Correctional Services 2016/07 Annual Report: Auditor-General input, with Minister present

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Justice and Correctional Services

03 October 2017
Chairperson: Ms M Pilane-Majake (ANC) (Acting)
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Meeting Summary

Annual Reports 2016/17 

The AGSA highlighted that both the Department of Correctional Services (DCS) and the Department of Justice (DOJ) had regressed from ‘unqualified’ audit opinions to ‘qualified’ opinions in the 2016/17 financial year. This was primarily due to the non-compliance with a new financial reporting standards, non-compliance with the supply-chain management procedures of the PFMA, as well as the deficit in consequence management at both entities.

The DCS achieved 25 out of 40 targets predetermined objectives of 2016/17 financial year, representing 63 percent in achievement of targets for the year under review. The DCS spent 99.82 of its adjusted budget of R21 trillion for the 2016/17 financial year, underspending R38 million.  The total Personnel and Salary Administration System (PERSAL) headcount reported a total headcount of 39,634 out of a funded permanent establishment of 41,994 posts, leaving 2,735 vacant funded posts. As a result of these vacancies, the DCS underspent on its budget for compensation of employees by an amount of R404 million (2.8 percent).

The AGSA noted a regression in the financial management of both the DCS and the DOJ. The DCS is under particular pressure, as R282 million was appropriated from its 2016/17 budget to cover expenditure from the 2015/16 year. At the end of the 2015/16 financial year, the department had R374 million worth of invoices older than 30 days, in violation of National Treasury regulations. The AGSA reported no unauthorized expenditure at the DCS and the DOJ, however irregular expenditure has increased significantly. The DCS incurred R836 million in irregular expenditure in the year under review, while the DOJ incurred an amount of R47 million. The AGSA noted that consequence management for both entities is generally inadequate in this regard. Fruitless and wasteful expenditure amounted to R1 million at the DCS and R3 million at the DOJ.

The AGSA highlighted that there had been some over-expenditure in the erection and purchasing of mobile courts, and that an amount of R10.9 million is currently being investigated as potential irregular expenditure. The AGSA listed R1.4 million as fruitless and wasteful expenditure on the project, as some mobile courts are not currently useful or not required. One of the DCS’s primary objectives during the year under review was to increase bed spaces to reduce overcrowding in prison facilities. Despite a budget of around R500 million for this purpose, only 33% of the targeted amount of additional bed spaces have actually been created. This shortfall was attributed to material shortages, the liquidation of some contractors, and inadequate project management. The AGSA reported that the DCS investigations unit lacks the capacity to investigate cases of misconduct or transgressions in a timeous and efficient manner.

The Minister of Justice and Correctional Services stated that South Africa was in a phase of austerity, which has resulted in significant budget cuts across all departments. He acknowledged that in some cases, human resource capacity has been “hamstrung” by these budget cuts, including within the Portfolio. The Minster noted that challenges relating to infrastructure remain a major concern, specifically the issue of overcrowding at the DCS. He acknowledged that efforts to create extra space have thus far produced limited results. He noted that there has been an effort to redistribute inmates from most overcrowded facilities to those that are less overcrowded or even under-utilized.

Members highlighted the problem of non-compliance to prescripts and regulations, specifically on the issue of irregular and fruitless and wasteful expenditure at the DCS. The Minister stated that there had been a distinct lack of competency and accountability in the 2016/17 year. Directors in lower levels of the DCS were capable of approving hundreds of millions disbursements for infrastructure to Department of Public Works, without any checks and balances preventing them from doing so. He stated that it may be necessary to review the consequence management interventions currently in place to address this matter.

Members of the Committee raised questions pertaining to the removal of the ‘court backlogs’ indicator from the DOJ’s annual performance plan. They expressed concern at the fact that neither the DOJ or related entities could take responsibility for the severe backlogs in the South African court system. Members also raised concerns around the number of Acting-Executive staff members were present in the DCS delegation. Considering the vacancy rate, they recommended that the DCS make haste with the appointment of permanent positions.

The Department of Correctional Services reported that it was audited on 4 programmes with the introduction of Social Reintegration Programme. The audit conclusions for the 2016/17 indicates that out of the four (4) programmes selected the department has been unqualified on three (3 ) programmes (Rehabilitation, Care and Social Reintegration) and has been qualified on one programme (Incarceration). Qualification on indicator of percentage of overcrowding in correctional centres and remand detention facilities in excess of approved capacity due to lack of evidence to substantiate approved accommodation. The Department spent 99.82 of its adjusted budget of R21 billion for the 2016/17 financial year, underspending R38 million. The underlying factors that influenced expenditure in 2016-17 financial year have significant implications for the 2017-18 resource utilization and potential negative impact on the priorities and objectives as contained on 2017-18 Annual Performance Plan. The rising municipal service charges continue to put pressure on the budget of the Department. Due to shortfall on municipal services item, the infrastructure programme will be compromised over the medium term, unless electricity and water consumption is contained by one way or another. In 2017-18 financial year, R183 million has been reduced from capital projects towards municipal service charges.

Members asked about vacancy rates, over-expenditure in the Department, the number of beds, the capacity of the internal audit team and the use of municipal services.

Meeting report

Election of Acting Chairperson
Ms M Pilane-Majake (ANC) was elected Acting-Chairperson for the session.

Briefing by Office of the Auditor-General (AGSA) on Department of Correctional Services Audit Outcomes
Mr Lourens van Vuuren, Business Executive, AGSA, explained that there had been a change in the auditing methodology to become more coherent with international standards. Most notably, AGSA reports now start with the audit opinion first and elaborates on technicalities thereafter. This has been seen as a positive change by external stakeholders. There have also been other minor changes, which are not of particular interest to the Portfolio Committee. The presenter also reminded members that the AGSA has a constitutional mandate and exists to enable oversight. He also explained that the importance of aligning performance plans with the National Development Plan, to ensure that ultimate goals will be achieved.

The AGSA reports emphasize accountability, because high levels of accountability lead to positive audit outcomes and ultimate achievement of the predetermined targets and goals. This process begins with planning, finding targets and making sure that there are proper internal supervision and controls. Then there should be monitoring and checks by the different levels of assurance providers, starting with management, the Executive Authority, audit committees, and also the relevant Portfolio Committees. These checks are carried out throughout the reporting period to facilitate appropriate consequence management in cases of non-compliance with regulations or non-achievement of objectives. If these principles are applied, there should be better audit outcomes and thus better outcomes for the citizens of South Africa.

The Mr van Vuuren stated that the annual audit report focused on three areas: financial statements, compliance, and performance information.

There has been a regression in terms of audit outcomes at Department of Correctional Services (DCS) year-on-year. The department received an unqualified audit opinion in the 2015/16 financial year, but received a qualified audit opinion in the 2016/17 year. The qualified opinion can be attributed to the failure to comply with a new standard in financial reporting as of 2016/17, which requires all departments to report on progress made on immovable tangible assets. For the past four years, the National Treasury has required departments to include this in an annexure to the financial statements, therefore the opinion of the AGSA was that the DCS had adequate time to prepare for this change in financial reporting standards. Nevertheless, the department failed to disclose a figure for progress on immovable tangible assets during the 2016/17 year of assessment.

Regarding compliance with laws and regulations, the situation of the 2016/17 financial year is similar to that of the 2015/16 financial year. The Special Investigating Unit (SIU) and the Office of the Chief Justice (OCJ) have shown improvement in this area, as no non-compliance was reported. The AGSA noted that there is a lack of adequate controls with regards to financial statements at the DCS. The AGSA highlighted non-adherence to supply-chain management prescripts, and noted that there were a number of other items that were initially misstated but have been corrected by the department. Thus, the department was able to avoid further qualifications. The AGSA also found that the DCS had inadequate monitoring of quarterly performance reporting and ineffective consequence management against officials.

The AGSA noted that there were generally no concerns with the quality of the Annual Performance Plans (APPs) for the entities under review. Concerns surrounding the quality of annual performance reports were raised, particularly as there had been no change to the repeat findings for the DCS, the OCJ and the Office of the Public Protector in this regard. While the DCS has had some improvement, the Incarceration Programme did not adequately report the occupancy levels in prisons. The AGSA stressed that oversight, record keeping, reviewing and monitoring compliance and internal audits are paramount to performance planning and reporting at the DCS. Deficiencies in these areas lead to other inadequacies including discrepancies financial reporting and non-compliance with supply chain management regulations.

The AGSA noted that internal audits are not currently performing at the required level. This in turn has an impact on the audit committee, which relies on the reports of internal audit reports to make recommendations to management. Management also relies on internal audit reports to be able to address internal control deficiencies, make changes to the control environment, and ultimately change the audit outcomes. The AGSA report states that senior management provided limited or no assurance, the accounting officer provided limited or no assurance, the executive authority provided assurance and internal audits did not provide the required level of assurance. The DCS’s Audit committee and the Portfolio Committee were found to have provided assurance and adequately carried out its oversight function.

One of the DCS’s primary objectives during the year under review was to increase bed spaces to reduce overcrowding in prison facilities. Some of the projects were inaugurated as early as 2007, but have not been completed and therefore the objective has not been achieved. Despite a budget of around R500 million for this purpose, only 33% of the targeted amount of additional bed spaces have actually been created. This shortfall was attributed to material shortages and the fact that some contractors were liquidated. Another important factor highlighted was inadequate project management. The AGSA stressed that this area needs to be addressed going forward to ensure that projects are completed on time and without exceeding the allocated budget.

The AGSA reported that the DCS is facing budget limitations and is experiencing financial challenges. The DCS appropriated R282 million from its 2016/17 budget to cover expenditure from the 2015/16 year. At the end of the 2015/16 financial year, the department had R374 million of invoices older than 30 days, thereby not complying with the regulations of the National Treasury. Had the DCS paid these invoices within the prescribed period, it would have exceeded its budget, which would have resulted in unauthorized expenditure of R336 million. Therefore, in the interest of avoiding unauthorized expenditure, the payment of these invoices was delayed, thereby putting pressure on the DCS in the current financial year.

For the 2016/17 financial year, the AGSA reported no unauthorized expenditure, while fruitless and wasteful expenditure has increased from R28 million three years ago to R1 million in the 2016/17 year. Irregular expenditure amounted to R836 million in the 2016/17 financial year, reflecting a significant increase from previous years. Most irregular expenditure came as a result of non-compliance to supply-chain management regulations. The AGSA informed members that irregular expenditure is not necessarily expenditure that obtained no value, but did not follow appropriate procedures.

The AGSA highlighted that a number of cases of irregular expenditure and fruitless and wasteful expenditure have been investigated by the department, but have taken excessively long to be concluded. The AGSA stated that the Public Finance Management Act (PFMA) requires prompt consequence management after a transgression has occurred, however, the DCS is not performing at the required level. The AGSA also noted that the Standing Committee on Public Accounts (SCOPA) has previously engaged the department on these same issues.

The AGSA noted that the Accounting Officer and senior management take too long to respond to changes in circumstances and recommends that the DCS develop an action plan to deal with further changes in financial reporting requirements. The AGSA also highlighted that consequences for poor performance and transgressions at the DOJ are often inadequate. The manual system of consequence management currently utilized by the DOJ to collate and report performance information is particularly labour-intensive, and does not have the built-in controls that similar systems have adopted. Therefore, the AGSA recommends monitoring the implementation of the new system currently being developed by the DCS. The AGSA stressed that it was imperative that this new system is implemented as soon as possible, that it has in-build controls, and that it ensures that performance information is adequately collated and reported. The AGSA recommended that the Portfolio Committee continue to monitor the financial health of the DCS, as the amounts that are rolled-over from previous years are increasing. The AGSA also recommended that the DCS implement an audit action plan with strict target dates that are monitored regularly. In this regard, the Portfolio Committee should also exercise oversight over this implementation process, specifically ro monitor compliance with laws and regulations. Finally, the AGSA recommended that the DCS focus on the actual achievement of set performance targets, particularly the upgrading of incarceration facilities.

The AGSA announced the enhancement of its audit methodology for the 2016/17 audit cycle. As a result, auditors now work in a more integrated manner and focus more on risk, which enables AGSA to help the Portfolio Committee exercise oversight, thereby increasing accountability. The AGSA has also launched a new initiative known as ‘Status of the Records Review’, which replaces the key control assessments. The intention of this new methodology is to highlight risks and management areas of concern from the outset. This is intended to assist the audit committee and Accounting Officer to develop an action plan quickly and to ensure that risks and areas of concern are actually addressed.

The final section of the presentation dealt with the relationship between accountability, corruption and service delivery. In the public sector environment, many monopolies exist and therefore individuals are free to exercise their discretion. In this environment, low levels of accountability create opportunities for corruption. Therefore, the AGSA aims to contribute to high levels of accountability, to decrease levels of corruption.

Discussion
The Acting Chairperson thanked the AGSA for its presentation. He noted the presence of Inspecting Judge Mr JV van der Westhuizen and the Director of National Prosecuting Authority Mr S Abrahams, and allowed members to put forward questions and comments.

Ms M Mothapo (ANC) asked if the DCS had been trained to make use of the new audit methodology. Furthermore, she asked what the AGSA suggests the DCS should do in the situations where either invoices cannot be paid within 30 days or the allocated budget is exceeded.

Mr van Vuuren responded that the audit methods have been communicated to the auditees. This communication primarily focused on the integrated working of auditors and the emphasis on risk. Other methodological changes, he argued, were not of interest to external stakeholders. Regarding the question of non-compliance with PFMA regulations, the AGSA emphasized that it reports on non-compliance with regulations, but has no authority to hierarchize these laws and regulations.

Mr W Horn (DA) asked for more clarity on the deficiency in consequence management at the DCS. Specifically, he wanted to know whether there have been improvements, or if consequence management was essentially non-existent.

Mr van Vuuren explained that the DCS has an investigative unit, but this unit does not have sufficient capacity to investigate cases at an acceptable rate. The AGSA therefore recommended focusing on enhancing the capacity of the investigative unit and the pace of the investigations.

Mr N Matiase (EFF) asked for clarity on the relationship between irregular expenditure and the wastage of value. He inquired as to the independence of the internal audit process within the DCS. Lastly, he asked for a clearer definition of consequence management, requesting an outline of the key elements to effective consequence management.

Mr van Vuuren stated that irregular expenditure is expenditure incurred without following the appropriate procedures. However, even expenditure that did not comply with all applicable laws and regulations can still obtain some value. For example, when the number of quotations for procurement of furniture was less than regulations require, the expenditure for the purchase of furniture will be classified as irregular, but value was obtained as the furniture was bought. In the case of such irregular expenditure, there should be an investigation to determine why the procedures were not followed and if any value was lost. Thus, if the amount spent on furniture exceeded what would be a reasonable amount, value would have been lost in this example. With regards to the independence of internal audits, the AGSA explained that the PFMA requires each entity to have an internal audit unit, which is placed under the control and direction of the audit committee. Thus, the PFMA provides for the necessary independence of internal audits. The AGSA stated that effective consequence management involves investigation of transgressions and appropriate responses, determination of value losses and, if transgressions are repeated, training or changes to the responses to transgressions.

Mr M Maila (ANC) inquired about the purpose of a meeting between the office of the AGSA and the Minister of Justice and Correctional Services.

Mr van Vuuren stated that it regularly meets with the Executive, typically to discuss the audit outcomes at the end of audit cycles. The purpose of this engagement is to inform and receive commitments from the Executive. The AGSA report specifically indicates what commitments the Executive has made, what commitments have been made previously, and what progress has been made with regard to those commitments. On occasion, the AGSA meets with the Executive to discuss progress on implementation of actions plans and to provide feedback, ultimately to allow the Executive to exercise its oversight function. During these feedback sessions, the AGSA continuously raised the concern that the DCS was not progressing sufficiently in terms of the previous audit action plans.

The Acting Chairperson requested that the AGSA proceed with the audit report for the Department of Correctional Services.

Briefing by AGSA on Department of Justice Audit Outcomes
The AGSA thanked the Acting Chairperson, and noted that the first section of the report was identical to the report presented previously.

The AGSA reported that overall, audit outcomes are stagnating. For the 2015/16 financial year, the SIU was marked as ‘yellow’, but progressed to ‘green’ for the 2016/17 financial year, as there were no material findings in all three areas of the audit. Due to the failure to disclose progress on immovable tangible asset in their financial statements, the DOJ has regressed in the 2016/17 year in terms of its audit outcome.

With regards to the compliance with key legislation, the AGSA stated that there had been an overall improvement since the 2015/16 financial year, particularly in the SIU and OCJ. Only two entities, namely the DOJ and the Public Protector of South Africa (PPSA), required improvement in the opinion of the AGSA. Key issues identified relate to at these entities relate to irregular expenditure. Additionally, the AGSA found that the reported performance information was inadequate, leading to challenges in the overall audit.

All entities received a ‘green’ outcome for the presentation of proper performance plans, in compliance with the National Treasury framework, The AGSA explained that the Third Party Fund, President’s Fund and Guardian’s Fund were not required to present their own annual performance plans, but still highlighted the quality of their submitted reports. The DOJ, the PPSA and the OCJ continued to have findings in those areas, specifically with regards to the reliability of their performance information and thus, the AGSA experienced challenges when it came to the verification of their provided information.

DOJ and PPSA have require intervention in a number of areas, particularly that of financial and performance management. The AGSA suggested that to improve performance and financial management, monthly reviews should be enhanced in order to pick up on issues raised with regards to financial statements, performance information and compliance with key legislation. If this is achieved, the entities will be able to identify discrepancies sooner and rectify them before the audit outcomes are released. The AGSA highlighted that Legal Aid South Africa and the Guardian’s Fund have had consistently good audit outcomes over the past years.

For the DOJ, the AGSA reported material findings regarding the reliability of the reported performance information pertaining to the Court Services programme. Moreover, the AGSA stated that there were challenges in verifying the number of sexual offenders that have been convicted. For the OCJ, there were material findings regarding the reliability of the reported performance information pertaining to the Judicial Support and Court Administration programme. For the PPSA, the AGSA reported material findings regarding the reliability of the reported performance information pertaining to both the Investigations programme and the Complaints and Stakeholder Management programme. The AGSA highlighted that the Investigations programme spent 107% of the allocated budget, while achieving only 22% of the targets that were set for the year under review.

The AGSA noted that each of the responsible departments and entities had to some degree included the Integrated Justice System (IJS) initiatives in their respective APPs, but that some departments require an update of their Information Technology (IT) infrastructure to be fully integrated with the IJS. Furthermore, the AGSA stated that the project management and governance programme for all entities requires more effective monitoring with respect to tracking commitments, deadlines and budget spent. Regarding the erection and purchasing of mobile courts, the AGSA highlighted that there has been some over-expenditure, and that an amount of R10.9 million is currently being investigated as potential irregular expenditure. Furthermore, R1.4 million was listed as fruitless and wasteful expenditure, as some mobile courts are not currently useful or not required.

The AGSA reported that there has been a regression in the financial management at the DOJ, as there is lingering uncertainty as to whether one auditee can continue to operate in the future, while another auditee had more than two unfavorable indicators. Compared to the previous financial year, the number of auditees that have two or less unfavorable indicators has increased from three to four.

Regarding the compliance with key legislation, the AGSA reported that the OCJ and SIU improved with regards to the material misstatements submitted in financial statements, while the DOJ, PPSA and TPS require further improvement. The AGSA stated that there had been a regression in terms of prevention of unauthorized, irregular, and fruitless and wasteful expenditure at these entities. The AGSA noted that there have been findings at the PPSA and the DOJ, while in the previous financial year, only the DOJ had findings in this regard. Concerning the management and procurement of contracts, there has also been a regression. None of the entities had findings in the 2015/16 financial year, however the DOJ had material findings for the 2016/17 year. The AGSA highlighted that the DOJ has experienced a regression in consequence management in the year under review.

In the 2016/17 financial year, the AGSA identified no unauthorized expenditure at the DOJ. Fruitless and wasteful expenditure for the year under review was R3 million, reflecting an incremental increase year-on-year. The AGSA identified R47 million in irregular expenditure during the period 2016/17, reflecting a substantial increase from R25 million in the previous year. The AGSA stated that this was mainly due to non-compliance with supply-chain management regulations. The AGSA noted that the DOJ did not take appropriate steps in its consequence management to respond to incidents of misconduct and transgressions.

The AGSA recommended that the entities under the Portfolio Committee should focus on improving the response time by management. The number of entities with findings in this regard has increased from two in the 2015/16 period to four in the current period. The AGSA assured the Portfolio Committee that none of the entities are unstable or have vacancies to the extent that they would be unable to adequately carry out their duties. While there has been some improvement in terms of performance, in general there continues to be a lack of consequences management for poor performance or transgressions. The number of entities that have findings in this regard has decreased from three in the previous year to two in the 2016/17 year. The AGSA noted that the DOJ and PPSA require improvement in this area in particular.

Regarding the key commitments by the Minister, the AGSA found that the electronic performance management system has not been consistently rolled out across all regions. A commitment was also made to improve the IT system of the Guardian’s Fund, but has not been implemented. Other commitments include the CFO taking control of the supply chain asset management, and the commitment to fill outstanding vacancies.

The AGSA recommended the Portfolio Committee obtain confirmations from entities that financial statements and performance reports are adequately reviewed by management; that these entities provide confirmation that their financial statements have been reviewed by the CFO, Accounting Authority and audit committee prior to their submission; and that progress on the implementation of action plans is tracked by auditees to ensure that audit findings are addresses, in particular compliance with legislation and supply-chain management.

The AGSA stated that the South African Board of Sheriffs was an entity that the AGSA did not audit, but nevertheless falls within the Portfolio Committee’s jurisdiction. Over the past years, there have been no negative issues to report.

Discussion

The Acting Chairperson thanked the AGSA and allowed members to raise comments and questions.

Mr Horn asked for the AGSA’s view on whether all targets and indicators in the APP must be dealt with by the audits.  He stated that the question was relevant because the ‘court backlogs’ target was removed from the APP. He argued that the DOJ and related entities had claimed they were not solely responsible for these, and that they agreed with the AGSA that since this was not their sole responsibility, they should not be held responsible. The consequence of this is that no particular body is being held responsible for the reporting of the status of actual court cases and of how many are on the backlog roll. He stated that the situation is untenable and that ultimately, the DOJ and the relevant entities must be held responsible for the streamlining of court cases in the interest of protecting the ends of justice.

The AGSA could not provide a clear response to this question.

Mr Matiase stated that it was pleasing to see the various organs move from ‘qualified’ status to ‘unqualified with no findings’. However, he argued that it was equally discomforting that the overall custodial component of the DOJ was not doing well. He requested the opinion of the AGSA on the reported R1.4 million expenditure on mobile courts which to date, remain unutilised. He also asked why the South African Board of Sheriffs does not fall under the oversight of the DCS, and whether this should be taken into consideration by the AGSA.

Mr B Bongo (ANC) echoed Mr Matiase’s question requesting clarity on the status of the South African Board of Sheriffs.

The AGSA stated that the R1.4 million was listed as fruitless and wasteful expenditure. Regarding the South African Board for Sheriffs, the AGSA explained that the DOJ exercises oversight over this entity. All the entities mentioned in the report, except the constitutional institutions, receive funding from the DOJ and are therefore listed under transfer payments in this category.

Mr Maila asked whether the AGSA, as the supreme auditing institution, should highlight the role of SCOPA as an assurance provider for government departments and various entities. What is SCOPA’s specific function as an assurance provider?

The AGSA noted that the role of SCOPA is to make recommendations, and subsequently for the department or entity to implement these recommendations. If transgressions are repeated, the process itself will be repeated. However, SCOPA is not a committee that AGSA ordinarily engages with and it would therefore be difficult to categorize SCOPA as an assurance provider.

The Chairperson thanked the AGSA for the presentation. She then welcomed the Minister of Justice and Correctional Services and handed over to him to present his overview.

Remarks and Responses by Minister
The Minister thanked the Portfolio Committee for allowing him to account for performances, as well as to showcase some of the positive achievements that have been realized in the financial year under consideration. The Minister highlighted the presence of the Inspecting Judge Mr van der Westhuizen, the director of the NPA, the acting National Commissioner of Corrections, as well as their accompanying senior officials. He acknowledged the positive work that has been realized in many areas across the broader portfolio. Various entities and programmes continue to have high levels of performance, including good auditing outcomes. In particular, he noted that this was the sixteenth year in which Legal Aid has received a clean audit. There are a number of programmes which continue to realize clean audit within the DOJ, namely the President Fund, the Guardian Fund and others. He stated that these positive performances have given the broader portfolio a good reputation.

The Minister regretted that the DCS and the DOJ have regressed from an unqualified audit last year to qualified audit this year. He stated that this regression was the result of failure to comply with new financial reporting standards that require including capital works in progress to be reflected on the financial statements. The Minister stated that he regrets the fact that the Accounting Officers and CFO’s of both departments were not able to respond to this new requirement in time. He stated that he understood the reasoning of the AGSA in this regard, and accepted this decision.

The Minister noted the persistent problem of non-compliance to prescripts and regulations, specifically on the issue of irregular and fruitless and wasteful expenditure, which continued to feature prominently in the AGSA reports. He stated that it may be necessary to review the consequence management interventions currently in place. In terms of the capacity issues, the Minister stated that South Africa was in a phase of austerity, which has resulted in significant budget cuts across all departments. He acknowledged that in some cases, human resource capacity has been “hamstrung” by these budget cuts, including within the Portfolio. He stressed the need for re-prioritization of work, taking into account the limitations imposed by budget cuts.

The Minister stated that there have been significant accomplishments in the roll-outs of certain projects. He made reference to the IJS in particular, which has been expanded significantly to enable entities to track a particular individual across the entire criminal justice chain. He noted that the challenges relating to infrastructure remain a major concern, and that at the DCS the issue of overcrowding continues, as efforts to create extra space have thus far produced limited results. He stated that there has been an effort to redistribute inmates from most overcrowded facilities to those that are less overcrowded or even under-utilized.

Regarding the irregular procurement processes at the DCS, the Minister stated that he had written to the former National Commissioner of the DCS, Mr Zach Modise, about the need for disciplinary action based on the AGSA’s recommendation. An update from the National Commissioner is expected on the 31st March, including the consequence management update of the 2016/2017 financial year.

Regarding over-expenditure in the budget for capital works, the Minister stated that the projected costs and the projected cost escalation of these projects should be taken into account in terms of financial management.
One of the key observations that the Minister made when entering office in 2014 was the lack of technical capacity for facilities management within the department. Additionally, he identified a lack of expertise in the Department of Public Works and the entities within it. The Minister expressed his concern that the Department of Public Works (DPW) was not monitoring their expenditure processes of invoicing, accountability, their infrastructural rollout arrangements and their facilities management. The Minister referred to the appointment of the six facility directors in each DCS region to provide better control over the relationship with the DPW. There is a focus on improvement in relation to monitoring, the effective rollout of infrastructural management, development, maintenance, financial overheads lastly, ensuring that the DCS is not short changed. The Minister mentions an issue with the departments paying more for services then they are meant to due to lack of verified information from the DPW. The Minister stated that there is a need for better scrutiny of invoices received from the DPW in the future to avoid further financial overheads.

The Minister stated that he had recently visited a math and science facility in Limpopo, which cost around R2 million to build. R800 000 worth of labour costs was not charged to the school as it was voluntary work, which saved the Department of Education and the taxpayer significantly. The Minister stated that the country could save by making better use of voluntary labour to address infrastructure development programmes. The Minister made reference to the High Court of Limpopo, specifically its issue of limited parking space when it was initially constructed. The municipality regulated the number of parking spaces during the planning stages of the court, therefore any extra parking spaces would be deemed as an extra to the pricing of the construction. The operational licensing of the court did not consider extra parking space, which lead to further negotiations for more land to be acquired for more parking. The DOJ had to purchase the land at a higher cost as larger parking was not considered in the beginning stages of planning. He stated that this was an example of the financial overheads experienced by the DCS. In Mpumalanga, the department is in the process of negotiating servitude of the court from a nearby college. The college is requesting the DCS build a dormitory for students valued at R35 Million in exchange for the excess servitude. If the department refuses, then the college would decline the department’s request.

The Minister stated there had been a distinct lack of competency and accountability in the 2016/17 year. In terms of staff management, directors in lower levels were capable of approving hundreds of millions without any checks and balances. These individuals were approving disbursements for infrastructure to DPW without being competent to do so. He stated that the Ministerial level does not even have the authority to approve these payments, though lower spheres within the DCS are doing so freely. The Ministerial office made inquiries on this, and the response was that they were disbursements made years ago, which the ministerial office was not aware of.

The Minister stated that there had been a delay in the completion of the Mpumalanga High Court in Mbombela, as the construction company was faced with a massive boulder on site. This required a new technical engineering strategy to overcome the hurdle, which caused delay and an increase in cost of the construction from 2015 onwards.

In terms of transformation in legal services, the DOJ had engaged with the Chief-Executive Officer (CEO) of Legal Aid on this issue. He noted the “impeccable performance” of Legal Aid in the past 16 years. The DOJ is gaining skill from Legal Aid to drive the transformation of state legal agenda. The Minister noted that the DOJ is effective in the quality of handling of the litigation value chain, which will build competency within all the departments resulting to the avoidance of litigation. The department wants to be careful of the manner it handles litigation specially in efficient administration processes, in order to avoid default judgements that are ineffective. The DOJ intends to transform the state law adviser as an entity to become part of a comprehensive, integrated, efficient state legal service. This service will have the objective of improving the quality of legal services the state receives, the value for money, making sure the state serves as an incubator for skills transfer to support the transformation agenda. In order to achieve this, the DOJ must reign in those who are currently litigating independently of the general system within government federal state attorney. This includes the parastatals and municipalities who are currently not part of the framework of the federal state attorney will need to be introduced to the transformation procedure for the state. The policy framework will be overarching which requires time to roll-out the integration of the other entities that perform litigation, as there may be limited capacity to absorb all the spheres into one. The Minister stated that the DOJ intends to save the states money and increase efficiency with the transformation agenda.

Ms Mothapo enquired about the Kimberly High Court.

The Minister stated that the court existed before 1994, and was one of the seven High Courts existing prior the 27th April 1994 during regime change. The two High Courts that were created after regime change are Mpumalanga and Limpopo. By the end of the 2016/2017 financial year, all the provinces under democracy will have their own dedicated High Courts. The issue has been handled under the observation the Judicial and Support Services resources, to ensure that the expansion of the higher and lower courts is supported by the resource requirements to be rolled out by 2019.

In terms of the rationalisation of court jurisdictional boundaries and ministerial boundaries, the Minister stated that the DOJ was striving for full alignment with all the spheres of government. This is being achieved by revisiting provincial municipalities which are communicating with the demarcation board. He stated that this was not only in Matatiele, but across the country. The implications for boundaries of High courts and Magistrate Courts is that they will also have to be on board with the transformation and realignment of the state, as mentioned by Cabinet recently. The DOJ was also working with the Department of Cooperative Governance and Traditional Affairs (COGTA), as well as the Ministerial Demarcation Board.

In terms of filling the position of Solicitor-General, the DOJ advertised the position and received applications where applicants did not have enough capacity for the post, yet this is positive as the position-holder cannot exceed the capacity of Director-General. The portfolio’s responsibility set by the public service benchmarked it at the level of a Deputy-Director General, however the DOJ was forced to advertise it as is, thus resulting to unsuitable applicants. Considering the fundamental restructuring project of State Legal Services, the department hopes that the results will yield a suitable candidate for the post.

In terms of overcrowding in DCS prison facilities, the Minister stated that since the Saldanha judgment in December 2016, the Department has complied with the 150 occupancy regulation as the maximum for Pollsmoor prison. This has transformed the prisons identity to a remand detention facility, and the DCS has removed the previously sentenced prisoners to other facilities in the Western Cape. The transfer of prisoners in other provinces has solved the issue of under-crowding in the Free State. The Department has also broadened the project to be a national project instead of provincial one, so that the target of 150 can be a norm to avoid facilities facing overcrowding. The NEC and PPC are structures instituted by the judiciary to manage case flows and other processes for efficiency enhancement in the courts. This is so cases are finalized hastily, back-logs and the turnaround are reduced. The other intervention to overcrowding includes the diversion programmes within the criminal justice system according to the relevant Acts in place. The Minister stated that overcrowding is not the result of the prevalent petty crimes or persons serving in the correctional facility. The bulk reason of the overcrowding is due to long-term jail sentences because of serious offences.

In terms of parole for inmates on life sentences, the Minister stated that there have been many complaints regarding correctional centres not providing profiles promptly when an inmate qualifies for parole, due to administrative inefficiency. The DCS has begun to address this issue in every facility to avoid any further action taken by inmates who fall victim to the inefficiency. The DCS also started acting on profiles that are returned due to certain actions that should have been taken previously for the inmate to qualify for parole because of administrative inefficiency.

On the issue of the regression in audit outcomes, the Ministerial office regrets the outcome of the audits. The issue of audit committee has indicated all the government structures across the portfolio are now in place, there may be varied levels of performance. The Minister shares that the performance of 67 percent in the DCS is below par, while the DOJ achieved 87 percent. In terms of the repeat findings, the Minister responded by stating the findings are mainly in the areas of supply-chain management, procurement of IT and the SETA compliance/requirements. These transgressions were mostly in the tenders the DCS had awarded. The Ministerial Office addressed the issue by saying it is not acceptable that the procurement process has been tainted by the same transgression. The officials and Acting-Commissioner will justify these activities and how they will be prevented in the future.

In terms of parole for inmates on life sentences, the Minister stated that there have been many complaints regarding correctional centres not providing profiles promptly when an inmate qualifies for parole, due to administrative inefficiency. The DCS has begun to address this issue in every facility to avoid any further action taken by inmates who fall victim to the inefficiency. The DCS also started acting on profiles that are returned due to certain actions that should have been taken previously for the inmate to qualify for parole because of administrative inefficiency.

Mr N Matiase (EFF) enquired about the lack of consequence management at the DCS.

The Minister referred to the 2017 DCS annual budget report, specifically the disciplinary actions that occurred in the financial year 2016/17. There were a total of 3169 cases of disciplinary action during the year under review, ranging from correctional counselling (446), verbal warnings (975), written warnings (844), final written warnings (491), suspension without salary (118) to dismissals (117).  

Mr B Bongo (ANC) asked about the vacancy rate within the DCS.

The Minister replied that the DCS was satisfied with the 6 percent vacancy rate. Additionally, the department also has used contract posts as a way of augmenting human resource strategies across the board, as the establishment sometimes limits the human resource needs required against permanent staff.

Addressing questions about state capture, the Minister stated that wherever corruption occurs, is not acceptable, yet we cannot say that within Parliament and in the court system that it does not exist. He stated that half of the common allegations of corruption do not exist in the Minister’s eyes, as it is mainly based on rumors and not facts.

The Minister concluded by congratulating the Acting Chairperson for achieving her doctorate in Philosophy on the behalf of the collective.

The Acting Chairperson stated that she shares sentiment of the Minister that no South African should engage in corruption, and that corruption should not be utilized in political party competition. Instead of political parties pursing and apprehending those who are corrupt by making an example of those caught, unfortunately corruption is found within the political parties themselves.

The Acting Chairperson appreciated the Minister’s responses; however the regression is in contrast to the previous positive outcomes from years before. The Portfolio Committee was concerned by the occurrence of regression yet it is still hopeful that there will be positive results in the next meeting.


Briefing by Department of Correctional Services (DCS)
Mr James Smalberger, Acting National Commissioner, DCS, introduced his colleagues within the Department and noted that some of the delegation were in acting positions for less than a week since present.

Mr Smalberger stated that the DCS takes full responsibility for the findings in the annual report, even though it was before the tenure of many of the executives present. He noted that the delegation had prepared a presentation; however the projector was not working currently and there was not enough time, therefore he requested guidance from the Committee.

The Acting Chairperson noted that Members should have gone through the presented document beforehand.

Mr Bongo suggested that the presentation speak specifically to the relevant topics at hand, and that the presentation should skip the preambles highlighted in the document.

The Acting Chairperson agreed with Mr Bongo’s suggestion, especially since there were pressing questions that members of the Portfolio Committee need clarification on.

In light of the Committee’s view, Mr Smalberger stated that the first part of the presentation be presented by the Chief Deputy Commissioner and the second section by the CFO.

Mr Joseph Katenga, Chief Deputy Commissioner: Strategic Management, DCS, stated that the DCS achieved 25 out of 40 targets predetermined objectives of 2016/17 financial year. This represents a 63% achievement of targets.

Mr Katenga said that the Department was audited on 4 programmes with the introduction of Social Reintegration Programme. The audit conclusions for the 2016/17 indicates that out of the four (4) programmes selected the department has been unqualified on three (3 ) programmes (Rehabilitation, Care and Social Reintegration) and has been qualified on one programme (Incarceration). Qualification on indicator of percentage of overcrowding in correctional centres and remand detention facilities in excess of approved capacity due to lack of evidence to substantiate approved accommodation.

The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, as required by section 40(1) (b) of the PFMA. Material misstatements of contingent liabilities, agent-principal arrangements and prior period errors identified by the auditors in the submitted financial statements were corrected, but the uncorrected material misstatements on immovable capital work-progress resulted in the financial statements receiving a qualified audit opinion. Effective steps were not taken to prevent irregular expenditure; majority of the irregular expenditure was caused by extensions made without obtaining timeous approval / following proper approval procedures. Money was spent on a contract without the approval of a properly authorised official. Contractual obligations and/or money owed by the department were not met and/or settled within 30 days

Another issue that was raised by AGSA on strategic planning and performance management. This was regarding the appropriate information system to enable the Department to monitor the progress made towards archiving the goals, targets and core objectives as indicated in the annual performance plan. They were not adequately implemented for the 2016/2017 financial year; however the projects have managed to automate five of the performance indicators. The implementation of solutions is ongoing.

Mr Nicodemus Ligege, CFO, DCS, presented the DCS financial report, specifically the audit outcome and financial expenditure as presented in the annual report. He noted the budget cuts of R235 million at the beginning of the financial year of 2015/16, of which R176 million was for payment of salaries, and payments for capital assets amounting to R59 million. The DCS spent 99.82 of its adjusted budget of R21 billion for the 2016/17 financial year, underspending R38 million.  

Looking at Compensation of Employees, the actual spending of R14,417 billion (97.27%) against the final appropriation of R14,821 billion (100%) resulted in an under spending of R404 million due to funded vacant posts. PERSAL reported a funded permanent establishment of 41,994 of which 39,259 are funded filled posts, 402 posts are filled additional to the funded establishment, mostly on entry level, resulting in a total PERSAL head count of 39,634, but leaving 2,735 vacant funded posts (6.51%). With respect to  Learnership, 2 017 learners were certified as competent and absorption in the department. These learners are given contract posts and only absorbed as soon as entry security posts becomes vacant.

In respect of Occupational Specific Dispensation for Correctional Officials, the Department implemented OSD phase 2 in line with Departmental Bargaining Chamber (DBC) resolution 1 of 2016 which was signed on the 21 November 2016. Estimated 13 000 officials who are currently in service were paid adjustment notches and 17% back pay in February 2017 and March 2017 respectively. At the end of 31 March 2017 the department had not finalised the implementation of OSD. It is envisaged that the process of translation of notches and the 17% of the 30% will be finalised in 2017/18 and the remaining 13% of 30% over the 2017 Medium Term Expenditure Framework period.

On Goods & Services, the actual spending of R6,111 billion (106.71%) against the final appropriation of R5,727 billion (100%) resulted in an over spending of R384 million is ascribed to the item: Property Payments under the activity Capital Works for municipal services where invoices amounting to R193,3 million received for the 2015/16 financial year were paid in the current financial year as well as items: Agency and Support/Outsourced Services and Food and Food Supplies as a result of increase of food prices. In 2017/18 financial year and over the 2018 MTEF period, Goods and Services budget continues to be constrained. On average 65% of the departmental budget allocation for Goods and Services is mainly allocated to food for inmates, operating leases, property payments and Public Private Correctional facilities. The cross subsidising from lower to higher CPI items as required in terms of the MTEF guidelines is therefore not feasible in the case of the Department.

The underlying factors that influenced expenditure in 2016-17 financial year have significant implications for the 2017-18 resource utilization and potential negative impact on the priorities and objectives as contained on 2017-18 Annual Performance Plan. In the light of OSD settlement obligation which is payable over the next 3 financial years, the Human Resource Plan and Forecast was completed to inform the parameters and maximum posts that can be filled provided that they are funded. Significant number of funded posts will be reduced over the MTEF period on programmes 1, 2 and 4 estimated as follows:
-Administration - 1 579 posts (23%); Incarceration - 434 posts (1.6%); Care – 170 posts (10%)
-For Programmes Rehabilitation and Social Reintegration, there will be increase in funded posts by 410 and 271 respectively  

The rising municipal service charges continue to put pressure on the budget of the Department. Due to shortfall on municipal services item, the infrastructure programme will be compromised over the medium term, unless electricity and water consumption is contained by one way or another. In 2017-18 financial year, R183 million has been reduced from capital projects towards municipal service charges.

Discussion
The Acting Chairperson commended the work the Department has done and raised her concern about leases and municipal spending. She sought clarity on the amount and requested a break down.

Mr Horn expressed concern about the statement of qualifications and the inmate numbers. He stated that the response of this year contradicted last year’s reasons, which is a red flag for the Portfolio Committee. He requested clarification on the vacancy rate for social workers. Is this figure 11 percent? Since there are people with no jobs, why is there vacancy in the DCS?  In terms of over-expenditure, specifically the careless way contracts are handled, what is the DCS doing to prevent this from happening?

Ms Mothapo stated that she was not happy with the level of performance at the DCS, considering nearly 100 percent of the budget was used within the 2016/17 financial year. She also requested an update on the critical skills development programme.

Mr Bongo stated that the internal audit should be increased in terms of capacity and participation. New performance indicators have been introduced for over a year and the Department is not equipped and trained to utilise these standards. He recommended that the Acting-Executive staff should be decreased, and more permanent staff should be introduced.

The Acting Chairperson recommended that the DCS should lower the number of interns, as there were graduates who are highly qualified yet there is a high vacancy percentage at the DCS.

Mr Smalberger explained that measures were already in place to increase beds in prisons and the information given earlier was to address overcrowding and not the old reasons which are being solved.

Considering the DCS’s heavy usage of water and electricity, the Acting Chairperson recommended that the DCS consider alternative sources, as the expenditure will keep on increasing using conventional forms of energy. She stated that there is much research to be done on farming and utilisation of labour to create self-sustainable food sources to reduce costs in the future. She thanked the DCS for their presentation and their accomplishments, and noted the improvements made, despite concerns regarding the financials. She stated that the DCS had an open door to the Committee whenever necessary.

The meeting was adjourned.


 

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