The Minister of Water and Environmental Affairs and the Department of Water Affairs interacted with the Standing Committee on the Department's Annual Report and financial statements for 2009/10. The Department had received a qualified audit opinion on the basis of immovable and movable tangible capital assets, and misclassifications of expenditure on goods and services as capital expenditure. The Auditor-General emphasised the matter of irregular expenditure. The Auditor-General also drew attention to additional matters.
The Auditor-General had also carried out a special investigation into certain alleged procurement irregularities and tabled a report in May 2010.
Members expressed disappointment that the Department of Water Affairs had received an audit opinion for 2009/10 qualified on three items, after receiving an unqualified audit opinion in 2008/09 and an audit opinion qualified on only one item in 2007/08. The thrust of their questions was what happened and why there had been such a big step backward. Specific questions were asked on immovable and movable assets, goods and services, leadership matters, and certain governance issues. Members observed that across all departments and entities, the question of leadership kept arising. There was instability at the top levels of the Department. Many positions were currently held in an acting capacity.
Members asked what specific actions had been taken against the accounting officer. Had any one else been called to account for non-compliance on supply chain management and procurement processes? Members commended the Acting Director-General’s suspension of the Departmental Bidding Adjudication Committee, and noted that the main cause of the qualification was assets. What was the Department’s problem in keeping an asset register? The Auditor-General had found a lack of documentation. Why were there no documents? The Department never seemed to be quite ready for the Auditor-General. Members had heard that the Department of Defence had a dedicated audit unit and asked if Water Affairs had ever asked for outside assistance. Members asked if problems in the Water Trading Entity impacted on the main account, who staffed the internal audit department, and if there was not an internal audit specifically for the Water Trading Entity. The Office of the Auditor-General confirmed that there was only one internal audit department responsible for both the Water Trading Entity and for the Department.
Members observed a capacity problem across the entire Department. The Department appeared satisfied with its vacancy rate. The Chairperson emphasised the importance of effective management. Members asked why the Department had not exactly reconciled goods and services monthly as required by law, where the bottleneck lay, why the Department had misclassified leases and submitted its performance report late.
The Department replied that it now made sure that there was a direct linkage of the estimates of national expenditure to the strategic plan of the Department. However, in this regard, Members asked if any one official had been responsible for causing the Department to be inconsistent in following the Treasury Regulations, and observed that, under the law, the head of department was ultimately responsible. The Chairperson suspected that some transgressions were not taken seriously by departments, and that often no disciplinary measures were taken against officials. However, there was no Treasury Regulation or section of the law that was minor.
Questions were asked on the Department’s use of consultants. Members thought that the Water Trading Entity was a Cinderella - a place to put inadequate staff and poor leaders. The Department denied this and indicated its plans to appoint a separate chief financial officer for the Entity. Members asked about the suspense accounts. The Department was now endeavouring to ensure that the suspense accounts were cleared and unallocated amounts followed up. Members questioned the accuracy of the Entity’s client records, including what clients owed. The Department acknowledged that the Department needed to monitor its accounts closely and regularly, without any delay: part of the solution would be the activation of the utilities module of the Systems, Applications and Products in Data Processing SAP platform.
Members questioned the Department on irregular expenditure. Who was responsible and what sanctions were being applied? The Department replied that it had issued warning letters and was establishing a risk management committee. Some investigations had been referred to the Special Investigating Unit. Members were cynical about condonement of irregular expenditure. Members asked about impairment of infrastructure assets, leadership and systems. The Chairperson commented on skills capacity and resource management. Moreover, this lack was accompanied by absence of direction.
Further questions were asked on the Auditor-General's Investigation Report into certain alleged procurement irregularities (tabled May 2010). Members observed that adequate leadership oversight was the core issue. Deficiencies here accounted for the “big stain on the Department”. It was to the previous Minister's credit that she had acted to suspend the previous Director-General. However, ministerial oversight should go much further than that. There should be healthy interaction and political oversight. Questions were asked on missing or unsigned contracts, and declaration of interest. The Department replied that it did find that some documentation was missing when it conducted investigations and it suspected that documentation was intentionally mislaid. Supply chain management did its best to reconstruct those documents. Staff members who had an interest would not be part of that evaluation of a tender. Members asked why in-house capacity was not being developed. The Department undertook to provide a list of consultants. Members noted that the Annual Report made no reference to acid mine drainage. Would action against acid mine drainage entail any additional expenditure for the Department? Under South African law the polluter paid. Had the Department considered legal action against the directors of offending mines? The Department acknowledged that additional expenditure would be incurred. There would be a provision in the 2011/12 budget. The Department would attempt to recover some of the costs of its intervention. Members asked if the former accounting officer would, additionally, be prosecuted in terms of Section 38 of the Public Finance Management Act. The Department replied that it had pursued not only Section 38 but also several violations of the Treasury Regulations.
The Minister assured the Standing Committee that the Ministry and Department would do its best to address the issues that had been raised by the Auditor-General as well as the issues raised by the request of the former Minister, who had asked that those matters be investigated. The Ministry and Department would follow through on them. This was an obligation on the Ministry and the Department. With reference to the political questions raised and the implication that the number of trips referred to in the Annual Report 2009/10 by the former Minister and the former Deputy Minister might have disturbed the ministerial oversight role, the Minister assured the Standing Committee that the Ministry would definitely fulfil that oversight role, as it had always done in the past, without necessarily laying aside the other tasks that the Ministry had to do. The internal issues of leadership in management, including the Water Trading Entity, had been noted. The Ministry and Department were working day and night to ensure this capacity was acquired. The Minister acknowledged that there was “a near crisis” in the Entity. The management team present had done a great deal. The Minister acknowledged the assistance of the former Minister, and she affirmed that there existed the required leadership capacity in the Department. What had been lacking in the past was sufficient leadership enforcement within the Department – “enforcement at the top to drive the entire team”. The Minister had already agreed that with acid mine drainage, the polluter had to pay by means of an environmental levy or tax. The Minister would forward information to the Standing Committee on the use of consultants and in what capacity some former members of the Department had returned as such. The Ministry and Department would never accept the practice of “javelining”.
The Chairperson welcomed the Hon. Ms Edna Molewa, Minister of Water and Environmental Affairs, and the Acting Director-General and colleagues from the Department of Water Affairs. The Chairperson welcomed Members, including Mr P Mathebe (ANC) from the Portfolio Committee on Water Affairs.
The Chairperson asked for direct and pertinent answers.
Today’s interaction would not only be concerned with the Annual Report but also with Auditor-General's Investigation Report into certain alleged procurement irregularities (tabled May 2010)
Department of Water Affairs and Water Trading Accounts 2009/10: hearings
Immovable assets, movable assets, governance and leadership
Mr R Ainslie (ANC) expressed disappointment that the Department of Water Affairs had received an audit opinion for 2009/10 qualified on three items, after receiving an unqualified audit opinion in 2008/09 and an audit opinion qualified on only one item in 2007/08. This was quite a big step backward. The main purpose of today’s discussions would be “What happened?” Members would be asking what went wrong in the year under review.
Mr Ainslie said that he would be dealing with items in the Annual Report, from pages 91-94, specifically with immovable assets, movable assets, goods and services, leadership matters, and certain governance issues.
Mr Ainslie began with leadership. In the Auditor-General’s reports, across all departments and entities, this question of leadership kept arising. It had to be asked to what extent a lack of leadership had resulted in this qualification.
Mr Ainslie noted that there seemed to be a great deal of instability at the top levels of the Department. Members had learned today that there were many positions currently held in an acting capacity. This was a serious concern in such an important Department. When would some of these senior appointments be confirmed?
Mr Trevor Balzer, Acting Director-General, Department of Water Affairs, acknowledged that it was embarrassing to have to introduce half one’s management team in an acting capacity. However, this was really the outcome of the special report whereby certain actions were taken by the Director-General at that time and which process was being brought to a conclusion at the moment. A dispute had been declared around the outcome of that disciplinary process. With regard to the position of Chief Financial Officer, the presiding officer of the disciplinary hearing was expected to give his outcome on that process within the next day or two. With regard to the position of Deputy Director-General of Corporate Services, that disciplinary process had started but been delayed. The filling of vacant posts could not take place while the outcome of the disciplinary hearings was still pending. For the time being, the Department would have to continue with some acting positions; it was not possible to advertise these posts until the disciplinary hearings had been concluded, since to do so would pre-empt the outcome of the disciplinary process.
The Chairperson accepted this explanation.
Mr Ainslie asked about other acting positions.
Mr Balzer explained that one of the posts had not been filled because the Department was undergoing a restructuring exercise. It was understood that the policy and regulatory responsibilities of the Department would be split. The post would be filled once that process had been completed.
Mr Balzer said that the position of Chief Director: Human Resources had, because the incumbent had been appointed Acting Director of Corporate Services, been filled by Advocate Darol Holby, in an acting capacity.
Mr Ainslie asked if this had a knock-on effect.
Mr Balzer replied that it had a tremendous knock-on effect. It had been necessary to move people up one level into acting positions. So that knock-on effect cascaded down.
Mr Ainslie said that the Auditor-General had been quite specific about the actions that the Accounting Officer had not taken (Annual Report, page 93). Mr Ainslie asked what specific actions had been taken against the Accounting Officer. Also had any one else been called to account for non-compliance in regard to supply chain management and procurement processes?
Mr Ainslie asked also about other former officials who had not complied with the Public Finance Management Act in respect of these two items.
Advocate Darol Holby, Acting Chief Director: Human Resources replied that the former Accounting Officer was charged with 13 counts of procurement irregularities. She was subsequently found guilty on all counts and dismissed on 31 October 2010. There was a dispute pending. The Minister had further taken a decision to engage the Special Investigating Unit (SIU) to determine if there were any civil or criminal activities that might be linked to those irregularities. That investigation was still pending. However, the former Chief Financial Officer had also been charged for similar offences relating to irregular expenditure. The former Chief Financial Officer had since been found guilty and the Department was waiting within the next few days the outcome of the sanction in respect to that matter. The Deputy Director-General: Corporate Services, and the Chief Information Officer, had also been charged with similar irregular expenditure. The Department, as of 23 November 2010, had also informed seven members of the Department’s Bidding Adjudication Committee (DBAC) that an investigation was ensuing against them; the Acting Director-General had decided to suspend the functioning of those members within the DBAC and had since formed an interim committee. The Department had decided to take criminal proceedings against the staff members implicated in the report as well as seek civil recovery. The Department’s instruction to the SIU was that in the event that the Department was able to secure any type of criminal conviction, the Department would also be pursuing a Section 300 request for compensation through the criminal courts and if anyone was found to have been enriched by these irregularities the Asset Forfeiture Unit (AFU) in the Office of the National Director of Public Prosecutions would take steps to seize these assets.
Mr Balzer reiterated that he had suspended the DBAC referred to in the special report of the Auditor-General and established an interim committee made up of the deputy directors-general of the Department and supported by supply chain practitioners. That committee sat under the deputy director-general of national infrastructure, Dr Cornelius Ruiters, Deputy Director-General: National Water Resource Infrastructure, Department of Water Affairs.
Mr Ainslie commended this strong and tough action.
Mr Ainslie began his questions on assets, the main cause of the qualification.
Mr Ainslie asked what the Department’s problem in keeping an asset register was.
Mr Balzer replied that, having been qualified on account of the assets register, it was difficult to live by the statement quoted by Mr Ainslie from the Report that the Department had maintained an asset register.
Mr Balzer indicated some of the actions that had been taken in respect to immoveable assets.
Mr Ainslie referred to the Annual Report, page 91, on immovable assets. He then referred to table 32, page 146, on which the Auditor-General had said that he was unable to determine the existence or completeness of assets. Mr Ainslie asked what some of these items related to, for example dwellings, and non-residential buildings. What was the difference between the two?
Mr Ainslie also asked how the Department defined heritage assets, and subsoil assets.
Mr Ainslie asked Mr Balzer to deal with immovable assets first.
Mr Balzer replied that at the time the immovable asset register was part of the Water Trading Entity (WTE). The Department had discovered some of the assets should have been reclassified and included in the main account register. There were two accounts in the Department: the trading account and the main account. Some of the assets had, in fact, been included on the wrong asset register. The infrastructure evaluation report was submitted to the main account auditors at the time, but, due to the occasion when it was submitted, there was not sufficient time to verify the existence and completeness of those immovable and tangible capital assets. So the Department had had to move them from the trading entity to the main account. That had subsequently been rectified. Mr Balzer had supporting documentation with him which indicated the infrastructure evaluation. Mr Balzer also had with him a compact disc (CD) containing the asset registers of all the movable and immovable asset registers. These were too big to carry around as a paper copy. This was the action taken in response to the first question, and Mr Balzer could leave those schedules with the Standing Committee.
Mr Ainslie argued that the Auditor-General had been unable to complete his works because the asset registers were not ready on time. Why? If the Auditor-General were to visit today, would he be able to find the final asset register, or at least the asset register final up to a particular date?
Mr Balzer thought that he had covered that question already in his response. He was confident that he could answer in the affirmative, and this was why he had a CD available. He believed, subject to confirmation by a further audit by the Auditor-General, that the audit register was complete.
Mr Ainslie asked what the difference between dwellings and non-residential buildings was. He also repeated his question about sub-soil assets.
Ms Ntabiseng Fundakubi, the Acting Chief Financial Officer, said that dwellings denoted buildings such as workshops and office buildings in the sub-stations of the Department. The non-dwellings were the facilities at dams and the treatment works.
The Chairperson asked about heritage assets and subsoil assets.
Ms Fundakubi replied that heritage assets were the biological assets that had subsequently been moved to the Department of Agriculture, Forestry and Fisheries. However, at the time when the Department had reported, the assets were still on the Department’s books. Biological assets were forests and trees. Subsoil assets were part of the land used by the Department. Land assets were the land, but also the buildings situated on the land, so the Department classified these assets as land assets.
Mr Ainslie asked how the Department classified rivers.
Mr Ainslie asked about movable assets and goods and services, since the main finding there was that there was discrepancy between what the Department had on its asset register and the closing balance on page 142.
Mr Ainslie said that the Auditor-General had found a lack of documentation and he was not able to verify the correctness of these items. Why was there this discrepancy and why no documents?
Mr Balzer acknowledged that there had been a problem. The main cause was a misclassification between the Department’s movable assets and goods and services. There had been delays in processing those transactions on time for the audit, which resulted in the overstated goods and services as disclosed. To prevent a future occurrence of this nature, the Department would make sure that journals and reconciliations were passed monthly. With regard to goods and services, it linked back to the earlier response on the movable assets that should have been captured on the capital account. Once again the Department was dealing with journals and reconciliation. The goods and services had reflected acquisitions that should have been captured on the capital account. Once again the Department was now dealing with journals and reconciliations on a monthly basis. Mr Balzer hoped that the result of these reconciliations would indeed show in terms of the audit for the 2010/11 financial year.
Mr Ainslie said that the Department never seemed to be quite ready for the Auditor-General. The documents were always there but never quite ready enough for when he came to do his audit. Did the Department have a specific audit unit to prepare for the Auditor-General's visit so that all documents, including the asset register would be ready?
Mr Ainslie said that the previous week the Standing Committee had heard from the Department of Defence that it had a dedicated audit unit for this purpose.
Mr Ainslie asked if the Department of Water Affairs ever asked for outside assistance to ensure that it could overcome the afore-mentioned problems on time. The Department of Defence called in outside assistance from the National Treasury, and even someone from the Office of the Auditor-General had been seconded to this unit in that Department. The result had been a dramatic decrease in the number of qualifications from 12 or 11 down to one.
Mr Ainslie observed that the Department of Water Affairs was not prepared either in terms of time or of capacity for when the Auditor-General arrived to perform the audit. How could this be avoided?
Mr Balzer assured the Standing Committee that the Department would be better prepared in dealing with the current 2010/11 audit. He had, four weeks previously, established an audit steering committee chaired by the Acting CFO and composed essentially of the heads of the branches together with other relevant support staff. This audit steering committee met every two weeks, and sought to prepare quality information, in good time, to the Auditor-General.
Mr Balzer said that the Auditor-General had two audit teams – one dealing with the main accounts and one dealing with the Water Trading Entity (WTE). “They sit on that steering committee as well,” and highlighted items that might require intervention from management. This was the action that Mr Balzer had taken. He was confident that this action would result in a better interaction with the Auditor-General's Office and in a better flow of documentation.
Mr Balzer asked Members to bear in mind that the necessary documentation was to be found not only at the national office but also at the nine regional offices four the main account and at four area offices for the WTE.
The Chairperson indicated to Mr Balzer that this explanation sufficed.
Mr Ainslie thought that the WTE was almost a separate entity. Did problems in the WTE impact on the main account?
Mr Ainslie said that key aspects of good governance were internal controls and the internal audit unit. He referred to the audit committee's report, Annual Report, page 69.
Mr Ainslie was dismayed at the poor attendance of the previous Acting Director-General, who had attended only one out of seven meetings. As a matter of principle, surely the Director-General or Acting Director-General should attend.
Mr Balzer agreed. His attendance record was so far 100%. He could not speak for the previous Acting Director-General.
Mr Ainslie asked about the internal audit department. Who staffed it? What about the lack of capacity?
Ms S Thomas, the Chairperson of the Audit Committee, Department of Water Affairs, responded that the internal audit department was an in-house department. The person heading that department was present. In the year under review, most of the senior people had not been employed. This was the main reason for an ineffective internal audit department. In the current year, 2010/11, the Department had an audit plan approved by the audit committee, but it had not been completed by the internal audit department and the main reason given was that the internal audit department still had issues of capacity. The issues related specifically to senior personnel. There were not enough people to lead them in the areas of compliance and performance. Going forward, unless the issues of capacity were addressed, the internal audit department would not achieve the audit plan as approved by the audit committee.
Mr Ainslie observed that the heart of the problem – a dysfunctional internal audit department, was at the heart of the organisation. How big was this internal audit department?
Ms Thomas responded that the number of staff members was 44.
The Chairperson asked the head of the internal audit department to respond to the actual challenges.
Mr Moshito Maphanga, Chief Director: Internal Audit, Department of Water Affairs, replied that the year under review, 2009/10, was the year in which he was appointed. Previously internal audit had always been understaffed. The Department had then decided to enhance internal audit capacity. Mr Maphanga was appointed and then other staff members. Unfortunately the appointment process was concluded only in the last quarter of this financial year leaving the unit with insufficient time to implement the audit plan. The unit had since progressed to implement most of the audit plan, but, as it did so, certain challenges were experienced.
The Chairperson asked what the challenges were.
Mr Moshito Maphanga replied that when the structure was created, the Department could have kept in mind that there were two entities – the main account and the WTE. There was a need for a unit to focus on the WTE and a specific directorate to focus on the main account. The same approach of the Auditor-General, to have a specific unit to focus on the main account and a specific unit to focus on the WTE, was required. This capacity challenge still needed to be addressed within the organisation.
Mr Ainslie thus inferred that there were two audit committees.
Mr Maphanga replied that there was only one.
The Chairperson asked Mr Balzer to confirm.
Mr Balzer confirmed that there was but one audit committee. This was established in terms of the relevant legislation, and was chaired by Ms Thomas. Internally, to manage the audit, Mr Balzer had established an audit steering committee. This latter committee operated on a two-part agenda. This was in terms of Mr Balzer's governance arrangements. It was the audit committee that was established by law.
The Chairperson asked about internal audit.
Mr Balzer replied that an internal audit unit was established in the Department. This unit, in terms of the organisational arrangements, reported directly to the head of the Department.
The Chairperson understood that, but asked specifically about capacity issues.
Mr Balzer replied that reviewing the organisational structure of the Department was a process that had been started. There were weaknesses as Mr Maphanga had pointed out, in that the audit unit was currently a single unit, and not organised on the basis of looking at separately the main and the WTE accounts.
The Chairperson asked Mr Balzer what he was going to do about that.
Mr Balzer replied that, having identified the weaknesses, it was one of the areas that the Department would address in terms of its organisational arrangements. Mr Balzer had made an undertaking to the Minister to start that process on 01 April 2011 and have the results available within three months.
The Chairperson was asking his question specifically in relation to internal audit. The broader issues around the governance arrangements were something else. The Portfolio Committee on Water and Environmental Affairs would be able to follow up.
Mr M Steele (DA) asked about the WTE's internal audit. Was there not an internal audit specifically for the WTE in the light of what was written in the Annual Report?
Mr Balzer replied that, in the Annual Report, the Department reported on the Department and the WTE separately; however, one was talking about the same internal audit unit.
Mr Steele was not satisfied. Was the Department implying that the Auditor-General could not count?
Mr Ainslie pleaded with the Department to answer, in Mr Steele's section of the hearing, the question to what extent audit problems in the WTE impacted on the auditing of the main account. It was confusing.
The Chairperson asked the Auditor-General to respond.
Ms Alice Muller, Corporate Executive: Auditor-General of South Africa (AGSA), replied that, indeed it was confusing, and offered apologies for the wording. There was indeed only one internal audit department responsible for both the WTE and for the Department. They divided their resources to do both.
Mr Ainslie asked what the vacancy rate in this single audit unit was.
Mr Maphanga replied that at the time of this audit report the staff complement was 44, but this had been depleted by the transfer of the former Department of Water Affairs and Forestry to the present Department of Agriculture, Forestry and Fisheries. About four positions had been released. Later, in the first quarter of the year under review, all the vacant positions had been filled. However, there was rapid turnover of staff to other internal audit units in Government. There were now some vacancies but efforts were being made to fill them.
Mr Ainslie asked what the current size of the unit was.
Mr Maphanga replied that the vacancy rate was now 10%.
Mr Ainslie asked when these vacancies would be filled, because he doubted the unit's ability to support the Department's obtaining an unqualified audit report without its being fully staffed and reported effectively to the audit committee and to management. If that chain were broken, Mr Ainslie could not foresee an unqualified audit report. When would the unit fill those four vacancies?
Mr Maphanga replied that these four vacancies were part of the Department's recruitment drive.
The Chairperson said that the unit must address the problem of turnover.
Mr Balzer replied that this was not only a problem in internal audit but also across the Department. There was always a lag between the time that someone resigned and the time that the post was filled.
Mr Balzer replied that for some of the investigations, the Department did engage contract staff. Some 119 investigations were currently in progress. 35 were being conducted by staff contracted in. This was in cases where the Department lacked special skills such as forensic audit.
Mr Ainslie observed that there was a capacity problem across the entire Department.
The Department responded that its vacancy rate for scientists was only 11.3%. Its vacancy rate in internal audit (IA) was only 9%. This was also the result of turnover. In the policy and regulation branch, which was also key, the vacancy rate was only around 21%. This was only 146 posts, which had been advertised, and for which candidates were being selected. Hopefully this would be completed in the next few weeks. In the provincial offices, the vacancy rate was only 15.2%. Those posts had already been advertised. The overall vacancy rate for the Department at the end of February 2011 was 15.5%. Over a period of 12 months, the Department hoped to reduce it to around 10% by the end of June, the end of the first quarter of the new financial year 2011/12. Corporate services had made a proposal to the Acting Director-General on retention whereby the Department would create a process of mentoring and shadowing. The Department also had a graduate training programme to produce the required number of scientists, engineers and technicians. There was also competition from the private sector. On this the Department had engaged with the Department of Public Service and Administration (DPSA). One of the main challenges to retention was the salary packages. There were also issues of conditions of service.
Mr Ainslie was worried. He asked who established what an acceptable vacancy rate was. He would have thought that for a Department like Water Affairs it was absolutely vital to have a full complement. Was a vacancy rate of even 1% acceptable? Perhaps this needed to be looked at on another day. This concluded Mr Ainslie's area of focus.
The Chairperson emphasised the importance of effective management.
Goods and services
Mr S Thobejane (ANC) asked why the Department had not exactly reconciled goods and services monthly as required by law.
Mr Balzer apologised if he had unwittingly blamed his predecessors.
The Chairperson asked where the bottleneck was. Surely Mr Balzer would have taken observations when he was appointed. Was it that people were not told or that there was no follow-up.
Mr Balzer replied that he had detected that there had been no monthly reconciliations. The Department had then corrected that situation. A financial improvement action plan had been instituted after the Auditor-General's report. This covered each of the areas of qualification.
Ms Fundakubi replied the two contributing factors to the goods and services were the issue of operating leases and separation of capital amount from interest. When these were captured, they were captured as one amount, but they should have been split. Also the inconsistency of transactions on certain items had contributed. This had been corrected. To rectify the situation for the future, the Department had the monthly meeting at which all the relevant stakeholders sat to rectify inconsistencies.
Mr Thobejane said that a portfolio committee might be satisfied with the reporting as at present, but the Standing Committee was not since it was dealing with things that had already happened. Hence Members wanted to know why goods and services were not reconciled. Why had the Department misclassified leases?
Ms Fundakubi replied that, in the past, the lack of knowledge of how to do the transactions on leases prevailed throughout the regions and at head office. However, training had since been provided, but this was also picked up during the interim financial statements and there was little time to correct the misclassification by the time of the final audit.
Mr Thobejane understood that the Department had employed people who did not know how to do their work. Yet on the 15th of every month those same people would be seen queuing at the bank.
The Chairperson asked what today's date was.
Mr Thobejane remarked on the paucity of photographs in the Annual Report.
The Chairperson gave clarity on the changes of personnel. The Acting Director-General post had undergone a change of incumbent. He asked Mr Thobejane to wait for Mr P Pretorius (DA)'s area of focus.
Non-compliance with laws and regulations
Mr Thobejane asked about non-compliance. Why was it so difficult to comply with the laws governing the Department?
Mr Balzer replied that the Auditor-General had remarked specifically on the non-submission of the performance report, which should have been submitted two months after the end of the financial year. It had been submitted three days late, although the Auditor-General had expressed an opinion on it. However, the non-compliance related to late submission.
Mr Thobejane asked why the Department submitted its performance report late.
Mr Balzer could not indicate why it was submitted late. He had not been appointed at the time.
Mr Thobejane was becoming confused. Whether Mr Balzer was there or not, he had to account for the good and the bad in the Department. Mr Balzer must be open on why there was late submission.
Mr Thobejane heard Mr Balzar consulting his staff, and observed that Mr Balzar should have done this prior to this hearing. Asking here was a dereliction of responsibility.
The Chairperson wanted the meeting to move forward. He suggested some possible reasons for delay. It was important to identify the causes; otherwise the bottlenecks would come out again in the next audit. It was not a frivolous question.
Mr Balzer conceded that it was not a frivolous question. He could not give an answer, but he indicated the action that he had taken to ensure that the same delay would not happen in this year's audit, 2010/11. The business performance unit of the Department had been carrying out this year quarterly reviews of performance against the strategic plan. With those quarterly reviews, the Department would not miss submission within the two month period.
Mr Thobejane objected that in terms of the Treasury Regulations (TR), the Department's strategic plan was required to be consistent with the Department's own medium term estimates of expenditure. The Department had not complied with this. Why had the Department not complied?
Mr Balzer acknowledged this criticism of the Department's strategic plan. This criticism had applied to previous years as well. It had also been raised sharply with the 2010/11 financial year, when the Department had reported to the Portfolio Committee.
Mr Balzer indicated the action that he had taken. In terms of the strategic plan for the 2011/12 financial year, the Department had made sure that there was a direct linkage of the estimates of national expenditure to the strategic plan of the Department. Indeed that strategic plan for the year going forward was submitted last week. Mr Balzer was, however, afraid that Members would find the same mismatch during the 2010/11 year as well. However, in the quarterly reviews, the Department made every effort to link the estimates of national expenditure and the strategic plan to ensure that the linkage was in place. This was the action that Mr Balzer had taken to prevent a recurrence of the issue that the Auditor-General had raised in both the WTE and the main account.
Mr Thobejane asked if any one official had been responsible for causing the Department to be inconsistent in following the Treasury Regulations.
Mr Balzer replied that the Department prepared the Annual Report collectively.
The Chairperson said that, under the law, the head of department was ultimately responsible.
Mr Balzer hesitated to discuss the charges.
The Chairperson said that the charges could be dealt with under agenda item 4 – investigation report into certain alleged procurement irregularities.
Mr Thobejane argued that here he was concerned with obtaining an answer to his question above.
Mr Balzer hesitated to reply.
The Chairperson said that he suspected that some of these transgressions were not taken seriously by departments, and that often no disciplinary measures were taken against officials. However, there was no Treasury Regulation or section of the law that was minor. It was this absence of consequences that then developed into a failure to comply on a whole range of matters. This was the point of Mr Thobejane's question, especially as it related to senior management.
Adv Holby replied that replied that there were 13 counts all based on non-compliance with Treasury Regulations and Departmental procedures for procurement. The Auditor-General's Office had assisted the Department in testifying in that process and the officials were found guilty. Moreover, the Minister had decided to take it a step further by pursuing criminal action against the individuals concerned, as well as engaging the Special Investigating Unit (SIU) for the possible recovering of monies through the Asset Forfeiture Unit. So there had been serious consequences as a result of these infringements. Because it was in a legal forum, Mr Botha could not disclose the nature of it, but he could assure Members that the officials were charged on violation of the Treasury Regulations.
The Chairperson was satisfied.
A Member hoped that the issue of the asset register would not recur in the 2010/11 audit report.
Mr Balzer confirmed, as he had done earlier, that the Department had indeed carried out the reconciliations. However, the proof would be the Auditor-General's opinion.
The above Member asked to what extent the Department was using consultants and for how long they would be used.
The Chairperson said that a performance report on the use of consultants was awaited.
Mr Balzer confirmed that consultants – professional service providers, had been used, by way of valuing assets, to assist the Department in the compilation of the asset register. Many of the Department's assets were engineering structures which required specialised valuing skills.
Mr Balzer requested permission to supply subsequently information on the cost of hiring the consultants.
The Chairperson agreed.
Water Trading Entity (WTE)
Mr Steele asked about the capacity of the staff. Most of the problems appeared to derive from insufficient capacity and leadership. Moreover, some of the problems with capacity were not of a very advanced nature. He asked if the WTE had any leadership or capacity shortcomings which the Department as a whole did not. It appeared from the audit report that the WTE was somewhat an orphan – or rather a Cinderella, which was even worse. He hoped that the WTE was not seen by the Department as a place to put inadequate staff and poor leaders.
Mr Balzer replied that there was no intention whatsoever to treat the WTE as inferior. He had an obligation to treat both WTE and the Department equally. The vacancy rate in the Department's finance rate was 30%, which was the highest vacancy rate within the Department. The WTE account and the Department's account were managed by a single chief financial officer (CFO). The former CFO was under suspension and undergoing a disciplinary process. In consultation with the Minister, and after consulting the Accountant General, the Department had decided to split the two accounts and appoint a separate CFO for each account. Various options had been explored. A person with energy and drive was sought, not necessarily someone on a retirement programme. The Department had settled on the option of seeking a CFO on secondment, with the concurrence of the National Treasury, from the private sector. Five companies had been approached, with a closing date of Friday, 18 March 2011.
Mr Balzer added that the Department had already begun work on a turnaround strategy for the WTE account.
The Chairperson was satisfied.
Mr Steele observed that Mr Balzer's was the kind of candour that the Standing Committee admired.
Mr Steele, however, thought that appointing a separate CFO for each account was a fairly natural solution that could have been adopted years before. There was a very real chance that fraud and corruption would enter where non-compliance became a culture. This was the bottom of the Committee's concerns.
Mr Steele referred to the problems of the suspense account (Annual Report, page 185). These were matters that a competent financial management system would actually address. Accounts were not being cleared on a monthly basis, and reconciliations were not being confirmed in order to confirm the balance of the accounts. As a consequence the Auditor-General could not find to whom the money should actually be allocated. He asked the Department to please explain how this state of affairs was allowed to exist and to continue year after year.
Mr Balzer replied that unallocated accounts were partly the cause of the problems with the suspense account because of the non-availability of reference numbers for the clients that the Department served. This was an issue that was now being dealt with. He conceded that the Department had also failed to clear that suspense account on a monthly basis. Action had been taken to ensure that the suspense account was cleared on a monthly basis.
Ms Fundakubi added that it was the significance of the amount that had caused the seriousness of the qualification as to the suspense account. However, as Mr Balzer had indicted, the Department was now endeavouring to ensure that the suspense accounts were cleared and unallocated amounts followed up.
Mr Steele said that this response led naturally to his next question on the accuracy of the WTE's client records, including what clients owed. This was all to do with the water related services revenue section, to the accounts receivable section in the Auditor-General's report. At the heart of the Auditor-General's concern was the issue of the accuracy of the records. Did the Department know who owed it money? Did the Department pursue debtors? Did it let accounts become so old that eventually it had to write them off to the tune of hundreds of millions of rands in bad debts? Moreover, were there consumers, who, because they knew that the Department could not determine accurate figures for accounts, actually decide for themselves what they owed the WTE? Mr Steele suspected that this was happening. The Auditor-General had reported that only 4% of the enquiries that the Auditor-General had sent out, to confirm the amount that debtors owed, were returned. The confirmations showed significant discrepancies between the amount that management had showed was outstanding and the amounts that customers indicated were owed. Thus Mr Steele suspected that the customers were determining what they should pay. This was about as close to financial chaos as you could get.
Mr Balzer said that the user information did not reside within finance. It resided within the Department's Water Use Authorisation and Registration Management System (WARMS).That information was on a monthly basis transferred to the trading entity, which then issued the bills.
Mr Steele understood that the Department had a data base of consumers from which information was transferred monthly to the financial management system, which presumably meant that the systems were not integrated. This was beginning to get worse than Mr Steele had thought possible.
Mr Balzer confirmed that they were not integrated, thus it was manual linking on which the Department depended. The WARMS data base resided outside finance and information from it was transferred to the Systems, Applications and Products in Data Processing SAP system.
The Chairperson acknowledged this response.
Mr Steele said that this matter of systems not talking to systems must be highlighted in the Standing Committee's report.
Mr Steele asked if the Department looked to the State Information Technology Agency (SITA) or some other service provider. The Department could not operate on this basis without the kind of consequences seen here.
Mr Balzer added that the WTE operated on a SAP platform – an enterprise resource system. This had been implemented in 2006. The version that the Department was using was already two generations old in that updates had not been implemented. Mr Balzer was due to meet the chief executive officer of SAP Africa just to see how the Department's current SAP platform could be brought up to date. There were also a number of modules in that SAP platform which, like the utilities module, were not activated. Mr Balzer was investigating why these were not activated. Mr Balzer regretted that he had to respond on work that was in progress.
The Chairperson asked who was supposed to activate it and why the person concerned had not done so. All sorts of possibilities might have arisen out of that failure to implement the utilities module. However, the Chairperson was confident that the Portfolio Committee would monitor the Department's progress in this regard.
Mr Steele said that a specific aspect of the trade receivables (Annual Report, page 208) was impairment provision. He wanted to focus on the collective assessment of trade receivables. The WTE risk categorised the balance of the trade receivables under certain categories, as indicated in the Annual Report. How did the WTE have bulk payers, who made up 60% of the trade receivables, who owed for over 150 days?
Mr Balzer asked Ms Fundakubi to respond.
Ms Fundakubi acknowledged that the Department needed to monitor its accounts closely and regularly, without any delay.
Mr Steele said that this was the understatement of the day. The Department's clients were clearly “ripping it off big time”.
Mr Balzer added that the Department had examined the risks of that account. In some instances the reconciliation of those debtors went back to 2002. This was quite a mammoth task that had to be undertaken.
The Department hoped to eliminate the need to reconstruct debtors' accounts, which was time consuming. The allocation of account managers for key customers was also being examined. Part of the solution would be the activation of the utilities module of the SAP platform.
Mr Steele moved on and referred to the Annual Report, page 186 – the issues related to irregular expenditure, and page 227, table 27 of the financial statements. He listed the items, which all related to weak internal control. He asked who was responsible and what sanctions were being applied.
Mr Balzer replied that warning letters had been issued to the project managers concerned. The acting head of department at the time had condoned the expenditure. There were three items that were still being dealt with. Despite condonement in six cases, warning letters had been issued. From a governance point of view
Mr Balzer was establishing a risk management committee in the Department, of which committee the branch heads would form the core. The Department had invited three of its entities to nominate its risk managers for service on this committee. The Trans-Caledon Tunnel Authority (TCTA), Umgeni Water and Rand Water had put forward names. That committee would hold its first meeting on Thursday, 17 March 2011. Mr Balzer would open the first meeting, at which a chairperson would be appointed. Thereafter the committee would report to Mr Balzer.
Mr Balzer said that the Department had responded to the control environment by putting in place governance, risk management and compliance frameworks which had been considered by top management and would be taken forward into the new risk management committee to ensure that the Department improved on the control environment of the Department.
Mr Steele advised the Department to consider whether the issuing of warning letters was actually sufficient. Perhaps there should have been some further investigation as to whether there were any conflicts of interest or whether there were any other reasons why these procedures were conveniently ignored. This was something that should be deliberated upon.
The Chairperson asked if this would be investigated. Such advantaging of service providers over others did not happen innocently.
Mr Balzer agreed with the Chairperson. Those warning letters had been issued prior to his assuming responsibility.
As Adv Holby had indicated previously, most of these tenders had formed part of the package which the Department had referred to the SIU. “The other process evolves out of that.”
Mr Balzer, knowing that these warning letters had been issued, was now investigating on a different basis, and rather than investigating each tender internally, on its own, the Department had put them into a basket for the SIU to investigate in order to assist the Department.
The Chairperson acknowledged this response.
Mr Steele expected that the Standing Committee would have to schedule another engagement with the SIU. As a cynical Member of the Standing Committee, as soon as he heard the word “condonation” of irregular expenditure he would question the condonation as much as the irregular expenditure.
Mr Steele was, however, comforted by that assurance and looked forward to hearing the outcomes of that SIU investigation.
Mr Steele asked about the significant uncertainties of the WTE (Annual Report, page 215 – contingent liabilities. He was well aware that this matter was sub judice. The author of the Annual Report had not stopped at reporting an outstanding issue relating to Group 5 Construction versus the WTE. He or she had then gone on to editorialise and say that the entity was confident of its success. By doing so, the obvious question was invited which would invalidate the whole sub judice provision. What on earth was the basis of this confidence, and should it have appeared in a report of this kind?
The Chairperson agreed with Mr Steele. He was sure that the Department would take note of what Mr Steele had said.
Mr Balzer could not agree more with Mr Steele.
The Department confirmed that the matter was sub judice, but did not know the date when this matter would be heard.
Impairment of WTE infrastructure assets (Annual Report, page 186)
Mr Steele referred R446 million impaired because of assets that were functionally unable to fulfil their purpose because of unsuitable design and lack of functionality on account of the accumulation of silt. Mr Steele declared an interest because in his own municipality there was a dam that was deemed impossible to manage because of a build-up of silt and which was about to be sold by tender. How did the Department build an asset without a plan to maintain it? How did the Department decide when it was no longer worthwhile to maintain an asset? How did the Department deal with silt accumulation?
Dr Ruiters replied that, in the design of any dam, provision was made for storage and the accumulation of silt.
Mr Steele noted that an actuarial model did seem to be applied to dams. However, this was work for the relevant portfolio committee, whereas the Standing Committee was concerned with whether such a model had been devised in a financially responsible way. Mr Steele believed that R446 million was a large sum to write off in a year.
Mr Steele would highlight again the issue of leadership and the oversight responsibility that the Auditor-General had highlighted on pages 187-188. He quoted from the Annual Report.
Mr Steele asked the Department to report on leadership and systems.
The Chairperson commented on skills capacity and financial management (Annual Report, page 179). Moreover, this lack was accompanied by absence of direction.
Mr Balzer thanked the Chairperson for pointing out these matters, although his earlier responses had touched upon them. He referred Mr Steele to the Annual Report, page 195, in respect of his earlier question on the expected useful life of infrastructure, some of which, such as tunnels, might be expected to last up to 300 years.
Mr Steele remarked that aqueducts built by the Romans were still in use.
Ms T Chiloane (ANC) asked a follow-up question about irregular expenditure (Annual Report, page 140). She asked about the amount of R4.6 million which was condoned by the Acting Director-General because of services that were rendered without the Department's authority. She asked for clarity.
Mr Balzer replied that the irregular expenditure had been condoned by the Acting Director-General but warning letters had been issued.
Ms Chiloane asked about the revenue in terns of the South African (SA) Standards of Generally Accepted Accounting Practice (GRAP). There was an amount which was returned to sender by the Department. Perhaps the Auditor-General could assist? What procedures did the Department follow in regard to revenue returned to sender?
Mr Balzer replied that this item appeared on page 185 of the Annual Report. He had responded to this when dealing with the risks related to revenue, and the linkage between the WARMS and SAP. No return to sender revenue would be reversed in future. Steps were being taken to trace customers. Thereafter an assessment of the ability to recover the money would be done.
Mr Balzer said, moreover, that the Department had appointed some graduate contract staff to assist within the WTE to follow-up on the return to sender accounts. This was part of the risk management plan.
Mr Balzer said that the Department had taken on contract staff to deal with the backlog. These contract staff would work under the guidance of a manager in the WTE.
Ms A Muthambi (ANC) asked about irregular expenditure. She noted that the only action taken was with regard to the surplus.
Ms Muthambi asked about the other matters. Action must be taken in terms of the Public Finance Management Act (PFMA).
Mr Balzer replied that this action had not been taken at the time of preparing the Annual Report. However, he undertook to provide a detailed schedule by Tuesday, 22 March 2011.
Ms Muthambi asked about human resources matters, in particular, the way performance bonuses to senior management staff (SMS) were awarded.
Mr Balzer replied that there had been no such payments as yet. He would deal with the moderation of the assessments in about two weeks time.
Ms Muthambi referred to the Annual Report, page 124, table 4.1, on salaries and wages. For what was the figure of R12.676 million as performance?
Mr Balzer replied that it was for work done in the previous year, 2008/09.
Ms Muthambi asked about the dismissal of the former Director-General. Was the dispute about the dismissal?
Adv Holby replied that the dispute was about the dismissal.
The Chairperson thanked the Department.
Auditor-General's Investigation Report into certain alleged procurement irregularities (tabled May 2010)
Mr P Pretorius (DA) quoted the Auditor-General's findings.
Mr Pretorius asked about corrective measures. Adequate leadership oversight was the core issue. Deficiencies here accounted for the “big stain on the Department”.
Mr Pretorius quoted further from the Auditor-General's Investigation Report. He regretted that the previous Minister, previous Deputy Minister, and previous staff members were not present. It was to the previous Minister's credit that she had acted to suspend the previous Director-General. However, ministerial oversight should go much further than that.
Mr Pretorius referred to Auditor-General's Investigation Report, pages 9-10. He asked about the then Minister's and then Deputy Minister's overseas travels, while, in a sense “Rome was burning” in the Department. Maybe there was value to be added by these trips, but he was doubtful. He pleaded with the current Minister not to do the same, but to be hands-on in the Department, not that she should do the work of the Director-General. However, there should be healthy interaction and political oversight.
Mr Pretorius quoted the specific findings.
The Chairperson asked what had happened since May 2010 on the findings of this Report.
Mr Pretorius said that Members already knew, since Adv Holby had reported that certain people had been found guilty and criminal proceedings were now in progress.
Mr Pretorius said that an information technology (IT) contract originally worth R180 million had been extended in contravention of regulations and its value had increased to R1.056 billion. Moreover, the Auditor-General could not find a signed contract. Was it still the case that no signed contract was to be found?
The Chairperson asked if the contract was ever found subsequent to the Auditor-General's Investigation Report.
Mr Balzer replied that, to the best of his knowledge, a contract had been signed. The company concerned had been taken over, and the contract had had to be ceded on a legal basis. That process was concluded towards the end of 2010.
Mr Pretorius asserted that the Auditor-General had reported that the information was there but had come from an unsigned contract. Perhaps the Department had lost its own copy of the contract.
Mr Balzer said that the present contract, with T-Systems, expired in September 2011. SITA was involved in reviewing the Department's business plan for the engagement of an outsourced contractor. The transition period should be, if all went to plan, from 31 July 2011. That procurement process had thus been instituted.
The Chairperson accepted this response.
Mr Pretorius sought an assurance that the contract would not be extended on a month-to-month basis or six month basis like the previous contract.
Mr Balzer replied that he “would not fall into the same trap”. This was why the Department sought a new contractor by September 2011. Moreover, the new contractor must be appointed before the expiry of the present contract in order to ensure a transition period.
The Chairperson acknowledged this response.
Mr Pretorius cited a second instance in which the Auditor-General could not find a contract.
Mr Balzer replied that his colleague had just informed him that in this case the signed contract had not come to the fore.
Ms Fundakubi said that, at the time of the investigation, the documentation could not be found. The situation remained the same.
Mr Pretorius urged the Department to prevent a recurrence and asked how it dealt with signed contracts.
Mr Balzer replied that the custodian of contacts was supply chain management.
Ms Fundakubi said that the situation had since been corrected with regard to the management of documents. The project manager was informed prior to the expiry of a contract.
Mr Pretorius asked if there were any other contracts missing.
Ms Fundakubi replied that were some documents missing from the file of contracts, but not contracts per se.
Mr Pretorius asked if they were filed wrongly.
Mr Balzer confirmed that the Department did find that some documentation was missing when it did investigations. He suspected that documentation was intentionally mislaid. Supply chain management did its best to reconstruct those documents.
Mr Pretorius suspected that too.
Mr Pretorius quoted further observations of the Auditor-General, to the effect that senior managers should not allow themselves to be influenced by personal relationships and should recuse themselves when there might be a conflict of interest. What did the Department do to ensure that there was no conflict of interest when signing contracts?
Mr Balzer explained the Department's procedures for declaring interest. Staff members who had an interest would not be part of that evaluation of a tender. All those declarations of interest would be on the record.
Mr Pretorius asked if there was any connection between an apparently favoured company and any of the senior officials at the time.
Adv Holby replied that this was exactly why the Department had charged the former Director-General. As a result, the former Director-General was found guilty of misconduct. Unfortunately, the scope of the proceedings was limited to the violation of the process. The possibility of any additional benefits was subject to the SIU investigation.
Mr Pretorius asked why the amount of the contract was increased from R3.8 million to R4.1 million.
Mr Balzer replied that these were the exact issues which the Department hoped to ascertain from the next stage of its investigations.
Mr Pretorius asked about the appointment of travel agents, and interference by the then Director-General.
Mr Balzer replied that this was also the subject of investigation but these three travel agencies' contracts had expired in 2010. As a result of a procurement process a new travel agent had been appointed.
Mr Pretorius reiterated his call for stronger ministerial involvement and believed that the present Minister would heed that call.
The Chairperson thanked Mr Pretorius.
Mr N Singh (IFP) commended the Department on taking action against the former Director-General, otherwise there could have been greater losses to the state.
Mr Singh asked if any of the contractors referred to formerly employees of the Department.
Ms Fundakubi said that the Department did not have that information as yet.
Mr Singh asked how the Department paid in the absence of a signed contract.
Ms Fundakubi said that any payment in the absence of a signed contract was irregular. A master contract may have been signed and used as the basis for payments.
Mr Singh could not understand the concept of a master contract.
Mr Balzer replied that in the case of a particular contractor, there was a master contract system in place. Those contractual arrangements had been attended to.
The Chairperson thought that it was more the deviations that were at issue.
Mr Singh asked how the Department appointed consultants (Annual Report, page 274-277). This was R115 million worth. There was a list of projects, but no list of the consultants hired. Who were these 72 service providers?
Mr Singh asked why in-house capacity was not being developed.
Mr Balzer undertook to provide a list of consultants.
Mr Balzer said that some of the consultants were contractors for projects. They were put under the same heading. In future contractors would be separated from professional service providers who were consultants.
The present high level reflected the vacancy rate, but also the Department's need for specialised services.
Mr Thobejane asked how far the Department had progressed in implementing the Auditor-General's recommendations.
Mr Balzer said that, “in a way”, he had already responded to those issues. He had tried to indicate, in his answers to various questions, the measures taken. He believed that the Department had taken 'fairly substantive steps” in addressing those weaknesses.
Mr Thobejane asked if the Department, holistically, had a time frame for implementation of the Auditor-General's recommendations.
Mr Balzer responded that it was an ongoing exercise. Much of the Auditor-General's work was done on samples and the Department picked up some anomalies that the Auditor-General did not. Some issues were identified through the Presidential hotline. It was “an ongoing struggle” to deal with fraudulent activities and attempts to bypass controls. Mr Balzer informed the Minister of the action that he, Mr Balzer, had taken.
Mr Ainslie said that the Annual Report made no reference to acid mine drainage. However, this related to several of the Department's programmes, and the Department was part of an inter-ministerial task group on the subject. Would action against acid mine drainage entail any additional expenditure for the Department.
Mr Ainslie referred to the principle in South African law that the polluter paid. Had the Department considered legal action against the directors of offending mines?
Mr Balzer acknowledged that acid mine drainage was not in the Annual Report, but that additional expenditure would be incurred. There would be provision in the 2011/12 budget of the Department. In terms of Sections 19 and 20 of the National Water Act the Department would attempt to recover some of the costs of its intervention.
Mr Pretorius asked if the former accounting officer would, additionally, be prosecuted in terms of Section 38 of the PFMA. This was of importance to the Standing Committee.
Mr Pretorius quoted Section 86 of the PFMA which detailed the consequences.
Adv Holby replied that the Department had not only pursued Section 38 but also several violations of the Treasury Regulations.
Ms A Muthambi (ANC) asked about the other officials in the system who were implicated.
Ms Muthambi was very concerned about the use of consultants. She wanted a list of them, and she asked if the Department had a cooling off period after staff had resigned before they could return in the capacity of consultants.
Adv Holby replied that on 23 November 2010 the Department had already informed eight other officials who formed part of the Department Bidding Adjudication Committee (DBAC) that they were in fact also under investigation. The Department had currently outsourced some of those investigations to external auditors. The action was not just limited to the top management but extended also to the level of other officials.
The Chairperson asked if it was a fact that a good number of the service providers that the Department was engaging were people who used to work in the Department.
The Department responded that, on an individual basis, the Department did not have any employees who were consultants themselves, but in the specialised fields, such as construction, there might be former employees who were working for other entities that served the Department on contracts.
The Chairperson asked if there was any “cooling off period”.
The Department responded that it did not consider employees for service as contractors unless they had been out of the Department's service for more than five years.
The Chairperson asked if there was compliance with this policy.
The Department responded that on an individual basis the answer was “yes”. However, when contracts were signed with companies, it might be discovered later that individuals working for that company had been employees who had left the Department less than five years previously.
The Chairperson asked what the difference was. For the Committee the issue was compliance.
The Department responded that these former employees did not present themselves as owners, but as, for example, a geohydrologist employed by another company that submitted bids, and they might be listed as a specialist working on the project.
Ms Muthambi was not satisfied. She alluded to possible conflicts of interest, and she had witnessed such in her area.
The Chairperson said that the issue was not merely to talk to the conceptual framework. What was under discussion was the implementation and practical framework. It was indeed an issue that needed further examination.
The Chairperson noted that the National Treasury and Auditor-General’s delegations were listening with keen interest and nodding their heads.
Mr M Steele (DA) said that it was very important to be clear whether someone was employed as a consultant or as an employee or as a director or in any other capacity in a company, since there were big legal issues as to the status of such a person. Consequently there were limitations on employment in terms of five or three year periods. It was necessary to be very careful.
Mr Singh objected that this did not prevent a colleague from asking a question. All Members wanted was information. Members were not making any assertions.
The Chairperson assured Mr Singh that all Members of the Committee were on “this side of the house”.
The Chairperson thanked Members for the interaction.
Mr Mathebe was very much disappointed to hear the officials denying the issue of consultants, because, in the Portfolio Committee, the officials had admitted that there were those who had been employees of the Department and later returned as consultants. Moreover, the Portfolio Committee was still awaiting the names of those consultants, after the Portfolio Committee had requested the list from the Department. There was no building of capacity in this Department. There were no understudies. If someone left, he later came back and did the same thing that he had being doing before as an employee.
Mr Mathebe also said that he was disappointed to hear the Acting Director-General saying earlier on that even this year there would be a recurrence of some of the issues that the Auditor-General had identified previously. When the officials from the Auditor-General’s Office had come to brief the Portfolio Committee, they told the Members that they, the officials, had proposed some quarterly meetings with members of the Department in order to help the Department put its affairs in order before even doing a formal audit. Mr Mathebe asked if those meetings had materialised. If they had, why were these things still recurring? If these meetings had not happened, why not? Failure to conduct the meetings would have indicated a reluctance to comply with the issues that had been identified, and somebody must take responsibility.
Mr Mathebe said that the Department should have begun to investigate these issues much earlier.
Mr Mathebe said that another issue was the writing off of some debt referred to by the Acting Chief Financial Officer. He asked if the Department continued to do business with those companies whose debts it had written off.
The Chairperson advised the Minister and the Acting Director-General that he did not want to hear officials giving answers that were deliberately misleading. He hoped that the names of the officials would be provided. “That is wrong and is totally unacceptable.” If one did not take Parliament seriously, it meant that one did not take the people seriously. Proper contextualisation of the engagement was needed. He hoped that the Acting Director-General and his team would be able to get the ship back on course. It was necessary to make sustained progress.
The Chairperson recalled that when the WTE came to the Portfolio Committee in 2010, its reports had just been too bad. He hoped that the interventions put in place would bear fruit.
The Chairperson said, with regard to the internal audit, that it should be dealt with in the same way that the Department was dealing with the issue of the separate CFO for the WTE.
The Chairperson said, with regard to the issues around non-compliance, that the Standing Committee merely wanted to insist on compliance with the legislation and regulations. If rules were not observed, they must be enforced, and there must be oversight to ensure enforcement. Impunity was antithetical to the Standing Committee’s sense of what was right. The Standing Committee stood behind management that acted with vigour.
Minister of Water and Environmental Affairs’ response
The Minister appreciated the opportunity for the Department to account to the Committee on a voluntary basis rather than in response to sanctions. It was, indeed, necessary to account. It would be easy as the Minister simply to let management take care of all the problems. It would also be easy as the Minister merely to defend and protect the Department. Members, on the other hand, could have chosen to ask “sweetheart questions”. Anyone present could have taken the easy route, but no one had done so. The Minister acknowledged that the Department was handling public money and that it was necessary to comply. It was necessary to be as vigorous as possible in ensuring that there was compliance and adequate accountability. The Minister assured the Standing Committee that the Ministry and Department would do its best to address the issues that had been raised by the Auditor-General as well as the issues raised by the request of the former Minister, who had asked that those matters be investigated. The Ministry and Department would follow through on them. This was an obligation on the Ministry and the Department.
With reference to the political questions raised by Mr Pretorius, and the implication that the number of trips referred to in the Annual Report 2009/10 by the former Minister and the former Deputy Minister might have disturbed the ministerial oversight role, the Minister assured the Standing Committee that the Ministry would definitely fulfil that oversight role, as it had always done in the past, without necessarily laying aside the other tasks that the Ministry had to do. The Minister and Deputy Minister were obliged to travel across the world to carry out those other tasks. The Minister was sure that the former Minister and Deputy Minister were not simply visiting just for the sake of it, and the Ministry could not reduce its visits in response to observations in the Standing Committee; however, the Minister and Deputy Minister would fulfil both responsibilities.
There had been issues about dismissals of members of the Department. There were issues as to whether there would be immediate improvement. “I don’t think we want to sit here and lie to you; that’s not part of our job.” The Minister conceded that there were issues that kept coming and raising their ugly heads. Thus the SIU was being brought in to investigate and to assist in retrieving some of the monies that had been “lost”; however, contrary to Mr Singh’s view, the Minister did not think that this money had been lost. However, there would be some areas where it was necessary to retrieve funds.
The internal issues of leadership in management, including the WTE, had been noted. The Ministry and Department were working day and night to ensure that this capacity was acquired, especially with regard to turning the WTE around. However, the Minister acknowledged that there was “a near crisis” in the WTA and addressing it required measures beyond those discussed in today’s meeting and a long term evaluation of the WTE was in progress. The management present had done a great deal.
The Minister did not think that the issues of accounting lines, were fundamental to the problem of the WTE, but it was necessary to clarify these matters
The Minister acknowledged the assistance of the former Minister, and she affirmed that there existed the required leadership capacity in the Department; what had been lacking in the past was sufficient leadership enforcement within the Department – “enforcement at the top to drive the entire team”.
The Minister assured the Standing Committee that the Ministry and Department would “stop at nothing”.
The Minister had already agreed that in the issue of acid mine drainage the polluter had to pay by means of an environmental levy or tax.
The Minister would forward information to the Standing Committee on the use of consultants and in what capacity some former members of the Department had returned as such. It had never been the intention of the Department to hide information. Noting that members of the National Treasury and Auditor-General delegations were listening very carefully, the Minister said that the Ministry and Department would never accept the practice of javelining.
The Minister said that the Department would continue sending progress reports to the Standing Committee without being requested to do so.
The Minister said that the matter of the Director-General had already been discussed. The term of office had come to an end on 28 February 2011. There were some matters pending at the conciliation level. Having had discussions at the level of the Department of Public Service and Administration (DPSA), the position would be advertised.
The Chairperson thanked the Minister and appreciated that the political leadership was exerting itself to improve the situation in the Department and with regard to the WTE.
The meeting was adjourned.
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