Section 100 interventions: Provincial Departments under Administration: status report by National Treasury and DPSA

Meeting report

Introduction
The Chairperson referred to the oversight role as set out in Section 195 of the South African Constitution, saying that the Committee would also go to these provinces and see if the situation was a true reflection of what was presented by the two departments in their status reports. The Committee would work with the Public Service Commission, the Auditor-General and the relevant provincial oversight committees. They had reports from these institutions and would send these to the provinces in advance of their visit.

National Treasury status report
The Deputy Director General of Intergovernmental Relations in National Treasury, Mr Kenneth Brown, provided information on the background to each intervention, the current financial status of each department, and measures to strengthen each department (see document). The following salient points were made:

Department of Public Services and Administration (DPSA) status report
The Director General, Mr Mashwahle Diphofa, introduced the large delegation from the DPSA and the Deputy Director General: Human Resources Management Development, Ms Colette Clark, made the presentation. She discussed the scope of the interventions, the methodology and five phases. The stabilization phase was well advanced. The recovery phase had been initiated in all departments. Progress in the Section 100(1)(b) interventions in Limpopo and Eastern Cape was discussed in detail. The emerging issues from these interventions were listed (see document).

Discussion
Questions
Ms M Mohale (ANC) referred to Treasury slide 3 which stated that Limpopo HODs had surrendered their accounting officer functions and asked what the Heads of Departments (HODs) were then doing. After your investigations for so many months was it a matter of capacity? For example, did the CFO or people who are working in supply chains have relevant qualifications or were they employing people without qualifications?
On the matter of the DPSA doing a headcount audit and Persal cleanup, how did one ensure that the correct information was migrated into Persal? She asked if people were being redeployed from the provincial treasury - where were they being sent? And who redeployed them? It stated on Treasury slide 12 that “recruitment was underway to fill the vacant HOD position and other critical positions” in the Limpopo Treasury. When they went to HOD in December was there no HOD in the provincial treasury? What had happened to the HOD? If there were problems in the provincial treasury, the HOD was responsible. So if they are saying that they are now filling a vacant post where was he and what happened to him? And the staff for the other critical positions, what had happened to them?

Ms Mohale also asked about the hiring of staff for the Gauteng Health Department. She said ‘we do have problems with understaffing” and she wished to know whether they were actually health care workers or merely administrative staff. She read on slide 12: “Going forward, the payment intervals of the province would be aligned to receipts from national government in order to avoid future liquidity problems” and requested clarity.

Ms Mohale noted that DPSA had said ICT infrastructure was outdated. What was the role of the State Information Technology Agency (SITA) on this issue because there had been no mention? Looking at the DPSA presentation slide 31 on Project Capacity – what was the role of PALAMA? This problem was not new. Why was it ongoing?

Mr E Nyekemba (ANC) welcomed the presentation from both National Treasury and DPSA. He asked about National Treasury’s intervention in the four provinces and noted that their focus was very strong but wanted to know which areas were identified as critical? How long did they intend to work with the provinces to ensure that Treasury was fully capacitated? In relation to the Gauteng Shared Service Centre, which was used commonly for all provincial departments, National Treasury said in their intervention and discussions they were now capacitating departments to take charge of their own procurement processes. Were GSSC staff going to be transferred to departments? What was the plan for this?

On DPSA in terms of coordination and capacity, Mr Nyekemba noted the main issue affected was discharging responsibility when dealing with national and provincial departments as the public service, this was not the same as assisting in administration. How had they been affected and how would they ensure their mandate was fulfilled. How did they deal with that? What plans did they put in place? If later other provinces had problems, what steps would be taken to deal with new issues coming up? What backup mechanisms were in place? The Committee was getting a briefing on the status quo but the Committee must go down there and do oversight work. For both DPSA and National Treasury, how was your reception from politicians and the administration in the provinces you are assisting – good or bad – was it bad and then turned good or vice versa?

The Chairperson asked what were the major weaknesses inherent within the Shared Service Centre that had been found apart from decentralisation? Does one see them as being very efficient? Do they work well? She suspected that the process would be complicated when they lacked a hands-on approach as was the case with a centralised process carried out without much local input as may be needed for proper implementation.

Mr Du Toit thanked the delegates for good presentations. He went on to say that he believed these documents would go down as a landmark on the matter. He said that most parliamentarians had a clear idea of the problem and were not surprised. He thought that two of the most profound slides were 27 and 31. He raised the issues occurring at National Treasury and Limpopo Roads and noted that they had a clear idea of what was wrong in the public service department. Integration of new workers was very slow and he emphasised that sustainability past this intervention was key. He noted that juniors were allowed to work on proposals but managers were not, and wished to know how this could be an effective management procedure. He asked how this situation could arise? In regards to capturing personal data, he wondered if one had enough people to conduct investigations and mete out discipline? He asked for an overall view and possible recommendations for the future.

Mr Du Toit said that a budget was only as good as its accuracy. How did one match the budget to the need. And did one have the people to verify that? A wrong budget was linked to underspending.

Mr Du Toit asked why the HOD position was not filled in Limpopo and where did the skills come from if they couldn not be found before? He stated that this position was not a redundant one and he wished to know if someone had set aside the position with someone specific in mind? He noted they must have the would to process important issues.

Lastly on the issue of the contract for Gauteng with R 2.1 billion in savings, he asked “do we have sufficient skills to solve this issue? Why now and not before? If they had skills, why send it out to contractors? He asked if contract management practices were a euphemism for corruption? Why was this forked out to contractors? The final question was why did it take so long to intervene, and what were the root causes of this problem?

Mr S Marais (DA) asked why were all the actions and plans they had taken reactive and not proactive? Why had the situation escalated to such a level that it was necessary to put Limpopo under administration? He said we have ended up with a huge problem that was also mentioned in the National Development Plan regarding skills and capacity. He expressed fear that a single national civil service, as planned for the future, would be a disaster. He said he had heard that for instance the Free State’s Department of Sport and Recreation went through their annual budget within two or three months and when that happens, they could expect overspending. Regarding the competence and capacity of staff in the provinces, he said it was not Treasury’s job to identify and train those who needed training but rather the DPSA and the DG. The provinces did not ask the Public Administration Leadership and Management Academy (PALAMA) to give them training because they did not know they needed the training. There was a systemic problem when the customer had to ask PALAMA because the customer did not know what it needed to get from PALAMA. He said guidelines were needed to prevent these sort of issues from arising. Mr Marais asked Treasury if they had attempted to gain payment within 30 days. He noted that the President and Minister of Finance said, according to newspaper reports unless the reports were wrong, that national departments would pay bills in 30 days. In the Free State the contractors stopped working because they were not paid within 30 days. What was the correct position? How much of overspending and under spending was linked to corruption? Limpopo had the highest levels of corruption but it was one of the poorest areas of the country – so it seemed to be linked. Turning to DPSA, he asked how many of the premiers, HODs and senior staff were held accountable in terms of the law and how many disciplinary actions were pursued in this regard? Someone was to blame. What had been done about this? These facts were critical to the situation. Financial management was clearly the biggest issue. If PALAMA was not identifying the problem, then they were not providing the solution this country needed. And should they pursue a single public service – he expressed a strong distrust in its potential for success.

Mr M Manana (ANC) said that the problem of skills had been emphasised but the bigger problem was attitude. Mr Marais said we have failed to manage national departments, but Mr Manana felt that was incorrectly put. As he saw it, the National Cabinet had been able to identify and act against systemic issues. We want people who want to serve. He said that those individuals who are found wanting must be prosecuted to the full extent of the law. He said these were lessons for other provinces and other departments that if employees were not committed to serve, then they must leave the public service.

Mr Manana continued that overspending and under spending were related to corruption and maladministration. He believed that the intervention team also understood that the core problem was inability to manage public funds. How did one go forward to solve this problem? The people of Limpopo and the provincial administrations had to understand that the intervention was in the best interest of the province and in the best interest of the poor. There needed to be a change of attitude at the political leadership level by serving people with diligence. He thanked the intervention team for their work up to now but one could not guarantee that these problems would not resurface next year. Lessons needed to be learned from this intervention and other departments had to learn to spend public money well. The national government had been criticized for a very long time for not dealing with corruption but they had risen to the occasion and he hope this would result in positive legislation.

The Chairperson asked how to avoid this kind of collapse in the future. She emphasised that corruption was a major concern and it was necessary to learn from the collapse. Across all departments s32 areas had been identified for further investigation. One area of particular concern was the procurement system. A distinct picture of corruption practices was needed. The provinces who were not implicated in corruption should be studied as there might be pointers to demonstrate a devolution into corruption. Budget votes had been passed but perhaps there were intergovernmental issues. She indicated there were cases of gross violation of the Public Finance Management Act (PFMA). She wondered how one could go about rooting out corruption.

Her final comments regarded health in Gauteng giving the example that, if there was not any proper management, then people from Mpumulanga would go to Steve Biko Hospital in Gauteng which was a very efficient facility but how can they deal with such an overflow of patients? She wanted to know if there was a process to prevent hospitals from collapsing? We have to strengthen our government systems and ensure health care was taken care of. There was a need to root out corruption and those who did not want to work efficiently and effectively with the reform process.

National Treasury response
Mr Brown of National Treasury replied as follows:
To Ms Mohale’s questions, he replied that the Head of Department was appointed by the Office of the Premier. The powers of this position were set out in the PFMA and the Public Service Act. The question was whether it was lack of capacity or qualifications that was posing the problem. The HOD that was in place was previously an accountant so he understood the financial aspect of the role but it was another thing to understand the full scope of the job, which involved management. And that was one thing we picked up on - that the HOD did not have that ability and did not understand the full ambit of his responsibility. There were other examples where problems arose with staff who were not competent to be able to do their jobs once a Head of Department shifted functions and moved f from one division to another. In relation to the Free State, it had a tradition of a very strong treasury but what happened was that the Premier had moved one treasury employee who had been in charge of the budget to a municipality which accounted for concerns over removing talented employees to other areas without a backup in place. Also, for example, with Assets and Liabilities or Cash Management, the HODs there did not have a good idea of their role or how to manage possible problems. Thus it boiled down to a number of senior people who did not have the skill to be able to function properly within their given role.

Countries did need health professionals and they must be hired. Ninety seven percent of provinces’ revenue comes from the national government with predetermined spending priorities. Only three percent came from the province itself. The province must be able to spend appropriately with budgetary objectives in mind. There must be an alignment of the payment system with whom they hire. Part of their revenue flows from taxes which are collected at certain intervals, for example VAT and part comes from borrowing.

National government looked at when this money would come in and this was how they managed cash flow. Then we develop a payment schedule which references conditional grants and the dates they would be paid out. We give them a payment schedule and see if this was aligned with the provinces’ needs. Unfortunately at the moment there was a misalignment. Part of what we have done was to stabilise this area.

The provincial treasury did not meet their obligations so there was no a cash management system in place. Secondly there was a problem of overspending on personnel. There needed to be someone who understood how to budget for human resources across all departments. National Treasury had that capacity and knew what was happening around them but there was still a need for the provinces to build that capability themselves.

General financial management was a big issue which was administered by the Accountant General not the CFO and who dictated to all the other spending agencies including the provinces, where certain decisions were overridden. Budget preparation and budget management was another problem. A budget was easy to prepare but it was more difficult to manage and an extensive monitoring system was raised as a possible solution. There were however still gaps which needed to be addressed.

About the Gauteng Shared Service Centre (GSSC), it had taken accountability away from departments because the departments blamed the GSSC. Their main complaint was that they did not have enough money to do their work. Treasury asked that there be more accountability of the money that was given and how it was spent so that alterations could be made and the system adapted to better work with specific needs.

The relationship was not that bad with Limpopo specifically. The MEC for Finance tabled the budget on behalf of the Minister without any problems. They were starting to see the interface with treasury they wanted because many of the key persons involved in cash management had begun working together.

On the matter of the budget, the issue was how did one match it with the need. For example, one needed to quantify how many teachers one needed in the system and then one could calculate their wage book which enabled cash flow management. On the implementation side, it was a question of having the right skills for the budget to have the desired impact. This intervention was about the creation of this link specifically. Over spending must also be avoided and numbers strictly adhered to and practices made uniform. Thus one had to look at the supply chain and ensure uniformity across procurement procedures.

Health and education functions were decentralized. The question was how to monitor and manage delegations. On the R2.1 billion savings in regards to contract management, some people did not have the ability to manage a contract, if a school should be R35 million, it should not become R50 million.

On Mr Marais’ question about being proactive, in Limpopo we had seen this problem last June. We had met provincial authorities in July and spoken to them again in September. Corruption was at the root of the problem. He agreed that National Treasury had to find a more proactive way of dealing with these problems otherwise they would continue on in an unending cycle.

We must properly implement a supply chain and the national department should be reconfigured. Mr Brown said we were moving in that direction.

Mr Brown commented that he had been working for Treasury for 14 years. And only once before had he dared to say this to Parliament and he had not been kicked out, so he would say it again now. There were just no consequences in government. If someone did not do their work, then they must be fired. The problem was that nobody asked any questions of the culprits, and those people were still there. They should be fired. And that was at the heart of the problem. One should not forget the political interface of the system where many of these problems are created. If someone knew they would be fired, then they would do the job to the best of their ability.

On Sports and Recreation, it was literally impossible they could spend their entire budget in only two months. In terms of payment within 30 days and the situation arising in the Free State, each contractor must provide their own funding. They needed to build the roads and government would pay them over 3-4 years. They then could not raise the money on their own, so they violated their contract. The provinces must now find resources and align to settle that. “If we can start to deal with the supply chain, we’ll make huge progress”.

In terms of the other provinces, Western Cape’s Treasury and other departments were functional. If they take KZN, the Premier was previously MEC for Finance so clearly he knew that Treasury worked and in this case the health department faced similar challenges as in Gauteng. However they were able to turn the situation around in just two years. Treasury placed key people in the health department and rooted out whatever needed to be rooted out. Key leadership was important.

Northern Cape had a fairly strong treasury except for the health department where there are considerable problems on top of which the CFO may leave them. So there was a desire to intervene and help that department.

North West had to fill three key positions with the right people so stability in one’s finances would be created. One of those positions was budget preparation and budget management where they had recruited someone from the Free State and he was doing a good job. The other issue was infrastructure management on which National Treasury was supporting them. There was a lot of work to be done but they were controlling the financial environment fairly well.

The Eastern Cape Treasury “knows its business”. When Cabinet took a decision to intervene in the Department of Education there, the information provided by the provincial treasury to fix the situation was really amazing. So the Treasury was fairly well capacitated and we have also placed people there to exercise their constitutional mandate

In terms of Gauteng, except for the Health Department, the Treasury was fairly ok. They had released R2 billion last year to deal with accrual. They showed that they knew where their money was and how to deal with it. They budgeted for the Gautrain and its repayment so the quality of their budget was good, “they know what they’re doing”. He was confident that the right capacity would be put in place who were not complacent. On the debt owed to the National Health Laboratory Service (NHLS) there was a need for timely payment and in the case of KZN, they had appointed a retired judge to deal with the dispute over the correct amount owing. There was also a pricing issue raised by Gauteng so there was a need to fully scrutinize what was happening in NHLS to make sure value for money was always evident.

In reference to Steve Biko Hospital, it was moving toward utilization rates. If they use the system, they are paid for the burden they need to carry. They assessed usage data at Steve Biko Hospital so the province who had more usage would get more money allocated to it which was the opposite of what was happening in Mpumalanga where usage was down so funding would be cut. When Treasury allocated the money it was of great importance that the health system was functioning properly so that from one province to another there was uniformity in billing. If they actually analysed many of the services provided by Steve Biko, they were actually services people should have gotten at a clinic, so the entire system needs to be fixed

DPSA response
Ms Ledule Bosch, DPSA Chief Director: Monitoring and Evaluation, replied on the process of ensuring data was migrated into the system without error. She stated that their point of departure was the quality of data as influenced by business rules. In the process of verifying data several discrepancies had arisen such as finding officials without surnames and without names. This was non-compliant with pre-established business rules. They were looking at each and every department to identify those discrepancies and also at vacancy rates as well as at all the crucial information needed for planning and decision making to assess the quality of data. They had started in August 2011 so they were using August as a baseline for comparison. Statistics South Africa had also come on board to look at the data. They had to provide confidence in the quality of the data on hand.

Through the Directors General Forum they were giving reports which provided preset departmental indicators for instance sick leave management rate. This enabled monitoring of trends and an overall understanding of what was happening within the department. These reports were also sent out to HODs and Directors General to follow it up.

Mr Siyabonga Msimang, DPSA Acting Chief Director: Organisational Development, responding to questions on sustainability, said that information was key as without access to information, people tended to formulate their own opinions. The DPSA had sent a task team that addressed several instances of sustainability within the Eastern Cape to prevent another collapse. Resources were made available to all work streams including the Office of the Premier to ensure there was sustainability across the board. They were slowly turning the corner in terms of partnering with the provincial premiers – rather than imposing themselves over the provinces…the will of Pretoria on the provinces.

DPSA Deputy Director General: Human Resources Management Development, Ms Colette Clark responded to the questions about DPSA’s mandate and skills. In 2006 there was a necessity to put out a directive from the Minister of Public Service and Administration because of the proliferation of corporate forums including Shared Services Centres. In many instances there were no feasibility studies to show whether services should be shared or not. DPSA played a central role in terms of if a department requested a corporate forum. The business model of Shared Services came from the private sector. Legislation dictated that they could not delegate accountability. They could only delegate downwards or to an official. Authority and responsibility around functions in the corporate space did not lend themselves to a “shared services centre”. For very, very small departments from a budget cost analysis perspective – they might lend themselves to shared services – but that was in unique circumstances.

Both the Auditor-General and the DPSA had picked up that accountability was the main issue. The question posed was whether the person one had hired had the necessary skills to do the job. They established the HR Connect system for this very purpose. DPSA tagged every bit of biographical data of employees post-employment. They looked at that person’s skills and then the job requirements and matched the person to the job, and then did an analysis of the gap.

DPSA also did a pre-employment assessment in terms of the personal development plan. They assessed whether there was a gap between the job the person must do and the requirements of the job. The profile was compiled in terms of the core competencies of the job. They must do this competency assessment. In the same way, service providers were also validated.

The Director General commented that assessment and interaction in the province had not involved SITA as yet. Institutions like SITA would have to play a critical role. Government issues raised were being addressed. DPSA was working with the advice of government within the ICT framework. They wanted the framework approved by Cabinet for the purpose of improving the framework.

How was the capacity of DPSA affected? They had a responsibility to ensure there was an enabling environment. DPSA must ensure that departments are trained in the implementation of policies, for example via formal workshops or via one-on-one interaction.

There had to be the creation of a centralised pool where one could draw resources from outside the public service to assist in a particular province.

There would be processes to see if people had been in conflict with the law. Criminal processes may follow.

The Director General said he agreed with Mr Manana on his point about attitude. They required staff with passion. Where the attitude was wrong, resources would not be used properly. It was important to keep focus on the important matters. Support must go hand in hand with accountability.

The Director General said that Mr Marais had asked, “How does one know that one does not know”. We should collectively say that this was the progress we had made via personal development plans. If provinces were not done properly, then we were creating a problem for PALAMA. They must assess the skills needed. It was our legislative duty to do this. One had to address the issue of leadership, management and accountability.

The Chairperson had to end the meeting due to time constraints. She said there would be a follow-up. They would work on these matters until they delved to the core.

Appendix:
National intervention in provincial administration
[Heading amended by s. 2(a) the Constitution Eleventh Amendment Act of 2003.]
100. (1) When a province cannot or does not fulfill an executive obligation in terms of the
Constitution or legislation, the national executive may intervene by taking any
appropriate steps to ensure fulfillment of that obligation, including—
(a) issuing a directive to the provincial executive, describing the extent of the
failure to fulfill its obligations and stating any steps required to meet its obligations; and
(b) assuming responsibility for the relevant obligation in that province to the extent necessary to—
(i) maintain essential national standards or meet established minimum
standards for the rendering of a service;
(ii) maintain economic unity;
iii) maintain national security; or
iv) prevent that province from taking unreasonable action that was prejudicial to the interests of another province or to the country as a whole.
2) If the national executive intervenes in a province in terms of subsection (1)(b) -
a) it must submit a written notice of the intervention to the National Council of Provinces within 14 days after the intervention began;
b) the intervention must end if the Council disapproves the intervention within 3 days after the intervention began or by the end of that period had not approved the intervention; and
c) the Council must, while the intervention continues, review the intervention regularly and may make any appropriate recommendations to the national executive.
3) National legislation may regulate the process established by this section.