Presentation to The Social Development Portfolio Committee Parliament

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Presentation to The Social Development
Portfolio CommitteeParliament

• Cape Town8 November 2006

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STRUCTURE OF THE PRESENTATION

• Background (CEO)
• Performance against targets (CEO)
• Annual Financial Report (CFO)
• Report of the Auditor-General (CFO)
• Projects Report (PD)
• Human Resources (HRD)
• Way Forward (Corrective Measures) (CEO)
• Questions and comments (Members) the Portfolio
  Committee

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BACKGROUND

• Key parts of the Annual Report are
• Overviews by the Minister Chairperson of the
  Board and the CEO
• Emphasis from Minister and Chairperson of the
  Board Strategic importance of the NDA within the
  context of the country to achieve Millennium
  Development Goals and reduce poverty by half by
  2014.
• In addition
• Turning around and building the institutional
  capacity of the NDA in order to deliver on its
  mandate.
• Performance assessment based on the original
  Strategic plan approved by the Minister prior to
  the appointment of the CEO.
• Performance assessment based on the performance
  agreement between the Board and the CEO which was
  entered into on his appointment and which
  contained 13 priority goals. See pages 31 to 51
  of the Annual Report for all the Performance
  Information
• Historical legacy of the organisation
• Chronic problems which led to ministerial
  intervention October 2003 support

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BACKGROUND

• Historical legacy of the organisation
• Chronic problems which led to ministerial
  intervention in October 2003
• Forensic Audit which led to the suspension and
  subsequent resignation of the previous CEO
• None of the NDAs previous CEOs have served their
  full term of office.
• Appointment of new board on 5 December 2004.
• Lack of good corporate governance, culture and
  practices.
• Inability to disburse committed fund and meet its
  mandated obiligations.

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BACKGROUND

• Upon appointment of the new CEO on 1st June
  2005, the following challenges / problems were
  identified through CEO provincial visits, the
  commissioning of an independent culture survey
  and a business processes review
• Backlog of unresolved labour relations cases
  including those of the previous CEO and COO.
• Lack of common strategic direction and
  leadership.
• Lack of performance culture and management
  systems
• Huge backlogs in payments to funded projects.
• Weak and inadequate systems of monitoring and
  evaluation for projects.

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BACKGROUND

• No properly updated database of NGOs and CBOs
  as prescribed in the NDA Act.
• Weak reporting and document management systems.
• Negative credibility and perceptions about the
  NDA among stakeholders and the public.
• Weak administrative systems.
• Non-alignment between organisational structure,
  people and strategy.
• Low levels of appropriate skills and competencies
  throughout the organisation to achieve its goals.
• Weak corporate governance systems and capacity.
• Problems regarding projects management contract
  management procurement systems and delegation of
  authority.

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BACKGROUND

• No clear programme of capacity building for CBOs
  and NGOs as mandated by the NDA Act.
• No updated strategically aligned approved
  organisational structure

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POVERTY STATISTICS

• Levels of Poverty
• The current estimates of poverty by HSRC show
  that the proportion of people living in poverty
  in South Africa is as follows-
• Approximately 57 of individuals in South Africa
  were living below the poverty income line in
  2001, unchanged from 1996.
• This translates into 26m people being classified
  as poor.

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POVERTY STATISTICS
Table 1. Poverty Distribution by Province
Poverty Distribution by Province
Province No. of poor persons (million) of population in poverty Poverty gap (R billion) Share of poverty gap
Eastern Cape 4.6 72 14.8 18.2
Free State 1.8 68 5.9 7.2
Gauteng 3.7 42 12.1 14.1
Kwa-Zulu Natal 5.7 61 18.3 22.5
Limpopo 4.1 77 11.5 14.1
Mpumalanga 1.8 57 7.1 8.7
North West 1.9 52 6.1 7.5
Northern Cape 0.5 61 1.5 1.8
Western Cape 1.4 35 4.1 5.0
South Africa 25.7 57 81.3 100.0
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PERFORMANCE AGAINST TARGETS

• Strategic Focus for the year
• As as result of the chronic historical problems
  and crises, the programme of action inevitably
  focused on organisational
• transformation and implementing a turn around
  plan.
• Highlights Measured against agreed performance
  targets, and operating under difficult
  circumstances of transformation the orgasation
  has been highly successful in
• Developing a widely canvassed five year strategic
  plan which gives proper direction. It has a
  theme of Unlocking potential

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PERFORMANCE AGAINST TARGETS

• Building organisational stability by establishing
  proper policies and systems for managements.
• Building organisational stability by establishing
  proper policies and systems for managements.
• Commissioning a business process review and
  culture assessment and implementing
  recommendations to improve organisational
  performance
• Improving communication with stakeholders through
  extensive consultations on strategy and feedback
  through extensive meetings in the provinces
• Improving the turn-around time for projects
  payments after Board approval e.g. eliminating
  the payments backlog by paying 84 long
  outstanding unpaid projects a total of R28 200
  000
• Improving on corporate governance compliance
  through systems and capacity building as
  demonstrated by the Internal Audit assessments)

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PERFORMANCE AGAINST TARGETS

• Developing an integrated human resources strategy
  which is properly aligned to the strategic plan
  of the organisation for implementation.
• Developing a risk management plan for the
  organisation (31 March 2006)
• Implementation of technology aligned with
  organisational business needs in accordance with
  the IT strategy.
• Improving on corporate governance compliance
  through systems and capacity building as
  demonstrated by the Internal Audit assessments.
• Establishing governance frameworks and processes
  for the Board and management structures as
  evidenced by the Board Charter, the Board
  Protocol and the Terms of Reference for the Board
  Committees, Exco and Senior Management Team

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PERFORMANCE AGAINST TARGETS

• Approval of one hundred and four (104) projects
  valued at sixty eight comma seven million rands
  (R68,7m) to benefit more than seventy thousand
  (70 000) people directly and over two hundred and
  seventy eight thousand ( 278 000) people
  indirectly.
• Disbursement of over sixty two million rands
  (R62m) of grant money for projects.
• Implementing capacity building projects for CSOs
  valued at over one million rands (R1m)
• Starting negotiations with the European
  Commission for funding in order to mobilise
  resources for poverty eradication.
• Significantly, the organisation has achieved over
  eighty five percent (85) of its targets in terms
  of the CEOs performance agreement with the
  Board.

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PERFORMANCE AGAINST TARGETS

• Significantly, the organisation has achieved over
  eighty five percent (85) of its targets in terms
  of the CEOs performance agreement with the
  Board.
• When measured against the original strategy, over
  sixty percent (60) of targets were met or
  partially met.

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ANNUAL FINANCIAL REPORT

• The report will cover
• Statement of Financial Performance
• Statement of Financial Position
• Report of the Auditor-General

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STATEMENT OF FINANCIAL PERFORMANCE
2006 2005 INCOME 172 713
532 141 376 167 Grant 121 482 000 125 587
590 Interest 15 816 471 13 831
372 Other 35 415 061 1 957
205 EXPENDITURE 124 062 814 156
227 498 Direct Funding 55 668
925 90 180 382 Programme Support 3 685
324 7 265 356 Staff cost
33 364 954 31 005 865 Administration cost 27
775 895 27 775 895 Net (deficit)/surplus for
the year 48 650 717 14 851 331
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STATEMENT OF FINANCIAL POSITION

• 2006
• 2 496 332
• 264 742 848
• 249 217 694
• 12 239 987
• 3 285 167
• 267 239 180
• 148 779 338
• 46 562 057
• 104 472 581
• (2 255 297)
• 118 459 842
• 2 950 044
• 110 333 935
• 5 175 863

• ASSETS 2005
• Property, plant and equipment 2
  063 030
• Current assets
  259 894 616
• Cash cash equivalents Government
  241 347 911
• Cash and cash equivalents European
  15 066 058
• Accounts receivable
  3 480 647
• TOTAL ASSETS
  261 957 646
• Funds Liabilities 100 903 539
• Funds 46 562 054
• Development Fund 49 842 188
• Projects Fund 4 499
  297
• Current liabilities
  104 472 581
• Accounts payable 5 653
  733
• Committed projects
  150 824 400
• Interest payable European Community
  4 575 974

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REPORT OF AUDITOR-GENERAL

• MATTER
• Alleged misappropriation of funds

• MANAGEMENT PROGRESS
• During the annual audit, irregular payments were
  identified
• Fraud charges were laid against a junior accounts
  clerk for the alleged misappropriation which is
  currently estimated to be R8.8 million
• The accounts clerk allegedly involved is in jail
  pending a bail application
• Forensic auditors engaged to investigate the
  alleged fraud have produced a draft interim
  report

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REPORT OF AUDITOR-GENERAL

• MATTER
• Contracts for 2 projects for
• R3 649 162 not be submitted
• by the NDA.
• A contract for a project for
• R799 112 was not signed by
• both parties
• No adequate filing / project management system.

• MANAGEMENT PROGRESS
• One contract for R3 489 122 was located and the
  other contract for R160 040 was destroyed in the
  fire.
• Contract referred to by the A-G was in the
  process of being finalised by the NDA and had not
  yet been submitted to the NDA signatory for
  signature. The project had not been paid.
• Updating of a filing register is underway and the
  project management system is being enhanced in
  conjunction with the introduction of improved IT
  systems.

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REPORT OF AUDITOR-GENERAL

• MANAGEMENT PROGRESS
• The possibility of the difference being due to
  fraudulent payments is being investigated
• A write back policy was approved during the month
  of July 2006
• All the six projects will be recommended for
  write back/withdrawal if they meet project
  withdrawal criteria in accordance with the said
  policy
• The NDA has verified that the six projects either
  exist or have been closed and external auditors
  are being contracted to confirm this.

• MATTER
• Amounts written back from two
• committed projects did not agree
• with the approved amounts for those projects.
• Six projects for R911 227 did not
• show any financial movement on the
• NDA account for 7 months to 2 years
• and were not included in the projects
• write-back.
• The existence of 6 projects for
• R7 170 947 could not be verified.

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REPORT OF AUDITOR-GENERAL

• MATTER
• Letters from 9 projects, confirming receipt of
  payments amounting to
• R3 795 924 not submitted.
• No proof of payment submitted for
• 7 projects for R1 669 134.
• No independent reconciliation of payments to the
  individual project bank statements was performed.
• General Ledger projects writebacks
• of R20 066 537.

• MANAGEMENT PROGRESS
• Grant confirmation letters signed by the projects
  were subsequently submitted to the auditors.
• Proof of receipt of payment has been obtained
  from all the projects and is on file.
• Projects payments reconciliations are now sent to
  the Projects Department and include the EFT audit
  reports and monthly bank statement
• This General Ledger amount has been written off
  with Board approval. No further action required

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REPORT OF AUDITOR-GENERAL

• MATTER
• General Ledger trade creditor write backs of R1
  400 000
• Special conditions which had to be
• met before funding could continue
• were not evidenced in files and a
• policy to ensure that special
• conditions on projects are met before
• payment is released, has not been
• developed.

• MANAGEMENT PROGRESS
• This General Ledger amount pertaining to trade
  creditors has been written off with Board
  approval. No further action required
• A process has been implemented to ensure that
  special conditions on projects are met before
  payments are released.

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PROJECTS REPORT
Grant Trends / Allocations to the NDA
2001/2 2001/2 2002/3 2002/3 2003/4 2003/4 2004/5 2004/5 2005/6 2005/6 2006/7 2006/7 2007/8 2007/8
Rm Rm Rm Rm Rm Rm Rm
Grant 92.7 96.7 4 103.2 7 109 6 121.5 11 128.7 6 135.2 5
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PROJECTS REPORT
NDA Funded Projects for the Year Ended 31 March
2006

• Commitments R68.7 million
• Disbursements R62.0 million
• Number of projects 104

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PROJECTS REPORT
South African Government Grant Commitments 2005/6
Province Number of Projects Approved Amount Committed per Province (R)
Limpopo 17 13 455 724
Mpumalanga 11 7 055 798
Eastern Cape 36 13 455 271
Northen Cape 4 3 880 568
Western Cape 8 5 759 286
KwaZulu Natal 15 12 169 884
North West 2 2 704 576
Free State 3 1 453 427
Gauteng 8 8 762 621
TOTAL 104 68 697 155
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HUMAN RESOURCES

• Demographic Overview

• NDA is demographically represented in all 9
  provinces
• It is operationally structured into a National
  Office and 9 provincial offices
• Each provincial Office is headed by a Provincial
  Manager who reports to the Development Management
  directorate.
• Each Province is also divided geographically
  based on districts with Development Managers
  (project specialists) responsible for the project
  management function at local level.

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HUMAN RESOURCES
Executive EE Distribution at 31 March 2006
African Asian Coloured White
Male 3 0 0 1
Female 1 1 0 1
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HUMAN RESOURCES

• Background to Challenges

• Human Resources historically has been an area
  where the NDA has experienced a large number of
  challenges. To create context for the progress
  that has been made, the most important of these
  issues are listed and included the following

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HUMAN RESOURCES
HR Challenges Existing as at 2003 needing to
be addressed

• No HR strategy existed
• Very few HR Information System existed
• Poorly designed HR policies
• Audit opinion on poor HR administration
• No legal compliance with no submission of an
  annual EE report, WSP and even occupational
  health insurance where not paid by the NDA.
• No remuneration structure existed including poor
  payroll management
• No employee support programmes existed

• No training and development plan or strategically
  aligned programme existed
• No Performance management system existed and
  performance was not measured at all
• A poorly aligned structure existed and very few
  positions where clearly defined with
  appropriately designed and documented Job
  Descriptions
• A large number of CCMA cases where pending
• The provident fund lost an unacceptable of its
  value

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HUMAN RESOURCES

• Current Situation

All issues as listed have been addressed, with HR
programmes and systems being put in place
resulting in the audit opinion successfully
being removed over the period with only a few
housekeeping matters being mentioned for the
2005 2006 year reviewed.

• Multi-year programmes
• initiated during the 2005
• 2006 year include the
• Organisational redesign and restructuring
• Determination of human capital readiness through
  organisational wide competency assessments
• Building of organisational capability
• Performance planning, enhancement, monitoring and
  evaluation

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