National Treasury, UIF, Compensation Fund Annual Report non-tabling: with Ministers

Meeting report

The Chairperson explained that the meeting was meant to have been physical as the virtual arrangement tends to bring complications. He apologised for the change in the arrangement. He welcomed the Minister of Employment and Labour Enoch Godongwana. He explained to the Committee that Treasury’s presentation is still not available. He handed the platform over to Minister Thulas Nxesi.

Minister of Employment and Labour opening remarks
Minister Thulas Nxesi explained that the Deputy Minister and Department Director-General could not attend the meeting due to commitments in Spain. This is the second time the Committee has a meeting over the shortcomings of the Funds and this shows how seriously the Committee takes these shortcomings. As the executive authority, he will always give the Committee his full cooperation even in tough circumstances. He flagged the fact that the annual reports have been submitted late to Parliament for two years straight. This is a critical part of the progress reports.

Unemployment Insurance Fund (UIF) briefing
Mr Teboho Maruping, UIF Commissioner, stated that the presentation covers service delivery challenges, Special Investigation Unit (SIU) investigations and feedback on some of the case outcomes, progress on irregular expenditure investigations, ICT challenges, and call centre progress. The issues that bother the UIF as an institution are the negative reports about their investments, delays in the follow-the-money project implementation, late submission of financial reports, UIF liquidity and poor customer experience.

Mr Teboho Maruping reported on the 12 priority areas identified to enable a UIF turnaround. This included ICT, dealing with irregular, fruitless and wasteful expenditure (IFWE), resolving speedily fraud and risk management cases. Progress is being made on majority of the priority areas.

He reported on the qualified audit opinion received by UIF which reveals that the quality of its annual financial statements (AFS) remains a concern. Its financial health is also a concern as its financial position has regressed. Information technology and its audit action plan remain a concern.

The UIF received a disclaimer audit opinion in 2016/17. The reason for the audit disclaimer was the investment opinion impacting the cash flow and how the UIF accounted for its financials. The UIF had an aggressive investment action plan with the Public Investment Corporation (PIC) in the 2017/18 which resulted in the UIF receiving an unqualified opinion. This shows that it is easier for the UIF to receive a better audit opinion if PIC does what is expected of them.

He stated that the unlisted investment portfolio is a nightmare. Engagements are being had with National Treasury and the Accounting Standards Board to see how the investment portfolios can best be treated.

Progress is being made on irregular expenditure. The UIF has already started the process of disciplinary consequence management. An SOP has been developed in terms of the Public Finance Management Act (PFMA). The UIF has also developed and utilised a commitment register and a prepayment checklist. The only area that remains a challenge is Covid-19 TERS.

On actions being taken about the Fund's investments, the UIF has consulted with various stakeholders to ensure that the technical opinion that is being developed to treat the unlisted investments is credible. The key stakeholders are National Treasury and the Accountant General.

A detailed review procedure has been developed to use the management accounts of the companies it invests in. There are still a number of companies whose financials are not ready. The Fund has a balancing act to do in that the unlisted investment portfolio is intended to create jobs and the risk of the review is that the Fund may withdraw from the unlisted investment portfolio that creates jobs and compromise the Fund’s very mandate of creating jobs.

Auditor General South Africa (AGSA) does make a finding that there is a problem with the record keeping in the UIF. The poor record-keeping is due to the UIF struggling to get AFS from these companies it has invested in. Working papers have been developed for the review of valuation reports and management accounting policies. The project plan is to deliver by 31 March 2023.

On service delivery, a project plan with timelines has been submitted.

On investigations, charges, and implicated officials, he stated that names were not provided due to the risk of contravening the Protection of Personal Information Act. The status of the case has been provided.

The Chairperson remarked that the entire matter of holding names in confidence does not fly with this Committee.

Compensation Fund briefing
Mr Vuyo Mafata, Compensation Commissioner, presented on its audit action plan, the unlisted investments, litigation and the forensic investigations. Revenue, medical benefit claims, and investments are the three main areas that contribute to the negative audit outcomes.

The audit action plan includes monitoring the controls have been designed and 84% of audit readiness activities have been implemented. To prepare financial statements that are materially free of misstatements, the financial statements have been delayed to ensure that the necessary work is completed, that all the supporting documents are presented, and all technical issues resolved. Engagements are being held with National Treasury on several elements such as revenue and investments. The conclusion of these activities will lead to a point where the Compensation Fund can submit financial statements.

The financial statements are needed in order to consolidate the investment companies AFS into that of the UIF. The financial statements need to be reviewed for completeness and accuracy. This was not done at the time the Fund received most of the financial statements. Auditors have been hired to do high-level review work on these.

On the investments and unlisted investments, he stated that the three instruments the Fund invests in are equity in a company, debt instruments, and investing in private equity funds.

On progress in receiving AFS from the 11 companies the Fund has invested in, three companies have not submitted yet. This should not impact the consolidation of financial statements. The Fund is expecting to receive AFS from the three companies by the end of November 2022.

Discussion
Mr A Lees (DA) stated that one gets the impression that we are dealing with new organisations with no history when one is listening to the presentations. It is astounding that the Committee is hearing about all these proposed changes. The annual reports are due by the 30 September and that must be done. He expressed concern over the Auditor-General’s role in this. Why is the audit report not simply issued and tabled in Parliament when the 30 September deadline has been reached and management letters have been issued?

Why is the Auditor-General allowing entities such as the UIF and the Compensation Commission to drag this out indefinitely? Audits are done at the end of the financial year on 31 March and that is the time when assessments must be done. This is not an opportunity for the auditee to go and fix things before the audit is completed. It is unacceptable to state: “once we have everything in place we will be ready to complete the audit and submit the annual report”. One should be at a point where one charges the Director-General as the Department accounting officer for delinquency. National Treasury has issued directives about annual reports. We drafted a Private Member's Bill to deal with this very issue. The Bill was rejected and now this issue goes on and on. Can the Auditor-General comment on why the audit report is not tabled and the Auditor-General continues to negotiate.

The unlisted investments paint a similar picture of items still needing to be completed before the audit deadline. He was astounded to hear about management accounts and the Generally Recognised Accounting Practice (GRAP) standards. Surely we have learnt lessons from Steinhoff where even the audited financials were fraudulent.

Now we are supposed to have some sort of assurance from the management accounts of these investment companies? It is astounding that we can even think of going down this route. Let alone say this is the answer for these delinquent companies and investments we are making which cannot even produce proper financial statements. We are investing huge amounts of money there. Are any jobs created by this investment as the objectives state? You are looking at management accounts. Pieces of paper drawn up by the very people who might be committing fraud. These unlisted investments and loans are out of control. Why is the UIF and the Compensation Fund dealing with obtaining these AFS and reports from these investees? The Public Investment Corporation (PIC) should be doing this. The PIC must be held accountable and pulled into this debate. These investments are done by the PIC on a mandate from the UIF and the Compensation Fund. He did not understand why the UIF and the Compensation Fund as clients are not holding the PIC accountable and ensuring that the investments are withdrawn if they do not obtain the required documents.

In the previous engagement with the Compensation Fund, Mr Mafata said that entities such as sole traders and corporations can register online. It does not work. You get an error message that says this company cannot be registered online when you get to the end of the registration process. The only businesses that can be registered online are companies registered with the Companies and Intellectual Property Commission (CIPC). How is it possible to inform a parliamentary committee that it is possible when in fact it is not possible? Perhaps the Committee should do a dummy registration exercise in this meeting and see what happens.

The CompEasy system the Commissioner referred to comes across as xenophobic. Clients are required to produce work permits and passports whereas there is no legal requirement for that. What is the legal basis for requiring these documents when dealing with foreign employees? The bank details of registered employers have not been migrated to the CompEasy system. It takes months and months to get the bank details into the CompEasy system through the whole process that now has to be followed. Why is that the case?

When claims are paid out by the Compensation Fund (CF), there is not a detailed remittance advice with the payment. The person receiving the payment does not know exactly how that claim was adjudicated or how the amount was calculated. The old system used to provide a detailed remittance advice.

There has been a lot of media coverage on visits to farming enterprises in his constituency to check the adherence by farming employers to the labour laws. That is important. Can we get a report from CF and UIF as to what the status is now? What is the total number of employers registered in the agricultural sector by category type of farming? How many of those are up to date with their annual returns and payments? We need to ensure that these employers follow the law and if this is a massive problem that SCOPA also needs to get involved in. He supported the Chairperson’s comments on the claims of confidentiality.

Ms V Mente (EFF) stated that she has interest in the UIF document which speaks about the SIU investigations and the steps taken by the Department in this regard. She would like to get extra information as the document itself says that the companies are grouped together and then an official is responsible for all companies. It is interesting that there are two officials who received a sanction of a month’s salary and then the rest is final written warnings. These are people that have been found guilty of a serious transgression who falsely said that there is a sole provider for a certain service. That is fraud. Did the Department open criminal cases? You cannot have a senior officer breach all the laws of the Public Finance Management Act (PFMA) and have an accounting officer and an accounting authority that clearly states the roles and responsibilities of this too that there was criminal intent on the side of those that have transgressed. Are there criminal cases against such officials? If not, why? How do you give a final written warning on a person who takes companies and fraudulently states that they are sole providers?

The Chairperson reminded Minister Thulas Nxesi about their previous conversation about perennial disclaimed audit outcomes from the UIF and the Compensation Fund. The Committee had directed that a forensic investigation must be done in those spaces because of the poor audit outcomes, some that went back ten years. What is the progress on that? The Department needs to provide an update on how far the implementation of that Committee directive is.

Compensation Fund response
Mr Mafata corrected the Chairperson that the challenge with the AFS of investing companies is not about the inability to produce AFS but rather about their timing. There is a difference in the date of their financial year end compared to government's 31 March. This requires the CF to wait for them to finish their audits. If that poses a risk for CF completing its financials on time, then it relies on the management accounts for audit review and the auditors would then go back and check if there have been any material changes between the management accounts used for the review and the final AFS. The companies are in good standing and are producing the relevant statutory AFS as required by law.

On sole proprietors, the online registration system is working. There may be an individual matter on how they are operating the system or with the verification of that particular person as a sole proprietor. The system is working and he does not know of any significant challenges about this. Domestic employers have been able to register themselves on the same system.

On CompEasy, as part of the controls required by the Compensation Fund to implement over claims it adjudicates, they have an automated control that allows them to validate any ID directly through the population register from the Department of Home Affairs. However, the CF is not able to validate foreign passports as there is no South African authority that maintains a database of foreign passports. As a result, we require these documents from claimants who are foreign nationals as an additional control as we do not get this from Home Affairs. This is not to discriminate but to compensate for this control to address a deficiency identified in our claim process.

There have been instances where employer banking details have been migrated and they have to follow the process to get it updated on the CompEasy system. This creates discomfort in employers in some cases as they are not happy with the turnaround time for the update of their banking details.

On the remittance advice, he replied that it is not correct that there is no remittance advice. The remittance advice is sent to the medical service providers after every payment round. Where medical service providers require detailed line items for each of the items paid, they are able to request that information is more detailed. The challenge with the remittance advice is that medical service providers use different third parties to submit claims. That information does not get updated with the Compensation Fund when such changes happen or when employees leave that employer. The system will continue to send a remittance advice to the last submitted email address. If a person has left an employer or the medical service provider has changed the provider who submits claims on your behalf, if that information does not come to the Fund, those medical service providers would obviously not get the remittance advice. This information is updated when service providers state that they did not receive these.

UIF response
Mr Maruping replied that the report on the agriculture sector can be made available to the Committee within the next seven days.

On the feedback of how many in the agriculture industry are registered, declaring and making contributions and if they are up to date, he would need to be assisted by the Committee on the confidentiality of the names in the report. He has the names in front of him and could give them to the Committee now. He needed the Committee’s guidance about the fact that it was an employee relations matter. He does not have consent from these employees and he might interfere with their right to privacy. The names of all people affected by the Special Investigating Unit investigation can be provided if the Committee gives him privacy guidance on this.

The Chairperson told Mr Maruping that he can send the Committee the report as it will be fine. What he was cautioning Mr Maruping against was the assumption that there are things which must be kept secret. These reports are about public funds. Send the report and we will look at it in a holistic manner.

Minister response
Minister Thulas Nxesi stated that he is comfortable with the Chairperson's response that the UIF should not be afraid to give the report. The report will be given with the hope that the UIF will be protected. They are in a very litigious country and people can take them head on.

On the Chairperson’s questions about investigations, unless he is wrong, the investigations into the UIF were left to the SIU and the Hawks. Thorough investigations were done on UIF’s management. A report that did not flag any criminal matters came back to the Department. The report spoke about issues of negligence. We were able to clear the Commissioner and the Chief Operations Officer. A process is being followed on the Chief Financial Officer. All the investigations were conducted by SIU, the Hawks and Fusion Centre.

The Chairperson replied that he will remind the Minister, if not now then later in writing.

Auditor-General South Africa (AGSA) response
Ms Kgabo Komape, AGSA Business Executive, replied why AGSA is allowing entities to continue working on and editing their financial reports when the reports are due and why it does not give them the same treatment it gave to South African Airlines (SAA). AGSA has started tabling where entities are delaying the process over a period of time. The UIF and CF have not submitted their 2021/22 AFS. The audit has not been done per se. The UIF and CF Commissioners stated that they have the intention to submit their AFS by 31 March 2023. This means that they are a year behind all other auditees.

There has not been audit for the two entities meaning there has not been anything for AGSA to conclude on.

Further discussion
Mr Lees stated that his faith in the AGSA has been restored. He was under the impression that something had been sent for audit at the very least. This reinforces his view that the delinquency of the two Commissioners and the DEL Director-General is very serious. It seems that audits from prior years have not been sorted out. He thanked AGSA for its response. It is obfuscation that the Committee is told one thing about management accounts and then later told that all the financials are being received and the management accounts are not needed and financial year timing is the actual problem. We need to get a clear picture when we get these two Annual Reports.

The Chairperson stated that there has been a lot of word salad taking place. He suggested that moving forward, the UIF and CF should be given separate meetings so the Committee can unpack what is happening in greater detail. It seems as though the Committee is dealing with totally new entities that have no history and have just been established. The consequence management is not consistent with what has happened historically and currently. He noted what had been stated and the Committee will communicate with the Minister in writing about the issues raised. The Committee will engage with the SIU and the Anti-Corruption Task Team. Follow up visits to the Compensation Fund and the UIF should be prioritised. Things are not moving with the required seriousness and urgency. We can leave things at saying that the Committee has listened to the presentations but has not understood the presentations. He stated to the Minister that it is worrying that two audits - 2021/22 and 2022/23 - will have to be done concurrently. The Committee has listened and will communicate with them.

The Minister replied that the Department plans to meet the entire management of the two entities with AGSA. He is happy that NEHAWU is present. He requested the Committee consider calling the Department to report-back on the progress and the time frames it would have put in place after that meeting. He would not mind if the Committee calls them back even before the year ends.

The Chairperson stated that DEL should be given time to have the meeting with the entities and AGSA. What the Committee can do is receive monthly reports. The first report can be received on 1 December. The Committee will engage with AGSA when it is necessary. The Department will be kept on a short leash when it is needed. A consolidated report on progress between now and the end of the month should be provided. The oversight visits will be prioritised. The people who are at the forefront of “fixing the problems” have been the same people present when the problems occurred. That irony on its own tells us everything that we need to know. The phrase “shape up or ship out” must be at the forefront of the Minister’s mind as he doubts that the people working with the Minister are fit for purpose.

National Treasury
The Chairperson noted the small number of slides in the National Treasury presentation. It is ok that it is a five slide presentation. The presentation should not be focused on the quantity of slides. He handed over to the Minister and his team to explain why National Treasury had not yet tabled its 2021/22 Annual Report.

Minister of Finance Enoch Godongwana apologised for the number of slides and agreed that the presentation should have been made available at a reasonable time before the meeting. By law, the Minister had to submit a letter the Speaker if it has not tabled the Annual Report to Parliament by the 30 September deadline. He has asked the Treasury officials led by the Acting Director General to explain where the challenge lies.

Mr Ismail Momoniat, National Treasury Acting Director General, apologised for the late submission of the presentation. He also emphasised the importance of meeting the Public Finance Management Act (PFMA) deadlines for annual reports as they promote transparency and accountability. The delay in tabling annual reports is not due to poor financial management or disputes between auditor and auditee. National Treasury has been working feverishly with the AGSA team to try and resolve the issues but not all issues have been resolved. National Treasury submitted its financial statements on 31 May 2022 within the stipulated deadline. AGSA provided National Treasury with findings on these disputed matters from 8 July 2022 with the first draft management report being received on 12 July 2022. Treasury has met with the AGSA team and the Treasury audit team has been kept informed. There is one outstanding issue which is being referred to the Accountant General again. Treasury hopes that process can be concluded within the next day or two. Whether this conclusion happens depends on if the two parties reach agreement.

Discussion
The Chairperson thanked the Acting DG and stated that the Committee still wants a substantive explanation as to why the Annual Report was not submitted.

Mr S Somyo (ANC) said that it is Day 32 of the Minister’s failure to table the Annual Report. This must be reviewed. National Treasury ought to be exemplary in all forms of financial accountability. He referred to the list of items the Acting DG made reference to. Its failure to table the Annual Report seems to be based on three areas. One of them is the Integrated Financial Management System (IFMS) which is a matter being handled since 2013. Therefore all financials from then on would have carried that point about its implementation of the IFMS.

Therefore, one would be interested in what is now contested when it comes to the IFMS. He understood the other two items. The IFMS item has been a finding in the previous audit too. We need to meet on that. We are trying to check if the Minister found time to respond to the Minister of Public Service’s correspondence on this same matter of the IFMS in January 2022 because the Department of Public Service and Administration (DPSA) has been part of the team looking into the success of that programme. What is it now that is making National Treasury to be locked down on such items in the audit process?

Mr Lees stated that he now understands why the former National Treasury DG, Mr Dondo Mogajane, opposed the Private Member's Bill that dealt with the late submission of annual reports just before he left Treasury. The Committee needs to know the actual details of why the report has been delayed. The Committee would be grateful to know the details of the audit disputes, even the dispute not yet dealt with. Hopefully there will be agreement within the next day or so.

Ms Mente stated that it is one thing to account and it is another to smokescreen. She is not sure how the Chairperson addressed his invitation to National Treasury for today’s meeting. The late submission of the presentation document by Treasury is unacceptable. As the Committee, we do not listen to people’s presentations. We read the presentations ourselves beforehand in order to understand and not be thrown off. She is not pleased with the five pages the Committee received because they are condescending. They are written as if it is a message to a friend because of the many acronyms. It is a very shorthand written presentation. The fact that Treasury has to come here means that the Committee knows that there is a dispute.

The Chairperson stated that the prescripts of the law allow Treasury to engage in the audit process that is happening now. He is not casting an indictment on the non-compliance. Treasury is held to a higher standard as the custodians of the PFMA. It does draw attention when Treasury does not table its annual report because it is on a higher pedestal. Treasury does need to delve into the merits and demerits of why they have not tabled so that this precedent can be avoided. Non-tabling is not the norm and should arise in extra-ordinary circumstances. The extra-ordinary circumstances need to be explained in this meeting. The circumstances need to be rational and reasonable so that the Committee can understand them to be a genuine application of the law.

Treasury response
Mr Momoniat agreed with the Chairperson’s statement that National Treasury must be held to the highest standards and that it should be an example to others. It is painful that Treasury is late with its Annual Report submission but the issues are important. He does not want any blame attached to the previous Director General who has been out of this process. He was there when the financial statements were submitted but he did not take a position about tabling of legislation. A different audit approach to guarantees was taken this year and Treasury was only alerted about this in July. Treasury then had to explain that when guarantees were issues the issues were about related parties. It was an extremely technical matter. This is not to say that Treasury does not agree on a new interpretation on guarantees but it helps if Treasury receives sufficient notice beforehand when changes are made. We have made an agreement on that through the dispute mechanism and there was a positive outcome.

On the Integrated Financial Management System, Mr Momoniat replied that he is not aware about the letter that Mr Somyo spoke about. It would be helpful if he can expand on that. He has not had involvement with IFMS therefore he does not have any challenges to raise. It was the Gupta channel ANN7 which launched an attack about IFMS through a leaked internal audit report in 2017. There have been countless investigations which is alright because National Treasury should never have anything to hide. It first went to Deloitte, then Nexus, then the Hawks, SIU and Public Protector were investigating. He had not seen evidence of one cent being stolen or spent badly. We can disagree on the process, but nothing has emerged. This is not to say that when the other investigations are completed they may come up with something but nothing has been revealed until they do. The problem Treasury faces is that the IFMS implementation, which is an important project, has been seriously delayed. The whole dispute is around a contractual agreement that government has entered into and what happens is every year when a payment is made of R68 million for maintenance and support, AGSA says that because the IFMS is not being used, it is therefore fruitless expenditure. Treasury is looking at renegotiating the contract.

While paying for the contract results in fruitless and wasteful expenditure expenditure, not paying would have similar consequences. It has become an issue. What Treasury has tried to do now is to try and see what the accounting standard is that should apply. What should the basis of deeming something fruitless and wasteful expenditure be? These concepts are not standard accounting concepts and they do have implications on whether we deliver or not. The state would face legal consequences if we were to abandon IFMS. If the current approach to fruitless and wasteful expenditure is maintained, it is still going to be considered fruitless expenditure in 2022/23 when the financials come up for audit. It is not that money is being misappropriated; the payments are in terms of a contractual agreement. The whole issue is what is the way forward on IFMS – this is a discussion that is being had. Treasury is trying to renegotiate with Oracle so that AGSA’s concerns are met. We do have differences on the accounting standard and the way in which payments are being treated in the AGSA interpretation. This needs to be resolved otherwise it leads to perverse audit outcomes. We need to find a way forward on IFMS so that it does not continue to hold government back.

Finance Minister response
Minister Enoch Godongwana echoed that Treasury cannot afford to lower the bar. It is his intention that it should not do so. Like the Acting Director-General, he is also new to the IFMS debate. This was reported to him as an agreement by Cabinet that three departments must work together on this. It seems now that those departments are not on the same page about the continuation of the IFMS. This has implications on the implementation because to provide for the rollout, you need to have a service provider, and to get a service provider, it has to be done by one of our sister departments who are not committed on the project. The State Information Technology Agency (SITA) is going to ensure that it provides Treasury with a service provider for rollout. But because we are not rolling out yet, AGSA says that the cost Treasury is incurring for maintaining these items without a rollout is irregular.

His undertaking to the Committee is that he will ensure at the end of the financial year that this impasse is resolved so that we are able to continue. A meeting has been set up with the relevant ministries. The meeting will be had in November upon the Minister’s return from the G20. He will find the letter that Mr Somyo spoke about. Corporate services is delegated to the Deputy Minister. The day to day operations of the Department are the Deputy Minister’s function; therefore, he could not discuss the dispute between Treasury and AGSA because he wants to maintain neutrality on the issue. The matter of the difference between the three departments should be resolved in November 2022 so that this does not persist into the next financial year.

Further discussion
Mr Somyo thanked Mr Momoniat and the Minister for their responses. If he looks into the IFMS programme schedule that has been provided, it has three phases ending 2015, 2017 and 2022 which is the programme’s closure. Is that programme in existence? Are you anticipating to close it come December? How much have you paid for it so far if it exists? That same contention is in the letter addressed to the Minister signed on 28 January 2022 by the previous Minister where she states the withdrawal of DPSA is due to the delay in the implementation of the programme. She gives the reason that programme is sailing deeply into fruitless and wasteful expenditure. She cited the amount involved and she was totally against that kind of a result. If you do not want that to be classified as wasteful expenditure, where are you currently with the IFMS programme? The closure and the successful implementation of the programme is supposed to be in 2022. We know there was already a failure in the dissemination of one of the critical instances of that programme in December 2020. Where are we? Is this project management weakness that is being made into a financial problem. That is where we are. Your failure to submit the Annual Report sails on the definition problem to which you subject other departments.

The Chairperson stated that the Committee needs a full presentation on IFMS in all its material realities. Mr Momoniat said the IFMS programme amount to wasteful expenditure whether payment is made or not. Where are we with this thing? The IFMS was a discussion in the Fifth Parliament and is still a discussion today. It is the greatest implementation failure in the financial management space of this country. It is inconceivable how we arrive here. It is open ended and is a revolving door. An engagement must be had with the three departments.

After all is said and done, when are you tabling your Annual Report to Parliament so that this matter is brought to a conclusion? The audit dispute management has to arrive at a logical conclusion of some sort. The negotiations and discussions are not alive for eternity.

Mr Momoniat replied that he chaired the steering committee of all these entities and they have been told that the letter from the previous Minister is in the process of being withdrawn. It is a problem that there is a change in approach every time there is a new head yet there is a contractual commitment from the preceding government. Honouring such contractual commitments is a fundamental rule unless you are going to take steps to change it. The next step for the steering committee is the November meeting that the Minister refers to. What is the role of the executive authority of ministers when there is a procurement? All of those things come to play. It should just be about implementation. He had also been told that there were three tender processes that Treasury had to do through SITA and all three failed. The project is actually stuck. The Minister had asked him to look into how we can modernise our procurement system for infrastructure.

A Treasury representative replied that the project had been re-baselined prior to the 2021/22 financial year. That re-baseline is reflected in the MTFS with a final rollout date. What should have been done this year, in terms of milestones, was to appoint a service provider through SITA and then to establish two pilot projects in the Department and two in the provinces. Unfortunately, Treasury has attempted three times to appoint a service provider through SITA and this has not yet been successful. Our attempt during 2021/22 unfortunately resulted in the bids received being significantly higher than the budget allocated. Modernising and automating our financial IT systems is not only to address the ageing systems currently running but also to implement recommendations about better monitoring and more intelligent reporting made by a number of commissions. Engagements are being had with SITA about the appointment of a service provider to be done by Treasury instead of SITA. Engagements are being had with Oracle about the support and maintenance. The Committee will know that the purchase of licences was a once off payment in 2016. The issue at hand is the support and maintenance that is being paid. We have equally engaged with other entities and provinces to be able to bring resident skills for the required development to start the rollout. The process has been started in the Western Cape. We are looking at a number of mechanisms to address the IFMS delay.

Mr Momoniat stated that Treasury would welcome detailed input on IFMS after November. We have to resolve these issues, implement the pilot projects, and renegotiate the contract because to now implement something that was meant to be implemented in 2017 – even the contract needs to be updated. We are having those discussions with the providers, in line with the current contract. We are trying to see what can change within the rules to modernise it.

On the Annual Report, Treasury was going to have a meeting with the AGSA unit this morning so the date had to be changed. We can move with speed if the issue is resolved. If the issue is not resolved, then we do have to take a view about how we resolve this because this is going to come up next year as well if it is not resolved. He does not have the answer but we can inform the Committee and the Minister about the outcome of our discussions before 4 November. The Minister had depended on the 4 November but it is dependent on the outcome of this process.

Mr Somyo said that the resolution of the matter is not based on the book, it is based on the project realisation. It is going to arise every year if not realised. This is wasteful and fruitless expenditure.

The Chairperson was of the belief that everyone is in agreement this cannot be a revolving door.

The Minister replied that this is exactly what he is saying. He has to find a resolution for the project before the end of the financial year. He agrees that if the issue is not resolved there is going to be a continuation. He is undertaking to find a solution for the resolution of the problem before the end of the financial year.

Ms Mente stated that she went back to the Committee minutes of 2017 and 2018. In 2017 we were moving from IFMS I, 2018 we are going to IFMS II – there is Oracle and money is flowing. The previous Director General explained how the money was flowing. Now no one from Treasury gives a clear reason why it is not fruitless and wasteful expenditure. Why is Treasury disputing AGSA? The matter is clearly based on the IFMS project which is not giving fruitful results. The only thing we do is pay, maintain and hire service providers. Even with the forensic outcomes, no one has been taken to task. Not taking someone to task means that you are disagreeing with the investigation outcomes. Therefore, you brought someone on board who you do not have confidence in. The fact that you cannot charge anyone from that investigation is wasteful expenditure.

The fact that you continue to bring other service providers on board for a system that is not delivering is fruitless and wasteful expenditure. Give the Committee a reason that it is not wasteful and fruitless expenditure. The Department is not convincing the Committee that money was not spent in vain. Was the money not spent in vain, was there value for money for any expenditure thus far since 2017 to date? If the Auditor General is only making this finding now, what was the finding on the IFMS project in previous years? What was Treasury’s standing? We cannot sit and waste time. This is fruitless and wasteful expenditure.

The Chairperson said to Mr Momoniat that the crux of the matter is that the Committee is increasingly worried about the extent of the delay of the Annual Report submission. Now disputes are arising. We will end up with negotiated audit outcomes and that is not ideal. This will become your headache if this precedent is set and entrenched. Let us wait for the meeting between Treasury and AGSA and then we will devise a mechanism about this IFMS issue so that it can find new expression in the parliamentary process with all three relevant departments. This is so that the new reality is explained and the matter can be closed. You are not going to find joy at SITA because SITA itself has its own headaches. You cannot expect a headache to solve your headache. The Executive must look at this. The problems in one entity set a domino action into effect which stops other processes. The IFMS issue is a case of déjà vu for me. It is exactly like Medupi and Kusile. He shared the same sentiments as the other Committee members.

Minister of Finance Enoch Godongwana replied that there are three issues, the first being the tabling on 4 November after the meeting with AGSA. The second being the overall presentation on the history of the IFMS and the cost. The third issue is the overall resolution of the IFMS programme between the three departments, which he has undertaken to lead and ensure it takes place. We would like the Committee to give us time to do those three things and then we can return to the Committee.

The Chairperson stated that the Minister’s response is fine. What the Committee wants is the Annual Report, the conclusion of the audit process, and to deal with the IFMS pandemic. The programme is currently tight. It would be correct to get a full briefing on IFMS before Parliament rises. A date will be set for Treasury to brief the Committee to update it on the material facts. The Committee would like an updated commitment on the Annual Report tabling date so it can report to the Speaker on that.

The Chairperson thanked the Minister and his team for their presence and explanations. It cannot be overemphasised that Treasury is the torch bearer for compliance.

The Minister thanked the Chairperson for the Committee’s frankness with the matters raised today. Treasury does not have anything to hide. The Acting Director General will return to brief the Committee. The tabling will be done in the last two weeks of November. By then the tabling will be combined with the outcome of the IFMS discussions with the different departments.

The Chairperson said the meeting can possibly be joined with the Treasury 22 November meeting.

Meeting adjourned.