2. Forensic Audit Presentation Portfolio Committee Cape Town 15 May 2007 Government Printing Works

3. BACKGROUND  FINANCIAL MISMANAGEMENT CONCERNS  Ministerial decision to institute a forensic audit  PFMA compliance on Tender processes  LEADERSHIP  General leadership wanting  Financial Performance Auditor General’s successive disclaimers Auditor General’s successive disclaimers  2002/2003  2003/2004  2004/2005 Government Printing Works

4. PERIOD UNDER REVIEW  1 st April 2003 – 31 st December 2004  Tender awarded to Gobodo Forensic & Investigative Accounting – 20 th April 2005 Government Printing Works

5. GOBODO’s MANDATE  Data interrogation  Identify, classify and investigate irregularities  Forensic Accounting & Financial Investigation  Review tender & procurement processes  Asset management disposal  Perform due diligence investigation of key suppliers  General financial management  Information Security  Review the security, integrity & confidentiality of info  Review program change controls  Review business continuity  Review EFT transactions & cash payments  General review of computer systems Government Printing Works

6. FINDINGS FINDINGS  PECAS Systems (Printers Estimating Costing and Scheduling system) violation  SD K Alpha - Excessive procurement  16 random samples between April 2003 and Dec 2004  Irregular expenditure – R21,0mn  Violation of delegated authority – p58 art 6.18 & p75  Contraventions of section 45(b) & (c) PFMA  SD K Beta  Distribution not done “according to standard acquisition policy & procedures” – R40,0mn  Minutes and contracts missing!!!  Violation of delegated authorities – p57 art 6.17  Contraventions of s 45(b) & (c) PFMA Government Printing Works

7. FINDINGS  REDUNDANT STOCK  Gross Mismanagement of stores Consistent Overstocking (Treasury Regulation 10.1.1(b)) Consistent Overstocking (Treasury Regulation 10.1.1(b)) Late delivery by suppliers not penalised Late delivery by suppliers not penalised Damage to paper (TR 10.1.1(a)) Damage to paper (TR 10.1.1(a)) Government Printing Works

8. FINDINGS  REASONS SUPPLIED FOR OVERSTOCKING  Latent defect in PECAS system re status of task  Improper calculation of paper needed – human waste, consistent errors, etc  Lack of communication between operations and procurement Late outsourcing of jobs – paper nevertheless procured Late outsourcing of jobs – paper nevertheless procured Urgent jobs not reflected on PECAS – system circumvented Urgent jobs not reflected on PECAS – system circumvented Government Printing Works

9. FINDINGS  PAPER PROCUREMENT – SUPPLY CHAIN  Significant difference in value btwn AFS and PECAS 2002/3 AFS raw material R 26,4; PECAS R 40,1m (paper) 2002/3 AFS raw material R 26,4; PECAS R 40,1m (paper) 2003/4 AFS raw material R 23,5m; PECAS R 35,4m (paper) 2003/4 AFS raw material R 23,5m; PECAS R 35,4m (paper) 2004/5 AFS raw material R 23,2m; PECAS R 29,5m (paper) 2004/5 AFS raw material R 23,2m; PECAS R 29,5m (paper) SIU could not confirm accuracy and validity of inventory amounts reflected on AFS - documents lost SIU could not confirm accuracy and validity of inventory amounts reflected on AFS - documents lost  Contravention of TR 10.1.2 Government Printing Works

10. FINDINGS  CONTRAVENTION & VIOLATION OF PFMA  Security of records  Lack of controls within Procurement Division Government Printing Works

11. STATUS REPORT  SUSPENSIONS  INVESTIGATIONS HAVE BEEN EXTENDED Government Printing Works

12. MEASURES PROPOSED  PROPOSED DISCIPLINARY MEASURES  Charge Sheets issued to several individuals Gross mismanagement Gross mismanagement Dereliction of duty Dereliction of duty Violation of tender procedures Violation of tender procedures Lack of duly delegated authority to procure any goods Lack of duly delegated authority to procure any goods All actions ultra vires – TR 8.2.1 All actions ultra vires – TR 8.2.1 PFMA 38(1)(h)(iii) PFMA 38(1)(h)(iii) Total of Irregular expenditure of R66,0mn Total of Irregular expenditure of R66,0mn  Irregular expenditure – R1,5mn  Irregular expenditure – R3,0mn  Signed replenishment advises without written delegation Be charged according to the precepts of the PFMA & TR Be charged according to the precepts of the PFMA & TR Criminal and Civil charges be considered Criminal and Civil charges be considered Government Printing Works

13. THANK YOU Government Printing Works