Correctional Services 2010/11 Audit Report: hearings

Meeting report

Opening remarks by SCOPA Chairperson
The Chairperson noted the State Information Technology Agency (SITA) and the Department of Public Service and Administration had been called into the meeting because aspects of their work impacted on delivery by the Department of Correctional Services. The DCS Minister was in the DRC, whilst her counterpart at DPSA was attending the Climate Change conference in Durban. The Committee did not receive communication to suggest why the Deputy Minister would not be part of the proceedings. Having the two institutions at the meeting would afford them an opportunity to understand the concerns the Committee had, and would ensure that matters were addressed.

He said the Committee was concerned that, despite commitment to improve, the Department continually failed. The Committee did not believe that it should be inherent that things would always go wrong at DCS; at some point things should go right. The role of leadership was to ensure that processes complied with legislation. It could not be that every year stakeholders engaged on the same issues. But the Department was sluggish in ensuring that things were done the right way. The Committee faced a dilemma of assisting officials in order to be transparent about challenges and doing oversight. He said the challenges needed to become a collective burden for both Parliament and the officials.

Following correspondence from the Department on the public-private partnership (PPP), the Committee was forced to change its recommendations to Parliament. He requested DCS to share information on the possible expenses the Department would incur as a result of the cancellation of contracts. He handed over to Mr N Singh (IFP) to lead the discussion on his focus area.

Asset management
Mr Singh said the Department had done well except in the area of asset management which resulted in a qualified audit opinion for the 2010/11 financial year. It was concerning that asset management had resulted in qualified audit opinions since 2005. Previously the Committee had advised DCS to develop a monitoring strategy that would address matters relating to proper accounting; verification; recording and documentation of assets. He asked if the Department had complied or if it had disregarded the SCOPA recommendation. The Committee expected to hear commitments from the departments so that when the Committee sat next year, it did not have the same situation. The information from the Auditor-General that there was some progress on asset management was not good enough.

Mr Tom Moyane, Director General: DCS, replied that moveable assets had been affecting the Department for a number of years. The AG had identified – leadership; governance; and financial management – as key issues that needed to be attended to. The Department recruited 400 interns with the purpose of dealing with assets verification in all DCS centres. The Department had assessed the situation, and had an understanding of where the assets could be located. The interns were deployed in all regions, and assets whereabouts were known and could be recalled anytime.

He said the Department took a decision that there be no inter-store transfers of assets. Assets had been moved around in the past and that led to the Department being unable to account for them. The Department had indeed taken serious consideration of the recommendation.

Mr Singh asked if the Department had an updated system to capture information on assets.

Mr Moyane said there was manual capturing of the information and deficiencies existed in that system. DCS had adopted a spreadsheet approach to the matter so it could locate where the assets were. The Department, in collaboration with SITA, was working hard to improve on its IT systems.

Mr Singh said the difficulty lay with the system being unable to contain the information and asked if there was backup. He invited SITA to explain the system that had been developed in conjunction with the Department. He asked about the number of asset items that the Department was talking about and their total value.

Mr Moyane replied that he did not have the figures. He said the backup system had been a challenge for DCS for a number of years. The Department’s IT systems were not robust enough to provide sustained support to the daily operations. There was a weekly “bucket” of the IT systems. The Department needed to create a database for instances where information had been destroyed. DCS was working with SITA to address the matter.

Mr Siphiwe Sokhela, DCS Chief Financial Officer, said the Department had looked into the SCOPA recommendations when it prepared its action plan. The Department was implementing the monthly asset reconciliation in order to detect problems early. There had been a challenge with the opening and closing balance of assets for a while. The best way to address this was to conduct a physical verification from the floor to the asset register and vice versa.

Evaluation of assets was another challenge but had since been corrected. often figures on the asset register were not properly recorded in the past ten years. DCS had gone through this exercise and did not anticipate a qualification this year, because the system it used – LOGIS – took care of inter-stores transfers. The Department also engaged with Treasury on challenges with LOGIS and was promised that by January 2012 the problem would be resolved.

Mr R Ainslie (ANC) said if the inter-store transfers were not taking place, then the Department had not solved its assets problems. It was possible that DCS had assets that were unused somewhere, and was scared to transfer them because of the systems. The Department was held captive to LOGIS and he asked what it was doing with the programme.

Mr Monyane replied that stopping the transfer of assets was a temporary measure to ensure accountability. In the regions, proper procedures needed to be followed as there were instances where assets had be roaming around and not being accounted for.

The Chairperson asked if the inter-store transfers were happening or not. He asked if the spreadsheet approach was assisting the Department in the inter-store transfers or just dealt with the management of assets.

Mr Sokhela replied the Department became aware of the problem of the inter-store transfers at the end of July. A call was made that inter-store transfers be stopped in order for the Department to be able to reconcile on a monthly basis. For the critical ones, the regional commissioners needed to motivate to DCS as to why they needed to transfer. The Department would reconcile and once it was satisfied there was a need, then a transfer would happen. DCS had reconciled up to September and was happy with the interim result.

The Chairperson asked the official from the AG if he understood the explanation and if it could assist the Department not to have a qualification again.

Mr Barry Wheeler, Corporate Executive: Office of the Auditor-General, said when the duplication problem was detected in the LOGIS system, it was immediately brought to the attention of the Department. Due to multitude and complexities of entries, the DCS was unable to go back to the system and make corrections. It decided to manage and ring-fence transactions for the current financial year. The suggestion put forward was that transactions and entries for 2011/12 would be held outside the system until such time LOGIS was sorted. The AG’s Office insisted on three issues: that a full record be kept; there was reconciliation; and work done was properly recorded. These would ensure that once the system was running properly information would be uploaded. The suggestion of a spreadsheet was from the CFO as he believed that it was the best method. It did not matter if it was a hand or electronic system during the interim period as the current reconciliation would be audited as well. Mr Wheeler had been told LOGIS would be ready by the end of January but there were only two months left. The auditors were satisfied as long as there was evidence and proper recording of correct values and a full audit trail. He was not aware that inter-store transfers had been stopped, but rather the loading of those onto LOGIS.

Ms Star Kafu, Director: Accounting Support and Reporting, National Treasury, said there was an assurance from LOGIS that the system would be in place for Correctional Services.

The Chairperson asked why the system would be finalised so late in the year as the departmental auditing was expected to have already started.

Ms Kafu replied it was agreed with DCS that it should implement controls to ensure that it accounted for the inter-store transfers. The Department should not wait for LOGIS before it implemented controls. National Treasury indicated it would assist DCS account for the inter-store transfers. Although the system would only be functional at the end of January, that should not hinder DCS in processing transactions. DCS had also been requested to send communication to the centres informing them on how they could account in the current system. The LOGIS problem was unique to DCS.

Mr Singh said he was not happy with the answer from National Treasury as the problem with LOGIS was experienced in other departments.

Mr Wheeler said there were other departments that had the same challenge, but DCS had a huge number of transfers that went through the LOGIS system.

Mr Singh said the issue with the system needed to be taken further with the SITA. He asked for the starting point when physical verification was done, and how DCS knew if all its assets were still there. Were there cases where the Department had not found assets? He asked for the kind of controls that were in place to ensure that assets could be traced right down to the centres.

Mr Sokhela said DCS conducted full asset verification twice a year to ensure assets on the floor were also on the register, and any variances were investigated.

The Chairperson said the general challenge with assets as a qualification issue was eliminated. The key issue was the inter-store transfers, and a response that would give comfort would be a promise that these transactions would be properly managed.

Mr Ainslie sought clarity on whether the inter-store transfers had stopped, given the statement by the AG official, that a large number of transactions were happening. Stopping the inter-store transfers would have a negative impact on the functioning of the Department. The Committee wanted to know the effect of stopping these transactions on the Department.

Mr Moyane said stopping inter-store transfers was a temporary measure and assets that were in the system could be accounted for.

Mr Sokhela said before the inter-store transfers were stopped, some transactions were not supported by proper documentation. DCS could not survive without the inter-store transfers, and had to come up with an internal control. The Department had given an instruction that regional commissioners had to motivate when wanting to transfer. This would assist in keeping the audit trail of the assets and ensure that commissioners were accountable in their regions.

Ms Brenda Madumise, DCS Audit Committee Chairperson, said internal audit was being done by PWC&Sikela, and asset management was ranked in the top five risks. The audit was underway to review the adequacy of the controls in place. The Audit Committee was assisting the Department in ensuring that controls in the area of asset management were in place.

SITA’s role at DCS
Mr Singh wanted to know the role of SITA and how it was assisting the Department.

Mr Blake Mosley-Lefatola, SITA Chief Executive Officer, said one of the Agency’s roles was to rollout the Integrated Financial Management Systems (IFMS) to government. Asset management was a module to this system, and the intention was to have this system cover all departments. IFMS would replace the old system and DCS had been prioritised in the implementation of the programme. By March 2012, SITA would inspect the implementation progress. Dedicated support was provided to DCS, and there were continual meetings aimed at resolving the challenges. At the last meeting with DCS, the Agency had seconded one of its senior managers to be based full-time at the Department.

Mr Neo Shole, SITA Account Manager, said the Agency was looking at resolving the IT infrastructure issues at DCS. The biggest problem was the internet, as DCS had challenges in receiving and sending emails. Currently there was a proposal on how to restructure the Department system and change the internet connection it was on. The aim was to move DCS to a private network that was more secure and faster.

The Chairperson sought clarity on the term “more secure” system. Were there any security gaps or lapses in the current system?

Mr Shole replied that DCS was on an old gap system that was shared with other government departments. A private network would eliminate the possibility of anyone being able to access DCS network.

Mr C Pretorius asked if the National Commissioner agreed that things were improving at DCS, especially given a statement in the Annual Report that said the challenges associate with SITA procurement worsened the situation on projects. The picture painted was gloomy and very concerning.

Mr Moyane said the situation had not changed that much and the IT infrastructure was still a challenge. The Department had networks that were old; and systems that had to be upgraded. The meetings DCS held with SITA were aimed at resolving these issues amicably. ICT challenges had long been with the Department, but there were attempts to have a robust system that would have the email service functioning effectively. The system needed also to guard against viruses. DCS could not say, therefore, that its IT system was functional.

Mr Pretorius asked how SITA fitted into the picture as there were too many consultants offering the IT service. Could the National Commissioner give an indication as to whom did these people work for? The number of consultants offering an IT service indicated that a lot of money was channelled towards the service. He asked if there were any departmental staff that were shadowing the consultants and, if so, what was the ratio to the consultants.

Mr Moyane replied that at the time the report was presented there were 189 consultants at DCS, but that had since been reduced by 40. A large percentage of the consultants came through companies that were contracted by SITA. The Department wanted to be in charge of its IT system and it had recruited 21 members to run the IT unit. The plan was to reduce dependency on consultants and people from outside. Through the reduction of the number of consultants in the employ of the Department, a R59 million savings had been achieved. In the past the Department did not have an effective leadership in the IT sphere.

The Chairperson asked for clarity on how SITA fitted at DCS, if it relied on that many consultants.

Mr Moyane said there was Contract 569, where departments could have a support structure on any IT solutions they needed. DCS chose not to be party to this. It sought to outsource the service and that had led to problems. But now Contract 569 had expired and DCS was moving to have its own people in the IT sphere. SITA used to contract consultants on behalf of the Department but that had stopped. There were contracts at the Department that ran for up to 15 and 25 years.

Mr Pretorius asked if the Department avoided SITA because it was not up to scratch.

Mr Moyane said DCS was not avoiding SITA and when there was a need for support the Department would go to the Agency.

The Chairperson said he struggled to understand the role of SITA at the Department, and requested that it be explained. What support did the Department get from SITA if it relied on this number of consultants? The Agency should explain its role and if its presence was making a difference. He failed to understand how 189 consultants could not offer such a simple service as administering emails for the Department.

Mr Shole said SITA’s role in government was to run support as an advisory body on the IT; strategies; and introducing new technologies. The Agency supported departments on transversal systems and on any other new projects that they would like to embark on. SITA supported departments with procurement, professional and project management services. Contract 569 ended on 31 March 2011. This contract sought to assist departments in acquiring services of certain skills and SITA was used to contract those critical skills on certain key projects. This was the reason DCS would have the number of consultants it had.

Mr S Abram (ANC - Portfolio Committee on Correctional Services) said the answers were unsatisfactory and led to more questions. He asked the status of IT currently at the Department given that only recently an official had boasted at a Portfolio Committee meeting that he was an expert in the field. He asked if the gentleman (by name of Mr Moji) was still employed by the Department.

Mr Moyane said the IT service at the Department was unstable, and the Department was trying to improve the situation. The 21 departmental IT staff was visiting each region to determine the extent of the problem. The discussions with SITA also sought to make the infrastructure functional. Mr Moji brought stability at the Department in line with the AG’s findings, but his contract had expired. The Department was in the process of appointing a permanent head for the IT unit.

Mr Abrahams reasoned that if Mr Moji brought stability to the Department, it would have been in the interest of DCS to keep his services.

Mr Moyane replied that Mr Moji had created an environment of bringing the network controllers into the Department as they were the weakest. Once this milestone had been achieved, and coupled with the DCS decision to downscale on consultants, it was decided that Mr Moji’s time had to end when his contract expired.

Mr Ainslie asked if there was proper coordination on IT systems. There was SITA working on IT; there were consultants who got paid R35 million on developing systems; and there was LOGIS. He asked if the Department was getting value for money in all of this. He requested an explanation of the tariff system used when hiring the consultants. It was shocking that a person would be paid up to R184 000 a day as per the report.

Mr Moyane replied that there was no value for money in all the work. And there were no introspection mechanisms at the Department to monitor IT. The current leadership was desperate to change that situation.

The Chairperson interjected and asked how consultants were brought to the Department.

Mr Moyane said the question was very difficult as some of these consultants were in the employ of DCS for a number of years. There was an understanding among the leadership of the Department that ICT be attended to in the manner that it had been. The tariffs that applied were determined by SITA, based on the contracts that were there. He was not sure if the tariffs were value for money but the Department had to see the value for money when it contracted people.

DPSA Director General input
The Chairperson likened the Department to a consultant’s paradise and said he failed to grasp the role of SITA at the Department. Mr Maswahle Diphofa, DPSA Director General, needed to clarify the role of the Agency. What the Committee was hearing was that the challenges associated with SITA procurement worsened the situation at DCS. The Committee struggled to make sense on why there was SITA if a department as big as DCS – that was also part of the security cluster – could struggle with a basic system of sending emails. It would appear that the Department had become an accessory for private companies to lay hands on government funds.

Mr Diphofa said the intention with the establishment of SITA was to have an agency that would achieve economies of scale for government, so that IT equipment was purchased through the Agency. Another objective was to promote inter-operability in terms of systems used by government departments. It was visualised that SITA would administer the system, and it would contain various service modules. In practice challenges experienced by departments in varying degrees. Cabinet recognised this; hence it had approved the SITA turn-around strategy that prescribed delivering excellent service in the public sector.

Mr Diphofa said departments were still faced with challenges in terms of the nature of assistance that they required. The management at SITA was trying to put measures in place such as the seconding of an official to be fulltime at DCS.

The Chairperson asked how government could have let SITA deteriorate to the extent of needing a turn-around strategy. The Committee had heard the term turn-around quite often and, once mentioned, it meant an institution was dysfunctional. He asked if there was any value for having employed SITA at DCS.

Mr Diphofa replied that a focus discussion was needed on the turn-around strategy, as challenges were varied. Some challenges at DCS were governance related whilst others were as a result of the systems. The magnitude of the mandate might have led SITA to fail. The Agency had not fallen into a ditch as there were functions it still carried out. SITA facilitated the purchase of IT equipment and had provided the Department with a database of service providers, and systems to run the supply chain management processes. DPSA interacted on an ongoing basis with various departments that had challenges such as Higher Education and Defence in an effort to make sure that the necessary interventions were made.

SITA discussion continued
Mr Roni Mabena, SITA Chairperson, said the role of SITA was very limited at DCS and was confined to the offering of a transversal service. The contract that had ended (Contract 569) was aimed at increasing involvement and overseeing the introduction of the modernisation of systems at DCS. The expiry of the contract limited SITA from providing an advisory role to the Department.

SITA had its internal challenges that undermined the capacity to fulfil the mandate optimally. The turn-around strategy was an end product of an analysis that identified a number of issues that SITA was faced with. One of the key challenges was stable leadership at the Agency. SITA had had 14 CEOs in ten years of existence. There was no way there could be stability in that environment. SITA had a stable leadership now, with all of the vacant posts filled. There would be a change and things would not be as bleak as it looked right now.

Mr Mosley said the relationship with DCS was not what it should be. SITA was working to resolve the email system where communication would be sent but took days to get through.

Mr Moyane said the issue of consultants was a pointed one. The Department was now drawing up service level agreements with SITA. An indication was that the challenges with consultants at DCS were as a result of the Department requesting services without an audit of what needed to be done.

The Chairperson said this behaviour was outright corruption and DCS needed to provide the Committee with a full list of the consultants. He was tempted to enquire if the senior management was engaged in the asset liabilities it was inheriting.

Mr Ainslie said he agreed with the Chairperson that there was a need for a detailed list of the consultants and the kind of work they did.

Mr Pretorius said he found it strange that in the past financial year, SITA’s supply of computers amounted to R130 million whilst the external consultants amounted only to R12 million. These amounts were puzzling because SITA had just informed the Committee that it was the least involved at the Department. He requested an explanation on the balance between external consultants and those contracted by SITA.

Mr Abrahams asked for details of the current posts at DCS’s IT section. He wanted to know the number of funded posts, and if they were filled. An earlier indication was that there were only 21 network operators employed by the Department; what had been done to fast track appointments in the field. He asked about the involvement and engagement of tertiary institutions in finding suitable candidates. A department operating on a R16 billion budget needed to be run on commercial principles, otherwise it would get nowhere. There was no point in paying millions of rands to people who only knew to account on organisational culture. The Department should ensure that it had personnel that could perform these specialised tasks internally. Government should minimise reliance on service providers. SITA’s intentions were known, in fact, all government-established institutions had such good intentions. Sadly, they were not judged on intentions but what they delivered.

Mr Mosley said SITA would have to provide a written breakdown of what was bought for the R130 million listed for computer services.

The Chairperson asked if the price could have been as a result of SITA relying on labour brokers after landing the contract. He voiced unhappiness that the Department received the kind of IT service it got, for a R130 million in 2010/11.

Mr Mosley said that was the component but only accounted for R58 million.

Mr Mabena said the challenge was much bigger and cut across the public service. Part of the challenge was the legacy and the history of the country. The industry had not done well and SA’s position was so low that it fell behind Zimbabwe and Uganda. Most of the staff SITA employed were not well equipped and were only acquainted with old systems. There was a need to develop an IT academy that should involve higher learning institutions. SITA had not produced skilled people in its ten years’ of existence.

The Chairperson said legacy could not be used as an excuse, as there were 14 CEOs in ten years. These things should have been addressed. The issue was ability.

Material losses
Ms D Chiloane (ANC) asked why the Department incurred huge losses in state vehicles. The AG’s Report indicated that vehicle losses cost R9 million rand in the previous financial year.

Mr Moyane replied that this was a sad state of affairs, because the management of the fleet was not put into perspective. There were no measures to deal with vehicle losses and DCS had moved to hold people accountable for damage to state equipment. The Department thought it was important to hold regional commissioners accountable for the management and handling of the assets.

There was an attempt in the Department to reduce the material losses. The culture of accountability when handling state assets had to be instilled from top management down at the Department. Another element that contributed to damage to DCS fleet was the state of the roads and infrastructure. In the main, it was the human element that contributed largely as people simply did not care.

Ms Chiloane sought clarity on the measures that had been put in place. She asked if the measures were a monitoring tool or just a memorandum. What sanctions had the Department imposed on those employees who showed no care when handling state property?

Mr Moyane said there were sanctions in place but DCS followed a process of an investigation. He requested an official from the supply chain management unit to provide a breakdown on the issue of R3 million spent on damaged vehicles and resultant disciplinary action.

Mr Manqoba Ngubo, Supply Chain Management DCS, said accidents and incidents regarding state vehicles were investigated. Action was taken to recover state expenses against those found liable. There were 821 cases for 2009 and 443 had been finalised and disciplinary action was taken on 66 of those. For 2010 there were 846 cases; 404 were finalised and 80 of those were disciplined.

DCS was faced with the challenge of sub-standard reports after investigations. In most instances, there had to be re-investigations, because reports came indicating write-offs. The Department had introduced measures to control the number of vehicles damaged. There was re-training of all transport controllers in all the regions; and those who passed a licence more than five years ago were re-tested. This was not because they could not drive, but to inculcate the culture that employees had to look after government property. Officials were also given guidelines on what to do when vehicles were in their care.

Ms Chiloane asked if the cost of the 80 cases, finalised last year, had been determined. And if DCS had sought to recover the money from those found guilty.

Mr Ngubo replied that the total value of the 80 cases amounted to R1 836 000. The procedure would be to recover the money from the employees’ salaries, but he did not have a statistic on how much of the figure had been recovered so far.

Claims
Ms Chiloane sought clarity on the claims against the Department. [The DCS reported claims against it amounting to R1,3 billion carried over from previous financial years. In 2010/11, R34,855 million was claimed, comprising amongst others R7,665 million from assaults/bodily injury claims; R7,417 million from unlawful detention claims; and R1,941 million from motor accidents.]

Mr Matome Malatsi, DCS Acting Deputy Commissioner: Legal Services and Anti-Corruption Unit, replied that there were three categories: unlawful detention, motor collisions and assault by warders.

Ms Chiloane sought further clarity on the unlawful detention and assault categories.

Mr Malatsi replied that these categories involved the entire criminal justice system. It was possible that a person was kept in prison, even though the person was due for parole or bail. Assault involved a DCS official mishandling an inmate in a manner that was beyond provisions of the law.

Mr Abrahams said it was worrying that there was lack of discipline and integrity at the Department. Unless there were officials with integrity at the department, DCS would always be in serious trouble. Integrity had to prevail from daily operations of the Department right to the information that was provided to Parliament. The number of people who appeared for discipline reasons was too high and the Committee needed to do something. He cited a statement in the AG’s Report, that fraudulent payments made on other officials’ names amounting to millions of rands.

Under-expenditure
Ms Chiloane wanted to know the views of the National Commissioner on the under expenditure that amounted to R728 million in the previous year.

Mr Moyane said the Department had taken note of the issue and was worried. The Department had a moratorium on employment and that impacted on DCS filling positions. As the Department was labour intensive, its inability to employ had a potential to affect budget performance. The amount of R728 million was as a result of failure to employ and the vacancy rate contributed to this.

There was a glaring poor performance on DCS’s side when it came to facilities. Dependency on the Department of Public Works (DPW) in this area had led to an under-spending of R255 million. The Department had taken a decision to engage other parastatals in maintaining DCS facilities. DPW lacked capacity and that was evident in the total sum that was not spent on facilities.

Vacancy rate
Ms Chiloane asked for the current vacancy rate at the Department and if it impacted on service delivery.

Ms Linda Bond, DCS Human Resource Development, replied that the current vacancy rate was 3.7% and that the impact was dire on service delivery. There were challenges of inefficient systems and high volumes of applications when it came to filling posts at the Department. DCS was unable to deal with its turn-over rate and there was a general lack of HR capacity. The staff was ageing and institutional maturity was required to improve turn-around time at regional level. There were seven projects that the DCS was undertaking in order to improve the situation.

The greatest number of the vacancies was at the bottom level and there was a need to feed the organisation from there. Two recruitment learnerships would be undertaken next year. Apart from increasing learnerships, DCS had engaged the South African National Defence Force and was promised 350 officials that would be availed for the employ of the Department. The Department had also resolved to outsource the skills it did not have.

The Department had been advertising posts. Although advertising had been prolific, dealing with applications was sluggish. The Department was looking at capacitating its HR component so that it was able to deliver. And in that regard, it was engaging tertiary institutions to get qualified graduates.

Ms Chiloane said the R185 million stated as a saving due to inability to fill professional positions was a problem. The reason the Department was unable to fill positions was because it relied on consultants, some of whom were officials who had resigned from the DCS.

Mr Moyane replied that dependency on consultants was a disease and had contributed to under-expenditure in the Department. DCS was doing all it could to fill the posts and recognised that this was a problem that it needed to deal with. The Department was losing about 100 people every month. The management audit committee was embarking on a process to audit all DCS employees. There was another challenge of ageing staff within the Department. Once there were service awards for people who had been with the organisation for 41 years, it could mean the Department had not been able to recruit dynamically at the lower level.

Goods and services
Ms Chiloane asked if the Department was able to monitor the projects that were implemented by DPW, and if there were implementing agents other than DPW.

Mr Moyane replied that DCS lacked project management ability and this was a weak point that needed to be improved upon.

The Chairperson interjected and asked if the Department had a strong point, as it appeared everything discussed was a weak point.

Mr Moyane replied that he was reporting on the past financial year 2010/11 (he had only been appointed in May 2010). There was a project management team and it had given an indication that it would be able to spend its allocation. DCS had put in place monitoring mechanisms for projects that were ongoing. Monitoring did not happen in 2010/11, and that contributed to under-spending. The Independent Development Trust (IDT) was another implementing agent the Department worked with.

Ms Chiloane noted the Triple P (public-private partnerships) contracts that were cancelled. She was worried by the dysfunctional relationship with DPW, especially that there were four pending projects. She asked for the views of the Department on saving money around the projects. What legal contestations were there on this cancellation of the Triple Ps.

Mr Pretorius requested details of figures as surely there would have been strong civil claims against the state by Triple P partners.

Mr Moyane replied that he had advised the Minister that the Triple Ps were not value for money. There were issues of affordability and the Department could not outsource security. These were also in line with policy on Triple Ps regarding the changing scenario of corrections. The Department had not received any letter to indicate there were claims against it. Details on claims could only be provided if such claims were on record.

Department of Public Works (DPW) input
Ms Chiloane asked the Department of Public Works to explain its relationship with DCS, especially around the issues that had been raised.

Mr Pietro Chiapasco, DPW Acting Deputy Director General: Inner City Regeneration, Project Management & Professional Services, said DPW was honoured to have DCS as it largest client. DPW had prioritised an extensive complement of internal and external capacity throughout the country to provide the necessary resources to DCS. Contrary to what DCS had said, the Department had spent 86% of its budget on DCS and a written explanation would be provided if it was needed on the matter.

Reasons for the 14% expenditure were extensive and project specific. These reasons included untimely provision of accommodation requirements by DCS; changes in project scope midway through the project; complex site acquisition and clearance processes; inclement weather on projects; internal capacity and capability within DPW. Many of these could not be short circuited.

Mr Chiapasco said the valuation issue raised in the report by DCS as a challenge only referred to one facility in Polokwane. The valuation had not gone very smoothly because the site was privately owned. The valuation unit conducted its work, but the owner disagreed with the valuation report and felt the property was of a much greater value than what government had offered. The resultant process was the owner’s valuation that led to a third independent valuation being commissioned. There was no meeting of minds and DPW then had to approach the Land Affairs Board. These were things that led to delays in acquisition, but the process was quick when there was a meeting of the minds.

Expenditure management
Ms Nosimo Balindlela (COPE) said she appreciated honesty by the National Commissioner. It was concerning that the matter of tender approvals without the knowledge of the delegated official had been raised for the third year running. This was against the prescripts of the Public Finance Management Act. It made mockery of the AG’s work and was a sign of disrespect. What had DCS done with those officials who had contravened the PFMA regulations.

Mr Moyane replied that once the issue of unauthorised approvals was brought to the attention of DCS, it had moved with speed and put monitoring mechanisms in place.

The Chairperson said he had a problem with the repeated use of ‘once the matter was brought to our attention’. It meant without the AG, the Department was unable within its systems to detect deviation. The statement was worrisome. The fact that DCS had a monitoring unit should assist in ensuring these things were detected within the Department.

Mr Moyane said the monitoring mechanism dealt with the payment of all DCS clients. All matters relating to payment were dealt with by the delegated authority. The Department complied with PFMA, and all payments made not according to the Act were being investigated. There were punitive measures for those found not to have complied with the Act.

Ms Balindlela asked how much of the R483 million in unauthorised expenditure had been recovered from officials. She asked for a description of the offences since the report made mention of disciplinary hearings without mentioning the nature of offences.

Mr Sokhela replied that the R483 million was not a mistake, but an implementation of a resolution to pay overtime. If the Committee looked at the track record of the Department, it would note that there had never been an unauthorised expenditure except in 2010 where DCS had no choice but to implement the resolution on overtime payments.

Misconduct and ill-discipline
Mr Pretorius said he endorsed the view that there was widespread ill-discipline at the Department, but it was good that it was taking action as there were over 4 000 cases of misconduct in 2010. He sought clarity on the 88 employees who had been dismissed. If one looked through the list, there were 200 cases that warranted dismissal last year. He asked if the DCS was strict enough when enforcing discipline.

Mr Malatsi replied that the high number of individuals taken to disciplinary hearings was testimony to the Department being serious about ensuring DCS officials had integrity. The small number of dismissals was as a result of a resolution that DCS had with the unions, which explored measures other than dismissal. The Department acknowledged that it needed to improve on dismissals. In the first six months of this year, DCS had already dismissed 15 officials for fraud and corruption.

Mr Pretorius asked if the official was implying that there could have been clear cut cases of fraud and corruption where people were found guilty, but because of the arrangement with organised labour, they were not dismissed.

Mr Malatsi replied in the negative, saying there were a number of alternatives available to persons chairing disciplinary hearings, such as recommending demotions or salary cuts. It was possible that there were thieves who, by virtue of the arrangement with unions, were still in the employ of the Department.

Ms Muthambi sought clarity on the 218 cases that were withdrawn. This was strange because at the level of bringing charges, one needed to have compelling evidence. What was the cost associated with these withdrawals? She asked what was meant by the 513 ‘no outcome’ cases.

Mr Malatsi replied there were a number of reasons for withdrawals, for example, when witnesses were no longer available or complainants were no longer participating in the hearings. The ‘no outcome’ referred to cases pending. The cost was huge and the Department needed to be creative around handling cases. DCS operated in a highly industrialised environment where people challenged the processes. These dragged out some cases.

Procurement and Contracts
Ms Balindlela asked if the National Commissioner was aware of officials performing remunerative work without permission from the Department and suppliers who did not declare employment or relationships with persons involved in adjudication of bids. She wanted to know the steps taken on such matters.

Mr Moyane replied DCS had issued a circular in 2009 about employees who were involved in procurement. This informed employees they had to declare their interests and not participate in any activity that would result in a conflict of interest. The investigation unit was also involved and in situations where the Department was misled, it had requested that contracts be paid back. Remunerative work outside of the Department had to be signed and sanctioned by him. Where this had not happened, DCS asked the HR unit to investigate to determine the kind of work done. Disciplinary measures were taken against such officials. It was unsettling that officials still performed remunerative work outside the Department.

Mr Ainslie said the Committee needed to get a list of names of those who conducted business with the Department. Such a report needed to include details on the type of work and the cost of such work.

Mr Moyane requested a week to provide this detailed information.

Mr Malatsi ran the Committee through the list of disciplinary cases that had been finalised. Item 44 on the report related to a fraudulent payment amounting to R1.8 million. The suspect was a foreign national who had been traced to Pakistan, but who had family living in SA. He had hacked into the DCS system and manipulated the system used to effect payments.

Ms Chiloane asked if the foreign national had been arrested.

Mr Malatsi said the suspect had skipped the country, but the process was underway to repatriate him with the help of Interpol.

General discussions continue
Mr Pretorious asked if it was deliberate that senior managers did not take a performance bonus in the year under review.

Mr Moyane replied that it was a deliberate decision because their performance did not warrant bonuses and the Department had received a qualified audit opinion.

Ms Muthambi sought clarity from the chairperson of the Audit Committee on the views of the AG about the Department, as stated on page 100 of the report.

Ms Madumise said the Audit Committee was reconstituted and the work was already done when she joined the Department. Issues raised by the AG on internal controls were the same issues that the internal audit committee had picked up over a period of time. The internal audit was under-resourced and lacked skill and capacity. The committee was looking at the weaknesses. The current audit committee was thorough and would assist the Department so that errors were picked up internally without really having to go to the AG.

The Chairperson said this information was useful but it failed to address the question. For the reports of the Audit Committee to be useful for oversight, they needed to be detailed, objective and truthful. All the things that the Committee dealt with were related to weakness of internal controls. The Committee wanted the Department to have internal capacity. The consultants that the Department relied on for internal audit function were not helpful. It was bad when government was ripped off by private entities, but it was even worse when its own creations let it down. People needed to ensure that state organs served the people to the best of their ability.

The meeting was adjourned.