Department of Correctional Services: interrogation of Audit Report 2005/06

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.