Minister of Public Works on Strategy against fraud and corruption

Meeting report

The Chairperson opened proceedings by reminding the Department of Public Works (DPW) of a “Zero Tolerance Summit” on fraud and corruption, held in 2007, at which the DPW had come up with about nine or ten resolutions, as well as about four additional measures, aimed at ensuring corrupt practices in the Department would be eradicated. She wanted to know why corruption was still taking place after so much had been spent on organising a conference to tackle the problem.

The Acting Director General (ADG), Ms Mandisa Fatyela-Lindie, referred to several issues hindering the implementation of the 2007 resolutions. The difficulty lay not so much with implementation, but with having to deal with “hidden corruption.” What went on behind the scenes was often highly complicated, and only the Special Investigating Unit (SIU) had the forensic tools to handle it. Since 2007, there had been no leadership continuity at ministerial and director general level, and this had helped to create a climate that was ripe for corruption. Systems within the DPW had also posed challenges, such as the Property Management Information System (PMIS), which was archaic and made fraud hard to detect. The Work Control System (WCS) was intended to help the Department keep track of projects, but where project managers failed to update the system, fraudulent activities were able to take place. In recent months, the DPW had rekindled the establishment of the legal committee, comprising professionals who understood the technicalities of the Department, and which looked at issues such as litigation involving project planning and implementation. A committee had also been set up to look at variation orders, so that all orders above the threshold approved by the National Treasury had to pass through this committee, and the DG had to be satisfied with the reason for the variation order.

The Chairperson quoted one of the resolutions from the 2007 conference, which stated that the DPW would “publish the names of individuals and entities involved in corrupt activities and fraudulent practices”, detailing the nature of the transgressions and convictions, and yet she had never seen such a list published.

Ms Fatyela-Lindie conceded that this had not happened, and added that the names of those currently under investigation could not be published until they had been found guilty. The DPW was operating in a difficult environment, where legal processes had to be strictly followed, and the cases were now with the SA Police Service (SAPS).

The Chairperson said that progress in these cases needed to be followed up.

Presentation: Strategy Against Fraud and Corruption
Ms Tebogo Tukisi, Chief Audit Executive of the DPW, said that when Minister Thulas Nxesi had been appointed last October, he had inherited many challenges – the inability to account for state properties (asset register), mismanagement of leases, negative publicity (such as SAPS leases), adverse reports from the Public Protector and the Auditor General, poor services rendered to client departments, and many critical executive posts being filled on an “acting” basis. In November 2011, the Minister had embarked on a turnaround strategy for the DPW, focussing on two critical areas – fighting fraud and corruption, and improving business operating performance.

Fighting fraud and corruption had been identified as a key focus area in the annual performance plan (APP) and had led to the development and implementation of a fraud and corruption awareness strategy which was directly aligned to the audit of leases, achieving a clean audit, supply chain management (SCM) review, and governance and performance management review. The appointment of the Special Investigating Unit (SIU) by the President had allowed the Minister to revive the SIU mandate, and with the turnaround strategy providing funding, the SIU was able to operate as an independent entity engaging directly with the Minister. Several investigations had been completed, while others were still being conducted, and stern action had been taken against some senior officials within the DPW. Funds had also been allocated for the appointment of a panel of service providers who would assist in conducting investigations within the DPW as and when they were required. Other intervention measures involved improved co-operation with institutions such as the Auditor General, the Public Protector and National Treasury.

Internally, the DPW had a dedicated unit whose mandate was to promote an anti-fraud and corruption “culture” within the Department. The Fraud Awareness and Investigation (FAI) was a directorate within Internal Audit and Investigation Services (IAIS), and was mandated with the promotion of anti-fraud and corruption campaigns, and conducting investigations on reported allegations. It conducted workshops directed at all levels within the DPW, and after conducting investigations, referred cases to other law enforcement agencies such as the SIU, SAPS and National Intelligence Agency (NIA).

An approved fraud prevention strategy was being rolled out, identifying basic fraud and corruption prevention measures already in place within the DPW. It had also identified fraud and corruption risks that had to be addressed in order for the strategy to be implemented successfully. However, it did not guarantee that the DPW would not be impacted by incidents of fraud and corruption, and was intended to serve as an additional measure to assist in the limitation of their impact, with a particular focus on creating awareness and promoting ethical business conduct. The strategy was based on prevention, detection, investigation and resolution, and would be reviewed every two years. Prevention looked at adherence to policies and procedures, physical and information security, the vetting of employees and risk management. Detection involved keeping a “register of allegations” which had been passed on to investigators, internal auditing, support from employees and other stakeholders, and encouragement for whistle-blowers to report irregularities. Investigations could be handled internally only to a limited extent, owing to capacity limitations, which was why service providers had had to be appointed, while co-operation was also needed with other agencies such as SAPS and the SIU. Resolution would be achieved through improved controls, disciplinary action, recovery of losses through civil action, and criminal prosecutions.

Ms Tukisi said all whistle-blowers were encouraged to follow the procedures prescribed in the Protected Disclosures Act, so that they would not suffer any penalty or retribution for reporting “in good faith” any suspected or actual incident of fraud or corruption within the DPW. However, false allegations made with malicious intent would be subjected to firm disciplinary or other appropriate actions.

During the 2011-12 period, 79 cases had been reported within the Department. Of these, 27 investigations had been completed, 26 were under investigation, and a further 26 had not yet started. Disciplinary action had been recommended against 46 individuals, with criminal cases recommended against six, civil proceedings against five, and three companies recommended for blacklisting by the National Treasury.

The fraud awareness campaign was being conducted throughout the country by means of regional workshops, presentations during Extended Public Works Programmes, public service inductions for new employees, the displaying of posters, and articles in internal publications.

The success of the strategy so far covered the extent of SIU investigations, the suspension of implicated officials, the instituting of internal disciplinary processes, criminal proceedings taking place, and the exposing of a sophisticated scam involving fraudulent orders. Challenges remaining were the loss of an organisational culture, centred on service delivery, a lack of accountability and leadership from senior management, a lack of ethics, and too many officials filling positions in an “acting” capacity.

Discussion
The Minister, the Hon Thulas Nxesi, who had joined the meeting during the presentation, was warmly welcomed by the Chairperson and Members, who expressed appreciation for his making himself available to participate in the discussion of a matter of such importance to the Committee.

Ms A Dreyer (DA) said the presentation had slightly disappointed her, as fraud and corruption was the most important problem the government was facing. While the Department was taking a hard line on promoting a culture of awareness, investigation, and improved co-operation, there was a lack of detail when it came to actual consequences. The best plans and strategies were doomed to failure if they were not implemented, and people were not made to pay for their misdemeanours. The presentation had referred often to “recommendations”, but the Committee needed to know how many cases had actually been finalised and prosecuted, how many civil cases had been instituted, and how much money had been recovered. The time for a soft approach was over – people needed to be suspended, charged, kicked out if found guilty and put behind bars. They needed to be named and shamed.

Ms C Madlopha (ANC) said the Minister had previously identified the lack of leadership as a contributor to making the DPW dysfunctional, and it seemed as if the Department was now starting afresh. She asked whether the appointment of a panel of service providers to assist in overcoming the DPW’s capacity limitations was on a full-time basis, or whether they would be called upon only when required. She also asked how this linked with the Fraud Awareness and Investigation (FAI) unit, as there appeared to be a duplication of responsibilities. She expressed concern that the FAI would conduct its investigations at all levels within the DPW, as investigating those in authority carried the threat of victimisation. She criticised the decision to review the strategy every two years instead of annually, as the implementation of review findings so far apart could be too late. She recommended that once an internal investigation had been completed, the perpetrators should be named and shamed, as per the 2007 resolution, so that they could be prevented from securing any other job in the public service.

Mr M Swathe (DA) asked whether the awareness strategy was being fully implemented, commenting that Members were not aware of what was happening in the cases of officials being investigated. He also wanted to know if the DPW had started to implement the vetting of employees, as there would be problems if this process was not yet in operation.

Mr K Sithole (IFP) asked for further details about the disciplinary actions taken within the DPW, and commented that the Committee had never heard about any of the findings of the internal audit unit. He asked whether the turnaround strategy had led to any improvements in the capacity and accountability of the Department’s leadership.

Ms N Ngcengwane (ANC) referred to the 2007 summit, at which a number of people had been identified by the internal team as being involved in fraudulent or corrupt activities, but nothing had been heard about this since. She said it would be very sad if the SAPS were unable to take action, based on the information provided by the SIU. She pointed out that people in the rural areas did not have access to internet information about protection of whistle-blowers, but they knew a great deal about what was happening in their communities, and could provide valuable information. She asked if the names of blacklisted companies were being provided to other government departments, where they could still procure tenders. She also wanted to know if the fraudulent orders scam involved insiders in the DPW.

Ms N Madlala (ANC) said the presentation had not mentioned the reported resistance to disciplinary measures by unions such as NEHAWU, as well as senior officials, and asked what the Department was doing about this.

Ms N November (ANC) asked whether the Committee could meet with the Police Portfolio Committee to discuss the issue of SAPS always dragging its heels over fraud and corruption cases.

The Chairperson asked whether whistle blowers were paid, or not. She also wanted to know if the DPW could “unpack” the corrupt practices being investigated, as this had been done in 2007 and it would be instructive to see if the same practices were being carried out.

Minister’s intervention
At this stage, Minister Nxesi intervened to tell the Committee that the presentation had not covered the external investigations carried out by the SIU or the resultant cases. This was because the SIU reported directly to the Minister, as it dealt with very sensitive cases which might impact on a number of senior officials. The SIU was unable to provide an overall, comprehensive report, as it proceeded on a case by case basis, handing each case over when it had completed its investigation, for it to be dealt with. Legal issues also caused delays. He pointed out that the Department made “recommendations” because the SIU could not lay charges – it could only recommend to the police to lay charges. Once the police had decided to press charges, it was out of the DPW’s hands. The prosecution of the case moved it to another department, and this one of the reasons why the process took so long.

Some of the disciplinary processes had to be handled by the Department itself, and even here, people would come with advocates – who they paid for – and they would find all sorts of ways of stalling the disciplinary hearings. This was involving the DPW in huge legal costs. However, if the DPW did not follow the legal process, it could lose the cases on technicalities.

The Minister then gave examples of eleven cases currently before the courts or under investigation, providing details of the status of each case and the factors delaying their completion. These factors included presiding officers being accused of bias, advocates not available on dates set by the courts, accused employees producing sick certificates to secure postponements, or resigning their jobs to avoid disciplinary action.

He said the Department had applied to the High Court to have the well-publicised lease agreement between SAPS and Roux Shabangu declared invalid. Nedbank had then entered the fray and filed an application to intervene, which had been opposed by the Department. The judge had ruled in favour of the DPW in May. The date for the hearing had been set for October 8, but the DPW’s advocate was not available for that date. In other words, the legal process had proceeded at a pace which was not controlled by the DPW.

Other cases described by the Minister included the suspension of a former director general, Mr Siviwe Dongwana, on charges which turned out to be frivolous (and now involved settlement negotiations), employees receiving cars and cash from service providers, or not disclosing their dealings with service providers, employees attempting to destroy incriminating evidence, conflicts of interest in the proposed building of an airport in an area found not to be suitable, and four directors implicated in a deal with contractors to build houses for new Ministers after the Cabinet had been expanded.

He said with all the legal work involved, it should be apparent why it was necessary to appoint outside providers to assist the DPW to carry out its turnaround strategy. He also pointed out that the major focus had been directed at the top of the organisation, as the DPW needed good senior management to address the issue of fraud and corruption.

Discussion
Ms Dreyer said the Committee appreciated the fact that the Minister had “played open cards” with Members, and understood the sensitivities involved. She asked whether officials who resigned after being charged, could still be prosecuted.

Ms Ngcengwane asked if it would not be possible to seek a second opinion on the medical condition of people who produced sick certificates to delay court proceedings. She wanted to know if convicted offenders could be blacklisted.

Ms Madlopha said the turnaround strategy seemed to be bearing fruit. She accepted that no disciplinary action could be taken once an employee had resigned, but sought confirmation they could still be prosecuted in court.

Mr Swathe said officials were still being paid by the Department, even when they delayed proceedings. He asked if it was not possible to recover this money if they were convicted.

The Minister replied that people who resigned from the DPW were not let off the hook. They would still have to face criminal charges – they could not run away from them. Another issue arose when these people, after resigning, wanted to join other departments. Their names needed to be published, to avoid this, but there was also an onus on employing departments to conduct strict reference checks. He suggested that the Committee should discuss this matter with the Public Service Portfolio Committee.

Employees facing disciplinary or legal action remained on pay until they were found guilty, in terms of the law. However, the whole public service needed to find ways to fast track disciplinary hearings, which could often take up to two years to conclude. This meant having to employ people in acting positions for extended periods, while still carrying the cost of the suspended employee. It should be possible to reduce the process to a maximum of four months. He added that employees did not have to refund income received while under suspension, even if found guilty. The blacklisting of convicted offenders should be easy, if all the departments “put their heads together.”

He said it was the Department’s strategy to seek a second opinion concerning sick certificates, but even in these instances, there were legal processes involved in appointing a suitable person, and then further delays if that person was not available.

In terms of the Prevention and Combating of Corrupt Activities Act, if there was a guilty verdict, the state could apply for the forfeiture of the benefits or proceeds of crime, and recover its funds.

The Chairperson said that in terms of the “zero tolerance” strategy, the names of offenders should be published, and this should apply to an official who had resigned before facing a disciplinary hearing.

Ms Madlopha warned that it needed to be established if the official had in fact been found guilty, to protect the DPW from possible legal action if his name were published.

The Minister commented that if a person resigned, this provided only temporary relief, as he would still have to face prosecution.

Ms Dreyer said that although the presentation had not been able to cover the external SIU cases, the internal disciplinary cases needed to be “fleshed out” in a similar manner to those described by the Minister.

Ms Tukisi gave an undertaking that the DPW would provide details of the internal cases.

She said the panel of service providers was not a full-time appointment. They would provide assistance to the internal audit unit in reducing the backlog over a period of two to three years.

(At this stage, the Minister left the meeting, after the Chairperson had thanked him for his involvement.)

Ms Tukisi said that if the Committee felt it was advisable to review the fraud prevention strategy annually, instead of every two years, the Department could do this.

Referring to the inquiry as to whether any of the DPW’s officials had been involved as insiders in the fraudulent orders scam, she said this was a possibility, although none had been implicated so far.

Mr Phillip Masilo, Special Advisor to the Minister, said the Department – on his advice – had been reluctant to name and shame people because this had both internal and external implications which could have serious legal consequences.
 
Ms Fatyela-Lindie expanded on earlier discussions concerning capacity shortages in the internal audit unit, supply chain management issues, change management training and recent developments in management accountability. She defended the Department against criticism of over-expenditure on certain projects, pointing out that even the Cape Town stadium had cost three times the original estimate – and the private sector could source expertise anywhere in the world.

Referring to a suggestion that the service providers’ panel and the FAI would be duplicating their efforts, she said that this was not the case. There was high turnover in the internal audit unit, due in part to intimidation, and there was a huge backlog. She agreed that the presentation should have indicated that the panel was being appointed to strengthen the Department.

The Chairperson thanked the DPW delegation for their presentation. The meeting was adjourned.