The Committee met with the Departments of Labour, Home Affairs, Correctional Services and Public Works to discuss these departments’ Quarterly Reports. The Departments of Labour, Correctional Services and Public Works mentioned that a large contributing factor to their under-expenditure arose through the Department of Public Works’ failure to invoice on time. Members called for a meeting between the Directors General of the Department of Public Works and other relevant Departments in order to deal with this issue.
The Chairperson noted that the Department of Labour’s expenditure was, in relation to its expenditure benchmarks, generally satisfactory. Its capital expenditure was of concern to him. Once again, the representatives attributed this to challenges with the Department of Public Works. The Department’s Director-General said he had written a letter to the Minister out of frustration with this issue. Members asked to be furnished with a copy of this letter. Members also enquired about low expenditure in this Department’s Social Insurance programme, whether social insurance was necessary, or could be reduced, what was being done to retain labour inspectors and whether provision had been made for the changes in the following financial year. Members asked if South Africa possessed the skills, and the Department noted that they were available, but there was a mismatch between skills and salaries offered. Members also asked about the work being done by the Sector Education and Training Authorities, and whether the Department was satisfied with it.
The Department of Home Affairs’ presentation made note of the transformative process it was undergoing. This process was seen as a major contributing factor to the Department’s under-expenditure in relation to Employee Compensation. A member asked whether the Department felt adequately prepared for the 2010 World Cup.
The Department replied that it felt confident around its readiness and that it had already put programmes in place which would help it deliver effective service in this regard. Members asked if the Government Printing Works, having received 100% of the transfers, would require more funding, whether the Department had budgeted for any over-expenditure, the reasons for under-expenditure on employee compensation and high expenditure on transfers, and the age of the orders.
The Department of Correctional Services mentioned that the absence of a Service Level Agreement with the Department of Public Works was one of its major challenges affecting expenditure. Despite this, and as a result of its own internal management systems upgrade, it had made significant progress. Although a Memorandum of Understanding had been undertaken between the two Departments, a Service Level Agreement was vital to improving its capital expenditure figures. Members asked how communication with Department of Public Works could be improved, questioned the differences between programmes, and the reasons why the Service Level Agreement was not yet signed.
The Department of Public Works said in its presentation that of the billing it had done, the payments made were very low. It could provide proof of invoices it had sent out to the various Departments. It had put programmes in place to expedite the invoicing process as well as ensure a more effective billing system. The Chairperson noted that, in terms of the Public Finance and Management Act, it was the responsibility of the Accounting Officer of a department to pay promptly. Service Level Agreements should be signed upfront. He asked for this Department to provide the Committee with a list of departments that had delayed paying, as well as a written report on its communication with other departments.
Quarterly Report presentations:
Department of Labour (DOL)
The Chairperson asked for clarity around what the Social Insurance Programme of the Department of Labour (DOL) entailed, and why the spending on this was only at 4.6%. He also asked whether the low spending in relation to Capital Expenditure (Capex) was related to this Department’s challenges with the Department of Public Works.
Mr Jimmy Manyi, Director-General, Department of Labour, answered that Social Insurance was the allocation that the Department was given for injuries on duty of officials of all national departments, except for those working for the South African Police Services, South African National Defence Force and Department of Correctional Services. Payouts in regard to this insurance were made on a claims basis only. The expenditure as of 30 June 2009 stood at R410 000.
Mr Bheki Maduna, Chief Financial Officer, Department of Labour, added that low Capex spending was a challenge for the Department. The Director-General had written a letter to the Minister raising his concerns around this expenditure. Although construction on some of its labour centres had gone ahead, there had been no registering of a claim for money that was budgeted.
Mr Manyi continued that the Department had grown increasingly frustrated with the Department of Public Works’ (DPW) lack of delivery.
Mr M Swart (DA) asked whether, considering a possible revenue shortfall of R60 billion, the R8.9 million for Social Insurance was necessary, and whether it would not be possible to reduce this allocated amount.
Mr Sam Morotoba, Deputy Director-General, Department of Labour, answered that the Department could discuss this issue with the National Treasury.
The Chairperson asked how the Social Insurance programme had been performing, and it there was a continued need for this programme.
Mr Manyi answered that it was difficult for the Department to predict its spend on this programme, as it was claims-based. The amount could, however, be reduced and the Department could - if and when the need arose - approach the National Treasury for additional funds.
Mr Morotoba added that the trends in terms of Social Insurance had indeed been low. As public servants did not pay insurance, in terms of the Compensation for Occupational Injuries and Diseases Act (COIDA), Government did not pay the necessary dues to the Compensation Fund. Instead, it made a special allocation for public servants.
The Chairperson asked whether the Department expected over-expenditure in the ESDS programme. He also asked what the Department was doing to retain labour inspectors.
Mr Morotoba answered that the 39% expenditure in this programme had been as a result of the two transfers, which were carried by the programme. These were R75 million in the first quarter to Umsobomvu Youth Fund and R9.5 million to Productivity SA. Funds were transferred at the beginning of each quarter, as agreed upon in the Service Level Agreement. The Department was still responsible for transfer of funds to the National Youth Development Agency, which resulted from the merger of the Umsobomvu Youth Fund and the National Youth Commission. The Department had done projections for the entire year and did not foresee any over-expenditure.
Mr Manyi added that the Department was working on professionalising labour inspectors. The key issue here was that labour inspectors were often not in possession of the necessary technical capabilities around the matters that they were assigned to inspect. The challenge with this tied in to the fact that the salaries offered for inspectors were too low in relation to the qualifications needed. This had slowed the recruitment process down considerably. The Department now had to look at re-grading inspectors’ salary levels.
The Chairperson asked how long this process would take.
Mr Manyi replied that the budget that the Department had put forward from March 2010 had factored in this issue.
Ms B Ngcobo (ANC) asked whether South Africa possessed the necessary skills.
Mr Manyi replied that these skills were available in South Africa, but that the issue lay with paying for these skills.
Mr Swart asked how much cash the Sector Education and Training Authorities had available to them.
Mr Morotoba answered that he could not say with certainty what these amounts were. Detailed, audited financial statements which outlined the exact amounts could however be made available to the Committee. 50% of this money was guaranteed as grant funding which was allocated for the employers. A further 20% was for the funding of discretionary projects within the SETAs, while 10% went towards administration.
Ms Ngcobo asked whether any of the other Departments had approached DOL to assist in skills development.
Mr Morotoba answered that DOL’s dealings with other departments varied according the specific departments’ needs.
Ms Ngcobo asked whether the same amount had always been allocated for Social Insurance, and whether expenditure at this programme had always been at this low level.
Mr David Kyle, Director of Finance, Department of Labour, answered that, in the past, the budget allocation had been as high as R20 million per annum. As all of this allocation could not be used, it was brought down to R10 million. This year it had been brought down even further to R8.9 million. Expenditure trends in this programme were, however, difficult to predict and calculations had to factor in issues such as inflation rates and rates which affected medical aid contributions.
Mr J Gelderblom (ANC) asked what the economic results were of the work done by the SETAs, who was monitoring this and whether the Department had been satisfied with these results.
Mr Morotoba replied that the money allocated to SETAs was used by the Department to monitor how the Levy Fund, collected through the National Skills Levy, was used by SETAs, and to look at the impact of the work they were doing. Research conducted by the Human Sciences Research Council showed that more than 70% of those who graduated through learnership programmes had found employment. Between 80% and 95% of learners who did apprenticeships found direct employment as artisans within the companies in which they underwent their training. There was therefore value found, and youth were assisted, as well as the unemployed. The re-training of people already employed had led to a minimisation of job losses within the current uncertain economic climate. The National Skills Fund and the Unemployment Insurance Fund had put aside R2.4 billion towards lessening the negative effects of the economic recession on companies in distress, and minimising job losses.
Department Of Home Affairs (DHA) Presentation
Mr Mavuso Msimang, Director-General, Department of Home Affairs, said that the strategic goals the Department had set for itself for the next five years reflected the transformative processes that were taking place within the Department. He outlined the goals as contained in the mission statement. He then said that the Department had four programmes: Administration, Services to Citizens, National Immigration and Transfers to Agencies.
Mr Mkhuseni Apleni, Chief Financial Officer, Department of Home Affairs, explained that these programmes were allocated the following budgets: Administration – R1.087 billion (19% of which had been spent); Services to Citizens – R1.336 billion (18.4% of which had been spent); Immigration Services – R1.327 billion (19.6% of which had been spent); and Transfers to Agencies – R1.299 billion (63% of which had been spent). Thirty percent of the R5.050 billion total budget had been spent thus far.
The Department’s spend on Employee Compensation was 22% and on Goods and Services was at 16.2%, both lower than the National Treasury norm of 25%. Its expenditure on Capital Assets stood at 21.4%. It had, however, spent 63% of its allocated Transfers and Subsidies budget. Under-expenditure with regards to Employee Compensation was as a result of the non-filling of vacant posts, which was in turn due to the migration of employees to the new structure. Low expenditure on Goods and Services was attributed to the non-payment of orders placed in the first quarter as well as claims for foreign missions not being processed. The high transfers to agencies was attributable mainly to: the first payment to the Film and Publications Board (46.1%); the total amount for the New Passport System, which was transferred to Government Printing Works in April 2009 (100%); and high transfers to the Independent Electoral Commission (50.5%) due to the 22 April 2009 election day.
Mr Swart enquired about the Department’s readiness in terms of the 2010 World Cup.
Mr Msimang answered that the Department felt confident about this. It had, to this end, employed in excess of 250 Immigration Officers (who were deployed at both Cape Town International and OR Tambo Airports) and it had also initiated other preparatory programmes.
Ms Ngcobo asked whether the Department would have attained the required 25% expenditure norm, were it not for the transfers. She also asked how it would deal with any possible further requests from the Government Printing Works (GPW).
Mr Apleni answered that the Department could not transfer more than was allocated so the entity concerned could not make further requests. These budgets were approved by the National Treasury. GPW had requested money for the New Passport System only, and not for its general operations.
The Chairperson asked whether the Department had budgeted for any over-expenditure. He enquired whether there would be an improvement on low spending at the end of the next quarter. He further enquired if its expenditure in its Services to Citizens programme was part of its projection.
Mr Apleni answered that DHA was moving ahead with payment of orders placed. It was also hoping to pay for foreign missions in advance. The Department’s expenditure with regards to Services to Citizens was lower than it had projected.
Mr D Mavundla (ANC) asked for more details as to why spending with regards to Employee Compensation and Goods and Services had been so low, and why the expenditure on Transfers was so high.
Mr Apleni answered that within the Department there were vacant funded posts which had not been filled. Subsequent to discussions with Unions, it was decided that, as there was the risk of employees not fitting into the new structure, these positions would be filled only once the migration process had been completed.
Mr Msimang added that the Department’s transformative migration process was a highly negotiated movement of staff from the old to the new structure. The migration process of its Senior Management Staff had been completed and it was currently in the process of finalising the migration of lower-level staff.
Mr Gelderblom asked how many of the orders placed in the first quarter were older than 30 days, and were not spent in the first quarter.
Mr Apleni answered that, although he did not have the exact figures, there were orders that were older than 30 days. The Department was looking into this issue. The Department could make this information available to the Committee.
Department Of Correctional Services Presentation
Ms Nandi Moreka, Acting Chief Financial Officer, Department of Correctional Services, said that the Department had been allocated a budget of R13.238 billion, of which R2892 billion (21.85%) had been spent. There were many factors which affected this low spend. The under-expenditure in the Programme for Administration was mainly attributable to the low spending of funds allocated for Master Information Systems Plan (MISP) projects. Over-spending in the Programme for Security was due to payments of overtime to correctional officials. The implementation of 7-Day Establishment (as of 1 July 2009) would, however, result in a reduction in overtime payments. Under-expenditure in the Programme for Corrections was largely due to low spending of funds allocated for the purchasing of machinery and equipment, due to ITC approval problems and the delay in the bidding process. Under-expenditure in the Programme for Care was mainly due to the relevant outstanding internal charges transactions to be cleared to this Programme, in line with the request for items and consumption. Under-spending in the Programme for Development was mainly due to the slow spending of funds allocated for the purchases of machinery and equipment, again due to ITC approval problems, and the delay in the bidding process. The over-expenditure on Compensation of Employees was mainly due to overtime payments made. Under-expenditure on Goods and Services was largely due to the low spending of funds allocated for MISP projects. Over-expenditure on Transfers and Subsidies was mainly due to the payments made for the leave and inmates gratuities under the item households. Under-expenditure on Capital Assets was due largely to low spending of funds allocated for capital works projects, due to the low billing from the Department of Public Works for capital works projects completed.
The Chairperson asked for reasons why the Department’s Capex had been so low.
Mr Teboho Motseki, Chief Deputy Commissioner: Corrections, Department of Correctional Services, answered that the Department of Correctional Services (DCS) had been allocated around R1 billion for a portion of its capital works projects, called Accommodation-Related Expenses. For this, the Department was billed quarterly. Any delay by the Department of Public Works in invoicing the Department, however, impacted negatively on the Department’s projected expenditure. The management of billing, and the management of the work that DPW should be doing, should be done in the context of a Service Level Agreement. In the absence of such an Agreement it was hard for either department to hold the other accountable. DCS had spent 100% of its facilities’ budget and was confident that this trend would continue.
Dr P Rabie (DA) asked whether the Department had any suggestions on how to improve communication between it and the Department of Public Works.
Ms Jenny Schreiner, Acting National Commissioner, Department of Correctional Services, answered that there had been engagements which had resulted in some progress. DCS had sought ways to improve the management of its own internal processes. There were, however, still problems around the bidding system. The key problem was the absence of a Service Level Agreement.
Mr Motseki added that there was a Memorandum of Understanding between the two departments, though it was soon coming to an end. Suggestions had been put forward for monthly meetings between the two departments in order to manage every project.
Ms R Mashigo (ANC) asked what plans the Department had put in place to reduce overtime payments made. She also asked for an explanation of the difference between the Programme for Care and Programme for Corrections. She enquired how the Department would use PPP and what effect this had upon its programmes.
Ms Moreka answered that the Minister had, on 1 July 2009, made a determination that the Department was to become a 7-Day Establishment. This would reduce the amount of overtime payments made.
Ms Schreiner added that the Programme for Care dealt with the provision of care services (mainly health, spiritual and social work services).The Programme for Corrections dealt with the administration of correctional centres, admissions and release of inmates to and from correctional facilities.
Ms Ngcobo asked why the Department’s projected spending was lower than the 25% norm.
Ms Moreka answered that the Department drew up a spending plan annually. Based on this spending plan, it then coordinated spending plans per programme.
The Chairperson asked why the Service Level Agreement had not been signed.
Mr Motseki answered that the Department had been waiting for a draft of the Service Level Agreement from the Department of Public Works.
Ms Cathy Motsisi , Chief Financial Officer, Department of Public Works, added that her Department was working on the draft Service Level Agreement. This should, however, not serve an obstacle for the Department of Correctional Services’ under-expenditure. The Department issued invoices three months in advance. If the system and capacity was not there to pay within client departments, this problem would persist.
Department Of Public Works Presentation
Ms Motsisi, Chief Financial Officer, Department of Public Works, said the Department had spent 22% of its quarterly budget. 26% of its Compensation to Employees budget had been spent and the issues which could have resulted in possible over-spending here had been resolved. In terms of its programmes, it had spent 31% of its Administration and 22% of its Provision of Land and Accommodation budgets. It had spent 13% of its Policy Unit and Expanded Public Works Programme (EPWP) budget and 70% of its Auxiliary Services budget. In terms of its Property Management Trading Entity (PMTE), the Department had billed R1.308 billion to client departments, of which it received only R601 million. Proof of invoices issued could be provided by the Department. The Department used the Works Control System (WCS) to generate invoices to clients for capital projects. Clients had to sign off on budgets for whatever they requested from the Department. Billing happened monthly with a difference of one month, except for leases which were billed quarterly. The generation of invoices was manual, as the systems used were not billing systems. This entity was established in order to help the Department recover the services it provided to clients. In terms of its action plan for an effective billing system and revenue collection, the Department had put some measures in place: One-on-one visits to client departments had been increased, and billing had been enhanced so as to include itemised invoices. DPW had engaged the National Treasury to enforce payments by Departments. Capacity had been created in order to expedite invoicing. A space audit would be conducted so as to ensure correct invoicing; It would implement a credible billing system once the PMTE had been fully established; It would also explore systems for monitoring of consumption.
Ms Ngcobo asked whether the Department could move away from the slow delivery of invoices.
Ms Motsisi replied that the Department had, to this end, set up a call centre for service providers who were owed by the Department to submit their invoices. It had committed itself to a seven-day turnaround with regards to these payments.
The meeting was adjourned.
- Department of Agriculture,Forestry& Fisheries Presentation
- Department of Communication Presentation
- Department of Correctional Services: Quarterly Report
- Department of Home Affairs Presentation: Quarterly Report
- Department: Water Affairs Presentation
- Department of Public Works: Quarterly Report
- Department of Labour Presentation: Quarterly Report
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