Members bid farewell to Rev Meshoe, who was leaving the Committee, thanked him for his substantial efforts and wished him well.
The Private Security Industry Regulatory Authority (PSIRA) returned to the Committee to present its answers to a number of questions asked on the previous day about its Annual Report (AR). During the previous meeting, Members had already commented that the presentation by PSIRA raised more queries than it answered, and had expressed their unhappiness at the damning remarks by the Auditor-General that PSIRA and the Council appeared to be unaware of the legislative requirements, and at the numerous inconsistencies in figures. During this meeting, more inconsistencies came to light, with seven separate errors in the Annual Report document being noted, which would require errata to be tabled by the Minister in Parliament, discrepancies in the manner of reporting on the finances, and incorrect or confusing terminology. Several Members commented that PSIRA’s answers were unacceptable, and the Chairperson eventually was driven to remark that it was “a disgrace”, was failing dismally in its responsibilities to the people of South Africa and that if its disrespectful attitude to the Committee continued, the Committee would have no option but to call in the Minister. Members were very concerned that in several respects the officials and Council seemed not to appreciate or understand the governing legislation, including the Public Finance Management Act and the standard rules relating to entities.
The Council could not answer how the salaries of the Director and Deputy Director were fixed, nor the appointment of the Chairperson, which was done by the Minister. After further questions around the salary of the Executive Chairperson, the Events Management Unit (three people, despite the fact that no events were held in this year). and the personal assistants, who were on a par with senior investigators, a Member suggested that the investigation ordered by the Minister should be extended to look into all personnel matters and PSIRA was asked to submit a full organogram with names, naming any relatives, salaries and job descriptions. Members were appalled to hear that the hotline, sub-contracted out, had fielded 26 calls that resulted in reports, at a cost of R47 000. No topics for research were identified as there were no staff but this begged the question of whether the budgeting dictated the priorities or whether priorities were set and PSIRA then tried to find money, which also could explain the huge rise in levies. Members were also concerned that PSIRA had actually recorded a surplus but yet had still asked for allocations from the Department of Police. PSIRA maintained that it had risk management plans, in direct contradiction to what the Auditor-General (AG) had found, and also claimed to have a contingent liability fund, although it was not reflected in the Annual Report. The lease agreement must be sent to the Committee. The debt collection processes were also questioned and a full breakdown was demanded in respect of this, the consultancy fees, the fixed term contracts, and the staffing and activities of the satellite and regional offices. The Parliamentary Researchers were asked to provide further comment on the answers given for the financial statements, including Council allowances. Members questioned why information provided in a meeting of September 2012 was in direct contradiction to information presented today in relation to the sale of the building and the Director’s salary. They were worried that an “informal” arrangement in place at the PSIRA offices, for potential staff to wait to be hired, posed enormous potential for corruption. PSIRA must provide more information in another session on the following Tuesday.
Rev K Meshoe (ACDP) noted that he had left the Committee and was focusing on other matters. He thanked his colleagues for their diligence, hard work and cooperation, and bid them farewell officially.
Mr V Ndlovu (IFP) and Ms D Kohler-Barnard (DA) thanked Rev Meshoe for his kind words, and said that his calm and reasoned attitude would be sorely missed.
Ms A Molebatsi (ANC) echoed that he would be missed, but hoped to see him for debates in Parliament. She thanked him for his work in this Committee.
The Chairperson added that she wanted to thank Rev Meshoe for his contribution, particularly during oversight. It was remarkable that a party leader had managed to be so actively involved in party meetings. The Committee wished him well.
Private Security Regulatory Authority Annual Report 2011/12: Parliamentary questions
The Chairperson asked the Private Security Industry Regulatory Authority (PSIRA) what document it was attempting to circulate, and reminded PSIRA that any documents must be given in well in advance.
Mr Nick Legege, Deputy Director: Finance, PSIRA, said that this would explain the financial questions.
Ms Zelda Holtzman, Deputy Chairperson, PSIRA Council, thanked Members for the questions posed on the previous day. They had been grouped, rather than dealing with them one at a time, into topics.
Council matters, leadership and capacity, salaries
Ms Holtzman wanted to admit, at the outside, that PSIRA did indeed have some leadership and capacity problems. These matters would be addressed, in part, in the PSIRA Amendment Bill. It was admitted that the composition of Council was a problem as there were currently only two members, which meant there was no quorum. There was a full time Executive Chair and part time member and the decision making processes were difficult. PSIRA was trying to address the functions and the governance structures. Decision making, and Council oversight, had been problematic. It was hoped that, when the term of Council ended in December, the Minister would take into consideration the comments about composition, quality and competencies, in order to take PSIRA into the transitional phase of the turnaround strategy. Council would be trying to give direction, guidance, support and oversight, but the strategic direction would require very consistent input. PSIRA would be seeking the guidance of the House and in the next phase the challenges should have been recognised, and there should be an understanding of what needed to be built upon.
The Chairperson interjected to ask, before Ms Holtzman moved on, what had informed Council when it decided upon the salaries of the directors and deputy directors.
Ms Holtzman said the decision had been reached after difficulty and compromise. Council had met twice.
The Chairperson said this did not address the question. The criteria used to determine the salaries of the executive must be stated. The salaries were not in line with other entities, and the motivation for the discrepancy must be known.
Ms Holtzman said the Council met twice. The relationships between day to day oversight decisions, and those of management, were blurred because of the institutional arrangements. Council had not been functioning optimally and providing oversight, nor inspecting all the areas of the executive decisions and criteria. A process was undertaken before the Council’s term of office. PriceWaterhouseCoopers (PWC) had done a study on salary scales, but she could not say what informed the decision.
The Chairperson said that the Act clearly said that the Council appointed the executive. She insisted that an answer must be given.
Mr V Ndlovu (IFP) suggested that this question be held over for the moment so the Committee could return to it later. He thought it needed to be dealt with at the end of the day.
The Chairperson insisted that the answer must be obtained, and asked if he could motivate that.
Mr Ndlovu thought that the matter could be dealt with as a Committee, as he understood what Ms Holtzman was implying, but she clearly had difficulty in saying it.
The Chairperson reminded everyone that this was an Annual Report (AR) hearing and the Committee had a responsibility to look at how entities and departments had spent taxpayers’ money. It was not PSIRA’s money. Levies and fees were determined by government. The Committee had to be able to understand the decisions.
Mr M George (COPE) noted that the role of Chairperson and Director of PSIRA were becoming blurred. That was incorrect, and he wondered when this had happened, as it seemed to be the main problem.
The Chairperson reiterated that the Director and Deputy Directors were appointed by the Council. The Council must therefore give an answer on what the criteria were. If the two Councillors present were not part of that process, then they must say so.
Ms Holtzman answered that in relation to the appointment of the Director, Council was part of the process. However, the present Council could not give an answer “with full confidence” on the salary scales. The PWC process had preceded the Council’s term of office, and what informed that she could not say. The current Director was appointed in August 2010. The posts of executives were evaluated and this post was vacant. Council was part of the appointment process.
The Chairperson asked if the Council was not part of the package process.
Ms Holtzman said that there was a process under way, separately, to decide how the salary packages should be structured.
The Chairperson did not understand why National Treasury and public service were not involved.
Mr George asked which other party was involved.
Mr Ndlovu said that he understood what Ms Holtzman was saying but he had wanted her to say that she was not a party to deciding the salary scale. That was how he understood it, but he wanted to hear exactly what she meant.
The Chairperson commented that Members should not be trying to tell the entities how to answer the questions. She called for a simple answer.
Ms Holtzman reiterated that there was a two-part process. Council was part of the selection in so far as the interview and appointment went. However, the decision on the salaries went through a separate process and was not formalised in the Council. She had understood that there would be a process.
The Chairperson asked what the situation was with the Deputy Directors and their salaries.
Ms Holtzman said that not all Deputy Directors were appointed at the same time. Different Council members had sat in on the interview processes. At that stage there were five members of the PSIRA Council. The same process was followed in regard to the appointments. There was no involvement of the Council in the salary determination process.
Mr George asked who determined the salaries. Council clearly did not do so, although it should have done.
Ms Holtzman said that she could not speculate. All she could present was the Council’s decision and what it had signed off. She could not comment on what the process was, as she was not party to it.
Ms A Molebatsi (ANC) asked why Ms Holtzman found it so difficult to state who had determined the salary.
The Chairperson also found this worrisome. Council was the oversight body. There were numerous challenges. PSIRA had said that the Act was being amended, but this was not something suggested by PSIRA; it was the Committee who had picked up that there was a problem. She was concerned that some problems were simply being ignored. The Council should have questioned issues, even if it met very few times, and its failure to do so pointed to oversight on the part of Council. Whether or not the Council was functional - and it had acknowledged that it was dysfunctional – she wanted to know what interventions that Council had made.
Mr George said that someone must have determined the salaries, and he asked if this was never reported back to the Council.
Ms D Kohler-Barnard (DA) asked Gen Anwar Dramat, Councillor, PSIRA, to give his input. She suggested that the salaries must be reviewed, as this was not acceptable, and if necessary, a forensic audit must be done.
The Chairperson did not think the latter was necessary, given that the Minister had already told Mr D Stubbe (DA) that the Accountant-General had been asked to look into the PSIRA Chairperson’s and Director’s salaries.
She was not happy with the answers. To take the process forward, she then asked PSIRA, in writing, to spell out exactly what process was followed, who was involved in the interviews, their names, the date of the Council decisions, with extracts from the minutes, and a written explanation on the salaries. PWC could make an input into salaries, but was not capable of determining the salaries. Ultimately, the Public Service Commission, the PSIRA Act and National Treasury would determine the matter. This must be submitted in time for the Committee to finalise its report, by the following Friday.
Mr Marabel Chauke, Director, PSIRA, said he would answer the question as to how many calls there had been to the hotline. He did not have the total number of calls, but he could say how many reports were generated.
The Chairperson stopped him at this point and said that Mr Chauke had had ample opportunity, since 13:00 on the previous day, to get that information. She asked why he did not have it, and why he was now talking of reports.
Mr Chauke responded that there were 26 cases reported to PSIRA by KPMG. He explained that the Hotline also had some dropped calls, and this number was not known.
The Chairperson asked what the cost was for KPMG for this year.
Mr Chauke said it was around R47 000.
The Chairperson commented that these must be the most expensive calls in the country. She questioned whether value for money was being obtained.
Mr Ndlovu asked why KPMG was used.
Mr Chauke reiterated that there were also dropped calls. The total number of calls would be greater than the number of reports sent by KPMG.
The Chairperson asked again why Mr Chauke had not got those figures from KPMG, and asked if he took the Committee seriously. Mr Chauke simply needed to make one call to KPMG. She also thought that PSIRA would have tracked the calls, to ensure that it was getting value for money.
Mr Chauke said that he believed that PSIRA got value for money. He assured the Committee that he was not trying to mislead Parliament.
The Chairperson asked what those 26 reports contained.
Mr Chauke answered that they consisted of reports on complaints by members of the industry, security officers or the public, relating to complaints against service providers.
The Chairperson wanted to know how many incidents were covered.
Mr Chauke said that they related to 26 incidents.
The Chairperson said that this boiled down to the fact that the R47 000 was paid for 26 calls in the year. She asked why KPMG was needed to do this, and why it was not possible for the PSIRA to handle 26 calls.
Mr Chauke said that at the time the independent auditor was asked to administer the Call Centre, to avoid any misperception or fears of intimidation by PSIRA itself handling the line.
The Chairperson said that PSIRA was the regulating authority, and it was therefore an independent body. One of PSIRA’s main regulatory responsibilities had thus been seconded to a private company, at a cost of R47 000. It was not possible to have another independent body for an existing body; she drew a corollary that the IPID did not outsource its work. She asked if Mr Chauke thought this was a cost-effective decision.
Mr Chauke wanted to clarity the hotline use, and said this arrangement was not intended to remove any responsibility from PSIRA. As reported on the previous day, PSIRA had a dedicated line managed by the law enforcement division, to allow industry members to report corruption, including corruption by members of PSIRA and service providers.
The Chairperson said that this did not answer the question.
Mr Chauke conceded that, given the number of calls received, he must agree with the Committee that this was not cost effective.
The Chairperson said that there was no motivation to have the hotline. People should be able to lay complaints with PSIRA directly. Government could not outsource its responsibility. PSIRA was part of government, as it was mentioned in the PFMA. This issue would have to be reported on.
The Chairperson asked the Council members were aware of the decision and whether it was in reports at the time
Ms Holtzman confirmed that she did not recall that this was mentioned.
Mr Chauke moved on to the question as to what companies had competed with KPMG in tendering for the hotline. He said that KPMG had quoted just under R47 000, Deloitte Touche (trading as Tip Off Anonymous) had quoted R469 000 and Ernst and Young eventually did not quote.
Mr Chauke noted questions asked around the research topics identified under programme 1. The process of identifying topics for research was quite complex and there had been discussions around the mandate of the authority. However, the recruitment process for researchers took longer than anticipated, which was why the research was noted as “not achieved” in the AR.
The Chairperson asked what was so complex about identifying the topics for research. She also questioned how PSIRA could set a target to produce four research reports if no staff were in place. A full year had been taken to identify the topics. She would have thought that the new legislation was the obvious topic to choose.
Mr Chauke said that PSIRA did not have a research unit.
The Chairperson interjected to ask how then PSIRA could plan to do research.
Mr Chauke said that the recruitment was intended to be done in that year.
The Chairperson reiterated her question what was so complex about identifying topics to research.
Mr Chauke said that this entailed looking at the mandate of the authority, considering its areas of priority and what it would develop, to determine what research outcomes were appropriate. There were human resources (HR) challenges and that was part of the reason for non-compliance.
The Chairperson was not satisfied with the answer, but said she did not think anything better could be given. She asked him to move to the next question.
Mr Chauke noted a question from Mr George on how budgeting was done. PSIRA would hold a strategy planning session, to take stock of the situation, guided by its mandate, at which it would set the priorities and objectives in the year, then develop the Annual Performance Plan and then look at the costing.
Mr George said that his point was that PSIRA had ascribed non-achievement of its plans and targets to financial constraints. He had asked if PSIRA planned first and then looked for money, or whether it would firstly note how much was available in order to set its priorities and plans.
The Chairperson said that this came back to the same issues already addressed. PSIRA should have established a unit when it knew there was research to be done. Here again, there was no correlation between funding and planning. PSIRA also had said that a number of targets were “achieved” and they were clearly not.
Mr Chauke wanted to put the budget in context, and said that PSIRA had no guaranteed income, because it was dependent on fees contributed by the industry. It would project what its revenue was likely to be, but would have to revise priorities and targets if it was not able to collect what it had anticipated.
Mr George asked if PSIRA would plan before it actually had received the money, on the mere hope that it would be collected. He thought that surely PSIRA should time its collections and planning better. He reiterated that PSIRA had constantly noted non-achievement on targets. He wondered why it could not use money that it already had collected to pay for programmes.
Mr Nick Legege, Deputy Director: Finance, PSIRA, said that PISRA was a trading entity and it generated its own income, which should be used for the programmes. PSIRA could not use the money it already had collected, because, at the end of the financial year, the PSIRA was required, in terms of the Public Finance Management Act (PFMA) to surrender any surplus to National Treasury. It was unlikely that PSIRA could successfully motivate for retention of the surplus for the purpose of operations, although National Treasury might allow it for continuing expenditure. Historical data was used to project how much the entity was likely to receive. In the 2011/12 year, there was a challenge, because there was a delay in communication. The budget and strategic plan were based on the assumption that the fees would have increased. In addition, PSIRA unexpectedly had to move to a building where it now had to pay rent, which was not anticipated. This led to the decision to defer some programmes.
Mr Ndlovu wondered if Mr Legege was talking of fiscal dumping.
Mr Legege explained that PSIRA would not have cash at the end of the year because of the National Treasury requirements to surrender any surplus. This was not the same.
Ms D Kohler-Barnard (DA) said that PSIRA was claiming poverty at every turn and wondered why it was now speaking of a surplus.
Mr Ndlovu said that he still did not understand how the answer about surrendering money would relate to the budgeting.
Ms Holtzman said that PSIRA did not yet have the answer to the problem. Gen Dramat and she had held a discussion with National Treasury to see what financial models might be used by other agencies. She wanted to know what planning process should be undertaken to ensure that strategic processes and budgets were linked. PSIRA collected fees and it was unsustainable for it to depend entirely on this income.
Mr Legege clarified that the reference to the surplus was a response to Mr George’s question as to whether PSIRA could use the money it had already from the previous financial year. PSIRA was making assumptions based on history. He explained that immediately after the budget assumptions, PSIRA faced a legal challenge that led to the collections being reduced. He said again that even if the PSIRA had had any surplus, it could not have retained it. That money would therefore no longer appear in the books.
The Chairperson said that it was not true that PSIRA had no idea of its revenue. It was aware of how many legal entities were registered, and the court case was brought because PSIRA acted contrary to National Treasury’s advice for an increase of 9.1%, charging increases way in excess of that. Mr Legege failed to mention that after an entity had surrendered money, it could make application to have the money repaid to it. She also thought that the mention of the new building was not being taken in context. Whilst PSIRA had no choice but to move, it did have a choice to take a cheaper building, to use its old furniture instead of spending R4.1 million on furniture and the move, just as it had had a choice whether to pay R47 000 for 26 calls. For those choices, the Committee would be holding PSIRA responsible.
Mr George said that other businesses also made projections all the time, and would be affected by slumps and demand. However, this was no excuse for not managing the budget, and for failing to fulfil the targets. PSIRA must take into account the unknown when it budgeted.
Ms Holtzman wanted to deal with the outstanding questions in relation to the Chairperson. The appointment and conditions of service and term of the office of the Chairperson lay with the Minister. This was not an appointment done by Council. The Council did not know what arrangements would be around his current incapacity. The Chair would be appointed as a full-time executive chair until the Minister or the law changed that situation.
The Chairperson commented that the Committee had wanted the appointment to be part-time. The Minister had also said that the salaries of the Chairperson, and the Director and Deputy Directors were being investigated. None of the Council signed off on the Chairperson’s salary or his appointment.
Mr Legege continued with the financial questions. There was no risk management strategy approved. It was submitted at the end of the fourth quarter, but PSIRA did one formal risk assessment in February 2012, and another in May. There was mitigation and tracking of risks continuously, and reports were submitted to the Risk Committee quarterly.
Ms Kohler Barnard pointed out that the Auditor-General had said that no risk management plan was in place.
The Chairperson commented that it seemed that PSIRA was simply wasting time. Questions were not being answered. PSIRA continued to state what it was doing, but this was contrary to what the Auditor-General had said.
Mr Legege returned to the question of the lease agreement. Council had approved the procurement in April and the resolution of the Council gave the authority to the Director to sign it.
The Chairperson wanted to see the lease agreement, and the minute of the Council meeting approving it.
Mr Legege said that PSIRA had a three year plan to collect the uncollected debt. From the time that PSIRA was established, there had been no proper process, but some accounts had been closed and de-registered. The first phase of writing-off commenced in 2010. Phase 2 and 3 were running in 2010/11 and 2011/12, in relation to business debt. The outstanding debt would be finalised in this year. The process entailed getting details about who was to be sued. The debt collection agency would do a trace and make recommendations whether the debtors could be pursued or should be written off. The same process applied with the collection of the current debt. Last year 6 005 accounts were written off. The old debt collection was being done by an agency but the current debt collection was being done by PSIRA itself. He noted a trend that companies would pay their outstanding debt when they had to tender, and required a letter of good standing. PSIRA was now liaising with National Treasury and the Auditor-General to see whether payment of PSIRA levies could somehow e be incorporated into Treasury Practice Notes as a standard requirement. He explained that in the last financial year, the amount billed was R128 million and R108 million was collected.
Ms Kohler-Barnard said that previously it was R75.5 million. She asked if the debt was cumulative, or whether new debts only were reflected ach year.
Mr Legege said that there was legacy debt and although this was not growing, it simply had not been written it off. It was kept in the books until there was confirmation that the debtor could not be traced.
The Chairperson said that this did not make sense. The Committee wanted a breakdown of the value, how many companies and how many individuals were making up the debt, the amount and value written off, and how many companies were de-registered for each of the outstanding years, including the year of reporting.
Ms Molebatsi wanted detail also on the number of accounts written off.
Mr Legege said that the likelihood of collection was based on when the invoice was processed, when payments had been made and how many debtor days were involved. The average would be large if all the old debt was included.
Mr Legege responded to a question on contingent liability, saying that there was a budget for contingencies.
The Chairperson asked where this was reflected, since the Auditor-General (AG) had specifically noted that it was not reflected.
Mr Legege said that this was not presented in the Annual Report.
Mr Legege noted that in 2011/12 the total cash collected was R108 million, and this reflected an increase on the amount collected in the previous financial year.
Consultancy fees and contracts
Mr Legege said that the service provider (the name was inaudible) had been providing an IT service with IT personnel. The contract expired in August 2011. After that, PSIRA had employed its own IT staff. The amount paid in 2010/11 was R3.1 million and in the 2011/12 it was R1.3 million as the contract ran only for five months. There was a schedule and this would give the detailed breakdown of the total, showing who was paid, who they were, and what they provided.
The Chairperson confirmed that this must be submitted.
Mr Stubbe said that the document said the contract was “terminated”
Mr Legege said that the contract had expired.
Mr Stubbe and the Chairperson said that there was a legal difference between these terms.
Discrepancy in financial statements
Mr Legege drew attention to a reconciliation statement (see attached two-page document). The intention of PSIRA was to provide the Committee with further details on the expenditure but when PSIRA compiled its slides, some items of revenue and expenditure were aggregated, so they did not match what was in the AR. This was an oversight on the part of PSIRA: its management accounts were presented in one way, and the financial statements in another. These pages now showed a reconciliation. There was no difference in the totals. The deficit was the same as that reflected in the Annual Financial Statements. In future, PSIRA would present reports that followed the same format. He apologized for any inconvenience.
Mr George said that the “sundry amounts and other income” had not been explained. No terms should have been used that were not clearly explained. An explanation had been requested of the “sundry” figures.
Mr Ndlovu referred to Annexure A. He asked what “SIRA” was supposed to mean. The professionalism of the document was now in question, if the PSIRA could not even reflect its name correctly.
The Chairperson agreed that “other income” was included in this document. She wondered if PSIRA was attempting to hide any money from National Treasury. At the end of last year it had requested money, yet now seemed to have enough money.
Mr Ndlovu asked if the “sundry income” listed on the loose page was a negative or positive amount.
Ms Ursula Mellet, Financial Director, PSIRA, said that “sundry” income of R122 000 was made up of small incidents, such as recovery of telephone calls and faxes, or documents sold. The total of “other” income of R21 million, under “other” was made up of services rendered, the proceeds from insurance claims, from the debtors book, and money deposited directly to the bank account.
The Chairperson took up the last point. A few years back, PSIRA said it was having difficulty identifying direct payments into its bank account. Debt collection should be treated entirely separately. She wanted to know how much money had accrued prior to being returned to National Treasury.
Mr Legege said the amount was R30 million.
The Chairperson asked the Committee Researcher, and researchers from the Finance Committees, to look into the way the financial statements had been presented, and to report back to this Committee. There was still something that was not right. She questioned how PSIRA could have a surplus of R30 million yet claim that it wanted the Department of Police to bail it out, and she could not understand how this request was made. She reminded PSIRA that all its funding comprised public money. She also asked that the PSIRA Council take a closer look at the financial situation.
Mr Legege reported that the old building of PSIRA had not yet been sold. It was put on tender in March, through a competitive bidding process.
The Chairperson reminded him that when PSIRA presented its quarterly financial statement, three months ago, the Committee was told that the process had been “finalised” but because the successful bidder had not been informed, PSIRA did not want to name that bidder. She therefore questioned which of the statements was correct, and why there was a discrepancy in the versions.
Mr Legege said that offers were received, after the bid had closed. The offer was however subjected to an evaluation process. At the time that PSIRA last reported, an offer had been made. He then explained that the property consisted of one building, that was condemned, and two residential houses, and despite the fact that PSIRA moved out of the main building, it still had its Customer Services Division in the houses, and they would move when the sale went through. PSIRA then started to procure for its Walk-In Centre. However, it then realised that section 54 of the PFMA required the Minister to approve of the disposal of any significant assets, and that process had not been done.
The Chairperson thought that PSIRA was now wasting the Committee’s time. She reiterated what PSIRA had said at the earlier meeting. Mr Legege’s response now suggested that only after concluding all the other processes did PSIRA realise that the Minister’s sign-off was needed. PSIRA was not following the standard government processes, and it had also not done this with the lease.
Ms Holtzman said that the Chairperson was correct in her recollection of what had been said at the earlier meeting. Technically, the statement that the matter had been finalised was incorrect because the Minister’s approval was still outstanding.
The Chairperson said that the serious conclusion to be drawn from this was that PSIRA was not aware of the requirements and simply “stumbled” upon them. The AG had made precisely this point, reiterating, several times, that management and Council were “not.. aware of / unfamiliar with the requirements”. She asked Mr Chauke if he had ever read through the PFMA. She asked why PSIRA seemed to have such a disregard for legal requirements. She also noted that a possible figure of R1.8 million had been mentioned for the sale of the building and she had wondered at the time if it would not be worth just demolishing it and converting it into parking to bring in more income. She asked when this matter would be finalised.
Mr Chauke said PSIRA would finalise the submissions to the Minister and if approval was obtained, PSIRA should be able to finalise the sale by the end of the year.
The Chairperson noted that the proposals had not yet been submitted to the Minister. She said that as soon as this matter was finalised, full details must be given to the Committee, including all tenders, where it had been advertised, and the amount for which the property had been sold.
Missing details of Council allowances
Mr Legege noted that although previous reports had carried details on the emoluments and travelling allowance paid to Councillors, it had been incorrectly recorded. The Generally Recognised Accounting Principles (GRAP) required that these amounts should not be reflected as if the Councillor was receiving something, but the 2009 financial statements seemed to indicate that these were expenses incurred in the normal course of business. Now there was no reference to Councillors, other than the Executive Chairperson, who was earning a salary. The other members did not earn any income so none of the transactions were disclosed.
The Chairperson said that this was not her understanding of what should be reflected. She asked the researchers to check on this point as well
In relation to the costs of the Council’s office, she insisted that this must be given, with a breakdown, in the same way as departments reported on the costing of the Minister’s office, by the following Friday.
Mr Legege said that the details were not in the AR, but they could be provided. .
Mr Pilathi Mthethwa, Deputy Director, Law Enforcement, noted that questions had been asked about the personnel in the legal services division. PSIRA had targeted reducing the length of time taken for matters to move from inspection to prosecution stage, which was at one stage taking up to two years. Three inspectors were deployed to Legal Services. Two were deployed as a lateral transfer or secondment, because they were almost at the same level as the prosecutors, and one was deployed in an acting capacity because he was at a lower level than inspector. Since then, the 90-day turnaround was being reached. Once that had been reached, their positions would be considered again. PSIRA was working with its HR unit to ensure that the positions of the prosecutors were finalised.
The Chairperson commented that three different terms had been used : lateral transfer, secondment and acting.
Mr Mthethwa explained that two were seconded because they were laterally transferred.
The Chairperson said that these terms were entirely different. If they were transferred, their original department would lose them. If they were seconded, they would still be regarded as attached to the original unit, although working elsewhere.
Mr Mthethwa said that then they had been seconded.
The Chairperson commented that PSIRA management did not appear to understand even basic governance terminology. She asked Mr Chauke why this was so.
Mr Chauke said that there was no intention to mislead the House. It was a confusion in terminology. Mr Mthethwa perhaps had just chosen the wrong words.
The Chairperson agreed that there was indeed confusion on terms. This confirmed the point of the AG that management did not understand the issues.
Mr Mthethwa then outlined and answered the questions about the regional offices and satellite offices. He said that the difference between them was that essentially a satellite office provided primary services to the client, whereas the regional office provided primary and secondary services. He gave examples of primary services, which would include issuing of certificates, receiving complaints, but not investigating them, for they would be forwarded to Head Office and allowing security officers who were hired when they stood outside the premises to be checked by their new employers.
The Chairperson asked if PSIRA was working as a labour broker.
Mr Mthethwa said it was not. However, security officers who were looking for work would come and stand outside the PSIRA offices, and the security companies would know where to come and source new staff, and would be able to visit the PSIRA office immediately to check on their registration status.
The Chairperson pointed out the huge corruption possibilities in this arrangement, and expressed her concern that this was noted as a “primary function”. Any person should be able to check whether a person was a properly registered security officer, by putting the card number into the website. There was surely then no need for any private security companies or officials to stand around the PSIRA offices, as the companies could check on the numbers through the website.
Ms Molebatsi sought clarity on what was done with the complaints received.
Mr Ndlovu also wanted clarity on whether security companies would come to PSIRA and could not understand why there was any need for people to meet at PSIRA offices.
The Chairperson agreed, and commented that the PSIRA Office in Cape Town constantly had queues of security offices blocking the entrances and stairways. She was not happy on this point, but, in order to move forward, asked that PSIRA provide the number of staff, and their designation, employed in each of the satellite offices. There should also be a full report on those satellite offices, including their financial status, what each had done, in respect of each of the primary functions, including referral of companies and individuals to each other. The same information was also needed for the regional offices. Rental, personnel and “sundry” expenses must be given.
Ms Molebatsi reminded PSIRA also to include details on the cases referred, and what had happened to them after they were referred.
The Chairperson said it should be easy for PSIRA to compile this information, as management should have looked at it as part of the yearly review.
Mr Mthethwa explained that the function of the security offices in the hiring of staff was informal or accidental in nature. These activities did not take place within the premises of PSIRA, but happened outside. PSIRA had no control over this.
The Chairperson disputed this. Firstly, she assured the Council that if they walked to the PSIRA local offices, they would see that the contact was certainly not happening outside the building but in the PSIRA offices. She cautioned that these type of “informal” arrangements could led to dangerous precedents, as had happened in offices of Department of Home Affairs, which had been running a side-line of weddings from one of its offices.
Mr George did not believe that there was any such thing as “out of PSIRA control”. The reason why the security officers and companies were there was that PSIRA was clearly doing something out of the ordinary.
Ms Holtzman said that this situation was not going unnoticed, but was not fully understood by the Council. PSIRA was striving to be an authority with integrity that provided oversight over the industry. She agreed that there was a risk and Council would look at it. PSIRA was looking at the institutional risk areas, including management and compliance. However, she reminded the Council that there were currently only two members on the Council.
Queries in relation to tables in the AR: Pending registration applications
Mr Mthethwa said that there was an error in the layout of the columns as they appeared in the AR. All the numbers should move to the right, so that they fell under the correct headings. The first column was in relation to 1 600 business applications, the second should be business applications in 2011/12, at 1066, and the third was the applications rejected, at 464. The last column reflected those still in progress, which was 77. There were 6 carried forward from previous years.
The Chairperson asked how long the six had been outstanding. They must have been submitted before 1 April 2011.
Mr Mthethwa said that they might refer to matters carried over from March 2012. Any outstanding applications were attended to first.
Mr Ndlovu asked if that AR document had now been audited and checked before being submitted to the Minister and Parliament. It was not of a professional standard, despite being a public document.
The Chairperson commented that she had been counting the number of times that PSIRA had to apologise for errors. She had noted five apologies since 11:00 that morning. She agreed with Mr Ndlovu that this cast serious doubts on whether the information was reliable. The Minister would now have to table another document correcting the mistakes. She asked who had compiled the AR.
Mr Chauke wanted to apologise for the mistakes. The errata document would be prepared. Reports from the various divisions would be consolidated, and those divisions were supposed to check them and have them edited. He acknowledged that more efforts were needed to check the documents thoroughly.
The Chairperson added that the printer was not named on the document, and this was another requirement. Details of the printer and cost must be provided in writing.
Mr George asked if the AR was tabled to Council. The document revealed a number of areas of concern and surely the Council should have been alerted to the potential for problems – for instance, the vacancies in the prosecutor division – and asked how the work was then being done.
The Chairperson reminded Members that the Council had only met twice in this year, and that the Committee’s insistence that it must meet at least four times was justified.
Ms Holtzman confirmed that Council had met only twice, but had now increased the frequency of its meetings. She agreed that concerns were raised.
The Chairperson added that of course any Council member could proactively take a stance and request that a Council meeting take place.
Mr Isaac Ralioma, Senior Manager: Human Capital, PSIRA responded to questions asked about sick and incapacity leave. The administration of leave was managed by the Human Capital Division and an employee self-service system was introduced to enhance controls. PSIRA had a leave policy, and a dedicated person to administer leave. There were categories of annual leave, sick leave, additional sick leave, study leave and special leave. Incapacity was not addressed in any leave policy and further consideration could be given to this point.
The Chairperson made the point that leave was addressed in the PFMA.
Office of Director
Mr Ralioma answered the questions about the composition of the Office of the Director. It was comprised of the Director and his PA, the Chairperson of the PSIRA Council and his PA, two senior investigators and one investigator. There were therefore seven people. The total package for the Director was R1 025 115 per annum, and for the Chairperson the total package was R1 441 969. The two senior investigators received a basic salary of R319 554 plus other benefits, including medical and pension company contribution. The total cost to company was a package inclusive of all other benefits, but he could not name that amount.
The Chairperson said this was unacceptable. The Committee had made it quite clear what it expected. By Friday, the PSIRA had to provide the total costs for the investigators. She then asked how much the investigator and PAs were paid.
Mr Ralioma said the basic salary for the investigator was R282 559 per annum, but again this did not include the medical contribution. He would get the information on the total package. The Chairperson’s and Director’s PA were each receiving R319 554 per annum, which excluded medial and company contributions, the same as a Senior Investigator.
Mr Stubbe wanted to know what the breakdown was of every other benefits.
Ms Kohler-Barnard said that surely there was a mistake, but received confirmation that the PAs were being paid at the levels of senior investigators.
Mr Ndlovu asked if these salaries had been compared with other entities, as they were vastly different. PSIRA was simply not acting in the same way as other entities.
Mr George thought that every salary needed to be investigated by the Minister.
The Chairperson said this was indicative of a very unhealthy governance structure. It was incorrect that Chairperson and Director were in the same Office. There were also discrepancies between the figures now quoted and those given at the September meeting, in relation to Mr Chauke’s own salary. She reminded PSIRA that lying to Parliament was punishable with a sentence of imprisonment. PSIRA seemed to assume – incorrectly – that this Committee would not be thoroughly prepared and would not check what had been said previously. There was a R19 000 difference between figures given in September and at this meeting.
Mr Ralioma answered the questions as to why there were three staff in the Events Management division, and what they were doing. He explained that they managed all events and marketing within the PSIRA, to ensure that all planned events were hosted professionally, and they coordinated design and development of marketing in line with the approved marketing strategy. There was a Manager, a Coordinator, and Front Desk Consultant, who had to receive visitors and ensure that boardrooms were available and ready for the meetings.
Mr George questioned why a Manager was needed to manage one person. He got the impression that PSIRA was simply trying to accrue and distribute money internally.
Mr Ndlovu stressed that the Committee had asked these questions to find out what exactly PSIRA was doing. The organisation was supposed to be professional.
Ms Molebatsi questioned that surely there were not daily “events” to be managed.
Ms Kohler-Barnard asked that the investigations into the salaries should be extended. She wanted to know the professional job descriptions of everyone, and asked also who might be related to whom. Booking a boardroom was a secretarial job, and she wanted to know exactly what events PSIRA held. She could not understand why three people were being employed to manage a few events a year.
The Chairperson asked if “meetings” were events, and that PSIRA specify what the events were, their type and their frequency.
Mr Chauke said that industry forums would fall within this definition. Although there were none in this year, he was citing this as an example of an event that might be arranged. Other events could be strategic planning sessions, team building events for inspectors, and road shows. He conceded that in this year there were no events.
The Chairperson said that essentially three people were then being paid to do nothing. She commented that PSIRA, in addition, had the audacity to report that it needed another person. It was well-known that there was no relationship with the industry. PAs in the office would be able to arrange strategic planning sessions and imbizos.
Overall, she stated that “PSIRA is a disgrace”.
The Chairperson commented that the Committee could certainly ask the Public Service Commission to look into this, but in the meantime, PSIRA was required to provide a complete and total organogram, including all regional, satellite and head offices, with names, salaries and job titles, by the following Friday.
Mr Ndlovu asked for, and received confirmation from the Chairperson, that the PSIRA had not consulted the Public Service Commission.
Asset management figures
Ms Ralioma said that page 15 of the AR set out the total package of personnel expenditure, and Members had asked whether the figure for Asset Management was correct. He apologised that there was a misprint. The correct figure was R766 626, and the figures were therefore switched. The other figure related to facilities management.
The Chairperson said she was too scared to ask what facilities management was. This was now the seventh error to which PSIRA had admitted, and the switch in figures affected the financial statements.
Fixed term contracts
Mr Ralioma said that the fixed term contract figure of R2 million represented the 27 positions that were on fixed term contracts in the year
Mr Stubbe said that even if the figures had been swopped around, there was no explanation of why the salary costs had almost doubled from one year to another. The figures simply did not correlate, and it was even more worrying because this figure related to one person; it was not correct that this type of increase could be given in one year.
Mr Stubbe said he was undecided how the Committee would be able to fix this problem, and thought that the Committee could not reach a conclusion now.
The Chairperson agreed that the Committee would have to give serious consideration to the issues. She told the Council that it must also see the extent of the problem. What had been said now about the financial figures impacted on the whole AR. In summary, this session had achieved little other than to waste Members’ time.
Mr Ralioma confirmed again that the 27 fixed term contracts cost R2 million.
The Chairperson said that they were reflected as zero cost.
Mr Stubbe said that the question was asked on why, and to whom, the contracts were awarded.
Mr Ralioma explained that the salaries for the fixed term contracts were reflected together with staff members’ salaries. There was a list, and he would provide it to the Members.
The Chairperson said this was not acceptable. This question was asked on the previous day, and, if necessary, she would keep PSIRA in the room until that list was presented. She insisted that one of the PSIRA representatives must leave the room right now, and get the list printed and copied. Members had had a full list of questions. PSIRA was using delaying tactics and this was irritating the Committee. These Members were not scared of working hard, and would insist on proper responses even if this meant sitting through the night. She would not allow this Committee to be treated with this disdain and disrespect, and it had never been treated in this way before, even during the most robust engagements with SAPS. She agreed with Mr Stubbe that Members of this Committee dealt with figures on a daily basis, and could not be fobbed off.
The Chairperson suggested to Members that Members cut their planned visit to the Free State short by one day to finalise the issues, and reiterated to PSIRA that at the meeting on the following Tuesday, 27 November, the Committee would not tolerate the kinds of answers provided today by PSIRA, and would have no option other than to call in the Minister if this attitude persisted.
She summarised that PSIRA must, by the following Friday, submit to the Committee Secretary the organogram (with all positions, and the names and qualifications of every single person, and an indication of any relatives, salaries and job description). The details on the sale of the building must be communicated to the Committee the moment it was finalised. All other details would have to be provided at the next meeting. Mr Chauke must, before then, go through the Annual Report, isolate every mistake, and alert the Minister, so that the errors were tabled in Parliament. The Committee Researchers would be reporting back on the financial statements. The Committee could conduct any inspections at its own behest.
She concluded that PSIRA was letting down the people of South Africa. If she had been in their position, she would have battles with her conscience. PSIRA had been entrusted with responsibilities that directly affected the people of the country and it was failing dramatically. If PSIRA officials were not taking the job seriously, the Committee could not be expected to take PSIRA seriously.
The morning session was adjourned.
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