1. 1 Presentation to the Portfolio Committee on Social Development Annual Report 2012/13

2. 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. 2

3. Presentation Outline Overview; Programme Performance Information - Achievements against 2012/13 Strategic Priorities; Budget and Expenditure for 2012/13; Summary of Audit Outcomes; and Challenges 3

4. Overview

5. 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);

6. 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!

7. 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. 7

8. 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. 8

9. Agency Service Delivery Network 9 Head Office (1) RegionsKZNNWECWCGPMPLIMPNCFSNational Regional Offices1111111119 District Offices44755455544 Local Offices752662163833452614335 Service Points423217242408173112110902 Pay-points2781734302029712329621203632039937

10. 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 10

11. Performance against the 2012/13 Priorities PERFORMANCE INFORMATION 11

12. Implementation of the Social Assistance Programme ObjectiveImprove 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 Achieved1 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.

13. Social Grants Trends 13 Grant type/Period 2007/082008/092009/102010/112011/122012/13 Old Age2 229 5502 390 5432 546 6572 678 5542 750 8572 873 197 War Veteran1 9241 5001 216958753587 Disability1 408 4561 286 8831 264 4771 200 8981 198 1311 164 192 Grant in Aid37 34346 06953 23758 41366 493 73 719 Foster Child454 199474 759510 760512 874536 747 532 159 Care Dependency 102 292107 065110 731112 185114 993120 268 Child Support8 189 9758 765 3549 570 28710 371 95010 927 73111 341 988 Total12 423 73913 072 17314 057 36514 935 83215 595 70516 106 110 Annual Growth5.20%7.50%6.20%4.42%3.27% Number of grant benefits and percentage growth over a five year period by grant type

14. Social Grants Trends: growth rates (2011/12 vs. 2012/13) 14 Grant type/Period2011/122012/13Difference% growth Old Age2 750 8572 873 197122 3404.45% War Veteran753587-166-22.05% Disability1 198 1311 164 192-33 939-2.83% Grant-in-Aid66 493 73 7197 22610.87% Foster Child536 747 532 159-4 588-0.85% Care Dependency114 993120 2685 2754.59% Child Support10 927 73111 341 988414 2573.79% Total15 595 70516 106 110510 4053.27%

15. Number of grant benefits by grant type and region as at 31 March 2013 Region/ Grant typeOAGWVGDGGIAFCGCDGCSGTotal EC509 61276185 5419 54518 429117 2311 843 6842 684 118 FS172 103886 3101 1995 86441 317637 075943 876 GP424 892147123 2471 65515 78358 7221 581 7562 206 202 KZN590 95986311 40229 19036 012135 4422 746 8883 849 979 LIM395 2644789 15511 32111 91358 9531 588 4892 155 142 MPU227 2392780 8242 8838 65235 3591 051 6261 406 610 NW217 2741985 8674 0928 33942 215751 1951 109 001 NC74 9191750 0124 2144 48514 342277 835425 824 WC260 935160151 8349 62010 79128 578863 4401 325 358 Total2 873 1975871 164 19273 719120 268532 15911 341 98816 106 110

16. 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 16

17. 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. 17

18. Local Office & Service Points Improvements ObjectiveImprove 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 AchievedA 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.

19. 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 19

20. 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) 20

21. 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. 21

22. 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.

23. 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. 23

24. 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. 24

25. 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. 25

26. Implementation of the Legal Services Model 26 Office 2011/122012/2013 No of CasesCost (R) No of CasesCost (R) Head Office (HO)113 341 699.3423 198 927.59 Eastern Cape (EC)1251 200 000.00683 658 225.00 Free State (FS)-80 474.4410.00 Gauteng (GP)10.00261 560.00 KwaZulu-Natal (KZN)73488 426.4271 450 272.87 Limpopo (LP)332 927.52029 509.92 Mpumalanga (MP)1659 869.87153 869.52 Northern Cape (NC)361 000.001111 093.35 North West (NW)5226 381.3652 079 084.11 Western Cape (WC)27543 433.96240 878.38 TOTAL2496 634 212.918910 683 420.74

27. 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). 27

28. Budget and Expenditure for 2012/13 (Financials)

29. Presentation to the Portfolio Committee 2012/13 Audited financial outcome

30. 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 30

31. Overview of the budget cont. 31

32. Overview of the budget cont. 32

33. Overview of the budget cont. 33

34. 2012/13 Audited financial outcome 34

35. Summary of overall Head Office expenditure 35

36. Summary of all regions per economic classification 36

37. 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. 37

38. 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. 38

39. Auditor-General Report and Comments

40. 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)..

41. 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 41

42. 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 42

43. 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. 43

44. 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. 44

45. 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. 45

46. 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.. 46

47. CHALLENGES

48. 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 48

49. 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 49

50. 50 Thank you