A summary of this committee meeting is not yet available.
FINANCE PORTFOLIO COMMITTEE
24 August 1999
MEETING WITH JUDGE HEATH AND FINANCIAL MARKETS AMENDMENT BILL
Documents handed out:
Heath Special Investigating Unit Presentation on: Activity based cost structure and funding
Judge Heath from the Heath Special Investigations Unit (HSIU) presented the Unit's proposals to the Committee. Judge Heath said the budget allocated to the HSIU is not enough and puts the unit under extreme financial constraint. This financial constraint on the unit makes it very difficult for the unit to operate effectively. Staff of the HSIU have a large workload and are working overtime on a regular basis because of minimum human resources due to the lack of finances. A proposal was made that either the unit should finance itself by keeping a percentage of monies recovered or that foreign or private funding should be considered.
The Committee passed the Financial Markets Amendment Bill.
Heath Special Investigations Unit
The Chairperson invited Judge Heath, Head of the Heath Special Investigations Unit (HSIU), to give a presentation on the activities of the HSIU. Judge Heath introduced Mr Coetzee, an assistant, to do part of the presentation. Mr Coetzee said that the HSIU responds to all allegations and referred investigations. A case is only completed once recoveries have been made. Recoveries take the form of cash, assets, savings and prevention. Mr Coetzee said the activities and actual costs of the HSIU are financed by the budget allocated.
Funding of the Unit
Mr Coetzee presented the Basic Government structure and on the other hand the HSIU structure. The Basic Government structure is based on pre-determined operational activities. These activities are within a pre-determined time frame of 1 year from 01 April to 31 March. This gives effect to a zero-based budget for cost or expenditure. According to Mr Coetzee this structure is problematic and cannot be used when considering the activities of the HSIU. The HSIU structure is of such a nature that operational activities consist of pre-determined cases as on 01 April and (added to that) new cases received during the financial year. The HSIU responds to all cases and therefore it is difficult to plan how many cases will appear. The HSIU activities can also because of procedure and difficulty run over a time frame of one year. Therefore it is not possible to have a zero-based structure budget.
Considering the current activity-based costing Mr Coetzee said there are two options :
Remain within current expenditure allocations. This means a pre-determined flow of activities and costs, which would mean no additional cases after costing and no unexpected events. Furthermore the time constraint for activities must be enforced, all cases to be completed within the period 01 April and 31 March.
Remain within the objectives of the Unit. This means to allow objectives to control the flow of activities and costs. This will require additional funding from government and/or other sources of funding. Furthermore no time constraints for allocation of activities and allow balances to be carried over.
Mr Coetzee concluded that constraints are being put on the Unit and this makes it extremely difficult to operate efficiently under these financial constraints.
Judge Heath echoed Mr Coetzee's point that it is impossible to predetermine what costs are going to be. He raised the question of how investigators are to cope with the number of cases allocated to them without the necessary financial support. Furthermore supporting staff are working overtime on regular basis. Lawyers' tasks include not only the legal field but they are also required to play an advisory role to investigators, they are also working overtime and are expected to travel. Should this continue the Unit would be faced with a situation where it will not be able to take on further cases because of the shortage of human resources and finances.
Judge Heath said that in order for the Unit to run effectively 400 people are required and not 109 which are currently employed, especially when one considers that the Unit is nationally active. The Judge said at the moment the Unit is running a loss and cannot run effectively.
The Judge also questioned why the Unit could not finance itself by keeping a percentage of the money recovered. To assist in the current financial crisis of the Unit the US was approached, but unfortunately this was not successful since this body does not finance this type of activity. Furthermore the private sector is willing to spend money on this project, but often the question is asked to whom should the cheque be made out. The concern is whether monies donated will be used by the Unit or will it go into government coffers. It is proposed that mechanisms should be put in place to look into this issue.
A representative from the Auditor General's Office said the Auditor General's Office does not get involved in policy decisions or considerations. A report, which also considers the accountability of the Unit, has been submitted to the Department of Justice. He said that there is no consistency in the accountability of offices and that there is a need for the Treasury to play a more active role in accountability arrangements.
Mr L Green (ACDP) thanked Judge Heath and the Unit for a job well done. He questioned the disparities that exist between the Judge and the Minister of Finance concerning the figures of Savings and Prevention and asked whether this conflict had been resolved and whether the current figures reflect the position of both parties. Judge Heath said that the Minister requested that the figures be submitted for investigation to the Auditor General's office and this was done accordingly. It was also agreed that both parties would accept the outcome of the Auditor General's office investigation. The representative from the Auditor General's Office also responded that the current figures have been clarified by the Auditor General's Office. The R 1, 326,487,211 for Savings and Prevention included cash and assets recoveries (R60 370 744) which had also been reflected in error as a separate item in the HSIU's Total Recoveries as on 31 March 1999.
Dr G Koornhof (UDM) commented that 62% of the HSIU's budget goes towards salaries and asked whether salaries are market related. According to the Judge salaries are no longer market related because of the lack of money and already the HSIU lost two employees because of the low salaries.
Dr Koornhof furthermore asked the Auditor General's Office whether Option B proposed by Judge Heath, which will allow other funding, is acceptable. The Auditor General's Office responded that current legislation does not allow for this to happen. This in itself requires a policy decision to be taken and the Auditor General's Office does not get involved in policy decisions. It is an option but must be very carefully investigated and researched and amendments of legislation must be considered.
Dr G Woods (IFP) asked the Judge to give some thoughts to tightening up and not taking on so many cases, as work done by the HSIU is also being done by other departments, for example litigation carried out by the Attorney General's office. The response was that the HSIU investigations are not criminal but rather civil actions. It will take longer to allow litigation to go through the Attorney General's office, because of the long nature of civil proceedings in South African courts. The matter can be dealt with and disposed of simply and quickly in the Special Tribunals. Furthermore the HSIU has developed short cuts to shorten the whole process.
Dr L Luyt pointed out that during actual investigations of cases more cases come up, which as a result increase the HSIU's workload, he then asked whether the HSIU has the power to indict someone. The Judge responded that it is true that other cases do emanate from cases investigated and the HSIU must consider them as well. Concerning indictments the HSIU does have the power to take immediate action by issuing an interdict by using the Special Tribunals; in extremely urgent cases, Judge Heath can personally issue an interdict.
Mr B Turok (ANC) said that the HSIU is perceived as rendering a special service and therefore asked whether there is a time frame set for the service to be provided. The Judge said that the HSIU does not have any time frame and should be a permanent institution. The Judge expressed the view that corruption will never come to an end and therefore the HSIU's role will continue.
The Committee recommended that State Expenditure must enter into talks with the Attorney General's office pertaining to the accountability arrangement. A representative from the Attorney General's office said that such talks are welcomed and that six weeks would be enough to put a time frame in place for these talks. The issue of uniformity of accountability would be discussed at these talks. He also noted that legislation regarding accountability was in the pipeline.
Concerning the funding of the HSIU the committee recommended that the HSIU must engage in talks with the Department of Justice concerning the proposals made by the HSIU. Mr Ebrahim from the Department of Justice agreed to this arrangement. Mr Ebrahim also agreed to submit a report by the end of October about the progress made.
Financial Markets Amendment Bill
The Chairperson said that no submissions had been received on this Bill and the Committee therefore passed the Bill.
Since there were no further matters to be discussed the meeting was closed.
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