Presentation to The Social Development Portfolio Committee Parliament Cape Town 21 November 2007

STRUCTURE OF THE PRESENTATION Background (CEO) Performance against targets (CEO) Annual Financial Report (CFO) Report of the Auditor-General (CFO) Projects Report (DMD) Human Resources (CEO) Way Forward (CEO) 8. Questions and comments

BACKGROUND 1. Key sections of the Annual Report are: The Overviews by the Minister; Chairperson of the Board and the CEO Emphasis by the Minister and Chairperson of the Board included: The NDA strengthens the second economy by providing grants to Civil Society Organisations (CSOs) and, through its capacity building programme, ensuring that CSOs are equipped with skills required to make them sustainable. Through the strategic goal of organisational transformation, much emphasis has been placed on governance issues and improving systems and processes. This resulted in the NDA receiving a clean, unqualified audit with no emphasis of matter from the Auditor-General – a praiseworthy and pleasing achievement. Much needed stability and focus was brought to the NDA. The revision of the NDA’s strategy and restructuring of the NDA presented challenges including 29 staff members taking voluntary severance packages.

BACKGROUND continued Despite the challenges faced, the NDA started to vigorously implement its five year strategic plan. This has positioned the NDA as a key and relevant contributor to the fight against poverty. Grant funding was undertaken through two approaches – Requests for proposals and programme formulation. Funding of 95 projects for R110,97 million was approved by the Board and R49,5 million was disbursed during the year. A capacity building programme on which R25,7 million will be spent over 2 years was introduced. The Board’s term of office was drawing to a close and a new Board has been appointed. The Minister paid tribute to the Board members for the good work they had done in building the NDA. The Chairperson thanked the Minister for the confidence he had placed in the Board and for his unbridled support The Chairperson also paid tribute to his fellow Board members, the CEO and the staff.

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.

Poverty Distribution by Province POVERTY STATISTICS Poverty Distribution by Province Province No. of poor persons (million) % of population in poverty Poverty gap (R billion) Share of poverty gap Eastern Cape 4.6 72% 14.8 18.2 % Free State 1.8 68% 5.9 7.2 % Gauteng 3.7 42% 12.1 14.1% Kwa-Zulu Natal 5.7 61% 18.3 22.5% Limpopo 4.1 77% 11.5 Mpumlwana 57% 7.1 8.7% North West 1.9 52% 6.1 7.5% Northern Cape 0.5 1.5 1.8% Western Cape 1.4 35% 5.0% South Africa 25.7 81.3 100.0%

PERFORMANCE AGAINST TARGETS STRATEGIC FOCUS FOR THE YEAR The strategic goals for the year were: Organizational transformation Partnering with strategic stakeholders to accelerate the fight against poverty Mobilizing resources for community development, Empowering communities for sustainable development, and Increasing the communication of credible researched information The organizational transformation goal received the highest priority and focused on building a performance culture; people competencies; leadership development; improving business processes and systems; good corporate governance; building brand credibility and confidence with our stakeholders.

PERFORMANCE AGAINST TARGETS continued ACHIEVEMENTS IN THE YEAR Developed and implemented a performance management system Restructured the organization in line with organizational goals and objectives Employed high calibre executives and implemented leadership development training programmes Conducted competency profiles for executives and senior management for the purpose of development Deployed a Workplace Skills Programme and published Quality of Work Life policies Implemented an integrated Enterprise Resource Planning system (ERP) Established professional corporate governance systems such as the internal audit, and legal and risk units Re-branded the organisation and implemented programmes of communications which improved the organisation’s credibility among our stakeholders and the public as a whole Established partnerships with most of the key Development Finance Institutions (DFI) by actively participating in the DFI forum and its activities

PERFORMANCE AGAINST TARGETS continued ACHIEVEMENTS IN THE YEAR continued Signed partnership agreements with the Department of Trade and Industry (the DTI) on poverty alleviation and development projects Funded, organised and participated in a number of key conferences and seminars on poverty and development Improved our overall administrative and management system. The Board has approved funding of 95 projects amounting to R110,97 million. Of these, 33 projects worth R27,27 million emanated from the Request For Proposal (RFP) process and 42 projects worth R57, 96 million emanated from the Programme Formulation (PF) process. The Board has also approved 20 projects worth R25,73 million for a 2 year Capacity Building Programme. An amount of R49 million was disbursed. This was less than the R62 million disbursed in the previous financial year mainly due to the following factors:

PERFORMANCE AGAINST TARGETS continued ACHIEVEMENTS IN THE YEAR continued Ongoing forensic investigations conducted following the discovery of fraud resulting in some project files being withheld for extended periods Payment of lower amounts to projects as first tranches/cash flow to cover capacity building; Late submission of projects to the NDA Board for funding; More stringent tranching/cash flow and risk management as a result of identified projects’ institutional capacity challenges; and Delays in meeting Board conditions. Further details of the performance of the NDA during the year under review are included in a narrative form in pages 16 to 31 of the Annual Report and a Schedule of the performance of the organisation in a tabular format is also available.

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

STATEMENT OF FINANCIAL PERFORMANCE 2007 2006 INCOME 150 701 122 172 713 532 Grants 123 012 000 121 482 000 Other 7 938 146 35 415 061 Interest 19 750 976 15 816 471 EXPENDITURE 163 207 584 124 062 814 Direct Funding 9 237 644 55 668 925 Projects Support 4 708 840 3 685 324 Staff cost 33 327 581 33 364 954 Administration cost 32 794 723 31 343 611 Net (deficit)/surplus for the year (12 506 462) 48 650 717

STATEMENT OF FINANCIAL POSITION ASSETS 2007 Current Assets 282 297 362 Cash & cash equivalents – Government 266 904 677 Cash and cash equivalents –European 12 974 667 Accounts receivable 2 418 018 Non-Current Assets Property, plant and equipment 2 846 570 __________ TOTAL ASSETS 285 143 932 FUNDS & LIABILITIES Funds 132 594 161 Development Fund 46 562 054 Projects Fund 87 119 364 Administration Fund (1 167 257) Current liabilities 152 549 771 Accounts payable 4 922 484 Committed projects 141 719 780 Interest payable – European Community 5 907 507 TOTAL FUNDS AND LIABILITIES 285 143 932 2006 264 742 848 249 217 694 12 239 987 3 285 167 2 496 332 __________ 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

OVERVIEW OF THE ERP SYSTEM WHY THE ERP SYSTEM WAS SOURCED Key Challenges PTS challenges Lack of system integration Paper based environment Lack of accountability / ownership Loss of documentation Lack of automated and performance reports Inadequate/Lack of automated controls Lack of audit trail / logs Heavy reliance on manual controls Lack of exception reports ERP Selection Review of business model Review of business processes Develop IT strategy (business needs) Selection of ERP partner, Microsoft Dynamics v9 using the IT Strategy

OVERVIEW OF THE ERP SYSTEM Phase One (Completed) Phase Two Phase Three (Outstanding) Travel Management Phase 1 Enhancements Human Resources Projects Registration Project Contract Marketing & Comms Project payments Monitoring & Evaluation Research & Development Document Management Procurement Process Company Secretariat Helpdesk Funds Allocation Time & Expense Courier Services Risk Management Stationery Management Petty cash

OVERVIEW OF THE ERP SYSTEM continued Project Registration Project Contracting Monitoring & Evaluation Project payment Captured Contract by PAD M&E report by DM Province create Payments Assigned to DM Amount, Date, M&E dates & Conditions PM approved report PAD prepares supporting docs Referred Contract review M&E for Write Back DMD approve payment Approved Confirm project signature on the contract Finance release payments Rejected by PM Confirm NDA signature on the contract

REPORT OF AUDITOR-GENERAL The NDA received a clean unqualified audit with no emphasis of matter from the Auditor-General Attention was drawn to the following other matters that are ancillary to the Auditor-General’s responsibilities in the audit of the financial statements:

REPORT OF AUDITOR-GENERAL continued MATTER 1. Material non-compliance with applicable legislation The audit committee’s terms of reference have neither been approved by the board, nor is it reviewed annually as required by Treasury Regulation 3.1.8. In addition, no disclosure has been made in the National Development Agency’s annual report on whether or not the audit committee has adopted formal terms of reference and if so, whether the committee satisfied its responsibilities for the year, in compliance with its terms of reference, as required by Treasury Regulation 3.1.9. 2. Material corrections made to the financial statements submitted for audit 2.1 Accrued expenses were increased by R2 834 984. 2.2 Operating lease expenses were increased by R663 321 to comply with International Accounting Standard IAS 17. 2.3 Impairment of an accounts receivable of R495 456. 2.4 Increase of R2 455 595 to Committed Projects, being accounts that were fraudulently manipulated in the prior year. MANAGEMENT PROGRESS 1. These matters will be rectified once the new Board has taken office and a new Audit Committee has been appointed. 2.1 The NDA financials that were given to the auditors were completed in the second week of April, which was meant to assist the auditors by giving them enough time to audit. The accruals include invoices that were received in May and June after the financials had been submitted to the auditors. 2.2 Last year, our understanding was that we would process all adjusting journals at once. Had we been advised that passing adjusting journals is a reportable matter, we would have passed these journals before 31 May 2007. 2.3 This was noted and addressed 2.4 We note the comment. However the effect of the fraud was corrected last year and this year at the global level rather than at each project creditor account.

REPORT OF AUDITOR-GENERAL continued MATTER 2.5 Reinstatement of projects to the value of R4 149 196 that were previously written off. 3. Matters of governance 3.1 The following policies and procedures appear on the Policy Register of the National Development Agency but the policies were not approved by the Board: Information Technology Security Disaster Recovery and Backup Plan Information Technology Standard, Policies and Procedures Funding system description Grant making policy framework and criteria National Development Fund policy General controls in the information technology environment 4. An information systems (IS) audit of the general controls surrounding the financial and human resources applications was completed in June 2007. The most significant findings identified were the following: 4.1 Certain user security settings regarding access to the network and application were not adequately set to protect the information against unauthorised access. 4.2 The access activities of users were not adequately monitored and managed to ensure accountability. MANAGEMENT PROGRESS 2.5 The write back of R10 million was processed in anticipation of Board approval. However, the Board rejected projects to the value of R4 million presented as write back projects because the reports supporting the write backs were not detailed enough. Hence the adjustment. 3. The policies will be presented to the new Board for approval. 4. Advanced technology that addressed these issues was purchased and installed.

DEVELOPMENT MANAGEMENT (PROJECTS) REPORT Grant Trends / Allocations to the NDA 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 R’m % Grant 92.7 96.7 4% 103.2 7% 109 6% 121.5 11% 128.7 135.2 5%

DEVELOPMENT MANAGEMENT (PROJECTS) REPORT contnued NDA Funded Projects for the Year Ended 31 March 2007 Commitments R110,97 million Disbursements R49.0 million Number of projects 95

DEVELOPMENT MANAGEMENT (PROJECTS) REPORT continued GRANT COMMITMENTS Year 2005/2006 2006/2007 Province Number of Projects Approved Amount Committed per Province (R) Limpopo 17 13 455 724 13 14 398 627 Mpumalanga 11 7 055 798 9 8 234 240 Eastern Cape 36 13 455 271 14 14 084 531 Northern Cape 4 3 880 568 5 6 550 638 Western Cape 8 5 759 286 9 853 361 KwaZulu-Natal 15 12 169 884 16 650 394 North West 2 2 704 576 9 665 661 Free State 3 1 453 427 10 10 527 164 Gauteng 8 762 621 12 812 434 National 8 192 510 TOTAL 104 68 697 155 95 110 969 560

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.

HUMAN RESOURCES continued_ The total staff complement at the NDA at 31 March 2007 was 88 of which 37 were male and 51 were female. A breakdown of staff in the provinces is as follows: Province Number of staff Gauteng 5 Eastern Cape 6 Free State Northern Cape 2 KwaZulu-Natal 3 Mpumalanga 4 Limpopo North West Western Cape Head Office 50

WAY FORWARD Our challenges for the coming financial year are in the following areas: Induction of the new Board and its Committees Revision of the strategy and funding cycle process Our institutional capacity Organisational and individual performance Limited funding sources Updated database of civil society organisations Up to date researched information on poverty and development trends at macro and micro levels An appropriate funding model A reviewed NDA Act and Delegations of Authority

WAY FORWARD continued Going forward, we have revised the MTEF Strategy, which contains the following strategic goals: • Organisational transformation • Partnering for development • Community empowerment for sustainable development • Communication of credible and relevant development information. We have plans in place to address the challenges identified above. These include Speeding up organisational transformation for completion by the end of the 2007/2008 financial year Placing greater emphasis on financial resource mobilisation Improving and increasing the output of our researched information Completing the establishment of our Civil Society organisations database Completing the process of establishing an appropriate funding model and delegations To amend the NDA Act and Delegations of Authority.