Recurrent problems identified by Auditor General: hearings with Treasury & DPSA; Marine Living Resources Fund; South African Wea

Meeting report

STANDING COMMITTEE ON PUBLIC ACCOUNTS (SCOPA)
23 June 2006
RECURRENT PROBLEMS IDENTIFIED BY AUDITOR GENERAL: HEARINGS WITH TREASURY & DPSA; MARINE LIVING RESOURCES FUND; SOUTH AFRICAN WEATHER SERVICES: HEARINGS

Chairperson: Mr T Godi (ANC)

Document handed out:
Auditor-General’s 2004/05 Financial Year General Audit Report
DEAT Annual Review 2004/05 (www.deat.gov.za)
South African Weather Services Annual Report 2004/05

SUMMARY
Hearings were held on the recurrent problems identified by the Auditor General in his 2004/05 General Report on Audit Outcomes. The topics highlighted were poor implementation of Treasury guidelines by departments, human resource challenges, adequate governance arrangements and non-compliance by public entities. The Directors General of National Treasury and Department of Public Service and Administration were questioned on these problems and advice was requested on best practices to correct these problems. Treasury noted that there were many role-players that had to hold departments to account - the important ones being Treasury, the Auditor General and the parliamentary committees.

It was noted that some Ministers and Directors General did not attend parliamentary committee oversight meetings. The Director General should attended the meeting if the Minister was not able to do so. The absence of both the Minister and the Director General was unacceptable.

Non-compliance with laws, policies and procedures by public entities such as the reluctance to declare interests as was the case with South Africa Weather Services was a serious deviation.

Some institutions tabled financial statements and budgets very late. The Marine Living Resources Fund was sent away from the meeting as it had failed to table financial statements in Parliament for four years. It was requested to prepare the statements and return to SCOPA in August. Public entities were supposed to be at the forefront of service delivery for departments under which they were formed. However the governance structures of some of them were unsatisfactory.

The word "capacity" had lost its gloss in the Committee because there was a tendency to blame everything on capacity. Departments appeared to claim that there was no capacity even if one was talking about simple filing.

MINUTES
Processes: implementation of policies, guidelines and procedures
Dr E Nkem-Abonta said that because of the work of the Treasury and the Department of Public Service and Administration (DPSA), the public service now had a number of policies, guidelines and procedures. However, the Auditor-General (AG) had complained that they were hardly ever implemented in full. There was no real ‘ownership’ of these policies and guidelines. What were Treasury and the DPSA doing to ensure that the correct policies were in place and were being implemented?

Mr Lesetja Kganyago, Director-General: Treasury, said that the starting point was the Public Financial Management Act (PFMA). When Treasury discovered transgressions, the relevant accounting officers were made aware of the problem and asked to take the necessary steps. If the failure to take action was not undertaken, Treasury would take action.

The failure to follow the guidelines was evidence of a reluctance to operate in a rules-based environment. The Office of the Accountant-General could do a number of things to remedy the situation. It could issue practice notes to guide departments on the implementation of certain processes and it could offer targeted training. An example was a recent asset management guideline that was issued across Government. Targeted training was given to Chief Financial Officers (CFOs) and other related persons to use the guideline.

What Treasury could not do however, was to do the work for the departments. After the training, some of which was accredited, departments could not claim that they did not know what to do and how to do it. The Accountant-General had also held a number of meetings for the internal auditors and the CFOs to provide assistance.

If implementation still did not occur, the accounting officer would have to be notified, and if no action followed that, it would be brought to the attention of the executive authority, and if there still was no action, the matter would appear in the AG’s audit report and an appearance before this Committee would probably follow.

The Chairperson asked how many such letters from the Accountant-General to department accounting officers had been sent. Why were departments still using the "monotonous" excuse that they had no capacity to deliver when the Treasury was providing training?

Mr Freeman Nomvalo, the Accountant-General of Treasury, said that Treasury had provided training in asset management and had put structures into provinces and departments for the asset management. However, they could not guarantee that the training provided was sufficient. The accounting officers also had a role and responsibility to ensure that the work got done.

In the CFO meetings, issues about the internal dynamics within departments were raised. Internal auditors complained about the lack of support they received from the accounting officers. This suggested that some of the officers were not fulfilling their roles. On the other hand, the accounting officers complained that some of them acted as Directors-General so their CFO duties suffered. Treasury had set up structures to deal with these problems. Each person in the Accountant-General’s office had a responsibility to a specific number of departments and met with the departments at least four times per year to provide assistance. The ultimate responsibility to deliver was on the Department, with Treasury monitoring the processes and ensuring that progress was being made.

Mr Kenny Govender, Deputy Director-General: DPSA, said that since 1999 human resource frameworks in the Department were decentralised to the individual departments. In recent speeches, their Minister said that the DPSA’s work could not stop at simply developing policies. They had to help ensure that the policies were implemented.

The President had asked the DPSA if they had adequate capacity to deliver on their mandates. Since 2004 the DPSA had undertaken some capacity assessment exercises. They had intervened in six Departments: Education, Health, Transport, Housing, Justice and Constitutional Development and the Finance cluster. From the assessments they had identified poor compliance with policies and practices as a major problem, along with the poor organisational structures put in place.

The DPSA had requested all departments to come to them for a recommendation before they put in place any new organisational structure. The DPSA would do an assessment to ensure that the structures were correct. There were also issues in performance management and development. Interventions were put in place in the Education and Health Departments to help their implementation models. They were also working with Treasury and the Public Service Commission (PSC) to assist the Department of Home Affairs with their human resource concerns.

They were also working hard on the Government-wide monitoring and evaluation system which was going to look at human resource issues. They were implementing an ‘early warning system’ which gave a statistical analysis of vacancies, leave utilisation and spending on over-time. They were looking at ways to encourage self assessments by departments to deal with their issues internally first. The Minister of DPSA had also issued guidelines on recruitment policies and hopefully through better recruitment there would be better people available to implement the policies with emphasis on competency-based recruitment.

Dr Nkem-Abonta asked why there was no action taken against those officials who constantly failed to deliver services. Training was provided, guidelines were issued but things still were not getting done. Why? Were they incapable of learning? Was there no sense of duty?

Mr E Trent (DA) said that the PFMA made specific reference for disciplinary action to be taken and it actually prescribed some criminal sanctions. Why were people not being disciplined or being charged criminally?

Mr Nomvalo replied that there were many role-players that had to hold departments to account. According to the PFMA, the Treasury had to support the departments and enforce the legislation. Disciplinary actions were administrative processes that took place within departments. The PSC’s report pointed out a number of these actions. They were not enough though, but something was being done.

The executive authority of the Department also had a role in the disciplinary actions. Treasury was only one of the role-players. This Committee and the Portfolio Committees also had to act. Section 55 of the Constitution said that Parliament had to set up processes to make departments and executive authorities accountable to Parliament. Greater impact would be made if all three role-players did their part.

Last year the Treasury had written letters to the accounting officers of six departments including their public entities, especially regarding Section 40 of the PFMA (about reporting arrangements).

Mr Kganyago added that there was a whole chapter in the PFMA dedicated to dealing with misconduct. The PSC report said that since the implementation of the PFMA in 2000 there had been almost 3 600 cases of financial misconduct. He was unsure why departments still under-performed so badly.

He illustrated how things should work by giving an example of a previous Treasury audit report by the AG. In Treasury’s annual audit report, there had been an "emphasis of matter" item which had to do with medical expenditure. The AG was not happy with the control environment of this money so steps had to be taken to incorporate its administration into the Department’s strategic plan. How it was administered was put into the CFO’s performance agreement to hold him responsible. The internal audit committee then provided oversight. The problematic area was corrected and the matter then disappeared from future audit reports.

Departments had to put clauses in CFO’s performance agreements to fulfil specific tasks and mandates within a certain time period. Cabinet had directed that these were some of the steps that had to be taken by departments.

Mr V Smith (ANC) said that he wanted Treasury and the DPSA to advise the Committee on the way forward. He gave the specific example of the Department of Labour where the AG had found contraventions of Treasury Regulations including write-offs of R1.5 million in salaries. What could the Committee do to ensure that action was taken? The time had come to move away from the theory and idea of enforcement. What concrete steps could be taken in this specific example to see disciplinary action being taken? They did not have to answer these questions now but their advice was needed.

Human resource issues within Departments
As illustration of this problematic matter identified by the Auditor General, Mr V Smith said that the Committee had had a meeting with the Department of Housing. The AG had discovered that the department did not have a filing system for housing subsidy applications and anyone could gain access to their computer system and change or manipulate the applications for subsidies. The Department’s excuse was that there was "a lack of capacity." Then they had a meeting with the Department of Labour. Their Information Technology section had 51 funded posts but on two were filled in 2005. To date, only eight had been filled. The excuse again was "a lack of capacity." This was becoming monotonous.

What Labour was doing was that after hiring the two people, they then brought in consultants (Siemens) and paid them R1.2 billion to do the Department’s job. Mr Smith said that such problems had to be resolved collectively. It could not be possible that there were human resource problems and yet they kept so many unfilled posts and paid so much money to consultants. He asked DPSA and Treasury if their strategies to fix these issues were effective. It was time to move away from such pronouncements and actually see results.

He asked what the chances were of Treasury getting money allocated for salaries back from the Department as it had not been used since consultants had been brought in. Could the Director General of Labour be disciplined?

Ms M Mashiane (ANC) added that despite such transgressions, huge bonuses were paid to senior department staff. On what basis were they paid such bonuses? What was disturbing was that the DPSA was appearing before the Committee yet its own Director General could not be bothered to attend.

Mr Kenny Govender (Chief Director: Human Resource Development Strategy) said that the DPSA’s policy on bonuses stated that departments should be spending not more than 1.5% of its personnel expenditure on bonuses, unless the executing authority allowed otherwise. Any deviation from that 1.5% figure was evidence that the department had performed well. However, the DPSA was going to look at this area with their early warning system and perhaps they had to go further and actually ‘name and shame’ those departments that were abusing the system. Hopefully their early warning system could help them identify those departments with systems in place and those without and how they were being managed.

The DPSA was at the forefront of the recruitment of scarce critical skills in the public service. As part of their capacity assessment, they had developed a strategy with the Department of Trade and Industry to help them fill their posts. At the end of the day, the responsibility of going through the recruitment process was with the Heads of Departments. To ensure that the right people were in the right places, DPSA was conducting a comprehensive personnel expenditure review process looking at the trends for the past five years to develop a future remuneration policy. The policy would include an examination of the remuneration packages for professionals.

Mr Kganyago said that he had come to accept that many of Treasury’s employees "would not stay forever". He incorporated this into the Department’s strategic plan. These were highly sought after skills, but for a department to say that they did not have a filing system because they did not have filing clerks and cabinets was "beyond him."

The use of consultants was "tricky." Treasury was once asked to assess the use of consultants in Government to see if consultants were being used so that departments did not have to bother to do the job themselves. He believed that their use showed a lack of understanding by a department of ensuring it had the capabilities it needed to do the job itself. Consultants should be used only for short-term projects where the department lacked the necessary capacity.

Mr Nomvalo added that departments had to address these issues internally. It was not impossible to do so. Training could be given to some to bring them ‘up to speed.’ In fact 1% of Department’s payroll budgets had to be dedicated to training. There was huge unemployment including people with degrees. Train them.

Mr Shauket Fakie, Auditor General, agreed that the responsibility to run departments lay with the Directors General and the executive authorities. However, the question was: why did the same issues come up every year? Government needed to start working ‘smarter’ rather than ‘harder.’ There was a core of public servants but no-one had done a skills analysis of them. The training was provided but were they training the appropriately-skilled people to implement what they were being trained for. This was why problems recurred. Also, were the right people providing the training?

He was encouraged by some of the work that the DPSA was doing including the capacity assessment and he wanted reports on it. The early warning system and the national norms and standards would be useful to identify if departments were transgressing and the Office of the Auditor General could report on this. A skills audit was also required to see if the right people were there now, in the right environment. Also, questions needed to be asked about how training could continue where there was a high staff turnover and what mechanisms were in place to include new recruits in the training.

Another question to ask was whether the level of maturity of public service senior officials was at the correct level. When the issue became one about performance management in a person’s individual capacity and the Office of the Auditor General identified the same annual problems in its audit, this had led to fights with the Director-General on a personal level. There had to be more maturity about how such issues were dealt with.

Governance Arrangements
Mr Trent said that he had done some research on the National Departments audit reports for the last four years. There were 35 qualified reports or disclaimers and 128 had an "emphasis of matter" rating. The AG had said in the past that if department s could rely on their internal audits, it could make things a lot better and it could act as an early warning system. The AG also said that it was critical for departments to have proper governance arrangements. There had to be segregation of duties between operators in departments. The PFMA stressed the need to establish internal audit committees. Governance arrangements in terms of legislation were adequate, but the question was whether the structures were effective. The DPSA and Treasury had talked about training but did not even mention internal auditing. Was this not a priority?

Mr Nomvalo replied that internal auditing was critical. The first conference Treasury had held the previous year was about this very issue. They were also going to be hosting another one on financial management later this year. They recognised that internal auditing within a department would not be effective if the audit committee was ineffective. They created a system where the committee had direct lines to the Director-General, the AG and Treasury.

The Office of the Accountant-General had asked various departments to attend their audit committee meetings to see their governance structures in place and to see what role they could play in assisting them. Most of the departments responded positively, and whatever problems there were with one or two of them, had been resolved.

Over the past two years they had done assessments of some of the internal audit issues, including the role of the accounting officers. Some committees complained that their accounting officers did not even attend the committee meetings. This emphasised the point that the success of the internal auditing process depended on the effectiveness of the committee.

In terms of Treasury’s interventions, they had just trained about 700 officials on auditing. High staff turnover was also a serious problem. The areas of internal auditing and risk management had been split up from this year in the Office of the Accountant-General to bring focus to their activities.

Ms T Sibanyoni, from the Office of the Accountant-General of Treasury, added that Treasury had gone on a ‘road-show’ to educate people on the new internal auditing framework. The framework provided guidance on the establishment of internal audit structures, the operations of the audit committee and its composition. They offered generic training for provincial and local government officials. This training helped them to identify further training needs.

They also had a Forum for Chief Auditing Executives with meetings twice a month to discuss issues of common interest and they were using the AG’s General Report on Audit Outcomes as the agenda for the meetings to identify problems and come up with solutions. They had also developed "best practice" manuals as many departments did not have internal auditing manuals and charters which were necessary policy documents. They were also developing tools to evaluate the effectiveness of the audit committees to be used by all departments.

Mr Trent said that it was evident that all the plans were in place but the question was whether they would be implemented fully. The quality and availability of people with auditing skills was also an issue. Did the Treasury have any idea of what the vacancy rate was for internal auditors among the provinces and were there any plans to attract more?

Mr Kganyago said that changes had been made in legislation with regards to the auditing profession. It was really a matter of scarce skills but in the 2005/06 year Treasury had rolled out 33 training courses attended by 793 internal audit and risk management officials.

Mr Nomvalo said that there were just over 600 certified internal auditors in the whole country and in the past year alone five or six of the Treasury’s senior auditors had gone to the private sector. Perhaps the solution was that departments had to share these professionals. The Treasury’s initiatives were aimed at doing the best with the available resources, but this had to be complemented with accounting officers taking the internal audit process seriously. Risk management was also critical to the internal audit process. They were capacitating this area and in some departments had done capacity assessments.

Treasury had taken in interns and deployed them to provinces and departments. They would become full time employees of the departments over time. He did not have the exact vacancy rates but would report back to the Committee on this.

Non-compliance by Public Entities
Dr E Nkem-Abonta (ANC) said that one expected a higher standard from public entities because they were removed from standards for public services in order to ensure efficiency gains. About 80% of them had tabled their financial statements late. Most of the time the entities had claimed to have exemptions received from the Treasury and the Auditor General (AG). He asked what was the basis for granting the exemptions.

The Chairperson said that the exemptions had already been dealt with by the Accountant General before Dr Nkem-Abonta joined the Committee.

Dr Nkem-Abonta asked what was the government doing to ensure that public entities complied with policies.

The Chairperson said that the General Report of the AG on Audit Outcomes did not have a complete list of public entities. He asked what was being done to ensure that there was a complete list. He imagined that before 1994 the government knew of all entities that it had.

Mr L Kganyago (Director General: Treasury) replied that the government had not identified all its entities until the implementation of the Public Finance Management Act (PFMA). It was the PFMA that had compelled them to compile a register of the entities. The register was comprehensive and all assets that the government was aware that it owned were included in the register. All other old assets that were not in the register would be included as soon as they were discovered. There were strict procedures that had to be followed when creating any new entities. The relevant Department had to approach Treasury with a proposal to create a new entity and no entity could be created unless Treasury had given its approval. The entity would be registered as soon as it was created. For instance, the government knew that South African Special Risk Insurance Association (SASRIA) belonged to it. The Board of SASRIA had indicated that it did not belong to the government and the government had to seek legal advice on the matter. Lawyers confirmed that the government did not own it. The solution was to change the law and declare government the owner.

He said that public entities were supposed to be at the forefront of service delivery for the Departments under which they were formed. When publishing an annual report, each Department was supposed to list all public entities that reported to it. Many of the public entities were funded either by a transfer from the fiscus or some levy that they retained.

The Chairperson asked if Treasury had been able look at some of the entities and ask if they were still appropriate and able to serve the public good in their current forms. Some of them were a drain on the fiscus. There was the problem of staff costs and some public entities were beginning to look like milking cows.

Mr Kganyago replied that Treasury was not satisfied with some of the public entities. Jointly with the Department of Public Services and Administration it had conducted a review and also looked at their governance structures and models. The review was sent to Cabinet and Cabinet had asked Treasury to do further work and revert to it this year. The review ended up having to look at the governance and business plans. These were very contested terrains because the entities reported either via the accounting officer of the relevant Department or executive authority of the Department. Cabinet had also asked for a specific review of the development finance institutions. Statements were made that some of them were almost behaving like banks. Their mandates were last review a long time ago and they had to be realigned with policies of the specific line function Ministries. This process commended a month ago and the first interim report was expected in 9 months' time and the final reports in 18 months' time.

The AG said that Treasury had a listing of all public entities. There were sheltered employment factories that were not listed even though they should have been listed as a Schedule 3 entities. There were many entities that were not listed and the initiative should come from the line Department. The question was what would happen should the line Department not take the initiative. The responsibility of the line Department in terms of oversight and participating in the Board of the public entities was lacking. Public entities got formed and had their own boards and the Departments played limited roles in managing them. Public entities were reluctant to disclose salaries of their executives. These were some of the transversal challenges picked up in auditing them or reviewing their financial statements where the AG was not the auditor.

Mr E Trent (DA) focussed on how people were held responsible for their own actions. It was said that Treasury could not interfere with the accounting officer of a Department because they were equal as colleagues. Interventions then became a role of Parliament or a political role. The situation appeared to be slightly different with public entities. He said that Section 49 of the PFMA provided that the accounting authority was the Board or somebody appointed by the Board. It also provided that the relevant Treasury might, in exceptional circumstances, approve or instruct that another functionary of a public entity should be the accounting authority for that entity. Treasury had the discretion and its role of holding accounting officers accountable was far stronger than in the case of government Department. The Director General of a Department should ensure that entities were fulfilling their mandate. The problem was that the Director General of a Department was not the accounting officer of the public entity. The question was whether the Director General could take action against an accounting officer of a public entity. He also asked why Treasury did not take the necessary action if a Department could not take action against an accounting officer of a public entity.

The Chairperson said that the Committee interacted with reports a year after and Treasury should interact with Departments throughout the course of year. He asked how the early warning systems were assisting in picking up problems and attending to them without waiting for SCOPA to ask questions. Reflecting on the hearings that the Committee conducted in the previous week, it was only the Department of Labour that had a Director General who had been in office for more than a year. He wondered what role the DPSA had in terms of the process of appointing accounting officers. It was easy for a Director General who had failed a Department to jump ship to another Department. When confronted with questions, the Director General would say that he or she was still new in the Department and would request some time to look at issues under discussion. How was it possible to allow a person who had failed a Department to jump to another Department? Was this not part of the problem that was forcing the country to move in a circle in its attempts improve governance and administration?

Mr Kganyago replied that when he joined Treasury he had found a note in his drawer that said "in case of trouble blame your predecessor". Unfortunately there was no trouble and he could therefore not blame his predecessor. The law said the Board was the accounting authority of a public entity. The exception had to do with either Treasury saying that the Board would not be the accounting authority or in instances where the Board had been suspended and a person had been designated as the accounting authority. In real terms the executive authority was the accounting officer because it was the executive authority's duty to put the Board in place. One would find that at the end the Chief Executive Officer of a public entity talked more frequently with the accounting officer of the Department and the Chairperson of the Board talked more frequently with the Minister. This not written down in law but was how interaction usually occurred. The Committee had the power to summon the public entity to account.

Mr K Govender (DPSA) replied that the early warning systems did not apply to public entities and there was a need to find ways of putting them in place. It was important to ensure that regular reports were submitted to all oversight committees. There was a need to track and record why an individual was still in office. At the moment the assessment of accounting officers was at the level of the Public Service Commission and it might be helpful to do such assessment on a six months basis as opposed to the end of the year. The appointment of accounting officers was at the level of Cabinet but the DPSA had the duty to process all the appointments. It might be important for the DPSA to be responsible for advising Cabinet in terms of problems or failures of the individuals concerned and to make clear recommendations.

Hearing on Marine Living Resources Fund: Department of Environmental Affairs
The Department was represented by Dr Patrick Matlou (DDG: Tourism), Dr M Mayekiso (DDG: Marine Coastal Management and also Accounting Officer for the Marine Living Resources Fund), Mr A Ismail (CFO: Marine Living Resources Fund), Mr B Tashe (Acting CEO: SAWS), Mr P Maluleke (Chairperson: Risk and Audit Committee of SAWS), and Ms S Rensburg (Chairperson of Board of SAWS). Dr Matlou was also the Acting Director General of the Department for the day in the absence of Ms Pam Yako (Director General) who could not be present because her daughter had passed away.

Mr P Gerber (ANC) said that Parliament was not a talk shop and that it was the Committee's responsibility to look after the taxpayers' money. It should ensure that people got value for money just as the Marine Living Resources was supposed to see to it that the fishing industry had a watchdog. Employees of the Department were civil servant paid by the taxpayers. The impression was that the serving factor in the name "civil servant" was not really coming to the light. One could say this because the Marine Living Resources Fund had not tabled any financial results for four years.

He said that the PFMA was not a pamphlet but an Act of Parliament. The Fund was breaking the law by not tabling its financial results in Parliament. Failure to table the financial results was illegal, criminal and wrong. The entity was supposed to rule and regulate the fishing industry, an industry which fed the poorest of the poor and enriched the richest of the rich in this country. It was worth a lot of money and was riddled with people who broke the law. One only had to think about the smuggling of abalone in this country. The question was how the entity could expect people to abide by the fishing law if it was also breaking the law. The entity had adopted a seaside attitude in relation to financial reports. The entity was in a mess and the financial information received from the AG indicated this clearly. He asked the delegates to go back and complete the financial statements, submit them to the AG and then submit them to the Committee in two months' time. The Committee should apply the harshest form of disciplinary available in terms of PFMA should the Fund not comply with the request. He suggested that the Fund should not be allowed to interact with the Committee today and should be released so that it could go and start working on the financial statements.

The Chairperson asked for Dr Matlou's reaction to statement made by Mr Gerber.

Mr Matlou replied that his understanding was that the financial statements had been presented and submitted on time.

Mr D Gumede (ANC) said that a member of the Committee had made a proposal that the entity be released. He seconded the proposal as a representative of the taxpayers. The entity should come back to the Committee when it was ready to account.

The Chairperson said that he was not asking for a contest on the proposal by Mr Gerber. It was only fair and procedural that the Committee heard the Fund even if it was for a minute.

Mr Matlou said that the annual report could not be finished because one needed audited financial statements. Financial statements had been submitted to the AG and there could have been some mistakes in them. The annual reports for the four years could not be completed because the audits were done late.

The Chairperson endorsed the suspension of today’s hearing and said that the entity should come back to the Committee in not more than two months. It would only be then that the Fund would be required to furnish explanations on specific issues. The Committee wanted to exercise its mandate as rigorously as possible to ensure that laws passed by Parliament were followed by everybody especially public officials. The funds that were entrusted to the Fund should be utilised in a manner that was beneficial to the people. He hoped that the DG of the Department would be present in the next meeting so that she could account before the Committee. It was disturbing that some Directors General did not take the meetings of the Committee seriously. The Department's delegation would not be accepted in the next meeting should the Director General not be present.

Hearing on South African Weather Services (SAWS): Department of Environmental Affairs
The Chairperson said that the non-availability of the Director General was not acceptable. The fact that the Minister was not there meant that the Director General had to be there in person. The absence of both the Minister and the Director General created the sense that coming to Parliament was "a mere exercise".

Mr Vincent Smith (ANC) asked when the Director General had gone on leave. Was it after or before she had received the notice to appear before the Committee? It would be a different set up should the Committee be told that she had gone on leave knowing fully well that the Committee had requested her to appear before it.

Mr P Gerber said that he had been told that the DG had lost a daughter. The Committee sympathised with her but the communication between the Department and the Committee could have been improved. This opened the question whether the Committee should continue with the hearing in her absence. The Committee would interact with the Marine Living Resources Fund in August and it might want to consider interacting with Weather Services then.

Mr Trent said that it all boiled down to who was the accounting officer. The accounting officer was not the Director General of the Department. It was true that the entity was performing a function under the Department but its Board was the accounting officer. The Committee should continue with the hearing if the Board was present. It was obviously desirable that the Minister and the Director General should have attended the meeting.

The Chairperson ruled that the Committee continue with the hearing. The absence of the DG was not the decisive factor in considering whether to engage the Marine Living Resources Fund.

Ms L Mashiane (ANC) hoped that the Board would not hide behind the DG in whatever input it would make.

The Chairperson said that the Acting Director General was present and hoped that the Board would have all the answer that the Committee wanted. The Director General was not the Department and those officials who were present should be able to answer the questions.

The AG commented that in relation to the Marine Living Resources Fund, he hoped that he would be given an opportunity to address the issue that the audit report was the reason for the delay when the Fund appeared before the Committee in August. He would hate the creation of the impression that the audit was the cause of the dilemma.

The Chairperson said that the AG would be given such an opportunity. He invited Ms A Dreyer (DA) to lead the discussion.

Ms Dreyer said that one of the responsibilities of the Board of SAWS was to ensure continuity, succession planning and the retention of organisational memory. She said that in October 2004 the Chief Financial Officer (CFO) was suspended for sexual harassment. In June 2005 the CFO's services were terminated and the new CFO resigned (all in one month). A new CFO was appointed in September 2005) but resigned in less than a month. In November 2005 a Senior Manager: Finance resigned and a new Senior Manager was appointed in January 2006. An interim Chief Executive Officer (CEO) was appointed in April 2006 but for a six months period. With all this turbulence in the system, the question was what was going on in the entity.

Ms Sizeka Rensburg, Chairperson of SAWS Board, replied that SAWS had experienced a challenging period in terms of retaining key people. It had suffered from the consequences of the labour market. People came into the organisation only to be head hunted within a short period of time. It was clear that there was a sexual harassment case against the CFO and the organisation had to deal with it. Dismissal was the only option after the person had been found guilty. After that the entity appointed a South African who had been working in Lesotho for Eskom but he received a better offer within two weeks and resigned. The organisation was not able to match the salary packages offered by the private sector. The CFO who was now in place was committed to the organisation. The organisation had to look at how to ensure that the function was attractive in order to retain people.

She said that the CEO who left in August 2005 had been with the organisation for two years and was unfortunately recruited by the World Meteorological Organisation. The position was advertised twice but no suitable candidate could be found. Together with the Minister, it was thought that it was important to head hunt a person who could keep the boat moving. The decision was to engage the interim CEO for an interim six-months with the hope that the entity would be able to find a suitable person within the six months. The organisation had looked at ways to attract people with commercial backgrounds. The entity was also involved in commercial activities. It had been very difficult to get the right person. It was believed that the plan that was in place would ensure that it got the right person.

Ms Dreyer said that the Treasury Director General had talked about the difficulty of retaining staff. He had said that people would often come to him say that they could stay with Treasury for three years and show it the best practices if they would be given good references after their contract period. He had indicated that he was very happy to employ people under those conditions. She asked what mechanisms were in place to ensure that people did not leave after spending just a month in the organisation. The organisation was making a loss in employing a person for a month because there was no way that it could get value for such a person's salary in a month.

Ms Rensburg replied that people had indicated that they would stay if they were offered better salaries. It was unfortunate that the organisation could not match other organisations on salaries. The biggest challenge was the balance of commercial activities with scientific activities. SAWS and the Department had discussed the issues of adjusting salaries and linking them directly to income generated. There was a whole lot of responsibility of developing new products. The entity offered a product that customers never paid for before. The responsibility of developing new products and new markets required specific skills.

Ms Dreyer said that it was a good idea to link salaries to income generated. She noted that the greatest portion of SAWS's gross revenue was from government and that that portion had increased whilst the income generated from the commercial sector had decreased. SAWS was not very successful in generating income from the commercial side of operations and it was a good idea to link salaries to performance. She asked for a comment on the fact that the vacancy rate had increased from 4,5% to 8,5 % within a year period. What was the organisation was doing about this.

Ms Rensburg replied that the challenge was that at the beginning of the institution staff was transferred from a government department into an entity that had to become a business. The entity had to charge clients for services rendered. Some of the people were not geared for their new roles. For instance, some scientists had made clear that they were not interested in the business side of the entity and wanted to remain as scientists. There were also other people who did not fit into the new entity and some of them chose to go back to the government Department. She reiterated that the entity was competing with other organisations for skilled staff and it had suffered in this regard. Forecasters who had left had been open in their exit interviews and indicated that they had been offered better salaries elsewhere. SAWS was looking at ensuring that staff members were enthusiastic about their jobs and salaries should become part of a bigger compensation. Training was also very important. Sometimes people had no real interest in their jobs because they did not understand the potential that existed. There was a scholarship Fund for people who wanted to study further especially in the meteorological side.

Ms Dreyer said that compliance with the law and regulations was very important. The Committee had seen people breaking the law with no consequences. The Annual Report provided that one of the purposes of the Executive Management Committee was to support all areas of SAWS operations by establishing, co-cordinationg and maintaining clear directives in terms of strategy, standards, guidelines, policies and procedures. However, there was no respect for those policies and procedures. The PFMA required that Board members and the executive management should declare their interests in the register. She asked if all Board members had done so, if not, why not.

Ms Rensburg replied that SAWS had a registered. Some people had not declared their interests during the year under review but all missing details had been submitted.

Ms Dreyer asked why it took the organisation three years to comply with the law and regulations.

Ms Rensburg replied that there was no particular reason. There were capacity challenges and the Secretariat of the Board operated with seconded staff for the first two years. The Secretary of the Board was the key person in terms of keeping the register. This challenge was highlighted to SAWS and corrective action had since been taken.

The Chairperson asked what kind of capacity was required to maintain a register.

Ms Rensburg replied that the register was kept but was not up to date. Members had to declare their interests on annual basis and not all people had done this in the year review. The real issue was the maintenance of the register. Capacity was related to the continuity in relation to staff in the position. There would be problems should there be nobody in the position at a particular time.

The Chairperson said that the word "capacity" had lost its gloss in the Committee because there was a tendency to blame everything on capacity. One wondered if capacity referred to the absence of people in general or the absence of skilled people in particular. People would say that there was no capacity even if one was talking about simple filing.

Ms Dreyer said that during the year under review members of the Board had not declared their interests and this was attributed to capacity. A special audit report by Sithole Incorporated had revealed numerous irregularities that had occurred during the year under review. There was deviation where it was impractical to invite competitive bids as prescribed in the supply management policy. The appointment of the bid committee had not been finalised. The approval of 20% extension on tender 27 by the General Manager: Corporate Services constituted irregular expenditure. The appointment of Mr James Forson and the approval of his 20% variation had not followed proper procedures. The appointment of consultants under Human Resources: Corporate Service had reached unprecedented proportions and this was a cause for great concern. The appointment of Mr Lesedi had also not followed proper procedure. The irregularities were of extreme concern and smacked of corruption. All these irregularities occurred during the time in which members had not declared their interests.

Ms Rensburg replied that the declaration of interests she had referred to was in relation to Board Members. The Annual report prior to the year under review did not highlight this problem because the register was in place. She reiterated that the problem was largely due to the maintenance of the register. Most members of staff had not signed the declarations but this had since been done. SAWS had experienced serious teething problems in terms of compliance from some members of staff. The Board had internal auditors and this was one way of ensuring that internal controls were effective. The special audit report was actually commissioned by the Board as a result of what it had seen from the internal audit. It had taken action in respect of all the irregularities. The General Manager: Corporate Services had been dismissed because of some of the irregularities. SAWS had insisted in ensuring that all Senior Managers go for training in supply chain management because part of the challenge was that some of the people had little understanding or appreciation of the policies.

Mr H Bekker (IFP) asked if all members of the Board had declared their interests in a meeting of the Board. He also asked if Board members had excused themselves from discussions on tenders or matters from which they could have benefited.

Ms Rensburg replied that the Board did not approve tenders. The Board had the declaration of interests in issues to be discussed as one of its items on the agenda of its meetings.

Mr Bekker noted that there was a lack of willingness to declare interests.

Ms Rensburg replied that the unwillingness was in relation to the staff and not Board members. Sometimes members of staff did not actually understand why they had to declare interests. Every staff members had since signed the declaration after the importance of declaring interests had been properly explained to them.

Mr Bekker said that the unwillingness to declare interest seemed to suggest that staff members were saying that the management should not interfere in their little money-making business on the side.

The Chairperson said that such unwillingness was unacceptable unless the entity was being governed according to the law of the jungle wherein everybody had his or her own fiefdom. He could not understand why people had to be persuaded to comply with law, polices and procedures. It was for the first time in the hearing process that the Committee had heard that somebody had been dismissed. It seemed that it was difficult for entities to dismiss people. People would just sit in their offices until such time they resigned and grass-hop to another department.

Dr Nkem-Abonta asked if there were consequences for people how had been found guilty. He asked if the presenter agreed with the findings of the special audit. He also asked if the auditors were still working for the organisation and if the irregularities had occurred under Ms Rensburg's tenure.

Ms Rensburg agreed with the finding. The auditors were still working for the organisation and the irregularities had occurred under her tenure.

Ms Dreyer said that lack of training was very similar to capacity and had also lost its gloss in the Committee. Treasury had indicated the measures it had put in place to ensure that people were aware of policies. One had to clearly understand and know the rules in order to be able to circumvent them. She did not accept lack of training as an excuse. The investment policy implemented in the year under review did not comply with all requirements set out in Treasury regulations. She asked what had been done to correct this.

Ms Rensburg replied that it had already been corrected and would be approved at the next meeting.

Ms Dreyer asked what policy was applied in the year under review.

Ms Rensburg replied that SAWS did not have any investments in the year in question.

Ms Dreyer asked why the detailed budget was only submitted in 1 March 2004 and not six months before the beginning of the financial year as required by the law.

Ms Rensburg replied that SAWS had already tried to submit all documents as required. It could not finalise the budget in time and had sought and received extension from the Minister. The budget was submitted within the period agreed to with the Minister.

Dr Nkem-Abonta asked if the Minister of Environmental Affairs and Tourism had the power to grant such an extension.

An official from National Treasury replied that the requirement in terms of section 53(1) of the PFMA was six months before the start of the financial year. There was some flexibility built into the section. The executive authority could give an extension.

Mr Gerber said that Annual Report mentioned a property that had been donated to SAWS by the Department of Public Works. It was valued about R21 million and was then re-valued at R50, 6 million. He asked if the property had been registered in the name of Weather Services.

Ms Rensburg replied that it had not yet been registered under SAWS's name. Mr Gerber asked what was the delay and whether SAWS would put R21 million or R50, 6 million down when registering it.

Ms Rensburg replied that that the delay was initially with the Department of Public Works but was now with the Tshwane Municipality. The property had apparently not been subdivided and transfer could not take place intil the subdivision had taken place.

Mr Gerber said that the AG report had indicated the lack of sufficient policies on controls to monitor donor funding. He asked if this had been improved.

Ms Rensburg replied that the AG had brought the shortcoming to SAWS's attention and corrective action had since been taken. There were separate bank accounts for each donor.

Mr Gerber noted that Ms LD Less (Member of the Executive Management of SAWS) had received no bonus. He wondered if this had anything to do with the person or her surname.

Ms Rensburg replied that Ms Less had not received a bonus because she had started her job late in the year.

Mr Trent said that SAWS should be more careful in what it said in the forewords of the report. He noted the statement that "during the past four years, SAWS has been able to grow its commercial revenue and diversify its client base". This seemed to suggest that SAWS was going like a Boeing but the facts indicated that the commercial base was probably 90% aviation and there was no real diversification. SAWS had a contingent liability of R8, 5 million in respect of the aviation industry. There was also a contingent liability of staff members who had been dismissed.

Ms Rensburg said that the foreword was in relation to a four-year period. Diversification did occur in that period.

Mr V Maluleke, Chairperson: Risk and Audit Committee of SAWS and board member, replied that the aviation debt was complicated and there was a dispute on it in relation to the tariff. The issue was whether the tariff that had been published was correct. Some of the local airlines had not paid according to the tariff. There was a possibility that SAWS might have to refund some of the difference in the tariff. There had been a process of revising the tariff and new tariff had been accepted. The new tariff was much lower than the tariff that was in dispute.

The Chairperson said that the Committee would not accept a situation wherein there was reluctance by (people who were paid monthly salaries and bonuses) to comply with the law, policy and procedures. In some cases service delivery was not up to scratch and one wondered what percentage of their salaries did people who did not perform their tasks deserve. People were paid monthly salaries and bonuses to perform certain task.

The meeting was adjourned.