CRL Commission; Department of Education; Parliament of SA: Interrogation of Audit Reports 2005/6

PUBLIC ACCOUNTS STANDING COMMITTEE (SCOPA)
28 February 2007
CRL COMMISSION; DEPARTMENT OF EDUCATION; PARLIAMENT OF SA: INTERROGATION OF AUDIT REPORTS 2005/6

Chairperson: Mr N Godi (PAC)

Relevant documents:
Annual Report: 2005/6 Commission for Promotion & Protection of Rights of Cultural, Religious and Linguistic Communities (available at www.crlcommission.org.za)
Annual Report 2005/6 Department of Education (available at www.education.gov.za)
Annual Report 2005/6 Parliament of the Republic of South Africa (available at www.parliament.org.za)
Audit Report 2005/6 Commission for Promotion & Protection of Rights of Cultural, Religious and Linguistic Communities
Audit Report 2005/6 Department of Education
Audit Report 2005/6 Parliament of the Republic of South Africa

Audio Recording of the Meeting

SUMMARY
The Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities was asked to answer questions on the Matters of Emphasis highlighted by the Auditor General. Questions asked related to lack of controls prior to December 2005, communication of policies to staff, the vacancy rate, the number of funded posts, and the initial budget of R9 million, which was out of kilter with the spending. Confirmation was sought that specific systems were now in place. Other questions related to the role of the Commission, the organogram, the functions of Commissioners, letters and conditions of appointment, failure to meet Treasury guidelines on tenders, the performance contract of the CEO, the delegation channels, declaration of interests, performance contracts and correction of the inaccuracy of personnel files. The variance in trade and other receivables from 2004 to 2005 was questioned, and the comment made that the notes to the financial statements should be clearer.

The National Department of Education had received an unqualified report but there were Matters of Emphasis. Members raised questions on monitoring mechanisms for conditional grants transferred to provinces, the powers that the Department had to enforce compliance with the Division of Revenue Act, the levels of compliance by provinces, the specific steps in relation to the Eastern Cape and Kwazulu Natal, control over institutions of higher learning, and the possibility of the Department taking steps against individuals who did not comply. The ability of provinces to report was raised. Other questions were asked about the asset management shortcomings, the high turnover of staff, and capacity in the planning and monitoring unit. 

Parliament had received a qualified report, and it was clear that its operation was still a grey area, since the relevant legislation had not yet been finalised. It was confirmed that Parliament accounted within the spirit of the Public Finance Management Act. Specific questions were asked on the functioning of the audit committee, the outsourcing of the audit function, the extent to which the lack of legislation hampered the financial administration, and the steps taken to try to achieve finality. Further questions were asked on surplus funds, the lack of proof of evaluation of performance of staff, problematic systems, monitoring of bad debts, and the lack of a register of laws and regulations applicable. Members asked about performance bonuses, the reasons why the risk management committee had not met in the course of the year, the mandate of the risk committee, and whether policies were distributed to staff. Further questions were directed to measurement of objectives, the core business of Parliament, the current situation regarding the travel fraud, management of assets including artworks, the parliamentary buildings and movable assets. The asset register was queried and clarity was sought on the valuations assigned. Further questions related to membership of inter-parliamentary bodies, the lack of finality on the Parliamentary Association, and lack of finality on matters in previous reports. Written confirmation was requested on finalisation of the 1997 tax matter, the rise in employee benefits, staff debtors and fees paid to contractors and consultants and ownership of the Fernwood Sports Club.

MINUTES
Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities (CRL): Interrogation of Audit Report 2005/06
Mr E Trent (DA) noted that the Commission promoted the tolerance and development of national unity. It had recently hosted a conference - looking forward to the next ten years. He asked whether the conference had put the Commission on the right path

Ms Pumla Madiba, CEO, CRL replied that it had done so, and that the outcomes of the conference had contributed to a business plan and measurable objectives.

Mr Trent noted that the Auditor General (AG) had raised a number of Matters of Emphasis in the report. He had reported that controls were not in place or were not working as designed. This was due to the fact that most policies and procedures were approved only in December 2005. There was a poor control environment, including lack of adequate capacity in the financial department. There was no implemented framework for performance monitoring. He asked for comment.

Ms Madiba replied that the policies and procedures were adopted in December 2005, after CRL had looked at the areas of weakness identified by the AG, and CRL had therefore responded to the highlighted weaknesses. The policies were drawn specifically to what the AG had raised.

Mr Trent asked whether the policies were communicated to staff, and if they clearly understand the policies and the consequences of not abiding by them.

Ms Madiba replied that over and above the policies there had been a procedural step-by-step manual. CRL was a small organisation and communication was good. It was impossible to say that everyone always would stick to the procedures, but all were aware of it, and there would be closer monitoring, evaluation and correction.

Mr Trent noted that there were 32 approved posts, but only 19 had been filled. He asked to what extent the vacancies impacted on the organisation and its operations.

Ms Madiba stated that the high level of vacancies was due to the non-funding of posts. The vacancy rate was calculated on the approved, and not the funded posts. That area of emphasis by the AG had assisted CRL to motivate for increased funding from National Treasury (NT), and it had now managed to have more posts approved.

The Chairperson noted that there was a surplus at the end of the financial year, and enquired how the posts had been filled.

Ms Madiba stated the posts were not funded according to the budget, so the surplus related to something else. There had also been resignations. Because there was no budget, the funds could not be used for the vacancies.

The Chairperson queried how this could be so, but did not pursue the matter.

Mr Trent asked how many of the 33 posts were funded. He was concerned that the budget request for 2004/05 had been R30 million, but the budget approved was only R9 million. He wondered if CRL was getting less money than necessary to complete its portfolio.

Ms Madiba said that the R9 million budget was not based on calculations or cost drivers, but was paid in to open an account before CRL was established. In essence it was a notional amount as the institution had not yet come into being.

The Chairperson asked how that figure was arrived at.

Ms Marion Mbina, National Treasury, explained that CRL was a Chapter 9 Institution linked to the Department of Provincial and Local Government (DPLG). The R9 million was intended to be set-up costs, including the payment for a number of part-time commissioners. The figure was arrived at on information supplied by DPLG. 

Mr Trent had asked about the conference as it presumably impacted upon the business plan. He noted that there was a surplus of R253 000. R1.07 had been budgeted for administration but CRL had spent over R4 million, so the budget was hopelessly out of kilter in this, and indeed in other areas. R5.9 million was budgeted for staff, yet there was massive under spending. He did not understand how the administration costs could be so high when there were not sufficient staff.

Ms Madiba noted that the administration costs were high owing to start up costs. In this year CRL had set up the permanent offices at Constitutional Hill. The costs related to furniture and equipment. The staff included not only the employees, the Commissioners.

Mr Trent enquired if the Commissioners were serving part time.

Ms Madiba confirmed that they were.

Mr Trent asked the Auditor General why there had been no note in relation to the set up costs, because this would appear to explain a number of the problems.

Ms Andronica Masemola, Office of the Auditor General, noted that there were broad comments on costs. The AG had said that the CRL was recently established and had to go through the start up process.

Mr Trent noted that these comments had not been specific. He asked the AG if the explanation now given was acceptable.

Ms Masemola replied that this was acceptable. With regard to the variance in budget, the allocations related to the actual expenditure. The budget had included the payment for commissioners as an administrative expense, not as a staff cost, whereas the financial statements showed the allocations differently.

Mr Trent asked if there was proper financial management.

Dr Mongezi Guma, Chairperson, CRL made the point that some of the finances were administered by DPLG during the setting up period. It was not so much that there was not sufficient financial management now, but that it had not been done by CRL until the staff were set up.

Mr Trent noted that this had been a problematic year for a number of reasons. He felt that it was more important to focus upon what had been done now. He noted the assurance that policies and procedures were now in place. He asked specifically if there was a suitably qualified financial officer.

Ms Madiba confirmed that there was one. The previous CFO had resigned shortly prior to the AG report. There was now a new CFO, who had previously held an Acting CFO appointment. Many of the weaknesses had been corrected under him while he was acting, and he had assisted to set up the systems.

The Chairperson asked if the role of the Commission had been clarified.

Dr Guma stated that the Commissioners and staff were now established, and the conference was mandated by law. There was an outreach to communicate. When CRL began to employ staff it had to deal with transitional issues, when the Commissioners were doing some outreach work and the staff were doing administrative work. Last year there was an organogram drawn to delineate the lines of operation between Commissioners and staff. This was still a transitional movement, and not yet fully sorted out.

The Chairperson asked if the CRL was working on the basis of the organogram at operational level.

Dr Guma stated that this was being done. However there was a historical problem of people forgetting that they were not staff. The Department did not give the Commissioners a well-articulated idea of roles and responsibilities, so there were some lingering grey areas. He confirmed that this was work in progress. It was now articulated more clearly what Commissioners were to do.

The Chairperson asked how long it would take before the matter was sorted out>

Ms Madiba replied that a general document from the Ministry was attached to the letters of appointment, which set out the rates per hour and per day. However, CRL was now working on whether the rates per day were for meetings or work. There might be a need for regulations to articulate more clearly what the day or hour should be spent on.

Mr Trent said that the AG had reported that the conditions of appointment for the Commissioners had not yet been finalised. He said that this was a statutory matter, and this should have been the first thing done. He asked if there was now compliance with the section of the Act.

Dr Guma said the letters of appointment were signed by the President, and the letters setting out the roles and responsibilities by the Minister of DPLG. CRL itself was not able to deal with this and could only ask that it be done. Dr Guma added that he was the only Executive Commissioner, but there was nothing to specify the difference of functions between himself and the non-executive Commissioners.

Mr Trent asked how CRL could go forward. He asked how much pressure CRL had put on the Minister to implement matters.

The Chairperson said that this was outside the Commission's scope, and the Committee might need to include in its Resolution a note of what the Department should do. It was nonsensical to establish a structure but not define the roles.

Dr Guma noted that CRL had written to the Minister, and the Director General of DPLG. The Minutes of the Portfolio Committee had noted specifically that a member commented on lack of administrative support from DPLG.

Mr Trent asked for an received confirmation that the following were in place:-
Internal policies and procedures, conditions of appointment, risk assessment strategy on fraud prevention, and internal audit. Mr Trent noted that the internal auditors had held a number of meetings, but they had not commented on what the AG had said.

Ms Madiba confirmed that the internal audit unit was functional and were contributing to the move forward.

Mr Trent asked whether supply chain management was in place.

Ms Madiba said the policy had been drawn. The supply chain management unit did not yet exist but CRL was employing people as it acquired funding and would establish these posts.

Mr Trent said that the AG had highlighted two instances in which goods were acquired without the correct Treasury procedures being followed. In particular an amount of R750 000 had been paid for diaries and calendars. He asked what assurances there were of fair and equitable procedures.

Ms Madiba replied that in view of the amount of money involved the tender should have been a public one. There had been time constraints, as CRL wanted to have the diaries printed before December.  The diaries were more of an educational tool than anything else. They explained the cultural significance of various dates and helped to identify which dates should be prioritised as relevant to the Commission’s work. They had included a great deal on languages and were a useful reference tool. CRL had been requested to re-issue the diaries but had now downscaled and could not do so.

The Chairperson noted that the correct procedures must be followed, as supply chain issues were vital. This was a cause for deep concern and an area in which personal interests could be served. He warned that no challenges to the process should exist.

Mr Trent said that this was a new entity, and he would like to add that contraventions of the Public Finance Management Act (PFMA) could lead to criminal proceedings. He felt that CRL displayed the correct spirit. He asked whether the CRL could provide a written summary of what procedures had been followed.

The Chairperson said that no explanation would change what had happened. The procedures were not followed, and it did not matter what alternative procedures were used. He did not think the matter could be taken further, other than CRL ensuring it did not happen again.

Mr Trent accepted the ruling of the Chairperson. He asked if the correct policy was now in place.

Ms Madiba confirmed that it was.

Mr Trent asked if the CEO's performance contract had been signed.

Ms Madiba replied that it had been signed, and that it included measurable performance objectives on the basis of the operational plan for each year.

Mr Trent asked if there was proper delineation of delegation of power.

Ms Madiba confirmed that this existed, but might not be fully implementable at this stage in view of the vacancies. In the current year there was some money available and once the vacancies were filled the delegations would be able to run properly. 

Mr Trent asked if there was likely to be a clean audit for the next year.

Ms Madiba said that CRL was attempting to do this.

Mr Trent asked about the declaration of interests.

Ms Madiba confirmed that a procedure was established, and that such declaration was a standing item for meetings, to ensure that as interests changed they were declared. This included commissioners and staff.

Mr Trent asked if there was a register of interests.

Ms Madiba confirmed that there was a register, and a standard form to be filled out.

Mr Trent asked how far CRL had gone with performance contracts.

Ms Madiba said this had started well. It was not implemented immediately because the strategic plan and operational planning were work in progress. She had spoken of the limited number of employees. The responsibilities of the limited staff were over and above what was contained in the job description. Now that more attention had been paid to this, CRL was able to operate in accordance with the operational plan.

Mr Trent noted that the AG had raised a number of matters relating to the control environment. Ms Madiba stated that they had been dealt with. He asked specifically if the inaccuracy of personnel files had been corrected.

Ms Madiba confirmed that this had been done and the filing system had been improved.

Mr Trent noted that trade and other receivables amounted to R3.3 million for 2004, but a huge variance a year later. He asked what accounted for the difference.

Mr Cornelius Smuts, CFO, CRL indicated that the R32 000 in the 2005/06 year had included a donation from ABSA but he did not know offhand the composition of the R3.3 million.

Ms Madiba promised to look back into the books and respond in detail in writing.

Mr Trent noted that net cash from activities showed a deficit, which was described in the note as "acquisition of property, plant and equipment". He asked what this represented. 

Ms Masemola (AG) noted that the figures represented the outflow of cash, and that the same amounts were reflected in the balance sheet.

Mr Trent commented that the notes to the financial statements should be clearer.

Mr Trent commented also that public awareness of the organisation was not high, and perhaps this needed more attention.

National Department of Education (DOE): Interrogation of Auditor General's report 2005/6
The Chairperson noted that the Director General had been with the Department since 1996 and had been Director General since 2005. The Chief Financial Officer had been with the Department since the 1970s and had been appointed as CFO in 2002. He noted that this was unusual.

Ms L Mashiane (ANC) noted that DOE had problems with conditional grants. There was a vacancy rate of 32.23%. Weaknesses in asset management were a thorny issue. Although the audit report had been unqualified, SCOPA felt it was important to try to understand the problems faced by the Department as highlighted in these Matters of Emphasis.

Mr E Pule (UCDP) noted that in DOE could be commended upon having received unqualified reports in 2004 and 2005. However, the material Matters of Emphasis had caused concern. Two of these matters had also been raised in 2004/5. This implied that no proper corrective action had been taken at the time. The AG had reported inadequate monitoring mechanisms for conditional grants transferred to provinces and pointed out certain limitations in the monitoring frameworks. Financial reports from provinces were not received within 15 days after the end of the month; there had been non compliance with the Division of Revenue Act (DORA); low spending; and failure to submit reports. If there was no monitoring, provinces would continue to contravene the DORA provisions. Of particular concern were Eastern Cape and Kwazulu Natal who were receiving large amounts. He asked DOE to clarify what mechanisms or structures existed to force compliance with DORA.

Mr Duncan Hindle, Director General, DOE confirmed that this had been raised in the previous audit report, although in 2004/5 there were no concerns around asset management. DOE shared the concerns on the grants. DOE tried to work collaboratively with the provinces to try to get them to comply with the reporting requirements. Some still had not done so. The only enforcement instrument was to withhold the next transfer of the conditional grant. This was done on five occasions, either because there was no report, or because of concerns about the business plan or the state of delivery. Once the requirements had been met, DOE would have to release the money. In areas like school feeding DOE would be reluctant to withhold, and it would rather try to adopt other measures to correct. The Provinces had understood the seriousness of the matter, although these transgressions were apparently not reflected on the provincial books.

The Chairperson asked what impact these mechanisms had.

Mr Hindle believed there was a positive impact and that compliance had improved in the current year.

Mr Pule noted that despite these mechanisms the Provinces had not complied with Section 25 of DORA by submitting reports to the provincial treasury and the national office. He asked what other measures were in place to ensure that they did comply, as the current measures were not working.

Mr Hindle stressed that National Treasury had received the reports, since in most cases DOE had managed to extract the reports between 15^th and 20^th of the month. He noted that there was a range of provinces that did not comply in different months, and it was not that there had been zero compliance, nor that one province had consistently not complied. Many were compliant.

The Chairperson asked that the full information should be sent to the Committee at a later stage. The AG’s report had not given an indication of the level of compliance and a statistical table would assist.

Mr Pule noted that there had been a workshop on business plans and procedures, but Eastern Cape had not submitted the business plan. He asked what measures could be taken against this province in particular, and asked whether it was being treated the same as other provinces.

Mr Hindle said that payment of the next transfer had been withheld from Eastern Cape on more than one occasion. The DOE had also worked in a developmental sense with the Province. There had been a new Head of Department and DOE had travelled there to try to ensure that the systems were compliant.

Mr Pule noted that Kwazulu Natal had received the highest percentage of the budget, and asked what had been done about this province.

Mr Hindle replied that it was of concern that the three largest provinces had the weakest administration. Kwazulu Natal had 25% of learners, which accounted for their large share. DOE had also worked with that province, and a Chief Director had been seconded down there for eighteen months to deal with procurement and supply chain management.

Mr Pule asked if DOE had engaged with National Treasury (NT) about withholding the funds.

Mr Hindle noted that DOE would consult with NT before withholding. He hoped the new leadership in the Eastern Cape would assist in setting right the matters needing attention. DOE would continue to work with this province to try to ensure delivery.

Mr Pule noted that the AG had stated that the April 2006 report had not included amounts withheld for two periods and did not include the actual expenditure as required by DORA.

Mr Hindle stated that the provinces were likely to have been paid out in April 2006, and tranches would only be withheld after that month. DOE would, when submitting information to NT, reflect that nothing had been received from a Province.

The Chairperson noted that the largest portion of the budget went to institutions of higher learning and not to the Provinces. He asked if there was any mechanism to check on utilisation of these resources, as effectively DOE was a conduit for the funds.

Mr Hindle replied that every institution was required to provide DOE with audited financial statements, which would be interrogated and monitored. DOE recognised that they were largely statutory bodies with their own mandates, who took responsibility for day to day management of funds. This matter was high on the agenda of the Department and a number of institutions seemed to be having difficulty in managing the funds.

Mr Pule asked if DOE had ever considered taking steps against a provincial official who did not comply.

Mr Hindle said that the individuals were not employees of DOE but of the provincial departments. There was probably no legal basis for DOE to discipline them.

The Chairperson noted that this was a problem that would require further investigation by parliament, especially in relation to DORA.

Mr Trent noted that when the Department of Health had appeared before SCOPA, the matter of reporting by the provinces had also been raised. There, it appeared that some of the conditions for provinces’ reports were so onerous that they could not possibly comply, with the result that this matter of emphasis would appear every year. He asked whether the DOE reporting format was realistic.

The Chairperson asked if the format could be simplified without compromising standards.

Mr Hindle replied that the conditional grants had been managed for a number of years. Initially they had onerous conditions, but this had been gradually corrected and at present the conditions were manageable. Despite limitations around reporting, the grants were being spent.

Mr Pule noted that the matter of emphasis in relation to asset management had appeared in the 2004 report. In 2005/6 the AG had pointed to various shortcomings in the asset register of the Department. This report indicated that the financial information was inconsistently valued. Intangible assets were not included, neither were certain capitalised assets which were misallocated to repairs or maintenance. Some assets disposed of were not reflected. There were more problems in this year than in the previous year. This indicated that although corrective action was taken, it was not adequate to ensure that the asset register was fully compliant with regulations. Mr Pule asked why the DOE had failed to update this register.

Mr Hindle said that the asset management comment in the 2004 report had related to the security of the IT systems. That had been corrected. The asset management issues now raised had not been raised in the 2004 report. The DOE had taken account of the report and had gone back to 1999 to re-value and correct the register. The intangible assets pertained to publication of materials such as curriculum support and the Freedom Charter. DOE had not thought that these were assets, but now realised that they had copyright value and had included them. The capitalised assets were in the register, but had been allocated under an incorrect code. Some assets were transferred to the Provinces without being reflected; this had been an administrative oversight, and had now been corrected. The asset register was now up to date.

The Chairperson said that the staff complement showed high turnover that did not have a positive impact on capacity to deliver on the mandate. He asked why there was such a high turnover and what measures had been taken to try to correct the situation.

Mr Hindle confirmed that this was a concern since DOE was operating in a highly competitive market, including competition from the provincial departments. There was staff movement between the National and Provincial departments. The difficulty in recruiting senior people was common to many departments. He had recently advertised for a deputy Director General of Higher Education. Only fifteen applications were received, of which half came from primary school principals with no experience in higher education. There was not a single applicant from the higher education sector. Universities were able to offer better packages and better conditions of service. The Minister had previously asked for a hold on appointments, pending a review, so in 2005/6 no non-essential posts were filled. The new organogram had now been approved and the posts would be filled as best as possible.

The Chairperson asked whether the planning and monitoring unit had capacity.

Mr Hindle assured the Committee that this branch, notwithstanding a dearth of skills, was able to recruit and there was now a fully-fledged monitoring directorate.

Parliament of the Republic of South Africa: Interrogation of Audit Report 2005/06
The Chairperson noted that there were some grey areas around the accounting office of Parliament, which still needed to be finalised. Parliament was not a department, and therefore not as clearly defined in terms of the PFMA as other departments and public entities. However, since it operated in the spirit of the PFMA SCOPA interrogated matters of accountability in the same way, with a view to assisting it to manage its affairs properly.

The Chairperson noted that in 2005/06 the audit committee had only held one meeting. He asked if a new committee had been established, what progress it had made, and how functional it was.

Mr Zingile Dingani, Secretary to Parliament replied that the audit committee had met once before its term had ended in December 2005. Advertisements were sent out for new members at that time. When a requirement was added to ensure that members were properly vetted, this process had taken some time.  In the result, the appointment was completed only in December 2006. The new members were now in office.

The Chairperson asked if the outsourcing of the audit function was to be permanent, or whether there would be in house capacity.

Mr Digani noted that this would not be permanent. The contract of the outsourced auditors would expire in 2007. Work had been doe to set up a new structure internally. Parliament was busy filling the positions, and the new unit would be fully functional by the time the outsourced contract expired.

The Chairperson asked to what extent the non finalisation of the legislation intended to govern Parliament hampered the financial administration.

Mr Dingani said that it was a problem. However, Parliament did work within the spirit of the PFMA and knew how it should operate. Insofar as the legislation was concerned, he noted that the AG had raised the lack of finalisation as a matter of emphasis. Mr Dingani did not believe that it should have been in the AG’s report. The lack of progress was not attributable to the management of Parliament, as it did not fall within its mandate to finalise the legislation.

The Chairperson asked how management viewed the matter, and whether there had been interaction on the delay in the passing of the legislation.

Mr Dingani understood that the draft had been completed, and that it was in the hands of the finance committee.

Mr V Smith (ANC) noted that Parliament was a multi million rand business. He commented that there was no governance mechanism provided by specific legislation, and that Parliament  did not fall under PFMA or the Companies Act. He postulated that if the Secretary were to state that he did not have to submit documents, SCOPA would therefore not have any mechanism to hold it accountable. He reminded the Secretary that in 2005 he had said that discussions were continuing and moving forward on the legislation, and that these discussions would inform the setting up of the best mechanism for Parliament. Two years later nothing further had happened. He felt that accountability could no longer be a debatable issue, that the accounting officers could not continue to operate without firm boundaries, and enquired what was happening.

Mr Dingani replied that Parliament was not really operating n the dark. Certain parts of the PFMA did apply and Parliament did operate in the spirit of PFMA. The Powers, Privileges and Immunities legislation gave effect to what needed to be done. Parliament accepted the overall financial management framework used in the country. Although there was no specific law, Parliament did respect the same general principles and conduct business in the same way as applied to other public services.

Mr Smith said that the questions would therefore be directed to the PFMA principles.

Ms Mashiane asked how the surplus funds mentioned in the report came about, what they would be used for and how Parliament would ensure that no surplus existed in future.

Mr Dingani said that these “surplus funds” were not the same as “unspent funds”. The issues of under spending in the audit report had referred specifically to certain office equipment.

Ms Mashiane noted the comment, but pointed out that there was still an item, under paragraph 6.1 to be explained. The surplus funds apparently related to statutory appropriations.

Ms D O’Brien, Chief Financial Officer (CFO), Parliament replied that all moneys not spent would be termed as under spending and would have to be resubmitted to National Treasury. The under spending was admitted and the funds were returned in April 2006. Parliament had other funding sources, such as income emanating from catering and similar services. The surplus related to these sources. It would not have to be surrendered as it was from separate income. Interest received was another major funding source. This money was in reserve and the surplus was being earmarked for the space utilisation project. With permission from Treasury, there would be a process to change the strategic direction of Parliament so that surplus funding could be used, after due process had been followed, for other matters not budgeted for.

Ms Mashiane asked how Parliament would ensure that there was no surplus.

Mr Digani said there was a series of processes in place, which would include better planning. He noted that said that the budgets had now been aligned. Some time was spent in trying to assess the best model, but this had been corrected. In terms of the structure, about 300 posts had been abolished and this was the reason for the under spending. The budgets had also assumed that each of the posts would be filled at the highest level, and thus there was essentially in-built under spending.

Mr Smith noted that the accounting officer remained accountable at the end of the day. He asked who the “people” were as referred to by Mr Dingani, who allegedly had not done proper planning. He asked specifically what Mr Dingani himself was doing. He noted that so far from there being an under spend on staff, the AG’s report had in fact noted a R17 million over spend under Programme 1.

Mr Dingani said that action had been taken to correct all the programmes. In referring to “people” he was making a generic comment on what had happened in the past. Although there might be under expenditure currently, he noted that there had been a major restructuring of the Human Resources, Public Affairs and Finance divisions. Negotiations with the unions had held back some of the processes.

Ms L Mashiane (ANC) referred to the AG’s comments that no proof could be provided that the evaluation of the performance of staff had been carried out according to the approved policies and procedures. She asked whether the staff were evaluated, and, if so, why the information was not given to the auditors. 

Ms D O’Brien noted that the staff were evaluated, and that this information could be given to the AG.

The Chairperson asked why the information was not made available at the time.

Mr Dingani replied that previously no systems existed in Parliament, as identified by the 2003/04 report. The lack of information arose from the lack of systems.

The Chairperson asked what had happened subsequent to this time.

Mr Mzi Mbangula, Divisional Manager, Corporate Services, Parliament noted that the information had been given to the AG.

Ms Mashiane stated that this did not explain exactly why the information was not available at the time of the audit.

Mr Dingani replied that systems were a problem and there was in addition no disaster recovery plan, so that if documents were lost there was no backup.

Ms Mashiane noted that the improved recovery policy did not include provision for bad debts and the AG had reported that the policy in respect of bad debts was inadequate. She asked what procedures were followed and how the accounting officer would monitor bad debts.

Mr Mbangula stated that the performance results cycle ran concurrently with the audit, which created some problems.

Ms Mashiane repeated her last question.

Mr Lionel Klaasen, Division Manager, Institutional Support, Parliament responded that debts in Parliament would be written off by the Office of the President. Management would do the monitoring of debts. When debts were not recoverable they would be handed over to the State Attorney. Only after that body had advised that the debts could not be recovered would they be referred for write-off.

Ms Mashiane asked what monitoring was done in respect of debts.

Mr Dingani replied that this was a continuous management function, and the CFO and other officers would make regular reports.

Ms Mashiane stated that the AG had reported that the register of all laws and regulations applicable to parliament could not be submitted for audit purposes. She asked if such a register existed, and what had been done to ensure that it would be available.

Mr Dingani stated that a register had been compiled and completed. It would be available for the AG for the next audit, and had already in fact been submitted to his office.

Ms Mashiane reported that the AG commented that the procedure manuals and process flows were inadequately compiled, in that they did not include reference to applicable laws and regulations. She asked what steps were taken when Parliament employed new employees and whether they fully understood all the systems.

Mr Dingani asked at this point that the Members should give page references when asking questions to make it easier to respond.

Mr D Gumede clarified that this referred to paragraph 6.2 of the audit report.

Ms Gloria Spelman, Head, Internal Audit Unit, Parliament replied that this point had been taken up with the AG as the Unit did not understand what laws and regulations should be quoted. It was agreed with the AG that this comment was merely a “value-add” issue and there were in fact no applicable laws. The manual was sufficient as it stood.

Mr Dingani added that new employees would be inducted both at the general level and in relation to their specific functions. They fully understood what they were to do.

Ms Mashiane asked whether performance bonuses were paid, and how they would be assessed.

Mr Dingani noted that they were paid, based on assessment of individuals against a performance assessment model.

Ms Mashiane asked whether there was a performance manual for human resources (HR) purposes.

Mr Dingani replied that there was

Ms Mashiane asked for comment from the AG.

Ms Lily Zondo, Corporate Executive, Office of AG commented that the performance assessment as stipulated in the manual could not be submitted, so that there was no verification of the processes followed.

Mr T Bonhomme (ANC) noted that there was a weakness of internal controls and that the risk management committee had not met in the course of the year. He asked why this had not happened and whether meetings had subsequently been held.

Mr Dingani answered that the Committee was unable to meet in this year, but had done so now.

Mr Bonhomme asked what the mandate of the risk committee was, and whether it included compiling risk policies.

Mr Dingani stated that its broad mandate was to look at risk and ensure that management was informed about any risk so it could put an action plan in place.

Mr Bonhomme asked whether management had approved policies that were distributed to staff.

Mr Dingani replied that all policies were available to staff in a compendium format. All staff had active knowledge of the policies.

Mr Bonhomme asked how many times the Committee had met.

Mr Dingani confirmed it had met twice.

Mr Trent stated that services were rendered to parliament and its members to ensure that the objectives of Parliament could be met. The AG had stated, in his evaluation of performance reports, that the objectives set out in the strategic plan could not be reconciled with the objectives per the budget and therefore achievement could not be compared to the desired outcomes. He asked whether Parliament considered that it could properly measure these objectives.

Mr Dingani said that there was a problem in progress. Parliament had adopted the plans in February 2005 but due to the discrepancy in the budget being finalised it was necessary to rewrite the plans. In the future there would be alignment of plans and budgets. 

Mr Trent noted that there were about 30 objectives set out, but as far as he could see only two or three were measured.

Mr Dingani noted that the broad objectives were set out under various areas. The three main objectives were oversight, public participation and building an effective institution. These had been aligned to the budget.

The Chairperson asked what the current position was.

Mr Dingani said that when looking to the core business of Parliament, management (meaning Parliamentary Services) would give assistance for the achievement of cooperative and institutional matters. It would not be correct to expect management to deal with political issues. Therefore it was unfair, for instance, to try to judge management on the basis of the number of laws passed.

Mr Trent said that there were no quantifiable services. A statement such as “goals and services would be delivered on time” meant nothing. He was particularly concerned that the legislation which was to govern Parliament had not been passed, and this was surely one of the main priorities. He asked why this was not a major objective, particularly as there were problems with corporate governance, and what had been done to speed up the process.

Mr Dingani said that his management team had done all they could to facilitate the legislation, and had appointed consultants to assist the Finance Committee to complete its work in respect of the Bill. However, Parliamentary Services could not put this as an objective since the matter was outside its scope. The process could not be driven any further by management; he could merely assist and facilitate.

The Chairperson noted that Mr Trent had not insinuated that Parliamentary Services could drive the process, but noted that there was effectively a Catch-22 situation since it could not run effectively without having that legislation. He asked whether Mr Dingani had taken any positive steps to try to move the process along. The Committee would like to know where it could assist.

Mr Dingani stated that management had done all within its powers in the matter already.

Ms L Mabe, Chairperson: Joint Budget Committee, noted that the matter had essentially reached a stalemate and she suggested that it should be agreed that Parliament should act in accordance with the PFMA until the new legislation was passed.

The Chairperson indicated that there was an understanding that they would do so.

Mr Trent asked how much of the money defrauded from Parliament as a result of the travel scam had been recovered, and whether the recovery attempts were going according to plan.

Mr Dingani noted that Parliament was the major creditor in the insolvency proceedings and the matter was in the hands of the liquidators. Parliament was not collecting any debts, as these were being done as part of the liquidation proceedings. About R6.6 million had been recovered and there was good progress..

Mr Trent asked whether any of the money would need to be written off as bad debt.

Mr Dingani said that this was possible. Some of the debts might have prescribed by the time the matter was handed over to the liquidators.

Mr Trent asked if the liquidators held accounts on individuals.

Mr Dingani said that this depended, again, on prescription and on whether demands were made by the travel agents in respect of debts owed. Summons had been issued against individuals who had not responded to the letters of demand.

Mr Trent believed that about R61 million was involved and asked whether there was a list of transactions adding up to that amount.

Mr Dingani explained that the bulk of the total insolvency liability related to other people, and not to Parliament. Parliament was owed around R25 million, as established by two forensic audits. Other creditors included SAA, banks and other institutions.

Mr Trent commented that there was a great deal of speculation about the issue and that it was important to establish the facts.

Mr P Gerber (ANC) stated that the AG had commented that the assets worth R2.9 million could not be physically verified. Asset management had been identified as a problem. There were also issues around the authorisation of items worth less than R5 000. The financial statements had understated the assets. There was uncertainty as to exactly what assets were currently owned. Mr Gerber said that Parliament was one of the most important institutions and it was worrying that its record keeping was not impeccable. He asked who was responsible for assets and venues and who would assist in sorting out problems of asset management. He pointed to a number of defects in the current venue and asked what had happened to items such as Parliamentary crockery and cutlery.

Mr Dingani said that Parliament relied heavily upon the Department of Public Works (DPW) for upkeep of the physical assets and institution. In 2004/05 there was a suggestion that Parliament take over the functions from DPW, but it was decided that this was not part of Parliament’s core business. Although DPW was responsible for maintenance, Parliament would, on a day-to-day basis, do things that were conducive to the work of MPs. He conceded that there were weaknesses in the system.

Ms O’Brien said that in regard to the asset register the question of the R2.9 million had been resolved. All assets had been identified and valued. She noted that the assets were based on accrual accounting and certain journal entries were made without details having been given. Parliament was busy with a reconciliation of the general ledger and the asset register. The guidelines of Treasury had been incorrectly applied in regard to the R5 000 limit. A decision had now been taken to deal with assets item by item, so that, for instance, a boardroom table and chair set would not be dealt with as one unit but as individual items. All items under R5 000 were still recorded on the asset register, so that they were listed, but were not assigned a value. There was a verification process under way to tag all assets with barcodes so that asset counts could be easily performed.

Mr Klaasen added that Parliament was busy with a major refurbishment of offices, costing around R10 million, that would be finalised in the foreseeable future. There was a helpdesk and electricians and maintenance people did attend to work on a daily basis. Some of the assets were antiques and should not be moved. Cutlery and crockery bearing the new parliamentary emblem was on order.

Mr Gerber noted that the Parliamentary art collection was an important asset. The report had noted that the Keiskammashoek Tapestry had been sold to Standard Bank, who had immediately loaned it back to Parliament for display. He asked why this had been sold and for what amount. He also noted that certain other artworks had been purchased and he asked what procedure was followed and how they were paid for. Other items had been lent to other museums and he asked whether there were policies in place for loans, particularly in relation to insurance cover and to checking the condition of the items when returned.

Mr Dingani confirmed the tapestry had been sold and was on an extended loan to Parliament.

Mr Klaasen added that Mrs Botha was the person who made the internal arrangements for art works, and all purchases and displays were channelled through her office. There were policies for loans and gifts. He could not give the exact amounts but confirmed that he would check them and send them through to the Committee in writing.

Mr Gerber noted his concern that the Keiskammashoek Tapestry was a historical item. He wished also to have the name of the person who authorised the sale in writing.

Mr Gerber asked what the procedures now were in regard to the in-house travel agents and how this process had come about.

Mr Dingani stated that this had arisen as a result of the travel fraud. A contracted company now owned and ran the travel system after Parliament had tendered for the work.

Mr Klaasen named the company and stated that this was a five year contract.

Ms Dreyer noted that one of the visions of Parliament included cooperation with other spheres of government and working with international bodies. She noted that the Annual Report made mention of membership fees paid to “certain inter-Parliamentary bodies”. She asked who these bodies were and how much was paid.

Mr Dingani said that the bodies included the Commonwealth Parliamentary Association, the International Parliamentary Union, and the Southern African Development Community. The National Council of Provinces (NCOP) belonged to an African association. He was not sure of the details of the fees but confirmed that he would send these through in writing.

Ms O’Brien indicated that the expenditure was around R80 000.

Ms Dreyer said that the AG had reported that the Parliamentary Association was established with the object of fostering mutual understanding between legislatures. Monthly contributions were apparently made, but the funds were not part of the financial books and records of Parliament. The AG had been unable to fix the current value of the funds. She asked where the money was, and what it was used for.

Mr Dingani replied that this matter had continued to appear on the AG’s reports for a number of years and Parliament was seeking a final solution. The Association existed pre-1994 and the bulk of the money constituted of parliamentary contributions and members’ contributions. The money was held in a bank account, and was not being used for any purpose. The Association was not functioning. After discussion it was decided that the Association should be dissolved so that the funds could be released, in all likelihood to the Disaster Fund, but the current members would have to meet to confirm the dissolution. Parliament was busy trying to identify the members. He confirmed that the money was safe

Ms Dreyer asked what steps had been taken to try to bring the matter to finality.

Mr Dingani said that Parliament had already proposed possible ways to dissolve the Association. A constitution had been drawn for the Disaster Fund in anticipation of the money being transferred there. Parliament was trying to identify the current members but had so far identified only Dr Mulder, and had asked for others to be identified.

Ms Dreyer noted that two members of the Committee had just indicated that they too were members. She asked how much effort had really been put into trying to identify the members. She noted that the Speaker had already instructed that the money be transferred, yet there was no discernible progress.

Mr Dingani said that he had already set out the actions taken. There was a meeting on 20 November 2006 when this matter was raised and it was resolved that action should be taken to dissolve the Association. Once again he had some reservations whether the work of dissolving the Association was the work of Parliament, as this was not a management function. The decision to dissolve the Association lay with the institution of Parliament, and with the Association members, and not with management.

Ms Dreyer noted that at a meeting on 1 March 2005 SCOPA had noted that Parliament still had a number of outstanding matters not dealt with from the previous audit report. She suggested that there seemed to have been no improvements in this regard.

Mr T Mofokeng (ANC) stated that since 2001 there had been no finalisation of a 1997 tax matter and supporting documents had not been found. He asked if this matter had yet been finalised with the SA Revenue Services and what steps had been taken to clarify it, if not already done.

Mr Dingani stated that this matter was finally resolved with Revenue Services last year.

Mr Mofokeng asked that written confirmation of this be forwarded to the Committee.

Mr Dingani said that this had been done after the audit had been completed, but he would confirm it in writing.

Mr Mofokeng noted that there appeared to have been no depreciation of fixed assets, with the same values having been carried over from the previous year. He asked for an explanation.

Mr Dingani assured him that Parliament took its work very seriously and that it was trying to deal with all matters.

Ms O’Brien said that Parliament accounted on the modified accrual basis, not on the strict accrual basis. The Departments accounted on a modified cash basis, because their budgets were drawn on the modified cash basis. National Treasury was moving over to the modified accrual basis. Therefore the assets were reflected according to their prior value, or at cost, and depreciation was not reflected in the financial statements.

Mr Mofokeng asked why the number of professional staff was shown as 115 for the 2004/05 period yet only as 5 for the 2005/06 period.

Mr Dingani answered that there had been a reclassification process and this did not reflect staff having left.

Mr Mofokeng appealed to the accounting officer to ensure that the work was being done properly. He noted that insufficient records appeared to have been held in relation to some of the legal actions.

Mr Dingani replied that the travel fraud matters were complex. He wished to clarify the position of Parliament. There was a perception that matters had worsened since 2004. This was not so. If the AG’s reports were used as a measurement it should be noted that although the 2003/04 report contained eight qualifications, only one appeared in 2004/05 and 2005/06. A number of matters that were not reported on in the audit report had been rectified and put in place.

Mr Smith asked a number of questions but asked that the answers to be submitted in writing, in view of the shortage of time. He asked for an explanation of the rise in employee benefits from R172 million in 2004 to R189 million in 2005. He asked what the staff debtors of R1.9 million represented, and what was the age of the debts. He noted that although DPW were the main contractors in carrying out work on the parliamentary premises, additional fees of R86 million had been paid to contractors and consultants in the year under review. Furthermore this was a 139% increase on the figure paid in 2004/05. He asked for details of the consultants used and the services rendered.

Mr Trent stated that the balance sheet contained a statement of R16.5 million, of which R6 million had been recovered, described as “fruitless and wasteful expenditure”. He asked when this would be dealt with.

Mr Dingani confirmed that this related to the travel fraud and was in the hands of the liquidators.

Mr Trent also commented that the fixed assets were listed as R63.708 million, but the notes to the financial statements indicated two values for fixed assets, but neither appeared to reconcile with this amount.

Ms O’Brien said that this matter was dealt with under Note 14. There were two amounts reflected, being R49.769 million and R21.290 million. The accumulated depreciation had been deducted from the total of these two figures to reach the figure of R63.708 million. The two valuations represented the modified cash and modified accrual calculations. The template was drawn on the modified cash basis. The Generally Accepted Accounting Practice (GAAP) permitted assets to be valued in this way.

Mr Trent asked for written confirmation of who currently owned the Fernwood Sports Club.

The Chairperson stated that these answers should be submitted in writing , and SCOPA would thereafter draw its report and recommendations.

The meeting was adjourned.