Correctional Services; Rural Development & Land Reform 2011 Third Quarter Expenditure Report

Standing Committee on Appropriations

23 April 2012
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Chairperson said the meeting had been called to find out why the two Departments had underspent their budget by the end of the third quarter. The third Quarter expenditure was an indicator of how they would spend in the future and therefore affected the budget allocations of the Departments. He wanted to know why this was a trend over the past three years and why vacant posts were not filled.

Department of Rural Development and Land Reform
The Department of Rural Development and Land Reform (DLRD) briefed the Committee on spending trends and gave explanations for the slow spending and the interventions to address the slow spending. It ascribed the underspending to the budget of the Department having increased hugely and the Department had been constrained by having the same staff capacity as in previous years. The Restitution Programme, in the form of transfers and subsidies, and the Rural Development Programme, in the form of Capital Asset expenditure were the main reasons for under expenditure. The majority of senior management posts had been filled. A Land Commissioner and a Deputy Land Commissioner had been appointed. The vacancy rate at the end of the third quarter was 12.5% but this was mainly due to posts requiring scarce technical skills. Spending on goods and services had been affected by delays in the rollout of the Rural Development Programme. The Department had rearranged the way the restitution process worked with the inclusion of a quality control committee and all post settlement support grants incorporated into the Recapitalisation and Development Programme. Expenditure on capital assets had been low because there had been delays in the delivery of specialised information technology, cadastral survey and mapping and spatial planning equipment.

Members wanted the Department to explain what was really happening, not what they thought the Committee wanted to hear. Where would the post settlement money come from and whose responsibility would it be? When would the Land Affairs Board be established? Had the Department determined what its financial obligations would be for the contracts they had signed? Members said land transfers were not happening. The biggest concern was the Auditor General’s report highlighting a lack of internal controls and of Information Technology (IT) governance and the absence of an asset register resulting in fruitless and wasteful expenditure. Other members said the Department needed more money for Land Restitution. What interventions were in palace to address the high level of unpaid invoices in the third quarter? What plans were in place to address the scarcity in technical skills? Members said the Department had to market its achievements more aggressively. Members said that the issue at hand was the explanation of the third quarter expenditure not the achievements of the fourth quarter. Why had there been a high vacancy rate? Members questioned how the Department could spend so much in the fourth quarter. Members said the Department had said a year ago that the validation process would be finalised. The Committee requested a written report on the numbers involved in the validation process and what monetary value was attached to the 8 770 outstanding claims, plus how many had been validated with the reply including a provincial breakdown.

Members asked if the Department was sure the recapitalisation programme would get them on track to be productive again. Did the Department know how much they needed for the different provinces? Members asked if the Department was just dumping money in the fourth quarter and would the Committee be hearing about fruitless and wasteful expenditure. Since 2009 the expenditure trend had been a declining one.

Department of Correctional Services
The Department of Correctional Services (DCS) briefed the Committee on the programme structure of the Department which had been streamlined from seven to five programmes. Performance reporting had been refined and reporting accuracy had been tightened. DCS intended preparing financial statements on a monthly basis so that it could become aware earlier of problems and be able to make timeous interventions. All programme managers held monthly planning meetings. DCS had underspent on two programmes and it had not filled vacant positions in Programmes One to Five and had used that money on compensation plans and pay grade progressions. The Department had increased the intake of warders and the vacancy rate, which had been 3.7%, was now 1.6%. In the past two years there had been no intake as part of a belt tightening exercise requested by Treasury. Other interventions were planning ahead for the loss of staff due to retirement and a retention strategy to reduce the exodus of staff. Since 2010, the Department had had a problem with infrastructure spending because it used the Department of Public Works (DPW) as its third party contractor. The DPW did not do the work on time and the Department was thus underspending and in addition when work was done invoices did not have the necessary accompanying support documentation. It had engaged with the DPW and with the Independent Development Trust (IDT). All qualifications in the 2009/10 report were now unqualified with the exception of inter-stores transfers which the transversal computer system could not handle and it was engaged with Treasury to come up with a manual reconciliation.

Members commented that the internal audit function was not working properly in awarding contracts, there was slow spending on transfers and subsidies and on capital assets. How far was the Department on the privatisation of correctional services? Members said that the Committee needed to get the Department’s explanations regarding the DPW in writing so that the latter Department could be tackled. How many vacancies were for social workers? Members asked what interventions had occurred regarding IT. Members wanted to know the full reasons for the acquittal of an employee accused of fraud. Members wanted a full written explanation containing how many investigations were currently related to fraud and how many cases the Department were dealing with in addition to the matters raised by the Auditor General as well as instances of non-compliance with the supply chain management. How was the money involved to be recovered? Members said the Committee wanted full written details on what interventions the Department had put in place to ensure an unqualified audit. What was the exact amount of under expenditure due to interaction with the DPW? Members said the Department did a lot of infrastructure work and suggested that they establish a small infrastructure unit and set up monthly client meetings.

Meeting report

Department of Rural Development and Land Reform (DRD&LR) third quarter spending
Mr Mduduzi Shabane, DRD&LR Director General, explained that the budget of the Department had increased hugely and the Department had been constrained by having the same staff capacity as in previous years.

Ms Irene Singo, Acting CFO, said the Restitution Programme, in the form of transfers and subsidies and the Rural Development Programme, in the form of Capital Asset expenditure were the main reasons for under expenditure.

She said the majority of senior management posts had been filled. A Land Commissioner and a Deputy Land Commissioner had been appointed. The vacancy rate at the end of the third quarter was 12.5% but that this was mainly due to posts requiring scarce technical skills.

Spending on goods and services had been affected by delays in the rollout of the Rural Development Programme. Spending, which had been at R392m at the end of the third quarter, had rocketed to R786.5m by the end of the fourth quarter.

The Department had rearranged the way the restitution process worked with the inclusion of a quality control committee and all post settlement support grants incorporated into the Recapitalisation and Development Programme. This resulted in spending jumping from R615m at the end of the third quarter to R1.8bn by the end of the fourth quarter.

Expenditure on capital assets had been low because there had been delays in the delivery of specialised information technology, cadastral survey and mapping and spatial planning equipment.

Discussion
The Chairperson noted that the Department’s spending overall had been at 43.5% over nine months yet in three months they had spent 47%. He wanted the Department to tell the Committee what was really happening, not what they thought the Committee wanted to hear. He asked where the post settlement money would come from and whose responsibility it was.

Mr M Swart (DA) said the budget of the Department should be reduced if the money was not being spent. When would the Land Affairs Board be established? Had the Department determined what its financial obligations would be for the contracts that they had signed. Land transfers were not happening. His biggest concern was the Auditor General’s report highlighting a lack of internal controls and of Information Technology (IT) governance and the absence of an asset register resulting in fruitless and wasteful expenditure.

Mr J Gelderblom (ANC) said the Department needed more money for Land Restitution. There was a high level of unpaid invoices in the third quarter and what interventions were in place to address this. What plans were in place to address the scarcity in technical skill? The Department had to market its achievements more aggressively.

Ms R Mashigo (ANC) said that the issue at hand was the explanation of the third quarter expenditure, not the achievements of the fourth quarter. Why had there been a high vacancy rate?

Mr J van der Linde (DA) questioned how the Department could spend so much in the fourth quarter.

Dr S Van Dyk (DA) asked what the Department foresaw in terms of expenditure trends, taking into account the changes to the Department’s programme.

Mr Shabane replied that the year had not been a normal one. The Department had been aware since the first quarter that spending would be low. Many land restitution claims had been approved but not finalised. The Department would be responsible for post settlement support. The grants would demand proper planning and the Department had put a priority on achieving the 30% target. The Department would need a lot of money as the 30% was only for land that the government had already bought. Forestry land, for example, was very expensive because of the standing timber value which in itself varied from year to year. The fruitless and wasteful expenditure had been incurred when the Department had run out of money and incurred interest. In addition if court orders were brought against the Department and were not brought to the attention of the CFO, then officials would be charged. The Department was determined that invoices would be paid within thirty days. The Department had a very progressive plan in place to tackle the skills shortage with over 85% of all surveying students at university being sponsored by government. The Rural Development Plan would be finalised by 26 April for presentation to the National Planning Commission.

Mr Swart (DA) said the Department had said a year ago that the validation process would be finalised. Could the Committee get a written report on the numbers involved in the validation process and what monetary value was attached to the 8 770 outstanding claims and how many had been validated. He could only see a declining trend in the expenditure of the Department. The questions on the asset register, the land affairs board formation and the IT situation had not been answered.

Mr Gelderblom (ANC) asked that the written reply include a provincial breakdown of the figures.

Dr Van Dyk (DA) said the evaluation process would be huge.

Mr Gelderblom (ANC) said the Minister had stated that a board had been instituted to look into the process.
 
Mr J van der Linde (DA) asked if the Department was sure the recapitalisation programme would get them on track to be productive again. Did the Department know how much they needed for the different provinces?

Ms R Mashigo (ANC) said that the land claims affected the food security of the country. She asked if the Department was just dumping money in the fourth quarter and would the Committee be hearing about fruitless and wasteful expenditure.

Ms L Yengeni (ANC) asked if the Department was sure that the fourth quarter report would accurately reflect expenditure.

The Chairperson said that the Restitution Programme had 35% expenditure at the end of the third quarter and by the end of the fourth quarter was at 99,3%. On what had the money been spent? The Committee appreciated the challenges restitution imposed and therefore it was confused when 60% of the budget could be spent in three months.

Mr Shabane replied that it would take a long time to do all the evaluations. Unsurveyed land that the state owned would be surveyed and he hoped that the asset register would be ready.

Mr Swart reiterated that he wanted to know the monetary value of the land that had been validated.

Ms Ntsiki Mashiya, DDG Corporate Services, said that all the senior management positions had been filled and that the vacancy rate was now below 10%. Performance agreements had been entered into with 90% of the senior management and for over 90% with other levels of staff.

The Chairperson said that the Committee would only support the Department once it was clear on what and how they spent their budget. Since 2009 the expenditure trend had been a declining one. He acknowledged that the restitution programme was a difficult one.

Department of Correctional Services (DCS)
Mr Siphiwe Sokhela, CFO, said the programme structure of the Department had been streamlined from seven to five programmes. Performance reporting had been refined and reporting accuracy had been tightened. Overcrowding in prisons stood at 36% and third quarter reporting contained the anomalous figure of 234% for offender involvement in corrections programme. This was because of the re-categorisation of this programme into the care sector.

The Department intended preparing financial statements on a monthly basis so that the Department could become aware earlier of problems and be able to take corrective action. All programme managers met monthly to do proper planning and not just dump the budget. The Department had underspent on two programmes and the Department had not filled vacant positions in Programmes One to Five and had used that money on compensation plans and pay grade progressions. The Department used to have one intake of warders and the vacancy rate had been 3.7% but had instituted additional intakes and the rate was now 1.6%. In the past two years there had been no intake as part of a belt tightening exercise requested by Treasury. The Department was not a normal Department and other interventions were planning ahead for the loss of staff due to retirement and a retention strategy to reduce the exodus of staff.

Since 2010, the Department had had a problem with infrastructure spending because it used the Department of Public Works (DPW) as its third party contractor. It did not have a specific signed memorandum of agreement. Even when agreements were signed, the DPW did not do the work on time and the Department was thus under spending. In addition invoices did not have the necessary accompanying support documentation. It had requested information from the DPW and had even engaged with the DPW and with the Independent Development Trust.

All qualifications in the 2009/10 report were now unqualified with the exception of inter-stores transfers which the transversal computer system could not handle and it was engaged with Treasury to come up with a manual reconciliation.

Discussion
Mr Swart (DA) said the internal audit function was not working properly in awarding contracts, there was slow spending on transfers and subsidies and on capital assets. How far was the Department on the privatisation of correctional services?

Mr Gelderblom (ANC) said that the Committee needed to get the Department’s explanations regarding the DPW in writing so that the latter Department could be tackled. How many vacancies were for social workers?

Dr Van Dyk (DA) said the issue of capacity at the Department and the DPW had been a problem since 2004. Apart from engagement with the DPW and the IDT, what other steps had been undertaken to overcome the problem?

Ms Mashigo (ANC) asked what interventions had occurred regarding IT.

Mr Sokhela replied that four cases were identified regarding the Auditor General’s report and had been reported as irregular expenditure and handed to the Department’s Investigative Unit. One case concerned a person who had conducted business with the Department prior to working for the Department. The person had been acquitted.

Ms Yengeni (ANC) wanted to know the full reasons for the acquittal.

Mr Sokhela replied that the Department would provide a full written report.

The Chairperson said that the CFO should know the details of the case off hand, as it impacted on the CFO’s work.

Ms Nandi Mareka, former acting CFO, said that business conducted under level 13 did not require a declaration of interest and the person involved was employed at level 6. This was a gap from the level 12 sector downward that existed across the public sector spectrum. In the second case, two people had been dishonest and made false declarations on the forms.

Ms Yengeni said the Committee needed a full written explanation containing how many investigations were currently related to fraud and how many cases the Department were dealing with in addition to the matters raised by the Auditor General as well as instances of non-compliance with the supply chain management. She added that the Auditor General mentioned seven investigations not four. How was the money involved to be recovered?

Mr Sokhela replied that the audit capacity had suffered because it had not had a chief auditor and the audit committee itself had only had three members. This had since been increased to five and the Department had employed another two deputy directors so that the audit monitoring could extend to centre level.

Ms Jenny Schreiner, Deputy Commissioner in the Department of Correctional Services, added that previously it had been at director level and that now it was at chief director level and this had led to significant contributions to the audit capacity. The Department did track fraud cases and would provide the information to the Committee.

Mr Sokhela replied that it had contracted outside IT consultants but now had a permanent person employed by the Department. The service level agreement with the DPW had been signed at the end October last year.

Ms Schreiner said that with regard to the question on social workers, the Department would provide a written reply.

Ms Yengeni said the Committee wanted full written details on what interventions the Department had put in place to ensure an unqualified audit. How were the R3.3m material loss monies to be recovered? What was the exact amount of under expenditure due to interaction with the DPW?

The Chairperson said that the reports would be due on the 3 May. The Department did a lot of infrastructure work and suggested that they establish a small infrastructure unit and set up monthly client meetings.

The meeting was adjourned.



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