The Department of Labour gave a briefing on financial issues that were required to be reported on for the Budget Review and Recommendation Report process. It was briefly noted at the outset that an audit qualification in the previous year related to the Point To Point Protocol (PPP) assets and contract with Siemens, and that there was still a dispute as to the amount finally due under this contract, which had another 14 months to run. However, the audit report for 2010/11 was unqualified and progress had been made on addressing the audit issues from the previous report. The Department was strengthening its efforts in regard to recovery of debt, was ensuring that quarterly and monthly reports were compiled in relation to performance management processes, and emphasised the need to have accurate source information available. Senior staff were now all obliged to declare business interests. Asset Management Unit officials were appointed in each province to try to achieve greater transparency and there was an attempt to ensure that all reporting requirements were fulfilled. The Department noted that over the past three years the vacancy rate had fluctuated, due to transfer of staff to the Department of Higher Education and training. It had now compiled and would enforce an organogram, attempt to do away with frozen posts, and was trying to professionalise the Labour Inspectorate and improve service delivery.
There were delays relating to buildings, leases and renovations connected to the Department of Public Works, and there were other delays arising from the Sector Education and Training Authority processes. Some virements were applied for and approved by National Treasury. However, the department’s requests for more funding to increase the number of mobile service centres, and the number of vehicles made available to inspectors, were not approved.
Members questioned whether the Department’s method of communication did not provide barriers, noted that many of the Labour Centres were situated only on tarred roads but that the rural areas, where some of the worst labour abuses occurred, did not seem to be covered and asked how the Department was monitoring the work of the Labour Inspectors. Several questions were asked about the staff debt and how it could be recovered, as well as whether any external debt collectors were used. Members asked if there was a whistleblower policy in place, and asked for copies if there was. They enquired what the problems had been in regard to the Siemens contract and were most disappointed with the fact that an unfavourable contract had been entered into with National Treasury, that there were no monitoring mechanisms built in throughout the ten-year period, asked how the discrepancy in user-numbers occurred and the problems in actual delivery. They wanted to get the comments of the Department and National Treasury and Siemens on the dispute, and the comments of the two government departments on the reasons for entering into such a contract. They enquired if the Minister was aware of problems with the Department of Public Works and South African Qualifications Authority, and whether other departments experienced similar problems in this regard, and asked for amounts involved in leases, particularly of the Labour Centres.
Budgetary Review and Recommendation Report (BRRR) required in terms of the Money Bills Amendment Procedure and Related Matters Act (MBAPRMA): Department of Labour briefing
Mr Les Kettledas, Deputy Director General, Department of Labour, noted that the Department of Labour (DOL or the Department) had, by dint of a concerted effort, addressed the previous audit qualifications relating to the Point to Point Protocol (PPP) assets under the contract with Siemens He noted that the Auditor-General South Africa (AG) had issued an unqualified audit report in respect of the financial statements for the 2010/11 financial year.
The Department also reported on a contingent asset value of R 5 020 000 in the 2009/2010 financial year, which apparently arose because the fee charged was reflective of the fact that more users were apparently registered than there were employees in the Department. Siemens and the Department were disputing the amounts, so the final figures could not be disclosed in that financial year.
Mr Kettledas noted that there was an emphasis placed on policies relating to quarterly monitoring and evaluation and on the need to ensure that all source documentation and information substantiating performance was available. Reviews and updates were also focused upon, to ensure good and transparent governance processes and practices. In 2010/11 the Department had formed a National Risk Committee to strengthen its risk management processes and to deal with possible conflicts of business interest, and now all senior management were required to declare their business interests, to sign the Code of Good Conduct, and better pre-employment screening and vetting took place. A Fraud Prevention Plan, fraud awareness campaigns and a whistle-blowing policy were developed.
Each provincial office was capacitated and an Asset Management Unit (AMU) official was appointed. Internal audits took place, leading to a final internal audit report, to enable the Audit Committee with evaluate the effectiveness of the internal audit function. Follow-ups on matters previously identified were conducted during the internal audit process in 2010/2011. Five vacant posts had subsequently been filled in May and June 2010, so to strengthen capacity in internal audits.
A National Risk Management Committee had been established and a fraud prevention plan was developed and approved. Risk Monitoring was conducted on a continual basis and an Action Plan was implemented to address audit findings. Other processes in which the Department was currently engaged included the recovery of departmental debts in conjunction with the Department’s Legal Services division, regular assessments of supply chain management and performance to ensure deficiencies were corrected, and establishment of proper lines of reporting to support effective internal controls over financial reporting.
Mr Kettledas continued to report that the Department recorded a vacancy rate of 8.6% as at 31 March 2011. There had been a decrease in posts over the last three years because of transfer of some staff to the Department of Higher Education and Training. The Department was attempting to professionalise the Labour Inspectorate and create additional posts there to improve the quality of service delivery.
The payment processes relating to buildings and related expenditure claimed by the Department of Public Works had been delayed, but were being dealt with. Virements had taken place, with the approval of National Treasury, as set out more fully in the presentation (see attached document), mainly to pay for affiliation fees due to the International Labour Organisation (ILO) and to offset over-expenditure on office administration.
The second phase of the Sheltered Employment Factories (SEF) business case would be finalised by the end of the 2011/12 financial year, which would then enable the Department to finalise the organisational structure and the funding framework. A Chief Financial Officer was appointed, in the interim, to help SEF comply with the relevant financial and reporting prescripts. As mentioned, the Department wanted to professionalise the Labour Inspectorate and this would require further funding for appointment of staff in general and specialist capacities, which had been approved and would apply with effect from the 2012/13 financial year.
Although the Department also wished to increase the number of mobile labour centres and number of vehicles for Inspectors, no extra funding was provided. The Department had changed the structure of its budgets and the new structure was set out, that attempted to stress the core functions of Inspection Enforcement Services (IES) and Public Employment Services (PES). An asset register had been compiled and audited. The funding for the entities was set out. The Commission for Conciliation, Mediation and Arbitration (CCMA) would receive R94.7 million in 2011/12, rising to R113.1 million in 2013/14, and the National Economic Development and Labour Council (NEDLAC) would receive R6.5 million, 5.3 million and 5.7 million respectively over the next three years.
Mr F Maserumule (ANC) was concerned that the language of communication used by the Department of Labour effectively served to disqualify many people from full participation. He noted that most Labour Centres were also situated on the tarred roads, and failed to take account of the fact that most of the labour violations were happening in the rural towns and farms. He enquired exactly how the Department monitored and trained the staff in these Centres.
Mr Kettledas said that in relation to the rural areas, trucks would be used, which would then serve as the Labour Centres for those areas. This was the reason why the Department wanted extra funding, to provide more trucks.
The Chairperson asked whether there would be tracking of any staff who were dismissed or left the Department, to ensure that their debts were paid.
Mr G Boinamo (DA) sought clarity on the exact amount of loss suffered by the Department as a result of the PPP contract.
Mr Boinamo also wanted figures for the money that had to be recovered from past and present staff.
Mr K Manamela (ANC) asked what amount was currently outstanding by way of Departmental debt.
The Chairperson also asked for this figure, and asked what categories and numbers of employees owed money, and whether any debt collectors had been employed to recover the amounts, and whether they could not be deducted from the pension funds of the employees.
Mr Bheki Maduna, Chief Financial Officer, noted that Departmental debts arose from situations related to bursaries given to staff for further study. Should the staff fail in their studies, these would then be regarded as a loan or debt. Another situation in which staff may owe the Department was when administrative errors were made that resulted in the staff being paid more than their correct salary. In relation to the inspectors, the Department paid 70% of vehicle instalments for inspectors, plus insurance and maintenance costs. If there was any non-compliance the vehicle would be recovered and whatever was still outstanding was regarded as a debt to be collected from the staff member.
Mr Maduna added that recovery of these amounts was slightly contentious. Only a certain percentage of a bonus or pension could be attached (up to R10 000), and if the staff owed in excess of that at the time of leaving the Department it sometimes became an issue to recover it. The Department was also exploring other avenues of debt collection. At the moment no external debt collectors were being employed.
Mr I Ollis (DA) asked when the Department would be releasing the Annual General Report.
Mr Ollis sought further clarity on the number of users registered, asking for a breakdown of additional staff and the staff at the begging of the contract tenure.
Mr Ollis asked if the Department had experienced any problems any problems with the South African Qualifications Authority (SAQA) relating to delays in the vetting process.
Mr Ollis asked if there was a document relating to whistle-blowing, which perhaps outlined what would or would not be regarded as permissible.
Mr Ollis noted that there had been a workshop recently on budget planning and asked why clarity could not be obtained on how many vehicles were needed for Inspectors, as well as what type, and the number of uniforms needed. In general, he felt that this presentation was too vague and general. No objectives, goals or milestones were set. There were also no figures for the number of vacant posts, nor how much would be required to fill those posts.
Mr Kettledas noted that clear targets would be shown in the Strategic Plan and also in the Annual Performance Plans, which were being worked on.
Mr E Nyekembe (ANC) noted that there was some progress in some areas. However, he noted that the processes to be followed for vetting, DPW issues, and SAQA still needed to be resolved. He asked to what extent these issues had been raised with the Director-General, and also wanted to know if any other departments had problems with these issues.
Mr Nyekembe asked for more clarity on the declaration of business interests by senior management. He noted that the Public Service Commission was usually driving this process, and he wanted to know where the reports were on this, and what legislation governed the issue.
The Chairperson asked whether it was only senior managers who were required to declare their business interest. He pointed out that procurement officers could also have an unfair advantage.
Mr Maduna said that he was not aware of any specific legislation requiring the disclosures, but declarations had to be submitted annually to the Department of Public Service and Administration, and the Code of Good Practice would require officials who had any vested interests in the subject matter being procured also to disclose this.
Mr Boinamo (DA) noted that the presentation document did not have page numbers.
Mr Boinamo enquired why the Department had not followed up on investigations when it first became aware of fraud.
Mr Maduna confirmed that fraud had been noted in the Unemployment Insurance Fund (UIF) and Compensation Fund (CF) and there were attempts to try to counteract this at all labour centres.
Mr Boinamo asked why the Department was still paying Siemens even though there were no longer any computers.
Ms L Makhubela-Mashele (ANC) noted, in relation to the PPP contract, that Siemens came in installed the entire infrastructure before the Department paid them over a period of ten years, and it seemed that the Department was still paying the debt.
Mr Kettledas added that part of the concerns around the fluctuation of the fee were related either to under-budgeting, or to the fluctuating exchange rate.
Mr Maduna added that the PPP contract had provided that the PPP partner would provide and maintain the equipment and also provided the Department with support. Initially, there had been between 4 600 and 6 000 users catered for in terms of the contract. The unitary fee was not supposed to increase unless new employees were added. However, there were discrepancies due to some users having upgraded and those who were added. There were no milestones. This PPP contract had been signed by National Treasury, on behalf of the Department. He admitted that there was a problem in that the checklist only came into play at the end of the 10-year period. Some of the deliverables were not in fact delivered. The Department may be able to claim refunds. However, there was some difficult in termination, due to the conditions and undertakings, as well as the need to unbundled. Twelve months of termination was required. The contract had 14 months to run. The PPP contract was a tripartite agreement and the Department was used as a pilot to assess its success.
The Chairperson and Members expressed severe concern, saying that it was seemingly a dangerous and expensive contract fraught with risk, which amounted to a waste of money. The Committee should obtain written comments from the Department, the National Treasury and Siemens on the problems. The DOL and National Treasury should also indicate why they had signed such an unfavourable contract with no checklists or milestones for measurement over the ten-year period.
Mr D Kganare (COPE) asked if there was an approved organogram for the Department, and whether the posts were budgeted for.
Mr Kettledas also explained that the organogram would be approved, and the Department was endeavouring to do away with the system whereby certain posts had been frozen.
Mr Manamela asked for comment on the seeming increases in the vacancy rate, pointing out that the President had mandated all departments to fill all vacant posts by the end of August.
Mr Les Kettledas replied, in respect of the vacancies, that the vacancy rate would not increase. However, there would be an increase in the number of posts, from 3 092 to 3 655, and this should contribute positively to the labour market.
Mr Kganare asked what the Department meant when it said that there was a need to “professionalise” the Inspectorate, to what level the posts would be raised, and whether there was any system that would safeguard and monitor fieldworkers and ensure that there was no abuse.
Mr Kettledas explained that this simply meant that inspectors would need to be qualified in the field, either through having qualifications or experience in that area. For instance, an inspector dealing with explosives would be required to demonstrate skills and expertise in that particular field.
Mr Kganare enquired how much the Labour Centres cost to rent.
Mr Ollis asked if the Minister had been made aware of the issues around rentals and renovations, where there seemed to be problems with the Department of Public Works (DPW) and asked what relationship existed between these departments.
Mr Maduna responded that, in relation to buildings and leases, there had been discussions with an official from the Department of Public Works, and the issue seemed to be progressing. Mr Maduna confirmed that the Minister was aware of the issues, as she and the Director General met regularly to keep abreast of issues arising from internal audits. A list of the buildings had been compiled, which would be provided to the Committee. The Department of Labour was currently getting copies of the leases from DPW.
Mr Manamela was concerned about the statement that there were more computers than there were users. He asked why this was so.
Mr Manamela said that the strategic objectives seemed to have been copied across from other documents.
Mr Manamela asked if the Department had moved from a manual to electronic system for the Compensation Fund.
Mr Maduna noted that the amounts for virements would need to be calculated and he could make them available.
The meeting was adjourned.
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