The Office of the Auditor General said the audit outcomes for the Department of Telecommunications and Postal Services (DTPS) and its entities had been stagnant for 2015/16, and the number of compliance findings had increased. Key positions remained vacant or suspended and a significant number of senior positions were being filled in an acting capacity.
There had been a regression in the quality of performance information. The usefulness of the information stood at 56%, with the most common findings being that the indicators were not well defined or verifiable and that the targets were not specific and measurable. The reliability of the information stood at 38%, with the most common findings being that information was not valid, accurate or complete. There had been a regression in compliance with legislation and in the quality of the financial statements, and there had been R398m of unauthorised, irregular and fruitless and wasteful expenditure. The main causes for poor performance were a slow response in improving key controls and addressing risk areas in the case of the SA Post Office (SAPO), the National Electronic Media Institute of SA (NEMISA) and the State Information Technology Agency (SITA); instability or vacancies in key positions, or key officials lacking competencies, in the case of SAPO, the DTPS, the Universal Service and Access Agency of South Africa (USAASA) and NEMISA; and inadequate consequences for poor performance and transgressions in the case of SAPO and USAASA.
Its recommendations for improvement were that the auditees should strengthen their processes and controls in order to create and sustain a control environment that supported reliable reporting. It also recommended that oversight bodies oversee and follow up on the filling of key vacancies in the portfolio. Senior management, political leadership and oversight structures should continue to pay close attention to supply chain management transgressions, investigate incidents of non-compliance, take appropriate corrective steps and implement consequence management. It said that BroadBand Infraco (BBI) and Sentech were not audited by the AG.
Members asked whether the negative findings would have been avoided if the senior vacant posts had been filled. How often did the Department engage with problematic entities and their senior management? Why did the AG not audit BBI and Sentech? Was it permissible for the BBI and Sentech not to have the AG as their auditors. They said that the quality of submitted financial statements for this year and the previous financial year suggested that the staff were not capable of doing the work. How was the information contained in reports that were submitted verified? What role did the AG play if there was no consequence management in place? Members asked what it would take to stop irregular expenditure. What was the AG’s level of engagement with the audit committees of the Department and its entities? How reliable were the sales figures reported by Postbank? What role was played by the AG when there was a repeat of the same offence? Was any time frame given for immediate action? What was meant by consequence management?
The Minister of Telecommunications and Postal Services, spoke to the broader issues covering all the entities. He said there had been a lot of progress on the issue of vacancies, and updated the Committee on the situation at SAPO, Postbank, Sentech and NEMISA. Earlier in the year, NEMISA’s chairperson, CEO and CFO had left and this might have had an impact on the stability of the organisation. The issue of vacancies was also linked to how much the state paid.
The challenge regarding USAASA was that in the previous year, most members of the board had had to be replaced because of the Digital Terrestrial Television (DTT) tender process issue. There was an investigation under way to assess whether things had been done properly and Treasury was assisting with this. The biggest risk for the DTT program was around procurement and the management of contracts. The court challenge was also a risk to the organisation, because the board’s legal opinion was that they could not proceed with procurement after the Supreme Court of Appeal. This would unfortunately be inherited by the new board and impact on them. Historical matters were still an issue. There was a Special Investigating Unit (SIU) investigation spanning the last ten years and some of these matters had been finalised. The SIU had issued an interim report for USAASA with which the board had disagreed, and this placed even more risk on the organisation. On the other hand, the new SAPO board had accepted the SIU recommendations and were working with the SIU to start court cases.
The Department said that during the reporting period, it had functioned under the organisational structure of the former Department of Communications, which had not been aligned to its newly assigned mandate and functions. The DTPS was therefore, currently in the process of revising the organisational structure to put in place a structure which was fully aligned to its mandate and strategy.
The Department had received an unqualified audit for the fourth year in a row. The audit report findings had decreased from three in the previous year to two for the year under review, and the management letter findings had been reduced from 27 to 15. Total revenue had been R28.2bn, compared to the previous year’s R3.9bn, because of the sale of Vodacom shares worth R26.8bn. Total expenditure had been R1.3bn compared to the previous year’s R2.1bn. R26.9bn had been transferred to Treasury.
Members asked if the Department was taking steps to remedy material non-compliance findings on legislation. They said the new Companies Act was a powerful tool to hold directors to account for the governance of entities. Would the Minister investigate the possibility of holding directors to account under this Act? The Minister had spoken of advertised posts, where the requirements were set too high and excluded young people who would not have the required experience. Would lowering the years of experience required be considered? It was difficult to accept that a Department which was supposed to do oversight on the entities was also failing to comply with legislation. Members asked who did the work regarding the bilateral agreements with neighbouring countries on the harmonisation of frequency agreements. Was it not the time for the Department to take back the process of digital migration? Why were there so many revisions to the White Paper submitted to Cabinet? Why had there been no interaction with the private sector, which was materially and negatively affected? Had any attempt been made to reduce barriers to employment for people with scarce skills? Did the Department have a stakeholder engagement plan?
Members said that some targets had not been fully achieved, yet 100% of the budget had been spent. They questioned the spending on consultants, four of whom were employed for a year at an average R4m per consultant. They asked why the two national advisory bodies to the Minister on broadband and on cyber security had been totally ignored. Why had the DG failed to mention the R27m in irregular expenditure in his presentation? The contingent liability for possible legal action was R57m -- what was this for? Was there such a shortage of service providers in the country that there should be a twelve month delay in the appointment of one? How often did the Department meet with state-owned companies (SOCs) entities to ensure alignment of their targets? How much was being spent on postal and courier services?
The Chairperson said all the issues that had been raised by the Committee had been contained in the Committee’s previous Budgetary Review and Recommendation Report (BRRR) recommendations. What efforts had been made to implement what had been raised in its recommendations? The under-performance in the programmes meant that either the targets were unrealistic, or there had been non-performance in the DTPS. The Department was just repeating its previous year’s performance -- there had been no change. She asked how SAPO was expected for to survive when government bodies did not support it. This was a serious issue that needed to be taken up, otherwise the government would have to continue to bail SAPO out.
Office of the Auditor General (AG): Briefing
Ms Nelisiwe Mhlongo, Office of Auditor General of South Africa (AGSA), said the key messages were that the audit outcomes for the Department and its entities were stagnant for 2015/16 and the number of compliance findings had increased. Key positions remained vacant or suspended and the positions filled in an acting capacity were for a Director-General at the Department of Telecommunications and Postal Services (DTPS); a Chief Executive Officer (CEO) and Chief Financial Officer (CFO) at the National Electronic Media Institute of SA (NEMISA); a CFO and a chairperson of the board at the Universal Service and Access Agency of South Africa (USAASA); a CFO at Sentech; a CFO and COO at the SA Post Office (SAPO); and a chairperson of the board at the State Information Technology Agency (SITA).
She said there had been a regression in the quality of performance information. The usefulness of the information stood at 56%, with the most common findings being that the indicators were not well defined or verifiable and that the targets were not specific and measurable. The reliability of the information stood at 38%, with the most common findings being that information was either not valid, or not accurate or complete. There had been a regression in compliance with legislation and in the quality of the financial statements. There had been R398m of unauthorised, irregular and fruitless and wasteful expenditure, and there had been a regression in the key controls of leadership and in financial and performance management.
She then spoke about the follow-up on the commitments made by the Minister. The top root causes for poor performance were a slow response in improving key controls and addressing risk areas in the case of SAPO, NEMISA and SITA; instability or vacancies in key positions or key officials lacking competencies in the case of SAPO, the DTPS, USAASA and NEMISA; inadequate consequences for poor performance and transgressions in the case of SAPO and USAASA.
Their key recommendations for improvement were that auditees should strengthen their processes and controls, to create and sustain a control environment that supported reliable reporting. AGSA recommended that the following best practices be implemented to prevent material misstatements and non -compliance with legislation:
- all vacant managerial and key official positions that have remained vacant for extended periods should be filled;
- a training programme had to be implemented to ensure that all staff were up to date with the requirements of their jobs and relevant legislation;
- consequence management had to be implemented;
- daily and monthly processing and reconciling of controls over the areas where material misstatements were identified in the submitted financial statements, should be implemented;
- the information for the secondary financial information should not be prepared only when compiling the year-end financial statements, but regularly, and reviewed monthly;
- auditees should identify the root cause of the material misstatements identified during the audit and ensure that adequate and immediate action is taken to address them
It also recommended that oversight bodies oversee and follow up on the filling of key vacancies in the portfolio.
Senior management, political leadership and oversight structures should continue to pay close attention to supply chain management transgressions. They should investigate the incidents of non-compliance, take appropriate corrective steps and implement consequence management.
She said that BroadBand Infraco (BBI) and Sentech had not been audited by the AG.
Mr C Mackenzie (DA) asked whether the negative findings would have been avoided if the four vacant posts had been filled. How often did the Department engage with problematic entities and their senior management? Why had the AG not audited BBI and Sentech?
Ms J Kilian (ANC) asked if the AG had any supplementary notes on the entities. She was concerned that the report reflected a deterioration in the results. She asked if it was permissible that BBI and Sentech did not have the AG as their auditors.
Ms M Shinn (DA) said that the quality of submitted financial statements for this year and the previous financial year suggested that the staff were not capable of doing the work. It was shocking that the Department’s irregular expenditure had gone up and the irregular expenditure of the Department and its entities was R500 million, whereas in the previous year it had been R176 000. There was a problem with the staff, especially with management. How could the Department have R27.4m in irregular expenditure, whereas in the previous year it had been R1.2m?
On the issue of usefulness and reliability, Ms D Tsotetsi (ANC) asked how the information contained in reports that had been submitted was verified. What role did the AG play if there was no consequence management in place?
Mr E Siwele (ANC) asked what it would take to stop the irregular expenditure.
The Chairperson asked what the AG’s level of engagement with the audit committees of the Department and its entities were. Had the audits of SAPO and Postbank been separate? How reliable were the sales figures reported by Postbank?
On the quality of submitted financial statements, Ms Mhlongo said that in the previous financial year, BBI and the Department had had capacity issues in the finance department, but this year those posts had been filled and this was reflected in the green flag for financial statements. Other issues had been that financial statements had to be prepared on a day to day basis, not at the end of the year.
On how often there was engagement, she said it was on a weekly or monthly basis, and the AG did do follow ups on action plans. Most of the quarterly engagements were to highlight key controls.
On why the AG was not auditing BBI and Sentech, she said the AG provided oversight on the outside audit process. BBI and Sentech would in future be taken over by the AG when the AG was ready to do so.
Mr Janse van Rensberg, AGSA Executive, said there was comprehensive interaction with the entities in terms of risk and capacitation issues. The AG took responsibility for the audits of BBI and Sentech.
On the issue of additional notes on the entities, Ms Mhlongo said the concern was on the non-compliance regarding the provision of information. The AG had concerns on performance information. On the issue of stopping irregular expenditure, she said consequence management had been spoken about, as well as the issue of capacity and the need to have skilled people run the supply chain management process. On the role the AG played, she said the AG audited and also gave recommendations.
Mr Janse van Rensberg said the AG had regular meetings and rigorous discussions with SAPO. It interacted with CFOs on a daily and weekly basis. It was important that the finance units were capacitated to support the CFOs. It was important to clean the books of the historical irregular expenditure going forward. The revenue line of SAPO remained a concern, because this was critical for the sustainability of SAPO.
The Chairperson asked if the irregular expenditure was for the Universal Service and Access Fund (USAF) or USAASA.
Ms Mhlongo said it was for USAF, and there was a possibility that it was from the installation phase, but the R188m had been in the manufacturing and consultant phases. This figure was only to 31 March, and the figure subsequent to that date could be higher.
Ms Tsotetsi asked about the role played by the AG when there was a repeat of the same offence. On the bullet point calling for immediate action, she asked if there was any time frame given for immediate action.
Ms Kilian asked what was meant by consequence management.
On how soon action needed to be taken, Ms Mhlongo said the AG recommended what would assist the entities to move forward and immediate early action in implementation was required.
Mr Janse Van Rensberg said that in relation to SAPO, it was critical that there was a comprehensive action plan with detailed timelines.
On the issue of consequence management, Ms Mhlongo said that Treasury regulations and the Public Finance Management Act (PFMA) did specify what should happen.
Mr Janse van Rensberg said it was important that there were clear job descriptions and clear roles and responsibilities. A number of irregular expenditure issues were related to prior historical contracts.
Department of Telecommunications and Postal Services (DTPS)
Dr Siyabonga Cwele, Minister of Telecommunications and Postal Services, spoke to the broader issues covering all the entities.
On the issue of vacancies, he said there had been a lot of progress. A current vacancy was for the CFO post at SAPO, where they were awaiting the outcome of interviews for this post. He hoped that a name would be recommended to Cabinet by the end of this year. The current CFO was there in an acting capacity and was actually the CFO of the Postbank. The vacancy at Sentech was the other vacancy that had not been finalised. Pressure had been placed on the board to fill the vacancy. There had been two appointments but people had not taken the post because they had received better offers elsewhere. The CFO of NEMISA and the new Chief Operating Officer (COO) of NEMISA, as well as the chairperson of the board of NEMISA, had just been appointed.
There had been challenges at the boards of USAASA and NEMISA, where the members’ terms had expired and they were not eligible to be appointed again. Earlier in the year, NEMISA’s chairperson, CEO and CFO had left, and this might have an impact on the stability of the organisation. It was not clear whether there had been tension between the management and the board.
The issue of vacancies was also linked to how much the state paid. There was a disjuncture, because most of the entities were paying at the level of a chief director. The Department was trying to address this by going to the Department of Public Service and Administration (DPSA) and Treasury to do post level determinations.
The challenge regarding USAASA was that in the previous year, most members of the board had had to be replaced, because their major problem had been around Digital Terrestrial Television (DTT). The Department had been assured that the tender process was open and that all but one of the 27 applicants had qualified, but it was in the implementation of the tender that problems had arisen. There was an investigation under way to assess whether things had been done properly, and Treasury was assisting with this. The biggest risk for the DTT program was around procurement and the management of contracts. The Department had rejected a proposal for escalations on the contract, because the contracts had clearly stated that the private sector would carry the exchange rate risks. This would have an impact on the programme. The court challenge was also a risk to the organisation, because the board’s legal opinion was that they could not proceed with procurement after the Supreme Court of Appeal. This would unfortunately be inherited by the new board and would impact on them.
The Department had appointed a CFO in the last financial year, but he said the concern was also about the capacity of the finance unit. The risk the Department faced was that it did not have a chief director for information technology (IT). There was no funding for that post because of the cost containment measures -- when a person resigned then that post was frozen and there was no budget for the post. SITA had had a CEO and CFO appointed in the previous year, but there were question marks over whether there was an effective unit to support them.
Historical matters were still an issue. There was a Special Investigating Unit (SIU) investigation spanning the last ten years, and some matters had been finalised. The SIU had issued an interim report for USAASA which the board had disagreed with, and this placed even more risk on the organisation. On the other hand, the new SAPO board had accepted the SIU recommendations and were working with the SIU to start the court cases. In May/June, the Department had reported on the dysfunctionality of the Department and action had been taken which had resulted in the departure of executives, including the DG, and this had had an impact. There were still three DDG posts that needed to be filled. The challenge was that the Public Service Commission had not commented on the correctness or otherwise of the previous disciplinary cases. The Department had taken a legal opinion so that it could move forward.
Mr Sipho Mjwara, Acting DG, DTPS, said that during the reporting period, the Department had functioned under the organisational structure of the former Department of Communications, which was not aligned to its newly assigned mandate and functions. The Department was therefore currently in the process of revising the organisational structure in order to put in place an organisational structure and related matters which were fully aligned to its mandate and strategy.
The Department had received an unqualified audit for the fourth year in a row. The audit report findings had decreased from three in the previous year to two for the year under review, and the management letter findings had been reduced from 27 to 15. The two audit findings were for expenditure management, where there had been irregular expenditure, as the 8% virement had been exceeded, and for procurement and contract management, where the reasons and motivation for deviations from normal supply chain management (SCM) processes were not reasonable, as required by the practice note. He spoke to the key findings of the management letter, and the resolved audit findings of the previous audit in 2014/15. He then described the achievements in Programme 3 on ICT policy, research and capacity development, Programme 5 on ICT infrastructure support, Programme 4 on ICT enterprise development and state-owned company (SOC) oversight, Programme 2 on ICT international affairs, and Programmr 1 on administration.
Ms Joy Masemola, CFO, DTPS, spoke to the Department’s financial performance. Total revenue had been R28.2bn, compared to the previous year’s R3.9bn. The difference was because of the sale of Vodacom shares worth R26.8bn. Total expenditure had been R1.3bn, compared to the previous year’s R2.1bn. R26.9bn had been transferred to Treasury.
She said that section 43 of the PFMA stated that when funds were transferred to an entity, Treasury approval was required, which the Department had duly acquired. It also stated that it should not exceed 8%, and the AG had found that the transfer had exceeded 8%. The Department had sought further clarification from Treasury of the approval. Treasury had said it was approved. The AG said the difference -- the amount above the 8% -- would be disclosed as irregular expenditure. This transfer related to monies transferred to SAPO to assist it in its operations. The total transferred had been R50.2m, of which R26.2m was regarded as irregular.
Ms Kilian asked the Minister whether good progress had been made since the split from the Department of Communications. Would there be a significantly different audit outcome by the following year? She said the Committee should have access to the management letter. There had been material non-compliance findings on legislation -- was the Department taking measures to remedy this? She noted the non-attendance of members of the risk committee at its meetings. She was shocked that proper leave systems were not in place.
Mr Mackenzie said the new Companies Act was a powerful tool to hold directors to account for the governance of entities. Would the Minister investigate the possibility of holding directors to account under this Act? He asked whether the R26bn realised from the sale of Vodacom shares could be considered insider trading, given the possibility of an open access network which would have a material impact on the price of Vodacom shares.
Mr Siwele said the Minister had spoken of advertised posts where the requirements were set too high and excluded young people who would not have the experience. Would the lowering of the years of experience required be considered? He said he found it difficult that the Department which was supposed to do oversight on the entities was also failing to comply with legislation. Why were the terms ‘fully achieved’ and ‘partially achieved’ used to describe whether targets were met?
Ms Shinn asked who did the work regarding the bilateral agreements with neighbouring countries on the harmonisation of frequency agreements. Was it not the time for the Department to take back the process of digital migration? What exactly had happened to the former DG and the three DDGs? One document said that the DG had been expelled. There had been two DDGs that the former DG had fired, and there was one DDG who had been fired but who was fighting his dismissal. Why had there been so many revisions to the white paper submitted to Cabinet? Why was there no interaction with the private sector, which was materially and negatively affected?
Ms L Maseko (ANC) asked where the Department was, for example, in relation to the findings of the AG on the reduction in the management letter to 15 findings. It was important for the DG to find out where the negligence lay and to implement consequence management. She questioned the ‘fully achieved’ status of the target on the cost to communicate, because there were still issues around the cost to communicate. The SIU investigations had to be completed. On the post of IT director that had been frozen, she said that it was an essential post and wanted to know the reasons for freezing it.
Ms N Ndongeni (ANC) asked if there had been any progress in the Department’s review process and the monitoring of compliance since the previous year. Had any attempt been made to reduce barriers to employment for people with scarce skills? Did the Department have a stakeholder engagement plan?
Ms Tsotetsi asked if consideration could be given to lower the experience required for posts, from five to three years. Did the Minister have original copies of the qualifications of the staff who compiled the Department’s reports, which would verify that they were what they claimed to be?
The Chairperson said BBI had disclosed a loan that was owed to the Department and to the IDC. What had been the requirements for that loan, in terms of disclosure in the financial statement? She said that some targets had not been fully achieved, yet 100% of the monies had been spent.
On the Department’s irregular expenditure, Ms Mhlongo said the Department was allowed to shift funds between programmes, subject to some rules, and in this case the funds were limited to 8%.
Ms Masemola said the matter had been discussed with the AG, and they had agreed that it should be disclosed as irregular expenditure.
Mr Mjwara said the Department had written a letter to Treasury to seek to move R50m to SAPO. Treasury had granted the move. The AG had said that the Department and Treasury had agreed to something that was not correct.
The Chairperson said this was of concern, as two Departments had not picked up on the contravention of the PFMA.
Ms Kilian concurred.
The Minister said the context was that the money had not initially been sought from the Department. There had been an urgent court case for which the R50m was needed. The Department had worked with the Minister of Finance and Treasury, which did not have funds available and asked that it be sourced from any programme. This did not make it correct.
In response to other questions posed, the Minister said that he was hoping that there would be an improvement from the boards that had been dysfunctional and management that had not been of assistance. Under the leadership of the Deputy President, some of the entities were starting to become stabilised and they should improve. The situation had deteriorated a little at USAASA and NEMISA.
On holding members to account in terms of the Companies Act, he said the Department was aware of these provisions. In the case of SAPO, it was a matter of urgency that action had to be taken.
On the issue of the R26bn Vodacom shares, he said there had definitely been no insider trading because the state had not wanted to sell the shares. They were sold only because of the funding crisis surrounding Eskom, and there was a clause in the sale whereby the government could buy the shares back.
The ICT White Paper had been developed in a transparent manner, and the industry had been involved in its phased development.
There would have to be negotiations with the DPSA and Treasury on the employment criteria for posts. There was a committee led by the Deputy President that was looking at this issue. The real challenge was that the pay was much less than the market was paying, making it difficult to attract skilled personnel.
He was happy to say that the recent appointments to the NEMISA board were experienced people, and this was because of their will to serve their country rather than because of the pay.
The Department of Communications had signed bilateral agreements, but the DTPS was signing more comprehensive agreements on the whole frequency spectrum, not just on the DTT programme. The signing of an agreement with Namibia would take place in the next few weeks. It was not the time, nor his intention, to take the DTT program back from the Department of Communications. The Department continued to cooperate with the Department of Communication, however, because most of the implementation fell under the supervision of the DTPS. It would have been better if the funding had come from the Department of Communication, and not from the DTPS.
He said the term of the DG was expiring, but he felt the Department had done the right thing to fire her, even though it was her last day. A disciplinary hearing had taken place and the Department wanted to show that consequence management was being implemented. Of the three DDGs, one had been released and the other two were Departmental matters, and did not fall under his ambit.
The revisions to the white paper were a normal process. Most of the concerns were positive, and this was what had caused the delay in the publication of the white paper. Only government bodies had been consulted, because the process was still at the Cabinet stage and the document could not be released beyond government. However the consultation over issues was not limited to government, and all mobile telephone companies had been engaged, which had helped to clarify misconceptions. The fundamental shift was that there was a movement to the sharing of networks. Because of the spatial nature of apartheid, there was no other country that South Africa could learn from in terms of opening its networks, so the government wanted the infrastructure spread all over the country and expanded to beyond the cities.
On the issue of consequence management, and whether bonuses would be paid, he said that the Department was trying to follow this dictum and had not issued bonuses to management. This had been impressed on the boards of the entities as well.
Referring to the issue of skills, he said people might have certificates but not necessarily have the skill. The Department could not direct the SIU investigations, as it had been appointed by the President. The SIU informed the Department if there were irregularities, and his approach was that the Department had to comply.
He agreed that the post of IT director was important and that money needed to be found. Qualifications were being verified for posts such as CEO, COO, and CFO using South African Qualifications Authority (SAQA) verification. SITA had historical investigations related to it, but he had full confidence in the CEO and the board was being recruited and would be in place by the end of the calendar year. The financial and procurement sections remained a big risk. Most of the issues at SITA were related to procurement irregularities which had led to court challenges. Cabinet had asked for a report on the efficiency and effectiveness of SITA procurement.
There was room to improve the targets that the Department had set. There was a need to finalise the top management positions in the Department, especially around the two DDGs, because the funds for these posts might also be frozen.
On the issue of 100% expenditure while targets had been only partially achieved, he said there would be further improvement to the targets.
A briefing on policy issues would have to be done before the end of the calendar year. No proposals for legislative changes had been submitted, but there would be certain legislation that would be introduced in the following year.
He said most of the Department’s budget was for transfers, and the Department was left only with fixed costs for personnel.
The Minister then left the meeting.
Ms Mhlongo responded on the BBI loan, and said the Department had disclosed that there had been a subsequent event where the old custodian department had said that BBI had been clearing the loan. There were still discussions between the two Departments.
Regarding the question on the management letter, Mr Mjwara said that the management letter had been issued on findings that were not material, and the Department had interacted with the AG’s office to correct any issues that had been brought up.
On the issue of compliance with legislation, he said the Department had not been compliant on the 30-day payment of suppliers period, there had been irregular expenditure with regard to the PFMA, and also non-compliance with the Public Servants Administration Act with respect to leave management, performance agreements not being signed on time and the human resource plan not being submitted on time. The 30-day payment process had been centralised and now payments beyond 30 days were the exception rather than the rule. The irregular payment had been a once-off incident relating to a money transfer to the SA Post Office. There had been only one instance of the leave form not having been captured on time.
On the issue of internal control, he said the risk committee met on a quarterly basis, with a quorum.
Regarding the Department’s ability to comply with legislation, he said there had been instances where the Department had not complied with legislation, particularly the PFMA and the Department’s handling of the transfer of money to the SA Post Office.
Mr Farhad Osman, Chief Director: Strategic Planning and Performance Monitoring, DTPS, said the issue of the usefulness and reliability of the performance information was related to one target where additional content on performance information had been required to match the evidence of achievement. This had not changed the status of the target and was not material, therefore it had appeared in the internal management letter.
On the use of the terms ‘fully achieved’ and ‘partially achieved’, he said annual targets were expanded into quarterly targets and if some quarterly targets were achieved while others were not, then they would be recorded as ‘partially achieved’ to account for progress made and related expenditure.
Ms Thulisile Manzini, DDG: Administration, DTPS, referred to the issue of whether there were internal controls, and confirmed that there were monitoring and evaluation structures. A budget committee had been established. There was another committee that looked at all the policies of the Department and how they were being implemented.
Performance agreements had been a challenge previously, but this had significantly improved. There were consequences for people who had not submitted forms. A reminder was sent, and if the forms were not submitted on time then those staff did not qualify for a bonus or pay progression.
There were not many leave issues. There had been only the one case mentioned previously. The Department had communicated all the correspondence from the DPSA and Treasury so that staff were fully informed.
Mr Mjwara said the DDG for Administration had been replaced by Ms Manzini. The DDG for Policy had not initially challenged his dismissal, but had later done so, and the matter had been heard at the Bargaining Council and the Department had won its case. The case of the DDG for International Affairs was still at the Bargaining Council and would be heard in October. Unauthorised and irregular expenditure had been incurred by him. The PFMA had mandated the Department to recover the money. The Department had taken advice from the Public Service Commission, which had indicated that the Department needed to seek legal advice on all the matters during the process of disciplining the DDG. The legal advice was that the Department ought to take steps to recover the money. This had been initiated.
There had been a series of discussions about the White Paper, and the Department had been very willing to provide the reasons why it had taken certain positions.
The Department was implementing consequence management. There was a consequence if, for example, one did not sign one’s performance agreement, then one would not get progression on the pay scales.
Regarding the issue of non-attendance by audit committee officials, he said there was one official who did not want to attend because she had said she was not fit to do the task. That person had been replaced and the committee had met with a quorum.
The SIU investigations that were related to the Department had been completed. The report would be issued to the President.
Mr Alfred Mashishi, Acting DDG: Information Society and Research, DTPS, responded on the issue of whether the Department had an engagement plan for research. He said the target had not been achieved, but the Department had a plan which was influenced by the fact that research was done by the Department of Science and Technology (DST), and ICT research was also done by the private sector. The Department was looking at institutions like Carnegie-Mellon, and the road map developed by the DST. The funding for the implementation of the road map meant that there had to be collaboration between the DTPS and the DST. The Department still needed to decide which information it still needed.
Mr Willie Vukela, Acting DDG: Policy and Strategy, DTPS, said the target regarding the cost to communicate was on the framework, not on the actual programme. The framework had been acquired by the DPME to monitor and evaluate programmes and projects. The programme was able to include a whole lot of issues, and going forward it needed to be implemented.
On the issue of programmes that had not been completed yet 100% of the budget had been spent, Ms Masemola said that on the program marked as 69%, the Department reviewed expenditure patterns to see if programmes were not moving. For example, the SIU investigations had not been properly budgeted for, so money had been shifted to cover those costs. Money had also been shifted from the Broadband project to assist SAPO and Sentech. The Department had shifted funds to more pressing issues.
Mr Mashishi responded on the issue of whether the Department had a structure to engage with stakeholders on an ongoing basis, and said the Department had established an interim ICT forum to assist the Department and to ensure that ICT reached the whole country. In establishing the forum, the framework and terms of reference and participants needed to be established. Four chambers had been established on an interim basis, with the intention of formally launching the forum by the end of the financial year. The chambers had given input on the challenges, on how the participation would be structured and the frequency of engagement. The chambers had recently put out their programmes for the next three years. There were teething issues, as well as the issue of the support of a secretariat that needed to be put in place.
Mr Mjwara said the target for the recruitment of people with disabilities was two per cent, and this had been achieved. All national organisations working with disabilities were also represented on the ICT forum where discussions were taking place.
Ms Manzini said the lowering of standards to attract staff would be difficult because the Department was governed by legislation, and the DPSA used uniform grading systems.
Mr Mackenzie said R75m in total had been spent on consultants. Four consultants had been indicated for cybersecurity -- were they companies or consultants? These four had been employed for a year at an average of R4m per consultant. He wanted more information on this. R40m had been spent on metro Wi-Fi projects involving 243 consultants over a period of one month. Then there had been four projects with one consultant for two years costing R70m. Was this a single consultant, or a company?
Ms Tsotetsi said it should be possible to motivate for lesser experience, and not lower the qualifications. She wanted to know what timeframes there were when targets were partially achieved.
Ms Shinn asked why the two national advisory bodies to the Minister on broadband and on cyber security had been totally ignored. Had they been formally disbanded? Why had the DG failed to mention the R27m in irregular expenditure in his presentation? It was not only the DDGs who had gone through disciplinary hearings, there had been a number of staff too. What had happened to them, because 17 officials had been involved in misconduct? The cost of the metro Wi-Fi consultants worked out at R164 000 each for a month’s work. The contingent liability for possible legal action was R57m -- what was this for? Who was the “abnormal appointment” who was earning R1.6m? She wanted more information on the overtime of R178 000 and R256 000.
Mr Siwele said there had been mention in the annual report of a project manager who was ill, and also of a project manager who had resigned. Was this the same person? He asked if there was such a shortage of service providers in the country that there should be a twelve-month delay in the appointment of one.
Ms Kilian asked if there were mechanisms in place to prevent the trend of taking sick leave just because it was viewed as a benefit to be used, even if one was not sick. What consequence management steps were taken in the Department? She wanted more feedback on the irregular expenditure. Was all the money recovered in terms of fruitless and wasteful expenditure on traffic fines. What was the reference to ‘no shows’?
Ms Ndongeni said an important program was SOC oversight. How often did the Department meet with these entities to ensure alignment of their targets?
The Chairperson said that all programmes had under-spent and funds had been moved, so why was a programme recorded as having spent 100% of its budget. How much was being spent on postal and courier services? Programmes 1 and 2 had recorded a 50% performance, which was under-performance. In Programme 4, that the establishment of a business case for the Ikamva National e-Skills Institute (iNESI) bill was not a target -- the target was a draft bill. She said this in relation to the issue of ‘partially achieved’ and ‘fully achieved’. She said the lack of clarity on SOC rationalisation impacted on SOCs’ performance and their future.
Mr Tinyiko Ngobeni, DDG: Infrastructure Support, DTPS, responded on the issue of payments to cybersecurity consultants, and said the money had been paid to secure the building housing the cybersecurity hub at the Council for Scientific and Industrial Research (CSIR) and to pay for the systems and tools used at the hub. The metro Wi-Fi rollout had been a Cabinet decision to assist metros. The method used was that metros continued to use their existing service providers, and funds would be transferred to the metro municipalities against their plans to roll out the Wi-Fi systems.
On the issue of modifying the recruitment requirements, Ms Manzini said there was the Recognition of Prior Learning (RPL) process to formally recognise experience through a certification process. The Department had started the process, especially at the lower levels.
Mr Ngobeni referred to the issue of national advisory boards on broadband and cybersecurity, and said the cybersecurity advisory council had compiled its annual report which they would present to the Minister. The Minister had met with the chairperson of the broadband council and agreed to review how the council was structured. Before the chairperson and the deputy chairperson of the broadband council had resigned, the Minister had met with the chairperson and engaged him on how the council was working, and arising from this there had been agreement that the council structure needed to be reconfigured. This process was under way.
On the issue of sick leave, Ms Manzini said only 8% had exhausted their sick leave allocation.
Mr Mjwara said the reason why unauthorised expenditure had not been included in the presentation was that all the monies were virements, from Programmes 2, 3 and 5, to Programmes 1 and 4.
Ms Shinn said the AG had referred to it as irregular expenditure, yet the DG referred to it as virements. This was confusing.
Mr Mjwara said the AG had spoken of a portion of the funds that had not been authorised. This was the amount above the 8% which had been authorised. The total virement money had been R85m, and the funds that had gone to the SAPO had been R50m and of this, R26m was not authorised.
The Minister had said that the ICT Indaba disciplinary actions should be stopped to allow the Public Service Commission (PSC) to determine what to do. The PSC had recommended that the Department needed to take legal advice. In the course of this year, the Department had resumed dealing with all of those disciplinary matters and they would be reported on.
Mr Mjwara said the issue of contingent liabilities was related to a possible litigation by a person who had not won a DTT award, who was a competitor to Media Corner. The Department had instituted action to cancel Media Corner’s contract, and this process was now before the court.
Ms Manzini said overtime was applicable only to the lower levels of staff, and was only for events outside of the province. The Department did not spend a lot on overtime.
Mr Mjwara said the project which could not be executed because of the ill health of a person had been related to the promotion of transformation in the ICT sector.
Mr Mashishi said the targets were related to an entrepreneurship programme and a research programme. On the question of whether it was the same person, he replied that it was not. The entrepreneurship project manager had fallen ill. The research person had been on the verge of retirement.
Mr Ngobeni, on the question around connecting sites, said it had been as a result of delays in appointing a service provider to provide the connectivity. Since then the Department had worked through SITA to publish a tender, which was under way.
Ms Masemola responded on the failure to evaluate bids and the SCM processes of the Department, and said that a Deputy Director: Contracts had recently been appointed, as well as an assistant director, so that there was now sufficient personnel to oversee the bid committees to ensure proper processes were followed.
Ms Manzini said that no bonuses were given to anyone who did not have a performance contract, nor were they considered for a pay progression.
Mr Mjwara said the amount involved in the traffic fines and ‘no shows’ was not R1m, but R1 000. The fines had been fully recovered from the officials who had incurred them.
Ms Masemola said ‘no shows’ were when the Department booked accommodation but the person did not pitch up and fees were incurred. The Department recovered money from the officials involved.
On the issue of an abnormal appointments, Mr Mjwara said three people had been appointed during the policy consultation period.
Mr Omega Shelembe, DDG: State Owned Enterprises, responded on the issue of SOC oversight, and said meetings with SOCs were a daily occurrence.
Mr Mjwara referred to expenditure on postal and courier services, and said Cabinet had instructed that 30% of business should be directed towards SAPO. The Department had then asked Treasury for a practice note to ensure that the Department was allowed to do this. Treasury’s response had been that the Department should confine itself to what the legislation said, which confined the Department to letters only above a certain weight. The Department was still awaiting a note which would allow it to allocate the full 30%.
Mr Osman explained how the reports were compiled with regard to mandates and funding models. These were related to Sentech, SITA, USAASA, the iNESI Bill, the SAPO set-top boxes (STBs) and the monitoring and evaluation (M&E) on that, and the economic value of SAPO. The Department had specifically looked at each of the six areas, particularly the business cases. The reports referred to the quarterly targets when doing the annual report. ‘Partially achieved’ had been recorded for Sentech, SITA and the iNESI Bill, because some quarterly targets had not been achieved.
He said Programmes 1 and 2 were sitting at 50% achievement, and acknowledged that the achievements here had been minimal.
Mr Mjwara said there had been a vast improvement in Programmes 1 and 2 from the first quarter.
On the issue of the rationalisation of SOCs and why consultants had not been used, Mr Shelembe said the targets had to do with the review of the mandates of SITA and Sentech, which had not been done because of HR constraints. At that time, the units overseeing these entities had been headed by only one person. Since then the capacity of the units had been strengthened. An assessment had already been done on the technical abilities of SITA and the Sentech rationalisation, and a consolidated blueprint was expected by the end of the financial year.
Mr Mjwara said that part of the work that needed to be undertaken for rationalisation had to be taken by the organisations themselves, based on how they defined themselves, and this could not be sourced to outsiders. A lot of this work had been done and reports had been produced. Consultants had not been assigned to do the work because at this moment the phase was not one where the entities lacked the required skills.
Ms Maseko said she had not had a response to the sick leave question, and whether there was a tracking mechanism for the payment of invoices.
Mr Mackenzie wanted more information on the questions posed on consultants.
Ms Tsotetsi asked what the timeframe had been for performance agreements submitted but not concluded within the timeframe, and how late the submissions were and what the potential risk was of submitting them late.
Ms Kilian wanted the Department to identify sick leave trends.
Ms Maseko asked if there was monitoring of the submission of quarterly performance reports.
The Chairperson said all the issues that had been raised by the Committee had been contained in the Committee’s previous Budgetary Review and Recommendation Report (BRRR) recommendations. To what extent were there efforts to implement what had been raised by the Committee in its recommendations? She asked how the Committee was going to deal with the implementation of the issues raised by the Committee and by the AG. The under-performance in the programmes meant that either the targets were unrealistic or there was non-performance in the Department. The Department was just repeating its previous year’s performance -- there had been no change.
Ms Shinn asked if there were perhaps too many targets for the Department to handle, given its capacity and monetary constraints. Should the Department not be pruning the amount of work it was doing?
The Chairperson said that one of the previous year’s recommendations was that the entities had too many targets, and that they should be revised.
Prof Hlengiwe Mkhize, Deputy Minister, DTPS, said that an approved ICT policy had given the Department a window of opportunity to focus on implementation. The Department had inherited a broad and vague mandate in 2014. On the question of SOEs, she said that the Department had had a DDG for SOEs who had resigned, and a new DDG had been appointed. With the finalisation of the ICT policy, the DDG had had to return and the rationalisation programme should move forward. The challenge for the Department remained the number of acting DDGs.
Ms Kilian said the DG was acting as an internal control unit on his own, and she felt there was a need for an internal control unit. She asked why there was a need to have a risk management committee of 11 people. Was it not an opportune time to review the organisational structure of the Department?
Mr Mjwara said the Department was evaluating its internal organisational structure. An operational structure had been set up was already meeting and monitoring activities. The Department had translated the AG’s findings into an action plan, and the Committee’s recommendations would also be reduced into an action plan.
Regarding the performance targets, he said the Department had had 45 when the report had been done, and these had been reduced to 21 in the current financial year.
Ms Manzini said she would request that the Department be given time to do an analysis of the sick leave taken and whether there were any trends.
There was a specific process that was followed with the submission of performance reports, and there were bi-annual performance reviews.
Mr Mjwara said there were tracking mechanisms to ensure that payments were made to suppliers within 30 days,
Ms Tsotetsi said her questions were: What was the required time frame for the submissions? How late were the submissions? What was the potential risk of a late submission? How did the Department account for the other quarters?
Ms Manzini said there were specific time frames given for the submissions. The time frames were given by the DPSA and assessments started three months after the submission date. The Department had established its own timeframes to reduce the risk that submissions were not in time. The risk was that the Department was unable to monitor performance, which could hamper delivery by the Department. The submission rate in the DTPS was very high.
On the issue of consultants, Mr Ngobeni said the money for the Wi-Fi project had been transferred to the metro municipalities, but in the annual report it had been reflected as money for consultants.
Mr Mackenzie asked if the money had been paid to the municipalities, or to the consultants.
Mr Ngobeni said it had been transferred to the municipalities which in turn had appointed the service providers.
Ms Masemola said the R70m was the total for all the consultants.
Ms Shinn said that this had been mentioned for four projects, yet eight projects had been listed.
Mr Mjwara responded on the issue of the couriers used, and said that Treasury had issued a transversal tender which had been won by Skynet. The DTPS had had no say in which courier to use and this was why it had asked for a practice note from Treasury to allow it to utilise SAPO for 30% of its business.
The Chairperson asked how SAPO was expected for to survive when government bodies did not support it. This was a serious issue that needed to be taken up, otherwise government would have to continue to bail SAPO out. As government, it was not showing confidence in the entity.
Ms Masemola said the figures did add up to the R70m, and the number of projects was eight and not four.
Mr Mackenzie asked about the R316 00 for interest on an American Express credit card. How many cards was this for, and what was the reason for the interest payment?
Ms Masemola said the card was linked to a travel agency through which travel for officials was arranged. The interest was also linked to the 30-day payment, where invoices were not certified. The Department was busy recovering the money from officials who were supposed to have certified the invoices. Late payment of invoices had been reduced a lot -- there were not more than two, and concerned mainly unverified banking details.
The meeting was adjourned
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