Department of Water Affairs and Forestry: hearing

Meeting report

PUBLIC ACCOUNTS STANDING COMMITTEE
8 May 2002
DEPARTMENT OF WATER AFFAIRS AND FORESTRY: HEARINGS

[This is a transcript of the meeting, produced by the Public Accounts Committee Secretariat.]
PRESENT

ANC

Chiba, Mr L
Gerber, Mr P
Gumede, Mr. D
Kannemeyer, Mr B
Mothoagae, Ms P K
Nair, Mr. B
Ndou, Mr R
Smith, Mr V
Mabudhafasi, Ms
Mrs B T Sonjica

DP

Lowe, Mr M

NNP

Beukman, Mr. F (Chairperson)

APOLOGIES

Koornhof, Mr G
Woods, Dr. G
Hlangwana, Ms N L
Dudley, Ms C

In attendance

Auditor-General's Office

Mr A Van Dyck
Mr. C Botes
Mr Magondo
Mr T Nombembe Acting Auditor-General: Office of the Auditor-General.


National Treasury

Mr N Marais

Parliament

Mr S Mfenyana, Secretary to Parliament;
Mr L H Klassen, Manager of Institutional Support Division

Department of Water Affairs and Forestry
Mr A M Muller, Director-General: Department of Water Affairs and Forestry;
Mr M J Mabala; Chief Financial Officer: Department of Water Affairs and Forestry; Mrs M Modipa, Deputy Director-General: Corporate Services Department of Water Affairs and Forestry;
Mr J Pottoane, Deputy Director-General of Operations: Department of Water Affairs and Forestry;
Ms L Bethlehem, Chief Director: Department of Forestry;

Formalities

The Chairperson welcomed members of the Committee, the Auditor-Generals Office, National Treasury, Parliament and the Department of water Affairs and Forestry. He confirmed the agenda and it was adopted as circulated.

Herewith follows the verbatim transcript of proceedings.

Mr S Mfenyana, Secretary to Parliament; Mr L H Klassen, Manager of Institutional Support Division

[Chairperson] We welcome Mr Mfenyana and his delegation, the members and the media. I hand over to Mr Kannemeyer. His group has worked very hard during the last two weeks to prepare for today's meeting.

[Mr B Kannemeyer] There has been a couple of interesting debates that we had around the whole process and question of accountability of Parliament itself. We all understand that in terms of the Constitution and other relevant legislation, it is Parliament, the Legislature that holds the Executive to account on a number of areas. We did during our own interaction and in preparation for this Hearing look at the matter of Parliament's own accountability. We indeed feel that there is an area that one would have to look at on a longer term basis and some of the questions and interaction may certainly assist us in that direction. We are aware of some uncertainties, probably legally or constitutionally, but we are then also aware of the current precedents for the interaction between SCOPA and Parliament in terms of the accountability. So from our side that is one area that we would want to follow-up to make sure that any uncertainty relating to the process of accountability between Parliament and currently SCOPA that that can be sorted out and a final and more permanent arrangement and understanding of that can be achieved. We did not plan to go into a major discussion on that, but certainly if, from Parliament's side, there is indication around how they view that particular accounting relation then they certainly want to engage around that. In going to the body of the Audit Report for the financial year 2000/2001, we have incorporated aspects relating from the 1999/2000, as well as the 2000/2001 Report. From what we have done is that we are going to look at a number of areas, including aspects relating the financial management and the question of roll over funds. We are going to have a couple of questions on the party political support funds and the Constituents' Allowances. We are going to look at a matter relating to staff bursaries; disposal of equipment and/or other items. We also have focused on internal audit aspects in Parliament. The members have been allocated specific questions and if other members have questions, we would appeal that we first allow the members that have allocated questions, then for other members to come in with other specific questions. The questions I am going to put relates to aspects of financial management. I assume that the members and the delegation would have our preparatory pack, because that is what I am going to refer to, the one in which we have asked the questions and on which they have send the replies. I am referring to the whole aspect of the applicability of the PFMA on Parliament and the basis for Parliament for the assessment of Parliament's adherence to sound financial management practices. Currently there seem to be a vacuum or an uncertainty relating to the applicability of the PFMA on Parliament and that has been acknowledged in a number of areas. To deal with that, however, there was then requests that we then either look at the amendment of the PFMA or that we look at the development of legislation that would guide that. In your reply on page 90 to our question 5, you have indicated that currently you are looking at a draft Bill that would deal with the financial administration of Parliament and the provincial legislatures. What is the progress that you have made in developing the draft Bill on financial administration for Parliament and the legislatures? What is the timeframes that you think you will be finalizing this draft Bill so that Parliament can start processing it?

[Mr S Mfenyana] Let me again indicate that we are happy to appear before SCOPA as we have indicated in our responses. We think that even if there is some non-clarity about the position, it is in our interest, because we subscribe also to the values of good governance and accountability. In so far as the new Bill, which has been drafted, arising from the indication in the PFMA itself that the Treasury for Parliament would be the Presiding Officers. A draft finance administration for Parliament and the provincial legislatures was assigned to a consultant who prepared the draft which was then discussed by the Speaker's Forum. The final version was then submitted to the Presiding Officers. It is as of now with the Presiding Officers. The expectation was that it would then be tabled and referred to a specific committee. We are not in a position to go beyond that. I will send a reminder to the Presiding Officers asking for an indication. So far I have not received a response.

[Mr B Kannemeyer] Can we get an indication of how long it has been with the Presiding Officers?

[Mr S Mfenyana] It is about two weeks now.

[Mr B Kannemeyer] I think that is fair. There is a number of areas, and it is going to come up as the Hearing goes on, where, I think rightly so, when we ask you what have you done in terms of this specific requirement of the PFMA, that you can rightfully say it is not applicable on us and therefore we have not met that particular aspect. It is only when this legislation is put down and adopted by Parliament that we can know that there is now a proper framework and basis on which we can say you are either adhering to it or you are not, because we will have a consistent and singular base on which to look at that. For this Committee it is important that we would get a timeframe in terms of that. We know it is difficult for you to commit yourself here, but unless you give us some sort of commitment it is not going to assist you in terms of pressurizing the Presiding Officers to make sure that we deal with the necessary speed relating to this. We cannot just accept that since the PFMA was adopted that the relevant people in Parliament were not aware that there were some aspects that did not cover the accountability of Parliament or the financial management on this side of Parliament in that particular context. So we would really want to from where you are sitting get an indication whether we are talking about the next two or three months, or whether that draft Bill will get to a relevant parliamentary committee within the next year? That is what we as a Committee would want to look at. We want that type of commitment from you to give us a broad timeframe in your understand as Accounting Officer for Parliament you are going to make sure that we get that Bill through Parliament within the next year or three, so that we know, as SCOPA, what we are looking at.

[Mr S Mfenyana] I do not think there is a fear of Parliament not complying with the provisions of the PFMA. Section 33 of that Act does indicate that if there is any inconsistency between the PFMA and any other Act, then the PFMA ……………. It. We are, in fact, complying with the PFMA. We are merely saying that to ensure that the Parliament and its role has an oversight institution over the Executive and because there are provisions within the PFMA itself for Parliament to have its own Treasury, then we need to set that in place. There is absolutely no fear of Parliament not complying with the PFMA in the current situation.

[Mr B Kannemeyer] I am sure some of the other members that has got questions relating to that specific aspect may follow that up, because I think our preparation we certainly got an answer or two that actually says that the PFMA is not applicable to Parliament. So that is the type of one that we were worried about. I think we can live that. I think it is still the question of the timeframe. Let us say that we allow the Accounting Officer to interact with the Presiding Officers and come back with a timeframe to the Committee, so that we can then have that type of follow-up. I think that is the least one would want out of this engagement. I do not know what your ruling on that would be?

[Chairperson] I think that will be the correct approach. I think the PFMA is very clear, as the Secretary indicated in the end, it is as far as any other legislation - if there is a conflict with the Privileges Act. I think the interaction is the correct route.

[Mr B Kannemeyer] This question relates to page 16, and this comes from the reply to the question on the Fraud Prevention and Detection Plan. According to the reply on the establishment of the Fraud Prevention Plan during questions that we have asked you on the 1999/2000 financial year, you stated that donor funds from the European Union (EU) have been earmarked for the establishment of the plan and that is was then supposed to be completed before 31 December 2001. But on the follow-up question for the 2000/2001 financial year you now state that Parliament has applied for donor funding to develop the plan which is anticipated to take place within the next few months. What is the actual situation, because on the one hand the impression is created that funds have been secured already sometime last year and the plan would be finished by December 2001. Now we get the impression that you are still trying to secure the funding. What is the timeframe to get a Fraud Prevention and Detection plan in place?

[Mr S Mfenyana] It is indeed true that at the time when we made the response, we were securing funds and we were going to use our Internal Audit, PricewaterhouseCoopers, to carry out the project. When we submitted the document for approval and for funding, the EU, to whom we are applying for funds, they have conditions. They said they noted that there was no tendering, because the amounts are quite high. According to their rules we should have had at least three service providers to select from, but we had simply thought that we should allow our Internal Audits, who have been running with most of the projects of this kind, to deal with it. So they then rejected our application and insisted that they would want to see a project which has been tendered with at least a selection from no less than three service providers. That is the process in which we are involved right now. The tendering has been done. We are in the process of finalizing the …………….., so that we complied with the rules of the EU.

[Mr B Kannemeyer] Whilst you have mentioned Pricewaterhouse-Coopers, a number of departments also make use of external auditors to assist in the internal audit function. Currently our internal audit function in Parliament is outsourced to Pricewaterhouse-Coopers. Do you view that as a permanent arrangement or whether you are applying to make sure that we develop our own internal audit unit? If the plan is to move to an internal audit unit in-house - What is the process with PricewaterhouseCoopers to ensure skills transfer to people in Parliament itself?

[Mr S Mfenyana] To start with, yes, we have outsourced, but in the meantime we have also started to prepare for having our own in-house internal audit. In pursuance of that we have recruited somebody who would be the advisor to our Treasure at the beginning and then finally it does become our own, but be also an internal auditor. Mr J Harilal is our Treasury Advisor as well as the Internal Audit. We are interacting with PricewaterhouseCoopers and we are going to work out the process of transfer. That we can report later as we progress. The process has started.

[Mr B Kannemeyer] By when do you see Parliament having its own Internal Audit Unit?

[Mr S Mfenyana] The contract with PricewaterhouseCoopers of three years is still running for the next two years. So we expect that at the end of this Parliament, in the new Parliament we should be able to start with an Internal Audit.

[Mr B Kannemeyer] I have questions relating to the Chief Financial Officer (CFO). In reply to some of our questions you have indicated that a new CFO will assume duties on 2 May 2002. Have that happened? We want to follow up on the wording of your reply, because you have indicated that you have identified a suitable candidate. Was that identification through the normal advertising in short-listing into the processes or whether the identifying was through other means?

[Mr S Mfenyana] I am happy to say we have met our deadline of 2 May 2002. We do have a CFO in the name of Mr Harry Charlton. The process, through experience, now especially for such proofs, we had in October 2001 thought we had find somebody. Unfortunately, that person resigned in December 2001. So it became clear even in that process that simple advertisements will not get us the type of people we want, so we did what is referred to as head-hunting. We had a sufficient number of candidates. A proper panel was set up which interviewed the candidates. The final short list was about six and out of that we were able to come out with the person who we have now employed, Mr H Charlton. I could also mention that in that …………… there was even a Presiding Officer.

[Mr B Kannemeyer] The question around the performance contract, I am sure that would be followed up and we would be kept informed about the performance contract with the CFO. In the matter relation to operational procedure manual on page 17, question 8, the reply to question 8. The question of dealing with unauthorised, irregular, fruitless and wasteful expenditure to ensure that we have got a preventative strategy for that. With the aspects indicated is a production of an Operational Procedures manual, the last bullet under 8(a). We strongly support that. We think that is the most critical element in ensuring a good control environment to prevent unauthorised, irregular or fruitless expenditure. Could you inform us about the timeframes that you have set yourself for that operational manual? Is it already in place? If it is already in place, that would be fine. If not, we would want to find out what is your own timeframes for when you see an operational procedure manual to be in place to avoid occurrences of these types of expenditure.

[Mr L H Klassen] The production of procedure manuals we consider as an integral part of the Fraud Prevention and Detection Plan which, in first, is the risk assessment, evaluations, documentations and thereafter also production of manuals. We have set a timeframe to have that done subject to approval by the EU funding, which we are pretty confident we will get. Risk assessments will be done by the end of June 2002. Procedural manuals should be in place by the end of August 2002.

[Mr B Kannemeyer] I was just wondering, would it not be better suited if we say the whole question of a proper control environment, Fraud Prevention and Detection and your prevention and detection plan, should we really make that dependent on foreign or donor funding? If it is so important in the administration and running of Parliament, why did you make that dependent on foreign funding? Should we not budget for that? What if we do not get the money or if it is delayed, as it has been? What was the thinking on that?

[Mr S Mfenyana] Over the past five years there was a whole national project with the EU and Parliament had a slice of that. It was quite a huge amount, somewhere around R80 million. The programme has run and it is now in its last stages - phase 6. It is about to fold up in the second half of this year. It has been important that we demonstrate, and I think we have ably done that, and that there was a need for this assistance and we are using it as it should be used. This project has even the blessing of the EU itself. They appreciate its importance. It was only a technicality which made them to say - please present it in the proper way, but they fully support it. So we do not think that there is a risk of it not being approved. We are not entirely saying that we have put all our eggs in that basket. We would find other means if the worst came to the worst. The funds were simply there and meant for this type of activity.

[Mr B Kannemeyer] On page 17, 8(b) - one of the incidents of your unauthorised expenditure involves salary fraud of about R20 000 that was detected during the year. You have reported to us that the official was found guilty and dismissed and that Parliament is now in the process of instituting a criminal claim against the official in question. Has progress been made on that? Did you proceed with the criminal charges? What steps have been put in place to prevent recurrence of what led out to that salary fraud?

[Mr L H Klassen] The case has been handed over to the Police and they are following up on that side. That is both for the criminal and civil side recovery, if at all possible. There is other staff in the office now and proper segregation of duties have been put in place. What happened in the past was that the Salary Section was allowed to do certain approvals for the payment of allowances. We have now taken that action away from the Salary Section and given it to the Human Resource (HR) Section. So it is HR that will initiate these deductions and Salaries will follow-up. So there is proper segregation of duties to prevent a re-occurrence of a similar nature.

[Mr B Kannemeyer] On page 19 is a reference to question B7. According to the reply that we have received - the Stock Control/ point of sale system is still to be implemented to improve the controls in the Catering Section. Mr P Gerber will later speak more on the Catering Section. Could you inform the Committee with timeframes that you have set yourself on the implementation of this Stock Control/point of sale system?

[Mr L Klassen] The evaluations of the system have been done. We know exactly what it is that we do want. We have gone out on tender. We have received tenders and it comes to an amount of approximately R1.2 million. What we are looking at is the availability of funds in this year (2002), because we did budget for it in the next year (2003/2004), but if funds are available during this year (2002) we will certainly acquire the system this year. If not, then we have to get it in next year where we have budgeted for it.

[Mr B Kannemeyer] This is the one where we are saying that currently there is not correlation between the amount of the stock or goods that leaves the store room and the number of meals served. Is that the one we are talking about?

[Mr L Klassen] Yes. The system that we want to acquire for Catering is an entire stock control. Everything that comes into stock, the purchases of catering stuff, the store's controlling of the stuff, the issuing of stuff from the store to the catering section, right down to the point of sale controls where you know what the price of food is - a costing system for the price of food. We know exactly what the price of food is and what we are selling it for. We calculate our process on that and control it with stock. So it is a complete system which is being used by most big places. We did go to Grand West and Mount Nelson to see what they are doing and we are looking at the same type of system for Parliament.

[Mr B Kannemeyer] On page 17, question A5 - according to your replies received the Audit Committee evaluated the financial statement for the 2000/2001 financial year. Why was the Audit Committee's evaluation of your financial statements was not included in the Annual Report of Parliament?

[Mr S Mfenyana] As we indicated in our response, the statements was submitted on 31 May 2002 for audit purposes. We are saying that since this was the first time that the financial statements had to be submitted in the new format to comply with the PFMA, the Treasury required certain changes which would be acceptable for audit purposes. And so the corrected set of financial statements were signed on 29 June 2002 and resubmitted for audit purposes on 18 July 2002. So originally we were within the timeframe, but because it was a first experience and certain things had to be done, and I think Treasury also accepted the delay in good faith. I am made to understand that Parliament was announced the first three between other departments who have been able to comply with this preparation of this Report in this way. So although we may have had some delays we seem to be up there with the best of them in this regard.

[Mr B Kannemeyer] We take note of that. In our interpellation one of the members indicated that in terms of the PFMA your Audit Committee is supposed to evaluate your financial statements. You replied that they have done that. And that their evaluation of it should be included in your Annual Report, because it is like almost an independent view from your own assessment of the financial statements. Was there any specific reason why that was not included in the Annual Report, not the financial statements?

[Mr L Klassen] There is not a specific reason for it. I think this was the first time that we have prepared an Annual Report in this manner and it is an omission on our part that that was not included.

[Mr B Kannemeyer] That concludes my section.

[Chairperson] Are there any questions from other members regarding this matter?

[Mr M Lowe] Could I ask one question that goes to the non-establishment of the Fraud Detection and Prevention Plan? I am not satisfied with the response. You have indicated that you have not managed to establish it because you are waiting for donor funding. As Mr Kannemeyer has said, this should be a priority of your Department. Why has it not formed part of your budget in the past? Surely you should budget for that first and other things can come out of donor funding if you expect to receive it. I also note there is total unspent funding of some R14 million. Why is that unspent funding not being immediately allocated to a Fraud Detection Plan? I am just concerned that there is not sufficient concern or haste being put by the Department to get this matter in place. It is an integral part of the functioning in your Department. I am not satisfied that you are reflecting that concern. It should, in my opinion, be one of the number one priorities. Could I have a response?

[Chairperson] I can just indicate with regard to the unspent funds Ms Mothoagae is going to deal with that. You can deal with that first part.

[Mr L Klassen] We certainly consider the implementation of a Fraud Prevention and Detection Plan as a priority for Parliament. As the Secretary has indicated, we also have to use up the available funds from EU. This is why we never anticipated that there would be this type of problem with the EU. If they did not have this requirement the plan would certainly have been implemented with funding from EU, instead of us going to National Treasury for such funds. The cost of the project is about R600 000 to R700 000. Certainly, if there are problems with EU then we will fund it out of parliamentary funds, but with the availability of funds from EU it is a first choice to use those funds which will not be available to us next year where as Treasury will be there. The Fraud Prevention and Detection Plan, and this is why we went to our internal auditors, does not stand in a vacuum. We have internal auditors, for two years, who have already documented many of Parliament sytems. Procurement and Catering has been documented. Many of our systems have already been documented. So it is the production of manuals from these documented systems. We see that as a roll-in plan. It is not as if there are no systems in Parliament at the moment. It is not as if there is no measure for Fraud Prevention and Detection, but it certainly is one of our priorities to formalize it and to have it in with whistle blowing etc as soon as we can. Like the Secretary has said, we are confident that it was rejected because of technical reasons by the EU, but there will not be a problem with putting it in within the foreseeable future within the time limits that we did set.

[Mr M Lowe] I accept your reply. With respect, we are only talking R600 000 here. It just begs the question once more that it really should not be the money out of a budget of R266 million. Although everything might be in place, surely it is a priority to find the R600 00 and get that finished, because it really is just the cap on the edge of a process that should be there. To use the example we are waiting for foreign funding does not hold any water, because it is not the foreign with respect to that R600 000 out of R266 million. Can I ask for an undertaking that it receives a priority to find the money, even if you roll it across and get it finished? It really is just the cap on what should be a very important internal mechanism.
[Chairperson] We go to the roll over of unspent funds.

[Ms K Mothoagae] My first question around roll over of unspent funds is on page 40 of the Auditor-General. It was indicated that the amount unspent first was going to be made to Treasury and there is a copy to that effect that Treasury reflect that Parliament is not expected to surrender that money. How was this money eventually spent?

[Mr L Klassen] During the current year 2001/2002 Parliament was struck suddenly by major increases in fuel cost and air travel cost. In the current year we have exceeded our budgeted expenditure on the cost of air travel, in particular, and reimbursement of travel, motor vehicle fuel cost and in respect of member's claims also. That is where the major portion of that R12 million of the R14 million was used to make good for the sudden rise in fuel cost and air ticket costs.

[Ms K Mothoagae] If then the sudden rises of prices, I am not sure because this money was not spend and there was just rises. So if there was no money that was in the coffers what could have helped Parliament at that stage?

[Mr L Klassen] If I understand the question correctly, you are saying to me, if we did not have these roll over funds how would we have funded these? The normal procedure would have been for us to apply for money in the Adjustments Budgets in October. We would have asked for money from National Treasury.

[Ms K Mothoagae] While we are still on this, may I just find out from Mr Klassen, because I think there is a Report from PricewaterhouseCoopers that Parliament is still struggling to calculate kilometers for entries from their homes to their constituency and from their constituency to the nearest airport. It was identified as a weakness. Does this mean also that this was part of the problem in the rise of this, because it is still not addressed?

[Mr L Klassen] I do not consider that to have been a reason for increase the reimbursement of travel cost. PricewaterhouseCoopers were querying the calculations that we were doing and their opinion of how we should be doing it. In the Finance Section of Parliament the reimbursement of member's claims is done in terms of a set of rules. L19 is the circular in which there is determined how members will be reimbursed for all cost. We are operating in terms of L19 which is not necessarily of how they think we should be, but we have got to operate in terms of that circular which is approved by Joint Rules.

[Ms K Mothoagae] How much of the unspent money is still left and how is it going to be spent? Are we anticipating the same problem in this financial year?

[Mr L Klassen] The unspent portion of parliamentary funds for that particular year was R14.4 million. Currently our estimate of over-expenditure for the past year is in the vicinity of R12 million. So there is approximately R2.5 million money which has still not been spent. It is really the parliamentary Treasury which is the Presiding Officer who decide how that R2.5 million should be applied.

[Mr Kannemeyer] I think it will be useful if we can see, particularly the R9,7 million which was in your reply indicated as a duplicate allocation, how it came about? You then replied to us that there was a duplicate allocation by the Budget Committee of Parliament where it was discovered in the administration process and separately allocated as well. Then you indicated that that would be used in Parliament for other ordinary things. Can you give us a breakdown of that? Not necessarily now, we can get that in writing. I would be interested to see how did members' claims and increased travel cost over that period amount to something like R10 million or R12 million. It would be useful.

[Mr L Klassen] I can respond to that one right now. It is during the 1999 Parliament we had what was commonly known in Parliament as the Cronje document. We had a MP, Mr Cronje, who came up with a beautiful calculation of what money Parliament should be paying to political parties, so that that party can run, also that each member within the party can run his office in Parliament. That document was presented by the ANC adopted by all parties, and that formed the new base on which party support was being paid over of. Monies were paid off by Parliament to parties for the support of members. Included in that documentation was an amount, it basically said Parliament should pay over to parties amounts for telephone usage of R3.7 million. That was telephones, cell phones etc; R4.3 million for computer costs; R1.5 million for research and then R267 000 for liaison, which came to a total of R9.9 million. At the same time within the parliamentary Budget the Secretary to Parliament budgeted that this procedure for member's telephone claims would continue. In other words, members would submit claims to Parliament and then members would be paid. Instead of giving the telephone money to the party to give to the member, members could still come and claim. And, also, members were issued laptops by Parliament. So there was no need to give money to the party to give to members to get laptops, telephone cost and research, because Parliament budgeted for research, telephone cost and computer cost. It would have been a duplication to allow members those facilities and also take that same money and give it to parties to distribute to members. It was a duplication and the Presiding Officers allowed us not to distribute that money to parties. That money was then kept over and formed the basis amount of this unspent R14 million which was then subsequently used as I have previously indicated.

[Ms K Mothoagae] I have a question on committees, because I think it falls under programmes of legislation and oversight. How are these moneys allocated to committees? How much is each committee getting, because some committees are underspending. Their employers use all the money. Can we get the whole distribution of the budget to committees?

[Mr L Klassen] Over the years committee chairpersons have been asked by the Chair of Chairs to submit their budgetary requirements and every year it becomes a very difficult item and eventually there is a decision to give each committee the same amount. However, that is the budget allocation. We do not restrict or severely limit the committees because of the difficulty, but we do have rules controlling the expenditure. The Presiding Officers have delegated the Chief Whip of the Majority Party to approve committee expenditures in terms of travel etc. So where there is the budgetary allocations to these committees at that particular stage was not totally defined, the control over the expenditure was very limited, because that had to be approved first by the Chief Whip of the Majority Party.

[Ms K Mothoagae] I think our problem will be solved as committees, because each time committees are asking for money. We are always told that there is a restriction of unknowns allocated. I think that will be followed-up with the Presiding Officer. Around the Constituent's Allowances and financing of staff of political parties - from the reply we received new rules have been drafted and no rules have yet been drafted according to the auditors. I am not sure whether this covers the question that was referred earlier on around procedure manuals. Can the managers respond?

[Mr L Klassen] We drafted a new set of rules governing the payment of Constituents' Allowances to parties. The new rules ensures that we comply with the relevant section of the PFMA, which I think is 39.1(j). So the new rules have been clear on how and why Constituents' Allowance are paid for; how it will be spend; who should be controlling it; the requirement of an audit of these funds and the appointment of an accounting officer for the management of these funds. This set of rules was presented to the National Assembly Rules Committee; from the National Assembly Rules Committee it was referred back to parties for consideration, and political parties are now to come back to the National Assembly Rules with their approval or amendments or any changes which they want to see on these rules. At this point of time we are waiting for a return of these rules from the National Assembly Rules Committee.

[Ms K Mothoagae] How soon ago was this?

[Mr L Klassen] I think it was presented at the previous meeting. I know the National Assembly Rules Committee met last week, but these rules were presented towards the end of the last meeting that they had at the end of last year (2001).

[Ms K Mothoagae] This again is taking us back to the Presiding Officers. We will have to follow it up. With regard to the Constituents' Allowances - the political office staff payments are done on Multidata and not on PERSAL as all the salaries of Parliament. Why is that?

[Mr L Klassen] With respect, I think it is an issue for parties. Parliament no longer pays the salaries of staff working for parties. In the revised Party Support Funding that money is paid over to parties and they pay their staff. I do not think that political parties can use Parliament's PERSAL system for that reason. I think that is why they have to make their own choice of which system they would use to pay their staff.

[Ms K Mothoagae] If that is the case, so this money is allocated to representation of parties, the more numbers we have in Parliament the more staff we can have and you can do anything. Can you clarify that? I understand it is for parties to decide on that one. Is it not open to anything by anybody?

[Mr L Klassen] It is not as if they can do anything. They can do anything within the rules. We have got a set of rules of how that money should be voted to Party Support and Constituents' Allowance. Like I said, this Constituents' Allowance we are waiting for the new set of rules to be approved by the Rules Committee. Those rules are very clear on how that money should be spend and who is in charge of that money.

[Ms K Mothoagae] If the rules are applicable, there is somewhere where the auditors for Parliament indicated that we are still using the 1994 set of Rules and whether the parties will just submit just a financial statement to get new funding. The PFMA is still left to come to Parliament, so we are not sure what is happening. That is worrying.

[Mr L Klassen] At that stage we was still using the 1994 set of rules and the PFMA have not been in yet, but as soon as the PFMA came in we drafted the new rules, which ensures that compliance for payments to third parties are being adhered to. These are the new set of rules which we are awaiting from the National Assembly Rules Committee's approval, but we are applying it in the meantime as if it is applicable in terms of the PFMA.

[Chairperson] In your one response regarding the Committee Section regarding the approval of expenditure - you indicated the delegation from the Presiding Officer to the Chief Whip - what in your mind, from a control and accounting perspective, could that system be improved? If so, what would you suggest from your side?

[Mr L Klassen] We would like to respond in writing to that. I certainly have to give it some thought before we throw an answer off the cuff.

[Mr B Kannemeyer] I was just wondering - all political parties staff - it is correct now. I understand that you have got a formula in which you work out that. If a party has got x members, there is a formula, they get so much money. Is that more or less correct? And they then decide whether they appoint two people at this salary or twenty people at that salary. Is that how the system currently works?

[Mr L Klassen] Yes, we have a formula which we decide how many staff and secretaries there should be for x number of members. So we calculate the payment to parties on a formula used by parties basically saying - if we had to do it this is how we would have paid - and we pay it on that basis which was approved by the voted Committee and the Rules Committee. When it comes to the party, the party is not compelled to do exactly as we are saying. So if we say to the party we give you money to employ a supervisor at a R100 000 and that party decides that they will use that R100 000 and employ two people at R50 000, we do not dictate to the party that they should do any differently. Right, we base our payment on our formula. If a party decides to do differently, as long as it is within the rules and they are not breaking any of the rules, we accept it.

[Mr B Kannemeyer] The PERSAL is for parliamentary and departmental staff. That is understood. The Multidata system that has been referred to, that we have picked up, is that run through Parliament on behalf of their political party? How does that work? My understanding is then that none of the payment of party political staff should go through Parliament's system.

[Mr L Klassen] Multidata, it was with the change over when the staff went over. It was not just that. It was the ANC and there were about three or four parties who at that time told us that they have not got systems in place yet, if we could assist them with running their salaries. We then went on their behalf to Multidata and we did their payments on their behalf. We paid their staff and recovered it from the parties. We first gave them the Party Support Fund and they will have to give it back to us until they could set it up and take over and implement their own systems. I do not know which systems they are using now, but it was an interim measure to assist parties.

[Mr B Kannemeyer] So all parties are running their own systems now?

[Mr M Lowe] With regard to payments for the support staff of political parties, notwithstanding the fact that you now have rules in place and political parties are left to a degree to their own devices, do you have any control management or insight into whether political parties are employing staff in terms of the proper conditions of employment - that they are paying proper salaries; that they are correctly deducting UIF, PAYE, or is that also left to the devices of political parties? Secondly, it goes to the payment of Constituents' Allowances. Here you indicated that there are some rules but that yet to be approved. Are you saying that at the moment you have no knowledge or no control over how Constituents' Allowances are used by political parties once they are paid across? If the rules, such as they are, are not currently approved or implemented - can you be sure that political parties are using those monies to run constituency offices and that they are not being used for political purposes; that they are not being paid to repay debt or whatever? How would you be able to track that and manage it in the future as well, but more particularly what is happening now and possibly in the past?

[Mr L Klassen] If I can respond to the first question about staff of parties - we do put out a requirement to political parties to lodge copies of their employment contracts with ourselves. That is particularly to make sure that they are going to pay reasonable salaries etc. We do ask political parties to lodge contracts of their staff with ourselves. The parties are the employers, but that is the kind of control that we try to have over them.

[Mr M Lowe] Can I ask if all political parties have lodged those documents with you?

[Mr L Klassen] I do not know if they are all lodged at this point in time, but we certainly when we started off the process we insisted that all those contracts be lodged with us. We would have to check on that one. On the second question - payment of Constituents' Allowances - as I have said, new rules for Constituents' Allowances are very specific. But even in the old rules we had the rules debt determine how Constituents' Allowances should be spend and what it should be spend for. It has always been a requirement that the auditor statement should clearly tell us that those funds were used for purposes as determined in those rules. When audit statements did not dictate we have gone back to the auditors and said put this in your certificate. We require it.

[Mr M Lowe] Can I ask if you are satisfied that all Constituents' Allowances are being correctly used for the purposes they are intended?
[Mr L Klassen] Yes, we are satisfied that we have got Audit Reports for all those Constituents' Allowances that they have been used for those purposes.

[Mr L Chiba] In connection with the formula - the size of the political party is very important, because that determines different needs for different political parties. If you had a standard formula for all political parties, irrespective of their sizes and needs, is it not true that this would advantage or disadvantage some political parties?

[Mr L Klassen] The basis of the formula is per individual Member of Parliament. That is how the document was presented, basically saying for a Member of Parliament this would be his requirements. Then we multiply it by the number of members in the party. We are satisfied that we are catering for even the party which only has one member it is adequate and the party which has more members obviously has more flexibility. They have not got more money, but they have got more flexibility than the party with one member.

[Chairperson] We go to staff bursaries.

[Mr M Lowe] On page 31 in the Auditor-General's Report, section 5 in the administration section - you indicate there under staff bursaries that you awarded 73 new bursaries in 2001, and of those 73 - seven for the completion of matric and 66 for the completion of other tertiary studies. There were also 78 other bursaries allocated on a continuing basis, I would assume from previous years. You have also indicated in your response that employers are obliged to train and empower employees beyond the organisational requirements of the departments. Can you tell me - of those 73 bursaries awarded and also for the 78 bursaries allocated on a continuing basis - how many of those are for empowering, skilling and training people beyond the organisational requirements simply as their job?

[Mr S Mfenyana] We do have a document which spells out the composition of our Bursary Committee and the guidelines as to how they should operate. Within those guidelines there is, for instance, provision first for those who fail that we would not continue to provide a bursary. Also, that for those who undertake, especially at tertiary level who get bursaries from Parliament, there is an arrangement whereby they are expected to work a certain period after completion which is spelled out. It says "an employee to whom a bursary is awarded in terms of the scheme is required to sign an agreement to remain in Parliament's service for a period of one month for every R500 or part thereof". I am saying there is that arrangement. So within that I would have to go and get the exact figures as to how many are at matric and how many are at tertiary level. There are those clear guidelines as to how the bursary functions. In each committee there is representation, not only of management but also of the unions, so you can be sure nothing untoward happens there. At this point that is about broadly what I can indicate.

[Mr M Lowe] Let me assure you I do not think the Committee is concerned that anything untoward is going on, far from it. What we would like to see is that in allocating bursaries you, firstly, as you have indicated you do at times, at what the job description is of the person receiving the bursary, so that they can better perform their functions. Also that you look at awarding bursaries so that they can grow into perhaps higher grades or levels of skills and perhaps skills elsewhere. But having said that, I also need to ask what further steps could you perhaps be taking to ensure that once you equip people with these new skills you use them in the Department? That they do not just take flight, move on elsewhere, which we have seen to a degree happening. In other words, we are concerned your Department is picking up the cost of further educating employees only to find them move off either to other departments or, frankly, out of the Service completely which seems rather unfair. It might be skilling individuals, but then the taxpayer is paying for that and there are other ways of doing it. You save a month per R500. Are you thinking about other ways to attract and keep those people? Perhaps to offer them better career path moves into other positions or to keep them within the Service surely, even if it is outside the offices of Parliament, but within the Service, so that we keep making use of the investment that we have made. That is the assurance that the Committee looks for.

[Mr S Mfenyana] The primary objective is to get our staff to improve themselves in the areas where they are operating. The Committee tries to follow that line. However, in keeping with the broader purpose of assisting the development of our staff, we do not penalize them or narrow them to exactly what they are doing. If they can undertake studies which are still needed within the institution, we do allow that. I think a dramatic case as to how we do absorb our staff was when we first had the survey done in 1995 by Deloitte and Touche which the findings showed that we had over employed in Catering and in the Service Officer's core. We needed to reduce. We had staff who had been improving themselves and some have qualified and got matric. We then created posts for administrative assistants and a lot of those who had the proper qualifications were converted from Service Staff or Catering to administrative assistants. That opened up career paths for them. We are continuously looking at ways in which we can encourage staff to follow certain career paths. We have started implementing our Performance Management System and that is going to assist us even further in that direction.

[Chairperson] I have a general question in relation to that. What is your lost rate per year of your total staff, the percentage, that maybe leave during the year and you have to employ new duly recruited staff?

[Mr S Mfenyana] Are we talking about staff turnover?

[Chairperson] In terms of your total staff complication - what is the variations or percentages during the year for one year? If you look at the past five years, what is the loss of staff who left the employment of Parliament?
[Mr S Mfenyana] Over the five years - our staff overall - there has not been serious fluxuations. It is true that there is a regular flow of outgoing and recruitment, but we have not really experienced dramatic changes. Yes, at the senior management level the flow seems to be much more. We had to content with the fact that you are not alone. For some reason the corporate world seems to believe that people who work in Parliament can serve them better and they are willing to pay far more than we can afford to get some of our people who had been trained.

[Mr B Nair] If you look at the section dealing with finance and administration, I think 6.1.1 deals with this staff mobility and staff turnover.

[Chairperson] We move on to the disposal of equipment with other items.

[Mr P Gerber] My first question is - 361 desktop computers and 414 laptops were purchased. Taking into account the number of members of the National Assembly and the Council of Provinces, how many computers were purchased for support staff? Could you inform the Committee what happened to the old computer equipment after the amount of R23 million was spent? Could you inform the Committee on the process regarding maintenance and upgrading of these computers? Some problems were experienced with passwords of computers. Could you inform the Committee on the steps taken to enhance the security on computers and equipment?

[Mr L Klassen] The 414 laptops purchased were for all Members of Parliament. If you take 400 National Assembly minus the ministers and plus the 54 from NCOP then you get to 414. The desktops were for parliamentary staff. We do not supply support staff with computers, because we do in the Party Support Funding money is given to parties to acquire computers for their staff. Old computers are dealt with in terms of Parliament's procurement procedures. We have a process for disposing of old computers. Old computers is a major problem in that before we can dispose off an old computer the license agreements require us to remove all software. If you remove software from an old computer you will appreciate it that it is worth nothing, because modern software cannot be put on old computers because of memories etc. We have proper procedures for getting rid of them. The whole lot is basically going out to scrap dealers who melt them up to get lead etc. They have no resale value. We as Parliament have tried to give them to schools. We have tried to give them to the Department of Correctional Services, but to give anybody a computer without software is really a no thank that we have got for them. The process for maintenance and upgrading of Member's laptops - we do not upgrade Member's computers. Members were given computers and the rules are saying that the Secretary to Parliament is responsible for the maintenance of those computers. The Secretary is however not responsible for the insurance aspects of the computers. Members are requested to include it in their own insurances, because the cost of trying to ensure that laptops for Parliament is more expensive than the computer itself, if Parliament tries to ensure them. As for passwords - passwords on returned computers is a major problem, because Members are given computers and Members to secure their data do put passwords into those computers. When Members leave and those computers are returned the cost of removing that password, if we cannot contact the Members in the cases of deceased Members etc, is almost the cost of a new computer. It is in the vicinity of between R8 000 and R10 000. So it is a problem that we do have which we are addressing in saying to Members please, if you put in a password, try to remove that. The last question is security on computers. I think I have covered that that the responsibility is with Members to ensure the safety of their computers.

[Mr P Gerber] You said that you are disposing of these things through the proper procedures. These procedures - are they a State secret or where are they advertised? So few people know about that. Secondly, in the last couple of years there was a lot of clothing that service officers used to wear. Was that also done away in the proper procedures? Was it sold? Where was it advertised? Also regarding the tapes and the amps when it comes to sound and vision. There was in the basement and a couple of dark rooms yesterday some magnificent antique furniture that is lying around that any antique dealer would give anything to buy and to restore. So regarding these proper procedures I would like more clarity on.
[Mr L Klassen] As I have said it is no State secret on where it is disposed off. It is documented in Parliament's procedures how to dispose of redundant computer equipment etc. In the case of computers we particularly got an auction here in to try and dispose for us. It is advertised also in Parliament when these auctions do take place and the stuff is put out there. The manner of sale is being advertised on the notice boards of parliament when it happens in Parliament. Clothing - there was old clothing coming back from many years ago. The Secretary to Parliament has donated that to the Salvation Army or one of these charitable institutions, because we considered it to have no resale value other. As for antique furniture - for all furniture we have not sold any of Parliament's furniture. There are two piles of furniture at the Maitland stores of PWD, which they have given to us, where there is completely scrapped and broken furniture, not antique furniture, and another pile of stuff which we are currently looking at to see if there is anything that we can repair out of that. As for the basements of Parliament - we have secured a new storage which is underneath the SARS building across the street. We have a huge storage area where all furniture is now being taken to, so it will no longer be in the basements of Parliament. That is the area where the furniture will be kept. There is no intention and at this stage we have not got any approval to dispose of any antique furniture. There is beautiful furniture around and we are taking proper storage measures for them.

[Mr P Gerber] I have been here for nearly three years and I have not seen a notice of any auction or sale. It will be good if one can make it a bit more transparent. I think it will be a good suggestion from this Committee if you do get in a antique expert to draw up an inventory of the old furniture and things in this Parliament that is worth restoring and keeping in tact, so that we do have an inventory on that. It will also be interesting to have an evaluation of that. I think one can do with a proper thing like that.

[Mr B Kannemeyer] On the computer software - I want to concur with Mr Gerber. I have been within the same time here. I cannot recall having seen the advertisements for the resale of computers and those things. I want to suggest - the President in his residential address at the beginning of the year made an announcement that Microsoft has indicated that they were going to supply all schools with Microsoft software. If you link that with the computers that we do away with then it becomes something much more useful. There are probably lots of Members in terms of their own constituency work that may find a way of looking at some of these aspects that one can look at. I think I would particularly want to suggest that Parliament follow-up with the President's announcement of Microsoft's willingness to supply schools with software and look at that.

[Mr M Lowe] I want to align myself with all the comments that have been made, particularly from Mr Gerber and Mr Kannemeyer. Can I just ask, firstly, you have been in pains not to tell us what the procedures are? I accept it might be time problem. I am a little concern that you just keep saying there are proper procedures in place. I think we need to, not necessarily here, know what those procedures are. I too maybe have not looked in the right places, but have not seen any notices advertising the computers that are going to be available for sale. I also want to question the definition of what an old computer is. I accept an old computer in the real sense of old has no real market value. Are we talking about a piece of equipment that is one or three years old? I do not know, because I simply cannot believe that even a three-year old pc when you take all the software off cannot be reloaded with software and be of extreme use elsewhere. The point has been made. I think we need to know more about this procedure and make sure that it truly is made available. I think along the lines of what Mr Kannemeyer has made about the President's announcement about Microsoft that needs to be looked at. The second point is met with some degree of frustration. With all this furniture that is available and you never throw furniture away, could somebody explain why after seven months in this fine institution I am still waiting for furniture, as the Chairman can attest to in my office, notwithstanding letters, phone calls etc? Now I hear there is all this furniture in the basement of my building. What is going on?

[Mr L Klassen] The procedures are really no State secret. The basis of selling any equipment is to the highest bidder. The Department has not got much to sell. We do not really sell things, but when we do sell that is our prime basis that it will be sold in an open transparent manner to the highest bidder. And auction tends to be the way that we go with it. When we are talking about these computers we are talking about computers which has been in this Parliament from the time before computers had hard drives and floppy disks. Those are the ones we are selling and we have been trying to get rid off. It is not as if we are selling computers which are three years old. I want to make a point about furniture. There is a total amount from all Members for furniture, but we have got limited budgets. We try and spread it as far as we can. If Members do want old furniture, I have furnished my office with furniture from the basement, from the basement you can tell me and we can try and see what we can find for you. I do think that is beautiful furniture.

[Ms K Mothoagae] My question is around the laptops. With regard to the training for the use of laptops - who is responsible that Members are all literate? It is still a problem. We still have some of us who are computer illiterate. So it does not assist much to have a laptop, because the training that has been conducted has been to open and close the computer. It is not much.

[Mr S Mfenyana] The training of Members falls under the Member's Support Committee. At the Joint Rules meeting yesterday the Member's Support Committee presented a plan. They presented a report on the training that we are doing and further plans for training of Members. So that is where that results. There has been several training. We do have a place where we have computers for training, but the programme is under the Member's Support Committee.

[Mr P Gerber] My next question is regarding the waste paper in Parliament. It states in your Annual Report on page 45 that Parliament received R12 000 for the sale of waste paper. Scrap paper dealers pay the bergies here 50c a kilogram. So a big institution like us should be able to negotiate a price of at least a rand. Let us take the 50c a kilogram scenario, then that means the R12 000 that this Parliament produces 24 tons of waste paper a year which is highly impossible. I have a ton of waste paper in my office. We have got 400 MPs here who produce at least 200 tons of waste paper per year, but even half that, it is 100 tons. Then you would talk of about R60 000. So somewhere, according to my sub A arithmetic, a lot of paper is getting lost. Are there scales for weighing these stuff when they go out? If there are scales, has the scales been serviced lately? Is the system of waste paper fool proof or fraud proof? Do you not agree with me that 24 tons of paper for this institution is a bit too little?

[Mr L Klassen] It is an area certainly that we ourselves are looking at at present. We do have contractors. We went out on a bidding process to get contractors to take away the waste paper from Parliament. The trouble with waste paper is that the prices fluxuate. They go up and down all the time. That is the one issue. Now to get a contractor for a year or three years to give a flat price, we probably will not get the best price at all times. The further aspect with it is just how far do we go with waste paper. Do we have our own sorting, because it is very difficult? There are different grains of paper. To get the best price for paper you first have to sort it into the categories in which it is. If you are a bergie and you get a pile this high, it is easier to sort it and do that. If you sell it to a contractor and you sell him two tons per week - are you going to sort it yourself first or what do you do with it? We are looking at the moment at our waste paper of how we should dispose of it. Should we continue to just throw anything in a bag and say to somebody to take it away or should we then employ people who will first sit there and sort it to ensure that we get prices? These are issues that we are battling with at the moment. We are looking into it.

[Mr P Gerber] You still have not answered me if you are happy with the amount of tonnage that is reflected if you think that is a true reflection of the weight of paper that has gone out? I would like to know where the bidding process is done? What criteria is used to determine what is waste paper? When is something waste and when it still can be used for something else?

[Mr L Klassen] With regard to the calculations - we are not happy that the monies that we receive for waste paper is what we should be getting. That is why we are ourselves looking at it to see why is it not more than what it is. Parliament has a Procurement Unit which does all the procurement of goods and services in Parliament. They have a specific set of policies and procedures on which they act. For the sale of waste we go out on contract. We advertise and we have people bidding ad contracting. That is the procedure that we are using in these cases. We do it by way of tender. It is very difficult to say what is waste. It is general, at the moment, whatever is in the bin and what has been thrown out of an office. That is how it is collected and put in a pile. At this stage we have not got a system to distinguish between different sorts of waste.

[Mr P Gerber] This is a Hansard of 1940. It is worth a wealth. It is even written in old high Dutch and a lot of people will pay a lot of money for this. Would you consider that to be waste paper as well? Or has something gone wrong because a lot of them have been dumped and they have been taken away by the company who takes it away to go and manufacture toilet paper and tissues? Seriously, there are big things wrong with what we are doing in terms of criteria of waste paper. Besides this, there are also nice Hansards of the new dispensation that are also thrown away. In my constituency I would give anything to have some of those send out to my farm schools and schools. I was just thinking that maybe Parliament can do a bit more to see that they distribute these things to schools etc. We are talking about literacy, but you cannot have literacy if you do not have anything to read. I would like to know who got this contract? Was it changed lately? How much is Parliament getting per kilogram? For how long is this contract?

[Mr S Mfenyana] Let me deal with the Hansards, the various types, the bound volumes and the soft cover volumes. What we did, there was before the question of a certain number of Hansards which are allocated to Members which was then stopped. We have tried to reduce the numbers which are now printed, but for a certain period there was an excess when we stopped the process. We then drew up a list of institutions and indicated to them that we had some excess Hansard copies. We worked out a distribution pattern. To our surprise some of the institutions were not keen to just receive excess copies. They wanted either sets for certain periods, but in copies that are not in sequence they were not interested in that. We did have some Members when it was known that we were disposing with the weeding process also in the library when it was discovered that a lot of space is taken by a very large number of certain publications. One particular issue had more than was deemed necessary, because we do keep a certain number for the record. So a weeding process has also been carried out in the library to dispose of some of those excess material. We had indicated to certain institutions whom we thought would be interested that there was all this material available. In some cases they said that they either had them or they would not need them if they were not in a certain sequence or a certain volumes. We did receive from some Members who made requests that they would like to receive copies. We did give to those Members who made such requests. The rest we disposed of. That is what has happened.

[Mr L Klassen] With regard to the contractor - I cannot remember the name of the contractor who has the waste paper contract. It was changed and we do change it on an annual basis. We do get contracts. I will to respond to the Chairperson the name of the person who currently has the contract, the price we get per ton and when we change contractors.

[Mr B Gerber] With regard to the Catering and the food - I mention these things because I am worried about a lack of a culture of saving in Parliament. If you go to certain overseas parliaments of various countries you will see above their switch lights that there is a little sign that says "save electricity, switch it off". If you look at our envelopes here, there is no stamp on it and it is not spoiled, but people write on them with ink just to send a document from one office to another office. If we can create a culture of just using a pencil then you can reuse your envelope again. The food in Parliament - I get the impression sometimes that a lot of good quality food are wasted and thrown in bins and given to pigs at the end of the day. Is there not a way that we as Parliament can lead in a process of maybe to see if we cannot make more of the good food that goes to waste here available to hungry people out there?

[Mr L Klassen] With regard to envelopes - you will notice that we prefer using envelopes which has a whole block of names, so that we can use the same envelope about fifty times. We do generally use those envelopes. It is unfortunate that sometimes people use blank clean envelopes as been stated by the Member. About the food - we have to distinguish between good food left over and scrap. Whatever is scrap - we have just changed the system. We do not send them to "pig drums" downstairs. We now have bins within the kitchens where throw away food is being thrown into and that is removed on a daily basis by waste tech contractors. As for food which is still edible - yes, we do send that food to charitable institutions. There is a collective central point which we send it to. It was centralized by the Baptist church of Durbanville. They have just changed over to somebody new now, but we do ensure that food which is still edible which can go out goes to the needy. We do not charge them for it. We do ask them to come and pick it up and it is being picked up on a regular basis.

[Chairperson] We move onto to our next and last item. it will be on the internal audit.

[Mr V Smith] Could you inform the Committee as to whether you have a procedural manual or not? In 1999 your internal auditors said that Mr Hahndiek does not have a procedural manual. Do you have it now?

[Mr L Klassen] In 1999 our internal auditors did a complete risk assessment of all areas of Parliament and it was identified that in certain areas and sections we need a procedural manual. One of them was in the National Assembly where he said there was no procedural manual for the processes taking place in the House. What we have now done is that an ex employee has been employed on a contract basis, Mr Peter Lillienfeldt, and he is at the moment busy drafting the necessary procedural manual for the National Assembly. That project should be completed within one or two months and thereafter a completed manual will be in place. Manuals have also been written or are in the process of being written in the National Council of Provinces. The other areas where they are coming short, for instance Finance, it forms part of the Fraud Prevention/Detection Plan. So whenever necessary we do initiate the writing of manuals.

[Mr V Smith] Can you explain to this Committee why it has taken us from 1999 to 2002, for instance, for the procedural manual to be finalised? I am saying it has been identified in 1999. And as I go through my questions you are going to notice that many things have been identified five years ago. We are still sitting today and the reports we are getting from the Management of Parliament is that it will be implemented in the future. I just want to have an understanding why is it taking us so long to implement internal audit controls generally. We will go to the specifics as I go along. The procedural manual is one example. We have identified it in 1999. You are saying to us now that an ex employee has been identified and it is going to take him two months to do it. Why the delay of three years?

[Mr S Mfenyana] Let us take the table staff, the Houses and the various manuals which should be annually actually be updated. We have various manuals like the Pronouncements of Presiding Officers; the Unparliamentary Language; the procedures in terms of a Guide to Presiding Offices etc. I got here in 1994 and since 1994, from 1995 we had this whole s……………. of Parliament which resulted in a restructuring exercise which took us up to 1997. It created a totally new structure in terms of the administration of this Parliament. We then had to try and get people to understand and operate within that structure. We created new units and sections which never existed before. We had to bring in people to learn those and get people to understand how they operate. We have just completed another re-organisation having looked at how we are operating and making changes. What I have done is this - over the periods, also I must mention it is very important, we have also embarked on a very intense affirmative action drive which brought in a lot of people who had no previous experience of Parliament per se, but they maybe had skills which could be useful, but they needed also to get an understanding of Parliament from within. In the process of all those changes some of the normal activity of continuously updating certain manuals could not be done partly because there was not sufficient time. During the recesses we were busy training. There was a fulltime programme for training staff. There was not much time for people to be sitting there and updating. We managed to proceed with whatever was there. So there are some "oldish" manuals at that. The major focus now is how to update that material. So whilst we were bringing in these new people we also had some people either going on retirement or resigning from the older staff who were more experienced. There has not been sufficient skills transfer or memory transfer. We are not making excuses. I am trying to give you a picture of an institution which has been virtually since 1994 been in a state of permanent changing. New people were coming in. Where it was possible to make due with whatever material was available and where we did not needed to go and update that manual on parliamentary language there was sufficient material. It is all kept, but there is no time to actually work it out into a proper manual. We are trying to look at all those aspects right now. We have used the availability of the EU funds to get either people to come in and assist us or contract some people to carry out some of this work. It has not been an easy period. Perhaps we are looking forward to finally settling down. This Parliament has never settled down since 1994. the latest activity of an integrated human resource development plan, hopefully, will stabilize sufficiently the workings of our Parliament. Without undermining what you are saying that there seems to be a long time we take before we can get manuals to be prepared - you do need to have a sense of the lot of changes which have been occasioned by the need to bring in people as representative as possible - to get skills, even the skills, some of them when we get people from private businesses or government departments, unfortunately there is no institution as yet which can teach you about Parliament. To a large extent staff who are recruited -it is in-house training which makes them able to carry out their duties.

[Mr V Smith] Let me pose the same question to you. We are in excess of R200 million for procurement in Parliament. Do we have a manual or system to rate our suppliers? In other words, we are buying from everybody. Who are we buying from? What criteria do we use for our purchases in Parliament?

[Mr L Klassen] Within Parliament we established a Procurement Unit with a manager and staff working for him. Except for the Procurement Unit which does the work, we have a Procurement Committee which is appointed by the Presiding Officers. We have proper procurement procedures and policies which are all documented and in terms of which the committee and the staff are operating. We have also implemented the State Transversal System, LOGIS, a logistical system which covers all purchases etc. The LOGIS system now does give us the necessary procurement tools to measure, for instance, the economic order quantities, low values and high value items. The implementation of that system has gone a long way towards addressing the need that we did not have. We do evaluate. We do not buy all from all a sundry. All purchases in Parliament are done on contract, either specific tenders or on enabling tenders. We do evaluate our suppliers and we do ensure that our order quantities are the right quantities and goods at the right time.

[Mr V Smith] Could I ask you to supply this Committee with a profile of your suppliers? I do not want the names. I want to know how much of the R200 million, or whatever the figure may be, goes to black economic empowerment and how much goes to old establishment etc. Could you give us, as soon as possible, a profile of how we are using our muscle of Parliament to do what we preached to do out there, like black economic empowerment? I move onto catering. Again, in 1999 we were informed by the internal audit that we have, for instance, four store rooms. In 1999 we said that the ideal situation would be to have one store room, so that our inventory at catering levels etc could be maximized or the control thereof be maximized. Again, I am saying to you that when the internal audit was done in 2001 it was not done. Or while the implementation date given by Management by Mr Moodliar was that it was going to be implemented in April 2002. Can you confirm to this Committee that that has been done? If it has not been done, when do you expect that to be done? What are the hold ups? The internal auditors, as far as we understand it, was a management tool to help Management perform. It appears to me that that management tool either has not been used effectively; has been disregarded or we are struggling to implement it. Have you got one store room for our catering as oppose to four? If you have not, by when do you expect to have that implemented?

[Mr L Klassen] The deadline given was April 2002. We have got now one central store for catering. It has got to be seen in total perspective that we, firstly, for decisions in Parliament, Parliament does not own this building. Any changes that we want to make are generally we require the Department of Public Works. So it is not a simple case of we do things. We have got to engage the Department of Public Works to ensure that we get the necessary changes etc to the building and structures as we need. That does take some time. The changing over from the four storerooms - we have a centralized storeroom now. It forms part of our entire Catering Audit, because that audit was not simply on storerooms. It is also with the price of food and every detail of it. We have looked at a computer system to control the stores and issues etc. It also involves changing staff and retraining staff. We cannot simply just put people there. They need training etc and to do all these things general tend to take some time.

[Mr V Smith] In terms of your reconciliation of catering and monies paid to that - are reconciliations done and what is the status of that?

[Mr L Klassen] As stated in that Audit Report we are trying to manually reconcile the price of the food on the plate with what we have put in. It is a very difficult operation to try and do it manually. We have not got the system in place yet. We have gone out and tender. We know exactly what systems we want. We will be purchasing our stock control purchases and point of sale computer system for Catering. If funds are available this year we will do so. If not available this year, we have budgeted for it in the next financial year.

[Mr V Smith] Can you give me an idea of how much you think what is the risk of loss? If you are saying to me that if funds are available this year, you put a point of saying "this year", if not available this year you will do it next year. I am assuming that that is informed by the fact that we either not very exposed in that area, because if you are very exposed then I want to suggest that it becomes a priority. How exposed are we? When we do a reconciliation, are we going to find a situation that what we are getting back as payment for meals versus what we have been paid for those supplies are not great, because if they are great I think it will then be a problem for us to adopt an attitude that says "well if monies are available we will do it". Do you have a gut feel as to how accurate our returns are as oppose to what we are purchasing?

[Mr L Klassen] We do know that the price of a plate of food in Parliament is lower than what we should be selling it. The prices of food in Parliament is determined by the Joint Rules Committee. The price was recently increased by approximately R5 or R6. We try and do it every year. We are not always successful, because it is not our decision to change it. We do believe that food is not being sold at the market price that we should be getting for it. If that is what is meant by exposure then that is it. As for other losses in Parliament - we are trying our best to control waste and over-supply as much as we can on a manual basis. Hopefully when we have a computer system it is going to assist us in curbing and quantify the waste. At this point in time we are not quantifying it, so it is not possible for me to give estimates.

[Mr V Smith] It was eluded earlier on the whole control around Member's claims. What system do you have in place to verify that if I put in a claim that said I traveled from my nearest airport to my house, and it was 10 kilometers? How is it done right now?

[Mr L Klassen] First of all, we are dealing with honorable Members of Parliament. So we do understand that we do not of necessity have those kind of problems. But to further emphasise that, when a constituency is given to a Member the Chief Whip has to sign a certain document. On that document the Chief Whip does give us an indication of the distance between home etc. That is recorded on there, so we do get an indication. The Chief Whip has made it very clear to us that they do not guarantee those mileages, but we do know on that form approximately what mileage it is. We do spot checks. We will not pay a Member more than what is stated on that particular document. Generally we do rely on the honesty of Members.

[Mr V Smith] I am glad you rely on the honesty of honorable Members, but that is not going to buy you much in accounting terms. I can tell you that, because the controls systems are there to make sure that our consciences are clean. If you say that, that is fine. I just think that as difficult as it is a task that maybe we must apply our minds, all of us, as to how that can be done. I am not pointing a finger to you. I can imagine 400 people claiming every weekend and we are relying on the honesty of Mr Vincent Smith to do that for you. Let us leave it at that. Suffice to say Chairperson that we need to do something. I do not think it is an acceptable position. With regard to the salary reconciliations - your response indicated to us that at some stage you have done a salary reconciliation after April, if memory serves me correctly. What is the status right now? Are salary reconciliations done up to date? I would imagine salary reconciliations would include whether the monies that you deduct from my PAYE goes to the Receiver. I would imagine that Audit that compass you is the salary reconciliations.

[Mr L Klassen] I would have to come back to this one. I left the Finance section of Parliament in October 2001. It would be unfair to ask Harry Charlton because he just joined a week ago. So exactly what the status is at the moment, we have to come back to the Committee about that one.

[Mr V Smith] Can you give us a reasonable deadline? We do not want to impose a deadline. Could you tell us by when will the new gentleman be able to come back to this Committee and say salary reconciliations are up to date or this is where they are?

[Mr L Klassen] I certainly do not think that it should take him more than a week to go and look where he is.

[Mr V Smith] Let us look at the electronic fund transfers. Going through this documentation it appears to me, and I need you to confirm that, that the segregation of duties according to Deloitte's was not up to speed. In other words, I could work out what the claim should be and approve the claim and do all that type of stuff. In other words, the system controller had access to do the administration work etc. Of course that is a major exposure, not only in your system, but all over, that you cannot design the system and be the administrator. Secondly, the physical accessibility to computers - we are informed that these computers are left not being logged off; the offices are not locked. So technically I could walk into that office and change my claim from 40 kilometers to 4 000 kilometers, if I wanted to, because, one - the computers are not logged off for lengthy period; two - the offices are not locked. Can you give us some sort of assurance that these things have been rectified?

[Mr L Klassen] These areas were certainly addressed last year (2001), because it is particularly the logging off. The current systems that we have been using are that once you are in a system it tended to stay for approximately twenty minutes thereafter. So it did give opportunity for anybody else to access the system. That is what led to the R20 000 fraud that we had, because somebody accessed somebody else's computer. We have made very clear to staff that when they leave their computers they have to switch off their computers. When both of them are out of the office where they share offices that offices should be locked. The more important thing is to log off or get out of that computer system before leaving the desk. We followed that up with SITA in asking them to get a quicker black out of the systems. So when a staff member stops working on a system that the system will switch off sooner instead of spending the twenty minutes. The industry norm seems to be after three minutes the thing should switch itself off. I have not had a response yet whether that has been implemented, because with the systems that we are using are the State Transversal System, so it should be the same system for everybody else. Whether that has been put in place, but we certainly did follow-up with them on that on the system itself. As for the people, yes we did give them circulars and warnings that they should not leave their computers unattended. At a stage we did have a problem. We still do. Electronic transfers requires that one person puts in the data. That person cannot process the payment, so the next person processes the payment and a third person after we get the bank statement back the following day, that third person checks to see what electronic transfers has gone through. That is the system that we have got in place to ensure that we do not have one person who can then change the claim etc. So there is a person who does the calculations who puts it into the computer. It is approved by the authorizer and the following day after the bank transfer has gone through it is then checked by a third person to ensure that it was properly done. So that segregation of duties has been made.

[Mr V Smith] Are you comfortable that that system is working? It is one thing to have a system, but is it working? You do not have to answer me now. I am sure next year when we have this Hearing we will expect that these type of audit findings do not exist any longer. They have been there since 1999. It is 2002 now. I am saying it is one thing to confirm to this Committee that this is happening. We would imagine that when the next internal audit is done that these things will not be there. The Audit Committee that you have in place - how effective is it? Can you tell me what role has it played since 1999? I am asking this question in the light of the fact that the Auditor-General in the last two Reports that I am looking at, in both instances the Auditor-General says "the Internal Audit Report has been discussed with the Audit Committee and Management have indicated that corrective measures would be taken". He said that in the 2000 Report. He said that again in last year's Report. I do know that there is an Audit Committee. How effective is that Audit Committee in assisting you to do your work as Management of Parliament?

[Mr L Klassen] The new systems that we put in place were put in in 2000. We had to put in new computers because of the Y2K bug at the time. Obviously we had new teething problems in getting into the systems and getting used to the systems. The system should have been stabilized and procedures and matters have been put in place at that stage. Hopefully we will not have reoccurrence of the same sort of queries that arose in the year under review. As for the Audit Committee - the Audit Committee is set up in terms of the PFMA. The Audit Committee is totally independent. The Members of the Audit Committee, one is a Senior Manager at Old Mutual, the Chairperson is a very Senior Manager at Woolworths and there are two Members of Parliament on that. The Auditor-General attends all meetings of that Committee. The parliamentary Internal Auditors, PricewaterhouseCoopers, attend that Committee. We as Management respond to that Committee. They do put big requirements on the performance of Management. I certainly think that as stated in the Act also, it is a very good governance measure. It is the other avenue to ensure that Management performs and does the things that they are performing. Our Audit Committee has been there for some time now. I think as we go along it is becoming more effective and ensuring that things are being done.

[Mr B Kannemeyer] In conclusion, I think the Members have covered the different questions. I think generally what we are saying is that with the general management of Parliament we are fairly happy. There is a number of areas, particularly regarding the Internal Audit arrangements and the general control environment that has come to the fore. Some of the aspects have been highlighted in the Internal Audit Report that Mr Smith has referred to just now. We have not interacted with the representatives of Parliament on the Internal Audit Report of February 2002. It is in our possession and in that Internal Audit Report some of the aspects mentioned now we see are still recurring. So in terms of what a number of Members have said, we would certainly want to follow-up on some of those aspects. I think critical in our resolution we would want to ensure that the Fraud Prevention/Detection Plan would be finalised as indicated. Your procedural manuals as has been indicated would be in place, as well as the point of sales/stock control system to ensure the number of areas that have been raised. Our further interaction would be on the basis of the resolution. We look forward to when we engage again that these matters that came to the light during this Hearing would then have been resolved, so that we can move on.

[Chairperson] Thank you very much Mr Kannemeyer. Thank you Mr Mfenyana and your team for attending. Hopefully when we meet next time it will be under a new legislative regime and we are looking forward to that legislation being processed by Parliament during this year. Thank you for Mr Britz and his team for assisting and your attendance.

[Mr S Mfenyana] Thank you also Chairperson and Members.
STANDING COMMITTEE ON PUBLIC ACCOUNTS
WEDNESDAY
08 MAY 2002

DISCUSSION RE: REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF VOTE 34 [RP 88/2001] FOR THE YEAR ENDED 31 MARCH 2001 AND VOTE 35 [RP 144/2000] - WATER AFFAIRS AND FORESTRY FOR THE YEAR ENDED 31 MARCH 2000


Mr A M Muller, Director-General: Department of Water Affairs and Forestry; Mr M J Mabala; Chief Financial Officer: Department of Water Affairs and Forestry; Mrs M Modipa, Deputy Director-General: Corporate Services Department of Water Affairs and Forestry; Mr J Pottoane, Deputy Director-General of Operations: Department of Water Affairs and Forestry; Ms L Bethlehem, Chief Director: Department of Forestry; Mr N Marais, Treasury; Mr Magondo, Office of the Auditor-General; Mrs B T Sonjica, Chairperson of Water Affairs and Forestry; Mr T Nombembe, Acting Auditor-General : Office of the Auditor-General.

[Mr F Beukman (Chairperson)] We welcome the Department. Mr Kannemeyer over to you.

[Mr B Kannemeyer] We did not have a Hearing with the Department of Water Affairs and Forestry on the 1999/2000 audited financial statements. What we would do, again, is that there would be some comparisons between the questions on the 1999/2000 Report and the answers supplied and cross reference between those and the answers replied to the questions on the 2000/2001 Report. There would also be towards the end of our session some questions that in our opinion are outstanding from the 1999/2000 financial year. In general, we are breaking up the question around the following aspects. The first part that I will be dealing with will be around the prevention of fraud; irregular wasteful expenses and the hotline that was established; a little cover on the financial statements; recoverability of debts. Mr L Chiba will deal with aspects relating to irregular expenditure and internal control. We will also have a couple of questions on some trading accounts, and we will also engage around the Water Authorization and Registration Management System (WARMS) System, as well as the other colleagues; Ms Mothoagae, Mr Gumede and probably either Mr Lowe would fall in. Chair, as you have welcomed the Chair of the Water Affairs and Forestry Committee, as well as one of the Members, from our cluster side as well we want to, again, appreciate the fact that they have been part of us during the preparations. If you would not mind, Chairperson, to from time to time if the Chair or the Member would want to follow-up on after we have concluded a particular section of our own questioning. Our main reference document will be the Auditor-General's Report and our own preparatory document. I am hoping that the Director-General does have a copy of this, so that when I use the reference it is easy for them to follow in our numbered page. It is the one that says "Preparatory Documentation: Hearing on 8 May 2002". That is just for reference. You should have all of that somewhere in your own documentation, but we have just given you our copy for our reference. On page 8 of the Preparatory document, question A 2 - in the reply it was indicated that a hotline has been established where acts of fraud, crime, waste and inefficiency can be confidentially reported. Could the Director-General and his team provide the Committee with a summary of the operations of the hotline? If possible, if that could include the number of incidents reported on the hotline until now - the number of incidents that was investigated after it has been reported through the hotline; the number of incidents reported and investigated that has been resolved? Whether we can be informed on the process of deciding on which of the reported cases to be followed up? What is the process and criteria that whoever follows up use when they decide what or not to follow up? I will stop with those two because the further two questions relates to the Inspectorate.

[Mr M J Mabala] I will not be in a better position as of now to give the actual numbers. What I want to report, firstly, is about the operation of the hotline. We have an independent company that is running the hotline for us. It reports regularly to my office. What we normally do is that we get these reports on a daily basis or after every second day depending on the number of incidents that have been reported. I can report here that until now, especially after the first twelve months of operation on this hotline, we have received in excess of 70 calls that have been reported on the system. They have given numbers. I think as of Monday I received the last one. It is number 74 or 76 if I am not wrong. That is the number where we are now. In terms of the investigations - we normally investigate every complaint that we receive. Investigations take a number of forms. There are those that you can immediately get an answer without engaging investigators. There are those that need further investigation. Then you will have to send a team of people to go out and to do investigations. What I am saying is that everyone is considered as important whether you can get an answer by just phoning one official and getting an answer. That is the level of investigation that we consider as being done. In terms of the number that has been resolved, again, I do not have the actual number. I can give the report within a number of days. What we have done, we have designed a schedule that indicates all the reported cases from number one up to the last one; the progress in terms of each one of them; and those that have not yet been resolved, what is the process? We will be in a position to give that information if it is so required from the Members here? Process of which the cases are to be followed. Like I have said, it depends on the intensity of the issues to be investigated. The process is just to let the Internal Auditors if the question or the concerns that are raised warrant internal investigations. Where the complaint is of such a big nature that it warrants to be investigated by people from outside we then go into forensic auditing. But, that again depends on what the Internal Auditors will tell us if they cannot do the work and if it can be done by people from outside the Department?

[Mr B Kannemeyer] We just have a little concern about the inability of the Department to provide us with some of the statistics. I think when we had our preparatory meeting on this we have asked the Auditors to interact with the Department to try and get it to us. If the Chief Financial Officer (CFO) is saying that they do have a schedule which indicates the cases reported; progress on it and so on, I would think you should have been able to provide that to us. The one aspect that is useful is the fact that you say you do investigate all cases. So that covers the first two parts. What we are interested in is whether the hotline is useful. If you say that 74 cases have been reported, all have been investigated and out of this we have found 10 or so to be substantiated and it occurred mainly in the following areas, it would assist in identifying the remaining risk areas or where focus would be needed, that type of aspect. One would have thought that it should be a fairly available schedule that you should be able to provide.

[Mr A M Muller] I am not sure that we were asked to provide that and if that is what is wanted I think we can provide it. We can check whether that was in fact requested. The second point, can we just ask the CFO to indicate the success rate of those 70 numbers that have actually been resolved which was substantive. Perhaps that would be helpful.

[Mr B Kannemeyer] Can you just ask our Auditors, Mr Magondo, whether we have actually requested that after Tuesday when we met on this?

[Mr Magondo] The request that I had made was on the Thursday. Whether I asked particularly about the statistics, I cannot recall, but I had a meeting with Mr Mabala where I said we want additional information on the operation of the hotline.

[Mr A M Muller] Can we have some idea on those questions that have been followed up? Can you indicate the more serious one?

[Mr M J Mabala] What I can say is that the recent questions or concerns that were send to the Department have not yet been resolved. When I talk about the recent ones, it would be those that have been reported from the beginning of the financial year, the beginning of April. In terms of all that have been reported from the beginning of the working of the hotline, all of them have been addressed. The success rate in terms of being able to pin point specific problem areas - I would say eight out of ten we are able to find. Yes, there is a problem and action has been taken in terms of a Report from our Internal Audit, and even specific steps have been taken. We have realized in other instances that the concerns that are raised, some of them and that is the two out of ten that I am talking about, that came as a result of maybe office differences where a person now says that I am going to report this person anonymously. What we normally do, every case that we successfully or unsuccessfully resolve we report back to the operators of the hotline, so that if the person phones back they are able to tell him or her what the process is.
[Mr B Kannemeyer] The latter part of that reply indicates that the Department regularly undertakes inspections by the financial procurement inspectors to determine whether officers perform their duties according to prescribed financial and procurement rules and regulations. We find this to be a useful tool. What we would want to know is whether that Inspectorate is still functioning? If it is, to whom is it reporting and probably the regularity with which these inspections are done, if they are still done?

[Mr M J Mabala] The procurement inspectors are still part of the process. Because of the lack of resources in terms of appointing people we have now appointed inspectors from outside the Department. They are independent people. They have a track record of having worked in similar circumstances. They report to me as the CFO and we will have scheduled report back meetings and they report on a monthly basis. Their Reports come in the form of written reports in terms of the areas that they have covered. We normally plan our procurement investigations in the way of saying go to region A, B and C and after so many weeks come back and report. That is what is currently happening.

[Mr B Kannemeyer] We now move onto the question of the financial statements. We refer to the replies on the 1999/2000 Report and then also to the 2000/2001 Report. In the reply to 1999/2000 there was an indication that, I think correctly so that the Public Finance Management Act (PFMA) provisions were not applicable at the time, but there were then processes put in place to ensure that the relevant people and sections would be able to have everything completed and finalized, so that for the 2000/2001 year everything would be on time. In terms of the reply that we have received is also in terms of the interaction with the Auditors. There was apparently some misunderstanding which resulted in the late submission of the financial statements. We would just want to be clear on the actual nature of that misunderstanding, so that we can determine, not in terms of the portion in blame, but where actually the problem lies, so that we can prevent this type of recurrence in the future.

[Mr A M Muller] The first point is just to mention that the delay in submission was by a few days literally. The question of the details of issues raised, I can give over to the CFO.

[Mr M J Mabala] One issue that came very clear was the fact that when we communicated with the Office of the Auditor-General we would have signed the initial document even before it was certified as correct in terms of the wording and everything. That is where the delay came. By the time the document came back it was a day or two days after, because it had to come for signature. Our communication with the Auditor-General, firstly, was as a result of a draft that we would have signed had we understood that time was against us. I think there is where the problem lies in terms of the final document and a draft document.

[Mr B Kannemeyer] The Auditor-General's Report is saying that the financial statements required changes in order to be acceptable for audit purposes and were handed back to the Accounting Officer to effect these changes. In our own discussion and preparation for this Hearing we came across the possibility that the format in which the statements are supposed to be done so that it complies with the relevant regulations and or rules, that there might have been uncertainty, either on the part of the Department or delay on the part of Treasury to indicate to the Department what is the exact format that would be required. From our side we would want to determine where exactly did the hiccup occur, so that we can interact with the relevant people. Can we get clarity on that?

[Mr M J Mabala] Firstly, I can say there was not enough clarity. That was a misunderstanding between the officers from both Water Affairs and National Treasury in terms of the format. When we ultimately got the format it is the time when there was not enough time to finalize the ten things that were already done in the format that the Department had understood that it could be the one that is needed. Overall, the misunderstanding I think caused us about two or three days. It was not a very big number of days.

[Mr B Kannemeyer] We certainly would want to follow that up. I do not know from the side of National Treasury, who is here, if they can respond. We also have interaction with National Treasury on the PFMA implementation plans and the time frames and so on. We were assured that everything was in process, all the departments and processes were put in place. There have been briefing sessions, and training and all these type of aspects were in place. Whether it is two or three days, I agree, it is not a major thing the number of days, but we would not want to be included in a schedule that the Auditor-General prepares for this Committee. The Department of Water Affairs and Forestry's papers were submitted late and it was not your fault, we definitely would not want that. But, at the same time we would not want a situation where the Treasury is said to have not done their work if as is indicated was a simple misunderstanding. From our side, we would certainly want National Treasury, if not now, to follow up on the matter and to get back to us on it.

[Chairperson] Yes, I think it is important if we can get a response. We will also interact when we meet with the Auditor-General on his General Report. We will also deal with departments that submitted their reports late. We also would deal with that. I think it is important if the Treasury maybe can assist us on that.

[Mr A M Muller] Before the Treasury comes in, I think it is also useful to say that this is the first occasion, as I recall, that the financial statements are included in the Annual Report of the Department. Previously they have been presented separately, the audited financial statements. What I think what was happening was the two organization's printing schedules and proof-reading schedules were trying to be overlapped. In fact, it was a very simple management issue around how you go through the proof-reading process and who determines the final proofs. We come from a department which is used to having to present a final proof document and in this case it had to go to the Auditor-General. We then found that it did not meet with their requirements which would normally be quite routine. It was this first attempt to merge the two processes that came slightly undone. Treasury might want to add to that. Certainly, that was my understanding as I tried to unpack what has actually happened between the two sides.

[Mr N Marais] As far as Treasury is concerned I know that in April 2001 a circular was sent to all Departments on the format of Annual Reports and what should be in it? What may happen in circumstances where there is uncertainty about what should be done - that specific department will contact Treasury and have discussions with the Accountant-General's Office, and where there are problems they can discuss it and they will be pointed to what should be done. If it is found that there is a general problem, a transversal problem, that problem will also be shown to all departments that they know what they should do. All the departments are usually in the same boat as far as that is concerned. I have not got specific details or statistics on what happened at that stage, but that is as far as National Treasury is concerned. All the departments got the same instructions at the same time.

[Mr B Kannemeyer] I think, as indicated, you will follow up in the resolution on the matter. The next part I am moving to is regarding the recoverability of debts, page 72 of the Auditor-General's Report paragraph 2.2.1, and on the questions and answers pack we are looking at page 46. It is indicated here on page 46 the recoverability of debts. There are some figures and amounts given. We were informed through interaction with the Auditor's Office that included in the debtors outstanding is an amount of R7.8 million which is an overpayment to (Trans-Caledon Tunnel Authority) TCTA. Again, we have been provided with this information by the Auditor-General's Office. How is it possible that both Head Office and the Regional Office paid this company this particular amount? What caused that to happen?

[Mr A M Muller] Firstly, I must clarify the TCTA is not a company with whom we make occasional payments. It is a parastatel, a national business enterprise with whom we manage the Lesotho Highlands finances and there is a transaction of approximately R1.2 billion, if my memory serves me right, between them. This is a 7.8 error within a framework of transactions to the value of R1 billion plus. Mr Mabala can go into the details.

[Mr M J Mabala] The information that I have in terms of the overpayment, especially where the Head Office and the Region paid the same company an amount - we normally find in the Department, especially towards the end of the financial year, where our financial system, the payment system, either is very slow, especially in regions where the amount of work is very high. They would then go and ask for help at Head Office to help them. We normally make payments to consultants and companies through the LOGIS system. But, in cases where there are bottlenecks in terms of the amount of payments that have to go out and we find ourselves in a situation where we have to pay before the end of a reporting period - we normally would then use the Financial Management System (FMS) to make payment. I think in this case what happened, there was not clear indication from the region that the payment could be made still in time at Head Office. And what happened, there was a misunderstanding and when I talk about misunderstanding it is that there was not enough information that flowed between the two offices that stopped the other offices from not even making payment. That was an issue that we took very seriously with the affected officials. We were able to rectify the mistake quite on time.

[Mr B Kannemeyer] Just one comment on the Director-General's comment that it is only R7.8 million in the context of R1.2 billion. I think I understand percentage wise that is very little, it is very insignificant. In terms of the actual amount of R7.8 million, we do regard it as substantial. Particularly, if we move to our next question whether that particular amount has been recovered from TCTA? We are informed that of the R28 odd million that is still in the financial statements - there were two such overpayments to TCTA. The one of R7.8 million and the other of plus minus R6 million. The R6 million plus minus has been recovered. This amount apparently has not been recovered. Why has it not been recovered?

[Mr A M Muller] The reason for contextualizing the TCTA is that this is a regular stream of payments, and that if there is an administrative problem that will occur. So, I was trying to distinguish not that R7.8 million is not an important amount, but that if there is an administrative hitch in one of the hundred payments it is a different matter to having a sudden payment appearing irregularly for R7.8 million. I think the very management issues are actually quite different. With regards to the recoverability and the other reason for mentioning the TCTA status, is that there would not normally be any difficulty in recovering an overpayment to the TCTA.

[Mr M J Mabala] I do not have information that says the amount has not been totally recovered. I think, the information that I have and towards the end of the financial year we had to go into a process of declaring accounts of both the Department and the TCTA in particular. One will have to go back and check if everything out of the R7 million has been paid. I think the latest information when we were closing the books was that there was an amount of about R13 million and it might have included both the R6 million and R7 million that we are trying to balance and close the books in terms of journals. I am quite aware that part of the amount has been paid. I would just have to check about the details of the R7 million.

[Mr B Kannemeyer] I think we would want that clarity. We do have information from the Auditors, whom we have worked with, that indicates that the R6 million has been recovered. In fact, we have got problems to recover the R8 million, because TCTA is telling the Department you must prove that you have paid us double for this particular invoice. That is what concerns us. Because of an internal misunderstanding or problem, is leading us now to prove to TCTA that we indeed have overpaid or double paid you. Again, we can call on the Auditors to substantiate the information that I am using, but in our preparation that is why we have build this type of questions in here and that is what concerns us.

[Chairperson] I am a bit concerned that we do not know what is exactly the status. It is not that this amount was not declared a few months or so ago. I presumed the Department will come here and inform us exactly on what is the position. Maybe the Director-General and the panel can enlighten us on that.

[Mr B McIntosh] There is another point which may have slipped by - it is this controversial payment was also paid not just from the Director-General's Office, but also from his regional office. I think there is also concern that there is an overpayment out of the Gauteng region as well as from Pretoria.

[Mr A M Muller] It was a duplicated payment. I think what we will do, if we may, is advise the Committee in writing within two weeks of the exact status of the reasonable questions and to understand the context.

[Mr B Kannemeyer] The next one is on page 81 of the Auditor-General's Report. There is an amount of R388 000 that is highlighted as salary overpayments. We recently had an interaction with National Treasury and particularly the people who was handling the salary administration system. We find here that of the total amount of bad debts written off of R429 000 about R388 000 of that relates to salary overpayments. So, it is more than 90 % of all debts written off relates to salary overpayments. That is bottom page 81, paragraph 8.2 under miscellaneous expenditure in the Annual Report. How did these salary overpayments occurred? How did it happen that certain staff were overpaid? What steps were attempted to recover this money that lead you to write it off basically?

[Mr M J Mabala] We are talking about 117 cases that relate to that amount without going into specific details of each. We have groupings of how those amounts came about. A lot of them were in respect of people that had resigned, especially the people in our regions where the system is a little bit slow in terms of informing the Head Office when a person had already resigned. So you will find that person still gets paid a month or two, in certain cases even maybe three months. By the time we stop the salary then that person has been getting salaries through the bank. That is the process that now we find ourselves having to deal with. The question would then be does that particular individual's pensions cover the amount of the overpaid salaries. That is the case in most of the 117 cases that we have. In other instances, it was just pure overpayment where the information that we had indicated that a person is at a particular salary range. We have inherited this especially when we were bringing people in from different previous administrations. Especially, where the information, the records, the files in the previous administrations were not reliable or were not there, so that we could consolidate and reconcile them with what we had. We had a process of trying to reconcile those. I remember in one of our regions where the entire number of files could not be found immediately. So, when they ultimately found, we found that there is that discrepancy in terms of where a person is currently paid and where the person was? That is the second type of problems that we also find ourselves inheriting. The third one does not affect many people. It was just a matter of overpaying people, but later on finding that, yes there has been an overpayment through the internal audit mechanisms and then recovering the money. In all these cases we have established that these people had now left the system and in trying to find them, most of them in rural areas have changed addresses. We even had the process of having a company that was trying to locate all these people. Ultimately they came and said we are not able to find them. We also had a contact session appointment with the Receiver of Revenue as well has the Department of Home Affairs. We think they have better records of identifying people in all these cases. By the time we came to a conclusion of writing the amount off we had gone through both institutions to find these people and we could not find them.

[Mr B Kannemeyer] We are covered with that that the Department has gone through the necessary steps to assure themselves that the money indeed would be irrecoverable. Our emphasis is in terms of preventing the recurrence of these type of aspects. If the CFO or the Accounting Officer can just briefly indicate what steps or measures have been implemented to prevent the recurrence of overpayment of salaries, and to jack up PERSAL System to make sure that these things do not reoccur?

[Mr A M Muller] We are talking about resignations where there is a very clear process in place. Then the question is if that process is not followed there are officials at fault and it needs to be followed up in a disciplinary manner. There are also cases of abscondment. I am sure the Committee is aware that abscondment is not quite that easy to manage, because it is not clear when somebody does not turn up for two months whether they are coming back again with a sick note or whether they are not going to come back and you eventually is going to have to write them off. That is quite a difficult management decision and there is almost always going to be in those cases an overpayment made. We could ask the Deputy Director of Corporate Services to add to that. I think if we can just understand the situation - if a rural forest auxiliary does not come to work for two months a note is then passed through to the Office to say initiate abscondment proceedings by which time there has been an overpayment. Then that same person in a rural village somewhere in the Eastern Cape has to be found. I think it is in those cases that we will get these averages. If you look at the average loss it is about R3 500 per case, which is approximately two months salary, which has been lost and has not been traceable. Perhaps, it would be useful for us to distinguish in these 117 cases between the numbers which are resignations, which should have been managed, and abscondments which fall into the more difficult category. We could perhaps ask for that to be provided to the Committee?
[Mr B Kannemeyer] That is exactly what I was going to suggest when you raised the question of abscondments. If you profess that all these cases were abscondments there is no problem. We do not have the analysis of what this indicate and you can mention the abscondments just to through us off the trail of what is actually happening. So I take the point of the abscondments. What we are interested in, these are the overpayments that have been written off. There may still be overpayments on the books that we are trying to recover. As the management advice you to reduce this if, exactly as you have said, because Treasury have indicated to us that PERSAL is so designed that in terms of Public Service Regulations you are supposed to give three months notice, those type of things, so that there can be a stop put on payment. So, that in terms of normal processes, if the Human Resource Department, Treasury or your Salary Section do their job properly and the internal controls are properly, the only cases that should in theory come here would be the abscondments and your more difficult cases basically. That is what we are trying to get to - for management to discern exactly between what you have just touched on your last input. I think that would be quite useful that when you look at your overpayments of salary you do that rate-up yourself. So that next time you appear here we do not have to ask you this questions, because it will indicate that of the R388 000, R350 000 was due to abscondments totally beyond your control and then we would not have to go down this line.

[Chairperson] We will go over to irregular expenditure, internal control and overtime.
[Mr L Chiba] In terms of irregular expenditure, while in terms the Annual Report on page 73, there he makes the point that payments were made to consultants who are not included in the consultant database as required by Tender Board procedures. In your reply on page 46 of the preparatory documentation you state that there were no consultants used who are not on the consultants database. There are two different contentions here. If your contention is correct that there were no consultants used that were not on the database, I accept. The problem that now arises is which contention is correct? I think we must get a clear indication whether your contention is correct or whether the Auditor-General's contention here is incorrect? Can we have some clarity? Can we hear from you, as well as from the Office of the Auditor-General as regards to this particular contention? Based on the reply there will be the issue of irregular expenditure. If your reply is correct then it will not be irregular expenditure. But, if your reply is incorrect then irregular expenditure shall have been deemed to have occurred. Let us get clarity on this one, so that we can proceed with the matter.

[Mr A M Muller] I am going to ask Mr M Mabala to talk about the different systems used for recording the consultants who might explain some of the difficulties.

[Mr M J Mabala] In 1999 we implemented a computerized system of recording all our service providers on the database. Previously, we were using a manual system and in that system we were able to have information on a regular basis. I think it was quarterly. Every three months we were issuing a report that would indicate the people on the system and any new people would then also appear in that report. This is a copy of the Report that I am talking about. It will show the number of the companies that are on the database. Since we went on a computerized system we were now no more printing reports. We were relying more on the computer to give us the information of the new people that have been put on the system. What we have here is the number of people that appear as on a particular date. What we did in this one is we requested a copy of all those people that are on the database. What I am trying to say here is that in the new system when a person appears on the computer it shows the date of entry as the date when the amendments, when we bring in new people, have been done. That is one weakness in our system that it does not show the time when the person has got onto the system. The other problem is that when we introduced the computerized system - what we did is all the old cases that were there, after confirming that they were still part of the service providers, the date that they came on the database was the date that we implemented the new system. So, that is another problem that we might be having. In terms of the answer that we gave - when the Auditor-General approached us to say that you have appointed people that were not on your system, we were able to, within our records, go back and check if these people have been on the system. It might be that the date that we see is the new date that does not include when we were still using the manual system.

[Mr L Chiba] I would like to get a comment from the Office of the Auditor-General on this aspect. I tell you it is very important because what can actually happen, the Committee will have to decide what interpretation to accept. Depending on that interpretation we will then however say that it is irregular expenditure or it is not irregular expenditure. Therefore, I think this matter must be resolved. Can we have some sort of input from the Office of the Auditor-General on this aspect?

[Mr Magondo] The particulars that the irregular expenditure relates to are two suppliers that we contend were not on the approved suppliers list being Council for D…………. who will pay R216 000 and Motor Training and Development Consultancy who will pay R208 000. The third category of this irregular expenditure related to MS Cloete and Associates, a contractor whose contract in the documents that you have available at the Department indicate that his contract was dated 1996 and it was valid for four months. Therefore we contended that there was no valid contract for that person or the contract was not renewed, so that it will continue to be utilized by the Department. We raised the issue within our final Audit Clearing meeting with the Accounting Officer in July 2001. We gave the Department the opportunity to prove to us that the people were indeed in the Department. We finalized the Audit and concluded that it is correct, because we were not able to get the evidence that support otherwise. When the answers to the SCOPA questions were presented to us I sent the manager on the job back to the Department to say go and find this information. He came back and said I do not have the information. On Thursday, I had a session with the CFO to say that this information is still outstanding of the R208 000. To date, we have not seen that the people are on the approved database. We are not convinced that the response that is given is correct, because what we have seen when we were doing the Audit during July 2001 indicated that the people were not on the records. If it takes this long for the Department to come back to us and show us the proof then we are concerned.

[Mr L Chiba] I would like to propose a way forward in this issue, so the Committee becomes in a position to decide exactly what is what and then incorporate our view in the resulting resolution. I would like to ask both the Office of the Auditor-General, as well as the Department to send us a memo detailing all the details. Then we will sit down as SCOPA and take our decision in the matter. Will that be an acceptable proposal?

[Mr T Nombembe] I do not have a problem with the proposal. I just want to state a matter of principle. Whatever is covered in the Audit Report is supported by audit evidence. There is no way that the Office will state something in the Report that is not properly substantiated by audit evidence. I am not quite sure about the need to otherwise to then provide detailed information over and above what is stated in the Audit Report for this is our audit output. Unless you are asking us to provide the working papers, we will gladly proceed.

[Mr B Kannemeyer] The way we work and prepare is that we receive the Auditor-General's Report. Based on the Auditor-General's Report we develop questions that we send to the Department. When we receive the replies from the Department, we evaluate those replies and compare it again with the Auditor-General's Report. If there is differences as in this case, we then meet again with the Auditors, and said look, exactly as Mr L Chiba has now put it, there is a contradiction. In this case the contradiction is in such a nature that only one can be correct. We then asked the Auditors look, either one of you is correct not on purpose or whatever. We are happy when we came into this meeting that the Auditors have substantiated their statement in this Report. What we are saying and this is the part that is important for the Department - if at all there is proof that these people are on a database somewhere, what is happening now is that in this Report, because if there is evidence that suggests these three companies are on a database somewhere your failure to provide it to the Auditors have resulted in it being included in an Auditor-General's Report. If it a question of that it is available, then the problem actually shift in terms of your interaction with the Auditor-General. With my limited understanding of how the Auditor's Office should work, there should be management interaction between the Auditors and the Office. And my understanding, Mr Nombembe must assist us, before this thing is printed there is final interaction in terms of the factual correctness of what is in here. That becomes the area of concern for us. I am quite happy that if the Department wants to respond finally that we can do exactly what Mr L Chiba have suggested that from the Department's side to provide us with that evidence that may clear this, otherwise the Committee will not have the option but not to approve this particular expenditure.

[Mr A M Muller] We take this in the spirit that we are trying to make the systems work. I think as Mr Mabala said, the database shows the names of these consultants very clearly. So, they are on a database. As he also said, the difficulty is that the system that is being used as an electronic system records the date of entries into the electronic system as the date of commencement of that record. Sometimes, I think, we are very quick to go into E government without thinking of the implications thereof. Clearly what has happened in this case is that the date origination of the record on paper when transferred into electronics did not get registered. Now I am not hearing the concern being raised as a problem of the system, which to me it clearly is. There is a field missing in this E database that should have been conceptualized. I think the problem is actually not with these three consultants. The problem is that the system sounds as though it has not been conceptualized. What I am not clear about is why the CFO and the Audit team did not go back to the physical records of the first register. If we may, within two weeks, see if we can find those original records, the physical hard copy records of the register, and see whether they prove the contention we have that these people were registered when the appointment was made, or whether they were not. What does concern me is that this should have been sorted out in those terms before now and it has not been, and that we also recognize. If we can for the purposes of clearing this amounts, either as irregular or as cleared, have that two weeks to clear it up. If we could also record that there is a systems problem which is going to have to be put right and we would also acknowledge that.

[Chairperson] Mr Chiba, I think your suggestion that we ask the Department within 14 days to provide us with the alternative proof or documentation and then we as SCOPA can look at that.

[Mr L Chiba] The next issue that I would like to tackle is on page 48 of the preparatory documentation and it is on page 74 of the annual Report and it refers to internal controls. It is the last bullet on page 74 regarding employees over the age of 65. In your reply you stated there are 162 employees over the age of 65 years of age, that 47 cases are in the final stages and 115 cases are in process. This happens to be a backlog except for approved cases. What is the timeframe to ensure that those employees older than 65 years are removed from the Public Service?

[Mrs M Modipa] I think basically the problem that we have here as far as the people who are over 65 is the people that were actually inherited from the old administrations as we had them. What we are doing is trying to verify ages for example. Some of these people do not even have records. There are discrepancies in terms of dates of birth. That is a process on its own to try to verify whether those people, as starters, are actually over 65. Once it is verified that those people that are actually over 65 the second process is also to inform those people, because some of them is a question of information of not knowing exactly what is the right age of retirement in the Public Service given the kind of environment in which we find the Department operating, especially reaching out onto those far rural areas. The third issue is making sure that people who actually exit the system are the people who actually were admitted into pensions, as you know historically that people would work for a number of years without being admitted to the pensions department. Therefore, we are making sure that those people leave the system with some kind of security to make sure that they have got something to live off as they exit the system. That is the process which actually also engages the National Department of Treasury which administers the pension. It is also another process that we are engaging in. There are three processes that the government is focusing on.

[Mr L Chiba] At the same time what I did ask for is the timeframe. , Could you make any input on that particular aspect of this issue?

[Mrs M Modipa] Because of the number of people that we find every year, it is a process that is continued. We have started in 1999 to begin to clean up this process and it is a continuous process. We have made some progress from then up to now, but it not a very satisfactory process, because of the outlying number of areas that we have got to outreach and make sure that we address the problem. We are definitely making sure that we do have a project in place which is actually sitting down and addressing these issues almost on a daily basis.

[Mr L Chiba] In your reply on page 47 of the preparatory documentation, it is indicated that all overtime is approved at a senior management level. Are the reasons for the exceptional circumstances documented on the form before approval at a senior management level? If the reasons for the exceptional circumstances are not documented, what steps do you intend taking to ensure that overtime is duly approved in line with the Public Service Regulations? Could you inform the Committee whether you have considered bringing additional staff in at a normal rate? If you have given the matter consideration - what conclusions have you reached? If not, what are the reasons for not giving any consideration to the matter of bringing additional staff at normal rates?

[Mr A M Muller] I am not sure how to start approaching this. Perhaps I can give a practical example. The Jane First Hospital recently spent a weekend without water. The reason for that is that the staff who asked to go and sort out the pumps late one Friday night had recently received the circular about overtime procedures. They said unless they can contact and get the approvals in writing they have been told not to do it. We do have an operational department which has problems which occur at 10:00 on a Friday night. I think that part of our difficulty is achieving the correct balance between the written approval in advance after such an overtime, and what we believe as operationally correct, the immediate response to a problem and the post facto acknowledgement of that. It is a very difficult balance for our staff in the regions to achieve. I have no apologies for bringing these practical cases to the notice of members. One of the cases that is mentioned is of drivers who were paid overtime because on their way back from a very distant, and now a notorious town of Jan Kemp Dorp, they overran their time that they were allowed to drive and they slept on the side of the road. In terms of policy they were paid overtime for that. We also recently had a case of four people who were killed driving outside the regulations and it looked like they fell asleep at the wheel and went into a truck. At some point we have to get a balance between what is feasible to approve in advance in writing and what is sensible and correct as a management decision. When we start having hospitals without water and four people dying because they drove over hours, I think that in this Committee, much though I appreciate and understand why the regulation has to be imposed, there has to be an understanding also of the operational nature of our work. I can ask the Deputy Director-General of Corporate Services to go into detail about how about how we are controlling the overtime and the extent to which the measures for predictable overtime are in place. I do just want to draw attention to those cases of emergency breakdowns; of people on the road in the regions at night; the kind of flood events that occur that requires responses that cannot be programmed or authorized in advanced. I am not sure whether you would like to hear more details about the formal controls or should I try to explain a little bit of the context within which some of these events occur?

[Mr L Chiba] I think the Deputy Director-General can send us a memorandum of the steps that you have taken. What I would like to make very clear about SCOPA, this particular Committee is not made up of robots or people who are insensitive to things. We are actually very sensitive to exceptional circumstances like the one you have already mentioned of no water in the hospitals. In those cases there is no problem whatsoever. But, when it occurs on a fairly regular basis apart from exceptional circumstances then I think this Committee is within its mandate to express concern and bring it to the attention of the Department with the view of rectifying an unhealthy situation. That is all we actually saying, but we will appreciate an input from the Deputy Director-General.

[Chairperson] Then we go to the Water Trading Account and the Debtors Management System

[Mr B Kannemeyer] This relates to the Auditor-General's Report on page 88. The reason why we are focusing on this is in our interaction with the Auditors we were informed that this is one of the key areas, the question of revenue that goes through the Department amounts to R1.2 billion as earlier indicated by the Director-General, probably, R1.6 billion as per the financial statements. In terms of that it is a fairly important aspect the question around the debtor management system. On page 13, question B12, the first time this question was raised and then we are going to concentrate more on page 49, question B4, because the information provided on page 13 is repeated again. So our reference is question 4 on page 49. According to the response that we have received on the questions submitted during 1999/2000, the Department mentioned that the Billing Module would be implemented during October 2001. If we look at the response on page 49 relating to the 2000/2001 financial year, the implementation date for the Billing Module is now indicated as April 2002. Now our concern or little confusion probably, was that in the question that we have asked to explain the delay relating to the implementation the Department indicated to us that there were no delay. We were struggling to comprehend whether it was our lack of understanding the English language or whether indeed the answer show that there was a delay. The follow up question that we have asked, what is the new timetable given that we could not reach the implementation date of October 2001 for the Billing system? On the same page question 5, then gives us the new timeframe for the implementation of the system. Why was there an indication that there was no delay, if clearly there was a delay? Could you inform us what were the types of problems experienced that caused the delay? In our mind there has been a delay and it would have been better for the Department to tell us, look the nature of the delay was x, y and z, but the reply said that there was no delay.

[Mr A M Muller] We are talking about one of the sub accounts of Water Trading Account. The Water Trading Account is four accounts, one of which deals with the TCTA; one which deals with local government order services, another with irrigation and then with integrated water management. I think the answer to the question - was there a delay in implementing the Water Authorization and Registration Management System (WARMS) Module - there was no detail is correct. Was there a delay in applying the WARMS Module by sending out Bills? If by the answer, the implementation by sending out the first Bills, we need to distinguish between the development of the Module and the sending out of Bills. We have the Module in place. It is working and it was working at the time it was supposed to work. We did not send out Bills in October, no. There are two reason for that. Firstly, some of the parties concerned work within a financial year. As we did with Local Government, we have tried to seek more charges and enable the people to prepare budgets and pay accordingly. Secondly, this is a new charge in terms of the water pricing strategy. At the time at which the Module was ready the full quota of water users had not been registered. If we had sent out bills to 60% of the water users they might well and justifiable have complained that this was an unfair treatment in that the full quota had not been registered and were not so being treated. The two factors together lead us to take a decision that we would implement with good publicity, advance warning and more than 90% of the effected users now on the system that we would implement on the 1 April 2002. Mr Mabala informs me that the Bills will be going out in the next ten days. I think that is the long story. If you can appreciate the distinction between having Module ready and actually applying it and sending out bills which requires another process to be complete of registering and having an appropriate number of users actually on the system.

[Mr B Kannemeyer] We understand exactly that. We do our preparation based on what you provide to us. In your reply to question 4, you correctly refer us to as was reported on the SCOPA question for 1999/2000 namely, and then you quote 12 (a) of your answer that you have given last year. If I refer you to the last sentence there "The Billing Module of WARMS is under development and will be implemented in October 2001." We understand the difference between developing the system and implementing it. You have committed yourself then that it will be implemented. Again, as Mr L Chiba has said, we are not cold to difficulties and problems that the Department experience. Our question was not taking it to task for not implementing it. Ours was to understand what caused the delay. When you said that there was no delay, we were trying to figure out what is happening here, because certainly implementation date October 2001 and implementation date 1 April 2002 is two different things. At the last sentence of that next paragraph it says you will now have it in place from 1 April 2002, the Billing System will be implemented to start cost recovery. I am quite happy in fact that what you seem to say is that there were a slower pace of registration of the first Module to get people registered. And, I think somewhere out there you said you want an 80% registration before you can rollout the system. That, I think, is sufficient and makes me understand why the delay was necessary. We do not want to fight whether there was a delay or not. Our reading says that there has been a delay, but you have justified why it was necessary. That is how we want to interpret it. Just in terms of the actual Billing System, we have asked our Auditors to interact with you and find out whether you can send us a copy of how it would work. We have received one. We just want to find out from you whether this is how it is going to look? If it is, we have a couple of questions around it. This was faxed to the Center Managers, the Auditors dealing with your specific Department, on our request it was sent to them. If you can just confer whether this is how it is going to look, because if this is just a sample it is okay. But if it the final one I am supposed to work with we have got a definite couple of questions.

[Mr M J Mabala] This is not the final invoice that will go out. I think even in terms of the answers that we are giving - we went through a process that would then be tested over and over again. When I received this information earlier this week, actually we had a briefing session with the Manager who is in charge of developing the WARMS System, when we had this briefing session we raised a number of questions even in terms of saying what can we see what will be implementing next week. Next week we are going to issue out accounts or bills for the month up to the end of April 2002. What are we going to see? We have been given this information which I also had a number of concerns. This is a working document. We will be talking to the Manager himself and he has also acknowledged that certain things might not be what is going to be the final document in two weeks' time. I share your concern also that this document still needs to be improved. For instance, one would like to see the quantity of the water in a particular month. What was the opening and closing usage of the water? I would also like to see that the amounts that are showed here compare favorably, even the balance should be what is coming out of the total individual amounts. Let us consider this as an example which we would be happy if you could also raise particular concerns, so that when we go to him we say we have these concerns, the Committee also has a number of concerns. How do we now develop a document that will satisfy everybody?

[Mr B Kannemeyer] I have always considered this, but the more and more I interact with government departments, I think really that the professions of consultancy seems to be a very lucrative one. If this is the product of consultants that have been appointed to assist the Department with the Billing System and it is two weeks before implementation date, and according to me there is still such a massive amount of work needed from what this is and from what we want. Then really, it is very concerning. The immediate thing that falls up, if you are talking about water invoicing and billing, there is no meterage automatically on this thing. The usage and the reading, that is not indicated. As you say what was the last reading date and what is the final one, so that you can determine the number of units, that is not on here. Secondly, on an ordinary Excel program the totals in the amount column should add up to the bottom amounts. Then again, if you compare those, it does not. It indicates on the top the question of tax invoice. There is no indication of the VAT, either the VAT number or the amount. Without going into the detail, we have been informed now that the system will be implemented. Memorandums are going out to inform everyone that the new Billing System will come into being. We will be sitting here a week or two before that time with a draft document which I would accept. It is not the Department's fault, because you have appointed consultants to do this type of thing for you. I would really want to check up on the performance aspects in the contract with the consultants if this is the type of work that they produced with a couple of days before the implementation date. Again, looking at our documentation and correspondence in terms of the Department's own timeframes, this Billing System was supposed to have been introduced on 1 April 2002. We are now sitting on 8 May 2002. We do not have a final copy of what the actual billing document will look like and it must still be tested on a sample basis to further bring out the type of shortcomings and problems and then only be fully rolled out. The concern is in the context that we are running a R1.6 billion revenue basis here and we do not have a comprehensive Billing System. That is the context. We understand the difficulties and problems, but we would want the Department to understand our concern in the context of the amount of money that we are talking about?

[Mr A M Muller] There is a series of very helpful comments that we have taken note of and we will take it forward. Just to be clear, this is not for the entire Trading Account. This is for the Water Resource Trading Account. That is the first issue. Part of that means that in many cases there is not a meter reading. It is a fixed charge for X hectares of trees which has now been assessed to use so much water and that assessment is fixed and it is done on a monthly basis. There are many different types of charges that would come in, an irrigation farmer who is assessed on a particular approach and not metered. There is a separate discussion about whether all water charges should be metered. The tree farmers tell us it is quite difficult, but this irrigation farmer certainly can be metered. I think there is another element to this as well. We were just discussing whether we know the full answer. Part of the difficulty is, in fact, a lot of this was done in-house and perhaps has not benefited from the kinds of consultants who would at least know what a tax invoice should look like, and perhaps would be much more concerned about getting the technical system working than with the commercial system. That is always one of the difficulties that we have. Can I with reference to the meter question say that that definitely is addressed because of the nature of this and then to say that we are running out approximately 42 000 in the next few days. I am sure we are going to have a lot of feedback with a slightly amended format.

[Mrs B T Sonjica] Can the Department give us an indication of a timeframe as to when the Billing System would be completed and fully operational? So that we have a sense of a timeframe that we are talking about, because presently it has a negative impact on cost recovery, I think the Department is aware of that.

[Mr A M Muller] As far as I am concerned, this is effective as of 1 April 2002 because of the consumption that has happened since 1 April 2002. The water used since 1 April 2002 will be billed. And we will next be reporting on our failures, perhaps because of technical difficulties here. We will be coming back and explain why there is shortcomings. It is only on the water resource management sub account of trading that we are talking. There are other systems in place, if I am not mistaken, for the other accounts, but more particular on the water services account there is a completely separate process running which we discussed which is being done within the framework of the division of Revenue Act.

[Chairperson] We move on to revenue.
[Ms P K Mothoagae] My question is on paragraph 2.2.1 (b), page 88, and the reply to the answer is on page 48 of our preparatory document. I wish to say upfront that it is a sensitive issue. We are sensitive. We are from these communities that are being referred to in the Auditor-General's Report. However, we are concerned that this lack of progress to reach agreement on the post December 2000 period. We should think that the Department should have prioritized so that the current revenue may be recovered. We would like the Director-General to (a) comment on the progress that has been made to collect outstanding revenue; (b) to institute mechanisms to hold municipalities accountable and (c) to formalize a timeframe to get the agreements? Already there is a reply on this preparatory document that there was problem of all these conflict resolutions with regard to inter-departments.

[Mr A M Muller] If I can say that this is not a simple matter that somebody has consumed water, there is a clear agreement and they must pay for it. We are talking about the constitutional arrangements between National and Local in regard to the responsibility for which is not very clearly defined. Our efforts to define it have included extensive interaction with Treasury, which is now reflected in the provisions of the Division of Revenue Acts, which puts certain conditions on transfers of funds which that means we cannot actually perform certain service unless local government take certain actions, which will be very helpful to us. At a political level we have also had the minister visiting a number of the provincial MECs for Local Government to enlist their support together with the support for organized local government to encourage local governments to come to agreement between us. There is contestation about exactly what it is that we are legally entitled to. We believe the Division of Revenue Act 2002 actually goes quite a long way to clarify that. What it does require is that formal agreements be entered into and I am sure Mr J Pottoane can give us details of that. If it were simply a matter of sending out bills and enforcing them, we would have gone a lot faster. As it is, we have had to ask for political intervention at the level of minister and, I think they are called the President of SALGA, the provincial associations.

[Mr J Pottoane] In this regard there is a very encouraging progress where the local government structures, now I understand the obligation that they have, is such that for all the current consumptions bills are being paid and collected in time. There are various arrangements to suite the capability of those local governments that are owing us two to three years in respect of their regular payments to reduce the arrears that they owe the Department in this regard. Secondly, the local governments also understand their obligations in terms of the contractual obligations that are also now being finalized and entered into in respect of the Division of Revenue Act and also in respect of the PFMA.

[Ms P K Mothoagae] We are happy to hear that there is progress. Is this not impacting negatively on the provision of free water basic services? Because, we have municipalities to date that they still need to institute free water basis. I am talking about ………… to be specific, but that is not the only municipality. Does this not affect the system that the Department is putting in place?

[Mr J Pottoane] We have about plus minus 70 municipalities that are not yet implementing free basic water. The timeframe for this is two years. All the support is being given to them so that they have the infrastructure and the necessary systems to be able to implement the free basic water. What we are talking about here is predominately about water supply where the Department is supplying water to the Local Government authorities. Therefore, ………………….. does it impede in respect of the implementation of free basic water.

[Mr A M Muller] I would like to add onto this just so that Members are clear that what is occurring, in fact, is that in many cases municipalities are charging consumers for water and retaining the revenue. That is dangerous, because it gives them a false sense of financial viability, because they are, in fact, being subsidized by water services provided by the Department. So we are very anxious that they understand that this a service provided by virtue of financial transfer, which is now transparent in Le Dora. If they continue to try and operate on this basis they will eventually find that this stream of revenue ceases, and that eventually is determined by the Division of Revenue Act over the next three years. The concern for us is that municipality should understand exactly what revenue streams they have and then apply them for free water. We think that the enforcement of payment for services provided is an important step, in fact, in helping them to understand how to provide free basic water. It is very much a question of assisting local governments to understand their financial streams and what they can do and what they cannot do, how they should use streams such as the equitable share and streams such as the conditional guards.

[Chairperson] Mr D Gumede will deal with the Industrial Plantation Trading Account.

[Mr D Gumede] My first question would be in relation to the revenue starting from page 92. In the Auditor-General's Report it is 2.2. In your replies it is page 51, question 2. Could you inform the Committee what is the extent of revenue generated from the remote areas given the difficulty you have?

[Mr A M Muller] Just to try and understand the question, I would classify almost by definition the areas forested in terms of our commercial forestry as being rural and largely remote. The trees grow better in those areas. I think we are talking about the total revenue from industrial forestry. That is what I understand the question to be. If that is the question I can ask the Chief Director of Forestry to give a response to that, but I would just like to confirm that is what we are looking for.

[Mr D Gumede] In fact, it is in relation to the control of revenue and debtors.

[Mr B Kannemeyer] Maybe I must just add there that it is manually collected. We have not computerized those and you have indicated the remoteness of these locations why you cannot do it computerized.

[Ms L Bethlehem] Indeed, we had replied to the question in terms of the manual needs to collect revenue in places where there were no computers. The difficulty really has been that particularly in the Eastern Cape a number of the places in which we collect revenue are places where electricity is not available at the plantation level. Therefore invoices were generated manually and then only put onto the computer after the fact. We have provided some additional information at your request. The situation has slightly changed as a result of a transfer of certain assets to SAFCOL and Singisi which took place last year (2001). At present about half, which is now to say R14 million of the amount which is currently collected or projected for this current financial year, is collected in places where the invoicing is done manually. As a result of the restructuring we are having to change some of our management systems. One of the things that we have now done is to ask for an investigation in that region to look at the possibility of centralizing that invoicing function to the Regional Office, rather than producing the invoice at the plantation level. It is a little bit challenging, because the measurement of the timber takes place at plantation level and whether there is no electricity one cannot scan the log to determine its size and therefore its value. One has to make an on the ground measurement of the log. We are looking at whether it is not possible to send through measurements and then generate the invoice in the Regional Office, rather than generating the invoice on the plantation level. At present for this current financial year, the amount that is collected in those regions projected for this year is R14 million.

[Mr D Gumede] Are you satisfied with your controls?

[Ms L Bethlehem] I think the answer to that is that in the further remote regions there is little choice but to do the measurements manually, because we think we cannot get scanners into those areas to scan the size of logs. So we have little choice but to get the forester and the purchaser to jointly determine the actual volume that is being sold according to the contract. Where I have not been satisfied is that in those particular regions that does not mean we necessarily have to invoice at the plantation. Those measurements could be send in to a centralized office and from there they could be invoiced. I think that is an improvement in the system which we are now looking to implement.

[Mr D Gumede] So you are satisfied with the controls in some areas. You are not satisfied with controls in other areas. Let me go the second section. It is in relation to disposal of Government forests. It is from the Auditor-General's Report and in your Annual Report it is on page 93 and it is 3.2. The Department with the assistance of the Department of Public Enterprise is in the process of finalizing the same transaction agreement which will ensure the transfer of the forestry operations from the Department to new entities. This process had not been finalized due to delays related to the bidding process. In your reply you said you are already having two preferred bidders. What is the progress right now?

[Ms L Bethlehem] The two bidders that we refer to were for one particular forestry set of assets. That was the asset known as Komati Land, which is a set of forestry assets to be found in the Mpumalanga and Limpopo Provinces made up largely of SAFCOL assets, but also of assets that formerly belonged to our Department and which was transferred to SAFCOL on 1 December 2001. At that stage there were indeed two preferred bidders. That has now been narrowed down to a single one which was announced by the Minister of Public Enterprises about a month ago. There is now a successful bidder, if I can use that term, that has been identified. The assets have been transferred from our Department to SAFCOL and therefore are no longer on our books.

[Mr D Gumede] Do you have the bidding amount? Who would receive that amount?

[Ms L Bethlehem] The bidding amount is R335 million and that amount would be paid to the South African Forestry Company Limited which in term would pay that amount to the National Treasury. That would then be a transaction which would be facilitated by the Department of Public Enterprises which is the owner of SAFCOL, so we would have no financial involvement with the transaction going forward.

[Mr D Gumede] Could you inform this Committee whether there are any liabilities relating to the disposal of the Government forests which remain the responsibility of your Department?

[Ms L Bethlehem] The role that our Department now plays is that we regulate the assets in terms of a written lease which is entered into by the Minister of Water Affairs and Forestry and the company with whom the transaction is concluded. This applies now to the two transactions that have already been concluded, the transactions which I referred to just now which is in the process of being concluded, as well as future expected transactions. In all of those cases our role becomes as a kind of a "landlord". We oversee the assets in terms of a lease. That lease is an instrument which is entered into in terms of the National Forests Act and before entering into the lease our Minister must have the permission of the Ministers of Public Works and Land Affairs in order to enter into that lease. We are talking about quite substantial areas of land so far concluded. Some 100 000 hectares had still to be concluded, altogether another 300 000 odd hectares. The Treasury was involved with us, as well as the Department of Land Affairs and Public Works, in working out the exact wording of the lease. The lease document, as I am sure you can imagine, is a complexed and important document, because it regulates what the Department can and cannot do in the future regarding these assets. In the end, although we wanted to be rather more brief, the lease document itself takes up more than 100 pages. It is a detailed document that sets out essentially the rules of the game going forward. In our interaction over the lease the Treasury was very strongly of the view that we must do everything possible to eliminate or severely limit any contingent liabilities and strenuous efforts were made to do that. Treasury oversaw the process to make sure that we did not include any liabilities which we should not. In the end we were able to exclude almost all contingent liabilities, except for those related to possible land invasions and possible land claims. We were fortunate enough to be concluding the final lease during some of the difficult times in the region. In the end we also in consulting with the Minister of Land Affairs accepted certain liabilities for a specific period of time should the Government fail to take any action if the land in question was invaded by communities, therefore making it impossible for the Forestry to carry on. If the Government refuses to take any action in that regard, we would then face certain liabilities. There are also liabilities with regard to future land claims, although, again, these have been managed down to very specific instances. We believe that the liabilities that we have accepted at the end are liabilities which are highly controlled and are in cases where we think it is very unlikely that the State will ever face any difficulty, but where, for example, the investors became very nervous in these certain circumstances. In general, I can say that the transfer of risk has been successful because by managing the plantations we carried all sorts of risks and liabilities, and through the transfer of these plantations these have been limited to very specific, and if I may say, unlikely cases.

[Mr D Gumede] I think it still merits a risk analysis of possible liabilities which should be communicated to the Committee.

[Mr P Gerber] If I understood the lady correct, then it means that we are leasing the land and not selling it. You say that the Department of Public Enterprises is heavily involved in this process. One of the weaknesses in the whole Arms Deal was the lack of systems. For instance, when it comes to certain departments due to the lack that they have never been involved in those kind of dealings before. I was just wondering, we do not sell off or lease off forests every day and that the Department of Public Enterprises themselves really has done their homework on this. You have not answered the question Mr Gumede asked you of who the preferred bidder was? I still have difficulty with this whole concept of private bidders and preferred bidders. In terms of the R335 million - did you value that as an asset, a lease or as a growing concern? How did you come to that amount? Was it split in the middle between two evaluations or something like that? I would like to get more clarity regarding the final amount for this Komati Land which was leased off.

[Mr A M Muller] To be very clear, there was a substantial degree of advice that was brought in by Public Enterprises and by our Department. International advice, both from the commercial consultancies, as well as from other governments who have gone through these processes, to the point which I believe that it is just been written up as a book as a bit of an example of best international practice by the people who did the advice. I suppose they would like to sell their services. It was very good advice. I do think that I need to mention is that we are talking here about a transaction that was actually largely lead by Public Enterprises. I am not sure at what point we should draw the line between our responsibilities. We are very happy to inform the Committee that in essence we are describing the responsibility of another department. I think it would be useful just to clarify the preferred bidder, as well as the way in which the amount was determined. I think that it was a very clear process that resulted in that.

[Ms L Bethlehem] The bidder is a company called Zama Resources. The question of the lease and the asset - it is an interesting set of issues and the Director-General is right that we took substantial international advice on this, particularly from the Government of New Zealand which had previously done this. The Director-General is also correct to say that later in the year there will be a conference where there will be international experiences presented about the ways in which different countries have done this and ours will be used as a case study. With regard to the amount that was arrived at for that particular asset - a valuation was performed, and again this is under the Management of Public Enterprises, by an independent Forest Valuator which was signed off by the SAFCOL Board which essentially set out what that company believe to be the value of the asset. The valuation included both the rental payments which are made in terms of the lease, as well as an once-off payment for the assets themselves. Companies will be paying lease rentals going forward and discounted cash flow valuation of those was included in the amount and from there it was a bidding process. The bids were then compared to the independent valuation. Again, the Director-General is right that this is something of which we are informed, but which is under another department.

[Mr P Gerber] Was only the one valuation done which was included by SAFCOL Board or was there more than one done?

[Ms L Bethlehem] I think that I am now stepping into areas that I do not have enough detail on. I am just not sure how many valuations were done?

[Chairperson] We move to 2.9 - underspending

[Ms K Mothoagae] My question is on page 79 to 80 of the Annual Report - expenses per programme and explanation of material differences. According to the PFMA it is required that monthly progress on expenses should be submitted to Treasury. Using the early warning signs we would like to know, from the Accounting Office, if he did not foresee the savings on, for example, programmes 2, 7 and 8 which reflect saving which is in excess of 13% each?

[Mr A M Muller] The management of expenditure in the Public Service is an interesting art. I say that carefully. My colleague, the CFO, does run a monthly expenditure review Comparison against Forecasting reporting to Treasury. We are in an environment in which certain decisions which are well outside of our control can have substantial material influence on our expenditure. It is the simple decision of the Cabinet to approve or not approve an appointment at a Senior Officer level; to approve or not approve a policy for further work to be done can make significant impacts. As a result we do have to manage through the year the progress and to ensure that those programmes which for some reason are progressing faster than was planned, we do not unnecessarily hold them back. If there are funds available for programmes which are slower than we had hoped for, we go through the necessary processes to adjust the funding between them with the intention that at the end of the year we shall have expended the budget for the purposes voted, if not quite in the exact proportions that we had indicated in the beginning of the year. If there is any detail about how we do process the various amounts, the CFO will be happy to assist. We do manage and monitor. Our experience is that it is usually the big external events that cause major differences. For instance, if a bidder is expected to come on a certain date and a legal problem is reached and that delays the process for three months, it completely throws our budgeting for industrial forestry which we have hoped to dispose off in a certain time. We can go through, line by line, and try to recollect what happened on particular lines. We are very happy to try and do that, but I think in general we are managing quite a complexed environment and the challenge is to let things that are going well go and to chase the ones that are running into difficulty and try and unblock the difficulties. It does result in this kind of pattern of expenditure.
[Mr M J Mabala] If I may give a little bit of details in certain instances? We are talking here about programmes 2, 7 and 8. We usually at the beginning of the next financial year we normally identify areas where there was underspending and the reasons why there was underspending and whether that amount under spent can then be requested as a roll over. In these particular instances, I can refer to programme 2 where the biggest amount of spending was in two areas where we asked for a roll over. That was for life management. We were not able to finish the implementation of projects that were related to addressing the damage that was caused by floods. Again, it was because towards the end of the financial year there were other floods that now disturbed the continuation of the projects. That is the reason that we have certain amounts that were under spent. Forestry - it was also because certain processes that were being run between the two departments, Water Affairs and Public Enterprises, were not finalised in time. Especially in as far as the entire structuring was concerned. So in that respect we had certain amounts that were not spent by the end of the financial year and then we had to ask for roll-overs. That would be the real issues. Apart from that, we have on a monthly basis the early warning system, as has been reported by the honorable member, where we do indicate areas where there is concern, and the reasons as much as we report to National Treasury we also tell them that there are reasons that are beyond our control and we will then be requiring the money to be rolled over.

[Ms K Mothoagae] I still wish to pursue the matter by asking a further question. Was there any reason why the savings were not taken into account when the revision of budget was done? And couple it with the explanation on page 80 of the Annual Report that there may be reasons for the filling of vacant posts for consultants that also contributed to the under spending?

[Mr M J Mabala] If I understand the first question clearly - it was saying whether the savings were considered when the revision was done? Normally what happens is that we work through a system with National Treasury that indicates to us within a number of years, three or five, of the MTF - how much money can be allocated to a particular department considering the smoothness within which spending will be happening. Again, what happens is that towards the end of the financial year we also have an opportunity to go to National Treasury and say to them that we want additional money, because certain processes will not be covered within the indicated allocation. So that process, again, happens independently where one would find in a particular year that additional funds are made available over and above what was indicated. That is taken into consideration when the budget for the next financial year is considered. The question in terms of the savings when consultants were appointed and also in terms of the filling of positions - I think the details can also be confirmed with the Deputy-Director General : Corporate Services in terms of the appointment of personnel. In as far as the appointment of consultants goes - we found that there are processes or a programme that is in place which need additional manpower to come and help, and especially from the consultants, but before the plans are in place one would not be in a position to appoint the consultants to do work. It also has a lot to do with, firstly, the internal processes of having plans ready or even to acquire the services of the consultants to come and do planning before our first spending can take place. That also has the implication of saying if those plans are not in place immediately that there will be some delays.

[Ms K Mothoagae] Does it mean that a lack of proper planning is also contributing to all that the CFO is raising?

[Mr A M Muller] As I have already referred, I think that the context in which we plan is a difficult one. A current process, as an example, when we have planned to run a particular policy consultation process for which consultants will have to be appointed, the original schedule was given. For various reasons outside of the control of the Department it is delayed for three months. The question is can we be held accountable for a decision at a political level that says this process must wait now for three months because something is happening, for instance, in another department. I am referring to this one particular that is happening at the moment. I do believe that we seek to plan, but we have to recognize that we are planning within an uncertain framework and what is as important as planning accurately is that we should also have mechanisms to manage the resources we have and make sure that they are effectively used for the general purposes that they were voted for. I think we do achieve a good balance. I will agree with the Member that in most cases we do not spend exactly as was planned. I think that is the reality and we have to manage within that reality.

[Mrs B T Sonjica] I want to raise a concern around programme 7, sub programme 4 for Local institutional development support, because it reflects the biggest saving in that area and yet it is quite an important allocation which looks into the capacity building of local government. Could we get an explanation towards that given the limited capacity within Local Government?

[Mr J Pottoane] This is true. It is quite an important function in terms of building the capacity of the Local Government. The House is definitely aware that the transformation of that sphere of government in favour of December 2000 that it has taken quite a while for the new local government structures to get in place. We have a story of one of the local governments that did not even had an office five, six months after they were in place. These are the practicalities in terms of the difficulties that are there on the ground. Secondly, there has to be a methodical approach which in conjunction with the Department of Provincial and Local Government and the Department of Water Affairs and Forestry was consulted to ensure that our efforts are synergistic. As a result this kind of processes tend to be protected as a result of long consultation processes and as a result of this important function there would be some underspending.

[Chairperson] Then we go to number 10 - issues relating to the 1999/2000 financial year.
[Mr B McIntosh] May I say that it is good to be in this Committee? It is possibly the most important Committee in this Parliament. I appreciate being here. I would like to ask the Director-General and his staff, on page 10, paragraph 3.1 of our questions we put through to you - could you inform us on what progress you as a Department has made in taking the appropriate steps to apply disciplinary actions in terms of unauthorised expenditure?

[Mr A M Muller] This is paragraph 3.1, page 10, unauthorised expenditure. Is this the expenditure on the contracting of legal advice?

[Mr B McIntosh] It is unauthorised expenditure in which you had agree to take disciplinary action. What disciplinary action are you taking? Your response last time was that what action you have taken has not been published, but after a series of consultations and negotiations it was concluded that the system is in need of more efficiency and better control. In the paragraph it says "The Department is now taking appropriate steps to institute disciplinary action." What have you done?

[Mr A M Muller] I believe it refers to the case where a legal officer was asked to source an advance on an urgent basis on a matter to do with environmental legislation and went to the Attorney nominated by the internal officer rather than to a State Attorney. The matter was reviewed. It was found that while there was good reason to go to a nominated source of legal advice, because of the particular nature of the problem and the expertise of the person nominated, it was strictly an incorrect procedure. That procedure was then reviewed. The officer was interviewed. He explained that he felt that because of the urgency and because the instruction came from the senior officer he did the right thing. He agreed on reflection that he should have told the officer that he cannot procure legal advice on that basis and that he should go first to the State Attorney. There was a discussion as to whether he should reimburse, I believe it was in the order of R5 500 that was paid for this advice, that amount. It was concluded that because substantial correct useful legal advice was indeed obtained by the State it would be unjust enrichment by the State to take money from an officer when it has, in fact, received perfectly good useful legal advice. The officer was then cautioned that even if the instruction came from the Chief Director they were in future please to remind the Chief Director that there were rules and to apply the rules in the future. So there was a verbal caution. The Chief Director concerned was also advised that they should not put undue pressure on officials to break the rules. If that is the case that was referred to, that is certainly on the cases in which I know that this matter was raised and this is how it was dealt with.

[Mr B McIntosh] Was it published?

[[Mr A M Muller] It was a verbal reprimand. It is certainly on record in the Department, but it was not published as a public reprimand. No, we do reserve that kind of sanction for more serious cases.

[Mr B McIntosh] In your reply to question 2 on page 10, you said you had come to a conclusion that your procurement and provisioning system is in need of more efficiency and better control. What have you done to introduce better efficiency and control?

[Mr M J Mabala] When we looked at our internal controls, especially in the procurement area, we had earlier identified some gaps. We went on to establish regional committees that would on a regular basis look into the procurement of goods and services. We call them the Economic Control Committees. They are further established in every region and they report regularly to a committee at Head Office that looks into the entire acquisition of goods and services.

[Mr B McIntosh] What I think we need to know is are those committees now functioning? Have you received any reports from them?

[Mr M J Mabala] The committees are functioning. We have received the reports and we have a regular reporting process from every region. They do report regularly to the committee at Head Office and we are satisfied with the amount of ……………… report sitting in there.

[Mr B McIntosh] On the budgetary process on page 10, question 3 put down as 2 - what progress have you made in addressing the question of vacant posts and the question of posts which are additional to the establishment? There is a table of overstaffing in the regions, Forestry and Head Office. Could you tell us what is happening there?

[Mrs M Modipa] What the Department started with in 1999/2000 - we had an additional post to the establishment to the amount of R8 044. As we sit here currently, we have made progress in trying to rationalize the situation, because the additional posts is people who are being absorbed from throughout the country who are being put and tried to be matched to the positions with the same value of money into the establishment. Moving from 1999/2000 at an amount R8 044 we have moved to a process of rationalizing that kind of situation. We are currently standing at R2 887 employees who are still to be matched to those positions. The process of restructuring, especially in Forestry, has also assisted us in terms of trying to rationalize people from those other areas also into Forestry vacancies, as they exist. One other thing that makes us to be able to deal with this situation is that we have prioritised this situation a lot by filling positions externally which also makes it difficult for us to fill positions immediately, because we think it is a priority for us to rationalize the establishment before we fill the positions from externally. That is beginning to give a picture of where we are getting people first into the system before we go outside and put people into those vacant positions.

[Mr B McIntosh] Could you explain to me how you do this Human Resource Management, because even if one takes out Forestry, which I accept has been in terms of administration, a festering sore in the Department, your additional establishment is just under 2 000 and your vacant posts is around 7 000? I do not know how you match those two figures. How is that being done? When do you think you are going to have resolved this discrepancy?

[Mr A M Muller] This might seem like a refrain, but you were not here last year. You might not recognize it, but you have heard it before. The Department has been in a process of restructuring since 1994. It went up from 7 000 to 27 000. It is on the way down. We expect it to be down to approximately 7 000 within five years. A completely reconfigured 7 000, but down there again. We do have a difficulty in matching the establishment to the actual work, the establishment by which I mean the administrative establishment to keep pace with these changes. I am not sure, for instance, how the Forestry establishment currently looks like, whether we have entirely cleaned out all the industrial forestry. It is a question and I do not know the answer.. This process of running the establishment has tended to run behind the actual movements as we restructure. I think that when we stabilize, and I am afraid it will only probably be within the next five years, that we will then see a closer match between the posts vacant, many of which we have no intention of filling, but they are formally registered as posts vacant and they need to be cleaned up, and the additional posts which we would have liked to reduce to zero. My colleague has said that the number here is 4 000 and it used to be more than that. The number originally that were additional to the establishment was 13 000. We believe that we had made quite good progress. We do not see this being completely cleaned up for a couple of years yet. It is being dealt with in the ongoing process of restructuring. I should add that that restructuring process is managed by all my senior managers in a committee which I chair on a fortnightly basis, because the pace of change of structural change as we deal not just with Forestry but with water institutions as well. We are about to move perhaps 6 000 people from the Department into Local Government in the next three years according to the Division of Revenue and its programme. The administration of just keeping up with those changes as they happen is challenging.

[Mr B McIntosh] In the light of your answer, and I accept that these statistics that we are talking about were of the 2000 year, but aligned for the fact that you are planning to move a lot of responsibilities to local government in terms of the Division of Revenue Act, if you were to come back again to this Committee, could you not give us or prepare to give us whenever you come before this Committee again a more effective congruence between posts vacant and posts additional to the establishment? I am sure that nobody in this Committee underestimates the transitional procedures, the bringing together of different departments and sorting out administratively the kind of problems that we have had in creating the new South African. Even so, I still think we should get some more up to date figures on this, just for the discipline of the budgetary process.

[Mr A M Muller] We are happy to give that. Can I just say that as an example of how it is moving, the figure that you have for vote vacant posts shows 13 612. The most recent is 8 722. So 5 000 gone. Within that what we will try and do, if that is acceptable, is to distinguish between the funded posts which are vacant, which are those that we intend to fill, and the unfunded which are in a sense "parked" and not intended to fill. That might give the Committee a better idea of where we intend to go and what the administrative and budgetary problems are in terms of unfilled posts for administrative reasons.

[Mr B McIntosh] I do have one question. It falls under the budgetary process although it also came up under WARMS. There is a section, and maybe the Director-General could note this and I think this Committee should note it, under 5 on page 70 of the Annual Report called Public entities. The Director-General has mentioned in terms of over spending and the kind of money that the Trans-Caledon Tunnel Authority, for example, is receiving. We are talking about billions of rand. We have also just had a new dam approved by Cabinet to service the growing Western Cape areas called Skuifraamdam. That is going to be off budget as well apparently. The Trans-Caledon Tunnel Authority is going to be presumably handling that. I just think in terms of financial discipline in the National House- keeping, SCOPA should at least know in some way if the Trans-Caledon Tunnel Authority does not report to the Auditor-General. Maybe the Auditor-General himself could just inform us as to whether he does do report it on the Trans-Caledon Tunnel Authority as an example of the Water Boards as well? I do think from that point of view that we as a Committee should know about that and how that impacts on the budgetary process for the Department.

[Mr A M Muller] Obviously the accounting arrangements for the Public Enterprises was something which is covered by the PFMA, again, which is changing. I believe most of the reports, there might be one or two exclusions, are tabled in Parliament as required. We could obviously be advised as to what the arrangements are in terms of their oversight. We are following here the format as required. I think the whole question of accountability in Public Enterprises is again one of the broader ones which we defer to our colleagues in Treasury and Public Enterprises for guidance. We follow their rules, but they set the rules.

[Chairperson] In terms of Schedule 2 of the PFMA, the Trans-Caledon Tunnel Authority (TCTA) definitely falls under the PFMA for that purpose.

[Mr T Nombembe] The TCTA is audited by a private audit firm and we are not responsible for that audit.

[Mrs B T Sonjica] It is a policy matter. The issue is about the filling of the vacant posts. Does it address the issue of representivity in terms of gender in the demographics?

[Mrs M Modipa] I think one of the priorities as we begin to fill these vacancies that we begin to redress as well. We do have statistics that we can provide to that effect to show that we are advancing towards redressing it. Our most difficult areas are the skills resource which are for example the field of engineering. We are doing all efforts to try and address the situation with all the means available to the Department.

[Mr P Gerber] I want to know from the Director-General whether the Department in terms of the budget has the capacity to deal with illegal commercial plantations? In other words, if a landowner puts up a plantation next to a sensitive nature reserve and there is no way that he does not get a permit, does the Department have the capacity to go in and remove that? Does the Department investigate the zonings and status of the adjacent properties when an application is made by a landowner to start a forest on his property?

[Mr A M Muller] I think we do have some capacity. We obviously do not have as much capacity as we want to pursue illegal plantations. We are bound by remedies that start with a polite interaction before we use more forceful methods. I think our success rate is reasonably good. Reviewing the appeals in front of the Water Appeals Tribunal at the moment, I do note that there is a preponderance of appeals relating to decisions taken in respect of these kind of permits, which suggests to me that at least there is legal action happening and that people are being squeezed by it. In relation to the precise details of what we consider when we give permits for a forestation - our interest is limited to that of water use and therefore we would not be that concerned about the neighbours. If I am not mistaken, we are also, by agreement with our sister agencies, looking at a number of other dimensions. I am not sure if this is one of them and whether my Chief Director : Forestry could not give some guidance. It is a matter of some sensitivity.

[Ms L Bethlehem] I can only add that when a decision is made about whether or not a license should be given for a new plantation to be planted, there has to be a decision made by our Department in relation to the water impact, the stream flow reduction impact. By the Department of Agriculture - if it is land that has not been previously cultivated, and by the provincial Department of Environment Affairs with regard to the environmental regulations. I imagine that the zoning question would fall into the environmental regulations. I am not sure of that. I think that what we are trying to do at present is to establish a one-stop shop, because one of the difficulties for plantation developers is that they have to go to three different departments for permission before they can plant. Sometimes it becomes a very lengthy process. So there are pilot projects to try and get the three departments to make a decision jointly and therefore integrate the decision-making process.

[Mr B Kannemeyer] Suffice to say that the matters raised, and as the minutes will reflect, I think the Director-General and his Committee has also taken note of the different aspects that we have agreed would be supplied with in writing, and the follow-up and the timeframes that the Director-General himself have indicated when we would get that. If we could get that in the stipulated timeframes we would be in a position to finalise our resolution so that we can follow-up on the rest of the matters.
[Chairperson] I think we have dealt with a lot of issues. On a number of issues I think there is causes of concern and we will discuss it within SCOPA and come back to you on these matters. At the end of the day we must establish whether the taxpayers gets his money worth and whether the financial management of this Department is in order. Thank you very much for being here.

[Mrs B T Sonjica] Thank you for inviting us to participate in this very important portfolio. In the future we will be better prepared for this type of interaction. We look forward to that.