ms Thoko Didiza, Minister of Agriculture, Land Reform and Rural Development, had to intervene to assist Casidra with its procurement system.

Ms D Baartman (DA) asked how many people sat on Casidra’s Bid Specification Committee, the Bid Evaluation Committee and on the Bid Adjudication Committee and who they were.

Mr Marran addressed Mr van Zyl and restated what he had explained about a payment being made when the date on a B-BBEE certificate had lapsed and Mr Marran asked whether that could be seen as negligent because payment was made without checking the dates again.

Mr van Zyl said those were not the facts of the matter but that he was explaining how things change quickly. He said if that payment was in the AG’s selection, he would flag the dates when the paperwork was not in order. He said agreeing with the AG in that regard does not mean that at any point the incorrect amount or supplier had been paid.

On the composition of the Bid Committees, Mr van Zyl said Casidra had seven managers who were not always all present at meetings. If there was an appeal, then the managers who were involved in the original authorisation could not sit for the appeal. That had been changed after a complaint had been laid and legal advice had been obtained. At least three to four managers handled the approval, and the other managers heard many appeals.  At least three managers had to be present on the various committees. It was usually the same people, but it changed depending on who heard the authorisation.

The Chairperson said Ms Baartman’s question was very direct as she asked how many people sat on those three Committees.

Mr van Zyl said at least three of the managers.

Ms Baartman asked if all three managers were the same across the Committees. As she understood it, the same managers could sit on the Evaluation Committee and the Adjudication Committee as per the Public Finance Management Act 1 of 1999 (PFMA) but the Specification Committee and every other committee had to have different managers.

Mr Marran noted that Casidra had repeatedly said that no incorrect payments had been made to service providers. Mr van Zyl said the correct payments had been made to the correct service providers but that was not what Mr Marran had asked.  Mr Marran was referring to the instances when B-BBEE certificates had lapsed, and those dates had not been checked and asked if payment would still be made or whether the service provider would be asked for updated B-BBEE certificates. ‘Should payments have been made when the certificates had lapsed’? ‘If those checks had not been made could that be seen as negligent’? ‘It was a yes or no question’.

Ms Nkondlo added onto what Ms Baartman asked and said the Bid Committees were regulated under the PFMA. She also wanted to know what Mr van Zyl would say because it seemed the Managers moved across Committees. She said the CFO was required to Chair the Bid Adjudication Committee and asked if Mr van Zyl was in that function. ‘Could Casidra provide information about who sat in the Bid Committees namely the Specification, Evaluation, and the Adjudication Committees’? That was the specified in the legislation and there was a course with the National School of Governance to help entities with this issue because it seemed Mr van Zyl was not clear on the differentiation as he had referred to them as management committees.

The Chairperson referred to the ‘Bid Kaizen Team’ mentioned in the presentation and asked whether that meant the Bid Adjudication Committee.

Mr van Zyl said the evaluation was done by the Bid Kaizen team who were totally independent people with knowledge who addressed those matters.

The Chairperson asked whether that was the name of a company.

Mr van Zyl said it was an established company principle which Casidra used to refer to their team by. He said it was the technical team who were all staff members. Transactions were tabled for approval before the management team which composed of the seven staff members. However, not all seven members were present to do approvals as there had to be different people from the seven available to hear appeals. At least three managers had to decide the approvals and they were interchangeable because it would not always be the same people who heard approvals and appeals.

On Mr Marran’s question about negligence, Mr van Zyl said the AG would flag irregularities not in terms of negligence but in terms of the PFMA legislation or Casidra procedures.

Ms Baartman said he wanted to understand the procedure. She outlined the procurement process and asked for the names of the people on the Specifications Committee. She asked what role those people played. She further detailed the procurement process and pointed out that there had to be different people on the Evaluations Committee and Adjudication Committee. She then explained that once a tender had been awarded the contract would be managed. That entailed a process of how payment approvals would occur. What Ms Baartman wanted to know was whether the Bid Kaizen Committee or the management committee that Casidra referred to was actually the Bid Selection Committee, the Bid Evaluation Committee, or the Bid Adjudication Committee. If they were not any of the three Committees she cited, were those the processors that dealt with payments of contracts awarded after the tender process? She asked for clarity on the matter.

Mr van Zyl said the Bid Kaizen team were the people with the technical expertise and were not the people that formed part of the Executive Management. They did work and made a recommendation to the management committee which was what Casidra called the Bid Adjudication Committee. He repeated that the Bid Adjudication Committee had a maximum of seven members all of which did not sit on that Committee. The Bid Kaizen Teams – Evaluation Team was totally different from the Bid Adjudication Committee which was to keep functions separate.

Mr Symington asked that the question be answered in writing so more clarity could be given.

The Chairperson agreed and it would be passed in a resolution. He said any remaining questions will be put into the Committee Resolutions.

Casidra was excused from the meeting.

Committee Resolutions

Ms Baartman said Casidra was calling the PFMA prescribed Committees by other names and asked for an organogram or something that indicated the specific people in the different committees. She asked for a flow diagram of the procurement and payment process. Her follow-up questions were dependent on that process which she was unclear about.

Mr America agreed with Mr Baartman and asked for a flow chart with the detail Ms Baartman mentioned.

Mr America said the discussion that had just ensued was useful but reminded Members not to forget the purpose of the meeting which was to address the audit findings found by the AG. He said Casidra had addressed those findings which had not reoccurred in the subsequent audit it underwent. That suggested to Mr America that the measure Casidra had put in place were effective and had been approved by the AG. He still supported Ms Baartman’s request.

The Chairperson supported the request for a flow chart on Casidra’a procurement process. The only one he had was that Casidra had been evasive when asked direct and simple questions that required professional answers.

Ms Nkondlo agreed with the proposition. And added that it include an organogram in relation to the procurement process so Members could understand who the responsible persons were and what they were responsible for.

On the dismissed employee, Ms Nkondlo wanted to understand the basis for the dismissal. She referred to Casidra’s explanation that the person had been dismissed for negligently ill-advising the management committee. However, Ms Nkondlo found that when the management had been asked about its negligence, they became evasive. She said in a fair labour environment everyone could be found guilty of negligence. She asked for the details about how the person was dismissed where Mr van Zyl stated that the employee received a final written warning before ultimately getting dismissed. She wanted to understand the issue from a governance point of view.

The Chairperson said Members collectively felt that the dismissed employee had been made a sacrificial lamb to protect the senior management. He asked for a report explaining what led to that dismissal.

Mr America said perhaps the Committee could request a copy of the arbitration award.

Consideration and adoption of minutes dated 27 August 2021

The Chairperson took Members through the minutes page-by-page.

The minutes were adopted without changes.

The meeting was adjourned.