Defence Secretariat 3rd quarter 2011 performance, focusing on financial issues

Meeting report

Defence Secretariat 3^rd quarter 2011 performance report
Dr Thobekile Gamede, Chief of Policy, Planning and Strategy, Department of Defence, presented the Defence Secretariat Report for the 3rd Quarter (September to December 2011).

Dr Gamede tabled a strategy map of the defence force, and explained that the deliverables of the Defence Secretariat (the Secretariat) were highlighted in green and the deliverables of the South African National Defence Force (SANDF) / Department of Defence and Military Veterans (DoD) highlighted in yellow. The ultimate outcome of the Defence Secretariat was to achieve enhanced civil oversight over the operations of the SANDF, and the ultimate outcome of the SANDF was to ensure that South Africa (RSA) was defended and protected. These were described as output deliverables.

She then explained that the internal processes and resources management could be grouped under the function of administration of the DoD. In terms of supporting the DoD and building for the future, the Secretariat had to promote and gain a greater appreciation of the defence industry and ensure consensus on defence, which touched on policy and communications.

The Defence Secretariat’s Programme Overview was tabled, and she noted that the Secretariat ran several sub-programmes. These were listed as the sub-programmes for Departmental Direction (which was reported under the sub-programme Policy and Planning), for Governmental Information Technology Officer (GITO), for Policy and Planning (which dealt with defence policy, strategy and planning), for Financial Services, for Acquisition Services (which dealt with Defence Matériel), for Defence Supply Chain Integration and for Defence International Affairs.

Dr Sam Gulube, Secretary of Defence, Defence Secretariat, continued to set out the achievements of the different sub-programmes, and the obstacles and challenges encountered in each (see attached report for full details).

He particularly highlighted the Financial Services programme, noting that the Secretariat had finalised and consolidated the post-Audit Action Plan to rectify all adverse findings made by the Auditor-General (AG) in the previous financial period. She also highlighted the institutionalisation of Operation Clean Audit. She noted that one obstacle to reaching the goal was posed by the slow responses to audit enquiries by some services and divisions.

In respect of the Defence Matériel programme, he noted that the delays in the acquisition approval process hampered achievement of project milestones and related cash-flow on the Special defence Account (SDA)

While the Defence Secretariat managed to show some successes in supply chain integration, some significant challenges remained around the E-procure tool. It was emphasised that this system had to be handed over to C-LOG as system owner.

Under the sub-programme of Defence International Affairs, agreements were signed between the RSA and Benin on the African Union Special Task Force in Burundi, between RSA, Mozambique and Tanzania on Maritime Security in the Indian Ocean, and with United Arab Emirates on Defence Cooperation. One of the problems in this programme was that outdated software on the DoD Information Systems caused interdepartmental communication problems.

The next part of the presentation listed priorities of the Ministry of Defence and Military Veterans (MoD&MV), performance indicators, Annual targets for 2011/12, Quarterly Achieved Targets and planned management Interventions. The priorities were named as execution of the border safeguard function,  enhancement of the SANDF Landward Defence Capabilities, job creation, revitalisation of the Defence Reserves, restructuring and support of the defence industry, and the establishment of the Department of Defence Works to look after the DoD’s own public works projects. 

The next section of the presentation dealt with performance indicators required by National Treasury; if the targets were reached, this should contribute to a clean audit. The list included issues like the finalisation of the Border Management Strategy, throughput in terms of the DoD National Youth Service concept, the approval of the DoD anti-corruption policy, the institutionalisation of the Defence Force Service Commission, and the need to address the vacancy rate, as 87% of funded posts were filled by end December 2011. National Treasury required the DoD to work on mitigating its risks. Both the Defence Secretariat and DoD had set up risk registers to record systems and instances that resulted in deviations from the regulations. The fact that the IT systems of Finance, Supply Chain Management and Human Resources management were not integrated created opportunities for non-adherence to supply chain protocols, which would result in adverse findings by the AG. This had been addressed and the new system would be implemented on 1April 2012.

Financial Performance for the 3^rd Quarter 2011/12
Dr Gulube tabled slides showing the financial performance in the 3^rd quarter of 2011/12 and noted that the estimates had to be adjusted, because the DoD found that its expenses were exceeding the allocations made by National Treasury. DoD had requested R576, 5 million, and received R344.1 million. It had requested R81.4 million for Operation COPPER, for border patrols, and R59.2 million had been requested for Operation CORONA, the maritime security project in the Indian Ocean. The shortfall was R232.4 million.

R600 million had been paid into the Warburg Dillon Read Planning Module account, which was used for the management of the Strategic Defence Packages (SDPs) and which was controlled by NT. This account would be completed and closed by the end of the current financial year.

In 31 December 2010, the Department had spent R21.5 billion out of the R30.5 billion allocation, or 70.8% of the allocation. By 31 December 2011, the Department had spent R24.5 billion of the R34.4 billion allocated, or 71.4% of the allocation. The underspending was attributed to the fact that a salary increase that was approved was not actually implemented during the third quarter, but would be implemented in the 1^st Quarter of 2012.

It was noted that the DoD aimed to collect revenue of R803 million, but succeeded in collecting R513.8 million.

The report also outlined the actions the DoD had undertaken in order to address the adverse findings of the AG. The findings were numbered according to the serial numbers that the AG allocated to them. In particular, she highlighted several interventions in the area of Asset Management, such as training for role players in compliance requirements, tightening of policies, the compilation of an accounting manual, as well as more efficient management of leases.

Discussion
The Chairperson said that the Law Research Commission’s report was circulated amongst the Members and Members of the Commission had been invited to the meeting so that they could explain the processes involved in repealing a law, but he wanted a preliminary indication from Members as to whether they were happy to accept and read the report themselves, or whether they wished to have a briefing.

Mr D Maynier (DA) indicated that he would be happy to go through the report without receiving a briefing.

Mr Maynier said that the Defence Review Update reports was supposed to have been completed by 31 December 2011, and enquired what the delay was.

Dr Gulube replied that there was a delay regarding the conclusion of the Update. The Committee had visited the troops in the DRC, Central African Republic and Chad. At the moment, the SANDF was primarily occupied in peace-keeping missions. The report was being worked upon, and should be finally completed in June, and should be ready to be presented in July 2012.

Mr Maynier quoted the section that noted that delays in the acquisition approval process hampered the achievements of project milestones. He asked what the names of the programmes were, what was being acquired, and what the problem was.  

Dr Gulube replied that the process of acquisition started from the SANDF providing its requirements for the operations, to the point of developing staff targets. One stage had to be approved before going to the next stage. A financial feasibility project study had to be done as well. The acquisition decision makers had to consider whether the requirement of operations would be best satisfied through off- the-shelf acquisition from another country, or by development of equipment within the country. It was a long process, and a task team had been established to see how the procedure could be fast-tracked.

Mr Maynier said that the Department conducted an investigation in the use of shadow planes by the Air Force and asked for details of the outcome of this investigation.

Mr Gulube said that he had received the financial information associated with the shadow planes, but as Secretary of Defence, he was not aware of any investigation into the matter.

Mr Maynier asked for a progress report on the investigation into the executive jets.

Dr Gulube replied that most that of these cases were still under investigation. The investigations had not been completed. The DoD would report on them as soon as the investigations were completed.

Mr Maynier said that the financial report did not mention irregular, fruitless or wasteful expenditure. However, he noted from the report that an amount of R840 million was divided into two amounts; of which R447 million had been accrued as a result of deviating from the proper billing procedures, whilst R220 million had accrued as a result of deviating from the proper payment procedures. He wanted to know from which divisions of DoD these amounts emanated, as well as the details of the contracts.

Mr Mziwonke Dlabantu, Chief Financial Officer, DoD, said that he did not have full details about this irregular, fruitless and wasteful expenditure. He noted, however, that the R447 million amount related to twenty separate incidents, not one, and in these the proper procurement processes had not been followed. The contracts were not opened up for tender. He said that the DoD needed to make use of its own database. These incidents also included payments related to AEG / AMG, which was a Denel entity. The old contract had not been aligned with the new regulations.

Mr Maynier said that he knew of an  incident of fruitless and wasteful expenditure in the amount of R4 000 113 for which an official had been suspended.  He asked which unit was involved, whether the Department could name the official, and whether the incident had been reported to the South African Police Service (SAPS).

Mr Gulube said that he did not have the name, but the Minister would in any event have to give permission before any names could be published, as this was for the Special Defence Account.

Mr J Maake (ANC) commented that nothing on this was included in the current report.

Mr Maynier said that this was part of his concern; a financial report should be reporting on fruitless and wasteful expenditure.

Mr Dlabantu said he had no immediate answers to this, but would supply written answers to the Committee Secretary.

Mr Maynier said that at a previous occasion, when the Department promised that the written responses would be supplied, this had taken six months.

Mr Maynier registered his strong objection to the answers, and asked the Department and the AG to provide specifics regarding the irregular, fruitless and wasteful expenditure. He was sure, based on the past experiences, that it would take the Department another six months to supply answers to these questions. He was not sure whether the delay lay with the DoD or with Parliament. He suspected, however, that it could lie with Parliament.

Presidential review on State Owned Entities
The Chairperson noted that the Committee Report on the Presidential review could not be adopted, because there was not a quorum.

The meeting was adjourned.