SIU Presentation to Portfolio Committee: Justice and Correctional Services 21 October 2014 Annual Report 2013/2014

Presentation Outline 1. Introduction 2. SIU Investigations 2.1 Performance over the FY 2.2 Key Investigations 3. Human Resources 4. Financials 4.1 Financial Results Overview 4.2 Audit Outcomes 4.3 Section 55 (2) (b) (i) of the Public Finance Management Act (PFMA) read with Treasury Regulation 28.2.1 5. Key Operational Challenges 6. End

Performance Over the Financial Year Investigations For the period 2013/14: 7 new proclamations were issued. 30 Presidential reports were submitted. Outcomes 2013/14 The SIU exceeded six of its nine targets for the financial year. The six achieved were: Value of potential cash recoverable: R261m Actual value of cash recovered: R75.8m Value of expenditure in procurement matters where irregularities have been identified: R1.3bn Matters referred to the prosecuting authority: 273 Matters prepared for civil litigation: 1 338 Matters referred for disciplinary action: 326

Key Investigations 1. National Department of Public Works: Prestige project situated at Nkandla, KZN: Proclamation R59 of 2013 Investigation completed and final report submitted to the President. There is one civil case for R155 million in court. 12 disciplinary “dockets” were handed to the Department for action and disciplinary proceedings are currently being conducted. 4 criminal matters were referred to the prosecuting authority for financial misconduct. 9 cases referred to SARS (submission of illegal tax clearance certificates). 2. Universal Service and Access Agency of South Africa (USAASA): Proclamation R20 of 2014 Investigations still on-going. An urgent application to set aside the appointment of the CEO is set to be heard in court.

Key Investigations cont… 3. Media Corner: Proclamation R10 of 2014. An application has been brought in the North Gauteng High Court for declaration of invalidity of a contract to the value of R 756 million. Due to the intervention of the SIU, the abovementioned application will seek to ensure that the matter is heard in the High Court rather than arbitration proceedings provided for in the contract. 4. The Gauteng Health Department matter: Proclamation R21 of 2010 Third parties sought arbitration in a claim for R1,3 billion. The SIU provided the Department with evidence to successfully resist the claim. The matter has been referred to the Asset Forfeiture Unit (“the AFU”) for further action.

Key investigations cont… Potential further matters for civil proceedings: At least ten (10) further matters have been identified where SIU investigations have produced evidence that could result in civil litigation being instituted in the near future. These matters are at an advanced stage and will go to external counsel for direction as to the institution of civil proceedings. Considerable amounts of money are involved in these matters.

Human Resources The SIU had a total staff complement of 564 as at 1 April 2014. Operational staff: 445 Non operational staff: 119 29 staff left the SIU and 10 new appointments were made. The SIU contracts in specialist skills when needed, for example Forensic Lawyers, Quantity Surveyors, Architects, Security Experts and Engineers. To date the SIU has contracted 14 lawyers who assist the complement of 15 lawyers permanently employed by the SIU. The SIU has one corporate lawyer

Financial Results Overview N1 – This represents the interest earned on a positive cash balance. N2 – The increase was mainly due to the cost of living adjustment to salaries. N3 – The 34% decrease is influenced by the R41.3m reduction in use of consultants as well as R9.1m reduction in depreciation. 2013/14 Financial year 2013/14 R’000 2012/13 R’000 Variance % Income - Revenue income 499 578 493 853 1% - Other income 4 141 3 815 9% (N1) 503 719 497 668 Expenditure - Employee cost 259 127 235 558 10% (N2) - Travel 15 387 15 416 0% - Other operational costs 107 354 162 356 -34% (N3) 381 868 413 330

Financial Results Overview cont… 2013/14 Financial Year Budget R’000 Actual R’000 Variance % Income - Government Grant 295 859 0% - Project Income 149 000 203 719 37% - Other Income 3 526 4 141 17% 448 385 503 719 12% Expenditure - Employee costs 277 521 258 969 -7% - Forensic consultants (ACTT) * 7 680 5 098 -34% - Travelling & Accommodation 17 340 17 186 -1% - Direct Operational costs 20 117 17 674 -12% - Administration costs 125 727 82 941 448 386 381 868 -15% Accounting Surplus - 121 851 Cash roll over 75 297 * About 93% of the forensic consultant expenditure relates to Anti-Corruption Task Team (ACTT)

Financial Results Overview cont… 2014/15 (Q1 & Q2) Financial Year Budget ¹ R’000 Actual R’000 Variance % Income - Government Grant 148 407 148 404 0% - Project Income 104 821 37 528 -64% - Other Income 1 907 2 064 8% 255 135 187 996 -26% Expenditure   - Employee costs 149 297 130 507 -13% - Forensic consultants (ACTT) 4 048 471 -88% - Travelling & Accommodation 6 466 5 239 -19% - Direct Operational costs 12 053 8 455 -30% - Administration costs 35 511 28 788 207 375 173 460 -16% Accounting Surplus 47 760 14 536 ¹ The SIU having regard for its operations ideally is able to estimate the costs it will incur for the whole year and although these costs may not be spread evenly through the year, these figures above represent costs at the half year mark

Audit Outcomes for 2013/14 financial year The emphasis of matter was as a result of restating prior year errors, which were corrected in the current financial year. The SIU has developed an action plan to address the audit findings raised by the Auditor General (AGSA). 2013/14 2012/13 2011/12 2010/11 Type of Opinion Unqualified Number of emphasis of matter 1 2

Section 55 (2) (b) (i) of the Public Finance Management Act (PFMA) read with Treasury Regulation 28.2.1 SIU has reported irregular expenditure of R 14.3m for the 2013/14 financial year. All the items above relate to irregular expenditure and not fruitless and wasteful nor unauthorised expenditure. Even though the R4.7m is reflected in our annual report, it is in fact ACTT-related The R7.2m is due to the use of a service provider without a tender process being followed. The R1.2m relates to a lease that expired and continued on a month to month basis which the Auditor General found to be irregular expenditure. 2013/14 financial year R’000 Non-compliance to SCM process – Forensic consultants for ACTT 4 721 Expenditure on a temporary employee 155 Non-compliance to SCM process – Repairs & maintenance/Report editing services 23 Non-compliance to SCM process – Travel & accommodation 7 240 Incorrect awarding of points to bidders - SCM policy not updated with new regulations 941 Proper SCM processes not followed when extending the existing contracts that lapsed 1 200 Purchases not approved by the delegated official 9 14 290

Key Operational Challenges Budgetary challenges The SIU currently experiences difficulty in collecting money owed to it by State institutions where investigations are conducted. This matter is being addressed with National Treasury and the AGSA. Investigation Timelines A perception exists that investigations by the SIU take too long to complete. This could be because some proclamations have a broad scope. Proclamations that are now obtained are more specific and targeted which should result in matters being completed more speedily. It must be emphasised that SIU investigations are not merely aimed at producing reports, but to bring finality to matters through criminal, disciplinary and civil litigation. Specialist skills In light of the fact that SIU investigations now pursue specific legal outcomes, key specialist resources such as senior lawyers with the relevant experience are required. These experienced lawyers are not readily available and it is a challenge to recruit such skills. Processes are being pursued to identify the required level of seniority and to address this challenge.

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