Auditor General's performance audit of entities: Disclosure of interests

Meeting report

The Chairperson said that the Committee had scheduled a session with the National Treasury (NT), the Public Service Commission (PSC) and the Department of Public Service and Administration (DPSA) to look at the Auditor-General’s performance audit of entities that were connected to government employees, or which did work for national or provincial departments, in order to ascertain what needed to done to address the wrongs that had been identified in the Auditor General's (AG) report. However, it was also necessary for the various departments whose entities had acted incorrectly to appear before this Committee to deal with the AG’s comments.

Department of Police
Ms P Ngwenya-Mabila (ANC) asked the Department of Police what corrective measures had been taken to ensure that their employees' failure to declare financial interests, as well as the fact that they had taken part in tendering processes when they had vested interests in it, did not happen again.

Mr Pahlane, Deputy Commissioner, Department of Police, said that there were eleven cases involving employees that were outlined in the AG’s report. Of the five employees in Category A (where employees did business with the department), three had resigned following disciplinary action. Once they had resigned, it became difficult to take the disciplinary action any further. The remaining two were still in the employ of the police service, but were no longer doing any business with the department.

The Chairperson asked what had happened to the two had not resigned.

Mr Pahlane answered that in both cases disciplinary action had been instituted against the employees. One of the employees had been given a written warning and had been redeployed. The other employee was still in the organisation, as he had complied with the national instruction to get permission to do business with the department.

Mr Pahlane continued that Category B related to spousal-related companies doing business with their own departments. One of the employees concerned was married to the owner of the company. Although she was not required to seek permission, she had done so. She had also not been responsible for procurement.

In terms of employee-related companies doing business with other national departments, two of the employees concerned had resigned. The rest of the employees were already no longer active within the department.

Mr Pahlane outlined the corrective measures taken. In March 2006 the Department had issued an instruction that permission for all business and/or extra-remunerative work within the Department was to be reviewed no longer by the Captain, but by the National or Provincial Commissioner on an annual basis.

Ms Ngwenya-Mabila then asked the Department of Public Service and Administration when it would complete the investigation into the disclosure forms that were to filled out by the police employees.

Professor Richard Levin, Director General, DPSA, answered that the Department was currently amending the regulations, though it would be subject to a broader discussion within Cabinet. This was to be done within the next two months.

Ms Ngwenya-Mabila asked whether any of the Department of Police’s employees had disclosed their financial interests. If so, she asked if this had been done on time, and she asked also for an indication of how many had disclosed on time, and how many failed to do so.

Mr Pahlane answered that in the 2007/8 financial year, 629 financial disclosure forms were submitted. This represented a compliance rate of 96.3%. In 2008/9 there had only been five outstanding disclosures that had not been submitted by the deadline of 30 April. Of these, one related to a person who had at the time been on suspension. The other four were to had disciplinary action taken against them.

Ms Ngwenya-Mabila asked when this disciplinary action was to be taken.

Mr Pahlane replied that action was to be taken before the end of August 2009, as the Department had been in the process of doing consolidations.

Ms Ngwenya-Mabila then asked whether all 629 senior officers had been granted permission by either the National or Provincial Commissioner to do business with the Department or other departments.

Mr Pahlane answered that he could unfortunately not tell how many had had approval.

Ms Ngwenya-Mabila asked whether the Department had conducted any training of supply management staff and, if so, if there had been any notable impact as a result of this training.

Ms Magda Stander, Deputy National Commissioner, responded that the Department was training its supply management staff on a continuous basis with regards to procurement procedures. Its employees also had to sign a code of conduct in which they had to declare that they were not involved in the bidding process, or declare any interests if they were indeed involved.

Mr N Singh (IFP) examined whether there had been any fraud committed in terms of the resignations and disciplinary action. In terms of remunerative work, he asked if there were any guidelines which regulated what work the Department's employees could do.
Mr Pahlane replied that the following businesses were not allowed: businesses connected to the taxi industry, brothels, insurance, firearm/ driver's licences, gambling, private investigation services, livestock, micro-lending, second-hand goods, or any business which had been contracted to the State to render a particular service.

The Chairperson referred to page 13 of the AG’s report and asked whether there was any contradiction in the officer having done business with a State department and only receiving a written warning. He asked for comment as to whether that disciplinary action was appropriate. He also asked how it was possible that a person be granted permission to do business with other government departments.

Mr Pahlane answered that there was no contradiction. At the time when permission was granted, that provision was not in the guidelines.

The Chairperson asked when that provision had been inserted.

Mr Pahlane said that, according to the Department’s records, a circular was released in March 2006.

The Chairperson asked when the employee concerned had transacted with the Department.

Mr Pahlane gave the following dates: 2005/6, 2006/7, 2007/8.

Mr M Mbili (ANC) said that, considering the date the provision had been inserted, the employee should not have received approval for 2007/8 to do business with the Department.

Mr Cele agreed that for the 2007/8 transactions, the employee should not had been granted approval to do business with the department, and added that the 2006/7 transactions should be considered borderline cases as the circular was released in 2006.

The Chairperson said that because the circular was issued in March 2006, the matter for 2006 in fact fell within the 2005- 2006 financial year. He said that the report by SAPS seemed to be deliberately misleading.

Mr Mbili asked for clarity around the issue of moonlighting, as it affected the performance of members of the Department.

Mr Cele answered that the Department would have to find out if there were officers involved in such activities and act accordingly.

Mr M Steele (DA) asked whether the Department had any dedicated staff members to investigate officers who undertook “moonlight” activities, and, if not, then he wished to know the reasons why not. He also asked how many members had been charged with misconduct under this offence.

Mr Pahlane replied that the Department had not had the capacity until now, but was in the process of addressing this issue.

Department of Education (DOE)
Ms M Matladi (UCDP) asked the Department of Education what procedures had been followed in awarding the Afri-books tender and who the adjudicators had been.

Dr Molapo Qhobela, Acting Director-General, Department of Education, answered that he did not had the names of the adjudicators who awarded the tender.

Mr Theuns Theroux, Acting Chief Financial Officer, Department of Education, answered that the normal adjudication procedures had been followed in the awarding of this tender.
Ms Matladi requested that documents be furnished in order to prove that the Department had indeed followed 'normal procedure' in awarding the tender, as well as to prove that the employee concerned was not involved in the procurement, adjudication or evaluation processes. She also enquired whether the Department had an auditing committee or any internal audits.

Dr Qhobela replied that the DOE did have internal audits as well as an internal audit committee.

The Chairperson said that, according to the Department, the employee concerned did not disclose that she was a shareholder, although it was found out later that she was, at the time when the company submitted tendering documents. He asked what the Department had done regarding this matter, and probed why did it not act upon this information.

Dr Qhobela answered that the Department needed to strengthen its monitoring process. It would also have to go through what steps were taken along the evaluation process, and find out where the fault lines were and who was responsible. The head of the Adjudication Committee would be brought in front of the committee.

Mr Mbili asked what the tender had been for, and whether the person responsible was still in the employ of the Department.

Dr Qhobela answered that the tender had been for fiction books written in different official languages. The employee concerned was no longer in the employ of the department. She had been appointed as an official of the KwaZulu-Natal Department of Education. The Department had asked this provincial department to follow up on the matter after providing them with the necessary information.

Ms Matladi asked what measures had been put in place to address this anomaly in the Department.

Dr Qhobela replied that when such incidents occurred, the officials had been dismissed.

Mr Theroux said the DOE had subsequently put measures in place to curb reoccurrence of such incidents. A decision was taken to release a circular regarding the declaration of interests. The Department's internal audit unit had also been requested to verify all tenders and to make sure that no departmental official was in any way involved in these tenders, especially for the last financial year.

The Chairperson noted that this was not good enough. The Department must make sure that the steps it had put in place were effective at preventing the recurrence of these types of incidences.

Department of Correctional Services (DCS)
Mr R Ainslie (ANC) said that, of all the departments surveyed, the Department of Correctional Services was one of the worst transgressors. The AG had reported that four officials in the Department undertook work outside of their official duties, to the value of over R1 million. The report had recommended that disciplinary action be taken against these four. He asked whether this had been done.

Ms Jennifer Schreiner, Acting National Commissioner, Department of Correctional Services, answered that it had not been done.

Mr Ainslie asked why it was taking the Department so long, as it had been over a year since the report was made available, and asked what were seen as the obstacles in the way of doing this expeditiously.

Ms Schreiner agreed that it was unacceptable that it had not been done yet. Although the Department had been through frequent changes in officials in that year, it could not be blamed on that.

Mr Ainslie referred to page 17 of the report, with particular regard to conflict of interest. Two employees in the department had not declared their interests. The report had recommended that disciplinary steps be taken against these employees. He enquired whether this had been done.

Ms Schreiner responded that it had not been done. The critical element for the DCS was that there was interconnectedness between not doing remunerative work without permission, not doing business with the Department and not disclosing financial interests. It needed to look at the issue holistically.

Mr Ainslie asked what had been done to ensure that laws governing these issues were brought to the attention of the Department's employees.

Ms Schreiner answered that the DCS had developed a policy around this and that remunerative work now had to be applied for on an annual basis, whereas before there had been no time limit.

Mr Ainslie asked why tender forms had not been filled out thoroughly.

Ms Schreiner replied that the DCS had taken steps to ensure that this was done. It had amended the forms so as to get greater clarity. It had also ensured that its supply chain management personnel undergo a training process in order to ensure compliance.

Mr Ainslie asked what had been to stem conflict of interest and how it was monitored.

Ms Schreiner said that part of what the DCS was doing was to ensure that there was an internal education process to inform DCS’s employees of what constituted a conflict of interest.

The Chairperson said that officials from this Department were always promising to right the wrongs in the Department, but always returned with things looking worse than before. Ms Scheiner's commitments therefore had to be regarded with some scepticism. He noted that there were some very serious problems in the Department that needed to be addressed.

Mr N Du Toit (DA) asked whether anyone in the Department had permission to act to address these problems. In addition, he asked whether the Department had policies in place to deal with these problems.

Ms Schreiner answered that the Department was in the process of working around sections of the Correctional Services Act in order to get greater clarity around the procedures it followed in relation to disciplinary action, but that this did not preclude it from taking action. It had policies that addressed the taking on of remunerative work outside of the Department. Also, aside from cases identified in the report, there were other cases which had been uncovered by the departmental investigations unit. This was an issue of which the DCS was aware, and it was consistently working on addressing these issues.

Department of Labour (DOL)
Mr Steele asked the Department of Labour whether it had taken any disciplinary action against the employees identified in the report who performed extra-remunerative work without approval. He also asked if the relevant parties had been informed of the requirements that they needed to request approval, and if the Department had acted in terms of the recommendations in the report.

Mr Sam Morotoba, Acting Director-General, Department of Labour, answered that the DOL had acted on the recommendations. It had compliance levels currently standing at 95%. The other 5% related to members who were either under suspension or booked off on medical grounds. There were also monitoring measures put in place. There was a policy that had been signed, which formed part of the orientation of staff when they joined the Department.
Mr Steele referred to employee-related companies and Close Corporations (CCs) doing business with the Department and asked what action had been taken against the four employees mentioned in the report.

Mr Morotoba responded that the DOL had approached all four parties concerned. One of the cases had been referred to their legal department.

Mr Steele asked whether any investigations had been undertaken regarding the three employees’ spouses who were doing business with the DOL.

Mr Morotoba replied that investigations had been done and that all the employees concerned were no longer in the employ of the Department.

Mr Steele asked what the Department had done about three of its directors who were repeat-offenders at not disclosing their interests.

Mr Morotoba replied that the Department had identified the directors concerned and was in the process of booking two of them off on medical grounds. The other had been on suspension and had subsequently resumed duties.

Mr Steele asked whether failure to disclose automatically became a disciplinary offence within the DOL.

Mr Morotoba answered that it was.

Department of Water and Environmental Affairs (DWEA)
Mr Mbili asked what the Department of Water and Environmental Affairs had done in terms of the recommendations listed in the Auditor Generals' Report.

Ms Nombulelo Ngele, Acting Director-General, Department of Water and Environmental Affairs, answered that most of the employees mentioned had resigned. She noted that they wanted to discuss measures that the Department had put in place.

Mr Mbili asked when these measures had been put in place.

Ms Ngele said that the Department had introduced a centralised buying system. Senior Management Service (SMS) members who had not disclosed had been given final warnings. With regards to non-SMS members, the DWEA had issued a directive encouraging them to disclose. It had also developed a register where all the people in the Department who had disclosed their companies were listed.

The Chairperson asked when the Department had instituted disciplinary measures.

Ms Ngele said these were instituted in July this year.

The Chairperson said that this Department was one of the poorer performing departments in terms of governance. There was therefore a serious challenge to Ms Ngele to make sure that these issues were addressed. Since the report had already come out in August last year, it was unacceptable that nothing had happened until July the following year.

Department of Communications (DOC)
Mr T Bonhomme (ANC) asked the Department of Communications what action it had taken against the official who did not declare a conflict of interest.

Ms Gerda Grabe, Acting Director-General, Department of Communications, answered that, by the time the Department had received the report, the specific official had already resigned and moved to another department. However, when DOC received the information it immediately requested its internal audit unit to undertake an investigation. Also, at all meetings of the Evaluation Committee as well as the Adjudication Committee, all members were required to complete declaration forms.

Mr Ainslie asked if the Department was still doing business with the company concerned.

Ms Grabe replied that the Department was no longer doing business with the company.

Department of Arts and Culture (DAC)
Mr Du Toit asked the Department of Arts and Culture what it had done regarding the recommendations in the report.

Mr Themba Wakashe, Director-General, Department of Arts and Culture, said that the official concerned had been suspended in July this year.

Mr Du Toit asked why it had taken so long.

Mr Wakashe said that the information regarding the official had come to his attention rather late.

Mr Du Toit asked whether the person had been suspended to appease the Committee.

Mr Wakashe replied that he never hesitated to act against the official concerned. The Department was going ahead with disciplinary action.

Mr Du Toit asked what the Department was going to do about people who failed to bring the matter to Mr Wakashe's attention, as they were obviously not doing their jobs, and whether they too were likely to be suspended.

Mr Wakashe responded that he would have to ascertain what the correct disciplinary action would be that had to be followed.

Mr Mbili asked why the person had not been arrested if fraudulent activity had taken place.

Mr Wakashe said that the matter had been reported to the police.

Mr Mbili asked when the matter had been reported to the police.

Mr Wakashe replied that it had been reported four weeks prior to the date of this meeting.

Mr Mbili asked whether the Department had followed the matter up with the police.

Mr Wakashe replied that he did not know what the progress was with this case, as the police were following their own processes. The DAC’s immediate interest was to make sure that the official was charged within the Department. He would be able to check up on the matter and provide a case number to the Committee.

Mr Mbili asked the Department to provide a case number.

Subsequently, shortly before the adjournment of the meeting, the Departmental officials returned to state that they had not been able to contact the person in the Department who had been responsible for laying the charge, and said that they could not provide the case number today.

Mr Mbili then asked whether the case was indeed reported to the police.

The Department representatives could not answer the question.

The Chairperson said that the statement that the case was opened was clearly incorrect factually.

Department of Agriculture, Forestry and Fisheries (DAFF)
Mr J Gelderblom (ANC) asked the Department of Agriculture, Forestry and Fisheries when it had taken the decision to investigate Department officials identified in the report, and what had happened since.

Ms Njabulo Nduli, Director-General, Department of Agriculture, Forestry and Fisheries, answered that one of the officials had resigned from the Department, but that the Department did follow up on the case, and the matter had subsequently been handed over to the State Attorney, so that the funds could be recovered. It was also discovered that this official had been working with his father, who was in the supply chain management unit. The Department had also issued the father with a final written warning, and if he committed a similar offence again he would be dismissed. The second official concerned manipulated the tender process. The case had been followed through and the official had received a final written warning. The Department was also currently in the process of recovering the money the official earned through these activities.

Mr Gelderblom asked whether those were the only cases the Department had picked up on and investigated.

Ms Nduli replied that those were the only cases the Department was aware of.

Mr Gelderblom asked whether the Department was still doing business with the company.

Ms Nduli answered that the Department was not still doing business with the company concerned.

Department of Trade and Industry (dti)
Mr Singh asked the Department of Trade and Industry what had happened to the official who failed to declare interests when doing business with the Department. He also asked which directorate this tender had come from, and what were the services rendered.

Mr Tshediso Matona, Director-General, Department of Trade and Industry, answered that the service was in the Department's marketing division, to help with the production of a publication. When the Department had found out about this matter, if had referred the matter to National Treasury (NT).

Mr Singh asked whether the company had any other contracts before 2007, and whether NT could tell the Committee what it meant when companies were blacklisted, and whether these companies would be listed on a database that informed other departments that they could not do business.
 
Mr Nduli responded that this was the only case where the company was involved with the Department. The information was available for government access, but not was not public information.

Mr Singh asked whether that Director in the Department was not aware that he should have declared that his wife was the Director in the company, before tendering for the contract.

Mr Nduli replied that the official concerned had since left the Department, though it remained unclear as to whether this was related to the matter at hand or not.

The Chairperson asked Prof Levin why it was that officials could simply resign and there be no follow-up disciplinary action.

Prof Levin answered that there had been amendments to the Public Service Act, signed by the President in April 2008. The Basic Conditions of Employment Act required a person to work out a 30-days notice period, and it had now been stated that people were not to be granted shorter notice periods, so that employees who had cases pending against them were obliged to serve the full term. Disciplinary action should be concluded, if possible, within this 30-day period. In cases which involved criminal activity, such as fraud, the Departments were encouraged to follow not only the administrative route, but to also explore the avenue of laying criminal charges. In the case of employees suspected of misconduct, who moved to other departments, they could be disciplined by the other department. They must in fact be disciplined if the old Department required that this be done. If there were any transgression of the provisions of the Act it would be mandatory for Heads of Departments to take disciplinary action against those transgressing. Moreover, it would be mandatory for those departments to report to the Minister of Public Service and Administration regarding these transgressions.

The Chairperson concluded the hearing by saying that the Committee was not satisfied with monitoring of compliance. There seemed to be a lack of understanding and delivery by public officials in ensuring compliance to financial management procedures. Managers were not managing, and supervisors were not supervising. It was of concern that where matters had been identified by the Auditor-General, Departments had not taken disciplinary measures. Aside from the Department of Agriculture, there was no real sense of the departments taking responsibility.

The meeting was adjourned