Update 13 June 2011

Greetings All, Please start to harass/inform members of parliament of the importance of fixing the National Lottery Fund’s processes, leakages etc. Short notes to individuals, party whips etc etc will help force DTI to give this some attention and to do a better job of revising the Act which comes up for review in parliament soon. The changes will not go far enough if we do not push things. Also please continue to distribute to relevant parts of your network.

Thanks.

SOME THOUGHTS IN PREPARATION FOR THE NATIONAL LOTTERIES CONFERENCE
20th – 21st JUNE 2011


1. The goals of the Efficiency of SARS, full Transparency and a Democratic or (client-based) evaluation of the processes, staff, etc should be debated, and signed up to by the Ministry and the NLB.

2. We need to define clearly the value system which guides processes and decisions in the grant-making activities related to the NLDTF, and to generate a catch-all question by which we know that the values are achieved whenever a decision is made. The Christian-sourced touchstone “What would Jesus do?” is an example of what we need but which obviously will not apply here. “Is this developmental or in the service of the threatened and marginalised citizens of the Republic of South Africa” is too clumsy. So, let’s get thinking!However a rigidly values-based system is achieved, it needs to be encoded in the Act, and lived in the day-to-day work of the board.

3. Much blame for the lack of efficiency, etc is placed on the structural weaknesses of the Act, which does not provide for acceptable levels of governance or oversight (not to mention payment) of the DA’s. Justice Gamble’s ruling must be implemented, and the DA’s must report to the NLB (see below). Also, it is reported (by the Chair) that the DA’s are likely to be staffed on a full-time basis. The Act requires the DA members to be “experts in their fields”. I foresee an expensive growth in the bureaucracy of the NLB, if both objectives are to be fulfilled. The term of office of these individuals should be limited to, at most, two years. Provision should be made to minimise conflicted decisions, even after they have left (similar to those in the Act regulating future employment of Board members).I believe that the DA’s should continue to be staffed on a part-time basis by ‘expert’ practitioners, and that their work should be supported by highly skilled secretariats, using well-designed software tools to ensure that the work rate of the DA’s improves dramatically.Should this not be done, it becomes all the more vital that the work of the DA’s is properly governed by a sub-committee of the NLB, and that mandates, objectives, etc are clear and publically determined.

4. Calls for applications currently result in chaos (as reported by Sershan Naidoo), as they have closing dates, which less-resourced organisations struggle to meet. Annual calls, stressing any changes in rules, conditions, etc should be made, and there should not be any closing dates (most international grant makers practice this). This will avoid the panic and spread out the arrival of applications, making it easier for staff to cope. Fewer documents are likely to be lost under these circumstances.

5. Twelve thousand five hundred applications were received in the last round, and there was some discussion about the capacity of organisations to deal with this. The NLB has 160 plus staff. Assuming 20 are lower level service providers this still means 90 applications per year per person – less than 1 per day. There really IS a problem somewhere! The management systems must be revisited. Plans to establish regional offices should be evaluated in terms of a cost-benefit analysis.

6. Given the fraught history of, for example, lost documents resulting in wrongly declined applications, there is a need for an Ombudsman to manage complaints and appeals. The Ombudsman’s office could also operate a “whistle-blower” service, where reports and suspicions of conflicted decisions, etc could be dealt with.

7. We are constantly told that the 3 DA’s and Miscellaneous add up to 100% of the spend of the NLDTF. The cost of operations is not reported as a percentage of the funds utilised. Our NLB appears not to be too expensive to operate compared to some others around the world – but that cost must also be reported as the salaries, offices, travel, etc are paid from the NLDTF (which many think only goes to “good works”). Transparency of remuneration and the cost of governance - a requirement for organisations listed on the JSE should also be considered.

8. The NLDTF was established to fund “developmental” organisations of civil society. For the foreseeable future, it will have an income of about R1,5 billion per annum. This is not adequate to fund all the needy organisations that come knocking on their door for money. The scope of work/range of funding arenas should be more tightly defined (within the Sports, Charity, Arts, Miscellaneous categories) so that all and sundry do not expect lotteries to bail them out. Other organs of government and business, should do that. The NLDTF can not do it all, and especially should not fund agencies established by government, which are provided for by the fiscus.

SUGGESTIONS FOR FURTHER AMENDMENTS TO THE LOTTERIES ACT 57 OF 1997 , AS SUPPLEMENTED BY MINISTER DAVIES IN REGULATION GAZETTE NO. 9340, JULY 2010

1. A clear preamble or introduction to the Act, defining the developmental and social objectives of the NLDTF needs to be included. This must help to determine whether a particular project is funded through capturing the values guiding the decision to fund a particular organisation.

“Does it contribute to the developmental agenda, or assist the marginalised?”
If not, don’t give it any money!

Section 32(1) of the Act (as expanded in July 2010) attempts this, but does not go far enough, saying only that “general development” in the country must be “taken into account” (along with ticket sales, population, etc) when decisions are made. Section 32(2), though clumsily worded (The priorities ... must contribute) comes closer to defining intent and 32(3) [a to g] needs restructuring, as it sets a target of 50% spend of each DA on activities, not necessarily within their remit. This subset also introduces the funding of local economic development, which should be funded by other state entities, not the NLDTF.

2. Judge Gamble’s rulings in the SEAP case (22352/2008) must be given life in the rewrite of the Act. Inter alia:
- The DA’s (whilst still appointed by the minister) must be subject to the governance and oversight of the NLB;
- The actions of the DA’s and the NLB constitute ‘administrative action’ in terms of the Constitution, and the Promotion of Administrative Justice Act;
- The DA’s have no regulatory power and can only guide the Board and Minister – non-compliance with their “rules” is not enough reason to refuse funding, i.e. the rules have to be spelt out clearly, encoded in regulation, and guide the work of the DA’s.

Section 5, of the Act provides for the establishment of executive committees of the NLB. I would strongly recommend that one (staffed with the requisite skillsets) be established to oversee:
(i) the enhancement of the governance of the DA’s;
(ii) the general improvements we all seem to agree are necessary;
(iii) the communication with applicants, grantees and the general public.This Exco should provide written reports to the Minister directly, as well as to the NLB on a quarterly basis.

3. Section 10 of the Act speaks to “applying the principles of openness and transparency” primarily in communication with the Minister. These principles should guide the entire Act (except in confidential information relating to bids for new operators) and should be elevated as such to the introduction/preamble to the Act. Our Constitution, with the right to access information, provides for this, but it should be specifically spelt out here.

4. Section 12(4) says that the financial statements shall be audited by the AG, or his nominee. Many modern businesses audit a lot more than financials, and all large audit firms are equipped to do so. Performance and procedures, in terms of the developmental and social goals should also be audited and provision should be made for that here. Sections 28, 29, 30 and 31 also make provision for audits of the DA’s financials by the AG. This probably arises from the fact that Section 32 (1) states that “the board pays over to the DA... a DA may pay to a recipient”. In practice (and correctly), no money is paid to any DA, and it does not require financial auditing. The relevant amendments should be made.

5. I am certain that the NLB produces an annual budget against which it measures its performance in terms of cost effectiveness, etc. Section 34 gives the Minister the right to allocate payments to the NLB from the NLDTF. No mention of how the amount is determined. This section should define that the amount is determined by the budget produced by the NLB, and presented to the Minister for approval.
I hope that these thoughts contribute to a productive discussion at the conference.

Yours with regards and best wishes.

Ralph Freese