Public Protector and Office of the Auditor-General on their investigative reports on the functioning of the Commission on Gender Equality: briefing

Meeting report

The Chairperson thanked the Auditor-General of South Africa (AGSA) and the Office of the Public Protector for honouring the Committee's invitation.  It was the Committee's duty to consider the forensic investigation of the AGSA, the Office of the Public Protector, and the National Treasury into the Commission of Gender Equality and produce a report. This report, when ready, would be tabled in the National Assembly.

Auditor-General South Africa report on investigation at Commission for Gender Equality (CGE)
Ms Caroline Mampuru, Business Executive, Auditor-General of South Africa (AGSA), said that the former Deputy Speaker of the National Assembly had requested a joint investigation between the AGSA and the Public Protector (PP) based on a complaint and allegations of improper conduct and impropriety at the Commission for Gender Equality (CGE). A meeting was held between the AGSA and the PP at which it was decided that the two institutions would conduct two separate investigations on distinct issues raised in the allegations. Also at that meeting the two institutions had decided who would be dealing with what.  Subsequently this decision was communicated to the Deputy Speaker. (Slide 2)

Ms Mampuru outlined the scope of the AGSA's side of the investigation. The CGE's deviations from laws and regulations were considered from the aspect of the Public Finance Management Act 1999 (PFMA), the Treasury Regulations, and CGE's own policies and procedures. Also the AGSA had examined irregularities in the CGE's call (savings) account, the irregularities in travel expense claims of commissioners and the former chairperson, the irregularities with financial lease contracts, fraudulent activities in the CGE payroll system, and unjustified refunds or back pay to CGE employees. The investigation covered the 2007/08 and 2008/09 financial years. (Slide 3) The vast majority of the issues that were raised were found to be substantiated. Ms Mampuru highlighted these as well as those allegations that were found to be unsubstantiated. Predominantly the AGSA found that CGE had failed to adhere to its own policies, and to the PFMA and Treasury Regulations. The AGSA found also that there was inadequate planning, and very weak monitoring and oversight by the CGE's leadership to ensure performance, compliance and ethical behaviour.  The AGSA also found indications of an environment at the CGE which presented a high risk and susceptibility to fraud. (Slide 4)

Ms Mampuru pointed out that, in relation to poor monitoring and oversight, whilst there had been a number of prior reports, such as the Kader Asmal Report on the Chapter 9 Institutions, and also the organisational diagnosis report of the CGE (highlighted in the AGSA's report, page 43), the issues identified in these earlier reports were still apparent in the time of the AGSA's investigation. There had been no effort to ensure that the recommendations of those earlier reports had been implemented.

Ms Mampuru explained that various irregularities in the bank and cash management system of the CGE had been noted due to non-adherence with the PFMA, the Treasury Regulations and the CGE's own internal policies and procedures. These findings included the following. The CGE had opened 11 bank accounts which included a call account (savings) account without the National Treasury's approval and without following the prescribed tender procedures. Bank overdrafts had been noted on all ten cheque accounts. Transfers amounting to approximately R250 000 could not be verified. No formal set of delegations had been implemented for the approval of payments; this resulted in cheques to the value of R7.6 million being processed on the bank statements without the approval of the accounting officer or any designated official. Payments above R2 000 totalling R58.6 million were made by cheque and not electronically as prescribed. Various discrepancies were noted between the original cheques processed on the bank statements, the cheque stubs, and the information stated in the cheque register.  (Slide 5)

The AGSA found with regard to corporate credit accounts that the CGE had not complied with the requirements set by the then Department of State Expenditure, now the National Treasury, and the CGE plenary session's resolution on the opening and managing of the CGE's corporate credit cards. As a result these credit cards had been used improperly. (Slide 6)

The AGSA found various irregularities in the expenditure management system of the CGE. Again, these were the result of non-adherence to the PFMA, the Treasury Regulations, and the CGE's own internal policies and procedures. The findings indicated an environment that functioned without a formal set of delegations and the organisational structure necessary to ensure compliance and prevent irregularities. These findings included the following. Payments amounting to approximately R58 million were identified that had not been approved or recommended by a delegated official. There was a lack of internal controls; payments were made to service providers without original invoices or supporting documentation and without a report that the goods or services had been satisfactorily delivered. Invoices or contractual obligations to service providers were not settled in the prescribed time; this resulted in service providers issuing letters of demand. (Slide 7)

The AGSA's findings on supply chain management (SCM) were predominantly due to the CGE's non-adherence to the PFMA, the Treasury Regulations, its own internal policies and procedures, and to the Practice Notes issued by the National Treasury. These findings were amplified by the failure to establish a supply chain management unit and formal bid committees to ensure that supply chain management system was fair, equitable, transparent, competitive and cost-effective. These findings included the following. There was no approved SCM policy and the draft policy was not in line with all aspects of SCM prescripts. No list of prospective suppliers was compiled and quotations were requested without consulting any list of approved or prospective suppliers – there was effectively a free-for-all. Without a list there was a likelihood of paying uncompetitive prices. The prescribed procurement processes were not always followed in the procurement of goods or services which resulted in irregular expenditure of approximately R19.1 million. A lack of communication and monitoring of contracts with service providers resulted in contract periods and amounts being exceeded which had a financial implication for the CGE of approximately R5.5 million. Various cases were identified in which the CGE had made payments to service providers on contracts which were invalid or without entering into contracts. (Slide 8)

The AGSA's findings on claims and allowances identified various instances where the commissioners, the deputy chairperson, and the former chairperson had contravened the PFMA, the Treasury Regulations, the CGE's internal policies and procedures on subsistence, travel and cellular telephone claims. These contraventions resulted in possible irregular payments amounting to approximately R2.9 million. The former chairperson incurred, because of a lack of policy on cellular telephones, expenditure on cellular telephones amounting to approximately R46 401 in March 2009 for which the CGE had not been reimbursed by July 2010.  (Slide 9)

The commissioners, the deputy chairperson, and the former chairperson had been found to contravene the    PFMA, the Treasury Regulations, and CGE's own internal policies and procedures on air travel, accommodation and car hire - one of the things that would happen was that people would travel without having filed the proper travel requisitions and obtained proper authorisations. These contraventions resulted in possible irregular payments to the extent of approximately R5 million. (Slide 10).  Such arrangements included travel for relatives and other persons known to the former chairperson. A balance of R34 000 had, at the time of the conclusion of the investigation, still not been repaid to the CGE. (For further details of the former chairperson's irregular travel arrangements, please refer to the second paragraph, slide 10).

Excessive overtime payments to the extent of approximately R622 881 over a period of 24 months and employees claiming overtime in excess of the hours prescribed in terms of the Basic Conditions of Employment Amendment Act resulted from a lack of a policy on overtime. (Slide 11)

The AGSA's management report was, of course, issued to the management of the CGE to afford role players with the opportunity to comment or provide further documentation, explanations, policy or defences in April 2010 and to the plenary of the CGE in May 2010. The former chairperson, although no longer part of the CGE, was also provided with an opportunity to respond on the specific findings that related to her, since the report hinged on so many findings against her as an individual. She was also interviewed. 

The CGE management, the CGE plenary, and the former chairperson responded finally in June 2010.

The CGE management indicted in its response that it noted all the management report's recommendations and that it intended to implement the relevant corrective measures to address the deficiencies identified. Implementation would be by way of including the management report's recommendations into the CGE's turnaround plan to be implemented during the 2010/11 financial year.

Public Protector of South Africa oral briefing: Report of an investigation into complaints relating to misconduct and maladministration in connection with the affairs of the CGE
Advocate Stoffel Fourie, Executive Manager: Good Governance and Integrity, Office of the Public Protector, said that the Public Protector's report that was in front of Members had been submitted to the Deputy Speaker at the end of September 2010.  He apologised for not being able to offer a slide presentation. 

The investigation had quite a long history, beginning in 2006 when the former Public Protector submitted a report to the National Assembly. Then in 2007 as Members would be aware the Kader Asmal report dealt with the Commission quite extensively.  From 2008 to 2010 the Public Protector had started receiving complaints again. 

A feature of the complaints that the Public Protector investigated was that the majority of them came from inside the Commission, either from staff members or from the commissioners themselves on issues of governance and integrity.  Members might have noticed media reports recently in which the former chairperson was criticising “this report” and asserting that she was not given a proper opportunity.  Members would have noticed from the responses in the Public Protector's statements that the Public Protector had given her an opportunity to respond on all the matters contained in the Public Protector's document. However, she never did respond, in detail.

However, the Public Protector's investigation was a little different from that of the AGSA colleagues who had dealt with financial issues, in that the Public Protector had focused on issues of good governance. The complaints that the Public Protector had received were more of a personalised nature – for example, somebody alleging that someone “was rude to me in the passage”. Shortly after the Public Protector had commenced its investigations, that person had resigned and the Public Protector felt that it was useless to investigate personalised issues and felt that it was more purposeful to concentrate on governance issues.

The colleagues from the AGSA had already indicated that it was in March 2009 that the AGSA and the Public Protector had decided to conduct two separate investigations but report more or less at the same time in terms of respective mandates.

Adv Fourie referred to the Public Protector's findings in a summarised format on page 3, for example, paragraph 3 (a) on that page stated that CGE's enabling Act's provisions were outdated compared to the provisions of the Constitution on the CGE. This Act still referred to the provisions of Government as they were in the days of South Africa's Interim Constitution. The Public Protector felt that it was high time that this legislation be updated. The Public Protector was also worried that by the end of October the Commission would not be constituted properly in terms of its own Act because two many members of the Commission had resigned and the minimum number of members was not complied with. This was of particular significance to the Public Protector since the Kader Asmal report had referred to the delay in the appointment of new commissioners. At one time there was only one commissioner and that was the chairperson. This effectively meant that the Commission could not function lawfully.

Further, the Public Protector had found that the CGE had not effectively implemented the findings of its previous report on issues found in 2006 or the findings of the “ad hoc parliamentary committee”.  The Public Protector had asked for responses to this in detail. In the last interview that Adv Fourie had held with the CEO and with one of the senior commissioners it was clear that those previous recommendations had not been properly implemented. 

Adv Fourie, referring to subsequent paragraphs, explained the Public Protector's other findings. Examples   included the cancellation of a contract with a firm of chartered accountants without any explanation or apology. 

Also the Public Protector had found that two commissioners had been appointed as joint chief executive officers (CEOs). This was unlawful, irregular, and constituted maladministration. Moreover, on appointment they did not resign as commissioners. The expenditure incurred by two commissioners might constitute irregular expenditure as contemplated by the PFMA and might therefore have to be investigated in terms of Treasury Regulations.

Issues of personnel practices and human resources were very much a focus of the complaints that the Public Protector had received.  There was the perception of two ladies who were transferred from their positions by the former chairperson and the former chief executive officer and that they were treated improperly: this perception was found to be justified: they were not given proper explanations for the move, and they were seriously unhappy about it at the time.  (Paragraph (g))

The AGSA had also reported on what was referred to in paragraph (h) in which case an amount of approximately R4 million was spent on an organisational diagnostic process but without any tangible results to date. The Public Protector believed that this expenditure might have been fruitless and wasteful and needed to be investigated in terms of the Treasury Regulations.

The Public Protector viewed very seriously the situation of the finance department in terms of staff complement and skills (paragraph (j)): this required urgent attention to deal with the matters highlighted by the AGSA.

There was need for guidelines to regulate the interaction between commissioners and the secretariat (paragraph (k)). This was just one line, but very important in the mind of the Public Protector as to what could take the Commission forward.  It created much unnecessary friction that there was no guideline or regulatory framework as to when a commissioner could intervene in the administration and to what extent a member of the staff was report to an individual commissioner on particular matters. It created much confusion and unnecessary stress in the organisation. 

Adv Fourie explained the Public Protector's dealing with the appointment of a consultant (page 5) as the interim chief executive officer of the organisation: this was unlawful and irregular. Therefore his actions during his tenure might have resulted in irregular expenditure and this should be investigated.

Adv Fourie said that the Public Protector had referred to the policy on housing allowances for the staff – the policy document could not be found; the only document that could be found was a reference to the housing allowance for the commissioners. The housing allowance was a bone of contention and the cause of many complaints (paragraph (n)).

No progress had been made with the implementation of the Occupation Specific Dispensation (OSD). This was a very serious matter for people who worked in the public sector, and a cause of great unhappiness to the staff of the CGE, who qualified for this dispensation.

No performance assessment of the staff had taken place in the 2008/09 financial year; this was a contravention of CGE’s own guidelines (paragraph (p)).

Adv Fourie explained the Public Protector's key recommendations (page 5-6). These included amending the CGE Act to bring it into line with the Constitution and the requirements of the CGE, and also to fill the vacant positions of commissioners within the CGE. Members would note that there had been an acting chairperson of the CGE for a very long time.

The Public Protector also recommended that the Director-General of the National Treasury investigate and report to the Deputy Speaker on the irregular expenditure and the appropriate action to be taken if required.  It had never been envisaged that a commissioner would become the accounting officer – the chief executive officer - and would therefore be reporting to herself. This was something that had to be dealt with.

It was also recommended that the CGE urgently implement the recommendations of the Public Protector's previous report and the Parliamentary Review Report.

Discussion
Mr J Sibanyoni (ANC) commended the AGSA and the Public Protector on their reports. The manner of compilation provided easy reading. He also appreciated being taken though the reports page by page, paragraph by paragraph. He asked why the CGE's internal audit had not detected the irregularities at an early stage.

Mr Lourens van Vuuren, AGSA Business Executive, explained that the audit opinions for 2007/08 and 2008/09 were disclaimers, which were one of the worst audit outcomes possible. The basis for a disclaimer was normally that the AGSA could not find adequate supporting documentation to express an opinion.  The AGSA explained issues of irregular expenditure, and other issues in the 2008/09 report. Thus links could be traced between the AGSA's normal audit reports and this particular investigation. 

Adv Fourie said that the Kader Asmal report had detected irregularities, but the CGE had failed to do anything about them. 
 
Ms D Robinson (DA) commended the clear and excellent reports. It was “absolutely horrifying” that a watchdog organisation that was meant to uphold values and the Constitution had been so devious. She asked whether the former chairperson's upgrade on air travel to Geneva was from economy to business class or business class to first class. Ms Robinson thought that business class was adequate. (Slide 10)

Ms Mampuru replied that the upgrade was from economy to business class.

Ms H Malgas (ANC) asked for the names of all those involved at the CGE from 2007 to 2009 inclusive. Some of the people in the organisation at that time remained.

Mr Oberholzer undertook to supply a list of names and positions – and companies, where appropriate. 

Adv Fourie referred to the Public Protector's report, which made mention of the termination of the services of the former chief executive officer. An internal enquiry had been conducted into her alleged misconduct, on the basis of which she was dismissed. She had then taken the dismissal on review.   Eventually her services were terminated by agreement. The other names were referred to in the Public Protector's document.

Ms P Duncan (DA) asked the AGSA for the full amounts, in millions of rands, of irregular expenditure involved since the CGE's inception.

The AGSA explained that it would not be possible to give this information the same day. The AGSA would endeavour to compile and categorise this information.

Ms Duncan asked if the National Treasury had yet responded to the recommendation that it investigate a number of matters. If so, what was National Treasury's response. If there was no response, when would Members be able to know what the response was, in order that Members could conclude on the matter?

Adv Fourie replied that these responses would take some time. However, the Public Protector followed up its recommendations on a regular basis. The last paragraph of the report dealt with monitoring. The Public Protector would follow-up and keep the Committee informed. If there was no response, it would be up to Parliament to intervene.

Ms S Rwexana (COPE) asked if the AGSA had made recommendations on the report.

Mr Mike Oberholzer, Senior Manager, AGSA, said that the AGSA had not highlighted its recommendations, but after each section in the report, recommendations would be found. He gave an example of a recommendation on page 23 of the AGSA's report. Mr Oberholzer referred to Annexure A of the AGSA's report where the AGSA had summarised all its recommendations.

Ms A van Wyk (ANC) knew that the AGSA had made recommendations although these had not been highlighted. She agreed that another department or Parliament should consider the report.

Ms Van Wyk asked if there were recommendations for steps to be taken against particular individuals.

Ms Mampuru replied that the AGSA's draft management report did give specific names of people. So the Commission was aware of what disciplinary steps it must take. The executive management must ensure that disciplinary steps followed the AGSA's report.  Of course, management could not discipline commissioners. Commissioners were appointed by the President, so decisions had to be made at that level.   There was litigation between the former chairperson and the CGE for the trip to New York and other issues. 

Ms Van Wyk asked what the AGSA's findings on the loss were. The losses should not be measured only financially but in terms of the loss of work that the CGE should have done but had failed to do. 

Ms P Lebenya-Ntlanzi (IFP) said that it was clear that the CGE had disregarded all policies regarding the management of public funds. She asked if there was any way to recover the money.

Mr Oberholzer replied that it was not necessarily possible to recover irregular expenditure from the personnel concerned.  It was first necessary to conduct an investigation to determine if there was a case of financial misconduct, and then according to the PFMA one could recover.

Ms Mampuru said that in some circumstances it was possible to recover money, but in case of non-compliance with supply chain management processes but where services had been rendered it was not possible to recover funds.

Ms Lebenya-Ntlanzi asked if charges could be laid against anyone. It was shocking that an organisation of this nature operated like a tuck shop. “They do as they please.” They disregard “any law that exists in this country”.

Adv Fourie said that the Public Protector could not make a finding that somebody should be disciplined. The PFMA had very specific rules on remedial actions. The Public Protector could not itself take action against the commissioners since they were accountable to the National Assembly.

Ms Robinson said that the names of the whistle blowers who had told the story as it was should be cleared. She endorsed Ms Malgas' request for the names of all involved in the “questionable” practices. 

Adv Fourie referred to page 42 of the Public Protector's report. The whistle blowers had been dismissed, but were later reinstated and all their benefits repaid.  In terms of money they therefore had not lost anything but it had been a traumatic experience for them to be without a job.  They were named in the report. A copy of the report had been sent to the staff representatives committee so that they could see what the outcome of their complaints was. 

Ms Robinson said that it was unfortunate that the CGE was in such a state of disrepute, especially now as we were beginning the 16 days of activism.

Ms Robinson asked if requesting overtime at the CGE was seen as an easy way to obtain cash. There was need to introduce a new dispensation. What were the conditions of employment?

Ms Mampuru replied that there should be an overtime policy. Without a policy there tended to be non-compliance. The excessive overtime did contravene the Basic Conditions of Employment Act.

The Chairperson asked for clarification on the finding that the Commission for Gender Equality Act 1996 was not in line with the Constitution. If it was true, how the Act could be brought into line. Were amendments appropriate?

Adv Fourie said that the implications of the Commission for Gender Equality Act were not so very serious in terms of the day to day operation of the Commission, but he advised that the Commission for Gender Equality Act be amended, in line with the amendments to the Public Protector Act, as some of its terms were outdated, for example, its use of the word “senate”.

Mr Mukesh Vassen, Parliamentary Legal Advisor, said that certain provisions of the CGE Act needed to be reconsidered, as had been indicated in the Kader Asmal report.

Ms Van Wyk asked if any change could be expected with the current CGE staff members and commissioners in office.

Ms Mampuru did not reply positively.

Mr Oberholzer replied that there was a lack of structures in the CGE that could adjudicate in supply chain management matters. He said that there were many acting positions in the CGE. The chief financial officer (CFO) had resigned in 2007. He believed that the CGE could move forward if a suitable structure could be established.

Mr G Snell (ANC) asked how the AGSA and the Public Protector related to National Treasury when it came to allocating budgets: this was a systemic question about an entity which lacked the ability and the will to spend its budget properly. 

Ms Lebenya-Ntlanzi asked if irregularities had happened because of corruption or because of lack of information in the institution.  Was any role played by National Treasury in the past because this was a recurring problem? She was surprised that staff did not demonstrate knowledge of applicable legislation.

Ms Mampuru replied that it was a lack of policies, a lack of relevant committees to drive the processes and a lack of monitoring and oversight by the executive management and the Commission. All these combined caused the problems that necessitated the investigations that the AGSA and the Public Protector had been explaining. The AGSA had not observed corruption.   The AGSA had examined the investigations of the Standing Committee on Public Accounts (SCOPA) and had found allegations of fraud on the CGE payroll system to be unfounded. However, the environment and the lack of internal controls meant that one could not rule out some level of corruption.  However, it was not the AGSA's mandate and intention to probe those issues. But the risk was reasonably high.

Ms Malgas asked why the CGE had 11 bank accounts, while there were only nine provinces.

Mr Oberholzer said that one bank account was a call account (savings account), one was an account for use nationally, and the other nine were provincial accounts.

Ms Van Wyk asked why the National Treasury had given funds to an institution that could not manage them.

Ms Mampuru replied to Ms Van Wyk that the AGSA would brief the National Treasury and ask it to prepare for it interaction with the Committee if the Committee should decide to ask it to appear.

Ms Duncan asked what the relevance of transferring a Chapter 9 institution to another ministry was. The Minister did not have powers over Chapter 9 institutions.

Ms Mampuru said that the CGE had considerable autonomy and had not demonstrated strong links with the Department of Justice and Constitutional Development in which it had resided at the time of the investigation.

Ms Duncan said that National Treasury should appear before the Committee. [National Treasury was represented at this meeting only in the role of an observer.] The Committee's extension until 26 January 2011 was very important – the Committee did not have much time to compile a report, and the next step would be to invite National Treasury. 

Mr Vassen referred to Section 7 of the CGE Act. It was necessary to distinguish the actions of CGE staff and commissioners.

Ms Robinson asked if there was any evidence that the management of the CGE was doing any better than before. She noted that this Ad Hoc Committee had been established to monitor more closely than the Portfolio Committee on Justice and Constitutional Development.

Mr van Vuuren, AGSA, said that there had been some positive movement in the audit opinion from a disclaimer to a qualified audit opinion in the 2009/10 reporting period.  The AGSA could now get access to documentation. However, there were still challenges of irregular expenditure. There were still structural challenges such as lack of supply chain management. However, the AGSA visited the CGE only once a year. It was therefore important that the CGE establish an effective internal audit. Though internal audit was a legislative requirement and was very important, the CGE's internal audit had been ineffective. A strong audit committee should be established and there should be strong communication between it and the chairperson of the Commission.  There must be strong governance structures and they must act in time. Great intervention was needed from the leadership.

Ms Van Wyk asked that the Committee Researcher be requested to obtain the CGE's turnaround strategy.

Ms Duncan said that it was necessary to be specific when the Committee invited the CGE, since it had already given a presentation to the Portfolio Committee on Women, Children, Youth and Persons with Disability. The Ad Hoc Committee wanted to know more.

The Chairperson thanked the AGSA and the Public Protector. It was agreed that the Committee would invite the National Treasury. It was also necessary to invite the CGE to appear before the Committee. These steps would be necessary before the Committee could complete its report. Mr Vassen would assist.

The meeting was adjourned.