Forensic Audit Report: Public Service Sector Education Training Authority: Minister & Department briefings

Meeting report

Forensic Audit Report on Public Service Sector Education and Training Authority
Hon Richard Baloyi, Minister of Public Service and Administration, thanked the Portfolio Committee for allowing the Public Service Sector Education and Training Authority (PSETA) to make its presentation on the forensic audit. He noted that the PSETA was established in 2000, pursuant to the Skills Development Act. The PSETA had later evolved into a unit of the Department of Public Service and Administration (DPSA) and was therefore no longer a self-standing SETA.

Mr Themba Mhambi, Administrator for the PSETA, delivered the briefing to the Portfolio Committee. He noted the history of the PSETA. The PSETA had been established in terms of the Skills Development Act in 2000. As mentioned by the Minister, it had been changed into a DPSA unit, as opposed to a self-standing SETA, in February 2001, being listed as a Schedule 3 public entity in terms of the Public Finance Management Act (PFMA). It was subsequently, in November 2001, delisted as a public entity. It was re-listed again in April 2006.

Mr Mhambi noted that in 2004, there had been an agreement between PSETA and the National Skills Fund (NSF) for a PSETA run, NSF-funded learnership project. The budget was R106 million, which included provision for learner allowances, administration and project salaries and training. That project was supposed to run from March 2005 to April 2006 in Mpumalanga, the North-West Province, Northern Cape, Kwa-Zulu Natal and the Eastern Cape. The project had not been properly closed, even though it had run its course. PSETA had become aware of fraud on two accounts, and a complaint had been laid with the South African Police Services (SAPS), which was then referred to the Commercial Crimes Unit for investigation.

The project's finance manager had been arrested and convicted in 2009 on 38 counts of fraud, and was sentenced to ten years imprisonment. The matter had then been referred to forensic auditors to investigate the extent of the fraud.

Mr Mhambi tabled a summary of the forensic investigation report to the Committee (see attached presentation for full details). He said that there had been interference with the banking details of learners and that fraudulent alternations had been made. Some payments had been authorised without proper review and R1 466 310 had been paid into fictitious accounts. He also noted that irregular payments of R55 100 had been processed by two authorisers from the Grant Disbursement account. The forensic audit report further noted potential of R10 853 850 fraudulent transactions, where there was no evidence of payments to legitimate bank accounts.

Mr Mhambi said that it had been recommended that the matter be referred back to the Special Investigations Unit (SIU) for finalisation.

He concluded the presentation by highlighting the action that had been taken by the PSETA, the DPSA and the NSF. PSETA had referred the conduct of two of the former Project Managers back to the DPSA, for investigation into possible negligence. PSETA and the DPSA had also liaised with the SIU, in response to the recommendation that this should be done. PSETA and the NSF had agreed that steps must also be taken to close off the project properly.

Discussion
Mr E Nyenkembe (ANC) welcomed the report. He noted the working relationship between the DPSA and the PSETA and said that when the Skills Development Act was put in place, there had been a definite identification of areas where work was needed on skills development. He enquired when this specific issue was likely to be finalised, pointing out that a time frame must be set for this.

The Minister noted that the engagement between the DPSA and the SIU had suggested that the investigations should be completed in nine months. If this was likely to change, the DPSA would communicate this to the Portfolio Committee.

Mr L Suka (ANC) appreciated the report. He agreed that people had been benefiting from the NSF, and wanted to know how those people would be affected if the NSF was closed. He also referred to the turnaround strategy that the PSETA had noted in the presentation, and emphasised the importance of speeding up the entire process and indicating where tangible progress was made. This was an old issue, but he was surprised that it was being raised now as if it was something new.

The Minster said that the NSF was an entity formed under the National Skills Development Act. There was no suggestion that the NSF itself would be closed, nor that the legislation was likely to be repealed. Instead, it was this particular project that needed to be properly closed off. The NSF would remain in existence as long as the National Skills Development Act was in existence.

The Chairperson sought details on the funding model.

Mr Mhambi said that the DPSA currently received its funding from the National Treasury (NT), as a transfer in terms of the Public Finance Management Act. The transfer focused on administrative and operational funding rather than core business. He said that there was no current model on that but that the task team led by the Department of Higher Education and Training (DHET) would be meeting soon.

Ms H Van Schalkwyk (DA) said that corruption was “a cancer in our society”. She wanted to know why the former project's Finance Manager had not been properly screened before his appointment to the post. She said that the former Finance Manager for the project already had seven warrants for arrest issued against him, quoting his ID number, at the time, and some of the charges had been for fraud.
She noted that the DPSA itself had hired the placement agency, and wanted to know why the agency had not managed to trace these facts about him, which were identified by the SIU.

Ms Thulisile  Manzini, Acting Chief Operating Officer, DPSA, said that the DPSA no longer used that agency to do its pre-employment checking. All the potential appointments were now screened by the National Intelligence Agency (NIA).

Mr Mhambi added that the former Finance Manager for the project had held multiple identification documents at that time of appointment and that was one of the aggravating circumstances.

Ms Van Schalkwyk wanted to know whether the business proposal for further investigations, between PSETA and the SIU, had been signed.

Mr Mhambi said that the business proposal had been signed in January 2011. He added that the process itself had begun in August 2010 and that the SIU had conducted a pre-investigation process that had begun in August 2010 and ended in December 2010.

Ms Van Schalkwyk also wanted to know the status of the disciplinary process concerning the possible negligence of the two former project members from the DPSA.

Ms Manzini replied that the disciplinary process was under way, and that the two people concerned had been issued with a letter and were due to appear at a hearing the following Friday. If this process returned a guilty finding, the DPSA would take the necessary further steps.

Mr Suka noted that the problem often lay with the vetting process.

Mr Thabo Zibaya, Chief Financial Officer: PSETA, DPSA, noted that the transfer of funds had been a transfer between two accounts operated from the PSETA, one relating to the NSF, and the other being the Grant Disbursement Account. He said that the transfer had occurred in 2005 from the Grant Disbursement Account to the NSF. This money would be transferred from the NSF back to the Grant Disbursement Account.

Mr Nyenkembe noted that the assumption was that learnerships were a good cause as they replaced apprenticeships, and contributed to the acquisition of skills.

The meeting was adjourned.