Pan South African Language Board (PANSALB), Playhouse Company, Land Bank & Agricultural Research Council: interrogation of Annua
STANDING COMMITTEE ON
PUBLIC ACCOUNTS
09 MAY 2007
PAN SOUTH AFRICAN LANGUAGE BOARD (PANSALB), THE PLAYHOUSE COMPANY, THE LAND
BANK AND THE AGRICULTURAL RESEARCH COUNCIL: INTERROGATION OF ANNUAL REPORTS
2005/2006
Chairperson: Mr N T Godi
(PAC)
Documents handed out:
Annual Report: PANSALB
PANSALB: Auditor
General’s Report
Annual Report: The Playhouse Company [available later at www.playhousecompany.com]
The Playhouse
Company: Auditor General’s Report
Annual Report: The
Land Bank
The Land Bank:
Auditor General’s Report
Annual Report: The Agricultural Research Council [available later at www.arc.agric.za]
The Agricultural Research Council: Auditor
General’s Report
SUMMARY
The Pan South Africa
Language Board appeared before the Committee, who questioned the new CEO
whether she had been aware of the difficulties before taking appointment, and
noted her comment that the Board believed that with the right capacity it could
turn around, noting that it had a huge mandate. Further questions were raised
about capacity constraints, poor leadership practices in the past, details of
the procedures that led to the current CEO’s appointment, the exit report of a
former employee, and whether the Board had a Human Resources department. The
Committee demanded that information on human resources be forwarded to the
Committee within two weeks. A forensic audit had highlighted many
irregularities and Members questioned what course of action would be followed
to address them. Members pointed to missing information, the poor quality of
proof reading in the Annual Report, and pointed out that
public sector entities such as the Special Investigations Unit might be
more suitable to undertake forensic audits than consultant corporates.
The Playhouse Company had obtained three qualifications in the report and there
were problems with staff, vacancies and internal financial management. The
Company stated that all the qualifications had been addressed and recfitied.
Questions were asked on the risk management policy being put into place, the
review of internal auditing procedures, whether supply chain management was in
place, non-compliance with regard to vacancies, and explanation of irregular
expenditure arising from a grant from the Department of Arts and Culture.
The Land Bank had experienced problems of losses, liquidity, credit and
overexposure, and the Committee was concerned that the previous CEO had not
attended a meeting in 2005, and the current CEO was not present at this
meeting. Questions were asked as to how much time the Chairperson was present
at the Bank, which other Boards he sat upon, how the Boards and Committees were
structured and why separate payments to board members of the Bank and the
Insurance arm were paid. Further questions were asked on the bonuses paid to
the CEO and CFO, whether sufficient time had been allocated to major decisions
at meetings, the skills development plan, the problems of vacancies and people
in acting positions, the streamlining of the processes, the management
problems, and the quantum of loans granted to individual clients in relation to
the equity of the bank. Specific questions were asked on the criteria used, a
loan granted to a wholesaler, that was 122% above the
bank’s equity, and the rationale behind the ratings in relation to Afgri. The
policies relating to loans were questioned. Members were concerned about the
loan debtors and recusal of managers where they had an interest, contingent
liabilities, and the concern over loss of R31 million despite Land Bank having
paid to keep a farm running. The Committee commented that the reconstruction
costs paid to a consulting house was unnecessary, and that the State Information
Technology Agency should have been called upon. SCOPA would be following up on
practices of outsourcing despite internal resources being available.
The Agricultural Research Council had not reported vacancies in the annual
report and lack of capacity appeared to be the root cause of weaknesses, which
were identified as including poor internal controls, segregation of duties, the
accounts receivable qualification, non-implementation of supply chain
management, changes to financial statements and non-disclosure of plant and
property accounting. Members questioned the steps being taken to address this
lack of capacity, the vacancies, the vacancies
specifically in the finance section, the payment of ex gratia bonus and leave
payments, and the valuations attached to unlisted shares on the balance sheet.
MINUTES
Pan South African Language Board (PANSALB): Interrogation of audit report
2006
The Chairperson expressed his appreciation for the important role PANSALB
played in promoting language equality in the country, and in addressing the
marginalisation that many languages had been subjected to. He asked why the
Chairperson was not present.
Father Smangaliso Mkhatshwa,
Deputy Chairperson, PANSALB Board, said that the Chairperson was conducting
interviews elsewhere at Parliament.
The Chairperson noted that the CEO had been in her position for two months, and
asked whether she was aware of the situation at PANSALB at the time of her
engagement.
Ms Ntombenhle Nkosi, CEO, PANSALB, replied in
the affirmative, and added that she had been engaged in discussion with the
former Acting CEO of PANSALB.
The Chairperson asked what Ms Nkosi meant by “engaged”.
Ms Nkosi replied that she meant that she had been briefed about the general
situation and the various audit reports that had been conducted.
The Chairperson asked whether she had been made aware of these matters before
or after her appointment.
Ms Nkosi said that if the Chairperson was referring to the financial matters of
PANSALB, then she was not aware of these matters prior to her appointment, as
people outside of PANSALB were not privy to internal matters.
The Chairperson said that after reading the Auditor-General’s report and
various other documents, he had reached the conclusion that PANSALB was a sinking
ship.
Ms Nkosi said that PANSALB believed that with the right capacity, the
organisation could steer itself into safer waters. She said that the enormity
of the challenge PANSALB was facing should be clear when looking at its huge
mandate and the resources provided for achieving this mandate.
The Chairperson asked whether the main problem was capacity constraints and
whether poor leadership had contributed to this problem.
Ms Nkosi said that this was true and that the new leadership appointments would
address these issues.
The Chairperson said that past management practices had let the organisation
down, and that her predecessor, in particular, had not performed adequately.
Ms Nkosi said that the former CEO did not have a Chief Financial Officer (CFO).
The Chairperson noted that this could not excuse her frequent absences from
Board meetings and from the workplace. He said that this had nothing to do with
not having a CFO. The Chairperson said that he did recognize capacity
constraints, but that this did not excuse poor leadership practices.
The Chairperson said that the report submitted by the Executive Committee of
PANSALB made it necessary for him to ask for details of the procedures that led
to Ms Nkosi’s appointment. He said there had been queries about documents that
had to be submitted prior to her engagement, and that this caused a shadow of
doubt with regard to her appointment.
Mr Mkhatshwa noted that he was also a member of the Executive Committee of
PANSALB, and that the report submitted was correct. He said that the proper
procedure was followed. The position was advertised in newspapers, and ten
candidates were short listed and interviewed. Ms Nkosi had a qualification
obtained in the United States of America, and this qualification was submitted
to the South African Qualifications Authority (SAQA) for verification. The
Board gave powers to the Executive Committee and Ms Nkosi was appointed on this
basis. Mr Mkhatshwa confirmed that all areas of concern with regard to the
CEO’s appointment were addressed at Board level. He added that not all members
of the Board had supported Ms Nkosi’s appointment.
The Chairperson said that he was asking these questions in the interests of
leadership practices, as it was poor leadership that had led to the past
situation at PANSALB. He said that a leader should only be appointed if all
members of the Board were in agreement.
The Chairperson referred to the exit report of a former employee, and asked for
comment.
Mr Mkhatshwa said that it was not good practice to write a report when out of
the organization, as problems raised could be better addressed when the person
was still inside the organization.
Mr E Trent (DA) asked whether a Human Resources (HR) department was in
existence and, if so, why there was no information on this in the annual
report.
Mr Mkhatshwa replied that an HR department was in existence, but that PANSALB
had been following Treasury guidelines in the compilation of their annual
report.
Mr Trent said that PANSALB should forward this information to SCOPA, as it was
essential for the Committee to have information about vacancies at the
institution, before reporting to parliament.
The Chairperson asked that the information concerning human resources be
forwarded to SCOPA within two weeks.
The Chairperson referred to the forensic audit that had highlighted many
irregularities within the Department. He asked for confirmation that the CEO
had been correctly briefed, and had read the annual report. He asked what
course of action she planned to embark upon to address the issues raised.
Ms Nkosi said that after being briefed by the former Acting CEO, she had held a
meeting with all the staff of PANSALB, including the provincial managers, where
she had disclosed the findings of the audit report, so that all staff members
could be made aware of the seriousness of the situation at PANSALB. She had
also indicated at the meeting that the audit would be extended to provincial
managers and their departments.
The Chairperson referred to reports of problems with segregation of duties,
inadequate asset management and supply chain management, poor office
management, inadequate financial reporting procedures, and poor internal
control mechanisms. He said that these were fundamental issues within any
organisation.
Ms Nkosi said that she and the CFO had designed a plan to address these issues,
and that policies in this regard would be in place within three months. She
added that an excellent risk management policy was now in existence, and had
already been implemented.
Mr P Gerber (ANC) said that there was a great deal of missing information, for
example, salary and chronological information. He asked that this information
should be included in the next annual report.
Mr Gerber remarked that PANSALB was supposed to see that language was used
properly, but yet there were a number of spelling errors in the annual report.
He asked that this matter be addressed in subsequent reports.
The Chairperson referred to the forensic audit of Deloitte and Touche. He said
that with regard to issues such as conflict of interest and problems with
procurement, the CEO would have to follow up and satisfy herself
that these matters were being addressed. He said that public sector entities
such as the Special Investigations Unit (SIU) had powers to interrogate, and
might be more suitable to undertake forensic audits than corporates.
The Chairperson concluded the review by saying that he hoped all the issues
raised would be addressed.
The Playhouse Company: Interrogation of Annual Report 2006
Mr Mahmoud Rajab, Finance Committee
Chairperson, The Playhouse Company, offered apologies for the absence of the
company Chairperson, who could not attend for personal reasons.
Mr Trent acknowledged that many general improvements seemed to have taken place
at The Playhouse Company, but that the main concern of SCOPA was to address
financial management issues. He said that the audit history was of concern, as
three qualifications had been obtained. Mr Trent felt that the Auditor-General
had not judged the company too harshly, as there was a strong awareness of
problems with staff, vacancies and internal financial management.
Mr Rajab said that he would like to rebut any suggestions that the financial
situation of The Playhouse Company was in any way lacking.
The Chairperson pointed out that the very fact of three qualifications made it
evident that the financial situation of the company was wanting.
Mr Rajab said that all issues raised by the Auditor-General had already been
rectified.
Mr Trent asked whether the issue of deferred income had been resolved
Mr Rajab replied that it had.
The Chairperson asked for, and received confirmation that all the areas of
qualification had been addressed.
Mr Trent said that the Auditor-General’s report showed that no risk management
policy was in place, and asked for clarity.
Mr Rajab replied that the services of a professional auditing company had been
engaged for this purpose, so the matter was being addressed.
Mr Trent said that the Audit Committee was reported not to have reviewed
internal auditing procedures, and apparently did not take vigorous action.
Mr Rajab said that the company’s Audit Committee operated under the control of
an external chairperson, and that meetings were held regularly.
Mr Trent asked whether supply chain management was in place, and Mr Rajab said
that it was.
Mr Trent asked for more information on non-compliance with regard to vacancies
and Mr Rajab replied that all senior management posts had already been filled.
Mr Trent asked for an explanation of the item on irregular expenditure.
Mr Rajab conceded that this was an area of concern for The Playhouse Company.
He said that the matter was best approached by referring to correspondence from
the Department of Arts and Culture, relating to the payment of a R5 million
grant to The Playhouse Company. The Department of Arts and Culture had
stipulated that R500 000 of this amount should be ring fenced for payment to a
company that would be recording compact discs (CD’s). The Playhouse Company
approached the Department for clarification and was informed that this was the
basis upon which the grant would be awarded. The money was handed over and this
was documented. Mr Rajab said that The Playhouse Company had acted with as much
transparency as possible, and had acted in compliance with the grant
conditions.
Mr Trent asked whether The Playhouse Company had any involvement with the
entity that recorded the CD’s and whether any tender process had taken place.
Mr Rajab replied that The Playhouse Company had no involvement with the
recording company, and that the matter was strictly between the recording
company and the Department.
Mr Terence Nombembe, Auditor-General, South Africa, said that the expenditure
was recorded in the financial statements of the Department of Arts and Culture,
and that the issue was raised as a matter of emphasis in the report on The
Playhouse Company.
The Land Bank: Interrogation of Annual Report 2006
Mr Gerber said that the Land Bank had been one of the pillars of development in
South Africa, but members of Parliament and the public have become increasingly
sceptical of the institution over the past few years. There had been problems
of losses, liquidity, credit and overexposure and said that what was happening
was worrisome and totally unacceptable, which were contributing to slow
demolition of a solid institution. Mr Gerber said that it was also worrying
that in In 2005, the previous CEO could not attend a
meeting with SCOPA because he was in Angola, and the current CEO was not
present at this meeting.
Mr Lungile Mazwai, Chairperson, Land Bank Board, said
that the CEO had arranged a family trip abroad, partly related to personal
stress, before notification of today’s meeting, and that the Acting CEO had
fallen ill and had been booked off for the week.
The Chairperson said that this did not give a good impression of the
organization.
Mr Gerber concurred and said that it was becoming a habit for key people not to
be present and that this was unacceptable, as they were paid from taxpayer’s
money.
Mr Gerber asked how much time Mr Mazwai spent at the Land Bank, and whether he
had an office on the premises.
Mr Mazwai replied that outside of meetings, he spent no time there, and did not
have an office on the premises. He said that he sat on various committees so
was present at committee meetings, Board meetings and meetings with Departments
and Ministries.
Mr Gerber asked if he sat on other boards and Mr Mazwai replied that he sat on
the Board of Trustees of Netcare.
Mr Gerber noted that the CEO had received a bonus of R1 million and the CFO had
received a bonus of
R390 000. He asked Mr Mazwai to explain these bonuses.
Mr Mazwai said that the bonus paid to the CEO was a performance bonus in the
sense that when he was contracted, certain outcomes were agreed upon. The
delivery of a turnaround strategy for the Land Bank was the main outcome that
was identified. Mr Mazwai pointed out that the CEO had been appointed in terms
of the Land Bank Act, and was therefore accountable to the Board, which had
approved his bonus. The CFO was contracted by and accountable to the CEO, and
his bonus was therefore decided by the CEO. When the CFO was appointed, he had
to forfeit a bonus from his previous company. The bonus paid to him was
therefore in order to recompense him for having to forfeit the bonus at his
previous company.
Mr Gerber asked whether the bonus paid to the CEO had been discussed at the
Remuneration Committee.
Mr Mazwai confirmed that it had.
Mr Gerber asked whether Mr Mazwai had attended that specific Remuneration
Committee meeting
Mr Mazwai replied that he had been present.
Mr Gerber said that the minutes of that particular meeting stated that a few
matters regarding the CEO’s bonus remained unresolved. According to the
minutes, there were no measurable outputs for the payment of the bonus. It was
also stated that a recruiting agent had advised the CEO that he would
automatically be paid a bonus in the first year. Mr Gerber said that it was
therefore questionable whether the bonus was performance related.
Mr Mazwai said that the basis on which the Board had approved payment of the
bonus for the CEO had been documented in the minutes of the Board meeting. The
Remuneration Committee made recommendations to the Board, who would then make
the final decision on a specific matter.
Mr Gerber asked how often the findings of the Remuneration Committee were
altered by the Board, and Mr Mazwai replied that in certain cases, there were
factors that were not taken into account by the Remuneration Committee, but
which were subsequently addressed by the Board.
Mr Gerber said that at the Land Bank Bosberaad, there were 22 items on the
agenda, and the meeting lasted for two hours and 20 minutes. One item referred
to the R1 million bonus and another item referred to a
9% increase for the CEO. He wanted to know if sufficient time was being spent
on major decisions, and how much time was given to discussion of the CEO’s
bonus and increase.
Mr Mazwai replied that it was more important that the right work had been done
and that the correct information had been considered, prior to the decision
being made. He added that if the correct information was at hand, a two-day
deliberation was not required to make a decision.
Mr Gerber mentioned that a skills development levy had been paid, but that no
skills development plan was in place. He asked for clarity on the skills
development levy.
Mr Mazwai said that in terms of legislation every employer must pay 2% of
payroll to government, and that a skills development programme should be built
around this. He said that the CEO had attended a skills training programme.
Mr Gerber asked whether the insurance subsidiary formed part of the Land Bank.
Mr Mazwai confirmed that it did, and added that it occupied the same building
as the Land Bank.
Mr Gerber asked why the insurance entity had a separate Board, and why members
of the Land Bank were paid separately when they sat on the insurance Board.
Mr Mazwai replied that the insurance subsidiary was seen as a separate
committee, and had a similar status to the Audit Committee, for example. The
insurance subsidiary had been constituted in accordance with the Companies Act,
and not the Land Bank Act, so therefore had a different legal structure. Mr
Mazwai added that the Board of the Land Bank did not sit simultaneously with
the insurance subsidiary Board, so separate payments were in order.
Mr Gerber asked whether it was morally correct for people to be paid
separately.
Mr Mazwai replied that Board members who sat on the Audit Committee, for
example, were also paid separately, the principle being that the two meetings
did not sit simultaneously. He added that Land Bank executives who sat on
committees were not paid separate amounts in addition to their salary, and that
separate payments were only made to non-executive members who sat on different
Boards.
Mr Gerber said that the Auditor-General’s report had shown that the Land Bank
had 114 terminations, 141 vacancies, and 26 employees with acting appointments
in higher positions. He asked what was being done to solve this problem.
Mr Mazwai said that there were five components to the turnaround strategy and
one of these was to fill management posts. Part of the exercise involved
attempts at re-skilling and re-training within the organisation in order to
fill these posts. He added that many vacancies had been created during a
previous streamlining exercise.
The Chairperson pointed out that streamlining usually referred to the merging
or lessening of posts.
Mr Mazwai replied that the process was called business process redesigning. He
said that problems were caused by the fact that it took too long to process
applications, and methods were explored to streamline this process so that
there were not so many steps and people involved in the processing of one
application.
The Chairperson remarked that this streamlining exercise was intended to make
the organization leaner, when in fact the organization had to expand, in order
for vacancies to be filled.
Ms A Dreyer (DA) said that it seemed the root cause of
the Land Bank’s slide downwards was a management problem. She referred to the
Auditor-General’s report and said that she would like to know whether or not
the Land Bank was a bank. Ms Dreyer said that the Auditor-General’s report
showed that the quantum of loans granted to individual clients was very high in
relation to the equity of the bank. She asked for details about the criteria
that were used with these loans.
Mr Mazwai said that this was referred to as concentration risk. He added that
most of the losses and impairments had been incurred with loans advanced
between 1998 and 2001.
Ms Dreyer said that one specific loan was 122% above the bank’s equity, and
asked for an explanation.
Mr Litha Nyhonyha, Audit Committee Chairperson, The Land Bank, said that this
was an issue of concentration risk. He said that the Land Bank had a Credit
Committee that reviewed decisions of this nature. He added that steps have also
been taken to streamline credit approval procedures, and that the high rate in
this regard had been revised. Mr Nyhonyha explained that in the case referred
to by Ms Dreyer, the loan had been granted on the
basis that the company was a wholesaler. The Land Bank had examined their
systems, track record and how well they managed in the past. Mr Nyhonyna said
that the concerns expressed by SCOPA with regard to this case would be taken
into consideration.
Ms Dreyer said she was not satisfied with this response as specific questions
were not being answered. She wanted to know who had approved this specific
loan.
Mr Mazwai replied that the Board had approved the loan
and that the criteria used were the
concentration risk factor, and the fact that the Land Bank needed to make money
in commercial business in order to drive its developmental mandate. He added
that the Land Bank also needed to make its own money and accumulate its own
reserves. He said that as a developmental finance entity in the agricultural
sector, the Land Bank could not diversify. The Land Bank also needed to make
profit as farmers and markets were getting bigger and consolidation was taking
place on an increasing scale. Profit was essential so that the Land Bank could
lend to co-operatives and contribute to food security.
The Chairperson said that in terms of the Bank’s risk rating, he had observed
that there were entities with a rating of 1 in a particular year, and then a
rating of 4 in the following year. He asked what this meant in relation to the
Land Bank’s rating process.
Mr Mazwai replied that with regard to Afgri, the rationale was that if this
company went insolvent, the Land Bank would not have to write off the R2.2
billion owing, but that this amount would only be written off if everyone that
Afgri had made loans to also went insolvent. He added
that the Land Bank had lost a lot of capital as a result of new accounting
standards and bad loans in the past that had to be written off.
Ms Dreyer said that the Auditor-General had referred to the Land Bank’s
credit policies as robust, but that she considered this a rather diplomatic
description. She said that she understood that the Land Bank did not perform
credit checks on step-up loans.
Mr Mazwai replied that this was one of the reasons that step-up loans had been
stopped. He said that these were loans in the range of R200 to R18 000.
Ms Dreyer said that she also understood that the Land Bank did not require
security.
Mr Mazwai replied that as far as he was aware, the Land Bank always required
security.
Ms Dreyer said that this was quite reassuring and asked whether the Land Bank
had a policy that provided guidelines for the granting of loans.
Mr Mazwai said that it did.
Ms Dreyer asked whether this policy was adhered to.
Mr Mazwai said that it was. He said that loans above R120 million were referred
to the Board, and loans under this amount were dealt with by management. He
added that this system was consistently adhered to.
Ms Dreyer observed that the potential rolling of loans was open to
abuse. She said that a client who owed the Land Bank R4 000 would borrow this
sum from a micro-lender and repay the Land Bank. This client would then step up
to an amount of R8 000 and would repay the micro-lender and pocket the
remaining R4 000. The Land Bank would not be repaid and this would become a bad
debt.
Mr Mazwai said that this was another reason that step up loans had been
stopped. He added that the establishment of MAFISA also meant that this form of
lending was no longer necessary.
Ms Dreyer said that government was committed to helping the Land Bank
and asked whether they had received anything yet.
Mr Mazwai replied that they had been verbally advised of a cash payment, but
that nothing had been received at this stage.
Mr V Smith (ANC) referred to page 86 of the annual financial statement relating
to loan debtors and other interests. He said that the report referred to a
former General Manager (GM) of the Land Bank who, along with two other GM’s,
had interests in entities that had received loans from the Land Bank. He asked
for clarification with regard to a possible conflict of interests, and asked
how one could be sure that the proper recusals were in place when the decision
to grant the loans had been taken.
Mr Mazwai replied that the managers had indeed recused themselves at
this point, and had not played a part in the processing of the applications.
Declarations of interests were also made at Board meetings, which meant that
all members were aware of the interests of other members. He added that the
Board was very strict in this regard.
Mr Smith replied that he was satisfied with this explanation but that SCOPA
would remain vigilant bout the situation.
Mr Smith referred to contingent liabilities, and pointed out a sum of R31.7
million. He said that the Land Bank had a client that was being liquidated and
had appointed someone to manage the assets of that client. He asked why costs
were incurred to maintain the assets of a client that was being liquidated. He
added that the appeal in that case had been lost, so it was obviously a bad
decision.
Mr Mazwai replied that the principle behind this was that the land of the
client must be maintained as this land was the security that had been provided
for the loan. Land Bank could not allow the land to lay fallow but must work it
in order to maintain the value of the security. . The Bank kept the farm
running so that it could be sold as a going concern at an increased value.
Mr Smith said that the bottom line was that R31.7 million had been lost.
Mr Mazwai concurred that this was the case.
Mr Smith said that this would be taken into account when SCOPA made its
recommendation to Parliament.
Mr Smith asked for an explanation of reconstruction costs.
Ms K Pillay, Senior Manager: Finance, The Land Bank, said that reconstructive
costs covered the consulting house that was assisting the Land Bank with its
turnaround strategy. She said that the amount of R16 million was for the
rollout of the SAP system.
Mr Smith said that this was unnecessary expenditure as the public entity State
Information Technology Agency (SITA) could have been approached for this
purpose.
The Chairperson added that this was a very important issue, and was also
applicable to the contracting of forensic auditing services. He said that the
SIU had more powers than private auditors and that SCOPA would follow up this
practice of outsourcing rather than using the governmental internal resources
that were available.
The Chairperson concluded the review by saying that the Land Bank had appeared
before SCOPA in 2005, and that many recommendations had been made. The same
issues had, however, arisen at the present meeting and he hoped that the
situation would improve shortly.
Agricultural Research Council (ARC): Interrogation of Audit Report
Mr Gerber said that the Council’s vacancies were not reported in its annual
report. He said that the Auditor-General’s report had cited lack of capacity as
the root cause of a number of weaknesses. These weaknesses included poor
internal controls, segregation of duties, the accounts receivable
qualification, non-implementation of supply chain management, changes to
financial statements and non-disclosure of plant and property accounting. He
said that if lack of capacity caused so many problems, the vacancies had to be
reflected. He asked what the Council was doing to address this lack of capacity
and skills.
Mr Elton Bosch, Deputy Chairperson, Agricultural Research Council Board, said
that the Board was not happy about having to appear before SCOPA. He said that
the plant and property non-disclosure had led to the suspension of the CFO, and
that the matter had been resolved. He said that the accounts receivable matter
had also been resolved as a qualification. Poor internal controls did not
relate to qualification issues, but were process issues. He said that the ARC
had instituted new internal control measures such as increasing the range of
internal audits, and improving risk management and fraud control mechanisms. Mr
Bosch said that the supply chain management issue was a case of
non-implementation of policy. He said that the policy had now been implemented.
With regard to changes to financial statements, the disclosure requirements had
changed, hence the changes to the statements. He said that in terms of
performance information, there was miscommunication between the Auditor-General
and the then-CEO regarding the information that had to be submitted. The
correct information was not submitted, but the performance information was
disclosed.
Mr Gerber said that he was still not satisfied with regard to information on
vacancies.
Dr Shadrack Moephuli, CEO, Agricultural Research Council, said that page 49 of
the annual report provided an account of the organisational breakdown and
showed that there were 2 698 vacancies. He said that many of these vacancies
were created when consolidation of institutions took place and that many people
had resigned during this consolidation period. Dr Moephuli said that these
vacancies were in relation to the period under review, and that he could not
really shed light on these vacancies.
The Chairperson said that what the Committee really wanted to know was whether
the issue of capacity constraints had been identified subsequent to the report,
and how the Council intended to address this issue.
Dr Moephuli replied that since the report, there had been many new
appointments, but also many resignations. He added that job and competency
profiling had taken place in order to identify critical skills.
The Chairperson asked for details on the vacancy situation in the Finance
Division.
Mr Clifton Changfoot, Acting Chief Financial Officer, Agricultural Research
Council, said that job and competency profiles had been done, and that there
were currently 43 vacancies in a staff complement of 280.
Mr Trent said that SCOPA focused strongly on financial management, so would
require a proper breakdown of staff structures and vacancies within the Finance
Division. He added that this would facilitate identification of areas of
weakness within the financial management spectrum.
Mr Gerber asked for an explanation of ex gratia bonus and leave payments.
Mr Bosch said that an ex gratia bonus was basically a performance bonus. Leave
payments referred to accrued leave that was paid out when a staff member exited
the organization. He said that this practice had since been amended in line
with standard labour practices, and that staff were now encouraged to take
leave rather than to accumulate days.
Mr Gerber said that the unlisted shares on the balance sheet appeared to be
very nominal valuations and asked whether proper evaluations could be provided.
Mr Bosch replied that the Auditor-General had not indicated that the unlisted
shares were incorrectly valued, so the ARC considered these valuations to be
correct.
The Chairperson concluded the Review by saying that the Committee would be
awaiting the next report of the Council, and would juxtapose this new report
against the issues discussed at the present meeting.
The meeting was adjourned.