Internal Auditing in the Department of Correctional Services: Audit Committee briefing
Meeting Summary
Although the Committee was due to hear the Quarterly Performance Report of the Department of Correctional Services (DCS), the Audit Committee of the DCS was instead asked to report on its position. The apologies of the National Commissioner and Chief Financial Officer were noted, and some Members expressed their concern that they were not present.It was outlined at the start that the DCS lacked a fully-functioning information technology (IT) structure, with the majority of IT staff being consultants, who even attended to preparation of plans for the DCS. This was cited also as problematic by the Audit Committee. Members of the Audit Committee complained that this Committee had not yet been granted a proper place in the DCS. There was no internal auditing capacity, and external auditors had to be brought in, which raised IT and HR risks. There was a tendency to pass the buck in the DCS, and no one wanted to take responsibility. Because the DCS management had refused to take the Audit Committee seriously, the matter had been escalated to the Minister. There was a culture problem, yet the DCS was slow to respond, especially about the lack of IT systems, which it had agreed was holding it back. There was no head of internal auditing, as the previous incumbent had been suspended and was to be replaced, but the advertisement process had taken far too long, resulting in the applicants withdrawing their applications, and the vacancy rate in IT was also a problem. It was noted that although the State Information Technology Agency could provide the infrastructure and the Audit Committee had expressed willingness to assist, nothing had been done, and the Audit Committee was quite frank that sterner action would have to be taken, and it would not hesitate to call on the Minister again for assistance.
Members questioned the assurances previously given by an IT manager to the Committee that the DCS’s IT situation would improve. One Member commented that the DCS had effectively lost its institutional memory when experienced people resigned, and pointed out that not only did consultants not contribute to building institutional memory, but were able to manipulate the system and had no vested interest in ensuring improvement within the Department. The IT collapse in the DCS was of huge concern. Other Members agreed that there was no depth in the way in which questions had been answered, and there seemed to be a lack of organisational culture. Questions were posed on the length of the contract with the auditing consortium, transfer of skills, and the ideal size of the audit component. Members asked why the head of internal auditing had been suspended, and expressed severe criticism at the failure of the DCS to fill the auditing and IT posts, noting that the failure to fill posts was undermining the President’s State of the Nation Address, and that the Committee’s concerns, expressed several times in the past, were being ignored. Questions were raised as to what happened to the budget for the posts that, although funded, were not filled. The Chairperson and a DA member concurred that the DCS obviously did not have effective recruitment strategies for head hunting, suggesting that universities should be approached, and that lists containing details of who had applied, the dates, and why they had been rejected, as well as information as to whom letters had been addressed to head-hunt must be sent through to the Committee. The Chairperson stressed again that the Portfolio Committee was adamant that the DCS must achieve an unqualified audit, and that it would have to work hard on all aspects to do so, and that in that regard further meetings and discussions would be held with National Treasury, the Auditor-General and the internal audit division. The Committee also wanted to assess the capacity and corruption in the DCS and ensure better commitment, including honouring of commitments made to the Portfolio Committee. Questions about eligibility for parole were briefly raised. It was resolved that another meeting would be arranged in the following week with the Minister, National Commissioner, Chief Financial Officer and Internal Audit, and hopefully also the Auditor-General.
Meeting report
Chairperson’s introductory remarks
Dr Jenny Schreiner, Chief Deputy Commissioner: Offender Management Services, Department of Correctional Services, apologised for the absence of the National Commissioner and the Chief Financial Officer of the Department of Correctional Services (DCS or the Department).
The Chairperson stated that it was important for this Portfolio Committee (PC) to intensify its monitoring of the Department of Correctional Services (DCS) and to this end, the PC would be interacting with the legal unit, and with the Departmental Investigations Unit (DIU), as well as looking into the information technology (IT) status of the DCS.
He noted that the DCS Audit Committee had been invited to the meeting. The DCS had met with the Auditor-General (AG) a month earlier, to discuss the fact that there was a severe lack of functional IT systems in the DCS. It was apparently impossible for the DCS – which effectively functioned as an accommodation establishment, a hospital and an educational institution, all of which were highly dependent on IT – to get out a simple e-mail.
The Audit Committee was responsible for internal auditing. It was part of the National Treasury requirements. The DCS had been receiving qualified audits since its inception. It had no IT system to speak of, and IT had to be the backbone of internal control. IT services in the DCS was 99%-driven by consultants, and even the strategic plan for IT had been prepared not by the DCS itself, but by a non-employee. There was a question to be asked what such systems were doing to undermine the DCS.
The Chairperson noted that there were also delegates from the National Treasury present in the meeting, and said that although National Treasury (NT) had made comments about the DCS’s finances, not much had been done, and there was some question as to how seriously the problems in the DCS were being taken. This Committee would like to see the Department achieve an unqualified audit report, but had to get some sense as to how this could be achieved, from both National Treasury and the Audit Committee. He noted that if the DCS could not be effective, the cycle of crime could not be broken. The DCS Annual Report stated that National Treasury had reviewed the AG’s report, and had looked into accounting policy and practices, as well as compliance with regulation. There had been material losses in vehicles, amounting to R3 million. Besides material losses, there had been under-spending, due to late invoicing and lack of internal controls. A proper DCS internal audit capacity had to be established. At Bethal and Rustenburg, the investigations of the
Department of Correctional Services Internal Audit Committee briefing
Ms Brenda Madumise, Manager, Internal Audit, DCS, stated that the Audit Committee (AC) had to be granted a proper place in the DCS. There was no effective internal audit capacity. There had to be core sourcing and auditors had to be brought in.
Ms Madumise pointed out the prevalence of IT risk. The IT plan had to be separated from the rest of the plans. There were also human resources and other risks. Consideration must be given to what happened to current staff when the DCS brought in people from outside to assist. There had to be a plan from the consortium. A resourced and competent team had been assembled over three years, which was overseen by the Audit Committee, but the Audit committee had not managed to get the minutes out of the internal audit team.
Ms Madumise continued that although new to her position , she had the sense that the buck was being passed, and no one was prepared to take responsibility, with nobody admitting to delays. The National Commissioner and Chief Financial Officer had been told that the Audit Committee would object if no corrective measures were taken, and had been asked to inform the management team that the Audit Committee had to obtain information if it was to sit. The National Commissioner would have to take stringent action, but at the moment there had been blame assigned from one person to another. The leadership issue started at the top, and the Minister had been obliged to intervene, when there had been no responses to questions from the Audit Committee. The Minister was fully aware of the situation, although it should not have had to escalate this far. If the DCS team refused to take the Audit Committee seriously, there would be consequences. Despite the fact that some management saw the Audit Committee as irrelevant, or as a nuisance, it had to be an integral part of the DCS and to ensure that certain things were done.
Mr K Buthelezi, Member of the DCS Audit Committee, pointed out that the control environment needed a more appropriate culture, chiefly with regard to delegation systems. Internal auditing and IT needed attention. The DCS had been slow in its responses, and had taken twelve months to respond to reports on the performance audit by the AG in May 2010. The Chief Financial Officer had agreed that a lack of IT systems was holding the DCS back, and there was no effective IT environment. However, the DCS had failed to respond to the AG’s report on the matter. There was no current head of internal auditing, as one incumbent had been suspended, but was still being paid a salary. The position had been advertised and then the advertisement was withdrawn. The DCS had taken three months to shortlist, and by then the applicants had moved on. He urged that such matters had to be dealt with in a week or two, as people would not be prepared to wait. This position was still vacant.
Mr Buthelezi noted that the Audit Committee had set up a special audit committee for IT issues. There had to be a turnaround strategy. The Audit Committee did not have executive power but it had to look at risks. It sat every second week. Senior managers had to lead the internal audit. The executive had to act. There were managers who never looked at reports. The DCS was owed R400 000, because it had allowed the debt to accrue. He described the situation as “a circus”.
Mr Charles Motau, Member of the Audit Committee, drew attention to the 42% vacancy rate in IT. He noted that often consultants would come to a meeting, and no IT manager would be present. State Information Technology Agency (SITA) could provide an IT infrastructure, but the question must be asked as to why this was taking so long. The DCS claimed that it had policies, but these were not forthcoming. It was not feasible to have consultants in IT. The Audit Committee made itself available but was not approached. With the SITA infrastructure, much could be achieved within a short space of time. Minutes had been kept of Audit Committee meetings.
A delegate from the National Treasury noted that NT and the AG had assisted on DCS audit qualifications. There was an agreement to support the Department. In the previous year, some qualifications had been rectified, but the DCS was still qualified in regard to management of assets.
Discussion
Ms W Ngwenya (ANC) remarked that the Committee had passed a Bill because it believed that IT systems would be set up in the DCS. She asked for further comment about the IT manager who had assured the PC that there was no IT problem.
Ms M Phaliso (ANC) said that it was not surprising that the morale in the DCS was low. There had been a clean sweep of its institutional memory, with key people leaving and consultants taking their place. The Members had reminded the DCS that they were not in favour of consultants being hired, because this eroded institutional memory, and consultants could manipulate systems, having no real concern with the DCS welfare. The Department could not be owned by a hierarchy on the outside. Cost containment and security would probably not be regarded as priorities by consultants. Without IT, the DCS could not exist, yet the DCS had not given any definitive answers about corrective measures. IT collapse impacted on corruption control. The DCS had no head of internal auditing, and the Portfolio Committee was unable to get to the bottom of the matter, no matter what approach it had adopted. Matters could even reach the point where the Committee would refuse to approve the budget. The question was whether it was the inside or inside that was leading the DCS. An IT manager had made a confident presentation to the PC, but she wondered if he had been security-screened. Capacity was lacking and institutional memory was gone. Reliance on consultants had to stop.
Ms Madumise replied that there had to be predetermined objectives and a supply chain infrastructure for IT.
Mr L Max (DA) said that the reports on internal auditing problems were not new. The Committee had heard the same high level rhetoric from the DCS several times. There was a lack of organisational culture commitment. When the DCS was asked questions after presentations, there was no depth in the answers given. This raised questions about the quality of top DCS management. People coming in were not committed. The Audit Committee had used word like “disaster”, “disgrace” and “circus” to describe the DCS audit situation. This was an eye-opener, as well as the oversight, which had revealed that the attitude of staff, evidenced simply in the way they walked or behaved, was disturbing. Few seemed committed, and were simply intent on claiming their salaries. He agreed with the concerns of Ms Ngwenya about the absence of the National Commissioner. He also pointed out at the Annual Report had differing views about the running of the DCS, with the DCS claiming that things were running smoothly, but the Auditor-General painting a different picture.
Mr J Selfe (DA) asked about the length of the contract with PriceWaterhouseCoopers, and outcomes expected in terms of transfer of skills.
Ms Madumise responded that the Audit Committee had asked for a skills transfer plan. It was not feasible to have an internal resource, and to pay outsiders as well. There would be an intervention with the Minister to get adequate responses.
Mr Selfe asked about the number of internal audit consultants.
Ms Madumise replied that there were 20 internal auditors. A skills profile had not been done. The 20 professionals made things easier, as previously the DCS did not have the requisite capacity.
Mr Selfe asked why the Head of internal auditing had been suspended.
Ms Madumise replied that feedback had been required from management, who had replied that it was a drawn out process.
Mr Terence Raseroka, Deputy Commissioner: Executive Management, DCS, responded that Ms Elsie Cloete had been head of internal auditing. She had been suspended after meetings between the National Commissioner and the Internal Audit division. Staff had raised allegations of mismanagement. A Human Resources Manager had been appointed, who had proved incompetent. The allegations were investigated, and there had been two disciplinary hearings. Ms Cloete’s representative had looked at other options, and it was decided to follow the route of retirement due to ill-health.
Ms Madumise answered that the leadership vacuum was causing problems. A strategy would be made clear in the new year, with a new head. The National Commissioner had said that the DCS was head-hunting a suitable person.
Mr Selfe asked about the ideal size of an audit component, and how many posts had been filled.
Mr Buthelezi responded that International Auditing standards provided the benchmark. A certain percentage of the total budget had to go towards this. There should be 80 auditors but there were only 20. Even if the consortium transferred skills, there would still be specialised skills needed. Filling of vacant positions had to be fast-tracked.
Mr Selfe asked when interventions through the Minister had taken place. He asked if these had been directed to specific issues, or just the DCS responses. He asked about leadership at the top, and whether the new leadership was showing improvements.
Ms Madumise responded that nothing was happening as yet. The Audit Committee was still not viewed or treated seriously.
Ms Madumise stated that the Audit Committee wanted a direct line to the National Commissioner and the Minister. It could not go through 20 people. The fact that it meant business had to be recognised. The DCS had to feel the presence of the Audit Committee and work with it, not regard it as an enemy. The Audit Committee would be painstaking in its approach, but it did not merely require compliance, but actual work. Dr Schreiner knew that the Audit Committee had made it clear that a DCS member had to be appointed as head of Government Information Technology Office (GITO).
The Chairperson asked what had been done with money set aside for filling internal audit posts. If appointments had not been made, that money had to be returned to the national fiscus. There was still a high vacancy rate, although there was money sitting elsewhere so the DCS could not claim shortage of funding as a reason for not making appointments. Head hunting was said to be difficult, but Mr Selfe had made the practical suggestion that desks be put up at universities to attract graduates. Government was simply not doing enough to promote local employment, and he cited another example of qualified welders sitting on the streets while private companies were hiring welders from
The Chief Deputy Commissioner: Corporate Services, DCS, replied that GITO posts had been advertised. Shortlisting interviews would take place on 13 December. Interviews for internal auditors had been conducted without success. Head-hunting would continue.
The Chairperson asked how that was being done.
The Chief Deputy Commissioner responded that people in industry recommended candidates.
The Chairperson said that if the DCS could give him names of people to whom it had written, he would undoubtedly be able to source someone, and he said that it was simply not acceptable that financial staff could not be found. He asked that a list be sent through to the Committee Secretary.
Mr S Abram (ANC) asked for a list of when adverts had been placed, how many had applied, and why the applicants had been deemed unsuitable. He asked when the head-hunting would start. The Portfolio Committee was simply not being kept properly informed and he noted that any business would have been able to fill these vacancies long ago
The Chief Deputy Commissioner noted that such a list would be supplied.
The Chairperson expressed regret at the fact that the Chief Financial Officer and National Commissioner were not present, and expressed the view that the Minister and Deputy Minister also should be present when these issues were fully discussed. He advised Dr Schreiner that the Portfolio Committee was insistent that the DCS had to achieve a clean audit, and it would not be sufficient merely to fix up the problem with the assets. He believed that all stakeholders, including National Treasury, the Auditor-General and Internal Audit Division had to work on this together and that oversight had to be intensified.
Mr M Cele (ANC) noted that the DCS undermined the President’s aims through its consistently high vacancy rates.
Ms Phaliso opined that funds had to be spent efficiently and economically to achieve proper corrective action. The Committee was not getting adequate answers, and was being seriously undermined. Management as a whole had to assess institutional memory, and how much real experience there was. Capacity and corruption also had to be assessed. She proposed that this meeting be adjourned and that another meeting be arranged, where the whole DCS management would be present.
Ms Ngwenya remarked that underspending was a problem. She asked how certain the DCS was that it would in fact fill the posts after the interviews on 13 December. The DCS had to deliver on artisan education.
Mr Abram wondered if privately-run prisons would allow there to be no head of internal auditing. He commended the Audit Committee for being brutally frank. It was a mistake for entities to think that they should not state the situation up front, even if this were to result in criticism. There was a lack of commitment and integrity in the DCS. Promises had been made regarding the improved state of DCS facilities, and improved leadership, and those promises should be accompanied by integrity. Strict time frames had to be presented. If DCS was a private company or represented shareholders, it would certainly not be allowed to continue to act in this way. The Portfolio Committee asked questions without getting responses. There was a major systemic problem. The DCS had to make commitments to the Portfolio Committee, and carry them out.
Mr V Magagula (ANC) said that somebody seemed to be dragging the whole DCS down. The Portfolio Committee had played its role in obtaining funding for the DCS, yet people were not employed. The DCS had to say, there and then, what would be affecting the next budget.
The Chairperson agreed that it would be necessary to arrange another meeting, where the Audit Committee, the Minister, the Chief Financial Officer and National Commissioner were all present.
Dr Schreiner reminded the Portfolio Committee that the Minister was included in the delegation to the Democratic Republic of Congo, and would only be back by 3 December.
The Chairperson suggested that a meeting take place in January.
Ms Phaliso protested that the matter could not be delayed, and suggested that a meeting be arranged in December.
Mr Abram supported this.
The Chairperson agreed that Tuesday 6 or Wednesday 7 December would be set aside, and if necessary the Committee would travel to
Ms Madumise noted that she would not be available until 7 December, and requested that the meeting start after 10h00.
The Chairperson suggested that the meeting be arranged for the afternoon of 7 December or Thursday 8 December, if the Auditor-General was available. He asked the DCS to send through the information about vacancies and a strategy. He also asked the DCS members present to convey the discussions fully to the National Commissioner and Chief Financial Officer.
The Chairperson also asked that the DCS clarify the position on parole. Offenders used to become eligible for parole after four-fifths of their time had been served, but it seemed that this had been changed to one third.
Mr Modise replied that in the event of an offender having escaped from custody, s/he would have to serve four fifths of the time before becoming eligible. In other categories, inmates were eligible after having served one third, but it had again been changed to one half of sentence time.
Mr Abram urged that the DCS be timeous in responding to questions, noting that this had not always happened in the past.
The Chairperson noted that he did receive a message from Dr Schreiner that officials had been out of office. However, full answers would still be required.
The meeting was adjourned.
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