The Auditor-General and the Audit Committee briefed the Committee on their respective reports for the 2018/19 financial year. The Department of Community Safety and its entity, the Western Cape Liquor Authority, also briefed the Committee on their annual reports.
The Member of the Executive Council (MEC) commended the Department on its clean audit record, but suggested there was a need to pay greater attention to performance audits, which aim at value for money and effective service delivery to the people. However, this could be limited if the AG insisted on the current practice, where there was obsession with clean audits at the expense of effective service delivery. The Department’s Head of Department added that the AG continued to raise the bar for the Accounting Officers. For instance, consequence management had been expanded and the Accounting Officers may be held liable for material irregularities. This forced most Accounting Officer to prioritise clean audits at the expense of service delivery. The Department had to develop the means to balance clean and performance audits.
The Chairperson said that the meeting would occur in two sessions. The Audit Committee and the Auditor General would first brief the Committee on their reports. The Department and the Liquor Authority would then present their annual reports to the Committee. The Chairperson urged the presenters to be as brief and concise as possible.
Mr M Hlengwa (IFP), Chairperson of the National SCOPA, thanked the Chairperson of the Committee and others present for the opportunity to work together with the Western Cape SCOPA. The provincial and national SCOPA had to work together to inspire public confidence. The national SCOPA sought active engagement with all provincial SCOPAs around the country so they could collaborate to address the various challenges at both provincial and municipal levels.
Discussion: DOCS Annual Report
The Chairperson said that the Committee would discuss Parts C and E of the Department’s annual report.
Adv Albert Fritz, Member of the Executive Council (MEC), DOCS, presented the Department’s annual report for the 2018/19 financial year. Its clean audit for 10 consecutive years was the result of effective governance, which the Department took seriously. It was moving into the consciousness of performance audits, which aim at value for money and effective service delivery to the people. However, this could be limited if the AG insisted on the current practice, where there was obsession with clean audits at the expense of effective service delivery. The Department valued interaction with the Committee and welcomed questions about its annual report.
Ms D Baartman (DA) wanted to know if Department members who were absent from the Ethics and Enterprise Risk management committee meetings tendered justifiable apologies. She expressed concern about the inability of the DOCS to effectively monitor and evaluate the neighborhood watches against the provisions of Section 6 of the Western Cape Community Safety Act. Were there plans to change the way monitoring and evaluation was done? She sought clarity on why critical systems on related information were compromised, based on the Department's annual report as documented on page 87. She commended the Department for effectively dealing with all cases of corruption.
Mr Gideon Morris, Head of Department (HOD): DOCS, said that all members absent at EERMCO meetings tendered valid apologies. It should be noted that only key members, including the HOD, the CFO, and Ms Linde Govender, Chief Director: Management Support, were mandated to attend the meetings.
In response to the question on neighborhood watches, the HOD said the Public Finance Management Act required the Department to monitor all transfer payments to its entities. However, it was difficult to monitor and evaluate the activities of the neighborhood watches due to the vastness of their number. The Department had therefore deployed various technologies to monitor the activities of the entities, as opposed to the conventional practice where staff of the Department monitor them.
Mr David Coetzee, Director: Security Advisory Services, said that the Security Risk Management Unit manages access control system to all provincial buildings in the central business district (CBD). The unit ensures that the control mechanism of all critical systems involved in continuity of business functions optimally.
Mr America commented on the decision of the DOCS to transition from a clean audit to a performance audit in order to enhance service delivery. How would the Department fulfill the requirements of the AG while it maximised service delivery?
MEC Fritz said that “red tape” was a serious challenge. The Department did not wish to sacrifice its clean audit record, which was indicative of effective governance. It would strive to create a healthy balance between governance and effective service delivery. Steps should be taken to remove unnecessary delays in procurement processes. He commented that accreditation of neighborhood watches, which was needed to screen members of the entity and should be done timeously, could sometimes take up to a year due to the delay involved in fingerprinting.
Mr Morris said the Auditor-General continued to raise the bar for the Accounting Officers. For instance, consequence management had been expanded and the Accounting Officer may be held liable for material irregularities. This forced most Accounting Officer to prioritise clean audits at the expense of service delivery. With the leadership of MEC Fritz, however, the DOCS could develop the means to balance clean and performance audits.
Ms Nkondlo urged the DOCS to explain why the Community Police Forum (CPF) had limited participation in the extended partnership programme (EPP). What was the cause of the limited participation and what was the role of the Community Police Forum in the extended partnership programme? Which of the programmes was affected by the lack of Information Technology (IT) staff and skills? She said that most of the underspending during the financial year had resulted from the failure to fill vacant positions, and staff attrition. What was the Department doing to resolve this matter?
Adv Yashina Pillay, Chief Director: Secretariat for Safety and Security, said that the extended partnership programme supports and funds the CPFs in the Province. The EPP was based on Section 18 of the SAPS Act, which was a legislative requirement. The DOCS signed transfer payment agreements with the CPFs. CPFs may not participate in the EPP for a number of reasons. The Department did provide training, support and administrative capacity to CPFs participating in the EPP. The DOCS supports and funds CPFs, provided they submit monthly reports. CPFs that perform well may qualify for a matching grant to run projects of their choice in their communities.
Ms Nkondlo sought an explanation on why CPFs were listed among key strategic risks if their services were voluntary.
Adv Pillay said that the CPFs were not mandated to participate in the EPP. Only CPFs that entered into a transfer payment agreement with the Department were eligible for support and funding. More than 90% of the CPFs had entered into a transfer payment agreement with the DOCS.
The HOD said that the CPFs were part of the annual performance plan of the Department. This was why they were listed as a risk. Therefore, the Department must devise means to mitigate and manage such risk within the rules of the Audit Committee.
MEC Fritz said that two CPFs, in Camps Bay and Sea Point, had refused to sign a transfer agreement with the Department. Therefore, they were not bound by the rules of the Department.
Adv Pillay said that there were no nationally acceptable systems to monitor the functionality of CPFs. Section 18 of the SAPS Act specifies the function of the CPFs, and all CPFs must fulfill the requirement to be considered a functional structure. The Department did not have the power to dissolve the CPFs. Only the police authority could dissolve them, so the Department submits its report to the national Secretariat and the Provincial Commissioner, who could then take appropriate steps to dissolve the CPFs.
An official of the Department said that the IT section of the Department was ably supported by the Department of the Premier. Inadequate IT staff and skills was considered a risk, because no staff was committed to the IT functions, but there was funding coming towards the section in light of the fourth industrial revolution.
Mr M Kama (ANC) expressed doubt about the ability of the Department to monitor and evaluate the neighborhood watches. How did it intend to monitor the entities with technology when the IT section was understaffed and unskilled? He also expressed concern about the CPFs. Why had some CPFs refused to participate in the EPP? Could non-participation result from insufficient funds from the Department? Was it possible that certain CPFs in “trouble spots” in the Province were dysfunctional?
The HOD said that the Department must achieve its predetermined targets in order to achieve a clean audit. The Department develops measures to mitigate risks that could result in under-performance or non-achievement. The Department had over-achieved its targets when it came to meeting with CPFs (189 meetings instead of the target 68), because the majority of the CPFs were functional as opposed to the minority that were dysfunctional. The dysfunctional CPFs were mainly concentrated in crime and gang hotspots. The Department was taking steps to resolve the conflicts between neighborhood watches and the CPFs.
The Department was taking active steps to improve its IT section. It aimed to utilize the capacity of an IT expert to navigate through the complexity of technology and improve information and databases, amongst others. This would position the Department for the future.
Mr R Allen (DA) expressed concern about the rift between members of neighborhood watches and CPFs. What were the underlying factors? What prevented the neighborhood watches and CPFs from reaching a middle ground? How did the Department plan to address the impact that the cost of compliance had over scarce resources?
MEC Fritz said that the CPF was a very complex structure. The forums operate mostly in the precinct of police stations, whereas the neighborhood watches watch the streets at night. The national Department, Home Affairs and other role-players came up with the 'Community Safety Forum' initiative to further improve security across the Province. It was important for the CPFs and neighborhood watches to find common ground in order to accommodate the new structure. The CPFs appeared to be conservative and did not want the neighborhood watches to play an active role in the new structure. The Department actively discouraged this attitude of the CPFs. Both structures must be able to vote in order to make the Community Safety Forum a democratic structure. All members of both structures would be vetted before election. Criminal elements in the structures must be eliminated. The ability of the members of both CPFs and neighborhood watches to vote on the same platform normally constituted the core of the Department's annual general meeting (AGM). The Department had enough resources to sustain all CPFs in the province. However, the CPFs must have a formal agreement with the Department before they could receive transfer payments. About 97% of the CPFs had formal agreements with the Department, and the Department was willing to work with the rest provided they were willing to sign the contract.
The Chairperson was not sure if “CPF” was an acronym for Community Police Forum or Community Policing Forum.
Mr Morris said that the CPF was a statutory structure and the function was clearly specified in Section 18 of the SAPS Act. Section 18 specifies the name as Community Police Forum. The Section also specifies people who qualify to be on the structure. The CPFs have the mandate to promote transparency between the community and the police. The Department usually compensates them for that level of compliance. The CPFs were responsible for joint problem identification and solutions with the police, whereas the neighborhood watches do the patrols. The Department had robust engagements with the CPFs, and about R5 million in transfer payments was made in the last two financial years.
There were no audit findings on the transfer payments. The Department had an amicable relationship with 95% of the CPFs, and had developed measures to bring the rest on board in order to improve the safety situation in the province. This was why the Department takes the AGM seriously. The election must be conducted so that the Department could deal with the right people.
Discussion on Part E
Ms Baartman spoke about the variances that resulted from under-spending on the compensation of employees (R4.003 million) and goods and services (R3.298 million). Was there a timeline to fill the vacant posts? She expressed concern about the delay in the finalisation of the technical specifications and lack of market response to the Wi-Fi Neighborhood Watch Project. What did the Department mean by lack of market response? She noted that the Overstrand Local Municipality, the Swartland Local Municipality and City of Cape Town had spent 5%, 0% and 0%, respectively, of the transfer payment and conditional grant. The Department should try to explain these figures. Why did the Department fail to transfer payment to City Improvement Districts (CIDs)? What was the nature of the claims against the Department? There was an unconfirmed outstanding balance of R22 000 between the Department of Labour and the DOCS. Who was the debtor? When would the debtor pay? There was also an outstanding balance of R37 000 between the DOCS and the SAPS. When would the debtor pay?
The HOD said that the Department had a staff turnover of 11% and a vacancy rate of 2%. There would always be vacancies in the Department. As the Department employed a member of staff, another member may decide to resign. It had advertised a tender to provide Wi-Fi solutions that could enhance the functionality of the neighborhood watches. Unfortunately, it could not get the product it requested. It was continuing to search for a service provider that could provide the solutions.
The transfer payments and conditional grants to Swartland, Overstrand and City of Cape Town were made to the K-9 units to amplify the work of the traffic officials on the roads.
The Department had transferred R900 000 to CIDs in the 2017/18 financial year in order to protect automated teller machines (ATM) in some hotspots in the CBD. The entity had not exhausted the money, and the balance was rolled over to the current financial year. The Department should make another transfer payment to the entity in the next financial year. The claims against the Department were the cost that the court might charge against the Department.
The Department of Labour, as well as the SAPS, owed money to the Department. The main reason for the amount resulted from DOCS staff moving to those entities, and DOCS still paying their salaries. The DOCS had taken active steps to recover the funds. Therefore, this was not an area of concern.
Ms Nkondlo sought clarity on why there was an exponential increase in the amount allocated to computer services in the year under review compared to the previous financial year, as reported on page 153 of the annual report. Why did the spending on Programme 2 decrease by more than 100% of the allocated amount in 2017/18 financial year? Why did the Department decrease the amount of the bursaries it gave to staff in the year under review? What was the difference between consultants and contractors? The financial report revealed that the Department did not incur any cost on the compensation of employee (CoE) under Programme 3.1 (Safety Partnerships). However, the Department had financial transactions.
The HOD said that the Department did not incur any cost on the programme because Adv Pillay and an official of the Department were both responsible for the programme, and both had been compensated under Programme 2. The Programme had dedicated staff members in the prior financial year. This was why the CoE was greater in the 2017/18 compared to the 2018/19 financial year.
There was a spike in the amount allocated to computer services in the year under review due to the procurement of software licences and upgrades to the computer control room. The control room monitors and controls all cameras in the CBD. The HOD urged the Committee to visit the control room to have an appreciation of the expenditure on computer services. The amount of the bursaries had decreased under a particular programme because all the staff members on bursaries had completed their studies. However, the overall bursary allocation had increased from R103 000 in the 2017/18 financial year, to R180 000 in the 2018/19 financial year.
The Chairperson encouraged the Department to ensure compliance with the requirements of the BBB-EE Act so that noncompliance did not become a material finding in the future. The Department should also strike a healthy balance between clean audits and effective service delivery.
He thanked the Department for effective engagement with the Committee.
Ms Nkondlo expressed concern that most of the under-spending in the four programmes was linked to the failure to fill vacant positions. What was the view of the Audit Committee on this?
The Public Audit Act specifically states the mandate of the Auditor General. The AG must audit compliance with laws and regulations, financial statements and predetermined objectives. The laws and regulations were legislated by the National Parliament and administered by the National Treasury. The mandate of the AG was to enforce compliance with the legislation. The AG audits a few areas of focus annually. The procurement of goods and services was a key area in all government departments, and it was the conduit through which the majority of the money flows. Therefore the departments must comply with the National Parliament and National Treasury pronouncements on how money should be spent in South Africa economy. The departments should consult with the National Parliament and Treasury if the cost of compliance becomes a burden to them. They should also find means to address all forms of interpretive errors. The AG cannot change the legislation of the National Parliament. The AGSA office does recommend that departments should address grievances at relevant forums. It continues to perform its mandate and reports its findings to the National Treasury. The disposition of a department does not have an impact on the AGs opinion. The AG reaches conclusions based on findings.
The human resources (HR) function had been centralized within the Department of the Premier (DotP), and there were challenges in filling vacant positions. Some of the money meant for CoE had been recycled through the fiscus. Failure to fill vacant positions continued to impact service delivery.
Mr Xego said the AG did not have to satisfy the Department when executing its mandate. He expressed concern about the R500 000 in goods and services procured without competitive bidding as required by Treasury regulations. He sought clarity on internal control deficiencies. Service delivery should take preference over clean audits.
Mr Kingwill said that the irregularity associated with the R500 000 had occurred in 2015. However, the matter was brought into the year under review because the investigations were not finalised.
Discussion on Liquor Authority
Mr Xego expressed concern that most of the departments did not comply with the BBB-EE Act. What could be the reason for this?
Ms Nkondlo sought to know why the Chairperson of the Board, Adv Thembalihle Sidaki, had attended only 10 meetings.
How much expense did the Liquor Authority incur on the forensic investigations into the cases of fraud and corruption? How did it monitor compliance with corporate social responsibility?
Mr Kingwill said that the Board had enormous responsibilities, thus the need to create sub-committees. The chairperson did not attend all the meetings of the sub-committees. This enabled him to chair the Board independent of the discussions that took place in the sub-committees.
Mr Marvin Jackson, Deputy Director: Corporate Services, said that the Authority did not have direct corporate social responsibility projects in the year under review. However, it educated potential licence holders on the importance of corporate responsibility and how they should conduct themselves in the communities where they operate. The Authority also instructs licence holders on consequence management should they renege on the conditions attached to their licence. The Authority might decide to revoke the licence, impose a fine or impose stricter conditions if the holder does not comply with the conditions attached to the licence.
Mr Philip Prinsloo, Deputy Director: Communication, Education and Stakeholder Relations, said that the Liquor Authority had various initiatives to educate licence holders. It also collaborates actively with schools and communities in order to reduce harm in the communities and maximize benefits from operators.
Mr Kama commented that most of the licence holders were sophisticated and sell liquor for extended periods, especially in areas outside the metros. How did the Authority protect those who reported such activities?
An official of the Authority said that there was a platform for anonymous complaints. It also partners with the CPFs, neighborhood watches and other role-players to enhance safety in communities. Lack of funding remained a challenge for the entity and it aimed to resolve the matter through active partnerships with other stakeholders in subsequent financial years.
Ms Baartman urged the Committee to provide the details of its sessions. Which of its sessions were open to the public and which sessions were held behind closed doors?
Mr Dustin Davids, the Committee's Procedural Officer, said that the Constitution empowered members of the public to attend all Parliamentary sessions. However, certain meetings could be held in camera if the requestor's concern was justifiable. The requestor in this case, the Audit Committee, suggested that certain sessions should be held in camera due to the sensitivity of the matters.
Ms Baartman sought clarity on why overtime costs had increased from R71 120 in 2018 to R133 169 in 2019. She noted that the number of Board members as at 31 March 2018 was double the number of Board members as at 31 March 2019. Meanwhile the remuneration was almost the same. Why had the cost of printing and stationary reduced by almost R200 000? She asked the Authority to provide detail on penalties for late payment, as reported on page 109 of the annual report. Why did the Authority buy tickets after it had made an incorrect booking?
Ms Maria Vos, Acting CFO of the Liquor Authority, said the spike in the overtime cost was due to the extended time spent on the condonement process. The Liquor Authority had notified every licencee on the condonement list about the consequences of non-compliance with relevant requirements. Another reason for the spike in overtime cost was the extended time spent in the preparation of the financial statement.
The number of the members on the Governing Board of the Liquor Authority as of 31 March 2019 almost doubled that of 31 March 2018 because there was an overlapping period during the transition. The penalty on late payment had been due to wrong advice an official of the WCLA had given to a licencee. The WCLA had taken responsibility for the losses incurred by the licensee. The Authority had purchased an additional flight ticket due to an incorrect booking. It could not reschedule the flight because the initial purchase was the cheapest offer, therefore the need to buy a new flight ticket.
Mr Simion George, Acting CEO: WCLA, said that the remuneration of committee members had stayed almost the same because the number of hours spent in meetings had been similar.
An official of the WCLA said that the allocation to printing and stationary decreased by almost R200 000 because funds were reallocated to priority areas, especially advertising.
The Chairperson thanked the Department and the Liquor Authority for the robustness of the interactive sessions. The Department had to implement the requirements of the BBB-EE Act to prevent the matter from being escalated to a material finding in the future. There must be a healthy balance between clean audits and service delivery.
The Chairperson urged Members to remind him to request questions from the members of the public during SCOPA's meetings. This had been the practice in the Committee, but he had forgotten to do that this time around. The AC had requested that its report should be embargoed until it presents it to the Committee. Only after this could the Committee invite the media and the members of the public.
Mr America said that it was not SCOPA's responsibility to investigate the expenditure of the departments. Such matters should be left to the various standing committees that had oversight of the department.
Ms Baartman said that Rule 101 of the Western Cape Provincial Parliament empowered Members to interrogate the financial statements of provincial departments and entities, as well as the AG's and AC's reports. Any Member with a contrary opinion could refer such a matter to the Rules Committee and other relevant authorities.
Ms Nkondlo agreed with Ms Baartman. The Committee would continue to conduct its duties in the manner it deemed fit. The Chairperson should declare the nature of each session of SCOPA meetings in the future. This would protect the Committee from any form of unjustifiable complaints.
The Chairperson urged the Committee to continue with the current practice. Any future amendments would be based on lessons learnt and experience of the Committee, and on the approval of the relevant authorities.
The Committee should monitor the departments' commitments to implement the requirements of the BBB-EE Act.
The forensic investigations into financial irregularities in the WCLA had led to a regression in its audit outcome. The WCLA had promised to submit the report of the forensic investigation to the Committee. The Committee should ensure that it gets the report.
The Chairperson appointed Ms Nkondlo to chair the Committee while he was away in the subsequent week.
The meeting was adjourned.
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