Appropriation Bill 2017: Public Service Commission comment

Standing Committee on Appropriations

30 May 2017
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

The Public Service Commission (PSC) presented the Committee with a comprehensive account of its comments on the 2017 Appropriations Bill. After looking at the mandate of the PSC, its areas of oversight and output of oversight function, the presentation discussed general comments on the 2017 Appropriation Bill with regard to issues pertaining to the PSC mandate. This included an assessment of strategies available to significantly improve administration practices in the public service, efficiencies, effectiveness and value for money with regard to the 2017 budget vote allocations, what can be done to ensure government’ measures to improve overall systems of governance were successful and budget vs. performance for national departments. The presentation also looked at effective and efficient performance within the public service (what can be done to improve the effectiveness of the state vis-à-vis delivery trajectory of government as contained in the National Development Plan), identifying and discussing government programmes wherein major efficiencies and savings were possible and other matters that may assist the Committee in processing the 2017 Appropriation Bill.

The Committee commended the presentation for being elaborate, informative, factual, eye-opening, clear, straightforward and comprehensive. Members felt issues with the Department of Public Works needed to be looked into. The Committee discussed the resource pool, PSC intervening in precautionary suspensions, rating agencies and the need for National Treasury to lead by example – other departments could not be expected to be compliant when Treasury was not following its own framework and regulations relating to the integrated financial management. Members remarked that it was indictment that people were doing as they pleased not performing, not complying and were allowed to get away with this. The Committee questioned the usefulness of Service Delivery Improvement Policies and where they were used successfully and said there was need for a strategy to ensure compliance of consulting the Department of Performance Monitoring and Evaluation before organisational structures were approved by Executive Authorities.

Meeting report

Introduction by the Chairperson

The Chairperson welcomed the Public Service Commission (PSC) noting that the meeting of the day was a very important one. The PSC would brief the Committee on the 2017 Appropriation Bill. The PSC was a valued partner that worked with the Committee to maximise socio-economic benefits of scarce resources made available to people. Previous inputs from the PSC were related to the management of personnel and spending, improved financial management in government departments, improved management of government property and improved cost containment targets in annual target planning. The Committee would use inputs from the PSC to make recommendations in those areas. Thanks to invaluable contributions from the PSC, Committee recommendations were accepted by Parliament as valuable. Difficult times had to be faced.  Allocation of limited resources demanded the greatest care and research based evidence. It had to be ensured that budgets approved were transformative and would lead to a people- centered public service. She hoped for open and free engagement, fruitful deliberation and innovative ideas that would effect budget allocation. There was ongoing discussion about alignment of budgets to the National Development Plan (NDP).

Apologies were received from Mr AM Shaik Emam (NFP), Ms E Louw (EFF) and Ms D Senokoanyane (ANC).

Public Service Commission: Comment on the 2017 Appropriation Bill

Ms Carmen Domingo-Swarts, Director: Programme Evaluation, PSC, after looking at the mandate of the PSC, its areas of oversight, output of its oversight function and outlining what the presentation covered, commented that National Treasury (NT) continued to place a ceiling on the wage bill which resulted in temporary stabilisation. Higher than inflation wage settlements placed pressure on the wage bill and Departments would need to devise innovative ways to execute their mandate with limited resources. Public servants needed to be held to a higher standard of professionalism because they served public interest and used public monies. Public interest should always come first with zero tolerance to corrupt activities. Such high standards of integrity and commitment necessitated ethical leadership of the highest caliber. Other interventions to curb corruption included resuscitating the National Anti-Corruption Forum, led by the Minister of the Department of Public Service and Administration (DPSA) and the PSC. The finalisation of the Forum would include both public and private sectors and will be led by the Inter Ministerial Committee on Anti-Corruption.

The presentation then discussed strategies available to significantly improve administration practice in the public service in terms of strategic management, governance and accountability, human resource management and financial management.

Looking at the efficiencies, effectiveness and value for money with regard to the 2017 Appropriation Bill and the percentage of planned outputs achieved, the percentage of national departments that managed to achieve more than 80% of planned targets declined from 37.8% in 2014/15 to 28.9%in 2015/16. The departments where below 50% of predetermined targets were achieved and reflecting above 80% expenditure included:

-Department of Energy

-Department of Women

-Department of Water and Sanitation

Noteworthy was the dramatic decline in performance of the Civilian Secretariat for Police. The percentage of planned outputs can be increased by proper target setting, redesigning delivery models and processes and by performance management. Performance management should be improved on both the organisational level and the individual staff assessment level – organisational performance must be aligned with individual performance i.e. individuals could not be receiving performance bonuses when the organisation was not performing. On organisational level it was about better measurement of unit performance and appropriate management action in the case of poor performance. Appropriate management action included consequences for poor performance but even more importantly, giving managers authority and means to take all necessary steps to improve performance.

Ms Domingo-Swarts outlined with filling of performance agreements, Directors-General and Heads of Departments in the public service were required to enter into performance agreements with Executive Authorities and submitted to the Department of Performance Monitoring and Evaluation (DPME). Since the 2014/15 financial year submission rate of 18% there had been significant improvement in 2015/16 and 2016/17.

With the payment of invoices, there had been a dramatic increase in the number of invoices paid after 30 days mainly attributed to the Department of Defence, Department of Public Works (DPW) and Department of Military Veterans. There was also a significant increase in the number of invoices older than 30 days not paid mainly attributed to the DPW, and Department of Agriculture, Forestry and Fisheries. It was also found that larger amounts were being paid first.

In terms of the use of consultants, there was a clear decline in the cost of consultants in terms of financial reporting services, preparation of performance information, IT services and other services in the 2015/16 financial year. Based on the areas of concern of the Auditor-General of SA, pertaining to poor financial reporting and management and preparation for performance information in departments, it was clear there was no skills transfer by consultants over the two previous financial years. Although there was a decline in the cost of consultants for both financial reporting and preparation of performance information, these were core functions and it was concerning they needed to be outsourced. There seemed to be a decline in the number of consultants used based on information provided.

Ms Domingo-Swarts then turned to governance and what could be done to ensure government’s measures to improve overall systems of governance were successful, in the area of audit outcomes, the 2015/16 audit outcomes showed slight improvement in audit results of national and provincial departments although there were some recurring areas of concern, including:

-Departments of Education, Department of Health and DPW were responsible for 37% of the budget continuing to have poor outcomes

-financial sustainability of State Owned Entities remained a concern – uncertainty of the ability of some of the Entities to continue operations delayed audits, as evidence as needed t report them as a going concern. The operations and audit outcomes were negatively affected by weaknesses in leadership and governance such as instability at board level, vacancies in key positions, inadequate consequence management and poor monitoring and oversight of financial, performance management and major procurement processes.

The area that showed no improvement was the audit opinion on financial statements. The poor quality of financial statements submitted raised concern about in-year reporting and management of finances. Increase in irregular expenditure mainly due to non-compliance with supply chain management legislation. This represented expenditure incurred towards procurement of goods and services without following prescribed processes. The signs of poor financial management included increased occurrence of deficits, departments funding cash flow shortfalls from the next year’s budget, poor revenue management and inability to pay creditors within required 30 days.

Looking at financial misconduct, there was a huge decline in finalized cases of financial misconduct reported by national departments for 2015/16 (238 cases) from 563 cases in 2014/15 (42% reduction). Departments with the highest number of completed cases included:

-Department of Police (114 cases)

-Department of Defence and DPW (22 cases each)

-Department of Correctional Services (15 cases)

Departments with the lowest number of completed cases included, Department of Arts and Culture, Civilian Secretariat for Police, Independent Police Investigative Directorate, Department of Mineral Resources, Department of Public Enterprises, Statistics SA, Department of Transport and Department of Women – all these departments have reported only one finalised case each.

Turning to precautionary suspensions, this was a good indicator of health of HR administration. 2015/16 reflected a small reduction in the number of people suspended with a notable increase in the number of people whose suspension exceeded 60 days, including a significant increase in the average number of days suspended. Suspensions affected the wage bill because employees were paid whilst on leave and costs may be incurred, however, 2015/16 reflected a significant increase in the cost of suspensions from R31 million in 2014/15 to R54 million in 2015/16. Suspensions were largely attributed to the Department of Police, Department of Justice and Department of Defence. Although there was a noteworthy downward trend in number of officials suspended, the Department of Police numbers remained high.

Ms Domingo-Swarts then discussed what can be done to improve the effectiveness of the state vis-à-vis the delivery trajectory of government’s objectives contained in the NDP. With the vacancy rate of national departments, one of the biggest challenges for national government was to attract and retain qualified and competent persons in all areas of administration. As per the NDP, there was unevenness in capacity that led to uneven performance in the public service. The overall vacancy rate in the public service was 11.22% which was above the norm of 10% as at December 2016. Of the 43 national departments, a total of 22 (51%) had a vacancy rate above the 10% norm. Of concern were the following departments with a vacancy rate above the 10% norm:

-Department of Human Settlements

-Department of Sport and Recreation

-Department of Water and Sanitation

-Department of Transport

-Department of Communications

Ms Domingo-Swarts said the vacany rates were attributed to:

-ongoing restructuring over long periods and delays in finalisation of the approved organsiational structure

-moratoria on filling of posts that were in place for extensive periods

-lack of delegations, in some departments, to fill posts that often result in lengthy approval processes

-delays in finalisation of prescribed pre-employment verifications on the part of the SA Qualifications Authority (in respect of educational qualifications) and the State Security Agency (in respect of the other prescribed verifications)

Another key area of concern that affected performance was the provision of “reasonable functional accommodation that facilitates service delivery” by DPW. Departments have raised the maintenance of buildings and management of lease contracts as persistent problems. DPW indicated its lack of delivery was ascribed to contractual and labour disputes – this brought into question the capacity of the Department to deliver on its key function.

National departments have not adjusted operations to reflect allocated budgets, for example, some departments continued to recruit. This meant the initial shortfall for 2017/18 will be even larger and it will be difficult to sustain headcounts for the next three years. National Treasury, in collaboration with DPSA, will develop guidelines for departments on management of headcounts.

Corruption undermined good governance, legitimacy and credibility of the state, sound and functional institutions as well as effective operation of government. It further hampered developmental efforts. Therefore there was a need to continuously promote ethical conduct in the public sector. One step government took was to bar public service employees from doing business with government and other organs of state. The transitional period for public servants to declare activities under the 2016 public service regulations ended 31 January 2017. This meant by February 2017 those public servants conducting business with an organ of state should have resigned from either the business or from the public service. DPSA was currently working on collating information on public service employees who failed to comply with the new regulations, upon completion disciplinary processes will be instituted against all who failed to comply.

Ms Domingo-Swarts concluded by noting there was a need to find balance between building a capable state and cost cutting measures which require innovation to facilitate effective and efficient service delivery and performance. The foundation for this was sound strategic and human resource plans, with clear linkages over the Medium Term Expenditure Framework and departmental Budget Votes. These plans should be costed for implementation, which required implementation of costing models, taking into consideration both human and financial resources. Assessments should be undertaken focused on the number of departments, the duplication of functions and top heavy structures of service delivery departments. Proper management of public funds required setting up proper accountability frameworks (aligning responsibility, authority and accountability) and detection and presentation of unauthorised, irregular, fruitless and wasteful expenditure and taking disciplinary actions against negligent officials.

Discussion

The Chairperson thanked the PSC for a presentation that was elaborate, informative, factual and an eye opener.

Ms M Manana (ANC) welcomed the briefing – it was clear, straightforward and an eye opener. In reference to the presentation questioning the capacity of the Department of Public Works (DPW), she said this issue had to be looked into as most departments complained about the DPW. It could be that the Department was overloaded.

Mr A McLoughlin (DA), referring to invoices paid, asked if invoices paid after 30 days and invoices older than 30 days which were not paid, was the same thing. Were there any invoices getting paid within 30 days?

Dr M Figg (DA) agreed that the briefing was comprehensive. He liked the fact that the format was the same as for previous briefings which meant that one could compare information. Many areas were covered very well. The Committee had to sit down and look at the briefing with the Committee researchers to decide how to act on it. It was an indictment that people were doing as they pleased, not performing and complying, and getting away with it. Every page of the briefing contained valuable information. Referring to the payment of invoices, it looked like a good job was done in that large amounts were being paid but such amounts were paid to large businesses that could afford to carry that invoice – it was the small suppliers who really needed to be paid.

The Chairperson, referring to the percentage of planned outputs achieved, noted that only two years of the current Medium Term Expenditure Framework (MTEF) were dealt with – was this because annual reports were not yet available? Did the PSC ever intervene in precautionary suspension? If so, the Committee would like to piggybank on it in terms of recommendations. There was the risk of fruitless expenditure.

Ms S Shope-Sithole (ANC) agreed that the PSC always gave good briefings. Departments were not following the framework developed by National Treasury. Departments could not follow the regulations pertaining to the integrated financial management system. It seemed that the NT itself was not abiding by it. It was only natural that if the Treasury itself could not follow regulations, it could not be expected that departments would be able to do so. She had been shocked by evidence that pointed to that. There had to be a deeper delving into that to see if Treasury could be sorted out. Treasury was the anchor. Foreign countries, whether developed or undeveloped, looked to the NT when assessing the country. She used to hate downgrading agencies with a passion because they never upgraded anyone. But she dealt with her pain and consulted three economists, who assured her those agencies were learned people who made use of research. They would not downgrade a country from a distance. They would take a closer look to see what was being hidden. Rating agencies had access to integrated financial management systems reports. It was understandable if non-compliance was found in other departments, like education, but it was not acceptable in the Treasury. Matters within Treasury had to be rectified before other departments could follow suit. Confidence needed from investors would then return. She had a problem if there was looting and corruption in Treasury.

Ms Pumelele Nzimande, PSC Commissioner, appreciated the feedback from the Committee. In terms of DPW, she believed the Standing Committee, with other Committees, needed to maintain dedicated focus on the DPW. It was not only a matter of lack of capability. The PSC itself was also a victim. Challenges were not easy to detect. Even the rentals paid by government departments were not commercially based. Money was being taken from the public purse.

With the payment of invoices, the PSC recommended measures to effect the breakdown of payments at national and provincial levels. Only the NT was paying in accordance with the Public Finance Management Act (PFMA). There was interest due to suppliers. If all partners insisted on interest, there would be a big money drain from the public purse as it was suppliers who were vulnerable and settled for what was due to them, without interest.

In terms of PSC intervention in precautionary suspension, there were three kinds of intervention. Research on this area was conducted to gain clarity - round table discussions with HR management across the public service indicated that guidelines were not being followed. People were gotten rid of even if their presence would not interfere with investigations. The PSC developed guidelines for Executive Authorities. When there was reshuffling, Executive Authorities were dealt with directly. The PSC made inputs so that the School of Government could prepare a model. 

Ms Nzimande agreed with Ms Shope-Sithole about the Treasury. The PSC believed the Standing Committee had to oversee PPP projects. Even for existing PPP projects in Health and Correctional Services, there had to be oversight of value for money. The PSC did research and there was a report that could be shared. When there was an upcoming initiative, the PSC could provide guidelines for questions that could be asked to strengthen oversight. There was a unit in the NT that provided oversight of PPP projects – this unit could be called to appear before the Committee. Value for money had to be drilled.

Ms Domingo-Swarts added that with payment of invoices, focus was on non-compliance. Efforts were made to track down which invoices were not paid on time. The Department of Performance Management and Evaluation (DPME) had a dedicated component which was named in the PSC November briefing. Between the DPME and the NT there had to be an indication of whether suppliers were paid or not, after 30 days. Results were currently seen in the change of function of NT.  Formerly, NT was assigned with oversight of Strategic and Annual Performance Plans but the DPME had taken over some of the functions – this explained the DPME name change from Performance Monitoring and Evaluation to Planning, Monitoring and Evaluation. Focus of NT was on budget alignment with the MTSF and MTEF while DPME focus was on strategic objectives developed. The balance became skewed in the sense that DPME had less focus on alignment between money and indicators. Changes occurred in the preceding two years. The NT developed guidelines but only partially complied with the development of Strategic and Annual Performance Plans. Information about the amount of invoices paid on time could be requested from the DPME. DPME could present a better picture to the Committee as it had all the required information.

The Chairperson asked if Service Delivery Improvement Policies (SDIPs) were useful and where it was used successfully. She asked why it was not used by departments. She then spoke to the presentation’s mention of consultation with DPME before organisational structures were approved by Executive Authorities - non-compliance with the requirement resulted in non-alignment with the MTEF budget and the departmental organisational structure. A strategy was needed in this regard. Organograms could only be approved after consultation with the Department of Public Service and Administration (DPSA). She asked what the current situation was with regard to the withdrawal of money for posts by government. She asked if these posts were being blocked and requested more information on the resource pool.

Ms Domingo-Swarts replied that the biggest challenge was retention of people with skills and competencies. The PSC requested a quicker turnaround time to fill posts. There were people in the pool who were tested and could deliver on the scope of work. There had to be better turnaround time to fill critical posts. Service Delivery Improvement Policies were linked to strategic management requirements. The question was how to translate the Strategic Plan into concrete plans based on what was to be achieved. It was difficult to say when the SDIPs were effective. It was also difficult to say whether the charter was useful, if it was not known and if it was in place. There was lack of definition of what a citizen could expect from a department. Citizens also had to know where they could complain if a department could not deliver on what was expected. The question was how to improve performance. Consultation with the DPSA about organisational structure was highlighted in the Management Performance Assessment Tool (MPAT) results. It was not known which departments were complying but the DPSA could provide more information on that. There was concern about impact on headcounts. Non-critical posts were a challenge. Posts related to the core business of departments were usually defined as critical but findings of the Auditor-General of SA stressed more administrative and strategic management skills were needed. When there was a high vacancy rate, administrative posts were pushed aside.

Ms Nzimande added that some departments went ahead without DPSA approval of the organisational structure because there was a long waiting period. However, gaps were being closed.

Committee Announcements

The Chairperson noted the Management Committee identified a need to meet with the NT regarding overspending, governance, oversight and control over the integrated management system. The meeting would take place Thursday, 1 June, at 18h00. Four departments were identified as priority departments. The Committee secretariat wrote to the Portfolio Committees of the four departments identified for reports and to prepare for engagement with them. The Committee had to stop working in isolation and depart from the silo approach. Recommendations of other Committees had to be looked at. Recommendations of the Standing Committee had to be aligned with those of other Committees. Issues not relevant to the Appropriations Bill but raised at the community public hearing would be referred to the Petitions Committee to investigate. Local government issues, like houses and shacks, would be referred to departments, to be followed up on when departments appeared before the Committee. The Committee represented the public and as such could pick up on issues relevant to other departments. Committee researchers had to help identify places for oversight visits. Stakeholders at grassroots level had to be identified for round table discussions on the Appropriations Bill.

Correspondence

There was a request from a PhD student to interview Members of the Committee. Members did not indicate if they were available. She herself was available. Whoever was available had to inform the Committee Secretary so that names could be sent to the student. Names would appear in the thesis.

The Management Committee discussed the development of an instrument to interrogate quarterly reports. It would be circulated to Members.

Mr N Gcwabaza (ANC) thanked Members for their inputs. He looked forward to discussing the instrument the Chairperson referred to. There was something the Committee was not doing right in terms of focused attention on expenditure of departments and closing of loopholes. Events of preceding days suggested the Committee could be doing better not only with regard to Treasury but all departments. Focus on budget expenditure, budget outcomes and line items of departments, subject to Committee oversight, had to be tightened. He pleaded the Committee cut to the chase with stories departments were telling. Parliament would rise to the occasion if the Committee maintained sharp focus. Members had to reflect and put down points to add to those of the Content Adviser.

The Chairperson advised there had to be a due date for that. A document was produced by the NT about expenditure across departments which had to be circulated. Researchers were not to abdicate their responsibility. There had to be focus on expenditure, according to economic classification, because that was where money was hidden. There had to be a breakdown plan for money given for infrastructure so that goals for the five year term could be achieved.

The meeting was adjourned.

 

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