SCOPA had arranged the hearing with Department of Water and Sanitation (DWS) as a follow-up to an unsatisfactory hearing in November 2016. In addition to irregular, fruitless and wasteful expenditure, the DWS accruals and commitments were added to the agenda. As it turned out, Committee came close to declaring the meeting as fruitless and wasteful expenditure.
On the question of political accountability, it was noted that neither the Minister nor the Deputy Minister was present to witness the poor response by DWS. The Executive Authority had an important accountability role towards the Committee and its absence was unfortunate.
DWS had irregular expenditure of R2.5 billion and R87.2 million in fruitless and wasteful expenditure but the Committee found that very little had been done to resolve these matters and no one had been charged with an offence. The Director General explained that he had only been in the position for four months so he was still on a learning curve and unable to respond to questions as he did not know the Department well enough and others before him had been responsible for the failures.
The Committee found that the Department had recommended disciplinary action for all of the 482 incidents recorded as irregular. As the Department believed that the Public Service disciplinary code did not support punitive discipline, not one of the persons involved in the irregular incidents had been charged or fired. On investigation, the Committee established that one person who had been responsible for R4.4 million in irregular expenditure had simply left as a result of the non-punitive disciplinary action system. The Committee found evidence of ‘malicious’ compliance in the way that some of the disciplinary processes had been carried out as they had been done the week prior to the hearing. The Department was warned that they were either in with the fraudsters, or they were naïve and they had to choose which it was.
Matters that had been raised in the 2015/16 DWS Audit Report had been left unattended
DWS accruals were R500.8 million. On investigating accruals and commitments, the Committee found that the Department had been technically broke at the end of 2015/16. Further evidence showed that accruals had tripled in 2016/17 and that there were doubts about the viability of DWS and its ability to ensure that water and sanitation infrastructure could be provided for the country. Massive overruns in project costs were bankrupting the Department. The Regional Bulk Infrastructure Project was in jeopardy as money from that grant would be used to deal with lack of funds. The enormous amount of money spent by DWS was questioned. A list of which companies had been paid and which had not, and who made the decision about preferential payment was requested.
The Overberg Water Board, which had had a seconded CEO for over two years, was completely dysfunctional but there had been no attempt to find a permanent CEO.
Committee members were highly frustrated by the lack of any attempt on the part of the Accounting Officer or the CFO to give satisfactory answers or to admit that the Department was dysfunctional. There were questions as to whether there had been financial shenanigans and whether pals had been paid for jobs while legitimate invoices were not paid.
The most fruitful aspect of the meeting for SCOPA lay in identifying that the Department was in deep crisis which threatened water supply in the country. SCOPA arranged another meeting to investigate accruals in more depth.
The Department of Water and Sanitation (DWS) Director-General, Mr Dan Metlana Mashitisho, offered apologies from the Minister of Water and Sanitation, Ms Nomvula Mokonyane, who was unable to attend as she was indisposed. He also offered apologies for the Deputy Minister, Ms Pamela Tshwete.
The Chairperson indicated that the hearing was a follow-up to the hearing with the Department of Water and Sanitation in November 2016 which they had been unable to complete. DWS had irregular expenditure of R2.5 billion and R87.2 million in fruitless and wasteful expenditure. Since November, there had been ongoing work that would assist the Department to respond adequately to the Committee this time. The Committee wanted to take the discussion to its conclusion, but had added accruals, commitments and liabilities to the hearing agenda. A study of all national departments had showed that DWS had highest amount of accruals. This was more than the savings DWS had in 2015, which meant in terms of financial health, the DWS was very sick. They could not have paid everyone within the financial year as they had not had sufficient funds. The Department had chosen not to pay creditors and had shown accruals rather pay the creditors and incur irregular expenditure. DWS was not the only department guilty of excessive accruals but the Committee wanted to know how it had come about. Water was very important in the lives of people. How people obtained access to water was a critical question, which was why DWS was so important. Without water, there was no life. Ms Chiloane would lead the questions on irregular expenditure. Thereafter, Mr Hlengwa would deal with accruals, commitments and liabilities.
Ms T Chiloane (ANC) noted that the hearing was a follow-up to the November 2016 hearing and the information requested by the Committee then was sent only six months later, on the day before this meeting.
DWS Director-General, Mr Mashitisho, replied that the bulk of the information since the meeting had been sent but it was only the additional information about accruals and disciplinary action that was sent late. He had sent a letter to the Chairperson explaining that they were too busy to make the deadline but he did apologise.
Ms Chiloane noted that according to the Auditor-General’s audit report, DWS had an accumulated figure of R2.5 billion irregular expenditure and so the Committee had requested a list of disciplinary actions taken. She wanted clarity on progress in the investigations.
The DG explained that they had submitted a document outlining the situation but he would ask the Chief Director for Risk Management to take the Committee through the document.
DWS Chief Director for Risk Management, Chris du Preez, stated that the investigations had been concluded in December and the Department had sent that information to the Committee at the time. They had recommended disciplinary action for all of the 482 incidents recorded as irregular. Three Senior Managers had been suspended and were facing disciplinary investigation and procedures; 22 employees had resigned and left the employ of the Department; 35 final written warnings had been issued; 84 written warnings were issued; five employees were sent for counselling and training. 330 matters were in progress, being dealt with by the various managers.
Ms Chiloane referred to the list of disciplinary items provided by DWS. As an example, she referred particularly to a letter written to Mr Baloyi, Director of Water Regulations. The letter was dated 24 May 2017, one week previously.
Mr du Preez explained that the line managers were responsible for disciplinary processes and some were slower than others in undertaking the process. KwaZulu-Natal staff had begun the process immediately but other provinces were slower to get going. He apologised but said that the matter was in progess.
Ms Chiloane was not convinced by the reply. She wanted a more convincing response as fourteen letters had been issued on 24 May 2017. Three letters had been signed in the Northern Cape on the same day.
Mr du Preez explained that they had undertaken their investigation and had sent their reports to the line managers who had looked at what had transpired, as required by the Public Service (PS) disciplinary code. The line managers had to have their own engagement with the employees. The managers in the provinces had to hold hearings and some provinces had taken longer than others.
The Chairperson queried the fact that Limpopo had signed 14 letters on one day. The Committee did not want a sense of malicious compliance in that DWS had quickly done something before they came to this hearing.
Ms Chiloane worried that it was malicious compliance and was not keen to move on.
The Chairperson said the Committee had noted the phenomenon and hoped that DWS heard what she was saying. She referred to the DWS disciplinary track sheet. The amount of irregular expenditure involved in the offences differed from R500 to R500 000, but the employees had all received a final written warning. Could she have an explanation?
Mr du Preez explained that it all came down to the Public Service Disciplinary Code. The Code provided in its preamble that, firstly, discipline was not a punitive measure. Secondly, provisions provided for the chairperson of a disciplinary committee to take into account the transgression by that specific employee. Here they were looking at it in its full context but when they had the disciplinary enquiry, the committee had to deal with the individual, the transgression and the mitigating circumstances, whether it was a first or second transgression and so on, and then the chairperson of that disciplinary hearing would pronounce a sanction. Senior managers could not change the decision as the code was a collective agreement and the sanction was based on the Labour Relations Act and the Bill of Rights.
Ms Chiloane thought that there was a loophole somewhere. She asked what was the difference between someone who issued a contract for R480 000 to the highest bidder with lowest points and someone who had approved catering for R2 500? How could they both get a final written warning?
The Chairperson suggested that they should underline that concern and move on. If disciplinary action did not serve as a deterrent, then it was an exercise in futility.
Ms Chiloane asked about implementing agents who had failed to follow procedures. What was the total value where procurement processes were not followed by the implementing agents?
The DG replied that DWS had submitted a document to that effect. Most of the water boards were involved, including Sedibeng and Amatole. He could not remember the names of all the water boards.
The Chairperson explained that the purpose of the question was to gain specific information and to facilitate discussion.
Ms Chiloane asked about the value of irregular expenditure by the DWS implementing agents.
Mr M Booi (ANC) asked why the DG had not been able to obtain the information in the six months since the previous hearing and more than a year since the original request for information. The point of SCOPA was that everyone was well prepared to hold discussions. What was the problem with the Department?
The DG replied he had understood that they had already submitted the information. Also, it was not just the water boards but municipalities were also involved.
The Chairperson intervened and asked the DG to answer directly.
Ms Chiloane stated that she needed answers to her questions. The DG was asked to pay attention.
The DG replied that he had sent the information to SCOPA.
Ms Chiloane asked him to talk to the information.
The DG was not able to give the number.
The Chairperson suggested that Ms Chiloane should underline this and carry on.
Mr Booi objected that the DG was not answering the question. It was not for the Chairperson to support the DG. The Committee member had worked hard and she needed answers.
Mr T Brauteseth (DA) added that the devil was in the detail and SCOPA wanted detail. If one added up all the money referred to in the lists, it was a lot. The DG was the Accounting Officer and he could go to jail for the irregular expenses – so he should wake up and answer questions.
National Treasury Chief Director: Supply Chain Governance, Mr Solly Tshitangano, informed DWS that they could go to the DWS Annual Report on page 292 which showed the irregular expenditure per item.
Ms Chiloane explained that the DG was not accounting to her but to South Africa. She had the Annual Report but it seemed that the DG did not even have the Annual Report before him.
The Chairperson said he was noting the unanswered questions so that he could determine how far they were getting with the hearing.
Mr Booi argued that they could not postpone as the DG was paid by the South African taxpayer. DWS was not the only department that they had to deal with and they could not keep calling them back for meetings.
Mr E Kekana (ANC) said that it was very clear that DWS was not prepared for the hearing. They had failed the first three questions. What was the point of asking questions as they would not know the answers. DWS was idling and Ms Chiloane was identifying actions of malicious compliance. It was clear that they had just forwarded information which they were seeing for the first time at the hearing.
Ms N Kunou (ANC) was adamant that the DG had not opened the documents before the hearing and they had just put together documents the previous week simply to make a show of compliance. The DG had not even known the names of the Water Board entities. She suggested that a member of the DG’s team be requested to answer.
Mr M Hlengwa (IFP) was frustrated. He asked who had prepared the documents and whether the DG had signed off on the documents. The DG was the Accounting Authority so he had to be able to speak to the documents that he had sent to SCOPA.
Ms N Mente (EFF) said that the DG should say that the DWS was not ready. It was a thorough document, except that the names of those who were in charge of the offices where the transgression had taken place had been omitted. As far as disciplinary hearings were concerned, senior management initiated the case, appointed a chairperson and they presented evidence. That had not been done. The document was simply drawn up for the Committee to assume that they had done what was needed to be done. Disciplinary hearings did not happen the way that the Chief Risk Manager had said for management levels 8 to 12. He had talked about level 1 to 7 hearings. Top level disciplinary hearings were different.
Mr Brauteseth said that he wanted the hearing to continue because to send DWS away was an easy option. He had lots of questions and if the DG had to sit there and expose his ignorance to the public, so be it. The South African community expected them to hold officials and politicians to account. If SCOPA sent them away, SCOPA was letting the South African public down. They needed to be held to account. They could not come unprepared, thinking that SCOPA would let them off and they would come back in six months’ time.
Mr C Ross (DA) raised the question of political accountability and said it was a pity that the Minister and Deputy Minister could not be there as they needed to witness the performance of the Department and the frustration of the Committee. He believed that SCOPA should register when the Executive Authority was not present in their hearings. The Minister and Deputy Minister had an important oversight role and an important accountability towards the Committee. For the record, the Committee took note of the fact that both the Minister and Deputy Minister were not present and it was a most unfortunate situation.
Mr Booi said that they could lengthen the interrogation with no responses. The accounting officer should answer the questions, not the Minister, but he accepted that they should try a few more questions. It was a hearing and they wanted to hear answers.
Mr Kekana said that it very clear that they were going to get nothing from the DG. There was no response to the first three questions. What was the point of proceeding as the Committee would get nothing. It was malicious compliance. The letters dated the previous week proved that they had simply put something together for today’s hearing.
The Chairperson explained to the DG that the Committee expected him to go much deeper into the details of the reports. They did not want generalisations.
Mr Hlengwa raised the point that the CFO was Acting DG in November but he had not rescued the DG. The CFO understood what was expected. Had a proper hand-over been done about SCOPA’s expectations for the hearing?
The DG asked for the opportunity for the DWS team to go through the issues. He had thought that they would come back to the parked issues. The one thing he needed to indicate was that he had brought a team that could respond to the issues. The Committee needed to bear in mind that the preparations were done in the branches and sent through to the Heads of Departments and then it was coordinated in his office. He had signed off, but it was very bulky. The Committee should also note that he had been with the Department for four months and he could not master everything in four months, but he did not abdicate his responsibility. A department of the magnitude of DWS could not be mastered in four months. He had been through the Annual Report, but had not signed it as he had not been there during that period. It was not an excuse and he took responsibility as the present Accounting Officer. He began to explain his confusion about the question on the Water Boards.
Mr Booi interjected on a point of order and told the DG that he was not chairing the hearing. He was an accounting officer and had to report to the Committee and the Committee wanted to hear from him, not the team. The Committee wanted answers.
Mr Brauteseth suggested that the previous Acting DG was sitting next to the DG and could answer the questions.
Mr Booi stated that the previous acting DG had not been able to answer questions in November so that suggestion was no good.
Mr Hlengwa said that since the DG had signed off the documents, he was responsible for the report and had to be able to answer. If he had not read the documents that he had signed off, he had to be exposed. Four months was more than enough time to get to know a department. For the DG to say that “DWS had submitted a document” was not a response. Closing the hearing would put SCOPA on shaky ground. He insisted that the hearing continue.
Mr Booi conceded to the view of continuing with the hearing.
Mr Sifiso Mkhize, DWS CFO (and previous Acting DG), informed the hearing that the R2.5 billion of irregular expenditure had been broken down into the eight Water Boards and each region. R2.2 billion in irregular expenditure came from implementing agents, which were the Water Boards and the municipalities. The information had been handed over to the Risk Management Unit. Each implementing agent had gone through investigation and disciplinary processes. There had been some movement in the cases and some warning letters had been issued. Certain regions had acted immediately and some letters were issued at that time. Others had embarked on processes but took longer and some of the letters were signed off only in May. The labour relations processes had taken longer than DWS had expected.
The Chairperson believed that at that point in the hearing there was clarity as to the standard of answers expected and the Committee could engage with DWS. Ms Chiloane was asked to continue the questions.
Ms Chiloane returned to the implementing agents. She noted that the implementing agents had used service providers and that was where 77% of the irregular expenditure had occurred. What was the role of DWS in overseeing the implementing agents? How much money had been recovered from the three officials that they had dismissed?
The DG explained that they had not dismissed anyone. The irregular expenditure came about because of lack of project management at the time. DWS needed a Service Level Agreement (SLA) with the implementing agencies to make oversight more rigorous. He agreed with the Chairperson that the oversight was not rigorous, but he had identified that shortcoming. There were serious gaps in contract management and projects.
The Chairperson wanted to know who was responsible for oversight.
In response, the DG suggested that on the side of the agents, it would have been their accounting officers who implemented on behalf of the Department but in the DWS, when he came in, he realised there were anomalies and immediately took action. Ultimately, the DDG responsible for Water Resource Infrastructure (WRI) was responsible.
The Chairperson asked for the name of the person who was paid by the public to do this work which had not been done and had caused them to be at the hearing.
The DG informed the Committee that the DDG for WRI was Ms Zandile Mathe who was on suspension.
The Chairperson explained that as they were public servants, SCOPA would deal with the persons who were responsible, not with generalisations.
The DG replied that also on suspension were Andre van der Walt who was running the Bucket Eradication Project and the CFO of the Water Trading Entity, Mr Mpho Mofekeng. When people were on suspension, they were innocent until proven guilty.
Ms Chiloane explained that the Constitution gave SCOPA the task of oversight. She asked why it was so difficult for the DG to mention names. And when he did, he stated that they were not guilty. Who were the three people who had resigned? She referred to the letters signed in May. How much money had been recovered from them? How did she know that the information that she was receiving was credible?
The DG asked the Chief Risk Officer to explain the oversight management of the implementing agents.
Mr du Preez, DWS Chief Director: Risk Management, explained that DWS had an SLA or Implementing Agent Agreement that needed to be signed. During their investigations, they had found that some SLAs were signed and some had not been signed. There were also weaknesses in the Agreement that contributed to irregular expenditure. DWS Legal Services were in process of strengthening the SLA. The implementing agents were responsible for 86% of the irregular expenditure. Mostly the irregular expenditure involved exceeding contract values. For example, Lepelle did not follow procurement processes with the Giyani project. Others exceeded contract amounts because they did not follow a proper process to get approval to exceed the amount.
Mr du Preez said the Regional Bulk (RB) Infrastructure Grant Framework was adopted in 2009 to indicate how things had to be done, but the policies, procedures and guidelines referred to in the Framework were never drawn up and the irregularities occurred as a result of that failure. The projects were implemented through the regional offices. Oversight was done by the WRI DDG through the regional managers but the policies and procedures to guide them were not written up.
The Chairperson wanted to know why it had not been done.
The Chief Risk Officer could not say why it was not done but it should have been done by the person in charge of the RB process in 2009 and he would get the name. He had to agree with the Chairperson that those who were involved in the following years also did nothing. The accounting officers over those periods would have to be the ones to account.
The Chief Risk Officer explained that the irregular expenditure was as a result of non-compliance with rules. He stated that those who had resigned may have been guilty of not following processes but a service had been rendered, so there was no money to be claimed back. For example, one person did not get three quotes but only got two quotes and the service was rendered. But it was still irregular.
The Chairperson asked if not following procedures was a mitigating circumstance. It was sending the wrong message that they were not accountable. He wanted a full explanation of the persons who had resigned. It was an area where they had to drill down.
Mr Booi added that they could not blame those who were not there as the current Accounting Officer, by law, takes full responsibility.
Mr V Smith (ANC) addressed the mitigation that services had been provided, that is, that something was done and there was value for money. The Committee was directed to the list of irregular expenditure where the companies “Thick and Thin” and “Nazwo Trading” were listed as delivering security services. The services were irregular because they had not qualified. It had been determined prior to the contract that the bidder “could not provide functionality”. That meant he could not do the job. R1.2 million was paid per contract to a service provider who was not qualified to do the job. The same individual had done the same thing for more than nine transactions, probably in excess of R2 million. Why had the service providers kept getting contracts when they could not do the job? Were there no consequences?
The Chief Risk Officer explained that when bids were evaluated, they awarded points for certain criteria.
The Chairperson asked for an explanation of the criterion, “functionality”.
The CFO explained that they allocate a point in terms of the capacity or ability to do the job. In that case the service provider scored below that mark but it was sort of moved to the next level.
The Chairperson stated that they had agreed that it was irregular so DWS could not try to say that there was something right about it.
Mr Smith asked who constituted the Bid Committee and who signed it off? Usually the Bid Committee chairperson was the CFO, who was responsible together with other members of the bid committee. If he had signed it off, he had to account or be asked to leave the institution. They were talking about R1 million for one transaction. The entire Bid Committee and its chairperson were responsible. The DG had to ask him to resign when he got back to the office.
The Chairperson asked for clarity as to how the service provider had got the contract. Was there a bid committee? What was the process? Had that person changed the winning bid? Who were the people?
The DG asked the Risk Management Unit to provide the names and other details.
Mr du Preez replied that he did not have the details with him but he would forward it in writing to the Committee within a day or two.
Ms Chiloane said that they had had six months since the last hearing and 12 months since the Annual Report. Why did the Department find it so difficult to provide names? Service providers were named but the names of the DWS officials were not given. She requested copies of the resignation letters.
The Chairperson asked for copies of the resignation letters and their positions in the department, as well as the letters of suspension before the end of the week. The Committee needed to know about the “Thick and Thin” and “Nazwo Trading” contracts if there had been a tender, had there been a Bid Adjudication Committee (BAC) meeting, and if so, who had attended, as well as a copy of the minutes. The names of persons who resigned and their positions in the DWS should also be forwarded in writing.
Ms Chiloane asked if anyone from the Regions or Water Boards were at the hearing and able to answer.
[It was established that there was no one].
Ms Chiloane noted that the Risk Manager had said that nearly 80% of irregular expenditure was due to the implementing agencies. That information was not true and did not correspond with the information that they had provided. In its 2015/16 Annual Report, DWS had stated that the line function was looking into the irregular expenditure. This had not been done. DWS should not lie. Had they lied in the Annual Report?
Ms Chiloane had checked the November hearing minutes in which DWS had promised responses by December 2016 but it had taken until 25 May to get the information. They had also committed to send the list of names but had not done so.
Ms Chiloane read details of some examples of irregularities from the Annual Report and the actions taken, amounting to R1.7 billion. She wanted DWS to explain in detail what had happened in each instance. She wanted to go through each item, one at a time.
Mr Ross noted that there were 238 municipalities and eight Water Boards involved. He asked for the outstanding amounts owing to DWS as it had huge consequences for water users. The Department could not respond to each individual item of irregular expenditure but they could provide details of the amounts outstanding from each of its agents, a list of SLAs not signed, and what the dysfunctionality was per agent and the irregularities and weaknesses.
The Chairperson asked the DG to provide details of the matters on page 292 of the DWS Annual Report.
The DG replied that the details from the Annual Report had not been submitted to the Committee, but he could submit this. He did not have, with him, the details that SCOPA needed. He had not known that they needed such specific details, including the names of people. But now he knew.
Mr Booi felt that the DG should have known or made it his business to know what was expected of him.
The DG explained that they did not have Regional Managers in DWS but the DDGs were Heads of Branches and they were in the room.
Mr Ross pointed out that it was not the Regional Managers who were responsible.
Ms Chiloane felt disrespected as she had not got answers.
Mr Brauteseth asked to speak to the Chief Risk Officer about consequence management. He recalled that the Chief Risk Officer had said that disciplinary matters were not meant to be punitive. Was that like the Waldorf School where everyone won a prize? One person was involved in the appointment of all three security companies: ‘Thick and Thin”, “Nazwo Trading” and “Ngwanakgomo Trading”. That person had been responsible for R4.4 million as a result of the non-punitive disciplinary action system. The Chief Risk Officer had said that the disciplinary action was decided by the disciplinary committee chairperson, after which they could do nothing about the decision. From his experience in disciplinary procedures, there should be a whole range of actions from counselling to fines and dismissal. What was the scope of the penalties at DWS? It seemed that there were only two options: written warning or final written warning. In Limpopo, the security companies received the same amounts which were repeated a number of times. Could he clarify if the records were inaccurate or whether they were monthly payments? He assured the DG that there were serial fraudsters and the person was probably doing the same thing in another department. DWS was in with them or being naïve.
Mr Brauteseth noted that there were no dates of incidents so how could the 330 cases be tracked? In Polokwane, the letters were all initiation letters, i.e. the start of the process, not written warnings. The “thorough” report said nothing without dates because they could not establish efficiency. There had been malicious compliance as the 15 letters had been duplicated.
Mr Brauteseth therefore requested dates of the incident and date of initiation of disciplinary procedures for each of the 330 incidents. Then they could take action. Management were either in it or they were naïve. A person with in a R190 training misconduct had been given a final written warning yet a person responsible for a R100 000 incident was given counselling. Something was not right. Out of all of the actions, there was not one dismissal and not one referred to the Hawks or SAPS. Were the chairpersons of disciplinary process in cahoots? The DWS was in a mess. The DG and CFO did not know what was going on and he believed that the Minister kept a tight control so that the DG did not know what was happening. He called for an ad hoc enquiry into the Department of Water and Sanitation.
The Chief Risk Manager said that he was not “in” anything. He was not responsible for discipline in the department. The disciplinary code was the Public Service Code and DPSA could respond to the questions about the disciplinary code. From a risk management point of view, he admitted that there were serious problems and serious weaknesses in consequences management. One had to push very hard to get anything done in DWS. From a risk management point of view, he could admit that they had serious challenges and gaps in systems, controls and procedures in DWS. Since 2014, there had been attempts to correct things. The audit committee had been dysfunctional and it had been replaced. They had a risk management unit that had not functioned and that had been replaced. The internal audit unit had had 1 500 internal audit findings that had not been dealt with. DWS was not trying to hide anything. There were problems and they were trying to deal with them. He would provide details of the Limpopo incidents. There was a range of disciplinary sanctions. They did appoint the disciplinary committee chairperson but the chairperson made the decision. He would look for the dates of incidents and initiation of disciplinary processes.
Ms Mente understood disciplinary procedures and wanted to emphasize that the disciplinary code had six steps of sanction, but when it was serious misconduct, i.e. fraud, maladministration and theft, they were all cases of gross misconduct. If DWS had proved the cases properly to the disciplinary committee, the employees would have been found guilty of theft. DWS had said that they had received value for money. Lepelle Northern Water had appointed LTE Consulting on a R700 million contract but it had ballooned to R1.4 billion. The services rendered could never justify R1.4 billion but she did not see LTE Consulting listed in the document. That was thieving of the highest order. There were no dates but there were two pages with Kimberley listed stating “goods and services” plus the service provider was the same in each case. The same person was responsible for these four instances and he received a written warning for each and every incident. The discipline was meant to be corrective but they had been given the same sanction four times. The work was never followed up and never supervised. There was no monitoring tool.
Mr Ross was concerned to note that DWS owed R5 billion to the Reserve Bank, contractors and the Water Boards, and the amount was increasing each year. The provision of water was so important that they needed an inquiry. The Minister had expressed frustration with COGTA and she had noted that municipalities were not paying their water bills and therefore it was a matter to do with the fiscus. It was so serious that there was a limitation of water supply in many municipalities. It therefore warranted a parliamentary inquiry. He asked DWS what was the situation with COGTA on the non-payment of water provision. It was a pity that the Minister was not present to give guidance.
Mr J Basson (DA), Water and Sanitation Portfolio Committee member, wanted to pick up a project that he did not see in the documentation. It was the infrastructure project in the Mopani District which escalated from R96.4 million to R502.6 million in three months. The Portfolio Committee had asked the Public Protector to investigate. What SCOPA was experiencing was exactly what the Portfolio Committee had experienced. The Portfolio Committee Chairperson had, the previous week, requested information on the suspension of the three employees and the Committee was denied the information. They had even offered to hold an in camera meeting so that they could be informed.
The SCOPA Chairperson informed the member that he had received a letter about that.
Mr Basson continued that the Portfolio Committee had sent the DWS back and requested that they pay for their own costs to return as they had come unprepared. If one took up a job, one was paid for the responsibility from day one. The current financial year was going to see even worse results because of this trend. They owed R1.5 billion to contractors and owed Reserve Bank 2.6 billion. DWS had not been able to explain how they were going to fund this during a two-day Portfolio Committee meeting the previous week. That was going to have a huge impact on infrastructure development. DWS was told it had to return the next day. The Minister had then presented a different version the following day. He supported an ad hoc enquiry. There was no leadership and a lot of political interference in the Department.
The Chairperson noted that although SCOPA had thought that they were dealing with R500 million accruals, the Portfolio Committee member had informed them of other amounts owing.
Ms M Khawula (EFF), Water and Sanitation Portfolio Committee member, spoke in Zulu saying that she was sick and tired of the Department of Water and Sanitation. Parliament was wasting their time with them. She expressed her frustration and castigated the Department in Zulu saying that they had let everyone down.
The Chairperson asked the DG if he could add anything.
The DG replied that it was not the position of the Department that discipline had to be non-punitive but that of DPSA. The Chairperson suggested he move on as the Risk Manager had already admitted that there was a need to strengthen the processes of discipline.
The DG asked the Water Trading Entity CFO to answer.
Mr Booi complained that the Committee did not want to hear from someone else. The SCOPA Chairperson should not give the DG too much leeway or to park questions, as the Committee wanted answers.
The Chairperson noted that five people had made inputs and the Department was being invited to respond, which meant even a member of his team could answer.
Ms Khawula continued to complain in isiZulu but the Chairperson asked the DG to continue. Mr Booi interrupted again. He did not want the SCOPA Chairperson too be kind and allow him to get answers from team members. He said that the PFMA talked to the misconduct of the DG who had no respect for Parliament. The CFO had been asked to assist but that did not help.
The Chairperson said that he had just wanted to hear if the department could respond to anything. He could not make decisions about a course of action to help DWS out of the situation until the end of the hearing.
Mr Booi found that it was unacceptable as he thought that the DG was not honest. Mr Kekana proposed that they just note the behaviour of the department, note the issues and move on to Mr Hlengwa’s questions.
The Chairperson determined that they needed to move on to accruals. He asked the DG to take notes and at the end he could talk to any issues that he felt that he wanted to address.
Mr Hlengwa referred to the DWS reports that showed a series of events awaiting line function to finalise the matters in 2015/16. Where were they with these matters? He wanted to determine efficiency.
The Chairperson asked the DG if they had been resolved.
The DG did not respond but the Chief Risk Manager said that the matters of the 2015/16 Report had not been resolved.
Mr Hlengwa asked who was responsible for finalising the matters.
The Risk Manager said it was line management but he did not where it was in the process and he did not have the names, but he would get the names.
Mr Booi said he was being evasive and should answer.
Mr Hlengwa said that DWS had been called to SCOPA to give answers to questions on irregular expenditure and accruals. He wanted to align himself to the Chairperson’s euphemistic approach but at the heart of the problem was that the DG had arrived in his office four months ago but did not seem to have taken action relating to wasteful expenditure.
The DG replied that he had analysed what had happened in the Department and he was dealing with the things systematically. He had started at the top. He had a plan for dealing with the matters and he could not deal with the matters in a short space of time, but he was satisfied where he had started. He thought that perhaps the Committee could tell him that he was too slow and give him timelines.
Mr Hlengwa stated that the term “dealing with” could have many meanings, but it did not necessarily mean someone was productive. He was almost speechless. If a DG was appearing before SCOPA, he had to go to each of the itemised accruals and get detailed info on each itemised item. Could the Committee get a progress report on each item? Who was responsible for it and an envisaged date when it would be completed? The open-ended dealing with matters verged on gross misconduct.
The Water Trading Entity in 2015/6 had liabilities of R991.1 million, payables of R482.6 million and accruals of R332.3 million but nothing showed how much of the amount had been outstanding longer than 30 days. The previous acting DG had said in the Annual Report that the entity had a positive cash flow from operating activities amounting to R5.5 billion. The cash and cash equivalents at the end of the year amounted to R43 million and the entity had since put in place measures to follow up on the recovery of debt and to delay payment. Mr Hlengwa wanted a very, very detailed explanation around the liabilities, the payables and the accruals. How could they have accruals of R332.2 million and give no details?
Water Trading Entity Acting CFO, Mr Paul Nel, explained that the Water Trading Entity (WTE) did not work on a cash basis but worked on an accrual system. They showed the position at 31 March. Any invoices relating to that financial year had to be raised in the balance sheet, but it did not mean that the monies were due. WTE had to report to National Treasury on any accruals that they did not pay within 30 days. By end of April the previous year, they had paid 96% of invoices within 30 days. On average, they paid 97% of invoices within 30 days.
Mr Hlengwa asked about the accruals for the 2016/17 year end.
Mr Nel replied that they were in process of finalising the year so he could not give an accurate figure but the pattern was the same and they would have more or less the same accruals, with inflation. National Treasury had allowed them to pay everyone.
Mr Hlengwa moved to the DWS accruals which were R500.8 million: R45 million for goods and services and R455.8 million for capital assets. Could DWS explain?
The DWS CFO agreed with the accruals, which were mainly related to the Regional Bulk Infrastructure projects which were multi-year. Some projects which were earmarked for completion and payment in the following year, had been completed in the year prior and hence DWS had those invoices. They had been paid in the month after year end.
Mr Hlengwa pointed out that R68.7 million in accruals were dated longer than 30 days. All the irregular expenditure was being paid, but those items that had to be paid were not being paid. How did irregular expenditure get to the front of the payment schedule? Had the DWS paid suppliers on time, they would have had irregular expenses of R311 million. They were juggling which was the better wrong. Both were wrong but they were attempting to massage wrongdoings. He wanted clarity on the R68.7 million in accruals that were dated longer than 30 days.
The CFO replied that they received invoices on a monthly basis but the engineers had to go on site to verify the work before payment was made. Delayed payment was because engineers had not assessed work done.
The Chairperson asked if it was not the case that they did not have the money to pay suppliers. He suggested that they had had more invoices than money in the bank at the end of the financial year – R168 million as against R580 million of accruals.
The CFO stated that they had sent money back to National Treasury.
Mr Hlengwa asked if DWS was in a position to settle that amount of accruals. Did they have the money to pay the invoices? Did the stack of invoices match the stack of money?
After a moment of silence, the CFO affirmed that they had not had the money to pay the invoices but noted that some projects had been accelerated. The Department had earmarked money for the projects, but for the following financial year.
Mr Hlengwa asked if that would have been part of the commitments and not accruals. If it was intended for the following year, why was it included in the previous financial year? DWS had had commitments worth 50% of their budget.
The CFO explained that the service had been rendered and so it became an accrual.
Mr Hlengwa asked if he had settled the invoices, would he have incurred R311 million unauthorised expenditure.
The CFO agreed.
Mr Hlengwa asked why he had not paid, but received no answer.
Mr Smith understood that accruals meant that work had been done and that the invoices would be provided within a month. However, other people whose work was due for completion in the outer year had been paid. Why were people getting paid for completing their work more quickly and others who finished on time were not getting paid? How did they choose who to pay and who not to pay? On what basis did they discriminate? DWS had a surplus of R189 million as an underspend, but had they paid what they owed, they would have been broke. So, they were effectively broke at the end of 2015/16 and were not a going concern. The previously Acting DG had to explain how DWS had got into such a situation.
Mr M Johnson (ANC), Water and Sanitation Portfolio Committee chairperson, stated that the accrual amounts that the Portfolio Committee had been given were different from those given to SCOPA. How did they manage to pay the outstanding amounts going forward to 2016/17? The Committee had stated that they were paying Peter to pay Paul and then borrowing to pay Sam. The figure for accruals given to the Portfolio Committee was R1.5 billion, not what they were giving in the SCOPA hearing. How would they deal with that? They would have to tamper with their Regional Bulk Infrastructure grant as well as the Water and Sanitation Institutional grant. How would they manage to pay the outstanding invoices? It made things very difficult for the Portfolio Committee. The Portfolio Committee had recommended that the Auditor General and National Treasury should get together with DWS and do a thorough investigation.
Mr Hlengwa asked how much the Department had sent back to National Treasury.
The CFO replied that they had sent back R189 million. His explanation for the accruals was that the projects were multi-year projects and they had a budget in the following year but the work had been completed in the prior year. They had the money in the following year. However, he admitted that at the end of the financial year, they had had more accruals than the money that had been sent back to National Treasury.
Mr Hlengwa said that they were broke. They were bankrupt, so why were they ducking and diving. He asked from what programmes the under-expenditure came, as the money could have been intended for something else. The bottom line was that DWS was broke. The centre did not hold. He requested a detailed itemised list of those who were owed money. He believed that there had been discretionary financial management and pals were paid instead of those who should have been paid. They chose to underspend rather than overspend and face SCOPA. They had accruals of R729 million and they had only sent back R189 million. DWS had commitments for R9.4 billion when they went into the 2016/17 financial year.
The CFO replied that they had a budget of R15.5 billion for 2016/17.
Mr Hlengwa did know how they could manage on the remaining budget after extracting the R9.4 billion commitments. What kind of planning was that when they owed more than half of the budget before the year began? There had been an emphasis on justifying instead of admitting to their financial shenanigans. There was no financial control - a large percentage of their budget was for travel in Programme 1. That was not a service delivery item. Who was travelling? Where were they going?
Mr Hlengwa said that DWS was carrying accruals in programmes other than in projects. He wanted a list of travel expenses with full details of who was going where and whether they had travelled. He wanted a list of which companies had been paid and which had not, and who made the decision about payment.
Mr Hlengwa turned to the question of the seconded CEO of Overberg Water Board. His blood was boiling so he wanted a response as to who was carrying the cost for the secondment, including accommodation and flights.
The DG replied that DWS had seconded her so the Department covered all her costs. He asked the DDG responsible for Water and Sanitation Regulation to respond.
Mr Anil Singh, DWS Deputy Director-General: Water and Sanitation Regulation, explained that the Acting CEO, Ms Nthabiseng Fundakubi, was the DWS CFO who was seconded when the previous CEO was dismissed. The condition of the secondment was that she would continue to be Acting CEO until the position was filled in order to stabilise the organisation. She had been seconded since 2014 or 2015.
Mr Hlengwa asked if no one could see anything wrong with that. How much had it cost DWS? The entity was unstable but 18 months later they still did not have a permanent CEO. Who had been acting in her vacancy, and so on down the line? Had they advertised the position? If yes, when, if not, why not?
Mr Johnson explained that the Portfolio Committee had a definite interest in the matter. The Overberg Water Board Acting CEO was formerly the DWS CFO but her position as CFO had been filled. She did not have a position to go back to in the Department. At first, the secondment was for a maximum of one year but it was extended indefinitely until the post of CEO had been filled. The Overberg Water Board had been called to the Portfolio Committee because the entity had become dysfunctional. The Portfolio Committee had not received any financials from Overberg, nor had they received its tariff proposals. The Portfolio Committee did not know if the Overberg budget would be on course.
Mr Basson, Water and Sanitation Portfolio Committee member, stated that his colleague had been explaining about 2015/16 but it had a knock-on effect. DWS had achieved only 43% of their targets despite having utilised all the budget. Eventually they would not be able to provide water and it would be the communities who would suffer. DWS told different stories about where the money was coming from. In fact, the money was to come from the Regional Infrastructure grant which would have a marked impact on the infrastructure in the country. The fact was that people had to be paid R1.5 billion by the end of the year, but the Department had had nothing. They had over-expenditure of R18 million. The following year DWS would owe all its budget. Either they had appointed contractors when they did not have the money or the money had been spent on irregular expenditure. It was important to take decisive action on the way forward for Water and Sanitation. People would take to the streets if there was no water. It was one of two things: they had appointed people without having the funds or they had overpaid on projects.
The Chairperson stated that it was clear that there were far deeper critical matters. They needed to isolate a few critical areas and not go broad. They needed to go deeper into accruals and they needed the necessary detail. The DWS accruals had tripled from 2015/16 to 2016/17. The Committees needed to arrange another meeting and go into the details of the amounts that had not been paid. There was a serious problem. Lepelle Northern Water had been taken on as an emergency project, but it had gone on for many years and had ballooned. The Minister had instituted a commission into the matter.
Mr Hlengwa said that he no longer wanted to hear responses that were condescending and sanitised. He supported a second engagement to zoom into the matters. He requested that National Prosecuting Authority (NPA) and Special Investigating Unit (SIU) representatives be present. The enquiry had to zoom into the Regional Bulk Infrastructure projects because of the oversized skeletons that lay there. They should also apply their minds to a structured enquiry or investigation. DWS was in crisis and Parliament needed to admit this. The Department had to admit it as their failures were there for everyone to see. He did not want the same unprofessional conduct at the next meeting.
Mr Booi asked that the Chairpersons of SCOPA and the Water Portfolio Committee exchange information and SCOPA could focus on its mandate and use its power and the Portfolio Committee could take up the other concerns.
Mr Kekana said he agreed that they should isolate and zoom into issues. He did not think that they should decide on an ad hoc committee until they dealt with the proposal in the National Assembly.
Mr Ross agreed with the proposal regarding another meeting. Did the DG understand that he had a debt with the Reserve Bank? The Department had had a qualified audit and now a qualified audit with findings. They needed to engage with the Auditor-General and National Treasury on the matter.
Mr Smith thought that the Portfolio Committee Chairperson should call the DWS to look at their current budget at the end of June and scrutinise their Quarter 1 budget and expenditure. They should have a SCOPA type meeting. They could not wait until the 2017/18 financial year end.
Ms Mente said she wanted to help the DWS. She suggested that they should identify the culprits before SCOPA did and they should get the Hawks or SAPS to investigate. SCOPA would not be lenient. It was their heads or the heads of the culprits.
Mr Booi suggested that they should formally invite the Minister because SCOPA was not satisfied with the DG’s ability to speak to the issues. The Chairperson should write to the Minister about the inability of her Department to account.
Ms Chiloane was in agreement with other Members but added that the Department must find the culprits. The DG had said, on record, that he was on a learning curve and so it was expected that when he returned, he would have learnt and there would be a change of attitude.
The Chairperson would attempt to set up a meeting with DWS within three weeks and he would inform the DG in writing of the minimum information that he would have to prepare but the DG should prepare broadly as the Chairperson could not guess in which direction the hearing may take. He was to remember that transgressions had to be pinned onto an individual and they would want names.
Godi, Mr NT
Baker, Ms TE
Basson, Mr LJ
Bilankulu, Ms NK
Booi, Mr MS
Brauteseth, Mr TJ
Cebekhulu, Inkosi RN
Chauke, Mr HP
Chiloane, Ms TD
Galo, Mr MP
Hlengwa, Mr M
Johnson, Mr M
Kekana, Mr E
Kekana, Ms HB
Khawula, Ms MS
Khunou, Ms NP
Manana, Ms DP
Mente, Ms NV
Ross, Mr DC
Smith, Mr VG
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