DEPARTMENT OF LABOUR PORTFOLIO COMMITTEE ON LABOUR BUDGETARY REVIEW AND RECOMMENDATION REPORT 2010 30 AUGUST 2011

Audit Performance

Audit Performance The Department has, through concerted effort, addressed the audit qualification relating to the PPP assets during the 2010/11 financial year. In this respect, the Office of the Auditor-General has issued an unqualified audit report on the financial statements for 2010/11.

Audit Performance The Department reported a contingent asset to a value of R5,020,000.00 in the 2009/10 financial year. This was based on the Department noticing that the unitary fee reflected a larger number of users than actually employed by DoL. The Department could not disclose the amount in 2010/11 due to Siemens disputing the matter, and the Department needs to substantiate the claim.

Audit Performance The Department’s Chief Operations Officer (COO), was tasked with evaluating the performance management processes within the Department. In this respect, policies relating to the quarterly monitoring and evaluation processes were reemphasised and the need to ensure that source documentation/information substantiating such reported performance was inculcated into the Department. Quarterly Performance Reports were compiled and submitted in line with the prescripts.

Audit Performance Governance structures and Responsibilities. In an ongoing effort to ensure that the Department is managed responsibly and ethically, reviews and updates are done for governance processes and practices. Risk Management approach, system and processes are embodied into the culture and practices of the organisation. In the 2010/11 financial year, the Department established a National Risk Committee to strengthen its risk management processes.

Audit Performance The Department has implemented processes to minimise conflict of interest. These processes are as a result of legislative requirements and best practices which we aim to enrich. All members of the SMS are required to declare their business interests annually. Critical to strengthening organisational integrity, and in addition to the above, pre-employment screening, vetting processes of both employees and service providers, declarations during recruitment processes, SCM practitioners signing the Code of Good Conduct, and declarations by members of oversight committees, have been implemented.

Audit Performance The Department has formalised a Fraud Prevention Plan to prevent, detect and investigate fraudulent activities and to protect assets and other resources from dishonest and unethical conduct. Fraud awareness campaigns were conducted with various sections and labour centres within the Department. The Department has enhanced its reporting processes with the development of the Whistle Blowing Policy.

Reports of the Committee on Public Accounts

Committee on Public Accounts Capital Assets The Department’s Asset Management Unit (AMU) was fully capacitated and a dedicated AMU official was appointed at each Provincial Office. Governance Issues A schedule is maintained regarding the commencement and completion of internal audits, and the issuing of the final internal audit report.

Committee on Public Accounts Governance Issues Information is provided annually to the Audit Committee enabling the Committee to evaluate the effectiveness of the internal audit function. Follow up audits regarding issues previously raised by Internal Audit were included in the annual audit plan for the 2010/11 financial year and reports thereon were subsequently provided to management. Five (5) vacant posts were filled during May and June 2010, to strengthen capacity in Internal Audit.

Committee on Public Accounts Non-compliance with Laws and Regulations Strategic and operational risk assessments were conducted and reports are available. National Risk Management Committee established. Fraud prevention plan developed and approved. Risk monitoring is conducted on a continuous basis. Action Plan implemented to address audit findings.

Committee on Public Accounts Non-compliance with Laws and Regulations (cont.) Processes regarding the recovery of departmental debt have been established in conjunction with the Department’s Legal Services division. Management implemented regular assessments of supply chain management performance to ensure that deficiencies are corrected. The Department addressed areas of responsibility and established lines of reporting in order to support effective internal control over financial reporting.

Committee Observations

Committee Observations The Department reflected a vacancy rate of 8,6% as at 31 March 2011. Filled posts decreased from 3,495 in 2007/08 to 3,092 in 2010/11, but are expected to grow to 3,655 in 2013/14. The decrease between 2007/08 and 2010/11 is attributed to the transfer of 372 posts from the Department of Labour to the Department of Higher Education and Training. The increase over the MTEF, is attributable the strategy to professionalise the labour inspectorate, including the creation of additional posts and to improve the quality of service delivery and effectively meet client requirements.

Committee Observations The Department has attempted to address constraints regarding the payment processes relating to Buildings and related expenditure claimed by the Department of Public Works, aimed at addressing the delays experienced in this regard. However, constraints are still encountered in respect of obtaining detailed expenditure in respect of individual buildings occupied by the Department and as such, delays are still evident in respect of this classification of expenditure.

Committee Observations In terms of the Department’s Financial Statements for the 2010/11 financial year, it is evident that Virement, as permitted in terms of Section 43 of the Public Finance Management Act (PFMA – Act 1 of 1999) was applied. An amount of R1.25 million was shifted from IES to LP&LMP in order to increase the provision made for affiliation fees payable to the ILO. An amount of R20.1 million was shifted from IES to PES in order to increase the provision made in respect of the SEF. The above Virement was approved by the National Treasury.

Committee Observations Final Virement of R15.9 million from IES, R5.01 million from PES and R7.9 million from LP&LMP to Administration was approved by the Accounting Officer. This Virement was required in order to off set an over expenditure which was recorded in respect of Office Accommodation, again highlighting the need for the Department to obtain reliable information from DPW relating to leases for buildings occupied by the Department.

Committee Recommendations

Committee Recommendations The second (2nd) phase of the SEF business case is currently in progress with National Treasury assistance and it is envisioned that it will be finalised before the end of the 2011/12 financial year. The Employment Services Bill released by Cabinet for public consultation provides for the SEF legal Status. The conclusion of the business case and the passage of the Bill will enable the Department to finalise the organisational structure and funding framework of the entity.

Committee Recommendations As an interim measure, aimed at addressing the concerns raised regarding the financial capabilities available at the SEF, a CFO was appointed, on contract, to assist the SEF in ensuring compliance with the relevant financial prescripts and reporting formats.

Committee Recommendations The Department included into its 2011/12 MTEF submission, the funding requirements regarding the implementation of the Professionalisation of the Inspectorate. This submission aimed to address the appointment of generalist, principal and specialist inspectors. Funding was approved however, this will only form part of the Department’s Vote from 1 April 2012. 2012/13 2013/14 R28,0 mil. R32,0 mil.

Committee Recommendations Submission was made by the Department, in the MTEF process, to increase the number of mobile labour centres, as well as the number of vehicles to be made available to Inspectors to carry out their duties. In this respect however, funding was not provided through the Vote.

Committee Recommendations During the 2010/11 financial year, the Department effected changes to its budget structure. The Department is now structured as follows: Administration Inspection and Enforcement Services Public Employment Services Labour Policy and Labour Market Programmes (Changed to Labour Policy and Industrial Relations as from 1 April 2011) The changes aimed to highlight the core functions of IES and PES.

Committee Recommendations Concerted efforts were made by the Department to address the 2009/10 audit qualification relating to IT assets managed under the Department’s PPP contract. In this respect, the Department’s Integrated Asset Management System (IAMS), which complies with the requirements of the National Treasury, was utilised to prepare and submit for audit, an asset register in respect of all IT equipment managed in terms of the PPP. In its report, the Office of the Auditor-General expressed an unqualified opinion on the financial statements of the Department for the 2010/11 financial year.

Committee Recommendations In respect of the Department’s Public entities, with specific reference to the Commission for Conciliation, Mediation and Arbitration (CCMA) and the National Economic, Development and Labour Council (NEDLAC), and in considering the demand for services being placed on these entities, additional funding was allocated as follows: CCMA: R94,7 mil, R103,2 mil and R113,1 mil for 2011/12, 2012/13 and 2013/14 respectively. NEDLAC: R6,5 mil, R5,3 mil and R5,7 mil for 2011/12, 2012/13 and 2013/14 respectively.

THANK YOU