Annual Report 2009/10 Presentation to the Select Committee 15 February 2011

Annual Report 2009/10 Presentation to the Select Committee

15 February 2011

Purpose of the Presentation

• The purpose of this presentation is to present to the Select Committee:

– the 2009/10 Annual Report for SASSA; and

Outline of the presentation• The presentation covers the following:

– Overview;

– Achievements against 2009/10 Strategic Priorities;

– Budget and Expenditure for 2009/10;

– Challenges; and

– Action taken to remedy the challenges.

Overview

Background

• SASSA was established as a Schedule 3A Public Entity in April 2006 to transform social security in South Africa.

• Since SASSA’s establishment there has been a steady increase in the demand for services and subsequent increase in the workload of its staff.

• In the year under review over 14 million benefits are payable to over 8 million beneficiaries.

• The average number of transactions that SASSA deals with per annum is 4,680,675 excluding payments.

(No is only limited to what is processed on SOCPEN)

Background cont ….

• The challenges resulting from increased demand for services have been exarcerbated by the following

– Marginal growth in number of employees dealing directly with grants administration vs. the significant growth in demand for services. (Beneficiary to staff ratio has consistently increased).

– SASSA’s social assistance system has remained largely manual.

– Investment in systems infrastructure has not materialised due to budgetary constraints.

– Significant growth in the number of social assistance benefits from 3.2 million in 1998 to 14 million in 2010

Mandate

• SASSA derives its mandate from the following Acts:

• The Constitution of the RSA, 1996 (Act No.108 of 1996); “Everyone has the right to have access to Social Security,

including, if they are unable to support themselves and their dependants, appropriate social assistance”

• Social Assistance Act, 2004 (Act No.13 of 2004); “Everyone has the right to have access to Social Security,

including, if they are unable to support themselves and their dependants, appropriate social assistance.”

• South African Social Security Agency Act, 2004 (Act No.9 of 2004); One of the key objects of this Act is for SASSA to” act, eventually,

as the sole agent that will ensure the efficient and effective management, administration and payment of social assistance.”

Vision

“A comprehensive socialsecurity services that assists people in being self sufficient

and supporting those in need”

Mission To manage quality social security services to eligible and

potential beneficiaries, effectively and efficiently.

Strategic Priorities

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.

Achievements Against 2009/10 Strategic Priorities

PRIORITY 1 Customer Care-centred Benefits Administration and Management

System

Overall Achievements• Over 8 million South Africans receive over 14

million social assistance benefits10 million are child benefits; 2.5m are older persons; and 1.3m are people with disabilities.

• The number of people receiving grant increased from about 13m in 2008/09 to just above 14m in 2009/10, which represents a growth of 7.5%

Grant Uptake for Financial Years 2007/08 to 2009/10

Grant type 2007/08 2008/09 2009/10 Difference% Growth

RateDisability Grant 1,408,456 1,286,893 1,264,477 -121,573 -1.7

Old Age 2,229,550 2,390,543 2,546,657 160,993 6.5

War veterans 1,924 1,500 -284 -424 -18.9

Care Dependency 102,292 107,065 110,731 3,666 3.4

Child Support 8,189,975 8,765,354 9.570,287 804,933 9.2

Foster Child 454,199 474,759 510,760 36,001 7.6%

TOTAL 12,386,396 13,026,104 14,057,365 1,031,261 7.5Grant in Aid 37,343 46,069 53,237 7,168 15.6

• 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

New Policy ReformsAge Equalisation • The target was 100% of all men aged 61 and 62 by 31 March 2010

– In total 100,358 males in this age group 61 and 62 - are now receiving grants for older persons.

– This represents 77.4% of the target of 129,662 for the year under review.

– Achievement of targets were negatively affected by inadequate human resources

• Gradual Expansion of CSG – Implemented the extension of the Child Support Grant (CSG) to

children from 1 January 2009;– A total of 673 553 children over the age of 14 are in receipt of

CSG– This represents 69.4% of the target of 970,369.– Achievement of targets were negatively affected by delays in the

actual budget allocation –which impacted on implementation date.

Disability Management Model

• Six targeted regions implemented the prioritized elements of the Disability Management Model;

• Implemented the gate keeping, medical assessment and medical form modules which 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.

Improved Grants Payment System

• The Agency implemented a strategy to promote electronic payments as alternatives where infrastructure exists.

• The project led to:– 23.4% reduction in cash payments from R 6.3 million to R 4,8

million; – ACB payments almost doubled from R 1.9m in April 2009 to

R 3.8m in March 2010.

• Standardised service level agreements with Cash payment providers;

• The Agency is also working on long term strategy to improve payment system in South Africa.

Automated Core Business Systems• Continued to improve the Grant Application system to fast track the

grant application process:– Implementation of full IGAP still limited to one region in Free

State; and– Conducted readiness assessments in all eight regions.

• Introduced systems to restrict access to the SOCPEN system so as to minimise fraud;

• Implemented the Management Information system (registry module) in all regions which improved decision-making and accountability;

• Standardised the application and review processes.• Complete roll out of IGAP not achieved due to budgetary

constraints.

Automated Core Business Systems

• Implemented the Enterprise Resource Planning system – which will facilitate compliance to Accrual basis of accounting – although challenges experienced during reporting period;

• Developed an ICT service delivery infrastructure network to support the grants administration and payment processes.

Beneficiary Maintenance

• 97.9% of beneficiaries were notified of administrative actions prior to lapsing of grants

• Lapsing done at Head Office to reduce delays and addressing regional capacity problems;

• Services were taken closer to potential beneficiaries, especially to those in the deep rural areas, through the Integrated Community Registration Outreach Programme (ICROP)• All regions together with other critical government departments have

implemented ICROP through participation in the Premier’s Outreach Programmes

• As a result of ICROP beneficiary numbers increased by 42,194 and 3, 824 beneficiaries were assisted with SRD;

• Additional services rendered include enquiries, reviews, life certification, payment method changes, amendment of beneficiaries financial information, reconstruction of files and collection of missing documentation.

PRIORITY 2 Improved Organisational

Capacity

Improved Organisational Capacity

• Although the Agency was encumbered by a number of challenges, there has been continuous improvement in the way the Agency operates.

• Improvement in access to SASSA services: – Most local offices and pay points are accessible to beneficiaries; – Investment in the development and acquisition of systems and

infrastructure was made to enable the Agency to improve access to social grants;

– Invested in infrastructure improvement at various pay points across country;

– Used of various media to market SASSA’s services .

Improved Organisational Capacity

• 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)

Improved Organisational Capacity• Financial management

– Migrated to Accrual based accounting– Reviewed and Implemented financial controls, policies and

procedures in line with GRAP standards

• Developed a Corporate compliance and integrity model and 91 inspections were conducted in nine regions– Implemented Integrity Model –

• 734 grant beneficiary files were verified and • 3,986 grant investigations completed

• Developed and implemented an annual Internal Audit Coverage Plan, which clearly articulates the areas of focus for the financial year

Budget and Expenditure for 2009/10 (Social Assistance Transfers)

29

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/ underspending of R1 billion in the 2009/10 financial year, driven largely by

the lack of additional adequate administration budget despite new additional policy and legislative requirements

Savings due to suspension and lapsing of grants.

Comments on Grants, SRD and Adjustment Estimates: 2009/10

• Actual SRD expenditure amounted to R165 million

• The roll-over request for R52 million to fund previous year SRD commitments was approved (in full)

• A total of 13,921 million beneficiaries were paid.

Expenditure: 2009/10 (Social Assistance and SRD)

GRANT TYPE

ADJUSTED BUDGET

ALLOCATION R millions

EXPENDITURE

R millions

SAVINGS(+)/ DEFICIT (-)

R millionsOld Age 30,141,044 29,925,939 215,104War Veterans 22,626 16,754 5,871Disability 17,074,558 16,613,249 461,308Foster Care 4,491,348 4,434,441 56,906Care Dependency 1,509,904 1,434,143 75,761Child Support

Grant 27,008,825 26,669,761 339,064

SUBTOTAL 80,248,306 79,094,287 1,154,019

Relief of Distress 184,412 165,458 18,954

TOTAL 80,432,718 79,259,748 1,172,970

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

GRANT TYPE ORIGINAL BUDGET

ALLOCATION(R millions)

ADJUSTED BUDGET

ALLOCATION(R millions)

Old Age 30,141,044 30,141,044

War Veterans 22,626 22,626

Disability 17,074,558 17,074,558

Foster Care 4,491,348 4,491,348

Care Dependency 1,509,904 1,509904

Child Support Grant 27,008,826 27,008,826

SUBTOTAL (-R80m) 80,248,306 80,248,306

Relief of Distress (+R52m) 132,000 184,412

TOTAL 80,380,306 80,432,718

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

Grant Type

ORIGINAL BUDGET

ALLOCATION 2009/10Rands

SHIFTING 1

Rands

SHIFTING 2

Rands

ADJUSTED ORIGINAL

BUDGET FOR 2009/10Rands

Eastern Cape 24,671,812 2,901,066  27,572,878

Free State 9,205,237   9,205,237

Gauteng 15,925,434 31,506,224 5,000,000 52,431,658

KwaZulu Natal 29,595,836  8,593,221   38,18,792

Limpopo 16,825,836  6,654,301 -5,000,000 18,390,137

Mpumalanga 8,719,831 2,847,188 11,567,019

Northern Cape 6,488,077 6,488.077

North West 10,686,124   10,686,124

Western Cape 9,882,078     9,882,078

Total 132,000,000 52,412,000 - 184,412,000

Expenditure: 2009/10 (Social Assistance and SRD)

GRANT TYPEACTUAL NUMBER OF

BENEFICIARIES PAID PER GRANT TYPE

Old Age 29,925,939War Veterans 16,754Disability 16,613,249Foster Care 4,434,441Care Dependency 1,434,143

Child Support Grant 26,669,761

TOTAL 79,094,289 TOTAL numbers for March 2010 13,921,525

Budget and Expenditure for 2009/10 (Financial Administration)

2008/09 – 2010/11 SASSA Administration Budget & Expenditure for Comments• The Administration budget for SASSA has grown from R4,6 to R5,2

billion growing with 12% and 9% respectively.• The Administrative expenditure against budget has decreased from 18%

over budget to 7% under budget. • The Budget vs Expenditure table depicts that since 2008/09 the Agency

has been overspending on its allocated budget. The total deficit being R839 million.

• The Agency halved the overspending from R839 million reported during the 2008/09 financial year to R490 million due turnaround strategy interventions which resulted in Cash Stabilization. Expenditure has decreased by 5% over the two financial years.

• The major overspending was on handling fees (CPC’s), shared services and litigations.

• The Agency is projecting to save R426 million in the current financial year mainly as a result of reduction in disbursement fees per beneficiary charged by CPC’s

• The savings will be offset against the existing deficit.

2008/09 – 2010/11 Budget vs. Expenditure

2008-09 2008-09 ACTUAL 2009-10 2009-10 ACTUAL 2010-11 ANNUAL ACTUALBUDGET EXP. AS % BUDGET EXP. AS % BUDGET FORECAST AS %

R'000 R'000 BUDGET R'000 R'000 R'000 R'000 BUDGETREVENUEGrants Received 4,630,292,000 4,630,292,000 100% 5,168,896,000 5,168,896,000 100% 5,611,388,555 5,631,400,000 100%Commission Received - - - - - 656,000 Interest Received: Debtors - 350,866 - 277,484 - Other Operating Revenue - 10,701,868 - 12,855,977 - 7,713,000 Previous Year - - - - - TOTAL REVENUE 4,630,292,000 4,641,344,734 100% 5,168,896,000 5,182,029,461 100% 5,611,388,555 5,639,769,000 101%

EXPENDITUREPersonnel 1,340,014,880 1,339,440,578 100% 1,478,347,990 1,499,091,000 101% 1,673,665,879 1,658,661,000 99%Administrative 722,435,807 670,553,016 93% 92,577,358 91,476,541 99% 92,068,540 73,126,000 79%Transfers and Subsidies 18,054,498 17,789,227 99% 16,313,674 12,536,507 77% 18,378,200 18,425,000 100%Audit Fees 10,505,000 9,395,773 89% 20,349,591 9,445,884 46% 11,397,000 11,397,000 100%Depreciation - 44,359,841 - 51,149,690 - 58,130,000 Payment Contractor Fees 1,854,732,463 2,397,371,197 129% 2,439,789,345 2,536,470,905 104% 2,628,258,400 2,302,058,400 88%Inventories 44,056,527 58,931,699 134% 38,947,918 24,590,000 63% - - Other Operating Expenses 496,703,583 731,586,934 147% 1,067,622,182 1,433,153,240 134% 1,170,152,442 1,054,503,507 90%TOTAL EXPENDITURE 4,486,502,758 5,269,428,265 117% 5,153,948,058 5,657,913,766 110% 5,593,920,461 5,176,300,907 93%

PPE 143,789,242 211,307,984 147% 14,948,697 14,993,630 100% 37,468,093 37,468,093 100%

TOTAL EXPENDITURE 4,630,292,000 5,480,736,249 118% 5,168,896,755 5,672,907,396 110% 5,631,388,554 5,213,769,000 93%(839,391,515) (490,877,935) 426,000,000

DESCRIPTION

2009/10 Preliminary Expenditure Report per Economic Classification

AUDIT 2009/10

AG’s FINDINGS• 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

• Reporting• Non performance based budgeting• Inefficient and inconsistent monitoring and reporting methods and

processes• Inadequate systems and record keeping• Lack of leadership

AUDIT 2009/10 cont. REASONS

• Lack of source documentation which lead to scope limitations raised by the AG generally across board in the Agency

• Implementation of the Oracle system which lead to • Different processing of data and reconciliation process requirements• Lack of regular standard reports used for monitoring and evaluation of Agency

performance• Lack of skilled resources and understanding of system from staff as a whole

• Migration from cash to accrual accounting which lead to • Non reconciliation of control accounts• Incorrect or no provision for liabilities• Lack of skilled resources and understanding of accounting standard from staff as a

whole

• AG lack of understanding on newly implemented Oracle system which lead to

• Information requests in an unfamiliar and inconsistent format, in particular batch formatting causing serious delays and identification of source documentation

AUDIT 2009/10 cont.

SHORT TERM INTERVENTION • Development and implementation of the action plan against the audit

findings of the AGSA;• Appointment of an accounting firm to assist the Agency for a period

of one year;• Skills audit for the Finance Branch in particular in the Supply Chain

Management environment;• Recruitment of employees with accrual accounting skills for specific

areas in the Finance Branch such as, cash and banking, inventory, assets and financial reporting;

• Specific focused training on both the system and accrual basis of accounting principles for staff and AG;

• Change Management initiatives for the Agency as a whole.• Allow ORARCLE South Africa as system owners to do a post

implementation audit.

AUDIT 2009/10 cont.

SHORT TERM INTERVENTION (cont)• Submission of progress reports on a monthly basis.• Review and amendment of policies and procedures.• Structures have been established to monitor the implementation of the

policies and procedures.• Customized system reports have been developed to enhance

reporting however several more developments are required• A Change Control Board has been established to facilitate efficient

system development in terms of the objectives of the Agency and the Finance Department requirements

AUDIT 2009/10 cont.

LONG TERM INTERVENTIONS• Completion of the business process reengineering project;• Professionalization of the Finance Branch (registration with

professional bodies such as SAIPA, SAICA etc.);• Implementation of the skills audit recommendations;• Continuous training and change management interventions;• Rotation of Finance Branch employees within the various units; • Liaising with auditing firms and professional bodies such as

(IPFA,SAICA, SAIPA etc.) as part of the training interventions;• Facilitating undergraduate and postgraduate learnership

programmes; and• The implementation of a retention and succession strategy.

AUDIT 2009/10 cont.FINANCIAL ADMINISTRATION PROGRESS ACCOUNTS PAYABLE

• R139 million accrual misstatement• Most of the amounts has been correctly reallocated with R4,2 million remaining

unresolved• Accounts payable is soft closed from April to November 2010, with creditors control

reconciliations between sub ledger and general ledger completed up to November• Creditor statements remain a matter to be addressed

CASH MANAGEMENT• R35 million opening balance misstatement

• The opening balance R35m reallocation of voided payment journal is completed and posted.

• Bank reconciliations is completed from April to November and in progress for December and January

ACCOUNTS RECEIVABLE• R45 million debtors misstatement

• AR loans module not implemented• Due to the project in progress to fix prior year data as well as to take on debtors

excluded previously, monthly reconciliations on movements have not been completed

AUDIT 2009/10 cont.FINANCIAL ADMINISTRATION PROGRESS PAYROLL

• Non Reconciled Payroll Control Account• Reconciliation on payroll control account from April to October is completed with

November and December in progress.• Reconciliation of 3rd party is completed up to November 2010 with December in

progress. – Note that there are still difference being investigated.– 3rd Party payments remain a challenge which needs to be addressed on a more

strategic and system orientated level

BUSINESS SUPPORT CENTRE• Non closure of month-ends

• Month-ends must be closed in a specific sequence and is dependent on this sequence to ensure a comprehensive “hard” closure

• Currently periods have only been soft closed, except for Inventory that is hard closed. • The soft closing is due to the fact that there are duplicate cost manager transactions,

reconciliations still needs to be completed and AR Loans data integrity process needs to be finalized.

AUDIT 2009/10 cont.FINANCIAL ADMINISTRATION PROGRESS .

ASSET MANAGEMENT• R11 million Asset clearing account 9/11 misstatement

• Journal has been reversed and re-allocated• Asset register is being updated• Mass Additions (MA) for Apr to Dec 2010 has been posted (GL to FA)

– MA WERE ONLY RUN FOR INVOICES THAT WERE PAID AND NEEDS TO BE ADDRESSED

• R13 million Accumulated Funds misstatement• The discrepancy remains under investigation

• Disposal of assets accounting treatment• A circular was issued on the treatment regarding disposal of assets, with such assets

identified and being updated on the asset register.

• Lease evaluation and quantification• A register is maintained for all leases• Contracts are being updated with correct calculations and classifications• Transfer of Limpopo properties being addressed

• Oracle system cost misstatement• The cost for the development of ORACLE was identified and the asset register has

been updated with the latest development cost of R25 million.

AUDIT 2009/10 cont.FINANCIAL ADMINISTRATION PROGRESS . INVENTORY MANAGEMENT

• R9 million receiving misstatement• Duplicate transactions in cost management have been identified and will

need to be resolved by way of journals• It will have a negative impact to the 2010/11 AFS if not resolved timeously

(SR 3-2234328571)• Reconciliations can only be performed once duplicate transactions resolved

CURRENT STATUS:• The AG started an interim audit

• Focus are firstly on the audit findings of 2009/10• Information are being requested differently for the current year (from the sub-ledger)

• Reconciliation processes have been implemented and are in the process of being developed and enhanced

• Skilled resources and critical staff remains a challenge

AUDIT 2009/10 cont.FINANCIAL ADMINISTRATION PROGRESS CRITICAL POSTS:

• there is a critical need for the urgent appointment of 202 finance staff:• 4 finance head office specialists, • 18 regional consolidation specialists, • 137 grants debtors’ clerks and • 43 cashiers

• Needed to: • Address AG compliance issues, • Compensate for skills deficiencies, • Bridge skills gap brought on by migration to accrual accounting• Facilitate the creation of a dedicated Revenue and Debt Management Unit• Eliminate the reliance on Grant Administration staff who lack the financial

background in collecting and transacting monies due to the Agency

AUDIT 2009/10 cont.FINANCIAL ADMINISTRATION PROGRESS

ONGOING FOCUS:• Leadership, Skills transfer and Compliance management

• Regional management visits• Appointment of Service provider to assist with

• Accrual accounting financial management, reporting and skills transfer

• Training on reconciliations and accrual policies implementation• Centralization of finance function at regional level

• Increase control and reporting• Consolidation of required skills• Financial Implication: consider subsidization of relocation costs of affected

staff members

• AR loan module implementation finalization• Appointment of finance critical posts• Develop performance budget system reports and framework

CHALLENGES

Strategic challenges• Migrated from Cash based accounting to accrual based accounting

which led to late submission of Annual Financial statements to AG as required by PFMA.

• Financial constraints – Recent policy changes have placed increased demands on

SASSA without the adjustment in allocation of additional resources; and led to

– Reprioritisation of key outputs.

System Challenges

• The lack of automated business processes make activities extremely labour intensive and error prone.

• There has been further delays in the Roll-out of IGAP;

– The target of five regions could not be achieved due to lack of funds;

– Roll-out to the rest of Free State was delayed by negotiations with labour.

Grants administration challenges

• The agency has been experiencing a number of Grant administration challenges which led to Audit Qualification for the DSD;

• The qualified audit report for DSD focused on poor record management leading to missing files and other critical documentation; and

• Inability to destroy obsolete files.

Grants administration challenges

Record Management Infrastructure The physical infrastructure of the 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; and There are serious capacity constraints as the registries are

understaffed which only exacerbate the problem.

Action taken to remedy challenges

• Late submission of AFS. A service provider has been appointed to assist SASSA with system challenges that led to SASSA submitting its AFS late

• Financial constraints. – Implementing turnaround strategy

o Cash stabilisationo Business process engineering (OD)

• Lack of automated business processes. Budget for 2011/12 will be reprioritized to fast track automated business

processes

• Grant Administration challenges Implementation of Action Plan over a period of three years; Implementation of the SDM

• Human capital management The agency will be appointing critical staff to address service delivery

challenges

Conclusion• Overall SASSA has performed well in the year under review;• SASSA has identified challenges affecting the institution and it is

working tirelessly to remedy the situation; and• In this effort SASSA is depending on support from the Select

Committee as it grapples with the many challenges.