STANDING COMMITTE ON PUBLIC ACCOUNTS Director-General: Basic Education DEPARTMENT OF BASIC EDUCATION IRREGULAR EXPENDITURE AND FRUITLESS AND WASTEFUL EXPENDITURE STANDING COMMITTE ON PUBLIC ACCOUNTS 9 November 2016 MR HM MWELI Director-General: Basic Education

PRESENTATION OUTLINE Purpose Irregular expenditure Fruitless and wasteful expenditure Measures taken to avoid similar occurrence Recommendation(s)

PURPOSE To present to SCOPA irregular, fruitless and wasteful expenditure as stated in the Annual Report of the Department for the 2015/16 financial year. To inform SCOPA of the measures taken to avoid the recurrence of the irregular and fruitless and wasteful expenditure in future.

IRREGULAR EXPENDITURE

IRREGULAR EXPENDITURE FOR 2015/16 Implementing Agent/ service provider 2014/15 R'000 2015/16 TOTAL Coega: Eastern Cape 19 327 1 870 21 197 DBSA 120 445 292 925 413 370 Mvula Trust - 51 942 Adopt a school 7 033 Deloitte and Touche 3 297 SAB&T 54 916 23 723 78 639 ESKOM 24 185 194 688 404 975 599 663

IRREGULAR EXPENDITURE INCURRED Company involved Date of incidence Amount involved in R’000 Official(s) involved Investigation Outcome of investigation (Concluded/ not concluded) Action taken Coega: Eastern Cape DBSA 2012/13 2011/12 21 197 217 721 Coega CEO ASIDI Officials DBSA CEO ASIDI Officials Auditor- General & Internal Investigation Internal Investigation After the Auditor-General’s report, an internal investigation ensued to confirm the findings of the AG. Result: Coega and DBSA did not follow supply chain management processes in accordance with the PFMA in all instances. Some CIDB certificates were not valid, BBBEE certificate not submitted and VAT certificates not certified. Letters issued to Implementing Agents insisting on following the SCM processes according to the PFMA. Two meetings held with all Implementing Agents to discuss audit findings and compliance matters.

IRREGULAR EXPENDITURE INCURRED Company involved Date of incidence Amount involved in R’000 Official(s) involved Investigations Outcome of investigation (Concluded/ not concluded) Action taken Rigorous monitoring on a monthly basis to check compliance with all PFMA prescripts for all Implementing Agents DBSA 30/09/2015 195 649 ASIDI programme officials Auditor- General & Internal Contract expired while the projects were continuing. Final written warning letters were issued to relevant officials Matter regularized and contract renewed

IRREGULAR EXPENDITURE INCURRED Company involved Date of incidence Amount involved R’000 Official(s) involved Investigation Outcome of investigation (Concluded/not concluded) Action taken Adopt-a- school 19/08/2013 7 033 The Executive Authority No investigation The Executive Authority gave the directive to appoint the service provider and informed the Minister of Finance of the decision. Model chosen because it was cost effective and huge saving for DBE. No action taken

IRREGULAR EXPENDITURE INCURRED Company involved Date of incidence Amount involved R’000 Official(s) involved Investigation Outcome of investigation (Concluded/ not concluded) Action taken Mvula Trust 2011/12 51 942 The Accounting Officer/ASIDI officials Auditor-General & Internal In the MoA, it was agreed that Mvula Trust will use their own procurement processes which were deemed to be free and fair. It was later established that their processes were not always in line with the PFMA. MoA was amended. Mvula Trust has to follow Government procurement processes. All procurement process are being monitored.

IRREGULAR EXPENDITURE INCURRED Company involved Date of incidence Amount involved R’000 Official(s) involved Investigations Outcome of investigation (Concluded/ not concluded) Action taken Deloitte and Touché 25/05/2015 3 297 Department’s HR Unit Auditor-General The matter was referred to DPSA. The DPSA’s legal unit indicated that the Department followed correct procedures in the appointment of Deloitte and Touché. However, the Auditor-General did not accept the explanation of the Department as well as the ruling by the DPSA. AG’s office requested to liaise with DPSA on the matter.

IRREGULAR EXPENDITURE INCURRED Company involved Date of incidence Amount involved R’000 Official(s) involved Investigations Outcome of investigation (Concluded/ not concluded) Action taken SAB&T 30/08/2013 78 639 Responsibility will be determined through the investigation Auditor- General, Internal & External Internal investigation confirmed findings of AG. A service provider has been appointed to investigate the process and determine responsibility Awaiting the outcome of the investigation ESKOM 31/03/2015 24 185 ASIDI programme officials Auditor- General & Internal Contract expired while the projects were continuing. Final written warning letters were issued to relevant officials Matter regularised and contract renewed TOTAL 599 663

FRUITLESS AND WASTEFUL EXPENDITURE

FRUITLESS AND WASTEFUL EXPENDITURE FOR 2015/16 PROGRAMME 2015/16 R'000 Kha Ri Gude 44 305 TOTAL

FRUITLESS AND WASTEFUL EXPENDITURE INCURRED Company involved Date of incidence Amount involved R’000 Official(s) involved Investigation Outcome of investigation (Concluded/ not concluded) Action taken Kha Ri Gude volunteers 2015/16 44 305 Kha Ri Gude officials Auditor-General, Internal Internal investigation is still in progress. Departmental officials are confirming the actual amount of fruitless and wasteful expenditure. External- a service provider has been appointed to investigate the matter. . Final written warning letters have been issued to officials. Deductions amounting to R282 297.22 have already been effected from some of the volunteers.

FRUITLESS AND WASTEFUL EXPENDITURE INCURRED Company involved Date of incidence Amount involved R’000 Official(s) involved Investigation Outcome of investigation (Concluded/ not concluded) Action taken Kha Ri Gude volunteers 2015/16 44 305 Kha Ri Gude officials External External- a service provider has been appointed to investigate the matter. . The service will determine if fraud occurred. TOTAL

MEASURES TAKEN TO AVOID SIMILAR OCCURENCES

MEASURES TAKEN TO AVOID SIMILAR OCCURENCES TYPE Measures taken Irregular Expenditure Final written warning letters issued to relevant officials. MoAs with Implementing agents were amended ( Mvula Trust). Letters to Implementing Agents on following the SCM processes Departmental officials are now part of the bid committees to ensure compliance with the PFMA. Rigorous monitoring process in place. Fruitless and Wasteful Expenditure Identity numbers of learners are verified with Department of Home Affairs before payments of stipends are processed to volunteers. Training sessions were held with Volunteer Coordinators where processes and procedures were explained to them.

DISCLOSURE FOR 2016/17 Despite the measures taken with regard to irregular expenditure, it must be noted that in some instances irregular expenditure incurred straddles over financial years. For the 2016/17 financial year, the Department will have to disclose irregular expenditure on the following: Expenditure incurred on expired MoAs before they were extended in the 2016/17 financial year to cater for projects in progress. Projects that are in progress/completion phase where SCM processes were not followed completely.

RECOMMENDATIONS That SCOPA accepts the explanation given by the Department on the matter and also accepts the corrective measures put in place to ensure that expenditure is managed according to the prescripts of the PFMA.