Presentation to the Portfolio Committee on Public Service & Administration 23 February 2011 Harold Wesso PhD Acting Director-General Department of Communications Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

PURPOSE To brief the Portfolio Committee on the irregular, unauthorised, fruitless and wasteful expenditure incurred by the Department of Communications during the 2009/2010 financial year. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Background During the financial year 2009/2010, the Auditor General has identified R24,202,000 of irregular expenditure of which R15,701,000 was incurred in prior years. The balance of R8,501,000 was incurred during the 2009/2010 financial year. Below is a detailed breakdown of amounts, service providers involved, the years in which they were incurred, and the circumstances under which the transactions occurred, including the corrective measures taken by the Department to prevent recurrence. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Irregular Expenditure for Prior Years (i.e. 2006-2008) Service provider Amount Year Reason Corrective Measures Distinctive Choice R15,304, 000 2006-2008 A Travel Agency was appointed without following procedures to render travel and accommodation to the office of the former leadership of the Department. A disciplinary process concerning officials who were involved in this matter is currently underway. The matter is before the courts. Legal advice is being sought wrt to officials who have left the Dept to determine the possibility of recovery. Uniglobe R397, 000 2008 A Travel agency was procedurally appointed to render travel and accommodation services to the Department. However the agency was used by officials in the Department to procure goods and services outside its scope of wo work The Tender Committee has recommended that precautionary letters be issued to officials who were involved. This process has commenced. SUB TOTAL R15,701 Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Irregular and Unauthorized Expenditure for 2009-2010 Service provider Amount Year Reason Corrective Measures Draft FCB R446, 000 2009/10 A service provider was procedurally appointed to render communication and marketing related services for Broadcasting Digital Migration, however, the service provider was requested to place an advert paying tribute to the late Minister, contrary to its scope of work. An investigation was conducted and concluded. Disciplinary action has been instituted against officials who were involved and the matter is before the courts. Various service providers (Unauthorized Expenditure) R1,106, 000 No procurement process followed in acquisition of various goods and services below the rand value of R200k. No prior approval was obtained before purchasing. The Tender Committee has recommended that precautionary letters be issued to officials who were involved and this process has commenced. Intelligent Edge R2, 427, 000 A service provider was appointed to render training to community radio stations without following procurement procedures. A former employee responsible for this transaction has since left the department. However a legal opinion is being solicited in this regard to determine the possibility of recovery. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Making South Africa a Global Leader Service provider Amount Year Reason Corrective Measures Distinctive Choice R4, 522, 000 2009/10 A Travel agency was appointed without following procurement procedures to render travel and accommodation to the offices of the former leadership of the Department. A disciplinary process concerning officials who were involved in this matter is currently underway. The matter is before the courts. Legal advice is being sought wrt to officials who have left the Dept to determine the possibility of recovery. SUB TOTAL R8,501, 000 Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Making South Africa a Global Leader Fruitless and Wasteful Expenditure for 2009/2010 The Department incurred fruitless and wasteful expenditure of R54, 000 as follows: Service Provider Amount Year Reason Corrective Measures Telkom R30, 000 2009/2010 Interest on late payment due to an investigation related to a DoC line that was intercepted by a syndicate and made illegal calls Telkom has since reversed this amount to the Department Flights R1, 000 Cancellation of air tickets Transaction condoned and written off. Duplicate payments. R21, 000 Two service providers were paid for the same service. Transaction not yet condoned, the matter is with the State Attorneys for advice. Visa fees R2, 000 Payments for visas for a trip that did not take place due to reasons beyond their control Condoned and written-off. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Procurement is strictly done in line with the SCM policy Corrective Measures In response to non-compliance with supply chain management regulations as highlighted by the Auditor General, appropriate measures and key controls have been adopted and immediately implemented by the Department as follows: Procurement is strictly done in line with the SCM policy Sourcing of goods and services up to R200k has been centralized- a function which was previously left to individual business units and led to instances of non-compliance. The evaluation of all tenders is done in line with the PPPFA regulations. All Responsibility Managers have been trained on Supply Chain Management and PFMA (It is now a requirement that Managers must undergo this training prior appointment as Responsibility Managers) Internal Audit Unit is fully functional and has concluded audit of critical areas such as supply chain and finance and recommended areas for improvements. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Corrective Measures Cont’D 7. The Audit Committee is in place and functional All finance policies have been reviewed to ensure that compliance is strengthened. Regular meetings are held with the Accounting Officer to assess the state of compliance in the Department and to identify areas that need further improvement. 10.The Departmental Bid Adjudication Committee is fully constituted and functional. Alternate members of the committee have now been appointed to ensure that there is rotation. 10.Disciplinary processes have been instituted against officials who have transgressed the law. These matters are at different stages in terms of progress. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Concluding Remarks The Department of Communications takes the issues of compliance with PFMA, PPPFA and Treasury Regulations very serious. The leadership of the Department has adopted zero-tolerance against non-compliance by ensuring that key internal controls are fully in place to prevent recurrence. Compliance in the Department has significantly improved and a culture of compliance is beginning to emerge. The Leadership of the Department has further adopted a “hands on Approach” to ensure that compliance is every employee’s Responsibility in the Department. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

THANK YOU Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development