Integrated Financial Management System & PERSAL projects: Departmental presentation

Meeting report

Appointment of Acting Chairperson
Members nominated Mr M Manana (ANC) as the Acting Chairperson, as the Chairperson, Ms Moloi-Moropa (ANC) was attending to Committee business in Johannesburg.

Acting Chairperson’s introductory remarks
The Acting Chairperson tendered apologies from the Minister and Deputy Minister of Public Service and Administration (DPSA) and the Minister of Finance, who were attending other Cabinet meetings.

He noted that Ms H van Schalkwyk and Mr G Hill Lewis had been replaced, and the new Committee Members were Mr Dumisani Ximbi (ANC), Mr Kobus Marais (DA, Shadow Minister of Public Service and Administration), and Mr Deetlefs du Toit (DA, Deputy shadow Minister of Public Service and Administration).

Integrated Financial Management System & PERSAL clean up projects: Department of Public Service and Administration presentation
Mr Kenny Govender, Deputy Director General, Department of Public Service and Administration, noted that the key reason that the Department of Public Service and Administration (DPSA or the Department) had decided upon the implementation of the Integrated Financial Management System (IFMS) was to provide both national and provincial government with a system that integrated human resource, payroll, financial, supply chain management and business intelligence information. Other major objectives were to replace aging technologies, enable the implementation of Public Finance Management Act (PFMA) and Public Service Act (PSA) and re-focus State Information Technology Agency (SITA) towards its core mandate. It also would ensure the development of Information and Communication Technology (ICT) skills within the country.

He noted that the IFMS was to replace legacy systems that were outdated, were increasingly difficult to maintain and upgrade, and that lacked inter-operability. IFMS also provided centralised solutions to standardise on technology and leverage on economies of scale. In addition, automation of business processes would ensure greater efficiency within Government, improving quality of data, access to data and elimination of manual data capturing processes. This had potential cost savings, one example being the elimination of manual leave capturing.

A background summary set out that this process originated with Cabinet Memo No 16 of 2005, which proposed the integration and renewal of all financial, supply and human resource management information technology systems used in national and provincial Departments. Cabinet Memo No 22 of 2007 resulted in the fast-tracking of the development of Human Resource Management, Procurement Management and Asset Management (AM) modules. Phase one of the project was approved in October 2002, by the Budget Council, and this was completed in February 2004. The deliverables for this phase were the Master Systems Plan, User Requirements Statements and Prospectus. The second phase was planned to take approximately 24 months, and would comprise the establishment of a prime systems integrator (PSI) capability within SITA, and acquisition of infrastructure to support the lead applications, as well as procurement of commercial off-the-shelf (COTS) software for the Human Resource Management (HRM) and Procurement Management Module (PMM), and the establishment of support infrastructure and testing facilities. Partnerships with industry were central to this phase. The third and final phase would take approximately 60 months, and would result in the development of new core modules in Supply Chain Management (SCM), Finance, Procurement of Catalogue Management, Business Intelligence (BI) and Payroll.

The IFMS governance structure was outlined, which highlighted Ministerial oversight at the apex, then the IFMS steering committee and Phase 2 advisory panel. This committee comprised members from National Treasury (NT), SITA, DPSA and ad-hoc representatives from the Department of Defence (DOD) and the South African Police Service (SAPS), who would address specific issues. DPSA was responsible for determining the HR policies, processes and systems for the Public Service and ensuring that IFMS supported these. DPSA was also mandated with the management and maintenance of HR corporate reference data, such as qualification and competency catalogues. It was to oversee the roll-out of the IFMS HR module to the Public Service, and would provide support to other departments during HR implementations.

National Treasury would act as financial sponsor and determine the financial and supply chain management policies, processes and systems for the Public Service, while ensuring that IFMS supported these. NT was also to manage and maintain financial and supply chain management corporate reference data, such as the standard chart of accounts and must oversee the roll-out of the IFMS financial, payroll and SCM modules to the Public Service.
 
SITA was to develop an appropriate overall integrated solution for architecture and systems specification. It must also develop or acquire, and integrate, the components and services into an overall solution and provide technical support over the solution’s lifecycle.

All three institutions had a collective responsibility for oversight over the IFMS programme in respect of pricing policies, levels and quality of services rendered to government clients, and overall management of the various modules to ensure integrity of IFMS.

Mr Govender then outlined the product scope. Supply Chain Management included catalogue management, procurement management, inventory management and asset management. HR included health and safety management, education training development, labour relations, HR planning, organisational management, recruitment management, employee movement, performance management, HR reporting, career management, remuneration management, termination of service and HR administration. The Financial Management and Payroll products would comprise the Medium Term Expenditure Framework (MTEF) budget preparation, departmental financial management, treasury financial management and payroll. Business intelligence would include reporting, analysis, dashboards and data mining.

Mr Govender outlined the progress to date in the Phase 2 non-product deliverables. SITA had undergone internal self-assessments as part of the Personnel Software Inspector(PSI) Capacitating, supplemented by another assessment led by the Johannesburg Centre of Software Engineering. An assessment of SITA by an independent panel of experts was scheduled for 2012. A high-level cost and pricing model had been completed, and other more detailed work was ongoing.

On the skills development and change management side, the IFMS Training Framework and Change Management Strategy Framework for users had been completed. The Implementation Methodology Toolkit had been completed. A partner database of 155 partners had been developed.

The progress on product development was then outlined. Already completed processes included Asset Management and HR management (in 2010) and Procurement Management and Catalogue Management (2011). Still in progress, and expected to be completed in 2012 and 2013, was work on the Supply Chain Management extended inventory and Payroll, Financial Management and Business Intelligence.

Mr Govender then reported on progress on product lead site implementations, which were completed in respect of National Treasury (AM/PMM), Limpopo Departments of Provincial Treasury, Roads and Transport, Local Government and Housing and Agriculture (AM). The Public Service and Administration (HRM) had been completed. Lead site implementations in Limpopo Provincial Department of Health (AM), Free State Department of Education (HRM) and the Department of Defence and Military Veterans (AM/PMM) were ongoing.

A report was also given on business industries’ involvement with SITA. The vendors were named as Simunye Consortium (for HRM), IBM (for Integrated Development Environment), Bytes (for Technical Support Services), ICT Works Consortium (for Procurement Management), Pilog (for Catalogue Management) and Praxis (for Business Intelligence). There were, in total, 155 implementation partners (see attached presentation for an outline of these in the provinces).

The total expenditure to date was R559 million. Mr Govender noted that the IFMS had not yet been fully implemented and rolled out to Government as envisaged, primarily due to the complexity of the IFMS programme. Departments had underestimated the time frames for the work to be done. There were longer than anticipated procurement and contract negotiation processes. There was lack of full capacity in SITA’s IFMS team, due to a 60% vacancy rate. There were additional responsibilities cast by moving Phase 3 deliverables of COTS products to Phase 2. Other reasons for slippages included misalignment of product procurement and development, and a lack of functional skills in some Departments.

The strategy to remedy the problems included a revision of the Memorandum for Cabinet, with more realistic timelines. The implementation of the SITA turnaround strategy had addressed that entity’s capacity problems, and when the contracts were concluded, industry partners would also augment its capability. In addition, the institutionalisation of IFMS architecture would result in less complexities in the development of outstanding modules.

The next step involved the finalisation and development of outstanding modules A strategy for the rollout of IFMS would be formulated, with relevant stakeholders, in 2012/13. National rollout of selected modules was due to commence in that year.

It was vital that synergy was maintained to ensure that accurate and “clean” data was migrated from PERSAL to IFMS HR and Payroll systems at implementation. PERSAL would still be utilised as a payroll system and as a source of reporting on HR in the Public Service for a number of years, until IFMS was fully implemented. Workshops would be held to raise awareness amongst managers and officials about the value of improvement of PERSAL information and the utilisation of HR management information for planning and decision-making.

Mr Govender concluded that DPSA would continue enforcing compliance through implementation support interventions, continuous monitoring of implementation of recommendations based on quarterly reports submitted, continuous monitoring of project plans submitted with timelines, and notification of any non-compliance to the executive authority. Accountability could be strengthened by reporting of data quality analysis on a regular basis, and by continuing with data quality assessment.

Discussion
The Chairperson asked for clarification on how many years it could take to implement migration of “clean” data from PERSAL to IFMS, HR and Payroll systems.

Mr Nagalin Tuganadar, Executive: Development Solutions, Norms and Standards, SITA, replied that the PERSAL clean-up project was projected to be completed by the following year. However, the implementation of IFMS could be affected by how Departments structured themselves. Individual Departments and industry partners would have to make the final projections.
 
Mr Bobby Maake, Chief Director: Financial Systems, National Treasury, added that systems of this kind could take between fifteen and twenty years for a full rollout.

Mr A Williams (ANC) asked how long after implementation it would take for IFMS to pay for itself, through the cost recovery model.

Mr Tuganadar replied that IFMS was replacing a number of legacy systems, and so it was necessary to ensure that as one model was phased out another was already in place to replace it. The Cabinet memo of 2005 stated that the budget should be kept in line with projections. It was now at R1.3 billion per annum, but this amount did not factor in a number of broader systems, such as all systems under HR.

Mr Maake noted that the cost saving and recovery could be achieved through the phasing out of the less effective systems.

Mr Williams enquired as to the number of jobs directly and indirectly created through the process so far.

Mr Tuganadar replied that directly the total number of direct jobs created was 320, which was expected to increase to 500 as the rollout proceeded, whilst it was estimated that over 1 000 indirect jobs had been created.

Mr Williams asked what criteria were used for the tender process to ensure that there was no corruption.

Mr S Marais (DA) asked what measures had been put in place to ensure that the Phase 2 advisory panel would be independent, asking who made the appointments and what their expertise must be.

Mr Blake Mosley-Lefatola, Chief Executive Officer, SITA replied that SITA had a mandate to become the prime system integrator for Government and, in order to achieve this, it had to follow the Capacity Maturity Model Integration (CMMI) to enhance its capabilities. SITA was undertaking an assessment in March for capability in the areas of acquisition, development practices and service delivery. An independent panel of experts appointed by the Ministers could assess these areas. The process should be completed in the financial year 2015/16, with the completion of level five capability assessments.

Mr Marais asked if the Department had designed a productivity model to assist in qualifying productivity.

Mr Mashwahle Diphofa, Director General, Department of Public Service and Administration, replied that at the moment there was no productivity model in place. However, a project was currently under way between DPSA and the National Productivity Institute to formulate a productivity assessment model, which could be piloted within the Departments of Health and Education.

Mr Marais asked what criteria were used to identify the industrial partners and how they were monitored and evaluated to ensure they delivered quality services.

Mr Tuganadar replied that an implementation methodology model was used. The model specified different disciplines to be followed; for example change management, training and data management, and the companies were accredited on those areas. A quality check was also used to ensure that the industry partners delivered.

Ms Khumbudzo Ntshavheni, Chief Operations Officer, SITA, added that the criteria used for the tender process required that partners be selected who had the capacity to develop and who were willing to share the risk. Another aim was to select and grow small to medium partners. The tender process categorised the capacity of the partners from incubation level to “platinum” level – and platinum level partners who had more resources, experience and capacity had a responsibility to assist partners at incubation level.

Mr D du Toit (DA) asked for the cost implications of the process.

Mr Diphofa replied that the cost -benefit analysis enabled management to improve on areas where it had previously not been effective, such as HR, where some modules had not existed in the previous system. Considerable resources were needed to address these limitations.

Mr Marais noted that the presentation stated that governance and oversight arrangements needed improvement. He added that this was vague and that the statement required to be more specific and measurable.

Mr du Toit asked whether this process, once completed, would allow a single Public Service Provider or whether it would allow the present situation to continue.

Mr Maake replied that the single Public Service was not put forward as a part of the recommendations for IFMS at the time. The decision had been taken to implement IFMS at national and provincial level. In considering the integration and expansion of IFMS it was important to take into consideration complications caused by the fact that national and provincial government reporting was based on the PFMA, whilst local governments reported in terms of the Municipal Finance Management Act (MFMA).

Mr Diphofa confirmed that when the IFMS was formulated, this was done in consideration of the current system. However, when municipalities were added, then systems would already in place, and he said that infrastructure, training and change management would be done to include municipalities.

Mr du Toit asked for clarity on the procurement process.

Ms Febe Potgieter-Gqubule, Board Member, SITA, replied that one of the reasons for the turnaround strategy was to address issues of the integrity of the procurement process. Mechanisms had been put in place to ensure that procurement of small amounts was passed by an internal auditor. For larger procurements, external audits were used. This explained why two of the tenders were still under adjudication.

The Chairperson asked what mechanisms were put in place to address the 60% vacancy rate.

Ms Potgieter-Gqubule replied that the 60% vacancy rate was recorded at the time of the appointment of the board. The DPSA had since assigned staff for the IFMS, so that currently there was almost full staff capacity in this area. The staff would expand as the programme was rolled out.

Mr Tuganadar reiterated that the vacancy rate had now decreased to 30%, and SITA was working with its industry partners to close the gap.

The Chairperson asked how it was possible to determine which departments had more accurate or reliable information.

A DPSA representative replied that DPSA made use of two evaluating tools. The early warning system, which looked at performance areas such as management planning and accounting, using indicators such as the turnaround strategy and vacancy rates, to determine how a Department was performing. A quarterly HR report, based on these findings, was sent to departments, informing them of performance in key areas, and this report would assist the DPSA in prioritising where assistance was most required.

The Chairperson asked about the role of the Department of Performance Monitoring and Evaluation.

Mr Diphofa replied that this department made use of information generated from the monitoring systems. Access to this information had assisted in the generation of the Medium Term Strategic Report.

Mr Marais asked for information on changes that were taking place within the Public Service Commission.

The Chairperson noted that the Public Service Commission was best placed to respond to the question.

The meeting was adjourned.