Department of Correctional Services & National Prosecuting Authority 2007/08 Audits: hearings

Meeting report

Department of Correctional Services 2007/08:
Mr Godi welcomed the new Commissioner of the Department of Correctional Services (DCS), Ms Xoliswa Sibeko, in her new post, wished her well and hoped there would be more stability in leadership in future. She was accompanied by Mr J Shilubane, Acting CDC : Central Services; Ms Nandi Mareka, Acting CDC: Finance; Mr M Ngubo, DC: Supply Chain Management; Mr A Tsetasne, CDC: Corporate Services; Ms Jenny Schreiner , CDC: Special Operations & Management Support; Mr Manelisi Wolela, DC: Communications; Ms E Cloete, Dir: Internal Audit.

Mr Godi said that the audit report for the DSC was not acceptable. Unfortunately the person who signed the report was no longer with the Department and it now weighed upon others to fix matters. It seemed that while the Department was forever claiming its house was in order, their annual report regularly failed to reflect this sentiment. He asked what the Portfolio Committee for Correctional Services had done about this state of affairs and to what extent there had been interaction between the Committee and the Department.

Tangible Assets; Non-compliance with legislation; Matters of Governance; Performance audit
Adv Stephens referred to 5.2.3 of the Audit Report and asked for an explanation for the severe adjustments made to the Capital Asset register and asked whether this discrepancy had been resolved.
Opening balances had simply been changed by R162 million for buildings and fixed structures and by a staggering R805 million for machinery and equipment. There was no reconciliation or bases for these opening balances and they seemed to have been created simply to balance the totals at then end. He asked whether Ms Mareka had been in this position since the signing of the report.

Ms Nandi Mareka (Acting CFO) said the former CFO had resigned and she was now in the position of acting CFO. She said the figures disclosed had to tally with the asset register and their budget, but the guidelines by National Treasury had not been clear enough to indicate how the amounts could be transferred out to the Department of Public Works (DPW).

Adv Stephens asked what the guidelines had to do with the amounts of R162 and R805 million.

Ms Mareka said the amounts from the previous financial statements did not tally with the asset register and therefore in their Note 29 they had broken down the adjustments to R162 million for buildings and fixed structures and R805 million for machinery and equipment.

A member from National Treasury commented that the issue had been resolved already.

Ms Mareka said they had not yet resolved how to transfer the monies.

Mr Godi asked how the paragraph could be explained.

Ms Mareka said that the matter was not fully resolved

Mr Godi asked who had written the statement.

Mr Barry Wheeler, Corporate Executive: Office of the Auditor General (AG), said that the matter was resolved and the report was correct.

Mr Faizel Jogee Senior Manager: Office of the Auditor General (AG), said that they had qualified the audit because buildings and fixed structures had not been transferred to the DPW, as should have occurred. New buildings did not enter the asset register as they were incorporated into statements for the current year. An amount of R1.2 billion worth of older buildings had been transferred to the DPW, but an amount of R164 million could not be accounted for by the DCS. This was being questioned by the AG.

Adv Stephens asked whether the information was available.

Mr Teboho Motseli, CDC: Corrections, said the evidence was not available and was in the possession of DPW.

Mr Godi commented this indicated the non relevance of the guidelines and asked whether this had been explained to the AG.

Mr Jogee said the R164 million should still be accounted for even if it was a relatively small amount by comparison to the rest of the total which had been declared.

Mr Motseli said the information for the rest of the totals had been sourced from DPW, besides which it had been a struggle to obtain this information. The information for the R164 million could not be obtained. He said the payment of works was by the DPW although the DCS was being held accountable and the latter had to ensure their budget was correct as far as identifying improvements and construction was concerned. To date, the service level agreement between the two departments had not been signed and had been pending since 2005.This agreement stipulated lines of accountability and roles and responsibilities, as well as guidelines for the interpretation guidelines from the National Treasury.

Mr Godi reiterated the AG had found no evidence for the amount in question.

Ms Mareka said the evidence was available for the outstanding amount and that this had been acknowledged sometime at the end of July. This amount was for R261 million and had been reconciled. She claimed the relevant branch, indicating that of DCS, had been informed of this evidence.

Mr Godi said these issues should have been discussed among themselves before they had come to the meeting.

Ms Sibeko said they had only discussed the Treasury guidelines as an issue and they had not discussed the evidence.

Mr Godi remarked the evidence was crucial to the dialogue and considering the contradictions by the Department it was becoming increasingly difficult to take what they said at face value. He asked again whether the branch in question had been supplied with the evidence, as there seemed to be no flow of information and was symptomatic of the need for enhanced coordination.

Adv Stephens commented on the complete waste of time. He referred to the comments by the AG in the report regarding tangible capital assets and the lack of evidence for the reconciliation, specifically referring to amounts of R87 million, R55 million as well as amount of R108 million. He asked whether these amounts had been reconciled.

Ms Mareka replied they were in the process of reconciling the first two amounts. There were capacity gaps at certain sites and head office was sending people to these sites to assist in the process.

Mr Godi asked about the explanation of the R108 million.

Ms Mareka replied this amount was due to depreciation of assets. Depreciation of assets had been calculated by their system which was not in alignment with the system used by the AG.

Mr Godi asked whether the AG had accepted this reply.

Ms Mareka reiterated it was a system issue.

Mr Godi asked if therefore this matter would not come up again.

Ms Mareka assured him the system would be changed.

Adv Stephens referred to the comment in the Audit Report on internal controls made by the AG, which contained a long list of concerns. These referred to transactions which were not clearly documented, not properly managed, maintained or updated. It also referred to reconciliations. Mr Stephens asked if any steps had been taken to rectify this.

Ms Mareka replied that these problems all referred to the challenge in reconciling the figures for buildings and fixed structures.

Adv Stephens disagreed.

Ms Mareka said they had put a process in place whereby they drew down payment reports. There remained huge gaps in asset verification and problems with supply chain management.

Mr Godi said these challenges were not new. It seemed that the Department was at the start of the process of putting measures in place and this had only taken place since the AG’s Audit Report had come out, which seemed rather belated. Management was supposed to manage.

Adv Stephens referred to comments in the report that transactions and events were not appropriately classified. He commented that management could not occur without a proper recording of transactions and events, in order to make effective decisions.

Mr Wheeler referred to page 94 of the DCS Annual Report and said the problem of classification related to tangible capital assets and the problem of excessive adjustments.

Mr Jogee said the AG had found control weaknesses. The closing balances for machinery and equipment did not tally with the opening balances for the next year by an amount of R805 million. This difference had been reported to the DCS.

Mr Godi said the challenge of instability in the Department surely contributed to these discrepancies. This process of reconciliation could not take place within the meeting as they were wasting everyone’s time. A simple yes or no would suffice. These problems should have been dealt with long ago. There seemed to be a serious challenge with management asserting itself.

Ms Mareka said part of the problem was due to the fencing project which the DPW had listed under its own assets.

Adv Stephens spoke about the non-compliance with applicable legislation and what he considered the most serious transgression of all: the high incidence of overcrowding in the correctional centres, which did not allow for human dignity. This was a primary responsibility of the Department which was not being fulfilled and had not been fulfilled for several year running. He asked what measures had been taken to address these findings.

Mr Godi commented that the building of correctional centres was obviously a solution but there had been a bungle in this regard as well.

Mr D Bloem (Chairperson of Portfolio Committee for Correctional Services) said there had been only one prison built over the past years, which was in Kimberley. Eight prisons were supposed to have been built in a private and public enterprise partnership (PPP). He said his Committee was not convinced this was the best model as the two existing PPP prisons in Bloemfontein and Limpopo some R600 million had been spent of taxpayers’ money. He was not convinced this was cost effective at all. He did not believe that further prisons would soon be completed.

Mr Godi asked Mr Bloem whether this was his informed opinion.

Mr Bloem replied that four prisons had been budgeted for since 2002. These were supposed to be constructed in Kimberley, Nigel, Leeukop and Klerksdorp. Thus far only Kimberley had been completed.

Mr Lekgetho (ANC) said other options should be considered such as the detainees who could not afford bail or awaiting trial. An abridged classification process could be instituted, especially those in prison for minor offences.

Mr Trent asked to what extent the break down of the criminal justice system affected the ability of the Department to administer. He commented they must be under enormous pressure.

Mr Godi reminded them of the original question of overcrowding and asked how the DCS intended increasing its capacity.

Mr V Smith (ANC) referred to page 116 of the DCS Annual Report which indicated an under-spending of R262 million on facilities in 2007/08 and R400 million in the previous year. This seemed to indicate the Department was incapable of managing its cash flow and this could possibly lead to a cut in budget in the future. According to the Portfolio Committee nothing was happening in this regard. The reason given – that the DPW had not billed them in time – could not be accepted.

Mr Godi agreed Parliament could amend budgets.

Mr Motseli said measures had been taken to address capacity and he also referred to the current Criminal Justice Review. They were dealing with 9000 detainees awaiting trial by collaborating with magistrates. They were introducing protocols for this purpose. The distribution of inmates was being addressed as certain correctional centres were not overcrowded and could accommodate overflow from other prisons. They had embarked on a process of upgrading and repairs to increase capacity of existing centres significantly. The new centre in Kimberley would generate an additional 3000 spaces. This would be complete by April next year. The further five facilities which were to be constructed would generate 15000 spaces.

Mr Godi said he was opposed to PPP arrangements and SCOPA had made this abundantly clear on several occasions to the DCS with no response forthcoming. They had asked for the names of the officials who had been involved in the negotiations for these contracts. This list had not been provided. It had come to their attention that some of the officials involved had resigned and had taken up senior posts in those institutions. He said PPPs were not in the interest of the state or the public. They were more expensive to the state.

Ms Sibeko said she had to put together a team skilled in property development as she did not currently have the staff for this sort of expertise.

Mr R Mofokeng (ANC) said the DCS should be concerned about people and delivery. Overcrowding had been an issue for thirteen years since 1996. They had used around R9 billion and had a further R2 billion available for use. Yet there were 9770 vacancies out of which 137 were in financial administration. It was crucial these positions were filled. The DCS had to be upfront about any challenges they might be experiencing as a result of poor cooperation from other departments or ministries within government.

Mr Bloem said the problem lay with the attitude of government departments, which ran roughshod over the opinions of Parliament. The Portfolio Committee strongly disapproved of the use of PPPs in the building of prisons. It would make this known when it came to the approval of budgets.

Mr Wheeler said the 2007/08 qualifications by the AG were based on the opening balances for the year. The AG would have to receive the relevant information from the DCS in order to obviate the possibility of qualifying the DCS audit again next year for the very same reason. It was therefore imperative that supporting documents were provided to ensure the opening balance for the next year would be accepted.

Irregular, Fruitless and wasteful expenditure, Tangible Assets, Leave entitlements
Mr P Gerber (ANC) showed members three prison uniforms and asked whether, as a civilian, he was allowed to be in possession of these clothes.

The Department officials asked from where he had got these uniforms.

Mr Gerber asked who made these uniforms and from where the material came.

Ms Sibeko said the clothes were made by the prisoners themselves. They made about 300 uniforms a day.

Mr Tsetsane said some people copied these uniforms.

Mr Gerber said he had three jails in the vicinity of his home and had found the uniforms on the Wellington municipal dump. He asked what controls were in place regarding these uniforms. He referred to the report and asked for explanation of the R393 million not spent indicated on page 118, and R275 million not spent indicated on page 117 of the DCS Annual Report.

Ms Mareka said the R393 million included all revenue collected by the Department which had been centralized to the National Revenue Fund. The variances referred to on page 116 of the Annual Report were related to voted funds and included foreign aid and assistance. The reconciliation was on page 118.

Mr Gerber referred to the vacancy rate of 11,4% and asked where the Department had budgeted for the shortfall of posts.

Ms Mareka replied the Department was funded for 43 000 posts and not the stated 45 000 posts. Cost pressures had led to the spending of the money available for the balance of the budget, which was towards payment of overtime and allowances.

Mr Gerber asked whether there was actually only a 5% rate of vacancy.

Ms Mareka agreed this was the case as the Department had to first prove their ability to fill these posts before the full 11,4% would be catered for by National Treasury. They had made inroads in this respect.

Mr Gerber referred to the payment of bonus performances on page 123 of the report which had gone from R846 000 in the previous year and then jumped to R49,6 million this year.

Ms Mareka said this discrepancy was due to a difference in assessment terms.

Mr Godi asked whether money for vacancies had been spent on awards.

Mr Moreka replied that there was a budget for performance awards.

Mr Smith asked how it was possible for the DCS to spend R3 million on consultants, when they were struggling to get a budget for posts. He asked for an explanation of an item in the report which indicated that R8000 a day had been paid to consultants for the training of staff over the period of one year for hygiene services.

Mr Tsetsane said the payment was for occupational training on hygiene assessment to various personnel. The R3 million was paid to a company for the service of hygiene assessment at their prisons. This involved taking swabs and samples from foods in order to assess the hygienic standards of the prison environment. It also included the abattoirs and dairies they used for the prisons. These had to be assessed independently.

Mr Godi asked why there were no officials available to do this work.

Mr Tsetsane said there used to be but they were not adequately trained. Sometimes nurses had been used for this purpose. A group was being trained for this purpose over a twelve month period.

Mr Gerber asked for an explanation of the gifts stated in the report, which referred to R812 000 donated by Bosasa operations. This was a food catering company that was being used by the prisons.

Ms Mareka said Bosasa was rendering food facilities management services to the prisons. The feasibility of using this service provider was still in process.

Mr Godi assured the DCS this was not cost effective and not in the interest of the state and only in the interest of a few. It seemed the DCS was set on its course like a train hurtling along it tracks and all they as members could do was get out of the way as there was no way of stopping it from following its course. A mind shift change was needed, if there was to be any meaning in this engagement.

Mr Smith asked for clarity on the role of Bosasa as it was active in seven regions and it had donated R812 000 out of the total R986 000 donated to the DCS. This showed it to be a major donor as well as a major contractor. This indicated a conflict of interest.

Mr Godi said the DCS had to take it as given and needed to review this matter.

Dr H Bekker (IFP) asked for written response to the findings in the Report concerning the inhumane treatment of prisoners. There was a complaints list through which inmates could lodge their complaints. This list had registered 18000 complaints. He asked for an analysis of these complaints in order to find out how many of these allegations were about sexual assault and rape.

Mr G Madikiza (ANC) asked Ms Mareka how long she had occupied the position of Acting CFO and whether she was actually fulfilling two posts. He asked what the employment time frames for the position were.

Mr Tsetsane said that they were not currently employing a CFO. They would be outsourcing the position.

Ms Sibeko said they were in a process of reviewing this decision.

Mr Godi said he hoped she would be able to take the DCS in the right direction, that she was there to stay and that the DCS could produce a clean audit report in the coming years, even considering the complexities and the preponderance for corrupt tendencies.

National Prosecuting Authority Audit Report 2007/08:
Prepayments and advancements; Financial management; Lease commitments; Housing guarantees
Mr G Madikizi referred to the prepayments and advances in the Audit Report, which had been overstated by R22 million and was not recoverable.

Mr Brian Graham (CFO: NPA) said that this amount was from the proceeds of sales and lease back arrangements with a takeover of computer requirements by a service provider with full maintenance / lease arrangements.

Mr Godi asked what had been done about the statement in the Audit Report.

Dr Khotso de Wee (acting CEO of NPA) said the matter consisted of two problems. The AG had not been convinced that the arrangement represented value for money. Supporting documents had been requested regarding this issue and these were currently available. The second problem related to the following of relevant procurement processes, which had been followed.
 
Mr Madikizi commented on the statements in the Audit Report claiming the NPA did not have reliable financial report procedures, nor were they thoroughly communicated throughout the Department.

Dr Wee disagreed and said while they were not perfect they were reasonably reliable.

Mr Madikizi said this did not seem to be the case as the Audit Report had given the NPA a disclaimer. He asked for comment on the late spending of funds.

Dr Wee said this had been due to late receipt of funds from the Department of Justice and this resulted in late reprioritization. This situation would be avoided in future.

Mr Godi said this had happened several times in the past. The Department of Justice (DoJ) would have to improve its processes.

Mr Madikizi asked how this could be facilitated.

Dr Wee replied that the NPA had formed a joint committee with the Legal Aid Board and the DoJ. They would be changing time frames in order to avoid spikes in spending.

Mr Madikizi asked what measures had been put in place to improve reporting policies as they seemed to be defective.

Dr Wee replied that they were in the process of drafting policies which would be available by the end of the financial year.

Mr Madikizi asked for comment on the statement in the Audit Report regarding lease commitments.

Dr Wee said this related mostly to cell phone usage. The NPA had changed their policy by having individuals signing for their contract with service providers instead of the NPA doing so on behalf of individuals. They now had to claim for work related calls which would then be refunded. Other lease agreements were mostly historical.

Mr Madikizi asked for information on the housing guarantees, which had been highlighted in the Audit Report as lacking accuracy and control. Officials who had left the NPA were still on the register.

Dr Wee said they were engaging with banking institutions to update the housing guarantee register. The liability had been determined and the register was being updated.

Mr Godi asked whether this had led to a correction of the books.

Dr Wee said in some instances. Certain guarantees had been transferred to other departments, but in certain instance staff had taken their files with them and they were in the process of retrieving them in order to effect the necessary changes.

Mr Godi asked for a list of this process indicating which guarantees had been transferred already and which were still in process.

Dr Wee agreed to this.

Mr Madikizi asked for an explanation of the AG’s statement that simple activities such as data capturing were not being done and asked whether this was due to lack of capacity.

Dr Wee said they were committed to strengthening their capacity.

Mr Madikizi said it seemed more a result of lack of supervision and management.

Dr Wee said it could be due to supply chain management. One such instance was leave administration, where managers had an attitude problem. He was in the process of sorting this out and ensuring that there was an audit trail as far as leave was concerned. It was also a question of ensuring there were consequences for misdemeanours.

Mr Madikizi said the Standing Committee on Public Accounts (SCOPA) had raised previous resolutions regarding governance and asked whether any of these had been acted upon.

Dr Wee replied that he had paid attention to all of them.

Mr Madikizi asked whether the NPA had the will to turn around the audit outcome for future financial years or whether it was just going to be business as usual.

Dr Wee assured members it could not be business as usual. He held regular fortnightly meetings with staff to deal with all the issues at hand. He was just nervous about the time frames to turn things around.

Mr Godi asked how long the current CFO had been in his position.

Mr Graham replied that he had been there since October 2007.

Mr Gerber asked whether the Adv B Simelane and B Simelane stated in the Annual Report were related.

Dr Wee said they were not.

Mr Gerber asked how the street value of confiscated goods was determined.

An representative from the Office of the Auditor General said they were estimated by the relevant experts and the curator would then get a valuation certificate.

Mr Gerber asked for comment on the statement in the Audit Report regarding irregular, fruitless and wasteful
expenditure. He asked for root causes of this situation and whether any disciplinary action had been taken against perpetrators.

Dr Wee replied that this had been largely due to a lack of procurement processes. A new system had been put in place. The relevant authorities were under investigation and no one had yet been disciplined. The process needed more time.

Mr Godi asked why nobody had yet been disciplined when some individuals had been suspended for a period of two years.

Dr Wee said the amount in question of R423 million seemed like a very large amount, but it had to be considered that this was divided into other amounts. An amount of R113 million was with the Director General for condonation and the R66 million referred to was document related.

Mr Godi said no amount was too small for consideration.

Dr Wee agreed and said he did not mean it in that context.

Dr Wee said these and other matters would be resolved before the end of the next financial year.

Mr Gerber asked how the internal controls for leave entitlement had not functioned at all. Partly the problem had been one of attitude.

Mr Mofokeng asked whether staff had been suspended on full pay and if so, from which account were they being paid.

Mr J Haywood, Acting Manager, said they were paid from the current budget for employee compensation as their salaries had already been budgeted for.

Dr Wee said it depended on the severity of the case if staff were suspended with or without pay. They did not pay two salaries for one position. The person acting in the position came from within the institution.

Mr Madikizi asked whether staff acting in other positions were given an acting allowance.

Mr Haywood said they were not given an allowance as the position was not considered vacant.

Other matters; Internal Control; Non-compliance with applicable legislation; Matters of Governance
Mr Trent referred again to the previous SCOPA resolutions, specifically about the recommendations made to provide clear definition of duties for accounting officers, the listing of the NPA as an entity in terms of the PFMA and asked whether these resolutions had been acted upon.

Dr Wee replied that the definitions had been done and the listing was still under consideration by the new Minister of Justice.

Mr Trent said he could not understand what the problem was since the NPA had to be listed as an entity. The matters relating to late fiscal dumping seemed to be as a result of the mechanism of funding for the NPA. He asked whether there been any discussions about this situation.

Mr Trent referred to the control environment not being up to standard. He referred to the presentation by the AG made to Committee Chairpersons on the previous day where he mentioned five points that would aid positive audit outcomes. One of them was a close involvement by leadership and a commitment to the challenges. Another point had been the regular preparation of financial statements and simple procedures such as written procedures and effective record keeping.

Dr Wee said these matters were being addressed by the various measures such as the dedicated task teams, policy drafting, investigations, condonations and the introduction of new leave software, which would ensure an audit trail. These processes would take time to become entrenched.

Mr Trent spoke about control activities and cost and potential effectiveness in terms of risk.

Dr Wee said there was a risk management unit in place.

In reply to Mr Godi asking how long this unit had been in place, Dr Wee said two years.

Mr Godi said this was disturbing as they seemed to have had little effect

Mr Andre Malan of the NPA said it had been a question of capacity and risk mitigation plans had been put in place, with which the AG had been duly impressed.

Mr Trent welcomed this. He asked for comment regarding non-compliance with applicable legislation.

Dr Wee said he had approached the Accounting Officer, the Director General, and the DoJ in this regard and the relevant delegations had been finalised.

Mr Trent asked about irregularities in tender processes where either they were not awarded to the highest points or the correct tender process had not been followed and they had not used the appropriate database supplier.

Dr Wee said he had finalised a draft report and they were investigating specific instances. This would be complete by the end of February.

Mr Haywood said they had identified problem areas regarding non-compliant appointments and they were in a process of training the relevant delegated authorities.

Mr Godi asked whether those who had made non-compliant appointments had been taken to task. Training was not enough.

Dr Wee said serious violations would result in consequences and disciplinary action.

Mr Trent said the NPA must give SCOPA feedback in this regard, as this had been one of the worst audit reports he had seen in years. The matter of the Criminal Assets Recovery Account  (CARA) was another point in question. It had been found this unit had also not fulfilled its responsibilities according to page 67 of the Annual Report.

Dr Wee said they had to strengthen their capacity as they had been sharing capacity with the DoJ. This was not effective and the situation was under review.

Mr Trent said the financial statements had been subject to many adjustments.

Mr Graham agreed and said some of these had been recommended by the AG and some had been made for the sake of accuracy. Next year time frames would be much sharper. Detailed monthly reports would be available and every unit would sign off their own statements.

Mr Trent referred to a paragraph in the Annual Report which referred to the accounting process for forfeited assets as being difficult and complex. He asked whether the system had controls in place or whether assets could simply disappear.

A member of the NPA said the curator was responsible for an initial and final report for every asset and this had to be reconciled with monies. There was a whole process in place to ensure that assets were in safe hands and disposed of appropriately.

Mr Trent thanked him.

The meeting was adjourned.