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PRESENTATION TO PORTFOLIO COMMITTEE ON SOCIAL DEVELOPMENT 01 MARCH 2011

PRESENTATION TO PORTFOLIO COMMITTEE ON SOCIAL DEVELOPMENT 01 MARCH 2011. Purpose of the Presentation. The purpose of this presentation is to present to the Portfolio Committee the 2009/10 Annual Report for SASSA Financial and service delivery challenges

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PRESENTATION TO PORTFOLIO COMMITTEE ON SOCIAL DEVELOPMENT 01 MARCH 2011

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  1. PRESENTATION TO PORTFOLIO COMMITTEE ON SOCIAL DEVELOPMENT 01 MARCH 2011

  2. Purpose of the Presentation • The purpose of this presentation is to present to the Portfolio Committee • the 2009/10Annual Report for SASSA • Financial and service delivery challenges • Short and long-term measures to deal with challenges

  3. Outline of the presentation • The presentation covers the following: • Part 1: Overview • Part 2: Performance Information • Achievements against 2009/10 Strategic Priorities • Service Delivery Challenges • Part 3: Financial Management • Budget and Expenditure for 2009/10 • Financial and administration challenges • Part 4: Audit Outcomes • Action Plan to address Audit Challenges

  4. Overview

  5. Background • The year under review 2009/10 was characterized by the following: • SASSA was grappling with huge deficit for the previous year of about R839m and overdraft of approximately R410m as at 31 March 2009. • The Agency had to maintain a balance between improving service delivery and reducing the budget deficit • SASSA also had to migrate from a modified cash to accrual basis of accounting, while changing from legacy systems(BAS, Persal and Logis) to an Enterprise Resource Planning (Oracle) system

  6. Background cont …. • There has been an increase in the demand for services which has been exacerbated by the following: • Significant growth in the number of social assistance benefits from 3.2 million in 1998 to 14 million in 2010 • Marginal growth in number of employees dealing directly with grants administration vs. the significant growth in demand for services. • SASSA’s social assistance system has remained largely manual. • Investment in systems infrastructure has not materialised due to budgetary constraints.

  7. Highlights 2009/2010 • We have increased the number of social grants by 7.5% from about 13m in 2008/09 to just above 14m in 2009/10 • 10 million are child benefits; • 2.5m are older persons; and • 1.26m are people with disabilities. • The average number of transactions that SASSA dealt with during this financial year increased from about 3.7m in 2008/09 to approximately 4,6m in 2009/10, excluding payments. • The deficit for the year reduced by half compared to last year and we reduced irregular expenditure from about R69m in the previous financial year to just below R2.6 m

  8. Grant Uptake for Financial Years 2007/08 to 2009/10 • In 2009/10, there was an increase of 1,031,261 in grants uptake which represents a growth rate of 7.5% • There is a decrease in the uptake of disability and war veterans grants • The decrease in DG is due to intensive review process which led to 90% reduction in temporary disability-grant backlogs

  9. Strategic Prioritiesfor 2009/10 • Priorities for the year under review: • Customer Care-centred Benefits Administration and Management System; • Improved Organisational Capacity; and • Comprehensive and Integrated Social Security Administration and Management Services.

  10. Achievements Against 2009/10 Strategic Priorities

  11. PRIORITY 1 Customer Care-centred Benefits Administration and Management System

  12. Policy and Legislation on Social Assistance implemented • Achieved an increase of 1,031,261 in grants uptake which represents a growth rate of 7.5% • There was a decrease in total disability and war veterans grants by about 121,000 and 424 respectively • The decrease on disability grants is largely due to intensive review and lapsing of temporary disability grants

  13. Implementation of Policy and Legislation on Social Assistance Age Equalisation • The target was to reach 129 662 men aged 61 and 62 by 31 March 2010. • In total 100,358 males in this age group 61 and 62 are in receipt of older persons grants, which represents 77.4% of the target. • Partial achievement of this target could be due to a number of reasons including lack of IDs, inadequate marketing of new reforms, accessibility of our offices Gradual Expansion of CSG • The target was to extend the CSG to about 970,369 above the age of 14 years. • A total of 673 553 children over the age of 14 are in receipt of CSG, which represents 69.4% of the target. • Non-achievement of this target was due to the fact that effective date of implementation was planned to be April 2009 but the actual implementation date was finally 1 October 2009.

  14. Automated Core Business Systems • The target was to develop and implement the following systems: • Improved Grant Application Process (IGAP), Management Information System (MIS) and ERP • IGAP • The target for implementing IGAP in five regions proved to be unrealistic due to insufficient budget allocation. • Implementation of full IGAP is still limited to one region in Free State; • Conducted readiness assessments in all regions. • MIS • Implemented the MIS registry module in all regions which improved decision-making and accountability • MIS Interface with other government institutions was not achieved due to failure to reach corporate agreement with key Departments. • ERP • ERP system was fully implemented, however i-modules could not be rolled out to regions due to the magnitude and complexity of the work to be done.

  15. Beneficiary Maintenance • Target: – to increase percentage of beneficiaries notified of administrative actions and to improve systems for administration and management of reviews • 97.9% of the targeted beneficiaries were notified of administrative actions prior to lapsing of grants • The development of computerized data quality management systems was not achieved due to lack of funds to acquire external expertise. • Implementation of internal review mechanism could not be implemented due to delays in approval of legislation.

  16. Comprehensive Payment Management System • The Comprehensive Payment Management Framework was developed and approved but not fully implemented due to litigation challenges. • Consequently, the Agency is revising its approach to improve payment system in South Africa. • In addition, the Agency implemented a strategy to promote electronic payments as alternatives to cash payments, where infrastructure exists. The project led to: • 23.4% reduction in cash payments from 6.3 million to 4,8 million; • ACB payments almost doubled from 1.9m in April 2009 to 3.8m in March 2010

  17. Six targeted regions implemented the prioritized elements of the Disability Management Model which include the gate keeping, medical assessment and medical form modules and this resulted in substantial savings for the agency Decreased temporary disability grant application significantly by implementing the three months waiting period before reapplication; In order to minimise fraud with the processing of disability grants, the Agency introduced Medical assessment forms with serial numbers. Implementation of Disability Management Model

  18. Customer Relationships Management Strategy • Planned to develop and implement the prioritised elements of the Customer Relationship Management and the Integrated Community Registration Outreach Programme (ICROP) • Customer Relationship Management – although the strategy was not approved, some critical service delivery initiatives were implemented in some local offices to improve customer experience. These include • Enquiry management, queue management, customer care charter, booking system and capacity building on bathopele principles • Development of ICROP Strategy not achieved, however • Services were taken closer to potential beneficiaries, especially to those in the deep rural areas using mobile units • All regions together with other critical government departments have implemented community outreach programmes through participation in the Premier’s Outreach Programme

  19. Service Delivery Model • Developed the draft service delivery model, to be finalised in 2010/2011.

  20. PRIORITY 2 Improved Organisational Capacity

  21. Improved Organisational Capacity • Under this priority, the objective was to enhance the Agency’s efficiency and improved access to its services. • Development and approval of most internal control policies was achieved, however, there is still more work to be done in implementing some of these policies. • Improved access to SASSA services: • Most local offices and pay points are accessible to beneficiaries; although there are still challenges. • Invested in infrastructure improvement at various pay points across country; • Continued with efforts to market SASSA’s services .

  22. Improved Organisational Capacity • Approval of the Corporate compliance and integrity Policy was delayed due to consultations with staff • Implemented benefits verification elements of the integrity model : • 1,994 grant beneficiaries were verified for eligibility and existence. • 7,440 grant investigations conducted ; • 3,454 people taken to court for grant fraud; • 314 inspections conducted • Implemented Corporate Compliance Model six regions • 91 inspections were conducted in six regions

  23. Improved Organisational Capacity • Litigation • Implemented the litigation strategy resulting in: • Reduced number of litigation cases from about 15 212 in 2008/09 to approximately 2 735 cases; • Reduced litigation costs from about R40m to R20m • Financial management • Migrated from cash to Accrual basis of accounting • Reviewed and Implemented financial controls, policies and procedures in line with GRAP standards

  24. A zero tolerance approach to misconduct has been adopted leading to 191 cases finalized and varying sanctions imposed Challenges have been identified around the management of poor performance and consequently Individual Poor Performance Management Guidelines were developed to capacitate supervisors; In Order to maintain healthy lifestyle and to encourage a wellness culture the following initiatives were implemented: Voluntary Testing and Counselling where 700 (10%) of the total staff complement participated; Financial Management programmes were implemented to address budgeting and debt management skills for individual employees; Health Screening programmes conducted to detect and treat diseases which include blood pressure, cholesterol, sugar screening, HIV and AIDS Human Resources Management.

  25. Fraud Management • Implemented Fraud Management Strategy which resulted in a saving of R180, 9 million • 3,454 fraud cases were investigated representing 115% achievement;; • Over 32 687 fraudulent grants were removed from the system in the financial year; • 223 inspections and 1,260 grant verification completed; • 3 797 social grant fraud cases were brought before the courts and 3,491 were finalised with 3,345 convictions; and • 8,383 persons signed acknowledgement of debt (total value R51.2m) • Developed and implemented an annual Internal Audit Coverage Plan, which clearly articulates the areas of focus for the financial year

  26. SERVICE DELIVERY CHALLENGES

  27. The following are some of the service delivery challenges the Agency has been experiencing: Service Points Overcrowding at service points due to Sleepovers and early arrivals at service points; Long waiting periods in waiting rooms Repeat visits by clients; and Lack of adequate office accommodation Payment Services : Poor conditions of some of our paypoints A large number of the pay points do not provide humane basic facilities; Most rural pay points require urgent infrastructural attention; and there are still reported cases of exploitation of beneficiaries by merchants and money lenders. Grants administration challenges

  28. Record Management The physical infrastructure of some of our registries do not meet the requirements of the OHSA There is a lack of adequate filing space, resulting in multiple registries which also carries a cost implication Missing files and other critical documentation Reviews We have significant backlogs in reviews and life certificates resulting in over payments to non-eligible beneficiaries Sending of notification letters is very costly Management of reviews is time-bound which results in staff focusing on the reviews instead of new applications The dependency on the DSD and the DoJ results in either continuing to paying a grant without a mandate or suspending payment leaving vulnerable children without support. Grants administration challenges

  29. FRAUD MANAGEMENT: The nature of SASSA business lends it to be vulnerable to a high risk of fraud and corruption. The lack of interdepartmental collaboration, collusion of staff and lack of online interfaces has resulted in an environment where fraud flourishes; and Given the perceived inability of SASSA to successfully deal with the fraud challenges have resulted in a loss of credibility. Grants administration challenges

  30. Social Assistance TransfersBudget and Expenditure 2009/10

  31. Comments on Grants, SRD and Adjustment Estimates: 2009/10 Social Assistance expenditure for 2009/10 amounted to R79,259 billion. Social Assistance and SRD expenditure highlighted a saving of R1 billion. There were no budget adjustments for 2009, as a result of savings of R1 billion in the 2009/10 financial year, driven largely by the lack of adequate administration budget and lack of reaching additional beneficiary targets given legislative changes Actual SRD expenditure amounted to R165 million The rollover request for R52 million to fund previous year SRD commitments was approved (in full). 38

  32. Expenditure: 2009/10 (Social Assistance and SRD) 39

  33. Adjustment Estimates: 2009/10 (Social Assistance and SRD) 40

  34. Budget Allocation: 2009/10 (SRD with in-year shifts) 41

  35. AG findings And Progress Report Transfers to households budget (Social Grants)

  36. Background • The Agency together with DSD got a qualified audit opinion for the 2009/2010 financial year due to scope limitation on the transfers to households budget. • The Agency in consultation with DSD, Treasury and AG’s office developed a three year action plan to rectify all the discrepancies identified during the 2009/2010 Social Grants Audit. • Of the R545million Budget Bid submitted to National Treasury on the automation of grants application, approval and filing (or record management) the Agency was allocated R535million.

  37. Audit Findings • Exceptions noted during the 2009/10 FY covered the following: • Scope Limitation related to the following: • Missing Files - 545 076 • Missing Critical Documents - 159 302 • Non Performance of Grants Reviews • Lack of Accountability on the Social Relief of Distress • Poor Management of Grant Debtors

  38. Progress achieved against set targets

  39. Comments on progress achieved • All the exceptions noted during the audit are receiving the necessary attention. • However, a significant amount thereof has been resolved. • All outstanding matters will be resolved by 15 March 2011.

  40. SASSA AdministrationBudget and Expenditure 2009/10

  41. 2008/09 – 2010/11 Budget vs. Expenditure 48

  42. 2009/10 Preliminary Expenditure Report per Economic Classification

  43. 2008/09 – 2010/11 SASSA Administration Budget & Expenditure The Administration budget for SASSA has grown a total of 12% from R4,6 to R5,2 billion between 2008/09 and 2009/10 The total expenditure against budget has decreased from 18% over budget in 2008/09 to 10% over budget in 2009/10. The Budget vs Expenditure table depicts that over both the financial years the Agency have been overspending on its allocated budget. The Agency halved the overspending from R839 million reported during the 2008/09 financial year to R490 million due to turnaround strategy interventions which came as a result of Cash Stabilization measures including: Austerity Measures Promotion of electronic payment channels (banks) for social assistance grants beneficiaries Reduction in disbursement fees per beneficiary charged by CPC’s 50

  44. 2008/09 – 2010/11 SASSA Administration Budget & Expenditure Key cost drivers were handling fees (CPC’s), shared services and litigations. For the year under review 44% was spent on CPC’s, 26% on personnel and 25% on Other Operating expenses The major spending within other operating expenditure includes: Leases at R229 million - 15% of total other expenditure Security at R105 million - 7% of total other expenditure Cleaning at R34 million - 2% of total other expenditure Travel and Subsistence at R77 million - 5% of total other expenditure Communication at R103 million - 7% of total other expenditure The Agency is projecting a surplus of approximately R426 million in the 2010/11 financial year due to Cash Stabilization initiatives presented in previous slide The surplus will reduce the accumulative deficit. The performance related rewards for senior management service members as reflected in the annual report represent their service bonus and not performance incentives. 51

  45. Auditor-General Report Comments and Progress on SASSA Administration budget

  46. AUDIT 2009/10 AG FINDINGS The Auditor General issued a Disclaimer Opinion as they were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion Audit Findings included: Late Submission of Financial Statements Inadequate systems and record keeping Financial Administration Material misstatement on sub-ledger accounts resulting in incorrect expenditure, assets and liability reporting on the AFS Incorrect or non-application of the basis of accounting, GRAP standard Incorrect or no provision for significant liabilities, in particular legal fees 53

  47. LATE SUBMISSION • The South African Social Security Agency only submitted its financial statements for auditing on 10 August 2010 and not on 31 May 2010, as required by the PFMA. • The reason for the late submission was: • The extension of 3 years granted by National Treasury proved to be insufficient to ensure readiness for the implementation of GRAP accounting and reconstruction of all prior year comparative figures • During the year under review the Agency changed from modified cash to Accrual accounting together with implementing the new Oracle ERP system which resulted in reconciliations not performed as some modules were implemented late.

  48. The Agency have developed and implemented an action plan against the audit findings of the AGSA with monthly progress reports to DSD, the AG and the Minister; The Agency have appointed an accounting firm to assist with financial management for a period of one year; The Agency has reviewed and amended policies and procedures and established structures to monitor the implementation there-of Specific focused training on both the system and accrual basis of accounting principles have been and are continued to be provided to staff SHORT TERM INTERVENTION

  49. EXCO approved a skills audit for the whole Finance Branch in particular the Supply Chain Management environment; The Agency has identified a need for new posts to be filled and some of the posts are already advertised in order to recruit employees with accrual accounting skills in specific areas of the Finance Branch such as, cash and banking, inventory, assets and financial reporting; The Agency is busy implementing in-house Change Management initiatives for the Agency as a whole. SHORT TERM INTERVENTION (cont.)

  50. Completion of the restructuring of the Finance Branch in line with the rest of the Agency; Professionalization of the Finance Branch (registration with professional bodies such as IPFA, SAIPA, SAICA etc.); Based on the outcome of the skills audit recommendation we intend to continue with reskilling our current employees whiles at the same time we re-deploy , create environment for job-rotation Ensure that we provide bursaries for under graduates qualifications working together with various auditing firms and professional bodies such as (IPFA,SAICA, SAIPA etc.) Develop and implement a retention and succession strategy. LONG TERM INTERVENTION

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