Department of Correctional Services: interrogation of Audit Report 2005/06
Public Accounts (SCOPA)
02 March 2007
Meeting Summary
A summary of this committee meeting is not yet available.
Meeting report
STANDING COMMITTEE ON PUBLIC ACCOUNTS (SCOPA)
2 March 2007
DEPARTMENT OF CORRECTIONAL SERVICES: INTERROGATION OF AUDIT REPORT 2005/06
Chairperson: Mr T N Godi (PAC)
Documents Handed Out:
Department
of Correctional Services Annual Report 2005/06 [available later at www.dcs.gov.za]
Department of
Correctional Services Audit Report 2005/06
Audio recording of the
meeting
SUMMARY
The Department of Correctional Services appeared before the Committee to
answer questions on its Audited Financial Statement Report for the financial
year 2005/06. The issues raised included the problem of staff debt, home owners
allowances, travel and subsistence allowances, medical aid and pharmacy stock
control, as identified by the Auditor General. Further questions related to the
compliance improvement plan, the gaps in management of contracts, bar coding of
assets, the lack of recordal of intangible assets, loss of vehicles (which was
not able to be addressed), leases and costs of the private prisons. Attention
was also paid to staff vacancies and contracts awarded by the Department. The
Committee was particularly concerned that the Department’s Asset management
systems were not appropriate. It was noted that the problem of systems that did
not talk to each other would be a recurring problem, as the new Integrated
Asset Management system would only be in place in a few years time. Members
learnt of three major contracts, totalling R1.6 billion and questioned the
terms, the process of tendering and awarding and the time still left to run.
There were allegations that the same companies were linked to each tender. The Committee
was very concerned that the senior managers involved in the procurement of such
contracts were no longer in the service of the Department and that some may
have joined the private companies to which the contracts were awarded. The
Chairperson asked the Department to furnish the Committee with the exact
details of this issue, including who and how many members had left to join
these private companies. The Chairperson noted that the Department still had
much work to do in terms of turning itself around, and that he hoped that it
would be able to do this.
MINUTES
The Chairperson commented that the Department of Correctional Services
(DCS) had been faced with ongoing challenges for some time in terms of service
delivery. In previous engagements the Department had tried very hard to
convince the Committee that there were no problems, yet the report suggested
that matters were worse than last year. The Chairperson commented that an
attitude of denial was not the way to go, but DCS should rather work with SCOPA
to find a solution to all the challenges. He explained that because of the size
and nature of the Department the potential for corruption, fraud and
undesirable practices needed to be systematically addressed.
Mr E Trent (IFP) was concerned about staff matters, noting that this was a
qualification on the report of the Auditor General (AG). Receivables had risen
to R36 million from R30 million last year, with staff debt seeming to be the
main problem, as well as eight shortcomings being identified again this year.
He asked what the Department was actually doing about these staff issues as it
had almost been a year since the audit took place and there was enough time to
correct them.
Ms Jabu E Sishuba (Acting Commissioner: DCS) noted that the Department was
aware of the various issues raised in the report, and admitted that problems
relating to staff, such as staff debt and follow ups, had been addressed
insufficiently. This has become a project of the Department, to be carried out
in two phases. The first phase was to start with members who had left the
Department but still owed the Department money.
Mr Trent asked whether the Department had identified debts that would be
irrecoverable and what the anticipated loss to the Department would be. He also
inquired whether the project had been completed or if it was ongoing.
Ms Sishuba responded that the Department had identified those people who were
indebted and was working on this.
The Chairperson asked whether the regional spread was uniform, or if there were
certain regions in which a high prevalence of debt existed
Ms Nandi Mareka (Deputy Commissioner: Financial and Management Accounting, DCS)
noted that with regard to the first phase of the project, the Department had to
write off R11 million as irrecoverable. In terms of the spread across the
regions, the highest instance was in Gauteng (R2.8 million), followed by
KwaZulu-Natal and then the other provinces. It was explained that the project
was monitored on a monthly basis and that meetings with the regions then
occurred. The first phase had to be extended as not all cases that were
qualified had been identified. The second phase concentrated also on
identifying those cases but attached to it were the accidental or logistical
losses . The second phase concentrated on the amounts that were recoverable
Mr Trent asked how much of the balance of the R36 million was anticipated to be
a write-off, as it seemed as though many debtors had since left the service.
Ms Mareka responded that in the first phase, all ex-members were targeted. The
second phase was a process of cleansing and an amount of R5 million was
identified.
Mr Trent asked how much of the R36 million related to those still employed in
the department.
Ms Mareka noted that she did not have the figures with her
Mr Trent asked if the Department could furnish SCOPA with this information.
The Chairperson sought clarity whether the second phase of the project had
started.
Ms Mareka responded that it had started but that in the cleansing process, it
was found that some cases were not qualified.
Mr Trent asked if the Department was taking all possible steps to recover
monies from those employees who had left the service, for instance, by handing
them over to debt collectors. With regard to those still employed, he asked
whether all the information regarding the debt was up to date and in order
Ms Sishuba responded that the Department had engaged the service of debt
collectors to recover the debt of those who had left the Department. She
explained that there was a mechanism within the second phase of the project
that ensured that debt is recoverable. When seeking an advance the staff member
was now required to sign specifically that the agreement would be enforceable
even if the person left the DSC.
Mr Trent asked what percentage of the total debt was current and whether the
Department anticipated that the Auditor General would raise this issue again in
the next report.
Ms Sishuba explained that the Department would have like to have cleansed the
whole system, but that some progress had been made. The Auditor General could
raise issues, but the Department was working closely with the Auditor General
to correct this area already.
The Chairperson asked if this was a problem at staff or management level
Ms Sishuba noted that management took full responsibility and accountability.
She noted however, that it would have to be more vigilant in monitoring and
evaluation. She added that at some point, follow ups must be done by
management.
The Chairperson commented that “at some point” was not the issue. The job of
management was to oversee and enforce compliance, monitoring and evaluation,
and this was a challenge facing the Department now. If this was not properly
done, junior staff would be able to find ways to perform any number of
undesirable activities.
Mr Trent noted that the Auditor General had stated that there were problems of
staff and capacity. He enquired whether it was a problem of capacity, or a case
of negligence. He asked whether the Department had enough staff working on the
project and what the time frame for completion was.
Ms Sishuba explained that it was both a capacity and a negligence problem. DCS
had a programme of capacity building and training. It now had a compliance
improvement plan which the regions were to must report upon. Head office must
also be held accountable to ensure that monitoring and evaluation was
occurring. The Risk Management Committee sat every two months to present its
compliance reports. The Department also met with the Portfolio Committee
quarterly to report on these issues.
Mr Trent asked if any action had been taken in respect of negligent staff
Ms Sishuba responded that action had been taken against negligent staff in
various cases.
Mr Trent commented that in every Department there were systems to deal with
problems such as negligence, but that often nothing was done when it did occur
and therefore the problem was perpetuated. In relation to the Home Owner’s
Allowance, he asked whether the systems were up to date and what the time frame
would be in dealing with this issue.
Ms Sishuba responded that the Department was working on this matter and had
identified cases where the State guarantee still remained with the bank or
where the person had sold the house to somebody else. There was a database and
prevention measures are being put in place.
Mr Trent noted that this was good news. He wanted clarity on the time frame for
completion
Mr Vernie Petersen (Chief Deputy Commissioner: Corporate Services, DCS)
responded that those instances raised by the Auditor General had been put on
file and a project team was dealing with these cases. He could not supply the
Committee with an end-date.
Mr Trent asked if confirmation on the occupation of the dwellings had been done
or if the Department was still doing this.
Mr Petersen noted that progress had been made in this area, with the number of
guarantees being reduced to around 5 000. The Department had reduced the
liability to the State quite considerably, from R74.9 million to R41.5 million,
or 45%. He noted that not all of the guarantees were questionable, but that
they had not been managed properly. Some could have been cancelled, but this
had not occurred.
Mr Trent said that the AG had identified the main cause of the qualifications
as a lack of proper management and framework for monitoring. He asked whether
the Department could assure the Committee that these problems would be
addressed and would become sustainable.
Ms Sishuba responded that that was the intention of management. Thus far the
enforcement of consequences for non-compliance had been the Department’s weak
point, but that it would be more vigilant in future.
Mr Trent commented that he had a problem with an answer that indicated
intention, although he noted that the Department had a plan. He asked if the
Department had the capacity to put this plan into place.
Ms Sishuba responded that there was training and capacity building. The
Department’s Integrated Human Resource Plan looked at all these issues. She
explained that external help had also been given with regard to policies and
procedures. It was explained that performance agreements of managers and the
work performance plan did cover non-compliance.
Mr Trent raised the issue of employer benefit provision. Leave entitlement and
capped leave amounting to R700 million were misstated by an unknown amount, due
to the incorrect leave credits on the government payroll system PERSAL.
Ms Sishuba responded that the monthly reconciliation between the leave file and
PERSAL had now been done to ensure completeness. Staff had been identified to
undertake the coordination of the leave. A pilot project, using the Western
Cape, applied this new model, and an improvement had been noted. The Department
was testing an integrated corporate service system, as this system would erase
human error.
Mr Trent noted that in respect of subsistence and traveling a massive amount of
money was lost and fraud had been identified in the system. The AG had noted
six shortcomings in his report. He asked for clarity on claims lodged within
seven days. .
Ms Sishuba responded that the Department had procedures and processes with
regard to subsistence and traveling. Supervisors were supposed to ensure that
within seven days of travel a form is submitted. The Department had provided a
standing item in its Finance Meeting Agenda, so that these issues must be dealt
with monthly by direct supervisors, in an attempt to immediately identify and
deal with non-compliance. The Department was dealing with a backlog of
non-compliance and consequences would attach.. A clause would now be included
in the form to the effect that a failure to sign and return the form in seven
days would result in the allowance being automatically be deducted from salary.
Mr Trent stated that the AG had reported that incorrect amounts were paid or
claimed and that some claims were either not authorized, or were authorized by
the incorrect delegation. He asked if there was any proper management and
supervision over people, and if they were called to account for not doing their
jobs, and action taken against them.
Ms Sishuba responded that DCS had looked at both the previous and current
reports and measures were in place. The problems had been identified and corrected.
Although every manager was supposed to assume responsibility, this had not
happened at that time. This had now been corrected.
Mr Trent stated that he was happy with this answer and that the Committee
looked forward to the report at the end of the year.
The Chairperson was interested in the views of the regional commissioner in
terms of the challenges faced by the Department, as most issues seemed to
relate to a lack of compliance.
Mr N Tshivhashe (Regional Commissioner: Limpopo Mpumalanga and NorthWest)
responded that he agreed that in terms of general internal control, there was a
problem. Since the Compliance Improvement Plan had been given to the regions,
all internal controls were to be monitored. This responsibility had been
delegated to the Deputy Regional Commissioner and a committee of regional
inspectors who would monitor compliance on a monthly basis and report to the
National Office. In addition to this, progress on all internal controls had to
be reflected ion the quarterly report. The Regional Heads of Finance, Supply-Chain Management, and
Corporate services linked with the Deputy Commissioners on a monthly basis to
report back on progress. If non-compliance of managers was identified the necessary
steps were taken.
The Chairperson commented that there were serious gaps in management control
and supervision of staff.
Ms A Dreyer (DA) commented that DCS had received four consecutive qualified
Audit Reports, with the same issues arising year after year. The Committee was
very worried about this. The goal of the Department was to rehabilitate
offenders yet it seemed it could not rehabilitate itself. The Department had
created the impression that it was becoming “a serial offender”. She noted that
the AG had again reported that the fixed asset register was not being
maintained. She asked what steps were being taken to correct this.
Ms Sishuba responded that DCS was not proud to have the same issues recurring
for four years and that there was a problem that the tools used by DCS were not
compatible.
The Chairperson asked why the Department had only realized after purchasing the
systems that they were not compliant. This was surely an issue of a lack of
planning or poor planning.
Ms Sishuba explained that the systems the Department was using were recommended
or prescribed by National Treasury (NT)
but were not compatible. A compatible system had been identified and DCS was
engaging with Treasury in this regard.
The Chairperson noted that the issue of asset management has been identified as
a challenge for the past four years. He asked for comment from National
Treasury.
Mr Pieter Erasmus (Deputy Director responsible for Correctional Services,
National Treasury) noted that the systems were developed for financial
administration and stock issue, but that the systems did not talk to each
other. An integrated system was being developed.
The Chairperson and Ms L Mashiane (ANC) asked how it could happen that Treasury
prescribed systems that were not compatible.
Mr Barry Wheeler (Business Executive: Auditor General’s Office) responded that
there were two issues. The first was that the National Treasury issued, through
the Accountant General’s Office, Practice Note Seven of 2006, which barred Departments from enhancing and
procuring systems until the Integrated Financial Management System was put in
place. This system would take a number of years to become available and be
installed as an active system in Departments. The major concern was what would
happen in the interim period, being the next
three or four years, before the system was introduced. In other words,
the Department of Correctional Services would still have this problem for a
number of years to come. The second issue related to the audit and here Mr
Wheeler explained that Correctional Services had indicated to the AG that
procedures to reconcile the three systems manually were developed. This was
communicated to all users on 14 April 2006 and training in this regard had
started. This would not necessarily ensure that the three systems were properly
reconciled but was an attempt to achieve a manual reconciliation. It required
manpower, effort and additional work, which an integrated system would resolve.
Until such time as the systems were properly integrated, the Auditor General
was unable to express an opinion as to the accuracy of the record keeping both
during the year, or the amounts
recorded on the three systems at year-end. This issue could not be
resolved from an audit perspective until such time as reconciliation was actually
done on an annual and ongoing basis. Therefore it was likely to be raised as an
issue in the next two or three annual audit reports, unless an integrated
system was introduced or the web-asset tool was replaced.
The Chairperson asked why this was a continual problem with DCS yet the South
African Police Services (SAPS) seemed to have one of the best systems. He asked
if it was not a question of manpower.
Mr Wheeler responded that the auditors believed that reconciliation was
possible. The system that the Auditor General utilised was not the same system
as DCS’s system. He noted that the problem was not peculiar to Correctional
Services, but also to other Departments such as Defence. He could not comment
on how much it cost to find the manpower to do reconciliations.
The Chairperson enquired how this problem could be obviated.
Ms Sishuba responded that DCS had developed procedures to help people on the
ground. Asset controllers had been trained and the cumbersome process of
reconciling had been started. There was some fear that the process might not be
sustainable as it required intense work, but the verification process had
started in September 2006
Ms Dreyer asked whether this plan was the same as the asset management reform
plan
Ms Sishuba responded that it was part of the whole plan. She also noted that a
register was to be kept.
Ms Dreyer noted that there were various meetings between Treasury and
Correctional Services and that according to the report the implementation plan
had been adopted. She sought confirmation.
Ms Sishuba responded that it has been adopted
Ms Dreyer asked what progress had been made with regard to the implementation
plan, whether it had been circulated to staff and how it was being monitored.
Ms Sishuba responded that it had been circulated to staff and that it has been
used to train them. The process d was initially to have been completed at the
end of March 2007, but because of the magnitude of the work and the backlog,
this had been extended to June 2007.
Ms Dreyer commented that this was good to hear and that the situation would
continue to be monitored. It was noted that there were also other problems
related to asset management, where not all items were bar-coded and recorded in
the fixed asset register. She asked for clarity.
Ms Sishuba responded that part of the project was the verification of
bar-coding, which had largely been done. Where this had not been attended to
there was a human error factor. and where it has not been done, this is again a
problem of human element. The inventory controllers were not always addressing
movement from one office to another. Engraving was now being used where
bar-codes had not been placed or were removed.
Ms Dreyer asked if there were specific members allocated to supervise the
staff, and if these positions were filled.
Ms Sishuba responded that controllers were in place to do this job and that
they had supervisors. Ultimately, the supply-chain management had to regularly
update the register and see that the regions reported to Head Office. In the
regions people had been identified to do the work
Ms Dreyer asked if the Department was aware that the qualification had resulted
in a loss of assets.
The Chairperson commented that in a system in which assets were not captured
correctly there was a possibility for
asset losses. That was a danger in not having a properly updated asset
register.
Ms Sishuba agreed with the Chairperson .
Ms Dreyer asked what the situation was in terms of an intangible asset register
that apparently was not maintained.
Ms Mareka responded that it was true that a record of intangible assets was not
kept. She noted that a list had been requested and should be available at the
end of March
Ms Dreyer asked if the post of Commissioner had been advertised
Ms Sishuba responded that the post has been advertised and the Minister had
stated that the post will be filled by April.
Mr P Gerber (ANC) noted that the Department had material losses of state
vehicles amounting to R178 000 in 2004/05. This amount had increased to R863
000 this year. He sought clarity on this issue.
Ms Sishuba responded that she had not looked at fleet management but could
provide the Committee with this information shortly.
Mr Trent asked if the Department had any short-term plans to stop losses
occurring.
Ms Sishuba responded that there was a register and reiterated that it was
originally expected to have been completed by March, but that it would be done
by June. There were prevention measures in place and DCS was also dealing with
the backlog.
Ms L Mashiane (ANC), commented, with regard to pharmacies, that there were
ongoing stock control problems as a result of a system error. She asked why the
Department did not perform stock counts on a regular basis and what the consequences
of this were.
Ms Sishuba responded that DCS had addressed the system and were currently
testing it in Pretoria. Until 2005 staff in supply-chain management were
utilised and trained for stock management. The new legislation required stock
counts to be done by the pharmacists. DCS had prepared the procedures in line
with legislation and pharmacists were being trained. It was noted that there
was a high turnover of pharmacists, as the Department had difficulty in
retaining staff.
Ms Mashiane wanted to be assured that stock counts would be done on a regular
basis
Ms Sishuba responded that this would be a requirement of the job description
and there would be stated consequences for non-compliance. The Department was
thinking about out-sourcing pharmacists because of the difficulty in attracting
and retaining pharmacists.
Ms Mashiane noted that all the problems faced by the Department were affected
by lack of proper management, monitoring and evaluation. She asked whether
proper policies were in place to deal with these solutions given
Ms Sishuba responded that DCS had to align policy and procedures with the new
Act. A pharmacist was appointed as a manager and was now training other
pharmacists. She agreed that there needed to be proper monitoring and
evaluation procedures.
Ms Mashiane commented, that medical aid had been a problem for a number of
years, involving a large sum of money. It was noted that in the last meeting,
the Committee could not get an indication of whether or not this would be resolved.
The AG reported that the procedure manual could not be provided for audit
purposes. She asked if the Department had an approved procedure manual for
medical aid, and if not, what documents were used instead.
Ms Sishuba responded that the original arrangement had been that 100% of
medical aid was paid. Then this altered to a two-thirds contribution by DCS and
one-third payment from the members. The report indicated that incorrect
deductions were being carried out and this was being addressed. The other
problem was the life certificates.
Ms Mashiane asked if the procedure manual had been properly communicated to
employees
Mr Petersen responded that DCS had just completed the policy and procedures for
employee benefits and it was currently being quality-assured by an external
auditor. It should be in place by 1 April 2007.
Ms Mashiane asked how long the Department anticipated that it would take from 1
April 2007 for the manual to be explained and understood by members or staff
Mr Petersen emphasised that compliance had been prioritized and training was
vital. There was a process of rolling out training on the manual and that he
hoped significant changes could occur.
Ms Mashiane asked what progress had been made in terms of life certificates,
the verification of members and their dependants.
Mr Petersen responded that the Department had been able to get 90% of the life
certificates subsequent to the concern having been raised. He noted that the
Department had not had a medical aid administration office since the closed
scheme, which was done by NEDCOR. Since NEDCOR had become independent, it had
required the Department to monitor the situation. The internal capacity had now
been established and staff members in the medical aid office ensured that there
was a database. The Department was working closely with the Government
Employees Pension Fund (GEPF). The system was manual at the moment but would
become electronic.
Ms Mashiane asked, in instances where the employee contribution was more that
the required amount, what steps had been taken to rectify.
Mr Petersen responded that too many assumptions had been made with regard to
medical aid. When the two-thirds, one-third scheme was introduced, the
Department hoped that PERSAL would sort out the discrepancies. This was not the
case. DCS had tried to pick up on the specific concerns raised by the AG.
Ongoing monthly reconciliation would solve the problem and this was part of the
task of the newly established office.
Ms Mashiane asked if there were any losses incurred in this regard, and if over
payments by the employer had been recovered.
Mr Petersen responded that this was part of the debt management process
Ms Mashiane asked how medical aid could be given to members without their
identity numbers. She asked if this was not opening up the Department to fraud.
Mr Petersen reiterated that DCS had moved away from 100% subsidisation to a
contributory scheme. The main problem was that DCS had not previously taken the
responsibility to set up a system to duplicate the records of the medical aid
office or of the service provider. This was now part of the process being
undertaken by the medical aid office, and
records were being obtained from the different medical aids. This
information must be reconciled with the information on PERSAL. If this
information was not obtained and the members could not provide it, their
benefits would be suspended, and eventually cancelled for non-compliance.
Ms Mashiane asked if the medical aid office was adequately staffed.
Mr Petersen responded that DCS had appointed contract staff due to the urgency
and that there was a work-study process in place. DCS was coping with the
issue.
Ms Mashiane asked whether the Department was thinking about internships to help
with the workload in the meantime.
Mr Petersen responded that DCS did have a number of interns and that in the
short-term both interns and contract staff would be used.
Ms Mashiane wanted a progress report on validity checks
Mr Petersen responded that the Department was dependant on the information
supplied by service providers. This information was now being obtained from the
medical aid and was being manually entered into the system. The Department was
dealing with 39 000 members, and that it did not yet have capacity to deal with
this number.
The Chairperson asked when this unit would be up and running
Mr Petersen responded that this would be up and running by the end of March.
Because the Department had changed from a closed scheme where there were
automatic transfers by government to the medical aid funds, there was a
different set of challenges.
Ms Mashiane asked if this type of work was only centralized at national level.
She enquired as to the amount of work that needed to be done by the regions as
well as the monitoring from National level.
Mr Petersen responded that this was definitely one of the functions that the
DCS wanted to centralise in terms of record keeping and quality assurance.
Initially, the relationship was between the individual member and MEDCOR. Now,
in order to exercise the control function, there was an extra role placed on
the National level and a responsibility from people at local level that correct
information was sent. He noted that there was an automatic magtape once the
information was captured
Ms Mashiane asked whether the Department would be in a position to have the
same kind of report at the next meeting, given the fact that there would be new
Commissioners appointed soon.
Mr Gerber sought clarity on whether the nurses on the medical staff were
receiving the same salaries as in other departments.
Ms Sishuba responded that the environment in which the nurses worked was
different to that of a hospital. The Department, as part of its retention
strategy, was looking at this issue, and was engaging the Department of Health
and the Department of Public Services and Administration (DPSA) to assist in
the strategy. At present the salaries were lower.
The Chairperson asked how the Department hoped to retain staff when they paid
lower salaries
Mr Petersen responded that the level of remuneration for staff was determined
in the public service generally. DPSA was assisting in addressing this problem.
It was noted that in the past, nurses could benefit from overtime but this had
been phased out in favour of a seven day work week. This had the unfortunate
effect of decreasing their take-home salary. The Department had to come up with
measures to attract those workers, given the environment of Correctional
Services.
The Chairperson asked why such a discrepancy existed with regard to salaries
Mr Petersen responded that the discrepancy existed within the levels of salary
in the public service. As part of the retention strategy, DCS was looking at
lifting the starting notch for nurses from level six to level seven.
The Chairperson asked if the DCS or the DPSA would increase the salaries.
Mr Petersen responded that there were two processes. DCS was involved in
conjunction with the DOH and DPSA. On the other hand, the executing authority
has certain tools that could be used
The Chairperson noted that there was still some room to manoeuver.
Mr T Bonhomme (ANC) sought clarity on
leases, asking if the Department would be ready by the end of March.
Ms Mareka responded that all the parties wanted the matter to be resolved so
that there was no recurrence. Meetings with the Accountant General had been
taking place and some gaps had been identified in the wording of the guideline.
The DCS was looking at examples from other departments.
Mr Bonhomme asked if the process on supply-chain management and allegations of
mismanagement had been finalized.
Ms Sishuba responded that the AG had stated that supply-chain management was no
longer a part of the investigation.
Mr Gerber sought clarity on the difference of almost R2 million spending from
2004/5 to 2005/6. He asked how much it cost to house a prisoner per day
Ms Sishuba responded that it was now R123 per day per prisoner
Mr Gerber noted that the APOX jail was able to accommodate 5952 inmates. Last
year, the cost per annum per prisoner was R85 790, which was nearly double the
amount of a normal jail, whilst this year it has increased to R98 835 per
prisoner per annum. This equated to about R270 per day as compared to R123 per
day for an ordinary prison. He asked for the motivation behind the Department’s
contract. He also sought clarity on the Directors of these private companies,
one of whom was housed in an Assistant Warden’s flat. He further asked how many
more years would the contract run with the private companies.
Mr P C Gillingham (Chief Deputy Commissioner: Corrections, DCS) responded that
he did not have all the details with him, but that DCS would get back to the
Committee on this. In terms of the contract a fixed fee and a variable fee were
paid. The fixed fee related to the actual number of beds inside the prison, and
its occupation. The variable fee was for the building itself, and the period
was 17 years. This fee had decreased. Once the 25 year contract expired, the
building would become the property of the State and not of Correctional
Services. The Department had entered into the contract without a feasibility
study being done.
Mr Gerber sought clarity how the amount could have decreased when spending was
up to R535 million. He wanted to know for how long the Department was required
to pay this fee
Mr Gillingham responded that the fixed fee could decrease as it was linked to
the consumer price index and would decrease in line with decreases in interest
rates. He noted that the Department was already four years into the contract,
and that there were thirteen years left.
Mr Gerber asked if Mr Gillingham was in the Department when the contracts were
being discussed.
Mr Gillingham responded that he was a Provincial Commissioner at the time but
was not part of the exercise of drafting the contracts
Mr Gerber asked if anyone present was involved in the drafting of the contracts
Mr Tshivhashe responded that he was also in the Department but was not part of
the drafting process
Mr Gerber enquired who had been involved in the drafting of the contracts
Mr Tshivhashe responded that most of them had retired.
Mr Gillingham further responded that some of had resigned and that some of them
had joined private companies.
Mr Gerber and the Chairperson sought clarity on these members who had resigned
and joined private companies in senior positions. He asked if it was correct
that some had now become directors of the private companies to which DCS had
awarded contracts.
Mr Gillingham explained that these companies had employed a number of staff
from the Department.
Mr Gerber sought clarity on the number of staff working at these companies
Mr Gillingham responded that he did not have this information available
The Chairperson asked if anybody knew about the number of staff in the Mangaung
Facility
Mr Tshivhashe responded that he did not have this information, though it could
be obtained and forwarded to the Committee.
Mr Gerber asked for the total amount of staff in the DCS
Mr Petersen responded that there were 39562 staff employed directly by the
Department. The total number of staff at DCS facilities was 41 990.
Mr Gillingham noted that not all the staff working in these private facilities
were recruited from the Department. He confirmed that DCS would get the exact
figures from these companies and report back to the Committee.
Ms Mareka stated that the total expenditure reported in the appropriation
statement was slightly higher this year because it was took into account the
private facilities as well.
Mr Gerber noted that R210 million had been awarded to ProActive Health
Solutions. He could not find this company in the Register of Companies.
Mr Petersen responded that ProActive Health Solutions was part of Alexander
Forbes.
Mr Gerber noted that the Department had three massive contracts amounting to
R1.6 billion. It was noted that some of the directors of these companies, and
their auditors, were the same. He asked for clarity on how these three
contracts came about.
Mr Gillingham responded that three different exercises were advertised. The
first was the contract covered by the Department for additional services. The
second contract was for the erection of fences at various facilities. The third
contract was for access control at 66 centres
The Chairperson noted that the issue was the amounts involved. There were
rumours that these companies shared one physical address. He asked if the
Department was confident that these tenders had been awarded properly
Mr Gillingham responded that the procurement procedures were followed as
prescribed and that the process was subject to an auditing process.
Mr Gerber wanted clarity on how tenders had been awarded previously and whether
such large sums were awarded to a few companies, or if they were small sums to
many companies.
Mr Gillingham responded that previously, the Department of Public Works (DPW)
had assisted with regard to tenders. In view of problems it was decided that
the procurement process would be undertaken by DCS. Some of the companies had
previously done work for the Department.
The Chairperson commented that it was not so important whether the process was
new, but whether it was beyond reproach.
Mr Wheeler responded that the Auditor General did extend his auditing to the
three contracts previously mentioned, and during the course of that review a
number of shortcomings were identified, such as project management and approval
payments. There were issues that the AG felt uncomfortable about and
subsequently took up; one with an investigating unit of the Public Service
Commission, and the other with the Special Investigations Unit, which related
to projects dating from 1995. The Auditor General would monitor future projects
and DCS would continue to report on this.
Mr Gerber asked sought clarity on the one contract that was said to be new.
Mr Gillingham responded that it was the outsourcing of the management of the
Department’s kitchens, which was awarded to the company BUSASA
Mr Gerber noted that this contract was for R718 million and asked if this was
the biggest contract to date.
Mr Gillingham responded that he had not looked at that specifically, though it
was one of the biggest
Mr Gerber noted that this and the other two contracts totalled R1.6 billion. He
asked if there was any contract that was possibly bigger than this total
Mr Gillingham responded that there was no bigger contract
Mr Gerber asked what the Department’s capacity to monitor these contracts was
and who was involved.
Mr Gillingham responded that there was a Director of Contract Management in the
Department who was responsible for overseeing the management of all large
contracts. Project managers were also appointed at area manager levels, who
were to report on a monthly basis
The Chairperson asked about the capacity of the contract office to manage
projects of this nature and magnitude.
Mr Gillingham responded that the Director had created the capacity to manage
these contracts on an ongoing basis
Mr Gerber asked how many people were involved in the actual discussion and
awarding of these contracts. He also asked what their educational levels were.
Mr Gillingham responded that different groups were involved. All contracts were
approved by the National Certification Committee that consists of all five Chief
Deputy Commissioners (CDC).
Mr Gerber asked if any of these CDCs had financial expertise and if they were
still in the service.
Mr Gillingham responded that he did not know whether they had financial
expertise but that they were still in the service.
Mr Gerber sought clarity on whether only five people were involved in awarding
the contract
Mr Gillingham responded that it was finally awarded by the Adjudication
Committee which was appointed by the National Commissioner
The Chairperson asked who sat on this Committee.
Mr Gillingham responded that the Committee comprised members from the
Department
Mr Gerber asked Mr Gillingham if he was at all involved in the process
Mr Gillingham replied that he was a member of the National Adjudicating Committee
Mr Gerber asked if any external people were involved
Mr Gillingham noted that he was aware that in one instance the Council for
Scientific and Industrial Research (CSIR) was involved
Ms Mashiane noted that the Department recently posted time-share facilities.
She sought clarity on this issue
Mr Gillingham responded that the Department would reply in writing to this
question. He noted however, that the time-share stemmed from the facilities
fund.
Mr Gerber sought clarity on the time span of the three contracts.
Mr Gillingham responded that contract for the kitchens was valid until
August/September 2007. The fences contract was a maintenance contract of four
years, of which almost the full period remained. The contract for access
control was also a maintenance contract for four years, of which there was
still three and a half years left.
Mr Gerber sought clarity on the specifications of the contracts, asking if they
were drawn up by the Department
Mr Gillingham responded that the specifications for the contract for fences
were drawn up with the assistance of the Department of Public Works. In terms
of the access control contract, the Department made use of the CSIR
specifications
Mr Gerber asked if the Department would again award such a massive contract as
it had done with the kitchens, or if it would do things differently on expiry.
Mr Gillingham responded that there was currently an evaluation team looking
into this.
Mr Gerber asked if this was the same evaluation team that awarded the contract
in the first place
Mr Gillingham responded that it was not.
Mr Gerber sought clarity on the problems concerning Public Works and the
fencing contract
Mr Gillingham responded that there were problems with maintenance of fences in
the facilities in Pietermaritzburg.
Mr Gerber asked if the Department would stick to its current arrangement once
the contract expired or if they would go back to DPW.
Mr Gillingham responded that DCS was in the process of looking into this as it
was having problems in maintaining facilities
The Chairperson asked what led the Department to its decision to award the
kitchen contract.
Mr Gillingham responded that he would get back to the Committee on that
question
The Chairperson noted that the Committee did not want a situation in which the
outsourcing of services was used as a tool for people to make fast money.
The Chairperson raised the issue of staff vacancies in the Department, noting
that they had a direct impact on the ability of the Department to discharge its
responsibility. He wanted to know what was being done about this
Ms Sishuba responded that this was indeed a concern to management as this had a
direct impact on rehabilitation. In terms of the retention strategy, the
Department did need to look at remuneration, as well as the problem of
head-hunting and counter-offers
The Chairperson asked if there were instances where new entrants into the
Department, especially those with degrees or qualifications, were misplaced.
Ms Sishuba responded that in 2004/5 the Department did a skills audit to
identify these people. Some preferred to remain as custodial members as the
remuneration was better.
The Chairperson sought clarity on the contractual staff in the Department.
Mr Petersen responded that a number of projects of DCS required special skills,
and in this case contract workers were used. The levels of remuneration varied.
The Chairperson commented that it was hoped that the new management of DCS
would turn things around. The opportunity should be taken to effect real change
in the Department.
Mr D Bloem (Chairperson, Portfolio Committee Correctional Services) commented
that he appreciated the invitation extended to the Portfolio Committee. He
commented that at some stage actions must be taken against Departments who did
not comply with the Public Finance Management Act (PFMA). He noted that the
Committees could not discuss the same issues year after year as voters want to
see that there really is delivery. He wondered whether black economic
empowerment principles were involved in the major contracts.
The Chairperson noted that there was still a lot of work to be done in the
Department especially with regard to the asset management systems that need to
be replaced. He reminded the DCS to supply the Committee with the names of the
officials who were involved in the tender process and those who subsequently
resigned to work for the private companies.
The meeting was adjourned.
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