The Standing Committee on Public Accounts, having heard evidence in August last year from the new Commissioner of Correctional Services and the former acting Commissioner, now the chief financial officer, on the Report of the Auditor-General for the 1999-2000 financial year [RP117-00], and also having considered information received subsequent to the hearing, dated 25 October 2001, as well as written responses from the Commissioner to questions from the Committee arising from its review of the Auditor-General's Report on the financial statements for the 2000-2001 financial year [RP 148-01], dated 25 January 2002, and further responses dated 9 May 2002, reports as follows:
A. Recruitment and training
The Committee is concerned about the following factors related to human resources that are negatively impacting on the capacity of the Department to deliver correctional services to the prison population of South Africa:
1. A lack of capacity to train the annual intakes of the Department.
2. Poor planning and administration associated with the utilisation of training facilities.
3. Poor planning in terms of training curricula and equipment.
4. Inadequate screening by the Department of new recruits, resulting in the subsequent discovery of recruits with fraudulent qualifications or criminal records.
The Committee has noted the attempts to more effectively manage recruitment and screening processes, as well as to better plan the academic calendar and improve the training curricula. The Committee expects to see substantial progress reported in this regard in the annual reports in respect of the 2001-02 financial year. The Committee recommends that the Portfolio Committee on Correctional Services also note the matters raised and evaluate whether progress is made with respect to each of the areas of concern. It is also recommended that the Department demonstrate to the Committee and the Portfolio Committee on Correctional Services the manner in which it effectively measures the total cost of training and how it determines the value gained from such an investment in training.
B. Jackson State University Scholarship Programme
The Committee welcomes the termination of this Programme (with unjustifiably high costs to the taxpayer). The Committee recommends that the Department in future not only ensure that South African tertiary institutions are used for similar types of training, but also that participants in such programmes are contractually bound to the Department for at least as long as they have been assisted to study.
C. Computer audit
The Committee noted with concern the weaknesses with regard to the general controls within the Admission and Release System, the Pharmaceutical System at the Department's head office and the Pretoria management area, and the application controls within the Provisioning Administration System. It is especially concerned at the lack of a separation of duties and the associated risk of fraud. The undertaking by the Department that the matter was receiving urgent attention, was therefore welcomed. The Committee recommends that the Auditor-General evaluate the progress made during the 2001-02 audit.
D. Internal control environment and risk management
1. The Committee noted that once again the Auditor-General reported a variety of symptoms of poor internal control, the following being examples:
(a) Insufficient debtor management and debt recovery.
(b) Poor checking of source documents at head office and poor batch control at various provincial offices.
(c) Inadequate certification of payrolls.
(d) Poor control of UIF payments and recording of contributions.
(e) Incomplete reconciliations between the computerised financial management and personnel and salary systems.
(f) The Committee was informed of the Department's intention to address each of the findings of the external auditors, as well as the internal auditors, at the highest management level.
The Committee was further informed of disciplinary action taken against a number of officials who had not complied with control procedures. The Department also undertook that in future steps would be taken in every case of failure to comply with requirements of the Public Finance Management Act (the PFMA). In this regard, the Committee wishes to remind the Commissioner of his obligations in terms of section 81 of the PFMA, as well as the responsibilities of other officials in terms of section 45 of that Act.
The Committee recommends that -
(i) the Commissioner report to the National Assembly on the success of Operation Vukuza in each of the respective provinces, and on how any deficiencies identified had been addressed.
(ii) the Commissioner indicate progress made with the capacitation of the internal audit unit, as well as any arrangements made for outsourcing.
(iii) the Commissioner include the Audit Committee report to the House on the responsiveness by the Department's management to internal findings as well as the Audit Committee's recommendations regarding stricter monitoring mechanisms and the application of disciplinary procedures.
The Committee further recommends that in his report for 2001-02 the Auditor-General specifically report on:
(iv) whether reliance could be placed on the work of the Department's internal auditors, and if not, indicate the main reasons for the non-reliance; and
(v) the responsiveness by the Department's management to the findings in his latest report.
2. The Committee was provided with information on the latest risk assessment exercise carried out by the Department. A list of the main areas of risk identified, was provided, as well as the measures, which at face value seemed to address each of the risk areas. In view of the various financial management problems reported by the Auditor-General, the Committee is deeply concerned that proper management of the financial resources of the Department was not identified as one of the priority risk areas.
The Committee recommends that the Commissioner -
(a) prioritise risk management and ensure that progress made in respect to each of the areas in terms of planned deadlines is monitored at least on a bimonthly basis, and that effective corrective measures are taken where required
(b) provide impetus to certain of the risk management plans, e.g. drafting of the proposal on the development of human resources strategies, and the development of the inmate tracking system, so that finalisation of the actions be achieved sooner rather than later
(c) regard financial management as one of the priority risk areas
(d) provide each of 10 main risk areas a target date for finalisation of the corrective action.
E. Vehicle management
The Committee is concerned at the management weaknesses with respect to government transport. It noted that the logistics directorate would be conducting a detailed analysis and inspection at 50 management areas during the coming year in order to deal with weaknesses more proactively.
The Committee recommends that the Commissioner report on the results of the inspections and any corrective actions taken, the extent and outcomes of any disciplinary actions instituted against any staff members, and the completeness currently of the register of unauthorised drivers.
F. Stock and equipment
The Committee has taken note of the barcoding system which had been implemented at national Head Office and of the fact that it will be rolled out to all the provinces.
The Committee recommends that -
1. the Commissioner indicate the status of implementation of the barcoding system in each of the respective provinces
2. the effectiveness of the barcoding system throughout the Department be evaluated and reported on by the Auditor-General in the 2001-02 audit report.
G. Merit awards and members' qualifications
The Committee noted the evidence in the Commissioner's correspondence of 25 January 2002 that no merit awards were paid without proper approval per a departmental merit list as source document.
The Committee recommends that the Commissioner provide the House with -
1. a proper report on all cases investigated by the departmental task team appointed to investigate all cases of possible irregular merit awards in respect of the 1999-00 financial year
2. the results of the work carried out by the special task teams established in the various provinces to investigate possible fraudulent qualifications
3. the results of the recovery actions as a result of incorrect payment of merit awards planned for finalisation by 28 August 2002
4. information as to whether the qualifications of all staff members have been verified.
H. Personnel Salary Administration System
The Committee was informed that the Department had implemented a new Persal function which will meet all the Department's needs, including reliable information on staff members on suspension.
The Committee recommends that the Auditor-General review and report on the effectiveness of the enhanced Persal system during the 2001-02 audit.
I. Medical Fringe Benefits
1. The Committee was informed that the Department may be liable for an amount of approximately R48,5 million to the SA Revenue Services in respect of outstanding PAYE. The Committee further noted that in January 2002 the matter had not been resolved, despite it having been raised in August 2000 already.
(a) The Committee therefore recommends that both the SARS and the Department ensure that the matter be immediately resolved and the outcome be reported to the House within two months of the date of adoption of this Report by the National Assembly.
(b) The Committee further recommends that the SARS, in consultation with the National Treasury, consider issuing appropriate guidelines to all public sector departments at national and provincial level regarding PAYE obligations in respect of all benefits or perks received from the employer with respect to, for example, free medical aid, free or subsidised housing, or other allowances to ensure compliance with the income tax legislation in all cases.
1. Medical Services (MEDCOR)
The Committee noted that finality has not been reached with respect to the new administrator of the departmental medical scheme.
The Committee recommends that the matter be finalised as a matter of urgency and progress be reported on to the House within two months of the adoption of this Report by the National Assembly.
I. Unauthorised expenditure
1. Par 2.2.1(a), [RP 117-00] (1999-00 financial year)
The Auditor-General reported that expenditure totalling R534 486,93 incurred during various financial years was regarded as unauthorised in terms of section 33 of the Exchequer Act, 1975 (Act No. 66 of 1975), and comprised the following:
(a) Development and provision of computer-based assessment instrument, R107 713,08
The Department engaged a consultant from a university through a tender to lead a research and development project. Due to a lack of appropriate co-ordination and a misunderstanding over the tasks and responsibilities of various partner directorates in the Department, additional professional expertise was utilised. The authorised tender amount was consequently overspent by more than 100% without prior approval form the State Tender Board. The State Tender Board was approached for ex post facto approval on 26 July 1999, but approval was not granted and the said amount is regarded as unauthorised.
The Committee was informed that no action was taken against the staff responsible, on the grounds that they were no longer in the service of the Department.
The Committee recommends that the Parliamentary Law Advisers be requested to advise on the feasibility of the accounting officer attempting to recover any possible loss to the State, in order for the Committee to consider validation of the unauthorised expenditure.
(b) Maintenance contract, R243 577,94 (R1,367,22 in 1999-00)
During the previous financial year payments amounting to R1 367 225 relating to a maintenance contract were made after the contract had expired and without the approval of the State Tender board. During the year under review additional unauthorised expenditure of R243 577,94 was incurred in this regard. As in the previous year, the State Tender Board was approached for ex post facto approval, but approval was not granted and the said amount was regarded as unauthorised by the Auditor-General.
The Committee was informed that after a departmental enquiry, disciplinary action was taken against two of the three officials responsible. The Committee was also informed that an enhanced contract management policy has been implemented under the direction of the Good Governance Chief Directorate, but that full implementation could not be confirmed.
In view of the aforementioned action taken, the Committee recommends that -
* the Auditor-General evaluate the effectiveness of the contract management policy
* the Portfolio Committee on Correctional Services be requested to monitor the implementation of the procurement and provisioning system of the Department, in the light of the requirements of section 38(1)(iii) of the PFMA
* the unauthorised expenditure in respect of both financial years is approved by the National Assembly.
(c) Appointment of board of inquiry: Pollsmoor management area, R183 195,91
The Minister of Correctional Services ruled that a board of inquiry had to be appointed to investigate the violence at the Pollsmoor management area in 1997. The total cost of the investigation exceeded the authorised amount in terms of the prescribed State Tender Board regulations. The State Tender Board did not grant ex post facto approval, and the amount of R183 195,91 was therefore regarded as unauthorised.
The Committee was informed that no action was taken against the staff member responsible on the grounds that he or she was no longer in the service of the Department.
The Committee recommends that the Parliamentary Law Advisers be requested to advise on the feasibility of the accounting officer attempting to recover any possible loss to the State, in order for the Committee to consider validation of the unauthorised expenditure.
2. Par 3.6, p 130 [RP148-01] (2000-01) (see 25/1/02, p 17 & 18
In his Report on the 2000-01 financial year the Auditor-General reported expenditure totaling R773 873,11 incurred during various financial years as unauthorised in terms of section 33 of the repealed Exchequer Act, 1975 (Act No. 66 of 1975), comprising the following:
(a) Strategic planning sessions, R723 873,11
The Auditor-General performed a forensic audit regarding expenditure relating to certain strategic planning sessions, and a final report was submitted to the Department on 14 February 2001. According to the forensic report, there were severe restrictions on the investigation, as many documents including timesheets and invoices were not available. According to the report unauthorised expenditure incurred with regard to strategic planning services and travelling expenditure relating thereto for the period 1 June 1992 to 31 may 1995, amounted to R508 666,19 and R215 206,92, respectively.
The Committee was informed that no action was taken against the staff member responsible on the grounds that he or she was no longer in the service of the Department.
The Committee recommends that the Parliamentary Law Advisers be requested to advise on the feasibility of the accounting officer attempting to recover any possible loss to the State.
(b) Psychological counselling of members: Pietermaritzburg management area, R50 000
During a visit to the Pietermaritzburg prison the former Minister of Correctional Services ordered that the prison be closed down and its members and prisoners transferred. Members at the prison vowed to oppose an order to close down the prison. Relationships were tense and mass action was threatening. Since actions by the Department to defuse the situation did not yield positive results, the provincial commissioner in KwaZulu-Natal made an application to head office to obtain the services of two external psychologists to attend to the problem. Due to a dire need for assistance to defuse the tense situation, the correct procedure for urgent cases was not followed.
The State Tender Board was approached for ex post facto approval on 17 and 30 March 2000, but approval was not granted and the said amount is regarded as unauthorised.
The Committee was informed that disciplinary action had been taken against the official responsible, and that provisioning administration officers are now trained regarding procedures in cases of urgency.
In view of the above actions taken, the Committee recommends that the unauthorised expenditure in question be authorised by Parliament, but that the accounting officer ensure that in future unauthorised and irregular expenditure are correctly disclosed in the financial statements.
3. The Committee further recommends that the Commissioner ensure that in future -
(a) upon the resignation or retirement of staff members from the Department, any related potential or pending enquiries or disciplinary actions are appropriately resolved
(b) all unauthorised, irregular or fruitless and wasteful expenditure be properly recorded in the accounts of the Departments and accurately disclosed in the financial statements to the National Assembly.
4. Unauthorised expenditure of R29 253 730 (1998-99)
Having considered further information submitted to it by the former acting Commissioner during 2001, the Committee recommends as follows:
(a) With regard to the unauthorised medical expenditure totalling R27 429 482 relating to a contract for medical aid administration without the appropriate tender procedures having been followed, the Committee has been informed that a proper service was rendered to the Department and that no one had unduly benefitted. The Committee therefore recommends that the amount be authorised by the National Assembly.
(b) This Committee cannot condone the payment of awards of R109 293 to the former Commissioner in the circumstances in which it had taken place. The Committee has further been informed that an amount of R60 111 was recovered from the former Commissioner. The Committee recommends that the Accounting Officer initiate the necessary steps to recover any part of the amount in question that may still be outstanding from the relevant beneficiary. The Committee further recommends that the matter be resolved as far as possible within the next six months and that the outcome be reported to the National Assembly.
(c) Unauthorised expenditure totalling R347 730 was incurred, which related to repairs and maintenance as well as capital improvements amounting to R147 591 and R200 139 for the 1996-97 and 1997-98 financial years, respectively, before proper transfer of the property to the State. As a service was rendered to the Department and no one had unduly benefitted, the Committee recommends that the amount be authorised by the National Assembly.
K. Computer audit
The Committee was informed of a number of control deficiencies with regard to the Department's provisioning administration system, as well as corrective measures taken by the Department in response to the weaknesses identified by the Auditor-General.
The Committee recommends that the Auditor-General review the effectiveness of the corrective measures during the next computer audit planned for the Department of Correctional Services.
L. Housing guarantees
The Committee heard evidence that the Department was pursuing legal action where possible to recover debt to the State with respect to housing guarantees.
The Committee strongly encourages the Commissioner to continue with legal actions and to explore every possible avenue aimed at limiting the loss to the State before considering writing off any of these debts.