Department of Home Affairs; Department of International Relations and Cooperation: hearings of evidence

Meeting report

The Chairperson welcomed Members to the meeting. He apologised for the meeting starting late, but there had been problems with getting the venue. He welcomed officials from the Department of Home Affairs (DHA), National Treasury (NT) and the Department of International Relations and Cooperation (DIRCO). Members introduced themselves. The Committee had met with the Department of Home Affairs earlier in the year to talk about unauthorized expenditure, and the Committee had taken a resolution on the matter. However, the current meeting was mainly about the report of the Auditor General, and the concerns raised in the report with regard to the financial statements. This would be done in accordance with the Public Finance Management Act (PFMA), which had a number of instruments in place to ensure that public funds were managed properly. Where there were challenges, solutions would then be sought collectively.

Mr V Smith (ANC) said the mandate of the Committee was to look at the financials as presented to Parliament by the Auditor General (AG), together with the annual reports submitted to Parliament. The Minister of Finance, in his budget speech, had said: “Better value for money for public service delivery depends on rigorous financial management, effective systems and an unrelenting fight against corruption.” The Committee and Parliament were therefore informed by these realities. The PFMA also spoke to the sanctions in place, should financial misconduct be identified. It was inconceivable that after 16 years, there had not been a single public official who had been brought before some sort of adjudicator because of financial misconduct on the strength of the PFMA. The PFMA clearly indicated that a person found guilty of financial misconduct would be fined or sentenced to time in jail. This has never happened. Nobody had been fined and nobody had been sent to jail, yet the amount of corruption and financial mismanagement and negligence was at a point where it simply could not be justified anymore. That would be the context in which the Committee would be having its discussions.

He said there would be consequences during this term. His first assignment when he came to Parliament in 1999 was at the Department of Home Affairs, and it was a complete disaster. This had since improved, and the DHA had received an unqualified report in 2014. However, this year the Department had received a disclaimer. What had the Department done since the AG’s report had been signed to turn the department around? If nothing has been done, there needed to be a discussion about it. What processes were the Department putting in place to fix the situation? In two weeks’ time, the DHA would be coming to Parliament to ask for more money, as the financial year would be coming to an end. If these problems had not been rectified, why should Parliament give the Department more money? The Department needed to acknowledge that there was a problem within the DHA before the it was given any more money.

The Chairperson asked the Department to respond.

Mr Mkuseli Apleni, Director-General, DHA said the Department acknowledged it used tax payers money and that the services of home affairs could not be received anywhere other than at the Department, therefore the DHA had a serious responsibility to the citizens. The major issue facing the department was its relationship with the Department of International Relations and Cooperation (DIRCO) with regard to transactions of Home Affairs abroad, although there were still some challenges within the country. The pertinent question was around what the Department was doing about such matters. With regard to the Department’s operations abroad, he said that DIRCO was mandated to pay the expenditure on behalf of the DHA.

The Chairperson said that the major challenge related to the processing of transactions between the Department of Home Affairs and DIRCO, and therefore this should be addressed first. However, if there were other problems, those should be dealt with first because they would be internal problems within the DHA. He asked National Treasury and the Auditor General to provide input on whether the relationship with DIRCO was causing the problems, or whether it was a whole range of issues within the Department which had resulted in the disclaimer.

Mr Naveen Mooloo, Chief Manager, Auditor-General of South Africa (AGSA), said looking at the Department’s financials, the problem was a mixture of a number of issue. The DIRCO account was a major factor, but there were other issues as well.

Mr Beerson Baboojee, Chief Director: Risk Management, National Treasury agreed with AGSA that the DIRCO problem should be ring-fenced and then the local problem looked at separately. However, the DIRCO problem had not caused the disclaimer from AGSA, and what needed to happen was to sort out the administration between the two departments. The Department of Home Affairs had been in touch with National Treasury to try and find a solution.

The Chairperson said the problems would be solved only if the DHA was able to acknowledge the actual problems within the Department. The internal dynamics of any entity was more of a determinant than the external factors. DIRCO was an entity outside the Department, therefore the issues which had brought about the challenges inside the Department needed to be isolated and addressed. What were the challenges within the DHA and what was the Department doing about them? Where there was a disclaimer, surely there were multiple factors which contributed to it, and these should be the starting point of the discussions.

Mr Apleni agreed that there were indeed internal issues which needed to be addressed. The first challenge within the Department was that of skills, which related to issues around leadership. The Department had been around for many years, and had been structured on a centralised approach. Around 2011, the Department had adopted a decentralised approach, and directors were appointed for the first time in order to have a structure at the provincial level. However, the only people below that were those at the front office issuing documents -- there were no finance people. The Department had then started to address this problems.

The second issue was that the Department was paper-run -- relying on people to fill out forms for record purposes. There were serious problems with the proper capturing of information. The Department was, however, moving towards modernising the work of the Department.

Another issue was that of the lack of chief financial officers. Mr Apleni explained that he was Chief Financial Officer within the Department from 2009, but had been appointed in 2011 as a Director-General. Because there was no Chief Financial Officer within the Department, he had had to manage both positions. Such issues had destabilised the processes within the Department. A Chief Financial Officer had been appointed and left within a year, and after that another one had been appointed on an “acting” basis. However, the Department did not want to move away from the decentralized approach. A Chief Financial Officer had been appointed in September 2013 on a permanent basis. These were some of the challenges the Department had been faced with organisationally.

With regard to the specifics, the issue was still around assets. The problem was that these were managed manually, and people sometimes did not capture information correctly. Assets were also listed at a value which was not supported by the documents. This was a big issue for the DOH, so the Department had approached National Treasury and made proposals on how it could be addressed. One of the major issues related to around 2008, when a company had been appointed by the Department to compile the asset register, but when AGSA had looked for these documents, they could not be found. The Department then suggested to National Treasury that the register be segmented, where there would be a requirement for minimum information which a company needed to have. The assets were then ring-fenced. He explained that the Department was no longer using a manual system. In February 2013, it had started making use of a scanner to capture the information.

Another issue was that the DHA did not own property. Property used by the Department was owned by the Department of Public Works and by the private companies. The DHA did not have immovable property, therefore this was not captured in the Department’s asset register. The DHA had met with the AG and suggested that there be a meeting with all the relevant government departments to understand where there were common challenges. The Department had drafted a minimum intervention strategy document for improving audit outcomes, which clearly stipulated what needed to be done with the assets, what the monthly checklist needed to include, what needed to be done with the first value registers and all other matters. The Minister had also met with the AG to discuss the DHA’s commitments to the AG, which would be managed by the Minister. These were some of the challenges faced by the Department internally.

In addition, the Department was beginning to deal with the issue of consequences. Employees at the senior management level had not disclosed their financial interests. These people had been dealt with and consequences had been applied. Some audit evidence had not supported the information previously given by employees. Various interventions were in place to address these internal challenges. Another problem with staff was that of leave not being signed off -- people simply stayed away from work longer than what was allowed.

Mr Smith agreed with the Auditor General and National Treasury that some of the issues were internal. He referred to the DOH’s annual report, where it spoke about investigations. The report indicated that there were investigations underway for fraud and two employees had been dismissed and one had resigned. Could the latest information on these matters be made available to the Committee? Why would employees involved in cases of fraud and corruption be dismissed, and not have a criminal fine? Who were these employees?

Mr Apleni said the person dismissed in the Departmental process had in fact been arrested, and was serving a sentence. His name was Sikhosana. The Department had opened a criminal case against the individual. The investigation being conducted by the Public Protector was still under way. The Department had reached a settlement with the Gijima information technology (IT) company. The Public Protector and the Special Investigating Unit (SIU) wanted to investigate the matter. The matter was therefore still with the Public Protector.

The Chairperson said Mr Apleni needed to check with the Public Protector to see how far the process was towards completion. Had the investigations started, or where they still to commence?

Mr Apleni said the investigations had started.

Mr Smith said the Department needed to keep the Committee informed about progress regarding the investigations. There needed to be serious consequences. On payables, he said all these matters related to the ruling party’s policies. The President during the State of the Nation Address had indicated that government departments would make payments within 30 days. Could the Department explain why it was so difficult for it to pay invoices within 30 days? According to the AG, the Department had defaulted to the extent of about R 28 million. Was this a cashflow problem, or was it negligence on behalf of the people tasked with paying the invoices?

Mr Apleni said that the budget of the DHA was over R 6 billion. The Department was not withholding payments in order to save, but there were processes to follow. Some of the invoices the Department received had information which was not complete; some companies did not have the right tax clearances and it became difficult for the Department to process these payments. It still faced challenges as a result of its decentralized approach. Provinces previously followed different payment processes, and this was being addressed. He agreed that R28 million was indeed a lot of money that had not been paid to the suppliers.

Mr Smith said that AGSA was independent, and could not be influenced by the Committee. Could the Committee find a way to contextualise the matter with the Auditor General? The concern was that the message which went out to the public was that the government did not pay on time. There needed to be more of a context to why the Department was not paying.

Mr Mooloo, said it should be noted that in instances where the Department had not paid because of a dispute, such items would not result in a report of non-compliance. These cases had been excluded from the audit.

Mr Smith referred to irregular and fruitless expenditure. Irregular expenditure did not necessarily mean there was wrongdoing, but what was of concern was that these matters were still under investigation. Could the Department indicate how many of the six matters under investigation had been concluded, and what the holdup was concerning those which had not yet been concluded? The Department had less than 30 days before the next financial year.

Mr Apleni responded that the report was for the situation as at 31 March 2014. The Department had established a Theft and Losses Committee, whose role was to look at each of the cases and deal with them. A report would be submitted to the Committee to indicate how much had been done. The Department was busy investigating whether all irregular and fruitless expenditure had been reported to the Chief Financial Officer. The next step would be to find out whether all B48 forms had been signed by the delegated authority.

The Chairperson asked that the list of investigations under way on irregular expenditure be made available to the Committee -- who was involved, how much they were being investigated for and what the Department had done in response. The Department needed to provide the Committee with an appraisal of what was still outstanding on a quarterly basis, until all irregular and fruitless expenditure had been sorted out.

Mr Smith spoke about consequence management. According to the report of the Auditor General, effective and appropriate disciplinary steps had not been taken against officials responsible for irregular and fruitless expenditure. If these matters had been resolved, according to the Department, why where they still reflected in the report?

Mr Mooloo explained that the AG had reported on the financial year until 31 March 2014. The cases which the AG was referring to in the report were cases from the previous financial year. The fact the there was no Chief Financial Officer in the Department in 2013 meant that certain processes had not happened.

Mr T Brauteseth (DA) referred to where the Department set out its achievements with regard to disciplinary hearings. There had been 161 disciplinary hearings. However, there had been no mention of senior managers within the Department being held up for non-compliance. The Department had had legislative non-compliance issues since 2009 -- where were the disciplinary hearings for the accounting officers responsible for legislative noncompliance? The excuse that there was no Chief Financial Officer (CFO) was disingenuous. The CFO had resigned in September 2013, and from that time onwards an Acting CFO had been appointed until March 2014. Therefore, during the year under review there was, in fact ,a CFO. Was there any other person within the Department with knowledge of the PFMA, other than the CFO? He also spoke about compliance, and asked whether the CFO was the only accounting officer who could assess annual financial statements, performance and annual reports within the Department? What were the major problems within the Department concerning resources? People taking unsupervised leave was also a serious problem. The Department needed to supply the Committee with a full breakdown of the R28 million, indicating who was not being paid and why. There were many small businesses which would go under if they were not getting paid.

Mr Apleni responded that the Department had recently dismissed a Deputy Director General as a result of corruption. The Head of Internal Audit had also been recently dismissed. A Chief Director responsible for Asset Management in the 2011/12 financial year had been demoted to Director, and was currently challenging the Department in court. The staff with which the Department dealt regarding the non-disclosure of assets, were not employees below level 12 – they were senior management service (SMS) members. With the new processes in place, the Department had written to three Deputy Director Generals regarding disciplinary matters. With regard to the CFO, he indicated that a directive from the Minister had been given that the Department needed to appoint a permanent CFO to provide leadership. The Department had an Acting CFO, not a permanent one. The lack of permanent leadership contributed to the paralysis within the Department.

On the leave issue, he said the DHA had previously operated on a shift system, and in response to the challenges this system had brought about, the Department had changed its working hours. On payments within 30 days, he agreed that this was still a challenge because of the Department’s decentralization.

Mr Brauteseth asked what the Department’s internal control staff component was. What was the Department doing to change the culture of non-compliance, low morale, unauthorized absence, a culture of entitlement rather than of excellence, and subtle defiance and malicious compliance?

Mr Apleni replied that the Minister would be launching a programme called “I am a leader” to deal with the “soft” issues within the Department. On the last Wednesday of every month, Home Affairs offices would be open an hour and thirty minutes later, so that staff could have their internal meetings. This was an attempt to deal with the issue of low morale, among others. The Department had also changed its performance contracts after a meeting with the AG, to deal with issues around the culture of entitlement rather than that of excellence. The Department had also finalised the report on performance bonuses -- no manager within Home Affairs had received a performance bonus for 2013/14.

Mr M Booi (ANC) said the Department needed to report to the Committee on a quarterly basis, not yearly, on progress being made on all matters discussed. He referred to the issue of claims against the Department, which included claims from Duma Travel, G-Fleet and Westbank, and asked how the Department would explain these,

Mr Apleni replied that G-Fleet had sent the same invoices to the Department twice. Duma Travel was no longer the Department’s travel agent, but there were invoices which had come through after the contract had been terminated.

The Chairperson asked whether Duma Travel had sent invoices without any person using their services?

Mr Apleni responded that Duma Travel had already been paid for an invoice which had been sent to the Department, but the same invoice had again been sent through to the Department after the contract had been terminated.

Mr R Lees (DA) said he understood the need for strong leadership within the financial division, but it seemed like the proper structures had never been put in place within the Department in the first place.

Mr Smith referred to departmental revenue, and asked whether this was only for the DHA or whether it also included revenue from DIRCO.

Mr Apleni said the Department collected revenue from abroad, as well as from within the country, so the departmental revenue reflected in the report included that of DIRCO as well.

Department of International Relations of Cooperation (DIRCO) Hearing

Chairperson welcomed officials from DIRCO to the meeting.

Mr Ebrahim Saley, Deputy Director General, DIRCO thanked the Committee for the invitation. He apologized on behalf of the Director General, who was unable to attend the meeting due to statutory responsibilities in Zimbabwe. Mr Saley would be representing the Director General in his absence.

Chairperson Godi said the Committee would start with the issues which linked DIRCO to the Department of Home Affairs, and then move on to the annual report of DIRCO. He had been informed the previous week that the Director General would not be attending the meeting because he would be out of the country. He emphasised that the Committee would have wanted the accounting officer to attend the meeting, to lead the delegation and to account to Parliament. It was only in exceptional circumstances that the Committee would concede to such arrangements.

Mr Booi said the taxpayers of South Africa wanted to hear from the Director General, because they were the ones who paid the Director General’s salary, and not the people of Zimbabwe. The Director General was aware that Parliament was sitting, therefore the current arrangement would not be tolerated. This was an example of Parliament being undermined.

Mr Smith said it was very dangerous for Mr Saley to have agreed to be the leader of the delegation. The Committee was committed to making sure people were held accountable for financial misconduct and irregular expenditure. The PFMA clearly stipulated the implications for financial misconduct. Should the Committee find that there had been negligence within DIRCO, and Mr Saley agreed to it, the Committee could take a decision to fire the Director General, or for him to pay the price. Government officials should be very careful to appear before the Committee unless they were prepared to take full responsibility for the decisions of the Committee, regardless of the fact that one was acting on behalf of another individual. He said somebody would get a fine or be arrested in the current financial year, even if only to send a message.

Mr Lees said DIRCO had a disclaimer. The Department was in a serious mess. The AG could not confirm any of the Department’s figures. In addition, the accounting officer was treating the Committee with utter distain by not attending the meeting. This was not acceptable.

The Chairperson asked the Committee to deal with the matters relating to DIRCO and the Department of Home Affairs.

Mr Smith said DIRCO was an agent for the Department of Home Affairs overseas. DIRCO would collect money for items such as passport applications and give the money to the Department of Home Affairs. This money would then find its way into the fiscus. Around R674 million was outstanding from DIRCO, and this needed to be addressed. Secondly, when the money was collected by DIRCO it had gone into a suspense account, Treasury regulations stipulated that the suspense account should be cleared within 30 days, but this had not been the case. If this regulation from Treasury was not reasonable, DIRCO needed to take the matter up with Treasury, or else the Department would always be in default. Could DIRCO provide a progress report to the Committee in writing, to indicate where the matter was currently?

 

Mr Apleni had said the Department had received approval from Treasury that DIRCO could take money and deposit it directly into the Revenue Fund. The issue was that if there was an error or omissions within the processes of DIRCO, the Department of Home Affairs would still be accountable. Based on this, the Department had met with the AG, and the recommendation from the AG was that Home Affairs should approach the Department of Public Service and Administration (DPSA) to transfer the function of collection to DIRCO. The responsibility would then rest with both departments. The DPSA had indicated that such an approach would be problematic, but DIRCO had written a letter to the Accountant General agreeing that DIRCO could take the money, deposit it to the Revenue Fund, and be accountable for it. Mr Apleni had met with the Accountant General the previous week to see how the matter of responsibility could be handled, and this was currently being worked on. On the payment side, DIRCO paid expenses on behalf of Home Affairs. The Department of Home Affairs had approached Treasury to find out whether the whole baseline amount could be transferred to DIRCO, and Treasury had approved this. What was outstanding was the issue of accountability.

The Chairperson said the matter of accountability had been raised by the Committee a while back, and that had been the basis of the meeting with the two departments present. There needed to be timeframes for resolutions.

Mr Booi said the matter needed to be addressed as a matter of urgency. Both departments needed to work together to reach solutions. The public perception about government was that it could not resolve its internal problems. The Department of Home Affairs needed to commit to come back with a full report to the Committee in three months. If this issue was not resolved as a matter of urgency, the Committee would have to intervene.

Mr Lees was pleased to hear that there had been progress made by the two departments. Was National Treasury happy with what was being proposed?

Ms Gillian Wilson, Chief Director: Public Finance, National Treasury indicated that the problem had been ongoing for a long time. National Treasury had tried to resolve it through a memorandum of understanding between the two departments, but that had not worked. A stronger mechanism was needed to regulate the transactions between Home Affairs and DIRCO. The approval which National Treasury had in place on the revenue was that the money could be deposited directly from DIRCO into the national Revenue Fund. National Treasury was still in the process of finalising regulations in terms of transferring the budget from Home Affairs to DIRCO. DIRCO was responsible for the operational budget, but the policy arm of the functions would still be within Home Affairs. Once this was in place, NT would work towards regulating the transactions between the two departments. National Treasury was still in the process of finalising the approval from the expenditure side.

The Chairperson asked whether there were any timeframes for addressing the outstanding expenditure matters.

Ms Wilson replied that the matter had been taken through to public finance and the Budget Office, and would now need to be signed off by the Deputy Director General within the Budget Office, who was currently on leave. All other role players had signed off.

The Chairperson asked whether the signing off would be finalized in a week’s time, when the Deputy Director General was back from leave.

Ms Wilson said a scanned copy has been forwarded to the Committee, with all the signatures. She was confident that the last signature would come through by the end of the week (13 March 2015).

Mr Apleni said the side which needed more commitment was that of dealing with the responsibility issue. National Treasury had approved that the money would be deposited into the Revenue Fund, but the responsibility aspect had still not been addressed.

The Chairperson asked National Treasury to provide an explanation on the responsibility part. In what sense did DIRCO collect the money and report back, but when there were errors, it would be the responsibility of Home Affairs to address them?

Ms Wilson replied and said there were foreign missions where Home Affairs did not have a presence. National Treasury was in agreement that the responsibility should not lie with Home Affairs, but rather with DIRCO, because DIRCO was responsible for the operations side of policy in Home Affairs. The National Treasury still had to convince the DPSA that DIRCO should be allowed to take responsibility for the money, because this matter caused problems for the Department of Home Affairs.

Mr Saley said DIRCO may endeavor to meet all the requirements, but because of the macro picture, this was not always possible.

The chairperson said the issues around DIRCO and the department taking responsibility would be dealt with on an ongoing basis, as long as the fundamental principle was agreed upon.

Mr Mooloo said according to legislation, the mandate lay with the Department of Home Affairs. The only model which would work for what was being proposed was a transfer of functions. The Committee needed to take note of the fact that there needed to be clarity around when the proposal would be applicable, when it was effective and what transactions it affected. Some of the transaction between the two departments went back to 2004.

The Chairperson agreed with Mr Mooloo, saying the proposal would be applicable from the current financial year going forward. However, timeframes were needed to address the outstanding matters, with National Treasury driving the process.

 

Presentation: Vote 5 – Department of International Relations and Cooperation

Mr M Hlengwa (IFP) said the Committee had a responsibility to uphold the rule of law and to ensure that legislation was compliable. The issue of capacity needed to be separated from that of duty. DIRCO had received a qualified audit opinion in 2013/14 and there were issues around assets stipulated in the annual report. According to the Auditor General, DIRCO had not maintained an updated asset register. Tangible capital assets and minor capital assets had been understated by R25 million. Proper controls to safeguard and maintain assets had not been adequately implemented as required. He asked that DIRCO take the Committee through what internal controls had been implemented, and why tangible capital assets and minor capital assets had been understated by R25 million.

Mr Saley asked the Chief Financial Officer to lead the response to the questions.

Mr Caiphus Ramashau, CFO, DIRCO, said for the period of 2013/14 DIRCO had regressed in terms of the opinion of the Auditor General. Measures had been implemented to deal with movable tangible assets, but DIRCO had been very late during the time of the audit. The management of assets had been based on compliance, and this had not been effective. DIRCO had then implemented the electronic fiscal asset verification process, in which all missions used a scanner to verify assets. One of the areas DIRCO was lacking was that of custodian of assets. DIRCO had decided to conduct bi-annual asset verifications using a scanner to improve in this area. All corporate service managers had been requested to attend a workshop on asset management in September 2014 and as a result, a turnaround strategy had been developed on how assets could be managed better. The audit committee had supported DIRCO by establishing a task team to conduct oversight in support of the CFO and senior officers within finance and the supply chain.

The Chairperson asked whether, with all the above mentioned interventions, the challenges had been resolved.

Mr Ramashau said DIRCO had a credible asset register which clearly showed how the asset audit had been conducted.

Mr Hlengwa asked that DIRCO prepare a breakdown of the over-expenditure.

The Chairperson asked if the Committee could get these breakdowns in a week’s time.

Mr Ramashau said the breakdown would be made available to the Committee in a week.

Mr Hlengwa said the AG had raised concerns around DIRCO’s ineffective systems of financial and risk management for internal controls. According to the AG, the accounting authority had failed to ensure that risk assessment was conducted regularly and that a risk management strategy had been implemented in accordance with Treasury regulations. These were grave concerns for the Committee. What corrective steps had been taken by DIRCO to deal with these concerns? These were simple matters concerning the delegation of duties, not of a lack of skills.

Mr Saley indicated that the CFO would respond to the questions.

Mr Ramashau replied that DIRCO was committed to put in governance measures to address these matters.

The Chairperson asked why the measures had not been there before.

Mr Hlengwa said these were regulations prescribed by the PFMA and Treasury regulations.

Mr Ramashau said there had previously been no capacity.

Mr Saley said the question was a difficult one to answer.

Mr Hlengwa said that the response was not acceptable. An issue was whether the African Renaissance Fund (ARF) was being managed properly. The shortfall of responses was a problem because the Director General was not present.

Mr Booi said it was a problem that the Deputy Director General was not able to respond to some of the questions. This could not be entertained. The questions were not new ones. The Committee could not be tolerant of a Director General who did not want to account. He said it was clear that the meeting could not proceed.

The Chairperson said the absence of the Director General was felt immensely.

Mr Lees said the Committee had indicated its concerns, but they were not a reflection on the people present from DIRCO, but rather a reflection on the accounting officer who was not at the meeting. In his experience, the delegation would be asked to go back and return with the Director General. However, because the programme of the Committee was full, the matter should not just be allowed to slip through the cracks. If necessary, the Committee needed to approach the Minister to ensure that the Director General was present at the next meeting to which he was invited by the Committee.

The Chairperson agreed that the way the officials were responding did not deal with the issues Members were concerned about. Officials from DIRCO were asked to come back at another time, with the Director General and the Auditor General. In addition, someone needed to be held accountable for the costs of travel incurred.

Mr Hlengwa said Members wanted answers.

The Chairperson thanked Members and officials who attended and engaged Members in discussions. The Director General would be sent a letter inviting him to another briefing of the Committee. All officials present from DIRCO, National Treasury and the Office of the Auditor General, would also need to come back at that time.

The meeting was adjourned.