SCOPA briefing on State employees doing business

Transcription

1 SCOPA briefing on State employees doing business

2 Reputation promise/mission The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, exists to strengthen our country s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

3 Table of contents Background Summary of 2008 performance report findings and recommendations Approach to audit conflict of interest since the publishing of the PA report Measures implemented by government to address PA recommendations Audit findings since the publishing of the PA report Conclusion and way forward

4 Background In 2008, the AGSA performed a transversal performance audit to determine the extent of employee conflict of interest in the supply chain processes of departments. The performance audit focused on: Employees of departments doing business with own departments; Employees spouses doing business with departments where the husband/wife is employed; Employees of departments doing business with other national departments The scope of work was focused on transactions pertaining to the financial year. Based on the key findings, the AGSA made certain recommendations for action by relevant the stakeholders: National Treasury (Accountant-General), the Department of Public Service and Administration (DPSA), the Public Service Commission (PSC); and various departments (employers) where findings were identified.

5 Summary of 2008 performance report findings and recommendations Finding AGSA recommendation Commitments by role-players Employees doing business with own departments did not have approval to perform other remunerative work Departments must take disciplinary action against employees who perform other remunerative work without approval Departments should implement and monitor controls for managing employees other remunerative work Designated employees should be informed of the requirement that they have to request approval to perform other remunerative work. Departments committed to implement and actively monitor controls to manage performance of other remunerative work by employees. Departments committed to follow up on cases reported in order to take action.

6 Summary of 2008 performance report findings and recommendations Finding AGSA recommendation Commitments by role-players Employees doing business with government but failed to declare their interest on the financial disclosure forms. Departments should consider taking disciplinary action against designated employees who had not declared their interests. Government must Consider amending the existing regulations to strengthen the requirements 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. At the time of the report, the PSC had established a directorate to scrutinise the completeness of the financial disclosure forms. The PSC had also 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).

7 Summary of 2008 performance report findings and recommendations Finding AGSA recommendation Commitments by role-players Bidders made misrepresentations by not declaring in the tender documentation that employees are related to the companies and CCs that are tendering National Treasury should extend the declaration of interest in the SBD4 to include a declaration of all relationships with the state. 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 (SBD 4) to compel bidders to mention their shareholding, and not only directorships. Finding Other SCM non-compliance in the process of awarding tenders and contracts to employee-related entities Various cases were identified 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, failure to apply the preference point system, etc.

8 Approach to audit conflict of interest since the publishing of the PA report 2008 performance audit Incorporated into annual audits to determine whether: tenders were awarded to persons in service of the state or their close family members State officials disclosed their interest in tenders or that of their close family members Audit process uses CAATs, based on the comparison of the following databases PERSAL employees of departments CIPC registers of companies & directors BAS government payments system Findings are communicated to management Reporting: Material findings are escalated to audit report Summary of significant findings included in GR

9 Measures implemented by government to address PA recommendations NT instruction (PN 7 of 2009/10) to refine requirements relating to management of conflict of interest in SCM processes NT implemented the CSD for all organs of state; The CSD interfaces with SARS tax clearance system, Home affairs population register, CIPC companies register, PERSAL database of government employees DPSA promulgated the revised public service regulations (PSR). The revised PSR prohibits employees of departments from doing business with the state, strengthen requirements around the process for disclosure of financial interests, strengthen requirements around the process for application for approval of additional remunerative work, amongst other matters. DPSA implemented the edisclosure system to simplify the process of annual disclosure of interests

10 Audit findings since the publishing of the PA report

11 Important to note Scope exclusions Scope of audits does not include the verification of shares held in companies as this information is not always available on the CIPC database. Extent of findings These 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 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 a noncompliance with regard to dealing with the conflict of interest, e.g. interests not disclosed.

12 Figure 1 - Employee-related companies doing business with own departments 32% (12) 32%(12) 18% (7) 8% (3) 5% (2) 3% (1) 8% (3) PA report

13 Figure 2 - Employees close family members doing business with own departments 32% (12) 8% (3) 13% (5) 13% (5) 13% (5) 11% (4) None identified / Not audited PA report

14 Figure 3 Companies related to employees of other organs of state doing business with the department 24% (9) 11% (4) 13% (5) 13% (5) 8% (3) None identified/ not audited Not audited Performance Audit

15 Table 1 List of departments with findings + correlation with overall audit outcomes National Department Agriculture, Forestry and Fisheries Value of awards R Value of awards R Value of awards R Value of awards R 77,220 34, Value of awards R Arts & Culture 55,938 Correctional Services 1,309, ,997 1,268, , , ,392 Defence 15,197,992 Energy 13, ,544 Health 304,266 2,448,565 10,059, Value of awards R Higher Education and 154,089 Training Home Affairs ,720,111 International Relations & 207,806 Co-operation Unqualified with no findings Unqualified with findings Qualified with findings Adverse with findings Disclaimed with findings

16 Table 1 List of departments with findings + correlation with overall audit outcomes CONT Justice & Constitutional 5,998,747 7,364,279 6,865,069 12,982 Development Planning, Monitoring and Evaluation 204,000 Police 14,872,320 15,433, ,509 1,457,148 Public Enterprises 1,456,224 16,929 Public Service and 1,830,557 Administration Public Works 4,802,630 20, , ,044 Rural Development & Land Reform 20, , ,646 Social Development 117,708 Sport & Recreation 50,085 Unqualified with no findings Unqualified with findings Qualified with findings Adverse with findings Disclaimed with findings

17 Table 1 List of departments with findings + correlation with overall audit outcomes CONT Tourism 39,477 Trade and Industry 5,594,490 Transport 3,117,072 Water and Sanitation 1,906,769 2,100,000 Women 494,945 GCIS 171,000 Statistics South 761,428 Africa 266,813 86,105 The Presidency 100,000 Unqualified with no findings Unqualified with findings Qualified with findings Adverse with findings Disclaimed with findings

18 Table 2.1 Nature of findings: Employees of departments doing business with own department Department Finding: Employees who are directors or members of companies doing business with their own departments and the employee failed to disclose the interest Correctional Services R (1 employee) R (4 employees) R (14 employees) Rural Development & R Land Reform (1 employee) Agriculture, Forestry and R Fisheries (1 employee) The Presidency R (1 employees) Statistics South Africa R (4 employee) Health R (1 employee) Defence R (2 employees)

19 Table 2.1 Nature of findings: Employees of departments doing business with own department CONT Department Employees who are directors or members of companies doing business with their own departments and supplier did not submit declaration of interest as part of the bidding process. Police R (96 suppliers) The Presidency R (1 supplier) Defence R (1 supplier) Correctional Services R (4 suppliers) 3. Employees who are directors or members of companies doing business with their own departments supplier did not declare interest in the submitted declaration (submitted a false declaration) Police R

20 Table 2.2 Employees close family members doing business with own departments Department Awards to providers who are close family member/ partner/ associate of person in service of auditee - Conflicted officials of the department failed to disclose the interest Public Enterprises R Correctional Services R R R R R Planning, Monitoring and Evaluation R Water and Sanitation R Home Affairs R Defence R Awards to providers who are close family member/ partner/ associate of person in service of auditee - Providers did not submit declaration of interest Water and Sanitation R Home Affairs R R Defence R60936 Correctional Services R

21 Table 2.2 Employees close family members doing business with own departments CONT Department Awards to providers who are close family member/ partner/ associate of person in service of auditee - provider did not declare interest (submitted a false declaration) Police R Public Enterprises R Correctional Services R R R Water and Sanitation R R Public Works R R Justice & Constitutional R R Development Planning, Monitoring and R Evaluation Health R Agriculture, Forestry and R Fisheries Statistics South Africa R GCIS R Defence R

22 Table 2.3 Companies related to employees of other organs of state doing business with the department Department Awards to providers who are in service of other state institutions - provider did not declare interest (submitted a false declaration) Higher Education and R Training Statistics South Africa R Trade and Industry R Sport & Recreation R R Public Enterprises R R Justice & Constitutional Development Women, Children & People with Disabilities Public Service and Administration R R R R R Health R R Rural Development & Land Reform R Statistics South Africa R Government Communication & R Information System Tourism R39 477

23 2.3 Companies related to employees of other organs of state doing business with the department CONT Department Awards to providers who are in service of other state institutions - provider did not submit declaration of interest Public works R Energy R Sport & Recreation Development R International Relations & Co-operation Health R

24 Departments with findings in interest in suppliers v/s other SCM findings 9 departments with interest 7 departments with interest 7 departments with interest 8 departments with interest 9 departments with interest 10 departments with interest 22% (2) 14%(1) 25% (2) 11% (1) 10% (1) 43% (3) 78%(7) 86% (6) 75% (6) 89% (8) 90%(9) 57% (4) With SCM findings on interest only With SCM findings on interest and other SCM

25 Departments with findings in interest in suppliers v/s material SCM findings 9 departments with interest 7 departments with interest 7 departments with interest 8 departments with interest 9 departments with interest 10 departments with interest 56% (5) 71% (5) 43% (3) 50% (4) 33% (3) 60% (6) 44%(4) 29% (2) 57% (4) 50% (4) 67% (6) 40% (4) With non SCM findings on interest With material SCM findings on interest and/ or other SCM findings

26 Approval to perform additional remunerative work For all employees who are directors of companies doing business with the state, we test for approval of additional remunerative work. Where no such approval exists, the finding is reported to management to investigate possible contravention of section 30 of the Public Service Act. Prior to the promulgation of the 2016 revised Public Service Regulations, legislation was not clear on whether a directorship can be regarded as remunerative work. In the past 2 years, such findings were reported at the following departments for management to investigate: Name of Department Number of employees Department of International Relations & Co-operation 1 14 Department of Correctional Services 7 63 Department of Health 1 26 Department of Police 181 Department of Public Enterprises 4 Department of Mineral Resources 1 Department of Labour Department of Human Settlements 9 Department of Justice and Constitutional Development 28 Department of Water and Sanitation 6 Department of Home Affairs 10 Department of Rural development and Land reform 1 Department of Higher Education and Training (DHET) 5

27 Conclusion and way forward

28 Conclusion and way forward A lot of work has been done by government to try and address weaknesses in the SCM environment. This document only provides information from audit observations. The following institutions which have a role to play in strengthening governance in the public sector may provide additional useful information to SCOPA with regard to the programmes they have implemented: The Department of Public Service and Administration; The Office of the Chief Procurement Officer (National Treasury); and The Public Service Commission. SCOPA may also consider following up with some of the departments that have had significant and / or repeat findings on conflict of interests with a view of establishing their reasons for not being able to put measures in place to deal with conflict of interests. Such hearings may also provide an opportunity to establish the exact nature of consequences meted on employees and suppliers responsible for the audit findings on conflict of interests. The AGSA will continue to support the committee in this initiative whenever we are called.

29 Thank you

30 How to get in touch with the AGSA