Unauthorised expenditure in the Departments of the Presidency; Women, Children and People with Disabilities; and Sports and Recreation; Briefing by the National Treasury

Meeting report

Briefing by the National Treasury on unauthorised expenditure in the Presidency
Ms Mmatshepo Maidi, Director at the National Treasury, noted that during 2010/11, the Presidency had overspent by an amount of R28m. The unauthorised expenditure had initially been taken as a charge against the 2012/13 budget.  However, a subsequent review had led to approval of funding from the National Revenue Fund. Not enough information had initially been available. Travel costs had formed part of the expenditure, and it had subsequently been realised that the President had had to travel extensively, especially to African countries. There had also been legal costs. This had led to a decision for additional funding to be approved.

Discussion
Mr R Ainslie (ANC) asked the Treasury to expand on the new information that had led to a changed decision. He conceded that it was difficult to budget for the Presidency, but there had to be detail about what had caused decisions to be changed.

Ms Maidi responded that the unauthorised expenditure was mostly on goods and services, specifically related to travel expenses incurred by the Office of the President. The Presidential mandate included foreign policy matters, and hence expenses incurred had come to be viewed as unavoidable.

With regard to legal costs, she stated that it was difficult for the Presidency to budget for legal costs. It was hard to establish beforehand how much expenditure could be expected in a given year.

The Chairperson admonished the Treasury, as the question had not been answered.  A distinction had been made between initial and additional information. He asked what the difference between the two was. The Treasury had referred to travel and legal costs. He asked how that had come to be viewed differently.

Ms Maidi replied that an initial analysis of the 2012/13 budget had led to a decision to charge expenses against it. It had then become clear that the Presidential budget was under pressure, and that money could not be taken from it.

The Chairperson remarked that the additional information obtained was that the budget had been under pressure.

Mr Ainslie remarked that the Treasury had not applied their minds correctly to the fact that the international role of the Presidency was of great importance. The Presidency was not a normal department. It was necessary to consider a flexible budget model, so that unforeseen costs could be absorbed in future.

Ms Maidi agreed that an initial submission had been made on the basis of insufficient information. The funding model would be reviewed, and a contingency reserve would be put in place.

Dr P Rabie (DA) asked for a breakdown of the R28m in terms of travel and legal costs.

Ms Maidi replied that it could be supplied later.

The Chairperson insisted that if the Treasury were making recommendations, such information had to be at the ready.

Ms Maidi responded that travel costs had made up R20m, legal costs R3,4m, appointments R1m, advertising costs R0,56m, and communications R2,45m.

Dr Rabie requested that these figures be put in writing.

The Chairperson remarked that heavy weather was being made of a simple thing. The question was whether the global figure could be viewed as unavoidable costs.

Ms Maidi replied that not all of the expenditure had been unavoidable.

The Chairperson remarked that the matter had to be dealt with in that context. It would not do for the Department to be provided with a blank cheque.  It could turn out that the amount would be R40m the next time.

Dr D George (DA) said that no presidency anywhere had access to unlimited money. The unauthorised expenditure did not seem unavoidable to him. He asked for a detailed list of legal costs.  He conceded that the President had to travel, but R28m was a lot of money. It would not do for the budget to become a bottomless pit. There was uncertainty about the Presidency as a department, in budgetary terms.

The Chairperson asked about the amount that was to be rolled over.

Ms Maidi replied that she was not sure.

The Chairperson said that it was about the principle of unspent money being rolled over to cover the unauthorised amount.  At first it had been said that the money would be taken from the fiscus, and later it was stated that it would be rolled over.

Ms G Saal (ANC) remarked that overspending at least showed that some work had been done, but it should have been explained properly with figures. The Presidency was a busy office that was spending more than it was getting. This was in order, as long as the overspending was explained.

The Chairperson asked for more information on the rollover.

Briefing by the Treasury on unauthorised expenditure in the Department of Women, Children and People with Disabilities
Mr George Tembo, Director: Public Finance Unit responsible for Department of Women, Children and People with Disabilities, National Treasury, noted that the budget for that department had grown in real terms. There had been overspending of R3,7m related to unauthorised travel, national days and telecommunications. The Treasury had not been persuaded that there had been extraordinary circumstances. The overspending would be charged to the 2012/13 budget. The Treasury and the Department were working on a turnaround strategy to manage the budget better, and to avoid unauthorised expenditure. Details of spending on travel and accommodation were not at that moment available.

Discussion
The Chairperson asked how decisions could possibly be reached without detail.

Mr Themba replied that the information was with the Treasury.

The Chairperson told him that the detail was needed at that very moment.  It would not do to gloss over oversight.  Informed decisions had to be made.

Mr Themba responded that trips overseas had been made by the Minister and the Director General. Delegations had been too big, and had to be smaller in future. There had been money for the hosting of national days, but these events had not been properly funded. The amount available for cellphones had been too high, and would be reduced.

Ms T Chiloane (ANC) said the Treasury had had access to expenditure figures since November 2010. There had been non-compliance with the Public Finances Management Act (PFMA). The question was why the DG and the Accounting Officer had been unable to comply.

The Chairperson asked about compliance challenges.

Mr Themba replied that the Department had been unable to submit monthly expenditure reports, as it had still been setting up BAS, LOGIS and PERSAL systems.

Mr Mzolisi Toni, Acting Director General, added that the systems had not been in place in November 2010.  However, it was now possible to monitor expenditure properly.

Ms Chiloane remarked that the Department was new, but had been given sufficient funds. It was impossible to build a house without proper finance systems. There were capacity constraints. It would not be appropriate to have money without systems in place to manage it.

Ms R Nyalangu (ANC) asked how it could be that the Department could ask for money without submitting monthly reports. How could the Treasury keep pumping money in?

Ms M Mangena (ANC) noted that the responsibility for hosting national days had been shifted from the Department of Arts and Culture without the resources to back the additional expense up.

The Chairperson remarked that the Department would have to budget for this expenditure in future. The question was, how it had been allowed to happen?  The two Ministers would have to provide an explanation.

Mr Ainslie commented that the Committee was not impressed. The Treasury would have to come better prepared in future, and this message had to be made known to the Minister. He asked how things had been done before November 2010.  Unauthorised expenditure of R3m was not a problem, but a massive increase to R22m was being projected.  He asked about reasons for the increase.

Mr Themba replied that the Department had been in the process of being established. There had been problems in respect of both systems and staff.  There had been a lack of funding to establish the Department, and the Presidency had handled finances at that stage.

The Chairperson asked if the Presidency had been reporting to the Treasury at that time.

Mr Themba replied that although the Department of Arts and Culture had offered to pay for the function shift, it had not in fact done so.

Mr Ainslie asked about expenditure before 2010.

Mr Themba replied that that information could be obtained from the Presidency.

The Chairperson remarked that not enough money had been made available to establish the new department.

Dr George asked that trips made be listed, indicating the expenditure incurred on each. It had to be asked whether the trips made had been mandatory.

Mr S Thobejane (ANC) issued a reminder that misrepresentation of facts was a criminal offence.  When a mandate was transferred from one department to another, there were rules and written agreements that governed the process.   The Committee had to be provided with such a memorandum.

The Chairperson noted that such a memorandum would not reside with the Treasury.

Mr Thobejane continued that the Treasury was responsible for monitoring spending. The Treasury had done nothing about the eight-month period from April to November. They had played cards on their computers.  It was not acceptable that action had been taken only after eight months. He asked if the Treasury had written to the Department to tell them that they were failing to do what the law required. Officials had not acted because they had been secure in the knowledge that they were earning salaries. The PFMA stated that the Minister had to appoint a Head Accounting Officer to set up systems. Departments had to account to Parliament, and Parliament had to account to the people.

Mr J Moepeng (ANC) remarked that the Treasury was like the departments it monitored. The Treasury had to go back for more information. They had to anticipate the kind of questions that would be asked of them.

Briefing by the Treasury on unauthorised expenditure in the Department of Sport and Recreation
Mr Spencer Janari, Director: Public Finance Unit responsible for Education in the Treasury, noted that there had been unauthorised expenditure of R704 000, dating back to 2010/11. The Department had hosted a Seventh Day Adventist student conference in 2007. The Director General at that time had afterwards declared expenditure for the conference was unauthorised.  The Treasury had decided that it had been incorrect to declare the expenditure as unauthorized, as it was viewed as part of a departmental strategy to mobilise youth for the World Cup. The Minister of Sport and Recreation had drawn up a memorandum some months before the conference that had stressed the need for the department to take part in mass mobilisation. The event had been recorded as an achievement in 2008, which meant that it could not be viewed as unauthorised expenditure. The Treasury had recommended that the expenditure be declared authorised.

Dr George remarked that it was difficult to establish a viewpoint when the DG who had declared the expenditure unauthorised, was not there to explain.

Mr Janari replied that the Auditor General (AG) had agreed with the Director General at the time. The Treasury could not understand why the AG had agreed, and yet the event was recorded as an achievement in 2008. Treasury had not been part of the auditing process.

Dr George suggested that the AG be asked to explain his position.

The Chairperson remarked that the circumstances were peculiar. It had to be decided whether the event had been in line with mass mobilisation.

Mr Alec Moemi, Director General of Sport and Recreation, stated that past correspondence had been examined. The event had been authorised by the Minister, and a letter had been written to the then DG to remind her of obligations in respect of the event. The question was whether the DG in fact received the letter.  The event had been delegated to a Director, and there had been a misunderstanding between the Director and the DG about the authorisation from the Minister to proceed. The amount involved had in fact been pre-approved, and the event had been in accordance with the purpose of the Department.

The Chairperson remarked that it had been a case of unauthorised expenditure, not in terms of the PFMA, but as interpreted by the then Director General.

Mr Thobejane agreed that it was a matter of the DG in fact declaring that it had not been authorised by her. The Committee had the authority to condone this decision.

The Chairperson concluded that the Treasury had to supply more detailed information.  Decisions had to be taken on the basis of specific amounts spent. There had to be a judgment on each transaction.

The Committee would spend the following week on an oversight visit to Bushbuck Ridge and the North West Province.

The Chairperson adjourned the meeting.