The Parliament Research Unit presented its analysis of the Department of Labour’s 2007/08 Annual Report. The report assessed the performance of the Department’s six programmes by asking a series of questions about the achievement of its planned outputs and specific service delivery responsibilities.
The second leg of the presentation provided a breakdown of the financial information contained in the Department’s 2007/08 Annual Report. The Department had been allocated R8.8 billion for that financial year. The overall expenditure of the Department amounted to R8.2 billion. The under-spending for each of its programmes was listed. Virements (transfer of unfunds from one programme to another programme where they were used) amounted to R5.6 million. The reasons for these needed to be ascertained by the Committee.
The matters that had led to a qualified audit opinion by the Auditor General were explained. The Committee needed to establish how and when the Department planned to address these issues.
Four researchers from the Parliament Research Unit presented its analysis of the Department of Labour’s 2007/08 Annual Report. The group comprised of Ms Sindi Mkhize, Mr Sizwe Nyenyiso, Mr Phelelani Dlomo and Mr Sibongile Ncgobo. The purpose of the report was to analyse the programmatic, human resource and financial performance of the Department.
Ms Mkhize firstly presented the legislative mandate of the Department. She did so by pointing out the challenges facing the department and the pieces of legislation that had been enacted to address those challenges. She touched on its mission statement and also listed the institutions that reported to the Department. Ms Mkhize outlined the Department’s broad, long-term strategic objectives such as contribution to employment, enhancing skills development and promoting equity in the labour market. She followed this up with its strategic priorities for the period 2007-2010 were more measurable such as the decentralization of functions and the delegation of authority.
Ms Mkhize continued with an overview of the programmatic performance of the Department. She did point out that she would focus only on the main programmes. The Administration Programme performed the overall management of the Department and provided centralized support services.
The Service Delivery Programme ensured proper implementation and compliance of the Department’s policies and programmes through proper evaluation, monitoring and inspections. A concern was however that there had been delays in the decentralization of functions to provincial offices by the Department. Members were encouraged to ask the Department what the cause of these delays were. The Committee was also encouraged to ask the Department what progress had been made with regards to the private sector’s Employment Equity Policy.
The Employment and Skills Development Services/Human Resources Development Programme focused on the implementation and monitoring of employment creation and skills development through the National Skills Development Strategy and the National Human Resources Development Strategy. The Department had reported that provincial growth and development strategies had been aligned to ASGISA (Accelerated and Shared Growth Initiative for South Africa) targets. Members were urged to ask what kinds of projects had been promoted under these strategies and whether these projects addressed the need of scarce and critical skills, as promoted under ASGISA.
The Labour Policy and Labour Market Programmes were elaborated upon. It was responsible for the establishment of an equitable and sound labour relations environment and promoting SA’s interest in international labour matters. The Department had reported progress on issues of sectoral determinations such as hospitality, taxi, and welfare. Moreover the Department had met with various departments such as Social Development, Water Affairs and Forestry so as to mainstream activities performed through the programme, Towards the Elimination of worst forms of Child Labour (TECL), into their work plans. Members were encouraged to ask the Department how the Child Labour Programme objectives had influenced the legislative framework which affected children’s rights and protection. Ms Mkhize said that NEDLAC and the Department tended to report on the same issues. Both NEDLAC and the Department should shed light on where their respective functions start and end. The Committee should ask what measures did the Department take in order not to take over the competencies of its entities such as NEDLAC.
In relation to the National Skills Fund the Department had recorded success with regards to various skills training projects, including those that promote co-operatives, Adult Basic Training (ABET) et al. Ms Mkhize however noted that certain questions begged to be asked. For instance the situation where the Department had underestimated the number of learners in various projects, how did it affect the quality and budget of these projects? Another question was what kind of co-ops had received support from the Department. These were just some of the questions members were encouraged to ask the Department.
Ms Mkhize pointed out that the Sheltered Employment Factories (SEF) had in 2007/08 received an unqualified audit report as opposed to a qualified report in 2006/07. The SEF was thus implementing its turnaround strategy and was restructuring itself. The National Skills Fund (NSF) had on the other hand received a qualified report for 2007/08. Even though the NSF had implemented some of Standing Committee on Public Accounts (SCOPA) resolutions, the Auditor-General had raised concerns that the entity had not sufficiently implemented all the SCOPA resolutions and the prior year’s external audit recommendations. The researcher asked members to question the delays in implementing recommendations from the external auditors and SCOPA. Members should also be informed as to which recommendations had not been implemented and the reason for this.
Mr Sizwe Nyenyiso continued with a breakdown of the financial information contained in the Department’s 2007/08 Annual Report. The Department had been allocated R8.8 billion for the financial year. The overall expenditure of the Department amounted to R8.2 billion. The Department had spent R1.9 billion or 95.62% of the R2 billion budgeted for programmes. It had under-spent by R89.2 million or 4.38%, mainly on programme budgeting. The Department had thus under-spent on all its programmes. Virements amounting to R5.6 million had taken place for the period 2007/08. Virements were the transfer of funds from one programme where they were not being used to another programme where they were going to be used. Mr Nyenyiso was perplexed as to why funds had been vired to certain programmes when these programmes themselves were under-spending.
Members were urged to ask the Department how the under-spending impacted upon its service delivery and the achievement of its departmental objectives. The Department should also be asked if it had an early warning system in place to monitor when under or over-spending took place.
The Department had received a qualified audit opinion for 2007/08. The qualified opinion was based on the shortcomings identified in the management and controls of assets and the asset register. Some of the issues raised were the incorrect valuation of assets in the asset register; the asset register was not adequately maintained as per the requirements of National Treasury and there was the duplication of asset barcodes. The research unit felt that the Committee should ask the Department how and when it planned to address the issues raised by the Auditor General.
Mr M Mzondeki (ANC) asked at what point the Department undertook a virement. Also did National Treasury question why funds needed to be vired?
Mr Dlomo noted that each financial year had four quarters and that 25% of funds needed to be spent per quarter. Virements were done in August; hence funds that were unspent during the first two quarters could be vired. He emphasized that the Committee should not only look at under-spending as a whole but more specifically look at where it was happening under specific programmes. A department was only allowed to vire up to 8% of its funds. The Department had vired 2% of its funds. He was not sure to what extent National Treasury questioned the need to vire funds. Motivation was however needed in order for it to be allowed. He felt that viring funds from a programme defeated the purpose of that programme.
The Chair agreed.
Ms S Rajbally (Minority Front) asked what was the need to transfer funds from one programme to another. Did the programme from which funds were transferred suffer? She also felt that there should be quarterly monitoring of programme spending.
Mr Dlomo said that the Department should shed light on the monitoring of its programme spending. National Treasury monitored the expenditure of the Department by way of quarterly review reports. The Joint Budget Committee dealt with these issues but felt that all parliamentary committees should get involved.
Mr L Labuschagne (DA) explained that there was nothing wrong with the concept of a virement. Budgets were often done 18 months in advance and funds frequently had to be transferred to where they were needed, that is, from one programme to another. National Treasury had to approve such transfers. The question should be why the Department was not spending the funds in its programmes. If it were, then there would be no funds to vire.
Dr U Roopnarain (IFP) said that 4.38% was a great deal of under-spending. She noted that the Department had a problem filling vacancies and asked why this was so. The under-spending by the Department was in part due to the unfilled vacancies. She noted that perhaps the skills needed were not available. She asked if the researchers had figures on the unfilled vacancies.
Mr Nyenyiso replied that the Department had to shed light on the under-spending issue. Some of the programmes might have been compromised. There was a general problem relating to the compensation of employees as they did not have the skills. Capital expenditure was slow and it contributed to the overall under -spending.
Mr Dlomo stated that it was an undeniable fact that all departments suffered from vacancies. The second concern was procurement processes. Departments simply do not comply with supply chain procedures.
Mr Labuschagne said that perhaps the Committee should question the Department around December/January as to why it had not spent its funds. These questions should be posed in the year it was happening and not after the fact as the case was at present.
The Chair agreed that quarterly reports would shed light on the issue of departmental spending.
Ms Rajbally also agreed that regular reports would be useful. She could not comprehend how the Department of Labour could have vacancies when unemployment was so rife.
The Chair asked what the basis for the qualified report by the AG was.
Mr Nyenyiso replied that some of the issues highlighted were internal controls, monitoring, and non-compliance with legislation.
Ms Rajbally said that the Committee needed to hold the Department accountable.
Mr Mzondeki asked why in the Annual Report was mention made of Employment Equity (EE) in the private sector yet no mention of EE in the public sector. He referred to the under-spending in the Social Insurance Programme and asked whether it was correct that it was 41%.
Ms Mkhize replied that EE in the private sector received specific mention because it was lagging far behind the public sector.
Mr Nyenyiso said that the under-spending in the Social Insurance Programme was in fact 41%.
Dr Roopnarain stated that the issue of internal controls seemed to be symptomatic of entities linked with the Department. She suggested that perhaps a score card reflecting the performance of entities should be drawn up as it could assist with oversight in the future.
The Chair said that the analysis had been useful in that it had brought certain issues to the fore. Virements and the under-spending by specific programmes were two such issues.
The meeting was adjourned.
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