Department of Labour and its entities 1st Quarter performance: research report; 2014/15 Audit by Auditor-General South Africa

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Labour

22 September 2015
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Appropriations Committee Researcher provided a brief analysis of the expenditure review of the Department of Labour (DOL) for the past five years, including the first quarter expenditure for the 2015/16 financial year.

The DOL spent 99.5 % of its budget in 2010, but achieved only 43.4 % of its target; 99% of the budget was spent in 2011, with 59% of targets achieved; 95.1% of the budget was spent in 2012, with 53% of targets achieved; 97% of the budget was spent in 2013, with 75% of targets achieved; and in 2014, 95% of the budget was spent, with only 43% of targets achieved. Programmes on goods and services had not been performing well. This had been due to reasons such as a delay in the submission of invoices by the Department of Public Works and incorrect invoices not submitted on time, delays in procurement in administration, and issues with inspection and enforcement services, labour policy and industrial relations programmes. In the first quarter of 2015/16, the DOL had spent R778.8 million of the annual R2.6 billion budget, reflecting an under-expenditure of R130 million against the projected target.

The Auditor General’s presentation provided guidance to the Committee on how to ensure effective oversight. It listed the ten qualities of an effective oversight Committee. The Committee should also involve audit committees in the accountability processes, advocate for the establishment and strengthening of internal audit units within entities, intensify oversight visits as an additional facet to portfolio committee hearings, advocate political accountability by inviting Ministers to attend hearings, and get monitoring reports from National Treasury on a quarterly basis.

Members noted with concern that the same research findings had been presented years ago, and the DOL was only getting worse and failing. The Committee had to demand that the Minister appear before it to explain the issues identified in the researcher’s report. The Workmen’s Compensation Fund had failed the vulnerable in society. The accounting officer must be held accountable. There had been a lack of consequence management, and what was now evident was the retrogressive nature of the DOL and its entities. The Minister must give a commitment as to when action would be taken against non-performing senior managers, who were also tolerating under-performance from their juniors. The Committee had been deluded into thinking that the Department was performing by looking at its spending, yet it had been under-performing. The Auditor General had highlighted a number of issues over the years which had not been remedied.

Meeting report

Department of Labour Five Year Expenditure Review and 2015/16 First Quarter Analysis

Mr Phelelani Dlomo, Appropriations Committee Researcher, provided a brief analysis of the expenditure review of the Department of Labour (DOL) for the past five years, including the first quarter expenditure for the 2015/16 financial year. The analysis began with the 2010/11 to 2014/15 financial years, with an aim of reflecting the full picture of trends over the past five years. It also looked at the expenditure for the first quarter of 2015/16 in relation to the performance targets for the same period. The intention was to assist the Committee to conduct more effective oversight and make necessary recommendations to the Department to improve its expenditure and performance trends.

The DOL spent 99.5 % of its budget in 2010, but achieved only 43.4 % of its target; 99% of the budget was spent in 2011, with 59% of targets achieved; 95.1% of the budget was spent in 2012, with 53% of targets achieved; 97% of the budget was spent in 2013, with 75% of targets achieved; and in 2014 95% budget was spent, with only 43% of targets achieved. Programmes on goods and services had not been performing well. This had been due to reasons such as a delay in the submission of invoices by the Department of Public Works and incorrect invoices not submitted on time, delays in procurement in administration, and issues with inspection and enforcement services, labour policy and industrial relations programmes.

In the first quarter of 2015/16, the DOL had spent R778.8 million of the annual R2.6 billion budget, reflecting an under expenditure of R130 million against the projected target. Reasons for under-spending had been slow spending on stationery, office leases and travel, and unfilled funded vacant positions.

In 2012, the Department had recorded R880 000 of fruitless and wasteful expenditure and a number of investigations were under way. This had been attributed to the Gauteng Imbizo being cancelled due to unforeseen circumstances, lost soap dispensers, the Jobs Fair visit, a mutual separation agreement with an official, and a damaged photocopier machine.

Mr Dlomo recommended that the Committee should ensure that the Strategic and Annual Performance Plan was credible before it was adopted every year, and ensure it was monitored on quarterly basis. The Committee should request a presentation on the Service Delivery Improvement Plan and Audit Improvement Plan, based on the challenges raised both by the Auditor General (AG) and in the Annual Report. The Committee should invite both National Treasury and the Department to clarify the issue of the 2014 baseline budget cut, to understand the rationale and whether it would still affect the Department going forward. The Committee should invite the Department of Public Works (DPW), Travel with Flair and other service providers to address the issues of late payment and submission of invoices, as it affected the expenditure cycle of the Department and it had both legal and economic implications. The Committee should request an evaluation process for the non-performing programmes -- Programmes 1 and 4 -- to determine the exact challenges and bottlenecks, making use of Department of Monitoring and Evaluation (DPME) tools and systems to enhance performance outcomes. If these challenges were not addressed, the Department would struggle to contribute to the achievement of outcomes

Discussion

Ms F Loliwe (ANC) said the presentation was an eye opener as the Committee moved towards the Budgetary Review and Recommendation Report (BRRR). She asked if Mr Dlomo was not allowed by law to advise departments.

Mr D America (DA) said the report was painful and distressing to hear. The Committee had been deluded into thinking that the Department was performing by looking at the spending, yet it was under-performing. The AG had highlighted a number of issues over the years which had not been implemented.

Ms Meisie Nkau, Business Executive, Auditor General, supported Mr Dlomo’s analysis, as it had provided a lot of insights. The Department was spending, yet underachieving. The DOL was carrying accruals from previous years. The monitoring and evaluation was not working effectively. The performance information had to be given as much attention as the financial information to ensure service delivery. The DOL must present to the Committee on its spending by economic classification.

Mr Dlomo said the Appropriations Committee monitored all departments, but because of capacity constraints, it looked at at least eight out of 40. This Committee was at liberty only to provide recommendations. Interventions were useless if the strategic plan and APP had been approved by the specific portfolio committee. In the same way a bank rejected a business plan, the Committee had to be satisfied with the APP.

Mr M Bagraim (DA) said the same report had been presented years ago, and the DOL was only getting worse and failing. The Committee must demand that the Minister appear before it to explain the issues noted in Mr Dlomo’s report. He added that the Workmen’s Compensation Fund had failed the vulnerable in society.

The Chairperson asked how the Committee should engage with the National Treasury on the 100 posts in the inspectorate affected because of budget cuts, as this impacted seriously on the vulnerable.

Mr Dlomo replied that he was part of Parliament and had no direct mandate from the Department, but just assisted Members to provide effective oversight. In a sluggish economy, the DOL had to look at where the budget was being spent to achieve value for money. The Committee could call the Treasury and the DOL to discuss the issues together, but the South African Treasury was not as hard as those in other nations, where money was taken away for the next financial year if they were not happy with the performance. Because of the challenges in economic growth and shrinking revenues, the Treasury may not be able to give the money needed.

The Chairperson thanked Mr Dlomo for informing the Committee, and suggested the Appropriations Committee should advertise itself to the other Committees.

Auditor General presentation

Ms Nkau said the purpose of the presentation was to provide the Committee with applicable information and guidance on the Cooperative Governance portfolio’s 2014-15 audit outcomes so that the Committee could ensure effective oversight. She listed ten attributes of an effective oversight committee. These were:

  • Adequate powers and functions, and enough time to meet;

  • Capacity building of members and continuity of membership;

  • A competent secretariat and professional support (research / legal);

  • Annual oversight objectives / effective planning structure/s;

  • Innovative oversight practices, e.g. oversight inspections;

  • Constructive working relationship among members;

  • Reliance on assurance role players such as AGSA and Audit Committee;

  • Positive relations with media and other stakeholders;

  • Executive authority support / accounting officer cooperation; and

  • Self- assessment by committee / monitoring and evaluation (M&E) of all committees by Speaker’s office.

The focus areas of portfolio committees included involving audit committees in the accountability processes; advocating for the establishment and strengthening of internal audit units within entities; intensification of oversight visits as an additional facet to PC hearings; advocating for political accountability by inviting the Ministers to attend hearings, and getting monitoring reports from National Treasury on a quarterly basis.

The presentation had a diagram showing how the Department and its entities had performed from the 2013/14 financial year to date.

Discussion

Mr Bagraim asked if the DOL was the worst department in government. He thanked the AG for speaking truth to power and he hoped somebody would be taking action. The Chairperson would not leave any stone unturned. He suspected corruption in the Compensation Fund, where R52 billion was collected annually.

Mr America said the accounting officer must be held accountable. There had been a lack of consequence management and what was now evident was the retrogressive nature of the DOL and its entities. The Minister had to give a commitment as to when action would be taken against non-performing senior managers, who were also tolerating under-performance from their juniors.

Ms Nkau replied the DOL was not the worst, but the Committee had to measure itself against the best.

Mr Dlomo said the Committee must put in a mechanism to measure the BRRR recommendations. It could also invite the Public Service Commission to enhance its understanding. The DPME had a mechanism to assess senior managers in terms of accountability, human resources and financial performance. No action had been taken against officials engaging in irregular activities. When the DOL appeared before Parliament, the Committee must not lose sight of the issues presented.

The meeting was adjourned.

 

 

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