The National Treasury briefed the Committee on the differences between irregular and unauthorised expenditure. This was not always illegal but disciplinary steps could be taken against officials responsible including the recovery of money. More effective audit committees were needed. Treasury had monitoring tools in place but seemed unwilling to intervene except in cases of gross financial mismanagement. The recent uproar regarding state entities purchasing World Cup tickets with public funds was noted. An investigation was under way but it was felt that entities might be able to justify their expenditure. While many entities were still receiving qualified reports from the Auditor General, there was evidently some improvement in financial control.
The process of Government’s granting guarantees to entities was outlined. The National Treasury now controlled the Land Bank and Development Bank of South Africa. The major guarantee was in favour of Eskom as it had taken a huge loan to cover its build programme. Members felt that state-owned entities should be making money for Government rather than consuming revenue.
The South African Social Security Agency was charged with distributing social benefits. Members criticised the agency as a waste of money. The agency had a huge overdraft. Private contractors were engaged to distribute grants to those without personal bank accounts and it came to light that these contractors were being paid excessive amounts. It was agreed that in-depth discussion was needed to discuss many aspects of the agency.
Government's duties regarding the monitoring of conditional grant funding to provinces and municipalities were outlined. Members were concerned over poor financial control at provincial and municipal level. Members identified poor and inaccurate reports as a major contributing factor. It was agreed that more training was needed for officials.
Members said that asset management was the source of many emphases of matter in the Auditor-General’s reports and asked if too much was being expected from the audit committees. These committees should be able to suggest measures to prevent qualified reports. Members suggested that templates be made available. Members noted that internal audit reports did not give sufficient information. Important issues were not being raised. Management simply ignored what it did not like. Events in the Department of Police showed the need for independent audit committees. The National Treasury should have the tools to intervene at all levels of Government. The National Treasury should return with reports on audit committees and asset management. 2008/09 had seen much over-expenditure. This might have been because it was the final year of the third Parliament. Many contractors had not yet been paid. There should be engagement with National Treasury on a quarterly basis. The condonement process was too easy.
Condonement in Terms of the Public Finance Management Act (PFMA)
Mr Freeman Nomvalo, Accountant-General, National Treasury (NT), said that the question of irregular expenditure was defined in legislation. Loosely speaking it was expenditure that was not in compliance with the Public Funds Management Act (PFMA) or other pieces of legislation. Irregular expenditure was not necessarily expenditure which should not have happened. Often what was termed as irregular expenditure was normal expenditure where the normal process of authorisation had not been followed.
Mr Nomvalo said the question was how to deal with irregular expenditure. It might be that it was unjustified in some cases. The incorrectness would have to be proved. Sometimes it was a result of doing the correct things but after they should have been done. All matters were considered on a case by case basis. Full disclosure was required.
Mr Lwazi Giba, Director, NT, said that the accounting officer of an entity had to submit a written report to the relevant treasury. Monthly reports were also required. Where irregular expenditure had occurred the accounting officer was obliged to take disciplinary steps.
Mr Giba said that if appropriate, the entity could request that the relevant authority condone the expenditure. A detailed motivation would have to be submitted. If the authority could not condone the expense then it should be recovered from the responsible person. If the money could not be recovered, as was often the case with the big amounts typically involved, the accounting officer could write it off. The procedure for this was onerous. The deduction should remain against the applicable programme. The most important aspect was the disciplinary process. An example of such an offence would be a tender not being advertised.
Mr Giba said that where an NT regulation had been breached, only NT could condone the expenditure. The accounting officer would also have to explain what had happened where a non-competitive bid had been accepted for a tender.
Mr Nomvalo said that the writing off of irregular expenditure did not end the liability to recover funds. Repayments could be ordered over an extended period. It might happen that such an incident could lead to the Auditor General (AG) returning a qualified report on the entity. This would depend on the circumstances. If the AG was satisfied that adequate corrective action had been taken then this would not appear in the report. The ability of the NT to condone expenditure was found in Section 79 of the PFMA. NT had the power to facilitate the implementation of regulations. The Minister of Finance could exempt any institution from the provisions of the PFMA for a prescribed period. Such exemptions would have to be published in the Government Gazette.
Mr P Pretorius (DA) said that there was need of a training exercise for Members. Clarity was needed on the definition of irregular, wasteful and fruitless expenditure. This was needed especially regarding the purchase of World Cup tickets as the purchase could be seen as any of the three possibilities. He asked if his assessment was correct. There was a big difference.
Mr Nomvalo said that the Minister of Finance had issued instructions regarding the purchase of World Cup tickets by state entities through NT early in the year. The Municipal Financial Management Act (MFMA) was drafted differently to the PFMA even though there were similarities. The communiqué had been issued in May and it was unlikely that any purchases were made after that date. Wasteful expenditure could be defined as excessive spending and irregular spending where there was a deviation from the normal procedure. In the case of unauthorised spending, the purchase of tickets could loosely be described as entertainment. This was a permitted category of spending and the exact nature of the proposed spending should be specified in the budget. The ticket issue was more an issue of judgement rather than a legal one. There was a slightly different dispensation for municipalities as there was more specific legislation. The ticket issue was not a straightforward one.
Mr Pretorius felt that NT must be looking forward to the investigation into the ticket saga. He suspected that some entities had bought tickets and then sold them onwards for their own account. One of the problems noted by the AG and NT was the huge turnover in staff. New officials had no background knowledge and he suspected that there was a lack of proper training. He asked what NT was doing about this. He felt that officials were being left to sink by themselves.
Mr Nomvalo understood what Mr Pretorius was saying. In one department the head of department (HoD) and Member of the Executive Council (MEC) changed regularly. However, there were other departments where the staff were more stable and yet received consistent qualified reports. Many regulations were not being complied with. There was some hope. In the
Mr Nomvalo added that issues which led to qualifications were often simple things such as failure to retain evidence of expenses such as receipts and invoices. No special skills were needed for this level of administration. The Department of Home Affairs always received a qualified report but was improving over the years. There was often a chain reaction but the corner could be turned.
Mr Pretorius asked if the top three positions in Government departments should receive formal training on the legal requirements.
Mr Nomvalo felt that this was absolutely necessary. Only the Eastern Cape Government had invited NT to discuss financial matters with them. NT had produced an induction manual which could be found on its website.
Mr Pretorius said that entities should move to the compliance part of the contract.
Mr N Singh (IFP) said that the NT regulations were voluminous. There was a sunset clause which allowed deviations from regulations. He asked who could approve of such deviations. There was still a grey area between irregular and unauthorised expenditure. He asked who followed up on these matters.
Mr Nomvalo said that if NT was aware of irregular expenditure it had a duty to advise the relevant department. In fact the onus was on whoever detected the irregularity to report it. Recovery could only be enforced where a person could be held liable. Indisputable liability had to be shown and could face challenges in court. There were different grounds for condoning irregular expenses. Emergency cases had to be considered. Such irregular expenditure had to benefit Government before condonement could be considered.
Mr S Thobejane (ANC) asked if the purchase of World Cup tickets could be considered to be a form of fiscal dumping. He asked what weight the letter sent to Government entities by the Minister of Finance had carried. He asked if entities should have been requested to make disclosure of their purchases on receipt of the letter.
Mr Nomvalo said that this had not been part of the communiqué and had thus not been expected. It might have been a good idea.
The Chairperson said that the Minister's letter was not the law but merely an interpretation of the law.
Mr Nomvalo said that officials should know the law.
Mr Thobejane asked if the Committee could have access to the letter.
Mr Nomvalo said he would send a copy. However, the contents of the letter had been contained in a press release and had been published on the NT website.
Mr M Malale (ANC) asked how many cases had been opened since the amendment of the legislation had been tested in court. He asked how many civil cases had been launched to recover unauthorised expenditure. The Director-General of a department was not a judge. The legal fraternity was not being given an opportunity to test the law. At the moment it was only a piece of paper to be interpreted.
Mr Nomvalo did not know of any cases. There should be some in the near future but it was a case of too little too late. Some cases could have been dealt with such as fraud legislation. He had discussed this aspect with a prosecutor.
Mr M Steele (DA) asked if the letter from NT had gone to provincial accountants-general. He asked if they would forward it to municipalities. Matters raised should be included in the annual report.
Mr Steele said that the Committee had heard a detailed explanation on under expenditure. He asked what NT was doing about runaway over expenditure. Some authorities were guilty of this year after year. He asked what role NT and provincial treasuries had to play. They should be identifying doubts as to whether such authorities were going concerns. He asked what treasuries were doing to ensure that revenue was being collected. His municipality suffered from a serious problem of non-collection of rates.
The Chairperson asked Members to focus only on the conditional grants during this round of questions. Mr Steele's questions should be parked.
Mr Steele accepted this decision provided that his questions would be answered later during the meeting.
Mr Nomvalo said that a problem was that the financial year (FY) for municipalities only ended at the end of June. There was some comment received. NT would communicate on the issue. In terms of runaway expenditure the financial recovery unit was engaging in some cases. NT was monitoring cases of where municipalities were not being considered to be going concerns. This was particularly so in the case of the so-called repeat offenders. The
Guarantees, Loans and Transfers
Mr Higgo du Toit, Chief Director, Guarantee and Financial Monitoring, NT, said that Parliament had the final say on the budget of Government entities. In terms of the PFMA, the Minister for the respective entity was in charge of the relevant guarantees. The PFMA was explicit in this regard. The first choice was to take money from the National Revenue Fund if these guarantees were not included in the budget. He said that the Minister of Finance had responsibility for the Development Bank of South Africa (DBSA) and, since July 2008, the Land Bank. NT took the approach that the guarantee should allow the entity the time to implement a turnaround strategy. NT charged a guarantee fee which equated to the interest rate which a bank would charge. A detailed plan was needed as to how the entity would manage to return to sustainability. NT wanted to see the bigger picture.
Mr Du Toit said that unique high level conditions would be stipulated. NT would monitor the situation closely and introduce remedial action. NT would engage with that entity. There had been major increases. Eskom needed R175.9 billion for its build programme. A condition of the guarantee issued in the case of Eskom was that if the debts were called in then Government would take the debt over. This was the first case of Government making a loan to a state owned entity (SOE). The guarantee to Eskom was phased over a number of years. It was limited to R30 billion over a five year period. Transfer payments were made in the normal course of business.
Mr Nomvalo said that NT would provide assistance in two forms. These were the issue of guarantees and fiscal transfers appropriated by Parliament.
The Chairperson asked for an explanation of the bail-outs paid to SOEs.
Mr Singh asked if the list provided by Mr du Toit was comprehensive. He was not convinced of the figures regarding South African Airways (SAA). He asked if there was provision made for a possible call on the guarantees either in paper or cash, or whether the figures quoted were only provisions in the budget. He asked how often the guarantees were called up. In terms of the Pebble Bed Modulator Reactor (PBMR) project there was a guarantee of R1.75 billion. He asked when Parliament would be briefed fully on the return for investment.
Mr Du Toit replied that the Department of Public Enterprises (DPE) was the host for the SOEs. The bail-outs had been paid by Government to sustain these enterprises in terms of Schedule 2 and 3. It was rare for others to need such finance as they were seen as an extension of Government. All the guarantees were on paper. They were made in terms of debts which might be incurred. Only one guarantee had been called up. This was a guarantee to Denel of R260 million. They had an agreement to manufacture components for SAAB Aerospace. The expense involved was R1.6 billion. The guarantee was an indemnity payment to protect standards of manufacture. The PBMR was now part of history. There would be no new transfers to the project as it was being wound down. There was still a challenge regarding intellectual property rights regarding the PBMR project. Close to R8 billion had been spent on the project.
Mr Steele asked what conditions were attached to the guarantee for Eskom. He understood that if the guarantee was drawn down by Eskom there would be an annual payment of R30 billion for five years. The loan would be converted to a state debt over a 25 year period. He asked what the repayment conditions were.
Mr Du Toit said that there was a convolution between the two concepts. The loan was R60 billion. There was a specific approach through Parliament. It would be repaid in three instalments. Provision had been made for measures should Eskom default. The capital required for the build programme was R176 billion. R30 billion was required each year with an incremental increase over a number of years. The guarantee was in place should Eskom default. Government was becoming an investor in Eskom. They would be required to submit quarterly reports and audited financial statements twice a year. Eskom had to be maintained as a going concern.
Ms T Chiloane (ANC) said that the money was appropriated by the Department of Finance on behalf of Eskom. A breakdown of the conditions was needed.
Mr Du Toit explained that NT's approach was that it was only a R60 billion loan. Eskom faced a challenge of a shortfall in funding. They had expected a higher tariff increase than that which had been granted. There were individual tailored conditions for the different entities. The Land Bank had to maintain a capital ratio of 20%, which was higher that that imposed on the commercial banks. Government expected the Land Bank to take higher risks that a commercial bank would. Quarterly reports had to be submitted. Non-performing loans had to be specifically addressed. The book of non-performing loans had to be cleared out. A turnaround strategy had been required and this was now working. The Land Bank had recovered R214 million during 2009 and a recovery expected for 2010 was R190 million. The recovery was happening albeit slowly.
Mr M Mbili (ANC) said that it would be best if NT could provide written explanations as many institutions were involved. Members could then interrogate these explanations.
Mr Singh asked how the Land Bank was reconciling loans made to “ghost” emerging farmers. It fell directly under NT.
Mr Du Toit said that newspapers had reported on the Mafiqa Fund. This was an initiative of the Department of Agriculture which granted the loans. The Land Bank only acted as an agent.
The Chairperson remarked that the purpose of an SOE was to make profit for Government. However, the money was flowing the wrong way. He asked when Government had last been paid a dividend. There had to be a distinction between a Government department and a public enterprise. NT was a custodian of the PFMA.
Mr Nomvalo took heed of the request made by the Committee to provide information regarding World Cup related expenditure. They had requested departments to provide this information. There had been a discussion on the advisability of the expenditure and the matter needed consideration. There were categories of expenditure such as entertainment which were approved. It was a question of how much had been spent. A broader engagement was needed. Information needed for this audit concerned the FYs leading up to 2010. The prudent entities had bought their tickets well in advance. The question was who had benefited. At present it was only a guess.
Reporting Structures for SASSA
Mr Brenton van Vrede (Director, NT) said that the flow of funds to the South African Social Security Agency (SASSA) was subject to dual accountability. This matter had already been raised at the Standing Committee on Public Accounts (SCOPA). The functions of SASSA were to administer social assistance, to collect and maintain information for the payment of grants, to establish a fraud reporting mechanism and to render services in accordance with an agreement with a relevant authority.
Mr Van Vrede said that the Chief Executive Officer (CEO) of SASSA reported to the Minister. SASSA reported to the Minister of Social Development even though the Minister did not appoint the CEO.
Mr Van Vrede said that a challenge facing SASSA was its large overdraft. An inter-ministerial task team had been established. Stringent austerity measures had been introduced. There had been a review of grant payment contracts. The potential saving was R1 billion. He felt that SASSA might be overstaffed. There was a structure for 18 000 staff. He wondered if SASSA needed a Board. The oversight function of NT had been increased. The high overdraft could be due to a change of operational systems from cash based to accrual based.
Mr Van Vrede said that there was a system of dual accountability. They spoke of big money and small money. The big money was the allocation of R90 billion for social grants, while the small money was an allocation of R5.6 billion for administration. This was paid directly to the agency. Money for grants was transferred to households. It was paid into SASSA's bank account and was then distributed either into the accounts of beneficiaries or to cash payment contractors. This could not be seen as revenue.
Mr Van Vrede said that social grants were a large component of Government’s poverty relief programme. There was a need to deal with administrative issues. Possible solutions had been given. Service level agreements were in place by and large.
Ms M Mangena (ANC) asked how SASSA knew that the money was going to the correct people.
Mr Van Vrede replied that most of the payments went directly into the beneficiary's bank account.
Ms Mangena said that her question was concerned with the payment contractors.
Mr Van Vrede replied that this was a question which SASSA should answer.
Mr M Malale (ANC) asked how much was given to the payment contractors to distribute.
Mr Van Vrede replied that it was R2.5 billion annually.
Mr Malale said that payments to beneficiaries were a core function of the Department of Social Development. NT was saying that SASSA needed a board as the issue was too sophisticated for the Department to handle.
Mr Nomvalo said that accountability rested with SASSA. Only one person was answerable at present. There were huge responsibilities. This was why NT had felt the need for a Board to be appointed. The Department must still retain accountability.
Mr Thobejane said that there were technical problems in the distribution of money. Some did not go to the correct recipients. The service level agreement (
Mr Van Vrede said that NT did not have that level of detail. Most of the payments were automated. The payment contractors created virtual bank accounts for the recipients. The contractors were equipped with machines similar to automatic teller machines (ATMs). NT played no direct role in the distribution of benefits.
Ms M Matladi (UCDP) said that the Cash Payment Service (CPS) had once been used in the majority of provinces. This function had been taken over by SASSA. Government had thought that this would minimise the problem. The CPS was still being employed by SASSA to do the job which it had failed to do. This was a real concern. The same faces were resurfacing.
Mr Nomvalo said that NT had engaged with SASSA on the quest for efficiency. The decisions were made at SASSA and this was where the answers should be found. NT was looking at broad issues.
Mr Pretorius said that SASSA was technically bankrupt. They were in overdraft to the tune of R1.2 billion. He asked why this situation had been allowed to develop. The overdraft represented more than 20% of the agency's total income. He asked how long the turnaround process would last.
Mr Van Vrede said that SASSA had moved from a cash to an accrual basis. Members would be shocked to see what the total liability for Government was. The situation could have been detected earlier. NT felt that R1 billion too much was being paid to the payment contractors. If this was cut out then the overdraft could be paid off within a year. On the question of bankruptcy, SASSA was a Section 3A entity and was backed by Government. NT was in the process of appraising the situation.
Mr Steele said that the same money was going through several sets of hands. His opinion was that the whole establishment of SASSA was wasteful expenditure.
Mr Nomvalo said that SASSA had been established through an Act of Parliament. The mechanism was in place. NT was not above Parliament and must manage SASSA's finances in terms of its mandate.
Mr Singh saw red lights flashing. Perhaps the wrong questions were being asked. Members should rather ask why SASSA had been established. A broader debate was needed. Beneficiaries must get what was due to them.
The Chairperson was concerned that SASSA had a shortfall of R1.2 billion on a budget of R5.6 billion. He felt that they were moving slowly. R2.5 billion was being transferred to the payment contractors. However, this spending could be reduced by R1 billion. Government needed to close this gap. He was not detecting a sense of outrage from NT.
Mr Thobejane said that important questions were being asked but were being asked of the wrong people.
The Chairperson said that the Committee needed to meet with SASSA. They would be invited with the other Departments for a meeting on 5 August. They needed to speak with departments that were dragging their feet on disciplinary matters.
Mr Nomvalo said that specific issues were bound to contracts. There was a need to follow a process. Wherever inefficiency was exposed the entity would be dealt with.
The Chairperson said that there was a clause in the PFMA providing for criminal action against an accounting officer guilty of gross negligence. This could mean anything. He asked that if there was a R1 billion over-payment to contractors, then could that be regarded as gross negligence. The Committee would deal with the specific issues when they met with SASSA.
Monitoring of Conditional Grants
Ms Julinda Gantana,
Ms Gantana went on to present the duties of provincial departments and municipalities. They also needed to receive a detailed payment schedule. Detailed information was published on NT's website. She went on to list the duties of the provincial treasuries. Transfers were determined by reporting. Payment schedules could be amended if approved by NT in appropriate circumstances. NT was acting to address legal non-compliance and poor expenditure patterns. Funds could be withheld for thirty days or on a permanent basis. Funds could be transferred to another province for use on the same programmes. The AG could be advised of cases of financial misconduct. There was an extensive programme of consultation.
Mr Sello Mashaba (Director, NT) added that Section 28 of the Division of Revenue Act (DORA) allowed for the reversion of unspent conditional grants to NT. This provision had been invoked for the first time in 2009. Municipalities were treated as a third sphere. They had no uniform system and operated on an accrual basis.
Ms Gantana listed some cases where action had been taken. Important issues had been raised. The conditions attached to the conditional grant were set by the transferring department.
Mr Nomvalo said that SASSA was a dual responsibility. NT was engaging relevant parties on this matter. The Department remained accountable. His impression was that things were going wrong in SASSA. The entity needed proper controls. The format for the audit committee was prescribed. It should provide high level information in terms of reporting on the controls in the entity. Loose descriptions were due to unique circumstances. There were sensitive issues involved. In such cases the audit committee could report directly to the entity's executive, the relevant treasury or the AG.
Mr Nomvalo said that a framework for asset management had been developed during 2003 and had since been revised. Training had been provided. During 2005 each Department had been advised that it would need to develop plans. Moveable assets throughout the country had to be managed. Immovable assets fell under the Department of Public Works (DPW). The DPW had a legal responsibility. Various departments faced challenges. For example, the Department of Defence had to comply with North Atlantic Treaty Organisation (NATO) standards. This was a mismatch with NT's requirements. A procedure was under way to address this mismatch and a joint task team had been established.
Mr Steele said that the briefing on the audit committee had been inadequate. He needed to get a feel for its functions and a detailed presentation was needed.
Mr Mbili said that the Constitution made provision for three spheres of Government. He could not see where municipalities were referred to as implementing agencies. They were regarded as independent entities. He asked what was stopping the transferring agencies from making their transfers directly to municipalities rather than through provincial Government. This model was followed with the Municipal Infrastructure Grant (MIG). He asked if NT had the capacity to intervene with the provinces. He asked what the implication was in withholding funds, as these had been approved for a specific purpose.
Ms Gantana replied that no conditional grants went directly to municipalities. These funds went through the province for a specific service. Provinces would have to give an indication of expected transfers. Interventions were prescribed in Section 100 of the Constitution. There were certain expectations on the recipients of conditional grants. If the transferring department felt that conditions were not being met then funds could be withheld for up to thirty days. If funds were to be withheld for more than thirty days then NT would have to approve the action. The process was not automatic and would only be invoked in the case of serious problems. Some provinces did not have the ability to spend their grants. Interventions were being made to support municipalities.
Mr Mbili asked what checks and balances were in place. He asked how funds could be transferred if the recipients did not have the capacity to spend the money. Transfers were being made but only later was it being realised that there was a lack of capacity.
Mr Nomvalo suspected that entities could spend the allocated funds but there were still problems. The community expected Government to provide certain services. Government had to follow a balancing act. Once the money was transferred there was an expectation that other issues would be dealt with. It was not an easy decision to withhold funding.
Mr Singh said that conditional grants were being used to finance running expenses. The citizenry would suffer if funding was withheld. It was a paper exercise. He asked what other forms of intervention were available. Creative methods were needed. Many of the service delivery protests stemmed from services which had been promised on the basis of conditional grant funding.
Mr Singh asked what happened to the interest on funds transferred to entities which were deposited in bank accounts until the money was needed. He felt that the interest could be ring fenced to provide for certain defined projects.
Mr Singh asked what NT's monitoring capacity was. Details were needed where funds allocated to one province had been diverted to another. He was particularly interested in what had happened to funding for school nutrition funds. If these were to be withheld, he asked if the children would go hungry.
The Chairperson said that the transferring authorities would be appearing before the Committee on 3 August. The first part of Mr Singh's question would be answered then.
Mr Mashaba replied that the NT realised that they needed more human resources, especially to monitor municipalities. They had increased their capacity already. A new Chief Directorate had been established for the analysis of local government. Three directors had been appointed and six more posts had been approved of which three had already been filled.
Mr Nomvalo said that there was support by NT and provincial treasuries. The units described by Mr Mashaba were being mirrored in the provinces.
Ms M Matladi (UCDP) said that budgeted funds had to be surrendered to the Treasury unless they were already committed. Her experience was that departments and municipalities gave the impression that the funds were committed. They would then request roll-overs or indulge in fiscal dumping. Government was told that the funds were committed. She asked what was being done about this practice. It had been going on for years.
Mr Nomvalo said that funds were accepted as being committed where activity was already taking place in the project concerned and where orders for material had been placed. He hoped that false claims would be picked up. Proof of commitment was needed. NT did not want to take back interest payments. If the service was being provided then that department was doing well. He would consider the suggestion of ring-fenced funds from interest accrued. As the matter stood the entity was getting the benefits. Interest accrued to the account of the spending agency.
Ms Chiloane asked if NT retained allocations where provinces and municipalities had under spent in the past.
Ms Gantana replied that national departments were responsible for the transfer of funds to lower levels of Government. When funds were reallocated the reason was not necessarily that the authority could not spend the money. It depended on the type of grant and the circumstances. Provinces had to put forward a business case. She mentioned the example of funds allocated for transport projects in
Mr Steele asked which Department would be employing the extra directors appointed to analyse the performance in local government.
Mr Nomvalo replied that it was NT itself and not the Department of Co-operative Governance and Traditional Authorities (COGTA).
Ms Gantana said that provincial treasuries had specific duties. They were the custodians of provincial reserve funds. They had a role to play in curbing runaway spending. The equitable share grant was unconditional. NT would support the provinces and show them how to run their business more efficiently. There had been several interactions. Provincial departments had been shown how to undertake budget analysis. NT had shared their insights with their provincial counterparts. Technical committees had been established. If entities continued to over spend, their budgets would be assessed and recommendations would be made for implementation at provincial level.
The Chairperson raised the matter of asset management. This was the source of many of the emphases of matter cited by the AG. Poor asset and document management were often the reasons for the AG’s giving qualified reports to entities. He asked what the state of compliance was. He asked what capacity challenges entities faced. He asked if the wrong people were attending the workshops.
Mr R Ainslie (ANC) asked if too much was being expected from the audit committees. These committees should be able to suggest measures to prevent qualified reports. The annual report on the Department of Correctional Services (DCS) was totally different from the findings of the AG. He would like to see templates being made available. A tick box approach was being followed. He noted that the policy for audit committees was to report to management but they could go straight to the executive on sensitive matters. He felt that the facility to approach the executive directly should be a matter of course. Monthly and quarterly reports were sent to the audit committee which was satisfied with these reports. He could not understand this in the light of the far-reaching qualifications issued by the AG. The DCS was a serial offender in this regard. He asked if the formats for reports were correct and requested that they be circulated to the Committee for evaluation.
The Chairperson said that the Committee needed to engage on this matter. There was an obvious challenge in that internal reports did not give sufficient information. Important issues were not being raised. Management simply ignored what it did not like. He asked what role internal audit played.
Mr Thobejane said that events in the Department of Police showed the need for independent audit committees.
Ms Matladi said that the role of NT was to act as a monitor. It should have the tools to intervene at all levels of Government. She asked if these tools made any impact. She asked if people were learning from the workshops as errors kept recurring. She asked if it was a matter of going back to the drawing board.
Mr Steele agreed that NT should come back with reports on audit committees and asset management.
The Chairperson said that the FY 2008/09 had seen a lot of over expenditure. This might have been because it was the final year of the third Parliament. The causative factors should be identified. Many contractors had not yet been paid.
Mr Nomvalo said that further investigations were being conducted into some matters. Some were saying that funding models were not addressing the actual needs. Adjustments were possible. Controls were not good. This led to a higher likelihood of fraud. It might be that money was not going into service delivery. Poor planning was a problem. Departments should conduct their own investigations.
Mr Mbili noted that the Accountant-General had said that the framework had been in place in 2003/04. Workshops had been held on asset management. He did not understand why things were not being done correctly. He asked what was so difficult about asset management.
The Chairperson said that this issue would be dealt with in the detailed presentation. He asked why this was not happening.
Mr Mbili said that NT's interventions did not seem to be working. He asked where the problems lay. There was progress in some departments but there were still gaps.
The Chairperson suggested that there should be engagement with NT on a quarterly basis. He felt that the condonement process was too easy. Minimal information had been released on the audit committees. All the feedback had arisen from earlier hearings.
The meeting was adjourned.
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