Financial Misconduct in Government Departments: Public Service Commission report

PUBLIC SERVICE AND ADMINISTRATION PORTFOLIO COMMITTEE; JOINT BUDGET COMMITTEE
21 September 2007
FINANCIAL MISCONDUCT OF GOVERNMENT DEPARTMENTS: PUBLIC SERVICE COMMISSION REPORT

Chairperson: Mr P Gomomo (ANC)

Documents handed out:
Public Service Commission Report on Financial Misconduct for 2005/06 financial year
Public Service Commission (PSC) presentation

Audio recording of meeting

SUMMARY

The Public Service Commission briefed both the Portfolio Committee on Public Service and Administration and the Joint Budget Committee on their 2005/06 Financial Misconduct in the Public Service Report. The report showed an increase in the number of cases of financial misconduct, which could be due to the better reporting by departments. In total, there were 771 cases. The high prevalence of the fraud and theft offences remained disconcerting and could be ascribed to a lack of proper control systems.
Of the 771 cases, 81% of the employees were found guilty of financial misconduct. In 23 disciplinary cases, the matter was not finalised because the people concerned had resigned. Criminal proceedings were instituted in 25% of the cases. The departments needed to provide reasons to the PSC why criminal proceedings were not instituted in 49% of cases but failed to do so.

Members were concerned about the follow-up strategies to ensure implementation of the PSC recommendations. The Committees agreed that they would have to come up with a resolution addressing the financial misconduct problems in the public service such as tightening control systems. 

MINUTES
Ms Nozipho Mxakato-Diseko (PSC Commissioner) opened the briefing on the Financial Misconduct Report for 2005/06. She identified financial misconduct as an indicator of the extension of corruption in the public sector. The Financial Misconduct Report flowed from the Public Finance Management Act (PFMA) that required the Minister of Public Service and Administration to make regulations prescribing the manner, form and circumstances in which allegations, disciplinary and criminal charges of financial misconduct should be reported.
Treasury regulations specify that all departments report the outcome of their finalised misconduct cases to the Public Service Commission.

Ms Caroline Mampuru (Chief Director) continued, saying that the report’s role was to indicate the current status of financial misconduct in departments. Public servants were expected to administer public resources in an accountable and transparent manner, hence the need for such a report. She noted that the Public Service Commission found that not all departments reported to them on financial misconduct although they were compelled to do so in terms of Treasury regulations. Alternatively the prescribed information supplied was insufficient which meant that PSC had to do much follow-up work. There had been an increase in the number of cases in the 2005/06 financial year, which could be ascribed to better reporting by departments.

All 34 national departments had submitted reports with 10 reporting no financial misconduct cases. All provincial departments had submitted reports except for Gauteng’s Education Department. Of the 105 reports, 54 reported no financial misconduct cases. In total, there were 771 cases in 2005/06. The results showed that financial misconduct in national departments was higher than the provincial departments.

Ms Mampuru provided a detailed overview of the statistics for 2005/06. Fraud and theft had been the most prevalent offences with employees in the salary range 6 and 7 having the highest number of financial misconduct cases. The high prevalence of these offences remained disconcerting and could be ascribed to a lack of proper control systems.
Of the 771 cases, 81% of the employees were found guilty of financial misconduct. In 23 disciplinary cases, the matter was not finalised because the people concerned had resigned. Criminal proceedings were instituted in 25% of the cases. The departments failed to give reasons why criminal proceedings were not instituted in 49% of cases.

In conclusion, Ms Mampuru said that the PSC had recommended that the National Treasury should review the Treasury Regulations with a view to compelling departments to report financial costs as a result of financial misconduct and their success in the recovery of the debt.


Discussion
The Chairperson congratulated the Commission on their report.

Ms Diseko stated that the report enabled one to understand the scale of the problem by providing tangible figures as opposed to perceptions. She pointed out that there were 771 cases out of a total of 1.2 million public service employees. The Commission did have concerns where they received returns from departments stating nil cases.

Mr B Nguni (ANC) appreciated the input and commented on the effort that went into the construction of the Public Finance Management Act since it was instrumental in the proper functioning of government. He requested clarity on the number of misconduct cases that were detected at production level (salary levels 1 to 8). He wondered
 what role the Education Department should play in educating citizens about values. Non-compliance meant that there was a problem and whenever a problem needed solving, one could take various routes. The first would be taking action, educating and correcting. The only option evident from the Commission’s report was punitive sanctions such as dismissal. He asked what measures were taken to educate these people and put corrective measures in place.

Ms Diseko agreed that education should be at the core and one should keep on educating employees.

Ms N Dambuza (ANC) agreed with the PSC that it was the lack of proper control systems within departments. They had also observed such challenges as the Portfolio Committee on Housing.

Ms Diseko stated that the recommendations were to tighten the control systems within departments. Focus would be on developing appropriate mechanisms.

Ms Dambuza wondered how employees who resigned in one department due to investigation of financial misconduct, could be appointed by another department. 

Ms Diseko replied that they had noted the long, dragged-out investigations of financial misconduct cases, which resulted in departments employing people that were being investigated in another department. It was the onus of the individual departments to do a follow-up and compel potential employees to provide referees from their former department.

Ms Dambuza asked what kind of powers did the Commission have to enforce the regulations for departments to report on financial misconduct. She also commented on the financial implications of someone being suspended on full pay and wondered how that could be addressed.

Mr G Scheeman (ANC) was interested about the impact these cases would have on the running of the department and the implementation of government programmes.

Ms Diseko responded that every Rand lost had an impact on service delivery as that money could be used in a programme that would benefit society. For instance money that could be used for feeding had direct consequences on the child. 

Mr S Dithebe (ANC) referred to potential collaboration between the Public Protector and the Public Service Commission. He asked if the Commission had had cases where members of the public who knew of financial misconduct, had reported it to the Public Protector that in turn referred this to the Public Service Commission - instead of relying on the departments only.

Ms Diseko replied that they do get cases reported by ordinary citizens to the Public Service Commission through the National Anti-Corruption hotline. She noted that it would be important for the Commission not to duplicate the Public Protector’s role but resolve issues speedily that relate to corruption and redress.

Mr Dithebe agreed that 771 cases out of a million public service employees were not alarming. However, he was alarmed by the financial costs associated with it, which was R45 million.

Ms Diseko replied that the R45 million figure was provided in relation to the total cost emanating from unauthorized, irregular and fruitless and wasteful expenditure plus losses resulting from criminal conduct reported by departments.
 Members would be able to question the specific departments on those figures. The role of the Commission was to do oversight and report on what had happened.

Ms Mampuru added that the figures should be viewed with an understanding that there was an amount of R92 million that represented a single case in the Eastern Cape last year so that might have inflated the cost shown. The R92 million had been recovered.

Mr Dithebe referred to cases where no criminal charges were instituted by the department and asked what powers did the Commission have to compel the departments to do so.

Ms Diseko replied that they have begun to issue summons to Directors General of departments to invoke their power. They hope to draw on the benefits of the Public Service Amendment Bill to resolve issues quickly.

Mr Swart wondered why only 25% had criminal proceedings instituted against them.

Ms Mampuru replied that the nature of the allegations did not require criminal prosecutions. For example, some of the cases were as a result of negligence or failure to comply with policies and these do not allow for criminal prosecution. Referral to law enforcement would only be necessitated by theft and fraud offences. The biggest challenge the Commission had was the departments not providing explanations why they had not referred cases for criminal prosecution.

Ms Diseko mentioned that the Commission did not tolerate any form of corruption. They had brought the real scale of what was happening in the public service instead of perceptions.

Mr Dithebe acknowledged these responses but was still not convinced. The Commission said it was “issuing summons” but the presenter was not specific.  The Commission’s Report stated on the matter of criminal proceedings instituted against employees charged with financial misconduct, that “following analysis of cases in fraud, theft and corruption, it was found that departments indicated in 13 cases that criminal proceedings were not instituted against employees that had committed financial misconduct in excess of R100 000”. Given the summons powers conferred upon the Commission, why did they not act in these particular cases?

Ms Diseko clarified that the Public Service Commission performed an oversight role where it investigated cases and forwarded recommendations to specific departments. The Commission unraveled the corruption and recommended to Ministers to take particular action where they should institute legal proceedings together with the accounting officers. The Commission could only pressurise Ministers on Parliament’s behalf as to why the Ministers had not instituted legal action.

Mr Dithebe stated that he was more concerned with what was in the document in front of him, not the general processes. That was the R100 000 figure where no criminal charges were instituted in 13 cases.

Ms Mampuru replied that the Prevention and Combating of Corrupt Activities Act made it mandatory for amounts in excess of R100 000, to be reported by persons in authority. She said that it was worrisome to the Commission that this was not happening.

The Chairperson mentioned that the Committee’s particular concerns were on the follow-up measures taken after the Commission’s recommendations had been sent to the departments.

Mr R Baloyi (ANC) said that he appreciated the initiative or structures created by government that addressed financial matters that concerned the public. He appreciated the zero tolerance stance initiated by government that was achieved through such reports. However, it was unacceptable to have increased figures of financial misconduct. The resignation of investigated employees served as stumbling blocks in addressing such issues. He noted that 497 of 771 cases were fraud and theft related.

Ms Diseko said that she was pleased that the Committee was engaging with the Commission on these issues and that the Committee found these matters were unacceptable. Government needed these kinds of inputs.

Mr Baloyi stated that the Public Service Commission had reported and now they collectively had to look at the way forward to try and address these problems. Members of Parliament would have to do something about these recommendations to prevent the figure from growing.

Mr Schneeman referred to the 318 cases where no criminal action was taken. He asked if any action was taken in these cases.

Mr Schneeman asked if strong enough action was taken against everyone and if the processes addressing financial misconduct were satisfactory.

Ms Mashigo wondered about the recovery plan for the money that was misused.

Ms Mampuru replied that the Pensions Act made provision in situations where someone stole money from government or was involved in fraud, to enable such money to be obtained from their pension money. Some departments would use criminal and civil processes to recover the money However those methods would take time and they would not be visible in this financial year but in the next one.

Mr Gcwabaza appreciated the work of the Commission and stated that they would need the support of Parliament.

Mr Gcwabaza requested clarity on slide 14 where it referred to the increase in the number of cases yet a substantial decrease in the financial costs. He wondered about its accuracy in the light of departments failing to report on the financial misconduct “costs” to the Commission. He asked if the Commission had information on measures taken to recover state funds that had been lost through financial misconduct. If someone resigned before criminal proceedings had been concluded, how would they ensure that the person repays the stolen money?

Mr Keke asked if the Commission worked with the Auditor General when gathering information.

Ms Diseko answered that they had looked at the Audit Reports of the Auditor General, and collaborated and they had a memorandum with the Auditor General to avoid duplication.

Mr Mkhaliphi indicated that some departments did not report cases of financial misconduct in their annual reports and asked if there were measures the Commission had taken to address this.

Ms Diseko replied that departments were required to report misconduct cases in their annual reports according to Treasury regulations and if they did not include this, then the report would be incomplete. 

Mr Mkhaliphi referred to the Eastern Cape’s large numbers of cases and wondered if it was not due to the fact that there had been a dedicated focus specifically on that province.

Ms Diseko answered that the Eastern Cape was a case worth looking at. When they first went to visit the Eastern Cape, they were worried because there were no control systems in place in the departments. However, she had visited the Eastern Cape last month and there had been a major improvement. The Eastern Cape now had good practices.

Mr Mkhaliphi wondered if there were any follow-up measures for the departments that had not reported properly.

Ms Diseko responded that they hoped they would get to a point where Parliament would expect departments not complying with the regulations to account for the work they had not done.

Mr Dithebe complimented the Commission on their positive role. He wondered about the internal audit committees that should assist the Auditor General and asked if procedures for audit committees in the departments were standard and there was compliance.

Ms Diseko responded that there was a whole new culture of financial management and accountability that had been put in place. The audit committee standard is not up to scratch so the PSC is hoping they will improve on a continual basis with the PSC’s input. Departments had been battling with investigative capacity in following up corruption cases and this would link with the work of the audit committee.

The Chairperson noted the privilege of being exposed to this kind of report. He acknowledged the challenge of conducting oversight work and the importance of follow-up made by those who had reported. This applied not only to the PSC but everyone. He spoke of Members of Parliament who forget what recommendations they had adopted because they do not have follow-up strategies and have to attend numerous meetings. They had to act on the recommendations emerging from such reports.

The meeting was adjourned.