Department of Military Veterans (DMV) audit action plan; with Deputy Minister

Meeting report

Department of Military Veterans (DMV) Audit Action Plan
Deputy Minister Thabang Makwetla recalled in a previous meeting there were concerns about the performance of the Department of Military Veterans in a number of areas. As such, to improve performance, the Department was instructed to improve their audit action plan and report back on a quarterly basis. The Director General will present and thereafter the meeting can be opened for questions.

Director General, Ms Irene Mpolweni, introduced Acting Chief Financial Officer, Ms Gcasamba, who presented the Audit Action Plan.

Before doing so, the Chairperson asked if the presentation had been presented to the Audit Committee and the Auditor-General and the Director General confirmed this saying that they are working with the Auditor-General and it is a work in progress.

Following Mr S Marais (DA) raising concern about the Audit Committee's absence in the meeting, Chairperson Xaba proposed that the meeting be restructured such that the meeting presentation focuses on preventative measures and cases of fraud and corruption, because the audit plan must adequately address those to prevent repetitive audit findings. He asked the Committee how they felt about the suggestion and they all agreed that those specific areas be focused on.

Ms Zintle Gcasamba, DMV Acting Chief Financial Officer, said that she will zoom into the action plan description (Column E), as this is where she can to delve into the preventative measures. She also pointed to the root causes that appear in red in the spreadsheet because once one identifies the root cause, one will be able to account for the deficiency that occurred. In that way, DMV will be able to improve their audit.

In her presentation, she reported on each audit finding and the Auditor-General-agreed action plan and she provided a status update on progress as of 31 December 2021.

Findings on Finances
- Logistical Information System (LOGIS) user access management procedure was not formally documented.
At 31 December that procedure was not approved.
- LOGIS user modification process was not adequately implemented.
Addressing the first finding would result in DMV addressing the second finding.
- Segregation of duties on LOGIS not adequately implemented.
Resolved. Ms Gcasamba said that it is important that while it was resolved, it is important to resolve issues immediately. The delegations should be corrected by the CFO and she has resolved this to make it align with LOGIS requirements.
- Supply Chain Management (SCM) policy not updated with latest legislation and Treasury instructions.
The finding was addressed and DMV has an approved SCM policy.
- Difference between Irregular Expenditure schedule, Fruitless and Wasteful Expenditure schedule and the Annual Financial Statements.
Finding addressed. Going forward DMV will ensure there are adequate reviews of the financial statements before presented to Auditor-General South Africa (AGSA). As part of their preventative controls, their finance team attended a meeting with the National Treasury in preparation for the compilation of the annual financial statements. To this end, DMV does have preventative measures in place.
- Fixed Assets under investigation.
Investigations are in progress. The team went out last week to ensure that they reconcile DMV books to identify those items that require investigation so that they can be presented in front of the accounting officer.
- Determination test for fruitless and wasteful expenditure not performed.
This was dealt with during the audit. The preventative control was that DMV would conduct the test in line with the prescribed timelines as per the National Treasury requirements.
- High Level inconsistencies identified in the Financial Statements.
This will be prevented in future by ensuring that there are adequate reviews. The inconsistencies that arose were a result of the inadequate reviews.
- Suppliers not paid within 30 days
Ms Gcasamba discovered that there are challenges and gaps with the management of invoices. Initially, DMV was accepting invoices before the required steps were taken. She has now enforced that before invoices are dated and acknowledged, they have to be validated and verified. These invoices need to be approved through due process to avoid irregular and fruitless expenditure. She observed that this process has worked because as of January 2022, DMV had paid 100% of the invoices with 0% non-compliance. However, when it comes to benefits, 97% invoices were paid on time. This is something that they are looking to improve as mandated by the Public Finance Management Act (PFMA) and Treasury regulations
- High level inconsistencies identified in the Financial Statements.
She acknowledged that there were inconsistencies with financial statements. DMV is committing that this does not take place going forward.
- Payables not recognised
A preventative measure going forward would be intense validation of information. DMV is investing time in ensuring that all registered financials are reviewed before they are submitted for an audit.
- Recording of Key Management Emoluments
This was amended immediately after it was identified and it will be avoided in the future.
- Supply chain management: Non compliance with National Treasury Instruction no.11
DMV has created a database for all COVID-19 procurement. At the time of compiling the report, she cannot confirm that the objective has been achieved. It is therefore in progress.
- Control weakness in the review process of Overtime
Controls were implemented to ensure that this system was strengthened. There is now a fixed limit so that they do not go over the limit prescribed by the Service Department. She hesitates to confirm its efficiency. However, from interviews, she confirmed that it has been achieved but she just needs to validate it.
- Recurring fruitless and wasteful expenditure not prevented
This has since been prevented because of the reviewed and approved SCM policy. The control check was strengthened through the SCM policy for ‘no-shows’ where Military Veterans officials miss their flights.
- Submissions to B-BBEE Commission not performed
DMV is still working on it and it has not been an easy task to complete. It is still in progress.
- Subsequent event not disclosed in the AFS
This was corrected immediately after it was found by the audit. Going forward, DMV will disclose all subsequent events that occurred after the financial year.
- Incorrect disclosures included under irregular expenditure note
This was also corrected immediately after it was identified. DMV undertook to prevent this going forward.
- Suppliers in which close family members of role players have and interest
This was still in progress because of limitations in accessing information between suppliers and officials in systems that the Auditor General team has. It led to a small amount of about R20 000. However, that it is not something that is encouraged by DMV. What DMV does is require officials to disclose financial interests through Human Resources.
- Incorrect supplier awarded with bid
This is currently under investigation and cannot be reported as achieved until the investigation is concluded.
- Internal control deficiencies identified in the quotations register
This was corrected immediately after it was identified that there was a problem. Going forward DMV will verify that information before it is submitted for audit.
- Accruals overstated
This was corrected shortly after it was identified. In future, it will be avoided through review processes.
- Asset verification and reconciliation not performed
DMV is still working on this on the basis that preventative controls would take place in the form of Set Management Policy requiring DMV to perform reconciliation once in a financial year.
- Control weakness in the review process of Periodic Payments
This was corrected immediately it was identified and it will be prevented going forward.
- Fruitless and Wasteful Expenditure register misstatements
The mistakes were corrected immediately. Going forward it will be prevented through intense review.
- Irregular expenditure note - Items not condoned but removed understated
This was corrected immediately and it will be prevented going forward.
- Overstatement of irregular expenditure under assessment for Audit Committee remuneration
This was said to have occurred as a result of no policy. It was unclear what was meant by employees doing business with the State. As such, DMV has followed the Department of Public Service and Administration (DPSA) Circular and the Policy Unit has developed a policy to prevent this going forward.
- Understatement of accruals
This will be prevented through intense reviews.
- Payables not recognised
The same preventative controls employed above will be used to prevent this.
- Understatement of rental accruals
This was corrected.
- Overstatement of Lease Commitments
This has been corrected.
- Items not evaluated for local content
This is in progress as there is still a leg that is missing for validation.
-Understatement of Performance Bonus estimate
This was addressed immediately and will be avoided in future.
- Misstatements identified in the asset register
There is an improved policy which DMV needs to implement and ensure adequate reviews take place.

Ms Gcasamba said that DMV is making use of Morar Incorporated to assist with the financial statements. DMV has been making use of the company for the past two financial years. Hence, the focus is more on training the internal team so they can take over the responsibility of compiling financials. With the strengthened capacity, Ms Gcasamba hopes mistakes will be mitigated going forward.

Findings on Corporate Services
- Policies have not been approved.
DMV is making progress on this. As part of preventative controls, the Audit Committee has a standing agenda item that requires DMV to present its policy register to monitor the status and timeliness of the policy review. This is ongoing.
- Organisational Structure not aligned with the Strategic Plan.
This is something that Administration is not entirely in control of, given that the Act is under review which might come with its own human capacity requirements. As such, it would be wise to finalise this once the Bill has been concluded. It is an area that is in progress.
- Business agreement and Service Level Agreement was not reviewed
This was related to the ICT. According to the progress provided, this item was signed off. Going forward, DMV undertakes not to wait until policies are expired before they are reviewed.
- No formal process to measure ICT return on investment and benefit realisation
This was addressed according to the Government Information Technology Officer (GITO) as per the standing operating procedure. This was finalised. The same preventative controls will be applied here.
- Software licenses not adequately managed
This was still in progress. The unit has submitted to Financing for the procurement of the licences.
- Anti-virus software updates not adequately deployed
This was addressed and in the future it will be avoided.
- Patch management process was not adequately implemented
The action agreed on by the Auditor-General is that managers responsible will be engaged to ensure that work stations incompatible with the anti-virus are replaced. These were replaced and it will be monitored.
- Inactivity timeout setting on Active Directory not configured
This was corrected. The activated timeline is 15 minutes. It just needs to be set up and implemented on the system. It is also to be monitored by management.
- Lack of ICT awareness training
The training was held. There is a need for more consistency; however, the preventative controls are in place.
- Logon violations on the Active Directory were not monitored
This is still in progress. There is a temporary measure in place that is not ideal. However, it is being worked on. Preventative measures are being put in place to ensure it does not happen again.

- The firewall management processes were not adequately designed and monitored.
This is still in progress. DMV is still working on a firewall solution that will be managed through State Information Technology Agency (SITA).
- Disaster Recovery Plan not adequately designed
This is being resolved by incorporating it as an annexure with SITA to ensure that the Business Continuity Plan (BCP) is developed and it will inform the Disaster Recovery Plan.
- Personnel and Salary system (PERSAL) policy and procedure documents were in draft
This is in progress. DMV is working on it and the policy will be approved by the end of the financial year.
- User access rights on Personnel and Salary system were not reviewed
The ICT unit was not in agreement with the Auditor-General. As such, it is still in progress.
- Activities of the system controller on Personnel and Salary system were not monitored
The Salary system controller was since appointed and the issue identified was on Personnel.
- Password reset controls on Active Directory were not adequately implemented
It has been addressed. There was a disagreement on leave entitlement which was corrected immediately and will be avoided going forward.

Findings on Inter-Audit and Risk Management (IA&RM)
- Non-performance of the five year external assessments
The preventative control would be to perform the five year external quality assurance. The Audit Committee has resolved that DMV would follow what is called self-assessment with independent validation. The first step has been followed by DMV in approaching National Treasury. DMV would self-assist and invite an independent validator - usually the Institute of Internal Auditors - to give an opinion if the work of the auditors partially or generally complies or does not comply. This is still in progress.
- Capacity within the internal audit.
SCM is busy with procurement of a company which was an Audit Committee recommendation four years ago. AGSA was not satisfied with the capacity. This is intended to be completed by the end of February.

Findings on Socio-Economic Services (SES)
- Limitation misstatement: Healthcare
Military veterans received counselling and treatment throughout the year but this was not submitted by the registrar for the Auditor General. Preventing this is going to be a challenge because filing is an issue. There is a manual system in place and she cannot say that this finding is addressed. It is addressed according to the interviews with the responsible units. However, due to the manual system, there is always room for error. Progress on addressing this finding is thus on 80%, to err on the side of caution.
- Limitation misstatement: Education
The challenge here has to do with files that were missing education support checklists or missing adjudication. Files were kept but information was not necessarily filed accordingly. This was addressed in the audit. This is in progress for now. As a preventative measure file work should be conducted online through an online database system. However, files should be scanned so that there is no room for error.
- Critical positions were vacant for more than 12 months
At the time of the audit the Director General’s position was vacant. However, now it is filled. There are positions that are still vacant, however processes are in place to address this.
- Backups were not performed on the Military Veterans Beneficiaries Database
DMV is not doing well. However, the ICT development continuity plan was developed and it is currently in draft. After approval it will serve as a preventative control to prevent this finding from reoccurring.
- Number of Military Veterans provided with newly built houses per year
Ms Gcasamba said that quality assurance and validation should be enhanced. This stems from the manual system in place. The preventative control is to have everything scanned onto an online system.
- Policies have not been approved.
It was confirmed that the housing work stream to ensure that inputs from all work stakeholders are taken into consideration before the policy approves this issue. This item is still in progress and the preventative measure would be to ensure that the policy is finalised and it is implemented and monitored.

Findings on Empowerment and Stakeholder Management (ESM)
- Non-compliance
DMV is attending to this. The preventative measure was left open for the accounting officer to advise on the best way forward.

Lastly, Ms Gcasamba commented that consequence management is being worked on so as to prevent irregular expenditure. At the time of reporting, which was 31 December 2021, DMV had not received the concluded reports from Nexus Forensic Investigators. On the Deeds Office, she would like to leave that for the accounting officer to advise on.

Discussion
Mr M Basopu (ANC) appreciated the presentation and acknowledged that DMV is almost there in meeting the standards of the Office of the Auditor-General.

In the report, there is mention of suppliers linked to family members of Department officials and a report on fruitless and wasteful misconduct. His understanding is that this is can be abolished; however, in the presentation there was no mention of consequences. He expressed his concern at this.

He asked if DMV has an approved organogram. If not, how does it operate without one?

If this presentation is still to be reviewed by the Audit Committee, and that has not taken place yet, the presentation should be considered a draft for the time being.

Mr M Shelembe (DA) asked if the Chief Financial Officer has been suspended and how long the suspension will take. The CFO position is very important in DMV. If there is someone acting as CFO at the moment, he would like clarity on the capacity of that person.

He noted Ms Gcasamba's point that action cannot be taken because the Military Veterans Act is still under review. His understanding is that the Act is in force until such time as the review is over.

Mr Shelembe asked for clear timeframes on filling of appointments for the Committee to follow up on this.

Mr Shelembe made the point that in any organisation, the budget is implemented by an organogram. He is concerned that the organogram is not in line with the skills required. Therefore he asked if the organisation is fully functional.

Mr Marais asked for a response on the point raised earlier about consequence management. He brought up a recent article on the pending lawsuits of the Department of Defence and asked if these cases are applicable to the 2020/21 financial year.

He asked how much unspent money was forfeited to National Treasury for 2020/21.

Ms A Beukes (ANC) commending DMV on the progress made. She requested that the audit progress be submitted to Parliament. She asked how implementation of a new online system can be sped up. All the DMV processes are manual and she cannot understand why it is so in this technological age and the fourth industrial revolution.

She asked if there were consequences lodged against DMV officials who were ‘no-shows’ as this is fruitless and wasteful expenditure.

DMV response
Deputy Minister Makwetla commented about capacity – why does DMV go the route of appointing service providers when it can instead strengthen its internal systems by beefing up capacity. He also made the point that DMV must report on the internal audit plans based on the recommendations in the management letter from the Auditor General.

Director General Mpolweni replied that the audit opinion that DMV received was an unqualified opinion. She explained that the management letter from the Auditor General is what is being reported on through the presentation.

On the concern about consequence management, there was consequence management instituted on the R119 million raised earlier by the Office of the Public Service Commission. There were matters set aside and their cases are currently in progress. Some officials affected by the audit findings have received letters on what was laid out in the Auditor General management letter for their consideration and the disciplinary process they must follow.

For those officials who were a ‘no-show’, each DMV official received a list of findings in order to avoid further audit findings in each and every component. She had just received correspondence from the Labour Relations person who has engaged with the managers to prioritise each manager’s audit findings to ensure that the consequence process is kick started. Those processes are being finalised and will be completed before the end of the 2021/22 financial year.

The current organogram that is being utilised was approved in 2010. Work needs to be done to review the organogram. She acknowledged the Committee's concerns that there must be alignment between capacity and budget. These areas do indeed need to talk to each other. She undertook to speed up the organogram review and they are open to taking advice from the Committee.

They are indeed limited in capacity. To this end, DMV is looking to an external company to assist so the work of the internal audit does not fail. In the new organogram, DMV is looking for 8-10 positions to fill the unit.

On Finance and SCM, Ms Gcasamba acknowledged that there are indeed human related capacity constraints. DMV is working with StatsSA who has obtained clean audits for a number of years. It assessed the SCM capacity and it was confirmed that it is running short. DMV has also written to its mother department to lending some members of the Department of Defence team. It is a work in progress.

On underspending, DMV spent 89.4% of the 2020/21 budget of R480 million and R51 million (10,6%) was surrendered to National Treasury.

Ms Gcasamba confirmed that DMV is still attending to accessing the same platform that AGSA has.

Ms Mpolweni replied that DMV is still looking at addressing the complex area that is ICT. They are being assisted by SITA to help them out in the delivery of services. She acknowledged that the manual system has indeed affected a lot of military veterans in accessing their benefits on time. To this end DMV relied on SITA. A dry run was done from 6 December with DMV officials in training them on the online system. DMV intends on continuing with this process going forward. A GITO committee was established to address updating information and capacitating employees and stakeholders to ensure there is synergy moving forward. She remarked that it is a step-by-step process and they are excited to be a part of this revolutionary process.

Mr Sandisa Siyengo, Chief Director: Research & Policy Development, replied to the concerns about the organogram. Through the audit engagement DMV has undertaken that there is a need to match skills to the important areas in DMV so they will be looking at this internally. Fortunately, they have capacitated a Human Resources Manager that has taken this process on board. In the new financial year he is sure there will be announcements on the skills audit and capacitation of DMV.

Work on the organogram was done to the extent that a proposed functional structure was discussed with DPSA. The team was working from a base, taking the work that was done previously and developing it to current needs of DMV to ensure that it will be a functional structure. However, discussions are still to be had on the proper processes for enforcing this functional structure.

On ‘no-shows’ by officials, Mr Siyengo said that DMV has communicated with its employees and has investigated some of these cases. If an official is found to have been negligent then there is a debt recovery process that is to be undertaken. The struggle mainly concerned military veterans as the policy did not include them. It only spoke to DMV officials. DMV has since updated the policy to include their military veteran stakeholders. There will be clear instructions in the policy on how to recover state funds in those instances.

Ms Mpolweni noted that Treasury cut close to R5.5 million from the DMV budget as a result of COVID-19 and reducing personnel costs.

The Chairperson asked if DMV undertakes that an organogram will be produced for 2022/23.

The Director General confirmed that an organogram will be completed at end of 2021/2022.

The Chairperson requested a six-month progress report.

Ms Mpolweni confirmed that will be done.

Mr Marais raised two issues: The case about the Command of the Military Veterans not being paid yet, and the case where the Minister and Deputy Minister are not allowed to leave the hotel with the military.

The Director General asked that she report back on these matters in two weeks and Mr Marais agreed.

Ms Mpolweni extended an invitation to attend a DMV ministerial strategic planning session on 25 February.

Mr Marais made a plea that DMV give the Committee more time to respond to an invitation next time.

The Committee agreed.

Deputy Minister Makwetla apologised for late notice and stated that he only received the invitation yesterday.

The Chairperson appealed to the Committee that if there is anyone in Gauteng who is willing to represent DMV, he asked that they revert to him.

In closing, the Chairperson remarked that the issues were well identified by the Deputy Minister and the Committee simply asks that he delivers on these.

Deputy Minister Makwetla commented that the remarks are well received.

The minutes of 26 January, 9 and 16 February 2022 were adopted.

The Chairperson ended the meeting with the reminder that the Committee would meet that afternoon in plenary to discuss concerns about Defence finance with the Minister of Finance.