Departmental Budget Hearing: discussion of 2002/3 allocations/reprioritisation & finance management

Meeting report

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE
28 MAY 2002
DEPARTMENTAL BUDGET HEARING: BUDGET ALLOCATIONS/REPRIORITISATION AND FINANCE MANAGEMENT

Chairperson: Adv J H De Lange (ANC)

Documents Handed Out
Report of the CFO (.pdf format)
Business Unit: Court Services
Revised Base 80 Projects -May 2002

SUMMARY
The Committee was briefed on the financial management strategies put into place to eliminate the problems experienced by the Department. An in-depth discussion was held on the implementation of new financial management structures and plans and the management and problems of the trust account and guardians fund.

Mr McKenzie, the CFO, page by page laid out the Department of Justice and Constitutional Development's 2002/2003 Budget Allocations/Reprioritisation Report for the committee. In the process, Mr. McKenzie noted particular points of contention or controversy for the committee's response. The Committee spoke extensively on the committee's behalf and on several occasions asked the DG for reports to elucidate the budget requests of individual units of the Department of Justice.

MINUTES
Overview of the Budget and present Infrastructure
The Director General, Mr V Pikoli, said that the baseline amount in the budget was initially R4 billion. If the amount for infrastructure were deducted it would leave R3.9 billion. Taking out transfers to chapter 9 institutions and salary bill, an amount of R 1.3 Billion would be left for the activities of the department. The DG felt this was inadequate to carry out his mandate adequately.

He said that there are problems with "capacity" which still exist but were being dealt with in a decisive way and used the example of the Masters Office, which was plagued with problems of fraud and corruption. Investigations had been carried out the previous year and people had been suspended. Task teams had been set up to deal with the problem.

Monies have been put aside for forensic investigations and task teams have been appointed in the former Bantustan areas. He said that he had visited the Masters offices and everybody was upbeat.

He the referred to the Saturday courts and said that it is an ad hoc measure to combat the case backlog. What is needed is sufficiently senior people for handling finances in courts.

The Chairperson saw a potential problem with replacing magistrates with persons not trained for the job.
The DG agreed with the Chair but said that the main problem lay with how to go about doing it and explained that Justice College was offering to train people. The DG referred to Maintenance Investigations and said that the Policy Reserve Fund in the Director General's Office usually has R20 million. He feels that if those monies are available to the courts, more maintenance investigators will be appointed.

The DG noted that Financial Management of the department will be presented by the CFO who will explain the R90 million unfunded priorities. Of that R20 million will be used to clear the backlog in the books. However in order to deal with financial mismanagement issues and those of capacity and dishonesty, more money is required as the problems are big and the backlog runs into the year 2000. A difficulty was being experienced in dealing with issues of human dishonesty.

The Chairperson asked how they propose to deal with the problem of mismanagement?
The Director General answered that the way thus far was to provide adequate training.

The Chairperson asked how they prioritise all the different issues that have been raised? The Director General replied that a Compliance Committee has been set up to deal with financial mismanagement and the Director General himself is able to deal with these matters.

The Chairperson asked how many disciplinary hearings have been held thus far.
The Director General replied that thus far he has no figures but gave the example of Mafikeng where the Master was removed and replaced. He said that he has spoken to the Director of Public Prosecutions about prioritising.
The DG was then able to answer that 15 disciplinary hearings had been handled that year and the Chair responded that he would hear later why the number was only 15.

Financial Management
Mr Mckenzie, the Chief Financial Officer, referred to the CFO's Report and the document titled "Revised Base 80 Projects - May 2002" as the summary of his plan. His plan has two phases. In his summary of the phases he referred to the CFO`s annual report handed out the previous week

In summary he has created a list of initiatives which is detailed in the documents. He has created a Cycle of Improvement which has 2 approaches: the Stick and the Carrot approach.

Stick Approach
This is the first program which involves getting the books written up first. The consequences are that should theft or fraud arise there would be no compassion for this. He wants to get the Vote Account written up as far as possible. He estimates 95% of the vote account is written up already. However he is unable to do this with the Trust Account.

The Chair asked how much is needed for the Trust Account?

Mr Mckenzie replied that they had already spent 20 million on the vote account and he has got a quotation for writing up the books of the Trust Account, which he would deal with later. He said that R4 million was still needed to complete the writing up of the Vote Account.

Mr Mckenzie said that he would want to move the Trust Account away from the department and into another environment such as a banking institution. He said that he had got quotes from banks who would manage the process. The best quote had been for R13 million, however, since the department did not have the funds it had been agreed that Mr MacKenzie would do the job. There was also a good chance that R4 million would be received through donor funding.

The Chair felt that the department would not have the capacity to deal with the problem.

Mr MacKenzie clarified that he would be doing it personally.
The Chair inquired of the DG as to the possibility of obtaining the R13 million from somewhere so that Mr MacKenzie could spend his energies putting new things in place.

Mr MacKenzie replied that the R13 million was just for legal fees and not for putting the new framework in place.

The Chair questioned why more donor funding could not be found.

Mr MacKenzie responded that at first glance the problem seemed horrendous - but it was not necessarily so. He believed that most problems just could not be fixed, such as in Randburg which has no accounting books for the past and therefore no list of balances. He noted that some courts pay people and do not even take their ID numbers. Therefore the best thing to do was to opt for a secure system via a banking institution.

The Chair asked if the monies could not be raised somewhere?

The Director General answered that the only other money source is National Treasury.

The Chair said that monies must be taken from somewhere because that R13 million will escalate next year. He commented that Mr Mckenzie has lots of plans but no money to implement them and it is a priority of justice to come up with those monies.

The Director General said that they could get the monies from the Public Investigations Guardians Fund which totals R1.8 Billion which has been invested at 10.5% interest. After paying beneficiaries , the fund is left with R70 million and the balance goes to Fiscus.

The Chair then undertook to hold a meeting with SCOPA and the department to discuss this issue.

Mr Mckenzie noted that as books have been written up, it has shown where there has been instances of fraud and corruption. A Compliance Unit has been set up to deal with this but is staffed by only one person - that is why only 15 cases had been heard that year. He explained that the process was lengthy and when it was finally completed, the matter was taken on appeal. He said that the department had only uncovered the tip of the iceberg and explained that the department had commissioned a massive forensic audit and was anticipating a report back from the Auditor General within a month.

The Chair said that he awaits a briefing on this as soon as possible.

Mr McKenzie said he would be in a position to do that within the following days. In terms of managing the large backlog, the department was negotiating with magistrates to be presiding officers in "special disciplinary courts" to deal with disciplinary matters. This would then be followed up by a deeper forensic analysis and he believed the system would change the future.

Carrot Approach
This approach is to implement financial management within the department itself however, only parts of the system was being piloted at the moment. To date, upwards of 2900 people had been trained. For more than 80% of those, it had been the first training course that they had been on. The reality was that it was a 5-day course and so would not create "wizards", but the course was accompanied by comprehensive manuals. The effect of this was that things would now be standardised and so less of a problem would be experienced when people were transferred from one area to another. This system was being backed up by an analysis of the country in terms of management. The status quo was being audited to see what was being done and what was not. The intention is to create eight regions with a supervising team to check up at least once a month on what has been done and if everything is in order. They would operate in 54 clusters within the eight regions.

He said that historically books have been written up manually and sent to regional offices to be checked . He compared the people who did the checking to teachers but said that the books never went back to the "pupils" at the local office. The people at the regional offices responsible for the checking were now being trained as operations managers to do pre-checking and managing. He said that piloting should begin early next month in Randburg and the manuals will be finalised in June. All the regional heads would then come together to name the people who would take those posts. In each of the 54 cluster areas, the operations manager would have to move into a court in that particular area.

Mr Mackenzie noted that the change in management deals with the problem of obsolescence. Looking at the base 80 budgeting process, he said that he believed that South Africa was experiencing the same problems as were experienced in the former Eastern Bloc countries. What was missing was an allowance for choice. The budget for the CFO however started from base zero so that it was possible to see how everything unpacked. He had managed to formulate something which enhances the budgeting process.
The Justice Footprint project was working with three issues to see how things could be done better and cheaper and was essentially a re-look at how things could be done. The system currently in place is the old system. work being done at the moment was to look at the crime statistics and project where specialised courts were needed, for example, the Eastern Cape which experienced a higher rate of sexual offences would be a location for a specialised sexual offences court.
The zero based budget was part of the project to produce rightsizing, innovation and a new financial model. The standardisation projection, which he referred to as the "Governor Brown" project, has been the subject of substantial work and reflected the future of the department.

On the issue of the Masters Office, he said that a process of modernisation had been started to get the Masters Offices back on track. An accounting package had been bought implemented that was perfectly adequate and was working. Problems relating to the Masters Office was more people related and not related to systems, for example, everybody was now being trained in the maintenance of books. In certain TBVC states, the department was finding that money had not been put on deposit and so no interest had been earned. This had resulted in a rolling of balances that had snowballed, however, this was largely related to three offices and fraudulent practices in those offices. The matter was now in control as a raid had been conducted on the offices concerned an their contents had been removed and thoroughly analysed and audited. By the end of October, all Masters Offices would be computerised. He said that one of the risks of the Masters was that they were severely unfunded. The Masters system required connectivity and would not if they were left in their single unconnected units.
Of the departments various achievements he highlighted the introduction of the PEP recognition awards whereby people recognised each other for their good work. Two had been awarded thus far. An audit facilitation desk had been established to ensure that internal and external audits and their related issues were managed. Three newsletters had been launched to keep the department aware of various aspects of performance. Work on the re-engineering of Regional Offices had commenced. (For the full account see CFO's Report)
The Chair noted that Judges complain of buying as a problem. He inquired if there was a law that states that everything that government buys must go through a tender.
Mr Mackenzie answered that that was the case but the solution was to devolve the budget down to the courts to give them the power to determine their own budget. A yellow pages would also be developed. He explained that the Justice Department bought more or less the same things every year. He envisaged setting up a contracts negotiation division that would establish a "beforehand" tendering system so that a person at the courts could pick up the yellow pages and phone up the procurement person to ask him to deliver what was needed.
Discussion
Mr Swart (ACDP) inquired what was be done to retrieve money in situations, like Mafikeng for example, where large amounts had been the subject of
fraudulent or corrupt activities.
Imam Solomon (ANC) said that he had noticed in the provinces that the Masters Office was always "hidden away" somewhere in the court. He felt that since the Masters Office played an important role something should be done to give it a more prominent place and asked what was being done in that respect. On the issue of trust accounts, he asked if people would be able to cope with the new sophisticated approach that was being adopted.
The Chair added that with trust accounts it was possible to see what money came in and what went out. He asked if he was correct in saying that the trust account of each court always had enough money to pay out.
Mr Mackenzie replied that one of the problems in rural communities was the high rate of illiteracy. For years people have not maintained bank accounts, choosing instead to bank their money with the courts. The court in turn have failed to maintain records and neither have the people. This had only been discovered because every cheque issued for an amount greater than R2000 has to be cleared by the CFO personally. The courts do not separate their accounts and rule had come in because of fraud where huge amounts of money had been requested for "official purposes".
A forensic audit had been commissioned but he agreed with the Chair to have an in-camera review of the audit. He said that the DG had firm control of the matter and more detail would be provide in the in-camera meeting.

The Chair inquired if the department paid the accounts of the advocates that it utilised and if the department was then reimbursed for that amount. He questioned why the advocates were not paid directly.
Mr Mackenzie replied that that was tradition. However, in terms of the PMFA, bills have to be settled within 30 days and if not the service is stopped. This has brought the situation a lot more under control and the system is now current.
The Chair was of the opinion that the department should be ale to pay its own fees and recommended that that be looked at.
Mr Mackenzie said that he would stand over the question of the Masters Office. The DG stated that he agreed with Mr Solomon and said that the issue was one that was being addressed.
Ms Camerer asked if the deadlines set for the various projects would be met by the following year.
Mr Mackenzie replied that if everything went according to plan they would be ready before the end of the year.

Afternoon session
Mr Mackenzie noted that the 2002/2003 Budget is a 7% increase from the previous year. The first point of contention under the new budget concerned R2,000,000 set aside for a CFO Compliance Unit. The Chairperson believes that the only way to accomplish the Compliance task for this amount of money is if the Department hires ex-magistrates and lawyers from outside the department to take a certain number of cases on an independent contracting basis. If the department had to hire full time people for this task, it would cost far too much.

Next, Mr. McKenzie explained that the department had already contracted for an unbudgeted R482,000,000 for new computers. Most of the computers have been delivered; however, there is no money to link these computers or provide training to the potential users. Therefore, the majority of these computers remain in their boxes. The DG noted several problems with the implementation of the e-justice program. First, the program and the linking of the computers was to be funded by the EU and the Netherlands; however, set backs had occurred in releasing the money and the funding was now uncertain. Second, the DG stated that an oversupply of computers now existed. Offices that only needed four computers now had eight.

The Chairperson requested an immediate auditing of the computers. Furthermore, the Chairperson insisted that unused computers should be sent back to a central location less they risk being stolen or lost, and that perhaps it might be best to link up a pilot program rather than attempt to implement an entire costly system at once. He expressed frustration at wasting so much money that could be used in other areas.

On the issue of the Justice College's budgeting requests the Chairperson expressed scepticism of some of the proposed courses and questioned the College's desire to be independent from the Executive Branch. The Chairperson expressed his opinion that the Executive Branch is not attempting to indoctrinate lower court magistrates and that distancing the College from the Executive is unnecessary.

In the area of Legislative and Constitutional Development, the Chairperson questioned why R17,000,000 had been allocated to the Child Justice Bill (a Bill still in the legislative process) when nothing had been done to implement the Equality Court that has been on the books for over two years. The DG explained the problems of crime among children and the necessity of a Child Court to deal with those problems, but the Chairperson reiterated that the Equality issue should take priority.

The Chairperson did express his desire not to undermine the importance of the Child Justice Bill, but he insisted that the R5,000,000 in the budget for implementation should be reserved for Equality. He also pointed out that Gauteng has already established a Child Court in Pretoria without any direction from national government, suggesting that Provincial administration and funding could handle this issue. The Chairperson concluded that when the Child Justice Bill is voted on, it should include an amendment authorising the funding of the implementation costs of the Bill of R17,000,000.

The Chairperson requested a report from the DG concerning the Moseneke Judgment for Administration of Black Estates. The DG responded that they had already begun implementing a program. However the Chairperson wanted to see a plan because he doubted the allocated R29,000,000 was enough to complete the project if it involved the hiring of new staff.

The CFO noted that in the budget both Court Services and Human Resources had duplicated some numbers because they both felt it was their responsibility to request those funds. These funds included R280,000,000 for lower court personnel, and the Chairmen requested proof to show the necessity of hiring all of these new people.

In discussing the National Prosecuting Authority (NPA), Mr McKenzie explained that the unit has yet to firm up its numbers. Due to the increase in responsibility for the NPA, the NPA has enjoyed greater independence and funding; however, due to the difficulty in unpacking the NPA's numbers, the DOJ and the NPA will submit their budget requests separately and then have them added together later.

A major point of interest to the CFO concerned the Presidential Fund which is an independent body within the Department. In the Appropriations Bill, the amount allocated to the Fund had been raised from R190,001,000 in 2001/2002 to R310,01,000 for 2002/2003. Mr. McKenzie stated that he could not understand how the Department can be forced to increase the amount allocated without being given the money to do so. The CFO asked for the Chairperson's support in battling on this point, and the Chairperson agreed that someone should appear before the committee to explain the increase. The Chairperson also asked for a report to explain the Legal Aid Board's request for an additional R172,000,000.Lastly, the Committee discussed the 40% increase in judge' salaries that has taken place over the past 7 years. The Chairperson felt that the salaries and perks that judges receive may be excessive. Furthermore, not every judge receives the same perks, and while some judges have a R80,000 annual car allowance others do not. The Chairperson is annoyed by the complaints he hears from judges across the country concerning car allowances and the Senior Magistrate position. The DG stated that he does support the car allowance program. Mr. Magwanishe (ANC) asked if it is possible for the DG to provide fiscal information for how much the Department contributes to each Province for retired judges. The Chairperson suggested that they adjourn and reconvene the following morning for a detailed discussion of these issues.