The Standing Committee on Public Accounts, having considered and examined the:
* Report of the Auditor-General on the Financial Statements of Vote 22 - Land Affairs and the Registration of Deeds Trading Account for the year ended 31 March 2001 [RP 180-01]
* Report of the Auditor-General on the Financial Statements of Vote 22 - Land Affairs and the Registration of Deeds Trading Account for the year ended 31 March 2000 [RP 131-2000]
* Report of the Auditor-General on the Financial Statements of Vote 23 - Land Affairs and the Registration of Deeds Trading Account for the year ended 31 March 1999 [RP 147-99]
* Report of the Auditor-General on the Financial Statements of Vote 22 - Land Affairs and the Registration of Deeds Trading Account for the year ended 31 March 1998 [RP 193-98],
and having heard and considered evidence, reports as follows:
Introduction
This recommendation is a consolidation of the Audited Reports for the four financial years from 1998 to 2001. Although they have consistently been qualified reports, the Committee wishes to recognise that the Department of Land Affairs (the Department) has done much to improve internal systems of control and to minimise risk areas. As an example, the Department has established an Internal Audit Department, a framework for effective internal controls systems, Internal Audit and Audit Committee Charters and an annual audit plan. All vacant positions in the Internal Audit component have been filled, and the Department is well placed to implement the Public Finance Management Act, Act 29 of 1999.
1. Loans for Industrial Development (par 2.2.1(a), p 171 [RP 180-01])
Accumulated loans totalling R281 million in respect of Industrial Development were made between 1972 and 1994 to certain local authorities in order to attract industrialists to specific areas identified for economic development. These loans were in line with the policies at the time and were referred to at the time as Industrial Growth Point Loans.
For a number of years, the records within the Department could not be reconciled with those of the relevant local authorities. The outstanding amount of R281 million in the financial statements could not be verified because of a lack of information, a shortage of resources and the accumulation of debt interest. No payments in respect of the above-mentioned loans were made during the 1999-2000 financial year. However, certain local authorities had repaid the loans in full, and the Committee recognises this goodwill.
The Accounting Officer indicated that the Department had engaged with the Development Bank of Southern Africa (DBSA) through the National Treasury in an attempt to transfer these loans to the DBSA. The DBSA refused because there are no written agreements to enforce the loans and the affected local authorities are in a poor financial state. The Department set up an interdepartmental investigating committee, and the Accounting Officer indicated to the Committee, during a meeting dated 12 June 2001, that they were going to approach the Cabinet to write off the loans. The Accounting Officer furthermore indicated that the loans should never have been transferred to the Department in the first place.
At the above meeting it was agreed that the provincial auditors in the Office of the Auditor-General would write to the concerned local authorities and then report to the Committee on the status and movement of the loans. During August 2001, the nine provincial auditors presented a full schedule of the outstanding loan balances. The Committee has noted that two municipalities, Akasia and Newcastle, had paid their loans in June 2001. They were not aware of the Cabinet decision to write off the loans. However, the vast majority of the loans were not being serviced, and some attempts have been made for loan alleviation on the basis that repayments would cause considerable financial burden. In many cases the local authorities face liquidity problems, as no provision was made to service debt. If councils were to make provision to repay these loans, they would have to increase the service tariffs as well as rates and taxes which would impact negatively on the affected communities.
The Accounting Officer informed the Committee that a recommendation was made on 2 August 2001, and approval given by the Cabinet on 8 August 2001, to write off the outstanding total of R277 821 916,51 in respect of these loans. This was done even though the Committee recommended, on 12 June 2001, that an investigation take place to pursue an avenue where some of the amounts could be recovered.
The Committee wishes to express its concern with the manner in which the Department dealt with the Loans for Industrial Development, and requests that all the municipalities be notified of the status of their loans. The Committee observes that Cabinet approval for what occurred would not rectify the matter. After a meeting with the Accounting Officer on 12 June 2001, the Committee felt that the matter be further investigated by both the Committee and the Department before proceeding with the request to the Cabinet to write off the loans. In particular, the Department should have investigated methods of recovering outstanding amounts.
The Committee notes that it is unfortunate that no remedial action was taken to try and recover some of these outstanding amounts as this may set a negative precedent in future. However, the Committee agrees with the Department and concurs with the Cabinet, and recommends that the loans be written off as an authorised and irrecoverable amount.
2. Subsidised Transport (par 2.2.1(b), p 171 [RP 180-01])
The Committee notes with concern that for three consecutive years (1999-2001) an outstanding balance of R1 841 322 could not be confirmed. The Committee understands that a task team was appointed to take corrective action, and that they would meet once a month for this purpose and ultimately resolve the matter by the end of April 2002.
The Committee recommends that the Accounting Officer report to the Committee within 30 days of receipt of this resolution on progress made in resolving this outstanding balance of R1 841 322.
3. Surrender of Surplus Funds: Registration of Deeds Trading Account (par 3.2, p 172 [RP 180-01])
The Committee notes that the surplus in the Registration of Deeds Trading Account of the previous year, amounting to R17 136 845, had not been surrendered to the National Revenue Fund. However, the Committee notes that this matter was resolved on 25 October 2001, and commends the Accounting Officer for this.
4. Unauthorised Expenditure (par 2.2.2(a), p 3 [RP 131-00])
During the 1998-1999 and 1999-2000 financial years, remuneration totalling R254 455 was paid to members of the Ingonyama Trust Board. The payments were made prior to the approval of the proposed rates by the Minister of Finance, on 22 July 1999. The matter was referred to the executive head of the Department of Finance, who indicated that the Minister of Finance could not give retrospective approval.
The Committee notes the explanation given by the Accounting Officer regarding this unauthorised expenditure, that the money was not misappropriated and that the Department received value for money. The Committee is concerned that the Department disregards procedures, rules and regulations even where value for money may have been attained. However, in view of the steps taken by the Accounting Officer to prevent further contravention or the recurrence of unauthorised expenditure, the Committee recommends that these payments be authorised.
5. Unauthorised Expenditure (par 2.2.2(a), p 3 [RP 147-99])
An amount totalling R1 852 035 was identified during the financial year as unauthorised in terms of section 33(1)(d) of the Exchequer Act, 1975 (Act No. 66 of 1975). It comprises the following:
(a) An amount of R618 779 was paid to the Independent Mediation Services of South Africa (IMSSA) for five months, from 1 April 1998 to 31 August 1998, without a written contract between the Department and the organisation. Their services were employed to conduct a mediation facility on behalf of the Department. The Department requested ex post facto approval from the State Tender Board.
(b) An amount of R1 203 369 was paid to four consultants who had been appointed on an ongoing basis, whereas the tender bid specified that the projects were not supposed to exceed six working months. The consultants were GIS Regis Consultants. On 18 August 1998, the State Tender Board wrote that the payment made to these consultants would be unauthorised.
(c) An amount of R29 887 was paid to SGM Development Planning Consultants to deliver a report on "recent experience in the land use management system" for the Development and Planning Commission. The appointment of the consultant was made before it had been approved. Documentation reveals that the service was completed as early as 17 February 1999, but the requisition was only made on 16 March 1999. The anomaly is the time lapse between the issuing of the requisition and the date of the invoice, which precedes the requisition.
With regard to paragraphs (a) (b) and (c) above, the Committee has noted that:
* The State suffered no loss
* The above activities were necessary for the activity and service that was required at the time
* Services were rendered and goods received
* Value for money was received.
In view of this, the Committee recommends that the amounts in question be authorised by Parliament. However, the Committee recommends that the Department indicate within 30 days of the adoption of this Report by the National Assembly whether ex post facto approval had been obtained with respect to the above, and if not, what the State Tender Board's reasons were for not granting such approval.