DOD Feedback on PCD Report: Annual Report FY2005/06

1. DEPARTMENT OF DEFENCE FEEDBACK ON PCD REPORT: DOD ANNUAL REPORT FY2005/06 (13 March 2007)

2. To present to the Portfolio Committee on Defence feedback on the Annual Report 2005/06 tabled on 12 September 2006 Aim

3. It is requested that the Portfolio Committee on Defence approves the information provided as a subtantative response to the feedback report. Decision

4. Para 2.2 Approved document on the IFMS system developed in collaboration with the National Treasury The National Treasury has developed a plan for the implementation of the NT IFMS Project. The scope of the DOD’s involvement is as follows: - Participate as part of the adjudicating team for the application development toolset tender. - Participate in the formalisation of the user requirement statement for the asset management solution as the lead department for supply chain management - Participate in the finalisation and procurement of the HR application of the IFMS solution - Participate in the development of the financial management application and the other components of the final integrated IFMS solution The above was confirmed during formal discussions and work sessions between the DOD, the National Treasury and the SITA. Defence Administration

5. Cognisance should however be taken of the fact that the National Treasury has placed a moratorium on the renewal or enhancement of any information system that has a financial implication in government. DOD is dependant upon the NT plan and its ability to deliver integrated financial management solutions in collaboration with the public sector as the user community. This dependency is a risk to the DOD as it has a direct effect on the ability of the DOD to address either qualification or emphasis of matter by the Auditor-General Para 2.2 Approved document on the IFMS system developed in collaboration with the National Treasury Cont….

6. Para 2.2 The Committee needs a presentation on the status of the White Paper on Peace-Keeping Missions and the role that Foreign Affairs are playing in compliling this document The 2007 Government Programme of Action sets out the objective of updating the White Paper on Peace Missions. DFA Role: The Department of Foreign Affairs is the lead Department, SAPS and the DOD are supporting departments. During 2006, the DOD was part of the drafting team and provided inputs of the DFA on the White Paper as requested. Status: The Department of Foreign Affairs has subsequently submitted a Cabinet Memorandum on the Review of the White Paper on Peace Missions on the IRPS DG’s and Cabinet Committees. The White Paper was referred back for further work as directed by the Cluster. At the IRPS DG Cluster of 06 March 2007, the DG DFA undertook to expedite the submission of the Revised White Paper on Peace Missions to Cabinet during March 2007. The DOD recommends to the Committee that: - A joint sitting of the Committees having a portfolio concerning Foreign Affairs, Defence and Safety and Security be held, and - the Minister of Foreign Affairs be requested to provide a briefing on the Revised White Paper. Defence Administration

7. Par 2.2: PCD Recommendation: Planning Enabler Tool (GEJIMA) should be implemented in near future GEJIMA system is being implemented in a phased approach PHASE 1 Capturing of Service/Divisions Level 2 Plans on GEJIMA system – on track Training of Planners/Reporters to use GEJIMA system - continuous process Quarterly Reporting – All FY06/07 quarterly reporting was captured on the system PHASE 2 (Phases 2 and 3 - concurrent phases) Improving GEJIMA to accommodate customer requirements to stabilise system – in process Realigning GEJIMA system with Structure Management Control System, Financial Management System – adjustments once new structural changes are captured PHASE 3 Provide integrated DOD planning and controlling solution Study to determine interfacing requirements between other computer programmes and tools used, in addition to GEJIMA such as Activity Based Costing tool Determine final DOD user requirement Decision to be made either to further develop GEJIMA system to integrate all stand-alone programmes/tools or to buy best programme commercially off the shelf and develop to address full DOD requirement Defence Administration

8. Defence Administration (continued) • Par 2.2: PCD requested feedback on the issue of lack of capacity and loss of skills in Military Legal Services within 6 months • Resignation of Skilled Members *33 Military Legal Practitioners • The following Impact on Attrition (Causes for Attrition) • High demand for highly experienced SANDF members by other departments • Remuneration dispensation for law professionals in the DOD and other State Departments differ. They do not follow the same progression principles and/or appointment levels • A lack of upward mobility once salary level 11 has been reached. New appointees require 5-6 years to reach experience level of service rendering • Members feel insecure and leave the Legal Service Division as “Draft Military Discipline Bill” proposes abolishment of certain posts such as review counsel

9. Causes for lack of capacity No provision made on structure for Operational Law Support during external deployments (yet 8 – 9 military legal practitioners deployed at any given time) Posts for internal support personnel – Finance, Human Resources, etc Posts for interpreters- appointed on ad hoc basis sometimes affecting service delivery Unstaffed and unfunded posts due to a lack of funds – approximately 20 vacant posts Due to transformation imperatives junior members with potential and not the ideal level of experience will only gain experience over time Corrective Measures Re-structuring of the DLSD to create additional posts is a priority Amendment of the Personnel Management Code in order to make it flexible and introduce incentives to retain skilled staff Ensure that Mobility Exit Mechanism is not afforded to members to the detriment of Division, were it is unavoidably succession planning would be utilized to ensure skills are transferred. Funds have been requested through the Departmental Planning and Budgeting Committee to fund vacant posts Optimal utilisation of available personnel including Reserve Force members to ensure service delivery Defence Administration (continued)

10. Force Employment • Par 2.3: PCD supports the rejuvenation strategy to built a young dynamics force and to build the capacity of junior leaders. The Committee requested a presentation on the plan of action with regard to build the capacity of the SANDF • Rejuvenation of the SANDF • Background • DOD HR Strategy 2010 requires the rejuvenation of both the Regulars and Reserves • The MSDS provides rejuvenation from the bottom-up • Two MSDS imperatives: • Rejuvenation • Development opportunities for the youth • Rejuvenation results are demonstrated eg annual Ex SEBOKA • In terms of the 2007 Programme of Action for 2007, intensification of force rejuvenation lead by the DOD is a priority that has been identified within the JCPS Cluster

11. MSDS Growth Path

12. Improved Rank-Age Compliance of Privates

13. Rejuvenation Sustainability and Personnel Flow Up to now, rejuvenation concentrated on the Regular’s rejuvenation requirement 6 631 (75,1%) out of 8 463 MSDS members received Regular contracts (Core Service System) Only 1 233 potentially available for Reserves The DOD can sustain annual MSDS intakes of 4 500 (inflows must balance outflows) Insufficient capacity (training, accommodation, instructors, operating budget) limit intake size Larger MSDS outflows to Reserves will enhance capacity for bigger intakes (not over short term Planning Considerations Size of DOD HR composition is a function of force design, force structure, post establishment & sustainability Revised force design calls for 85 375 full-time HR Will be staffed by: 70 000 Regulars (uniformed and civilian) 15 375 MSDS MSDS intakes will therefore have to expand to 7 687 per year, of which 4 500 per year is currently funded Force Employment (continued)

14. Planning Considerations (continued) Appointments of MSDS members in the Regulars (Core Service System) should not exceed the annual personnel outflows in the Regulars Approx 50% of each MSDS intake should therefore be appointed in the Reserves after completing MSDS service As MSDS outflows to the Reserves increase, the size of intakes will progressively increase Conclusion on Rejuvenation Optimal SANDF rejuvenation throughout all ranks is a continuous endeavour and dependant on: Changing force design & structure requirements Natural outflow of members Training capacity Career management Sustainability of new intakes Significant progress has already been made to rejuvenate the junior ranks, especially Privates Rejuvenation will continue at the rate of 4 500 new members per year until the flow of MSDS members to the Reserves increase or the Defence Budget can be supplemented for additional capacity Force Employment (continued)

15. Landward Defence • Par 2.4: PCD throughout supports the allocation of more funds towards: • C Army expressed his appreciation to the PCD for supporting more funds to ensure a viable SA Army able to execute Government Objectives • Affordability of the SA Army – Reprioritising vs the Operating Budget • Personnel budget absorbs the bulk of the SA Army’s budget • Actions implemented by the SA Army • SA Army has initiated the works regiment concept which is now being explored by the DOD • SA Army is investing limited operating funds available for training mainly on MSDS intakes and basically no continuation training for the Regular Force (already trained) is done • Members are trained to the level required for Peace Support Operations and funding for conventional training is limited to a bare minimum to only retain a small core growth • The SA Army is “cannabalising” its Prime Mission Equipment to reduce maintenance costs • SA Army actively participated in the DOD Workgroup on the Update of the White Paper on Defence 2006 • DOD approach will be to engage the determinant clusters so as to solicit support for additional funding for rejuvenation of the landward Defence Programme with specific emphasis on the replacement of the prime mission equipment.

16. Landward Defence (continued) • State of Facilities • SA Army is to a large extent dependent on PWD for maintenance of facilities (major works) • To address basic Occupational, Health and Safety and MSDS requirements approx RB1,6 is needed. SA Army provided from own operating funds RM20,6 for day-to-day maintenance and RM24 for larger projects • Prime Mission Equipment • Limited funds available concentrated on maintenance of operational deployable vehicle and weapon systems. Additional RM150 received in FY2006/07 assisted to a large degree • SA Army invested heavily in acquisition of simulators for driver training and weapon systems (Armament Acquisition Projects as well as from operating funds) • SA Army in continuous liaison with Joint Operations Division to acquire more funds for maintenance of prime mission equipment returning form operational deployments • SA Army participating in DOD process of reprioritisation of the SCAMP and has finalised its approach to and plan for the Modernisation of Landward Systems

17. Landward Defence (continued) • Ammunition • Joint Operations Division will refund the SA Army for the replacement of ammunition used in external deployments. RM139 will be provided over a period of time. Approximately RM40 will be received in FY2007/08 • Joint Operations will refund any ammunition replacement in future • In December 2006 the SA Army provided the DOD with a letter from DENEL, stating their readiness and ability to produce ammunition to the value of RM300 should the order be placed before 31 March 2007 • Revitalisation of SA Army Technical Support Corps (TSC) Capability • SA Army allocated RM54 to the revitalisation of the SA Army TSC from the RM150 additional allocation for the maintenance of vehicles • SA Army reestablishing the TSC system in the SA Army and the MOD has approved the transfer of the TSC Training Centre and TSC Reserve Units to the SA Army with effect of 1 April 2007 • Retention of Skilled Personnel • The SA Army initiated an incentive to retain scarce skilled personnel. It has been accepted by and is presently being implemented within the DOD. However, the SA Army does not have the funds to implement the initiative in the SA Army • The SA Army has substantial increased its funding for advanced and technical training at external institutions

18. Air Defence • Par 2.5: PCD throughout supports the allocation of more funds towards • Retention of Skills and Experiences Shortages • SA Air Force is establishing a three-pillar approach to resolve retention issue in medium to long term • Pillar 1. Improved recruitment and selection ensuring only candidates seeking a long-term SA Air Force career. Will address current phenomenon where members join the Air Force to acquire scarce skills and then move to alternative employment at the earliest opportunity • Pillar 2. Improved career management of members removing obstacle to self-fulfilment. Members will work in an enabling environment, conducive to a high level of personal development, satisfaction and performance. It will make members less likely to leave the organisation in search of alternative employment • Pillar 3. Remuneration at a level where specialised members are fairly and reasonably compensated for their specialised skills, and where the difference between military and commercial remuneration is not so disparate that members wish to change careers for financial benefit only. Operating budget is being significantly depleted to fund improvements in incentive schemes to retain scarce skills. An intervention at the level of National Treasury and the Department of Public Service and Administration is required to find a solution

19. Air Defence (continued) • Deteriorating Aircraft Systems which affect Training of Personnel • Detailed plans addressing critical system integrity issues are being implemented. Some examples are: • A Policy Proposal, for funding an avionics upgrade on the Astra basic training aircraft will be presented at the June 2007 Departmental and Budgeting Evaluation Committee • A proposed holistic approach to resolve the requirement for air transport affecting both the B707 and C130 systems, is due to be presented to the Operations Staff Council in the near future • The Cessna 185 system, presently not maintaining flying status, will more likely be phased out earlier than the planned date of 2009. Alternative solutions to meet operational requirments are being considered, such as utilising the Air Force Reserve Squadrons and the C208 (Cessna Caravan) fleet to take over the Cessna 185 functions • SA Air Force Force Preparation and Force Employment Funded at Cost of Longer Term Need • A number of initiatives are in progress to improving resource balancing in the SA Air Force • An example is the present approach of meeting basic helicopter flying training requirement through outsourcing the training at a greatly reduced cost and with excellent results • A study has been completed to present the first phase of basic flying training at a low-cost, side-by-side, basic flying training. This will relieve the pressure on the Astra fleet, allowing the SA Air Force to address some of the longer-term system integrity requirements. • Initiatives are underway to reduce the footprint and cost drivers of the Air Force by amalgamating, relocating or rightsizing of units and functions. Eg the possible move of the Air Force Gymnasium from it’s present dolomite infested location to the Boston facility at Hoedspruit (presently partially utilised by the SA Police Service)

20. Maritime Defence • Par 2.6: PCD supports the integration of the Strategic Defence Packages (SDPs) and the allocation of more funds to retain the technical skills and expertise of personnel in the SA Navy • Integration of SDPs • SA Navy welcomes support in ensuring the SDPs receive appropriate attention to be fully integrated in the Navy • SAS AMATOLA and SAS ‘MANTHATISI commissioned into the SAN during FY05/06 • Additional funds (RM26) received during this period for integration, utilised for test equipment, spares, quayside pontoons and certain contractual obligations • SA Navy still learning with regards to SDPs and all aspects of the integration • Main cost driver is support contracts and spares for these vessels • Retention of Technical Skills and Expertise of Personnel • SA Navy did not receive sufficient funds for retention of expertise. • In FY2000 introduced incentive schemes for retention of combat officers and technical personnel • From 2000 to end FY2005/06 contracts awarded to combat officers and 623 technical personnel. This effort will be continued in the future • SA Navy cannot meet remuneration paid by private sector – always loss of skilled personnel • SA Navy decided that 40% of its allocation to operating the SA Navy and 60% to personnel costs – ratio will ensure keeping ships at sea • DOD Instruction 66/67 – “remunerative and compensatory allowances” for scarce musterings will assist in retaining personnel

21. Par 2.7: PCD throughout supports the allocation of more funds towards Rejuvenation of the Health Care Professionals on All Levels The community service system provides SAMHS with healthy flow of young (new) health professionals Support of PCD requested in improving remuneration of all health professionals in the military to be able to retain best candidates for the DOD as SAMHS cannot compete with private sector remuneration for health professionals The MOD made a principle decision: Health professionals in uniform shall receive an allowance for being deployable To add an incentive that is not available to the public health sector Final decision pending and funding of allowance needs to be sourced with support of PCD Military Health Services

22. Funding for Health Equipment (Static and Mobile) SAMHS Logistic Master Plan informs funding and equipment for static infrastructure. Acquisition through structured replacement cycle allowing for reprioritisation However, the SAMHS does not sufficient funding for health equipment renewal to a world class standard SAMHS has limited capabilities with regard to mobile hospitals with only one functional. There is a critical need for additional field hospitals to meet employment requirements Funding implications occur where health equipment require specialised localities (x-ray rooms) or structural changes to accommodate new generation health equipment. Additional funding required for facilities although health equipment remain interdependent DOD will engage the determinant clusters so as to mobilise support for additional funding for rejuvenation of the Millitary Health Support Programme with specific emphasis on the replacement of the prime mission equipment and infrastructure. Funding for Health Equipment (Static and Mobile

23. Defence Intelligence • Par 2.8: The lack of Personnel and also the location of the Defence Intelligence Headquarters need urgent attention. The Committee requires a briefing within 2 months on whether the Intelligence Headquarters has moved • Lack of Personnel • Challenge. Continued loss of experienced personnel to other Departments • Measures Taken • Recruitment of members from MSDS (at the end of their MSDS period) during FY06/07. Twelve SA Navy members and applications for security clearances put in process. Appointment only after positive outcome of security clearance. • Recruitment of graduate MSDS members during FY2007/08 • Recruitment of under-graduates from South African Universities during the FY2008/09 • Location of Defence Intelligence Headquarters • Relocation of Defence Intelligence Headquarters was handed to National Department of Public Works (NDPW) under the RE-KGABISA project for option analysis • This avenue exceded the agreed deadline and project was subsequently handed to NDPW to manage the option analysis through its in-house capabilities. Result is expected to be completed by 15 April 2007. • Defence Intelligence confirmed preferred option is SA Defence Intelligence College (RADCLIF) • Date for briefing to be determined (June/July 2007)

24. Joint Support • Joint Support Office • Par 2.9.1: The Committee need a briefing from the Department with regard to Information and Communication Technology (ICT) obsolescence to which extend this is a challenge to replace this equipment • Information and Communication Technology (ICT) obsolescence • Oct 06 DOD promulgated Information Strategy (embracing mainly information superiority and security), a DOD Enterprise Information Systems (DEIS) framework • DEIS Master Plan to be approved in March 2007, thereafter projects will focus on procuring effective, optimised, integrated, secured solutions • On obtaining funding for implementation of DEIS Master Plan the challenge to replace obsolescent equipment will be addressed • DOD Logistic Agency • Par 2.9.1: The Committee also need an update on the Wahlmanstahl land claims • Update on Wahlmanstahl land claims • DOD and the claimants agreed on the area to be restored • Agreement by the DOD was communicated to the land claims commission (Gauteng and NW Province) • Land Claims Commission now in the process to finalise administration process in order to transfer the land to the claimants

25. DOD Logistic Agency (continued) Par 2.9.2: The Committee required feedback within 3 months with regard to the Asset Management system which is not fully compliant with General Recognised Accounting Practice (GRAP) Accrual Accounting Senior Asset Management team established and policy being finalised Discussions with National Treasury (NT) IFMS programme to ensure that DOD and NT technical and software requirements are the same DOD to apply to NT (clearing house) for any further enhancements to present systems Will only be able to account according to GRAP with combined implementation of IFMS and enhanced DOD systems Implementation scheduled from 2008 to 2012 Par 2.9.2: The Committee recommends an oversight visit to investigate the following two issues: DOD Air Supply Unit – Deteriorating Facilities and Lack of Equipment Vacant facilities identified in Thaba Tshwane to relocate DOD Air Supply Unit Cost analyses has been done by NDPW for repair of the vacant facilities Approximately RM5 is required On securing funding DFSM/Army Office, NDPW can start repair, followed by relocation of unit Date for oversight visit to be determined Joint Support (continued)

26. Joint Support (continued) • DOD Logistic Agency (continued) • DOD Restructuring Process Materiel/Logistics • Out of several alternatives developed, the following was approved • Chief of Acquisition is to transform into Chief of Matériel responsible for • Departmental governance, risk and compliance management authority for matériel • Capacitating Secretary for Defence's statutory functions • Continuing to manage acquisition • Chief of Logistics is to transform into Chief of Staff Logistics • Departmental functional authority for logistics (including delegated procurement) • Capacitating C SANDF’s statutory functions • Progress in finalising implementation arrangements for Option 2A has been slow • A Request For Information (RFI) to test the market developed • Objective - to seek information from potential service providers able to assist DOD in development, implementation and validation of integrated and synergistic Asset and Supply Chain Management continuous improvement programme • RFI will be issued as soon as possible

27. Joint Support (continued) • Human Resources Support Centre • Par 2.9.3: The Committee needs to know who qualifies for the Non-Statutory Force Pension. How many outstanding applications are there and what are the criteria for applying. It is stated that 11 558 applications were forwarded to the GEPF and that 500 names were verified for the administration of the Military Veterans. The Committee will liaise with the Department in this regard. The committee further recommends that these options should be advertised and that more imbizos should be held so that more beneficiaries are reached. • Non Statutory Force (NSF) Pensions Dispensation (Report and presentation available) • Who qualifies. Former MK/APLA member who entered into employment agreement with DOD or any State department either as a Public Service Act Personnel (PSAP) member or as a Defence Act (uniform) personnel member through integration or normal personnel acquisition process • Criteria for Applying • Non-statutory Force service • The period between the date on which the NSF members joined their respective former forces and the date of their taking up employment with DOD • If joined former NSF before age 16, the service will start from age 16

28. Joint Support (continued) • NSF Pensions Dispensation (Continued) • Outstanding Applications • Numbers Integrated • Exited Members

29. NSF Pensions Dispensation (Continued) Outstanding Applications Challenges Members without valid addresses Living members – 569 Deceased members – 318 Liaison took place with home affairs – very little results Letters sent to units - 62 members responded NSF joining dates disputes – 2 640, resolved – 601 Project not funded for FY2007/08 and indicated as a financial risk MOD requested for political intervention PCD Recommendations Placing of Adverts. No funds were available in FY06/07 to place adverts Holding Imbizos. Road shows conducted from November 06 – Feb 07 distributing NSF pension quotations for serving members. Conducted 3 briefings on NSF pension benefits and solicit assistance in tracing outstanding beneficiaries. Traced 62 beneficiaries with assistance of Military Veterans Associations. Imbizos with Military Veterans Associations planned for FY07/08 Meeting with MKVA. Meeting on 11 Oct 06 with representatives from MKVA requesting assistance in tracing beneficiaries. (List provided) To date no feedback received. Joint Support (continued)

30. Par 2.10 The Committee needs a briefing on the acquisition plan of the Department on the successful identification of the preferred bidder and approvals as well as initiation of negotiations with regards to the supplier of the Tactical Intelligence Systems A multi-source tender process is utilised for the selection of the bidder. AASB approval obtained in February 2007 wherein the preferred bidder is Denel Optronics as a main contractor and Aerosud as the mechanical subcontractor. Integration of sensors into Cessna caravan will occur in the second quarter of 2007. Development of data link by the end of 2007. Delivery of 3 additional sensors early 2008. Acquisition Plan

31. Report of the Auditor General • Qualification: Corrective Measures • Par 3.4. There should be an improvement on • Housing Loans and Guarantees ( Redemption of State Guarantees and Management of Credits on the Guarantee Account (130401) • Processes to redeem guarantees issued before 1 January 2001 • Obtain PERSOL reports and audit all files • Letters to financial institutions with follow ups • Rectify PERSOL data • Note registers and compile statistics • Letter to member at unit • Submissions to Directorate Financial Support Service (DFSS) • Audit files with credit on account – Ledger 13401 • Letters to financial institutions with follow ups • Prepare submissions • Payment by Directorate Personnel Payments final pay section or DFSS • Progress made • Redeeming of guarantees – total of 2406 cases with 6 sections already audited • Reduced credits on Ledger 130401 – total of 681 cases outstanding. RM5 055 795 credit reduced to RM2 699 264 by 2 February 2007 • Work through all files by 15 June 07

32. Report of the Auditor General (continued) • Rank Review Audit • June 2004 AG reported shortcomings of 384 NSF members • Phased action plan implemented • Phase 1 - Determine correct name list of all members - completed • Phase 2 - Centralise rank review files and ensure all documentation are filed - to be completed by 30 April 2007 • Phase 3 - Avail all files with updated name list to AG • Phase 4 - Determine whether all approved reviews have been implemented • Phase 5 - Integrate rank review files with members’ master files • During Phase 1 and 2 it was found that • Final list comprised of 383 names and not 384 as referred to • Of 383 some 338 members benefited from the rank review and were re-ranked • Total of 28 members’ services terminated prior to 1 April 2003. They did not benefit • Total of 11 members promoted to higher ranks prior to and some subsequent to 1 April 2003 • Total of 15 members initially recommended for certain appointments/promotions were changed at very late stage eg recommended for officer appointment – refused – promoted to WO1 rank • Re ranking promotions and appointments done wef 1 April 2003. Members’ services terminated prior to 1 April 2003 and/or promoted prior/subsequent to 1 Apr 2003 no longer form part of audit • Challenge • Biggest challenge at present is to rebuild a set of files that can be audited • Task to be completed by end of April 2007

33. Capturing of Leave (Management of Leave Administration) Deficiencies Leave applications not captured electrically Attendance registers not completed or reconciled with leave records Supporting documents not attached to sick leave applications Leave registers not utilised as prescribed Leave application forms not filed on leave files Corrective Measures In-post training to leave clerks on unit level – Mar to August 2006 Leave manuals, electronic input documents and training slide show placed on DOD Intranet for easy access to all levels Instruction dated 26 September 2006 disseminated to Services and Divisions to take corrective actions and institute corrective measures Disseminated DOD Instruction on Management of Work Attendance (Co-signed by Secretary for Defence and C SANDF) to Services and Divisions in January 2007 Further Actions Planned Continued lectures to learners on Joint Senior Command and Staff Programme Continued presentations to units on work attendance and leave administration Staff visits to inspect units with negative audit reports Report of the Auditor General (continued)

34. Report of the Auditor General (continued) • Qualification: Corrective Measures • Par 3.4. The Committee needs a briefing in correlation to the 60 month time frame needed for the Personnel expenditure. Unrealistic establishment referred to on page 60 in the Annual Report presentation. The PCD does not accept such a long time frame as a remedial measure • Unrealistic Post Establishment • The time frame of 60 months as indicated in the Annual Report presentation to address the “unrealistic establishment” is not correct • Remedial actions have been instituted in order to address the issue as a matter of great urgency • This matter emanates from the Auditor General Report on the FY 2005/2006 Annual Report (See Reference Statement) • Reference Statement • The Auditor General Report on the FY2005/2006 Annual Report states that there has been an increase in the number of approved posts from 95,088 in 2005 to 102 048 in the reporting year, of which 77,858 posts were filled. Based on these approved posts, the achievement of the 2010 goal of 70,000 approved posts does not appear to be realistic. (FY04/05 – 05/06 Audit Findings)

35. Report of the Auditor General (continued) • Current DOD Challenges • Reduce SMCS posts to Defence Review Update 2006 figures • SMCS total 103,552 • DR Update 85,375 • Administrative student posts 9,925 • Reduce SMCS by 8,252 • New SMS Total • DR 2006 total 85,375 • Administrative student posts 9,925 • Total 95,300 • Funding available 78,648 • Funding shortfall 6,727

36. Remedial Action Delete all duplicate structures (staffing purposes) +/- 200 – 30 March 2007 Delete posts on closing down units = 2000 (All Services & Divisions) – 31 May 2007, continuous thereafter Delete Transformation and Restructuring Programme (TRP) posts not required +/- 2000 (SA Army) – 30 March 2007 Delete posts not filled for last 5 years, excluding designated scarce skills musterings – 30 March 2007 Issue DOD Plan Instruction by 31 March 07 to reduce 8,252 redundant posts on the SMCS as follows : Apply DR06 post establishment baseline targets for each Service and Division as per parameters of the Force Design Model – 15 March 07 Analyse rank /salary ratios and rank/age targets within each Service /Division with the aim to curb rank inflation – 15 Aug 07 Ongoing review of organisational design of Services and Divisions to verify the most relevant and affordable structures Ongoing execution of the management of DAP and PSAP on the SMCS ito CHR Instruction No 06/2006 dated 30 June 2006 -Services/Divisions at monthly HR Board Actively identify posts not being utilised - DIMS through monthly Structure Control Board (SCB). Report of the Auditor General (continued)

37. There should be an improvement on the following issues: Qualification : Corrective Measures – Travel and Subsistence Travel and Subsistence Action Plan Reasons No interface between the FMS and PERSOL system – reliant on a manually driven process. Measures and Completion Dates 5 members already appointed, 2 more to be appointed before June 2007. System Interface between FMS and PERSOL to be completed in 2007/2008. The CMIS Division is currently in the process of amending the expenditure control systems which will commence with the Personnel Payments system. Financial year balances on main ledger account to be reconciled by 31 Mar 08. Report of the Auditor –General

38. Departmental Revenue Action Plan There should be an improvement on the following issues: Qualification : Corrective Measures – Departmental Revenue Report of the Auditor-General

39. Revenue Management Revenue Policy Capturing on PERSOL – Force number related Revenue Budget Revenue Collection Capturing on CRV system Tariffs & tariff structure Capturing on medical Debtors System Accounting NT Approval & distribution Dep into NRF Reporting in Annual Financial Statements

40. FMS Enhancements Technical Investigation completed by 25 Oct 06. Documentation and cost estimate submitted. Client Approval - Done. CMIS Ratification - Done. Programming completed 23 Feb 07 (Done). Testing 26 Feb 07 to 9 Mar 07 (In process). Implementation during Apr 07 (On schedule). REVENUE MANAGEMENT

41. Formalise responsibilities – 30 Nov 06 – DODW impact. Amend FMS to enable capturing of revenue budget – 31 Dec 06 – Completed. Enhanced Cash Receipt Voucher Systems – 31 Mar 07 – In process. Improved budget rules – 31 Jan 07 – Done (Continuous). Staffing of vacant AD Revenue Budget post – 31 Jan 07 – In process. Approved DOD Tariff Structure and Tariffs for 07/08 – 31 Jan 07. Distribution of approve tariffs – 15 Feb 07. Amended PERSOL System to allocate salary deductions to specific series – 31 Mar 07 – In process. REVENUE ACTION PLAN

42. Update mainframe systems with new tariffs – 31 Mar 07. Item 90 SCOA compliant – 100%. Approved Tariff Management DODI – 30 Apr 07. Approved Revenue Management DODI and JDP – 30 Apr 07. Request revised tariff structure and tariffs for 08/09 – 1 Sep 07. Submit revised tariff structure and tariffs to NT for approval – 7 Dec 07. Distribute approved tariff structure and tariffs within DOD – 15 Feb 07. Call for inputs to revise and update existing Revenue and Tariff Management DODIs and JDPs – 22 Feb 08. Ensure Item 90 remains SCOA compliant 31 Mar 08. Update mainframe systems with approved tariffs – 31 Mar 08. REVENUE ACTION PLAN (CONT)

43. Approved Deviation – Software and other intangible assets movement schedule Action Plan Armscor has developed a draft IP Management Practice Note to implement DOD IP Management Policy. This team is also responsible for the establishment of an electronic IP Database. Armscor is responsible for the maintenance of the database whilst an oversight function within the DOD will monitor the accuracy and completeness of the database. The envisaged target date for implementation of a manual IP database is 1 April 2007 whilst the envisaged target date for implementation of an electronic IP database is 1 April 2008. Report of the Auditor-General

44. Par 3.4. The Committee needs a briefing in correlation with regard to the 60 month time frame needed for the Information systems audit referred to on page 60 in the Annual Report presentation.   The presentation made on the 12 September 2006 Audit referred to the IFMS implementation timeframes. These timeframes are from the National Treasury’s IFMS implementation plan. The IFMS implementation is a multidsciplinary project chaired by the National Treasury where all departments are represented. Report to the Auditor -General

45. Emphasis of Matter Items 05/06

46. Emphasis of Matter Items 05/06

47. QUESTIONS AND DISCUSSION Conclusion Siyabulela