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PUBLIC ACCOUNTS STANDING COMMITTEE
8 March 2005
STATE INFORMATION TECHNOLOGY AGENCY (SITA) FINANCIAL STATEMENTS 2003/04: HEARING
Chairperson: Mr F Beukman(NNP)
Documents handed out:
SITA Annual Report 2003/04 (not yet tabled in Parliament)
Auditor General’s Report
The Committee held a hearing on the Auditor General’s 2004 Report on the State Information Technology Agency (SITA). Questions were asked on the following matters: governance structure, transfer to accrual accounting, the Gateway project, service delivery and client relations, PFMA compliance and special investigations on procurement. The Committee was informed that the Gateway project had resulted in huge losses due to a lack of proper financial management. Therefore the alleged irregularities in the running of this project. The hearing was told that only R18 million of the budget allocated to this project was recovered and the R82 million outstanding was unaccounted for. There were no timeframes set to recover the monies.
The Committee discussed the reluctance of government departments to use SITA because of its poor performance track record. The Agency was encouraged to create a climate for the proper management of finances and information systems. This would change the perception that SITA was a bad option.
The Committee probed the CEO of SITA, Mr Mavuso Msimang, about matters raised in the Auditor General’s 2004 Report on SITA financial statements of that year. As the Accounting Officer, Mr Msimang, provided some introductory remarks, saying that he had joined the organisation six months previously and that there had been a serious influx of problems stemming from the 2003 period. His main task to date had been to correct what had gone wrong. He was in the process of restructuring and one of his first efforts was to appoint a new Executive Committee, which had now been in place for six months. There had been major reorganisation of SITA's structure. He said he would welcome the opportunity to explain matters.
Ms Mashiane(ANC) required an explanation about the term of office of SITA directors. She put it to the CEO that their terms of office may expire simultaneously which would risk the continuity of the work of the board.
The CEO explained that the term of office of directors did not expire at the same time. The term of office of directors had been increased from three to five years so that they would not retire/resign at same time. The likelihood of such directors retiring at the same time was minimal. The CEO indicated that it is in SITA’s best interest that continuity of board members is established.
Mr Fakie urged the CEO to design tenure of board members in a manner that would not compromise the accountability of SITA as state agency.
The CEO said that currently the new board members were placed on a standard contract. These new contracts were currently being phased in and directors were not appointed at the same time.
Mr Fakie commented that SITA falls under the operational responsibility of the Department of Public Service and Administration (DPSA) to which it was accountable. However, the ownership of its systems lay with the National Treasury. [PMG note: The IFMS is a joint National Treasury, SITA and DPSA initiative to manage the evolution of government’s transversal IT systems so as to conform to business and legal requirements in a cost-effective manner. The IFMS project is an integration and migration of government Finance, Human Resources, Asset Management, Logistics and other line of business solutions, into a single distributed transversal system. The infrastructure of such a transversal system should support interoperability and leverage the e-Government opportunities].
The CEO replied that such issues were addressed through the integrated financial management system (IMFS). This system was a management tool for the transversal system.
Ms. Mashiane asked if timeframes had been set to develop the full IFMS.
The CEO conceded that it would take long to develop such a system. The IMFS was a major project driven by the National Treasury over a period of 10 years. The estimated cost of implementing it was around R10 billion.
Mr Fakie required an indication of the extent to which the IFMS was being extended to departments. The CEO indicated that SITA was responsible for IT support of government departments. However these departments were using different IT systems. It was necessary that SITA transfer the different systems to a single entity. Therefore centralised control was the main focus of SITA. He indicated that there were ongoing debates around the issue of whether "same size fits all". Mr J Jacobs(National Treasury) added that this integrated IT system was at a developmental stage and discussions were continuing.
The CEO told the hearing that SITA wanted to improve service delivery and communications both internally and externally plus ensure financial sustainability of state departments through efficient IT support systems. In addition SITA wanted to ensure that procurement policies and standards are adhered to through best practice. There were attempts at SITA to minimise the level of corruption and fraud. The Committee heard that SITA had whistle blower policy and an anti fraud prevention team. This team was independent and was guided by a code of ethics. The various regions were being given workshops on the code of ethics. Employees and suppliers were urged to report incidents of corruption and fraud to the anti-fraud unit.
The CEO held the view that internal financial controls at SITA were adequate as supported by the internal audit committee report.
Ms. Mashiane required an explanation with regard to the constant complaints from a broad range of users of SITA services. She asked if there was a mechanism for dealing with these complaints.
The CEO was aware of the outcry and said efforts were being made to improve service delivery. SITA had developed a scorecard with which end-users could rate quality of service offered. He was confident that these complaints would diminish with time.
Transfer accrual accounting
Mr Beukman asked if SITA was strategically placed to implement the transversal system in government departments.
The CEO responded that the IFMS was the driving force behind the implementation process of the transversal system. However he noted that it was difficult to determine whether this could be achieved without duplication.
Mr Beukman wanted clarity on the role played by SITA in co-ordinating the IT work of departments.
The CEO agreed that core role of SITA was to co-ordinate the IT of government departments. However such co-ordinating role must be restrictively interpreted. Further there was little SITA could do to compel departments to utilise its services. SITA lacked the authority to do so as it was a creature of statute. SITA could only do what is prescribed in terms of legislation
Mr Fakie interjected and said that SITA was indeed capacitated to deal with issues of compliance by departments. In addition there were stringent requirements placed on departments in respect of the Public Finance Management Act (PFMA). The departments were further pressurised by the requirements of the Accounting Standards Boards. The Auditor General concluded that it was incumbent upon the government departments, SITA and National Treasury to formulate a well co-ordinated financial management strategy.
Mr Beukman asked if there was a task team assisting departments to streamline their accrual accounting systems in order to avoid departments doing their own thing.
The CEO again requested that National Treasury take the lead in replying to this question. A representative from Treasury said departments were being encouraged to co-operate with SITA.
Mr Beukman asked if SITA had the best model to ensure compliance by various departments.
The CEO remarked that the poor and inefficient showing by SITA had led to departments having a lack of confidence in SITA. However things were improving as there was better efficiency and SITA was talking to such departments.
Mr Fakie also highlighted other reasons underlying the lack of confidence in SITA. He commented that departments were under pressure to comply with PFMA requirements. Under this sort of pressure department approached the private sector and avoided choosing SITA. He noted that departments were not experts in implementing IT programmes. They therefore needed a partner that could confidently help them to bring efficiency to their departments.
The CEO said that SITA was well placed to provide IT support to government departments. SITA had also delivered in assisting various schools and colleges with the monitoring exam papers. He noted that 42% of SITA’s work was based on IT support for the payment of department salaries.
Mr B Pule asked for an explanation on the steps taken to roll out the Gateway project. Who were the role players involved in the project? He also asked for feedback on the negotiations between DPSA and Public Works.
The CEO replied that an audit of the project had been completed. The audit found much wrongdoing due to lack of good governance. The Department of Public Works had refused to take responsibility for the alleged irregularities in the project. Even though key role players had left the Gateway project, SITA has approached lawyers to pursue legal action. Legal action would be pursued against individuals and companies allegedly responsible for such irregularities. The CEO expressed disappointment at the findings of the audit report on the Gateway project and called it "a shameful episode". However he assured the Members that disciplinary action was being taken to ensure that the culprits were brought to book.
Mr Pule wanted to know who were the role players in the Gateway project.
The Committee heard that the project was initiated by the DPSA in conjunction with the Minister of Public Works. SITA was appointed as an IT advisor to the project. The decision making by the steering committee was terrible and fell short of good governance. The committee had approved the use and payment of millions of rands without properly discussing such payment. The audit committee found that R28 million had been spent extravagantly on telephones and payment of suppliers. The audit also revealed lack of planning and management. Further the project did not comply with SITA’s own procedures and policies for procurement.
Mr Pule wanted to know if the individuals responsible were held accountable.
The CEO replied that the letters had been written to these role-players and responses were lacking in regard to their respective role in the project. He assured Members that SITA was determined to recover the loss incurred through wrongdoing.
Mr Pule asked if there were any structured plans to improve project management at SITA.
The CEO replied that they were in the process of developing a Master Systems Plan similar to the one allocated to Parliament.
Mr Pule wanted to know about plans to speed up the transformation at SITA in order to implement equity. It was observed from the report that the demographics showed only a slight change in equity. It was submitted that 70% of contractors doing business with SITA were white. Remuneration of contractors by SITA amounted to R36 million.
The CEO replied that it was really problematic to implement equity employment at SITA but SITA was committed to affirmative action and transformation of the Agency.
Mr V Smith submitted that in regard to performance contract, the period of service could not be reconciled with bonuses given. In another instance a manager was given R45 000 as a performance bonus when she had only been with Agency for 3 months. Another senior manager received R500 000 as a performance bonus. In one case, a senior manager had received a performance bonus in excess of his gross salary.
Mr Smith asked for an explanation why certain management officials were being given extravagant bonuses. He strongly challenged the current structure of such contracts and required an explanation.
The CEO answered that there are discrepancies in salaries at management level. In addition the contracts of directors on the same level are not the same. Therefore there were different contracts for directors at management level. The CEO added that although SITA was part of the public service, their salaries were in line with the IT industry. But it was necessary to overhaul the salary structure to correct the situation.
Mr Smith asked if there was framework to ensure compliance with the provisions of PFMA.
The CEO stressed that such a framework had already been approved by Auditor General and Minister.
Mr Beukman asked if anyone has ever been suspended at the Agency.
The CEO replied that a certain Peter Modise was suspended by the Agency in July 2004.
Special Investigation on Procurement
Mr Trent (DA) asked why the Agency was unable to get requests for provision of IT support systems, especially from various government departments. He submitted that the departments were purchasing management information systems from other suppliers at huge costs to the State coffers.
The CEO replied that the trend was as a result of lack of efficiency at the Agency. However he blamed department for their failure to comply with legislation establishing the Agency. The Agency was signing service agreements in an effort to improve efficiency. The Agency has been approached by some municipalities and it was negotiating with certain provinces. Therefore the Agency is hoping to provide information management systems to provinces such as the North West, KwaZulu-Natal and Limpopo.
Mr Beukman submitted that the National Treasury could play critical role in assisting the Agency to deal with matters.
Mr Jacobs (NT) agreed that the National Treasury could assist in ensuring departments comply with legislation . However he noted that current legislation and guidelines related to procurement work had loopholes and requires amendments.
Mr Trent probed the CEO on the fixed properties and costs of their transfers into the deeds registry.
The CEO replied that transfer of properties like Centurion was finalised and papers were lodged with the deeds office. But transfer of properties like Beta and Numerous was not yet finalised. Where there was delay in the transfer of properties, this was caused by lack of plans and proper records of costs and value of such properties existed. Mr Beukman asked if SITA was responsible for the ransfer of properties in question. The CEO replied that the Agency was merely responsible for the technical aspects of transfers and Public Works Department was responsible for entire transfer process.
Mr Trent wanted to know if progress had been made in regard to investigation of the e-government tender. He submitted that there were alleged irregularities as guidelines were not followed. The tender relates to supply of e-government systems at an estimated cost of R11 million. It is alleged that some suppliers had unfair advantage during the tendering process.
The CEO told the Committee that the investigation was continuing but could not give a detailed report on progress. However the CEO undertook to provide the Committee with written report on progress made.
Mr Beukman asked if the Agency had correct mechanisms in regard to procurement work.
The CEO replied that things were being reorganised at the Agency. The new executive committee evaluates tenders and makes recommendations to the accounting officer. The management structure and information management systems were being upgraded.
Mr Gerber (ANC) submitted that the Unemployment Insurance Fund had purchased IT systems from Siemens after entering into short term contract with them. The IT equipment cost about R15 billion and was bought with the approval of the Labour Department. He asked whether any safeguards existed in relation to such contracts and wanted clarity on the role of SITA.
The CEO said he was aware of the existence of a ten-year contract between the Labour Department and Siemens. He submitted there was little SITA could do with such contracts. SITA had no authority in terms of its legislation to intervene where contracts had already been made.
Mr Gomomo (ANC) appealed to Members to assist SITA to execute its legislative mandate. He urged the CEO and management of the Agency to set timeframes within which money owed to the Agency could be recovered. In particular he referred to the R53 million lost in Gateway project. Further he cautioned the Committee not to criticise the Agency but help to persuade departments to work with SITA.
The CEO welcomed the comments made and said the Agency would delighted to get such assistance from Parliament.
Mr Sithole (ANC) asked if SITA was providing IT support for municipalities who were the service delivery arm of government.
The CEO responded that the Agency had done a pilot project where IT support was needed by a municipality in North West. The North West provincial government had expressed interest in working with the Agency. He expressed hope that the Agency’s involvement at local government would increase.
Mr Fakie submitted that although the Agency was a public entity, it must operate on business values to build credibility. In this regard he recommended that the Agency do client survey. It needed to create a climate for the proper management of finances and information systems. He argued that addressing these issues could change the perception that SITA was a bad option.
Ms T Tobias (ANC) expressed concern that the Committee was rather powerless in ensuring that parastatals and government agencies were fulfilling their mandate. She said that the Committee was given Annual Reports and only asked for explanation from representatives. Mr Ngubane(ANC) agreed that the role of the Committee was to provide oversight. Therefore the CEOs of state agencies were obliged to fully account for their organisations before the Committee.
Ms Mashiane asked whether Department of Public Service and Administration as shareholder was satisfied with work done by SITA. She hoped that government departments would begin to use SITA as a preferred supplier of for their IT support requirements. In addition she hoped that the millions outstanding in the Gateway project would be speedily recovered and negotiations finalised.
The meeting was adjourned.
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