Department of Correctional Services 1st Quarter 2015/16 performance & Internal Control Environment

Meeting report

Department of Correctional Services on the Internal Control Environment

Mr Abel Motaung, Deputy Commissioner; Internal Control Compliance, Department of Correctional Service (DCS) said that internal control environment challenges had been weak structures, ineffective and weak monitoring and evaluation of financial, compliance and performance information, ineffective oversight functions to ensure that standards were met, and poor record-keeping mechanisms. There had also been inconsistencies in reporting on performance information, material non-compliance to regulatory frameworks, repetitive audit findings, non-implementation of consequence management, as well as poor audit management.

The Department was following a combined assurance approach to ensure that the internal control system was effective and efficient in all areas of its operations. This approach had the benefits of maximising risk and governance oversight, maximising control efficiencies, and optimising overall assurance to the audit and risk committee.

Mr Motaung said everyone within the Department had a role and responsibility to maintain to ensure an effective and efficient internal control system. This approach therefore co-ordinated the efforts of management and internal and external assurance providers in a manner that ensured collaboration, and assisted in bringing about a holistic view of the department's risk profile and assurance activities. The combined assurance approach ensured that the internal control system was designed to provide assurance on the following aspects:

• Effectiveness and efficiency of operations;
• Reliability of financial and performance reporting;
• Compliance with applicable laws and regulations.

The approach considered three lines of defence to ensure an effective and efficient system of internal controls within the Department. The first line included risk owners/managers; the second line was comprised of risk, control and compliance, with the third line being the internal and external audits. The second line of defence (internal control) was set up to support management in ensuring effective and efficient internal controls, and was structured with an internal audit component, risk management, an internal control unit, and an inspectorate unit for compliance purposes. The Department was addressing all vacancies within the internal control environment.

Role players within the internal control environment had committed to supporting the audit committee (AC) through tracking and monitoring audit action plans, ‘internal controls’ being a standing item on AC agenda, and considering any other business or concern raised by the AC.

The Auditor General of South Africa (AGSA) would provide audit liaison, and review responses for quality before submission to ensure their acceptance. It would also monitor commitments and dashboard reporting, coordinate findings and responses (also from the regions), and hold meetings to clarify issues and follow up on non-responsiveness. As a result of the above, the internal control environment had gained the trust and support of the AC and AGSA.

Mr Motaung said the Committee's Budgetary Review and Recommendation report, adopted on 31 October 2014, stated that performance information must submitted within 30 days after end of a quarter. The Department had been in compliance with this requirement, as performance information had been submitted to the relevant stakeholders within the 30-days deadline. Positions that needed to be filled to prevent leadership instability had seen the appointment of the National Commissioner and Chief Financial Officer (CFO). In terms of the recommendation that the DCS should use technology to improve monitoring and security, it had been agreed that the Department needed to further explore the possibility of using technology such as CCTV cameras to improve monitoring and security. An exploration exercise would assist the Department to come up with an informed policy position.

He described the Department’s approach to the internal control maturity plan. The characteristics of the maturity stage had five levels:

• Level 1 was the initial stage -- processes were unpredictable, poorly controlled and reactive;
• Level 2 was the managed stage -- process characterized for projects, and was often reactive;
• Level 3 was the defined stage -- process characterized for the organization and was proactive;
• Level 4 was the quantitatively managed stage -- processes measured and controlled;
• Level 5 was the optimising stage, and focused on process improvement.

Currently, the Department was at Levels 1 and 2. Its internal control maturity plan included quality assurance, and automated coordination of audit findings and responses, and this should be a continuous process in order to reach Level 5. In 2015/16, the Department wanted to reach Level 3, with Level 4 being achieved by 2016/17, and Level 5 by 2017/18.

Mr Zach Modise, National Commissioner: Department of Correctional Services (DCS), said the Department’s responsibility was management and it had not performed well. As a result, it had put in place a team for compliance risk management and internal audit. It already had core source management, with a service provider. The Department had been lacking in consequence management, but had commenced investigations on all cases where irregularities had been reported. So far, the Department had improved on the assets side, but it had been qualified over the fact that a register of liabilities was not in place. The Department was currently working on the register, and would provide the Committee with another update on the status of the internal control.

Discussion

Ms G Breytenbatch (DA) said there was no internal control in the Department, and this needed to be taken seriously. Offenders were vulnerable and the Department wanted to appoint more staff, but it needed to ensure that there were people looking after offenders 24 hours a day, because several times there had been few people on duty, especially at the weekends. She asked why CCTV had not been implemented because it could be of assistance to everyone in prison, both warders and offenders.

Mr L Mpumlwana (ANC) said he was not happy with the promises usually made by the Department. It had promised to look into the issue of CCTVs before, and in the presentation it was not clear whether work on this issue had started or not. He had asked the Department about the vacant positions that have not been filled for five years, specifically in the Matole and Mthatha areas. People had been interviewed two to three years ago, but nothing had been finalised. The Department’s presentation had been rather vague, as most of the matters had been generalised. It was advisable to have a specific presentation. The issue of internal auditors was very important, and he was happy that the Department had promised to attend to this matter. He commented that the head office of the Department had grown more than any other part of the Department.

Mr W Horn (DA) said the AG had made a repetition on its findings for three years -- officials doing work outside the Department without consent, contracts being awarded to officials or close family members, and awards being given to those on the blacklist of the National Treasury. He asked if anything had been done to address these issues, and wanted to know the extent to which this had been happening.

Ms C Mojake (ANC) said that the presentation had not been informative. The issue of asset management and asset control had not been clearly addressed, with measurable performance indicators. The emphasis by the Department had been on corruption, where there had continuously been qualified audits. It actually helps to make management accountable, and this accountability could be embodied in the management contracts. She asked what disciplinary action and measures the Department was taking in this regard. When it came to staff, what type of challenges did the Department face in relation to the use of the Correctional Services Act and the Public Service Act? How did the Department make provinces account? Were there any challenges when it came to the autonomy of the provinces?

The Chairperson said such issues as people not being on duty to watch offenders in the evenings and on the weekends may be beyond management’s control. This came down to the question of whether there were people appointed who actually were committed to their jobs, and this may be a bigger problem. The autonomy of provinces had to be looked at to determine whether it was in terms of the law, because this could result in the DCS management losing control.

Mr Modise said the Department’s repeated problems had unfortunately been going on for quite some time, and every time proper measures were about to be put in place, they ended up not being done.  This had happened in the case of Ms Nandi Mareka, Deputy Commissioner for Financial and Management Accounting. The Department had taken a long time to fill in this position and Ms Mareke had been acting in this position on two occasions. There had been no appointment of a Commissioner to ensure that the same issues did not arise. What had been important was that a number of transformation areas had been put in place, as the Department had been requested to do.

The Department had developed a management structure to deal with remand detainees without any investment from National Treasury. The Department had therefore had to contact other structures to ensure that this initiative was fully funded and staff had been appointed. This was not an excuse, however, but rather an opportunity for the Department to handle the situation. It was true that the Department had received qualified audits for a number of years, and the areas of qualification had mainly been on asset management, unauthorised expenditure and material under-spending of the DCS. These areas had been attended to and this should be indicated by changes in the audit opinions.

The Department currently had no full complement for the shift pattern, and this would be an issue that it had to deal with before the end of September. It had been given a White Paper on Correction, but there had never been any financial assistance in the budget. Its establishment had increased, however, although this had also been because of the previous delay in filling positions.

DCS on first quarter performance report

Mr Terence Raseroka, Deputy Commissioner: Executive Management, DCS, said the Department had reviewed its performance against its plan for the first quarter, and had achieved only 21 of its 38 targets. The breakdown by programme was:

• Administration. Ten targets, four achieved,
• Incarceration. Eleven targets, four achieved,
• Rehabilitation. Five targets, four achieved.
• Care. Five targets, four achieved.
• Social reintegration. Seven targets, five achieved.

DCS on first quarter financial report

Mr Nick Ligege, Chief Financial Officer, DCS, said the year-to-date expenditure of the Department as at 30 June 2015 was R4 690 billion (22.75%), against the spending plan of R4 995 billion (24.23%), resulting in a R305 million (1.48%) under-spending of the original budget. Factors that had contributed to the under- and over-spending per programme were:

• Administration. The actual spending was R936 million (25.33%), against the target of R845 million (22.85%). The over-spending was mainly due to the net effect of over-spending for property payments under office accommodation.
• Incarceration. The actual spending of R2 882 billion (22.04%) against the spending plan of R3, 247 billion (24.83%) was mainly on compensation of employees, and was under-spent due to funded vacancies. The Personnel Administration System (PERSAL) reported a funded permanent establishment of 28 825, of which 26 428 were funded filled posts, 975 posts were filled additional to the funded establishment, mostly at the entry level, resulting in a total PERSAL head count of 27 403, but leaving 2 397 vacant funded posts (8.31%).
• Rehabilitation. The actual spending of R230 million (20.01%) against the spending plan of R255 million (22.16%) was mainly on compensation of employees, with under-spending again due to the vacancy rate. PERSAL reported a funded permanent establishment of 2 260, of which 1 961 were funded filled posts, 23 posts were filled additional to the funded establishment, mostly at the entry level, resulting in a total PERSAL head count of 1 984, but leaving 299 vacant funded posts (13.23%).
• Care. The actual spending of R426 million (23.70%) against the spending plan of R429 million (23.89%) was on compensation of employees, with under-spending due to the vacancy rate. PERSAL reported a funded permanent establishment of 1 924, of which 1 718 were funded filled posts, 36 posts were filled additional to the funded establishment, mostly at the entry level, resulting in a total PERSAL head count of 1 754, but leaving 206 vacant funded posts (10.70%).
• Social Reintegration. The actual spending of R215 million (24.15%) against the spending plan of R219 million (24.53%) was again due to the effect of the vacancy rate on the compensation of employees. PERSAL reported a funded permanent establishment of 2 153, of which 1 989 were funded filled posts, three posts were filled additional to the funded establishment, mostly at the entry level, resulting in a total PERSAL head count on 1 992, but leaving 164 vacant funded posts (7.61%).

On payments for capital assets, the under-spending was mainly under payments for buildings and other fixed structures due to the fact that invoices for April and May 2015 had been received late in June 2015 and would be processed in July 2015. There had also been slow moving projects due to a shortage of manganese bars and contractors who had been liquidated. The joint task team of the DCS and Department of Public Works (DPW), led by the Deputy Ministers of both departments, was currently looking at unblocking the identified problem areas. The spending plan as at June 2015 was R200 million against the actual spending of R129 million, resulting to an under-spending of R71 million.

The actual expenditure on compensation of employees had been R3 208 billion (22.86%) against the spending plan of R3 466 billion (24.69%). This was mainly due to vacant funded posts. PERSAL reported a funded permanent establishment of 42 006, of which 38 027 were funded filled posts, 2 116 posts were filled additional to the funded establishment, mostly at the entry level, resulting in a total PERSAL headcount of 40 143, but leaving 3 979 vacant funded posts (9,47%).

With goods and services, the actual spending of R1 312 million (23,94%) against the spending plan of R1 283 million (23.41%) was mainly on the item operating leases. Moreover, on interest and rent on land, there had been an expenditure of R44 000 incurred against a zero budget, which was due to interest paid on an arrear salary.

On transfers and subsidies, the actual spending of R25 million (20.79%) against the spending plan of R27 million (22.78%) was due to lower than anticipated payments of leave gratuities for service terminations.

Under payment for financial assets, the R7 000 expenditure incurred was due to debts written off.

In response to the Budgetary Review and Recommendations Report of 31 October, budget cuts as directed by the Cabinet had been implemented and service delivery had not been hampered. Budget cuts had been implemented only where there were historical trends of under-expenditure against planned targets. Spending pressures which had occurred where cuts had been made were managed as part of in-year monitoring and funds reprioritisation. The department had also implemented and complied with National Treasury’s cost containment measures with effect from 1 January 2014, on non-core items.

Discussion

Mr Mpumlwana said he was concerned about greater emphasis being placed on incarceration than there was on rehabilitation. It needed to be remembered that there was a difference between correctional services and prison. Therefore this should also be gradually be shown in the financial information, so that Correctional Services could move away from being prison.

Mr M Maila (ANC) said he was concerned about the over-spending and under-spending of the budget.

Mr Horn asked the Department for an explanation of how there could be arrears in the salaries of their officials. He was also concerned about the vacancy rate, and suggested the Department fill these positions otherwise there would be more losses. With regard to information technology (IT) and manual systems which had to be phased out, the presentation showed that there had been no spending during the first part of the financial year, and this required an explanation. The CARE programme must also be questioned. How could health services have a huge under-spending when health was an essential core element of the welfare of inmates?

Ms Majeke an also raised concern about the Department’s under-spending, looking at the 22% the Department had spent instead of the allocated 24%. It was worth addressing the identification of risks, so that whatever the Department was doing it could make reference to internal audit to understand the risks. She asked about the overspending on households.

The Chairperson said the last time the Committee had been told there was not enough budget for rehabilitation, and now there under-spending in this area. This needed to be seriously looked into, because it meant there was something wrong. He was sympathetic to the Department’s request for more funds. The Correctional Centre could be a business venture, because last time the Committee had been informed that the farms that used to produce were no longer producing, and there had also been complaints about equipment. Given the fact that there were thousands of young people in the Correctional Services who needed to be developed, he suggested that it could be a good thing for the Department to partner with universities and have graduates come to Correctional Services to teach detainees about life skills. He said that the Department deserved more money, and the Committee should consider making a recommendation to this effect.

Mr Modise said that with its limited budget, the Department was doing everything in its power to ensure that its quarterly performance report dealt with the issues which it could overcome. It was true that the budget allocation was biased towards administration, because the Department was a labour intensive organisation. The Department was working with the branches that were responsible for rehabilitation and care of offenders. There had been a problem with the management committee, but an advertisement had been issued for people with skills like social workers that the Department wanted to include in the committee. The Department had been in contact with National Treasury in this respect. The Department wanted to change direction in the sense that it would put more investment into the rehabilitation programme.

He said the Department’s farms around the country were aligned to the needs of the communities around them, and from time to time requests were made to supply needy crèches and old age homes with vegetables through its the supply chain management. Interventions had started where some children who were not working had started taking courses in skills development at the correctional centres. The Department had an agreement with the Department of Arts and Culture and through this, a library was opened last year in the Western Cape for offenders to have books nearby. The Department also had a programme called Funda Mzantsi, where children attending formal schools outside competed with offenders on reading, storytelling, reciting of poems. The Department of Arts and Culture facilitated this event. The Department did sell vegetables to needy communities, but what the Department had not done was to see how it could utilise its revenue. The Department had, however, been donating to communities that were in need and had been trying to establish a training entity, but this could not be done.  Although the Department had been unable to establish a training entity, it had not abandoned this idea.

The meeting was adjourned.