Western Cape Education Department: irregular, fruitless & wasteful expenditure investigations & minimisation; accruals & overpayments

Meeting report

The Chairperson said the meeting was the result of a number of concerns raised by the Audit Committee.

Conducted in a statement-question-answer format, the meeting went directly into a discussion of the following agenda items:

• the major areas for improvement as identified by the Audit Committee during the 2016/17
• financial year;
• salary overpayments in respect of Policy on Incapacity Leave and Ill-Health Retirement (PILIR) cases that occurred during the 2016/17 financial year;
• accrual payments made after 30 days’ of receipt of invoices;
• the status of the investigations relating to irregular, fruitless and wasteful expenditure, and steps taken to ensure minimisation of such expenditure.

Major Areas of Improvement

The pertinent issues under discussion were district support to schools, teacher absenteeism, human resource (HR) planning (school principals), transfer payments, specialised support and disaster recovery.

Mr Leon Ely, Deputy Director General (DDG): Corporate Services, WCED, gave a brief outline of the audit and risk management process at the WCED. He said audit recommendations were generated from three entities -- the office of the Auditor-General of South Africa (AGSA ); the office of the Premier; and the Internal Control Unit (ICU) of the WCED, which also kept an eye on Standing Committee on Public Accounts (SCOPA) resolutions pertaining to the Department. These were all monitored by the Department’s Executive Committee (EXCO) consisting of all Heads of Department (HODs) and Deputy Directors General (DDGs) and incorporated into a regular quarterly report.

Mr Ely said that the Department had achieved significant progress since the last audit. However, he conceded that “here and there” some matters were still receiving attention and were far from being resolved.

Ms M Wenger (DA) said she had noted that the recommendations had implementation deadlines. She asked how many of the deadlines had expired, or if all outstanding issues were still within the stipulated timeline.

Mr S Tyatyam (ANC), on the same issue but referring to those which had been implemented, wanted to know what the cost of implementation had been and whether there had been any consequences for those whose actions had caused or contributed to the status quo before implementation.

Mr Ely responded that the internal audit process included a risk assessment which recommended particular controls that needed to be put in place. In other words the idea was to improve systems rather than correcting wrongs or redeeming losses. Such cases then ruled out the notion of “consequences” for people.

Mr Tyatyam asked whether, in spite of Mr Ely’s explanation, were there no cases where, for example, an employee was failing to make transfer payments or was not performing at the required level, and thus putting processes at risk?

Mr Ely said such cases fell within the performance management and review system and in that context, under- or non-performance would indeed involve consequences. However, the main focus of internal auditing was to strengthen and enhance internal controls. Where auditors picked up cases of negligence and other related issues, the Department had clear guidelines to deal with them, as would be clear later when the meeting dealt with irregular expenditure and similar matters.

In response to Ms Wenger on implementation deadlines, he admitted that with some of the recommendations, the Department was experiencing challenges to such an extent that some deadlines had had to be revised. Even with the revised deadlines, such as on the leave management system and some HR planning issues, the situation was “slightly beyond” the control of the Department, as it had to rely on external processes such as the information technology (IT) system or other Departments ,for example, for full implementation.

Mr D Joseph (DA) asked how big an issue teacher absenteeism was. What criteria were used in defining the phenomenon?

Ms Debbie Schafer. Member of the Executive Council (MEC) for Education. replied that teacher absenteeism was a “huge issue”, especially when compared with its more easily managed version in relation to Departmental staff. She said in schools, the Department relied mainly on the principals to record and upload information on absent teachers, but this was proving to be quite a challenge. The situation was so serious she had taken the matter up with the National Department of Education.

Mr M Mnqasela (DA) asked whether teacher absenteeism could be approached in a standardised way across all schools, and what measures had been taken to address non-adherence with Departmental procedures when dealing with it.

Mr Ely replied that teacher absenteeism fell within the bracket of issues where the Department had struggled to achieve full implementation because of the systems-driven nature of the challenge. The Centre for e-Innovation (CE-I), on which the Department depended for the processing of absent-without-leave forms and other related HR matters, had budget-cut problems and this had caused the delay.

To ameliorate the challenge, the Department had just completed a road show during which all school principals had been briefed on the correct procedures governing leave and work attendance, and how to capture all the relevant information. Currently the level of absenteeism in the Province was about 2%, which was down a percentage point from a previous survey. The rule of thumb was that at 4% and above, one had to start worrying.

Mr Ivan Carolus, Chief Director: People Management Practices, WCED, in reply to the question on teacher absenteeism and standardisation, gave the Committee a grass roots perspective on how the leave management process unfolded at a typical school. He said an electronic system was in place which captured daily sign-ins from teachers across the province.

The non-existence of a teacher’s daily sign-in -- and this could be established from head office in real time -- automatically generated a leave form. Should the completed leave form not have reached WCED’ HR Department after two weeks, a full investigation then ensued.

In addition, the school principal currently had an “electronic book” through which, at the click of a mouse, he/she could access the entire procedure regulating leave, including all types of leave applicable. Sick leave was currently the biggest headache because it was the most commonly abused type. He reassured the Committee, however, that armed with the latest technology and its pattern-recognition abilities, the Department had begun to zero in on the trouble spots.  

Mr Tyatyam asked if the system was able to distinguish between genuine and fraudulent cases of sick leave, or those where the defective physical infrastructure of the school itself was causing a teacher to be sick.

Mr Carolus said that in the case of defective infrastructure, the Department relied on a teacher’s medical certificate and the quarterly reports of the health risk manager, who was always on hand to assist in such cases. In the last two years, an employee health and wellness practitioner had also become a part of the process of assessing school premises for potential or actual health risks and hazards. He confirmed there had been actual instances where teachers had been moved to other schools because of health reasons.

Mr Tyatyam cited a school in one of Cape Town’s townships, where teachers had been complaining of TB for a long time. What had been done about this school, and how many teachers in other schools had been moved under similar circumstances in the last financial year?

Mr Carolus said he was unwilling to give figures lest he be “in trouble”, but he upheld the principle that teachers were indeed moved to more suitable schools when valid health reasons had been proved.

Salary Overpayments - Policy on Incapacity Leave and Ill-Health Retirement (PILIR)

Mr Ely said it was of the utmost importance to keep in mind that PILIR was a national policy whose prescripts the WCED had no choice but to follow. PILIR inevitably led to salary overpayment, because it allowed employees to go on long term sick leave or retirement before approval had been obtained. In cases of non-approval, the employee would have already been out of work with pay for months, and would not be in a position to pay back what he/she owed to the state. In many instances, employees could not be traced or had even left the country, thus forcing the WCED to write off the overpayment.

Mr Tyatyam said the matter under discussion continued to be one that bedevilled the Department every financial year, and to him it seemed the Department had decided that nothing could be done about it – that every year, money which could be put to great use should be lost and just written off as irrecoverable. He asked the Department to explain why it could not follow the example of the private sector, where before the severance package was paid, the company ensured that all monies owed to it by the employee had been recovered. He observed that the overpayment of salaries was not confined to PILIR cases, but also occurred where employees were still at the work-place. How had that come about?  

Mr Joseph asked how long it took before the overpayment was written off. Was the cost to recover the money also taken into account? Why did it take so long before a decision on a PILIR application was taken?

The Chairperson said he was inclined to agree that PILIR was indeed a challenge, but he also asked for an explanation on the other instances of salary overpayment.

Ms M Maseko (DA) was also willing to concede on the PILIR cases, but wanted to know what was being done to curb other cases of overpayment. Did the cause reside in systemic inadequacies or in human error?

Ms Schafer shared the Committee’s concerns on the issues, and expressed her frustration about the Department’s inability to recover overpayments from employees still on the job. Why could that not be deducted from teachers’ pension payouts or outstanding leave payments? She believed that the Department could do more to address the matter than it had done before.

Mr Ely responded to Mr Tyatyam’s comments with regard to the Department’s apparent apathy on PILIR overpayments, and said the reality was that as long as the national policy remained in its present form, salary overpayments were inevitable. To compound the issue, even with teachers still working for the WCED, recovery of the debt was not a straightforward matter, as the law compelled the Department to consider an employee’s personal circumstances before deciding how much could be deducted a month.

Mr Carolus, responding further to Mr Tyatyam and Ms Schafer, said even recovering money from an employee’s pension benefits was a fraught process. The Government Employees Pension Fund (GEPF) was not always cooperative on this matter, as it often argued that it was not a debt collection agency.

The situation was further complicated by teachers/employees who had been on contract, as in those cases there was no pension to deduct from. In other cases, the amount of money to be deducted was such that it was not even worthwhile to recover.

However, in instances where employees had already left the job but a payment had been issued by accident, the Department had begun to turn the tide by putting in place an early warning system that could electronically reverse the payment at the bank.

Accrual payments made after 30 days of receipt of invoices

Mr Ely explained the context which had given rise to the late payment of invoices due at the end of March 2018. One of the major causes was a new database system, with the usual teething problems, introduced by the National Treasury at the beginning of the year.

Mr Johan Kitshoff, Director: Financial Accounting, WCED, took the Committee through some of the measures being put in place to address these and other related challenges. For perspective, he said the Department paid about 2 500 invoices per month, of which between 20 and 50 missed the deadline. However, it was government policy that all invoices be paid within the 30 day period, and the Department was committed to that.

A particularly taxing challenge for the Department was the School Nutrition Programme. The whole programme involved a single 20-page invoice, demanding the devotion of time and human resources to the checking and confirmation of deliveries to around 30 schools across the Western Cape before the invoice could be paid.

The Department was currently considering the idea of making it a requirement that suppliers in the nutrition sector have an electronic invoice system to make it easier for the Department to certify delivery electronically.

Mr Joseph asked if it was really necessary for all invoices to be paid in 30 days. Could not the Department work it out with suppliers that certain types of invoices be paid in 30 days, and others in 60 or 90 days?

Mr Kitshoff said the 30-day period was a National Treasury regulation. It was theoretically possible to make alternative arrangements with a supplier, but in his experience suppliers preferred 30 days.

Status of investigations on irregular, fruitless and wasteful expenditure

Mr Ely said that investigations were conducted by the Department’s Internal Control Unit on thousands of invoices paid each month to test either for irregularity or fruitless and wasteful expenditure. Invoices that seemed to suggest the above were then passed on to Mr Kitshoff for further investigation. This, in auditing terms, was called the filtering process.

In the last few years the Department, had experienced an increase of non-compliance with supply chain management procedures. The response had been to introduce what he called “Supply Chain Management Champions”, which had dramatically improved processes and reduced the number of non-compliance issues in the Department. He was, however, quick to point out that where negligence had been found, the Department had instituted disciplinary measures.

Mr Joseph asked about companies that had been blacklisted for various kinds of unlawful practice. Had there been instances of this, and was government in general made aware of the danger posed by these companies?

Mr Ely replied that in such cases the Department, together with the National Treasury, either blacklisted companies or put them on suspension. This was not a straightforward matter, but involved certain prescribed legal norms.

The meeting was adjourned.