Public Service & Administration Budget Review and Recommendation Report: DPSA briefing; Auditor-General of South Africa (AGSA) briefing
Meeting Summary
The Department of Public Service and Administration (DPSA) briefed the Committee on a number of issues related to the BRRR process. The first briefing was given by the Centre for Public Service and Innovation (CPSI) and gave a general overview of the finances of the entity with a focus on the three-pronged approach to enhance innovation in the public service. The briefing also covered the main problems of the entity relating to its budget.
The second briefing focused on the Government Employees Medical Scheme (GEMS). Issues around GEMS were discussed such as money allocated from National Treasury, membership profile, affordability of medical care and the National Health Insurance (NHI).
The third briefing was done by the internal audit unit of the DPSA where the key improvements and information and communication technology issues were briefly discussed.
The briefing by the Auditor-General of South Africa (AGSA) covered audit outcomes and focus areas for the Department and public service entities.
Members raised a number of issues in discussion, including, in the case of the CPSI, prioritisation of areas of innovation, projects and amendment of legislation. Under the briefing by the AGSA, the Members discussed accountability and information technology (IT) controls. The DA was particularly shocked at the state of the public service, on the evidence of the AGSA's audit reports.
Meeting report
IntroductionThe Chairperson outlined the agenda. She noted the miscommunication that resulted in the Public Service Commission (PSC)'s not being present for this meeting. She highlighted Section 77 of the Constitution which related to Money Bills. This Section indicated the legislative framework of how money should be handled and how the Budgetary Review and Recommendation Report (BRRR) process fitted in. She then read out the apologies, noting that many Members were part of other committees. She also said the Minister would not be attending even though she was required to be part of the BRRR process, adding that she found this unacceptable. She said this was the first time a Minister was not part of this process.
Public Service & Administration Budget Review and Recommendation Report: DPSA briefing
Mr Mashwahle Diphofa, Department of Public Service and Administration (DPSA) Director-General (DG) introduced the delegates present.
Centre for Public Service (CPSI) Innovation
Mr Pierre Schoonraad, CPSI Chief Director, Research and Development, said the presentation was to highlight issues related to finance. The CPSI's budget was not sufficient. He outlined the three-pronged approach to enhance innovation in the public service. The first was to understand where the service delivery issues were, establish what the root causes were, and then to think of innovative ways of dealing with those service delivery challenges. The second was to bring in decision makers and guide them through a process of incubation and solution support in diverse fields such a crime prevention, water safety, education and safety and security. The last was a knowledge platform to provide public servants with best practices where departments could learn from each other. He provided an example linked to the health sector.
He looked at the main problems experienced by the CPSI, in terms of its budget. He noted the problems of budget accountability in that the CPSI shared votes with the DPSA and did not receive transfer payments. He said this meant that if there were problems within the CPSI, the DPSA DG would be held accountable. Looking ahead, he said the CPSI needed permanent and more long-term funding from 2014/15 onwards. He raised a particular concern that the CPSI did not have a funding mechanism to support pilot projects in terms of bridging funding, or, as in the private sector, venture capital. He said that for many projects the CPSI depended on the private sector for funding, often with unnecessary conditions attached to that funding. He used the example of the Committee's wanting it to look into the issue of disabilities further, but it had no money to do this or would need to take funds from another project.
Discussion
The Chairperson asked how the CPSI identified or prioritised areas of innovation.
Mr Schoonraad replied that, in theory, the CPSI related its work to government priorities but were dependent on a receptive audience. He said the CPSI was guided by government priorities but also by problems experienced or identified by other departments or citizens on a day to day basis. He highlighted the problem of resource availability. He said the CPSI was a drawing card and many people requested its assistance and input.
The Chairperson asked if the CPSI had stable projects which it built on, as an issue of clarity. She raised a point on accountability and the progress in dealing with this,
Mr Diphofa said that one could respond to this at a later stage but this was also a concern for the Department because it meant that he, as DG, could be held accountable without being responsible. He added it was an issue that needed to be taken up with National Treasury in terms of the Public Finance Management Act (No. 1 of 1999) (PFMA) so that the accounting officer of CPSI was held accountable. He said this applied to other entities too. He said the CPSI was working on its own financial capacity.
Mr D du Toit (DA) asked if the DG meant the legislation needed to be amended. He also questioned the third prong in the three prong approach of the CPSI.
Mr Schoonraad said it was the knowledge platform.
Mr Diphofa said an amendment was not necessary.
Mr Schoonraad added there were many problems of interpretation of the PFMA and this was where the contention was.
Mr Du Toit said the grey areas in the interpretation and implementation of the PFMA, in practice, needed to be addressed.
The Chairperson agreed with Mr Du Toit. She said it was an issue raised on many occasions by the Committee. She requested that the Department brought closure to this issue.
Government Employees Medical Scheme (GEMS)
Dr Stan Moloabi, GEMS Acting CEO, noted that GEMS had received an unqualified audit with matters of emphasis of non-compliance, but these matters were addressed through the Council for Medical Schemes. He noted that the migration of about 16 000 pensioners from Medi-Help, based on a Cabinet decision, had led to the scheme experiencing higher claiming patterns and said the reserve levels, at the end of the year, would be affected, adversely, because of this.
Dr Moloabi said that there was an average contribution increase of 10.26% for 2013 [unable to verify] and noted this was the first time the scheme would be introducing a double digit increase. He also spoke to this issue of non-compliance mentioned in the matters of emphasis. He said the GEMS budget came purely from the contribution by members.
Discussion
Mr S Marais (DA) said it seemed as if GEMS was doing well, except for the contribution increase, about which he was very concerned. He questioned the number of pensioners in the membership profile.
Mr Du Toit said that GEMS needed to look at the bell-curve or density distribution of the income of the age profile. From here, GEMS could assess how to absorb increases.
Dr Moloabi confirmed that GEMS was a well-run entity. He explained how the budgetary process worked. He noted the massive increase of pensioners because of the migration of Medi-Help members. He said the pensioners from Medi-Help received a full subsidy from government.
Mr Marais asked if Treasury had agreed to the increase. He also asked who was responsible for the administration of GEMS and principle costs.
Dr Moloabi said there was an agreement that government would subsidise pensions pre-1992 and this money would come from Treasury. With pensions in the other categories, the increases would be paid out of their own pockets and budgets were constructed according to the trends. He said the 10.26% was the best prudent increase. The operational services of GEMS were outsourced and tenders were procured every three years or contracts were renewed annually. The administration contract, was the biggest and most of the budget went toward this.
Mr Du Toit said this was no small matter as the affordability of medical care was a major issue, as the USA presidential election campaign had shown.
The Chairperson questioned the relationship of the National Health Insurance (NHI) and GEMS.
Dr Moloabi said that the issue of NHI was under the focus of the board of trustees and there was interaction with the Department of Health (DoH) on the pilot project. GEMS had met with the DoH on a management level to study the role GEMS could play in that environment but GEMS was still waiting for feedback on this.
The Chairperson asked the DG for a brief update on Public Service Education and Training Authority (PSETA) and the Public Administration Leadership And Management Academy (PALAMA).
Mr Diphofa said he would afford these entities with an opportunity to make a briefing to the Committee themselves at another time but he would touch on the main issues. As to PSETA, the main issue was the inadequacy of its budget. PSETA had approached the Department to supplement the budget. The Department was looking at a draft policy to find solutions to this problem. Looking at PALAMA, there were no additional issues but the move to establish it as a school of government was in progress and there was interaction with counterparts in the UK. It would be fair that the accounting officer of PALAMA be afforded an opportunity to address any concerns Members might have had.
The Chairperson said issues such as these were integral to the BRRR process. She was not happy about this.
Mr Du Toit asked if PALAMA had come up with a plan on which to brief the Committee and, if this was not the case, he wanted such a plan to look at budget and operational issues. It was fair that sufficient time was given for this.
The Chairperson said this issue should be flagged for the BRRR process.
Ms M Mohale (ANC) asked what amount of time should be given to BRRR as this issue had been raised before.
The Chairperson agreed that a “PALAMA indaba” had been mentioned for some time.
Mr Marais noted that, in Pretoria, there was some confusion between PALAMA and PSETA in terms of who was doing education in the public service. PSETA had made its role clear but PALAMA had not and he felt this information was needed if Members were to support PALAMA.
Internal Audit Information
Mr D van der Nest, DPSA audit committee member, said that there was huge improvement, especially since the Department had received an unqualified audit. There was a reduction in the issues that were flagged by the AGSA but the audit committee would keep monitoring the situation. The audit committee would monitor performance information and provide updated information regularly. The key improvements were in finance, in terms of the supply chain; but there were a few issues in IT that the Department was monitoring. The cooperation between the audit committee and the AGSA had really made a difference, especially in the value added.
Mr Van der Nest said that the Department was comfortable that the internal audit unit was effective, apart from some capacity problems and its extended scope, but the unit was “co-sourcing” to improve its capacity. The problem was that many auditors were snatched by the country’s top four audit firms with high salaries. He said that only specific audit functions would be outsourced. The audit committee received valuable support from management.
Looking at GEMS, he said it was a model for corporate governance with good management supervision and effective risk management processes. In short, there were no concerns with the control environment.
Discussion
Mr Marais was pleased with what was heard. He was concerned with the impact that more contributors could have on GEMS, potentially.
Mr Du Toit was also very worried about the impact more members would have on GEMS.
The Chairperson said there were a number of issues of concern. The implementation and roll-out of information and communications technology (ICT) was not as expected. She said the DPSA needed to focus on issues of technology. Another big issue of concern was the anti-corruption unit. The Minister needed to look into this matter seriously as it sent out the wrong signal. She said it should be mentioned in the BRRR.
Ms Mohale asked how information on innovation and best practice from CPSI could be made known to other departments.
Mr Schoonraad said the public service was a big ship slow to change but this specific project had been brought to the attention of MECs for Health in Gauteng and KwaZulu-Natal (KZN). Slowly but surely the practice would be rolled out and the CPSI would present it as a case-study to be disseminated.
Mr Du Toit said the information should be forwarded to him.
Mr Marais questioned who was actually responsible for the Thusong Centres.
Mr Diphofa said there were different management models used at the moment. In some cases it was local government and, in others, the office of the premier, while in the pilot model it was DPSA which was accountable.
Public Service & Administration Budget Review and Recommendation Report: Auditor-General of South Africa (AGSA) briefing
The Chairperson said that the Committee simply needed a snapshot of how the DPSA performed in the audit.
Ms Meisie Nkau, AGSA Business Executive, noted that this was the presentation given to the National Council of Provinces (NCOP) last week by Mr Terence Nombembe, Auditor-General. She noted that she was not responsible for public service but she would provide a broad overview.
When looking at the three-year audit outcomes, she said a worrying factor was that the numbers had gone down and there was an increase in outstanding audits. She noted that approximately seven entities did not submit their reports and statements. This was looked at under the three year audit outcomes.
Ms Nkau turned to the current year audit outcomes. Most of the government departments were sitting in the yellow category while, with the major public entities, most were in the green while some were in the yellow category.
Looking at the status of focus areas, she said that these were key risks that illustrated the level of problems in area. She said IT controls were particularly worrying. There was a problem with departments not producing credible financial information. In terms of human resource (HR) management, problems were identified with vacant positions, performance monitoring, and incorrect submission of leave. HR management was the basis for other focus areas and could provide effective leadership. Hereafter, she briefly touched on the sector department predetermined objective findings and findings on compliance with laws and regulations.
Ms Nkau looked at the root causes and said these were the issues that caused the problems identified by the AGSA.
Discussion
Mr Du Toit said that the situation was nothing short of a country with an administration in crisis. Many findings of the AG were shocking and intervention from the highest levels of government was needed. He said Parliament needed to implore the Executive to take action.
Mr Marais said that people needed to be held accountable. The skills and knowledge needed to run the IT controls was lacking which was of concern given that everything was IT-driven these days. People did not trust a country with an unreliable civil service. The problems were not always in the Department but in the public service.
Ms Mohale said that solutions needed to be thought of instead of bemoaning a downward movement of the public service.
Ms Nkau said that serious interventions were needed, especially in mind of the target of a clean audit by 2014.
The Chairperson said that it was clear that oversight needed to be tightened within a certain direction. She referred to the Constitution.
The Chairperson said that cluster meetings were needed to present a collaborative approach and to confront other departments on serious matters. A Portfolio Committee had greater powers to combat issues and this meant a broader mandate than that of the Select Committee on Public Service and Administration.
Mr Marais asked how the presentation of the AGSA was delivered to the National Council of Provinces (NCOP) before being presented to the Committee.
The Chairperson said that it might have something to do with the workshop for all committee chairpersons.
Ms Nkau replied that it was presented to both Portfolio and Select Committees. She noted that she was not specific to the Department so could not really speak on particular issues related to the Department.
The meeting was adjourned.
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