Department of Correctional Services, National Agricultural Marketing Council & SA Wine Industry Trust: Audit Report hearings
Public Accounts (SCOPA)
07 November 2007
Meeting Summary
A summary of this committee meeting is not yet available.
Meeting report
PUBLIC ACCOUNTS SELECT COMMITTEE
7 November 2007
DEPARTMENT CORRECTIONAL SERVICES, NATIONAL AGRICULTURAL MARKETING COUNCIL
& S A WINE INDUSTRY TRUST: AUDIT
REPORT HEARINGS
Chairperson: Mr T Godi (APC)
Documents handed out:
Department of Correctional
Services Annual Report for the financial year 2006/07
Audio recording of meeting [Part 1][Part 2]
SUMMARY
The Committee was to have interrogated the South African Wine Industry
Trust, but had received a letter noting that Members of the board were overseas
and could not appear. The Committee was concerned that the Trust had not
appeared before this Committee for nine years, that the Auditor General was
unable to access the financial statements and that effectively there was no
audit report. The Chairperson pointed out that they could be summoned before
Parliament.
The National Agricultural Marketing Council was asked about funding from SA
Wine Industry Trust, the amounts lying in trust that had not been audited, the
function of the Council, and whether it was able to verify information, how the
Council would decide on what to report to the Minister, and the relationship
with other bodies, that seemed to create a loophole. The Council had also been
concerned about the Trust, and had reported to the Minister.
The Department of Correctional Services was asked to explain the
non-availability of documents regarding assets and medical expenditure, staff
debts, the reasons these were being written off, whether reconciliations were
performed, and the problems in attracting and retaining staff. The lack of
properly qualified financial staff was questioned, as was the compensation for
employees,
the consultants and contractors. Further questions related to the operating
leases, the loss of state vehicles, and the corrective action being taken,
claims against the Department, and the qualifications on asset management. The
Committee questioned the manual reconciliations and the problems of interface
between the systems, IT systems, the medical aid reconciliations, and problems
around contributions to deceased members. The Department was asked to pay close
attention to the areas where it received qualifications.
MINUTES
South African Wine Industry Trust (SAWIT)
The Chairperson informed the members that he had received a letter of
apology from the South African Wine Industry Trust (SAWIT) the previous
afternoon. He said that the reason for not being able to attend the meeting was
that some of the board members were overseas.
Mr Gerber commented that SAWIT had not been before parliament for a period of
nine years and it seemed as though they were playing hide-and- seek with the
Committee. Mr Gerber said that according to the trust deed, the CEO could have
come to the meeting without his team. Lastly, he said that the Auditor-General
had been denied access to the financial statements of SAWIT, which raised more
concern and added that even if they came before the Committee it would be
useless because SAWIT had no financial statements. He asked why that organisation was so
secretive.
Mr H Bekker (IFP) asked whether there was anything stated in the letter about
the nature of SAWIT’s board members overseas trip. He said that it did not make
sense that they were undertaking overseas trips despite their apparent
financial difficulties.
The Chairperson responded that there was no mention of the nature of their
overseas trip. He noted that parliament had the authority to call in anyone to
appear before them, and said that this line would be followed with SAWIT.
National Agricultural Marketing Council (NAMC)
Mr Gerber asked whether the bodies that were part of the wine industry
received any money from SAWIT.
Mr Ronald Ramabulana, Chief Executive Officer, NAMC, responded that he was not
sure about this year, but in previous years, including the last year, the
bodies had been receiving money from SAWIT.
Mr Gerber asked for the details of the money that the various bodies had been
receiving from SAWIT. He then asked what the progress was in terms of the
recommendations by the Agricultural Trust and whether there had been any
reporting since the recommendations.
Mr Ramabulana responded that the Act did not mention the trust. He said that
the NAMC as a facilitator to the Minister put forward recommendations but they
had no right to call and ask any industry trust if they had submitted financial
statements to the Auditor-General (AG). He said that there were individual
engagements between trustees and the Minister.
Mr Gerber commented that R1.5 billion was lying in the trusts that were not
audited and asked whether this figure was correct.
Mr Ramabulana responded that at the end of the year, the NAMC requested trusts
to tell them how much they had in terms of assets, and the figure of R1.5
billion was what they received. He said that they relied on this information
and had no other way of verifying this information.
Mr Gerber (ANC) said that he did not understand how the assets of SAWIT
increased from R6 million to R170 million in one year and suggested that this
be checked out.
Mr E Trent (DA) said that he was confused about there being no statutory
requirement for the trusts to report, and yet they reported to parliament. He
said that surely an organisation would not do something that was not a
statutory requirement.
The Chairperson requested that the Committee not enter the debate raised by Mr
Trent.
Mr M Stephens (DA) asked what the relationship was between SAWIT and the NAMC
if SAWIT just provided the NAMC just with figures all the time.
Mr Ramabulana responded that according to the Agricultural Marketing Act, there
was no relationship. He said that what the NAMC did in terms of advising the
Minister was have SAWIT just report to them.
Mr Stephens asked, in light of the above response, why then SAWIT reported to
the NAMC.
The Chairperson asked what could be done in order for the Committee to get
closer to the NAMC and get more information from them.
Mr Masiphula Mbongwa, Director-General: National Department of Agriculture, responded that the
Department was looking to devise a mechanism to strengthen their relationship
with the various bodies. He said that they would try to find different
mechanisms to ensure adequate disclosure.
The Chairperson commented that the Department had also realised that the
relationship between the Department and the trusts created a loophole. He then
asked how far the review process was.
Mr Mbongwa responded that the review process was finalised, and mentioned that
the implementation would have to be closely monitored because it would affect
the MEC.
Mr Stephens asked what the NAMC advised the Minister on.
Mr Ramabulana responded that they advised the Minister according to the legal
mandate as stated in the Agricultural Marketing Act.
Mr Stephens asked whether the NAMC had advised the Minister to re-look the
board of trustees of a trust, because they were not exercising their fiduciary
duties by having a loss on capital assets.
Mr Ramabulana responded that the NAMC was also concerned about such losses
being incurred. He said he was not in a position to talk about what was said in
the report, because the report had not been adopted nor processed by the
Minister.
The Chairperson asked when the report was submitted to the Minister.
Mr Ramabulana responded that the report was submitted in March and the NAMC had
still not received any comment about it.
Mr Trent asked whether the Minister had made any recommendations what NAMC
should focus on, or whether it just decided on what was relevant to report.
Mr V Smith (ANC) responded that officials could not be asked about documents
that were with the Minister. He said that SCOPA should engage with the Minister
itself.
Mr Gerber commented
that he was not pleased with the Audit Committee’s board members’
non-attendance of meetings. He said that normally there were no such comments
in an audit report about the Audit Committee and asked if there had been any
improvements in this regard.
Mr Ramabulana responded that some members of the Audit Committee resigned,
hence their absence from meetings. He said that it was not that people were not
attending meetings.
Mr Gerber commented that it was not correct for the NAMC to report on the Audit
Committee members’ attendance in the way it appeared, because the report was a public
document and it reflected badly. He suggested that in future reports, there
must be an explanation detailing the reasons for non-attendance.
Department of Correctional Services (DCS)
Ms N Hlangwana (ANC) said that the audit report stated that documents
regarding assets and medical expenditure were not available and also that
record-keeping of staff debt and medical expenditure were not adequate. She
asked what plans were put in place to ensure that this did not happen again.
Commissioner Vernon Petersen, National Commissioner of Correctional Services, responded that the
DCS had been operating as a militarised organisation and was now moving to a
Public Services Act organisation, and this process was not complete. He said
that the changes had been keeping the Department busy as they were also trying
to get staff ready for the move. He however emphasised that that could not be
used as an excuse. The Department had been looking at strategies in handling
the internal control issue. He said that the Department had had meetings with
the Auditor-General (AG) for recommendations and advice. The Department had
also negotiated with the office of the AG to not only point out the internal
control weaknesses but to also make recommendations for improvement. The AG had
now provided the Department with a training manual for staff members.
Ms Hlangwana said that it was found that staff debts had not been reconciled
and she was concerned that there could be fraud in this regard. She commented
that there needed to be on-going monitoring of asset and debt management.
Comm Petersen responded that the Department concurred with the findings of the
AG in this regard. He said that a major part of this debt related to the Judge
White Commission and part of the Department ’s
strategy was to restore them.
Ms N Hlangwana asked why the Department was not writing off these amounts by
collecting the money.
Comm Petersen responded that part of the strategy was writing off the debts,
which had already taken place, and the other was speeding up collections. He
said that the Department was also conducting processes of checking these
registers regularly for a better tracking system.
The Chairperson asked whether monthly reconciliations were currently being
done.
Comm Petersen responded that the Department had a task team in place. They
categorised the staff debts and had reconciled the Judge White Commission and
had also been able to recover about R15 million. He said that they did have
challenges holistically in terms of other debts, in that monthly
reconciliations were not being done on other categories.
Ms Hlangwana commented that the Department reported that it was facing
challenges in terms of recruiting social workers and asked if there was any
policy or strategy to retain health care personnel and also to recruit more.
Comm Petersen responded that they received R60 million and R54 million last
year from National Treasury and it was meant to finance health care personnel
posts. He said that the Department had had problems of outflow of professionals
and this happened mostly when the Department phased out payments for overtime
worked on weekends. The Commissioner said that they had looked at remunerating
staff differently in order to attract staff and retain them.
Mr Smith said that there was a 30% vacancy rate. He said that this problem
related to the fact that the Department did not have financially trained people.
Mr Smith said that there was under spending reported in the appropriation
account and said that it could not be correct that the Department did not have
financial resources if they were saving R580 million. He said he believed that
it was not a resources problem but rather that the Department did not have
financially trained staff.
Comm Petersen responded that they did have challenges in the financial
management training and supply chain management. He said that the Department
was implementing a programme of training because finance skilled people were
normally in lower level positions. The under spending occurred in personnel and
infrastructure. He said that there had been financial injections from National
Treasury and savings from outgoing personnel.
Mr Smith commented that the only qualification that the Department had last
year, which was not repeated this year, related to housing guarantees. Mr Smith
said the Department was doing better but they also need to look at other
qualifications because it was not about how many qualifications they received
but rather the impact of even one qualification. Mr Smith then referred to
compensation for employees and said that this had increased by R500 million. He
asked for the reason for this large increase in light of the Department’s
report that they only had 4000 more people.
Comm Petersen responded that the Department was moving towards a 7-day stipend
that required the Department to employ approximately 10 000 staff. The increase
was also due to implementation of the White Paper and staff requirements for
the new prisons. He added that if the Department had not phased out overtime
for weekends, it would have been R1.2 billion for that particular expenditure.
The Department had received 10 300 intakes of staff but this was affected by
resignations.
Mr Smith commented that the Department employed people and pays an additional
amount and yet they still had consultants and contractors, the amount for which
had increased to R53 million. He asked what kind of work was being done for
this amount.
Mr Alfred Tsetsane, Chief Deputy Commissioner: Corporate Services: DCS,
responded that they were using consultants in the Information Technology (IT)
department and work was being done in the Infrastructure department
. He said consultants were used in areas where the Department could not
normally appoint the correct people, because of the technical intensity of the
work. Mr Tsetsane added that there was training on junior and middle management
also done externally.
Mr Smith asked why the operating leases went up by 105%.
Ms Nandi Mareka, Deputy Commissioner: Finance DCS, responded that that amount related to
funds sitting under the Department of Public Works. A catering contract was
under inventories and it was suggested that they put them under special
payments.
Mr Smith asked what the R10 million for venues and facilities requested by the
Department was for.
Mr Tsetsane responded that most of that amount related to training for junior
and medium management to roll-out the White Paper in times when they needed
bigger venues.
Mr Smith said that there were material losses of R3 million and approximately
R1 million of that was a loss of state vehicles. He asked what the cause was of
this and whether the Department was taking any corrective action. .
Ms Mareka responded that where people had transgressed, they had tried to find
ways to get money from them and that the Department had disciplinary measures
in place. The challenge was that the State Attorney was sometimes too eager to
write off the amounts. The Department had been advised to look at Treasury
regulations and to have a clause that covered the employer.
Mr Smith (ANC) suggested that the State Attorney should also come before SCOPA
at some stage because it seemed that this office was not adequately protecting
the interests of the State. He said that
maybe National Treasury should be present at that meeting too.
The Chairperson asked whether any disciplinary measures had been taken.
Comm Petersen responded that in case of negligence the Department did take
disciplinary action, which was also based on the findings of the case.
Mr Smith asked what the claims amounting to R1.6 million were against the Department .
Ms Mareka responded that these claims against the Department were various
categories of claims. She said that the Department would forward the details of
these claims to the Committee.
Mr Smith said that irregular expenditure amounted to R137 000 because of a
service profiling leadership on the intranet. He asked whether they took out
profiles within government and why it was costing them R137 000 to do that.
Ms Mareka responded that the statement used the word “intranet” incorrectly,
and that it should have rather read as “internet.”
Mr Trent commented that the Department had received a qualification for asset
management for the past two years. In relation to buildings and fixed
structures, he said that additions were meant to be capitalised and transferred
to the Department of Public Works, according to National Treasury, and asked
why this was not done.
Comm Petersen responded that DCS wrote to the Department of Public Works to
inform them that they were not reflecting it in the Department of Correctional
Services accounts.
Ms Mareka added that they had engaged National Treasury because there had been
no guidelines with respect to accounting for this.
A delegate from National Treasury added that when a Department engaged National
Treasury, National Treasury would take it to the team that dealt with the
matter and then a practice note would be issued.
Mr Trent commented that the AG said three different IT systems were being used
for asset management,
and had also said that there were no proper reconciliations
performed in the three systems. He asked for an explanation of why the
Department was going to introduce a LOGIS system that was going to have a short
life span.
Comm Petersen responded that DCS had attempted to reconcile the three systems,
only to be frustrated by the basis on which information was recorded in those
systems. That was the reason for moving to the LOGIS system.
Mr G Madikiza (UDM) asked what challenges the Department was facing with
respect to the manual reconciliation that started in March 2006. He asked how
DCS were addressing this issue and when it would be put to rest.
Comm Petersen responded that the challenges faced were that the systems were
different, thus making it difficult to do manual reconciliations. He said that
the Department was hoping to be viable in 47 centres in February. He added that
work would have to be done using the months of December and January, and
emphasised that this was a multi-year project, but the Department would do
their best.
Mr Madikiza asked why the Service Level Agreement was signed in September,
which was late.
Mr Jack Shilubane, Deputy Commissioner: Information Technology, DCS, responded that the
Service Level Agreement was used to measure state level IT and could impose
penalties based on it. He said that in that particular year the Department had
issues that they were not pleased with, and they were not comfortable signing.
This was seen as a means of safeguarding the Department .
Mr Madikiza asked whether the Department would agree that some issues were not
really IT related but rather were problems that related to humans with respect
to monitoring and evaluation.
Mr Shilubane responded that the question posed was a tricky one to respond to,
as IT supported most of the processes that the Department did.
Mr Madikiza commented that the audit report stated that assets were only
counted annually and shortages were not followed up. It was also stated that
documents with respect to assets, staff debts and staff expenditure were not
properly managed and updated. He said that the Department could not blame IT
for that, and asked who was responsible for such.
Comm Petersen responded that those problems were due to lack of staff and lack
of supervision.
Mr T Bonhomme (ANC) asked whether the problem of the Department being unable to
verify payments made to Medical Aids was rectified.
Comm Petersen responded that this related to retired members and that these
payments were administered by Government Pension Payments.
Mr Bonhomme referred to contributions made to deceased members and said that
there seemed to be corruption in this regard. He asked how much money was
involved and if any of the money was retrieved.
Comm Petersen responded that the Department had subsequently checked and it
involved eight people. The Medical Aid Scheme was at fault and the Department
had had discussions with the Scheme informing them they must pay. He said that
at that stage the Department did not have a database, but they were resolving
that.
The Chairperson said that it was discovered that life certificates did not
include dependents’ information, and asked how the Department was dealing with
this.
Mr Alfred Tsetsane responded that they had given continuation members until
February to sort this out. The Department received proof of life certificates
from 5 000 members already. He said that the process was frustrated by the
submission of wrong addresses. He said that the Department now had a separate
mailbox where they engaged these separately.
The Chairperson thanked the Department for their attendance and also thanked
the Chairperson of the Portfolio Committee on Correctional Services for
attending the meeting. He said that the Committee hoped that the financial
results of the Department for the next period would be better and that the
Department must pay close attention to the areas where they received
qualifications.
The Chairperson of the Portfolio Committee on Correctional Services thanked
SCOPA for their invaluable input, and assured the Members that the Portfolio
Committee’s mandate for meetings next year would be based on the issues raised
at this meeting.
The meeting was then adjourned.
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