Department of Justice and Constitutional Developmentpmg-assets.s3-website-eu-west-1.amazonaws.com/docs/... · Page - 3 of 51 9 May 2002 Department of Justice and Constitutional Development

Office of the CFO

Tel: 012 – 315 1019 Fax: 012 – 3236471

Email – [email protected]

Department of Justice and Constitutional Development

Performance Enhancement Programme

PEP

Report of the CFO

For the Year to 31 March 2001

&

Business Plan for the Year Ahead

Table of Contents 1. Overview............................................................................................................................................................... 3

2. Executive Summary Of Achievements To Date ......................................................................................... 7

2.1 Corporatisation ............................................................................................................................................7

2.2 Monthly Accounts.......................................................................................................................................7

2.3 Change Management ..................................................................................................................................7

2.4 Base 80..........................................................................................................................................................8

2.5 As Is Analysis ..............................................................................................................................................8

2.6 Filing Vacant Posts .....................................................................................................................................9

2.7 Monthly Reporting......................................................................................................................................9

2.8 Compliance...................................................................................................................................................9

2.9 Donor Fund Administration ....................................................................................................................10

2.10 Capacity Building......................................................................................................................................10

2.11 Budget Coaches Phase I ...........................................................................................................................11

2.12 Justice Footprint ........................................................................................................................................11

2.13 Governor Brown........................................................................................................................................12

2.14 Rolling Stone Phase I ...............................................................................................................................12

2.15 Modernisation............................................................................................................................................13

2.16 Forensic Investigations.............................................................................................................................13

2.17 PEP Recognition Awards.........................................................................................................................13

2.18 Audit Facilitation.......................................................................................................................................13

2.19 Head Office Re-engineering....................................................................................................................14

2.20 Newsletters .................................................................................................................................................14

2.21 Regional Re-engineering .........................................................................................................................14

2.22 Performance Audit ....................................................................................................................................14

2.23 Zero Based Budget ....................................................................................................................................15

2.24 Budget Coaches Phase II .........................................................................................................................15

2.25 Rolling Stone Phase II ..............................................................................................................................15

2.26 Trust Account Diversion..........................................................................................................................15

2.27 Payroll Re-engineering.............................................................................................................................15

2.28 Procurement ...............................................................................................................................................15

3. Environmental Review....................................................................................................................................16

3.1 People..........................................................................................................................................................16

3.2 Systems .......................................................................................................................................................17

3.3 Funding.......................................................................................................................................................18

3.4 Culture.........................................................................................................................................................23

4. Restructuring The Office of the CFO .........................................................................................................24

5. Outsourcing Cash Handling / Trust Account Diversion ........................................................................31

6. Restructuring Financial Operations in the Masters Business Unit.....................................................32

7. Financial Performance ....................................................................................................................................33

8. Broad Management Framework / Business Plan.....................................................................................35

9. Challenges and Action Plans, in the Office of the CFO, to Address Audit Queries......................35

10. Strategic Framework .......................................................................................................................................43

11. MTEF Budget Allocations..............................................................................................................................50

12. Conclusion ..........................................................................................................................................................51

Page - 3 of 51 9 May 2002 Department of Justice and Constitutional Development

Office of the CFO – PEP Annual Review – 2001/02

1. Overview

For the year under review monthly reports and an interim report have been presented. This report is drawn, in part, from these reports. Please note that the audit of our financial records for the year under review is not complete. The final audited Financial Statements are due for release in August 2002.

A year ago, Business Against Crime (BAC) seconded me to the department. The need to strengthen the financial management capacity of the Office of the CFO was undisputed. Stakeholders had cause for their consternation. In the spirit of the established partnership, BAC agreed to the secondment for a year. This period has been extended to the end of this year. A request for a further extension has been made and this matter will be put to the next BAC board meeting.

We have, over the last year, reached a deeper understanding of the gravity of the findings of the Auditor General. A thorough analysis of the shortcomings has been made with a view to promoting solutions aligned with the redesigning of financial systems and procedures. In short, we know where we are, we understand the constraints and we have devised a package of interventions to address concerns.

The Department of Justice and Constitutional Development has been working on corrective measures to address audit concerns for a number of years. These measures were, in the past, based on the assumption that requisite fundamentals were in place. Unfortunately this assumption was not validated by the actual state of the Department’s financial affairs. Errors and irregularities persisted and were re-affirmed by reports tabled by the Auditor-General, Internal Audit, the Inspectorate and external Donor Fund Auditors.

A comprehensive Performance Enhancement Programme (PEP) was launched to address our vision. Achievements and the future direction of the programme, as envisioned at this stage, are set out below. The role of the Board of Directors and each Business Unit Managing Director, combined with the co-operation of Business Against Crime and the intervention of successful business leaders, who have volunteered assistance by accepting appointment to the Board of Directors, is critical. The continued support of international donors, business and the Business Trust who provide the capacity to explore solutions should also not be under estimated.

I have consistently stated that our problems cannot be micro-managed. There is a bigger picture. The facts presented by the Auditor-General are symptoms of the problem. No amount of fine-tuning will resolve this situation. The Department requires a cohesive leadership team that possesses the enthusiasm to ensure success and determine a clear focus for the Department. The current state of affairs will continue to worsen before it improves largely because backlog processing will, as previously projected, enable quantification of contingent losses.

The Office of the CFO supports the policy framework set out in the Departmental Business Model which, for ease of reference, is set out below.



Markets/ Clients Management Alliances/ValuesCore Products Strategy

Strategy“Justice is at the Centre of our Society

and our Strategy is Designed to Ensure that it Prevails and has Meaning”

Keep it JustUphold the Constitution

Protect and Ensure a Fine Justice SystemEntrench Equitable Justice Through “Right Sizing”

Keep it ManagedPractice Expertise Based Governance

Enable Knowledge Based Decision MakingIncrease Efficiency, Effectiveness and Productivity

in Service DeliveryKeep it Focussed

Effect Backlog ReductionDrive Thought into Action

Put People First through “ Batho Pele”Keep it Resourced

Modernise through TechnologyDevelop Best in Class Facilities Management

Build Capacity through Intellectual DevelopmentKeep it Coordinated

Work Together towards an Integrated Justice System

Promote Partnerships with Business and Communities

Intervene, Mobilise and Respond with Inter-disciplinary Task Teams when Necessary

Department of Justice and Constitutional Development – Business Model

MarketThe Publicand the State

in South Africa

Clients§ Judiciary§ Magistracy§NPA

“Prosecutors”§ Legal

Profession§Accused Persons,

Witnesses etc§ Independent

Bodies Such As:§ DSO

“Scorpions”§ Legal Aid

Board§ TRC

§ Human Rights Commission

§ Commission on GenderEquality§ Public Protector

Products & Services

§ Provision of aJustice Systemto the Market

§ Promotion ofConstitutionalDemocracy§ Providing

Legal Services(Public andState/Govt .Departments) § Management

of Courts§ Management

of Dispute ResolutionMechanisms

§ Support Servicesto Clients

Justice System§Criminal Justice

Protecting the Public§Juvenile Justice

Restorative Justice§Civil Justice

Effective & Fair Dispute Resolution§Family Justice

Protecting Family Obligations

Alliances& Suppliers

§ Other Government Departments

§ Core Suppliers of Services

§ Auditor General§ SAPS§ Correctional

Services§ Social

Development§ Legal Profession§ Donor Funders§ CSIR§ N G O’s such as

BAC, NICRO etc

Values§ Accessibility§ Expedition &

Timeliness§ Equality, Fairness

& Integrity§ Independence &

Accountability§ Productivity§ Public Trust &

Confidence

External Business DriversPolitical Influence

Funding (State & Donor)

Parliament

Staff Retention Public/ Investor Confidence HIV/Aids

Technology

Legislation etc.

PFMA, Batho Pele , and PSASocial Needs Resource Constraints

Crime

Management Processes

FinanceHuman

Resources

ISMModernisation

Public Education &

Communication

Court Services

MastersOffice

Legislative & ConstitutionalDevelopment

Legal Servicesto the State

GovernanceBoard of Directors <> Exco

Support Services

Core Business Processes& Resource Management

Our Vision: A Safer and More Secure South Africa Our Mission: To Administer JusticeT o Uphold and Protect the Constitution and the Rule of the law. We are Accountable to the Public and the State, in Rendering Acc essible, Fair,

Speedy and a Cost Effective Administration of Justice, in the In terests of a Safer and More Secure South Africa. We will achieve this by: Promoting Constitutional Democracy - Providing Appropriate Legal Services - The Sound Management of Courts - Alternative Dispute Resolution Mechanisms

Markets/ Clients Management Alliances/ValuesCore Products Strategy

Strategy“Justice is at the Centre of our Society

and our Strategy is Designed to Ensure that it Prevails and has Meaning”

Keep it JustUphold the Constitution

Protect and Ensure a Fine Justice SystemEntrench Equitable Justice Through “Right Sizing”

Keep it ManagedPractice Expertise Based Governance

Enable Knowledge Based Decision MakingIncrease Efficiency, Effectiveness and Productivity

in Service DeliveryKeep it Focussed

Effect Backlog ReductionDrive Thought into Action

Put People First through “ Batho Pele”Keep it Resourced

Modernise through TechnologyDevelop Best in Class Facilities Management

Build Capacity through Intellectual DevelopmentKeep it Coordinated

Work Together towards an Integrated Justice System

Promote Partnerships with Business and Communities

Intervene, Mobilise and Respond with Inter-disciplinary Task Teams when Necessary

Department of Justice and Constitutional Development – Business Model

MarketThe Publicand the State

in South Africa

Clients§ Judiciary§ Magistracy§NPA

“Prosecutors”§ Legal

Profession§Accused Persons,

Witnesses etc§ Independent

Bodies Such As:§ DSO

“Scorpions”§ Legal Aid

Board§ TRC

§ Human Rights Commission

§ Commission on GenderEquality§ Public Protector

Products & Services

§ Provision of aJustice Systemto the Market

§ Promotion ofConstitutionalDemocracy§ Providing

Legal Services(Public andState/Govt .Departments) § Management

of Courts§ Management

of Dispute ResolutionMechanisms

§ Support Servicesto Clients

Justice System§Criminal Justice

Protecting the Public§Juvenile Justice

Restorative Justice§Civil Justice

Effective & Fair Dispute Resolution§Family Justice

Protecting Family Obligations

Alliances& Suppliers

§ Other Government Departments

§ Core Suppliers of Services

§ Auditor General§ SAPS§ Correctional

Services§ Social

Development§ Legal Profession§ Donor Funders§ CSIR§ N G O’s such as

BAC, NICRO etc

Values§ Accessibility§ Expedition &

Timeliness§ Equality, Fairness

& Integrity§ Independence &

Accountability§ Productivity§ Public Trust &

Confidence

External Business DriversPolitical Influence

Funding (State & Donor)

Parliament

Staff Retention Public/ Investor Confidence HIV/Aids

Technology

Legislation etc.

PFMA, Batho Pele , and PSASocial Needs Resource Constraints

Crime

Management Processes

FinanceHuman

Resources

ISMModernisation

Public Education &

Communication

Court Services

MastersOffice

Legislative & ConstitutionalDevelopment

Legal Servicesto the State

GovernanceBoard of Directors <> Exco

Support Services

Core Business Processes& Resource Management

Our Vision: A Safer and More Secure South Africa Our Mission: To Administer JusticeT o Uphold and Protect the Constitution and the Rule of the law. We are Accountable to the Public and the State, in Rendering Acc essible, Fair,

Speedy and a Cost Effective Administration of Justice, in the In terests of a Safer and More Secure South Africa. We will achieve this by: Promoting Constitutional Democracy - Providing Appropriate Legal Services - The Sound Management of Courts - Alternative Dispute Resolution Mechanisms



•Directing, controlling etc•Implementing and tracking budget & strategy progress

•Setting objectives•Formalising ideas•Setting up structures

§Building strategy§Cultivating ideas§Innovation feedback

§Creating a vision§Gathering facts & ideas§Innovation workshops

PRIMARY FOCUS

•Business Units & Management•Project teams§Task teams§User group & volunteersDRIVERS

•Driving & encouraging•Project management

•Team Building•Energising

§Co-ordination§Motivation

•Facilitation•Enthusiasm

DRIVING FORCE

§Obstacle management§Priority setting§Achieving goals & compliance

§Goal setting§Authorisation§Maturing goals

§Goal testing§Generating§Immature goals

§Goal identification§Filtering§Researching Goals

FOCUS

•Establish alliances, partners etc•Empower decision making•Mgt training, team building, support, listening & coaching•Tenders, Budgets-> “Base 80”•Accountability-> defined roles•Attention to detail & improve •Timeous delivery-> milestones •Marketing deliverables•KPI & CSF monitoring •Change management•Decision making & instructions•Recognition to achievers•Choices must be predictable•People focussed, learning, communicating, working together & meeting promises•Communicating performance

§Funding estimates§Measurable deliverables§Detailed specifications§Pilot projects, prototyping§Resource acquisition§Technology & know how §Competency audit –capacity & capability§Define “The Bus & Gauges”§Customer analysis§Branding & marketing§Resource prioritisation & allocation, skills gaps§Cash flow & investment§Timeframes: what - when§Change management§Defining alternatives & communicating

§Consulting-Stakeholders & helping -Experts & learning•Stimulating creativity•Brain storming, strategic positioning & tactics•Expectation management•Technology evaluation•Sharing information•Follow-up meetings, workshops, building morale, meaning & purpose•Costs, benefits & SWOT•Climbing the right wall, at the right place?•Sharing alternatives & communicating

§Visiting stakeholders§Building Trust, Ownership & Buy-in§Information search§Gathering facts & statistics§Starting the “War Room”§Meetings & workshops§Filing & knowledge mgt§Determining current situation, what, for whom, where, when, how much, how often, why, needs, customers, markets etc§Policies & procedures§Painting the detail of the unseen future§Evaluating alternatives & communicating

MINDSETACTIVITIESETC.

NoteThis is not meant to

be a complete guide to the Performance

Enhancement Programme.

It is a quick reference chart to “PEP”

ReportsThe Speedo, The Rev

Counter, The Fuel Gauge & Monthly PEP Info Pack

•MS Project etc•Statistical analysis and progress monitoring, reports- news letters

§Detailed reports§Multiple news letters•Mind maps

§Reports & news letter§Mind maps§Notice Boards

§Reports & news letter§Mind maps§Project Office Notice Board

PROJECT TOOLS

§Detailed action plan §Broad action plan §Concept document§Scope documentDOCUMENTATION

PROJECT IMPLEMENTATION

PROJECT DEFINITION

CONCEPT FORMULATION

BUILDINGBUY-IN

DRIVING THOUGHT INTO ACTION

Business ModelTransformation



PEP– Performance Enhancement Programme Overview - Project Status

DRIVING THOUGHT INTO ACTION

BUILDING BUY-IN

CONCEPT FORMULATION

PROJECT DEFINITION

PROJECT IMPLEMENT

ATION

Transformation Status 1. Corporatisation 2. Monthly Accounts 3. Change Management 4. Base 80 5. As Is Analysis 6. Filling Vacant Posts 7. Monthly Reporting 8. Compliance 9. Donor Fund Admin 10. Capacity Building 11. Budget Coaches Phase I 12. Justice Footprint 13. Governor Brown 14. Rolling Stone Phase I 15. Modernisation 16. Forensic Investigations 17. PEP Recognition Awards 18. Audit Facilitation 19. Head Office Re -

engineering 20. Newsletters 21. Regional Re-engineering 22. Performance Audit 23. Zero Based Budget 24. Budget Coaches Phase II 25. Rolling Stone Phase II 26. Trust a/c Diversion 27. Payroll Re- engineering 28. Procurement

Scope Document Concept Document Broad Action Plan Detailed Action Plan

FOCUS Goal identification Filtering Researching Goals

Goal testing Generating Immature goals

Goal setting Authorisation Maturing goals

Obstacle mgt Priority setting Achieving goals

DRIVING FORCE Facilitation Enthusiasm

Co-ordination Motivation

Team Building Energising

Driving Project management

DRIVERS User Group Task team Project team Departments

PRIMARY FOCUS Creating a vision Gathering facts/ideas Innovation workshops

Building strategy Cultivating ideas Innovation feedback

Setting objectives Formalising ideas Setting up structures

Directing, controlling etc Implementing and tracking budget & strategy progress

QUICK REFERENCE GUIDE: SEE DETAIL BELOW



2. Executive Summary Of Achievements To Date

2.1 Corporatisation

2.1.1 The Department has been restructured along corporate lines in line with the King II report. It is well known that our Government seeks to develop and strengthen our public-private partnerships in strategic areas. In this regard, we engaged senior business executives in the review and finalisation of our strategic plans and change-management process within the Department. We agreed to a radical restructuring of our Department. In addition a Board of Directors similar to that of a private company advises the Department. Serving as Directors on the Board, are both executive and non-executive members drawn from the private sector of our economy. The CEO (who is also the accounting officer), the managing directors of seven business units and the CFO serve as executive members of the Board. These self- contained business units have clear responsibilities, and are made accountable to the Board for their performance. Among these business units are four line function structures dealing with all Court Services, Legal Services, Legislation and Constitutional Development and the Masters Office. The four supporting business units, which are designed to formulate policy at a national level, are the Office of the Chief Financial Officer, Human Resources, Public Education and Communication, and Information and Systems Management. In the restructuring process, the Department has given prominence to the Masters Division by elevating it to one of its core functions.

2.1.2 A Governing Board and a Budget Management and Review Committee was established in the Office of the CFO. Outside business leaders Brian King, Tom Wixley, Gloria Serobe and Iraj Abedian have agreed to join the CFO on these “Mini Boards”. The CFO is delighted that they have been able to commit to assist with the governance of the enormous task that lies ahead in steering the department into the future. Tough decisions lie ahead and their vast experience will be invaluable to the CFO.

2.1.3 All Business Units have drafted measurable objectives for the year ahead and these will be assessed and or measured by cost, quantity, quality and timeliness.

2.2 Monthly Accounts

2.2.1 Monthly management accounts have been produced for every month this year within two weeks of the month end. The department has never before produced monthly management accounts.

2.3 Change Management

2.3.1 A number of initiatives were put in place in an attempt to foster team building. Initiatives such as: The [email protected] initiative – an open line to the CFO. The kindergarten – a mentoring programme whereby the CFO coached senior staff on management matters. The 123 initiative – whereby staff were introduced to each other, notwithstanding the fact that



many had worked for the same division for some time. The issue of user- friendly “Door Plates” with the photo of the person thereon was also implemented.

2.3.2 A culture of self-directed work teams has been fostered and a start has been made in the national office to create a modern open-plan working environment that supports team building.

2.3.3 All staff in the Office of the CFO from Assistant Director and above, attended a three day change management workshop. Mike Boon of Vulindlela Consulting facilitated two days of the workshop concentrating on diversity matters and team building. I personally found the workshop to be exhausting, on target as far as our needs are concerned and outstanding as a catalyst to cohesive leadership development. It was a job well done and I thank all concerned.

2.4 Base 80

2.4.1 The MTEF allocations reflect a scarcity of funding and better management of available funding is thus critical. A new budget framework called the BASE 80 was devised that manages budget allocations at different levels. The budget allocation level provides detail of funded and unfunded activity decision packages and the performance management level provides detail at a standard item level. The distinguishing feature of the Base 80 approach is that it provides detail of marginal decision packages and in addition details unfunded decision packages. The result of choices made, after due consideration of priority, policy and focussed departmental alignment, are highlighted in the Base 80.

2.4.2 The Base 80 budget concept has been implemented at a national level. The year ahead will see the concept taken to lower budget levels as a part of the Zero Based Budgeting initiative (see Justice Footprint project), the appointment of the second tier of budget coaches (see Budget Coaches Phase II) and standardisation (see the Governor Brown project).

2.5 As Is Analysis

2.5.1 A detailed “as is” analysis of financial operations across the country was completed.

2.5.2 A project to assess the needs of the Masters Office in respect the appointment of Financial Officers has commenced. Notwithstanding the fact that sums in excess of a billion rand are involved the Guardians Fund has previously not employed people with any financial qualifications.



2.6 Filing Vacant Posts

2.6.1 A shortlist meeting was held relating to permanently filling the post of the CFO. Four qualified Chartered Accountants were shortlisted for interviews on 11 October 2001. Two candidates were interviewed and no appointment was made. Business Against Crime agreed to extend my secondment for a further year and ano ther year is currently under consideration.

2.6.2 A number of critical posts are vacant including, Chief Directors Budgeting, Financial Operations, and Payroll Services. Directors Deposit Account, Budgeting and Eastern Cape. Certain of these posts are still the subject of the “job evaluation process”.

2.6.3 The post of Chief Director Budgets / Decision Support was offered to a candidate who after numerous extensions decided to decline the position.

2.6.4 A candidate for the post of Director: Eastern Cape has been put forward for confirmation.

2.7 Monthly Reporting

2.7.1 A PEP report has been produced each month to communicate progress made to all stakeholders. These reports are consolidated on the monthly “PEP Info Pack” that is distributed on CD.

2.8 Compliance

2.8.1 The culture of non-compliance is being addressed. A file was prepared scheduling all transgressions relating to non-compliance and incompetence. A full time project manager has been appointed to expedite disciplinary hearings within the Office of the CFO and the employment of all persons convicted and in jail is to cease.

2.8.2 An advisory board has been established to offer advice on overcoming obstacles to the efficient prosecution of financial misconduct.

2.8.3 A major anti- fraud and anti-corruption campaign in the Masters Offices has been launched and the financial administration at three offices has been restructured to other offices.

2.8.4 An anti- fraud and corruption hotline was launched to promote whistle-blowing. The number is 0800 00 59 33.

2.8.5 A risk management committee was established as a Departmental committee and it is operative.



2.9 Donor Fund Administration

2.9.1 Donor fund account queries for the 1996 to 1999 years have been cleared.

2.9.2 The administration of the USAID fund was transferred to Business Against Crime who man a service office in the Presidia Building, Pretoria on the second floor.

2.10 Capacity Building

2.10.1 The entire EXCO completed a three day course in performance budgeting and related PFMA matters. This was followed up with the training of some 70 senior staff who form the basis of the budget implementation teams. This course was held on 9,10 and 11 October. With this underpinning, the management and attitude to our budgets has improved.

2.10.2 Permanent Budget Coaches have been appointed to all Business Units and except for two who were on study leave underwent intensive budget training at the UCT Graduate School of Business.

2.10.3 Specialised training for all staff at the Masters Offices in management, service delivery, conflict resolution and diversity has commenced.

2.10.4 Three senior project managers were appointed to expedite PEP projects at the National Office.

2.10.5 At our request UCT has structured a B.Com (Hons) degree that will be offered on a part time basis from July 2002. The degree will be a one year part-time programme with two full-time weeks at the GSB. This programme will prepare executives in the public sector with appropriate strategic cost management and financial management skills. The approach is interdisciplinary with the emphasis on the development of conceptual knowledge and problem solving ability in issues relating to strategic cost and financial management (SCFM). At the end of the programme participants will be able to assess the financial implications of legislation on the public and, where appropriate, the private sector.

2.10.6 The internal auditing co-sourcing and capacity building agreements were extended last year to build the capacity of the internal audit function.

2.10.7 A national capacity building project has been completed. “Cash Hall” training was conducted in some 380 venues across the country. Some 2109 staff have been trained and have been assessed in terms of their competency. For some 80% of the people trained this was the first training course that they had attended whilst in the employ of the department. Details the number of people trained are set out below:-



PLANNED ACTUAL

Eastern Cape 273 372

Western Cape 213 202

Northern Cape 98 94

KwaZulu Natal 318 344

Free State 199 195

North West 99 151

Gauteng 385 510

Mpumalanga 141 121

Northern Province 139 120

TOTAL 1865 2109

2.10.8 Senior management have been trained in corporate governance in terms of the King II report.

2.10.9 The reconciliation of the FMS system to PERSAL has been outsourced. Work has commenced in all provinces however it is too early to commit to a completion date. It is hoped that by next month a target date will have been established.

2.11 Budget Coaches Phase I

2.11.1 Budget coaches were appointed to service the needs of all Business Unit Managing Directors and the Ministry.

2.12 Justice Footprint

2.12.1 The costing, right sizing and ZBB tender was awarded to the CSIR consortium by the Tender Board. This “Justice Footprint” project is covering a number of aspects including determining “demand” by GIS mapping all crime types at a police station level and is right sizing “supply” in the form of court services. A complete financial model is being written of departmental activities to assist in the finalisation of a Zero Based Budget. This project will optimise budget allocations but more importantly it is to establish and path find an innovation process that the Department is to perpetuate.



2.12.2 The payroll-benchmarking tender was awarded to Deloitte Human Capital. This project is to present a detailed recommendation by mid May of the cost the department should be budgeting for to ensure that good average competency is attracted for all career paths in the department. A draft report was received on 10 May 2002 and has been distributed to Exco and the Magistrates Commission.

2.13 Governor Brown

2.13.1 Revised Departmental Financial Instructions have been printed and have been issued to all Justice Offices.

2.13.2 In line with constitutional changes, other departments left the Justice Offices after 1994 and the magistrates moved, over time, to the role of independent dispute-resolution officers as opposed to also being the senior civil servant responsible for administration in the district. This has meant that the finance function and the administration function are performed, in hundreds of courts, by one person earning less than three thousand rand per month and who is not supervised. Treasury was not able to grant any funds for training or for upgrading the posts to address this problem. In response a project has been launched to standardise financial operations in all Justice Offices. A detailed draft standards manual has been completed and will be piloted at Randburg Magistrates Court in May 2002.

2.14 Rolling Stone Phase I

2.14.1 A massive national backlog reduction initiative celebrated small beginnings with work commencing in Bronkhorstspruit (Sub-office) , Umtata (Sub-office), Head Office (Deposit A/C old and new) and in King Williams Town (Masters Office). This project gathers outside contractors and staff from sub-offices into teams that split and multiply concurrently with regional office initiatives in tackling this enormous task. In the first few months of 2002 some 174 temporary outside accountants were employed on this project in addition to departmental staff. The race is on to get the Vote account books written up before the finalisation of the financial statements thus ensuring that this years audit does not have a scope limitation that anywhere near approximates that of last year.

2.14.2 Temporary staff have been deployed nationally to assist in getting the books of the Masters Office up to date.

2.14.3 A Financial Process Monitoring Unit, to track the status of financial records, was established.

2.14.4 A project to expedite the collection of funds outstanding on the Agency Services account was initiated and two people were appointed, on the Rolling Stones project budget, on contract. The decision was made to focus on six government departments. Collections during the period to 28 March amounted to R96 million. This matter will need further attention as the net reduction is R26 million on the Agency Services Account. Suspense



accounts too have been targeted and the overall national totals have been reduced from R21 million to R 15 million

2.15 Modernisation

2.15.1 The computerisation of the financial systems of the Guardians Fund has commenced and is due to be completed in all centres by October 2002.

2.15.2 A project has commenced to evaluate the cost benefit of the deployment of a computerised bank reconciliation tool to assist with reconciliations. Currently, as a general rule, bank reconciliations are done too late. Two suppliers have been selected and the system is being tested as a “middleware tool” linking the FMS to SITA at the Johannesburg Magistrates Court and as a PC “stand-a-alone” system at the Umlazi Justice Office. Current indications are positive except for the availability of the necessary ability to utilise the systems.

2.16 Forensic Investigations

2.16.1 A R10 million contract to do forensic auditing with a specific view to putting those that perpetrate fraud and corruption in jail was awarded to the Auditor–General. This project is to be extended and expanded. Some R4 million has been prioritised for the new financial year. This will not be sufficient and further funding will be sought to complete this unfunded priority. Transgressions have been referred for disciplinary action or criminal charges have been laid

2.16.2 The auditor General has been requested to do a Performance Audit on the work and plans of the Office of the CFO. This report should be available by the end of May 2002.

2.17 PEP Recognition Awards

2.17.1 An awards programme has been launched to recognise pockets of excellence in the Office of the CFO.

2.18 Audit Facilitation

2.18.1 An Audit Facilitation desk has been established to co-ordinate and facilitate the efforts of The Inspectorate, Internal Audit, SCOPA, the Portfolio Committee, the Auditor General etc. This “Desk” is not a line function but will track queries, responses and will share information.



2.19 Head Office Re-engineering

2.19.1 Restructuring national financial operations including the employment of some of the key people that were critically needed to effect improvements has been done.

2.19.2 The Exco of the Department met for a full day on 6 May 2002. A number of fundamental decisions were made that will have a far reaching effect on the Office of the CFO. Decisions taken include that the Office of the CFO shall be responsible for procurement. In effect this means that the ”buying” function as is distinct from the “facilities management” function are to be unpacked and that buying and associated activities in all regions and at Head Office are now CFO functions. The “bookkeeping / financial transaction processing” functions now fall under the Office of the CFO. This means that all finance people in the courts, state attorneys offices etc and all regional staff now report to the Office of the CFO and not to court services. The impact of these decisions large and include the fact that a supervision and management infrastructure will have to be put in place. There is no management or supervision catered for in the current organisation structure.

2.20 Newsletters

2.20.1 One page newsletters have been launched. They are the weekly “Speedo” dealing with performance and operational news, the bi-monthly “Rev Counter” sharing information from the Audit Facilitation Desk and the monthly “Fuel Gauge” dealing with matters relating to resource surveys and feedback thereon.

2.21 Regional Re-engineering

2.21.1 Work on re-engineering the Regional Offices has commenced. It is expected that implementation will commence in July 2002 and that this pilot will have established roll-out final criteria within three months. The pilot region is to be the “Umzanzi Region” which has been identified as an area that needs assistance and constitutes Southern KwaZulu Natal and Northern Eastern Cape. The staffing of this pilot area is to be drawn from volunteers from the Department. The roll-out time line will be dependent on budget needs and availability. A budget conceptual framework will be ready for the June 2002 MTEF submission.

2.22 Performance Audit

2.22.1 The Auditor General has been requested to complete a Performance Audit of all initiatives implemented as well as of plans targeted for the future in the Office of the CFO. The expansion of this initiative to all Business Units is an unfunded priority.



2.23 Zero Based Budget

2.23.1 Business Units have been requested to commence with this task that will dovetail into the Justice Footprint Project.

2.24 Budget Coaches Phase II

2.24.1 Planning for the appointment of Budget Coaches at a level below the Business Unit Managing Directors has begun. It is targeted to start deploying these budget coaches in July 2002.

2.25 Rolling Stone Phase II

2.25.1 Work has commenced with the reduction of transaction processing backlogs relating to the Deposit or Trust account. The current target for completion is the end of this financial year, however there is a very slim hope of achieving this target as it is dependent on funding and Trust Account Diversion.

2.26 Trust Account Diversion

2.26.1 The determination of broad consensus on a framework to totally outsource the handling of cash relating to the Deposit or Trust Account in an affordable manner has been achieved. The department does not have the people nor systems to address this problem. A funding request has been made to USAID which, if successful, will greatly expedite the extensive work required to implement this project. Quotes received for a transaction advisor are in the region of R12 million. The current view of the department is that this project be conducted by the Office of the CFO.

2.26.2 A number of major financial and technology organisations have been consulted and a conceptual framework has been issued for comment. An RFI is likely to be issued shortly.

2.27 Payroll Re-engineering

2.27.1 This project will be further progressed after the appointment of the Chief Director: Payroll Services.

2.28 Procurement

2.28.1 A conceptual framework for the management of the procurement function was completed last year. This work will be progressed now that this function is included within the scope of the Office of the CFO.



3. Environmental Review

Our environment has shaped our past, as it will, our future. Key to the transformation of our environment is an understanding of the challenges that include people, systems, funding and culture. These aspects are discussed below:-

3.1 People

Whilst across-the-board pockets of excellence exist, fundamental problems still remain. Steps taken in recent years have been necessary but not sufficient, and a comprehensive re-engineering exercise is currently in progress to build and enhance capacity. Hidden behind the harsh reality of recent audit evidence presented lies some cold comfort in that, while there is little to reflect a year on year improvement in form, evidence presented proves that we are succeeding in our quest to get the books written up and to root out fraud and corruption. Quantifying the extent of training necessitated to ensure competence is debatable. However, we have made a good start this past year. Some 2109 staff at court level have been trained in Cash Hall transaction processing procedures and more than a 100 senior staff received budget training.

Finding solutions to staffing concerns cannot, and indeed has not been underestimated. The short-term appointment of sufficient, competent staff at approved rates of remuneration to fill numerous vacancies, is undoubtedly a significant pre-requisite to delivery. The average time taken to fill a vacancy is, in my opinion, a sign of a system that is over regulated in the wrong areas. Work study, job evaluations and a seemingly endless procession of committees and analysis, that is not unique to this department, not only delays appointments but also ensures that critically needed jobs are not being done. The effectiveness of the total process is, in my opinion, also entrenched in established policy fulfilment that fails to recognise fundamental and real flaws, such as the fact that more than 80% of the finance function is conducted by people, who were and are appointed by selection panels, that have no representation from people that either work in finance or that have a financial qualification. In addition, we continue, often, to appoint at rates of pay that prohibit the appointment of people competent to do the job required and thus capacity building is needed.

Major obstacles to delivery thus include inefficiencies in employment and in procurement practices (versus legis lation) and backlog “mountains”.

Without the prospect of more funding, better systems, significant training grants, improved remuneration packages to attract more competent financial administrators at a court level the strategy is to divert workloads away from Justice Offices (Trust Account Diversion project) and to standardise (Governor Brown project) that which remains.

A project called the Governor Brown project is underway that will initially produce a standards manual. This manual, a draft of which has been completed, consists of three parts: the “look and feel”, operations and performance management. The “look and feel” section prescribes signage, stationary, file covers, office organisation charts etc. The operations section is divided between financial transaction processing (vote and trust) and budget management. The performance management section prescribes minimum reporting standards to be met on a monthly basis. The standards manuals are low-level instructional by nature prescribing exactly the duties in financial administration. Each Justice Office is to be visited



from July this year (Regional Reengineering) by a finance official who will evaluate the financial performance, compliance and resourcing of the office in question and sign off the report in conjunction with the finance staff.

Other people-related matters include merits that are inadequately provided for and merits awarded in the past that are not as yet paid which affects staff morale. This is particularly of concern in respect of the NPA. Personnel costs and funding are not adequately managed within budget limitations. Court Services are expected to be some R200 million over on personnel costs whilst the NPA will be under spent on personnel. Finally, there is little consensus on the current staff establishment. All of these issues need to be “unpacked” within the Justice Footprint project and this will be done.

Success will come in a number of guises before it actually manifests itself fully. The road ahead will continue to be an arduous and daunting experience for the faint-hearted but succeed we will, given one fundamental enabler, people – successful people, with the humility to learn.

As stated before, as soon as our people believe that they can, want and need to do it – they will. It too, will continue to be a process and not an event. The toughest aspect is expected to be in the form of passive resistance to the Compliance Unit as this unit escalates prosecution on matters relating to financial misconduct. This resistance has begun and Exco will need to play an active role in ensuring that this project is not stuck in the “treacle” of middle management resistance.

3.2 Systems

Legacy systems and processes are not coping and in the case of the deposit account, where monies in trust are administered on behalf of the public, contingent losses have been acknowledged as non-quantifiable. I remain of the opinion that, taken as a whole, the management of the deposit account has collapsed. Given inherent complexities, an off- the-shelf solution is unlikely and piloting an outsourcing possibility has commenced. If charged, in the short term, with the administration of all black persons’ estates, in line with legislative imperatives, a number of propositions may be explored, including my own, which is that without further physical and human resources, the Masters Office too, will not cope with this additional financial administrative burden.

Enormous backlogs existed in vote account transaction processing. At this stage these backlogs have large ly been cleared. Examples progressed include suspense accounts relating to staff, excluding alleged fraud, such as outstanding S&T claims at all Justice Offices. The year ahead will see a race between funding and backlog reduction in relation to the Deposit or Trust account. The Office of the CFO needs to be entrenched along the lines of a virtual shared service centre providing financial services to the various Business Units. This has now been agreed to by all and this lays the foundation for the re-engineering of the financial support service that will see the control function being split from the service function. Control is exercised by the accounting officer who delegates authority, in part, to various Business Unit Managing Directors. The Office of the CFO will consequently and primarily concentrate on transactional processing and advisory services while the Business Units will drive budget performance, delegated control responsibilities from the accounting officer and where deemed appropriate, specialist financial operations.



At a macro level the department faces significant risk relating to the sustainability of ISM. The ISM option presented within the MTEF process requested some R482 million for a range of initiatives that are listed below and zero funding was granted towards these requests.

Technology: Hardware: Deployment/upgrade of approximately 4000 PC’s, printers and 400 servers.

Audio visual: Electronic office equipment to interface with the PC’s (e.g. LCD projectors)

Software & licences: Enterprise agreements and Microsoft licences as well as virus detect software and various other COTS.

IT Services: Consulting which includes the obtainment of professional services for the development of the DNS, ICMS, FAS, MIS HR and other e-Justice systems. The two biggest cost drivers are the DNS (Rm 250 over 2 years) and ICMS (Rb 1.7 over 4 years)

Outsourcing: This includes the maintenance of the existing infrastructure as well as the data lines leasing. Related herein is the computer time required for operations

At the year-end ISM was prioritised some R200 million towards contracted expenditure in line with the MTEF requests. This delays the risk but does not dilute the fact that we have contracted for goods and services for which no budget allocation has been awarded and hence the continued development and rollout of a technology platform is not sustainable without further funding. At the highest level, intervention is needed. Capital expenditure of this nature is an investment and it is proposed that high level discussions are called for at which fiscal constraints and priorities (sustainability) over the medium term are shared. To facilitate this process the department should prepare, together with IJS partners, estimates of “efficiency dividends” that can be expected from the modernisation programme. Given that the benefit is exceeded by the cost the question turns to funding methods - central government funding versus public private partnerships providing the capital, within an affordable annual envelope.

I am encouraged in that we are getting closer to knowing what we do not know. If the devil is in the detail we now know, it lies in the deposit account. Apart from this, the snapshot of our capacity in one year’s time, will again reflect substantial change that will have noticeably enhanced our capacity to deliver.

3.3 Funding

The PFMA (Public Finance Management Act), MTEF (Medium Term Expenditure Framework) and MTSF ( Medium Term Strategic Framework) processes are, in my opinion, examples of “best practice” in the management of public finance.

The MTEF represents the expenditure aspect of the MTBF ( Medium Term Budgeting Framework) that seeks to balance expenditures with revenues in the annual fiscal budget.

The Base 80 Project moots a MTMF (Medium Term Management Framework) that clearly presents the “reverse promise”. The reverse promise is, in essence, a service level agreement that sets out what will be done and most importantly it also sets out what will not be done.

The current MTEF process, incremental and top down by design, calls for additional budget options for consideration and prioritisation against available funding.



How long will it take to re- invent the Department to such an extent that it regains financial and administrative credibility through an unqualified audit opinion?

The popular response includes a request for more money. Intense competition exists for available funding and I am not convinced that money alone will solve our problems. All Departments want more rather than less. I believe this to be a result of the emphasis placed on the equitable share formula approach which creates winners out of those that get the most, rather than those that deliver the most. To assist in changing mindsets to delivery the public sector needs to embrace socio-economic accounting principles in accounting for outputs. We need to change priorities and cut back to budget for success on core functions that must be adequately funded. We need to concentrate on a narrow front rather than dilute across a broad front. We then need to use this allocated funding wisely, so that we are entrusted to deliver not only dispute resolution services, but also the social services associated with our core function. We must start by doing what we do - well. Non-core service delivery opportunities are vast. In short, success lies in productivity.

Budgetary accounting has historically been “top down” and incremental by nature whereby budget “slices” are handed down without a structured approach to the analysis of needs, priorities and requirements. It was largely a one-way process. The Base 80 MTMF seeks to develop a mechanism to provide cohesion and co-ordination between the management of the department, constitutional priorities and political choice within the economic reality of the MTEF.

Thus the transformation of budget management is the objective of the Base 80 Project. When complete the process will commence as a “bottom up” activity orientated process that will be progressed by the communication of “top down” decision-making. Thus it will be a two way process. The Base 80 concept was introduced last year at Business Unit level. This concept calls for budgets to disclose activity based decision packages, for a percentage of the provisional (bottom up) then final (top down) budget allocations. In addition, it is required that the budget present unfunded priority needs.

The decision maker is presented with choice as to the marginal allocation of resources. The choices that must be made, as the Base 80 hierarchy rises to the top, move from an assessment of alternatives to achieve outputs, to an assessment of outputs to achieve outcomes. At each level the objective of each decision package needs to be provided. The decision maker needs to be presented with alternatives and an assessment of the impact that the alternative will have upon achieving direct and indirect outputs and outcomes. Incremental costs can thus be assessed against incremental benefits measured against financial or socio-economic value criteria.

Choices can be made at various levels once the process is enabled by a Base 80 budget. Budget alignment can be effected at successively higher levels in support of goal congruency towards stated policy in support of desired outcomes. Policy at the highest (political) level is implemented by the Ministers Committee on the Budget that is advised by various agencies such as the Justice Portfolio Committee, Treasury etc. Budget optimisation can be driven by driving budget ownership and accountability down to lower levels. It is my firm belief that budget ownership and accountability, as distinct from budget distribution, needs to be passed to lower levels.



A budget may be expanded through the acquisition of additional funding such as supplementary allocations, donor funding, emergency relief etc.

A listing of standard items make up an activity. This and other activities are aggregated in a hierarchy of activities and are ranked according to a cost benefit prioritisation process. The listing and analysis of activities is extended downwards from the submitting activity in the hierarchy starting at the top ie Department of Justice -> Court Services -> Lower Courts -> Ceres -> Facilities Management -> Personnel -> Merit Awards. Thus at any level in the activity hierarchy a listing can be obtained re funded and unfunded expense classifications eg unfunded Merit Awards at each layer.

At the lowest activity level, of the Base 80 budget, the analysis is per standard item. Above this level, each successive layer, is a summary of the activity level below. Thus at the highest level (if universally implemented), the Base 80 would reflect departmental allocations per department (on the budget allocation and prioritisation view). A standard item listing would reflect actual aggregated standard item expenditure, for each activity (item or activity layer), on the budget management view, together with budgeted costs and variances. A quarterly actual to budget review is scheduled as a part of the management of decision packages. At the quarterly reviews of the budget committee (Ms Gloria Serobe, Mr Tom Wixley, Mr Iraj Abedian, DG & CFO) the reprioritisation and reallocation of unspent committed expenditure will be effected. Thus, if not rolled over from one quarter to the next, unspent funding is to be allocated to unfunded priorities.

It is submitted that at departmental level a policy reserve should be retained. The policy reserve of the department is R 20 million. The early release in the MTEF cycle of the national budget focus, has enabled the commitment of this funding in- line with this focus. In the current year, focussed as it is towards poverty alleviation, the Director General has committed the full R 20 million at his disposal, towards the appointment, for the year, of maintenance investigators. This allocation creates no “rights” to future allocations.

Figure 1:

Base 80 Budget Prioritisation and Allocation Process

DecisionHierarchy:Objectives,

Alternatives &Impact vsCosts and Benefits

DecisionHierarchy:Objectives,

Alternatives &Impact vsCosts and Benefits

Escalatin

gA

ctivityH

ierarchy

Decision Package

Management

Base 10 | 20 | 30 | 40 | 50 | 60 | 70 | 80 | 90 | 100 >< Unfunded

ChoiceEconomic, Constitutional & Political

Extending Down

Budget Expansion



The Base 80 process is designed to assess the margin for policy manoeuvring. The marginal activity classifications in the last 20% (Base 80-100) provides the decision maker with an envelope of funding to which policy priority can be assessed and reallocations made as between the “Base 80-100” allocations and the “Unfunded” allocations. Each layer within the activity chain that extends down reserves 80% of the preliminary MTEF allocation on the basis that lower line management “knows better” on the question of resource allocation. The Base 80 also recognises that future MTEF allocations are not an entitlement and that these may be adjusted either up or down. The impact of MTEF adjustments, within the medium term cycle, are also determinable through the Base 80 MTMF concept. Business Units have been charged to group activities into programmes (larger projects) at higher levels thus not having to reflect hundreds of activities that would be difficult to assess at a policy level. Donor funded projects and unfunded projects are to be reflected at a more detailed “bite sized” level as marginal funding, when available, is not likely to accommodate larger projects. The Base 80 drives a planning culture to future fluctuation and enables the highest (political) authority, through appropriate or delegated structures, to assess the acceptability of the level of operation of the department, by reference to the funded versus unfunded activities. The hard political decision, in the face of significant unfunded activities, centres upon the expansion of certain business units versus the elimination of questionable programmes or activities. In a developing economy “needs” will always outstrip the economic reality of financial constraints and thus the more detailed management of “choice” is seen to be an imperative. Key values to be progressed in the management of budget resources including donor funds are:-

• Reaching up and co-ordinating: Choice mechanism - equitable share determination based on progressing policy priorities rather than on “bargaining power” entitlement

• Reaching down and listening: Empowering self-directed work teams • Transparency: Sharing widely

CORE SERVICE DELIVERY FUNCTIONALITY

MARGINALSERVICE DELIVERY FUNCTIONALITY

EFFICIENCY BUILDERS & DESPERATE NEEDS

ROLLED FORWARD ACTIVITIES

ALLOCATION

- Employees

- Goods & Services

- Fixed Capital etc

Base 0 - 80 - ActivitiesBase 80 - 100 - Activities

Donor Funded - ActivitiesUnfunded - Activities

- Employees

- Goods & Services

- Fixed Capital etc

- Employees

- Goods & Services

- Fixed Capital etc

- Employees

- Goods & Services

- Fixed Capital etc

GFS / STD ITEM CLASSIFICATION

PRIORITISATIONBUSINESS

UNIT

Figure 2:

Base 80 Budget Prioritisation and Allocation



• Sustainability: Long term impact monitoring (policy plans and expenditure programmes)

• Efficiency: Quarterly resource allocation and prioritisation and “efficiency dividends” tied to capital (investment) expenditure

• Operational productivity: Performance management (MTSF monitoring) • Budgeting for success: The making of hard choices to avoid the allocation of diluted

budgets, across a broad front, thus ensuring that failure is not a self fulfilling prophecy. As with all other line functions the re-engineering of the finance support service must support, not lead, the business architecture dictated by a customer’s strategic plans. It is thus important for Business Units to take ownership of the Justice Footprint project – whilst facilitated by the Justice Footprint Project Office. The project is designed to benefit all Business Units, as with many things, the success of the initiative to any particular Business Unit will depend on the input and leadership of that Business Unit. The Office of the CFO can and will facilitate and cost innovations conceptualised for inclusion in the ZBB and the financial model. This process can be depicted as follows:

In line with the above, the Financial Support Services offered by the Office of the CFO to Customer Business Units support but do not dictate business processes. The Office of the CFO thus never dictates expenditure priorities to Business Units except where funding that is received is “ring fenced” by Treasury for a specific purpose. These business processes are empowered by the budget process including the determination of the Base 80, ENE, MTEF etc inputs. The Base 80 thus is the Business Units responsibility to manage. Should the Office of the CFO be left to complete MTEF etc documentation the “tail would be wagging the dog”! Managing Directors of Business Units are thus responsible and must take ownership of these business processes and integrate the support services offered by the Office of the CFO. Historically the Finance Division controlled the process and this perspective was not optimal.

Support Service Development

Implementation and Execution

Customer’s Business Projects

Support Service Architecture / Permutations

offered

Customer’s

Strategic Plans

Customer’s Business

Architecture & Structures

Support Service Enabling Strategy & Strategic Thinking (positioning)



Business Units are currently deliberating upon budget allocations towards determining their Zero Based Budgets. Provisional Base 80 budgets have been prepared and all Business Units are consulting their stakeholders.

3.4 Culture

My own experience of visiting a Justice Office is that I am received extremely well, “teaed” or “coffeeed”, normally “biscuited”, presented to all together with speeches of salutation or request, and then, I am expected to leave. As polite as this custom is, I think that, sadly, it must go. That “bosses should work” is a phenomena least expected. A non-existent layer of supervisory or management skills is the result, and thus, coaching or mentoring experience, that takes time to develop or acquire from a role model has no foothold.

The very first meeting I held after taking office was to address the question of transformation. Transformation is not unique to the civil service, this matter is the focus of long standing management theory, practice and discussion. Alternatively referred to as change management the need therefore is to address a variety of matters such as technology advancements and the resultant obsolescence of “old school” people. This aspect is particularly applicable. Various incidents come to mind such as staff requesting adding machines when they have unused computers and printers still in boxes in their offices; morale matters where groups of staff meet behind closed doors to perpetuate being a part of the problem versus being a part of the solution; staff requesting hand-written payslips; comments indicative of racially-biased perceptions or mistrust between race groups and origin (urban vs rural); the perception that incompetence and non-compliance are the responsib ility of the employer alone. Broad based transformation is fundamental to long-term success.

The right question, to expose the core of the compliance problem, is, I fear – are we working? Starting at Justice Office level, finance officials do not work. It is not that they do it wrong but that it is not done. This is attested by audit findings of a 90% non-compliance with laid-down systems and processes. Non-compliance enables corruption, and it is. With this in mind, all cash hall training seminars, held in 380 venues for 2109 people, concluded with an assessment of the officials trained and a classification of their being competent or incompetent and, if the latter, whether they are trainable or non-trainable. All audit findings were categorised on the basis of compliance. Audit agencies are required to name all persons responsible for transgressions as this costs no more and encourages better management.

To counter non-compliance we must change existing mindsets. Multiple checking confuses accountability and ownership of the problem. Responsibility and accountability must be clearly pegged. Investigation, prosecution and, where warranted, conviction must demonstrate zero tolerance in respect of corruption. As success requires service delivery by all, incompetence must be weeded out where and when it is apparent.

To drive this process, a national awareness campaign was launched last year surrounding the restructuring of the department and this was supported by a booklet, video and presentations. The central message, amongst others was, if you do not do your job you will lose it. Suffice to say that fraud and corruption continues to be significant and that it is and will be decisively dealt with through the appropriate courts and by our compliance unit.



In support of this drive, a full-time Compliance Unit has been established in the Office of the CFO. The purpose of this unit is to expedite disciplinary action outstanding in the Office of the CFO. Departmentally, some 2 000 disciplinary cases are outstanding. We thank the NPA and the Magistracy who have made available people to assist in ensuring that the investigation and chairing of inquiries are of a high professional standard. I endorse the concept embedded in our constitution that the Magistracy should be independent. Independence however is distinct from responsibility and I believe that Regional Court Magistrates are ideally placed to play the pivotal role needed in setting the standards for professionalism and ethics. The concept of a single judic iary will, in my opinion, hinge amongst other things on minimising perceived differences between the Magistracy and High Court Judges. Further funding will be required to continue with wide-spread forensic auditing, training, testing of competency levels and communication, if the problem is to be addressed both effectively and holistically. Efficiency savings should enable the sustainability of these measures in the long term however without seed funding these benefits will not be unlocked.

An anti- fraud and corruption hotline was established last year. A risk management committee has been established and senior management have been trained in the requirements for good corporate governance as laid down by the King II report.

Culture changes are a process. The process is underway.

The anti-fraud and corruption hotline number is 0800 00 59 33.

4. Restructuring The Office of the CFO

CFO

Chief Director Budgets, Procurement

& Decision Support

Chief Director Financial Operations

& Co-ordination

Chief Director Monies in Trust & Deposit Account

Director Payroll

Services

Financial Operations Directors

Regional “Mentoring & Coaching”

Financial Operations Director

National Office

Operations Coaches “Coaching & Monitoring”

Reporting Services & Audit Facilitation

Financial Process

Monitoring Unit & Backlog Reduction

Systems & Control & BAS Implementation

Transaction Processing and Agency Services

Donor Fund Administration

Standardisation “Establishment & Continuous Improvement”

Help Desk &

Communications



The Chief Director Budgets and Decision Support is charged with the responsibility of mentoring the Budget Coaches who report directly to line management. Budget Coaches at all levels will need to be intimately familiar with the financial model developed by the Justice Footprint Project and in addition they will need to manage the Base 80 process as it aggregates low level Base 80’s, that they must coordinate and produce, from the bottom to the top. The Chief Director Budgets and Decision Support is also charged with perpetuating the Justice Footprint concept or process. Each successive year that the Justice Footprint process is replayed, over the year, culminating in the MTEF submission, the available funding will be optimised. It is envisaged that a detailed Zero Based Budget, costed by the Budgeting Directorate will only be done every five years. In the interim years, incremental allocations will be made at decision package level. The chief director is likely to be a pathfinder with a macro economic perspective able to assess equitable shares and give direction to vision and policy in the prioritisation and allocation of the budget after extensive research and the piloting of innovations as a part of an innovative continuous improvement culture. The contract negotiation sub-directorate , within procurement / buying is likely to report to the Chief Director: Budgets and Decision Support. The Chief Director Financial Operations is responsible for all transaction processing activities including related matters such as reporting services, backlogs, annual financial statements, donor fund administration, buying processing including the Logis system etc. This person will have to have a proven record of having successfully converted, with consistency and regularity, thought into action. The Chief Director Deposit and or Trust Account will be responsible, as the key client contact, for the outsourced Trust Account Diversion Project. This person will need to have an advanced IT and or MIS systems knowledge. It will be expected that this person will manage the interface with the outsourced partners or alternatively an insourced partner. A Director Deposit Account is also envisaged for a period, at least, to lead the way forward in resolving the historical deposit account crisis (backlogs) and in making the current system, while it lasts, more efficient. The post of Chief Director Payroll Systems is dependent upon the consolidation of matters relating to people paid by the Department. Should the current payment sub-directorate remain, as distinct from a consolidation of payroll administration together with payroll financial transaction processing (payment sub-directorate) then a Directorate rather than a Chief Directorate is envisaged for the envisaged national Payroll Services directorate.

The current decentralised regional office structure is to be realigned. With effect from 1 July 2002 the new structure will be piloted and then rolled out. The new organisational structure supports the vision of a virtual national shared finance service. The management of the shared service vests in the CFO as head of the “Financial Operations Executive Committee” (Fin Ops Exco) of the Office of the CFO. This committee consists of the Regional Finance Heads and the Chief Directors and Directors of the Finance Directorates at Head Office (Financial Operations, Budgets, Deposit Account & Donor Funding and Payroll). A number of these posts are, as stated above, currently vacant. The finance capacity at regional and at sub-office level is to be enhanced by the new structure. The broad framework is as follows:

o “Budget Allocation, Prioritisation and Management” and “Transaction Processing / Operations Management” are defined as two distinct processes. Budget prioritisation and management is the responsibility of line management and as such is positioned within the Business Units that have this responsibility.



In support of this responsibility budget coaches have and are to be appointed to assist line managers (Business Unit Managing Directors, Regional Heads: Court Services, Masters of the High Courts etc) in the discharge of their responsibilities. These line managers are to be totally responsible for the bottom up drafting and presentation of Base 80 proposals which are to be presented for consolidation to the Director: Budgets in the Office of the CFO on an annual basis. Budget allocation and performance management to be co-ordinated by the Office of the CFO as follows:

o Budgeting Principles

• Equitable share determination: Overall needs analysis ; • Prioritisation: Zero Based and Base 80; • Independence and accountability: Fund management; • The reverse promise: Business plans and strategies; • Budgeting for success: Failure should not be a self fulfilling prophecy.

o Process

§ Establishment of budgetary framework: Annually

• CFO: Provisional Base 80 budgets distributed: Open for comment;

• CFO: Provisional budget (general ledger) allocations: Open to buy;

• CFO: Provisional allocation meeting: Understanding the suggested allocation;

• Business Unit: Reworked business plan: Within the provisional Base 80 allocation:-

o Base 80 proposal: Funded and unfunded decision packages established and prioritised;

o Strategic framework with measurable objectives;

o Monthly cash flow targets;

• DG: Business plan review:-

o Finalisation and approval of:

§ Base 80: Prioritisation and initial budget allocations ;

§ Monthly cash flow targets: Accountability;

§ Strategy and measurable objectives: The reverse promise.



• CFO: Budget (general ledger) adjustments.

o Monthly budget commitment:-

• CFO: submit budget commitment vs actual reports to BU for the preceding month.

o Quarterly budget review:-

• Business Unit: Reworked business plan: Within the Base 80 allocation. Base 80 Reprioritisation and Allocation schedules are to reflect the decision packages for the marginal 20% of activities plus the unfunded activities thus enabling choice, realignment, reprioritisation etc.

o Base 80 review: Funded and unfunded decision packages reprioritised;

o Strategic framework with measurable objectives reviewed;

o Monthly cash flow commitments for the next quarter.

o Budget Committee: Business plan review:-

• Actual to budget review. Performance management schedules within the Base 80 reflect the actual to budget position per standard item. Once BASS is introduced then performance management will be possible per activity by standard item.

• Finalisation and approval of:

o Base 80: Reprioritisation and reallocation;

o Monthly cash flow targets committed: Accountability;

o Strategy and measurable objectives: The reverse promise.

o CFO: Budget (general ledger) adjustments.

o Budget (General Ledger) Adjustments

• All budget (general ledger) adjustments to be submitted in writing. A suggested adjustment form is available from the Office of the CFO. Budget virements are subject to Treasury guidelines. Once budget allocations are approved by the DG for the first quarter, ownership of a budget allocation rests with Business Units. Budget allocations will be reviewed by the Budget Committee quarterly. Budget virements within Treasury regulations will be approved or reasons will be provided.



o Zero Based Budget

• During 2002 the Justice Footprint Project is tasked to assist Business Units in the determination of a Zero Based Budget. It is proposed that this exercise be conducted every five years. The process requires each Business Unit to identify decision packages representative of functional activities that are separately identifiable operating units that will be prioritised within an equitable share allocation.

o MTEF

• The MTEF (Medium Term Expenditure Framework) submission in June 2002 will be drawn from the current Base 80 submissions. Business units are to resubmit or reconfirm their current Base 80 by 20 May 2002.

o MTSF

• The MTSF (Medium Term Strategic Framework) submission in 2003 will be drawn from the current Business Plans.

o The appointment of a Regional Budget Coach to the Regional Head, Court Services that is to be located in the office of the Regional Head, Court Services. This post is suggested at Assistant Director level but this ranking will be dependent upon the availability of people at this level. The incumbent will report to the Regional Head, Court Services and to the National Budget Coach: Court Services.

o The Regional Finance Head is to relocate to a court, if possible, or alternatively such other accommodation as is deemed to be the best alternative given the circumstances peculiar to each region. The choice of location being dependent upon office space availability. This post, designated as, Director: Regional Financial Operations should be at Director level for all regions that have been right sized. The Regional Financial Operations Director is to be the Operations Coach for the Court at which he or she is located. The Regional Financial Operations Director is to report directly to the Chief Director Financial Operations and to the Fin Ops Exco. An alternative under consideration in the development of a conceptual framework, as an example, is as follows:

§ Regional Financial Operation Director - High Court Cape Town

§ Ops Coaches – to be located in one of the allocated courts. o Van Rhynsdorp, Vredendal, Clanwilliam, Vredenburg, Hopeful,

Laaiplek, Wellington, Tulbagh and Wolseley. (9 Offices) o Ceres, Laingsburg, Montagu, Robertson, Ladysmith, Porterville,

Piketberg, Moorreesburg. (8 offices)



o Simonstown, Strand, Somerset West, Stellenbosch, Caledon, Grabouw, Hermanus, Bredasdorp. (8 Offices)

o Uniondale, Knysna, Riversdale, Heidelberg, Albertinia, Swellendam,

Bonnievale, Prince Albert, Beaufort West, Murraysburg, Calitzdorp. (11 Offices)

o Cape Town, Bellville, Malmesbury, Paarl, Worcester, Atlantis, Mitchells

Plain. (7 Offices)

o Goodwood, Kuilsriver, George, Mossel Bay, Oudtshoorn, Wynberg, State Attorney Cape Town. (7 Offices)

o Operations coaches are to be appointed to defined court clusters and they are to report directly to the Regional Financial Operations Director. Operations Coaches are to be assigned a defined cluster of Justice Offices that they are to mentor and monitor as required by the standards manual (Governor Brown Project). Operations coaches should be based in a court within their cluster. The local office of the State Attorney is to be allocated as the responsibility of one of the Operations Coaches. Given a need for backlog reduction and or training this is to be arranged with the Regional Financial Operations Director who will utilise the services of the Regional or National Support Desk. The duties of an Operations Coach are to be specified, in detail, in the standards manual.

o The Office of the Regional Financial Operations Director is to be staffed with people at various levels whose function is to man a Support Desk that will see to training and backlog reduction in Justice Offices.

o The Director (Chief Director) Payroll Services at national level, once appointed, is to review current arrangements and take operational changes to the Fin Ops Exco for approval. With this in mind, current arrangements in relation to payroll administration are to remain in force, however, this position may be reviewed in conjunction with the HR Business Unit. All staff employed in all finance payroll matters are to report through to the Director Payroll Services upon appointment, until such time, these staff are to report to the Regional Finance Operations Director.

o Justice Offices could be allocated to redefined regions. In terms of a concept document (open for discussion) a new region is suggested, constituting of southern KwaZulu Natal and northern Eastern Cape. The current Northern Cape region could report in to the North West Region. The current posts of Deputy Director Finance in the North West Region and the Assistant Director: Finance post in the Northern Cape are suggested to be at Director and Deputy Director level respectively. The Assistant Directors post is to remain at Kimberley but this post to become an operations coach or budget coach post. It is suggested that Mapumalanga report in to the Limpopo Region. As a guide all new regions are to be determined on the basis of an equal distribution of weighted size and volume between the regions. All regional finance transaction processing functions in relation to Agency Services are to be withdrawn to National Office. This concept document was drawn up on the basis that direct supervision and management of the finance “bookkeeping” functions are necessary due to the low technical skills



of the people and as the systems are manual in a weak internal control environment. The extent of management supervision per month per location is suggested at Masters Office 3 days, Magistrates Office 1 day, Senior Magistrates Office 2 days, Chief Magistrates Office 4 days, High Court & Appeal Courts 3 days, State Attorneys Offices 2 days, Constitutional Court 3 days, Special Tribunal 1 day, Labour Court 3 days, Family Court 1 day, Umlazi Court 5 days, Land Claims Court 1 day, Umtata Magistrates Court 5 days, Divorce Courts 1 day, Johannesburg Magistrates Court 2x5 days, Randburg Courts 2x3 days, Port Elizabeth/Durban/ODI/Phuthaditjhaba 2x5days. Locations to be assigned to a cluster such that each cluster constitutes a 22 day working month for one operations coach ie a management man month. On this basis after allowing for travelling time, planning and report backs the following table was determined which reflects the number of standardised clusters per region and the number of management supervision days.

REGION OPERATIONS DAYS 22 DAY CLUSTERS KZ 139 11 EC 153 9 WC 84 6 FS 111 11 NC 49 4 NW 48 4 G 102 12 L 53 4 M 47 3 TOTAL 786 59

From the above it can be seen that the merger of Northern Cape with North West, the merger of Mapumalanga and Limpopo, and the creation of a new region that draws from both Kwa-Zulu Natal and the Eastern Cape produces eight approximately equal regions. It is suggested that each of these new regions be split into two and that the Regional Finance Head manage the Operations Coaches in the one half as well as that this person be required to manage the Deputy Finance Head who is tasked to manage the Operations Coaches in the other half of the region. All of the regional management to be located at court level in their respective clusters or regions. The regions and clusters discussed above would, in terms of this conceptual framework (that is still open for discussion), be as follows:



5. Outsourcing Cash Handling / Trust Account Diversion

Substantial work has been done towards achieving this goal. Detailed reports are available. The internal audit findings on non-compliance in Justice Offices of some 90% indicates that some 90% of the work in these offices is not done. Forensic audit findings are that the risk of thefts and losses as a result of fraud and corruption is unacceptably high. This is due, in part, to a lack of supervision and management which is not likely to be replaced since the Magistracy has ceased to perform this function. The backlogs that exist nationwide read together with the fact that when backlog teams leave a Justice Office that transaction processing status commences to slip backwards indicating that we cannot do the job with the resources, both people and systems, that we have. The MTEF request that we lodged in respect of these needs received due consideration but was awarded no financial backing in the supplementary or MTEF allocations. The current financial systems are, in more than 90% of the Justice Offices, manual systems. The modernisation of these systems cannot be expected in the short to medium term due to a lack of funding. Thus given the prospect of no improvement in resources the only alternative is “less work”. Given the outsourcing of cash handling more than half of the workload in courts will be removed. This will enable many staff in larger courts to be redeployed to activities such as maintenance investigation and in smaller courts it will enhance the likelihood that the books and records are kept up to date and that court administration receives more attention. The process will also enable a focus on dispute resolution and on facilities management in support of the former objective. In short, the envisaged solution seeks to put cash management under the control of the banking sector, with value-added services attached such as management information



systems, providing decision support information, to officials charged with a variety of tracing, dispute resolution, advice etc tasks. The Office of the CFO is convinced that without securing the above goal, the management of the deposit or trust account, in compliance with the requirements of the PFMA is, at this stage, not likely. This project is a priority unfunded initiative of the Office of the CFO. Application has been made to USAID for assistance. Other donors will be approached and the option will be presented to Treasury in our next MTEF submission. Given that we did not have the resources, during the current year, to get the Deposit or Trust Account books written up, the Office of the CFO concentrated, where possible, on getting the Vote Account books written up. During the year ahead an attempt will be made to reduce the backlogs in the Deposit or Trust Account books. In certain areas these books were last reconciled in the early 1980’s and in other areas they were last reconciled in 1960! The cost benefit of getting these books up-to-date across the country is diluted by the fact that due to missing records, it is expected that in many instances the job will be impossible to achieve. With this in mind, given the scarcity of funding, it is likely that available funds will be directed towards creating a future rather than to packaging history. Efforts that are to be exerted in getting the books written up will be focussed towards, where possible, uncovering financial misconduct upon which action can be taken. Thus, in short, as was stated above, there is a slim chance that the Deposit or Trust Account target for the reduction of transaction processing backlogs will be met.

6. Restructuring Financial Operations in the Masters Business Unit

• The appointment of a National Financial Operations Manager to perform the oversight function of the Guardians Fund. This person is to report to the MD: Masters Business Unit and to the CFO. This post needs to be assessed but is suggested at a Director or Chief Director level.

• The appointment of a permanent National Budget Coach that reports to the Managing Director: Masters Business Unit. This person to be responsible for assisting the Masters MD in the total budget function for all Masters Offices. This post to be at assistant Director level.

• The appointment of a Financial Operations Manager at each Masters Office who will report to a number of people. The person is to report to the Master in relation to the operation of the Guardians Fund, to the Regional Financial Operations Director in relation to miscellaneous Vote Account payments and to the National Financial Operations Manager. Given the large fund balance involved it is suggested that these posts be at Assistant Director level.



7. Financial Performance

Under expenditure at 29 April 2002 details follow: R 41 517 000 Less: Ring fenced budget allocations from Treasury not spent R 39 000 000 Under spend before items below: R 2 517 000 Over spend included above to be reimbursed re:

Judiciary R13 149 236 Public Protector R 1 967 225

Provisional Departmental Under Spend R17 633 568

These numbers are provisional and are likely to change. Comment will thus be reserved until the next monthly PEP report. Current outstanding financial commitments are of the order of some R 140 million. Roll over funding is to be restricted to a request for the ring fenced budget allocations. This will mean that Business Units will be required to reprioritise their current planned expenditures to accommodate their unfunded future financial commitments.



Under /over expenditure analysis by Business Unit (thousands)

BUSINESS UNIT

Adjusted budget

allocation 2001 to 2002

Roll over budget

allocation R199 658

Adjustment

Estimate Allocation

R50m + R50m

Final adjusted budget Actual Expenditure

Under / (Over) Spend

Adjustments to spend

Adjusted under / (over) spend

Ministry 9,349 - - 9,349 9,275 74 74 CEO 20,341 11,600 10,000 41,941 12,217 29,724 29,724

CFO 54,171 5,901 1,126 61,198 93,593

(32,395) 27,169 (5,226) PEC 7,893 - - 7,893 7,674 219 219

ISM

210,554 39,000

(50,000) 199,554 320,759

(121,205) (121,205)

HUMAN RESOURCE 60,611 19,600 18,212 98,423 58,550 39,873 39,873 LEGAL SERVICES 95,316 4,800 886 101,002 100,763 239 239 LEGISLATIVE AND CONST DEVELOP 17,543 6,450 941 24,934 15,438 9,496 9,496 MASTERS 48,588 6,200 4,040 58,828 53,755 5,073 5,073

COURTS

1,628,574 29,253

(299,304)

1,358,523 1,695,074

(336,551) 344,810 8,259 NPA 422962 15800 383890.58 822652.58 715,570.10 107,082 107,082 INDEPENDENT BODIES 658833 6395 10000 675228 686,208.35

(10,980) (10,980)

OTHER 309358 54659 0 364017 364,017 (363,810) 207 Thefts and losses (8,169) (8,169)

JUDICIARY 149592 0 7959 157551 170,700.24

(13,149) (13,149) Grand Total 3693685 199658 87751 3981094 3,939,577 41,517 - 41,517



8. Broad Management Framework / Business Plan

Management of the Office of the CFO is largely driven by a framework that focuses on:- • Resources: These are allocated per the prioritisation and allocation view of the Base 80

Budget and are managed with reference to the management view (actual to budget) of the Base 80 Budget on a quarterly basis.

• Compliance: PFMA compliance is addressed with reference to an action plan, reviewed on a quarterly basis. The current action plan is detailed below (see point 9).

• Performance: The MTSF detailed below (see point 10) sets out performance targets. Progress in achieving these targets are reported upon monthly in the monthly PEP report. The MTSF is updated quarterly.

• Communication: Monthly reports and regular newsletters. • Management: self-directed work teams.

9. Challenges and Action Plans, in the Office of the CFO, to Address Audit Queries

These are detailed below.



NO

MATTERS REQUIRING ATTENTION CHALLENGES ACTION PLANS

1. Backlogs in capturing transactions Lack of adequately skilled staff

A capacity building cash hall training project is underway. 2019 staff have been trained in 380 venues. Competence of staff in cash halls have been assessed.

and writing up books (vote and trust)

A backlog reduction project, Rolling Stone, is underway to reduce transaction processing backlogs.

Clearance/follow-up on suspense accts Agency services accounts (long

Following up for final time, Discussions with National Treasury for write offs where necessary

outstanding, irrecoverable) No detailed analysis done due to volume of transactions in accts BAS on-line capturing

2.

Limitation of audit scope - audit opinion disclaimed The books and records are not up to date Project Rolling Stone

Batch and documentation controls are inadequate

Poor liaison with compliance agencies

3.

Payroll Administration and the reconciliation of payroll related expenditure per FMS to PERSAL

Insufficient staff; available staff inadequately trained. This is especially so in certain Regional Offices

Payroll administration to be reengineered in the new financial year and the reconciliation has been outsourced

4. Interim internal control measures Lack of adequate skilled staff Cash Hall training

to be put in place Culture of non-compliance Compliance Team Post checking vs Pre-checking Releasing staff previously involved in post-checking to do pre-checking

5. Monies in Trust - National Crisis Discussion Paper on possible solutions / Diversion



NO


to be solved Deputy Director appointed at National Office as a first step

6.

Shortcomings regarding leave admini- Lack of adequate skilled staff Pilot project on Automation of Leave

stration, leave credits Lack of compliance - Judges' Backlogs in process of being cleared secretaries DG to approve recommendations made by HR HR training project

7. Thefts and Losses shortcomings Shortage of adequately skilled staff

Reconciliation between Finance and Legal Liability on monthly basis

No reconciliation between Finance and Legal Liability Cash Hall training Centralisation of Thefts and Losses except KZN

8. Contingent Liabilities Inadequate registers Reconciliation in progress

(Housing guarantees, Pending law No reconciliation

Legal Liability to estimate pending law suits and obtain confirmation from all State Attorneys

suits, Motor Finance Scheme guaran- Lack of adequately skilled staff

tees)

9. Judges' salaries and allowances Errors in that the payments are All judges being paid on Persal as from 2001/02

not done via Persal

10. Witness Protection Programme Lack of adequately skilled staff

NPA - Has National Treasury been approached regarding own set of regulations?

Should have separate regulations

due to the nature of the programme

In the process of obtaining National Treasury approval to deviate from current procurement regulations. This approval should be with backdated effect as expenditure in this regard was previously reported to be unauthorised and irregular.

11. Control over assets Poor control over assets due to Plan to address shortcomings awaited from Procurement and lack of adequately skilled staff, Mr Ngoma



NO


no stocktaking for last few years, Stocktaking to be done continuously non-compliance to prescripts

12. Internal audit Skills transfer in terms of contract To engage in process of following up whether the tenderers have done what they were appointed for

13. Accountability arrangements Establishment of DSO, cut-off and Financial delegation to NPA

- between NPA/DSO planning for implementation of Letter from DG arranging monthly meetings between the amendment act NPA and CFO Monthly advances to NPA, journals passed to allocate transactions in DOJCD books - Public Protector Processing by DOJCD Transfer payment from 2002 financial year Claiming of transactions processed by us

14. Donor Funding Project managers not knowing what Appointment letters including responsibilities issued and workshop held with all project managers.

their responsibilities are

Donor suspense account not New structures on FMS to properly account for donor funds, clearing suspense account

reconciled, cleared Inadequate overall project manage- Establishment of Project Office initiative ment Reports on performance

Report on performance not provided All MD's, project managers, regions to provide inputs for 2002 Annual Report and Annual Financials

Donor requirements Establishment of Project Office initiative, BAC to take over administration of the USAID funds in March 2002

15. Accounting transactions incorrect Non-compliance to prescripts Compliance Team

Re financial year (cut-off), overpayments Pre-checking



NO


BAS on-line capturing

16.

Unauthorised, Irregular and Fruitless Not reported to National Office SCOPA to finalise very old unauthorised expenditure -

and Wasteful expenditure relating to Not accounted for in terms of awaiting resolution (up to 1999/2000)

- previous financial years prescripts Inputs for annual report and annual financial state-

- relating to 2002 financial year Not properly investigated, follow-up, ments - giving all clear guidance on what it is, and

steps not taken where needed the steps to be taken on discovery thereof NOTE: None reported for the 2002 year Non-compliance with prescripts Compliance Team

17. Revenue administration Non-compliance with prescritps Cash Hall training

No reconciliation between revenue Compliance Team paid to SARS and revenue on Reconciliation done monthly to explain differences (Persal to FMS) FMS BAS automatically posts stale warrant vouchers to Revenue

18. Long outstanding unresolved issues No or little progress as a result Audit Facilitation coordinating all inputs

(Notch increments, Day-to-day main- of no one taking charge of issues

tenance, State Attorney Umtata, to resolve/finalise Help Desk established in the Office of the CFO

Goldstone, State Attorney balances,

Amalgamation former TBVC, and

Judge White)



NO


19. Annual financial statements

The preparation and publication of the Annual Financial Statements has not been solely under the control of the Office of the CFO

Dedicated units have been established to manage compliance agencies and financial reporting

20. Budget Process

Budget allocations based on historical baselines and equitable shares not based on a detailed needs analysis. Output / Performance budgeting : Justice Footprint

Business Unit Managers are not taking responsibility for budgets and budget control of the programmes for which they are responsible Footprint Project

Budget Coaches for all Business Units

21.

FINANCIAL MANAGEMENT -

There are many obstacles. Categories include people, systems funding and culture. Consequently staff do not have the necessary skills, fraud and corruption is significant and available structures and resources need realignment. Funding to be sought to continue backlog reduction initiatives

GENERAL

The Financial Process Monitoring Unit is to co-ordinate monthly returns on the status of transaction processing and to monitor resources at Justice Office, Regional and National levels.

Funding to be sought to continue with forensic audit initiatives.

Legislative costing training to commence (Staff to enrol for a B.Comm Honours Degree at UCT in June 2002) as a decision support initiative enabling the consideration of financial consequences of new legislation tabled.

Implementing Regional Support Programme at sub-office level Standardisation of Financial Administration in all offices Helpdesk at National Office



NO


FMS to BAS including DNS roll-out/alternatives where no connectivity Reengineer Payroll Services

Responsibility for Procurement Services to be finalised by Exco and Procurement Services to be reengineered.

22. Masters Offices Manual system. Amalgamation. Masters Financial Transformation Programme Fraud and corruption PFMA ISSUES



23. Progress with PFMA implementation slow.

The Department does not have the resources to comply with the PFMA. In short, weaknesses in financial management systems, risk management, internal control and non-compliance with prescripts exist which preclude compliance with the PFMA.

Progress made with the implementation of the PFMA is monitored by the DoJ&CD Exco and at Board meetings as well as by regular meetings with SCOPA and the Portfolio Committee. The Anti Fraud and Corruption Committee have been tasked by Exco to do a risk assessment annually and to produce a risk management plan to address the risk. I n many courts the books and records have not been reconciled for decades. The worst known cases exceed forty years since last reconciliation. It is estimated that all Vote a/c transaction processing will be up to date by the end of March 2002. • It is not possible to estimate how long it will take to catch up on writing up and

reconciling the records relating to Monies in Trust, in addition, funding for this initiative is limited thus completing the task is not a given

• Once the books are up to date we do not have the capacity to keep them current. In short the alternatives are more people, better systems or less work. We do not anticipate extra human capacity in the short term nor do we expect ISM to be in a position to provide widespread systems enhancements in the year ahead. The strategy thus is to outsource the cash management of maintenance monies thereby ensuring that there is less work to be done. The first pilot is to commence in Umtata shortly.

Internal control weaknesses at Justice Offices are as a result of the organisational structure and a lack of resources. • The removal of Magistrates from the role of administrative head leaves a void in the

management and supervision of day to day activities at Justice Offices. • Funding for the appointment of Court Managers was not granted in the 2001 MTEF. • A legislative costing unit is to be trained over the next few years to assess and submit

the financial implications of new legislation tabled. • A standardisation project (The Governor Brown Project) has been launched to create

standard financial operating manuals. • The Financial Process Monitoring Unit has been established to track the currency of

transaction processing and to monitor the resourcing of all finance offices. • The organisational structure and functioning of the Office of the CFO is under review.

Finance staff in the Regional Offices and at Justice Offices did not report to the CFO. All finance staff now report to the CFO. Regional finance managers are to be tasked as standards trainers and inspectors. Up to about a third of the regional office finance staff check and correct the work done at Justice Offices (post checking). Certain staff are to be redeployed to train Justice Office staff to do it correctly in the first place (pre checking).

• The Capacity Building Project (Cash Hall training of some 1800 staff in 380 venues) is assessing competencies. The Governor Brown Project is establishing operating standards in Justice Offices and the Compliance Project teams are being referred cases of non-compliance for disciplinary action.

In short the Rolling Stone Project is catching up on backlogs and referring corruption and fraud suspicions to the Forensic Audit teams who refer findings to the Compliance Unit.



10. Strategic Framework

10.1.1 Vision

To be a cost effective service delivery division

10.1.2 Mission and Strategic Objective

Mission: To build stakeholder confidence in our capacity and capability to deliver what we promise. Strategic Objective: To resolve audit queries and implement the PFMA as soon as is practically possible.

10.1.3 Measurable Objectives, Strategies, Activities, Outputs, Measurement and Monitoring Mechanisms

Activity Output Cost Measure Quantity Measure Quality Measure Timeliness Measure

Launch "The Office of the CFO" Business Unit branding R90k DG/CFO Approval By May 2002

Addressing Audit Queries and Implementation of the PFMA

This is the subject of a separate document.

Subject to systems, people and funding.

Financial Services - Backlog Reduction: Vote Account

Financial records up to date Under R7m All Justice Offices, Regions and Head Office

Audit Acceptance By March 2002

Fully Qualified AFS thus No Audit Qualification

All Justice Offices, Regions and Head Office

Audit Acceptance By May 2004

Financial Services - Backlog Reduction: Trust Account

Financial records up to date Unknown - Initial reprioritisation R10m

All Justice Offices, Regions and Head Office

Audit Acceptance By March 2003




Financial Services - Enhanced security and management of Monies in Trust

JDAS & DNS Rollout ISM Budget All offices ISM/Exco Approval The pace of this roll out is in the hands of ISM

"Diversion" see Maint enance discussion paper

Umtata pilot with SAPO to establish costs - should be partly self funding

Where possible , nationally implemented

Depending on Backlog funding and progress - Availability of GAAP compliant AFS by March 2004

No Deposit a/c backlogs by March 2003

Financial Services -Capacity Building

Cash hall process training R8.5m 1,800 people trained Competency Assessments By May 2002

Financial Services - Masters Office

No backlogs Unknown All offices CFO Approval By December 2002

Reengineered financial systems ISM Budget All offices CFO Approval By December 2002

Financial Services - General Comply with Reporting Calendar

CFO Approval Per Calendar

Reorganise Head Office Structures

CFO Approval By March 2002

Produce Annual Financial St atement Graphics

Under R30k DG Approval By end March 2002

Produce Annual Financial Statements

AG Approval By end April 2002

Launch the "Financial Process Monitoring Unit" with Office of the CFO Launch

CFO Approval By May 2002




Launch the "Compliance Agency Facilitation and Monitoring Unit” with Office of the CFO Launch


Launch the "Help Desk" with Office of the CFO Launch


Launch the "Compliance Unit" with Office of the CFO Launch


Establish a link with the Finance Division of the NPA

DG Approval By April 2002

TRC handover CFO Approval By May 2002

Extend Forensic Audit Initiative covering the 2002 - 2003 Financial Year

Funding to be found DG Approval ASAP

Create Justice Office Support Clusters and appoint Cluster Heads in charge of standardisation training and monitoring, backlog reduction and introduce pre-checking vs. current post checking

CFO Approval By June 2002

Standardisation: Roll out the "Governor Brown Project"

R1.3m Standard financial operations manuals covering all Justice Offices


Fill vacant posts CFO Approval By July 2002

Implement BAS Accountant General Approval

As determined by the Accountant General




Appoint a Chief Director: Financial Services

R450k CFO Approval By August 2002

Appoint a new CFO DG Approval By August 2002

Standardisation Training Funding to be sought - estimated at R8m

All Justice Offices By March 2003

Budget Services - Justice Footprint Project

See below Under R6.4m See below See below See below

Demand Analysis See above Arrest Statistics from SAPS, Justice Unit Value Lists, NPA Financial & Personnel Data, DCS Data & D of SD Data

Accuracy of data 1 month from receipt of baseline information

Supply Analysis See above Inputs from all BU's Accuracy of data 2 months from receipt of baseline information

Right Sizing / Equitable Share Determination

See above Inputs from all BU's Exco Approval By July 2002

Innovation Reviews See above Inputs from all BU's CFO Approval By August 2002

Costing See above Inputs from all BU's Accuracy of Estimates By August 2002

Zero Based Budget See above Inputs from all BU's CFO Approval By October 2002

Financial Model See above Inputs from all BU's CFO Approval By October 2002




2003 Draft MTSF See above Inputs from all BU's CFO Approval By December 2002

2003 Draft MTEF See above Inputs from all BU's CFO Approval By February 2003

Budget Services - Reengineering the budget process

Establishing a reengineered budget process including an annual calendar of check dates for submissions and finalised reports covering actual to budget reporting, Base 80 finalisation, MTSF and MTEF submissions etc. Plus standardised templates for the submission of inputs.

CFO Approval By July 2002

Establishing an equitable share approach (must haves, should haves, other - apportionment) to budget allocations based on prioritised needs that is based on the findings of the Justice Footprint Project

Exco approval By December 2002

Budget Services - Restructuring budget decision support

Appointing regional Budget Coaches

Improved actual to budget projections

By May 2002

Budget Services - General Budget Coach training Funding to be found Improved actual to budget projections

Ongoing

Finalise 2002 MTSF Submission

DG Approval By March 2002

Finalise 2002 MTEF Submission

By June 2002




Finalise Supplementary Budget Allocations submission

DG Approval By August 2002


Training on the Financial Model ex Footprint Project

User Acceptance and CFO Approval

By November 2002

Appoint permanent Budget Coach to Masters Business Unit

CFO Approval By December 2002

Appoint Assistant Budget Coach to Court Services Business Unit

CFO Approval By December 2002

Draft 2003 MTSF Submission CFO Approval By December 2002

Draft 2003 MTEF Submission CFO Approval By February 2003

Payroll Services Establish "Payroll Services" and Appoint a Chief Director?

R450k CFO Approval By June 2002

Establish "Payroll Services" functionality and responsibilities as between the Office of the CFO and HR

DG Approval By July 2002

Monthly reconciliation of FMS/BAS to PERSAL






Establish One National (Virtual) Payroll Services Unit

Unknown Nationally implemented No of payroll related queries Take over responsibility for one region per month from August 2002 into a new payroll management strategy

Procurement Services Establish responsibility for this function

DG Approval By April 2002

Reengineer Procurement Services if a CFO function

Unknown Nationally implemented By August 2002



11. MTEF Budget Allocations

1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Rands - Thousands Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget

Administration 39,037 49,587 105,636 157,869 173,765 148,925 133,809 205,162 159,520 150,397 272,328 366,354 350,277 335,712 354,943Administration of Justice 345,548 433,016 560,442 600,533 826,754 891,177 1,008,969 1,214,401 1,310,186 1,428,376 1,571,479 1,322,165 1,391,258 1,549,169 1,682,048

Administration of Law 46,141 51,364 61,585 77,874 117,664 117,064 123,917 145,702 142,456 147,480 147,204 182,352 196,557 198,126 213,814

Sub total DoJ 430,726 533,967 727,663 836,276 1,118,183 1,157,166 1,266,695 1,565,265 1,612,162 1,726,253 1,991,011 1,870,871 1,938,092 2,083,007 2,250,805

NPA 269,362 822,241 942,316 1,040,185 1,108,346Total DoJ Core Functions 430,726 533,967 727,663 836,276 1,118,183 1,157,166 1,266,695 1,565,265 1,612,162 1,726,253 2,260,373 2,693,112 2,880,408 3,123,192 3,359,151

Independent Entities

Public Protector 147 163 695 898 1,081 3,893 4,168 5,943 5,770 15,399 23,969 35,766 34,500 36,253 38,436

Legal Aid Board 62,357 68,256 184,341 159,264 345,300 222,927 340,880 245,573 322,103 341,827 357,924 378,282Security Forces Board of Inquiry 11,219 Aux and Assoc Services + NCPS 16,009 22,820 76,125 58,467 131,035 286,759 367,186 203,145 772,562 836,212 556,604 591,593Total Indep Entities + NCPS 147 163 695 79,264 103,376 264,359 221,899 482,278 515,456 723,465 472,687 1,130,431 1,212,539 950,781 1,008,311

Budget Total 430,873 534,130 728,358 915,540 1,221,559 1,421,525 1,488,594 2,047,543 2,127,618 2,449,718 2,733,060 3,823,543 4,092,947 4,073,973 4,367,462

Over or (under) expenditure Pre 1997 the budget of the department was not fully spent. 24,046 47,046 43,521 -192,760

Percentages of Total Budget

Administration 9% 9% 15% 17% 14% 10% 9% 10% 7% 6% 10% 10% 9% 8% 8%



12. Conclusion

The year under review was characterised by tuff decisions. Choices were made and with limited resources significant progress was made. The legacy of all those that volunteered to join me in establishing the Performance Enhancement Programme is the faith that they have established in the programme that presents a future that can be unpacked, in detail. To all those that volunteered to assist, my sincere thanks, for your trust and friendship. The way forward has been charted but more importantly the resolve to achieve now underpins the foresight of the leadership that created the opportunity for us, together, to succeed. Alan Mackenzie 7 May 2002

Documents

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