Conflict of Interest in Government: Auditor General briefing

Public Accounts (SCOPA)

09 May 2017
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Auditor-General South Africa (AGSA) spoke about conflict of interest in Government since the findings of its 2008 Performance Audit Report on the matter. The briefing included a summary of the 2008 Report findings and recommendations, how AGSA approached auditing conflict of interest since the publishing of the 2008 Performance Audit Report, the measures implemented by government to address the Report recommendations, the nature of the audit findings since the publishing of the 2008 Report and current recommendations made by the AGSA as the way forward.

AGSA highlighted that specific departments are repeat offenders when it comes to the highest numbers of cases, these include the Departments of Correctional Services, Justice and Constitutional Development, and Police. They stated that they are seeing a lack of consequence management which has made it difficult for some of these departments to get out of non-compliance.

AGSA stated that since the new Public Service regulations banning civil servants from doing business with the state which took effect at the end of August 2016, implementation of this alongside disclosures from state employees about close relatives doing business with government will be monitored and the information released.

Members requested information from the Auditor-General on the affected departments, how much was lost in terms of the cost of the conflict of interest and if conflict of interest was related to the R48 billion irregular expenditure of the state. They asked AGSA about the mechanisms put in place to monitor the implementation of the recommendations made by the departments concerned.

Members highlighted that seeing that AGSA had the list of transgressors from 2015/6, moving forward these departments and employees need to be monitored as since August 2016, this was now a contravention of the law. In the future, SCOPA plans to work closely with the Portfolio Committee on Public Service and Administration to deal with conflict of interest.

Meeting report

The Chairperson said that he wanted today’s exercise to be seen as an enabling one. In 2008, the Auditor-General of South Africa (AGSA) produced a performance audit of government employees doing business with national departments. After the Arms Deal, which was the most widely publicised case, it was made clear that officials were intrinsically involved in determining who gets what, and how government tenders are shared amongst relatives and friends.

After the 2008 Report, what has been the outcome? Have things stagnated, have things progressed or have things got worse? Especially in the light of the fruitless and wasteful and irregular expenditure, what is the driver of such expenditure? Is it self-interest or administrative weakness? This element of conflict of interest talks to the ethics of the civil servants. To what extent is South Africa able to build the kind of civil servants envisioned in our Constitution and how far are we in having officials that are honest and law abiding? It is on this basis that SCOPA requested AGSA to conduct a review and AGSA will present its findings.

Conflict of interest in Government: briefing by Auditor-General South Africa
Mr Eugene Zungu, AGSA National Leader: Audit Services, introduced his colleagues: Mr Barry Wheeler, Corporate Executive and Mr Fhumulani Rabonda Senior Manager: Audit and Research.

Mr Zungu said he would enlighten the Committee on what has happened since 2008. AGSA has provided its 2008 Performance Audit Report. Its briefing document consists of a summary of the 2008 performance report findings and recommendations, the approach to audit conflict of interest since the publishing of the Performance Audit Report, measures implemented by government to address the Performance Audit recommendations, the audit findings since the publishing of the Performance Audit Report and the finally current recommendations for the way forward.

The Performance Audit of 2008 covered transactions pertaining to the 2005/6 financial year. When they conducted the performance audit , they looked at the following transactions: Employees of departments doing business with own departments, as well as those who had not declared that they were doing business with their own departments. They looked at employees’ spouses doing business with departments where the husband/wife is employed and they identified conflicts which were not declared in these instances. The third area was employees of departments doing business with other national departments.

For today’s proceedings, the focus will be on national departments, although the audit is conducted on all three spheres of government. Specific recommendations were made by AGSA and specific commitments were made by relevant stakeholders that included National Treasury (Accountant-General), Department of Public Service and Administration (DPSA), Public Service Commission (PSC) and various departments (employers) where findings were identified.

2008 Performance Audit findings and recommendations
• AGSA found 30 employees who had not sought the necessary approval to perform remunerative work with their own department. R32 million was spent on contracts awarded to companies associated with those employees.

AGSA’s recommendation in those cases was that departments must take disciplinary action against employees who perform such remunerative work without approval. Additionally, departments should implement and monitor controls for managing employees’ other remunerative work. They recommended that designated employees should be informed of the requirement that they have to request approval to perform other remunerative work. AGSA asked for specific commitments by role-players on these recommendations.

• AGSA then looked at companies or closed corporations owned by employees doing business with government but who failed to declare their interest on the financial disclosure form. AGSA found that there were 19 employees in breach with R30.6 million paid to companies owned by those employees.

AGSA’s recommendation included that departments should consider taking disciplinary action against designated employees who had not declared their interests. They recommended that government must consider amending the existing regulations to strengthen the requirements. Further, new employees and employees transferring within departments should make the disclosure within 30 days of appointment / transfer. Policy should require employees to disclose changes in circumstances within 30 days. Employees must ensure that CIPC (formerly Cipro) maintains an accurate account of their resignations as directors or members.

Commitments were made by role-players to align themselves with the recommendations, particularly by PSC which at the time of the report, had established a directorate to scrutinise the completeness of the financial disclosure forms. PSC had committed to establishing rules for the scrutiny of financial disclosure forms and for the management of conflicts of interest.

At the time of the report, the DPSA was investigating the implementation a financial interest disclosure form to be completed by employees on salary levels 1 to 12 (non-designated employees).

• The third category of findings covered entities that received awards from departments yet the entities had not declared that they had employees that work for government. AGSA recommendations were that National Treasury should extend the declaration of interest in the SBD4 forms to include a declaration of all relationships with the state. Additionally, declarations by employees and their spouses should be made compulsory if the company in which they have an interest submits a quotation.

National Treasury committed to amend the standard bidding document (SBD4) to compel bidders to mention their shareholding, and not only directorships.

AGSA made a finding on supply chain management (SCM) non-compliance in the awarding tenders and contracts to employee-related entities. AGSA found various cases where the departments did not comply with the SCM prescripts when awarding tenders where conflict of interests existed. These cases were identified on a sample basis. The findings include deviations from official SCM processes and failure to apply the preference point system.

Approach to auditing conflict of interest since the publishing of the 2008 Performance Audit
AGSA changed their auditing approach by starting to look at instances where state officials have disclosed their interest in tenders and the interest of their close family members. To audit this, the audit process uses computer-assisted audit techniques (CAATs) which is based on the comparison of the following databases: PERSAL (Personnel Salary System) for employees of departments, Companies and Intellectual Property Commission (CIPC) for registers of companies and directors and the Basic Accounting System (BAS) which is a government payments system. How it works is that if you have an employee on PERSAL, one compares to see if they have any directorship via the CIPC database, then from there they use BAS to see if there is any trading activity with government within their own department or any other government department. That is the process followed to identify exceptions.

AGSA’s findings of any exceptions are communicated to management. Issues that are found to be material enough are the escalated to the audit report. For the last five or six years, they have included a high level summary of trends that have been observed in the area of conflict of interest.

Measures implemented by government to address the Performance Audit recommendations
In the period 2009 to 2010, National Treasury issued an instruction (PN 7 of 2009/10) to refine requirements relating to management of conflict of interest in SCM processes.

In the period 2015 to 2016, National Treasury implemented the Centralised Supplier Database (CSD) for all organs of state. The CSD interfaces with SARS tax clearance system, Home Affairs population register, CIPC companies register, and PERSAL database of government employees.

In the period 2016 to 2017, DPSA promulgated revised public service regulations (PSR) prohibiting employees of departments from doing business with the state, strengthened requirements for disclosure of financial interests and requirements for application for approval of additional remunerative work. DPSA implemented the eDisclosure system to simplify the process of annual disclosure of interests. Basically those are the interventions that have been observed by AGSA.

Audit findings since the publishing of the Performance Audit Report
With regards to exclusions, the scope of audits does not include the verification of shares held in companies as this information is not always available on the CIPC database. So this means that if an employee is found to be a director of a company that does business with a department and resigns from the directorship but is still a shareholder in that company that will not be picked up in the scope of AGSA’s auditing.

The extent of their findings relate to the period when there was no legislation that prohibited state officials from doing business with the state. Therefore, the following analysis of findings does not represent all awards made to state officials or close family members. They only include those contracts where the audit process would have identified non compliance in dealing with conflict of interest, e.g. interests not disclosed.

Slide 12 illustrates the work done in 2008 with regards to employee-related companies doing business with his/her own department. The graphic shows that 12 departments (32% of national departments) were an area of concern in 2008 and by 2015/6 it was 3 departments (8%). The overall observation is that departments have taken the AGSA recommendations to heart.

Slide 13 illustrates employees’ close family members doing business with their own departments. The graphic shows that 12 departments (32% of the departments) were an area of concern in 2008 and by 2015/6 it was 3 departments (8%). Similarly, the number has been reduced from 2008.

Slide 14 illustrates companies related to employees of other organs of state doing business with the department which was not covered in the 2008 performance report. But they decided to start looking at this in 2011 to 2012 where they had 3 departments that had issues. In 2015/6 it was at the highest level ever, with 24% of departments. This area is the only one where cases with issues have increased. What they have found is that suppliers make declarations of interests but state falsely that they do not have any conflict of interest and then AGSA identifies that there were specific conflicts.

Mr Zungu showed the list of departments with findings and its correlation with overall audit outcomes. AGSA has broken down (a) departments which had employee-related companies doing business with their own department, (b) employees’ close family members doing business with their own departments and (c) departments which had companies related to employees of other organs of state, doing business with them.

While a number of departments have managed to put measures in place to deal with conflict of interests since the publishing of the Performance Audit Report, there are a few departments that are still attracting repeat findings in this regard. These include the Departments of Correctional Services, Justice and Constitutional Development, and Police. The Department of Correctional Services and the Department of Police have similar challenges as they struggle with implementing effective controls in a decentralised environment. Correctional Services, for instance, has four regions and over 250 correctional facilities, each one processing procurement transactions, resulting in a lack of effective monitoring of controls.

Centralisation of procurement processes has been seen to work. For example, the Department of Defence has managed to put effective controls in their SCM systems through centralisation.

Conclusion and way forward
At a transversal level, a lot of work has been done by government to address weaknesses in the SCM environment. These interventions can only be effective if the department itself implements them and if in areas where there have been breaches, disciplinary measures are taken against affected employees and action taken against suppliers who make false declarations. He added that there is a gap in terms of a lack of consequences.

The following institutions which have a role to play in strengthening governance in the public sector may provide additional useful information to South Africa Standing Committee on Public Accounts (SCOPA) on the programmes they have implemented: Department of Public Service and Administration, Office of the Chief Procurement Officer (National Treasury); and Public Service Commission. SCOPA may consider following up with some of the departments that have had significant and/or repeat findings on conflict of interests with a view to establishing their reasons for not being able to put measures in place to deal with conflict of interests. Such hearings may provide an opportunity to establish the exact nature of consequences meted on employees and suppliers responsible for the audit findings on conflict of interests. AGSA will support the Committee whenever they are called.

The Chairperson thanked AGSA, saying it has enabled the Committee to do their work. The Office of the Auditor-General is an enabler, they give information to the Committee for oversight. Looking at the figures, the people who have gone rogue and should be arrested are in the Departments of Police and Justice – the very departments that should ensure that the law is enforced.

Ms N Khunou (ANC) stated that they have more than 34 departments and when they had interacted with the Department of Public Service and Administration (DPSA), it had said that it was difficult to check this information on the directors in terms of who is doing business with the state. She asked when DPSA made this improvement? When looking at the tender process, is it possible to check on all the tenders processed to ensure public servants are not in conflict with doing business with the state when it comes to family members. When one declares immediate family members such as a spouse or kids it is easy to check but what about other relatives? How can they make sure that nobody gets away with murder? Moving forward the Committee needs to interact with DPSA to ensure such gaps are filled.

Mr C Ross (DA) was concerned about how they deal with the measures and reforms by government on conflict of interest when it seems that consequence management goes back to the department itself which is a problem because the transgressors are in the department itself. And to get the responsibility from the companies they deal with is another matter. However, they need to deal with the departments and the problem with the departments is supply chain management. He asked if there is a specific section in the audit report that addresses this conflict of interest within a specific department.

He referred to section 30 of the Public Service Act (PSA) which is a bit vague and asked AGSA to provide more information on that area. On the status of an unqualified audit with findings, such as that of Correctional Services, there are massive transgressions in terms of conflict of interest but no consequence in this regard. Should AGSA not play a role where it addresses these transgressions in the audit findings and thus makes it easier for the Committee to pick it up in its analysis of the audit report?

Mr T Brauteseth (DA) noted that the explanatory notes provided by AGSA on page two referred to “sample” a couple of times. Does that indicate that the problem much bigger than what is reflected? Is that the full picture because if it is only a sample, then it is extremely worrying?

Referring to the list of departments in which employees have transgressed. The Public Service Act has been in play for two years so it has been a contravention for two years. Does AGSA have the list of employees and bid suppliers who have been in contravention from 2015/16 at least? Can AGSA obtain any details as to what has happened to these employees and suppliers? They need to investigate if there has been any sort of action taken against the transgressors otherwise the law is just a waste of time.

Ms N Mente (EFF) had a few concerns. The first is the section where the audit process using the CAATs is explained with the three systems of PERSAL, CIPC and BAS. These systems provide AGSA with data that shows that a person, such as herself is employed in department A under the PERSAL system and but when you go to CIPC and her name is not listed as the owner of the company yet she features in the company, would they be able to pick up her name?

Secondly on the work on the 2015/6 period where DPSA had systems in place such as eDisclosure and the public service regulations (PSR), she asked if AGSA was referring to the Public Administration Management (PAM) Act which prohibits completely all employees of the state to do business with the state. She stated that the provision of approving additional remunerative work does not mean that the employee will be working with the state; they will be opening their own business which has nothing to do with the state.

Some employees had approval to do business with the state but the Public Administration Management Act prohibits them to open a tuck shop or any kind of business to do with the state. She asked the Auditor-General to please help them with the names of the departments in graphs 1, 2 and 3 because the figures do not have the names of the departments on the graphs. As much as the decrease is impressive such as in figure 1 from the year 2012, it would be interesting to know if it is not the same departments that are the culprits? Getting the names of the departments for all three categories will enable the Committee to check that it is not the same “Correctional Services and Police Departments” committing transgressions.

Lastly, where directors are concerned, when the former Minister Ramatlhodi took to the podium in mid-January, in line with the new Public Service regulations public servants who were doing business with the state must resign their directorships by the 31 January 2017. Anyone that did not resign by 31 January is outside the scope of the law altogether because there is the Public Administration Management Act and the Minister warned them too. Can they get names of those that still hold directorships with companies doing business with the state?

Mr E Kekana (ANC) asked if there are mechanisms to check on these recommendations and if not, what AGSA suggests that the Committee does? He asked if is it possible to give an indication of those 30 individuals that were involved in transgressions, in which departments they were they and of the R30.6 million, how much was recovered by the state? Perhaps SCOPA should meet with the departments concerned and the Public Service Commission to follow up on the recommendations.

Mr M Booi (ANC) thanked the Auditor-General for doing the work. When AGSA came to Parliament and did a presentation to bring attention to a problem, they used the statistical approach of sampling, but that is fudging the issue. It does not talk to the real issue. So what is the extent of the problem? Who is involved? Did they recover the money? Was it not AGSA’s job to recover the money? He requested that they give them the facts and details. How big is the problem?

A fudging of the report is not helping to exit out of the problem, names should be included. When a report is requested, the Auditor-General has suddenly become very selective on the details. You do not want to tell us what is happening with provinces, you do not want to tell us what is happening in local government, but AGSA had implied they would give us the total scope of the challenge. A full disclosure is required so that SCOPA can make decisions, are these transgressors located in provinces or local level? They do not want a sample or a summary; they need the real full story. The Auditor-General needs to be specific, not speak in a general sense. Furthermore AGSA is not giving them criteria as to who is exonerated.

Mr Zungu replied that he would deal with the questions himself and in some instances, he would direct the questions to his colleagues, particularly the ones dealing the Acts and section 30 of the PSA.

On the question of the disclosure of interest in levels 12 to 1, at the time of the 2008 Performance Audit it was only designated employees that were required to make the disclosure of financial interests. The AGSA recommendation at the time was to extend the disclosure to all the employees but it is one of the recommendations that has not be implemented. AGSA saying that this disclosure needs to cover all employees at all levels not just designated employees.

On whether it is difficult to check on relatives doing business with the state and how to close that gap, the report talks about close family members, such as spouse and children. However they do not have the ability to pick up on the wider circle of relatives. He does not think it possible for them to pick up on those gaps.

Mr Booi asked if they were to say the ‘Madiba’ clan, can they not pick that up? How far is their ability to check that relationship?

Mr Zungu stated that if he were being audited, the close family relatives that can be picked up are his children and his spouse because their information is in his HR records. Yet his brother or cousins cannot be picked up, so those are the limitations on the work AGSA can do.

On elevating the findings in the department audit report, what they elevate in the report depends on the materiality of the issue they identify. If for example in a department there is one employee or one supplier which has not declared conflict of interest, that matter will only be found in the management report which they share with the management of the department concerned, but it will not be found in the audit report because they would not identify it as material.

When matters are elevated to the audit report, they will mention specific regulations that are being breached. In addition they elevate the matters to the general report which are slightly more consolidated and more digestible because it is specific in the categorisation of the issues.

On the status of the audit report, he referred to the table on page seven where there is a comparison of the audit outcomes of the departments that had conflict of interest not being declared, none of them are green, meaning none of them are clean. This basically means that each one of these departments had findings and these findings would have been compliance findings, which means that these departments can produce an unqualified set of financial statements.

On sampling, he said that this information is not derived from sampling. AGSA does a comparison of the three databases (PERSAL, BAS , CIPRO). Due to the use of the CAATs they can audit the database 100% and pick up all those instances where you match two databases and find some commonality - so that is not informed by sampling. But other areas where they audit the adherence to SCM, that cannot be audited in any other way besides sampling which is why they refer to sampling in that part of the report. There are so many tenders issued and it is an accepted practice that auditors sample. It is about how you sample to limit the risk of arriving at an incorrect audit opinion.

On the question about the report showing employees still trading with government in 2015/6, which might be seen as the period after the implementation of PAM, he noted that the regulations become effective on 31 August 2016. What they reported when they referred to 2015/16 in the report is the period until 31 March 2016 before the promulgation of these regulations. Post August 2016, state officials will not be permitted to trade with government, so in those instances whether they declare or not, AGSA will highlight and elevate those cases in their report.

In terms of the list of employees and suppliers and what has happened to them and Mr Booi’s concern, AGSA did not see today’s meeting as an exercise to discuss the specifics, but if the Committee wants that information, they can provide it. With regards to the list of departments and the list of employees, they can provide that information. In terms of what has happened to the suppliers, they cannot answer that question in terms of each of the specific cases. AGSA recommends that the Committee sits with each of these departments. Once the list of suppliers and employees has been provided, in his view, the answers should come from the departments concerned.

On whether the system can pick up when a person is not a director of the company, they cannot pick it up, they only pick it up if the person is a director. So if the person is a shareholder and is employed by the state, they will not pick it up. What they can say with certainty is when the person is a director of the company, they can definitely check it.

On Ms Mente’s request for names of those holding directorship even after the Minister had told them to cease their directorship, AGSA does not have the information now. They are still busy doing auditing the 2016/7 cycle. The information will available when they do the audit reports for 2016/7.

On whether AGSA has mechanisms in place to check up on their recommendations, Mr Zungu replied that they can check whether departments are following recommendations in general but they cannot check a specific case with a specific employee. He added that he would be happy if SCOPA can in writing outline the specific departments they would like information on, as they are amenable to sharing information they have.

He referred the Committee to the three annexures in the 2008 report which indicated the specific departments in the three categories. Yet if the Committee wants specific information, they are happy to share details.

In response to Mr Booi’s question, he stated that the brief that AGSA received about the day’s proceedings was to share information on what is happening with national departments. Hence the local and provincial governments were not dealt with and they confined the briefing today to national departments. Members could rest assured that the insights they have given today on the national level, the same has been done for provinces and local government.

Mr Fhumulani Rabonda, Senior Manager AGSA, replied that section 30 of the Public Service Act was not clear as to what “performing work” is. They sought legal opinion to clarify if holding a directorship constitutes “performing work” and they could not conclude this. They then decided to not discard the findings, but instead they reported them to management to investigate because it becomes an allegation of possible misconduct. The good thing now, starting from 2016/7, DPSA has clarified that holding a directorship amounts to “performing work”. Post this finding, they can say moving forward that those holding directorships have contravened.

On the implementation of PAM Act and the PSA Regulations, he agreed with Mr Zungu that the implementation date is 31 August 2016. To marry the two, the Act was assented to by the President but he did not indicate the implementation date and left that power to DPSA to promulgate sections of the Act bit by bit through regulations. No public servant is allowed to do business with the state. Public servants include employees of national and provincial departments, and it does not cover municipal employees or employees of entities.

The Chairperson asked if employees are not allowed to do business with the state or departments.

Mr Rabonda responded that it is “the state” and added that they had meetings to clarify that point with departments.

The Chairperson asked, who is the state or what is the state? Is the state limited to departments or does it include entities and parastatals such as Eskom?

Mr Rabonda responded that they expanded the definition to include all spheres of government and, yes , it covers parastatals too.

The Chairperson asked what is an employee? To what extent are you an employee or not? Is an advisor to the minister an employee or not?

Mr Rabonda stated that an employee refers to those defined by the Public Service Act, so the advisors in this case, he does not think fall under the Public Service Act.

Mr Booi stated that the Auditor-General stated that there was R48 billion of irregular expenditure and this became part of the figures associated with employees doing business with government. He asked how they get out of that as that was the impression created. He asked what the magnitude is of these amounts. This new interpretation presented today in monetary terms, the amount of what government has lost and what has been recovered is not disclosed.

Ms Khunou said that she agreed with Mr Booi because when the President spoke of this matter, they were all concerned. It was a big problem in terms of public service employees. But the information that the Auditor-General is giving the Committee, is not the same as information they have been hearing throughout the years. She thinks it is important that they have a meeting between AGSA and Public Service and Administration. The Chairperson’s question of who is an employee was an interesting one because how do they categorise Directors General. Who are the real culprits doing all these transgressions?

She noted that it is fewer than 30 employees doing business with the state and asked Mr Zungu thinks that is a serious problem. Is it something that SCOPA should deal with to the core? The way that Mr Zungu has simplified the R32 million pertaining to employees doing business with government, is too simplified. She is not sure what SCOPA should do with the information. The Committee wants to root out corruption in South Africa. The other issue is that when it comes to SCM, people are not paid within 30 days because public servants do not have an interest in having those people paid because they did not get the tender. It is a serious problem that has been simplified today.

Mr Brauteseth thanked AGSA for the report and said that with the provisions coming into operation in August 2016, then no one on the list is found guilty, so this has been an academic exercise to tell us who the known persons are. Effectively, there is nothing the Committee can do in terms of disciplinary action because the people on the list have done nothing wrong in terms of the law.

Considering the database of the employees identified in 2015/16, seeing that they know who the suspects are, will AGSA follow up on these employees in 2016/17? Will AGSA give the Committee a report on these employees next year?

Ms Mente referred to the eDisclosure system in DPSA. In the last meeting she had with the DPSA Committee, it was noted that the system is not 100% as the officials themselves do not disclose. They were at 77% in disclosing, so that system on its own is not assisting, and therefore they can unearth even more.

She stated that with all these reports they cannot rule out the corruption. As much as today’s presentation is national only, 39 people is a lot of people and the amount of money being distributed amongst them alone not including provinces and local level is too much. It is a huge sum and it needs to be accounted for, so they need to use this information if the Auditor-General can assist with the breakdown of the names and the list of departments. As much as the report states how many employees per department were issued tenders, they are interested in knowing who those employees are.

Mr Ross thanked the Auditor-General for his reply and for making the conflict of interest transparent. In response to Mr Zungu stating that the financial statements are highlighted in the management report, he added that unfortunately they are not privy to the management report. Mr Zungu mentioned that the conflict of interest is elevated into another mechanism, could he please give more clarity on that?

On the link between what was being reported today and the R48 billion irregular expenditure, Mr Zungu replied that on page 7 of the briefing, the amounts can be found for the instances where officials conducted business with the state. The findings relate to the period when there was no legislation that prohibited state officials from doing business with the state. The figures do not represent all awards made to state officials or their close family members. They only include those contracts where the audit process would have identified non-compliance in dealing with conflict of interest, such as interests not disclosed.

In terms of the irregular expenditure figure, the point made on page 12 of the briefing is that for most of the department with conflict of interest, they are finding other SCM non-compliance because the figure of R48 billion is driven by an environment of non-compliance within supply chain management.

In terms of how much the government has lost as a result of conflict of interest, this a complicated question. In most instances, services and goods have been delivered but you can never be certain if government has received value for money. If one is highlighting concerns about how the procurement process is conducted, to quantify that is impossible.

When AGSA flags issues, in terms of the departments concerned and those responsible for holding the department accountable, it is vital that these issues are attended to. Departments need to conduct thorough investigations to understand what other interests have been served through non adherence to basic compliance requirements.

There are trends that have been picked up each year with departments, such as Correctional Services, whether their numbers are significant it depends on where you sit. But from the point of view of the country, these numbers are material and warrant a closer look.

In terms of what SCOPA should focus on, AGSA has been reporting on the lack of consequence management. At a localised level, the lack of consequence management has made it difficult for some of these departments to get out of non-compliance. So the question is, with the stricter rules starting from August 2016, what type of numbers will AGSA be reporting in these departments?

In terms of who exactly is exonerated, levels 1 to 12 are not identified as designated employees. This means that they are not required to declare their interests, but this is no longer the case with the new regulations.

On information being presented not being the same as other departments, members can share where they are seeing differences; then AGSA can understand if they are talking to the same information. The information shared today is the same as the information shared with the respective departments in terms of their management reports.

In terms assisting the Committee in rooting out corruption, they have flagged in the report false declaration by the suppliers or the employees and have flagged it as a fraud risk indicator. It could be a precursor to corrupt behaviour happening in that specific department. A question they can ask themselves is why does a specific department continue to have the same finding and perhaps SCOPA can follow up.

With regards to simplifying the problem, he does not believe that is the case. They have followed up on observations they have made since 2008 but if the Committee requires more information, AGSA is happy to share it with them. On the database of employees doing work with the state, they will start reporting on that from 2016/7 and that information will be made available.

Mr Booi asked in terms of money cost, how much is it costing? How much was the loss?           

Mr Zungu replied that when they start reporting from 2016/17, they can give a full picture of the amount. This is because from 2016/17 no employees are allowed to do business with the state so moving forward, it will be much bigger numbers than what has been seen. In the past, in terms of the law, there was no contravention.

Mr Brauteseth stated that these provisions are not a silver bullet, if one is of corrupt orientation, one can get a friend to pick up a business deal. Stopping corruption comes down to SCM processes and the Public Finance Management Act (PFMA) and Treasury processes.

Mr Booi stated that the staggered implementation of Public Administration Management Act is a cause for concern because it allows elements of corruption because while the Act is partly implemented, officials are finding a way to beat the system. He added that he foresees the problem of corruption growing.

The Chairperson stated that today's engagement was important because it talks to the topic of ethics within Public Administration. Once one has employees doing business with the state, one cannot imagine what other things they can do. This report talks to employees who did not do their declaration when they were supposed to or gave false declarations. As Parliament, they should drive a clean, ethical administration. They must never say that it is still a small fire and they should wait until it is big; that is not right, they need to nip it in the bud.

From what he has seen, the Departments of Police, Correctional Services, Justice and Constitutional Affairs, Public Works, and Trade and Industry are the departments that have high amounts in 2015/6. He added that with all the affected departments, even if R20 000, it is R20 000 that should not have happened. Even if by letter, the affected department needs to explain what happened and what measures they have taken. Depending on the type of reports they give us, the Committee can decide on whether to take further action. But those departments that have high numbers must come before the Committee and explain themselves. The Public Service Commission, the Department of Public Service and Administration and National Treasury, need to have an engagement where they ask “where are we” on the commitments made about the 2008 report? Yes, the Act has been passed, despite its staggered implementation, but what is PSC doing and saying and what is National Treasury doing in light of it?

The Chairperson stated that he had had a discussion with the chairperson of the Portfolio Committee of Public Service and Administration and they need to have much closer interaction because all the problems that they are dealing with as SCOPA are a result of a not so good public service and yet DPSA has a very central responsibility in ensuring the kind of civil service that the Constitution and the law requires. Therefore how the Committee interacts with that Portfolio Committee and getting it to see these issues from SCOPA’s perspective, can play an important role in informing its work.

He reminded AGSA delegation that the Committee needs specific details in order for this to move forward.

The meeting was adjourned.

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