Hearings on Auditor General Report on performance audit of entities connected with government employees and doing business with national and provincial departments.

Meeting report

The Chairperson referred to the sensitivity of the matters under discussion and how the still unresolved conflicts of interest in the arms deal exemplified the need to ensure transparency at every level of government. He explained that the five focus areas of the Auditor-General’s Report would be addressed and invited Ms M Matladi to proceed with the first of them. 

Approval to perform remunerative work:
Ms M Matladi (ANC) noted that only a fraction of the number of designated employees (senior managers) had approval to do remunerative work outside the public sector. She asked why this was so and whether any action had been taken against those who earned income from work done outside of their public sector responsibilities.

Prof Richard Levin, Director-General: Department of Public Service and Administration (DPSA), answered that ideally, the provinces were responsible for taking action. He also indicated that the matter of directorships must be interrogated as it was not clear whether they could be regarded as constituting remunerative work. Point 8.2.1 (page 33) of the Auditor-General’s Report mentioned the need to obtain a clear legal opinion on directorship fees which seemingly were not defined as being remuneration.

The Chairperson invited the provinces to respond directly to the question.

Mr J Mgidi (Acting Director-General, Mpumalanga) answered that he possessed a list of some of the names of those senior managers who did not have permission to receive outside remuneration and explained that the disciplinary process was time-consuming. He had no figures of how many people were undergoing disciplinary procedures for this.

Ms Matladi reiterated her question as to whether action had been taken against offenders.

The Chairperson answered on behalf of the silent Mr Mgidi that no action had yet been taken.

Mr R Ainslie (ANC) suggested that the fact that action had not been taken revealed that no internal monitoring existed as Mpumalanga seemed unaware of the problem until the Auditor-General’s Report had exposed it.

Mr Mgidi conceded that their monitoring system was not working.

Ms M NaNa Magomola (Acting Director-General, North West) assured the Committee that she was not being defensive but she had received some reports of unauthorised remunerative work but, similarly, had no figures for action being taken against the guilty parties.

The Chairperson expressed a growing sense of frustration that it was not possible to engage without proper information. He required numbers of people undergoing a disciplinary process in the various provinces. He asked Pramesh Bhana (Corporate Executive of the Auditor-General) whether any figures were available for KwaZulu Natal.

Mr Bhana replied that no figures were available but a list of exceptions had been compiled where figures were incomplete.

The Chairperson then addressed the Acting Director-General of KZN and asked how it was possible that the performance audit could not be concluded in his province. He pointed out that a letter sent to him when he was Director-General in the Premier’s Office on 20 Feb 2009 had not been answered.

Mr A Govender (acting Director-General, KZN) replied that when he left the Premier’s Office there were no outstanding issues. Mr Bhana then remarked that since Mr Govender had taken office in May 2009 he had responded promptly and personally to all of the Auditor-General’s requests. 

The Chairperson then addressed the various Directors-General generally, stating that a pattern had emerged which suggested that no awareness of the problems identified in the Auditor-General’s Report existed prior to the report being tabled. He required the Directors-General simply to inform the Committee of action taken in cases where there had been unauthorised external remuneration.

Ms L Mashiane (COPE) added that the Committee had to be informed who was actually involved in conflicts of interest. She found it incomprehensible that no action had been taken since August 2008.

Ms Matladi continued with her previous line of questioning to ask whether the Directors-General had systems of control to monitor the remuneration work of their employees.

Dr Sibongile Mutwa (Director-General of the Premier’s Office in the Eastern Cape) replied that her department had compiled figures for employees trading with government. Ms Matladi asked whether the 230 employees doing so without approval had been picked up. To which Dr Mutwa answered unequivocally that she had figures but two departments had not been included in those figures yet.

Dr Ellen Kornegay (Deputy Director-General in the Department of Public Service and Administration, tasked with Governance and Anti-corruption) stated that she possessed a much more current report going up to 2008 which should serve as a baseline. She said that the problem of non-disclosure arose from the fact that the financial disclosure form itself did not require public servants to disclose outside remuneration and her department was working on closing this gap. Prof Levin added to this that in 2003 the state law advisors had commented that under certain circumstances, directorships could not be regarded as remunerative work.

Ms Odette Ramsingh (Director-General of the Public Service Commission) noted that amendments had been made to the Public Finance Management Act (PFMA) about this but had not yet been incorporated into the financial disclosure form as they were awaiting approval from the executive.

Dr Kornegay commented that this should not prevent departments and provinces from disciplining employees because the findings of the Auditor-General required action. Directorships were clearly for the purpose of earning income, in her view, and there could be no confusion.

Mr N du Toit (DA) commented that an untested legal opinion obtained in 2003 was not what SCOPA expected of those who helped oversee the allocation of public funds. He underlined Dr Kornegay’s statement that the question of remuneration was simple: if SARS would tax it in the hands of the recipient, it was income. He asked the Directors-General whether they were willing to follow up on these outstanding issues and how long they expected the process to take.

In a growing spirit of voluntary disclosure, Ms Moira Marais-Martin (Acting Director-General of the Northern Cape) revealed that all her department monitored was compliance in terms of the forms sent to the Public Service Commission; they were not currently able to analyse the forms. She candidly admitted that her department also did not do enough in terms of monitoring outside remuneration and conflicts of interest.

Ms Matladi pressed the Directors-General further, asking them whether they were making their employees aware of pending disciplinary action and how long it would take to act against them. She was also concerned that members who resigned might escape action.

Prof Levin admitted that the Auditor-General’s Report pointed to a lack of awareness of the problems and although there had been national awareness campaigns to raise awareness, departmental campaigns had not been undertaken. He confirmed that resigned members could not be prosecuted or disciplined.

Ms Matladi was disgusted that these members would no longer be answerable for the misuse of public funds.

Mr J Gelderblom (ANC) asked at what point the Directors-General had become aware of this outside remunerative work, had they informed their Premiers and MECs and what action had followed once they had been alerted.

Dr M Nwaila (Director-General of the Free State) replied that only senior members were required to declare and their forms were given to the executive. As no one else was supposed to see the forms it was only later that they realised there were deficiencies. This was compounded by the lack of guidelines to be followed for members below director level.

The Chairperson responded to Ms Nomfundo Tshabalala’s (Acting Director-General, Gauteng) subsequent clarification that since disclosure was dealt with at departmental level, it appeared that these controls were wholly unsatisfactory. Ms Tshabalala acknowledged that deficiencies existed.

Mr Gelderblom asked whether the Director-General or MEC of the offending departments were informed. Ms Tshabalala replied that they had been and letters had been sent to the Accounting Officers of those departments, requiring feedback. Regrettably no feedback had been received so far.

Mr N Singh (IFP) said that guidelines were urgently needed as employees could effectively perform remunerative work outside the public sector with permission. This impacted on service delivery in the provinces and it was incumbent upon the provinces to interrogate the existing rules and regulations.

Mr S Makana (SCOPA Chairperson, Gauteng) urged that the Committee should demand substantive, clear answers; the lack thereof amounted to contempt of Parliament.

The Chairperson summarised the essence of this focus point with the comment that the Directors-General must agree that monitoring systems were either ineffective or non-existent. Secondly, the DPSA had not done well in managing this process; the definition of remuneration was very restrictive and it must be broadened so that action could be taken. A definitive legal opinion must be obtained on directorships so that a line could be drawn in the sand swiftly.

Mr Bhana pointed out at this point that the purpose of the Auditor-General’s management report was to uncover discrepancies which were then confirmed by the province. KwaZulu Natal had not replied to some cases for over a year.

Mr Govender replied that as soon as he had received the report he had presented it to the Premier and had called a meeting for all HODs last week to communicate the problems. Unfortunately, the Premier’s Office had been unaware of the report until recently.

Mr Gelderblom rejoined that that was precisely the problem; the Director-General had not informed the Premier until ten months after the Auditor-General’s Report had been published.

Ms L M Mashiane (COPE) remarked that the Acting Director-General was simply hiding information because he must have known about the report long ago.

Mr Bhana reiterated his earlier comment that Mr Govender had personally addressed the issues since taking office.

Dr Kornegay reminded all present that the Directors-General did not have the power to take action, instead the Ministers and MECs were responsible for doing so.

Declaration of interest by designated employees:
Mr M Mbili (ANC) commented that it was indisputable that employees should have obtained permission to work outside the public service. HODs should also have known that there were people in their departments breaking the law because the framework existed before the report. He suggested sharply that those who had not obtained permission had surely broken the law.

Prof Levin referred again to the grey area of directorships which must be clarified.

The Chairperson countered that the report suggested that there existed a culture of breaking the law in government entities.

Mr Mbili continued with his question, asking what had been done to those who had not disclosed their conflicts of interest.

The Chairperson requested that National Treasury explain the failure of their own systems in monitoring compliance.

The Accountant-General, Mr Freeman Nomvalo, affirmed that the responsibility lay with the departmental and provincial Accounting Officers to enforce compliance. In addition, it was within the ambit of the Auditor-General to pick up discrepancies.

Mr Mbili remarked that that was precisely the point, since the Accounting Officers themselves were breaking the law by not taking action. The Accounting Officers should then also be prosecuted. He found it hard to accept that the report was eight months old, yet monitoring and compliance systems were still not in place. He asked how SCOPA could assist the departments in fulfilling their mandate.

The Chairperson broadened the appeal to include the Treasury, DPSA and PSC but there was no response from the left hand side of the chamber.

Mr Mbili pointed out that the relevant Accounting Officers had not instituted any disciplinary action nor had they put systems in place, effectively tying the hands of the Committee. He expressed some disgust at what he perceived to be an arrogant attitude from the officials who did not even answer questions properly.

The Chairperson asked the members of the PSC to report on any disciplinary action taken in terms of the Auditor-General’s Report. He wished to have a list of senior members who had failed to comply which he could make available to the provinces.

One of the Directors-General responded that although the Auditor-General’s Report was dated August 2008, it had only been received in June 2009 and this went a long way to explaining their tardiness in taking action. 

Declaration of interest in bidding documentation
Mr M Steele (DA) referred to Point 7.3.3 regarding the deficiencies of the ST 12 (Declaration of Interest form), observing that the Accountant-General in Point 7.3.4 wanted to tighten the regulations even more. He asked the Accountant-General whether he would do so.

Mr Nomvalo replied that he would and that information relating to spouses and relatives of government employees would have to be disclosed on the amended forms in future. This would be done through existing Treasury supply chain regulations which made it illegal for any private business interests to remain undisclosed.

Mr Steele referred to Point 7.3.3 (d) of the Report which talked of the integration of the PSC system and the Companies and Intellectual Property Registration Office (CIPRO). He asked whether other databases had also been considered. In addition there were a number of issues outstanding, concerning large tenders and he believed that the relevant departments should be summoned to reply to specific cases.

Mr Mbili inserted a question for the Accountant-General, asking whether he liaised with law-enforcement agencies to follow up on any illegal activity detected.

Mr Nomvalo replied that he could only engage with the departments concerned and rely on them to initiate the intervention of law enforcement themselves. When Mr Mbili queried this, the Accountant-General deflected the question by commenting that the function of Treasury was to enable departments to perform these functions themselves. In his view, the oversight and enforcement role should ultimately be performed by Parliament.

Conflicts of interest:
Mr N Singh (IFP) remarked that although there was a legal quibble on the definition of conflicts of interest, nothing seemed to have changed regarding full disclosure. He asked what penalties and fines had been imposed where there were undisclosed conflicts of interest, had ethics officers been appointed and had performance agreements been amended to include matters of disclosure.

Ms O Ramsingh (Director-General of the PSC) replied briefly that there had been improvements at provincial level but a regression at national level in terms of disclosure and the monitoring of conflicts of interest.

One of the members of the PSC delegation revealed that some senior managers refused to disclose their interests and there seemed to her a lack of political will to prosecute repeat offenders. The PSC possessed a more recent report from 2007/8, in which 21% of a sample of Senior Management (SMS) members did not disclose their interests, and 10% of this number had flatly refused to do so. When a letter was sent to the Minister no reaction had been received; therefore, she was forced to conclude that there was a problem at the top. Certain provinces such as the Northern Cape had since 2007/8 achieved 100% compliance, this however was an exception as she perceived that the general situation was worsening rather than improving.

The Chairperson requested that a list of serial offenders be supplied to SCOPA so that it could interact with Parliament and take the matter further.

Mr Singh underlined this response as demonstrating that non- compliance had become habitual. In specific cases such as in the Departments of Agriculture, Arts and Culture, Communications, Correctional Services, Education, Labour, Trade and Industry and Water Affairs and Forestry it was imperative that the relevant Directors-General be called to respond and reveal what action had been taken. He also asked the Accountant-General why these responses from the mentioned departments were given as insufficient.

Mr Nomvalo reiterated that he could not take action and that the responses from the various offending departments indicated that they were neither aware of, nor understood the regulations.
     
Non-compliance with certain Treasury regulations and VAT legislation:
Ms F Mathambi (ANC) referred to Point 7.5.1 and stated that in the context of the Report and the responses received so far, it was obvious that there was collusion between Accounting Officers and officials. Further on in the report it mentioned that more than R3 million was paid to companies that were not VAT registered.

The Chairperson agreed that the Report was littered with problems of non-compliance.

Mr N du Toit (DA) believed that the only way to deal with the problem was to root it out at the top. If officials were unable to answer questions, they should resign. He referred to pages of evidence where provinces were doing business with themselves, involving millions of Rands of public funds and yet no action had followed.

Mr Steele then referred to Point 1.7.3 which spoke of deviations from the supply chain management process where officials had awarded contracts to companies with lower scores without giving any explanation. He asked, predictably, whether any action had been taken.

The Chairperson responded that the provinces had made it clear that no action had been taken.

Mr N van Rooyen (SCOPA Chairperson, Free State) commented that the situation was even more dire than it appeared from the current evidence as certain HODs in the report did not even respond. Further, the report only dealt with senior managers, not lower level managers, so there was no knowing how many other problems were lurking below the surface. He could not resist suggesting that the national football coach should consider including many of the officials present in the Bafana Bafana team as the quality of fancy footwork on display was something even a Brazilian would be proud of.

A number of members of SCOPA expressed the need for immediate action and resignations where required. They agreed that there was contempt for Parliament and dereliction of duty which could not be justified by weak disclosure rules and certain pieces of unclear legislation. In order not to waste time with airy responses in future, Mr D Ngobeni (SCOPA Chairperson, Limpopo) suggested that questions be directed in writing beforehand and the relevant officials should then be tasked to answer the questions accurately and fully when they appear in person before the Committee.

Mr Nomvalo sardonically thanked the members and the Chairperson for being the one committee which was able to put the ‘fear of God’ into officials.

The Chairperson then tasked the Acting Director-General of KZN to put a time frame on his province’s response to outstanding questions posed by the Auditor-General, which he duly gave as the end of July. The Chairperson promised that specific departments would be called to account and adjourned the meeting.