March to the Lotto Offices

Memorandum for National Lotteries Board

Expectations

The mandate of the National Lotteries Board (NLB) was to supplement funding to ‘good causes’; it should be an attractive way for the public to support these causes, and a way to generate additional funding to supplement other sources. It must be remembered that the bulk of essential social services are still rendered by non-profit organisations. Many of these services are statutory in nature e.g. child protection services. Despite various initiatives, there are still no proper financial arrangements in place for this purpose, an issue that has been acknowledged by the National Planning Commission. NPOs thus rely on the National Lottery Distribution Trust Fund (NLDTF) as a critical source to be able to render these services.

Concerns

From this perspective, we wish to raise the following concerns, all of which have been well documented in initiatives such as the research report undertaken by The Funding Practice Alliance, the class action to the Western Cape High Court and the subsequent appeal by NLB, as well as the debates in many public fora:

  • In recent years, a number of decisions taken by various distribution agencies appear questionable and blatantly corrupt. We refer to:-
    • Funding the Earth, Wind and Fire Concert;
    • The R100m funding to the NYDA;
    • Funding’ Impucuzeko’ to the tune of R58m to make a film;
    • R51m funding  for Makhaya – an events company which operates mainly in Eastern Europe – and the fundraiser happens to be the daughter of the Chairman of the NLB;
  • Changing criteria – for example stating that previously unfunded organisations would be favoured, while this was never stated in the call for proposals;
  • Poor administration and communication with grantees, for example being told that documents have been lost, and that the revenue of NLDTF has been reduced when this does not appear to be the case from the latest Audited Financial Statements;
  • Long turnaround times for applications;
  • A rigid and formulaic approach.

Conclusion

The Research Report of the Funding Practice Alliance concluded that:

  • There are flaws in the legislation that have a direct impact on the structure and functioning of the grant making aspect of the NLB;
  • There are structural problems in the NLB that affect governance, accountability and functioning in respect of grant disbursements;
  • Internal processes for managing, processing and adjudicating grant applications as well as for disbursing funds are ineffective and inefficient, resulting in unreasonable delays.

In its judgement in the SAEP and Another matter, the Supreme Court of Appeal concluded that

There was a failure to fulfil mandate

The NLB and the distribution agencies have not been fulfilling their mandate in terms of the law. “Despite the Minister’s determinations and the overwhelming social need for these funds, the [NLB] and [distribution agencies] have consistently failed to meet their targets.” The SCA further found that - “In total, in 2009, the fund had R6 billion in unallocated funds.

There was apparent failure to understand mandate

Distressingly “the board does not appear to understand its mandate properly.” This is because the chairperson of the board seems to hold the view that “grants given by board are ‘gratuities’ which are allocated at the board’s discretion.” The SCA dismissed this view as ‘wrong’ and confirmed that - “The board holds public funds in trust for the purpose of allocating them to deserving projects. And it must ensure that these funds are allocated to those projects, provided of course that they meet the necessary requirements. The funds do not belong to the board to be disbursed as its largesse.”

A single phone call could have brought clarity

On two occasions a ‘single phone call’ to the relevant NGO’s could have clarified matters. The SCA described it as ‘a simple exercise that would not have unduly burdened the board’. In one matter, failure to do this simple task resulted in rigidity and thoughtlessness

In view of all this, we can only conclude that trust has broken down between the NLB and NLDTF on the one hand, and the general public and grantees on the other: the NLB is not able to fulfil its mandate to the general public, grantees or beneficiaries.  In the interest of our beneficiaries and general good governance this behaviour cannot be allowed to continue.

Requests

In the light of all the foregoing, we want the following actions implemented:

  • That the Lotteries take note of the judgements above and implement the recommendations;
  • That a forensic audit is conducted regarding grants made over the last three years with a particular focus on delivery of stated objectives and  issues relating to conflict of interest and “insider” assistance in regard to the members of the Distribution Agencies;
  • That such an audit pay particular attention to grants made over R5 million;
  • That a life-style audit on the Chairman, Board members, and senior staff of the NLB;
  • That a transparent process of calls for nominations and appointments to the Distribution Agencies be established with full information regarding the candidates made available to the public;
  • That information on any grants over R5 million is fully available to the public in relation to the grantee organisation and the purpose of the grant;
  • That full time Distribution Agencies are established to cope with the large numbers of applications;
  • That administrative changes are made so that applications can be submitted throughout the year, rather than a single deadline once a year;
  • That clear grant criteria that are inclusive rather than exclusive are set and that there is a reduction in random decision-making on the part of the Minister of Trade and Industry;
  • That provision is made for multi-year grants for organisations in good standing
  • That an effective and independent appeals process is created, separate from the Distribution Agency that made the decision;
  • That turnaround time for applications, including grant payments, should not exceed 120 days;
  • That a transparent system be implemented in relation to the awarding of grants including monthly publication on the lotteries website of grants made against income, including interest on investments.

To sign the petition, forward your names, organisation, telephone/mobile number and e-mail address to Sandra Miller at sandra@sandramillar.co.za.

Date: 27 January 2012

Sandra Millar

On behalf of concerned members of NGO sector
Tel: 012 430 2630
Mobile: 082 555 4905

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