Public Protector Investigation; Correspondence from former CSA CEO legal team; Report on UNESCO Convention; with Ministry

Meeting report

DSAC’s report on Public Protector’s investigation into departmental maladministration
           
Dr Cynthia Khumalo, Acting Director-General, Department of Sports, Arts and Culture (DSAC), introduced her team. Ms Mandisa Tshikwatamba, Deputy Director-General (DDG): Corporate Services, led the briefing.

Ms Tshikwatamba said that Public Protector Report 95 of 2021/22 was issued following an investigation into allegations of maladministration and improper conduct in connection with the appointment of private law firms by the Department for litigation in which the Department was not a party, as well as its failure to take appropriate action against those responsible following allegations of financial misconduct by the Culture and Creative Industries Federation of South Africa (CCIFSA).

The investigation originated from complaints lodged by Mr Graeme Gilfillan and Mr Eugene Mthethwa in September 2018 and August 2019, respectively. The report found that the allegations of maladministration and of financial misconduct by CCIFSA were substantiated. The report contained remedial actions to remedy the maladministration, improper conduct and irregular expenditure, which were to be undertaken by the Minister and the Director-General of the Department. The Minister had to ensure that in future, all Ministerial Directives having financial implications for the Department were in writing, and that the Director-General file these with the National Treasury and the Auditor-General of South Africa (AGSA). The Minister had to include monitoring the implementation of remedial action as part of his oversight role. The Department had noted this remedial action.
 
The Director-General had to prevent the recurrence of the improprieties identified in the investigation and ensure that appropriate actions were taken to ensure that such conduct was not repeated. He had to provide the Public Protector with a copy of the final report of the forensic investigation conducted by BIG into allegations of misappropriation of funds by CCIFSA. He had to ensure that funding requests from third parties were subjected to comprehensive legal vetting by the Department's legal section prior to its approval. 
 
The Department's Director of Human Resource Management had to ensure that line managers, division managers and section managers understood their role to improve the Department's governance and financial management well, and would implement effective internal controls in their respective areas.

The Minister and Director-General had to submit an implementation plan to the Public Protector indicating how the remedial action would be implemented within 90 working days from the issue date of the report, which was on 27 February 2022.

She said the Minister and the DG’s action plans had been developed and implemented. The final Business Innovations Group (BIG) forensic report has been forwarded to the Public Protector, and the funding policy and been reviewed, amended and implemented. Human resources were engaging with the National School of Government (NSG) in rolling out a training programme on implementing internal controls and avoiding irregular, fruitless and wasteful expenditure.

See attached for full presentation

Public Protector on the implementation of remedial actions

Adv Kholeka Gcaleka, Acting Public Protector, introduced her team and Adv Nelisiwe Nkabinde, Chief Operations Officer (COO), Public Protector’s Office, led the briefing.

Adv Nkabinde noted that CCIFSA had a new executive leadership. She said the Public Protector had received updates on the Department’s report the previous night.

Mr T Mhlongo (DA) said the Public Protector should talk to the report that Committee Members had received, and not the amended updated report.

The Chairperson said the updated amendments to the report should be allowed to be heard, as the Committee had to report back to the Speaker.

Mr D Joseph (DA) suggested that the amendments be heard, and then the Committee could decide what to do.

Adv Nkabinde said their presentation had not changed -- they had asked for more documentary evidence, which had been provided the previous night.

She spoke to the original complaints filed with the Public Prosecutor. The Public Protector had found that the allegation that the Department contravened the provisions of the Public Finance Management Act (PFMA), the National Treasury Regulations and the Culture Promotion Act (CPA), by providing funding for litigation in which it was not a party, was substantiated and thus constituted irregular expenditure. Any directive by an executive authority of a department to the Accounting Officer of the department having financial implications for the department had to be in writing, and a copy of this document must be filed with the National Treasury and the Auditor-General. The only evidence submitted by the Department was a memorandum containing a note, purported to be in the Minister’s handwriting, where the Minister asserted that he was not sure whether the R500 000 requested further motivation. This was not in accord with the directive, and constituted irregular expenditure and therefore equated to improper conduct and maladministration.

She said that the Public Protector had received the BIG report from the DSAC, and the Department had made recommendations for corrective action to be taken. It had studied the Department’s report and noted that some officials implicated in the BIG report were no longer with the Department. The Department had provided a Promotion and Development of Funding policy document to the Public Protector. The Public Protector had received a letter from the Department stating that it had informed Treasury about the irregular expenditure, and had also applied for condonation. The Public Protector noted the training provided to staff and emphasised that training should be continuous. Its opinion was therefore that the Department had implemented the remedial actions.

Discussion

Mr Mhlongo said that many remedial actions had not been done. It was shocking that the Department had responded to the Public Protector only the previous night, after many years. It showed Chapter 9 institutions were not respected and that maladministration had occurred. In the Miriam Makeba issue, the previous Minister had misled him on the CCIFSA, and lies had been told. He said CCIFSA was a looting scheme. He asked the Department to share the memorandum of understanding (MOU) with the CCIFSA, and how much had been given to them, as CCIFSA had no audited financial statements.

He put it to the Minister that the Surplus Funds Policy had not been implemented. He asked what was done to people who were implicated but were no longer with the Department. He asserted that there was no approval letter issued by Treasury, as claimed by the Department. The Department had to furnish proof that the policy was implemented as it should have been implemented.

He asked the Public Protector what other legal opinion there was on the BIG report of 2016. He wanted proof that it had been implemented.

Ms R Adams (ANC) asked what measures were put in place to monitor maladministration, improper conduct and irregular expenditure, and why the Public Protector was reporting that no action was taken. Did the Department consider or impose accountability factors to ensure that irregular expenditure actions could be avoided? Which deadlines of the recommendations did the Department fail to meet? What was the composition of the adjudication panel that considered funding applications, and what criteria were followed in constituting the panel?

Mr E Mthethwa (EFF) said he was on a Committee to hold people accountable and did not accept that when people left the Department, they were forgiven. Based on the PFMA and Treasury regulations, how could the Department fund an organisation for three years when that organisation had no audited financial statements?

On the BIG report, he said the CCIFSA should have been held accountable. He agreed with Mr Mhlongo that there was corruption and that the CCIFSA was used as a conduit to steal money from the government. People under whom irregular expenditure had occurred had left or been transferred to other government departments. Were they exonerated? What had happened to the people who had left the Department? He noted that ex-president Zuma was still being prosecuted. Was it a case of being selective on who was prosecuted? Why had the legal department not vetted funding proposals and advised the Minister? He said CCIFSA was implicated in maladministration and mismanagement of funds, yet could not be investigated by the Special Investigating Unit (SIU).

He said the Minister had limited discretionary power to fund whoever he wished, but there had been a project which had not gone through a tender process and was given directly to the CCIFSA to be managed. How could the then Minister be exonerated? He said he had noted that whistleblowers on maladministration were treated with disrespect.

Mr Joseph said the Committee represented Parliament and needed to support the Public Protector. He noticed serious questions on consequence management, particularly disciplinary hearings not happening against senior management in government, and training that was not introduced.

He asked about the status of the CCIFSA. Was it a democratically elected national body or just a few individuals? Was it a Departmental entity, or a non-profit organisation (NPO) doing projects for the government, and who did it account to? On senior management that had left, he asked what structures in government dealt with consequence management. Was the Public Protector satisfied with the compliance monitoring and tracking systems the Department said were in place?

Mr A Zondi (ANC) said Chapter 9 institutions were critical for the country. He wanted to know about human resource management and line management.

Ms V Malomane (ANC) said she was happy to hear that the Public Protector acknowledged that the Department was doing remedial action and doing training programmes with staff to ensure that issues were not repeated. The Public Protector had said that all the remedial actions were done, but she wanted to know if they were happy with what was being done and if anything was still to be done by the Department.

The Chairperson said the remedial action raised by the Public Protector, for example, should not take very long to resolve.

DSAC's response

Dr Khumalo said the Department did its best to respond to the Public Protector or any other oversight body. The report was issued in February 2022. Several engagements took place with the Public Protector to clarify some of the issues covered in the remedial actions. The Department had then accepted the remedial actions and started to implement them. The reports were submitted to the Public Protector in November 2022. The late updates were because the Public Protector had felt they needed portfolios of evidence for the funding policy. The funding policy mentioned in the report was a policy that talked to funding issues, transfers and financial assistance and was developed in 2020. In line with the remedial actions, the policy was reviewed and amended, and this reviewed version was the one forwarded to the Public Protector.

On the surplus projects funding policy, she said it was a policy applicable to public entities. The CCIFSA was not a public entity.

She said she was not aware of the 2016 BIG report, but she was aware of the 2020 report, which was the one used to address challenges that had been identified. The report dealt with the segregation of responsibilities. She said dealings with the CCIFSA were dictated by policy. The Department played an oversight role, and had to ensure good governance. The current new CCIFSA executive had put documented policies in place, hired an administration officer to deal with administration issues, and structured themselves so that various responsibilities were apportioned to the board. There was a memorandum of agreement (MOA), which was how the CCIFSA accounted for the R5m funding allocated to it.

On what constituted the panel and the criteria used, she said the funding policies stipulated the criteria.

She was unaware of any allegations that the CCIFSA was stealing money and was referring to the R5m allocated to the entity. The Department had a person dedicated to monitoring projects.

Responding to the issue of consequence management and what happened to senior management, Ms Tshikwatamba said that if people left the Department with no charges levelled against them or disciplinary charges in process, then to charge a person later could be construed as a witch hunt. There was no framework to deal with this. The Department believed it had dealt with junior staff correctly, and had thus introduced the training programmes recommended by the Treasury and the NSG.

Mr Israel Mokgwamme, Chief Financial Officer (CFO), DSAC, said the surplus funding was related to public entities who had not spent all their money within a particular year. Application was made to Treasury for the rollover of these funds; if accepted, they could be retained. The CCIFSA was not a public entity -- they were governed by the MOU between the Department and the CCIFSA.
 
On why the Department's legal team were not vetting applications, Dr Khumalo said it did not vet all applications, only those that went through the process and had been granted funding as per the compliance guidelines.

Minister of Sport, Arts and Culture, Mr Zizi Kodwa, expressed his thanks to the office of the Public Protector. He said the Department had implemented the remedial actions of the Public Protector report. It had not been implemented just the previous day, but for some time already.

Referring to questions about the CCIFSA, he said the Members were better informed than he was on the origins and the significance of the entity. He said the CCIFSA was a federation with provincial structures, and the Department was unaware of any allegations that it was stealing money.

When a person left the Department, there was very little the Department could do against that person. This was a conundrum all of government was facing. The DSAC was unaware of any employee using the CCIFSA to siphon money. There were internal controls in place dealing with the concerns raised by Members.

Adv Nkabinde responded on the issue of expired projects and surplus funds, and said they were also inclined to think it was related to an investigation of the National Arts Council (NAC) in 2019/20, but nothing relevant to the expired projects and surplus funds had been found.

She said progress was being made with implementing remedial action, and that it was being done within particular time frames. This report, however, did not specify time frames for the remedial action. The Public Protector had a dedicated team that followed up on remedial actions, and had engaged with departments and state organs before issuing the final report.

On the report itself and its submission, she said that the report -- once it was signed and submitted -- had also been submitted to the complainant. The Public Protector had received a copy of the BIG report on allegations of misappropriation of funds by CCIFSA, but this did not mean that the Public Protector did not want to give the Member a copy of the report.

On the submission of documents by the Department only the previous day, Adv Gcaleka said this had been mainly to get supporting documents.

Further discussion

Mr Mhlongo asked if the previous Director-General (DG) had been charged, and if not, why not? Was there a timeframe for the training of the Department’s officials? On the transfer of funding to the NAC between 2022 and now, he said there was no letter from the Treasury to allow the Department to transfer surplus funds. He asked the Public Protector if there was any letter from the Treasury on the matter. The only letter he knew of was the 2015/16 letter. He wanted a copy of the Department’s MOA with the CCIFSA. Who were the new members of the CCIFSA executive? Could the financial statements for one year be provided?
 
Mr Mthethwa said it was common knowledge that government officials did not respond on time. He said remedial actions had time frames. The Public Protector had investigated the matter in 2018, but only the previous day had the Department provided a report on the remedial action. This meant the Public Protector was also not doing their work properly. He felt a wrong perception was being created, in that one joined the government, committed corruption and then left to go to another department and one was free from one's previous wrongdoing. This should not be condoned and examples should be made. He said he had evidence of political interference by the Minister, where government officials were instructed to fund a project that the Department never solicited. This should not be allowed to continue.

He requested the itemised budget given to the CCIFSA from 2015/16 until the new leadership took over, as he knew from first-hand experience that the CCIFSA had not even held an annual general meeting (AGM). If there had not been an AGM, how could they speak about the CCIFSA submitting reports on the R5m budget? He asked for deviation requests and a copy of the MOU. He also wanted the AG’s reports of the Department, to see what it had reported on the issues he had raised. He was still awaiting responses from Dr Khumalo on some of the issues. He said no one had mentioned the National Empowerment Fund (NEF), which had been part of his complaint. He wanted to see the report on the young people who had benefited from the R50m given to the NEF without a tender process, and evidence of youth who had become entrepreneurs.

The Chairperson interrupted and said that the agenda of the meeting was not the CCIFSA.

Mr Mthethwa said the Public Protector report had addressed what he was speaking about. He questioned whether the Chairperson wanted him to accept the reports without interrogating them. He felt he was being intimidated by the Chairperson.

Mr Joseph supported the Chairperson, saying the Committee’s job was oversight, and not for or against the CCIFSA. He proposed that the Committee apply its mind to the agenda items and request substantiating evidence.

Ms Nocawe Mafu, Deputy Minister, felt there had been a sufficient response and the report, as tabled, adequately dealt with the issues. She said the difficulty arose when the complainant was also a parliamentary committee member, and how one should deal with issues as a complainant or as a member of the Committee. In addition, the complaint was lodged in 2018 and the report was submitted in 2022 dealing with the remedial action, while a lot of information was given by a Member which was related to 2015.

Adv Gcaleka said that the report on remedial action was not reported the previous evening, but the Public Protector had been seeking proof that the action had been taken. The purpose of the Public Protector was to strengthen democracy and not necessarily to be punitive, but gross negligence or maladministration necessitated remedial actions be taken through consequence management. The delay in consequence management led to officials being able to move to other departments, or out of government. There should be proper vetting procedures. There had been engagements with the Public Service Association (PSA) to see what measures could be introduced to allow consequence management to occur even after a transfer to another department. The report noted that there was no remedial action against the former Minister, so the Public Protector could enforce nothing against him.

Mr Mhlongo said that the DA did not support the report as it was tabled, as there was no supporting documentation, and it reserved its rights.

Mr Mthethwa said the EFF was also not adopting the report, and was distancing itself from it.

The Chairperson tabled a motion that the report be taken to the Speaker.

Ms Adams agreed, and Ms Malomane seconded the proposal, adding that a proper draft report should be compiled for adoption.

Request for intervention in the matter between Mr Thabang Moroe and Cricket South Africa
           
Minister Kodwa said the Department had interacted with the correspondents, and there was a history to the matter. There had been an expectation that the Minister had to interfere in the legal opinion. There was very little that a Minister could do to interfere in such matters, as this was a relationship between an employer and an employee. The employee, if aggrieved, had many avenues he could exhaust.

Mr Mhlongo said the letter asked for assistance from the Committee, not interference by the Minister. He said the Committee was still awaiting an investigation report from Cricket South Africa (CSA). He added that CSA had lost R270m -- what had been the findings on this? 

Mr Joseph said the Committee needed to be aware of the processes to be followed. The letter fell under correspondence, and should be treated as such. Who should the letter be referred to before the Committee did its oversight role?

Mr Zondi asked how the Committee could intervene when the two parties' options had not been exhausted. At the moment, the matter was still between the employer and the employee.

Ms Malomane said the Committee should wait until there was an outcome, as the matter also had legal ramifications.

The Chairperson concurred with what the Members said.

Mr Mhlongo said all parties should be present before the Committee, and it would be an opportunity to get the review of the Funduzi report from CSA.

Committee matters

Reports and minutes

The Committee adopted the draft Committee report on the 2023 Unesco Conservation for the Safeguarding of Intangible Cultural Heritage, noting the DA’s objections and the reservation of their rights.

The minutes of 19 and 23 May were adopted.

Mr Joseph reminded the meeting that the South African Football Association (SAFA) asked for support for SAFA House property to be separated from the Department of Public Works and Infrastructure (DPWI), and on the FNB stadium, so SAFA needed to provide the Committee with the correspondence on these two items.

Mr Mhlongo said a letter from SAFA on Banyana Banyana had still not been received. The Committee should have a 'matters arising' component to its meeting, to do follow-ups. He was in litigation with SAFA and Mr Danny Jordaan, and this had been raised in the meeting and should be reflected in the minutes.

The Chairperson noted that as to whether the litigation matter was in the minutes or not, should be followed up by the secretary.

Draft third term programme
 
Mr Mhlongo said he wanted to be consulted regarding the draft third term programme. What had happened to the requests he had submitted for inclusion in the third term programme?

The Chairperson asked that the draft programme be heard, and the requests for Netball SA (NSA), Banyana Banyana and SAFA to be invited to meet the Committee should then be considered.

Mr Ajabulile Mtiya, Committee Secretary, outlined the programme.

The Chairperson said that the requests for NSA, Banyana Banyana and SAFA to be invited to meet the Committee would be included in the 12 and 15 October programme.

Mr Mhlongo asked for Netball SA, SAFA, the National Library and the Mzansi NPO to also be included in the programme for October.

The Chairperson said one had to first check how far the SIU investigation into the Mzansi NPO had progressed.

Mr Mthethwa said no one in the DSAC was taking responsibility for the Downtown Music Hub. He wanted a discussion on this and the radio monitoring of the industry so that royalties could be monitored and collected, either when the Department was presenting to the Committee, or in October.

The Chairperson said that it should be part of the third quarter report, and that they would be reminded about that.

Mr Joseph reminded the Committee that the Department had to present its first quarter report before the end of the year.

Mr Mtiya said he would include the first quarter report in the programme.

Ms V van Dyk (DA) asked that Boxing SA should also be considered for inclusion.

The Chairperson said that specifics needed to be detailed when calling for an organisation to appear before the Committee. A revised draft programme would be put forward.

The meeting was adjourned.