Accountability at the Heart of Trust
Accountability is the cornerstone of trust, not knowing how public funds are utilised leads to mistrust. The NLC aims to grow and preserve the trust relationship with its stakeholders by conducting business ethically and protecting public funds, received from the National Lottery operator and distributed to NPO for good causes, against fraud and corruption.
Sound/Good Corporate governance is the golden thread that runs through the NLC’s operations. Our leadership’s drive to preserve a culture of sound corporate governance and the maintenance of healthy internal controls ensure transparent and effective corporate governance in pursuit to become a beacon of corporate governance excellence.
We provide controls to mitigate against potential and perceived corruption through various groundbreaking initiatives to not only drive the ethical message home but to ensure our valued employees and external stakeholders engage in ethical practices.
The NLC takes cognisance of all corporate governance issues emanating from our stakeholders, objectively and critically analysing the matters and proactively managing and implementing required controls to ensure our mandate is delivered effectively and efficiently. Reputational risk has been a critical focus for the NLC in the year under review. Driven by our stakeholder inclusive approach, we pro-actively embarked on a process to investigate claims concerning corruption within the NLC from a media outlet, as well as a political organisation, and whether remedial action was required. We used this opportunity to look inward and apply thorough measurement techniques to ascertain the validity of these aspersions.
To respond proactively to these claims, the NLC applied the following globally accepted techniques of measuring corruption:
Measure 1: Perceptions of corruption
The Board undertook to measure perceptions by commissioning An Ethics Media Monitoring Programme, which included a media exposure analysis.
The media exposure analysis offers a comprehensive review and examination of the NLC’s media coverage with the aim of establishing the quantity and quality of media coverage afforded to the organisation in the recent past, where these reports could have either enhanced or undermined the organisation’s reputation.
The analysis covered print, broadcast and online media.
At an overall level, media stories that portrayed the NLC as ethical media increased from prior year, accounting for 57% (2019: 52%) of the total media coverage media share while unethical media decreased from prior year, accounted for 43% (2019: 48%) of the total media coverage.
Key findings revealed that, in general, online media dominates the media coverage, led by My ZA, Daily Maverick, South Africa Direct News, the Citizen, Limpopo Mirror, South Africa News Shafaqna, GroundUp, News24, Eminetra and Zoutnet. Enca, followed by Chai FM and 702 lead broadcast media reports.
From the media analysis, it became clear that media reports relating to unethical conduct concerned proactively funded projects, which have been investigated. Through its Ethical media monitoring programme, the NLC has pro- actively conducted preliminary investigations on media related allegations.
Measure 2: Experience of corruption
We believe that leadership based on ethical foundations results in a culture of ethical and moral behaviour and compliance with laws, rules, codes and standards. During the year, the NLC was accredited Top Employer by the Top Employer Institute, a global authority on recognizing excellence in people practices.
The NLC achieved rating of 100%, relative to the benchmark average of 96.95%. The NLC also conducted an analysis of its stakeholder’s real level of interaction with corruption. The assessment was conducted through our whistleblowing hotlines, where NLC was able to gauge the public’s experience as it relates to corrupt activities over the past four years. It is noteworthy to mention that the NLC experienced a 2.78% loss on annual revenue to fraud over the past four years, which was significantly less than the ACFE benchmark of 5% loss on annual revenue to fraud.
The NLC continues to investigate all allegations reported internally and co-operate with law enforcement agencies in the investigation of alleged misappropriation of funds referred to them.
| Average for 4 Years |
2017/18 | 2018/19 | 2019/20 | 2020/21 | |
|---|---|---|---|---|---|
| No of complaints against total applications processed | 0.90% | 0.72% | 0.79% | 0.88% | 1.23% |
| No of complaints against total beneficiaries funded | 1.7% | 0.90% | 1.03% | 1.38% | 3.49% |
| Amount related to complaints against total disbursed | 2.78% | 4.48% | 2.67% | 0.50% | 3.45% |
Measure 3: Proxy indicators and risks of corruption
The NLC has a zero-tolerance risk appetite for fraud and corruption. All possible cases have been thoroughly assessed and, where required, internally and independently investigated.
In line with this, we continue to focus on clean administration and transparency to enable accountability. The audit of the NLC Group carried out by the Auditor-General of South Africa is one such avenue of accountability. The Auditor-General audits each state entity, providing insight into the way public funds are managed.
It is against this backdrop that we recognise our heightened responsibility to demonstrate effective, ethical governance practices. Pleasingly, the NLC has over the past five years sustained financially unqualified opinions on the National Lottery Distribution Trust Fund (separate annual financial statements) and National Lotteries Participants Trust (separate annual financial statements). In the financial year under review, the Auditor General has reported irregular expenditure of R23 million in the audit report as a result of what the AGSA found to be procurement in contravention Treasury Regulation 16A6.1, 16A6.4 and paragraph 3.3.1 and 3.4.1 of Practice Note 2007/8. These findings have resulted in the Auditor issuing a qualified opinion on the Annual Financial Statements for the 2021 financial year. The impact of this qualification is that the AGSA has satisfied itself that the Annual Financial statements of the NLC are a fair presentation in all material respect with the exception of the impact of non-compliance findings relating to procurement. The interpretation of the relevant practice note has been consistent and in line with prior financial years. Management is taking a view on the interpretation of the relevant practice notes and continues to engage relevant authorities in this regard.
The NLC takes cognisance of measures that could result in corrupt activities in regard to service delivery standards, as a result, the following measures are in place to mitigate risks:
| Service recipients have power to hold those charged with the duty of monitoring service providers accountable |
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| Ease with which the performance of service providers can be monitored |
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| Payment towards Service offered by Organisation |
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| Apparent salience to the experimental context of professional norms |
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| Generate the expected levels of technical and financial performance |
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| Strengthened institutional capacity at local, district and national levels |
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| Efficient and effective model of public service delivery |
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Measure 4: Informality and the limits of corruption
Informal practices like the acceptance of gifts tend to blur the lines between bribery and genuine gifts provided in the ordinary course of business. The NLC ethics office has evolved over the years through its review of the NLC Code of Conduct, which incorporates and provides clear guidelines on the handling of gifts, as well as instituting a technological platform to manage these.
According to these records, employees received minimal gifts, with the practice of accepting gifts not encouraged. Quarterly analysis is conducted, with a trend analysis showing no indication of gifts received that contradict policy.
Measure 5: Integrity – Shifting policy agendas
The NLC has a progressive policy framework that draws from legislation and global corporate governance best practice, as well as directives issued by relevant bodies to ensure proactive adherence. Our policies are intended to empower, educate and foster a values-based implementation of our mandate.
The advances we have made through the use of technological platforms and innovative means of engagement with our stakeholders has inculcated a culture of governance and control, ensuring credibility and integrity in our processes.
Looking aheads
We welcome the continued feedback from our stakeholders, understanding that accountability truly does reside at the heart of trust. We will continue to proactively respond to all concerns raised and to rigorously investigate all allegations. While this cycle of measures gives us a good gauge that ethical and effective leadership have been embedded and that the correct measures are in place to ensure that this sense of ethical responsibility is cascaded throughout the organisation, we also understand that to guard against the corruption we have seen take root in other institutions, we must remain constantly vigilant in observing the principles of corporate governance within our legal framework to ensure we build trust. Ethical and effective leadership will therefore remain a key area of focus in the year ahead.