1. PRESENTATION BY THE BOARD OF PRASA ON IMPLEMENTATION OF THE REMEDIAL ACTION RECOMMENDED BY THE PUBLIC PROTECTOR IN RESPECT OF REPORT NO: 3 OF 2015/16 ENTITLED “DERAILED”
11 September 2015

2. Introduction
The Board has been invited to brief the PCOT on the Public Protector’s Report and provide Comprehensive Action Plan to address the findings
The report of the Public Protector (“the Report”) was published on 24 August
The investigation leading up to the publication of the Report was initiated pursuant to 37 complaints lodged with the Office of the Public Protector by SATAWU in 2012
SATAWU sought at some point to withdraw the complaint, but a new party, viz National Transport Movement (“NTM”) came forth to pursue the complaint
The Public Protector has made findings on some of the complaints, but deferred others for further investigation and reporting at a later stage

3. Complaints
The complaints were directed at both Mr Tshepo Lucky Montana, the then Group Chief Executive Officer (“GCEO”) of PRASA personally and PRASA as an organisation
The general tenor of the complaints was premised upon:
Improper award of tenders
Maladministration
Corruption
Conflict of interests
Financial mismanagement
Irregular management of human resources
Nepotism
Improper treatment of whistle blowers

4. The Auditor -General’s Report
Preceding the release of Public Protector's Report, the Board received the Auditor-General’s report for the Financial Year 2014/15
The 2014/15 Audit Report was presented to the Board on 30 July 2015
The Report highlighted irregular expenditure and fruitless and wasteful expenditure
The Board resolved to investigate both the irregular and fruitless and wasteful expenditure reported by the A-G in excess R500 million
The Board also resolved to review the SCM Policy and capacitate the SCM Department, review Academic Qualifications of Senior Management and strengthen Internal controls.

5. The Public Protector’s Findings
The summary of the findings may be gleaned from the executive summary of the Report set out on pages 22 – 46 of the Report
The Public Protector found that:
The scope of some tenders was extended beyond what had been advertised
Contracts with service providers were terminated without notice
Service providers were in some instances appointed without a tender process or competitive quotations being sought
Contracts would be extended beyond their term without a competitive process
An advance payment was made to a supplier in contravention of the Public Finance Management Act (“PFMA”)

6. The Findings (...cont)
A contract that had already been highlighted to be irregular by the Public Protector was extended whilst the investigation was still underway
A tender was awarded for a larger scope and a price in excess than was tendered for
Managers implicated in wrong doing were not subjected to disciplinary action
During 2009/10 expenditure was incurred in excess of the budget
Fruitless and wasteful expenditure was incurred in the early termination of leases at Umjantshi House and Intersite Building, Woodmead.
R was spent on labour dispute settlements with executives during , resulting in fruitless and wasteful expenditure

7. The Findings (...cont)
Employees are improperly suspended and paid salaries whilst not at work
Employees implicated in fraud amounting to R8.1 million were not disciplined
Of the 37 complaints - four (4) were deferred and will be dealt with in Volume 2
No evidence could be found by the Public Protector to sustain 13 complaints

8. Recommended Remedial Action
The following recommendations are made by the Pubic Protector:
Disciplinary action be taken by the Board against responsible officials, where appropriate
A Review of the effectiveness of PRASA’s internal controls on Supply Chain Management and Human Resource Processes be undertaken
The R350m ( the threshold should be R350k instead R350m) threshold for competitive bidding process of procurement of goods and services be reviewed
The Board to report to National Treasury and the Auditor General regarding alleged financial misconduct and take steps in connection with such financial misconduct as contemplated in Section 85 of the PFMA

9. Recommended Remedial Action
National Treasury to be commissioned to conduct a forensic investigation into all contracts above R10 million since 2012 to June 2015
The remedial action is set out separately as regards the Chairman of the Board of PRASA and the acting GCEO, but the substance of each mirrors the other

10. Proposed Implementation Remedial Actions
The Board engaged the services of external Legal Advisors whose opinion is that the impact of the findings of the Public Protector, have the following effect:
Contracts concluded irregularly in contravention of the SCM policy of PRASA and the law are unlawful and invalid from the onset
Thus all payments made in the past and in the future are without lawful course
The incurred expenditure in vein would constitute wasteful and irregular expenditure
The same would apply to instances of improper human resource management - (suspensions and settlements constitute fruitless and wasteful expenditure)

11. Proposed Implementation Remedial Actions (...cont)
The Board has initiated the following processes:
Disputed Contracts
Each case will be treated on its own merits
Management is assessing whether or not value has been given for the goods or services that were procured pursuant thereto
Where value has been given, PRASA does not propose to pursue the matter further
Where PRASA is of the view that no value was given or that the value given is not commensurate with the price paid for what was delivered, PRASA will where necessary institute legal proceedings to recover the monies paid

12. Proposed Implementation Remedial Actions (...cont)
Disputed Ongoing Contracts
PRASA will assess the necessity of each service provided pursuant to such contracts
Those that are not critical to the business of PRASA will be discontinued immediately
Those that are business critical will be regularised on a short term basis whilst a proper procurement process is initiated in respect of such services
Upon completion of the procurement process, such contracts shall be terminated forthwith
In instances where the agreed price is not commensurate with the service or goods provided, PRASA will institute legal proceedings for the recovery of such funds

13. Proposed Implementation Remedial Actions (...cont)
Disciplinary Action
PRASA is reviewing evidence against each of the employees who are implicated in the Report with the view to establish their culpability in the irregularities identified in the Report
Where there is evidence of wrong doing, disciplinary proceedings will be instituted against such employees insofar as they remain within the employ of PRASA
Criminal Proceedings
PRASA, working together with the National Treasury and the Auditor General, will in the course of the conduct of the forensic investigations that are underway seek to establish whether or not any fraud, corruption or other offence has been committed by anyone in relation to the disputed contracts and others that are under scrutiny
Where evidence of criminality is identified, criminal proceedings will be instituted with the South African Police Service to ensure that such persons are held to account

14. Proposed Implementation Remedial Actions (...cont)
Suspended Employees
PRASA will strictly adhere to the prescripts of its disciplinary policy.

15. Proposed Implementation Remedial Actions (...cont)
Supply Chain Management Policies
PRASA has already initiated a process to review its SCM policies and practices
PRASA has engaged Treasury to second an experienced Supply Chain practitioner to assist in the review of the SCM Framework and Structure
PRASA will continue to co-operate with National Treasury and the Auditor General’s office to implement the improvements recommended by them
Co-operation with Government and Other Agencies
PRASA will continue to co-operate with National Treasury, the Auditor General’s office (and any consultants that may be engaged by them) to ensure due and proper implementation of any of the remedial actions that have been recommended by the Public Protector and generally to remedy all shortcomings that have been identified in the SCM Policies and Financial Management Policies of PRASA

16. Conclusion
PRASA has embraced the outcome of the Public Protector’s investigation, albeit incomplete, as an opportunity to clean up and re-engineer its processes to ensure the implementation of best practice in the procurement of goods and services and management of its finances and to remain on course to achieve its stated goals and service delivery objectives.
The Board will keep the Minister informed at all times and the Portfolio Committee On Transport will receive progress updates as and when requested.

17. QUESTIONS AND DISCUSSION

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