Justice Administered Fund Bill: preliminary briefing and proposed public participation plan; Oversight Visit Report; Update on International Travel

Meeting report

Briefing by Department of Justice on the Justice Administered Fund Bill
Mr Johan Johnson, Chief Director: Finance, Department of Justice (DOJ), outlined the background of the Bill coming about as a result of the problems experienced by the DOJ regarding Third Party Funds (TPF) mainly in the form of maintenance payments and bail payments, both of which were paid to the courts and distributed by the DOJ. These TPF were kept in trust funds, which presented a number of additional problems, including a lack of legislation to handle these funds which created loop-holes for corruption. The lack of specific legislation to deal with TPF was raised by the Auditor-General as a material matter, and had an outcome on the audit. This was why the DOJ was asking for a specific legal basis and framework to deal with and ensure accountability over these TPF.

Ms Alta van Der Walt, Legislative Development, DOJ, explained the purpose of the bill being, to allow for the establishment of the Justice Administered Fund, to regulate the management, control, investment and utilisation of money in the Fund, to provide for matters connected therewith.

Ms van Der Walt outlined the clauses of the Bill.

Clause 1 defines various expressions that were necessary to be defined for the purposes of the Bill.

Clause 2 provides for the establishment of the Fund within the Department.

Clause 3 deals with the finances of the Fund. Provision is made that the Fund will administer the following monies on behalf of third parties:

(a)Money received in terms of maintenance orders made in terms of the Maintenance Act, 1998 (Act No. 99 of 1998);

(b) money received as bail payable in terms of the Criminal Procedure Act, 1977 (Act No. 51 of 1977), or any other Act of Parliament;

(c)money paid to court in terms of any Rule of Court or any other law, of which the intended beneficiary is a third party;

(d)money received which cannot immediately be allocated into any of the categories listed in paragraphs (a) to (c); and (e) interest earned, or bank charges raised on money paid into or retained by the Fund.

Clause 4 deals with the management, control and administration of the Fund. Provision is made that for the purposes of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (the PFMA), the Director-General of Justice and Constitutional Development is accountable for the Fund.

Clause 5 deals with the bank accounts within the Fund including a separate reserve account. Provision is made that—(a) the accounting officer must, within the Fund, open and maintain

bank accounts as he or she deems fit and assign to each such bank account a name that clearly identifies the account, one of which must be a separate account to be known as the reserve account (subclause (1));

(b) the provisions of section 7 of the PMFA, apply with the necessary changes to the said bank accounts (subclause (2));

(c)the Minister (meaning the cabinet member responsible for the administration of justice), in consultation with the Minister of Finance, may, by notice in the Gazette, determine a limit on the maximum credit balance permitted in the reserve account (subclause (3));

(d)any unclaimed money and money which cannot immediately be allocated into any of the categories listed in clause 3 (a) to (c), due to beneficiaries, must within 30 days, after receipt thereof, be paid into the reserve account. If a beneficiary claims an amount of money that has been paid into the reserve account, or the allocation of money that has been paid into the reserve account becomes known, within 10 years after it has been paid into the reserve account, the reserve account will be debited and the money will be paid to the beneficiary or be allocated correctly (subclause (4)); and

(e) the funding for any deficit, not covered by the reserve account, is to be negotiated with the National Treasury within the budgetary framework prescribed by the National Treasury, subject to an appropriation by Parliament (subclause (5)).

Clause 6 deals with the utilisation of money in the Fund. Provision is made that—

(a)the money in the Fund referred to in clause 3(a) to (d) may only be used for the purposes for which it has been paid into the Fund, and must be paid directly from the Fund to the party who or that is entitled to the payment in question (subclause (1));

(b) the bank costs relating to bank accounts, opened and maintained in respect of the Fund, must be defrayed against the interest earned in respect of those accounts and any net balance of interest earned on those accounts must be paid into the reserve account. If the said bank costs exceed the amount of interest earned, the net balance of the bank costs must be defrayed from the reserve account (subclause (2));

(c) the money in the reserve account may only be used for the purposes referred to in subclause (2)

(b) and to cover any deficit in the Fund (subclause (3)); and

(d) the accounting officer must ensure that any amount in excess of the amount in the reserve account contemplated in clause 5(3), is paid over to the National Revenue Fund (subclause (4)).

Clause 7 deals with the investment of money in the Fund that is not immediately required. Provision is made that—

(a)any money in the Fund which is not required for immediate use, may be invested with a financial institution approved by the Minister of Finance and may be withdrawn when required (subclause (1));

(b) any unexpended balance of the money of the Fund at the end of any financial year shall be carried forward as a credit of the Fund to the next succeeding financial year (subclause (2)); and

(c) any interest which may accrue to money invested must on a monthly basis be paid into the reserve account (subclause (3)).

Clause 8 deals with the making of regulations. Provision is made that—

the Minister, in consultation with the Minister of Finance, may make regulations, regarding the manner in which money—

(i) is received by the Department and paid into the Fund;

(ii) in the Fund is accounted for;

(iii) in the Fund is paid to parties entitled to that payment; and

(iv) in the Fund is to be paid to the National Treasury.

Regulations may also be made regarding the writing-off of losses against the reserve account and generally, all matters which were reasonably necessary or expedient to be prescribed in order to achieve the objects of the Bill (subclause (1)); and (b) a regulation made under this clause may provide that any person who contravenes, or fails to comply with, a provision thereof, is guilty of an offence and on conviction liable to a fine or to imprisonment for a period not exceeding 12 months (subclause(2)).

Clause 9 deals with financial instructions. Provision is made that the accounting officer may, in consultation with National Treasury, issue financial instructions, which were not in conflict with this Bill, the PFMA or regulations made, or instructions issued, in terms of section

76 of the Public Finance Management Act, prescribing further procedures to be followed in respect of the management, control and administration of the Fund.

Clause 10 contains the short title and date of commencement of the Bill.

Discussion
Mr M Mohapi (ANC, Free State) sought clarity as to what exactly the purpose was behind Clause seven, investments.

Ms B Engelbrecht (DA, Gauteng) noted that the DOJ was making large monetary transactions, she sought clarity as to whether the bank charges incurred by these large transactions were covered by the interest received on the money held by the DOJ.

Ms G Manopole (ANC, Northern Cape) asked whether research had been conducted into the impact of electronic banking on operations, costs as well as potential manipulation.

Mr S Thobejane (ANC, Limpopo) asked if the presenter was gender sensitive as he only made reference to males paying maintenance in his presentation.

Mr Johnson responded that any given day there was R300 million in bank accounts or as cash in the courts throughout the country, this presented a huge opportunity for fraud to be committed. If there were substantial money available it could be invested on a short-term basis, approved by the necessary investment policy where it could possibly be used for generating quick income to fund operations. But it was primarily about cash and risk management so that the cash was moved out of the courts.

Since the adoption of Electronic Funds Transfer (EFT) payments which allowed for quick payments, the bank charges became more than the interest accumulated leading to a shortfall. Yet this was seen as a positive development as it meant beneficiaries received their money quickly.

The benefits of electronic banking were more and broader control, all payments in the future would be automatic, fewer employees needed and quicker payments.

Ms Engelbrecht asked what the value of the unallocated funds held in the TPF was, and what was being done to distribute and allocate these funds to the correct beneficiaries.

Mr Mohapi was not convinced by the response he received that one of the reasons investments were pursued was to combat corruption. He pointed out how many pension funds were giving beneficiaries challenges as a result of their investing the pension funds. He was worried that this could happen with the TPF investments.

Mr Johnson responded that the only purpose of investing was risk management. An approved investment policy direct the authorities and the DOJ would direct where to invest and for how long. He pointed out that they currently invested with two other funds. Going forward they could possibly look at different approaches.

Mr Mohapi replied that the DOJ had a reserve account which kept money that was not used, but with an investment account you had a particular objective, so the DOJ was using the reasoning behind the reserve account to advance an investment objective of making profit, so the reasons given were not convincing as there already was a reserve account. 

Mr Mhlanga pointed out that any institution of state was not there to make profit, but to sustain services.

Mr Thobejane sought clarity as to who would benefit from these investments.

Ms van Der Walt responded that with investments the act did not say money must be invested, rather it may be invested with the approval of the Minister of Finance. An example was the money in the Guardian Fund which was invested. She pointed out that there was a limit on the amount allowed into the reserve account, with the idea being that the remaining money would be invested as it was money that was not allocated. If it lay around there were certain risks involved.

Mr Thobejane suggested that the debate be halted so that the department be allowed to go and develop a proper analysis and understanding so that when they present again they come with clearer answers and explanations.

Mr Mohapi said you don’t address a deficiency and convert it into an opportunity, rather the department should address the issue of these unallocated funds by investing in mechanisms and processes to track down the necessary beneficiaries. 

Mr Johnson responded that unallocated money was unclassified money where people made deposits without referencing what it was for. Follow ups were then required to make contact with the person who originally made the deposit, to trace who the beneficiary was. The value of the unallocated funds for the last financial year was R61 million.

The Chairperson pointed out that if the Department could not answer a question it may come back and answer.

Mr Johnson said that when this legislation was constructed it was guided by other funds, as well as by the finding of the Auditor-General.

The Chairperson thanked the presenters.

Proposed Public Participation Plan for the Justice Administered Fund Bill
Mr Gurshwyn Dixon, Secretary of the Committee, explained that the bill was a Section 75 bill and the Committee did not send the bill to provinces to conduct public hearings and public participation. In the past if it was a Section 75 bill and the portfolio Committee had dealt with public hearings then the National Council of Provinces (NCOP) did not generally do public hearings unless it was a controversial bill. With the Lamosa Judgement all bills referred to the Committee should have some form of public participation. The proposal was to use electronic platforms such as the radio, Parliament’s website and other social media platforms to advertise the bill and to request any written submissions on the bill.  There were proposed timelines which were dependant on National Assembly (NA).

Discussion
Mr G Michalakis (DA, Free State) had no objections, but said it would be pointless to copy the public participation process used by the NA. The NCOP needed to find a way to conduct public participation that did not overlap with what the NA had done so that it extends to areas the NA was unable to reach.

Mr Mohapi said he would not necessarily support the proposal if it had an impact on the budget. He asked whether the Committee was in a position given the time constraints in November to remain time-bound to whatever was proposed.

The Chairperson agreed with Mr Mohapi and suggested that there be a rescheduling.

Mr Mhlanga suggested that the approach be that the proposed programme be noted, and said that provinces should be involved in the public participation for the bill, especially since only one written submission was given when the NA conducted public participation.

Mr Thobejane said the dates proposed were not doable in terms of the work the Committee had ahead of it. He suggested that administration and the Department look at rescheduling.

Mr Dixon sought clarity as the NCOP did not have a standard practice of how to deal with Section 75 bills. He asked if the Committee was suggesting that public hearing be conducted in the provinces. He pointed out that if they were done in Parliament there were three meetings scheduled for the Committee.

Mr Thobejane suggested that the last option be used.

Mr Mhlanga said that Committee should also look at the affected beneficiaries of this bill like the Social Workers Association who should be consulted.

Report on Oversight Visit to Air Force Base Hoedspruit and Oversight of the Department of Military Veterans
Mr Thobejane went through the report beginning with the oversight visit to Air Force Base Hoedspruit.

Mr Michalakis, referred to page 5 point 10, and requested that the information supplied by the commander of 19 Squadron, that all helicopters were grounded and that all Squadrons faced problems of grounding be captured in the report.

Ms Manopole requested that there be a follow-up on the issues at the Air Force Base, as well as information on the state of other Air Force Bases.

Mr Thobejane moved on to the Oversight of the Department of Military Veterans section of the report.

Ms Manopole sought clarity as to when the Minister and Deputy Minister would come to the Committee to hear the pertinent issues raised. She saw it as a problem that the Minister and Deputy Minister had not appeared despite various requests.

Mr Mohapi said that more needed to be done to assist military veterans. Timelines need to be attached to recommendations made to the Minister.

Mr Michalakis said it was concerning that the Minister had not attended Committee meetings.

Mr Thobejane requested that the correct date of the oversight visit be shown on the report.

The report was adopted with amendments.

Mr Michalakis said the Minister needed to account to the Committee which represents the people. It was her constitutional obligation.

Mr Thobejane said the Committee needed to register its concern with the way the Minister treated the Committee.

Adoption of Minutes
Minute of Committee meeting held on 12 October 2016 were adopted.

The Chairperson proposed the adoption of the minutes of the 2 November Committee meeting.

Mr Mohapi requested that all issues raised around this report be followed up, and that it must be noted who the chairperson of the meeting was.

Mr Thobejane requested that there be no point A for 15.3 as there was only one point made so why have an A if there is no B.

Mr Mohapi sought clarity as to why there was no response regarding the issue of schools that experience violence and gangsterism with the South African Police Service taking 2-3 hours to respond. He had issue with the responses given that there were regular inspections to deal with shebeens that operated continuously making a lot of noise which caused problems for people in the community, yet he had people approaching him to complain about shebeens operating and making a lot of noise throughout the night to the early hours of the morning. He requested that details of the areas where follow-ups and inspections had been made.

The Chairperson said that this needed to be taken up, and that the Committee must report to the Department that they were not happy with the responses.

The minutes were adopted with amendments.

Update on International Travel
Mr Dixon updated the Committee and reported that an application was submitted for the trip to India. It was in the process of being approved. Requests were sent to the High Commissioner in India to draft a programme and liaise with the Indian Parliament. The High Commission was still waiting for the Indian Parliament to reply.  Research was done by the Committee that would be travelling with the Select Committee on Security and Justice.

Discussion
Mr Thobejane requested that all research be presented to the Committee in written form.

Mr Mohapi asked when the Department of International Relations and Cooperation (DIRCO) would confirm.

Mr Dixon responded that communication was sent to DIRCO two weeks ago, and they contacted the Indian Parliament. The Indian Parliament had yet to confirm. Another communication can be sent.

Mr Mohapi asked that there be a follow up.

Ms Engelbrecht was concerned that there was no confirmation of dates up until this point.

Mr Dixon said the dates were confirmed from 10-18 December 2016.

Mr Michalakis sought clarity as to whether anything was being held up from Parliament’s side and if approval had been given by the Chief Whip and the Chairperson.

The Chairperson said that in principle it was approved, but the budget needed to be approved.

The Chairperson adjourned the meeting.