Review of Limpopo intervention in terms of section 100 (2) (c) of Constitution: input by Premier, DPCI, Anti-Corruption Task Team & Chief Administrator (day 1)

NCOP Finance

14 October 2013
Chairperson: Mr C De Beer (ANC; Northern Cape)
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Meeting Summary

The Premier of Limpopo said the Section 100 intervention had come as a great relief to the people of Limpopo at a time when things had almost collapsed for the province.  The main objective of the Section was to make every effort to create sustainable capacity in the province and to ensure compliance with the Public Finance Management Act (PFMA).  Most of these objectives had been achieved. 

The Premier thanked the Cabinet for the intervention strategy, and the National Council of Provinces (NCOP) and its Committees for their oversight roles.  The work by the team of administrators had brought a lot of relief to the people of Limpopo.  With the assistance of DPSA and the Special Investigating Unit (SIU), more than 300 civil servants in Limpopo faced several charges for flouting the rules, ranging from minor to gross irregularities, 88 senior managers had received letters of intent to charge, and two Heads of Departments were appearing before disciplinary hearings. They remained suspended while the investigation took place.  He likened Limpopo to a patient in hospital and said that the patient was now out of the intensive care unit and needed to be discharged.  The administrators would show in their presentations that Limpopo had made significant recovery financially so that Limpopo could compete on the big stage with other provinces.  

The Chief Administrator said a diagnostic report was completed in March 2012 and the weaknesses were identified as a lack of leadership and laxity of officials; poor systems, processes, skills and capacity; and a non-reliability of the IT infrastructure and/or enabling systems and software.   Accumulated unauthorised expenditure prior to the intervention was R2.7 billion, and at the end of March 2013, accumulated unauthorised of R500 million still remained unapproved.  The cash position showed a R1.7 billion overdraft prior to the intervention and a cash surplus of R4.2 billion at the end of August 2013.  Provincial expenditure showed projected overspending of R594.6 million prior to the intervention, and projected overspending of R833 million at the end of August 2013.  . 

Over the years the Auditor-General (AG) had always qualified the Provincial Treasury over tribal levies, where traditional leaders deposited money into the bank account, but withdrew more than was deposited.   The Treasury had never reconciled those accounts over a number of years, but those accounts had since been reconciled. The audit outcomes of the provincial departments showed that the Education, Health and Public Works departments achieved a disclaimer opinion and Provincial Treasury and the Department of Roads and Transport achieved an unqualified audit opinion.    Although it would not be possible to solve all the problems in Limpopo, there were five specific areas that should be addressed that would sustain the improvements.  These areas were infrastructure; competitive procurement; asset management; data and records management; and compliance, interpretation and enforcement.  

Limpopo Treasury said it was currently reducing the planned 583 posts in the Treasury to between 350 and 380 posts, and critical management positions had been filled while the other vacant posts had been advertised.  A skills audit in the office of the Chief Financial Officer was identified as an initiative to improve financial management, skills development and capacity building.  The service provider had assessed Provincial Treasury -- the final report was in process -- and the Health and Education departments would be assessed next.  Project-based learning was implemented and transversal contracts were being put in place to address supply chain challenges.  Standard operating procedures were being developed and the provincial Supply Chain Management policy had been reviewed. 

A more efficient electronic accounting system had been implemented in the Provincial Treasury and would be implemented in other provincial departments.   Discussions to implement a database system which would be secure, had started, and would have an audit trail for any changes made to the asset register and scanning facilities to perform asset verification process.  The province had applied to National Treasury to implement a centralised supplier database system to manage all suppliers for all departments in the province. 

The province had tabled the 2013/2014 budget with a surplus of R735 million, of which R640 million had been set aside to finance the unauthorised expenditure.  The province had since reduced the unauthorised expenditure by R931 million, of which R821 million had been funded by the Provincial Revenue Fund.  The outstanding unauthorised expenditure was R1.4 billion, of which the province intended to finance R640 million in 2013/14 and the balance over the Mediun Term Expenditure Framework (MTEF).

Members commended the monitoring and evaluation role of the project management units (PMUs), and acknowledged the province’s problems in sourcing project managers and engineers.  Concern was expressed over the lack of leadership in Limpopo, as well as the financial impact of “ghost” workers.  Many plans had been developed, but time frames had not been set for their implementation.  It had been suggested that pressure was being brought to bear on the administrators to withdraw the intervention.

The Directorate for Priority Crime Investigation (DPCI) and Anti-Corruption Task Team (ACTT) said that based on the National Treasury results of risk assessment, with forensic investigations, findings of incidents of irregularities, fraud and corruption and conflict of interests, the following departments had been identified as priority areas for ACTT investigations: Education, Transport and Road Agency of Limpopo, Health and Social Development, Public Works and Provincial Treasury.

National Treasury had issued 22 investigation reports that facilitated disciplinary proceedings by the Department of Public Service and Administration (DPSA) and to date, two heads of departments had been suspended and 45 officials across the departments had been charged.    A summary of disciplinary cases of fraud and corruption that included Health and Social Development, Education, Public Works and COGHSTA showed 47 cases, with 46 still in progress and one having been finalised.  The disciplinary cases in progress related to the officials already charged and hearing proceedings were in progress.  More officials would be charged on the balance of the 13 forensic reports issued by National Treasury that were under scrutiny by the DPSA.

In terms of the criminal cases, National Treasury would seek an order of endorsement as contemplated in terms of Section 29 of the Prevention and Combating of Corrupt Activities Act, 2004, to register the affected entities and parties on the Register for Tender Defaulters, not to do any business with the State.  At least ten officials with the Department of Roads and Transport had resigned before the commencement of the disciplinary proceedings, but criminal investigations were ongoing.

National Treasury had established in the review audit of the Limpopo Provincial Treasury, that six out of ten Limpopo PMG accounts had been used to process both credit transfers and other electronic bank transfers directly on the FNB online system, without authorisation or disbursement on BAS.  The investigation was still in progress to establish if all identified irregular transactions not proceeded through BAS had been rectified and recorded in the BAS in the correct financial periods of the affected departments.  A summary of disciplinary cases of conflict of interest (government officials doing remunerative work outside the public service) showed 302 cases had been uncovered, with 40 finalised, 49 cases still in progress, 86 cases referred to the departments for finalisation, and 103 cases had been withdrawn.  A summary of ACTT criminal cases under Section 100 showed 26 cases with 34 accused, with 13 of the cases in court while 13 were still in progress.

Members asked if officials who had resigned to avoid investigation were being followed up, and said there was a need to reconcile information on public service officials across all three tiers of government.  They asked why some cases had been withdrawn, and what the value of tender irregularities had been.  They were assured that there would be a significant recovery of revenue when investigations and prosecutions had been completed.

The administrator for Limpopo Health Department, stated that 38 boilers at 19 hospitals had been refurbished and repaired, and R88 million had been secured for the project. Funding was now available for maintenance of the boilers and the process of securing a contract for maintenance was under way.  The focus was on the roll-out of a transversal procurement plan that spoke to the development of efficient and sustainable procurement systems for the health sector.

The organisational structure needed to be reviewed to align with the health priorities, but 32 of the hospital CEO posts had been filled and an additional seven were at approval stage.   In total, of the 40 hospitals, 39 would have appointed permanent CEOs by the end of October 2013. Three new CFO posts were being filled and would be in place by the end of November 2013, and 51 posts of former interns had been filled by National Health with provincial technical support officials for a two-year contract period.  Medicine stock had increased from 43% in March 2013, to 79.7% in September 2013, and 173 posts of the approved total staff establishment of 234 had been filled since April 2012.  An IT contract had been put in place, effective from October 2013, to support the system and direct deliveries were now being implemented for the two tertiary hospitals (Polokwane and  Mankweng) instead of the depot, and would be rolled out to regional and district hospitals.

Members sought further details about the interns and how they would be deployed, and asked whether a possible conflict of interest might exist with the involvement of external auditors in the intervention process.  They also wanted assurance on the medicine supply situation in the province.
 

Meeting report

Opening Remarks by Chairperson
The Chairperson explained that the Select Committee on Finance had been joined by some members of committees relevant to the matter to be discussed.  He welcomed the Premier of Limpopo, Mr Stanley Mathabatha and the delegates from Limpopo.  When the engagement with Limpopo had started, the goal was -- as with all provinces -- good governance and sound financial management in all spheres of government in order to have a clean administration and efficient service delivery that was sustainable.  He referred to the print headlines that reported on Limpopo’s financial woes, and said that should not happen again. This intervention could determine, based on the quarterly reports from the different departments, if the Limpopo administration was running into bankruptcy and what their fiscal position was.  This intervention was guided by the Constitution, the Public Finance Management Act (PFMA), the national budget and the State of the Nation Address, and needed skilled and competent people to do the work.  A diagnostic analysis had been done and an action plan developed, and then the Committee had asked if there were skilled people to do the work and to implement the action plan.  The Committee had been told there was a recovery plan and with every engagement with Limpopo province, the Committee had asked who the right people were to implement these plans, which should be sustainable at the end of the day.  The Chairperson explained there would be a briefing by the administrator of the Provincial Treasury on progress made with regard to the intervention, and briefings by the Anti-Corruption Task team and the administrator for the Department of Health on progress made. 

Opening Remarks by the Premier

Mr Stanley Mathabatha, Premier of Limpopo, said the Section 100 (b) intervention had come as a great relief to the people of Limpopo at a time when things had almost collapsed for the province.  The reported impending shutdown of the American government was reminiscent of early last year, when it was reported in the media that civil servants may not be paid, that hospital services had stopped working and that learners did not have books.  The main objective of Section 100 (b) was to make every effort to create sustainable capacity in the province and to ensure compliance with the PFMA.  Most of these objectives had been achieved.  The Premier mentioned all learner and teaching material for the 2014 academic year had been procured and delivery had already started. 

Due to the dire situation the province found itself in, a needs analysis was submitted from the Roads and Transport department indicating that not less than R414.713 million was needed for committed projects.  The roll-over application had been R176.695 million, while the balance of the project had been budgeted for in the current financial year.  The under-spending was due to a lack of clarity on the procurement procedures for the appointment of professional service providers, and the late finalisation of design due to the late appointment of service providers.  Bids were re-advertised, because no suitable contractors could be recommended after evaluation, and completion of the terms of reference for Roads Agency Limpopo (RAL) had been late, due to consultation with the Department of Public Service and Administration (DPSA), National Treasury (NT) and the National Department of Transport (NDT).  Mechanisms had been put in place to ensure that the Road User Fund would be utilised in the 2013/14 financial year. 

The Premier thanked the Cabinet for the intervention strategy, and the National Council of Provinces (NCOP) and its Committees for their oversight roles.  He thanked the administrators for their hard work and determination, because when he was first appointed as the Premier of Limpopo and received the preliminary status report, he said ‘prayers were needed.’   The work by the team of administrators brought a lot of relief to the people of Limpopo.  With the assistance of DPSA and the Special Investigating Unit (SIU), more than 300 civil servants in Limpopo faced several charges for flouting the rules, ranging from minor to gross irregularities, 88 senior managers had received letters of intent to charge, and two Heads of Departments were appearing before disciplinary hearings. They remained suspended while the investigation took place.  He likened Limpopo to a patient in hospital and said that patient was now out of the intensive care unit and needed to be discharged.  The administrators would show in their presentations that Limpopo had made significant recovery financially so that Limpopo could compete on the big stage with other provinces.

The Chairperson thanked the Premier, and said the objective was to measure the progress made from January 2012.   Section 100 (2) (c) of the Constitution stated the NCOP should review the intervention and could make recommendations. 

Briefing by Chief Administrator and Head of Department: Limpopo Treasury

Mr M Tom, Chief Administrator, said that on 10 January 2012, in an agreement between Limpopo province and the government, the purpose of the intervention was agreed to -- it was to assist the province to upgrade its systems and capabilities to a new normality, to ensure compliance with legislation and the regulations framework of government and to enhance the quality of service delivery.  To serve this purpose, the intervention focused on recovery, governance and sustainability.  The diagnostic report was completed in March 2012 and the weaknesses were identified as a lack of leadership and laxity of officials; poor systems, processes, skills and capacity; and a non-reliability of the IT infrastructure and or enabling systems and software.  The presentation would cover the financial recovery and the Treasury Head of Department (HOD) would talk about the financial recovery within Treasury. 

Accumulated unauthorised expenditure prior to the intervention was R2.7 billion, and at the end of March 2013, accumulated unauthorised of R500 million still remained unapproved.  By the end of August, R640 million was allocated and spending at the end of August 2013 showed R640 million allocated and balanced over the Medium Term Expenditure Framework (MTEF).  The cash position showed a R1.7 billion overdraft prior to the intervention and a cash surplus of R4.2 billion at the end of August 2013.  Provincial expenditure showed projected overspending of R594.6 million prior to the intervention, and projected overspending of R833 million at the end of August 2013.  The Education and Health departments were responsible for that overspending.  The Education budget projected overspending of R354.5 million prior to the intervention and now projected overspending of R277.9 million.  The health budget and the provincial compensation of employees (COE) showed movement from a projected overspending of R250.2 million and R661 million, to R604.8 million and R437 million respectively. 

Mr Tom gave an overview of the Provincial Treasury and said that over the years the Auditor-General (AG) had always qualified that department over tribal levies, where traditional leaders deposited money into the bank account, but withdrew more than was deposited.   The Treasury had never reconciled those accounts over a number of years, but those accounts had since been reconciled. The audit outcomes of the provincial departments showed that the Education, Health and Public Works departments achieved a disclaimer opinion and Provincial Treasury and the Department of Roads and Transport achieved an unqualified audit opinion.  Despite the disclaimer opinion of those departments, Mr Tom said there had been several positive changes made within them, and he gave an overview of some of the issues that had contributed to the audit opinion. 

Mr Gavin Pratt, Head of Department, Limpopo Treasury, said the provincial Treasury and the Administrator were currently reducing the planned 583 posts in the Limpopo Treasury to between 350 and 380 posts, and critical management positions had been filled while the other vacant posts had been advertised.  A skills audit in the office of the Chief Financial Officer was identified as an initiative to improve financial management, skills development and capacity building.  The service provider had assessed Provincial Treasury -- the final report was in process -- and the Health and Education departments would be assessed next.  Project-based learning was implemented and transversal contracts were being put in place to address supply chain challenges.  Standard operating procedures were being developed and the provincial Supply Chain Management policy had been reviewed. 

A more efficient electronic accounting system had been implemented in the Provincial Treasury and would be implemented in other provincial departments.   Discussions to implement a database system which would be secure, had started, and would have an audit trail for any changes made to the asset register and scanning facilities to perform asset verification process.  The province had applied to National Treasury to implement a centralised supplier database system to manage all suppliers for all departments in the province. 

The province had tabled the 2013/2014 budget with a surplus of R735 million, of which R640 million had been set aside to finance the unauthorised expenditure.  The province had since reduced the unauthorised expenditure by R931 million, of which R821 million had been funded by the Provincial Revenue Fund.  The outstanding unauthorised expenditure was R1.4 billion, of which the province intended to finance R640 million in 2013/14 and the balance over the MTEF. The preliminary expenditure outcomes for 2012/13 showed that cost of equity (COE) would account for 69% of the provincial expenditure, and the Health and Education departments accounted for 85% of the total COE in the province.  Through the efforts of management, the Education department’s budget had been stabilised and the Provincial Treasury was putting all its efforts into stabilising the Health department’s personnel and goods and services budget, which was posing a big challenge to the province.

A team had been deployed in the province to provide technical support to the intervention department to improve the 2014 clean audit drive.  The main contributing factors to the disclaimed and qualified audit opinions were the inability to provide a complete, accurate and credible asset register and the inability to provide all the documents required by the AG to verify amounts in the Annual Financial Statements (AFS). The status of the municipal audit outcomes was a major concern, and the Department of Co-operative Governance, Human Settlements and Traditional Affairs (COGHSTA) and Provincial Treasury had signed a memorandum of understanding to assist municipalities going forward. 

In order to strengthen the cash flow management of the province, Provincial Treasury had issued cash allocation letters to each department indicating their cash allocation for each payment run date, as well as the processes to be followed by departments to enable Provincial Treasury to release payment tapes.  Currently, Provincial Treasury stringently monitored each department’s cash flows and daily bank balances. All payment runs were now certified and approved by the Accounting Officer and Chief Financial Officer (CFO) of each department before they were released from the Basic Accounting System (BAS).

Although the different departments would present details of the recovery, Mr Tom highlighted a few from the departments.  More than 2 000 teachers were appointed and the number of temporary educators was reduced from 2 544, to 55 at the end of August 2013.  Rural allowances were being paid to 7 000 teachers. The headcount verification of educators and learners had been completed and data processing was underway.  For the 2013 academic year, text books were ordered on time, adequate funding was made available and surplus stock was procured.  Norms and standards for funding of schools had improved from 66% of the national norms in 2012/13, to 76.2% for 2013/14. It was expected to continue to improve and be fully funded in two to three years’ time. 

An acting CFO had been appointed through the National Department of Health (DOH), and recruitment was being done for the vacant posts in the CFO’s office.  Thirty-three hospital Chief Executive Officers had been appointed and headcount verification was commencing in August 2013 to address the challenge of ghost workers.  An increase of over 20% in the provincial budget for medicines (through internal reprioritisation) was the largest budget increase in the country.  A building complex had been acquired to provide for the accommodation needs of about 300 professional staff members, and 38 boilers in 19 hospitals were currently being repaired.

While the audit remained an adverse opinion for the Public Works department, there was an improvement in the number of AG findings, from 167 to 132, when compared to the 2011/12 audit finding.  The lease review project due to be completed on 30 October 2013, was expected to result in substantial savings from the current R200 million per annum office space rental.    Out of a total of R632 million infrastructure projects budgeted for the current year, R412 million of these projects would be delivered by the Independent Development Trust (IDT) under a strictly monitored programme.  Three construction project managers, one chief architect and five quantity surveyors were appointed and ten officials in the CFO’s office were receiving training under the Public Sector Advanced Certificate offered by the Association of Accounting Technicians (AAT).

Most of the activity in the Department of Roads and Transport had involved dealing with corruption, and 30 cases were handed over to the SIU for investigation.  Various irregular tenders were investigated and cancelled and a study would shortly be conducted on the feasibility of Road Agency Limpopo (RAL) and Gateway Airport Authority Limited (GAAL).  A new model for the delivery of roads infrastructure would be developed, and 36 maintenance projects were being implemented.

Mr Tom said that although it would not be possible to solve all the problems in Limpopo, there were five specific areas that should be addressed that would sustain the improvements.  He identified these areas as infrastructure; competitive procurement; asset management; data and records management; and compliance, interpretation and enforcement.  Limpopo had the second lowest budget allocated for infrastructure delivery, but also had the lowest spending rate, and the reason was structural.  The province had experienced great difficulty in recruiting skilled professionals to deliver these projects.   He proposed a centralised recruitment of staff process, to eliminate mistakes made during recruitment and the efficient use of the system of management and implementation of Project Management Units (PMUs) responsible for planning, implementation and monitoring. 

He referred to an investigation done by Provincial Treasury on the Reconstruction and Development Programme (RDP) houses that were built by COGHSTA, which had found that no monitoring was actually being done.  They had relied solely on the National Home Builders Registration Council (NHBRC) to ensure that the houses were being adequately built. 

Another problem in Limpopo in terms of sustainability, was competitive procurement.  A common supplier database was needed because over 70% of procurement was being done through quotations, and this system was being abused.  Standard operating procedure manuals should dictate the step-by-step procurement process that would enforce compliance capability and consequences.  The Logical Information System (LOGIS), which was being rolled out, would be used in asset management, but interim solutions were needed to capture the assets and ensure a faster rollout.  Data and records would be managed by introducing electronic records management, such as microfilming or scanning technology.  The level of competence in the CFO offices was still lacking, and Provincial Treasury had been asked to develop a CFO support programme that recruited highly skilled individuals who could support the CFO.  The strengthening of the capability in the Treasury, as well as the office of the CFO’s in departments, should be accelerated.

Mr David Masondo, Limpopo Finance MEC, said the Limpopo Treasury had been incapacitated before, but going forward he could see how the department could oversee other departments as it should and ensuring they spent their budgets in terms of the PFMA.  In collaboration with the office of the Premier and the intervention team, the recovery could be sustained.

Discussion
Ms B Mncube (ANC, Gauteng) commended the intervention team for coming up with Project Management Units (PMUs), which were needed to focus on monitoring and evaluation.  She said the Committee had gone to oversee a bridge in Limpopo -- and there had been no bridge.  She agreed that in Gauteng there were similar problems in sourcing project managers and engineers, and this issue should be raised at a national level.  She asked if there was any way of blacklisting service providers that did not deliver.  Gauteng had implemented a similar centralised procurement system, and they had made a few mistakes and when the system was implemented, Limpopo should learn from those mistakes.  She referred to the disclaimed opinions of other entities, as well as those that showed regression or no improvement at all, and asked what the plan going forward, with regard to those entities, was.

Ms R Rasmeni (ANC, North West) asked what effect ghost workers had on the province’s revenue.  She asked what the status of the RAL and GAAL board was, and to clarify the relationship between PMU and monitoring and evaluation.

Mr B Mashile (ANC, Mpumalanga) recalled that at the last visit, the Premier had said they were ready for the intervention be lifted.  Today they had heard the same thing, but did not see any evidence in the report that any changes had been made.  He referred to the statement that the competence in the CFO’s office left a lot to be desired, and to the diagnostic report that spoke of a lack of leadership and laxity of officials.

Mr M Jacobs (ANC, Free State) said the goal of the meeting was to evaluate the work done by the intervention team.  He would have liked to see the diagnostic report against the recovery points, with percentages that indicated the level of progress and what still needed to be done, to get a clear idea of the progress.  He asked about in-sourcing the issues listed under procurement, and said it seemed like an expensive exercise.  PMUs could be implemented if skilled and competent people drove the initiative.

Ms M Boroto (ANC, Mpumalanga) said she feared that the work that had been done so far would be undermined by the possibility of big staff and capacity changes, and asked if Provincial Treasury was ready to be the oversight department it was meant to be.  The centralised procurement database was a good suggestion, but how would it be maintained by the staff and kept free from irregularities.  She wanted to know what the involvement of local government was, especially with local issues such as RDP houses.

Mr D Joseph (DA, Western Cape) said leadership in the province had been identified as lacking, and asked what Mr Tom recommended. With regard to implementation of PMUs and the CFO support, would the need be more staff and more structure?  The essence of the whole collapse was the inability of Treasury to monitor other departments -- did Treasury have that ability now?  He asked that the administrator should give a recommendation on what the Committee should do, based on the mandate they had received from government.

Mr R Lees (DA, KwaZulu-Natal) said the Committee kept getting told about plans, with no indication of when they would be implemented.  He referred to the lease issue and said six months ago Mr Tom had reported it was a major issue, and now it was reported to be taking place.  He referred to the audit on the ghost workers in one department, and asked about the other departments and what the outcomes and costs were.  He referred to the tribal levies and said that the reconciliation of an account did not stop the abuse -- what was actually being done to prevent unauthorised spending on those accounts?   Provincial treasury had not finalised its organisational structure yet.   There had been talk about the boilers for months, and now it was reported that 38 were being repaired.  He had a great deal of respect for Mr Tom and this was not a criticism against him, but he had serious misgivings about the pressure on Mr Tom to withdraw the intervention.  There were no evidence of real systemic changes because it was easy to turn the finances around by stopping the money flow.   This was not just a money problem -- in this case, it was the people and the systems.

Mr M de Villiers (DA, Western Cape) asked the administrator to elaborate on the centralised recruitment of staff and, based on the recommendation to review the top 20 contracts, asked if he could tell the Committee how many contracts there were.  There were ten municipalities that had shown regress -- what was the status of those municipalities?   In reference to the management skills of staff, he asked if the staff would be better off managing the situation in different departments.

The Chairperson told Mr Tom there was an impression that he was under pressure to lift the intervention, and asked what the action plan was, because this was the final phase of the recovery process.

Mr M Sibande (ANC, Mpumalanga) echoed the Chairperson and said there should be a thorough investigation done on RAL and GAAL, and it should not be treated on a racial basis.  He referred to monitoring and evaluation and said the Committee had gone to Limpopo to oversee two bridges that had reportedly been 91% and 80% completed -- and there were no bridges when they got there.  He referred to page 5 of the presentation, and asked why the R500 million had remained unapproved.  He addressed the Premier, and said those that had been charged with departmental irregularities should be named.

Mr Tom said most of the questions that had been asked would be dealt with in the individual departmental presentations. 

Mr Edgar Sishi, Chief Director: National Treasury, said there had been a Cabinet meeting where it had been agreed that there would be a transition period during which National Treasury should work collaboratively with the team and divisions in respect of sustainability.  Cabinet had agreed that the financial collapse that had triggered the intervention had been arrested, and the next six months would involve dealing with sustainability of the recovery.  Mr Sishi asked the Committee to commit to the timeline and to apply its mind to the recommendation made by Cabinet. 

Mr Tom said  that, based on the Cabinet recommendation, the team had looked into what areas needed to be addressed to strengthen the people issues and processes that were not yet in place.   If those areas of the intervention were addressed, he believed that the recovery would be sustainable.  The Premier was aware of the six months timeline.  He stated that he had not been under pressure to have the intervention lifted.

The Chairperson said it was the first time that the Committee had heard of a specific time frame since the intervention had started.

Mr Tom said the intention was never to fire all the people that had been implicated through disciplinary hearings, but to have some integrated into the recovery processes.  There was a blacklisting process in place through the Central Procurement Office (CPO) established within National Treasury, and they were responsible for blacklisting non-compliant service providers.  The progress and details of what had exactly been done in each department would be presented by those departments to the Committee.  Systemic recovery would be more difficult than financial recovery, because core processes had to be addressed and reprogrammed.  The team understood the systematic nature of some interventions.   For example, the presentation had identified asset management as a systemic process.

The Chairperson asked Mr Tom to recap the five areas for a sustainable recovery.

Mr Tom named the five areas shown on the presentation slide, and said the administrators from the different departments would address the questions of the Committee.

The Premier said the RAL and GAAL board had been dissolved and would be restructured.  The task team in charge of the investigations into the disciplinary and criminal proceedings had raised the challenges they faced, and he would be meeting with them the following week.  He referred to the insinuation that politicians were pressurising Mr Tom to withdraw the intervention, and said he would not mind if the intervention continued until next year.  He said new boilers had been procured at a cost of R88 million, and the challenge existed over the kinds of coal that were used.

The Chairperson said that members should hold their questions until the individual presentations by the departments.  He thanked the Premier and the delegates and introduced the next presentation.

Directorate for Priority Crime Investigation (DPCI) and Anti-Corruption Task Team (ACTT) progress report

Lt. Gen Anwa Dramat, Head: DPCI, South African Police Service, and Chairperson of the ACTT, said the presentation provided the details Committee members had requested at the previous meeting.  On 22 July 2010 the President had announced the establishment of an Anti-Corruption Task Team to expedite the investigation and prosecution of corruption criminal cases.  The purpose of the ACTT was to provide for better coordination of governmental functions within the Justice, Crime Prevention and Security Cluster (JCPS), with the aim of reducing corruption in South Africa; to expedite the effective investigation and prosecution of priority corruption cases; and to work together with other government departments and initiatives to strengthen government systems, reduce risks, and to prevent the incidence of corruption.

He listed the principal and secondary member institutions and said the Ministry of Finance had played a leading role in implementing the national intervention in Limpopo.  All the ACTT members had been requested on 14 December 2011 to support the intervention, and the ACTT institutions had effectively implemented their investigation plans in January 2012. 

Based on the National Treasury results of risk assessment, with forensic investigations, findings of incidents of irregularities, fraud and corruption and conflict of interests, the following departments had been identified as priority areas for ACTT investigations: Education, Transport and Road Agency of Limpopo, Health and Social Development, Public Works and Provincial Treasury.

The SIU had conducted a conducted a conflict of interest analysis based on the data provided by National Treasury on the Basic Accounting System (BAS) and the Personal Administration System (PERSAL).

National Treasury issued 22 investigation reports that facilitated disciplinary proceedings by the DPSA and to date, two heads of departments had been suspended and 45 officials across the departments had been charged.  (See list of National Treasury forensic reports on page 4 of the attached document).  A summary of disciplinary cases of fraud and corruption that included Health and Social Development, Education, Public Works and COGHSTA showed 47 cases, with 46 still in progress and one having been finalised.  The COGHSTA matter had prevented the implementation of a R900 million tender irregularly awarded by the department and had resulted in the suspension of the HOD.  The disciplinary cases in progress related to the officials already charged and hearing proceedings were in progress.  More officials would be charged on the balance of the 13 forensic reports issued by National Treasury that were under scrutiny by the Department of Public Service and Administration (DPSA).

In terms of the criminal cases, National Treasury would seek an order of endorsement as contemplated in terms of Section 29 of the Prevention and Combating of Corrupt Activities Act, 2004, to register the affected entities and parties on the Register for Tender Defaulters, not to do any business with the State.  At least ten officials with the Department of Roads and Transport had resigned before the commencement of the disciplinary proceedings, but criminal investigations were ongoing.

National Treasury had established in the review audit of the Limpopo Provincial Treasury, that six out of ten Limpopo PMG accounts had been used to process both credit transfers and other electronic bank transfers directly on the FNB online system, without authorisation or disbursement on BAS.  The investigation was still in progress to establish if all identified irregular transactions not proceeded through BAS had been rectified and recorded in the BAS in the correct financial periods of the affected departments.  (See list of affected departments on page 7 of attached document). 

A summary of disciplinary cases of conflict of interest (government officials doing remunerative work outside the public service) showed 302 cases had been uncovered, with 40 finalised, 49 cases still in progress, 86 cases referred to the departments for finalisation, and 103 cases had been withdrawn.

A summary of ACTT criminal cases under Section 100 showed 26 cases with 34 accused, with 13 of the cases in court while 13 were still in progress.  Pages 8-10 gave details of the criminal cases and pages 10-12 listed the arrested suspects.

The report was concluded and the Chairperson gave over to the Committee.

Discussion
Ms Mncube referred to the statement by National Treasury that it would follow up on those officials that had resigned, and the challenges they faced, since local government officials and consultants could not be detected through PERSAL.  She asked what other mechanisms there were to identify those individuals.

Mr Jacobs asked who was conducting this investigation, and how much revenue had been recovered through this investigation.

Mr Joseph referred to the tender values recorded in the presentation, and asked if the amount the accused had been charged for was available and open to the public.

Gen. Dramat said that this was sensitive information and the values in the presentation showed only the tender values, and did not imply that the whole amount was criminally linked.

Mr Sibande referred to page 7 of the presentation, and asked for clarification on why 27 cases in the Roads and Transport Department had been withdrawn.  He asked if the role of the bank had been identified in any way, or proved significant through this investigation.

Mr Mashile asked for clarification on the statement that more officials would be charged, as well as on the differentiation of the cases into conflict of interest, criminal and fraud and corruption.  He also asked when this process would be concluded, because this was key to creating certainty in the Limpopo administration.

Gen. Dramat said the 302 conflict of interest cases had emanated from a desktop analysis done by the SIU. Nine of the forensic reports produced by National Treasury had been referred to DPSA for disciplinary proceedings based on fraud and corruption allegations, and the bulk of the 27 forensic reports had been handed over to the ACTT for criminal investigation.

The Chairperson asked for clarification on the withdrawn cases, and those referred to the department for finalisation.

Ms Zanele Mxunyelwa, Head of Specialised Audit Services: Office of the Auditor-General, said she would explain the processes and Committee members could then decide if they still had any questions.  National Treasury was responsible for the intervention, because it had been picked up on BAS that there was huge overspending, but the bank statements showed an ever bigger overdraft that was not reflected on BAS.  The office of the Accountant-General had downloaded all the BAS statements from 2008 to 2011 to assess which departments were overspending and who was doing banking directly on the FNB online system without recording it on BAS.  The five departments with the biggest overspending had been identified, but another issue had been the service providers that claimed that the province owed them money and were threatening litigation, so National treasury had had to determine what the province was paying service providers for, and where the money had gone if it had not been paid to the service providers in order to prevent further costs that would be incurred by litigation, through the forensic investigations.  After the reports were produced, the SIU had done the desk top analysis that had assessed links between the PERSAL-registered officials and the statements generated.  The SIU had identified 302 cases and these cases had to be individually checked Not all of those cases had shown evidence of a crime and had been withdrawn, and some had to be further investigated, because in some cases it became clear that government officials were doing remunerative work outside government and officials, especially in the Premier’s office, had circumvented the BAS.  Now National Treasury had to analyse the bank and BAS statements to determine where the money had ended up.   No bank official had been involved, nor was the bank guilty of any wrongdoing.  If an official resigned before the disciplinary process was completed, that person could still be criminally pursued.  Some had moved from provincial to local government departments or been hired by the government as consultants because they were directors of their own personal companies and were not paid through PERSAL.

The Chairperson asked if there was not any recourse to reconcile information about public service officials.

Mr Nhlakanipho Nkontwana, Acting Head:  Office of Standards and Compliance, DPSA, replied that this was one of the objectives of the Public Administration Management Bill, and would be addressed by the DPSA. Local government was a sphere on its own and municipalities were employers in their own right, but there needed to be a way that cascaded information on who were in national and provincial government, to local government.  Conflict of interest issues were regulated through officials having to declare their holdings or businesses.

Ms Mxunyelwa said that during the disciplinary proceedings and at the conclusion of the criminal cases, there would be a significant recovery of revenue.

The Chairperson thanked the delegation and said that recommendations could be formed from such a clear report.

Department of Health Progress Report
[Chairperson for this briefing: Ms R Rasmeni (ANC)]

Ms Valerie Rennie, Administrator for Limpopo Health Department, stated that the first section of the report dealt with the audit findings, and as there was already an action plan, she would start with the head count. The head count addressed the unconfirmed number of employees, the expenditure related to compensation of employees, and the inaccurate numbers for planning purposes.  The draft report was submitted in October 2013 and the final report would be ready by the end of October 2013.  The 38 boilers at 19 hospitals had been refurbished and repaired and R88 million had been secured for the project. Funding was now available for maintenance of the boilers and the process of securing a contract for maintenance was under way.  The focus was on the roll-out of a transversal procurement plan that spoke to the development of efficient and sustainable procurement systems for the health sector.

Mr Rennie said perhaps she should have started by introducing the newly appointed Head of Department, Dr Sipho Kabane, and apologised to the Committee members.

The organisational structure needed to be reviewed to align with the health priorities, but the sector faced challenges such as high expenditure of COE and a high vacancy rate, but 32 of the hospital CEO posts had been filled and an additional seven were at approval stage.   In total, of the 40 hospitals, 39 would have appointed permanent CEOs by the end of October 2013. Three new CFO posts were being filled and would be in place by the end of November 2013, and 51 posts of former interns had been filled by National Health with provincial technical support officials for a two-year contract, and had been placed at the Polokwane and Mankweng tertiary hospitals, as well as the provincial office to address finance, IT and human resource matters. 

Medicine stock had increased from 43% in March 2013, to 79.7% in September 2013, and 173 posts of the approved total staff establishment of 234 had been filled since April 2012.  An IT contract had been put in place, effective from October 2013, to support the system and direct deliveries were now being implemented for the two tertiary hospitals (Polokwane and  Mankweng) instead of the depot, and would be rolled out to regional and district hospitals.

A new staff establishment infrastructure had been developed and approved.  A doctors’ accommodation project had been completed and handed over and 300 health professionals would be occupying the premises.  All managers were scheduled to undergo project-based learning and all planned projects had been included in the Annual Performance Plan (APP) and reported on monthly.  A capacity analysis was done and found that of the approved 2 000 posts, 1 024 had been filled and this translated directly into the challenges Mr Tom talked about.

Discussion
Ms Boroto asked where the complex would be built and whether it would address the transport needs of the rural population.  She also asked if the medicine procurement processes addressed the needs of the rural community.  She wanted to know if the practice of transferring patients long distances to neighbouring cities was still ongoing.  She referred to the issue of paying monies over to the provinces that treated the patients, because such practices spoke to officials with corrupt mentalities.

Ms Rennie said the complex would be built in Polokwane.  Dr Kabane said the complex would be built in an urban area, but it was not the only complex to be built and several hospitals, even in the rural districts, would offer accommodation to professionals, and this was on the departmental plans for infrastructure. Not all the provinces had the skills and capacities to deal with complex medical problems, like Groote Schuur and Charlotte Maxeke hospitals, especially in Limpopo.   However, the way in which the referrals were done was reason for concern, because the conditional grant funding for these services was already at those hospitals that could deliver these services, but there was continued demand from the referring province for payment of services.  A review of the National Tertiary Services Grant was needed in order to address those particular challenges.

Mr Lees said Mr Tom had reported that 38 boilers would be repaired, the Premier had said 38 new boilers would be procured and the presenter had said 38 boilers had been repaired and refurbished.  He asked what the status of the boilers was.  He echoed Ms Boroto’s concerns about the location of the complex to be built for medical professionals, and asked how it would be dealt with as a fringe benefit with regard to other professionals getting the same benefits.

Ms Rennie said the boilers had been both repaired and refurbished and were functional. 

Dr Kabane said the professionals in Limpopo were beneficiaries of the rural allowance which was used to pay for their accommodation, and in a sense it was a sort of subsidy.

Ms Mncube said the issue of district hospitals had come up twice.   She had visited a district hospital in Limpopo in an oversight capacity, and that hospital could share some of their best practices with other hospitals in terms of maintenance and staff culture with others facing challenges.  She said she would provide the name of the hospital before the end of the meeting.

Ms Mncube said the hospital was Mecklenburg hospital, and the CEO of the hospital had a clear understanding of the challenges of the hospital, as well the plan to address those challenges.

Mr Jacobs said he had asked a question previously about services being provided in-house, or whether they were being outsourced, because this could be applied to the Health Department, and outsourcing could create jobs.  He asked if the shortage of medicine issue had improved.

Ms Rennie said the issue regarding medicine had definitely improved -- from 43% in March 2013 to almost 80%, and the target was 95%.   This was related to the budget for medical supplies that had improved from about R800 million last year to R1 billion this year, and was in line with the benchmark set by National Health.  The growth performance was the highest of all nine provinces in the country.  In collaboration with National Health, analysis was done on security and found that the province had the highest budget for security.  Services such as catering, laundry and security were sourced in-house -- at this point it provided more control and was more sustainable.

Mr Mashile asked who the 51 interns were that had been employed.  He needed clarification on what an audit support unit was.  He referred to the assistance provided by the PwC-Rakoma team, and asked about the conditions of the terms of reference or service level agreement -- those consultants surely had different interests to the Health department, and could delay the contract to ensure continuous work.  He also referred to a recent media report concerning shortages of surgical gloves and to the percentages in the presentation when addressing medical and surgical supplies, and said the 43% level of functioning could not be adequate.

Ms Rennie said the 43% level had been addressed in partnership with Gauteng, through the sharing of tenders, and said the supplies issue could be ascribed to mistakes in procurement processes, but also to manufacturers defaulting. Those appointed were interns for 12 months and had now been contracted. In the terms of reference with PwC-Rakoma, a plan had been developed jointly, and their services would be ended at the end of March, but could continue if requested, until after the audit at the end of July.  They were there for technical support and offered capacity building at the district level, and put systems in place at the provincial level.  PwC-Rakoma also fulfilled a financial role by checking contracts before they were signed off, they analysed financial statements and engaged with the AG. 

Dr Kabane said the medicine level at this point was acceptable, and should just be further improved to 95%, while the consumables were still at 43% due to not being able to get what they needed from manufacturers, as well as a lack of facilities to secure a build-up of stock.  Hospitals were encouraged to buy directly from suppliers. 

Mr Mashile referred to the conflict of interest cases listed in the presentation and said that at the previous presentation it had been discussed that an official should declare his or her business interests.   The provision that such a person needed permission from the Executive should be enforced.

Ms L Mabija (ANC, Limpopo) asked if there was a tracking unit in the Health Department to measure when things got out of hand, because if there was not a practical measuring unit, it would be difficult to turn things around.

The Chairperson thanked the Premier and the delegates and the meeting was closed.
 

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