The Select Committee was briefed on the 2016/17 annual report of the Department of Telecommunications and Postal Services (DPTS). Issues generated from the internal audit report were outlined, and action plans were spelt out. Areas requiring attention included supply chain management issues, non-compliance with tendering procedures, disciplinary action to deal with irregular expenditure, late payments to suppliers, and financial statements submitted for auditing containing material misstatements. It had also been identified that the internal audit unit had not audited transfers made to the Department’s entities, which amounted to over R1 billion. The Department would implement a comprehensive process to develop an internal audit plan which contained control measures to ensure that all legislative requirements and recommended best practices were taken into account.
The Department reported that annual appropriation of the Department in the 2016/17 financial year was R2.417 billion. Total revenue was R3.249 billion, while total expenditure amounted to R2.076 billion. R1.173 had been transferred to National Treasury. Cash transfers to the Universal Service and Access Agency of South Africa (USAASA) had been R69 million, while R589.4 million was transferred to the Universal Service and Access Fund (USAF) for set-top box (STB) installations. USAF had also received a further R55.2 million, while R240 million was transferred to the South African Post Office (SAPO). R77.2 million was transferred to the National Electronic Media Institute of SA (NEMISA), and transfers made to international organisations amounted to R26.1 million. The total transfer payments for 2016/17 had been R1.057 billion.
Members asked about problems of rolling out broadband, and asked whether the Department was unable to participate in a programme of youth development, since youth unemployment was high. Concern was expressed over the irregular expenditure of the Department, the impact of transfers, the lack of improvement in the level of its performance, the retention of critical skills and the high vacancy ratio, and the need for disciplinary action to be taken against those responsible for making irregular staff appointments.
Dr Siyabonga Cwele, Minister of Telecommunications and Postal Services, said that officials of the Department would present the annual report and highlight measures that had been taken to correct some issues faced by the Department. He gave an overview of the report, stating that there had been some improvement in the performance of the Department. However, there were a few areas such as information communication technology (ICT) construction and administration where it was not performing well.
Department of Telecommunications and Postal Services (DTPS): Annual Performance Report
Mr Robert Nkuna, Director-General: DTPS, provided an outline of the report, which included the Auditor General's (AG’s) audit outcome, findings in the 2016/17 audit report, key findings in the 2016/17 management letter, interventions to address audit outcomes, significant achievements and areas of underachievement during the reporting period, and programme performance for 2016/17 with a specific focus on targets not achieved and the 2016/17 financial report.
The Department had spent most of last year focusing on the performance side of the organisation. However, there had been a realisation that it was not enough to focus on performance only, as the Department also needed to account when it came to financing. The report therefore began with areas that pertained to the management of finances. He outlined the Department’s approach to dealing with issues raised by the AG, which included the findings of last year and irregular expenditure dating back to 2008 amounting to R100 million. A lot of work had been done on some of the key findings dating back ten years. There had also been an improvement in risk management in the sense that the Department was beginning to pick up problems way before they happened.
DTPS: Financial Report 2016/2017
Ms Thulisile Manzini, Deputy Director-General, DTPS, said that the audit outcome for 2016/17 reveals that four matters had been reported in the audit report, and 22 in the management letter, making 26 in total, but all of the opinions that had been reported were unqualified. The matters reported in the audit report showed that no deviation had been approved for procuring goods and services without obtaining at least three quotations. Action plans taken in this case involved the supply chain management (SCM) policy being reviewed to enhance internal control, and deviation forms to be completed at all times. Also, procurements were to be effected only after approval was granted. This was included as a Key Performance Indicator (KPI) in the performance agreement of the delegated official in SCM.
Findings also showed non-compliance identified in the hygiene and cleaning services tender. The action plan in this regard included a central database to be used to verify a declaration of interest, and all bids were to be sent to the internal audit unit to be audited before awarding. Further, the wording of the terms of reference and evaluation criteria was to be objective and simple for evaluation purposes, and there would be training as well as the development of bids for committee members.
Findings on irregular expenditure had revealed that there was no consequence on the management of such expenditure. Action plans included the taking of disciplinary action against all officials who were responsible for irregular expenditure, a review of SCM policy to enhance internal controls, the appointment of an irregular expenditure committee, and conducting workshops across the Department on SCM policies.
It was found that the financial statements submitted for auditing contained material misstatements. Action plans included an adequate review of the payment of financial assets, which would be further validated with entities.
The issues raised in the audit report also included irregular appointments which indicated salary payments made to employees before the appointment was approved. Action plans to be taken involved disciplinary action to be taken against all officials who were responsible for the irregular appointments and a review of the recruitment and selection policy to enhance internal control.
Findings also suggested that payments to suppliers were not made within 30 days. The action plans included centralisation of the receipt of invoices and a template to track and monitor the payment of invoices was in place. Moreover, control measures had been put in place to ensure that the process of certification of invoices was smooth.
It had also been identified that the internal audit unit had not audited transfers made to the entities. The Department would develop and implement a comprehensive process to develop an internal audit plan which contained control measures to ensure that all legislative requirements and leading practices recommended were taken into account. It had been found that the internal audit plan for the 2017/18 financial year did not cover transfer payments, and performance agreements had not been submitted within the required time frame. The action plan to be taken was the implementation of a disciplinary process.
Interventions undertaken by the Department to address the AG’s findings included the development and implementation of an Integrated Action Plan (IAP) that focused on providing a systematic resolution of the findings and ensuring that root causes were effectively identified and addressed. The effective implementation of the IAP was monitored on a regular basis by the Governance Integrated Action Plan Committee and the Departmental Executive Committee. The Chief Director (CD): Internal Audit Services, conducts follow-up audits as an independent monitoring of progress on the implementation of the IAP. The Audit Committee provides independent oversight, holding the executive management to account for the effective implementation of the IAP.
Mr Nkuna said the Department had achieved 17 of its 21 planned annual targets (81%) while spending 86% of its budget allocation. These significant achievements included drafting ICT legislation (White Paper). The Department had identified priority bills such as the Electronic Communications Amendment Bill and the ICT Sector Regulator and Tribunal Bill, so as to enable the implementation of the White Paper in the short to medium term. It had developed the national e-Strategy and the e-Government strategy which had undergone stakeholder consultation – including the government cluster system -- following which it had been approved by Cabinet and gazetted for public comment.
Following the development of the ICT small, medium and micro enterprise (SMME) strategy, extensive stakeholder consultation had been undertaken, including presentations to the government cluster system, following which the strategy had been approved by Cabinet. The Department had also developed assessment reports on the rationalisation of BroadBand Infraco (BBI), the State Information Technology Agency (SITA), SENTECH and the South African Post Office (SAPO). In addition, the national radio fequency plan was reviewed and updated during the reporting period. The Department had developed five South African positions that were advanced at relevant international ICT forums to advance the Republic’s ICT agenda.
The Department had automated its business processes by sourcing, installing, configuring and customising an electronic document management and workflow system as part of moving towards a paperless system. An organisational culture and climate change survey had been conducted on all staff of the Department, and this had informed the development of an action plan to improve the organisational climate and culture.
The Department had not achieved four of its 21 planned 2016/17 annual targets. These included the revision and implementation of the organisational structure, the development of the South Africa’s positions on BRICS, the national e-strategy being gazetted after the reporting period, and issues with project management involving the roll-out of broadband connectivity.
Ms Manzini said the annual appropriation of the Department in the 2016/17 financial year was R2.417 billion. Total revenue was R3.249 billion, while total expenditure amounted to R2.076 billion. R1.173 had been transferred to National Treasury. Cash transfers to the Universal Service and Access Agency of South Africa (USAASA) had been R69 million, while R589.4 million was transferred to the Universal Service and Access Fund (USAF) for set-top box (STB) installations. USAF also received a further R55.2 million, while R240 million was transferred to SAPO. R77.2 million was transferred to the National Electronic Media Institute of SA (NEMISA), and transfers made to international organisations amounted to R26.1 million. The total transfer payments for 2016/17 had been R1.057 billion.
Mr J Parkies (ANC, Free State) asked the Department to unpack the impact of the transfers especially to international organisations, and also to justify the 86% of its expenditure. He was still waiting for a copy of the ICT policy document from the Department.
Dr H Mateme (ANC Limpopo) asked why the Department always remained at the same level of performance, because all of the AG’s report was deemed unqualified. The five-year term was almost done, but it seemed the Department had not yet found its feet. What would the achievements of the Department be, since it was still battling to get its policy in place? What were the handicaps and why were funds not used for their intended purpose? Why was more money used on salaries than services and capital works? She believed that getting this proportion right might require some long-term planning.
She also asked about problems of rolling out broadband, and asked whether the Department was unable to participate in a programme of youth development, since youth unemployment was high. Who had been responsible for approving the irregular salary payments indicated in the report? She asked about the regularity of the implementation of the IAP, and the involvement of the Independent Communications Authority of South Africa (ICASA) in this Bill, and the constitutional implications. She asked why the Department had a 50% vacancy rate, and what was being done about recruitment.
Mr E Mlambo (ANC, Gauteng) also referred to the salary payments being approved before the appointment, and asked how this had been possible. Who was liable for this, and what was the Department doing to those responsible? How regular was the effective implementation of the IAP monitoring? Who were the beneficiaries of the Wireless Access Network? He asked about the plans the Department had in terms going forward with the South African Social Security Agency (SASSA).
Mr A Singh (ANC, Kwazulu-Natal) asked about plans in place to retain critical skills in the Department.
The Chairperson asked what systems were in place to deal with irregular expenditure. She stressed that disciplinary action should be taken against officials.
Mr L Gaehler (UDM, Eastern Cape), said the presentation had indicated that the internal audit unit had not audited the transfers made to the entities. Why was the Department keeping the internal audit unit? He also asked about the Minister’s plans in relation to employing graduates.
Dr Mateme what time frame was needed by the Department to deal with the 50% vacancy rate. There were young people with degrees walking the streets without jobs.
The Chairperson asked what made the Department believe that they would get a service provider now for broadband, since it had indicated it had been unable to appoint a broadband connectivity service provider.
Minister Cwele said that every Member of the Committee should receive the new policy on ICT. The Department intended to organise a workshop with Members of Parliament on the rationale for the policy. The Department was very small and its budget went through transfers to oversight agencies to do the actual work. As such, the difficulty it experienced in getting a clean audit was because of the many dependent agencies. Some of the major irregular expenditures cited in the report were irregular expenditures carried over from 2013/14.
The challenges that the Department was experiencing with broadband was because of budget insufficiency. Thus, R60 billion was needed to connect government departments. The first approach that government could undertake was to have lead agents that could deliver very quickly. Regarding a deviation from the National Treasury, it preferred a tender system which had been put forward, but Telkom was no longer interested. This was for the lower districts, with less infrastructure. The Department had decided to use state agencies to roll out this infrastructure, but the approval process was bureaucratic. The private agencies, however, rolled out because policies were put in place for them.
Additionally, there were problems with leadership. The accounting officer had been suspended, based on an investigation conducted by the Public Service Commission. During that period, an advisor had been appointed for the Minister to improve issues, which had brought a lot of stability.
Regarding the provision of broadband and Wireless Access Network (WAN) to beneficiaries, the Minister said that regulators were aware of the requirements, but had done things that made the policy useless. The envisaged WAN would not be run by the government, but by private companies. Out of 400 licences that had been given, only six companies had access, which rendered the situation very critical. He added that network coverage was not good in the rural areas, and one function of WAN was to expand networks. SA would be left behind with an apartheid infrastructure if the country sis not remain competitive by evolving with the digital economy. Many local and international companies were offering to train SA citizens on how to use the internet. Additionally, local devices should be allowed on the market. Entities like the National Treasury should facilitate the purchase of local products.
The Minister added that ICASA was not a policy-making, but a regulatory and licensing body. However, it had inputs in the draft legislation. Licensing rested with ICASA, so there was no conflict.
The Director-General said the Department looked for information on what was happening with each case of expenditure. Information was found in some cases, and not in others. For those cases that involved people in the Department, information was sought from people in the Department to help. It had also gone to court to seek recourse for irregular expenditure, and was waiting on the decision of the court.
It was unavoidable for the Department to be part of an international organisation, given the nature of its work. Thus it was involved with BRICS and other countries for consistency.
With regard to the youth, the Minister had directed last year that the Department should look for opportunities anytime it met with SMMEs. Last year, some youths had been taken to China and Korea to learn. To retain critical skills, the Department gives bursaries for training and short-term courses for professional development. Additionally, last year’s unachieved project was still part of the annual performance plan.
The meeting was adjourned
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