The Portfolio Committee met with the Auditor General of South Africa (AGSA) and the officials from the Department of Transport (DoT), led by the Minister, to discuss the audit outcomes and annual performance of the Department for 2015/16.
The Department had regressed in comparison to the past two years and had moved from an unqualified audit outcome with findings, to a qualified audit outcome with findings. The main reason for the findings had been the issue of the Electronic National Administration Traffic Information System (eNaTIS) assets. There were no records to support the assets that were disclosed in the financial statements, and access to physically verify them had been limited due to the ongoing litigation around the system. There had been a court ruling preventing the DoT from entering the Tasima premises to verify the assets (or face 30 days in jail), while the AG’s auditing framework required the assets to be verified. The Minister pointed out that without this untenable situation, the DoT’s audited performance would have shown an improvement from the previous year.
The concerns of the AG focused on problems of leadership in the Department, the auctioning of audit plans, human resource (HR) management, and monitoring and compliance with rules and regulations. It identified some of the root causes of its audit outcomes as the instability resulting from vacancies in key positions within the Department, the slow response of management to implement action plans to address issues of non-compliance, and the eNaTIS matter, which was new and needed tracking going forward in terms of how it was addressed.
The DoT reported that municipalities had continued to implement the integrated public transport networks and the rollout of the bus network transit systems. It continued to monitor the provincial roads maintenance grant by the provinces, and deeper analysis of the grant would show that as the national grants were dispersed, fewer funds were being allocated by some provinces for road infrastructure. This was a matter that needed the attention of the Portfolio Committee. Through the modernisation programme and the rolling stock fleet renewal programme, the Passenger Rail Agency of SA (PRASA) was well on course to positioning rail as the backbone of South African public transport. The Department’s efforts in supporting the standardisation of PRASA were going well, and the turn-around strategy for the organisation was beginning to bear fruit,
Members’ questions were focused mainly on the eNaTIS issue, the impact of Treasury budget cuts on the DoT’s performance, and the need to restore capable leadership through the filling of senior management vacancies. The Department assured the Committee that the vacancy issues were being dealt with, and the Director General post had been advertised.
Department of Transport audit outcomes
Mr Vinay Ramballi, Senior Manager: Auditor General of South Africa (AGSA), said he would share the audit outcomes of the National Department of Transport (DOT) in order to highlight certain issues that had been picked up during the audit process in order to assist the Committee through the Budget Review and Recommendation Report (BRRR) process in terms of creating oversight and effective governance over the Department and its entities.
The Department had regressed in comparison to the past two years and had moved from an unqualified audit outcome with findings, to a qualified audit outcome with findings. The reason for the findings was the issue of the Electronic National Administration Traffic Information System (eNaTIS) assets -- the fact that there were no records to support the assets that were disclosed in the financial statements, and access to physically verify the assets was limited. This had been due to the ongoing litigation around the eNaTIS system.
The key areas of non-compliance that were picked up in the Department included the issue of material misstatements in the financial statements around accruals, and also the issue of the eNaTIS assets. The second area of non-compliance was the issue of asset management and a failure to prevent irregular and fruitless and wasteful expenditure.
The concerns of the office of the AG revolved around the leadership issue in the Department, the auctioning of audit plans, human resource (HR) management, and monitoring and compliance with rules and regulations.
The Department had not picked up on any material audit findings on rail, road and public transport issues. It had not incurred any unauthorised expenditure this year -- in the previous two years, the unauthorised expenditure had been as a result of payment for the maintenance of the eNaTIS system which was not included in the budget, and so overspending had occurred. The DoThad investigated all the fruitless and wasteful expenditure issues.
Some of the root causes of theDoT’s audit outcomes were the instability caused by vacancies in key positions within the Department, the slow response by management in terms of action plans to address the issue of non-compliance, and the eNaTIS issue, which was new and needed tracking going forward in terms of how it was addressed.
Mr C Hunsinger (DA) said there must be a case similar to the one that the Department was facing now in terms of battling with litigation, which had resulted in having the annual report (AR), as well as the AG’s report, submitted late. He asked if there were any written guidelines on how to go forward with tackling the challenges that the Department was currently facing.
Ms S Xego (ANC) said she was concerned about the issue of eNaTIS, but would reserve her questions for the Department instead of asking the Auditor General. Now that the AG was unable to audit all the programmes of the Department, how would the process of auditing take place in the next financial year?
Mr L Ramatlakane (ANC) asked for more clarity on eNaTIS and the issue of assets and insufficient records, because this matter was not new.
Mr M Maswanganyi (ANC) asked about the instability caused by vacancies in senior positions, because the Department had once reported that the positions have been filled, and requested the Department to address the question instead of the AG’s office. Had the involvement of the Chief Financial Officer (CFO) with the Passenger Rail Agency of SA (PRASA) had an impact on the performance of the Department, because previous audits had not been as bad as the 2015/16 audit outcomes when it came to performance?
Mr G Radebe (ANC) wanted to establish if the AG had received any feedback regarding the challenge in filling the vacancies in top positions in the DoT which had been reported in the previous financial year.
The Chairperson asked how large the financial adjustments had been after the Treasury had cut some of the DoT’s funding, and what impact had the adjustments had on the programmes planned for the 2015/16 financial year. After having gone through the 2014/15 and 2015/16 annual reports, she had found there were certain similarities based on repeat findings in them -- did that mean that there had been some copying and pasting from the previous reports?
Mr M Sibande (ANC) asked about the issue of leadership within the Department, which was something that had been going on for the past three years. If vacancies were not filled then there would be no leadership, and the main question now was who was leading if there were vacant leadership positions in the Department.
Mr Ramballi addressed Mr Hunsinger’s question about whether there was a document that guided the audit process should there be pending litigation. The Department was required to comply with the Modified Cash Standard, which was the accounting framework for the audit process. The eNaTIS assets met the criteria of being owned by the Department. The issue of the litigation focused more on the transfer of the system to the DoT, and not only the ownership. The matter had also been referred to the Office of the Accountant General, which was the standard bearer in the public sector, and they had also come to the conclusion that eNaTIS was an asset of the Department and should be accounted for by the Department. The AG’s office had to audit purely in terms of the accounting framework that was in place.
The eNaTIS assets issue was a significant matter. It was one of the higher valued items in terms of account balances and would be audited again in the next financial year. The office of the Accountant General had said that the eNaTIS asset should have been recorded since the 2008 financial year, but this had been picked up only in the last financial year. In terms of the accruals that had been misstated, the accruals were material and had been corrected. The eNaTIS assets were material, but because of the litigation around the issue, it could not be corrected.
The issue of instability of vacancies in key positions and the impact it had was a question that AGSA would not be able to answer, because it just assessed key positions and particularly focused on the Deputy Director General level and above, and how that would affect stability in the Department. He suggested that perhaps the Department might respond to the impact of the vacancies. The CFO not being there permanently could have had an impact, but there was the issue of the eNaTIS assets and whether the CFO could have prevented that situation. The eNaTIS assets could not be excluded from the audit process because it met the definition criteria for the accounting framework -- it was an asset that was owned by the Department, and the Office of the Auditor General followed the accounting framework criteria.
The impact on the budget cuts by Treasury on service delivery was something that would be read in the annual performance report on the DoT’s achievements and targets. He was hesitant to comment on the issue of copying and pasting, because the AG’s office had not picked it up in the audit process. It had picked up an improving trend in both the usefulness and reliability of information, but whether the objectives were repeated or not was something that he would not comment on. Some of the objectives and targets were more long term, and were spread over maybe two or three financial years, so perhaps that was why it seemed as if they were repeated.
When there was a vacant position, there was usually an acting Deputy Director General (DDG). The leadership positions referred to were the Accounting Officer and senior leadership, which would be the DDGs or Acting DDGs. When assessments were made of who should be having a hands-on idea of what was happening in the Department, it was usually those people who were being referred to.
Mr Hunsinger said that if eNaTIS had been found to be in accordance and assessable in terms of the accounting framework, could the AG’s office then confirm that it was not about the ownership of the assets, but more of a basic inventory issue, in that insufficient records had been available?
Mr Ramballi confirmed that it was not an issue of ownership, because it had gone through the right processes, with the Accountant General involved, and they had confirmed that through reading of the contract, ownership was not an issue but rather the transfer of the assets.
Department of Transport: Annual Report 2015/16
Mr Radebe requested that office of the Auditor General remain and be present for the DoT’s presentation to assist the Department in providing direction.
Ms Dipuo Peters, Minister of Transport, apologised for the late tending of the annual report. The delay had been unavoidable, because the Department was facing the worst possible audit outcome of a disclaimer audit opinion due to noncompliance. The bitter battle over the eNaTIS system was currently before the Constitutional Court. The Ministry had had to intervene and ensure that an amicable solution was sought with the Auditor General, which had resulted in a large amount of correspondence and mitigations. There had been a total of nine meetings -- two led by the Deputy Minister and one by the Minister herself, and the rest led by the office of the Director General. A final audit report had been issued after consultation with the AG, in which the qualification of the audit opinion was clearly stated to be the result of the ongoing litigation against the Department. The purpose of the annual report was to give the Department, the public in general and the Portfolio Committee an overview of the resources allocated to the Department and how these resources had been used in fulfilling its statutory mandate.
During the period under review, municipalities had continued to implement the integrated public transport networks and the rollout of the bus network transit systems. The Department continued to monitor the provincial roads maintenance grant by the provinces, and deeper analysis of grant would show that as the national grants were dispersed, fewer funds were being allocated by some provinces for road infrastructure. This was a matter that needed the attention of the Portfolio Committee. Through the modernization programme and the rolling stock fleet renewal programme, the Passenger Rail Agency of SA (PRASA) was well on course to positioning rail as the backbone of South African public transport. The Department’s efforts in supporting the standardization of PRASA were going well, and the turn-around strategy for the organisation was beginning to bear fruit, which was a result of the deployment of the CFO of the Department of Transport to PRASA.
Maritime safety remained one of the key strategic areas of focus, and the Department would continue to pursue interventions that would ensure the safety of life at sea while intensifying its input into Operation Phakisa. This was to ensure that the sector transformed and plays an optimal role within the ocean’s economy. The DoT had ensured that civil aviation matters were addressed.
The executive authority of the Department had ensured that consequence management had become a reality in the operations of the DoT, and there are currently employees who were being subject to disciplinary processes for contravening Departmental processes. It had a big challenge regarding gender representation at the senior management service (SMS) level, with about 39% females and 61% males.
In the last financial year, the DoT had committed to finalising the National Road Safety Strategy, but because of the consultation process with Nedbank, it would be able to finalise it only in the second quarter of the 2016/17 financial year.
eNaTIS Issue: Discussion
Mr Mathabatha Mokonyama, Acting Director General, DoT, said that the eNaTIS issue, which was a big problem for the Department, had been summarised by the AG, and he requested to be allowed to explain it further in depth. The Department had 17 court orders and interdicts, which stated among other things that the Department should not touch the systems. When the Department had made an attempt to verify some of the assets with the AG, it had found them not to have been tagged. The Acting DG and the CFO were among the people who were facing 30 days of imprisonment. The fact that high ranking officials were on suspension, with some facing charges, was based on some of the audit findings, and needed further investigation. The issue around consequence management was being dealt with, and if the Department had not been battling with eNaTIS, it would have received a good audit opinion.
Mr Hunsinger said that if the reason for the delay in submitting the documentation was not about ownership, but about record keeping, why had this particular requirement been waived by the AG in previous financial years, but was now considered very important in the year under review?
Mr Sibande said he was concerned because the Department had been with eNaTIS since 2002, and there was now an untouchable skeleton in the midst of the Portfolio and Department -- even the fact that it was indicated that the formation of the relationship had been founded illegally.
Mr M de Freitas (DA) said the issue with eNaTIS had been on the table for many years, going all back to how the entire eNaTIS contract had been drawn up. This had put the Department at a disadvantage and had led to such problems.
Mr Mokonyama explained that the contract was a five year contract, and after the five years there would be a management transfer plan which would last for another five years. In terms of the modified cash standard, if a system like eNaTIS was built, ownership of the system could be assumed once the system was complete. In 2012, the eNaTIS contract had been extended, and that was why there criminal and civil cases regardless of the money generated from the system. The court judgments explicitly stated that the Department should not do anything that could be alleged to be a transfer of the system, and could not set foot on Tasima’s premises and if the court order was violated, people may face 30 days in jail. If the Department did not go to verify the assets, then they would not be complying with the auditing principles, and if they did go to verify the assets, then they would run the risk of imprisonment.
Annual Report presentation
Mr Mokonyama said the Department had set a total number of 50 targets for the year under review, with 45 targets achieved and five not achieved. The key achievements for each programme in the Department were:
Programme 1: Administration
- 53 interns were appointed and placed with effect from April 2016 translating in 7.6% of the staff establishment.
- Health and wellness campaigns were conducted; 256 electronic news releases updated and circulated; DoT language policy reviewed; engagement with the government communication and information system (GCIS) conducted on the DoT corporate identity manual; 98% of the Presidential Hotline cases resolved.
- International relations strategy had been approved.
- Departmental intranet site finalised and rolled out.
- Implementation of action plans to address audit findings monitored on a quarterly basis; and action plans for strategic risks monitored on a quarterly basis.
The challenge with this particular programme was that only 36 vacant posts (against a targeted 115) had been filled during the period under review. The under-performance was due to budget cuts on the compensation of employees and a moratorium placed by the National Treasury on the filling of vacant posts. The Department would continue to engage the National Treasury to ensure that a solution was reached to enable it to fill critical vacant positions.
Programme Two: Integrated Transport Planning
- Drafts of the frameworks for infrastructure and transport funding were completed and submitted for approval as targeted.
- The Road Freight Strategy was completed and submitted for approval.
- The Single Transport Economic Regulator (STER) Bill was submitted to Cabinet, and consultations on subsidiary regulations conducted with the Ports Regulator.
- The Private Sector Participation (PSP) Framework was successfully developed and was being transferred to the National Treasury for inclusion (as a chapter) in the overarching PSP currently being developed by the National Treasury.
- The draft of the Green Transport Strategy had been successfully developed as targeted during the period under review.
The challenge for this programme was that the development of the Harrismith hub framework had not been completed. Option analysis and value assessment reports had been completed, in collaboration with the Free State Department of Roads, Police and Transport. These reports would be tabled as the basis of the overarching Harrismith hub framework.
Programme three: Rail Transport
- The draft White Paper on the national rail transport policy had been finalised.
- The guidelines for submission of rail economic regulatory information had been completed and approved during the period under review.
- The branch line strategy had been finalised and would be presented at the next sitting of the economic sectors, employment and infrastructure development (ESEID) cluster.
- The draft National Railway Safety Regulator Bill had been successfully developed during the period under review.
- The draft national railway safety strategy had been completed, and consultations on the draft strategy were conducted with PRASA and the Rail Safety Regulator (RSR) during the period under review.
Programme Four: Road Transport.
- The draft Green Paper on the roads policy had been completed, and submission to Cabinet had been approved.
- All approved Provincial Road Maintenance Grant (PRMG) projects had been monitored in line with the budget. An annual monitoring report had also been compiled and submitted for quality assurance.
- The status quo analysis report for the development of the Access Road Development Plan had been completed and submitted for quality assurance.
- The Administrative Adjudication of Road Traffic Offences (AARTO) Amendment Bill had been submitted and approved by Cabinet during the period under review. The Bill would be submitted to Parliament in the new financial year.
Programme five: Civil Aviation
- The National Civil Aviation Policy (NCAP) and the National Airports Development Plan (NADP) had been completed and submission to Cabinet had been approved.
- Air service agreements had been reviewed with Egypt, Guinea, Guinea-Bissau, Mauritius, Curacao, Namibia, Turkey, Australia, Israel, Austria, Serbia and Sierra Leone.
- A draft Civil Aviation Amendment Bill had been completed, and recommendations on the transfer of the asset to Eastern Cape Provincial Government were duly approved.
Programme six: Maritime Transport
- Drafts of the Cabotage Strategy and Cabotage Billl were completed and submitted for quality assurance.
- The Africa Maritime Charter was approved by Cabinet in May 2015 and by Parliament in February 2016.
The Green Paper on the National Transport Policy was presented to the International Cooperation, Trade and Security (ICTS) cluster in March 2016. Submission of the Green Paper to Cabinet was not approved by the DoT executive authority. The DoT would prioritize the Green Paper in the new financial year to ensure all outstanding issues were addressed, to enable submission to Cabinet.
The Cabotage Policy had been completed and included as a chapter in the Green Paper on the National Maritime Transport Policy that was presented to the ICTS Cluster. However, as with the Green Paper on the National Maritime Transport Policy, submission to Cabinet was not approved by the DoT executive authority. The process to develop the National Maritime Transport Policy had been re-arranged to consider the Cabotage policy.
Programme seven: Public Transport
- The reviewed rural transport strategy had been completed, and submission to Cabinet had been approved.
- The national learner transport policy had been approved by Cabinet and subsequently published for implementation as a target during the period under review.
- A total of 3 226 old taxi vehicles were scrapped during the period under review due to the increase in demand by operators. The Taxi Recapitalisation Programme (TRP) review document had been developed, and its submission to Cabinet had been approved.
- The final draft of the Integrated Public Transport turnaround plan had been completed and submitted for quality assurance.
Other areas that the Department aimed to improve included enhancing a structured and coordinated inter-sectoral planning and reporting mechanism, such as the oversight of entities and provincial departments. Another area was to strengthen performance evaluation in line with the Department of Performance Monitoring and Evaluation’s (DPME’s) national evaluation framework.
Mr Maswanganyi said that it seemed that there was a problem of under-expenditure when it came to policy initiatives, and the Department to provide clarity on what had led to the under-expenditure.
Mr Sibande asked for more details on the bus subsidies’ matter, and the use of old Putco buses. Why were some the targets that were highlighted in the presentation not met? What were the financial implications of the ongoing litigation processes faced by the Department? He asked for clarity on the unauthorized, fruitless and wasteful expenditure of about R129 million. Why was there a discrepancy in the amount of subsidies given to provinces, and what criteria were used by the Department when dispersing the subsidies.
Mr Hunsinger asked if there was no mechanism that could speed up the process of filling vacant positions related to suspensions and other labour issues.
Mr Radebe said he was worried about the vacancies that were not being filled. What was the Department planning to do with the challenges that it was facing, because these affected its performance? Did it have any plans to address issues of irregular and wasteful expenditure that had been reported in the 2015/16 annual report, so as to avoid similar occurrences in the 2016/17 financial year and in future?
Mr Ramatlakane asked who changes the scope of contracts, and requested clarity on that particular issue.
The Chairperson asked if there was a programme or template that ensured that repeat findings did not take place, in order to hold people accountable, and whether the template could be sent to the Portfolio Committee.
The Minister said that some questions could be raised through the Questions to the Minister, and she would address some of those raised at the meeting since there was limited time to address them all.
Since her arrival in to the Department of Transport, there had been one litigation issue after another, and the litigation processes were costly. The issue of vacancies had been escalated, and there had been some engagements with the Minister of Finance in order to discuss funding. In the previous financial year there had been a misunderstanding between the DoT and Treasury, based on a letter that had come from Treasury that had said that no posts must be filled. However, the misunderstanding had been resolved and the filling of recent posts was because of the decision made by the DoT.
Regarding the regression in the Department’s performance based on the audit outcomes, the AG had highlighted that had it not been for the eNaTIS matter, the audit outcomes would have shown an improvement rather than a regression. However, the DoT’s capacities had been improved, appointments had been made in the internal audit unit, and there was a plan in place to address the problems and issues highlighted by the AG.
The Minister said that she would not respond to the questions of the opposition (DA), since the Committee Members that represented the DA had left the meeting before the questions could be addressed by the Department, and she did not reply to people who were absent.
The deployment of the CFO to PRASA had not had an impact on the audit outcomes, because during the audit process -- and even during the litigation processes -- the CFO had been present, and so his deployment did not have a negative impact. The post of the Director General had been advertised.
The Minister thanked the Portfolio Committee for the opportunity to present the annual report, albeit delayed.
The Chairperson thanked the officials present and said that the Department should continue engaging with the AG.
The meeting was adjourned.
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