The Chairperson clarified that the 13 March meeting with the Department of Correctional Services (DCS) had been to address the performance audit by the Auditor-General on the use of consultants. This meeting would deal with the Annual Report. DCS had been unable to move towards a clean audit over the years. The Committee did not enjoy engaging on the same issues year after year; it was ideal that such meetings assisted and took departments forward. At the end of the session the Department should be able to value the interaction. The sense should be that progress would be made after such a meeting. This needed to be the overriding consideration of the hearing.
Members voiced frustration at the Department’s inability to achieve a clean audit and its over reliance on consultants. The Department was, in the terminology it knew best, serial offenders with no hope of ever getting parole when it came to controlling financial affairs. The issues picked up by the Auditor-General in the current report, were the same as those raised with the Department for the past five years.
Clarity was sought on inadequate assets management, inter-stores transfers, and Logis - all matters that had contributed to this year’s qualification. Particular focus was on Logis, as it was the main challenge. The Department was also asked to clarify the matter of the Acting Chief Finance Officer (CFO).
The Department noted the “hopelessness” and “serial offending” comments, and gave an assurance that it was not all doom and gloom. DCS explained that Logis was a transversal system residing at National Treasury, and DCS had engaged Treasury about the inability of Logis in assisting DCS with closing balances. Inter-stores transfers were directly related to the non-functioning of Logis. It gave different closing statement for balances. Therefore when using the manual system, things did not tally. The solution lay with Treasury, and until Treasury came with solutions to address the challenge, the problem would persist.
Treasury officials commented that DCS had indeed raised the Logis matter and this matter was subsequently taken up with the unit responsible who made changes to suit DCS. A report had been submitted to DCS and it indicated what changes had been made on internal transfers for both major and minor assets. DCS users had also been trained on the system for the 2011/12 financial year. The team would be matching internal stores transfers-in and internal stores transfers-out; this was the only aspect left. Treasury was of the opinion that there were other challenges that the AG had identified, that they would not have been corrected (even if Logis was fixed). There had never been feedback from DCS to indicate the Logis system was still a challenge.
DCS noted that its permanent CFO joined the Department of Defence in December. DCS immediately advertised but was not satisfied with the quality of applicants. The post was re-advertised. It had not planned on having an acting CFO; in fact the leadership had previously taken a decision that there should not be an acting position at senior management staff (SMS) level. An announcement would be made on the recruitment of a CFO in due course.
Clarity was sought on the service level agreement with the State Information Technology Agency (SITA), especially delayed IT projects - some of which had been ongoing for six years and were still incomplete. DCS commented it had raised SITA’s inability to complete projects with the Portfolio Committee on Correctional Services. DCS could have recruited its own IT staff. IT issues were not addressed.
Members asked about the PriceWaterCoopers and Sekela consortium who performed the internal audit function. Why was it necessary to have the consortium perform the internal audit function? When was the consortium appointed; and what were the reasons to outsource the internal audit function, instead of building own capacity? The consortium had been appointed in June 2012 with a budget of R7 million, and it was required to do the internal audit work on behalf of DCS. The DCS own unit was seriously understaffed hence appointing the consortium was intended to support the objective of developing that skill internally in preparation for when the contract expired. In terms of the service level agreement with the consortium, it was supposed to “upskill” the internal audit unit of the DCS. This was the intention.
Members contended part of the challenge at DCS was failure to hold people accountable. It was easy for people to transgress repeatedly because they were not held accountable. There were no internal controls at all when it came to this matter at DCS; it was a free-for-all. People repeated the offences; what was the reprimand, or did the DCS issue warning letters as recommended by the Committee? People were allowed to get away with this behaviour; it was DCS’s fault.
The Chairperson clarified the meeting with the Department of Correctional Services (DCS), earlier in the year, was mainly on the performance audit by the Auditor-General. The meeting would deal with the 2011/12 Annual Report. DCS had been unable to move towards a clean audit over the years. The Committee did not enjoy engaging on the same issues over a number of years; it was ideal that these meetings assisted and took departments forward. At the end of the session the DCS should be able to value the interaction. The sense should be that progress would be made after each meeting. This needed to be the overriding considerations in all these hearings.
Yesterday, the Committee received an apology indicating the Minister, Mr Sibusiso Ndebele, would not be attending the meeting. Ministers pulling out at the last moment was a challenge with all departments; Ministers acted as though they were not aware of scheduled meetings. This called into question the role of deputy ministers. The Minister was held up in Durban in some conference, and yet the Deputy Minister, Adv Ngoako Ramatlodi, indicated he could not attend either.
Assets and the incomplete Logis
Mr N Singh (IFP) commented that the introductory remarks could not be more accurate as it indicated the kind of hopelessness that Members had when meeting with DCS. DCS was, in the terminology it knew best, serial offenders with no hope of ever getting parole when it came to controlling financial affairs. The issues picked up by the Auditor-General in the current report, were the same as those that had been raised with the DCS over the past five years.
He sought clarity on what had happened since November 2012 when the audit by the Auditor-General (AG) reported inadequate assets management, inter-stores transfers, and Logis were a challenge at the Department, and this had resulted in a qualification. What was happening with regards to management of the assets; the bulk of the issues contained in the AG’s report related to movable and tangible assets. While answering, could the position of the Acting Chief Finance Officer (CFO) be clarified. Where was the permanent CFO?
Mr Tom Moyane, DCS National Commissioner and Director General (DG), commented that the delegation had taken note of the “hopelessness” and “serial offending” comments. It was not all doom and gloom as reasons for qualification "were attributable to a number of issues". The permanent CFO of DCS joined the Department of Defence (DOD) in December. DCS had advertised immediately but it was not satisfied with the quality of applicants. The post was re-advertised. It was not planned that there be an acting CFO, and in fact the leadership had previously taken a decision that there should not be an acting position at senior management staff (SMS) level. An announcements would be made on the recruitment of a CFO in due course; other positions as well were being filled as well.
Mr Moyane said Logis was a transversal system residing at Treasury and so it was not a departmental system. In 2011 Treasury and the AG met about the inability of Logis in assisting DCS with closing balances. Treasury said it would provide a functional Logis that would assist DCS in its daily operations. For DCS to mitigate the challenge posed by Logis, DCS informed the AG that it would continue using the spreadsheet or manual option to capture. Inter-stores transfers were directly related to the non-functioning of Logis at DCS. It gave different closing statement for balances; therefore when using the manual system things did not tally. The solution lay with Treasury, and until Treasury came with a solution that addressed the challenge, the problem would persist. Any department should be able to account for the assets it had on its books. Soon after he took over the reins in 2010, asset management was looked at because it impacted on the audit opinion DCS received. A decision was taken to recruit. DCS wanted to draw attention to the fact that asset management was not a responsibility of the finance unit, but of all managers. DCS should now be able to account for each and every asset found in all offices.
Mr Singh commented that Treasury and the AG needed to comment on the accusation that Treasury was part of the cause for DCS’s qualification on the Logis system. In five years, the same accusation would still be made that Treasury was part of the problem. He would raise the matter with the Minister in the afternoon in the House during the debate on the Treasury budget.
Ms Star Kafu, Treasury Director : Accounting Support and Reporting, commented that DCShad indeed raised the matter and this was subsequently taken up by the Logis unit with a view to effecting changes to the system. A report was submitted to DCS and it indicated the changes done on internal transfers for both major and minor assets DCS users had also been trained on the system for the 2011/12 financial year. For the current year the team had removed the internal transfers from the additions and disposals adjustments. The team indicated it would be matching internal stores transfers-in and internal stores transfers-out; this was the only aspect left for it to do. Treasury was of the opinion that there were other internal challenges that the AG had identified - such as where a store would transfer out but the other store would not receive it. Even if Logis was sorted, these were the kind of items that had not been corrected. There had never been feedback from DCS to indicate the Logis system was still not assisting after it had been corrected.
Mr Musa Hlongwa, AG Business Executiv, commented it was true that Logis still gave challenges in terms of the inter-stores transfers. In the last audit it found the manual intervention by DCS had helped reduced the extent of the problem. The other issue that gave rise to the qualified audit was both the missing existence and completeness of the assets.
The Chairperson commented that the focus needed to be on the part about internal transfers that Logis was not assisting in.
Mr Singh requested that clarity be given as to what would be done, and if the situation could be corrected. DCS needed to consider the situation of moving away from the spreadsheet to the electronic system. If this was to be corrected, who would correct it?
Mr Moyane replied Logis resided with Treasury. DCS did not have the full package that addressed all its challenges. If the matter was dealt with in a “piecemeal approach”, challenges would continue. This being a transversal system DCS needed to have finality. DCS needed to know if this matter would be addressed and how. DCS made a decision that it would not abandon the spreadsheet until it was satisfied that the Logis system was fully functional. DCS would prefer to have one functional system.
The Chairperson commented it was the second time the Committee was dealing with internal transfers. The issues raised were the same as those discussed two years ago, and the expectation from the Committee was to hear how the challenges would be addressed. He sought clarity on whether the DG suggested that until such time the transversal system was changed completely to address gaps, internal transfers challenge would always be there.
Ms Nandi Mareka, Acting CFO, DCS, commented the audit qualification was mainly due to inter-stores. DCS went to look at all the inter-stores done from 1 April 2011 and the supporting documentation to do the reconciliations, was found. She clarified the qualification was not on the 2011/12 inter-stores transfers; it was a qualification because of a comparative figure in the 2010/11 figures which were qualified. It was normal for financial statements to compare results with the preceding year.
The Chairperson commented that the explanation of the processes was not an issue and mattered not. The question sought to establish if the issue had been resolved.
Ms Mareka replied “no”.
The Chairperson asked, "Then what?" His question sought to understand if DCS was suggesting because of the challenges with the system, Government had to fold its hands and do nothing about it.
Mr Moyane replied DCS would put in every measure to address the matter. DCS was therefore saying that Treasury should come with a complete system; this had not happened. This was the problem.
The Chairperson interjected and said the suggestion from Treasury had been that adjustments had been made on the system, and DCS staff were trained on it. What was it that was lacking? He requested that Treasury clarify the matter.
Ms Kafu said system developers indicated adjustments had been done, the only thing that was outstanding was trying to assist DCS to match inter store transfer-in with inter stores transfers-out. The users were trained and there was never feedback if the training was effective or not. There were other internal issues that DCS still needed to address according to the AG.
The Chairperson asked if the challenge was a system’s problem or a people’s problem. He sought clarity on whether the pending adjustments on the system meant that, in its current form, Logis was not useful.
Ms Kafu replied the information Treasury had was that the system had been adjusted and the Logis team even provided training manuals used to train officials. And such materials were also forwarded to Ms Mareka.
The Chairperson requested that the DG respond and clarify the issue of assets being taken out of stores and not being received at the other end; secondly, that training was done with personnel and yet no feedback had been given.
Mr Moyane replied he did not want to get into a debate. The training was only received in 2013 February, whilst the matter had been raised since 2010. It was impossible that such training would address challenges mid-way through the audit process. If the training happened only recently, how would that assist in addressing the problem? He was being frank and did not want to cast aspersions, but rather to have a functional system. Despite all the deficiencies, DCS had not sat back and waited Treasury. It had put in internal control measures to address the challenge. Until such time that the owner of the system (Treasury) provided a holistic system, there would always be deficiencies.
Ms Mareka said the training only happened after the report had been compiled, and DCS provided feedback on the training. There were still gaps in the adjusted system.
The Chairperson asked if the feedback was written or verbal
Ms Mareka replied it was in writing.
The Chairperson requested that there be follow up on this, and the information be provided to the Committee as well. If indeed feedback was given, and yet the Logis team indicated to Treasury that it never received feedback, then there was a challenge that had to be collectively addressed.
Mr Singh commented that while he accepted there would be follow ups on the matter, the Committee could not be an arbiter between departments. The departments interacted regularly and they should be able to resolve whatever differences there were. These things needed to be sorted out behind closed doors. It was not satisfactory to have these interdepartmental exchanges when the Committee actually expected more substantial information.
The Chairperson commented that the AG met departments quarterly. He asked the Office of the AG what was it that DCS needed to do to address the current challenges.
Mr Hlongwa replied in the last audit there were no material misstatements, but there were from previous years. DCS was on the right track even with the spreadsheet whilst working on improvements with the Logis.
The Chairperson said he did not understand how Treasury procured an incomplete system. How did it happen; and even have guts to pass such a system over to other departments?
Mr Singh reiterated he would raise the matter with the Minister in the afternoon. He sought clarity on item 8 on page 108 in the Annual Report, where the AG indicated he could not be satisfied with major movable assets where there were material mistakes of an estimated amount of R47 million. Could DCS comment on this aspect of the report?
Ms Mareka replied that her earlier response about comparative figures was applicable to this as well. This was not something applicable to 2011/12.
Mr Singh commented he would not ask the question on the R10 million amount noted in the audit report as he would get the same answer.
The DG and the CFO both nodded to indicate that would be the case.
Mr Singh sought clarity on tangible capital assets. He commented this was another area of concern especially if the AG indicated he could not verify if the assets were there or not. How was the existence of assets verified at DCS? Were there systems in place, and why would the AG have picked up this issue?
Mr Moyane replied systems had been put in place in all regions. Asset management was a responsibility of all managers in DCS and they were followed up in order to clear the matter. This was an indictment against DCS; it was important that it was dealt with once and for all. Where gaps had been identified, systems were created. DCS was looking to recruit and up-skill finance managers at regional offices. These matters could be adequately addressed when there was education, and once measures were applied.
Mr Singh sought clarity on non-identification, and material misstatements on minor movable assets, and physical identification. He commented that the answer would not be any different, if he were to ask if anything would be done about these matters.
The Chairperson interjected and said the Committee should surely hear a different reply as physical identification had nothing to do with Logis.
Mr Moyane replied teams had been identified within the finance unit to deal with assets. Misstatements and verification of assets were a responsibility of everyone within DCS. DCS believed this finding should not appear again in the next audit report.
The Chairperson commented that the Committee would mark that and check what the next report said.
Mr Singh sought clarity on the non-disclosure of lease statements by DCS on state-owned property.
Ms Mareka replied departments occupied buildings that, in terms of legislation, were owned by the Department of Public Works (DPW). On the devolution of funds to departments, there were amounts appropriated that were earmarked for maintenance and not leases.
The Chairperson commented that the explanation was confusing. He asked if the amount related to material non-disclosure of money spent or wrong classification. It was either of the two, and if not, the official needed to indicate what it was.
Ms Mareka replied with regard to the finding on lease statements that the figure had already been sorted out.
Mr Singh requested that the relationship that DCS had with DPW be clarified as pertaining to what DCS could do when it came to maintenance. Was not there an arrangement that DCS could repair things that were menial in nature especially at facilities?
Mr Moyane replied this was a government wide problem, but there were meetings with the new DG at DPW. The meetings looked to address giving DCS clearance on managing the mandate it had.
Mr Singh sought clarity on whether the 400 interns used for asset verification were still with DCS, and if they still served a useful purpose.
Mr Moyane replied “yes”, the interns were still part of DCS, and they still served a useful purpose.
Mr Singh sought clarity on the under-expenditure of R483 million recorded in the period under review. R400 million of the amount was used to write off money that Parliament and the Committee refused to approve. DCS utilised the current budget to write off the amount and yet it under-spent. Three areas, as identified by the AG, where DCS under-spent, were compensation of employees; goods and services, and buildings. Could DCS elaborate on this aspect of the audit report, and what was being done to address the matter.
Mr Moyane replied that compensation of employees was key and critical. DCS staff complement played a pivotal role at the coalface of its business. In the year under review, it was possible to fill all vacant posts, but due to time challenges, DCS could not fill all the posts within the required time. Subsequent to the Standing Committee on Public Accounts (Scopa) meeting last year, DCS had moved on and met with Treasury and the AG. Together, it was agreed that the money not spent be declared a saving.
Mr Singh interjected and sought clarity on why departments regarded under-spending as a saving. This was a challenge; some programmes that had been planned for that year must have been compromised. What were those programmes?
He also requested that clarity be given on the service level agreement with the State Information Technology Agency (SITA). A particular reference should be made to delayed IT projects as well.
Mr Moyane replied that incomplete projects with SITA had been discussed extensively. There had been projects that had been ongoing for the past six years; sub contracting services had been sought especially with regards to architect projects. DCS had raised SITA’s inability to complete projects with the Portfolio Committee. DCS could have recruited its own IT staff. IT issues were not addressed. Another component that had a negative impact was the use of consultants to fill posts that, with a better recruitment process, DCS could have handled much better.
Mr Singh sought clarity on goods and services, especially procurement of uniforms and security fencing at correctional centres. The AG had found action was being taken to avoid recurrence. In many prisons, fencing was found to be incomplete.
He understood that in one prison – Pollsmoor in Cape Town – the guards were being fenced in as well. Why would guards, who were supposed to be guarding prisoners be guarded? But also why did DCS under-spend on security fencing?
Ms Mareka replied that a rollover of funding was requested in the year under review for the procurement of uniforms. The contract was cancelled because the awarded bidder submitted misleading information. A legal opinion was sought, and the contract was terminated as a result.
Mr Moyane replied that the fencing project was undertaken by Independent Development Trust (IDT). The statement that everybody was being fenced-in still had to be verified with the CFO. The purpose of fencing in correctional centres was to keep the prison in a secure mode. In any prison, anywhere, there was perimeter fencing this also formed part of the infrastructure. Perimeter fencing included provision of fencing for officials’ residences, and in all instances there was funding related to this matter. The current contract with the IDT was mainly for the prisons so that inmates could not effect escapes.
Mr Singh commented that in relation to Tzaneen prison, it was unacceptable that the contractor could not get windows and metal doors and that resulting in delays in the project. What was being done to ensure that when the contract was awarded, delivery happened. It was unacceptable that in prisons like Ceres in the Western Cape, contracts were awarded to the least deserving contractors. Who awarded these tenders, and what checks were done to ascertain capability of contractors?
Ms Mareka replied that major maintenance and rehabilitation of infrastructure, procurement was solely done by DPW; all DCS would do was just to provide specifications of what it needed.
The Chairperson asked what was the role of DCS in those projects.
Ms Mareka replied that DCS just provided the specifications, and once that had been done DPW took over the process.
Mr Singh asked if this meant the Committee needed to ask questions of DPW. The Committee needed to note these things; this would apply to many other departments. He asked if DCS got value for money for the body scan equipment, and if procurement of the equipment had been finalised.
Ms Mareka replied that procurement for body scanning equipment had not been finalised and no roll-overs were approved by the roll-over committee.
Mr Moyane commented that at the centre of the body scanning equipment was the issue of health and safety in the technical specifications. DCS had to ensure compliance in this area. DCS did not want to bring in equipment that was not compliant to health and safety standards in correctional facilities.
Mr Singh said despite the response, the things that went in and out of prison cells were worrying. The equipment was urgently required, so that the movement of drugs and guns was curbed. People had died in prisons.
Mr Moyane committed to these things happening at correctional facilities in the coming financial year. A decision had been taken that all measures would be in place next year.
Mr Singh quipped that what the response meant was that if anyone visited a prison at the moment, safety was not guaranteed.
Ms S Mangena (ANC) asked if validation of information was done at DCS, especially since the AG had made findings on the usefulness of information from regional managers. According to the AG this had been happening since 2006 to 2011. The AG claimed there were discrepancies every year. The information from regional offices did not make any sense, why was this happening?
Ms Ntsiki Jolingana, Chief Operating Officer (COO), replied that there were gaps in the information received; some was system related. It was difficult for some centres not connected to the networks to provide the information as some relied on manual systems. There were indeed areas where there were challenges.
DCS had agreed with regional commissioners that the manual system should not be thrown away even if electronic was functioning in some centres. There were gaps; and practical challenges included non-functional equipment such as fax machines in rural facilities like Lusikisiki. The challenges were being addressed; and DCS was instilling the culture that officials need not wait for reports, but should also pay visits to centres. This would ensure valid information was captured correctly, and forwarded to where it was needed. But indeed something was being done about the inconsistency of the information.
Ms Mangena commented that she was not happy, especially that the failure appeared to be at the Head Office. The duty of Head Office was to ensure regional offices operated with as little hindrance as possible. These challenges were reported to the Head Office, but it failed to respond.
The Chairperson commented that he too found it difficult to understand how DCS would have a challenge with petty things such as dysfunctional fax machines, to the extent of it leading to a finding by the AG. What was difficult about reporting and replacing a faulty fax machine?
Mr Moyane replied that systems at DCS had been dysfunctional for a long while, and this did not bode well for the smooth exchange of information. The current IT system was being investigated, and was part of the SITA programmes that had been mnetioned. Dysfunctionality also spoke to the bigger challenge that was there with alignment of strategic plans and programmes. Hence, the view that officials should not be relying on the system, but had to do physical verification of the information. A decision had been taken that regional and centre managers should file information on the systems that were available. The challenges were being addressed.
Ms Mangena commented that the systems issue worried the Office of the AG; This had been an ongoing challenge for a long time. What processes were in place to ensure findings on information and quarterly reports were addressed?
Ms Jolingana replied that DCS management had compiled action plans as soon as the audit findings were made. The action plans were monitored through the quarterly review meetings.
Ms Mangena commented that she was worried because the suggestion was that if the AG had not discovered the challenges, DCS would not have been aware of them.
Mr Moyane conceded the observation was indeed correct. But the AG’s oversight role was to identify gaps in the systems and draw the attention of departments to such. DCS would need to respond to the findings. There was the quarterly meetings to look at these challenges. The quarterly review of reports by management happened frequently now.
Ms Mangena asked what had been done to solve the finding on failure to achieve “a significant number” of planned targets of prior years. This was an indication of how service delivery was hampered at DCS; yet DCS spent over 97%. How possible was this, and how had it influenced the budget allocation for the current year?
Mr Terrence Raseroka, Acting Chief Deputy Commissioner Strategic Management, DCS, replied that challenges in the planning process impacted on non-achievement of targets. The strategic plan (SP), annual performance plan (APP), and the operational plans (Ops) were misaligned.
The Chairperson interjected and said "they still were" in terms of the AG’s report.
Mr Raseroka replied yes, but the current plans had all been corrected. Prior to this there were misaligned plans that did not talk to the DCS budget. This disjuncture led to the failure to achieve targets that DCS had set itself. When DCS intervened, there was an indication that it could not tamper with the plans during an administration’s term. Towards the end of 2012, a decision was taken to change and align the plans so that matters impacting on delivery could be adequately dealt with. Of 123 targets in that financial year, 53 had been achieved and that translated to 47% achievement. This had been corrected. In the current plan there were 39 clearly defined targets.
Ms Mangena asked what controls were there to ensure targets in the APP were achieved and that the non achievers were held accountable. Would that happen?
Mr Raseroka replied that it would happen. In the current plan, the business managers were responsible for the targets in their units, as they contributed to the development of those targets. The strategic management held quarterly reviews where branch managers accounted for their actions and performance against set targets.
The Chairperson asked how achievements were verified on quarterly reports.
Mr Raseroka replied that DCS got report and analysed them. But DCS insisted on the portfolio of evidence for every target that came in; this was not there before.
Internal audits and the consortium
Mr Ainslie said he was disappointed with the audit committee report as it did not give the kind of detail required by the Committee. The DCS audit committee needed to copy the audit report submitted by the Department of Home Affairs (DHA). The table on page 78 on attendance of meetings was not useful; clarity was needed on that table. The second point was under the internal audit. Why was it necessary to have the consortium PriceWaterCoopers and Sekela performing the internal audit function? When was the consortium appointed. Also, could the reasons for outsourcing the internal audit function, instead of building own capacity, be elaborated on?
Mr Lehlohonolo Majake, DCS Audit Committee Chair, replied that the consortium was appointed around June 2012. The budget for the consortium was R7 million, and it was required to do internal audit work on behalf of DCS. The unit was seriously understaffed hence appointing the consortium to support the objective of developing that skill.
Mr Ainslie commented that this was the core function of DCS, and asked why it was being outsourced.
Mr Majake replied that the intention to hire the consortium was to develop the skill internally in preparation for when the contract expired.
The Chairperson sought clarity on how DCS hoped to achieve the objective of developing internal audit capacity if the unit was understaffed.
Mr Majake replied that in terms of the service level agreement with the consortium, it was supposed to “upskill” the internal audit unit of DCS. This was the intention, and was part of the contract.
Mr Moyane said the observation of the Members could not have been more accurate. Prior to 2010 it was observed that the internal audit was not well resourced. Secondly, it was under staffed and was not “pitched” at the requisite level. This led to the decision to outsource the function. In 2010/11 it was agreed that there was a need to resource the internal audit, but also reduce reliance on consultants. It became apparent in instances where external service providers were engaged, skill transfer did not occur. DCS felt it could not continue with such an untenable situation.
Mr Ainslie sought clarity on the contribution of consultants especially as DCS had been relying on them for a number of years. What had these consultants been doing all these years; why had internal staff not been capacitated? Despite having the consultants, and paying R7 million, performance on financial management was still so poor. Was DCS getting value for money from the consortium? When would there be a turnaround, and when would the services of the consultants be no longer required?
Mr Moyane replied that this was indeed the case. He had already indicated that the previous outsourcing did not build capacity. There was no skills transfer and capacity building. In 2012, it was agreed that the head of the internal audit post had to be elevated to the equivalent of a chief director. This was the person who would be tasked with heading an enormous budget such as DCS's. Having a junior official at the level of a director for the post was no longer tenable. It was made clear to the consortium that by the time the contract expired, DCS needed to have its own staff capable of running it. This did not happen with the previous consultants. A decision to change the outlook of the unit was taken. Thus a chief audit executive at a chief director level was appointed. The current reports coming from the unit provided a clear picture of what needed to be done. There had been marked improvements. This report would not provide the Committee with that information; but in the next report the value received from the outsourcing would be evident. He replied that it was rather early to predict when the services of the consultants would not be required. The organisation administered 286 facilities with a massive budget.
The Chairperson sought clarity on the deadline of the consortium’s contract.
Mr Moyane replied that it was a three year contract.
Mr Ainslie commented that 15 years into the implementation of the Public Finance Management Act (PFMA), departments were still challenged with getting financial matters correct. The AG had identified ten items relating to material misstatements. These issues were not from prior years as it was claimed earlier; these were current matters. How was this possible; where was the weakness? If officials could assist Members understand where the problem lay?
Ms Mareka replied that the problem was not in one structure of the layer; the challenge penetrated from the management level right through to centre level managers. Mechanisms to counter the risk of not preparing financial statements on a monthly basis had been introduced. Challenges were still picked up; those who were meant to check and verify failed to do so. Part of the challenge was that officials worked on operational matters at facilities in the morning, and would later have to attend to office work in the afternoon. This was a challenge. DCS agreed with the items the AG had raised. Measures had been put in place to mitigate these.
Management sat down with the audit chief executive and requested monthly submission of financial statements. Basic Accounting System (BAS), generally used by government departments, did not provide complete reporting. It was important to do quality assurance by pre-auditing the statements before they landed at the AG’s desk. In the current situation one needed all role players to be able to do this exercise.
Mr Ainslie commented that DCS had been giving the same assurance each time it appeared before SCOPA. The tendency had been to disregard SCOPA recommendations. There was no progress in moving DCS towards achieving clean audits. He asked what was being done with the findings if senior managers failed to perform their tasks. Was it not possible to hold senior managers accountable, and make clean audits mandatory in their contracts?
Mr Moyane replied that he agreed.
Mr Ainslie asked on which part?
Mr Moyane replied that on accountability; this was a critical point for any organisation if it wanted to redeem itself. The concern about continually obtaining qualified audits was worrying all managers. Something was being done though and responsibility was being taken. The issues raised and the SCOPA resolutions were an indictment that had to be dealt with. Everything possible was being done to achieve clean audits, but what was required was the right skill at the lower levels of the organisation so that the correct information could be provided. Also from a financial perspective, regional financial heads should be continually trained. It was important to have timelines for when the situation would be turned around.
Mr Ainslie said he accepted the assurance that something was being done, but asked if irregular expenditure was out of control. If something was being done, what was done about irregular expenditure?
Mr Moyane replied that yes, indeed it was.
Mr Ainslie commented that the challenge was the failure to hold people accountable. It was easy for people to transgress repeatedly because they were not held accountable. He requested that Treasury comment, on what it did about irregular expenditure at DCS? There were no internal controls at all when it came to this item at DCS; it was a free-for-all.
The Chairperson asked that DCS answer and outline the framework dealing with situations where procurement procedures had not been followed.
Ms Mareka replied that over and above Treasury regulations, DCS had its own procedures. The main problem was compliance, and this was perpetuated when leadership did not do the necessary checks.
Mr Ainslie interjected and said the main problem was failure to hold people accountable. People came and repeated the offences; what was the reprimand, or did DCS issue warning letters as recommended by the Committee? People were allowed to get away with this behaviour; it was DCS’s fault.
The Chairperson sought clarity on what disciplinary actions had been done since the audit report. Were there consequences for people who signed off on spending without the necessary documentation?
Ms Mareka replied that all cases of irregular expenditure were investigated. On the reported cases, management had requested independent investigations.
The Chairperson asked what had been found so far - especially since it was the middle of the following year since the incidents were uncovered.
Mr Ainslie commented that some incidents were so straightforward that they did not require investigations. It seemed DCS had no stomach to hold people accountable.
The Chairperson requested that DCS be allowed to answer.
Ms Mareka replied that it was unfortunate the internal audit had not come back with a report of all the cases that they had investigated.
The Chairperson pointed out that the consortium was being paid R7 million; could it have been for under-performance.
Ms Mareka clarified the consortium was not paid until it had submitted an acceptable report to management. They had not been paid for this exercise.
The Chairperson sought clarity on whether the exercise would be done at an additional cost.
Ms Mareka replied that it was within the R7 million budgeted figure.
Mr Ainslie requested more information on the 13 findings mentioned on page 6 of the audit report, especially on items 2 (deviation from bidding processes), 3 (payments made exceeding the original contract amount by R60 million), and 5 (declaration of interest). Particular regard should be given to the specifics on item 3 as to who were the prohibited suppliers as stated in the report; who was involved, and how it happened that a contract could be exceeded by that much. These were mentioned on page 106 of the AG report where DCS employees performed work contracts for DCS.
The Chairperson requested that detailed information on all 13 cases be provided.
Fruitless and wasteful expenditure
Mr Ainslie asked if the officials would agree fruitless and wasteful expenditure was out of control as well. He asked what was being done about it, because not a single investigation, out of 18, had been finalised. He asked why? There was no need to investigate some of these cases. He cited item 11, where officials had failed to attend training and as a result R149 000 was wasted; why should that be investigated? DCS did not have stomach for accountability, and this was the root cause of the qualification. Why were investigations required on the matter. It appeared to be a simple matter of comparing registers and taking action against those who did not attend.
The Chairperson requested that DCS explain the item on fruitless and wasteful expenditure.
Mr Moyane replied that the big draw card was the R37 million that the AG had indicated there was no memorandum of understanding on the service level agreement between DCS and DPW. There were engagements with DPW to ascertain the causes of this. Wasteful expenditure related to public-private-partnerships (PPPs) and needed to be contextualised because they had been cancelled. The manner the item was captured should be rearranged. Cabinet had agreed that the PPPs had to be cancelled given that there was no value for money derived from the process. DCS should come back to the Committee and explain how this was classified as a wasteful expenditure. Although investigations would be taken on all items, it was important that explanations be provided on the biggest ones.
Mr Ainslie agreed the two largest items that contributed to the R71 million total of wasteful expenditure needed investigations, but asked if the official would concede there were itemsoin the list that did not have to be investigated such as officials’ failure to attend training, failure to cancel air tickets and losing car keys. What investigations were needed for these?
Ms Mareka replied that DCS needed to be fair when dealing with transgressors even if the amounts looked insignificant. Hearings would ensure DCS did not lose cases due to simple things such as not following own guidelines and processes. Under Treasury guidelines, irregular and fruitless and wasteful expenditure cases had to be investigated. The cases needed not take long even if both sides had to be heard on the matters.
Mr Tebogo Mokoena, Chief Deputy Commissioner Human Resources, DCS, commented that if the non-attendance of training was not investigated, from the perspective of labour legislation, one walked on a thin line. Recouping money from officials or disciplining them was not as simple in practice as charging them today and finalising the case tomorrow.
Ms T Chiloane (ANC) commented that based on the responses of the DG, before 2010, DCS was in utter disarray. Also testimony to this was the number of investigations that were pending from that era. She asked how much of the staff establishment came from that era, and sought clarity on the status of the case against the former DCS DG, Mr Linda Mti. There were just too many cases involving him; what was the update?
Mr Moyane replied that the answer was “positive”. When the current management team came in 2010, the COO was a regional commissioner. Capacity was brought in; pockets of excellence needed to be concentrated in leadership. A number of regional commissioners were roped in to the sphere of control and leadership.
He did not mean to cast aspersions, but there was a need to concentrate leadership in order to bring about turn around. The quality of leadership currently at DCS was a conscious decision. The DG could not lead with a team of 14 people as some were strategic, and some operational. Therefore the conscious decision was taken to have a clear design of what was operational, and that had to have a full authority to lead. And hence the claim there was a complete shift.
Mr Moyane said that he had no idea about Mr Mti’s whereabouts, as he left at the end of his term of office. He could not pronounce on anything beyond this.
The Chairperson clarified there was a report from the Special Investigating Unit (SIU) that implicated Mr Mti and the former CFO, Mr Patrick Gillingham. The Committee understood there were matters that were to be referred to the police. The question was raised in that context.
Mr Moyane replied that the matter was only brought to his attention this year by Treasury at a surprise meeting, especially as Treasury sought clarity on the matter of the SIU report. He had never seen the report, and Treasury duly provided it. Mr Gillingham indeed resigned, but investigations by the Hawks and the SIU had not been finalised because reports remained with them.
Ms Chiloane voiced dissatisfaction and said she would follow the matter in future sessions with DCS.
The Chairperson asked if DCS did not have an interest in following up cases of transgressions by people it once employed.
Mr Moyane replied that he would not mislead the Committee. Allegations were made against the two officials in that report. Ms Jenny Schreiner – who once acted as a DG – was in liaison with law enforcement agencies. The Hawks and the SIU had requested documents from DCS and those were provided. There had never been a formal meeting between him and the law enforcement agencies to indicate certain officials were being charged.
Ms Chiloane sought clarity on the IT framework that was promised last year, but had not yet been implemented. What was the challenge; why could DCS not have own IT framework that addressed its daily needs.
Mr Moyane replied that there was no framework in place until DCS was restructured in such a way that management was able to get results. The branch leadership was at a very junior level, hence the number of challenges that were encountered in this aspect. When the chief deputy commissioner (CDC) was appointed the first thing was to restructure the unit.
There were now all pertinent requisites at DCS like the IT framework, the IT strategy and the IT programme that all sought to address the problems and the constraints that had existed. When the Logis was fully functional it had to be able to dovetail into the IT system of DCS. There was a need for a robust and a well resourced IT unit. The IT environment at DCS had been a "hunting field" for consultants in the past and there was no value for money.
Dr D George (DA) sought clarity on the Naturena Halfway houses pilot project. He asked if critical evaluation was done on the project, and also sought to establish if it was indeed correct that the houses were occupied by people who were not supposed to be. Were there records of people who occupied the houses?
Ms Jolingana replied that the Halfway house pilot project existed in Naturena. There was an evaluation and a needs assessment, and the conclusion was that more halfway houses were needed, but also assistance was needed from non-governmental organisations (NGOs) in order to run the halfway houses effectively.
Mr Moyane commented that when he took office a decision was taken to audit the facilities throughout the country. There were 283 facilities throughout, and some facilities had officers’ quarters. DCS was busy with the audit of the facilities. From the information he had, there was no indication of non staff occupants of the houses. The suspicion about the occupants in these quarters was raised following a claim by a correctional manager in Durban that some escapees resided at these quarters, and also that retired members stayed there. This claim was investigated and it was found to be incorrect.
The Chairperson commented that the response was not satisfactory, as it did not give a sense that DCS was actively pursuing the process to ensure those who stayed in the quarters were not DCS staff.
Mr Singh requested a written response on why travel and subsistence recorded an increase of R100 million in one year. He noted “Other operating expenditure” had increased expenditure from R15 million to over R65 million in one year. This needed to be broken down. The contingent liabilities due to body injuries and assault amounted to over a billion rand; this was a lot of money. What interventions were there to counter this?
Ms Mareka replied that for the figure on travel, it needed to be borne in mind that travel was not limited to the normal travel of commuting from one place to the other. It included operational costs for the government vehicles. In 2010, DCS increased its fleet by buying a number of cars. This was the reason for the jump. The “other” would be responded to in writing. The R1 billion on contingent liabilities was an opening balance; those were the contingencies for 2010/11 but the figure went down to about R417 million.
Ms Mangena commented that it was important that Ministers attend the meetings, as they should be listening to the kind of issues Members raised. She sought clarity on whether the Bosasa contract was still running.
Ms Mangena asked if issuing uniform to awaiting trialists was not compounding the challenge of prison escapes. Uniforms made awaiting trialists intermingle with ease with convicted inmates, and during sport days it could be easy for them to escape. She was worried by inmates who possessed cellphones. She noted how once she had received a call from an inmate requesting airtime. The use of cellphones allowed for collusion between inmates and those on the outside.
Ms G Saal (ANC) commented on officials who had left DCS, saying it worried her when officials were rotated in the public service without background checks. It had become normal that an official would mess up in department X, only to emerge in a powerful position at department Y. There had to be communication among departments, even if a policy was designed for those officials who avoided disciplinary actions by resigning.
Ms Saal commented that it puzzled her that DCS did not have entities and yet expenditure was reflected as that of entities. The Committee still awaited the details of the service providers who provided a shoddy service in the construction of prisons in the Western Cape. She about the possibility of manipulating the body scan system. How did guns and cellphones enter prison cells? She also asked about the fraud in the Persal system.
The Chairperson sought an update on the investigations mentioned on pages 62 and 67 on the construction of prisons in Ceres and Van Rhynsdorp.
Mr Moyane replied that investigations were ongoing, and the prisons were still under construction. The matter had also been raised by the Portfolio Committee, especially that the facilities were due for upgrading. The delays had an effect on the overcrowding in other facilities. Once the report was complete, it would be shared with the Committee.
The standard operating procedure was that anyone had to leave personal items at reception. Any gadgets, including cellphones, were deemed inappropriate and were not allowed into the facilities. This was applicable to everybody and searches were also done. The installation of body scanner equipment would limit the element of contraband in the facilities and the introduction of unwanted items at the facilities.
Mr Mokoena requested a written report on the investigations pending on the Persal system.
The Chairperson said the Committee would send a note to DCS to indicate all the items it was promised written responses on. It looked from the presentations that this year could be a turning point in terms of the audit opinion. The Committee would police developments and would eagerly await the next Annual Report.
The meeting was adjourned.
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