Department on progress made by Special Investigations Unit on fraud and corruption; Voucher Scheme programme: briefing

Meeting report

Progress made by the Special Investigations Unit (SIU) on issues of fraud and corruption
Ms Khumoetsile Gaesale, Chief Director: Internal Audit, Risk Management and Special Investigations, Department of Human Settlements, presented on the background of the Special Investigations Unit (SIU)'s performance reports of 2006-2008 as well as the SIU's action plan.
A comprehensive approach to investigations ensued, followed by progress that had been made thus far on investigations as well as the proposed way forward and project highlights.

The office of the Auditor-General (AG) had, according to Ms Gaesale, conducted performance audits regarding the delivery of houses for 2006-2008.
In 2006, it was emphasised that 7353 government employees did not qualify for housing subsidies.
In 2008, 6974 municipal employees did not qualify for housing subsidies.
According to the AG, during 2009-2010, they had made findings that many of the beneficiaries who were on the system were indeed government employees.
The corruption led to the National Department of Human Settlements forging a relationship with the Special Investigating Unit (SIU).

The SIU had been mandated to conduct national investigations and, according to Ms Gaesale, the President had recently signed an extension to the proclamation that had extended the time frame for investigation to 30 July 2010.
Ms Gaesale highlighted the operating framework of the SIU as well as issues relating to 2007 and 2010 proclamations. Please refer to attached Department SIU document for further details.

Three focus areas/priorities of the investigation were highlighted. They were fraud in relation to subsidies, contracts and syndicate investigations.
Ms Gaesale highlighted the profile of investigated subsidies, which comprised fraudulent activity and over-payment.

The key findings of the 2006 AG government report was that of the cases that had been handed over for investigation, 49% had been irregular and 51% had been qualified.
The findings of the municipal 2008 report stipulated that of the 5440 cases that had been handed over for investigation, 70% had been qualified and 30% had been irregular.
Ms Gaesale noted the improvements that had been made to the system, which related to misrepresentation, over-payments, accountability and the use of fictitious ID s.
Systematic recommendations were tabled as well as issues relating to Hot Line referrals, syndicate investigations and the contracts-SIU approach.

One of the key outcomes was to identify the blockage points in the contract's value chain. Potential legal outcomes as well as issues relating to the investigation of contracts were tabled.

The proposed way forward derived that there had been commencement with the investigation of 20 contracts during the 2010/2011 financial year.
Labour was also seen as an intensive exercise and the parallel process of restriction was ongoing.

There was also the continuous 'up skilling' of officials as a proposed way forward.
Ms Gaesale noted the procurement investigations that had been taking place as well as project highlights regarding subsidies and contracts.

Individual Rural Housing Subsidy Voucher Programme
Mr Louis van der Walt, Director: Human Settlement Policy Development, Department of Human Settlements, briefed the Committee on the Individual Rural Housing Subsidy Voucher Programme. He noted the background and the reason for this special invention.
He provided the Committee with an overview of the programme and noted what the key features of the programme were.

According to Mr van der Walt, the programme only applied to persons with informal land rights and the land rights had to be uncontested, confirmed and proved.
He briefed the Committee on how the process worked. The Rural Housing Loan Fund (RHLF) would negotiate funding reservation with MECs (Members of the Executive Council) over the Medium Term Expenditure Framework (MTEF) periods.
The RHLF had indicated that it would act as the Financial and Administrative Agent and it would evaluate and appoint subsidy administrators.

Ms van der Walt noted what the fees for the service provider would be and the role of the Subsidy Administrator. Payment options were tabled to the Committee as well as how the process of verification worked. He noted general aspects of the programme. Implementation requirements were that the voucher system (smart card/debit card) still needed to be developed as well as standard house plans and its approvals. There were also accreditation requirements that were still needed.

The challenges were possible incomplete dwellings, misappropriation of funding, inferior workmanship, conflict between parties, transporting of materials, and the availability of material suppliers, service providers and subsidy administrators.

Mr van der Walt said that the RHLF had developed a risk mitigation strategy and that it had decided to pay service and material suppliers directly. He noted some of the programme's financial implications.

Mr van der Walt said that due to the financial implications and inherent risks attached to the programme, it was decided to defer the implementation of the Programme until the investigations on the establishment of the Housing Development Financed Institution was concluded.


Discussion
Mr Thabane Zulu, Director-General (DG), Department of Human Settlements (NDHS), opened the discussion with Committee members. He noted that the work of the SIU was not done free of charge and that the NDHS had especially budgeted for the SIU to perform its investigations.

Mr A Steyn (DA) said that when he had done his oversight visit to the Department, he was concerned about the lack of security at the Department's internal investigations unit.
The internal investigations office was an open plan arrangement and there had been an overt lack of security especially since people could easily gain access to such confidential information.

Mr Steyn referred to the AG report of 2006/2007. He said that as far as that report was concerned, there was no new information that had come to light and that the figures had remained more or less the same.

With regards to the SIU recommendations, he noted that he accepted that the Human Settlements Act might not create an offence or a sanction against it, if a certain portion of it was not complied with, but emphasised that he would imagine that there were other pieces of legislation that could deal with criminal activity of government officials.
He did not think that the Department should wait for a piece of legislation to be amended before taking some kind of legal action against criminals or guilty government officials.
He sought clarity with regards to the Hot-line referrals and its time frames.
He requested that the Department present the Committee at a later stage with more information on the SIU and the walk through in terms of the nine provinces.
He suggested that the Department should not follow the course of disciplinary hearings in the event of a criminal offence but that criminals should be charged and the law had to take its course.

Mr T Zulu noted that the matter had received the Department's attention and that the Department did not have the capacity to investigate and arrest.
The matter regarding the NHBRC had been directed to the SIU and the Minister had taken the decision to budget for the SIU this year for an amount of R20 million.
The DG noted that whistle-blowers were in danger even if they were in witness protection programmes.

The DG said that in the case of a clear criminal activity, the Department did not take disciplinary action, but referred the matter immediately to the SIU and to the law.
He was concerned about issues revolving around the blacklisting of contractors. He noted that sometimes when a contractor was blacklisted, that contractor could very easily just open up another company under a family member’s name.

Mr Steyn asked if the Department had put into place any mechanisms to prevent that and added that if something was not done about the situation, the Department would just have the same companies, just with different Director's names and they would be doing the same thing over and over again.
He was concerned that the whistle-blowers and informers were often in a life threatening situation.

Committee members were concerned about the Department's recovery of payment from broke contractors.

Ms A Mashishi (ANC) sought clarity on the walk through process and the debt lines.

Ms M Njobe (COPE) was concerned about the safety of informers and added that the Department should find means to encourage whistle-blowers.

She said that the information on the improvements to the systems of the SIU presentation was too vague and general and noted that specification was necessary.
She sought clarity on the number of contractors and enquired why Ms Gaesale had noted it as being illegal.

Mr R Bhoola (MF) noted that he now had a very clear indication about what was happening in the Department in relation to how syndicates operate.
He added that some of them were municipal officials who often entered into a deal to evict innocent people and then a few hours later, they would sell that very same home.
He said that when one heard of attorneys and conveyancers being struck off the court roll, and when he heard of officials, contractor and engineers all involved in this type of corruption, he actually empathised with the Department as they had a mammoth task at hand in trying to rule out this type of corruption.
He commended the Department for the efforts that they had made thus far in addressing the issues of corruption and fraud.

Mr T Zulu noted that the matter of syndicates was very sensitive, complex and life threatening and that people could lose their lives if they became whistle-blowers and informers.
He added that some informers had in fact already lost their lives and that it was a very serious matter.

The DG noted that the information provided by the SIU was much generalised and that the SIU often struggled to get information due to the sensitivity of the matter and the overt danger attached to being an informer.

Mr Bhoola was concerned about the R40 million that would be recovered over a period of 60 months and added that the 60 months payment plan was unacceptable.
He added that the Department should still act in alignment with the Labour Relations Act (LRA), but that they, in the event of criminal activity, should pursue the perpetrators and have them charged criminally.
He was concerned about the R11 million that had been recovered by the Department, but only R5 million had been paid out to the Department.
He sought clarity on the other R6 million that still had to be paid out to the Department.
According to the Department, the SIU had received the money and was in the process of finalising the reconciliations.
He noted that it was indeed a sad day when there were councillors also involved.

Committee members sought clarity on the actual three provinces which had provided feedback regarding the walk though.

Mr M Mdakane (ANC) was concerned about the repayment plan of 60 months regarding criminals. He said that by allowing those found guilty of corruption to pay the Department back over such a lengthy period, it was like encouraging them to be corrupt.

The DG noted his concern and would take the matter up with the SIU.

Mr Mdakane made a plea to the Department to eradicate the building of poor quality houses as the cost of demolishing those houses was also costing the Department money.

Mr Steyn asked if the recovered money went back to the National Treasury (NT) or whether it was ring-fenced to go back to the SIU.

Ms Gaesale noted that the money would be going back to the provinces.

The Chairperson asked how an unlawful beneficiary was defined by the Department.

Mr Neville Cheney, Chief Operating Officer (COO), Department of Human Settlements, noted that it was any person who was not legally entitled to receive that benefit.

The Chairperson noted that the challenges posed in the presentation regarding the Voucher programme were not new to government and that the programme should proceed.

Mr Mdakane said that the pilot project of the programme should be processed without further delay, with its risks obviously being taken into account.

Mr Steyn noted that it was an innovative idea and referred to the use of some existing infrastructure.

Mr Bhoola said that he did not see why the project should be suspended.

Mr van der Walt noted that the challenges were not scaring the Department and that they would be addressing the challenges. He had just brought the challenges to light in the presentation.

He was aware that there were challenges faced throughout the national sphere of government.

The meeting was adjourned.