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Presentation to the Portfolio Committee on Social Development

Annual Report 2012/13

Purpose of the Presentation

• The purpose of this presentation is to present to the Parliament’s Portfolio Committee on Social Development:

– The 2012/13 Annual Report for the Agency; and

– to reflect on some key administrative challenges facing the Agency.

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Presentation Outline

• Overview;

• Programme Performance Information - Achievements against 2012/13 Strategic Priorities;

• Budget and Expenditure for 2012/13;

• Summary of Audit Outcomes; and

• Challenges

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Overview

Mandate

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

• SASSA derives its mandate from the following Acts:

– The Constitution of the RSA, 1996 (Act No.108 of 1996);– Social Assistance Act, 2004 (Act No.13 of 2004); – South African Social Security Agency Act, 2004 (Act No.9

of 2004);

Vision

• “A leader in the delivery of social security services”

Mission

To administer quality customer-centric social security services to eligible and potential beneficiaries.

The Agency’s Slogan

Paying the right social grant, to the right person,

at the right time and place. NJALO!

Key priorities for 2012/13

• To deliver quality social security services focusing on the following:

– Excellent customer care;

– The automation of systems;

– Improving organisational capacity; and

– Promoting good governance.

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Strategic Objectives

• Strategic Objectives for SASSA for the reporting period were:

– to ensure that eligible beneficiaries receive benefits due to them;

– to improve the quality of service delivery to our customers;

– to achieve a fully integrated and automated social assistance service; and

– to ensure that the Agency is optimally capacitated for optimal service delivery.

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Agency Service Delivery Network

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Head Office (1)

Regions KZN NW EC WC GP MP LIMP NC FS National

Regional Offices 1 1 1 1 1 1 1 1 1 9

District Offices 4 4 7 5 5 4 5 5 5 44

Local Offices 75 26 62 16 38 33 45 26 14 335

Service Points 4 23 217 242 40 81 73 112 110 902

Pay-points 2781 734 3020 297 123 296 2120 363 203 9937

Background

• During the period under review SASSA continued on its path of improving the lives of the poor and vulnerable.

• At the end of the financial year, a total of 16 106 110 grants were in payment

• The re-registration project is the flagship and largest project that the Agency embarked on during this financial year

• A decision was taken to slow down on some of the planned targets in the Agency such as the reviews and to concentrate the available resources on re-registration and as a result the Agency achieved 69% of its annual targets

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Performance against the 2012/13 Priorities

PERFORMANCE INFORMATION

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Implementation of the Social Assistance Programme

Objective • Improve the reach to qualifying/eligible social assistance beneficiaries

Planned Activities

• Target is to reach at least 1.2m new beneficiaries; and • Increase the number of grants in payment from 15 595 705 to 16

069 007

Achieved • 1 280 818 new applications were processed• 16 106 110 social assistance benefits are in payment

11 994 415 are children’s grants; 2 873 197 are older person’s grants; 1 164 192 are people with disabilities grants; 587 are war veteran grants; and 73 719 are grant-in aid recipients

• More than 863 689 grants were lapsed due to death, voluntary cancellations and reviews.

Social Grants Trends

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Grant type/Period

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

Old Age 2 229 550 2 390 543 2 546 657 2 678 554 2 750 857 2 873 197

War Veteran 1 924 1 500 1 216 958 753 587

Disability 1 408 456 1 286 883 1 264 477 1 200 898 1 198 131 1 164 192

Grant in Aid 37 343 46 069 53 237 58 413 66 493 73 719

Foster Child 454 199 474 759 510 760 512 874 536 747 532 159

Care Dependency

102 292 107 065 110 731 112 185 114 993 120 268

Child Support 8 189 975 8 765 354 9 570 287 10 371 950 10 927 731 11 341 988

Total 12 423 739 13 072 173 14 057 365 14 935 832 15 595 705 16 106 110

Annual Growth 5.20% 7.50% 6.20% 4.42% 3.27%

Number of grant benefits and percentage growth over a five year period by grant type

Social Grants Trends: growth rates (2011/12 vs. 2012/13)

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Grant type/Period 2011/12 2012/13 Difference % growth

Old Age 2 750 857 2 873 197 122 340 4.45%

War Veteran 753 587 -166 -22.05%

Disability 1 198 131 1 164 192 -33 939 -2.83%

Grant-in-Aid 66 493 73 719 7 226 10.87%

Foster Child 536 747 532 159 -4 588 -0.85%

Care Dependency 114 993 120 268 5 275 4.59%

Child Support 10 927 731 11 341 988 414 257 3.79%

Total 15 595 705 16 106 110 510 405 3.27%

Number of grant benefits by grant type and region as at 31 March 2013

Region/Grant type OAG WVG DG GIA FCG CDG CSG TotalEC 509 612 76 185 541 9 545 18 429 117 231 1 843 684 2 684 118FS 172 103 8 86 310 1 199 5 864 41 317 637 075 943 876GP 424 892 147 123 247 1 655 15 783 58 722 1 581 756 2 206 202KZN 590 959 86 311 402 29 190 36 012 135 442 2 746 888 3 849 979LIM 395 264 47 89 155 11 321 11 913 58 953 1 588 489 2 155 142MPU 227 239 27 80 824 2 883 8 652 35 359 1 051 626 1 406 610NW 217 274 19 85 867 4 092 8 339 42 215 751 195 1 109 001NC 74 919 17 50 012 4 214 4 485 14 342 277 835 425 824WC 260 935 160 151 834 9 620 10 791 28 578 863 440 1 325 358Total 2 873 197 587 1 164 192 73 719 120 268 532 159 11 341 988 16 106 110

Social Grants Trends analysis• Overall, grant benefits uptake increased by 3.27% between 2011/12 and

2012/2013.

• There was an increase in all but three grant types, i,.e., War Veteran Grants , Disability Grants and Foster Child Grants due to attrition rates and effective reviews.

• At 4.45%, Old Age Grant has shown a more than normal growth rate of 2% year-on-year. This is due to the increase in the threshold criteria for the means test, which resulted in many beneficiaries coming into the system. 

• The number of Disability Grants decreased due to improved management of temporary disability and more stringent screening and assessment of permanent disability 

• Grant-in-Aid has increased due to improved awareness campaigns 

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Improvements in the Grants Application process

Standardisation of business processes at all local offices and service points.

•Improvement in the turnaround times to process social grants applications: The target for the processing of new social grant applications was to have 90% processed within 21 days.

– 91% (1.167m) of all new applications were processed within 21 days.

•The year under review focus was on full implementation of the standardised 4-step process for social grant applications

– Full standardisation has been implemented in all local offices, except in three offices, which are still undergoing renovations as part of the Local Office Improvement Project.

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Local Office & Service Points Improvements

Objective Improve the conditions under which we serve the beneficiaries and to ensure that all customers experiences the same business processes.

Planned Target

Physical infrastructure improvement and standardisation. The target is to have 72 local offices and 400 pay-points upgraded to suit the new standardised application process

Achieved • A total of ninety-five (95) local offices were improved, which is twenty three (23) more than the annual target. This brings the number of upgraded offices to 259 since the 2011.

• In the period under review, six hundred and ninety-two (692) pay points were upgraded at a cost of R18 776 416. The Agency surpassed its target by two hundred and ninety-two (292). The improvements implemented included procurement of shelters such as tents, ablution facilities, upgrading and/or repairs of existing structures, provision of chairs as well as construction of facilities for the disabled and frail, such as ramps and toilets.

Improvements in the Payment process

Re-registration

•The re-registration project is the largest data integrity and beneficiary authentication project ever to be embarked upon.

•The overall objective was to re-register 22 million beneficiaries, recipients and procurators.

•The project entailed the mass re-registration of existing beneficiaries, children receiving grants and procurators.

•A total of 18.9 million people were successfully re-registered onto the new system. This resulted in over 150 000 social grants being cancelled voluntarily, leading to a saving of R150 million per annum.

•In the implementation of the project on re-registration 8000 jobs were created for unemployed youth. 3 000 of whom were placed in permanent positions

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Improvements in the Payment process

SASSA CARD

•A SASSA smart payment card underwritten by Grindrod Bank, endorsed by MasterCard has been issued to more than 10 million social grants recipients.

•The Card contains both Pin and Biometric capability and thus recipients can use it to access payment any where, anytime, using multiple payment channels.

•Benefits of the Current Payment System: Introduction of the current payment system has broad positive benefits to both SASSA and beneficiaries, and to a large extent the South African Economy.

– The current payment system has absorbed the previously unbanked beneficiaries and incorporated them into the banking community. Almost 60% of cash beneficiaries have migrated from pay points and have a preference to receive their social grants at their convenient payment vendor and at ATM’s (at ATM’s normal bank charges apply).

– beneficiaries have also used the increased payment channels to access their social grants within the first seven (7) calendar days of the month.

– the common payment distribution to all beneficiaries;

– significantly reduced the costs for transacting (From average of R30 to R16.44 per transaction)

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Integrated Community Regisration Outreach Programme (ICROP)

• ICROP was established to improve access to and equity in services to beneficiaries in rural and semi-rural areas;

• The success of ICROP can be attributed to partnerships with key stakeholders, such as government departments, non-governmental organisations, faith-based organisations, traditional leaders and ward councillors;

• ICROP targeted 40 poverty wards for the provision of social assistance. The target was met and surpassed as 390 poverty wards benefitted through special ICROP requests; and

• A total of 61 110 beneficiaries in 430 wards had access to social assistance through ICROP. The target of 60 000 beneficiaries for the period under review was therefore exceeded.

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Automation

• The Agency seeks to achieve a fully automated system through a fully secured, integrated and automated end-to-end system in order to improve the administration of the social assistance programme by 2016;

• In line with this, the Agency established a baseline of the Agency’s as-is environment and developed an ICT vision for the future that supports the strategic objectives of the Agency through the Enterprise Architecture project.

• The strategic architecture, known as the Digital Beneficiary Services Platform (DBSP), was developed.

Fraud Management

• SASSA continued to implement its zero tolerance approach to fraud and corruption.

• The target was to investigate 50% of fraud cases identified.

– 78% percent of fraud cases were investigated (i.e., 4 000 out of 5 134)

– 98% of suspicious grants were verified for validity (29 780 suspicious social grants were verified for validity

• The focus of the Agency has shifted from beneficiaries to its own staff members who collude with beneficiaries and other organs of State, including crime syndicates to defraud the system. Efforts to clamp down on syndicates in specific regions, resulted in the arrest and conviction of 10 current Agency officials, 3 former Agency officials and 15 agents/touts.

• Nationally, 52 of the Agency’s officials were suspended from duty, 25 have been dismissed and 7 resigned prior to the completion of their disciplinary cases.

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Fraud Management cont…

• During the 2012/13 financial year, a total of 7 734 fraud/corruption cases were registered; 2 747 cases were finalised; 1 272 cases were closed; and 3 715 cases are still in progress.

• The monetary value related to cases finalised amount to R59.4 million.

• Other successes include the arrest of 50 individuals in the Mahlabathini area within the Ulundi District, who were found to be in possession of 127 unregistered SASSA cards, 3 CPS registration machines and R47 000 in cash. Five of these suspects remain in custody.

• Money lending also became a focus of the multidisciplinary Agency approach. Successful operations include a total of 29 individuals arrested and 1 008 Agency cards and R 82 156.00 cash confiscated.

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Implementation of the Legal Services Model • The legal risks that the Agency is exposed to in its day-to-day

operations – have been mitigated to a great extent.

• The total number of litigation cases decreased from 249 in 2011/12 to 89 in 2012/13.

• The total amount of litigation costs (liability) as at the 2012/13 financial year is R10 683 420.74.

• This amount includes the amount for the costs incurred in respect of the matters which were dealt with in the previous financial years; however, the bills for the costs were only submitted during the current financial year.

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Implementation of the Legal Services Model

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Office

2011/12 2012/2013

 No of Cases Cost (R)  No of Cases Cost (R)Head Office (HO) 11 3 341 699.34 2 3 198 927.59Eastern Cape (EC) 125 1 200 000.00 68 3 658 225.00Free State (FS) - 80 474.44 1 0.00Gauteng (GP) 1 0.00 2 61 560.00KwaZulu-Natal (KZN) 73 488 426.42 7 1 450 272.87Limpopo (LP) 3 32 927.52 0 29 509.92Mpumalanga (MP) 1 659 869.87 1 53 869.52Northern Cape (NC) 3 61 000.00 1 111 093.35North West (NW) 5 226 381.36 5 2 079 084.11Western Cape (WC) 27 543 433.96 2 40 878.38TOTAL 249 6 634 212.91 89 10 683 420.74

Organisational Capacity• One of the Agency’s priorities for the year under review was to improve its

organisational capacity, particularly at service delivery.

– To this end, a total of 931 positions were filled to augment the capacity, especially in the core business.

– This increased the staff complement to 8 496 permanent staff members and 530 contract staff.

• To ensure the welfare of its workforce, the Agency continued to implement various programmes as part of its Employee Wellness Programme.

– 59 Wellness Champions were trained to ensure effective implementation of the Programme

– Psychological support was provided to employees, including those affected and infected by human immunodeficiency virus (HIV) and acquired immune deficiency syndrome (AIDS).

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Budget and Expenditure for 2012/13 (Financials)

Presentation to the Portfolio Committee

2012/13 Audited financial outcome

Overview of the budget

• The spending and strategic focus of the South African Social Security Agency remains the administration and payment of social grants

• A significant achievement was achieved in turning around the agency’s financial position whereby an accumulated overdraft of R839.4 million was dealt with. Cost containment measures played a key part of the intervention.

• The majority of the budget (34%) is on compensation of employees, followed by the cash handling fees (32%), while the balance caters for operational expenses such as office accommodation, cleaning, security, travel, communication, etc.

• Head Office accounts for 50% of the budget due to the cash handling fees budget while the other 50% is at the nine regions

• KwaZulu-Natal and the Eastern Cape regions accounts for the majority of the regional share of the budget respectively.

• The 2012/13 budget was adjusted (reduced) from R6,200,270 billion to R6,119,770 billion by an amount of R80,500 million during the adjustment budget process

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Overview of the budget cont.

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2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17R'000 R'000 R'000 R'000 R'000 R'000 R'000

Baseline Allocation 5 631 387 6 143 657 6 200 270 6 531 188 6 875 069 7 191 343 7 203 032 Adjustment (savings) - - -80 500 -65 324 -137 528 -215 782 - Reduction for reprioritisation to absorp social work graduates - - - -100 000 -104 900 -109 770 - Further reduction - - -50 000 -50 000 -20 000 - Trasnfer to PSC (Fraud Hotline) - - - -4 816 -5 052 -5 305 - Total 5 631 387 6 143 657 6 119 770 6 311 048 6 577 589 6 840 486 7 203 032

Overview of the budget cont.

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Overview of the budget cont.

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2012/13 Audited financial outcome

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Economic Classification Budget Amount Expenditure Surplus/Defict SpentR'000 R'000 R'000 %

Compensation of employees 2 082 597 2 068 437 14 160 99%Goods and services of which : 3 797 892 3 554 650 243 242 94%Payment Contractor Fees 1 947 078 1 935 842 11 236 99%Other Goods & Services 1 850 814 1 618 809 232 005 87%Transfers and subsidies 22 630 19 268 3 362 85%Capital expenditure 216 651 65 737 150 914 30%

Total 6 119 770 5 777 307 342 463 94%

Summary of overall Head Office expenditure

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Item Budget Amount Expenditure Surplus/Defict SpentR'000 R'000 R'000 %

Compensation of employees 176 759 158 935 17 824 90%Payment Contractor Fees 1 947 078 1 935 842 11 236 99%Other Goods & Services 799 791 607 586 192 205 76%Transfers and subsidies 3 803 1 575 2 228 41%Capital expenditure 160 542 2 181 158 361 1%

Total 3 087 973 2 706 119 381 854 88%

Summary of all regions per economic classification

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Item Budget Amount Expenditure Surplus/Defict SpentR'000 R'000 R'000 %

Compensation of employees 1 904 587 1 892 897 11 690 99%Payment Contractor Fees - - - 0%Other Goods & Services 1 050 159 1 098 974 (48 814) 105%Transfers and subsidies 21 057 17 694 3 363 84%Capital expenditure 55 994 61 623 (5 629) 110%

Total 3 031 797 3 071 187 (39 390) 101%

Commentary on spending trends• Compensation of employees

• Some of the vacant funded posts remained unfilled at the regions and head office while some where in the process of being filled at financial year-end, contributing to an under spending on this item.

• Goods and Services

• The expenditure trend on this item is influenced by the following key items:

– Communication: Expenditure reached 101% of the budget allocation due to the communication drive related to the mass beneficiary re-registration project. The project had a significant impact on the budget

– Computer Services: Spending reached 76%. The under spending is due to the delayed Biometrics system project and the less than anticipated expenditure on Grants Business Automation project.

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Commentary on spending trends

– Cash Handling Fees: The majority of the overall saving was realised on this item as a result of the reduced tariff on cash handling fees and reduced transactions in the disbursement of grant monies as a result of the new payment contract. However an amount of R140 million was shifted to CAPEX for the purchase of motor vehicles

– Lease payments: Expenditure reached 108%, however there regions that have realised a saving due to the buildings that were budgeted for and were not occupied by financial year-end due to the lengthy DPW process.

– Property payments: Spending reached 100% and is in line with the projected spending for the period.

– CAPEX – Funds (R140m) were shifted to this item for the purpose of purchasing motor vehicles. However due to issues with the contract the purchase delayed until financial year-end leading to under spending on the item.

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Auditor-General Report and Comments

AGSA’s opinion

•The financial statements present fairly, in all material respects, the financial position of the Agency as at 31 March 2013, and its financial performance and cash flows for the year then ended in accordance with SA Standards of GRAP and the requirements of the PFMA and the South African Social Security Agency Act, 2004 (Act No.9 of 2004).

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Auditor General Report and Comments• AGSA’s opinion – Unqualified Audit. The AG found that:

– SASSA’s financial statements present fairly the financial position of the Agency as at 31 March 2013

– SASSA’s financial performance and cash flows for the year were in accordance with SA Standards of GRAP and the requirements of the PFMA and the South African Social Security Agency Act, 2004

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Auditor General Report and Comments• Emphasis of matter: Pending Litigation Case

– The Agency is involved in a pending litigation with ALLPAY Consolidated Investment Holdings (Pty) regarding the awarding of the Social Grant Payment Tender to Cash Paymaster Services.

– Subsequent to the Supreme Court of Appeal delivering judgement in the ALLPAY//SASSA and CPS matter (applicant for the review and setting aside of the award pursuant to the payment tender) in favour of SASSA, ALLPAY has filed an application for leave to appeal at the Constitutional Court

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Report on other Legal and Regulatory Requirements

• The following findings relevant to performance against predetermined objectives, compliance with laws and regulations and internal control have been made.

• Predetermined objectives

– Reliability of information: There were no material findings on the report on predetermined objectives concerning the usefulness and reliability of the information.

– Achievement of planned targets: Of the 80 total numbers of planned targets, 25 were not achieved during the year under review. This represents 31% of total planned targets that were not achieved during the year under review.

– This was mainly due to the fact that indicators and targets were not suitably developed during the strategic planning process and the entity did not consider relevant systems and evidential requirements during the annual strategic planning process.

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Report on other Legal and Regulatory Requirements cont…

Compliance with laws and regulations

• The AGSA did not identify any instances of material non compliance with specific matters in key applicable laws and regulations as set out in the General Notice issued in terms of the PAA.

•Annual Financial Statements

– The financial statements submitted for auditing were not supported by full and proper records as required by section 55(1)(a)(b) of the PFMA, for example, leases and commitments.

– Material misstatements of commitments and disclosure items identified by the auditors in the submitted financial statements were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.

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Report on other Legal and Regulatory Requirements cont…

Internal control : Significant deficiencies with regards to the following were found:

•Leadership:

– Lack of review and oversight regarding approved and communicated policies and procedures to enable and support understanding of internal control activities to ensure complete and accurate financial reporting of commitments, disclosure items and performance reporting.

•Financial and performance management

– Proper record keeping and review processes were not implemented in a timely manner to ensure that there is complete, relevant and accurate financial reporting on commitments, disclosure items and performance reporting.

•Governance

– Procedures to ensure compliance with Treasury Regulations 27.2.7(a) were not in place.

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Report on other Legal and Regulatory Requirements cont…Investigations

•Investigations with regard to non-compliance to the supply chain management policy and procedures are currently in progress, which could result in possible fraudulent actions and possible irregular expenditure..

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CHALLENGES

Challenges

• Payment Tender pending court case

• Complaints regarding on-going deductions on the SASSA Card

• In the implementation of fraud Management strategy, the Agency was had to close-out some offices due to the number of officials that were implicated in fraudulent activities

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Recommendations

• It is recommended that the Portfolio Committee on Social Development note and support

– SASSA 2012/13 Annual Performance Report

– SASSA financial statements for 2012/13 ; and

– Challenges that the Agency is facing

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Thank you