DCS: measures to address irregular, fruitless and wasteful expenditure; Covid 19 related matters; with Deputy Minister

Meeting report

DCS: Fruitless and wasteful expenditure

Mr Nick Ligege, Chief Financial Officer (CFO), Department of Correctional Services (DCS), provided the Committee with the following breakdown of the R4.08 billion irregular, fruitless and wasteful expenditure by the Department as at 31 March 2020:

• Non-compliance by implementing agent – Independent Development Trust (IDT): R1 816 million;
•  Nutrition services (extension of contract) - R389 million;
• Procurement of perishable provisions where contracts were not in place - R1 045 million;
• Non-compliance with procurement: Government Immovable Asset Management Act (GIAMA) audits - R159 million;
• Non-compliance with State Information Technology Agency (SITA) Act - R229 million;
• Non-compliance to supply chain management (SCM) prescripts - R443 million.

He said that R2.726 billion (67%) of the irregular, fruitless and wasteful expenditure was carried out at the DCS head office, and the balance at the provinces.

Presenting an overview of the Department’s investigative processes, he said it had appointed 27 investigators at Head Office and regions to assist with the investigations, and had received legal opinion on cases investigated from senior counsel on 4 June. Based on their opinion and recommendations, the Department was currently processing cases that were due for prescription, while also undertaking appropriate disciplinary steps against any official who might have been involved.

Overall, a combined total of 988 cases of irregular, fruitless and wasteful expenditure were either under investigation or had been finalised in a total of 1 204 cases reported on both registers. This meant 82% of cases were under investigation or had been investigated.

In light of challenges and root causes, a number of steps had been put in place to address the situation.

The DCS had inadequate capacity because of a high vacancy rate, leading to lack of segregation of duties at various procurement stores. This had been addressed through rationalisation of a number of stores. 23 stores had been closed since 2017, reducing the total number of stores to 108.

There was continuous training of SCM officials to address the lack of skills. The Department had introduced annual SCM national workshops since 2017. This platform provides opportunities to SCM officials to learn, gain knowledge, and share best practices for improved compliance to laws and regulations. Stakeholders that were invited include National Treasury, the Auditor General, internal audit and other assurance service providers.

Policies and procedures had been reviewed, and were approved in March 2019 in order to strengthen internal controls and to address issues of non-compliance to SCM prescripts.

Memoranda of Agreements (MoAs) with implementing agents who execute some procurement processes on behalf of the Department, such as the IDT, had been reviewed. The amended MoAs include clauses that compel active participation of the DCS officials in bid committees, as well as approvals of change controls or contract variations, to avoid an unjustifiable escalation of project costs.

Other measures implemented include collaboration with National Treasury for strategic commodity sourcing for high expenditure commodities; requesting exemption from Treasury for commodities to be procured without contracts for a period not exceeding six (6) months, to allow the Department to finalise its own contracts; demand management plans and consolidation of procurement requirements; and internal audit reviews of tenders above R20 million for compliance to SCM prescripts before final awards.

Department’s response to COVID19

Ms Vuyi Mlomo-Ndlovu, Acting Chief Deputy Commissioner: Remand Operations Management, DCS, said several standard operating procedures (SOPs) had been introduced in response to the outbreak of COVID19. These pertained to deep cleaning after identification of COVID-19 suspected/confirmed cases, monitoring of symptoms and management of essential workers for COVID-19 related infection, quarantine and isolation for those with co-morbidities, and de-isolation criteria for the discharge of persons in quarantine and isolation sites.

Other changes to the existing SOPs included measures for the disposal of general waste generated from patients in isolation or quarantine, such as food, disposable plates, cups, cutlery etc, and completion of relevant forms for all cases where COVID-19 caused, or is assumed to have caused, or contributed to death. All deaths due to natural causes must be tested for COVID-19.

Standard operating procedures for detection, preparedness and response to COVID-19 include:

• Maintenance of partnerships. The purpose of this SOP was to maintain collaborative efforts with multiple stakeholders to strengthen the Department’s response to COVID-19, thus enhancing the efficiency and quality of service provision;
• The training of health care professionals, other staff members and inmates, to ensure that all staff and inmates are acquainted with the latest COVID-19 developments;
• Preventative strategies, such as targeted awareness and sensitization of staff, and infection prevention and control (IPC) measures;
• Targeted awareness and sensitisation of staff on COVID-19 preventative measures, including promotion of hand and respiratory hygiene, utilising video platforms, print and various other media;
• Deep cleaning after suspected or confirmed COVID-19 cases to prevent the survival of the virus in the environment;
• Ensure screening of all inmates admitted into the Correctional Centres for COVID-19 and other health conditions, as well as ensuring that parolees or probationers are screened prior to admission to Community Corrections;
• Screening of officials, learners/students, visitors, external training providers, parolees, probationers and residents of official accommodation for COVID-19 symptoms;
• Various measures dealing with the monitoring and management of essential workers, ensuring the availability of personal protective equipment (PPE), control of movements between DCS and external facilities, guarding and escorting functions, contact with suppliers and visitors, management of confirmed cases, and contact tracing.

Discussion

Mr J Selfe (DA) said that the figures for irregular expenditure show that about 45% of it referred to the SA Fence and Gate contract, and about 35% referred to catering contracts dating back to when BOSASA had stopped catering for inmates. According to the Department, these were technical issues that were initially regarded as irregular by National Treasury. R3.24 billion had been paid out to various contractors, but in what sense had it been it irregular? Did the Department get value for money? Were goods and services delivered?
 

Adv S Swart (ACDP) asked what the consequence management for people responsible for the irregular expenditure had been. The presentation had given an indication the cases that had been finalized, but it should be borne in mind that fruitless and wasteful expenditure did not necessarily mean that goods were not received, and this needed to be distinguished from corruption. He suggested that the Special Investigating Unit (SIU) present to the Committee on its progress on the litigation. He asked what the reference to senior counsel referred to in the presentation. What matters had been referred to the National Prosecution Authority (NPA) by the Department or the SIU? What was the challenge with providing the AG with sufficient information to commence with investigations? Exceptions from National Treasury were always a great concern, such as in the case of the IDT escalation of the fencing costs. It seemed to be a trend, where exceptions resulted in fruitless and wasteful expenditure.

Adv Swart commended the Department for its 91.6 % COVID19 recovery rate. The efforts of the 600 nurses who were screening and testing for the virus, was greatly appreciated and welcomed by the Committee. The challenge with screening was that a-symptomatic people entering facilities were not detected. Were there other ways of preventing the virus from entering the prisons? Were there concerns regarding the procurement of PPE?

Ms W Newhoudt-Druchen (ANC) said some irregular expenditure was due to deviations from SCM legislation and the lack of effective application of National Treasury regulations. Did the Department record these deviations? What measures were in place to prevent them from recurring? How many national workshops had there been since the 2017? Had the SCM vacancies been filled? Did it take more than 90 days for irregular expenditure to be investigated? If so, what was the cause of this delay? Was there any wasteful expenditure that had been recovered? The COVID19 measures were commended. How many inmates had tested positive for COVID19 and been placed in isolation? How many inmates had been hospitalised for COVID19? A news article had stated that an official from the Department had shot his wife, who was also an official of the Department. Gender-based violence (GBV) had spread especially during lockdown -- had this case been determined as domestic violence? What measures were in place to prevent GBV within the Department? 

Mr W Horn (DA) said the Department was not truly taking the Committee into its confidence regarding the fruitless and wasteful expenditure. It was understandable that the historic cases of irregular expenditure had a knock-on effect, but what percentage of the irregular expenditure was due to new awards being made? The presentation had stated 10%, but there was simply no way that perishables could balloon to such a large amount from 2017/2018. If the AG reported that the 10% was actually due to black economic empowerment (BEE) points not being properly counted in the regions, and there was non-compliance with SCM causing a recurrence of irregular expenditure, the Committee would have to take a strong stance against the Department. The Department needed to give a better breakdown of the R443 billion of irregular and wasteful expenditure.

Mr Horn said that the Department had admitted to creating false impressions in the Committee previously, and by extension this had made the Minister a liar. This had been in reference to the extension of the African Global Operations nutrition contract. The National Commissioner and many of the current team had previously told the Committee that all contracts with African Global Operations/BOSASA had been terminated. At some stage, the Committee had interrogated the Department on whether inmates were suffering as a result of the sudden change of the nutritional contracts. In the Minister’s budget speech of 2019, it was widely reported that BOSASA had been removed from the DCS. However, since 31 March 2020, the Committee had been informed that National Treasury had granted an extension but had later branded it as irregular expenditure. This was not good enough, and a better explanation was needed for the impression that BOSASA had been completely removed from the Department.

According to the presentation, 67% of the irregular expenditure was incurred at head office. Later, role players at the regional and district level offices were implicated. In respect of the 67% implicated at head office, how many people were being investigated? How many officials were facing or had faced disciplinary action?

Department’s response

Mr Ligege responded that the R388 million referred to the contract with African Global that was extended for six months, pending the finalisation of procurement processes for a renewable contract for nutrition services. Goods and services were received at this time in the form of the provision of food at management areas. National Treasury had approved the extension, but it was not justifiable as the Department should have had the contract in place before its expiration. Due to this delay, it was determined to be irregular.

The procurement of perishable provisions did not have contracts in place. The contract of R1.44 billion referred to contracts that were not in place at various management areas and correction facilities for the provision of perishables. The practice notes stated that any expenditure over R500 000 ought to go through a competitive tendering process, but this did not occur. Instead, the Department had used price quotations for perishable items such as bread and groceries. The procurement in the various facilities were in excess of R500 000, so the Auditor-General (AG) determined this as irregular, as it did not go through the tendering process. This was partly due to poor planning and instances where procurement processes were determined to be non-compliant, and the Department had had to resort to procuring using price quotations.

The non-compliance by the IDT implementing agent was an escalation of the original contracts for the fencing projects. The original contract was R476 million, and it had escalated to R1.8 billion. The escalation was not in line with the variation, which should be within 20% and approved by Treasury. This resulted in it being deemed as irregular. The IDT issue had been subject to the SIU findings, and there were a number of other suspected irregularities related to this project. Delivery of the service had occurred, but there was an indication that there had been overpayments. The SIU would be in a better position to speak on this. There was current litigation related to this project.
 

The prescription from the Senior Counsel referred to cases from a time-frame point of view. From the time an irregularity occurred, did the Department commence with investigations within three years? Did the Department finalise the matter? The Department had reviewed the timeframe of cases from about the sixth or seventh financial year back, to date. This was to establish which matters had been investigated and what the reasons for cases not being investigated were.

The outstanding information for the AG to commence with investigations referred to issues relating to personnel numbers and identity numbers. This was needed for proper investigations to occur. Letters had been addressed to the AG regarding this to ensure that the investigations commence.

Ms Mlomo-Ndlovu said it was not possible to test all persons entering facilities, as much as the Department would like to. It followed the protocols of the Department of Health (DoH) that stipulate the criteria for persons to be tested. Inmates that were newly incarcerated were quarantined for 14 days and monitored before being integrated into communal cells. In terms of infection prevention control, cloth masks and hand hygiene were emphasised at all facilities.

Mr Arthur Fraser, National Commissioner, DCS, said that Proclamation 48 of 2017 had 13 points, and only three pertained to the DCS, which involved going through consequence management processes. In most instances involving the reports from the SIU, the Department was dealing with disciplinary action as recommended. He had engaged with the AG on 11 June 2020 regarding the procurement of PPE. It was being tracked, and follow-up communications had taken place. Around the first week of August, a whistle-blower had brought to light irregularities in the procurement of PPE within the Department. The SIU had been requested to engage on the matter, and all the relevant documentation had been made available to the SIU. It was in the process of formulating a report on the matter.

Mr Ligege said there was an irregular expenditure register that was updated on a monthly basis. The regions submit their registers, which were then considered by the Head Office and reported to National Treasury. There were a number of measures in place to detect, prevent and correct irregular expenditure. The capacity of the SCM was thin at the various stores of procurement, where there was a lack of segregation. This meant that in a procurement environment, one person would requests quotations, adjudicate the quotations, create a purchase order and receive goods at the store. This was not a favourable situation, and at least three people should be responsible for these functions. Some stores had therefore been closed down, where the Department could not afford at least two or three personnel within the stores. This was an example of one of the preventative measures in place.

There had been three national workshops since they began in 2017. The last one was in December 2019. They provide an opportunity to train and address the gaps within the Department’s policies.

Not all vacancies in regard to SCM could be filled, due to a shrinking budget. The use of technology had been used to remedy this. Procurement did not necessarily have to happen at the point of delivery, so the Department was trying to consolidate this so that procurement could happen at one place and delivery happen at another place. This would reduce the need for personnel throughout the country.

Mr Ramootsedi Motaung, Deputy Commissioner: Internal Control and Compliance, DCS, said there were cases of investigations into irregular expenditure that had lasted over 90 days. The reasons were due to inefficiencies in the processes, and issues of capacity. Historically there had been no investigating personnel, so it had been handed over to inspectors for assistance. About 27 investigators had since been allocated, but this was still not enough as there were over 1 000 cases and a backlog. There was a lack of officials to assist with the process going forward. This was being addressed by devolving cases to functionaries to fast-track the investigations within the 90-day period. There have been recoveries for the fruitless and wasteful expenditure, but the process was incredibly slow, as once people had been served with a notice of recovery, there were disputes. The dispute process was lengthy.

Ms Mlomo-Ndlovu said that up to 31 August, there had been 2 489 confirmed COVID19 cases, with a positivity rate of 12.8%. There was a recovery rate of 90% -- 2 228 had recovered -- and 46 had succumbed to the virus. The death rate was about 2%, which was in line with the external environment.

Mr Ligege said that the case where the official had shot and killed his wife who was also an official of the Department, had occurred on 28 August. It had occurred in their residence, where the husband had assaulted his wife with an object until she succumbed to her injuries. He had been arrested and appeared at the local magistrates court on 31 August for a bail application, which was denied. He appeared in court again on 9 September. The police were still investigating the matter, and the Department had launched its own internal investigation.
 

Mr Fraser said that the Department was in the process of finalising policies relating to GBV that were aligned to the national response to GBV. One policy would focus on work base-related GBV, and the framework would be linked to a multidisciplinary approach. The Department was looking at possibly partnering with relevant stakeholders with the aim of preventing and addressing GBV. There needed to be advocacy around GBV amongst officials and inmates.

He said the presentation showed the total value of irregular expenditure as at March 2020, which would include the historical expenditure which had not necessarily occurred in 2020. One item posed as a challenge in the presentation was that in the 2019/2020 financial year, there was an entry into the irregular expenditure register of R1.04 billion, which related to the procurement of food perishables. It had been put into the register only now, as the Department had a qualification of its 2018/2019 financials on the basis that the irregular expenditure was incomplete. The entry included a number of contracts that had been running for more than one financial year and deemed to be irregular, as in aggregate they exceeded R500 000, which required the Department to embark on a competitive bidding process. The Department had to thus review all purchases from previous years that were not contracts secured through a competitive bidding process. Thus the corrected financials had been brought in as one entry amounting to R1.04 billion. Mr Horn had been correct that such a large sum could not be incurred in one year -- it was due to the manner in which it had been reported.

The Department would provide the Committee with the detailed irregular expenditure register that breaks down the total of R433 million in SCM irregular expenditure.

He explained the inconsistencies of the Department in presenting to the Committee that Africa Global had been removed from the Department, yet there was still irregular expenditure being presented. The contract had been in place from 2017 to March 2019, when it had been cancelled while it was in effect. Before the contract was entered into, the procurement process of renewing the contract into 2017 had been delayed, and African Global already had a contract dated 1 August 2013, ending 31 July 2016. At the end of July 2016, the Department had not finalised the new process of having contracts in place. The contract needed to be extended, as the Department could not have a case where food was not being provided to management areas and to facilities. Treasury had granted a six-month extension, and the cost had been R388 million, as presented. It had been approved on the basis that it was a critical service, but it was still deemed irregular due to the Department’s poor planning. The AG had found that the extension was irregular, and if the DCS had done proper planning, it would not have occurred. There was no current contract with African Global.

Mr Fraser responded to Mr Horn’s statement that the Department had not taken the Committee into its confidence , and said that the DCS respected the Committee and its input. It had implemented the suggestions of the Committee wherever possible.

Follow-up Discussion

Ms N Maseko-Jele (ANC) said that the admission by Mr Fraser of the challenges regarding irregular expenditure and non-compliance showed that the Department was aware of its problems. She hoped that efforts would be accelerated to ensure that the ills presented were eradicated. The Committee acknowledged that cleaning up of the Department was happening, but issues of poor planning were not acceptable. Had the Department centralised the signatures of the contracts worth R3 million? Had there been a follow-up of the termination of contracts and recoveries subsequent to this? Could errors of miscalculation of BEE points and other similar acts be done purposefully? Training on these processes had been implemented for officials, so could this be another way of officials hiding corrupt activity? With the investigations performed within the Department that were handed over to the SIU, was there any prospect of criminal convictions? She said that the Committee wanted to see guilty people wearing orange overalls.

Ms Maseko-Jele asked what protocols were in place for inmates with a child, when the mother contracted COVID19? There had been reports of increased suicides in the facilities -- could the Committee be furnished with these numbers? It was disheartening seeing perpetrators of GBV committing suicide before facing justice.

Mr Horn asked what amounts of irregular expenditure had incurred in the current financial year. The expenses regarding perishables were vague. It was said that they stemmed back from 2017/2018, but had those patterns repeated themselves and were there expenses for the current financial year?

Ms Maseko-Jele asked if there were officials who were conducting business with the state. Had there been disciplinary action in this regard?

Department’s response

Mr Ligege said that one of the preventative mechanisms was the centralisation of contract signatures, and the Department was still pursuing this. The function of contract management and the function of vetting on a management level at the various levels had not been capacitated. It was capacitated only at head office. To avoid the Department entering problematic contracts, it had centralised high value contracts so that they could be legally vetted by a unit that had been adequately capacitated.
 

The Department had introduced the issue of due diligence prior to the awarding of contracts to avoid deliberate non-compliance. Some issues of non-compliance were found to be genuine mistakes, where points were not calculated accordingly. In some cases, spreadsheets had errors and others were due to a lack of reviewal. Where it had been found that the non-compliance had been deliberate, to favour certain suppliers or passing over a bidder that would have been awarded a contract, the matter was referred to the Departmental investigation unit and, on large scale non-compliance, it was referred to the SIU.
 

There were cases where officials had been found not to have complied with SCM regulations and related acts. There were 74 cases where disciplinary cases had been processed internally. Officials had received barring outcomes such as final written warnings, three months suspension without salary and final written warnings. The rand value of these cases was R17 528 618.

Ms Mlomo-Ndlovu said that inmate mothers who tested positive for COVID19 followed the protocols stipulated by the DOH, which were based on the age and weight of the baby, and this would determine how the baby was managed. If the mother chose to breastfeed despite being sick, the DCS ensured that she wore PPE and adhered to hand hygiene. There was no evidence that there was viral transmission in breast milk. If the mother was able to express breast milk, that was encouraged. If the mother was unable to care for herself or the baby, there were caregivers who took care of the child and fed the child formula or expressed breast milk.

Mr Ligege said that in 2017, there had been 25 suicides, 20% of which were as a result of hanging, 16% through medicinal overdose, and one case of self-inflicted injuries. In 2018/2019, there had been 31 suicides, of which 81% were due to hanging, 11% due to medicinal overdose, and 3% due to self-inflicted injuries. In 2019/2020 there were 20 suicides, of which 85% were due to hanging and 15% due to medicinal overdose. There had been 175 suicide attempts in 2017, 168 in 2018/2019, and 204 in 2019/2020, but these attempts had been prevented due to prevention methods implemented by the DCS. Causes for suicides ranged from mental illness, family problems and old-fashion designed cells, where officials were unable to see into them. The lack of thorough searches that resultrf in suicides performed using contraband was a contributing factor. Victimisation from gangs, and fear of the unknown environment by first time offenders, were causes for suicides. The DCS implemented a suicide prevention plan which had helped to decrease the number of suicides. Insight was also gained from an integrated team of psychologists and social workers who researched suicides, and this contributed to the training of officials.

Mr Fraser said that with all SIU referrals where officials were implicated, the DCS ensured that disciplinary processes were applied and based on this, it was determined if criminal charges needed to be filed. Where there was complicity or collusion with service providers, the suppliers were removed from the database and reported to Treasury. The Department had assisted law enforcement agencies that required additional assistance where criminal charges had been laid.
 

Mr Ligege stated that based on the AG’s report, there were 22 officials who were determined to be doing business with the state. The Department had commenced with the investigations to confirm the findings of the AG. What the Department had found so far was that some officials were doing businesses with other organs of state, and not necessarily the DCS. However, some officials were doing business with the DCS. The Department had registered the functionaries where these officials were working, to conduct investigations and disciplinary action. The regions were in the process of finalising these cases. There were two instances where discipline had been carried out, but during the review process, it had been advised that this be looked into, as the disciplinary measures could be extended.
 

Mr Fraser thanked the Committee for its engagement with the Department. He said that it enabled the Department to be more proactive and forge forward for improvement.

Deputy Minister’s closing remarks

Mr Phathekile Holomisa, Deputy Minister of Correctional Services, said that the Committee empowered and capacitated the Department through its questions and suggestions.  Some of the points made had required greater clarity, especially around the irregular, wasteful and fruitless expenditure. The Ministry and the Commissioner and his team would ensure that presentations were structured in a way that avoided elementary questions on matters that should be brought up front.

He recognised the Committee’s concern around consequence management. The DCS was committed to rectifying the ills found in the Department. The current leadership was taking the combating of corruption seriously. Its mandate was to take care of law breakers, so it was unacceptable that it found itself keeping such people within its ranks. The support from the Committee was appreciated, and the Department pledged to do better in future.

The Chairperson suggested that the Committee should have a meeting with the SIU, as many issues raised during the meeting involved the SIU. There was going to be a prolonged annual report process after the upcoming recess. The Committee required a breakdown of the R4 billion in irregular expenditure such as the R2.7 billion attributed to Head Office. The Committee wanted this breakdown by next week so that it could carry out a follow-up with the Department.

Consideration of Cybercrime and Cybersecurity Bill report

The Chairperson tabled the Report on the Cybercrime and Cybersecurity Bill [B6B-2017] [National Assembly -section 75] dated 2 September 2020.

t was determined that a quorum was not formed, so the Report would be tabled again at another meeting.

The meeting was adjourned.