Department of Defence Quarter 2 performance; BRRR feedback & Audit Action Implementation Plan

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Defence and Military Veterans

05 February 2020
Chairperson: Mr V Xaba (ANC)
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Meeting Summary

The Chairperson mentioned that a letter of apology had been received from the Minister’s Office, requesting to excuse the Department of Defence delegation from the meeting. The Committee support staff would brief the Members on its analysis of the Department’s presentation

The support staff indicated that the Defence account had decreased over the last few years from R6.2 billion in 2016 to R814 million, currently. The decrease was imposing several challenges given that the Department was labour-intensive and its activities did not decrease. The Department was willing to reprioritize and decrease expenditure to maintain its activities despite a reduced Compensation of Employees (CoE) fund.

The AG together with other bodies had initiated an investigation on the irregular, fruitless and wasteful expenditure incurred by the Department that was still ongoing. The Department was encouraged to implement the necessary consequent management.

The second analysis was on the internal audit reports of the Department. The Department had received a disqualified audit report from the Auditor-General (AG). This encouraged the Department to cooperate with the Auditor-General of South Africa (AGSA) as well as other bodies such as the National Treasury. The cooperation had since assisted the Department in improving its performance.

The last presentation was a second quarter expenditure analysis on the Department. The analysis showed that the Department had met 50% of its expenditure. This was good because it meant that the Department was on track with its expenditure plan. However, there were red flags detected regarding the CoE. By the end of the second quarter the Department had reportedly spent more than 8.8% of its projected expenditure. The Department would have meetings organised with the President, the Minister of Finance, the Minister of Public Service and Administration as well as the Minister of Defence and Military Veterans to address challenges regarding CoE.

The Members commented that there was an assumption that new equipment could not be purchased because money was spent on maintaining old equipment. They were concerned about the recruitment of more young people into the Force when there was a failure to pay the current workers.

The Chairperson said that the Department should share its successes and challenges on the national border as well as its successes on the deployment in the Western Cape in order for the Committee to determine the effectiveness of these interventions. A status report on the works commission should also be presented. 

Meeting report

Opening Remarks by the Chairperson

The Chairperson welcomed everyone present and briefly reviewed the various oversight visits undertaken by the committee at an Army Base, the South African Airforce, South African Navy, Defence Force and the South African Military Health Services. The oversight visits enabled the committee to gain a better understanding of the operations, conditions and challenges faced by the different divisions. The Committee met with the various senior leaderships of each division.

The Chairperson highlighted that the Defence Force was a vital division and that an oversight visit to the Pretoria base had to be scheduled as well as to the borderline of the country, following the high number of undocumented foreign nationals.

The Chairperson mentioned that a letter of apology had been received from the Minister’s Office, requesting to excuse the Department of Defence delegation from the meeting.

The Chairperson also highlighted the amendments to the meeting agenda and said that an additional item would be added to the committee programme.

The Members agreed with the amendment of the agenda. 

The Chairperson then allowed the support staff to begin with the analysis of the presentation forwarded by the Department of Defence; to provide feedback on the Department’s BRRR status report and an analysis of the audit action implementation plan.

Meeting Minutes

Department of Defence BRRR Status Report

Mr Peter Daniels, Content Advisor, Portfolio Committee on Defence and Military Veterans, indicated that the Department of Defence (DOD) only responded to eight of the twelve budget recommendations; reason being that the Department reported only quarterly and not later than the 1st of February. The Defence account had decreased over the last few years from R6.2 billion in 2016 to R814 million, currently.

Mr Daniels mentioned that the main issue that was identified by the Defence Department about the decreased defence account allocated by National Treasury was the shortage of employee allocation pertaining to the Compensation of Employees (CoE) fund. The decrease was imposing challenges given that the Department was labour-intensive and its activities did not decrease. The Department was willing to reprioritize and decrease expenditure to maintain its activities despite a reduced CoE. If the CoE would not be reduced then there would be problems within the department. The Department had not yet reprioritised amidst the challenges which had been identified a long time ago.

The second problem facing the Department was the usage of the Special Defence Account (SDA). The concern was that the Department was unable to maintain important projects because the SDA had been drastically used up. The third was the investigation into the irregular, fruitless and wasteful expenditure incurred by the Department. The AG together with other bodies had initiated an investigation that was still ongoing. The Department was encouraged to implement the necessary consequent management.

There were major problems in the internal audits division which were identified by the AG. A total of 69 posts were available, with only 43 of the 69 posts having been filled. There was a concern about when the remaining posts would be filled by the Department. The audit report was an unqualified opinion because of the Department’s need to disclose its tangible assets. There was currently ongoing discussion between the Department and ARMSCOR.

Another problem was the reimbursements from the United Nations. The Department’s solution was to improve the serviceability of prime mission equipment from 70% to 86%.

Another problem was the decrease in sea and flying hours by the South African Navy and South African Airforce as well as the impact the decrease had on key military functions. The sea and flying hours were highly affected by departmental virements and shifts which had not occurred recently but had occurred in the past. The necessary steps had to be taken by the Department to ensure that scheduled upgrades for the Navy frigates and submarines took place. Two projects had already been registered by the Navy as capital acquisition projects.

The Department also faced problems in the modernisation of military force capabilities to execute constitutional mandates which were previously observed by Committee Members. More focus should be on the expenditure on key deliverables. The capabilities were acquired through the Strategic Capital Acquisition Master Plan (SCAMP). However, no new contract could be taken up by the Department to modernise the current capital equipment due to the insufficient SDA allocation.   

Status on Audit Action Plans

Mr Daniels further discussed the Department of Defence’s audit action plans. The Department’s Accounting Officer had ruled that remedial action plans, regarding the AG’s findings, should and would be submitted; the Department should maintain cooperation with the National Treasury concerning various progress qualifications.

He stated that the Department’s Work-In-Process (WIP) was disclosed on the ongoing discussions with ARMSCOR. There had also been ongoing interactions between the Department, National Treasury and AGSA. The interactions necessitated site visits in order to observe tangible assets. Regarding intangible capital assets, the Department updated its registers with software, licenses and all supporting documents had been submitted and were available for viewing.

Mr Daniels stated that the AG’s personnel would continue having access to sensitive project information for inspection. Any amendments made to the SDA would be in conflict with the Public Finance Management Act (PFMA). Additionally, the AG had been unable to commit a missing amount which the Department indicated to be understated but the error had since been corrected by the AG; the Department must also qualify its commitments.

Mr Daniels also indicated that the irregular expenditure incurred by the Department on the Supply Chain Management (SCM) had resulted in SCM practitioners being trained to ensure consistencies and the disqualification of suppliers who did not meet the minimum requirements. In addition, there were regular meetings with commanding officers of procurement units to improve practices.   

Second Quarter Expenditure Analysis

Dr Wilhelm Janse Van Rensburg, Committee Researcher, indicated that the Department had met 50% of its expenditure. This was good because it meant that the Department was on track with its expenditure plan. However, there were red flags detected regarding the CoE. By the end of the second quarter the Department had reportedly spent more than 8.8% of its projected expenditure.

Regarding the payment of capital assets, the Department’s spending was 123% higher than the projected expenditure by the mid-year. The higher spending in the Department’s programmes was a result of the high spending on the CoE. The slow spending in certain programmes of the Department were a result of a delay in processing invoices and the delay in paying salary increases for Defence Intelligence Senior Management. However, as soon as the salaries were adjusted there would be a higher spending.

He mentioned that the Department would have meetings organised with the President, the Minister of Finance, the Minister of Public Service and Administration as well as the Minister of Defence and Military Veterans to address challenges regarding CoE. The Committee was encouraged to follow up on the outcomes of Department’s the engagements to avoid a repetition of issues.

The key non-financial performance issues were identified to be the borderline safeguard, forced rejuvenation and preparation of the Military Skills Development System (MSDF) and the high CoE – which had not had any resolutions.  

Discussion

The Chairperson suggested that a meeting should be scheduled with the office of the AG to meet with the Committee regarding the audit action plans. 

Mr T Mmutle (ANC) further suggested that the meeting with the AG be scheduled early in the year before a scheduled meeting with the Department. It should serve as a build up to hold the Department accountable.

The Chairperson announced that the meeting with the AG on the 19th would be postponed to the 26th of February 2020.

The Members were in agreement with the amendment.

Ms M Modise (ANC) commented that there was an assumption that new equipment could not be purchased because money was spent on maintaining old equipment. She expressed concern with the recruitment of more young people into the Force when there was a failure to pay the current workers.

Ms A Beukes (ANC) questioned why a status report of the meetings about the audit action plans was not included in the presentation. The Department was too comfortable.

Mr M Shelembe (DA) could not understand the progress of the Department regarding irregular expenditure. He questioned how the SCM practitioners were employed and why they were being trained.

He emphasized that the Department should be able to perform without seeking applause from the AG.

Mr Mmutle agreed with Mr Shelembe about the need for the Department to perform without seeking applause. The SCM training was important to ensure that personnel were consistently skilled and capable of fulfilling their duties. He also requested that project budget amounts should be provided.

The Chairperson highlighted the key issues that were evident in the analysis by the support staff on the Department’s presentation, with the most significant one being over-expenditure on the CoE and the impact thereof on the general performance of the Department and the Army. Until the expenditure was better managed, the problem would still exist. 

Members had no comments on the second quarter expenditure analysis report, saying that the report was comprehensive enough and straight forward.

The Chairperson said that the Department should share its successes and challenges on the national border as well as its successes on the deployment in the Western Cape in order for the Committee to determine the effectiveness of these interventions. A status report on the works commission should also be presented.   

The Committee discussed the complaints and matters that were received from the public which were deemed confidential and for the Committee to deal with privately.

Mr Bryan Mantyi, Committee Secretary, indicated that there were fourteen complaints in total from the public.

Mr Mutle brought to the attention of the Committee the issue of the lost ammunition in Hammanskraal. There had still been no update on the retrieval of the ammunition, the plane crash landing and on the sexual abuse and discrimination against female soldiers in camps. This was preventing the Committee from playing its oversight role.

The Chairperson and Committee agreed to an on-camera meeting with the Minister to discuss the public complaints and the issues raised by Mr Mmutle.

The minutes from the previous meeting could not be adopted because the Committee was not quorate.

The meeting was adjourned.

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