8 PREVENTION: REVIEW OF SUPPLY CHAIN MANAGEMENT: Conduct of SCM officials in all government institutions: Lack of proper delegation and poor segregation of roles, e.g. very junior officials approve large orders and process payments. ‒ Treasury, jointly with National Treasury improving the assignment of SCM delegations to the correct level – Accounting Officers instructed to implement clear SCM Decision Frameworks. Provincial Treasury to enforce compliance through audits and regular SCM compliance reviews. This includes the enforcement of the code of conduct for SCM practitioners. Ensure the establishment of bid committees that take decisions independently
9 PREVENTION: REVIEW OF SUPPLY CHAIN MANAGEMENT: Cover quoting Loophole discussed with the National Treasury, and an amendment will soon be made to the PFMA to define the conditions under which deviation may occur rather than leaving it to the Accounting Officers or authorities to decide.
10 PREVENTION: REVIEW OF SUPPLY CHAIN MANAGEMENT: Acquiring e-procurement tool: Total est. budget R6m -- Designed to curb fraud and corruption done through cover-quoting and - many other similar fraudulent practices. - An automated system of suppliers rotation; - Used for invitation of quotations; - An electronic method of dealing with requisitions and issuing of orders. Ready to be piloted but was delayed by the proposed implementation of IFMS by National Treasury – similar system.
11 PREVENTION: REVIEW OF SUPPLY CHAIN MANAGEMENT: Inflation of prices of bidders in collusion with officials in SCM Developing a daily updated price-list of all goods and services that government procures will be developed. Project is now on phase 2. - Purpose – to introduce price bench-marking in the procurement of goods and services; - To curb a serious problem of price inflation by those that do business with government; - Ensure that all government institutions pay market related prices; - System will be linked with the proposed Strategic Sourcing System. The Provincial Treasury is also enforcing the use of transversal or general period contracts in the Province.
12 PREVENTION: REVIEW OF SUPPLY CHAIN MANAGEMENT: CONTRACT MANAGEMENT: Total Est. Project budget R26,8m Phase 1: The development of a contract inventory of all existing contracts in all departments – 6 pilot departments and 3 municipalities. Shortcomings identified during phase 1 include: - Awarding contracts to service providers not registered in the provincial suppliers database; - Payments made with amounts exceeding the amounts reflected in orders issued; - Continued provision of services after expiry of contracts without any legal extensions or variations; etc The diagnosis phase (second phase): a clause-by-clause review of each contract to ensure that delivery has met promise. Followed by a thorough review of these contracts. 2010/11 expenditure approximately R6,3m
13 PREVENTION: REVIEW OF SUPPLY CHAIN MANAGEMENT: TENDER APPEALS TRIBUNAL: Total est. budget R3,5m The Tender Appeals tribunal, which is already in place for provincial departments, has reversed several cases. It offers the public the opportunity to question any process in the awarding of tenders. It will now also be implemented in municipalities. Phase one (a pilot project) is in progress. Potential members to sit in the Municipal Tribunals has been identified. MT’s will provide a mechanism of reporting irregularities in the award of contracts by municipalities in the province. 2010/11 Expenditure is approximately R2m
14 PREVENTION: REVIEW OF SUPPLY CHAIN MANAGEMENT: REVAMPING OF DATABASE: R1,7m Cleaning up and establishing a new single suppliers’ database for all provincial departments and municipalities to promote accountability and compliance. Suppliers asked to re-register. It acts as a deterrent for fraud and corruption and is now also linked with external organizations (SARS, CIPRO, and CIDB). Will identify service providers with poor track records or under investigation and for black listing. All suppliers to give stipulate their core businesses and their locations. Project has been completed and system came alive in September 2010.
15 PREVENTION: CASH MANAGEMENT CONTROLS: All payments over R500 000 require a tender system All payments of R1m (where quotes had to be used for some reason) to be verified by Treasury (bank accounts). Enables Treasury to: -Pick up bogus bank accounts -Ensure that the right people are paid -Makes top management of different departments aware that large amounts of money is coming through because they have to sign it -Acts as a deterrent because fraudsters know that Treasury will be checking
16 PREVENTION: CASH MANAGEMENT CONTROLS: -All payments of R1m (where quotes had to be used for some reason) to be verified by Treasury (bank accounts). -Challenge is that fraudster can still split the amounts, e.g. Two payments of R499 999. -Treasury currently working on measures to tighten the screws also on smaller amounts. -Constantly updating Practice Notes to cover loopholes. -A special TreasuryTask Team has been established to follow up on irregular and unauthorized expenditure reported by the departments
17 RE-ACTIVE : HOW FRAUD & CORRUPTION IS PICKED UP BY TREASURY: Allegations of fraud, corruption, maladministration, theft, mismanagement of funds and misrepresentations constantly received through: - NACH (Hotline) via the Office of the Premier - Directly from whistle blowers - Executing authorities - Senior management of government institutions - Identified through normal assurance reviews
18 FORENSIC INVESTIGATIONS ARE CONDUCTED BY THE INTERNAL AUDIT SERVICES: The Unit presents the outcomes of the investigations to the relevant institutions with recommendations, e.g. civil recoveries, disciplinary action or referring the case to the law enforcement institutions for criminal investigation. ‒ Established a good and close relationships with law enforcement agencies with the HAWKS, SAPS, SIU, SARS, AFU, ACTT, NPA and NIA.
19 FORENSIC INVESTIGATIONS ARE CONDUCTED BY THE INTERNAL AUDIT SERVICES: Since 2009 - 125 investigations were conducted. Requests came from Municipalities (29), Public Entities (10) and Provincial Departments (86) ‒ Expenditure on Forensic Investigations: -Financial year 2010/11 – R15,6m (Excl. ongoing Health costs) - - Financial year 2011/12 – R20,9m
20 FORENSIC INVESTIGATIONS ARE CONDUCTED BY THE INTERNAL AUDIT SERVICES: RECOMMENDED CIVIL RECOVERIES INSTITUTIONSSERVICE PROVIDER ® EST. OFFICIALS ® EST. ASSETS SEIZED ® EST. DEPARTMENTS90 267 04425 950254m MUNICIPALITIES/PUBL IC ENTITIES/OTHERS 101 38321 000 TOTAL90 368 42746 959254m
21 FORENSIC INVESTIGATIONS ARE CONDUCTED BY THE INTERNAL AUDIT SERVICES: CRIMINAL ACTIONS RECOMMENDED
22 OTHER THE INTERNAL AUDIT INITIATIVES: Working with the Office of the Premier - Most critical criminal cases and prioritisation discussed with law enforcement agencies. Special arrangements with the High Court. -Disciplinary courts are yet to be established to address existing backlogs of the disciplinary cases. In the interim -OTP has appointed a Task Team to start addressing the backlog -Also Provincial Audit and Risk Committee provides oversight on Supply Chain Management, other financial mismanagement & other governance issues. -Interim Financial Statements Audits are now conducted to indentify irregular and unauthorized expenditure in time.
23 PROGRESS Audits are widely accepted as a way to curb corruption and act as a potent deterrent to waste and abuse of public funds 2014 Clean Audits campaign to intensify efforts to obtain unqualified audit reports for all public institutions in KwaZulu-Natal. Crucial step in the promotion of a culture of accountability and responsibility. Strengthening Risk Management Programs by introducing Reputational Risk Management process and Appointment of Ethicists & Compliance Officers
24 PROGRESS The Audit Outcomes (both for municipalities and provincial government departments) clearly shows a general improvement in compliance with financial reporting. The phasing in of performance auditing to government expenditure has been adding more value by shifting the focus to results-oriented auditing. The cost-cutting measures have certainly also acted as a deterrent by making top management more aware of managing finances in their departments.
25 PLEASE ASSIST US: Corruption can be reported anonymously by any member of society to the National Anti-Corruption Hotline (NACH) at 0800 701 701. In terms of a National Cabinet resolution any member of the public can also alert Treasury to fraudulent activities and we encourage members to come forward.