Auditor General's Performance Audit of Projects funded by the National Development Agency (NDA): hearing

Public Accounts (SCOPA)

17 August 2010
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Committee conducted a hearing on the Auditor General’s Performance Audit of projects funded by the National Development Agency. Members questioned the Agency on the commencement of projects, non-compliance, communication, monitoring and discontinued projects.

The Minister of Social Development was unable to attend. The Deputy Minister attended in her place.

Members said that for a project approved by the National Development Agency there were pre-funding conditions to be met before a contract was signed. These included opening of a separate bank account and preparation of a detailed budget. However, in the 19 projects visited by the Committee it was found that separate bank accounts had either not opened or had not been opened on time. Members asked why the Agency failed to make beneficiaries comply with the pre-funding conditions.

Members noted that 68% percent of the projects visited had money transferred to them seven weeks after a contract was signed instead of in two weeks as stipulated in the agreement. Members asked why it had taken the Agency so long to transfer funds. Members asked who carried the financial responsibilities for the extra payment due to increased prices, because, while a project had been waiting for funding for seven weeks, prices had gone up. A Member asked also how the Agency dealt with the individuals who could have investigated this matter.

The Committee did not feel that Agency had taken very serious disciplinary action against employees who had failed to perform adequately. It was too easy just to point a finger at a senior manager and give him or her a verbal warning. The more senior a manager the more catastrophic were the implications for an organisation, and if the Agency was taking infractions very seriously then the actions taken against those managers should have been serious.

The Agency had a contract that it signed with beneficiaries. This contract stipulated that a report was needed about project activities, results and impacts. Out of 22 projects only one had met the requirement and submitted a report.

 

Members asked why it had taken the Agency so long to identify this problem of projects not adhering to the contract and why had it not followed up on those which had not submitted a report.


The Agency was not even able to identify that only one project had met the requirements until the Auditor-General had reported.

 

Members asked why the Agency had not identified the problem beforehand, and why had it failed to follow up. Members asked what the Agency did when it found that beneficiaries were not meeting the requirements of the National Development Agency Act. The Committee asked the Agency what it had done to address the non-compliance with regulations.

Members said that there were legal requirements to which projects must adhere. The Agency could not use excuses such as that people were from grass root levels or illiterate. A Member objected to the view that just because people were illiterate they were foolish or did not understand. If the Agency had communicated with these projects and told participants in their own language what they needed to do then those participants should be able to do what was expected of them. The Chairperson felt that illiterate people were more reliable than educated people at times.

In relation to corrective action by the Agency against employees who were not doing their jobs, the Committee’s view, and Government’s view, was that the most severe punishment was a final written warning. However, a person could even get three such warnings without any further action. In all the Departments that had appeared before the Committee there were only a few in which very strong action was taken. It seemed that among civil servants there was feeling of entitlement that the holder of a high level job with a good salary would only get a verbal warning. This was a worrisome factor.

 

Members asked if the Agency could supply the Committee with the details where it had taken action, and state who the people were and what the sanctions were so that the Committee could assess whether or not there was any laxity in the Agency. The intended beneficiaries were very poor people living in the most abject conditions and they would need very strong support from Agency in order that the projects to uplift them could be implemented.  

Members wanted to know about communication between the head office and beneficiaries. They asked if communication between the two had improved, and if beneficiaries were able to write a letter directly to head office with any questions they had. Not everyone had telephones and so it would be easier for such persons to write a letter and communicate by post directly with the head office

The Deputy Minister of Social Development said that it was clear that the Committee wanted to see value for every cent that was spent. She noted the two issues of capacity building which centred on the board, management, and the recipients. The Auditor-General’s report had presented the Agency with an opportunity to consolidate its work. It was clear that there were many challenges in the Agency, such as the internal audit committee which the Agency should try to use as a measurement for improvement of work. The Agency also tried to create waterproof systems of monitoring so that it could maximise its work. What was important was that Agency was dealing with the poorest of the poor, but and at some stage it had taken advantage and ignored some of the basic areas of accountability. The people with whom the Agency worked were committed and understood that they needed to account for every cent used. It was alleged that the Agency was duplicating the work of municipalities. However, the Deputy Minister believed that some municipalities were doing work that was supposed to be done by the Agency.

Meeting report

Hearing on the Auditor General’s Performance Audit of Projects funded by the National Development Agency (NDA)
The Chairperson told Members that the Minister of Social Development was supposed to attend the meeting but was unwell. The Deputy Minister would be attending in her place.

Commencement on Projects
Ms M Matladi (UCDP) said when a project was approved by the National Development Agency (NDA) there were pre-funding conditions which had to be met before a contract was signed. These included opening of a separate bank account and preparation a detailed budget. However, in the cases of the 19 projects visited by the Committee it was found that a separate bank account was either not opened or was not opened on time. She asked why the NDA failed to make beneficiaries comply with the pre-funding conditions.

Mr Malusi Mpumlwana, Chair of the Board: NDA, said that there were two sets of conditions; one had to be fulfilled before the decision was made to make a grant and thereafter another set of conditions before money was dispatched. There were a variety of these conditions, one of them being the opening of accounts; the NDA had found a very wide range of reasons why the accounts were not opened.

Ms Matladi asked why NDA did not help beneficiaries to meet the pre-fund conditions.

Ms Vimelwa Mhlapo, Chief Executive Officer (CEO): NDA, replied that at the time the NDA did not have a system which helped beneficiaries meet the pre-funding conditions, in terms of opening a bank account. This was because the organisations had existing accounts and the NDA had assumed that it would be easy for them to open a separate bank account. Subsequent to the performance audit, NDA had reviewed the conditions and had put interventions in place that would assist communities and beneficiaries. The NDA had also interacted with banks as well so that the beneficiaries could get assistance. She reminded the Committee that the NDA was working at a grass roots level and there was a high level of illiteracy.

The Chairperson said the issue was that money had been transferred by NDA into bank accounts that were not new and were not opened for a particular project. The point of opening a separate bank account was so that money would only be spent on that particular project and so that the money did not get mixed up with other funds. It seemed that NDA did not really mind if this condition was not met.

Ms Mhlapo said that at the time of the performance audit there was no system of assisting those civil society organisations to open a separate bank account. The reason NDA required that projects had a separate bank account was so that money transferred would be utilised for the right project so that it could be monitored.

The Chairperson pointed out that indeed there was a pre-funding condition saying that a new bank account had to be opened, yet NDA still paid money into accounts that were not new. NDA did not adhere to its own conditions.

Ms Matladi asked if the system, which NDA currently had in place, was waterproof and that it would not find the same problems happening.

The Chairperson clarified what Ms Matladi said and explained to the NDA that the Committee wanted to know if the issue was still a problem.

Ms Mhlapo said it was not a problem anymore, because all the conditions had been included in the pre-adjudication processes, so that once a project was approved all the conditions had already been looked at and adhered to.

Ms Matladi asked, if there was no separate bank account, how the NDA monitored how money was being spent by each project and what the unspent balance of the grant was.

Ms Mhlapo replied that, if there was no separate bank account, then funds were not transferred, and that was why there was a delay in projects getting money from the NDA.

The Chairperson pointed out that this meant that the first question asked by Ms Matladi was irrelevant. He reiterated Ms Matladi’s question about how money was monitored when it was put into an existing account.

Ms Rashide Assel, Chief Operating Officer (COO): NDA, said the NDA checked the project’s balance sheet, income statements, and invoices and looked at the project’s balance to make sure the money was spent in accordance with that budget.

Ms Matladi said that in 68 percent of the projects visited money was transferred seven weeks after a contract was signed instead of in two weeks which was the agreement. She asked why it had taken NDA so long to transfer funds.

Ms Mhlapo replied that this was because of the issue of the separate pre-conditions NDA had in place. The project had been approved by the NDA but it did not meet the pre-funding conditions yet, so funding was delayed. This was why all pre-conditions were now put into one step.

The Chairperson asked why there were pre-payment conditions.

Ms Matladi asked who carried the financial responsibilities of the extra payment due to increased prices, because, while the project had been waiting for funding for seven weeks, prices went up. She also asked how NDA dealt with the individuals who could have looked into this matter.

Mr Reuben Mogano, Development Management Executive: NDA replied that the responsibility lay with the NDA. This impacted on project implementation activities. However, the contract was structured in such a way that it accommodated for a 15% rise in those situations. This was not necessarily because of delays but there were other factors to take into consideration.

The Chairperson asked what those factors were.

Mr Mogano replied that the factors were escalation of prices especially when dealing with projects that dealt with agriculture and a whole range of other things.

Ms Matladi said she was not sure if she was right to say that it was because of that 15% percent that the NDA could delay transferring funds for seven weeks, because it knew it was covered.

Mr Mogano replied that the NDA actually preferred to transfer funds as quickly as possible. However it was also expected as a governmental institution to be an effective custodian of public funds and that meant ensuring there was adequate capacity to manage funds.

Ms Matladi once again asked which individuals were responsible and what had been done to those who were responsible.

Ms Mhlapo replied that, following the outcomes of the report and at the time that the report was being done, NDA did have its performance management system and disciplinary processes in place. Having looked at the findings, the NDA had realised that it had to strengthen its performance management systems.


The Chairperson asked if the performance management systems of NDA were weak or problematic.

Mr Mogano said they were. At the time of the performance management system review there were inadequacies found.

The Chairperson asked if this meant that not all delays were because of beneficiaries not complying with conditions.

Mr Mogano said that was correct.

Ms Mhlapo said that, since strengthening the NDA’s performance management system, action had been taken against individual staff members who had failed to perform.

The Chairperson asked what action was taken against these individuals and how many of them were involved.


Ms Mhlapo replied that there were 13 staff members. These staff members were given verbal warnings, written warnings and counselling in terms of strengthening their performance. There was also a problem with staff capacity of the individual staff members within NDA and therefore the NDA had to institute some processes to strengthen the capacity.

The Chairperson asked if the NDA had an idea of how many times it needed to fall back on the 15%.

Mr Mogano replied that NDA did not have the exact figures but he could say that it was less than 10% because, if there was any additional funding required, it had to go through the Board and the Board had not approved anything.

The Chairperson asked, ‘of the certain staff’, what percentage they contributed.

Mr Mogano said that the NDA had just under 100 employees at a national and provincial level, so the figure was about 11 percent of overall staff.

The Chairperson asked at what level these staff members were.

Mr Mogano said it was at a high level. It was provincial managers or heads of provinces, development managers, and only two at administrative levels.

The Chairperson said that it was worrying that this was happening at a high level and it did not reflect well on senior management.

Ms Mhlapo agreed that it was worrying and said this was why action was taken against those at senior level. She said that the NDA took it very seriously.

The Chairperson replied that he did not feel that NDA had taken it very seriously, because it was easy to just wag your finger at a senior manager and give him/her a verbal warning. The more senior a manager the more catastrophic the implications on a organisation would be, and so, if NDA was taking it very seriously, then the actions taken against those managers should also have been serious.

Mr M Steele (DA) said he wanted to go back to the points made on pre-funding conditions not being met, payments not being made on time and meeting of pre-funding conditions which took up to 4.8 months and projects could not be commenced in that season. He said what he was not hearing was the sense of alarm and urgency by the Board of the NDA, when the facts became apparent. If the Board was actually operating, in terms of its responsibilities, it would have seen the figures and would have reacted with alarm and urgency. However it had to wait until the Auditor General’s (AG) report before any action was taken with regards to management compliance with the requirements. He asked how the Board had managed to miss the warning signs.

Mr Mpumlwana gave the Committee some context on the management issues at NDA. Between the year 2003 and 2006 the NDA had its CEO and Chief Operations Offcier (COO) suspended. It was during that time that the Minister of Social Development had had an envoy managing the NDA; there were serious problems with the management. Only in 2006 did the NDA manage to have a proper management system with the coming in of a new CEO. The purpose of that CEO was to develop a turnaround strategy and there was a fair amount of restructuring and strengthening of the systems. So the conflicts in the AG report were coming from a time when things were quite bad, but the Board had recognised that, and when it hired the CEO, he was given the job of strengthening the organisation and getting an internal auditor who was not present before. The report from the AG could have been worse than it actually was.

The Chairperson asked where the Board was at that time, as it needed to account for problems not management. He asked whether the Board had played its role.

Non-compliance
Ms Matladi moved onto the issue of non-compliance. NDA had a contract that it signed with beneficiaries and one of the things stipulated in the contract was that a report was needed about project activities, results and impacts, etc. Out of 22 projects only one had met the requirement and submitted a report. She asked why it had taken the NDA so long to identify this problem of projects not adhering to the contract and why had it not followed up on those who had not submitted a report.

Mr Mogano said there was a need to segregate the reports that were required. The first set of reports were reports presented at the time of adjudication, the second set of reports were admitted as part of the monitoring process and the third set were admitted as part of the close out including annual financial statements. There were projects that had submitted incomplete information in certain respects, particularly in respect of business plans. The requirement for a business plan was only introduced in 2008 as part of the requirements for income generating projects.

Ms Matladi said she was not convinced by the answer given by Mr Mogano. The NDA did not even identify that only one project had met the requirements until the AG had come along and done a report. She asked why the NDA could not identify the problem beforehand and why had it failed to follow up irrespective of when it was introduced.

The Chairperson wanted to know what the NDA did when it found that beneficiaries were not meeting the requirements of the NDA Act.  He asked NDA what it did to address the non-compliance with regulations.

Ms Mhlapo said at the time of the performance audit there were challenges around two issues. There were issues around monitoring of projects, which was why it could not pick up the non-compliance in terms of the agreement.

The Chairperson asked if there was somebody responsible or a division that was responsible for monitoring the projects.

Ms Mhlapo replied that it was the responsibility of development managers located in each province.

The Chairperson confirmed that the Agency had people who were paid to monitor projects.

Ms Mhlapo replied that it was part of their function and the development managers at that time were not doing their job properly due to capacity challenges.

The Chairperson said he wanted a ‘yes or no’ answer. The facts spoke for themselves, so there was no need to complicate it. Monitoring and monitoring was to be done by the  people who were employed to do so, and if there were challenges it meant that people were not doing their work effectively and efficiently. He asked if that was the issue.

Ms Mhlapo said that it was.

The Chairperson asked what the current situation with monitoring was.

Ms Mhlapo said that the situation had improved in the sense that NDA picked up that some of the reasons that those development managers were not doing their work properly was because there was a challenge in terms of their skills.

The Chairperson asked how these people were employed in the first instance, if they did not have the necessary skills.

Mr Mogano said that the type of development managers the NDA required should have had a full set of technical and other skills. The technical skills related to financial management.

The Chairperson reiterated what he had asked before. He wanted to know how those people could have been employed without the necessary skills.

Mr Mogano said that, in some organisations, people were brought in at different levels and there was always a commitment to continuously improve the skills of staff, and the NDA had done precisely that. The NDA knew that it was not optimal and that it could have been done differently.

Ms Matladi asked what corrective measures were currently in place for writing comprehensive reports and about the fact that beneficiaries are not submitting them.

Ms Mhlapo said that there was a lack of understand by the projects so the NDA had now translated its contracts so that there would be interaction and a clear understanding of what other requirements are.

The Chairperson said the requirement was about reporting. Within in six months of receiving funds projects needed to submit a report. He asked if the beneficiaries were meeting the requirement.

Mr Mogano said that the beneficiaries were meeting the requirements, but not in all instance. NDA had noted that, without its support, projects would not be able to.

The Chairperson said it was a legal requirement and if projects were not adhering to them then NDA might as well not have them. He said NDA could not use excuses such as people were from grass root levels or illiterate. He objected to the view that just because people were illiterate they were foolish or they did not understand. If the NDA communicated with people in these projects and told them in their own language what they needed to do, then they should be able to do it. The Chairperson felt that illiterate people were more reliable than educated people at times.

Ms Matladi asked how the NDA was able to establish the status of the projects, if there were no comprehensive reports. She asked if the NDA kept pumping money into these projects even if it did not know if they were still being sustained, if they were continuing, or if they had collapsed.

Mr Mogano said money was only released once a development manager had monitored the situation.

The Chairperson understood that Mr Mogano had just said that the development managers were not doing their job properly. There was a defective monitoring system.

Monitoring
Mr M Malale (ANC) asked how many development managers there were in the NDA.

Mr Mogano replied that there were 39 development managers.

Mr Malale asked how many would be deployed in a province and what were the challenges that were facing them.

Ms Mhlapo said that, in terms of the projects which covered all the regions and provinces, there were 352 projects over nine provinces that the 39 development managers needed to monitor. These projects were used to combat poverty. There was an average of 40 projects per province.

Mr Malale asked if, after the intervention by the AG, the NDA was able to generate substantive reports from the projects so that it could know what the shortfalls were and about the financial management of the projects.

Ms Mhlapo said that there was a vast improvement since the performance audit was done, and there was improvement in the reporting itself and the monitoring of projects.

Mr Malale asked if the NDA could assure the Committee that financial recall could be kept in terms of the projects it was funding.

Ms Mhlapo said the NDA could do so, as financial records were kept as part of its capacity building. The NDA was providing the relevant support in terms of assisting the projects so there was an improvement in terms of financial management. 

Mr Malale said that his last question was on to the issue of corrective action that the NDA said it took in respect of employees who were not doing their jobs. The view within the Committee and within Government was that the most severe punishment was a final written warning. However, a person could even get three of them without any further action. In all the Departments that came before the Committee, there were only a few where very strong action was taken. It seemed that in civil servants there was a culture of entitlement that if a person had a high level job with a good salary he or she would only get a verbal warning. This was a worrisome factor. He asked if the NDA could supply the Committee with the details where it had taken action. Who were the people, and what were the sanctions? The Committee needed to know so that it could assess whether there was any laxity in the NDA. The beneficiaries were very poor people living in poverty and they would need very strong support from NDA in order to implement projects that would uplift them.

Mr M Mbili (ANC) said that he felt that some of the answers given by the NDA were as disappointing as the AG report. He asked NDA what its idea of a successful project was.  

The Chairperson said the Committee could return to this question at the end as it should be a final comment from the NDA at the end of the meeting.

Communication
Ms M Mangena (ANC) said she wanted to know about communication between the head office and beneficiaries. She asked if communication between the two had improved.

Ms Mhlapo said that communication had improved because projects could communicate with regional offices. The regional office concerned would then pass on the message to head office. She said that head office took every item of correspondence very seriously and it addressed issues.

Ms Mangena asked if beneficiaries were able to write a letter that would be go straight to head office with any questions they had. Not everyone had telephones and so it would be easier for them to write a letter and communicate directly with head office by post.

Ms Mhlapo said that this was why regional offices were located in areas close to the people so that projects could have access and communication with NDA. Matters that were problematic between regional offices and projects were diverted to head office.

Discontinued Projects
Mr Steele referred the Committee and the management of the NDA to page 12 of the AG report, paragraph 6.6.1, which set out the circumstances under which a project might be recommended for withdrawal. There were six bullet points which explained the circumstances. He said he wanted to get a sense from the management as to whether any of the circumstances were beyond the control of the NDA. 

Ms Mhlapo said that some of the circumstances, such as bullet number two – unresolved conflicts within the project had impacted on delivery of planned activities – were beyond the NDA’s control as well as in its control. NDA was dealing with civil society organisations, and people working within the projects were doing so voluntarily, so sometimes people would move to areas where projects were getting more money because they got better pay there. Things like that were out of the NDA’s control. Capacity played a big role in whether a project was discontinued and this was a challenge, and NDA needed to improve on capacity building.

Mr Steele said that this was the exact answer he wanted. He referred the meeting to page 14 of the AG’s report, where there was a breakdown of the percentages for reasons why projects were discontinued. 51% of the projects discontinued were projects demonstrating inadequacy in governance, management and technical capacity. This was the single largest share of discontinued projects. The NDA had agreed that this was something that was partly in its control, so it should have been up to NDA to intervene. He asked if that was a fair comment.

Ms Mhlapo said that it was a fair comment.

Mr Steele referred the meeting to paragraph 6.6.2 (a), where the problem was quantified. Of the R14.030 million spent on projects, R7.146 million had already been paid out. Some of these were due to non-compliance issues and R4 million was paid out to those; 10% was written back due to the misappropriation of funds or financial mismanagement after R338 380 had been paid to projects. This could be classified as fruitless and wasteful expenditure. He said his concern lay with the first sentence of paragraph (b) which said “The NDA did not have procedures to recover funds from non-complying projects or to control funds allocated to projects once misappropriation or mismanagement had been identified”. So there was fruitless and wasteful expenditure of at least R338 380 and the NDA had no procedures to recover funds. He said he would like to hear that the problem had been dramatically reversed, that there were now policies to recover such funds, and what the amount of funds which had been recovered was.

Ms Mhlapo replied that the recovery of assets had been a major challenge for NDA. The challenges were around the issues of ownership of assets, the location of assets, and tracing those assets. However, the NDA had improved in terms of ensuring that the NDA funding agreement was reviewed, and it had stipulated that all assets needed to be held in the NDA until the conclusion of the project. It had also established close relationships with law enforcement agencies to deal with the issue.

Mr Steele asked if the NDA could provide the Committee with a report as to what actions had been taken to recover assets.

Ms Mhlapo said she would ensure that a report was given to the Committee by the following week.

Discussion
Mr Steele asked about the suspension of the former CEO and COO. He wanted to know what were the consequences of those suspensions, and if anyone had been dismissed. He also asked what action had the Board taken.

Mr Mpumlwana said that there was a long disciplinary process that went on for almost 18 months. The CEO was involved in a major legal battle and the NDA had to engage an external senior advocate to proceed over the case. There were a number of charges, but in the end the CEO was found guilty and was dismissed. The same had happened with the COO. Only then could the NDA begin the process of appointing a new CEO, which happened in 2006. He said that he had the privilege of serving on that Board and he was coming to end of his second term. However, it was through his service on the Board that he knew what the challenges were at that time, and the NDA was in a terrible state. He added that the previous CEO had also left unceremoniously. The first two CEOs of the NDA had not performed to the standards that were required. It was only with the third CEO and the second Board that the turnaround strategy had began. The NDA was now positioned for a more effective bearing. He believed that the AG report represented a twilight time when the NDA did not have the systems it should have had; there was not even an internal auditor - it was really quite bad at the time. It now had resources to be successful and deliver what it was supposed to.

Mr Steele said that he hoped that when the CEO was found guilty, he was found guilty with costs.

Mr Mpumlwana said that he was.

Mr N Singh (IFP) said he was confused about all the CEOs who had come and gone. He asked if a Mr Godfrey Mokate had been one of the good CEOs.

Mr Mpumlwana said that Mr Mokate was had been one of the CEOs who had helped with the turnaround of the systems on which the NDA was improving.

Mr Singh said that there was no evidence of records that governance aspects of the projects had been monitored, no indication that narrative reports had been reviewed, no indication that financial sustainability had been reviewed, and no report on compliance set by the NDA Board. He asked if management and the Board had looked at all the other projects and found a similar kind of trend that the AG had found in the 19 projects that were visited. If one looked at the NDA as a whole, it had to be asked if there was a need for the NDA to exist. He said that he did not necessarily expect an answer to this question, but it was something for the Committee to think about. He wanted to know if there was value for money.

Ms Mhlapo said that, as managers, they had picked up on the trends, because, when looking at the bigger percentage of the discontinued projects, the matter was related to the lack of capacity in terms of governance, management, and technical skills. Since then the NDA had strengthened its support in terms of ensuring that those organisations had proper capacity.

Mr Singh asked if the NDA had quantified the fruitless and wasteful expenditure.  

NDA replied that it had and it was on the NDA’s financial statements annually. There were only two years when the NDA had not written back, but it was usually on the financial statements.

The Chairperson asked that the NDA also send this with the other documents which the Committee had requested.

Mr Mpumlwana said that he wanted to return to the question on trends. He said that it was sad to say that it was worse than the current report. There were challenges with the application and adjudication process at that time as well as with reporting and monitoring. It was so bad that there was a time when the NDA had suspended the processes and created a program of request for proposals. At that time, in order to mitigate the volumes that it was dealing with and the matter of incapacity of management, the NDA had introduced an outside adjudication process as a short term measure while systems were being strengthened. This was something that of which the NDA had been conscious. The fact was that something needed to be done to bring systems to a level where they could function. The NDA, with the mandate of poverty reduction, actually functioned on a budget of about R100 million, which was the original amount given by the IDT at the time of foundation. In order for it to function in the way that it should in all the provinces, it had to have offices that were closer to the community. This made the NDA top heavy.


Ms A Muthambi (ANC) followed up on the question about communication. The CEO had indicated that development managers were on the ground, but the issue that the AG was raising was that the communication from head office was slow and beneficiaries rarely got feedback. She understood that the NDA had said that it was communicating through its development managers, but it was reported that they were not executing their roles in regards to monitoring. She asked the CEO if she was satisfied with the communication between head office and beneficiaries, and that NDA was fine in terms of its current development managers.

Ms Mhlapo said that there had been a significant improvement in terms of communication. The NDA admitted that there were flaws at the time of the report in terms of the capacity of the development managers. Since then it had strengthened the processes and systems and there was continuous communication. Communication was no longer a challenge.

Ms Muthambi referred back to the question about the failure to take action against mangers that did not perform. There seemed to be a lack of appetite to discipline in the public service. She wanted to remind the CEO that one of her key roles was to ensure that there was discipline in the work place. The AG had said that up to the date of the report there was no evidence of disciplinary action taken against employees who failed to execute their duties. She wanted to know when the NDA was going to conclude the disciplinary action against those officials who did not perform.

Ms Mhlapo said that, as indicated, action had already been taken against managers. There were 13 officials who had action taken against them.

Mr R Ainslie (ANC) said that he wanted a detailed account on how the NDA recovered funds from projects that had failed or were discontinued. He wanted to know what the immediate active steps were that the NDA took to ensure that it got some of its money back and what were the procedures.

Mr Mogano said that the first part was the procedure that was in the contract itself. The contract provided for power of attorney and the expectation was that the NDA was able to go to the bank and ask it to freeze the project’s account. The second part would be reporting, when there was an instance of financial mismanagement, to law enforcement agencies. The NDA had engaged these agencies. There were instances when NDA had physically retrieved some of the moveable assets from projects which it had stored. Finally, the Constitution made a provision that, if an organisation should be dissolved, the assets would be donated to organisations which conducted similar work.

Mr Ainslie asked if Mr Mogano could refer him to a page in the annual report where the NDA reported on the action it had taken to ensure that funds were recovered. He asked if it even featured in the report.

Mr Mogano said that he was not sure if it was in the report.

Mr Ainslie said that it did not feature in the report. Parliament had a right to know these kinds of details as it was dealing with a lot of money. He advised the AG to report on these things in the next report.

The Chairperson agreed with Mr Ainslie. The Committee wanted a detailed report of these actions, in which provinces they happened, how many and why, and procedures.

Mr Mogano said the AG did request a list of instances were there had been transgressions, the actions that had been taken and the amount involved. The NDA did have that list.

The Chairperson asked if that list could be given to the Committee as well.

Mr Mbili asked, if a project purchased a tractor, if the tractor needed to be registered in the NDA’s name or in the name of the entity that had been funded, because the resources were needed to help empower people. If it had to be in the name of the NDA, then he would have an issue with that.

Mr Mogano said that it was the same principle as when a person bought a car. The car remained the property of the bank until it was fully paid for. So the possession of the property was with the project; however the ownership would rest with the NDA until termination of the project.

The Chairperson asked if that meant that the NDA recovered property from projects only if the project had stopped midway, but, if the project was completed, then the assets belonged to the beneficiaries.

Mr P Pretorius (DA) said that the situation gave him a feeling of déjà vu; the Committee had seen it in other Departments before. The report was a damning one that talked of a Department in disarray. There was administrative chaos in the head office, where deadlines were not met, and money was not paid out. There was no proper monitoring; prescripts were ignored; and there was a lack of asset control and non-recovering of funds. The Chairman of the Board had said that there were major problems from 2003 to 2006. He wanted to know how long the current CEO had been in the position, and if it was with this CEO that final responsibility rested.

Mr Mpumlwana replied that the current CEO was the second one since 2006.

Mr Pretorius objected that the CEO had certain responsibilities in terms of law and prescripts. ‘The buck stopped’ with the CEO even if the person was in place for one day. He did not get the sense that there was action taken in the organisation for transgressions of its own internal rules and prescripts. Section 42 of the Department’s Act said the NDA might grant money from its funds in accordance with its procedures. He wanted to know if there were prescripts of what needed to be done.

Ms Mhlapo replied that there were prescripts and policies that needed to be followed.

Mr Pretorius asked if there was a sense from management’s side that the policies and prescripts had to be adhered to, and, if management was not satisfied, what action would be taken. The Committee had heard of the previous CEO and COO being fired. His concern was that these things were controlled by ordinary managers. The NDA’s 39 managers were responsible for not fulfilling their functions. He wanted to know what had been done to control them and discipline them for non-performance.

Ms Mhlapo said that she was going to repeat the answer she gave earlier on. The NDA had taken action. Management needed to take responsibility for ensuring that performance was monitored. There were very strict performance and monitoring measures being put in place to ensure that NDA monitored the performance of its managers.

Mr Pretorius asked if that meant that no one had been fired yet.

Mr Mogano said that there had been resignations, suspensions, and final written warnings, and warnings issued.

Mr Pretorius asked how recruitment worked in the NDA. Was it done centrally in Pretoria or were staff appointed per region by the lower level of staff in those regions.

Ms Assel replied that it appointed the development managers centrally. Most of its functions, such as human resources (HR) were centralised; only a minimal staff was kept in the regional offices.

Mr Pretorius said he still did not understand how it was possible to have 39 people while the bulk of them could not do their jobs. The recruitment criteria seemed to be a problem. He asked how it was possible that so many people were not skilled for the jobs that they had to do.

Mr Singh said there were also nine provincial managers. He wanted to know what they were doing.

Mr Mogano said he had answered the question on the recruitment process already. The skills profile, in terms of what was required, was a very unique profile and NDA admitted that the profile it required would probably need continuous updating of skills. This is what it was doing.

Mr Pretorius said that in terms of NDA’s current situation, the Department was not running effectively and had not for the past few years. He asked whether performance bonuses had been paid to any of its managers and themselves, particularly to management, in the last year.


Mr Pretorius then referred to paragraph 6.1.4 of the AG’s in which the AG had recommended that the NDA provide assistance to project beneficiaries to understand and to meet the pre-funding conditions and requirements on a timely basis.  The response from the Accounting Officers (AA) was unclear and he asked for some clarity on that. According to the response, NDA had ensured that the pre-contract conditions were minimised by installing more rigorous project assessment and adjudication processes through institutionalised provincial peer review and national peer review/technical review committee processes. He wanted to know what that meant in plain English.

Mr Mogano said that when the CEO made her comments she was referring to adjudication conditions and pre-transfer release conditions. The NDA had since taken a decision to ensure that the pre-approval conditions and the pre-transfer conditions were reviewed at the time of adjudication, in order to streamline processes and combat the delays in commencement of projects. It also had to do with the quality of the projects submissions that the AG referred to. In terms of performance bonuses these were paid to some managers on the basis of their individual performance. Since then NDA had introduced a three tier performance management system at organisational level, at unit level and at individual level. In other words, if the organisation was not scoring, then it did not expect the units and the individual to score. This meant that, if the organisation had achieved a score of two, the individual could not achieve a score of four.  

Dr M Mangena (AZAPO) asked at what levels each of the 13 officials ranked. On so many occasions the Committee had heard of people going for disciplinary action, but it had later heard that the people involved were sweepers and data capturers, and the like.  

Ms Mhlapo replied that there were seven development managers, three provincial managers, one national grounds manager, one project administrator, and one registry officer.

Dr Mangena asked which provinces were they from.

Ms Mhlapo replied that there were two development managers and one provincial manager from Mpumalanga, two development managers and one provincial manager from KwaZulu-Natal, one provincial manager and development manager from Limpopo, one development manager from the Free State, one development manager from Gauteng, and the last two were from the national office;  the registry officer was from head office.

Dr Mangena wanted clarity on the second bullet from paragraph 6.6.1 (a), according to which some unresolved conflicts were out of the NDA’s control. He asked what this meant. He wanted an example of a situation that was out of its control.

Mr Mogano replied that there were instances were people were killed, in Gauteng, over the issue of funding. As soon as money was introduced in some projects conflict arose and that accounted for the biggest portion of unresolved conflicts. The question that should have been asked was if the situation was insurmountable. The NDA believed that the situation was serious, but not necessarily insurmountable; but there were situations were it had to take an objective stand and ask if it was worth continuing with a project. In such cases, NDA had to cut its losses and discontinue the project.

The Chairperson said that, in terms of the record, it was only 10% at the time and it seemed to have escalated. It did seem to be out of the control of the NDA. However he asked how the incompetence of the NDA contributed to this type of conflict. 

Dr Mangena asked about non-compliance recovery procedures. He wanted to know who the official was who was responsible for establishing a recovery procedure in the NDA.

Mr Mogano said that as it stated in the contract that there was a process outlined for the recovery of equipment. At the project level the development manager was responsible for managing that project and responsible for instituting the processes that were provided for in the contract.

Dr Mangena said that, according to paragraph 6.6.2 (b), “the NDA did not have procedures to recover funds from non-complying projects or to control funds allocated to projects once misappropriation or mismanagement had been identified”.  He once again asked who the manager in the NDA was who was supposed to establish and develop these tools that NDA was talking about. The answer given by Mr Mogano was not relevant to his question and Dr Mangena now wanted a proper answer.

The Chairperson asked if Dr Mangena was asking for the name of the executive who was responsible for this.

Dr Mangena said the NDA should know who the person was who was supposed to make sure that the NDA had this recovery tool. He wanted to know who the person was, if it was the executive authority, the manager, or the Department.

Ms Mhlapo replied that the CEO had a certain responsibility to ensure the functioning of the organisation and that the policies were adhered to.

The Chairperson confirmed that it was the CEO who was responsible then.

Dr Mangena asked what happened to the CEO and the AA, after failing to put these procedures in place. He asked if that person was present at the meeting.

Mr Mpumlwana replied that the person was not there. It was ‘awkward’ to reflect on previous employees in such a public forum. He said that the CEO responsible was no longer working for the NDA.

Dr Mangena insisted that the NDA tell the Committee what had happened to the CEO. He did not see how the NDA could say it was ‘awkward’ to answer Parliament’s questions.

Mr Mpumlwana replied that the CEO had resigned.

Dr Mangena inferred that that meant that the NDA had basically done nothing until the CEO himself had resigned.

Mr Mpumlwana replied that there were a number of engagements between the Board and the CEO which had led to his resignation.

Dr Mangena said his question remained unanswered. He asked what had happened in relation to this particular failure from NDA, and what it had done. He understood that the previous CEO realised that there were challenges and had resigned, but he wanted to know, because Mr Mpumlwana had not resigned. He asked what the NDA had done when it had seen that this person was neglecting his work.

Mr Mpumlwana replied that the NDA had asked the CEO to resign.

Ms Matladi said that she heard the CEO say that there were times when the beneficiaries moved from one project to another because another project was getting more money. She asked why there was not a criterion with everyone was getting the same amount.

Ms Mhlapo replied that each project was different and related to different sectors; for that reason there could not be one set of criteria.


Ms Matladi wanted to know who the director was who had approved the incomplete reports submitted by projects. She asked what had happened to that director.

Mr Mogano said the person who ultimately approved reports for payment was himself. The NDA was structured in terms of nine provinces, and all the provinces reported to the executive, which was he. The reports that to which the AG was referring were reports submitted by projects to the provincial offices. The NDA did not transfer funds after receiving a report from a project. Funds were allocated after a report was written by the NDA’s own development manager.

Ms Matladi said R7.146 million was paid into a discontinued project. She wanted to know how the NDA got that money back and who transferred the money.

The Chairperson pointed out that the R7.146 million was the total paid to all projects that were discontinued after the amount was paid.

Ms Mhlapo replied that there were different stages for transferring money; at the fist stage there were no problems or challenges, but, as the project continued to move forward, conflicts arose which lead to its discontinuation. The money was paid before there were problems. It was because the project had become a risk that it was discontinued by the NDA.

Ms Matladi said the NDA’s mandate was to eradicate poverty. She asked if the NDA was winning on the mandate that it had been given.

Mr Mpumlwana replied that it was winning on the mandate to eradicate poverty. However, poverty in South Africa could not really be eradicated with a budget of R100 million. The NDA was trying to demonstrate two things - firstly to show communities what could be achieved, and secondly to help build the capacity of communities.

Ms Matladi asked if that meant that the mandate given in the report was not the actual mandate.

Mr Mpumlwana said that that was not the case, but what the Committee must remember was that R100 million could not eradicate poverty in total. It was unlocking the potential to eradicate poverty.

The Chairperson asked the Deputy Minister to conclude the meeting with her comments.

The Hon. Ms Bathabile Dlamini, Deputy Minister of Social Development, said that it was clear from the meeting was that the Committee wanted to see value for every cent that was spent. Two issues which had arisen were capacity building, which centred on the board and management, and the recipients. The AG report had presented NDA with an opportunity to consolidate its work. From the responses given it was clear that there were many challenges in the NDA. These challenges included the internal audit committee, which should NDA should try to use as a measurement for the improvement of its work, and the reports should be used to make sure it stepped up its work. The NDA had also tried to create waterproof systems of monitoring so that it could maximise its work. What was important was that NDA was dealing with the poorest of the poor, who were vulnerable groups, and at some stage the NDA had taken advantage and turned a blind eye to some of the basic areas of accountability. She agreed with the Committee that NDA needed to examine the amount of projects which had been discontinued. NDA should make sure that this was not money wasted. The people with whom NDA worked were committed and understood that they needed to account for every cent used. There were issues that looked minor from afar, but from the perspective of one attending the meeting they appeared very important. The efficiency and effectiveness of the NDA depended on the strength of communities it worked with and the incubation period, and it had to ensure that it was hands on. To do so NDA needed a large quantum to help a project progress on time. In the past, projects had crashed for lack of this. The NDA needed to help projects become independent. The Minister said that she needed to defend the existence of the NDA. It was said that NDA was duplicating the work of municipalities; meanwhile it was these municipalities which were doing work that they were not supposed to, since this work fell within the terms of responsibility of the NDA.  Everyone wanted to help combat poverty in South Africa, but it was NDA’s responsibility to do this, not municipalities. NDA had given funds to communities that were very weak financially, and most of the institutions funding communities used strict measures. Such measures meant that some people did receive funds. She pointed out that many of the emerging farmers had succeeded thanks to the NDA. In the advent of democracy, NDA had to be created because there were international donors giving money to NGOs. When democracy became established, funding stopped because international donors thought that the South African Government would provide enough funds. Much had been done to ensure that NDA carried out the work with which it had been entrusted.

The meeting was adjourned.

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