A total disregard for oversight, consequence management and compliance with the regulations of the Public Finance Management Act (PFMA) by top management in the department of defence (DOD), are among the reasons the department’s financials remain in a mess.
A provisional and scathing management report on the auditor-general of SA’s (AGSA) audits of the department’s affairs is blunt in its findings: leadership did not review nor monitor compliance with supply-chain management (SCM) laws. In fact, in 90 of the completed 122 investigations into alleged fraud in the past financial year, no appropriate action was taken as per the recommendations of the investigations.
The report was submitted to the department’s management for comments before the final audit report is issued. The DOD has received qualified audits for a number of years with the management report being the precursor for yet another one.
Questionable leadership and poor decision-making
The report echoes the budget speech of minister of defence Thandi Modise, who in May bemoaned the dilapidated state of the SA National Defence Force’s (SANDF) equipment and facilities within an ever-decreasing defence budget.
“The current state of equipment and facilities can, in many instances, be ascribed to questionable leadership and poor decision-making.
“I am alarmed about the number of audit qualifications in the department of defence, as well as the number of reports of illicit activities, fraud and corruption that are being brought to my attention. This cannot continue unabated. The governance and accountability framework and systems in the department have to be overhauled,” she stated.
At least 20 employees within the department were conducting business with the DoD, with contracts adding up to R2.9m, while 151 were doing business with other state entities worth R28.8m.
The AGSA found there are still 833 cases of alleged misconduct, fraud and improper SCM infringements not completed, with some ongoing for more than a year. Irregular expenditure identified in the previous financial year to the amount of R6.1bn was not even investigated by the DOD. In the same year, no appropriate steps were taken against officials involved in expenditure adding up to R680m.
In the same year, fruitless and wasteful expenditure of more than R8.5bn was not investigated.
At least 20 employees within the department were conducting business with the DOD, with contracts adding up to R2.9m, while 151 were doing business with other state entities worth R28.8m. This is in contravention with Public Service Regulations of 2016, which prohibited such conduct as of August 1 2016.
The departmental record-keeping was in such a poor state that contracts of more than R205m could not be properly audited to establish if they were irregular or not.
For the same reason, goods and services were procured without obtaining at least three price quotations. Some of the contracts were awarded to suppliers whose tax matters had not been verified with Sars, while construction contracts making up R1m were awarded to contractors not registered with the Construction Industry Development Board (cidb).
Auditor-general Tsakani Maluleke also cited the DOD for not implementing consequence management in the 2021 financial year. However, the management report indicates little progress in this regard.
The DOD was also one of three entities against which Maluleke issued remedial actions in 2021. The others are the Prasa and the Free State human settlements department.
The debacle whereby the SANDF in 2020 imported an unregistered Covid-19 drug from Cuba, Heberon Alfa, in a contract making up R260.5m and which was riddled with irregularities, has also not been concluded. According to the report, the DOD only paid R33.5m of the total amount due with no indication from the department on how the issue will be resolved, even though the drugs were returned to Cuba.
The AGSA, secretary for defence Sonto Kudjoe, and accounting officer for the DOD were also unable to reach a satisfactory conclusion in addressing the material irregularity and more so on who will be charged for the loss.
“We have concluded that the actions taken are not adequate ... because no disciplinary actions have been taken against those who are responsible. And the amount paid has not been recovered after the return of the drugs.
“This noncompliance is likely to result in a material financial loss of R260.5m for the department,” the report concludes.
‘Significant deficiencies’
Citing yet another lack of consequence management on the DOD’s side, the report refers to lease payments for unoccupied buildings that resulted in a total loss of R108m. The DOD acknowledged the expenditure, but a subsequent board of enquiry into the matter concluded no person was liable for the financial loss despite an investigation report into the matter recommending Kudjoe and the DOD top management charge and discipline the identified officials.
The report states “significant deficiencies” in internal control over expenditure as one of the drivers in the dismal state of affairs in the DoD. Its lack of proper IT systems is one of these deficiencies.
The department’s IT policy, which governs security management, was last reviewed in 2010.
Data restoration tests were not performed as the SANDF does not have enough hardware capacity to perform the tests. The data therefore may not be available when backup restoration is required.
The E-Procure system was still running on a version that was last updated in 2015 and was no longer supported by the system vendor.
Modise in her budget speech ordered Kudjoe to interrogate all reports of misconduct, both departmental and criminal, and institute consequence management where appropriate “to the extent of preferring criminal charges against perpetrators. This must extend to both civilian employees and uniformed members”.
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