forensic audit report - nac.org.za

Report: NAC- Forensic Investigation PESP

Per Email

17 September 2021

The Chairperson

H.R.H Princess Celenhle Dlamini

National Arts Council

Corner Gqigwi Mrwebi and 66 Margeret Mcingana Street

Newtown

Johannesburg

2001

Per e-mail:

Report: Forensic audit regarding the Presidential Employment Stimulus Programme (PESP)

at the NAC

Dear Chairperson

Please refer to our report included in this letter in respect of the forensic investigation services conducted by

Mazars Forensic Services (Pty) Ltd (“Mazars”).

This report contains confidential and proprietary information, which neither you nor any of your

representatives may disclose to third parties without prior discussions with Mazars.

Should you require any further information regarding the report, please feel free to contact Keeran Madhav at

+27 011 547 4090 or [email protected] and/or Jerome Adams at 011 547 4065 or

[email protected].

Yours Faithfully

Keeran Madhav

Director

Mazars Forensic Services (Pty) Ltd

mailto:[email protected]

mailto:[email protected]


CONTENTS

ABBREVIATIONS ............................................................................................................................................... 4

A. Companies / Entities ........................................................................................................................ 4

B. Individuals ........................................................................................................................................ 4

C. Abbreviated terms ........................................................................................................................... 5

Schedule of Annexures....................................................................................................................................... 7

Schedule of Exhibits ........................................................................................................................................... 8

Table References ............................................................................................................................................... 9

1. SCOPE & LIMITATIONS ..................................................................................................................... 10

2. BACKGROUND ................................................................................................................................... 12

3. PROCEDURES PERFORMED ........................................................................................................... 13

4. FINDINGS ............................................................................................................................................ 14

A. Inception of PESP ......................................................................................................................... 14

B. PESP Resource Plan .................................................................................................................... 16

B.1 Roles and responsibilities of key stakeholders ............................................................................... 17

CEO - Ms Mangope .................................................................................................................... 17

CFO - Mr Changfoot .................................................................................................................... 18

Senior Project Manager- Ms Marillier .......................................................................................... 18

Project Manager .......................................................................................................................... 21

Review Monitoring and Evaluation Officers ................................................................................ 22

NAC Panel members .................................................................................................................. 23

Exco ............................................................................................................................................ 27

C. PESP Process and procedures ..................................................................................................... 27

C.1 PESP Communication Plan ....................................................................................................... 28

C.2 PESP Evaluation process and procedures ................................................................................ 29

D. Grant Management System ........................................................................................................... 29

D.1. PESP applications received ....................................................................................................... 30

D.2 PESP Administrative Compliance .............................................................................................. 31

D.3 PESP Evaluation process ............................................................................................................... 34

Admin Review ............................................................................................................................ 34

Panel Evaluation ....................................................................................................................... 36

D.4 PESP Adjudication process ............................................................................................................ 41

Stream 1 and 2: Summary of Approvals ................................................................................. 41

Grant Notification Letters ......................................................................................................... 51

E. Funding of PESP ........................................................................................................................... 52

Understanding the guiding figure concept ............................................................................ 52

Test of guiding figure amount ................................................................................................. 54


Unauthorised approval of PESP applications ........................................................................ 56

Irregular expenditure paid on the initial guiding figure ........................................................ 57

Concerns raised by Mr Theo Lawrence .................................................................................. 57

F. Conflict checks............................................................................................................................... 58

G. PESP Objectives ........................................................................................................................... 60

5. SUMMARY OF FINDINGS .................................................................................................................. 61

PESP Resource Plan ............................................................................................................................ 61

Roles and responsibilities of key stakeholders ..................................................................................... 61

CEO - Ms Mangope .................................................................................................................... 61

SPM – Eugene Marillier .............................................................................................................. 61

NAC Panel Members .................................................................................................................. 62

Exco ............................................................................................................................................ 63

PESP applications received .................................................................................................................. 63

D.2 PESP Administrative Compliance .............................................................................................. 64

D.3 PESP Evaluation process ............................................................................................................... 64

Admin Review ............................................................................................................................ 64

Panel Evaluation ....................................................................................................................... 65

Stream 1 and 2: Summary of Approvals ................................................................................. 66

Grant Notification Letters ......................................................................................................... 67

Funding of the PESP ............................................................................................................................. 68

Guiding Figure ........................................................................................................................... 68

Unauthorised approval of PESP applications ........................................................................ 68

Irregular expenditure ................................................................................................................ 69

Conflict checks .......................................................................................................................... 69

6. RECOMMENDATIONS........................................................................................................................ 70

The Project Managers ........................................................................................................................... 71

Ms Marillier ............................................................................................................................................ 72

Panel Members ..................................................................................................................................... 72

Mr Changfoot ......................................................................................................................................... 73

Ms Mangope .......................................................................................................................................... 73

Exco ....................................................................................................................................................... 74


ABBREVIATIONS

The following abbreviations were applied and referred to in this report:

A. Companies / Entities

Abbreviation Description

DSAC National Department of Sports, Arts and Culture

Mazars Mazars Forensic Services (Pty) Ltd

NAC National Arts Council

B. Individuals


Advocate Ribane Advocate Nakedi Ribane, Panel 4 Chairperson Stream 2

Dr Labuscagne Dr Cobi Labuschagne, Consultant to the CEO

Dr Mdluli Dr Same Mdluli, Panel 1 Chairperson Stream 2

Mr Changfoot Mr Clifton Changfoot, CFO

Mr Lawrence Mr Theo Lawrence, Panel 3 Panel Member

Mr Sikhosana Mr Itumeleng Sikhosana, IT Manager

Ms Bhoola Ms Reshma Bhoola, Acting CFO

Ms Dingoko Ms Kelebogile Dingoko, Acting HR Manager

Ms Diphofa Ms Julie Diphofa, Acting CEO

Ms Kahn Ms Lesley Kahn, GMS Administrator

Ms Katz Ms Rosie Katz, Senior Project Manager

Dr Khumalo Dr C.S Khumalo, Deputy Director General, DSAC

Ms Mangope Ms Rosemary Mangope, CEO

Ms Marillier Ms Eugene Marillier, Senior Project Manager

Mr Mkhize Mr Vusumuzi Mkhize, Director General, DSAC

Mr Ngoato Mr Hartley Ngoato, Chairperson of the former NAC Council

Ms Phetla Ms Thola Phetla Marketing and Communications Manager


C. Abbreviated terms


(Pty) Ltd Proprietary Limited

ADO Arts Development Officer

Adv Advocate

B-BBEE Broad-based Black Economic Empowerment

CC Carbon copied

CEO Chief Executive Officer

CFO Chief Financial Officer

CIPC Companies and Intellectual Property Commission

Cllr Councillor

Co Company

COSEC Company Secretary

DG Director General

Dr Doctor

EFT Electronic Fund Transfer

Exco Executive Committee

GMS Grant Management System

GNL Grant Notification Letter

HR Human Resources

Ltd Limited

Microsoft Word (about document

format)

Microsoft Word processor program

MOA Memorandum of Agreement

MOU Memorandum of Understanding

Mr Mister, reference to a male

Ms Mrs or Miss, reference to a female

n/a Not applicable

NAC Act National Arts Council Act, 56 of 1997

NFVF National Film and Video Foundation



No Number

OPEX Operational expenditure

Par or para Paragraph

PESP Presidential Employment Stimulus Programme

PFMA Public Finance Management Act, 1 of 1999

PMs Panel Members

SOP Standard Operating Procedures

SPM Senior Project Manager

Stream 1 Wage subsidies, of which R100 million was allocated to Job Retention

Stream 2 Job creation through projects, of which R185 million was allocated for

the creative and cultural work as well as for the creation of work

opportunities


Schedule of Annexures

All references to Annexures relate to summaries, schedules, spreadsheets, or information created by Mazars.

This report should be read in conjunction with the Annexures and Exhibits.

Annexure Description

Annexure A List of documents received from Cosec

Annexure B Summary of PESP applications received during 30 October 2020 to 27 November 2020

Annexure C Computation of incomplete applications rejected on GMS

Annexure D Mazars findings for not meeting administrative compliance requirements

Annexure E Stream 1: Summary of Administrative Review per reviewer

Annexure F Stream 1: Summary of Administrative Review per project

Annexure G Stream 2: Summary of Administrative Review per project

Annexure H Stream 1: Summary of Panel Evaluation

Annexure I Stream 2: Summary of Panel Evaluation

Annexure J Stream 2: Inconsistencies identified in the information provided by the NAC


Schedule of Exhibits

All references to Exhibits relate to third party evidentiary documentation obtained and not created by Mazars.

Exhibit Description

1 PESP Proposal, dated 02 October 2020

2 Memorandum of Agreement, dated 02 November 2020

3 CEO Resolution (Annexure A), dated 27 October 2020

4 Supplier Entity maintenance form (Annexure of B), Not Dated

5 Council Minutes 19 September 2020, dated 19 September 2020

6 PESP Organogram, Not Dated

7 E-mail dated 27 October 2020 from Ms Mangope to Ms Diphofa, dated 27 October 2020

8 Paragraph 3 of PESP contract letter of Ms Diphofa, dated 27 October 2020

9 Extension of contract letter for the period 1 September 2020 to 31 March 2021, dated 15 September 2020

10 Contract letter appointing Ms Marillier as Arts Development Officer, dated 25 September 2020

11 Job advertisement of numerous PESP positions, Not Dated

12 PESP Process flow 30 October 2020 - 30 April 2021, Not Dated

13 Memorandum of Undertaking, dated 12 November 2020

14 PESP communication plan, dated 30 October 2020

15 PESP Communications Presentation, dated 11 November 2020

16 Minutes of Exco meeting, dated 30 November 2020

17 Minutes of Exco meeting, dated 06 December 2020

18 Panel Report, dated 28 November 2020



21 Panel Report, dated 13 December 2020



24 Panel Report, dated 28 December 2020

25 XDS Report, Dr Sipho Sithole, Not Dated

26 XDS Report, Nise Malange, Not Dated

27 XDS Report, Bongani Tembe, Not Dated


Table References

Table 1: Interviews Conducted ........................................................................................................................ 13

Table 2: NAC Resource plan for PESP ........................................................................................................... 16

Table 3: Details of Project Managers appointed for PESP .............................................................................. 21

Table 4: PMs used during PESP ..................................................................................................................... 23

Table 5: Summary of attendance of Exco meetings 26 November 2020- 30 December 2020 ....................... 27

Table 6: Summary of PESP applications received during 30 October 2020 to 27 November 2020 ............... 30

Table 7: Computation of incomplete applications rejected on GMS ............................................................... 30

Table 8: Mazars findings for not meeting administrative compliance requirements ....................................... 31

Table 9: Names and number of Stream 1 PESP applications issued for administrative compliance review .. 34

Table 10: Stream 1 - Review conducted by the administration review team .................................................. 34

Table 11: Stream 2 - Review conducted by the administration review team .................................................. 35

Table 12: Stream 1 - Evaluation criteria .......................................................................................................... 36

Table 13: Stream 1 - Allocation and review of applications for review by Panel ............................................. 37

Table 14: Stream 2 - Evaluation criteria .......................................................................................................... 38

Table 15: Stream 2 - Allocation and review of applications for review by Panel ............................................. 40

Table 16: Inconsistencies identified in the information provided by the NAC in respect of Stream 2 ............. 41

Table 17: Summary of Exco Approval for stream 1 application and cost from Panel Indexes compared with

GMS data ......................................................................................................................................................... 46

Table 18: Summary of approvals by Exco ....................................................................................................... 50

Table 19: Summary of recommended applications per stream and the costing thereof (GMS-Master data) . 55

Table 20: Applications that were included in the PESP payment schedules .................................................. 57

Table 21: Summary of PESP applications received during 30 October 2020 to 27 November 2020 ............. 63

Table 22: Irregular inclusions of declined applications .................................................................................... 65

Table 23: Summary of Exco Approvals of PESP applications ........................................................................ 66


1. SCOPE & LIMITATIONS

1.1. MANDATE

Mazars was instructed by the Chairperson of the National Arts Council (“NAC”) to conduct a forensic audit

on behalf of NAC regarding the Presidential Employment Stimulus Programme (“PESP”).

1.2. SCOPE

In terms of the instructions, we understand that the scope to be as follows:

1.2.1 Determine if there were any irregularities or inconsistencies in the management, adjudication, and

approval of PESP applications received from the sector.

1.2.2 Determine if there is any culpability with regard to those entrusted with PESP application and

administration process.

1.2.3 Determine if there has been gross negligence, misconduct, or dereliction of duty in respect of the

Chief Executive Officer (“CEO”) tasked with the management of the PESP process.


Chief Financial Officer (“CFO”) tasked with the management of the PESP process.


Previous Council tasked with the management of the PESP process.


any NAC staff/ Management/ Panel Member/ Council tasked with the management of the PESP

process.

1.2.7 Performing a reconciliation on PESP related funds, confirming cash on hand.

1.2.8 Provide a comprehensive report with recommendations for Council’s consideration and action,

where possible.

1.3. LIMITATIONS AND QUALIFICATIONS

Our report is subject to the following limitations and qualifications:

1.3.1. This report has been prepared solely for the use of NAC. As such, it should not be disclosed to any

other party without our prior written consent, which we may, at our discretion withhold or give subject

to conditions. It shall be a condition of such consent, if given, that Mazars accepts no responsibility

to that third party and that any such third party will hold Mazars harmless in respect of any

consequences of such disclosure. Whether or not we have given our consent, we will not accept

liability or responsibility to any other party who may gain access to this report.

1.3.2. We were not required to, nor did we undertake an audit or review in terms of the International

Standards on Auditing or International Standards on Review Engagements; consequently, no

assurance is expressed.


1.3.3. We do not express any legal opinion in this document, nor should anything stated herein be regarded

as such.

1.3.4. Where we have had to review and/or analyse any documentation in the context of this assignment,

we have reviewed and/or analysed documentation with which we have been provided and/or which

we have obtained and, unless the contrary is stated in this report, we have not performed any

procedures to verify and/or authenticate any such documentation.

1.3.5. We cannot give any undertaking concerning the accuracy and correctness of the information

contained on public databases as we do not control this information. However, we have taken every

effort to verify such data.

1.3.6. The findings contained herein are based on the work performed to the date of this progress report.

We cannot confirm the completeness of such information as the potential exists that not all relevant

information and documentation was made available to us. Any information or documentation brought

to our attention after the date of this report which will affect the findings detailed herein will require

our findings to be adjusted or qualified accordingly.

1.3.7. Information contained in block brackets has been assumed with reference to the context in which the

information is contained, and information gathered from the full investigation.

1.3.8. We made use of keyword searches across the electronic data provided. The information identified

from these keyword searches was then reviewed for relevance to the investigation. Relevant

information, identified through this procedure, has been annexed to this report.

1.3.9. All the interviews conducted were recorded and consent was obtained from each individual

interviewed.

1.3.10. The information and documentation included in this report as annexures and/or exhibits have been

converted from the original to pdf. In some cases, this has required the original to be reduced in size

or other minor modifications to the original.

1.3.11. Where necessary, Microsoft Excel files have been modified to enable them to be printed.

This may have included removing information not considered relevant to the investigation. The

electronic copy on the annexure includes information as it was presented without these modifications.

1.3.12. We requested numerous documents from the Company Secretary and to date the following

information has not been received. The outstanding information has limited us to conclude all our

investigation procedures:

1.3.12.1. NAC schedule of 35 advisory panel members;

1.3.12.2. PESP PROCESS FLOW 30 October 2020 TO 30 April 2021 of 26 advisory panel

members;

1.3.12.3. Council resolution approving the deviation of section 11 (2) of the NAC Act;

1.3.12.4. Submission motivating for the deviation to appoint Ms Marillier, as the SPM for PESP;

1.3.12.5. PESP contract letter issued during October 2020 to Mr Changfoot, by Ms Mangope;


1.3.12.6. Submission requesting additional funds from National Treasury due to exceeding the

PESP budget.

1.3.13. We requested to conduct an interview with Mr Arendse, to discuss the roles and responsibilities he

performed in respect of the PESP. Mr Arendse requested the following undertaking from Mazars,

prior to meeting with us, “…I would need an undertaking that I will be able to see their report, or at

least that section which pertains to me, before a final version is submitted to the NAC and DSAC…”.

We could not agree to the condition set by Mr Arendse, and therefore did not pursue our interview

with him. The matter was also referred to Council for consideration.

2. BACKGROUND

2.1 It is our understanding that the forensic audit emanates from concern raised by the incoming NAC

Council members regarding the management and allocation of funds regarding the PESP by the

former NAC Council and the Executive Management Team of the NAC.

2.2 We also understand the following information as background to the PESP:

2.2.1 The NAC was tasked by the Department of Sports, Arts and Culture (“DSAC”) to

manage the PESP.

2.2.2 The NAC was allocated a budget amount of R300 million to be disbursed through two

funding streams, namely:

2.2.2.1 Stream 1 for wage subsidies, of which R100 million was allocated to Job

Retention;

2.2.2.2 Stream 2 for Job creation through projects, of which R185 million was allocated

for the of creative and cultural work as well as for the creation of work

opportunities; and

2.2.2.3 Project administration cost of 5% amounting to R15 million.

2.2.3 Numerous complaints have been received from the industry and concerned individuals,

including some of the Panel Members (“PMs”) who were involved in the PESP

adjudication process, about how this programme was managed by the NAC.

2.2.4 For instance, it has become general knowledge that PESP was oversubscribed for

Stream 2, and that only the first set of approved, successful beneficiaries were

announced (utilising the full budget) without taking into account the remaining also

approved, successful beneficiaries.

2.2.5 It is alleged at the inception of this investigation that only 613 applicants were announced

as successful, whereas 761 successful and approved applicants were left out as there

was no more budget available to be disbursed.

2.3 The new Council amended the financial guiding figure to accommodate all the successful approved

applicants and also requested the extension of the payments of the projects to a later period as

initially envisaged.


3. PROCEDURES PERFORMED

3.1. In executing our mandate, the following procedures listed below were performed. Please note that

these procedures were not necessarily undertaken in sequential order.

3.2. We have listed the documents received in and inspected Annexure A1

3.3. We conducted interviews with the following individuals:

Table 1: Interviews Conducted

Name Portfolio Date interviewed

Ms Bhoola Acting CFO 06 July 2021

20 August 2021

25 August 2021

Ms Kahn GMS Administrator Multiple interviews for verification of GMS data

Ms Katz Senior Project Manager 12 July 2021

Ms Marillier Senior Project Manager 13 July 2021

23 August 2021

Dr Labuscagne Consultant to the CEO 20 July 2021

Ms Diphofa Acting CEO 17 August 2021

Mr Sikhosana IT Manager 18 August 2021

Dr Mdluli Panel 1 Chairperson Stream 2 19 August 2021

Advocate Ribane Panel 4 Chairperson Stream 2 19 August 2021

Ms Phetla Marketing and Communications Manager

18 August 2021

Ms Kelebogile Dingoko Acting HR Manager 18 August 2021

Mr Lawrence Panel 3 PM 23 August 2021

Mr Changfoot CFO 24 August 2021

Ms Mangope CEO 24 August 2021

3.4. We performed data analytics procedures on the data provided by the NAC:

3.4.1. Various GMS Data; and

3.4.2. Panel 1 and 2 Indexes approved by Exco.

1 Refer to Annexure A - List of documents received from Cosec


4. FINDINGS

4.1 Our findings are detailed in the sections below set out under the following sub-headings:

A. Inception of PESP

B. PESP Resource plan

C. PESP processes and procedures, (Compliance, Evaluation, Adjudication)

a. Stream 1

b. Stream 2

D. Grant Management System

E. Funding of PESP

F. PESP Objectives

A. Inception of PESP

4.1. In terms of the PESP proposal, NAC was responsible for managing the following objectives of the

PESP2:

4.1.1. To offer support for employment retention opportunities through an open call for proposals

that will benefit 7,000 beneficiaries in the cultural and creative institutions and organisations

(Stream 1), with an allocated budget of R100 million; and

4.1.2. To create work opportunities for 8,000 beneficiaries through an open call for proposals in

the cultural and creatives industries (Stream 2), with an allocated budget of R185 million.

4.2. On 27 October 2020, the Chairperson of the NAC Council, Mr Hartley Ngoato (“Mr Ngoato”)

addressed a letter to Dr C.S Khumalo (“Dr Khumalo”), the Deputy Director General at the DSAC,

informing Dr Khumalo that Ms Kesebogile Rosemary Mangope (“Ms Mangope”) the CEO of NAC,

has been granted authority by the NAC to sign the Memorandum of Agreement and all other

documents as may be required between DSAC and the NAC for the implementation of the PESP.

4.3. We inspected the “MEMORANDUM OF AGREEMENT WITH REGARD TO THE TRANSFER OF

PAYMENTS” (“MOA”)3 entered between the NAC and DSAC, signed on 02 November 2020 by

Ms Mangope, and signed by Mr Vusumuzi Mkhize (“Mr Mkhize”) the Director General (“DG”) of

DSAC on 3 November 2020.

4.4. The MOA also refers to the following Annexures as addendums:

4.4.1. Chief Executive Officer authorised by the Resolution of the Board of Directors referred to

as Annexure A4:

4.4.2. Supplier/ Entity Maintenance form referred to Annexure B5; and

4.4.3. PESP beneficiary funding proposal (“PESP proposal”) referred to as Annexure C.

2 Refer to Exhibit 01 - PESP Proposal, dated 02 October 2020 3 Refer to Exhibit 02 - Memorandum of Agreement, dated 02 November 2020 4 Refer to Exhibit 03 - CEO Resolution (Annexure A), dated 27 October 2020 5 Refer to Exhibit 04 - Supplier Entity maintenance form (Annexure of B), Not Dated


4.5. The MOA indicates that the agreement commenced on 29 October 2020 and will remain in full force

and effect until 30 June 2021.

4.6. The MOA provides financial support of R300 million for the PESP to the NAC, to be disbursed as

follows:

4.6.1. Stream 1 allocation of R100 million;

4.6.2. Stream 2 allocation of R185 million; and

4.6.3. NAC project management/ administration fee of 5% (R15 million) that may be levied from

the R300 million by the NAC.

4.7. The NAC agreed to obligations set out in Paragraph 6 of the MOA, under the heading

“OBLIGATIONS OF THE BENEFICIARY” of which some are referred to:

“6.1 ensure the implementation of effective, efficient and transparent financial management and

internal control systems throughout the duration of this agreement.

6.2 utilise the allocation provided by the Department exclusively and solely for the purpose of the

project;

6.3 keep full and proper records of its financial affairs and do all things reasonably necessary to

ensure effective implementation and completion of the project”.

4.8. We inspected the PESP beneficiary funding proposal and noted the following eleven elements

covered in the proposal, reference to these elements will be referred to in different sections of our

report:

4.8.1. NAC’s approach the PESP;

4.8.2. NAC’S PESP Streams;

4.8.3. Compliance documents;

4.8.4. Guidelines;

4.8.5. Adjudication criteria;

4.8.6. Process flow;

4.8.7. Human resource approach;

4.8.8. Risk register;

4.8.9. Role allocation between DSAC and NAC;

4.8.10. Call for application; and

4.8.11. Press statement.


B. PESP Resource Plan

4.9. In order to determine if there were any irregularities or inconsistencies in the management, of PESP

applications, we obtained an understanding of the roles of the various stakeholders.

4.10. We inspected a PESP resource plan and noted the following key resources identified in the

management and adjudication processes of the PESP applications as indicated in Table 2, below:

Table 2: NAC Resource plan for PESP

Requirements Resource Duration

PESP Project Direction and Oversight

Internal: CEO Permanent staff

Project Risk and Finance Oversight

Internal: CFO Permanent staff

Overall / Senior Project Manager Contractor:

Eugene Marillier-Malotana

6 Months

Project Advisor Internal: ADM, Julie Diphofa Permanent staff

Project Strategic Direction Contractor: Cobi Labuscagne 6 Months

Project Manager Contract 6 Months

Administrator Contract 6 Months

Review and verification assistance

Contract 1.5 Months

PMs All NAC Capacity Building PMs who are available and additional industry experts

1.5 Months

4.11. Ms Marillier provided us with a copy of an PESP Organogram indicating the actual number of

individuals used for the duration of the PESP.

4.12. According to paragraph 42 of the Council meeting of 19 September 20206, all HR requirements for

the PESP were prepared and posted on the NAC website7. Based on our inspection of the job

descriptions posted on the NAC website with the closing date, 15 September 2020, the following

fixed term contracts were advertised:

4.12.1. One HR Generalist;

4.12.2. Two Finance Officers;

4.12.3. Four Project Administrators;

4.12.4. Two Marketing and Communications Assistants;

4.12.5. Five Project Managers;

4.12.6. One GMS/ IT Help Desk Administrator;

4.12.7. One Senior Administrator; and

4.12.8. Four Call Centre Operators.

6 Refer to Exhibit 05 - Minutes of Council Meeting, dated 19 September 2020 7 Refer to Exhibit 06 - PESP Organogram, Not Dated


4.13. We identified the following roles and responsibilities of the key stakeholders in the management,

adjudication, and approval of PESP applications as informed by the Senior Project Manager (“SPM”):

4.13.1. CEO;

4.13.2. CFO;

4.13.3. SPM;

4.13.4. Project Manager;

4.13.5. Review, Monitoring and Evaluation Officers (“RMEs”);

4.13.6. PMs; and

4.13.7. Executive Council Members (“Exco”).

B.1 Roles and responsibilities of key stakeholders

CEO - Ms Mangope

4.14. Ms Mangope was responsible for the management and execution of the PESP, this is according to

Paragraph 5.2 of the MOA that states, “The Beneficiary hereby appoints Kesebogile Rosemary

Mangope or her duly authorised representative to serve both as Liaison Officer and project Manager

between the respective parties and is responsible for managing the execution of the project to finality”

4.15. We inspected the email, dated 27 October 2020, from Ms Mangope addressed to Ms Diphofa with

the subject matter “Contract for signature”, the emails state the following8:

“Dear Julie

Attached please find your contract for the PESP for your signature. Feel free to add more given your

expertise. Please note that during the coaching session today Management agreed on developing a

Task Organogram led by this type of contract. You are hereby requested to develop a KANBAN

reflecting deliverables and timelines. IT will develop a shared cloud document to allow all of us to

view where matters are at, at all times.

Should you have any questions please do not hesitate to contact me.

Regards”

4.16. The PESP contract letter paragraph 3, states that Ms Diphofa undertake the following

responsibilities9:

“Deliverables for PESP

- Provide advice and guidance to the oversight team on the scoping of the PESP

- Manage deliverables of the ADOs working on the PESP as per the schedule provided by the

Senior Project Manager

- Oversee communication with Panels and scheduling of Panel meetings

8 Refer to Exhibit 07 - E-mail from Ms Mangope to Ms Diphofa, dated 27 October 2020 9 Refer to Exhibit 08 - Paragraph 3 of PESP contract letter of Ms Diphofa, dated 27 October 2020


- Oversee relevant contracting, monitoring and evaluation together with the Senior Project

Manager

- Oversee appeals process with Senior Project Manager

- Develop specific MoAs for the PESP with Panel Members

- Any other tasks as May be required to successfully achieve the PESP project”.

4.17. Ms Diphofa informed us that she signed the PESP contract that was issued to her by Ms Mangope.

4.18. We questioned Ms Diphofa, whether she performed all the deliverables as stated in the PESP

contract letter.

4.19. Ms Diphofa informed us that she was not very active in the PESP, because she was managing two

other projects and the PESP was managed by Ms Mangope with the assistance of the Senior Project

Manager/Ms Marillier.

4.20. Ms Diphofa also informed us that she assisted with the following matters regarding PESP:

4.20.1. Provided advisory services to the Senior Project Manager and other team members as and

when requested.

4.20.2. Provided administrative assistance to Panel 3, during one of the panel meetings

in December 2020;

4.20.3. Attended most of the funding update meetings.

CFO - Mr Changfoot

4.21. Mr Changfoot informed us that he received a PESP contract that was issued by Ms Mangope during

October 2020, which states various responsibilities that Mr Changfoot had to undertake regarding

the PESP. We have yet to receive the contract referred to by Mr Changfoot.

4.22. Mr Changfoot further informed us that he did not sign the abovementioned contract because the

deliverables were aligned to his core roles and responsibilities as CFO.

4.23. Mr Changfoot informed us that the role of Finance in regard to the PESP, were only involved after

Exco approved applications, as they had to facilitate the respective payments to beneficiaries.

4.24. Our review of the delegation of authority limits the role of the CFO to the release of project funds

after Council approval.

Senior Project Manager- Ms Marillier

4.25. On 15 September 2020, Ms Mangope signed an offer of extension of contract letter addressed to

Ms Marillier for the position of Senior Project Manager (“SPM”) for two projects. The contract period

was 01 September 2020 to 31 March 202110:

4.25.1. DSAC COVID-19 Relief Fund; and

4.25.2. PESP.

10 Refer to Exhibit 09 - Extension of contract letter for the period 1 September 2020 to 31 March 2021, dated 15 September 2020


4.26. The extension of contract letter also refers to the following eighteen work deliverables as indicated

in Annexure A in respect of the PESP:

“Provide overall project management to deliver an end to end PESP Project on behalf of the DSAC:

- Develop the project call in line with DSAC guidelines;

- Establish NAC working teams to review and recommend, or decline applications for the

two PESP streams;

- Oversee the GMS application form development process;

- Manage induction of new teams;

- Manage the timelines and deliverables of the process flow;

- Manage deliverable of all team members against agreed upon timelines;

- Communicate frequently with PESP internal team;

- Liaise with the DSAC on a regular basis and provide regular project reports and other

reports as and when required;

- Sit as a representative of the NAC on all technical committee meetings;

- Provide Virtual Communication sessions for applicants prior to the call closing;

- Provide support to the NAC panels during the adjudication process;

- Provide support to the NAC Council during the adjudication process;

- Oversee issuing of approval letters, contracting and decline letters;

- Provide Virtual Communication sessions for beneficiaries after contracting;

- Oversee disbursements to beneficiaries;

- Oversee the panel appeals process;

- Manage monitoring and evaluation process; and

- Provide a final close out report for both the NAC and DSAC”.

4.27. Ms Marillier accepted the offer and signed the extension of contract for the position SPM on

15 September 2020, and her basic salary was R60,000.00 per month.

4.28. Ms Diphofa confirmed via email correspondence that Ms Marillier worked on both the PESP and

DSAC COVID-19 Relief Fund projects during the period September 2020 to 31 March 2021.

4.29. Ms Diphofa also informed us that the DSAC COVID-19 Relief Fund project terminated on 31 March

2021. Therefore implying that Ms Marillier worked solely on the PESP during the period 1 April 2021

to 30 June 2021.

4.30. Ms Matsebe confirmed via email that the salary of Ms Marillier was paid from the PESP budget for

the period October 2020 until June 2021.

4.31. Ms Marillier was working on a non-PESP related project for six months (October 2020 to March 2021)

whilst receiving remuneration from the PESP funding, which contravenes paragraph 6.2 of the MOA,


that states, “utilise the allocation provided by the Department exclusively and solely for the purpose

of the project.”

4.32. The salary paid to Ms Marillier during October 2020 to March 2021, was not exclusively for working

on PESP. The salary paid during the six-month period amounts to R360,000.00 (R60,000.00 x 6

months) and this payment amounts to irregular expenditure as it contravenes paragraph 6.2 of the

MOA.

4.33. We find that Ms Mangope failed to comply with Section 57 (c) of the PFMA, as she did not take

effective and appropriate steps to prevent the irregular payment of Ms Marillier salary of

R360,000.00, as the PESP funds were not exclusively used for PESP related work.

4.34. Prior to Ms Marillier’s appointment as SPM, she was contracted for a 12-month period,

01 August 2019 until 30 September 2020 to NAC in the capacity as Arts Development Officer

(“ADO”)11.

4.35. Ms Marillier informed us of the following:

4.35.1. She was working on the Second Wave project, which she was working on in the capacity

as a contracted ADO, when she was offered the position of SPM by Ms Mangope.

4.35.2. She did not expect to be offered the position SPM for PESP, because of her commitment

to an existing project and she assumed that Dr Labuscagne would assume the role of SPM

for PESP.

4.35.3. At management meetings the matter was discussed by Ms Mangope to appoint her as SPM

for PESP.

4.36. The offer to appoint Ms Marillier as a SPM was not supported by a formal written submission

motivating why the position was not advertised. During consultation with Ms Dingoko, she informed

us that no HR submission requesting for the deviation of appointment of the PESP Senior Project

Manager is in the personnel file of Ms Marillier.

4.37. In the absence of a formal submission motivating for the deviation to appoint Ms Marillier, as the

SPM for PESP. Ms Mangope failed to follow generally accepted recruitment practices.

4.38. Ms Marillier was not eligible to be offered an extension of contract letter as SPM, as she was not

previously employed in the capacity of a SPM. During consultation with Ms Marillier, she regarded

the offer of appointment as SPM as a promotion from the position she occupied at the time.

4.39. The appointment of Ms Marillier in the position as SPM was irregular based on the following:

4.39.1. No recruitment procedures were followed in filling the position of SPM for PESP.

4.39.2. A formal submission was not prepared, authorising the appointment of Ms Marillier as SPM.

4.39.3. The extension of contract as a SPM should not have been offered to Ms Marillier, the

portfolio of a SPM is different to Ms Marillier’s initial contract as an ADO within the NAC.

11 Refer to Exhibit 10 - Contract letter appointing Ms Marillier as Arts Development Officer, dated 25 September 2020


Project Manager

4.40. We noted from the Organogram that the following ten individuals, (indicated in Table 3 below) were

appointed as project managers to work on PESP on a contract basis for 6-months:

Table 3: Details of Project Managers appointed for PESP

# Name Contract period

1 Zola Lumko 05/11/2020 - 30/04/2021

2 Nqobile Tshabalala 05/11/2020 - 30/04/2021

3 Andrea Voges 05/11/2020 - 30/04/2021

4 Mayenziwe Zuma 05/11/2020 - 31/05/2021.

5 Nolitha Peter 09/11/2020 - 30/04/2021

6 Tshepo Alex Malapane 07/12/2020 - 31/03/2021

7 Trevi-Jean Le Pere 02/02/2021 - 31/05/2021

8 Thulile Ndlovu 02/02/2021 - 31/05/2021

9 Rosie Katz 12/03/2021 - 30/06/2021

10 Themba Maseko 19/04/2021 – Date not provided

4.41. We noted that five Project Managers were appointed during the open call for proposals period, and

the other five Project Managers were appointed after the closing date of the PESP applications on

GMS.

4.42. We inspected a job advertisement of numerous positions and note the following responsibilities of

the Project Manager12:

“The incumbents must have knowledge of the arts, culture and heritage sector in South Africa and

grant funding experience. Experience in other government agencies, institutions or departments

will also be welcomed. In addition to this, have strong team management and leadership skills,

advanced Excel competency and managing large volumes of data. The key responsibilities for

this role are planning, execution, time management, documentation management, trouble-shooting,

monitoring and evaluation.

Additional role requirements are

− Sound Problem-solving ability;

− Activity and resource planning;

− Organising and motivating a project team;

− Team and resource management;

12 Refer to Exhibit 11 - Job advertisement of numerous PESP positions, Not Dated


− Control time management;

− Analyse and manage project risk;

− Create and update workflows and project plans;

− Monitor project progress and address potential issues;

− Manage reports and documentation;

− Monitor and report on project progress;

− Prepare and provide documentation to internal teams and key stakeholders;

− Act as a point of contact for stakeholders;

− Ensure stakeholder satisfaction;

− Ensure that governance protocols are adhered to;

− Ability to communicate at all levels of the organisation

− Sound MS Office Skills (excellent MS Word and MS Excel ability required);

− At least seven year’s work experience in a project management role;

− Diploma or degree in a relevant field required;

− Ability to work long and late hours for the duration of the project”.

4.43. Ms Marillier informed us that the Review, Monitoring Evaluation Officers provided administrative

support services to the Project Managers.

Review Monitoring and Evaluation Officers

4.44. We inspected a job advertisement of numerous positions and note the following responsibilities of

the RMEs (Previously referred to as Project Administrators):

− Sound knowledge of the arts, culture and heritage sector in South Africa;

− Sound MS Office Skills (excellent MS Word and MS Excel ability required);

− Scheduling regular meetings and recording decisions (Excellent command of written and

spoken English required);

− Prepare and provide documentation to internal teams and key stakeholders;

− At least two year’s work experience in a project administrator, project coordinator or similar

role;

− Diploma or degree in a relevant field required;

− Ability to work long and late hours for the duration of the project.


NAC Panel members

4.45. Section 11 (1) of the NAC Act, states that Council may establish an advisory panel for every field of

the arts it deems necessary.

4.46. We were informed by the Company Secretary (“COSEC”) that the PMs were appointed through a

process of an open call to serve on NAC panel during August 2018, the NAC was therefore not

required to advertise and fill these portfolios for the PESP.

4.47. We requested to be provided with the terms of reference of the advisory panel and were directed by

Ms Diphofa to paragraph 9, of the draft terms of reference for Committee of Panel Chairs (“CoPC”)

dated December 2020, which indicates the roles of the advisory panel.

4.48. According to paragraph 9.1 of the CoPC the advisory panel is a team of experts nominated through

a public nomination process and serve a 3-year term.

4.49. We inspected the minutes of the Council meeting dated 27 January 2021, and noted from paragraph

22 k, that the advisory panel consist of 35 advisors and only 19 advisors were available to work on

the PESP. We requested to be provided with the schedule of the 35 panel advisors and to date this

information remains outstanding.

4.50. Ms Marillier informed us that the following 21 individuals (5 Council members and 16 PMs), indicated

in Table 4 below, formed part of the PESP PMs who were responsible for evaluation of the

applications:

Table 4: PMs used during PESP

# Name Panel Member Portfolio

1 Arthur Zitha Panel member

2 Carol Brown Panel member

3 Celeste Matthews-Wannenburgh Panel member

4 Conroy Cupido Panel member

5 Dave Tudor Panel member

6 Kearabilwe Malao Panel member

7 Kingdom Moshounyane Panel member

8 Mandy Van der Spuy Council member

9 Michael Arendse Council member

10 Molebogeng Mokomele Panel member

11 Nakedi Ribane Council member

12 Njabulo Mkhondo Panel member

13 Njabulo Mthimkulu Panel member

14 Papama Mnqandi Panel member

15 Rosie Katz Panel member

16 Same Mdluli Council member


# Name Panel Member Portfolio

17 Themba Luthuli Panel member

18 Theo Lawrence Panel member

19 Thoko Nogabe Council member

20 Tsietsi W D Mohapi Panel member

21 Zothani Vilakazi Panel member

4.51. We noted the following anomalies in respect of the constitution of the PMs that formed part of the

PESP evaluation process:

4.51.1. Council members performed actual evaluation of applications on GMS, which is in

contravention of Section 11(2) of the NAC Act.

“Every advisory panel shall consist of no more than five persons who have achieved

distinction or have special knowledge or experience in the field of the arts in question. and

[sic] were not members of the Council.”

The following Council members served as PMs of the PESP:

4.51.1.1. Adv. Ribane;

4.51.1.2. Cllr Nogabe;

4.51.1.3. Cllr Arendse;

4.51.1.4. Dr Mduli; and

4.51.1.5. Cllr Van der Spuy.

4.52. We obtained a payment scheduled from the NAC Finance unit, indicating that R511,452 was paid

from PESP funding to the five Council members while serving as PMs during the period November

2020 to March 2021.

4.53. The breakdown of the R511,452 payment to the five Council members are as follows. We regard

these payments as irregular as Council members were paid for performing work of PMs:

4.53.1. Adv. Ribane was paid R141,813;

4.53.2. Cllr Nogabe was paid R87,767;

4.53.3. Cllr Arendse was paid R103,798;

4.53.4. Dr Mduli was paid R121,297; and

4.53.5. Cllr Van der Spuy was paid R56,776.


4.53.6. Council members did not comply with the business practices of NAC as stated in paragraph

9.3 of the CoPC under the heading “Composition of the Advisory Panel” states the

following:

“Four people should be appointed as members of the Advisory Panel per funding program;

and the fifth (5 th) member should be a Council member who chairs a specific Panel. In the

absence of a Panel Chair, the Chair of the Panel shall appoint one of the members of the

Panel of Chairpersons Committee to act as the Chairperson in consultation with the

Chairperson of the POCC. The number of meetings convened would be as and when calls

for applications are made.”

4.53.7. Paragraph 49 of the minutes of the Council meeting of 19 September 2020, Council

resolved that:

Regarding the opportunity for Council members to take up contracting positions within the

NAC during this period, the Council resolved that they would not be taking up this

opportunity and would remain in their oversight role. This was to ensure that the Council

remains as the due diligence body that checks that processes were being followed

properly.”

4.54. We were not provided with any document approving the deviation from the required prescripts

indicated in Section 11(2) of the NAC Act. In the absence of such a document, we find that Council

contravened Section 11(2) of the NAC Act.

4.55. We also find that Council disregarded their own resolution of 19 September 2020 by allowing the

above five Council Members to actively participate as PMs, in the evaluation of applications.

4.56. We find that Ms Mangope failed to advise Council to adhere to Section 11(2) of the NAC Act, as well

as Council resolution of 19 September 2020 and did not ensure that internal controls of the NAC was

maintained within her area of responsibility.

4.57. We were not provided with any document approving deviation from the required prescripts indicated

in Section 11(2) of the NAC Act. In the absence of such a document, we find that Council contravened

Section 11(2) of the NAC Act.

4.58. We inspected a document titled “PESP PROCESS FLOW 30 October 2020 TO 30 April 2021” and

noted the following seven processes that had to be undertaken by the PM under the heading

“Recommended Panel Review Process”13:

“1. Panel Members will receive only “Proceed” application forms from Project Managers (PMs) after

a cycle or batch has been reviewed by the Review Monitoring and Evaluation (RME) Officers;

13 Refer to Exhibit 12 - PESP Process flow 30 October 2020 - 30 April 2021, Not Dated


2. Panel Members will be allocated “Proceed” applications only. A spreadsheet with declined

applications, indicating the reasons for declining each application will be provided to Panel members

for review;

3. Each panel member will be required to review each “Proceed” application, meaning that each

application will be reviewed by all panel members in a panel (This May be reviewed depending on

the number of applications reviewed, and in discussion with panel members);

4. On the “sitting” day, each panel member will be required to have reviewed all applications allocated

to them;

5. During the “sitting” meeting, it is recommended that applications that have received at least three

“Proceeds” from the full panel be recommended for approval. It will therefore be applications that

have received three declines from each of the panels that will be considered in the meeting. This

process is recommended in order to address the anticipated volume of applications that will be

received, including the time limits within which applications have to be reviewed and announced.

6. The above proposed process therefore calls for all panel members to have reviewed ALL

applications by the time of the panel sitting.

7. A spreadsheet of all recommended and declined applications will be prepared for the Council

Committee approvals process”

4.59. PM entered into agreement with the NAC for the purposes of the PESP by signing the panel

Memorandum of Understanding for PMs (“MOU”) that was issued by Ms Mangope dated

12 November 202014.

4.60. We understand that each PM had to sign the acceptance of these processes. We were only able to

inspect the MOU signed by 10 PMs as we have not had sight of the remaining six PMs’ signed

acceptance letters. We are yet to be provided with the signed documents for the remaining six PMs.

4.61. PM agreed to the following ten deliverables as stated in the MOU:

“- Assist in disseminating the PESP call for application to your database and networks

- Be available as a spokesperson for the PESP if the need arises

- Familiarise yourself with the structure and outline of the PESP

- Familiarise yourself with the process flow of the PESP

- Familiarise yourself with guidelines, criteria and scoring for the PESP

- Review applications as per the schedule provided by the Senior Project Manager

- Complete the review of all allocated applications prior to the set panel meetings

- Score applications on GMS prior to the set panel meetings

- Attend the full panel meeting on the designated date

14 Refer to Exhibit 13 - Memorandum of Undertaking, dated 12 November 2020


- Create reports on application rejection, verification and acceptance as per the needs and

specifications of the Senior Project Manager before and after panel meetings where needed”

4.62. When reviewing the seven requirements stated in the panel review processes and the ten

deliverables stated in the MOU, we find that PM committed to undertake both these procedures and

any deviation from the set deliverables will amount to possible breach of contract.

Exco

4.63. The role of Exco was to approve the applications adjudicated by the different panels.

4.64. Ms Mangope informed us that Council resolved to delegate the approvals of PESP applications to

Exco. We have not been provided with any documents to support this Delegation of Authority. In the

absence thereof, Exco did not have the delegated authority to approve PESP applications.

4.65. Exco held six meetings where submissions to approve PESP applications were presented during the

period 30 November 2020 to 30 December 2020.

4.66. The following Individuals were either in attendance or not present at all six Exco meetings:

Table 5: Summary of attendance of Exco meetings 26 November 2020- 30 December 2020

[Legend: Present Apology Not invited for attendance]

Name Portfolio 30/11 6/12 11/12 18/12 19/12 30/12

Hartley Ngoato Chairperson

Jabu Dlamini Deputy Chairperson

Prof Sekgothe Mokgoatsana Council member

Jerry Mabuza Council member

Michael Arendse Council member

Avril Joffe Council member

Mandie van der Spuy Council member

Dr Same Mduli Council member

Erica Elk Council member

Attendance by Invitation only

Rosemary Mangope CEO

Clifton Changfoot CFO

Eugene Marillier SPM

Dr Cobi Labuscagne NAC Contractor

Zola Lumko

Julie Diphofa ADM

C. PESP Process and procedures

4.67. The PESP was advertised as an open call for proposals and individuals and formally registered

institutions, organisations and groups could apply for funding. All applicants had to be South African

citizens and over eighteen years of age.


4.68. Applicants were encouraged to apply for PESP funding via the online platform on GMS.

4.69. The applications for both streams opened on 30 October 2020 and the closing date for Stream 1

applications was 20 November 2020 and Stream 2 was 27 November 2020.

4.70. According to paragraph 5.5 of the PESP Proposal application had to meet the following

administrative requirements to proceed to the next phase which was evaluation of applications by

PMs. Paragraph 5.5 states the following, “Applicants are required to submit all documents listed in

the application form via the online platform. Faxed, unsigned, e‐mailed and incomplete applications

will not be accepted. Incomplete applications will not be considered and will automatically be

disqualified.”

4.71. During evaluation phase, applicants would be evaluated against the set criteria and their applications

would be scored by PMs.

4.72. The PESP Proposal document reflected a Process flow, which indicates specific tasks with timelines

allocated to it, and the success of the PESP would be measured against NAC’s strict adherence to

these timelines.

4.73. We noted a Risk Register referred to in paragraph 8 of the PESP Proposal that consists of 11 risks.

The Risk Register was prepared during the preparation of the PESP Proposal document, which

mostly addresses reputation risks. We were not provided with any subsequent Risk Register

assessing the risks as the PESP project progressed.

4.74. During consultation with Ms Marillier, she informed us that due to competing priorities relating to the

day-to-day administration of the PESP, no amendments to the Risk Register was performed.

C.1 PESP Communication Plan

4.75. According to Ms Phetla, a PESP Communication Plan was adopted by NAC with the purpose of

making the public aware of the PESP project and to understand the messages15.

4.76. We noted from the Communication Plan that social media in conjunction with other media platforms

such as google adverts, website publications, radio, newspapers, art publications, newsletters,

contact sessions with various stakeholders were used in respect of public awareness.

4.77. Ms Phetla also provided us with a PowerPoint presentation addressed and presented to DSAC on

11 November 2020, that indicates the progress of the various media platforms used in order to

achieve the objective of public awareness16.

4.78. We conducted an independent analysis on some of the media platforms and can confirm with the

information presented on the various media platforms.

4.79. Thus, the above confirms that NAC raised public awareness of the PESP project.

15 Refer to Exhibit 14 - PESP communication plan, dated 30 October 2020 16 Refer to Exhibit 15 - PESP Communications Presentation, dated 11 November 2020


C.2 PESP Evaluation process and procedures

4.80. In order to determine if there were any irregularities or inconsistencies in the adjudication, and approval

of PESP applications, we took guidance from the information recorded on the Grant Management

System (“GMS”).

4.81. The findings as set out in this report, are based on the primary evidence obtained from the GMS.

4.82. The GMS is a live, online system, and all applications were submitted on this platform.

4.83. The GMS provides data in respect of the evaluation, adjudication, funding of PESP applications as

well as access to a selection of reports.

C.3 PESP application process

4.84. We requested the Standard Operating Procedure (“SOP”) document in respect of PESP evaluation,

adjudication and approval processes. We understand that such a document does not exist at the

NAC. We established through consultations with various PESP team members that the following

administrative processes were followed:

4.84.1. Administrative compliance reviews commenced prior to the closing date of PESP

applications.

4.84.2. Only applications that met all administrative compliance requirements were issued to PMs

by the SPM and or the Project Manager of that panel.

4.84.3. PMs were divided into groups of 3/4 people and were allocated applications per Stream

per category (individual/organisation).

4.84.4. The same PESP application was issued to the PMs of a specific panel. PM then individually

evaluated each application and scored each application on the GMS based on the set

evaluation criteria.

4.84.5. Panel meetings would be convened per panel and a report would be compiled for final

consideration, to proceed or not to proceed.

4.84.6. The panel recommendations would be presented to Exco for adjudication.

4.84.7. Applicants would be informed on the outcome of their applications through grant notification

letters (“GNL”).

D. Grant Management System

4.85. Our report focuses on the analysis of the following data obtained from GMS, that is verified against

the work performed by the various PESP teams:

4.85.1. PESP applications received;

4.85.2. Administrative Compliance of PESP applications;

4.85.3. Evaluation of PESP applications; and

4.85.4. Adjudication of PESP applications.


D.1. PESP applications received

4.86. The opening and closing period, for online PESP applications were as follows:

4.86.1. Stream 1: 30 October 2020 to 20 November 2020; and

4.86.2. Stream 2: 30 October 2020 to 27 November 2020.

4.87. Our analysis of the GMS identified that a total of 5,201 applications were received, and the total funds

applied for by the applicants amounted to R3,6 billion, as indicated in Table 6 below:

Table 6: Summary of PESP applications received during 30 October 2020 to 27 November 202017

Stream 1 Number of applications

Amount requested by applicants (ZAR)



Individual 536 18,004,779.99 Individual 1,959 357,176,541.48

Organisations 505 254,500,977.03 Organisations 2,201 3,021,515,195.73

Total

Stream 1

1,041 272,505,757.02 Total

Stream 2

4,160 3,301,288,258.97

Total number of applicants: Stream 1 & 2 5,201

Total amount applied for by applicants: Stream 1 & 2 3,651,197,494.23

4.88. Our analysis of the GMS identified that 2,716 of the 5,201 PESP applications were automatically

disqualified due to incomplete information (GMS code description 1 &11) submitted/recorded on the

GMS online application platform.

4.89. This therefore implies that 2,485 PESP applications qualified to proceed to the administrative

compliance process, the breakdown of these applications is provided in Table 7 below:

Table 7: Computation of incomplete applications rejected on GMS18

Description Stream 1 Stream 2 Total

Individual Organisations Individual Organisations

Number of open applications received

536 505 1,959 2,201 5,201

Less number of incomplete applications on GMS

(Code 1 & 11)

-338 -248 -1,156 -974 -2,716

Applications to be reviewed for admin compliance and evaluation

198 257 803 1,227 2,485

Total Stream 1 applications qualified to proceed to administrative compliance

455 Total Stream 2 applications qualified to proceed to administrative compliance

2,030

17 Refer to Annexure B - Summary of PESP applications received during 30 October 2020 to 27 November 2020 18 Refer to Annexure C - Computation of incomplete applications rejected on GMS


4.90. According to the minutes of the Exco meeting of 30 November 2020, the NAC Management reported

that 455 Stream 1 and 2,030 Stream 2 PESP applications were received, that correspond with the

data on GMS19.

4.91. The actual number of applications received and the monetary value thereof, was known to Council

as early as 30 November 2021. Thus, implying that the allocated budget of R285 million would not

be sufficient to address the projected funds applied for, amounting to R3,651,197,494.23.

4.92. We found no evidence of oversight in respect of risk governance, exercised by Council, regarding

the implementation of the PESP within the allocated budget of R285 million.

4.93. Other than the process flow document (paragraph 6, of the PESP Proposal), which set specific

timelines for the execution of deliverables. We found no evidence that Ms Mangope submitted a

formal proposal to DSAC to revise the timelines of the process flow document or propose different

management controls to ensure that the PESP objectives are met.

4.94. In the absence of any re-assessments of the process flow, after knowing the actual number of

applications received and the monetary value of their applications, it implies that the PESP

Management team was comfortable that the PESP objectives would be achieved within the required

timelines by the PESP resource team.

D.2 PESP Administrative Compliance

4.95. We analysed the GMS spreadsheet that includes all approved applications as at 02 July 2021 (date

GMS data obtained by Mazars). Our analysis did not consider the declined, incomplete, errors on

applications and cancelled applications.

4.96. The number of instances whereby the required administrative compliance documents were not

provided is reflected in Table 8 below. We considered any application that has at least one incorrectly

submitted document, as non-compliant.

Table 8: Mazars findings for not meeting administrative compliance requirements20

Document required for compliance Stream 1 Stream 2

Number of approved applications inspected 1,041 4,160

Annexure B: Filled job reporting template (not completed) 20 135

Proof of Bank Account / Bank Statement 28 2

Certified copies of SA ID’s (not older than 3 months) of one office bearers of the organisation

1 6

Original valid tax clearance certificate or PIN for the organisation 15 47

Latest/recent organisations original banks statement (within the past 3 months) 23 103

Certified copy of the organisation’s registration certificate. 149 421

CV of the main applicant 196 19

19 Refer to Exhibit 16 - Minutes of Exco meeting dated 30 November 2020, dated 30 November 2020 20 Refer to Annexure D - Mazars findings for not meeting administrative compliance requirements


Document required for compliance Stream 1 Stream 2

Examples of your organisation’s previous works in the form of photographs, brochures, or other published/printed materials

1 9

1 letter of reference (signed and dated) from other arts organisations 188 15

Total non-compliant projects 347 757

Total Declined Applications 107 1,050

Total Incomplete Applications 581 2,172

Total Cancelled Applications 1 4

Total erroneous Applications 5 3

4.97. As a point of departure, we only analysed documents that were submitted incorrectly and not those

that had compliance issues, for example, an uncertified document.

4.98. Based on our consultation with Ms Mangope, she informed us that GMS ought to have disqualified

all incomplete applications i.e., when a document is not provided. However, from the table above,

we noted 1,104 applications from both Stream 1 and Stream 2, where at least one incorrect document

was submitted.

4.99. During consultation with Ms Khan, she informed us that the GMS does not distinguish what type of

document an applicant may attached to the required field when completing an application. This

means that an applicant can attach a bank statement document in the identity document field, the

GMS will only recognise that a document was attached to the required field. The validity checks of

the actual document had to be performed during the administrative compliance check process by the

NAC.

4.100. The above non-compliance matters referred in Table 8, ought to have been identified during the

administrative compliance review process by the following admin reviewers (number of applications):

4.100.1. Stream 1

4.100.1.1. Alpheus Matlou (2)

4.100.1.2. Andrea Voges (144)

4.100.1.3. Cobi Laubscagne (38)

4.100.1.4. Nomalanga Nkosi (16)

4.100.1.5. Nqobile Tshabalala (135)

4.100.1.6. Palesa Mopeli (8)

4.100.1.7. Simangaliso Thango (4)

4.100.2. Stream 2

4.100.2.1. Alpheus Matlou (62)

4.100.2.2. Andrew Nkadimeng (42)

4.100.2.3. Charmaine Monareng (23)


4.100.2.4. Cobi Laubscagne (50)

4.100.2.5. Gabisile Motuba (21)

4.100.2.6. Mayenziwe Zuma (86)

4.100.2.7. Modise Khumalo (19)

4.100.2.8. Nolitha Peter (17)

4.100.2.9. Nomalanga Nkosi (13)

4.100.2.10. Palesa Mopeli (3)

4.100.2.11. Puleng Lesala (29)

4.100.2.12. Rosie Katz (32)

4.100.2.13. Simangaliso Thango (57)

4.100.2.14. Simangele Hlophe (24)

4.100.2.15. Sithembiso Bose (44)

4.100.2.16. Tshepo Malapane (5)

4.100.2.17. Vuyo Madyibi (40)

4.100.2.18. Zola Lumko (30)

4.101. Ms Marillier failed to ensure that paragraph 5.5 of the PESP Proposal was complied with, which

states the following:

“Applicants are required to submit all documents listed in the application form via the online platform.

Faxed, unsigned, e‐mailed and incomplete applications will not be accepted. Incomplete applications

will not be considered and will automatically be disqualified”.

4.101.1. The Review, Monitoring and Evaluation Officers and Project Managers who reviewed the

applications for administrative compliance failed to ensure that incomplete applications

were disqualified.

4.101.2. Ms Marillier was allegedly derelict in her duty by failing to monitor the administration

compliance processes to ensure that incomplete applications were disqualified, as stated

in paragraph 5.5 of PESP Proposal, which is a task assigned to her as a SPM.

4.101.3. Ms Mangope failed to provide adequate oversight and was negligent in managing the

execution of the administrative compliance processes which allowed 1,104 applications to

be considered for evaluation when they ought to have been disqualified.


D.3 PESP Evaluation process

Admin Review

Stream 1

4.102. We obtained a MS Excel report referred to as “PESP Project Application Review” and analysed the

456 applications that we reviewed for Stream 1. It should be noted that one of the initial incomplete

applications was included amongst the 455 applications to be reviewed for administrative compliance,

which therefore brought this total to 456.

4.103. The abovementioned reviews were conducted by the following individuals:

Table 9: Names and number of Stream 1 PESP applications issued for administrative compliance review21

Name of PESP team member

Portfolio Number of applications reviewed

Alpheus Matlou Reviewer, Monitoring Evaluation Officer 5

Andrea Voges Project Manager 182

Cobi Laubscagne Organisational Effectiveness Practitioner 53

Nomalanga Nkosi Reviewer, Monitoring Evaluation Officer 24

Nqobile Tshabalala Project Manager 177

Palesa Mopeli NAC Employee 10

Simangaliso Thango Reviewer, Monitoring Evaluation Officer 5

Total 456

4.104. We further analysed the 456 Stream 1 PESP applications reflected on the GMS, Microsoft Excel

report referred to as “PESP Project Application Review” as indicated in Table 10 below:

Table 10: Stream 1 - Review conducted by the administration review team22

Month No of Applications Allocated for Review

Approved for Administrative Compliance

Declined for Administrative Compliance

November 454 347 107

December - - -

January 1 - 1

No Completion Date 1 - 1

Total 456 347 109

4.105. From the above, we noted that 347 applications were approved for admin compliance in Stream 1

during November 2020.

4.106. One application was declined, 45 days after the date of issue to the respective team member.

21 Refer to Annexure E - Stream 1: Summary of Administrative Review per reviewer 22 Refer to Annexure F - Stream 1: Summary of Administrative Review per project


4.107. One application is unaccounted for, it is unclear whether this application (project number 3758901,

Good Clothing), was considered.

4.108. The PESP Management team executed the administrative verification and review processes

timelines in respect of Stream 1 applications, by concluding this process within nine days.

Stream 2

4.109. We obtained a MS Excel report referred to as “PESP Project Application Review” and analysed the

2,030 applications in respect of Stream 2 as reflected in Table 11 below:

Table 11: Stream 2 - Review conducted by the administration review team23

Month No of Applications Allocated for Admin Review

No of Applications Reviewed

Approved for Administrative Compliance

Declined for Administrative Compliance

November 494 351 256 95

December 1,536 1,646 711 935

January - 1 - 1

No Completion Date - 32 13 19

Total 2,030 2,030 980 1,050

4.110. From the above, we noted that 980 applications were approved for admin compliance in Stream 2

during November and December 2020.

4.111. 1,050 applications were declined of which one application was declined in January 2021.

4.112. 32 applications were allocated for admin review. However, the reviews were never finalised as no

completion date is recorded on GMS. Of these applications, 13 applications were recommended for

approval and 19 applications were declined.

4.113. The Project Manager and SPM failed to monitor the administrative compliance process in respect of

the 32 applications.

4.114. We find that the above analysis identifies the lack of adequate monitoring and control by the SPM

and the lack of oversight by Ms Mangope to ensure:

4.114.1. The administration compliance process ought to have commenced on 06 November 2020

and concluded on 15 December 2020. However, the administrative review process started

on 11 November 2020. During the period 11 November 2020 to 15 December 2020, only

494 applications were allocated for administration review.

4.114.2. The deliverables and timelines of the administrative compliance process flow of Stream 2

was managed, considering that the administrative verification and review processes

commenced five days later than what is stated in the Process flow.

4.114.3. More team/ staff members were deployed/ recruited to assist with the administrative

compliance processes in respect of the 2,030 Stream 2 applications.

23 Refer to Annexure G - Stream 2: Summary of Administrative Review per project


4.114.4. The administrative compliance team assessed all the applications that were issued to them

within a specific timeline.

4.114.5. Progress reports of work allocated to the different administrative team members were kept

and updated on a daily basis to assess progress.

Panel Evaluation

Stream 1

4.115. Although 347 applications qualified to proceed to evaluation, we found that the 109 applications that

were disqualified during the administration compliance process, were included for evaluation by the

Panel.

4.116. We found no Exco resolution or any subsequent request for deviation, approving the inclusion of the

109 disqualified applications to proceed to evaluation.

4.117. The Project Managers and the SPM acted without authorisation by allocating the 109 disqualified

applications for evaluation and therefore compromised the integrity of the evaluation processes.

4.118. Ms Mangope’s failed to oversee the management and execution of the administrative processes

relating to the inclusion of the 109 disqualified applications.

4.119. Ms Marillier informed us that one panel was established, to evaluate the 455 Stream 1 applications

that were split between:

4.119.1. 198 Individual applications; and

4.119.2. 257 Organisation applications.

4.120. During consultation with Dr Mduli, she informed us that on average, a PM would review 16

applications per day.

4.121. This panel consisted of seven PMs including the panel chairperson who was Ms Mandy van der Spuy

(“Ms van der Spuy”) who was also a member of the NAC Council.

4.122. Paragraph 5.8 of the PESP Proposal indicates that applications had to be evaluated against the

following four evaluation criteria as stated in Table 12 below, which had to be scored on GMS by

each PM:

Table 12: Stream 1 - Evaluation criteria

Assessment criteria Explanation Score

1. Demonstration of Job retention − Suitable job retention in the sector Out of 5

2. Transformation

The NAC has to strive

towards a transformed art

and culture sector

− Demographics of employment and

ownership

− Youth involvement

− Women involvement

Out of 5



− People with disabilities involvement

− Under-funded provinces

3. Number jobs retained − Number of jobs retained Out of 5

4. Sector experience − Track record

− Diversity or depth of experience

− Demonstration of some sector experience

− Knowledgeable of the field

− Technical capability to succeed

Out of 5

Total Out of 20

4.123. We analysed the applications allocated and reviewed by the Panel in respect of Stream 1 and found

that 456 applications were allocated to the PMs to evaluated even though only 347 applications

(applications that passed administrative compliance) had to be evaluated, as presented in Table 13

below:

Table 13: Stream 1 - Allocation and review of applications for review by Pane24l

Month No of Applications

Allocated to Panel

No of Applications

Reviewed

Recommended

to Approve

Recommended

Decline

November 225 184 162 22

December 231 269 185 84

January - 2 1 1

No Completion Date - 1 1

Total 456 456 349 107

4.124. Of the 456 applications allocated to the Panel, one reviewed application had no closing date whereby

the application was approved by the Panel. It is unclear therefore, whether this application was

evaluated.

4.125. Our analysis identifies that the PMs recommended 349 applications for approval and declined 107

applications. We found the 107 applications that failed admin compliance, were subsequently

declined as they also did not meet the required evaluation criteria for recommendation.

24 Refer to Annexure H - Stream 1: Summary of Panel Evaluation


4.126. The PMs evaluated an average number of 16 applications per day, therefore, implying that they spent

an average of six days to evaluate the 107 applications. As a result, the four PMs were paid R25,350

each (R4,225 x 6 days). The NAC therefore paid an estimated amount of R101,400 in this regard

4.127. The time that PMs spent on the evaluation of the 107 applications, and what they were subsequently

paid for, amounts to fruitless and wasteful expenditure, estimated at R101,400.

4.128. The failure by the SPM to adequately perform her duties, by including the 107 applications declined

during the admin review, resulted in a fruitless exercise of the Panel, evaluating these applications a

second time with a similar outcome.

Stream 2

4.129. Ms Marillier informed us that initially two panels were established to evaluate the Stream 2

applications that met the administrative compliance requirements, and a third panel chaired by Adv

Ribane for Stream 2 applications was subsequently establish on 23 December 2020, to assist in

managing the unallocated PESP applications.

4.130. The project team that worked on Stream 2, consisted of 17 PMs that were split into three Panels

which were chaired by the following Council Members:

4.130.1. Panel 2: Dr Mduli;

4.130.2. Panel 3: Cllr Arendse; and

4.130.3. Panel 4: Adv Ribane.

4.131. Paragraph 5.8 of the PESP Proposal indicates that applications had to be evaluated against the

following five evaluation criteria as stated in Table 14 below, which had to be scored on GMS by

each PM:

Table 14: Stream 2 - Evaluation criteria


1. A strong proposal is a demonstration of getting the sector back to work showing innovation

− Artistic Merit

− Creativity

− Innovation

− Economic spin-off

− Ambition

− New technologies

− Audience development

− Market Access

− Sustainability

− Legacy

Out of 10

2. The NAC has to strive towards a transformed arts and culture sector

− Demographics of employment

− Ownership

− Empowerment

Out of 10



− Youth involvement

− Women involvement

− People with disabilities involvement

− Under-funded provinces

− Showcasing of South Africa’s cultures including indigenous culture

− Showcasing of under-represented cultures

− Diversity

3. Number of jobs created − Number of jobs created Out of 10

4. Sector experience − Track record

− Diversity or depth of experience

− Demonstration of some sector experience

− Knowledgeable of the field

− Technical capability to succeed

Out of 10

Budget and activity plan − Logical budget

− Feasible budget

− Sufficient detail provided in budget

− Within industry standards

− Logical activity plan

− Feasible activity plan with timelines

− Logical resource structure

− Sufficient detail provided in project plan

− COVID-19 compliant

− All other documents are compliant

Out of 10

Total Out of 50

4.132. According to paragraph 6 of the Process flow the panel review processes had to commence on

9 November 2020 until 18 December 2020. Our analysis found that the applications were allocated

for evaluation as early as 11 November 2020.


4.133. We analysed the applications allocated and reviewed by the Panels on Stream 2 and found the

following in Table 15 below:

Table 15: Stream 2 - Allocation and review of applications for review by Panel25

Month No of Applications Allocated to Panel

No of Applications Reviewed

Recommended to Approve

Recommended Decline

November 140 127 97 30

December 964 544 419 125

January 647 998 442 556

February - 60 22 38

No Completion Date - 22 - 22

Total 1,751 1,751 980 771

4.134. Even though only 980 applications from the 2,030 applicants met administrative compliance, we find

that 1,751 applications were allocated to Panels for evaluation. This indicates that the SPM did not

manage the allocation of applications to PMs because 771 applications, which failed administrative

compliance, were evaluated.

4.135. We also found that 22 reviewed applications had no closing date whereby all 22 applications were

declined by the Panel. It is unclear therefore, whether these applications were reviewed by the Panel.

4.136. Our analysis of the GMS data also identified that three PMs did not complete the evaluation of all

allocated applications prior to the sitting of the first combined (individual and organisation) panel

meeting which took place on 28 November 2020.

4.137. Our analysis identifies that the PMs recommended 980 applications for approval and declined 771

applications. We found the 771 applications that failed admin compliance, were subsequently

declined as they also did not meet the required evaluation criteria for recommendation.

4.138. The PMs evaluated an average number of 16 applications per day therefore implying that they spent

an average of six days to evaluate the 771 applications. As a result, the eight PMs were paid

R101,400 each (R4,225 x 24 days x 2 Panels). The NAC therefore paid an estimated amount of

R811,200 in this regard

4.139. The time that PMs spent on the evaluation of the 771 applications, and what they were subsequently

paid for, therefore amounts to fruitless and wasteful expenditure, estimated at R811,200.


during the admin review, resulted in a fruitless exercise of the Panel, evaluating these applications a

second time with a similar outcome.

4.141. Furthermore, we find that numerous PMs were in breach of bullet 7 of the MOU they signed as PMs

which state, “Complete the review of all allocated applications prior to the set panel meetings”.

25 Refer to Annexure I - Stream 2: Summary of Panel Evaluation


4.142. The implicated PMs failed to comply with the deliverable to complete all allocated applications prior

to the set panel meetings as stated in the MOU. Ms Marillier informed us that she could not get

involved in the management and deliverables of PMs as it is the responsibility of the panel

Chairperson who managed and monitored the performance of PMs.

4.143. We find the explanation provided by Ms Marillier to be inconsistent with the terms and conditions of

her contract as SPM, which requires that she provides overall project management in respect of

timelines and deliverables of PESP. Ms Marillier failed to take effective and appropriate steps against

the implicated PMs.

4.144. We found no revised process flow document or any other management report or mitigating controls

to be implemented to ensure the successful management and execution of the PESP administrative

compliance processes for Stream 2 by the SPM and Ms Mangope.

D.4 PESP Adjudication process

Stream 1 and 2: Summary of Approvals

4.145. We identified numerous inconsistent information when comparing the information recorded in GMS,

Panel Indexes, the Panel reports presented to Council as well as the minutes of Exco meetings, as

indicated in Table 16 below:

Table 16: Inconsistencies identified in the information provided by the NAC in respect of Stream 226

Applications Source Individuals Organisations Total

Number of Applications Received

GMS 1,959 2,201 4,160

Panel Index 603 176 779

Panel Report 804 - 804

Exco Minutes 836 205 1,041

Number of Applications Approved

GMS 408 568 976



Exco Minutes 538 481 1,019

Number of Applications Declined

GMS 1,551 1,633 3,184



Exco Minutes 267 25 292

Applications unaccounted for/ Outstanding Review as at the last Exco meeting

GMS - - -

Panel Index - - -


Exco Minutes 87 51 138

4.146. The inconsistencies in the table above, is discussed further in the sections below.

26 Refer to Annexure J - Stream 2: Inconsistencies identified in the information provided by the NAC


Exco Meeting dated 30 November 2020

4.147. We inspected the minutes of the Exco meeting dated 30 November 2020, and noted the following

information presented by the NAC Management from item 2.1 paragraph 8, f, under the sub-heading

“PESP Update” which states:

“A breakdown of the first phase adjudication held on the 28th and the 29th of November 2020 was

provided. It was noted that National Treasury allocated R100m for Stream 1, of which R9.6m was

recommended for approval. The Committee raised concerns that the numbers were very far from the

target and the NAC needed to demonstrate that the numbers could be achieved. Management

highlighted that they were confident the numbers could be achieved. It was noted that the number of

jobs that could be retained in Stream 1 was quite high, even though the application numbers were

low. The possible jobs that could be retained were 200,000. Management was requested to include

in the report the information on the jobs being retained.”

4.148. Exco meeting dated 30 November 2020, resolved not to approve the PESP submissions presented.

Exco Meeting dated 06 December 202027

Panel meeting/ Panel report and Indexes – Stream 128

4.149. A Panel meeting for Stream 1 applications was conducted on 28 November 2020, to reconcile all the

applications evaluated amongst the PMs.

4.150. We inspected the minutes of The Panel meeting dated 28 November 2020, and noted the following

information stated in paragraph 10.2 under the sub-heading “Applications Received in Stream1

(Individuals)” which states the following:

− “Number of applications declined by reviewers: 158

− Number of applications serving on the panel agenda:102

− Total number recommended for approval by panel: 8

− Total number still under review for compliancy:94

− Total amount requested from applications on panel agenda: R9 020 259

− Total amount of individual projects recommended by panel: R211 600”

4.151. It is unclear why the Panel Report refers to the declined 158 applications, as these applications were

disqualified as incomplete applications during the online registration processes on GMS.

4.152. We also inspected a Microsoft Excel document referred to as the Panel Index for Stream 1 Individuals

that relates to the 102 applications and noted that eight applications were recommended to proceed,

36 applications declined, and 56 applications recommended to proceed subject to further information.

4.153. The inability of the PMs to execute the deliverables within the required timelines contributed to PESP

timelines not being met as stated in the process flow.

27 Refer to Exhibit 17 - Minutes of Exco meeting, dated 06 December 2020 28 Refer to Exhibit 18 - Panel Report, dated 28 November 2020


4.154. We identified numerous inconsistent information when comparing the information recorded in the

minutes of the Panel meeting and the data recorded in the Panel Index of 28 November 2020, as

indicated below:

Panel Index (Individual): 28 November 2020 Panel Report: 28 November 2020

− 58 applications recommended to proceed

subject to certain administrative

compliance matters to be met.

− 36 applications declined.



compliance matters to be met.


4.155. We further noted from paragraph 10.3 of the minutes of the Panel meeting dated 28 November 2020,

under the sub-heading “Applications Received in Stream 1 (Organisations)” which states:

− “Number of applications declined by reviewers: 133

− Number of applications serving on the panel agenda:124

− Total number of organisations recommended for approval: 49

− Total number still under review for compliancy: 75

− Total amount requested from applications on panel agenda: R44 464 750,208

− Total amount recommended for approval: R7 698 300”

4.156. It is unclear why the Panel Report refers to the declined 133 applications, as these applications were

disqualified as incomplete applications during the online registration processes on GMS. Also,

bearing in mind that 143 applications were issued to PMs for evaluation, this implies that 10

applications would have been recommended to proceed.

4.157. We also inspected a Microsoft Excel document referred to as the Panel Index for Stream 1

Organisations that relates to 128 applications, and noted that 49 applications were recommended to

proceed, 38 applications declined, and 41 applications recommended to proceed subject to further

information.

4.158. We identified numerous inconsistent information when comparing the information recorded in the

minutes of the Panel meeting and the data recorded in the Panel Index of 28 November 2020, as

indicated below:

Panel Index (Organisation): 28 November 2020 Panel Report: 28 November 2020



compliance matters to be met; and




compliance matters to be met; and


4.159. We find that Ms Marillier did not review the Panel minutes/report to identify these discrepancies and

was allegedly derelict in executing her duties.



4.160. We inspected the panel report and noted that the following recommendations in respect of Stream 2

(Individual) applications:

“Number of applications declined by reviewer/s - 54

Number of applications serving on the panel agenda – 54

Total amount requested from applications of the panel agenda - R18 629 497,2

Total amount recommended for approval - R14 232 621,3

Number of individual projects recommended – 43”

4.161. We inspected the Panel Index and noted 23 applications recorded under the worksheet “Proceed” that

amount to R7,913,580. We find the information in the panel report is not consistent with the information

recorded in the Panel Index.

Exco approval

4.162. According to paragraph 6 of the PESP Proposal we noted that only one Council meeting was

scheduled for 30 November 2020, to adjudicate over all the PESP applications.

4.163. According to the PESP Proposal Process flow, the NAC had to announce the outcome of the PESP

on 01 December 2020, and not a single application was approved by Exco at that date. Ms Mangope,

as the NAC representative responsible for managing and execution of the PESP, failed to meet the

obligations in respect of the fixed dates (Process flow as agreed in the MOA with the DSAC).

4.164. The failure by Ms Mangope, to meet the required timelines in respect of the PESP resulted in the

NAC contravening its obligation as stated in paragraph 6.12 of the MOA which reads:

“…meet its obligations arising from this agreement on the fixed dates failing which the Department

shall, without prejudice to any of its rights be entitled in terms of the law or by virtue of this agreement

to discontinue and further payment or transfer of the allocation and to cancel the agreement and

reclaim any amounts paid together with interest at tempora morae rate”

4.165. We inspected the minutes of the next Exco meeting dated 6 December 2020 and noted that the same

Panel Index and Panel report dated 28 November 2020, presented to Exco on 30 November 2020,

was again presented to Exco on 6 December 2020.

4.166. This implies that the Project Manager’s, SPM, and CEO failed to provide Exco with complete,

accurate and reliable information of the applications evaluated by the PMs, and this conduct is

indicative of negligence, according to the schedule of offences as stated in the HR Policy of the NAC.

4.167. We also noted the following from paragraph 12, item 2.1 of the Exco minutes of 6 December 2020

under the sub-heading “Approval of the PESP Funding Indexes” which reads as follow:

“It was noted that out of the actual number of applications under stream 1 that were still under review

was 69 and not 94 as presented in the report. Compliance review was mainly regarding document

certification and tax compliance. The total amount requested from individual applications in stream

1 was R9 020 259 and the total amount awarded was just R211 600. For organisations, the total

amount requested in stream 1 was R44 464 750 and the total amount awarded was R7 698 300”.


4.168. Exco approved the following PESP applications:

4.168.1. Eight Stream 1 (Individuals) that amounts to R211,600;

4.168.2. Stream 1 (Organisations) that amounts to R7,698,300 (the number of approved

applications is not recorded in the Exco minutes); and

4.168.3. 58 Stream 2 (Individuals) that amounts to R81,575,678.



4.169. Only one Panel report and Panel Index was provided to us, which is the same Panel report and Panel

Index dated 28 November 2020, that served at the Exco meeting on 06 December 2020.

Exco approval

4.170. According to the minutes of the Exco meeting of 11 December 2020, Exco approved 23 applications

for the amount of R8.3 million and 20 applications subject to verification for the amount of R6.5 million.


Panel meeting/ Panel report and Indexes - Stream 131

4.171. We noted that the second round of Stream1 PESP evaluations were conducted during the period

28 November to 18 December 2020.

4.172. We inspected a Panel report dated 12 and 13 December 2020 and noted the following information

as recommended by the PMs:

4.172.1. Stream 1 (Individual)

4.172.1.1. 111 applications set before the panel; and

4.172.1.2. 86 applications were recommended to proceed.

4.173. Stream 1 (Organisations)

4.173.1.1. 154 applications set before the panel; and

4.173.1.2. 111 applications were recommended to proceed.

4.174. We also inspected the Panel Index of 12 December 2020 and noted that a total of 265 applications

set before the panel of which 112 applications were recommended for approval and 67 applications

declined by the PMs.

4.175. When comparing the information recorded on the Panel Index 12 December 2020, and what is stated

in the Panel report “12 and 13 December 2020”, the information does not correspond, in that:

4.175.1. Stream 1 Individuals, Panel report indicates 86 applicants, which have 19 (86-67) additional

applications when compared to the Panel Index;

4.175.2. Stream 1 Organisations, Panel report indicates 111, which have 1 (111-112) less

application when compared to the Panel Index;

29 Refer to Exhibit 19 - Minutes of Exco meeting, dated 11 December 2020 30 Refer to Exhibit 20 - Minutes of Exco meeting, dated 18 December 2020 31 Refer to Exhibit 21 - Panel Report, dated 13 December 2020


4.176. We noted that the adjudication of all Stream 1 applications was concluded by Exco on 18 December

2020, of which 255 applications were approved from the 455 that were evaluated.

Exco Approval

4.177. Paragraph 35, b, of the Exco minutes of 18 December states the following, “…all applications for

Stream 1 had been completed…”. This therefore implies that the PMs’ concluded the evaluation of the

455 Stream 1 applications and presented all information to Exco for consideration on 18 December

2020.

4.178. Ms Marillier informed us that no other Stream 1 applications were considered by Exco after the final

approvals of this Stream 1 applications on 18 December 2020.

4.179. Our analysis in respect of the Exco approvals of Stream 1 applications is summarised in Table 17

below:

Table 17: Summary of Exco Approval for stream 1 application

Summary of Exco approval - Stream 1 applications and cost

Individual Organisation Total

Number of applications received 198 257 455

Total number of applications approved by Exco as at 18 December 2020

94 161 255

Total number of applications declined 25 65 90

Total number of applications not accounted for or considered by Exco

79 31 110

4.180. We identified the following anomaly regarding Table 17 above:

4.180.1. From the 455 applications, 110 applications are unaccounted for and or not submitted for

consideration to Exco.


4.181. We compared the 255 approved applications by Exco against the 347 approved applications on

GMS. Our analysis identified that 92 of the 110 unaccounted applications (refer to Table 17 above)

were included as approved applications on GMS, as summarised in Table 18 below:

Table 18: Summary of Exco Approval for stream 1 application and cost from compared with GMS data

Description Individual Organisation Total Amount (ZAR)

Applications approved on GMS as at 30 July 2021(Mazars obtained information from GMS)

149 198 347 40,504,000

Exco approvals of Stream 1 applications as at

18 December 2020

94 161 255 (31,598,100)

Variance of Stream1 Exco approval versus approved applications recorded on GMS

55 37 92 8,905,900

Description Financial breakdown as per Exco approval 18 December 2020 (ZAR)

Financial breakdown as per GMS approval at 30 July 2021 (Mazars obtained information from GMS) (ZAR)

Allocated budget 100,000,000 100,000,000

Less approved allocations (31,598,100) (40,504,000)

Balance of PESP Stream 1 budget

68,401,900 59,496,000

4.182. We identified the following anomalies:

4.182.1. The total value of the applications approved by Exco (R31,598,100), is less than the

approved amount reflected in GMS (R40,504,000) which results the unauthorised approval

of R8,905,900

4.182.2. Exco did not approve 92 applications that amounts to R8, 905,900. The approval of these

applications and subsequent payments made to the 92 beneficiaries amounts to irregular

expenditure.

4.183. We questioned Ms Marillier regarding the accuracy and reliability of the information in respect of

the applications that are recorded as approved on GMS when Exco did not approve these

applications.

4.184. During consultation with Ms Marillier, she informed us of the following:

4.184.1. Protect Managers reported directly to her;

4.184.2. The Project Managers were responsible for monitoring project progress and addressing

potential issues and also managing reporting on project progress to her and on GMS; and

4.184.3. She was responsible for managing and monitoring work of the Project Managers.

4.185. Ms Marillier acknowledged responsibility for not managing the deliverables of the Project Managers.


4.186. We find that Ms Marillier was allegedly derelict in her duties in respect of the evaluation of PESP

applications, in that:

4.186.1. She failed to manage and monitor that accurate information in respect of Exco

adjudications are reported on the GMS; and

4.186.2. She failed to provide overall project management oversight during the evaluation process.

4.187. We find that Ms Mangope failed to ensure that a system of internal control was maintained or carried

out by allowing the inclusion of the 92 applications as successful beneficiaries of the PESP when

Exco did not approve these applications.

4.188. We find that Mr Changfoot failed to provide financial management oversight to ensure that the 92

Stream 1 applications were indeed authorised by Exco, prior to processing any payments.


4.189. No Panel report and Panel Index was presented to Exco at the meeting of 18 December 2020.

Exco approval

4.190. The minutes of the Exco meeting states that the Project Manager had not submitted the consolidated

list for presentation to Exco.



4.191. No Panel report and Panel Index was presented to Exco at the meeting of 19 December 2020.

Exco approval

4.192. We also noted from paragraph 32 of the Exco minutes of 19 December 2020, that Exco resolved that

corrective action must be taken against PM who are not delivering work within the required timeline,

which states:

“It was highlighted that the Project Managers should always assess the performance of the panel

members and where there are performance issues, corrective actions must be taken to ensure that

work is completed by the target date”.

4.193. We enquired from Ms Marillier why no corrective action was instituted against those employees who

failed to execute the allocated tasks within the required timelines. Ms Marillier informed us that as

SPM she has no authority to address the conduct of PMs.

4.194. Ms Mangope informed us that it was the responsibility of the Panel Chairpersons to manage the work

allocated to PMs.

4.195. Ms Mangope failed to impose paragraph 4 of the MOU for PMs which states, “That if a panel member

is unable to meet the obligations of being a panel member, that they will be removed from the panel”.

32 Refer to Exhibit 22 - Minutes of Exco meeting, dated 19 December 2020


4.196. We also find that Ms Mangope did not implement corrective action against PM who failed to perform

the tasks allocated within the required timelines, as per Exco resolution. Ms Mangope was allegedly

derelict in executing her duties as to the authorised person who was mandated to manage the PESP.



4.197. According to the Panel report for Panel 2 the recommended R99,312,485 based on the following

applications evaluated:

“Total number of applications received by 27 November 2020 696

Number of applications declined by reviewers 236

Number of applications served on the panel agenda 460

Number of applications approved by Panel 373

Number of declined by the Panel 69

Number of NFVF referred by Panel 14

Number of NHC referred by Panel”

4.198. We found that the Panel Index refers to 449 applications and it excludes the classification of the

information stated in the Panel report.

4.199. We were not provided with a Panel report for Panel 4.

4.200. We inspected the Panel Index of Panel 4 and noted 150 applications were recommended to proceed

which amounts to R127,190,367 and 26 applications were declined

Exco approval

4.201. We noted from the minutes of the Exco meeting of 30 December 2020, that 152 applications that

forms part of batch 3 had not yet been evaluated by Panel 3 and it could not be presented to Exco.

Paragraph 26 of the minutes states the following:

“Concerns were raised over the outstanding Batch 3 applications that had not been presented to

EXCO and the 152 applications that have not been adjudicated. The CEO highlighted that these

outstanding applications can only be approved by the next Council.”

4.202. The following applications were approved by Exco in respect of Stream 2:

4.202.1. 373 Stream 2 (Individual- Panel 2) that amounts to R99.3 million;

4.202.2. 22 Stream 2 (Organisations- Panel 3, Batch 1) that amounts to R21.6 million;

4.202.3. 90 Stream 2 (Organisations – Panel 3, Batch 2) that amounts to R58.6 million; and

4.202.4. 150 Stream 2 (Organisations- Panel 4) that amounts to R127.1 million.

33 Refer to Exhibit 23 - Minutes of Exco meeting, dated 30 December 2020 34 Refer to Exhibit 24 - Panel Report, dated 28 December 2020


4.203. Table 19 below provides a breakdown of the evaluation and adjudication outcomes of approved

applications. It should be noted that prior to 30 December 2020, Exco had already committed R121,3

million from the allocated R285 million, which left Exco with a budget of R163,6 million:

Table 19: Summary of approvals by Exco

Date of Exco Meeting

Number of approved applications

Total approved

applications

Amount approved (ZAR) Total Amount

Approved Stream 1 Stream 2 Stream 1 Stream 2

30 November 2020 Exco did not approve any applications during this meeting

06 December 2020 57 58 115 7,909,900 81,575,678 89,485,778

11 December 2020 - 23 23 - 8,300,000 8,300,000

18 December 2020 198 - 198 23,688,200 - 23,600,000

30 December 2020 - 635 635 - 306,600,000 306,600,000

Total 255 716 971 31,598,100 396,475,678 428,073,778

4.204. Our analysis as illustrated in the above table identifies that Exco’s approval of the 635 Stream 2

applications on 30 December 2020, exceeded the allocated budget by R143 million (R163.6 –

R306,6).

4.205. We find that Ms Mangope was well informed of what the cost was of the PESP applications as

approved by Exco. Paragraph 21 of the Exco minutes of 30 December 2020, states:

“The CEO highlighted that after today’s (30 December 2020) earlier approvals of Panels 4 and 3,

which were to the amount of R362.1m, and the estimated amounts for Batches Two and Three, the

NAC was over budget. The CEO further highlighted that the figures were approaching R600m now.”

4.206. We noted from the minutes of the meeting that neither Ms Mangope or Mr Changfoot, assume

responsibility for steering or setting direction to Exco on measures to be implemented that will

address the oversubscribed budget that was approaching R600 million as reported by Ms Mangope.

4.207. We also find that Exco did not act within the best interest of the NAC, in managing the financial affairs

of the PESP, in that no approval for additional funding was obtained as alluded to by the CEO and

yet applications in excess of the allocated budget were approved.

4.208. Ms Mangope relied on an engagement she had with National Treasury that the funds will possibly

be obtained from other organisations who did not manage to spend their PESP funds. Paragraph 22

of the Exco minutes of states,

“…. The CEO indicated that other organisations were allocated PESP funds but were unable to spend

them and there was a possibility that these funds could be made available to the arts sector.”

4.209. Exco trusted the information presented by Ms Mangope and this resulted in them (Exco) making the

following statement in paragraph 27 of the Exco minutes of 30 December 2020:

“Management was commended on the good work done and it was highlighted that it would be a

brilliant feather in the NAC’s cap if the NAC was able to use the unpsent(sic) funds from the other


sectors and that this would put the NAC in good standing to receive further allocations for public

employment should that be approved for the next financial year. It was further highlighted that the

NAC should aim for as many approvals and meeting as many of the targets as agreed to and if the

announcements to the sector could be done by the 31st of December 2020, it would be well received

within the sector.”

4.210. We questioned Ms Mangope on whether any formal written request for additional funding for the

PESP was submitted to DSAC and or National Treasury. Ms Mangope informed us that there ought

to have been a formal submission, but she is unable to confirm this.

4.211. In the absence of being provided with a formal submission requesting additional funding from

National Treasury, we find that Ms Mangope was negligent in that she misrepresented information

to Exco who continued to approve funding for applications beyond the allocated PESP budget.

4.212. Ms Mangope created an unreasonable expectation by presenting information to Exco over which she

had no control or authority, and this resulted in Exco continuously approving applications in excess

of the allocated budget.

4.213. We find that Ms Mangope failed to act with fidelity, honesty and in the best interest of the NAC in

managing the financial affairs of the PESP by not ensuring that the approved applications remained

within the allocated budget of R285 million as opposed to the over-committed amount of

R428,073,778. Ms Mangope, therefore, contravened Section 50 (1) (b) of the Public Finance

Management Act (“PFMA”) which states, “act with fidelity, honesty, integrity and in the best interest

of the public entity in managing the financial affairs of the public entity”

4.214. We find that Mr Changfoot failed to act with fidelity, honesty and in the best interest of the NAC in

managing the financial affairs of the PESP by not raising concerns that Exco’s approval of Stream 2

applications that exceeded the allocated budget of R285 million which led to Exco over-committing

an amount of R428,073,778. Mr Changfoot, therefore, contravened Section 50 (1) (b) of the PFMA

which states, “act with fidelity, honesty, integrity and in the best interest of the public entity in

managing the financial affairs of the public entity”

Grant Notification Letters

4.215. We analysed the Grant Notification Letters (“GNLs”) issued on GMS and noted the following

anomalies:

4.215.1. Stream 1

4.215.1.1. As at 11 December 2020, 57 applications were approved by Exco, amounting

to R7,909,900. However, 151 GNLs were issued on 11 December 2020,

amounting to R16,118,600. Therefore, an unauthorised commitment of

R8,208,700 was made to 94 applicants (151 -57), that were not yet considered

by Exco.

4.215.1.2. 198 applications were approved by Exco on 18 December 2020, amounting


amounting to R24,402,000. Therefore, an unauthorised commitment of R802,000

was made to two applicants.


4.215.2. Stream 2

4.215.2.1. As at 13 December 2020, 81 applications were approved by Exco, amounting


amounting to R63,924,400. We found that 23 applications were approved by

Exco, but had no GNL issued, amounting to a difference of R25,951,278.

4.216. Ms Marillier did not provide adequate oversight regarding the issuing of GNLs and failed to

comply with bullet 13 of Annexure A of her employment contract “Oversee issuing of

approval letters, contracting and decline letters”.

E. Funding of PESP

4.217. In order to establish whether NAC implemented effective, efficient, and transparent financial

management and internal control systems throughout the duration of this agreement. We took

guidance from legislative prescripts, NAC policies and procedures, Exco resolutions, Panel Indexes

as approved by Exco during 2020 and the GMS data.

4.218. The NAC was obligated to disburse the allocated budget through two streams of which R100 million

was allocated to Stream 1, that focused on job retention, and R185 million allocated to Stream 2,

that focused on projects that can create income opportunities in the arts and culture sector.

Understanding the guiding figure concept

4.219. The NAC published a document referred to as “CALL FOR APPLICATIONS FOR THE

PRESIDENTIAL EMPLOYMENT STIMULUS PROGRAMME” which informed prospective applicants

about the guiding figure amounts.

4.220. We noted the following information from the call for applications document which states the following

in respect of the two streams:

“STREAM 1: JOB RETENTION WAGE SUBSIDY…The average wage subsidy has been calculated

at R16 600 over three months concluding 31 March 2021”; and

“STREAM 2… The NAC has taken direction from the Presidency and DSAC to assess the proposals

and funding requests based on the ambition and merit of the project. As such, no threshold to the

funding amount per project will apply. However, each employment opportunity within the project has

been calculated at R25 000 (R8333,33 per month) over 3 months concluding

31 March (January, February and March 2021). This is a guiding cost figure that applicants should

consider when applying. Note that a project could contain multiple opportunities”.

4.221. When inspecting the minutes of the Exco meetings we noted that concerns regarding the

interpretation of the guiding figure amounts by applicants and the subsequent assessment thereof

by PMs were frequently raised.


4.222. The following concerns were noted from the Exco minutes:

4.222.1. Exco meeting 30 November 2020, paragraph 11(l) states:

“As it was clear that there had not been much understanding of the concept by the team,

panels, or beneficiaries, it was suggested that the NAC should go back to the sector and

help people to understand the concept for the next round.

For the moment, the Committee could not agree to amounts that were above the R25,000

per opportunity.

Some of the numbers and amounts submitted needed to be reconsidered accordingly.

Those that requested high amounts should be asked to increase their job creation numbers

to match the amounts requested.

Those that requested too little should be requested to either increase their budgets or lower

the number of people to be supported.”

4.222.2. The following resolutions were made by Exco:

“(a) Applicants must be made aware that the R25,000 was inclusive of human and

operational costs, and that the expectation was that these funds would also go towards

payment of people involved in the project, not just the project owner.

The applicants must be made aware that the budget goes towards everything the project

needs so that the project would be sustainable.

(d) It was clear from the discussions during the meeting that not everyone was on the same

page. Management needed to find a way to ensure that everyone including the panels,

project managers, and applicants was on the same page and had the same understanding

of the concept.”

4.222.3. Exco meeting 6 December 2020, concerns raised as per paragraph 58:

“It was noted that the majority of the applicants (90%) did not understand the funding

formula to apply it to their budgets. Many applicants submitted their applications as if they

were applying for normal NAC funding.

This resulted in many good projects applying for far less than what they were eligible for.

Thus, the panel deliberated over each application individually and decided whether to

adjust the allotment upwards or downwards from the guiding figure on a case-by-case

basis, taking into account the request for leniency from the Presidency.

Where the panel was of the opinion the project could be conducted for far less or the

amounts for the line items were inflated, then the amount was adjusted downwards.”

4.222.4. Exco meeting 30 December 2020, paragraph 16 Exco resolution:


“If the Panel adjudicates that the project was viable, has artistic merit, fulfils transformation

requirements, and can create jobs, the Panel should apply the guiding principle based on

the number of jobs asked for.

The Panel should not reduce the number of jobs in the underserved Provinces and should

not increase the jobs more than what has been requested by the applicant in the three

strong Provinces (Gauteng, KZN and Western Cape).

3. Panels should call the organisations and individuals if the amount now offered (guiding

figure) exceeds the amount requested to ensure the organisation can transfer the

respective amounts to the people occupying the opportunities now created and/or can

utilize the amounts allocated for operational costs (which were part of the R25,000 per work

opportunity).”

4.223. It is our understanding that the resolution from Exco was that the guiding figure amount ought to be

applied for every job opportunity created by the successful applicants and that these job

opportunities may not be decreased or increased by the PMs.

4.224. During consultation with Ms Mangope, Ms Marillier, Ms Diphofa, Dr Mdluli and Adv Ribane all

confirmed to our understanding of the implementation of the guiding figure amount to be correct as

per Exco resolution.

4.225. In order to determine the management and application of the financial cost, we analysed the Exco

minutes and panel indexes, which are discussed below.

Test of guiding figure amount

4.226. We tested Exco’s interpretation of applying the guiding figure amounts in order to determine the

financial implications thereof.

4.227. We tested the guiding figure amount per stream of the applications approved by Exco as of

30 December 2020, against the initial number of job opportunities applied for by applicants, as well

as the number of job opportunities recommended by the panel members.


4.228. Our tests identified the following scenarios. A breakdown thereof is provided in Table 20 below:

4.228.1. Cost of the initial number of job opportunities applied for by applicants amounts to R637,705,800.

Table 20: Summary of recommended applications per stream and the costing thereof (GMS-Master data)

Stream 1 (Guiding figure – R16,600) Stream 2 (Guiding Figure – R25,000) Stream 1 & 2 Totals

Individuals Organisations Total Individuals Organisations Total

Number of Applications Received- GMS

197 258 455 802 1,224 2,026 2,481

Number of Applications approved - GMS

149 198 347 408 568 976 1,323

Number of Applications Declined- GMS

48 59 107 394 656 1,050 1,157

Number of job opportunities recommended by panel

277 2,136 2,413 4,589 19,317 23,906 26,319

Mazars computation of job opportunities per guiding figure as per Exco resolution (ZAR)

4,598,200 35,457,600 40,055,800 114,725,000 482,925,000 597,650,000 637,705,800

4.229. The above scenarios clearly indicate that the NAC did not have sufficient funds to disburse the PESP funding to all successful applicants by applying

the guiding figure as it exceeded the allocated budget.

4.230. Exco failed to act in the best interest of the NAC, in managing the financial affairs of the PESP, by approval of funds that was not available to the NAC.

Exco therefore contravened Section 50(1)(b) of the PFMA.


Unauthorised approval of PESP applications

4.231. Our inspection of the Exco minutes identified that on 6 and 18 December 2020, Exco approved 255

and declined 90 Stream 1 PESP applications, to the value of R31,598,100. It should be noted that

no other Stream 1 PESP applications were presented to Exco after the Exco meeting of

18 December 2020.

4.232. When comparing the GMS data (347 approved applications) with the minutes of the Exco meetings

that approved the 255 applications, we find 92 applications from the 455 applications recorded as

successful when they were not approved by Exco.

4.233. The GMS master data indicates 347 approved Stream 1 applications to the value of R40,504,000.

4.234. When comparing (the financial implications of the additional 92 applications) Exco approval against

the GMS data we find that an additional amount of R8,905,900 reported as approved whilst no record

exist that approval was granted by Exco for this amount as alluded to in Table 18 of this report.

4.235. During consultation with Mr Changfoot, we enquired whether he executed any financial oversight of

the PESP from a financial management perspective, and he informed us of the following:

4.235.1. He requested financial reports from Ms Marillier, prior to Exco meetings and did not receive

any reports;

4.235.2. He raised the concerns that he did not receive PESP reports to provide risk and financial

oversight at the General Management meetings and still did not receive any PESP reports

from Ms Marillier; and

4.235.3. He cannot recall whether he issued a formal request for financial management reports to

be provided with by Ms Marillier in respect of PESP.

4.236. We find that Mr Changfoot was allegedly derelict in his duties as he did not exercise financial

oversight in that R8,905,900 was awarded to applicants when no approval thereof was granted by

Exco. Mr Changfoot contravened Section 57 (a) of the PFMA which states, “An official in a public

entity- must ensure that the system of financial management and internal control established for that

public entity is carried out within the area of responsibility of that official”.

4.237. Ms Marillier was allegedly derelict in her duties in that she failed oversee that the issuing of approval

letters is issued to applications that was approved by Exco, this negligence resulted in approval

letters issued to the value of R8,905,900 when no approval thereof was granted by Exco.

4.238. Ms Mangope was negligent in managing and executing her duties in respect of the PESP in that

R8,905,900 was awarded to applicants when no approval thereof was granted by Exco, considering

that she attended the two Exco meetings where PESP Stream 1 applications were approved.


Irregular expenditure paid on the initial guiding figure

4.239. We analysed the successful applications as prepared by the NAC Finance unit and compared this

data against the GMS data to establish any anomalies.

4.240. Our analysis of the two data sources identified that the following applications that were declined

during the adjudication processes were included in the PESP payment schedules, as indicated in

Table 21 below:

Table 21: Applications that were included in the PESP payment schedules

Description Number of applications

Approved Amount (ZAR)

Amount Paid (ZAR)

Stream 1- Individual 3 21,790 -

Stream 1- Organisations 2 - -

Stream 2- Individual 5 969,655 -

Stream 2- Organisations 17 87,160 87,160

Total 27 991,445 87,160

4.241. Ms Marillier provided incorrect information to the NAC Finance unit and was negligent in the

performance of her duties, as she signed off the payment requisition form that resulted in the payment

of R87,160 to three applicants.

4.242. We also find that Mr Changfoot failed to ensure that the system of internal control and financial

management were carried out within his area of responsibility, by verifying that the beneficiaries that

were paid R87,160 were applications that were approved by Exco.

Concerns raised by Mr Theo Lawrence

4.243. We inspected the status of the respective applications raised in the letter of concern from

Mr Lawrence as well as additional information provided by him during our consultation.

4.244. Upon further investigation we established the following in respect of these concerns:

4.244.1. Application number (3400000) was declined by Panel 3, because it did not meet the NAC

objectives in respect of PESP and the application was referred to the NFVF.

4.244.2. The applicant submitted a request to the SPM that their application be reconsidered, and

the SPM referred the matter to the Panel Chairperson.

4.244.3. The application was re-evaluated and approved by Panel 4.

4.244.4. We find that this application ought to be raised at the Appeal process. However, this was

not the case and deviated from the required processes.

4.244.5. The value of the funds paid to this applicant to date amounts to R305,060.00.

4.244.6. The payment of this application amounts to irregular expenditure.


4.245. Application number (3900000) the application was declined on GMS, and we found no information

on the PESP payment schedules that any payment was processed to this applicant. There are no

merits to this concern.

4.246. We find no evidence indicating any irregularity in respect of this application, as no payment has been

processed by NAC.

4.247. A conflicted application did not meet all administrative compliance requirements, the application was

subsequently presented at Exco meeting on 30 December 2020 and approved.

F. Conflict checks

4.248. We inspected a legal opinion report dated 16 March 2021, addressed to Mr Mkhize from the Office

of the Chief State Law Adviser.

4.249. The legal opinion states the following:

4.249.1. The current Council members who were beneficiaries of the PESP could not have

participated in a decision to award the PESP benefit to them; and

4.249.2. The fact that Council members were beneficiaries of the PESP when they assumed their

duties as Council does not mean that a conflict of interest arose.

4.249.3. Section 4 (10) of the NAC Act, provides that members of the Council shall not be eligible

for grants from the Council during their term of office, is only applicable to persons who are

already members of the Council.

4.250. We conducted a directorship search of the former and current NAC Council members. In order to

identify any potential conflict of interest of Council members that received benefits from the PESP.

4.251. We identified that four members of Council received PESP benefits:

4.251.1. Current Council members:

4.251.1.1. Dr Sipho Sithole, Afrocentric Talent Agency (Pty) Ltd, is the company that

benefitted from PESP35;

4.251.1.2. Ms Nise Malange, Siwela Sonke Dance Theatre, is the company that

benefitted from PESP36; and

4.251.1.3. Mr Bongani Tembe, Durban Music School, is the company that benefitted from

PESP37.

4.252. Our analysis of the PESP applications confirm that the approval of the companies of the three above

mentioned members of Council transpired prior to them taking up their duties as members of Council

and could not have participate in the decision making to award PESP benefits.

35 Refer to Exhibit 25 - XDS Report, Dr Sipho Sithole, Not Dated 36 Refer to Exhibit 26 - XDS Report, Nise Malange, Not Dated 37 Refer to Exhibit 27 - XDS Report, Bongani Tembe, Not Dated


4.253. COSEC also informed us that the three current members of Council disclosed that they are

beneficiaries of the PESP.

4.254. We therefore find that the current three members of Council had no conflict of interest prior to them

assuming their roles as NAC Council members on 1 January 2021.

4.255. We noted that the following former member of Council was a beneficiary of the PESP:

4.255.1. Ms Erika Elk, The Craft and Design Institute, is the company that benefitted from PESP

4.256. We inspected the minutes of the Exco meetings and noted that Ms Elk was in attendance at four of

the Exco meetings that adjudicated over the PESP applications, and she contravened Section 8 (5)

of the NAC Act, that states

“A member of the Council shall not vote or in any manner participate in the proceedings at any

meeting of the Council nor be present at the venue where such a meeting is held, if. in relation to

any matter before the Council. he or she has any interest which precludes him or her from performing

his or her functions as a member of the Council in a fair, unbiased and proper manner.”

4.257. Our inspection of Stream 1, Panel reports identified that the following three PMs disclosed conflict of

interest with companies that applied for the PESP benefit:

Table 22: Summary of Stream 1 conflict of interest disclosed by PMs

# Panel member Company of interests

1 Ms Mandie van der Spuy 3415901 – Moving Into Dance

2 3418201 – The Craft and Design Institute

3 3431501 – Sibikwa Community Project NPC

4 3476901 – Theatre on the Square

5 3402101 – Forgotten Angle Collaborative

6 3441401 – Hermanus FynArts

7 3449101 – T Musicman

8 3473801 – Vuyani Dance Theatre

9 3690601 – Mosaic Economy (Usha Seejarim)

10 3430101 – Kickstarter – Assitej SA

11 3476901 - Theatre on the Square

12 Mr Tsietsi Mohapi 3709001 – Nomsa Angelina de Wee

13 3700001 – South African Book Development Council

14 Ms Celeste Wannenburg 3506401 – Ichneumon

4.258. We inspected the GMS data in respect of the evaluation of applications and found that none of the

three PM’s evaluated any of the PESP applications for the interests that they reported as conflict.

4.259. However, we find that Ms van der Spuy who was a member of Council during 2020 and chairperson

of Stream 1 panel evaluation processes, did not recuse herself from the PESP processes. Ms van

der Spuy therefore contravened Section 8 (5) of the NAC Act.


4.260. We find that the Exco did not act within the best interest of the NAC, by allowing Ms Elk and Ms van

der Spuy to participate in the PESP processes when they were conflicted and therefore contravened

Section 8 (5) of the NAC Act.

G. PESP Objectives

4.261. As alluded to in this report, we find that the NAC failed to achieve the set objectives in respect of the

PESP in that:

4.261.1. The required job opportunities of both Stream 1 (7,000) and Stream 2 (8,000) were not

achieved;

4.261.2. The public announcement of successful applicants was not achieved within the required

timeline, being 01 December 2020;

4.261.3. Applicants were not able to receive the wage subsidy during the intended period of January,

February and March 2021;

4.261.4. The approval of PESP applications, exceeded the allocated budget amount; and

4.261.5. Not all PESP applications were evaluated within the required timeline;


5. SUMMARY OF FINDINGS

PESP Resource Plan

5.1. As alluded to in Table 2 of the report, the majority of the staff members responsible for executing the

PESP functions were contracted staff, employed for a minimum period of six months, whose

contracts have subsequently expired.

Roles and responsibilities of key stakeholders

CEO - Ms Mangope

5.2. The PESP Proposal document reflected a Process flow, which indicates specific tasks with timelines

allocated to it, and the success of the PESP would be measured against NAC’s strict adherence to

these timelines.

5.3. Ms Mangope was responsible for the management and execution of the PESP, this is according to

Paragraph 5.2 of the MOA that states, “The Beneficiary hereby appoints Kesebogile Rosemary

Mangope or her duly authorised representative to serve both as Liaison Officer and project Manager

between the respective parties and is responsible for managing the execution of the project to finality”

SPM – Eugene Marillier

5.4. The offer to appoint Ms Marillier as a SPM was not supported by a formal written submission

motivating why the position was not advertised. During consultation with Ms Dingoko, she informed

us that no HR submission requesting for the deviation of appointment of the PESP Senior Project

Manager is in the personnel file of Ms Marillier.

5.5. In the absence of a formal submission motivating for the deviation to appoint Ms Marillier, as the

SPM for PESP. Ms Mangope failed to follow generally accepted recruitment practices.

5.6. Ms Marillier was not eligible to be offered an extension of contract letter as SPM, as she was not

previously employed in the capacity of a SPM. During consultation with Ms Marillier, she regarded

the offer of appointment as SPM as a promotion from the position she occupied at the time.

5.7. The appointment of Ms Marillier in the position as SPM was irregular based on the following:

5.7.1. No recruitment procedures were followed in filling the position of SPM for PESP.

5.7.2. A formal submission was not prepared, authorising the appointment of Ms Marillier as SPM.

5.7.3. The extension of contract as a SPM should not have been offered to Ms Marillier, as the

portfolio of a SPM is different to Ms Marillier’s initial contract of the ADO within the NAC.

5.8. Ms Marillier worked on a non-PESP related project for six months (October 2020 to March 2021)

whilst receiving remuneration from the PESP funding, which contravenes paragraph 6.2 of the MOA,

that states, “utilise the allocation provided by the Department exclusively and solely for the purpose

of the project.”


5.9. The salary paid to Ms Marillier during October 2020 to March 2021, was not exclusively used for

PESP. The salary paid during the six-month period of R360,000.00 (R60,000.00 x 6 months)

constitutes irregular expenditure as it contravenes paragraph 6.2 of the MOA.

5.10. Section 57 (c) of the PFMA was contravened by Ms Mangope as she did not take effective and

appropriate steps to prevent the irregular salary payment of R360,000 to Ms Marillier, as the PESP

funds were not exclusively used for PESP related work.

NAC Panel Members

5.11. Council members performed actual evaluation of applications on GMS, which is in contravention of

Section 11(2) of the NAC Act.

“Every advisory panel shall consist of no more than five persons who have achieved distinction or

have special knowledge or experience in the field of the arts in question. and [sic] were not members

of the Council.”

5.12. The following Council members served as PMs of the PESP:

5.12.1. Adv. Ribane;

5.12.2. Cllr Nogabe;

5.12.3. Cllr Arendse;

5.12.4. Dr Mduli; and

5.12.5. Ms Van der Spuy.

5.13. Paragraph 49 of the minutes of the Council meeting of 19 September 2020, Council resolved that:

Regarding the opportunity for Council members to take up contracting positions within the NAC

during this period, the Council resolved that they would not be taking up this opportunity and would

remain in their oversight role. This was to ensure that the Council remains as the due diligence body

that checks that processes were being followed properly.”

5.14. We were not provided with any document approving deviation from the required prescripts as

indicated in Section 11(2) of the NAC Act. In the absence of such a document, we find that Council

contravened Section 11(2) of the NAC Act.

5.15. We also find that Council disregarded their own resolution of 19 September 2020 by allowing the

above five Council Members to actively participate in the evaluation of applications.

5.16. We find that Ms Mangope failed to advise Council to adhere to Section 11(2) of the NAC Act, as well

as Council resolution of 19 September 2020 and was therefore negligent in her responsibilities.

5.17. The five Council members were cumulatively paid R511,452 for performing work of PMs. These

payments are regarded as irregular expenditure as Council members contravened the provisions of

the NAC Act.


Exco

5.18. Ms Mangope informed us that Council resolved to delegate the approvals of PESP applications to

Exco. We have not been provided with any documents to support this Delegation of Authority. In the

absence thereof, Exco did not have the delegated authority to approve PESP applications.

PESP applications received

5.19. Our analysis of the GMS identified that a total of 5,201 applications were received, and the total funds

applied for by the applicants amounted to R3,6 billion, as indicated in Table 6 below:

Table 23: Summary of PESP applications received during 30 October 2020 to 27 November 2020





Individual 536 18,004,779.99 Individual 1,959 357,176,541.48

Organisations 505 254,500,977.03 Organisations 2,201 3,021,515,195.73

Total

Stream 1

1,041 272,505,757.02 Total

Stream 2

4,160 3,301,288,258.97

Total number of applicants: Stream 1 & 2 5,201

Total amount applied for by applicants: Stream 1 & 2 3,651,197,494.23

5.20. Our analysis of the GMS identified that 2,716 of the 5,201 PESP applications were automatically

disqualified due to incomplete information (GMS code description 1 &11) submitted/recorded on the

GMS online application platform.

5.21. This therefore implies that 2,485 PESP applications qualified to proceed to the administrative

compliance process, the breakdown of these applications is as follows:

5.21.1. The NAC Management reported that 455 Stream 1; and

5.21.2. 2,030 Stream 2 PESP applications were received.

5.22. From the above, it is clear that the actual number of applications received and the monetary value

thereof, was known to Council as early as 30 November 2021. Thus, implying that the allocated

budget of R285 million would not be sufficient to address the projected funds applied for, amounting

to R3,651,197,494.23.

5.23. We found no evidence of oversight of risk governance, exercised by Council, regarding the

implementation of the PESP within the allocated budget of R285 million.

5.24. We found no evidence that Ms Mangope submitted a formal proposal to DSAC to revise the timelines

of the process flow document or propose different management controls to ensure that the PESP

objectives are met within the prescribed timelines.


D.2 PESP Administrative Compliance

5.25. During consultation with Ms Khan, she informed us that the GMS does not distinguish what type of

document an applicant may attached to the required field when completing an application. The

validity checks of the actual document had to be performed during the administrative compliance

check process by the NAC.

5.26. However, we noted that 1,104 applications from both Stream 1 and Stream 2, where at least one

incorrect document was submitted.

5.27. The non-compliance matters, ought to have been identified during the administrative compliance

review process by the Review, Monitoring and Evaluation Officers and Project Managers as detailed

in Paragraph 4.100 above.

5.28. The Review, Monitoring and Evaluation Officers and Project Managers who reviewed the

applications for administrative compliance failed to ensure that incomplete applications were

disqualified.

5.29. Ms Marillier was allegedly derelict in her duty by failing to monitor the administration compliance

processes to ensure that incomplete applications were disqualified, as stated in paragraph 5.5 of

PESP Proposal, which is a task assigned to her as a SPM.

5.30. Ms Mangope failed to provide adequate oversight and was negligent in managing the execution of

the administrative compliance processes which allowed 1,104 applications to be considered for

evaluation when they ought to have been disqualified.

D.3 PESP Evaluation process

Admin Review

Stream 1

5.31. We noted that 456 applications were allocated for administrative review of which 347 applications

were approved and 107 applications were declined for admin compliance during November 2020.

5.32. One application was declined, 45 days after the date of issue to the respective team member.

5.33. One application is unaccounted for, it is unclear whether this application (project number 3758901,

Good Clothing), was considered.

Stream 2

5.34. We noted that 2,030 applications were allocated for administrative review of which 980 applications

were approved and 1.050 were declined for admin compliance in Stream 2 during November and

December 2020.

5.35. One application was declined in January 2021.

5.36. 32 applications were never finalised as no completion date is recorded on GMS. Of these

applications, 13 applications were recommended for approval and 19 applications were declined.

The Project Manager and SPM failed to monitor the administrative compliance process in respect of

the 32 applications.


5.37. We find that the above analysis identifies the lack of adequate monitoring and control by the SPM

and the lack of oversight by Ms Mangope to ensure that:

5.37.1. The administration compliance process ought to have commenced on 06 November 2020

and concluded on 15 December 2020. However, the administrative review process started

on 11 November 2020. During the period 11 November 2020 to 15 December 2020, only

494 applications were allocated for administration review. As detailed in Paragraph

4.114.1.

Panel Evaluation

Irregular inclusions of declined applications

5.38. Table 22 below demonstrates alleged fruitless and wasteful expenditure incurred as a result of

disqualified applications allocated to PMs for evaluation.

Table 24: Irregular inclusions of declined applications

Description Stream 1 Stream 2

Disqualified applications during admin review as well as during evaluation 109 771

Average applications evaluated per day* 16 16

Total number of days for evaluation of above applications 6 24

Number of PMs per panel, who evaluated applications 4 4

Number of Panels per stream 1 2

Daily remuneration rate per PM 4,225 4,225

Total fruitless and wasteful expenditure per stream 101,400 811,200

Total 912,600

*Based on consultation with Dr Mduli,16 applications (30 minutes per application over a minimum of 8 hours

per day) were reviewed on average per day.

5.39. Although 1,327 applications qualified to proceed to evaluation, we found that the 880 applications

that were disqualified during the administration compliance process, were included for evaluation by

the Panel.

5.40. We found no Exco resolution or any subsequent request for deviation, approving the inclusion of the

disqualified applications to proceed to evaluation.

5.41. The Project Managers and the SPM acted without authorisation by allocating the disqualified

applications for evaluation and therefore compromised the integrity of the evaluation processes.

5.42. Ms Mangope’s failed to oversee the management and execution of the administrative processes

relating to the inclusion of the disqualified applications.

5.43. The time that PMs spent on the evaluation of the 880 applications, and what the PMs were

subsequently paid for, amounts to fruitless and wasteful expenditure estimated at R912,600.



during the admin review, resulted into a fruitless exercise of the Panel, evaluating these applications

a second time with a similar outcome.

Scoring of Applications by PMs

5.45. PMs were in breach of bullet 7 of the MOU they signed as PMs which state, “Complete the review of

all allocated applications prior to the set panel meetings”.

5.46. The implicated PMs failed to comply with the deliverable to complete all allocated applications prior

to the set panel meetings as stated in the MOU.

5.47. Ms Marillier failed to take effective and appropriate steps against the implicated PMs.

Stream 1 and 2: Summary of Approvals

5.48. Exco convened on the following dates where approval of PESP applications adjudicated:

Table 25: Summary of Exco Approvals of PESP applications

Date of Exco Meeting

Number of approved applications

Total approved

applications

Amount approved (ZAR) Total Amount

Approved Stream 1 Stream 2 Stream 1 Stream 2

30 November 2020 Exco did not approve any applications during this meeting

06 December 2020 57 58 115 7,909,900 81,575,678 89,485,778

11 December 2020 - 23 23 - 8,300,000 8,300,000

18 December 2020 198 - 198 23,688,200 - 23,600,000

30 December 2020 - 635 635 - 306,600,000 306,600,000

Total 255 716 971 31,598,100 396,475,678 428,073,778

5.49. According to the MOA, Council had to convene on 30 November 2020, to adjudicate on all the PESP

applications that was recommended for approval by the PMs.

5.50. The Council meeting that convened on 30 November 2020 resolved not to approve any submission

presented to Council. Therefore, resulting in the NAC not meeting the required timelines as stated in

the MOA.

5.51. Ms Mangope, as the NAC representative responsible for managing and execution of the PESP, failed

to meet the obligations in respect of the fixed dates (Process flow as agreed in the MOA with the

DSAC). The failure by Ms Mangope, to meet the required timelines in respect of the PESP resulted

in the NAC contravening its obligation as stated in paragraph 6.12 of the MOA which reads:

“…meet its obligations arising from this agreement on the fixed dates failing which the Department

shall, without prejudice to any of its rights be entitled in terms of the law or by virtue of this agreement

to discontinue and further payment or transfer of the allocation and to cancel the agreement and

reclaim any amounts paid together with interest at tempora morae rate”


5.52. Four Exco meetings were convened during December 2020 approving 971(255+716) applications

amounting to R428,073,778, which exceeds the allocated budget by R143,073,778.

5.53. From the minutes of Exco meeting dated 30 December 2020, 152 applications forming part of batch

3 had not yet been evaluated by Panel 3 and could not be presented to Exco.

5.54. Exco did not approve 92 applications that amounts to R8, 905,900. The approval of these

applications and subsequent payments made to the 92 beneficiaries amounts to irregular

expenditure.

5.55. Ms Mangope failed to ensure that a system of internal control was maintained or carried out by

allowing the inclusion of the 92 Stream 1 applications as successful beneficiaries of the PESP when

Exco did not approve these applications.

5.56. Mr Changfoot failed to provide financial management oversight to ensure that the 92 Stream 1

applications were indeed approved by Exco, prior to processing any payments to them.

5.57. Ms Mangope failed to act with fidelity, honesty and in the best interest of the NAC in managing the

financial affairs of the PESP by not ensuring that the approved applications remained within the

allocated budget of R285 million as opposed to over-committing an amount of R428,073,778. Ms

Mangope, therefore, contravened Section 50 (1) (b) of the Public Finance Management Act (“PFMA”)



5.58. Mr Changfoot failed to act with fidelity, honesty and in the best interest of the NAC in managing the

financial affairs of the PESP by not raising concerns that Exco’s approval of Stream 2 applications

exceeded the allocated budget of R285 million which led to Exco over-committing an amount of

R428,073,778. Mr Changfoot, therefore, contravened Section 50 (1) (b) of the PFMA which states,

“act with fidelity, honesty, integrity and in the best interest of the public entity in managing the financial

affairs of the public entity”

Grant Notification Letters

5.59. Stream 1

5.59.1. GNLs issued on 11 December 2020 resulted in the unauthorised commitment of

R8,208,700 was made to 94 applicants.

5.59.2. GNLs issued on 23 December 2020 resulted in the unauthorised commitment of R802,000

was made to two applicants.

5.60. Stream 2

5.60.1. From the 81 applications that were approved by Exco as of 13 December 2020, we found

that 23 of these applications had no GNL issued to them, amounting to a difference of

R25,951,278.


5.61. Ms Marillier did not provide adequate oversight regarding the issuing of GNLs and failed to comply

with bullet 13 of Annexure A of her employment contract “Oversee issuing of approval letters,

contracting and decline letters”.

Funding of the PESP

Guiding Figure

5.62. Exco resolved that the guiding figure (Stream 1: R16,600 and Stream 2: R25,000), ought to be

applied for every job opportunity created by the successful applicants and that these job

opportunities may not be decreased or increased by the PMs.

5.63. Our test of the guiding figure identified the following results of the applications approved on GMS.

We find that the application of the instruction by Exco, to apply the guiding figure on all applications

(number of jobs approved), resulted in the oversubscription as demonstrated in Paragraph 4.228:

5.63.1. Cost of the initial number of job opportunities applied for by applicants amounts to

R637,705,800

5.64. Exco failed to act in the best interest of the NAC in managing the financial affairs of the PESP by

approval of funds that was not available to the NAC. Exco therefore contravened Section 50(1)(b) of

the PFMA.

5.65. We find that Ms Mangope was well informed of what the cost was of the PESP applications as

approving by Exco, that was approaching R600 million.

5.66. Ms Mangope did not assume responsibility for steering Exco on measures to be implemented that

will address the oversubscribed budget that was approaching R600 million.

5.67. Ms Mangope informed Exco that she engaged with National Treasury and that the NAC will possibly

receive additional funds from other SOEs who did not utilise their allocated PESP funding, which was

approximately R30 million.

5.68. We also find that Exco did not act within the best interest of the NAC, in managing the financial affairs

of the PESP. No approval for additional funding was obtained in writing from National Treasury to

approve the additional funding, as alluded to by the CEO. Exco continued to approve applications

beyond the allocated budget of R285 million.

5.69. We find that Ms Mangope failed to act with fidelity, honesty and in the best interest of the NAC in

managing the financial affairs of the PESP by not ensuring that the approved applications remained

within the allocated budget of R285 million as opposed to the over-committed amount of

R637,705,800.

Unauthorised approval of PESP applications

5.70. When comparing Exco approval against the GMS data we find that an additional amount of

R8,905,900 reported as approved whilst no record exist that approval was granted by Exco for this

amount as alluded to in Paragraph 4.182 of this report.


5.71. We find that Mr Changfoot was allegedly derelict in his duties as he did not exercise financial

oversight in that R8,905,900 was awarded to applicants when no approval thereof was granted by

Exco. Mr Changfoot contravened Section 57 (a) of the PFMA.

5.72. Ms Marillier was allegedly derelict in her duties in that she failed oversee that the issuing of approval

letters is issued to applications that was approved by Exco, this negligence resulted in approval

letters issued to the value of R8,905,900 when no approval thereof was granted by Exco.

5.73. Ms Mangope was negligent in managing and executing her duties in respect of the PESP in that

R8,905,900 was awarded to applicants when no approval thereof was granted by Exco, considering

that she attended the two Exco meetings where PESP Stream 1 applications were approved.

Irregular expenditure

5.74. Ms Marillier provided incorrect information to the NAC Finance unit and was negligent in the

performance of her duties, as she signed off the payment requisition form that resulted in the payment

of R87,160 to three applicants that were not approved by Exco.

5.75. Mr Changfoot failed to ensure that a system of internal control and financial management were

carried out within his area of responsibility, by verifying that the beneficiaries that were paid R87,160

were applications that were approved by Exco.

5.76. Application number 3400000 was declined by Panel 3 and subsequently approved by Panel 4 after

a request was made by the applicant for reconsideration of their application.

5.77. The value of the funds paid to this applicant to date amounts to R305,060.00. The payment of this

application amounts to irregular expenditure.

5.78. This application ought to be raised at the Appeal process. However, this was not the case and

therefore deviating from the required processes.

Conflict checks

5.79. The GMS data and Exco minutes confirm that the approval of the companies in respect of the three

current Council members (Dr Sithole, Ms Malange and Mr Tembe) transpired prior to them taking up

their duties as members of Council, and they could not have participated in the decision making to

award PESP benefits to their companies.

5.80. Ms van der Spuy who was a member of Council during 2020 and chairperson of Stream 1 panel

evaluation processes, did not recuse herself from the PESP processes. Ms van der Spuy therefore

contravened Section 8 (5) of the NAC Act.

5.81. Ms Elk who is a director of a company that benefited from the PESP, was in attendance at four of

the Exco meetings that adjudicated over the PESP applications, and she contravened Section 8 (5)

of the NAC Act.

5.82. Exco did not act within the best interest of the NAC, by allowing Ms Elk and Ms van der Spuy to

participate in the PESP processes when they were conflicted and therefore contravened Section 8

(5) of the NAC Act.


6. RECOMMENDATIONS

6.1. We recommend that the NAC consults its Legal representatives on the implementation of the

recommendations stated below.

6.2. We recommend that the NAC considers appropriate corrective action against the following:

6.2.1. The Project Managers

6.2.1.1. Zola Lumko

6.2.1.2. Nqobile Tshabalala

6.2.1.3. Andrea Voges

6.2.1.4. Mayenziwe Zuma

6.2.1.5. Nolitha Peter

6.2.2. Ms Marillier

6.2.3. Panel Members

6.2.3.1. Arthur Zitha

6.2.3.2. Carol Brown

6.2.3.3. Celeste Matthews-Wannenburgh

6.2.3.4. Conroy Cupido

6.2.3.5. Dave Tudor

6.2.3.6. Kearabilwe Malao

6.2.3.7. Kingdom Moshounyane

6.2.3.8. Mandy Van der Spuy

6.2.3.9. Michael Arendse

6.2.3.10. Molebogeng Mokomele

6.2.3.11. Nakedi Ribane

6.2.3.12. Njabulo Mkhondo

6.2.3.13. Njabulo Mthimkulu

6.2.3.14. Papama Mnqandi

6.2.3.15. Rosie Katz

6.2.3.16. Same Mdluli

6.2.3.17. Themba Luthuli

6.2.3.18. Theo Lawrence


6.2.3.19. Thoko Nogabe

6.2.3.20. Tsietsi W D Mohapi

6.2.3.21. Zothani Vilakazi

6.2.4. Ms Mangope;

6.2.5. Mr Changfoot; and

6.2.6. Exco.

The Project Managers

6.3. The conduct of the following individuals is indicative of misconduct as they failed to manage and

execute the activities within their area of responsibility. It should be noted that the five above

mentioned project Managers were contracted to the NAC for a period of six months and their

contracts have subsequently expired.

6.4. According to Section 57(a) of the PFMA, the Project Managers failed to ensure that the system of

internal control and financial management were carried out within their area of responsibility in that

they:

6.4.1. Failed to complete administrative compliance reviews within the set timeframe, as stated

in paragraph 5.5 of PESP Proposal;

6.4.2. Failed to analyse and manage project risks to provide Exco with complete, accurate and

reliable information of the applications to be evaluated by the PMs;

6.4.3. Failed to manage and provide accurate panel reports and panel indexes; and

6.4.4. Failed to ensure that GNLs are issued to only those applicants as approved by Exco.

6.5. According to Section 57(c) of the PFMA, the Project Managers failed to take appropriate steps to

prevent, within their area of responsibility, any irregular expenditure and fruitless and wasteful

expenditure in that:

6.5.1. Project Managers allocated applications that failed administrative compliance to PMs for

evaluation purposes. This resulted in the same applications being declined by PMs after

evaluation. PMs spent unnecessary time to evaluate applications that they ought not to

have received. PMs claimed payment for evaluating the disqualified applications that

amounts to fruitless and wasteful expenditure estimated at R912,600.00.


Ms Marillier

6.6. According to Section 57(c) of the PFMA, Ms Marillier failed to take appropriate steps to prevent,

within their area of responsibility, any irregular expenditure and fruitless and wasteful expenditure in

that she:

6.6.1. Failed to manage the deliverables of the Project Managers who allocated applications that

failed administrative compliance to PMs for evaluation purposes, that were also declined

after evaluation by the PMs. PMs spent unnecessary time to evaluate these applications

and claimed payment for evaluating these applications that amounts to fruitless and

wasteful expenditure estimated at R912,600.00.

6.6.2. Provided incorrect information to the NAC Finance unit, as she signed off the payment

requisition forms to the value of R87,160.

6.7. According to Section 57(a) of the PFMA, Ms Marillier failed to ensure that the system of internal

control and financial management were carried out within her area of responsibility in that she:

6.7.1. Failed to manage the deliverable of all team members against agreed upon timelines as

stated in the PESP Proposal;

6.7.2. Failed to manage and monitor the administration compliance processes to ensure that

incomplete applications were disqualified, as stated in paragraph 5.5 of PESP Proposal;

6.7.3. Failed to review the Panel report to identify any discrepancies against the Panel Indexes

prior to the submission of these documents to Exco;

6.7.4. Failed to manage the adjudication of PESP applications within the required timeline, due

to lack of information provided by Project Managers and PMs;

6.7.5. Failed to oversee that the issuing of approval letters is issued to applications that were

approved by Exco. This resulted in approval letter issued to the value of R8,905,900 when

no approval thereof was granted by Exco.

Panel Members

6.8. According to Section 57(a) of the PFMA, the Panel Members failed to ensure that the system of

internal control and financial management were carried out within their area of responsibility in

respect of:

6.8.1. Failing to complete the review of all allocated applications prior to the set panel meetings;

6.8.2. Failing to review applications as per the schedule provided by the SPM; and

6.8.3. Failing to score applications on GMS prior to panel meetings; therefore, in breach of their

MOU terms.


Mr Changfoot

6.9. According to Section 57(a) of the PFMA Mr Changfoot failed to ensure that the system of internal

control and financial management were carried out within his area of responsibility in that he:

6.9.1. Failed to exercise financial oversight in that R8,905,900 was awarded to applicants when

no approval thereof was granted by Exco;

6.9.2. Failed to provide financial management oversight to ensure that the 92 Stream 1

applications were indeed approved by Exco, prior to processing any payments to them;

6.9.3. Failed to ensure that a system of internal control and financial management were carried

out within his area of responsibility, by verifying that the beneficiaries that were paid

R87,160 were applications that were approved by Exco.

6.10. Failed to act with fidelity, honesty and in the best interest of the NAC in managing the financial affairs

of the PESP by not raising concerns that Exco’s approval of Stream 2 applications exceeded the

allocated budget of R285 million which led to Exco over-committing an amount of R428,073,778. Mr

Changfoot therefore, contravened Section 50 (1) (b) of the PFMA which states, “act with fidelity,

honesty, integrity and in the best interest of the public entity in managing the financial affairs of the

public entity”

Ms Mangope

6.11. According to Section 57(a) of the PFMA, Ms Mangope failed to ensure that the system of internal

control and financial management were carried out within her area of responsibility in that she:

6.11.1. Failed to comply with the NAC’s generally accepted recruitment processes or practices

when appointing Ms Marillier as SPM for the PESP, as no formal submission seeking

approval to deviate from the normal recruitment process was followed;

6.11.2. Failed to comply with the obligation of the MOA, as stated in paragraph 6.2 “utilise the

allocation provided by the Department exclusively and solely for the purpose of the project”

since Ms Marillier was contracted to work on other projects in the capacity as SPM, whilst

her salary was funded from the PESP expenditure;

6.11.3. Failed to provide adequate oversight and was negligent in managing the execution of the

administrative compliance processes which allowed 1,104 applications to be considered

for evaluation when they ought to have been disqualified;

6.11.4. Failed to meet the obligations in respect of the fixed dates as agreed in the MOA with the

DSAC;

6.11.5. Failed to manage project risk in that the timelines and deliverables stated in the process

flow document were not met and no evidence of re-assessing or mitigation of management

controls were found to ensure that the PESP deliverables were met;


6.11.6. Failed to impose corrective action against PMs who did not meet their obligations as stated

in paragraph 4 of the MOU for PMs, “That if a panel member is unable to meet the

obligations of being a panel member, that they will be removed from the panel;.

6.11.7. Misrepresenting information to Exco who continued to approve funding for applications

beyond the allocated PESP budget, when no formal submission requesting additional

funding from National Treasury was requested;

6.11.8. Failed to manage and execute her duties in respect of the PESP in that R8,905,900 was

awarded to applicants when no approval thereof was granted by Exco, considering that

she attended the two Exco meetings where PESP Stream 1 applications were approved;

6.11.9. Ms Mangope failed to manage and achieve the objectives of the PESP in that:

6.11.10. Stream 1 did not manage to support the required job retention opportunities

for 7,000 beneficiaries.

6.11.11. Stream 2 did not manage to create the required job opportunities for 8,000

beneficiaries.

6.11.12. The allocated budget of R300 million was exceeded during the adjudication of

applications by Exco and Ms Mangope did not take effective and appropriate

steps to prevent and/or mitigate the oversubscription within her area of

responsibility.

6.12. Ms Mangope contravened Section 57 (c) of the PFMA as she did not take effective and appropriate

steps to prevent the irregular salary expenditure of R360,000 to Ms, as the PESP funds were not

exclusively used for PESP related work.

6.13. Ms Mangope failed to act with fidelity, honesty and in the best interest of the NAC in managing the

financial affairs of the PESP by not ensuring that the approved applications remained within the

allocated budget of R285 million as opposed to over-committing an amount of R428,073,778. Ms

Mangope therefore, contravened Section 50 (1) (b) of the Public Finance Management Act (“PFMA”)



Exco

6.14. According to Section 83 (1) of the PFMA, Exco failed to comply with section 50 (1)(b), which states,

“(b) act with fidelity, honesty, integrity and in the best interest of the public entity in managing the

financial affairs of the public entity” in that they:

6.14.1. Approved PESP applications to the value of R428,073,778 that exceed the allocated

budget by R143,073,778.

6.14.2. Did not obtain approval from National Treasury to approve PESP applications in excess of

the allocated budget of R285 million;


6.14.3. Failed to comply with Section 11 of the NAC Act, by allowing Council members to evaluate

PESP applications while serving as Council members;

6.14.4. Disregarded their own resolution of 19 September 2020 by allowing five Council Members

to actively participate in the evaluation of applications; and

6.14.5. Failed to provide oversight of risk governance, regarding the implementation of the PESP

within the allocated budget of R285 million.

6.15. Exco did not act within the best interest of the NAC, by allowing Ms Elk and Ms van der Spuy to

participate in the PESP processes when they were conflicted and therefore contravened Section 8

(5) of the NAC Act.

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