AGSA briefing on 2019/20 audit outcomes of the DOJCD, PPSA, &OCJ; OCJ 2019/20 Annual Report

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Justice and Correctional Services

17 November 2020
Chairperson: Mr B Magwanishe (ANC)
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Meeting Summary

2019/20 Annual Reports

In a virtual meeting, the Committee was briefed by the Office of Auditor-General South Africa (AGSA) on the 2019/20 audit outcomes of the Department of Justice and Constitutional Development (DOJCD), the Office of the Public Protector (PPSA) and the Office of the Chief Justice (OCJ). The Committee was also briefed by the Office of the Chief Justice on its 2019/20 Annual Report. The 2019/20 audit outcomes of the justice portfolio were:

-Special Investigating Unit (SIU): Unqualified with no findings

-Legal Aid SA (LASA): Unqualified with no findings

-Guardian’s Fund (GF): Unqualified with no findings

-President’s Fund (PF): Unqualified with no findings

-Justice administered fund (JAF), previously third party funds (TPF): Unqualified with no findings

-SA Human Rights Commission (SAHRC): Unqualified with findings

-DOJCD: Qualified with findings

The SIU, LASA, GF, PF and JAF were commended for retaining their clean audit outcomes. The stagnation in the audit outcomes of the DoJCD are as a result of inadequate implementation and review of the initiatives contained in the Department’s post audit action plan. Whilst the quality of submitted financial statements of the SAHRC’s has been maintained the challenges within the supply chain management environment and performance information reporting remain.

DoJCD’s audit outcomes have been stagnant over the past three financial years with a qualification on contingent liabilities. This status will not change until the different role players work together to ensure that information relating to ongoing litigation is regularly updated and reviewed. The number of material adjustments required to the submitted financial statements and performance reports for DoJCD has reduced but further enhancements are required particularly in the state attorney environment. Non-compliance with key legislation remains a challenge especially in SCM, which has led to irregular expenditure and fruitless and wasteful expenditure being incurred. The instability in the leadership of this unit has been a major contributor to the non-compliance identified

Members were concerned that despite assurances given to the Committee, the Department and entities were not implementing their audit action plans s it was clear from the AG’s presentation that there were areas of non-improvement or stagnation. It was said there was there is no sense of urgency by management in responding to the massagers in addressing risks identified and improving internal control - this is an issue the Committee needs to raise with the Department and the entities. Concern was expressed on the internal audit capacity of the Department and entities – it is something the Committee must address. Members suggested there might be a need to meet with the AGSA more regularly, maybe quarterly, so that the Committee can also monitor the compliance and get feedback from the AG’s office which will create a very important role in assisting it in the oversight function. There was also concern regarding possible governance challenges between the Department and the NPA. Members wanted to know more about fees not collected by the state attorney which they found was a red flag. There is also R421 million owed to the SUI by client departments – this was even more concerning given budget cuts.  Members wanted answers on the Department’s investigations into irregular expenditure.

It was said the message from the AGSA confirms the Committee’s assessment of both the Department of Justice and Correctional Services that these departments are in crisis. The approach of the AG should be to find ways to avert the crisis, and to answer the questions raised by the Members about the implementation of the Public Audit Act. The Committee was deeply concerned by investigations of the state attorney’s office. The Committee sought more interactive engagement between the AGSA, the Department entities concerned, and the Committee and to have a conversation that would include National Treasury as the Committee is deeply concerned with the performance of the Department. There is a clear correlation between their audit qualifications and their underperformance and it is clear the Department needs attention. It was said the Master’s Office was in a messy situation and needs serious auditing. Its performance is very concerning more so for the fact that it is serving the vulnerable community. There is a need to deal with consequence management as it relates to underperformance because the taxpayers are paying the Department to perform at a particular level. Continuous underperformance is directly robbing the people of South Africa of what they are entitled to which is service - the Committee cannot be in a game where it treats the lack of service delivery as a ritual or as a routine. The Committee was also concerned by the lack of transformation on the side of the legal fraternity in relation to race, gender and disability – there must be active change to ensure those in the legal fraternity whom are black, women and have disabilities get briefs and practice their skills in court. There is a vast difference between what is reported in the Annual Reports and the reality. This is however not to say that there are no star performances in the Department such as Legal Aid SA, but the Department itself leaves so much to be desired and the Committee should focus on it.

The AGS then briefed the Committee on the audit outcomes of the Office of the Chief Justice for 201920 - the OCJ achieved an audit outcome of unqualified with no findings in 2019/20 – unchanged since 2017/18.

The AGSA commend the OCJ on maintaining the clean audit outcomes for the past three financial years. The financial and performance reports submitted for audit were free from material misstatements. The financial and performance reports submitted for audit were free from material misstatements. No fruitless and wasteful expenditure was incurred during the 2019/20 financial year. No irregular expenditure was incurred during the 2019/20 financial year

Looking at the audit outcomes for the PP over the past five years, there was an improvement in 2019/20 where the PP achieved an unqualified audit with no findings – an improvement from the prior years’ opinion of unqualified with findings. The financial and performance reports submitted for audit were free from material misstatements. Fruitless and wasteful expenditure increased over two years from R2 419 in 2018/19 to R34 297 in 2019/20 period while irregular expenditure decreased over two years from R7.6m in 2018/19 to R201 216 in 2019/20.

Members commended the good results of the OCJ and PPSA – they said the entities were leading by example and this was something the DOJCD could learn from.  

For the 2019/20 financial year, the OCJ the OCJ had 20 planned targets of which 14 targets were met translating to 70% were achieved.  This was a slight decrease from the previous financial year when 18/20 targets were achieved (90%).

Key achievements in 2019:20:

-The Department achieved an unqualified audit opinion with no material findings

-Vacancy rate of 8.9%: below 10% target set by government

-Opening of Mpumalanga division of the High Court

-Combined assurance plan in 24 superior courts

-Piloted CaseLines solutions in Gauteng division of the High Court as part of court modernisation

-Fraud prevention strategy in 24 superior courts

-115 skills-enhancing judicial education courses for judicial officers and aspiring junior judicial officers against a target of 80

Members asked about the projects regarding court modernisation, if there any plans to amend the rules of the court to cater for the online civil procedures, performance agreements and lessons learnt from COVID19. Concern was expressed of security in the courts.

The OCJ was commended for a job well during the financial year under review.  The Committee would attempt to secure a meeting, through the Office of the Speaker, with the Chief Justice so that Members of Parliament may have a meaningful engagement with the Judiciary and the Chief Justice regarding some issue which the Committee thinks are of mutual interest between the two parties

Meeting report

Opening Remarks by the Chairperson

The Chairperson welcomed Members and everyone to the meeting. He then called upon the first presenter from the Auditor-General to give the first presentation.

AGSA Briefing on the 2019/20 audit outcomes of the Department of Justice and Constitutional Development (DOJCD) portfolio

Mr Rehaan Mohamed Ali, Senior Audit Manager, AGSA, outlined the 2019/20 audit outcomes of the justice portfolio:

-Special Investigating Unit (SIU): Unqualified with no findings

-Legal Aid SA (LASA): Unqualified with no findings

-Guardian’s Fund (GF): Unqualified with no findings

-President’s Fund (PF): Unqualified with no findings

-Justice administered fund (JAF), previously third party funds (TPF): Unqualified with no findings

-SA Human Rights Commission (SAHRC): Unqualified with findings

-DOJCD: Qualified with findings

The SIU, LASA, GF, PF and JAF were commended for retaining their clean audit outcomes. Best practices which have resulted in desirable audit outcomes include the timeous and diligent implementation of actions to address identified risks and concerns emanating from internal and external audits. The stagnation in the audit outcomes of the DoJCD are as a result of inadequate implementation and review of the initiatives contained in the Department’s post audit action plan. Some improvements were however noted across all the audit focus areas. Whilst the quality of submitted financial statements of the SAHRC’s has been maintained the challenges within the supply chain management environment and performance information reporting remain

Credible financial reporting

The DoJCD received one qualification paragraph opinion as it corrected some misstatements identified during the audit. The significant deficiencies in the accounting for contingent liabilities have resulted in a qualification in each of the past three financial periods. While action plans have  previously been compiled to address the matter, these plans have not been implemented and monitored with the necessary care. Addressing the qualification requires collaboration from the State Attorney, Legal Services, National Prosecuting Authority (NPA) and the finance unit and this has not always been the case. Significant deficiencies in the asset management environment were brought to the attention of management in the prior year and while a repeat qualification was avoided, there remains concerns in this area as reflected by the R181 million worth of assets that were not verified during the year end asset counts. Investigations into these assets are ongoing.

Disregard for compliance with legislation

Top five non-compliance areas:

-Quality of financial statements (DoJCD)

- Procurement and contract Management (DoJCD and SAHRC)

-Prevention of irregular, fruitless and wasteful expenditure (DoJCD and SAHRC)

-Consequence Management – Investigations into instances of irregular expenditure (SAHRC)

- Expenditure management – timeous payment of service providers (DoJCD)

Status of Internal control

The SAHRC reflected concern in areas of effective leadership, proper record keeping, daily and monthly controls, and risk management; but showed intervention required in the area of the review and monitor compliance.

The DoJCD reflected concern in areas of effective leadership, and risk management; but showed intervention required in the areas of review and monitor compliance, proper record keeping, and daily and monthly controls.

Financial health

No material uncertainty exists whether the auditees can continue to operate in future.

Fruitless and wasteful expenditure

This decreased over two years from R6m in 2018/19 to R1.2m in 2019/20. The majority of the disclosed fruitless and wasteful expenditure for the current year was caused by curator fees expenditure relating to NPA (R1 million). The remaining R170 000 at DoJCD relates to interest on late payments and no shows for travel

Irregular expenditure

Decreased over to years from R985m in 2019/20 to R570m in 2019/20.

 Irregular expenditure for the DoJCD was under assessment. A further R867 millions of potential irregular is yet to be confirmed:

  • R197 million relating to procurement of legal services by the state attorney.
  • R561 million relating to allegations of fraudulent documents submitted by suppliers.
  • The remaining transaction primarily to instances where National Treasury (NT) approval for extensions/deviations was not obtained.

Other entities:

  • The SAHRC irregular expenditure emanates from non-compliance with National Treasury Note 8 of 2007 and Treasury Regulation 16A 9.1 (d) and16A 6.3 (b.) Irregular expenditure incurred is mainlydue to the non-adherence to policies and procedures (R2 639 000).
  • LASA irregular expenditure was a combination of extensions of contracts above 15% not approved by NT and office rental payments made where there were no signed contracts in place (R 3940 000)
  • SIU irregular expenditure was as a result of payment of salaries at scales above the notch (R253 000).

Supply chain management:

Most common findings on supply chain management:

-Contract extensions greater than 15% concluded without NT approval at three auditees (DoJCD, SAHRC & LASA)

-Three quotations not obtained at two auditees (DoJCD & SAHRC)

-Competitive bidding process not followed at one auditee (DoJCD & SAHRC)

-Declaration of interest not obtained two auditees (DoJCD & SAHRC)

-Procurement from suppliers not on Central Supplier Database two auditees (DoJCD & SAHRC)

Recommendations

To the Departments and its entities

• There should be the required urgency by management in responding to AGSA messages about addressing risks identified and improving internal controls.

• The internal audit of the department and entities should be assigned the responsibility for tracking and verifying the progress against the audit action plan.

• Continued stability and right tone at the top for the entities that have maintained clean audits is essential to sustaining these outcomes.

• The SAHRC – investigations into instances of irregular expenditure should be completed with the necessary urgency so that corrective action can be implemented.

To the Portfolio Committee

• The PC should request accounting officers/authorities and the Minister to provide feedback on the implementation and progress of action plans to ensure improvement in the audit outcomes of the portfolio.

• Governance challenges between the department and the NPA remain a stumbling block in achieving clean administration.

Overall message

DoJCD’s audit outcomes have been stagnant over the past three financial years with a qualification on contingent liabilities. This status will not change until the different role players work together to ensure that information relating to ongoing litigation is regularly updated and reviewed. The number of material adjustments required to the submitted financial statements and performance reports for DoJCD has reduced but further enhancements are required particularly in the state attorney environment. Non-compliance with key legislation remains a challenge especially in SCM, which has led to irregular expenditure and fruitless and wasteful expenditure being incurred. The instability in the leadership of this unit has been a major contributor to the non compliances identified

Discussion

Mr W Horn (DA) thanked the presenter for the presentation and the important role the AGSA plays in monitoring and trying to ensure sound financial and organisational management of the departments. The AGSA briefed the Committee on the general excitement about the amendment of the Public Audit Act. This Act would allow the AG to react to failures to ensure proper consequence management by either referring such matters to law enforcement agencies for investigation or by issuing what is called a Certificate of Debt against the Accounting Authority to enforce the paying back of irregular expenditure not properly investigated if consequence management has not been affected. Mr Horn said he was hoping that this presentation would say something about whether the AG has embarked on that road or, if there have not been any investigations yet as reported by the SAHRC.  

Secondly, it is easy to get the sense that the bar set by the Department for lack of investigation seems not to be that high. In the respect of the Department of Justice, for example in their presentation to the Committee circulated beforehand ,it admits that in terms of the security guarding services which the AG has referred to and the appointment of the legal services, which are the two major contributors to the irregular expenditure amounts of the Department of Justice according to Justice itself, no consequence management to these two contracts has been implemented. The AGSA, however, said that it is satisfied that some sort of investigation is ongoing but in the same vein, the Committee knows that specifically the security guarding issue stems as far back as 2016. It also knows that as Members of the Portfolio Committee that this issue lies at the heart of where there is a suspension with full pay without a hearing of the Chief Financial Officer (CFO). Mr Horn wanted the Auditor-General to possibly unpack these issues further and to also inform the Portfolio Committee as to what extent the progress made by the Department and its entities and if these investigations where monitored.

The other question relates to the comment made by the Auditor-General that they requested the Portfolio Committee to keep on monitoring the implementation of audit action plans. From the Department side, the frustration experienced by the Committee is that whenever it is briefed by the departments and entities on this, it gets a broad assurance that the audit action plan is being attended to and that it will see a lot of progress in the immediate future. However if one looks on the broader level of the presentation by the AG, there is a major stagnation in respect of these issues. So he wanted to know from the AG as to what extent would it still be engaging on a monthly or quarterly basis with the Department and the entity with these issues and whether they would be in a position to possibly join the Department when it comes and reports on the implementation of action plans to the Committee going forward.

Mr S Swart (ACDP) began by relaying his message of condolence to the AGSA for the passing on of the outgoing Auditor-General, Mr Kimi Makwetu.

The slides on recommendation could be very important for the Portfolio Committee to make follow-ups of the recommendations with the Department and its entities. Unfortunately, there is no sense of urgency by management in responding to the massagers in addressing risks identified and improving internal control. There seems to be a deficiency there as there is not the necessary urgency and this is an issue the Committee needs to raise with the Department and the entities.

The second issue which is of course a concern is the internal audits of the Department and the entities. This is another issue the Committee needs to follow up on. The issue related to the Portfolio Committee in that it should request the Accounting Officer and the Minister to provide feedback on implementation. He suggested that there was a need to meet with the AG possibly more regularly, maybe quarterly so that the Committee can also monitor the compliance and get feedback from the AG’s office which will create a very important role in assisting it in the oversight function - almost like a budget office of Parliament that helps with a national budget. The AG should maybe specifically handle the issues highlighted on governance challenges between the Department and the NPA, unpacking this further because they said it remained a stumbling block in achieving a clean administration and this is an issue that needs to be unpacked a little bit more so that the Committee can understand more clearly if the Department and the NPA could come and talk of some legislative amendments in that regard as well.  

The issue relating to the outcomes of statements of the past three financial years with the qualifications is the matter of deterioration that Mr Swart said he would like to see an improvement in and not stagnation. And the AG’s office says this status will not change until the different role it plays is put together and ensure that information related to ongoing litigation is regularly updated and reviewed. That is a key aspect and is the role of the state attorney. The second issue there relates to R2.4 billion legal fees that the AG indicated is not being collected from the departments. This is a massive red flag - how can a Department afford R2.4 billion on its books that it is not collecting and there is an increase of R400 million over the last financial year. There is also R421 million owed to the SUI by client departments. With the budgets being cut, those departments are going to be in a more difficult situation to pay the Justice Department so there is a need to find ways from the AG and the Department on how the issue can be addressed.

Ms J Mofokeng (ANC) wanted to check on the SAHRC, on the credible performance reporting saying that a lack of sufficient evidence could not be provided to support. ‘Are there any recommendations on how to be doing it better’, because she thought there was going to be a note on the recommendations by the Department saying ‘this is how we can do it better’. The issue of investigation which Mr Horn touched on, Ms Mofokeng wanted to know how R181 million worth of assets were not verified. However, the Department said that the investigation on these assets is still ongoing. ‘What is the essence of the time frame for these because there seems to be no timeframes tagged on these investigations’, the same also go for the previous reported expenditure investigation? There is a need for clarity on this.

Dr M Ndlozi (EFF) began with a show of appreciation to the Chairperson. He said that he was mostly covered by Mr Horn about the matter of the implications following the amendments that were made last year. ‘What are the questions asked about the investigations on irregular expenditure because the Department says that there is an investigation but leaves it at that’? The Committee needs to know if the money was covered.  ‘How far are they with the investigation’? It needs to know the progress of these investigations. This will help to eradicate the culture of simply saying that there is something wrong but there are no implications for the wrongdoers. Some of the objectives set by the Department require transformation.

For example, does the audit enquire about the usage of service providers concerning people and women? Is that not an important audit inquiry if the Department across the government accepts these transformational objectives on one hand, while on the other hand they purchase locally produced goods. ‘Is this an audit inquiry’? ‘Does the Department ask these questions or not and if it does what the objectives reflect become part of the Department’s inquiry’? ‘Or it is something that the Department does not look into at all, if so, why is that so’? Finally, the Department needs to explain the impediments of governance between the NPA and government that cause audit problems, so that the Committee can be able to go to these two entities to inquiry about the Department’s oversight responsibility.

Adv G Breytenbach (DA) conveyed her condolences to the AGSA and said that her questions had already been asked by Mr Horn and Mr Swart.

Responses

Mr Ali began by appreciating the condolences made to the AGSA. His first response was on the implementation of the amendment Act stating that the matter in which the office implemented the Act was a failed approach as the Committee would recall that in the 2018/19 cycle, they implemented 16 auditees in 2019/20.They selected 89 auditees who were implementing the amendments. At the start of each cycle, the Department goes through a risk assessment process and it looks at which auditees have the capacity and skills to implement the amendments. It also look at the nature of the financing and the environment and the risk of these environments and then makes a selection in terms of the particular auditees to implement the amendments. Looking at the outcomes of the audit department for the current year, and going through the assessment of the 19 October 2021 year which will happen now, these concerns, in terms of the accelerating irregular expenditure and the court cost management processes and the long timeframe, will be canceled in terms of the amendment. Once it was done with the audit, the AGSA would return to the Portfolio Committee in terms of whether every department has been selected according to the implementation perspective.

For the 2019/20 year, the Department looked at other risk areas in terms of the service delivery of tangible deliverables where one could easily identify the financial loss in terms of huge settlements and other infrastructure departments that were prioritised. Like it was said, one looks forward to rolling out more entities as capacity develops. It is very likely that soon all will be implemented by the Department itself. In terms of the guarding services and the irregular expenditure nominated from there, the previous Accounting Officer did secure investigation contacts dating back to 2012 - it was 2018/19 and to date, two reports were issued to the Department, one in terms of the guarding services themselves, and the result of that particular report did result in disciplinary processes being instituted against the senior officers in the Department. The report included these disciplinary processes, which are ongoing, and the Committee should engage with the current Director-General (DG) in terms of current progress on those preliminary proceedings.

In terms of the role in monitoring, there are a couple of mechanisms that were utilised to follow up on the significant deficiencies that were identified in the previous years. Two stages were utilised which were done in terms of the current year in the third quarter of the financial year. Then there was also the interim audit which is basically the interim management report and in that report key deficiencies identified in the previous year were focused on. The AG was very willing and available to come and engage with the Department on these reports.

If the Portfolio Committee requires that one thinks from the overall reaction to risks and mistakes that were identified and why it was said in some instances that it was not done with the required urgency. It is the way that the action plan is structured. Interim audits are done throughout the year. Management will wait until the end of the audit process, which in this case is September but normally would be July, and put together the action plan in trying to address those findings. That might be six months after the findings have been received and agreed to by management. That is why the timing of that plan needs to be a light document so that the management, as soon as they agree to the finding and the recommendations, should plan to address that particular deficiency in the light document. From the reporting perspective to the Portfolio Committee, the internal audit can play that role in terms of validating the programme so that once the Department comes and presents the progress against the plan, the Committee can have an independent assurance provider being internally audited and validated for those actions management said it has done.

Similarly, internal auditors within the SAHRC do not have issues under review due to insufficient audit evidence for management. The role of the internal audit is to review those significant witnesses who are the supporting elements and processes. Additionally, the procurement environment reviews the compliance of the procurement processes. With the updated legislation, especially with the changes in legislation, it was noted that in the procurement environment at the SAHRC, there were instances where the declaration of interests was not being submitted. That was only a misunderstanding of the role that National Treasury plays in terms of the central supply database and they relied on the central supply database for those declarations. However, the internal audit under review would have noted National Treasury that one cannot just rely on CFD for that process and hopefully it could have been rectified before it was identified in the audit. That is also a role the internal audit can improve upon in terms of internal quoting processes at the SAHRC.

Regarding governance challenges, in previous discussions with the Accounting Officer of DOJCD, it was a case of reporting lines and implementing the necessary limited action or consequence management given that the Accounting Officer was responsible for the ultimate set of financial statements. The Head of the NPA was also responsible for those reporting lines. Additionally, the NPA does not always then get the attention it deserves. It does not get the necessary focus it deserves in terms of their issues regarding whether it be compliance or any other matter from the Department.

As of the specifics and the limitation regarding performance and information reporting, the SAHRC needs to be upfront about what documentation it needs. Many of these instances involve the Commissioners themselves that would go to these engagements and host these engagements. They then need to be in a position to communicate to those role players what the responsibilities are in terms of document management and put in place processes to collect that information. That documentation would include the submission of performance information and substantiating evidence for those processes. One just basically needs to have a proper process for what is required and who it is required from and then that needs to be reviewed on a quarterly basis.

Regarding timeframes for asset management or the asset investigation in those particular instances, there was a bit of sympathy for the Department. Those investigations into the assets that were missing were planned for in April and May. The pandemic peak had an impact on those and as much as R181 million was outstanding. Once the lockdown started, the investigation halted and they had reduced the R80million to R40 million. Those investigations were continuing so the asset management environment processes have significantly improved from the 2018/19 year. But as was said, there is a problem in terms of the daily disciplines of making sure the asset is where it is supposed to be because ideally, through the initial verification in the third quarter, there were many assets that one could not verify. But they have that particular exercise and it was being addressed after the lockdown.

Some of the irregular expenditure under investigation still needs to be controlled as some of the weekly assets are due to ongoing investigations and are taking quite a long time and some are contracts that are under investigation. Some of the irregular expenditure was of a technical nature that required some input from National Treasury. As much as it should have happened earlier, when the engagements did happen, National Treasury did not give clear answers and those engagements are still ongoing. So it is a combination of factors, but when it does become irregular expenditure, it can be controlled and should be in the timeframe set by the Department and it should not necessarily take as long as it is taking now. One has to determine whether the irregular expenditure finishes or not and then after that, institute the necessary investigation followed up by the necessary disciplinary action.

For transformation objectives, in terms of local content specifically, an audit was done of that particular legislation to ensurethe local content reflects the necessary information to meet those requirements.  The particular legislation was audited again and there were no significant issues. When the legislation was rolled out a few years ago, some healing issues were done but not anymore.

Confirming the objective relating to women, the Department would have looked at all the performance information. This year, the state leaders were looked at and things the state leaders did and information relating to the various issues on female applicants and briefs awarded to women, and the percentages awarded to these female applicants and also to previously disadvantaged individuals as well. The information was audited and the information they presented in the performance report was well considered to be valuable in terms of reliability.

Follow up questions

Dr Ndlozi stated that the question of transformation concerning black people as well as women should not be rushed. This is a very important matter for which the legal fraternity has to set a big example for in terms of its legal beliefs. So it has to be highlighted in detail in the report. The Department cannot just say ‘no it did not look at it’. If it looked at it, what did it say? It has to be reported and it has to be something that is consistently flagged so that it is openly monitored. Another thing, is the Department giving briefs to women? Is it giving briefs to black lawyers, black attorneys so on and so forth? What are the percentages that are supposed to track that down? And in the procurement policy one has to ask ‘is the product that the entities are securing locally produced’? These are very important things we do not just say no, there were no problems. I think they deserve a specific mention in proper details not just with five or ten pages. It should reach us, ‘what are your outcomes concerning these two questions’?

Ms W Newhoudt-Drunchen (ANC) wanted to ask about irregular expenditure at the bottom of the slide (slide 19) which said “remaining transactions” then it goes on to say “nothing was approved”. ‘What happens when objectives are not achieved and how does the AG support the entities and the departments’? ‘Do you advise the Department on how it should take this forward to rectify the situation in that particular case’?

Responses

Mr Ali said that in terms of the performance of the Department, women and the disadvantaged applicants, it is included on the Department side on page 77 of the performance report. Percentages of briefs that were rewarded to women were 41% for the 2019/20 year while the percentage of briefs awarded to the disadvantaged was 83%. In terms of land value, the percentage awarded to women is 28% in the current year so from the auditing perspective, the AGSA does not normally comment in terms of the achievement themselves. One notes the credibility of what the Department is reporting. So if the Department is reporting, in this instance, that 41% of the briefs were being given to women, the AG will go and ensure that this was accurate in terms of going and looking at total briefs that were allocated and to whom and whether those percentages were correct.

From the local content perspective, local content regulations require a certain level of local content interference, certain types of goods being followed, and all of the thresholds in the applicable legislation. If the applicable legislation says that it requires 100% local content, the AG goes and tests whether in the request for quotation, the suppliers were informed that they require 100% local content, and when they get a winning supplier, that supplier does get the threshold in terms of the quotation. In that instance, the AG tests the Department’s compliance with regulations, and there was not an instance where it did not comply with the local content asked for.

Ms Newhoudt-Drunchen repeated her question. It refers to slide number 19, in terms of irregular expenditure - there is a block on the slide that says a further R860 million has not been confirmed. At the bottom of the slide it says the remaining transactions were primarily related and the request for approval for an extension was denied. ‘So did National Treasury not approve of that or the deviation’? She wanted to understand why the approval was not received from National Treasury and if so, why it was not sorted out and what can be advised. ‘How should the Department go about with that’? She requested clarity on this.

Mr Ali said that in instances where they have gone to or not gone to National Treasury, it is a case about whether they have had the contracts for a specific period. So for specific services, and because the procurement service has not been finalised in time, then those particular contracts were extended beyond two years. And the interpretation of the Auditor was that if they want to extend the particular contract beyond the two years, they needed to get Treasury approval as it would constitute a new procurement. The Department however had a different view in terms of that in that it did not go to National Treasury because it was within the window of the 15% threshold. That matter was taken to Treasury as it was a sitting between the AGSA and the Department was of the view that the committee would approve that particular extension. And that matter was indeed taken to National Treasury however National Treasury has not given guidance in terms of whether the Department was within its delegation of approval or not. However, the recommendation that was given to the Department in these instances is to go to National Treasury in any event right upfront because if there is any grey room, one might as well get approval from National Treasury. It is unlikely that National Treasury will give the outcome in the coming weeks and then it could either be irregular expenditure or not but then the Department would be careful about the matter.  Even if Treasury said the expenditure is not irregular, the Department would have to go to Treasury in the future because other departments have gone to Treasury in the past.

The Chairperson, on behalf of the Committee, conveyed his deepest condolences on the passing of the AG. He said that he admired the role the AG played in improving the relationships between the office of the AGSA and Parliament. He was a fighter for good financial governance who would be greatly missed.

The message from the AGSA confirms the Committee’s assessment of both the Department of Justice and Correctional Services that these departments are in crisis. The approach of the AG should be to find ways to avert the crisis, and to answer the questions raised by the Members about the implementation of the Public Audit Act. So the Committee is pleading that both departments be prioritised. For instance, concerning the State Attorney’s office, it is a known fact that that office is under investigation by the SIU for serious corruption issues. For example, between the office of the State Attorney and some of the legal practitioners in the country, some in Gauteng, some in the Eastern Cape, and the issues that have been raised by the Committee highlighted related to the Department of Health with medical malpractice; are issues that are also under investigation.

It would be important that there is greater collaboration between the Department and other state agencies such as the SIU in getting much more information because what might appear as a deletion of one zero or adding one zero, might not be any accounting irregularity. It might be as a result of serious criminal activities that may have been taking place. That is why there is that particular investigation in the office of the State Attorney.

The Chairperson expressed joy for the presence of the Solicitor- General in the meeting. He asked for a more interactive engagement between the AGSA, the Department entities concerned, and the Committee and to have a conversation that would include National Treasury. This is because the Committee is deeply concerned with the performance of the Department. There is a clear correlation between their audit qualifications and their underperformance. For instance, there is R800 million that is under investigation concerning irregular expenditure yet there is also R764 million under-expenditure. In addition to that this, the Department has been in a state of decline in terms of performance. In the last financial year, it was at 61%, the year before that it was at 74%, the fourth quarter it was at 51%, and the first quarter of this year it was at 54%. So it is a Department that needs urgent attention. The Committee does not think this law should be prioritised because it cannot be dealing with consequence management as it is only related to corruption. There is a need to deal with consequence management as it relates to underperformance because the taxpayers are paying the Department to perform at a particular level. Continuous underperformance is directly robbing the people of South Africa of what they are entitled to which is service.

The Chairperson said there is another office, which he could not remember the name, which is in a state of disarray. So it would be important not to treat it as a normal Department with normal performance because it is not, that is why the Minister has been invited to come on Friday afternoon so that the Committee can have a conversation with him regarding the Department’s performance.

For example, the matter raised by Mr Swart on quarterly meetings should be observed and involve the Department as well as stakeholders. There was a process that was started by inviting the chairpersons of internal audit committees to be part of the meeting and to give their reports. Listening to the report it is quite clear the SAHRC and the Department think that the internal audit committee has a lot to answer for as most of the issues they are raising are recurring and the Committee cannot be in a game where it treats the lack of service delivery as a ritual or as a routine. Answers like ‘no this is under control, we are dealing with it’, yet when the next audit control report comes, nothing happens, nothing improves, and this cannot be accepted. The fact that the Department has the CFO and several employees in the unit being under suspension for a long period and those disciplinary cases are not coming to an end it is not good at all. The high vacancy rate is 23% among senior managers. The result is what the auditor is saying today. There is a clear correlation between that and the results the Committee saw.

The Chairperson continued and said the gear of focus must be shifted in the timeframes to help one another. It cannot be a United Nation (UN) meeting where things are discussed for over 30 years. Matters need to be brought to a conclusion. The Committee must ensure things promised are achieved. The issue of consequence management, the issue of the Solicitor- General, who has been in office for a few months now, etc. Starting from next year, the Committee would like to start having discussions with the Solicitor- General and hear about its interventions. As with the questions raised by Dr Ndlozi, there is a problem and the Department might provide the Committee with statistics to say it is doing well but the response and the outcry received from black legal practitioners who said that they were not given briefs, the fact that there has only been one judge since democracy in the Constitutional Court representing people with disabilities, is something of concern. Judges who are women, people of disability, and black cannot be produced unless they are in court getting briefs, and they are in court daily practicing their skills.

There is a vast difference between what is reported in the Annual Reports and the reality. If one fails to transform the legal system, one fails to transform the judiciary. This Department should be treated carefully together with the AGSA. The Master’s Office was in a messy situation and needs serious auditing. Its performance is very concerning more so for the fact that it is serving the vulnerable community. The Chairperson appealed to all to work together through regular meetings to improve service delivery for all. The aim of these engagements is about improved service delivery for all people. This is however not to say that there are no star performances in the Department such as Legal Aid SA, but the Department itself leaves so much to be desired and the Committee should focus on it.

Mr Ali said the AGSA knew the concerns in terms of implementation of PAIA and this would be taken seriously in the 2020/21 financial year. From a collaboration perspective, the AGSA would definitely look forward to meetings with other role players and also with the SIU. Engagements would be had with them to understand their concerns and to incorporate any elements that can be improved from those processes.

AGSA Briefing on the 2019/20 audit outcomes of the Office of the Chief Justice (OCJ)

The OCJ achieved an audit outcome of unqualified with no findings in 2019/20 – unchanged since 2017/18.

The AGSA commend the OCJ on maintaining the clean audit outcomes for the past three financial years. The financial and performance reports submitted for audit were free from material misstatements. This is due to the quality review processes that the department has implemented and maintained. Monitoring of compliance with laws and applicable legislation by the department also contributed to maintaining the clean audit outcome.The financial and performance reports submitted for audit were free from material misstatements. There were also no material findings identified in the performance reporting. No material non-compliance with legislation was identified during the current and previous financial years at the OCJ.

Status of internal control

Two areas were highlighted but which not affect the audit report but still required attention to prevent them from materialising and affecting the audit report. These areas were daily and monthly controls and review and monitor compliance.

Financial Health

-The average number of days to pay creditors is 11 days; this was well within the required 30 days. The balance of accruals as at year-end increased, the increase is mainly attributable to the COVID-1 restrictions implemented during March 2020.

-The department has an accrual-adjusted surplus for the year under review, and its assets exceed liabilities

-the department does not have a bank overdraft and no cash shortfall.

No fruitless and wasteful expenditure was incurred during the 2019/20 financial year.

No irregular expenditure was incurred during the 2019/20 financial year. This was an improvement from the prior financial year - R679 000 of irregular expenditure was identified during the 2018/19 financial year. This irregular expenditure has been investigated and is currently awaiting condonation by National Treasury

NO SCM non-compliance during the 2019/20 financial year

Recommendations

To the Department:

-Strengthening of controls within financial and performance reporting. Misstatements were noted in prepayments and service bonuses disclosures in the financial statements, these were however immaterial.

-Some of the ICT policies and procedures are reviewed but not yet approved. Management should ensure that IT policies and procedures are approved and fully implemented. They should also ensure stability in key management positions within the ICT unit.

To the Portfolio Committee

-The Committee should request feedback on the implementation of the audit action plans to ensure that: he accounting officer of the department provided assurance as there were no significant issues identified on the financial statements or reporting, performance reporting and compliance with applicable laws and regulations and the oversight structures maintained their status of the previous year by providing the required level of assurance over financial and performance reporting as well as compliance with legislation and holding management of the department accountable for its mandate.

AGSA Briefing on the 2019/20 audit outcomes of the Public Protector of SA (PPSA)

Looking at the audit outcomes for the PP over the past five years, there was an improvement in 2019/20 where the PP achieved an unqualified audit with no findings – an improvement from the prior years’ opinion of unqualified with findings.

The financial and performance reports submitted for audit were free from material misstatements. There was no material misstatements in the financial statements were identified at the PPSA during the current financial year. This is an improvement as there were material adjustments in the prior financial year.

The improvement in audit outcomes is mainly attributable to the following:

• Improvement in the daily and monthly processing controls

• Implementation and monitoring of a tool to monitor payments to suppliers.

• Improved quality review processes of the financial and performance reports.

• Stability in the finance, SCM and performance management positions

• Monitoring of compliance with laws and applicable legislation

Compliance with legislation

No material findings on the performance reporting were identified - this is an improvement in comparison to the previous financial year where the institution had findings on payments not made within 30 days and material adjustments to financial statements submitted for audit.

Status of internal control

Two areas of concern were highlighted but which would not affect the audit reported but still required attention to prevent them from materialising and affecting the audit report. These areas were daily and monthly controls and review and monitor compliance.

Financial Health

No material uncertainty exists of that the auditee can continue to operate in future

Fruitless and wasteful expenditure

This increased over two years from R2 419 in 2018/19 to R34 297 in 2019/20 period. Fruitless and wasteful expenditure incurred related to the following: cancellation of trips (accommodation and flight)- R16 041, incorrect order issued to service provider – R13 000, cancellation of tender – R1008 and interest on outstanding payment to Department of Public Works (DPW) – R4 248

Irregular expenditure

Deceased over two years from R7.6m in 2018/19 to R201 216 in 2019/20. The non-compliance identified in the 2019/20 financial year, in the main, relates to: payments to attorneys above the agreed charge out rates and appointment of service provider whose tax matters had not been declared by the South African Revenue Service to be in order.

Most common findings on supply chain management:

-Quotations awarded to bidders who did not submit declaration of interest.

-Payments made in excess of approved contract rates

-Services procured from a supplier whose tax matters had not been declared by the South African Revenue Service to be in order

Recommendations

To the institution

• Strengthening of review controls within recording and reporting of financial and performance information to ensure the correctness of information reported.

• Continuous follow-ups with suppliers to ensure that invoices are timeously submitted to the institution.

• Management should also continuously monitor the audit action plans to prevent repeat audit findings.

To the Portfolio Committee

• Request accounting officer to provide feedback on the implementation and progress of action plans to ensure repeat audit findings are avoided and the clean audit outcome is maintained.

           Discussion

Ms Mofokeng asked about what was said earlier by the Chairperson that the entities of the Department of Justice are not doing well. She wanted to commend the OCJ and PPSA for their audit outcome. What is needed is a follow-up on the issue of Information and Communication Technology. She also noted that the report of the OCJ states that the Deputy Director-General’s (DDG’s) position is still vacant.

Mr X Nqola (ANC) said that the Committee needs to instruct the SIU to go in the right direction.

The Chairperson commended the good work done by the PPSA and OCJ. For example, in 2019, the report the Committee received showed that they had achieved 50% of their targets, and the following year it was 74% of their targets, and now they have achieved 89% of their targets. There is a relationship between that achievement and their improved financial management. For the first time in the 25 years of their existence, this is the first good audit report that they have received. The OCJ is also leading by example.

He acknowledged the presence of the acting DG of Justice – the Department needed to learn from the best practices of its sister organisations. The Acting Director-General (DG) was asked if she had already met with sister organisations.

Responses by the DOJCD Acting DG

Ms Kalayvni Pillay, Acting DG, DOJCD, said that she had not met with the other entities yet but there is a planned meeting with the PPSA in the next few days. There was a briefing a few months ago, but a serious meeting of the justice cluster with the Minister will be convened soon after these meetings.

The Chairperson said that these matters have been raised more than twice but nothing has been done. Entities such as Legal Aid SA has achieved a clean audit report for 19 years and received the Employer of Choice for 11 conservative years – the Committee has been saying that DOJCD needs to learn from these examples – the Committee has been raising this for more than a year. ‘Are you too proud to learn from the people you are working with’?

Ms Pillay responded that that was not the case. She thought the Chairperson was referring to the current audit outcomes. There is an entities’ forum that the Minister convened for Justice, and has had one meeting during the term. There were also other meetings before this.   

Then the Chairperson asked why there have not been any improvements in her Department despite having these meetings.

Ms Pillay responded that over the past few years, in the Department’s presentations to the Committee, it had indicated its challenges as far as human resources was concerned. Unfortunately, the Department has had serious challenges concerning senior management and in particular, had an Acting DG since October 2019. The one year without the Accounting Officer has had a very negative impact on the Department as far as its performance and stability is concerned.  Above that, the budget cuts in the Department over the years, cut staff in critical areas. The Department is trying to regroup and show that positions in key areas are filled – this will address the question of leadership instability. The decision on the DG is awaiting Cabinet’s attention. This instability affected the Department’s negatively.

The Chairperson asked how the Department could use budget cuts as an excuse when it underspent about R764 million and then said this was due to underperforming. Additionally, the Department has just appointed the DDG for Corporate Services but the mess has been around since 2016.

Ms Pillay said that large portions of those amounts are used for filling the post of Magistrates and it is out of the Department’s hands. As far as the DDG for Corporate Services is concerned, before the position was filled on 1 September, the process took a long time and this was a concern. There is an ongoing effort to address these deficiencies in the filling of vacancies that occurred in the previous financial years and which have affected the Department’s performance.

The Chairperson said that the Committee would be engaging with the Minister on Friday because these responses are grossly inadequate and the impact is that the Department is not meeting its targets which mean that South Africans are not getting their services and it is not something to be taken lightly. There has to be greater attention paid to the DOJCD as it has been established to ensure that the resources of the state are utilised efficiently and prudently so that people get the services they deserve. The Department and the Committee must work together to see that there is improvement as shown by the PPSA and OCJ. However, the Committee is concerned that the two departments have huge budget allocations yet are without proper accounting authorities, leadership instability, and have high vacancy rates - this is very concerning and without consequence management, they will not get far.

OCJ 2019/20 Annual Report

Mr Itumeleng Malao, Director: Monitoring and Evaluation and Reporting, OCJ, took Members through the presentation.

Overall performance overview

For the 2019/20 financial year, the OCJ had 20 planned targets of which 14 targets were met translating to 70% were achieved.  This was a slight decrease from the previous financial year when 18/20 targets were achieved (90%).

Key achievements in 2019:20:

-The Department achieved an unqualified audit opinion with no material findings

-Vacancy rate of 8.9%: below 10% target set by government

-Opening of Mpumalanga division of the High Court

-Combined assurance plan in 24 superior courts

-Piloted CaseLines solutions in Gauteng division of the High Court as part of court moderninsation

-Fraud prevention strategy in 24 superior courts

-115 skills-enhancing judicial education courses for judicial officers and aspiring junior judicial officers against a target of 80

Mr Malao took the Committee through the performance per programme

A summary of financial performance was also provided.

[see presentation attached for further detail]

Discussion

Mr Horn congratulated the OCJ for a job well done. His first question was based on the continued development of the surrounding ICT and asked if Department could brief the Committee on the CaseLine pilot project even though it was not finalised within the financial year and hence not included in the Annual Report. However, through media, the Committee and the public looked through the CaseLine as a means of drawing answers. Based on what they learned through the media it is not clear whether the CaseLine is the answer or not. Secondly, have conclusive decisions been made by the OCJ as part of the solution going forward’? Was there a proper analysis of what went wrong in North Gauteng? To what extent was the problem ascribed to the result of human resource failure? To what extent was the pilot project in North Gauteng hampered by the ICT structure and to what extent does the intermittent provision of electricity in South Africa, known as load shedding, affect the efficacy of the CaseLine system during the project?

Ms Mofokeng wanted to know if there any plans to amend the rules of the court to cater for the online civil procedures and even new rules for traceries.  The Department is doing well in terms of its finances yet has a high turnover of staff in supply chain management - was that problem rectified? On the issue of a performance agreement, how far is the Department in the bargaining council as some senior management members did not sign’?

Ms Newhoudt-Drunchen, regarding ICT, wanted to know what the positive outcomes were and if those outcomes can be replicated in other courts too as per the target.

The Chairperson also asked whether any international benchmarks were done especially with developed and developing countries with issues of court modernisation especially with countries such s India that are very good in ICT, but also share the common law in the legal system as South Africa doe. What lessons has the Department learned from COVID-19? To what extent can the Fourth Industrial Revolution be integrated to improve the system? He asked for the Committee to be furnished with that information.

There is also the issue of security in the courts and the fact that the Department talks about patrolling private security services even those that are not South African. The answers are not satisfying; the Committee needs to discuss this next year. Especially with what happened in the North where the court officials were getting threats - this can affect impartiality. The issue of the awareness programme of the judiciary officers and prosecutors is of utmost importance for the administration of justice as well.

Responses

Ms Memme Sejosengwe, Secretary-General, OCJ, said that with regard to the performance relating to the senior manager, the matter related to a manager who has a dispute regarding the bargaining process in the labor relationships forums.

Mr Casper Coetzer, CFO, OCJ, said the high turnover was in the court administrative environment for some core functions such as the registrars. The SCM is stable; with no turnover.

Mr Nathi Mncube, Chief Director: Court Administration, OCJ, said that on the issue of CaseLine in ICT, automation of courts is one of the Chief Justice’s priorities supported by the heads of court. It is a matter that has been worked on for quite some time to ensure that most of the court processes are automated. Court online has two components, the first is the Case Line Management (CLM) dynamics, which members of the public can interact with. It is undeveloped due to some delays over the past months. It is bound to be finished and piloted by April 2021. The second component is the backend of the court line commonly known as CaseLine, where it involves evidence management. When there was a delay in the CLM dynamics, a decision was made to say; Cas Line is mostly used by judges and can be used because it is readily available for pilot projects. Then it was decided that it would be implemented in Gauteng; however, there was never any sign given in anticipation that the CaseLine would be implemented and piloted on its own because that was not what the Department sought out to do. It was because of the circumstances that prevailed at the time and it was thought to be part of the solution that could be implemented.  

However, in Gauteng, the Department became creative and the resident judge allowed litigants to load cases on to the system. There are lessons learned from the pilot project of using CaseLine in Gauteng; there were complaints that the solution was not meant to be implemented in the manner it was did. But it assisted during the lockdown - it is not meant for litigants to load documents on it so many challenges were experienced. It will not be advisable to implement it in isolation. By June 2021, an end-to-end solution, which is Court Online, would have to be implemented where litigants would load documents and for example, and a summons could be issued online. Court Online rules can be changed to align with court proceedings and processes. The resident judge is in charge of changing the rules and when piloted next year, the rules will be ready. If it does not happen, then the judge in charge can give a guideline on how the process should be conducted at the court.

Ms Sejosengwe said the matter of ICT was raised with the Chief Justice. The Committee’s concerns about security in the courts were noted. The Department has to come to account on this. On the awareness programme, the heads of courts have already assisted on this matter which they have discussed extensively and acted on the same sentiments which the Chairperson has raised. They have put in place a plan on their side to have an awareness programme for the judiciary established. It is one of the things which will be shared by the Chief Justice. Regarding international studies, the Chief Justice and the team of judges did take students abroad to look at various countries’ modernisation of the courts strategies. This was happening in other jurisdictions and various lessons were being learnt there. Countries such as Singapore and Malaysia, and at some point judges from Singapore, came to South Africa for a workshop with the judges.

Closing Remarks

The Chairman thanked the Department for its presentation and the endeavor to work on the comments made by the Committee to help improve the performance of the OCJ. He promised to help secure a meeting, through the Office of the Speaker, with the Chief Justice so that Members of Parliament may have a meaningful engagement with the Judiciary and the Chief Justice regarding some issue which the Committee thinks are of mutual interest between the two parties. Early next year, there will be another meeting between the Committee and the Department of Justice to discuss the issue of security which is very important.

Committee business

The Chairperson pointed out that the Committee had not yet received permission from the Speaker to advertise for the vacancy of Commissioner of the South African Human Right Commission whose previous holder, Ambassador Priscilla Jana, had passed away. They have received the go-ahead to advertise for the vacancy as the term for the current holder will be expiring in February 2021. However, the Committee wants to have the two vacancies advertised together so they are waiting for the go-ahead from the Speaker.

The other matter is that the Committee has not received the Correctional Services Amendment Bill yet. It was sent to the Committee for information purposes and there was a briefing but for the Committee to advertise the Bill for comments, it must be formally referred.  The Committee has been advised that it is still with the State Law Advisors so it cannot be advertised until it has been referred to the Committee. The challenge with it is that there is a deadline and the Bill must be passed by both the National Assembly (NA) and the National Council of Provinces (NCOP) and assented by the President before the 21 May 2021. Looking at the NA and NCOP processes, and the looming end of year recess, there is panic that the Bill may not be passed in time.  This will result in a gap in the law and Parliament is going to be in the spotlight. The necessary pressure has been put on the Executive.

The meeting was adjourned.

 

 

 

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