Office of the Public Protector Annual Report 2008/9: interrogation

Meeting report

Chairperson’s opening remarks
The Chairperson stated that there had been movement in terms of the committee’s engagement with the South African Local Government Association (SALGA), the Department of Co-operative Governance and Traditional Affairs (COGTA) and the office of the Auditor-General (AG).

Office of the Public Protector Annual Report 2009/09
The Chairperson noted that the Office of the Public Protector (OPP) had been asked to attend this meeting to engage on issues arising from the 2008/09 Annual Report. He pointed out that the OPP was an important institution established by the Constitution, and it was vital that it should be and remain in a healthy situation.

Mr P Pretorius (DA) stated that his questions would focus on the first finding of the Auditor-General (AG), around property and equipment. The OPP had received a clean audit from the AGSA for the six years preceding the 2008/9 Annual Report. However, problems were reported in the 2008/09 financial year around valuation of assets, including property, equipment, computer equipment, furniture, office equipment and vehicles. On page 110 of the Annual Report, the AG reported that OPP’s management did not revalue its assets and the condition of assets was not reflected in the asset register. Thus the AG could not certify the asset values. Page 141 of the Annual Report had a breakdown of the figures, showing that a substantial sum was unable to be verified. Mr Pretorius asked why this had occurred.

Mr Themba Mthethwa, Chief Executive Officer, Office of the Public Protector, replied that from January 2009 there had only been an Acting Accounting Officer.

The Chairperson asked why this had taken a year to finalise.

Adv Mamiki Shai, Deputy Public Protector, OPP, replied that the OPP had an accounting officer who was charged under disciplinary procedures and was dismissed, and that the matter took a year to resolve. During this time, because the Accounting Officer was suspended on full pay, there were no funds available to appoint a replacement, although an Acting Chief Executive Officer was appointed.

Mr Pretorius stated that even if there was an Acting CEO, they surely had the same functions.

Adv Shai replied that the person appointed was appointed only as an accounting officer, and was a junior member of staff.

The Chairperson asked why the valuation of assets had not been done.

Mr Mthethwa said that in September 2008 the then-Chief Financial Officer (CFO) had died and that when Mr Mthethwa assumed office, he was informed that all the information pertaining to the valuation of assets had been on the CFO’s personal laptop, which was not recovered. Since then OPP had corrected what the AG had raised.

The Chairperson noted that the OPP had gone a long way to addressing the issues.

Mr M Steele (DA) said that the death of the CFO was indeed of concern, but equally of concern was the information that was contained in his own laptop, which was apparently the sole source of the information, He requested more information on the data protection policies of the OPP, saying that surely the CFO’s laptop could not be the sole reservoir of information .

Mr Mthethwa replied that the CFO had a desktop and laptop and that the desktop was regularly backed up onto the network, but that the laptop contained the information that the AG needed. The OPP had tried to do a valuation of the assets, but the AG could not accept the manner in which the assets had quickly been valued.

Mr Pretorius asked if this meant that the past CFO was solely responsible, and had no one else who assisted him, and if this meant that there was no proper succession plan.

Mr Mthethwa replied that the OPP had now had corrected this and had a proper succession plan.

Mr M Malale (ANC) asked if the same problem would recur should the present CFO die, or if OPP had addressed the manner in which data was stored.

Mr Mthethwa replied that now the OPP had instituted a system whereby a person connecting to the laptop would automatically cause a back up of data. Proper systems were now in place, with an off-site backup server.

Mr Steele asked if, at the time of the CFO’s death, the backup servers did not have the information and if this meant that there was not a backup system in place then.

Mr Mthethwa replied that the CFO was using a non-networked laptop, which did not get backed-up.

Mr Pretorius asked if he could now confirm that the OPP had a proper succession plan and backup systems in place.

Mr Mthethwa replied in the affirmative.

Mr Pretorius asked whether asset management fell under the Finance and Supply Chain Management Programme.

Mr Mthethwa replied that it did.

Mr Pretorius said that page 37 of the Annual Report, under paragraph 8.4.3, said that output would be unqualified, but that this referred to “2007/8”. He asked if this was an error.

Mr Mthethwa replied that it was an error.

The Chairperson asked why such a substantial error had been made.

Mr Mthethwa replied that he could not remember.

Mr Malale pointed out that Mr Mthethwa signed the report, and asked why he did not see it and correct it. He asked Mr Mthethwa whether he generally signed things without going through them properly.

Mr Mthethwa replied that he did go through it properly, but that this error slipped through.

Mr S Thobejane (ANC) stated that pages 24 and 25 showed the same mistake. This also gave the impression that the Annual Report was done in a hasty manner. 

The Chairperson stated that this was unacceptable. These reports could not be hurried or rushed through, and needed to be taken seriously.

Mr Pretorius asked whether Mr Mthethwa could confirm that things had changed dramatically. He added that the AG had acknowledged that the root cause of the problems was the CFO’s death, and that Mr Mthethwa had confirmed this.

Mr Mthetwa reiterated that this was the case. The OPP had now followed the AG’s recommendations and now had proper plans in place.

Adv Shai added that this financial year the Deputy Public Protector (DPP) was asked to become involved in the financial statements and quarterly reports. She had undertaken a project to look into the records before the Audit Committee, in order to detect and rectify problems.

The Chairperson replied that he was pleased to hear that leaders were actively taking responsibility and not just sitting back in their offices.

Ms M Matladi (UCDP) stated that with regard to operating leases, page 111of the Annual Report said that there was uncertainty around the payment of leases for the OPP, and that there was a contract between the Department of Public Works (DPW) and the lessee. She asked how it happened that the OPP did not have copies of the lease contracts.

Mr Mthethwa replied that the DPW had been contracting for premises on behalf of the OPP and that OPP paid the lease. They had gone through an audit to determine who was responsible for certain payments, and the DPW had said that only five of the OPP’s offices need to be paid for. OPP had met with the AG and corrected this. OPP now had a lease file, containing its own and the DPW’s commitments.

Ms Matladi replied that that the Committee was not dealing with the future but performing a enquiry into why this was not done at the time.

Mr Mthethwa replied that all along the DPW had acted in a similar way to a landlord. Until the AG raised this issue, the OPP had not realised it was a problem. The OPP’s budget for premises went straight from the Department of Justice and Constitutional Development (DOJ & CD) to the DPW.

The Chairperson stated that it seemed that the OPP had simply regarded its situation as one of free lodging from the DPW.

Mr Mthethwa replied that OPP had taken measures to correct the problem.

The Chairperson replied the Committee was concerned that departments only seemed to act after the AG had raised the issues.

Ms Matladi stated that the Annual Report, on page 159, Point 2.7.3, reported that in respect of office rentals, the DPW was paying leases of all the offices, and there was no clarity on whether the OPP had reimbursed the DPW, as there was apparently reluctance on the part of OPP to pay. She asked why their liability was not clarified with the DPW.

Mr Mthethwa replied that it was correct that OPP did not want to pay, but that it was an extraordinary case where the budget for OPP’s offices went straight from the DOJ & CD to DPW.

The Chairperson asked if he was suggesting that the DOJ & CD was not paying its dues to the DPW.

Mr Mthethwa replied that this was so. However, if it was found that OPP had to pay the R5 million, then it would do so.

Ms Matladi asked who was responsible for the finalisation of the photocopier contract.

Mr Mthethwa replied that this referred to the Minolta machine where there was a contract between National Treasury and Minolta, although OPP was using the machine.

Mr Jevio Mculu, Financial Officer, OPP, added that the contract had been entered into between National Treasury and Minolta. OPP was given the use of the machine and told that payment by OPP would only start after the contract was finalised.

Mr Pretorius said there was reference to 18 buildings, but the Annual Report referred to 17. He asked if OPP had acquired another building.

Mr Mthethwa replied that OPP had a new office in Kwa-kwa.

Ms Matladi referred to page 111, item 14, note 1.21, and asked what had been the error discovered in 2008/9.

Mr Mculu replied that note 1.21 on page 135 explained the errors.

The Chairperson asked Mr Mculu to tell the Committee what the errors were.

Mr Mculu replied that the first table indicated errors in terms of accounts payable in regard to medical aid. The second table referred to trade and other payables, which related to fixed assets.

The Chairperson asked if there was anything else wrong, besides what was contained in the document.

Mr Mculu replied that the errors were discovered when OPP interacted with the AG.

Mr Steele stated that medical aid payments were susceptible to fraud, and asked if OPP were certain that these were errors.

Mr Mthethwa replied that in this instance OPP had paid the members’ contribution to the medical aid and that the calculations for this amount were incorrect.

Mr R Ainslie (ANC) asked why this error was not picked up by the internal audit committee.

Mr Mthethwa replied that some errors were picked up and disclosed, in line with their obligations.

The Chairperson asked whether these errors referred to were picked up internally or by the AG.

Mr Mthethwa replied that they were picked up internally.

Ms Matladi asked how these errors affected the 2008/9 financial statements.

Mr Mculu replied that the errors were picked up after the financial statements were prepared.

Ms Matladi asked whether OPP could say that the 2008/9 audit should have been unqualified.

Mr Mthethwa replied that the error was picked up in the following year, and did not have a effect on the subsequent financial statements.

Mr Lourens Van Vuuren, Acting Business Executive, AGSA, stated that if these errors had not been picked up then they would have led to a qualified audit.

Ms Matladi referred to contingent liabilities on page 159, at points 27.1 and 27.2. These referred to contingent liabilities relating to the European Union (EU) and she asked what the costs of litigation would be.

Mr Mthethwa replied that the contingent liability with the EU related to the CSAP, which was a collaboration of three Chapter 9 institutions. There was a fall out with a service provider, which led to CSAP being sued. A settlement was reached. The amount initially being claimed was R1 million, but the matter was settled for payment of R600 000, which was split between the three Chapter 9 Institutions.

Ms Matladi commented that there seemed to be challenges, as most of the time funding from the EU was not accounted for to the AG.

The Chairperson asked what happened with the CSAP, EU funded project.

Mr Mthethwa replied that OPP served notice against the person representing it in CSAP.

The Chairperson asked what actually happened to the project.

Mr Mthethwa replied that the service provider was appointed for an outreach facility in the Eastern Cape. The contract, however, was signed after the EU funding deadline of 21 December 2007, and when the EU was unable to fund, CSAP ended up being sued.

The Chairperson asked who was responsible for the signing of the contract on time.

Mr Mthethwa replied that it was the Chief Executive Officer of CSAP. OPP had felt that its representative did not take sufficient action against the CSAP’s CEO.

The Chairperson replied that the loss of funding due to negligence was not acceptable. If there were projects administered by outside bodies then they needed to be taken seriously. Actions such as this reflected very badly on the entities, and resulted in the loss of funding to areas where it was needed.

Mr A Muthambi (ANC) asked when the former Acting CEO resigned.

Mr Mthethwa replied that it was in January or February 2010.

Ms Muthambi asked when OPP had become aware of the irregularities.

Mr Mthethwa replied that this became apparent in March or April.

Ms Matladi said that she was worried that the Accounting Officer was not aware of exactly when things occurred.

Mr Mthethwa replied that he was aware of these things, but that he could not remember offhand the exact dates of everything.

Ms Muthambi asked how OPP could have allowed the former Acting CEO to resign, when there was such a serious matter pending. She added that OPP did have a month’s notice period prescribed for resignations, and that it could have acted in this period.

The Chairperson added that the Acting CEO resigned in January. The settlement in regard to the EU was made in October 2009. Thus, OPP had ample time to act, as it was well aware of the liability that had been incurred.

Mr Mthethwa replied that he could not take action unless the Public Protector initiated it.

Adv Shai said that when the previous Public Protector had held office, all staff, including the Deputy Public Protector, reported directly to him.

The Chairperson asked how that had happened, as the Accounting Officer, the CEO, had to have the power to initiate proceedings.

Adv Shai replied that in 2006, during her appointment, this matter was raised as an issue between herself and the Public Protector. The Public Protector was in charge of staff and finances. The acting CEO left in January 2010, and had communicated her intention to leave directly to the Public Protector, without anyone else becoming aware of the matter. When the new Public Protector took office, this was one of the issues that was looked at.

Mr Mthethwa added that he did not see the settlement agreement until the former Public Protector had left.

Ms Muthambi said that this was not helping the Committee in any way. The Public Finance Management Act (PFMA) clearly laid out the roles of the CEO. The Committee was therefore unable to accept that these were valid explanations. She also noted that it was stated on page 150 of the Annual Report that the Acting CEO was paid an Acting allowance, and was given a R28 000 performance bonus. She asked who had authorised this. It was untoward that this person should receive a performance bonus when no performance had occurred.

Mr Mthethwa replied that it was authorised by the previous Public Protector. Mr Mthethwa  had raised the PFMA issue, and looked at the Public Protector Act (PPA), and had noted that there was a conflict between the two pieces of legislation, which he suggested that Members should look at.

Ms T Chiloane (ANC) said that it did appear that the previous Public Protector had done everything autonomously. Due to this Mr Mthethwa could not do anything, and was in fact suspended by him.

Mr Malale stated that in regard to financial matters the provisions of the PFMA took precedence over those of the Public Protector Act (PPA). There was in fact no need to refer to it in regard to the financial aspects.

Mr Pretorius asked how Mr Mthethwa was able to be reinstated, after being suspended, within four days of the new Public Protector taking office.

Mr Mthethwa replied that that, exercising his functions in terms of the PFMA, he had refused to make payment in respect of some items. The Public Protector had demanded that he should receive payment for outstanding leave days. Mr Mthethwa thought that this was incorrect under the PFMA, refused to do so, and was thus suspended.

Mr Steele asked whether the OPP’s current management had any grounds for believing that it was necessary to undertake a forensic inquiry into finances during the term of the previous Public Protector.

Mr Mthethwa replied that the only real worry was the CSAP/EU issue. However, PriceWaterhouse Cooper (PWC) was looking into this, on behalf of the EU. The AG had examined the other areas.

The Chairperson said that the Committee should have some interaction with the EU on this and look at the PWC report to the EU.

Mr Malale said that the Committee now needed to focus on the Annual Report.

The Chairperson stated that on Page 159, under item 27.4, made reference to the Mail & Guardian and he asked what this was about.

Mr Malale interjected that the Committee was supposed to be dealing with financial matters and that if it was going to revert to other substantial issues, then more time would be needed.

The Chairperson replied that there was a legal cost implication; appealing this case could incur additional legal costs, which was indeed a financial issue. He acknowledged the concerns of Mr Malale but assured him that his questions related not to the substance of the matter, but to the costs. 

Mr Malale thanked the Chairperson for the clarity, but asked if this meant that the Committee could also discuss institutional issues of the OPP.

The Chairperson replied that he and Mr Malale were in agreement; the Committee would not, at this stage, be going into institutional issues.

Mr Malale asked how many meetings the Audit Committee had in 2008/9.

Mr Vusi Mokwena, Chairperson of the Audit Committee, OPP, replied that OPP had four planned meetings and had held an additional one to discuss the financial statements.

Mr Malale said that the Report seemed to indicate that there were only three meetings attended and that the rest did not achieve the required quorum.

The Chairperson asked OPP to check this, noting that the person who attended three meetings was Mr J Mokwena, and the person who had attended five meetings was a Ms Vuso.

Mr Mokwena replied that he was the Mr J Mokwena referred to in the report.

Mr Malale stated that in future annual reports, OPP should include a list of meetings attended and those not attended.

Mr Malale asked how the AG was able to verify the status of cases. 

Mr Mthethwa replied that in the North-West province, OPP’s regional office would receive a complaint, and later in the day the head office would receive a schedule of cases from the regional offices for that particular day. This would be forwarded to the Public Protector and the Deputy Public Protector personally. They would pinpoint cases that would be assigned as special executive acts. The remaining cases would be allocated to investigators in the regions.

Mr Malale said that the AG’s report related to the structure of this, saying that there was not a specific structured file on the exact status of cases. He added that page 17 showed that the AG suggested that OPP did not have solid policies.

Mr Mthethwa admitted that on the issue of procedures there were some gaps.  OPP had created a procedural manual, but was not able to get everything into line.

Mr Malale referred to page 18, and stated that OPP needed a template, and that it also needed to work on specifying outputs. He then referred to page 19, under point 8.2.3.5, and stated that OPP could not complete a policy flowchart. He asked why OPP could not do this, as it took very little time.

Mr Mthethwa replied that it was not just a flowchart, but that there was also a need to know exactly where it began. An Area Resolution Unit was initiated and there was debate around this, which caused a hold-up. However OPP had now established this Unit.

Mr Malale, making reference to point 8.2.35.5, asked whether it really took a year to conceptualise and develop a skills diversity policy.

Mr Mthethwa replied that this depended on the OPP doing a skills audit, which had taken a while, since the OPP was spread over large areas.

Mr Malale replied that OPP surely did not need a year to do a skills audit for 250 people.  

Mr Malale referred to point 8.2.3.8, on Change Management Strategy and Policy, and asked for information on this.

Mr Mthethwa replied that this was marked as “not achieved” because the Public Protector did not sign off on it.

Mr Malale referred to page 21, on Think Tank Reports, and asked what exactly these were, and why there were so few reports coming through.

Mr Mthethwa replied that the Think Tank was a peer review system, and that all investigators would submit to the Think Tank which quarterly. Once approved, the Public Protector would sign off on these and release them. The process was ongoing.

Mr Malale said that on page 23, under point 8.2.5.1, it was stated that OPP had approved a security management strategy but could not approve the procedure manual. 

Mr Mthethwa replied that security was more a priority at the time than getting a manual together.

Mr Malale said that once again this was a functional matter, which should not take so long to do.

Mr Malale asked if all Public Protector staff were National Intelligence Agency (NIA) vetted.

Mr Mthethwa replied that they were.

Mr Malale referred to page 31 of the Annual Report, and stated that using a percentage measurement for completion of the manual was not necessary. OPP had either completed, or not completed, and this was the point that needed to be made.

Mr Malale asked for more information on the R2 million spent on performance bonuses.

Mr Mthethwa replied that OPP had a performance policy, based on the number of cases finalised. However, in terms of its new strategy, OPP was re-looking at the bonuses, considering whether remedial action taken, rather than finalisation, should not be the deciding factor.

Mr Malale noted that OPP spent R200 000 on consultants. The reason that OPP’s staff were paid so much was that they were supposed to be experts themselves, in which case they should not need to hire in consultants to do their jobs for them.

Mr Mthethwa noted this comment.

Mr A Ainslie (ANC) referred to the comment on page 116 of the Annual Report, that the AG was not happy with performance information reported on in the Annual Report, because of a lack of proper source material. He asked why OPP was not able to convince the AG of the accuracy of its claims.

Mr Mthethwa replied that the AG was not happy with the correctness of some information. However, OPP now had a Case Management System that provided information at the click of a mouse.

The Chairperson asked whether OPP had checked with the AG whether the system was satisfactory.

Mr Mthethwa replied that OPP had come up with a flow process and procedural manual, and was busy finalising the implementation of the system, after which it would confer again with the AG.

Mr Ainslie referred to page 14, point 8.1.3.7, and asked if OPP also monitored the implementation of recommendations to organs of State.

Mr Mthethwa replied that OPP did, but this information had not been included in the document.

Mr Ainslie replied that this was a good monitoring tool and OPP needed to advise of it.

Mr Ainslie noted that page 20 noted that there had been 100% implementation of the Quality Internal Audit Report. He asked whether receiving a qualified audit meant that the internal audit committee was not picking up on issues.

Mr Mthethwa agreed with Mr Ainslie.

Mr Mokwena added that Mr Ainslie was correct in his observation. OPP was being fed information by the internal auditors, and the chances of picking up these issues were low.

Mr Mthethwa stated that OPP had identified internal shortcomings.

The Chairperson referred to page 116, paragraph 25, and page 14, point 8.1.3.6, which referred to the AG’s report and contained the comment “achieved”. He asked if OPP did not see a contradiction.

Mr Mthethwa replied that this related to finalised matters and that OPP did not see a contradiction.

The Chairperson asked if he was then contesting what was said in paragraph 25.

Mr Mthethwa replied that paragraph 25 contained the AG’s comments, while point was the OPP’s response.

The Chairperson said that the question was substantive as on page 14 OPP were saying that the objective set was achieved and on page 116 the AGSA was saying that supporting information for this did not adequately support the accuracy and completeness of facts and that he could not guarantee the information.

Adv Shai replied that it was true that the AG had reported a qualification, and that the OPP had been using a manual system to co-ordinate the information. The AG was also correct about the source document issue. In order to rectify the problem, the OPP had designed an electronic case management system. Challenges had been apparent with the recordal of information manually.

Mr Steele said that the statistical overview on page 4 of the Annual Report indicated that OPP was slowly getting on top of the backlog situation, but that in Gauteng, Kwazulu-Natal, Limpopo and Mpumalanga the number of cases carried forward exceeded those carried forward for the previous year. This suggested management and capacity problems in these provinces.

Mr Mthethwa replied that OPP was aware of this and had taken extraordinary measures to deal with this by sending people from Head Office to those offices to deal with the backlog.

Mr Steele approved of this.

Mr Steele referred to page 63. He asked whether there was a written policy that guided the priority of own-initiated investigations.

Mr Mthethwa replied that OPP had a practice whereby, if an investigator picked up on something, he or she would do an investigation plan, with a project plan and a budget and send it through for approval to the Deputy Public Prosecutor, in line with the process.

Mr Pretorius noted that vehicle expenses for leased vehicles had increased from R873 000 to R2.34 million. He asked why this was necessary, as senior staff received travelling allowances.

Mr Mthethwa replied that the escalated amount referred to the Public Protector’s vehicle.

Mr Pretorius asked if he was saying that the Public Protector’s car cost R2.34 million.

Mr Mculu replied that this amount related to cars which were being used by staff members. Head Office had two, and the regional offices had some cars as well. Staff investigators also hired cars. The figure was all inclusive of all these amounts.

Mr Mthethwa added that last year there was an increase in outreach.

Mr Pretorius asked what mechanism was in place to follow up on recommendations made after investigations.

Mr Mthethwa replied that in most cases there was compliance, and that OPP was looking for a mechanism to ensure this. In cases of individual plaintiffs, OPP joined their cases as an amicus curiae.

The Chairperson stated that most of the issues had been addressed.

The meeting was adjourned.