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An agency of the Department of Arts and Culture Presented by: Mr Fanie Makhanya Chairperson 04 FEBRUARY 2014 SAHRA PRESENTATION TO THE PORTFOLIO COMMITTEE.

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Presentation on theme: "An agency of the Department of Arts and Culture Presented by: Mr Fanie Makhanya Chairperson 04 FEBRUARY 2014 SAHRA PRESENTATION TO THE PORTFOLIO COMMITTEE."— Presentation transcript:

1 An agency of the Department of Arts and Culture Presented by: Mr Fanie Makhanya Chairperson 04 FEBRUARY 2014 SAHRA PRESENTATION TO THE PORTFOLIO COMMITTEE 1

2 An agency of the Department of Arts and Culture PURPOSE The purpose of this presentation is to: To give the Portfolio Committee of the Progress of SAHRA’s intervention; To give the status report on the areas identified by the Committee and To introduce the newly appointed SAHRA Council to the Committee. 2

3 An agency of the Department of Arts and Culture PRESENTATION OUTLINE BACKGROUND TURNAROUND PROCESS FINANCE TEAM OD TEAM PROPERTY STRATEGY TEAM FORENSIC AUDIT THE STATUS REPORT OF THE FOLLOWING: THE STATE OF FUNCTIONING OF PHRA’S THE STATE OF OUR PROPERTIES WHICH ARE LEASED BELOW MARKET VALUE THE PROTECTION OF THE SA HERITAGE AGAINST ILLEGAL THE REPATRIATION AND PROTECTION OF THE SA STRUGGLE HERITAGE THE STATUS OF DICTRICT 6 THE RECRUITMENT PROCESS OF THE CEO THE INTRODUCTION OF THE NEW COUNCIL 3

4 An agency of the Department of Arts and Culture Background During 2011/2012 SAHRA received a negative audit finding that was disclaimed The Council appointed a turnaround task team to correct the disclaimed audit SAHRA reported to the Portfolio Committee the intervention strategies adopted to redress the challenges in the organisation. This included the appointment of Consultants to address problems in the following areas: Finance Assets Organizational Development Property Portfolio Forensic Audit 4

5 An agency of the Department of Arts and Culture The Functions of the teams The Finance Team: helped us to clean the mess that spans the period of 3 years The property Team; submitted the draft report to the Council and have made their inputs and they will submit the final report The OD Team: completed the skills audit, Org. culture audit, Performance Management system, Organizational Performance Management Framework, Wellness Program; salary benchmarking The Forensic Report; Just received the final report 5

6 An agency of the Department of Arts and Culture Outcome of the first phase of intervention: Audit history Qualified audit opinion Findings on compliance No findings on PDO Disclaimed audit opinion Findings on compliance Findings on PDO Qualified audit opinion Findings on compliance Findings on PDO Unqualified audit opinion Findings on compliance/internal control Findings on PDO

7 An agency of the Department of Arts and Culture Basis for the Qualified Audit Opinion Basis for the qualificationProgress to date /Correcting Entry Contingent Liability disclosure The public entity accumulated surpluses without the prior written approval of National Treasury as required by section 53(3) of the PFMA. Approval has already been received from National Treasury to retain the R84,779million surplus. Statement of Comparison of Budget and Actual Amounts In terms of the SA Standards of GRAP, GRAP 24, Presentation of budget information in financial statements the entity is required to present the actual amounts spent against the budget on a comparable basis to the budget. The AFS were subsequently corrected to clear the discrepancies however, it was already late to submit a new set of the AFS to the AG. Disclosure of the comparative reconciliation of other financial The public entity disclosed a prior period error as a change in accounting policy in note 28 which is in contradiction with Standards of Generally Recognised Accounting Practice, GRAP 3, Accounting policies, Changes in Accounting Estimate and Errors. (R3,133,480) The AFS were subsequently corrected to clear the discrepancies however, it was already late to submit a new set of the AFS to the AG. 7

8 An agency of the Department of Arts and Culture Basis for the Qualified Audit Opinion Basis for the qualificationProgress to date /Correcting Entry Disclosure of the narrative of the reconciliation of the comparative unspent conditional grants liability The public entity disclosed the amount of interest received and income received in the comparative period reconciliation as one amount in the line item in note 14, Interest received, which is in contradiction with SA Standards of GRAP, GRAP 1, Presentation of financial statements. ( R1,553,028) The AFS were subsequently corrected to clear the discrepancies however, it was already late to submit a new set of the AFS to the AG. The public entity disclosed a prior period error as a change in accounting policy in note 28 which is in contradiction with Standards of Generally Recognised Accounting Practice, GRAP 3, Accounting policies, Changes in Accounting Estimate and Errors. The amount is adjusted for correctly against the respective account balances and line items; however it is disclosed as a change in accounting policy when in fact it is a prior period error.( R3,583,585) The AFS were subsequently corrected to clear the discrepancies however, it was already late to submit a new set of the AFS to the AG. 8

9 An agency of the Department of Arts and Culture THE STATUS OF THE PHRAS 1.Amafa aKwazulu Natali represented in Council and fully functional 2.Heritage Western not represented in SAHRA Council but fully functional 3.Eastern Cape represented in Council and fully functional with limited resources 4.Gauteng represented in Council and performs all functions except Archaeology, Palaeontology and Meteorites 5.Free State represented in Council and performs all functions except Archaeology, Palaeontology and Meteorites 6.Northern Cape not represented in Council perform built environment functions 7.Limpopo no Council but represented in Council perform built environment functions. 8.Mpumalanga no Council but represented in Council perform built environment functions 9.North West no PHRA Council not represented in Council. SAHRA Perform functions.

10 An agency of the Department of Arts and Culture Name & SurnameProperty NameLease start dateLease end dateRental Amount University of Cape TownValkenberg Manor01-Dec-85November 2037R per annum THE STATUS OF SAHRA Properties Properties Which Are Leased Below Market Value

11 An agency of the Department of Arts and Culture

12 SAHRA Progress - Properties  The South African Heritage Resources Agency owns a number of cottages in Struisbaai and during the 1980’s, the National Monuments Council entered into lease agreements with various tenants.  The lease agreements bind SAHRA to a twenty five year lease agreement that can be renewed by the tenant for a further twenty five years, with a rental of R1 a year.  SAHRA’s previous council had requested that these lease agreements be canceled and the tenants be evicted.  SAHRA’s legal advisor proceeded with eviction letters and sought legal advise from Bowman Gilfillan Attorneys. 12

13 An agency of the Department of Arts and Culture Name & SurnameStruisbaai CottagesLease start dateLease end dateRental Amount Charles Wilhelm ThesenCottage 124/04/198331/03/2008R1 per year Negotiating the new Lease Agreement with the tenant Hendre and Rehan PioutCottage 221 /11/198031/10/2005R1 per year Negotiating the new Lease Agreement with the tenant Henry Villet, Klohn and PartnersCottage 31980/10/0930/08/2005R1 per year Negotiating the new Lease Agreement with the tenant Noelette Ann Wilmot and Harold John WilmotCottage 421/11/198130/10/2006R1 per year Negotiating the new Lease Agreement with the tenant Petrus Turlet DreyerCottage 51981/01/0930/08/2006R1 per year Negotiating the new Lease Agreement with the tenant Sarel Johannes EngelbrechtCottage 61981/12/0930/08/2006R1 per year Negotiating the new Lease Agreement with the tenant Maruis Erasmus Redemeyer & Mary Betista OosthyzenCottage 8 14 /07/198131/06/2006R1 per year Negotiating the new Lease Agreement with the tenant Alice Hendrina Gouws and Francis Anne FortuinCottage 924/06/198131/05/2006R1 per year Negotiating the new Lease Agreement with the tenant STRUISBAAI FISHERMAN COTTAGES

14 An agency of the Department of Arts and Culture 14

15 An agency of the Department of Arts and Culture TERMS OF LEASE AGREEMENT  The rent shall be the sum of R1.00 per year payable annually  The Tenant may not cede the rights to the lease to the cessionary or sublet the lease without permission from SAHRA  On termination of the initial period (the first 25 years) the Tenant AT HIS OPTION is entitled to renew the lease for the same annual rental of R1.00.  In the event of termination of the lease by reason of death, the Tenant has an option of ceding the lease to a beneficiary stipulated on the lease agreement  The Tenant shall have the right to renew the lease for a further period of 25 years provided that he shall give notice to SAHRA in writing at least one month prior to expiration of this lease.

16 An agency of the Department of Arts and Culture LEASE AGREEMENTS CURRENT STATUS OF COTTAGE 1 – CHARLES THESEN – RENEWED LEASE on 23 RD APRIL 2008 COTTAGE 2 – HENDRE & REHAN PITOUT – RENEWED on 21 st NOVEMBER 2005 COTTAGE 3 – HENRY VILLET – KLOHN AND PARTNERS - have sent eviction letter no response, tracing agent employed to locate COTTAGE 4 - NOELETTE & HAROLD WILMOT – have sent eviction letter no response, tracing agent employed to locate

17 An agency of the Department of Arts and Culture CURRENT STATUS OF LEASE AGREEMENTS COTTAGE 5 – DREYER – RENEWED LEASE on 29 August 2006 COTTAGE 6 - JOHANNES - RENEWED LEASE on 21 June 2006 COTTAGE 8 - RADEMEYER & OOSTHUYZEN - THE ORIGINAL TENANT CEDED THE LEASE TO A FRIEND – THE FRIEND HAS RENEWED THE LEASE. COTTAGE 9 – GOUS & FORTUIN - RENEWED LEASE ON 28 TH MAY 2006

18 An agency of the Department of Arts and Culture Position of Tenants Prior to obtaining a Legal Opinion, the SAHRA met with the Tenants to discuss the option of entering into a new market related lease agreements: Cottage 1 – not interested as the lease is renewed. Cottage 2 – not interested as the lease is renewed. Cottage 3 – unable to reach Tenant Cottage 4 – unable to reach Tenant Cottage 5 - not interested the lease is renewed. Cottage 6 – Is willing to enter into a new lease agreement. Cottage 8 – Is willing to enter into a new lease agreement. Cottage 9 - Is willing to enter into a new lease agreement. 18

19 An agency of the Department of Arts and Culture Legal Position Lease period The following Legal Position was obtained from Bowman Gilfillan Attorneys: The lease is renewable twice – the period of the lease may not exceed 75 years This is based on “on termination the right to renew for a further 25 years” & “such renewed lease shall again be renewable on similar terms” 19

20 An agency of the Department of Arts and Culture Legal Position Improvements to properties Even though certain tenants may have incurred expenses Improvements made to the homes amounting to R This does not imply that the lease agreement has perpetual renewals The tenants were compensated by nominal rental and 75 year term 20

21 An agency of the Department of Arts and Culture Termination on the basis of non registration of lease Some may argue that because the lease agreement is a long a lease it is invalid as it is not registered. The Formalities in respect of Leases of Land Act 18 of 1969 refers to “successors in title”. All successors in title are bound by long leases irrespective of whether they are registered or not. SAHRA is a successor in title as it “inherited” the lease from the NMC 21 Legal Position

22 An agency of the Department of Arts and Culture 22 T erminate Leases Leases that are not renewed = those that have not exercised their option of renewal by writing to SAHRA are therefore subject to the Rental Housing Act – “a month to month lease” and can receive one months notice of termination. Leases that were renewed = considering that the lease agreement is not in perpetuity and therefore a legal binding contract and further considering that it was not necessary to register the lease agreement.- the lease agreement cannot be simply terminated. Legal Position

23 An agency of the Department of Arts and Culture Options for consideration by SAHRA At the time the leases were concluded – during the National Monuments Act – the NMA required that the Minister give consent in writing prior to the leasing of land. The argument is that if there is no such consent then the lease was ultra vires. A further option would be section 27 (19) of the NHRA – where SAHRA may make regulations pertaining to heritage and regulate conditions of heritage sites – perhaps obtain a “fair market rental” through proclamation of regulations. However SAHRA would have to show that the reason for drafting regulations of this sort was according to the principles of heritage management and within the general powers and duties of SAHRA. i.e. why is it necessary to obtain a “fair market related rental” 23

24 An agency of the Department of Arts and Culture Consolidation of the property challenges SAHRA is taking all of the above into consideration as the draft Property Management Strategy is being finalised. The Property strategy will assist in the preservation of the our heritage for future generations

25 An agency of the Department of Arts and Culture PROTECTION AGAINST ILLEGAL EXPORT SAHRA regulates the movement of Heritage Objects outside of and into SA. Applications to export heritage objects are made on the SA Heritage Resources Information System (SAHRIS). SAHRA refused to approve the export of the only known signed copy of the Freedom Charter. Customs has a co-operative governance role to play which is not yet in place but processes are in motion to enter into a Memorandum of Understanding with Customs to address this gap. SAHRA has also adapted the List of Types of Heritage Objects that are protected to include these in SARS Prohibited and Restricted List. In 2012/2013, SAHRA received 24 applications for the export of 27 Heritage Objects of which 3 permits were refused. It is believed that objects may be illegally exported because it is known that Customs does not have the infrastructure in place to prevent illegal export.

26 An agency of the Department of Arts and Culture PROTECTION AGAINST ILLEGAL EXPORT In 2013 Military objects were stolen from museums in Kimberley, Bloemfontein and the Karoo. Artworks were stolen in North West. The thefts were reported to the SAPS who view these as low priority crime. SAHRA forward the information to the Endangered Species Desk and Interpol for investigation. Since the decline of the National Forum for the Law Enforcement against Heritage Related Crime (NALEH), there is co-ordination of heritage related crime in South Africa. Although illicit trafficking and thefts from museums form part of organised crime, due to gaps in infrastructure, Heritage Objects are wittingly or unwittingly illegally exported by members of the public.

27 An agency of the Department of Arts and Culture REPATRIATION AND PROTECTION OF STRUGGLE HERITAGE SAHRA’ mandate is restitution of Heritage Objects when a community or body with a bona fide interest makes a claim on a movable heritage resource as part of the national estate and is held by or curated in a publicly funded institution. SAHRA can advise Minister who must consult with Minister of Finance to purchase or subject to compensation, expropriate any property for conservation or any other purpose under the NHR Act if that purpose is a public purpose or is the public interest. SAHRA is also mandated to repatriate heritage objects which have been removed from South Africa and which SAHRA considers to be significant as part of the national estate.

28 An agency of the Department of Arts and Culture Update on District six Two meetings were held with CEO of District Six after the Portfolio Committee presentation The discussions were around the clear demarcation of boundaries as the area is big and earmarked for development Due to the size of the area there are possibilities of objections and challenges They were advised to develop an integrated management plan that will be inclusive of all facets of the area 28

29 An agency of the Department of Arts and Culture The appointment of the CEO Council advertise the position Recruited an HR company to assist with the recruitment process The interviews were conducted 29

30 An agency of the Department of Arts and Culture SAHRA Council Members SAHRA Accounting Authority The term of office the previous Council came to an end on 31 July 2013 and a new Council was appointed on 01 August 2013 and inducted on the 15 August Mr Fanie Makhanya: S AHRA Council Chairperson ( Architect by Profession) Ms Mmabatho Ramagoshi: Acting CEO & Head of Turnaround Strategy`[ not activated] Dr Chitja Twala: Chairperson of HR & REMCO (History Lecturer at the University of Free State) Mr Mokena Makeka: Chairperson of IT & Assets Committee ( Architect by Profession) Dr Ndukuyakhe Ndlovu: Chairperson HRM Committee (Senior lecturer in Archaeology at the University of Pretoria) Ms Reyhana Gani:Chairperson of Audit & Risk Committee (Chartered Accountant) 30

31 An agency of the Department of Arts and Culture SAHRA Council Members Dr William Ndlala: Council Member (Member of the Commission for Traditional Leadership, Dispute & Claims) Dr Gregory Houston: Council Member (Chief Research Specialist) Ms Jean Burgess: Council Member (Chairperson of the EC PHRA) Mr Jabu Sindane: Council Member (Municipal Manager) Mr Donald Lithole: Council Member (Manager Museums & Heritage Services) 31

32 An agency of the Department of Arts and Culture Issues raised in the previous briefing of the PC (cont.) The process followed by SAHRA to transfer of moveable assets:  SAHRA transferred all computers and vehicles to the PHRAs if they were willing to accept if not donated to schools and community organisations, obsolete and untraceable assets were written off according to the policy Concerns on the use of Contract Workers and Consultants by SAHRA:  Limited capacity and existing skills level at SAHRA a challenge but OD process and implementation of the proposed structure could turn this around Financial accountability and request for financial statements by the PC  Accounts were de-recognised and removed from general ledger  Investment policy ensured minimization bank charges and better investment without compromising service delivery 32

33 An agency of the Department of Arts and Culture Appointment of a CEO  It was recommended by the PC that the appointment of the CEO be undertaken by the incoming Council since the present term was ending July 2013  The contract of the Acting CEO was extended to 31 April 2013 and appointment of a new CEO to be completed by 31 January 2014  It was requested that UNION Representative be present in PC sessions It was recommended to audit all policies rather than continuously developing new ones Relocation to Pretoria  PC highlighted that SAHRA operated like a regional office not national due to its locations in Cape Town  However, no comments were made on the proposed relocation of SAHRA to Gauteng 33 Issues raised in the previous briefing of the PC (cont.)

34 An agency of the Department of Arts and Culture Properties  Water meters were being installed to address the high amounts paid for upkeep of SAHRA properties Concerns were raised on tenants that are renting SAHRA properties for R1 per annum and the status of such contracts  The 25 year lease ended in 2006 and will not be renewed  Eviction letters were sent to tenants and on receipt the tenants contacted the property Officer. SAHRA Legal Advisor and the Officer since engaged the tenants who are willing to pay more and enter into a new lease agreement  To prevent vandalising of property SAHRA was to refurbish the properties and put them on the rental market The payment of levies and rates and taxes by SAHRA for minimal returns on rentals was raised as a concern by the PC  The response was that SAHRA was legally obliged to pay and a strategy was to be developed to provide better returns to cover the rates, taxes and levies. 34 Issues raised in the previous briefing of the PC (cont.)

35 An agency of the Department of Arts and Culture Root Causes for history of issues 35 Instability of Leadership Lack of policies and procedures Lack of skilled staff Lack of controls over basic daily/week ly/monthly processes

36 An agency of the Department of Arts and Culture Management Conclusion 36  The year on year comparison shows that the Agency was receiving unqualified audit Opinion albeit the historical corrections that had to be done during the 2012/13 financial year.  Management therefore submits that this audit was not a normal audit as demonstrated by the previous disclaimer opinion received.  To date we have made significant progress with regards to improving controls and developing a comprehensive action plan to clear the audit finding.

37 An agency of the Department of Arts and Culture 37 Thank You!


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