SASSA & NDA Annual Report 2021/22; with Minister

Meeting report

NDA: Responses to questions on annual report

Mr Solomon Shingange, Acting Chief Financial Officer, National Development Agency (NDA), responded to the question of why the NDA had retained the funding received from the Gauteng Department of Social Development (DSD) to implement a programme on their behalf. It had received the funds to implement a farming programme in Gauteng. After the service level agreement (SLA) was signed, there were challenges with some of the conditions placed in the contract for implementing the programme. When the matter was referred to the province, they could not resolve some issues. There was then an amicable agreement that the Department would take back the funds and try to sort out the issues that the NDA had raised. Some of those issues had the potential of the NDA being found to be non-compliant in terms of grant funding processes.

Referring to the question on slide 25, he said that every year the NDA budgeted for increases based on the guidelines received from National Treasury. Over and above that, the Agency negotiated with the trade unions on salary increases. The increase in the staff cost was due to the annual adjustment in the salaries. If some vacant positions were filled in the current year, then there would also be an increase in staff costs. 

As soon as the financial year was completed and the staff had completed their performance assessments, they went through an internal moderation process. After the internal moderation process, the executive committee (Exco) recommended it to the board, and because of the absence of the board, the performance bonus issue had not yet been finalised. The provisional amount seen in the income statement and the balance sheet was a revision, so if the board were to approve the bonus, it could then be paid. The NDA did not have a board during the 2021/22 financial year, but the DSD and the National Treasury (NT) had approved an interim accounting authority that was performing the function of the board. Therefore, the issue of the bonuses had not been finalised, as it was being taken through the approval process.

Ms Susan Khumalo, Chief Operations Officer, NDA, responded to the question on the list of stakeholders that received funding from the NDA. The list of stakeholders could be shared through a submission. She said 88 civil society organisations (CSOs) had been funded through the grant funding programme during the 2021/22 financial year, but the names could not be divulged in this meeting. 25 CSOs were funded from KwaZulu-Natal (KZN) for R2.8 million. In the Eastern Cape, 12 were funded for an amount of R1.7 million. In the Free State,11 were funded for R2.09m. In Limpopo, ten were funded for R1.4 m. In North West, eight were funded for R1.9 million. In Mpumalanga, six were funded for R1.1 million. In the Northern Cape, six were funded for R442 000, in the Western Cape, five were funded for R1.2 million, and in Gauteng, five were funded for R409 000.

The NDA had an annual target of 1 800 CSOs to be capacitated during the financial year, but it had capacitated 2 558  throughout the country. The provincial breakdown was: KZN 436, Limpopo 327, Free State 306, Western Cape 289, Eastern Cape 266, North West 264, Gauteng 263, Mpumalanga 235 and Northern Cape 172. 

The NDA used different monitoring mechanisms to track the performance of targets in the provinces. Firstly, it did so through the submission of standardised monthly, quarterly, and annual reports. Secondly, there was the monitoring of the sites, and thirdly, there were visits to provinces conducted by the respective senior managers and executives. There were also quarterly review sessions that were held at the end of each quarter during the year.

During the lockdown, the Unemployment Insurance Fund (UIF) learners had not been paid the normal stipends, but they had received the stipends when they were attending classes as per the agreement signed with the UIF. During the lockdown period, a special request was made to the UIF to provide learners with three months of stipends for April, May and June 2020, and the UIF later approved the stipends.  

The criminal assets recovery account (CARA) programme was established to address gender-based violence (GBV) issues and is still being implemented. The funding for the programme was R95 million, and it was almost at the end of the implementation process. There was funding for the volunteer programme which was not sourced from the CARA programme -- it had its own funding. The first phase of the volunteer programme was implemented and completed with that funding. The current volunteer programme was funded from the R30 million funding received from Treasury. The two programmes and the budgets were separate, and not interlinked.

Mr Ben Morule, Senior Manager: Strategic Planning, NDA, responded to the turnaround strategy questions, and said that the NDA had already started gradually implementing the turnaround strategy in the current financial year. Four key deliverables were included in the annual performance plan (APP) and the key performance indicators (KPIs). The NDA would focus on its information communication technology (ICT) architecture to ensure that it was configured in line with the turnaround strategy. The NDA had already started implementing different projects in nine districts to fully test the district development model (DDM), and the integration of services in each of the chosen districts to embed the business model of the NDA concerning skills development and grant funding.

The last project that the NDA was undertaking was the partnership model, where the Agency had already started engaging a number of different partners in resource mobilisation, but also where there was a common vision around development programmes being implemented on the ground. The Department shared the contents of its turnaround strategy and what would underpin its work going forward with all of those development partners.

Ms Hajra Mansour, Chief Audit Executive, NDA, responded to the questions on the Auditor-General of South Africa (AGSA) findings. It had 38 findings in the 2019/20 financial year, and in 2020/21, the findings had been reduced to 16. The internal audit function followed up on all the recommendations by the AGSA to assess whether the management had implemented the recommendations. During the third quarter of the current financial year, all the findings were resolved by the management of the NDA.  In the current financial year, there were 12 findings which were already in the process of being looked at and verified to see whether management had responded to the implementation and recommendations made by AGSA.

Mr Bongani Magongo, Acting Chief Executive Officer (CEO), NDA, responded to the questions on the investigations. The UIF investigation was about to be finished, and the volunteer programme was in the process of concluding the determination test conducted by the internal audit function. When the investigations were complete, the NDA would implement the recommendations that would come from all the reports. If there was any indication of criminality, the people who were found to have caused irregularities would have to be referred to law enforcement agencies. An internal policy dealt with misconduct for recommendations that came from any of the investigations into irregular or fruitless and wasteful expenditure. Most fruitless and wasteful expenditure was due to people not showing up, and those funds had been recovered from staff. There was currently a policy that dealt with the recovery of losses at the NDA. The human resource (HR) function was set to deal with those who needed to undergo the disciplinary process. 

The process of appointing the new board was about to be concluded, and the new board might start within a few weeks or a month. The CEO's post would be advertised now, because the board would soon be in place as it had the responsibility for recruiting a permanent CEO. 

SASSA: Responses to questions on annual report

Mr Brenton van Vrede, Executive Manager: Grants, South African Social Security Agency (SASSA), said that it had always been part of SASSA’s system to EFT money directly into beneficiaries' bank accounts, as it was the safest and most convenient way. For those who did not provide their bank accounts, there was an option to withdraw the money from merchants through its partnership with the Postbank. Those beneficiaries did not need to have smartphones, but did need to have cell phones to receive SMSs, and the cellphone number must match the one used when registering for the grant. People often changed their cellphone numbers and this often caused challenges at merchants. Therefore those that changed their numbers needed to update them on the SASSA system as well. 

On the awareness initiatives around the child support grant (CSG) top-up that had been implemented, the uptake had been slow, but that was expected with all new grants that were implemented. Most regions had been undertaking various campaigns on the CSG top-ups by doing radio interviews with community radio stations, and having various stakeholder engagements with the local leadership and civil society organisations. There were various engagements with key government departments such as the DSD, and there would also be engagements with the Department of Health. This was an ongoing process, and the DSD would be hosting a national broadcast to all community radio stations, together with regular press releases.

Based on the legislation, SASSA did not pay grants to migrants and asylum seekers -- only refugees and permanent residents qualified for social grants. There were currently about 6 500 refugees who were receiving social assistance. The social relief of distress (SRD) grant was also available to asylum seekers, and currently, about 15 300 asylum seekers were paid this grant. The verification process was the same for all people that qualified for social grants, and the Department of Home Affairs (DHA) was responsible for determining the identification of these applicants. To a large extent, SASSA relied on the DHA for that. 

The alternative document process was potentially the one area where fraud may occur, but in terms of the social systems law, SASSA could not deny anybody a right to social grants if they had been denied a right to identity. There could potentially be abuses in the system, but the numbers on this were quite low, as about 60 000 adults got grants through this process and only 1 000 of them used the alternative benefit system. There were about 40 000 children that used this method. 

SASSA had consistently been meeting its target of processing 95% of applications within five days, but the biggest challenge was around the SRD grant which crept in this year due to the changing of the system and having a lot of hurdles in getting the new system up to date. SASSA had been three months behind when it initially started with the new SRD grant system, but currently, it is only about one month behind. There was a challenge with the UIF and the database that had not been received since June, but a decision had been made that the September payments would not be put on hold any longer and would be processed without the latest UIF updated database. 

The important factor that needed to be noted in the digital context into which the SRD grant had taken SASSA, was that these databases were not SASSA databases and had a dependency on them. It did not have control over those databases, so the inadequate databases could not be fixed by SASSA. With that being said, the blame was not being put on the UIF, the South African Revenue Service (SARS), or anyone who ran these databases. When doing these digital checks, one had to recognise that the data used would never be accurate, because people did not always update their data. The key, and most difficult, decision that had to be made was to what extent the data could be used, because there could be errors in the data and decisions had to be made based on that data. If SASSA had implemented the AGSA’s recommendation, no social grants would have been paid in 2020 because the data would never be accurate.

If SASSA had to actively pursue all the 5 000 cases of ineligible people who had received the SRD grant, it would essentially be taking a lot of resources into recovering a very small amount of money. The court process would take a bit of time, as 5 000 people have to be taken to court.

Fraud would never end. Crime was a societal problem, and as long as SASSA was an organisation that managed money, there would always be people who would try to defraud it. It had to build a strong and capable fraud unit and put various anti-fraud systems in place to try and mitigate fraud as much as possible. The biggest challenge was finding the right balance between the acceptable level of fraud that could be tolerated and the strong arm that said that if discovered, SASSA would go after them aggressively, without necessarily having too many obstacles that prevented the flow of legitimate people. The last thing one would want to do was to subject the legitimate people to a whole range of subjective checks just because one wanted to root out the very small percentage of people who were going to try to defraud the Agency. 

The last thing to note was that it was very difficult to implement systems in a short space of time. That was one of the key challenges SASSA had with the SRD grant. If given sufficient time, it was easier to set up systems and implement them as efficient as possible. 

Mr Hlengani Bila, General Manager: Fraud Management and Compliance, SASSA, said that before SASSA could procure a fraud detection system, it needed to conduct a fraud pattern analysis.  From that analysis, SASSA had identified that all the fraud detection requirements were necessary for the Agency to have a strategic competitive advantage in reducing fraud within the entity. It was currently using an internal system called the Business Intelligence System, which had been giving positive spin-offs in detecting fraud. For instance, 37 grants had just been detected and stopped in the Eastern Cape through this system.  SASSA had not procured a system externally, but was using the internal system because the in-house system was effective.

The fraud unit looked into three areas regarding matters involving public servants who received grants. The first area was the question of disciplinary action and loss recovery. SASSA was also concentrating on referring these cases for criminal prosecution. To date, it had communicated with all the departments in which those public servants were working, informing them that there were implicated public servants in their departments, and had requested them to assist in disciplinary actions and loss recovery. 628 matters had been referred for criminal investigation and prosecution. The fraud unit was very resolute on the issue of criminal referrals, because it worked through a multi-disciplinary approach with the National Prosecuting Authority (NPA) and the South African Police Service (SAPS) to ensure that a successful prosecution was secured. On the issue of disciplinary actions and loss recovery, the Agency depended on the affected departments to assist.

Mr Tsakeriwa Chauke, CFO, SASSA, responded to the question of delays in disciplinary procedures. The Agency considered laying criminal charges against former employees only if there were elements of criminality present. Legal proceedings were also considered where losses had occurred. In cases where there was no element of criminality and no losses were incurred, it would just be a financial non-compliance that could be addressed only through disciplinary processes. 

SASSA could confirm that there was a gap in terms of contract management. Upon realisation of that gap, there was the implementation of what was called the Removable Property Management Model. This model had been activated for the past two years and captured all leases so that the head office could exercise oversight over all the Agency's leases, which were monitored monthly. Some cases had already expired at the time of the implementation of this model, which was why irregular expenditure on leases had been reported. The Agency was currently in the procurement process on the cases that had expired, and the Department of Public Works and Infrastructure had been requested to do the procurement on behalf of SASSA. Once the procurement process was finalised, the expired cases matter would have been dealt with. 

SASSA had received 71 findings, and the AGSA recommendations led to the development of its audit action plan. 66 of the 71 recommendations had been finalised, and only five findings were still work in progress. The finalisation of irregular expenditure for the cases that had been long outstanding had not been completed because some of the cases took a long time to investigate, and others were complex in nature. 

The response to fruitless and wasteful expenditure was 63% completed. The main reason was that some of the cases were still undergoing court processes and investigations. The lack of an external quality assurance assessment of the internal audit function was also not finalised. Every five years, an internal audit function of a department needed to be reviewed by an external person, and SASSA could not get a service provider to do the external quality assurance assessment. It had now engaged with National Treasury to assist with preparing the external assessment. Yesterday an appointed team from Treasury was interviewed, and they started with the process of assisting SASSA in preparing for the external assessment. The issue of network security could not be concluded because several projects needed to be implemented within the ICT environment, which would take a couple of years. 

SASSA reported that it finalised 829 of the 937 cases that had been present at the closure of the 2020/21 financial year. It had been able to finalise 95% of the irregular expenditure cases in the opening balance. Within the 829 cases, 730 were related to irregular expenditure, and 24 to fruitless and wasteful expenditure. If one compares SASSA's performance for 2021 to 2022, it would be noticed that there was a significant increase in the resolution of cases. National Treasury would never condone an irregular expenditure matter unless it was satisfied that the corrective and preventative measures that had been considered by the Agency were deemed to be appropriate.

SASSA has implemented several mechanisms to foster a culture of consequence management, firstly by improving the turnaround time for finalising cases of alleged misconduct and implementing preventative measures within the supply chain management (SCM) environment. The Agency had already reviewed the SCM policy and procedures, and trained all the bid committees across the organisation. It had started with the pre-audit of all the tender awards before they were awarded by using the SCM compliance unit and internal audit.

The inspectorate was independent of the DSD and SASSA, but SASSA would be able to report all cases of fraud to the inspectorate for investigation.

The irregular expenditure was related to the leases that SASSA currently held. It had 659 leases, of which 113 were with the DPWI, and the rest were in the hands of SASSA. The Agency had prioritised the procurement of the expired leases, and was currently reviewing the policy on immovable property management policy. It was already improving the contract management issues.

Ms Busisiwe Memela, CEO, SASSA, replied that the R316 million case had been subjected to court proceedings, and the Agency had felt at the time that it was prudent to get a sense of where the court proceedings were heading before it started with the forensic investigation. The R74 million case was also a process that was in litigation, as the service provider was being litigated. SASSA has since started forensic investigations into both cases. It received the reports on 11 October, and the draft report was received on 11 July on the R74 million case. It had held a meeting with the institution that had been sourced by Treasury which was helping with the forensic investigation. The supplementary report was received on 2 October. The Agency and the audit committee were considering both reports, and a meeting would be held next week.

Chairpersons’ closing remarks

The Chairperson said that if Members had any questions that were not answered, they should note them and forward them again to the Department.

On the matter of the SASSA cards, did the Agency think that making new cards in rural areas was going to be successfully done, knowing that there were no banks in rural areas, and the Postbank was always having challenges of not having cards on hand?

Minister’s closing remarks

Ms Lindiwe Zulu, Minister of Social Development, thanked the Committee for the questions and the good working relationship that the Department had with the Committee.

She suggested that perhaps in future, there should be two meetings for the reports so that the meeting was not too exhausting, and there would not be a situation where there had to be another meeting for the Department to answer questions.

The meeting was adjourned.