Implementation of the Financial Disclosure Framework; Consolidated Monitoring and Evaluation Report on Department of Human Settlements; Profiling and analysis of the most common manifestations of corruption and its related risks in the Public Service

Public Service and Administration

21 June 2011
Chairperson: Ms J Moloi-Moropa (ANC)
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Meeting Summary

The Committee met with the Public Service Commission and the Departments of Human Settlements and Public Service and Administration to discuss reports related to the Financial Disclosure Framework, corruption and monitoring and evaluation reports. The Commission gave a presentation on the implementation of the Financial Disclosure Framework for the financial year 2008/2009. The Commission had since the 1999/00 financial year been responsible for the management of the Framework for senior managers in the Public Service. The Framework was initially only applicable to Heads of Departments  but since 2000/01 it had applied to all senior managers. The average rate of disclosures was 80% but the Commission wanted a rate of 100%. The Western Cape had the highest percentage of disclosure forms submitted at 94% and the Free State and Gauteng had the lowest percentage at 27%. The presentation also spoke to the scrutiny of financial disclosures, the identification of potential conflicts of interests and the scrutiny of disclosures of Heads of Departments. Some recommendations by the Commission included charging senior managers with misconduct and strengthening conflicts of interest regulations.

Members asked whether financial disclosures were verified for accuracy. They also wanted to know what sampling techniques were used for the study of potential conflicts of interest. The reason for the non-compliance of the Framework and the powers the Commission with regards to disciplinary actions were questioned. Members commented that the information in the report was old (2008/09) and suggested that the Special Anti-corruption Unit had to assist departments with cases of potential conflicts of interest.

The Commission presented its report on the consolidated Monitoring and Evaluation report of the national and provincial departments of human settlements for the 2009/10 evaluation cycle. The presentation included the background and purpose as well as the ranking of the departments. The Western Cape department was found to be the highest (86%) with the Eastern Cape and the North West performing the poorest. A comparison between the previous and the 2009/10 assessment was given. Issues related to the three highest and three lowest scoring principles were outlined and discussed. Overall, one of the provincial departments was struggling to institute sound administrative practices. Encouraging was that there was substantial improvement in performance overall as five of the seven provincial departments improved their performance by more than 10%.

Members suggested that best practices from well performing provinces should be shared with other poorer performing provinces. Limpopo province, which had declined in performance, was of concern and the presentation lacked recommendations as these were not given at all. Members also wanted to know why it was taking the Department an average of 339 calendar days to fill vacant posts as this was too long. Members questioned the process of allocating beneficiaries to houses in cases where complications arose, such as the death of the parent whereby children were left stranded.

The final presentation by the Commission was on the profiling and analysis of the most common manifestations of corruption and its related risks in the Public Service. The presentation included an introduction and an outline of the objectives of the National Anti-corruption Hotline which included detecting incidents of potential corruption by enabling callers to report incidents and successfully investigating alleged corruption cases. Cases of alleged corruption reported to the Hotline as at 31 June 2010 was 7 766 and the largest number of allegations investigated by departments were on fraud and bribery (1 511) and the mismanagement of Government funds (985). Some of the key findings by the Commission included that 50% of the departments assessed had clearly written objectives on fighting corruption but they tended to put little emphasis on investigating allegations of corruption. The Commission also found that departments were too lenient in imposing disciplinary sanctions against corrupt officials found guilty of fraud and corruption, as they usually got off with a written or final warning or no action at all. The Commission recommended that departments should report all fraud and corruption related activities to the South African Police Service in order for criminal action to be taken against perpetrators. The Commission also recommended that Heads of Departments must be held accountable and responsible if they did not ensure that a disciplinary enquiry was resolved within 60 days, depending on the complexity of the matter and length of the investigation. More could be done in combating and preventing corruption if strategies, structures and anti-corruption capabilities were well co-ordinated.

Members were disappointed that 63% of cases were still outstanding and suggested that the process needed to be speeded up. Members said that the longer a case took to be finalised, so many things could happen in the meantime which would result in cases losing their strength and eventually leading to the closure of such cases without a resolution. Members also suggested that investigations could be assisted by other institutions where departments did not have the capacity to investigate their own cases. 

Meeting report

Implementation of the Financial Disclosure Framework: presentation
Dr Dovhani Mamphiswana, Deputy Director-General, Intelligence and Anti-corruption, Public Service Commission (PSC) said that the PSC had since the 1999/00 financial year been responsible for the management of the Financial Disclosure Framework (FDF) for senior managers in the Public Service. The FDF was initially only applicable to Heads of Departments but since 2000/01 it had applied to all senior managers. The objective of the FDF was to manage the potential conflicts that may have existed between a senior manager’s private interests and public responsibilities in order to ensure that actual conflicts of interests did not occur. The PSC had since the inception of the framework placed major focus on ensuring compliance with the submission of financial disclosures which was a regulatory requirement in terms of Chapter 3 of the Public Service Regulations. All members of the Senior Management Service (SMS) should submit their disclosure forms by 30 April to the Executive Authorities (EAs) and EAs should submit copies of the forms to the PSC by 31 May.

Dr Mamphiswana explained that the rate of compliance had stabilized around the 80% mark over the last five financial years. However, the PSC was of the view that only 100% compliance rate would be acceptable. The responsibility of ensuring that disclosures were submitted to the PSC timeously rested with the EAs. Since the implementation of the FDF, the PSC had consistently reminded EAs to submit the outstanding financial disclosures of the senior managers and advised them to institute disciplinary measures against defaulting senior managers. Reminders were also on several occasions forwarded to the EAs by the Minister of Public Service and Administration at the request of the PSC. Despite such reminders, a 100% compliance rate had not yet been achieved and there had been no evidence of senior managers being charged with misconduct for failing to comply with the FDF. By the due date of 31 May 2009, the disclosure forms of 40% SMS members (39% from national departments and 58% from provincial departments) were received. The Western Cape had submitted the highest number of forms at 94% and the Free State as well as Gauteng had submitted the least at 27% respectively.

Dr Mamphiswana went on with the scrutiny of financial disclosures. Apart from compliance monitoring, the PSC had intensified its efforts with the scrutiny of the financial disclosure forms in order to identify potential conflicts of interests. For this purpose, the PSC scrutinised the financial disclosures of 30% of all senior managers that submitted their disclosures within a given financial year by the due date of 31 May. The sample included the Northern Cape, Gauteng and the Free State provincial departments as well as ten national departments namely Cooperative Governance and Traditional Affairs, Education (both departments), Human Settlements, Home Affairs, Labour, National Treasury, Office of the Public Service Commission, Public Administration, Leadership and Management Academy, Presidency, State Security, Sports and Recreation South Africa, and Statistics South Africa.

In scrutinising the disclosures of the sample of senior managers, the PSC assessed whether the private interests declared by senior managers could pose a potential conflict with their official responsibilities. This was done by assessing whether there was a link between the official duties of a senior manager and the business activities of a company or consultancy in which the senior manager held a Directorship or Partnership. If a senior manager was involved in three of more companies, in which instance he or she would in all probability, not have the time to devote his or her full attention to his or her official responsibilities; and two or more officials from the same department were involved in the same company or companies as such officials could make decisions on awarding of contracts that favoured on another.

Dr Mamphiswana highlighted that in order to verify information on the financial disclosures, the PSC, however, obtained information on the Directorships and Partnerships held by the senior managers from the Companies and Intellectual Property Commission (CIPC)’s data base and on properties owned from the Deeds Register. Out of the 2 628 financial disclosure forms scrutinised, the PSC identified 542 senior managers that may have potential conflicts of interest between their private interests and official duties. This total represented 20% of all senior managers that formed part of the sample. The highest number of potential conflicts of interest at provincial level was identified in Gauteng province (162) whilst the highest number in a national department was identified at the National Treasury (45). The fact that 20% of all senior managers that formed part of the sample may experience potential conflicts of interest illustrated the importance of a system such as the FDF as a mechanism to prevent corruption. Through the identification of potential conflicts of interest, departments were able to manage the risks associated with the conflicts of interest, and ensure that it did not become an actual conflict of interest. The view of the PSC was that there was nothing wrong in having private interests. However, it was to be expected that there would be occasions when an official’s private interests would come into conflict with his or her public duties thereby becoming an actual conflict of interest. Such actual conflicts of interest should be avoided. Where conflicts of interest could not reasonably be avoided they should be appropriately managed.

Dr Mamphiswana gave the findings on the scrutiny of disclosures of HODs. The scrutiny of the disclosures of HODs was done on the same basis as was the case of SMS members. For this purpose, the PSC assessed the disclosures based on information on the disclosure forms, the CIPC data base and the Deeds Register. The PSC found that 44 HODs had potential conflicts of interest linked to the work of their departments. 41 HODs were involved in too many companies and 11 HODs shared companies with their counterparts in other departments. It was further found that 26 HODs did not disclose their properties. This was in direct contravention of the framework and called for disciplinary action in terms of the Disciplinary Code and Procedures of the SMS Handbook.

In cases where HODs were involved in private companies and where the activities of the companies were linked to the work of the departments, they risked the danger of taking decisions that would favour their companies. Where HODs shared a company with their counterparts, the possibility was that these HODs could make decisions that favoured one another. On the other hand, the involvement of HODs in too many companies (three or more) put their ability to devote full attention to their official duties into question. This was based on the fact that Section 30 of the Public Service Act 1994 stipulated that “every officer shall place the whole of his or her time at the disposal of the State”. The view was that should an official be involved in three or more companies he or she would not, in all probability, have the time to devote his or her full attention to the requirements of the State in terms of his or her official responsibilities.

Dr Mamphiswana said that PSC was also of the view that HODs, as the leaders in their departments should set the example with regards to the framework. HODs had the power to disperse public funds and to authorise programmes. As Accounting Officers they were also exposed to privileged and sensitive information. Therefore, the actions should be accompanied by greater transparency and accountability. There would also be an expectation of greater ethical leadership on HODs. The PSC was of the view that HODs should express such expectations through concrete ethical actions daily.

It was further recommended that members of the SMS be made aware of the fact that they needed to disclose all companies, including dormant and non-profit making companies. Companies for which senior managers were performing work but were not receiving remuneration must also be disclosed. Instances where such managers had been charged with misconduct must also be reported to the PSC. The PSC also recommended that given their Legislative and Parliamentary oversight role, Portfolio Committees should call departments and EAs to account where there had been non-compliance as well as low levels of compliance to the FDF. Through this overview the PSC had come to realise that there was a gap in the regulations regarding the participation of SMS members in Government contracts. It came to light that SMS members had companies which regularly interacted with Government departments by obtaining contracts. However, there was no provision that regulated such interaction.

In conclusion, Dr Mamphiswana said that the management of potential conflicts of interest formed an integral part in the Public Service’s initiatives to become integrity driven. Through the identification and management of potential conflicts of interest honest public servants were kept honest and professional ethics was promoted within the workplace. Compliance with the FDF should therefore not be seen purely as a mandatory requirement but as an ethical obligation of each and every senior manager. Moreover, a disclosure framework should be regarded as part of a larger effort to regulate conflicts of interest situations in the Public Service. While it was a crucial tool for preventing and controlling abuse of office by public servants, it could not deal with the full range of conflict of interest situations that emerged at a departmental level. However, the FDF had assisted in raising awareness among public servants for the need to be transparent and accountable in the execution of their official duties.

Discussion
Mr A Williams (ANC) asked whether the financial interests of those persons who have disclosed were verified.

Mr Paul Helepi, Commissioner, Public Service Commission, replied that the disclosures were verified by the CIPC. However, the data base was sometimes outdated and the accuracy of these verifications was not always at 100%.

Ms M Mohale (ANC) asked what type of sampling technique was done on the senior manager study, whether it was random or whether the PSC focused on a specific department.

Dr Mamphiswana replied that sampling focused on different departments and provinces each year. Where there were trends of non submission, the PSC would consider taking a sample from that same area the following year.

Dr H van Schalkwyk (DA) asked what the reasons for non-compliance were.

Mr Helepi replied that the reasons were multiple but in the end it was the EA’s who did not adhere to the FDF and the PSC was powerless as they had no disciplinary power over departments and provinces.

Mr L Suka (ANC) said that the report was for 2008/09 and this information was old. He would have liked to see the most recent report for 2010/11. There was a gap in the application of disciplinary procedures. However, the recommendations by the PSC were good.

Mr Ben Mthembu, Commissioner, PSC, replied that the time lapse was a concern but the submissions of financial disclosure forms were slow therefore as of the current financial year, the PSC had put advertisements in newspapers and was currently engaging in the disclosure exercise.

Dr Van Schalkwyk suggested that FDF compliance should be included in the employment contracts of senior managers.

Mr Helepi replied that it was stated in these employment contracts but it was not specific enough with regards to disciplinary actions that could be taken. The PSC had made recommendations to departments but in the end it was the responsibility of the department to implement it.

Mr Williams commented that the recommendations made by the PSC were very good. The reminders for submissions were not enough and the departments had to come and account for their non compliance. He suggested that the Anti-corruption Unit should investigate potential conflicts of interest.

Mr Kenny Govender, Deputy Director-General, Department of Public Service and Administration (DPSA), said that the problem with financial disclosures was that it was too decentralized. Discipline rested with the EAs. A possible penalty that could be imposed on those who did not disclose their financial interests was to withhold performance bonuses as well as imposing other types of financial sanctions. A possible electronic submission system was also being developed.

Consolidated Monitoring and Evaluation (M&E) Report on the Department of Human Settlements: presentation
Mr Kobus van der Merwe, Chief Director: Governance and Monitoring, Public Service Commission, explained that the aim of the consolidated report on the housing sector was to provide an overview of the national and nine provincial departments’ performance against the Constitutional values and principles listed in Section 195 of the Constitution. The actual performance of a department was assessed against a set of indicators and standards. Based on the assessment, a score was awarded to the department per principle and an average score was calculated. The 2009/10 sample included all the human settlement departments. The 2009/10 evaluation cycle had an average of 53% (adequate performance). Five or more departments had improved their performance by 10% or more:
Western Cape from good (72%) to excellent performance (86%)
National from 63% to 76% which was good performance
Northern Cape from poor (36%) to adequate performance (55%)
Mpumalanga from poor (23%) to adequate performance (43%)
Free State from poor (22%) to adequate performance (42%)
Of concern were the two departments (Limpopo and North West) where no real improvement in performance was noted.

Mr Van der Merwe gave an overview of performance per principle for the 2009/2010 evaluation cycle. Departments scored the highest against the principles of accountability (75%), transparency (68%) and development orientation (67%). Departments scored the lowest against the principles of good human resource management practices (39%), representivity (37%) and fairness (31%). With regards to accountability, the average score for the ten departments was 75%. Seven out of ten departments received unqualified audit options. There was an 86% compliance with the requirements of a good fraud prevention plan, even though five of the plans did not mention specific strategies for housing projects. The average score for transparency was 68%. Departments complied with the key requirement for annual reporting, namely that performance should be reported against predetermined objectives. With regards to development orientation, the average score was 67%. Departments generally complied with the PSC’s standards. Government had set development objectives for the housing programme beyond the mere provision of a house and as a result housing values had increased by between 13 and 57% between 2003 and 2008 and 35 000 jobs had been created over the last ten years.

Mr Van der Merwe explained the three principles which had the lowest scores. Good human resources management and career development practices had an average score of 39%. There was a limited relationship between the existence of a Work Place Skills Plan (WPSP) and the implementation thereof. None of the departments met the PSC’s compliance standard of 90 days to fill vacancies as it took them an average of 339 calendar days. The lack of effective monitoring of the recruitment process was one of the possible reasons for the delay in filling posts. With regards to representivity, the average score was 37% and the main reason for the poor performance was that two of the three employment equity targets, namely for women and people with disabilities had not been met. None of the departments had met the new target for women at senior management level of 50% by March 2009. All of them had, however, exceeded the previous target of 30%. With regards to the principle of fairness, the average score was 31%. The main reason for the poor performance was that seven out of ten departments did not submit information for assessment against this principle. The key administrative decision affecting the public was the allocation of houses. This was many times experienced as unfair by beneficiaries. The decision was, however, not taken by the departments but by municipalities. The factors determining the allocation of a house was whether a housing project was undertaken in the area where the beneficiary lived, the beneficiary’s position on the waiting list and the vulnerability of the beneficiary.

Mr Van der Merwe concluded by highlighting that overall substantial improvement in performance had taken place. Five of the seven departments that were re-assessed improved their performance by more than 10%. The challenge facing the public housing sector was not a lack of instruments, mechanisms and institutions to manage policy outcomes, but rather the institutionalisation of systems and a performance culture, as well as the capacity and will of all staff members to implement the policies and systems. 

Discussion
Mr Williams said that best practices from one province to another should be shared to improve performance, especially in the Eastern Cape and North West. He disagreed with the statement on slide 16 which stated that informal housing would be more viable for the poor.

Ms Mohale noted that the performance in Limpopo had declined but was still considered as adequate. As a person who came from Limpopo, she considered adequate as not good at all.

Mr Suka said that the presentation should have included recommendations and turn around strategies to problems.

Dr Mamphiswana replied that the recommendations were available in the report itself but not in the presentation. This report was the consolidated report; individual reports with their own recommendations were available on the PSC website.

Mr Van der Merwe added that the recommendations did not directly state how the department should change its process, but rather what types of steps could be put into place to improve supervision by provincial departments on municipalities. They were merely guidelines.

Mr E Nyekembe (ANC) asked why the Department was taking so long to fill vacant posts.

Mr Helepi replied that there were various reasons why the rate of recruitment was so slow. According to law, 90 days was the general rule. The PSC had developed and presented workshops to the department on guidelines on how to improve and fast track the recruitment process.

Mr Phillip Chauke, Chief Director: Monitoring and Evaluation, Department of Human Settlements, added that he had noted the departments who were not performing well. The PSC had the general rule of 90 days to fill a post, but in the department there was a different process due to the difference in qualifications and requirements for different posts. 

Ms J Maluleke (ANC) asked what happened to children of beneficiaries who were on housing waiting lists whose parents passed away.

Mr Chauke replied that there was a specific process for the allocation of houses which involved moving more vulnerable people up the list according to their age, health status, etc. If parents were allocated homes and lived in them when passing away, that property would be transferred to dependants. However, there was no system currently which took care of the allocation of houses to children who lose their parents while on the waiting lists. This was something crucial to consider and the department would have to look into it.

Profiling and analysis of the most common manifestations of corruption and its related risks in the Public Service: presentation
Dr Mamphiswana gave an introduction on the report. The global discourse on good governance was underpinned by the expectation that Government should be proactive in fighting the spread of corruption and in promoting an integrity-driven form of administration. Accompanying this should be political will to put in place enabling policies and a commitment to implement them. On 14 August 2003 Cabinet approved the establishment of one National Anti Corruption Hotline (NACH) for the Public Service, and the PSC was mandated to manage the NACH.

Dr Mamphiswana explained that the objectives of the NACH were to:
Deter potential corruption by making all employees and members of the public aware that the Public Service was not a “soft target”
Detect incidents of corruption through encouraging whistle blowers to report incidents which they witnessed occurring in the Public Service
Ensure the successful investigation of alleged corruption and to provide feedback to whistle blowers
Raise awareness that Government took corruption seriously
Enable callers to report corruption anonymously thus encouraging whistle-blowing

Dr Mamphiswana gave an outline of cases of alleged corruption reported to the NACH as at 31 June 2010. The analysis established that there was a slow rate of feedback with respect to cases being investigated. Of the 7 766 cases reported through the NACH and referred to departments since September 2004 to June 2010, feedback was received on only 2 811 (36%) of them. This meant that feedback on 4 955 (63%) of cases referred to departments and public bodies by the PSC was still outstanding. The largest number of cases of alleged corruption referred to and investigated by departments was on fraud and bribery (1 511) and the mismanagement of Government funds (985). The five most common manifestations of corruption were fraud and bribery, mismanagement of Government funds, abuse of Government resources, identity document fraud and procurement irregularities.

Key findings by the PSC were that 50% of the departments assessed had clearly written objectives on fighting corruption. However, the PSC found that departments tended to place little emphasis on investigating allegations of corruption. The study also found that the contents of fraud prevention plans tended to differ from one department to another, and that the implementation of these plans was inadequate. With regards to staffing, 50% of respondents indicated that their staffing within the anti-corruption units contributed to the capacity constraints experienced by departments regarding investigations. On average, the number of officials employed by the departments per anti-corruption unit was four. Also, 45% of respondents indicated that there was inadequate practical knowledge of assessing and managing the risk of fraud and corruption in the Public Service.

Dr Mamphiswana said that the PSC also found that departments were too lenient in imposing disciplinary sanctions against corrupt officials found guilty of fraud and corruption. Departments did not refer cases of alleged corruption to the South African Police Service (SAPS) for criminal prosecution where it was necessary. This was a serious concern as it undermined the fight against corruption. With regards to suspensions, departments took more than 60 days to finalise enquiries even in cases of minor offences. This was too costly for Government as the officials were being suspended from duty with full pay for up to one year.

Dr Mamphiswana said that recommendations from the PSC included that departments should periodically surprise procurement audits of selected projects to identify weaknesses and malpractices in procurement processes. The PSC recommended that HODs must be held accountable and responsible if they did not ensure that a disciplinary enquiry was resolved within 60 days, depending on the complexity of the matter and the length of the investigation. Departments also needed to report all fraud and corruption related activities to the SAPS, in order for criminal action to be taken against perpetrators. The PSC also recommended that investigative capability should be enhanced by centralizing and capacitating anti-corruption units and co-ordinating and integrating investigative capacities in the local spheres of Government. A guideline on minimum sanctions for specific offences of fraud and corruption had to be issued by the Minister of Public Service and Administration and this guideline should make provisions for minimum sentences to be imposed by departments in acts of misconduct.

Dr Mamphiswana said that more could be done in combating and preventing corruption if strategies, structures and anti-corruption capabilities were well coordinated. Government must commit as much resources as possible to address capacity constraints in relation to the investigation of cases of alleged corruption. 

Discussion
Mr Williams said that the 63% of cases outstanding was very bad. He wanted to know whether other anti-corruption institutions with investigative skills could deal with these cases as the departments did not have the capacity to deal with such instances. If not, then the departments had the responsibility to appoint people with the relevant skills to find corrupt people and remove them.

Mr Govender replied that governments special Anti-corruption Unit only dealt with high profile cases and did not have the capacity to deal with all cases from all departments. The Department of Public Service and Administration did have a close working relationship with this unit.    

Mr Suka commented that is seemed there was no particular time-frame for the handling of corruption cases and once it loses its status most cases were closed. He wanted to see a way forward that included speeding up the investigations. The Public Finance Management Act (PFMA) gave responsibility to the Directors- General as they were the accounting officers.

Mr Govender agreed and added that discipline rested with the HODs and Members of the Executive Councils (MECs) of the departments involved. With regards to time-frames, it was disappointing because public servants under investigation were usually suspended with full pay for up to 60 days. After that, most of them return to work even if the case had been finalised or not. Guidelines on suspensions had been developed but it was up to the relevant ministers to have them implemented.

Mr Helepi said that departments were told to follow DPSA guidelines, and in some cases of good application of these guidelines people were arrested and money reclaimed.

Dr Mamphiswana  added that another thing to look at was the protection of whistle blowers because they were targeted and harassed and this too slowed down the investigative process. Also, officials who became aware that they were investigated move to other departments. This made it difficult to follow up because sometimes whistle blowers want to remain anonymous and this delayed the finalisation of the process.

The meeting was adjourned.

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