|
 Summary:
The National Lotteries Board said that it had ironed out its communication problems with its distributing agencies. Its presentation focused on the distribution of the National Lotteries Distribution Trust Fund, the internal process for processing applications and the figures for distributing agency output and other relevant distribution statistics. There was currently over R6 billion in the Fund.
The Department of Trade and Industry’s presentation focused on the challenges that it had identified in a series of meetings with the distributing agencies and the NLB and the proposed solutions to some of the problems. The presentation provided details of progress achieved and the proposed solutions.
There were corporate governance issues in terms of the management and the administration of the Fund. On the role of the distributing agencies, the legislation was not clear on accountability and corporate governance responsibilities. The DTI had also identified significant administrative constraints in the handling of funding applications which contributed to huge backlogs and turnaround times of up to two years when processing them.
The DTI also proposed educational campaigns as a way of promoting the
optimal distribution of the funds which would focus on assisting
communities when putting together their applications.
Questions included how the inequality in the distribution of the Fund to
different provinces would be solved, had the global economic crisis had
an impact, educating the public about the Fund especially targeting
poorer communities where there was a greater need.
Minutes:
National Lotteries Board on the National Lotteries Distribution Trust
Fund (NLDTF)
The Chairperson of the National Lotteries Board (NLB), Professor
Nevhutanda Alfred, briefly addressed the Committee on the Board’s
strategic direction going forward under his leadership. He promised to
vindicate the legislature’s desire for the entity to deliver and assured
the Committee that the problems between the distributing agencies and
the Board that had been experienced in the past had been resolved. The
distributing agencies, as well as any member of the general public,
could now feel free to consult the Chairperson and any member of the
Board on any matter that they were not happy about. The National
Lotteries Board was geared to deliver its mandate and no stone would be
left unturned in pursuing that objective. Much of what it and the
Department of Trade and Industry were presenting was the outcome of
several consultations between them to map out how the NLB could function
efficiently and effectively.
The Chairperson of the Portfolio Committee commented that he appreciated
the enthusiasm shown by the new board. This meant that the work which
the Committee had put in last year had not been in vain. However, the
proof was always in the pudding and the Committee were anxious to see
the work being done by the NLB and the way in which the NLDTF was being
distributed. The co-ordination between the NLB and the DTI was also
critical and it was important for the left hand to know what the right
hand was doing.
Professor Vevek Ram, CEO: NLB, explained that the NLP input would
provide an overview of what the Board’s work was about with special
reference to the distribution of the NLDTF and the challenges that they
faced. The DTI input would focus on how those challenges would be
addressed.
Professor Ram explained that presentation would give a brief
organisational background because they thought that there was a
misperception that the primary function of the NLB was to distribute
money when in fact it was a regulator whose primary function was to
regulate the national lottery. The presentation would also look at
distribution challenges and some of the interventions that the NLB had
already implemented.
The primary function of the Board was to regulate the national and other
lotteries so that they were run with utmost integrity and to ensure
that the national lottery generated maximum revenues for good causes in a
responsible way and that these revenues were disbursed equitably and
expeditiously.
The NLB owed its existence to the National Lotteries Act which
established its functions, set out the process for awarding the licence
to operate the national lottery and established the National Lottery
Distribution Trust Fund (NLDTF). This was the fund where all the
revenues from the lottery as prescribed by the licence where actually
held. The Act also set mechanisms for distributing funds from the NLDTF
and processes for monitoring and regulating private and society
lotteries and promotional competitions.
The functions of the Board were to advise the Minister on the
functioning of the lottery licence, the percentages that were allocated
to different causes, such as arts and culture, natural heritage,
charities and sport, and also to advise the Minister on the efficacy of
legislation. The Act did not specifically mention that the Board should
be involved in the distribution of the NLDTF but it did make provision
for the Minister to allocate any other duty to the Board. One of the
duties allocated by Minister Erwin in 2000 was for the NLB to take over
the administration of the distribution of funds. The Board did not
really make the decision as to who got funding but provided the
administrative support for that whole process.
Having been given that additional task, they found that the Board had
almost become two organisations in one, having both a regulatory role
and one which was the support function for the distribution. In
practice, one found that nine tenths of their work was more focused on
distribution rather than regulation. It was not that they were ignoring
the regulation but it was just how things had turned out.
The presentation provided an overview of the distribution of the NLDTF
and took the Committee through the process of how the distributing
agencies decided on allocation of the fund and the procedure for
inviting applications. He also briefed the Committee on the charities
that were a focus for the NLDTF and other areas of focus in arts,
culture and heritage and sports. The Committee was also given the
details of the internal process for processing applications and the
figures for distributing agency output and other relevant NLDTF
distribution statistics.
Professor Ram briefed the Committee on some of the challenges faced by
the entity particularly in processing applications for funds where
progress was bogged down by a high volume of applications compared to
the capacity to deal with them. The NLB estimated that they received an
estimated 1000 applications more than they could handle. The issue of
distribution was another area of concern because of there had been no
direction from the Minister of Trade and Industry. Another challenge
faced by the NLB was that there was no detailed formal process of
adjudicating applications.
The problem with the funding model was that the Act currently specified
that it was application based. This meant that to get money one had to
fill in an application form. This meant that the NLDTF could not be used
for emergency funding such as required after the occurrence of a
natural disaster such as flooding or fire. For instance, the Department
of Education had recently been running around looking for R10 million to
acquire portable buildings to use as classrooms. The NLDTF could not
fund that because without an application, the Auditor-General would then
jump on them because that was not how the process was specified in the
Act.
Another concern was that the application requirements were quite
rigorous and what this meant in effect was that one had to have money in
order to get money from the NLDTF. This was because one needed to
furnish audited financial statements, and all kinds of record keeping
which the fancy organisations had. This meant that organisations that
did not really need the money were the ones actually getting the money
whilst the ones in dire need were not.
The NLB was also concerned about the impact that they achieved with the
NLDTF money in terms of the R6.2 billion that they disbursed. A small
scale impact study had been done a few years back and what it showed was
that this money was used to allow organisations to continue existing.
There was no real significant impact that said so many new jobs had been
created or that there had been any other social changes that were
significant.
Professor Ram touched on several other challenges which included the
fact that the distributing agencies were not accountable formally for
the money which they disbursed and the lack of a mechanism for appeal or
review of a funding application. The NLB had no statutory authority to
review a decision made by the distributing agency.
Discussion
Mr X Mabaso (ANC) congratulated the new leadership of the NLB and wished
them well in their future endeavours. He was impressed with the input
and he felt that it would go a long way in assisting the Committee to
identify problems experienced by the entity. His only worry would be
whether the workshops that were planned were going to come up with
solutions to these identified problems. It was a big worry because the
same problems that were outlined here would be a measure of the Board’s
efficacy as well as their associates because the Committee expected
those problems to be resolved.
Professor Nevhutanda responded to questions on the strategic
direction of the NLB. There had been an induction of the Board by the
DTI. The strategic session that the CEO and he had referred to would
look at the current mission and vision of the NLB to see if it tallied
with the current Act. If it did, they would consider how they could make
it more elaborate to include some of the DTI’s suggestions. The
strategic session would look at the NLB organogram structure to see if
it answered the oft-repeated concerns of the legislators. If not, they
would consider ways of making it responsive to the concerns raised by
Parliament and the public so the structure was aligned to the delivery
mechanism they intended to implement. The strategic workshop would also
look at the need for educational campaigns and the turnaround times for
the applications.
Mr Mabaso asked what the strategies were for achieving a provincial
balance in the distribution of funds. He pointed to the extremes
reflected in the presentation which showed certain provinces receiving
more than others.
Professor Nevhutanda responded that there was a pilot project planned in
one or two provinces such as Limpopo where offices would be opened to
ensure that the service was brought to where people were located so that
they would not have to struggle to apply. This was something that they
were still negotiating with DTI so that they could get clarity as to how
this could be done.
Ms Mpho Mosing, Director: Consumer and Corporate Regulatory Division
(CCRD) in the DTI, made mention of an important assessment that had been
done by the DTI. They had conducted a needs assessment in all the
provinces so that they could address the issue of funding balance.
Mr Mabaso referred to the five categories approved for good cause
funding and asked why the Reconstruction and Development Programme (RDP)
category had a figure of zero. Was this a policy decision or indeed was
it the correct figure?
Ms Nomfundo Maseti, Acting DDG: Consumer and Corporate Regulation
Division (CCRD), responded that there was a need to revisit that
particular category because the legislation that established the RDP no
longer existed. They would have to decide if the five categories
approved for good cause funding in the legislation should be maintained
or should they remove some.
Professor Ram added that the Act stated that a certain proportion
recommended by the Minister had to be put into the RDP Fund or a fund
designated by the Minister of Finance. RDP was now defunct and they had
asked the Minister of Finance to tell them where they could put this
money. The Minister had responded that National Treasury was not
interested in the fund and that they had to negotiate with the DTI about
what to do with the money. The DTI had then recommended that they
reduce the allocation to zero until the Act was amended.
Mr Mabaso referred to the challenges faced by the Board and asked how
they intended to deal with the issue of incapacity that they faced.
Professor Nevhutanda replied that the DTI had come up with a good
mechanism. As a Board they were also looking at ways that would allow
organisations to consult the NLB for information. They were ensuring
that people were free to make phone calls to the NLB for information
about the application process. In the past, there had been no access to
the NLB offices for organisations and the public.
Mr Mabaso asked if the Board had a strategy to ensure that they did not
have a surplus of unspent NLDTF money as had happened in the past
financial year – despite poverty remaining unaddressed.
Professor Ram responded that they did not have any control over the flow
of the NLDTF. The money flowed because grants were made. They had no
control over those grants in terms of to whom they were made, what the
amounts would be or how many applications were considered. Therefore
surplus depended on applications and on funding. Until more categories
were added by an amendment to the Act, then they did not have an answer
on how to get rid of the surplus. Obviously if the number of rejections
were reduced then some of that surplus would go away. However at the
moment there was no concrete mechanism for them to say that they would
be able to get rid of the surplus in a year or two.
Department of Trade and Industry on National Lotteries Distribution
Trust Fund (NLDTF)
Ms Nomfundo Maseti, Acting DDG: Consumer and Corporate Regulation
Division (CCRD), provided a progress report on the challenges that the
DTI had identified in a series of meetings with the distributing
agencies and the NLB and the proposed solutions to some of the problems.
In her overview of the institutions that were established by the
Lotteries Act, she emphasised the relationship between them, the level
of accountability and the function of each. The Act was very specific
that it gave the NLB the power to administer the Fund and to invest it
in a Trust. At the same time, the Act established the distributing
agencies that determined the beneficiaries of the fund. Therefore the
NLB as a Fund trustee needed to obtain a decision from the distributing
agency so it can then disburse the funds from the NLDTF.
There were corporate governance matters in the management and the
administration of the NLDTF. However when it came to the role of the
distributing agencies, it was not very clear in the legislation what
accountability and corporate governance existed. It was important from
the outset to outline those relationships and be aware of the different
categories of the distributing agencies.
An important consideration when trying to capture the purpose of the
Fund was the framework or direction by the Minister. The Act empowered
the Minister to advise the distributing agencies as to where the NLDTF
money had to be channelled and its utilisation purpose. As the Minister
provided that kind of direction, he had to take into account specific
factors to do with the general development in the Republic. Some factors
which had to be taken into account were the improvement in the standard
of living of the community, the financial and socio-economic needs of
the provinces and the number of tickets that were sold in each province.
Ms Maseti corrected Slide 5 of the DTI presentation saying that the
current value of the Fund was estimated at R6,2 billion and not R5,8
billion (which was for the 2008/09 financial year and not the current
one). She said that they would supply the correct figures for that slide
to the Committee.
She said that the problems identified by the DTI included some that the
Minister could rectify by way of regulations to avoid waiting for
amendments to the legislation. Others were administrative problems that
could be resolved between the NLB and its distributing agencies via
internal process. This included the support required by the distributing
agencies in assessing and adjudicating over the applications.
The administrative problems were being addressed through a sub-committee
chaired by the DTI. The Central Applications Office (CAO) had been
assigned to the NLB by the former Minister of Trade and Industry. This
provided support to the distributing agencies when presented with
certain challenges. When the applications were received, the CAO had to
screen the applications to check if basic documents and information were
available. There was a need for this to be done by people with a
certain level of skills. The problem was that there was a high staff
turnover of those responsible for screening the applications. People who
were involved in the screening phase did not have the necessary
knowledge and the proper training for doing that work. This was why
distributing agencies ended up with applications with incomplete
information, which once it got to the NLB for processing, there would be
delays because of missing details. There were not any dedicated
resources assigned to training. There was therefore a need to capacitate
the application process so that the process moved smoothly. Another
problem was the loss of documents as a result of the long turnaround
time for processing applications - a period of almost two years. Calls
for applications were made once a year and there was no mechanism where
calls could actually be made on a more regular basis. This resulted in
their receiving a huge bulk of applications. It took them a year to
assess the applications and process them. It was desirable to have a
process where applications were called for regularly so that they could
be assessed as they came in to improve their processing time. An
assessment of the resources to handle applications throughout the year
was required.
Another problem was inadequate communication between the distributing
agencies and the NLB. The NLB obviously had concerns about corporate
governance and accountability. If they wanted to query the adjudication
decision made by the distributing agencies, there was not any formal
process for reviewing applications without delaying the conclusion of
grant agreements. The turnaround time for the conclusion of grant
agreements took almost two years.
The DTI, through its sub-committee, had tried to identify the causes for
these problems and how they could actually eliminate them. Some
required legislative amendments, such as the accountability of each
structure - particularly the distributing agencies as they made
decisions on the allocation of funds. There was a lack of clear
responsibility by them for accountability for NLFTF money. This would be
dealt with in proposed amendments that would be brought to the
Committee in the course of the year.
The relationship between the Minister, the NLB and the distributing
agencies and their different roles needed clarification. At present, the
role of the Minister was sometimes confused with that of the NLB as a
result of unintended consequences in the legislation. There was also a
lack of direction or guidance in the adjudication of applications
required for the distributing agencies. This had been done in the past
year and a notice had been published.
Another difficulty was the compulsory requirement for first-time
applicants to produce audited financial statements. This affected
smaller organisations that despite a worthy cause had no financial
statements as they were only starting up their operations. The DTI felt
that this requirement was unnecessary. The DTI had been unable to see
what the rationale for this requirement was because such organisations
would have never been granted any funds and they could therefore see no
reason why they were required to account. This was something that could
be rectified by way of regulations as it was a requirement which had not
existed in the past but had been instituted by regulations in 2005.
The DTI also proposed educational campaigns to promote the optimal
distribution of funds, understanding of the application requirements and
procedures and which would focus on assisting communities in putting
together their applications.
Discussion
Mr Van Der Westhuizen (DA) asked the CEO of the NLB if there had been
any response from the NLB or its distributing agencies to the global
economic downturn exacerbating the hardships experienced in South
Africa. Had more money been allocated to charities for instance and had
they employed more staff to assist in speeding up the processing of
applications?
Professor Ram replied that specific responses to the economic downturn
would have to be articulated by the distributing agencies that would met
with the Committee in the following week.
Mr Van Der Westhuizen commented that whilst he was glad to hear that an
impact study had been conducted on the NLDTF that had been disbursed. He
differed with the NLB’s finding that all of the money that they had
disbursed had made a very low impact. He was aware of many
non-governmental organisations that employed many volunteers with funds
received from the NLDTF. They put their time and energy into the
activities of charitable causes that produced immediate and great
changes in communities. For example, the late Honourable Schmidt who had
been a Deputy Principal at a primary school in the Free State had
informed him that they had developed sports fields using NLDTF money.
Each and every year there were hundreds of school children who benefited
from what had been a once-off allocation from the lottery fund. If it
was true that there were organisations that were making very little
impact with funds from the NLDTF, then the issue of impact had to be
brought in to the criteria for allocating funds so that funds would only
be given where the impact was highest.
Professor Ram conceded that there was some impact but this was
incidental rather than planned. This impact was not significant because
it was not tied to a particular funding focus. It all came back to the
issue of the need for a funding policy which was precise and focused and
to achieve such impact could mean that the Act would have to be
amended.
Mr N Gcwabaza (ANC) referred to slide 11 of the NLB document and slide 8
of the DTI document which touched on the problems of auditing the
distributing agencies. He asked if there was nowhere at all where the
agencies were made accountable in the legislation. Were they suggesting
that they could deal with these funds as they wished and that nobody
could look into their books in terms of the legislation? If that was the
case, then this created a lot of problems
Professor Ram replied that there was currently no accountability in the
legislation because the distributing agencies used other people’s money
and not their own funds. In terms of legislation there was no way that
one could get around this. They had discussed the matter with the
Auditor-General who had agreed that it was not his responsibility to
audit the distributing agencies.
Mr Gcwabaza asked for the correct amount of Fund that was available for
distribution.
Ms Maseti explained that DTI’s slide 5 was outdated as it quoted the
figure for the 2008/09 financial year but not the current value of the
NLDTF.
Ms F Khumalo (ANC) asked what the major problem was that resulted in
applications being rejected. She noted the large number of rejections
caused by lack of knowledge of application procedures and the need for
training. Was the fact that applications were called for only once a
year also a reason for the large number of rejections because
applications were given enough time for proper consideration?
Ms H Line (ANC) asked in view of Professor Ram’s comment that the
greatest number of rejections was a result of people not understanding
the application requirements, whether this meant that only people in
Gauteng and the Western Cape were the ones who understood these
requirements. Part of this had been answered by the DTI when they said
most of the allocations went to the bigger provinces because more
tickets were sold there. However she was asking this because Professor
Ram had submitted that most of the rejected applications did not meet
the requirements. She wanted to know if the NLB had a database of all
the applications submitted to the Board.
Professor Ram replied that the pilot project had looked at the
statistical distribution of the rejections and they had thus established
offices in Nelspruit, Polokwane and East London. The purpose of these
satellite offices was to help people on the ground to fill in
application forms and for them to understand what the requirements were.
They had to have a very focused and targeted approach if they were to
be successful. In the absence of a policy for funding it would be
difficult to target outreach. For example, if funding was for disability
then rural communities could be targeted with that particular objective
in mind. At the moment, because funding was so widespread, it was
difficult to achieve any sort of targeted impact in specific areas.
Professor Ram explained that most of the rejections they had were due to
non-compliance. There were a criteria and a list of documents to be
provided with the application as required by the Act. Many of the
rejections were because the criteria had not been met or the documents
had not been submitted. A lot of the rejected applications did not even
come to the stage where the merit of the applications was looked at
because they were rejected on the basis of non-compliance.
Mr S Njikelana (ANC) noted that mention had been made of educational
campaigns and outreach programmes. He asked if there had been any such
educational campaigns or programmes in the past. He asked to what extent
there had been any conscious focus on the area of the disabled.
Professor Nevhutanda agreed that in the reports on the allocation of
NLDTF, it was important to disaggregate information on the basis of age,
gender and disability for instance so that one could acquire statistics
of how many women had been educated using such funds or how many people
with disabilities had been assisted.
Professor Ram replied that with respect to disability, the decision to
fund was made by the distributing agencies. They did have a category
which they set aside for disabled funding.
Ms Maseti replied to members’ concerns about monitoring and the targeted
campaigns or where money had to be directed. The main problem was in
the different functions of the Board, the Minister and the distributing
agencies and this came through especially in levels of accountability.
The Chairperson commented that crime prevention was missing and felt
that it was necessary to expand the category to include it. He added
that the priority still had to be alleviating poverty.
Mr Mabaso asked if the CEO had done anything to overcome the failures
and challenges that had been articulated. He asked if all these failures
had occurred under his leadership.
Professor Ram explained that his role as a conventional CEO gave him
little or no control over the NLDTF allocation. There had been
significant changes in the NLB from the time when he had been appointed
to the present day including the additional requirements for
distributing funds at the end of 2000. There were matters not within the
NLB’s control and they could only do what they could control.
The meeting was adjourned
Read more on the NLDTF here:
http://www.forum.org.za/Summary-of-Resolutions-NWF-Policy-Positions-October-2009
http://www.forum.org.za/Gauteng-NGOs-challenge-the-Lottery
http://www.forum.org.za/CBOs-and-the-NLDTF
http://www.forum.org.za/Funding-Workshops-for-CBOs-in-Limpopo
http://www.forum.org.za/The-Forum-s-Position-on-the-National-Lottery-Fund
 Click here to download Challenges on National Lotteries Distribution Fund 158.64 Kb
|
