Financial Disclosure compliance; Whistleblowing mechanisms: PSC briefing

Public Service and Administration

25 May 2016
Chairperson: Ms B Mabe (ANC)
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Meeting Summary

The Public Service Commission (PSC) firstly briefed the Committee on compliance with the Financial Disclosure Framework. The trend analysis on the submission of financial disclosure forms by national and provincial departments by the due date for the past five years was presented. In 2010/11 compliance had been 68%, rising to 85% in 2013/14 and dropping to 82% in 2014/15 financial year. The reports were due by end April for the preceding year. More Senior Management Service (SMS) staff were submitting electronically, but the numbers outstanding were 1 746. Western Cape and Northern Cape both showed 100% submission of financial disclosure forms by national and provincial departments, and Free State was the lowest performing province with 74%. National departments recorded 74% compliance, whereas the total compliance rate in respect of provincial departments was 95% by the due date. 35 of the 44 Directors General of national departments submitted their financial disclosure forms by the due-date of 30 April 2015, and 3 949 of the 4 159 provincial forms were received by due date. PSC was still concerned about instances where designated officials submitted their financial disclosure forms on time to their respective Executive Authorities, who then delayed in submitting those forms to the PSC.

Members suggested that the Public Service Commission (PSC) should report all cases where there is a suspected conflict of interest, and urged the PSC to try to achieve full reporting. It was suggested that PSC should also try to improve communication with various government departments by allowing at least two months for the finalisation and submission of financial disclosure forms. One Member suggested that the names of officials not submitting should be published, particularly in the case of Directors General, although another did not agree that it would serve a purpose,  and others expressed their dismay not only at the fact that people in such senior positions were failing to comply, but also at the non-submissions reported for the National Treasury, National School of Government and  Department of Public Service and Administration in particular. They asked if PSC was implementing the “lifestyle audit”, particularly for employees who were working with allocations of tenders. They asked for an indication of how the Office of the Premier in the Eastern Cape had managed to achieve compliance, asked if reasons were being provided for failure to submit forms, and asked about the process for submission of electronic disclosure forms. Several Members asked what would happen where the SMS employees had submitted forms timeously but there was a failure to pass them on by the Executive Authority. Members discussed whether those in acting positions should also have to comply, and the responsibility of members who were suspended or dismissed. Members also felt that this principle should be extended to local government, particularly municipal managers. It was noted that a report and comparative study would be provided and Members were asked to check the recommendations in that.

The PSC then presented a report on whistle-blowing, noting that the PSC was mandated by Cabinet to manage the National Anti-Corruption Hotline (NACH), through which whistle-blowers would report corruption and maladaminstration. In 2011, research showed that often employees who were whistle-blowers were victimised and intimidated by senior management and had little recourse. The study came up with recommendations to protect them, particularly since the numbers of whistle-blowers had been declining over the years, with people not having faith in the current framework; the Business Ethics Survey of 2013, as well as another study by PricewaterhouseCoopers found that 65% of employees with knowledge of wrongdoing in their organisations preferred to remain silent for fear of reprisal and victimisation. Recommendations included taking action against employers who victimised, the victimisation being criminalised, employers being obliged to keep identity of whistle-blowers confidential, and amendments to the Protected Disclosures Act and Witness Protection Act. This challenge was not unique to South Africa. Members supported the proposed amendments to be made in the PDA as whistle-blowing was regarded as one of the best mechanisms for fighting corruption.  Members sought clarity on the process and heard that the Department of Justice and Constitutional Development was processing the amendments. They agreed that victimisation of whistle-blowers should be a punishable offence and one Member suggested that incentives might be useful, although another felt that these could only apply if wrongdoing was actually found.
 

Meeting report

Financial Disclosure Framework and whistle-blowing: Compliance and current status: Public Service Commission (PSC) briefing
Ms Sellinah Nkosi, Commissioner, Public Service Commission, indicated that all members of the Senior Management Service (SMS) are, in terms of Chapter 3, clause 1 of the Public Service Regulations (PSR), required to disclose, to their respective Executive Authorities (EAs), particulars of all their registrable interests (e.g. companies and properties) not later than 30 April each year, for the previous financial year.  The PSR further require that the EAs must submit copies of the forms on which the designated employees disclosed their financial interests, to the Public Service Commission (PSC or the Commission) by not later than 31 May of each year. The PSC monitors compliance with the submission of financial disclosures and scrutinises them in order to determine the prevalence of conflicts of interest in the Public Service. The preliminary statistics for the last year were presented during September 2015 and the final statistics, after validation, would be  presented now. These include updates as at 31 March 2016.

She reported the trend analysis extracted from the submission of financial disclosure forms by national and provincial departments by the due date for the past five years. These showed that 68% of the national and provincial departments submitted their financial disclosure forms in 2010/11 financial year. The number went up to 85% in 2013/14 before going down to 82% in the 2014/15 financial year. The total number of both manual and electronic submissions of financial disclosure by Senior Management Staff (SMS) was 8 213, and 1 746 forms were outstanding. Western Cape and Northern Cape are the only provinces to have had 100% submission of financial disclosure forms by national and provincial departments by the due date. Free State was the lowest complying province with 74%. National departments recorded 74% compliance, whereas the total compliance rate in respect of provincial departments was 95% by the due date.
           
Ms Nkosi mentioned that there are some departments, both at national and provincial level, that did not submit a single financial disclosure form to the PSC by the due date of 31 May 2015. This contributed to the poor submission rate that was recorded nationally. 11 National Departments did not submit financial disclosure forms by the due date for the 2014/2015 financial year. These included:
Department of Environmental Affairs
Department of Correctional Services
Department of Higher Education and Training
Department of Human Settlement
Independent Police Investigative Directorate
National School of Government
National Treasury
Department of Public Enterprises
Department of Public Service and Administration
Department of Sports and Recreation
Department of Trade and Industry.

Seven Provincial Departments did not submit financial disclosure forms by the due date for the 2014/2015 financial year. Some departments, including Department of Higher Education and Training, Public Enterprises and Public Service and Administration, are regarded as repeat offenders, as they failed to submit their financial disclosure forms by the due date of 31 May for two consecutive financial years, from 2013 to 2015. Eight departments submitted their financial disclosure forms by the due date but did not achieve 100% compliance rate. The Departments of Correctional Services, State Security Agency and National School of Government still had not submitted all forms to date.

35 of the 44 Directors-General of the national departments submitted their financial disclosure forms by the due-date of 30 April 2015.Two Directors-General submitted their financial disclosure forms to their Executive Authorities after due date of 30 April 2015 - the Director-General of Military Veterans (submitted on 01 June 2015) and the Director-General of Public Enterprises (submitted on 08 May 2015). Seven Directors-General did not submit their financial disclosures forms by the due date.

Ms Nkosi took the Committee through the summary of submission of financial disclosure forms for the 2014/15 financial year by provincial departments. The Northern Cape recorded 100% compliance rate by the due date for the past four years and Western Cape recorded 100% compliance rate by the due date for the past five years. A total of 3 377 SMS members submitted their financial disclosures via e-Disclosure and 572 SMS members submitted manually. This showed the state of readiness to utilise e-Disclosure and how well it had been received and embraced by SMS members. Out of 4 159 provincial SMS members, 3 949 financial disclosure forms were received by PSC by the due date. 210 financial disclosure forms were outstanding, and this was a cause for concern. Parliament and Provincial Legislatures must hold the Executive Authorities of the poorly performing departments to account, as 100% compliance rate is required by the due date. The PSC will publish a consolidated report, on the Overview of the Financial Disclosure Framework for the 2014/15 Financial Year.

She mentioned that the PSC was still concerned about instances where designated officials submit their financial disclosure forms on time to their respective EAs, but the EAs delay in submitting the forms to the PSC. The obligation to submit the disclosure forms to the PSC rests with the EAs. EAs are also under an obligation to report on actions that have been taken against transgressors, and where no action has been taken, to provide reasons to the PSC.

Discussion
The Chairperson welcomed the insightful presentation that covered a lot of issues on financial disclosure. It would be important for the Committee to know if the Minister of Water and Sanitation was involved in the submission of a report on actions that had been taken in the previous financial disclosures. It would be proper for PSC to report all cases where there is a suspected conflict of interest. It is clear that there had been a slight decline in the number of financial disclosure forms between the 2013/14 financial year (97%) and 2014/15 (95%). PSC should be striving to achieve 100% in the submission of financial disclosure forms by SMS members. PSC should also try to improve communication with various government departments by allowing more time – and here she suggested at least two months - for the finalisation of the submission of financial disclosure forms in order to achieve the ultimate target of 100%. She agreed that it was of concern that some EAs were given financial disclosure forms on time but never responded at all for the signing off.
           
The Chairperson expressed disappointment that the Department of Public Service and Administration (DPSA) did not do well in the signing off of financial disclosure forms, as it should be leading by example in this framework. She suggested that the PSC should also introduce the model of the submission of financial disclosure forms to local government in order to ensure that there is consistency. She wanted to emphasise that the introduction of the model was not about disciplining officials but getting everybody moving in one direction. There should be a tracking mechanism in place to check if a particular department would be able to submit financial disclosure forms timeously.    
Ms Nkosi responded that the Minister of Public Service and Administration was indeed involved in the process as the PSC is compelled to write to the Minister to take action against any SMS members who did not submit the financial disclosure forms. The Minister also compiles the report that contained the information required to finalise the scrutiny. The SMS members in North West Department of Education and Sports Development were not available for consultation. PSC was receiving other reports on the actions that had been taken by the EAs on those SMS members who had not submitted financial disclosure forms. PSC had noted all the recommendations that had been made by the Chairperson and these would be taken on board.

Mr E Marais (DA) indicated that Members of Parliament are also expected to submit their financial disclosure forms by the stipulated due-date and it is often publicised in the media if any MP did not  submit a financial disclosure form on the due-date. He therefore suggested that PSC should publish all the names of officials who had not submitted financial disclosure forms, especially of those individuals in senior positions, like the Director-Generals. He urged that PSC should also publish the names of the seven Director-Generals who did not submit their financial disclosure forms, and their relative departments. It was quite clear that those senior officials who were reluctant to submit their financial disclosure forms were usually those who were doing businesses with government. The Department should collaborate with the Committee to “get rid of” those senior officials that had not submitted their financial disclosure forms.

Mr A van der Westerhuizen (DA) was shocked to hear that there were seven Director-Generals that had not submitted their financial disclosure forms on time, and noted that this was indicative of bad discipline in the Public Service Commission. He asked if there was there any specific reason for the decline in compliance for the submission of financial disclosure forms for 97% to 95%. It was unclear as to who was to accept responsibility if a member of the executive authority did not enforce compliance by a Director-General and SMS. The Committee should be briefed on any disciplinary steps that had been taken against those SMS employees who had failed to submit financial disclosure forms. He asked how far was the PSC on the “lifestyle audit”, especially for those SMS members who could potentially influence the decisions on the allocation of tenders? It had been reported that one of the best ways of defrauding government of public funds was through conducting business with family members.  It was therefore of concern that the financial disclosure forms that are to be submitted by SMS employees did not contain information on business interest of family members.

Ms R Lesoma (ANC) also welcomed the insightful presentation. She was worried to hear that there were only two provinces who were able to achieve 100% in the submission of financial disclosure forms. It was clear that the PSC was trying its best to ensure that would be a 100% achievement in the submission of financial disclosure forms, but she recommended that the DPSA would also need to come on board and provide further assistance. She felt that the “naming and shaming” method for those senior officials that had failed to submit the financial disclosure forms was not likely to achieve the desired results as it just put an unnecessary pressure on public servants. Chapter 10 of the Public Service Act and regulations was also about promoting and maintaining high standards of professional ethics and the Department of Public Service and Administration should also be leading in this regard. It would be important for the PSC to ensure that the executive authority was also able to do its bit in the process of submission of financial disclosure forms.

Ms Lesoma requested that the Committee should be provided with information providing a breakdown of those senior provincial officials who had not submitted their financial disclosure forms, as this would be helpful when conducting an oversight. She wanted to know if there was any progress or improvement that had been noted after the commitment by the Office of the Premier of the Eastern Cape, that it will conduct consultations with all the departments and submit the reports to the PSC. It was unclear if PSC was looking beyond the reasons that had been forwarded by various government departments on their failure to submit financial disclosure forms. The Committee should have a session with School of Government, DPSA and National Treasury, as these were particular institutions that should be complying with the submission of financial disclosure forms.
 
Ms W Neuhoudt-Druchen (ANC)   wanted to know the process for the submission of the electronic-disclosure forms, as it was unclear whether the form would go straight to the PSC or whether it would go via the EA of each government department. It would be important for the Committee to be provided with statistics on the number of officials in the Department of Planning, Monitoring and Evaluation (DPME) and the Presidency who did not comply with submission of financial disclosure forms on due date. She asked if there was any particular reason why there was no mention of the submission of financial disclosure forms from the SMS of the Department of Communications.
 
Mr M Ntombela (ANC) also asked if the Office of the Premier in the Eastern Cape was able to inform the PSC that it will conduct consultations with all the departments and submit the reports to the PSC. It was concerning to him to note a common defect between the State Security Agency (SSA) and National Treasury as he did not expect lack of compliance on the submission of financial disclosure forms from these very important departments who were to monitor compliance by others. He asked if there were any alternative arrangements that were made to ensure that the senior officials of the State Security Agency (SSA) are able to submit their financial disclosure forms.  He wanted to know about the kind of response that was received by the Chairperson from the SMS members at the Office of the Public Service Commission about their financial interests during the 2013/14 reporting period and asked for more explanation on the kind of circumstances that were “still the same” in respect of SMS members of the Public Service Commission in the current reporting period and the 2014/2015 financial year, as set out in slide 18? Mr Ntombela commented that it would be interesting to know how the National Treasury was justifying the compliance rate of 11%, considering that this department is the custodian of public funds. He also wanted to know what happened in cases where the senior officials had complied with the framework for submission of financial disclosure forms but the Executive Authority did not submit the disclosure forms timeously? He also thought the Committee should get an explanation whether the PSC had any plans in place to improve compliance with the submission of financial disclosure forms, and what motivation could be used for SMS members improve compliance in this regard.

Dr Dovhani Mamphiswana, Deputy Director-General: Integrity and Anti-Corruption, Public Service Commission, replied that the then Director-General of Department of Arts and Culture, Professor Patrick Ngulube was suspended during the period of reporting.

The Chairperson interrupted and wanted to know if an Acting SMS member was also subjected to the submissions of financial disclosure form requirements.

Dr Mamphiswana responded that the Acting SMS members were also required to submit financial disclosure forms but they had to do this at their own capacity. There was also an Acting Director-General from the Department of Human Settlements, Mr Mbulelo Tshangana, after the departure of Mr Thabane Zulu. The Director-General of IPID, Mr Robert McBride, had been suspended during the period of reporting and Mr Israel Kgamanyane had taken on the Acting position. The current Director-General of Department of Sports and Recreation, Mr Alec Moemi, also did not submit the financial disclosure forms.

The Chairperson complained about the fact that the information that was now being provided was not reflected on the presentation that had been made. The presentation was misleading in a sense that it had made mention of only three fully-fledged Director-Generals, from the Departments of Sports and Recreation, Human Settlements and Defence, who did not submit their financial disclosure forms.

Mr Marais suggested that the report should perhaps clarify what was the position for a fully-fledged Director-General and those who were in acting positions.

The Chairperson added that it was also possible that the calculation of the average compliance rate from 2010/2011 and 2014/15 that had been done by PSC was incorrect, as it included those Director-Generals who were in the acting positions.

Ms Lesoma requested that the PSC should be open to the Committee on all the information in regard to the process of submission of financial disclosure forms.

Mr Ntombela made the point that a person appointed in an acting capacity was expected to take on the responsibilities of that position and was appointed officially. He felt, therefore, that  it was immaterial whether the person was acting, as he or she should obey the obligations of that particular position.

The Chairperson disagreed with Mr Ntombela and said that the permanent and acting roles were quite different; an individual could be in an acting position for a very brief period.

Mr Ntombela wanted to know if it was stipulated in the legislation that the SMS members in acting positions should be treated differently to those in permanent positions, particularly in regard to submission of financial disclosure forms.

Dr Mamphiswana replied that there were two different ways in which acting posts would be regarded. Some bore the title, but may not have the full responsibilities of a particular position. The PSC reported on those Director-Generals who were suspended during the period of reporting. The regulations stated that even if SMS members had been suspended they are still required to submit their financial disclosure forms. That is why they were counted under the total of seven Director-Generals that had not submitted their financial disclosure forms.

Mr Marais mentioned that the suspended senior officials were still getting full salaries, so their responsibility and accountability was still on-going. PSC should have mentioned the names of the Director-Generals that did not submit their financial disclosure forms in their presentation.

Mr Marais suggested that it would be appropriate for the Chairperson to send a letter of congratulation to the Northern Cape and Western Cape for 100% submission of financial disclosure forms. He also noted that Articles 56 and 57 should apply to local government in the appointment of a Municipal Manager. It must also be stipulated that metropolitan municipalities have executive directors and directors and all of them fell into the category as directors.

Dr Mamphiswana replied that the decline in the rate of compliance to submission of financial disclosure forms was seen in those departments that had lowered the standard in the reporting period. PSC was indeed trying to improve communication with government departments so as to improve the rate of compliance. The PSC and DPSA are currently engaging with respective accounting officers, and part of these engagements were directed to improving the compliance rate.

He noted that the regulations are clear, and that the EAs should take the responsibility for cases where a Director-General had failed to comply with the existing legislation. It was the responsibility of the Committee to directly engage with respective EAs in cases where they had also failed to submit their financial disclosure forms. The PSC was still considering developing a framework to conduct a “lifestyle audit” but this was regarded as a very controversial method and violated basic human rights.

The Public Administration Management Act (PAMA) that was assented to by the President in December 2014 dealt with possible conflict of interest between SMS employees and their family members. It was indeed correct that the PSC should be moving towards 100% compliance rate for the submission of financial disclosure forms. The suggestion that PSC should be liaising with government departments at least two months prior to their submission of financial disclosure forms was appropriate, as this would also allow PSC to identify those EAs who had not submitted their financial disclosure forms on time. The performance agreement of the respective EAs should include the compliance with the regulatory framework. PSC would need to go back to the Eastern Cape provincial Commissioner so as to ascertain whether there was any follow-up that was made on the promise to inform the PSC that it will conduct the consultations with all the departments and submit the reports to the PSC.

Ms Nkosi stated that the Committee would be provided with a report on the comparative study of financial disclosures in other countries. There were also recommendations that were made in the report, and Members were asked to scrutinise those and indicate if they could be supported. The Committee could be provided with a booklet that contained information on all government departments that had failed to submit the financial disclosure forms on time. The Department of Communications and other government departments whose names were not mentioned in the presentation had complied with the submission of financial disclosure forms. PSC had taken a decision that once the Inspector General is appointed by SSA, he/she should be responsible for scrutinising the financial disclosure forms, as it was unacceptable for such an important agency not to comply with submission.

Dr Mamphiswana responded that Mr Zulu was suspended in December and therefore he would only be included in the 2015/16 reporting period. The Department was monitoring the submissions that had been made by various government departments during the submission period. The Department is able to inform all departments on the progress in regard to the status of financial disclosure forms. There is a concerted effort to ensure that all SMS members are able to ultimately submit financial disclosure forms and there was a hope that this would bring about improvement in the compliance rate in the upcoming reporting period.

The Chairperson reiterated that the model of submission of financial disclosure forms should be introduced to local government. The responsibilities of acting Director-Generals in regard to submission of financial disclosure forms should be clarified.

Ms Lesoma suggested that the acting Director-Generals should attend a specific training course in order to be familiar issues related to compliance, regulation and the importance of the integrity of government.

Whistle-blowing report: Public Service Commission briefing
Ms Nkosi stated that the PSC was mandated by Cabinet to manage the National Anti-Corruption Hotline (NACH), in terms of a Cabinet Memorandum No 45 of 2003 dated 14 August 2003. Whistle-blowers report acts of corruption and maladministration through the NACH. The Cabinet Memorandum provides that the PSC will from time to time evaluate the efficiency of the hotline system and recommend improvements where necessary.

PSC had therefore conducted research, in 2011,  “Measuring the Effectiveness of the NACH”. In this research, it was found that often employees who blow the whistle on corruption are victimised and intimidated by senior management and have had little recourse. The PSC received numerous complaints from investigators about threats from senior management while conducting investigations. It is therefore evident that those who are affected by the investigations turn against the whistle-blowers and the investigators. Whistle-blowers and investigators need to be protected in order for them to report any case of alleged corruption without fear and favour.

The PSC conducted a research study on “The nature and extent of the protection of whistle-blowers and investigators in the Public Service” and came up with feasible recommendations so as to contribute towards the protection of the whistle-blowers and investigators. The number of people who report corruption has declined. Many people do not have faith in the current framework as it is ineffective in the protection of the whistle-blowers and investigators. The Business Ethics Survey of 2013 in South Africa found that 65% of employees with knowledge of wrongdoing in their organisations prefer to remain silent for fear of reprisal and victimisation. This finding is consistent with that of the PricewaterhouseCoopers (PWC) Global Economic Crime Survey for South Africa of 2013, which points to a downward whistle-blowing trend. In 2007, 16% of the wrongdoing was discovered through whistle-blowing. This figure dropped to 6% in 2013. In 2007 the number of those who blew the whistle was at 25.3% and came down to 18.4% in 2011.

Ms Nkosi indicated that there were a number of recommendations that had been forwarded, which included increased protection of whistle-blowers when reporting cases of alleged corruption in the Public Service. Action should be taken against employers who victimize whistle-blowers: No previous liability was considered for employers who unfairly victimised whistle-blowers. PSC therefore wanted to recommend that criminal liability should attach to the employer, where detriment was suffered by the employee/worker after whistle-blowing. The Protected Disclosures Act should have a clause that provided for confidentiality of whistle-blowers.

She noted that the history of whistle-blowers in this country is replete with examples of victimisation, in both the public and private sectors. The PSC is of the opinion that if the Act is to become an effective tool against corruption and maladministration, then it needs to be revised to include an obligation, on the part of the employer, to keep the identity of whistle-blowers confidential. Departments should thus take the necessary steps to ensure such confidentiality, and by this tool, the protection of whistle-blowers should be enhanced and guaranteed.

In conclusion, Ms Nkosi emphasised that corruption destroys societies and the institutions established to deliver quality services. It holds development to ransom. The challenge has always been to develop effective whistle-blowing protection legislation, and this was something that countries all over the world had grappled with for some time. In order to increase security for whistle-blowers and investigators, the PSC therefore would be proposing an amendment to the Witness Protection Act to include additional security measures for whistle-blowers and investigators.

Discussion
The Chairperson appreciated the presentation as the whistle-blowing method was one of the best tools in the fight against corruption. She asked the PSC to clarify exactly what it was proposing.

Ms Nkosi responded that PSC had received proposals on possible amendments by various bodies and this presentation had already been given also to the Department of Justice and Constitutional Development (DoJCD). The presentation was made to this Committee since the PSC was managing an Anti-Corruption Hotline, and was intended to keep Members of this Committee aware of the proposed amendments that would support the Protected Disclosures Act (PDA).

Dr Mamphiswana added that the Portfolio Committee on Justice and Constitutional Development was in the process of conducting public hearings on the matter of whistle-blowing.

Mr van der Westerhuizen indicated that he was also in support of the proposed amendments to be introduced to the PDA, as this was indeed the country's last hope in the fight against corruption. It should become a punishable offence to victimise a whistle-blower. There should also be incentives put in place to compensate those people that had taken the difficult decision to report corrupt practices. 

The Chairperson wanted to know make it clear that the Committee was in support of the proposed amendments to be introduced in the PDA. However, she felt that any compensation should only be offered after there was a concrete proof of wrongdoing.

The meeting was adjourned.

 

Present

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