The
following report replaces the Report of the Portfolio Committee on Arts and
Culture, which was published in the Announcements, Tablings and Committee
Reports date 22 October 2014 on page 1459.
Budgetary Review and Recommendation Report of the
Portfolio Committee on Arts and Culture, on the performance of the department
of arts and culture for the 2013/14 financial year, DATED 21 October 2014
The Portfolio Committee on Arts and Culture (hereinafter referred to as “the
Committee”), having considered the
performance of the Department of Arts and Culture (hereinafter referred to as “the Department”), reports as follows:
1. Introduction
1.1.
Mandate of Committee
The Constitution of the Republic of South Africa (Act
No. 108 of 1996) empowers the National Assembly, through its committees, to
ensure that executive organs of the state in the national sphere of government
are accountable to it. It further empowers the National Assembly to maintain
oversight of the exercise on national executive. In order for the Committee to provide oversight,
the Budget Review and Recommendation Report (BRRR) is an essential tool to
assess the Department’s performance and strategic direction. The BRRR also acts
as a mechanism to measure service delivery and identify areas that require urgent
interventions. The BRRR process enables the Committee to understand how the
Department has expended its appropriated budget.
1.2.
Description of Core Functions of the Department
The Department derives its mandate from the
Constitution with specific focus on language and culture, access to information
and, to some extent, education. In relation to government’s 2014-2019 Medium
Term Strategic Framework, the Department has to respond to Outcome 14: Nation Building and Social Cohesion.
The Department further seeks to unleash the
potential of the arts, culture and heritage sector to contribute to job
creation and economic growth through the Mzansi Golden Economy (MGE) strategy.
Furthermore, the Department is also responsible for the promotion of the
performing arts in South Africa; provision and promotion of official languages
and enhancement of linguistic diversity in South Africa; and provision and
maintenance of the declared cultural institutions, national archives and
library services in South Africa.
1.3.
Purpose of the BRR Report
Section 5 of the Money Bills Amendment Procedure and
Related Matters Act (Act No. 9 of 2009) requires the National Assembly, through
its Committees, to produce a Budgetary Review and Recommendation Report which
assesses the performance of each national department with reference to the
following:
a) The Medium Term Estimates of Expenditure,
Strategic Priorities and Measurable Objectives, as tabled in the National
Assembly;
b) Prevailing Strategic Plans;
c) The Expenditure Report as published by the
National Treasury in terms of section 32 of the Public Finance Management Act
(Act No. 1 of 1999);
d) The Financial Statements and Annual Reports;
e) The Reports of the Committee of Public Accounts;
and
f) Any other information requested by or presented to
a House of Parliament.
1.4.
Method
In compiling the 2014/15 BRRR the Committee utilised
the following documents:
§ 2014 February State of the Nation Address;
§ 2014 June State of the Nation Address;
§ The 2013 Management Performance Assessment Tool:
National Departments Score Cards as issued by the Department of Performance
Management and Evaluation;
§ 2009-2014 Strategic Plan of the Department of Art
and Culture;
§ 2014/15 Annual Performance Plan of the Department
of Arts and Culture;
§ 2013/14 Annual Report of the Department of Arts
and Culture;
§ 2013/14 Reports of the Auditor-General on the
outcomes of audit findings of the Department of Arts and Culture;
§ 2013/14 Budget Review and Recommendation Report of
the Portfolio Committee on Arts and Culture;
§ 2014/15 first quarter expenditure report of the
Department of Arts and Culture; and
§ The National Development Plan: Vision for 2030.
During the 2012 Medium Term Budget Policy
Statement (MTBPS), the Minister of Finance announced a consolidated government
expenditure framework, a system that extends the monitoring of expenditure to
entities and other spheres of government. Furthermore, due to the fact that 80%
of the Department’s budget is transferred to departmental entities, the
Committee requested them to provide information that relate to their
expenditure on personnel as well as goods and services. Furthermore, entities
were also requested to provide performance information from 1 April - 30
September 2014 and its vacancy profile. Information was requested from the
following entities:
1.5.
Portfolio Committee’s Oversight Environment
The year 2014 marks the twentieth anniversary of
freedom and democracy. This has been characterised by various commemorations as
the country hosted the fifth general elections. During the February State of
the Nation Address, the President emphasised the need to prioritise healing,
nation building and continue to build understanding, tolerance and
reconciliation as part of the 20th commemoration of freedom and
democracy. The President emphasised that during the 2014-2019 government term
of office sport and culture will play a major role as unifying factors. In
addition, the President pointed out that government will continue to promote
inclusive heritage through building monuments and other symbols that honour the
heroes of the struggle that delivered the freed and democracy.
Since the beginning of the fifth parliament, the Committee
has been actively involved on oversight functions that seek to ensure that the
delivery of arts, culture and heritage services is accelerated and South
Africans enjoy the value of their diverse heritage. The Committee has
challenged entities of the Department to align themselves with strategic
priorities of government. These include alignment with the National Development
Plan (NDP): Vision 2030 and contribution to job creation. The Committee has
robustly engaged the Pan South African Language Board (PanSALB) in an attempt
to assist the Department to ensure that PanSALB fulfils its Constitutional
mandate.
The Committee acknowledges that the Department has a
pivotal role to play in realising the vision of the NDP. The Committee believes
that the amplification of the current programmes of the Department could
enhance the delivery of services and a delivery of a dream of a ‘better life
for all’.
The President has set the target to increase the
number of foreign visitor arrival to be more than 15 million annually by 2017
while setting the economic growth target at 5% by 2019. These targets require all
sectors of society to embark on various measures and interventions to create a
demand to visit South Africa and to jump-start the economy. This requires museums
to develop new attractive exhibitions and artistic products by performing and
visual arts institutions. The MGE strategy positions the sector to be a
catalyst in economic growth.
2. Overview of the key relevant policy focus areas
The following policy developments characterised
the sector during the 2013/14 financial year:
2.1.
South
African Language Practitioners’ Council Act
During the 2013/14 financial year the President
enacted the South Africa Language Practitioners’ Council Act (Act No. 8 of
2014). This legislation establishes a national public entity that will be
responsible for the promotion of language practice in South Africa and be a
professional body responsible for the accreditation of language practitioners
and development of the code of conduct for language practitioners.
2.2.
Review
of the 1996 Arts, Culture and Heritage White Paper
In accordance with the policy review report, the
Department initiated the review of the 1996 White Paper. The process has
culminated in a number of public consultations with stakeholders in the sector.
It is envisaged that a revised White Paper on Arts, Culture and Heritage will
realign the sector taking into consideration current needs of shared services, scarce
skills, compliance and excessive audit costs as well as demands of the 21st
century.
2.3.
Draft
National Museum Policy
Since the establishment of the Department of Arts, Culture,
Science and Technology in 1994 the issue of what constitutes a ‘national museum’
has been unclear. The draft national museum policy seeks to provide a framework
for the management of national museums in South Africa within the broader context
of heritage management and key government priorities. The policy has been
circulated for public consultation and the Department hosted a consultative
seminar.
2.4.
International
Agreements
In 2013 the National Assembly adopted the United Nations
Educational, Scientific and Cultural Organization (UNESCO) Convention on the
protection of underwater cultural heritage; the International Institute for the
Unification of Private Law (UNIDROIT) Convention on the stolen or illegally
exported cultural objects; and the 1999 second protocol to the 1954 Hague
Convention for the protection of cultural property in the event of armed
conflict. These conventions do not necessitate any legislative amendments.
However, the 1999 second protocol to the 1954 Hague Convention for the
protection of cultural property in the event of armed conflict requires that
sites of cultural property should not be used for military operations. In the
South African context the Castle of Good Hope in Cape Town hosts a cultural
property and a military operation. The Departments of Arts and Culture and
Defence should resolve this issue as it presents a potential threat to cultural
property in the event of armed conflict.
2.5.
Impact
of the National Development Plan, vision 2030
The NDP asserts that South Africans have made
significant progress in uniting the country since 1994. The end of apartheid
restored the dignity of all South Africans. It identifies shared history as the
basis of fundamental relationships that define us as South Africans. The NDP
presents this shared identity within the Constitutional framework as a social
compact that carefully defines our togetherness and accords rights and exacts
obligations to each of us. The work of the Department is central to the
implementation of Chapter 15, Transforming
Society and Uniting the County, of the NDP. The Department’s programmes of
nation building and social cohesion are directly aligned to the NDP. It has
also streamlined itself to respond to critical goals of the NDP. However, some
entities of the Department are still to align their strategic operations with
the goals of the NDP.
2.6.
Medium
Term Strategic Framework, 2014 - 2019
The Medium Term Strategic Framework (MTSF) defines the
strategic objectives and targets of government for the next five years. The
2014-2019 MTSF is based on the diagnostic report of the Planning Commission and
therefore grounded on the vision of the NDP. The Department has been assigned
with Outcome 14: Nation Building and Social Cohesion.
3. Summary of previous key financial and performance
recommendations of Committee
3.1.
2013/14 BRRR Recommendations
During the 2013/4 BRRR the
Committee made the following recommendations:
a)
Financial
Management & Governance
§ The Committee observed that there are huge funding disparities among
institutions whose mandate is similar. The Department should review its funding
formula with regards to funding of its entities;
§ The Department to prioritise the legislative review process in order to
streamline proper management of entities;
§ The Department to speed up the recruitment of the Chief Financial
Officer (CFO);
§ The Department to ensure that entities prioritise legislative
compliance;
§ The Department to develop a system to ensure that provinces spend
Conditional Grants allocated to them;
§ A Shareholder Compact between the Minister and entities should be clear
on the expected financial management outcomes;
§ For smaller entities the Committee has observed that it is sometimes
difficult to develop control measures that are required as there are sometimes
insufficient human resource capacity. The Committee recommends that the
Department consider establishing shared services while working on the
establishment of the flagships as recommended in the 2013/14 budget report
(Central Flagship and KwaZulu-Natal Flagship);
§
The
Department should develop a Road Map of Financial Compliance for the sector and
seek ways to reward financial compliance;
§
Where lack
of skills has been identified consistently, the Department in partnership with
affected entities should develop a Personal Development Plan which should
result in reskilling concerned personnel; and
§
The
Department and entities should develop clear guidelines and consequences of
non-compliance.
b) Performance Information and other related
§
The
Department to develop transversal performance indicators for its entities in
order to enhance its ability to measure value for money throughout the sector.
This would enable the Department to ensure that there is accurate
standardisation to rate performance of institutions while they can add their
own indicator based on their field of specialisation.
The Committee observes that the Department took some
of these recommendations seriously as the following has been achieved:
§ Both the draft review of the White Paper on Arts,
Culture and Heritage and the draft National Museum Policy seek to enforce the
notion of shared services within the sector;
§ The Department increased oversight visits to
institutions that had serious non- compliance challenges;
§ A Project Support Office was established to assist
provinces like Limpopo and Eastern Cape to fast-track the expenditure on the
conditional grant;
§ The Department worked closely with the National
Treasury to intervene where there were transgressions and instituted forensic
investigations; and
§ The Shareholder Compact includes expectations of
financial compliance and both the accounting authority and accounting officer
make commitments.
However, the Committee notes that the following key
recommendations were not implemented:
§ The position of the CFO has been vacant for over
four years and has still not been filled;
§ The Road Map for Financial Compliance for the
sector and the rewarding of financial compliance has not been developed; and
§ The Department has not been able to develop
specific skills development plans for entities that have staff in key positions
and they are unable to achieve their outcomes, e.g. the issue of skills deficit
was identified by the Auditor General as a key cause of non-compliance among
some entities.
3.2.
2014/15 Committee Budget Report
The Committee supported the 2014/15 budget of the
Department and its Annual Performance Plan (APP). It also supported the
strategic alignment of the Department’s programmes with the NDP. The following
recommendations were made during the 2014/15 budget report:
The Committee observes the following based on its
2014/15 budget report recommendations:
4. Overview and assessment of financial performance
Over the past years the Department has received an unqualified
audit opinion with matters of emphasis. It should be noted that despite the
audit opinion being unqualified, the amount of irregular, fruitless and
wasteful expenditure has been growing steadily. During the 2013/14 audit the
Department received a qualified audit opinion. The Committee observes that with
the exception of Robben Island Museum and Iziko Museums of South Africa which
received clean audits, there is a general regression in the audit outcomes as more
auditees received qualified opinions compared to the previous financial year.
Audit opinion |
2009/10 |
2010/11 |
2011/12 |
2012/13 |
2013/14 |
Clean |
6 |
6 |
6 |
8 |
9 |
Unqualified |
16 |
17 |
15 |
14 |
9 |
Qualified |
4 |
2 |
4 |
4 |
7 |
Adverse |
0 |
1 |
0 |
0 |
0 |
Disclaimer |
0 |
0 |
1 |
0 |
1 |
Figure 1: Audit history of the vote[1]
The
Committee observes that the National Film and Video Foundation, War Museum of
the Boer Republic, Artscape, KwaZulu-Natal Playhouse, Luthuli Museum,
KwaZulu-Natal Museum and Freedom Park have consistently received clean audits. The
Committee observes that five entities improved their audit findings (Robben
Island Museum and Iziko Museums of South Africa improved from unqualified with
finding to unqualified with no findings. William Humphreys Art Gallery, South
African State Theatre and South African Heritage Resources Agency improved from
being qualified to unqualified with findings). The Committee remains concerned
about the future of the Pan South African Language Board (PanSALB). As
indicated in Figure 1 above the entity received a disclaimer from the Auditor
General. During the recent oversight visit of the Committee it discovered that
the entity has not budgeted for the position of the Chief Executive Officer
(CEO) thus it cannot fill the post until the 2015/16 financial. This contravenes
section 36 (1) of the Public Finance Management Act (Act No.1 of 1999, as
amended) which requires that every department and constitutional institution
must have an accounting officer. The Committee is also concerned about the
oversight function of the Department since it approved the draft budget of PanSALB
which unfunded the CEO’s position. The Committee also observed that PanSALB is
in a serious paralysis phase that requires urgent consideration by the both
Parliament and the Department.
Figure 2: Audit outcomes in percentage
Irregular Expenditure
The Committee is concerned about the exponential
growth of irregular expenditure within the Department and its entities. Out of
the R2.9 billion appropriated budget of the vote, R225.6 million was incurred
as irregular expenditure. While the Committee cannot conclude that this funding
was spent on fraudulent activities, it is concerned by the Department’s and
entities’ failure to comply with the supply chain management procedures as this
could lead to potential fraud and corrupt activities. The Committee views
perpetual irregular expenditure with displeasure as it has a pernicious impact
on the public trust of the Department and its entities.
The Committee is concerned about the lack of internal
control mechanisms to disclose irregular expenditure and the ability by the
Department and its entities to disclose it accurately. Financial Statements of
the Department and its entities disclosed only R119.1 million as irregular
expenditure while the Auditor General discovered an additional R106.4 million
which the Department and its entities has failed to disclose.
Figure 3: History of Irregular
expenditure within the vote[2]
Fruitless and Wasteful
expenditure
The Committee notes the extent to which the
Department’s and its entities’ fruitless and wasteful expenditure has grown
over the past three financial years. While the vote had incurred R4.7 million in
fruitless and wasteful expenditure in 2011/12, by 2013/14 this amount had grown
to R9.3 million. The Committee is concerned that some of this money was paid
for among other things, services that were never rendered, Value Added Tax
(VAT) paid to non-VAT vendors and payment of traffic fines that should be paid
by perpetrators. In addition, the Committee is concerned about the Department’s
and its entities’ failure to disclose fruitless and wasteful expenditure
accurately. While the Department and its entities disclosed R3.7 million as its
fruitless and wasteful expenditure the Auditor General discovered an additional
R5.5 million.
Figure 4: History of Fruitless and
wasteful expenditure by the vote[3]
Non Compliance
The Auditor General has raised serious concerns with
regards to the quality of financial statements that are generated by the
Department and its entities. The AG postulates that had it not given auditees
an opportunity to correct financial statements, that fifteen auditees would
have been qualified instead of nine.
The Committee is concerned by the report of the AG
that the quality of annual performance reports has regressed if compared with
the previous financial year. While during the 2012/13 financial year only eight
auditees were identified not to have complied, during the 2013/14 financial
year the figure has increased to twelve. The root cause of non-compliance could
be appropriated to lack of skills within the sector, inability of the
accounting authority to exercise its oversight function, lack of peer
collaboration with the sector and non-appointment of the CFO of the Department.
Vacancy Profile
The Committee notes that the Department and its
entities have unfilled funded vacancies that are critical in delivery of
services. Four entities do not have CEOs while one entity has had its CEO
suspended and it has not been able to finalise the disciplinary process within
sixty days. While these posts are currently occupied by acting CEOs, with the
exception of PanSALB where there is no acting CEO, there is a risk that
appointed acting CEOs cannot function efficiently in these positions since they
still have to perform on positions they were originally contracted to.
Some entities take more than a year to fill a critical
position. The Luthuli Museum, for example, has taken more than two years to
fill a researcher’s position and more than a year to fill a curator’s position.
This has affected service delivery as performance targets for research, exhibitions
and education programmes were not achieved.
4.1.
Overview of 2013/14 Vote allocation and spending
Final Appropriation |
Actual Expenditure |
Variance |
% Spent |
|
|
R’000 |
R’000 |
R’000 |
% |
Administration |
258,068 |
258,068 |
- |
100% |
Performing Arts |
602,085 |
572,195 |
29,890 |
95% |
National Language Service |
134,616 |
134,616 |
- |
100% |
Cultural Development |
255,195 |
254,129 |
1,066 |
99.6% |
Heritage Promotion |
829,170 |
731,922 |
97,248 |
88.3% |
National Archives and Library
Services |
835,643 |
804,290 |
31,353 |
96.3% |
Grand Total |
2,914,777 |
2,755,220 |
159,557 |
94.5% |
Figure 5: Expenditure patterns
with the vote[4]
4.2.
Financial Performance 2013/14
The Committee notes that the Department spent 94.5% or
R2.7 billion of its appropriation. The Department reported an underexpenditure
of R159.5 million compared to R15.9 million in the 2012/13 financial year. The
major cause of under expenditure was mainly underperformance of capital works within
the Heritage Promotion programme. The Committee recognises the sterling work of
the Department with regards to the delivery of the library services through the
conditional grant. However, the Committee is concerned that despite these
strides Limpopo, Free State, Northern Cape, and North West provinces report an
excessive amount of under expenditure.
The Committee notes with
concerns expenditure delays in the Mzansi Golden Economy (MGE) projects. MGE is
a job creation catalyst, therefore any delays compromises the ability of
government to create a required number of employment opportunities. The
Department’s virement of R223.5 million (for MGE projects) is also concerning
as this questions the planning ability of the Department.
Personnel are a necessary expenditure in any
Department as staff drives the programmes of the government. However, there
needs to be constant awareness of the need to strike a balance between
expenditure on personnel and expenditure associated with core function and
other operational costs. The Committee further observed that there are certain
entities whose growth in personnel expenditure is disproportionate with
indicative subsidy growth. Some of these entities’ personnel expenditure
constitutes more than 80% of the total budget. If this scenario is not properly
managed it could result into a situation whereby their entire budget is spent
on personnel costs and this will have a negative impact on service delivery.
4.3.
Financial Performance 2014/15
The
Department has a 2014/15 available appropriation of R3.5 billion which
represents a nominal increase of R610 million, or 20 per cent, from 2013/14. Transfers and Subsidies account for R2.8
billion of the available budget.
At a Glance: Composition of Expenditure A total of 77.2 per cent of expenditure during the first quarter was
under transfers and subsidies and payments for financial assets, with the
remaining 22.8 per cent spent on departmental operations. Of operational expenditure, 32.7 per cent was on compensation of
employees, 64.9 per cent on goods and services, and 0 per cent on
interest and rent on land. 2.4 per
cent of expenditure was on payments to capital assets. |
|
Figure 6: Budget expenditure during the 1st quarter of
2014/16[5]
|
By the end of August
2014 the Department had expended R1.4 billion, 40%, of its appropriated budget.
This expenditure trend does not convince the Committee that the Department will
spend 100% of its budget given that the Department has a history of underspending
on capital works.
Thirteen entities that were studied demonstrate that there is a relatively
stable expenditure pattern which leans towards growth on personnel costs.
Freedom Park has spent over 22% of its total budget on personnel costs. Robben
Island Museum’s scenario is concerning. Its personnel costs are more than the
subsidy it receives from the Department. The Museum plans generate R74.5
million. While the Committee applauds such a business sustainability model it
is concerned about the risk level associated with it. What would happen if the Museum
is unable to generate its expected revenue? The Committee is concerned with the
expenditure patterns at the South African Heritage Resources Agency. By 30
September 2014 the entity had spent R31.6 million on personnel costs against
the budget of R46.4 million, excluding R20 million of the conditional grant.
5. Overview of service delivery ENVIRONMENT and FinancIAL
performance, 2013/14 & 2014/15
5.1.
Service Delivery Performance for 2013/14
The 2013/14 was characterised by the centenary commemoration of the 1913
Native Land Act. Many entities hosted programmes that were aligned to the 1913
Native Land Act. The Department further achieved the following:
5.2.
Service Delivery Performance for 2014/15
The Department has streamlined its microstructure and
this resulted in a subsequent reduction of its programme from six to four
programmes. The Committee holds a strong view that the Department and its
entities have a vital role to play in the transformation of the South African
society. While the Department and its entities find it difficult to achieve
performance targets it is mindful that more targets were achieved between April
to June 2014 compared to the same period during the 2013/14 financial year. The
Committee is concerned that job creation targets are not reported quarterly and
this hinders effective oversight by the Committee. This also has a potential to
prohibit the government from conducting mid-term monitoring on this performance
target.
6. Recommendations
In the light of the key performance issues raised in this report, the
Committee recommends the following:
a) The Department must spend 100% of its appropriated
budget;
b) The Department should ensure that the CFO and
National Archivist positions are filled by not later than 31 March 2015;
c) The Department to report quarterly to Parliament on
its job creation target;
d) The Department to consider tapping into the Expanded
Public Works Programme -Environment and Culture sector, to create additional
job opportunities in the sector;
e) The Department to develop customised national
indicators for entities to ensure that government strategic goals are met;
f) The Department to consider a Cultural Season with
African countries in light of South Africa being signatory to African Charter
on Cultural Renaissance;
g) The Department should consider repositioning the
National Archives in a manner that makes it more effective, efficient, visible and
accountable;
h) The Department to forge intergovernmental
relations that enables entities to work with provincial departments that are
responsible for cultural affairs;
i) The Department to reprioritise its Medium Term
Expenditure Framework to ensure that entities that serve the needs of disable
citizens are properly maintained;
j) The Department to initiate inter-departmental peer
assistance programmes to enable experienced and well-resourced institutions to
assist fledgling entities;
k) The Department should assist the Board of PanSALB to
appoint a CEO and a CFO and resolve the institutional paralysis at PanSALB with
immediate effect; and
l) The Department must continue to strengthen
internal controls and work towards eliminating irregular, fruitless and
wasteful expenditure incurred within the Department and its entities.
7. Appreciation
The Committee thanks the support of the Department and
entities that worked hard to produce documents that were required to generate
this report.
Report to be considered.
a
[1]Presentation by the
Auditor General of South Africa to the Portfolio Committee on Arts and Culture,
Parliament of the Republic of South Africa, Cape Town, 14 October 2014.
[2] Presentation by the Auditor General of South
Africa to the Portfolio Committee on Arts and Culture, Parliament of the
Republic of South Africa, Cape Town, 14 October 2014.
[3]Presentation by the
Auditor General of South Africa to the Portfolio Committee on Arts and Culture,
Parliament of the Republic of South Africa, 14 October 2014.
[4] Presentation by the Acting Director General of
the Department of Arts and Culture to the Portfolio Committee on Arts and
Culture, Parliament of the Republic of South Africa, Cape Town, 14 October
2014.
[5] Standing Committee on Appropriation, 1st
Quarterly Expenditure Report-2014/15 Financial Year (2014, p. 62).