Financial Statements of Department of Correctional Services: hearing

STANDING COMMITTEE ON PUBLIC ACCOUNTS
23 August 2006
FINANCIAL STATEMENTS OF DEPARTMENT OF CORRECTIONAL SERVICES: HEARING

Chairperson: Mr T Godi (PAC)

Documents handed out:
Correctional Services Annual Report 2004/05 [available at www.dcs.gov.za]

SUMMARY

The Department of Correctional Services appeared before the Committee to answer questions about its 2004/05 Annual Report and Financial Statements. As this was not the first time the Department had to appear before the Committee, Members asked searching questions about the qualified audit the Department had yet again received. The Committee made it clear that it was no longer interested in excuses and expected rapid progress to resolve the problems at Correctional Services.

MINUTES

Discussion of Correctional Services Financial Statements

Mr V Smith (ANC) wanted to know who had compiled the Department of Correctional Services’ (DCS) annual report?

Mr L Mti, National Commissioner, replied that various people in his department compiled the report.

Mr Smith noted that at least five paragraphs (on page 74) of the annual report were copied from the previous year’s annual report. He said that some reports were not worthy to come before Parliament. He wanted to know what the “value add” of such a report would be.

Mr Mti replied that the report had not been copied from the previous annual report. The Department receives a template from National Treasury, which is used to compile the annual report. The Department is not trying to undermine the authority of the Committee. The wording of the report may be the same, but the figures are different.

Mr Smith commented that there was underspending of R156 million. Various reasons for this are given in the annual report. He said that in 2003 the Committee was told that the late implementation of the Basic Accounting System (BAS) was one of the reasons for the underspending. He wanted to know why it had taken the Department three years to train their staff on the BAS. He also wanted to know why the money has still not been spent even after the staff had received training.

Mr P Gillingham, DCS Chief Financial Officer, replied that the training was done during 2003/04 and was completed during 2004/05. He said that the problem lay with the internal departmental charges.

Mr Smith said that the report stated that there was underspending and at the same time there was overspending of R109 million. He wanted to know why the same reasons were given for both.

Ms N Mareka (DCS: Financial &Management Accounting) replied that they are the only department that has internal service charges for stock that is bought in bulk. When the BAS system was implemented no allowance was made for internal service charges.

Mr Smith commented that the administration programme existed to provide support to the department. He said that there is a high vacancy rate in the Department. This was not much different from the previous year. He felt that this was part of the reason why the financial statements looked the way they did. He wanted to know why there was an increase in the amount spent on protective clothing from R8 million in the previous financial year to R44 million.

Mr Gillingham replied that bulletproof vests were purchased for the staff.

Mr Smith commented that R121 million was allocated for subsistence and travel. He wanted to know what this amount was made up of.

Ms Mareka replied that most of this money was for subsistence and travel (SET) and relocation fees. It also included allowances for new school uniforms for the staff’s children.

Mr Smith commented that this amount did not correspond with the amount of vacancies in the department. He said that no allowance had been made for more staff to be appointed. He wanted to know what was being done either recover or write-off the staff debt, which amounts to R14, 898 million. He also wanted to know what was being done to correct the overpayment of R30 million.

Ms Mareka replied that there were processes that had to be followed in the department to recover debt. She said that the South African Police Services (SAPS) investigated cases of theft. This means that they need to wait for the police to complete their investigation first and this could take any amount of time, because of the slow movement of the SAPS.

The Chairperson commented that he hoped that Correctional Services were not accusing the SAPS of delaying their cases.

Ms L Mashiane (ANC) wanted to know why there has been insufficient capturing of assets. She commented that this has been a problem for the past four years and asked why the situation has not improved.

Mr Mti replied that they had approached the Auditor General about the shortcomings of the asset management system. He said that this was a system that was imposed by National Treasury.

Ms Mashiane stated that the Committee did not want excuses from the Department. She wanted to know if there was no interaction between Correctional Services and National Treasury.

Mr C Haak from National Treasury replied that there were three systems in place for asset management. They can however only be used correctly if the Department is “sorted out”. The system is only there to assist with asset management. Treasury has put a halt to the development of any new systems.

Mr T Motseki, DCS Executive Manager, replied that if data is crosschecked on the three systems different information is obtained. The systems did not talk to each other.

Mr S Fakie, Auditor General, said it was difficult to say why there were three asset management systems. This complicated matters. However the entire problem was not with the system that was used. Some of the problems were due to human error.

Ms Mashiane wanted to know if the department had sufficient staff to do all the work.

Mr Mti replied that they had appointed a recruitment agency to help them fill vacancies.

The Chairperson said that it then meant that there was not enough staff to do the work.

Mr Mti replied that there was no point in saying that they did not have enough people to do the work. They tried to do their best with the staff they had.

The Chairperson wanted to know why there were no supporting documents in the personnel files. He wanted to know how people are been paid when the Department has no idea what their qualifications are. He wanted to know if this was also not why people are being overpaid.

Mr Motseki replied that they received a huge number of applications for positions, which are advertised. He said that you would find that some of the documents would go missing because of the amount of work they had.

Ms Mashiane wanted to know how payment takes place if there are no supporting documents for appointed staff.

Ms Mareka replied that when people apply for positions the supporting documents are supplied. Once the person has been appointed the documents need to be brought out again. The documents are not always in the sub file.

The Auditor General stated that all departments had massive volumes of documents. In order for files to be complete, the Human Resources division had to follow up on missing documents. Once all documents are collected, the file then needs to be updated on a regular bases.

Ms Mashiane commented that invoices are not always certified and that some invoices are not always paid.

Ms Mareka replied that sometimes there is a query on an invoice and it then cannot be paid on time. A set of procedures has been put in place to deal with the problem. She said that they have asked Treasury to assist them with this.

Mr E Trent (DA) wanted to know if there is no staffing problem then why is there such a high vacancy rate? He wanted to know what had happened to the undertakings which the Department had given on 18 November 2004.

Mr Mti replied that they had about 7 000 vacancies. They have appointed a recruitment agency to assist them.

Mr Trent commented that they had no idea of how much has been spent on skills development. He also wanted to know what is being done to retain staff. He wanted to know if they have embarked on the implementing incentives as stated in 2004. He also wanted to know if it had had no effect.

Mr Mti replied that the incentives that they had decided to give to staff to retain them have not had any effect.

Mr Trent wanted to know how the department knew what to pay staff if incorrect job evaluation had been done. He commented that the Committee would want a better report next year. One of the reasons the Department had received a qualified report was because it had paid medical expenses based on face value. There were no supporting documents for the expenses.

Mr Mti replied that this was a historical problem that they have since attended to.

The Auditor General confirmed this.

Mr Trent asked for progress on recovering staff debt.

Ms Mareka replied that qualifying debt would be written off, but in some cases debt will not be recovered at once.

Mr Trent wanted to know what percentage would be recovered.
Ms Mareka replied that there were processes that had to be followed before they knew how much debt they would recover.

Ms A Dreyer (DA) commented that the vacancy level had exceeded all expectations. She did not know how the Department could have operated like that. She felt that there was a lack of willingness to remedy the situation. She wanted to know on what basis the Commissioner’s performance bonus was paid.

Mr Mti replied that he would not be able to answer this question, as there were managers above him who decided this.

Ms Dreyer wanted to know if the current CFO had received a performance bonus.

Mr Mti replied that the current CFO had not received a bonus.

Ms Dreyer wanted to know if the Committee could be supplied with the policy for the payment of performance bonuses.

The Chairperson commented that the policy could be sent to the Committee in writing.

Ms Dreyer wanted to know if the Commissioner agreed that senior management should attend the audit committee meetings. She said that it appears as if the Department does not care about the Auditor General’s committee meetings. It appears that they are wasting the taxpayer’s money.

Mr Mti replied that it would not be correct for him not to take the audit committee meetings seriously. He said that the problems of the past have improved.

The Chairperson commented that the problem is that the audit committee meetings are not being attended.

Ms Dreyer wanted to know who should attend the meetings.

The Auditor General replied that it would be best for the accounting officer to attend the audit committee meetings. As for the audit steering committee meetings, the accounting officer can attend more of those meetings as they are held more frequently.

Ms Mashiane wanted to know what had been done about the IT systems.

Mr Motseki replied that they have made progress with the IT systems. They have entered into an agreement with the State Information Technology Agency (SITA). There was however still a lack of policy around IT security.

Mr P Gerber (ANC) wanted to know who had decided to enter into a 25-year contract for a privately run prison. The cost of incarcerating an inmate there is twice the amount than in a state run prison. He wanted to know if they could not build their own prisons.

Mr Mti replied that he did not know who had decided to enter into the 25-year contract. He said that he is not happy with the arrangement, as it is too costly. They were trying to find a way out of it.

Mr Gerber wanted to know why Correctional Services in the Free State was spending a lot of money on conferences and meetings. He also wanted to know why the services of LABAT were procured.

Mr Mti replied that the Free State is used as a central location for meetings and conferences by the National Department. In 2001 the department had used LABAT to help sort out problems in the Department. This however was a waste of money, as there was not much help coming from LABAT.

Mr Trent anted a written response from the department on the extent of the training, which their officials had undergone. He also wanted more information on the medical expenses and fraud.

Mr Smith told the department that they would not hesitate to call it back to check on their progress. He said that he is sure that there will be another qualified report from the Auditor General for the 2006/07 financial year. He suggested that the department look at seeking outside help to overcome its problems. Parliament was using its oversight function and the Committee’s criticism was not personal. SCOPA took its role very seriously.

Mr D Bloem (ANC, Chairperson: Portfolio Committee on Correctional Services) commented that his Committee had never agreed with the 25-year contract for a privately run prison. He said that it was a waste of taxpayers’ money. The Portfolio Committee would follow up on the various issues raised. DCS was not an easy department to manage, he added.

The Chairperson commented that he could not understand why there were three asset management systems. Most Directors-General who appeared before the Committee are new. This cannot be said for Correctional Services. It was the third time they had to appear before the Committee. They did not want excuses. He said that it is not cost effective to have privately run prisons.

The meeting was adjourned.