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Presentation to The Social Development Portfolio Committee Parliament

This presentation provides an overview of the National Development Agency's performance against targets, annual financial report, and projects report. It also discusses the challenges and corrective measures taken to address them.

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Presentation to The Social Development Portfolio Committee Parliament

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  1. Presentation to The Social Development Portfolio CommitteeParliament Cape Town8 November 2006

  2. 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

  3. 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

  4. 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 NDA’s 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.

  5. 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.

  6. BACKGROUND • No properly updated database of NGO’s and CBO’s 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.

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

  8. 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.

  9. POVERTY STATISTICS Table 1. Poverty Distribution by Province Poverty Distribution by Province

  10. 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

  11. 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)

  12. 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

  13. 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 CEO’s performance agreement with the Board.

  14. PERFORMANCE AGAINST TARGETS • Significantly, the organisation has achieved over eighty five percent (85%) of its targets in terms of the CEO’s performance agreement with the Board. • When measured against the original strategy, over sixty percent (60%) of targets were met or partially met.

  15. ANNUAL FINANCIAL REPORT • The report will cover • Statement of Financial Performance • Statement of Financial Position • Report of the Auditor-General

  16. STATEMENT OF FINANCIAL PERFORMANCE 2006 2005 INCOME 172 713 532141 376 167 Grant 121 482 000 125 587 590 Interest 15 816 471 13 831 372 Other 35 415 061 1 957 205 EXPENDITURE124 062 814156 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 71714 851 331

  17. 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 ASSETS261 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 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 STATEMENT OF FINANCIAL POSITION

  18. 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; REPORT OF AUDITOR-GENERAL

  19. 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. REPORT OF AUDITOR-GENERAL

  20. 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. 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. REPORT OF AUDITOR-GENERAL

  21. 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 REPORT OF AUDITOR-GENERAL

  22. 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. REPORT OF AUDITOR-GENERAL

  23. PROJECTS REPORT Grant Trends / Allocations to the NDA

  24. PROJECTS REPORT NDA Funded Projects for the Year Ended 31 March 2006 • Commitments R68.7 million • Disbursements R62.0 million • Number of projects 104

  25. PROJECTS REPORT South African Government Grant Commitments: 2005/6

  26. 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.

  27. HUMAN RESOURCES Executive EE Distribution at 31 March 2006

  28. 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:

  29. 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

  30. 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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