Department of Correctional Services: hearing

Meeting report

PUBLIC ACCOUNTS STANDING COMMITTEE
10 November 2004
DEPARTMENT OF CORRECTIONAL SERVICES: HEARING

Chairperson: Mr F Beukman (NNP)

Documents handed out
Department of Correctional Services Annual Report 2003/2004

SUMMARY
The Department of Correctional Service was asked to answer various questions about their use of budget reflected in their Annual Report. This had been their third consecutive qualified report from the Auditor-General (A-G). The Committee was concerned about serious management flaws and that the Department had not been entirely honest in their report. Members showed special concern about the money spent on information technology, Medcor, human resource management and the abuse of staff vacation and sick leave allowances.

MINUTES
The Chairperson welcomed the Department delegation, which had to appear before SCOPA because its Auditor-General's Report had again been qualified. The focus areas today would be on the internal controls, Medcor, information technology, human resources management and staff leave, and the use of consultants.

Department National Commissioner L Mti noted that the Department had studied the Report of the Auditor-General and accepted its findings.

Ms L Mabe (ANC) thought the main reason for the Department's qualified report had been it's medical over-expenditure, and noted serious internal control inefficiencies in the Department. Insufficient control meant that the White Commission's findings had not been fully implemented. There were also serious inefficiencies in the human resource management system and weaknesses in information technology. There must be serious financial problems as this was their third consecutive qualified report.

Mr V Smith (ANC) expressed the Committees sympathies about the events at C-Max prison the previous Sunday. He asked Mr Sloan, Chairperson of the Audit Committee, if he had had sight of the Audit Committee's report for the current year. Mr Sloan answered in the affirmative.

Mr Smith referred to the 2002/3 report around the effectiveness of the internal audit. The audit indicated that significant control weaknesses had been reported by the A-G about recurring non-compliance. He read from the current audit report and noted that the same problems reported in the same words. Perhaps this was a 'cut and paste' exercise, which should be considered an insult to the Committee's intelligence and contempt for Parliament. He asked the Commissioner to explain this. He also asked the A-G if it was acceptable the Audit Committees report was not signed.

The Commissioner responded that the report was no attempt to insult the intelligence of Members. The examples mentioned were a continuation of the same programmes. Even through the words might be the same, the figures differed.

The Department Chief Financial Officer, Mr P Gillingham, stated that due to the Department's restructuring, the formulation of new regions and the demarcation of management areas, the exercise had been redone.

Mr Smith gave further examples of identical reportage, and still felt much of the report was a cut and paste exercise. He then proceeded to the Strategic Plans 2002/2003 and 2003/2004, where one of the key objectives had been to enhance the capacity of the Department's core administrative functions, to be evaluated quarterly. The other was the training of management and staff on the updated audit framework and improved internal controls. He was concerned with all the problems referred to in SCOPA's resolution and the A-G's report, and lack of improvement. He highlighted lack of internal controls and independent review, differences in staff leave taken according to the register and lacking support documentation, control accounts not followed up regularly, inaccurate incomplete asset registers, differences between provincial administration systems and stock, and insufficient control over access to computer equipment. The previous year had depicted a similar picture.

Mr Smith continued that the A-G's report had indicated that for the last two financial years, instances of non-compliance had been detected and were recurring. The Audit Committee thought this was due to a lack of commitment by senior management. He asked the Commissioner to explain problems with the internal audit unit, and why are they unable to reconcile leave taken and leave that was reflected on the register. He could not understand how some of these problems could take so long to be resolved.

Mr Smith asked the A-G to explain why his report stated that the Department had 'come a long way', as he could not see this reflected in the reports.

The Auditor-General explained that in the past, there had been problems with internal controls and a lack of capacity within the internal audit unit. In the past year, the Department had filled the vacancies in the internal audit department. However, he was still concerned with the overall control measures and the internal control problems, that still did not seem to be being addressed.

The Commissioner stated that that they had appointed consultants to assist the internal audit unit, as they had experienced difficulties in retaining professional appointees. They had an asset register but there had been problems in transferring the asset management to the bar-coded system. There had been an improvement in the management of sick leave, but the issue also needed to be contextualised with the particularly high stress levels of staff in this Department. The move from a five-day week to a seven-day week system was contributing to the leave problem.

The Regional Commissioner of Kwazulu-Natal, Mr V Peterson, said the major restructuring process and strengthening management capacity were difficulties. They would be assessing the levels of non-compliance. In the improvement of management, considerable gains had been made and vacancies had been reduced. They had been concentrating on enforcing leave system compliance and had initiated 'leave audits'.

Mr Smith said the current financial report indicated that four senior managers had received performance bonuses at a total cost of R94 000. In job ranking Band A, two people had shared R28 000; and in Band B, one person had received a R28 000 performance bonus. Had these bonuses gone to officials in financial management, because they did not deserve such bonuses?

The Auditor-General stated that it would have been appropriate for the Department to have submitted an action plan with timeframes to SCOPA and to the Auditor-General's Office, so that they could assess progress.

The Commissioner concurred. The two performance bonuses mentioned by Mr Smith were for members of the financial team.

Mr E Trent (DA) stated that they had had an opportunity to visit the Modderby Prison. He had learned that there were large numbers of unfunded posts. The A-G said he was aware of vacancies in key areas of management, such as financial and human resource management. Considering that the Department sent R5 million of its R7.3 million on personnel, human resource management was a critical issue.

Mr Trent had taken out three key issues of the Department stated plan being a recruitment and retention strategy, the issue of the inception of a seven day four shift working day and the renewal of salary and benefits. What were the vacancy and skills levels in your human resource Department. Were there definite action and time frames in respect of the three issues raised previously.

The Commissioner answered that the major portion of the vacancies had been for professionals due to the fact that many processionals had left his Department and other state departments for greener pastures. The Department had undertaken a deliberate move to appoint two service providers to assists the Department to fill these vacancies. Even with outsourcing, recruitment had proved to be a difficult task. The critical post had been identified in terms of the new structure. At a senior management structure vacancies caused confusion as these posts have not been financed yet and therefore could not be viewed as vacant. The recruitment and retention of staff was a noble idea that the Department was striving towards. He was not entirely sure when this would be achieved. In terms of the seven-day establishment the Department had hoped it would be established by the first of October 2004 however there had been delays with the unions not being comfortable with the new arrangement. This seven-day establishment plan has financial implications as an additional 9000 employees would be required. The Department was in discussion with the National Treasury to find a solution as to how this could be phased in. The Department had hoped to be moving towards the system by the end of the financial year. The remuneration and benefit salary issue would be looked at by a Cabinet Member and is being looked at by the Minister because disparities had existed between the budget of this Department and other Department such as the police services for example.

Mr Peterson concurred and said the vacancy rate at corporate level nationally was 9%. The Department was making efforts to rectify this. Treasury had awarded R20 million for rural allowances and incentives for scarce skills in the medical profession to attract and retain staff.

Mr Trent commented that the Department should prioritise filling vacancies. The Department needed to stop the abuse of sick and disability leave because that was where much money was lost.

The Chairperson showed where the report listed 209 069 sick days and 69 530 disability leave days taken, at a cost of R81.459 million. When were corrective measures put in place, and had there been any improvement? Could the Department quantify these improvements and provide comparative figures?

Mr Peterson answered that in 2001, disability sick leave applications numbered 523, of which 433 had been approved. In 2002, the total application numbered 400, of which 98 had been approved. This year to date, 109 applications had been made, of which 39 had been approved. However, closing this 'gap' had opened a abuse of sick leave, but these statistics were not yet available. The inception on the seven-day week should solve this as the working week would be reduced, and stress levels would be lowered, thus reducing sick leave.

Mr Trent asked for clarity on whether there were monitoring systems in place. Mr Peterson answered that systems were in place and the compliance audit would indicate the success rate of these measures.

Mr Trent mentioned compared this to the Department of Defence, which probably had more employees and equal stress levels. The Department of Correctional Services paid out R31 million more than Defence.

Mr Trent asked long it would take to complete the verification of qualifications. Had any cases of fraudulent documentation been found, and if so, what action had been taken?

The Commissioner stated that the Department had to deal with some cases identified by the Commission of Inquiry, and various staff had been dismissed. Eighteen cases had also been identified by the Jali Commission and all these staffmembers had been dismissed. All senior management had had their qualifications audited by the Department of Public Services and Administration. The challenge now was check the authenticity of senior certificates. Three-quarters had already been verified.

Mr Trent asked if any progress had been made with the recovery of the salaries of 901 overpaid officials. The Commissioner stated that some individuals were still contesting the findings of the White Commission.

Mr C Wang (ID) asked what had informed the decision to use the Cybase program as it was outdated. With regard to the Microsoft choice, had they considered alternatives such as Linux that did not attract any licensing fees. He asked if the software support fees of R1 million only applied in Gauteng. Why did the Department decide to have a different date overlapping a licensing agreement with Novell? Why were there no service level agreements?

The Commissioner stated that part of the problem had to do with the turnover of leadership within SETA. The Department was convinced that not everything had been done correctly with Cybase. The Special Investigation Unit (SIU) was looking into this.

Mr T Motseki, Executive Manager in the Office of the Commissioner, stated that Cybase had been chosen because it met the replication requirement needed at that time. The plan was to pilot the program in Gauteng and role it out nationally. However the price for national rollout differed to the price of the quotation. An investigation was underway and the Department was in a disputed with Cybase. For the Department to increase its efficiency, they required ways of making the systems compatible. The Department was slowly moving towards using Microsoft that was three times cheaper. The Department had licence agreements for hardware. SETA's response had come long after a series of queries had been submitted. This had required the Department to be proactive in terms of placing orders in advance. The Department had a service agreement.

Mr Wang asked if the problem then lay with SETA. Microsoft might be three time cheaper in the licensing or support, but the hardware was not compatible to the software, so the Department required new hardware. Did the R51 million spent on computers include R12 million spent on service, as this was not visible on the site visit. Were there many instances of unauthorised access to computers for games or pornography for example, and what were the policies around the use of the internet?

Mr Motseki stated that the intention was not to blame SETA. Perhaps the restructuring of SETA affected their response. Attempts had been made to confer with SETA to resolve these issues. The Department had a program where compatible hardware was rolled out to the sites required and non-compatible hardware would be used for the training of staff and inmates. Their policy around the use of the internet was that people needed to apply for access. There was a monitoring structure in place.

The Chairperson asked if the estimate of the feasibility study regarding Department hardware was really outdated.

The Commissioner stated that the Departments resources were limited in terms of rectifying this problem and that better equipment was indeed required.

Ms L Mabe (ANC) asked why SETA had taken so long to respond to the Department.

Mr Govender from the Department of Public Services and Administration, stated that they were unable to respond to these questions. The Chairperson suggested that a formal request be made to SETA regarding the issue.

Mr Trent asked for the major areas where IT were required in the Department's duties. Mr Motseki stated that IT was required to capture personnel data and the details of inmates. This information was strategically important.

Ms L Mashiane (ANC) asked how far the Department had progressed with the implementation of the Public Service Co-ordinating Bargaining Council's Resolution 3 of 1999, and why had it taken the Department so long to implement this.

The Commissioner stated that it had taken staffmembers a while to accept this, but the Department recognised that it was not a negotiable matter. The one-third: two-thirds contribution would be implemented on 1 December 2004. The impact of this would be difficult for staff. Department staff had conflicting interpretations on how the Department was meant to comply with the resolution.

Mr Peterson stated that staffmembers had to bear the brunt of coverage reductions. This was a difficult matter because as members contributions had increased, the medical cover by Medcor had decreased. There has been uncertainty as to the required period to implement this.

The Auditor-General explained that the principle of the two third: one third contributions, had also emanated from income tax legislation. Had the Department considered the impact of not complying with the legislation?

Mr Peterson agreed that this failure had resulted in an addition tax liability for members at a cost of R 341 million. The view of the Department was that staffmembers could not be held responsible for this amount. As the Department did not have the funds, Treasury had been approached for assistance.

Ms Machine asked if there was a system to monitor the transfer of the contribution by the employees and employer. If not, what time frames had been identified for implementation? Was there a reliable database to implement the transfer of payments as required by section 38 of the Public Finances Management Act (PFMA)?

The Commissioner stated that the Department was preparing its transfer system to ensure the Department would be able to respond to these issues by 1 December 2004.

Mr Peterson answered that a system was in place that would specify the number of Medcor Members, and therefore technically what Medcor should get. The problem however was that the Department had continued to pay more that they should.

Ms Machine asked about the status of the case of employees found to be involved in medical aid fraud. How many employees were involved and what remedial measures had been taken?

The Commissioner stated that nine staffmembers had been found to be involved. Over and above the criminal investigation undertaken by the Special Investigation Unit (SIU), the Department had initiated its own internal investigation.

Ms Mshaina asked if the same process would be undertaken with excessive staff claims. The Commissioner answered positively.

Ms Mashiana stated that medical practitioners had been investigated and that seven had been arrested. What had the progress been there?

The Commissioner stated that approximately R1 million had been retrieved over and above the criminal charges that had been laid against them. The investigation had been spearheaded externally by the SIU. More money was expected to be retrieved.

Ms Mashiana stated that the A-G's report of 2004 had claimed that invoices were paid on face value against insufficient supporting documentation. The Department should have had a system in place to validate the accuracy of monthly payments to Medcor. An agreement indicating the financial responsibilities and commitments of the Department and Medcor, should have existed. Were there any monitoring mechanisms to remedy the situation of insufficient supporting documentation. Were there any plans to have a better system to validate the accuracy of monthly payment to Medcor? Had an agreement been put in place to indicate the financial responsibilities and commitment of each party?

The Commissioner stated that it would be possible for the A-G to monitor this.

The Auditor-General asked if there could be some mechanism to provide supporting documentation to verify the amount being paid to Medcor. The Commissioner stated that this would not be a problem.

Ms Mabe asked if there would be a service level agreement with Medcor. Mr Peterson answered that there would not be a service level agreement as this would contradict their legal advice.

Ms Mabe stated that the 2003/2004 report stated that the Department had spent R22 million on consultants. Why had such a large amount of money been spent, especially on the appointment of a transaction advisor. Had a feasibility study been done for the procurement of more prisons to the value of R40 million? Why had the Department not used the South African Management Development Institute (SAMDI) that assisted with capacity-building?

The Commissioner stated that the contraction of a capacity advisor had not been initiated by the Department, but by Treasury. SAMDI did not have the capacity to assist with the consultation.

Ms Mabe stated that R14.6 million was an excessive amount to spend on consultants, and asked Treasury to explain.

Mr J Johnson, the Treasury Director of Public Finance, answered that in terms of section 36 of the PFMA, feasibility studies had to be done before committing funds to major capital works.

Ms Mabe asked the Department of Public Service and Administration's opinion on the intent to use consultants to a larger extent. She asked about their findings and what had been spent. Had there been a transfer of skills?

Mr Govender explained that he did not have these totals with him. His Department had created a internal consultant service that could service all departments. Guidelines have also been provided on the contracting of consultants and the transfer of skills. Together with Treasury, they had factored in specific fee structures for the appointment of consultants.

Ms Mabe stated that the SIU report stated that R370 million had been recovered for the Department of Correctional Services. She asked if the money had gone to National Treasury or if it had been returned to the Department. The Commissioner answered that the money had been sent to Treasury.

Ms Mabe said she had raised the issue in the hope that this would assist the Department with its debt to Medcor issue.

The Chairperson asked Mr Johnson if the Department would receive the required funds to implement the seven-day establishment. Mr Johnson stated that the Department of Correctional Service intended to spend R770 million on overtime pay that would easily cover the cost of the implementation of the seven-day week. Treasury would recommend that additional funding be granted in the future.

Dr M van Dyk (DA) asked about the tertiary qualifications of the Chief Financial Officer. Had training been received at a tertiary institution on the implementation of the Public Finance Management Act? Had the Head of the Internal Audit Unit obtained officially recognised accounting and audit qualifications? What percentage of the personnel in the financial division of the Department had received training at a tertiary institution? What was the budget for the training of the accounting personnel?

The Commissioner answered that training was in the general budget and he would not be able to indicate what percentage was spent on accounts training. Recent appointments definitely were qualified. The Head of the Internal Audit Unit indeed had the necessary tertiary qualification. The Chief Financial Officer did not have the necessary qualification.

Mr P Gerber (ANC) stated that the cost per prisoner per day was R106 at state prisons, and R227 at private prisons. What companies were involved in the private prison contracts? How was it more cost-effective to have private prisons? Why was the Department closing prisons while they wanted to build new prisons too?

The Commissioner answered that the prison that was closed down had not been suitable to house human beings. The two controllers at private prisons only had to inspect its day-to-day operations and a unit at head office monitored the contracts. It terms of the figures, private prison did not make sense. However the issue was not as simple as that, and the contracts had already been entered into.

A Member asked if progress had been made with regard to the filling of vacancies. What was the problem with deducting the money from salaries that has been overpaid?

The Commissioner stated that the vacancies referred to were not funded, and therefore could not be viewed as vacancies.

A Member asked about the mechanism to deal with non-compliance in terms of the Basic Conditions of Employment Act. The Commissioner stated that mechanisms were in place.

Mr D Bloem (ANC) asked how the Committee could assist with security with regard to the events at C-Max Prison.

The Commissioner stated that proper infrastructure, improved technology, Information management and improved personnel, were all areas with which the Department would appreciate assistance.

Mr Trent expressed disappointment that the Committee had not got a direct answer on whether the situation would improve. Would the Commissioner allow contractors to exceed the capacity of private prisons.

The Commissioner stated that according to the contract, firms could not exceed the capacity of prisons. An action plan would be submitted to SCOPA on how the problem could be dealt with.

The meeting was adjourned.