The Department of Public Service and Administration, alongside entities – the office of the Premier of the Northern Cape, and the Public Service Commission, met with the Public Service and Administration Portfolio Committee with the intent to discuss the Financial Disclosure Framework and Lifestyle Audits of public service members, and what each entailed. This meeting was also the result of the Portfolio Committee’s dissatisfaction with the implementation of the frameworks by the Department and the Commission, as expressed in a prior meeting in March.
The Department briefed the Committee on the distinction between the Financial Disclosure Framework and the Lifestyle Audits Framework and their intent and purposes in the public service. It said that the purpose of the Financial Disclosure Framework was to manage conflict of interest situations in the public service, as per regulations in the United Nations Convention against Corruption, and to encourage public service employees to be transparent.
The Department reported that departments that still had not initiated lifestyle audits were identified for further training on implementing the Guide. Recently, a lifestyle investigation course was developed to improve investigations, and the Special Investigating Unit (SIU) is engaged in selecting departments to perform lifestyle audits on their behalf. More departments started to perform lifestyle audits, with an improvement seen in detecting conflicts of interest and referring cases for investigations.
The Northern Cape Provincial Government presented the briefing on the use of law enforcement agencies to conduct lifestyle audits. The Committee had requested this briefing after the session held in March 2023 in the Northern Cape. At the time, the Premier was still in the process of consultations with the SIU and the State Security Agency (SSA) regarding its intentions to assist in conducting lifestyle audits. This briefing was thus the progress report since the last meeting.
The Committee had requested the Public Service Commission (PSC) to assist in synergising the Financial Disclosure Framework (FDF) with the Lifestyle Audits Guidelines (the Guidelines) for the national and provincial departments that were developed by the Department of Public Service and Administration (DPSA). This was to establish whether the Guidelines mimicked the aforementioned Framework.
The entity remarked that the essential purpose of the Framework is to manage conflicts of interest, and thereby promote ethical conduct, accountability and transparency in the Public Service (in line with constitutional values & principles as contained in section 195 of the Constitution of the Republic of South Africa, 1996).
The entity said that it had played a pivotal role towards the development of the Guide through the research as part of providing inputs. Upon finalisation of the Concept Document, the entity submitted it to the Office of the Chief State Law Advisor to seek a legal opinion on its competence to conduct lifestyle audits.
The Chairperson welcomed everyone present, and she officially opened the meeting.
Apologies were noted from Ms C Motsepe (EFF), Ms R Komane (EFF), and Mr T James (ANC). Ms Komane did, however, attend the meeting.
No apologies were noted from the Department of Public Service and Administration (DPSA). However, the Minister, Ms Noxolo Kiviet, experienced connectivity issues at the beginning of the meeting.
On 01 March 2023, the Portfolio Committee invited the DPSA and the Public Service Commission (PSC) to account for implementing lifestyle audits and the financial disclosure framework in the public service. The Committee was dissatisfied with the implementation, including outsourcing findings to law enforcement agencies.
The Northern Cape Province was to clarify its standing on lifestyle audits. The PSC provided an objective view of the financial disclosure framework and lifestyle audits to determine the similarities between both frameworks.
The Chairperson welcomed opening remarks from the Minister before their presentation.
Minister Kiviet started by presenting apologies on behalf of Deputy Minister, Dr Chana Pilane-Majake, who was attending an African Region Anti-Corruption Forum, and Director-General, Ms Yoliswa Makhasi, DPSA, who was the chairperson for an African Forum for Managers in the public sector.
Minister Kiviet stated that transparency and ethical behaviour were an integral part of good governance and ensuring a functional state.
The collaboration between the Department and anti-corruption entities did yield results, with the receipt of a recent report, addressing the unduly claims to the Temporary Employment Relief Scheme (TERS) fund implemented during Covid-19. These companies were to pay over R100m back to fiscus.
Minister Kiviet introduced Mr Nyiko Mabunda, DDG: Human Resources Management and Development, DPSA; Mr Henk Boshoff, Commissioner, PSC; Mr Matome Malatsi, DDG: Integrity and Anti-Corruption, PSC.
The Minister thanked the Committee for holding the Department to account, and welcomed the presentation led by Mr Salomon Hoogenraad-Vermaak, Head: Public Administration Ethics, Integrity and Disciplinary Technical Assistance Unit (TAU), DPSA.
Briefing by the Department of Public Service and Administration: distinction between the Financial Disclosure Framework and the Lifestyle Audits Framework and its intent and purposes in the Public Service
Mr Hoogenraad-Vermaak outlined the aim of the presentation, which was to brief the Portfolio Committee on the distinction between the Financial Disclosure Framework and the Lifestyle Audits Framework and their intent and purposes in the public service.
Financial Disclosure Framework
The Financial Disclosure Framework was introduced in 2016 under the Public Service Regulations (PSR, 2016), issued by the then Minister of Public Service and Administration. Chapter two of the PSR concerns the conduct of employees in the public service, and it covers the financial disclosure framework and anti-corruption and ethics functions. The inclusion of financial disclosures was also in response to a requirement in the United Nations Convention against Corruption (UNCAC), as South Africa is a signatory thereof.
The purpose of the Financial Disclosure Framework was to manage conflict of interest situations in the public service, as per regulations in the UNCAC, and to encourage public service employees to be transparent.
In terms of the adopted regulations, designated employees such as members of the Senior Management Service (SMS), heads of department (HOD) and any other employee or category of employees determined by the MPSA, disclose their financial interests via the electronic system (eDisclosure). SMS members and HODs disclose in April each year. Other categories of employees disclosed in June and July every second year. They are required to disclose: shares, loan accounts, income-generating assets, trusts, directorships and partnerships, other remunerated work, consultancies and retainerships, gifts and hospitality, and ownership in immovable property and vehicles.
These financial disclosures are then verified by the ethics officer(s) in a department, using the database linked to the eDisclosure system (Deeds, the Companies and Intellectual Property Commission (CIPC), National Traffic Information System (eNatis), and internal registers).
The intention of this Framework is to:
- promote and maintain a high level of professional ethics (as per the Constitution section 195) by encouraging transparency;
- manage any conflict of interest situation that is identified through the disclosure of financial interests;
- institutionalise the Code of Conduct by assessing compliance with the relevant prescripts governing the conduct of designated employees in the public service (such as other remunerative work and gifts).
In 2018, the President of the Republic of South Africa announced that lifestyle audits must be compulsory for all government employees, including public service employees. In 2020/2021, the DG, DPSA, approved a Framework and Strategy for implementing lifestyle audits in the public service.
On 01 April 2021, the Minister of the DPSA approved a Guide to implement lifestyle audits in the public service to be implemented by all public service Departments, which made lifestyle audits compulsory. This gave effect to Regulation 22 of the PSR, 2016. It also addressed the requirement in the UNCAC regarding conflicts of interest.
The purpose of lifestyle audits was to:
- manage conflicts of interest situations in the public service (as per UNCAC)
- strengthen risk management in departments focusing on corruption and ethics
- address unexplained wealth amongst public service employees
- deter corrupt behaviour
- strengthen ethical conduct.
Lifestyle audits were introduced as part of the PSR, 2016, to be a legitimate mechanism for HODs to analyse ethics and corruption risks as part of the Department’s system of risk management.
Lifestyle audits are a decentralised function, carried out by departments based on their risk profiles. The information on the eDisclosure system is verified (lifestyle review) and then used to determine if an employee is living beyond his or her means, and to determine if there are any conflicts of interest that may point to corrupt activities.
If such is determined, a case is opened with the Police for investigation (lifestyle investigation). If the source of unexplained wealth could not be determined, the assistance of an auditor is obtained to assist (lifestyle audit).
The intention of lifestyle audits is to determine if employees:
- live within their financial means;
- can explain other sources of income received; and
- do not feed their lifestyles with the proceeds of crime.
Thus, to build an ethical public service, with professional employees who focus on service delivery and not self-enrichment.
- Both are measures aimed at strengthening the conduct of public service employees to give effect to section 195 of the Constitution (professionalisation).
- Both focused on identifying conflicts of interest. The eDisclosure system primarily focuses on collecting information to assess possible and actual conflicts of interest, such as receiving gifts and performance of other remunerative work. Lifestyle audits go one step further, by using the information on the eDisclosure system to perform a risk assessment to identify if employees are living beyond their means. In the process, conflicts of interest are evaluated to determine if they contributed to unexplained wealth, such as conducting business with the State. As such, financial disclosures are the backbone of lifestyle audits, where it is used to identify criminal conduct.
- Both are part of government’s Anti-Corruption system to address conflicts of interest and corruption risks. Others include vetting and integrity testing.
To assist the new categories in submitting Financial Declarations, the DPSA identified departments with challenges and provided them with workshops. A Guide was also adopted and departments are assisted during the submission period to register their members on the eDisclosure system.
Departments were advised to discipline officials that failed to declare their interests. If not done, the DPSA forwarded a non-compliance letter to the relevant department. In some instances, a Minister-to-Minister letter to request disciplinary steps to be taken.
Departments that still had not initiated lifestyle audits were identified for further training on implementing the Guide. Recently, a lifestyle investigation course was developed to improve investigations, and the Special Investigating Unit (SIU) is engaged to select departments to perform lifestyle audits on their behalf.
More departments started to perform lifestyle audits, with an improvement seen in detecting conflicts of interest and referring cases for investigations.
Mr Hoogenraad-Vermaak concluded his presentation.
Northern Cape Premier’s Office: The Use of Law Enforcement Agencies to Conduct Lifestyle Audits
Mr Justice Bekebeke, Director-General of the Northern Cape Provincial Government, presented the briefing on the use of law enforcement agencies to conduct lifestyle audits.
The Committee had requested this briefing after the session held in March 2023 in the Northern Cape. At the time, the Premier was still in the process of consultations with the SIU and the State Security Agency (SSA) regarding its intentions to assist in conducting lifestyle audits. This briefing was thus the progress report since the last meeting.
The DPSA requested lifestyle audit reports in January 2022, as part of the Department’s risk and ethics management strategy. During this time, the Department was recruiting a Chief Risk Officer, who was later appointed in March 2022.
The DPSA required consolidating all reports from departments and government entities in the province, from the Office of the Premier. The capacity of risk officers in the provincial administration to facilitate lifestyle audits and report to the DPSA was found lacking.
Currently, the progress has been fragmented, reporting on the following:
- financial disclosures to the PSC
- Z204 security vetting to the SSA
- vetting of qualifications.
There were backlogs in some of the processes due to institutional constraints.
As per the methodology in the briefing:
- Lifestyle audits could implement more processes other than financial disclosure
- Relevant capacity to verify the lifestyle of the employee was needed to determine whether the employee’s lifestyle corresponds with their earnings
- There was an inadequate capacity of risk officers with the ability to conduct these assessments. Training was required.
- Agencies such as the SSA and the SIU were already in the space of investigations. By legislation, they had been granted permission to retrieve whatever documentation was required to conduct these assessments.
- Verification beyond what had been provided by the employee was necessary.
- The investigation approach was to be qualitative instead of quantitative, and this was to be ensured through investigations done on important documentation such as academic transcripts; identification documents of spouses or next of kin; criminal history checks; statements of all accounts.
These are a few of the documents to be collected for assessment. The progress had been a signed service level agreement with the SIU. This agreement entailed:
- Conduct lifestyle audits for 235 senior managers and 213 supply chain management officials.
- Building of capacity for all risk and anti-corruption/ethics officials.
- The agreement was 12 months long in validity
- The agreement had been consented to by all HODs in the HOD forum.
- This was in line with section 7(3)(c) of the Public Service Act (PSA) and to streamline reporting through OTP to the DPSA
- The SIU requested that risk officers and all other persons involved in risk assessment be vetted
- The DG appointed a Liaison officer to liaise with the SIU for any specific information requests.
- SSA was also in consultation to assist with the vetting of the qualifications of employees.
- There was a request for R10m-R13m to be put aside by National Treasury for the funding of the project
The monitoring process was to be conducted as follows:
- A Steering Committee had been established under the directive of the DG.
- This Committee would use the terms of reference to track implementation progress.
Briefing by the Public Service Commission: An Objective Assessment on the Financial Disclosure Framework and the Lifestyle Audit
Commissioner Henk Boshoff extended an apology on behalf of Mr Somadoda Fikeni, Chairperson of the PSC. Present with Mr Boshoff was Mr Matome Malatsi, DDG: Integrity and Anti-Corruption.
Commissioner Boshoff briefly outlined what the presentation would entail, and then provided Mr Malatsi with the platform to present.
An Objective Assessment by the Public Service Commission on the Financial Disclosure Framework and Lifestyle Audits Framework in the Public Administration
The Portfolio Committee on the Public Service and Administration had requested the Public Service Commission (PSC) to assist in synergising the Financial Disclosure Framework (FDF) with the Lifestyle Audits Guidelines (the Guidelines) for the national and provincial departments that were developed by the Department of Public Service and Administration (DPSA). This was to establish whether the Guidelines mimicked the FDF.
The PSC had considered the request of the Portfolio Committee, and compiled a critical analysis of the FDF and the Guidelines as discussed below. In its analysis, the PSC deemed it prudent to first explain what the two documents (both the FDF and Guidelines) entail, and how they relate to each other.
Financial disclosure is a mechanism by which public officials periodically submit information about their registrable interests as required by the relevant prescripts. The FDF is contained in chapter two of the Public Service Regulation of 2016 (PSR). Regarding the FDF, the PSC assessed compliance with the requirement to disclose financial interests by the respective due dates to establish whether all SMS members in the respective Departments had submitted their financial disclosure forms, and whether these forms were submitted on time to the PSC.
The PSC then would then verify if all financial interests had been disclosed, to ascertain if there was any conflict of interest. The verification process, also referred to as the scrutiny process by the PSC, enabled the PSC to determine the prevalence of conflicts.
The FDF provided for the declaration of registrable interests by designated officials in the Public Service.
The PSC sent individual departmental reports with findings and recommendations, which are submitted to all EAs. The declaration of financial interests enables the Executive Authorities (EAs), through the scrutiny report of the PSC, to take action where conflict of interest has been identified as part of consequence management of interest.
The required disclosure of information was repeated, as previously mentioned by the DPSA in their presentation.
Once the prevalence of conflicts of interest has been established, the relevant EAs are informed accordingly and advised on necessary interventions that can be implemented to ensure that the conflicts of interest are properly managed and/or removed.
Failure to remove a conflict of interest when directed to do so will expose the affected employee to disciplinary action in terms of section 16A of the Public Service Act (1994) as amended. Where appropriate, the PSC would advise the relevant EAs to cause lifestyle audits to be conducted on certain officials, whose registrable interests raise some red flags.
Lifestyle audits were defined as an amalgamation of reports from various databases which would provide management and investigators with a snapshot into certain aspects of an employee's life. This was to determine if there were unexplained wealth on the part of the employee. The areas usually covered in a basic lifestyle audit were properties, motor vehicles, and company registrar information. These areas were publicly available data that anyone could access by signing or concluding agreements with the relevant entities to access their databases (Powell, 2010).
The PSC played a pivotal role in developing the Guide through the research as part of providing inputs.
Upon finalisation of the Concept Document, the PSC submitted it to the Office of the Chief State Law Advisor to seek a legal opinion on the PSC’s competence to conduct lifestyle audits.
Feedback from the Chief State Law Advisor
The feedback from the Chief State Law Advisor is as follows:
- Section 14 of the Constitution, which protects every person’s right to privacy;
- Section 236(4) of the Criminal Procedure Act, 51 of 1977 which provides that no bank shall be compelled to produce any accounting record… unless there is a court order compelling the production of such record;
- Section 31 of the Civil Proceedings Act 25 of 1965, which provides that no bank shall be compelled to produce its ledgers, day books, cash books or other account books in any civil proceedings unless the person presiding at such proceedings orders that they shall be so produced;
- Section 9 of the Promotion of Access to Information Act 2 of 2000, which deals with access to any information held by the State and any other person and the right to protection of privacy, commercial confidentiality and effective, efficient and good governance;
- Section 13(1)(c) of the National Prosecuting Authority Act 32 of 1998, which established the Asset Forfeiture Unit;
- Prevention of Organized Crime Act 121 of 1998, which stipulates that the Commissioner for South African Revenue Services must be notified, with the view for mutual cooperation and sharing of information where there is an investigation into property, financial activities, affairs or business of any person;
- The Chief State Law Advisor further suggested that the legislation that empowers the PSC to monitor the disclosure of interest must be amended, to make it clear that the PSC is empowered to conduct investigations to ensure that the high standard of professional ethics as contemplated in section 195(1)(a) of the Constitution is maintained;
- Scrutiny of the legal opinion would reveal that in view of the prevailing legislation, conducting lifestyle audits reside with the purview of the law enforcement agencies, as they have the necessary investigative and prosecutorial mandates;
- The PSC was of the opinion that this advice is applicable to the entire Public Administration.
The DPSA, as the policy-developing agency, played a pivotal role in implementing and monitoring the lifestyle audit.
The following differences were noted between the FDF and lifestyle audits:
- FDF focuses on disclosure of registrable interests, to manage conflict of interests.
- Lifestyle audits were more intrusive, taking the form of investigations that limited individuals’ rights to privacy and determining existence of unexplained wealth.
- FDF is part of regular Framework, ensuring ethical conduct in the public service sector.
- Lifestyle audits were only conducted upon suspicion of illicit activity, which could even lead to criminal prosecution.
- The distinction becomes more apparent when the PSC identifies any red flags regarding unexplained wealth while verifying information contained in the FDFs. It recommends to the EAs that lifestyle audits be conducted on affected individuals regarding the Guide.
- The provisions relating to conducting lifestyle audits are contained in clauses six, seven and eight of the Guide.
- The FDF does not have these provisions. Therefore, it cannot be said that the Guide mimics the FDF.
The following recommendations were given. Parliament was to pass legislation that:
- granted departments and municipalities the power to conduct lifestyle audits on respective employees should the need arise.
- allow investigators access to sensitive information such as banking records, trust deeds and offshore assets.
- facilitate inter-agency collaboration for information-sharing purposes when pursuing investigations or lifestyle audits.
The Guide serves as a positive step towards achieving ethical conduct in the Public Service. However, it is devoid of any legal enforcement and cannot be binding on the departments. More particularly considering the legal opinion of the Chief State Law Advisor referred to above. The Guide has no legal force but only provides guidance in dealing with unexplained wealth.
Essentially, the FDF is to manage conflicts of interest, thereby promoting ethical conduct, accountability and transparency in the Public Service (in line with constitutional values & principles as contained in section 195 of the Constitution of the Republic of South Africa, 1996).
However, it must be noted that the FDF and the Guideline are closely related, in that the information that is extracted from the scrutiny reports of the FDF informs the investigation linked to lifestyle audits.
Mr Malatsi concluded his presentation.
[please note this is a summary of the discussion as PMG does not have the full meeting audio recording]
Dr M Gondwe (DA) enquired whether the Department had been of any assistance to the Office of the Premier of the Northern Cape, and asked for a detailed answer on how the Department had helped.
Ms R Komane (EFF) enquired about the findings of the lifestyle audits; what had been the consequential action against government employees and officials found guilty of fraud or corruption? What progress had been made?
Dr J Nothnagel (ANC) enquired about the role of anti-corruption agencies in facilitating financial disclosure frameworks and lifestyle audits. What was the progress on getting Parliament to pass legislation granting the PSC power to probe into the confidential financial records of employees suspected of fraud or corruption for investigative purposes?
Mr Bekebeke responded to Dr Gondwe’s question, stating that the Department had been of great help in alleviating corruption within the Northern Cape provincial governance, however there were still constraints faced by the Office of the Premier that needed addressing to ensure full efficiency. The presentation by the Office of the Premier provided a detailed indication of progress, assisted by the Department in the briefing on the use of law enforcement agencies to conduct lifestyle audits.
Ms Komane’s enquiry was responded to in Minister Kiviet’s opening remarks and the DPSA’s presentation. ‘The collaboration between the Department and anti-corruption entities did yield results, with the receipt of a recent report, addressing the unduly claims to the Temporary Employment Relief Scheme (TERS) fund implemented during Covid-19. These companies were to pay over R100m back to fiscus,’ and ‘More departments started to perform lifestyle audits, with an improvement seen in the detection of conflicts of interest and the referral of cases for investigations.’
Mr Mabunda answered Dr Nothnagel’s question by referring her to the presentation by the Northern Cape Premier’s Office, which indicated the involvement of the SSA and the SIU, and a service level agreement with the SIU, which had assisted with the facilitation of the conduct of lifestyle audits for 235 senior managers and 213 supply chain management officials and the building of capacity for all risk and anti-corruption/ethics officials in the province.
The Chairperson thanked all the guests for appearing before the Committee and the Members for attending the meeting.
The Committee then considered and adopted minutes from prior meetings.
The meeting was adjourned.
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