DA KZN calls for swift action against fraud and financial irregularities culprits

Mark Steele, MPL

DA KZN Spokesperson on Scopa

Note: This is a member statement delivered by Mark Steele during a sitting of the KZN Provincial Legislature today.

This report proves that Scopa continues to be one of the most productive committees in this Legislature, sharing the distinction with the Finance Committee of holding the most hearings and follow-up meetings with the provincial departments.  I would like to record my appreciation to the chairperson and members of the committee and the extremely professional staff who together with the AGSA make the work of oversight so much easier.

Just before the hearings season commenced, however, members of Scopa attended the annual APAC conference.  The resolutions adopted there called for more real consequences for the perpetrators of fraud and financial irregularities.  In two key areas this province needs to improve dramatically when it comes to putting into effect these APAC resolutions.

The first is in the area of blacklisting companies found guilty of offences in terms of the supply chain regulations.

National Treasury runs a website with a list of all blacklisted companies from both the national government and the provinces.  Of the hundreds of companies listed on the website I could not find one which came from a KZN provincial department.  In contrast the much maligned government of the province of Mpumalanga has dozens of companies blacklisted from doing business with the state.  Consequences – what consequences?  Here in KZN you don’t even get listed on the national website of companies who have defrauded the taxpayers and perverted the delivery of services to the poor.

Scopa heard during the hearings of many cases where officials have been charged with disciplinary or criminal offences.  Many, however, have been allowed merely to resign and have moved on, while some have been dismissed but with no criminal prosecution.  The amounts recovered have been a very small fraction of the total of the fraud or irregularity involved.  Consequences – what consequences?

Nor do we have a provincial register of blacklisted employees found guilty of fraud or corruption.  Either the Office of the Premier or the Provincial Treasury needs to step up to the plate and make a commitment to gathering information into a central data base on all employees dismissed for offences under the PFMA or Treasury regulations.  We cannot have cases such as that of the Department of Social Development official who was investigated for fraud while employed by the DOSD.  She has now left and the charges have come to nothing, which is unfortunate because she has now been appointed in the Department of Public Works – in a promotion post.   Consequences – what consequences?

Overall the picture for the PFMA audits of KZN departments and entities for 2013/14 showed how far we are from the goal of clean audits by 2014.  The quality of submitted financial statements declined while the number of clean audits in KZN declined from 14 to 9 (23%) of departments and entities.

Unauthorised expenditure has increased from R452 million to R685 million, irregular expenditure from R3.5 billion to R4.2 billion, while fruitless and wasteful expenditure has gone from R11 million to R13 million.  As ever we need to caution that irregular expenditure does not simply mean all this money was stolen, but it does mean that officials did not follow the prescribed regulations which are there precisely to prevent fraud and corruption.

The AGSA concluded that, and I quote – ‘Accounting Officers and Executive Authorities need to instil a culture of good financial management and compliance with legislation’.  ‘Executive Authorities need to monitor performance and enforce accountably and consequences’.  Which is why it is so disappointing that at the AGSA’s first level of assurance, for senior management, AOs and EAs there has been a uniform regression in the level of assurance.  At the second and third levels there has been improvement or only limited improvement yet at the level where government can and should be making a difference there has been a regression.  Some 17% of KZN EAs provide limited or no assurance while only 44% get the green light from the AGSA.  These figures replicate the figures from the Public Service Commission survey which found that in 2010/11, of 3 KZN departments surveyed, none had EAs who followed up with employees who failed to disclose conflicts of interest.

Mr Premier – if you want KZN to compete, as indeed it should, with Gauteng (54% clean audits) and the Western Cape (78% clean audits) then you need to get a grip on those of your MECs who simply aren’t providing adequate leadership and the example that is needed.  Do your weekly cabinet meetings feature the achievement of clean audits on every agenda – they do in Premier Zille’s cabinet meetings.  Do you have the authority actually to make MECs jump when it comes to enforcing compliance with the PFMA and PSC regulations?   These regulations are not optional – they are there for a purpose, but there needs to be the political will to make compliance non-negotiable.  Mr Premier – you need to shake up your non-performing cabinet colleagues or KZN will continue to languish amongst the provincial audit also-rans.

Madam Speaker – the DA supports the resolutions contained in this report.