Home Affairs Annual Report 2006/07: Ministerial and Department briefing

Meeting report

The Chairperson welcomed the Minister and Deputy Minister to the meeting. He noted that apologies had previously been presented by the Minister, on account of her illness. He reminded the Committee that on 29 January the Committee had met to present the Annual Report. At the previous meeting a presentation had been led by the Deputy Minister, but during the engagement it became apparent that the presentation did not in fact speak to the Annual Report, so time was given to the Department to go back and prepare a presentation on the Annual Report.

Briefing by Minister of Home Affairs
The Minister of Home Affairs, Hon Nosiviwe Mapisa-Nqakula, thanked the Committee for the opportunity for interaction and presentation of the Annual Report. The 2006/07 period covered the year in which intervention had been made into the Department of Home Affairs (DHA). The seriousness of the audit findings, and the oversight role of this Committee was fully appreciated.

Mr Mavuso Msimang, Director General, had joined the DHA after the financial period of the year under review, but he could speak to the report. She wished to summarise where the Department had come from and where it was going in improvement, particularly of financial management. The Committee would be aware of the work of the Support Intervention Task Team (SITT), but she felt that it was relevant to repeat some issues to give context to the 2006/07 Annual Report. This did not detract from the responsibility to account for funds and performance. Services were delivered and improvements had been made despite the poor system and deficiencies. She wished to acknowledge the efforts of the dedicated staff, who had worked under difficult conditions. She wished also to reiterate her own responsibility in steering the Department, and giving it direction. She was realistic about what could be achieved by building a new Home Affairs, with a different environment and work culture, premised on the need for accountability, effective and efficient performance. She had requested assistance from National Treasury in identifying and rectifying the inadequacies, and had appointed the SITT. Her Ministry had acknowledged that the Department was dysfunctional, and that it was important that it be able to function effectively.

On 14 March 2007 a summary of the report of the SITT was presented to this Committee. It indicated poor leadership and management, misalignment of human resources, poor Information Technology (IT) deployment and an uncoordinated service delivery strategy. The Annual Report must be read against this background. A comprehensive turnaround strategy had begun. A team of experts had been appointed, and the programme must be reviewed as a comprehensive and long term programme. Phase 1 was concluded in December, consisting of baseline studies and system design.

The Minister said that all these issues were important as background, because neither she nor Cabinet had been expecting anything better to emerge in the Annual Report. She was of course disappointed by having another disclaimer, but this in fact reflected the SITT findings, and she would have been surprised had there been a contrary view. The whole reason for having a turnaround team was to address the serious weakness in financial management. These problems had been identified even earlier, but those investigations undertaken prior to the SITT review, had not gone deeply enough into the problems. Only when the SITT report was submitted was it possible to realise the extent of the challenges. The size of the intervention, and the costs involved, reflected the extent of the problem. For instance, an account dealing with aliens had for some reason "slipped through the net" and these concerns had been raised with the Auditor General (AG) at the time, because the existence of this account had not been discovered earlier by his office.

The Minister noted that it was not possible, therefore, to have resolved all problems in the 2006/07 year. By the time the 2007/08 was complete, there should be progress towards a better report.

Part of the work undertaken in 2006/07 had included an audit clean up, a plan to address audit concerns, and overall improvement of management. Phase 2 of the turnaround, beginning in January 2008, continued implementation of the programmes. There had been improvements in various areas. The Department was putting in place new systems to support service delivery. The effort would require substantial commitment from all. She was personally pleased with progress and was confident that the SITT and the Department would succeed.

Finally the Minister commented that the DHA's staff had put substantial effort into the presentation, and she noted that it was costly both in time and resources for the Department to have to keep appearing if it was not allowed to give the presentation. Whilst she was not seeking to prescribe how the Committee should do its work, it would be preferable if perhaps a list of questions or pointers could be sent to the Department in advance, and an indication of how the Department should prepare itself, so that it did not disappoint the Committee, and was not sent away before it could make the presentation.

Discussion
 The Chairperson noted that the Portfolio Committee had expected the Department to table the Annual Report and talk specifically to it. This was an opportunity for the Department, based on the strategic plan and objective, to say what the Department had achieved in that year The Department had not been prepared for this, as it had prepared itself on current issues only. It was the Department itself that had asked for the opportunity to prepare again on the Strategic Plan. It was explained to the Department and the Deputy Minister precisely what was expected. Senior officials of the Department who had been present before should have been aware of the issues that would be raised. The fault was not on the side of the Committee.

The Minister thanked the Chairperson for that clarification.

The Minister then made the point, for the record, that DHA was not experiencing "business as usual". Everything had to be turned around as a result of the SITT report. When looking at the time frames, it was important to appreciate that the DHA might have gone beyond what it planned to do, or might have had had to temper what it had intended to do, as set out in the Strategic Plan. The Strategic Plan for 2006/07 was designed by the very calibre of people who were later identified by the SITT as people who lacked the necessary capacity to deal with the challenges. Where there might be divergences between the Strategic Plan and the Annual Report, this arose owing to the need to act on the challenges at the time.

Department of Home Affairs (DHA) Annual Report 2006/07 Briefing
Mr Mavuso Msimang, Director General, DHA, noted that the Strategic Plan had set out nine high level objectives, and there was a plan with outputs across the units. After the SITT came in, additional inputs were included. The Annual Report had included the Government Printing Works (GPW) and included appropriation of accounts and notes.

The Strategic Plan was developed in March 2006, when it was agreed that DHA was largely dysfunctional, and so objectives were included that were intended to transform the department and develop a new organisational model. There had been a disclaimer in 2005/06 which had led to the SITT assistance. The root causes of the problems were analysed and the report was made available to the Department in 2007. The malaise in the Department had largely to do with poor leadership and management, poor human resources and design, issues of IT, service delivery concerns and financial management controls that were inadequate.

Mr Sagaran Naidoo, Acting Chief Financial Officer, DHA, noted that there was a disclaimer of opinion in 2007 because of serious systemic financial management problems. The DHA was broken into three programmes: Administration (including the branches), Service delivery (Civic Services and National Immigration Branch (NIB), and Auxiliary branch, including the Film and Publication Board. The Department did deliver services and 95% of the budget was spent. There was underspending of R57 million where vacant posts were not filled. In good s and services R3 million was not spent. This arose from debt written off for interest charges. The largest under spending was in payment for Capital Assets.

Mr Naidoo said that the audit report was a damning one of twelve pages, containing significant detail. In cash and cash equivalent accounts transactions were not recorded daily, nor cleared within a short time. Reconciliation on accounts were not done on a monthly basis, but may have been done only towards the end of the year. Reconciling items were not followed up timeously. This meant that items listed were not followed up, and so some might go back to 2002. Supporting documentation was either mislaid or misfiled, and this was a problem at head office and the regions. Documents were not sent timeously to head Office for processing.

In terms of payables, the inter-responsibility accounts were not cleared. That had to do with branches within the Department. That account should be zero at the end of every year. The Government Garage interfaced directly with the Basic Accounting System (BAS). In the 2006/07 year the transactions were not cleared, and the auditors had correctly noted that this should not have happened. Accounts were not being used for the correct purposes. Under capital assets, vehicles may have been bought, for instance, under goods and services. During the year under review, the DHA team had tried to do a testing on capital assets, but did not finish the task. Therefore the Fixed Asset register was not complete, and was not populated by correct methods, values and descriptions. There were errors on the cost, and some had been incorrectly classified under goods and services. When assets were written off, they used to be recorded still at R1, so they did not disappear. The BAS system recorded them at cost, but the necessary adjustments had not been done.

Revenue was being collected, but the cash registers were operating as stand-alone machines and had not interfaced with anything in the Department. Therefore this caused the need for reliance on another  process until the value was recorded into BAS. BAS was not at that stage rolled out to all offices. Sometimes there was a delay between deposit books being handed over and the receipts being raised.

The BAS system worked on a cash basis, not accrual accounting. If the money was not paid, it could not be recorded. Supporting documentation of till slips and receipts was missing. There had been capacity issues, in that some individuals were not dedicated to the function of operating the tills. Vouchers were received from the Department of Foreign Affairs (DFA) were very late - sometimes as late as a year after the event.

The fruitless and wasteful expenditure reported on was referring to a contract to deal with illegal immigrants. It was based on a fixed capacity. The tariff in the contract was R79,90 per day, which was supposed to cover full accommodation, meals plus medical costs. That was grossly subsidised, and did not match to the capacity procured.

Expenditure challenges lay primarily with Government Garage, where the supporting documentation in terms of fuel slips could not be found. The fleet management reports were available, but there were not source documents.

There were weak internal controls. There was a challenge in the internal audit department. There was lack of practical knowledge of the Public Finance Management Act (PFMA) and guidelines, and people relied on old knowledge, which had not been updated for system change.

Going forward, the problems were being addressed by improving processes and related controls. Addressing the finding was not the solution; it was necessary to address the underlying processes that related to those findings. It was necessary to utilise departmental resources more efficiently. there had been resources, but no proper management of those resources. There was a need to improve on monitoring and evaluation. Compliance was not well managed, and tools for monitoring and evaluation were also lacking . Projects had been allocated now to DDG, who had taken ownership of those projects and were addressing the detailed work streams, each with multiple projects.

Mr Naidoo put into context what the DHA was currently doing. The Department had looked at various sources and reports and had come up with 442 unique findings. He had summarised the challenges in detail in the presentation. Suspense accounts or clearing accounts were being analysed and cleared, and this should be complete by end March. There was now better accounting for departmental revenue, and collection of it. Contracts and management of contracts, and compliance with PFMA and Treasury regulations was being followed up. The suspense accounts should be cleared by end of March 2008. In respect of assets, the team doing the count would not be paid until the full count was done to the extent that it would lift the disclaimer on assets. This included bar-coding, break-up of the register into major and minor assets (over or under R5 000), and revaluation not based on historical cost. These steps might give rise to a need to re-state the prior figures. Maintenance plans were also being put into place to do a twice-yearly asset count. A pilot project had been implemented of cash handling devices at three sites. These machines interfaced directly with the bank and also had a receipting solution which would cut out the possibility of incorrect charges. The level of finance acumen would be improved at the front office. A unit was to be set up to deal specifically with contracts, which would now separate out the tender documents, payment terms and the Service Level Agreements (SLAs). The Bid Adjudication Committee had been reinstituted with senior members of the Department. A Directorate was now established to ensure compliance with the various prescripts, with the aim of monthly reporting in due course.  A financial control committee would look at monitoring findings across the whole organisation. The matter of disclosure was being addressed by the CFO running three year ends, to allow for two trial runs on disclosure. Respecting the time lines in terms of submission was part of the annual production plan, which was shared between the DG's and CFO's offices. Management of the audit process had previously been a problem, but now there was a scheduled plan, so that the Annual Report would be tabled timeously for 2007/08.

Discussion
Ms I Mars (IFP) asked for an explanation on the write-off of debts and how much was involved.

Mr Naidoo said the total amount of debt was R10 million. R8.9 million related to fines levied under the Penalty Case System, which would automatically generate interest if the debt was not paid. The interest was being written off.

Ms Mars asked for clarification on the difficulties with Department of Foreign Affairs (DFA) vouchers.

Mr Naidoo said that DHA and DFA shared a building. Some of the expenses were carried by DFA,  but these had to be supported by vouchers. Once DHA confirmed receipt of the vouchers, it would check each, and money was due to be released. However, the whole process was not desirable, as certain accountability aspects were not properly divided between the two departments.

Mr F Beukman (ANC) asked whether critical posts would be filled within the stated 6 months, and whether performance agreements would be set up.

The Minister said that the DHA had an earnest desire to fill vacancies. However, she reminded the Committee that it was in the process of turnaround. If Cabinet did approve the new structure, then critical vacancies must be filled as soon as possible. However, the way in which the posts, and therefore the vacancies, were currently structured might in fact change to meet the new challenges.

Mr Msimang stressed that the structure was being overhauled. This was being informed by the findings of the SITT, which that had criticised the current alignment. The Business Process Re-engineering aimed to set up new systems for processing of information. The Centre for Scientific and Industrial Research (CSIR) Report on the footprint of DHA in Africa had also dealt with the design of the organisation. The work stream design was examining the future organisation, and Markinor's survey had also assisted in setting out what South Africans expected of the DHA. There were some strategic posts - in anti-corruption and international relations, and IT  - that had to be filled. DHA would engage with the AG to note that the original designs around the posts would not necessarily match to the final result. The Unions and the Department of Public Service and Administration (DPSA) were also involved in discussions. He further noted that the reality was that the DHA also had difficulty in attracting the right people. Many simply did not wish to join a department about which they had poor perceptions. He had spent the last six months trying to appoint a communications officer.

Mr Beukman was pleased with the positive appointment of the Acting CFO, He wondered if the other people were available or if there should be outsourcing. He further raised concerns about the internal audit Committee. He was concerned that the audit committee should be holding more than the minimum number of meetings. If that Committee's Chairperson had vacated the post, then it was necessary to get more people to sit. He asked if there were sufficient people to handle compliance, or if it was necessary to outsource this function.

Mr S Swart (ACDP) asked particularly what was being done about monitoring, as this was a recurring issue.

Kgoshi W Morwamoche reminded the DHA that there should not be violations of procedures and the Public Finance Management Act (PFMA).

Kgoshi Morwamoche asked the Minister about the AG's concerns that some illegal immigrants might be held for longer periods, and asked how far the Minister was towards amending the Act to regulate the position after 90 days.

The Minister responded that it was not necessary to amend the Act. The majority of illegal immigrants detained were quickly repatriated within a week or so. However, if an illegal immigrant had stayed in the centre beyond 30 days the DHA would make it standard practice to go to Court to seek authorisation to keep the person beyond that time, as part of the checks and balances to avoid abuse of power. There had been a couple of occasions where people had been detained for up to 90 days, but this had occurred where there had not been good co operation between the DHA and foreign embassies, who had refused to grant passports for their own citizens to return to their own countries. Also, the illegal immigrants might lie about their nationality as a delaying tactic. The immigrants did not mind being at the centre, as long as they were in South Africa. She reiterated that such instances were in the minority. Many immigrants would arrive with infectious diseases, such as meningitis or tuberculosis, and DHA would try to get immigrants out of South Africa as quickly as possible to avoid the possibility of their death in South Africa. Women would not be kept for longer than three days. DHA certainly did not wish to keep anyone beyond the 90 days already catered for in the Act.

Kgoshi Morwamoche queried how far the review of the contract that was criticised as having given rise to fruitless and wasteful expenditure was.

Dr S Huang (ANC) asked what was the total of the fruitless and wasteful expenditure. A recent media report had claimed that about R56 million had been wasted on returning illegal immigrants.

Mr Msimang noted that the contract would be reviewed shortly. The costs had been structured in such a way that the per capita costing looked cheap, but the provision of services actually did not match those costs, which were instead concealed in infrastructure costs. The contractors were being asked to come up with a clear and transparent accounting.

Kgoshi Morwamoche said that the question of aligning the computers of DHA with Head Office had been a recurring issue. The AG had once again raised concerns around capturing people who were applying for certain services properly. Sometimes there were over-captures. If the computers were linked, there would not be a problem, nor the backlog of cases in respect of asylum seekers.

The Minister said that DHA had spent millions over the years on IT systems that had not been integrated. This might even have been deliberately done. Part of the turnaround was to ensure integration, particularly interface between the backlog systems and the refugee offices.

Mr Msimang added that by the end of March there would be an interfaced Asylum Seeker and Deportation Management System. It would capture live biometric data, and link to the DHA National Information System (HANIS). The police were experiencing difficulties with undocumented people. Those coming on temporary or long stays would be entered on the system. This would also extend to cover civic operations to avoid some of the corruption that had taken place. If a person lost an ID, in future the details of the person lodging the claim would also be captured.

Kgoshi Morwamoche noted that the Annual Report had referred to R97 460 expenditure because of fire at Acacia Park informal settlement. The Strategic Plan had never explained that DHA would be taking over any functions of other government departments such as social services. In addition, there had been "transport of unemployed others to travel to Swaziland" An explanation was needed.

Mr Malusi Gigaba, Deputy Minister of Home Affairs, responded that DHA was not taking on the functions of Department of Social Development (DSD). From time to time DHA had the power to waive fees in deserving cases, which were considered individually on their merits. For instance, where an ID had been destroyed in a shack fire, the DHA might decide to waive the fee for the IDs, on a compassionate basis.

Mr Swart referred to the Capital Assets on page 80 of the Annual Report. He appreciated the explanation going forward, but needed clarity on the figures. The AG had been unable to establish ownership of the assets. He asked what amount was involved.

Mr Naidoo said that when procedures and policies changed between DHA and DFA, certain equipment was not being accounted for. Of the R1 billion of assets, some amounts were not covered, some not captured and year end, and R12 million was being investigated in a suspense account.

Deputy Minister Gigaba noted that the AG, because of the shortcomings set out in the bullet points, could not verify the accuracy of the figures. This comment applied in relation to all of the figures. The Acting CFO had already indicated that there was to be a complete audit of all capital assets, to capture them properly, and to establish ownership or leasing rights.

Dr Huang noted, on page 111, that there was a high external audit fee, which had increased greatly from the previous year. However, every year the audits had been delayed.

Mr Naidoo noted that the audit fee was not controllable by the Department. The AG would present a bill, which would be paid. For the first time last year agents were brought on site, and that was one reason for the escalation of the rates. The fee was also time-based. In the current invoice the figure budgeted had been exceeded. Attempts to negotiate audit fees could be interpreted as a limitation of scope.

The Minister stressed that the Committee and the DHA should reach a point where they could see light at the end of the tunnel. She suggested that it would be useful if the DHA could perhaps take the Committee through each of the work streams, to see what was being done in each stream. It was good to focus on the past, to see how to move forward, but also necessary to focus on how to send out a message.

Mr M Louw thanked the Minister and Director General for their frankness. He aligned himself with comments by Members Beukman and Swart around lack of internal controls. Interfacing of systems was key to the operation of the DHA. The twelve-page adverse opinion reflected a long and slow decline, caused by lack of accountability. He shared in the hopes for the future and thought the Committee should lend support. However, he was not sure whether the lack of leadership and management was arising at Departmental or Ministerial level. He asked what had happened to those who had been in control at the time. Whilst he agreed that it would be useful for the Committee to meet with the Minister and Department to receive a presentation on the work of the Department, he said that the public also needed to know about the problems, as they were the ones not able to access services.

The Minister said that past experiences were useful lessons, but she could not answer for all the ills that had happened in the past for ever. She had acknowledged that systems did not talk to each other. However, she was not responsible for that, and nor was her predecessor. The Ministry was acknowledging that there were problems and indeed was bringing the problems to the attention of the Committee. That acknowledgement seemed to be being misinterpreted as a sign of weakness. The public had not complained that the systems were not integrated; that was a challenge that had been identified and confided to the Committee. She did not see that there was any need to tell everyone about the problems of the past. She would think it far more important to broadcast the fact that the systems were now integrated. She should not be penalised for acknowledging that mistakes had been made. The DHA had not tried to hide that there had been a backlog, nor the cause of it. Whilst she appreciated that the buck stopped with her as Minister, she did not think that political mileage should be made out of a painful problem that was in fact caused by officials.

Mr Louw said that it was difficult for him to respond.

The Chairperson said that every Member had the right to ask questions. However, today the Committee was calling on the Department to account on the Annual Report. The questions should be in line with what was on the agenda. The Committee was still to have the budget presentation, and would still be dealing with the Strategic Plan of the Department. The Committee could not make reference here to what had been achieved, because it first had to sort out the nature of the past problems. It was critical that the Committee understand the allocation of units, since resources would be allocated according to what the Department said it would be doing. If there had been a change in allocations, and there were still problems with issues of immigration, the question was what had been done with the allocation given. The problems were acknowledged. The CFO's presentation was not really different to what the AG had said.

The Chairperson agreed that the issue was indeed who must account. The Committee was not able to go any further than what had been presented. At the last meeting, the Committee had said that if the Department was not able to account for the 2006/07 year, then the previous incumbents must account for it. The exercise of passing the budget as informed by the Strategic Plan would still be done. Any changes to the Strategic Plan must be clearly explained. That process had not happened. The Committee had allocated resources based on the plans that had been identified. The Department would be appearing before SCOPA next week. The problem for years had been that only when SCOPA was interrogating issues would inaccuracies in the Department's reporting to the Portfolio Committee be picked up. Internal controls had been criticised by this Committee for ten years. There had not yet been a confident statement that enough internal capacity had been deployed. Within the next three or six years he would like to know what were the time frames and plans, and he would like to know also when the contract of Mr Msimang would expire. There were not yet plans for turnaround presented. Members had noted the comments, as well as the support given. Refugee centres were still causing problems. It was a priority to ensure that every 16-year old had an ID book. Whilst the Committee understood the problems it would like to ensure that proper systems were being put in place. This should be addressed specifically in the strategic plan.

Kgoshi Morwamoche asked for the Minister's report on corruption and fraud with the UK passports.

The Chairperson ruled that this should not be dealt with today; it would be discussed later.

The Minister noted that there was nothing official or formal from the UK Government on this matter, so she could not comment on it. Once there was something official, she would come to give a report to the Committee. If the Committee wanted a general report on issues of corruption, the DG could certainly do this.

Mr M Sibande (ANC) noted from the report of the Acting CFO that there had been serious problems in the finance department. The previous CFO had been suspended. However, he was surely not the only person who should take responsibility. The misfiling of document and non-availability of slips indicated that there was a systemic problem. He asked what steps had been taken to ensure that those responsible were being sanctioned. There seemed to be many who had not been doing their jobs, and he asked whether they were still in their jobs.

The Minister noted that members of the department, including some from the finance division, had been charged for various misdeeds.

Mr Sibande noted that DHA had bad publicity. He wondered why DHA was always seeming to be reactive, and acted after media reports.

Mr W Skhosana (ANC) noted that even when problems were identified, it seemed to take far too long to address them. He cited the Aliens Control Account, apparently discovered several years ago, and he wondered what had been done with this. Most of the issues raised in this financial report were not new. He would like to have time lines for correction. He asked the CFO if he, for instance, was certain that the revenue control would be dealt with after 14 months.

The Minister noted that the Acting CFO had already elaborated what the Aliens Control account represented and the problems that had arisen. That account was run through DFA. The Acting CFO had also set out what was being done to address the challenges. This account was only audited by the AG for the first time in 2004/5, when it was brought to the attention of the Minister. It was not a true reflection to say that problems were arising already in 2002/03.

Kgoshi Morwamoche said that he had heard that false IDs were being used to back-date same-sex marriages even to dates before that law had come into existence. Many people had also complained that when IDs were being corrected, DHA was not automatically informing other relevant departments, such as Department of Transport, so that problems would then arise with drivers licence renewals, for instance.

Dr Huang pointed out several pages in the Annual Report showing discrepancies (some typographical errors) in figures. This gave rise to queries . The figures would have to be adjusted. It was impossible to tell which assets were being referred to.

The Chairperson said that there was too short a time for further questions. At a further meeting the DHA would engage with the Committee on the budget. That would provide an opportunity for further questions.

The Chairperson thanked the Minister, the Deputy Minister and all officials. He hoped to see a turnaround. There was a crisis since over the last ten years the Committee had been raising the same issues. Finally the interventions were beginning to address the recommendations made and the initiatives were deserving of support.

Mr Louw suggested that if the oversight function was to be done properly, more than two hours should be devoted to the Department.

The Chairperson said that there would be a workshop, when a full presentation would be given on the turnaround. The Department should explain all themes in turn and explain the capacity.

The Minister and some Members had to be released at this point to attend other meetings.

Government Printing Works (GPW) Annual Report Briefing
Mr Tom Moyane, CEO, Government Printing Works, said that the overview for the year would contextualise the strategic role and position played by GPW in the DHA. It would also address the issues raised by the AG. The adverse opinion of the AG was being taken very seriously.

Mr Moyane then proceeded to summarise what items had been identified by the AG, and to explain what these represented, and what processes were being put in place to correct them. On management of debtors, GPW had been hampered by lack of efficient and effective steps. The top ten defaulters had been identified, corrective measures were been taken, and there were attempts to verify all amounts. Letters were being sent to the DGs of the departments. Termination of services was also being considered. The outstanding debt as at 31 March 2007 was R135.4million. By January this had increased by R138 000, because departments had not paid and reconciled over the festive season. It was hoped that this was once again on track.

In relation to the suspense accounts, he noted how these worked, and said that they would be cleared when the departments provided GPW with remittance advice. Government departments were not indicating what accounts they were paying. The credit limit issue remained a concern. In the course of this year, limits would be set that could not be overridden. A formal policy on outstanding debt would now be rigorously implemented. There was now a Printers Estimate Computer Analysis system in place to do reconciliations.

In relation to inventory management, external analysts had now been engaged to do an analysis of systems to address the inconsistencies identified on the job tickets. GPW relied heavily on the systems installed some years ago. GPW was operating as a manufacturing entity and the systems must be geared to link to processes in the factory. The 10% profit levied on the margin on labour would be re-assessed as to whether it was in conformity with industry norms.

In respect of creditors, there were challenges. Compliance was another issue. In respect of property, plant and equipment, assets had been in some cases incorrectly charged to the income statement. This was a challenge in the organisation. There was a need to re-evaluate, to update the asset register, and to dispose of obsolete equipment. Plans had been put in place and were on track.

There was a special investigation in respect of the Gobodo Forensic Report last year, indicating possible wasteful or fruitless expenditures occurring between April 2003 and December 2004. The Forensic Report was disputed, and the Special Investigating Unit (SIU) had been asked to check on materiality of the report. This was ongoing at the moment and the GPW would give a full report when this was finalised. An amount of R66 million was alleged to be involved, but until the SIU had finalised its report this could not be verified.

In relation to the breach of the Basic Conditions of Employment Act (BCEA) the AG had indicated that there were gross violations in respect of overtime. However, as a manufacturing entity, and in light of resignations of artisans, it was not possible for GPW to subscribe fully to the Act. The GPW played a pivotal role in not only DHA but in the workings of the whole of government and had signed an agreement to deliver a certain number of documents each day. It was forced to have people work longer hours in order to deliver the services. DPSA had become involved, as GPW was unable to attract artisans into the industry. There was a general a shortage of artisans, and the salaries were not competitive.

The AG had also raised the issue of the internal audit. A fraud prevention plan was signed in 2007. There was a draft whistle blowing policy, which would be implemented by end March 2008. The audit committee and internal audit had also been raised. A risk assessment plan had been approved. GPW had previously shared an audit committee with the DHA, which was not to the advantage of GPW. It now had its own internal audit committee and it was meeting regularly.

A huge challenge had been raised around information systems and communication. GPW had formulated a strategic business plan to deal with IT and systems reconciliations. By the end of the financial year Exco should be able to  approve tenders to sort out the information system problems.

GPW, as a Trading Account, only received R200 000 for address and accountability, under the budget vote and had to generate its own funds by operating a commercial enterprise to defray other running expenses. Any surplus had to be declared to National Treasury. In the current year, it had however received R110 million, which was allocated to procure equipment for passport manufacturing systems.

The strategic objectives for 2006/07 had included a draft business case, which was completed, and a presentation had been made to National Treasury. However, a diversification strategy was to be drawn, and there were some questions raised about viability. Those issues were being addressed.  The draft Security Printer's Bill had been completed and the legal transformation process was ongoing. It was developing a holistic conversion plan. A new corporate identity and logo was still in the pipeline.

For a number of years GPW had been operating without due processes. Therefore the organisation now had to be restructured into a flatter structure. In order to do this, health and safety strategies, skills assessments and sustainable plans were being set up. It had developed a marketing strategy. It would like to engage in a larger market in sub-Sahara Africa. Analyses had been done and a benchmarking exercise looking at similar operations in the world had commenced. In respect of business systems and technology improvement, there were current upgrades ongoing in infrastructure and environment, including procurement of a state-of-the-art factory and equipment, thanks to the R110 million granted by DHA. In 2008/09 GPW should be in a position to produce a top-quality passport.

The transformation was key to create proper business management and business intelligence. A Task Team had been set up to look at speeding up processes. A meeting was held with a panel of DPSA and Treasury to consider whether the new proposed model was suitable. Continuation of work as had been done in the past was not helping the security of the printing. The same problems set out by DHA applied also to GPW. High staff turnover was a problem, particularly since remuneration was not compatible. Presently there was no CFO at GPW. At leadership and management level, there were therefore serious problems. Leadership provided a strategic direction for management to manage. If these capabilities did not exist it was impossible for GPW to operate as a private operation within the public sector. He pleaded that perhaps a special dispensation was needed for GPW.

There had been no recapitalisation of equipment since 1998. With the money now allotted there was migration to new technology. Hopefully GPW would now be able to provide a successful quality product. the environment was still a problem as the old building had been declared unsafe and a health hazard. New equipment could not be located there because there was not sufficient electrical capacity in the building.

GPW set out the achievements for 2006/07. It believed it had provided a good service to departments. There had been no leaks of examination papers from these offices. Revenue stamps were being printed for Lesotho. The African Union Diplomatic passports contract had been awarded to GPW. There were milestones in passports being produced for DHA. There was good Black Economic Empowerment (BEE) compliance, with 92% of work going to BEE companies. 64% of printing was done in-house; other work had to be outsourced because the outdated equipment would have compromised quality.

Discussion
The Chairperson said that there were still problems with the Annual Report, so that the Department would have to deal with the process to correct the figures, as pointed out by Dr Huang. He therefore said that the Committee would not be able to adopt the report in its current form.

The Chairperson asked why the R110 million had not appeared on the DHA allocations. During the budget speech the Minister of Finance had said that R800 million was put aside for a new passport machine. He asked for clarity on these figures. The DHA must tell the Committee how it had arrived at this allocation and the source of it.

Mr Moyane confirmed that R110 million had been transferred. That money was with GPW. Direct procurement with a service provider had happened and the equipment would be delivered in June/July. A pilot printing would be done before the end of the year.

Deputy Minister Gigaba noted that the R110 million would appear in the next financial report, as the funds  had been released during the current financial year. This figure was part of the R800 million, and it would be accounted for at the appropriate time.

Mr M Sikakane (ANC) said that it was suggested that GPW be corporatised but he wondered if it was not necessary to legislate for this.

Deputy Minister Gigaba said that the necessary Bill had been drafted and would follow the processes through Cabinet.

Mr Beukman asked what short-term steps had been taken to ensure that the issues around the CFO and the internal audit were resolved. He would not like the AG to have to report again that internal audit controls were not in place.

Mr Moyane replied that there had been many changes in the CFO post and the various incumbents had never stayed long. The GPW was a trading entity with turnover of over half a billion rand. There was a need to have good direction and command over the finances, by a person with financial and management accounting experience, such as a qualified chartered accountant He had been interacting with the Director General of DHA to see what could be put in place, as also with the Deputy Minister.

Mr Moyane added that there was a functional audit committee, which was enthusiastic. There had been a  weak internal audit because of the lack of CFO. The risk management and risk plans would not survive without these key positions in place. GPW was hoping to find solutions by the end of the financial year.

Deputy Minister Gigaba said that GPW was trying to find short-term measures, because the salaries were simply not good enough. These challenges would last until corporatisation was dealt with. There was not much that could be done for the longer term until the public service had settled the issues. There was an Acting CFO appointment, but this too had been hampered by lack of supporting capacity.

Kgoshi Morwamoche said that GPW had not complied with certain ruling and legislation. He asked why long-outstanding debts were not submitted to the State Attorney for collection.

Dr Huang was concerned also about the debt written off. This he regarded as a most serious issue.

The Chairperson asked what was informing the calculation of debt. The Committee had already asked for a list of departments who were not paying, so that they could be called to account before the Committee, but that had not happened.

Mr Moyane said that the GPW had looked at the issue of debt very critically. It had sought an opinion as to what would solve the issue. The checking of invoices and taking the matter to the State Attorney might not have been done correctly in the past. In the future GPW would be complying with the requirements. R63 million was indicated in the financial statement. In fact debts had historically not been written off since 1997. From a corporate governance perspective, the GPW could not just ignore this and run as if nothing had happened. Those debts, which had not been traced before, had to be written off and the accounts had to be cleaned. It was not planned for this year. The same applied to the R50 million figure mentioned elsewhere in the report. GPW was sitting with a huge amount of old and obsolete equipment. In some cases documents had been printed with the old coat of arms and had to be written off as they could not be used. With respect to debtors, debts were classified by dates. Old debts had to be reclassified to find out if they were recoverable. There was no reason not to collect the "new debtors, but there was a challenge in that there was no capacity at the moment to do so.

Kgoshi Morwamoche noted that some officials were receiving 100% of their salaries again in overtime.
Dr Huang also raised this as a problem, suggesting that attention needed to be paid as to whether the employees were doing their jobs properly in the normal working hours, and whether the overtime was indeed necessary.

Mr Skhosana agreed that the overtime was of concern. The Department of Correctional Services had had a similar problem,and had agreed to different working hours, with proper salary structures. He asked what strategies had been put in place to avoid the temptation for people to work overtime.

Deputy Minister Gigaba explained that there was a serous shortage and high turnover of artisans. These were specialised skills. Capacity was therefore an issue on a perpetual basis, as trained staff would be poached by other organisations, both public and private. In the absence of full capacity, the GPW had no option other than to use what capacity it had, for longer hours. Corporatisation should assist GPW in dealing with the problems, as it was losing people through a combination of a non-conducive environment and gap in salaries. In the short term, even a recruitment of interns would not make any impact. The GPW itself had to impart the skills, and if there was no one to impart those skills, the interns would be under utilised.

Mr Moyane stressed that the overtime arose from an objective reality that could not be ignored. It was not that people were sitting idle during the day. There were eight security binding machines, yet there were only two skilled artisans to do the job. Machine minders did not have the requisite skills to stand in, only to give some support in some areas. It was impossible to conceive that the Government Gazette might not be printed on a Friday. That would violate the basic principle of assisting Government to function. GPW also could physically not stop producing ID documents. If there were less artisans, and there was a need to deliver on time, then the only objective solution was to have people working longer. Some were working for between 12 to 16 hours. There were health and safety issues also at stake. The GPW was trying to rationalise the impact on health. He pointed out that the sector was very short of skills, and about 38 artisans had been lost to the banking sector, where remuneration was three times higher than GPW could offer. He would like to get some opinions from Members on how else he could deliver on time with less people on the floor.

Dr Huang made the suggestion that perhaps day and night shifts should be considered,

Mr Moyane said that the matter could be reviewed. However, there was no way in which he could find extra people. There was a lack of artisans.

Mr Sikakane noted that the Committee was not really addressing the issue. The Committee should address what the GPW should be doing in respect of overtime - and perhaps issue a ruling as to whether it should be permitted to carry on with the overtime.

Kgoshi Morwamoche wondered if the budget could be shifted to equate salaries of artisans with competing organisations, in order to attract the skills. Perhaps the R200 million being written off should be moved to salaries.

The Chairperson said that concerns around corporatisation had not yet been resolved. Perhaps this would be a short term solution. Often companies were not understudying the skills of imported employees. Therefore there would be a continuing problem of getting the right skills.

Deputy Minister Gigaba suggested that the point not be laboured further. He reiterated that the printing skills were extremely specialised skills that were simply not available. Perhaps there was a need to rationalise overtime, try to deal with skills recruitment, and retention as a whole process. Sometimes GPW had suffered from its own successes, which caused other countries to come to GPW with more work. GPW had then to consider boosting itself by undertaking the job, or simply saying that it could not take on any work because of lack of skills. It was possible to look again at deploying the turnaround team, to best consider the vision of becoming the specialist security printer on the continent, as also to find ways of dealing with the immediate challenges.

Dr Huang noted that the profitability figures had "decreased" 92% between the 2005 and 2006 financial years. He asked for clarification and criticised the errors.

Mr Skhosana said that the report made mention of stock-taking. On a site visit, the Committee had seen that some of the stock-taking was being done manually. He wondered if this was a completely new exercise.

Mr Moyane said that the stock-taking items seen by the Committee had been identified by the then-new management as "paper on the floor", which was part of the Goboda Forensic Investigation. It was incumbent upon management to dispose of it. It had elected that this should be sold as scrap.

Mr Skhosana noted that in its last interaction with GPW, the Committee was told that different departments were not paying their debts to the GPW. This time, the statement was turned around to the effect that GPW was not collecting. He asked whether the fact that there were still outstanding debts was due to he departments, or GPW.

Mr Moyane noted that government departments also had a reciprocal duty to pay in 30 days. He would see a dual duty. This had been pursued and he would provide a list of those departments still owing money.

The Chairperson said that the Committee was now reiterating its previous request for the list of defaulting departments. The Committee could then write formal letters to the Directors General asking for reports and, if necessary, could call them in.

The Chairperson wondered if corporatisation would deal with the problems. The problem still arose with compliance. If there was not compliance, then the Committee must find a way to assist. He asked how far the corporatisation process had gone, and whether there would have been a change by the next financial year. He also asked what other measures had been put in place. There was a need to resolve these issues. The role of National Treasury must be explained.

Deputy Minister Gigaba noted that presently it was not in the performance contracts that a CFO should achieve a clean audit. However measures to address this were being explored. The Department was trying to do was to look at matters persistently being raised by the AG, to ensure that in the next financial audit, there was not recurrence.

The Chairperson asked what interventions had been made. There had been similar situations in 2005/06. The history of GPW had been shaky. The issue of the premises had also been long outstanding. The conditions there for staff were dreadful. He asked what help had been given by the SITT at DHA, if any. The Chairperson agreed that the number of debts written off for 2005/06 and the continued lack of a permanent CFO was serious. He noted that GPW would have to specify what kind of interventions were needed - even to the extent of putting in place steps similar to those in DHA.

Mr Moyane said that he had interacted with the DG and a support team was attached to GPW. There was a strategy list to deal with corporatisation. By the end of the month there should be a clear picture what needed to be done and what was outstanding. The tasks and time lines were clear. The GPW took cognisance of the concerns, and there was a need to have someone guiding the department. Support was requested in regard to fast tracking the process.

Mr Moyane added that the issue of the offices had been discussed with the DG, the Minister and others. A site had been found. However, the matter currently lay with the Department of Public Works and he requested the Committee to ask the Minister of Public Works to fast-track the process. If the DPW did not see this as a strategic priority they would drag their feet. It was necessary for GPW to go to a site that provided proper secure facilities. In the meantime it had found an interim facility where the new South African passports would be printed. GPW and the Minister had taken a proactive approach as far as they could. The documentation could be made available.

The Chairperson said that now a direct request had been made, the Committee would schedule a meeting around this matter, as well as the Soweto office, and other matters that could be listed by the Director General. The Minister of Public Works could be invited to the meeting at which the budget was to be addressed.

Mr Msimang said that the matter had been discussed with DPW, who had expressed their willingness to assist, but there was still no delivery. One option might be for DHA itself to be allowed to manage the issue.

The Chairperson noted that critical questions had been raised and must be taken seriously by the Department. The Director General of DHA must deal with the question of the CFO once and for all, before his contract expired. In dealing with the Strategic Plan of the Department, the Committee would be looking for clear strategy and time frames on this issue. The previous Strategic Plan had not been adopted, because it had not indicated any time frames. The current turnaround should be addressing a plan with clear dates. The Committee had engaged with the SITT and it was important that there should be further engagement with the recommendations. The separation of the Department's programmes was a key matter. The Committee would also like to see an organogram of the DHA clarifying the operational structure. .

The meeting was adjourned.