The Provincial Treasury advised the Committee the Department had obtained its sixth consecutive clean audit, but acknowledged that achieving the results had come at a cost to employees. Progress had been made in filling vacancies, but it remained a challenge as employees in the senior manager category were upwardly mobile and were continuously looking for career progression opportunities elsewhere.
The Western Cape Government was participating, as a pilot project, in the migration of the legacy systems to the Integrated Financial Management System (IFMS). The Department had embarked on an “evergreen” project that looked at the legacy systems while the process of migrating to the IFMS was in progress. There had been progress with the introduction of the joint district approach to support capacity building in municipalities. It remained a challenge, however, due to limited resources and inadequate structures at municipalities.
The Chairperson of the Gambling and Racing Board expressed his pride in the Board for achieving the majority of its targets. The Board had engaged with beneficiaries of corporate social investment (CSI) initiatives through licence holders to ensure that the benefits reached the communities. Awareness programmes had been introduced at schools to educate children on the dangers of illegal gambling. The Board was paying attention to e-gaming, as it was becoming a global issue.
Provincial Treasury Annual Report
The Chairperson said the process for the day would involve going through Part A, Part B and Part D of each annual report, starting with the Department and followed by the Gambling Board. She would allow questions from the public after the session of each Department or entity.
Ms Julinda Gantana, Acting Head of Department (HOD), Western Cape Provincial Treasury, alerted the Committee to the errata in the report, and said that a sheet had been placed in the cover of the hard copy of the report to indicate the amendments.
She said that in terms of the Department’s vision statement of good financial governance, it had attained its sixth consecutive clean audit, spent 98.79% of its budget appropriation and achieved 98.3% of its targets. The achievements had not been reached without challenges. The Department was having challenges to keep the vacancies under control, but in spite of that the targets were met.
Part A: General Information
Ms N Nkondlo (ANC) asked what work was being done to improve the capacity of municipalities in light of findings in the report of the Auditor-General (AG). She acknowledged the limitations on spending at municipalities, and asked what the challenges were in this regard. What were the reasons for under-expenditure regarding the filling of vacancies, and why were interns not appointed? Knowing that virement was a standard tool for reallocating funds, she asked whether funding of interventions were not pre-empted to be funded through virements. Did the Department have a Private Public Partnerships (PPP) framework, and how it was measured in relation to value for money for government? She asked about the areas of concern that had been raised with National Treasury about the issue of instruction notes. She raised a concern about the senior management level vacancies, as well as the number of acting positions in the organogram and asked for clarity about some local government-related functions sitting under “public finance.”
Mr D Mitchell (DA) questioned how future processes would be affected in light of the announcement by the Minister of Finance regarding the wage bill. The vacancy rate within supply chain management (SCM) had been reported at 38%, and he asked what the current status was.
Ms Gantana responded that national Government was embarking on strategies to contain the wage bill. One of the levers at its disposal was the early retirement initiative. This was a challenge for the Western Cape Government, which had the lowest salary bill in the country, at 54% of total expenditure. It differed between departments, but unfortunately Provincial Treasury had a high vacancy rate. Targeting the compensation of employees (CoE) might not be the most effective way to reduce numbers in the Western Cape. The Department was funded through the provincial equitable share and the provincial budget must still be tabled.
Regarding the capacity of municipalities, she said the joint district approach had been introduced, and progress was made with the single support plan to support municipalities.
Ms Annamarie Smit, Chief Financial Officer (CFO), Western Cape Provincial Treasury, said that fewer interns had been appointed, as some of the bursary holders had been unsuccessful, while others had opted to do further studies.
She said expenses not anticipated were related to uncertainty about the numbers at the beginning of the financial year. It included requirements for the safety of documents, purchasing of computer equipment for new staff members, and other items which depended on requirements.
The reasons for vacancies in the SCM unit were that one person had passed on, while another had accepted an offer for other employment. Two vacancies had been filled on 1 October and 1 November, and interviews for two other positions had been concluded.
Ms Gantana said the position of HOD would be filled by 1 December. The Department was waiting on the candidate for Chief Director: Public Policy Services, to confirm the date of commencement of duty. The Deputy Director General (DDG): Fiscal and Economic Services, had been seconded to the Office of the Premier, but the position was anticipated to remain on the books of the Department. The Chief Directorate: Local Government and Public Finance, had two vacancies which the Department was in the process of filling.
Structure of the Department
The acting HOD explained that the work of the Department cut across areas in Treasury, and was done in an integrated manner. The work was split between governance and accounting, based on the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA).
Mr Isac Smith, acting DDG: Governance and Asset Management, said that the Department followed a structured approach to support municipalities. Issues of non-compliance were highlighted in the CFO forum. Municipalities were being assessed on a continuous basis and that as far as capacity building was concerned, programmes were introduced to assist municipalities.
Ms Melissa van Niekerk, Director: Financial Governance, said assessments were identified as a key driver to enhance financial governance. The integrated capacitation strategy was implemented to build a pipeline through an external bursary programme, as well as the internship programme. The Department worked in partnership with the School of Public Leadership to capacitate municipal staff. It also partnered with the Department of Local Government, the South African Local Government Association (SALGA) and other tertiary institutions. Through assessment and focusing on key areas, the Department actively worked in a proactive manner to address shortcomings, and also applied the joint district approach. The internal audit report was used to address control inefficiencies in a coordinated manner.
Ms Nadia Ebrahim, acting Chief Director: Asset Management, Western Cape Provincial Treasury, said that instruction notes were issued in terms of the Public Finance Management Act (PFMA). Some inconsistencies between the regulatory framework and the instructions led to non-compliance and irregular expenditure. In practice, when the process identified in instructions differed from Provincial Treasury rules, it became non-compliance. National Treasury was looking at the challenges of the impact of instructions.
Public Private Partnerships
An official from the Department said that final approval of PPPs was a National Treasury function and depended on value for money in terms of a public sector comparative, adequate risk transfer between public and private sectors and affordability. The national Minister was revisiting the current framework.
Ms Nkondlo stated that despite capacity building programmes, there were still glaring performance challenges. She asked what caused the delay in confirming vacancies. She requested that the PPP list and a status report on the average age of projects, measured against the three elements of the framework, be shared with the Committee.
Ms Gantana replied that she took note of the requests and would provide the report to the Committee. She said that interventions were targeted to address the range of challenges faced by the Department. One of the challenges was to determine whether there was sufficient capacity at municipalities to take over once training was completed.
Ms Van Niekerk said that the challenges in capacity building were due to limited resources and inadequate structures. More guidance was needed on interpretation challenges in terms of reforms. A lot of effort was required with the initiative to target SCM and combined assurance and to provide practical guidance in terms of implementation.
Ms Ebrahim said that some of the challenges were cyclical and required standardisation and strengthening of the governance framework to ensure good governance. SCM peaked over a five-year period. Audits got more rigorous and generic in nature. Critical and material issues related to interpretation requirements became an issue as instructions on circulars did not describe the finer detail in terms of deviation from audit results. Issues of governance and compliance were in conflict. As the Department improved and matured, the shift from compliance to performance had an effect on resources. In SCM, there was a huge movement between the Department and municipalities because of inconsistencies in salaries. This had an impact on continuity and the institutional memory of the Department.
Mr Aziz Hardien, Chief Director: Financial Governance and Accounting, Western Cape Provincial Treasury, said that audit findings changed every year due to interpretation of requirements. Last year, the changes were in terms of the municipal Standard Chart of Accounts (mSCOA). It appeared that findings in one province were used to subject other provinces to the same audit outcome. One of the issues was looking at people in the service of the state. There was not a single system that could give that level of information. The Department was managing the situation, but municipalities did not have the same resources as departments to challenge audit outcomes.
Part B: Performance Information
Ms Nkondlo asked what the state of readiness of provincial departments was to implement the integrated systems, and whether Provincial Treasury had the capacity to assist municipalities. She requested progress on the alternative dispute mechanism, and asked whether decisions were binding and enforceable.
Ms Gantana replied that the Western Cape had indicated its willingness to participate as a pilot project for the Integrated Financial Management System (IFMS). There had not been a lot of movement. The Department had embarked on an “evergreen” project that looked at the legacy systems of Basic Accounting System (BAS) and Personnel and Salary Administration System (PERSAL) in the absence of a fully capable IFMS system. Municipalities had different financial systems compared to provincial departments and national government. Reforms in terms of mSCOA were to align reporting. The Department did not have the capacity to assist municipalities, but she did not foresee the system integration happening in the near future.
Mr Aphiwe Mazomba, Director: Supporting and Interlinked Financial Systems, Western Cape Provincial Treasury, responded that the Department engaged all 13 departments to gauge the challenges from a finance system perspective. He said that the resounding message from municipalities had been a request for more agile systems to deal with the challenges. The current focus was on cleaning up the legacy systems and looking at a modernisation strategy to improve data in terms of business challenges. The Department had engaged municipalities through the standing committees and human resources (HR) forums on Standard Operating Procedures (SOPs).
Mr Hardien said that municipalities had more courage to take cases to court, and warned that it should be the last resort. A document was being drafted for reporting disagreements of interpretation on audit findings with the AG. Cases would be sent to the Provincial Treasury for independent assessment. The AG would accept escalation only if it came directly from National Treasury. The document was tabled with the office of the acting National Accounting General, but the position was in flux as the appointment was not yet confirmed. The matter had been communicated with the AG.
Implementation of IFMS
The Chairperson noticed that reporting standards differed between reports of the Departments, and asked what the impact would be on moving from a cash standard to an accrual system. She asked for clarity on how the accounting would be changed.
Mr Hardien explained that municipalities worked in an accrual environment, which was the goal of the IFMS. The legacy systems of the Department -- BAS, PERSAL and the Logistical Information System (LOGIS) – had been set up for cash purposes. The current position of IFMS was an accrual system with functionality of the cash systems which would be switched off over time. The migration from BAS, PERSAL and LOGIS would allow for a change in the system, but the accounting would be kept the same. Once all departments and entities were on the system, it would change to accrual accounting. The process could take ten to 15 years. The last presentation on this issue had indicated that all provinces would be migrated by 2029.
Ms Nkondlo appreciated the positive response on implementation, but cautioned that the Department needed to monitor the situation. There were glaring problems in the socio-economic profile of municipalities, and she asked for an explanation of the extent to which Treasury and Local Government utilised information, and through which mechanism. She asked how it was possible for the Department to achieve 100% of its targets despite the number of vacancies and limited resources at its disposal.
Ms Gantana gave an assurance that the Department was working with the Department of Environmental Affairs and Planning on the drafting of strategic planning. This helped to make a connection between areas of growth and to identify challenges in areas where growth was lacking. The Department used information to determine the training that was needed by municipalities on the Integrated Development Plans (IDPs). It was working in terms of the Integrated Work Plan to deal with issues of joint planning and budgeting. For this year, Treasury, together with the Department of Local Government and the Department of the Premier, had had two planning sessions where Local Government had been invited to the Medium Term Expenditure Committee (MTEC) session. The information was pitched in a manner so that it became specific to that area. Provincial Treasury had actively ensured that departments and municipalities used the information.
Cost of achieving results
She said that despite vacancies, the results achieved came at a cost and required a lot of work and energy. The ethos and culture of the Department dictated that it could not afford to fail. The most important issue was to fill the vacancies, as they took a toll on the team.
Mr Smith agreed that delivering results came at a cost. The Department relied on the capacity of municipalities and the departments by working smart and combining resources. Reference groups within municipalities and the departments assisted the Department to deliver services.
Ms Analiese Pick, acting Chief Director: Provincial Government Public Finance, confirmed that the results came at a cost. She said that the team was extremely committed and recognised its responsibility to the province. The team worked long hours and looked to partners for assistance. The team celebrated the Integrated Work Plan coordination of budgeting and implementation, as national and provincial representatives started to share information on planning. From an infrastructure perspective, it helped to build a platform of sharing and complementing each other to avoid duplication.
Ms Nkondlo reasoned that the cost needed to be quantified in terms of extra hours and overtime payments. She asked to be directed to this cost in the report.
The Chairperson agreed with the issue of cost being reflected in the annual report. Some of the reports reflected salaries and benefits as “service in kind”. The Department of Arts and Culture, for example, had someone employed by the Department who assisted three other entities. Questions were asked about the accounting, especially regarding the impact of vacancies, where people were struggling to accomplish their current job descriptions.
She asked what the nature was of the 608 queries regarding the supplier database, as people in her constituency were complaining about the central as well as the provincial database. It seemed that no one was answering the telephones and some people had been frustrated, especially in the construction industry. She requested highlights of the key developments on data mining and dashboarding into SCM performance. Given the recent emphasis on gender-based violence (GBV), she was looking for any reference to GBV budgeting, but did not see it in the report. She asked whether it was taken into account within the budgeting process, or framed in a manner to have an impact on society.
Ms Gantana confirmed that GBV budgeting was not in the 2018/19 annual report, but that the Department started to work on it and had attended a workshop on the issue. She said that it would be included in the report of the following year.
Ms Ebrahim said that the Western Cape supplier database had been in operation since 2002. The red tape in the procurement process required evidence-based tender documents for suppliers doing business with the Western Cape government. The huge influx in queries was due to the dual registration process that involved compulsory requirements for the national database, which also required supplier documents for every tender process. Most of the queries related to registration, suspension of the database or not finding the file on the platform.
Data mining and dash boarding
Ms Ebrahim said that a lot of assessments were done on data mining through dash-boarding, to obtain information on how SCM was performed by looking at demographics and spending in terms of socio-economic empowerment. Various questions were raised on how the SCM budget was spent. Over the last five years, the Department had looked at business analytics and how to draw information from different sources to give a helicopter view and to identify gaps in training, development and spending. The information was being used not just for looking at compliance, but also to improve service delivery by using the supply chain differently.
Ms Ronel Slinger, acting Chief Director: Public Policy Services, Western Cape Provincial Treasury, said that the GBV process was on-going. Training was being provided by the national Department of Women, and the Department of the Premier (DotP) was leading the programme. Indicators would form part of the next financial year’s reporting.
The Chairperson said indicators should be the subject of a separate briefing on the status so far of the impact on service delivery. There should also be a presentation on the implementation of the GBV programme.
Part D: Human Resource Management
Mr Mitchell was concerned about the resignation statistics being the highest in the 30 – 39 age group.
Ms Nkondlo commented on the level of adherence to employment equity and equitable distribution of senior and top management positions. She expressed her appreciation to the Department for its efforts in accommodating people with disabilities. She was not convinced that her assumptions about the cost issue had been addressed.
Ms Gantana said that Provincial Treasury had a flat structure, with a senior manager category that was upwardly mobile. Insufficient career progression opportunities was one of the reasons for leaving. SCM was most affected by staff movement. The municipalities were the main competitor, as they offered better packages.
Employment equity was a challenge linked to the young black professional category, which were looking for upward movement. The Department had embarked on programmes to address the equity challenge through internal and external bursaries. It was in partnership with Nedbank to target grade 11 students who complied with specific equity criteria. Once studies were completed, students were employed by various departments and municipalities, for the account of the Department.
The Department did not pay overtime in kind. The cost was reflected in the utilisation of sick leave. This was a manifestation of the stresses and pressures of the job.
Mr Mitchell queried why only one person had been granted a higher salary. He asked what the process for awarding performance bonuses was, as only half of the Department had been rewarded. He asked for clarity on the job evaluation process and what was being done to address the incidence of “burn-out.”
Ms Gantana replied that only one person received a higher notch on the same level, as there were limitations to retention offerings. The Department could not afford to compensate for overtime and needed to find alternative ways to show appreciation. Incentives would be built into the system to retain employees.
Mr Mitchell asked what guided the prescript on limitation of the retention offerings.
Mr Warren Wilson, Deputy Director: People Analytics, DotP, said that the public service regulation determined the rules, and that it was applied nationally.
The Chairperson queried the loss of staff to municipalities. She asked how municipalities were able to afford higher packages with smaller budgets than the provincial department. Bursary holders who were first year generation students lacked family support for professional degrees. Some did not necessarily enjoy it, but did it only to be able to earn an income. She asked what type of emotional support there was for students to complete their studies. She asked what could be done to internally locate research done by consultants.
The acting HOD replied that the Department employed a bursary administrator in the role of supporting students, or deferred students to counselling if it was needed. Research that required specialised knowledge was outsourced to universities, but some of the work was done internally. Capacity would be built with Provincial Treasury over time on some of the research projects.
The Chairperson asked what process was involved in deciding which university would do the research.
Ms Gantana replied that there were historical contracts in place with universities, but the Department followed an open supply chain process. The long standing contract with Stellenbosch University was coming to an end.
Ms Van Niekerk said that provincial staff were sought after for their experience, and that was why the departments were losing staff to municipalities. Urban municipalities could afford to offer higher packages.
The Chairperson asked what the Central Bargaining Arrangement was.
Ms Gantana responded that it was determined centrally and implemented nationally.
Ms Nkondlo asked what the nature of the unresolved grievances was.
Ms Gantana said nine of the 18 cases were related to acting allowances which the Department had decided not to pay. The other cases related to disciplinary and promotion issues, where people felt overlooked. All 18 cases had been resolved. Four unresolved cases involved performance management and the conduct of a supervisor.
There were no questions from members of the public.
Western Cape Gambling and Racing Board Annual Report
The Chairperson indicated that the discussion would focus on Part A, Part B and Part D. The other sections of the report had been dealt with in the applicable standing Committee meetings.
Mr David Lakay, Chairperson: Western Cape Gambling and Racing Board (WCGRB), said he was proud to present the annual report.
Ms M Maseko (DA) asked how the Board identified problem gamblers. She questioned what was done in terms of the awareness programmes at schools and whether the Department of Education was happy with the programmes. She asked whether the 40 operators who had negative results, due to illegal gambling, were still operating. What planning was done to prevent the challenge of not having a quorum at meetings?
Mr Robin Bennett, Head of Department (HOD): Regulatory Compliance, WCGRB, replied that the onus was on licence holders to identify punters via internal programmes. This was done by noticing persons who gambled more than normal or who remained seated at the machines for an excessive amount of time. Participation in the awareness programmes of the Board was voluntary, and did not involve interaction with members of the Board.
Ms Maseko asked what the Board would say to licence holders regarding being pro-active to identify challenges.
Mr Lakay said that it was a voluntary process and as a regulator, the Board was not able to identify problem gamblers. A family member could approach the Board, but the individual would have to subject him/herself to the programme.
Mr Bennett explained that school children did not understand the dangers of gambling and were educated through sessions at the schools. The measurement was to look at the number of persons in the area with complaints. Allegations of illegal gambling were investigated through raids with the South African Police Service (SAPS). Awareness programmes had been, introduced as the public was not knowledgeable of machines and would often confuse game machines with arcade machines.
Ms Maseko said that the response had been generic, and asked for a specific answer to the 40 cases with negative results.
Mr Bennett said that the response to allegations of illegal gambling would be immediate in the past but the approach had been changed to a desktop analysis of cases to determine the need for an immediate response.
Mr Lakay said that Board members were appointed by the Minister, with no input from the Board. At no stage had there been a need to cancel a resolution because of members being unable to attend a meeting. The Board met monthly, except in December. If a meeting was missed, it could have implications for licencees. The Board was in constant consultation with Treasury and had regular meetings with the Minister. In the event that the term of a Board member ended, the secretary would inform the Board, which in turn would inform the Minister. Provincial Treasury handled the process, and the two vacancies that had not been filled for almost a year was placing pressure on the remaining members.
Ms Maseko asked who the responsible person was who needed to schedule the meetings in anticipation of the ending of the terms of members.
The Chairperson indicated that the Committee had made recommendations to the Provincial Treasury two months ago.
Mr Lakay said that he had reminded the Minister and the officials at the last engagement with Treasury on 25 August, but no response had been received to date.
The Chairperson asked Dr Ndodana Nleya, Director: Fiscal Policy, Provincial Treasury, for his response on the matter.
Dr Nleya confirmed that Treasury had received the recommendations from the Standing Committee on Finance (SCOF). The Minister needed to take it to Cabinet and the process was under way. It must still be considered, and was yet to be finalised. He said that in addition to the expiry of terms, other ways that vacancies occurred included death and resignations. The resignations in March 2018 and June 2019 were the two vacancies that the Department were dealing with. The process had already started for the May and June 2020 term endings.
The Chairperson asked for time frames for tabling the draft at Cabinet.
Dr Nleya replied that he understood the urgency, and would be following up on the matter.
Ms Nkondlo remarked that the matter of urgency should be dealt with in the resolutions, and that reasons for the delay should be asked from the Minister. Referring to the implementation of corporate social investment (CSI) initiatives through the licence holders, she asked whether it meant that the Board did not run the CSI initiatives and whether the it monitored the license holders on CSI programmes. She requested a report that would indicate the spending on CSI programmes. She asked where the Committee could get information on Broad Based Black Economic Empowerment (BBBEE) targets, and what the progress was in terms of the monitoring of targets. She asked about plans in meeting particular legislative risks in becoming self-sufficient. She questioned the rationale for the location of the Board in Treasury.
Mr Lakay responded that the Board had a structured programme with licencees through regular engagement and reporting. It met on a quarterly basis with sectoral sub-committees and get a full report about licencees’ CSI programmes. After such meetings, the Board interacted with beneficiaries of CSI programmes on a face-to-face basis. An after-CSI programme engagement had taken place at Grand West recently.
Ms Yvonne Skepu, Manager: Legal Services, said that the Board had sub-committees for each sector that provided a quarterly report on specific targets. Each regulator imposed BBBEE targets.
Ms Nkondlo requested that the reports be made available to the Committee.
Mr Lakay said that the information was not in the annual report, and proposed that the Board made a presentation to share the information with Members of the Standing Committees on Finance and Publice Accounts.
Ms Nkondlo remarked that she found it discomforting that the information was not in the annual report. She requested standardisation of processes so that the public could have access to the information.
Mr Lakay replied that the annual report gave high level information, and that the detailed report was not intended to be included in the Annual Report.
Mr Mitchell disagreed, and asked how citizens were going to rely on limited information during oversight engagements with constituencies.
Ms Zoë Siwa, CFO, said that the Board generated income through statutory fees. There was a gap in legislation when comparing the funding model to other gambling boards. Provincial Treasury requested that amended fees be regarded as per the Act.
Mr Primo Abrahams, CEO, said that the Act did not require the Board to be attached to Treasury. He was not privy to the reason for its location, and suggested that Treasury would be better placed to give an answer.
The Chairperson asked Ms Gantana if she knew the answer to the question.
The acting HOD said that the decision had been taken by the Western Cape government, based on the original thinking of the appropriation of tax, when it was established. The Western Cape government never made the decision to relocate the Board to another department.
Ms Nkondlo proposed that the Policy Department should look at trends and movements in terms of benefits and the effectiveness of the Department linked to Treasury. The process of legislative amendments should be considered. She regarded it as a misallocation of the entity.
Mr Mitchell said that the Act had been amended in 1999, and that outdated Acts needed to be investigated.
The Chairperson suggested that the Minister should be requested to submit a recommendation to the Cabinet.
She referred to an article on the multi-million rand pigeon racing industry, which had appeared on the front page of the Farmer’s Weekly recently. She asked if pigeon racing was licensed, and how it was being regulated.
Ms Skepu replied that in terms of current local legislation, any form of animal racing was not legalised except for the sanctioning of horse racing and bookmakers betting on foreign events. Pigeon racing was considered illegal gambling, and would be subjected to law enforcement.
The Chairperson said that the industry had been in existence for years, and questioned whether there had been any complaints.
Mr Lakay responded that it was an illegal activity, but when regarded as a sporting activity, it was not considered a gambling activity. He said that it would be referred for investigation.
Mr Bennett said that on-line gambling was illegal, but internet cafes disguised gambling activities. E-gaming was becoming a global issue, and he had attended a conference where the issue was discussed.
The Committee Members had no questions on Part B and Part D.
There were also no questions from the public.
The meeting was adjourned.
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