Second letter - 17 April 2011

Second letter - 17 April 2011

THE LOTTERY FUND - Towards a solution

Minister Rob Davies
Dept of Trade and Industry

I propose three achievable and pragmatic goals for the governance and management of the National Lotteries Distribution Trust Fund. First, and most important, the efficiency of SARS. Second, complete transparency of process and result. And third client -based evaluation of the performance of the fund and defined members of staff.

In reverse order: Why client-based and who are they? The clients comprise all who apply for funding from the Lotteries whether they receive any or not. This primarily to re-set the balance of power – it is our money, managed on our behalf, and the staff of the NLB have the job of delivering on a mandate from central government to a defined subset of the people. When they don’t deliver, who better to report to Parliament than ourselves? To achieve this, we need a system that can be evaluated – not the murky and turgid operation which currently exists. Also, when one’s job is on the line, people treat those who evaluate their performance with greater respect.

Transparency because transparency limits corruption (of process and simple theft) unlike anything else and consequently builds trust - both stated objectives of government.

Now for the big one. Efficiency in any organisation is enabled by the rules and regulations governing the enterprise, achieved through good management and operating systems, and driven by leadership.

To Enable efficiency

The Distributing Agencies (DA’s). As many reading this will know, the members of the three DA’s are engaged part-time in the task of evaluating applications, approving or rejecting grants, determining the scale of the grant and setting conditions which have to be met before payment. This is the area in which change in legislation is most required in order to speed up the processes. It is argued that full-time DA’s will mean faster turnaround. This is not necessarily true. I propose a full-time secretariat supporting the work of the DA’s. This team will execute the bulk of the work currently undertaken by the DA’s, reading and sifting through applications, reports etc and making decisions to fund or not within parameters clearly defined by the DA’s. The current or similarly constituted DA committees should bring their expertise to bear on (1) defining the scope of authority, decision making frameworks etc of the Secretariats, (2) those cases that do not fit the defined parameters guiding the secretariat; (3) all applications for more than R2 million per annum, and (4) auditing - on a test basis of 1 in 10 - all grants made by the secretariat to refine the quality of its work.

Converting the current DA committees (comprised of highly skilled and expensive professionals) to full-time employees would mean that individuals active in the field, and with the experience and insight required, would not be likely to abandon their current tasks to be available full time to the NLB to guide the processes.

The Judgement in the SEAP case (page 29 of the Funding Partnership Alliance Report) (FPA) should be formalised in legislation. How does the NLB justify spending money to appeal a judgement which seeks to implement the mandate of the NLDTF and improve operations? The NLB is delaying this drive to efficiency!

The Ministers (both Finance and DTI) have to ensure that the mission of the fund is clear, understood and “operationalised” by the NLB. It seems the definition of “developmental” needs to be spelt out as, in practice, the NLDTF operations do not reflect a developmental objective. (Is development not simply “to act in a way that cumulatively benefits the population with specific focus on the disempowered and marginalised poor”?). A simple enough guide.

Achieving Efficiency

Management systems are not delivering. A document tracking and management system–DMS (commonly used elsewhere) is urgently needed. All organisations applying (not every application) must get a tracking number and a Client Service Officer (CSO). The CSO should manage all communication with the applicant, liaising between the applicant and the operational divisions of the NLB. These people will be on one year contracts, renewable only on positive evaluation by the clients. Each CSO could manage up to 500 clients, depending on the degree to which the process is automated. They must ensure that applications are complete (responding within 1 week), collate documents for assessment, follow up on behalf of clients, and communicate constantly, with decisions and disbursements taking no longer than two months. Precedent for this is to be found in banks and microfinance ngo’s serving poor communities.

The Document Management System must file and record all applications and their progress through the system. It should not allow editing of the applications and should record each time it is read and by whom. All notes, comments, etc will be stored with the application automatically, as well as records of all decisions and queries (with dates and times), what actions are to be taken and who is responsible. It must also be remotely readable by the client who can submit reports etc directly onto the system. This will make it impossible for applicants to deny responsibility for failing to report, etc and ensure that staff can no longer lose documents. Systems such as these are available “off the shelf” are easy to use and can be customised as required. The current practice of scanning off-site, with no tracking system, is unacceptable.

The drive to efficiency

From the FPA Report and the chorus of complaints, leadership has failed and some members of the management team must be retrained, replaced or redeployed. Without good leadership efficiency will never be attained. Enabling regulation and great systems will not change attitude, levels of discipline etc. The question is “Where does leadership of the NLDTF and it functions rest?” The CEO and others of the NLB seem to deliver well in non-NLDTF arenas and co-operated intelligently with the FPA. Is it simply (as some argue) that the mandate and guidance the NLB receives from legislation and the relevant ministers is not clear in regard to their role as funder to charities and financier of developmental organisations? Clarity, via a statement and directives, of the developmental role of the Fund from you minister is a necessary first step.

I propose that the NLDTF is not separated from the governance of the NLB. The risk of a temporary halt in disbursements is too big. A new board, reporting to the NLB (as though a subsidiary) should be established to implement the intent of the original designers of the NLB and NLDTF to oversee the necessary changes and govern the institution into the future. Further, I believe that the range of experience required by this board is different to that of the main board of the NLB. This would mean that leadership must still be established for the NLDTF as an institution in its own right and that the current absence of a defined leadership role is a source of the problems we face. The choice of chair for this board is vital.

Minister Davies, there remain a number of unanswered questions which will drive the urgency of our response and shape our understanding of the scale of what needs fixing. Firstly, what does it cost to run the functions of the NLDTF and how does it compare to best practice globally? Secondly, how, by whom and at what cost and benefit is the non-distributed money managed? Thirdly, how much money is “allocated” and to who?

Some notes before concluding

There must be an urgent solution found to rescue organisations damaged by failings of the Fund. Emergency grants should be made where necessary. This could be adjudicated by an outside agency, and unspent funds allocated to this purpose. There is precedent. The first responsible minister acted to secure organisations threatened by the delay in flow of the first NLDTF money.

Despite the ambitions of many callers, the NLDTF cannot fund or be responsible for the repair of all the ills of South Africa. It will never have enough money. No funds should flow from here to other organisations established by government (schools, hospitals, the NDA). Nothing to national sports teams with TV revenue- rather support community-based entities outside the purview of the Department of Sport.

An agency needs to be established – or contracted – to support and train applicants and grantees. This will result in clearer requests from better-governed organisations and contribute to the rebuilding of community level skills helping our municipalities towards efficiency in the longer term. Perhaps one of the larger accounting firms can engage with this on a pro bono basis! The Japanese audit board system could be a model.

Different criteria should apply to organisations of different scale and age. The smaller the request, and younger the organisation, the less onerous the criteria should be.

Is the Fund a “grant maker” or a “funding partner”? Clarifying this question will shape the structure and competencies of the reworked organisation. If the latter, the characteristics of a “good funder” needs to be explored.

In conclusion Minister Davies; The NLB, under your guidance, has to restructure (rethink, redesign) the governance and functioning of the NLDTF. Emergency relief to organisations harmed unfairly by failure to maximise the developmental and humanitarian impact of the Fund is essential and urgent. Please bear in mind that the experience of many individuals can be brought to bear on the efforts towards a solution. Civil society must be included in the redesign – this could provide a salutary lesson in governance from which we all could learn! Finally, all questions about the management of undistributed money could be dealt with by improving the efficiency of the management of the fund and communicating openly about who and what the funds are being held back for. Transparency will remove the suspicion with which the fund is regarded.

Many organisations and individuals have expressed anxiety and fear to comment or make public their stories and suggestions. This is a measure of a deep failing within the management of the Fund.

I have presented here ideas, some my own, and some not, for pragmatic repair. I hope that you engage fully with this debate and accept these ideas in the constructive spirit i intend. Many anticipate your response.

Yours in struggle
Ralph Freese