SECOND REPORT  OF THE COMMITTEE ON PUBLIC ACCOUNTS ON THE REPORT OF THE AUDITOR-GENERAL ON A PERFORMANCE AUDIT OF THE HANDLING OF CONFISCATED ABALONE AT THE DEPARTMNENT OF ENVIRONMENTAL AFFAIRS AND TOURISM, dated 16 February 2010

Background

On March 2008, the Auditor-General (A-G) engaged with the Accounting Officer of the Department of Environmental Affairs and Tourism (DEAT) to perform a performance audit of the handling of confiscated abalone. The audit was requested by the Standing Committee on Pubic Accounts (SCOPA). Various factors such as a lack of formal policy and or guidelines regulating the receiving, storage and disposal of confiscated abalone were identified.

The Auditor-General report demonstrated that measures were not in place to ensure the timely awarding of tenders for the processing of confiscated abalone; that uniform tariffs were not applied for the processing, marketing, selling and exporting of abalone; and that the non-rotation of the processing of abalone between the service providers resulted in the use of an additional monitoring team.

Report of the Committee

The Standing Committee on Public Accounts (SCOPA) heard and considered evidence from the Directors General and Heads of Departments of the following Departments & Entities:

• Department of Environmental Affairs and Tourism
• Department of Police
• Department of Justice
• National Prosecuting Authority of South Africa
• The South African Revenue Services (SARS)

Subsequent to the hearing, the Committee undertook a site visit to Paarden Island abalone storage on the 6 October 2009 to investigate the handling of confiscated abalone.

The Auditor- General raised specific concerns on the following and reported as follows:

1. Formal policy and guidelines regarding the handling of confiscated abalone

A formal policy and or guidelines relating to receiving, storage, processing and disposal of confiscated abalone did not exist. A draft policy was compiled during June 2007, but as at June 2008 it had not been approved or communicated to all role players involved in the handling of confiscated abalone: furthermore, the draft policy was not comprehensive and specific in addressing various aspects relating to handling of confiscated abalone.

With regard to the above, the Committee recommends as follows:

a) A specific and comprehensive policy for the handling, storage, processing and disposal of confiscated abalone should be speedily approved and implemented.

b) The Department of Environmental Affairs and Tourism should develop norms and standards relating to the handling of confiscated abalone.

2. Status of court cases relating to confiscated abalone

The Auditor -General raised specific concerns and reported as follows:

a) The Department of Environmental Affairs and Tourism did not monitor progress of court cases relating to abalone that had been confiscated. The Department of Environmental Affairs and Tourism therefore did not know which court cases had been finalised and whether the samples kept for court purposes could be released for processing.

b) The Department of Environmental Affairs and Tourism  records of samples of confiscated abalone kept for court purposes (as at 31 July 2007) were incomplete and details of police investigations were not maintained for some of the samples of confiscated abalone which failure could complicate the monitoring and follow up of court cases.

With regard to the above, the Committee recommends as follows:

a) The Department of Environmental Affairs and Tourism must put measures in place to ensure that the reported cases of confiscated abalone are timeously followed up and reported.

b) The Department of Environmental Affairs and Tourism  must improve the record keeping of samples retained for court purposes; this will enable follow up on the progress of court cases

c) For purposes of ensuring an improved conviction rate of cases relating to confiscated abalone, the Department of Environmental Affairs and Tourism must put measures in place that will ensure a structured co-ordination between Department of Environmental Affairs and Tourism and other government departments.

3. Awarding of tenders

The Auditor-General raised specific concerns and reported as follows:

• There was a delay in the awarding of the tenders for the processing of confiscated abalone (MLRF 050) and monitoring of the processing function (MLRF 049) as well as the signing of memorandum of agreement (MoAs) with the successful service providers after the previous processing contract ended on 30 November 2005, therefore confiscated abalone could not be processed and was stockpiled.

With regard to the above, the Committee recommends as follows:

• The Department of Environmental Affairs and Tourism must ensure that tender contracts are timeously renewed or awarded to prevent unnecessary delays in the processing of confiscated abalone and the resultant loss of potential income to the Department.

4. Tariff structures for the processing, marketing, selling and exporting of abalone

The Auditor-General raised a specific concern and reported as follows:

• The Marine and Coastal Management (MCM) awarded tenders for the processing, marketing, selling and exporting of abalone to three service providers at different tariffs. During the period October 2006 to August 2007, the total actual costs (as invoiced by the three service providers) for processing, marketing, selling and exporting of 173 794 kg of wet abalone amounted to R 7.1 million. If all the costs and invoices were based on the cost structure as per the MoA with the service provider who had the lowest tariff structure, the total would have been R 5.3 million.

With regard to the above, the Committee recommends as follows:

• The Department of Environmental Affairs and Tourism must develop a proper costing system that will address issues related to the standardisation of prices of service providers in accordance with the adopted costing methodology.

5. Payment to the Project Monitoring Team (PMT)

The Auditor- General raised specific concerns and reported as follows:

a) Invoices received from the PMT for services rendered during the 11-month period from October 2006 to August 2007 amounted to R 6.5 million (Inclusive of VAT and disbursements), which is R 23 426 more than the budget allocated for the 24-month period and R 1.2 million more than the approved ceiling price.

b) The MoA states that, the processing of abalone should have taken place on a rotational basis between the three service providers. No records existed that rotation occurred during the tenure of the existing service contracts up to August 2007. It is also estimated that the additional costs owing to the non-rotation of the processing of abalone between service providers during the corresponding period amounted to R 1.4 million.

c) In respect of seven of the eleven invoices (63 per cent) analysed for the period October 2006 to August 2007, the PMT made use of additional staff or staff were used for more hours than indicated in the tender document. The total cost paid by the Department of Environmental Affairs and Tourism  for additional PMT staff amounted to R 1.8 million for the period October 2006 to August 2007

With regard to the above, the Committee recommends as follows:

a) The MCM must take effective and appropriate steps to prevent irregular expenditure.

b) The MCM must in line with its procurement policy appoint one service provider, in order to ensure maximum economic benefits from its processing, marketing, selling and exporting of confiscated abalone.

6. Further Recommendation

The Committee further recommends that the Accounting Officer should submit a progress report on all the above recommendations to the National Assembly within 60 days after the adoption of this report by the House.