Auditor General's Report on Department of Justice & Constitutional Development: hearing
Public Accounts (SCOPA)
14 November 2001
Meeting Summary
A summary of this committee meeting is not yet available.
Meeting report
PUBLIC ACCOUNTS STANDING COMMITTEE
14 November 2001
AUDITOR-GENERAL'S REPORT ON DEPARTMENT OF JUSTICE & CONSTITUTIONAL DEVELOPMENT: HEARING
Chairperson: Dr G Woods (IFP)
Documents handed out:
Auditor General Report on Department of Justice & Constitutional Development
Auditor General Report on the Special Review of the Deposit Account Administered by the Department of Justice & Constitutional Development [RP100/2001]
[see Auditor General's website for these documents at www.agsa.co.za ]
Department of Justice & Constitutional Development - Annual Report
Department of Justice & Constitutional Development : Preliminary Questions to Accounting Officer from SCOPA
Department of Justice & Constitutional Development - Project Rolling Stone (See Appendix 1)
Department of Justice & Constitutional Development - PEP Monthly Report, October 2001 (See Appendix 2)
SUMMARY
The Department was questioned by the Committee on problem areas identified by the Auditor General. The questioning focused on general administration, witness protection, housing guarantees, deposit accounts, senior management and donor funding. The Department submitted that many problems were due to the inherited legacies of the past, staffing problems and insufficient funds being allocated. The Committee would be monitoring progress.
Thirteenth Report of the Standing Committee on Public Accounts, dated 8 November 2001:
The Standing Committee on Public Accounts, having considered certain papers submitted to it and having heard evidence from Ms S Gillwald, Deputy Minister for Justice and Constitutional Development, Mr S Patterson, Audit Committee, Mr V P Pikoli, Director-General: Justice and Constitutional Development, and Mr A Mackenzie, Chief Financial Officer: Justice, reports as follows:
A. Introduction
The Committee has held a hearing with the Department of Justice in order to fulfil its obligation in accordance with its Tenth Report for 2000, to set up a system of monitoring progress made by the Department in improving financial management.
In that Tenth Report, the Committee expressed its view that if there was no significant improvement in the management of public finances of the Department of Justice, the Committee would request the National Treasury to intervene, in terms of the Public Finance Management Act, in the financial management of the Department.
The Committee notes with guarded optimism the appointment of the new Chief Financial Officer (CFO) in the Department, as well as the organisational restructuring and the establishment of the new Board of Justice. The Department appears to focus on fixing the crisis in financial management that has been plaguing it. While the Committee welcomes these new developments, it remains concerned that the Department still faces a number of obstacles in overcoming challenges to improve and consolidate improvements in systems of sound financial management that remain.
The Committee further notes that the new changes at the Department, particularly the Performance Enhancement Programme (PEP), appear to have been replaced, in large part, by the Financial Management Improvement Plan (FMIP), which previously had been submitted by the Department for the Committee's attention.
The Committee has received the Auditor-General's Report on the 2000-01 accounts of the Department, and will hold further hearings with the Department, as and when required.
B. Financial Management - new CFO and change management
On previous occasions the Committee has expressed its concern at the need for a committed CFO to lead the Department out of its financial management malaise. The Committee notes the secondment to the Department of the current CFO, that this is an appointment for a year and that the Department will have to take steps to ensure that a new CFO is in place on a more permanent basis and that a substantial amount of skills transfer will be required from the current CFO to the new CFO.
The Committee is therefore concerned at the sustainability of the significant macro-organisational changes initiated by the new CFO and the overall sustainability of the new approach, pending either the extension of the CFO's tenure - which would imply a new arrangement between the government and Business Against Crime - or the appointment of a new permanent CFO.
In this regard, the Committee has noted with concern the Director-General's comments that the search for a CFO, prior to appointment of the incumbent CFO, proved difficult and that this may again be the case in future. The Committee firmly believes that in order for the turnaround in the Department to be viable and sustainable, a strong CFO will be needed, with the complete support of the Board of Justice, to effect the changes proposed.
The Committee recommends that it be informed of succession planning in respect of the CFO. The Committee has noted the grave concerns expressed by the Audit Committee about the incumbent CFO's short tenure and the need to ensure that the new CFO is sufficiently skilled and competent to carry the restructuring forward. The Committee further requires a more comprehensive briefing on the new structure of the Business Units in the Department as well as the Board of Justice, in the event that this might affect the accountability arrangements of the Department with regard to the Committee.
The Committee is further concerned at delays in skills training to improve financial management skills in the Department. In terms of the previous FMIP, skills training was due to commence in February 2001. Due to the comprehensive skills audit initiated by the new CFO, the training deadlines initially envisaged in the FMIP have been pushed back.
While the Committee commends the approach of a comprehensive skills audit, it remains concerned that the training deadlines have not been met in a Department in which the upgrading of financial management skills is fundamental to addressing its financial management crisis.
C. Decentralisation
The Committee has expressed concern at the impact of the policy decision on decentralisation and its role in exacerbating the difficulties and problems in financial management.
The Committee has noted the statements by the Deputy Minister for Justice that there is a clear policy decision that the decentralised Regional Offices must be phased out. The Committee notes statements by the Deputy Minister for Justice and Constitutional Development that the eventual goal is for each office to be a cost centre in the new financial management plan of the Department. It is clear that the "exit strategy" appears to entail an incremental approach, with pilot projects being launched in the Eastern Cape Regional Office in East London.
As the decentralisation question is fundamental to changing the public finance management fortunes of the Department, the Committee looks forward to receiving details of how the policy decision on decentralisation will find expression in the "exit strategy", which was submitted to the Board of Justice. The Committee will take this "exit strategy" into consideration in preparation for its next engagement with the Department, as the area of decentralisation remains a key concern to the Committee.
The Committee welcomes the Deputy Minister's commitment to brief the Committee on deadlines, time-frames and the detail of the decentralisation "exit strategy", and request that the relevant information be submitted as soon as possible.
The Committee requires further detail on the manner in which the Department envisages centralising the Budget and then devolving responsibilities to the respective "cost centres" mentioned by the Deputy Minister.
D. Information furnished to Committee
In its Tenth Report, the Committee called for the Department of Justice to, firstly, submit monthly reports on the FMIP adopted by the Department and, secondly, quarterly reports to be submitted by the Audit Committee. The Committee called for these regular reporting lines because of the severe problems in the Department and the need to have a more active oversight role in the context of the difficulties within the Department.
It is of great concern to the Committee that the Department failed to meet these reporting obligations requested by Parliament. The Committee raised these concerns with both the CFO and the Director-General, and the Committee will continue to require substantive quarterly reports from the Department, in the light of the substantive organisational change at the Department. In addition, the Committee will be receiving copies of the monthly progress reports with the implementation of the Departments' PEP, submitted by the CFO to the Board of Justice. The Committee has received the monthly report for June, submitted to the Board of Justice. The information will be used as part of the preparation for the upcoming hearing. The Committee also notes the willingness of the CFO to brief members of the Committee on a more regular basis.
E. Audit Committee
The Committee notes comments by the Deputy Minister and the Director-General that an Audit Committee is being set up that will provide appropriate direction to the Internal Audit Unit.
F. Deposit Account
The Committee remains concerned about the negative situation surrounding the Deposit Account. The Committee has noted that financial statements for the 1994-95, 1995-96, 1996-97 and 1997-98 financial years were due to be produced by the end of May. It is of concern to the Committee that these statements may be unauditable. A report by the Auditor-General in this regard has been tabled recently [RP 100-2001], and will be dealt with during the upcoming hearing.
G. Unauthorised expenditure, 1997-98, 1998-99 and 1999-2000
The Committee heard and considered evidence on the following instances of unauthorised expenditure reported on in the reports of the Auditor-General for the 1997-98, 1998-99 and 1999-2000 financial years:
1. 1997-98 financial year - expenditure totalling R157 415 769.28 (par 2.2.1, p 5)
(a) Over-expenditure on voted funds relating to personal expenditure amounting to R24 754 954.15 was mainly due to inadequate financial control and the lack of reliable management information. Consequently, the amount was unauthorised in terms of section 33(1)(b) of the Exchequer Act, 1975 (Act No. 66 of 1975), applicable at the time.
The Committee has taken note that since 1 April 2001, monthly management reports are being produced and that in future the Department should foresee instances of likely excess expenditure, provided that the monthly reports are reliable and the information is used regularly for corrective steps.
In view of the above, the Committee recommends that the amount be authorised. However, the Committee wishes to point out to the Director-General that in terms of the regime established by the PFMA since April 2000, excess spending on voted funds is regarded as financial misconduct.
(b) A column-2 item relating to the Legal Aid Board amounting to R102 633 298.84 exceeded the amount voted due to misallocation of expenditure. Authority of the Minister of Finance was not obtained as prescribed by section 7(1)(b)(ii) of the Exchequer Act. However, there was no loss to the State.
The Committee recommends that the amount be authorised, but will in future not accept similar instances of poor control.
(c) Virement approval by the accounting officer was not given for the utilisation of savings to defray excess expenditure totalling R29 568 550,43, which resulted in unauthorised expenditure in terms section 33(1)(b) of the Exchequer Act. Included in the amount is an amount of R166 645.80, which constitutes a saving on a column-2 item, which may only have been used for defraying the expenditure with the specific approval of the Minister of Finance in terms of section 6(2) of the Exchequer Act.
Strict adherence to the legal requirements for virement approval will be expected in future. Such consideration should also always be supported with proper and timely management information. As the State did not suffer any losses, the Committee recommends that the amount be authorised by Parliament.
(d) Non-compliance with State Tender Board directives gave rise to an amount of R458 965.86 being unauthorised. The expenditure was related to the appointment of consultants for employment equity workshops and for the compilation of business plans relating to the transformation of the administration of justice project. The State Tender Board did not grant ex post facto approval for the non-compliance.
As the Committee has been informed that the Department had certified that the services rendered were to its satisfaction and benefitted the State, it recommends that the amount in question be authorised by Parliament.
2. 1998-99 financial year - expenditure totalling R79 074 324,32 (par 2.2.1, p 5)
(a) During the 1998-99 financial year, excess spending on voted funds gave rise to unauthorised expenditure of R47 046 814,09 in terms of section 33(1)(b) of the Exchequer Act.
As in the case of paragraph 1 above, the excess seems to be the result of inadequate financial control and a lack of complete management information necessary to take timely corrective action in curbing over-expenditure. However, in view of the improved position with regard to regular management information and the fact that, with effect from the 2000-01 financial year, over-expenditure is regarded as financial misconduct, the Committee recommends that the amount in question be authorised by Parliament.
(b) Virement approval for utilising savings amounting to R21 162 076.18 to defray excess expenditure was not given by the Accounting Officer, as required by section 6(1) of the Exchequer Act, with the result that the amount is unauthorised. This reflects poor financial management discipline. However, as the State did not suffer any loss, it is recommended that the amount be authorised by Parliament.
(c) Expenditure of R10 654,131.64 relating to Legal Aid prior to 17 October 1997 was incorrectly charged to the Department and is therefore unauthorised in terms of section 33(1)(a) of the Exchequer Act. Given the precarious financial position of the Legal Aid Board at the time and since then, the Committee is of the opinion that claiming the amount in question from the Legal Aid Board at this stage would not be supportive of the rendering of legal aid envisaged by the Constitution.
The Committee therefore recommends that the amount in question be authorised.
(d) An ex gratia payment of R67,450.74 was made without obtaining Treasury approval, resulting in unauthorised expenditure in terms of section 33(1)(c) of the Exchequer Act. The payment relates to overtime remuneration to a senior magistrate acting as a regional representative for KwaZulu-Natal for the period October 1996 to July 1997. As ex gratia payments are not uncommon, the overtime worked was in the interest of the Department and the payment was made on recommendation of the State Attorney, the Committee recommends that the amount in question be authorised by Parliament.
(e) An instance of non-compliance with State Tender Board directives relating to an amount of R143,851.85 was listed in the General Report of the Auditor-General for the year in question as expenditure that "is not material or has not resulted in a loss to the State, or the question of mala fides did not arise, or the expenditure is only unauthorised due to a technical contravention of the regulations".
The Committee therefore recommends authorisation of the amount in question.
(f) Backlogs in capturing batches of expenditure vouchers: The Committee is very concerned about the backlog that has existed for a number of years with respect to the capturing of expenditure vouchers. In the 1998-99 financial year, this possibly gave rise to departmental expenditure for the year being understated by approximately R91,5 million. The Committee has been informed that a dedicated task team has been constituted to eliminate the backlog, but that the project may only be fully completed in 2002.
The Committee wishes to give notice that it will await the proper completion of the project, but that as from the 2002-03 financial years, no backlogs will be tolerated.
3. 1999-2000 financial year
A cost overrun of R1 1767 38 on a contract of R2 172 726 approved by the State Tender Board, relating to information technology services for Y2K preparation, was unauthorised.
No mala fides was involved and the Department benefitted from the service. Although the State Tender Board should have been approached for extension, the State did not suffer any loss. The Committee therefore recommends that the amount in question be authorised by Parliament.
With respect to the remainder of the 1999-2000 unauthorised expenditure, the Committee has requested certain explanations from the Director-General of the Department.
Postscript
The Committee wishes to point out, however, that in recommending the approval of the above instances of unauthorised expenditure, it does not condone any form of non-compliance with applicable law, nor wasteful or fruitless expenditure. The Committee is cognisant of the efforts of the Accounting Officer, assisted by the acting CFO during this year, to instill financial management discipline within the Department. These efforts are strongly supported by the Committee. However, at the same time the Accounting Officer's future achievements in this regard will be measured against the highest standards of public accountability and stewardship.
Appendix 1
THE DEPARTMENT OF JUSTICE AND CONSTITUTIONAL DEVELOPMENT - PROJECT ROLLING STONE
1. Introduction
The natural culmination of transaction backlogs has been the inability of the Auditor General to perform an adequate Audit of the Department as a result of the decrease in the scope of the audit and thus this project was initiated to clear backlogs at all DoJ&CD offices, i.e. Justice Sub Offices , Regional Offices and National Office.
2. Risks
The fact that current transactions are not processed and reconciled opens the Department to substantial risk relating to fraud and corruption as officials are readily able to 'hide' shortages to a time when processing is complete and reconciled. At such time many an investigation has been obstructed by the fact that receipt books are missing and events cannot be recalled.
3. Budget Impact
In the initiation phase substantial costs have been brought to account that relate to prior years and should this pattern continue it will impact on current budgets.
4. Project Plan
Towards reducing backlogs and reconciling the Vote and Trust Accounts progress and plans are as follows:
4.1 GAUTENG
4.1.1 Achievements to date
- The project was initiated and started on 16/10/01
- 5 task teams have been formed to clear Gauteng 'A' and Gauteng 'B' offices
- Cleared backlogs, reconciled Trust Account in Bronkhorstpruit and Pretoria North offices
- Cleared backlogs, reconciled Vote Account in Pretoria North office.
4.1.2 Activities scheduled for next period
- Complete clearing of backlogs in Vote Account - Bronkhorstpruit (2/11/01)
- Clear backlogs and reconcile Trust and Vote Accounts in:
Cullinan (9/11/01)
Randfontein (7/11/01)
Westonaria (14/11/01)
- Engage 15 additional people to complete the existing task teams (19/11/01)
- Provide the necessary training
- Form 10 task teams (50 internal and external people) (18/12/01) to clear the remaining 30
Offices.
4.2 NORTHERN PROVINCE
4.2.1 Achievements to date
Project has been initiated
4.2.2 Activities scheduled for next period
- Formal project commencement and discussions with Regional project coordinator.
- Form 5 task teams with internal and external people (14/11/2001)
- Provide necessary training (22/11/01)
- Begin clearing backlogs in selected offices
4.3 NORTH WEST PROVINCE
4.3.1 Achievements to Date
- The project was started on 15/10/01
- Formulated plan of action and order of clear
- Resourcing of task teams (internal and external)
- Dedicated regional people already in sub-offices sorting out problems
- Activities scheduled for next period
- Form 5 task teams (internal and external) (9/I 1/01)
- Provide necessary training (9/11/01)
- Clear Zeerust Office (12/11/0l)
- Clear Ditsobotla and Lichtenberg offices (23/11/01)
- Form 10 task teams (50 people) to clear remaining offices (7/01/02)
4.4 FREE STATE
4.4.1 Achievements to date
Project has been initiated
4.4.2 Activities scheduled for next period
- Formal project commencement and discussions with Regional project coordinator (9/11/01).
- Form 5 task teams with internal and external people (14/11/2001)
- Provide necessary training (20/11/01)
- Begin clearing backlogs in selected offices (phase 1)
4.5 MULANGA
4.5.1 Achievements to Date
Project has been initiated
4.5.2 Activities scheduled for next period
- Formal project commencement and discussions with Regional project coordinator (7/11/01).
- Form 5 task teams with internal and external people (14/11/2001)
- Provide necessary training (20/11/01)
- Begin clearing backlogs in selected offices (phase 1)
- KZN
4.6.1 Achievements to Date
- The project was started on 30/1 0/01
- Resourcing of task teams (internal and external)
4.6.2 Activities scheduled for next period
- Finalise plan of action and order of clearing
- Form 5 task teams (internal and external) (14/11/01)
- Provide necessary training (16/11/01)
- Start clearing of offices (phase 1)
- Form 10 task teams (50 people) to clear remaining offices (7/01/02)
- WESTREN CAPE
4.7.1 Achievements to date
- The project was initiated and started on 22/10/01
- 5 task teams have been formed
- Cleared backlogs, reconciled and finalised Vote Account (100%) in 12 offices.
- Started clearing backlogs in remaining offices (5 % - 50 % complete)
- Guardian Fund backlogs:
- Task Team of 15 deployed in Umtata and Bisho (King Williams Town):
- Procedures for receipts and payments correctly formulated and implemented
- Cashbooks run on a daily basis
- Card opened for every minor
- All necessary cards brought up to date, before payments are made
- Control lists for receipts and payments introduced
- R 14.5 mill (King Williams Town) R 21 mill (Umtata) been paid to Public Investment Commissioner.
- Problems prior to 1/10/01 have been ring-fenced.
4.7.2 Activities scheduled for next period
- Task team administration workshop (2/11/01)
- Draw and process journal entries (2/11/01)
- Training (Monies in Trust) of sub office staff (13/11/01)
- Complete clearing of backlogs, clean up and reconciliation of Vote Accounts in
- Cape Town Regional Office (9/11/01)
- Kuilsriver (9/11/01)
- Cape Town High Court (16/11/01)
- Ceres(16/11/01)
- Worcester(16/11/01)
- Stellenbosch (16/11/01)
- Tulhagh (16/11/01)
- Wellington(16/11/0l)
- Complete the remainder of the offices during January/February 2002.
- Guardian Fund backlogs.
- Thohoyando (5/11/01 - 9/11/01)
- EASTERN CAPE
4.8.1 Achievements to date
Project has been initiated
4.8.2 Activities scheduled for next period
- Formal project commencement and discussions with Regional project coordinator(01/11/01).
- Form 5 task teams with internal and external people (14/11/2001)
- Provide necessary training (29/11/01)
- Begin clearing backlogs in selected offices (phase 1)
- NORTHERN CAPE
4.9.1 Achievements To Date
- All backlogs have been cleared
- All reconciliation's are up to date for Vote and Trust Accounts, at sub office and regional level
4.9.2 Activities scheduled for next period
- Clearing of accounts and reconciliation's at National Office
- Sorting out problems at National Office.
- Provide people to other regional task teams
Appendix 2
DEPARTMENT OF JUSTICE AND CONSTITUTIONAL DEVELOPMENT PEP MONTHLY REPORT - OCTOBER 2001
1. Milestones
The governing board of the Office of the CFO has been established. Brian King and Tom Wixley have agreed to join the CFO on the "Mini Board" of the office of the CFO. Brian and Tom are directors on the main board of the department. Both are acknowledged business leaders of long standing and the CFO is delighted that they have been able to commit to the governance of the enormous task that lies ahead in steering the Business Unit into the future. Tough decisions lie ahead and their vast experience will be invaluable to the CFO.
The Performance Enhancement Programme is progressing well. All the projects within the programme will impact on the service delivery of the Department. Where projects cut across Business Units the projects have been established with co-ownership governance. An example being the Backlog Reduction Project which is a central part of the ISM Business Units FAS (Financial Administration System) Project. This project is at present funded by the FAS Project budget vote. The current focus of the programme is as follows:
The costing, right sizing and zero based budgeting initiative has been launched under the leadership of the Director General as the "Justice Footprint Project" within the Performance Enhancement Programme.
A number of workshops have been held to establish roles and responsibilities.
The first in a series of working sessions to generate budget decision packages on specialist areas of service delivery is scheduled for the 15th of November 2001. The draft invitation to the working session is attached for information purposes. It is likely that follow up sessions will be held to capture the input of other interested stakeholders on the topic in other centres.
A workshop is scheduled for 20 November 2001 in Pretoria to start the process of populating data sets within the process of determining demand to meet geographically dispersed crime categories.
The Justice Footprint Project tender submission of the CSIR Consortium is attached for information purposes. The submission is in fine with the tender requirements. Please note that the salary survey and benchmarking section of the tender was awarded to Deloitte Human Capital. The output of the salary survey and benchmarking tender will dovetail with the work of the Justice Footprint Project. The output of The Justice Footprint Project will be made available to other Government Departments within the JCPS cluster as well as to DPSA.
The Deposit Account Administration Enhancement Project has shown movement in the month under review. This is a joint initiative of ISM and the Office of the CFO.
The Post Office implementation team conducted on site surveys at the Pretoria and Umtata Justice Offices. A pilot site agreement is expected to be concluded before the end of the month. This proposal will see the installation of ATM's at Justice Offices which will enable the drawing of cash by people collecting maintenance monies on their first visit each month. Current procedures call for two visits and for payees that do not have bank accounts to discount cheques (mostly with rural stores) before they are able to access cash. It should be noted that before JADAS or the Post Office concept can be installed the financial records must be up to date to enable conversion. Twin systems cannot be maintained. The Post Office proposal is attached for information.
As a result of work done to establish international "best practice" a meeting is scheduled for 16 November 2001 to review the outsourced functions employed by EDS who have been awarded a tender by the Magistracy in the United Kingdom.
The administration of the Deposit Account and the Guardians Fund which are similar in a number of respects must be modernised as a matter of urgency and other possible PPP's are to be investigated. Possible interest in a PPP are to be investigated with micro lenders such as African Bank who have a similar target market and Pep Stores who have a similar geographic dispersion.
Notwithstanding the above it is believed that a substantial effort should be launched to divert maintenance payments from the Deposit Account administration system. Tests conducted in Benoni revealed that the majority of people queuing to pay maintenance monies in, or to request payment from, or to receive payment from Deposit Account officials are the holders of banking accounts and pay or receive payment on a monthly basis. In areas where people are largely 'unbanked" a diversion initiative would also "pay dividends" to those that receive payment that has been posted to the Justice Office, as the person paying in lives and works in another town. To facilitate such an initiative follow up investigative capacity would need to be established to assess cases of non payment. A cost benefit study will be conducted by this office.
The Budget Performance Enhancement Project has implemented a number of initiatives.
The training course for the 70 senior line and finance managers took place on 9, 10 and II October 2001 as planned and budget teams have been established under the leadership of the budget coaches appointed to each business unit.
Currently Six budget coaches and two people from the Justice Footprint Project are on a fourteen day intensive training course at the UCT GSB. These people have been allocated to teams and are working to a February timetable (to tie in with the MTSF presentation of our Minister to Parliament), for the determination of a measurable output budget based on the expected baseline. This budget will then be evaluated within our Justice Footprint Project which will cost and right-size a delivery framework prioritised from a zero base. In support of our Business Unit line managers the budget coaches have been charged with enhancing budget performance.
A part of the process of enhancing budget performance will be to review delivery performance against signed service level agreement5 that cascade from the top to the bottom. This process will ensure organisational clarity on responsibilities and levels of authority. Service level agreement5 are in place for the EXCO but the process needs to be extended down as the budget reporting framework is extended to reflect Business Unit financial activity. Financial responsibility allocations have been drawn up. It is expected that financial accountability to lower levels will be possible with the introduction of the BAS accounting system at the beginning of the new financial year. This capability will also enable productivity assessments and the Office of the CFO is to approach the National Productivity Institute (NPI) to establish "best practice" in this regard. Current accounting practice on the FMS system reports financial activity by programme and this promotes the management perspective of non-accountability for financial performance. The introduction of BAS will improve upon the management information available to line managers, to underpin the departmental strategy to enable knowledge based decision making, as it will enable deeper layers within cost centres accounted for.
A meeting was held with the Director General and the Accountant General at which the importance of introducing the BAS accounting package was stressed and the Director of Budgets, Mr Henry Isaacs has been seconded to this initiative to ensure a successful transition to the new reporting system.
A meeting was held with the CFO's and line management charged with social crime prevention and youth matters. It was established that within the JCPS cluster budget allocations are insufficient to achieve meaningful progress and the Director General supported a reprioritisation initiative that made funding available for desperate needs.
A new budget framework for the 2002 Estimates of National Expenditure (ENE) was released on 9 November 2001 by Treasury within the Treasury Budget Reform programme. A revised budget "Vote" presentation was released and the department's submission is required by 5 December 2001. This deadline is tight as good plans require planning. We will submit our input but will not alter our planning towards the February deadline for a "first draft" of a measurable output budget as planned within the Justice Footprint Project. A summary presentation on Budget Reform and the Vote template are attached.
The capacity building project is underway.
The draft 'Cash Hall" training manual included in the September Report has been finalised and is attached. A training programme to train 18 training teams commences on 12 November. This project will train some 1800 finance officials at 270 locations in the next twenty weeks. All course participants will be provided with a copy of the tra1n1n(~ manual. The training programme is in line with IPFA standards and an analysis in this respect is attached for further information. All staff trained will be required to complete a competency assessment at the end of the training and selected departmental staff in each Province will be trained as trainers thus enabling regional sustainability of the initiative. An excel spreadsheet detailing timing and location is attached.
The BCom (Hons) degree in strategic cost and financial management at the Dept of Accountancy at UCT is "on track". The Department will support the application of twelve selected officials and will offer bursaries to the officials that enroll. The University will offer a few bursaries to persons who are not departmental officials and the department 'will participate in their selection.
For completeness a schedule of training provided by the Justice College is attached for information.
The transaction processing backlog reduction project is progressing well.
Some twenty people have been sourced to assist in getting National Office backlogs relating to the Deposit Account and the Suspense Accounts up to date. It is expected that backlogged transactions currently at National Office will be cleared within three months. It must be noted that as the backlogs are cleared from Justice Offices to Regional Offices these will move to the National Office where the extra transaction processing capacity will need to be sustained.
Teams of people have been deployed to a number of Justice Offices around the country to clear transaction processing backlogs. Before the end of November trained teams will be deployed in all regions. The Northern Cape is processing current work and the Western Cape will have caught up within a couple of months. The Western Cape backlog teams commence training on 12 November 2001. It is not possible to estimate the timing for completion in the other regions where backlogs are substantial. The worst case scenario lies in the Northern Province where backlogs date back to 1982. A schedule of progress is attached for further information. Backlogs in the processing of Guardians Fund transactions are at an early stage and the extent of work required to finalise cannot be estimated at this point. It is anticipated that further funding for this project will be needed. All offices brought up to date will be so signed off by administration staff and by internal audit staff The Current budget is R 2 million.
The Masters Administration Enhancement Project has made progress in assessing their 'as is' position.
A detailed business process reengineering exercise of the Guardians Fund has been completed. This extensive study was undertaken by SITA and the recommendation is currently under evaluation.
From a business process point of view the unit has not frilly explored the benefits and cost savings possible through modernisation. The CFO is of the opinion that the current call for further funding, which is unlikely to be provided to the extent requested, will be revised as the underlying people cost is related to a costly manual record keeping and filing system not designed to manage modern volumes. This said, the Unit should be commended on the work done. A project investigated with the Justice Resources Trust was concluded, the financing of which, is suited to a PPP.
An electronic data scanning and filing system has been specified in collaboration with Microsoft. The system will be piloted by the end of the month.
The implementation of the Procurement Enhancement Project has been rescheduled with the appointment of a Project Manager on contract, who will initially assist with the procurement of a court security system, court infrastructure and capital works. A court security tender will be advertised in the Government Gazette on 16 November 200T. As soon as these priority matters are addressed then the Procurement Enhancement Project will be reassessed within the framework of the new courts management model that is to be devised.
Personnel matters:
The Office of the CFO took over the candidate short listing process from the Personnel Business Unit two weeks ago and most shortlist meetings are now complete. All short list meetings and interviews for advertised vacancies in the National Office will be completed by the end of November provided the HR Business Unit is able to notify short listed candidates in time. The Eastern Cape Finance Director and Deputy Director posts are vacant. The Deputy Director from the North West is commuting to the Eastern Cape on alternate weeks. These posts are due to be advertised shortly and need to be filled as a matter of urgency. An excel spreadsheet schedule of vacancies is attached.
The salary survey and benchmarking tender is due to be completed early in the new year.
Disciplinary action on the grounds of non-compliance has as yet not been instituted by the HR Business Unit.
A compliance review visit was made by the Auditor General, Courts line Management, Internal Audit and the CFO to the Randburg Magistrates Court. Corruption and fraud is significant. The Admin Controller has been suspended. The most senior finance clerk was not able to show where she had put pen to paper in recent months. This hands on approach by senior finance clerks is wide spread and a large part of the reason for accumulated backlogs. Morale amongst staff is low and frustrations within this Justice Office are high. The backlog project plan has been reprioritised to assist this office in the short term. Transaction volumes are high at Randburg however the First World facilities (provided by Vodacom) at the Wynberg Court (Alexandra) are under utilised. This visit reaffirmed the need established by the CFO within his first week of office that a serious programme to address "change management" is critical to building a motivated staffing structure.
Donor funding administration enhancement has been brought up to date.
Account queries for the 1996 to 1999 years have been cleared and the sign off of the Auditor General is awaited.
Transaction processing for the 2000 and 2001 years is complete apart from four claims that are outstanding, awaiting reimbursement from USAID and the USAID cost sharing schedule must be finalised.
The implementation of the financial operations and payroll recommendations have been put on hold pending the appointment of staffing to manage and execute these projects. The establishment of shared service centres will require seed funding and suitably qualified personnel to unlock the savings that will eventuate. Outsourcing these functions is an option that will need to be evaluated.
The office of the Auditor General has commenced preliminary investigations towards commencing the forensic audit of a number of fraudulent activities.
Financial Statements.
The monthly accounts are attached. Substantial under spending against project related budgeted expenditure continues and will have to be closely monitored by Business Unit Managing Directors. The tender board closes shortly, only to reopen during mid January, at which time, there will be little time for the delivery of time consuming project related work. Committed expenditure on merit awards needs to be established to enable shortages to be estimated against available funding. Please note that these are not audited figures and are provided for analysis. Please verify annual budget estimates against any possible budget corrections that may be effected between Business Units for time to time.
The publication of the errata on the published accounts has been delayed due to the illness of the Managing Director of the PEC Business Unit.
Preliminary questions have been received, in advance of discussions on management action on the audit reports of the Auditor General, for the reporting years I 999/2000 and 2000/2001, from Treasury and SCOPA. These questions and answers are attached. The Office of the CFO is acutely aware of the need to follow up on outstanding matters relating to the audit of transaction processing pertaining to previous years for many of these matters continue to be relevant in the current year. This task is a difficult one as approaching the task within an incremental improvement process whilst reengineering a new financial administration system requires a level of capacity that the Department does not possess and thus a balance has been sought which has required a level of compromise.
MTEF Budget Allocations:
The CFO accompanied our Deputy Minister to address the Budget Committee on 2 November 2001 and he was invited by our Minister to address the Ministers Committee on the budget on 4 November 2001. Cabinet is to confirm budget allocations for the next cycle on 16 November 2001. These meetings were, inter alia, informed of the Justice Footprint Project that will develop a macro plan for the department and the critical role that this project will play in determining the future baseline of the department within the available budget envelope on the basis of budgeting for success.
2. Obstacles and Risk Management
* The clearing of backlogs has exposed and highlighted the risk profile of the department in the provision of financial services within a weak control environment.
* Visits to Justice Offices has entrenched the view that capacity at this level is significantly sub standard and has emphasised the need to extend and expand the internal audit, inspectorate, forensic audit and capacity building initiatives.
* The marketing of the anti-fraud and corruption hotline (0800 00 59 33) to Justice Offices needs to be increased.
3. Conclusion
Significant progress has been made in the month under review, however
The Office of the CFO has stated that the position of the department in relation to the provision of financial services will seem to get worse as the reengineering process gets underway, largely as a result of the picture becoming clearer. This is proving to be the case.
The task ahead, whilst enormous, is achievable given people, systems, funding and a turn around in the culture of officials towards the acceptance of non-compliance and incompetence.
It is firmly believed that funding for a large part of the unfunded needs of the Department can be generated by creating efficiencies with seed funding and donor funding.
The Performance Enhancement Programme together with other initiatives such as the DNS project have reached a point where the transformation of the financial administration of the department has been firmly rooted.
Alan Mackenzie
Office of the CFO
9 November 2001
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