Correctional Services Irregular, Fruitless & Wasteful Expenditure & Accruals; with Minister Day 2
Public Accounts (SCOPA)
14 June 2017
Chairperson: Mr T Godi (APC)
The Committee engaged with the Minister of Justice and Correctional Services on suspect contracts procured by the Department of Correctional Services (DCS). The Committee had received a letter from Integritron Integrated Solutions lawyers about this hearing. According to the letter, there was a 2016 court interdict prohibiting Minister Masutha from publicly speaking about or acting on any issue before the Court, specifically the National Treasury report about reviewing the contract awarded to Integritron Integrated Solutions. The Chairperson had engaged with the Chief Whip and the Speaker on the matter. The lawyers' letter, together with the court interdict, was immediately referred to the Parliamentary Legal Advisors. The Committee’s approach was that the court interdict had nothing to do with Parliament as it was an interdict against the Minister. It was an interdict against disseminating or discussing certain documents. He noted that the Committee would not look at those documents mentioned in the court order.
The Minister had prepared a submission for the Committee which dealt with the Department of Correctional Services (DCS) irregular, fruitless and wasteful expenditure. On the Integrated Inmate Management System (IIMS) sub judice matter, he noted that the Committee should not look at the Treasury Report because it was before the court and this should be respected for procedural reasons. This was the matter pending the Auditor-General audit. Upon that audit outcome, the Minister would be in better position to reflect on the matter and to look for the way forward. On that point, he indicated that the Auditor General had produced a report in which there were findings on the IIMS. He had written a formal letter to the Commissioner in October 2016, in which he indicated the IIMS findings, and asked him to act on the basis of the recommendations. He had been receiving some reports on the action taken. Some were the responsibilities of the Department and some actions were taken under his direction.
He assured the Committee that in all instances where irregularities had been raised about contracts, they were before the SIU. Some matters were not referred due to the interdict. Following an investigation, the Minister of Finance had written a letter to him advising him to take certain action. He was not able to act on that letter because of the subsequent interdict. He had abided by the decision of the court. The AG, in his auditing work, made certain findings and recommendations which were not part of the interdict. The AG had written to the Department requesting it to act on those matters.
The Minister stated that the second matter that was raised in the previous meeting was the award and subsequent dispute of a contract awarded in 2008, for a pilot that intended to introduce a mechanism for remand detention and offender management on the information and communication technology (ICT) platform. When the matter was brought to his desk in 2014, he was advised that the Department was in dispute with the service provider because after two attempts of testing the system on site, it had failed. What this meant was that the R34 million proved to be unable to perform. The Department went into dispute with the service provider and that dispute had not rested. It was still the subject of litigation. The intention of the Department was to recover the money, which was classified as fruitless expenditure.
On consequence management, he was advised that there were more 700 cases of irregular, fruitless and wasteful expenditure of R494m, accumulated from 2011/2012.The Department assigned people to investigate these cases so as to take an appropriate action. 162 cases (representing 22%) had been finalised. Disciplinary action was taken in 55 cases.
He spoke about the Integrated Justice System (IJS) which was the criminal justice system cluster. A cabinet decision in 2008 established a centralised coordinating structure, which would also be responsible for managing the budget that would support the procurement of various departments and entities and, in turn, support the decentralised transversal management system. The issues being raised were related to the IJS board because there were no proper arrangements. The IJS had the role of conducting oversight of the procurement processes and utilisation of resources. In his view, the budgetary system was problematic. The procurement system was problematic. The State Information Technology Agency (SITA) was not serving on the IJS board and this was also a problem.
The Minister noted that the then Minister of Cooperative Governance and Traditional Affairs, Mr Pravin Gordhan, had written to him to advise about the disciplinary action involving Mr Nick Ligege in certain procurement that had occurred in COGTA prior to Mr Ligege’s resignation. After engaging Mr Ligege and after seeking legal advice, he was convinced that he had no reason to take any action against Mr Ligege. Essentially, those matters should have been raised before his leaving COGTA. It was not possible for him, as the new employer, to impose disciplinary action against him because he had no jurisdiction.
The Minister talked about the contract of employment of DCS Commissioner Zach Modise. He asked the Committee to allow him to continue to serve beyond the age of 60. In his two years of serving the Commission, the audit performance seemed to have gone well and this should serve as a benchmark of his performance. He asked the Committee and the AG to bring to his notice any matter that would be an impediment to the extension of Mr Modise’s employment.
In engaging with the DCS report, the Committee closely questioned Commissioner Modise - which at times became heated - to explain why his car was parked outside the house of the director of a company that does business worth R2bn with the Department and whether he has a personal relationship with SASSTEC directors. They sought clarity on the delay in resolving the many cases involved in the irregular expenditure of R494 million; about the appointment of CFO, Mr Nick Ligege; about the apparently forgotten BOSASA case; about the increasing accruals and the failure of DCS to pay creditors within the 30 day payment period. Members were also interested in hearing about the contribution of SITA in the failed RDOMS project.
The Chairperson opened the meeting by noting that the hearing on the DCS irregular, fruitless and wasteful expenditure as well as accruals, payables and commitments was a continuation and therefore they would continue as from page 18. The DCS and State Information Technology Agency (SITA) officials introduced themselves. He welcomed Mr Michael Masutha, the Minister of Justice and Correctional Services. He reiterated that the Committee would be engaging on issues that were prepared by the Minister and to give the Minister an opportunity to make a statement on matters arising.
The Chairperson noted that he received a letter from lawyers addressed to the Committee about this hearing. According to the letter, there was a 2016 court interdict prohibiting Minister Masutha from publicly speaking about or acting on any issue before the Court, specifically the National Treasury report about reviewing the contract awarded to Integritron Integrated Solutions. He had engaged with the Chief Whip and the Speaker of National Assembly on the matter and the lawyers' letter, together with the court interdict, was immediately referred to the Parliamentary Legal Advisors. The Committee’s approach was that court interdict had nothing to do with Parliament as it was an interdict against the Minister. It was an interdict against disseminating or discussing certain documents. He noted that the Committee was not going to look at those documents mentioned in the court order. He noted that the letter together with the court interdict had been distributed to Members.
Mr T Brauteseth (ANC) noted that although the National Treasury Report may not feature in the hearing, all other reports may be scrutinised.
The Chairperson remarked that that was also his understanding.
Mr M Booi (ANC) said that there was no way Parliament could be prohibited from fulfilling its role. What the court had said ought to be clear to the Committee. The officials were before Parliament and there was no way that the court could prevent Parliament holding them accountable. For the purpose of the meeting, the Committee should resume the hearing from where it left off in the last meeting. He hoped that the Commissioner would be responding to the questions put to him as there was nothing stopping Parliament from doing its work.
Mr Brauteseth stated that interdicting Parliament from doing its work would be an egregious breach of its duty. The Parliament had a duty to hold the Executive and officials to account. The judiciary could not be invoked to stop Parliament from doing its work as such invocation would be a violation of the arms of government and was absolutely absurd. He would abide by the decision of the Chairperson but that the hearing was not a matter that could easily go away. The matter would nevertheless be pursued. The executive could not dodge its responsibilities.
The Chairperson said the Committee should therefore focus on the agenda and he welcomed the Minister to brief the Committee.
The Minister thanked the Chairperson for affording him an opportunity to lead the Department and, in so doing, to state his remarks. Before he could proceed, he acknowledged the presence of the Deputy Minister and the Commissioner as well as the Commissioner’s team. He thanked the Deputy Minister for leading the team in the previous meeting, when he was unable to make himself available. In addition to being the head of this Department, he had also the task of acting as Minister of Public Works. He had been apprised of the content of discussion in the previous meeting. In terms of section 101 of the Constitution, he was an accounting officer to Parliament and this required him to avail himself to Parliament and respond to its concerns from his perspective. These concerns were highlighted in the Committee’s letter to the Department. The Minister noted the submission he had submitted to the Committee [Note: document not provided to the public]. For the sake of the Committee’s time he proposed not to read word by word what was contained in the submission.
He would start with the Integrated Inmate Management System (IIMS) question and sub-judice matter. On the Treasury Report, he noted that the Committee should not look at it because it was before the court and this should be respected for procedural reasons. He was not discouraging the Committee from engaging with it. This was the matter pending the audit of Auditor General (AG). Upon that audit outcome, the Minister would be in better position to reflect on the matter and to look for the way forward. On that point, he said the Auditor General produced a report in which there was findings on the IIMS and, as it was reported in his submission, he took it to himself to write a letter to the Commissioner formally in October 2016, in which he indicated the key findings, including the IIMS findings, and asked him to act on the basis of the recommendations. He had been receiving some reports on the action taken and some were the responsibilities of the Department and some actions were taken under his direction. On the question of the interdict, he said that in for all matters referring to irregularities in tender awards at his Department, there was not a single matter, where it had not been referred for investigation by the Special Investigating Unit (SIU). There was only one matter on his desk that he was still perusing. And he was sure that in few days it would also be referred. To summarise, he wanted to assure the Committee that in all instances where contract irregularities had been raised, they were all before the SIU. Some matters were not referred due to the interdict. As background, he noted that following an investigation, the Minister of Finance had written to him advising him to take certain action. However, he was not able to act on that letter because of the subsequent interdict. He consequently decided to abide by the decision of the court. Regardless the forum in which these issues would be dealt with, such forum would work to ensure a good leadership. If matters took the route of court, these matters would also be effectively addressed.
The Chairperson cautioned the Minister to stick to the matter in question and not to end up giving unnecessary details relating to his discussion with the Minister of Finance.
Minister Masutha replied that the letter was related to the matters covered by the interdict. Due to the interdict, the Minister had not yet acted on those matters. The AG, in his auditing work, made certain findings and recommendations which were not part of interdict. The AG had written to the Department requesting it to act on those matters.
The second matter raised in the previous meeting was the award and subsequent dispute of a contract awarded in 2008 as a pilot to introduce a mechanism for remand detention and offender management on an ICT platform. When the matter was brought to his desk in 2014, he was advised that the Department was in dispute with the service provider because after at least two attempts of testing the system on site, the system failed. It crashed. What this meant was that the program procured for about R33 million proved to be unable to perform. The Department went into dispute with the service provider and that dispute had not rested. It was still a legal matter and the subject of litigation. The intention of the Department was to recover the money, which was classified as fruitless expenditure.
The Department had indicated further minor fruitless and irregular expenditure, identified since 2011 in audit reports. Concerns raised by the Committee had been clarified by the Minister in his submission. The Committee should feel free to seek further clarity.
On consequence management, he was advised that there were more 700 cases of irregular expenditure that went back to 2011/12. The total value of irregular expenditure amounted to R494 million for that year. The Department assigned people to investigate these cases so as to take an appropriate action. 162 cases (representing 22%) had been finalised. Disciplinary action was taken in 55 cases. He referred to the Integrated Justice System (IJS) as the cluster of the criminal justice system. The Cabinet decision taken in 2008 was to establish a centralised coordinating structure, which could also be responsible for managing the budget that would support the procurement of various departments and entities and, in turn, support the decentralised transversal management system. The issues raised were related to the IJS Board because there were no proper arrangements. The IJS had the role of conducting oversight of the procurement processes and utilisation of resources and reporting thereof. This was due to budget being allocated under the auspices of the IJS. How it worked was that the department submitted its report on procured money and it looked, in his view, that the budgetary system was problematic. That was his intervention to illustrate that the procurement system in his department was problematic. SITA was not serving on the IJS Board and this was also a problem.
The Minister noted that the then Minister of COGTA, Mr Pravin Gordhan, wrote to him to advise on the disciplinary action involving Mr Dzivhuluwani Khodani Nicodemus (Nick) Ligege in certain procurement that had occurred in COGTA prior to his resignation. After engaging Mr Ligege and after seeking legal advice, he was convinced that he had no reason to take any action against Ligege. Essentially, such matters should have been raised before his leaving COGTA. It was not possible for him, as a new employer, to impose disciplinary action against him because he had no jurisdiction.
The Minister talked about the contract of employment of Mr Zach Modise. It was approved by Cabinet for a period of five years. The Correctional Services Act dictated that a person retires on reaching the age of 60 and Mr Modise would reach that age in August 2017. That was two months for him to go. He asked the Committee to allow him to continue to serve beyond the age of 60. In his two years of serving as the Commissioner, the audit performance seemed to be quite good and this could serve as a benchmark of his performance. He asked the Committee to bring to him any matter that would be an impediment to the extension of his employment. This would assist the Minister in considering such proposal in two weeks’ time. He also requested the AG write to him on any matter that may be relevant in consideration of Mr Modise’s extension of employment.
Mr Booi said that he took his time to go through the Minister’s submission. He noticed that he did not take into consideration the fact there were three arms of government. There was Executive, Judiciary and Legislature. These arms of government were also guided by the PFMA which ought to be respected as a matter of principle. He expected him to know about the question of accountability. The Executive ought to account. There was an interdict which intended to prevent Parliament from doing its work. It meant that Parliament should be closed and should take the views from Executive as well as service providers. The views of the Constitutional Court should be taken seriously; but it could not weaken the Parliament. That was why the Parliament maintained a good relationship with the court to ensure that Parliament remained a robust area where Executive Authorities should account. Members were respecting the Minister because he was willing to engage with Parliament. The Chairperson went through the IIMS matters and concluded that there should be an engagement to get answers from officials, especially Mr Modise. Officials could never tell Parliament what to do because Parliament ought to take a decision for any engagement on its own. If Parliament listened to the Executive, then it should be closed. When the Committee took a decision after engagement, it would make particular recommendations to the Auditor-General and other relevant institutions. For this to happen, Parliament needed to sit, engage, and take a decision that would benefit the public at large. The hearing should take a place as it would facilitate the Committee to write a report on the matter, including its observations, findings and recommendations. The hearing would include the views of the Minister. The hearing included the question of whom the Minister could employ, the work of National Treasury and the work of Auditor-General. In conducting the hearing, Members would stick to the principles and rules set out in the PFMA and would be guided by constitutional principles as well as Parliament Rules.
Mr D Ross (DA) said that on 7 June 2016 he made a remark with regard to the matter in question. He wanted to reiterate his caution that the matter to be dealt with – as indicated by the Minister in his submission – was before the court. Last year, the Committee was cautioned that it should deal only with irregular expenditure. The matter could be sub judice. The AG findings could be discussed with the aim of preventing irregular expenditure in the future.
The Minister expressed his happiness about caution and the inputs from Members. He noted that his submission and remarks were not intended to impede or limit the power of Parliament. When the Minister was an official, he understood that a Member had an entry access card which could be used to have access to any government office at any time – whether announced or not. He was not sure if this mechanism still applied. Likewise, Members were at liberty to ask any question on any business of government. He also extended his invitation, if Parliament so wished, to bring to his attention to any matter that it felt that the Minister should look into in terms of exercising his power. On the AG findings, all matters raised by the AG were referred to the Commissioner specifically – not only to respond to – but also to take an action. Yet, the interdict did not relate to the AG report, rather it related to the letter that was sent to the media as an instruction for the Minister to take certain action. Such a distinction should be clarified. He understood that he would not be answering on behalf of officials because they were invited to do so themselves. He was advised of actions that were taken by them, including irregularities. He asked whether Members wanted him to remain seated or to excuse himself. He would abide by any decision of the Chairperson.
The Chairperson said that he was invited to be present in the hearing.
Mr Booi said that Parliament usually did not deal with officials’ appointments; however, there was strong allegation against Mr Ligege. Did the Minister wanted the Committee to assist him to get deeper in the matter? A note should be taken of the demarcation of bodies but the Committee would like to know whether Mr Ligege was the right person for the position.
The Minister responded that the beauty of – not only the Constitution – but also the legal framework in its entirety presented them with many options that could be chosen from. There were a variety of instruments that could be utilised. For instance, if a criminal offence had been committed or suspected, the criminal investigation authority ought to make an investigation and the prosecutorial authority had a responsibility to unearth and prosecute criminality for the abuse of the state resources through irregular expenditure. There was no matter raised by municipal, provincial or national government that he had turn back. He signed them off for the President to issue a proclamation and for an SIU investigation to kick-off. As an employee, he had not the power to pursue any matter that had been investigated.
The Chairperson stated that he wanted Members to start focussing on and engaging with substantive issues.
Mr Kekana noted that Members had substantively engaged with preliminary issues. Members should go directly to the agenda of the day. Members had indicated that the accounting officer ought to prepare a report for them as per the last meeting.
Mr Booi said that his question was a procedural matter. The Minister made it clear that he submitted his brief to the Committee. What will be the standing if the Committee does not agree with him on the Ligege issue? He asked the Chairperson to ask the Minister whether he would agree with the decision of the Committee on matters relating to the report under review as well his appointment of Mr Ligege. The Committee should agree with the Minister on procedural rules and principles. Members did not have the AG report and this was a problem.
The Chairperson said that Members should express their opinion later on. He noted that he had many questions to ask on the Minister statement but he could prefer to consider the substantive issue of the day.
Mr Brauteseth noted that in the last meeting the Committee was stuck due to the contract which was not available and then it was made available. So members should be careful on how they asked questions. He asked whether all officials were available.
The Minister said the officials of all entities concerned were available. Some officials had been allowed to go and attend a conference abroad.
Mr Booi asked the Chairperson to allow members to start asking questions. The Committee was dealing with the Commissioner and not the Minister. The Committee had heard the Minister’s view. It was not the Minister to express apologies but the Commissioner.
Correctional Services National Commissioner, Mr Zach Modise, stated that Ms Nthabiseng Mosupye, DCS General Information Technology Officer (GITO) was with the IJS body looking at the systems and she was represented by Mr Jonas Mekgwe who was Deputy Commissioner: Applications Development.
Mr Brauteseth thanked the Commissioner for the information. He noted that he had questions for Ms Mosupye which he would hold. In a previous meeting he asked questions on whether the Commissioner was aware of the company known as SA Security Solutions and Technology (SASSTEC). Did the Commissioner try to find out who they were?
The Commissioner responded that he now knew what SASSTEC was.
Mr Brauteseth: Do you know that the SASSTEC was the holding company of Integritron Integrated Solutions (IIS)?
Commissioner Modise: What I know is that SASSTEC was a company and I do not know in which form. There were a number of companies, one of them being IIS.
Mr Brauteseth: Do you know who the directors of SASSTEC are?
Commissioner Modise: No. I know only two people that I believe could be members of directorship but I don’t know everybody there.
Mr Brauteseth: Can you confirm that SASSTEC is a company that you have done business with? A SASSTEC company, SA Fence and Gate, engaged with the Department for a contract which started with a contract of R476 million and ended up being R1.4 billion. Another company had a contract of R370 million. Don’t you think it is important to know the companies you are dealing, especially who they are, because they concluded contracts of about R2 billion with you?
Commissioner Modise: There were quite number of companies doing business with the Department. In the procurement of services, the Commissioner – as accounting officer – was not directly involved. Other official were directly involved, for example, the Chief Financial Officer. However, the procurement with the company in question was done through the Independent Development Trust (IDT), which had a contract with SA Fence and Gate and the Department was a recipient of the latter.
Mr Brauteseth: Are you saying that you have no relationship with Mr Patrick Monyeki or Geoff Greyling? Do you know them?
Commissioner Modise: I know Mr Geoffrey. The Department had a contract with the BOSASA Company and under it, the department procured services of fencing as well as installation of TVs in the correctional facilities. He is from Bloemfontein where I come from. I was Regional Commissioner of Correctional Services in Free State and incidentally met with Geoffrey. In an environment which I work in, I meet with many people, including politicians, business people, MPs, offenders and ex-offenders. I do not engage with them in the context of business. I have the Evaluation Committee that does that on my own behalf.
Mr Brauteseth: Do you have personal relationship with Greyling’s business?
Commissioner Modise: I do not. As I mentioned, I met with him incidentally. I just know him.
Mr Brauteseth: Can you tell me about your car being parked in front of Mr Geoff’s premises on 2 November 2015?
Commissioner Modise: I can’t recall that. Maybe, it would be important if I was to be provided with those particulars.
Mr Brauteseth: I have direct evidence of this. You have indicated that you have no relationship with Mr Geoff who is owner of SASSTEC which had a contract with your Department for R2 billion. Do you want to tell us that you do not know what your car was doing outside his house on the said date?
Commissioner Modise: I am surprised that I am under surveillance if that is the case. The fact of the matter was that I have four cars with personalised number plates. I am not the only one who uses them. My wife has got a car under my name and it goes on. I have never done business with Mr Geoff. I meet people, including those who do business with the department in many places.
Mr Brauteseth: I understand that you are an important man and that you meet a lot of people. It is however unusual that your car was parked at the premises of your major supplier. Do you know any member of your family who might have visited the supplier?
Commissioner Modise: I do not think I should answer that question. I will respond if it has something to do with me. I will not respond on behalf of my family and they should not be mentioned here. If my car was parked there, you should also know who was driving it.
Mr Brauteseth: What was the system in place prior to the IIMS contract? The AG found that, in terms of expenditure, two contracts were irregular. In a previous meeting, we did not have the breakdown of irregular expenditure. First of all, gives us detail on why the Remand Detainee Offender Management System failed?
Commissioner Modise: The Remand Detainee Offender Management System (RDOMS) was a project that started in 2008. I will provide you with information provided to me regardless of this project. At that point in time, I was not the accounting officer. Areas reported on indicate that the management was not proper; vendor management was a problem; SITA was part of it assisting the department to manage the project and the project crashed on more than one occasion. As indicated last week, there was a settlement that allowed another the project a chance and this chance was given on more than one occasion. It still crashed. I do not have IT skills and Mr Mekgwe will explain the technicalities that were involved in that system.
Mr Brauteseth: Can we speak to Mr Mekgwe? Mr Commissioner, how much was spent on the RDOMS project?
Mr Mekgwe: I am going to give you the total figures in the sequence in which they were spent. At the start of project, the Department paid R5.9 million to SITA. In the second year, R11.1 million was paid to SITA. It was a one-year contract which was extended to year two. There was no approval for an extension. In the year three, the implementation continued. There was no payment was made.
The Chairperson: Was it year two or year three?
Mr Mekgwe: It was year three. Well, there were a consecutive three years from 2008. The first year was R5 million. Basically, the two sums are about R17 million or so.
Mr Brauteseth: Was that the total amount paid to the RDOMS project.
Mr Mekgwe: That was the total amount that was spent on RDOMS but the story does not end there. The Department went through a number of litigation processes after year three. It also went through mediation which resulted in a settlement agreement – where there were claims and counter-claims between the Department and the service provider. The settlement agreement gave birth to another system called RAS which granted another 12 months opportunity to basically redeem RDOMS. Within that period of 12 months, for the last implementation, there was a pay-out of R17 million. These were payments that were made in respect of RDOMS as the departmental initiative. All the money paid to SITA amounted to a total of R34 million.
Mr Brauteseth: If the product does not work, you do not pay for it. For example, if you buy a car and its engine runs and stops, you normally do not pay. You end up concluding a settlement agreement because the Department made mistakes. If you buy a product, a supplier cannot deliver a non-functioning product. A settlement means that there were something done on the side of the Department. If your right is clear in law and your argument is strong, you will win. And if you committed some mistakes, you will lose. Can you explain?
Commissioner Modise: Regarding RDOMS, there were milestones – five in total, which had to be achieved. It was on those bases. In the end, a mediation process was undertaken due to disputes. In the mediation, it was agreed that the service provider shall be given an opportunity again. Such opportunity was given and again it crashed. Then, this matter was taken to court because the Department did not receive benefit from the project.
Mr Brauteseth: Is SITA still used?
Commissioner Modise: No. I was informed that it was used at Mangaung.
Mr Brauteseth: My concern is the fruitless expenditure of R34 million. Is the Department going to claim this money back?
Commissioner Modise: We believe that we will be reimbursed. That is why we did take the matter to court. I am not sure whether we will be victorious, but we weighed our options.
Mr Brauteseth: If you agree that you will be reimbursed, you are agreeing that this was a fruitless expenditure. Is it a standard practice that contracts should be SITA approved?
Commissioner Modise: The SITA Act prescribes that the procurement of information technology should be done through SITA in line with the regulations of the SITA Act. Therefore, any other procurement would not fall with the parameters of the SITA requirements.
Mr Brauteseth: Are you contemplating terminating a contract with IIS which does monitoring for you?
Commissioner Modise: There is consideration to institute such action. The investigating unit under Adv Muthebi is the one that has been given the responsibility to look into that service and see the possibility of cancelling the contract. They will use first mediation and if no solution, they will go to court.
Mr Brauteseth: What are the actual issues?
Commissioner Modise: The ASU had not complied with a number of issues. The services were not consistent with the PSIRA Act and the procurement was not done in line with the SITA Regulations.
Mr Brauteseth: Did the products go through SITA and PSIRA?
Commissioner Modise: There was no compliance with the SITA Regulations and the work done was mandatory services. Mandatory must be emphasised and services appeared to be irregular going forward.
Mr Brauteseth: How much has IIS cost us so far?
Commissioner Modise: The CFO will check the figures and provide clear details, but I think the cost was around R5 million per month for them to assist us monitoring some of our cases.
The Chairperson: And how many months had the monitoring been going?
Commissioner Modise: The CFO will tell us.
The Chairperson: How many months or how many years?
Mr Brauteseth: The date of cancellation was 21 May 2014. It cost R180 million.
Commissioner Modise: R180 million was a result of not having a full threshold of cases. Per agreement, we were supposed to have a 1 000 cases per day and there was a day we did not have a 1000 cases to be monitored electronically.
Mr Brauteseth: The problem was that the process was not SITA approved and thus irregular and that the Department, after spending a huge amount, realised that it had made a mistake and it had to cancel the contract. You spent a R120 million on a product that we should not have been spending on.
Commissioner Modise: What is important is to note that out ICT Unit – a unit that was not fully capacitated and it is not fully strengthened – made mistakes and the Department has undertaken to ensure that all services that are procured by the ICT Unit go through the SITA approval. The same mistake will not be done again.
Mr Brauteseth: One may not hesitate to conclude that you are irresponsible given your handling of finances. Is it your practice to work with such companies? Do you know what proof of concept is?
Commissioner Modise: Yes;
Mr Brauteseth: Do you know what references are?
Commissioner Modise: I do.
Mr Brauteseth: If you ask a company to deliver a product for you – what would be the right way to do that in terms of electronic monitoring? What are correct procedures to go to market?
Commissioner Modise: We are dealing here with issues that go long back when I was not yet a Commissioner. Regarding the right procedure, the Department had several branches. Most of the branches are headed by Deputy Commissioners. The branch in need of services would look for functional approval from the Accounting Officer through submission of a memorandum. Approval would be provided after a careful study of the memo. A task team would be set up to do a specification. After approval of the specification, the document would be submitted to the departmental supply chain management. Then it would be advertised. There would be an evaluation committee of the service required. After that, there would be an adjudication process, headed by the head of branch in the Department. The Commissioner would appoint the chairperson for a period of time. It might be six or 12 months. The award will be made after adjudication. There will be also a procurement plan and the amount of the award.
Mr Brauteseth: Would you regard it as irregular if any of your staff chose to meet with a bidder before the bid was announced?
Commissioner Modise: You did not understand me well. When I came on board, there were a number of things that were not right in the Department. My duty was to correct that situation. That is why I came with a plan of correcting all those things that happened in the past.
Mr Brauteseth: If you become aware that your staff were working with a bid company before the tender was announced, would you regard this as irregular?
Commissioner Modise: If it is incumbent staff, that is definitely irregular.
Mr Brauteseth: How would you comment if I provide you with proof that one of your staff has been doing that.
Commissioner Modise: The act should be brought to my attention and then I will cause an investigation be made, and then give an opportunity to the offender to explain, and then take a decision.
Mr Brauteseth: Mr Linda had been meeting with suppliers on the 14 July 2014 to provide specific terms of references and other important details; would this not amount to irregularity?
Commissioner Modise: That was indeed irregular:
Mr Brauteseth: This Committee has proof that your staff worked with SASSTEC staff to work on proof of concept over a period of one year. The EMS contract was cancelled because there was no compliance with both PSIRA and SITA. The Electronic Monitoring System (EMS) contract has not complied with PSIRA or State Information Technology Agency (SITA) and there was no action from the Department to cancel that contract. Last week we had an engagement and I see from the Minister report, there was expunging remarks that were made. It was your answers that brought us where we are. How could it be explained that two contracts of about R150 million were cancelled? There is a proof that you have a relationship with SASSTEC and that your staff had been in contact with it a year before the contract award was announced. There was flagrant corruption. It also touched on the security cluster because Defence used the same technology. The Minister should take note of this that, in the previous meeting, it was indicated that there were 438 cases; 55 had been settled – with a warning or little warning; 100 cases had been condoned by the Commissioner and the rest were still pending. This illustrates that you were completely in an irregular corrupt contract. You are close to retirement and it is better that you step down.
Commissioner Modise: When the RDOMS contract was concluded I was not in office. When the current EMS contract was concluded I was not in office as I came into office on 30 June 2014. The remarks of Member are therefore not correct and cannot be utilised to attack me. The Member is treating me with disrespect. Last week he was calling me a useless person and he is still proceeding with that and, Chairperson, I needed your protection. I am not a Member of Parliament. I am a public servant. I did not stand in the queue to ask for this job. I was duly appointed. I want to respond to the questions of Members as I had done this diligently and even last year when our engagement was robust, I was willing to come and respond. I do not think that it is right for the Member to continue to treat me with disrespect. I am neither his garden boy nor his farm boy.
Mr Brauteseth: He is completely out of line. I am asking you questions as a Member of Parliament. I am entitled to ask you questions. I did not shout at you neither did I insult you. I am entitled to my opinion with regard to your work and thus your statements must be withdrawn.
The Chairperson: The issues raised last week were directed to me. My understanding was that the views were not directed to the Commissioner as a person but to his work and should have been understood in this context. I do not think that we should get into something personal. Let’s deal with issues in the report without going beyond that.
Commissioner Modise: I think we need to listen to what the Member is saying. He previously stated that I am useless and that I am a liar. Today he is saying almost the same thing. He is not referring to the work but he is referring to the person. I am the person here and this is not correct.
The Chairperson: Unless I am proven wrong, statements have never been construed to refer to you as a person. They are directed at what you do, Mr Commissioner.
Mr Brauteseth: The statement of Mr Commissioner is very offensive and should be withdrawn.
The Chairperson agreed. The Commissioner’s response went beyond. He should go and listen to the record and he will find that the statement refers to at what he does.
Commissioner Modise: I am here under your leadership and to respect it. With due respect, I am not here to be arrogant.
Mr Booi said that the Commissioner is being asked to withdraw the last part of his statement and his behaviour is not acceptable.
The Chairperson agreed.
Ms T Chiloane (ANC) said that she wanted to speak about the irregular and fruitless expenditure of the 82 cases. Out of R37.2 million, only R550 000 was recovered. How do you prioritise the recovery of the money that had been wasted or mismanaged?
Commissioner Modise: Our performance in recovery was not at the level that we wanted it to be. What contributed much to the irregular amount was the R27 million paid, as explained earlier and many other cases were still pending investigation. Between taking action and finalising, that was where a number of cases are. We believe that by August – September 2017, we will have a bigger chuck of this wasteful expenditure. We prioritised but we did not get the fruits as we anticipated, as we recovered the lower ones and not the biggest ones.
Ms Chiloane: Why did you prioritise the lower ones? Why did you not have an interest in those with a big amount?
Commissioner Modise: We utilised the departmental investigators to conduct investigation all over the country on the basis of the AG information. We have requested the police to assist in conducting investigation for the process to move fast and we want them to assist when it comes to taking a decision from a legal point of view. We still have a lot to do to recover the fruitless expenditure.
Ms Chiloane: There was a provincial commissioner who was moved from Pretoria to KwaZulu Natal in 2016 and had a lot of that he has bargained for. There was also fruitless expenditure associated with this. Can you explain this? What progress have been recorded since September last year?
Commissioner Modise: There are a number of officials who were promoted. The reason was that there was a police assessment done earlier, indicating that some officials’ lives would be in danger if they remained in KwaZulu Natal. The Department responded to that assessment. We want to turn the situation around. There were cases where officers appointed from outside were not accepted.
Ms Chiloane: Were there not bodyguards among these officials?
Commissioner Modise: They were comprised of officials and police in that regard.
Ms Chiloane: Was no money spent on bodyguards? How much was spent in that respect? How long will you continue to get services from other departments?
Commissioner Modise: I have no information. Yes, there were expenses with respect to special danger allowances, normal subsistence and travelling allowances. I don’t know how much was paid for police services and I do not have full details with me.
Mr Booi said that they should go back to Mr Ligege and he asked how people at this level were employed. Do they go through security vetting? What process did you follow?
Commissioner Modise: When we employ we advertise, after which we shortlist. Shortlisted candidates are interviewed and are screened. Candidates are subjected to security vetting but they are not subject to skills testing.
Mr Booi asked which procedure was followed for Mr Ligege to be employed.
Commissioner Modise: I do not have the power to appoint a person to a Level 15 position. It is for the Minister, together with the Deputy Minister, to appoint the panel to recruit high level employees. Only his Human Resource Manager does the administrative part.
Mr Booi said that the President had noted a number of problems with the Department and referred it to a committee for inquiry. You have provided us with information and how do you like us to deal with them? The President noted maladministration in connection with your department, including improper and unlawful conduct of your employees, improper appropriation of public money and property. What do these statements imply to you, Mr Commissioner?
Commissioner Modise: Currently there are two DCS contracts that are under SIU scrutiny. It is the [MCU] contract and electronic tagging contract. The referral of these contracts to the Minister was done by myself after I had heard allegations of wrongdoing and the Minister took it further with the SIU.
Mr Booi reiterated that the President referred to maladministration and appropriation of money, which had nothing to with contracts, but had something to do with your work. It looks like the Department is run by the SIU and you want to convince us that you have done your best? When we ask questions you say that we are bullying you, but these are indictments against you. It is in this context I am inquiring about Mr Ligege. Where he came from, there was an allegation that he interfered with tenders. How do you want us to view you?
The Commissioner responded that there were challenges in the Department in complying with legislation and there was a problem with the financial management. However, since he joined the Department there was a recorded improvement. There was a progress.
Mr Booi said that the issue of Mr Ligege ought to be responded and he was soliciting his views on the opinion of the President that the Department was challenged by its administration. The Committee was trying to assist the Commissioner to find what the problems might be.
Commissioner Modise replied that there were agencies whose responsibilities were to investigate disputes and the SIU was one of those agencies. The Department usually sought their assistance regardless of the situation it was in. Their opinions were requested. It was still the Commissioner’s commitment to see the Department turned the corner and do better.
Mr Booi said that the corner could have been noticed for the last three years. According to the AG report, there were officials who failed to declare their interests, and this problem had to be referred to the police. There were also issues with lease agreements not signed. I know that you are going to say you were not there. Yet, it is your responsibility to take action. Are you saying that the President is misleading this Committee or is a liar to come to the conclusion that the Department was dysfunctional?
The Commissioner responded that he might say that there was no way that his Excellency could be lying because the evidence was there, which was reflected in the Annual Report. There was irregular expenditure. We sought assistance from other institutions, as result of lack of capacity, as it included forensic investigations.
Mr Booi asked what the Commissioner was doing to address the maladministration hence it did not require forensic investigation. Or are you stating that you are not capable of carrying out your administrative duties? If so, that is why the Correctional Services system had collapsed. I will put it to you again: Is the President’s opinion wrong?
The Commissioner responded that the proclamation of the President is regarding particular issues that were reported as irregular and as maladministration. What was critical was that they have uncovered these problems.
Mr Booi asked what the Department had uncovered and where was the report to attest to this. As a first in the history of Parliament, the Commissioner sought an interdict to prevent Parliament from doing its work. As a matter of fact, Parliament was paying you. What have you uncovered?
The Commissioner responded that there were number of issues that were uncovered on a daily basis.
Mr Booi noted that this was a misleading statement. There were people who do not declare their assets and appropriate public money as well as those who did business with him.
The Commissioner responded that other departments were struggling to uncover people who do business with the state. The current system of uncovering was relying on self-declaration.
Mr Booi noted that Members get impatient when they are misled. With regard to internal control, the AG said that DCS internal control was characterised by deficiencies. Put simply, the AG was saying that you were not running the department properly and this was reiterated by the President. How will we trust you that you will turn around this department?
Commissioner Modise replied that in last year’s engagement with SCOPA, DCS indicated what it wanted to put in place to turn around the department in terms of internal control and compliance. The building process started by putting new structures into the regions and head office to be able to do oversight and monitoring.
Mr Booi cut him short and noted that he did not do his work. It was clear.
Ms N Khonou (ANC) commented on the employees conducting business with the state. The law was clear on those who did not declare their assets or do business with the state. Did the Department try to comply with the law? The Commissioner’s report indicated that employees were blacklisted and this was not enough to comply with the law.
The Commissioner responded that each year, DCS officials in finance and supply chain management were expected to make a declaration. It involved all employees on 16 levels. After a period of time, the Commissioner will state who declared and who did not declare. Investigation was made of those who failed to declare.
Ms Khonou said that the law requires that he develop a policy around that. Was any policy developed?
The Commissioner agreed that there was a policy.
Ms Khonou asked how many cases were referred to the Executive Authority and how far was the EA in dealing with cases?
The Commissioner agreed that there could be other measures than just blacklisting. Together with other departments, they were finding other penalties that could be imposed. There were some cases where people who do business with the state are married to state employees.
Ms Khonou noted that most of cases of irregular expenditure were pending investigations. Have they been taken to the Executive Authority for pronouncement? How long do you take to investigate a case? There were cases from 2011 which were not finalised. How many cases have you taken to the Executive Authority?
The Commissioner responded that any investigation should not take more than 30 days. However, the Committee should note that he inherited these cases from 2011 and the team appointed was doing its best to finish and by August or latest December 2017, these cases would be finalised.
Ms Khonou asked whether there was anyone present from that investigation team.
The Commissioner replied there was. Mr Motaung was present.
Ms Khonou said, Mr Motaung, there were cases of 2011 and 2012 which were still pending investigation. Can you advise the Committee that you will finalise all those pending cases by August?
Do you have a full report with you on the irregular, wasteful and fruitless expenditure?
Mr Motaung replied that, so far the investigations conducted by the inspectorate, they were sitting with 275 cases. The cases that were investigated were 600, including those involving recoveries. Considering what we have done, we are very confident that we will finalise these cases. The main challenge was disciplinary action because this had to go through labour related assessments to avoid labour litigation.
Ms Khonou asked if he was saying that by August all cases will be finalised?
Mr Motaung reiterated that he was confident that all cases would be finalised.
Ms Khonou asked if he could clearly explain why it took so long to finalise these cases? Was there a report in which your progress was captured? The cases left represented 40%. How would it be possible to be finalised within two months?
Mr Motaung responded that a report could be submitted if the Committee pleased.
Ms Khonou asked why the Inspectorate was lagging its feet in disciplining the people. This conduct showed that the Department was not taking matters seriously. It did not take into account that millions of rand were wasted. Mr Motaung’s answers illustrated that nothing he had done. The Committee wanted a report and the General from Hawks wanted a report to do deal with criminals within the public sector.
The Chairperson agreed that a report should be made available to the Committee.
Mr Ross sought clarity on accruals that he thought were also significant. Accrual in 2014/15 was R130 million. These were expenses that were incurred but not yet recorded. The Committee needed an explanation why the amount for accruals was so high in 2015/16 and 2016/17.
The Commissioner noted that he would provide details in writing.
The Chairperson said that this was fine.
Mr Ross accepted that the Commissioner could answer in writing.
Mr E Kekana (ANC) said that he had two main questions: He stated with the reported submitted to the Committee and was happy with how he dealt with the issue of Hlehla on the EMS contract. He was happy because there was an internal hearing and then it referred the matter to SIU. On the Electronic Monitoring System, the Commissioner referred to the KPMG matter which was under investigation. It was under internal investigation. The matter was referred to the SIU without internal investigation, why? Another question comes from what other colleagues had been hammering on. That was the role of the accounting officer. The Commissioner clearly indicated that he had no system to investigate employees who were doing business with the state. If you look at the PFMA especially your responsibilities, it is the responsibility of the accounting officer to ensure that you have the system in your department; it is your responsibility to procure that system. By implication, are you saying that in the coming years, nothing done will be done because there was no system created?
The Commissioner responded that the KPMG matter urgently needed to be investigated and he had referred the case to the Minister. On dealing with employees doing business with the state, we approached National Treasury to assist us so that we can be able to detect this beforehand. As the accounting officer, it is my responsibility to ensure that the system is in place to ensure that wasteful, irregular and fruitless expenditure are dealt with.
Mr Kekana sought clarity on why he did not conduct an internal hearing.
The Commissioner responded that the Hamilton Hlela case was referred to him by the SIU to finalise the evidence the SIU did not cover. The SIU Head would provide more details on this case.
Ms Khunou said that some of the accruals could have been avoided, for instance, hiring a photocopy machine.
Ms Chiloane asked why it was so difficult to pay creditors on time. For the year under review, you incurred R258 million from which the following amounts were not paid on time: R85.7 million within 30 days and R237 million after more than 30 days. Why?
The Commissioner responded that the Department was facing challenges in making payments. The problem was, first, the system that was down. Secondly, it was the goods that were ordered, especially, getting the quality and quantity of the products correct that the Department had ordered. They had to ensure that what they had ordered was what they had paid. Some products were turned away due to quality. Sometimes, invoices were brought forward prior to delivering and these invoices were not entertained. Yes, the Department was not meeting the 30-day payment period and DCS had informed Treasury.
Ms Chiloane asked when DCS would learn to centralise its payment systems. Who was responsible for the payment system? The Department could not say it was not paying because of its system as a non-payment attitude would attract litigation. Some creditors were new in the business and needed payment on time for their business to survive. Non-payment would not encourage new entrepreneurs to do business. The Department of Defence was there and now the system was working well.
The Commissioner replied that the Department was constituted into six regions. In the beginning, the system was centralised and then it was decentralised seven years ago. Due to challenges, DCS was thinking of centralising the system again. Other challenges emanated from municipal services. Yes, there were cases where there was no justification for paying after 30 days. DCS was prioritising payment within 30 days.
Mr Chiloane said that last year the Committee was briefed about the turnaround strategy. Was there any report on this?
Mr Booi said that he was interested in the BOSASA case. How long had it been going on and how much had it cost the taxpayers?
The Commissioner responded that the Department did not have a case with BOSASA.
Mr Booi said that he warned the Commissioner to stop from lying and that he was going to demonstrate how he was untruthful and then he could get angry. The Committee was given a DCS case which was costing us R1.6 billion. The case could be traced to the tender awarded to BOSASA in 2004. Don’t you know about this case in your Department? Although this case goes back to years 2004 to 2007, it is not yet finalised. If you do not know about this case, you do not know your department and what is going on in your department.
The Chairperson suggested that they hear the Commissioner’s response.
Mr Booi said the Commissioner says he does not know about the BOSASA case. Can you resign on your own, Mr Commissioner?
The Commissioner said that was not aware of a case involving BOSASA. He knew of a case about nutrition services.
The Chairperson said that if the matter was referred to the National Prosecuting Authority (NPA), DCS should have an interest to see the finalisation of the case and be doing follow ups. DCS should be worried that it was taking years and years without being finalised. Before we know it, we would be told that the witnesses were dead or were nowhere to be found. The case should be of interest to DCS and should be followed up to ensure that the court finalises it. It looks like DCS handed the case to the NPA and then it turned its back.
Mr Booi said that the case was there and he could provide the case number to the Commissioner to assist him. What was the reason for keeping the Commissioner if he did not know what was going on in his department?
Ms Khunou noted that they had a turnaround strategy document. In a previous meeting, the Minister talked about this turnaround strategy. Can the Minister come back to unpack this turnaround strategy? The Department was not going to achieve what was written in the document.
The Chairperson asked if there was a person from SITA who was engaged in the RDOMS project.
Dr Setumo Mohapi, SITA CEO, agreed that there was Mr Mtimkulu who was manager of the RDOMS project.
The Chairperson noted that there was a report in front of the Committee and he was interested to hear the views of SITA on the project. There was a time that SITA was in shambles and did not know when it started delivering.
Dr Mohapi said that SITA could have done better.
The Chairperson asked why SITA could not do better. Was it because it was picking up people in the street and tell them come and manage the project?
Dr Mohapi replied that there was a problem in the file that they have received from the Department. The complaint against SITA was raised at high level and was quite loud. On the status of SITA, he noted that it was a long journey to get where they were, even though they were not yet where they wanted to be.
The Chairperson asked the added value on SITA.
Dr Mohapi apologised for being late because they were launching a major system.
The Chairperson said that SITA was a major problem not only in this department but in other departments as well. It had let down government and had failed it in various ways. He wanted to hear from Mr Mtimkulu himself.
Mr Muzi Mtimkulu, RDOMS Project Manager, noted that there were number of challenges with the RDOMS project. It had a number of phases and challenges. There were delays in terms of the architecture that was chosen. There were a number of changes that came in.
The Chairperson said that his duty was to manage these risks.
Mr Mtimkulu responded that he certainly did. However, there were challenges faced by the Department itself.
Mr Booi said that he should stop from using the word ‘challenges’ and rather state what those challenges were. The Committee was dealing with money and he should focus on the fiscal challenges.
Mr Mtimkulu replied that he managed the project for one year and the main challenge that he faced was that the Department was not coming to the board. The changes that were sent to the Department for approval were not approved. There was a point at which he suggested that the project should be annulled if DCS was not willing to come on board. One of the main sponsors of the Department was suspended. All relevant administrative documents were approved by the Department.
The Chairperson said that both DCS and SITA did not have a sense of the direction. Nothing could be done by SITA without DCS and SITA played its role in poor planning and execution of the project.
Ms Khunou commented that it was not sounding well for everyone to claim that he could not deliver because of this and that on basis of blank evidence. The Committee worked with facts and not with blank statements. SITA was stated in the report but in its brief it was not stating anything of substance to assist the Committee in its work.
The Chairperson said that something that they did not engage with was the consideration of how the Commissioner worked with his teams that accompanied him. If the Committee was saying that the Commissioner was failing in his duties, all those individuals with him were failing too. These were the people around the Commissioner in senior management who were not providing their leadership. That was the simple logic.
Mr Booi said that it could not be that simple logic. The PFMA stated who the accounting officer was. Members are asking about Mr Ligege and they could not provide details about him. Mr Ligege was here but was not allowed to speak for himself. Present were about six people from SITA who could not provide a single report. It was fruitless expenditure to come here with their CEO who came late. They come without preparing their paperwork.
The Chairperson raised concern about the fruitless expenditure. There was little done to strengthen the internal audit. One could not have a situation where the Department had no internal control. If one looked at the spreadsheet, overwhelmingly, the incidents of irregular expenditure were identified by the AG and not by internal audit, meaning that the Department had no capacity to do internal audit control. It was difficult to identify when the irregular expenditure did take place. It was not clear when money was paid.
The Commissioner responded that it was his responsibility to ensure that services were improved. There was no excuse. There was, however, a team put together to try to turn things around and to ensure that the Department achieved the set targets and objectives and which could set out a culture of working. It was a department that was gradually progressing. Its finance system should be developed. This would ensure the achievement of a clean audit. On the question of accruals, he noted that municipal services were not paid. On the budget, he noted that the Department did not have enough money to do its work. On the irregular expenditure cases, he noted that they would put more effort into what they were doing to ensure that all cases were investigated and finalised. The Department would work together with Treasury and the AG in identifying financial challenges and in detecting irregularities. He thanked Members for their time and hearing the Department out.
The Minister expressed profound gratitude for the wonderful work of the Committee and for pointing out the right direction. He noted that there were number of issues related to the relationship between DCS and the Department of Public Works, for example.
The Chairperson thanked all for their participation.
The meeting was adjourned.
Godi, Mr NT
Bonhomme, Mr TJ
Booi, Mr MS
Chiloane, Ms TD
Kekana, Mr E
Khunou, Ms NP
Mente, Ms NV
Ross, Mr DC
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