Budget and Integrated Implementation Plan: briefing

Meeting report

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE
14 May 2001
DEPARTMENT BUDGET: BRIEFING

Chairperson: Adv. J De Lange

Documents handed out:
Briefing to the Portfolio Committee on Budget 2001
Position of Acts: 30 April 2001
Department of Justice And Constitutional Development Legislative Programme 2001
Establishment of Justice Resources Trust (see Appendix)
Report on the transformation of State Legal Advisory services
South African Law Commission Programme
Budget Vote 22

SUMMARY
The Department of Justice presented on its 2001/2 Budget and new Integrated Implementation Plan. The Director General was present, together with the heads of the newly created business units. The Department had realised that there is lack of proper management systems. Business Against Crime has seconded a Chief Financial Officer to the Department of Justice to institute proper management systems. The Department has been divided into business units based on the functions carried out.

MINUTES
The Chairperson requested a specific briefing around the budget for the courts as well as the budget for the Master's Office.

Address by Director General
Mr Pikoli, the Director General: Department of Justice, mentioned that the Department has engaged in the process of restructuring the budget so that there is more emphasis on equitable distribution of the allocated amounts to the courts and other structures that form part of the Department. Since last year the Department has embarked on the Integrated Implementation Plan. However, this process has not been entirely devoid of problems. Focusing on the problems surrounding the issue of the spending of past budgets, he acknowledged that the Department has been criticized by the Standing Committee on Public Accounts (SCOPA). Furthermore, there have been problems surrounding lack of proper financial skills, especially in the former homeland areas where people were not adequately trained in financial management. The Department has decided to devise a strategy to manage courts. He said that this was necessary as some courts have good infrastructure and others are in a state of disrepair especially those in the rural areas. It was the intention of his Department to look at how it could address this problem.

Mr Pikoli noted that Mr MacKenzie, a chartered accountant seconded from and paid by Business against Crime, was the new Chief Financial Officer and he would address the committee on the Budget.

Discussion
Imam G Solomon (ANC) commended the Director General's plan but stated that the plan is long term and there are many current administrative problems. The Imam wanted clarity as to what interim plans were in place to work through problems that presently exist and could be solved immediately, thus keeping the machinery going.

The Chairperson agreed and suggested that a small group should be assigned to deal with the day to day problems that could be responded to quickly. He commented that if you send notice of a problem (that could be ironed out immediately) to National Office, such notices lie in piles and are often sorted out only five years later.

The Director General agreed that whilst they are looking at the big picture, everything else cannot be at a standstill. He understood the Committee to be referring to management problems and people problems (in terms of the attitude of people on the ground) and they were attending to this on a daily basis. He said that they realized that they needed to make emergency interventions in terms of training. For example in the former homelands, they learned that 800 magistrates had not received any formal training but were sitting on the bench and about 600 prosecutors were in a similar situation. The Justice College has highlighted the problem and made an emergency intervention through donor funding. They have appointed 15 tutors to conduct the necessary training.

He stated that another issue is that people do not want to be accountable. Officials on the ground do not make a proper analysis of their budget. He cited a case in a Grahamstown court where letters were not going out because there was not any money to buy stamps. As an intervention, Department personnel will be doing the rounds of all the courts and sub-offices and sometimes make unannounced visits. Also, a team of managers from the Department will go in, identify problems and design programs for management as well as financial and risk management programs. He stated that they will have ongoing training programmes to give people the necessary skills.

Mr Pikoli said that it is difficult to force people to work and last year the Department had the highest number of misconduct cases. As a means of intervention, the Department has tried to decrease the backlog of misconduct cases and hopes to clear this by June.

He agreed that they need a twin strategy in terms of looking at the broader issues that require time and also attend to issues that could be sorted out now and not left for tomorrow.

The Chairperson stated that the Director General had pointed out the problem but had not put his finger on the solution. There did not seem to be any response mechanisms at the National Office to deal with urgent issues. The Chairperson noted that in the Gauteng Office there were huge piles of correspondence that had not been attended to. He stressed that the Director General's Office should pay heed to this and cited an example of the Free State court that could not run due to their being unable to pay for petrol. He suggested that incompetent people should be sacked .

Imam Solomon yet again stressed that the Department was not able to handle practical issues and wanted to know what measures were in place to handle urgent problems. For example how effective would the Master's Office be in handling an urgent problem or a court in Solo which needs a two-way television be able to handle child abuse cases. In terms of the budget, this would cost a couple of thousand. If this were put to the person who handles the court administration plan, would he be able to look at and handle the issue quickly?

The Director General replied that the defining feature of the new Integrated Implementation Plan was that of responsibility, authority and accountability. In the new structure there are heads for each business unit and each head has been empowered to deal with issues that fall within that mandate immediately. They are trying to cut down on bureaucratic red tape that results in inefficiencies and delays. Another new feature is the creation of an operations room at head office called the 'war room' were they would have a clearer picture of what is happening throughout South Africa.

Department's Budget
Mr Mackenzie, Chief Financial Officer, said that he realized from his experience on the ground that the Department could not wait for the macro plan to be fully implemented before reaching a point of effectiveness, rather it is an issue of dealing with the obvious and people taking responsibility within their designated fields.

Discussion
Ms S Camerer (NNP) referred to the Master's Office. She noted that it was a vital part of the Department Of Justice and wanted clarity as to why the position of Chief Master was vacant and when the position would be filled.

The Director General explained that the Department has identified that the Master's Office is not adding value because of the way in which it is structured. The Department is addressing it as a standalone business unit thus making it work as a properly managed office. He referred the issue of the vacant position in the Master's Office to the head of the Master's Office Business Unit, to be addressed later on in the presentation.

Mr Swart (ACDP) asked for clarity on whether the integrated justice system functions effectively? He used the example of the Department Of Works input in the Justice System in the form of the cleaning staff and the effectiveness of the police transfer of prisoners to the court. He said that the integrated departments may work on a National and Provincial level, but not at grass roots level in the courts. The Chairperson noted that the above question would be answered later on in the proceedings.

Mr MacKenzie outlined how the new plan, Integrated Implementation Plan, for the Justice Department came into being and listed the work he has done since taking office:
- The plan for the Department is two months old. He presented these plans after a week of analysis at the Department and his plans are far ahead of schedule. As financial Officer he is certain that they would meet all deadlines within the next six months. After six months the plan will depend on finance and so he will reserve judgement thereon.
- In implementing the plan for the budget or financial services, they looked at the culture, systems and processes, and structure of the Department of Justice.
- In their assessment, they found that a third of the posts within the Department were vacant. They went door to door within head office, regional offices and some sub-offices. They have drafted a huge document with the names of employees and what they did. They have taken these duty sheets and flowcharted them. From this they were able to assess the inputs to the outputs.
- From the charts they were able to draft a schedule as to what needs to be done in the Department, by whom, and by what date. From the flowcharts they realized the extent of work within the Department that was non-productive.
- The different sections within the Department of Justice have presently been broken up into business units and each of these units would have its financial centre and report to the main financial service centre. Each centre would each be responsible for their own financial statements. This is still a decision to be taken by the National Office.
- From this, flow charts will be formulated, tasks and duties would be decide upon and this will decide the posts that need to be created.
- The Department's communication and technology sectors would be improved.
- This plan is to be tabled to the Board with all its financial implications and the plan will be implemented over the next six months.

The main areas within the financial plan are:
a) Budgeting
b) Transactions
c) Procurement
d) Deposit account
e) Donor Funding

Budgeting
Mr MacKenzie stated that the budget proposal included different views on the budget. On the
17 May 2001, the business units are due to meet and convert the budget process into a cost centre approach called a base 80 approach. Each business unit will take their current budget, put 80% on the top line and the 20% taken off as the marginal items these units will require.

For the future, a Costing Unit is planned for the Department. Its duties will include an assessment of a court which will then be costed and right sized in accordance with the work required for that particular region and the population that it serves. The idea of the Costing Unit will only develop over time. Thereafter the Department will be able to effectively cost the work that it does and determine how much it costs to provide services.

Currently the Department merely allocates a budget and the various sub-departments have to make do although the Department was not actually aware of how much it really cost for the sub-departments to run.

The idea within the Department of Justice is to 'Budget For Success' that is, to do everything at an approved level of service: provide a service at levels ABC, level D is unacceptable.

In the past, the budget was allocated in a geographical and hierarchical way, as opposed to a functional view. Consequently in the courts the allocation money was at a provincial level and that budget was under the control of the Regional Director. The Finance Officer in a court reports to the Magistrate who in turn responds to the Chief Magistrate. The reporting would then be to the regional level namely to the regional accountants who report to the regional director. With the new system, a Chief Financial Office will be the support centre, creating financial reports.

In summary, the focus of the new budget system is to create a cost-centred driven approach to budgeting where people at individual court houses can see what their budget is and they will be responsible for accounting for that budget. They will be serviced by more staff if needs be. But, the above are still proposals that have to be first approved by the Board.

Discussion
Ms. Camerer wanted clarity as to when the budget would be finalized. This was important as the Committee could only ask clarity on what was deemed to be the final budget.

Mr MacKenzie made an undertaking that the budget would be finalized on 24 May 2001 after the Board sat. He advised that the budget has been allocated, but some departments were asking for more funding. For example, the National Prosecuting Authority has asked for 48 million in order to clear backlogs by working on weekends over a short period of time. Also, the Gauteng region is looking for another 38 million. The Department and the Board will consider this in regard to reallocation and reprioritization but the budget has been set.

The Department has undertaken that Mr MacKenzie will spend one day a month at an office in Cape Town. Any persons wanting clarity can meet with him and he will explain some of the plans, models etc.

The Chairperson asked what Standing Committee on Public Account's response was to the spending of the past budget.

Mr MacKenzie replied as follows:
- SCOPA questioned Mr Mackenzie's time and availability to the Department of Justice and whether it would be sufficient to address the problems.
- They questioned the issue of unauthorized expenditure.
- Whether capacity building exercises had started.
- The issue regarding the deposit account.
- SCOPA noted that there was a lack of management through information systems within the Department.

Mr MacKenzie explained that with reference to the deposit account, he has made a detailed written account of a special audit on the deposit account. SCOPA has also asked the Auditor General to submit an account, but the report is not out yet.

On the issue of unauthorized expenditure, 43 million rands was deemed to be unauthorized spending. For the last three years, the Department has exceeded its budget, and SCOPA was very concerned and thought this to be a lack of effective budget control. He stated that due to the Department's lack of management information systems, the Department did not realize their financial standing and that they were overspending. Last year, there was under spending in some Departments although the records showed that there was overspending. Accordingly he agreed with SCOPA that there is a need for the new information systems that are proposed under the new Financial Office.

The Chairperson asked Mr MacKenzie to explain why there was under spending in the face of courts that needed money?

The Director General responded that there was under spending at the Office of the National Public Prosecutor because the Department was unable to fill a position. Also, there were monies outstanding from the other Departments within the Integrated Justice System.

Mr Pikoli stated that there was overspending in the area of personnel management but this figure would change once all reports come in from the various sub-departments. R 97 million was deemed to be overspent last year, although this is not the final figure as the books are not closed as yet. New information is being sought as to the exact amount but the information comes from the regions and this is a slow process.

Mr Pikoli once again stressed the need for a budget and a set of monthly accounts. He suggested that in the future, they would be able to make sense of last year's statistics of an under-spending of R 40 million in the lower courts and an overspending of R 20 million in the higher courts. He stated that these accounts were unaudited accounts but still raise warning lights.

An idea within the new system is that together with the new budget, there is a need for a new management structure. The Department requires self directed work teams rather than about six layers of managers. Instead the higher level jobs will be for people with technical abilities to run the costing of the various sub-departments.

At this point the Chairperson summarised the Department's plans as follows:
1) The Department has put a Chief Financial Officer in place.
2) Business units have been established, the head of each unit is directly responsible to the Chief Financial Officer for necessary training capacities.
3) There will be monthly expenditure checks in each business unit thus curtailing overspending.
4) Staff complements will change.
5) There will be a creation of a costing unit wherein they will ensure that legislation is not merely passed, but the Department would make certain that there is also sufficient money.
6) There will be an internal audit unit making sure that all of the above is implemented.
7) The Department will establish a whistle blowing hot-line in order to limit corruption.

Mr Swart (ACDP) wanted to know to what degree the Department will be able to get feedback from the lower courts? Mr MacKenzie said that he could not answer the question but would hope that it got better and better.

Imam Soloman asked if the internal audit units were to be part of the business units, that is, someone would see a problem, put his finger on it, and do an audit thereon.

The Director General replied that the audit team was an outside consortium namely Price Waterhouse. The audit committee was an independent committee and the chairperson was a Judge. The Department was building an internal audit team made up of graduates who are presently assisted by the external audit team thus building that kind of capacity within the Department.

The Chairperson referred to domestic violence and maintenance cases (were there has been an increase of cases), and asked how the costing unit would work within this environment. Mr Mackenzie replied using business principles: the business units will be deemed to be the clients of the financial services, these clients would have to be mentored and managed. He attempted to explain as per a flow chart.

Client-------------------interface-------------------costing, support division, contract division
1^st tier 2^nd tier 3^rd tier

---------outsourcing business units
4^th tier

The Chairperson asked for clarity on the Deposit Account.

Mr Mackenzie stated that SCOPA had requested that the Attorney General do an in-depth analysis on the deposit account, this report has not yet been published. The audit was done on 10 April 2001. De Loitte and Touche confirmed that the deposit account was unauditable. More than one hundred offices were audited, but ninety percent of these were deemed to be non-compliant with accounting principles.

The Chairperson asked if the Department would erase the past and start again.

Mr MacKenzie stated that the Department had spent many hours deciding on a means to solve the problem with the deposit account and had come up with the idea of
replacing the cash office within the courts with a Post Office. The Post Office would have a cash bank. He used the example of maintenance money, where there is a burden on the payee to make payment where the mother would receive payment. They realised that there was a burden on the payee if he lived in an urban area and the mother in a rural area. They propose that an electronic bar code be attached to the identity document of the mother and this would be picked up at the post office and payment would be made to her. They realised that most women relying on the maintenance courts are unbanked [do not have a bank account]. Most banks did not want the unbanked to be part of the queue at the banks and thus they were not able to get the banks to adopt the system. Therefore, the post office route within the courts was sought.

The same system would apply to payments of bail, which could be paid at any point. They envisage having one post office in each magisterial district.

The Chairperson wanted to know how long it would take to roll out the project. The Department's response was that they did not know at this stage.

Furthermore the Chairperson wanted to know how much the Deposit Account accumulated daily. The Department was again unable to respond.

The Chairperson asked how the post box system tied in with the Guardian's Fund?

Mr MacKenzie responded that the Guardian's Fund was managed by an ineffective system, and that the audit company De Loitte has gone in to do an audit. At this stage they have not considered whether the post box system would work.

The Chairperson noted that while on a visit to the Master's Office in Pietermaritzburg, he observed that there were no backup copies of the documents that were handled at the office. He asked that the Director General issue a direct order that photocopies of the documentation be made.

Ms S Camerer asked how much of money was handled by the deposit account on an annual basis. Mr Mackenzie put it down to approximately R 1.9 billion, almost R2 billion. The Department thought that it would be almost two years from the end of this month before the Post Office system rolled out, first to the major areas then to other areas.

The Chairperson asked what the interim measures would be? Her pointed out that in some areas, the court staff were transporting money to the bank. This was unacceptable policy.

The Director General stated that the proposed system within the Department was like setting up a delicate nervous system. In order for the post office system to work, information technology structures had to be set up. He explained to the chairperson that the Department was negotiating a number of tenders to establish a cash in transit system to transport money. This issue lies within the Department of Safety and Security. Also, 4000 posts would have to be filled to assist this process.

Mr MacKenzie detailed other problems on the ground especially with regard to the Umlazi Court where there is a lack of security. The people there hid under their desks every time a shot is fired, also the security is so poor that people can just walk off the street and onto the roofs of the court and they panic whenever the prisoners van comes in.

The Director General stated that this and other problems would be ironed out by the Department.

The meeting was adjourned due to time constraints.

Appendix:
DEPARTMENT OF JUSTICE AND CONSTITUTIONAL DEVELOPMENT

ESTABLISHMENT OF JUSTICE RESOURCES TRUST
The main objective of the Justice Resources Trust is to provide the Masters' of the High Court with resources, by way of funding or in kind, for the more efficient delivery of services to the fiduciary services industry and the general public.

PURPOSE
The purpose of this Memorandum is: -
1.1 To inform the Board of the exact nature of the Justice Resources Trust; and
1.2 To obtain approval for the formation and objectives of the Justice Resources Trust

SUMMARY
2.1 The idea of the Justice Resource Trust was conceived as a result of, inter alia, the significant role the Master of the High Court plays in the lives of most South Africans irrespective of colour, creed and background as well as financial institutions. The Master is also involved in the administration of deceased's estates, trusts, insolvency's, liquidations, estates of minors and persons with disabilities.

2.2 The main business of the Justice Resource Trust will be to obtain funding and resources from the private sector in order to supplement and satisfy the needs of the Masters' of the High Court in South Africa in order to ensure enhanced service delivery to fiduciary services industry and the general public.

2.3 In order to undertake the above-mentioned, the Justice Resource Trust will be guided by an Advisory Board, which will be convened and constituted by the Masters' of the High Court. The Advisory Board will identify critical resource needs and present it to the Trustees for the allocation of resources, be it cash or kind.

2.4 The proposed Justice Resource Trust will yield the following benefits:
Improved service delivery in line with the Batho Pele principles
Private sector fiduciary services practitioners will be able to participate through funding and representation on the Board of Trustees of the Justice Resource Trust
Jobs can be created
Serious consideration can be given to discriminatory legislation and the rationalisation of legislation pertaining to the administration of estates
The Justice Resource Trust will create the infrastructure and platform, which can become a powerful departure point for long-term development such as the Central fiduciary website-online communications, Probate registry (streamlining and fast tracking current processes) and a Central South African Wills Registry.

3. DISCUSSION
3.1 Background
The proposed Justice Resources Trust was borne of the following factors:
The economic significance of the Masters' Division in re-circulating millions of rands, which become frozen in deceased and insolvent estates annually, back into the economy through the processing of such estates to finality;

3.1.2. Recurring bureaucratic red tape which has prevented the Masters' Division from coping with the demands of population and economic expansion through lack of resources and revised work structures;

3.1.3 The financial harm suffered by the banking sector, trust companies, insolvency practitioners, attorneys and chartered accountants due to the fact that the Masters' Division falls far short of private sector levels of efficiency and service delivery

3.1.4 The antiquated manual methods of accounting employed in the Masters' Division, Guardians Fund, nationally which administers public funds in excess of R1 Billion

3.1.5 The lack of electronic infrastructure necessary to streamline work
processes and levels of service delivery;

3.1.6 Poor salary levels which have resulted in experienced personnel leaving the Masters Division for the private sector

3.1.7 Indiscriminate recruitment procedures, which do not meet the high levels of legal expertise required in the Division;

3.1.8 Critical staff shortages whereby a national workforce of 437 personnel are expected to process, from inception to conclusion, in excess of 77 000 deceased and insolvent estates and trusts manually each year. The minimum duration for finalising a deceased estate is not being less than 6 months while the majority of insolvent estates are finalised in not less than 12 to 18 months, due to inherent legal complexities

3.1.9 The continual inability of the State to recognise and address the aforementioned factors; and

3.1.10 Thousands of Black Intestates are left out in the cold.

3.2 Motivation for the Establishment of the Justice Resource Trust
3.2.1 The Justice Resources Trust constitutes a mechanism whereby private sector interest groups are able to provide funding, human resources, technological assistance and private sector expertise to the Masters' Division without having to compromise the integrity and statutory independence of the Masters' Division or the Department of Justice and Constitutional Development;

3.2.2 By virtue of the proposal, the Justice Resources Trust seeks to provide assistance to the Masters' Division similar to that which Business Against Crime initiative contributes to the criminal justice system

3.2.3 By means of a duly registered trust registered in terms of the Trust Property Control Act 57 of 1988 the Justice Resources Trust will act as a conduit for donations from well wishers in the private sector, to be administered by trustees consisting primarily of financial specialists with a banking background, academics and industry representatives allied to the Masters' Division;

3.2.4 The Justice Resources Trust seeks to address the efficiency, transparency, accountability and accessibility of the Masters' Division through technology solutions

3.3 Terms of Reference for the proposed Justice Resource Trust
The Justice Resources Trust will:

3.3.1 Obviate the requirement of having the State Tender Board approve of cash donations, as it will not involve donations of such nature;

Utilise funds at its disposal to employ computer technicians, programmers and legal staff in the Masters' Division subject to the Public Service staff codes and to monitor the progress of such staff through regular inspections;

3.3.3 Assist in providing innovative solutions to bottlenecks in the administration of the Masters' Division

3.3.4 Conduct statistical and other research to ensure that the Masters' Division functions optimally;

3.3.5 Address the issue of encompassing Black Intestate Estates meaningfully through the employment of social workers, interpreters;

3.3.6 Enhance the image of the Masters' Division and promote public awareness of the services offered;

3.3.7 Administer and to invest all funds donated to it judiciously and more efficiently than is capable of any government department;

3.3.8 Be guided by an Advisory Committee consisting of the Masters' of the High Court

3.3.9 Lend anonymity to all donations received so as not to compromise the integrity and impartiality of Masters' Division personnel

3.3.10 Constantly upgrade the technology within the Masters' Division

3.3.11 Fund the development of specialised hardware and software programmes to facilitate the speedy processing of Guardians Fund payments, calculation of estate duty and the like;

3.3.12 Provide and promote high levels of management skills within the Division;

3.3.13 Increase service delivery to unprecedented levels;

3.3.14 Apply part of its funding to keeping pace with and importing administrative procedures from overseas countries;

3.3.15 Provide technology to monitor all work statistics within the Division;

3.3.16 Conduct overseas research to rationalise local legislation to achieve horizontal equity in South Africa, in tandem with international practice

3.3.17 Provide electronic infrastructure to facilitate the Cross Border Insolvency Act; and

3.3.18 Enable the Masters' Office to render enhanced levels of service delivery to widows, orphans, mentally disabled persons, creditors, and heirs irrespective of colour, creed and background across the length and breadth of the Country.

3.4 Organisational and personnel implications
3.4.1 In respect of the Justice Resources Trust, the issue of human resources will only apply to the trustees thereof. The infrastructure, equipment, materials and financials will be provided by the Administrative Trustee to be appointed and such Trustee will be a representative of the Private Sector.

3.4.2 In respect of the Masters' of the High Court, the only resources required would be the respective Masters' of the High Court who will convene and constitute the Advisory Board. Their existing infrastructure will be used in support of their activities as members of the Advisory Board.

3.5 Financial implications
3.5.1 It is not possible to present an accurate financial budget at this stage. Once the concept of the Justice Resource Trust has been approved by all interested parties, it will be necessary to present the business case to institutions such as
Association of Trust Companies in South Africa
Law Society
Chartered Accountant of South Africa
Afrikaans Handels Instituut
South African Chamber of Business
Association of Insolvent Practitioners in South Africa
Other industry players

A well-known merchant bank indicated that it was keen to provide financial assistance towards the end of last year. The interested party discussed a figure of R20 million.

3.6 Communication implications
In order to ensure wide support and commitment to the Justice Resource Trust, a comprehensive communications strategy needs to be developed, the purpose of which will be to popularise the Trust and its functions and to ensure Private and Public Sector partnership.

3.7 Constitutional implications
The proposed establishment of the Trust is consistent with the Constitution in that it ensures access to Justice and aims to promote fundamental human rights of people.

3.8 RESPONSES OF OTHER DIVISIONS/ COMMITTEES/ BODIES CONSULTED
Discussions were held with the Masters' of High Court who are in support of the establishment of the Justice Resources Trust as well as with some organisations in the Private sector such as the merchant bank that have already indicated the possibility of financial support. This memorandum has already been tabled with EXCO and members have approved of the establishment of the Trust.

4. RECOMENDATION
In the light of the afore-mentioned, it is recommended that the Board approve of the formation and objectives of the proposed Justice Resources Trust.

CONTACT PERSON
Mr M Tshishonga
Deputy Director-General
(012) 3151218