Department of Home Affairs on Third and Fourth Quarter 2012/2013 Performance

Meeting report

Election of Acting Chairperson and Apologies
The Committee appointed Mr A Gaum (ANC) as the Acting Chairperson to preside over the proceedings of the day’s agenda. His nomination was proposed by Ms T Gasebonwe (ANC) and seconded by Mr M Mnqasela (DA).

The Committee Secretary informed the Committee that there were apologies from the Chairperson, Mr G McIntosh (COPE) and Ms N Mnisi (ANC). The Acting Chairperson proposed that the outstanding Committee minutes be stood over until the Chairperson returned, to which the Committee agreed.

Briefing on Third and Fourth Quarter Expenditure
Ms Rudzani Rasikhinya, Chief Financial Officer (CFO), Department of Home Affairs (DHA) tendered apologies on behalf of the Director-General, who was on leave, the Minister and Deputy Minister, who were attending a cluster meeting.

Expenditure as at 31 March 2013 -- background
The CFO in her introduction said she was surprised that the Committee had invited the DHA to present on just the expenditure, and not the performance as well. The presentation would cover the expenditure against the budget as at 31 March 2013, as per the annual financial statements submitted to the Auditor General on 31^st May 2013.

In earlier presentations to the Committee and during the financial year, the DHA had presented two sets of figures – one for the trading account and the other for the Department’s Budget Vote (the two had to be treated separately). During the Medium Term Expenditure Framework (MTEF), National Treasury (NT) had allocated the DHA an approved amount of R5.2 billion.  However, there had been no allocation for the printing of passports and all enabling documents. It had then been agreed that the DHA would establish a trading account to cover civic and immigration products. All the revenue to be collected for IDs, passports, permits and other related documents, was to be included in the trading account.

The approval from NT had been obtained and was effective from the 2011/2012 financial year, but the DHA could operationalize the trading account only in the 2012/2013 financial year.  NT had agreed to the postponement of the trading account to 2012/2013 and what it did in 2011 was to use self-financing activities to appropriate the monies to DHA during the adjustment budget (around R327 million, specifically for the printing of passports).

During the whole financial year, the DHA liaised with NT to agree on what the trading account meant. To the DHA, the trading account was a vehicle for money to be collected and deferring expenses (agreed upon line items) with the NT. The three line items to be covered by the trading account, as directed by the NT were printing costs (including the printing of face value forms), courier costs and cash in transit. These were line items considered as directly incurred in the generation of the revenue. Other fixed costs would not be covered by the trading account but by the DHA’s Budget Vote.

When the matter was discussed with the Auditor General towards the end of the financial year, a number of challenges had arisen with the trading account. For instance, according to the accounting standards, there was a need for a matching principle in the sense that all expenditure items had to form part of the trading account. Expenses were not being matched by the income received. It was also noted by the Auditor General that the revenue generated by the DHA had missed the definition of services rendered in terms of Generally Recognised Accounting Practice (GRAP) standards. This had posed a significant challenge to the DHA, as it did not have adequate systems to account for revenue as a sale of service.

The DHA had consulted NT on the challenges posed by the trading account and had asked for guidance on how to deal with it. The NT directed that the trading account would be disposed however the impact by this directive was the expenses that had been incurred by DHA relating to the trading account – expenses amounting around R286 million. Following this concern, the NT then agreed that the trading account would be deferred for at least three years and that during the three years thorough research would be conducted with the Auditor General to find an appropriate vehicle for the DHA to achieve the self-funding objective. The R286 million over-expenditure that had resulted from the trading account would be supported by NT – this therefore had led to the Department overspending on the DHA’s Budget Vote.  

Expenditure before trading account and expenditure as at 31 March 2013 - per programme
The CFO said that the DHA appropriation amounted to R5.2 billion.  Of this sum, R1.6 billion had been allocated to administration support services; R2.8 billion to services to citizens; and R746 million to immigration services. Overall, the DHA had spent 97.3% of its budget, leaving an unspent amount of R140.6 million -- equivalent to 2.7%.             

The expenditure as at 31 March 2013, per programme, showed a different picture because the trading account expenses had been taken into account. It showed that the DHA had overspent by around R160 million. The unauthorised expenditure had been R286 million due to the accounting framework used by the DHA in preparing financial statements.  

Expenditure as at 31 March 2013 – per economic classification
The adjusted budget allocation for compensation of employees was R2.2 billion, of which R2.1 billion had been spent, an equivalent of 98%. The unspent amount of R44.6 million was due to posts not being filled on time, a challenge that the DHA was trying to address.  Goods and services had been allocated R1.8 billion, but the actual expenditure was R2.1 billion, which was 12.8% over the budget. This was mainly due to the trading account expenses but there was not much of a percentage difference in other areas like transfers and subsidies, payment of capital assets and payment for financial assets. Overall, the DHA had over-spent by 3.1%.

Providing further explanation on the expenditure, she said that the DHA had requested a roll over of the R140 million (this had been spent as a result of the trading account) in Programme 1, which represented earmarked funds for the Department’s IT modernisation in the 2013/2014 financial year. Due to the technical over expenditure, the roll over request received no further consideration. However, NT had mentioned that it would appropriate this money in the future to cover the IT modernisation.

Spending at the end of March 2013 on Programme Two (Citizen Affairs) was at 107.7%, and this could be attributed to the non-implementation of the trading account. There had been an over-spending of 11% above budget on Programme Three (Immigration Affairs). In Immigration Services, there had been some expenses that had not been adequately budgeted for and the DHA had approached NT in this regard. The three cost areas that overspent were deportation, Advanced Passenger Processing system (APP) and the transportation of immigration officers. There had been an increase in the cost of deportation and the cost of fuel. DHA also had to meet the expense of keeping people for 30 days at Lindela Repatriation Centre. The DHA was looking into the issue of transporting immigration officers at three ports of entry for all the shifts instead of one shift. Overall, the non-implementation of the trading account had an impact on the overspending of the DHA.    

Expenditure as at 31 May 2013 per sub-programme
The Administration Support Services, Ministry, Corporate Services and Office Accommodation all spent 100% of their budgets. Only Transversal IT Management had under spent by 29.6%, mainly due to a delay in signing the definitive and sub-contracting agreements. Citizen Affairs had had a 7.7% (R226.2 million) over-expenditure due to the trading account expenses being taken into account, as was the case with Immigration Affairs, which over-spent by 11% (R74.3 million).  

The internal audit services sub-programme had spent 56% of its budget, which was due to some of the posts not being filled during the financial year, and the intended outsourcing to help with internal audit plans that was not realised. Legal services over-spent by 24%. The mechanism involved the Department of Justice, which was responsible for appointing the advocates and advisors on behalf of the DHA.  Legal costs increased during the financial year mainly because some invoices did not get to the DHA on time, with some invoices dating back to 2011. The DHA was discussing this challenge with the Department of Justice to find a way of ensuring that the invoices reached the DHA as and when they arose. There had been an increase in the number of cases against DHA that also had had to be defended.

Expenditure as at 31 March 2013 per Province
The CFO said that the Provinces had relatively spent what had been allocated to them, apart from Mpumalanga which had spent 5.7% above budget due to the increased volume of travellers during the Africa Cup of Nations and the Easter period. There had also been the appointment of 50 people from Defence to do work at Lebombo. 

Discussion
Ms P Petersen-Maduna (ANC) said that she was worried about the issue of deportation.   This seemed to be a waste of money, because the same people deported kept coming back. What changes were in place to ensure that quarterly under-spending did not occur?  What impact did the reduction in the DHA’s overall budget have on the implementation of services in the provinces?

The CFO said that the issue of deportation was a challenge to the DHA, adding that the establishment of the Border Management Agency would be relevant in helping with control of the border in respect of people that entered and left the country.

Ms Josephine Meyer, Chief Director: Revenue and Budgets, in response to the question on under-spending, said that the DHA had established an internal budget committee made up of all the deputy director generals and provincial managers. There was a quarterly determination of how much a branch or province was expected to spend (for instance 25% per quarter), and mechanisms were in place to ensure that priorities that came up during the year were funded.

On the issue of a reduction in the DHA’s budget, the CFO said that overall the DHA’s budget remained the same, compared to other departments that had experienced a reduction. However, the only line item that had decreased was the IT modernisation, mainly because the DHA had realised that it would not be able to spend the entire R314 million. The DHA had then declared R100 million as a saving, leaving R214 million.

There were some areas of the budget that had not been properly budgeted for.  In the provinces, for instance, the DHA had put aside money for Easter and the festive season because it was at such times that more people were needed at the border posts to assist with the queues and the movement of people. The budget committee was responsible for ensuring that ports of entry could function for the financial year 2013/2014, going forward.   

Mr Mnqasela, speaking on the transport of immigration officers to the border posts, asked to what extent the DHA had managed to build facilities to accommodate these officials, considering that the conditions at some of the existing facilities were dire – he gave an example of the North West post, where people even lacked ‘proper’ water. The lack of accommodation at some of the ports of entry partly contributed to the regular transportation of officials. 

The CFO in response said that transportation of immigration officers was for only three ports of entry – OR Tambo, King Shaka and Cape Town International -- because they operated on a 24-hour basis. These were the only ports of entry covered by the current contract. The agreement with the unions was that the immigration officials would be transported for shifts that started after 23h00. The DHA wanted this to be done for the other ports of entry as well, and not limited only to these three.

With regard to residential accommodation, the previous Minister had approached NT and asked for money.  This had been appropriated – R400 million for the building of residential accommodation at the ports of entry. Last year, R110 million (which had been for the financial year 2012/2013) had been surrendered by the Department of Public Works to NT because this money had not been spent on behalf of the DHA. This year, the same amount had been allocated to the DHA. A total of around R130 million had been allocated for border post infrastructure. Building of the infrastructure required permission from the Department of Public Works, so several engagements had taken place between the Director-General: DHA and the new Director-General for the Department of Public Works on the possibility of the DHA doing the building of the infrastructure on its own with the allocated funds. The discussion had also involved the Minister of Public Works. In the current financial year, the DHA had identified Lebombo, Maseru Bridge and Beit Bridge border posts for the construction of accommodation facilities.     

Regarding the over-expenditure on legal services that was being attributed to receipts not getting to the DHA on time, the CFO said the DHA was engaging with the Department of Justice on how to deal with the challenges in legal services, and especially on ensuring that invoices were received on a regular basis as opposed to after a year or so.

Ms G Bothman (ANC) wondered why the Committee was ‘wasting time with the meeting’. Last year the Committee had agreed that when the reports were being tabled before the Committee, they should have a template that aligned the expenditure with the strategic plan so that the Committee could understand what had been done with the funds. She suggested that the reports should have been tabled in the template that had been proposed by the Committee. The DHA should go back and do the right thing so that the Committee could hold it accountable.

The Acting Chairperson agreed with this proposal, and said that another meeting had to be scheduled at which a proper report had to be presented to the Committee in accordance with the proposed template. He added that, as had been alluded to by the CFO, the request from the Committee to the Department had not been correctly worded. 

Ms Bothman repeated her proposal that the meeting be adjourned so that DHA could go back and use the proper template for the report.

The Acting Chairperson said that a decision had been made that the DHA would go back to re-work the report, taking into account the concerns of the Committee about the linking up of expenditure with performance.

The CFO said that she had noted Ms Bothman’s concern, adding that the request from the Committee was limited to the DHA’s expenditure. The performance report to be presented to the Committee would show what the money was spent on.

Ms D Mathebe (ANC) was concerned about the filling of posts, as this was something that had been discussed at every meeting with the DHA in 2011, 2012 and now 2013.  When were these posts to be filled?  With regard to deportation, she said that it was unclear to her how the DHA knew who to deport, when and how, when it did not know the number of people that were in the country.

On the filling of posts, the CFO said that there were issues in terms of delegation that the DHA had dealt with. All the positions had had to come to the head office first, but now there was decentralisation, with the appointment of people in the provinces to deal with human resource functions. There was also a delegation of up to level 8 that was now left to the provincial manager, as the majority of the posts were within this range (for instance, the front office clerks and administrators) and there had been an increase in the number of posts filled.

On the issue of deportation, the CFO said that the DHA knew the number of people that had to be deported because there was a requirement to know the number of people at Lindela at a specific time, even from a contractual point of view, because the DHA was charged for the number of people at the repatriation centre. The DHA had a system in place that tracked how many people were at Lindela and how long these people had been at this centre.

The Acting Chairperson said that in future it would be advisable for the DHA to try and clarify any unclear communication from the Committee.     

The meeting was adjourned.