Audited Financial Statements of the Justice Department & Guardian Fund: hearings

STANDING COMMITTEE ON PUBLIC ACCOUNTS (SCOPA)
8 May 2007
HEARINGS ON AUDITED FINANCIAL STATEMENTS OF THE JUSTICE DEPARTMENT & GUARDIAN FUND

Chairperson: Mr T Godi (PAC)

Relevant Documents:
Department of Justice Annual Report 2005/06 [available at www.doj.gov.za]
Auditor General Report

Audio Recording of the Meeting

SUMMARY
Members of the Committee met with the Department of Justice in order to discuss the audited financial statements of the Department of Justice and the Guardian's fund. The Chairperson begun by asking the Department to provide clarity on whether the extraordinarily long investigations were the norm in the Department. Members felt that something needed to be done to deal with the issue of financial incompetence amongst governmental staff, and that the committee would not allow this type of situation to continue.  Other members felt that the Department needed to provide clarity on why certain offices had been excluded from the audit.

MINUTES
Discussion
The Chairperson begun by asking the Department to provide clarity on whether the extraordinarily long investigations were the norm in the Department

Adv M Simelane (Director-General: Department of Justice) replied that the Department relied on and used the suspensions as a way of persuading others to speak up against transgressions.

The Chairperson asked the Department to state whether the problem in the investigations was due to the lack of staff or the large amounts of transgressors, and also to what extent did the vacancy rate impact on the Department's ability to have officials freed from other responsibilities and extraditing the investigations.

Adv Simelane replied that the vacancy rate was high; however the vacancy rate did not affect departmental operations. As the Department strengthened the auditing processes, it discovered a great deal of transgression. It was also important to note that when the Department choses someone to perform investigations, it had to be someone with the right expertise that was able to deal with serious matters through its disciplinary process.  The Department currently had four members under suspension, who had been charged with serious matters, and the investigations were still pending.

The Chairperson stated that he was concerned by the length of the investigation periods, and said that they needed to be shortened. He then asked the Department to elaborate on what has been done to deal with the issue of the personnel files.

 Adv Simelane responded that the records in the Department's files were the responsibility of a unit called the Registry. The Department discovered that the unit was incorrectly placed, and had now been moved to the Director General's office. The Department felt that it if all units were placed in one area, it would be easier to access to information. A new system had been implemented, in which personnel files were checked on a regular basis, and taking people into account on the mismanagement of files. 

The Chairperson asked the Department to comment on what was being done to correct the performance information situation.

Adv Simelane responded that the Department had developed an indicator metric to ensure the alignment. The Department had also sent out the relevant requirements for performance information to all the units, and a memo would be issued to each of the units on what was required regarding performance information.

Ms S Gomm (Chief Financial Officer) responded that the performance indicator metric was based on a strategy that had been approved in August 2005.

Mr T Bonhomme (ANC) raised the issue of inventory management, and asked the Department to provide clarity on how one ensured that there were no stock shortages.

Adv Simalane stated that the Department had dedicated resources to training the necessary officials, and the situation occurred as a result of individuals not following the very necessary management processes.
 
Mr Bonhomme asked the Department to state whether the situation would once again occur
 
Adv Simalane responded that it the situation did occur, it would not be of the same magnitude.

Mr Bonhomme asked the Department to provide clarity regarding the issues around the software tangibles.

Ms Gomm replied that software was placed under current expenditure; however the auditor had a different opinion. The Department was awaiting feedback from treasury in order to determine the way forward.

Mr Bonhomme asked the Department to state whether something would be done after there was a report back. 

Ms Gomm replied that the Department was waiting on feedback from treasury and the auditor general. One also needed to bear in mind that the software was internally generated, and there was no external market for it.

The Chairperson stated that it seemed that the problem had not been fully resolved and that issues arising from inventory management were sorted out.

Mr V Smith (ANC) asked the Department to provide details surrounding the status of Mr McKenzie.

Adv Simalane replied that Mr McKenzie’s had been contracted to assist with the Moneys in Trust.

Mr Smith asked the Department to provide clarity on the status regarding the vacancy levels around financial management, as it was no longer acceptable that government did not have financial management personnel.

Adv Simalane replied that there was still a 30% vacancy rate, and no significant movement in the filling of posts. The Department has begun a work-study programme, which would provide clear indications on the type of financial processes that were in place.

The Chairperson asked the Department to elaborate on when a work-study dealing with the competency of those in employment and the high vacancy rate would be available.

Adv Simalane stated that the work-study should be resolved by the end of July

Mr Smith asked the Department to provide clarity on what the status was in terms the Department’s ability to manage Moneys in Trust.

Mr A McKenzie (Project Manager: Moneys in Trust) stated that in terms of the Money’s in Trust, there used to be a situation where there was individual incompetence, which had been resolved. The Department was currently in a situation where there was organizational incompetence, in that there was still is no system capable of achieving a sound system of financial management.

Mr Smith stated that something needed to be done to deal with the matter, and the Committee would not allow that type of situation to continue.

Mr Trent stated that Guardian Fund has massive amounts of money, yet performs dismally. It would be rather silly to raise various issues, as the same answers would be provided.

Mr T Nombembe (Auditor General) stated that he was conscious of the fact that the issue dealt with massive volumes, and a cashbook situation. There should be a basic system where cash received was actually captured; there was no need for a complicated system. The problem in the Department was one of internal control issues rather than the systemic issues.

The Chairperson stated that it was time to put issues of Moneys in Trust and the Guardian Fund aside, as there was no point in pursuing them. Also there were certain issues that had been discovered to go way beyond issues raised by Mr Smith, and the issues need to be followed up upon. 

Mr Trent stated that the Guardian Fund had been set up to protect the most venerable people in society and therefore something needed to be done to improve the situation.

Adv Simelane replied when dealing with the Moneys in Trust issue, one discovered that there were flaws in the accounting and the management of funds. What the members and Auditor General had alluded to, were matters that the Department had already perused, and whatever measures and steps were taken, there would still be opportunities that would make fraud easy.

The Department was making progress with the Guardian Fund, and was ensuring that correct systems were in place. There should be a different debate on the Guardian Fund, which was about development, and therefore should be administered by the Department of Social Development. A big challenge still remained in the handling of maintenance money. Receiving money should not be the business of the court, the courts business should be to ensure that that the necessary action was taken if the payment is not made. Raising such matters enabled the Department to elevate the systems that were in place. 

The Chairperson stated that the issues surrounding the Guardians Fund and Moneys in Trust was another debate, however a receipt should be given whenever someone paid money to a court official.

Adv Simelane replied that court officials received money with no information on the sender; this made it difficult for officials to issue receipts. 

Mr Trent asked the Department to provide clarity on why the Grahamstown and Cape Town offices were excluded form the audit.

Ms Gomm replied that the Department had asked the auditors to reduce the scope of the auditing, as the same findings that the auditor found in one office would be done in all the offices. The decision on which officers would be audited and the ones that wouldn’t was one that the auditors took. It was important to note that the Department provided the auditors with all the information from the offices that were not audited.
 
Mr Smith requested that SCOPA meet with the Justice Portfolio Committee, together with treasury in the near future, in order to sort out the matter. He then asked the Department to provide details on the progress regarding the forensic audit.

Ms Gomm replied that it was the Department that requested a forensic investigation, as it suspected irregularities in the contracts. The findings confirmed that there were indeed irregularities in the supply chain management systems; however the report had not formally been tabled.

Mr Smith asked the Auditor General to State when the report would be tabled
 
Mr Nombembe replied that the report was in its final stages, and would be available soon.

Mr Trent asked the Department to provide clarity on the criminal assets recovery accounts

Ms Gomm replied that the criminal assets recovery accounts were published separately and audited for 05\06, and had been tabled. It is a qualified report, as a result of the disclosure of assets under the curator's control.

The Chairpersons asked if the matter had been raised with the auditor general and national treasury

Ms Gomm replied there had been discussions and the Department was awaiting guidance from the national treasury

The Chairperson asked national treasury to provide clarity on the matter.

Mr Msulwa Daca (Chief Director: Accounting Services, National Treasury) that the issue is under the hospices of the National Prosecuting Authority. Treasury is busy trying to thrash out various opinions with the prosecuting authority in order to achieve finality on the matter.

Mr Trent asked whether the issues around the asset register had been resolved.

Ms Gomm replied that the question should be tabled to the National Prosecuting Authority.
 
The Chairperson said that there were lots of problems, and that some of the issues raised by the
Director General were policy issues, the matters raised regarding the vacancy rate were generic problems, whereas the issues raised the role of government were issued that needed a different approach. The Committee could only hope matters were speedily resolved.

The meeting was adjourned.