Provincial Treasury and Entities Annual Report 2021/22

Meeting report

Provincial Treasury and Entities Annual Report 2021/22

Ms Mireille Wenger, Western Cape Minister of Finance and Economic Opportunities, said that both the Provincial Treasury and the Western Cape Gambling and Racing Board had received clean audits. The mandate was to drive good financial governance across the provincial and local spheres. It was more than willing to answer any questions the Committee might have.

Mr David Savage, Head of Department (HOD), Provincial Treasury, said he echoed what the Minister had said. It was pleased with the audit outcome and reflected the effectiveness of the management and control systems within the Department. It was always looking to improve and strengthen the systems. It was grateful for the oversight done by the Auditor-General of South Africa (AGSA) and the independent support of the audit committee in strengthening resilience and moving to performance.

The Western Cape Gambling and Racing Board officials echoed the Minister's and the HOD's sentiments.

Part C: Governance

Discussion

Mr A Van der Westhuizen (DA) congratulated the Western Cape Government Provincial Treasury and the Western Cape Gambling and Racing Board on their excellent audit results. He said there might be some mistranslation between National Treasury directives and what was communicated to provincial departments. In previous years, the Provincial Treasury's procedure had been to first peruse the directives from National Treasury. It seemed to him as if the Provincial Treasury had had to digest this and explain it to the provincial departments and managers in the way in which the National Treasury interpreted that directive. This had been highlighted as a risk. Similar incidents like this had occurred, which had sent a number of provincial departments' procurement officers into a spin in the sense that the interpretation thereof was to the extent that the procurement had to stop. Unless other regulations were published, a new date had been set for 26 January 2023. He asked that the Committee be informed of the current situation and what it could expect. A situation of halting procurement should be avoided. Since it had been interpreted as the procurement should stop, what had happened then and what could have been done to avoid the situation experienced in the year under review?

Mr D America (DA) asked for clarity on whether the national guidelines would come from the Provincial Treasury that needed to be considered to develop its own procurement policies and regulations. He spoke about the emerging assets related to the treatment of irregular expenditure in the financial statements of the two institutions. The latest response from the AGSA gave him an understanding of what the intention of that sort of categorisation was, of an emerging risk. It was National Treasury’s responsibility to develop a framework in which the two entities would deal with the irregular expenditure as a result of a procurement process that was not compliant. If one started to consider drafting regulations that would guide departments and entities on how they should reflect items as irregular expenditure, it could help with the treatment of these irregularities.

He said mention had been made of contingent liabilities in the Provincial Treasury that should not belong there, but with the Western Cape Gambling and Racing Board. However, such liabilities were not reflected in the annual report of the Western Cape Gambling and Racing Board. He asked for more details on this. It was important that this be reflected.

There was no reflection of expenditure on municipalities; it was liable to account for the conditional grants only once the financial books had undergone monitoring of the expenditure, so how did it monitor this? He asked how the specific amount of servicing was determined concerning service fee accounts with lease agreements that stipulate the value of the benefit that the Western Cape Gambling and Racing Board was receiving without paying rental. There were office spaces that belonged to the Department of Transport and Public Works. How had it come up with a reduction in the amount in the last two years -- was it due to a reduction of office space? Had there been condonation of such irregular expenditure? He hoped that the correct process had been followed.

He asked about the componentisation of assets. It had been emphasised that this was needed, although it was not a requirement to break up and classify and value each component of a particular asset. It would be the responsibility of National Treasury to develop a framework and provide guidance. A huge cost would be involved for the departments, because departments had decentralised assets. There had to be capacitation. What would Treasury’s role be to ensure it complied with that expectation?

Ms N Nkondlo (ANC) asked about the nature of the staff overpayments. Provincial Treasury had a responsibility to look at the finances of everybody. She was surprised by the earlier discussion on how the political environment impacted on administration was not a risk to both the enterprise and emerging risks. Perhaps it was not much of a big risk for the Provincial Treasury, given that the work it did with the municipalities was highly unstable, so why did the Department feel as if it was downplaying the impact of the political environment on financial governance? There had been mention of the limited ability to improve the conformance of municipalities to laws and regulations in the supply chain management (SCM) environment, which was one of the things it still had to deal with. She asked that more details or an example be provided of such a challenge. She asked to what extent the trends of escalating commodity prices and the availability of goods were affecting the provincial economy. She was trying to understand the scope of this particular problem. Although detail had been provided on what was there and what was not in terms of goods, she asked for more detail from a mitigating and risk point of view, especially post-COVID-19. It had not been easy to protect the country against such challenges. This was the reason there was a long term industrialisation and local content policy to protect the country against such challenges. One had to meet the requirements between price and competitiveness. She said that just because a particular problem had not been covered did not mean it had gone away. The biggest problem the country was facing was the global supply chain. Global economies' prices were very steep. There would be service delivery challenges, especially because of the fiscus's constraints. People were demanding things for which they were unable to pay. She was asking this to see if these conversations were taking place and the role of the legislature in ensuring this kind of agility was within the ambit of the Provincial Treasury.

Ms N Makamba- Botya (EFF) asked what the issues were in the Tsogo Sun case, and in whose favour the court had ruled. She asked if all of the legislation, or just a part, needed to be amended. She asked what was meant by the loss of stakeholders' trust due to undue influence in the board's decision-making. Where did the so-called undue influence come from? There were no reported cases of fraud and corruption, and she wanted more detail on this. There were issues of gambling, where adults were going so far as attaching their assets, only to lose everything. This affected other people in the process, such as the family members and their children. What role was the board playing in intervening in such behaviour? How did it ensure gambling machines or slots were not tampered with to produce certain results? She asked why Mr S Kenyon and Ms A Pick attended only two instead of four enterprise risk management committee meetings. Why had the Western Cape Government reverted back to its previous decision, rather than using the regulations that still remained valid until the expiry date of the declaration of invalidity?

Responses

Minister Wenger said it might be helpful to give a full overview of the court ruling, such as the implications and where the matter stood now.

Mr Savage said that the issue around the regulations regarding the preferential procurement framework was very complicated. The Constitutional Court, after an extensive litigation process, had declared the regulations in their entirety null and void. The effect of that on public procurement was that there was no basis on which to apply the point system -- but it had to be applied. One was therefore sort of caught in the middle. It was something that the Provincial Treasury had anticipated from when the initial regulations had come out, because it could see the vulnerability in the regulations that would amount to a legal challenge. This underlined the importance of the Provincial Treasury’s role in digesting national regulations and circular instructions in navigating forward in the province in a way that sustained compliance and kept the wheels of government in motion.

The initial regulation had ambiguities and the Western Cape Government had been alerted to the risks embedded in the regulations and the eventuality that they might be overturned in court and declared invalid. The date on which the regulations would become invalid was a very practical matter. The Minister of Finance had approached the court for clarification, and the invalidity would be 26 January 2023. In the interim, the Minister or the National Treasury issued a draft replacement regulation in the Preferential Procurement Policy Framework Act. The effect of those regulations was to recognise the policy frameworks, section 217(2) of the Constitution, pursued by every procuring entity. Each procuring entity in South Africa would have to generate a policy framework to guide its preferential procurement going forward.

This was the nature of the decentralised supply chain. It had provided guidance to departments, entities and municipalities in the past when the first regulations came out. It had provided extensive guidance during the period of uncertainty, to the extent that it had asked the provincial executive, the Cabinet, to intervene on a special basis to discuss the challenge. This had been done to ensure there was stability in the supply chain systems. It also provided guidance to the departments, entities and municipalities on how to approach this sort of interregnum that was emerging. All of this was done prior to the clarity of the court.

At the time, it seemed like the only rational thing to do was to keep the supply chain moving. The invalidity would be only next year, so the supply chain could keep moving with the pre-existing framework it had been advised on. The next phase would be when the Minister gazetted the new regulations. This would give the entities time to prepare their own policy frameworks. The Provincial Treasury had already started a programme to assist those procuring entities to follow those policy frameworks, whether in the provincial or municipal sphere. There were a range of different requirements across different procuring entities. There was a degree of standardisation within the discretion that the court had quite forcefully implied should all be determined within the procuring entities themselves. The information about this programme could be shared with the Committee.

He said that looking back, one could see the disconnect and see why the court went the way it did on those matters. There had clearly been a degree of overreach that had turned out to be fatal in that respect, and it was highly disruptive. There was a lesson that could be learned regarding administrative regulations and the intention of the legislature. It had created a slightly chaotic environment when the court case was raised.

Minister Wenger said that in 2017, when the regulations were issued, they had been invalid at that stage. However, the Provincial Treasury had seen some invalidities in the regulations themselves. This included the compulsory regulations, and the Provincial Treasury had taken these concerns to the Cabinet to decide and implement preferential procurement in that manner. Provincial Treasury had also guided it on certain empowerment clauses. There were instances of double preferential procurement, and it had tried to mitigate this, so when the court came out with its first decision, it declared the entire set of regulations invalid and suspended them for a further 12 months. The Provincial Treasury had gone to Cabinet again on how it should be applied in the interim. It had reverted to the previous decision because of the relationship with National Treasury, which needed clarity. There were certain things that no longer applied. This was why the Provincial Treasury had reverted to the previous decision -- because it needed clarity. The court had then suspended that invalidity and given a clear indication of 12 months from the commencement date, and that it had until 26 January 2023 to replace it.

Mr Savage said the actual contingent liability was to the revenue fund itself, and not to the Department, and therefore it had not been disclosed. The transfers to municipalities must be spent in the financial year in which they were received. If not, it was subject to rollover procedures. There was regular monitoring, not just at the rollover stage, but compliance prior to the transfer. If the transfer was in multiple tranches, then it was associated with those tranches. Every grant would have a slightly different dynamic. Some would be a single transfer subject to prior compliance verification. This worked in conjunction with the audit system in a combined assurance framework. There was a condonation committee that processed all the applications for condonation from the province, and it did that assessment in terms of an eight-point framework, where it looked at documentary evidence around each of the eight steps. If the eight steps or requirements were met, it would then make a recommendation to the Head of Treasury.

He said that there was indeed a lot of irregular expenditure. A lot of significant issues would be coming up, and it would require a lot of collaboration across the Western Cape government to get this right. It was always good to have a safe pair of hands catching and fixing the issues. It could not expect machines to do everything. The lack of conformance to rules and procedures was some of the things that caused the municipal instability. It focused on the frontier of the friction point, which was the supply chain system. There was a retention, training, installation, and resilience issue within the supply chain system. It was trying to set up effective governance processes around supply chain management. Municipalities did reach out to the Provincial Treasury for guidance on supply chain challenges, and if they made an error, a team from Treasury would sit down with them and go into detail, considering all the documentation and the processes. It would then guide them on what was wrong, or if there was clear evidence of fraud and corruption. It would advise the municipalities to go forward and be aware of certain risks.

The global impacts on goods were related to two big forces -- the trade wars and the COVID-19 lockdowns in China. It was creating a set of dynamics in the global supply chain between the United States of America and China. At the same time, there was the Ukraine issue that was having an effect on energy and fuel prices. The wheat price was also going up because the world gets wheat grain from Ukraine. This was related to sharp inflationary pressures in the South African economy, because these items were usually priced in dollars. It was looking at the extent to which it had the capacity to provide further protection to vulnerable citizens in the province, and what would enable the businesses to keep going and retain jobs. There were a lot of very difficult questions such as to what extent this was a cyclical phenomenon, just a spike, or something structural. Different economists would give slightly different answers. These were the set of issues it had tried to get at in the provincial economic review and the municipal economic review.

He said that the regulatory framework for gambling was outdated, and there should be a decision on whether to keep the current legislation or go for a more comprehensive overhaul and modernisation of regulation in the industry. The policy research it was currently doing would provide it with a basis on which recommendations to make for amendments to the current legislation. A range of areas needed modernisation, including issues associated with the board's governance. Gambling regulations should keep pace with the times and the changing industry, so it would be logical to look towards a relatively more comprehensive modernisation of the regulatory framework set up in the province for the next ten to 20 years.

He said the two members that attended only two meetings because of urgent matters they had to attend to. Ms Pick plays a key role in public finance management for the provincial government, and Mr Kenyon has a similar role for municipalities. They were not always in charge of their own schedules, and they might clash. He could not provide the particular instances where the members had to leave, but there was a good attendance rate. In the enterprise risk management committee meetings in the Department, it tries to elevate risk management to get a sharper focus on the real world of risk, instead of something that comes out slightly bureaucratic. There had been robust discussions and there had been active participation.

Mr Aziz Hardien, Chief Director: Financial Governance and Accounting, Western Cape Provincial Treasury, said that National Treasury had recognised the problem of irregular expenditure and procuring institutions within the province. Various arrangements did happen, but the way the irregular expenditure was formulated was that whoever spent the money had to account for it. For instance, National Treasury might set up a transversal contract which all the provinces may have to opt into. If it was audited at the national level and it was found to be irregular expenditure, those institutions would have to account for it. Therefore, National Treasury recognised this as a problem, and would be addressing the irregular framework. There would possibly be a dual disclosure, in that the expenditure had happened in one department but the procuring processes had taken place in another department. He said there were many instances like this. For example, the Department of Transport and Public Works was responsible for providing accommodation, and sometimes it was their own buildings that the Provincial Treasury maintained and repaired. Sometimes the Provincial Treasury leased buildings to provide accommodation, but the costs became objective when it was its own building. It was easy to disclose that amount when it came to services in kind if a building was leased from another institution. The standard does allow it to say that it had received services in kind that cannot be quantified.

The Provincial Treasury and the Western Cape Gambling and Racing Board also had to record their services in kind. This was so that should Provincial Treasury get its own accommodation with the Department of Public Works, it would have to pay a price. There had to be a list of perspectives regarding the materiality of transactions. The current guidelines issued by National Treasury deal with componentisation and state, for instance, that if one buys a laptop and a mouse, it is two separate components, but this was immaterial in an organisation that had a R25 billion budget. He made an example of an aeroplane and an engine being two separate components, but there were different depreciation rates. The engine may last five years, whereas the body may last many years. This had all to do with the budget in terms of whether it would be replaced. Componentisation would not be relevant if departments could not determine or present the material assets to the individual.

An official said that staff overpayment had been an isolated incident. There were control measures in place to ensure that staff was not overpaid. In the year under review, there had been three to five overpayments that were related to non-pensionable allowances that were given to all employees. National Treasury had thought it would be easier if they did it on their system, so it was not an input from anybody. National Treasury had implemented it right across the board. The notification came through with the approval for the improvement of service, where the senior service managers were appointed only later in the year. Those overpayments were once-off, and had been rectified and recovered.

An official said that the litigation was now subject to appeal. The Western Cape Gambling and Racing Board collected taxes should there be contingent liability for services in kind. In the other litigation case that went to the High Court about the imposition of conditions, the court had confirmed that the board had the power to impose the conditions. The matter had been appealed to the Supreme Court of Appeal, where the judgment was overturned in certain respects. The board could impose conditions, but they varied in terms of methodology. He confirmed that there were many proposed amendments to the legislative framework. Three bills were pending. The board was a decision-making organ of state and had to consider various stakeholders' interests. It had to cultivate good relationships with the stakeholders, but it had to strike a balance. The board did have a firm corruption policy. Social responsibility was one of the focus areas of the board. There were various initiatives regarding responsible gambling.

The Committee asked that the question on corruption cases be responded to.

An official said in terms of the separation of powers, the board had been charged with the implementation of legislation. There was a unit that dealt with the drafting of provincial legislation. The board did engage with the legislation when amendments were being made. These amendments had to be spearheaded by legislation in the Department of the Premier. There has been a discussion for quite some time now on repealing the current legislation and replacing it with an updated piece of provincial legislation.

Before any gambling device was allowed onto the casino floor, it must meet certain specifications drawn up in terms of the old South African Bureau of Standards (SABS). There were ten standards related to casino equipment, software, tokens, etc. There were three testing laboratories to test those relevant games according to the specifications set out in the standards. Once approved, it would be submitted to the national regulator for compulsory specifications, and it would then issue an LLC, which was a letter of certification upon receipt. This certification letter would be submitted to the board, which would test the reports to see if they met national and provincial standards. Sometimes, the province added standards other than what was required. There were scheduled audits where inspections of the devices were conducted. There were systems in place which would determine if the machine or device was operating within the specified parameters. The licence holders themselves also monitor this. Any machine or device that was accessed outside the parameters would be looked at for investigation, checking on the gameplay of the machine, the manufacturer's specifications and whether it meets the standards.

The Members of the Committee felt that the report did not capture the responses of the Western Cape Gambling and Racing Board well. It was very silent on the issues of social liability. It wanted to know what mechanisms were in place to monitor or manage the issue of behaviour in terms of avoiding having an influence on the social ills of people in the country. The Committee wanted to know how it curbed the appetite to gamble.

Part E: Financial Information

Responding to Members' questions, Mr Savage said that the Department had capable people to operate the supply chain management unit effectively. There were one or two areas it had to look at for relieving pressure on some hardworking people.

The annual procurement plan was very important because it required a very disciplined and time-bound methodical approach to management of the supply chain, building on from the systems it already had. The overall financial management framework for the financial year had been good -- it had been making progress. If set timelines were not followed, it started to fade into December and then suddenly, it was a new year and the end of the financial year. Then one would try to accomplish too much in the last quarter, so it was important to follow the set timelines. The Department wanted to do things responsibly and effectively so it did not have to apply for a rollover. There had been engagement with unit managers to have real-time data on where they were sitting with the plans and the process throughout.

The outsourcing was predominately related to two programmes. There had been underspending, and the reason why the funds were not allocated to the other programmes was that, at the time, the two programmes were still on track. The spending programmes were on track and were then struggling to get over the line, preventing the opportunity to surrender money to the revenue fund for reallocation within the same year. It had committed to take this process a lot more seriously. The challenge for a relatively small vote by the Provincial Treasury was that single transactions could magnify their effects relative to the oversight and the overall size of the vote. In the context of a Department of Education or Health, these would be very small amounts that would not really show up much. However, in the Provincial Treasury, it would show up. It had to try harder on these matters. This year, there was a much tighter set of rules to drive both the reallocation and surrendering of funds. This would make a difference to the overall service offering, rather than effectively sterilising the money.

The "free play" matter was basically a shorthand for free credit -- a sort of loyalty credit that an individual gets when they gamble. This credit was loaded onto digital cards. If these credits amounted to gambling revenue, it was taxable. There were different views on the "free play" matter between the industry and the regulator. The matter under litigation was whether it should be subjected to tax or not. It was a resource that was given. The industry argued that it should not be taxable. It was an important matter to get clarity on.

Some significant transfers in vote three might be missing. Those were transfers to the provincial revenue fund, not to the Department itself. These receipts would reflect on each of the votes and in the blue book. These large amounts one would not see in Provincial Treasury. The gambling tax had been transferred through the Provincial Treasury sometime in the past, but that had been altered. It was now just another tax source due to the revenue fund and not the Department, so, these large amounts would reflect in the financial statements of the provincial revenue fund. There was a consolidated audit that happened after the audits of all the departments. A consolidated financial statement for the provincial revenue fund was put together and would go to the House and this Committee.

Ms Annamarie Smit, Director: Strategic and Operational Management Support, Provincial Treasury, said that the procurement of laptops had not only been from one service provider. It had initially identified one brand, and all of the service providers had come back to say that there was a waiting period of four to six months. This was the reason it had been cancelled and another brand identified. It also went out on a procurement process -- an open bid process.

The write-off amount was for bursary debt. There was a process where all outstanding debt was submitted to the state attorney, and it indicated that it could not identify the data and hence the writing off of R24 000.

The Nedbank issue involved a writing competition, where Provincial Treasury paid for the cash prizes. There was an agreement that Nedbank would reimburse the cash prizes, and the amount was still outstanding. There had been regular follow-ups with the bank. Nedbank Trust had an issue, but trustees had now been appointed.

The amount of irregular expenditure was for an expenditure above the contract value, and the contract had been for three years. An additional expenditure of R69 000 was not part of the contract, but the Department had derived the benefit and value for that. The condonation working committee had looked at this and approved it. Some items could not be verified during the stock-taking process. There had to be an accurate asset register, and the Department was working on it.

An official said that the workings of the Preferential Procurement Council (PPC) were a function that was not traditionally within the structure of the Provincial Treasury. However, it was a much-needed service, as it went with the technology involved in the supplier database management and the procurement system. There were administrative resources that helped the supplier databases. Over 9 000 suppliers, on average, were vetted in the process to do business with the Western Cape Government. It provided support for compliance, documentation and registration processes. Last year, a team dealt with about 13 600 supplier attendances, including 5 747 suppliers receiving registration assistance.

The financial recovery plan for Beaufort West had been approved three weeks before the end of the provincial financial year. Measures were in place to prevent fiscal dumping at the end of the financial year. Any new transfers to a municipality should be gazetted by 4 February of each year, but it missed the deadline. It had not made an immediate transfer in the new financial year because it was a municipality and wanted to institutionalise the financial recovery processes in the municipality first before transferring funds. It was currently in the process of ensuring that the financial recovery was institutionalised in Beaufort-West, and that the municipality was implementing the small amount of money in that grant that was able to complement the turn-around work of the municipality. It provided capacity support through consultants rather than transferring the funds to the municipality. If it was showing adequate progress, it might be appropriate to transfer the funds to it. It would rather risk the underspending on that kind of funding than making a transfer into a place where it was unsure whether the funds would be spent appropriately.

The Department carefully considers its position before embarking on defending any litigation. It would consider whether it should enter into settlement of negotiations where appropriate, or await the decision of a court. The board would participate in those litigious matters that would fundamentally impact the board’s regulation going forward. The board ought to put its position before the court in order for a particular judgment to be binding on the parties and set a legal precedent. The board had been cited in seven matters in the past three years, and only two of those had been opposed in the financial year. One application had been served on the board where it was cited as a party, and that matter was not opposed.

The board would consider whether it was a purely commercial matter, such as the board decision being challenged on review. The board may then file an affidavit explaining its decision and the reasons for it. The court would then take that into account. The law also limited the board’s power to negotiate to settle a matter. The board could not undo its decisions in terms of the Promotion of Administrative Justice Act (PAJA) and the broader body of administrative law. Not all matters were opposed by the board -- it also depended on the position of the parties. An example of the "free play" matter had been made where the board had agreed that it would apply for a declarator, and that each party would pay its own legal costs. The matter was now before the Supreme Court of Appeal. The other matter was the decision regarding the rollout of an additional 1 000 limited payout machines (LMPs), which was also before the Supreme Court of Appeal. These were historic matters from 2016 and 2017, respectively.

An official said that all the vacancies which had resulted in major savings had been filled.

The Chairperson said there had been an underspending of R17 million, which was 5% below budget, and asked what the cause was. He said that the Provincial Treasury had given a good explanation of componentisation, but there might have to be some further interaction on it. Many of the departments were now receiving clean audits. There were always those superficial questions on whether it was safe now. It should also see how it could help other provinces to improve their performance.

Mr Savage said the Treasury was happy to update the Committee on componentisation and preferential procurement issues. It would help the Committee to understand the sort of challenges that it was going to face in componentisation, and it could update it on what the developments were within the technical space. It wanted to reach the public space and residents of the Western Cape most efficiently and effectively possible, and to actually do service delivery. The Provincial Treasury had been working with the Auditor-General on performance auditing and how to respond to the lived experience of citizens. At a strategic level, it was on the same page.

Solid governance systems should make a difference in the quality of services. The question was how one should get there, because it was easier said than done. It was easy to try and introduce reforms to the systems, but they could easily set one back. Therefore, there had been discussion with the Auditor-General not so long ago about understanding the non-financial targets and indicators, and how to measure them. There were still some challenges in the provincial government space -- less on the financial side, but more on the non-financial side. It was so easy to just "softball" the indicators to achieve 100% of the targets. This would result in no real agility and reaction to what the citizens need. It would be focusing on a performance journey that would be a journey, and not just flicking a switch.

He said it was important to build a foundation before crossing the river. It would look at two things -- measuring the indicators and the incentives. If one brought in compliance incentives, it may not achieve the agility and responsiveness it sought to measure performance and encourage performance in the public sector. It was a complex set of issues that needed to start from a very clear destination. It had not yet disaggregated the phases of the journey, but it had regular quarterly meetings with the Auditor-General where it talked about these issues, such as how to advance the agenda and bring about appropriate audit reforms. It wanted to see the effective use of public resources. It was exciting, but it would be a long journey. He assured the Committee that the appropriate steps were underway.

He said the Department was not trying to shy away from the question of underspending. It laid out some details as to what the components were in the document, such as transfers. In terms of the financial recovery process part, it had to do with laptops. It had to do with software licenses, savings, and procurement of consultancy services for some business process engineering in the Department, for the public entities to review the process. It was aware that it had not done as well as it had hoped to in terms of supply chain management, but measures were now being put in place to prevent recurrence. If there were a hundred clean audits and it did not make a difference in people’s lives, they would be meaningless.

Mr Savage thanked the Committee for its interest in the work of the Department and other stakeholders. He was appreciative of the opportunity to engage.

The Chairperson thanked the Department and its Minister for always being available. The Committee did not always ask comfortable questions, but this was not done deliberately -- it was only playing its role in terms of accountability. Accountability was not a one-man show. It should be done collectively and it had to be transparent.

He also thanked the Auditor-General and the audit committee for always being available to sit in meetings.

Concluding comments

The Committee discussed the outcome of the meeting, and agreed that the issue of componentisation and the Preferential Procurement Policy Framework Act were much clearer. The Department was willing to cooperate on performance audits. There were a number of departments nationally and municipalities that were not even close to having clean audits. There was a correlation between service delivery and clean audits.

The Committee hoped that some of the issues raised would be resolved by next year when it met with the Provincial Treasury. Treasury had developed an eight-step process to deal with irregular expenditure, and that process should be provided to the Committee. The Committee also wanted to receive a progress report on the problem of underspending. It would also request the Provincial Treasury and the Local Government Department to present the responsibility for the governance plan to the Committee. Provincial Treasury was lending financial oversight and support to municipalities. The Department of Local Government also provided support from a programme point of view. National Treasury and the Auditor-General should also present to the Committee on the procurement environment.

The meeting was adjourned.