Hearing on the Annual Report and Financial Statements for the Department of Labour for 2011/12 financial year

Meeting report

Opening remarks
The Chairperson said the inability to manage the finances of the Department of Labour (DoL) had been a source of concern to the Committee. This was worrying, but the current report showed there had been improvements. The question was whether such progress could be sustained into the future. Going through the report, there were more things to be happy about than was the case with the past reports.  If the Department continued on this path, there would be no reason for it not to join the few departments that had achieved clean audits. Officials and Parliamentarians would no longer be bothered by compliance matters, but by obtaining value for money.

He acknowledged the apology of the Minister, Ms Mildred Oliphant, who had to attend to the issue of violence that had become a daily occurrence at the mines.

Mr Nathi Nhleko, Director General (DG): DoL, indicated that the chairperson of the audit committee would also be absent. There were other departmental officials who were attending a G20 meeting in Russia as well.

Processes not reviewed
Mr I Mfundisi (UCDP) commented that it would take a little while for the Department to reach a desirable position.  There was a common trend pertaining to the lack of training and monitoring at the Department. This also extended to the reviewing of processes at the Department. How did the Department hope to overcome the lack of training and reviewing of processes?

Mr Nhleko replied  that the matter the Auditor General (AG) had raised in his report had related to performance information. Steps taken thus far had been to review the strategic and annual performance plans (APPs). The DoL had also asked for assistance from National Treasury in order to aling the plans better.  There had been an improvement in the formulation of the strategic objectives and indicators.

The Chairperson asked if the “improvement” comment meant that the usefulness of information would still be a challenge in the future.

Mr Nhleko replied that future reports would indicate the extent of the improvements.

The Chairperson said there were only two outcomes regarding the usefulness of information -- either the DoL got it right, or it did not.

Mr Richmond Ntuli, DoL Acting Chief Director (CD): Performance and Monitoring Unit (PMU), said the Department had taken cognisance of the performance information contained in the report. The Department required expertise in dealing with training and as a result had approached the National Treasury’s (NT’s) Technical Assistance Unit (TAU). All heads of programmes within the Department were required to attend the training.

The Chairperson asked if the absence of expertise was the reason there was no training happening at DoL.

Mr Ntuli replied that this was indeed the case in terms of expertise in the framework of government. It had been found that performance targets were not measurable and verifiable.  The DoL welcomed the criticism, and this was where the TAU assistance had been useful, because it had helped the Department to set indicators in a manner that they could be measured and verified.

The Chairperson pointed out that there had been quarterly meetings with the office of the AG.

Mr Ntuli agreed, but he had sought to address the technicality of the AG’s comments. In short, the issues had been addressed, and the TAU had helped with the crafting of the indicators.  The DoL had verified them with the AG. It had since been realised that the APP and the strategic plan were the cause of the finding.  Both plans, although already presented to Parliament, had been reviewed. An erratum for these documents therefore had to be published. The erratum approved by the AG had then been presented to the Portfolio Committee and the Select Committee in February.

The Chairperson interjected, and said the response suggested that the Department had been submitting inaccurate information to Parliament.

Mr Mfundisi also sought clarity on the 47% achievement reported, and said it did not reflect well on the leadership of the Department.  How would the Department account for the failure, and would there be an improvement?

Mr Nhleko responded on the issue of plans, performance targets and indicators not being correctly aligned. Indeed, there should be concerns about the level of performance indicated in the report. However, whenever there was non-alignment of the strategic objectives, failure was likely.  The DoL was committed to perform at the required level, and there was a balance between performance and how resources were spent.

Use of consultants
Mr S Thobejane (ANC) complained that availing the report to Members at the eleventh hour did not assist with preparation, and did not do justice to the work of the Committee. The work of the Committee should not be limited to photocopies of the Auditor General’s (AG’s) report. Members should be given ample information so they could understand the situation of the Department. He appealed for information to be made available on time by departments.  He sought clarity on the use of consultants doing the work that ought to be done internally at the Department. If huge amounts of money had been used to hire the services of consultants, and yet the Department failed to meet its targets, what were the consultants being used for?

Mr Nhleko replied by giving an outline of the type of work that had to be done, which reflected that some activities required external intervention, as the Department lacked capacity.  He cited an example of conducting a study on minimum wages and conditions of employment.  The DoL had a resident unit on labour relations, but conducting research was a specialised kind of a job. These were the kinds of services that necessitated the hiring of consultants.

Mr Thobejane asked if this meant that these skills could not be developed internally.

Mr Nhleko replied that was not necessarily the case. If the Department were to do all of what was required on its own, it would mean that it would have to increase its capacity level and have a specialised unit to look into some of these issues.  An example was the scoping of the contract on the public-private partnerships (Triple Ps) by KPMG. It was known that the manner the Department had managed the Triple P contract was not ideal. At the time of entering the contract, there had been no internal capacity to manage the contract. This had also been the case with the Accenture contract, but where it was possible for DoL to carry out the work itself, it would do so. Where the service was specialised, there was no option but to go out and attract the required skill.

Mr Thobejane commented that it was important for departments to develop capacity in line with their future needs. Officials needed to look at expanding the responsibilities of the departments in line with new legislation, and develop specialised units, such as research. It was not ideal when departments remained in the old or conventional form of government operations.

Issues of compliance
Mr Thobejane sought clarity on the compliance with laws and regulations, and commented the level of compliance appeared to be exactly the same as they were in the 2010/11 report.  The Committee’s resolutions had been forwarded to the Department by August 2012, while the auditing process was still ongoing. The tradition should be for departments to note areas of concern during the hearings with the Committee, and to indicate that resolutions had been received late and as a result they could not stick to the recommendations, was no excuse. Why was compliance with regulations continually transgressed?

Mr Nhleko replied that the DoL had made interventions in dealing with some of the Committee’s resolutions.  For example, an intervention on procurement and contracting had been to provide training and workshops for officials on supply chain management (SCM) procedures. The policies and procedures had been communicated to the Department as a whole.  Incidents of irregular expenditure had as a result decreased. There had been one deviation from the competitive bidding process, to the value of R11 million, that had been approved on the basis of it being an emergency. Although the value of the transgressions had remained higher, the number of incidents had gone down.

Mr Thobejane interjected and said the official needed to confine himself to reasons for non-compliance, as the value of the money did not matter. Why was the DoL continuously not complying?

Mr Nhleko replied that he was not sure, and suggested that individual cases be addressed as to what was causing the transgression.

Mr Thobejane requested that the case on page 80 under item 23 be addressed, especially as it had previously been discussed at length.

The Chairperson commented that he understood continuous training had yielded positive results, but this needed to be weighed against the sky-rocketing value of the transgressions. The response had been silent on the monitoring aspect; supply chain officials reported to senior officials as well. He asked if there was a challenge with understanding the policies at that level as well, or whether the challenge was with the monitoring mechanism not being effective in detecting transgressions.  Policies would be there, but if it was materially beneficial for people to transgress, they would still do so. This was an aspect where management and monitoring became critical in ensuring interventions were not only taking place after there had been a deviation.

Mr Nhleko said he agreed.  It was important to create awareness among officials to abide by the policies. The DoL had always ensured that there were monitoring mechanisms in instances where deviations occurred. The departmental bid adjudication committee sat for valid reasons for deviations and documented them. The Department also sought approval and reported such deviations to NT when the amount exceeded R1 million.

Lack of competitive bidding processes
Mr Thobejane sought clarity on the awarding of contracts without inviting competitive bidders, and also asked if any of the responsible officials were part of the delegation.

Mr Bheki Maduna Chief Finance Officer (CFO): DoL replied that he was responsible for the unit. The particular instance in the report – the R11 million Accenture contract regarding IT – was as a result of the emergency of a contract coming to an end.  The deviation had occurred in regard to competitive bidding.

Mr Thobejane said he would not accept the explanation, especially as the Department had known that particular contract was coming to an end, and should therefore have put measures in place. The only acceptable explanation would be if the Department conceded challenges of leadership and planning. This was not an emergency.  If it happened that there was a thunderstorm coming, that would be an emergency.

Mr Nhleko replied that the point was valid, and this had led to friction between DoL and the Office of the AG.  Although the point was valid from a legal perspective, administratively it did not hold water. The Department had argued that it had been faced with a particular situation.  Indeed, planning should have been there.  In this particular contract, the exit and services transfer plan should already have been there in 2003.  In 2011, the Department had sat with no exit and services transfer plan, despite the eight-year existence of the contract. He said this had coincided with his arrival at the Department as DG.

Mr Thobejane asked if the official would concede that the Department had failed.

Mr Nhleko conceded and maintained his view that the argument made legal sense, but did not make administrative sense.

The Chairperson interjected and said the explanation was understood but not accepted, because the heading of the section was about compliance with laws and regulations. This was about how administrative action conformed to legal requirements.  After eight years, nothing had been done to prepare for administration that would comply with the law. The Committee accepted the explanation that the DG had just arrived when this contract had come to an end. The AG was indeed correct not to consider the DG’s personal situation -- the AG was auditing the Department. It appeared the challenge for the Department was to enter into a public-private partnership (Triple P) without the capacity to manage it. This was generally a challenge facing many Government departments.

The 30-days conundrum
Mr Thobejane asked why the DoL continually failed to pay contractors within 30 days. The head of state had complained about this failure on the part of departments.

Mr Maduna replied that non-compliance with this principle resulted partly because of the rejection of the processes that had been put in place. Prior to effecting payments, the DoL had to verify the banking details of the suppliers through the safety net -- a system that had been developed. Accounts for small suppliers got rejected by the system, and then the Department would have to engage with the supplier to register bank details.

Another reason surrounded valid certificates at around the time of the procurement. The procurement process took around four weeks; the tax certificate that was there when the supplier was registered on the database would expire. This would require the supplier to provide a new certificate; the process was exhaustive and meant that the supplier had to go to the Receiver of Revenue.

Mr Thobejane interjected, and asked how many days were ideal for the processing of payments after invoices had been submitted. The process appeared to be prolonged, unfairly so, because officials did not need 30 days to verify information.

Mr Maduna replied that a maximum of two weeks was needed, given the route invoices had to travel prior to arriving at the finance unit. The challenge he had as the CFO was to calculate the 30 days. Often suppliers complained about submitting to the Department, and yet the finance unit could find no trace of such invoices. The Department had had to develop one point of delivery so that it knew where to start when it calculated the 30-day period.

Mr Thobejane commented that this all pointed to the DG and the lack of systems in the Department.  The Public Finance Management Act (PFMA) required that the DG, as the accounting officer, had to put systems in place. The 30-day rule started on the submission day of the invoice by the supplier, whether the CFO knew of the submission or not.

The Chairperson sought clarity on the process of submitting the invoices and the processes of payment.

Mr Maduna replied that when a supplier submitted an invoice, it needed to be recorded so that it was traceable and managers could be held accountable. Once it had been recorded, it was then taken to the responsible manager who had received the job. The manager would be required to certify that he or she had received the job, and that it had been performed satisfactorily. When this had been done the invoice would be returned for the CFO’s attention, so that payments could be made.

Mr Thobejane asked if this was the process that required two weeks.

Mr Maduna replied that it was.

Mr Thobejane commented that if this was what was happening, compliance with the 30-day rule would never be realised. This was tantamount to encouraging departments to violate the law. The only concern was that these suppliers were small business people who were trying to establish their businesses. To spend two weeks merely to verify invoices and banking information was not proper, as some businesses might have had to go to matshonisas (loan-sharks) to pay for the work.  There was a need for a relook at the process.

The Chairperson asked if the Department was able to quantify the instances of delayed payments.

Mr Maduna replied that although he did not know the exact amounts, they were minimal.

The Chairperson commented it would be nice to have the figures.

Mr Maduna replied he had the information about payments not made within 30 days, as he submitted it to NT every month.

The Chairperson requested that such information be forwarded to the Committee in a week’s time, and that the information should reflect both the figures and reasons for not meeting the 30-day deadline.

Vacancy rate
Mr Thobejane said while the Department had allocated funding for particular posts, they had remained vacant. The perception that the government reserved posts for children or relatives – some of whom might still be at university – was prevalent. This was not good for the democratic government. Why had budgeted posts still not been filled?

Mr Nhleko replied there were a number of explanations as to why the Department was confronted with the challenge of not filling vacancies. The DoL was the leading Department in the public service in terms of filling posts.  Its vacancy level currently stood at 7.3%. The Department was reasonable in filling the critical vacancies -- it took about three months. The increase in the current vacancy situation had resulted from the approval of the Compensation Fund (CF) structure.  However.an effort was still needed to ensure the Department was capacitated and functional to the extent it should be. The Department was looking into critical functions, like the IT environment, and had begun to create capacity in that unit.

Mr Risimati Chauke, CD, Human Resource Management: DoL, said that while the Department had a 7.3% vacancy rate, there had been an improvement.  Some of the positions had taken a while to be filled, but the Department was improving on that aspect. There were challenges with the budget allocated for job advertising.  The DoL had also decided to use the database of the Employment Systems of SA to source candidates for Level 1 to Level 8. The use of the system allowed for positions to be filled without delays. The Department had also used its website to advertise positions.

The Chairperson pointed that there had not been a change in the vacancy rate of 7.3% from the last financial report, and yet all these interventions were being made.  Were these interventions just a theory, or a reflection of what happened.

Mr Chauke replied there had been movement at the end of the year, and there had been a noticeable drop from 7.3% to just over 7%.  The DoL had found itself in this position because it had created new positions for the purpose of decentralising the Compensation Fund.

Mr Thobejane interjected, and wanted reasons for not advertising the funded posts. When not filled, these posts resulted in under-expenditure.

Mr Chauke replied that sometimes there would be vacant positions at the Department but there would not be a budget available for advertising. A solution to that was the use of the Employment Systems of SA database.

Mr Thobejane interjected again, and said all this pointed to a failure by the DG, where he was required by the Public Finance Management Act (PFMA) to put systems in place. The systems would allow the DG to monitor the Department. It appeared there was a disjuncture in the process of hiring.   The alternative recruitment systems were discriminatory, especially as some rural areas were challenged for internet access.

Mr Nhleko replied that the DoL should acknowledge the challenge indeed existed, but an intervention had been devised. The system was not meant to discriminate against anyone -- the system was accessible to all areas, as it had a footprint throughout the country. The Employment System of SA would assist DoL to deal speedily with the lower-level positions.

INDLELA dilemma
Mr Thobejane sought clarity on the investigation process that the AG had made reference to in the report. What was happening with these investigations?

Mr Maduna replied the investigation had been implemented at one of the units – Institute for the National Development of Leanerships Employment Skills and Labour (INDLELA) – which had been transferred to the Department of Higher Education and Training (DHET). The DHET had to conclude the investigation and inform the DoL of the outcome. At the conclusion of the annual report, the DoL had not heard from the DHET about progress in the investigation.

The Chairperson interjected and wanted to know what the situation was now.

Mr Maduna replied nothing had been forwarded to the DoL and the situation had not changed.

Mr Thobejane said the DoL did not seem to care about the matter because the unit had been transferred.

Mr Maduna replied the unit had been transferred with assets, liabilities, obligations and the officials in charge of the institution.  If those officials were found to have transgressed some regulation, they would be dealt with by the DHET.

Mr Thobejane interjected and asked if the suggestion was that DoL had nothing to do with the item.

Mr Maduna replied that this was the case.

Sheltered Employment Factories (SEF)
Mr Thobejane sought clarity on the material losses as reflected on page 159, and note 3 on page 181 of the annual report.

Mr Silumko Nondwangu, CEO, Sheltered Employment Factories (SEF), replied that the specific material losses in the AG report had to do with the bulk buying of materials from suppliers for the production of textile goods. The materials that had been procured were over and above the required order. Steps had been taken to address that.

The Chairperson asked how that had happened.

Mr Nondwangu said SCM procedures had not existed at the entity in the past. This had affected the procurement of raw materials. There were now SCM policies and procedures with regard to the procurement of raw materials.

The Chairperson sought further clarity on what the issue was.

Mr Nondwangu replied that the issue had to do with clients specifying the materials they required, and compelling the entity to buy such materials. With SCM procedures in place, SEF had indicated to clients this would no longer be the case going forward. The extra material would now not be utilised after production by the entity. There was a rigorous process in place to ensure the right quantity was ordered.

Mr Thobejane asked why there were no policies.

Mr Nondwangu replied that the entity had serious governance challenges.

Mr Thobejane asked what the challenges were, and who was involved.

Mr Nondwangu replied the challenges included not having a legal person, and being operated on the basis of a memorandum.  The DoL had agreed with the transformation of the entity, and now a rigorous process had been undertaken to ensure better integration.

Mr Thobejane asked how it had happened that an entity had operated like a spaza shop, if not worse. The PFMA required that there be systems in place prior to any transfer of an entity.

Mr Nhleko replied that the SEF were designed for specific social and political purposes.

The Chairperson interjected and said the item had been dealt with at the last hearing. Unfortunately, since 1994 the entity had been left unchanged. This was a source of the challenges. The Committee was not ignorant of the history, but somehow officials seemed to have failed. He asked if there was a list of the clients where materials were bought. He saw a scam in all of the arrangements where suppliers decided quantities of goods. Yet the Department had agreed to that.  It looked as though there was collusion between officials and the suppliers.

Mr Nondwangu replied that SEF dealt with a layer of neglect in the factories. Neglect and collusion were very prevalent. He cited the example of a textile industry, where it had been noticed that raw materials were sourced only from Berg River in the Western Cape (WC). Hospitals in the province insisted on Berg River specifications when ordering raw materials. This meant SEF could not source raw materials from any other supplier in the country.  He described Berg River as “dominant and a monopoly” in the textile industry in the WC. Perhaps the Competition Commission through the Department ought to intervene. The relationship between the factories and the suppliers had been that of “master and a servant”.  Past practice had been that the suppliers dictated terms. This was the situation that had to be resolved.

Mr Nondwangu added that there had been investigation into the fraudulent matter, and information had been provided to the South African Police Service (SAPS). There had been no updated information on how the matter had progressed.

Irregular expenditure
Mr Thobejane sought clarity on irregular expenditure. He read from the report that “irregular expenditure related to expenditure incurred through procurement from sole suppliers by means other than tender, and without authorisation from the accounting officer.”  The report indicated no disciplinary procedures or criminal proceedings had been preferred. Could the officials comment on this?

Ms Yalekile Fundama, SEF CFO, replied the entity did not have procurement procedures and policies in the past. Procurement had been done without requesting three-quotations; there were no contracts with suppliers. This had resulted in the irregular expenditure reported.

Mr Thobejane interjected and said he would not ask any further questions.

Mr R Ainslie (ANC) said he was not happy with the response regarding irregular expenditure. The value on this item seemed to have increased dramatically over the years. The report did not give sufficient information.  The explanation contained in the report was too weak and figures of previous years had not been provided. This made it difficult for comparative reading. The report gave conflicting information -- elsewhere it indicated investigations were being undertaken, and yet no information had been made available on whether steps were being undertaken. Why was this?

Mr Maduna replied that the DoL would include comparative information in the next financial report.

Mr Ainslie observed that comparative information had been provided for every other item in the report, but somehow that had not been done with irregular expenditure. He quipped that the response regarding the next financial report would assist only future Public Accounts Committees (Scopas), as he was not sure which of the Members would return next year.  He insisted on information regarding the results of investigations.

The Chairperson requested the detailed information on investigations be provided in writing to the Committee.

Mr Ainslie sought clarity on why the irregular expenditure had increased, and said that was indicative of a lack of monitoring and adherence to regulations. What was the problem?

Mr Maduna replied that the DG had dealt with the issue. The incident was the R11 million regarding IT. This had contributed to the major increase in irregular expenditure.

Enabling legislation
Mr Ainslie commented that the challenges at the SEF were because the entity did not operate under enabling legislation, but operated in terms of a memorandum that was signed in 1947. Why had there been no attempt since 1994 to have the entity operate in a framework or some kind of legislation?

Mr Nondwangu replied that steps were currently underway to address the past. He cited an example of the Public Employment Services Bill – currently in Parliament – which had a provision that dealt with the legal establishment of the factories.  Within the factories, SCM procedures and policies had been established and submitted to the Department. A project management office had been established to monitor progress and implementation of the turnaround strategy. Funding had been received and there was commitment from factory management to increase sales in the next three years.

Mr Ainslie sought clarity on where the entity was with enabling legislation.  He commented that it took too long finalising the legislation, and asked how far into the future the officials foresaw implementation of the legislation under which the entity would operate.

Mr Nondwangu replied that information from Parliament indicated this could be the case around August 2013, and if not, before the end of the year.

The Chairperson sought clarity on who the beneficiaries of the factories were. Was his information correct that they were meant to benefit soldiers who were involved in the Second World War, and their families?

Mr Nondwangu replied that this was indeed correct. Management had recently ensured that beneficiaries were those from previously disadvantaged backgrounds.

The Chairperson quipped that the beneficiaries from WW2 had long passed on, and asked how the factories benefited those who had been involved in the liberation struggle, if at all.

Mr Nondwangu replied about a year ago there had been an attempt to forge a working relationship with the Department of Military Veterans (DMV).

The Chairperson commented that this was a logical thing to do from the word go. He failed to understand how liberation soldiers could be lingering on the streets if such an entity as the SEF existed. There were veterans who had been injured during the struggle and ought to qualify to be accommodated in the entity.

Procurement and contract management
Ms T Chiloane (ANC) sought clarity on employees performing remunerative work outside of the DoL without written permission. Who were these employees, and how many were they?

Mr Chauke replied that a list of those officials was available and it also indicated the action taken. He said 24 officials had been investigated in 2010/11 and all, except two, had been given final written warnings. In 2011/12 the number had reduced to 13 -- five had been found not guilty and the rest had been found guilty and issued with a final written warning.

Ms Chiloane requested that the names be made available to the Committee.

The Chairperson sought clarity on those DoL officials who had applied and been given permission.  What was the nature of the work they wanted to do?

Mr Nhleko replied that applications had varied.

The Chairperson said the Committee would prefer that the information be provided as a written report, with the reasons for doing work outside the Department detailed.

INDLELA revisited
Ms Chiloane sought further clarity on the INDLELA investigation, and asked what had happened to the officials at the entity, and where they were.   From the manner in which the item was captured in the report, it appeared that the investigation was complete.

Mr Nhleko replied that the DoL was not involved in the investigations. The forensic investigation had not been shared with the Department as well, as the entity had been transferred to DHET.

The Chairperson wondered why the matter had been included in the DoL report, and requested that the AG clarify the matter.

Ms Maidie Nkau, Business Executive: AG, replied that the item had been included in the report because the alleged transactions had taken place when the DoL administered the entity. The matter needed to be concluded by both departments on what action would be taken against the individuals, and where the matter needed to be disclosed.  By including it in the DoL report, the AG did not want to lose the essence of the matter.

The Chairperson interjected and said that the DoL was simply not interested in the essence of the matter, especially given how pointedly the CFO had responded earlier to the INDLELA question, further coupled with silence from the DG seated next to him. The silence of the DG had indicated that the position adopted was that the DoL had nothing to do with the entity, as it was now with DHET.

Mr Nhleko replied there had been a series of engagements with the AG on this matter. The entity’s administration had been transferred to another department -- how then was DoL accountable? The new department had to take action against INDLELA. The DoL could not be held accountable, because of the new institutional arrangement.

The Chairperson said the point about who administered INDLELA was clear; but the problem was the attitude adopted by DoL officials, especially considering the transgressions had happened while the entity was still administered by DoL.

Ms Chiloane asked if there were any officials involved in INDLELA who were still employees of DoL.

The Chairperson suggested that the Committee write to the DHET in order to find out what had happened with INDLELA.

General items
Mr N Singh (IFP) commented that it would be ideal to have the addresses of the 12 factories that were in the country, especially for oversight purposes. The issues concerning the SEF required a holistic approach. Government should be looking at the need for these factories, given the expenses incurred by them.

Mr Singh pointed out that financial statements indicated that the budget for advertisements had doubled, against an earlier suggestion that there was no money to advertise some of the posts.

Mr Chauke replied this money was not meant for advertising second level positions.

Mr Maduna said the money reflected in the financial statements was for the advertising of posts. The DoL had overstepped the initial allocation, and the unit needed more. The unit had been requested to find other ways of dealing with the issues.

Mr Singh said more information on advertising was required.

The Chairperson concurred, and said the information on how the advertising budget was spent ought to be included in the information that had already been requested.

Mr Singh noted that the budget for operating leases had decreased. He asked if the Department was using less space than it did in 2010.

Mr Maduna replied that the DoL had been pressing the Department of Public Works (DPW) to look for government buildings. The leases cost more -- annually they had increased by 8% to 12%, while the budget increase from NT had been only 5%. Another challenge was with the billing from DPW, as there were still issues with payments the DoL had to make to the DPW.

Mr Singh commented that billing was another transversal area that the Committee should look at with the DPW.  The DoL had reduced the leases’ cost by over R14 million.  It might be ideal to look at other departments as well.

Dr D George (DA) sought clarity on the debts written off that were indicated in the report, and asked what the debts were for.

Mr Maduna replied it was for staff transport, travel assistance, bursaries, salary overpayments and state guarantees.

The Chairperson asked if these had been incurred and become debt.

Mr Maduna replied that on subsidised transport, where money was allocated for officials’ travel, sometimes officials did not travel the kilometres and the contracts expired.  Travel assistance was when DoL gave advances to officials who travelled and had to come back and reconcile what they had spent against what they had been given. Sometimes officials did not get back on time to reconcile, but steps had been taken to recover the amounts that were outstanding.

The Chairperson pointed out that the report indicated that the money – R640 000 – had been cancelled, and had not been recovered.

Dr George sought clarity on what salary overpayments were, as indicated on page 129 of the report.

Mr Maduna replied this referred to when the DoL had overpaid officials in error.

Dr George commented that this amounted to well over R3.7 million worth of overpayments.  How did that happen?

Mr Maduna explained that the matter related to inspectors who had been upgraded in error.  A portion also happened with officials leaving the Department, where the systems were notified only one or two months after they had left.

Dr George commented that the suggestion was that the debt had been incurred as a result of the system, and asked what was being done to get the money back.

Mr Maduna replied as the money had been recorded into debt, the DoL had taken steps to recover the funds.  Part of that was to take the people to the Department’s legal unit. Ultimately, when all steps had failed, the recommendation from the state attorney had been to write off the debt.

Dr George asked what was done to those officials who were found to have erroneously made the payments.

Mr Nhleko clarified the issue around the upgrading of inspectors.  The DoL had received about R60 million from NT for the upgrading of inspectors. The effective date should have been 1 July  2009, but the approval was obtained for 1 June.   This had created an extra pay that ought not to have been processed. There were inspectors that did not qualify for the upgrading.

The Chairperson sought clarity on how people could be paid a month earlier than they were supposed to be. He also asked who had upgraded those who were not supposed to be upgraded.

Mr Chauke replied he did not have the list of those responsible for upgrading. Instead of the requirements that were stipulated in policy, the Department did it differently.

The Chairperson asked what action had been taken against the officials who had unofficially upgraded inspectors. He pleaded with the official to be honest, if no steps had been taken.

Mr Chauke replied that nothing had happened, although the Department had taken steps to verify the correctness of the query relating to the upgrades.  The DoL had consulted with other institutions and structures, and something would happen. He said the matter dated back to 2009.

Dr George said the unfairness of it all was that people had been upgraded without their knowledge, which back then was extra money, but now it had to be paid back. It might well be that some of the inspectors did not have the money and would have this lingering debt over their heads. This was unacceptable.

Mr A van der Westhuizen (Portfolio Committee on Labour: DA) commented that NEDLAC was one of the entities funded through the DoL and the AG had a finding of an abuse of a credit card at NEDLAC to the value of R100 000. He asked if those implicated were still in the employment of the Department. What action had been taken against them, and if so, what were the sanctions imposed?

Mr Maduna replied that NEDLAC reported directly to the Minister and could therefore not be included in the report.

Mr Ainslie asked if the DG was still in favour of giving approvals for public servants to do work outside the Department, given the stance in the New Development Plan (NDP), and the views of the Minister in the Department of Public Service Administration (DPSA), Ms Lindiwe Sisulu, on the matter.

Mr Nhleko replied that the debate around the matter was ongoing.  The DoL could be directed only by a policy that would eventually lead to the existence of legislation. Currently, the DoL still had officials who applied for permission to do work outside of government. There was no legal basis to deny them permission, but the debate was ongoing.

Mr Ainslie said he accepted the explanation, but the debate was taking longer and it did not need to..

Dr George commented that the response on NEDLAC was less than satisfactory, especially the suggestion that there was no monitoring or oversight over NEDLAC. This was worrying, because people’s money had been embezzled. The DG should have an answer -- if not, how then could the Minister know something that the DG did not?  

Mr Nhleko responded that the process was underway, and the Minister was considering the particular report on the credit card.

Dr George sought clarity on whether the suggestion was that the Minister was investigating and that at some point there would be a report released. If this was the case, the Committee would like to have such a report.

Mr Nhleko replied the decision as to what to do with the report would be the Minister’s. He understood that it was the audit committee of NEDLAC that had commissioned an investigation.

The Chairperson commented that the information provided had assisted the Committee with regard to the report it had to prepare for submission to Parliament. He requested that the information sought be provided by Tuesday next week.

The meeting was adjourned.