The Public Accounts Committee received briefings in a virtual meeting from the Western Cape Department of Social Development (DSD) and the Department of Transport and Public Works (DTPW) about mechanisms in place to monitor and manage the contingent liabilities recorded for the 2019/20 financial year under review.
The DSD reported there had been no housing loan guarantees outstanding because many employees were qualifying for 100% housing loans from financial institutions. Another positive was the housing allowance provisions that the government retained in the Government Employee Housing Scheme for employees not owning a house.
Referring to the mechanisms to monitor and manage contingent liabilities, the Department said the claims were dealt with by the State Attorney and Legal Services. The Department would do a follow up quarterly with these entities regarding the progress of cases. The finalisation of cases was not time bound or prescribed, due to numerous factors. Should claims be settled, a settlement order would be issued to the Department and was subject to approval from the Head of Department (HOD) or Member of the Executive Council (MEC), or both. The Department would then commence with payment, based on a reprioritised budget.
The Department described the societal impact of the distribution of relief food parcels and the value for money that had been achieved. Four humanitarian relief organisations had been enlisted to assist the Department in its endeavour to supply food relief to households in distress province wide. R20 million had been secured to provide 50 000 food parcels. The regional offices of the DSD had worked together with the humanitarian relief organisations to ensure the parcels reached the targeted beneficiaries. This had positively contributed to community calmness, the restoration of hope in destitute households, and trust and reassurance in the Department's ability to address food insecurity in communities/households working with other stakeholders.
The DTPW briefed the Committee on the entry points of lodging claims against the Department, and described the role of the various entities involved in processing them, and handling instances of litigation. If it was expected to lose a case in court, Legal Services would advise the DTPW to settle out of court to save on legal costs. All claims against the Department were listed in the contingent liabilities register from which the disclosure in the annual financial statements was made.
The Department said the monitoring of housing guarantees was performed by the Corporate Service Centre (CSC) to ensure minimum liability to the state and the shortest possible period of redemption guarantee. Borrow pit guarantees were controlled via an electronic system. On average, a borrow pit’s life cycle was five years and guarantees were issued for a five-year period. After the five-year period, the DTPW had a three-year period for rehabilitation of the borrow pit.
Members wanted to understand the aspects mentioned in the DSD's presentation that had been flagged by the AG, and how the Standing Committee on Public Accounts (SCOPA) was going to determine the societal impact of the relief food distribution and value for money. They enquired why employees were getting a housing allowance, even if they were not home owners; sought clarity on a case involving a minor who suffered injuries at a pre-school when playing equipment collapsed; asked for details of the claims against the Department amounting to approximately R2m; and wanted to know if there were no other non-profit or non-governmental organisations in the province's six regions that could have been used for food distribution, instead of the four that were hand-picked and based in Cape Town.
DSD on contingent liability management
Mr Juan Smith, Chief Financial Officer (CFO), Western Cape Department of Social Development (DSD), briefed the Committee on the mechanisms in place to monitor and manage the contingent liabilities recorded for the 2019/20 financial year under review. He focused his presentation on the three types of contingent liabilities: housing loan guarantees, claims against the Department, and intergovernmental payables.
He reported there were no housing loan guarantees outstanding for the Department, because many employees were qualifying for 100% housing loans from financial institutions. Another positive was the housing allowance provisions that government retained in the Government Employee Housing Scheme for employees not owning a house.
On mechanisns to monitor and manage the contingent liabilities, he explained the claims were dealt with by the State Attorney and Legal Services. The Department would then do a quarterly follow-up with the State Attorney and Legal Services regarding case progress. The finalisation of cases was not time bound or prescribed, due to numerous factors. Should claims be settled, a settlement order would be issued to the Department and was subject to approval from the Head of Department (HOD) or Member of the Executive Committee (MEC), or both. The Department would then commence with payment, based on a reprioritised budget. Legal Services would remove the matter from the case register on confirmation of payment from the Department.
Case registers were kept and maintained within the Internal Control component of the Department to enable it to implement proper internal controls, and to ensure the disclosure was in accordance with the Modified Cash standards. The case registers received from Legal Services monthly were monitored and managed by the Internal Control unit and new cases were immediately followed up by requesting the relevant documentation to support the liabilities. This would be any claims confirmed, deeds of settlement, etc. The case registers were updated on an ongoing basis as and when the State Attorney showed movement on the matters and submitted them to the finance unit for disclosure in the interm and Annual Financial Statements.
He said intergovernmental payables were claims by year end. The Finance Creditor Control unit followed up with the relevant Department in writing and issued debt confirmation letters. Payables in this regard were reported monthly to the HOD and the Provincial Treasury.
(A table was shown to illustrate the case register as at 31 March 2020, and intergovernmental payables)
Food relief impact
Mr Mzwandile Hewu, Chief Director: Community & Partnership Development, WC DSD, took the Committee through the societal impact of the distribution of the food parcels and value for money that was achieved from the distribution. Responding to the Covid-19 pandemic and lockdown imposed, the Department, in addition to its existing food security footprint, had coordinated the Emergency Food Relief Project. It involved the provision of 50 000 food parcels to mitigate against potential food insecurity in poorer households.
Four humanitarian relief organisations were enlisted to assist the Department in its endeavour to supply food relief to households in distress province wide. These organisations were: the South African National Zakáh Fund (SANZAF), the Mustadafin Foundation, Islamic Relief SA, and the South African Red Cross Society. R20 million was secured to provide 50 000 food parcels. The regional offices of the Department worked together with the humanitarian relief organisations to ensure food parcels reached the targeted beneficiaries. Challenges experienced and mitigation measures were documented in the COVID-19 quarterly reports.
Members of the public who were in need of food during the lockdown had to call the following numbers and request a food parcel:
Toll free 0800 220 250
PCM 079 769 1207
Email – email@example.com
The food requests were consolidated at the call centre into DSD regions and sent to the relevant region for assessment. The full details of those who qualified for a food parcel were sent to the contracted humanitarian relief organisation for distribution of the food parcels.
The Western Cape DSD had provided 60 920 food parcels targeting individuals and households who needed food. Food parcels were targeted at individuals/ households who had no means due to the lockdown imposed. This was as a result of the poor economic performance of the country, resulting in the high unemployment rate. A total of 257 680 beneficiaries (with 10kg maize meal included) were reached by this intervention.
The establishment of community nutrition and development centres (CNDCs) had increased the capacity to provide access to food to more people, and supported community-based programmes outside the coverage of the network of CNDCs and other DSD centres. Safety and security during deliveries was generally a challenge, but the South African Police Service (SAPS) provided excellent support. A very good collaboration between the state and the private sector in providing the food relief response was welcomed.
Mr Hewu indicated the roll-out of the food parcel project started to turn the tide because it positively contributed to community calmness, the restoration of hope in destitute households, and to trust and reassurance in the ability of the Department to address food insecurity in communities/households, working with other stakeholders. Many households had a guaranteed daily meal.
The Department’s partnership with humanitarian relief organisations instead of the private sector supply value chain resulted in competitive prices being obtained per food parcel. The AG’s report indicated that the distribution of food parcels by the South African Social Security Agency (SASSA) could have been significantly cheaper had SASSA used the existing non-profit organisations (NPOs) used by the DSD.
In his conclusion, he said that with all the challenges encountered, it was important for government to also ensure it had received value for money for the services it had rendered. Under normal circumstances, the Department would have sent monitoring officials to all the organisations funded under the current COVID-19 emergency situation. However, it had deployed key staff, working with partners, to ensure the efficient execution of the project. Under the COVID-19 lockdown regulations and its related protocols, the Department had employed all the means at its disposal to ensure that the services provided by the government had gone to the right beneficiaries, at the right time, in the right quality, and in the correct quantities.
(Tables were shown to illustrate food parcel costs and beneficiaries reached; and food parcel and additional food parcel allocations)
DTPW on contingent liability management
Mr Bashier Rahim, Director: Financial Governance, Western Cape Department of Transport & Public Works (DTPW), briefed the Committee on the management of contingent liabilities for the 2019/20 year under review. Claims were lodged against the Department through:
Communications office, via the Department’s generic email address that appeared in some publications or on the Western Cape Government (WCG) website;
Office of the State Attorney;
DoTP: Legal Services;
Office of the HOD;
Office of the Minister of Transport and Public Works.
These points of entry would forward the claims to the Directorate: Financial Governance (DFG) to investigate and process. Upon receipt, the DFG would register the claim on the Transversal Loss Control System, of which Provincial Treasury was the custodian. A case file would be opened in terms of the Archive Act at records management, and all relevant documents were filed.
The claim was referred to Legal Services to act on behalf of the DTPW. When the Department was summonsed, a formal request to defend the matter was sent to Legal Services, which would appoint the State Attorney to proceed with the litigation process. The claimant was required to provide the DTPW with the GPS co-ordinates, kilometer markings of the road or landmarks etc, to establish if the road in question was located within the jurisdiction of the DTPW. The engineer in charge of that section of the proclaimed provincial road in question would either do an on-site inspection or examination of existing maintenance records to establish whether or not a pothole was present. If a contractor was responsible for the maintenance of the proclaimed provincial road in question, the claimant would be advised to institute a claim directly against the contractor. All the information regarding the claim would be forwarded to the State Attorney via Legal Services.
Legal Services would then advise the Department regarding the merits of the claim against it. Depending on the geographical area depicted by the claimant and the litigation process involved, the State Attorney would appoint a correspondent attorney if it was outside of their jurisdiction, as the cost of travel would outweigh the economic viability to defend the matter. Counsel would be appointed to act on behalf of the DTPW for cases heard in the high court. If DTPW lost the case in the magistrates or high court, it would seek further advice from Legal Services whether it should appeal the judgment or settle the claim. In certain instances, if the DTPW was expected to lose a case in court, Legal Services would advise it to settle out of court to save on legal costs. All claims against the Department were listed in the contingent liabilities register from which the disclosure in the Annual Financial Statements was made.
The control of housing guarantees approved to employees was vested with the Corporate Service Centre (CSC). This included the following:
Maintaining records of all housing guarantee records;
Approval of applications via the DTPW;
All related Personnel Administration System (Persal) transactions; and
Liaison with employees, financial institutions and other relevant participants.
The monitoring of housing guarantees was performed by the CSC to ensure minimum liability to the state and the shortest possible period of redemption guarantee.
Borrow pit guarantees were controlled via an electronic system, which made provision for the following:
Request for guarantee was submitted electronically;
Each request was issued with a control number to track the guarantee;
Electronic record of the name of person requesting the guarantee;
Electronic record of project type, district municipal area, local municipal area, road number, guarantee amount, release date, date of issuing of guarantee, and borrow pit number.
On average, a borrow pit’s life cycle was five years, and guarantees were issued for a five-year period. After the five-year period, the DTPW had a three-year period for rehabilitation of the borrow pit. The national Department of Environmental Affairs (DEA) would issue a certificate of compliance for the rehabilitation of the specific borrow pit after conducting its inspection. The guarantee would be redeemed after the successful rehabilitation and removed from the borrow pits register.
Each claim was monitored individually by the DFG to ensure the litigation process occurred within the legal timeframe applicable. Claims against the DTPW were monitored on a quarterly basis by top management at its enterprise risk management committee meetings. Claims against the DTPW and contingent liabilities were monitored on a quarterly basis through the interim financial statements which were reviewed by the Provincial Treasury.
(A table was shown to illustrate the analysis of contingent liabilities in the annual financial statements as at 31 March 2020; the nature of claims against the DTPW as at 31 March 2021; the nature of the housing loan guarantees; and the nature of other guarantees (borrow pits))
Mr G Bosman (DA) wanted to understand what necessitated the request for the presentation about how SCOPA operated.
The Chairperson explained the Committee had decided on this when it was looking at the annual report of the Department and the AG’s report. A question had been asked about food parcels. Fortunately, there was clarity on the matter now. When the food parcel matter was raised, there was a discussion within SCOPA because it was felt a visit was needed to be done to the municipalities that were handling food parcels, but it was later decided to wait for the report of the Department. When the annual report came out, the Committee had decided to have an engagement with the Department on liabilities and other related matters.
Mr Bosman said the work SCOPA had undertaken was the responsibility of the Standing Committee on Social Development. The Speaker had not even mentioned these presentations should be made to SCOPA.
Ms D Baartman (DA) shared the same sentiment with Mr Bosman. She said in the previous meeting, she had indicated SCOPA should take the lead and be proactive, and be the Committee that sits the least seeing it was a retrospective Committee, and do investigations on matters that were brought before it. What was happening now was that Departments were coming to the Committee with the briefings, giving information that could be obtained from other Committees’ briefings and meetings. She said they could not be a Committee that received information in briefings and every meeting just because they did not sit in those meetings. There was a need to look at the mandate of SCOPA and matters that were referred to it. Judges did not look for cases. The courts dealt with matters brought before their attention.
The procedural officer said in terms of the rules, SCOPA must examine the financial statements of the Departments and entities. That was done on annual reports as well. The Speaker must refer such reports and financial statements to SCOPA. The Committee must also examine statements and reports that come from the Auditor General's (AG's) office. It formulated resolutions and that was how the Department got invited. A report of the Committee on this matter could be forwarded to Mr Bosman.
Mr Bosman said his concern was that SCOPA was doing the work of the Standing Committee on Social Development. He did not remember getting information that SCOPA would be conducting the work of the Standing Committee on Social Development.
The procedural officer indicated that SCOPA was of the view that if statements raised issues relating to the policy of the Department, the Committee should inform the Speaker and write a letter to the chairperson of the relevant standing committee. However, the rules were not saying SCOPA must, on every issue it identifies, inform the relevant standing Committee. It was usually via the resolutions of the Committee. This issue dealt with financial and policy matters.
Mr Bosman pointed out the DSD was very busy and did not receive a large chunk of the budget. Many of the officials in the meeting had busy diaries and ran transversal programmes. If the Committee was going to engage officials in meetings where they constantly reported on items ventilated by other Committees, they were not doing a service to the people of the Western Cape, and not allowing officials to deliver services on the ground. He suggested the Committee should devise a viable working plan it could discuss with the Standing Committee on Social Development which did not interfere with the work of the officials.
The Chairperson asked if the Committee was wrong to invite the Department for an information-sharing session.
Mr Bosman said SCOPA was duplicating work and depriving the Committee on Social Development of engagement with the officials.
The Chairperson said Mr Bosman seemed to be stifling the Committee from doing its work. The Committee had not transgressed in any way because it had taken a resolution on this matter. Accountability was what officials should do.
Ms Baartman said the judge did not engage with parties before matters were brought before the court. SCOPA was a retrospective-looking Committee. There had been no matters referred to the Committee for now. While Members were waiting for matters to be brought to them, they needed to empower and capacitate themselves. Mr Bosman was correct in what he was saying, because the Committee was depriving Members of his Committee a chance to engage with the Department in terms of oversight, and the same applied to the transport Committee. These matters should be discussed in the relevant committees. SCOPA was an investigative committee because it needed to investigate matters brought before it. The Committee could be educated in a different manner. There was a need to align what the Committee was supposed to be doing with what it was doing at the moment.
The Chairperson asked if Ms Baartman was saying the Committee had been wrong with its resolutions to invite the Department to explain contingent and liabilities, and how food parcels were distributed.
Ms Baartman admitted this was the case, saying she had raised this matter many times.
Mr M Xego (EFF) said he understood the procedure that should have been followed. The Committee was supposed to engage with the Department on its presentation according to the agenda. The Committee should raise this matter when it deals with resolutions and discuss how to function going forward. The resolution was taken by all Members about inviting the Department.
Mr Bosman wanted to understand the aspects the Department had mentioned in its presentation that were flagged by the AG, and how SCOPA was going to determine the societal impact of food distribution and value for money. If SCOPA was going to expand its mandate and focus on the work of the Department, then it should also consider inviting SASSA Western Cape to account on value for money. An impression had been created that money was not spent correctly, and the Department should account.
The Chairperson said the matter of societal impact was the responsibility of the Standing Committee on Social Development. SCOPA was interested in the expenditure and issues that had been presented so far. He hoped Mr Bosman was not trying to shield the Department from accounting on contingent liabilities. If Mr Bosman thought the Committee was wasting the time of the officials, the Committee could release the officials to go and do the work they were supposed to do.
Ms Baartman suggested Members should ask questions to the Department, and reserve the discussion for a later stage.
The Chairperson wanted to know why employees were getting an allowance, even if they were not home owners.
Mr Smith replied that in terms of the directive, an employee that rented a property or house was entitled to get an allowance for that rental. There was a difference, because when one owned a house, one got a loan guarantee from the Department.
The Chairperson asked for clarity on the claims against the Department amounting to approximately R2m.
An official from the Legal Services unit of the Department said these two matters were still pending. A youth had escaped from the Outeniqua facility and had claimed he was assaulted and had sustained body injuries, and was now claiming against the Department. The matter was being defended by the Department, looking at whether there had been negligence by Department officials. The other matter was because a resident of a facility had turned 18, but was discharged later. His claim was focused on being deprived of his freedom. These matters had not been finalised.
Mr Xego asked for clarity on a case involving a minor who had suffered injuries at a pre-school when playing equipment had collapsed. The claim amounted to R6.5m, and the judgment had been granted in favour of the Department. The matter was on appeal.
A Legal Services official said the matter was still pending. It was on appeal by the plaintiff. The matter in the Western Cape High court was decided against the Department on merit, and had gone on an appeal. On appeal, the court had overturned, it following a preceding judgment. There was no causal link to the action that led to the child’s injuries. The injured child was five years old when the swing structure fell on her. As a result of that 2008 action, she had suffered severe brain trauma. Now she was 15 or 16 years old, and was suffering from mental disabilities. The matter was on further appeal by the plaintiff.
Mr Bosman asked if the CFO and HOD were satisfied with the measures for monitoring the contingent liabilities.
Mr Smith said they were satisfied, because they had a partnership with Legal Services, which partnered with the State Attorneys to manage the liabilities. The Department received monthly and quarterly reports on these cases. The major issue was the time it took to finalise these cases, especially when it came to decisions and progress. A follow-up was usually done on the cases.
The Chairperson wanted some clarity on the four NGO food distributors that had delivered the food parcels in the four regions of the province. He asked if the Department was able to quantify the role of the private sector in delivering the food parcels, and if there had been any contribution made by the municipalities.
Dr Robert McDonald, HOD, WC DSD, said food parcels had been distributed in all six regions of the province. The province had kept a database of the organisations that helped, while others had decided to do things voluntarily, including non-governmental organisations (NGOs). The province had provided R16m to the district municipalities for food relief. The City of Cape Town had provided food relief because it had its own funds and did not take anything from the provincial assistance. SASSA had distributed food parcels and come with a Covid-19 grant. The Solidarity Fund had provided support as well. The private sector and NGOs had played a very big role. The Education Department and crèches had continued with the school feeding programme.
Mr Hewu said all the four humanitarian organisations had delivered food parcels in the various municipalities.
The Chairperson wanted clarity on the comment made by the AG that the distribution of food parcels could have been cheaper had SASSA used the NPOs used by the Department.
Dr McDonald explained that SASSA had decided to follow a procurement process for food parcels, and this had resulted in higher costs. The Department used to transfer funds to the NGOs. Three service providers were used through its procurement process.
The Chairperson asked if there were no other NPOs/NGOs in the six regions that could have been used instead of the four that were hand-picked and based in Cape Town.
Mr Hewu said the Department had looked for NGOs operating in the humanitarian space, and most of them (eight) were based in Cape Town. The Department had checked their capacity in terms of service delivery. It did not know of any humanitarian organisation dealing with relief disaster outside of the metro.
Dr McDonald added that time had been against them. The Department needed organisations that were able to deliver, based on their capacity. The food parcels process was designed for a hard lockdown, but when it became less stringent, the Department used better methods and involved smaller organisations.
The meeting was adjourned.
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